It is either the bailout or watch the banks start collapsing in a cascade effect. Then YOU could have sat back and watch as the FDIC announces that it can not insure YOUR deposits, while the stock market simultaneously began a panic. By time the government had to step in, YOU would have lost most, if not all of your life savings and the national economy would be in full blown recession.
I wish there could have been another way or that Bush had given the economy more time to adjust. This bailout gives the government too much control over the entire private sector and industry as a whole. The government now controls the banking system, it basically has operational and internal oversight over banking management, whereas before the government limited itself to regulatory policies. Add the banking system to the telecommunication system and a disturbing picture begins to emerge.
All under the guise of a conservative president. The guy is essentially a national socalist.
My Girlfriend said to me..."How many guitars do you need?" and I replied...."How many pairs of shoes do you need?" She got really quiet.
I will take a 30/40 year old home over a McMansion any day... they are built better(at least where I live). Sure my house is smaller but it was cheaper and I have more money to play with. I also don't mind sweat equity, I enjoy working on my house and fixing it up room by room.
I'm with you. The construction of older homes are so much better plus, in my opinion, they have far more character than the McMansions.
"When one gets in bed with government, one must expect the diseases it spreads." - Ron Paul
No the answer is not more regulation. The answer is more education. People need to educate themselves on how to be fiscally responsible. Not everyone can afford a 4 bedroom, 3.5 bath, two car garage home with cathedral ceilings and an in ground pool in the backyard. If all you can afford is a small starter home that that is what you should get. The problem is that we have become so materialistic. People are not satisfied with a smaller home or an economy car. They need the big homes and the BMWs or Mercedes-Benz in the drive way. Not everyone can afford that shit but people will dig themselves into massive debt just to keep up with the Jones'. I read somewhere that if every American stopped using their credit cards and simply bought what they could afford with cash our economy would collapse. So regulation is not going to change that.
come on. we can't teach our kids to read and do addition properly. we're going to explain the ins and outs of finance to everyone? shit, people need an MBA and a JD just to understand a basic mortgage contract... even a college degree won't do it. the people being fucked by this crisis aren't all rolling benz's and living in mansions. this is predatory lending, period. and we need to take a harder line on it.
the problem isn't just that the borrowers don't see or understand the long-term effects. the problem is that the lenders don't care about the long-term effects. they want to make their fortune and then hope to bail before it collapses and they don't care who gets burned in the collapse. THAT is what needs to be stopped.
Well to reinforce you post Kerry Killinger was just fired at WaMu's CEO. From some sources that I have he walked away with a nice package. Yet the thousands of people who had their lives turned up side down because of foreclosures don't get to go home to their multi-million dollar home with their multi-million dollar severance package.
I'm with you. The construction of older homes are so much better plus, in my opinion, they have far more character than the McMansions.
I agree...We have an 80 year old home built like a fortress. It would take a 1/2 million to build a home like it today...
but what kills me is so many say they don't build homes as well today as they used and yet these same people buy the new poorly constructed houses despite this...
Sometimes it's like they just want a new home for a security system and three car garage...
I think society is going thru a cycle. First in the 30’s there was a depression. People learned to live frugally. Then after WWII troops came home and lived the American dream….owning a house and working hard for the things they wanted. Somewhere between then and now, people became to think they were entitled to things without working for it.
Is it the bank’s duty to teach greedy people how to manage their money?
Did banks take advantage of these greedy people?
And I agree with the original post.
Healthcare, pricey education, gas prices, real estate.
Why don’t people protest?
Maybe we’re too busy on chat boards to actually protest anything.
*~Pearl Jam will be blasted from speakers until morale improves~*
come on. we can't teach our kids to read and do addition properly. we're going to explain the ins and outs of finance to everyone? shit, people need an MBA and a JD just to understand a basic mortgage contract... even a college degree won't do it. the people being fucked by this crisis aren't all rolling benz's and living in mansions. this is predatory lending, period. and we need to take a harder line on it.
the problem isn't just that the borrowers don't see or understand the long-term effects. the problem is that the lenders don't care about the long-term effects. they want to make their fortune and then hope to bail before it collapses and they don't care who gets burned in the collapse. THAT is what needs to be stopped.
Some blame has to be put on the borrowers too. Sure, mortgage contracts are complicated, but the info about the interest rate (what it is, and if it's fixed/adjustable) and the loan amount and all of the "important" details are very straight forward and simplified.
And in most cases, you have an agent and attorney that you select and pay to help clarify things.
I just can't excuse people who sign for a mortgage for several hundred thousand dollars, and either can't understand it, or don't research to figure things out.
Like I said before, I am sure that some people were screwed, with last minute term changes and things like that, and there should be some sort of appeal/grievance process to help them. But most of the problem is either people who borrowed above their means, or were counting on their home to keep increasing in value.
My whole life
was like a picture
of a sunny day
“We can complain because rose bushes have thorns, or rejoice because thorn bushes have roses.”
