New Blog - The Republicrat

[tanouryjr]

therepublicrat.wordpress.com/

[frankcor]

This is a tough issue and I know one thing is certain -- I'm not smart enough yet to know which way is best.

Consumer advocates believe that banks need to assume some responsibility for the current credit/housing crisis. They pushed loans that people simply could not afford.

The banks' position is that they will never be able to attract private capital if judges can arbitrarily rip up a signed contract and devalue a loan that a bank has made. And this recession will not end until private capital starts moving into the market once again so the freakin' government (us) can move out.

[Swimmy]

Here is my take:
1. banks are stupid and should be forced into bankruptcy
2. homeowners are stupid and should be forced into bankruptcy.

The banks knew these loans were high risk and knew they were approving them for people who simply could never repay them, the numbers don't lie! Therefore, they should receive NO tax money and be forced to re-organize, like the air lines do on occasion.

The homeowners are stupid for thinking that a variable rate mortgage meant that the rate would stay the same, or they would have flipped it before the rate increased. Homeowners are even more stupid for thinking they could afford a $200k home on a meager $30k salary! I don't care what kind of tactics the stupid banks used to sway your decision making powers. You're stupid for thinking you could afford it, period!

Let the banks go bankrupt and have the foreign banks move in because most of the "bail out" scam is going to them anyway!

Let the homeowners learn to take responsibility for their acts, just like I had to when I was 3. Enabling these idiots is what is killing our country's strength! Rome caved from within, Greece caved from within, Russia caved from within, we are caving from within! In a few years, the US will NO LONGER be a super power.

Look at what the Chinese are already saying. No one seems to care that if they call in their debts, the US will have to auction its land to pay off its debts.... And China is already saying that it is worried about its investments in our debt!

[dgriffin]

Not that simple.

Read, "The Government-Created Subprime Mortgage Meltdown," at:

www.lewrockwell.com/dilorenzo/dilorenzo125.html

I have read similar descriptions from both sides of the political spectrum.

"The thousands of mortgage defaults and foreclosures in the "subprime" housing market (i.e., mortgage holders with poor credit ratings) is the direct result of thirty years of government policy that has forced banks to make bad loans to un-creditworthy borrowers. The policy in question is the 1977 Community Reinvestment Act (CRA), which compels banks to make loans to low-income borrowers and in what the supporters of the Act call "communities of color" that they might not otherwise make based on purely economic criteria.

Consequently, banks in every community in America have been forced to hold a portfolio of bad loans, euphemistically referred to as "subprime" loans. In order to compensate themselves for the added risk of extending these loans, many lenders have increased the lending fees associated with mortgage loans. This is simply an indirect way of doing what banks always do – and what they must do to remain solvent: charging effectively higher rates of interest on riskier loans."

[frankcor]

But Barney Frank says it's not the government fault. He wouldn't lie, would he?

Dave, thanks for the link.

I'm afraid I have to agree with swimmy -- the banks must be allowed to go bankrupt. Stronger, more efficient banks will rise from their ashes. The cost will be great. But the cost will be even greater if we don't allow the market forces to play things out.

[Ralph]

Got to agree with Swimmy on this one.

Having worked at an agency that focused on "low income" - subprime style folks, I have to echo that those that borrowed and couldn't afford it should sink.

Most programs that offer access to such sub-prime loans offer much counseling and education on how to manage money and repair credit. When the advocate to financial institutions in favor of these folks for mortgages, they do so knowing what can be afforded and what cannot.

Folks that went for broke so to speak are doing just that and should suffer the consequences.
Banks that facilitated their demise should go down the same road.

[dgriffin]

I don't disagree that the offenders should pay for their errors. I don't know of anyone who thinks they should not, be they clueless borrowers or seedy bankers who still want their bonus checks.

And I don't know enough about economics to say whether the best way to prevent the economic system from imploding is to bail out the banks (and borrowers) or to let them go bankrupt. The only question in my mind is how to prevent an economic catastrophe that will effect us all, not who deserves what punishment.