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

[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?

[Black Landlord]

Is this what you meant to post, Mike? I don't see the problem with this statement, sorry.

[mikeylikesit]

Mr. Bush 's statement was in the thread line. “lax lending practices earlier this decade led to irresponsible lending and irresponsible borrowing.”

My comment was in the body of the thread. I could have made it clearer so now I will: How does one become an irresponsible borrower without there first being an irresponsible lender to borrow from?

..and it's mikey to you sir!

[mstudio]

I guess you could say there were irresponsible borrowers because the banks made it too easy to borrow. One would be irresponsible if they knew they could not pay the money back. The statement does say there was irresponsible lending, too.

[mikeylikesit]

Duplicate post: see below. I hate Safari.

[mikeylikesit]

It's not a chicken and egg question. Without an irresponsible lender, an irresponsible borrower can't borrow. Period!

[Lux Interior]

It's not a chicken and egg question. Without an irresponsible lender, an irresponsible borrower can't borrow. Period! Exclamation mark!

[rgG]

It takes two to tango. I get offers for more credit than I need, all the time. I don't take them up on the offer. Maybe you need irresponsible lending first, but without both parties coming to the dance, we would not be in this mess.

The borrowers are also at fault here. Many were greedy, other were stupid and some were both greedy and stupid. The same could be said for the lenders. The problem on both sides of the deal was that the parties directly involved were not the ones really taking the risk. The lenders were going to immediately sell the loan, therefore they didn't have to worry if the borrower could pay the money back. They were getting there money just for doing the initial paperwork. The borrower often had to put no money down, so if they couldn't make the payments, they weren't out anything either, except the hit to their credit score. Not enough personal risk was assumed by either of the two main parties to the transaction. The risk was pushed off to others who had no idea whether or not the original borrower could make the payments on the loan.

The rating agencies were also complicit by not accurately rating these mortgage backed securities, so many unsuspecting buyers bought what they thought were safe investments, when they weren't.

[Seacrest]

It seems everybody involved, in trying to circumvent so-called "regulation" basically thought that they had figured out how to bypass reality (you know, math and physics).

The country has been running on a Faith-based economic program for the last 25 years.

Problem is, many of us suckers believed them when they trotted out their Ayn Rand dreams of a Friedmanesque Utopia, where a man who worked hard and took risks would be rewarded with riches, but if he missed the mark he would need to find another vocation. If he did a poor job, or produced inferior goods, or put lead in the toothpaste, well he knew that the "market" would punish him and therefore that was the disincentive to be malevolent.

So, these guys got the de-regulation they wanted, but they ended up ALL lying themselves AND to each other. And the American people -- who couldn't get enough unearned granite countertops, and the Escalades with the spinnerz, towing the dual Jet-skis to the lake -- went right along with the boondoggle. As Rhonda states above, the risk was not only sidestepped by the primary actors, it was thought to be completely wrung out of the system. So these iBanks (NOT an Apple product, BTW) had one division pushing these mortgages on the one hand (and they were "pushing" them. I, who have never owned a home, was getting cold calls day and night from people who thought I would be interested in this or that equity loan.) and further up the chain they packaged the bonds and credit default swaps of these same crappy mortgages and sold them to the other banks and, in many cases, back to themselves.

Now these people want US -- present and future (way future) taxpayers -- to buy this crap and take it off their books. Which means, I am now a home owner, whether I like it or not.

I think Bush's comment on all of this, when he thought he was speaking off the record, is very telling: "Wall Street got drunk."

The "irresponsible borrower" meme, though, is yet another bogus "talking point" and a further diversion from what the real issue is. These "irresponsible borrowers" do not make the rules (though I do contend that not a small amount of the most egregious small-time swindlers need to serve some time in the Big House Without Granite Countertops), the Big Boys do, and now that they've scampered off with their sushi, they've stuck US with the bill.

[DaveS]

mikeylikesit wrote:
...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.