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Osterkraut
Osterkraut Reader
10/14/08 4:29 p.m.

Taken to the extreme conclusion, a bank wouldn't make a loan it couldn't make money on. Not being in the business of selling houses, a bank wouldn't give a loan to someone with a high-risk of defaulting on a house.

But I track you on the idealogical absolutes. I just don't have a problem with payday loans and ARMs, which are the work of capitalism (not that Santa fellow).

Salanis
Salanis SuperDork
10/14/08 4:37 p.m.

I think one of the big problems with this crisis was that the banks were not actually writing, approving, and packaging loans. Independent firms were writing, approving, and packaging loans. They did some mathematic model voodoo to make the loans seem much more viable, and then sold them in packages to banks who got stuck with them when they imploded.

The people actually generating the loans were not making money based on gambling that their loans were good investments, but were being paid on commission for how much loan money they approved.

At least, that is the impression I've gathered listening about the situation, and I could be completely mistaken.

carguy123
carguy123 HalfDork
10/14/08 10:31 p.m.

It's amazing the different takes on the "loan crisis". The Reader's Digest version is that the Govt has control over Fannie Mae, Freddie Mac, FHA, & VA. When the govt says you will approve loans to just about anyone who comes in the door and if you follow our new liberalized guidelines, and not your own, we will indemnify you if people default - then you do it that way.

1999 was the turning point.

Commissions had nothing to do with it.

carguy123
carguy123 HalfDork
10/15/08 9:27 a.m.

From an email I just got.

Do you know how to catch wild pigs?

       You catch wild pigs by finding a suitable place in the woods and putting corn on the ground. The pigs find it and begin to come everyday to eat the free corn. When they are used to coming every day, you put a fence down one side of the place where they are used to coming.

       When they get used to the fence, they begin to eat the corn again and you put up another side of the fence. They get used to that and start to eat again. You continue until you have all four sides of the fence up with a gate in the last side. The pigs, who are used to the free corn, start to come through the gate to eat, you slam the gate on them and catch the whole herd.

       Suddenly the wild pigs have lost their freedom. They run around and around inside the fence, but they are caught. Soon they go back to eating the free corn. They are so used to it that they have forgotten how to forage in the woods for themselves, so they accept their captivity.

       That is exactly what is happening to America . The government keeps pushing us toward socialism and keeps spreading the free corn out while we continually lose our freedoms -- just a little at a time.

       One should always remember: There is no such thing as a free lunch! Also, a politician will never provide a service for you cheaper than you can do it yourself.

A government big enough to give you everything you want, is big enough to take away everything you have.
        - Thomas Jefferson
Salanis
Salanis SuperDork
10/15/08 11:09 a.m.

I am more concerned by stupidity and short-sightedness than I am by malicious long-term schemes to subvert our way of life. That is not to say that what is occurring is right or wrong, just that I do not believe in any great government conspiracies. Or, as my dad would say:

Do not attribute to malice, that which can be more readily explained by stupidity.

Snowdoggie
Snowdoggie New Reader
10/15/08 11:17 a.m.
Osterkraut wrote: Taken to the extreme conclusion, a bank wouldn't make a loan it couldn't make money on. Not being in the business of selling houses, a bank wouldn't give a loan to someone with a high-risk of defaulting on a house. But I track you on the idealogical absolutes. I just don't have a problem with payday loans and ARMs, which are the work of capitalism (not that Santa fellow).

I don't normally have a problem with capitalism. I make my money working for corporations. But some of the stuff coming out of Wall Street now is insane. Selling houses to people who can't afford them and selling the loans to people who don't understand that there is no way these loans can be paid off is insanity. The banks and investment banks who do this need to go under, but our government seems to think that these banks are too big to go under.

The long term effect of this mess is that our government will be broke and in debt and our kids will have to pay for it, and that the American Investment Banks we just bailed out will have about the same reputation with Foriegn Investors as Nigerian e-mail scammers have with just about everybody. Now legitimate businesses can't get financing and people with decent credit who can afford to buy houses and cars won't be able to. And the guys who created the mess will skate off into the sunset with their commissions, their bonuses and their golden parachutes. I think some of these guys should do jail time.

If these banks want federal bailouts and government protection, the government has not just the right, but the duty to regulate them and limit risks.

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