<p>^^I agree, and that is crazy. But I’ll bet they care now, for those loans that they didn’t sell off and are still in their portfolio. Not many entities out there looking to buy subprime mortgages anymore, and the banks are getting killed on the bad mortgages. Some places, over 50% of the real estate sales are short sales, and the seller isn’t taking the loss, it’s the bank. They appear to have incentive not to give bad loans anymore, because who is going to buy them?</p>
<p>Busdriver11, the banks don’t understand risk.</p>
<p>I know that is hard to believe…but look at history. Look at recent history. Look at now.</p>
<p>Several years ago…
People were buying homes they could not afford.
Maybe they could afford 1200 a month…and they were getting loans and the cost of home ownership was 2,000 a month. </p>
<p>People couldn’t afford the homes…home prices dropped, you know the story.</p>
<p>Now…home prices have dropped so much…if a person bought a home…the costs might be 1,000 a month…rents are 1,200 a month.
Yet …the banks won’t loan.
People are not going to walk away from their homes if the alternative is
their costs go up.</p>
<p>Look at your own situation. You are able to buy condos and rent them out for a profit, because renting costs more than owning.
This is the time banks should be loaning money. The loans are a lot safer now. The safest they have been in decades.</p>
<p>I know our society is dependent on economic theories such as …people are going to make economically rational decisions, and everyone acting in their own self interest will work best for the economy…but those
theories are false and then our country makes decisions based on theories that are false…and we end up with a misallocation of resources, a poor economy, and most people are screwed (but not everybody is screwed).</p>
<p>I can think of many reasons why people don’t make economically rational decisions…</p>
<p>Ignorance
Greed
Fear
Need of security
Misinformation
Not understanding yourself
Other factors that are more important than economics.</p>
<p>I think capitalism is the best economic system so far because people do act in their own self interest (just not always rationally).</p>
<p>And because people don’t always act rationally, or in society’s best interest, we need rules and regulations, and government support of society.</p>
<p>If you understand what I just wrote…you will understand the banks. ;)</p>
<p>I understand what you wrote, and I think you’re right.</p>
<p>But I disagree with the premise that the banks won’t loan. They will, they are, and the rates are amazing. But you have to have good credit, plenty of equity and a source of payment. If you don’t, they won’t. This is probably the way it should be.</p>
<p>The banks don’t loan enough. There aren’t zero loans.;)</p>
<p>If the banks loaned more…asset prices would rise, more people would have jobs, the economy would be better, tax revenues would go up, etc. And the banks would have fewer troubled loans.</p>
<p>There are people out there that could not get home loans with net worths over 3 million but near zero income.</p>
<p>Think about it. These people could pay the laons back easily with assets…but the banks are afraid…</p>
<p>The banks were willing to give out loans on overpriced property to people without a pot to **** in and they won’t give out loans to millionaires. Lol.</p>
<p>Anyway…you are wrong about the banks…and I am not just talking residential loans…
I am talking commercial loans too. </p>
<p>I explained why already though…
Your condo situation explains why you are wrong.</p>
<p>It isn’t completely the banks “fault” that they aren’t lending. (You know I am NO fan of the too big to fails, but we should be fair, even if they aren’t.)</p>
<p>The problem we face, right now, is that the banks got involved in all of the regulations. So, we have no regulations where they wanted none, or useless regs, anyway, and very bad regulations where they didn’t care about it.</p>
<p>So, the regulators are all up in the banks about the loans, about the way they appraise, value and the way they capitalize themselves vis-a-vis loans… they call these “stress tests,” but there is more paperwork than ever, for the banks, and borrowers, and most of it is irrelevent.</p>
<p>The whole thing is a classic case of mishandling and overcomplication where something very simple would have worked…</p>
<p>But, you get the banks and the regulators and congress together and you end up with this mess. Guess who can’t get a line of credit or a loan? Joe average who always paid all of his bills.</p>
<p>ETA: and all of this was put together as a way to “protect” the too big to fails, who should be split up and back to basics. But, no, instead, you have small local banks under the microscope for problems THEY didn’t have, and TBTF’s going to “hedge” at the casinoes. It’s a mess of crony-capitalism.</p>
<p>Banks are sitting on hordes of cash. Barrons is right - if a lender never loses money on a deal they’re being too conservative. The financial crisis hit because all the players were able to convince themselves that they had no risk - that was stupid. But risk can be rationally assessed - and the banks are still sitting on cash, which is hurting the economy. </p>
<p>
Actually, the real losses (and not just JPM’s $5B) are to all of us. And there actually is something we can do about it. It’s just a matter of political willpower.</p>
<p>Well of course they’re scared now. So many people have walked away, they are paranoid and making people document every single thing. And commercial loans are often larger, with the economy in the tubes, people going bankrupt, businesses disappearing, they aren’t going to take a risk on a dream that something might be successful, or it might go down the tubes. Even my credit union, that has always been very conservative, has clamped down, most probably due to fear. I doubt they ever gave bad loans, but they’re darn sure to be careful now. And I want them to be, it’s the depositors money.</p>
<p>I have no idea why my condo situation proves that I’m wrong.</p>
