So now that the USA has nationalized Fannie and Freddie, increasing its public debt to the tune of 6 trillion US$, would someone like to take a stab at explaining to me why, after years of banging the drum for free-market enterprise and limiting government intervention in the economy, Bush and his buddies, Paulson and Bernanke have decided that socialism is the way forward after all?
It seems to me (A relative n00b in the affairs of world finance) that Bush and friends have just spent a veritable shitload of public cash to nationalise these two companies that state in their literature that they do not recieve subsidies or backing from the govt.
The immediate and obvious beneficiaries of this action would appear to be the very people who were responsible for the fiasco developing in the first place, ie the people in charge of these institutions and their shareholders.
So, like the evangalist espousing family values who gets exposed as a long-term kiddy fiddler.....
or the way McCain stood up and said with a straight face and told the world in relation to the Georgia/Russia events of late, "In the 21st century, nations don’t invade other nations." while simultaneously trying to put himself in charge of the US who has recently invaded and occupied two countries by trumpeting his support for the invasions...
......we can now see that the hypocrisy, blatant lies and manipulations have no limits when it comes to the self interest of the BushCo and their cronies, even when it comes to doing something as profoundly 'socialist' as nationalizing (at the monumental expense of the citizen tax-payer) the sorry ***** results of their failed economic policies.
/golf clap.
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OMGWTF!! Bush was a socialist all along!! LOL!1!!1!Follow
"If you have selfish, ignorant citizens, you're gonna get selfish, ignorant leaders". Carlin.
That about sums it up, but it's to the point where we vote for who we believe is the lesser evil, even if the majority out vote us.
In before the explanation on how this isn't actually hypocrisy at all from one of, I'm imagining, 3 posters.
His Excellency Aethien wrote:
Almalieque wrote:
If no one debated with me, then I wouldn't post here anymore.
gbaji wrote:
I'm not getting my news from anywhere Joph.
There is something fundamentally wrong with the way these insitutions work.
We had in the same in the UK with the recent nationisation of Northern Rock, a bank/mortgage lender who was on the verge of going bankrupt, or with companies that emerged from the privatisation of British Rail. The main problem, in my eyes, is that financial institutions have managed to get themselves an incredible deal: They have privatised profits and socialised losses: When they make money, it all goes to the shareholders. When they make important losses, the taxpayers end up paying for those losses. It's absolutely insane. And in between those two, these companies make huge amounts of money, very little of which goes back into the real economy. Not only that, but whenever government has tried to regulate the way these companies operate, they start screaiming the government intervention is harmful to the economy and that the markets regulate themselves.
They clearly don't. This system is completely flawed and unfair. The way the economy has gone in the last 10-15 years has seen a huge increase in the activity of financial markets and financial transactions that have nothing to do with real goods or services. I read somehwere that financial transactions in the "real economy" accounted for only 2.3% of all financial transactions.
I realise Freddie and Fanny are important cases, that had the government not nationalised them, lots of people would've been screwed over. The problem is not with their nationalisation as such, but with the fact that we allowed the system to develop in ways which could lead to such situations.
Personally, I think we have to choose: we either have some nationalised financial instutions that lend money to the poorest in society, and some tight and tightly supervised regulations on the private ones, or we have everything private and the government simply doesn't intervene. In my eyes, the second solution is suicide, but at least it's consistent. I think the first one would be much better. I also think imposing a tax on financial transactions would be a good idea. We're going to need serious re-adjustment of the way the markets work, both nationally and internationally. The current situation is completely skewed, and it's, as usual, the ordinary middle-class that ends up paying for those *****-ups and footing the bill.
We had in the same in the UK with the recent nationisation of Northern Rock, a bank/mortgage lender who was on the verge of going bankrupt, or with companies that emerged from the privatisation of British Rail. The main problem, in my eyes, is that financial institutions have managed to get themselves an incredible deal: They have privatised profits and socialised losses: When they make money, it all goes to the shareholders. When they make important losses, the taxpayers end up paying for those losses. It's absolutely insane. And in between those two, these companies make huge amounts of money, very little of which goes back into the real economy. Not only that, but whenever government has tried to regulate the way these companies operate, they start screaiming the government intervention is harmful to the economy and that the markets regulate themselves.
