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Post by BeenThere...DoneThat... on May 30, 2011 15:41:05 GMT -5
But I still stand on my premise of the Trade Deficit being the root of the problem. The housing disaster was just an unintended consequence of the government program to mask the problems caused by the trade deficit. so what is the answer to that problem? ...no more TV sitcoms? (jk)
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Post by mtntigger on May 30, 2011 15:55:03 GMT -5
I think that the U.S. doesn't have a focus and the space initiative in the 60s did that, just like WWII did that in the 40s. If we (as a country) were to focus on one goal, then we would discover things that would solve that problem. For example, if it wasn't for the U.S. government, most people wouldn't have a GPS device now. Do I know what can unite the country and for us to start thinking of ourselves as a country again versus over 300 million people? No, but I hope someone finds something soon.
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Deleted
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Post by Deleted on May 30, 2011 16:03:29 GMT -5
<<< how would that be put into practice? >>> ...well, for one thing we can get the feds out of the loan guaranteeing business, so that lenders must own up to their own risk tolerance... And require lender to keep all of the loan for at least a year, and after that still keep some of the loan for the entire life of the loan.
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Deleted
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Post by Deleted on May 30, 2011 16:05:45 GMT -5
I don't see any problem with lenders selling their loans. If they can't sell the loans, then areas of the country experiencing high growth would suffer from lack of funds to finance the growth. I believe a better alternative is to just raise the down payment requirement to 10% to 15% and to not allow any HELOC or second mortgages which would lower the equity below 30%. Why? And why could you put down 10-15% yet could not use a HELOC from 10-30%?
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rovo
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Post by rovo on May 30, 2011 16:49:14 GMT -5
Why? And why could you put down 10-15% yet could not use a HELOC from 10-30%?
Well, the primary reason for both is to prevent people from becoming too leveraged and to insure they can afford the home prior to buying. The minimum equity for a HELOC forces the home owner to accumulate wealth and not go under water on the home. Treating a home like a piggy bank is a road to personal financial disaster for most people (the financially stupid 60%).
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Post by mtntigger on May 30, 2011 18:02:20 GMT -5
If you think people are financially stupid, then do you think people should be forced to contribute to a 401k (or similar) program? If so, then won't the banks/Wall Street now have more power than they do now?
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rovo
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Post by rovo on May 30, 2011 18:08:27 GMT -5
If you think people are financially stupid, then do you think people should be forced to contribute to a 401k (or similar) program? If so, then won't the banks/Wall Street now have more power than they do now? They already are required to contribute to S.S. Just because I think they are financially stupid doesn't mean they should be forced to do something. There is a big difference between requiring loan applicants to offer proof they can repay and forcing them to make a contribution to an IRA.
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Nazgul Girl
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Babysitting our new grandbaby 3 days a week !
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Post by Nazgul Girl on May 30, 2011 18:42:25 GMT -5
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Post by BeenThere...DoneThat... on May 30, 2011 19:01:21 GMT -5
<<< Nobody should really be able to go to a lender and get a house for nothing down, because it makes it too easy to walk away and stick the taxpayers with bailing out their stupid lending institution in the long run. >>> ...and if we got the feds out of the loan guaranteeing business, then the lenders would have to own up to their own risk tolerance, leaving the taxpayers out of it...
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rovo
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Post by rovo on May 30, 2011 20:33:51 GMT -5
...and if we got the feds out of the loan guaranteeing business, then the lenders would have to own up to their own risk tolerance, leaving the taxpayers out of it...
Absolutely true, but the loans are almost always sold off so the risk transfers to the buyer of the loan. This doesn't present a problem if the loan is documented correctly. Also, if a large number of loans are grouped into units it becomes more difficult for the value to be determined.
So this takes us back to the original question about the economy because anything done to enhance the soundness of housing loans will also decrease the amount of loans and the number of houses sold. Reductions in demand result in less supply and fewer jobs for those building the homes, furnishing the homes, and maintaining the homes. The housing bubble caused by lower home loan requirements went a long way to delay the effects of a bad trade deficit. Unfortunately any artificial market prop eventually falls to the overwhelming power of the free markets.
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Havoc
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Post by Havoc on May 30, 2011 20:54:44 GMT -5
Have the causes of the previous financial crisis been resolved? Nope.... causes have not been resolved, and I would agree with the poster (Rovo?) who said that we are still in the first crisis. The only thing we have done is wall-papered over the cracks in our economy's foundation and as useless (and expensive) as this has been, we are finding out that even the wallpapering job was an inept piece of carp, geared towards keeping Wall Street (and as we now know, a slew of European banks and financial players) fat, happy, and in line for big bonuses. One of our biggest problem is our politicians inability to stop nationalizing companies debt. Although we can't take all the credit - it seems to have become an international epidemic (eg, Iceland, Ireland... ) The next biggest is our government's inability to let capitalism do its job (as opposed to govt picking winners & losers via bail-outs, tax breaks or subsidies for favored industries). Banks and investment companies would not be going about business-as-usual right now if they knew that they would actually be responsible for their actions, and they WOULD go out of business and lose their jobs if they mess up. The whole "too big too fail" idea has to go. A lot of the sub-prime loan meltdown was caused by loans to people who could not afford them. And a lot of the growth in the sub-prime loan market stems from loan programs that grew out of government mandates for "fair housing loans" and goals of increasing the percentage of homeowners ... So here we are, still throwing billions of dollars down the ratholes of Fannie and Freddie, and now politicians are starting to talk outloud about "banks need to start lending more money" to small businesses, homeowners, etc. ... :/ Another problem is the national debt. To sum up what I wrote on the "When this thread blows up" thread - about 6% of our national budget goes to paying the *interest* on our national debt. ATM we are paying relatively low interest rates. When our rates go up - and they will - the effect it will have on our debt payments will be the equivalent of your Uncle Louie pouring starter fluid on an already well-burning charcoal fire. And since we are already borrowing 40cents of every dollar we spend, we will have to borrow even more just to make interest payments on the debt we already owe. There is nothing - nothing - being done to address this. Our politicians squabble over cuts of just a few million dollars, which isn't even a rounding error on the amount we need to cut. And I agree with Rovo on the trade deficit - we aren't exporting enough goods and services. We made a lot of trade deals based on the presumption of (1) the US would keep it's dominance in high-end "intellectual" manufacturing (computers, iphones, ihats, etc) while importing lower value-added items and commodities, and (2) cheap oil would grease the wheels of international trade. Neither premise has panned out, and our blue-collar manufacturing base is so gutted that it is difficult to see it come back anytime soon. ETA - Sorry this got so long. Short version: Drink more ovaltine!
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Post by BeenThere...DoneThat... on May 30, 2011 22:31:24 GMT -5
...fwiw, I think the discussion here has been accurate enough to be depressing... so I'm not ignoring anybody or anything...
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Havoc
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Post by Havoc on May 31, 2011 21:35:56 GMT -5
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formerexpat
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Post by formerexpat on May 31, 2011 21:40:15 GMT -5
Liberal theories and lack of self reliance. Yes, both are still a problem.
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