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Edited by Mrph1 on Nov 30th 2023 at 11:03:59 AM

Nihlus1 Since: Jul, 2015
#112076: Feb 15th 2016 at 9:47:13 AM

Consumers weren't the ones paying underwriters to approve knowingly fraudulent applications and firing the ones who objected.
No, consumers were the ones submitting said fradulent applications in the first place in order to get in on dat sweet real estate money. The banks bought into the same delusion as the Feds and the consumers, that the bubble would never pop because housing prices would continue to rise. This was not the case.

The assertion that everything is the fault of the people who failed to stop the crisis, rather than the ones that caused the crisis ("the banks should have known people were lying to them and acted on it, but the people who lied did nothing wrong"), continues to be utterly ridiculous on its face.

LeGarcon Blowout soon fellow Stalker from Skadovsk Since: Aug, 2013 Relationship Status: Gay for Big Boss
Blowout soon fellow Stalker
#112077: Feb 15th 2016 at 9:47:27 AM

If you get conned by someone has the person committing the fraud not just committed a crime?

Or is it just your fault?

Oh really when?
Nihlus1 Since: Jul, 2015
#112078: Feb 15th 2016 at 9:48:58 AM

The consumers were the ones committing fraud by lying about their income and their ability to pay back their loans, you do know this right? All the banks (catalyzed by the Fed's lenient monetary police) did was assume people would pay back their loans using the same logic as those people. It was flawed logic, but few people at the time knew this. The banks don't want people to take out loans they can't pay back, it's bad for business.

edited 15th Feb '16 9:58:50 AM by Nihlus1

TobiasDrake (•̀⤙•́) (Edited uphill both ways) Relationship Status: Arm chopping is not a love language!
(•̀⤙•́)
#112079: Feb 15th 2016 at 9:51:47 AM

I've never engaged in real estate before but I've worked in auto lending.

In the case of an auto lien, the consumer rarely submits the loan to the bank. More frequently, it's the middleman auto dealership acting on their behalf. We had an department set up for pursuing reimbursement from the dealer for what we called Equipment Misrepresentation on repossessed vehicles. EM is when the dealer openly lies about the equipment on the vehicle. $500 for power locks that don't exist, $1,000 for a sunroof the car doesn't have, etc.

In these instances, the consumer never even sees the equipment contract. It's part of the paperwork between dealer and lender, not part of the agreement between customer and dealer. The consumer just signs the reasonable-sounding paperwork with a rough value of how much the car costs, blissfully unaware that the dealer is swindling them out of $2-5k in fraudulent claims so they can skim some money off the top.

I once saw a car with over $10,000 in Equipment Misrepresentation. 40% of a $25,000 loan was a lie. Tragically yet inevitably, the loan ended in repossession.

If real estate is anything like auto lending, then I have difficulty blaming the consumer for the actions of realtors.

edited 15th Feb '16 9:54:19 AM by TobiasDrake

My Tumblr. Currently side-by-side liveblogging Digimon Adventure, sub vs dub.
NativeJovian Jupiterian Local from Orlando, FL Since: Mar, 2014 Relationship Status: Maxing my social links
Jupiterian Local
#112080: Feb 15th 2016 at 10:02:40 AM

The problem with the banks wasn't that they made loans to people who couldn't pay them back. That happens. The house gets foreclosed on and everyone moves on. It's just a fact of the financial market.

The problem was that banks were selling risky loans to each other as non-risky ones, so the banks didn't know the amount of risk they were taking on. Banks can plan for some percentage of their loans defaulting, but not if they don't know how risky the loans they have are.

If Bank A gives me a loan that's considered risky (because it's more than I can easily afford and there's a reasonable chance I'll default on it), then it's not my fault if Bank A turns around and sells my risky loan to Bank B as a non-risky loan, which then bites Bank B in the ass when I default on it because they weren't expecting me to do that.

The personal responsibility of someone taking out a mortgage begins and ends with the mortgage. I default on my mortgage, I lose my house. That happened. That happened to a lot of people, actually, and no one's suggesting that they should be able to keep the house they can't afford.

