Blaming the "EVIL banks" for being greedy, to me, is akin to blaming doctors, teachers, or colleges for being greedy and evil for taking advantage of the common man and making him pay so much for healthcare and education. I believe the real finger to point is at our government.
"Fannie and Freddie were seized by the government in 2008 and guarantee around $5 trillion in mortgages (half the market). Together with federal agencies, they are responsible for backing around nine in 10 new mortgages. Keeping them afloat has cost taxpayers about $134 billion so far. (very costly bailout, TARP has been paid back, and I believe even GM will pay back almost all the money too) "
http://www.marketwatch.com/story/house-bill-seeks…
The market in housing hasnt been private for a decade or two. At the end of 2009, the government lifted the cap on Fannie and Freddie, putting us on the hook for their $5 Trillion portfolio. Investors always knew that the government implicitly backed Fannie and Freddie, and so the market let them borrow at far cheaper rates than they should have been able.
Fannie and Freddie bought or guaranteed mortgages from banks to "provide liquidity to the housing market". Banks and mortgage providers were happy to issue loans and sell them to Fannie, collecting fees for issuing the loans. Thus, a ton of capital was mis-allocated to the housing sector, believing their money to be safer due to government guarantees. This is why I generally point to the government (and the Fed for allowing such easy money in 2001) as the primary reason of the current downturn.
Congressmen should be forced to take at least two economics classes before being allowed to vote. Democrats should have to take two additional remedial classes...
The government's massive involvement in Education (primary and now ONLY provider of student loans, flooding market with cheap money) and Healthcare (medicare / medicaid / granting insurance companies antitrust and price-fixing exemptions along with tax benefits) have similarly created bubbles / inflated the cost of healthcare and education, as they did to the housing market.
Blaming the "EVIL banks" for being greedy, to me, is akin to blaming doctors, teachers, or colleges for being greedy and evil for taking advantage of the common man and making him pay so much for healthcare and education.
/government rant. Long live Ron Paul and Libertarians. Otherwise, get ready to use your paper money as toilet paper.
I'm getting so sick of dipshits like you that try and blame the government for the financial crisis.
Let me be clear, the financial crisis devastated the global economy because CDOs, CDO^2s, and naked-CDS (supplied by AIG) spread the toxin of sub-prime garbage throughout the system, leaving everyone brutally vulnerable to a downturn in the housing market. A downturn in the housing market alone would not have destroyed EVERYTHING if not for the financial instruments spreading the cancer throughout the entire system. And the insane amount of shitty loans would not have been possible without those same financial instruments.
Demand was driven from the top down. Why? Because CDOs made up of toxic dog shit mortgages were marketed as AAA securities, just like Treasuries, only with a higher return, and you could get them insured. So, the shady lenders had a huge incentive to pump out garbage loans to dipshits who couldn't afford them, pocket a ton of cash, and then pass on the mortgages to the banks, who could not get enough of them. The banks then, in turn, packaged them up in CDOs, marketed as pseudo-AAA securities, and passed them on to the next dipshit, making billions in the interim.
Yes, the government played a role. That is absolutely true. But, do you know what played a bigger role? Deregulation. The end of Glass-Steagall. The Commodity-Futures Modernization Act of 2000. Letting banks have ungodly leverage ratios. How did they get all of this deregulation? By lobbying the government and filling the ranks of government with their cronies (dipshits like Bob Rubin, for instance.)
Look, it'd be nice if we could just say "the government did it! It's the liberals fault!" But, that's just not how reality works. Of course, this is probably tough for you to understand, seeing as you were probably 19 years old when it all went down, sitting in a fucking intro-to-microeconomics class. But go ahead, keep cheer leading assholes that destroyed the economy and needed a bail out while calling yourself a libertarian.
LOL -- yeah, because a bunch of professional economists must be dipshits, too. Just because someone disagrees with you, doesn't make them a dipshit.
OP... what the fuck?
yeah the government is to blame to a certain extent (i.e. keeping rates super low in the 90's and early 2000's, then increasing them kind of quickly in 04-06, and throughout this entire time telling everybody and their grandmas to buy houses) but do you really think that if credit rating agencies are not culpable at all? They gave AAA ratings to securities that have had very little history. Also the banks themselves... yeah its the average person's fault for taking out loans they couldnt afford but half the time, the people taking out the loans had no idea what the terms of the loans are. Are they stupid? possibly. Were the terms of the loans so difficult to understand that even an educated person had difficulty understanding them? Yes.
It's a fool's errand to point blame at just one entity as opposed to many.
The banks were of course guilty because they were over-leveraging to produce greater profits (and losses ultimately). It is well known that the culture within banking's best and brightest is extremely competitive, so making extra margin off these high leveraged derivatives was more encouraged than considering the risks of it all. They knew they were playing with fire and chose to take profits over the potential risks.
The regulators were guilty because they grouped all these toxic securities along with decent securities into a single product and stamped it with a AAA rating. The tranche system used with MBS was vastly misunderstood by investors who assumed that just because they had a AAA security, they were safe in event of default. They thought that if something bad occurs, those with lower rated securities would be liquidated first, leaving themselves 'shielded' from the storm. This is the BS that regulators fed to banks, which banks fed to investors. What they didn't consider is that the housing market was so over leveraged that even AAA securities would be liquidated.
Lastly the government is responsible as well because they encouraged the sub-prime housing market. They laid out several plans to encourage housing in low income areas. Subsequently, these areas were a large reason that many defaulted. The government gave incentive to banks to over-leverage themselves when it came to MBS. The Basel Accords allowed banks to over-leverage mortgages by requiring FAR LESS capital on mortgage products than required on regular loans (believe it was like 1.4% capital vs. 8% !). And the fact that the government pretty much allowed Freddie & Fannie to have a monopoly on the housing market did not help. In fact, they had such little competition that both these companies had little incentive to keep controls top notch. Hence why they barely exist at the stature they once did.
So you can't really just blame one person. And honestly I only mentioned a fraction of the people to blame. It goes much deeper than that.
Bullshit. Blame credit ratings and banks if you want, but credit ratings agencies are independent, and its your own fucking fault for not doing your due diligence. Why were these loans enabled in the first place? Because of the governments ultra low interest rates, and Fannie and Freddie implicitly guaranteeing the housing market and flooding it with capital.
Im not saying Democrats are primarily to blame; government in general is. Just in general, democrats have absolutely no concept of economics, or serve a constituency that doesn't at least.
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