Thanks Draginol. Just because we ardently disagree on things doesn't mean they can't be discussed in a rational manner!

Here's what I'm trying to get at- I think the "root" of this issue is actually 3 things combined, if even 1 of them were removed this wouldn't be nearly as bad as it is.....turning into a global freeze on interlending and credit between banks, as we see this morning.

Two of the three issues we agree on.

1) Predatory lending by banks. Check.

2) People who can't afford the predatory loans and aren't smart enough to say "no!" Check.

3) Here's the kicker. #1 and 2 are bad enough, but it's what the banks have done with those loans that has blown this way out of proportion and into one of the biggest financial quagmires in recent history. If all this was was bad mortgages, yes, some banks would fail. But it wouldn't shut down liquidity in global markets. This is because the banks spun off these mortgages into all kinds of innovative financial products that they knowingly sold and traded at values far surpassing actual worth. In short, they sold crap on the market. Not only did they sell crap, they oversold it, and over-leveraged it too.

I'd have to check in order to match the right numbers to the right names, but I remember reading one economist detailing just how over-leveraged the big boys that failed were. I think Bear Stearns was over-leveraged more than 100 to 1. Stupid poor people didn't make the banks over-leverage themselves. Stupid poor people didn't convince the banks to create "structural investment vehicles" in order to try and sell junk paper. The banks did this all on their own, and so long as people believed that the turd they were buying was actually flowers it worked like a charm and the banks made a lot of money in a short amount of time.

So, in summary, IF the banks hadn't gone and done a reckless, immoral act, we'd be looking at more of an S&L crisis right now. Yes, it would still be bad but not nearly as bad as this. It would be a straightforward case of creating another RTC (resolution trust corporation as was done with S&L, please correct me if I got the name wrong) that would then take over all of these properties and sell them. In this case, it could probably negotiate with many folks to keep their homes at reduced payments, I dunno. Or, it could sell these homes at discount prices to third parties, with a legally binding contract that the third party would rent the home out (at a reasonable rate) to the current occupants for X amount of time after which it could re-negotiate to sell it, with original occupants getting first dibs and if they're not in a position to do so or not willing to do so then put it up on the market at large. I dunno, just an idea I'm throwing out there.

But that can't be done now. Why? Because the majority of the financial damage has been done by all the toxic paper that the banks created. Taking possession of properties and trying to re-sell them (which at this point in time would be foolhardy anyways unless there was a pre-existing arrangement to sell at a discount) wouldn't address all the junk paper that is floating around out there and now causing the banks to drown in a sea of red ink. To start, no one knows what kind of value this stuff should even begin to have. In reality, most of it is worthless, but the banks said it wasn't with their fancy credit scoring models and other jargon meant to cover over the fact that they probably pulled the numbers out of thin air to see how much they would get for it.

So, yes, stupid poor people with no money are partly to blame. That is 1/3 of the problem. The other 2/3 of the problem are the predatory lenders, and what the banks did with the loans once they had them.

Furthermore, while it is indeed the purchaser that got themselves into a pickle by signing on the dotted line, take a step back and look at the circumstances surrounding this:

Jeeter, a thirty-two year old forklift driver, sees that everyone's getting a house, and everyone that does so is flipping it within a year or two after buying and making a profit of tens of thousands of dollars. Jeeter maybe has his high school diploma, maybe not, but one thing he's been doing his whole life is working like a dog.

News media, pop culture tv shows and the like are all chearleeding the way to home-ownership.

"Buy now, can't go wrong with real estate, values keep going up and up!"

"Land, the one thing they're not making anymore of!"

"Homeownership- part and parcel of the American dream!"

Also, let's say that Jeeter's got a wife and child on the way and she wants a home to raise the youg one in.

So, Jeeter, after a lifetime of hard work and keeping his nose to the grindstone decides it's time he got his piece of the American Dream. He's not asking too much in his mind- he sees everyone else getting property. So, he goes into a bank, thumbs hooked into belt-loops of his jeans and says

"I want a house and I'll do anything it takes"

At this point, he has essentially put a giant sign on his back that says "please rape me"

And rape him they will!

"Just sign here Jeeter, within a year you can flip this double wide trailer and pocket 50 grand in cash, can't go wrong!"

Jeeter, with a lifetime of forklift driving knows about as much about financing in that he needs a bank account in which to deposit his cheque. All that "ABC..... ARM???" whatever gobbledygook is confusing to him.

Meanwhile, the nice fellow with the fancy suit and tie at the mortgage company is smart. He's gonna take care of Jeeter's interests, or so he believes. Jeeter, with his high school diploma (maybe) is used to a lifetime of deferring to authority that has a suit, tie, and a placard on the wall with a bunch of fancy letters on it from a university. In short, he's waaaay over his head and, to his blame, he's trusting that nice fellow to not screw him royally. Ha!

