Friday Question of the Day


I was one of those people who got a 30 year fixed loan back in the day when I could’ve got a 5 year ARM and “saved” a boat load of money a month. But I can be a conservative person and I suspected in the long run I’d be safer with a 30 year fixed. Now let me just say here that I truly find this housing crisis tragic. Reading the stories of how people got taken advantage of is heart breaking. I’m not talking about that. What I’m talking about is the gamblers. So you know where I’m going with this for the Friday Question of the Day – Who should the government bail out from the housing crisis? Banks, borrowers or both? Or neither?

19 Comment

  • Both – the people who got taken deserve some help in finding ways to stay in their homes, but if the banks fail we all lose. I get torn about this because the lack of personal responsibility in this country is infuriating, but I do believe that some of what happened was fraud and trickery.

  • The fiscally conservative, uppity “I told you so” part of me says NEITHER. But the realist in me says… bailing both of them a little out of the hole is probably the best thing for all of us.

  • If they don’t bail them out now they’ll likely pay for it in social services they receive down the road, which is usually more costly.

  • This is really tricky. Everybody loses if our financial institutions continue to crumble since our economy is already trending downward. On the other hand the real estate and mortgage industry was heavily to blame because they qualified people who shouldn’t have been qualified under the idea that the risk would be repackaged further down the line. They all just wanted their commissions.

    On the flip side, the borrowers took gambles too. Interest only loans? 100% financing? Buying more house than they can afford. Banking on appreciation and refinancing? There are no free lunches.

    But if we bail out the mortgage industry we need to regulate them more rigorously to prevent from doing this again. That means more restrictions in the near term plus keeping more of an eye over what practices they adopt to circumvent those regulations and regulating those if need be.

  • is it possible to ‘bail out’ the actors here in a way that does not reward carelessness, greed, or recklessness? while i am sure there are many homeowners that were these things, moreso, do i believe more of the blame is on the side of the lenders–it’s not a level playing field. this is THEIR BUSINESS, and no one put a gun to their head to make half-cocked loans to people they knew would not likely be able to pay them back. instead, many of these institutions were driven by one thing: greed. again, is there a way to bail out the real victims here and not the predators?

  • There are those who got taken. I feel for them. There are those who had unexpected circumstances along the way. I feel for them. I wish there was a way to bail out those who deserve it.

    But there are those whose greed was a whole lot more than what they knew their wallets could handle. Buying a home is a huge responsibility. For most of us, the biggest financial responsibility we’ll ever see. If you get a home as a status symbol that you just can’t keep up with now, I’m sorry. My empathy runs low.

    As for the banks, I agree with Paul. The mortgage industry itself needs more regulation from this point onward.

  • i think the prevalence of interest only loans and that banks seemed ready to give loans to just about anyone is part of what drove up housing prices so quickly in DC. Suddenly the monthly payment on a $500K house only cost what a 30yr fixed loan on a $350K house would have cost. And banks, real estate agents, and city govts (through property taxes) all made massive amounts of money from increasing housing prices. Of course many homeowners made a lot of money selling properties that doubled in price in only a few years and the pressure to get in the housing market was really quick. I agree w/ Chris though that the bulk of the responsibility has to be with the lenders…

  • amen anon 11:58! while there certainly needs to be some changes to the mortgage industry, i think people need to take some personal responsibility for THEIR choices!

  • There are people who got taken because they didn’t care to understand the details of their mortgages, and there are people who were victims of predatory lending. The first group doesn’t deserve a bail-out. The second has a legal remedy and shouldn’t need a bail-out. Of course, people who are victims of predatory lending are unlikely to have good lawyers on stand-by… As for the banks, I agree with the Feds: ask Bear Stearns investors if 7 cents on the dollar feels like a bail-out. The Feds may be buying up and/or guaranteeing some banks’ crappy sub-prime investments, but at fire-sale prices. Seems to me that the banks are to a large degree suffering the effects their poor decision-making.

  • It does say an awful lot about how well we educate people about personal finance (i.e. not at all) when someone who is otherwise intelligent believes they can afford a $500K mortgage on a five-figure salary.

  • The government shouldn’t bail anyone out. As any responsible taxpayer, I don’t want my taxes to help pay for people who made irresponsible financial decisions, and didn’t take the time to review.. That was their problem. It’s the issue of the banks.

    This whole situation makes me fume. Another issue for me is that Obama stands behind the Bail-outs, and that’s one of the reasons why I am not voting for him!!! Why can’t people understand that that is not good.

    It’s essentially giving people slaps on the wrists, if you really think about it.

  • I wrote the above, and I forgot to say — I’m a Hillary supporter.

  • When were ARMs invented? They shoulda never.

  • From all the reporting I’ve been hearing lately, I almost started thinking I might have been a real wuss for going with a fixed rate loan back in 2000. Thanks to everyone for affirming the truth that it’s better to play it safe. The risks behind such a huge investment weren’t that hard to see — and I have a math phobia.

  • This whole crisis is caused by greed and nothing more. When I bought my place, I was a mere 24 years old, but I knew that anything “adjustable” is subject to market fluctuations and is a gamble that no intelligent person would take. I knew, historically, that things go up and down all the time and that it’s better to stay conservative (financially) and not take risks with something like a mortgage payment. I thought it was just common knowledge, but apparently I was wrong. Several people in my condo building took the gamble; not only did they get adjustable rate mortgages, but they also borrowed the maximum amount allowed so that they could buy a huge place that was way more than they could afford. Guess what? Several have gone into foreclosure, gotten in trouble with their condo fees, or both. That all being said, I do not think that people should be bailed out, especially when they simply spent beyond their means. It sends a message that “the government” is going to bail people out when they get in financial trouble. People will go back to their old spending habits. People need to learn that living beyond their means is irresponsible and plain stupid.

  • A lot of people are saying that people bought beyond their means and are just getting what they deserve. Problem is that if a lot of your neighbors foreclose and their houses are sold by the bank for way less than they paid, and your neighborhood (or building) has a lot of vacant propoerties, that hurts the value of your home (not to mention the US economy is going into recession in large part because of the housing crisis). Once all the “comps” in your neighborhood are foreclosed properties, what’s your house going to sell for??

    Even if people got themselves in over their heads, I think it’s in everyone’s best interest to avoid houses going into foreclosure if at all possible. If the bank forgives part of your neighbor’s debt their credit rating will be fu#*ed for a long time to come, but it will help YOU in the long run.

  • we should be held responsible for the predictable consequences of our actions.

  • The Center for Economic and Policy Research has a plan that would ONLY bail out people who bought their homes to live in them. Not speculators, not banks. It would allow people to avoid foreclosures by renting their homes from those who hold the mortgages at an independently determined fair market rent. Essentially an own-to-rent solution.

  • Is anyone going to bail out gamblers in vegas? of course not. This is stupid.

    CAVEAT EMPTOR ! I feel nothing for people who are victims or “predatory lending”. All the information is there when you sign the paper.. if you are too lazy to read it, its your problem. Same for banks, which should know better, if you take on a huge risk, you might loose out.
    If this hurts the economy then perhaps the economy needs a hit to get straightened out. The worst part of a bailout is that people who are responsible and think reasonably before they act are still going to end up paying for other’s recklesness.

    It almost makes you want to be reckless because there will always be poeple who bail you out (who probably learned the hardway not to be reckless)

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