tstage wrote: Gentlemen,This is just a friendly reminder that this thread and conversation needs to steer back towards the OP and away from politics. This is a forum dedicated to the discussion of and about trains. Thanks for your consideration. Tom
Gentlemen,
This is just a friendly reminder that this thread and conversation needs to steer back towards the OP and away from politics. This is a forum dedicated to the discussion of and about trains. Thanks for your consideration.
Tom
Tom, of course, is the moderator who pulled my original posts trying to start this topic down twice.
Tom now wants us to steer away from politics. But Don Phillips writes a political column for Trains. So now Tom wants us to discuss a political column, which was the OP, without discussing politics. Go figure.
The gracious and generous comments of henry6 are appreciated and symbolic of why it's so much fun to read the forum comments and comment on them. Yes, I also agree with Tom that the thread wandered; but where else can an old duffer make a comment or posit an idea and reach so many intelligent and earnest men that he has something in common with?
These are dangerous and trying days for our Republic and Trains magazine and the good folks who run these forums, to say nothing of paying for them, are to be commended for giving us an opportunity to read the comments and ideas of our fellows and have a place to share our own. Well done, Trains magazine!
Forty and more years ago The Illustrated London News would end similar squabbles in its Letters column with the standard sentence: "The correspondence on this subject is now closed."
Unfortunately I have to agree with you Tom. It has been a great, intelligent, and interesting discussion done on a very high plain. Oltmannd, Bucryus, Greyhounds, NKP, and other participants should be commended for keeping the discussion centered on facts and ideas rather than falling ito the trap of personal attacks. I think Kathi Kube and TRAINS have been very fair and tolerant in allowing it to happen and evolve and we all should thank them. We somewhat strayed from the topic of discussing one item, namely Don Phillips' column in particular, and turned it into a broader discussion about political and social and econimic philosophies conerning railroads in particular, business in general, an politics overall. It is unfortunate that so many other forums fall into the nit picking, name calling, shouting matches that leave bad feelings and images of its participants; it is fortunate that this one did not. Thank you all for an invigorating and enlightening discussion, and thank you again, TRAINS, for allowing us the byte space! Hope we can all meet again sometime on just as friendly grounds.
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oltmannd wrote: I heard the same supposition by some dude on NPR this PM. The other side of this is the gov't did nothing from 1929 to 1932 (expect to begin to try to measure GDP) and the markets weren't soothed a bit.
I heard the same supposition by some dude on NPR this PM. The other side of this is the gov't did nothing from 1929 to 1932 (expect to begin to try to measure GDP) and the markets weren't soothed a bit.
I'm going to question this.
I think the government did plenty from 1929 through 1932 - and, as usual, it just made things worse. We'd had fininacial "Panics" (a good description of 2008) before 1929 - and none of them resulted in a "Great Depression".
What was different in 1929 was that the Federal Reserve had been established in 1913. When the economy began to contract the Fed stupidly responded by reducing the money supply. They saw their job as matching the amount of money to the amount of commerce. This, of course, drained liquidity from the system. This made commerce more difficult and caused further economic decline. This further economic decline caused the stupid Fed to further decrease the money supply which made commerce even more difficult and caused even further economic decline. This caused the Fed to reduce the money supply even more.
You get the idea, the economy was in an downward spiral that the Federal Government through the Federal Reserve accelerated.
There were also very dumb regulations on banking that greatly increased the likelyhood that US banks would fail. It is important to know that not one Canadian bank failed during the Great Depression while many US banks failed. Canada allowed branch banking. This allowed banks to spread risks. The US didn't allow branch banking so risks were concentated and localized. The prohibition on branch banking caused many failures which also made commerce much more difficult.
The government did plenty. The vast majority of what they did was harmful to US Citizens.