But blaming those people for the collapse of the economy is asinine.

Really from Jupiter, but not an alien.
Fighteer Lost in Space from The Time Vortex (Time Abyss) Relationship Status: TV Tropes ruined my love life
Lost in Space
#112081: Feb 15th 2016 at 10:06:47 AM

It is undoubtedly true that there were consumers submitting knowingly fraudulent mortgage applications to "cash in" on the rise in housing prices. However, all of those people were foreclosed on fairly early in the process. Had the damage been limited to them, there would not have been such a huge crisis.

The reason why everything blew up was the web of shadow banking that had grown around the mortgage bubble. That caused the whole credit system to seize up.

There was also the fallout to perfectly responsible consumers (like me) who had bought homes in the rising market that we could easily afford, but suddenly found ourselves with negative equity when the market bottomed out. This blocked the usual avenues of credit that might be available in the event of a crisis, such as losing our jobs, or to consolidate debts, invest in our properties, take vacations, adopt children, or similar major expenditures.

If you are going to tell me that I was committing some kind of fraud or malfeasance to buy a home in 2001 and then borrow against my equity in 2006, then I would like to, respectfully, punch you in the face.

But seriously, portraying banks as some kind of innocent victims in the whole affair is unbelievably ignorant and quite possibly intentionally trolling.

[down] Correct.

edited 15th Feb '16 10:08:52 AM by Fighteer

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"
LeGarcon Blowout soon fellow Stalker from Skadovsk Since: Aug, 2013 Relationship Status: Gay for Big Boss
Blowout soon fellow Stalker
#112082: Feb 15th 2016 at 10:08:19 AM

To put it as simply as possible.

I give you a loan I know you can't pay back. I then sell your debt to someone else telling them that you can pay them back.

Debt is asset like any other that can be bought and sold and traded. That is what crashed the economy.

Not the existence of the debt itself but the way it was traded.

Oh really when?
Nihlus1 Since: Jul, 2015
#112083: Feb 15th 2016 at 10:12:17 AM

If real estate is anything like auto lending
It is not.

If Bank A gives me a loan that's considered risky (because it's more than I can easily afford and there's a reasonable chance I'll default on it), then it's not my fault if Bank A turns around and sells my risky loan to Bank B as a non-risky loan, which then bites Bank B in the ass when I default on it because they weren't expecting me to do that.
They did this because everyone was demanding loans, and selling the mortgage enables the lender to lend money to the other borrowers. It's not like this practice is a secret or anything either, they are still doing this today. Because it's not actually a problem when people pay back their loans, rather it's just how the system works because it is often the most efficient way. That's why reform after the crisis was aimed at stricter lending standards. The problem is that these people didn't pay back their loans, so we got the credit crisis.

BTW, the banks would be legally obligated to tell you that they can transfer the loan. So if you took it out while knowing that, it's still your fault.

What you are doing is basically the same thing as blaming money for the existence of gambling.

The personal responsibility of someone taking out a mortgage begins and ends with the mortgage. I default on my mortgage, I lose my house. That happened. That happened to a lot of people, actually, and no one's suggesting that they should be able to keep the house they can't afford.
The effects of you defaulting on your house does not end with you losing it. By defaulting you have contributed to the financial crisis. So yes, it's still your fault.

But blaming those people for the collapse of the economy is asinine.
Asserting that they have no blame is what's asinine.

To put it as simply as possible. I give you a loan I know you can't pay back
You have already got it wrong. The banks assumed housing prices would keep rising and that they would get their money back. They were also often lied to about their client's income.