― Abraham Lincoln
come on. we can't teach our kids to read and do addition properly. we're going to explain the ins and outs of finance to everyone? shit, people need an MBA and a JD just to understand a basic mortgage contract... even a college degree won't do it. the people being fucked by this crisis aren't all rolling benz's and living in mansions. this is predatory lending, period. and we need to take a harder line on it.
the problem isn't just that the borrowers don't see or understand the long-term effects. the problem is that the lenders don't care about the long-term effects. they want to make their fortune and then hope to bail before it collapses and they don't care who gets burned in the collapse. THAT is what needs to be stopped.
You don't need an MBA to know wether you can afford a $2,000 a month mortgage payment or not? You don't need an MBA to know that your interest rate will go up every year, if you have an adjustable rate, and while you can afford your mortgage at the introductory rate that may not be the case in 3 years? You don't need an MBA to know that someone with a 560 credit score and making $45,000 a year shouldn't be buying a $600,000 home in a neighborhood with property taxes hovering around the $10,000 a year mark? All of these are pretty much common sense, yet people ignore these simple facts and sign on the dotted line. Yes mortgage brokers and lenders are responsible for this mess but the borrowers share an equal load. You can regulate the industry till your blue in the face but that is not going to stop people from living beyond their means.
"When one gets in bed with government, one must expect the diseases it spreads." - Ron Paul
You don't need an MBA to know wether you can afford a $2,000 a month mortgage payment or not? You don't need an MBA to know that your interest rate will go up every year, if you have an adjustable rate, and while you can afford your mortgage at the introductory rate that may not be the case in 3 years? You don't need an MBA to know that someone with a 560 credit score and making $45,000 a year shouldn't be buying a $600,000 home in a neighborhood with property taxes hovering around the $10,000 a year mark? All of these are pretty much common sense, yet people ignore these simple facts and sign on the dotted line. Yes mortgage brokers and lenders are responsible for this mess but the borrowers share an equal load. You can regulate the industry till your blue in the face but that is not going to stop people from living beyond their means.
those are not common sense decisions. i get the feeling you're in some financial field as a career. it's sometimes hard to see from the outside. i've learned things in law school that i can't believe people don't know about the law, but to an outsider of course it's going to be confusing.
i'm a pretty well educated guy and a reasonably intelligent person when it comes to handling my finances. but nonetheless, i don't know my credit score and i sure as hell don't know what it would mean if i did. i don't know what a good score is or how you get one. i read every form given to me about my federal loans and i still don't understand a goddamn word of it, with 6 of them saying one thing and 4 saying another. it's gibberish to me.
you're telling me a person who maybe finished high school is expected to be sophisticated enough to understand this all when the sales pressure is on and a smooth-talking banker who wants to lock down another loan for the bank to get a raise or promotion is telling them it's not going to be a problem? and if these people can't afford their home, how are they going to afford to retain an attorney to review all the terms and explain every contingency?
it sounds like you're viewing these buyers as largely white, upper-middle class folks who have attorneys and sophisticated finances. yes, those people are knowingly gambling at trying to live beyond their means. but i don't think they're a huge part of the people fannie and freddie were supposed to be helping. i think most of those people are unsophisticated buyers who never stood a chance of truly understanding what they were getting into.
this is why we need education reform. our schools don't teach shit worth knowing anymore. we hear about every mid-level female american that sewed a flag in the name of making sure we get balanced history, we hear about how evolution is prevailing theory but creationism should be kept in mind too, but we don't teach our kids a damn thing about a bank account, or balancing a checkbook, or how a loan works. the k-12 system is a joke.
those are not common sense decisions. i get the feeling you're in some financial field as a career. it's sometimes hard to see from the outside. i've learned things in law school that i can't believe people don't know about the law, but to an outsider of course it's going to be confusing.
i'm a pretty well educated guy and a reasonably intelligent person when it comes to handling my finances. but nonetheless, i don't know my credit score and i sure as hell don't know what it would mean if i did. i don't know what a good score is or how you get one. i read every form given to me about my federal loans and i still don't understand a goddamn word of it, with 6 of them saying one thing and 4 saying another. it's gibberish to me.
you're telling me a person who maybe finished high school is expected to be sophisticated enough to understand this all when the sales pressure is on and a smooth-talking banker who wants to lock down another loan for the bank to get a raise or promotion is telling them it's not going to be a problem? and if these people can't afford their home, how are they going to afford to retain an attorney to review all the terms and explain every contingency?
it sounds like you're viewing these buyers as largely white, upper-middle class folks who have attorneys and sophisticated finances. yes, those people are knowingly gambling at trying to live beyond their means. but i don't think they're a huge part of the people fannie and freddie were supposed to be helping. i think most of those people are unsophisticated buyers who never stood a chance of truly understanding what they were getting into.
this is why we need education reform. our schools don't teach shit worth knowing anymore. we hear about every mid-level female american that sewed a flag in the name of making sure we get balanced history, we hear about how evolution is prevailing theory but creationism should be kept in mind too, but we don't teach our kids a damn thing about a bank account, or balancing a checkbook, or how a loan works. the k-12 system is a joke.
I'm actually a graphic designers and wouldn't know anything about financing if it came up and gave me a lap dance. What I do know, through research is some of the basic ideas a borrower should know before even applying for a loan. Before I even bought my home, I checked my credit score to make sure that I had a good enough credit history and score to get a good fixed rate loan. I sat down, with my then wife, to go over our finances to see what we could afford to pay monthly. It doesn't take a genius to do these thing prior to buying a home.