They clearly don't. This system is completely flawed and unfair. The way the economy has gone in the last 10-15 years has seen a huge increase in the activity of financial markets and financial transactions that have nothing to do with real goods or services. I read somehwere that financial transactions in the "real economy" accounted for only 2.3% of all financial transactions.
I realise Freddie and Fanny are important cases, that had the government not nationalised them, lots of people would've been screwed over. The problem is not with their nationalisation as such, but with the fact that we allowed the system to develop in ways which could lead to such situations.
Personally, I think we have to choose: we either have some nationalised financial instutions that lend money to the poorest in society, and some tight and tightly supervised regulations on the private ones, or we have everything private and the government simply doesn't intervene. In my eyes, the second solution is suicide, but at least it's consistent. I think the first one would be much better. I also think imposing a tax on financial transactions would be a good idea. We're going to need serious re-adjustment of the way the markets work, both nationally and internationally. The current situation is completely skewed, and it's, as usual, the ordinary middle-class that ends up paying for those *****-ups and footing the bill.
Sad day in US history 
Remember when we had a balanced budget?
Those were the days.
Clinton was a fiscal conservative when compared to W.
Those were the days.
Clinton was a fiscal conservative when compared to W.
"The Rich are there to take all of the money & pay none of the taxes, the middle class is there to do all the work and pay all the taxes, and the poor are there to scare the crap out of the middle class." -George Carlin
Omegavegeta wrote:
Remember when we had a balanced budget?
Then you chucked the tea in the river and it's all been tits-up since then
Cheap joke aside, Paul's OP raises a number of issues about whether the GOP has any core principles.
If they had one, it would be down the spout with this abominable move.
Small Government?
My *****
"I started out with nothin' and I still got most of it left" - Seasick Steve
Nobby wrote:
[quote=Omegavegeta]Remember when we had a balanced budget?
Then you chucked the tea in the river and it's all been tits-up since then
Cheap joke aside, Paul's OP raises a number of issues about whether the GOP has any core principles.
If they had one, it would be down the spout with this abominable move.
Small Government?
My ************** think the GOP's core principle's are painfully obvious with this move: $$ comes first. Big companies are all that is important to Bush & Co.
Omegavegeta wrote:
Remember when we had a balanced budget?
Those were the days.
Clinton was a fiscal conservative when compared to W.
Those were the days.
Clinton was a fiscal conservative when compared to W.
Supply side economics never works on a national level. It never has and never will.
It's also part of the realization that we can't survive with a small government that the conservatives wish and have a stable economy.
Edited, Sep 10th 2008 4:02pm by Annabella
Turin wrote:
Seriously, what the f*ck nature?
Quote:
Freddie and Fannie were govn backed institutions to begin with.
Umm..No. not according to them, or the govt.
"If you have selfish, ignorant citizens, you're gonna get selfish, ignorant leaders". Carlin.
Commander Annabella wrote:
Omegavegeta wrote:
Remember when we had a balanced budget?
Those were the days.
Clinton was a fiscal conservative when compared to W.
Those were the days.
Clinton was a fiscal conservative when compared to W.
Supply side economics never works on a national level. It never has and never will.
It's also part of the realization that we can't survive with a small government that the conservatives wish and have a stable economy.
Edited, Sep 10th 2008 4:02pm by Annabella
But how do you prevent people from voting to give themselves money now (in the form of tax reductions) and have future generations pay it back with interest?
It's hard enough to get them to realize they are getting the equivalent of one nice steak dinner per year and the moderately wealthy are getting a Cadillac.
RedPhoenixxx wrote:
The main problem, in my eyes, is that financial institutions have managed to get themselves an incredible deal: They have privatised profits and socialised losses: When they make money, it all goes to the shareholders. When they make important losses, the taxpayers end up paying for those losses.
That's a pretty gross simplification of the situation though. They are both Government Sponsored Enterprises, which means that they've been more or less socialist institutions from the start. Fannie Mae was actually created as a government program as part of Roosevelt's New Deal.
The real problem isn't the privatization component, but the fact that both received funding and charter from the US government and had to comply with sets of regulations from the government beyond that of a normal lending institution. Add to that mix the widespread assumption that they were "backed" by the US government and it led to their use as a means to provide benefits to poor people (ie: classic socialism) via loans that they would not otherwise qualify for.
