No. of Recommendations: 80
Jchoy wrote: If any American got suckered, it's probably their own fault to a large extent.

There is a substantial number of risk averse Americans, many of whom are retired. An example might be a 65 to 80 year old that had saved $100k. For most of the ought’s, they could go out and build a 5 year ladder of CD’s. The 5th year CD typically yielded ~ 5.0%. When one matured, you added another 5 year, 5% CD. They received $5k each year per $100k of principle without taking any stock market risk. Inflation was about 2%. It is still about 2%, so they were getting ~ 3% real return until the financial repression started.

Post 2008, the CD ladder yields maybe 1.5%, so they have suffered a 70% loss of income, plus now have a negative real return of -.5%.

If you want to argue that this senior got suckered due to their own fault, you are welcome to do so. I will NOT be joining in. Instead I will argue that the senior did almost NOTHING wrong. Yes, I can fault the senior for permitting an incompetent Federal Reserve, particularly Alan Greenspan and Ben Bernanke for getting the US into Financial Repression. Yes, other parties had a role, but I hold the Fed with its staff of >200 PHD economists to a higher standard than the average retiree on main street.

Recall that the Federal Reserve was chartered with regulating home mortgages under the Home Ownership and Equity Protection Act of 1994. The Fed published Regulation Z that stated:

• Prohibit creditors without regard to a consumer’s ability to repay from sources other than the collateral itself
• Require creditors to verify income and assets they rely upon to determine repayment ability

Would you like to hazard a guess when the Fed published Reg Z in the Federal Register?
That would be July 30, 2008. It took them 14 years after HOEPA was signed into law to finalize these regulations. You are welcome to argue that the senior should have understood the implication of the Fed NOT regulating the home mortgage market until it was too late. Once again, I hold Alan, Ben and the Fed to a higher standard.

I could go on for a few hundred pages, but if you think that this senior “got suckered, largely due to their own fault,” we will just have to disagree.


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