Did the Poor Cause the Crisis?

[liberal N proud]

Republicans claim that poor homeowners are to blame for the global financial collapse. New economic evidence proves they're wrong.

The United States continues to be riven by heated debate about the causes of the 2007-09 financial crisis. Is government to blame for what went wrong, and, if so, in what sense? In December, the Republican minority on the Financial Crisis Inquiry Commission, weighed in with a preemptive dissenting narrative. According to this group, misguided government policies, aimed at increasing homeownership among relatively poor people, pushed too many into taking out subprime mortgages that they could not afford.

This narrative has the potential to gain a great deal of support, particularly in the Republican-controlled House of Representatives and in the run-up to the 2012 presidential election. But, while the FCIC Republicans write eloquently, do they have any evidence to back up their assertions? Are poor Americans responsible for causing the most severe global crisis in more than a generation?

Not according to Daron Acemoglu of MIT (and a co-author of mine on other topics), who presented his findings at the American Finance Association's annual meeting in early January. (The slides are on his MIT Web site.)

http://www.slate.com/id/2281718/pagenum/all/#p2

[Erose999]

1. Given how little of the nations wealth the poor control I'm gonna say "no". Subprime was not the

only cause of the "crisis", as well. And who said the poor were the only recipients of subprime mortgages, or that they were the only ones guilty of entering mortgage contracts beyond their ability to pay?

What about all those who got caught up in the trend of "flipping houses," and ended up defaulting when they discovered they were in over their heads and that "renovating" actually requires skills in things like plumbing and carpentry?

[raccoon]

2. They must have. They cause all the PITA social problems, drugs

(doesn't matter if you snort or you're a drunk and you're rich), crime, urban decay....

:sarcasm:

[lame54]

3. The crisis caused the poor

[mmonk]

7. +1

[liberal N proud]

12. For the GOP white is black and up is down so it makes sense for them

to turn this around from the crisis cause the poor to the poor causes the crisis.

Now wasn't that easy, just change the order of the words and the blame goes somewhere else.

[peace13]

4. Yes it was a miracle form god that the poor people caused this mess...

so that the rich could stick it to all of us. The poor even caused the stock market to crash. They are so good at hiding the money they make from all of this turmoil.

[Javaman]

5. No, you know what caused the crisis? a system that is gamed so the poor are set up to fail.

When you look at the stats regarding who in society controls what, then you will see who always gets the short end of the stick.

If you have an over inflated housing market, coupled with a struggling sector of the population, than marinate all that in bullshit rhetoric about how ANYONE can own a home, well fuck, what do you think is going to happen?

If you have a poor person who has been struggling all their lives, holding down crappy jobs, unable to afford the time and money to get a college education, always stressing about this thing or that, don't you think that they would love to have a home? A little normalcy? I little piece of straight road?

Fuck, I always get so angry when the poor are blamed for every damn thing in society when they get the least amount of help, get the funds to their local schools cut (because of under performing, which to me is antithetical to how funds should be handed out), live in food deserts, high crime neighborhoods because they can't afford better, while at the same time, all their various support programs are cut.

The poor are kept poor intentionally by the people in power. The corps want a slave wage workforce that has no time to question the powers-that-be out of fear of losing that minimum wage barely able to subsist type job.

There as been a deliberately planned program to make all of us poor over the last 35 years. To get rid of unions, living wages, pensions, cut into SS, medicare, welfare etc.

When you have no voice, you have no choice. You can't question.

So blaming the very small amount of people who "bought too much house" as the fault of the poor is plain and utter bullshit.

Is it the same as the fault of someone who was able to make the payments, but lost their jobs due to this lovely economy? They may not have been making huge money but enough to cover their mortgage. But then, they get laid off and they are screwed. Do we blame them?

Because those poor folks are the majority of what is going on out there.

This just plain fucking pisses me off.

[OHdem10]

6. If you noticed, from day one the Republicans have blamed

the crisis on Fannie and Freddie Mac. They have
never acknowledged Wall Streets role, the Mortgage
Companies who did not even ask people how much salsry
they earned, the Banks. They have tried to make
it sound like a bunch of Americans who could not afford
homes sammed the big boys. They know better but they
must protect their Business and Financial Institution
friends. Fox frames the stories the same way.

[mmonk]

8. Part of the supply side Reaganomics religion or cult is that you never

blame the removal of regulations nor instruments of greed like credit default swaps for any economic problems. So the victims are to always be blamed.

[burnsei sensei]

9. No.

In an economic and social sense, the power, the power to influence and the power to get things done, is commensurate with money.
The decisions of the rich and near-rich do much to direct the economy.
By no means are the poor responsible for the loss of jobs, gains in productivity or the presence of poverty.
The rich and institutions decide what gets done and what is done.
The poor have no such power in their hands and you know it.

[justiceischeap]

10. I'm going with the banks!

Not all poor folks should get home loans nor should all middle-class or upper middle-class. Anyone with a poor credit rating should not qualify for a mortgage. Period. I'm one of those people with a poor credit rating. I'm not saying everyone with a poor credit rating can't rehab their credit with a mortgage but if someone shows up for a loan with a history of not paying off those loans, then deny them the loan. Don't give them a huge interest rate to "punish" their poor rating instead. Deny the loan.

But no, banks so a cash cow in allowing people who would likely default on their loans. So yeah, I'm going with the banks.

[whathehell]

11. No, but they'd rather blame them than the WallStreeters who donate to their campaigns. n/t

[subterranean]

13. If government had any role in the meltdown,

it was its refusal to acknowledge the bubble that led up to it, and its lack of interest in monitoring the derivatives market.

[TheMadMonk]

14. No. Subprime mortgages grew out of a product marketed to realestate investors.

And they were only later marketed to the poor and the financially marginal, with promises of being able to "flip" the property before defered interest come due. And do so with sufficient profit to take out a standard mortgage on another property, or flip another property for even more profit.

If I were to be cynical about this, I'd say the market was deliberately crashed. As I alway say, it's not the absolute numbers that matter to the power players, but the relative percentages. And it suits those power players not at all, for too many "average" people to actually possess outright an appreciating asset of that magnitude. Or even have an affordable standard mortgage that won't balloon out of control in a declining market. As a home, a mortgaged property truely only appreciates or depreciates at the actual time of sale. In between time, something would have to go horrendously wrong, for the only choice of the mortgagee to be to walk away.

It could well be possible for the current mess of "lost" and "detached" notes/titles, to be resolved by the courts, by them "forcing" through the good faith renegotiation of the terms of loans that was supposed to go with TARP. That IS after all the obvious sensible sollution.

And in return their MERS system of mortgage exchange will be given official standing, and with not very much manipulation at all, could be handed a status and power similar to the Federal Reserve. Again by doing the obvious thing and making it a defacto national land registry. Parallel to (but tightly lintegrated with) existing state registries to begin with. Then of course the next logical step would be to offer to take over entirely from individual state registries for a substantial discount on what it costs the states to maintain their registries.