This is the exact same dynamic as someone who doesn't know much about cars taking their vehicle to a dishonest mechanic who's going to screw them over a couple hundred bucks unecessarily, only on a much larger scale.

So, it Jeeter to blame for being a stupid poor person? Yes, he is.

But the fellow sitting across the desk, with the credentials and the nice suit and tie, is even more to blame for royally screwing jeeter over, because this fellow knows better. But he's gonna do it anyway, because it's gonna get him a nice comission and more profit.

And this leads back to a fundamental tenet....

At the end of the day, we are our brother's keeper. If we don't, and only look out for number 1, society will indeed collapse!

I think Artysim has a good point in his last post but Draginol still seems right from my point of view. Yes both the banks for lending and the people for borrowing were wrong, but the people should have known better. It is said that ignorance is not an excuse when breaking a law, so why should it be considered an excuse when purchasing a home (or a car for that matter)? No one forced these people to by homes, deceived or not they still had the last say. BTW, how is one deceived into buying a house it's obvious one can not afford when one knows how much money one makes? I mean, I have always tried to live within my means but won't deny to have rented in places I knew I would have trouble affording and I was never deceived, if anything I deceived the rental places, just like the borrowers deceived the banks into believe they would pay the loads (although I am sure the banks were never really deceived just more like an act to have been deceived if you know what I mean) Again, ignorance is not an excuse.

I am one of those poor stupid people Draginol talks about and I admit it because I have never been that good managing my money knowing full well I was making mistakes but did it anyways because I just had to have those wants. A reason I do not own a house today, but I was also smart enough to know not to attemp to get a house I knew I could not afford. My credit is bad, but it's nothing compared to some who have thousands or hundreds of thousands in debt, I merely have a couple of thousand that could easily be fixed with my next income tax return, which i could have done years ago but again, I am one of those stupid poor people Draginol talks about. Well, I may be poor by some people standards but considering I have always had a car, 2 at one time, always had a place to live, always had food to eat (family of 4) and always had a job, I never have quite considered myself poor, just a person who could have done so much better but made a lot of poor decisions.

A lot of this mismanagement would not have happened had people who could not afford these home not taken the loans in the first place. Even if the Democrats were trying to make it easier for them to buy homes. In the end it would have been better to make the homes more affordable by selling cheap decent homes rather than expensive homes with easy loans.

Certainly but that's not the root still. That certainly excaberated the situation but it's not the root cause, it's a consequence of the root cause.

And what you're describing happens in every industry.  Let me give you an example of stuff I've seen recently:

Software company balance sheets are often total BS.  They don't always expense their labor. Instead, they take those dollars and turn that labor into an asset called Work in progress. When the project is done, it is thent turned into a fixed asset.  

So you can have a balance sheet where a company has millions of dollars in these assets but they're not really worth anything necessarily.  It can take a great deal of time and expertise to figure out the true value of these assets.

Similarly, all this bad paper floating around was largely based on these foreclosed properties which weren't worth nearly as much as they were.  I'm not convinced it was so much dishonesty as it was incompetence and sloppiness.

ANYWAY...

Getting back to the context of this discussion - the article Michael Moore wrote essentially argues that the richest people should be the ones to pay for the cleanup of this mess. And the richest Americans had little to nothing to do with this. "Stupid poor" people had a lot more to do with it.  That may offend the gentle sensibilities of some people but it doesn't change the reality that this bailout isn't for the sake of rich people only or even mostly.

If Michael Moore wants to play class warfare and blame a "class" it's not the greedy rich but the stupid poor he needs to point his finger at.

Since I support the bailout and people in my income bracket pay most of the taxes anyway, I'm obviously not suggesting that we drag poor people into the streets, harvest their organs and sell them to pay for the bailout. But at the same time, I get pretty offended at some clueless left-wing nut like Moore trying to use this as another excuse to loot my property.

I always find myself putting this queston on to those who think rich people should be the ones to fix everythinge because they have money to spare.

If you are or became rich someday, would you be one who would constantly give your money up to resolve a situation like this one when you probably had nothing to do with it?

Or even better,

How often have you taken from your own money that you have to spare and helped out another person who made some really poor choices?

If anyone who earns a decent living, makes enough money to enjoy life and to spare, can truly tell me they would simply give up a few thousands to help some complete stranger out of debt, please do so because I think it's hypocritical to expect others to do something you yourself would not. And I am not talking about giving up $20, I'm talking about a few hundreds or thousands.

Here's an example:

(this part was edited because the example I put seems more apporpiate for an article so please look for my next article for the example if you missed it. Thank you.)

