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Monday, September 26, 2016

WASHINGTON — There have been many wrongheaded explanations for the financial meltdown that fueled the Great Recession, but none is more ridiculous than this: The banks were brought down by greedy working-class home buyers aided by the heavy hand of the federal government. In other words, a financial crisis that has swept through the Western world was caused by secretaries and bus drivers who bought four-bedroom houses they couldn’t afford.

As that through-the-looking-glass theory goes, banks were forced to lend money to people with bad credit because of a law passed during the administration of Jimmy Carter. Or maybe it was Fannie Mae that put banks at the mercy of worthless borrowers. Just ask any of the Republican presidential candidates, all of whom cling to some version of that nutty narrative.

  • wnewcott

    Wait a minute–just who’s to blame for that $80,000 college loan? Not Wall Street. And maybe not even the students, who are mere kids signing their lives away against some far-off day of reckoning. At least some of that responsibility lies with America’s Higher Education Industry, an utterly unregulated big business that seizes on every increase in student aid programs as an opportunity to jack up tuition and expense fees. Does it really cost $40,000 a year to educate your average World History Major? Of course not. But as long as cheap subsidized, guaranteed loans are available to kids who need only know how to sign their names, those University Fat Cats will be sure to cash in.

  • rbcraton

    When my daughter and son-in-law decided to buy a house, they looked at their budget and bought what they could affort. Could they have borrowed more and bought a bigger fancier house, certainly. Would it have been wise, certainly not. Because they were wise, when the financial meltdown came, they were still able to afford their payments even though their family is growing!

    The banks were no more greedy than the individuals who spent more than they could afford in the hope that tomorrow would never come! The Occupy Wall Street demonstrators need to grow up!

  • ChristinaXNelson

    Your DD and SIL were responsible and therefore everyone who was not aware that the bank offers for financing were not in their best interests were acting with careless abandon?. That’s unfortunately crap. When I went to Bank of America to ask what HELOC terms would be so we could replace the old drafty windows in our house, I was given numbers that sounded too good to be true. Only because I was informed enough to ask the right questions was I then told “Oh no…15 years of these payments and you will have only paid the interest…then you will still owe the principal. But housing prices will continue to rise. You will have no problem.”. I was furious. How many other buyers went to banks to determine what they could afford to buy, and were pressed to believe that they had no reason to be concerned.”Hey…if you find you can’t afford this, just Sell the house. Housing prices are going up at least 5% a year.”. Lender employees were being given quotas to meet on sub-prime loans. That’s where they could make the biggest profit when the loans were sold to be bundled. I agree. If people like your daughter or like me represented the majority of buyers, the whole situation would not have imploded. Unfortunately, too many people trust the people they turn to for answers since they don’t know why they shouldn’t.

  • axe swipe

    Banks gave out loans knowing that the buyers really couldn’t afford them.
    Buyers took out loans knowing that they realistically couldn’t pay them back.
    The government pushed bankers to give out more loans while feeding poorer and lower-middle class Americans the line that everyone is entitled to own a bigger and better house, even if they couldn’t afford it.

    Maybe it is time that Americans started buying what they can afford and doing without the things they can’t afford, instead of relying on credit and burying themselves in debt.

    More than once when my wife and I were looking for a house, the lenders would say “You can afford this..” and we would look at it and say “On whose paycheck? Certainly not mine!” and we would walk away. This is what Americans should all be doing.

  • AnneG.Arsenault

    I have heard the argument from Repulicans that the Government forced the banks to give loans to the poor. It is unbelievable that any sane person could believe this, but they do. The protesters know they are being lied to by the rich people who run this country. But still the Republicans try to put them down as poor, young, students, any category which they look down on. Just remember that there are millions of people who would be out there on the streets with them if they weren’t too old. I marched and organized in the 60’s, but now all I can do is write and cheer them on.

  • Conservative

    I’m a registered Republican, although I’ve always split my ticket. Right now, I think that the Republican Party is irrelevant, because it has no solutions.

