Why not lynch the borrowers?

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addyguy

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In simple terms, the whole 'credit crunch' that is threatening to turn into a world recession started in the US housing market. People who really couldn't afford first, or second, mortgages took them out to own a house, or buy things. In a lot of cases, these people KNEW they couldn't afford the loan, and just hoped they could scrape by with for as long as possible. They were so easy to get, that it seemed silly not to try and get one.

The main blame for this problem has been placed at the feet of bankers, saying they made risky/marginal loans, in the hope that they would work out.

But where is the responsibility of people to not take out loans when they can't afford them, and defaulting on them w/o really caring? If the govt. is going to toss around $700 billion to rescue the banks, etc., wouldn't it make sense to put aside some of that money to investigate and catch deadbeat or fraudulent borrows, and make them take some of the blame?

I don't know, but a few well-earned life sentences for 'destabilizing the world economy' might make people think twice about taking out a risky loan. Heck, publicize the names, and you'd probably get a few nice public lynchings out of it!

Where is the individual responsibility in all this, and why is no-one addressing it?
 
Pointing the blame on the "little guy" (whether deserved or not) is not going to solve the problem, so that's why it's not being done. Pointing the blame on large corporations and the government is easier as they can more easily absorb the blame and its consequences.

Let's face it, there are a lot of stupid people out there that do what the market or the government allows them to do (or doesn't specifically prevent them from doing). So by controlling the those large loan givers, you will in effect be able to control the public.

Basically, the public is considered a puppet. And you don't blame the puppet for making the wrong moves.
 
What you say may be very true, Pete, but I still belive very strongly in individual responsibility. You got yourself into a situation, you get yourself out. Even if it kills you (from working two jobs, being homeless, whatever). You'll never find me voluntarily declaring bankrupcy.

Too many people take the easy way out.
 
Originally Posted By: addyguy
In simple terms, the whole 'credit crunch' that is threatening to turn into a world recession started in the US housing market. People who really couldn't afford first, or second, mortgages took them out to own a house, or buy things. In a lot of cases, these people KNEW they couldn't afford the loan, and just hoped they could scrape by with for as long as possible. They were so easy to get, that it seemed silly not to try and get one.

The main blame for this problem has been placed at the feet of bankers, saying they made risky/marginal loans, in the hope that they would work out.

But where is the responsibility of people to not take out loans when they can't afford them, and defaulting on them w/o really caring? If the govt. is going to toss around $700 billion to rescue the banks, etc., wouldn't it make sense to put aside some of that money to investigate and catch deadbeat or fraudulent borrows, and make them take some of the blame?

I don't know, but a few well-earned life sentences for 'destabilizing the world economy' might make people think twice about taking out a risky loan. Heck, publicize the names, and you'd probably get a few nice public lynchings out of it!

Where is the individual responsibility in all this, and why is no-one addressing it?


If the mortgage brokers and loan officers had denied these people though, like they should have, we wouldn't be here. I'd say the most blame lies at the foot of people originating loans when they knew those loans were bad.

By far, mortgage brokers who get nothing but a huge commission and assume no liability or risk associated with making a loan, are the real bandits, as mortgage companies and banks rely on their applications, number crunching, and information.

If anything, the bubble was created and burst under a perfect storm of realities - Greenspan's ridiculously low interest rates, corruption at the Fannies, the bursting of the dot com bubble which sent a lot of investment money into real estate, the fad of flipping houses for a quick buck, outright fraud in mortgage banking, the securitization of mortgages, especially subprime, the resultant derivative securities used to "back up" the worthless MBSs, and the overall result that a vast majority of our wealth/purchasing power was nothing but bubbled home equity that has instantly gone POOF into thin air.

You can't blame one single thing that created this mess, and to do so is naive.
 
Originally Posted By: addyguy
What you say may be very true, Pete, but I still belive very strongly in individual responsibility. You got yourself into a situation, you get yourself out. Even if it kills you (from working two jobs, being homeless, whatever). You'll never find me voluntarily declaring bankrupcy.

Too many people take the easy way out.

Oh yeah, I agree with you, despite what I wrote. Shifting the blame has become the way of life for many, and it's not a good thing. If I become fat or get high BP, I'll sue McDonalds. If I get lung cancer, I'll sue PhilipMorris. You get the idea...
 
CNN last night said we are all to blame for the credit crunch. Too much borrowing, not enough saving, etc.

I agree most of the fault does lie with lenders as they are supposed to be the ones who know better. Most people I know really don't understand credit so they think "the bank wouldn't lend it to me if I couldn't afford it."

John
 
I'm not naive, Drew. I'm aware that there is a LOT more to the situation than just shiftless borrowers, and in the end, the people who loan out the money should be able to guage if they are going to easily get it back - that's their business.

But, on the other hand, their are a lot of people who take out money they really can't pay back, for whatever reason. They know that if worse comes to worse, they can just declare and walk-away...
 
Mortgage officers who deny loans to low income people get threatened with racial discrimination, ethnic discrimination or gender discrimination lawsuits.
 
