The rickety financial skyscaper known as the subprime mortgage business is ready to tumble.....

[marmar]

From the Nation:


The House that Hedge Funds Built

Nicholas von Hoffman


Flash! The Wall Street subprime mortgage high-wire act continues.

Flash! At the midnight hour last week Bear Stearns, a major Wall Street house, has offered up more than $3 billion to save one of its hedge funds.

The money is to go to a financial child of Bear Stearns called High-Grade Structured Credit Strategies Fund. High-Grade is in hock to Deutsche Bank AG, Merrill Lynch & Co. and Lehman Brothers Holdings, among others, for staggering amounts of money. High-Grade borrowed the money to buy billions in bonds backed by the subprime home mortgages. The delinquency and default rates on these mortgages are rising so fast it's beginning to look like something staged by NASA.

Subprime mortgages are home purchaser loans given to people with bad credit histories, insufficient incomes, overextended credit, weird work histories, overwhelming family problems and you-name-what-else in the way of warnings that these mortgage recipients are bad risks. Why any prudent investor would buy such mortgages or bonds comprised of them would be a puzzle--except that the slogan on Wall Street seems to be "Make money today and let tomorrow take care of itself."

Tomorrow has arrived and it is beginning to take care of the greedy mortgage bankers, bond houses, financiers, hedge fund geniuses and Wall Street worthies who made hay the past few years while the sun briefly shone. These mortgages with their teaser interest rates and other deceptive gimmicks were bundled together into bonds, which institutions and financial organizations bought in the belief that they were safe. .....(more)

The complete piece is at: http://www.thenation.com/doc/20070709/howl

[Sapere aude]

1. The people who took these loans are as much to blame. Who here can say they take no responsibility

when they sign for a loan they know they can't repay?

This market should never have been made and borrowers should never have borrowed in it. Never a sub-prime borrower or lender be.

[trumad]

3. Yeah--that's it...blame the borrowers...

ugg!

[Sapere aude]

7. You obviously think people have no responsibility to know what they are getting into.

I blame both sides if you read my post. You have yourself to blame if you take out one of these loans.

There is just no other way to see it.

[trumad]

11. What I think is a whole lot of people were snookered into these types of loans

and that they simply aren't as smart as you in seeing that they were bad loans.

It must be nice to be so brilliant.

[Sapere aude]

13. It's not like this hasn't been talked about a million times. People know how far their paychecks

will stretch. They know if their jobs are secure. I don't buy the idea that you have to be smart to not get into trouble here.

The pressure is on looking like you made it by owning a home. That is the thing people can't overcome I think. The trouble is they look worse by getting foreclosed on than by renting.

The industry is as much to blame but what has anyone done to help people avoid this happening? Anyone with your attitude is as much to blame as the creditors I think.

[POAS]

14. You are right in as far as you go but

the question here is not about whether an individual is responsible for getting into a bad loan but rather about an industry built on making shaky loans. No individual borrower is responsible for the decline of the lenders, That blame falls squarely on the shoulders of the underwriters of those loans.

After all a borrower makes a bad choice once, the lenders in this industry made bad choices over and over and over again.

[napi21]

2. That's no different than the credit card industry giving cards to

ANYONE! Both are only promoting bankruptcy!

One of my neighbors, who is totally irresponsible with money & credit, filed for bankruptcy, lost his house, divorced his wife, etc. all within the last 6 months, and HE JUST GOT 2 new credit cards!!!!!

[Turbineguy]

4. That's so they can

charge him 23% interest until he files again.

[Dora]

5. Sometimes, those credit cards actually help to rebuild credit.

My husband had to file bankruptcy because of medical bills.

That first credit card after the bankruptcy was a stepping stone back into financial health for him. We were even able to buy a house within three years. We recently sold that house, by the way, and used part of those profits to pay off and close that same credit card. And why did we have a balance on that credit card?

Because of medical bills.

[napi21]

6. I don't dispute that, but certainly not in this case!

This guy ran up all his credit on buying all kind of things like rototiller, power washer, commercial chain saw, $6,000 tractor, log splitter, and constantly going out to dinner. He refinanced his house 3 times to pay off the CC's only to run them back up again! NO he doesn't work in the outdoor business, he's a mechanic. These were all toys for him, and most he used once or twice and then left them sit outside to rust!

There's no way anyone's going to convince me he had a sudden life altering experience in 6 months, and now is going to be a responsible credit manager!

You're right. I some cases, when the bankruptcy was not the fault of the CC holder. They do deserve a method to rebuild their credit, but not in HIS case!

[Sapere aude]

8. You have to sign for the cards don't you? They don't just give them to you.

People have no credit sense it seems and others don't care that they don't. You can't play victim if you don't tear up those credit card notices. Also you can opt out of getting them. You have to take responsibility for your credit.

[napi21]

10. Absolutely! That's the problem, as I see it.

It's like knowing a friend is an alcholic but you buy him a bottle of booze for his BDay, or give him a job bartending! Yes, the creditor has responsibility, but so does the issuer for dangling temtation in his face!

[Sapere aude]

12. Try this , anyone can stop them from dangling credit offers in front of you.

https://www.optoutprescreen.com/?rf=t

Take responsibility!

[depakid]

15. This is exactly the sort of situation that regulation should be designed to prevent

Making statements and holding unrealistic attitudes re: "personal responsibility" such as I've seen in this thread is FAR more to blame for the current problem than people who are simply acting as people will always act when free for all conditions like this exist.

Blaming them is like blaming a cat for eating killing birds!

The debt/finance industry AND the government, on the other hand, have the sophistication, the tools and (presumably) the foresight to avoid such precarious situations. And their failure to act responsibly may well cost us all very dearly.

[CanonRay]

9. Is this the first domino?

Leading to the collapse of the dollar and the U.S. economy?