Burning Down The House: What Caused Our Economic Crisis?
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[Poll]
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Burning Down The House: What Caused Our Economic Crisis?
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| Community Reinvestment Act? |
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| Those who knew but chose to stick their head in the sand? |
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| The Lobbyists? |
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| Wall Street? Short term sight? Greed? |
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| Congress? |
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| Chris Dodd? Barney Frank ...bank committees responsible for oversite? |
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| The Accountants? |
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| Those who also created the "dot com" bust? |
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| Those living way beyond their means? |
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| All of the above? |
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Total Votes : 58
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(last vote on : 10/1/2008 1:29:17 PM)
(Poll will run till: -- )
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Burning Down The House: What Caused Our Economic Crisis? - 9/28/2008 1:42:25 PM
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LivingParadox
Posts: 804
Joined: 2/28/2007
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Be sure to check out the Youtube video "Burning down the house: what caused our economic crisis?" ...
Well, worth the 10 minutes to view. Here's the link: Burning Down The House
Let me know what you all think....
< Message edited by LivingParadox -- 9/30/2008 1:36:22 PM >
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RE: Burning Down The House: What Caused Our Economic Cr... - 9/28/2008 5:58:38 PM
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zamdad
Posts: 1664
Joined: 4/8/2005
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I voted all of the above. Seems to me thae whole thing needs to be cleaned up. Starting with congress. I hope that all the incumbents get voted out and that we, the citizens, do a better job of getting and staying informed. We need to hold our elected official accountable better than the way thhey try to hold Wall Street and Main Street accountable.
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“A dead thing goes with the stream, but only a living thing can go against it.”
G.K. Chesterton
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RE: Burning Down The House: What Caused Our Economic Cr... - 9/28/2008 9:55:50 PM
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rgsoundguy
Posts: 401
Joined: 4/12/2005
From: Pottstown, PA
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Everybody up there had their part in it, but ultimately it was people living way beyond their means, and I wish I could have voted for more than one, but not all because I would like to also add to the mix the banks who approved those loans to people with negative credit history.
_____________________________
Albert Einstein said that insanity is doing the same thing over and over again and expecting different results. That convinces me that our nation is insane because we continually elect republicans and democrats expecting change and get none.
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RE: Burning Down The House: What Caused Our Economic Cr... - 9/28/2008 10:22:07 PM
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wing2000
Posts: 1038
Joined: 4/14/2005
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Lax regulation and greed.
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RE: Burning Down The House: What Caused Our Economic Cr... - 9/28/2008 10:33:33 PM
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colliefan
Posts: 2751
Joined: 4/12/2005
From: Raleigh, NC
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A major factor was the brillant individual who came up with the idea that it was OK to put individuals into a house with no money down and no proof of income and that one could finance the house for 125% of value.
Banks and other institutions bought and sold these loans, knowing the entire scheme was a deck of cards. Government officials got sweetheart deals to finance their abodes.
and in the end, the taxpayers are left with an empty sack.
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RE: Burning Down The House: What Caused Our Economic Cr... - 9/29/2008 2:24:17 AM
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zamdad
Posts: 1664
Joined: 4/8/2005
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quote:
ORIGINAL: colliefan
A major factor was the brillant individual who came up with the idea that it was OK to put individuals into a house with no money down and no proof of income and that one could finance the house for 125% of value.
Banks and other institutions bought and sold these loans, knowing the entire scheme was a deck of cards. Government officials got sweetheart deals to finance their abodes.
and in the end, the taxpayers are left with an empty sack.
Hmmmm... can you spell CONGRESS.
_____________________________
“A dead thing goes with the stream, but only a living thing can go against it.”
G.K. Chesterton
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RE: Burning Down The House: What Caused Our Economic Cr... - 9/29/2008 5:38:57 AM
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blue1914
Posts: 412
Joined: 6/21/2005
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http://www.youtube.com/watch?v=XjoJ9UF2hqg
This is a video on CDO's (collateralized debt obligations) which are the instruments of "credit" that are causing an estimated $66 trillion (I believe I heard that figure) of bad debts yet waiting to be called to account-in short, this crisis. I really do hope that no one is naive enough to believe that a few defaults on loans (of any form) would cause a crisis of this magnitude without those loans being tied to much more than their face value.
