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Comment by oihoaihsfoiahsf | Hacker News Reader

That's true, but also a non-sequitur, since nobody "stole" home equity from anyone. The value of homes went down across the board because of oversupply, and that is a phenomenon that required potential homeowners, financiers, builders, and other entities to tango. It's not something the banks caused to happen on their own, nor something they bear sole and unmitigated responsibility for.

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The banks did cause it to happen. They had an insatiable appetite for mortgage backed securities and would shop credit rating agencies (who were newly public companies) to get a AAA rating on total garbage they knew would explode.

Municipalities and pension funds would buy AAA securities even though the originators and packagers of the mortgagers knew they were garbage.

It was a big fraud caused by the bankers greed.

Yes, the banks were part of the cause. That is not in dispute, as you can see by reading my previous comments. But they would not have been able to commit their fraud without the aid of credulous buyers willing to purchase far more house than they could afford. That's all I'm saying.

In a functioning market, a buyer would not have received a loan, no matter how much they wanted to over extend themselves. But, because fraud was being committed from the rating agencies, investment banks and mortgage originators, they got the loan.

I understand what you saying, but I think you underestimate the lack of accountability that allowed people to get loans they were not in the best interest of anyone.

I guess my thing is more of a reaction against paternalism and the infantilization of the public. I do think there need to be much more in the way of bank regulations. I don't think the public ought to absolve itself of all responsibility because of the absence of some regulations. I just don't think it's healthy or necessarily leads to better decisions being made in the future. I want an informed public, not a deluded one.

Statistically, you can't have that. No matter what you want, a sufficiently motivated conman will be able to find the dumbest person, for instance by the methodology used by Nigerian-prince scammers: put out bait that's bad, to pre-screen for people dumb enough to be that kind of deluded.

Then you can say 'oh, that scam was so obvious that people ought to have seen through it!' but it was explicitly designed to be obvious because, statistically, THERE WILL be someone (perhaps a nice but foolish someone!) who does fall for it.

Therefore, you can't have an informed public. Ever. It's a matter of how you handle the edge cases. We don't have rules making things like murder, etc. bad just because MOST people don't deserve to be straight-up murdered. We have them because it needs not to be too tempting to murder in those cases where the guy REALLY deserved it… it's inhibiting the potential murderer on general principles, not making value judgements on why to protect extremely deserving victims.

This is not the case in the financial industry, and the consequences we pay for that might be pretty dire. In the financial industry they think they can say things like 'I want an informed public', and they think they can make entire business models on screwing deserving victims, and it's not really about the victims, it's about social pressure stopping people from being monstrous on general principles. And again, nothing at all stops bankers from being monstrous. Indeed, it's a survival characteristic: we select for that.

If people are stupid enough to enter into mortgages with payments they can't afford then they shouldn't be allowed to enter into any kind of legal contract. No credit cards, no payment plans, no cell phone plans, no insurance, nothing. Honestly, they shouldn't even be allowed to choose what they eat since they aren't certified nutritionists.

Your comparison to Nigerian scammers is irrelevant because there is nothing legitimate about a Nigerian prince scam, it's just stealing money. Millions of people have mortgages they can afford and pay for them just fine.

I agree with you about protecting the public, no one needs to be coddled.

But when parties enter into a transaction, there should be repercussion in the case of fraud. That never happened. One party in a transaction was lied to and there was no repercussion to the other party.

Also, thanks for taking the time to respond, really enjoy debating this topic. Wish it could be in more real time.

Individual loan applicants weren't defrauded though (in most cases). They knew what the monthly payments were and what would happen during possible interest rate adjustments.

It shouldn't have been a shocker to anyone making 2k a month that a 1.9k/mo mortgage was pretty risky.

Functioning markets also do not have the Federal Government backing hundreds of billions in loans every single year either (Fannie and Freddie then, and Ginnie now). It's pretty convenient to blame lenders while the government itself was pumping insane and irresponsible amounts of money directly into this market and telling lenders to find people to allow them to do this with. It's practically inevitable for lenders to get greedy when there's no oversight and trillions of dollars at stake. The truly bad actors in this are not the people doing what we know people end up doing when a system is designed like shit. It's the people who designed the shitty system.

>>> without the aid of credulous buyers

or with the aid of people with that necessary skill needed to convince regular people to do something only credulous people would do. What was the name of that skill,... hmm... isn't it "manipulation" or "marketing" ?

You see, if someone's is going to make a mistake, I tend to help him by preventing him to do so. I don't give him the pen to sign its destiny.

Y'all keep trying to explain the morality of what the banks and lenders did to me like I don't already know. I know. It's not good. That's irrelevant to the question of whether they were solely responsible.

I'd argue you're into red herring land a little yourself with the systemic goings-on.

From Joe Sixpack's perspective, he paid his mortgage every month for 20 years, was all set to retire on his home equity, and then poof, the rug got pulled out from under him.

It's a bit of a tall ask to say he should've seen that his home was overvalued and planned accordingly when all of Wall St couldn't see it either.

If Joe Sixpack owned for twenty years, he was not underwater after the crisis. He might not be in as good of a shape as he was at the top, and I can understand how that would be disappointing, but he's still doing fine. If he got greedy and did a big cash out ARM refinance, well, that sucks, but people are told from a very young age that when something seems too good to be true, it probably is. Caveat emptor! And there are warnings ALL OVER the documents you have to sign to actually participate in such a transaction. I reject the notion that American adults should not or cannot be custodians of their own financial lives.

I'm certainly not saying that I expect the average American to understand what actually happened. The average American believes all kinds of things that aren't true, even in much simpler domains of knowledge. I am just saying what actually happened.

What about the Joe Sixpacks who bought homes because housing always goes up and I can just flip this in three years?

But he can retire. He owns a house. Nothing poofed away. He owns it, and is not getting evicted. He can continue to live in that same house that he has lived in for 20 years.

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