If the borrowers willfully lied, shame on them. But, as you said, they may have been encouraged to falsify information by greedy and corrupt lenders.

Beelzebub and Rex are spot on”

Steve, a borrower who willfully falsifies a mortgage loan application is no victim. But the problem in 2004-07 was that the lies were actively encouraged by the ones who were supposed to be most responsible – the lenders. It was all about making a quick buck and then offloading the risk onto someone else before the fuse went off – and the ordinary middle-class taxpaying American got stuck holding the empty bag at the end of the day.

Beelzebub and Rex are spot on.

Once the lenders have some skin in the game moral hazard will be long gone.

By the bank ignoring it’s lawful lending standards to make a quick buck.

Lies on application, phony cosigners, renting rooms to fictitious renters…including kitchen.

They should prosecute some borrowers…mail fraud for starters..and phony applications…

The Countrywide folks were just honest, above board, objective lenders, right Wayne? They never tried to sweet talk, trick or coerce people into obtaining mortgages that Countrywide knew the customer couldn’t afford. They never sold mortgages just to pad their profit margins. Yeah, right, and Bernie Madoff was just a poor misunderstood commodities trader.

The irony is that the right is now pushing for the same kind of no regulation, turn-a-blind-eye government policies that allowed this to happen in the first place.

Some of your claims appear to be misinformed.

Federal housing data shows that the private sector, not the government or GSE’s were behind the booming subprime loans business at the height of the crisis. In fact, in 2006 84% of the subprime loans were ISSUED by private lending institutions. And 2/3rds of the 84% were not sold to the GSE’s – they were sold directly to Wall Street investment banks that bundled the loans – got fabricated AAA ratings (for a price)- and sold the CDO’s to unwary investors. And the fact that the investment banks shorted the toxic investments soon after they were sold only highlights the inherent fraud which took place.

You said:

“The commercial banks were merely being compliant with government to keep their bank charters and comply with bank regulators. By the way, if the commercial banks were out for nothing but “greed” why did they invest in the mortgages which offered the lowest rates of return?”

What are you talking about? The subprime loans were extremely profitable for the private lenders. The huge up-front ‘junk fees’ and add-on fees with high-interest rates turned the subprimes into a gold mine for the loan originators. It was all about “greed” and short term profit before it was sold off to the investment banks.

““Criminalizing” the banks or shaking them down for reparations won’t do much but offer political symbolism that the criminals were given “justice.”

Why, pray tell, should we punish murder under criminal statutes, Wayne??? Why punish rape??? Why punish extortion??? Why punish car theft???

Punishment deters others from committing the same criminal acts. What kind of message does it send out to the Wall Street banking community when they can rip off ordinary citizens for trillions of dollars and not one of them goes to jail??? Do you think immunity from the law will stop them from committing additional acts of financial fraud in the future???

Sure, the politicians who conspired with Wall Street to bring down the global economy should go to jail too.

From what I gather – you and I differ on this point: You think it’s all the government’s fault and that Wall Street was a victim of sorts.

I think BOTH the government and Wall Street are equally culpable for what happened.

Frankly, I don’t understand how anyone could blame one or the other and not both equally based on all the documented evidence that has been compiled over the last 4 years.

The commercial banks were merely being compliant with government to keep their bank charters and comply with bank regulators. By the way, if the commercial banks were out for nothing but “greed” why did they invest in the mortgages which offered the lowest rates of return? Commercial banks were complicit in what happened. But they didn’t invent NINJA and Sub-Prime loans “whole cloth” so to speak.

Unless you “whack” the crime boss – not just the small business being extorted by the Mafia for “insurance payments” – you will end up going in circles. But whacking the commercial banks will make those anti-business types in the Knowledge Class feel better. But it won’t bring justice to the perpetrators or to the so-called victims who went on a feeding frenzy for five years with the pension and savings of those who are retired or about to retire (i.e., the “Tea Party”). This is what partly fomented the Tea Party into existence.

The unstated policy by Congress at the time was to pump up family formations that underpin Social Security and Medicare for the elderly. But the policy failed because there weren’t and still aren’t enough young intact two-parent-two children families who are self-sufficient to prop up the retirements and entitlements of the elderly. The government tried an “easy money” fix. It failed and made the situation worse. This wouldn’t have occurred if the secondary mortgage market was not politicized. But who is going to go after Congress when they are the “lawmakers?” As the Roman writer Juvenal once said: “who guards the guardians?”

“Criminalizing” the banks or shaking them down for reparations won’t do much but offer political symbolism that the criminals were given “justice.”

The politicos would love for the banks to be criminalized while they get off Scott free. The banks can always pony up, say, $25 billion in reparations which is a mere drop in the enormous ocean of bad loans out there. Few will go to jail because what they were doing became the new “norm” for lending during the Housing Bubble.

I understand your viewpoint on this and realize you will strongly disagree. But for others listening in to this discussion this my counter viewpoint. We can only clarify our differences in viewpoints.

What about those who deliberately provided mortgage loans knowing that the customer had no chance in hell of paying the loan back????

Who is more responsible? The one provided the loan or the one who took it??? I contend the one who provided the loan. They are bound by law to follow lending standards. Knowing that they would sell the loan to someone else before the ink was dry gave them a reason not to give a damn whether it was a bad loan. Then it became someone else’s problem. And that’s how the meltdown started.