I then sell your debt to someone else telling them that you can pay them back. Debt is asset like any other that can be bought and sold and traded. That is what crashed the economy. Not the existence of the debt itself but the way it was traded.
Explain right now why the economy isn't crashing this second with that same thing still being legal.

edited 15th Feb '16 10:14:59 AM by Nihlus1

Fighteer Lost in Space from The Time Vortex (Time Abyss) Relationship Status: TV Tropes ruined my love life
Lost in Space
#112084: Feb 15th 2016 at 10:13:41 AM

Asserting that they have no no blame is what's asinine.
Cite a single person saying that. Please. But the power in the mortgagor-mortgagee relationship is almost entirely with the lender.

Explain right now why the economy isn't crashing this second with that same thing still being legal.
Because it largely is not. Dodd-Frank put a cap on the most egregious excesses of the system, and has been largely successful in keeping the shadow money out of the mortgage market. That said, there are signs of other bubbles occurring within the investment world that could still cause serious crises were they to burst.

edited 15th Feb '16 10:18:17 AM by Fighteer

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"
NativeJovian Jupiterian Local from Orlando, FL Since: Mar, 2014 Relationship Status: Maxing my social links
Jupiterian Local
#112085: Feb 15th 2016 at 10:20:08 AM

They did this because everyone was demanding loans, and selling the mortgage enables the lender to lend money to the other borrowers. It's not like this practice is a secret or anything either
The problem isn't selling mortgages. The problem is selling bad mortgages (ones likely to default) as good mortgages (ones unlikely to default). Which has nothing to do with the consumer actually paying back the mortgage.

Asserting that they have no no blame is what's asinine.
If the banks hadn't been cheating each other with subprime mortgages, then the economy wouldn't have collapsed when those mortgages defaulted. So no, the people taking out the mortgages have no moral responsibility for the collapse. They have some causal responsibility (ie, if they hadn't defaulted, then the whole situation wouldn't have happened), yes, but that doesn't make it their fault. If I buy a toaster and it shorts out because of a manufacturer defect and causes a fire, then I have causal responsibility for the fire (if I hadn't used the toaster, there wouldn't have been a fire), but the moral responsibility is on the manufacturer, who sold a defective toaster.

edited 15th Feb '16 10:21:28 AM by NativeJovian

Really from Jupiter, but not an alien.
Aszur A nice butterfly from Pagliacci's Since: Apr, 2014 Relationship Status: Don't hug me; I'm scared
A nice butterfly
#112086: Feb 15th 2016 at 10:24:20 AM

I dunno

Sounds kinda hard to believe or blame the people for making some sort of concerted effort to bring down the economy by going to lengths to not pay their homes, when compared to stupid practices by banks

It has always been the prerogative of children and half-wits to point out that the emperor has no clothes
Nihlus1 Since: Jul, 2015
#112087: Feb 15th 2016 at 10:25:23 AM

Cite a single person saying that. Please.
Stuff like this:
It is difficult to find any interpretation of this that supports the idea that a primary, or even significant portion of the blame lies on consumers
blaming those people for the collapse of the economy is asinine.
Is asinine. In fact, they did play a significant part. A very significant one.

It is undoubtedly true that there were consumers submitting knowingly fraudulent mortgage applications to "cash in" on the rise in housing prices. However, all of those people were foreclosed on fairly early in the process. Had the damage been limited to them, there would not have been such a huge crisis.

The reason why everything blew up was the web of shadow banking that had grown around the mortgage bubble. That caused the whole credit system to seize up.

The reason everything blew up was because everyone defaulted on their debts. I don't know how you think the economy works, but if millions of people can't pay their debts and their houses get foreclosed on, the damage is not limited to them.

This, by the way, is exactly why the reform has been aimed at increasing interest and lending standards, rather than, say, making the practice of selling mortgages illegal.

There was also the fallout to perfectly responsible consumers (like me) who had bought homes in the rising market that we could easily afford, but suddenly found ourselves with negative equity when the market bottomed out. This blocked the usual avenues of credit that might be available in the event of a crisis, such as losing our jobs, or to consolidate debts, invest in our properties, take vacations, adopt children, or similar major expenditures
And that fallout was a result of people taking out loans they couldn't afford, which was the result of loose lending and thinking real estate prices would rise forever, which was the result of the Fed's loose monetary policy. To blame this all on the banks is totally backwards.

