Pointing fingers for the financial crisis

[Cardinal]

Who is most at fault for the mortgage meltdown? Is it the people who bought more home than they could afford or borrowed against equity that may not have existed (or has since evaporated)? Is it speculators who drove up prices or made poor investment decisions? Is it the morgage brokers and banks who created subprime mortgages and wrote loans to people who could not repay them? Is it the federal government that failed to provide adequate oversight and regulation of the lending industry?

Yeah, I know you'd like to select multiple choices, but pick the ONE that is MOST to blame for the problem.

[Coragus]

I'll play this game and offer up my malinformed opinion.

I don't blame any specific person. I believe that it's a case of capitalism and supply and demand. We've been developing in the standard larger lot residential for many years, and now we've simply reached a point of saturation. While there was a demand, prices increased. Now there's not as much demand, and prices are decreasing.

This has happened many times in my lifetime with technology. How many remember how expensive your Commodore 64 was? It's just much more noticible now because houses are usually the largest item a family will buy.

There are obviously many other factors involved, but you said to pick one!

[ofos]

As much as I'd like to blame the people who saw deals too good to be true and fell into the subprime mortgages, I think it really goes on the mortgage brokers and bankers who got greedy and didn't leave enough margin to cover a downturn. Greed and bad business decisions come with short-term thinking. Each of the lending institutions should have had audit procedures in place to prevent over investment in the subprime market. It's no different than insurance companies ignoring their actuaries and insuring beyond their capabilities.

[Gedunker]

My wife and I were just talking about when we qualified for our $70,000 mortgage in 1995. The loan officer came back and told us we were qualified for up to $425,000. We looked at each other and replied simultaneously 'We only want $70k'.

I bet a whole bunch of other folks thought differently -- 'Gee, we could buy a lot more house and earn a lot more equity'. I suspect a heep of those folks actually did go out and buy more home than they could afford.

I blame gullible borrowers to a great extent. However, the credit shouldn't have been made available in the first place. Therefore I blame the banks.

[JNA]

You forgot the all important poll answer of

ALL OF THE ABOVE.



Anybody remember and does Circular and Cumulative Causation apply ?

[Tide]

I completely blame Fannie and Freddy and the other mortgage rating companies that continually gave them AAA ratings on their bonds. As one pundit said yesterday on the news, the bonds that Fannie and Freddy sold were worse than Junk Bonds, basically bets on bets.

I can't come to terms as to how Fannie and Freddy are govt. agencies but run as private organizations with little to no control. The administrators of these organizations were easily bought out by lobbyists and played all the capitalistic games that all publicly and privately owned companies do.

If any bailout were needed it is only needed, IMHO, for mortgage insuring and financing. Stricter guidelines are needed, however, if the lending gets too lean the economy will grind to a halt too.

I'm just sickened that this all of a sudden popped up over night it seems. Why haven't re realized this months and months ago? Every morning I wake up another bank or insurance agency is filing chapter 11 or being bought up.... but to happened all of a sudden like this is very scary.

[CJC]

The government, without question. We've long known that more often than not humans work for what is in their best short term interest. A gigantic role of government is to set the rules to prevent long term harm caused by short term interests of individuals.

The others involved were merely pawns in the game.

[kjel]

I cannot say there is any one of the above listed more at fault than another, I believe they all played equal roles in the debacle.

Borrowers: We are a debtor nation and a nation of debtors. Consumerism is rife with the buy it now, you can have it all mentality which fuels many personal finance downfalls. I think people generally lack a true understanding of finance in general so really don't grasp the details of what they are signing on for.

Speculators: To a degree this fueled the rise in prices paid for homes and in some places speculators were selling to speculators which exponentially increased housing prices. This happens even when there isn't a financial crisis.

Mortgage Companies/Banks/Brokers: Invention of exotic mortgages, no down payments, no-doc loans had a significant hand in what's going on now. Brokers and mortgage companies wrote and packaged loans as fast as they could without duly ensuring borrowers were truly qualified for what they were being loaned. After packaging the loans were bundled into funds/trust and then sold to banks. The banks bought a portfolio without really being concerned about the individual mortgages contained within. The creation of the Mortgage Electronic Registration System has made it possible that a loan be assigned a unique identifier to the loan, taken the paper out of the process, and enabled mass buying and selling the rights of institutions to buy and sell the mortgages.