Kind of the same as today.
http://www.youtube.com/watch?v=_MGT_cSi7Rs&feature=related
https://tstage9.wixsite.com/nyc-modeling
Time...It marches on...without ever turning around to see if anyone is even keeping in step.
oltmannd wrote: Bucyrus wrote: The big bailout was supposed to soothe the markets, but the markets have become anything but soothed. This leads to the common conclusion that the bailout was not sufficient to soothe the markets, or that the markets would be even more upset had not the bailout happened. But I have to wonder if the bailout has actually spooked the markets by highlighting a crisis and creating a sense of panic. After all when, in the name of solving the problem, you have the government socializing big chunks of our capitalistic system, which is represented by the markets, would not those markets feel threatened? Could the cure be more dangerous than the disease?I heard the same supposition by some dude on NPR this PM. The other side of this is the gov't did nothing from 1929 to 1932 (expect to begin to try to measure GDP) and the markets weren't soothed a bit.
Bucyrus wrote: The big bailout was supposed to soothe the markets, but the markets have become anything but soothed. This leads to the common conclusion that the bailout was not sufficient to soothe the markets, or that the markets would be even more upset had not the bailout happened. But I have to wonder if the bailout has actually spooked the markets by highlighting a crisis and creating a sense of panic. After all when, in the name of solving the problem, you have the government socializing big chunks of our capitalistic system, which is represented by the markets, would not those markets feel threatened? Could the cure be more dangerous than the disease?
The big bailout was supposed to soothe the markets, but the markets have become anything but soothed. This leads to the common conclusion that the bailout was not sufficient to soothe the markets, or that the markets would be even more upset had not the bailout happened.
But I have to wonder if the bailout has actually spooked the markets by highlighting a crisis and creating a sense of panic. After all when, in the name of solving the problem, you have the government socializing big chunks of our capitalistic system, which is represented by the markets, would not those markets feel threatened? Could the cure be more dangerous than the disease?
The real problem is that this is a major election year: the President, the whole house, and 1/3rd of the Senate. Doing nothing is not an option but doing something that doesn't work shows "E(lection)" for Effort. What no one ever stops to think about is that on the day after election the sun rises in the East and whatever decision or project put off because of the election, has to be faced anyway.
-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/)
henry6 wrote: oltmannd wrote: Can you give me an example of how 10,000 people get themselves in a "need" to go from A to B situation? That might provide some clues about personal vs. gov't responsibility to society.What does it really matter? It could be a daily commute, it could be weekly commerce between two points. It is rhetorical to seek opinions.
oltmannd wrote: Can you give me an example of how 10,000 people get themselves in a "need" to go from A to B situation? That might provide some clues about personal vs. gov't responsibility to society.
Can you give me an example of how 10,000 people get themselves in a "need" to go from A to B situation? That might provide some clues about personal vs. gov't responsibility to society.
What does it really matter? It could be a daily commute, it could be weekly commerce between two points. It is rhetorical to seek opinions.
It really matters because people have choices other than to have the gov't build them some transportation. They can move. They can phone it in. They can teleconference. They can vanpool, etc. The "need" for people to move is not an immutable given. I'm begging your question.
henry6 wrote: oltmannd wrote: [ The best use of capital is to put it to work where it can earn the best return, so that store owner must have had a place to put his capital where it would earn more. "Best" = dollars because markets are how we determine the value of things and dollars provide a uniform reference point.A hypothetical: There is coal in Wyoming. It can be gotten out of the ground onto a pile for $10/ton. There are people in Atlanta who are willing to pay for electricity at a rate that makes that coal worth $100/ton in Atlanta. I have two proposals before me for companies that want to form to move that coal and collect that $90 per ton. One is going to truck it. Their cost to move it will be $80/ton. One is going to move it by rail. Their cost is $50/ton to move it. Which company should I invest in? If both companies form, is either making an "excess" profit? Which company is best for the overall economy? What does it mean that one company has lower costs? Where does the profit go and what is done with those dollars next? What is likely to happen once both companies start up?(BTW, RRs need to have a net margin of about 20% in order to be able to afford enough capital just to replace worn out infrastructure and equipment)It depends on from what perspective you ask the question: Morally; Sound and fair business decsion; get as much as you can because it ain't gonna last anyway; get as much as you can because the end user can be held hostage. I guess what I am saying is to question the motives of the decscion process and the investor.
