Chef Jim Posted July 23, 2008 Share Posted July 23, 2008 Let's just say I disagree completely. And "expectation" has to do with sensibility, which the "housing boom" ain't based on in the least. If that were the case, you wouldn't have families making under $80K qualifying for houses that cost over $500K. The "ROOT" cause of the whole thing was cheap money. There were other factors that got it steaming further and faster than it should have but without cheap money, they never come into play. The money was like a $10 hooker. Cheap and easy. Cheap because of historically low rates and easy because of greedy loan officers. Those people in your example making $80k didn't qualify for the loan because money was cheap, they got the loan because of lax or non existant industry oversight. I had a client that worked at Ditech. I used to meet her over there. What a bunch of low life twenty and thirtysomething slime balls making $200k a year. Link to comment Share on other sites More sharing options...
GG Posted July 23, 2008 Share Posted July 23, 2008 The money was like a $10 hooker. Cheap and easy. Cheap because of historically low rates and easy because of greedy loan officers. Those people in your example making $80k didn't qualify for the loan because money was cheap, they got the loan because of lax or non existant industry oversight. I had a client that worked at Ditech. I used to meet her over there. What a bunch of low life twenty and thirtysomething slime balls making $200k a year. That's basically it. To AD - Just because Wall Street could get the money cheaply from the Fed for 2 years doesn't mean that the Fed is on the hook for what Wall Street & Main Street did with that money. And it wasn't the Fed that bought & sold spec houses and gave mortgages to anyone with a pulse. By 2004 mortgage rates were dropping, even though the Fed started raising rates. That in itself is an indication that loose Fed policy was not the main reason for creating the housing bubble. Plus, much of the money came from overseas, which in turn supported cheap Fed money and easy financing for all the mortgage securitizations. It's a huge game of Monday morning quarterbacking to second guess Fed's decision to leave rates low. But the time period is too short to lay blame on them. No one would second guess dropping rates dramatically in 2001. The question is whether rates should have been raised before 2004. But if you look at the totality of the players involved, 1% increase in Fed Funds in 2003 would have done nothing to slow the mortgage train. And even in retrospect, i's not a slam dunk that rates should have been raise in 2003. Fed needs to look at the total economy, and the tech sector was working out of a major collapse, and there wasn't certainty in 2003 that everything was well, because funding was still cut off to large swaths of tech & telecom sectors. That was a bigger priority at that time than worrying about what would happen to the housing market, because you thought that there was a semblance of discipline in extending credit to homeowners. Link to comment Share on other sites More sharing options...
jjamie12 Posted July 23, 2008 Share Posted July 23, 2008 they got the loan because of lax or non existant industry oversight. I don't completely agree with this. I believe that they got the loan because investors were not doing their due dilligence properly. The only way that these loans could be originated would be if they could get sold. Investors, in their search for yield, never thought to stop and ask about this stuff, they just chased a higher 'return'. "AAA's at 20 bps higher than other AAA's? I'm in!" They took the ratings at face value and went with it. Some would argue that the rating agencies are to blame; afterall, they were rated AAA! how can they go bad?!? I liken that to the following example: A realtor and appraiser tell you that a certain house is worth 200k. You don't know where it is, and you haven't seen it, but you buy it because the 'professionals' told you it was worth it. Turns out, you can only resell the house for 100k. Who's to blame for that messed up purchase? Link to comment Share on other sites More sharing options...
Chef Jim Posted July 23, 2008 Share Posted July 23, 2008 I liken that to the following example: A realtor and appraiser tell you that a certain house is worth 200k. You don't know where it is, and you haven't seen it, but you buy it because the 'professionals' told you it was worth it. Turns out, you can only resell the house for 100k. Who's to blame for that messed up purchase? The slimeball "professional" who told me it was worth $200k. Should I do the research? No, that's why I hired the slimeball professional. The only thing I'm guilty of is not doing a better job researching the "professional". If I had the time and the expertise to do all the research to make sure the value was correct why the hell hire the "professional". The industry is in the mess it is now because everyone and their grandmother got into it (RE agents, mortgage brokers) with piss poor training and virtually no compliance and they fed the monster which is the average Joe's desire to get rich quick. Link to comment Share on other sites More sharing options...
