fancycwabs (![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png)
fancycwabs) wrote2008-03-24 01:41 pm
fancycwabs) wrote2008-03-24 01:41 pm
A question.
Does the housing crisis strike anyone else as largely fictitious?
I mean, obviously people are losing their homes, and one major lending corporation seems to have suffered a collapse, but aren't the numbers driving the interest-rate increases arbitrary, designed to screw homeowners over based on the inability to refinance as their interest rates grew beyond their ability to pay?
Did Bear Stearns fail because it couldn't walk the fine line of screwing their customers just enough to get them to keep paying mortgages, but still enough to keep the investors from pulling their money out of Bear Stearns and investing it in a company who could screw its customers even better than Bear Stearns could?
After all the COFI hasn't really changed THAT much over the past few years--it certainly hasn't hit percentages I saw (7.5%) when I bought my own house seven years ago.
Are we, as a nation, going to wind up paying a lot of money to bail out real-estate speculators, instead of letting them suffer the consequences of their folly?
I mean, obviously people are losing their homes, and one major lending corporation seems to have suffered a collapse, but aren't the numbers driving the interest-rate increases arbitrary, designed to screw homeowners over based on the inability to refinance as their interest rates grew beyond their ability to pay?
Did Bear Stearns fail because it couldn't walk the fine line of screwing their customers just enough to get them to keep paying mortgages, but still enough to keep the investors from pulling their money out of Bear Stearns and investing it in a company who could screw its customers even better than Bear Stearns could?
After all the COFI hasn't really changed THAT much over the past few years--it certainly hasn't hit percentages I saw (7.5%) when I bought my own house seven years ago.
Are we, as a nation, going to wind up paying a lot of money to bail out real-estate speculators, instead of letting them suffer the consequences of their folly?
no subject
The results of a brief google give me the number 45,327 nationwide for January 2007, which they mark down as a 90% increase on last year. While not claiming statistical rigour on this, fudge-maths means that looks like around a quarter of a million more people will lose their homes in 2008 than in 2007. That's not total, that's excess.
As far as darn people and their risky behaviour goes, well, that's not really how the process goes. Yes, if you're super smart you should know how to analyse risk properly, but bear in mind the "crisis" was caused because super smart people running great big banks couldn't analyse risk properly. Ordinary people looking to get good deals on their houses can be forgiven, I think, for believing their financial advisors.
The basic situation is that a lot of people were sold mortgages whose repayments were reasonable proportions of their income, but which were miscalculated by the financial institutions who were all high on crack, meth and the belief that property bubbles never collapse. Come the inevitable squeeze, all of a sudden the banks have got a huge hangover and these really good deals suddenly turned those reasonable repayments into giant chunks that consumed 50% or more of people's incomes, shattering their budgets and in many cases breaking their budgets. And since it happened all at once, you've got lots of people looking to downsize and sell off their property, which depresses house prices in the area meaning their property might not even be worth their mortgage any more. Bang, and all of a sudden some neighbourhoods are full of people who have a $200K loan with repayments that jumped 100% in six months, secured on what is now a $130K house.
We're bailing out speculators at banks because they're "too big to fail," but we're not bailing out homeowners because they're "too small to fail". Welcome to capitalism. Remember, they want you to think it's the poor guy losing his house's fault because then you're not going to demand any bankers' heads on a spike.