Why do people keep blaming laissez-faire for this crisis?

[dmcowen674]

Originally posted by: daishi5
Topic Title: Why do people keep blaming laissez-faire for this crisis?

Topic Summary: Isn't this the governments fault?

I've been saying it's Bush's fault since 2001

 

[Craig234]

Originally posted by: blackangst1

Originally posted by: Craig234

Originally posted by: TheSlamma

Originally posted by: blackangst1
This subject is beat to death.

Is *some* of this the gov't's fault? Sure. But how much of this could have been prevented had the Americans who took out these loans paid their bills on time, learned to budget, and learned how to read their contract which spelled out what their balloon would have been?

Answer? All of it. We could have averted it 100% and left the task of re-regulating to the congress meanwhile the market doesnt spiral. *MOST* of this is not due to deception but to Americans not knowing how to manage their money. Im curious why we are so quick to blame Da Ebil Gub'ment and not citizens?

QFT

Quite wrong. As I've said, the reason 'predatory lender' exists for a reason. Any time you make excessive credit available, to poor people, rich people or companies, you will see people misuse it. If people could get addictive painkillers without prescription, some would abuse it. Similarly, when aggressive lenders told people who couldn't afford a motgage they were just fine in these sub-prime loans, some of the people did not know better and took them. Yes, they were not well educated on the finances, but that's not the whole story.

See my response above.

I did, and it's wrong for most of these mortgages. Sure, if the rates are fixed, it can say how much the payment will go to, but typically, those are adjustable rates, and they can't.

All it takes is a smooth talking mortgage salesperson to make it sound like it's unlikely to go up.

 

[herm0016]

Originally posted by: blackangst1
This subject is beat to death.

Is *some* of this the gov't's fault? Sure. But how much of this could have been prevented had the Americans who took out these loans paid their bills on time, learned to budget, and learned how to read their contract which spelled out what their balloon would have been?

Answer? All of it. We could have averted it 100% and left the task of re-regulating to the congress meanwhile the market doesnt spiral. *MOST* of this is not due to deception but to Americans not knowing how to manage their money. Im curious why we are so quick to blame Da Ebil Gub'ment and not citizens?

:thumbsup:

 

[daishi5]

Originally posted by: Craig234

You did not understand the point I was making.

One small pressure on Wall Street was the government getting loans for those who had a hard time getting them. That had some minor impact.

A much greater factor IMO was the "market pressure" of the firms competing for profits driving them towards ever more risky, ever more leveraged instruments.

While a firm might not want to take those risks normally, when they're under huge pressure with competition, the firms who do tend to beat those who don't in the short term.

That's pure market pressure, not government.

That's what regulation is about: allowing the 'constructive' catpialistic activities and not the 'destructive' ones.

Of course, that's theory not practice; in practice, take a look at the 30's for how the Rockefellers and Morgans fought each other by each trying to pressure the government to regulate in ways in which they had an advantage, and put the other family at a disadvantage (the Rockefellers won).

Of course, informed citizens might say that the larger problem was the elites (both families) having so much power over the policies of the democratic government in the first place, meaning the only question was in which orifice they would get the screwing from the powerful.

Capitalism doesn't care whether you win competitively by innovating a better product, or murdering the CEO of your competition. Society does care, and regulates. Besides the moral issue, society recognizes that companies killin each other's people, apart from the moral problem, reduces productivity, and bans it; they can recognize that market manipulation and other 'schemes' can harm productivity, harm the economy, and can ban them, while those who stand to profit billions try to lobby the government not to.

I think you are misunderstanding me as well. I am not saying that we can deregulate everything and expect the markets to magically make our lives better. Some markets do have a very natural tendency to allow some members of the market to abuse other members, mostly markets in which their is a concentration of power like wall street.

