Is there a philosophy behind sub-prime mortgages that goes beyond greed?
Greed may have been the original intent of sub-prime mortgages. But I think that the ‘ownership society’ George Bush has been promoting was the spirit and catalyst behind it.
“Subprime lending, is the practice of making loans to borrowers who do not qualify for the best market interest rates because of their deficient credit history” This kind of lending defies common sense. Nevertheless, subprime mortgage salesmen scouted around for anybody they could lend money to in order to make commissions and the banks and lending institutions went along with it. To fiscally responsible people this kind of lending doesn’t make any sense, lending money to people who could ill afford it or could not foreseeably pay it back.
One think that made subprime possible is the excess of money floating around in the world and low interest rates. But it was also the Bush administration and its attitude that encouraged it to blossom. The Bush administration dispensed with or ignored may of the regulations that governed the lending of money and protect people from predatory lending. I think the philosophy behind this was to make money as available as possible, to anyone, in order to enhance the ownerships society that Bush envisioned. For Bush an ownership society meant then there would be less dependence on government, thus less welfare payments and so on.
Subpriming was another way in which the Bush administration was privatizing and outsourcing the governments responsibility, the logic being that people who own property rely less on government. But it has backfired like many of this administrations schemes have, like Social Security reform. The government is now intervening in the subprime debacle because the pending of millions of foreclosures that could trigger a nation-wide recession. This is very scary for this administration.
Imagine, all this finance debacle under the watchful eye of the only president to have an MBA.
As far as I see it the government is the people. Thus the government reflects the needs and aspirations of the people. It also reflects what people are capable and not capable of. If the government has ruinous tendencies so does its people. If government causes inflation and make bad economic decisions so do the people.
Government is as much a part of “the market” as are the people. It is one agent of the overall economy or culture. If you want a better government and better results insist on better people, without ideology.
Yeah, Tortoise, I know. I was really addressing davids. While some of the subprime lending mess is due to predatory lending, there has always been that, even in the “prime” market. A lot of the current situation has been caused by the greed of the borrowers. Greed and stupidity. That’s been around for a while, too.
The sub-prime mortgate melt-down was a direct result of government increasing the money without adding real value to the economy. Now, you want the government to solve the problem it created? Great! We are in good hands!
Predatory pricing does not exist in reality. The money lenders had to decrease their rates. Otherwise, they would not be able to compete with the departments of government and their cronies who got free money.
Blame the government for giving printed money to their friends before the inflationary effects hit everybody else.
Subprime has its good side. It has helped a number of folks get homes rather than rent. This is good. Not all people with bad credit are slouches either. Circumstances may have caused setbacks. yes some people are idiots. but, some just need a chance.
Bad credit arises from many different things not just the lack of money or the unwillingness to pay.
Should someone pay for services not recieved? Many times a person will refuse to pay because they got screwed. The person they refuse to pay turns them over to the credit bureau. Then the consumer has to jump through friggin hoops to prove fraud or what have you. Or the consumer does not realize this was done. Etc.Etc. There are more reasons than one why a person has bad credit.
We have a credit score of 0. No one will touch us. That means we are not indebt have never had credit yet, we in our middle ages with property and stable jobs are a bad credit risk. Because we never had loans, always paid cash, always fought to only pay what was deserved or fought to not pay for bad service or product. ROFL Yea credit reports are sooooo accurate about people. Its is a load of crap IMO
People here are saying that we should not expect government to make things better or improve our lives because government is run by stupid and greedy people. Well, George Bush certainly has made that more a reality under his leadership. And that was his intention, to prove that you can’t count on government to do the right thing or make life better for Americans.
Under his watch Bush has dumbed down government by hired people not on merit or their capabilities but on friendship and personal loyalty. He has hired ‘yes’ people and people who wanted to alter reality. His administration has been base on cronyism and faith, which bodes badly for the expectation of a well run government. So naturally people are going to say government doesn’t work or can’t be relied on, because their are those who are deliberately making it that way.
