The real reason for the recession?

[Trader]

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
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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

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…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.

How much professional training do you need to understand, “You shall not bear false witness against your neighbor”? Traditional thinking is that occurs at about age 7 with the attainment of the use of reason.

If the banks really understood how dangerous these mortgages were, why did they buy so many mortgage backed securities? At the peak of the mortgage bubble, about 70% of mortgages were initiated by independent brokers, not the banks. The banks were certainly imprudent, but very few of them were committing fraud.

Actually, your skepticism confirms my basic argument that the financial crisis and recession are the result of the loss of trust because so many people failed to keep their word. The very word “credit” comes from the Latin meaning “to believe”. When we have good reason not to trust each other economic activity will be greatly reduced.

The path to a stable economy is for all of us to honor our promises, even if that means we have to change some of the things we do. Instead we look to politicians, who have never been a good example of keeping promises. Just last week they had a great time voting for legislation that was patently unconstitutional and violated their oaths of office so they could score points with voters who were rightly outraged by the AIG bonuses. Instead of insisting that we all honor contracts, they are teaching by example that no one should.

 

[kesa82]

Father Corapi once said ( I’m not quoting word-for-ford ) the common mean is mediocrity.
If you try to rise above it in any way, you will run into a great deal of opposition , even from your loved ones.

so we inevitably create governments which do not have as their primary goal helping people to better themselves.
We create oligarchies whose primary goal is creating good little Nazi slaves.

Math was not my best subject in school , still, a credit card with a 19% interest rate…
Common sense tells you that’s confiscatory. legal or not, that’s loan sharking.
That can only be deliberate, planned, preying on human weakness, preying on human misfortune, to engineer helplessness.

The sickest thing is those who SAY they want to help you ( and it’s easy enough to say anything ) but never do anything but take.

I don’t know about houses, but I do know about mobile homes. They had this great sceme going. They would sell mobile homes to people that they knew couldn’t really afford them. It didn’t matter that they would eventually end in foreclosure, with the interest they were making, and the other piratical fees, they actually got their money out of the "dead beat " , and then got to re-sell the mobile home and start the process all over again. Never mind that an individual or a family got ruined. They actually made out like bandits from the ruin. Where the sceme began to fail – and you didn’t have to be psychic to see it coming – was when , enstead of 2, 4, or 6 , mortgages ending in foreclosure, 10 out of 10 ended in foreclosure, and no more buyers showed up.
We learn nothing from history.

 

[kesa82]

Then there is the case where they eased out the 8 dollar an hour ( yes, 8 dollar an hour, hardly a kings ransom ) American worker and replaced him with a 6 dollar an hour Mexican , and if anyone complained they said it was sour grapes, and probubly also motivated by racism.
I guess you college types with all your erudition couldn’t see that you would be next?

About that, everyones favorite panacea, " get more education. "
Education is , always has been, always will be, expensive. where are teenagers and the unemployed to get the money? Pull it out of their @#%& ?
As Elizabeth Warren, Harvard professor and herself a professional academic, pointed out, while the cost of education does not by itself usually sink the fiscal ship, in the case of many families it is the proverbial last straw that breaks the camels back.

My favorite hobby horse is how we shower soldiers and police – who produce nothing , with glamour and praise, and turn our noses up in contempt at hamburger flippers and ditch diggers who produce EVERYTHING.

We have voted for predatory government 40 years, and predatory government is what we have gotten.

Go torture another felon, you’ll feal better.

 

[aspawloski4th]

“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?

That is over simplimfied. Lots of people who didnt pay their morgage didn’t do it on a whim. Some lost their job(like me), or had their job’s compensation cut. Nothing happens in a vacuum.

 

[Trader]

That is over simplimfied. Lots of people who didnt pay their morgage didn’t do it on a whim. Some lost their job(like me), or had their job’s compensation cut. Nothing happens in a vacuum.

Yes, it is oversimplified and I don’t mean to offend anyone who really acted prudently and honestly communicated with the lender when a problem arose. A lot of people lost jobs because other people failed to keep their promises. You are right that nothing happens in a vacuum. We are interconnected with others all over the world and the wrong behavior of one person can affect many others. That is exactly what happened when people lied on applications to buy homes they could not afford. They drove up the prices of houses and made them unaffordable for prudent people. When a house goes into foreclosure it hurts the property values of their neighbors. When you fail to make agreed payments, you hurt the person who is owed the payment.

I have no problem offending people who committed criminal acts and now want the government (all of us) to keep them in a house they never should have bought in the first place.

Here are some simple rules I learned from my father, who had only one year of high school:

If your regular budget does not include portions for both saving and sharing, you are living beyond your means.

If you can’t afford to pay for it, don’t buy it.

When you increase spending in one area, you need to reduce spending elsewhere.

Borrowing money always increases spending because you have to pay it back with interest.

 

[kesa82]

It was once explained to me that the actual cost to grow, manufacture, distribute, and make a hefty profit, off a pack of cigarettes is about …20 cents.

this is an extreme example ( ??? ) and cigarettes are, after all, a luxury.
But I think it is an example that will serve to illustrate the whole.
None of us really knows what we earn anymore. I don’t think the state itself really knows. I’ll never forget Ronald Reagans last state of the union address. He plopped a copy of the federal budget up on the podium, it was the size of 5 or 6 big city telephone books put together. He said, " My staff and I have two weeks to read this and understand it . We can’t do it. "
One must have some reasonable degree of certainty as to what the facts are, or moral choices become practically impossible.