What caused the current/ending recession

[DuckStupid 40]

So you lean towards reckless lending, with a little push by the Fed?

 

RLLD need to make things complex. Lots of big words means his smarter than the rest of us in his mind.

[kilroy69 1,251]

The Actions/Indifference of our government allowed Reckless Lending to Reckless borrowers and the Mortgage backed securities/housing bubble burst because of Criminal/Fradulent activities by financial institutions that we ended up having to bail out in the end.

 

 

So I would say I blame the government for not doing their job to protect first overall the economic stability of their country. Allowing Corporations to slowly erode or ignore safeguards that were put in place to stop things like this to happen causing a domino effect that almost ruined our country.

[IMMensaMind 462]

This is a really involved answer, requiring more space and time than is available here. This started with the formation of GSE (Government Sponsored Enterprise) of Fannie Mae in 1938 by FDR's New Deal (the first major Socialist policy instituted against this country under the guise of "helping", but which as actually damaged us greatly). FDR did then what we hear so much now: we need the Government to provide something that the free market isn't providing quickly enough: help for individual citizens. Post Great Depression, lenders weren't too keen to lend for homes, so Fannie was born as a result.

 

We would have been better off allowing the market to right itself at its own pace - but that's not the ideology of the run-of-the-mill Socialist, as FDR was.

 

Freddie Mac was then established, years later, to prevent Fannie from monopolizing the market when LBJ privatized it in the 60's. The idea behind both was to make it easier for the average Joe to own a home: even if it took subsidization by the US Government to get them there. In roughest terms, that means the risk of Joe defaulting was now spread to the entire tax-paying population (a fatally flawed idea that sustained itself with our tax dollars for decades). The formation of these two GSEs created the secondary mortgage market.

 

It was made worse several times: via legislative changes intended to make both more influential - by Jimmy Carter; by Clinton, and then by Senators like Chris Dodd and Barney Frank, both of whom were propagated by Freddie/Fannie via campaign contributions and preferred mortgage treatment. Even Obama participated, suing Chase (IIRC) to force loan approvals which were wreckless. As such, these two entities grew enormous, because they were intentionally shielded from the taxes and regulations placed upon the formal mortgage market, and with their assets, they also expanded enormous debt (equal to approximately 45% of our National Debt).

 

The new malignant activity created by these GSEs spawned an entirely new market of sub-prime mortgages, which then spiralled into yet another dangerous entity: the Credit Default Swap. This was the market's way of attempting to insulate itself against foreclosure, but in reality created an unsustainable Ponzi scheme, which saw itself implode - and take giants like Bear Stearns with it, when the market tanked.

 

The formation of CDRs in the market I akin to the body's formation of cancerous tumours: it is what the market did when it had something artificial (carginogenic) introduced into it. They were the unintended consequence manifested by artificial manipulation of the free market by those who have no understanding of the principles which guide a healthy market.

 

Many politicians, notably Dubya and McCain, saw Freddie and Fannie as dangerous, and capable of bringing down the economy, and they sounded the warning bell. At the time, the Dems controlled Congress. This is what was said then in defense of both:

 

http://www.youtube.com/watch?v=2UZ9l_AxKjAhttp://www.youtube.com/watch?v=iW5qKYfqALE

 

 

This artificially introduced player - Government player in the free market - created a swell in the supply of buyers, which (basic economics here) created a boom of demand for homes. The prices - naturally - skyrocketed. This of course created a tremendous amount of artificial wealth, as inflated equity was tapped by irresponsible homeowners, and used on myriad other things. This "Bubble" was doomed to pop: and when it did, millions of homeowners found themselves deeply in debt; many upside down on their mortgages. Frank in particular is guilty of obstruction/complicity in creating this crash, perhaps more than any other single person (except FDR, who I believe is the Grandfather of the Socialist movement which wreaked this destruction on our country).

[IMMensaMind 462]

Here, O'Reilly tears Frank a new one:

 

http://www.youtube.com/watch?v=FSIlUpoUdls

 

In short, and in general though, your answer is Government, and everyone in Government who believes that Government should be a social engineer, as FDR mos def was.

[BLS 314]

Here, O'Reilly tears Frank a new one:

 

http://www.youtube.com/watch?v=FSIlUpoUdls

 

In short, and in general though, your answer is Government, and everyone in Government who believes that Government should be a social engineer, as FDR mos def was.

