“lax lending practices earlier this decade led to irresponsible lending and irresponsible borrowing.”

[Wags]

Anyone see Kevin Phillips on Bill Moyer this week? He makes a pretty good case for bipartisan blame on the whole financial sector meltdown.

http://www.pbs.org/moyers/journal/09192008/watch2.html

[Black Landlord]

DaveS wrote:
[quote=mikeylikesit]
...a quote from Mr. Bush.

Could anyone here explain to me how there can be irresponsible borrowing without there first being irresponsible lending?

Anyone?

To answer the question one has to at least place some theoretical guidelines into the picture. Let us assume a man has legitimately qualified for a $7,500 Credit Card and a mortgage payment $500.00 per month. He has $15,000 in equity in his house in his $150,000 house. Basically a 10% down payment.

Over time he borrows all of his CC credit line, i.e. Christmas presents, new tires, replace a water heater etc. He decides to move that $7,500 to his mortgage, The bank writes him a new mortgage based on a 5% equity - legal - and he perfectly qualifies for the new payment PROVIDED he does NOT begin to use his credit card again. The bank has actually HELPED him legally TRY to regain control.

But he decides the following Christmas to spend more than he should, goes on vacation, etc. and is back up to $5,000 and a payment he can not afford. He's back to square one - in debt for more than he can afford.

Ain't the banks fault. The bank can not control how much OTHER credit a borrower decides to use. The bank was not irresponsible, the borrower was.


And if you look at the outstanding balances of CC's - you will see that this is a very typical problem.
This may be, but there are theoretically mechanisms in place to rule out potential mortgage costumers likely to be unable to manage finances (review of tax returns, bank statements, pay stubs, credit score)-- however, during the housing bubble, due to lack of oversight all kinds of mortgages (e.g. "no doc") appeared which circumvented the whole issue of the riskiness of the individual mortgagee.

[Black Landlord]

Damn smilies.

[mattkime]

who has a greater share of the blame - wall st. fat cats that declared themselves geniuses when the market was up? or joe average mortgage buyer that has no particular training in finance?

[MacMagus]

> who has a greater share of the blame

This is one of those situations where it almost looks like the government and private industry conspired to create the crisis.

Before deregulation, banks could continue to make loans so long as they had 15% of their value in reserves. After deregulation, U.S. banks supposedly averaged a 40:1 ratio of loans to assets. The difference was made up with credit from other banks.

So first came deregulation, then came abuse... Then came Greenspan trying to keep us out of a recession by playing with the interest rates, which temporarily propped up the stock market as well as encouraging unwise investments leveraged upon easy credit, including new construction and home-buying. It was a powder keg waiting for a spark.

[Black Landlord]

mattkime wrote:
who has a greater share of the blame - wall st. fat cats that declared themselves geniuses when the market was up? or joe average mortgage buyer that has no particular training in finance?

51% for the fat cats and 49% for Joe average. No wait, reverse that.

Anyways, you make it sound like not having "training" in finances absolves a consumer from having to make decisions within their budgets.

[vision63]

None of this really matters. The problem is going to be attempted to be addressed by throwing "your" money at it and there is nothing you can do to stop it. In this case the big rich banks will be handed a key to your treasury and be allowed to extract nearly a Trillion dollars of your money to use anyway they please. The "egg" will be shut out of the bailout because the Democrats will crumple within days. Then come October, we'll see what the real damage is. Hope I'm wrong.

[mikeylikesit]

They seem to be intent on getting this over with quickly regardless of cost. If true the only reason could be that for political reasons they can't allow a long string of collapses to go on from now until election day.

If that's the political strategy, the architects may want to glance over their shoulder to the West Coast. Washington Mutual, one of the superbanks that came into being following deregulation, is frantically looking for either a huge refinancing package or a buyer. They may not find either anywhere outside of Washington, so it's not over until its over.

Anyone still think this is all because of corrupt old Charlie Rangle spouting off about the problem? Remember when that was the party line talking point from right wing apologists? Poor old Charlie, he might of just have gone and shot himself dead if he only knew what he was uncovering and where it would lead. :banghead:

[vision63]

Well the New York Times has a strange hard-on for persecuting poor old Charlie the past couple of months. I think the administration is hell-bent upon getting it done before October disaster. Now like Paul Bremer Henry Paulson can't be questioned, can't reveal any kind of "information" to the public. It's just "gimme the money!"

[Black Landlord]

Update: 33% of the blame for the fat cats, 33% for Joe average, and 34% for Charlie Rangle. Glad we solved this crisis.