    They seem to never learn. When the Great depression started, all that Herbert Hoover and the conservative Congress could come up with was the Reconstruction Finance Corporation. It’s main function was to extend loans to businesses. Today, aside from handing bailout money to the fat cats so that they can pay themselves bonuses and repurchase their stock, the Republicans have proposed no solutions. Since 1930, the Republicans have not learned anything.

    The rich have a keen sense of entitlement, but they don’t seem to have much of any other kind of sense. When the French and Russian revolutions broke over their heads, they were caught completely by surprise, despite centuries of persecution of the poor by the rich. The condition of the twenty-first century American poor and middle class is far different from the condition of the poor in eighteenth century France and early twentieth century Russia, but we’re getting to that point, fast.

    When the “deluge,” as Louis the sixteenth phrased it hits here, I think that the American rich will be caught unawares and will pay dearly for their insensitivity.

  • Miss Creole

    Cynthia wrote that bankers were “furious with President Obama for pushing tepid regulations that might stop them from repeating their misconduct. And the president, unfortunately, backed off, worried that he might appear radical for supporting proposals that were law for a half-century after the Great Depression.”
    What regulations were these that the President pushed that were law for 50 years, until 1983 or early 80’s. Who overwrote this law?

  • Conservative

    To Miss Creole: I know the answer to your question. It’s the conservative Republicans, led, or was he just tagging along for the ride?, George W. Bush. The Republicans and George W. Bush emasculated the country’s regulations that were put in place by responsible previous congresses and administrations.

    Bush will probably “survive” the criticism to which he’s being justifiably subjected. Indeed, he may be too dense even to realize that he’s being criticized.

  • the_sage

    As I remember it the master architect of all this was Ronald Regan, the champion of de-regulation. It was de-regulation that gave the banks the opportunity to abuse the system. The fox watching the hen house. Today I shudder when I hear people suggest that we should return to those days.

    Credit Default Swaps, insurance parading as investments to avoid insurance regulations. Was it all legal?

  • dawnowens

    that it was the banks being so profligate with the money that made the house prices rise 5% every year for so long, thus making everyone panic that they had to get into the market while they could still afford it! It was an artificial price rise and completely unsustainable especially in the hot markets like California. It ended up pricing out anyone making a normal wage, thus giving birth to liar loans and the absurdities of strawberry pickers buying half million dollar shacks.

    When are the corporate thugs (you can tell them by their $5000 suits) going to go to jail? When are the politicians that accepted campaign money to look the other way going there, also?

    When are guillotines going to show up on every downtown street corner because the protestors get slightly, only slightly, more angry waiting for justice and rule of law to be reinstated?

    Meanwhile, Obama and the Justice Department (ha!) seem to be more concerned with whether cancer patients are smoking pot then they are with financial crimes and high treason.

  • buzzquick

    Let’s put the blame where it belongs. Firms like Goldman Sachs were selling blocks of Real Estate loans to AIG for example. Knowing that the securities were baseless and at high risk. Insurance Co.s are required to keep a percentage of cash and re-insurance to cover exposure for the the products that they have issued . Banks are required to pay specified amounts of $$ to the FDIC to keep a proper balance of loans to cash deposits. FDIC creates a pool of banks that can pick up exposure should a bank become over exposed and unable to call in loans produced by the bank. G-S used AIG to cover exposure, brokerage firms bet on the viability of the securities sold, if they fail, they have the insurance coverage by AIG. No one was checking to see that the $$ cash ratio to securities sold were protected. Because these firms were not viewed as banks, no regulations to stay within the limits of the FDIC. AIG was not required to keep $$ on hand and proper re-insurance to cover liabilities like insurance co.s are required to do.

