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Author: AlanK Big red star, 1000 posts Old School Fool Motley Fool One Everlasting Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308686  
Subject: While Greenspan Shrugged Date: 12/21/2007 7:28 AM
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So where were the regulators as one of the greatest financial disasters since the Great Depression unfolded? They were blinded by ideology.

“Fed shrugged as subprime crisis spread,” was the headline on a New York Times report on the failure of regulators to regulate. This may have been a discreet dig at Mr. Greenspan’s history as a disciple of Ayn Rand, the high priestess of unfettered capitalism known for her novel “Atlas Shrugged.”

In a 1963 essay for Ms. Rand’s newsletter, Mr. Greenspan dismissed as a “collectivist” myth the idea that businessmen, left to their own devices, “would attempt to sell unsafe food and drugs, fraudulent securities, and shoddy buildings.” On the contrary, he declared, “it is in the self-interest of every businessman to have a reputation for honest dealings and a quality product.”

It’s no wonder, then, that he brushed off warnings about deceptive lending practices, including those of Edward M. Gramlich, a member of the Federal Reserve board. In Mr. Greenspan’s world, predatory lending — like attempts to sell consumers poison toys and tainted seafood — just doesn’t happen.

Read the rest at:
http://www.nytimes.com/2007/12/21/opinion/21krugman.html?ref=opinion
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Author: varney Three stars, 500 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 265484 of 308686
Subject: Re: While Greenspan Shrugged Date: 12/21/2007 8:46 AM
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So where were the regulators as one of the greatest financial disasters since the Great Depression unfolded?

Cut out the drama. One of the greatest financial disasters since the Great Depression? That's like saying that a recent crash of a Cessna single engine prop plane is one of "the greatest air disasters since the Hindenburgh". This "crisis" will mostly hurt people who over-extended themselves needlessly.

It’s no wonder, then, that he brushed off warnings about deceptive lending practices...

There are papers that you sign which explain exactly how your mortgage works. If you don't understand them, then don't sign them. But I have trouble feeling sorry for people who picked an adjustable rate mortgage at a time when rates were at historic lows. Just where did they think the rates would adjust to??

But of course, it's the big bad lender's fault. They forced people to buy a house they couldn't afford. They lied to people and told them their adjustable rate mortgages would never go up. Sure thing.

How about a little personal responsibility.

Bruce

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Author: dswing Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 265505 of 308686
Subject: Re: While Greenspan Shrugged Date: 12/21/2007 12:24 PM
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AlanK

Usually op-ed pieces like the link you point to wind up advocating increased regulation as a preventive measure -- which has its own set of problems, and as most crises show, regulation is not a magic solution.

But is the irony lost on you (and the NY Times?) that your "poison toys" were manufactured in COMMUNIST factories? If you think "greed" is the ill-effect of capitalism, you are overlooking the inherent corruption that is not just a biproduct of, but the very lifeblood of socialism:


On 10 July 2007, China executed the former head of its state food and drug administration, Zheng Xiaoyu, for dereliction of duty and taking 6.5m yuan (about US $850,000) in bribes from the manufacturers of substandard medicines that had been blamed for several deaths. Zheng, who headed the agency between 1998 and 2005, had become the symbol of the quality control crisis in China's trade arising from the export of tainted goods – for some of which the authorities in Beijing had blamed him.[15]


I'll keep free-market ideology, thanks.

~dswing

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Author: MsMurrisch Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 265513 of 308686
Subject: Re: While Greenspan Shrugged Date: 12/21/2007 2:18 PM
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I bought my townhome almost 2 years ago with a 5yr-ARM fully aware that after five years I will be subject to the market. Personaly, rates were so low I considered a 30-yr fixed but the likelyhood of me staying in my townhome for more than 5 years if really low (first home, I will outgrow it, and my company tends to move me every 3-4 years)

I dealt with several brokers and found out that I knew more about lending than some of them just by researching the web! Needless to say the broker that won has been in business for 30 years and understands that markets change.

Bottom line - do your research and understand terms and conditions fully. Too many people just sign, sign, and sign during closing without understanding the paperwork. I agree with personal responsibility!

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Author: SeattlePioneer Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 265515 of 308686
Subject: Re: While Greenspan Shrugged Date: 12/21/2007 2:27 PM
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<<I bought my townhome almost 2 years ago with a 5yr-ARM fully aware that after five years I will be subject to the market. Personaly, rates were so low I considered a 30-yr fixed but the likelyhood of me staying in my townhome for more than 5 years if really low (first home, I will outgrow it, and my company tends to move me every 3-4 years)
>>



How does that decision to buy, and buy with an ARM, look to you now?


