Originally Posted by Ma_Republican
People who lost their homes because of job loss, that is included in the business equation. People who never should have gotten the loan to begin with coud not have been accounted for in the business equation. Thay are the ones who caused this crisis and all the feel good policies in the world will not change that fact.

While I understand and don't radically dispute your comment above, when I have seen it raised in the past, it too often is accompanied by assertions that people in substandard housing areas were the cause of this. It took a while to track down a source to balance that view but have one now. And it in fact links up well with your thesis at the top of the thread because it brings into focus the role that the lenders and others who are part of the "Wall Street" mess played in taking us down this road:
http://www.nytimes.com/2009/03/08/magazine/08Foreclosure-t.html?_r=1
Two passages in particular:
Quote
One entrepreneur in particular caught Brancatelli’s attention: 27-year-old Raymond Delacruz. He would buy a distressed property and, at best, make nominal repairs before quickly selling it for three or four times what he paid for it. The flips needed the cooperation of appraisers and the gullibility of home buyers. But the proliferation of mortgage companies — mostly based out of state and willing to provide loans with little documentation — also facilitated flippers.


and
Quote
Cold-calling mortgage brokers offered refinancing deals that would let homeowners use the equity in their houses to pay off other debts. A neighbor of Brancatelli’s had medical problems and fell behind in her bills. She refinanced, then did it two more times, draining the equity in her house. “She used her house as an A.T.M.,” Brancatelli says. “In the end, they just walked away. The debt exceeded the value of the house.” In other instances, mortgage brokers would cruise neighborhoods, looking for houses with old windows or a leaning porch, something that needed fixing. They would then offer to arrange financing to pay for repairs. Many of those deals were too good to be true, and interest rates ballooned after a short period of low payments. Suddenly burdened with debt, people began to lose homes they had owned free and clear.

As early as 2000, a handful of public officials led by the county treasurer, Jim Rokakis, went to the Federal Reserve Bank of Cleveland and pleaded with it to take some action. In 2002, the city passed an ordinance meant to discourage predatory lending by, among other things, requiring prospective borrowers to get premortgage counseling. In response, the banking industry threatened to stop making loans in the city and then lobbied state legislators to prohibit cities in Ohio from imposing local antipredatory lending laws.


Do the folks in this neighborhood who fell for these schemes deserve a portion of the blame for participating? Sure. Are they the root of the problem? Not hardly.

And so we have the companies that fostered the predatory lending going under as the fruits of their practices over-ripen, upstream (or down, depending on your point of view) concerns who bought the derivates based on these predatory practices taking major hits as the ephemeral nature of their investments fly away, major lenders taking hits that exceed their ability to absorb, the market crashing, and the economy going into an increasingly rapid tailspin.

All resulting from practices that began before Barack Obama was even a Senator, much less President. So to give him "credit" for this mess is overly "generous".

Last edited by loganrbt; 03/10/09 12:20 PM. Reason: cleaning up formatting
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