mrstickball said:
Final-Fan said:
mrstickball said:
Krusnik said:
its not as cut and dry as u put it but thats the gist of it. The underlying cause of the melt down was due to dishonesty of financial institution that exploited the loop holes caused by decades of constant deregulation (financial Lib.)
There were tons of instances where derivatives were placed on the market and were exposed to the same "toxic" debt by financial institutions (Fannie May/Freddie Mac?). Come to think of it was these same credit rating agencies that gave these derivatives AAA ratings.....hmm
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For the record, Fannie May/Freddie Mac are a government creation. The government incentiivized the creation of toxic assets by first pushing the banks to loan to minorities/poor people that could ill-afford houses. Certainly, the ratings agencies and banks played a part, but they didn't star the mess, government did.
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The way I remember it is that the loans I believe you're referring to didn't fail at the rate you're implying and that the actual problem was securitizing all the loans until banks had no idea WTF they were even trading and couldn't effectively renegotiate to avoid defaults. I guess you could blame government for allowing them to do that.
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You could also blame the governments for:
- Artificially inflating demand since the Community Reinvestment Act started & various acts in 1994 which not only drove up home ownership, but the price of homes as well (more demand = higher prices)
- Slashing the prime interest rate from 9% in 2000 to 4% in 2001, creating a culture ripe for all-time low interest rates
- Successively increasing rates from 4% to 8% from 2004 to 2005... Therefore when ARMs were re-negotiated (usually around 3 or 5 years), added on significant costs to homebuyers, making costs too high for them to continue the mortgages
- Fannie Mae & Freddie Mac which are government sponsored and were responsible for nearly 50% of home loans in 2008.
Government and business went hand in hand through the whole crisis. To ascribe 100% of the blame to lenders or the securitization of loans is crazy. It was a 50/50 proposition of government priming the pumps, businesses diving in and hiding toxic assets due to securitization tricks, and then stupid people buying into ARMs hook, line, and sinker.
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Ahhh yes the infamous "teaser rates" or bouncing bettys as i liked to call them. Also stickball im not sure it's fair to isolate one societal group as the main drivers of the subprime mess, if i remember correctly it was anyone who wanted a mortgage for a home was able to get one on seemingly low rates even college grads without a job were sucked in.
