Isn't this how we got here in the first place?


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saulgoode is offline saulgoode Post #1  March 23,2009, 10:16am
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http://news.yahoo.com/s/nm/20090323/..._usa_bailout_6


We're in this mess because during the 90s, we relaxed lending laws so more people could get loans. We created a "sub" prime market, and the banks threw money at anyone who ran towards the light. Housing in the North East, Florida, and the West spiked, because anyone could get a loan to pay for that house, and the houses appreciated at rates many times higher than the per-capita income increased. i.e., The appreciation was unsustainable.


Everybody saw it.


The loans were known to be high-risk, and often fraudulent, so they were bundled up with some good loans, filtered through a few institutions until they hit Wall Street, then sold as securities and bonds. You always had a point or two tacked onto your loan so that the originator could catch that point during the trades. My loan in 2005 got sold three times.


Right. So that didn't work out too well. The bad loans were too prevalent, and when you loan $500,000 to a guy making $50,000/yr, well, you get what you deserve. Yes, they actually made LOANS like this. Der.


But if you're the originating bank andmortagebrokerwhat do you care, so long as someone else bought the loan, and it's out of your hands. Three days, maybe a week, and the loan's no longer your problem.


Now, here we go again. We're bundling up the bad loans -- "Sop up the toxic loans" -- and trying to sell them again to Wall Street. For a while we'll get some relief. There'll be a wave of refinancing. We'll "cleanse banks" by drowning the investors in the toxic debt.


Then it won't be our problem anymore. Until the next Presidency. Then it's his/her problem.


Until 2011. When our taxes are slated to go up.


Geez. Someone's gotta pay off these loans, or write it off their books as a loss.


None of this makes a damned bit of sense to me. We're thinking short-term again, and that didn't work before!


- Saul
 
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RobInPlano is offline RobInPlano Post #2  March 23,2009, 10:24am
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Agreed, agreed, agreed.


It seems like so much of the proposed solutions are more of the same problems that got us into the mess.


Everybody is scrambling to avoid the pain that comes with the consequences of our bad behavior. But all we really are doing is passing biggerpain on to our kids.


Let's let the markets correct to their true value, and rebuild with a clean and healthy marketplace.
 
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saulgoode is offline saulgoode Post #3  March 23,2009, 11:01am
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RobInPlano,544993 wrote :

Agreed, agreed, agreed.


It seems like so much of the proposed solutions are more of the same problems that got us into the mess.


Everybody is scrambling to avoid the pain that comes with the consequences of our bad behavior. But all we really are doing is passing biggerpain on to our kids.


Let's let the markets correct to their true value, and rebuild with a clean and healthy marketplace.
This won't make it to your kids. I'm thirty-something, and fully expect this problem will hit me several more times before I die.


See, just as soon as we get this housing thing figured out -- which will take three or four presidencies, just as long as it took us to get into this mess (Clinton 8, then Bush 8) -- we'll hit the ever-looming Social Security bust. Suddenly, millions of good, honest, hard-working retirees who paid their dues, will no longer receive benefits, or will receive an amount far too small to sustain life.


There's a saying: "Let the beatings continue until morale improves!"


I feel like that's the logic we're using. We're doing the same things that got us into this mess, thinking they'll get us out of this mess. We're taking short-term gains against a long-term loss. Our politicians are even encouraging this mindset, encouraging us to think of the immediate gains and disregard the long-term losses.


We're bundling bad loans to sell themonWall Street -- once again, we're playing hot-potato to see who's left holding that debt.


We're encouraging banks to loosen lending standards -- maybe there's a reason the banks don't want to loan you money.


We're encouraging Wall Street to takemore risks than they're willing -- Geithner said that exactly, that Wall Street and investors must assumemore of the risk.


So, let the loans continue, let the risks accumulate,refinance the bad and bundle with the good, and sell it cheap, let's play duck duck duck duck duck duck GOOSE.


I did nothing wrong, and I'm smart with my money.But I sure as hell have to pay for the E/W coasts's mistakes, don't I. Egadsky.


Let the beatings continue, until morale improves.


- Saul
 
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dito is offline dito Post #4  March 23,2009, 11:20am
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Pouring gas on a fire puts it out!


This is going to affect all of us not just future generations.
 
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dwreese182 is offline dwreese182 Post #5  March 23,2009, 12:23pm
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Americans have a cultural problem. For some messed up reason most find it impossible to live below at at their means. The only thing my grandfather bought with credit was his house, everything else was cash. I've followed suite and have no debt whatsoever (of course I don't have a house but where I'm at in my life I don't really need one).


