The economy - should anyone feel guilty?

I’m not saying any single individual or one eaily identifiable group is responsible for the current economic difficulties, but I’m wondering if anyone feels like they did anything wrong and contribiuted to the mess - at least more than the average consumer/borrower/lender/financial marketeer.

Do the folks who took out mortgages that they should have known they had little chance of repaying, acknowledge that fact? Or do they feel they were screwed by buig business?

Do execs taking $100 million retirements watching their companies face governmental takeover feel that perhaps they did not deserve every penny of their wealth?

Do the shops that aggressively identified subprime mortgage candidates feel they were doing anything other than pursuing capitalism?

Just wondering. Any thoughts?

I don’t have any reason to feel guilty, but I am sort of privately blaming my little sister for this whole mess and think she should feel guilty. She and her husband are poster children for the whole mortgage thing, exactly fitting the description Bush gave last night of people taking loans for amounts they had no hope of repaying, thinking they could re-finance but never making a single payment on time. Then they abandoned the house.

Does she feel guilty? No. She feels victimized.

Apparently my brother has declared bankruptcy and my other sister was close but got a better job to help out. The brother should feel guilty too and so should my sister’s husband.

How about the dual-income couples who PLANNED to go bankrupt? In homestead states, they planned to keep their houses.
These people are no better than thieves.
But most of them see nothing wrong in this.

Paulson is worth 700 million. He shows no regret. If he believes ,he should offer the first 300 or 400 million.

My husband and I have been debating this issue for a while now. I think there are multiple answers. First, I think that the lenders should not be lending to people whose incomes are insufficient to sustain the adjustable part of the loan. Secondly, people should be able to figure out for themselves that they can’t afford a mortgage. For the most part, the lender is the one who holds the control, and they should save stupid people from themselves, so I have to put more blame in their lap. It seems to me that back in the day, there were much tighter standards and people didn’t jump into home ownership until they were truly ready.

I agree completely with this.

I remember buying my first house in the early 1990s. Granted, my household income was pretty low at the time, but we weren’t living in poverty or anything. We had to jump through hoops to buy a very modest house. I remember really having to go through a lot of trouble to get that mortgage.

Fast forward to the late 1990s and 2000s, and suddenly getting a mortgage was like buying candy. Yes, we had more income, but the mortgages they were approving us for had monthly payments that were WAY out of our ability to pay. They were approving us for homes that were two to three times the money that we figured we wanted to spend.

Unfortunately, I think a lot of people assume that if the bank says they can afford it, they can afford it. Yes, they should be smarter than that… but I think it’s been proved that a lot of people aren’t.

I think a lot of the blame falls on both lenders and realtors. I’m a realtor in northern Virginia, but spent most of the last boom working for sellers instead of buyers. I’m not an average realtor in that I do it part time, and will only work with one buyer and one seller at a time. I do this so that I can focus on my customers without running out of time for myself and my family.

One situation I ran into towards the end of the boom on a regular basis was that of a young immigrant couple, usually hispanic, who were being shuffled into no money down or interest only types of loans by their hispanic realtor and his hispanic lender (or aisan realtor/lender, or middle eastern, or whatever - the nationalities change, but not the setup). There was more than one transaction that I saw or participated in where I wondered how exactly the folks expected to repay the loan. And therein lies the rub: they didn’t really know themselves.

Instead, this couple that spoke very little English (more than 80% of my transactions required an interpreter for the buyer) being told by someone speaking their language not to worry about it, or quite possibly not telling the client the truth. As a result, a lot of people were hooked up with loans that they couldn’t afford, often I suspect due to complicity between agents and lenders. I know personally of several agents who encouraged buyers to lie on thier loan apps in order to gain a loan.

Remember always: Realtors work on commision, and mortgage lenders get bonuses or commision on mortgages - they’re not in the business for YOU, they’re in it for THEM. The result is sometime like what we’re seeing now: A bunch of people got ripped off, and the shifty folks pocketed a lot fo money.

The bankers and realtors who helped set up and then sell the mortgages which they knew were bad should feel guilty, because they were instrumental in causing the problem.

The executives should feel guilt not just for maintaining the corporate attitude where it was encouraged, but also for getting obscenely rich off society’s loss.

Ultimately, though, the most blame comes down to the idiots who took out mortgages that logic said they could not afford in their current circumstances. Ownership of a house is not something you have a right to and it’s a big responsibility. If you just blindly believe the guy at the bank who says of course you can afford it and the interest rates will stay low, you’re not responsible enough to try to own a house. Of course they’ll try to convince you you can afford it, because that’s how they make their money, and you should know that.

And of course, the government, for deregulating, sitting back and watching this happen, and then deciding the best way to deal with it is to effectively punish taxpayers.

But don’t a lot of actors in high finance take actions simply because they stand to profit from it, with “guilt” and responsibility playing no role in their thinking before or after? For example, when someone forces a hostile takeover of a corporation that leads to the ultimate liquidation, do they even care whetheranyone will ever benefit or suffer from a result, so long as they make their cash in the short term? Heck, I can imagine arguing that as a matter of policy they ought NOT consider such things, as their primary responsibility is a fiduciary duty to their shareholders.

I’m not saying they SHOULD feel guilt or social responsibility - merely questioning whether the individuals who act on this stage are able to sleep soundly at night. Someone like Michael Milken or Ivan Boesky. Do they consider themselves anything different than conmen? I’m sure a lot of conmen have no guilt keeping them ip at night. But generally I would consider such a mentality antisocial.

