If that's true, then why is the current government working hard to remove any protection (however meager it is/was) to prevent the same mistakes from happening all over again?
If the working class has no tolerance for these things, then it definitely isn't reflected in the people the working class has elected to 'represent' them.
I find your average worker doesn't really pay attention to the day-to-day news/politics (especially regulations & individual votes, media doesn't cover this either and nobody watches CSPAN) but by now knows that in 2008 the bankers & wall street — the people who put us in such predicament in the first place — got an enormous bail out that went to already super rich executive & CEO bonuses, but the working class lost their homes & jobs and received absolutely nothing.
I don't think think it will go that way the next time it happens.
"It couldn't possibly happen again, we're better/bigger/smarter than last time. So we have nothing to worry about, no reason to put in safety guards/regulations!" - Humans throughout history.
Because regardless of what you hear median income is the highest it's ever been: https://seekingalpha.com/article/4203346-july-2018-median-ho...
This is the first time that the real median hourly wage for full time employees is higher than it was in 1968.
I do think some people voted for Trump as essentially accelerationism, but unless the Democrats and the media apparatus succeed again in disenfranchising an actual left candidate in 2020 (which is always possible) the tide could turn.
The working class wasn't robbed at all. Maybe they lost the value they thought their homes had, but the reality is that all of that was just inflated.
2008 was an issue of moral hazard and unfortunately Joe Schmuck isn't aware of that going into a mortgage agreement. This will continue to happen forever until people finally learn that when something seems too good to be true, it probably is.
If you want to blame 2008 on anyone, you need to spread the blame like peanut butter among lending banks (but not every bank!!!), people who took on mortgages they couldn't pay (if nobody defaulted, the crisis would never have happened) and above all the credit rating agencies who exist for the sole purpose of assessing risk and maliciously failed to do so in order to not piss off their biggest customers (the banks).
Once that incentive was removed, mortgage servicing (often contracted to the same banks) could continue, putting unrelenting pressure on people who had taken out the loans. So what if they lost their loaned properties? Well anyone who had put down a down payment or had equity in their home lost that down and equity. So this ended up being a very one sided transfer of wealth out of the hands of people taking out mortgages, while preserving the profits of banks (they didn't have to accept the losses of the securities bought by the Fed...).
To me it looks like the the organizations with the deepest buffers of wealth (banks), got a bailout by the fed, while individual people bore the full pressure of having their wealth systematically reduced.
As an alternative, the fed could have risked similar or less money by offering to pay down some slice of the principal of the loans, requiring a refinance/reset to put the security back into balance with the market prices. This would have allowed wealth to stay in the hands of individuals, somewhat insulating the banks, but resulting in less transfer of wealth.
https://www.sec.gov/news/press/2008/2008-211.htm
Those banks should have been insolvent, and wiped out investors, it cost Americans an estimated 12.8 trillion dollars by kicking the can down the road
https://finance.yahoo.com/blogs/daily-ticker/2008-financial-...
This sounds like a made up number. What is your source?
> The 2008 Mortgage crisis robbed the working classes
How? I.e. what did working class people own that was subsequently taken away by some other entity?
> Wall Street over leveragged had huge wealth handed to them in money printing that was giving directly to their balance sheets.
A common misconception. The government did recapitalize various Wall St. entities on favorable terms, and did, via quantitative easing, give owners of some securities more than they might have gotten in the market without intervention. But there were certainly not any "no strings attached" givings of cash to the big financial entities.
The other stuff about how working Americans were the ones most hurt by the financial crisis also sounds incorrect to me. If I had to categorize winners and losers, owners of mortgage debt and homeowners would be the biggest losers of the crisis. Working Americans suffered knock on effects, or direct effects to the extent they were in the other categories, but they were not the primary victims.
$1.3 trillion from two levels of TARP, plus AIG, plus Fannie/Fredy.
The rest has been documented from lost of people who had sustainable mortgages but lost their home due to 9% unemployment that lasted years. There are many sources that cover this. I've read several books on the mortgage crisis and they are all in this category. That is a subset of the $13 trillion referenced in wikipedia sub-prime article.
>> Wall Street over leveragged had huge wealth handed to them in money printing that was giving directly to their balance sheets. > But there were certainly not any "no strings attached" givings of cash to the big financial entities.
You are missing the big robbery. Investment banking firms that purchased the CDOs/MBSs only had 3% of assets backing massive leverage. The reason the financial industry was going to CEASE UP was because they all didn't have the assets to backup the extreme leverage.
