Can we call this "crisis" what is really is? GREED

[PBS Poll-435]

For the better part of eighty years, the most reliable investment any bank or institution could make was in a home mortgage. People will pay off the loan that secures their residence.

However, 6-8% is not a great return if you are looking for your stock to rise exponentially. Banks(or any publicly-traded company, for that matter,) want DOUBLE DIGIT revenue and profit growth. How are you going to do that? A 20% 10K credit line? Nope. A 15% 30K auto loan? Nope. You need to somehow generate 10+% revenue on a high-dollar loan(and I am not talking about airplane notes.)

Many thought that home values would never decrease.

Many thought that as long as most people paid their mortgages, there would be no problem.

Many thought that housing was the strongest sector in our economy.

That kind of "conventional wisdom" brought us the mess we are in today. Adjustable-rate mortgages. Option mortgages that had the borrower pay only interest. How in the hell, in an "Ownership Society" do you build equity when you aren't paying a freaking penny towards the principal on the loan that you signed for?

Here is the problem. Home values went down. Countrywide didn't morph into ReMax. The lenders couldn't sell the homes that they had foreclosed on at a profit. Whoops!

Lenders that played the capital "musical chairs" game got stuck. How were they going to deliver DOUBLE DIGIT increases in revenue when they were actually losing money by not being prepared to sell homes that they had foreclosed on?

Lenders, in an attempt to free up capital, AND TO MAKE DOUBLE DIGIT ROI, created and utilized MBSs or mortgage-backed securities. Home loans were bundled, good and bad, and sold as securities. And when those securities go bad...

Wall Street freaks out, and here we are.

CEOs, Boards of Directors, and fat-cat "inside" investors wanted to make tech-type returns on the previously "safe" financial sector stocks.

The point here, is that the banks were counting on making profits from foreclosed homes. Oops.


Please K/R if you think this is a good explanation of the problems that triggered the "meltdown" and pending legislation.

[lligrd]

1. I Guess It Can Become A Crisis When So Many Were Invested

due to greed.

[PBS Poll-435]

3. Exactly, and here is why.

The family living a few houses down has income that is mostly derived from commissions. It is worth 250K. A nice little 4/3/3 in a good neighborhood with good schools.

The decide to re-finance their home to pay off some credit card debt and to build a pool for little Jimmy.

They figure that they can take the "option" ARM at a GREAT interest rate, pay no principal, if they have to, for two years and everything will even out in the end.

Sadly, this family, because of the economic downturn, never made a payment that exceeded the interest on their note. Daddy lost his job selling tech solutions. Mom went back to work as a secretary, and eventually, their savings was wiped out and they couldn't even make the interest payment on their modest home.

Home gets foreclosed...

Worshington Mutual(sic) now has a 200K note on a home that is worth 180K, retail, or 165K via auction.

Because they have no method or process in which to deal with this "asset," they sell it for 165K.

An instant 35 THOUSAND DOLLAR loss for WoMu.

[SE7Nth]

2. Obama calls it Greed

[PBS Poll-435]

4. I know he does. He gets this problem when so many don't

:thumbsup:

[PBS Poll-435]

5. kick

nt

[ShortnFiery]

6. It's all about GREED. Damn our democratic "leaders" who support this SCAM to

ROB the American People of their hard earned tax dollars only to send them to GREEDY corporate executives OVERSEAS.

Our democrats who support this are "out of touch" with the average American.

Damn every one of them who vote for this bill - may they be promptly ousted in their next democratic primary. :grr: Email/call your representative and tell them that THEY work for US!

[PBS Poll-435]

11. I never said that I was opposed to a bailout.

I don't want a stock market crash.

[PVnRT]

7. The problem is driven by greed, yes

Along with the push in the past decade to loosen regulations and controls on mortgages to get more people into homes.

I find it funny that the same kinds of policies espoused by the U. of Chicago economics department caused this, yet DUers are citing 44 of them on a list of people who oppose doing something to stem the tide while a better solution is found.

[KittyWampus]

8. Crony Capitalism

[PBS Poll-435]

14. ...

:kick:

[prolesunited]

13. Don't be logical

The fact is the wealthy profited from the Depression. No surprise those economists are trying to engineer another one.

[BlueInPhilly]

9. The market needs this bailout

There is no more liquidity out there. No more secondary market. For every economist that says "NO" to this, I am certain you can find one who says "YES" -

You might not agree with it, you might think it's all about greed. But this is WAY BIGGER than you and I. PLEASE, just this ONCE, trust your DEMOCRATIC party leaders.

[PBS Poll-435]

12. I agree.

The OP was about the cause to the problem.

I am tentatively supportive of the bill.

[Orsino]

10. Everyone is, or nearly so. Even * admitted that, didn't he?

:shrug: