Sure, no one knew exactly what the Fed would do, but the big financial institutions were pretty much the same as John Q. Public. They fully expected the Fed and/or govât to âdo something.â This was especially true in an election year. No one dreamed theyâd let all those big institutions just fail and go bankrupt. Think about it this wayâwhat if there were no govât involvement with S&Ls and no âemergencyâ rate cuts or other reactionary moves by the Fed in the 90s? It wouldâve been an uglier time, but youâd need suicidal tendencies to play with leverage or certain derivatives the way people later did if they knew the buck stopped with them.
I hear you. That's a fair point. But I think you're considering it as if people knew the risks they were taking and were pricing moral hazard into their behavior. No one could see from above the big picture of the huge systemic risk to do that correctly -- at best there was just the expectation that the Fed would drop rates to 0. In other words, people may have expected the gov't to <i>do something</i>, maybe for a black swan event, but didn't gamble on the risk of the entire system's collapse. In reality, very few understood those AAA CDOs (certainly not some pension fund), and no one accurately modeled those instruments or widespread counterparty risk. That's exactly why only a sage few speculators like Paulson's fund was able to identify a pristine trading opportunity. I think you get a part of the problem, but not the systemic aspect of it.
Maybe I'm missing something, but the banks made bad loans, the taxpayers bailed the banks out but the little guy got screwed. The banks got the money AND the mortgaged assets. Couldn't we have just paid off the bad loans for the little guy? Do we really need big banks? Wouldn't many small banks be ok? The little guy does need a house. We bailed out the bank he owed the money to and then the bank took his house.
LOL! Good point. I am telling you, these guys CAN'T lose. It is locked in profits. There is no risk. if you default, it will follow you for ever, they see to it. In the age of computer databases, you are fucked. It's ok though, because eventually, all things revert to the mean. In the age of the internet, we will use the same databases, and it is people that will have long memories.
and here i thought the little guy lied on his application about his income and got to live in a palace for a couple years after he stopped paying any mortgages, and is now complaining that since the papers weren't signed properly he should be able to live in the house for another couple of years without paying anything. no bailouts for anyone. big bank, small bank, individual- you reap what you sow. occupy wallstreet? = get a job i'm not going to feed you forever with my tax money. can't find a job to pay off your 100k+ student loans you got getting an art history degree? well that sucks you shouldn't have gotten a worthless lib arts degree for so much money, go back home and live with your parents that allowed you to waste your life.
Hell, umm, oh yeah - you miss something. the little guy is often greatly greedy, irresponsible, delusional little bastard. he does not care about his future, finances, health, nothing. all he wants is: free money! give me money so i can buy huge house and a car and a big flat TV. i'll tell you, such people deserve only one fate: poverty under the bridge. each and every person who desperately wants to be rich or perceived as rich, will be very poor.
100% agree with dumb_mother. the people who took loans are the problem. the banks didn't forced them to do it. sheeple demand free lunch. demand luxuries without effort. they're speculating with extremely high leverage taking student loans. buying useless gadgets on credit cards. who wanted government protection from fake terrorists? the sheeple. who demands super expensive medical "care", which is making health worse? the sheeple.
The government policies that FORCED banks to make bad loans were the beginning of the whole thing... Jimmy Carter and Clinton era leftist bullshit..