Now the Bush administration has to make an about face in correcting many of the shortcomings and neglect in government it helped create. However, these corrective measures are now costing the American people more money than if they had been followed in the first place. Like they say, prevention is cheaper than the cure. And this administration is wasting a lot of money in curing the damage and ills they helped cause, money that instead could have gone to improve the quality of life for everybody.
Davids - I have not claimed that we don’t need some regulation of the financial markets. We surely do, and we surely have some. And it must surely adapt to changing conditions.
I have claimed that George Bush is not wholly or personally responsible for the subprime debacle.
I think Bush has been a lousy president, by the way.
What is adolescent is to blame one Evil Guy for all of human nature. Sometimes the adult thing is to take some personal responsibility.
Up until the Reagan administration, Sub-prime mortgages were illegal. It was illegal because it’s simply a mafia type method that any criminal would have been proud to use.
It’s simply part and parcel of the transfer of wealth from the Middle Class and Working Class to large corporations.
I suggest reading the entire link to understand the importance of this criminal scheme.
" Sometimes the adult thing is to take some personal responsibility."
Of course people have to take some personal responsibility. But it is difficult when things are stacked against you as in the subprime instance. In this case some responsible people have been caught in a web of not their own making. Government is for the purpose of insuring an environment in which people can pursue their own self interest without being blind sided as many have in the subprime debacle, because in many instances the rules and personal responsibilities were hidden from them. In many instances people who once had mortgages they could personally control have lost that control because of highfalutin derivatives that have made taking personal responsibility almost impossible. And that hell was fueled by a lack of government supervision and oversight that used to exist, a practice that helped and encouraged people to take personal responsibility.
It makes perfect sense that Bush can not be totally held responsible for this dysfunctional government. It is a symptomatic/systematic problem and the responsibility can be laid at many doorsteps. But the Bush administration with its swagger, hubris and ideology has exacerbated the problem and brought government dysfunctional-ism and incompetence to new heights and levels never seen before.
The sub prime mortgage mess was truly a concerted effort to boondoggle a bunch of money from a whole society. Meida hype convinced the masses into bad borrowing and, more importantly, convinced investors to buy these bad loans. That way, the guys in the middle, who dreamed the whole thing up, could walk away with all the money while the people on both ends lost their asses.
They were so good at it that some of the other smart money guys (hedge funds and investment banks) bought into it and went down with the ship when it sank. The rest are laughing all the way to the offshore bank where their money is.
Everybody with a smidgen of economics saw this train wreck coming and everyone knew it was going to happen. It wasn’t a matter of if so much as when.
Bush can’t be blamed, since it was part of the Reagan era “reforms.”
But people expect large institutions to act with a minimal amount of honesty. Indeed, up until Reagan criminal schemes like sub-prime mortgages were not legal.
Usuary, as practiced by the Mafia is not legal, but if you are a credit card company you can charge ANYTHING you want. Another “reform” of the Reagan era.
Once again, I suggest you read the entire link to understand the scope of this criminal enterprise.
The problem with these comedic explanations is that they either blame the mortgage salesmen (just a common crook whose activities are now legal) or the buyer, for not reading the fine print.
No mortgage can be sold without a Banks approval, and the Banks expectation of making a profit. This particular scheme is tanking because the Banks expected a continued rise in real estate values. Such a rise would have made these mortgages highly profitable, as indeed they were.
Just as credit cards company interest is the equivalent in THAT industry of the sub-prime rate in This industry.
In the credit card case, corporations got Congress to change the bankruptcy laws, changes which impact only middle and working class people. Sooner or later the Banks will try to get Congress to bail them out of THIS mess, in the name of helping the poor.
In either event, we will foot the bill.
Merrill Lynch, a big player in this game, just fired their CEO, and the poor baby only recieved 200 million in severance pay…
And in the midst of this meltdown, Wall Street announced Christmas Bonuses of 38 Billion dollars. Yup, sounds like they are suffering.
Banks did not make a vast majority of the sub prime loans. In fact the law excludes them from making them. The sub prime mess was created by other financiers who were not banks and so not subject to the same regulations as bankers. The big investment banks that got caught up in this did not originate the loans they just bought them and brokered them.
