# Proposed response to mortgage crisis **URL:** \ **Category:** Great Debates\ **Created:** [March 6, 2008, 10:05pm UTC](https://boards.straightdope.com/t/proposed-response-to-mortgage-crisis/440382 "2008-03-06T22:05:57Z")\ **Posts on this page:** 20\ **Page:** 2
**Author:** ![Shagnasty](https://avatars.discourse-cdn.com/v4/letter/s/9dc877/32.png) [@Shagnasty](https://boards.straightdope.com/u/Shagnasty)\ **Post date:** [March 7, 2008, 1:43am UTC](https://boards.straightdope.com/t/proposed-response-to-mortgage-crisis/440382/21 "2008-03-07T01:43:41Z")
What about the people that wanted to buy a house and couldn’t because they were too expensive because of bubble market conditions? Why don’t most people look at the flip-side as an opportunity for them? The responsible homeowners of the current crop are overwhelmingly keeping their homes. Let that bubble burst and give the newlyweds a chance of buying instead of renting an apartment for years on end because someone wants to protects the misdeeds and pain of bodies that should have known what they were getting into. No one needs to be protected during this. My wife and I bought a house during the middle of this bubble but did it very responsibly and we are more than fine now. That isn’t a magic spell and anyone should have followed the philosophy. That is the way markets work. Someone may endure pain because of poor choices or simple bad luck but there are others on the other side that might be given an opportunity because of it. The movie Airplane has an appropriate quote from a fictional reporter: “They knew the risks when they got on the plane. I say let them crash.” ---
**Author:** ![begbert2](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/begbert2/32/3357_2.png) [@begbert2](https://boards.straightdope.com/u/begbert2)\ **Post date:** [March 7, 2008, 1:46am UTC](https://boards.straightdope.com/t/proposed-response-to-mortgage-crisis/440382/22 "2008-03-07T01:46:59Z")
[QUOTE=Shagnasty] What about the people that wanted to buy a house and couldn’t because they were too expensive because of bubble market conditions? Why don’t most people look at the flip-side as an opportunity for them? The responsible homeowners of the current crop are overwhelmingly keeping their homes. Let that bubble burst and give the newlyweds a chance of buying instead of renting an apartment for years on end because someone wants to protects the misdeeds and pain of bodies that should have known what they were getting into. No one needs to be protected during this. My wife and I bought a house during the middle of this bubble but did it very responsibly and we are more than fine now. That isn’t a magic spell and anyone should have followed the philosophy. That is the way markets work. Someone may endure pain because of poor choices or simple bad luck but there are others on the other side that might be given an opportunity because of it. The movie Airplane has an appropriate quote from a fictional reporter: “They knew the risks when they got on the plane. I say let them crash.” [/QUOTE] Seconded. I want the housing market to drop back to pre-bubble levels, perhaps a _little_ higher (inflation and all). Artificially propping things up just forcibly keeps me out of the market. (Well, that and not wanting to have to mow a lawn.) ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [March 7, 2008, 5:33am UTC](https://boards.straightdope.com/t/proposed-response-to-mortgage-crisis/440382/23 "2008-03-07T05:33:41Z")
A few years ago ,it was required that a person put 20 percent down on a house. Then later it became 10 . The ability of the borrower to pay was heavily scrutinized. It was not easy to get a loan. It changed but it was not the borrowers who made this condition possible. This whole mess is a creation of a greedy short sighted industry making a killing. The bailout will come. It will help the corporations. They will get saved for their malfecience. ---
**Author:** ![Gangster\_Octopus](https://avatars.discourse-cdn.com/v4/letter/g/a8b319/32.png) [@Gangster\_Octopus](https://boards.straightdope.com/u/Gangster_Octopus)\ **Post date:** [March 7, 2008, 5:40am UTC](https://boards.straightdope.com/t/proposed-response-to-mortgage-crisis/440382/24 "2008-03-07T05:40:51Z")
BTW, someone mentioned above that they needed to pull backthe reins on lending. Trust me, they have. I just signed loan papers on my first house and getting the loan was not easy. ---
