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Comments on: Was it the availability of credit that lead to the housing bubble? http://www.tvhe.co.nz/2008/09/29/was-it-the-availability-of-credit-that-lead-to-the-housing-bubble/ The Visible Hand in Economics Tue, 07 Oct 2008 06:17:23 +0000 hourly 1 https://wordpress.org/?v=6.9.4 By: NAU http://www.tvhe.co.nz/2008/09/29/was-it-the-availability-of-credit-that-lead-to-the-housing-bubble/#comment-2610 Tue, 07 Oct 2008 06:17:23 +0000 http://tvhe.wordpress.com/?p=1295#comment-2610 The only place success comes before work is in the dictionary.DonaldKendallDonald Kendall

]]> By: Matt Nolan http://www.tvhe.co.nz/2008/09/29/was-it-the-availability-of-credit-that-lead-to-the-housing-bubble/#comment-2603 Mon, 29 Sep 2008 08:54:40 +0000 http://tvhe.wordpress.com/?p=1295#comment-2603 “It was not the availability of the credit It was the people that were put in charge of its care.”

If by care you mean that risk wasn’t being disseminated efficiently in the market place because of asymmetric information then yes

]]> By: Mike Scornavacco http://www.tvhe.co.nz/2008/09/29/was-it-the-availability-of-credit-that-lead-to-the-housing-bubble/#comment-2602 Mon, 29 Sep 2008 07:03:18 +0000 http://tvhe.wordpress.com/?p=1295#comment-2602 It was not the availability of the credit It was the people that were put in charge of its care. http://www.revolutioncreditsolutions.com

]]> By: Matt Nolan http://www.tvhe.co.nz/2008/09/29/was-it-the-availability-of-credit-that-lead-to-the-housing-bubble/#comment-2608 Mon, 29 Sep 2008 05:59:59 +0000 http://tvhe.wordpress.com/?p=1295#comment-2608 “You have missed the additional point, which is why so many people are affected, that these “bad credit” loans were being repackaged to reduce the cost of borrowing”

First, I am talking about the global housing bubble (most specifically the New Zealand one).

Secondly, even in the case of the US housing bubble, the “bad credit” was only able to be packaged in this way because people were people purchasing the CDO also underestimated the risk associated with them – as the ratings agencies that specified the risk underestimated the risk associated with the housing market. Which is why the pricing of risk is the primary issue with the springing up of a housing bubble.

In fact you raise the risk point in your comments – I’m not sure we are really disagreeing

That is how I think of it anyways 🙂

]]> By: US News http://www.tvhe.co.nz/2008/09/29/was-it-the-availability-of-credit-that-lead-to-the-housing-bubble/#comment-2607 Mon, 29 Sep 2008 02:19:49 +0000 http://tvhe.wordpress.com/?p=1295#comment-2607 I think of myself as an intelligent, sensitive human being with the soul of a clown which always forces me to blow it at the most important moments.JamesDouglasMorrisonJames Douglas Morrison, lead singer of The Doors

]]> By: Steve http://www.tvhe.co.nz/2008/09/29/was-it-the-availability-of-credit-that-lead-to-the-housing-bubble/#comment-2609 Mon, 29 Sep 2008 01:56:16 +0000 http://tvhe.wordpress.com/?p=1295#comment-2609 absolutely too low interest rates as this blog rightly points out. My point was that the excess risks taken on by banks were passed on to many investors because the loans could be repackaged and sold to funds/investors/you and I, and we don’t see the risk because of the way the loans were repackaged. My point was that if the loans couldn’t be repackaged in the way they were (not saying this should be illegal, just properly rated) then the mess may not have spread as far afield.

The real mistake here was they way standard and poors etc evaluated the repackaged loans as being top quality, when the majority of the loans weren’t quality, just someone else was taking the risk of the “first one’s” collapsing.

]]> By: Miguel Sanchez http://www.tvhe.co.nz/2008/09/29/was-it-the-availability-of-credit-that-lead-to-the-housing-bubble/#comment-2606 Mon, 29 Sep 2008 01:02:11 +0000 http://tvhe.wordpress.com/?p=1295#comment-2606 I suspect that’s a reason why the US housing boom/bust has been more severe than elsewhere. But most of the Western world has had a housing bubble, and the only common theme I can think of is too-low interest rates.

]]> By: Steve http://www.tvhe.co.nz/2008/09/29/was-it-the-availability-of-credit-that-lead-to-the-housing-bubble/#comment-2605 Sun, 28 Sep 2008 21:24:07 +0000 http://tvhe.wordpress.com/?p=1295#comment-2605 Not quite so sure I agree with all of this;
You have missed the additional point, which is why so many people are affected, that these “bad credit” loans were being repackaged to reduce the cost of borrowing (and therefore pass these savings on to those who have bad credit and get loans for houses). the repackaged bit meant that you could buy a share of the 80% best loans, and someone else bought the 20% worst loans. (remeber we don’t know which are the best and worst, the person who buys the 80% best is not affected untill more than 20% of people default). The repackaged loans could then be presented as a huge chunk of safe loans, and a very small chunk of junk loans at a massive rate. This way, finance companies, banks, mortgage lenders, could appear to have good credit ratings and people invest etc.

I’m sure someone can explain it better than me, but the snowball effect of loans collapsing is the mess America is in right now.

]]> By: Interest Rates » Was it the availability of credit that lead to the housing bubble? http://www.tvhe.co.nz/2008/09/29/was-it-the-availability-of-credit-that-lead-to-the-housing-bubble/#comment-2604 Sun, 28 Sep 2008 20:51:31 +0000 http://tvhe.wordpress.com/?p=1295#comment-2604 […] Read the rest of this great post here […]

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