View Poll Results: What Created The 2008 Financial Meltdown?

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  • Greedy Wall Street Investment Bankers /Deregulation of the financial Industry

    37 33.94%
  • Barney Frank, Chris Dodd and the CRA

    32 29.36%
  • Poor people buying houses they can’t afford

    27 24.77%
  • Other

    13 11.93%
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Thread: What Created The 2008 Financial Meltdown?

  1. #61
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    Re: What Created The 2008 Financial Meltdown?

    Quote Originally Posted by Helix View Post
    the 2008 meltdown was the culmination of more than three decades of failed economic strategy.

    put simply, we outsourced / eliminated too many middle class jobs. we attempted to replace earned income with easier credit. this allowed consumption to continue even in the face of reduced or stagnated wages. in 2008, we experienced a large part of the correction which we would have been experiencing all along had credit not been made more available to displaced workers.

    the moral of the story is that if you live in a country with a GDP that is largely consumer spending based, you had better hire some people domestically and pay them wages that allow for some discretionary spending without extensive borrowing.
    I would agree, I would go further and say that shareholder wealth maximization has created an environment of short term profits over long term sustainability of companies. In the words of Jack Welch "On the face of it, shareholder value is the dumbest idea in the world"
    “Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.” John Maynard Keynes

  2. #62
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    Re: What Created The 2008 Financial Meltdown?

    Quote Originally Posted by iliveonramen View Post
    I would agree, I would go further and say that shareholder wealth maximization has created an environment of short term profits over long term sustainability of companies. In the words of Jack Welch "On the face of it, shareholder value is the dumbest idea in the world"
    It seems that companies increasingly rarely look beyond the next fiscal quarter.

  3. #63
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    Re: What Created The 2008 Financial Meltdown?

    Quote Originally Posted by Gipper View Post
    Translation: Since some people...scratch that...since most people are stupid, we have to give overwhelming power to government to act as daddy, slapping people's hands and shouting "no!" when they do something ridiculous?

    Ah hell, that's just great. Our problem isn't stupidity - it's that we subsidize it. Making an example of these fools would be a powerful learning tool for the next crop of economically ignorant folk who have dollar-green dreams and lack the education to realize them. If it wasn't for people like that, Las Vegas would be a watering hole and pass-through truck stop.

    We need to tell these homeless people to put out signs saying "Will work for food because I took out a loan I knew I couldn't pay back".
    Precisely. When we keep people from having to learn from their mistakes we'll keep making them. After Wall St. gambled and lost, we should have let those "too big to fail" firms fail to show any other would be gamblers the consequences of their actions. Instead, we enacted Dodd-Frank which codifies "too big to fail" and allows these firms to get bigger and bigger. Dodd-Frank is going to be a crippler of small to medium sized banks that can't afford to either A) comply with the mountains of red tape and regulation or B) hire an army of lobbyists, accountants, and Congressmen to drill out loopholes for them. Usually people desire regulation to keep in line big and powerful companies and prevent monopolies, but what they usually can't see is that excessive regulation hurts small and medium sized business because they can't afford either option A or B. So they either go out of business or get bought up by larger businesses. Typically regulations come from a place of good intentions, but we all know what the road to hell is paved with.
    America is the only country that went from barbarism to decadence without civilization in between.
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    Re: What Created The 2008 Financial Meltdown?

    Quote Originally Posted by pbrauer View Post
    What Created The 2008 Financial Meltdown?

    Greedy Wall Street Investment Bankers /Deregulation of the financial industry

    Barney Frank, Chris Dodd and the CRA

    Poor people buying houses they can’t afford.

    Other
    this is a complicated matter that has been explained ad nauseum.

    a vast-variety of things caused the meltdown.

    Causes of the late-2000s financial crisis - Wikipedia, the free encyclopedia

    1.1 The U.S. housing bubble and foreclosures
    1.2 Sub-prime lending
    1.2.1 Mortgage underwriting
    1.2.2 Mortgage fraud
    1.2.3 Down payments and negative equity
    1.2.4 Predatory lending
    2 Risk-taking behavior
    2.1 Consumer and household borrowing
    2.2 Home equity extraction
    2.3 Housing speculation
    2.4 Pro-cyclical human nature
    2.5 Corporate risk-taking and leverage
    3 Financial market factors
    3.1 Financial product innovation
    3.2 Inaccurate credit ratings
    3.3 Lack of Transparency (behavior) and Independence in Financial Modeling
    3.4 Off-balance sheet financing
    3.5 Regulatory avoidance
    3.6 Financial sector concentration
    4 Macroeconomic conditions
    4.1 Interest rates
    4.2 Globalization and Trade deficits
    4.3 Chinese mercantilism

  5. #65
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    Re: What Created The 2008 Financial Meltdown?