As long as those loans represented a small portion of the whole, this wasn't a problem. But it's always been "risky". And with the sub-prime mortgage collapse, they've been hit particularly hard. While the profits are privatized, the risks and requirements have never been. Imagine if the government gave you a special license for a business that helped you get started, but it then required that you provide your goods to customers regardless of whether they can actually pay. Now as long as most of your customers have the ability to pay full price, you're fine. But if that changes, you'll go out of business and can't stop it. That's effectively what these GSE lending organizations do. We can privatize them on paper, but as long as their charter effectively makes them instruments to give people stuff they can't really afford, they aren't really viable private enterprises and never have been.
If they had truly been private lenders for the last 40 years, they wouldn't be going under because they'd have been under no obligation to pick up the paper on all the bad loans out there. It's exactly the government control over their lending that has caused their collapse. The sword cuts both ways here IMO...
Edited, Sep 10th 2008 4:45pm by gbaji
King Nobby wrote:
More words please
yossarian wrote:
It's hard enough to get them to realize they are getting the equivalent of one nice steak dinner per year and the moderately wealthy are getting a Cadillac.
Can I put horns on the front of it, maybe from the bull that gave them their steaks?
Can't sleep, clown will eat me.
The upside to all this (being one of the three posters bsphil was refering to) is mortgage interest rates have already dropped considerably. Banks are going to be more open to lending money and this is being seen by economists as the housing crunch finally being through the worst.
Happy days are here again!
Is that what you expected me to say, bs?
Totem
Happy days are here again!
Is that what you expected me to say, bs?
Totem
Um... Let me also point out that it's not exactly like the "profits" were protected either. If you had shares in those two institutions, you lost 99% of your money over the last year. Lots of investors lost money on this. You know. Those private people with money who invest in the market? They lost on this.
The only people gaining are those who got bad loans. So, what's happening is that the socialized aspect is protected while the privatized aspect got crunched. I guess I'm not sure how anyone turns this around into a tale of greedy capitalism ******** everything up. It should be a cautionary tale of what happens when you allow your government to manipulate your lending industry too much in the name of making things more fair for poor people (by giving them loans they shouldn't qualify for).
At this point, the action isn't about socialism at all, but protecting the rest of the economy. Someone has to back up the paper on those loans, and at this point only the US government can do that. We can expect some inflationary effects from this (again), but it's better then having the entire lending market collapse. Bush was faced with two bad choices and took the less bad one in this case. We can always shift that lending system back to a privatized one later if we want. I'd personally prefer that we *not* then use it for several decades as a means of helping people who can't afford homes to buy them though. That's ultimately what started this mess...
The only people gaining are those who got bad loans. So, what's happening is that the socialized aspect is protected while the privatized aspect got crunched. I guess I'm not sure how anyone turns this around into a tale of greedy capitalism ******** everything up. It should be a cautionary tale of what happens when you allow your government to manipulate your lending industry too much in the name of making things more fair for poor people (by giving them loans they shouldn't qualify for).
At this point, the action isn't about socialism at all, but protecting the rest of the economy. Someone has to back up the paper on those loans, and at this point only the US government can do that. We can expect some inflationary effects from this (again), but it's better then having the entire lending market collapse. Bush was faced with two bad choices and took the less bad one in this case. We can always shift that lending system back to a privatized one later if we want. I'd personally prefer that we *not* then use it for several decades as a means of helping people who can't afford homes to buy them though. That's ultimately what started this mess...
King Nobby wrote:
More words please
Moreover, it wasn't the Fed's first inclination to bailout the housing loan industry. They let things shake out to see if it would correct itself, and when it didn't they stepped in to make good a sh1tload of loans for people who the Dem's like to lay claim to-- the hard working middle class and blue collar worker. And now you're complaining?
Why do you hate the hard working middle class and blue collar worker, Democrats? Why?!?
Besides, bailouts are old news. We've been bailing out people and institutions for generations. Social Security, Chrysler, and savings and loans anyone? Nothing to see here, people. Move along. Move along.
Totem
Why do you hate the hard working middle class and blue collar worker, Democrats? Why?!?
Besides, bailouts are old news. We've been bailing out people and institutions for generations. Social Security, Chrysler, and savings and loans anyone? Nothing to see here, people. Move along. Move along.
