>My argument has been that those defaulted loans set off the chain of events which put us where we are, and had those loans not been defaulted on, we would not be in this situation. Therefore if you prevent the defaults, you prevent the problem. You can call this over-simplistic all you want, but you can't argue that it is true.

Gotta disagree on some points here. Sure it's really bad that people defaulted on their loans and that definitely didn't help the bottom lines of the companies who had to take the hit. But this didn't really bring down the economy.

As ugb tried to explain to you on a couple occasions, the house of cards really leaned heavily on the mortgage backed securities. Imagine leveraging a huge amount of money on the basis that these mortgage revenues are basically a "sure thing." The companies took on huge amounts of risk because this basic premise was incorrect. The housing mortgages were not such a safe source of income after all and thus when the mortgage income started to become unreliable, no one could really put a fair value in for the mortgage backed securities. And uh oh most of these companies are leveraged in the billions and now have to write much of these investments off which spooks investors. Massive sell off on the stock begins, company loses mechanisms to raise cash. More panic = run on the bank = many failed companies.

So sure the inflated housing market hurt quite a lot and many people defaulting on loans was bad. But the mortgage backed securities and the giant house of cards that was allowed to be built on top of the mortgage backed securities is what in my opinion really shattered things.

You base your opinion (don't allow the unqualified people seeking a loan get a loan) on 20/20 hindsight. At the time they were seeking a loan, they seemed qualified based on the fact that the housing market had gone up consistently for 20ish years. I personally don't have as much a problem with the housing bubble bursting and many defaults happening. That sucks sure as i stated above wasn't really the reason that everything came crumbling down.

Back in 1990, the Government seized the Mustang Ranch brothel in Nevada for tax evasion and, as required by law and in an attempt to recoup the lost tax revenues, the U.S. Government tried to run it. They failed miserably and it closed a short time later.

Now we are trusting the economy of our country along with $700 billion to a pack of pretty much the same nit-wits who couldn't make money running a whore house and selling booze?

Thought that was worth a bit of a laugh.

Discuss.

hahahaha, well played comik

bc, first of all, i need nothing "explained" to me by ugb. I never denied that the majority of the mistakes were made in the selling of mortgage backed securities. But these securities would never had been sold if the foolish mortgage loans weren't given in the first place. You cannot deny the FACT which i have stated multiple times and no one has responded to, that if those loans were not defaulted on, the problem would not exist. Call this simplistic all you want, im not saying it isn't, but its all i have said, and its true. Stop the problem at its source and it never evolves into more and more problems.

>But these securities would never had been sold if the foolish mortgage loans weren't given in the first place.

Mortgage backed securities (MBS) have been traded for quite some time. I don't think giving or not giving "foolish mortgage loans" would have had any impact. The only thing that would have had an impact are laws forbidding them which is where I think the government might want step in and put some strict rules about these securities.

I think you may need to do a bit more research on MBS - http://en.wikipedia.org/wiki/Mortgage-backed_security

>You cannot deny the FACT which i have stated multiple times and no one has responded to, that if those loans were not defaulted on, the problem would not exist. Call this simplistic all you want, im not saying it isn't, but its all i have said, and its true.

You're stating the obvious and obviously stating nothing at the same time. What's your point?

> Stop the problem at its source and it never evolves into more and more problems.

So we should just continue to prop up the housing bubble by giving money to all the people who took out loans beyond their means? I guess that's one solution, it just isn't one that I agree with. It doesn't really address the source of the problem which was the financial institutions that allowed themselves to become so highly leveraged on MBS to the point that they go bankrupt after the first broad hiccup in the housing market.

Meagles, I think you and Pat are on the same train of thought, just different cars on the train.

The mortgage backed securities were selling at their highest volume in history thanks to "no money down, interest only" style loans. Anyone with a minimum wage job could buy a $250,000 home regardless of their past credit history. It was this loose lending policy that created the large volume of mortgage backed securities and the impending defaults that were to come. Again, government regulation of mortgage lenders may have avoided this entire problem, but in the end it was greedy banks and naive loan seekers coupled with the "bubble bursting" that has caused the economy to reach a free fall. Negative equity on a HOME is absolutely ridiculous and that is what a lot of STUPID Americans are dealing with right now. Blame the lack of government regualtion all you want, it's fucking common sense to not finance more than you can afford.

Agreed on all aspects thrax.

And i know what mortgage backed securities are, no need to reference its wikipedia page...

So Pat, I see you've been surfin' reddit.

reddit?

"Blame the lack of government regualtion all you want, it's fucking common sense to not finance more than you can afford."

Yes but it's not necessarily common sense just how much you can afford. Even the banker with a degree in finance and the fancy tie didn't know. He had the income and assets of the loan applicant right in front of him. He was the one taking the bigger risk. Who is the common man to disagree?

I think any attempt to break responsibility down to one group of people is gonna fail analytically. Bubbles are tricky and that's why we keep having them.

The human mind is not built to analyze probability well. If something seems sufficiently unlikely, we consider it essentially impossible. We think the 8v2 is impossible because we have never seen it. As time passes, we take that as evidence that the impossible is truly impossible and increase our bets on it not happening. This translates to banks having 50$ in leveraged loans for every 1$ in capital, they are THAT certain in their bet.

Consider that the best players in kdice have to learn to anticipate what happens if they LOSE that 5v4. However, no one here really considers the tradeoffs before an 8v4 attack. This crisis is like having a nice lead in the game, losing a "surprise" 8v3 and then realizing that without that 8 you have nothing to defend.

The metaphor breaks down however, because in the kdice case there is a clear person to blame. And that is Ryan.