jjamie12 Posted July 23, 2008 Share Posted July 23, 2008 The slimeball "professional" who told me it was worth $200k. Should I do the research? No, that's why I hired the slimeball professional. The only thing I'm guilty of is not doing a better job researching the "professional". If I had the time and the expertise to do all the research to make sure the value was correct why the hell hire the "professional". The industry is in the mess it is now because everyone and their grandmother got into it (RE agents, mortgage brokers) with piss poor training and virtually no compliance and they fed the monster which is the average Joe's desire to get rich quick. OK... We have fundamentally different views, I guess. It's a legit discussion, though. Do you get the blame if your client loses money on a particular trade, Chef? Link to comment Share on other sites More sharing options...
Chef Jim Posted July 23, 2008 Share Posted July 23, 2008 OK... We have fundamentally different views, I guess. It's a legit discussion, though. Do you get the blame if your client loses money on a particular trade, Chef? If I deceived them by telling them they were guaranteed to make money absolutely. That's a slimeball tactic just like in your scenario where the real estate agent told them a house was worth double what is really was. Link to comment Share on other sites More sharing options...
jjamie12 Posted July 23, 2008 Share Posted July 23, 2008 If I deceived them by telling them they were guaranteed to make money absolutely. That's a slimeball tactic just like in your scenario where the real estate agent told them a house was worth double what is really was. What if that person was a real estate professional? (or in your scenario, what if you were selling a stock pick to a fund manager and told him: "It can only go up!" He would laugh you out of the room, or at least, he better!) This is my point: The people who were out there buying these things were ABSOLUTELY people that should have known better! We aren't talking about widows and orphans being hoodwinked by the slick salesman from the city. These were professional money managers, managing hundreds of millions (if not billions) of dollars! These people, in their quest for return, bought up everything they could get their hands on, even though none of it made sense. Why were some 'AAA's' priced so much wider? Doesn't that raise a red flag to anyone? Ultimately, these people should have been much more responsible with the cash than they were. They COMPLETELY let down their investors. That's the whole thing with a bubble, though, right? People can't seem to help themselves, they just pour $$ into an investment even though it doesn't make sense. Link to comment Share on other sites More sharing options...
Chef Jim Posted July 23, 2008 Share Posted July 23, 2008 What if that person was a real estate professional? (or in your scenario, what if you were selling a stock pick to a fund manager and told him: "It can only go up!" He would laugh you out of the room, or at least, he better!) This is my point: The people who were out there buying these things were ABSOLUTELY people that should have known better! We aren't talking about widows and orphans being hoodwinked by the slick salesman from the city. These were professional money managers, managing hundreds of millions (if not billions) of dollars! These people, in their quest for return, bought up everything they could get their hands on, even though none of it made sense. Why were some 'AAA's' priced so much wider? Doesn't that raise a red flag to anyone? Ultimately, these people should have been much more responsible with the cash than they were. They COMPLETELY let down their investors. That's the whole thing with a bubble, though, right? People can't seem to help themselves, they just pour $$ into an investment even though it doesn't make sense. Ok, we're talking two different things here. I'm talking more about the brokers and lenders that were pushing the loans to average Joes. If they didn't get people that had no business buying these loans to actually sign the paperwork very little of this would have happened. There would be none of these foreclosures because none of these people would have gotten these loans in the first place if the industry had tougher regulations in regard to selling the loans. What's your income, what other debts do you have, how much savings do you have, what's your credit score? Oh, sorry NO LOAN FOR YOU! Link to comment Share on other sites More sharing options...
Wacka Posted July 24, 2008 Share Posted July 24, 2008 Just heard on the top of the hour news that a major find for oil and natural gas was found in an area encompassing the US and Russia at the Arctic Circle. 1/3 of the worlds natural gas and 90 BILLION barrels of oil. Link to comment Share on other sites More sharing options...
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