Davos: Subprime lending, a curse or a good deed of charity?

Question

Sub-prime lending has been highlighted as one of the main reasons for the collapse of financial institutions. Was it really the cause? All banks lent with a reasonable estimate that subprime borrowers would be able to pay off their monthly liabilities from their income streams. So lending was not at all a curse but was a good deed of charity-like to give those people an opportunity to own their own houses.

The thing went wrong was the pyramid model behind the operation of the market economy.  Failing pyramid model could not support anymore the jobs of many. So it was the failure of the interest based economy mechanism to keep the subprime borrowers still on board on their income streams. Consequentially they failed to pay off their monthly mortgage liabilities. It was beyond the foresight of banks that market mechanism would fail.

So it is imperative that spirituality of the market economy is fixed rather than scapegoating on subprime lending. Those people still be given opportunity to own their own assets.

fatsausage · Accepted Answer

The recession was caused by the greed of the 
financial institutions and it was morally wrong to bail them out.  Those institutions should all have been allowed to fail and bite the dust.

? · Answer

The Bible always uses debt and loans in a negative light.
The debtor is slave to the lender.
And the Bible tells us to give to one another.  

If we just save our money instead of buying everything on credit, we would be able to buy with cash.
Right now people are buying houses for the price of a nice car.

Just think, you buy a car on credit and pay it off in 3-4 years.
What if you buy a cheap-o car and pay into a savings account for 3 years.  You would earn interest instead of paying it.  So the $15,000 car that cost you $18,000 after interest now costs you $13,000 in savings because you made $2,000 in interest.  That's a net savings of $5,000.

If you apply God's principles to all aspects of life, then you will see this multiplied.
Soon paying into a savings account to buy a house isn't so crazy.

And what's wrong with renting?  So many get tied up in debt, then lose their job and go into bankruptcy and divorce due to the stress on the marriage.  Where if you rented, you just downgrade to a cheaper place or go Section 8 worst case scenario.

Moral: Prepay.  Stay out of debt.  If everyone did this, there would be NO SUB-PRIME CRISIS.

Reuben Goldstein · Answer

Post financial crisis sub-prime mortgages are described as "suicide mortgages." suicide for those who signed up to them. Let's be clear about this people who devised the sub-prime mortgage would never in a month of Sunday's offered one to their own children. The people who devised them were telling people openly that sub-prime was a great idea, but secretly they were making moves to financially offload them as quickly as possible in things like consolidated debt obligations. The bottom line is people devised them with the express intention of targeting poor, vulnerable and gullible people and ripping them off. Lets face it banks are not in the business of charity. They are in the business of making money and they don't care what they do to get it. 

Man's egoism, his greed more specifically, is at the root of the financial crisis. Unless we change our attitude towards other people then you can bet your bottom dollar that worse financial crisis's will open. Indeed all of our problems stem from it. If we don't correct that egoism our problems will manifest themselves many times over. Have a look at the following links as they explain exactly what we can do about the mess we are in: 

http://www.laitman.com/2008/10/the-financial-crisis-has-made-karl-marx-fashionable-in-europe/
http://www.laitman.com/2009/02/karl-marx-gains-popularity-in-europe/
http://www.laitman.com/2011/02/globalization-in-family-circumstances/

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Davos: Subprime lending, a curse or a good deed of charity?

3 Answers