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It was probably a bit unethical, but it was within the rules set by the federal government. If the government says "take out bad loans, take on extra risk, and we'll cover you if it fails, and oh, if you don't your competitors will", then it's a bit unfair to say "you did what we asked".

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FWIW Strat, I know a few people who have worked directly for Henry Paulson, and they "claim" he is one of the brightest financial minds they have ever met and have the utmost respect for him. They have never questioned his ethics. This came from two people whom I feel are honest people.

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Shareholders should applaud management... taxpayers, not so much.
Yep, and that's exactly the point. If you say to people "this is the only way you can expect to compete", then you can probably expect people to behave that way.
I do agree with you: we have terrible incentives built into the system. I just don't see a realistic fix. Crashes generally come with recessions, which are poison to the party in power. Even if we can get effective rules on the books to prevent firms from relying on taxpayer money during bad times, rules are only good as long as the politicians don't wish to change them.
Yeah, I've seen some "free market" solutions proposed, but they don't seem to completely solve the problem, to me. I think the first solution, though, is to get rid of the fiat currency. Before this latest crisis, I figured Ron Paul was just being flaky about this issue, but I'm starting to buy into the need for a commodity-based currency, combined with no federal backing of failed banks. It gets complicated quickly, though, because you have to look at a couple hundred years of world history, across countries, and examine each case and ask what was primary and what was secondary. What causes bank runs? How much damage do failed banks do to the economy? In the absence of disincentives, what kind of risks will banks take?There are no easy answers, but it's clear our current system is a mess.
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I really don't know as much as I should about what the gold standard would do to international currency trade. I've got some reading to do on it before finals.Let's say it would have the intended consequences and force the politicians to budget intelligently. We've abandoned it once before, who's to say we won't do it again? I wonder if education is the only way. If it's feasible to cram finance into already overcrowded high school curricula, we're talking at least another 20 years before you see any real impact. And the thing is, I talk to a lot of finance majors... they (mostly) shared the idiotic fixation on bonuses with the public. What does that say about our chances?
I'm not really sure what education would do. I KNEW why it was generally a bad idea to take out 100% mortgages and credit lines, but the incentives were set so that it was too hard to ignore them, so I got sucked in. And that's somebody who is smart and a chicken with money, what hope is there for people who are a little less of either? Can we ever be educated enough to ignore the chance to do something that makes sense for us, at least for now?
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I'm not really sure what education would do. I KNEW why it was generally a bad idea to take out 100% mortgages and credit lines, but the incentives were set so that it was too hard to ignore them, so I got sucked in. And that's somebody who is smart and a chicken with money, what hope is there for people who are a little less of either? Can we ever be educated enough to ignore the chance to do something that makes sense for us, at least for now?
You really hit the nail on the head. When friends of mine were buying homes a few years ago and telling me what they were spending, I would tell them that there was no way that the market was going to sustain itself. They all had lots of reasons why it would even though it made no sense. I was renting a condo for dirt cheap for several years, was contemplating moving out of state for a few job opportunities and had some other financial obligations (car payment for both me and my son, college tuition for him) that I knew it was not the right time to buy. It would be easy for me to say that I was too smart to fall for what was going on, but the reality is that if none of those situations were occurring I probably would have bought during the hype as well. It is human nature to make most purchases based on emotion than logic.
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When friends of mine were buying homes a few years ago and telling me what they were spending, I would tell them that there was no way that the market was going to sustain itself.
Were they buying homes in order to sell them?If you buy a home because you want a place of your own to live, it doesn't really matter what the market does afterwards. That's assuming you can afford it, but if you can't afford it, that's still not really a market issue.
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Made me think of this article in Rolling stone magazine that some guy spent 30 minutes telling me about one day when I was trying to leave work.

