Since our current economic problems seems to be a repeat of a previous Savings and Loan catastrophe in the past, what do we need to learn and do to prevent this from ever happening again? M

Villains in the Mortgage Mess?
Start at Wall Street. Keep Going.

By Kathleen Day
Sunday, June 1, 2008; B01

Go to this link to read the entire article:
Villains in the Mortgage Mess? Start at Wall Street. Keep Going. - washingtonpost.com

Yes, the executives at Countrywide Financial Corp. planned a top-dollar shindig at a ski resort earlier this year, just after the bank's multibillion dollar losses on subprime mortgages required a shotgun marriage to Bank of America. (A Wall Street Journal story forced them to cancel the party.) And sure, Bear Stearns chief executive James E. Cayne was off playing golf last summer as two of his investment bank's hedge funds collapsed under gargantuan subprime losses. (He's been dumped.)

But so far, the current mortgage meltdown hasn't featured the crasser displays of the 1980s savings and loan fiasco, when executives partied hearty -- one banker famously dressed up as a king and served lion meat to his guests -- as they created a mortgage industry mess that cost taxpayers more than $500 billion.

As a reporter for this newspaper, I covered the savings and loan debacle in depth and later wrote a book about it. Watching the current crisis unfold, I see much of the same behavior that led to the "S&L Hell" of two decades ago. Indeed, some of the fixes for the last problem led directly to this one. Once again, too many people had access to other people's money with too little oversight. Once again, the White House, Congress and federal bank regulators failed to police the financial services industry because they mistook deregulation for a system without any reasonable rules. And now as then, our saga is chock-a-block with people and institutions deserving special mention in the Suprime Hall of Slime.

But make no mistake: Today's crisis dwarfs the S&L fiasco. The eventual cost to taxpayers of this scandal is likely to make yesteryear's culprits look like pikers.

The short version of how we got here: Lenders, fat with money made cheap by the federal government, aggressively coaxed millions of borrowers to take out unaffordable mortgages. They lent this money without assessing whether borrowers could repay it. They assumed, in fact, that most wouldn't be able to and would have to refinance into new, equally unaffordable loans. This process would produce an endless cycle of fees for the lenders -- but only if home prices rose, fairy-tale-like, forever.

On what planet would that be an acceptable business plan?
(Go to link for the long version, more detailed description).

Bump

This is actually a critical issue. Learning from our mistakes on the housing bubble bursting is essential for not making future mistakes along the same lines.

Considering my career is entirely dependent on recovering the market to normal levels, yes, critical indeed!

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Memo to DC:
Quit screwing around and get it done, I don't care whose idea it was.
Right and wrong are obvious, as are ethics.
Do what we've hired you to do and lead.
Shut up and fix things. Now.

The short version of how we got here: Lenders, fat with money made cheap by the federal government, aggressively coaxed millions of borrowers to take out unaffordable mortgages. They lent this money without assessing whether borrowers could repay it. They assumed, in fact, that most wouldn't be able to and would have to refinance into new, equally unaffordable loans. This process would produce an endless cycle of fees for the lenders -- but only if home prices rose, fairy-tale-like, forever.

On what planet would that be an acceptable business plan?

Not this planet. Some people want total deregulation as if we have a free market economy. We don't. There is a need for regulation to the degree necessary to keep the loan sharks in line. They should not have the right to ruin the entire economy for everyone all for the sake of their GREED.

My boss, who's pretty smart when it comes to money management, said that when she was house hunting, was being pressured by the realtor to buy a home that cost more than she felt she could afford.

She resisted the pressure.

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January 20, 2009 - The end of an error.

Wait, you mean companies would actually pressure potential customers to spend as much of their money as possible? Noooooooo. Couldn't be. I mean, the strategy of every for-profit company should be only to sell people that which they can afford, regardless of what they're willing to spend...... /sarcasm.


Nobody ever wants to place the blame where it belongs: ON THE BORROWERS. Nobody made them take the loans, they made choices and those choices have negatively impacted their lives. It is not a Bank's job to only sell you what you can afford, it is a bank's job to be profitable; a job in which they failed by lending money to DEADBEATS. If you buy a $10k plasma tv, and you put it on 3 credit cards, is it the retailer's job to stop you from buying it? I thought not. Stop trying to blame lenders for the personal failings of borrowers and accept the fact that some people were simply not meant to own homes.

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"Timid men prefer the calm of despotism to the tempestuous sea of liberty." - Thomas Jefferson

"Truth is treason in the empire of lies." - Ron Paul

No, the banks are not entirely blameless. They chose to make loans to people with poor credit histories. If they had been more picky about who they loaned money to, there might not be as much of a mess as we have now.

Everybody involved, not just the borrowers, has a responsibility to make responsible decisions. Some financial institutions and mortgage brokers were just as irresponsible as some borrowers.

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January 20, 2009 - The end of an error.

I don't want to get into the blame game. I just would like to see us get smart enough to prevent this from ever happening again. Blaming this 100 percent on the borrowers is denial of the basic problem. It is like putting a group of little kiddies in a room with a big cookie jar with the lid off and expect them not to go grab a cookie. The loans were not only being offered, they were the preferred type of loan of lending agencies because of the potential for longterm, high interest rate entrapment of customers.

Ultimately you have to credit that there are some critical factors that will impact everyone with a recessession. This is in the same category as the stock brokers buying and selling oil to make a profit and jacking up the price of gas at the pump to DOUBLE causing runaway inflation and national economic hardship. There are limits to GREED that must be imposed.

I agree. The past few years, what we've seen in this country is a greed is good mentality, to the detriment of a lot of people.

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January 20, 2009 - The end of an error.

The villains are the deregulators = the Republicans.

One villain is McCain's economic advisor, Phil Graham, a guy McCain would appoint to Treasury secretary.



If that's not a good enough reason to vote against McCain, I don't know what is.

McCain economic policy shaped by lobbyist - Countdown with Keith Olbermann - MSNBC.com

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