    Greed was the lion here, lack of proper adherence to regulation, and no oversight. Washington is to blame. Enforce the regulations on the books. No one was watching, because members of Congress were getting huge amounts of $$ to campaign coffers. The same thing happened with the S & L’s in the 80’s. The S&L’s didn’t have to follow regulations because they were not banks.

    Everyone was getting huge amounts of $$, no one wanted to kill the cash cow.

  • SJolly

    You made me loan you!
    (I didn’t want to do it!)
    (I didn’t want to do it!)

  • Jules Philip Guidry Sr

    How can this be? Fifty Million American Citizen are living at the poverty level, and six-teen million American children are at that same poverty level. But yet, Wall Street C.E.O.s, Bank C.E.O.s are making MILLIONS. One reason is, most working Americans spend most of their time working, and don’t have the time to learn how to invest or understand how investing works. We depend on our banks and investment consultants to guide us. They talk, but tell us nothing of value. What is most important to them is their fee, or salary they earn. We learn from an early age to save our money in the local banks, or some insurance policy that has a dividend. We do not know how to diversify our money in Mutual Founds, term life insurance, and instead of banks, save our money in Federal Credit Unions. Banks, Insurance Companies, pay a low interest rate of 1.5 to 2.5% interest on your money while they invest your money and make from 8.5 to 15% interest; “on your money”. For our banking needs, use your local Credit Unions, you own a share of credit union, where with banks you own nothing. Credit unions do not charge fees on minimum balance checking accounts, or charge fees to use your own money.You can even mortgage your home through or car through the Federal Credit Union at less of an interest rate. For life insurance, buy term insurance, it is cheaper per-thousand then whole life dividend insurance. For Long term investments, use a mutual founds, or insurance that is coupled with a found account. This way, you can put money directly in your found account.

  • onetinsoldier66

    After reading the following statement I didn’t read any further as I know the rest from there on out is very likely completely absurd…

    “They were able to get away with it because there was too little government regulation.”

    The absurdity lies in anyone thinking that the Government can guarantee your safety, financially or physically. Fact, we left much of what consists real free markets long ago. Free Markets cannot guarantee your safety either. But a real actual Free Market would have not allowed the multiple market and government Ponzi Schemes that have been going on for nearly as long as they have been. Because in a real Free Market, you can actually see what’s going on, real quick. Bernie Madoff would have only last about ten days, or maybe ten weeks, instead of years.

    And further, this would not have happened, and we would have free markets, if we hadn’t allowed our Government to go where it is now, which is leaving the Constitution of this country so far behind that it’s no longer anywhere in sight. When did that happen? Pretty much when the people let it leave the True Gold Standard and create the Federal Reserve System, 1913. And then later allowed Nixon close the window on what was left of the Gold Standard in 1971 and then to proclaim, we’re all Keynesian’s now.

    Sincerely,

    Libertarian for Life
    Austrian Economist

  • Grady

    First, whenever I hear people insisting that the “corporations” or “fat cats” or the “rich” are responsible for whatever economic difficulty we are working through, I have to step back and consider that whoever is doing the talking is either politically irresponsible or not very bright. First, corporations and rich people have identities. Some of them do bad things. These people can be identified. To the extent they did wrong, they should be. But specifically. To suggest that a whole “class” of crpyto-robber barons none of us can quite put our finger on (OK there are a few Gordon Gekko types running around – we are a diverse nation. Again, can we be specific. Tarring the entire financial community is idiotic) have been at the trough suggests that a generation of sixties protester wannabes are not only without a clue but entirely off their meds. The real sixties activists had guts enough to name names even if wrong from time to time and they were rarely ever off their meds as I recall. Many of the corporations and the investors and rich people are liberals who kvetch endlessly about which airline they should fly to minimize their “carbon footprint” and “save the planet”. Isn’t Warren Buffet the largest investor of all of them. And he is supposed to be on your side.

