Quote:
Originally Posted by 12clicks
the peons HAD to lie on their application to get a mortgage that put them in over their head.
it was the bottom's greed that hurt them.
No one living on a starbucks wage got a 500k house without lying.
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I love how Republican responses to anything consist of nothing more than small talk. There is never any substance.
Lying during the mortgage boom was not necessary. If you go back to the early 90s, there were a lot of people renting that could perfectly afford a home mortgage, but lending standards were too high for even those people to get approved. Clinton and the GOP congress moved to change that by guaranteeing certain mortgages through Fannie and Freddie.
The problem is that after lenders saw that these sub prime buyers really could may their payments, they slowly lowered the bar within their own institutions to the point where anyone with a job got a loan of some amount.
The goal was to give out as many loans as possible and then sell the rights to those loans as low risk investments regardless of how high risk they really were. Then many of the lenders placed bets at AIG (which is in part essentially a Wall Street casino) that those loans would default.
So to reiterate:
Lender gives loan to someone they know can't afford it long term.
Lender places bet against borrower at AIG.
Lender sells loan to investors as a great investment.
Lender profits big.
Investor hurts.
THIS is what brought the economy down. Unfortunately, those that should be arrested can't be arrested because their institutions are the financial foundation of America (something that Thomas Jefferson warned against allowing to happen).