Inside The Great American Bubble MachineMatt Taibbi on how Goldman Sachs has engineered every major market manipulation since the Great DepressionMATT TAIBBI
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Capital Ratios and tighter regulation.The main reason that the Canadian banks have weathered the banking crisis better than banks in other countries is that the regulators here required higher capital ratios so that they couldn't over extend themselves with huge risks.http://www.reuters.com/article/idCAGEE5AM11I20091123One of the new realities Worldwide for banks is going to be that regulators are going to require higher ratios which should help to reduce the amount of gambling that they do but of course it won't work in all cases.

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Were they buying homes in order to sell them?If you buy a home because you want a place of your own to live, it doesn't really matter what the market does afterwards. That's assuming you can afford it, but if you can't afford it, that's still not really a market issue.
Well, maybe. Assuming you are not going to move or take a job out the area. We bought our house in 2003, with the thought we probably would not be there longer than 5 years (start a family need a bigger home and/or possibly relocate for a job). Both those things happened, I bought way before the market peak, and I am way way upside down in that house. My mortgage payment is more than my rent I get from renters.All the home improvements I did on the house to make it worth more at this point is wasted money, unless I keep the home for 10+ more years (which I probably will) and I did those all my self, so the only cost was the materials.What were we talking about again?
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Well, maybe. Assuming you are not going to move or take a job out the area. We bought our house in 2003, with the thought we probably would not be there longer than 5 years (start a family need a bigger home and/or possibly relocate for a job). Both those things happened, I bought way before the market peak, and I am way way upside down in that house. My mortgage payment is more than my rent I get from renters.All the home improvements I did on the house to make it worth more at this point is wasted money, unless I keep the home for 10+ more years (which I probably will) and I did those all my self, so the only cost was the materials.What were we talking about again?
How you sould have rented a condo and invested your money in stocks and gold...
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Long Term, Foreseeable future, and the future that you foresee is all relative to who we are talking about. Take My wife and I as example 1. We, much like El Guapo, bought our condo with our "Long Term" goals being 5 years at which point we want to start a family and possibly move out of state. We bought right near the peak, July 2006, and now we find ourselves 3 1/2 years later ready to start a family. We are going to put our house on the market in May and see what happens ... i'm thinking it will be bad and we will probably end up just staying put where we are for another couple of years, but we might as well see if we can sell.Take my parents as example 2. When they moved to Hawaii and bought their piece of land their long term goal meant the rest of their lives. They have been there over 20 years now and they have no plans of leaving.EDIT: Now that I think about it you guys were just messing around with each other and both know this ... Well Played sirs ... well played

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Long Term, Foreseeable future, and the future that you foresee is all relative to who we are talking about. Take My wife and I as example 1. We, much like El Guapo, bought our condo with our "Long Term" goals being 5 years at which point we want to start a family and possibly move out of state. We bought right near the peak, July 2006, and now we find ourselves 3 1/2 years later ready to start a family. We are going to put our house on the market in May and see what happens ... i'm thinking it will be bad and we will probably end up just staying put where we are for another couple of years, but we might as well see if we can sell.Take my parents as example 2. When they moved to Hawaii and bought their piece of land their long term goal meant the rest of their lives. They have been there over 20 years now and they have no plans of leaving.EDIT: Now that I think about it you guys were just messing around with each other and both know this ... Well Played sirs ... well played
Honestly, I don't know if Guapo is messing with me or not.Do you think you made a bad decision in example 1? I don't.
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Honestly, I don't know if Guapo is messing with me or not.Do you think you made a bad decision in example 1? I don't.
Personally I don't think we made a bad decision per se. We did the best we could with the information available. We also talked with the seller and got the price down 50K from what they were asking. All that being said we could afford and can still afford the condo that we bought and we put 10% down with a traditional 30 year on 80% and a HELOC on the other 10%. It just sucks now because we want to start a family and we can't really afford the house with just one of our incomes. It would be nice to be able to sell and get our deposit back and put that on another house out of state where we could get more bang for the buck. Either way though, I try not to second guess that decision too much.
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Speaking of Bailouts. Since this money is being returned wouldn't you think the best thing would be to use this money against the defecit. It's like they think since it is being paid back and there is extra money that they HAVE to spend it. HEY GUYS ... IT'S NOT FREE MONEY.

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