"When one gets in bed with government, one must expect the diseases it spreads." - Ron Paul
I'm actually a graphic designers and wouldn't know anything about financing if it came up and gave me a lap dance. What I do know, through research is some of the basic ideas a borrower should know before even applying for a loan. Before I even bought my home, I checked my credit score to make sure that I had a good enough credit history and score to get a good fixed rate loan. I sat down, with my then wife, to go over our finances to see what we could afford to pay monthly. It doesn't take a genius to do these thing prior to buying a home.
Exactly... no one is forcing you to buy a house. You are choosing to make the largest financial decision of your life, you should at least be responsible enough to do a little bit of research into the process. And if you don't, you shouldn't be rewarded because of your negligence or ignorance.
My whole life
was like a picture
of a sunny day
“We can complain because rose bushes have thorns, or rejoice because thorn bushes have roses.”
― Abraham Lincoln
I'm actually a graphic designers and wouldn't know anything about financing if it came up and gave me a lap dance. What I do know, through research is some of the basic ideas a borrower should know before even applying for a loan. Before I even bought my home, I checked my credit score to make sure that I had a good enough credit history and score to get a good fixed rate loan. I sat down, with my then wife, to go over our finances to see what we could afford to pay monthly. It doesn't take a genius to do these thing prior to buying a home.
i agree those are good ideas. but plenty of people don't have the tools for even these most basic financial processes. our schools teach people to be quiet, listen to the authority, and memorize. they teach nothing about how to learn or think. there are no practical skills. and i suspect more people are duped by greedy lenders than are simply recklessly indifferent in trying to live beyond their means.
Exactly... no one is forcing you to buy a house. You are choosing to make the largest financial decision of your life, you should at least be responsible enough to do a little bit of research into the process. And if you don't, you shouldn't be rewarded because of your negligence or ignorance.
people don't know HOW to do this kind of research. it's a skill that isn't taught and should be.
...and i suspect more people are duped by greedy lenders than are simply recklessly indifferent in trying to live beyond their means.
I'll disagree... Just look at the people who you work with or go to school with on a daily basis. I see plenty of people everyday who buy expensive cars that probably don't fit in their budget, or brag about the new flat-screen TV they just charged at best buy, or the new coach pocketbook that they paid $500 for, etc.... I manage a box office at an arena, and you'd be amazed at the number of people who have cards decline when trying to buy concert tickets. And instead of thinking that maybe they can't afford to go to a show, they whip out another card, and say "try this one".
People have become so materialistic and expect such instant gratification, that they overextend themselves everyday.
people don't know HOW to do this kind of research. it's a skill that isn't taught and should be.
But should the burden be put on our economy with bailouts if buyers go ahead enter contracts that they don't understand?
My whole life
was like a picture
of a sunny day
“We can complain because rose bushes have thorns, or rejoice because thorn bushes have roses.”
― Abraham Lincoln
Exactly... no one is forcing you to buy a house. You are choosing to make the largest financial decision of your life, you should at least be responsible enough to do a little bit of research into the process. And if you don't, you shouldn't be rewarded because of your negligence or ignorance.
i agree.
i think the issue here is that the BANKS should most certainly be aware of the risks involved and are VERY CAPABLE of assessing a buyers legitimate purchasing power.
And THAT is where i have a HUGE problem,
because, while the buyer most definately SHOULD have known his financial capacity, the bank DID know absolutely his capacity (or at least COULD have made that assessment, if it had not chose to WAIVE that ability with a "liars loan")
BECAUSE IT IS THE BANKS GETTING BAILED OUT HERE, and by-and-large NOT the consumer\buyer.
Sure "Project Hope", or whatever the fuck it is called, is working to refinance terms between lenders and QUALIFIED borrowers in distress, but more than anything that only serves self-interest on the part of the banks, who get to keep shity loans on their books at SOME sort of profit, rather than writing them off as a total loss.
But the REAL BAIL OUT is geared SOLEY at the banks,
and THAT is my BIG BIG BIG BEEF.
WHY DO YOU THINK THEY TOOK SUCH ASTRONOMICAL "RISK" IN LENDING TO THESE FOOLS?
Because they KNEW there WAS NO RISK because Big Government ALWAYS bails out Big Banks. ALWAYS.
If I was to smile and I held out my hand
If I opened it now would you not understand?
I'll disagree... Just look at the people who you work with or go to school with on a daily basis. I see plenty of people everyday who buy expensive cars that probably don't fit in their budget, or brag about the new flat-screen TV they just charged at best buy, or the new coach pocketbook that they paid $500 for, etc....
