Why are we expected to be smarter than the banks?

[cthulu2016]

"A lot of stupid people bought more house than they could afford."

Let's examine that common explanation of the housing bubble.

People (meaning someone other than myself, as typically used) are stupid, and thus deserve no assistance or even sympathy.

A person observed that everyone was making big profits in real estate. Ownership was "smarter" than it had ever been since it carried a huge asset-appreciation premium that renting did not. That person said, "Can I afford to buy this property?"

Well, if the price of the property continues to appreciate a person with no money at all can afford to buy the property. If he finds he cannot make the payments he just sells the house at a profit. It's like buying stocks on margin... if they always go up more than the interest on the margin then you can't fail.

So Wells Fargo says to the person, "Here yo go. You don't have much money but we will lend you $300,000 to buy this property."

Who is the stupid party here? The under-capitalized purchase makes no sense unless houses are guaranteed to always go up. But giving the mortgage is also predicated on the assumption that housing always goes up.

Why is the average person a stupid moron who deserves what he gets because he is so stupid that he has the same view of the housing market as the biggest mortgage-issuing banks in the world?

If Wells Fargo is willing to give you $300,000 against this property then Wells Fargo must think it is a viable purchase! And who knows more about mortgages and real estate than Wells-fucking-Fargo?

People branded irresponsible scum for accepting the financial advice of huge financial institutions while the huge financial institutions are treated like God.

[hedgehog]

1. Exactly! Not to mention - what drove the housing bubbles?

Weren't the banks who were ever willing to write higher and higher mortgages significant players?

[jtuck004]

2. And appointees of OUR government told us the fundamentals were strong, couldn't see a downside...

So we would have to be more clever, smoother, trickier, and maybe smarter than the banks and the government that is supposed to regulate them on our behalf.

No barrier there.

[Fire Walk With Me]

3. An Occupy LA member sums it up so well:

"The big key is understanding that the banks have built a model that profits from tricking people into taking bad loans, screwing investors by selling those bad loans to them (bad loans offer high returns, and look good on paper), then taking out insurance policies that collect if the loan they just sold to sucker investors goes bad. Then when the loan explodes, they collected those insurance payouts which, when the insurance company (biggest was AIG) went out of business were backed by TARP bailout money footed by the U.S. taxpayer. They then evict the homeowner and collect a second set of huge insurance payouts (homeowners insurance pays out full value of home upon eviction, and this is setting aside all the equity money which is pure profit). When your neighbor gets evicted, your property value drops simply from the bad luck of being beside him. If enough neighbors get evicted, your house's value falls to a point it's no longer worth paying, you walk away, and now your house is part of the crisis too.

As the cycle continues, the all-consuming maw of the banks buys these houses backs, flips them into rental properties, and before you know it you've got a Corktown, MI story where the average home value is reduced to ~$14,000, or a mortgage payment of ~150/mo, yet 85% of residents are tenants and the average rent is ~450/mo. Why? Because the banks also have the power to grant the loans people need to own the homes, and have decided that no individuals and/or small investors can receive loans, even tiny ones like ~$10,000 mortgages. As a result, giant corporations and wealthy investors (many bank owned, and all bank-affiliated) are buying up massive tracts of housing that are suddenly affordable, with bank-provided competition elimination in the form of no small loans being granted, then flipping them into rentals and enslaving the former homeowners who can't even afford to move.

Do you see how the banks have figured out how to make this situation profitable at every step? I'm not even going to go into how, thanks to being part of the Federal Reserve (not government, privately owned, don't forget it) ownership team and most important in-crowd in the world, the banks have literally UNLIMITED money with which to buy up these homes, and the only person who loses as they do so is us, the taxpayer, AGAIN, because the more money that is printed to use to buy our homes out from under us, the less the dollar in our pocket becomes worth, a fact only relevant to those who do not have the power simply to crank up the presses more.

'We can promise money to pay any debt. What we cannot promise is its purchasing power.' - Alan Greenspan, while Chairman of the Federal Reserve.

The game is rigged, and we need some time to unrig it. That's all we're asking for, and it benefits every person who is not a bank, while still allowing them to remain profitable throughout (even though they don't deserve it)."

[Downwinder]

4. The Banks here are renting.

[KurtNYC]

5. in order to avoid blaming the banks

obviously. Blame the victim.

[cthulu2016]

6. ...