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by ray on July 5th, 2008

ray

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Is mortgage crisis in U.S. a result of laissez faire capatilistic practices?

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Answers. 11 helpful answers below.

  • by LuckyLefty on July 5th, 2008

    LuckyLefty

    The govenment did nothing to influence the mortgage rates...


    it was the banks and their policies, apparently someone needed to learn their depression era history :/

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  • by VS Angel aka Mrs. Stealth Intelligence on July 5th, 2008

    VS Angel aka Mrs. Stealth Intelligence

    I call it Legalized Stealing.

    Even educated, upper-middle class families have lost their homes because the truth about what they were getting into was sugar-coated.

    We are ALL paying the price for this, and yet I still see the banks involved merrily making money! I guess it was a win/win situation for them and the crooked* mortgage brokers who offered these kinds of loans to ensure new business with a refinance in the future.

    It's outrageous!

    *Please note, not all Mortgage Brokers are crooks.

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  • by NotTheDoctor on July 5th, 2008

    NotTheDoctor

    Yes. Insofar as human greed being allowed to run its course is your definition of laissez-faire capitalism.

    Some people blame the "stupid poor people" that took out the loans that they couldn't afford.

    Other's blame the "greedy scheming lying" mortgage lenders that loaned money to people that they knew couldn't repay the debt, (like some latter-day Shylock) and then turned around and sold the debt in the form of complex and near-incomprehensible derivatives on the securities market.

    And still others blame the "invest in whatever you can even if you don't understand the investment vehicle" investment banks and brokerages that sunk massive amounts of money into these derivative securities without even trying to understand how they were structured and what real-world commodity backed them and generated the revenue.

    And finally, let's not forget the good old Congress of the US of A. Yes, those "shills on the Hill" (copyright 2008, Michael Tiffany) finally actually deserve some blame for real! The US Congress radically deregulated the mortgage securities markets with the Commodity Futures Modernization Act of 2000.

    So, in truth, all four parties are to blame: the borrowers, the lenders, the investors, and Congress. It took people that wanted to buy a home that they knew, or should have known, that they couldn't afford, borrowing money from people who knew that the borrowers probably wouldn't be able to repay their debt, but that was okay because the lender was just going to package the debt into high interest-yielding yet incomprehensibly complex (and therefore sexy) derivatives and prey upon the greed of the investment bankers with their untold billions of dollars to throw around looking for precisely these same high-interest sexy derivatives, all of which was conveniently made possible by an act of Congress. Whew! Still with me?

    That was the long, now for the short:

    It takes two to tango, they say. So in this case, it takes four to make cl#%t~+f**k. And there is more than enough blame to go around.

    P.S. As a final note, there is a fifth party of culpable nitwits in this tragedy. And that party is you and me and everyone else that got caught up in the euphoria of the real estate bubble and looked on and roasted marsh mellows, not realizing that it wasn't a campfire burning, it was Rome itself.

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  • by rgf2008 on July 19th, 2008

    rgf2008

    NO. It's just part of the plan to collapse the United States economy. The people that run us want to get the North American Union started sooner rather than later.
    Time to learn spanish and french.

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  • by thekingcobra63 on July 5th, 2008

    thekingcobra63

    No, it is really an issue of people taking out bad loans they could afford or didn't have any sense in understanding what a variable rate actually meant. You didn't see many forclosures on those people who got a fixed rate mortgage. Just because they were offering loans to people who had no business taking those loans does not mean it is the banks fault for offering them. People in all aspects of their lives have to know their limitations whether it be physical limits or financial reality.

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  • by judgebill on July 5th, 2008

    judgebill

    History has demonstrated that a) people don't always use common sense, b) institutions don't always use common sense, c) governments don't always use common sense. Yes, individuals "over-borrowed", banks and other lending institutions "over-loaned" and the government ignored what was happening. Remember the S&L crises some years back, same situation. We throw common sense out the window, get all excited about rising housing prices and everybody wants to climb aboard. Then, boom. The bottom drops out. Surprise. Well, it's happened in the past and, unfortunately, will happen again. Remember the "gas crises" in teh 1970's? Cars were lined up for blocks just to buy gas. Then we all resolved to buy smaller, more fuel efficient cars. Look where we are now. Is all this the result of laissez faaire capatalistic practices? Yes. On behalf of everybody.

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  • by Christine on November 30th, 2010

    Christine

    No. It was a result of government meddling. The tax credit for mortgage interest and the mandate during the 1990s for banks to lend to people the banks did not feel would be able to pay back the loans both contributed to the crisis, and have both inflated the cost of houses well beyond their true value.

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  • by Kevisaurus is a Carnotaurus today on July 5th, 2008

    Kevisaurus is a Carnotaurus today

    No it's a result of market manipulation by the mega-elite in order to get richer; don't be fooled.

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  • by DreAnna on July 5th, 2008

    DreAnna

    Everyone wants to put the blame on the lenders..well lets start off by saying lending institutions are in the business of making a profit as all business is. Though there have been some of them loaning with full knowledge that there is no way the borrower is going to be able to pay, most are just lending based on the credit. I have to put alot of the blame on the borrower themselves though. They take out in excess of the amount they could reasonably pay off should something unforeseen happens..loss of job, serious illness ect. Then to go with the shiny new house they bought they decide they must have a shiny new car in the drive and shiny new furnishings etc etc..put it on credit and not think about the what if's. When one of those what if's happens..it's easier to blame the lender than themselves :)

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  • by Shavale is very happy on July 5th, 2008

    Shavale is very happy

    I think it's due to the credit crunch. Think of debt as a house of cards.

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  • by SaulOhio on November 30th, 2010

    SaulOhio

    Laissez-fare had absolutely nothing to do with it, since we did not have laissez-faire.

    I will try to list some of the government measures that were in place that contributed to the housing bubble, but because of space and time, I can only list a small fraction of them.

    Bill Clinton's "National Homeownership Strategy", among other things, encouraged banks to abandon lending standards
    Fannie Mae and Freddie Mac, government sponsored enterprises, backed or bought out mortgages, encouraging bankers to lend money without having to care about being repaid. This accounted for a majority of mortgages.
    Bush's "American Dream Downpayment Act" provided many buyers with money to make downpayments when they couldn't afford to do so themselves.
    Most importantly, we had the Federal Reserve lowering its fund rate to 1% between 2002 and 2005, injecting about $1.5 trillion into the housing market.

    What we had was massive government intervention, creating huge market distortions. Laissez-faire had nothing to do with it.

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