I understand very little about this, so I'm just throwing this out for consideration. My impression has been that the government has had a big hand in what happened here, so I'm inclined to think we need far less regulation, not more.
One thing I keep hearing is that the government has been pressuring lenders (in the interest of "fairness", via the Community Reinvestment Act) to lend out money to risky customers where they ordinarily wouldn't, and that's where a lot of the bad debt comes from.
Here's a post with a graph showing how much more money was lent through the CRA in approximately the last 15 years versus its inception.
The language doesn't adequately show how huge the difference is: "$4.2 trillion in CRA dollars was committed from 1992 through 2005. In contrast, $8.8 billion was negotiated from 1977 through 1991."
That means, from 1977-1991 they spent $8.8 billion, and from 1992-2005 they spent $4.2 TRILLION, which is $4,200 billion, or 477 times as much money in about the same amount of time.
Obviously, not everybody who got a loan through the CRA ends up defaulting, but it seems like there's higher likelihood of defaulting if you're relaxing your standards and giving out more loans.
There also seems to be something fishy going on with people selling bad loans and transferring risk ... I don't know if I'll ever understand all of it.
no subject
One thing I keep hearing is that the government has been pressuring lenders (in the interest of "fairness", via the Community Reinvestment Act) to lend out money to risky customers where they ordinarily wouldn't, and that's where a lot of the bad debt comes from.
Here's a post with a graph showing how much more money was lent through the CRA in approximately the last 15 years versus its inception.
The language doesn't adequately show how huge the difference is: "$4.2 trillion in CRA dollars was committed from 1992 through 2005. In contrast, $8.8 billion was negotiated from 1977 through 1991."
That means, from 1977-1991 they spent $8.8 billion, and from 1992-2005 they spent $4.2 TRILLION, which is $4,200 billion, or 477 times as much money in about the same amount of time.
Obviously, not everybody who got a loan through the CRA ends up defaulting, but it seems like there's higher likelihood of defaulting if you're relaxing your standards and giving out more loans.
There also seems to be something fishy going on with people selling bad loans and transferring risk ... I don't know if I'll ever understand all of it.