Totem
I have no problems with bailouts specifically. But the rhetoric around them is amusing. You can't have government regulation of an industry, then have the industry fail as a result of that regulation, and argue that it's wrong for the government to bail out the industry.
Sure. In a perfect world, I'd like a lot less of that. But that would start with less of the up front regulation as well. They're two sides of a coin. I'm not a full on libertarian. We do regulate industries. Some of those regulations are protectionist. Some of them are about foreign trade balances. Some are about internal economic manipulation.
If we had *zero* regulation of an industry and it failed, then you could argue that it would be hypocritical of those on the right to demand a bail out. But that's just not the case here (or in any of the major bailouts we've had over the last several decades). The second the government starts manipulating prices, tariffs, and taxes, and implements subsidies and/or service requirements on an industry it assumes some responsibility for the potential negative effects that can cause on the industries themselves. And when those industries are important for the economy, the government is obligated to make choices to minimize damage in a situation like we're in now.
It's not a perfect system, but it's the one we use. The socialist aspect of this isn't in the bailout, but in the very structure of those two institutions in the first place.
Sure. In a perfect world, I'd like a lot less of that. But that would start with less of the up front regulation as well. They're two sides of a coin. I'm not a full on libertarian. We do regulate industries. Some of those regulations are protectionist. Some of them are about foreign trade balances. Some are about internal economic manipulation.
If we had *zero* regulation of an industry and it failed, then you could argue that it would be hypocritical of those on the right to demand a bail out. But that's just not the case here (or in any of the major bailouts we've had over the last several decades). The second the government starts manipulating prices, tariffs, and taxes, and implements subsidies and/or service requirements on an industry it assumes some responsibility for the potential negative effects that can cause on the industries themselves. And when those industries are important for the economy, the government is obligated to make choices to minimize damage in a situation like we're in now.
It's not a perfect system, but it's the one we use. The socialist aspect of this isn't in the bailout, but in the very structure of those two institutions in the first place.
King Nobby wrote:
More words please
Quote:
The only people gaining are those who got bad loans.
Are you sure??
Quote:
Under the government takeover plan of Fannie Mae and Freddie Mac announced Sunday, top executives and board of directors from both troubled mortgage lenders — which hold or guarantee more than $5.2 trillion of the nation’s $12 trillion of mortgages — are being replaced. Curious as to how much Daniel Mudd, the outgoing CEO of Fannie Mae, and Freddie Mac’s departing CEO Richard Syron would receive in case of removal from their positions, I checked in on details of respective employment agreements.
As neither man voluntarily retired or was removed for “cause†(material breach of contract), Mudd is entitled to receive cash severance of $1.98 million (two years of base salary) and a cash bonus of $2.23 million, according to Fannie Mae’s 2008 proxy filing. Syron should get $1.10 million (one-year’s salary) and a cash bonus of $2.64 million, according to Freddie Mac’s 2008 proxy filing.
In addition, Mudd holds pension benefits with a present value of $4.92 million and Syron has pension assets worth $1.46 million, as of December 2007.
As neither man voluntarily retired or was removed for “cause†(material breach of contract), Mudd is entitled to receive cash severance of $1.98 million (two years of base salary) and a cash bonus of $2.23 million, according to Fannie Mae’s 2008 proxy filing. Syron should get $1.10 million (one-year’s salary) and a cash bonus of $2.64 million, according to Freddie Mac’s 2008 proxy filing.
In addition, Mudd holds pension benefits with a present value of $4.92 million and Syron has pension assets worth $1.46 million, as of December 2007.
Link.
Quote:
I guess I'm not sure how anyone turns this around into a tale of greedy capitalism ******** everything up.
The incompetence has not just been allowed to continue, but the policies of the last few years have exacerbated the situation to its present catastrophic condition.
I guess i'm not sure how you can NOT see that.
"If you have selfish, ignorant citizens, you're gonna get selfish, ignorant leaders". Carlin.
Golden parachutes for execs are also old news. I may not like it, but that is modern business these days.
Totem
Totem
Paulsol. The compensation contracts for executives were signed when they were hired. You're acting like they're being given something out of the blue and we should re-evaluate whether they deserve it.
It's a contract. If you are under contract to pay someone money, you have to pay them. If a sports team signs a player to a contract and promises to pay them X amount over the next Y years, with Z sum paid if their contract is dropped prior to the end of the term, and that player gets injured and cant play, you have to continue paying them, right? And if you drop their contract, you have to pay them the Z value. It's legally *exactly* the same with executives.
