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 canít afford

    27 24.77%
  • Other

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

  1. #71
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    Re: What Created The 2008 Financial Meltdown?

    Quote Originally Posted by radcen View Post
    It seems that companies increasingly rarely look beyond the next fiscal quarter.
    That's probably because their CEO's get bonuses based on whatever profits the board members made that quarter. It's the incentives that are short sighted, I think.

    Quote Originally Posted by liblady View Post
    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?
    The bleeding of jobs? Are you referring to outsourcing of jobs by American companies? Well, it's not necessarily a bad thing, but our loss of the manufacturing sector in particular is some what concerning. I think we ARE just a bit too dependent on the service industry, though. If we aren't going to go into more debt, you're right we will need more jobs like manufacturing here. But that doesn't mean it had anything to do with the financial collapse.

  2. #72
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    Re: What Created The 2008 Financial Meltdown?

    Quote Originally Posted by A.Pearce View Post
    That's probably because their CEO's get bonuses based on whatever profits the board members made that quarter. It's the incentives that are short sighted, I think.
    I can buy that.

  3. #73
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    Re: What Created The 2008 Financial Meltdown?

    Quote Originally Posted by apdst View Post
    The congress critters weren't going to let that happen. The bankers would have released all kinds of docs showing how the government pressured them into making all those bad loans.
    Are you speculating or do you have a source?

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    Re: What Created The 2008 Financial Meltdown?

    I can't help but wonder what happens next. Home-ownership used to be a foundation of success in America. Many people bought into it while being unable to afford it. Banks took advantage of that, and Wall Street diffused these bad loans into every facet of the economy. I'm oversimplifying tenfold, of course, but correct me if I'm wrong. Do you think we're seeing a shift in American psychology, a shift towards thrift (as in the Depression era)? And if that's the case, how do we spend ourselves out of a second slump?
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  5. #75
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    Re: What Created The 2008 Financial Meltdown?

    Quote Originally Posted by Gipper View Post
    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.
    Maybe it's that term, I'm probably not up to date with all the terminology. I don't necessarily fault the banks, their job is to make money. During normal economic times, they can make more money through higher leverage. What higher leverage means, however, is that should something go wrong, you're going to lose more. Because there is no natural market limiter to this, the government has put in regulation to cap how much banks and such can leverage. Those regulations were removed/loosened. The banks were allowed to raise their leverage rates, and raise them they did. It's hard to justify not doing so when your competitors do so and are making money hand over fist. There's not long term feedback innate to the system which would say "you can't do this because if it breaks, you're dead". Particularly when the banks are then bailed out, thus removing the consequence of failure.

    This isn't the only thing, it didn't start the housing bubble. The housing bubble was there. But in the banks management of mortgages and leveraging, they took very very high risks that they knew were very very high risks. Should the system bust, you're screwed because you leveraged too high. And bust it did. And that feedback fed right into the system and all of a sudden banks were looking and a meltdown which required the tax payers to bail them out.

    While individuals most certainly need to be more responsible with their contract, there is no denying the sort of predatory loans which were occurring at the time. Get the mortgage, sell it off in a package somewhere else. Where does it go? No one knows (which was why the banks foreclosing on houses they couldn't prove they owned turned out to be such a huge scandal). Nothing is quite so simple in reality and there are various factors. But certainly deregulation played a major role in the magnitude of collapse.
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  6. #76
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    Re: What Created The 2008 Financial Meltdown?

    Quote Originally Posted by liblady
    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?
    I don't think whatever you refer to as a "massive bleed of jobs" had hardly any effect. This wasn't caused by a cyclical hiccup or by the elimination of certain domestic jobs. This was caused by large-scale consumer ignorance. The buck stops there. Nowhere else.

    And people walk out of their mortgages because of what we've been discussing - when they realize 6 months afterward that they obviously bit off more than they can chew.

    Hey, if you want to subsidize the average American's ignorance, that's fine. Write 'em a check. Don't sit there and cry foul and point fingers where they don't need pointed.