The robbery came because extreme money printing (QE) was used to "give assets" to banks so they would have far more than 3% assets to backup their massive leverage. The US tax payer was robbed with the money handed to them to sit on their balance sheets. That is the way their assets backing leverage raised above 3%. Banks getting more than 3% assets didn't happen any other way. Massive inflation will happen when this massive assets flood the market once a bank gets in trouble and transfers these QE "assets" into the market. That is when citizens will get robbed by the huge inflation impact of that QE.
Municipalities and pension funds would buy AAA securities even though the originators and packagers of the mortgagers knew they were garbage.
It was a big fraud caused by the bankers greed.
I understand what you saying, but I think you underestimate the lack of accountability that allowed people to get loans they were not in the best interest of anyone.
Then you can say 'oh, that scam was so obvious that people ought to have seen through it!' but it was explicitly designed to be obvious because, statistically, THERE WILL be someone (perhaps a nice but foolish someone!) who does fall for it.
Therefore, you can't have an informed public. Ever. It's a matter of how you handle the edge cases. We don't have rules making things like murder, etc. bad just because MOST people don't deserve to be straight-up murdered. We have them because it needs not to be too tempting to murder in those cases where the guy REALLY deserved it… it's inhibiting the potential murderer on general principles, not making value judgements on why to protect extremely deserving victims.
This is not the case in the financial industry, and the consequences we pay for that might be pretty dire. In the financial industry they think they can say things like 'I want an informed public', and they think they can make entire business models on screwing deserving victims, and it's not really about the victims, it's about social pressure stopping people from being monstrous on general principles. And again, nothing at all stops bankers from being monstrous. Indeed, it's a survival characteristic: we select for that.
Your comparison to Nigerian scammers is irrelevant because there is nothing legitimate about a Nigerian prince scam, it's just stealing money. Millions of people have mortgages they can afford and pay for them just fine.
But when parties enter into a transaction, there should be repercussion in the case of fraud. That never happened. One party in a transaction was lied to and there was no repercussion to the other party.
Also, thanks for taking the time to respond, really enjoy debating this topic. Wish it could be in more real time.
It shouldn't have been a shocker to anyone making 2k a month that a 1.9k/mo mortgage was pretty risky.
or with the aid of people with that necessary skill needed to convince regular people to do something only credulous people would do. What was the name of that skill,... hmm... isn't it "manipulation" or "marketing" ?
You see, if someone's is going to make a mistake, I tend to help him by preventing him to do so. I don't give him the pen to sign its destiny.
From Joe Sixpack's perspective, he paid his mortgage every month for 20 years, was all set to retire on his home equity, and then poof, the rug got pulled out from under him.
It's a bit of a tall ask to say he should've seen that his home was overvalued and planned accordingly when all of Wall St couldn't see it either.
I'm certainly not saying that I expect the average American to understand what actually happened. The average American believes all kinds of things that aren't true, even in much simpler domains of knowledge. I am just saying what actually happened.
In all fairness, the only reason their home equity had any value was thanks to an inflated housing market. It seems that what people 'stole' from them was the delusion that their homes had actually increased in value for the long term.
People were making decisions in a market they thought was fair. But, that market was fraudulent created by originators and bankers trying to make a quick buck.
My prediction for the next market crash:
1. Working class will lose their jobs
2. Middle class will lose their homes/investments
3. Wealthy class will get huge tax breaks to “stimulate investment”
4. Big companies will get massive bailouts in exchange for empty promises to create jobs that they never will keep
What makes you think next time will be any different?
Regardless of the "it can't happen hear" attitude, the US is clearly following the identical trajectory of about a dozen other countries which have fallen into demagogue led neo-autocracies blaming easy targets for their woes.
The only real question is whether we're talking about the future or the present.
The good news is they can be rented back from Wall St firms who have been snapping up rental properties with that windfall.
I highly doubt this sadly. As long as Americans have their internet, their cable and other comforts, they wont revolt. Its not dire enough.
I'm not sure that's really relevant in this case, but by the same token, the "increasing militarization" of police departments is probably also not relevant.
I'd wager that people upset about this stuff will continue to vote for rah-rah morons who channel their anger while sinking the knife deeper into their back. Happy to be proven wrong.
Meh. There won't be any surprise at all. Even now, people who are outraged about the bailouts are just the lunatic fringe libertarians (like myself) and some equally fringe progressives. Almost everyone I talk to about it says, "yeah, it's too bad that we had to give Citibank billions of dollars, but otherwise bad things would have happened, according to people who didn't predict the previous bad things, and are thus totally qualified in their predictive abilities, and Citibank paid it all back anyway, with no fudging of balance sheets or interest-free loans or anything like that".
