this post was submitted on 09 Feb 2025
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49
Did banks successfully shift blame for 2008 onto workers? (lemmy.ml)
submitted 3 weeks ago by merthyr1831@lemmy.ml to c/askchapo@hexbear.net
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I'm looking to buy a house so I'm going through mortgage stuff, so you inevitably hear a bit about the context for the 2008 financial crisis.

Now, what I've seen a lot from this perspective is that what the banks did wrong was to lend too much money to "anyone who applied". This narrative seems to be the justification for lots of the more invasive and punitive mortgage practices 17 years later.

To me, this is blaming the poor people who needed money for housing, then jacking rates above what they knew borrowers couldn't afford. It drops all blame from the banks who, if anything, are portrayed as "too generous" in this period, which was sadly ruined by idiot poors not paying their bills.

Now it might just be my anecdotal biases at play, but it all gives me the same vibe as carbon footprints: Sure, maybe it wasn't ideal for people to be sold loans who weren't likely to afford them later on, but you motherfuckers made the system whereby housing is either consolidated by shitty landlords or locked behind a lifelong debt designed to bleed you dry for the privilege of "owning" something.

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[–] came_apart_at_Kmart@hexbear.net 21 points 3 weeks ago

the loans they "gave" out were predatory as fuck, ARMs with balloon payments. these were extremely profitable loans and the banks over leveraged themselves to chase them and sign up as many as they could with shit like "Ninja" loans (no income, no job). the nut on those loans was insane for the lender and they would turn around and sell them to investors for big bucks after rating them as AAA safe. you have to remember banks are inverted. banks see savings accounts as liabilities and loans as assets. savings accounts cost them money and loans make them money.

loaning money to people who have shit credit and no collateral is far more profitable than the terms a lender can get loaning money to rich people with assets.

The Big Short is an entertaining movie that is also educational as hell about what happened, from a technical perspective.

the legacy of the GFC in the US for mortgage lenders is PMI aka Personal Mortgage Insurance. this is a mandated insurance premium the borrower has to pay on top of principal+interest payments on a loan that is "riskier". that's right, the insurance on a riskier loan is paid for by the borrower, but the lender is the beneficiary if the borrower defaults.

it's a beautiful system for capital formations.