We agree on quite a bit here, but I'm at a loss how you put all the blame on those who abused the system and give a pass to those who changed the laws that allowed and encouraged this to happen.
In my opinion, the laws where changed for political reasons. Low income people where not able to afford a house, so the laws where changed that required banks to give them loans to buy a house that they could not afford. Once this started, it snowballed into the disaster that we have today. Obama actualy went into the banks and threatened them if they didn't give loans to the people he was representing. It's what he did as a comunity organizer. He was a junior al sharpton.
Who benifited from these loans? Builders who where building the houses, suppliers that where selling materials, the banks, realtors, title companies and the cities who collected taxes. It was a win win for everyone until it peaked and crashed. Figuring out who and why is the only way to make sure it doesn't happen again.
I blame Bush for it because he only made half hearted attempts to fix it when he knew it was going to collapse. I put A LOT more of the blame on Clinton because he created it. While he has to lie and make up stories about balancing the budget and creating a surplus, he did create jobs and generate income. He did it by creating the housing bubble and interenet bubble. I think the housing bubble was planned and everyone involved knew it would fall apart, but was timed for well after Clinton was out of office. Same thing Obama has done with Obamacare. Time it so he's not in office and they can blame the poor sap in office when it fails. The other bubble that happened under Clinton was the dot com bubble. I think that was a total surprise to him. I give Janet Reno credit for that because of her asleep at the wheel aproach to law enforcement. She allowed the big players to lie about thier incomes and then everyone got into the act. With the internet creating a way for day traders to get in on buying stocks from home, it was a game that kept going up no matter what you bought. Instant millionairs buying anything.
Blame those who took advantage and spent like fools, but it was the GREED and CORRUPTION of the Clinton Administration that started all of it and what we are having to deal with today.
Eddie
We disagree because you are trying to claim a flea bite is why the economy bled to death. Yes, banks were unwilling to write housing loans in slums, and yes, the administration pressured them to loan anyway. They were hoping a higher percentage of home ownership would reverse the decay of some neighborhoods and allow more poor people to start building equity in a home, leaving them with some assets in their old age. That didn't work out well, but a few thousand $50,000 mortgages did not crash the banking system.
The problem started with deregulation of the banking system, which started during the Clinton administration and was exacerbated by the Bush "hands off" regulation policies directing agencies not to enforce the regulations that were left. They all believed, as Greenspan spouted, that free market capitalism would act toward the best interest of their companies and their stockholders. That didn't work out well either. When an employee has the prospect of a 7 or 8 digit annual bonus, the welfare of the stockholders is the last thing on his mind. The company is there for one purpose, to stoke his greed.
Deregulation was a heck of a lobbying job by the banking industry, at a time when people still trusted banks. They managed to repeal protections that had been in place since the 1930s, much to our regret. Congress restored some protections with Dodd-Frank, and the banks immediately started whining that it was costing them money. The difference is that now nobody trusts the banks. We know better. That's one reason companies are sitting with over $1 trillion in cash. They know if they run short of cash and have to go to the bank, they will end up paying credit card rates on commercial loans. It's a rare company that can afford to pay 26% on an operating capital loan, so they hoard their capital.
The housing market is in the dumpster because it is way overbuilt. We just don't need that many houses, and won't need them for years yet. Even after all the unsold inventory and millions of foreclosures work their way through the system, a big hunk of the homeowner population would love to sell theirs and get out from under it.
There is currently a boom in apartment building, but there will never be an apartment bubble. Apartment owners project occupancy rates and run the numbers. If the numbers pencil out, they build. If not, they don't. They don't speculate, they calculate. A lot of speculators got burned in the housing bubble, a lot of speculators got burned in the stock market. Many of them were innocent idiots, thinking the big numbers being flashed were real. Anybody can make up a number, but until you have the green stuff in your hand it's just a number.
The real value of my home has not changed a bit since 2007. It's still a comfortable place to live and grow timber. That's all it's worth. The value of all those overbuilt houses hasn't changed a bit either, but a lot of them are vacant because nobody wants to live there, and their condition is deteriorating. Since I bought my place 17 years ago I have spent almost $100,000 on upgrades and maintenance. Call it an average $500 a month for roof, heating system, new windows and doors, insulation, well maintenance, replacing the rotting deck, etc.
Thanks to a frugal lifestyle, I didn't have to involve a bank in any of those transactions, I just paid cash. The new kitchen just waited until I could write the check. That puts me in a minority. Most people just borrowed the money for the new kitchen, even though they couldn't afford it, and knew they couldn't afford it. They had all this theoretical equity, that vanished overnight. When they were faced with the responsibility to actually pay for the debts they had contracted, they freaked out, and many defaulted.
The big banks were leveraged to the hilt, and their assets only represented about 6% of the debts they had contracted. When their cash flow wouldn't cover their debt payments, just like Joe Homeowner, they defaulted, which is why there is no longer a Lehman Brothers. Unlike Joe Homeowner, they had a staff of lobbyists to tell the gummint what a bad thing it would be if they went broke, so Congress and Bush, in a panic, decided to bail them out. My congressional delegation voted against the bailout, but they got outvoted by yours.
The bailout of Fannie Mae and Freddie Mac has been much in the press, and represents some pretty substantial numbers, but that's just the tip of the iceberg. The Fed has purchased $1.2 trillion in toxic assets from the commercial banks, and because they have a face value, they don't show up as a government debt. The Fed just printed over a trillion dollars and handed it to the bankers who brought down the economy. In return, those same bankers are whining about being regulated.
Trying to claim that a few thousand poor people getting small mortgages did any damage to the mortgage industry is nonsense. What killed the US economy was greed. If you want to find someone to blame, look for who ended up with all the money.
