Re: [MLUG - DISCUSSION] ideas about housing crisis

[Mike Miller <EMAIL:PROTECTED>]

On Fri, 1 Feb 2008, Jonathan King wrote:

> Actually, that's not it at all. You are totally wrong here.

Can you find a third way to say that?  ;-)


> the intent was not to foreclose, because that loan would be held by 
> somebody in Dusseldorf or Chicago by the time that the people mailed the 
> keys back in Florida.

OK, I can believe that.  The intent was not to foreclose, but you are 
saying that foreclosure had no effect on the people who made the loan, and 
I guess that meant they didn't care if the recipients of the loan were 
qualified.

So, to answer my longstanding question of who was making money from this, 
putting together what I wrote and your reply, I'm getting (1) banks, (2) 
people on Wall Street who securitize mortgages into CDOs and such, (3) 
mortgage brokers.  The definite losers were people who bought the CDOS. 
Depending on timing, homeowners could be winners or losers.  People 
selling CDOs lost something when they got caught holding them at the end 
of the game.

The big crime seems to have been with Wall Street financiers packaging 
dubious mortgages into AAA securities.  I suppose the banks that gave out 
dubious mortgages pretended they were as solid as ever.  Mortgage brokers 
were negligent, but only because banks let them be negligent and paid them 
to be negligent.

Am I closer now?

Another question arises:  What changes allowed all of these events to 
transpire?  Was it merely low interest rates from the Fed?  Or was there 
some change in law that made it possible?

It seems to me that we are perennially in the midst of one 
multi-multi-billion dollar ripoff or another.  Consider the S&L Scandal of 
the late 1980s and early 1990s.  In some ways it was pretty similar to 
what just happened:

   ...many S&Ls lent far more money than was prudent, and to risky ventures
   which many S&Ls were not qualified to assess.  L. William Seidman,
   former chairman of both the FDIC and the Resolution Trust Corporation,
   stated, "The banking problems of the '80s and '90s came primarily, but
   not exclusively, from unsound real estate lending."

Where are the regulations we need to prevent these enormous failures?

Mike

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