[ubernostrum]

"I lied to this guy, committed fraud left and right, and violated basically every sound principle of lending that's ever existed to get him to sign on to a mortgage, because I knew I could sell it on immediately into a CDO and face no consequences if he defaulted. But since he fell for it, it's at least as much his fault as mine that it happened!"

Caveat emptor is the disguise force and fraud hide behind.

[yummyfajitas]

Clearly WaMu, Countrywide and AHM (some of the biggest mortgage issuers) faced no consequences from people defaulting on mortgages. Clearly BankAm and Citi aren't sitting on massive losses from bad loans they made, desperately trying to push the losses into future years.

Go read this paper about what actually happened. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1421837

It's hard to claim that person A stole from person B if both A and B lost money.

[Karunamon]

And so someone who signs a mortgage for a house they can't afford is completely blameless?

[ubernostrum]

Well, if you're someone who doesn't really know finance that well, who's probably never had a mortgage before and so doesn't know the ins and outs, and doesn't have a lot of friends/contacts who know finance or have mortgage experience...

...and you're getting pressure-talked by a mortgage agent who keeps telling you all about how this has a super-low interest rate for the first three years, and no income verification or down payment required, and that $150k house will be worth $175k, easy, maybe even $200k before the interest rate goes up, and it's a great market so you'll be guaranteed to flip the house in time and make a profit, and real estate always only goes up in value...

...and you give in to the relentless sales pitch and sign the papers, then sure, we can assign a percentage of the blame to you. But if you think it's a precise 50/50 split or anything close to that, I think you are a terrible judge of the situation.

(and that's without getting into the bits alluded to in my previous comment, like the fact that many of the lenders knew there was no chance these loans would be good, but were happy to do it anyway since they also knew they'd never be on the hook when the loans went bad, which is out-and-out undeniable fraud and has basically gone unquestioned and unpunished because of "well, everybody was to blame" narratives that try to sweep those inconvenient facts under the rug)

[onebaddude]

>if you're someone who doesn't really know finance that well

Well, you don't have to be a financial expert to understand the generalities of what you can and cannot afford.

The rest of what you describe can be equally attributed to greedy people thinking, "if the price doesn't rise, I'll bail in 3 months. No loss." I know some of those people.

>But if you think it's a precise 50/50 split or anything close to that, I think you are a terrible judge of the situation.

I know you read stories about the strawberry picker who can't speak english "pressured" into buying the million dollar home, but those cases were extremely rare.

The majority were people with $40,000 in income deciding to buy the $750,000 house, rather than the $200,000 house, because, you know, the American Dream says renting is bad and looking wealthy is a necessity. Give me the most money you can for the biggest house possible! This happened across the globe.

Oh, and you're forgetting the other major factor of the American specific bust: people who used their home equity to fund consumption. Mostly boomers. I guess those were also the unfortunate, duped poor, buying vacation homes, jet-skis and third cars?

It seems that your understanding of the situation is drawn from the mainstream, "evil-bankster" meme. But that only works because it's a populist sentiment. There is plenty of blame to go around; give it to the greedy.

[ubernostrum]

I know you read stories about the strawberry picker who can't speak english "pressured" into buying the million dollar home, but those cases were extremely rare.

The industry which sprung up around CDOs did two extremely dangerous things:

1. Because of the demand for mortgages from the CDO industry, created an incentive for lenders to make as many loans as possible.

2. Disconnected the people who were actually issuing the loans from the consequences, if and when the borrowers defaulted (since the actual lenders could immediately sell the loan into the CDO-bundling food chain, thus recovering their money so they'd no longer need to worry about the loan being repaid).

The combination of the pressure of (1) and the lack of consequences in (2) meant lenders drastically relaxed their policies, issuing loans to people who they knew they never would have lent to if they (the lenders) were going to be on the hook financially in case of default.

Meanwhile, it has been demonstrated beyond doubt that the larger entities which were offering CDOs to investors were promoting them as high-grade investments, with help from ratings agencies who either utterly failed in their function or were themselves complicit in the deception, even though those entities knew otherwise and were taking their own private actions in the market, aimed at profiting when (not if) CDOs failed to perform as advertised.

The result of this is was a large-scale transfer of wealth, largely from duped investors and duped borrowers (for make no mistake: knowingly issuing a loan to someone not qualified for the loan is a form of duping), largely to a relatively small and select group of people who were either involved in the lending and bundling food chain, or in offering CDOs to investors.

These are not memes. These are facts. This was a massive fraud perpetrated upon multiple groups.

You can, if you wish, say that the desire to play real-estate mogul or conspicuously consume played a part in driving people to take out loans, and assign some part of the responsibility to those people. You cannot, however, support in any way, based on the known and undisputed facts, the assertion that the borrowers bear (to quote precisely the original words to which I replied) "the majority of the blame" for this. The deliberate and knowing fraud in the CDO industry outstrips that as the noonday sun does a candle.

[onebaddude]

You can go on and on, but nothing will ever change the fact that no entity ever forced someone into a mortgage, CDO or investment. Each and every time was a voluntary contract between two parties, likely greed driven by both borrower and lender.