I think you are off base saying that ´democrat´ voices are limited here. I have been fighting here for months without any posts being deleted or edited. You are missing the entire point...of course banks thought it was profitable to lend to low income borrowers, because they knew the gov´t had their back. The way things were set up, the banks were, in a small sense, gambling with someone else´s money. Everything should be determined by risk vs reward, and if that were true, the banks would have not been so free with lending.. however, because the gov´t took away some of the risk, and the regulations were so lose with secondary markets, they knew that their downside risk was limited ( 1999-2005ish). The reasons Clinton pushed for housing for everyone was accurate, and it was a good policy. You are correct in your reasons.. people with homes are more likely to work, more likely to care for their neighborhood and feel pride. The problem was the regulations failed to cover the abuse, and that was people not buying their first home, but people buy 5 homes and trying to flip them.. or borrows or the banks finding ways to squeeze everything to the tipping point. But the biggest problem is that it was not phased in over time. The entire system should have had a 5-10 year ramp up, but instead the regulations changed overnight which created instance pressure on the demand side of things. And as I said, it is exactly what happened to the China stock market last year. They changed the margin regulations overnight, which created a frenzy of buying that fed on itself. As more people were able to successfuly flip houses early last decade, it made more and more people start buying houses trying to flip them also.
Better business people will pretty much always find a way to profit, to turn lemons into lemonade, so to speak, etc. I am of the belief that free markets work better than a big govt nanny state. I know more about my business than any politician. I think the federal government is pretty much useless beyond acting on the part of the taxpayers in matters of national defense, protecting our interests through sensible foreign policy, and protecting us from legit harm and fraud.
That's where the greed factored in. If I was a lender, I would assume that any loan I booked would be a loan I might be stuck with, which is the same principal I follow with any investment position I take - riskier positions are bought in smaller amounts, shorting is done very carefully, etc, etc. I would be aware at all times of such things as how much total $ I could withstand going bad at any time, etc.
I agree with your second comment.... but this is definitely a case where it wasn´t true. It was deregulation that allowed ´free markets´ to act they way they did last decade in the housing markets. The same thing with China right now. They deregulated or removed restriction on margin lending, which is what is the major cause of the meltdown there this month. ´free markets work better than nanny state´ breaks down a lot when you are talking about individuals within a corporation. AIG broke down completely because of a handful of people. A major bank in England went belly up because of a single employee. The technicalities of some of the trading methods are so complicated that they need to be regulated or every major finanical institution will be ´one employee´ away from filing bankruptcy. The same with margins in China. There needed to be someone telling them that you cannot have people ´gambling´ in the stock market with 95% of the money being borrowed money... just like you can´t have a person making $25k per year being able to mortgage a million dollar house with no money down. Employees within those companies just do not have enough skin in the game to control themselves...and greed will lead to what happened in the housing market or in china. I am not saying Al Gore needs to tell me how much water my toilet can hold.... but there does need to be some financial regulations in place or else you are going to constantly have rogue employees taking down huge companies.
I am very nervous that we are heading for another recession. I hope that is not the case because we are just finally starting to recover from the first one. It seems like all the conflict going on in the world is not doing anyone any good. Today I even saw that the Nasdaq took a steep down turn and I really started to panic. If the major stocks are doing horribly then chances are that the smaller ones will follow suit at some point.
No recession, just muddling along in a soft global economy. Some country sneezes, and other counties catch the sniffles. China sneezed, and the global central bankers are looking for some medicine to ward off spreading germs. Achoo...
Yes, I am concerned about the economy too. The stock market ups and downs and general volatility make it something to be concerned about for sure. I think that many people may be wondering where our economy is heading. It just seems to be one of the things we have to contend with in a volatile world.
