Fannie Mae & Freddie Mac - the big bailout?

[GrobbeeTrull2.0]

Originally Posted by Lyrical

Feel Good Story

Look chief, your stories about pulling yourself up by your bootstraps are fine and dandy, and I'm proud of you. But it doesn't remotely touch the underlying idea behind my statement.

Everyone in the thread prior to my comment was talking about how despite being in a recession, or in the downturn of an economic cycle, you can make obscene amounts of money. Is this not fact? When people are losing homes, declaring bankruptcy, losing jobs and the economy is being sluggish, how do you propose THEY make good of a horrible situation? The quick answer: They don't.

The people best suited to ride out recessions are those already wealthy, already managing their lives well, and already successful. And when assets come up for sale from the failing part of society, what do the wealthy do? They are able to buy more stocks, options, securities, whatever at bargain-bin prices.

What I'm talking about isn't some mystical property of Capitalism. Most major schools of economic thought seek to tackle, explain or do away with the fact that Capitalism has such fluxations.

So tell me, Lyrical, how am I wrong? I know it's nice to rant about something entirely tangential simply because a Communist said it, but how am I wrong? Even Eomer confirmed it with game theory examples.

[GrobbeeTrull2.0]

Originally Posted by Tuco

That or because it starves people?

Dictators surely are Communism.

[Phoenix]

Fucking please Grobbee. The people who are fucked right now are all the god damn morons who went out and spent money on houses they couldnt afford, thought they could flip a house in time to make a profit, or idiotic lenders who gave money to people who should of never of gotten approved for a mortgage. People living beyond their means is the problem, not capitalism. Of course none of those idiots have to really worry though, as daddy government is taking steps to come in and wipe their retarded asses for them. God forbid they learn a valuable lesson in life.

Anyone who budgeted their money properly and bought a house they could afford to make payments will have no problems. They are doing just fine, whether they are rich, or poor. I mean, my mom who would be considered poor is able to make the payments on her condo. Of course its also only a 60k one, not a 250k like most people seemed to of gone out and bought.

Live within your means, and you will never have a problem.

[Lyrical]

Originally Posted by GrobbeeTrull2.0

The people best suited to ride out recessions are those already wealthy, already managing their lives well, and already successful. And when assets come up for sale from the failing part of society, what do the wealthy do? They are able to buy more stocks, options, securities, whatever at bargain-bin prices.

You've moderated your stance already. You first said that the rich get rich and the poor get poorer. This doesn't have to happen.

Now you are saying rich people are better able to weather recession. Duh. I am not arguing that.

You neglected that poor people like me (I am not poor now) have the same venues to be able to buy stock. We can go to school, etc.

Its not impossible to change your situation.

-----------------------------------------------------

When I was dirtass poor, I had to be really disciplined. I was going to buy stock somehow. Some months we couldn't afford to invest. Some months we could. At times, our income was so low that if gas prices peaked, all money had to go to bills. I think for a couple of years my entertainment budget was $0. All I could afford to do was work (ouch). So I just worked more. And when it was noticed, and I started getting 5-9% raises, I was then able to put the excess money into equities. So while I might have been able to put away 1-3% of budget in equities, with a fat raise, I could now put in 7-9%. And then the next year, I busted butt, and could get to 12%. And so on and so on.

Bear with me, there's a point I am getting to here.

My income started to rise. Since I busted my ass, my income kept going up. It went to 33K, 37, 40K, 55K (got a big promotion), 60K, all the way up to 90K. So then I worked days and went to get my masters at night (for a full time degree). It was hard, but on graduation I was making 110K.

The whole time that I made more money, I never let my expenses go up much. When I was making 90K, we stil only had a house that was 120K. We didn't take a ton of vacations, no country club memberships. At one point, we were investing 54% of evry dollar that came in. And that was gross pay. In the last recession, 54% of our HHI went to saving and investing.

I look at it this way. As I get older and got more promotions (and made more money), I had a choice. I could go out and spend the money on frivolous things, or I could plow it back. Almost all of my raises went to saving and investing.

A book that had a great influence on me was "Rich Dad, Poor Dad." There are too many people that make a raise and then they spend it all. And many of times, they increase their fixed expenses by more than what they were increased. While I was doing the investing, I had co-workers that went out and bought expensive cars and expensive homes. I have seen people lose their job and have to go around begging for money because they lived way above their means. And every time their pay went up, and they got a promotion, they just went and bought more stuff.