What I am saying is that a lot of people, especially Pelosi last night, seem to be taking this to mean that deregulation=bad, and regulation=good. What it looks like to me is that the bad part of what we are seeing is the government, both democrat and republican saw a goal, namely home ownership, and saw something that prevented that goal, loans not being offered to sections of society that were deemed unsafe. Once they decided that all those poor people needed to get loans, the government started to add some regulations, specifying that banks needed to have certain percentages in underserved areas regardless of the fact that those areas may be underserved for a reason. They also removed regulations. The added regulations probably made the situation a bit worse, but when they removed regulations, a real monster was born.

Here is where I seem to differ from a lot of people, we already knew that a lot of people who could not could not afford loans, and who would default on those loans wanted loans. If only people who could afford and handle loans wanted loans, banks wouldn't even bother checking them out before approving them. When people of lower dependability started to get loans demand went through the roof. Then we saw lots of competition to get these new customers into the bank.

Up to this point none of this should be a surprise, we increase the number of eligible customers, demand rises, and suppliers rush to meet that demand. The problem was, there was no way to tell which mortgage backed papers were packed with these loans. Then things got even worse, a huge spike in prices, and everyone makes the same mistake we have seen in every bubble since the tulip bubble, prices are just going to keep going up. This is also predictable, it is not like we didn't just see the same behavior in the stock market for technology stocks just a few years before. However, these prices are packaged like bombs in these mortgage papers that so many institutions are holding, no one is sure which ones are good and which ones are going to explode.

And, the reason I blame the government is because they let this loose. When government regulation went from holding back the market and just containing it from doing bad things to actively trying to change the market to achieve good results they blew it all up. That in a very long and round about way is my point, regulation that just prevents bad things from happening is usually good because we can clearly see bad things, and they are not too hard to stop. Regulation and intervention that is aimed at reaching a goal however seems to me to be a very bad thing because no one really understands the whole economy, and a market cannot be driven.

 

[daishi5]

Originally posted by: Craig234

Originally posted by: blackangst1

Originally posted by: Craig234

Originally posted by: TheSlamma

Originally posted by: blackangst1
This subject is beat to death.

Is *some* of this the gov't's fault? Sure. But how much of this could have been prevented had the Americans who took out these loans paid their bills on time, learned to budget, and learned how to read their contract which spelled out what their balloon would have been?

Answer? All of it. We could have averted it 100% and left the task of re-regulating to the congress meanwhile the market doesnt spiral. *MOST* of this is not due to deception but to Americans not knowing how to manage their money. Im curious why we are so quick to blame Da Ebil Gub'ment and not citizens?

QFT

Quite wrong. As I've said, the reason 'predatory lender' exists for a reason. Any time you make excessive credit available, to poor people, rich people or companies, you will see people misuse it. If people could get addictive painkillers without prescription, some would abuse it. Similarly, when aggressive lenders told people who couldn't afford a motgage they were just fine in these sub-prime loans, some of the people did not know better and took them. Yes, they were not well educated on the finances, but that's not the whole story.

See my response above.

I did, and it's wrong for most of these mortgages. Sure, if the rates are fixed, it can say how much the payment will go to, but typically, those are adjustable rates, and they can't.

All it takes is a smooth talking mortgage salesperson to make it sound like it's unlikely to go up.

There is another problem, these loans are sold off. The bank that makes the loan has lost the incentive to make sure that it gets paid off, because once they sell the loan, if it defaults it is not their problem. At least that is my understanding. I think it is pretty clear that when a bank no longer pays the price for tricking someone into a loan they cannot pay, a bank will trick people into loans they cannot pay.

 

[fskimospy]

Originally posted by: blackangst1

Have you seen the disclosure page on a mortgage? It clearly says (for example) $1200 is your payment now, $3500 will be your payment under these terms in X years. Who's fault is it when they ignore the fact they cant afford $3500? The banks?

Please.

A little bit it is. In the end it is your responsibility as to what you put your name on, but the lenders were scummy too. They told people that it was okay to take on these loans, because their house would appreciate in value and they could refinance in 2 years with no trouble. This doesn't excuse people from making bad decisions, but it deserves to be noted.

