Quote Originally Posted by FilmFestGuy View Post
They are in equal responsibility with a bank being foolish enough to lend someone more money than they can repay.

Poor people didn't beg banks to create sub-prime loans. Sub-prime loans were invented by banks to take advantage of rising housing prices and sold to people who were higher risk because they were placing a bet that the value of the home would rise quickly and the person would sell the home before the interest rate spiked.

So, yes, the person making $30,000 a year applying for a $500,000 loan is responsible. But so is the idiotic bank that created such a possibility in the first place.
The banks who sold the mortgages weren't being foolish. They just didn't care if the homeowner could pay the mortgage back because they knew that they were going to sell the mortgage to someone else, and therefor they wouldn't be on the hook when the homeowner defaulted.

The law used to require the bank making the mortgage to hold onto the mortgage, which was enough incentive to insure that the bank would not give mortgages to people who couldn't afford them, but that changed with bank deregulation (thank you republicans). The deregulation allowed banks to group mortgages together and sell peices of these grouped mortgages as securities. Institutions like Lehman Bros, BofA, Goldman Sach etc bought them up like candy. When the housing bubble burst, these institutions were on hook, and were in danger of failing. That's what led to the bank bailout (ie TARP) under bush*