Whatever happened to personal responsibility?

[Joe Miner]

This isn't a case of one size fits all, for many people they look at it from a business perspective, and if they see that there is virtually no chance of recouping their funds any time soon and they decide to let it go, as a business would, then I don't see the problem with it. At the end of the day, his initial investment plus his credit rating will be gone.

 

The onus is on the bank more so than the consumer, they are the one's lending the money, they are the one's that the bondholders and other investors trusted in making the decision when it comes to the underwriting. If they want the home back, no one is stopping them, unless of course there is some federal or state moratorium for forclosures, but in most cases, they are free to forclose upon the house when they please.

 

They can try to forclose whenever they want.

 

Then people can make them take it to court, hence 1-2 years of continual living in the house without paying anything. Simply because the court system is backed up.

 

See, in my opinion, an individual has a greater responsibility than the bank. While the bank answers to its investors, an individual has to answer to themselves, their family, their friends, and others in the same society. Just answering to yourself alone should be more important than answering to investors. But that's just my opinion. Personal integrity and all.

 

From a financial perspective it may be acceptable to cut bait and live in the house for free until you're thrown out. From an individual standpoint...you're a piece of crap.

 

It's one thing to screw up in life, and then admit it, accept the consequences, and become a better person afterwards. It's another thing to screw up, blame others, duck the consequences for as long as possible, walk away thinking how righteous you were and how terrible those wanting to hold you accountable are.

[Magox]

See, in my opinion, an individual has a greater responsibility than the bank. While the bank answers to its investors, an individual has to answer to themselves, their family,

That's right, they have their family to answer to first, and if it makes sense to their family to let go of the home for financial reasons, then I respect that. No one is asking for a bailout, that was the government's doing, and I disagree with the idea of the federal government bailing out homeowners. Businesses default on obligations all the time, and why do they do that? Because in their view it made more financial sense to do so, there is very little difference.

 

This moral argument of having a responsibility to your neighbor or society is hogwash, the responsibility that the consumer mainly has is first and foremost to his family....

 

If you want to go down on the Titanic, that's your decision....

[Dan]

Making the prudent, wise investment decision will always trump the greed filled short term focused decision over the long haul....

 

Sure, if banks would of practiced good underwriting practices they would of made less than many others during the 2004-2007 period, but the losses they would of occured would of been far less than these same entities as well....

 

Yes, it is difficult when you have the stock and bondholders to appease, but that still doesn't excuse making a major costly mistake that caused many of these banks to shutdown just for the simple fact that they got way too greedy chasing after profits....

But, I think there's a disconnect here. The logical thing would be to think that these banks going out of business now, or even taking losses, is a bad thing. And they could have avoided it. However, what about the flipside? Say you do all these shakey practices for several years and make 10's if not 100's of millions of dollars in profit. Then go out of business. Many, if not all, investors will take that profit and run.

 

So, I'm not sure they really see this as a mistake. Perhaps many of the smaller, locally owned, banks do. But, the larger ones, especially the ones that then are able turn around and get their congressmen to bail them out, almost certainly see this as great business. Now, they just ride it out for a bit and start all over again.

[Dante]

That article makes me so mad, I cant see straight.

 

Its enough to make me ROOT for those "greedy bankers" to kick those !@#$turds out on their asses.

 

Let them go live on their !@#$ing "airboat"

 

!@#$.

I'm with you on this. Justify your welching by blaming the banks. Like people didn't know they signed high risk loans. Buying a $600,000 house with no cash down is always gonna work out, right? I'm no fan of the banks but a deal is a deal. BS

[Magox]

But, I think there's a disconnect here. The logical thing would be to think that these banks going out of business now, or even taking losses, is a bad thing. And they could have avoided it. However, what about the flipside? Say you do all these shakey practices for several years and make 10's if not 100's of millions of dollars in profit. Then go out of business. Many, if not all, investors will take that profit and run.

 

So, I'm not sure they really see this as a mistake. Perhaps many of the smaller, locally owned, banks do. But, the larger ones, especially the ones that then are able turn around and get their congressmen to bail them out, almost certainly see this as great business. Now, they just ride it out for a bit and start all over again.

