At this link:
Hah, hah, and yet again, hah!
HB
Are you letting the Flea Baggers use that old leaky toilet of yours?
Also, from your garden thread, I see they are leaving denture cleaners behind ;)
That's a good site. In my opinion, it was the bundling of mortgages into commodities that was the most harmful. Before that, banks cared about lending because they were on the hook if the loan wasn't repaid. Now all they cared about was getting the quick fees and selling the slow return (and risk) to anyone else. So of course they made loans that they had to know would fail.
But that has been going on since the 1980's.
No, mortgages have been sold to Fannie, Freddie etc for decades by the issuers. If you look at mortages issued for decades, there were a variety of players and many, if not most of them, sold off the mortgages. It's nothing new. I used mortgage companies that were just that, mortgage companies, back in the 80s. They did nothing more than process the loan, do the initial financing, and then sell them off so they can move on to do the next mortgage deal. Look at your Sunday paper and you will see lot's of similar companies doing business today.
The problem was that buyers of the bundled mortgages failed to do their due diligence and understand what they were buying. And that as you say, some of the mortgage processers were less than honest. But a lot of it was crowd mentality in thinking that real estate always goes up. So, if they made a loan that was a little shakey, worse that happens is they default in a few years and the holder breaks even. Nobody expected house prices to decline 40% or more in some cases.
That potential has been there for decades, it's nothing new.
A few weeks ago I heard an interview (broadcast originally in 2010, IIRC) with the author of a book about parenting -- lamenting that there wasn't much of it going on -- and not only in the traditional family. He referred to one of the Wall Street "geniuses," who had said, "We kept waiting for a parent to show up and tell us to stop, but nobody did."
Perce
If you're going to piss and moan about something the least you could do is learn how to spell what it is that's bothering you. The proper spelling is "Gonifs."
Reminds me of the story about a fellow with a warehouse full of tinned sardines. He sold them for five cents a tin. The guy who bought them for a nickle, turned around and sold them for fifteen cents. The chap who bought the sardines for fifteen cents sold them for a quarter.
The guy who bought the fish for a quarter went to the warehouse and opened a can. He ran right back to the person who sold him the sardines. "These sardines are RANCID! They're INEDIBLE!"
The seller waved his hand dismissively and said, "Son, those sardines aint' for EATIN', they're for buyin' and sellin'."
HB
HB
The Wall Street version of the above goes like this...
A guy falls in love with a thinly traded stock that's selling for $1. He buys 2,000 shares. Next day he sees it's at $1.25, so he buys another 2,000 shares. Then he sees it's at $2, so he buys 5,000 more shares. This goes on for a few weeks until he has 50,000 shares and it's at $15. He calls up his broker and says "Sell it all." The brokers asks, "To whom?"
There was also the impression that people could buy homes and not worry about how to pay the mortgage because home values would keep rising. And it worked, as long as home values kept rising. Many people who did understand that payments would increase (if not by how much) did figure that they could always sell the house for more than they paid for it.
Of course they do, that's a core and essential part of the business. How far do you think we's get with say an IPO if Wall Street had to carry the risk of the company, as opposed to getting INVESTORS to take the risk?
The securities you are bitching about were sold almost exclusively to sophisticated institutions. IF they didn't understand the risk, who's fault is that? Also, if the buyer didn't understand the full risk, why do you assume the seller did? It's like the guy that buys a 10 year old used car and 5 days later, the car won't go into third and the tranny is shot. The buyer then claims that the seller must have known the engine was bad. Of course, like in the securities example, the buyer didn't take the car for a test drive or to a mechanic for an inspection. And had the car gone 100,000 miles and another 10 years with no problems, he wouldn't be back offering to give the seller MORE money because the car turned out great, would he? And how far would he get in small claims? He'd get booted because it's an "as is" sale.
They certainly did, they bought it. It's like in the car example saying they really didn't want the car that later turned out to have problems.
That part is true. But clearly part of that was that there had not been a case of such a substantial collapse in real estate prices going back to at least the Great Depression. So, for analysts not to expect a 40% decline in prices doesn't seem all that unusual. And then it fed back on itself, taking lots of loans that were perfectly sound with it too.
Classic liberal thinking. Everyone else is stupid and needs the lib and big govt to take care of them. The concepts that got people into trouble don't require college. They are very basic. Let's see, I make X, my payment is Y for Z years. Can I afford it? What happens if I lose my job? What happens if my wife loses her job? etc.
That goes on everyday. It's occuring right now on the futures exchanges in NYC and Chicago. Part of the basics, which you don't understand. Here's a simple example that I've given you before. Suppose I own stock in company X. I bought it at 20, now it's at 35. I've done my due diligence and think the stock is now overvalued. Looks like the business climate will get more negative overall too. So, I sell the stock and at the same time I buy put options to profit if it goes down. That goes on every day and is PERFECTLY LEGAL. Did I have an obligation to tell the buyers that I think the stock is headed down? Of course not.
Horsewhipping
No one here is forgetting anything. I, as have many others, have told you a hundred times that there is a whole list of people responsible and who should have known better. Everyone from the buyer of the house at the very beginning, to govt which encouraged those purchases, to whomever issued the loans to begin with, to the parties that bought the CMOs in the end. You are the one who focuses exclusively on Wall Street.
Poor? Who's blaming the poor? Plenty of people who got caught up in houses they could not afford came from the middle class. And you assume everyone knew how it would turn out. How about this. You think just maybe that instead of evil capitalists being involved, there might have been some bright eyed libs, like you. You know, someone in Congress or the regulators or working at a bank or mortgage company thinking about how great it is that they are helping some poor person get a loan. A loan so that they could get their piece of the American dream. Where house prices always go up and you can't lose? Why, if
3 years in they need to sell the house, they can just break even as usual, right? Let me help them get ahead by making that loan.....
Giggle.
Thanks.
Yes, as Kurt's pointed out, everyone thought the prices would climb to the heavens, bolstered by chestnuts like "real estate prices will always rise because there's a fixed amount of it and God isn't making any more." We showed God!
I think there were a lot of factors. If people were even aware of the escalation clauses (I am sure they were whispered if they were mentioned at all) they thought, as you suggest, rising values would protect them. Or they thought they would have more income as they got older and got raises.
-- Bobby G.
Does a broker ever really ask that?
HB
By around 2005 most people with kids could see home prices was all a mirage. Maybe earlier. I could barely qualify for my "mid-level" mortgages in 1997, with 10% down. And I was making good bucks. I was surprised I didn't need 20% down, as for my first house. By 2002, it was clear my kids couldn't buy my house unless they went with one of the bogus mortgage deals. Zero down! Interest only! And they would also need a high-paying job. At the same time all this off-shoring of jobs gained speed. Writing was all over the wall. You lose your job, you can't pay a mortgage. Your kids' future doesn't look promising. Nothing complicated about that. I wonder how many of the foreclosures are due to job loss and nothing else. I've heard of people who had their homes almost paid off, then took out equity loans to the max for $40k pickup trucks and vacations. Then they lost their jobs - and their houses. Lots of stories. Many people have no financial sense. Chickens waiting to be plucked.
--Vic
I really object to that "everyone." It wasn't everyone. There's still a huge base of folks who are very leery of debt. Wouldn't think of getting in deep, or pulling equity from their home. In fact they pay off their mortgages early. They were never swayed by the PT Barnums.
--Vic
To the government, silly.
Yes, there are still one or two of us, still above water.
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