Maybe I still remember when I couldn't make ends meet, but I refrained from buying all that crap. The country is in trouble right now because too many of our neighbors went and mortgaged stuff they couldn't afford. Its like Kiyosaki (the author of Rich Dad Poor Dad said), when we get a raise and go spend it on a fixed item (like a sportscar, a boat, a bigger house), we are making a choice. We are choosing to live in the "rat race." In contrast, if we take that excess and save and invest it, we are deciding our own future and deciding to have freedom. Eventually, your assets get high enough that you can go do the nice things and not have to worry.

So I do feel bad for those that were responsible. But I believe that there are too many people out there that were irresponsible. Its like a co-worker of mine that went and moved into a high dollar neighborhood said. These people were so busy trying to compete with the rest of the neighborhood that they bought half million dollar+ homes, sportcars and BMW's, boats, etc. And this is when they were making like 80K. He said his neigborhood was so competitive that he mowed his lawn every day! They even competed to see who had the nicest lawn. I have no pity for someone that is making 80-90K and then goes and takes out loans on everything, loses their job, and then can't make payments. When I was making 80-90K a year, we had so much invested that I could have gone unemployed for five years and still have all the bills paid (without taking unemployment).

So I guess the long and short of it is that there are idiots across all spectrums. I don't have pity on the poor idiot that has the intellect and skill to do better and doesn't. And I don't have any pity on the rich idiot that goes broke. I knew a guy that was making 150K a year, he gets laid off, and two weeks later, he's going around begging people for money. He spent every penny on homes, boats, etc. He had ZERO savings.

So, I guess I am agreeing with Phoenix. What he said was shorter and more concise.

[Gurgeh]

Originally Posted by Lyrical

But I believe that there are too many people out there that were irresponsible.

It was bankers job to not loan money to unemployed people without capital base, ultimately it was bankers fault, they okayed loan that should never have been okayed. It was their job to say no and evaluate the financial risk.

Beside it's the average, responsible people that will be the worst off in this housing / loan crisis : people that shouldn't have been able to buy an house will lose them. Not much of a lost for them but for people that were able to afford one not only did they buy them at a much inflated price thanks to banks driving up the price through loose loan policy but also for a bunch of them their credit rate are going up, which can bankrupt them.

[Lyrical]

Originally Posted by Gurgeh

It was bankers job to not loan money to unemployed people without capital base, ultimately it was bankers fault, they okayed loan that should never have been okayed. It was their job to say no and evaluate the financial risk.

It comes down to personal responsibility. I have owned two homes. Both times, the bankers told me that I qualified for a much bigger house than I could possibly afford. I remember when I was only making 40K a year, and the banks told me I qualified for some insane amount. I remember rolling my eyes in front of the banker. I knew my budget, and I knew there was no way I could afford it. Not only that, but I wanted to make sure I had money left over to save/invest. So I was purposefully going to keep my fixed expenses down. Anyway, I remember asking the banker if he thought I was retarded or something. I bet there are alot of people that just go with what the banker says. "Wow, I qualify for that much? I guess I better go and look for that size house!"

We can go on and on about whose fault it is, but no one makes you sign the contract. Unless these people have had a gun pointed at their head, its on them.

I have said it over and over again. Just because you qualify for a bunch of debt doesn't mean you should use it all.

[Soriak]

The problem was that the guy you got your loan from didn't end up with any of the risk. If he closed the deal, he couldn't have cared less how long you got to keep your house - he got his money before the ink was dry.

It's a shame, because aggregating debt and trading it is a great system. Just got to find a way to keep some of the risk with the guy making the deal. Maybe pay them only after half the mortgage has been paid off.

[Simas]

I guess we can quit blaming drug dealers for any wrong doing and only blame their customers.

[Lyrical]

Originally Posted by Simas

I guess we can quit blaming drug dealers for any wrong doing and only blame their customers.

And I guess we can just throw out any shred of personal responsibility. It doesn't take a genius to know that if you can only afford $800 a month, you don't go sign up for $1500 a month.

Let's just engage in self-destructive behavior and blame it on everyone else. Its so much easier to blame one's problems on the Republicans, "the man", capitalism, our bad parents, or peer group, the price of gas, or any other thing other than to push away a loan that we know we can't afford.

