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Originally Posted by loquitur
robot parade, "unregulated capitalism" doesn't exist, and shouldn't. We'll always need police and courts, and we'll always need to enforce laws against fraud and violence. The issue is how much more than that we should assign the government to do. In this country, answers range from "a bit more" to "a whole lot." That particular debate has engrossed a fair number of high-candlepower thinkers for many years, and I don't think we're going to solve it here.
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My little rant was mostly informed by and directed at the over-simplistic logic that seems to dominate neocon thinking these days - that all regulation is bad, than any regulations that exist are bad for business and should be removed. There's a not-insignificant group of people who actually believe this (or at least, act as if they do).
My view is that a person or organization should be regulated and monitored (as opposed to punished after the fact) according to factors such as how harmful a given behavior is likely to be, how motivated or predisposed they are to perform a given action - with the understanding that people have more inherent rights than corporations, such as those outlined in the bill of rights.
So, the mortgage industry, like any industry, is motivated by profits - but, since they can cause fairly extensive harm to individuals, other companies, and society as a whole by engaging in unethical business practices, they should be monitored and regulated accordingly. In this case, the mortgage industry (or rather, players in the industry) engaged in various unethical practices which boil down to securing loans for individuals with terms that they should have known those individuals could not reasonably meet, and then passing those loans on to other entities (ie, The Big Banks) while misrepresenting the risks involved. I feel a lot less sympathy for The Big Banks, because I think they were more part of the problem than not, and have more resources to ensure that they were getting a fair deal.
The individuals who took out these loans of course bear some responsibility, but, the relative complexity of mortgage agreements, couple with deceptive practices on the part of mortgage brokers and companies resulted in many, many people taking loans that they were not realistically going to be able to pay. Most people would not take on a mortgage they knew they could pay. A combination of poor judgment and lack of financial sophistication on their part, poor guidance from the person providing the mortgage, who the buyer probably thought was acting in their best interest, and a softening economy led to the buyer being unable to pay the loan. Better transparency, regulation, and consumer education might help us avoid this in the future.
A word of advice - if a bank is offering you a mortgage that is going to adjust based on inflation in a few years, they are betting that interest rates will go up. It's almost never wise to bet against the banks.