As far as I can tell with my limited knowledge of economics the fundamental problem here was that the people making the loans weren't the ones that ended up being on the hook if the person defaulted. The bank would make a dubious loan, and people were buying them up in huge packages. That way the bank made money no matter what happened with it. If that's not a huge incentive to make a bunch of shitty loans I don't know what is.

 

[sandorski]

Originally posted by: BoberFett

Originally posted by: sandorski
Yup, it is Governments fault. They bought into Laissez Faire and deregulated.

True Laissez Faire economies don't allow you to loan our more than take in.

If I deposit a gold bar at a bank and the banker loans it out to someone else who promises to pay back two gold bars next year, the bank can't give that same bar of gold to someone else, unless they've mastered the black arts of alchemy.

Only government sponsored fiat money allows such a system.

I highly doubt that. Good sense and good Accounting would do it that way, but "true" Laissez Faire doesn't limit itself to that.

 

[heyheybooboo]

Originally posted by: eskimospy

Originally posted by: blackangst1

Have you seen the disclosure page on a mortgage? It clearly says (for example) $1200 is your payment now, $3500 will be your payment under these terms in X years. Who's fault is it when they ignore the fact they cant afford $3500? The banks?

Please.

A little bit it is. In the end it is your responsibility as to what you put your name on, but the lenders were scummy too. They told people that it was okay to take on these loans, because their house would appreciate in value and they could refinance in 2 years with no trouble. This doesn't excuse people from making bad decisions, but it deserves to be noted.

As far as I can tell with my limited knowledge of economics the fundamental problem here was that the people making the loans weren't the ones that ended up being on the hook if the person defaulted. The bank would make a dubious loan, and people were buying them up in huge packages. That way the bank made money no matter what happened with it. If that's not a huge incentive to make a bunch of shitty loans I don't know what is.

Ding Ding Ding Ding

The loan originators got their cash and did the dash.

Bundled securities are layered over bundled securities and dozens of folks have little itty-bitty pieces of various standing on each bundle.

 

[Craig234]

Originally posted by: daishi5

Originally posted by: Craig234

Originally posted by: blackangst1

Originally posted by: Craig234

Originally posted by: TheSlamma

Originally posted by: blackangst1
This subject is beat to death.

Is *some* of this the gov't's fault? Sure. But how much of this could have been prevented had the Americans who took out these loans paid their bills on time, learned to budget, and learned how to read their contract which spelled out what their balloon would have been?

Answer? All of it. We could have averted it 100% and left the task of re-regulating to the congress meanwhile the market doesnt spiral. *MOST* of this is not due to deception but to Americans not knowing how to manage their money. Im curious why we are so quick to blame Da Ebil Gub'ment and not citizens?

QFT

Quite wrong. As I've said, the reason 'predatory lender' exists for a reason. Any time you make excessive credit available, to poor people, rich people or companies, you will see people misuse it. If people could get addictive painkillers without prescription, some would abuse it. Similarly, when aggressive lenders told people who couldn't afford a motgage they were just fine in these sub-prime loans, some of the people did not know better and took them. Yes, they were not well educated on the finances, but that's not the whole story.

See my response above.

I did, and it's wrong for most of these mortgages. Sure, if the rates are fixed, it can say how much the payment will go to, but typically, those are adjustable rates, and they can't.

All it takes is a smooth talking mortgage salesperson to make it sound like it's unlikely to go up.

There is another problem, these loans are sold off. The bank that makes the loan has lost the incentive to make sure that it gets paid off, because once they sell the loan, if it defaults it is not their problem. At least that is my understanding. I think it is pretty clear that when a bank no longer pays the price for tricking someone into a loan they cannot pay, a bank will trick people into loans they cannot pay.

You're right, but it's even more complicated in how the mortgages were bundled into new financial products.

 

[blackangst1]

Originally posted by: eskimospy

Originally posted by: blackangst1

Have you seen the disclosure page on a mortgage? It clearly says (for example) $1200 is your payment now, $3500 will be your payment under these terms in X years. Who's fault is it when they ignore the fact they cant afford $3500? The banks?

Please.

