4 ms·

I'm sorry, I realize that you're asking for clarification, but it is really frustrating to keep hearing this kind of crap. Greece the country didn't borrow all

by glesica 12y ago

I'm sorry, I realize that you're asking for clarification, but it is really frustrating to keep hearing this kind of crap. Greece the country didn't borrow all (or even most) of that money, private borrowers borrowed it from German banks (or Greek banks that borrowed it from German banks). The money ended up as public debt because the banks got bailed out. The reasons for this were complex, but had a lot of do with German fiscal and labor policy. Once the loans turned out to be bad (because why on Earth did the banks expect that all of these funds could possibly to put to good, productive use, especially once credit standards were lowered), Greece was expected to deal with the situation. They did, and they bankrupted the country doing so (same with Portugal, Spain, and Ireland). There is, of course, plenty of blame to go around, but this is not a situation where the Greek government borrowed a ton of money and wasted it. They borrowed a ton of money to bail out their banking system including a bunch of German banks (which is where a lot of the money originated). This is exactly what the global economic elites were telling everyone to do in 2008. Then, once things got ugly, those same elites decided that the Greek people should collectively pay the price for two bad economic policies that were only partially the fault of their government. Suggested reading: http://www.amazon.com/Austerity-The-History-Dangerous-Idea/dp/019982830X http://www.amazon.com/Austerity-The-History-Dangerous-Idea/d... - this book goes into great depth about what exactly happened in Europe. http://blog.mpettis.com/2015/02/syriza-and-the-french-indemnity-of-1871-73/ http://blog.mpettis.com/2015/02/syriza-and-the-french-indemn... - blog post that describes how what has happened in Greece, Spain, and Portugal was effectively inevitable and not the fault of the respective governments so much as it was a result of a series of pan-European financial blunders.

protomyth 12y ago
"Greece the country didn't borrow all (or even most) of that money, private borrowers borrowed it from German banks (or Greek banks that borrowed it from German banks). The money ended up as public debt because the banks got bailed out." In the US there was quite a series of legal moves requiring banks to lend mortgages to people who didn't previously meet the banks criteria. Were German banks similarly compelled or was it just bad judgement of the banks?
- pjmorris 12y ago
  Could you be specific about these legal moves? Are you referring to the Community Reinvestment Act (CRA)[1]? Most of the subprime lending was done by banks that weren't held to those standards [2]. And CRA conformant loans have had better repayment records than the bulk of the pre-crisis securitized subprime lending. I believe it was bad judgement^H^H^H^H^H^H^H^H^H a business decision on the part of the bank(s). [1] http://en.wikipedia.org/wiki/Community_Reinvestment_Act http://en.wikipedia.org/wiki/Community_Reinvestment_Act [2] http://www.ritholtz.com/blog/2009/06/most-subprime-lenders-werent-covered-by-cra/ http://www.ritholtz.com/blog/2009/06/most-subprime-lenders-w...
  - protomyth 12y ago
    Yes, the CRA as modified by follow-up legislation. Your [2] actually gets its data from an article in the Orange County Register [3] which claims to do an analysis of a database that they do not provide or reference. A article of history [4] and the numerous WSJ articles provide a pretty clear picture. CRA had some very foolish amendments including some that affected the deployment of ATMs of all things. It wasn't the single cause, but it was a major player. Which brings me back to my original question "Were German banks compelled to make bad loans or was it their failed risk judgement?" 3) http://www.ocregister.com/articles/loans-20542-subprime-banks.html http://www.ocregister.com/articles/loans-20542-subprime-bank... 4) http://www.businessinsider.com/the-cra-debate-a-users-guide-2009-6 http://www.businessinsider.com/the-cra-debate-a-users-guide-...
    - crdoconnor 12y ago
      >It wasn't the single cause, but it was a major player. It wasn't a cause at all, as I pointed out above (with citations to the relevant studies). The line you keep spinning is the same line used by the banks as they tried to dodge responsibility for the subprime crisis: blaming it on Congress "forcing" them to lend to black people.
      - protomyth 12y ago
speeder 12y ago
There was also the scummy move of germany forcing greece to take some bailout money they don't wanted, and then striking a deal to sell some military equipment, that cost more or less the amount of money that greece didn't wanted. Unfortunately I don't have sources now (I saw the explanation back when greek protests started, some years ago)
belZaah 12y ago
Uh, Greece has been running a budget deficit since at least 1995. Of course you borrowed the money.
csense 12y ago
> They borrowed a ton of money to bail out their banking system > this is not a situation where the Greek government borrowed a ton of money and wasted it Government rescuing private firms that made bad bets from facing the financial consequences of their actions sounds like a waste of money to me.

by glesica 12y ago

protomyth 12y ago

"Greece the country didn't borrow all (or even most) of that money, private borrowers borrowed it from German banks (or Greek banks that borrowed it from German banks). The money ended up as public debt because the banks got bailed out." In the US there was quite a series of legal moves requiring banks to lend mortgages to people who didn't previously meet the banks criteria. Were German banks similarly compelled or was it just bad judgement of the banks?

pjmorris 12y ago
Could you be specific about these legal moves? Are you referring to the Community Reinvestment Act (CRA)[1]? Most of the subprime lending was done by banks that weren't held to those standards [2]. And CRA conformant loans have had better repayment records than the bulk of the pre-crisis securitized subprime lending. I believe it was bad judgement^H^H^H^H^H^H^H^H^H a business decision on the part of the bank(s). [1] http://en.wikipedia.org/wiki/Community_Reinvestment_Act http://en.wikipedia.org/wiki/Community_Reinvestment_Act [2] http://www.ritholtz.com/blog/2009/06/most-subprime-lenders-werent-covered-by-cra/ http://www.ritholtz.com/blog/2009/06/most-subprime-lenders-w...
- protomyth 12y ago
  Yes, the CRA as modified by follow-up legislation. Your [2] actually gets its data from an article in the Orange County Register [3] which claims to do an analysis of a database that they do not provide or reference. A article of history [4] and the numerous WSJ articles provide a pretty clear picture. CRA had some very foolish amendments including some that affected the deployment of ATMs of all things. It wasn't the single cause, but it was a major player. Which brings me back to my original question "Were German banks compelled to make bad loans or was it their failed risk judgement?" 3) http://www.ocregister.com/articles/loans-20542-subprime-banks.html http://www.ocregister.com/articles/loans-20542-subprime-bank... 4) http://www.businessinsider.com/the-cra-debate-a-users-guide-2009-6 http://www.businessinsider.com/the-cra-debate-a-users-guide-...
  - crdoconnor 12y ago
    >It wasn't the single cause, but it was a major player. It wasn't a cause at all, as I pointed out above (with citations to the relevant studies). The line you keep spinning is the same line used by the banks as they tried to dodge responsibility for the subprime crisis: blaming it on Congress "forcing" them to lend to black people.
    - protomyth 12y ago

speeder 12y ago

There was also the scummy move of germany forcing greece to take some bailout money they don't wanted, and then striking a deal to sell some military equipment, that cost more or less the amount of money that greece didn't wanted. Unfortunately I don't have sources now (I saw the explanation back when greek protests started, some years ago)

belZaah 12y ago

Uh, Greece has been running a budget deficit since at least 1995. Of course you borrowed the money.

csense 12y ago

> They borrowed a ton of money to bail out their banking system > this is not a situation where the Greek government borrowed a ton of money and wasted it Government rescuing private firms that made bad bets from facing the financial consequences of their actions sounds like a waste of money to me.