The real reason for the recession?

[Trader]

You won’t hear this from politicians of either party because it would offend too many voters and potential voters. So far I must be alone in my opinion.

Many millions of Americans just don’t consider keeping their word to be a high priority.

For the most important contract in any society, marriage, 50% end in divorce.

39% of babies are born to unmarried mothers.

Even in a very conservative area like Fort Wayne, Indiana, our court house has to have a child support drop box because so many parents will not provide even minimum support for their children unless the state forces them to do it.

According to the CEO of JP Morgan Chase, 30% of their foreclosures involve consumer fraud. Borrowers lied about their ability to pay, their intention to occupy the house, and the source of their down payment. Fraud rates for broker originated mortgages are much higher. (from a speech to the FDIC in August 2008) This was mostly ignored by the press.

The 'toxic assets" you hear about on bank balance sheets are not toxic if the borrowers continue to make their agreed payments. There are reports that even borrowers capable of making payments are withholding payment in order to qualify for the next bailout.

Rather than telling us that everyone should honor their commitments, politicians are telling us that no one should. Two weeks ago President Obama gave a speech describing a hard working family that fell on hard times through no fault of their own. First, they try to refinance their home, then they use credit cards, then they cut back on luxuries, HELLO! If the President really thinks that cutting back on luxuries should be the third option, he is not as smart as he thinks he is. If you have been constantly borrowing to finance luxury purchases hard times are inevitable and it is your fault.

If a whole generation adopts the slogan, “I want it all and I want it now!” a major collapse is unavoidable. While politicians want to point a finger at a few financial executives, the truth is that the current problems started from the bottom up.

 

[IrishYanksFan]

I do agree with with what you said above.

That being said, the real reason for the depression is the artificial inflation caused by the Federal Reserve (which is operated and owned by an Illuminati-type banking cabal, there’s nothing Federal about it) caused the housing bubble to finally burst. Also the socialist big brother government with the Community Reinvestment Act required banks to issue loans to underqualified borrowers, and no surprise a lot of them default on their loans!

There is no sense of personal responsibility nowadays. Sad to say even some proponents of Catholic “social justice” believe in large government and borderline socialism. They obviously have a poor understanding of economics and theology.

 

[RobHom]

Rampant stupidity, greed, foolishness, ambivalence, self gratification… Oh, I could go on and on…but when a society “even begins” to worry about which video system would be best to keep the little monsters quiet in the back seat, over what is really important…you are already in a downhill spiral, much like the death spiral a pilot experiences when he loses a wing…

Excuses are little more than “bad” excuses…for stupid decisions and bad conduct…

 

[Trader]

I do agree with with what you said above.

That being said, the real reason for the depression is the artificial inflation caused by the Federal Reserve (which is operated and owned by an Illuminati-type banking cabal, there’s nothing Federal about it) caused the housing bubble to finally burst. Also the socialist big brother government with the Community Reinvestment Act required banks to issue loans to underqualified borrowers, and no surprise a lot of them default on their loans!

There is no doubt that overly easy access to credit facilitated the problem, but no one was forced to finance purchases they could not pay for. People who lacked or temporarily lost their moral compass made many imprudent decisions. People who could legitimately buy a three bedroom home bought the four bedroom home with the sauna. People who could afford a condo two blocks from the ocean had to have that ocean view even if it cost 50% more. It was these imprudent purchases that drove up prices to unsustainable levels.

Hint: even if the mortgage broker, real estate broker, and the appraiser tell you it is OK to lie on your application, it isn’t. The more expensive the sale price and the faster sale takes place will earn them higher incomes. They do not inherently represent your best interest.

For me, the most telling problem frequently occurs when parents want to help their children purchase a first house. They lend money for the down payment and then sign a sworn statement that it was a gift. That is purjury–both a serious sin and a felony crime. What outcome can you expect for a society when parents teach their children to lie in the face of God in order to get what they want?

The Community Reinvestment Act requires a lot of record keeping which raises the cost of credit and eventually reduces the loans that can be made. It does not require bad loans to be made, but it does allow some less than ethical special interests use CRA as leverage. Cowardly bankers frequently give in to this pressure and everyone loses when that bad loan goes into foreclosure.

My brother is a banker in charge of business lending for a 22 branch community bank. Last year he turned down a loan for a woman only two months out of bankruptcy court who wanted to get a loan on her business so she could repay family members who lost money in her personal bankrupty. The proposed loan had no business purpose and bordered on bankruptcy fraud. She filed a complaint under CRA claiming that she was turned down because of her race. The complaint was denied, but the bank still had to pay a lawyer to defend themselves. They could not recover their costs for a false and friviolous claim because the complaintant was broke. What a system!

