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Competing with "Zombies"
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<P mce_keep="true">[quote user="nanaimo73"] <P>[quote user="Bucyrus"]<SPAN style="FONT-SIZE: 12pt; FONT-FAMILY: 'Times New Roman'; mso-fareast-font-family: 'Times New Roman'; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA"><FONT face=verdana,geneva size=2></FONT></SPAN> <P class=MsoNormal style="MARGIN: 0in 0in 0pt"><SPAN style="FONT-SIZE: 12pt; FONT-FAMILY: 'Times New Roman'; mso-fareast-font-family: 'Times New Roman'; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA"><FONT face=verdana,geneva size=2>Bankers did not simply get stupid overnight and become so greedy that they overlooked the need to check creditworthiness of borrowers, as many would have you believe.</FONT></SPAN></P> <P>[/quote]</P> <P>Regarding financing equipment for trucking, generally what kind of time periods would be involved? Three years for trailers, and five for tractors? <FONT color=#0066ff>Surely bankers must have seen the dangers in the housing bubble coming when current loans were made?</FONT> </P> <P>[/quote]</P> <P class=MsoNormal style="MARGIN: 0in 0in 0pt"><FONT face=verdana,geneva>That is a good question.<SPAN style="mso-spacerun: yes"> </SPAN>Bankers originate mortgages and sell them to Freddie Mac and Fannie Mae.<SPAN style="mso-spacerun: yes"> </SPAN>Therefore, the bankers’ credit standards for housing needed to be at least as high as the housing credit standards of Freddie and Fannie because if the bankers originated mortgages at a credit standard below the credit standard of Freddie and Fannie, Freddie and Fannie would not buy those mortgages.<SPAN style="mso-spacerun: yes"> </SPAN>So when F&F lowered their credit standards to a new low threshold, the banks followed suit and lowered their mortgage origination standards to the same new low threshold.<SPAN style="mso-spacerun: yes"> </SPAN>This is how the government assumed the risk of risky loans.<SPAN style="mso-spacerun: yes"> </SPAN></FONT></P><FONT face=verdana,geneva> <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" /><o:p></o:p></FONT> <P class=MsoNormal style="MARGIN: 0in 0in 0pt"><FONT face=verdana,geneva>Loan originators will drop new mortgages out of airplanes if the government assumes the risk of default on those mortgages.<SPAN style="mso-spacerun: yes"> </SPAN>Moreover, not only did the government assume the risk of the bad loans, but they also forced bankers to make them under the threat of being charged for violating the civil rights of disadvantaged borrowers.<SPAN style="mso-spacerun: yes"> </SPAN>The difference between how this played out in the U.S. versus in Canada stems from the fact that the U.S. congress has no authority over Canada.</FONT></P><FONT face=verdana,geneva> <o:p></o:p></FONT> <P class=MsoNormal style="MARGIN: 0in 0in 0pt"><FONT face=verdana,geneva>Just because zombie truckers are in trouble with their loans in the same manner that subprime mortgage borrowers are, does not mean that their trouble shares the same origin.<SPAN style="mso-spacerun: yes"> </SPAN>I am not aware that the government forced banks to make loans to under-qualified truckers, and then assumed the risk of those loans in the way it was done with home mortgages.<SPAN style="mso-spacerun: yes"> </SPAN><U>Affordable housing</U> was the motive behind the government involvement in the subprime mortgage debacle.<SPAN style="mso-spacerun: yes"> </SPAN>That particular advocacy/agenda would not apply to the trucking business.<SPAN style="mso-spacerun: yes"> </SPAN></FONT></P> <P class=MsoNormal style="MARGIN: 0in 0in 0pt"><SPAN style="FONT-SIZE: 12pt; FONT-FAMILY: 'Times New Roman'; mso-fareast-font-family: 'Times New Roman'; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA"><FONT face=verdana,geneva size=2></FONT></SPAN> </P> <P class=MsoNormal style="MARGIN: 0in 0in 0pt"><SPAN style="FONT-SIZE: 12pt; FONT-FAMILY: 'Times New Roman'; mso-fareast-font-family: 'Times New Roman'; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA"><FONT face=verdana,geneva size=2>I assume that the troubled truck loans today are merely the result of the recession that was created by the bursting of the subprime mortgage housing bubble.<SPAN style="mso-spacerun: yes"> </SPAN>If business is so slow that banks cannot find a market for repossessed trucks, it is probably also too slow for truckers to make their payments.<SPAN style="mso-spacerun: yes"> </SPAN>To your question:<SPAN style="mso-spacerun: yes"> </SPAN>I do not know whether the bankers should have seen the recession coming or not, but since they took the risk and made business loans that were ultimately jeopardized by the recession, I would say that bankers did not know the recession was coming.<SPAN style="mso-spacerun: yes"> </SPAN>Otherwise they would not have made those loans.</FONT></SPAN></P>
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