Has Obama gone too far ?

[CocoChanel]

Yes because everything you have to say is so important me.

Debating about Politics is pointless... just like arguing about Religion.
Nothing you say is going to make me become a republicans.
Nothing I say is going to make you become a democrat.
So what the damn point? There is none.

[DoesntMatter]

Was it Stiglitz?

It might have been, I can't remember. It was like a year ago

BTW, if you actually wrote all of that, that's impressive. I will read it, but not now

The housing bubble was less a case of 'poor people started buying homes' and more a case of over-leveraging of credit and easy access for everyone under the assumption of indefinitely rising housing values.

You'd have to be an idiot to assume housing values were going to keep rise. Or stay steady once you bought your house given how absurd housing prices in so many places are

But the "over-leveraging of credit and easy access" sounds a lot like "poor people buying homes they can't afford," only fancied up. You'll have to forgive my layman knowledge of this but that's how it sounds

As to the best actual example that makes me actually angry is this: In Buffalo where a lot of my family lives, my cousin and her husband live in a very nice neighborhood with most houses between half a million and a million dollars. Keep in mind that in Buffalo, that much money can get you about a 7,000 square foot home. The couple who lived a few houses down worked at Home Depot and made probably no more than $20 an hour, and they lived in a house as expensive and big as that. And they never paid their mortgage back and just left. They should rot in prison

[DoesntMatter]

Yes because everything you have to say is so important me.

Debating about Politics is pointless... just like arguing about Religion.
Nothing you say is going to make me become a republicans.
Nothing I say is going to make you become a democrat.
So what the damn point? There is none.

It has nothing to do with importance because it came from me, it has to do with importance because it came from Obama

[MVPlaya]

Idiot or not, everyone thought it despite early warning signs. Back in 06 a series of economists were already complaining about subprime mortgages and an impending housing bubble.

The problem is this: even if a market is going to bubble, it is still profitable to trade in it. In fact, most game theory shows that the ideal action in any type of bubbling market or ponzi scheme is to stay in the game until as close as possible to the bust.

Here's the thing, DM. Even if you refused to loan anything to people under the "Affordable Housing programs," the market would still have bubbled and collapsed. It wasn't just people fair housing initiatives, it was false and deceptive credit, reckless gambling on the housing market with derivative trades and credit swaps, and upper class people buying homes under the assumption that rising housing values could help them sell the home at a profit a few years down the line.

And the fact that all of this occurred under a declining economy.

That the housing market was going to bust was obvious to a lot of economists, I remember writing a paper about it my freshman year in college. My thesis was really simple: American's real wages were declining, housing values were rising. This disparity could not, under any circumstance, be reconciled without a bust or a massive swing in everyone's economic fortunes.

The recession caused real wages to decline, and the recession even pushed more people into the housing market since it was one of the few places you could invest in and expect long-term profits, since stocks were deemed too risky. The recession and risk-taking by banks during the recession enabled this collapse to occur.

[DoesntMatter]

Regardless of the impending burst, if banks hadn't given mortgages to people who wouldn't pay it back, wouldn't they have had no stake in the game then? They wouldn't have been out billions and billions of dollars with houses just sitting there

[MVPlaya]

I'm not sure who you mean by "people who wouldn't pay it back," you'll have to define that for me.

If you mean lower income people who qualified under affordable housing programs, then no.

The people who were buying low-income housing were playing in a much smaller credit market, and had a pretty small effect on larger housing markets ($400k+), which headed towards market bubbles all on their own. Each section of the housing market bubbled, high-income housing market, middle-income, and low-income. If one section of the housing market was discriminated against, the extent of the crisis could have been reduced, but the bubble would still have occurred and the subprime derivative trading would still have led to a massive spreading out of the financial crisis between various unrelated companies.

And there is no way for banks not to participate in the mortgage game, they are the main players. Better management by banks could have reduced the extent of their losses, but that would have cut into fiscal profits for their quarters, and there is a problem inside companies that managers are heavily rewarded for short-term profits if people can't see the long-term downside to their gambling. So, institutionally, bank managers gambled as much as they could.

[ecojeanne]

I'm not seeing any Americans in here freaking out about Obama. Just a mick and an Aussie.

that was so intelligently put, Miss America.

[BoredGeorge]

I'm not seeing any Americans in here freaking out about Obama. Just a mick and an Aussie.

I met an American today and he convinced me of the evils of socialism !

I hate having access to free medicine and a high standard of living.

Obama is a JERK !!!!

[Sanctuary]

Everyone knew the housing market would collapse, we just didn't know WHEN it would.

@ DM

There is no one specific cause for the crisis - dumb homeowners were part of the problem but that was probably a result of predatory lending more than anything.

Read this old article from TIME: [url]http://www.time.com/time/specials/packages/article/0,28804,1877351_1877350_1877339,00.html[/url]

@MVP

I am mostly in line with everything you said. However, I do want to make one point. And that point is in the defense of Greenspan. I acknowledge that he made a big mistake in keeping rates as low as he did. He even pushed for deregulation in the derivatives markets (which is a different mistake altogher). But let me go back to Greenspan keeping interest rates low.

You'll recall that we were in a recession in 2002. And just when things were looking really bad, a plane crashes into the World Trade Center exacerbating the situation. Yes, his justification for keeping rates low was so businesses have an easier time lending (not that there really is another reason lol) but you have to understand that there was a specter of deflation looming overhead. And I don't think I have to tell an economics major why taking a risk on inflation to prevent deflation is a sound gambit. He probably knew it would cause a housing bubble, but he certainly couldn't predict the derivatives market to get so ridiculous. It's easy to criticize Greenspan in hindsight but I think he acted completely rational given the information that was available at the time.

Of course, I'm not saying he did the right thing. But without condoning, or condemning, I understand why he did what he did; I most likely would've done the same exact thing in his shoes.