- May 19, 2008
You're making the mistake of thinking that all loans are equal. They're not. Telling banks to give poorer people loans is not what led to all of this. It's the type of loan that was given that caused it.cerebus23 said:No regulation in banks? You do realize that our government since carter had mandated that banks give loans to poor people for houses, lifting that rate to 55% under bush 2 in the midst of a housing bubble brought down our banks. It was not greedy bankers, or predatory loaning, really what banker gives someone money loving the idea that they might default? None of them is the answer. Cause all that defaulting is what caused the collapse in the first place.
Our government regulating this stuff in the first place is what landed us in this mess.
The problem is the type of loan that's at the heart of it is basically "you pay very little for the first two years, and then your rates go way up." This was because of the housing bubble - prices were going so high up that everyone figured it wouldn't be an issue. Their house would be worth more and they'd be able to afford the higher rate. Except it all came crashing down because it's called a bubble for a reason.
Now, it wasn't government regulation that led to banks creating and giving out this type of loan. It wasn't them being forced to give loans to poorer people. It was the banks themselves that created this and chose to give it out en masse. Not just to poor people, but to everyone that came in looking to get a home loan. There are internal memos and corporate e-mails from people saying that they know it's a bad idea and that it's not going to last, but that the sheer numbers make it a very profitable situation and thus they wanted to pursue it.
What part of government regulation is to blame for that? None. None at all. If the loans were just given to poorer people, or if they were the same type of loan given out before the housing bubble, your argument would have some merit. They could have given the same type of loan that they had been giving out before the bubble but they chose not to. They knew that it was a poor decision and they chose to pursue it. No government agency forced them to, and for that I am far more prone to blame the bankers than I am any government regulation.