NationStates Jolt Archive

Want to pose this question to our vast NSG audience. In the begining of this mortgage meltdown I was thinking about how this can benefit the nation instead of hurting it. I know this sounds un-capitalistic. I am very capitalistic however I see an opportunity here. Since the government already is involved in FHA and VA loans. Also appears to be headed to more involvement due to people moving away from conventional loans. Why shouldn't the US government hold the notes instead of banks. I don't advocate getting rid of the banks in this regard however allowing the fed's to hold the notes and make money off them. More of competition against the banks. Imagine if the Fed's held let's say 25% of the US home loan notes. Imagine the income off the interest helping boost revenue. We could possibly even reduce the income taxes based off this. I know I would feel better about payments being made to cover federal budgets then some private investor somewhere in Malibu or overseas. The fed's can also make it smoother to get a loan and not screw people over on predatory lending which has got us to the sub prime problem.

Who gives a care?

Its not my problem. :p

Well, it's wiped about 100 billion off the Australia stock market ... :(

The Fed exists for a very good reason. Even more importantly, the Fed is seperate from the rest of the government for a very good reason.

Your proposal violates both these reasons, hence it is a bad proposal.

How old are you? Have you had any experience with government at all?

Without even getting into libertarian principles, what makes you think politicians can create a government office, complete with red tape, corruption, and being manipulated for political reasons (from populist rhetoric, to political back-scratching, to paying off lobbyists) that is more efficient and capable of operating in financial markets than business while simultaneously providing better customer service?

The Government should NOT act like a business making money.

Banks are perfectly capable of competing with themselves.

If you've seen what happened at government-chartered corporations like Freddie Mac and Fannie Mae...you'd know the government is just as bad as banks, even worse then them when it comes to safely managing assets. Hell, they were doing so badly and were so mismanaged it's a wonder they didn't collapse. To make matters worse, governments always have a bailout, which means they can be as corrupt and incompetent as they want and almost certainly get away with it for a long time.

The last thing I would want is the Federal Reserve to be handed the biggest conflict-of-interest it has ever faced. They would not only be susceptible to political pressure (torpedoing what has been to date one of the most independent central banks in the world) but also pressured to keep interest rates artificially low in order to mollify debtors. The result would be high inflation, slow growth, and increasingly ineffective monetary policy.

The Government should NOT act like a business making money.

Banks are perfectly capable of competing with themselves.

The US government is doing a pretty good job in trying bankrupt the country.

Let the bank shareholders eat it, I say.

The problem is not nearly as widespread as people think. It's only awful if you have a dodgy mortgage (your fault) or you are a mortgage lender with no concept of underwriting standards (again your fault).

Or you own lot of CMOs.

It'll work itself out.

Let the bank shareholders eat it, I say.

The problem is not nearly as widespread as people think. It's only awful if you have a dodgy mortgage (your fault) or you are a mortgage lender with no concept of underwriting standards (again your fault).

Or you own lot of CMOs.

It'll work itself out.

In a nutshell ignorance is no defence for mistakes.

I'm a Leding Officer at Suncorp-Metway Ltd and we've had a very simple solution. Conservative lending and Consumer Credit Insurance. The result has been we have about a half dozen people at the maximum handling our collections, for billions of dollars in consumer lending.

Government controlled lending in dangerous, especially in high-risk lending. The government not only lacks the requirements to be a resoponsable lender, but cannot afford to assume the risk. Additionally, competitiveness could be better served by undercutting lending costs through tax concessions on loans.

All in all, what have learned from this experience? Hopefully it's what some banks have known for years, it is not always in people's best interests to give them a loan.

In a nutshell ignorance is no defence for mistakes.

To the extent that everyone else should not be forced to pay for the mess.

People sometimes lose money, that's how things work. Everyone wants a bailout now - well everyone who's screwed themselves - but I don't imagine those same folks would have been happy if a windfall tax had been levied on their activities in 2005 when things were just going swimmingly.

To the extent that everyone else should not be forced to pay for the mess.

People sometimes lose money, that's how things work. Everyone wants a bailout now - well everyone who's screwed themselves - but I don't imagine those same folks would have been happy if a windfall tax had been levied on their activities in 2005 when things were just going swimmingly.

