Wealth Reality

[HenryFortune]

You'll have to show me how I'm lying, then. The article you linked to didn't say anything about the banks being forced to make loans, it just said the banks were forced to locate a bank or two in redlined areas. Perhaps you can link me to some info that can show me where I'm wrong.

And I'd still like to know anyone's opinion on the fact that the vast majority of the bad loans were made to people who already had homes and refinanced so they could spend their borrowed money on other things besides their homes. Those types of loans were the bulk of the loans the banks knowingly made and which ultimately ruined our economy.

 

[Bfgrn]

Well, thanks for that insightful analysis. I've done a lot of research on these subjects and am merely telling you what I've learned. I admit it's possible that I'm mistaken or misinformed (if I am, you'll have to show me where, and how you came to that conclusion), but I'm not a liar and I resent being called one.

Good posts HF. I have also done research into the financial crisis, and have come to the conclusion there are two versions. The truth and the right wing version where the only culprits are evil government Democrats forcing bankers to sell homes to poor people and minorities.

 

[oldfart]

I argue your ire is misplaced. More regulation and government meddling in mortgages is not the answer. Free markets are.

Fine. Let's drop all government mortgage guarantees and see what happens. My dad bought the house I grew up in for 50% down and the balance over 5 years. I'm OK with doing the same. Ignore the screams coming from the banking, construction, and investment industries.

 

[Againsheila]

When people think about this sort of stuff, they usually only include people their age in the comparison.

People below 30 years don't necessarily have any wealth, they are in fact often indebted. Yet, because of that debt, helpful parents and their youth, their standard of living is actually decent.

Also I think it's important to differentiate between standard of living(spendable income), wealth and income. Of course for most people wealth is mostly immaterial. Skills, health and stuff like that matter. Yet none of that shows up in any wealth calculator.

I don't know what the heck you are talking about but when from the time I was 19, I was on my own. No loans from my parents, nothing. For a short time, when my husband was laid off and my mother was sick, she did come to live with us and paid a small amount of room and board which helped, but my parents sure as hell never paid our bills. Oh, and we had purchased our first home and had 2 kids before we were 30.

 

[expat_panama]

...Increasing the number of loans isn't the same as willfully and knowingly giving loans to people you know can't pay it back...

Actually it is.

What banks usually do is loan money only to those that will probably pay it back, and the people who don't get loans are those with higher default risks. If banks are forced to make loans to more than just the people who repay, the only choice is to knowingly loan to people who'll probably not repay. The only way to make banks accept those losses, is to make it clear that those losses would be less than the costs of threatened law suits.

What many banks didn't count on was that they'd be blamed for the expected defaults as 'predatory lenders'. More info here.

 

[Bfgrn]

...Increasing the number of loans isn't the same as willfully and knowingly giving loans to people you know can't pay it back...

Actually it is.

What banks usually do is loan money only to those that will probably pay it back, and the people who don't get loans are those with higher default risks. If banks are forced to make loans to more than just the people who repay, the only choice is to knowingly loan to people who'll probably not repay. The only way to make banks accept those losses, is to make it clear that those losses would be less than the costs of threatened law suits.

What many banks didn't count on was that they'd be blamed for the expected defaults as 'predatory lenders'. More info here.

More info here....You mean fairy tales for the obtuse?

The mortgage crisis happened because of private lenders, mostly private lenders outside of government lending standards, and by mostly wealthy home buyers known as speculators.

Here is what we DO know:

1) The financial crisis was not caused by low and middle income families buying a home.

2) It was not caused by dead beat poor people.

3) Fannie and Freddie were not to cause.

4) The Community Investment Act was not the culprit either.

The crisis was caused by private lending, to mostly upper middle class and the wealthy. ONLY 6% of of all the higher-priced loans were extended by CRA-covered lenders to lower-income borrowers or neighborhoods in their CRA assessment areas. The majority of those foreclosed on were wealthy and upper middle class, plus a large segment of buyers who were wealthy speculators looking for a fast buck. They strategically walked away from their mortgages, leaving people who bought homes to live in with lower values on their house and neighborhood.

