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re: Who/what entity would you say is most to blame for the 2007-2009 housing crisis/recession?
Posted on 2/3/22 at 2:19 pm to grizzlylongcut
Posted on 2/3/22 at 2:19 pm to grizzlylongcut
quote:
So it has nothing to do with the fact that the Federal Government basically forced those banks to write the loans?
that is not true - the fnma and fhlmc component of this was very small...they got crushed because they guaranteed so many mortgages - most high quality / but the spillover was just to big
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Posted on 2/3/22 at 2:20 pm to SlowFlowPro
Such an underrated movie
Posted on 2/3/22 at 2:22 pm to grizzlylongcut
Subprime mortgages.
Big mortgage lenders (backed by the government) were giving mortgages to anyone.
In summary, investors were buying mortgages from financial companies as an investment.
The financial firms had nothing to lose because they would make the loan then turn around and sell it at a profit. They encouraged their employees who made these loans to make more. And the more loans the individual loan officers made the more money they would make as well.
So this lead to them seeking out people to make loans to. Convincing people, who didn't have the enough money, that they could get the loan to work for them so they could afford it, etc.
Financial firms were making money hand over fist, the individuals giving out loans were making a lot of money, but when you give out a lot of loans to people who really can't afford it, at some point they will not be able to pay.
So the investors started losing on these investments and stopped buying them from the financial firms so they were not able to pay the banks they borrowed from back and it just kept trickling down from there.
But banks can make loans to investors on these risky investments because hey.. If they don't work out and they start losing money, they can just get into their helicopters and fly up to Washington DC and get bailed out.
Big mortgage lenders (backed by the government) were giving mortgages to anyone.
In summary, investors were buying mortgages from financial companies as an investment.
The financial firms had nothing to lose because they would make the loan then turn around and sell it at a profit. They encouraged their employees who made these loans to make more. And the more loans the individual loan officers made the more money they would make as well.
So this lead to them seeking out people to make loans to. Convincing people, who didn't have the enough money, that they could get the loan to work for them so they could afford it, etc.
Financial firms were making money hand over fist, the individuals giving out loans were making a lot of money, but when you give out a lot of loans to people who really can't afford it, at some point they will not be able to pay.
So the investors started losing on these investments and stopped buying them from the financial firms so they were not able to pay the banks they borrowed from back and it just kept trickling down from there.
But banks can make loans to investors on these risky investments because hey.. If they don't work out and they start losing money, they can just get into their helicopters and fly up to Washington DC and get bailed out.
This post was edited on 2/3/22 at 9:53 pm
Posted on 2/3/22 at 2:29 pm to Paul Allen
quote:
50k for a 300k house isn’t that inconceivable without debt and a 20% down payment. What would they note be, like $1400-$1500. Someone makings 50k could afford it.
Back then rates were 4% to 6%... does the payment still work?
Posted on 2/3/22 at 2:29 pm to grizzlylongcut
quote:Nope.
So it has nothing to do with the fact that the Federal Government basically forced those banks to write the loans?
The problem was NOT that there was too much supply of subprime mortgage backed securities. The problem was there was too much demand for mortgage backed securities.
Hedge funds, banks, and brokerages had too much demand for mortgage backed securities and other home mortgage investment vehicles. American home values had always increased. Domestic and foreign investors wanted to invest in those products.
Banks and lenders reduced their requirements to meet that demand.
Posted on 2/3/22 at 2:34 pm to GreatLakesTiger24
quote:
home buyers don't get nearly enough blame. just because you get approved for a loan doesn't mean you should take it.
Maybe to some degree, but a lot of these people were targeted and lied to.
Just like everyone who gave their money to Bernie Madoff to manage and other so called financial institutions that did what Bernie did but on a much smaller scale.
A lot of people who got loans were not even seeking to buy a new house. They were approached and told that they could buy a new home on whatever they were making. That they could make it work out for them because they had financial incentives to make those loans.
Everyone is chasing the American Dream right? So when someone approached them telling them they could change their living situation without them having to make more money.. They are going to be all in on it.
Posted on 2/3/22 at 2:35 pm to LT
You tell me
Posted on 2/3/22 at 2:35 pm to Salviati
quote:
Nope.
The problem was NOT that there was too much supply of subprime mortgage backed securities. The problem was there was too much demand for mortgage backed securities.
Hedge funds, banks, and brokerages had too much demand for mortgage backed securities and other home mortgage investment vehicles. American home values had always increased. Domestic and foreign investors wanted to invest in those products.
Banks and lenders reduced their requirements to meet that demand.
So, the fact that they were forced to lend to people that could never pay their house note by the government isn't a foundational issue in your estimation? Fascinating.
Posted on 2/3/22 at 2:38 pm to OweO
those poor, helpless people!
Posted on 2/3/22 at 2:39 pm to grizzlylongcut
quote:When people say things like: "the [Feds] basically forced those banks to write the loans," it means they have no idea what they are talking about.
So it has nothing to do with the fact that the Federal Government basically forced those banks to write the loans?
They are just regurgitating someone else's talking point.
Posted on 2/3/22 at 2:40 pm to grizzlylongcut
Whoever voted for/enforced legislation requiring folks be approved for loans for reasons outside of their demonstrated ability to repay those loans.
Period. Full stop.
Period. Full stop.
Posted on 2/3/22 at 2:42 pm to grizzlylongcut
It started with HUD/FHA and their acceptance of Buyer Down Payment Assistance Programs which was the fuel to the fraud.
Posted on 2/3/22 at 2:43 pm to Salviati
quote:
When people say things like: "the [Feds] basically forced those banks to write the loans," it means they have no idea what they are talking about.
They are just regurgitating someone else's talking point.
Did they not pass legislation over it?
Posted on 2/3/22 at 2:44 pm to grizzlylongcut
quote:
Did they not pass legislation over it?
And threatened with litigation.
Posted on 2/3/22 at 2:48 pm to notiger1997
quote:
Lots of blame to go around.
I remember Democrats having their race baiting politicians standing in front of congress demanding everyone should be able to get a loan and house even if they had next to nothing for a down payment.
Republican banker folks were happy to make it happen knowing the government would bail them out
Very accurate, but if Republican bankers balked (and many privately expressed concern) they were labeled racist. Just how this country rolls today.
Posted on 2/3/22 at 2:49 pm to hubreb
quote:
that literally had nothing to do with it
I’m going to pencil you down as not smart.
Posted on 2/3/22 at 2:51 pm to fallguy_1978
quote:
GW Bush didn't reverse any of their bad policies though.
And what do you think the media would’ve done if the “compassionate conservative” president had pulled the rug? Basically Washington scariced a few years of a miserable recession to satisfy BLM before their lives mattered.
Posted on 2/3/22 at 2:54 pm to grizzlylongcut
No law required banks to make subprime loans.
No law required banks to lower their lending standards.
Banks lowered their lending standards to create additional mortgage backed securities.
No law required banks to lower their lending standards.
Banks lowered their lending standards to create additional mortgage backed securities.
Posted on 2/3/22 at 2:55 pm to Geauxldilocks
quote:
that literally had nothing to do with it
I’m going to pencil you down as not smart.
got you, but considering i lived and worked it....sold a few 100mm in non-agency RMBS, CDOs, CLOs - was part of group whose only job was to peddle this stuff around the globe - i'm sure you know more than me....the simple answer as i posted earlier - the repeal of Glass Steagal in '99 was what caused this
one of the worst trades i was involved with - was a reverse inquiry of a CDO squared - the buyers ask for certain specs - it was 11.5mm / six months later they lost 10.3mm of it
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