Interesting that they are trying to blame the Bush administration with the lack of regulation when it was Bush that tried to reel it in from 2003-on. The Bush administration kept yelling about the coming housing crash/bubble burst that was being ignored along with the lack of regulations being past by the democrat congress. It was the Clinton administration that pushed for the deregulation and the subprime loans to those who couldn't afford either.
And this guy is wrong on heavy regulation saves capitalism? No the fear of failure and freedom to fail is what saves capitalism!!! Allowing innovations saves capitalism.
We are heading down a long road of facism. Yes, the ideas and actions coming out of the Whitehouse are more aligned with Facism. Obama was right when he said he wasn't a socialist.
He was blaming the Bush Administration, but I also heard him say that Geithner and Summers were right there with Clinton and the Democrats in congress, supporting the repeal of regulations passed after the first great depression. Interesting that 10 years after those regulations were passed, we are in the position that we are in. I believe that he's right that things with the big banks are much worse than they are letting on, and the cover-up is to keep us all from panicking and making a run on the banks.
Regulations were in place to allow honest capitalists to thrive and succeed while keeping the frauds at bay. It's not the honest ethical hard working capitalist that's a problem, it's the one that has criminal intent to defraud a country. Those guys intentionally made loans to people they knew couldn't pay, then they bundled those loans into CDO's and put AAA rating on them, then sold them around the world. And AIG got into the act by selling guarantees on those fraudulent instruments with their CDS's. The government has been supporting AIG to funnel money through AIG with their CDS's to all those banks that bought the fraudulent CDO's from the likes of Indy Mac.
I'm not trying to let Clinton, Geithner, Summers, the Democrats in Congress, or Obama off the hook. Everyone INCLUDING the Republicans are complicit. These guys are ALL too close to Wall Street, and now the American Taxpayer is taking a big one up the poop chute.
Terry, did you listen to the whole think, or did you click stop the first time you heard the word Bush?
The aspect that he's missing is what the loan issuers viewed as the get out of jail card. Home prices were increasing at an unheard of rate and the expectation was that there would not be defaults because it would continue to be easy to flip the properties at a price that would pay off all loans. When prices began to stabilize and then fall, the gig was up and default rates began to shoot up -- for all mortgages, not just sub-prime.
And that was the folly. The real estate market is always cyclical. When prices reach a critical "ceiling", the numbers of people who can afford the higher prices diminishes. This kind of thing was seen in various parts of the country before ... California, for example, about 20 (?) years ago ... and here in my own area when an Interstate opened around 1987.Quote:
the expectation was that there would not be defaults because it would continue to be easy to flip the properties at a price that would pay off all loans.
Prices then stop rising; deflate to some point where the market again attracts buyers. We have seen this in my own area of PA. The prices don't usually go as low as when they started their increase, but they are significantly lower than the peak. When the prices get low enough, buyers are again attracted to buy, and prices begin to increase again due to demand.
The error in the actions being taken now is that the market prices (here in my area) have not yet reached their "natural" low. Sellers are still pricing their homes too high to sell in less than 120 to 180 days. The tax credit IS attracting first-time buyers, but that may serve to keep prices higher than they would be if the market were left alone.
Just as with gasoline when it went to $4/gallon ... or any other product that rises in price to the point where consumers will begin to limit their consumption. When that happens the prices begin to decline until consumers decide that they can afford to increase their consumption gradually.
I really believed that the "credit" should have remained an interest-free "loan" ... or maybe blend a smaller "credit" with a larger, repayable "loan".
There is also a bit of a "glitch", the first-time buyers get a break, but the sellers who are "moving up" don't have that same benefit. With conventional loans now requiring increasing down payments (30% up from 20% to get a reasonable interest rate), the sellers are wanting more for the house they are selling to the first-time buyer. The first-time buyer is figuring the tax credit into this scenario, and possibly paying more than they should.
Since the conventional mortages are requiring higher down payments, guess what? The number of FHA mortgages in our area has at least doubled in the past year. While FHA loans only require a minimum of 3.5% down, you can put down a higher amount. It didn't take a rocket-scientist to figure out that an FHA loan could be a better deal than a conventional loan even if you had a larger down payment ... like 10% of 15%.
OTOH, if the prices have not bottomed out yet; and if job layoffs continue, all of these loans could also end up in trouble in a couple of years.
Interestingly, the cycle here in my area didn't vary dramatically from the "historic" 7-year cycle. In 1993 the prices were still coming down gradually from the "peak" around 1988 or 1989. It was about 7 years later (1994, 1995) that the increase gradually began; then started to accelerate considerably around 2003-2004. The advent of easier credit changed the "up" cycle by a couple of years, but, as we have found, it was "artificial". Prices peaked toward the end of 2006, and have been "softening" since then. By the beginning of 2008, the number of Realtors® in our local association had decreased by 1/3.
This is better coverage of the problem:
THESE ARE THE PEOPLE WE HAVE RUNNING OUR COUNTRY!