[Lyrical]

Originally Posted by Soriak

The problem was that the guy you got your loan from didn't end up with any of the risk. If he closed the deal, he couldn't have cared less how long you got to keep your house - he got his money before the ink was dry.

It's a shame, because aggregating debt and trading it is a great system. Just got to find a way to keep some of the risk with the guy making the deal. Maybe pay them only after half the mortgage has been paid off.

And you are 100% right. The banker should have risks, including chargeoffs for loan defaults, as well as potential jail time for the more aggregious cases. In capitalism, people do what is in their self interests, and sometimes their needs to be a stick (along with the carrot). You take away the risk in a situation like this, and you get bad behavior. I think the economists use the term "moral hazard" (or is it adverse selection, I always get the term confused). It seems just like the Savings and Loans crisis. When there is no risk, no one cares about losing money. You'd think we would have learned from our mistakes from the SLC.

I am little bit worried that the government is going to tighten up the rules so high on home lending, that it will hurt the honest and responsible people. I could see the gov't going the other way, and engaging in overkill in new legislation that is coming.

[Simas]

Originally Posted by Lyrical

It doesn't take a genius to know that if you can only afford $800 a month, you don't go sign up for $1500 a month.

It doesnt take a genius to know heroin is bad. Doesnt suddenly mean the drug dealer did nothing wrong.

Idiots should be blamed for taking out mortages they cant afford but the predatory lending practices deserve their share of the blame as well. As it is they're getting bailed out while thier customers are being told "LOL L2P the economy"

[Faille]

It's all very well saying that people should know better then to get into these situations, but how and why should they know better? Everything in this society tells them the opposite. There is not enough training, learning or upbringing to really teach people that they should know better.

Personally, back when I was in Uni in the mid 90's, I got caught with the latest fad, the mobile phone. It was all too easy to be convinced that I could afford one as a student and it would be a great asset to have. Needless to say a few month of 100's of dollar bills building up put me in a great bind at the time. In the grand scheme of things, it was a pretty cheap lesson to learn, but looking back, nothing I learned at school really prepared me for that situation and how to properly evaluate it, not did my parents give me guidance either. I really believe that these are the sorts of things that should be taught in our schools these days.

As for the people who pull themselves out of poverty, I think it's great that they have been able to do it and fully commend everyone who has, but to me always sounds too much like:

Anyone can win lotto, all you need to buy a ticket. If you don't buy a ticket then it's your own fault that you didn't win lotto.

An absolute gross simplification that doesn't take into account the years of hard work that people have put in, but I think does highlight the fact that the odds are far more stacked against the majority of people then they should be.

[Lyrical]

Originally Posted by Simas

It doesnt take a genius to know heroin is bad. Doesnt suddenly mean the drug dealer did nothing wrong.

Idiots should be blamed for taking out mortages they cant afford but the predatory lending practices deserve their share of the blame as well. As it is they're getting bailed out while thier customers are being told "LOL L2P the economy"

I agree.

[Phoenix]

What do you mean not enough training? You cant do simple math? Calculating a budget is probably one of the easiest things to do.

Idiots should be blamed for taking out mortages they cant afford but the predatory lending practices deserve their share of the blame as well. As it is they're getting bailed out while thier customers are being told "LOL L2P the economy"

Predatory? Did Fannie Mae put a gun to anyone's head and force them to sign a loan? Did they force them to buy a 500k house? Did they force them to get a ARM? No, they didnt. Fact is its a 50/50 problem. Half is the lender's fault for giving someone with 50k income a 500k loan and the other is the person taking that loan, simple as that. Both should know that is way beyond what both of them can risk and cover.

Everyone involved in this needs to have their dicks cut off. The only people getting screwed are those making their payments.

[Kolle]

Originally Posted by Phoenix

Bull fucking shit. If you work at Burger King all your life its because its your own damn fault that you didnt pursue higher education or any other option of trying to find a better career.

so if everyone pursues higher education or tries other options then everyone can have a 70k or higher salary job? or do you just mean a limited number of specific individuals can?

this attack on those workers does not work. it's a cop out to make one feel better about the situation they come to accept, shitty as it is. there is no "applying yourself" in this country for everyone because there aren't 300 million nfl player positions. there aren't 300 million ceo spots open. there aren't 300 million six figure income jobs with full benefits. someone will be working all of those jobs with low pay and little to no benefits. to put a blanket generalization on all of those people is ludicrous.