blame game

Which Paulson? The treasury secretary or the hedge fund one?

I think you have to start with those who made it possible in the first place. Without homebuyers and mortgage brokers and RE brokers and the gov to sell folks on the idea, the banks would have had nothing to securitize....

You also left out the regular local banks

So...

1. Congress / Freddie / Fannie
2. Homebuyer
3. RE Brokers
4. Originating banks
5. Mortgage Brokers
6. credit agencies
7. Fed
8. blow ups (its effect, not cause)
9. investors (hey, they just got suckered)
10. non-blow banks
11. profiting from the mess doesn't make you responsible for it, unless you actually caused it

y'all don't really want any other opinions. Just post to each other 'tl you get bored.

You forgot the regulators

there were no meltdowns in the US economy from 1930 to 1980 due to regulations put in place to regulate the banking and lending industry. In the 1980's Reagan deregulated causing first the S&L scandal, and now the Great Recession. Thanks Reagan and Republicans

And I think you need to divide homeowners into subprime/speculators/liar loans and the many others who for any number of reasons bought at the wrong time.

Scargo. Thank you for posting your opinion

"there were no meltdowns in the US economy from 1930 to 1980"

now thats a lie...

"the 1980's Reagan deregulated causing first the S&L scandal, and now the Great Recession."

actually, Clinton signed the repeal of Glass Steagall.

But, then again, perfitz wouldn't know a fact if it punched him in the head and dropped him into the lake las vegas sand pit he lives in.

"there were no meltdowns in the US economy from 1930 to 1980"

"now thats a lie..."

So then provide facts to support it is a lie.

Clinton didn't have enough votes to support a veto and you know it swe.

"Which Paulson? The treasury secretary or the hedge fund one?"

The hedge fund one.

Alpo, don't have time for an economic history lesson for you, and you won't understand it anyway, but your best best is to google all the recessions that happened between 1930 and 1980.

Once you've done that, go jump off a pier.

"You forgot the regulators"

I guess I was thinking that's included in the Fed, which does regulate the banks. Blame for not regulating AIG and investment banks should be placed w/ Congress IMO.

swe you do not know the difference between a recession and a financial crisis?

sec

"You also left out the regular local banks"

Good point.

Also, add this to my list:

11. Renters who profited by getting bubble-induced superior housing on the cheap.

AR, I want an ordered list, dammit! It will let me peer into your soul.

And scargo, please tell us yours. So far, I find it interesting that both somewhereelse and petrfitz are essentially blaming Congress, but just from different eras.

"Just post to each other 'tl you get bored."

Isn't that the point? Just eat 'tl you get full. Just sleep 'tl you're no longer tired. I'll wait for w67th to put up the next sentence in that succession.

I'm working on it, damn it. You'll see my soul when I'm good and ready. how about quasi-regulatory like fasb? just want to get the list complete before I order.

A recession is not a financial crisis. Someone needs to take Econ 101 really bad.

Interesting question. Do you mean legally & ethically or just because of their role?

"I guess I was thinking that's included in the Fed, which does regulate the banks. Blame for not regulating AIG and investment banks should be placed w/ Congress IMO."

Congress does not directly regulate companies. This power is delegated to agencies, such as Treasury, FDIC, SEC, and the Fed.

"I'm working on it, damn it. You'll see my soul when I'm good and ready. how about quasi-regulatory like fasb? just want to get the list complete before I order"

You can have anyone on your list that you wish. It's your own personal blame list. I think you should make a special slot for rufus.

"Congress does not directly regulate companies. This power is delegated to agencies, such as Treasury, FDIC, SEC, and the Fed."

I was thinking that the problem here is that derivatives AIG-style were left unregulated, as legislated by Congress with executive-branch support.

Congress sets the tax structure and funds or doesn't fund the regulators. Congress starved the SEC of money, created structural incentives to invest in real estate and helped block regulation to regulate derivatives.

> A recession is not a financial crisis. Someone needs to take Econ 101 really bad.

Someone needs to take reading 101 really bad.

Moron, you're changing the story now...

> Congress does not directly regulate companies. This power is delegated to agencies, such as
> Treasury, FDIC, SEC, and the Fed.

