Re: Blindly Into the Bubble
- From: "Jean Paul" <jobbahut@xxxxxxxxxxx>
- Date: Tue, 1 Jan 2008 10:59:49 -0600
"Rita" <Rita@xxxxxxxxxxx> wrote in message news:0elin3dsoa6i0o31famnpi898rnnr6mi0r@xxxxxxxxxx
On Mon, 31 Dec 2007 15:27:52 -0500, Oldie69@xxxxxxxxx (Olly Mensch)
wrote:
Islander - - you wrote - regarding interest rates on credit cards:" The
same game is played with credit cards.. There is little profit in
forcing a person into bankruptcy. Rather, it pays very well to increase
the interest rates and fees on accounts that appear to be in trouble
because most people actually work very hard to pay their bills."
= = First of all I do not quite agree that most people work very hard to
pay their bills; so many default, because of overspending, (although I
have no numbers to prove my claim) an d,if they do, why should the
sponsor take the brunt of their foolishness?! Why should they not have
to pay for the over-spending beyond what they can afford?!
= = Let me hasten to add that I am not very well informed in financial
business matters; yet, I cannot help getting the impression that you,and
also Alan L. tend to blame the "system" for their selfishness in raising
profits,etc.etc. when the "poor" consumer depends on them and perhaps
defaults,etc.etc.
To me that sounds simply as another liberal rant against the system. If
the Banks and other institutions were not allowed good profits, then the
average Joe Shmoe would not be able to do a lot of things which he now
can do. If then the average "Joe" (and I was an average "Joe", also)
defals at some point - the Banks, or whoever the sponsor was, are
entitled to make sure that they do not take the brunt of the buyer's
defaulting - for whatever reason - but remain strong, and if in the
process they need to raise their rates, in order to discourage future
malfuncioning , and perhaps opening the way for those institutions to go
downhill - then why on earth should they not protect themselves,and,
indeed,make it more difficult for the "failed" actions of the consumer -
no matter what the reason was for such failure. Those institutions are
not the Salvation Army- they are solid institutions,and without them,
the said consumer could not even consider practicing his spending habits
in the first place. Everyone has a sob story,when they default; the
loan insitutions cannot afford to lend an ear to that. You , (the
average citizen) enter into a loan agreement, and sign it, and had
better live up to it,and ,if you can 't, then,obviously, you will have
to pay dearly for your default. Even if one agrees that this is a
fairly tough attitude - yet, I feel,it is an attitude which keeps our
economy going - anything else would doom the strength of our economic
standing - and, if that happens, the consumer also suffers.
I am not an expert on economics - and I respect your and Alan's
reasoning -but I do feel differently.Most likely simply the difference
between being more conservative and being liberal.
Olly
The banks are suffering along with many others in the financial
markets as well as those who are losing their homes. In fact,
the entire economy is suffering and state and local governments
as well.
Perhaps you should read up on the subprime crisis and just how
widely its tentacles are reaching out and may reach even you.
I understand that these "bundles" were sold to foreign investors all over the world that were looking for higher interest rates. I kept hearing how China and others were financing our economy, and this is how some of it was handled.
You can blame the entire mess on those who signed for adjustable
rate mortgages but the situation is far more complex.
Lending institutions failed to verify income of many who applied
for these mortgages. They were so eager to lend funds they ignored
the simplest of good lending practice.
Those lending institutions were no longer required by law to verify their incomes, as I understand it. Bush's rhetoric of the "ownership" America where each family owns it's own home played into this.
Good lending practices follow law, not patriarchal paternal parenting.
Can you imagine a system in which you go to a car dealer and pick out the car you want, and the car dealer tells you that he won't sell that car to you because he thinks this other car over here that you didn't pick would be better suited to you, even though you could pay for either one? Surely, he is taking care of you and trying not to let you get into something that he feels is unsuitable for you.
JP
Banks bundled these subprime mortgages and sold them as securities
and so those who bought these securities are in trouble also.
I am no financial genius but I have been reading up on this
situation and it is far more complex than you suggest and a lot
of blame to go around in banking and the investment community
as well. A lot of people were looking to make tidy profits out
of a situation that was faulty in its very conception.
And it is not a matter of being conservative or being liberal.
If you think conservatives are not critizing the practices that
led to all this, think again. Or better yet, read up.
Just do a google subprime mortgages and you will find countless
sources.
Such as:
Market chaos needs taming
How could something so small - delinquent subprime mortgages, which
account for less than 2% of U.S. mortgage lending - trigger a
financial meltdown so severe that it drove the formerly thriving stock
market down 10%, sharply tightened credit for both homeowners and
businesses, and even scared the Federal Reserve?
Little by little, the factors that contributed to the fall are
becoming clearer, even if the relationship among them is not fully
understood.
Much of the disaster has to do with the way those shaky mortgages were
turned into complex investments and sold to banks, hedge funds and
other institutions, here and abroad. As the risks of those securities
became clear and their value fell, their owners were squeezed,
particularly if they'd bought the securities with borrowed money to
amplify their potential profits. To raise cash to cover their losses,
they sold off unrelated investments, notably stocks. Markets tumbled.
Etc. etc.
.
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