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> Start worrying when the banks stop offering mortgages to people trying to buy property in south beach. If the 2007 financial crisis taught me anything, it's

> Start worrying when the banks stop offering mortgages to people trying to buy property in south beach. If the 2007 financial crisis taught me anything, it's that we can't rely on the banks to make sound financial decisions, particularly regarding mortgages. Even more so now that the government bailed them out at taxpayer expense. They know that will happen again when needed. They have a safety net so they can gamble as much as they want—they can win but not lose. They will continue to believe this until/unless the government breaks them into pieces that aren't "too big to fail". Perhaps they already should have stopped offering those mortgages.

clarkmoody 8y ago
The 2007/8 bailout of banks is far from the first time the US government has socialized losses in the sector. The modern era of Wall Street bailouts started in the '80s after the Mexican Peso crisis. Bank bailouts have been happening since Colonial times, through emergency suspensions of specie payment, par laws, legal tender laws, etc. > we can't rely on the banks to make sound financial decisions Banks that have an implicit (or explicit) guarantee of bailout are making rational decisions about risk, since they can offload it on the taxpayer.
- fernandopj 8y ago
  > Banks that have an implicit (or explicit) guarantee of bailout are making rational decisions about risk, since they can offload it on the taxpayer. Agreed. From their perspective it's a sound and rational play - a better term would be to say we can't rely on banks to make moral or ethical decisions from a society perspective
- downrightmike 8y ago
  The shoe was on the other foot once: "Morgan helps end the Panic of 1893 Gold certificateOn February 20, 1895, J.P. Morgan & Co. led a bond offering that helped rescue the United States from a severe two-year economic depression." https://www.jpmorgan.com/country/US/en/jpmorgan/about/history/month/feb https://www.jpmorgan.com/country/US/en/jpmorgan/about/histor...
downrightmike 8y ago
The people who took out most of the mortgages, were good sound borrowers with good credit scores and were often buying a second or more house to flip. Not just the banks, the borrowers are made of humans that make bad choices and liked to gamble. https://qz.com/1064061/house-flippers-triggered-the-us-housing-market-crash-not-poor-subprime-borrowers-a-new-study-shows/ https://qz.com/1064061/house-flippers-triggered-the-us-housi...
- forapurpose 8y ago
  What does that tell us about banks loans as a signal of investment security? > Not just the banks, the borrowers I don't think the banks need defending, and I don't think we can compare the financial decisions made by professionals who are legal and moral custodians of the financial system with ordinary people. It would be like comparing the medical decisions of hospitals and ordinary people - 'it's not just the hospitals that offered this treatment as a cure, it's the patients who participated in it.' or 'It's not just the developers who made this highly insecure, malware-ridden software, it's the users who downloaded it.'
  - downrightmike 8y ago
    'it's not just the hospitals that offered this treatment as a cure, it's the patients who participated in it.' We'll see what happens with the FDA bypass for experimental treatments that went through this summer. - Do you not work in IT? 'it's the users who downloaded it.' The correct answer is both, because if a user wants to do something, they'll find a way, even though the admins do all they can to stop it. A lot of the business practices are nuanced and have a risk associated with them. The risk of the bail out not happening was the global economy failing, everyone playing the game was highly leveraged and everyone else paid for it.

clarkmoody 8y ago

The 2007/8 bailout of banks is far from the first time the US government has socialized losses in the sector. The modern era of Wall Street bailouts started in the '80s after the Mexican Peso crisis. Bank bailouts have been happening since Colonial times, through emergency suspensions of specie payment, par laws, legal tender laws, etc. > we can't rely on the banks to make sound financial decisions Banks that have an implicit (or explicit) guarantee of bailout are making rational decisions about risk, since they can offload it on the taxpayer.

fernandopj 8y ago
> Banks that have an implicit (or explicit) guarantee of bailout are making rational decisions about risk, since they can offload it on the taxpayer. Agreed. From their perspective it's a sound and rational play - a better term would be to say we can't rely on banks to make moral or ethical decisions from a society perspective
downrightmike 8y ago
The shoe was on the other foot once: "Morgan helps end the Panic of 1893 Gold certificateOn February 20, 1895, J.P. Morgan & Co. led a bond offering that helped rescue the United States from a severe two-year economic depression." https://www.jpmorgan.com/country/US/en/jpmorgan/about/history/month/feb https://www.jpmorgan.com/country/US/en/jpmorgan/about/histor...

downrightmike 8y ago

The people who took out most of the mortgages, were good sound borrowers with good credit scores and were often buying a second or more house to flip. Not just the banks, the borrowers are made of humans that make bad choices and liked to gamble. https://qz.com/1064061/house-flippers-triggered-the-us-housing-market-crash-not-poor-subprime-borrowers-a-new-study-shows/ https://qz.com/1064061/house-flippers-triggered-the-us-housi...

forapurpose 8y ago
What does that tell us about banks loans as a signal of investment security? > Not just the banks, the borrowers I don't think the banks need defending, and I don't think we can compare the financial decisions made by professionals who are legal and moral custodians of the financial system with ordinary people. It would be like comparing the medical decisions of hospitals and ordinary people - 'it's not just the hospitals that offered this treatment as a cure, it's the patients who participated in it.' or 'It's not just the developers who made this highly insecure, malware-ridden software, it's the users who downloaded it.'
- downrightmike 8y ago
  'it's not just the hospitals that offered this treatment as a cure, it's the patients who participated in it.' We'll see what happens with the FDA bypass for experimental treatments that went through this summer. - Do you not work in IT? 'it's the users who downloaded it.' The correct answer is both, because if a user wants to do something, they'll find a way, even though the admins do all they can to stop it. A lot of the business practices are nuanced and have a risk associated with them. The risk of the bail out not happening was the global economy failing, everyone playing the game was highly leveraged and everyone else paid for it.