Quote:
Originally Posted by detbuch
Sounds like the secondary market investors, by buying unworthy loans and then not giving the new loan that was promised by the original "predatory" lender, is stuck with the bad loan and by stupidity becomes the predator against himself. Can there be that much stupidity in this convuluted process, or are the parties depending on some invisible hand to come to the rescue? The Government, perhaps? And if so, how in the world did the government get involved in such a mess to begin with? Did it have something to do with beginning the process? If the government did not, even with the best intentions, insert itself into the housing market beyond the most basic regulatory necessity, would we be at this place now?
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The problem was that the risk was so obfuscated nobody really understood what was a good loan and what was a bad loan. I don't think for a second the market bet on this scheme because they thought the Government would back them up, quite simply, they never thought the housing market would fail and the money was too good to be true.
Had there been less government regulation the problem would likely be even worse. We don't have a barter and trade system...our markets rely on paper and credit. i.e. you can't have it both ways...
-spence
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