If you watch the video, you'll probably come away with a headache. After you get over it, you will see that these fantasy pieces of paper created out of thin air are not only dangerous but irresponsible.
Long and short-the CRA may have given the "bullets" for the gun (with a glut of sub-prime mortgages, the banks had to find a way to "monetize" their new "assets") but the trigger was pulled when greed caused irresponsible pie-in-the-sky funny money shell games. Who is responsible-WE ALL ARE!
If you ever owned a share of stock, you wanted it to increase in value. With U.S. manufacturing leaking offshore since the late '60's through to today, that created less opportunity for companies to grow here in America. They had to find ways to increase their value and their stock price without the benefit of new industry to loan to-hence these silly shell games like CDO's. What part did we all play-we wanted cheap products and "lapped" them up, further giving incentive to companies to play games like this. We also wanted high stock prices in our 401(k)'s so companies had to find a way to make that happen as well. We wanted stable jobs so the U.S. government found ways to give incentive to companies to create those-but without the capital to do so, how would that be accomplished-back to the circle above-by creating funny money though silly little shell games.
In short, we "wanted it all"-we wanted a chicken in every pot and it to be Dijon flavored-a living wage was not sufficient, we instead needed to find bigger and better everything. EVERY driveway needed a Lexus or a BMW-it's the American way! These companies and our government tried to give it all to us (and themselves by the way as well), but none of us were "counting the costs". We never figured that the day would come when a bill would be presented for our irresponsible living. Charge it-isn't that our motto today? We as a society have charged it all right-and now the charge bill is due.
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RE: Burning Down The House: What Caused Our Economic Cr... - 9/29/2008 7:19:34 PM
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LivingParadox
Posts: 804
Joined: 2/28/2007
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Gee the link had close to a million hits and got pulled. There is another version which I've updated the link.
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RE: Burning Down The House: What Caused Our Economic Cr... - 9/29/2008 7:27:07 PM
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GroupW
Posts: 2911
Joined: 11/16/2007
From: Up in the hills of Colorado (very BIG hills...)
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quote:
ORIGINAL: blue1914
If you watch the video, you'll probably come away with a headache. After you get over it, you will see that these fantasy pieces of paper created out of thin air are not only dangerous but irresponsible.
Not entirely. A collateralized debt obligation is just a legal structure to avoid double taxation on loan assets for investors. (Like an IRA is just a way to protect retirement savings from immediate taxation - whether an IRA is a good or bad one depends on what goes in it.)
There's nothing fundamentally good or bad about them. For some assets, they are amazingly good financing vehicles and avoid some of the unfortunate problems of a REMIC or grantor trust/debt-for-tax structure.
Like any other tool, it's how it was occasionally used that created a problem. People used them to finance assets for which they had no reliable information regarding the true credit risk. Some people put things into them that they didn't understand and sold them to people who didn't understand.
Only a minority of the CDO's created are actually causing a problem.
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: Burning Down The House: What Caused Our Economic Cr... - 9/29/2008 7:37:17 PM
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LivingParadox
Posts: 804
Joined: 2/28/2007
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quote:
ORIGINAL: GroupW
quote:
ORIGINAL: blue1914
If you watch the video, you'll probably come away with a headache. After you get over it, you will see that these fantasy pieces of paper created out of thin air are not only dangerous but irresponsible.
Not entirely. A collateralized debt obligation is just a legal structure to avoid double taxation on loan assets for investors. (Like an IRA is just a way to protect retirement savings from immediate taxation - whether an IRA is a good or bad one depends on what goes in it.)
There's nothing fundamentally good or bad about them. For some assets, they are amazingly good financing vehicles and avoid some of the unfortunate problems of a REMIC or grantor trust/debt-for-tax structure.