oltmannd wrote: [ The best use of capital is to put it to work where it can earn the best return, so that store owner must have had a place to put his capital where it would earn more. "Best" = dollars because markets are how we determine the value of things and dollars provide a uniform reference point.A hypothetical: There is coal in Wyoming. It can be gotten out of the ground onto a pile for $10/ton. There are people in Atlanta who are willing to pay for electricity at a rate that makes that coal worth $100/ton in Atlanta. I have two proposals before me for companies that want to form to move that coal and collect that $90 per ton. One is going to truck it. Their cost to move it will be $80/ton. One is going to move it by rail. Their cost is $50/ton to move it. Which company should I invest in? If both companies form, is either making an "excess" profit? Which company is best for the overall economy? What does it mean that one company has lower costs? Where does the profit go and what is done with those dollars next? What is likely to happen once both companies start up?(BTW, RRs need to have a net margin of about 20% in order to be able to afford enough capital just to replace worn out infrastructure and equipment)
The best use of capital is to put it to work where it can earn the best return, so that store owner must have had a place to put his capital where it would earn more. "Best" = dollars because markets are how we determine the value of things and dollars provide a uniform reference point.
A hypothetical: There is coal in Wyoming. It can be gotten out of the ground onto a pile for $10/ton. There are people in Atlanta who are willing to pay for electricity at a rate that makes that coal worth $100/ton in Atlanta. I have two proposals before me for companies that want to form to move that coal and collect that $90 per ton. One is going to truck it. Their cost to move it will be $80/ton. One is going to move it by rail. Their cost is $50/ton to move it.
Which company should I invest in? If both companies form, is either making an "excess" profit? Which company is best for the overall economy? What does it mean that one company has lower costs? Where does the profit go and what is done with those dollars next? What is likely to happen once both companies start up?
(BTW, RRs need to have a net margin of about 20% in order to be able to afford enough capital just to replace worn out infrastructure and equipment)
It depends on from what perspective you ask the question: Morally; Sound and fair business decsion; get as much as you can because it ain't gonna last anyway; get as much as you can because the end user can be held hostage. I guess what I am saying is to question the motives of the decscion process and the investor.
No, morally I think we are obligated to be as efficient with resources as possible. That's just plain old fashioned stewardship. The best investments generally mean more for everybody. The worst investments definitely mean less for everyone.
And, the end user is NOT held hostage. Assume that both the trucker and RR get enough backers to get into business. The trucker will make enough money delivering at $100 per ton to stay in business, but the RR will quickly see that they can get ALL the business if they cut their profit $10/ton and deliver at $90/ton. They are making a killing! Where does the money go? Some if it is needed to reinveste to keep going long term. The rest goes to the backers. What do they do with it? Put it back into the economy - either through consumption or though investment (maybe they need coal in Chicago, too?) Maybe they buy a new car a year earlier or eat out more.
But, "oh, the job loss!" some might say. The RR only needs one guy for every 10 the trucker needed. All those OTR truckers have been put out of work. Not so fast. For simplicity sake, lets say that the investors allow the RR to plow all the profit back in and now the RR is delivering coal to 10 markets instead of one. That creates enough jobs to hire all the displaced truckers. Now, instead of 100 guys working to get coal to one market, we can get coal to 10 markets. That's good stewardship of our time and talent.
At one time, it took 90% of us to produce enough food for us to eat. Not much manpower left to produce any goodies. Now it only takes 10% of us to produce more than we can eat. All those "displaced" workers got busy doing other things and now we have plent of food and lots of goodies. Even the poorest of us have more goodies than the the avg guy did 120 years ago.
But, there's one more good feature of capitalism. That RR that's making a killing delivering coal to Atlanta at $90/ton won't go unnoticed. Somebody else will want a piece of that action and figure they can get into that business and deliver it at $80/ton. They'll solicit investors, get in business and both RRs will be sellling at $80/ton. Then somebody figures out that the cost to move it could be reduced to $40/ton if they make the trains longer, and $35/ton if they use bigger cars, and $30/ton if they use DPU, and $25 if they get rid of the caboose, etc, etc, and finally the cost of coal in Atlanta falls to $50/ton.