In this instance, I can easily imagine a lot of high-fliers thinking that it was absolutely fine for them to do anything at all that they were not specifically prohibited from doing. If they are peddling crap, it is not their fault that they found folk stupid enough to buy it. And then that buyer repackaged it and passed it on to someone else, etc., etc.

Golden Rules of Mortgage lending were broken.

Lenders

Consistently overlooked were:

Credit Report and Scores (once used to decline the application, they merely became ‘suggestions’. For example, if the score was low, just go ahead and come up with wackier ‘Interest Only’ loan that dropped the monthly payment by 35 dollars. Yeah, that’s smart).

Income-to-debt ratios: I think the ceiling used to be 38% of gross income on mortgage and loans, but over 50% became normal.

Down Payment: Hmmm…let’s see, you’ve demonstrated that you can’t save even 5% down, so let’s do and 80/20 loan, wherein the 20% you put down comes from a LOAN! Brilliant.

Homeowners:

They had to have 42 inch plasma TVs while struggling to make their house payments.

They had to have a Garmin Navigation system while struggling to make their house payments.

Etc.

And…as I’ve suggested to other people who needed a coupla hundred bucks extra per month: CUT BACK…but they couldn’t even part ways with store bought coffee, take-out lunches and dinners out

OR, as I’ve suggested and was almost beaten by an angry mob when I did so: GET A SECOND JOB! WORK YOUR ASS OFF.

The last suggestion almost ended when I was almost killed for making it.

(A % of people will always lose their homes, because of circumstances beyond control, but too many now could have taken control and did not. Cutting back and hard work are almost crimes now – unspeakable crimes.)

The part that kills me is that people actually paid $350K for a cracker-box tract home that has a nice kitchen counter. I’m certain that I cannot squint my eyes tight enough to make my dad’s 1960 suburban Chicago ranch look worthy of that kind of price tag. However, the big problem wasn’t in Chicago; it was in CA and FL and TX. Did wages in those areas support the prices on some of these houses? Rehabbed or not, I simply cannot wrap my brain around the ultra-inflation and people’s willingness to buy these places.

I blame mortgage brokers and lax underwriting standards. People qualifying for loans where the bank took your word for it? I have a friend who used one of those loans to buy a place. He sold it right before the market tanked and somehow pulled it off, but he is the exception, most people I’ve met who used those loans have been foreclosed on.

The part that to me seems strange about the Interest only loans and ARMs is that the payments weren’t going to be that much less. The difference with the ARM was only maybe $60.00 a month. The Interest Only was maybe $100.00 a month. I just didn’t see what the big attraction was.

But it would be fine if they just kept them as under-capitalized mortgages. Then all the fallout would be between the banks who leant money unwisely and folks who over-leveraged themselves.

But as I understand it the real problems came when the whizkids in the back rooms started bundling and repackaging these mortgages, and selling them to other folk as more secure than they were. That’s how they ended up in your and my money market funds and IRAs.

Any sense of personal responsibility held by any of these people is being chipped away at daily by those who treat them as victims of “predatory” lending.

I wish more investigation could be done to expose this kind of thing, in the media or somewhere. I think it happened a lot more than we know, and it’s not well known because the “victims” (for lack of a better word) of this behavior won’t speak up out of shame or embarassment, or simply because they’re immigrants who don’t speak English very well. This isn’t the first such story I have heard. These mortgage brokers and real estate agents had huge dollar signs in their eyes, and just wanted to close the deal with uneducated naive homebuyers and be on their merry way. It didn’t matter what happened later on - the brokers and agents made their money with no negative repercussions whatsoever.

They should feel guilty, but I am sure they don’t. They should be held accountable, but I am sure they won’t.

Welby - it would be great if you could list some of your examples and give it to a local newspaper (The Washington Post, or Post columnist Marc Fisher) so someone could do an in-depth analysis of this type of situation. The greed of the middlemen needs to be exposed more.

This is how I understand it as well.

The cause of this crisis is misrepresentation. Banks rushed to make bad loans precisely because they could repackage them in a form which was completely unregulated and opaque. A form which was impossible to know the true value of.

And then they could sell them to someone else.

Because of the ability to seemingly unload the risk on someone else, banks felt the need to make more and more bad loans or be left behind.
So who should feel guilty?

The people who should have been regulating these mystery sales of what we now know to be valueless assets.

The banks who intentionally made bad loans so they could repackage them in an unregulated, mysterious form.
Since misrepresentation is the cause of the crisis, I don’t think homeowners should feel guilty unless they actually lied. If they told the truth, then they aren’t the ones that lied and caused the crisis.

Pretty much everyone involved shares some blame. But I do feel pity for the folks who could afford their mortgages even if it was a stretch but whose interest rates increased by a great amount, or who were snookered into interest only loans.

I blame the intrinsic greed of the capitalist system itself and its Corporate Fascist Engineers, Architects, and Overlords. Spercifically, The Republican party, its members, and the President that serves as its political arm.

Housing should be affordable and available to everyone. People shouldn’t be exploited for this basic need.

I’m not sure it’s as simple as everyone’s making it out to be. Yes, tons of folks got an gave loans they shouldn’t have, and I could feel smug for refiancing my ARM into a 30 year fixed at a good time, but credit relies on your earning power -right-now-…but what happens when the economy gets cranky and dials back your income?

Financial calculations are good, but they can’t predict the future, nor does your credit calculation include war, oil prices, or Enron.

Did people do some really shitty stuff? Sure, but i’ve also seen studys that indicate some of the most socially irresponsible folks GRAVITATE to management.

Here’s a snippet from an article from 5 years ago:

Seems to me that Barney (a Democrat) was dead wrong. And I think that policymakers with his attitude deserve some blame.