Why Isn't Wall Street in Jail?

Re:Why Isn't Wall Street in Jail? by acabal on Wednesday February 16, 2011 @10:11PM (#2229547)

Accepting a variable-rate mortgage is taking just a big a risk as the lender lending it to you. If you accept one of those, you should be financially prepared for the rate to rise, even dramatically. And if the rate rises beyond what you can reasonably expect to pay, well then, your risk didn't pay off. Owning a house isn't a right, and just as you can make lots of money off them (and many did!), you can lose it all.

The difference between that personal risk and the bank's risk is that the government ended up saving the banks, while the commoners got foreclosed on. And that's certainly a good reason to get angry.

Edit: Great, downvotes for not blaming it all on those evil Wall Street fat cats.

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Re:Why Isn't Wall Street in Jail? by kls on Wednesday February 16, 2011 @10:18PM (#2229569)

Right I got no problem with people getting foreclosed on that is the deal you make. But typically in law one looks at who is the professional and who is the laymen. Generally the burden of responsibility falls on the professional so from a legal perspective and from a moral perspective blaming the consumer is kind of backwards, that was the only point I was getting at. It is not right that the banks got bailed out but the fact that they did, further reduces any moral responsibility that one could place on the consumer. They are loosing their house and footing the bill so in my opinion they have paid their dues. I personally don't feel that the banks have paid their dues for their part in the mess.

I will give you an up-vote because I think your point of view is valid and this thread is going to get political. No guarantee it is going to remain up though.

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Re:Why Isn't Wall Street in Jail? by Klinky on Wednesday February 16, 2011 @11:55PM (#2229824)

Often the mechanics behind the adjustable rate mortgages were not fully disclosed to the lendee. In many cases banks did very little due diligence to verify the income of the lendee, yet the would pass these mortgages off to other banks & wall street as sound investments - despite having no idea really how well the person could pay it back.

Additionally buying a house was considered a wise investment due to the ballooning home prices. This myth was perpetuated by the banks themselves. The only way to keep it going was to give everyone and their dog a mortgage & they practically did, knowing full well that most of the people would not be able to pay it back. Essentially fraud.

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Re:Why Isn't Wall Street in Jail? by kls on Thursday February 17, 2011 @12:49AM (#2229938)

Additionally buying a house was considered a wise investment due to the ballooning home prices. This myth was perpetuated by the banks themselves.

It was also ingrained into the fabric of the American household. How many time has one heard, buy land they are not making any more of it or if you want to protect your money from inflation buy a house, they always go up. For 3 generations this has pretty much been a constant reality, one would have to go back to the depression to find wisdom that went against this reality.

I remember many friends saying we just have to get in before we get priced out of the market forever. People where so afraid of becoming renters for life that they where doing anything possible to secure a house before prices doubled again and they where permanently locked out of the market.

We are not talking about experienced investors here we are talking about people who just wanted to ensure they where not locked out of the American dream. Sure there where speculators, but the reality is speculators where only a fraction of the market and where some of the first to bail on their notes.

There where also many who used their house as an ATM, but with the shrinking job market can you really blame them many unwisely used it to maintain their standard of living and to put off the pain of adjustment to some point in the future, with the hope that better times would cover the call. which while unwise is not that out of the norm hell the government has been doing it for years.

To be clear, I am not making excuses for them but I think we are holding the consumer to a pretty high standard given the boom bust economy, the constant decline of jobs over the last decade, stagnant wages over the course of almost 2 decades, that has reduced real buying power and the financial shenanigans that have taken place. To blame the consumer after they have seen the middle class destroyed is really just rubbing salt in the wound.

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Re:Why Isn't Wall Street in Jail? by pyre on Thursday February 17, 2011 @01:17AM (#2230014)

Some people in our society are not fully equipped to properly evaluate all of the risks that they take (even on a daily basis). When you get into a car, you are placing a lot of trust in the 'professionals' (i.e. the engineers, the safety inspectors, the government regulators, Consumer Reports, etc) that the car is safe, why is a mortgage that much different? To many in our society the inner workings of mortgages (and personal finance in general) are just as transparent as how their car works. You can claim that if they should have educated themselves until you are blue in the face, but (1) we live in a society that doesn't exactly promote/reward that very well, and (2) the mortgage brokers probably pretty heavily tried to convince the consumers that there was no need to even 'shop around' to other brokers let alone spend the time to educate themselves on how their mortgage was going to work (hell, I'm sure some of the mortgage brokers probably didn't even know this; just how to fill out the paperwork to get the mortgage going).

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