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I'm not sure who "everyone" is... Since housing prices had dropped more than 8% a few times over the last 80 years, anyone who thought there was zero probabilit
by ajkessler 15y ago
I'm not sure who "everyone" is... Since housing prices had dropped more than 8% a few times over the last 80 years, anyone who thought there was zero probability of it happening again was clearly a moron.
As for the tinfoil hat crowd, I guess John Paulson, Steve Eisman, Michael Burry, Charles Ledley and James Mai weren't believed by the mainstream, but a lot of people saw what was coming. Those guys were just a few of the ones who were lucky enough to time it just right. There were many, many more who simply bet that the crash would come a few months earlier than it did.
- grandalf 15y agoI agree with all of your points. Maybe the figure was greater than 8% for the price drop -- there is some percentage that represents the worst case that was typically considered in all the contracts. I realize many foresaw the crisis. My main point is that we had a government program to keep housing prices high/rising, which led to much of the perception that the risk of a housing price drop was low. When considering who is to blame, we should blame our government at least as much as the financial executives.
- ajkessler 15y agoMinor correction: it's not that we "had" a government program... we "have": FHA is still handing out 3.5% down loans to people with 580 FICO scores. It's like 2008 never even happened. People actually sued about this last year: http://www.washingtonpost.com/wp-dyn/content/article/2010/12/03/AR2010120302784.html http://www.washingtonpost.com/wp-dyn/content/article/2010/12...
- grandalf 15y agoQuite true. Arguably though, the programs are part of the overall short/medium term "solution" for the crash. Yet nobody seems concerned that the same thing could happen again.