Here's the deal though. What's not mentioned is that the bulk of an executives compensation is *not* in the salary, but in options and shares of the company (usually). I can virtually guaranteed you that the biggest single losers from those companies losing so much value is the rich folks on the board, and the executives at the top. They lost massively more money in all of this than anyone else. The million or so in the parachute is pennies compared to what they'd have had if the businesses hadn't failed as they did.
There's a reason for that. It provides a vested interest for the executives and board to make the best decisions possible. Implying that they did some evil act to make their own business fail and cost themselves tens of millions of dollars in the process is ludicrous. The reality is that the very regulations they are bound to as a GSE made it impossible for them to avoid disaster. They could not choose not to pick up those loans as they were defaulted at lower lending levels. Thus, they ended up with the bulk of the bad paper in the industry and suffered for it.
Look. We can certainly debate the decades long history of events leading up to this, but I think it's really silly to come in on the tail end and try to say that the problem was the privatization aspects of the lending industry. Certainly, it's absurd to point to the paltry sums being handed out to the executives of the failed lenders as some kind of evidence of wrongdoing. Those guys lost their shirts relatively speaking.
It's a contract. If you are under contract to pay someone money, you have to pay them. If a sports team signs a player to a contract and promises to pay them X amount over the next Y years, with Z sum paid if their contract is dropped prior to the end of the term, and that player gets injured and cant play, you have to continue paying them, right? And if you drop their contract, you have to pay them the Z value. It's legally *exactly* the same with executives.
Here's the deal though. What's not mentioned is that the bulk of an executives compensation is *not* in the salary, but in options and shares of the company (usually). I can virtually guaranteed you that the biggest single losers from those companies losing so much value is the rich folks on the board, and the executives at the top. They lost massively more money in all of this than anyone else. The million or so in the parachute is pennies compared to what they'd have had if the businesses hadn't failed as they did.
There's a reason for that. It provides a vested interest for the executives and board to make the best decisions possible. Implying that they did some evil act to make their own business fail and cost themselves tens of millions of dollars in the process is ludicrous. The reality is that the very regulations they are bound to as a GSE made it impossible for them to avoid disaster. They could not choose not to pick up those loans as they were defaulted at lower lending levels. Thus, they ended up with the bulk of the bad paper in the industry and suffered for it.
Look. We can certainly debate the decades long history of events leading up to this, but I think it's really silly to come in on the tail end and try to say that the problem was the privatization aspects of the lending industry. Certainly, it's absurd to point to the paltry sums being handed out to the executives of the failed lenders as some kind of evidence of wrongdoing. Those guys lost their shirts relatively speaking.
King Nobby wrote:
More words please
Could anyone explain why the housing crisis happened now, if deregulation did not explicitly allow it just now?
I thought that was the standard explanation. I can detail it further if anyone needs it.
I thought that was the standard explanation. I can detail it further if anyone needs it.
Could someone explain to me in more detail the mechanisms of this government guarantee?
Normally, if someone defaults on their mortgage, the house is sold, and (is this true?) given how much the person has paid off of the principle of the mortgage already, say if they own the house 40%, and the bank owns 60% of it, then when the house is, sold 40% of the price goes to the former home owner and borrower, and 60% of the price goes to the bank and lender.
With this government guarantee, I see two possibilities.
Firstly, the borrower defaults, the house is sold, the borrower and the bank both get their cut of the sale price, and the government is guaranteeing paying the BANK the difference between the money they get back on the sale of the house, and the original worth of the house, or the loan, when the loan was first made out (because the house in the present market is worth less than it used to be). In this scenario, the defaulting borrower doesn't get to keep the house, they are no better off for the government guarantee. The only people better off in the short term are the share-holders of Fannie Mae and Freddie Mac. Who don't lose the worth of their shares, so they still have that money to later send around the private economy. The thing that puzzles me is that every American later has LESS money (to a total of the same amount) to send around the private economy, because the government has to recoup that money later in taxes. Taxes it otherwise could have spent providing government services, sending the money around the economy via different routes. Is this deferment of disappearing money hopefully turning a "hard" economic landing into a "soft" economic landing?