 

[IrishYanksFan]

My brother is a banker in charge of business lending for a 22 branch community bank. Last year he turned down a loan for a woman only two months out of bankruptcy court who wanted to get a loan on her business so she could repay family members who lost money in her personal bankrupty. The proposed loan had no business purpose and bordered on bankruptcy fraud. She filed a complaint under CRA claiming that she was turned down because of her race. The complaint was denied, but the bank still had to pay a lawyer to defend themselves. They could not recover their costs for a false and friviolous claim because the complaintant was broke. What a system!

that goes to another problem in america today, frivolous lawsuits.

I think its only fair that if the plantiff loses his case then he’s automatically responsible for the defendant’s legal fees. That’ll probably sharply reduce the ridiculous amount of lawsuits.

 

[cynic]

The banks were happy to hand out 100%, no deposit loans for a long period. Nobody forced them to do that, so some of the blame is theirs. But yeah, greed, materialism… just have to have a flatscreen tele and a new car every 3 years.

 

[jpm1977]

that goes to another problem in america today, frivolous lawsuits.

I think its only fair that if the plantiff loses his case then he’s automatically responsible for the defendant’s legal fees. That’ll probably sharply reduce the ridiculous amount of lawsuits.

That’s the law in the UK, and I don’t necessarily think its bad, but although there are many frivolous suits, there are suits brought by people who are truly wronged as well. Imagine if you were injured through the gross negligence of a truck driver and sued him and his employer, and through corruption, or out-lawyering, or a technicality or some other reason, the trucking company won? And for your trouble, you were presented with a $750,000.00 legal bill by the trucking company’s insurance company. The result would be that those who can’t afford legal bills (95% of America, I’d guess), would almost never sue anyone, and that would not be a paradise.

Frivolous lawsuits exist, but as a lawyer, I can tell you thousands are thrown out of court every day. The problem is overblown by groups financed by business organizations who actively advertise this as a huge problem, and who would love it if they could never be haled into court for anything. These groups don’t even try to hide that this is what they’re doing.

 

[Highwayhound]

Anyone wanting to have a recession go right ahead and have one. I personally have never had a recession in my life. I have heard many reports of such things, but decided at a relatively young age not to participate in them. I have always had work. I have always found work. Job security? Be an excellent janitor and no boss in the world will ever think of firing you.

Carry on with the recession.

God bless

 

[CatholicLeft]

The real reason for the recession? Greed! Pretty simple, huh? Jesus warned us about this. But I do love reading the “blame the victim” therories that are abound.

 

[manualman]

To be fair, the CRA loans are a TINY percentage of the bad loans out there. Be careful not to scapegoat. CRA DID constitute essentially a small snowball on a steep snowy slope.

Banks saw that they actually made decent money on those government required CRA loans (but apparently failed to see that the reason for that was the long, fast runup in housing prices). So they expanded their subprime business FAR beyond what was required by CRA. Wall Street saw the banks making big money on these subprime loans and demanded to be let in on the action (enter the mortgage backed security).

The vast majority of snow in the avalance is NOT related to CRA dictated loans. But it sure did spark the massive interest in subprime loan marketing that followed after it.

I too have heard examples of utter lack of integrity. I heard (third-hand) of one guy with a massive loan on a million dollar house. The next door million dollar house went into foreclosure and he made a deal with that bank to buy it for half a million with a mortgage and proceeded to walk away from his OWN million dollar mortgage! How do such people sleep at night?

 

[IrishYanksFan]

The real reason for the recession? Greed! Pretty simple, huh? Jesus warned us about this. But I do love reading the “blame the victim” therories that are abound.

Are you saying these poor people who defaulted on their loans are “victims” here?

CatholicLeft, are you a socialist? The Gospels only preach against greed because it has the capacity to distract us from God and doing good, but nowhere do they say that having money is inherently evil.

If I’m incorrect please provide a Bible verse. Don’t bother quoting some Pope or theologian because while they are infallible in matters of faith and morals they are not PhDs in Economics.

 

[Trader]

The real reason for the recession? Greed! Pretty simple, huh? Jesus warned us about this. But I do love reading the “blame the victim” therories that are abound.

“Blame the victim” is an interesting slogan. Would you further explain what you mean?

When a foreclosure takes place because the homeowner failed to pay his mortgage as agreed, is the victim the guy who no longer gets to live in a house for free, or the teachers’ pension fund who owned the mortgage and now has to take the loss?

 

[manualman]

“Blame the victim” is an interesting slogan. Would you further explain what you mean?

