I think all are responsible to a degree, but I think Wall Street and deregulation is more responsible than the others.
Because a lot of these lenders were fly-by-night organizations who knew they could off-load the loans to the big lenders as a package. They didn't care if someone couldn't pay the loan back, they were going to be sipping margaritas on a beach somewhere before the loan fell apart.
I had some first-hand exposure to what happened here as I did some strategic planning work for a mortgage producer in the middle of the decade. Here are my observations:
This was a supply-side problem that was allowed to happen because of lack of regulatory oversight. Investment banks created sophisticated financial instruments around mortgages, then pushed mortgage companies to place money with large signing bonuses and kick-backs. These mortgage companies (including my client) created boiler-room sales operations with out-bound telemarketers to find people with financial needs. This mortgage company did re-fi’s, 2nd and 3rd mortgages and mortgages to finance vacation homes and real estate speculation. The firm I worked with had a $200M open line with Countrywide and a $100M line with Lehman. They did their own loan approval. Though Lehman and Countrywide had the right to reject a loan, they rarely/rarely did. Between discounts, commissions and spifs (kickbacks), a typical $150,000 mortgage created $15,000 in closing fees to the Company (first sign this stuff makes no sense: where is their room for a 10% commission in a mortgage?).... and that is just the commission the mortgage retailer earned. There were far more commissions to be earned upstream. The core financing of this endeavor looked much more like a pyramid scheme than banking. (second sign of a house of cards: This little mortgage company had revenue of about $15M, but $300M in open credit lines)
The buyers of these mortgages were not poor (at least they way we think of the poor), but were doctors, lawyers, dentists, businessmen. They were generally overextended (living on home equity), had undocumented income or were real estate speculators (remember that?). Rarely did a warm body get a “no” on his mortgage app as very few deals were too ugly as there were good commissions to be made. This was a house cards and pretty obvious from my vantage point in 2005.
I am also a big believer that a big problem in our economy is that highest marginal tax rates are too low. The current system is such that people are encouraged to move money from the business to their personal accounts. There is no incentive to keep money in the business and re-invest. In the case of the mortgage melt-down the net-net of the activity was the financiers effectively stole the real estate equity of others, created these sophisticated financial instruments on which they received personal fees (placement fees, origination fees and success bonuses). Remember, the hedge funds, which were often the money source and packagers of these financial products
This is also a crude explanation of the meltdown, but a bit more illustrative. A meltdown of this magnitude could only happen if the very fiber of our financial system were threatened, as was the case in 2008, the problem was so sophisticated the very integrity of the world's banking and insurance system was in question.....
Sorry, but those that think the Community Reinvestment Act of 1977 suddenly reared its ugly head 30 years later and caused (primarily or secondarily) this problem are either ignorant or….. For those that think that poor people over buying was the issue, please explain how AIG a financial insurance company could be brought down in the process....
Sorry, this was just rape and pillage by Wall Street.
Most of the blame belongs to the borrowers and the government.
The borrowers and the government weren't having appraisers put in inflated appraisal values in order to get loans that they could sell off. I know a few people who worked for Countrywide prior to the bubble, the banks were not only aware of the issue, they were actively exacerbating it AND taking advantage of idiots who weren't financially able to borrow the amount that they were borrowing.
When an idiot's banker tells them that they can refi in order to avoid foreclosure indefinitely, the idiot will believe them. That's called predatory lending, though, and it was rampant.
Which conveniently omits the fact that while the bubble was still inflating, folks could have sold at any time for a substantial profit. That factoid deflates a whole lot of the libtard claims of "predatory lending", where once again liberals try to shift accountability from the individual, for the choices they freely make, onto some other boogieman that now requires the nanny state to take action.
Government started the whole sub-prime mess. They created the beast.
Which conveniently omits the fact that while the bubble was still inflating...
That's only the case where they had planned to flip the house in the first place and not simply have a place to live.
False. As the bubble was bursting and values began declining, there were still inflated values being sent in.
One of the main reasons that the values were inflating was because the lenders were getting their appraisers to "make the value work" so that the loan would be workable. (Can't get a cash out refi if there is no 'equity'. Often times, there was never any equity to begin with, especially in cases like the 115% LTV loans)
Teachers did
Rothschild family and USA's wars costs.
| Moderator's Warning: |
Deregulation.
George W Bush and Ronald Reagan.
Deregulation.
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