We get efficient use of capital, manpower and material. Which means the same number of people can produce more goods and services.
Or, we could have regulated the whole deal and dictate that "coal at Atlanta must be sold at $100/ton". Anyone making "excess profit" selling coal in Atlanta will have it confiscated. So, the trucker stays in business and the RR never has any motivation to reduce their costs, there's no new capital forming to expand into other markets and we have a much smaller pie to divide up - but everybody is making a "fair" profit. And, this is holding the end user hostage.
henry6 wrote: Bucyrus wrote: But the projects that private enterprise cannot make a profit on are the ones that amount to a subsidy to the users. Sure government can do that better than the private sector with those kind of endeavors because the private sector does not have the power to take money away from people. So the government is better with projects that redistribute wealth rather than make a profit, but how far do you want go with redistribution? You have referred to need as though it is the government's responsibility to eradicate it.First, define profit, or rather enough profit. I remeber about 20 years ago there was a store chain around Upstate NY that earned an annual profit of about 8% but since the owners wanted 12-15% profit, they closed the stores saying they were'nt making enough money. So, I'd like to hear more about profit margins per business rather than just profit vs. no profit and when does not enough profit mean no profit and gives a business the right to bail out or seek a bail out?.Based on that and the "goverments responsibility", if there is a need to move 10,000 people from point A to point B daily and a railroad company says it needs more profit or a subsidy to make up the loss and lets say such subsidy would be $10,000 a day. If there was no highway available to absorb the auto traffic represented, or if the cost of providing an adequate highway would be well in excess of $10,000 a day, would it not be prudent of government to pay the railroad the subsidy rather than build a new highway? Or would it be reasonable to expect private business build a new highway?
Bucyrus wrote: But the projects that private enterprise cannot make a profit on are the ones that amount to a subsidy to the users. Sure government can do that better than the private sector with those kind of endeavors because the private sector does not have the power to take money away from people. So the government is better with projects that redistribute wealth rather than make a profit, but how far do you want go with redistribution? You have referred to need as though it is the government's responsibility to eradicate it.
But the projects that private enterprise cannot make a profit on are the ones that amount to a subsidy to the users. Sure government can do that better than the private sector with those kind of endeavors because the private sector does not have the power to take money away from people. So the government is better with projects that redistribute wealth rather than make a profit, but how far do you want go with redistribution?
You have referred to need as though it is the government's responsibility to eradicate it.
First, define profit, or rather enough profit. I remeber about 20 years ago there was a store chain around Upstate NY that earned an annual profit of about 8% but since the owners wanted 12-15% profit, they closed the stores saying they were'nt making enough money. So, I'd like to hear more about profit margins per business rather than just profit vs. no profit and when does not enough profit mean no profit and gives a business the right to bail out or seek a bail out?.
Based on that and the "goverments responsibility", if there is a need to move 10,000 people from point A to point B daily and a railroad company says it needs more profit or a subsidy to make up the loss and lets say such subsidy would be $10,000 a day. If there was no highway available to absorb the auto traffic represented, or if the cost of providing an adequate highway would be well in excess of $10,000 a day, would it not be prudent of government to pay the railroad the subsidy rather than build a new highway? Or would it be reasonable to expect private business build a new highway?
The answer to the first part of your question is that the definition of enough profit is whatever it takes to get a private businessperson to invest and operate a given business. There is no set amount. It depends on the rate of return that a business investor is willing to settle for and the amount of risk that he or she is willing to take.
I only mentioned the concept of enough profit because you have previously stipulated that government needs to step in and provide things if business can't make a profit doing it. So my use of the term, enough was simply to address the fact that you have implied a threshold above which private business would be willing to provide a service in lieu of having it done by the government.
You have now taken this in a strange new direction by asking how low profit can be before a business has a right to quit or refuse to begin. A private business does not need to justify their profit level to anybody other than their investors, and they are not required to keep operating a business just because there is a need for what they do and their customers feel that the business's profit is adequate.