Only for those who sold out before the debacle. BAC was trading above $20 since 1997, Investors for Merrill Lynch were obliterated, same goes for Lehman, Bear Stearns and WAMU....

 

But to a certain extent you are right in that the federal government basically gave a life preserver to some of these institutions that made horrific business decisions. The banks along with the federal governments insistence of wanting to place too many people into homes is the main culprit here.

[Magox]

Buying a $600,000 house with no cash down is always gonna work out, right?

And who's dumbass decision was it to allow someone to buy that $600,000 house with no down payment?

 

You would expect more self accountability from a major bank than some overzealous, irresponsible consumer. You would think....

[\GoBillsInDallas/]

Who's dumbass idea was it to allow people with less than stellar credit buy a home without a down payment?

 

Bill Clinton, in 1999:

 

http://www.nytimes.com/1999/09/30/business...ge-lending.html

 

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

[Magox]

Bill Clinton, in 1999:

 

http://www.nytimes.com/1999/09/30/business...ge-lending.html

 

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.

Regarding this, you'll get no arguments here....

[DC Tom]

Only for those who sold out before the debacle. BAC was trading above $20 since 1997, Investors for Merrill Lynch were obliterated, same goes for Lehman, Bear Stearns and WAMU....

 

But to a certain extent you are right in that the federal government basically gave a life preserver to some of these institutions that made horrific business decisions. The banks along with the federal governments insistence of wanting to place too many people into homes is the main culprit here.

 

WAMU (and Countrywide) and shareholders both deserved to be obliterated, though. THOSE were the companies making horrific business decisions. Citi deserves it too...but they're "too big to fail".

 

Bear, I've never seen a single thing that can conclusively fault their business decisions as responsible for their meltdown. They had a multi-billion portfolio of securities held as cash reserves get marked down to worthless inside of 48 hours - they just got whipsawed, badly.

[meazza]

WAMU (and Countrywide) and shareholders both deserved to be obliterated, though. THOSE were the companies making horrific business decisions. Citi deserves it too...but they're "too big to fail".

 

Bear, I've never seen a single thing that can conclusively fault their business decisions as responsible for their meltdown. They had a multi-billion portfolio of securities held as cash reserves get marked down to worthless inside of 48 hours - they just got whipsawed, badly.

 

That's the risk of having a business model based on short term borrowing and no asset base.

 

If I recall correctly, their biggest clients from their strong hedge fund business pulled out at the first drop of blood which further made it impossible to recover. Of course that's the beauty of marking to market, if you're unlucky you could get killed very quickly.

 

What would have been "fair" would have been letting all the IB's be subject to this same market. The government bailouts simply made those who were bailed out unjustly stronger.

 

JPM for instance bought Bear for peanuts.

[Magox]

WAMU (and Countrywide) and shareholders both deserved to be obliterated, though. THOSE were the companies making horrific business decisions. Citi deserves it too...but they're "too big to fail".

 

Bear, I've never seen a single thing that can conclusively fault their business decisions as responsible for their meltdown. They had a multi-billion portfolio of securities held as cash reserves get marked down to worthless inside of 48 hours - they just got whipsawed, badly.

Ya, Citi too...

 

I'm not too sure though about Bear, they were also sattled with sub-prime, credit card, auto loan and a lot of other unsold paper debt... If memory serves me correct, they were one of the most over leveraged investment banks out there, hence the run on their paper... To a certain degree they all fell victim to collateral damage, but at the end of the day, all of the aforementioned banks played a role in the downturn. In my view, they should of been taken over by the Federal Government, into temporary receivership and chopped up and sold to banks that practiced wise, prudent business acumen, as opposed to giving these failed banking institutions a bailout by providing them with more cash so that they can buy out the other failed banks making it even more difficult to break the "too big to fail" cycle.

 

How idiotic is that?

[Joe Miner]

I don't disagree with that, however, if you are looking to specifically try to find more fault on one or the other, it's the banks responsibility to be the grown up, the consumer is like a child, they always want want want, and the bank has got to tell him, "no, you can't have this, you're not ready for it.".

