Unfortunately in politics, who ever is in office is blamed for whatever happens during his/her term. Examples! John F. Kennedy is blamed for the Bay of Pigs invasion even though Eisenhower (the previous president) was the one who planned it. Nixon and Lyndon B. Johnson are generally blamed for the Vietnam War even though it was FDR and Truman who first escalated the war from the beginning.
In the present, George W. Bush is blamed for the Mortgage Crisis of 2008 by the ignorant media. Does anyone else notice that the Democratic Party has barely put any blame on Bush? Why has Mrs. Pelosi not said a thing about Republicans messing things up? Is it just my imagination?
It is not my imagination. The Democrats know that the mortgage crisis is their fault. During the Clinton administration, the Democrats (and many Republicans) voted to give out "unchecked loans." That is, poor citizens of the USA were given loans, and they had to give no information about their paychecks. They did not have to show the banks their credit scores, past bankruptcies, or salaries. The banks were forced to give loans to everyone. Even if these people had no intentions of paying back the loans, the bank was forced to give the loan out. Why? It's the American dream of course! Own a home, and everything will work itself out!
So what happened? These people who had no business of getting loans were granted loans for huge houses that they had no ability to repay. The poor and upper class were given loans that were impossible to repay because of government interference in the market economy. The poor were given loans they could not even dream to repay. The rich were given houses and properties way beyond their means. Once the economy went down, the people could not repay their loans. Now we have millions of people who cannot repay their loans because of the bad economy, houses have to be foreclosed.
Why did this all happen? Government interference in the free market created this disaster. When the government forced banks to accept people who couldn't repay loans, the free market went out the window, and the market collapsed within a few years.
Government created this problem. Socialist-esque policies of the Clinton administration force the free market to take on people who could not fulfill their commitments. Less government would have allowed the right people to get the right loans needed for home ownership.
(I wrote this article on Microsoft Word. I tried to edit all the kinks and errors from posting it on AG. Sorry if there are any weird symbols on this post).
housing industry is what hurt the economy, like you said. when people bought their houses, the housing industry went up right after, so they sold them. then, people had less money to spend because all of their payments were going into the house, and the money was being spent elsewhere. where it was unneeded. for a while, the housing industry was booming, then it crashed along with everything else.
Unfortunately in politics, who ever is in office is blamed for whatever happens during his/her term.
An interesting point. Here in the UK our PM Gordon Brown is associated with the recession despite the fact very little of it was down to him and mostly due to the sub prime american housing market. People also forget he oversaw a period of economic boom as the chancellor of the exchequer and focus on the looming negative growth.
It is not my imagination. The Democrats know that the mortgage crisis is their fault. During the Clinton administration, the Democrats (and many Republicans) voted to give out "unchecked loans."
From an economic perspective it is difficult to pin the responsibility of the crash on an administration. In my opinion the largest factor was the incompetence of the banks rather than government policy. It was a relatively simple case of contagion that brought the system down. Banks lending to banks who then lent to other banks who then lent to other banls and so on. It only akes one bank to go under for the chain to break and send all the banks involved under. The irresponsibility of the banks and unrestrained capitalism caused this not the democratic policies of the clinton era.
I kind of broke this down in a chain a while ago in a project for my government class...As far as I can tell, the problem may have started with the Clinton Administration, but it was advanced greatly during the Bush era.
After 9/11, Bush decided to lower the interest rate for loans from the Federal Reserve. This meant that banks now had more money to lend, and thus could make more interest/money off of those loans. This is where the problem ties in with the real estate bubble. Because housing prices were skyrocketing, many people would buy homes off of these loans, and then sell them after a couple of months to try to make a profit. Despite the warnings that the bubble would pop, as it always does, people continued this process.
So, after the bubble did finally pop, tons and tons of people were left with expensive loans to pay off, as well as decreased house values.
From there on out, we know the story. Like woody said, we can't pinpoint the blame on a certain party. It all started with the greed of the lending companies/banks.
Both woody_7007 and Zootsuit_riot pretty much nailed the reason why. I'm just going to add, the development of loans known as "sub-prime" caused the demise of the mortgage industry. It is known that almost 25% of all home loans are sub-prime. Who in their right mind would lend out hundreds-of-thousands of dollars to people with FICO scores less that 660?
(Citing from Wikipedia) Here's a list of problems that makes people go from "rime" to "subprime":
* Two or more loan payments paid past 30 days due in the last 12 months, or one or more loan payments paid past 90 days due the last 36 months; * Judgment, foreclosure, repossession, or non-payment of a loan in the past; * Bankruptcy in the last 7 years; * Relatively high default probability as evidenced by, for example, a credit score of less than 620 (depending on the product/collateral), or other bureau or proprietary scores with an equivalent default probability likelihood. * Accuracy of the credit line data obtained by the underwriter.
Who would want to loan THAT much money so someone who falls into this category? That is why there is a mortgage crisis. At least now, with massive amounts of forclosure, people with cash on hand can buy houses at good prices, even without the housing bubble bursting yet. Sadly, this is at the expense of the families who can't pay their mortgages.
I do not feel too saorry for the people who took out loans. Many of these loans were 8 times more than their actual annual earnings. Whats more the banks were greedy enough to lend to almost anyone on self assured mortgages, which are basically when they dont require much evidence of people having an income with which to support them. This system was bound to crash sometime,and the fact that banks were selling on this debt to other banks turned it into a global issue, i still think the banks themselves should take lots of the blame not administrations. Interesting point by thelistman though.
Wow, dude. This is something i have been thinking about for a while, but was not sure.
Anyway, i agree with you totally.
Also, people are blaming the Republicans and Bush for the war and economy, but you have to remember, the Democrats control the senate right now (and they still will on 21/09), but anyways, whatever "crappy" (opinion thing) policies Bush has proposed that you do not like, well you're saviors the Democrats have voted them through >.>
What's wrong with being hungry for money? The United States was set up upon a capitalist foundation. The only problem is that gluttony must be avoided at all costs. This whole mortgage problem is a perfect example of people in power having gluttony.
Arguably efficient economics is based on meritocracy, however when there are so few restrictions in a market that potentially carries the most risk it is naiive to belive that free market capitalism will work itself out in the end. This is a classic example of a market faliure and this has sadly had terrible consequences.
Exactly! And with a communist governenment, their would be no greedy banks, currupt privately owned buisnesses to cause any sort of crisis. The U.S government would ensure that everyone [b]ONLY got what they neeeded[quote]
Exactly! And with a communist governenment, their would be no greedy banks, currupt privately owned buisnesses to cause any sort of crisis. The U.S government would ensure that everyone [b]ONLY got what they neeeded
haha not my point, but I'm not big on communism our economy should be lazzie faire if anything different,
Exactly! And with a communist governenment, their would be no greedy banks, currupt privately owned buisnesses to cause any sort of crisis. The U.S government would ensure that everyone [b]ONLY got what they neeeded
Uhhh, except politicians who are already inherently corrupt, due to kickbacks and lobbyists. True communism has never been achieved, and will probably never will. Whatever "communism" that the world has seen has been fake. The Soviet Union was pure socialism, it didn't reach communism, and China right now went from socialism to near dictatorship, to... something between socialism and democracy.
