In my opinion, the problem stems from a lack of understanding and/or a careless apathy from the public regarding proper financial management.  To point the finger at the Lenders alone will do no good, as like any business their main purpose is to make as much money as possible, which is the entire point of capitalism.

The ultimate example of capitalism is to do what Greenspan himself suggested lately ... Don't bailout but instead foreclose, then nationalize Freddie&Fannie and hold a public auction to the highest bidder. Works for me. (source: Bob Brinker. Ya'll should listen as he makes way more sense than NPR)

Good post, by the way.

I'll agree with that, vanity.

I'll agree with that, vanity.

I think hell just froze over.

It also has to do with "bundling" of sub-prime (and downright fraudulent) loans. The Big Two didn't do enough homework (or have stringent enough rules) when buying loans made by other lenders. How do you think people like Crisp & Cole were able to make so many loans and stay afloat for as long as they did? They bundled the loans made by their "Towers Lending" and sold them in bulk to companies like Fannie Mae and Freddie Mac. Now multiply that by the thousands of crooked loan companies that flourished during the housing bubble across the country, in almost every town.

The fact that moto is complaining about government (mis)management of the budget while voting twice for the idiot who ran up America's credit cards (and the Congress than enabled him) makes me laugh almost as hard as the idea that somehow an unregulated (free) market is much more stable (and cheaper) than a government-regulated (or even run) one. The problem with both the oil market and the housing market was not too much government interference, but too little interference (regulation). You've got crooked middle-men (futures traders for oil, and loan officers and appraisers for houses) working in the gaps where government regulations don't quite reach. They inflate the values of their markets, FAR beyond their true prices. Then when things collapse, people like moto go and blame the government, like it was the government inflating the prices. Bonus points for claiming that Ford and GM are the victims of the economy (instead of their own stupid focus on inefficient SUVs and trucks) whereas Fannie and Freddie are at fault for being required to buy certain loans (fraudulently made by crooked loan officers) by their government charter. That's some truly brilliant reasoning there, moto. No, really, you've outdone yourself. Granted, you aren't quite at the logic-breaking point of a, say, Bakersfield Superman or NeoCon, but this one is pushing the limits of what would be considered even mildly insane by the more rational of your readers.

Nothing personal, of course, eh Matt?

Mattloch, if we had a truly unregulated free market our economic conditions would not be what they are today. Problem is, the government is involved in a half-a**ed way. My opinion as far as the government goes, lead or get out of the way.

It's like being "kind of" pregnant. 

You are, or you're not, so my advice to those who believe that the government can fix everything for all of us, I wish you my best and I'd like to see that happen. And I'll see you in the soup line and I prefer Manhattan Chowder, thanks.

Nancy, I'd be saying the same thing no matter the source. But when someone knows enough about a situation and manipulates history or the facts to suit their opinion, that's when I tend to get fired up.
 

Wrong analogy, vanity. The government should be like the referee of a game. If they're doing their job, you never notice them there (because the players know the rules as well, and play within them). But when the players get out of line, the referee steps in and corrects the transgression (even punishing the players, if the rule was important enough, or the foul flagrant enough). You can have a well-called game, or a poorly-called game. You have hands-off refs (which usually results in people getting hurt, and one  side losing badly, usually the one playing within the rules), interventionist refs (which can sway the outcome of the game- just ask Donaghy), and just downright bad refs (who don't know the rules, or don't care). You also have good refs which step in at the first sign of trouble, and keeps the game fair (while serving notice to the thugs and headhunters that their bullying won't be tolerated). You can have a game that is "kind of" officiated.

Point taken, Mattloch, and I agree with the "ref" analogy. However, how can one (a business) play a game (earn a living and employ people) when the rules change at the whim of a vote by any government entity? Or the judiciary, for that matter. 

Your words: You can have a well-called game, or a poorly-called game. 

Do you really think the government is objective enough to do that? We wouldn't have this Freddie/Fannie situation in the first place if the government weren't involved. Now retirements and pensions are on the line. 

Having the government "kind of" involved is the kiss of death. Put us all out of our misery now and just nationalize everything. And they can start with the Screen Actors Guild.

There's plenty of blame to go around. For instance, I get a kick out of the radio commercial that has the alleged victim saying..