If you are going to tell me that I was committing some kind of fraud or malfeasance to buy a home in 2001 and then borrow against my equity in 2006
Did you take out loans you couldn't pay back and then default on them? Did you lie about your income?

then I would like to, respectfully, punch you in the face.
I'm simultaneously awed by your maturity and intimidated by your threats, I assure you. Have you also scored 300 confirmed kills in operations against Al-Qaeda?

But seriously, portraying banks as some kind of innocent victims
If you keep blatantly lying about what I'm saying, then any conversation is impossible. I have repeatedly said that both the banks and the consumers were at fault, but that the consumers held a larger responsibility on part of being a much bigger group.

Fighteer Lost in Space from The Time Vortex (Time Abyss) Relationship Status: TV Tropes ruined my love life
NativeJovian Jupiterian Local from Orlando, FL Since: Mar, 2014 Relationship Status: Maxing my social links
Jupiterian Local
#112089: Feb 15th 2016 at 10:31:21 AM

Not sure if he was deliberately trolling or just arguing in fantastically bad faith, but yeah.

Really from Jupiter, but not an alien.
Aszur A nice butterfly from Pagliacci's Since: Apr, 2014 Relationship Status: Don't hug me; I'm scared
A nice butterfly
#112090: Feb 15th 2016 at 10:33:23 AM

I have repeatedly said that both the banks and the consumers were at fault, but that the consumers held a larger responsibility on part of being a much bigger group.

But the consumers werent the ones who were able to look at the large picture or who handled the vast majority of the money. Those were the banks.

It has always been the prerogative of children and half-wits to point out that the emperor has no clothes
Achaemenid HGW XX/7 from Ruschestraße 103, Haus 1 Since: Dec, 2011 Relationship Status: Giving love a bad name
HGW XX/7
#112091: Feb 15th 2016 at 10:36:15 AM

EDIT: Seriously? I mean, I knew this would happen sooner or later, but...we've banned someone for breaking the circlejerk again?

Yeah, we're done with Mister Internet Tough Guy here.

Help me out here, where's the line between saying you want to 'respectfully' punch someone in the face and what Nihlus was doing?

edited 15th Feb '16 10:40:31 AM by Achaemenid

Schild und Schwert der Partei
Ramidel Since: Jan, 2001
#112092: Feb 15th 2016 at 10:38:35 AM

@Nihlus: It doesn't matter what the majority of investors were doing, it matters what the market drivers were doing. I did not say that the hedge funds were driving it, I said that hedge funds were buying and selling the side bets that were doing the driving. The difference is important; hedge funds were part of the apparat, but mostly were just trying to make money (ethically on their part, actually). The actually responsible group were the investment firms and banks that were creating the securities market in question. Hedge funds are a scapegoat, you're right.

Since you seem unaware of what I mean by "side bets," let me state that pension funds were absolutely not buying credit-default swaps en masse expecting the housing market to fail. Those were hedge funds shorting the housing market (big warning sign here!). They were shorting the housing market because Goldman Sachs and other firms had created insurance policies that allowed them to do so, in the full knowledge that there'd be a crash. (These are the same firms that were selling securities to the pension funds. Rule #1: The house always wins.)

The income from this market, meanwhile, created an opportunity and pressure on banks to do more business; furthermore, the securitization of the market meant that they had no incentive to do any kind of due diligence on the loans that they'd processed because they didn't lose anything if the loans went bust. There's an economic term for this: "moral hazard," and what it means is that if you lose nothing if a piece of property is destroyed because it's insured or oversold, you have no incentive to ensure that the property is safe. So banks were incentivized to create more and bigger home loans wherever they could, with no risk to themselves; all they needed to do was to get people's butts into houses.

