Why are some people blaming homeowners for the financial crisis?
Factcheck.org lists all responsible for our current economic situation.
•The Federal Reserve, which slashed interest rates after the dot-com bubble burst, making credit cheap.
•Home buyers, who took advantage of easy credit to bid up the prices of homes excessively.
•Congress, which continues to support a mortgage tax deduction that gives consumers a tax incentive to buy more expensive houses.
•Real estate agents, most of whom work for the sellers rather than the buyers and who earned higher commissions from selling more expensive homes.
•The Clinton administration, which pushed for less stringent credit and downpayment requirements for working- and middle-class families.
•Mortgage brokers, who offered less-credit-worthy home buyers subprime, adjustable rate loans with low initial payments, but exploding interest rates.
•Former Federal Reserve chairman Alan Greenspan, who in 2004, near the peak of the housing bubble, encouraged Americans to take out adjustable rate mortgages.
•Wall Street firms, who paid too little attention to the quality of the risky loans that they bundled into Mortgage Backed Securities (MBS), and issued bonds using those securities as collateral.
•The Bush administration, which failed to provide needed government oversight of the increasingly dicey mortgage-backed securities market.
•An obscure accounting rule called mark-to-market, which can have the paradoxical result of making assets be worth less on paper than they are in reality during times of panic.
•Collective delusion, or a belief on the part of all parties that home prices would keep rising forever, no matter how high or how fast they had already gone up.
http://www.factcheck.org/elections-2008/who_caused_the_economic_crisis.html
Laissez-Faire Guy – Did you read the article that I provided?
Bob, from all I have read, trickle down economics hasn’t worked and has created huge problems. The days of lenders with a conscience are long gone. The public is so quick to blame the homeowners while ignoring preditory lenders. They did everything in their power to write loans for poor people with bad credit. They even suggested ARMs for people whose credit was good enough for a fixed rate mortgage. They suggested interest only ARMs and other loans that I would never consider. Many people did not know any better, but the lenders knew what they were doing.
http://checksnbalances.blogspot.com/2007/05/predatory-lending.html
Jethro G – When we bought our home, we could have bought a more expensive home, but knew that we would be taking on too much if we did. The people who signed on the dotted line have contributed, but the lenders and lawmakers played a bigger part. At least, that’s the way it looks to me.
Zack Morris – LOL..Yes, I guess they do.
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Homeowners are certainly part of the problem. Too many of them took out adjustable loans KNOWING these loans would adjust up and KNOWING they probably wouldn’t be able to afford the adjustments. They just assumed the home value would grow at crazy rates, and they could sell or refinance easily later on at better terms.
I bought my home in 2004 and was offered adjustable rate financing that would have meant I could buy more home then I could afford. But I knew the rate would go up and I couldn’t afford the payments. So I bought less home and locked in a fixed rate that I can still afford today.
Also missing from that list are Democrats in Congress like Barney Frank that opposed reform of Fannie Mae and Freddie Mac, saying they were just fine.
Some home owners are in part to blame as are many other people. That is a pretty accurate list of who is to blame, aside form Clinton, Greenspan and Bush one more person to mention by name would be Barney Frank. Even as Fannie Mae and Freddie Mac were beginning to have trouble he was pressuring them to continue to give out loans to people who couldn’t afford them and telling everyone that those two companies were perfectly sound.
Problem was people were trying to get something for nothing and they found out it does not work that way.
Eddie your argument is well researched and documented.Let me try to add a little something based on experience.
There was a day when mortgages were not marketed.If a young couple went to a banker with stars in their eyes, the banker being what was then (then being pre Reaganomics) a conservative and a man of integrity, would inform them that they could not afford this and instructed to save money for a few more years until they could.The implementation of “trickle down” economics was actually a failure to the working class as wages did not grow enough to allow the average working person to ever accumulate the required 20% down as was common then.The loosening of credit was seen as a way of stimulating the economy in spite of inadequate wages. Greenspan has always been seen as a man who could create a bubble.The American economy was kept propped up like this for almost thirty years,and then we had GW Bush who politicized the economy (remember Cheney’s comment “Reagan proved that a deficit doesn’t matter”) and Republicans tried to take credit for a false economy.It is easy for the more fortunate of us to blame the homeowner. I believe that it is not as easy to place the blame on the true author of the middle class’s economic problems because the GOP would rather continue to revere Ronald Reagan as the saint of conservatism.
You need someone to blame