People have become so materialistic and expect such instant gratification, that they overextend themselves everyday.
i agree this society is overly materialistic and instant gratification seeking, but i don't know anyone living like this. they just don't understand this stuff and are intimidated. i get asked the most basic questions by friends about legal things, because nobody knows or understands it and even one year of law school puts me up on them. i see the same thing in finance. i don't know anyone buying flat screen tv's they can't afford, but i know plenty who have been screwed because they relied on the word of the phone salesmen or credit card offerer because that person knew more and was able to trade on their superior knowledge and expertise to allay the friend's doubts.
not that the friends shouldn't be held responsible for doing it. i'm just saying that it's not some reckless 'keeping up with the jones' thing for most of them. it's their willingness to trust the expert because they are at a disadvantage in terms of knowledge. consumers need more information. they need better education so people feel comfortable asking questions and doing research to know where they stand. and we need to lay some serious regulation and consequences on predatory lenders.
both sides of this problem need to be addressed. not just the one.
But should the burden be put on our economy with bailouts if buyers go ahead enter contracts that they don't understand?
no. im' not on board with the bailout. i'm just saying the blame for most of this falls on predatory lenders looking for their quick score and that we need to keep these assholes in line.
case in point, the wamu guy mentioned earlier. he promotes a culture of prowling for the subprime mortgages. he endangers wamu by these practices. he encourages the banks to saddle people with mortgages they cannot afford and that the banks KNEW they couldn't afford. his policies destroy those people's lives and finances. it wrecks wamu's financial stability and will probably lead to a lot of firings and cutbacks. but in the short term, profits soared, stockholders got rich as hell, and when the shit hit they fan, they still made a fortune. he walks away with a stern frown and a multi-million dollar retirement package. the feds will guarantee those loans, but the loan recipients are still fucked and so are many mid- and low-level wamu employees who will be cut to maintain profits so the stockholders don't see any dip in their income. that's what the fed money goes to... the people at the top never feel any of this. thus, there is no incentive to play nice. they can take all the risks they want with no fear of consequence.
that's actually why i oppose the bail out. i want the investors and execs to burn for this. but they won't. they won't even be inconvenienced. that's fucked. those people at the bottom are going down no matter what. those at the top should lose millions and feel the hurt too.
i agree this society is overly materialistic and instant gratification seeking, but i don't know anyone living like this. they just don't understand this stuff and are intimidated.
i do.
and it's not intimdation...
it's : 'ew, nobody's stopping me! i can have this this and this. who cares about the future?'
*~Pearl Jam will be blasted from speakers until morale improves~*
Please lets not confuse the issue here.. borrowers borrowing more than they can afford has absolutley nothing to due with lenders lending on "market value" and suffering balance sheet losses on reduction of value.
Its not about people not being able to pay their mortgages, its about Fannie&Freddie holding receivables at 5 on properties worth 2. In the end they (F&F) made bad investments becasue they cant foreclose on the properties, sell them and payoff the receivable and recoup their investment. Plan and simple, any other explanation is B/S.
If the borrower cant pay the monthly mortgatge then they can be foreclosed on and they are out in the cold. If the lenders made bad investments (lending money on inflated FMV of property) then they are out in the cold, scratch that, then they run to the govenment with there lobbyist and promise to take care of the incumbents.
Absolutlely nothing has been done for the Shmoe that purchased the house and cant pay for it, and nothing should be. There are limited cases where the mortgages were reworked but it only applied to less than ten percent of the total.
Michael Hudson is a former Wall Street economist specializing in the balance of payments and real estate at the Chase Manhattan Bank (now JP Morgan Chase & Co.), Arthur Anderson, and later at the Hudson Institute (no relation). In 1990 he helped established the world’s first sovereign debt fund for Scudder Stevens & Clark. Dr. Hudson was Dennis Kucinich’s Chief Economic Advisor in the recent Democratic primary presidential campaign, and has advised the U.S., Canadian, Mexican and Latvian governments, as well as the United Nations Institute for Training and Research (UNITAR). A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new ed., Pluto Press, 2002.
Mike Whitney: On Friday afternoon the government announced plans to place the two mortgage giants, Fannie Mae and Freddie Mac, under “conservatorship.” Shareholders will be virtually wiped out (their stock already had plunged by over 90 per cent) but the US Treasury will step in to protect the companies’ debt. To some extent it also will protect their preferred shares, which Morgan-Chase have marked down only by half.
This seems to be the most sweeping government intervention into the financial markets in American history. If these two companies are nationalized, it will add $5.3 trillion dollars to the nation's balance sheet. So my first question is, why is the Treasury bailing out bondholders and other investors in their mortgage IOUs? What is the public interest in all this?
Hudson: The Treasury emphasized that it was under a Sunday afternoon deadline to finalize the takeover details before the Asian markets opened for trading. This concern reflects the balance-of-payments and hence military dimension to the bailout. The central banks of China, Japan and Korea are major holders of these securities, precisely because of the large size of Fannie Mae and Freddie Mac – their $5.3 trillion in mortgage-backed debt that you mention, and the $11 trillion overall U.S. mortgage market.
When you look at the balance sheet of U.S. assets available for foreign central banks to buy with the $2.5 to $3.5 trillion of surplus dollars they hold, real estate is the only asset category large enough to absorb the balance-of-payments outflows that U.S. military spending, foreign trade and investment-capital flight are throwing off. When the U.S. military spends money abroad to fight the New Cold War, these dollars are recycled increasingly into U.S. mortgage-backed securities, because there is no other market large enough to absorb the sums involved. Remember, we do not permit foreigners – especially Asians – to buy high-tech, “national security” or key infrastructure. The government would prefer to see them buy harmless real estate trophies such as Rockefeller Center, or minority shares in banks with negative equity such as Citibank shares sold to the Saudis and Bahrainis.
