Why should there be help for the subprime crisis?

On the surface I totally agree with you. People should consider this an object lesson in buying things you cannot afford. Anytime a mortgage broker says they are giving you a lower rate up front so you can afford it, a normal rational person should be able to figure out that rate will correct itself over time.

However, the problem is so large it has huge ramifications on the national economy. If all these houses were to forclose at once, it would have dire effects on everyone else's property values. That would actually cost you and I more than just bailing these people out and telling them to grow up.

I agree with you. The buyer is responsible for their own actions and I don't necessarily think that freezing rates is going to stabilize the economy. First of all the investors that bought these loans are going to take a loss that will have to be made up. Where will they make up the deficiency? Well, Freddie Mac and Fannie Mae have already introduced new pricing guidelines for loans in 2008. Cost adjustments are much higher than what they have been...meaning clients that are purchasing and refinancing will be paying higher closing this coming year. So, all consumers will be effected one way or another which in turn could slow down the market anyway. The other option aside from freezing rates in my opinion would be more beneficial for the economy: FHA secure program. This program allows borrowers refinance their debt under the govt program by accepting lower credit scores but this program needs drastic reform. As a lender, the people that need to refi are still not eligible. I have also spoke to other lenders that have not had luck with this program. A big problem is prepayment penalties that some companies charged as well as the clients are past due on other bills because they have tried to pay the mtg payments and borrowed money which increases their debt ratio. Instead of freezing rates prepayment penalties could be waived and used as taxed income on these people to help out and debt ratio's could be increased in certain situations.

Well you raise some important points about human greed but the other greed is the lenders. The housing industry is a messy system and the subprime crisis is the way it is right now because banks and lenders wanted to make a quick buck by LENDING MONEY TO PEOPLE THEY KNEW WOULD EVENTUALLY BE UNABLE TO PAY THE MORTGAGES. Most of the buyers know very little about this sort of stuff and they were easy pickings.

GW Bush said that it is the responsibility of the customer to check the lenders out ,,,,,well the truth of the matter is that the housing and lending industry is not REGULATED BY THE GOVERNMENT VERY WELL and thats why they went and did what they did.

Any business owner knows you dont lend money to a customer who is a potential liability,,,,,,but these lenders and banks knew and they went ahead and did it anyway because they knew they could make a quick buck,,,,,,,but they didnt foresee the crisis they would create months down the line hehhe.

In some ways you could say both the buyer and lenders are at fault but i think its more the lenders fault BECAUSE THEY KNOW BETTER THAN TO DO WHAT THEY DID.

Great question. Hard to answer. Somehow, people insisted on lending more money to the current crop of idiots that already don't pay their bills. So who defrauded who? I don't know. It depends.

There are some issues with securities based on these terrible loans that were sold, without the buyers realizing how worthless they were. Again, who's at fault? It depends on whether fraud was committed. There are two options, either fraud or lack of due diligence. One is the seller's fault, and the one is the buyers.

If you're a student of world history, you may remember that a lot of people tend to get killed during a financial crisis. That's why they're entertaining thoughts of helping these banks out.

the subprime mess was not driven by consumer greed

it was driven by the fact that banks, brokerages and other lending institutions over-valued paper that these mortgages represented

also, credit grantors granted the credit to people who normally would not have been able to purchase a house due to lack of credit or other factors

the problem is that if these houses go to forclosure, it has an effect on the stock market, on companies that hold this commerical paper ( look at the losses for Citigroup, Bank of America, Wachovia, Washington Mutual and others ) and the economy in general

there are people who are going to lose their homes because of all this and a number of people have also lost jobs due to the mess this created

Agreed. No one who has the competency to sign a contract should be let off the hook. Although one could argue that subprimes have allowed many, who would not otherwise be able to, buy homes, it still seems pretty irresponsible to me. I'm a strong believer is responsibility for your actions. Although I'd hate to be in that situation, I'm not because I knew better. Natural consequences, I say. The government stepping in is to serve the larger potential economic fallout, I guess. I'm not a fan of the idea.

I think you raise an excellent point!

The main (and perhaps only) reason I can see for the banks to agree to a bailout is if NOT doing so would ultimately harm the banks, their other customers and their shareholders, and the economy in general more than a modest and imperfect bailout would.

I'm no expert. Time will tell whether this was a good idea or not.

THANK YOU!!! This is a consumer driven crisis,i know that many banks may have contributed to it but ignorance is not bliss.people knew what they were getting into and used there homes as a bank and now want to place the blame on banks for there greed.a good lesson for folks.. READ WHAT YOU SIGN!! take responsibility for your actions and stop trying to make your others pay for your greed..

In a perfect world, you're right. Caveat emptor.

These people COULD read, but they mostly bought into overappraised homes and were under the impression they'd be able to refinance into fixed rates when their ARMs swung wild.

Still, you're right in a perfect world.

Make no mistake: This isn't about helping the homeowners, it's about helping the lenders who sold high risk loans and then crapped out. If those lenders go belly up, the economy turns into a train wreck the likes of which we haven't seen since the Hoover years.

Well, if we let people who lose their homes because their eyes were bigger than their budget, then it does present used home buyers with some really great deals. If the Gov steps in and saves them, it helps the moral of the economy and stock market. Depends on which side of the street you are on as to whether it is good or bad.