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Wait wait wait. No one thought poor borrowers that caused a nationwide housing market crash. Furthermore, I don't think house flippers created an industry that

Wait wait wait. No one thought poor borrowers that caused a nationwide housing market crash. Furthermore, I don't think house flippers created an industry that needed an ever-increasing supply of loans for securitization and corrupted lending institutions with that demand either.

maxxxxx 9y ago
I have heard the line several times that the housing crisis was mainly caused by the government forcing banks to give loans to poor people who defaulted then.
- prostoalex 9y ago
  Those loans are still extended today, and there are lenders like LendingClub or Prosper catering to those needs in personal loans market. However, with their typical junk rating they're a small portion of the market, interesting only to investors with an appetite for risk. The systemic trouble started when instead of junk those loans were rated AAA, which then opened the door to pension funds and institutional bond funds.
  - zeamaize 9y ago
    I wouldn't describe lending club and prosper as junk loans. I have money invested there because I feel it's a better social use than gambling on the stock market. I see good solid 5% returns. Most of the loans are repaid quickly.
tasty_freeze 9y ago
You would be wrong. It is a widely held belief that the government forced lenders to give mortgages to unqualified poor people, and that is what caused the crash. Here is pushback against that thinking from 2008! It still has a lot of traction, probably as much as it did in 2008. With a bit of effort I could probably find a similar article from every year between then and now. http://www.slate.com/articles/business/moneybox/2008/10/subprime_suspects.html http://www.slate.com/articles/business/moneybox/2008/10/subp... Edit: from 2013 http://www.businessinsider.com/republican-explanation-of-2008-crash-is-false-2013-2 http://www.businessinsider.com/republican-explanation-of-200...
- Spooky23 9y ago
  The two things aren't mutually exclusive. The government absolutely did strongly encourage writing loans to less conventional borrowers, with the implied threat of civil rights investigations. At first, the encouragement was tied to home ownership programs that pre-screened applicants and provided training for owning a home. My dad ran one of these for a few years, and they were remarkably successful at transitioning section 8 recipients to homeowners and often homeowner/landlords. Later, they decided that wasn't fast enough and they skipped the education and screening and just wrote loans.

maxxxxx 9y ago

I have heard the line several times that the housing crisis was mainly caused by the government forcing banks to give loans to poor people who defaulted then.

prostoalex 9y ago
Those loans are still extended today, and there are lenders like LendingClub or Prosper catering to those needs in personal loans market. However, with their typical junk rating they're a small portion of the market, interesting only to investors with an appetite for risk. The systemic trouble started when instead of junk those loans were rated AAA, which then opened the door to pension funds and institutional bond funds.
- zeamaize 9y ago
  I wouldn't describe lending club and prosper as junk loans. I have money invested there because I feel it's a better social use than gambling on the stock market. I see good solid 5% returns. Most of the loans are repaid quickly.

tasty_freeze 9y ago

You would be wrong. It is a widely held belief that the government forced lenders to give mortgages to unqualified poor people, and that is what caused the crash. Here is pushback against that thinking from 2008! It still has a lot of traction, probably as much as it did in 2008. With a bit of effort I could probably find a similar article from every year between then and now. http://www.slate.com/articles/business/moneybox/2008/10/subprime_suspects.html http://www.slate.com/articles/business/moneybox/2008/10/subp... Edit: from 2013 http://www.businessinsider.com/republican-explanation-of-2008-crash-is-false-2013-2 http://www.businessinsider.com/republican-explanation-of-200...

Spooky23 9y ago
The two things aren't mutually exclusive. The government absolutely did strongly encourage writing loans to less conventional borrowers, with the implied threat of civil rights investigations. At first, the encouragement was tied to home ownership programs that pre-screened applicants and provided training for owning a home. My dad ran one of these for a few years, and they were remarkably successful at transitioning section 8 recipients to homeowners and often homeowner/landlords. Later, they decided that wasn't fast enough and they skipped the education and screening and just wrote loans.