    There were a few causes, but a lot of it came from deregulation of the banks and the high leverage rates the banks then took when making their loans. The extremely large leverage they took eventually blew the system wide open. Now did it cause the housing bubble? No, that was there and known though. So while knowing their was a bubble, they still leveraged as high as they could and got government to remove restrictions to allow them to leverage even higher. And when the bubble popped, they should have lost their shirts. There was a still a lot of undesirable things going on in wall street as well due to lack of regulation. But the banks behavior and choices were a huge multiplier that really helped break the system to the degree to which it became broken.
    You know the time is right to take control, we gotta take offense against the status quo

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  6. #66
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    Re: What Created The 2008 Financial Meltdown?

    Quote Originally Posted by pbrauer View Post
    Can you back these ridiculous claims up with any evidence? Why would a lender lend money to someone who can't pay them back?
    Two words: Moral Hazard.

  7. #67
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    Re: What Created The 2008 Financial Meltdown?

    Quote Originally Posted by Ikari
    There were a few causes, but a lot of it came from deregulation of the banks and the high leverage rates the banks then took when making their loans. The extremely large leverage they took eventually blew the system wide open. Now did it cause the housing bubble? No, that was there and known though. So while knowing their was a bubble, they still leveraged as high as they could and got government to remove restrictions to allow them to leverage even higher. And when the bubble popped, they should have lost their shirts. There was a still a lot of undesirable things going on in wall street as well due to lack of regulation. But the banks behavior and choices were a huge multiplier that really helped break the system to the degree to which it became broken.
    So you're saying the financial sector is guilty of lie by omission? I wouldn't argue that. What I would argue is that they had a moral obligation to allow an authoritarian stance about it. They act like used car dealers with their "once it's off the lot, it's a sale" mentality. The burden goes on the ultimate consumer to do a little research and not act like a tool.

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    Re: What Created The 2008 Financial Meltdown?

    Quote Originally Posted by pbrauer View Post
    Can you back these ridiculous claims up with any evidence? Why would a lender lend money to someone who can't pay them back?
    because:

    A- their loans were insured incase of default. hence the AIG bailout.

    B- they broke up the loans into little pieces and sold them as investments all over the globe.

  9. #69
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    Re: What Created The 2008 Financial Meltdown?

    Gipper and A Pierce already talked about the main cause. We deregulated banks enough to let them do what they wanted, but the government continued to insure against risk. The banks knew they were going to get bailed out if they did something stupid, so we should not be shocked that they allowed themselves to do something stupid. When you combine this with easy money and lax fraud enforcement we shouldn't be surprised that a huge bubble formed.
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  10. #70
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    Re: What Created The 2008 Financial Meltdown?

    Quote Originally Posted by Gipper View Post
    Mr. Pearce echoed my thoughts. Definitely #1 and #3, possibly some #2 thrown into it.

    Glass-Steagall gets crucified in this because too many people want to shirk responsibility involved in this. The true crime existed when regulations allowed for high-risk ventures to essentially be compensated when they would fail. If a business tried to bust coffers with derivatives and risky money market tools, the government would just recoup losses. That never should have come to be.

    I give the bulk of the blame to two parties - the dumbass who walked into the bank making $30,000 a year wanting a loan for a $250,000 house, and the dumbass bank who OK'd it. Put both of them in front of a firing squad.

    The only real problem is that it happened en masse, and while we could punish handfuls of individuals who do this, when they come out in full force and exert stupidity, you can't turn your back. If a fool and his money are soon parted, government should part too.
    so you don't think the massive bleed of jobs had any effect? also, the willingness of people today to walk out of their mortgages?

    Originally Posted by johnny_rebson:

    These are the same liberals who forgot how Iraq attacked us on 9/11.


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