Homebuyers are relevant because they're at the bottom of the food chain; furthermore, many of the homebuyers in question are indeed not responsible for their own actions. Why? Not only because homes were sold on high-pressure tactics, but also through outright fraud (to the tune of $112 billion in direct fraudulent loans). According to...I believe it was Charles Ferguson, author of The Inside Job and Predator Nation, but I could be getting my sources mixed up...a lot of the homes sold to new immigrants were sold to people who couldn't read the English on the contract and trusted the person who read the contract to them - whether or not you should sign something you can't read is immaterial, because intentionally mistranslating the contract is fraud. Some homebuyers were just poor money managers, of course, and bought more house than they could afford on the assumption that prices were going to rise forever - but even then, it takes two people to make a contract, and the banks made the loan contracts with these poor money managers in the full knowledge that the loans were going to go bust, and it's the banks that stuck the pension funds with the bill when the bubble burst.

EDIT: Leaving this up despite the disappearance of my interlocutor, since it's information on the subject.

I will say this: By definition, it takes a creditor to make a loan and a debtor to accept it. There is literally equal responsibility there.

[up][awesome]

edited 15th Feb '16 10:42:29 AM by Ramidel

Protagonist506 from Oregon Since: Dec, 2013 Relationship Status: Chocolate!
#112093: Feb 15th 2016 at 10:39:12 AM

What does it mean to "break the circlejerk"?

Leviticus 19:34
Ramidel Since: Jan, 2001
#112094: Feb 15th 2016 at 10:40:14 AM

[up]Disagreeing with the echo chamber.

edited 15th Feb '16 10:42:39 AM by Ramidel

Aszur A nice butterfly from Pagliacci's Since: Apr, 2014 Relationship Status: Don't hug me; I'm scared
A nice butterfly
#112095: Feb 15th 2016 at 10:44:09 AM

Help me out here, where's the line between saying you want to 'respectfully' punch someone in the face and what Nihlus was doing?

A nice sounding adjective before sarcasm makes it more better-goodier than the raw sarcasm.

You (amiable) silly goofy doody head.

It has always been the prerogative of children and half-wits to point out that the emperor has no clothes
Ogodei Fuck you, Fascist sympathizers from The front lines Since: Jan, 2011
Fuck you, Fascist sympathizers
#112096: Feb 15th 2016 at 10:44:25 AM

Some of the OTC threads do manage healthy debate, like Israel-Palestine, the Russia thread, the Arab Spring to an extent, the European Debt Crisis thread.

Here the contrarians tend to get caught eventually. Except for Jack.

FFShinra Since: Jan, 2001
#112097: Feb 15th 2016 at 10:45:25 AM

Thats cuz Jack is loveable.tongue

Only thing I'm confused about was the 300 AQ confirmed kills line.

Achaemenid HGW XX/7 from Ruschestraße 103, Haus 1 Since: Dec, 2011 Relationship Status: Giving love a bad name
HGW XX/7
#112098: Feb 15th 2016 at 10:46:03 AM

[up][up]

I wonder what those threads have in common?

[up]

It's from the Navy Seal copypasta.

edited 15th Feb '16 10:46:29 AM by Achaemenid

Schild und Schwert der Partei
Aszur A nice butterfly from Pagliacci's Since: Apr, 2014 Relationship Status: Don't hug me; I'm scared
A nice butterfly
#112099: Feb 15th 2016 at 10:46:18 AM

[up][up]The 300 AQ kills line is a reference to a navy seal meme

[up] -raises hand-

edited 15th Feb '16 10:46:52 AM by Aszur

It has always been the prerogative of children and half-wits to point out that the emperor has no clothes
Fighteer Lost in Space from The Time Vortex (Time Abyss) Relationship Status: TV Tropes ruined my love life
Lost in Space
#112100: Feb 15th 2016 at 10:46:49 AM

This guy was not debating in good faith. There was no attempt to engage with other posters' arguments or acknowledge different points of view. He was operating straight out of the concern troll's playbook. We can only tolerate that for so long.

edited 15th Feb '16 10:47:07 AM by Fighteer

"It's Occam's Shuriken! If the answer is elusive, never rule out ninjas!"

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