The Government: Essentially the regulators just couldn't keep up with the rapid changes in how the mortgage market operates and were always several steps behind or turned a blind eye in the name of non-interference. Because the crisis has the possibility of derailing the economy in many ways they have stepped in. While I don't wholeheartedly agree with the bail out in interest of stability it probably needs to happen. I certainly hope that legislation comes about and what is happening in the finance industry is scrutinized more in the future.

[zman]

Borrowers wanted more, more, more.

Borrowers created the market for the lending practices.

Borrowers now cannot pay their loans back.

[btrage]

Borrowers wanted more, more, more.

Borrowers created the market for the lending practices.

Borrowers now cannot pay their loans back.

I usually agree with you buddy, but not here.

I think that it was the predatory lending practices that fueled the "more, more, more".

In reality, it's probably a chicken/egg scenario. Either way, people are stupid.

[zman]

In reality, it's probably a chicken/egg scenario. Either way, people are stupid.

Probably this is better than my explanation.

I'm waiting for the masses to begin looting the foreclosed and vacant homes. Me needs some new deck boards.

[DetroitPlanner]

I don't think you can point the finger at any one of them and say that they were definitely to blame.

Lax Regulations? Yep.
Uneducated Loan Applicants? Yep
Greedy Banks? Come on now, who really trusts Mr. Drysdale?
Land Speculators? Oh yes, these folks ruined my hood.

[ofos]

You forgot the all important poll answer of

ALL OF THE ABOVE.

E'ven when it's specifically excluded, there is always someone who wants to choose "all of the above". C'mon zman, everybody can't be MOST to blame. Pick one or I'll start calling you Waffles.

[zman]

E'ven when it's specifically excluded, there is always someone who wants to choose "all of the above". C'mon zman, everybody can't be MOST to blame. Pick one or I'll start calling you Waffles.

Okay then... I blame you, ofos...


eggoPLAN

[imaplanner]

I blame that home improvement channel and all their stupid real estate flipping shows.

[ofos]

Okay then... I blame you, ofos...


eggoPLAN

Again, you just can't pick from the list that's provided. I call a timeout for you, Buddy. Go sit in the corner until you're ready to play by the rules. People who can't follow rules, cause economic chaos. FYI, I have two mortgages, neither of which is anywhere near that subprime category.

[imaplanner]

On second thought - I also blame ofos

[ofos]

On second thought - I also blame ofos

Might as well, I'm an independent voter. Now will either Obama or McCain have guts enough to blame the independents before the election?

[Bear Up North]

On second thought - I also blame ofos

Quite certain that Mod Police will not allow a stand-alone thread that puts the blame where it should be, so, continuing with what others have testified.....

Let's blame ofus.



Bear

[ofos]

Quite certain that Mod Police will not allow a stand-alone thread that puts the blame where it should be, so, continuing with what others have testified.....

Let's blame ofus.



Bear

You mean all ofus? Clever Bear!

[mgk920]

A lot of this can be traced to fair lending laws (starting with the Community Reinvestment Act) dating to the 1970s. It made MANY lenders afraid to say 'no' to otherwise unqualified borrowers for fear that the PC Police would get on their cases.



Mike

[Whose Yur Planner]

I also blame in ofos-it's all his fault. He should fired for gross incompetence and get a golden parachute worth 100 million to make sure he learned his lesson.

On a tad bit more serious note, I think it was a gang screw up. The lending institutions get a bit more of the blame because they acted out of naked greed. This overwhelmed whatever business sense they had. You expect the pros not to do stupid stuff because they know better.

[Richmond Jake]

Along with ofos, I blame suffrage. What were those guys thinking?

And I also blame Roosevelt, Nixon, Reagan, and Clinton.

[Gedunker]

So much for this post-pad-athon. Thread closed.