The problem is the domino effect this is having. The market needs to be propped up or the necrosis ripping through the finance world will devastating

The problem is the domino effect this is having. The market needs to be propped up or the necrosis ripping through the finance world will devastating

I do not think we are at the point of needing to prop up to much. I say let it ride and see how it shakes out.

I do not think we are at the point of needing to prop up to much. I say let it ride and see how it shakes out.

Another week of negative market growth and we'll have a global economic meltdown. We can't wait another day

I just blogged on the topic of mortgaging earlier this evening. I beg your indulgence because the following will wax philosophical and, at times, read like "pie-in-the-sky."

One of the points I touched on was the difficult and complicated process of buying a house. It's down to a lot more than walking into the realtor with a few hundred thousand in your dossier, stating what you're looking for in a house and forking over the bargeld.

At the same time, I understand and respect Interest. It's how the moneylenders get "paid;" they can't live on air and God's word alone, they deserve grocery money as much as the next guy. And it's no small feat to build a house, especially nowadays, so housebuilders earn their share of the pie as well.

I'm pretty sure things will clarify somewhat when I start taking home buying classes at my credit union next month, but for now I'm thoroughly daunted by the process.

In my blog, I posited a thought (here's where we veer into "pie-in-the-sky"): A kind of limited socialism where the state provides you with a house, health care, maintains energy and transportation infrastructure, education and protects same network of infrastructure. The rest is entirely up to you, J. Q. Citizen. Yes, I am aware that while it's a good idea, it's not realistic.

Somewhat less unrealistic was interest and utilities figured into the final "you pay this much" house price, instead of "you can buy this house for (yea) many hundred thousand some-odd" and tacking interest on. Pay for the house in one drop, and that's all you pay. Pay for it via down-and-payments and you pay about twice as much with interest.

Just a thought. Comment? Response?

(This coming from a country categorized as "Democratic Socialists" :D)

Another week of negative market growth and we'll have a global economic meltdown. We can't wait another day

I believe economic meltdowns are actually good at times.



I also slow down to look at car wrecks.

Another week of negative market growth and we'll have a global economic meltdown. We can't wait another day

A lot of the fall in stock markets recently is not related to problems with mortgages, but with stupid quant funds and redemptions. Propping up the mortgage market won't change that.

A lot of the fall in stock markets recently is not related to problems with mortgages, but with stupid quant funds and redemptions. Propping up the mortgage market won't change that.

Goes to show you should not allow computers to do everything. I would gather that is the problem or am I reading into it wrong?

Goes to show you should not allow computers to do everything. I would gather that is the problem or am I reading into it wrong?

Yah. Black box trading. Anway, the word is a lot of these funds experienced a one in 10,000 years event three days in a row. (Which seems to happen every seven years or so, so you'd think they'd know better at this point :rolleyes:).

So people called up and asked for their money back (what's left of it), which meant they ran into margin problems so they have to sell a lot of stuff to meet margin and redemptions. It'll probably go on for a while.

For those of us not in the economic know, is this going to result in a recession, or should we expect to see a drop and then continuing growth?

For those of us not in the economic know, is this going to result in a recession, or should we expect to see a drop and then continuing growth?

Nobody knows really. Anything could happen. Corporate cash flows are still good, so capital expenditure could step in and pick up the slack from the housing mess.

It could go the other way if consumer spending completely collapses.

For those of us not in the economic know, is this going to result in a recession, or should we expect to see a drop and then continuing growth?
Well, that's the trillion dollar question, isn't it.

My bet is that in the US it's going to slow down growth but probably not enough to make for a recession. Especially not if Bernanke cuts interest rates (I don't think he will though).

The rest of the world won't be bothered as much. The actual real economy effects, namely people having less disposable income and less equity in their homes, are confined to the US economy (and indeed just parts of that economy). Unless something weird happens and a few financial systems collapse (eg in China) the rest of the world will move on much as it has before.

The world of finance is going to be a bit less comfortable for a while though.

The problem is not nearly as widespread as people think.I think you are rite.


It'll work itself out.yup.. one way or the other.


Let the bank shareholders eat it, I say.I agree.
The banks are going to lose some $$ selling those overvalued properties.

