Democrats versus Republicans

[sck5]

Encouraging loans to poor people is a red herring. It isnt getting minorities into houses that caused this problem. They dont have enough money to bring down our financial system no matter how many bad loans they were given. (And that isnt even the case - The laws didnt say the banks had to give loans to minorities with bad credit ratings - It said they couldnt DENY loans to minorities who had EQUAL OR BETTER credit ratings as the non-minorities who were getting loans - Since the mortgage companies didnt deny a mortgage to anybody capable of signing their name that meant lots of minorities got loans - but they were no more undeserving than anyone else)

What caused this problem was the fiasco in the MBS market and the derivatives based on them. The regulators could easily (and soon will) have imposed capital requirements for banks and insurance companies playing in this market. They acted as if the boom could never end and when it did they were caught with too much of this worthless paper. A better regulatory setup would have said "OK buy as much of that crap as you like, but you have to have capital in the bank to back up a decent chunk of it or you are out of compliance". That could have put the brakes on the whole mess long before it got to where it did.

[sck5]

All of you guys above who say that the real perpetrators is US are right. But the fact is that we will do it again if we dont put in some common sense regulations to prevent it. Peoples' behavior is quite predictable. If you give them enough rope to hang themselves THEY WILL HANG THEMSELVES. Why give them the rope if there is an easy way to prevent it?

And please dont tell me that hanging themselves is what they deserve and we should let them hang because they are taking ME and everyone else down with them. I didnt overconsume and I didnt buy MBS's but my financial situation is sure as hell dependent on this mess just like everyone else's.

So dont pretend that this is a matter of individual choice. All those individual choices lead to outcomes that affect people who didnt make stupid choices, and if a better regulatory framework can prevent that then I am all for it.

[sailaway21]

sck5,
You just don't get it! Get off the prototypical liberal poor people bandwagon. sure the Congress, the Dem's in the Congress, were arrogant enough to think that everyone should own a home. Typical one size fits all government thinking. The problem is just as much the person making $50,000 a year, not poor but not rich, who thought that he could buy a $300,000 house because in a year he'd have $50,000 in instant equity in it. And that's what the Congress encouraged by letting the GSE's run wild. No problemo because the Fed's will bail them out, right?

The common sense you want is not going to come from the government. When did you ever see common sense from the government? Your government is the one who thinks that the same speed limit that is good for the Long Island Expressway is good for rural Montana! The common sense has to come from the individual investor or home buyer. And, if enough of them get the impression that something is riskless, you'll get another bubble of some sort and there isn't a damn thing the government can do to see it coming, or going.

If somebody drives up to your house today and offers you approximately twice what you intuitively know it to be worth, are you going to contact your government to alert them to the fact that there is "irrational exuberance" in the upstate New York real estate market?

If gold has gone up 10% per year over the last five years and you put your money into it, do you think you should be assured that it will continue to go up at the same rate?

You're asking for government to do what the market only can do. If we were to follow your desires we'd end up with a country like 1975 Czechoslovakia and you'd be living in a concrete apartment with a shared bathroom, and driving a Trabant. Government is incapable of doing what the market does automatically. Central planning does not work. The market system means that for almost every person who wins someone loses something. It ain't great but it beats all of us being in poverty like Czechoslovakia. Which is pretty much where our government has us headed now! Please tell them to stop before they help us some more!

[sck5]

Sailaway you need to get out more. You think that somewhat better regulation of a financial market that is in the process of melting down is the same thing as Communist central planning? Sheesh. How ridiculous.

Yes, markets can and do self-regulate. One of the ways they do that is with periodic crashes and meltdowns. We have known for more at least a century (when they invented the Federal Reserve which by the way some called socialism back in the day) how to prevent that without trashing the free market system we all know and love.

It cracks me up when right wing crazies (thats YOU sway) cant imagine ANYTHING between anything-goes-no-regulations-at-all and the goddam communists!

Well here is a news flash. There is a lot of territory between you and the commies. Most of us live there. And are wishing the government would try to prevent financial crashes, because we know how to do it and should.