**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\ **Post date:** [March 7, 2008, 6:03am UTC](https://boards.straightdope.com/t/proposed-response-to-mortgage-crisis/440382/25 "2008-03-07T06:03:37Z")
[QUOTE=Dinsdale] Am I incorrect in believing that both parties brought their problems upon themselves? The borrowers sought to finance homes under terms they could not meet, and lenders extended credit to folks who were unlikely to be able to satisfy the terms. [/QUOTE] Most people are specialists in production and generalists in consumption. A lot of the borrowers were scammed by middlemen who wrote an inherently unsustainable loan, sold the loan to naive investors, then pocketed their fee. As the late and lamented expert Ned Gramlich asked: “_Why are the most risky loan products sold to the least sophisticated borrowers? The question answers itself — the least sophisticated borrowers are probably duped into taking these products… the predictable result was carnage._” Those who permit these shucksters to continue to lead comfortable lives after making loans with no reasonable fiduciary basis should be punished. We do that to protect the market. I challenge those who think the solution lies with _caveat emptor_ and all that to show me an example where curbs on unscrupulous business practices resulted in disaster. Sure, conservatives _predicted_ disaster the SEC was established. But history shows that to have been pure hysteria. > [@Cheesesteak](#): > > I’m not looking to prop up the prices, I’m thinking more of easing the fall. Prices are at unsustainable levels, as shown by price/rent ratios. Actually, I’d prefer that they approach their equilibrium faster, rather than slower. But that doesn’t mean that mean that a forced easing of mortgage terms wouldn’t be appropriate. ---
**Author:** ![Cheesesteak](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cheesesteak/32/3694_2.png) [@Cheesesteak](https://boards.straightdope.com/u/Cheesesteak)\ **Post date:** [March 7, 2008, 1:17pm UTC](https://boards.straightdope.com/t/proposed-response-to-mortgage-crisis/440382/26 "2008-03-07T13:17:55Z")
[QUOTE=ivylass] In other words, 98-99% of mortgages are just fine. [/QUOTE] Not exactly true. From the [LA Times](http://www.latimes.com/news/nationworld/washingtondc/la-fi-foreclose7mar07,1,2986355.story) 2% of loans are in foreclosure, and an additional 6% are behind in their payments. This rate may be manageable, today, but it’s been going up over time, and doesn’t show signs of stopping. My point is, don’t wait until we hit unmanageable levels before taking steps to control the problem. We can take modest steps today to prevent disaster, and we could have taken even more modest steps 5 years ago, but it’s too late for that. I don’t want to sit for 12 more months, then look back at today and wish we had done something before it got _really_ bad. ---
**Author:** ![Dinsdale](https://avatars.discourse-cdn.com/v4/letter/d/97f17d/32.png) [@Dinsdale](https://boards.straightdope.com/u/Dinsdale)\ **Post date:** [March 7, 2008, 1:41pm UTC](https://boards.straightdope.com/t/proposed-response-to-mortgage-crisis/440382/27 "2008-03-07T13:41:11Z")
[QUOTE=Cheesesteak] Personally, I’m not interested in destroying the economy in order to teach people a lesson about fiscal conservatism. [/QUOTE] Well, I don’t know much about economics, but I have a hard time seeing what is all so fantastic about the current US economy that it needs to be preserved in its current state. An unstable financial community developed to encourage more and more people to own single family homes, because construction of American homes was one business that remained in America. So we build homes larger than anywhere else in the world, in distant ex-urbs requiring greater use of fossil fuels. Meanwhile, industries are sending jobs overseas, and businesses and governments are selling off assets to prop up current expenditures. To stimulate the economy, the government proposes handing out cash, and encouraging folks to immediately spend it on (most likely foreign made) consumer goods. So what is so all-fired great about our current economy that it needs to be propped up, other than that it allows us all to have huge quantities of “stuff”? I would be happy to sustain a present correction, if it would lead to a more sustainable economy and lifestyle for my kids and grandkids. Instead, we seem bent on propping up a house of cards. ---