For those of us not in the economic know, is this going to result in a recession, or should we expect to see a drop and then continuing growth?I dont know..

What I know is this.. In the US It is going to be more difficult to buy a House, because its going to be more difficult (or more expensive) to borrow money.
This may affect the whole lending sector, making it more difficult/expensive to get any kind of credit..

We gotta face it (US) we live too much on borrowed money.. we dont save enough.

What I know is this.. In the US It is going to be more difficult to buy a House, because its going to be more difficult (or more expensive) to borrow money.
This may affect the whole lending sector, making it more difficult/expensive to get any kind of credit..


That's going to be offset by houses becoming a lot cheaper, which is actually a very good thing for the average american.

Who gives a care?

Its not my problem. :p

Why not?

Don’t you get affected when the ECB has to pump billions of Euros into the financial system?

Let the bank shareholders eat it, I say.

The problem is not nearly as widespread as people think. It's only awful if you have a dodgy mortgage (your fault) or you are a mortgage lender with no concept of underwriting standards (again your fault).

Or you own lot of CMOs.

It'll work itself out.


You know what will happen when banks start going bankrupt, don't you?

A run on the other bank...

So having banks go bankrupt is not really an option; that is why banks need to be heavily regulated. Because before you know it the whole system comes crashing down.

Why not just outlaw all predatory lending practices? This whole notion of giving people a mortgage of $300 a month for two years and having it shoot up to $1500 a month after that, a price they can't even begin to afford, needs to have the kibosh put on it. I would even go so far as to outlaw adjustable-rate mortgages. People who can't afford a home with a standard 30-year fixed-rate mortgage just can't afford a home, plain and simple.

Seeing lending institutions make a quick buck off people who end up losing their homes is sickening. Yes, it's partially their own fault, but it's the fault of the corporations for convincing them that they can afford a home that they can't even come close to affording.

Any form of predatory or dishonest lending that pops up after that needs to be stamped out as well. Banks will try to stay ahead of the government and do things that are technically legal but dishonest and potentially unethical. It needs to be stopped. It's absolutely no wonder there was a housing market crash. (Granted, it helped me a lot; I got a nice condo at a dirt-cheap price...with a standard 30-year fixed rate mortgage, thank you very much...still, I'd rather wait to be able to afford a mortgage until I have more money than deal with bullshit lending practices.)

Well, it's wiped about 100 billion off the Australia stock market ... :(

Also made the dollar drop.

Why not just outlaw all predatory lending practices? This whole notion of giving people a mortgage of $300 a month for two years and having it shoot up to $1500 a month after that, a price they can't even begin to afford, needs to have the kibosh put on it. I would even go so far as to outlaw adjustable-rate mortgages. People who can't afford a home with a standard 30-year fixed-rate mortgage just can't afford a home, plain and simple.

Seeing lending institutions make a quick buck off people who end up losing their homes is sickening. Yes, it's partially their own fault, but it's the fault of the corporations for convincing them that they can afford a home that they can't even come close to affording.

Any form of predatory or dishonest lending that pops up after that needs to be stamped out as well. Banks will try to stay ahead of the government and do things that are technically legal but dishonest and potentially unethical. It needs to be stopped. It's absolutely no wonder there was a housing market crash. (Granted, it helped me a lot; I got a nice condo at a dirt-cheap price...with a standard 30-year fixed rate mortgage, thank you very much...still, I'd rather wait to be able to afford a mortgage until I have more money than deal with bullshit lending practices.)
When a poor person buys a house way out of their price range, they know perfectly well they cannot afford it. They are making just as much of a gamble as the lender and are just as responsible for it.

Actual fraud is very rare and is already illegal.

When someone gets greedy and figures they can buy a house way out of their price range with the assumption that they can just keep refinancing because credit will always be cheap, interest rates low, and housing prices will keep going up at a rapid pace, it is their own fault. 'Predatory' lending is just populist rhetoric for 'its not my fault, i didnt do anything wrong, they must have taken advantage of me'.

Suck it up, admit that you got greedy, and accept responsibility for your mistakes.

