For our friends across the pond

[St_Steven]

1. I agree to a point, but it wasn't a major cause. The major cause of the bubble was extremely low interest rates. The bubble popped because the interest rates were raised to fight inflation. The irony here is that they raise interest rates to take money out of the system, which rising energy prices were doing a fine job of anyway, and, even more ironically, it was the rising energy prices that were causing all the inflation anyway. It is easy to argue that we would have had a soft landing without raising interest rates if the NOLA or (my favorite) NINJA loans were regulated out of existence.

2. The qualifications were changed by lenders not the government. The really bad loans were made by relatively lightly regulated mortgage companies. Not banks. This is my main point in combating the assertion that the CRA was responsible for this mess. It was not.

3. From experience, during the raging market appraisers would value the home at whatever the sale price was plus a little more. I saw it happen more than once. They didn't value based on any real estimates of value, they figured out how to get an appraisal to the value needed.

4. Many investors got stuck. The breakdown in the market is due almost entirely on the factors sited in 1 with the additional factor of the ARM's that idiots signed up for began adjusting.

5. The government didn't make the CEO's purchase anything. They liked it happening because it freed up capitol for lending. The market's quarter to quarter time scale made the CEO's buy it. The stock market itself is the weakness of the capitalistic system, in my opinion. They report numbers to people who don't care what the business is doing other than quarter to quarter. Their in and out so fast it'll make your head spin. It is not a healthy way to run a business long term. It is certainly not a good way to run an entire economy. Radical, I know, and I don't have a better system. I certainly am not suggesting socialism or anything like that. But this is the greatest weakness in our capitalistic system. Also, the people who really fell down on the job to the point of criminal misconduct was the rating companies. They rated this paper as great stuff with low risk even though they knew that there was nothing to back up those ratings. They should go to jail.


And a fine set of posts 2-5 for me. I came over to get OSRIC 2.0 and stumble upon what I thought was a Thanksgiving post with a bunch of pages. Was curious why. I've been playing for decades though...really.

[AxeMental]

Well, welcome Steven to this site. Your posts in this discussion are pretty convincing to me (and as others can attest I don't change my mind quickly). I worked as a real estate broker and then a real estate appraiser (but couldn't stand the boredom anymore and now work with FEMA doing disaster inspections). Anyhow, I missed the boom (and for ethical reasons didn't get back into either field. I couldn't sell someone a house for 200K that I new in a few years wasn't going to be worth 80K (in my mind totally screwing the people that depend on you to know better), and I espl. couldn't ethically sign off on appraising property using the USPAP shell game method (basically hitting the number). And you are correct, appraisers hit numbers (the most difficult appraisal to do is one where a person wants you to calculate the value of their property for a sale. When it sells too fast your accused of undervaluing it, and if it stays on the market too long you overvalued it. The best you can hope for is a range.

Anyhow, your points are very well made. I don't blame low interest rates however, I blame low qualifying requirements (buyer x pre-low interest rates could afford a 100K house, post-low interest rates could afford a 200K house for the same PITI motgage payment. Since that person is getting a more valuable property, qualifications should have been increased (on the basis that those prices will go back down once interest rates go up and once investors start taking their profit). Buyers could get a fixed mortgage with good terms were OK because they had the ability to withstand a changing market (their house might go from 200K to 100K but so what, if they plan on staying in that house for at least 10 or 20 years (its going to suck but its not forclosure). The adjustables and creative lending arrangements were the problem. the stock market is broken per the rules. P&P also seems to share your opinion (the quarter report being all important). This is fixable by making the long term investors aware of the risk going on as well as making laws to prevent cooking the books). The investor is the best watch dog. Who has the will to do that. . No idea.

[St_Steven]

I don't think you need to increase the qualifications due to low interest. And I don't blame low interest for anything. The raising of interest rates baffled me, even at the time. As I said, energy prices were doing a fine job of removing money anyway, and they were the sole reason that inflation was being seen anyway. Raising interest rates couldn't fix that without killing demand (which, by way of killing the housing market, it did). What I do think is that people who got into ARM's were not wise (that's the nicest way I can put it) and, perhaps they should have had to meet higher qualifications. But if they could do that, the wouldn't have been getting an ARM anyway. Those loans are part of the problem anyway. Not the worst part of it, but a big part of it. People who qualified for ARM's that could really qualify are mostly ok. When you combine ARM's with NINJA's and NOLA's is when they really got into trouble.

Incidentally, people couldn't walk away from one house and buy another. Their credit would be wrecked to the point that they couldn't even get the crazy loans. They are renting.

[AxeMental]

Steven: "Incidentally, people couldn't walk away from one house and buy another. Their credit would be wrecked to the point that they couldn't even get the crazy loans. They are renting."

There are ways to get around horrible credit, even a past forclosure (another person signing the loan with you to cover it, having the seller carry the loan with a PMM, etc.). Its often worth it to walk away, if your taking a bath (or need to move for work etc.).

Thats true about the fuel cost eating up the money supply and causing inflation (btw I haven't seen prices coming down much in the grocery store, whats up with that?). I'm not a big believer in the FED controlling the money supply at any rate (has this ever been proven to work?).

Steven you should check out some of the other threads as well, espl. in the AD&D rules section. I'd like to get your feedback on some of those threads (particularly the thread on how initiative works).

[St_Steven]

I'll poke around there soon enough. I have to get moved to AZ soon (two and a half weeks, holy crap). These are simple issues compared to how AD&D initiative works anyway .