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Old 02-22-2009, 08:03 PM   #29
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Originally Posted by VIKING View Post
We all have the right to make foolish decisions, no question. And there are a lot of people who do just that everyday. Should those people have unfettered access to money weather they have the ability to repay or not. Who is in charge of our access to loan funds?
Fifteen years ago I tried to buy my first house. I had enough money for a five percent downpayment and closing costs. I had a very steady income with a good employment history. I had a seller willing to carry part of the loan. I had everything except a bank that would loan me the balance. I was turned down numerous times by my own bank, saving and loans and credit unions. Even private financing was not available for me. I didn't buy that house even though I could afford it. I was not able to borrow money to buy a house.
Read that last sentence again.
In the last ten years all of this changed. I could have gotten a 120% loan without proving I had an income. I could have borrowed twice as much money as I could afford to repay and there would be no one there but me to stop myself from making a decision that would have absolutely, definitly bankrupted me. My bad decision would have eventually lead to forclosure. If it was only me doing this, it wouldn't make a bit of difference to any of you. The bank would resell the property for a fair value, and I would spend 7 to 10 years trying to rebuild my credit.
When this becomes the normal way of doing business though, it causes the whole economy to hiccup. Tens of thousands of people all losing their homes and credit and causing a complete lack of trust of our banking and financial systems is the result. Being that our entire monetary system is now based on credit rather than equity, when there is a lack of trust, there is a huge problem that will affect all parts of our financial lives.
The money lending institutions are the gatekeepers of our credit security, as they always have been, so to blame the current crisis on borrowers is to give the banks free reign to continue what got us to this place. There is cupability on both sides, but to say that the borrowers got us into this mess is far from accurate. If those people who obviously could not afford to buy those houses were told "NO" by the lenders, as I once was, we all would not be talking about this now.
The Banks that did engage in this bad lending were making money on this from both ends. They would sell you a loan larger than you could afford, knowing that you would eventually lose everything. The loan agent and the lender would make their money immediately, then sell the loan to another institution, who would package many of them together into a "security". These would be sold on the stock market for as much as thirty times the value of the properties they contained. These securities were never worth anymore than the value of the properties in them, but the banks portrayed them as rock-solid investments, so people bought them. This is, to my way of thinking, a ponzi scheme, made legal by our elected officials.
So, my "bad" list goes like this;
1) Elected officials: for recently making all of this possible!

2) Lenders who participated in the practice of seperating us from our money,using a business model designed to cause complete failure, eventually. I hope they spent our money on lots of really fun, cool things!

3) The borrowers, who mistakenly believed that the banks would not be soooo stupid as to lend them more than they could afford to repay. Life without credit, or homeownership for 7 to 10 is their reward.

4) All the rest of us, who don't over-extend ourselves or make bad choices with our money. We all have allowed this to happen by not holding anyone accountable in government, and by electing those who would look the other way while we were being fleeced.

Now would someone please take away this soapbox, before I cause any real trouble!

my2cents, Rich
Could not have stated it better myself. Your Post summed it up nicely.
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Old 02-22-2009, 08:43 PM   #30
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I think you are conflating anarchism and libertarianism, Gene. In practice, many libertarians are actually minarchists or, more poetically, classic liberals. To borrow from the Wiki article, "According to Anthony Quinton, classical liberals believe that "an unfettered market" is the most efficient mechanism to satisfy human needs and channel resources to their most productive uses: they "are more suspicious than conservatives of all but the most minimal government."

As to your question, classic liberals or minarchists generally agree that government should have the authority to protect to rights of persons against force and fraud. You might appreciate this nice little essay on the distinction between lying and fraud.

So how does this relate to RV buying? Well, let's look at the larger issue of the subprime mortgage meltdown. Was this the result of predatory lending or was there something else going on? While it is an easy morality play to blame banks or greedy finance companies... but clearly some borrowers were cheating. Frankly, I think RV purchasers come out of this a bit better. There was no speculative bubble in the RV market. I think most people understand that they are not going to "flip" an RV and make a ton of money. An RV is not normally going to appreciate in value like real property. It is, for many, a purely discretionary and recreational purchase.

Did some people make some poor financial decisions buying RVs. Sure... and some made poor decisions by using home equity loans to buy big screen televisions. So, what is the best response? Should we try to craft a regulatory system to stop people from making bad decisions... or is it, in the long run, more efficient to simply let people suffer the consequences of those decisions?
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Old 02-22-2009, 08:59 PM   #31
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Should we try to craft a regulatory system to stop people from making bad decisions... or is it, in the long run, more efficient to simply let people suffer the consequences of those decisions?

Odd as it may sound and certainly a surprise to Gene, I'd opt for choice B.

Here's a little advice in life when you make your own financial decisions:
If a tiger is chasing your little group, you don't have to outrun the tiger--you just have to outrun the guy next to you.
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Old 02-22-2009, 09:45 PM   #32
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There is another angle on this that no one seems to notice. The whole mess came about because the federal government changed the rules to make the banks lend more freely while keeping FNMA and GNMA in place. So that the banks could make bad loans and palm them off on the government. No old time banker would have made such crazy loans without the government guarantees.

So it was actually bad government regulation NOT lack of regulation that caused the problem. If there was NO regulation the banks would not have taken the risk.
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Old 02-23-2009, 06:19 AM   #33
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Old 02-23-2009, 06:41 AM   #34
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Wheeeee!!

Very enlightened posts.
Hang on kids, it is going to be a wild ride.
As the mighty Mogambo guru would say, " We are all friggin' doomed."
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Old 02-23-2009, 07:02 AM   #35
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" We are all friggin' doomed."
Great 'ism Rob
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Old 02-23-2009, 07:15 AM   #36
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Originally Posted by Ganaraska View Post
There is another angle on this that no one seems to notice. The whole mess came about because the federal government changed the rules to make the banks lend more freely while keeping FNMA and GNMA in place. So that the banks could make bad loans and palm them off on the government. No old time banker would have made such crazy loans without the government guarantees.

So it was actually bad government regulation NOT lack of regulation that caused the problem. If there was NO regulation the banks would not have taken the risk.
Oh, I noticed a long time ago--we just need to avoid the "political" end of this Airstream forum but facts, as they say, are facts.

Yep, the Community Reinvestment Act of 1977 was designed to "encourage" banks and thrifts to meet the needs of all borrowers regardless of their financial status. The term "encourage" might have been coerced since federal money would be withheld from lending institutions that did not participate. It was designed to aid low and moderate income people and was the result of a Civil Rights study alleging that minorities were forced into conditions different than non-minorities such as higher interest, higher down payments, etc. President Jimmy Carter was in office at the time.

It was adjusted under President Clinton-some say for the better and, accordingly, some say it made it worse.
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