Iceland, a country that wants to punish the bankers responsible for the crisis

IMHO the blame is on the top bankers aka the Federal Reserves which prints money out of thin air, and our GOV who's borrowing them like there is no tomorrow.

Moreover, our lovely congressmen and women have mandated through FHA, fannie, and freddie that those who had to file bankruptcy or foreclosure is eligible for another tax payer funded loan in 3 years.

Right now, I have a borrower who had filed bankruptcy twice in 8 years, has 3 ongoing collections, 1 eviction in the past, but had just enough credit to qualify for FHA loan... and despite the underwriter and my judgement, we are obligated to approve the loan. Few years from now, DORA then will 'again' send me a complaint letter that we coerce this borrower into signing a loan he cannot afford.[Bang][Bang][Bang][Bang]

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Originally Posted by MB888

IMHO the blame is on the top bankers aka the Federal Reserves which prints money out of thin air, and our GOV who's borrowing them like there is no tomorrow.

Moreover, our lovely congressmen and women have mandated through FHA, fannie, and freddie that those who had to file bankruptcy or foreclosure is eligible for another tax payer funded loan in 3 years.

Right now, I have a borrower who had filed bankruptcy twice in 8 years, has 3 ongoing collections, 1 eviction in the past, but had just enough credit to qualify for FHA loan... and despite the underwriter and my judgement, we are obligated to approve the loan. Few years from now, DORA then will 'again' send me a complaint letter that we coerce this borrower into signing a loan he cannot afford.[Bang][Bang][Bang][Bang]

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Wow man... that is a perfect case of "Lead by Example" I guess...

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Originally Posted by Irving

The banks didn't want to finance people to buy houses that they couldn't afford, but the US. Government persuaded them.

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I believe this to be a incorrect statement. In times past the lender on the property remained holder of the loan begining to end. The lender had a interest in the property being fairly valued. What changed is that the lender quickly sold the loan to investment banks. They had no responsibility or loss if the value was not correct or the loan defaulted. The investment banks in their turn quickly combined these mortgages into debt derivitives that they sold to pension funds who liked them because the ratings agencys had bestowed them with a AAA rating. No responsibility or loss for the investment banks eithor. The investment banks were in fact clamoring for subprime loans, they made more money off those. The fact that they would buy every shitty fraudalent subprime mortgage out there was the primary driver of the ongoing subprime event

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Originally Posted by xring

I believe this to be a incorrect statement. In times past the lender on the property remained holder of the loan begining to end. The lender had a interest in the property being fairly valued. What changed is that the lender quickly sold the loan to investment banks. They had no responsibility or loss if the value was not correct or the loan defaulted. The investment banks in their turn quickly combined these mortgages into debt derivitives that they sold to pension funds who liked them because the ratings agencys had bestowed them with a AAA rating. No responsibility or loss for the investment banks eithor. The investment banks were in fact clamoring for subprime loans, they made more money off those. The fact that they would buy every shitty fraudalent subprime mortgage out there was the primary driver of the ongoing subprime event

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It isn't an inaccurate statement, it's what started it, and will start it again. The part in your statement is simply the automatic reaction of the investment bankers and mortgage writers to the first statement. If in the position, would you not buy up federally guaranteed loans? It's automatic profit, that's federally backed. Millions of loans all guaranteed to pay out. It's a big banker's wet dream. The 2 events are not mutually exclusive and the second couldn't have happened without the first.

Do I like it? No, but I blame the government for creating that environment far more than I blame a private capitalist for leveraging their abilities to profit from it.

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Originally Posted by xring

I believe this to be a incorrect statement. In times past the lender on the property remained holder of the loan begining to end. The lender had a interest in the property being fairly valued. What changed is that the lender quickly sold the loan to investment banks. They had no responsibility or loss if the value was not correct or the loan defaulted. The investment banks in their turn quickly combined these mortgages into debt derivitives that they sold to pension funds who liked them because the ratings agencys had bestowed them with a AAA rating. No responsibility or loss for the investment banks eithor. The investment banks were in fact clamoring for subprime loans, they made more money off those. The fact that they would buy every shitty fraudalent subprime mortgage out there was the primary driver of the ongoing subprime event

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True, but the few factors you forgot to mention, Fnma and freddie are federally chatter "insurance", FHA loans are Federally guaranteed. FNMA, Freddie, FHA will loan to just about anyone. Private banks' overlays require min credit score, income, asset to protect the banks. If private banks were to follow these agencies and FHA's rules, the 08 crash would have been 100x worse.

Meanwhile, if banks refuse to loan in down turn area, or not enough number of certain race, banks get slapped by redlining or Ecoa violation.

The secondary market may had taken the risk on the 'fraudulent notes' as you mentioned (DOH, opportunity exists, vulture will always be there), but that 'subprime' market was created by our own very federal mandates.

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Originally Posted by XC700116

It isn't an inaccurate statement, it's what started it, and will start it again. The part in your statement is simply the automatic reaction of the investment bankers and mortgage writers to the first statement. If in the position, would you not buy up federally guaranteed loans? It's automatic profit, that's federally backed. Millions of loans all guaranteed to pay out. It's a big banker's wet dream. The 2 events are not mutually exclusive and the second couldn't have happened without the first.