<p>'But, you get the banks and the regulators and congress together and you end up with this mess. </p>
<p>But, no, instead, you have small local banks under the microscope for problems THEY didn’t have, and TBTF’s going to “hedge” at the casinoes. It’s a mess of crony-capitalism."</p>
<p>That’s for sure!</p>
<p>Busdriver11, why did I say the your condo situation shows the banks should be making loans to potential homebuyers? You are buying condos and renting them out.</p>
<p>You don’t need the big downpayments now…the risk of home prices declining is much lower now… the cost of homeownership is less than the cost of renting.</p>
<p>If people can afford to rent your condos…they can afford to buy…
And if for some reason home prices dropped…home buyers would be less likely to walk. Homeowners would still pay their mortgages…because the alternative, renting, costs more.</p>
<p>And because of this…the banks have less risk. </p>
<p>The banks do have interest rate risk…the banks would have to hedge that risk…
We all can see how capable banks like JPM are at handling hedging. ;)</p>
<p>Anyway…to repeat…the risk to the banks is lower now than at anytime in decades…
So…the banks should lend now…</p>
<p>Sure, I can see your point on the risk of home values declining more as being unlikely. And of course people are less apt to walk away when they have home equity.</p>
<p>But not all people are interested in buying property, and taking the risks that come with it. They may have zero saved up for a down payment or closing costs, and may not want the commitment of owning. When any little thing comes up, they like calling up the landlord and having them fix it, instead of doing it themselves. It sounds rather appealing to me now. We have rented to people with great credit, decent paying jobs, wondering why they aren’t buying instead. But it’s not for everyone, I doubt that it’s because they couldn’t get a loan.</p>
<p>So what if we are buying condo’s and renting them out? They are short sales, and the banks really don’t care who they are selling them to, homeowner or investor, if it’s a cash offer. They just want them off their books, and would prefer to sell them to anyone who will give them cash. At least they recoup part of their losses.</p>
<p>Homeownership is not for everybody…never said it was…</p>
<p>And I did not comment negatively about your buying condos and renting them out…</p>
<p>Actually…In another thread, I was quite positive about your doing this. :)</p>
<p>You are starting to stray off topic. :)</p>
<p>I don’t know how much regulations are hurting bank lending…on some of these deals. Regulation should cut lending on very questionable deals. I don’t have a problem with that.</p>
<p>I see deals that are not that questionable that aren’t getting funding though.</p>
<p>There is one deal I would like to invest in myself…and I am pretty risk averse these days.</p>
<p>I didn’t think you were commenting negatively about the condos. I just didn’t think it proved your point.</p>
<p>And I always stray off topic. I’m studying all day. Bored, trying to avoid it.</p>
<p>If you can’t get funding through for your good deal, I hope you keep looking. I never give up, and if it is reasonable, I generally always find a way to do it or someone to loan money to me. How much money are you looking for?</p>
<p>[Small</a> banks say new mortgage regulations too onerous - USATODAY.com](<a href=“http://www.usatoday.com/money/industries/banking/2011-08-15-small-banks-fear-new-mortgage-regulations_n.htm]Small”>http://www.usatoday.com/money/industries/banking/2011-08-15-small-banks-fear-new-mortgage-regulations_n.htm)</p>
<p>
</p>
<p>TBTF’s are still trying to find ways to be investment banks and aren’t going to go back to the traditional business of lending until it is made simpler. In the meantime, the new laws are forcing increasing consolidation, not breaking them up. So, the consumer version of banking is vanishing and the banks keep trying to dodge the laws against prop trading. The TBTF’s are, frankly, too big to succeed as consumer banks, and they need to be broken up. Consumer banks and investment banks, and the two should simply not coexist. They can’t. The missions are at odds.</p>
<p>Busdriver11…i think my point is very logical…</p>
<p>People in real life understand it. :)</p>
<p>The project is millions of dollars…but my participation would be a small fraction of that. I am just a passive investor.</p>
<p>Nobody involved is giving up. Never. The project that was completed when the banks dropped out took 8 years.</p>
<p>My wife doesn’t know why the banks won’t lend. It could be regulation. The banks are totally uninterested. </p>
<p>What are you studying?</p>
<p>“Bankers believe Dodd-Frank will hasten the consolidation”</p>
<p>Lovely. I thought part of point of the regulation was to prevent more TBTF.</p>
<p>“My wife doesn’t know why the banks won’t lend. It could be regulation. The banks are totally uninterested.”</p>
<p>I thought you were generally supportive of more government involvement. Not so, I suppose, if the unintended consequences are to prevent banks from lending.</p>
<p>Studying for a 6 month sim check. Windshear, engine failure, boring. At least last time we got to practice losing both engines and landing in the water. Goes very smooth in the simulator, with the motion turned off, not something I’d like to do for real.</p>
<p>
</p>
<p>:eek:</p>
<p>I mean, I’m glad you practice, since we will need you at the wedding in ten years or so, but sheesh!</p>
<p>Promises, promises. You’ll probably marry her off to some other kid, I just know it!</p>
<p>Depends on what the government involvement is…</p>
<p>I am in favor of what works…</p>
<p>Busdriver11, come on… ;)</p>
<p>Sorry, you are stuck doing something boring…</p>
<p>
</p>
<p>Exactly. And when the two come into conflict, as in the run-up to the crash, the investment banking side ALWAYS wins.</p>
<p>Yep. Because it is faster and the money is bigger.</p>
<p>The two should be separated. And, yet, nobody mentions it, in the places where they ‘should’ mention it.</p>