I think people make the mistake of seeing the 2008 crisis as the mortgage failure, instead of the massive wealth transfer that you're talking about. When working class people paid too much and took too much leverage for real estate, and the market turned, they had to deal with the fallout. When banks like Goldman paid too much and took too much leverage betting on CDS, the proper response is the same -- not to give money to AIG to pay them back, but to have them face the consequences just as everyone else did.
They totally will again. The working class will again go against each other over irrelevant issues like guns, race and religion while the .1% will make sure to get ahead. I always like this story :
"An immigrant, a worker and a banker are sitting at the table with 10 cookies. The banker takes 9 and then tells the worker "watch out, the immigrant is going to steal your cookie"."
Like another commentator, I believe index funds are going to be ripped hard and this is what the average saver has been told to dump their money into by the banking industry since the last crisis.
I guess I should add the clarification that I think most folks who consider themselves middle-class and who are investing and saving money are actually working-class.
If you don't own your residence outright or have the liquid assets to purchase it and still make investments, you are working-class.
If you live in the valley and can't afford to buy and can't uproot your job to somewhere more affordable to buy while maintaining roughly the same income level, you're working-class too.
One can make a strong argument (even from marxist sources) that even the marxist revolutions were mostly directed by the middle class; most of the marxists call it the intelligentsia, but these were mostly educated men at a time when that meant more than it does now. (and even now, I think most people consider a good education enough to make you "middle class" even if you don't make that much scratch.)
I mean, all this depends on your definition of a "revolution" and of "middle class" - if I define "middle class" as "powerful or educated enough to get something done, while not being super rich" and I define revolution as "overthrow of the government by people who aren't already at the top of the power structure" then it almost becomes tautological; if people are powerful enough to start a revolution, by that definition, you are middle class or better, and if an elite starts a revolution, by that definition, it's then a coup.
(I'm not suggesting those are your definitions of revolution and middle class; just that the definition of those two words (and the definition of those two words is kinda fuzzy) makes all the difference in this question)
(but now it could be said that I'm changing the definition of elite to mean someone who has so much capital that they don't need to work. Still, I think that in both those wars, some of the leaders were also some of the richest people around. I'm also using a right-ish definition of revolution, especially in calling the ACW a revolution and not a reaction. I personally feel that 'reaction' might be reasonably applied to the ACW, at least, just because it was a clear attempt to roll back what would be called, really then and now, progress.)
This is sorta enshrining survivorship bias in your premises - take the largest economy around today and point out that every time it's crashed, it's recovered. Well, if it hadn't, there wouldn't be anything to point at.
There are actually plenty of examples - even among European settlers of the Americas - where the economy did not recover. The Continental Congress and the monetary system setup under it failed through hyperinflation, leading to the expression "not worth a Continental", and then the country had to be rebooted under the U.S. Constitution. Similarly, plantation owners in the Confederate States of America were totally wiped out - not only was the currency debased, the infrastructure destroyed, and the plantations burned, but the whole legal framework under which the plantation system operated was rewritten.
[1]: https://www.forbes.com/sites/sageworks/2012/09/21/private-co...
The mistake that index fund adherents make is that there is no such thing as passive investing.
Certain market participants have been screaming about this fact to anyone who will listen for 2+ years now.
There's an alarming amount of overlap between the groups: "claim that passive investing will underperform," and "make money when people actively invest."
Furthermore, how exactly are "passive investors" going to take a bath? They're simply making a very long term bull market bet; if DJI drops 50%, it's the active investors that might sell at this price, but the index funds will just keep their position until (and after) it recovers, the only case where they'll lose in the long run is if the DJI drops permanently and that doesn't seem plausible outside of ww3 scenarios.
Buy low, sell high; not the other way around.
I mean, that's the goal. Of course, it doesn't always work out that way, but you don't plan on selling at the bottom and buying as it recovers.
Working American's had to financially absorb the 2008 Mortgage crisis. 2008 was a direct robbery because Mortgage Orginators KNEW the mortgages would blow up, because their own Underwriting equations said they would. That is why they did fraud on the customer's income levels or worked with politicians to allow ignoring customer's income.
It caused a $5 trillion in transfer from the wealthy away from the working classes to the investor class in that 2008 Mortgage crisis.
The 2008 Mortgage crisis robbed the working classes, and transferred to the investor classes. Homes lost because of unemployment. Savings gone via rigged economy unemployment. Bail outs. Banks offloaded their worthless assets with government buying them. Wall Street over leveragged had huge wealth handed to them in money printing that was giving directly to their balance sheets.
The surpise will come the next time a Financial Crisis comes and the government works to sell out the working class