 

The bank speaks on behalf of many, the consumer speaks for himself, one has more responsibility than the other.

 

I simply disagree with this. That's akin to saying that the government should treat citizens like children and tell them what's best for them. I'm pretty sure you don't believe that.

 

From my perspective, my responsibility to myself is far greater than the bank's responsibility to their investors.

 

From my perspective, my responsibility to my family is far greater than the bank's responsibility to their investors.

 

Myself and my family are far more important than a bank's investors to me. To the bank it should be the opposite. I don't do business with the bank with their investors in mind, and the bank doesn't do business with me with my family in mind.

 

Responsibility is more personal in my opinion, and not something that can be quantified based on how many people you answer to.

 

Hence the thread title: Personal Responsibility

[Magox]

I simply disagree with this. That's akin to saying that the government should treat citizens like children and tell them what's best for them. I'm pretty sure you don't believe that.

 

From my perspective, my responsibility to myself is far greater than the bank's responsibility to their investors.

 

From my perspective, my responsibility to my family is far greater than the bank's responsibility to their investors.

 

Myself and my family are far more important than a bank's investors to me. To the bank it should be the opposite. I don't do business with the bank with their investors in mind, and the bank doesn't do business with me with my family in mind.

 

Responsibility is more personal in my opinion, and not something that can be quantified based on how many people you answer to.

 

Hence the thread title: Personal Responsibility

I get what you're saying, but you are missing the entire point. The bank has a fiduciary responsibility to make sure that they are making wise investment decisions on behalf of many different entities. And it is not "akin" to saying that the government should treat citizens like children and tell them what's best for them. We are talking about real money here, and money that doesn't belong to these consumers, money that comes from investors, that was trusted to be handled correctly.

 

Sorry, any bank that loans $600,000, unverified income, with no to little down payment is doing a disservice to it's clients and investors.

 

The main responsibility to the consumer is his family and himself. If the consumer made a bad decision, by purchasing a home he couldn't afford, then he's going to lose it. He will get hammered in his credit rating, which will affect any sort of loan that he will receive for the next decade, and he will lose whatever downpayment he put into the home. So yes, there is recourse here.

 

Going by the same example, if I bought a home at $600,000 and a house next door that is comparable is listed at $300,000, with slim prospects of recouping my initial investment, you better believe that I would drop that house in a heartbeat. I would also stay in there as long as I possibly could, without moral consequence. My responsibility is to do what is best for my family, and if dropping the home is the best decision for us, then I would do it, without hesitation.

[Joe Miner]

I get what you're saying, but you are missing the entire point. The bank has a fiduciary responsibility to make sure that they are making wise investment decisions on behalf of many different entities. And it is not "akin" to saying that the government should treat citizens like children and tell them what's best for them. We are talking about real money here, and money that doesn't belong to these consumers, money that comes from investors, that was trusted to be handled correctly.

 

Sorry, any bank that loans $600,000, unverified income, with no to little down payment is doing a disservice to it's clients and investors.

 

I completely agree with that. Banking practices like this are despicable. We should have been in a better position to let them fail as well.

 

My gripe with the article was people's attitude toward this mess:

 

[paraphrasing]

I can't afford my house. If I foreclose, I just get to keep my house for quite a while, not pay a mortgage, and live like I wanted to live before I discovered I couldn't pay for my house. And really I deserve this because it's not my fault I can't pay, it's the greedy bank's fault for taking my money and issuing me a bad loan.

 

Sure the bank's actions were terrible, but that kind of individual selfish attitude is disgusting.

 

Maybe you were right about banks having to play the parent and allowing or denying the children what they want. But I find that setup ridiculous as well. Grow up people, be responsible for yourselves, and know what the hell you're doing before you do it.

 

The more personally responsible you become, the less other people's greed will affect you.

 

Going by the same example, if I bought a home at $600,000 and a house next door that is comparable is listed at $300,000, with slim prospects of recouping my initial investment, you better believe that I would drop that house in a heartbeat. I would also stay in there as long as I possibly could, without moral consequence. My responsibility is to do what is best for my family, and if dropping the home is the best decision for us, then I would do it, without hesitation.

