Posted: Wed Oct 05, 2011 5:59 pm
If everyone who ever borrowed money is "stupid", then our country has so many stupid people that nothing will ever fix our problems anyway.
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Nah. Blaming it all on stupid people is scapegoating, isn't it?Hashi Lebwohl wrote:wayfriend...I suspect the jury is still out as to whether or not our problems are fixable at this point.
The "smelly hippies" were the kids and grandkids of the Silent Majority. Of *course* they cared. If the broadcasts of dead bodies in Vietnam were the real trigger, it wouldn't have taken almost a decade for them to bear fruit.Cail wrote:No one cared about the smelly hippies. The general public (silent majority) lost the stomach for warfare when it was televised every night.aliantha wrote:How did the news media end the war, in your view? By the time the late '60s rolled around, they were covering both the bloody corpses in Vietnam *and* the protests. Kent State happened fairly late in the game -- the Democratic National Convention in Chicago was in '68. The film (it wasn't video then...) from the battlefields began to be broadcast earlier than that -- '65, maybe? I'd have to look it up.Cail wrote:The hippies didn't end the war, the news media did.
And it ain't much, after debt service. Good post.Farsailer wrote:To look at it from the other direction: demand rose in direct response to the credit available. With increased demand came the rise in prices. Now demand has to fall back to what is supported by the real economic surplus available to consumers. In other words, that which a consumer has available to spend out of his pocket after he's taken care of shelter, food and clothing.
Sorry. When you blame people falling for a scam, and not the scam artists, that is exactly scapegoating.Hashi Lebwohl wrote:Scapegoating? No, I don't do that.
aliantha wrote:And it ain't much, after debt service. Good post.Farsailer wrote:To look at it from the other direction: demand rose in direct response to the credit available. With increased demand came the rise in prices. Now demand has to fall back to what is supported by the real economic surplus available to consumers. In other words, that which a consumer has available to spend out of his pocket after he's taken care of shelter, food and clothing.
The phrase "no debt" doesn't belong in the same sentence with "leveraged". Leverage in this context means one took on debt to obtain something that was otherwise unaffordable. By using debt, a home buyer can leverage his $20k of cash down payment into a house worth $100k.wayfriend wrote:Debt or no debt, if our economy was based on leveraged consumers, it's going to shrink when they de-leverage ---- and it ain't ever coming back.
This is unfortunately correct. Because every single time in the last 25 years that we did not take the pain pushed the debt mountain higher.This means that if we sit here and wait for demand to end the employment problem facing our country, we will be waiting a long time.
Yes we are going to have 20% to 30% unemployment. That can't be avoided now. Only choice we have left is we either bite the bullet and try to control our way down (unlikely given the atmosphere in DC) or the politicians keep their heads in the sand, then it will control us (what I think will happen). But ... it doesn't have to be the new normal. We still have a few things going in this country. Agriculture, natural resources, biotech, computer and mobile tech, none of this is going away. A fair amount of manufacturing jobs will eventually find their way back here. Plus who knows what new whizbang technologies will come out of nowhere to play dominant parts? However we have to hit bottom first, we have to push the bankers back to their proper place, clear the decks and then you will see a recovery.In fact, if we don't create a new source of demand to replace the one we've lost, we will not only stay at 10% unemployment, but as the population grows unemployment will as well, which will cause demand to fall, which will feed unemployment some more. It will eventually bottom out, but when it does, 20% or 30% unemployment will be the new normal.
This is the sort of thinking that got us in trouble in the first place. People need to understand that every time we had a recession, we did not deleverage, instead we dove deeper into debt as a means of pushing past the recessions. That charlatan Krugman wants us to keep doing that but we're tapped out now. Where the heck does it say we can solve the consumer debt problem by taking on more debt?So while everyone is saying debt is bad, mmkay, I am saying, maybe it would be more intelligent to find something to replace it in our economy before we dispose of it.
Stupid is an overstatement but with discipline people can learn to live largely without credit. Right now the only debt my family and I have is the mortgage for the home we live in. We paid off our Student loans (at 8.25% interest) in Three and a half years. Any credit cards used are paid off monthly and the Mortgage should be paid of in 3 to 4 years. This is one salary.wayfriend wrote:If everyone who ever borrowed money is "stupid", then our country has so many stupid people that nothing will ever fix our problems anyway.
You are assuming a fair amount there. In some cases, the loan officers were directed by their managers to fill in the income information themselves. Why would they do that? Because the managers' bonuses were based on the number and/or amount of money they loaned out. The institution was going to bundle the loans and sell them anyway, so there was no risk to the originators when the loans failed.SerScot wrote:If I lie to a lender to get a mortgage for a $400,000 home when I'm making $30,000 per year who told the lie. Who committed fraud? Was the lender stupid for not confirming the information provided, without question. But the lender made no misrepresentations and told no lies. As such the only person who committed fraud in that scenario is the borrower. Why is saying someone lied to get a loan "scapegoating"?
Even if this is true, that doesn't change the fact that the borrowers were signing legally binding contracts with language clearly stating that what they were signing was the truth.aliantha wrote:You are assuming a fair amount there. In some cases, the loan officers were directed by their managers to fill in the income information themselves. Why would they do that? Because the managers' bonuses were based on the number and/or amount of money they loaned out. The institution was going to bundle the loans and sell them anyway, so there was no risk to the originators when the loans failed.SerScot wrote:If I lie to a lender to get a mortgage for a $400,000 home when I'm making $30,000 per year who told the lie. Who committed fraud? Was the lender stupid for not confirming the information provided, without question. But the lender made no misrepresentations and told no lies. As such the only person who committed fraud in that scenario is the borrower. Why is saying someone lied to get a loan "scapegoating"?