But there is a limit on how nakedly the U.S. Government can exploit foreign central banks. It does need to keep dollar recycling going, in order to prevent a sharp dollar depreciation. The Treasury therefore has given informal assurances to foreign governments that they will guarantee at least the dollar value of the money their central banks are recycling. (These governments still will lose as the dollar plunges against hard currencies – just about every currency except the dollar these days.) A failure to provide investment guarantees to foreigners would thwart the continuation of U.S. overseas military spending! And once foreigners are bailed out, the Treasury has to bail out domestic American investors as well, simply for political reasons.
Fannie and Freddie have been loading up on risky mortgages for ages, under-stating the risks largely to increase their stock price so that their CEOs can pay themselves tens of millions of dollars in salary and stock options. Now they are essentially insolvent, as the principal itself is in question. There was widespread criticism of this year after year after year. Why was nothing done?
Hudson: Fannie and Freddie were notorious for their heavy Washington lobbying. They bought the support of Congressmen and Senators who managed to get onto the financial oversight committees so that they would be in a position to collect campaign financing from Wall Street that wanted to make sure that no real regulation would take place.
On the broadest level, Treasury Secretary Paulson has said that these companies are being taken over in order to reflate the real estate market. Fannie and Freddie were almost single-handedly supporting the junk mortgage market that was making Wall Street rich.
The CEOs claimed to pay themselves for “innovation.” In today’s Orwellian vocabulary financial “innovation” means the creation of special rent-extracting privilege. The privilege was being able to get the proverbial “free ride” (that is, economic rent) by borrowing at low-interest government rates to buy and repackage mortgages to sell at a high-interest markup. Their “innovation” lies in the ambiguity that enabled them to pose as public-sector borrowers when they wanted to borrow at low rates, and private-sector arbitrageurs when they wanted to get a rake-off from higher margins.
The government’s auditors are now finding out that their other innovation was to cook the accounting books, Enron-style. As mortgage arrears and defaults mounted up, Fannie and Freddie did not mark down their mortgage holdings to realistic prices. They said they would do this in a year or so – by 2009, after the Bush Administration’s deregulators have left office. The idea was to blame it all on Obama when they finally failed.
But at the deepest level of all, the “innovation” that created a rent-extracting loophole was the deception that making more and more bad-mortgage loans could continue for a prolonged period of time. The reality is that no exponential rise in debt ever has been able to be paid for more than a few years, because no economy ever has been able to produce a surplus fast enough to keep pace with the “magic of compound interest.” That phrase is itself a synonym for the exponential growth of debt.
i agree those are good ideas. but plenty of people don't have the tools for even these most basic financial processes. our schools teach people to be quiet, listen to the authority, and memorize. they teach nothing about how to learn or think. there are no practical skills. and i suspect more people are duped by greedy lenders than are simply recklessly indifferent in trying to live beyond their means.
How did you survive all the brainwashing, then?
It makes me sick when people blame things on "society" teaching them something. People can take responsibility for what they know and what their own individual opinions are.
The only people we should try to get even with...
...are those who've helped us.
Right 'round the corner could be bigger than ourselves.
It makes me sick when people blame things on "society" teaching them something. People can take responsibility for what they know and what their own individual opinions are.
did i say brainwashing? i don't think i did. i said i think our education system does a terrible job of preparing people for real life concerns. we learn a boatload of irrelevant information and very little that is practical. home economics is practically a synonym for "joke" in our high school parlance.
i "survived" because i had two parents to teach me these things. they had the money to give me weekly allowance to be placed in a savings account. they were able to set up starters accounts with a local bank. they taught me how to handle finances, how to save for things, what interest was, what happened if i overdrew, etc. all of this came from my parents. even WITH all that and even having taken classes at law school dealing with property, this stuff is still confusing and a struggle to wrap one's head around at times. some people (such as yourself) really get off on financial planning, and that's cool. but it doesn't come so naturally to everyone.
some children do not have two parents, or do not have enough money to provide this training to their children, or never received this training themselves. i think rather than having these kids memorize hamurabi's code of laws from 10,000 years ago in sumeria (i'm pretty sure 2 of those are wrong), maybe we should teach them things like managing finances, what an interest rate is, how to get a mortgage and what it means, how credit is determined.
i'm not saying people should not be responsible, but i think we also need to give people the tools to exercise good judgment and resist those who would take advantage of them. that's all.
Comments
All under the guise of a conservative president. The guy is essentially a national socalist.
I'm with you. The construction of older homes are so much better plus, in my opinion, they have far more character than the McMansions.
come on. we can't teach our kids to read and do addition properly. we're going to explain the ins and outs of finance to everyone? shit, people need an MBA and a JD just to understand a basic mortgage contract... even a college degree won't do it. the people being fucked by this crisis aren't all rolling benz's and living in mansions. this is predatory lending, period. and we need to take a harder line on it.
the problem isn't just that the borrowers don't see or understand the long-term effects. the problem is that the lenders don't care about the long-term effects. they want to make their fortune and then hope to bail before it collapses and they don't care who gets burned in the collapse. THAT is what needs to be stopped.
exactly what i'm talking about.
but what kills me is so many say they don't build homes as well today as they used and yet these same people buy the new poorly constructed houses despite this...
