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> it was the home owners who shouldn't have bought homes that caused the collapse That's peachy. If those homes shouldn't have been bought, why were banks maki

> it was the home owners who shouldn't have bought homes that caused the collapse That's peachy. If those homes shouldn't have been bought, why were banks making the loans in the first place? Because they could immediately transfer the risk to other parties, who didn't know they were shoddy loans. In a market with information asymmetry, that clears over years rather than days or weeks, I do find it quite distasteful to blame the home buyer. Yes, they shouldn't have taken the loan out in the first place, but beseeching the population to be more "responsible" in the future (for some value of responsibility), as if this will somehow avoid disaster in the face of structural hazards, is either naive or disingenuous (pick one).

hga 16y ago
"If those homes shouldn't have been bought, why were banks making the loans in the first place?" Because if they didn't, the Federal Government came down upon them like a ton of bricks. This was one grand and mostly bipartisan experiment, the difference between the two parties being one of degree, e.g. "ownership society" (G. W. Bush) vs. "let's roll the dice" (Barney Frank). ADDED: A decades long experiment, going back to the New Deal when e.g. Fannie Mae was created in 1938. To make it work, they obviously had to pump the system so that banks didn't hold onto the paper but could write new loans as they sold off the old ones. This had the not necessarily intended effect of separating the underwriting from the risk it created. Getting back to the point about buyers, unless you're a libertarian raw of tooth and claw and e.g. want to let anyone agree to any sort of loan at any terms (e.g. payday loans as a milder example), yes, a population in general does need to be forced to be responsible. All the more so when from top to bottom (e.g. White House and the Congress down to loan originators) the establishment has ... established so many structural hazards.
Tichy 16y ago
Please don't misquote me - my sentence started with an "if", and I was referring to the theory put forward in the article (Hence the "if" - meaning "if we assume the theory put forward in the article is true"). Nevertheless, as you say, it is group behavior and greed - I don't think any kind of regulation can prevent that. People will just find other ways to screw up. And I think it IS fair to blame the greedy people at least a little bit. As for banks having no risks, I don't really buy it. Could they count on the bailouts?

hga 16y ago

"If those homes shouldn't have been bought, why were banks making the loans in the first place?" Because if they didn't, the Federal Government came down upon them like a ton of bricks. This was one grand and mostly bipartisan experiment, the difference between the two parties being one of degree, e.g. "ownership society" (G. W. Bush) vs. "let's roll the dice" (Barney Frank). ADDED: A decades long experiment, going back to the New Deal when e.g. Fannie Mae was created in 1938. To make it work, they obviously had to pump the system so that banks didn't hold onto the paper but could write new loans as they sold off the old ones. This had the not necessarily intended effect of separating the underwriting from the risk it created. Getting back to the point about buyers, unless you're a libertarian raw of tooth and claw and e.g. want to let anyone agree to any sort of loan at any terms (e.g. payday loans as a milder example), yes, a population in general does need to be forced to be responsible. All the more so when from top to bottom (e.g. White House and the Congress down to loan originators) the establishment has ... established so many structural hazards.

Tichy 16y ago

Please don't misquote me - my sentence started with an "if", and I was referring to the theory put forward in the article (Hence the "if" - meaning "if we assume the theory put forward in the article is true"). Nevertheless, as you say, it is group behavior and greed - I don't think any kind of regulation can prevent that. People will just find other ways to screw up. And I think it IS fair to blame the greedy people at least a little bit. As for banks having no risks, I don't really buy it. Could they count on the bailouts?