What entity or profession will the public blame the most for this latest bubble? After the ARMs adjust, after the interest-only crowd walks away from their home, after people are undercut by the builders, after that paper wealth disappears, after the Senate hearings, who will the public blame the most?
Themselves?
The Fed?
Builders?
Lenders?
Realtors?
Speculators?
President?
Congress?
Fannie/Freddie?
Appraisers?
China?
And what one person (besides Greenspan) will be the face of the 2000 - 2005 Housing Bubble (RIP)? The Bernie Ebbers of this bubble?
January 13, 2006
Question for readers: In 2008, after the fall, who will take the lion's share of the blame
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16 comments:
Alan Greenspan and his group of liars on the Federal Open Market Committee. They screwed America.
The democratic leaders in congress will blame the President.
Economists will blame Alan Greenspan and so will Ben.
The builders will blame the land owners for overpricing the land.
The lenders will blame the
Fed for easy money.
Realtors will blame the sellers for asking to much for their houses.
Speculators will blame the realtors.
The President will blame the Fed.
Fannie/Freddie will blame the buyers.
Appraisers will blame the realtors.
China will blame USA.
Nobody will blame themselves.
and renters will blame all of the above......
Devest - "The Media" you are correct will be blamed. If they would have just shut up, the good times would have lasted some will argue
First, they'll blame all of the above. Then it will be China's fault. China will be accused of waging economic warefare.
Great motivational poster. Where can I buy and are ther emore like it. I agree with 41cadillac. Noone like to take the blame just like the poster says.
The regulators who allow people to borrow over 100% of a property's value, as well as the ability to borrow 100% of equity "gains". This is what caused the excesses beore the Great Depression - the ability to take 100% margin on stocks and reinvest them (in stocks) - after the crash, regulators changed that to 50%. I belive the same will happen for housing.
check out despair.com
It can be the Fed, and NOT the Federal Open Market Committee.
A central bank ought to be more than just a knob on the interest rates.
The Fed has better tools to thwart bubbles than the club of interest rates run by the FOMC. And Greenspan didn't use them.
In the stock market bubble, which he KNEW was a bubble, he could have seriously raised the margin ratio, to thwart excess personal investor speculation.
The argument was that it wouldn't constrain big hedge funds, which is true, but still the symbolic message would be taken seriously, and it would have saved many personal speculators from ruin and taken away the nitroglycerin on the fire of dumb speculative money.
Exactly the same should have happened in the housing bubble (notice past tense). The Fed and the appropriate bank regulators should have cracked down hard on underwriting standards and junk loans. Screw the bleating of the mortgage bankers who couldn't sell crap to people who couldn't buy.
The idea that "gee the entire USA isn't in a housing bubble, look at Indiana!" should stop the Fed is exactly as preposterous as the same idea during the stock market bubble. In that bubble, boring old value stocks went NOWHERE. Did the existence of so many such stocks change the fact of the bubble and the consequences of its popping? No.
Increasing margin requirements would have stopped speculation very well without killing the economy---as fuddy duddy old value stock investors weren't buying on margin anyway.
Just as increasing underwriting requirements would have slowed speculation in superhot markets as people would be told "no, no no, you can't buy this piece of crap for that much!" (I think we need a "NO" mortgage company that sensible peopel can take their house-crazed spouses to in order to have some sense scared into them.)
"Metroplexual said...
Great motivational poster. Where can I buy and are ther emore like it. I agree with 41cadillac. Noone like to take the blame just like the poster says."
Here's the website for more demotivational posters:
http://www.despair.com/
Gosh, you all act like this "bubble" phenomonen is uniquely AMERICAN! Don't forget the DUTCH invented it with tulips!
Right up there (and above us) is good old Australia, Great Britan, Shanghai, Spain, New Zealand, to mention a few where house costs are much higher than here and in countries with no fixed rate loan options!
If anyone gets burned it will be the builders and those who bought over-valued homes with risky options, little down payments or payments they can't afford.
Oh and what good will it do if there is an economic melt down? Stricter BK laws won't help those who walk away, nor will sky high unemployment. A little inflation would help rather than deflation Japanese style. Oh and even after 15 years of deflation in Japan would you still trade your million dollar house on the coast of California for a small flat in Tokyo? Homes by world standards are still very high in Japan and that with 15 years deflation and a population that is contracting.
And who will be blamed if all your panic-driven investment advice is wrong and people sell or don't buy when their finacial and home-valuation situation is balanced and in two years they can't afford that home with higher interest rates and inflation costs? Can we sue you as well?
RE: The most enduring image of this infomercial is that of a diminutive Vietnamese immigrant named Tom Vu telling tales of real estate fortunes from his yacht while surrounded by the gorgeous bodies of bikini-clad models.
Don't hate the playa! ;)
Sean
Homes by world standards are still very high in Japan and that with 15 years deflation and a population that is contracting.
Part of this is the tax structure. Capital gains tax in Japan is significantly higher than inheritance tax, so families whose property appreciated greatly during the boom are better off waiting for the elder generation to die than selling, and so supply to the housing market remains constrained.
The subprime lenders who push loans on people who simply cannot afford to own homes should be blamed. There will need to be some taxpayer bailout of the GSEs and perhaps even the reinsurance industry. Angelo Mozillo will be floating on his yacht and testify before the house committee that he did not know that tobacco was addic- ... er that there might be something wrong with common lending practices by videolink from his deckchair.
Blame Yourself! Nobody held a gun to your head.
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