[MLUG - DISCUSSION] ideas about housing crisis

[Mike Miller <EMAIL:PROTECTED>]

"60 Minutes" ran a segment on the "mortgage mess" the other day:

http://www.cbsnews.com/stories/2008/01/25/60minutes/main3752515.shtml

After seeing that, and other things, here's what I'm thinking happened: 
Many people will always want to buy houses for little or no money down, 
but they usually can't get a loan.  Banks were giving them loans anyway, 
sometimes for even more than the home was worth.  Why?  Well, they didn't 
quite say so on "60 Minutes", but putting two and two together, I think 
the reason is that they knew the home values were increasing and they 
would foreclose on people and turn a profit.  Why else would they give 
them low interest for the first year, doubling in the second year to a 
level that the owner could not pay?  Foreclosure had to have been part of 
the plan.  But the banks could do without the risk so they sold it off by 
letting others package these mortgages into mortgage-backed securities 
which were sold to unwary investors all over the world.  (On the bright 
side, we did get to screw over some foreign nationals, but how many times 
can we do that before people will not want to invest here?)

To me it looks like a big scam many layers thick.  Many of the people who 
were in on it probably lost money too when the housing market changed. 
They knew they were taking a gamble, so I don't feel sorry for the 
gamblers, but did the gamblers lose?  Or did other people who trusted them 
lose?

The CEO at Merril Lynch who got them into the mortgage securities scandal, 
and a loss of $8.4 billion, was "fired," which means that he walked away 
with a $161.5 million compensation package after earning $48 million the 
year before -- that'll teach him to take big risks with investor money! 
NY Times:

http://www.nytimes.com/2007/10/29/business/29merrill.html

The headline says that it was "a swift fall" for the CEO (into 
multi-hundred millionairedom).  Can I fall next?  Please?

I guess the moral of that story is "crime really pays," or maybe it's 
"cheat, cheat, often beat," or "cheaters typically prosper."

Mike

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