Well it gets even better though. Banks like Comerica sold unweary investors auction rate securities that have all kinds of bad loans tied to them including mortgages. They sold them as low risk long term securities however they are higher yield hence high risk normally sold as short term investments and they are now illiquid. Lehman and others also stuffed them into investors accounts more than likely illegally. Its currently under investigation by the FBI and also if you follow the news Andrew Cuomo had been prosecuting firms for this for a while now. This has mainly gone down since last years credit hiccup and accelerated after the first of the year. This is one of the reasons they decided to insure money market funds. The investment and commercial banks did this real fast trying to get their leverage down as fast as possible. They screwed a lot of small businesses,retail investors,charities,etc, because now they are stuck with these and cant dump them for quick operating cash. Cuomo won some of the cases so many of the banks and investment firms have to take the ars's back at par but its questionable how much of this can be done without more banks failing. This is probably why Wachovia finally tanked. It looked like Lehman had dumped enough but todays hearing with the CEO of Lehman indicated that they didn't dump enough exposure to bad commercial real estate loans and that seems to be what finally brought them down.

The hearing was great. They had Lehman emails about mortgage companies that Lehman bought to front their mbs business in which the Lehman managers were calling "mortgage sweatshops".....lol

They also mentioned how the SEC allowed the investment banks to raise their leverage during that past few years.

http://www.nysun.com/business/ex-sec-official-blames-agency-for-blow-up/86130/

The Bush administration was doing the same thing. He stuffed his cabinet full of FANNIE/FREDDIE revolving door directors when he first got into office and had HUD loosen up things even more......Do you forget how much he boast about home ownership numbers every time he had a chance. Look at his first HUD director Mel Martinez. The damn guy used HUD to buy himself a Florida Senate seat. Look at Martinez's lobby contributions. There are a bunch of real estate developers, mortgage companies, and banks on the list of contributors. Some that are currently in the news because they went bankrupt.

I know you don't want to give up on your goal of proving otherwise but again this is "as a result" of the people making loans they could not afford and the banks giving these loans to people who were of high risk. No matter how you put it, how you slice it, how you wanna make it sound; had these people not taken these loans most of this would not be happening, period.

Look dude, we all know who the real culprits here are. Bush did not exactly make things better but everyone knows the Democrats have more blame on this than anyone, even when a Republican controlled Congress did not do enough to stop it.

The Republican know this...The democrats think otherwise.....and people like myself put equal blame on the parties but mostly blame specific politicians from both parties.

No, because you dont answer questions that lead to answers you do not like.

This whole thread turned into a gigantic blame-fest.  Although, with a heading involving Michael Moore what else should be expected?  Good to see the national divide so deeply entrenched.  The fact that we have such heated debates raging on each side about who is to blame or what is the real culprit says to me that there is no specific, singular cause to the crisis.  Evidence has been provided, good stuff at that, to help compile the blame, but think about it...even the 'so called' experts can't even figure this one out to narrow down a complete individual source.  There have been quite a few slip-ups along the way.  We do need to recognize what caused the collapse of these industries, no doubt, but we should probably do it without the motive to single out a party.  Again, this is only happening ever-so intensly because of the election's approach.  The Partisan Blame Game (America's newest reality TV show, airing on all of your 24-hour news networks) is in full swing.

And this is more or less one of the probolems in life. people will not accept the reality of things and instead look to make it seem somehow even or simply ignore the truth. Why make it equal? Why not just point the finger where it belongs? Why defend one's beliefs just because it means you have to admit you were wrong? Many here have admitted that Bush plain sucked, they admit he made many mistakes, but I rarely see anyone admit the Democrat mistakes. Biden does a how show of mistakes, also known as the VP Debate, Obama has a very interesting back ground, but that doesn't matter either. But if any Republican is seen or heard of making freidns, shaking hands or even saluting from a distance with an undesireble person, the Democrats scream to joy.

That is exactly why I said I blame specific politicians from both parties. I watch the news, including congressional hearings to learn as much as I can about who has been involved. I do not put all Democrats in one bag and Republicans in another. There are honest and dishonest politicians in both parties. There are some that are involved and there are some that are not. There are some who deserve criticism and others who don't. There are some accusations made that are true and others that have no basis, are total spin, or simply made to cast doubt even though there are inadequate underlying facts.

It has nothing to do with belief. It has to do with who did what and for what reason.

Because there is no single source. There are many individuals who are involved including businessmen, investors, and politicians from both sides of the fence.

They need to make the business tax more broad based. A lot of the larger companies are given better shelters and more special interest tax breaks than the smaller companies. We're in a tough situation though. We can't lower taxes because the national debt is so high and congress has been incapable of lowering spending. They have been too busy passing bills that buy votes.

Business taxes are, in the final analysis, a charade and pointless (except to the politicians promoting them), merely hiding and obscuring the tax born by purchasers of goods through higher prices.  It's a way of taxing us without having it itemized for us to see and know.  I'd rather eliminate all business taxes & have more explicit taxes, preferably on consumption, rather than income.

Furthermore, the assumption that lowering tax rates lowers federal revenues has been shown to be wrong many times.  Low tax rates have resulted in increases in gross tax revenue more than once.  There is obviously a point at which lowering rates further results in no further tax revenue growth (the curve has to bottom out somewhere) but I don't believe anyone knows quite where that inflection point lies.