A little bit it is. In the end it is your responsibility as to what you put your name on, but the lenders were scummy too. They told people that it was okay to take on these loans, because their house would appreciate in value and they could refinance in 2 years with no trouble. This doesn't excuse people from making bad decisions, but it deserves to be noted.

As far as I can tell with my limited knowledge of economics the fundamental problem here was that the people making the loans weren't the ones that ended up being on the hook if the person defaulted. The bank would make a dubious loan, and people were buying them up in huge packages. That way the bank made money no matter what happened with it. If that's not a huge incentive to make a bunch of shitty loans I don't know what is.

I agree with you then...a little bit. Nothing is absolute, and 100% of the blame cant be laid on anyone or anything's shoulders. But certainly the MAJORITY of this mess is the consumer's.

 

[TheSlamma]

Originally posted by: Craig234

Originally posted by: TheSlamma

Originally posted by: blackangst1
This subject is beat to death.

Is *some* of this the gov't's fault? Sure. But how much of this could have been prevented had the Americans who took out these loans paid their bills on time, learned to budget, and learned how to read their contract which spelled out what their balloon would have been?

Answer? All of it. We could have averted it 100% and left the task of re-regulating to the congress meanwhile the market doesnt spiral. *MOST* of this is not due to deception but to Americans not knowing how to manage their money. Im curious why we are so quick to blame Da Ebil Gub'ment and not citizens?

QFT

Quite wrong. As I've said, the reason 'predatory lender' exists for a reason. Any time you make excessive credit available, to poor people, rich people or companies, you will see people misuse it. If people could get addictive painkillers without prescription, some would abuse it. Similarly, when aggressive lenders told people who couldn't afford a motgage they were just fine in these sub-prime loans, some of the people did not know better and took them. Yes, they were not well educated on the finances, but that's not the whole story.

Jesus christ how many times do I have to say THIS IS THE LARGEST PURCHASE OF YOUR LIFE. Maybe you should take a day or 16 to go over how home loans work when you are dropping 230K and figure out what you are getting. People research the fuck out of their cars but they buy a house on impulse?

Again if you can't take a little time to look into all the FREE information on buying a home then renting is for you!

 

[Craig234]

Originally posted by: TheSlamma

Originally posted by: Craig234

Originally posted by: TheSlamma

Originally posted by: blackangst1
This subject is beat to death.

Is *some* of this the gov't's fault? Sure. But how much of this could have been prevented had the Americans who took out these loans paid their bills on time, learned to budget, and learned how to read their contract which spelled out what their balloon would have been?

Answer? All of it. We could have averted it 100% and left the task of re-regulating to the congress meanwhile the market doesnt spiral. *MOST* of this is not due to deception but to Americans not knowing how to manage their money. Im curious why we are so quick to blame Da Ebil Gub'ment and not citizens?

QFT

Quite wrong. As I've said, the reason 'predatory lender' exists for a reason. Any time you make excessive credit available, to poor people, rich people or companies, you will see people misuse it. If people could get addictive painkillers without prescription, some would abuse it. Similarly, when aggressive lenders told people who couldn't afford a motgage they were just fine in these sub-prime loans, some of the people did not know better and took them. Yes, they were not well educated on the finances, but that's not the whole story.

Jesus christ how many times do I have to say THIS IS THE LARGEST PURCHASE OF YOUR LIFE. Maybe you should take a day or 16 to go over how home loans work when you are dropping 230K and figure out what you are getting. People research the fuck out of their cars but they buy a house on impulse?

Again if you can't take a little time to look into all the FREE information on buying a home then renting is for you!

You're just wrong in saying the whole issue is the buyer's need to make great predictions on the direction of adjustable rate mortgages and to see past the mortgage sales pitch.

It's about as helpful as saying the solution to alchoholism is 'don't drink too much'.

Thanks!

"For every problem, there is one solution which is simple, neat and wrong."
- H. L. Mencken

 

[Firebot]

Originally posted by: blackangst1
This subject is beat to death.