When a foreclosure takes place because the homeowner failed to pay his mortgage as agreed, is the victim the guy who no longer gets to live in a house for free, or the teachers’ pension fund who owned the mortgage and now has to take the loss?

Or is it the mortgage originator who knew dang well that the applicant was not qualified for the loan by reliable historic criteria, but didn’t care because he had a nice, gullible teacher’s pension fund waiting to buy up the mortgage backed security? A fund that foolishly believed that the mortgage business was a stable, mature industry with safe lendings standards and excellent track record for investment security. Such funds failed to recognize that lenders would behave differently when they weren’t responsible for the OUTCOME of the loan…

 

[Trader]

Or is it the mortgage originator who knew dang well that the applicant was not qualified for the loan by reliable historic criteria, but didn’t care because he had a nice, gullible teacher’s pension fund waiting to buy up the mortgage backed security? A fund that foolishly believed that the mortgage business was a stable, mature industry with safe lendings standards and excellent track record for investment security. Such funds failed to recognize that lenders would behave differently when they weren’t responsible for the OUTCOME of the loan…

The number one rule of banking used to be “know your customer.” Ignoring that rule also allows all sorts of money laundering schemes to flourish. You are correct that breaking the direct connecton between lender and borrower is a bad thing. Both the agressive originator and the deadbeat borrower find it easier to cheat some third party they have never met. There is no danger of embarassment seeing your community banker at chuch or the supermarket as might have happened 40 years ago.

As far as I know, “You shall not steal” and “You shall not bear false witness” do not have exceptions if the person you cheat is a stranger. With modern communications we are all neighbors and at the same time we try to be anonymous(even on catholic.com). The current recession shows that personal irresponsiblity can hurt all the other homeowners on your block and some stranger on another continent.

 

[jmcrae]

This particular recession was caused by a culture of little white lies - just say this (whatever “this” may be - yes, I’m getting a job from my father in law; yes, my wife has money that she will give me; whatever) - it doesn’t have to be true, and nobody even has to believe you, you just say it, like a magical incantation - and you will get whatever you want.

Deal with the details later; something will always come up, and everything will be okay. (Except that the details were never dealt with, and nothing came up, and it wasn’t okay.)

 

[edwest2]

Here it is:

appraisalnewsonline.typepad.com/appraisal_news_for_real_e/2009/01/businessweek-appraisers-rubberstamped-inflated-home-prices.html

Appraisers unscrupulously raising the values of homes. Now, they will need a watchdog.

Mortgages given to people who could barely afford to pay off their credit cards? A friend of mine, a former banker, said, What Happened to all the rules?

This isn’t about a particular party – it’s about a group of people who were already very wealthy, looking to squeeze one more drop of blood out of anything, anywhere so they could, what? Buy more stuff? Increase their gold bar collection?

Peace,
Ed

 

[CatholicLeft]

Are you saying these poor people who defaulted on their loans are “victims” here?

CatholicLeft, are you a socialist? The Gospels only preach against greed because it has the capacity to distract us from God and doing good, but nowhere do they say that having money is inherently evil.

If I’m incorrect please provide a Bible verse. Don’t bother quoting some Pope or theologian because while they are infallible in matters of faith and morals they are not PhDs in Economics.

Ahhh…How about the most famous quote on this subject…

…I tell you the truth, it is hard for a rich man to enter the kingdom of heaven. Again I tell you, it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God.
The parallel versions appear in Matthew 19:23-24, Mark 10:24-25 and Luke 18:24-25.

 

[CatholicLeft]

“Blame the victim” is an interesting slogan. Would you further explain what you mean?

When a foreclosure takes place because the homeowner failed to pay his mortgage as agreed, is the victim the guy who no longer gets to live in a house for free, or the teachers’ pension fund who owned the mortgage and now has to take the loss?

Victim blaming is holding the victims of a crime, an accident, or any type of abusive maltreatment to be entirely or partially responsible for the unfortunate incident that has occurred in their life, often when the victim had performed no actions to facilitate the incident. It is also about blaming individuals for their personal distress or for social difficulties, rather than the other parties involved or the overarching social system in place.

It has been proposed that one cause of victim-blaming is the “Just World Hypothesis”. People who believe that the world has to be fair may find it hard or impossible to accept a situation in which a person is unfairly and badly hurt. This leads to a sense that, somehow, the victim must have surely done ‘something’ to deserve their fate. Another theory entails the need to protect one’s own sense of invulnerability. This inspires people to believe that rape only happens to those who deserve or provoke the assault. This is a way of feeling safer. If the potential victim avoids the behaviors of the past victims then they themselves will remain safe and feel less vulnerable. In some countries, victim-blaming is more common, and women who have been raped are sometimes deemed to have behaved improperly. Often, these are countries where there is a significant social divide between the freedoms and status afforded to men and women.