**Author:** ![LonesomePolecat](https://avatars.discourse-cdn.com/v4/letter/l/a88e57/32.png) [@LonesomePolecat](https://boards.straightdope.com/u/LonesomePolecat)\ **Post date:** [March 7, 2008, 2:18pm UTC](https://boards.straightdope.com/t/proposed-response-to-mortgage-crisis/440382/28 "2008-03-07T14:18:18Z")
Bear in mind a lot of foreign investors got burned in our mortgage crisis, which makes America less attractive to foreign investors. If our real estate and housing markets turned out to be a hollow shell, what other Potemkin villages have we got going over here? ---
**Author:** ![An\_Arky](https://avatars.discourse-cdn.com/v4/letter/a/87869e/32.png) [@An\_Arky](https://boards.straightdope.com/u/An_Arky)\ **Post date:** [March 7, 2008, 2:24pm UTC](https://boards.straightdope.com/t/proposed-response-to-mortgage-crisis/440382/29 "2008-03-07T14:24:44Z")
I’m irrational about this, but when I see dumbasses that make like one third I do living upside down in houses 3 times as big, I tend to say damn the economy and let them swing. I really, really get pissed when these dumbasses fvck up my house value (both up and down) and retirement savings with their dumbassery enabled by the sheer evil of mortgage lenders. Up against the wall, the lot of them; I don’t care If I have to eat wormy hard tack for the next twenty years, as long as the dumbasses and evil lenders (not to mention day-trading bad actors in the stock market) are completely disabused of ever fvcking with my money again. ---
**Author:** ![Spoke](https://avatars.discourse-cdn.com/v4/letter/s/a88e57/32.png) [@Spoke](https://boards.straightdope.com/u/Spoke)\ **Post date:** [March 7, 2008, 4:39pm UTC](https://boards.straightdope.com/t/proposed-response-to-mortgage-crisis/440382/30 "2008-03-07T16:39:01Z")
Ask not for whom the bell tolls… [63,000 lost jobs in February.](http://abcnews.go.com/Business/Economy/story?id=4407470&page=1) This crisis will not just be affecting those _foolish_ homebuyers some of you love to deride. ---
**Author:** ![Wee\_Bairn](https://avatars.discourse-cdn.com/v4/letter/w/90db22/32.png) [@Wee\_Bairn](https://boards.straightdope.com/u/Wee_Bairn)\ **Post date:** [March 7, 2008, 4:44pm UTC](https://boards.straightdope.com/t/proposed-response-to-mortgage-crisis/440382/31 "2008-03-07T16:44:44Z")
If you bail people out of bad home loans, why stop there? Why not bail them out of bad car loans, or credit card deals? I was smart enough not to get a house out of my means, my friend wasn’t, now he gets rewarded for a stupid decision? Bull jive. Its not the government jobs to help stupid people or people who took a risk and lost. ---
**Author:** ![gonzomax](https://avatars.discourse-cdn.com/v4/letter/g/e8c25b/32.png) [@gonzomax](https://boards.straightdope.com/u/gonzomax)\ **Post date:** [March 7, 2008, 4:59pm UTC](https://boards.straightdope.com/t/proposed-response-to-mortgage-crisis/440382/32 "2008-03-07T16:59:38Z")
If you bail corporations out that caused this mess,how do expect them to learn. They will bail out the companies,not the people. Mismanagement is the hallmark of American capitalism. No amount of poor management will be punished . Top executives get huge salaries and bonuses as the company cuts down to pay off its losses. People who received mortgages were told by the companies that they could afford them. They were told by people in the industry who were supposed to be professionals . They were educated and in the field. Yet they spent a lot of time trying to sell borderline mortgages. Quit blaming the people. ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [March 7, 2008, 5:50pm UTC](https://boards.straightdope.com/t/proposed-response-to-mortgage-crisis/440382/33 "2008-03-07T17:50:23Z")
[QUOTE=spoke-] Meanwhile, [people are maxing out their credit cards to stay current on their mortgages.](http://abcnews.go.com/Business/Economy/story?id=4401032) [/QUOTE] As well as [tapping their 401k’s](http://ap.google.com/article/ALeqM5jifxziSyNcXOBFxvMj5ujFPFWheQD8UTJE806) > [@](#): > > Great-West Retirement Services, the unit of a Colorado-based insurance company that manages 3.5 million accounts for employers, said hardship withdrawals jumped 14 percent last year, and the number of loans rose almost 13 percent, with a dramatic increase occurring in the fourth quarter. > > Fidelity Investments, which jockeys with Vanguard Group as the nation’s largest mutual fund provider, said it saw withdrawals surge 17 percent in 2007, with record withdrawals in December, but a smaller increase in loans. Vanguard saw no change. > > “What we’re talking about is people spending their retirement now and lowering their standard of living when they retire … People aren’t willing to make some of the tougher choices in the short-term to make a better future for themselves,” said Stuart Ritter, a certified financial planner with T. Rowe Price. This economy will collapse when all the equity, savings and credit available to consumers has been exhausted. We can no longer grow by spending only what we earn. ---