Do I like it? No, but I blame the government for creating that environment far more than I blame a private capitalist for leveraging their abilities to profit from it.

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I see your point. Could you expound a little on what "leveraging you abilities" means. The investment banks knew the debt derivitives they were toxic as evidenced by the fact that they were betting against them at the same time they were selling them to clients. Legitimate hedges they say. To me the heart of capitalism is that you are rewarded for producing value and you fail if you do not. The investment banks sold a product that was toxic but they have not failed. Perhaps a socialist agenda was involved in the lax requirments of freddie and fanny. But that has ended. What is ongoing is socialism extended to the investment banks as they continue to gamble with leverages of 30 to 40 x, and not have to pay the price when the dice comes up snake eyes. If you are using 40x leverage a 3% loss means you are insolvent The most recent example is lieborgate that they were manipulating for profit via, wait for it, derivitives. The libor rate is supposedly sancrasact, it determines the interest rate paid by basicly on every loan originated as well as being a primary indicator of risk but here they were manipulating it having a grand old time - bottle of bollinger tonight at my place old chap. What is the true motivation of the goverment where they produce a environment where rewards are exponential and all risk is born by the taxpayer? answer that and ill buy you a cup of joe[Coffee]

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Originally Posted by MB888

True, but the few factors you forgot to mention, Fnma and freddie are federally chatter "insurance", FHA loans are Federally guaranteed. FNMA, Freddie, FHA will loan to just about anyone. Private banks' overlays require min credit score, income, asset to protect the banks. If private banks were to follow these agencies and FHA's rules, the 08 crash would have been 100x worse.

Meanwhile, if banks refuse to loan in down turn area, or not enough number of certain race, banks get slapped by redlining or Ecoa violation.

The secondary market may had taken the risk on the 'fraudulent notes' as you mentioned (DOH, opportunity exists, vulture will always be there), but that 'subprime' market was created by our own very federal mandates.

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I see your point.

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Originally Posted by Irving

The housing bubble is an "It takes two to tango" type of situation. The banks didn't want to finance people to buy houses that they couldn't afford, but the US. Government persuaded them. On the other hand, no one forced people to buy houses that they couldn't afford. Where exactly where you planning on pointing your finger?

Or, are you referring to banks investing in things that they shouldn't have and betting on people going bankrupt? If so, I'd point you back to the gov persuading banks to take huge risks by financing anyone for a house, regardless of if they could afford it or not.

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That's part of it, but a major part was bundling these risky mortgages into creative financial instruments like mortgage-backed securities (MBS) and collateralized debt obligations (CDO) whose price didn't reflect the risk inherent in the mortgages. The over-investment in these securities world-wide are where the foreign banks in countries like Iceland and the UK took such a hit.

Here's some background:

http://en.wikipedia.org/wiki/2007%E2...nancial_crisis

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Originally Posted by xring

I see your point. Could you expound a little on what "leveraging you abilities" means. The investment banks knew the debt derivitives they were toxic as evidenced by the fact that they were betting against them at the same time they were selling them to clients. Legitimate hedges they say. To me the heart of capitalism is that you are rewarded for producing value and you fail if you do not. The investment banks sold a product that was toxic but they have not failed. Perhaps a socialist agenda was involved in the lax requirments of freddie and fanny. But that has ended. What is ongoing is socialism extended to the investment banks as they continue to gamble with leverages of 30 to 40 x, and not have to pay the price when the dice comes up snake eyes. If you are using 40x leverage a 3% loss means you are insolvent The most recent example is lieborgate that they were manipulating for profit via, wait for it, derivitives. The libor rate is supposedly sancrasact, it determines the interest rate paid by basicly on every loan originated as well as being a primary indicator of risk but here they were manipulating it having a grand old time - bottle of bollinger tonight at my place old chap. What is the true motivation of the goverment where they produce a environment where rewards are exponential and all risk is born by the taxpayer? answer that and ill buy you a cup of joe[Coffee]

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Oh I wholly agree with you there where/are a pile of scamming fawkers in the upper echelon of banking and investments that did a LOT of shady though "legal" stunts that screwed the system, and taxpayers. That said IMO it all begins at the point where the federal govt decided to yet again play charity with the tax payer's dollar to win votes. As to the motivation......., I'm stuck somewhere between full on conspiracy and complete idiocy on the behalf of the bleeding hearts that pushed this crap.

I honestly don't think those that started it were smart enough to foresee the end result. They are completely baffled regularly by the most mundane things, however I think many of those that backed it saw the opportunity to profit off it in such a fashion and therefore helped push or at the very least stood completely out of the way. Meanwhile the same people as always really got screwed, and I'm not talking about those that were too stupid to realize they could never have a chance to pay back the loan they were signing. I'm talking about you and I, the taxpayer.

Then of course we had to later bail out the banks when it all tumbled.......................