Incorrect again. Congress delegates some power, and enforcement to some agencies, but it can and does directly create regulations for businesses.

ok, great. i'll deliberate and get back to you.

but in the meantime can we add the media, that great american home ownership dream machine? within that i'd include NAR. and what about economists?

rufus only impacted chicago real estate. people read his posts and decided to move to wisconsin instead.

You can add as many as you like!

I'm so looking forward to that list, it's like the SE equivalent of a Christmas gift list.

The regulators did not do their jobs because they were headed by people with deep Wall St. connections or people who wanted to have a good relationship with Wall St. so that they could get a job there.

Good post, Nada.

I would rank the 'enablers' #1 - those institutions that bought into the various tranches of sub-prime CDO deals and bought the unsecured debt of the investment banks and big lenders (countrywide, wamu, indymac to name a few). Yes, speculators who bought homes with false info on their mtge's and ridiculous loans were the 'users' but if their were no lenders, they couldn't have done what they did. These big institutions are supposed to know better - they are paid, handsomely, to analyze the investments they make, but apparently they all want to blame someone else (rating agencies, inv banks) for their mistakes.
Ordinary people took out ridiculous loans (20x income, etc.) on the advice of mtge brokers. Are they to blame? Is it illogical to assume that a bank wouldn't lend you money they thought you could never pay back? Not everyone is that sophisticated, and it is reasonable to assume that someone would only lend you money if they thought they would get it back + a return.
I would also put mtge brokers way higher - they are supposed to know what they are doing, and put people into appropriate loans. Yet there are tons of stories of them encouraging fraud, and talking people away from conventional mtges and into no-doc, neg-am loans that paid them huge $$s while simultaneously encouraging people to take out bigger mtge's than they could otherwise afford.
Finally, I would put Alan Greenspan up high on that list. If any single person could be blamed for this, it is him. 1) Willful ignorance of the risks and leverage that banks were taking on 2) Continually producing the fuel (cheap money) 3) Encouraging people to take out ARMs at the trough of the interest rate cycle.

Can we include Texas on the list?

Yes, Clinton did sign the bill undermining Glass Steagall, but the person who put the coalition together in Congress to do so, was the Senator from Enron, Phil Gramm.

As for the actual bubble itself, another curious omission from this list is George W. Bush and his cast of thousands. The RE bubble largely blew up and started to deflate in the years from 2001 through 2006 during which time, the Republican Party, headed by George W. Bush, was in control of all three branches of government, especially the Executive Branch which has all the regulatory agencies.

While aboutready makes an effort to distinquish between different segments of homebuying public, everyone here treats "regulators" as an homogeneous group. If you go back and look at the records, and the recent Congressional testimony, it is very clear that many of the professional Civil Servants in the regulatory agencies were raising red flags about what was going on in the mortgage market in 2002 and 2003 but were over-ruled by the political appointees running the agency. (If you like I'll provide the links to the transcripts.)

Interesting, printer. My view of the average homebuyer (from dozens of people I know) is that they were driven by profit motives rather than being "fooled" by affordability. No one I know was buying just because they could afford it. They thought RE grew at 10+% a year, they thought renting was throwing money away down the toilet vs. buying a home was an investment, etc. Pretty much everyone had and has loans they can afford: prime 30-year fixed or 5-plus-year ARMs with reasonable rates and reset structures. None of these people told me that I should be buying a home because I could afford it. Rather, they told me I should be buying because it's a great investment compared to throwing money away on rent. Walking through rent-vs-buy with them was dismissed. Even today on SE, we argue about buying from a financial perspective, and many people view it as a good investment vehicle. We have a discussion about investment much more frequently than affordability. You never hear people about what good consumption a home makes, but rather what a good investment it is.

I'm not doubting that there weren't many, many people who were put into bad loans. However, I fear that the lack of focus by society today on the real underlying phenomenon, which is mass bubbles that have been repeated throughout history, will just lead us to the same place over and over. Americans bought something like $5 trillion dollars of home during say 5 bubble years. That's about half a year of GDP. The rest of the world was more or less the same. No one is nearly as powerful as the beast that is the masses, with their large sums of aggregate money, believing something despite all reason.

