Times are tough all over

[lookout123]

ARMs are simply a tool. A quite effective one for specific purposes that was used by far too many for very incorrect reasons. The loan isn't to blame - the people who approved it and the people who took it are. The housing bubble didn't happen because a bunch of republicans figured out they could scam the system, it was a result of human nature colliding with market forces.

1) Home ownership changed from being the American Dream to the American Expectation.

2) Tech Bubble burst, money flooded out of equities. Money has to go somewhere real estate was attractive at the time.

3) Greenspan dropped rates to lowest in well over 40 years. Real estate became very attractive due to low cost money.

4) This made mortgages more affordable for everyone. New lenders and loan officers flooded the market and competition increased.

5) "highest percentage of home ownership in history" started creeping into the news and political speeches. People who never considered buying a home were now told they should, so they did.

6) Low Rates + Large amounts of cash + human nature (ego/greed) resulted in bigger houses, bigger prices, and competition between consumers/builders/lenders.

7) People started using ARMs to buy more house than they could afford rather than the intended purpose for the product.

8) Housing supply begins to outstrip demand with more development continuing.

9) Rates increase causing people to rethink the next new house compared to their current cost.

10) Supply starts to surge.

11) Builders offer incentives, causing resales to become less attractive, thus causing prospective buyers problems in selling current home or to keep it as "an investment property".

12) Smart money left real estate. ARMs start to reset. Everyone starts talking about the elephant in the room.

13) The snowball now has enough momentum to take out pretty much anything in it's path.

[tw]

Originally Posted by lookout123

ARMs are simply a tool. A quite effective one for specific purposes that was used by far too many for very incorrect reasons. The loan isn't to blame - the people who approved it and the people who took it are.

lookout123's analysis far more accurately describes how the avalanch started.

ARMs always existed and were useful for the few (single digit percent) applicants that needed it. ARMs would never have been approved for so many when rules and standards existed. Few qualified for an ARM until recently with deregulation. Suddenly almost anyone qualified for an ARMs when we were fixing the economy by throwing money at it - tax cuts, Greenspans low interest rates, etc. Loan officers could offer such dangerous mortgages to most anyone. Those mortgages would then be sold to markets that no longer bothered to review what they were investing in - mortgage backed securities carefully written so as to not be insurance and therefore devoid of any serious regulatory oversight. NINJA became the new standard for mortgages.

Perot was quite blunt about this. An economy is never fixed by throwing money at it like a grenade. And yet that is exactly what we did rather than let a recession fix the economy. Unfortunately and as a result, we are now doing it with literally the entire value of both the Federal Reserve and US Treasury. Yes, even those institutions have run into monetary shortages by issuing so much corporate welfare.

Money games were so widespread especially since 2000 that even the Treasury and Federal Reserve are scrambling to find and free more funds. Appreciate how massive this meltdown. Accounting changes and the CRA had near zero effect - obviously irrelevant to the problem.

[tw]

Classic man - your admittedly limited research has led you to post the right wing extremist mantra. Blame it on Clinton. Blame an accounting change. A finance market meltdown due to those trivial reasons?

Ignore that the mental midget intentionally deregulated and kept throwing money at the economy as if tax cuts to the rich, tax rebates, and massive government spending solve everything. Even equities were carefully written to be regulated only by the SEC (not regulated by the states) where regulations were subverted, ignored, or liberated. Where even NINJA was the new model for business.

George Jr got the deregulated economy he wanted. None of which is mentioned in classicman's research. Research curiously echoes what right wing extremists say. Blame Clinton. Never blame the administration that all but refused to prosecute Enron, did nothing to address a lack of transparency, and even refused to increase the Security and Exchange Commission budget.

Why such great care so that securities would not be insurance? Then the equity had near zero regulatory oversight by federal regulators – George Jr’s deregulation.

Rule changes after 2000 made it easy and profitable to market equities without due diligence. As a result, $trillions were tied into unstable equities - especially mortgaged backed securities that started an avalanche. As a result, credit and equities markets froze because no one knew who was stable and who was about to go belly up. As a result, companies ran to government for corporate welfare while the reason for those failures walked away with $hundreds of millions. All these somehow are missing in classicman's posts that would attack the messenger rather than address a fundamental problem. His research parrots right wing extremist mantra.

Blame 'mark to market'? Why not also blame Putin? Classicman – do you realize that is equivalent to blaming an ant for causing you to stumble? Can you deal with the absurdity of your ‘research’ rather than take it as a personal attack?

[Cicero]

Originally Posted by lookout123

1) Home ownership changed from being the American Dream to the American Expectation.

I think I said something like this in the "Finger Pointing" thread when people tried to narrow it to a specific political party.

Greed drove the market to sell off the American dream, along with the paint for the pickett fence. Greed is not a political affiliation.....I have known libs. and conservatives bent on selling this dream.

On the other hand: It was also job opportunity for a great many people, and I am sorry to see that they have no income now either.