Sometimes it's like they just want a new home for a security system and three car garage...
Is it the bank’s duty to teach greedy people how to manage their money?
Did banks take advantage of these greedy people?
And I agree with the original post.
Healthcare, pricey education, gas prices, real estate.
Why don’t people protest?
Maybe we’re too busy on chat boards to actually protest anything.
Some blame has to be put on the borrowers too. Sure, mortgage contracts are complicated, but the info about the interest rate (what it is, and if it's fixed/adjustable) and the loan amount and all of the "important" details are very straight forward and simplified.
And in most cases, you have an agent and attorney that you select and pay to help clarify things.
I just can't excuse people who sign for a mortgage for several hundred thousand dollars, and either can't understand it, or don't research to figure things out.
Like I said before, I am sure that some people were screwed, with last minute term changes and things like that, and there should be some sort of appeal/grievance process to help them. But most of the problem is either people who borrowed above their means, or were counting on their home to keep increasing in value.
was like a picture
of a sunny day
“We can complain because rose bushes have thorns, or rejoice because thorn bushes have roses.”
― Abraham Lincoln
You don't need an MBA to know wether you can afford a $2,000 a month mortgage payment or not? You don't need an MBA to know that your interest rate will go up every year, if you have an adjustable rate, and while you can afford your mortgage at the introductory rate that may not be the case in 3 years? You don't need an MBA to know that someone with a 560 credit score and making $45,000 a year shouldn't be buying a $600,000 home in a neighborhood with property taxes hovering around the $10,000 a year mark? All of these are pretty much common sense, yet people ignore these simple facts and sign on the dotted line. Yes mortgage brokers and lenders are responsible for this mess but the borrowers share an equal load. You can regulate the industry till your blue in the face but that is not going to stop people from living beyond their means.
those are not common sense decisions. i get the feeling you're in some financial field as a career. it's sometimes hard to see from the outside. i've learned things in law school that i can't believe people don't know about the law, but to an outsider of course it's going to be confusing.
i'm a pretty well educated guy and a reasonably intelligent person when it comes to handling my finances. but nonetheless, i don't know my credit score and i sure as hell don't know what it would mean if i did. i don't know what a good score is or how you get one. i read every form given to me about my federal loans and i still don't understand a goddamn word of it, with 6 of them saying one thing and 4 saying another. it's gibberish to me.
you're telling me a person who maybe finished high school is expected to be sophisticated enough to understand this all when the sales pressure is on and a smooth-talking banker who wants to lock down another loan for the bank to get a raise or promotion is telling them it's not going to be a problem? and if these people can't afford their home, how are they going to afford to retain an attorney to review all the terms and explain every contingency?
it sounds like you're viewing these buyers as largely white, upper-middle class folks who have attorneys and sophisticated finances. yes, those people are knowingly gambling at trying to live beyond their means. but i don't think they're a huge part of the people fannie and freddie were supposed to be helping. i think most of those people are unsophisticated buyers who never stood a chance of truly understanding what they were getting into.
this is why we need education reform. our schools don't teach shit worth knowing anymore. we hear about every mid-level female american that sewed a flag in the name of making sure we get balanced history, we hear about how evolution is prevailing theory but creationism should be kept in mind too, but we don't teach our kids a damn thing about a bank account, or balancing a checkbook, or how a loan works. the k-12 system is a joke.
I'm actually a graphic designers and wouldn't know anything about financing if it came up and gave me a lap dance. What I do know, through research is some of the basic ideas a borrower should know before even applying for a loan. Before I even bought my home, I checked my credit score to make sure that I had a good enough credit history and score to get a good fixed rate loan. I sat down, with my then wife, to go over our finances to see what we could afford to pay monthly. It doesn't take a genius to do these thing prior to buying a home.
Exactly... no one is forcing you to buy a house. You are choosing to make the largest financial decision of your life, you should at least be responsible enough to do a little bit of research into the process. And if you don't, you shouldn't be rewarded because of your negligence or ignorance.
was like a picture
of a sunny day
“We can complain because rose bushes have thorns, or rejoice because thorn bushes have roses.”
― Abraham Lincoln
i agree those are good ideas. but plenty of people don't have the tools for even these most basic financial processes. our schools teach people to be quiet, listen to the authority, and memorize. they teach nothing about how to learn or think. there are no practical skills. and i suspect more people are duped by greedy lenders than are simply recklessly indifferent in trying to live beyond their means.
people don't know HOW to do this kind of research. it's a skill that isn't taught and should be.
Get this,
It was an extra curricular class. Not even mandatory.
Ha!
I'll disagree... Just look at the people who you work with or go to school with on a daily basis. I see plenty of people everyday who buy expensive cars that probably don't fit in their budget, or brag about the new flat-screen TV they just charged at best buy, or the new coach pocketbook that they paid $500 for, etc.... I manage a box office at an arena, and you'd be amazed at the number of people who have cards decline when trying to buy concert tickets. And instead of thinking that maybe they can't afford to go to a show, they whip out another card, and say "try this one".