Yes, you can try to control the beast through policy and regulation of those that try to profit from feeding the beast. However, there seems to be no recognition of the beast.

In any case, I appreciate your viewpoint. Out of curiousity, of the people you know who bought between 2002/2003 - 2007/2008, what fraction had an appreciable amount of profit motivation?

FWIW, my problem with Greenspan is his dogamtic view that "you should do nothing to stop a bubble". While there are arguments for allowing bubbles (e.g., they do encourage people to produce more than they would otherwise -- look at what's happened to the quality of housing stock in the U.S. over the past decade, or else that it's too hard a balancing act between taming a bubble and killing growth), it's not always a good idea to take things to an extreme.

nada, i don't know anyone who bought for profit locally. everyone i know bought because they believed that waiting would only incur higher prices. and they all honestly believed that rents were going to skyrocket. that's the local market, i don't know about the national market.

sure there were many who thought it was a risk-free investment. after all they were told so by many people in positions of authority and the media. but most people weren't flippers. most people overpaid for their homes, and used improper assumptions when making their decisions (future income growth vs. unemployment, etc.)

demonize the speculators, but the others i believe were relying on increasing prices not as a source of profit, necessarily, but as a fall-back if they needed to sell. it made them feel safe. yes many foolishly bought, but in terms of blame, i think they're just an easy target that makes the more fiscally prudent feel good about themselves.

i'm glad printer responded. now i don't need to. although i do agree with sisyphean that our prior administration has a great deal to answer for.

also, as so many people had been priced out of their "forever" homes it is true that many people were buying with a shorter ownership time period in mind. but that's, i believe, a result of our society valuing owning so greatly. people were willing to compromise, because they felt they had to to "get in the game."

for many the game wound up not being so much fun.

I personally don't know anyone who stated their reason for buying their primary home was as an investment. But then I don't personally know anyone who has defaulted on their mortgage, either, so there has been no 'problem' to speak of. I do know a couple of people who played the 'flip this house' game on investment properties, and did well until they did badly - who knows how they netted out b/c they're never going to tell the truth anyway.

Agree with you on Greenspan. Monetary policy is a difficult tool to prick a bubble with as there would be so much collateral damage that it is hard to weigh the cost/benefit of doing so. However, he could have done something to manage leverage that was used blow the bubble up, so that if/when it did pop the damage would be manageable.

" My view of the average homebuyer (from dozens of people I know) is that they were driven by profit motives rather than being "fooled" by affordability. No one I know was buying just because they could afford it. They thought RE grew at 10+% a year, they thought renting was throwing money away down the toilet vs. buying a home was an investment, etc. Pretty much everyone had and has loans they can afford: prime 30-year fixed or 5-plus-year ARMs with reasonable rates and reset structures. None of these people told me that I should be buying a home because I could afford it. Rather, they told me I should be buying because it's a great investment compared to throwing money away on rent. Walking through rent-vs-buy with them was dismissed. Even today on SE, we argue about buying from a financial perspective, and many people view it as a good investment vehicle. We have a discussion about investment much more frequently than affordability. You never hear people about what good consumption a home makes, but rather what a good investment it is."

Bingo. Yes, there were exceptions, but they were the exceptions.

"I personally don't know anyone who stated their reason for buying their primary home was as an investment."

Then you probably don't know many people.

Hey SWE, aren't you going to blame Braney Frank and ACORN? Youd did get the RNC talking points that they are responsible for the entire crash, right?

"everyone i know bought because they believed that waiting would only incur higher prices."
"sure there were many who thought it was a risk-free investment."

Call me simple, but that sounds like speculation. If you think prices are going to go up, you buy. If you think prices are going to go down, you don't buy.

"demonize the speculators, but the others i believe were relying on increasing prices not as a source of profit, necessarily, but as a fall-back if they needed to sell. it made them feel safe."

Uh, OK, sounds like speculation, just like the one going on a decade-and-change ago. If I've got an investment where worst-case I'll be flat, and best-case I'll make a bunch, well why don't I max out the credit cards and bet it 'til the cows come home? Thinking there is no downside potential and only upside potential is what makes it irresponsible speculation.