Like any other tool, it's how it was occasionally used that created a problem. People used them to finance assets for which they had no reliable information regarding the true credit risk. Some people put things into them that they didn't understand and sold them to people who didn't understand.
Only a minority of the CDO's created are actually causing a problem.
Sounds like something that needs regulation. ;)
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RE: Burning Down The House: What Caused Our Economic Cr... - 9/29/2008 7:42:06 PM
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GroupW
Posts: 2911
Joined: 11/16/2007
From: Up in the hills of Colorado (very BIG hills...)
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People just need to go back to basics. Ratings agencies can't rate things they have no statistical data to analyze with. Issuers can't sell things they themselves don't understand. As long as buyers don't buy things they don't understand, it's not much of a problem.
We've always done this - greed drives people to get that extra little bit of investment return and they chase after the next great thing whether they understand it or not. It happened with tulip bulbs, telephones, commercial real estate, esoteric derivatives, technology companies, single family homes, mortgage backed securities, gold, oil, grains.
It's not the format of the investment vehicle - it's the investor.
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: Burning Down The House: What Caused Our Economic Cr... - 9/29/2008 7:44:15 PM
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LivingParadox
Posts: 804
Joined: 2/28/2007
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And with the investor lies the risk.
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RE: Burning Down The House: What Caused Our Economic Cr... - 9/29/2008 7:48:28 PM
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GroupW
Posts: 2911
Joined: 11/16/2007
From: Up in the hills of Colorado (very BIG hills...)
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quote:
ORIGINAL: LivingParadox
And with the investor lies the risk.
In nearly all cases that I can think of, absolutely. The one caveat is that we generally don't allow the financial infrastructure to completely break down. That was one of the causes of the great depression. Allowing a meltdown to that extent just causes too much misery among the innocent.
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: Burning Down The House: What Caused Our Economic Cr... - 9/29/2008 7:56:44 PM
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adelphi_sky
Posts: 409
Joined: 10/11/2007
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Plain and simple, whether you think it was congress, wall street, reinvestment acts, etc. It was the people at the front lines. There was so much money to be made, lending PRODUCTS and "chop shops" sprang up almost instantly. You can try to blame those that couldn't afford the loans but guess what, it's up to the lender to say yay or nay. That didn't happen. My wife mentioned a new story she heard on NPR about a product called a NINA loan. This is a loan that LENDERS approved for buyers with (N)o proof of (I)ncome and (N)o (A)ssets. With products like those, you're asking for trouble. But lenders grab the quick revenue from the origination fees, and then quickly pool the mortgages and sold the mortgages on the Mortgage Backed Securities market only to move on to originating more risky loans. You have to start at the entry point. not on the back end to find the trouble. Also, there wouldn't need to be oversight if the LENDERS would being honest with their customers and themselves.
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RE: Burning Down The House: What Caused Our Economic Cr... - 9/29/2008 8:37:13 PM
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colliefan
Posts: 2751
Joined: 4/12/2005
From: Raleigh, NC
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quote:
(Like an IRA is just a way to protect retirement savings from immediate taxation - whether an IRA is a good or bad one depends on what goes in it.)
The government should of provided a vehicle similar to an IRA to enable individuals to save for a significant downpayment. Instead, the government created no-money down, no proof of income, no proof of citizenship loans. When one get a 125% loan for a home and makes no payments, how can one lose a home? Also, if lenders didn't show proof of minority loans, they would lose the ability to engage in future banking transactions.
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RE: Burning Down The House: What Caused Our Economic Cr... - 9/29/2008 10:26:49 PM
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letusreason
Posts: 807
Joined: 8/30/2008
Status: online
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quote:
ORIGINAL: LivingParadox
Be sure to check out the Youtube video "Burning down the house: what caused our economic crisis?" ...
Well, worth the 10 minutes to view. Here's the link: Burning Down The House
Let me know what you all think....
That video is excellen.
So I guess youtube is not all bad.... there I said it, I can move on now.
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RE: Burning Down The House: What Caused Our Economic Cr... - 9/29/2008 10:47:13 PM
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GroupW
Posts: 2911
Joined: 11/16/2007
From: Up in the hills of Colorado (very BIG hills...)