 

[Texas_Roofer]

…For the most important contract in any society, marriage, 50% end in divorce.

?? but why would marriage failures reduce economic activity? it would create economic activity ?

39% of babies are born to unmarried mothers…

And the economics of that is what?

Even in a very conservative area like Fort Wayne, Indiana, our court house has to have a child support drop box because so many parents will not provide even minimum support for their children unless the state forces them to do it…

ah but is the issue the parents definition of support or the governments that is the issue here?

According to the CEO of JP Morgan Chase, 30% of their foreclosures involve consumer fraud. Borrowers lied about their ability to pay, their intention to occupy the house, and the source of their down payment. Fraud rates for broker originated mortgages are much higher. (from a speech to the FDIC in August 2008) This was mostly ignored by the press…

And rightly so, the biggest fraud was from the banker that is why he is so aware or the fraud. However if we handed out subpoenas and jail sentences for these frauds a whole lot of loan defaults would simply go away

The 'toxic assets" you hear about on bank balance sheets are not toxic if the borrowers continue to make their agreed payments. There are reports that even borrowers capable of making payments are withholding payment in order to qualify for the next bailout…

These are toxic because the bank with the others falsified what they were. They are high risk mortgages, sold as low risk investments

…Hint: even if the mortgage broker, real estate broker, and the appraiser tell you it is OK to lie on your application, it isn’t. …

were they not the professionals? It would seem odd to ask the buyer to know more about finance than the professionals.

My brother is a banker in charge of business lending for a 22 branch community bank. Last year he turned down a loan for a woman only two months out of bankruptcy court who wanted to get a loan on her business so she could repay family members who lost money in her personal bankruptcy. The proposed loan had no business purpose and bordered on bankruptcy fraud. She filed a complaint under CRA claiming that she was turned down because of her race. The complaint was denied, but the bank still had to pay a lawyer to defend themselves. They could not recover their costs for a false and frivolous claim because the complainant was broke. What a system!

All costs are included in the sale to include this cost

Are you saying these poor people who defaulted on their loans are “victims” here?..

Some are however that is in proper context, understand the price is based on buying offers so aggressive financing out bids conservative financing. the result can be a squeeze out of the conservatives

CatholicLeft, are you a socialist? The Gospels only preach against greed because it has the capacity to distract us from God and doing good, but nowhere do they say that having money is inherently evil…

search for the camel and the eye of the needle, however you are correct that the money is not the sin

If I’m incorrect please provide a Bible verse. Don’t bother quoting some Pope or theologian because while they are infallible in matters of faith and morals they are not PhDs in Economics.

Matthew 19:24 (New International Version)
24Again I tell you, it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God."

Mark 10:25 (New International Version)
25It is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God."

Luke 18:25 (New International Version)
25Indeed, it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God."

But John did not speak on the subject and I like John

“Blame the victim” is an interesting slogan. Would you further explain what you mean?
When a foreclosure takes place because the homeowner failed to pay his mortgage as agreed, is the victim the guy who no longer gets to live in a house for free, or the teachers’ pension fund who owned the mortgage and now has to take the loss?

The issues involve whether the professional appraiser, banker, etc were honest with the buyer and to what extent was the market inflated by the action of others. Similarly the buyer did not sell a high risk investment to the pension fund that was a less than truthful mortgage professional

 

[Trader]

…For the most important contract in any society, marriage, 50% end in divorce.

?? but why would marriage failures reduce economic activity? it would create economic activity ?
Quote:
39% of babies are born to unmarried mothers…

And the economics of that is what?

The best and most comprehensive academic study of marriage I know is the one by David Popenoe and Barbara Dafoe Whitehead of Rutgers University. It is not sectarian or partisan.
marriage.rutgers.edu/contact.html

Among their findings:

Married people are healthier, both physically and mentally; they have longer lifespans, more educational success, higher incomes, lower crime rates, and lower rates of incarceration. If you don’t understand that those are good things, we won’t have much to talk about.

Almost any activity will generate economic activity. That does not make it a good thing. A category 5 hurricane scoring a direct hit on the Houston Ship Channel would generate lots of economic activity. The roofing business in Texas would really take off, literally. You just have to ignore the loss of life, the destruction of existing property, the disruption of national energy infrastructure, and the probability that many of the victims would choose to relocate permanently.