**Author:** ![Mosier](https://avatars.discourse-cdn.com/v4/letter/m/7ea924/32.png) [@Mosier](https://boards.straightdope.com/u/Mosier)\ **Post date:** [March 7, 2008, 5:58pm UTC](https://boards.straightdope.com/t/proposed-response-to-mortgage-crisis/440382/34 "2008-03-07T17:58:54Z")
When Alan Greenspan is telling you that the mortgage you just got is perfectly safe, I don’t see why it’s unreasonable to assume that your mortgage is perfectly safe. There’s nothing foolish about getting an adjustable rate mortgage when even the top economic minds of the world don’t see a problem with it. Instead of this rapid decline in home prices driving so many people into the poorhouse, wouldn’t we rather see a solution that kept home prices stable? I have a traditional home loan that I can afford, but it really sucks that the house I bought 3 years ago is worth 20% less than I owe. The government should be (and already is!) looking for ways to stabilize housing prices, and I don’t see anything wrong with that. The banks survive, the borrowers survive, and everyone is a little bit wiser in the process. That is, presuming an answer exists, and that we can find it. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [March 7, 2008, 6:08pm UTC](https://boards.straightdope.com/t/proposed-response-to-mortgage-crisis/440382/35 "2008-03-07T18:08:53Z")
[QUOTE=gonzomax] A few years ago ,it was required that a person put 20 percent down on a house. Then later it became 10 . The ability of the borrower to pay was heavily scrutinized. It was not easy to get a loan. It changed but it was not the borrowers who made this condition possible. This whole mess is a creation of a greedy short sighted industry making a killing. The bailout will come. It will help the corporations. They will get saved for their malfecience. [/QUOTE] No, the corporations are suffering the worst penalty known to man - some execs won’t get their bonuses. I think a 10% down rule (or some large amount of money, whichever is less) would help a lot in keeping things rational. The same should go for home equity loans - only loan to get things up to 90%, at most. That would decrease prices somewhat, but wouldn’t affect people already in houses. As for the crash making houses affordable - I can’t afford a Bentley either, but I don’t want a Depression to arrive to depress prices enough so that I can. The problem with destroying the economy in order to save it is that a lot of people who’d theoretically be able to afford a house will be out of work or have their income cut, and so wouldn’t anyhow. ---
**Author:** ![spifflog](https://avatars.discourse-cdn.com/v4/letter/s/c5a1d2/32.png) [@spifflog](https://boards.straightdope.com/u/spifflog)\ **Post date:** [March 7, 2008, 6:11pm UTC](https://boards.straightdope.com/t/proposed-response-to-mortgage-crisis/440382/36 "2008-03-07T18:11:25Z")
[QUOTE=gonzomax] People who received mortgages were told by the companies that they could afford them. They were told by people in the industry who were supposed to be professionals . They were educated and in the field. Yet they spent a lot of time trying to sell borderline mortgages. Quit blaming the people. [/QUOTE] Let’s not stop there. Let’s bail out the guy who was told by his stock broker that Enron was a great deal. For most people, buying a house will be the greatest single financial investment they will ever make. They should treat it as such. No one put a gun to their head to buy these homes that they fundamentally could not afford. There’s a thing called personal responsibility in this country. Or at least there used to be. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [March 7, 2008, 6:13pm UTC](https://boards.straightdope.com/t/proposed-response-to-mortgage-crisis/440382/37 "2008-03-07T18:13:52Z")
