ARE THE CONSUMERS TO BLAME?
September 23rd 2008 00:00
First, let me provide the link here : Really Long Link
That’s a link that will lead you to a Forbes story by Andrew Farrell published by Yahoo! on “What Billionaires Say About The Wall Street Crisis”.
Check out the opinion given by New York Mayor Mike Bloomberg in the last paragraph of that story. In essence, he said the consumers, the people “who took out mortgages” are partly to blame on the Wall Street Crisis and not just the banks.
Can you believe this guy? I mean, he is the world’s 8th richest man, he owns Bloomberg Financial Services, he is the Mayor of New York City and he is counting the consumers, the people “who took out mortgages” among those who are to blame for the world’s current financial woes!
I thought the guy was cool. He reportedly used Bloomberg’s vast resources to conduct a research to determine whether he should join the US Presidential race, and when the results indicated that he shouldn’t, he respected the signs. That was good. That proved that he is a thinking man.
But then…
Well, I hope he was just misquoted in that Forbes story. Because I cannot imagine why he would think that the people “who took out mortgages” should be blamed for the world’s worst economic debacle.
Okay, maybe he meant those who took advantage of the opportunity and took out more mortgages than they can handle… but then again, who gave them that opportunity? And wasn’t the subprime mess about the subprime borrowers?
I mean, hey! Why lend to the guys whom you know cannot afford to pay? And if those guys cannot afford to pay their loans, why lend to them several times over?
No, no. I don’t think this is a simple case of providing supply because there is a demand. The guys who provided the supply know more about money matters than those who supposedly made the demands.
Yeah, maybe you can fault the regulators for not doing their jobs.
But please, don’t even try to convince me that a bunch of guys who cannot afford to pay can actually create a demand. My guess is that a couple of bright boys came up with a scheme to seduce (if not tricked) the borderline people into buying something they cannot afford, and that is what started it all...
And that is where the blame should lie.
That’s a link that will lead you to a Forbes story by Andrew Farrell published by Yahoo! on “What Billionaires Say About The Wall Street Crisis”.
Check out the opinion given by New York Mayor Mike Bloomberg in the last paragraph of that story. In essence, he said the consumers, the people “who took out mortgages” are partly to blame on the Wall Street Crisis and not just the banks.
Hello... what did you say? I caused the world markets to collapse! Me??? And wha...t? You know that I cannot even buy a... shirt???
I thought the guy was cool. He reportedly used Bloomberg’s vast resources to conduct a research to determine whether he should join the US Presidential race, and when the results indicated that he shouldn’t, he respected the signs. That was good. That proved that he is a thinking man.
But then…
Well, I hope he was just misquoted in that Forbes story. Because I cannot imagine why he would think that the people “who took out mortgages” should be blamed for the world’s worst economic debacle.
Okay, maybe he meant those who took advantage of the opportunity and took out more mortgages than they can handle… but then again, who gave them that opportunity? And wasn’t the subprime mess about the subprime borrowers?
I mean, hey! Why lend to the guys whom you know cannot afford to pay? And if those guys cannot afford to pay their loans, why lend to them several times over?
No, no. I don’t think this is a simple case of providing supply because there is a demand. The guys who provided the supply know more about money matters than those who supposedly made the demands.
Yeah, maybe you can fault the regulators for not doing their jobs.
But please, don’t even try to convince me that a bunch of guys who cannot afford to pay can actually create a demand. My guess is that a couple of bright boys came up with a scheme to seduce (if not tricked) the borderline people into buying something they cannot afford, and that is what started it all...
And that is where the blame should lie.
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Comment by Mike Landfair
Market Bugle
I think there were a lot of brokers that made a ton of money winking at the rules and allowed or encouraged those borrowers to sign, and there were a lot of banks that loaned money knowing the papers were fraudulent..
So what! Are we taxpayers supposed to rush in and make everyone whole? I say to heck with them all. I don't have much sympathy for victims. I think everyone should have the right to fail.
Comment by Cibbuano
20/20 Filmsight
Science News
Hunt Famous
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Fat Cult
Techbreak
Similarly, why were people given loans they couldn't pay? It seems obvious to some people that it was a bad deal, but at that time, there was a kind of fever, and bankers were advising people to take the loans anyway. What does the average consumer know about that?
Comment by Mike Landfair
Market Bugle
"So what! Are we taxpayers supposed to rush in and make everyone whole? I say to heck with them all. I don't have much sympathy for victims. I think everyone should have the right to fail."
Comment by British Bulldog
Of course the borrowers are partly to blame and to say they didn't know what they were doing - buying a house they couldn't afford with a non status ( no income proof) low start loan due to double in premuim in 5 years time on an over priced house asset likely to be worth less.
