> loans to stupid people,
Ah so it's (partly) the people's fault now? So when a banker shows up and offers a mortgage to a struggling family (which they can't afford), it's their fault for accepting it! I mean how could the banker ever have known? It's not like his job involves assessing these risks or anything.
Nobody struggling needs to buy a house. That's what renting is for.
And while it's sad, that banks were this short-sighted, it's important to note, the less ruthless ones were already priced out of the market.
Regardless: yes there is culturally a big difference in buying bitcoin and getting a mortgage: the latter is not considered a risky investment precisely because everyone isn't expecting you'll get one if you can't pay it off. Bitcoin on the other hand is not a loan, but putting money you already have into a risky investment (note: I'm making a living of cryptocurrencies) .
No, only partly blaming them, and they are definitely partly to blame.
A family borrowing too much is their problem, banks not doing their jobs is a national problem which should not be rewarded by bailouts, but by jail time and bankruptcies.
It's not credit card debt, even if you go bankrupt the bank can still collect the debt by evicting you. So it's not the same as loaning someone money for consumables.
Banks price foreclosure and delinquency rates into their interest rates. In 2007/2008 this didn't work because the banks themselves were over-leveraged.
But it doesn't change the fundamental aspect of this that a bank can be quite happy to give you a loan you don't have a high chance of paying back. If they charge you high enough interest rates it's free money for them.
This is only true under assumption that house prices won't decline.
That's because they aren't. It's not their responsibility to figure out their own credit risk in relation to other loans that are packaged up in CDSes by banks and given triple A ratings by rating firms and sold on the market.
It started with the banker that sold a mortgage while knowing the people couldn't afford it, and continued with other firms packaging it up all nice and shiny until the whole financial system collapsed. There is no way consumers (normal every day people) are responsible for this mess.
What if interest rates go up and my monthly repayment goes up by 10-15%? What if I lose my job tomorrow and it will take me 6 months to find a new role? These and similar are common sense questions a consumer should ask himself/herself before taking out a loan. I am not going to put 100% of the blame on the bankers. You don't need a degree in economics to be able to ask these simple common sense questions and make a judgement on whether it's a good idea to take out that loan.
That's personal responsibility, different from being responsible for the global economy. A dangerous game based on credit and loans was being played by banks and financial firms, but the people getting a mortgage where the poker chips not the poker players.
I'm not from the US, the crisis in 2008 hit my hometown (in Europe) hard. Do you expect me to (partly) blame US homeowners for this?
Why wasn't it up to the people to know they couldn't afford it? Have we really absolved personal responsibility this much?
If you're getting a mortgage it's time to start acting like an adult already.
I'm not sure anymore how big a cause for the crisis they were - there are articles arguing both directions.
https://ftalphaville.ft.com/2017/03/03/2185420/fed-vs-fed-on...
http://webcache.googleusercontent.com/search?q=cache:Hsi8ZX8...
Chapter Economic Incentives in the Housing and Mortgage Origination Markets in https://www.brookings.edu/wp-content/uploads/2016/06/11_orig...
Yes, it's absolutely partly the people's fault. There were tons of people taking massive loans they should not have. People cannot abnegate personal responsibility there.
A lot of things had to go wrong in the banking system for the crash to happen, but that was one of them.
Not all banks were doing dirty things, and not all people were doing things, but many banks were and so were many individuals, and so the rest of us pay the price.
This crisis is truly an American style crises - people in most other countries are hugely risk averse when it comes to this kind of stuff. Even buying cars on payments is a newer thing in some advanced countries ie Spain.
Not just attitudes though ... 'bankruptcy' is a survivable event for companies and individuals in America. Less so elsewhere.
The banks, for the most part, were being rewarded for originating loans that they weren't going to hold, so they had perverse incentives to loan as much money as they could. There was massive fraud throughout the system from the the borrowers to the mortgage agents to the banks to the re-packagers (other bigger financial institutions, usually) to the credit agencies. It was a total shit show all around.
The idea that the financial crisis was brought on by some greedy underclass with ideas above their station is a myth that the banks have been pushing ... and it seems a few HNers have just bought it hook, line and sinker.
From what I heard many people in US were (maybe still are) taking all kinds of non-necessary loans. Well that's really not the healthy mentality, nor is it standard anywhere else across the globe. People that can't do simple 2nd grade math on paper take those here in Europe, and often they suffer, together with their families.
Seriously, there is something called financial literacy, and 101 of that is - don't buy shit you can't afford with a HUGE comfortable margin. 102 would be don't take loan on anything but your housing, unless you're starting a company. Any other loan, you're entering needless risk for not good enough reason. My personal opinion this is one of the failures of modern schooling - these things should be taught to every child, over and over. How to do taxes, how government works, how to become a better member of society and contribute to it, and how to effin' be financially smart whatever your circumstances are.
Duped? You don't need to pour over financial models to know that spending 3/4 of your pay on a mortgage is going to cause problems. One thing I will say is that in the US, personal finance education is woefully inadequate. Just look at the number of people and the amount of balances that get carried on CCs. That alone is a sign how poorly people think about money.
The sad part is that a budget is not hard. It does require some self discipline, which is also sorely lacking.
No. Like I said there's a lot of people who could afford their homes, maybe even many.
I'm saying there's many people who were buying multiple homes, who shouldn't have been and that was part of the problem.
My thought was always I have a good job in software making way above the median income, and I can't comfortably afford a house. There is no way this can continue. It lasted much much longer than I would have guessed though.
The "boogeyman" borrower who borrowed millions, made no down payment and had 0 income rarely exists.
So what? Not every investment goes up, and even those that do go up rarely do so linearly. As far as your situation is concerned, who cares if the value dropped 50%. You were smart, bought something you could afford (presumably on a fixed rate), and just kept making the payments. Over the long term prices would come back.
The problem came in with people buying houses they could clearly not afford, and with no cushion for any downturn. They were not boogeyman borrowers, and were very common in places like Florida and Las Vegas. People who could only afford the teaser rate payment on a 3/1 ARM when fixed rates were at historic lows. Not a smart financial move on their part.
To argue they were being irrational, you'd have to show that it was irrational for them to believe in the myth that this trend would never end, which is tantamount to expecting markets to not experience manias or bubbles.