On 11/15/2008 10:35:11 PM, Euan Ritchie ([EMAIL PROTECTED]) wrote: > > Surely you can give a single example to support your claim that Bush > > deregulation was responsible for the "subprime mortgage crisis". > > It's fairly obvious it all began with private investment banks going > public in the 1980's > and shifting liabilities onto shareholders. > > Since then it's been a steadily increasing land slide of increased risk > in an environment of decreasing regulation as apparent wealth creation > has been trumpeted widely while the increasing fragility of ever > leveraged debt remained hidden. > > Both Republican and Democrat administrations were blinded by the > proclaimed profits, and everyone (and there were quite a few) who warned > of the dangers was simply ignored because the big players pooh poohed > them. What most failed to notice was the incentives the big players had > to ignore reality - it not being their wealth they were risking.
I'm sure that is all quite true, but I think it begins earlier. (Please correct me if I get the facts wrong here) About 50 years ago a home would cost 10-15K, you put 40% down and paid it off in 10 years. The idea that real estate would *always* increase in value set in and land and home prices increased at a rate that allowed people to think of their property as an "investment". Over the intervening period wages did not keep pace with the rising land values. So soon, lenders were forced to change their practices. At first 20% down and 20 years to pay and so on til you have 0% down and 30 or more years to pay. In light of rising property values, lenders had little choice but to give more liberal loans if they wanted to keep lending money for homes and land. Buyers had to accept longer term loans if they wanted to buy a home. So basically, it didn't matter all that much what government policies were, eventually we were going to come to this bubble burst one way or the other. (Though I must say that there is an implication of government complicity since rising real estate prices mean higher property tax revenues) Why this death spiral was not being discussed years ago is beyond me. Perhaps it is similar to an economic singularity. No one could see what was on the other side, and so averted their gaze. xponent Event Horizon Maru rob _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