Of course too blame the commission only brokers that signed them up and their separation from the actual lenders for it.
Of course too blame the principle of slice and dice securitiazation as a way of spreading the risk, when some of these were 50% full of loans like the above just waiting to go bad.
Of course then too, blame the banks for buying them withourt due dillgence becuase they trusted the rating agencies graded assesment.
Of course then too blame the rating agencies for doing a terrible job af assessing the risk of investing in them.
Of course blame Bush's administration for a lack of regulation to at least have a chance of reducing all this fraud.
Of course too blame US consumers for having an obsession with debt and conspicuous comsumption rather than good old 'saving for a rainy day' which may have become as we move towards the mother of all recessions.
As for the question 'should the tax payer bail the banks out?' No, the securities should be bought at a discounted price and sold at a higher price later when the market recovers, but without a banking system an economy cannot function as the transmission of money is the medium of exchange, yet these banks are tottering 'on the edge' with bad debt and refuse to borrow to each other, a natural banking function of advanced capitalism.
Last week we saw amazing things. Lehman bankrupt, Merrill Lynch sold for a song, the UK's largest mortgage lender HBOS too sold for a song and AIG the world's largest insurer on the verge of collapse before short term part nationalization saved it. These are things you'll never see again they are so seriuos and so the Bernanke/Paulson plan is is neccessary but should protect the tax payer and punish the banker in the correct proportion within the larger aim of saving the system .
So a witch hunt to find who really is to blame is really quite pointless, but amongst the bleeding hearts it is right that Michael Bloomberg reminds people that just about everyone is implicated and responsible and to the hard hearts, that if this is not done banks all over the world will see their share prices collapse and so they'll have no collateral to buy money to lend to you and me as well as offer rotten interst rates to investors like us.
It will perhaps take a 'backs against the wall' international effort to overcome this unholy mess and that's why everyone has to be blamed! Yes us too!
Regards to all,
British Bulldog.
Comment by Market Newbie
Stock Market Punk
But here are some reasons why i think the consumers shouldn't be blamed: 1. Shelter is among the most basic needs. 2. Most of the consumers do not have the sophistication of mortgage lenders, investment bankers, realtors, etc. when it comes to finance. 3. Consumers more often than not are presented with sugar coated arguments when being persuaded to buy, say, a house.
Sure, you'll say "buyers beware." But when you really want or need something, and you are told that you can have it easily in a way that seem palatable (the way it was presented to you) and you do not know any better, and you notice that all the respectable institutions are into it and the government is not saying that it is wrong...
will you, as a consumer, be committing a crime if you give in? Won't you give in?
Or you would you rather, that the poor guy who cannot afford much, first go to college, get a masters degree in finance or economics before he gets back to the guy offering him the comfort of a house that will shield him from the elements and say, hey look, I'm not buying because... ?
It's a house! It is not some luxury that the subprime borrowers will be basking in. And they are the subprime borrowers! What can you sell to guys like those? Yachts?
Now, if you took out those mortgages to flip them and help in creating the bubble, then you would not just be a consumer but a contributor to the mess and you should feel guilty.
Comment by British
I'm liberal too but the US is not like the Philippines with a massa of tens of millions of uneducated people who overdose on WOW WOW WEE and have never read a book in their lives.
THE US economy is the world's number 1 for the moment and has a fairly well educated population that balance their needs betwen entertainment and information, has a strong civic society, and consumer and other laws that can't be just bribed away etc and so US consumers have no excuse for not being informed about what they are buying.
In my blog above I said that everyone was to blame. If you can't create responsible citizens and then give them choice you may as well not bother to even build a society.
By the way, last night amazingly US financials rose as JP Morgan got Wa MU's asets for a song and congress looked again back on track to get a bank dodgy asset bail out deal signed in the next few days, so it looks as though Asia stocks will rise big time early next week as they largely fell on Friday on the Wa MU news after US gains ( but not on the PSE which amazingly rose yesterday morning showing just how uninformed people are here).
Regards for now,
British
Bulldog
Comment by Market Newbie
Stock Market Punk
You generalize too much. Not all westerners are well educated.There are morons even in the US, those morons need houses too. Some of your American cousins cleaned my friend's shoes too, last time he was in the US. And they drove his limo. The first British instructor I ever met didn't even know his spelling. And what is this fixation with Wowwowee? It is not a very popular show in my side of town.
You are probably getting mixed up with the wrong crowd. Get out of your small barangay in San Jose, Occidental Mindoro. It is NOT the whole Philippines.