Does your company pay for the costs and possible losses associated with moving so often?


My own bias would be to rent if I expected to move in a short time like that. We have gotten used to the idea that real estate is liquid and can easily be turned over, but that is an illusion when you look at a longer time frame. I'd be worried about being trapped in a location by an uncooperative market, or taking a large bath to get out.



Seattle Pioneer

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Author: nomoreplastic Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 265537 of 308686
Subject: Re: While Greenspan Shrugged Date: 12/22/2007 1:13 AM
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Bottom line - do your research and understand terms and conditions fully. Too many people just sign, sign, and sign during closing without understanding the paperwork. I agree with personal responsibility!

Several years ago I was a notary signing agent - bringing folks these loan papers to sign. It was amazing both how many people had no idea what they were signing (even with explanations). It was also quite common to hear loan agents tell people "Oh yeah, it IS a fixed rate, fixed for 3 years...". As the signing agent, I wasn't allowed to say anything other than "this form says X, meaning blah blah blah, do you understand, and if you agree, please sign here.." , Couldn't say to them "What are you nuts???". It was dreadful. Saw people do a lot of really stupid loans. For example, one older (not old) couple refied the house and cashed out every penny of equity, to give to the kids (they excitedly told me) right now. No doubt these people are facing that balloon payment today, and probably losing the house. Jeez!

NMP
(who isn't too bright with her own finances, but certainly recognized these loan as being REALLY bad news and didn't make that mistake at least!)

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Author: AlanK Big red star, 1000 posts Old School Fool Motley Fool One Everlasting Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 265545 of 308686
Subject: Re: While Greenspan Shrugged Date: 12/22/2007 9:46 AM
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Oh the assumptions people make. Post an oped piece about the lack of regulation for home mortgages and the assumptions is that I must be a real bleeding heart, naive idiot ready to bail out every knucklehead that took out an idiot loan.

For the record: People need to be more diligent about what they invest in and sign up for. I also recognize that by definition, half the population is of below average intelligence. Maybe you want to live in a society of Darwinian finances run by a pack of wolves preying on those less bright or educated than you. I don't. A few rules not permitting the most egregious of these subprime loans would not be a bad thing. For starters, it is in mine and your interests if our society as a whole is financially stable. Then everyone can afford whatever services you and I provide to society and we benefit too.

I'm also mystified as to why people feel compelled to take such strong sides. There are those who want to bail out the banks. They ague that not to do so could sink the whole economy. Others want to bail out the poor borrowers who were suckered into loans they didn't understand and could not afford arguing that they were taken advantage of. There is the third camp that says the heck with all of them. Let the chips fall where they may and those that made mistakes should suffer the consequences.

I fall into a fourth camp that sees lots of blame, stupidity, greed and recklessness on all sides. My inclination is to put some ground rules in place to minimize the chances this will happen again, give some help to some of the banks but let the worst of them collapse of their own weight and the same with the borrowers. If they could not even afford the teaser rates then they were totally reckless or stupid and should not be in their own homes. The real goal is to minimize the damage to the rest of us.

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Author: cattleman22 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 265546 of 308686
Subject: Re: While Greenspan Shrugged Date: 12/22/2007 10:00 AM
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{{I'm also mystified as to why people feel compelled to take such strong sides.}}

I take such a strong side because people are trying to implement regulations that would have prevented my wife and I from purchasing a house like we did this past year. We had to take out a subprime mortgage because we did not have a work history yet. We did have contracts stating what our salaries were, but these were considered insufficient for a documented loan.

The other rationale is that 85% or more of subprime loans are are performing. It seems irrational to throw out a group of 100 people simply because 15 made errors.


c

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Author: xtn Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 265697 of 308686
Subject: Re: While Greenspan Shrugged Date: 12/27/2007 10:13 AM
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Maybe you want to live in a society of Darwinian finances run by a pack of wolves preying on those less bright or educated than you. I don't.

I do. We keep protecting the week and stupid. There is only one certain long-term outcome of protecting the week and stupid: Becoming a society of week and stupid people.

We've got to accept the downward parts of the financial cycles. We've got to let the pieces fall where they may. Some people get financially hurt. Other people get unfairly rich. So be it. We've got to learn to play with the wolves without getting bitten. That's the society I want.

xtn

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