Is *some* of this the gov't's fault? Sure. But how much of this could have been prevented had the Americans who took out these loans paid their bills on time, learned to budget, and learned how to read their contract which spelled out what their balloon would have been?

Answer? All of it. We could have averted it 100% and left the task of re-regulating to the congress meanwhile the market doesnt spiral. *MOST* of this is not due to deception but to Americans not knowing how to manage their money. Im curious why we are so quick to blame Da Ebil Gub'ment and not citizens?

You can blame the American public for being irresponsible if you want, but the fact of the matter is banks laid out a loan shark type scheme attempting to get money out of citizens that should have never gotten the credit in the first place on the belief that the housing market would continue to skyrocket, charged them a very high interest rate, and the scheme failed. The government allowed such type of loans and mortgages to be legal, and legislated what would be the subprime market. The government and banks are fully responsible for the housing overvaluation that happened. By allowing loans to people who could not afford a house, the housing market got artificially inflated, with the banks profiting from this new virtual boom.

If the housing market continued to be red hot we wouldn't even be talking about this. Banks would be making tons and tons of cash, while citizens would continue to pay while the value of the home continues to go up without any problem. Any bubble has to burst though eventually.

Canada does not have this problem for a reason. The government has put restrictions on Canadian banks to prevent this type of loan sharking and false sense of entitlement to a house. Unless the average Canadian is much much smarter then the average American, the blame does go mainly to the government and the banks. While some markets are devaluing, the impact on the economy, banks and the Canadian public is minimal.

The American public can and should be blamed too, but in the end it's the American public who lost their homes and their assets, while the banks are getting bailed out from these bad loans at a premium from Uncle Sam, again at the American public's expense.

 

[WhipperSnapper]

One reason for blaming the free market is that the free trade aspect exposed us to Global Labor Arbitrage, which is one of the huge underlying drivers of the credit crisis (Americans no longer have middle class jobs while also having to pay for benefits for illegal aliens and the added costs of population explosion--can't pay the bills anymore). Global Labor Arbitrage is the economic force that is merging our economy with the impoverished economies of the rest of the world and dragging us down to third world status.

And that is one reason why many people are blaming laissez-faire and free trade.

 

[BoberFett]

Originally posted by: sandorski

Originally posted by: BoberFett

Originally posted by: sandorski
Yup, it is Governments fault. They bought into Laissez Faire and deregulated.

True Laissez Faire economies don't allow you to loan our more than take in.

If I deposit a gold bar at a bank and the banker loans it out to someone else who promises to pay back two gold bars next year, the bank can't give that same bar of gold to someone else, unless they've mastered the black arts of alchemy.

Only government sponsored fiat money allows such a system.

I highly doubt that. Good sense and good Accounting would do it that way, but "true" Laissez Faire doesn't limit itself to that.

You can doubt it all you want, you're still wrong.

 

[IronWing]

Let's make a deal. The government will get out of market regulation and we get to kill any corporate officer caught influencing government.

 

[LumbergTech]

Originally posted by: blackangst1
This subject is beat to death.

Is *some* of this the gov't's fault? Sure. But how much of this could have been prevented had the Americans who took out these loans paid their bills on time, learned to budget, and learned how to read their contract which spelled out what their balloon would have been?

Answer? All of it. We could have averted it 100% and left the task of re-regulating to the congress meanwhile the market doesnt spiral. *MOST* of this is not due to deception but to Americans not knowing how to manage their money. Im curious why we are so quick to blame Da Ebil Gub'ment and not citizens?

this seems to be the most ridiculous thing i have ever seen someone say on this matter..if everyone behaved responsibly...we could come closer to a utopia..woopty fucking doo

lets get back to reality land

the reason people dont blame citizens is because for the most part it is fucking pointless

people are going to do what they are going to do and policy has to reflect reality, not some ideal about what people should do

i can appreciate your point, maybe we should support more financial education in public schools, but i think that its going to be kind of difficult to convince people that because they make less money they dont deserve to live a comfortable and enjoyable life(whether you agree or not, you know its true that you won't convince most of them)

 

[halik]

Originally posted by: JS80
Q: Who's fault is it?