Did the markets crash back then when there were less people getting loans? No, they didn't (Sure the banks crashed back then, but it was mainly due to the lack of insurance and the mass amounts of people coming to withdrawel their money at one time out of fear). Back then banks were forced to be honest (as honest as a bank can be), now you have everyone and their brother wanting to buy a new car, furniture, big screen TV, huge homes and almost anything else you can think of they can't afford in the first place.This has allowed for the rise of super banks and the fall of the local community banks.


I believe that if people were to live at or below their means it would force more businesses to be honest and would help fight some of the curruption in the free market. Unfortunately, the American spending (or over-spending) culture will not be changing anytime soon. Thank you Television! Businesses can almost always bet on the average American obsession with class.


Of course I'm not a financial expert, but you can't argue that this is a problem in the US.
 
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Cyclist_Steve is offline Cyclist_Steve Post #6  March 23,2009, 12:46pm
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yup - our thinking here is all jacked up. i want what i want, when i want it.... and that's RIGHT now! i remember my parents having charge cards for department stores, but they were paid off every month. my grandparents never had anything of the sort.





......... i hope to be debt free in the not too distant future, but alas.... i fall prey to trading that desire for some new gizmo or gadget all too often.
 
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iRiver is offline iRiver Post #7  March 23,2009, 12:58pm
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This is just how it is.


The smart save, and build for tomorrow while the persistent victims live today as if tomorrow may never come.


Wasn't that the moral of the three little pigs? So what's changed?
 
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dwreese182 is offline dwreese182 Post #8  March 23,2009, 1:03pm
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Cyclist_Steve,545179 wrote :

yup - our thinking here is all jacked up. i want what i want, when i want it.... and that's RIGHT now! i remember my parents having charge cards for department stores, but they were paid off every month. my grandparents never had anything of the sort.





......... i hope to be debt free in the not too distant future, but alas.... i fall prey to trading that desire for some new gizmo or gadget all too often.
See there is a problem with not having any debt here in America. I have NO credit (which is worse than bad credit). The system is flawed. I try to be responsible with my spending but if I ever wanted to buy a house they would more than likely just laugh at me if I tried to get a loan. It is almost required to have a credit card and use it. I have a credit card (big $250 limit) but I have never used it. I just despise owing anyone money, even if I have the means to immediately pay it back. I would rather not eat than bum 5 bucks off of a friend for lunch if I forgot my wallet somewhere. Hard headed I guess.
 
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ThePriestess is offline ThePriestess Post #9  March 23,2009, 1:11pm
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dwreese182,545146 wrote :

Americans have a cultural problem. For some messed up reason most find it impossible to live below at at their means. The only thing my grandfather bought with credit was his house, everything else was cash. I've followed suite and have no debt whatsoever (of course I don't have a house but where I'm at in my life I don't really need one).


...


I believe that if people were to live at or below their means it would force more businesses to be honest and would help fight some of the curruption in the free market. Unfortunately, the American spending (or over-spending) culture will not be changing anytime soon. Thank you Television! Businesses can almost always bet on the average American obsession with class.
It is a problem, part individual and part the nation as a whole. Two generations (and growing) have been virtually force fed the belief they need to live in debt both to get what they want ... and to build CREDIT.


Credit card companies inundated them with daily offers and our economy became dependent upon consumers over-spending for items they didn't need (or even necessarily want).


But it doesn't stop at individual consumer spending ... businesses are guilty as well.
 
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RobInPlano is offline RobInPlano Post #10  March 23,2009, 2:36pm
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I agree with the sentiments about people addicted to debt.


Here's another thing to consider. What would happen to the price of cars, houses, and other big ticket items if loans became much more difficult to get?


It would push prices down. Real estate prices would drop, car prices would drop, etc... and suddenly we find ourselves in an environment where it'smore reasonablefor an average person to save up cash to buy a car or home.


The fact is that prices of big ticket items thatconstitute the "American dream" are artificially inflated by the demand created by easy credit.


If we will just allow the credit bubbles burst instead of propping them up, the people who will benefit most are the poor.Suddenly it becomes much more reasonable to save up25% to make a down payment on a housewhen the houseisn't artificially inflated to 100% of its real value. Not only that, but the payments on the house would be half as much as they are now.


Even if you can't afford to buy a house, what do you think happens to rental rates in those circumstances?


For all the class warfare fans out there, you should realize that the current efforts to prop up thehousing bubble is really going against your goals of taking from the rich and giving to the poor. Instead, the efforts to prop up thehousing bubble ispreserving the wealth (home values) of the rich, at substantialexpenseto the poor.
 
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