Paulson Plan Pisses Me Off | 8 comments (8 topical, 0 hidden)
Get it all out, man (none / 0)
My two cents pertaining to the sub-prime issue:

I know that we've all heard or read people telling us that the issue is complex, and the reasons that it happened are complex, and that the answer to who's responsible is complex.

But, I'm here to tell you, brothers and sisters, that it's not.

Deregulating rules on selling loans is the one single thing that caused this.

All these fly-by-night sub-prime lending companies were complete, total scams.

They made loans that to people that they KNEW would default when the payments ballooned. They couldn't GIVE these loans away fast enough. They had to SELL the idea to people. They used sales tactics to convince people to take these loans.

Why would they make loans that they knew couldn't be re-payed (in the terms) ?

Because they knew that they were going to sell them.

They sold them to companies that bundled them with other loans and sold these bundles to larger firms that bundled them with other types of loans. They bundled loans were finally purchased as investments by companies like Lehman and Merrill.

The whole thing was a scam, but legal because of deregulation.






by perdido619 on 09/19/2008 11:35:13 AM EST

This (none / 0)
Is exactly what I think caused the whole thing.  You only need to vet a person enough to know they'll be able to make the payments for a short while, then you sell the risk to someone else.  All this horse manure about the government "forcing" banks to lower their underwriting standards cannot explain the huge numbers of commercial and higher end loans (which were not bound by these guidelines) that were not properly vetted.  It was the usual culprit: greed, pure and simple.

by bfaul on 09/19/2008 12:00:21 PM EST

[ Parent ]
You're right (none / 0)

that they knew the borrowers could not pay the loans once they balooned.  They purposefully allowed borrowers to "qualify" based on the artificially reduced initial interest rates.

Bt it is not quite as simple as the greed of the loan originators.  The banks that managed these mortgage-backed securities that bought up those loans also knew the borrowers could not afford the loans once they balooned.  They bought the loans because of the profit they would make when the loans had to be refinanced - profit that came from the housing bubble, and depended on house prices increasing.  They created those loans to take the house value appreciation away from the homeowners and put it in their own pockets.

They didn't care if the homeowners defaulted and they had to foreclose - the house values were increasing and they would make even MORE money on the foreclosure.

And now we're bailing out those sick F*ckers.  $3,400 in debt for each if us and our kids.  Money our kids will have to pay back to China.  With interest.

by rbruck on 09/19/2008 12:36:47 PM EST

[ Parent ]

Paulson Plan Pisses Me Off | 8 comments (8 topical, 0 hidden)