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Politics : View from the Center and Left -- Ignore unavailable to you. Want to Upgrade?

To: Steve Lokness who wrote (211974)	12/17/2012 4:47:41 PM
From: Maurice Winn	1 Recommendation Read Replies (1) \| Respond to of 541202

At an auction, which is what buying and selling houses is, there is nobody to blame for whatever happens regarding price other than the freely acting buyers and sellers. Nobody sets prices other than the buyers and sellers. <I just don't follow your logic. To blame the home owners is nuts. Home buyers didn't cause the economic implosion; banks did! > I sold a house much too cheaply in 2000 because I had got sloppy and wasn't worried about maximizing price as we had bought another house and I just wanted to get rid of it. I don't blame anyone but me for accepting the low price. The buyers got a great bargain, especially since house prices then joined the global irrational exuberance as interest rates were cut and many people bid as much as they could get hold of, rather than what a property is actually worth. As you say, the banks also joined in the irrational exuberance, joining the "house prices never go down" mantra. One would think the shareholders would direct their managers to not go stupid lending money but they didn't. Alan Greenspan KBE was shocked [he said] to find that mortgagees were not prudential in their lending, and crowded to the edge of the precipice, some of them falling in and going bust. It seemed to me that there were three parties to the irrational exuberance. The house buyers who paid crazy prices, the banks who risked and lost their shareholders' funds [earning bank managers big bonuses in the process in a questionable conflict of interest], and the federal reserve which kept lending mega$billions at very low interest rates a year or two after the biotelecosmictechdot.com bust had been sorted out. We could extend that to the Fannie and Freddie government-backed ideology of required lending to sub-prime dodgy people with no business taking on such mortgages. I took a quick look and stayed well clear. Anyone could have done the same. Nobody was forced to bid high prices for houses. Similarly for Citibank and other bank shares - they looked a bargain with great P:E in 2005/2006 but I didn't want any of it because it seemed they were in danger. Sure enough. They went bust. When I make a mistake [such as buying Globalstar shares] I don't look for a scape-goat. I want to know what aspect of my thinking was faulty. In that case it was failing to identify intransigent managers [who I falsely thought would change plans when they realized their plans would not work]. Also, the management was dishonest about the success they were having in selling Globalstar phones which put them in the category of fraud, which is much harder to avoid. Even so, it was my fault for trusting them. I should have insisted on hard evidence, not promises. Blaming others leaves one exposed to making more mistakes of a similar nature. If I had bought a house in Escondido, Oceanside, or Carlsbad and lost money, it would have been my fault, not that of the banks/mortgagees, or Federal Reserve. It seemed silly to rescue bank shareholders and creditors with taxpayer/citizen money. It would have made more sense to let them go bust and the assets be bought by me for $1 [or more likely higher bidders]. I would have told the house owners that their mortgages were halved, with reduced interest rates, and they could carry on as they were if they chose to do so. I would not have paid big bonuses to the bank managers [which they paid themselves with the tarp and other money]. As it turned out, some of that tarp money made a profit, but that "profit" ignores the heavy dilution of the flooding money. When people crash their cars having consumed booze, I blame the drinker, not the vintner. When people smoke opium, it seems to be their decision, and not the fault of the opium growers in Afghanistan. When people borrow too much money and pay too high a price, it's their choice. A cautious creditor would tell them that it looked too risky, but the creditors did NOT look after their shareholders. Depending on a mortgagee to tell you not to borrow so much or pay too much seems an unwise way of buying a house. Mqurice