axiomatik

Nice to see some educated posts concerning the housing bubble, and not the usual "Barney Frank made banks give loans to poor people" BS.


The Giant Pool of Money | This American Life

This is the best explanation I've ever heard on the housing bubble. It's definitely worth listening to if you have the time. But this is the basics:

US Treasuries have been the gold standard when it comes to safe investments going back for decades. However, for most of the 2000's, the Fed's interest rates have been very low. So investors from all across the globe started looking for other safe investments that gave better returns. US Mortgages were also a very safe investment, and so globabl investors started investing in the commoditized mortgages from US banks.

However, before long, demand outstripped supply. Banks didn't have enough mortgages to sell. Too many investors wanted to buy in. So banks started lowering the requirements for getting a mortgage. Local loan officers searched for customers. They got a bonus for originating a loan, and then the local banks sold it to the big banks who sold it to investors. As more and more investors got into the game, banks got more and more desperate for mortgages, and kept lowering the requirements.

For a while, everything was going fine. People were signing up for mortgages that they couldn't really afford, but with the bubble raising home values, it didn't matter for a while. The house was worth hundreds of thousands more just a year later, value that you could tap into to help pay your bills. People were buying houses they couldn't afford, but because the value kept going up, they weren't getting delinquent. It was a precarious situation, but it was self-sustaining for a while. However, when gas prices rose and cut into people's budgets, and foreclosures started to rise. Pretty soon the bad news popped the bubble and home prices started falling.

It was a system-wide failure, with blame falling on millions of people. People who bought homes they couldn't really afford. Loan officers that wrote those loans. Some loan officers falsified the applications to get them approved. Local banks didn't care, because they just packaged up the loans and sold them to bigger banks. Big banks were watching for foreclosures, but while home values rose, it wasn't a problem, they were making money right now selling them to investors.

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duffman1278

How can you just sit there and say there is nothing you can do about it? That mentality is exactly what these big bankers want you to think. But I do agree with you that the media is trying ever so hard to keep the status quo but until a lot of people stand up and realize this crap needs to end now will they be forced to pay attention.

There's protest in NY, by wall street going on already for the past 8 days and none of the big media corporations here in the US have put much attention on it. The only ones actually covering the story are independent news channels and out of the country stations.

These people protesting are fighting for change and still people say "what a bunch of hippies they won't get anywhere" or "they're wasting their time" etc. We can and should be doing something, not just letting these crooks get away with this crap. So far it seems like Ron Paul is the only politician with sense and actually supports the people.

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RidgeRoamin

Obamas entire presidential campaign has been a joke so far. For the people who truly felt he was going to initiate change, you're all idiots, he's merely dismantled the nations economy. The hole he has dug is absurd and I honestly feel sorry for whoever wins the next election. But hell, I wouldn't be surprised if all the idiots re-elect Obama, it would just show how moronic our country is becoming.

RP all the way.

illvialuver

ronpaul, i dont care if it doesnt look like he will win, the point is to vote who YOU want to be president, NOT who do you think will win.

imotion s14

I like how they talk about Greenspan's interest rate drop and completely fail to factor in it's relevance to pumping up the housing bubble. Hell they don't even mention WHY it happened.

Here's a better explanation of WHY it was going to crash.. before it crashed.

Peter Schiff Mortgage Bankers Speech Nov/13/06 - YouTube

and it wasn't because of gas prices.. lol

Jtuned_andy

the only reason i registered to vote, and vote as republican....is to vote for Ron Paul

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axiomatik

Gas prices where the "straw that broke the camel's back", so-to-speak. Things were humming along under the grand delusion until gas prices raised the specter of an economic slowdown. Once people started worrying about the economy, it snowballed from there. On top of that, high gas prices cut into people's budgets. And those that were teetering on the edge, barely getting by with their house they couldn't really afford, were pushed over the edge when gas prices took a couple hundred dollars out of their monthly budget.

That's the problem with recessions, they are largely the product of a psychological shift among the population. The media starts talking about a potential recession. People hear the news and decide to be a little more cautious with their money. They buy fewer things. Companies see a drop in demand, and start cutting back a little, and the cycle reinforces itself.

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kingkilburn

And that is why I tell people to completely ignore the stock market unless they actually own stock.

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imotion s14

What broke the camel's back was people who got ARM loans and got caught at the top as their ARMs reset and the interest rates increase and their mortgage payments ballooned. When their mortgage consumes nearly 50% of their income at a low rate. What happens when the rates increases?

