Join the Meeting Place for Moms!
Talk to other moms, share advice, and have fun!

(minimum 6 characters)

How much responsibility does the banking industry hold for the housing/ credit crisis?

This is a really long article, so I will just pull some highlights. Very interesting stuff! Here is a summary of some loans that were actually issued.

Owner Marketing Company* stated income:$20,000 income reported on taxes:$13,333 amount of loan:$633,600

Answer Question
 
stacymomof2

Asked by stacymomof2 at 2:57 PM on Mar. 29, 2009 in Politics & Current Events

Level 23 (18,390 Credits)
Answers (19)
  • In my opinion its 50/50.

    The banks are there to give a service to the public. Just as if you want to go buy a new washing machine, they dont ask you if you have enough money, they just sell it to you. And let you deal with the bill. Same way with banks. BUT I do think they should have been more responsible and kept the mortages CLOSE to what someone should be able to afford.

    The buyer is a human with a brain. When making a HUGE purchase like this they should be realistic. People have such an attitude about what they DESERVE now and days that they ignored what they could afford and bought too much house.

    So to me, it was 50/50. Banks and buyers screwed up.
    Anonymous

    Answer by Anonymous at 3:02 PM on Mar. 29, 2009

  • http://www.msnbc.msn.com/id/29806956/ has a chart summarizing loans actually made.

    Quotes:“The chief appraiser once said, ‘Fraud is what we do.’ That’s how we got where we are today.’” Another former executive told Dateline he was present when the comment was made and confirmed the accuracy of LaLiberte’s account.

    “That place was run by the sales people,” some making $200,000 to $300,000 a month. That did create pressure on underwriters, the former manager said. “There was a lot of ‘keep your mouth shut’ going on, meaning you just didn’t ask questions about things you knew were wrong.”
    stacymomof2

    Answer by stacymomof2 at 3:04 PM on Mar. 29, 2009

  • True enough, there are a lot of buyers out there that knew they were taking out a very expensive loan. But the mortgage industry has a responsibility to NOT make fraudulent loans. They should say no. The thing is, they didn't want to, because they were greedy, and now, after a false housing bubble, everyone is losing money.
    stacymomof2

    Answer by stacymomof2 at 3:07 PM on Mar. 29, 2009

  • The banking industry holds "0" responsibility for the crisis. This is an industry - not a person. You have to look at who in Congress wrote the laws which allowed the preditory people working in the industry to exploit those laws. Then you HAVE to look at the liberal "do-gooders" out in the public who think everyone has a "right" to a home. We all have the right to work towards owning a home we can afford. No one deserves a home priced above our ability to pay. We HAVE to blame the people who knew they couldn't afford the payments, but, out of greed, took the deal anyway. Its ok to place blame where it belongs, but it is conterproductive to try to blame the "big, bad bank" when it isn't even a person.
    jesse123456

    Answer by jesse123456 at 3:26 PM on Mar. 29, 2009

  • The banking industry holds "0" responsibility for the crisis.

    I would have to disagree. Ultimately, they write the check. Often, sub-prime lenders did this even knowing it was too big a risk, and they did it to get fees and commissions. Then they sold them off in groups to investors (ie your 401k or whatever) and touted them as "safe" because mortgage-backed investments were considered generally safe, solid investments.

    Ultimately, the people who took out these mortgages usually paid the price with forclosure, bankruptcy, and judgments. The banks are getting a pass on fraudulent loans where they didn't complete any due diligence, as a matter of fact, encouraged fraud for short-term personal gain. Why are they not responsible as well? Nowhere in the statutes regarding sub-prime loans did it say to commit fraud in order to get yourself huge fees and commissions. They should not be let off the hook.
    stacymomof2

    Answer by stacymomof2 at 4:00 PM on Mar. 29, 2009

  • i'd say it went three ways. . .
    the fed, for starting the stupid housing programs to begin with.
    the banks, for grabbing their new found freedom and running with it.
    the people who took out the loans, who didn't even read to page 7 of the pamphlets dealing with mortgages payments rising if the rates went up. It was pretty clear.
    lovinangels

    Answer by lovinangels at 4:17 PM on Mar. 29, 2009

  • zero
    Anonymous

    Answer by Anonymous at 4:26 PM on Mar. 29, 2009

  • 25 percent their fault. I say the government is 25 percent at fault. Those who were idiot enough to take the loan when they knew what they could afford 50 percent at fault.
    Anonymous

    Answer by Anonymous at 5:44 PM on Mar. 29, 2009

  • could not afford. sorry for the typo
    Anonymous

    Answer by Anonymous at 5:45 PM on Mar. 29, 2009

  • 25 percent their fault. I say the government is 25 percent at fault. Those who were idiot enough to take the loan when they knew what they could afford 50 percent at fault.

    Somewhere about there, but I'd take a little more away from the industry and add it into the government. No matter what, it ultimately comes down to people who did not read their contracts, or did, and convinced themselves it was a "safe" gamble against their future. I can convince myself that if I go to the riverboat and bet $10 on red every time, that eventually I will come out ahead. That does not make it true, and more importantly, it does not make it the fault of the riverboat or the credit card I used to get the cash advance at double the interest rate of a regular charge.
    NotPanicking

    Answer by NotPanicking at 6:11 PM on Mar. 29, 2009

Join CafeMom now to contribute your answer and become part of our community. It's free and takes just a minute.