'Predatory' lending is just populist rhetoric for 'its not my fault, i didnt do anything wrong, they must have taken advantage of me'. true

IMO Predatory Lending is people lending you money -when you feel an emergency- at 20-100% interest.

absolutely not the case here.

That's going to be offset by houses becoming a lot cheaper, which is actually a very good thing for the average american.

Given how absurd the housing prices in the area are at the moment? Yessir.

When a poor person buys a house way out of their price range, they know perfectly well they cannot afford it. They are making just as much of a gamble as the lender and are just as responsible for it.

Actual fraud is very rare and is already illegal.

When someone gets greedy and figures they can buy a house way out of their price range with the assumption that they can just keep refinancing because credit will always be cheap, interest rates low, and housing prices will keep going up at a rapid pace, it is their own fault. 'Predatory' lending is just populist rhetoric for 'its not my fault, i didnt do anything wrong, they must have taken advantage of me'.

Suck it up, admit that you got greedy, and accept responsibility for your mistakes.

The problem is that people are lured with false promises of homeownership. It's not entirely the fault of people who buy these houses that they get screwed. Many are uneducated, undereducated, or coming out of a dire situation, and foreclosure would make that situation even worse.

If the American education system is not going to educate people on how to avoid predatory lending, they can, at the very least, protect them from it by outlawing it. The system is almost set up to trash people's credit and take their money for nothing but a couple of years in a decent house and a thrashing of their credit.

When a few people make the mistake, it's stupidity. When many people make the mistake, it's a problem with the system.

snip....
I suppose that is why it is called predatory lending. I think some regulation may come of this shakeout.

I also am appalled at how schools do not teach about "credit" and "lending". A role of a school is to teach kids how to cope in the real world. It is also a parents responsibility however schools should also touch base on finance for the real world.

The problem is that people are lured with false promises of homeownership.damn.. here we go again.. (me defending the bankers.. damn)

Promise made by whom? the Banks?
when you find the house of your dreams.. you go to the knocking the door of Bank.. they dont come to you.

BTW I have no love for the Bankers..

soon enough someone is going to say: "Its because Occean hates the jews.. antisemite.. Nazi.. etc" (many bankers are jews)

But what is fair is fair.. putting all the blame on the Bankers is unfair.
Sure they are partly responsible.. but we -consumers- need to behave in a more responsible way.

damn.. here we go again.. (me defending the bankers.. damn)

Promise made by whom? the Banks?
when you find the house of your dreams.. you go to the knocking the door of Bank.. they dont come to you.

BTW I have no love for the Bankers..

soon enough someone is going to say: "Its because Occean hates the jews.. antisemite.. Nazi.. etc" (many bankers are jews)

But what is fair is fair.. putting all the blame on the Bankers is unfair.
Sure they are partly responsible.. but we -consumers- need to behave in a more responsible way.

This doesn't put all the blame on the bankers. It puts half the blame on the bankers. And, if non-traditional lending (for lack of a better term) is disallowed, it's both a shot at the bankers and at the stupid wannabe homeowners who either don't know any better or are too deluded to know what they can and cannot afford.

I would say to the bankers, "You can't be trusted not to pick on a bunch of poor, uneducated slobs who have dreams of being homeowners."

And, at the same time, I would say to the buyers, "You can't be trusted to stay within your price range or wait until you can afford a house for real."

Consumers need to behave in a more responsible manner. And so do banks. Together, the opportunism of the banks and the irresponsibility of the buyers helped lead to the housing crisis.

Note that I'm not saying, "Oh noez it's all teh 3bu1 corporationz fault! Fin3 t3h bankkz infinuhteee bilyun dolurz!!!!!111oneoneone" Just as I wouldn't say, "People are stupid and deserve to be taken advantage of."

The problem is that people are lured with false promises of homeownership. It's not entirely the fault of people who buy these houses that they get screwed. Many are uneducated, undereducated, or coming out of a dire situation, and foreclosure would make that situation even worse.

If the American education system is not going to educate people on how to avoid predatory lending, they can, at the very least, protect them from it by outlawing it. The system is almost set up to trash people's credit and take their money for nothing but a couple of years in a decent house and a thrashing of their credit.

