We need more of this type of video being posted throughout the internet. Thanks for the video!

The big underlying assumption was still, housing prices never go down. If that stayed true, ARMs could be refinanced, etc. and even foreclosures would still be acceptable/profitable to banks. After that assumption was broken, it all fell apart.

people who are not credit worthy should not have been given loans. That blame should rest at the credit agencies. Thats why they exist.

I disagree that “everyone got greedy.” Many people got greedy, but almost everyone paid the price unless they saw what was happening. Even people who thought they were acting responsibly and making sound investments got burned.

Don’t forget that there was a fair amount of deception, complexity, and obscurity in the lending and securities market. Lack of oversight facilitated and encouraged greed, not big government helping minorities.

Greed is, by definition, a desire, not an action. It is how we ACT upon that desire that produces results……or in this case, consequences.

Greg has it spot on! Short of capitalism with true integrity, there needs to be laws in place to stop something like this.

The responsibility for this problem starts at the top and goes down.

It plays very much like an “if/then” statement and somebody failed to assess the correlation with ANY character, integrity or rule of law!

Here’s how to fix the problem:
http://www.youtube.com/watch?v=ouoPqnGVO-I

Those areas where foreclosure rates are the worst (Stockton, CA, Riverside County, etc.) weren’t ever redlined, b/c they were mostly made up of vacant land.

As an aside, anyone who works in affordable housing or similar community development industry will tell you that CRA is more of a means to get banks to talk to you than a mandate.

The problem with the above is that it leaves out way too much. This problem has lots of contributers. Starting with out of date rules and laws, and yes the C. R. A. started by Andrew Cumo during the Clinton years was part of it, also remember that Janet Reno sent out a memo to the major banks at the time stating that if they did not comply she would file charges, also Clinton , Robert Rubin and others took specific steps to see that CDO’s were not treated as insurance and therefore could not be regulated. Also with the help of Republicians Clinton repealed Glass-Steagle Act, this also played a part. Bush came along and didn’t stop C.R.A. and while Barney Frank and Chris Dodd who both got big money from Fannie Mae and Freddie Mac (also Fannie and Freddie ‘s CEO’s walked away with millions ) blocked any reform efforts there Bush and some Republicans tried to refom the 2, but only half hearted probably because some Republicans were getting PAC money from them also.

Then in 2002 in a 1.5 hour meeting referenced in the article I mentioned the SEC removed all restrictions on leverge for investment banks it had been 13, I think Soon some of them were leverged up to 40 or 50 times.
Next is the rating agencies which were being paid by the very companies that owned the securities to rate the same securities, just a bit of conflict of interest.
The biggest colprit though in my opinion were the store front mortage companies that got paid for each mortgage they wrote, as soon as they wrote it they sold it and so they didn’t care if it got paid back or not they got their money. In David Faber’s piece one of these guys said that if you could breathe and cause a fog on a mirror you could get a mortgage. This same guy said he had no guilt and did not thiunk he had done anything wrong. Incidently, the head of Auto Nation a car dealer said he knew there was a problem when a customer they had qualified for a mortgage but not a car loan??

Last but certainly not least are the people who took these loan many knowing they could not pay them back, not asking any questions about paying them back before signing, or setting themselves up to be able to pay back if eery single thing went right and there were no unexpected changes in their life or income.

The shocker for me in all of this is that not one soul accepts any blame. Socialogists describe an event where a mob attacks someone and they all kick and beat the person to death, in the end the person is dead but everyone in the mob denies being the one who killed them. This is essentially what happened to the mortgage industry.

I remember my sister trying to talk me into buying a home in her expensive neighborhood. She said her neighbors were all getting interest only loans that they were planning on refinancing after their kids were done with daycare. I knew plenty of white middle class people with the same mentality. The government didn’t do this. This is squarely on the irresponsible American public.

Great animation though… I actually thought the sub-prime graphic was dead on… : )

It completely glosses over the political clout that attacked the banks to make risky loans

Eric, I agree with your comment “Not one mention of the Community Reinvestment Act and how the government forced banks to lend to uncreditworthy minorities through regulatory bullying.” However, not all minorities are uncreditworthy. Lets not make this a race issue. To simply say “uncreditworthy borrowers” would fully explain how the CRA was the root of this problem.

Hilarious that the video mentions that housing prices were going up and up as if it were some sort of accident of nature. What created this housing bubble? A flood of demand, artificially created by loaning too much money at low rates to people who had a history of NOT paying back their loans.

There’s plenty of blame to go around – from the orginators, banks, and homeowners who borrowed about their means. But at the heart of it is free market interverence by big government.