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how is the economy effecting you?
danny_galaga:
--- Quote from: Endaar on August 14, 2010, 11:47:25 pm --- And to reiterate something I said earlier, banks have zero financial motive to make loans that are unlikely to be repaid.
--- End quote ---
The incentive was that a bank could repackage those risks as another form of investment and sell it on, and on, and on. A game of musical chairs, but no prize at the end. Well, not in the US anyway ;)
I bet there was no such repackaging of risks with car loans...
shmokes:
Banks deserve to be blamed because they were making sound financial decisions and it was despicable. when banks were handing out loans to people whose credit and income didn't begin to justify lending such a large amount it wasn't cos the banks had gone delusional and decided to ignore their formulas and just hope that somehow these people would think of some way to pay back the bank. The banks are professionals. They lended to these people because it wasn't a risk. The real estate market was booming. The bank knew they'd be foreclosing on a ton of these properties, but they'd be able to recoup their losses at foreclosure.
And this is why they deserve blame. The average person was looking at the market and getting caught up in the hysteria and making stupid decisions. The banks were just making evil ones. People were selling their houses for an upgrade and sinking all the equity they'd been building into their new house--a house that the bank, with their sophisticated formulas, planned from the beginning to eventually foreclose on. They were just stealing the life's work of people who were, of course, less financially sophisticated. It was a ---smurfing--- scam and people who want to let the banks off the hook are nuts. Those loans weren't just reckless. They were disgusting.
Those bankers were nothing more than Nigerian princes with means. Maybe their marks should have been more careful, but you don't just absolve the crook because his victims were gullible enough to fall for his scam.
AtomSmasher:
Shortly before the market crash, I knew a mortgage broker who specialized in sub-prime loans. She was making a ton of money at the time, but quit her job because she also hated that her job was to give loans to people who she knew wouldn't be able to afford the loans.
The banks and the brokers knew exactly what they were doing, but the money was so good that most of them didn't care.
shmokes:
The money was great. It took many of those people decades to build all that equity and the banks were able to take it from them like candy.
danny_galaga:
--- Quote from: shmokes on August 15, 2010, 01:53:58 am ---
The average person was looking at the market and getting caught up in the hysteria and making stupid decisions.
The banks were just making evil ones.
--- End quote ---
In a nutshell.
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