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Originally Posted by forrestlayne  Logically WHY would any bank do something like this to themselves? Sure the banks tried to pass off these loans into portillos(stock market) and also to other banks. Please explain why MOST banks have the same trouble. This problem is not just a couple of banks.
There are 52 major banks right now that is in the negative, the Federal Reserve has not release the list. If you do a search there are only 134 major banks list in the US.
Our government does regulates the banks dealing with how many loans to minorities... It is not strict the only way to let minorities plus lower income was to lossen the standards.
Otherwise unless you can prove that ALL these banks just dreamed this whole thing up I still think it is the "big" government hand in matters that should have been let to the banks.
There are lots of news article since the first Feb that are saying the same thing. |
I never said that there was anything logical about banks making these ridiculous loans, but I can tell you with certainty what their motivation was; greed. No US government agency has ever forced a bank to make any loan nor have they set quotas for lending by ethnicity. The DOJ can certainly investigate cases of discrimination.
Why would other banks adopt the same type of sloppy standards? It's because the other banks were doing it too. While the loans were going on the books, investors sat back marvelling at the growth and the promised returns. And, because these loans were being made, real estate prices were skyrocketing.
The thinking was that even if they had to foreclose, they couldn't lose. So, developers developed and builders built. But, it's a simple rule that they broke too; supply has exceeded demand. How many people think having two houses is a good idea? Who fueled idiocy in lending was not poor people so much as speculators. These are people who bought houses hoping to "flip" them in a year or two.
These loans were bundled together and sold after being guaranteed by bond insurers. Yes, bond insurers are in trouble too. Once these loans are sold on Wall Street, they leave the bank's portfolio (no such word as portillo that I know of). The reason they were able to get so stupid is because regulations have been chipped away and chipped away.
Yes, banks have been that stupid. They've done it before. It's why we had the Great Depression and stagflation in the 80s. Japan has been in a recession for the past 12 years for just these reasons.
Since you already know everything, I don't know why I'm trying to explain things. To satisfy yourself, why not stop by your bank, talk to the manager and ask him or her exactly how many loans the Fed has forced them to make. I will anxiously await your reply. I would also like to know which government agency you believe sets their underwriting standards.