Tough economic times - How is it affecting your life style?

[mrstickball]

TheRealMafoo said:

mrstickball said:

The bankers were idiots in giving out the money, and the people were stupid for not doing their homework and realizing the predatory lending practices that were going on.

 

I agree people were stupid for buying something they could not afford, but the banks were being incentivized by government for giving the loans. If banks gave a certain percentage of subprime loans, then they got a better deal on all their loans. It was Congresses way of putting poor people into homes.

That would have worked if people only bought homes they could afford. They didn’t. They used the constant increase in home values to buy homes they could not afford, gambling that when there payment went above what they could pay, that they could just refinance and use the increased value to do the same thing all over again. That only works until home builders meet demand for an ever increasing home owner base. Before the “Community Reinvestment Act' of 1999”, home ownership was a constant 60% of the population. When builders finally caught up, it was 75%. That means 20% of home owners had loans that if banks were left to their own devices, would have never given. Banks traditionally are not in the business of throwing good money after bad.

For years Congress got reports from independent auditors telling them that Fanny and Freddie were in trouble. Congress chose to ignore it. Telling a booming economy that subprime lending has to stop, and people who should not buy a home now can’t, is not in fashion. Waiting until it’s too late and then blaming everyone else seems to be though.

When looking up the name of the Community Reinvestment Act that caused this shift that caused the housing bust, I couldn't help but watch some of the horrendous accusations made by Democrats in congress that the auditors were wrong.

My community has been a 'victim' of the housing bubble. We're on the edge of a major city (Columbus, Ohio). Wonce the CRA went into effect, real estate prices went on a sharp increase for the past 7-8 years, and many people overspent on their houses. Once the bubble burst, those that were trying to sell their houses got a rude awakening on the 'real' price of a home - now half of the city (around 13,000) is on the market, and the houses aren't selling, as buyers are weary of the seller's stupidity.

I agree that it wasn't entirely the banks fault(s) - their goal is to minimize risk, and maximize profits. When the government subsidized bad behavior, and stupid ideas, there's nothing holding them back from doing it. Still, you wish that someone would have shown restraint, which is why I say everyone is to blame - but the Govt. first, people second, businesses third.