I've been thinking about the 2008 financial crisis and it got me wondering. People like to pin the blame on the banks for handing out sub-prime mortgages like candy.
But isn't the root cause of the issue due to people not paying back these loans on time thereby causing a lack of liquidity?
Basically, dead beat members of society couldn't pay back their loans is what caused it.
Am I wrong here?
Yes. The lenders lied to the people about rates to put it simple. . . BRB lending someone I know can't pay back money for a home
I see your point but it feels kind of one-sided to me. How are the people that accepted these loans any less to blame?
Human are cattle, can't be trusted, there needed to be regulations.
>give out loans in bad faith you know people will default on
>man this is awesome we're making so much money
>people default
>oh fug
The main question was if the loans were predatory. And in these types of cases, the blame was on both lender and buyer.
How is that different from accepting loans in bad faith knowing that you will default on
The root cause is the market failing to recognize the risks of sub-prime mortgages repackaged as collateralized mortgage obligations and other financial instruments. The repeal of glass-steagall (depression era regulations) allowed this to happen, though it is worth noting many countries don't have equivalent regulations and both goverment sponsored enterprises and private companies were involved. People assumed it was all legit.
One is a decision by financially literate people gambling with the fate of a too-big-to-fail industry, the other is a decision by some poor idiot being fast-talked by people whose entire job is fast-talking idiots like that.
Also only one of the two will be bailed out the the cost of taxpayers.
i don't know man. this approach seems very liberal to me aka a refusal to acknowledge personal responsibility. being given a loan is a privilege. I would argue the banks were doing these people a favor.
also, please stop perpetuating this meme of taxpayers somehow losing money from this ordeal. the loan was paid back with interest almost instantly by the banks.
>the loan was paid back with interest
if it didn't beat the market average it might as well be a loss
The possibility of a default and the associated consequences on both sides were part of the deal. And the people who defaulted had to deal with those consequences.
It was the banks who couldn't deal with the consequences of deals they willingly offered and needed governments to step in and save them.
It was simply the ruthless, amoral behavior of the banks and mortgage brokers, the stupidity of the borrowers, and shitty government policies.
Mortgage brokers offered mortgages at adjustable rates. They would shrink the initial payments down to make the offer look more appealing but then the adjustable would reset and the payments would increase by something ridiculous like 200%. Most of these adjustable rates reset in the second or third quarter of 2007. Was this mean and cutthroat? Yes. Was it illegal? No.
Now you get to the borrowers. Low income spics, niggers, rednecks, and all-around moronas who don't bother to read or ask about their contracts with no understanding about what interest rates are, what adjustable rates are, nothing. To them all they saw was that they would be getting a home for cheap. So they went with it.
Finally, you have government regulations like HUD which promoted giving mortgages out to poor people who had a high possibility of defaulting.
Is it mean to prey on low-income individual's dreams of owning a house? Obviously. But mortgages aren't a charity. Businesses aren't a charity. Business, Wall Street, and Banking aren't a morality festival. If I was a mortgage broker at the time you bet your ass I would be collecting fat bonuses on writing subprime mortgages that a bank would buy so that they could stuff it into an MBS with thousands of other subprime mortgages.
Poor people should have read their contracts.
I see. I guess that makes sense. Back in 2008, I wasn't too politically or socially aware so I didn't consider many of these things. I just took the media bait which was to pin the blame entirely on "corporate greed" and "too big to fail banks".
Having aged a bit, I can see that a large part of this can also be attributed to the stupid peasants. Kind of funny. You put these people in a position of responsibility for more than a second and they bring down the planet overnight.
You are 100% right OP
they bait and switched their customers by offering refinances that weren't guaranteed, then pulling the rug out at the last minute. we lost our house because of the predatory practices of these assholes. We started off being able to pay and they kept changing the interest rate until it was impossible. they wanted us to default, because once mortgages became a commodity you could make money on the way down as well as up.
>I can see that a large part of this can also be attributed to the stupid peasants.
The stupid peasants weren't watching the hundreds of thousands of other stupid peasants do the exact same thing
The banks were.
there's a part of this I think you're missing. Yes you could say people who get scammed due to their own stupidity deserve what they get, but the banks incurred a significant risk by scamming those people, and when that risk broke them they turned to the tax payer and said PLEASE HELP ME I HAD NO IDEA THIS WOULD HAPPEN when they knew exactly that this would happen.
And if we had said no you knew what you were doing now deal with the consequences, then 2008 would have been as bad as 1929 or worse.
You see both sides got fucked but only one side got punished for their fuckup.
I see what you're saying and I agree. The realization that the stupid people are partially to blame as well just struck me as odd.
lmao, elitist detected****
The banks knew what they were doing. Goldman Sachs, for instance, knew that their shit-tier-rated subprime mortgages that they were bundling into AAA CDO's were likely to default. They continued doing this because these shit mortgages were securitized, they could write them off as an asset and not debt with CDO magic. The more they lent out, the more they could increase their leverage, while simultaneously hedging against those same assets they were selling to investors, so that if they crashed they could, and did, cash out.
And then, the banks demanded they be bailed out, or "we'll let the economy crash". Basically, extorting billions from the public sector, while bank executives get richer and richer.
Millions lost their homes, and now they're going to fuck us over again with Student Loans. Trump is probably going to put a cap on government gaurantees of student loans, which will cause the tuition bubble to burst, and then schools will start closing. Hopefully I'll have graduated before it starts really exploding.
Certainly, people should be better educated. They shouldn't accept loans that they don't understand, or that they won't be able to pay back. But the availability of credit since the 70's had driven up the cost of housing so much that the only way people could afford to buy a house was to borrow. If they hadn't started lending to people who couldn't afford to borrow in the first place, housing wouldn't have been overvalued.
Yeah you're wrong. It was like putting meat in front of dogs, it's like dressed up in kkk hood at a BlackLivesMatter rally, it's like giving your girlfriend a whole block of chocolate when she said "no, I better stop at one" BULLSHIT SHE'S GONNA STOP. You know what's going to happen! and even if the other side should have resisted temptation, you know they won't. you know it.
Not to mention these banks were under no obligation to hand out these loans, they did so because of blatant disregard for reality and the attempt to make their books look better.
The lenders are totally to blame for the crises. Although for the individual borrowers, they have themselves to blame. But I still point the fault for the GFC as a whole squarely at the lenders.
It didn't help any that Boosh invaded Iraq driving up gas prices and stressing already poor people.
or that about that time it became socially acceptable to default on a loan just because the collateral was worth less than the outstanding principle. This may seem strange now, but before 2008 purposefully abandoning your mortgage and walking away from your house was cause for public scorn on top of all the legal consequences. At that time it became ok because so many people were doing it.
we could also point to banks selling mortgages, which pretty much kills any sense of loyalty the homeowners might have had left.
its both.
mostly the jews fault though.
itt we write novels instead of two words--
>moral hazard