    Secondly what is all this class conflict nonsense. The dominant part of the tea party and other right wing over the top movements are peopled and supported by the same sorts of not so wealthy and not so educated people that the new left (I shudder to so insult the intelligence of the old left but what is one to do?) purports to love. What is really going on is that this “activist right is composed largely the poorer folks with a certain kind of education and upbringing and who were hurt by the financial crisis are blaming it on Obama and excessive government and taxation and a lot of other ancient conservative shiboleths and a few folks on the margins who have their own nutty agendas or think they can make a buck. And the left, marginally better educated -many have been to Arcadia but few appear to have benefited much- and enamored of a sort of mythical notion that government (when elected by them) is uniquely suited to “lead” and take care of people responds not by wondering why the class that should be behind them (it was in the 1930’s) is screaming for their blood but by suggesting that the whole thing was perpetrated by robber barons who largely go nameless because demographically if you identified them you would find that they attend the same churches and temples and live in the same suburbs and share many of the same beliefs as their detractors. You do not find that many capitalists, robber baron or otherwise, in urban neighborhoods or trailer parks. Ironically, there is no rich hereditary “class” in America. That is cinematic opiate for the poor that has been disseminated for most of a century. More of the rich than not were born into blue collar working class (or rural) households, steeped in the ethics and dreams of those “classes” and living those dreams scratched their way up. Many of these modern day Gatsbys, sensing that their old views were not suitable to their new found society “liberalized” to a great extent. But class solidarity by a group of noveau riche who barely know each other organized to dupe the folks they left behind, the only defenders of whom then are the subburban middle class with their government jobs, anything-goes-as-long-as-it-is-“progressive”-but-heaven-forbid-there-should-actually-be-a-God “churches”,” PBS, adoring fixation on the non educational aspects of academic culture, unthinking support of every scrap of luddite nonsense that tries to pass itself off as “green” and enamored of cultural diversity (unless they don’t like the culture and then they are compradores and lackeys) excuses for political consciousness and mindless obeisance to anything antisocial as long as the word “activist” is tacked onto it somewhere. Are these people any more ridiculous than the some of the more colorful tea partiers and other right wing oddities? No. What concerns me is that any intelligent person could suggest for a moment that they are less so. It has ever been the bane of democracy that the mob (or in this case mobs) are quite happily poorly informed, incapable of much in the way of careful and responsible reasoning, intensely convinced that their specific self interest is the interest of the entire polity, loathe to listen to anyone but themselves, convinced that every reversal of their fortunes is an invidious conspiracy and invariably willing to ignore the requirements of civic order to attack whatever they perceive as against them. Small wonder the Athenians were careful about who they let into the electorate. That the lowest socioeconomic classes, poorly educated, bereft of information and eminently susceptible to political manipulation are making a “government and taxation are the culprit” argument should surprise no one. When have they ever not. The fact that the faction of American politics – the liberals, the left, the progressives, the “activists” should have so alienated their natural allies and far from clarifying the actual political situation, instead respond in kind with political nonsense that is not only equally or more nonsensical than that they oppose but utterly irresponsible given that they are in a position to know better, for no better reason than that they pine for the days when they could dispense with social order, march around and challenge “the Man” and intimidate the electorate into “respecting” their nonsense du jour. It is probably just that since the New Deal the progressive movement has become so affixed to the government dole that it cannot now imageine a an alternative existence, much less extricate itself. Now the progressive movement in America is not a negative thing. It has beena good and essential part of our national history. I credit much of the success of the civil rights movement and the improvement of unconscionable labor conditions in our country with their more intelligent and heartfelt efforts of 2 to 4 generations ago. And in a generous moment I think I even have to credit them with getting pollution under some kind of control which from the 1960’S we badly needed to do. You can always tell which initiatives were good sense. Nixon, when elected president, for all his faults, and later Ford, though conservatives, dutifully continued their development. But that does not mean one ought to have to put up with every loud, ignorant, luddite, mindlessly inclusive rant by every ignorant camp follower and sixties wannabe since the McGovern campaign. I think Obama is a good president. I think he actually thinks things through beyond “Hey, lets go down to the Unitarian Church and paint signs for our march against the fat cats” and he is trying to be a president for all of us, not just the ones who “think” rather self indulgently that they got him into office. That the right kvetches about him is to be expected though the rhetorical tack they take makes thinking people of any persuasion decidedly uncomfortable. That the left kvetches about him with almost equal agony (except that he is now their “lesser of two evils” candidate) suggests to me that the lights are off upstairs and nobody is really home at the moment. The failure of responsible and intelligent leadership that has in recent years destroyed the right as a credible force in American politics has now unmistakably and mortally afflicted the left. Come on guys – what happened to “Think globally act locally” or was that always just idle talk. Quit blaming unnamed classist shadows for all our ills, quit demonizing the salt of the Earth people you are supposed to love and serve eternally, and quit insisting we subscribe to whatever imbecilicly inclusive, revisionist and universally irritating “political potpouri” the last just-off-campus-collective-coffee-clatch on Sixth St. and University whipped up and show us how it works when it is done right. Or leave us alone.