"....turns out we had a variable loan." Turns out? Turns out? Turns out you're an idiot for not knowing what you are signing, or buying something because you could afford it for two years, then the payment skyrocketed. I have no sympathy for those buyers. They need to eat it as much as the lender.

FSG says: "To point the finger at the Lenders alone will do no good, as like any business their main purpose is to make as much money as possible, which is the entire point of capitalism."

Actually, the main object of a free market capitalist enterprise is to allow and encourage fair profit based on the production and sale of goods, services and commodities at fair market value.

The abuses by financial industry marketeers could have been prevented with proper oversight and enforcement of existing law.

Lending abuses and price gouging, especially of essential commodities such as energy, which push prices far  above fair market value is basically illegal under existing law.

The economic problems presently faced by this nation lie with the disinterested government which allows unfettered freedom of markets and which intentionally looks the other way as some marketeers violate the law.

So called free markets require oversight to prevent abuses and illegalities.

However, existing laws governing free markets have been virtually ignored while new legislation to strengthen existing law and protect the economic security of essential commodities markets has not been forthcoming by a government which has simply allowed crooks to flourish at the great expense of eroding the financial underpinnings and economic stability of the nation.

Somehow, conservative Republican administrations have embraced runaway free market economic policy as a tenet of capitalist democracy while regulation has been scorned and derided as evil, unpatriotic socialism.

The Republican mantra of basically flawed concept of less government has been corrupted with flawed ideological dogma.

At one time that Republican philosophy of smaller government simply promised less government intrusion into the personal lives of people.

Today, as conservatism has moved more toward fascism and the hawks wage war while chipping away at basic human rights, that philosophy has morphed into a system that allows corporate special interests to steal with impunity, under the guise of patriotic capitalism.

Conservatives have been quite successful, especially during the past eight years under the Bush/Cheney/Wolfowitz administration, of marginalizing liberals who might curb the greedy, warmongering of extremists who worship the military industrial complex  by demonizing liberal Democrats as evil, unpatriotic commies while selling themselves and their flawed policies to their adherents on the idea that they are the epitome of empirical patriotism and those rotten commie liberals that question their glorious leaders are unpatriotic.

Unfortunately for this nation, it's been the most successful political con job in the country's history. The hustlers have managed to split the nation into a cowboy soap opera oater of good guys and bad guys wearing figurative white and black hats.

Well, conservative Bush-loving  voters got what they wanted, an inept, incompetent, bellicose, good-ole-boy kangaroo government that Neroically fiddles away while the thieves play and burn and bankrupt the nation.

The really sad part is that even after eight disastrous years, many of the poor suckers who drank the conservative Kool Aid have not yet awakened to the fact that their country is being irreparably driven into the proverbial ground and are inexplicably bent on digging America's hole even deeper.

This nation needs some serious fixing, from its infrastructure to its governmental overstructure.

Whichever party takes the lead come November must turn things around before......

Hopefully, by November enough of the duped will wake up, and after January we can begin repairing the damage, free of this administration's greedy militant zealots and further social, political and economic diversity within this nation and the world they would certainly wreak.

I find the argument against Freddie Mac and Fannie Mae is misdirected. Mattloch made a very fine analogy on how the system should work, and pointed out where the fault for this particular meltdown really rests. Freddie and Fannie were negligent in making sure these mortgages were sound, but the charlatans at Ameriquest, Countrywide and the rest of the cast of lenders who were only concerned about collecting the fees on the loans are the real crooks in this affair. It is very much the same story as the Savings and Loan meltdown in the 1980s where deregulation and unscrupulous borrowing practices wrecked havoc. We keep allowing people to do the same scam and expect different results. Why not try real regulation for a change?

The really bad part of all this is that huge business concerns now write the legislation that becomes law. Until lobbyists are removed from the legislative process we're all lawn furniture caught in a hurricane.  

 Actually, the main object of a free market capitalist enterprise is to allow and encourage fair profit based on the production and sale of goods, services and commodities at fair market value.

True capitalism cares not for fairness.

 
Either way, good points, Saber.  I'm only stating that the public are partially to blame as well for not taking the time to do their homework before obtaining mortgages which would ultimately pull them under.  I've personally learned to always know what I'm getting into before I sign any legal documents.

Adam says: "Until lobbyists are removed from the legislative process we're all lawn furniture caught in a hurricane."

