I agree Amon, the consumers expected low interest rates and good times both in general and in house prices, through a combination of youth (never having lived through the bad), education (maybe not realising), and through general ignorance. There would have been no "predatory" lending if people were not willing to incur the debt. The companies were stupid though as well, credit card companies do not share data (ever), dislike controls even voluntary on debt shifting and are usually hostile to setting up a register of those with bad credit card records, all of which helped people shift debt from one card to another much the same goes for lax banking standards on the part of banks (they believed the tab would be picked up by government). And the government just encouraged bad habits with easy money, and dodgy policy decisions never quite understanding that it caused most of the bad practices or at least abetted them. And the media was being the media and actively egging on bad practices, "if you have credit card debt, you can roll it onto one card and pay a lower rate" style news coverage on many a current affairs style job; and now their showing utterly no common sense and are blaming the greed in many cases they actively encouraged.
Ignorance will win out, poor decisions will be made, regulations slapped on in a kneejerk reaction by Senators and what have you to “fix” the problem, they won’t fix it, the problems are myriad and mostly institutional. There is no fix, lack of regulation wasn’t the problem, most of the entities mired in problems were heavily regulated, it was investment banks which bought the toxic securities, and have suffered. They had almost the same regulatory burden as normal banks, the American financial sector is not an unregulated paradise like some people seem to believe its still fairly heavily regulated (comparable to Australia and Europe, there are slight differences but overall they are all fairly heavily regulated). Intelligent regulation is what’s needed if anything is needed, policy makers need to realise that they set up perverse incentives for banks to make money which should be closed (underwriting standards need to be strengthened, with better requirements for credit checks, and other means of stopping “to risky” lending, since it will sink the ability of banks to bundle and sell of mortgages removing the risk from themselves but you want to balance that against denying homes to the poor etc). Policy makers should also realise that they helped create the situation, and take a good hard look at themselves before they enact bad policy, and regulate the sector. If regulation is formulated, it should be comprehensive, well thought out, with an undertaking by government not to slot things into it at a future date that will impair its effectiveness. One can have perfectly sound regulations only to have them destroyed by special interests by the part of government and others, “a little change here, and a little change there and were talking about big changes”.
Masada “24” Fiscal Dictator of Earth
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