Home Forums Hunting & Shooting Hunter's Campfire Mortgage Crisis: It's like Groundhog's Day

FDIC only creates moral hazard, thus assuring booms, busts, and bailouts. The moral hazard necessitates the regulations, but that's doomed to fail due to the captured regulator phenomenon.

Heres what I dont get. You sign a mortgage and you owe lets say 100k. You pay in ten grand over a few years and then default. The bank has mortgage insurance to make them whole. Then they write off any loss. Then they buy the house back at auction and can sell it again. And all the while you still owe them the entire amount still. Thats just wrong. Everyone's protected but the buyer and honestly if the bank is made whole and your credit takes a hit...then why destroy the buyers life?

Not that they should get off Scot free but something isnt right here.

It's a hard asset, so, like all hard assets, it has real value. But land can be taxed and regulated right out from under you, unlike portable hard assets.

It's rigged in their favor because they own the government. If you want it rigged in your favor, buy yourself a Congressman or two.

Remember the golden rule...




...those with the gold rule.

Mortgage insurance does not cover all the banks cost to foreclose then try to sell a home. Yes they can write it off but if a bank makes a million in a year and loosed ten million in write offs they are still broke.

I can agree with that to some degree.

Captured Regulation happens, and it happens all the time. But that doesn't mean that all regulation is a failure. In fact, for most companies they remain properly regulated and in most instances the regulations work.

The problem comes when the companies they are regulating are big enough to corrupt the system. Then the regulation doesn't happen specifically for those companies. In such instances, the regulators ought to be sitting in the cell with he CEO of the company whom they failed to regulate.

But Wall Street has garnered so much power that CEO's no longer go to jail, they just fine the company instead of hold someone accountable.

well, since i am an exbanker, and put together real estate loans in the old days, i am familar on both sides with what happened.
the glass steigal act in the 30's separated the banking and the brokerage business. After many years and millions of dollars, your gooberment let them recombine the business. Thus banks could package loans and sell them with a security wrapper. Mistake no 1.
In the old days, you had to go through a underwriting process, 4to1 income to debt ratio, 20% down, credit, etc. Unless you could get a gooberment guarantee such as V.A., etc.
This later went to drive through underwriting without verification, and 100% financing, which meant the borrow had no skin in the game.
Then, with banking consolidations, the gooberment decided banks were being unfair in the ghetto, a practice called redlining, so you had to lend X amount of dollars to the people you really didn't want to lend X amount of dollars too, but if you didn't the mergers couldn't take place.
Then, the constant upward appreciation of property stopped, people living paycheck to paycheck out of work, so BOOM.
And, i have been seeing an add on T.V. lately advertising 100% financing or refinancing to veteran's. YOU think?
There were a few senators and top bankers that should have went to jail over this, but nada.
it will happen again.
oh, my the way, those derivities, which i bet one out of a 1000 on here understands, there is a board that determines when then are in default, staffed by the very same member banks that originated them.
Most banks in the country were probably B.K. in reality until a few years ago the government let them get away with valuing assets on which they had a lien at original value, not market value. If it had went to market value, as it use to be, they didn't have the set aside capitalization to cover those write downs.
And by the way, most banks DON"T hold their loans, that's what points are for. They are typically packaged for sale to a secondary lender like fannie mae, freddymac, etc.

The official report found that loans that were created under the law that made changes to the Community Reinvestment Act were like 12% of the bad loans. The problem it turns out wasn't government mandated loans, it was just really bad banking decisions.

Since investment banks were making so much money on derivatives tied to the US housing market, they were hungry for ANY loan they could get and re-package. So investment banks told mortgage lenders just get us the loans, we don't care if they're good or bad. That's because they were bribing the credit ratings companies to give them a AAA rating on everything.

So it wasn't government regulations (which were piss poor anyhow), it was greed and fraud that created those bad loans. And a little bit of government regulation...we don't want to let the politicians off he hook completely.

Too big to jail.

Not really. More the failings of the SEC, FNMA and the repeal of Glass-Steagall with the effect of the CRA thrown in for good measure.

The FDIC was way down the list of culpable entities. It had little to no authority over the underlying causes.

Without Golden West and Countrywide, the two biggest banks (BOA & First Union) would have weathered the storm without a bailout and Golden West and Countrywide were the poster children for why FNMA and the CRA were the real evils.

Oh that was good, can I steal that one?

Specifically I was speaking about their knowing about and allowing investment banks to leverage 32:1. That was a failure to regulate.

I've heard it from others, so it's not mine.

scottf, you're right. but my point was, once the bank gets its money back either by re-selling or reimbursement, why make the borrower pay the rest of the mortgage on a nonexistent house.

What's baffling to me is that people actually buy houses with less than 20% down. Craziness.

If it's an unsteady market, its a smart idea; you have little to no skin in the game. Now why a bank would lend to someone with no skin in the game is completely beyond me.

This is what it's all about. Well said.

Which portable hard assets are not taxable and unable to be regulated away?

I think what he is saying is that Land is taxable annually and thus can be foreclosed, should you stop paying taxes annually.

Some assets such as gold, stocks, bonds, guns, art, cars etc., are not necessarily taxed annually and thus have a lesser potential for government seizure.