Regarding your last question: What would be reasonable would be that if 10,000 people have a need to move themselves, they should pay for it themselves and not expect the government to either build them a road or a railroad.
Soo 6604 wrote: Murphy Siding wrote: Soo 6604 wrote: Soo 6604 wrote: Nothing important. Just needed the replies by email to stop.Carry on. Still trying to stop the email alertsSorry What, exactly does this post mean? Are you saying you still are getting an e-mail alert, that there is a new post on this thread, when you don't want to? I'm confused.That is exactly what is happening. I started by just editing my first post and unchecking the reply box. That didn't work so I posted twice again, still got reply email. Maybe the third time is the charm
Murphy Siding wrote: Soo 6604 wrote: Soo 6604 wrote: Nothing important. Just needed the replies by email to stop.Carry on. Still trying to stop the email alertsSorry What, exactly does this post mean? Are you saying you still are getting an e-mail alert, that there is a new post on this thread, when you don't want to? I'm confused.
Soo 6604 wrote: Soo 6604 wrote: Nothing important. Just needed the replies by email to stop.Carry on. Still trying to stop the email alertsSorry
Soo 6604 wrote: Nothing important. Just needed the replies by email to stop.Carry on.
Nothing important. Just needed the replies by email to stop.
Carry on.
Still trying to stop the email alerts
Sorry
That is exactly what is happening. I started by just editing my first post and unchecking the reply box. That didn't work so I posted twice again, still got reply email. Maybe the third time is the charm
Thanks to Chris / CopCarSS for my avatar.
http://www.youtube.com/user/pavabo
http://www.flickr.com/photos/paulvbox
Garr,
Your right, some banks actively shopped these loans... WaMu being one of them.
They also had a pretty active refinance program and personal loan program.
Sure, it was a buyers market, realtors knew this, knew who at what bank to send people to, and so...
Wanna bet those billboards that advertise "We Buy Ugly Houses" don't get renewed?
The "flip" market is dead.
You, me and just about anyone old enough to buy a beer learned that any and all markets are finite...at some point in time they will cease to rise, and either stabilize or drop.
The speculators in this simply guessed at the wrong time frame.
I am not disagreeing with greyhounds or Bycrus, a simply am not in total agreement with the government forcing this to happen, but think more along the lines of a set of circumstances that, while not unknown to all parties, was certainly not expected to happen as quickly as it did.
I think it simply got away from them before they actually had any plan to deal with it, and we the taxpayers are having to foot the bill...as one poster put it, they thought they would either be retired, out of office or dead before the bills came due...
23 17 46 11
edblysard wrote:That's not what I'm trying to tell you.I'm trying to tell you that the Federal Government changed the rules so that the loan officer, the person approving the loan, didn't have to worry whether the loan would be paid off or not. This decoupling by our Federal government of loan approval from the responsibility to exercise due dilligence in making the loan was bound to explode, and it did.I understand your point....what I was getting at was the loan officer had a moral, and legal responsibility to act in good faith, which at times means refusing to make a loan to people he or she knows can never repay.The banks and the loan officers were simply pushing paper, knowing that the sub prime loan would be bought by a risk company, not necessarily Freddie or Fannie...Reselling loans had becoming the business, not making good loans in the first place.I am not so certain the government encouraged that practice, but they certainly did not seem to actively discourage it either.The criteria for granting a loan was changed from "will they be able to make the payments" to "will we be able to sell the loan to a government sponsored enterprise". (Fannie Mae and Freddie Mac.)
That's not what I'm trying to tell you.
I'm trying to tell you that the Federal Government changed the rules so that the loan officer, the person approving the loan, didn't have to worry whether the loan would be paid off or not. This decoupling by our Federal government of loan approval from the responsibility to exercise due dilligence in making the loan was bound to explode, and it did.
I understand your point....what I was getting at was the loan officer had a moral, and legal responsibility to act in good faith, which at times means refusing to make a loan to people he or she knows can never repay.
The banks and the loan officers were simply pushing paper, knowing that the sub prime loan would be bought by a risk company, not necessarily Freddie or Fannie...
