"Toxic Assets", the Financial Crisis, and the Bankers

[deepsepia]

Originally Posted by gregn2484

I may be back tracking to the last page, no one has mentioned the next big bubble: Student Loans.

I am a college grad with a degree, and unemployed. During one job search I found a job opening in a Shipping and Receiving position (listing below) that requires a Masters Degree!!. I guess you must need a Bachelors Degree to work at McDonalds.

This is what college grads have to look forward to

Now I am in the process of reinventing myself, and doing it with no money.

Thank you for that. I've seen pretty much everything you describe, and I've more than a fw friends in the same position. It doesn't necessarily get any better with a Master's or other advanced degree-- it depends on just what subject and what school. There's a blog called "subprime JD" that details just how dire it is for law school graduates

Student loans and the education economy are perverse things. We have a very good secondary education system, but it's financed with a ton of debt, and that debt falls on students. It's also the peculiar characteristics of student loans -- generally not dischargeable in bankruptcy-- that make them so lethal, economically.

I don't know what the solution to this will be, but I do know there are a lot of people in this boat, and it's killing demand. We're an economy that runs on demand, and it's the 20-40 year old demographic that drives demand. Unfortunately, those folks start out their careers so heavily burdened by debt that they're barely able to keep their heads above water, let alone buy cars, houses -- the "natural demand" which would ordinarily accumulate.

solving this mostly overlooked problem has got to be on the agenda. Heard anyone mention student loans on the campaign trail?

[MisterMacky]

Originally Posted by deepsepia

*snip*

solving this mostly overlooked problem has got to be on the agenda. Heard anyone mention student loans on the campaign trail?

Student loans are high on the priority list, joined by ending the war on terror and drugs.

[deepsepia]

One of the favorite putative explanations of the Right for the financial crisis is to try to pin it on liberals mandating mortgage loans to poor people (by which you can read "undeserving black and brown people") under the Community Reinvestment Act

The data don't bear this out, and a recent study does a nice job of summarizing the data.

For those who just want the conclusion

Our analysis examining the type of lenders extending credit to LMI census tracts found no evidence that tracts with proportionally more lending by CRA-covered lenders experienced worse outcomes, whether measured by delinquency rates, high-PTI loans, or higher-priced lending. In fact, the evidence suggests that loan outcomes may have been marginally better in tracts that were served by more CRA-covered lenders than in similar tracts where CRA-covered institutions had less of a footprint. Loan purchases by CRA-covered lenders also do not appear to have been associated with riskier lending. Additionally, this analysis found no evidence that either the CRA or the GSE goals contributed to house prices appreciation during the 2001-2006 subprime buildup.

CRA = "Community Reinvestment Act"
LMI = "Low to Moderate Income"
GSE = Federal National Mortgage Association (FNMA) and FRE
PTI = "Payment to Income"

for those who're curious, the complete article is here:
http://www.federalreserve.gov/pubs/f...136/index.html