By the way, thank you USA taxpayers. My trust fund had Fannie Mae shares. I'm not sure if they held onto them, or divested them when they first started nose-diving. But if they held onto them, I just got a bounce.
The second possibility I see is that the government is stepping in and guaranteeing the BORROWER. So if the borrower defaults, the government pays the mortgage to the bank, and the borrower gets to keep the house. Somehow, I don't see this as what's actually going on, as it would require a much greater financial commitment from the Government in comparison to the first scenario. I'm presuming that the first scenario is "necessary" and the two FMs are in such trouble from the loan defaults because the US house price market is going backwards at the moment, instead of gaining. Which is where all this money is ultimately evaporating.
Anyway, if the second possibility is not true, and the first one is, then I hardly see the "little people", the poor Democratic constituents being bailed out here. It IS the "haves", the share-holders being bailed out, on the presumption that the rest of "you" will lose your jobs if all these shareholders lose money and stop spending so much. Of course, if this was Australia, everything would be complicated because by law every worker, rich and poor, is invested in Superannuation (401k?????) which usually means some money sunk into share trusts, most of which would hold Fannie Mae and Freddie Mac shares, out of the most usual share trust fund investment principles. (Spread risk, spread across market types, these businesses are dominant in their market, therefore "must-hold" shares.)
Edited, Sep 11th 2008 6:07am by Aripyanfar
Normally, if someone defaults on their mortgage, the house is sold, and (is this true?) given how much the person has paid off of the principle of the mortgage already, say if they own the house 40%, and the bank owns 60% of it, then when the house is, sold 40% of the price goes to the former home owner and borrower, and 60% of the price goes to the bank and lender.
With this government guarantee, I see two possibilities.
Firstly, the borrower defaults, the house is sold, the borrower and the bank both get their cut of the sale price, and the government is guaranteeing paying the BANK the difference between the money they get back on the sale of the house, and the original worth of the house, or the loan, when the loan was first made out (because the house in the present market is worth less than it used to be). In this scenario, the defaulting borrower doesn't get to keep the house, they are no better off for the government guarantee. The only people better off in the short term are the share-holders of Fannie Mae and Freddie Mac. Who don't lose the worth of their shares, so they still have that money to later send around the private economy. The thing that puzzles me is that every American later has LESS money (to a total of the same amount) to send around the private economy, because the government has to recoup that money later in taxes. Taxes it otherwise could have spent providing government services, sending the money around the economy via different routes. Is this deferment of disappearing money hopefully turning a "hard" economic landing into a "soft" economic landing?
By the way, thank you USA taxpayers. My trust fund had Fannie Mae shares. I'm not sure if they held onto them, or divested them when they first started nose-diving. But if they held onto them, I just got a bounce.
The second possibility I see is that the government is stepping in and guaranteeing the BORROWER. So if the borrower defaults, the government pays the mortgage to the bank, and the borrower gets to keep the house. Somehow, I don't see this as what's actually going on, as it would require a much greater financial commitment from the Government in comparison to the first scenario. I'm presuming that the first scenario is "necessary" and the two FMs are in such trouble from the loan defaults because the US house price market is going backwards at the moment, instead of gaining. Which is where all this money is ultimately evaporating.
Anyway, if the second possibility is not true, and the first one is, then I hardly see the "little people", the poor Democratic constituents being bailed out here. It IS the "haves", the share-holders being bailed out, on the presumption that the rest of "you" will lose your jobs if all these shareholders lose money and stop spending so much. Of course, if this was Australia, everything would be complicated because by law every worker, rich and poor, is invested in Superannuation (401k?????) which usually means some money sunk into share trusts, most of which would hold Fannie Mae and Freddie Mac shares, out of the most usual share trust fund investment principles. (Spread risk, spread across market types, these businesses are dominant in their market, therefore "must-hold" shares.)
Edited, Sep 11th 2008 6:07am by Aripyanfar
"Could anyone explain why the housing crisis happened now, if deregulation did not explicitly allow it just now?" --Yoss
The short answer is because deregulation does not prevent John Q. Public from buying more home than they can afford in a moment of "let's all get rich quick" frenzy.
