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Comment by hueving | Hacker News Reader

Yes, people do have responsibility for their own finances. We blame people for mindlessly speculating in cryptocurrencies, there is no reason to not do the same when they take on an adjustable rate mortgage that takes 3/4 of the family income to pay.

Nobody struggling needs to buy a house. That's what renting is for.

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It's literally one of the main jobs of the bank to make sure that it can get back the money that it lends!

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.

Whether the bank can get its money back and whether you can pay for the mortgage are different things.

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.

> a bank can be quite happy to give you a loan you don't have a high chance of paying back

This is only true under assumption that house prices won't decline.

Or if they can offload the risk. As they did.

They sell the loan much earlier, so they do not care as long as all check boxes can be checked.

It doesn't change the argument that it's not just the banks that are responsible. People who took these loans also share the responsibility. I don't like the knee jerk reaction of assuming it's not those peoples' fault at least partially. There are many fiscally responsible people who didn't take out those loans and instead were renting the whole time and saving diligently, planning for their financial future. Nobody cares about these responsible people apparently.

> Nobody cares about these responsible people apparently.

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.

It is their responsibility to be fiscally responsible and plan their spending in a way to have sound finances. Taking out a mortgage with near zero deposit with monthly repayment that takes 3/4 of your family income is irresponsible and I disagree with stripping such people of any responsibility. Just because it's easy to get a loan doesn't mean consumer is not responsible for judging feasibility of the loan.

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.

> 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?

> It started with the banker that sold a mortgage while knowing the people couldn't afford it

Why wasn't it up to the people to know they couldn't afford it? Have we really absolved personal responsibility this much?

Indeed. You have to sit down and sign an enormous stack of paperwork to get a mortgage in the U.S., and a large fraction of it is government mandated forms that explain the risks, which you sign acknowledging you read and understood them.

If you're getting a mortgage it's time to start acting like an adult already.

Responsible for their own finances, or responsible for the crisis? The latter claim is what seems to have started this conversation, and the individual getting a loan had very limited insight into the general mechanisms that led to trouble, and it's not their responsibility to ensure that whoever they get the loan from (and whoever its sold to downstream, without their input) is capable of handling it if many of the people they gave loans to default.

Actually, the banks packed those loans and sold it. They got the money. They got the bonuses and money after contracts. More contract, more money. They were no longer interested if the client can pay or not...

Huh?! AFAIK the majority of the mortgages just before the GFC were literally "no risk zero deposit" - if you couldn't repay, you could just move away and mail the keys to the bank, and you had no other obligations. Perfect (for the loan-taker) in case the housing market started crashing or just declining. You'd be stupid not to take such a loan!

Could you please share some sources about this?

Ah, took me a while to find the right Google term: "nonrecourse loan".

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...

Refinancing your house when money is tight vs. spending some free couch change in crypto ain't the same thing.

There are similarities though. Cheap credit can allow giving huge loans to people who drive prices of property up and fuel the buying frenzy. This aspect is similar to the ever rising price of cryptocurrency bringing in more and more buyers.

You are right, of course, but in our society we (correctly) punish illicit drug suppliers, dealers and buyers, because they are all knowingly engaged in activities that they know they shouldn't be engaged in. Punishing only one of those parties would be... classist? Maybe even racist?

OP was talking about casual or moral responsibility, not about criminal. Unless it was fraudulent neither party is to criminally blame, even if both hurried the economy toward the cliff. Even if "the banks" did so knowlingly. It was not their job to care about that.

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.

OP was blaming them for bringing the global economy to its knees.

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) .

"OP was blaming them"

No, only partly blaming them, and they are definitely partly to blame.

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