[QUOTE=gonzomax] If you bail corporations out that caused this mess,how do expect them to learn. They will bail out the companies,not the people. Mismanagement is the hallmark of American capitalism. No amount of poor management will be punished . Top executives get huge salaries and bonuses as the company cuts down to pay off its losses. People who received mortgages were told by the companies that they could afford them. They were told by people in the industry who were supposed to be professionals . They were educated and in the field. Yet they spent a lot of time trying to sell borderline mortgages. Quit blaming the people. [/QUOTE] On NPR yesterday was the interesting finding that 20% of the mortgages in minority neighborhoods were subprime, as opposed to about 4% in regular ones. The person I heard said that the incomes of the borrowers could not explain this, and that a lot of people in these neighborhoods were steered to subprimes when they qualified for regular ones. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [March 7, 2008, 6:16pm UTC](https://boards.straightdope.com/t/proposed-response-to-mortgage-crisis/440382/38 "2008-03-07T18:16:07Z")
[QUOTE=spifflog] Let’s not stop there. Let’s bail out the guy who was told by his stock broker that Enron was a great deal. For most people, buying a house will be the greatest single financial investment they will ever make. They should treat it as such. No one put a gun to their head to buy these homes that they fundamentally could not afford. There’s a thing called personal responsibility in this country. Or at least there used to be. [/QUOTE] The stockbroker didn’t know the truth. A better analogy was the execs of Enron who said it was a great investment when they knew it wasn’t. Some of them went to the slammer. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [March 7, 2008, 6:18pm UTC](https://boards.straightdope.com/t/proposed-response-to-mortgage-crisis/440382/39 "2008-03-07T18:18:32Z")
[QUOTE=Fear Itself] As well as [tapping their 401k’s](http://ap.google.com/article/ALeqM5jifxziSyNcXOBFxvMj5ujFPFWheQD8UTJE806)This economy will collapse when all the equity, savings and credit available to consumers has been exhausted. We can no longer grow by spending only what we earn. [/QUOTE] And maybe the execs who see their sales falling as a result of building up their profits and minimizing wages will finally get a clue. I only wish the retail market had crashed four years ago, when it wouldn’t have been as serious. ---
**Author:** ![Measure\_for\_Measure](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/measure_for_measure/32/557_2.png) [@Measure\_for\_Measure](https://boards.straightdope.com/u/Measure_for_Measure)\ **Post date:** [March 8, 2008, 4:57am UTC](https://boards.straightdope.com/t/proposed-response-to-mortgage-crisis/440382/40 "2008-03-08T04:57:15Z")
[QUOTE=Dinsdale] Well, I don’t know much about economics, but I have a hard time seeing what is all so fantastic about the current US economy that it needs to be preserved in its current state. … I would be happy to sustain a present correction, if it would lead to a more sustainable economy and lifestyle for my kids and grandkids. [/QUOTE] In 1929-30, commentators talked of a welcome spell of liquidation, all the better to pave the way for growth on a more solid basis. It made intuitive sense. Yet for some reason, businesses just kept … liquidating. We really don’t need another Great Depression. At the time macroeconomics had not been invented: that would happen in 1936, when Keynes published the General Theory of Employment Interest and Money. Aside from that, the experience of the 1930s shows that puritanical stances towards the economy can lead to great unpleasantness. A more focused approach is prudent. The economist and macroeconomic textbook author Alan Blinder endorses plans to establish [a Home Owners’ Loan Corporation](http://www.nytimes.com/2008/02/24/business/24view.html?_r=1&ref=business&oref=slogin) to deal with the mass foreclosure crisis. The idea merits attention and discussion. However. The goal of such an operation should not be to maintain housing prices artificially sustained by fraud and the suspension of sound business practice. [Previous page](https://boards.straightdope.com/t/proposed-response-to-mortgage-crisis/440382.md?page=1) [Next page](https://boards.straightdope.com/t/proposed-response-to-mortgage-crisis/440382.md?page=3)