  7. #77
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    Re: What Created The 2008 Financial Meltdown?

    Quote Originally Posted by Gipper View Post
    I don't think whatever you refer to as a "massive bleed of jobs" had hardly any effect. This wasn't caused by a cyclical hiccup or by the elimination of certain domestic jobs. This was caused by large-scale consumer ignorance. The buck stops there. Nowhere else.

    And people walk out of their mortgages because of what we've been discussing - when they realize 6 months afterward that they obviously bit off more than they can chew.

    Hey, if you want to subsidize the average American's ignorance, that's fine. Write 'em a check. Don't sit there and cry foul and point fingers where they don't need pointed.
    Now gip the real esate market was nothing more then a money pit from the broker up, ie:a 200,000 home was financed for 250,000 giving the buyer a 50,000 bonus to buy, buyers were told they would be able to refinance to lower high payments. The market offered lots of enticements to lure unqualified buyers into buying. Loans were made to buyers that obviously would not be able to keep up to payments. Bottom up predatory lending

    Subprime mortgage crisis - Wikipedia, the free encyclopedia

    The immediate cause or trigger of the crisis was the bursting of the United States housing bubble which peaked in approximately 2005–2006.[5][6] High default rates on "subprime" and adjustable rate mortgages (ARM), began to increase quickly thereafter. An increase in loan incentives such as easy initial terms and a long-term trend of rising housing prices had encouraged borrowers to assume difficult mortgages in the belief they would be able to quickly refinance at more favorable terms. Additionally, the economic incentives provided to the originators of subprime mortgages, along with outright fraud, increased the number of subprime mortgages provided to consumers who would have otherwise qualified for conforming loans. However, once interest rates began to rise and housing prices started to drop moderately in 2006–2007 in many parts of the U.S., refinancing became more difficult. Defaults and foreclosure activity increased dramatically as easy initial terms expired, home prices failed to go up as anticipated, and ARM interest rates reset higher. Falling prices also resulted in 23% of U.S. homes worth less than the mortgage loan by September 2010, providing a financial incentive for borrowers to enter foreclosure.[7] The ongoing foreclosure epidemic, of which subprime loans are one part, that began in late 2006 in the U.S. continues to be a key factor in the global economic crisis, because it drains wealth from consumers and erodes the financial strength of banking institutions.

  8. #78
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    Re: What Created The 2008 Financial Meltdown?

    Quote Originally Posted by EarlzP View Post
    Now gip the real esate market was nothing more then a money pit from the broker up, ie:a 200,000 home was financed for 250,000 giving the buyer a 50,000 bonus to buy, buyers were told they would be able to refinance to lower high payments. The market offered lots of enticements to lure unqualified buyers into buying. Loans were made to buyers that obviously would not be able to keep up to payments. Bottom up predatory lending
    You are quite right, and who came up with the idea of providing variable mortgage rates?
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  9. #79
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    Re: What Created The 2008 Financial Meltdown?

    Quote Originally Posted by Catawba View Post
    You are quite right, and who came up with the idea of providing variable mortgage rates?
    ARMs, in my opinion, aren't the primary cause. ARMs have been around for decades. It was sudden the lack of qualification criteria that was the primary cause. The lack of qualification criteria presented an illusion of ability to honor the contract. An illusion that was false in way too many cases. Again, in my opinion.

  10. #80
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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 canít afford.

    Other
    The 1st and 3rd option. It takes two to tango.One group trying to buy homes they can't afford and the other saying alright here is your loan.
    "A nation can survive its fools, and even the ambitious. But it cannot survive treason from within. An enemy at the gates is less formidable, for he is known and carries his banner openly. But the traitor moves amongst those within the gate freely, his sly whispers rustling through all the alleys, heard in the very halls of government itself. For the traitor appears not a traitor; he speaks in accents familiar to his victims, and he wears their face and their arguments, he appeals to the baseness that lies deep in the hearts of all men. He rots the soul of a nation, he works secretly and unknown in the night to undermine the pillars of the city, he infects the body politic so that it can no longer resist. A murder is less to fear"

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