AND, what really sucks for the right wing propaganda of lies, all the way back to the late '90's there was one very outspoken and vocal critic of predatory lending practices, they even held protests at companies like Wells Fargo and Lehman Brothers...ACORN

But, if you insist on blaming government, maybe you just forgot THIS...

Bush's 'ownership society'

"America is a stronger country every single time a family moves into a home of their own," George W. Bush said in October 2004. To achieve his vision, Bush pushed new policies encouraging homeownership, like the "zero-down-payment initiative," which was much as it sounds—a government-sponsored program that allowed people to get mortgages without a down payment. More exotic mortgages followed, including ones with no monthly payments for the first two years. Other mortgages required no documentation other than the say-so of the borrower. Absurd though these all were, they paled in comparison to the financial innovations that grew out of the mortgages—derivatives built on other derivatives, packaged and repackaged until no one could identify what they contained and how much they were, in fact, worth.

As we know by now, these instruments have brought the global financial system, improbably, to the brink of collapse.

End of the ‘Ownership Society’

 

[eflatminor]

Well, thanks for that insightful analysis. I've done a lot of research on these subjects and am merely telling you what I've learned. I admit it's possible that I'm mistaken or misinformed (if I am, you'll have to show me where, and how you came to that conclusion), but I'm not a liar and I resent being called one.

FWIW HF, I don't think you're lying but I do think you're overstating the culpability of bankers when it comes to the mortgage meltdown.

First, there are many small banks that made reasonable loans and kept them in house...yet those banks were forced by the Fed to take bailout money. Those banks had no choice but to accept Fed money and pay the Fed interest on that money. It's another example of government (or their henchmen at the Fed) meddling with markets.

Secondly, whether a government program/act/mandate is voluntary or not, a large, a publically traded institution will always seek to comply because they know damn well that if they don't, hell will reign down on them. Seriously, we may all think Barney Frank was a damn fool, but if you own a bank and tried to defy something like the CRA, you can be damn sure the likes of Frank would do whatever he could to put you out of business. It's what central planners do when they don't get their way.

As for the big banks, I suspect you and I agree that the extent to which those guys "dance" with their crony capitalist partners in Washington DC is nauseating. However, I blame the meddling politicians FAR more than the bankers who, after all, have a legal responsibility to do what is in the best interests of that bank's shareholders. If that means accepting the handouts, bailouts, tax loopholes, and government backing of risk, the bank WILL accept those perks. If they didn't, not only would the government come down on their ass, the shareholders would have a legal case against the bank. In other words, it may be 'unseemly' to watch these bankers get in bed with federal authorities but the criminality lies with the meddling politicians...a trend we must stop.

More importantly, I hope you will reconsider calling for even more government meddling to fix these kind of problems. Regardless of which party is in power, we should not look to central planners to fix problems caused by central planners.

Regardless of how you come to feel about this stuff, thanks for taking the time to participate in a serious discussion.

 

[HenryFortune]

As for the big banks, I suspect you and I agree that the extent to which those guys "dance" with their crony capitalist partners in Washington DC is nauseating. However, I blame the meddling politicians FAR more than the bankers who, after all, have a legal responsibility to do what is in the best interests of that bank's shareholders. If that means accepting the handouts, bailouts, tax loopholes, and government backing of risk, the bank WILL accept those perks. If they didn't, not only would the government come down on their ass, the shareholders would have a legal case against the bank. In other words, it may be 'unseemly' to watch these bankers get in bed with federal authorities but the criminality lies with the meddling politicians...a trend we must stop.

I agree, and I suspect that we're both looking at the same problem but seeing different culprits. You believe government should take most of the blame for the banking industry's undue influence over it and I believe the banking industry should take most of the blame. Either way, it's obvious that this marriage should be dissolved, but the only way that's going to happen is to make it illegal, and Congress is the only institution that can do this.