 

If you did this, you'd be an irresponsible dumbass. Because you didn't do the responsible thing of looking up the comparables before you bought it.

 

Why would you not feel morally wrong for living in a house that you were obligated to pay for but currently weren't, just because you found out it was a bad investment? That's pretty much stealing. It's suddenly ok to steal because someone else made a bad business decision and loaned you money?

[Magox]

I completely agree with that. Banking practices like this are despicable. We should have been in a better position to let them fail as well.

 

My gripe with the article was people's attitude toward this mess:

 

[paraphrasing]

I can't afford my house. If I foreclose, I just get to keep my house for quite a while, not pay a mortgage, and live like I wanted to live before I discovered I couldn't pay for my house. And really I deserve this because it's not my fault I can't pay, it's the greedy bank's fault for taking my money and issuing me a bad loan.

 

Sure the bank's actions were terrible, but that kind of individual selfish attitude is disgusting.

 

Maybe you were right about banks having to play the parent and allowing or denying the children what they want. But I find that setup ridiculous as well. Grow up people, be responsible for yourselves, and know what the hell you're doing before you do it.

 

The more personally responsible you become, the less other people's greed will affect you.

 

 

 

If you did this, you'd be an irresponsible dumbass. Because you didn't do the responsible thing of looking up the comparables before you bought it.

 

Why would you not feel morally wrong for living in a house that you were obligated to pay for but currently weren't, just because you found out it was a bad investment? That's pretty much stealing. It's suddenly ok to steal because someone else made a bad business decision and loaned you money?

In that instance it doesn't speak well for that individual, at least not from a fiscal stand point. But again, if that consumer over leverages himself once again, isn't it he that ultimately pays the price? How long can one go living outside of his means, before the day of reckoning comes about? At the end, he pays, one way or another.

[....lybob]

Wait until the United States defaults and that day is coming it will be postponed as long as possible but barring multiple revolutions in technology or the finding of massive natural resources that day is coming soon- a default on both promises made to our citizens and to our foreign creditors.

[Adam]

Another thing, many of those loans shouldn't of been given in the first place, the banks are just as responsible if not more so than the homeowners. One would expect consumers to lie and try to get themselves into a home that they probably shouldn't be in, but for the banks to allow this to happen, is unacceptable. The blame lies mainly with the banks, and for the government for having a system where the taxpayer at the end of the day ends up footing the bill.

Couldn't agree with you more. The private sector steals, so does the population. We live in a culture of excess and corruption and vote for politicians who will allow it to continue because they are a part of that culture.

[WisconsinBillzFan]

Wait until the United States defaults and that day is coming it will be postponed as long as possible but barring multiple revolutions in technology or the finding of massive natural resources that day is coming soon- a default on both promises made to our citizens and to our foreign creditors.

 

The only good part of seeing the US collapse is being able to watch all the government dependents who we subsidize being forced to fend for themselves for once.

[Magox]

Wait until the United States defaults and that day is coming it will be postponed as long as possible but barring multiple revolutions in technology or the finding of massive natural resources that day is coming soon- a default on both promises made to our citizens and to our foreign creditors.

The U.S won't default, because as Ben Bernanke had once said " "The U.S. government has a technology, called a printing press that allows it to produce as many U.S. dollars as it wishes at no cost."

[Jim in Anchorage]

We forclosed on our first home that we bought at the peak of the last housing boom (1990). The value had dropped to less than half of what we owed but we did not have one of those crazy loans, they didn't exist then as far as I can remember. We could afford our payments we just didn't want to live in that neighborhood anymore (we had been there for 7 years) so we made a business decision to walk away. We didn't pay our mortgage for 6 months but instead of blowing it we saved every penny. We moved and rented for a few years, worked hard to get our credit back and bought a new place 5 years later with great credit.

And what would the place be worth to you today if you held up your end of the deal? If you could pay the mortgage when you first bought it, what is the difference if the value goes down? If anything that would lower your property tax. Going by your theory anyone who buys a new car should never make a payment, Just drive it till the repo man takes it away. After all, it lost value the minute I drove it off the lot.