[US27inKS]

Originally Posted by sck5

Encouraging loans to poor people is a red herring. It isnt getting minorities into houses that caused this problem. They dont have enough money to bring down our financial system no matter how many bad loans they were given. (And that isnt even the case - The laws didnt say the banks had to give loans to minorities with bad credit ratings - It said they couldnt DENY loans to minorities who had EQUAL OR BETTER credit ratings as the non-minorities who were getting loans - Since the mortgage companies didnt deny a mortgage to anybody capable of signing their name that meant lots of minorities got loans - but they were no more undeserving than anyone else)

What caused this problem was the fiasco in the MBS market and the derivatives based on them. The regulators could easily (and soon will) have imposed capital requirements for banks and insurance companies playing in this market. They acted as if the boom could never end and when it did they were caught with too much of this worthless paper. A better regulatory setup would have said "OK buy as much of that crap as you like, but you have to have capital in the bank to back up a decent chunk of it or you are out of compliance". That could have put the brakes on the whole mess long before it got to where it did.

So you're saying that the MBS market caused this, but Fannie and Freddie loosening lending standards didn't? Are you also saying that the govt did not require banks to loosen credit standards? Would you like to see a video (again) that shows the hud sec bragging about fining banks who don't relax standards? No one here (except you) mentioned loans to minorities going bad. What has gone bad is loans made to people with poor credit. Poor people and minorities have nothing to do with it. Poor credit does. Just because minorities and poor people also tend to have poor credit doesn't mean they are the only ones with poor credit. If the stats I just looked at are correct, about 30% of americans have poor credit. It only took less than 10% mortgage defaults to make the house of cards fall.

The brakes that should have been put on this mess is at Fannie and Freddie. If Fannie and Freddie wouldn't buy up the high risk loans, other banks wouldn't make them as they have no where to sell them. You want to blame it on under capitalization? How about Fannie and Freddie taking it down to 1/2% capitalization. I guess they don't count because the Dems said they were in good shape.

[AdamLein]

Originally Posted by sck5

It is NOT A GOOD THING that the government now owns the mortgage market, the largest insurance company, and large parts of the banking system.

Why not?

Better regulation is preferable to government ownership.

Why?

[sailaway21]

Originally Posted by sck5

Sailaway you need to get out more. You think that somewhat better regulation of a financial market that is in the process of melting down is the same thing as Communist central planning? Sheesh. How ridiculous.

Yes, markets can and do self-regulate. One of the ways they do that is with periodic crashes and meltdowns. We have known for more at least a century (when they invented the Federal Reserve which by the way some called socialism back in the day) how to prevent that without trashing the free market system we all know and love.

It cracks me up when right wing crazies (thats YOU sway) cant imagine ANYTHING between anything-goes-no-regulations-at-all and the goddam communists!

Well here is a news flash. There is a lot of territory between you and the commies. Most of us live there. And are wishing the government would try to prevent financial crashes, because we know how to do it and should.

You're assuming that the free market system is now trashed. Did you have trouble buying a loaf of bread or something today?

Perhaps you could enlighten us just as to what precipitous declines the government or the Fed has prevented in the past? All that the Fed has prevented is the government from printing money to get us out of every little hiccup and repeat what lengthened the Great Depression. But that's out the window now, government is printing money like mad, to what effect? You're staring a deficit in the face that is only rivaled by WWII spending and, you want more from government!

I'd like government to prevent market crashes also. Millions of American women would like government to prevent premature ejaculation as well. Neither is going to happen. Ever.

[sailhog]

Originally Posted by sailaway21

Millions of American women would like government to prevent premature ejaculation as well. Neither is going to happen. Ever.

Not long after my wife and I met, she said to me in a moment of intimacy, "You've got 'premature ejaculator' written all over your face."

[AdamLein]

Originally Posted by sailaway21

Millions of American women would like government to prevent premature ejaculation as well.

We all knew it was coming... the government should have stepped in and taken over. Preferably Barney Frank.

[chucklesR]

Originally Posted by sailaway21

Millions of American women would like government to prevent premature ejaculation as well.

Thoughts of Nancy Pelosi and Hillary Clinton work pretty good toward that 'end', my kind of Government in action