The borrower, they shouldn't be taking out a loan that they can't pay back
The lender, they shouldn't be making loans that they suspect will default
The government for guaranteeing the loan
The government for failing to adequately regulate the lending process
All of the above
"There is an excellent correlation between giving society what it wants and making money, and almost no correlation between the desire to make money and how much money one makes." ~Dalio
I was an "all of the above", but I will always blame government the most. They created these most unusual circumstances, where everyone thought they could not lose. Had we not had the uber-inflation in the housing market, started by government, everyone would have behaved in far less risky behavior. As it was, the government created huge moral hazards, and huge money making opportunities, and I believe it is quite predictable what happens then
All that would have to happen for this to correct itself is the government letting the market correct itself. Yes...its going to sting a lot of people. But if this had been allowed to happen in 2007, a lot of people would have declared bankruptcy, those inflated homes would be rental properties, and in another two years, those people would be out of bankruptcy, solvent, and consumers.
lenders should make sure those they lend large sums of money to have the means to pay back the loan.
if they don't do that, they put their investors in jeopardy.
In the housing bubble, government gave it that initial momentum via the massive expansion of Fannie and Freddie in the 90's and their headlong dive into sub-primes. Then it was "hold on". Folks so easily forget that the only ones burned with the housing bubble were the last ones holding the bag. If you sold before the pop, you did well, if not better. But again, while it doesn't take much government to tip things artificially well, and it also doesn't take much to collapse it all.
And when we woke up, everything said "Made in China". Or similar.
Last edited by Eighty Deuce; 10-25-11 at 08:42 PM.
All of the Above covers it but I have to spot light the Housing and Community Development Act of 1977 wich got the bubble expanding way back over 30 years ago, so blame the 1977 Congress, Senate, Jimmy Carter and while you're at it, all those who have followed and did nothing about it.
There is plenty of blame to go around.
Funny, Carter had a winning smile and loosing Administration, Obama has a great line of BS and a loosing Administration.
Wow, it's amost like those three monkeys only were missing one who should I pick. I Carter looked like no evil but was, we have does nothing but evil, and whom should I pick for the last one? Oh I got it, Clinton can be almost evil, but not quite.
Of course, if Uncle Sam is guaranteeing the loan, then the onus is on Uncle Sam, which means the onus is on the taxpayer. Therefore, if you are a taxpayer, then the onus is on you. If you are not a taxpayer because you do not make enough money to be a taxpayer, then the onus is not on you, and you can do whatever you want.
That being said, if you are not a taxpayer and you default, then those who are taxpayers should retain the right to have you, and the banker who granted you the loan, drawn and quartered, live on pay-per-view.