A: Everyone. Except for me, I rent.

BINGO

We're all collectively at fault, because we all benefited form inflated housing prices.

 

[Mail5398]

If the government is going to remove risk from the marketplace, let's get ready for massive bailouts in every industry until the federal government owns every business. I thought the Soviet Union already tried that but who cares about history.

 

[IronWing]

Originally posted by: halik

Originally posted by: JS80
Q: Who's fault is it?

A: Everyone. Except for me, I rent.

BINGO

We're all collectively at fault, because we all benefited form inflated housing prices.

Not true at all; utter, complete bullshit in fact. We bought before the bubble. The bubble came, developers destroyed the area around us bulldozing perfectly good desert and filling it with 3000 sq foot pinatas, taxes went up, the bubble popped, and taxes based on bubble values linger. Now the bastards want us to bail them out.

 

[halik]

Originally posted by: Mail5398
If the government is going to remove risk from the marketplace, let's get ready for massive bailouts in every industry until the federal government owns every business. I thought the Soviet Union already tried that but who cares about history.

we also tried your idea in the 1930s...didn't work out so good

 

[halik]

Originally posted by: ironwing

Originally posted by: halik

Originally posted by: JS80
Q: Who's fault is it?

A: Everyone. Except for me, I rent.

BINGO

We're all collectively at fault, because we all benefited form inflated housing prices.

Not true at all; utter, complete bullshit in fact. We bought before the bubble. The bubble came, developers destroyed the area around us bulldozing perfectly good desert and filling it with 3000 sq foot pinatas, taxes went up, the bubble popped, and taxes based on bubble values linger. Now the bastards want us to bail them out.

we = americans on average
Home equity loans, arms, flippers etc.

 

[Mail5398]

Originally posted by: halik

Originally posted by: Mail5398
If the government is going to remove risk from the marketplace, let's get ready for massive bailouts in every industry until the federal government owns every business. I thought the Soviet Union already tried that but who cares about history.

we also tried your idea in the 1930s...didn't work out so good

Read your history book again. This is not the Great Depression. We are not even close.

 

[halik]

Originally posted by: Mail5398

Originally posted by: halik

Originally posted by: Mail5398
If the government is going to remove risk from the marketplace, let's get ready for massive bailouts in every industry until the federal government owns every business. I thought the Soviet Union already tried that but who cares about history.

we also tried your idea in the 1930s...didn't work out so good

Read your history book again. This is not the Great Depression. We are not even close.

You mean a credit crunch and libor shooting up 300 bips overnight is in no way similar to what made the system come apart in the 30s?

What exactly is your background? Because I'm loosely paraphrasing Bernanke from his testimony earlier this week....

 

[blackangst1]

Originally posted by: LumbergTech

Originally posted by: blackangst1
This subject is beat to death.

Is *some* of this the gov't's fault? Sure. But how much of this could have been prevented had the Americans who took out these loans paid their bills on time, learned to budget, and learned how to read their contract which spelled out what their balloon would have been?

Answer? All of it. We could have averted it 100% and left the task of re-regulating to the congress meanwhile the market doesnt spiral. *MOST* of this is not due to deception but to Americans not knowing how to manage their money. Im curious why we are so quick to blame Da Ebil Gub'ment and not citizens?

this seems to be the most ridiculous thing i have ever seen someone say on this matter..if everyone behaved responsibly...we could come closer to a utopia..woopty fucking doo

lets get back to reality land

the reason people dont blame citizens is because for the most part it is fucking pointless

people are going to do what they are going to do and policy has to reflect reality, not some ideal about what people should do

i can appreciate your point, maybe we should support more financial education in public schools, but i think that its going to be kind of difficult to convince people that because they make less money they dont deserve to live a comfortable and enjoyable life(whether you agree or not, you know its true that you won't convince most of them)

You disagree with me in general so therefore Im not suprosed at your comments. Id encourage you to find the untruth in my comments.