 

[eflatminor]

As for the big banks, I suspect you and I agree that the extent to which those guys "dance" with their crony capitalist partners in Washington DC is nauseating. However, I blame the meddling politicians FAR more than the bankers who, after all, have a legal responsibility to do what is in the best interests of that bank's shareholders. If that means accepting the handouts, bailouts, tax loopholes, and government backing of risk, the bank WILL accept those perks. If they didn't, not only would the government come down on their ass, the shareholders would have a legal case against the bank. In other words, it may be 'unseemly' to watch these bankers get in bed with federal authorities but the criminality lies with the meddling politicians...a trend we must stop.

I agree, and I suspect that we're both looking at the same problem but seeing different culprits. You believe government should take most of the blame for the banking industry's undue influence over it and I believe the banking industry should take most of the blame. Either way, it's obvious that this marriage should be dissolved, but the only way that's going to happen is to make it illegal, and Congress is the only institution that can do this.

Agreed but I can count on one hand the number of Congressmen that have stood firmly against cronyism. It seems the others believe in meddling with markets...for the greater good of course! They think only THEY have the magic beans...

 

[HenryFortune]

Agreed but I can count on one hand the number of Congressmen that have stood firmly against cronyism. It seems the others believe in meddling with markets...for the greater good of course! They think only THEY have the magic beans...

Again, we agree. I'm all for kicking the entire bunch out of office and installing an entirely new Congress that will actually work for their constituents rather than for the highest bidder.

 

[expat_panama]

...Increasing the number of loans isn't the same as willfully and knowingly giving loans to people you know can't pay it back...

Actually it is.

What banks usually do is loan money only to those that will probably pay it back, and the people who don't get loans are those with higher default risks. If banks are forced to make loans to more than just the people who repay, the only choice is to knowingly loan to people who'll probably not repay. The only way to make banks accept those losses, is to make it clear that those losses would be less than the costs of threatened law suits.

What many banks didn't count on was that they'd be blamed for the expected defaults as 'predatory lenders'. More info here.

...You mean...

Whatever I may mean or not mean doesn't change how banks work. They either loan to those who can repay, or the banks fail. No way around it. It's a reality that we either learn to deal with or we change the subject.

...The financial crisis was not caused by...

Ah, you're opting for a change of subject over to all the things you believe didn't cause the crisis.


cheers.

 

[Bfgrn]

Actually it is.

What banks usually do is loan money only to those that will probably pay it back, and the people who don't get loans are those with higher default risks. If banks are forced to make loans to more than just the people who repay, the only choice is to knowingly loan to people who'll probably not repay. The only way to make banks accept those losses, is to make it clear that those losses would be less than the costs of threatened law suits.

What many banks didn't count on was that they'd be blamed for the expected defaults as 'predatory lenders'. More info here.

...You mean...

Whatever I may mean or not mean doesn't change how banks work. They either loan to those who can repay, or the banks fail. No way around it. It's a reality that we either learn to deal with or we change the subject.

...The financial crisis was not caused by...

Ah, you're opting for a change of subject over to all the things you believe didn't cause the crisis.


cheers.

You are opting to try to silence the truth by erasing it. The banks did fail. But your fairy tale does not address the cause. Your opt-ed is a tale that is based not on reality, but an ideology that bankers and lenders are honest, because they are 'wealthy entrepreneurs'. The reality is they are criminals who should be in prison.

How Financial Criminalization Crashed the Economy, and the Culprits Got Off Scot-Free

It is no exaggeration to say that since the 1980s, much of the American (and global) financial sector has become criminalized, creating an industry culture that tolerates or even encourages systematic fraud. The behavior that caused the mortgage bubble and financial crisis was a natural outcome and continuation of this pattern, rather than some kind of economic accident.