See, now I'm all confused.

I bought a house, actually bought both houses during the time period when thing supposedly eased up for borrowers, and yet I had to make a downpayment on my house. I had to document where that money came from. I had to be able do document my employment status/income.

Maybe that's why I still have my house?

I don't mean to sound arrogant, but while a place to live may be considered a "right", owning said place isn't, and IMHO, government policies designed to encourage people who can barely afford to rent to become homeowners are the root of the problem here. Yeah, there are lenders that should've beeen more scrupulous, but if you start looking too hard at the borrowers and making decisions based on credit history and income, you're accused of red-lining and so on. What company wants additional government scrutiny?

My $.02 anyway.
 
Originally Posted By: addyguy
What you say may be very true, Pete, but I still belive very strongly in individual responsibility.
IMHO, the number one problem in America today is a complete lack of personal responsiblity; everything is always someone else's fault.

"I drove a stick-shift car with a cup of coffee between my knees and it spilled in my lap and burned me. That's McDonald's fault for making the coffee so hot."

Please...
smirk2.gif
 
Originally Posted By: John_K
CNN last night said we are all to blame for the credit crunch. John


I'm not. I've paid everything I have ever owed to anyone on time every time. I don't borrow to buy any vehicle. I borrowed to build my house, but like I said, paid everything on time.
 
There used to be a system in place where banks and mortgage companies wouldn't lend large sums of money to people who stood a significant chance of not being able to pay it back. Doh!

Those safeguards were removed on home loans and predatory lenders went out of their way to sell loans to people that couldn't afford them. Borrowers didn't change, lenders did. They way you prevent the problem happening in the future is by putting the safeguards back in place.

Other than giving some people a brief feeling of superiority, there is no point in blaming the clueless borrowers. People can whine about irresponsible borrowers all they want but that isn't where the problem needs to be fixed.
 
Originally Posted By: oilyriser
Mortgage officers who deny loans to low income people get threatened with racial discrimination, ethnic discrimination or gender discrimination lawsuits.


Ding ding ding!! We have a winner.
 
Quote:
I'm not. I've paid everything I have ever owed to anyone on time every time. I don't borrow to buy any vehicle. I borrowed to build my house, but like I said, paid everything on time.


Yes, that's true, I don't borrow money unless I have to and I pay my bills on time, and even pay loans back early. But in general we are all part of the problem.

John
 
Yea, once again, it had to come up. The entire housing crisis lies at the foot of poor minorities. I get it.
smirk2.gif


If you research the actual numbers of mortgage foreclosure, mortgage foreclosure under the CRA is very low compared to middle/upper income loans and other subprime loans (not under the CRA), as CRA loans are very scrupulously negotiated, under strict rules.

There's a heckuva lot more middle and upper income ghost town neighborhoods in Cali and Florida compared to inner city neighborhoods with banks subject to the CRA.
 
In a way money is like energy, you cannot create or destroy it. The people who made the money are the ones who got smart and sold their houses at the peak and didn't use the money to buy another house, or the developers who sold the houses at the time and didn't start another project. Or the one who sold the lands at very good price to those developers who bought the next lands after selling the houses they build at a good price.

So now:

1) You go after the bad borrowers? The have no money and the worst you can do is foreclose their houses, and drop the housing prices in the neighborhood further and start the chain reactions of price drop and foreclosure.

2) You go after the loan writers? They only made commissions and the ones that they made are not enough to cover even 1% of all the loses. We probably should still do it, but it won't help much more than dropping the interest rate 0.1%

3) You go after the banks? They go out of businesses and bankrupt FDIC and the Fed, economy tanks, as we see right now.

4) You do nothing? The market still tanks, will drag on the recession (anyone who say we are not in a recession is either a lair or blind). You have the benefit of everyone in the world that buy our mortgages to share our pains, but that put them in a recession as well and the chain reaction of global recession starts here.


In a way, there is nothing we can do other than to ride it out by doing nothing, accelerate the foreclosure and price drop to shorten and amplify the pain, or to drop the dollar value so everyone share the burden via inflation.



The damage is already done, regardless of what you do. Everything else is just a dog and pony show.
 
I am amazed at the outright gall involved in armies of PhDs in Economics and MBAs in finance blaming those pesky less educated people for collapsing the world financial system! Does that not sound surreal to anyone but me?

It sounds a lot like an automotive engineer deliberately designing an unsafe car, using his personal reputation for expertise to reassure all customers that the car is perfect for them, and then blaming them when they purchase these cars and have accidents.

You can not reasonably, simultaneously claim to be both the expert in the system (and on the system), and the victim of the other less expert elements.

I am particularly amazed by Allan Greenspan saying he never dreemed that markets would not self-regulate rationally. You create a system where the leaders are rewarded if they gamble and win, and rewarded if they gamble and fail. Where is the accountability for gambling, failing, and collapsing the system? How is this rational? In my opinion he has no moral high ground to talk about rational thinking and behavior.
 
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