The ongoing yard sale of legislation to special interests will surely continue with the election of McCain and his staff of 50 or so lobbyists who would remain his top advisers following his election to the presidency and become cabinet members and matriculate into a "new" administration, seizing other powerful appointed positions within a continuance of Republican leadership.

Hopefully, there will be enough conservative voters dissatisfied with the failed Republican promise to help effect needed change by ousting the Republicans altogether and forcing the troubled party to rethink and revamp its crumbling platform.

And yes, we know what change is.

Change is anything that directs the nation away from its present course.

It really isn't a matter of Obama versus McCain as much as it is a contest of political philosophies.

Look beyond the campaign rhetoric to their political parties to discover their true positions.

It is the parties that are the real political power and philosophy behind their figureheads.

Look to the parties' platforms for the best clue as to how the nation will be administered.

Look to the ways the parties' campaign strategies for clues on how their representatives will conduct themselves while in office both domestically and with the rest of the world.

If you're satisfied with the Rove Republican NeoCon slash and burn campaign smear tactics and ad hominem rhetoric, expect to see it reflected in their candidate's domestic and foreign policy.

Even the dumbest of pugilistic conservatives should know by now that bellicose bellowing, wars and a dearth of diplomacy doesn't resolve world problems or make foreign friends and allies and balance world affairs or mitigate partisan domestic legislative effort.

We don't need feisty little guys with big mouths and even bigger egos running the nation.

We need leaders with brains and the intelligence to steadily and thoughtfully guide us through the minefield of problems we have created with measured, insightful governance.

If we keep electing shoot-from-the-lip-and-hip cowboys to entertain us with manly rodeo machismo as they dumbly stumble and bumble through the complex world of domestic and foreign affairs, we will soon become a globally fractionalized nation without a decent horse to ride home or a decent home to ride home to.

Manipulating, MATTLOCH, which is exactly what you do.  A difference of opinion or seeing something from another view doesn't make you, or anyone, right.  Do you think you're that much better read than motopoet?  Geeezzz, we have so many "experts" on here I wonder why we don't have them all running the country.  The amazing thing is that they're "experts " on every topic.  What would be more truthful is to hear them say "in my opinion."

As for my comment about "personal", the business about insanity was what I was referencing. 

Free Market Enterprise.  Government Bailout.    Why do those tend to counter each other? 

No one bailed me out when my  business didn't make money.

FSG says: "I'm only stating that the public are partially to blame as well for not taking the time to do their homework before obtaining mortgages which would ultimately pull them under.  I've personally learned to always know what I'm getting into before I sign any legal documents."

Of course it's prudent and smart of you to read mortgage documents.

However, you are among a small minority of people with the ability to read and comprehend details and such couched within a complicated legal document which many attorneys might struggle to understand.

Unfortunately, the rest are not as capable and need help and protection from the scammers who would otherwise misrepresent their snake oil.

I've had real estate attorneys examine my voluminous mortgage documents for expensive hours who were unable to fully understand much of the language.

However, in the take-it-or-leave-it mortgage lending industry there is no countering a lender's document with revisions or modifications.

So people were left to rely on the supposedly independent parties representing lenders who show up at your home on Tuesday night and explain each and every provision, paragraph and page.

You and some others may be pretty smart about such things, but a whole lot of people aren't and they deserved protection from became from improper oversight, a decidedly predatory industry.

This is real simple concept that the public deserves protection from scammers.

That's why there are laws preventing people from any number of other scams.

If someone defrauds you on a Ponzi-type investment scheme, they get convicted of a felony and go to jail.

If someone sells you a bad mortgage you are incapable of understanding, they are equally guilty of fraud.

Many scammers in the mortgage lending industry conned millions of people into signing up for bad deals, bundled the trillions of dollars of bad paper into portfolios of financial instruments called derivatives and sold the packages to banks and other investors who are now holding the bag.

Crimes have been committed and eventually, some scapegoats will fall.

But many or perhaps even most of the victims who were conned should not be blamed for their inability to understand the specifics of the documents they signed.

The innocent victims should not be confused with those who knew what they were doing and knowingly signed up for bad mortgages with the intent of flipping the homes for profit in a mushrooming market before the balloon burst and the market went bad.

Will you vote for me Nancy?

You betca Anti...   :-)

However, you are among a small minority of people with the ability to read and comprehend details and such couched within a complicated legal document which many attorneys might struggle to understand.

Unfortunately, the rest are not as capable and need help and protection from the scammers who would otherwise misrepresent their snake oil.