It is important to understand that this behavior really is seriously criminal. We are not talking about neglecting some bureaucratic formality. We are talking about deliberate concealment of financial transactions that aided terrorism, nuclear weapons proliferation, and large-scale tax evasion; assisting in concealment of criminal assets and activities by others; and directly committing frauds that substantially worsened the worst financial bubbles and crises since the Depression.

None of this conduct was punished in any significant way. On November 7, 2011, the New York Times published an article based on its own review of major banks' settlements of SEC lawsuits since 1996. The Times' analysis found fifty-one cases in which major banks had settled cases involving securities fraud, after having previously been caught violating the same law, and then promising the SEC not to do so again. The Times' list, furthermore, covered only SEC securities fraud cases; it did not include any criminal cases, private lawsuits by victims, cases filed by state attorneys general, or any cases of bribery, money laundering, tax evasion, or illegal asset concealment -- all areas in which the banks have numerous and major violations. In Predator Nation, I provide detailed, well-documented accounts of behavior ranging from assisting Enron's frauds (Citigroup, Merrill Lynch), to fraudulently exploiting the Internet bubble (most of the major investment banks), to using for-profit colleges to exploit government student loan programs (Goldman Sachs), to assisting in money laundering and tax evasion on a large scale (at least eleven banks including UBS, Barclay's, and Lloyds), to using bribery and artificially complex derivatives to destroy the finances of a county government (JP Morgan Chase), to profiting from Bernard Madoff even while strongly suspecting him to be a fraud (JP Morgan Chase, UBS).

Total fines for all these cases combined appear to be far less than 1 percent of financial sector profits and bonuses during the same period. There have been very few prosecutions and no criminal convictions of large U.S. financial institutions or their senior executives. Where individuals not linked to major banks have committed similar offenses, they have been treated far more harshly.

Given this background, it is difficult to avoid the conclusion that the mortgage bubble and financial crisis were facilitated not only by deregulation but also by the prior twenty years' tolerance of large scale financial crime. First, the absence of prosecution gradually led to a deeply embedded cultural acceptance of unethical and criminal behavior in finance. And second, it generated a sense of personal impunity; bankers contemplating criminal actions were no longer deterred by threat of prosecution.

And just as the last twenty years of unpunished financial crime constituted a green light for the bubble, so, too, America's non-response to the bubble and crisis is setting the tone for financial conduct in the future.

 

[expat_panama]

...You mean...

Whatever I may mean or not mean doesn't change how banks work. They either loan to those who can repay, or the banks fail. No way around it. It's a reality that we either learn to deal with or we change the subject.

...The financial crisis was not caused by...

Ah, you're opting for a change of subject over to all the things you believe didn't cause the crisis.


cheers.

You are opting to try to silence the truth...

We're still disconnected here with my talking banks and money and your focus on things you don't like. Go ahead and enjoy your dislikes, but I really prefer enjoying my money so I'll just be off and on here checking to see if the chat ever gets back on track.

 

[Bfgrn]

Whatever I may mean or not mean doesn't change how banks work. They either loan to those who can repay, or the banks fail. No way around it. It's a reality that we either learn to deal with or we change the subject.Ah, you're opting for a change of subject over to all the things you believe didn't cause the crisis.


cheers.

You are opting to try to silence the truth...

We're still disconnected here with my talking banks and money and your focus on things you don't like. Go ahead and enjoy your dislikes, but I really prefer enjoying my money so I'll just be off and on here checking to see if the chat ever gets back on track.

I read your bullshit op-ed fairy tale, NOW you want to change the subject.

 

[EdwardBaiamonte]

It[Republicans] suddenly became the party of deficit reduction

Any party can suddenly become anything the voters decide; so what's the point, as if the liberal has any idea????????????????

When Bush was riding high it was a centrist party. If the Tea party takes over it will be very different. Similarily, Democrats now have a president in office who had two communist parents and voted to the left of Bernie Sanders. This is suddenly not the Party of JFK.

Now do you see that as a liberal you have no point at all and never will?? Sorry