Reselling loans had becoming the business, not making good loans in the first place.
I am not so certain the government encouraged that practice, but they certainly did not seem to actively discourage it either.
The criteria for granting a loan was changed from "will they be able to make the payments" to "will we be able to sell the loan to a government sponsored enterprise". (Fannie Mae and Freddie Mac.)
To me, it looks more like the subprime borrowers either shopped the loans, were guided to, or knew where to get the loans.
Not all banks made wholesale subprime loans, thus they have not been as affected by the subprime problem. For every loan officer that said "no" at institution A, there was a willing loan officer at institution B.
The seeds for this problem were sown by the federal government in '98/99. Freddie, Fannie, and others in the private sector nutured them by providing creative bundles to market the loans. Every one benefitted for a while with increased property values. However, very similar to a pyramid scheme, there came a point when there were not enough "bigger fools" left to fund the scheme.
Jay
zardoz wrote: henry6 wrote: .....And rather than look at these regulations as liberal help for the lowly poor, it was actually big government winking its eye at big financial business saying, "have a go at it, it won't cost you a thing and we'll all be out of office or dead by the time it all hits the fan."? I'm getting that feeling.
henry6 wrote: .....And rather than look at these regulations as liberal help for the lowly poor, it was actually big government winking its eye at big financial business saying, "have a go at it, it won't cost you a thing and we'll all be out of office or dead by the time it all hits the fan."? I'm getting that feeling.
Either what is said here or the "law of unintended consequences" in full blossom.
edblysard wrote: That's not what I'm trying to tell you.I'm trying to tell you that the Federal Government changed the rules so that the loan officer, the person approving the loan, didn't have to worry whether the loan would be paid off or not. This decoupling by our Federal government of loan approval from the responsibility to exercise due dilligence in making the loan was bound to explode, and it did.I understand your point....what I was getting at was the loan officer had a moral, and legal responsibility to act in good faith, which at times means refusing to make a loan to people he or she knows can never repay.The banks and the loan officers were simply pushing paper, knowing that the sub prime loan would be bought by a risk company, not necessarily Freddie or Fannie...Reselling loans had becoming the business, not making good loans in the first place.I am not so certain the government encouraged that practice, but they certainly did not seem to actively discourage it either.The criteria for granting a loan was changed from "will they be able to make the payments" to "will we be able to sell the loan to a government sponsored enterprise". (Fannie Mae and Freddie Mac.)Of course the lending institution could have been altruistic and foregone the money from granting and selling such loans, but then they would have been in trouble with Federal regulators who had laws requiring banks to make such loans. Which laws?I would be interested in looking that over.From my point of view, it has been an artificial market for over two decades, and all this bailout boils down to is an attempt by politicians to keep their financial contributors in a position to keep contributing.Even if it works on a marginal basis, (it won't) the market will still be an artificial one, the real value of most properties will still be inflated, and at some point, the market forces will prevail and either drive the prices back down to their real value level or kill the market completely...we are not quite there yet, but pretty close.The other problem is that the people who did and could repay their loans, will be stuck with a home artificially overpriced and over valued, and pretty much unsellable, while next door a home or property rescued by this bail out will be woefully underpriced.All the money you paid out in Federal, State and Local taxes on artificially priced property, and any real improvements you did to the property to increase its actual value simply vanished the moment the President signed this bill.
Of course the lending institution could have been altruistic and foregone the money from granting and selling such loans, but then they would have been in trouble with Federal regulators who had laws requiring banks to make such loans.
Which laws?
I would be interested in looking that over.
From my point of view, it has been an artificial market for over two decades, and all this bailout boils down to is an attempt by politicians to keep their financial contributors in a position to keep contributing.
Even if it works on a marginal basis, (it won't) the market will still be an artificial one, the real value of most properties will still be inflated, and at some point, the market forces will prevail and either drive the prices back down to their real value level or kill the market completely...we are not quite there yet, but pretty close.
The other problem is that the people who did and could repay their loans, will be stuck with a home artificially overpriced and over valued, and pretty much unsellable, while next door a home or property rescued by this bail out will be woefully underpriced.
