Consequences of Massive Bailouts

[scooterbug44]

I don't think someone who is in financial trouble is a bad person or an immoral person who necessarily got there because of bad decisions - we all know the economy hasn't been a bed of roses lately and a lot of good people have gotten hurt as a result.

It's not a question of morality as much as a question of responsibility, learning from mistakes, not repeating them, and trying to recover.

I don't begrudge a drowning person a lifeline - accidents/sheet happen, but I start to get annoyed when they are drowning because they don't know how to swim, ignored the posted warnings, jumped in the deep end of the pool when it was closed..............and now are biatching about no lifeguard being on duty.

IMO the people in the article Bob posted are deadbeats playing the system and ultimately making ALL OF US pick up the tab for their idiocy.

They haven't been paying their mortgage since last summer, his mother stopped paying 2 years ago, their credit was already shot, and they continue to blame everyone but themselves for their financial situation. That is the my biggest problem - that they won't take any blame or responsibility.

"refinanced at the height of the market, taking out cash to buy a truck they used as a contest prize for their hired animal trappers. It was a stupid move by their lender, according to Mr. Pemberton."

(I agree it was a stupid move - and not just by the bank). :roll:

His mother "refinanced several times during the boom but says she benefited only once, when she got enough money for a new roof. The other times, she said, unscrupulous salesmen promised her lower rates but simply charged her high fees."

(Why did she refinance several times if it didn't help her - and why did she sign paperwork that didn't give her a better rate or that she didn't understand?)

It's all well and good for them to walk away or not pay if that's the "smart" choice, but our economy is not going to recover when millions of households aren't paying their bills. These actions don't just hurt the evil banks and stop - it has major economic and social implications.

And skipping your mortgage payment to go have fun at the Hard Rock Casino or tool around in your airboat (is that paid off?) makes me see red - not just red ink!

 

[scooterbug44]

Lenders need to take some cues from the mafia and go after those who are gaming them. It's not good "business" to just let someone walk away owing you money be it $1 or $100,000 via a loan or bad checks (shopper). Word gets around quickly that nothing bad will happen if you stiff your lender except maybe a loss of some credit points and hell anyone can live with that. Break a couple of legs and pull a few fingernails and a surprising number of people will find the money.

You had my support until the last sentance!

 

[Geo]

Ha- poppy, I'm on board. Start with the biggest offenders (the corporations, the banks and wall street) and work your way down to the small fish.

 

[Bob]

excellent discussion. love listening to you all. always learning from you too.

so, we have a lot of friends in and around South Walton who have lost or who are losing their homes. probably most were due to financial mistakes and overextending. but the market was far different then and the risks did not seem to be that great - this is a real estate market with a lot of work going on in building, developing, selling, renting, etc. that was then. this is now. the worst nightmare risks kicked in and these people were good people then, making business decisions, and they are still good people, making business decisions. I am with 30A Shopper - its pretty straight forward. Good people caught in bad real estate economy. Its very stressful for them. I would not think its ever easy to walk away from the home that was once your dream come true. It is heartbreaking while at the same time a relief to be able to shed the unbelievable burden. I think its immoral to make such blanket judgments on anyone going through this. sure, there are some really bad decisions going on out with some folks there but what's new about that?

most are good people, decent people and they've been pulverized by this economy

 

[LuciferSam]

There's an issue of confidence here. I don't have much confidence in people who game the system and it makes no difference whether they are big or small. In fact if they are small, the chances that I might have to deal with them are much greater. So while it my not be a moral character issue, I think that a person's inability to execute in a financially responsible manner undoubtedly will carry over into other facets of his life. It's not just lenders who look at credit reports anymore. It's potential employers, business partners and spouses among others. I don't think I'm speaking just for myself, I think this is the way a lot of people feel.

 

[Minnie]

Actually I was told get good grades, get a job, earn and save and buy a house I can actually afford, not my dream house that a bank and a realtor told me I could afford, but truthfully knew I couldn't.

And I was told to buy a house that would allow me to save enough to pay my bills, have no debt, and put my child through college and pay for vacations with cash and save for retirement.

So yes it does me rub me when others work the system and get away with it be it Donald Trump or anyone else. I have a dear friend who is struggling to feed her children, but her ex that owes her 20,000 in back child support because he can't find a job, just had his mortgage payments reduced almost in half. There are jobs out there he could take, but he might have to move away from his lake house with the pool and the jacuzzi while she works 2 jobs to make ends meet. She was told she did not qualify for a morgage reduction because she had not missed any payments. I am sorry but that is wrong, in the worst way.