Still inclined to blame the people who took out the loans?
I can't agree with you on this, Ser. The massive amount of consumer debt in this country can't all be blamed on consumer fraud. Not all, not mostly, not some. An insignificant portion at best. And the existence of things such as Subprime lending and mortgage-backed securities means that this was baked into the industry by the lenders. It was a business model. That means it was signed off on from the board and major stockholders on down.SerScot wrote:Regarding "Scapegoating". It's not. If I lie to a lender to get a mortgage for a $400,000 home when I'm making $30,000 per year who told the lie. Who committed fraud?
I can only refer to to the definition of "scam" here. And I have yet to see one loan document that said, "if you do this you will have too much debt".Cail wrote:Even if this is true, that doesn't change the fact that the borrowers were signing legally binding contracts with language clearly stating that what they were signing was the truth.
SoulBiter - You forgot about Congress and the CRA law. They were the ones putting the pressure to get 'every' person into a house. The Fed just aided and abetted them with those super low interest rates.SoulBiter wrote:I agree that there were many many scams out there. I agree that banks and financial institutions were offering loans to people that were not loan worthy. I agree that some of these loans would make a loan shark blush.
But there is plenty of blame to go around.
Consumers - I'm not buying that this many consumers were too stupid to know that they were getting loans they couldn't afford. Most of it is simple math. Some were.. I agree there are some people that are dumb as a rock. But many just took the dice in their hands and rolled up. Too bad many came up snake eyes.
Financial institutions - Yeah the way they were buying and selling these as securities opened the door to exactly what happened.
The Fed - The Fed is probably the most complicit in this by putting pressure on the financial industry to make sure that 'every' person that wanted a house could get into one.
That's precisely what I disagree with. That they "bear responsibility" because they "fell for" it. That is saying that the scamee is responsible for the scam. That's blaming the victim. That's social darwinism - god gave us chumps so that their betters could take advantage of them.Farsailer wrote:Wayfriend - consumers bear responsibility to the extent that they fell for the "consume more" and "cash out your home equity" pitches without fulling understanding that this was based on a house of cards, i.e., debt, or understanding that house values could fall as well as rise.
Wrong, wrong, wrong. People must always be held accountable for their own actions.wayfriend wrote:But when you have someone who figures out that they can talk stupid people into paying fifty bucks to have a rock dropped on their head, and then builds a business around doing it to as many people as possible ... it doesn't look like the stupid person is responsible to me any more.
So people are responsible for being fooled. But banks aren't responsible for having fooled them. Got it.Hashi Lebwohl wrote:Wrong, wrong, wrong. People must always be held accountable for their own actions.
Again, I refer you to the definition of "scam", or "fraud": convincing people to do something against their own best interests for your own profit. If "no one held a gun to their heads" was a valid defense, there would be so such crime as fraud. Abramov would still be running his Ponzi.Hashi Lebwohl wrote:No one held a gun to their heads--people who bought mortgages that they couldn't afford did it of their own free will.
In this instance, yes. If they didn't understand the full impact of what they were signing it is their own fault.wayfriend wrote:So people are responsible for being fooled.
No, they are. Banks should never have been allowing all those creative mortgage products, especially when they knew that they would be dumping the debt onto someone else within 6 months.wayfriend wrote: But banks aren't responsible for having fooled them. Got it.
From USLegal.com:wayfriend wrote:Again, I refer you to the definition of "scam", or "fraud": convincing people to do something against their own best interests for your own profit. If "no one held a gun to their heads" was a valid defense, there would be so such crime as fraud. Abramov would still be running his Ponzi.
The banks didn't commit fraud with shady mortgage deals because all the terms and conditions are clearly spelled out in black and white.Fraud is generally defined in the law as an intentional misrepresentation of material existing fact made by one person to another with knowledge of its falsity and for the purpose of inducing the other person to act, and upon which the other person relies with resulting injury or damage. Fraud may also be made by an omission or purposeful failure to state material facts, which nondisclosure makes other statements misleading.
To constitute fraud, a misrepresentation or omission must also relate to an 'existing fact', not a promise to do something in the future, unless the person who made the promise did so without any present intent to perform it or with a positive intent not to perform it. Promises to do something in the future or a mere expression of opinion cannot be the basis of a claim of fraud unless the person stating the opinion has exclusive or superior knowledge of existing facts which are inconsistent with such opinion. The false statement or omission must be material, meaning that it was significant to the decision to be made.
Sometimes, it must be shown that the plaintiff's reliance was justifiable, and that upon reasonable inquiry would not have discovered the truth of the matter. For injury or damage to be the result of fraud, it must be shown that, except for the fraud, the injury or damage would not have occurred.
To constitute fraud the misrepresentation or omission must be made knowingly and intentionally, not as a result of mistake or accident, or in negligent disregard of its truth or falsity. Also, the plaintiff must prove that the defendant intended for the plaintiff to rely upon the misrepresentation and/or omission; that the plaintiff did in fact rely upon the misrepresentation and/or omission; and that the plaintiff suffered injury or damage as a result of the fraud. Damages may include punitive damages as a punishment or public example due to the malicious nature of the fraud.
There are many state and federal laws to regulate fraud in numerous areas. Some of the areas most heavily litigated include consumer fraud, corporate fraud, and insurance fraud.