Subprime Mortgage Crisis

>>1086510
Because if a bank gives out a $150'000 mortgage, they expect to earn at least double that in interest payments over the next 20-30 years.

The problem is defaults and applicants weren't properly vetted for this.

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>>1086510
>What did the banks have to gain from giving out mortgages to people who couldn't even pay them back?
Nothing, the government forced them to.

Also the extremely low interest rates from the federal reserve was the main reason for the boom.

>>1086519
Elaborate

>>1086519
t. Peter Schiff

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>>1086530
t. keynesian cucklel'd

>>1086510
Watch this
https://www.youtube.com/watch?v=4ECi6WJpbzE

The government starting handing out cheap risk free money for housing loans to try and stimulate the economy out of the dot.com bubble crash. In the process they inflated a massive housing bubble. Pretty much the same way the Fed is now pumping equity markets full of phony money to inflate a stock bubble to get them out of the housing crash.

Don't tell anyone here though. Apparently you can print money forever, the gains in the markets the last 3 years were "real" and the US economy is thriving.

>high risk = high interest
>it's not even the banks money
>taxpayers are bailing out banks with their own money

you go to a roulette table and receive $1000. Whatever the profits are, they are yours. Your losses are covered by the house. Make your moves.

DUUUUDE! I'm super interested in this stuff!

I just finished watching The Big Short too!

The people who gave out the mortgages packaged them into mortgage-backed securities, which they would then sell to investment banks who would get the interest. Mortgages have high ROI and usually a low rate of default, mostly because the value of a home tends to increase pretty steadily over time, so these securities became very, very popular and received the highest possible investment ratings. This increased demand from investment banks for more securities, so the mortgage lenders started loosening their credit standards to meet demand. The investment banks never caught onto this and continued to gobble up all the securities they could, particularly because the Fed had kept interest rates stupidly, ridiculously low and the securities were the only things getting any sort of good return.

To be honest, it wasn't even that people without creditworthiness got homes that caused all of this. That just kickstarted a decline in home values once market demand was tapped out. People bought homes expecting they'd be worth 30% or so more in ten years, instead many of them lost half or more of their value within two or three years, and people just decided they'd rather default than pay a loan on something that was worth half as much as it was supposed to be.

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>>1086519
You're right about the Fed's low rates playing a big part, but you're absolutely wrong about the CRA, which is an excuse invented by the same people who think forcing the Fed to keep rates low is 'laissez faire' and 'free market'.

>>1086510
They packaged the mortgages into securities. Mortgage backed securities were making a ton of money. Credit ratings got sloppy and gave them a high rating.
>>1086519
>the government forced banks to take out high risk mortgages
What?

Don't forget, Real Estate always goes up. because new people are born every day.

>>1086510
they get fees and interest . they don't give a fuck if the loans fail because he government will just print money to bail them out. it's like gambling with no chance of losing your own money, why wouldn't you just place as many bets as possible?

>>1086752

but money is printed and lent out faster than people are born

>>1086752
...except the west is going towards 0% demographic growth, or in some situations negative demographic growth.
so, not really

>>1086510
Clinton was responsible for most of the things that lead to it. Investment in communities that couldn't re-pay loans, repealing glass-steagall and so on. The funny thing here is that the Bush government actually tried to have Fannie Mae and Freddie Mac investigated, which would've prevented most of the crash, but the democrats killed it.

http://www.nytimes.com/2003/09/11/business/new-agency-proposed-to-oversee-freddie-mac-and-fannie-mae.html
https://en.wikipedia.org/wiki/Community_Reinvestment_Act

Another huge deal was also Clinton repealing glass-steagall

https://en.wikipedia.org/wiki/Glass%E2%80%93Steagall_Legislation
https://en.wikipedia.org/wiki/Gramm%E2%80%93Leach%E2%80%93Bliley_Act
>It repealed part of the Glass–Steagall Act of 1933, removing barriers in the market among banking companies, securities companies and insurance companies that prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and an insurance company.

>>1086510
They got all the payments, took the collateral too, got handouts from mommy government for the "loss," and resold the asset. Great way to get paid multiple times for the same thing while half the populace is stupidly stuttering "muh job creaturz."

>>1086763
>but money is printed and lent out faster than people are born

except I dont care about "money" I care about USD and you care about whatever currency you have to actually use to pay bills

So the fed can print 3 trillion as long as it only represents available liquidity and stays in banks and if the US dollar is strong and my income doesnt come from export then I can live with that arrangement

You try to black and white this shit and it just aint gonna work

>>1087268
Investigating the GSEs wouldn't have prevented shit; their loans performed above-average during the crisis
See
>>1086581

Do you know about pyramid schemes and how they work? people sell you things, and if they are lucrative enough, you fall for it?
Like wise, Banks in Usa Showed the investors etc in france and other countries, that they are getting bigger, more loans on paper, more Money to be recovered, and then when they weren't able to collect after 6-7 years, people or investors started pulling out their investment, then panic, remove, panic, remove, boom.

>>1086519
>the government forced
LMAO
the most retarded shit ive read whole day