  • anthony m liberatore

    I hope that this phenomenon is part of an ethos that may have it’s roots in the Arab Spring. May be it some sort of thing that is sprouting up all over the globe.
    As an old man with not much time left, it gives me hope that I might see something before I pass on. I hope that this movement stays loosie – goosie, so that the spy satellites and otherwise paranoid among us can’t target individuals for investigation and labeling, and also that this movement itself doesn’t become the platform for some Narcissist to launch his or her dream for fame and fortune.

  • Anosike Aloysius

    It is disheartened to blame the inglorious financial crisis on only the poor in the society. They are regular donkeys use accumulate the wealth of the nation while the Kings and members of their household only articulate how to waste them. No one should hold the poor masses responsible for the current disaster.

  • Totenkatz

    Cynthia Tucker needs to go back and educate herself more before she writes about a subject that she obviously knows little about. I have six brothers and sisters. My father fought the Japanese in WWII and only had a six grade education. My mother was college educated and taught us the importance of watching your money and saving some for a rainy day. I grew up poor wearing hand me downs most of my childhood. But my parents put a roof over our heads and food on the table (not a lot of food so we stayed thin) and taught us not to depend on the government but to believe in ourselves and work hard. They were die hard Democrats until Carter then they became Republicans. I have a high school education, did two years of college and hated it but paid back the student loans I took. I spent 20 years in the military (1977-1997), have had five different jobs since retiring from the military. I have always been wise with my money, though my first wife wasn’t and that is one reason she was my first wife, she almost broke me but I recovered by working hard and spending little. I thoroughly read all contracts before I sign them, including my mortgage contract. I educate myself on a subject, like a mortgage, a car, computer, finishing my basement, etc before I put a dime down. I became handy with tools and learned how to do a lot of things myself so I don’t have to hire someone else to do them. Again education, not schooling, ensures I keep my head above water. My yearly income is over $100,000 because I educated myself and my knowledge and experience is marketable and I know how to market myself to employers. I have no debt except my mortgage and even though I purchased my new home a few years before the big meltdown I was smart enough to purchase well and though my home value did drop some my home is still worth more than the mortgage I owe on it. Again being smart about how I spend my money and educating myself about the housing market before I bought my home including listening to those “talking heads” that were saying the housing bubble is going to burst. You see I’m self reliant and don’t expect the government to bail me out or take care of me, my parents taught me well. I expect the government to spend my money wisely (which it hasn’t) and stay out of my business and let the free market system work. The bailouts and stimulus, both Republican and Democrat only made things worst and it isn’t the rich peoples fault people lost their homes or your kid has a big college loan to pay off. No one makes you buy a house or go to college. If you are smart enough to get into college then you are smart enough to figure out you need money to go to college and smart enough to figure out if you borrow money you are going to have to pay it back. Don’t expect me to do it for you through the taxes I pay.