People have become so materialistic and expect such instant gratification, that they overextend themselves everyday.
But should the burden be put on our economy with bailouts if buyers go ahead enter contracts that they don't understand?
was like a picture
of a sunny day
“We can complain because rose bushes have thorns, or rejoice because thorn bushes have roses.”
― Abraham Lincoln
i agree.
i think the issue here is that the BANKS should most certainly be aware of the risks involved and are VERY CAPABLE of assessing a buyers legitimate purchasing power.
And THAT is where i have a HUGE problem,
because, while the buyer most definately SHOULD have known his financial capacity, the bank DID know absolutely his capacity (or at least COULD have made that assessment, if it had not chose to WAIVE that ability with a "liars loan")
BECAUSE IT IS THE BANKS GETTING BAILED OUT HERE, and by-and-large NOT the consumer\buyer.
Sure "Project Hope", or whatever the fuck it is called, is working to refinance terms between lenders and QUALIFIED borrowers in distress, but more than anything that only serves self-interest on the part of the banks, who get to keep shity loans on their books at SOME sort of profit, rather than writing them off as a total loss.
But the REAL BAIL OUT is geared SOLEY at the banks,
and THAT is my BIG BIG BIG BEEF.
WHY DO YOU THINK THEY TOOK SUCH ASTRONOMICAL "RISK" IN LENDING TO THESE FOOLS?
Because they KNEW there WAS NO RISK because Big Government ALWAYS bails out Big Banks. ALWAYS.
If I opened it now would you not understand?
i agree this society is overly materialistic and instant gratification seeking, but i don't know anyone living like this. they just don't understand this stuff and are intimidated. i get asked the most basic questions by friends about legal things, because nobody knows or understands it and even one year of law school puts me up on them. i see the same thing in finance. i don't know anyone buying flat screen tv's they can't afford, but i know plenty who have been screwed because they relied on the word of the phone salesmen or credit card offerer because that person knew more and was able to trade on their superior knowledge and expertise to allay the friend's doubts.
not that the friends shouldn't be held responsible for doing it. i'm just saying that it's not some reckless 'keeping up with the jones' thing for most of them. it's their willingness to trust the expert because they are at a disadvantage in terms of knowledge. consumers need more information. they need better education so people feel comfortable asking questions and doing research to know where they stand. and we need to lay some serious regulation and consequences on predatory lenders.
both sides of this problem need to be addressed. not just the one.
no. im' not on board with the bailout. i'm just saying the blame for most of this falls on predatory lenders looking for their quick score and that we need to keep these assholes in line.
case in point, the wamu guy mentioned earlier. he promotes a culture of prowling for the subprime mortgages. he endangers wamu by these practices. he encourages the banks to saddle people with mortgages they cannot afford and that the banks KNEW they couldn't afford. his policies destroy those people's lives and finances. it wrecks wamu's financial stability and will probably lead to a lot of firings and cutbacks. but in the short term, profits soared, stockholders got rich as hell, and when the shit hit they fan, they still made a fortune. he walks away with a stern frown and a multi-million dollar retirement package. the feds will guarantee those loans, but the loan recipients are still fucked and so are many mid- and low-level wamu employees who will be cut to maintain profits so the stockholders don't see any dip in their income. that's what the fed money goes to... the people at the top never feel any of this. thus, there is no incentive to play nice. they can take all the risks they want with no fear of consequence.
that's actually why i oppose the bail out. i want the investors and execs to burn for this. but they won't. they won't even be inconvenienced. that's fucked. those people at the bottom are going down no matter what. those at the top should lose millions and feel the hurt too.
i do.
and it's not intimdation...
it's : 'ew, nobody's stopping me! i can have this this and this. who cares about the future?'
Its not about people not being able to pay their mortgages, its about Fannie&Freddie holding receivables at 5 on properties worth 2. In the end they (F&F) made bad investments becasue they cant foreclose on the properties, sell them and payoff the receivable and recoup their investment. Plan and simple, any other explanation is B/S.
If the borrower cant pay the monthly mortgatge then they can be foreclosed on and they are out in the cold. If the lenders made bad investments (lending money on inflated FMV of property) then they are out in the cold, scratch that, then they run to the govenment with there lobbyist and promise to take care of the incumbents.
Absolutlely nothing has been done for the Shmoe that purchased the house and cant pay for it, and nothing should be. There are limited cases where the mortgages were reworked but it only applied to less than ten percent of the total.
very true. and a lot less jailtime. they look after their own.
Mike Whitney: On Friday afternoon the government announced plans to place the two mortgage giants, Fannie Mae and Freddie Mac, under “conservatorship.” Shareholders will be virtually wiped out (their stock already had plunged by over 90 per cent) but the US Treasury will step in to protect the companies’ debt. To some extent it also will protect their preferred shares, which Morgan-Chase have marked down only by half.
This seems to be the most sweeping government intervention into the financial markets in American history. If these two companies are nationalized, it will add $5.3 trillion dollars to the nation's balance sheet. So my first question is, why is the Treasury bailing out bondholders and other investors in their mortgage IOUs? What is the public interest in all this?