All the money you paid out in Federal, State and Local taxes on artificially priced property, and any real improvements you did to the property to increase its actual value simply vanished the moment the President signed this bill.
Somewhere in this arguement I am hearing that the loan officer felt he could approve any loan he wanted to because he knew that niether he nor his company would be responsible for its default; he and his company would make their money whether it was sold up the chain or not, whether it was paid off or not. So, isn't there a moral responsiblity by these companies not to abuse public funds? And rather than look at these regulations as liberal help for the lowly poor, it was actually big government winking its eye at big financial business saying, "have a go at it, it won't cost you a thing and we'll all be out of office or dead by the time it all hits the fan."? I'm getting that feeling.
Bucyrus wrote: edblysard wrote: I do place part of the blame on the lenders...who in their right mind lends $200,000.000 to a couple of kids each making a buck over minimum wage? Answer: Any lender who has a guarantee from the U.S. government to cover the loan if the couple of kids should happen to default. And any lender who is threatened by the U.S. government with civil rights prosecution for discrimination if they don't lend money to the financially disadvantaged.Lenders are caught between a rock and a hard place. If they don't lend to the under-qualified, they are discriminating, and if they do lend to them, they are predatory lenders. It is a way for the borrower to always be assured of being a victim. Predatory lenders, irresponsible borrowers, deregulation--these are NOT things that caused this housing crisis. It is true that the lenders lost the money. They played a role. They apparently got swept up in the euphoria of lending money in a world without risk. They may have overestimated the credibility of the government's guarantee. Apparently as evidenced by the events of the last couple weeks, the government was at least $700-billion dollars undercapitalized to make such a guarantee.The yellow brick road that takes you to the underlying explanation of the cause of this mess leads right to Freddie Mac and Fannie Mae and government policy executed through those two organizations starting in the 1990s. And it continues from there right into congress and ends at the doorstep of several specific individuals who can't stand this being known for at least a month. A 700-billion dollar piece of wool is being pulled over the public's eyes.
edblysard wrote: I do place part of the blame on the lenders...who in their right mind lends $200,000.000 to a couple of kids each making a buck over minimum wage?
I do place part of the blame on the lenders...who in their right mind lends $200,000.000 to a couple of kids each making a buck over minimum wage?
Answer: Any lender who has a guarantee from the U.S. government to cover the loan if the couple of kids should happen to default.
And any lender who is threatened by the U.S. government with civil rights prosecution for discrimination if they don't lend money to the financially disadvantaged.
Lenders are caught between a rock and a hard place. If they don't lend to the under-qualified, they are discriminating, and if they do lend to them, they are predatory lenders. It is a way for the borrower to always be assured of being a victim.
Predatory lenders, irresponsible borrowers, deregulation--these are NOT things that caused this housing crisis.
It is true that the lenders lost the money. They played a role. They apparently got swept up in the euphoria of lending money in a world without risk. They may have overestimated the credibility of the government's guarantee. Apparently as evidenced by the events of the last couple weeks, the government was at least $700-billion dollars undercapitalized to make such a guarantee.
The yellow brick road that takes you to the underlying explanation of the cause of this mess leads right to Freddie Mac and Fannie Mae and government policy executed through those two organizations starting in the 1990s. And it continues from there right into congress and ends at the doorstep of several specific individuals who can't stand this being known for at least a month.
A 700-billion dollar piece of wool is being pulled over the public's eyes.
I think this whole thing is a three legged stool.
The gov't thru Fannie and Freddie certainly had a part in this.
But, this doesn't explain why some banks are in really good shape (Wells Fargo) and some are a train wreck (WaMu - there is a nice interview with a former WaMu exec on NPR the other day about how he and others warned the other execs and the board, but were generally ignored) I can tell you that while WaMu was basically ignoring their good mortgages, Well Fargo was actively and agressively soliciting re-financing of low-risk mortgages currently held by other banks.
And, it doesn't let the dopes that signed mortgages they really couldn't afford unless everything broke just right off the hook.
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