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Old 09-06-2008, 07:51 PM   #91
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Dang. I wonder if something like that over here would've made the people who took out the expensive mortgages they couldn't afford think twice about it before they did it.
I put the blame on three entities:

1) The Federal Reserve under Alan Greenspan for keeping rates so low for so long in the early part of this decade, thus giving an incentive for reckless lending practices.

2) Investors for being greedy and seeing real estate as a loss-free investment. Thus, you had people buying multiple properties to sell them at a profit in a couple of years, at most, driving up home values substantially.

3) Banks for pushing non-investment minded individuals into bad loans so they could collect higher interest and fee income. Additionally, many of these banks also encouraged people to seek out homes for the maximum amount they "qualified for," even if it meant seeking out a house much larger than borrowers had initially imagined. Since the qualification standards were themselves reckless, as set by the individual banks' policies, they were essentially encouraging even upper middle class home buyers into reckless mortgages.

In general, it is harder to put the blame on individuals here, since it was an institutional failure brought on by greed.
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Old 09-06-2008, 08:03 PM   #92
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Dang. I wonder if something like that over here would've made the people who took out the expensive mortgages they couldn't afford think twice about it before they did it.
It seems reasonable to expect that it would, but the funny thing is though, it didn't seem to work in either Ireland or the UK in recent years, as there were also plenty of people over on this side of the pond taking out expensive mortgages that they couldn't afford. But I think that is more to do with ridiculously cheap credit and banks relaxing lending criteria.

There are no heroes in the whole debacle. The banks are to blame for doing away with tried and testing lending guidelines , the regulators are to blame for allowing it and some of the homeowners themselves are to blame with taking on credit they ought to have know they coudn't afford - and I emphasize I have sympathy for anyone, whatever the circumstances, who loses their home.
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Old 09-06-2008, 08:05 PM   #93
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I put the blame on three entities:

1) The Federal Reserve under Alan Greenspan for keeping rates so low for so long in the early part of this decade, thus giving an incentive for reckless lending practices.

2) Investors for being greedy and seeing real estate as a loss-free investment. Thus, you had people buying multiple properties to sell them at a profit in a couple of years, at most, driving up home values substantially.

3) Banks for pushing non-investment minded individuals into bad loans so they could collect higher interest and fee income. Additionally, many of these banks also encouraged people to seek out homes for the maximum amount they "qualified for," even if it meant seeking out a house much larger than borrowers had initially imagined. Since the qualification standards were themselves reckless, as set by the individual banks' policies, they were essentially encouraging even upper middle class home buyers into reckless mortgages.

In general, it is harder to put the blame on individuals here, since it was an institutional failure brought on by greed.
I largely agree, but surely your last sentence somewhat contradicts your point 2?
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Old 09-06-2008, 08:28 PM   #94
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I largely agree, but surely your last sentence somewhat contradicts your point 2?
Not really, because I make a sharp distinction between the investor class, who were buying multiple properties for the sole purpose of making money, and average individuals who were just trying to buy one home to live in for an undetermined length of time.
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Old 09-07-2008, 12:26 PM   #95
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Looks like it is official now.

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CNN.com

Breaking News: U.S. seizes mortgage giants

Federal officials today announced an extraordinary takeover of troubled mortgage giants Fannie Mae and Freddie Mac, signaling the most dramatic move to date aimed at shoring up the nation's housing market. Freddie and Fannie own half the mortgage debt in the country. Since last summer, they have suffered about $12 billion in losses.
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Old 09-07-2008, 12:34 PM   #96
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Another day, another government bail out.
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Old 09-07-2008, 12:37 PM   #97
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And the national debt will grow by another trillion.
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Old 09-07-2008, 12:40 PM   #98
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And the national debt will grow by another trillion.
It's on par for the "no tax and spend recklessly" Republican Party of Ronald Reagan and beyond.

It also looks like we're going to relearn the lessons of the 1890s as to why we created government regulations in the first place. Corporations of today act with impunity just like the corporations of the 19th century, as long as they can legally get away with it. Some expensive lessons, right?
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Old 09-07-2008, 12:48 PM   #99
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And McCain is largely running on a platform of de-regulation - which begs the question of what is left to deregulate at this point?

De-regulation has also contributed to commodities speculation, which is one area that has really not been properly addressed by lawmakers anywhere. It is particularly troubling because you can make an argument that commodities speculation indirectly drives certain aspects of foreign policy as well.
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Old 09-07-2008, 01:41 PM   #100
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De-regulation has also contributed to commodities speculation, which is one area that has really not been properly addressed by lawmakers anywhere.
Speculation can go long and short and is an essential part of futures markets. Although we had a run-up in commodity prices early in the year, many prices are down 30 or 40 percent from their peak, as fundamentals of demand and supply have improved. There have been recent studies (e.g. by the CFTC) showing that speculation was not a major factor in the price run-up. Also, India banned futures trading in essential commodities such as wheat, but found that this action did little to cool prices.
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Old 09-07-2008, 01:54 PM   #101
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That's true but there is a spectrum of responses between essentially unregulated commodities speculation and the outright banning of futures trading.
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Old 09-07-2008, 02:18 PM   #102
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That's true but there is a spectrum of responses between essentially unregulated commodities speculation and the outright banning of futures trading.
There has been action on that front this summer, such as the CFTC and the UK's FSA coordinating position limits on energy contracts. This extends to the Dubai exchange as well. Margin requirements have also been raised slightly. If too many restrictions are imposed, trading will simply move to somewhere like Singapore or Shanghai.
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Old 09-08-2008, 06:50 PM   #103
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Another day, another government bail out.
It's a slippery slope and a viscious cycle my friends.
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Old 09-08-2008, 07:06 PM   #104
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Gov. Sarah Palin made her first potentially major gaffe during her time on the national scene while discussing the developments of the perilous housing market this past weekend.

Speaking before voters in Colorado Springs, the Republican vice presidential nominee claimed that lending giants Fannie Mae and Freddie Mac had "gotten too big and too expensive to the taxpayers." The companies, as McClatchy reported, "aren't taxpayer funded but operate as private companies. The takeover may result in a taxpayer bailout during reorganization."
How can she be that uninformed?
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Old 09-08-2008, 07:10 PM   #105
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socialism for the rich, capitalism for the poor. developing...
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