Your theory doesn't even fit the time line. Home prices had hit the top and started to decline as foreclosures had an upward swing in early Q1 2007. Oil had a sharp drop in Q1 2007 and didn't pick up until late 2007 to Q3 2008. Well after the wave of record foreclosures started earlier that year.

So what's your solution? Pump people up with happy pills?

Our trade deficits, that's a psychological problem.

Our negative savings rate? Psychological.

Disintegration of our industrial capacity?

Capital flight off American shores. Obviously psychological.

There is absolutely no technical reasons for a recession. Booms are sustainable if only everyone was happy.

The imaginary value of our homes might have been psychological. But the debt we accumulated against the imaginary value of our homes to buy all stuff we have is as real as the flat screen TVs hanging over the fireplace of some Poor Schmuck's McMansion.

Kingbaby

McCain....

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redline racer510

At this point I would much rather vote for Elmo(yes the sesame street character) rather than voting for any of the other presidential candidates.

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illvialuver

I like how everyone who is against RP is for big bailouts, not being accountable for your actions, and against sound money.

Ron Paul has it right on so many counts, that unless your biased by some sort of belief or idioligy other than common sense, than you would vote for him.

kingkilburn

And to think the republicans pushed him out of the last election for McCain of all people.

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axiomatik

That's a finely nuanced argument you have there.

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word sux

ron paul will never win because the entire system is against him and the electoral vote is there as a backup just incase..

KA24DESOneThree

The vote is going to be between a douche bag and a turd sandwich (thanks, South Park). Neither will do anything to stop the destruction of this country. I don't care if RP wins; he'll be powerless and the rest of the world will consider us backwoods bumpkins for actually giving a shit about libertarian ideals.

I've come to grips with it: we the people are becoming more and more powerless against a stronger and stronger government. The hilarious thing is that it's ok with us; we've got too many mouths to feed and too many bills to pay to give a shit. As long as most of us have jobs and the rest have welfare, we're all too preoccupied in our own lives to consider for one moment that we're ensuring the enslavement of our future selves.

Meanwhile, I'll be lying and dodging to remain free.

RJF

Ron Paul not only a kook on national defense, but also a racist:

“Order was only restored in LA when it came time for the blacks to collect their welfare checks. The ‘poor’ lined up at the Post Office to get their handouts (since there were no deliveries) — and then complained about slow service.” - June 1992

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kingkilburn

1. I fail to see the racism.

2. Even if he was his libertarianism would prevent him form forcing his views on others.

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RJF

Ron Paul hanging out, smiling with white supremacist Stormfront.org founder Don Black

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RJF

“Incredibly Honest” Former Staffer Reveals Ron Paul “Hates Israel”

The Five: “Incredibly Honest” Former Staffer Reveals Ron Paul “Hates Israel” at Pat Dollard

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deolio

the only reason ron paul has a chance is because of his "different" ideas and claim that he will change the system.

i'm pretty sure obama has proven over the last few years that such a thing isn't possible.

might as well continue making the rest of the world think that america is a tolerant place for four more years until we vote in another old white guy.

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kingkilburn

How has RP voted and what bills has he authored or cosigned? You can't act like he is rank and file unless you are in complete denial or blind.

The picture doesn't prove anything other than they were in the same place at the same time.

Why shouldn't he hate Israel? Do you have a any idea how much of our money and political clout is funneled to that country? Backing Israel is one of the most dangerous things we do as a nation. Also the idea that our government had something to do with 9/11 is generally considered the more prevalent theory in America.


EDIT
The kicker for that video is the notion that Gingrich is the best candidate.

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ronmcdon

Even if RP posed with the dude and smiled it doesn't prove anything imo.
It's not like the said white supremacist is some famous media figure that everyone knows about.
Dude probably came up to RP to ask for a photo, autograph & RP complied.

anthonyr sil8ty

I know one thing, I wont vote for obama's bitch ass.

duffman1278

Exactly what I was thinking. He figured this must be just another supporter no harm in taking a picture. It's more than likely that not many people will see that picture and identify who the dude really is.

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imotion s14

Who cares about Israel? I'm not fucking Israeli. So why the fuck should any American give two-shits about Israel's interest?

They're big boys and more than capable of taking care of their potential enemies in the region.

I remember a Israeli spy ring was busted and the story got buried due to 9/11.

I remember when they stole nuclear secrets from the US and sold it to the USSR.

With friends like that, who needs enemies?

STEVES14

Ron paul!!!!!!!!!!!!!!!!!!

s13 @ fullboost

America is controlled by Israel anyways I would vote for RP

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upsdude

ugh if these are my 2 choices i'd rather not vote :P

kingkilburn

If you don't vote Newt could win. If that happens every one but him and his accountant loses.

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