Hudson: The Treasury emphasized that it was under a Sunday afternoon deadline to finalize the takeover details before the Asian markets opened for trading. This concern reflects the balance-of-payments and hence military dimension to the bailout. The central banks of China, Japan and Korea are major holders of these securities, precisely because of the large size of Fannie Mae and Freddie Mac – their $5.3 trillion in mortgage-backed debt that you mention, and the $11 trillion overall U.S. mortgage market.
When you look at the balance sheet of U.S. assets available for foreign central banks to buy with the $2.5 to $3.5 trillion of surplus dollars they hold, real estate is the only asset category large enough to absorb the balance-of-payments outflows that U.S. military spending, foreign trade and investment-capital flight are throwing off. When the U.S. military spends money abroad to fight the New Cold War, these dollars are recycled increasingly into U.S. mortgage-backed securities, because there is no other market large enough to absorb the sums involved. Remember, we do not permit foreigners – especially Asians – to buy high-tech, “national security” or key infrastructure. The government would prefer to see them buy harmless real estate trophies such as Rockefeller Center, or minority shares in banks with negative equity such as Citibank shares sold to the Saudis and Bahrainis.
But there is a limit on how nakedly the U.S. Government can exploit foreign central banks. It does need to keep dollar recycling going, in order to prevent a sharp dollar depreciation. The Treasury therefore has given informal assurances to foreign governments that they will guarantee at least the dollar value of the money their central banks are recycling. (These governments still will lose as the dollar plunges against hard currencies – just about every currency except the dollar these days.) A failure to provide investment guarantees to foreigners would thwart the continuation of U.S. overseas military spending! And once foreigners are bailed out, the Treasury has to bail out domestic American investors as well, simply for political reasons.
Fannie and Freddie have been loading up on risky mortgages for ages, under-stating the risks largely to increase their stock price so that their CEOs can pay themselves tens of millions of dollars in salary and stock options. Now they are essentially insolvent, as the principal itself is in question. There was widespread criticism of this year after year after year. Why was nothing done?
Hudson: Fannie and Freddie were notorious for their heavy Washington lobbying. They bought the support of Congressmen and Senators who managed to get onto the financial oversight committees so that they would be in a position to collect campaign financing from Wall Street that wanted to make sure that no real regulation would take place.
On the broadest level, Treasury Secretary Paulson has said that these companies are being taken over in order to reflate the real estate market. Fannie and Freddie were almost single-handedly supporting the junk mortgage market that was making Wall Street rich.
The CEOs claimed to pay themselves for “innovation.” In today’s Orwellian vocabulary financial “innovation” means the creation of special rent-extracting privilege. The privilege was being able to get the proverbial “free ride” (that is, economic rent) by borrowing at low-interest government rates to buy and repackage mortgages to sell at a high-interest markup. Their “innovation” lies in the ambiguity that enabled them to pose as public-sector borrowers when they wanted to borrow at low rates, and private-sector arbitrageurs when they wanted to get a rake-off from higher margins.
The government’s auditors are now finding out that their other innovation was to cook the accounting books, Enron-style. As mortgage arrears and defaults mounted up, Fannie and Freddie did not mark down their mortgage holdings to realistic prices. They said they would do this in a year or so – by 2009, after the Bush Administration’s deregulators have left office. The idea was to blame it all on Obama when they finally failed.
But at the deepest level of all, the “innovation” that created a rent-extracting loophole was the deception that making more and more bad-mortgage loans could continue for a prolonged period of time. The reality is that no exponential rise in debt ever has been able to be paid for more than a few years, because no economy ever has been able to produce a surplus fast enough to keep pace with the “magic of compound interest.” That phrase is itself a synonym for the exponential growth of debt.
read the rest here:
http://www.counterpunch.org/
How did you survive all the brainwashing, then?
It makes me sick when people blame things on "society" teaching them something. People can take responsibility for what they know and what their own individual opinions are.
...are those who've helped us.
Right 'round the corner could be bigger than ourselves.
did i say brainwashing? i don't think i did. i said i think our education system does a terrible job of preparing people for real life concerns. we learn a boatload of irrelevant information and very little that is practical. home economics is practically a synonym for "joke" in our high school parlance.
i "survived" because i had two parents to teach me these things. they had the money to give me weekly allowance to be placed in a savings account. they were able to set up starters accounts with a local bank. they taught me how to handle finances, how to save for things, what interest was, what happened if i overdrew, etc. all of this came from my parents. even WITH all that and even having taken classes at law school dealing with property, this stuff is still confusing and a struggle to wrap one's head around at times. some people (such as yourself) really get off on financial planning, and that's cool. but it doesn't come so naturally to everyone.
some children do not have two parents, or do not have enough money to provide this training to their children, or never received this training themselves. i think rather than having these kids memorize hamurabi's code of laws from 10,000 years ago in sumeria (i'm pretty sure 2 of those are wrong), maybe we should teach them things like managing finances, what an interest rate is, how to get a mortgage and what it means, how credit is determined.
i'm not saying people should not be responsible, but i think we also need to give people the tools to exercise good judgment and resist those who would take advantage of them. that's all.