PeakTrader.com

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PeakTrader:

Max, government was reckless in buying increasingly more subprime loans from banks, to keep fueling the cycle.

So, what did you expect?

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A subprime loan is a loan a bank wouldn’t normally make, and banks certainly wouldn’t make many of them.

However, they were promoted by Congress, e.g. Barney Frank and Chris Dodd, and guaranteed by the government, i.e. Fannie and Freddie.

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Max says: “…the simplest dispatch of this phony argument is to merely ask how commercial real estate followed the same path.”

The government promoted increasingly riskier loans, increasing demand for houses and driving-up housing prices. Huge increases in home prices raised income and increased demand, which also fueled a commercial real estate bubble.

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Some people sold their homes for huge gains, there was “house-flipping,” and many refinaced and took some equity out.

Are you assuming banks decided to go hog wild making risky loans on their own?

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Question: Are you assuming banks decided to go hog wild making risky loans on their own?

Max’s reply: “Of course they did. You know, your question itself just shows how people readily accept anything they’re fed as a “Truth”.”

So, the propaganda you’ve been reading led you to believe banks decided, on their own, it was a good idea to lend money to people who couldn’t pay it back.

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Bart:

Perhaps you don’t recall *special (drink the Kool Aid) moments* like this:

“As long as the music is playing, you’ve got to get up and dance.”
– Charles O. Prince, July 2007

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PeakTrader:

Bart, Citigroup avoided the dance, because it knew it would end in disaster.

However, it was forced to dance to compete, was late to the dance, and it lost the most.

Government throws very expensive dances.

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If you don’t believe me, maybe you’ll believe Mayor Bloomberg:

“I hear your complaints,” Bloomberg said. “Some of them are totally unfounded. It was not the banks that created the mortgage crisis. It was, plain and simple, Congress who forced everybody to go and give mortgages to people who were on the cusp.

Now, I’m not saying I’m sure that was terrible policy, because a lot of those people who got homes still have them and they wouldn’t have gotten them without that.

But they were the ones who pushed Fannie and Freddie to make a bunch of loans that were imprudent, if you will. They were the ones that pushed the banks to loan to everybody. And now we want to go vilify the banks because it’s one target, it’s easy to blame them and Congress certainly isn’t going to blame themselves.”

Michael Bloomberg is an American businessman and politician who is currently Mayor of New York City. With a net worth of $25 billion. He is the founder and 88% owner of Bloomberg L.P., a financial data-services firm.

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http://www.aei-ideas.org/2012/10/real-estate-news-mortgage-applications-refinancing-activity-are-rising-rental-vacancy-rates-fell-to-a-10-year-low-in-q3/#comments

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PeakTrader:

Government created the housing bubble.

Private lending institutions knew they’d be, ultimately, bailed-out, whether they were high-end or low-end loans, which they were through TARP and the Fed buying mortgage securities.

Government created, and increasingly facilitated, the moral hazard that allowed those lending institutions to make riskier and greater loans.

Also, it’s wrong to blame the Fed for policies or laws created by Congress, which the Fed must obey.

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http://www.aei-ideas.org/2012/11/us-homeownership-rate-falls-to-a-17-year-low-of-65-3-in-q3-as-homeownership-bubble-continues-to-deflate/#comments

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