When a few people make the mistake, it's stupidity. When many people make the mistake, it's a problem with the system.
So basically you are the type of person who makes "do not iron clothes while worn" warnings necessary arent you?

I suppose anyone who has a credit card and doesnt want to pay it off should just be able to walk away from the debt because "I didnt know I had to pay the money to the credit card company, I thought I just showed them the card and I got the stuff for free".

There are stupid people in this world, always have been, always will be. Should we really prevent the vast majority of people from pursuing perfectly valid endeavors because a tiny fraction of the populace is so stupid they thought they could buy a house for no money down and minuscule payments for the rest of their lives? Most of these 'victims' were being greedy and thought they could get away with it.

So basically you are the type of person who makes "do not iron clothes while worn" warnings necessary arent you?

No flaming is necessary. Besides, there's a big difference between buying a house with what seems to be a good deal versus doing something mind-numbingly dumb.

I suppose anyone who has a credit card and doesnt want to pay it off should just be able to walk away from the debt because "I didnt know I had to pay the money to the credit card company, I thought I just showed them the card and I got the stuff for free".

That's entirely different. The lending practices I refer to are more along the lines of "Well, the credit card company said that I only had to pay 90% of the balance for now, but I'll just get this new Super-Awesome Gold Card in two years and get the same deal," when the credit card company knows that the person can't be approved for the Super-Awesome Gold Card, and in two years, the person will have to pay 150% of the balance or face an interest penalty of 49%.

There are stupid people in this world, always have been, always will be. Should we really prevent the vast majority of people from pursuing perfectly valid endeavors because a tiny fraction of the populace is so stupid they thought they could buy a house for no money down and minuscule payments for the rest of their lives? Most of these 'victims' were being greedy and thought they could get away with it.

Most people pursue valid endeavors via traditional means. People don't go out and buy houses with adjustable-rate mortgages and sub-prime payments for two years to be jacked up to three times their original payment two years later. Most people buy houses with a normal fixed-rate, same-payment-every-month mortgage. To argue that I would prevent the majority from pursuing valid endeavors is to argue that I would ban all mortgage lending and force people to pay cash for houses.

Come to think of it, this discussion gives me an idea for an issue submission.

Want to pose this question to our vast NSG audience. In the begining of this mortgage meltdown I was thinking about how this can benefit the nation instead of hurting it. I know this sounds un-capitalistic. I am very capitalistic however I see an opportunity here. Since the government already is involved in FHA and VA loans. Also appears to be headed to more involvement due to people moving away from conventional loans. Why shouldn't the US government hold the notes instead of banks. I don't advocate getting rid of the banks in this regard however allowing the fed's to hold the notes and make money off them. More of competition against the banks. Imagine if the Fed's held let's say 25% of the US home loan notes. Imagine the income off the interest helping boost revenue. We could possibly even reduce the income taxes based off this. I know I would feel better about payments being made to cover federal budgets then some private investor somewhere in Malibu or overseas. The fed's can also make it smoother to get a loan and not screw people over on predatory lending which has got us to the sub prime problem.

The problem I see with this plan is that it places too much faith in the Government. You mentioned that the money woul dgo to the Federal budget instead of greedy predatory lenders, but I respectfully remind you that the Government who you trust not to become predatory with the loan is the very same Government that has never found a tax hike it didn't like. There are people who pay out half their income in various taxes.

To say nothing of the conflict of interest in allowing a governing body to compete directly against private financial institutions.

Predatory lending is already illegal. If you can show the bank/broker misrepresented the terms of the loan, you can get out from under it. Of course, you don't get to keep the house, but since you couldn't afford it anyway, that's fair.

The problem here is not predatory lending. The problem is stated income loans/bad underwriting.

The only reason why 'predatory lending' is banged on about is because Messrs. Dodd/Clinton/Obama want to arrange a bail out for their little buddies at goldman sachs/morgan stanley without having to send a bunch of home-debtors to prison. And this is a good way to sell it.

The best thing would be to let the market take of the irresponsible parties.

Americans do you want cheaper homes and a possible upswing in the housing market? Tell your forestry lobby group and government to lay-off Canada.

Canada has a comparative advantage (More trees and less people.) American protectionist lobby groups bug me to no end.