My point here is not to beat up on dumb speculation, but to call it what it is. I don't see how it helps to pretend like it didn't / doesn't exist.

BTW, don't you see this every day here on SE, even now?

i don't think people are that sophisticated, nada. they want a place to live, and they thought that they should buy before prices went up further. that was stupid in hindsight but not an illogical position to take. and i wouldn't call it speculation for the great unwashed masses who didn't sit around thinking of how the change in underwriting standards and low interest rates were affecting prices. they were being fed a constant stream of "news" justifying the position that prices would keep rising. if someone bought thinking that prices would stop rising and fall at some point but bought anyway and got caught, that was speculation.

people put far too great an emphasis on owning, i think. and they stretched way too far. but that's just my opinion. but to me the bottom line is what printer wrote. it was in the banks' and mortgage brokers' job descriptions to manage risk and they decided to do so in a completely novel way without the public ever becoming aware of the change.

yes, i see it on SE. even now. but even here i think that most people are looking for a place to live, not a short-term profit mechanism. you can't remove emotion from real estate. you can personally, and i've tried to do so as much as possible, but that's not the norm.

'call me simple, but that sounds like speculation. If you think prices are going to go up, you buy. If you think prices are going to go down, you don't buy.'

i think there is a difference between 'I can afford to pay $900k w/25% down and a 30yr fixed) for the apt I like and want to live in now, but I'm worried that if it goes up another 200k then I won't be able to, so I'll buy it now' and
'I'll buy that place for $900k w/5% down and a neg-am, no-doc loan b/c I'll put in granite countertops, travertine tile and stainless steel appliances and flip it in 6months for 1.1mm, making 4x on my equity'

Many people were "sophisticated", or so they thought. They bought a home assuming a sucker would come along later and pay more. They thought the gov't was paying part of their mortgage, they thought a home equity loan was more sophisticated than credit card debt for the same reason. And many thought if the bank is willing to lend me the money, it's their risk , not mine.

bs. most people had never considered the option of walking away until the collapse. I'd bet that fewer than 10 percent actually thought the risk was on the shoulders of the banks. you're grasp of psychology is quite weak

The big difference between the home owner and the Wall Street institution was scale and opportunity.

ridiculous.

and nasty.

why so bitter?

you forgot knowledge. unless you think that the homeowner in the inland empire knew as much or more than the mortgage subs of the large banks.

oh, and you also forgot reward. many bubble-era buyers have lost their homes, most have lost any equity they may have once had, the really unwise are so underwater their eyes are floating. the banks, with one huge exception, are extant (or acquired) and supported and have continued to profit.

ou forgot knowledge.
a dumb criminal and a smart criminal are both equally guilty

many bubble-era buyers have lost their homes
a caught criminal and a criminal who wasn't caught are both equally guilty

bingo. rs equates lack of knowledge and wisdom to criminality. your knowledge of legal precepts is as weak if not weaker than your understanding of psychology and motive.

idiotic. a few knew very well what they were doing. many did not.

sorry, rs, nothing in the law indicates that making a stupid purchase enabled by a knowing party is criminal. in many cases the liar loans were even totally filled out by the mortgage brokers/bankers after receiving legitimate info from the buyers. many buyers didn't even speak english in the inland empire.

keep up your mantra. it will be interesting to see how it holds up as more and more information regarding the bubble is revealed.

don't mind RS aboutready. He is a total bank whore. Just curious RS, what banks do you own stock in?

A dumb criminal equals a smart criminal. Sorry you do not see that.

I have no clue what the f*ck your talking about.

actually, alpie, that's the strangest thing. RS hates the banks too. or the lack of regulation thereof. but he is entirely unable to quit blaming the idiot who bought and is now likely in much reduced circumstances.

a bizarre mixture RS.

RS, i'm sorry you don't understand criminal.

intent.

rs, i'm sorry you think you're clever but you're not.

I'm sorry your sympathies are asymmetric. Personally I believe there were irresponsible people on both sides.

actually, rs, i've always said there are people to blame on both sides. it's a question of magnitude, no? numbers. i like numbers.

you like dogma.