Status: offline
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quote:
ORIGINAL: colliefan
quote:
(Like an IRA is just a way to protect retirement savings from immediate taxation - whether an IRA is a good or bad one depends on what goes in it.)
The government should of provided a vehicle similar to an IRA to enable individuals to save for a significant downpayment. Instead, the government created no-money down, no proof of income, no proof of citizenship loans. When one get a 125% loan for a home and makes no payments, how can one lose a home? Also, if lenders didn't show proof of minority loans, they would lose the ability to engage in future banking transactions.
I'd vote for it. A very good idea that never got much traction. It was actually part of some IRA related legislation a few years back.
Question - I haven't seen 125% loans in nearly a decade. Greentree and a couple of bottom feeding financial firms offered them for a while, but they went bust pretty fast. Never saw much of them after 1999 or so. Are you still seeing them?
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: Burning Down The House: What Caused Our Economic Cr... - 9/29/2008 10:55:19 PM
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tracydolls
Posts: 1839
Joined: 3/30/2008
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Greed by everyone did this.
when 9/11 happened instead of being prudent we went shopping.
It's hard to follow this mess because for so long, your Chicken Little, it's fundamentally strong, etc
now all of a sudden, the SKY is falling.
Yeah, right ok.
_____________________________
Rev 3:17 Because thou sayest, I am rich, and increased with goods, and have need of nothing; and knowest not that thou art wretched, and miserable, and poor, and blind, and naked:
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RE: Burning Down The House: What Caused Our Economic Cr... - 9/29/2008 11:15:58 PM
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womaninchrist
Posts: 450
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Regulation was made a bit TOO lax. Then lenders - some of them - took advantage and made loans that never should have been made. In debt up to your eyeballs? No problem. Habitual filer of bankruptcy? No problem. No down payment? No problem. Not really enough income? No problem. Whatever should have been a problem, there was a way around it. Plus, there were tons of high pressure salespeople - mortgage brokers, real estate agents, etc. - that tried their best to push people to buy more (often much more) than they could/should have bought. I can remember where at one point we tried to find a standard loan for around $50K. NO ONE wanted to bother with that, but many did contact us trying to sell us loans of 2-3 times what we wanted, cajoling us that there were "ways to make the numbers work". Fortunately, we were smart enough to turn down such a loan - however both my Mom and my Sis and her husbnd lost their homes to what can at best be termed very creative financing. With shenanigans like this going on, no wonder the market eventually collapsed - especially considering how many of these creative finance packages involved adjustible rates which are notorious for eventually becoming unaffordable for many as they adjust upward.
And for the nation to literally be balanced on the edge of the cliff - presuming of course all the dire warnings are correct - we have to have had the foxes guarding the hen house.
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RE: Burning Down The House: What Caused Our Economic Cr... - 9/29/2008 11:23:05 PM
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GroupW
Posts: 2911
Joined: 11/16/2007
From: Up in the hills of Colorado (very BIG hills...)
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I hear the arguments about relaxing lending standards, and there's some truth to it. Still, noone held a gun to anyone's head and told them to make loans that any third grader knew were stupid. Lax regulation was part of the problem, but only a small part.
Telling someone they CAN do something is different than telling them they SHOULD or MUST do something. One of the good things about our economic system is allowing people to be fatally stupid.
Hopefully everyone doesn't get stupid in the same way at the same time and cause a crisis, though.
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: Burning Down The House: What Caused Our Economic Cr... - 9/30/2008 1:40:24 AM
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wing2000
Posts: 1038
Joined: 4/14/2005
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quote:
Instead, the government created no-money down, no proof of income, no proof of citizenship loans.
...the government did not create those loans....financial institutions did - fueled by indiviudals who wanted to make a fast buck and had no risk in offering no verification loans. I think it would be more accurate to say that government regulators were asleep at the switch (or being heavily influenced to look the other way).
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RE: Burning Down The House: What Caused Our Economic Cr... - 9/30/2008 1:42:48 AM
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