Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

The Real Cost of the 2008 Financial Crisis

newyorker.com

Post reply on HN
Print view View original

271–280 of 404 posts

Re: The Real Cost of the 2008 Financial Crisis

#271

Post by pitaj »

OscarCunningham wrote: post #267
api wrote: post #239

Earlier quoted context omitted.

Americans (even some center-left ones) hate the idea of directly supporting anything, so cheap loans were used as a substitute for directly operating and funding public colleges. Same with housing. Directly supporting people is "socialism," a handout, and is seen as supporting laziness and vice. A loan must be paid back, which allows many Americans to view it as something encouraging responsibility and virtue. It all…

Wouldn't directly supporting people also produce price inflation?

Yep, what the parent commenter didn't say was that pumping money into any system almost always results in prices going wayyy up to absorb the new demand. This happens regardless or whether it's loans or direct subsidies.

Re: The Real Cost of the 2008 Financial Crisis

#272

Post by craftyguy »

WorkUntilRetire wrote: post #266

Did Lehman run index funds? What happened to their customers? What would happen today if a firm like Schwab or Fidelity suddenly went bankrupt? Would their S&P 500 index funds (Such as SWPPX or FFFFX) drop to zero, wiping out customer’s retirement?

> Would their S&P 500 index funds (Such as SWPPX or FFFFX) drop to zero, wiping out customer’s retirement?

I'm no expert, but I wouldn't think so if those funds track the indexes, since the index 'values' are the collective values of the stocks they represent. On the other hand, SWPPX, etc would no longer be maintained. That's a really good question though, I hope someone with more knowledge comments!

Re: The Real Cost of the 2008 Financial Crisis

#273

Post by [deleted] »

Lavery wrote: post #231

In a lot of ways, the current expression of the tech sector (certainly from a valuation standpoint) and the startup scene particularly feels like a consequence of the response to the financial crisis. Critics of the Fed spent years loudly worrying about how the various QE programs were going to drive up inflation. Of course, this didn't materialize, at least as measured in the usual basket of goods and services. What…

[deleted]

Re: The Real Cost of the 2008 Financial Crisis

#274

Post by camelite »

hueving wrote: post #221
Avshalom wrote: post #201

Earlier quoted context omitted.

the increase in mortgage originations was shared across the whole distribution of borrowers, and that middle- and high-income borrowers made up the majority of originations even at the peak of the boom. Compared to prior years, middle- and high-income borrowers (not the poor), as well as those with medium and high credit scores, made up a much larger share of delinquencies in the crisis relative to earlier years. htt…

Once the framework was in place to give out garbage loans, people across all income levels leveraged the opportunity to get houses they shouldn't have. This just shows how poisonous it is when the government screws up a market by essentially mandating that banks throw away their normal risk assessment process.

What government interventions caused the doubling of subprime lending from 2004 to 2006?

Re: The Real Cost of the 2008 Financial Crisis

#275

Post by kingaillas »

chiefalchemist wrote: post #40
tokyodude wrote: post #20

Earlier quoted context omitted.

I haven't a clue about the whether the bailouts were important or not. What I feel like I would have liked is for the bailouts to happen AND the top 20 to 100 people from every financial institution to have gone to prison for at least 10 years. The president of Goldman Sachs, the president (or ex-President) of Lehman, etc... etc... What it seems like from the outside is they screwed the world over and completely got…

At the very least the WS power structure should have been redistributed. Prior to the crisis there were eight major WS "banks." After there were seven. We were told by many elected officials that less was not a positive for the rest of us. Ten years later, after eight years of a "liberal" POTUS, there's still seven. Editorial: In the context of such history, DJT is the least of my worries.

>after eight years of a "liberal" POTUS

6 of those 8 years fighting a conservative Congress in both houses. Only 4 months of those other 2 years did he have enough Senate votes to bypass conservative filibusters. He spent that time/capital/effort squeezing ACA through.

