Sub Prime Mortgage Explained
This post is long but well worth it in explaining how the Sub Prime mortgage crisis came about. It remains in my opinion that no one involved should receive state assistance.
This post is long but well worth it in explaining how the Sub Prime mortgage crisis came about. It remains in my opinion that no one involved should receive state assistance.
January 31st, 2008 at 12:17 am
How can you believe what this article is saying and yet still maintain your belief in the almost mystical levels of innovation and efficiency that you claim is produced by massive corporations in the free market? The beginning of this post reads like a Dilbert strip… which is mostly how I think corporate america is actually run, but seems like anathema to your usual narrative.
January 31st, 2008 at 12:39 pm
Good info. One simple solution to this whole thing. Do your research before investing. Make sure you know how the risks are calculated before going into this kind of thing.
Re: darwin
A libertarian (me) reading this strip would probably claim one of two things.
1. The investors are at fault for not learning about what they were investing in.
2. The banks commited fraud by lieing about the risk assessments.
The difference between the two boils down to whether the sale of the loans had a clause that mentioned how trustworthy the numbers were.
January 31st, 2008 at 1:58 pm
Steve, this is one of the few issues on which we agree. boose makes a good point about the agreement on trustworthiness, as it is the only place where the state can step in.
January 31st, 2008 at 3:36 pm
The thing about subprime is that it isn’t all about personal responsibility. The banks took risks with folks that already showed they were not responsible (poor credit cases) and this has profound impact on not only the housing business, but all national and international business. Furthermore, the crisis effects the economy for everyone - not simply those people that took loans they couldn’t afford. Without any governmental action, the average homeowner is going to have to be stuck with awful interest rates and a weakened economy.
I’m not advocating state assistance for those that were irresponsible…. But let’s just remember that if the State intervenes, it’s not necessarily because they care about those subprime loanees that are losing their houses. They care about business and the fundamental health of the US and world economy.
January 31st, 2008 at 5:11 pm
Yes, I would certainly be more happy with the government prosecuting thousands of banking executives for fraud than with them bailing anyone out. Note of course that the libertarians implicitly favor bailing them out over prosecuting them, because they oppose campaign finance reform (let me know if I need to draw you a picture on that one).
Boose, my objection wasn’t about what the government should do, I was simply asking how the typical free-market libertarian can argue wit ha straight face for the efficiency and competence of the free market, as well as arguing the moral position that executives and management people deserve such huge salaries because they’re so much smarter and more competent than everyone else, and yet at the same time believe this narrative of incredible incompetence, inefficiency, fraud, etc, etc, along with the claims in the post that these trends are industry-wide. They seem like two completely contradictory narratives, yet libertarians seem to be embracing both of them at once without changing any of their positions.