Knowing the difference between Adjustable and Fixed rate mortgages isn't rocket science.  I'm in no way saying that the mortgage industry is not at fault, because they are - they took advantage of many people.  However, as I stated before, to put all blame on them is pointless.  As a whole, our country is extremely capable of learning the basics of any legal or financial issue - there are plenty of resources available through libraries, the internet, workshops, etc.  The reason why so many people are not capable and need help and protection from the scammers is because they are too lazy to do their homework.

For example: there are countless millions of Americans who are extremely well educated and intelligent who have racked up major amounts of credit card debt - not because they're incapable of learning how to manage their finances properly, but instead due to carelessness and the refusal to take 30 minutes to learn the basics about debt management, your FICO score, etc.  Many of these same people are now homeless because of the same apathetic approach to purchasing a home.

The only way to ensure that the current mortgage crisis is not repeated is to make sure that we tackle all issues - both on the corporate/political and the personal level.

See, I can get crossover votes!!!

I found the amortization schedule long, but very straightforward on how much was due every month for the next 30 years. So not understanding you are in an adjustable mortgage is rather silly, unless you just blindly sign anything. However, what I can buy is that people were bait-and-switched at the escrow table because I know people who has this happened. The basic ploy would be to verbally tell the person they were getting a fixed rate mortgage at a certain percentage and then when they get to escrow, it's suddenly an adjustable rate or a much higher fixed rate. Then hard sell tactics are used to get them to sign anyways like "you'll never get another mortgage in time and will lose the house" for a new purchase. I have to wonder how many didn't even notice the terms had been changed on them because they just blindly signed the paperwork.

 I have to wonder how many didn't even notice the terms had been changed on them because they just blindly signed the paperwork.

Exactly.  Blindly signing paperwork is a recipe for disaster.

Matt and all the other detractors and Bush blamers can say what they like, but this would have happened under any administration. I never said those enteties didn't have the right to make all the money they could, but I guess since Matt was so busy perusing the legal documents of the fair trade act, the constitution and the fine print of the management operations of Freddie and Fannie that he got too far behind to actually get the point of my complaint. Which was(I'll type very slowly here)WE as taxpayers, should not have to bail these corporations out.  These companies have and will cost us much more than the oil companies have, but if the oil companies fell on hard times would you be as sympathetic? I also asked about the hearings and investigations. Is someone going to try and convince me that the companies that lose money then want the taxpayer to bail them out shouldn't have to answer for that while the companies that ARE making money and not asking for anything SHOULD have to explain themselves? And Matt wants to tell me MY logic is flawed? Also, on the insanity allegation..one of the definitions of insanity is doing the same thing over and over and expecting different results...Like continuing to throw money at a problem then wondering why that problem doesn't go away. That is NOT a conservative trait nor a personal triait of mine.

I am NOT going to sit here and say I read ANY legal documents pertaining to this problem. I just read the news, listened to the analysts both pro and con and read about the corporations a little. It's easy to blame the idiots who signed on the dotted line for a million dollar home for 1,200 a month with nothing down and maybe some of those dipsticks didn't understand the in's and out's of variable rates and I know that some weren't planning on the market crash and thought they were making a great five year investment, but that's not my fault, as a taxpayer, either. That IS the fault of lenders making such ridiculous offers to people who could obviously not afford even a one percent rate hike and it should be shared by the Fannies and Freddies buying those loans as most finance companies sell their mortgages before the ink is dry on a deal. I realize that's how the business works, but again, should we have to foot the bill for their shortsightedness?

I bought my house in 2001 for 125K at 7%, re-fied in 2003 on a treasury ARM at 5.0%  to lower my payments until interest rates fell a bit(as a market friend said they would do), then re-fied again in 2005 at 6% fixed and I was satisfied to leave it at that. At it's peak, the house appraised at 270,000. I am into it for 200K and that includes the second and all told my payment is about 1,500 a month, which is just about how I planned it to begin with and I assure you I am no rocket scientist, I'm just not a fool.

With just a little foresight I was able to get the home I wanted and keep the payment manageable as I knew that, at some point, the real estate bubble had to burst. If I can do it, why couldn't these big corporations? One word..Greed. Even though they are billions in the hole, I assure you that their honchos have made their tens of millions and have no intention of helping we taxpayers out of this mess.

That's all I am saying