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Comment by lmg643 | Hacker News Reader

it's comforting to think that understanding the "language" of finance would have protected us. I also think it's comforting to think that this was the work of simply some greedy guys on wall street using strange words.

underlying all these instruments was the assumption that americans have never defaulted on home loans over historical norms, and even in the worst case assumption, still wouldn't be that bad.

this assumption was the bet implicit in every mortgage backed issuance. the names and the details are actually not as relevant - this basic concept was. perhaps that is why the author still struggles to understand - he's looking in the wrong direction.

this author writes of the greed of bankers who want to one-up the next guy, but when it comes to homeowners, are they not equally guilty of wanting to one-up the next guy with a bigger house, a quick flip, a granite countertop, or a cash-out refi?

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> I also think it's comforting to think that this was the work of simply some greedy guys on wall street using strange words.

Yes, actually, it was in a lot of cases. From the aggressive use of NINA loans (in some cases targeted at minorities) to selling mortgage-backed securities while betting AGAINST them, the financial industry had a much larger hand in this. Read the Levin-Coburn Report if you'd like to get better informed about what happened: http://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd...

> are they not equally guilty of wanting to one-up the next guy with a bigger house, a quick flip, a granite countertop, or a cash-out refi

1) The assumption you're making the insinuation that all homeowners engaged in this kind of activity which is an existential fallacy. 2) In situations like this, where one party (the financial industry) has more training, connections, influence, and knowledge and the other (homeowners) have CNBC, it's a stretch to say that the homeowners are the ones to blame.

> From the aggressive use of NINA loans (in some cases targeted at minorities)

Which was being done by the local banks, not the wall street guys. If anything the banks were ripping off the institutional investors they sold these bonds to, by selling mortgages that they wouldn't've taken themselves.

> selling mortgage-backed securities while betting AGAINST them

Any trade has two sides; anyone you buy a stock from is essentially betting against that stock.

> The assumption you're making the insinuation that all homeowners engaged in this kind of activity

No more than you're assuming everyone in the finance industry engaged in such activities.

> one party (the financial industry) has more training, connections, influence, and knowledge and the other (homeowners) have CNBC, it's a stretch to say that the homeowners are the ones to blame

Some of the losses were from complex products that were missold, reverse-amortization mortgages and the like, and yeah, the guys who sold those are responsible for most of the damage they caused. But a lot of the crash was simply people taking out a loan for $x/month when they couldn't afford to pay $x/month (or could until they lost their job), and that's not a complex question where training and experience make a difference.

I think you miss the point and write it off as quaint or comforting. The idea is that if more people understood what was going on in terms of common parlance, such as "gambling," then there would be more transparency simply because of less fog of obscurity and therefore potentially more eagerness to call for regulation or what have you.

The homeowners are not a major factor in this sense because the economy should not have rested on these risks. It's not about assuming people don't default. In fact, such defaults can be quite profitable for some people.

I think you're making it about personal responsibility or something when there is real merit to wheels of finance running in ways many would prefer them not to but are quite unaware of, partly due to "difficult" language. Whether this is really a problem with the language or with education levels or whatever is another matter but I think it is a real issue in a democracy.

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