Re: The Real Cost of the 2008 Financial Crisis

#276

Post by camelite »

hueving wrote: post #221
Avshalom wrote: post #201

Earlier quoted context omitted.

the increase in mortgage originations was shared across the whole distribution of borrowers, and that middle- and high-income borrowers made up the majority of originations even at the peak of the boom. Compared to prior years, middle- and high-income borrowers (not the poor), as well as those with medium and high credit scores, made up a much larger share of delinquencies in the crisis relative to earlier years. htt…

Once the framework was in place to give out garbage loans, people across all income levels leveraged the opportunity to get houses they shouldn't have. This just shows how poisonous it is when the government screws up a market by essentially mandating that banks throw away their normal risk assessment process.

What laws did the government pass which "screwed up" the market?

Re: The Real Cost of the 2008 Financial Crisis

#277

Post by pitaj »

Lavery wrote: post #231

In a lot of ways, the current expression of the tech sector (certainly from a valuation standpoint) and the startup scene particularly feels like a consequence of the response to the financial crisis. Critics of the Fed spent years loudly worrying about how the various QE programs were going to drive up inflation. Of course, this didn't materialize, at least as measured in the usual basket of goods and services. What…

Business Cycle Theory explains exactly this. When interest rates are too low, people go elsewhere for returns, resulting in malinvestment. What it doesn't do is predict when the crash will happen, or say how to spot which investments are bad.

Re: The Real Cost of the 2008 Financial Crisis

#278

Post by slg »

paulddraper wrote: post #247
slg wrote: post #241

Earlier quoted context omitted.

Taxes and tax incentives.

The U.S. does that. Loan interest and capital gains are treated much differently by the U.S. tax system if they are on a primary residence rather than on other assets. (More often than not, I see criticism of this on HN.)

Those benefits are regressive which results in the them barely moving the needle for working or middle class families. It goes back to the original comment in this thread that it is implemented in such a way that it has a nearly opposite result to its supposed intended effect.

Re: The Real Cost of the 2008 Financial Crisis

#279

Post by dhimes »

ThomPete wrote: post #253
dhimes wrote: post #90

Earlier quoted context omitted.

Without reading the book or even TFA, I'll comment on the concept of everybody doing the "right thing" leading to bad outcomes. I have a hunch that this is a pretty universal law, and the only way to mitigate it is through regulations that ban some of those "right things." I think that honest, moral players welcome good regulations because it keeps them from having to go down a slippery slope.

Problem is that you don't know what the good regulations is because you don't know their consequences in the long run. Clinton wanted to allow people to afford and buy a home because he knew for many of them that was the way out. That's why he put out executive orders back in the 90ies under his National Homeownership Strategy where they introduced more flexible underwriting rules. Among many other things he put out…

Just because a problem is hard doesn't mean we should abandon it. Maybe start with limiting the "instruments" available for gambling investing. Get rid of that one that bets on market volatility, for example (although that problem kind of solved itself as the investors in it lost their money).

Re: The Real Cost of the 2008 Financial Crisis

#280

Post by smogcutter »

api wrote: post #227
ptero wrote: post #173

Just a personal observation / data point as a lot of folks everywhere are saying "put bankers in prison" any time they recall 2008 crisis. This is from the US, no idea how things played out in other countries: Government shares a significant portion of the blame for this crisis. It required raising affordability of homes (i.e., loans) for lower income families. They might as well legislate away entropy, friction or g…

It also drove house prices crazy, a process that continues to this day and has ironically made housing permanently unaffordable for huge numbers of people. The housing bubble created a "new normal" for house prices that's frankly absurd when considered as a fraction of median income. It's very similar to the story with student loans. Easy student loans have driven tuition costs as crazy as housing costs.

A similar thing is happening with auto loans. There's a ton of bad car debt out there, and easy credit has inflated car prices and (I believe) helped disincentivize auto makers from building cars that are actually affordable. There's no market for simple and cheap if you can get something nicer on credit and not look poor.

There's a reason the Dodge Journey retails for 4k+ off msrp. With the inflated mspr they can get the bank to write a bigger loan. That way you can buy a journey at a "discount" with room to roll your existing bad loan into a new, even worse one.

Post reply on HN