[saiya-jin]

1) government encourages by all means available to them (=plenty) cheap, affordable loans to everybody, reasonable or not.

2) banks jump on the wagon, just as any other business would do having similar chance in their field

3) plenty of folks are plain math-stupid, lending as much as they can and trying even more for outright stupid reasons (ie TV, cars etc.) on top of other loans they already have, usually for housing

4) SHTF, since economy is never stable and we have cycles and whatnot

5) blame the banks, who cares about Clinton's administration allowing and pushing for this in first place. easy part.

the topic is of course more complex, ie derivative trading is/was in some cases pure evil, but that's another topic.

Btw, correct me if I am wrong, but wasn't the money just lended and now it's (being) paid back, maybe even with interest?

[RobertoG]

I don't get it.

How government encouraging something free a business of their responsibility of lending money following good business practices?

How is derivatives another topic? Is not this the real problem?

The money could be paid back, but, as in any investment we should take into account the opportunity cost of that investment. Instead of helping people they are saving banks. Is not there a very strong moral hazard?

Instead of saving big private entities because their fall would crash the world, what if we follow the fashion and start implementing micro-services?

[whatok]

It doesn't free a business of responsibility but if political pressure is put on regulators to treat companies differently depending on whether they played ball, it amounts to about the same thing.

[RobertoG]

Do you have any example of that happening?

Even if this is the case, if my business is a bank, how can I forget about risk assessment just because I could get treated differently by regulators? Is it not my duty to think in what will happen in the next recession? would not be the best action to initiate legal complains? do you know of any legal action initiated by banks because of that?

It seems to me that the simplest explanation is greed.

Somehow, after all we have seen, we try to exculpate the business and throw the guilt in the government. It's a little tiresome.

[saiya-jin]

I'll try to cover both of your posts - government stimulates lending by lowering interest rates for example. This was caused by general initiative of that government to get cheap loans to people, and it was effective. I am not aware of any more direct pressure to the lenders, which doesn't mean there wasn't some.

Derivates being another topic - just to topic of people getting loans beyond their means, overall it's the same crysis topic, and I think we agree that there is no good justification from banks for this part.

Why banks were saved - apart from dirty business of bribery and lobbying which is sad daily part of political existence, there is part about something along: john doe has some money in the bank, this bank goes bust, and he loses it all. There is a chance of getting some % of it in future in settlements, but nothing guaranteed. In that situation, no politician would willingly go there if they can avoid it. It's too easy to start pointing on them, and everybody takes it badly if they lose money because of somebody else's mistake.

What happened in the banks - bonuses, based only on last year's performance. Source of a good deal of evil roaming banking (and trading too). It means many pushing for short-term gains, not caring about broader or longer effects. People are clever, they want to maximize their own gain within boundaries set, and these things are set like this. Nobody works in banking for the passion for the job, everybody is in for the money involved, and an occasional feel of some power/influence (however pathetic this is, some people are wired like that).

[tamana]

Goldman Sachs risk assessment division assessed risks to them very accurately.