erx

The Housing Crisis: Personal Responsibility and Wishful Thinking

Excellent analysis Malkiel, I too am sick of the way this blame game is being played without keeping in perspective the very different roles and resources of the various players involved.

I agree with your hierarchy but would go even further. The mortgage bankers don’t merely belong on the top of this list, I would argue that they deserve the overwhelming majority of the blame themselves.

Everyone else was more or less doing their job. Homebuyers trying to get into a decent home – no surprise. RE agents and builders selling houses, brokers getting funds for their customers – just doing what they do. Obviously during the boom lots of folks pursued their respective endeavors beyond reasonable standards of ethics or prudence, but my point is the bankers didn’t do their job at all.

Is it not the role of the bankers to evaluate lending risks? Why else are they there? What other responsibility are they paid so handsomely to perform? Seems to me they are the ones who utterly failed to do what they were there to do.

And yes Greenspan should be blamed, for applying too much stimulus and especially for not exercising enough oversight during his tenure as ‘Banker in Chief’.

Gold’s 'Grand' Illusion

Yep - The commodity you want to own if things get really bad is not gold, it's ethanol (booze).

How to Help Both Homeowners and Lenders, at No Public Cost

Idea has promise, but fedup is right - how would we price this broken market? And who would decide?

In my area, houses are mostly just NOT selling at offer prices well below any of the official published price numbers. What these houses are 'worth' is a mystery for now.

Selling Over? I'm Just Not Buying It.

My2c - ???

Not sure where around the SF Bay you're talking about, but in my area list prices are already 20-30% down from the top. And no one is buying at these levels...

ARM Bailout Unfair to Responsible Borrowers

Nevermind the details of this particular bailout plan - I suspect that this entire housing/credit bust is going to end up hurting the responsible people most.

A bunch of people are going to be kicked out of houses they should have never been in in the first place. Some may get bailout deals to subsidize them as they continue to live beyond their means. The speculators and bankers who engineered this mess got to pocket a pretty sweet chunk of the gains on the way up. If their
risk management was so bad that they are now blowing up on the way down, maybe they likewise shouldn't be in the banking/speculating business in the first place. Anyway these folks will probably get bailed out too.

As far as 'hurt' vs 'mad', I disagree with JL. If you bought a house in 2006 in the CA county where I live you are almost certainly six figures in the red by now, regardless of how responsible you were in the sense of buying within your means. The point is that there is massive red ink hovering around right now and some of us are going to be eating these losses while others won't be. I'll bet that the folks like Mr. Sullivan, who bought houses responsibly during the past couple of years, are going to end up taking the lions share of this 'hurt', while many of the folks who are most to blame for creating the problem are mostly going to be able to walk away from the losses.

I would go even further and say that bailout plans which lower mortgage rates for demonstrably irresponsible folks, without the same low rates being made available for those who behaved more responsibly, ultimately just amount to a direct transfer of wealth from the responsible to the irresponsible in our society. This is not
just something to be mad about, it should be opposed - with class action lawsuits if necessary.