The whole housing boom started out here in Kalifornee-a, where the housing market was depressed after the Dot-com bust. We happened to buy at the absolute lowest point of the market, but within a month of our purchase the rising economy started to give people the means to buy more undervalued homes. As people noticed they could take an undervalued home, goldbrick it, or just sit on it for a month and realize a $10,000-15,000 profit, it became a cottage industry, which soon exploded into a largescale buying fever. People rode it higher and higher, banks saw incredible profits, wanted even larger profits, so they dropped normal 15-20% money down requirements, and then sold the mortgages to other larger banking entities who wanted in on the money.
None of it was illegal. None of it was immoral. None of it was regulated because this particular market had never been seen before. It makes it kind of hard to legislate regulations against something never encountered before.
It was foolish, however.
Particularly out here in the Republik of Kali, homes out here in the Valley that reasonably should have sold for $200,000 were selling for $500,000 and people didn't bat an eye to buy two or three, expecting to sell them in month's time and buy more toys or a larger home.
My house alone, a modest 1,500 square foot home bult in the '60s, saw its value rise $0.25 an hour during the craziest part of the boom. Mrs. Totem & I thought about selling, but quickly realized there was no way we'd be able to re-purchase another home.
Why? Because we believe in strictly living within a budget. Even though we saw our neighbors going crazy and moving in with cots and a hot plate, selling a week later!!! and moving a block or two further down the street to the more expensive homes, we weren't going to get caught without a seat once the music stopped. And the music was going to stop. Nothing could continue to rise so fast without falling at some point.
It all was a massive pyramid scheme based on the premise we could see the end before it got here, allowing everyone to pay off what they bought before the bill came due. And for a lot of people it worked.
I know I'm prolly telling you nothing you didn't know before, but regulation of an industry that hasn't had a history of problems just doesn't happen. We always close the barn door after the horses have run out. Never beforehand. That's just human nature.
So now we attempt to fix what's obviously broken and help people and banking institutions who wanted to gt rich quick.
Totem
The short answer is because deregulation does not prevent John Q. Public from buying more home than they can afford in a moment of "let's all get rich quick" frenzy.
The whole housing boom started out here in Kalifornee-a, where the housing market was depressed after the Dot-com bust. We happened to buy at the absolute lowest point of the market, but within a month of our purchase the rising economy started to give people the means to buy more undervalued homes. As people noticed they could take an undervalued home, goldbrick it, or just sit on it for a month and realize a $10,000-15,000 profit, it became a cottage industry, which soon exploded into a largescale buying fever. People rode it higher and higher, banks saw incredible profits, wanted even larger profits, so they dropped normal 15-20% money down requirements, and then sold the mortgages to other larger banking entities who wanted in on the money.
None of it was illegal. None of it was immoral. None of it was regulated because this particular market had never been seen before. It makes it kind of hard to legislate regulations against something never encountered before.
It was foolish, however.
Particularly out here in the Republik of Kali, homes out here in the Valley that reasonably should have sold for $200,000 were selling for $500,000 and people didn't bat an eye to buy two or three, expecting to sell them in month's time and buy more toys or a larger home.
My house alone, a modest 1,500 square foot home bult in the '60s, saw its value rise $0.25 an hour during the craziest part of the boom. Mrs. Totem & I thought about selling, but quickly realized there was no way we'd be able to re-purchase another home.
Why? Because we believe in strictly living within a budget. Even though we saw our neighbors going crazy and moving in with cots and a hot plate, selling a week later!!! and moving a block or two further down the street to the more expensive homes, we weren't going to get caught without a seat once the music stopped. And the music was going to stop. Nothing could continue to rise so fast without falling at some point.
It all was a massive pyramid scheme based on the premise we could see the end before it got here, allowing everyone to pay off what they bought before the bill came due. And for a lot of people it worked.
I know I'm prolly telling you nothing you didn't know before, but regulation of an industry that hasn't had a history of problems just doesn't happen. We always close the barn door after the horses have run out. Never beforehand. That's just human nature.
So now we attempt to fix what's obviously broken and help people and banking institutions who wanted to gt rich quick.
Totem
paulsol wrote:
/golf clap.
Freddie and Fannie are like Britney. Them can misbehave to the point where we have to take away their babies but we'll still give them awards...and monies.
Srsly, our economy over the last half a century was built on these GSE's. We let them die and we might not be all be able to have a 3-bedroom ranch with a TV in everyroom. That would be disasterous to this country.
Alma wrote:
I lost my post
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