Foreclosure Settlement Fixes Nothing

by Ryan on February 9, 2012

in Economy,Election 2012,Politics,Stupid government

The housing bubble was the biggest financial bubble in history.  Banks gave loans to people who couldn’t afford them, then sold mortgage-backed securities to dupes around the world.  Then, a circle firing squad of financial nitwits decided to insure the securities all along the way.  Times were good until about 2007.  By September 2008 Lehman Brothers, who leveraged these loans multiple times, experienced a sudden end to the gravy chain and poof! the financial crisis began as reverberations ran through the entire world’s economy.

The banks aren’t stupid.  They aren’t going to put their industry at risk unnecessarily.  The government encouraged them to make these loans, backing them up through Fannie Mae and Freddie Mac.  So, the banks, with backing from the federal government, went nuts — why not? the government expressly had their backs, allowed them to leverage beyond the legal limit around 2004, and kept civil rights groups and community organizers away too!

So, when I saw this deal the feds made with the banks and 49 states today, and listened to some of Obama’s remarks, I was frustrated.  We’re rewarding people’s bad behavior again.  I get the attempt to nail the banks if the banks tried to plainly screw people, but that should be handled on an individual basis, not in a blanket bailout.  We tried to make homeownership a right last decade — we saw how that turned out.

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