As to those that have lost their jobs and lost their homes, I feel for some of them but I do think many, not all, bought way more house than they could actually afford. Did they have savings, did they have a 6 month rainy day fund, did they pay cash for bills, did they save and pay for a house, or were they " house" poor because they wanted the luxury house instead of something much smaller with one bathroom.

Do I think they are bad people or amoral, absolutely not, greedy, maybe. Basically many gambled and lost, I don't gamble, not at the casinos and not with my purchases.

And yes I have taught my 25 year old the same lessons I was taught. Live within your means, pay for everything in full, and save for retirement.

 

[Geo]

Minnie, I agree with you. But what took place in the last decade with deregulation, loosening of lending standards, creation of faulty loans and financial products that bundle them created an artificially inflated real estate market. The overwhelming sentiment was- "well it's not like it's going to go down in value because history is on your side. So worst case scenario- if something goes bad with your job/health/income, etc you can just sell your house.

It was unprecedented that property everywhere would drop and do so
significantly.

I see lots of Monday morning quarterbacking.

 

[Minnie]

Minnie, I agree with you. But what took place in the last decade with deregulation, loosening of lending standards, creation of faulty loans and financial products that bundle them created an artificially inflated real estate market. The overwhelming sentiment was- "well it's not like it's going to go down in value because history is on your side. So worst case scenario- if something goes bad with your job/health/income, etc you can just sell your house.

It was unprecedented that property everywhere would drop and do so
significantly.

I see lots of Monday morning quarterbacking.

I understand that and maybe the difference is my husband and I had parents and grandparents who lived through the Depression, so yes they knew it could happen. And maybe we are overly cautious and knew we never wanted to be where we could not pay our way if hard times came, hence our rainy day fund.

I guess when some of our friends made fun of our choice in houses, and told us we could definitely afford more; I now have a hard time feeling sorry that they lost their million dollar home, had to sell their BMW, and the bling, when their income was no greater than ours to begin with.

But I sleep well at night, knowing I am debt free, have a great retirement fund, and could sell my house or rent it and make a good return on my investment.

Now those that did not over stretch themselves, lived within their means, bought a house they could actually afford and have fallen on hard times due to loss of jobs or health I do feel sorry for them.

But sometimes people who have lost their jobs have to make sacrifices they are not willing to make. They might have to move, even move out of state, they might have to have a second hand car with 150,000 miles on it like we do, and they might have to shop at Target or Wal-mart, they might have to work two jobs.

Until they are willing to be frugal and still can't make it, then no, I guess I have little sympathy.

So worst case scenario- if something goes bad with your job/health/income, etc you can just sell your house

See I was taught, worst case scenario if something goes bad with your job/health/income, can you "afford" your house.

My answer was yes I can.

 

[LuciferSam]

Minnie, I agree with you. But what took place in the last decade with deregulation, loosening of lending standards, creation of faulty loans and financial products that bundle them created an artificially inflated real estate market. The overwhelming sentiment was- "well it's not like it's going to go down in value because history is on your side. So worst case scenario- if something goes bad with your job/health/income, etc you can just sell your house.

It was unprecedented that property everywhere would drop and do so
significantly.

I see lots of Monday morning quarterbacking.

I'm not sure why you would think most people didn't see this coming ahead of time. You must not remember the boom and bust up in the northeast where there was literally a regional depression back in the late 80s. This was around the time of the savings and loan crisis. This was just the same ole same ole. Savings and loan crisis - Wikipedia, the free encyclopedia

 

[Geo]

LS, I see a lot of people coming out of the woodwork saying this scenario was so obviously going to happen- now. Don't remember all these same folks saying such things before it did.

Even the mainstream more conservative financial guru types did not predict this.

I know some PAW's (this is a reference to the book Millionaire Next Door) just like Minnie who got burned.

I'm happy for people who have been spared any suffering. And I feel for anyone who is hurting. I blame more than just their own choices and actions. The system failed us and now we are all paying for it-like it or not.

Last thought- money will be made and lost. You can't take it with you. Sometimes you gotta say what the hell and take a gamble. I respect people who go for it and who live a little and splurge sometimes.

That's just me.