 

 

I think you mean this one:

 

http://www.youtube.com/watch?v=aIm5Mp-mmRU

[GettnHuge 2]

Does anyone really believe that all these banks all at once just decided to make a bunch of high risk zero down loans to people with no income?

It only happened because a gov't committee and their GSEs said, we're changing the rules, we demand that you do this, we'll go along with you,

and if it fails, we'll back you all the way.

take away the risk and you take away responsibility

[BLS 314]

Does anyone really believe that all these banks all at once just decided to make a bunch of high risk zero down loans to people with no income?

It only happened because a gov't committee and their GSEs said, we're changing the rules, we demand that you do this, we'll go along with you,

and if it fails, we'll back you all the way.

take away the risk and you take away responsibility

 

 

Agreed completely, BUT I will always go back to the Fed as the root cause of the problem.

If there isn't an abundance of cheap credit, NONE of this matters. Regulations aren't needed because those who take risks lose their banking business (the way it's supposed to be).

[GettnHuge 2]

Agreed completely, BUT I will always go back to the Fed as the root cause of the problem.

If there isn't an abundance of cheap credit, NONE of this matters. Regulations aren't needed because those who take risks lose their banking business (the way it's supposed to be).

 

I'm with you on the Fed, overall sure plenty of blame there. I guess I tend to put them to the side because to me there is a bit of difference between creating

an environment of possible fail if misused, vs direct decisions, acts or demands in that environment pushing misuse into utter fail

[Bill E. 703]

Reckless Lending - Yes

Mortgage backed securities/housing bubble burst - Yes

Reckless borrowing/spending by joe public - Yes

Criminal/Fradulent activities by financial institutions - Yes

Actions/Indifference of our government - Yes

 

I don't know how to vote. It's like asking me which '80s Boston Celtic I hate.

 

+1. Reckless borrowing brought about in part by government pushing lenders into reckless lending. That lead to the burst, high unemployment and recession. I don't know about Criminal/Fradulent activities by financial institutions causing the recession as much as irresponsible activities by financial institutions. borrowers and government. Since I am not a lender, borrower or government official so I know that it was not my fault.

[Bill E. 703]

Does anyone really believe that all these banks all at once just decided to make a bunch of high risk zero down loans to people with no income?

It only happened because a gov't committee and their GSEs said, we're changing the rules, we demand that you do this, we'll go along with you,

and if it fails, we'll back you all the way.

take away the risk and you take away responsibility

Right, if you can lend money to anyone with a pulse and immediately sell the loan to Fanny or Freddie, why not do it?

[BLS 314]

Right, if you can lend money to anyone with a pulse and immediately sell the loan to Fanny or Freddie, why not do it?

 

 

Especially if .gov promises to 'cover your butt'?

[Strike 5,565]

Link?

 

 

before you get started, remember.....I have all of them easily available, each and every one where I pointedly blamed the government and the banks. But share your stupidity with us, by all means....

 

LOL. You did say I committed fraud. You gonna deny that one too?

[Jameslary 0]

According to me all the four factors are equally responsible for the recent economic turn moil.Moreover the US Real estate market crash,people thought that the real estate prices in USA would never come down,but when it did,it brought the whole economy with it and the subprime mortgage loans where loans given to people with bad credit history.

[peenie 1,915]

the mets started the recession? wtf is he saying? i don't even understand him. is he saying the mints? wth?

 

i don't believe reckless joe who didn't pay their loans was responsible because there have always been people who couldn't pay loans, it's the bank's responsibility to only loan money to people who can reliably pay it back.

 

you don't blame the 2 year old child for eating too many cookies, you blame the parent.

 

banks took advantage of people who had no ability to understand what they were doing in order to make a profit.

 

also, i had a friend who was a former home owner. she and her husband divorced, they sold their house and parted ways. she bought a new home with some sort of loan where she didn't have to have a large down payment and her interest was low at first and then got larger later on. she had to sell her house because of the eventual loan payments. she had a job and good credit. she wasn't a risk. she just made a poor decision about financing. i think that is what happened to a lot of people. they were offerred a choice that seemed smart and easier on the pocket. i think it's unfair to say poor people were out there buying mansions.

 

i still rent and all my poor friends rent.

[The Red-eye Jedi 0]

This pretty much explains it all:

 

http://www.econtalk.org/archives/2010/05/roberts_on_the_2.html