Everyone seems to complain about their landlord or their rental broker, yet they persist in a situation where someone else has control over their home lives.

now that's relevant on this thread. go spew elsewhere.

Oh, it's the lady who talks about luxury rentals and can't find a single one. Can't handle challenge?

hi sweetie, don't worry your little self about me. what do you think about the questions posed in the thread? or are you capable of thought other than easy insults?

Did you have a bad day at the rental office cheating post-college students and others out of their paychecks? How do you manage to do that on the one hand and convince them that renting is better than saving up to buy on the other hand?

You accuse me of easy insults yet you come on first and tell me to spew elsewhere?

honey, you don't have a clue, do you? i'm one of those horrible creatures, a stay-at-home mom. whose husband makes boat loads of money (although only as of recently).

adjust your insults, would you?

i said to spew elsewhere because your comment had nothing relevant to this thread. spew anywhere you'd like, but make it topical, no?

Alright, alright, then I'll answer the questions posed. I scrolled up a dozen or so posts before I came on, can you point out which question you were posing so I can respond to them? I see a lot of bickering among people who don't own, so please help me focus to answer your questions.

look, dabulls, i've owned two places in the city, two places elsewhere, and one i still own.

get over yourself.

So you support ownership?

if your question was serious, i have zero idea what you are talking about. has anybody talked about their rental agents/managers in this thread?

dabulls, i support wise investment decisions. that may or may not include ownership.

what do you support?

You've owned 4 places and own 1, so what is the issue? You are looking to buy 3 more and are concerned that people are driving the prices up? I'm not sure I understand.

You support wise investment decisions and you own but you don't want other people to own and you want to blame people as a ruse? I'm not sure I understand.

dabulls, i now suspect you are not so clever. the one that i own is in one of the very few markets that has appreciated since 2005. i made money (and quite a bit) off of the three that i sold.

although i'm not getting your point. maybe you don't have any?

So you sold and bet against the people who bought from you, is that what you are saying?

no, i sold in arms-length transactions with people of equal ability. btw, both of the purchasers made significant money off of my last two sales (i know because they both hired my broker who is a friend of mine). the first one, in another city back in 1996, i assume they could have made money.

So buying is a good idea?

Wouldn't that depend on when, what and for how much?

or was buying a good idea? or was selling? your thought process doesn't seem rational.

It seems as if the aboutready says that buying made sense for her and also that the person who bought from her family made money even though the price was enough that she made significant money when she sold to them. So two transactions making money for the owners according to aboutready. Is her point that buying is a good idea?

Well aboutready, you said that you bought and sold and made money, and the person who bought from you also sold and made money. So are you saying that buying is a bad idea? Is that why you are blaming someone? Who? I'm confused.

No you're not.

Aboutready, columbiacounty also says you aren't rational.

You bought and made money.
The person who bought from you made money.
Who are you blaming for that? And why?

Really...when and where did I say that? Who are you?

Sorry are you talking to me or aboutready?

Are you a buyer or a seller? Aboutready and I are buyers it seems.

Uh oh...it's back.

Renter?

lord you're dumb. i'm not blaming anyone for someone making money after my sale.

my point is not that buying is a good idea. my point is that when i bought and sold buying provided one a profit. but post-2004 (when i sold) i'm almost certain that the price of the unit shot up and then shot WAY down (development directly south cut off all light).

asshat.

So the blame is on who, you because you didn't tell the seller, the seller because he didn't know, or the developer? If there was no new development, you and I seem to be in agreement, although I don't know how anyone in New York City can assume the views are protected unless you border a park or a school or directly border the rivers.

no blame because i had zero clue that a developer would in the next two years plan a development. at the time my back view included three townhouses.. and the buyer sold for more than 25% more than he bought from me (two years later right before the townhouses sold). then the values declined. don't just assume facts, asshole.

So every transaction you are talking about has made money. Where is your concern against buying? What exactly are you blaming people for, and who?

Why don't you read the thread and answer your question?

cc, damned fine idea. what IS daballless talking about?

It's just trying to bait you.

I blame inonada 'coz he started this thread. Dabulls: go finish your homework, young man.

I will relay that.

cc, i get the bait concept. except here it has been so lame.