Comments on: Solutions for the Housing Crisis http://etbe.coker.com.au/2008/10/02/solutions-for-the-housing-crisis/ Linux, politics, and other interesting things Thu, 09 Feb 2012 01:09:24 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: etbe http://etbe.coker.com.au/2008/10/02/solutions-for-the-housing-crisis/comment-page-1/#comment-16080 etbe Fri, 03 Oct 2008 11:24:16 +0000 http://etbe.coker.com.au/?p=819#comment-16080 Anon: I think that the bankers should be held responsible for their own bad decisions. If you lend someone money with a 40 year repayment plan that will stretch their budget every month (as some banks have been doing in Australia) then unless they get a significant pay rise there is no possibility of repayment (in the modern work environment the chance of doing 40 years of work for the same company is close to zero - so there will be some temporary career setback along the way). Bankers who have a lot of knowledge about how the financial system works as well as statistical data concerning the ability of people to repay debts should be able to work this out. They also should know that prices of any asset will not consistently go up forever. The only way the 40 year mortgages that companies such as GE Money have offered in Australia can be profitable is for homeowners to on average pay a reasonable portion of the value of the property before they go bankrupt such that the forclosure sales can on average result in profit for the bank. The people who took out the large mortgages had much less knowledge and really weren't in an equal bargaining position. In the US I believe that you can take out a mortgage at age 18 but can't legally drink (in many places) until the age of 21. How can it be that someone can be simultaneously responsible enough to make a reasonable decision concerning a 40 year debt repayment plan but not responsible enough to decide whether to consume a glass of beer? Anon: I think that the bankers should be held responsible for their own bad decisions. If you lend someone money with a 40 year repayment plan that will stretch their budget every month (as some banks have been doing in Australia) then unless they get a significant pay rise there is no possibility of repayment (in the modern work environment the chance of doing 40 years of work for the same company is close to zero – so there will be some temporary career setback along the way).

Bankers who have a lot of knowledge about how the financial system works as well as statistical data concerning the ability of people to repay debts should be able to work this out. They also should know that prices of any asset will not consistently go up forever. The only way the 40 year mortgages that companies such as GE Money have offered in Australia can be profitable is for homeowners to on average pay a reasonable portion of the value of the property before they go bankrupt such that the forclosure sales can on average result in profit for the bank.

The people who took out the large mortgages had much less knowledge and really weren’t in an equal bargaining position.

In the US I believe that you can take out a mortgage at age 18 but can’t legally drink (in many places) until the age of 21. How can it be that someone can be simultaneously responsible enough to make a reasonable decision concerning a 40 year debt repayment plan but not responsible enough to decide whether to consume a glass of beer?

]]> By: Anonymous http://etbe.coker.com.au/2008/10/02/solutions-for-the-housing-crisis/comment-page-1/#comment-16079 Anonymous Fri, 03 Oct 2008 10:11:37 +0000 http://etbe.coker.com.au/?p=819#comment-16079 Why, exactly, does nobody seem to consider the possibility of making people responsible for their own bad decisions? If you enter into a mortgage with ridiculous terms, you nevertheless signed a contract, and you ought to have to live up to it or live with the consequences of not doing so. In other news, don't use your new electronic appliances in the shower. Why, exactly, does nobody seem to consider the possibility of making people responsible for their own bad decisions? If you enter into a mortgage with ridiculous terms, you nevertheless signed a contract, and you ought to have to live up to it or live with the consequences of not doing so. In other news, don’t use your new electronic appliances in the shower.

]]> By: etbe http://etbe.coker.com.au/2008/10/02/solutions-for-the-housing-crisis/comment-page-1/#comment-16069 etbe Thu, 02 Oct 2008 21:59:19 +0000 http://etbe.coker.com.au/?p=819#comment-16069 http://www.arthurmag.com/magpie/?p=3160 The above web page explains how the housing crisis was engineered to transfer wealth from the middle classes to the rich. http://www.arthurmag.com/magpie/?p=3160

The above web page explains how the housing crisis was engineered to transfer wealth from the middle classes to the rich.

]]> By: etbe http://etbe.coker.com.au/2008/10/02/solutions-for-the-housing-crisis/comment-page-1/#comment-16068 etbe Thu, 02 Oct 2008 21:35:53 +0000 http://etbe.coker.com.au/?p=819#comment-16068 Erik: You seem to assume that the banks have some magical powers. The banks in question are not making loans at the moment. What they do is not overly special, the most important functions (in terms of economics) can easily be done by others. If some banks fail then others take over. It's only if the deposits are taken that the economy would really have problems - but that would be local to the US. The US isn't going to be able to continue it's trade imbalance with China forever no matter what happens. Erik: You seem to assume that the banks have some magical powers. The banks in question are not making loans at the moment. What they do is not overly special, the most important functions (in terms of economics) can easily be done by others. If some banks fail then others take over.

It’s only if the deposits are taken that the economy would really have problems – but that would be local to the US.

The US isn’t going to be able to continue it’s trade imbalance with China forever no matter what happens.

]]> By: http://tiq.com/~erik/ http://etbe.coker.com.au/2008/10/02/solutions-for-the-housing-crisis/comment-page-1/#comment-16061 http://tiq.com/~erik/ Thu, 02 Oct 2008 12:11:49 +0000 http://etbe.coker.com.au/?p=819#comment-16061 This is what we did in <a href="http://www.nytimes.com/2008/09/23/business/worldbusiness/23krona.html?em" rel="nofollow">Sweden 1993 (NYT)</a>, in the end the taxpayers made money from the deal and we didn't have to live with a bank going bankrupt. Now I'm not sure it was a good deal (how can you ever know), but it was proportionally of the same size as the US bail out. The problem is if the US let banks go bankrupt they are affecting the whole world meaning you are going to have less to eat in South America, and banks might go bankrupt all over. If these families you are talking about did lent money from the bank, constantly keeping the loans 1% under the market value. Should they be refunded when the market crashes? Lending money on market value increase is very common. This is what we did in Sweden 1993 (NYT), in the end the taxpayers made money from the deal and we didn’t have to live with a bank going bankrupt. Now I’m not sure it was a good deal (how can you ever know), but it was proportionally of the same size as the US bail out.

The problem is if the US let banks go bankrupt they are affecting the whole world meaning you are going to have less to eat in South America, and banks might go bankrupt all over.

If these families you are talking about did lent money from the bank, constantly keeping the loans 1% under the market value. Should they be refunded when the market crashes? Lending money on market value increase is very common.

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