Is there such a thing as Price Gauging and is it the banks' fault that people got loans that?

In the 1990's, there were Rules about getting a loan. You had to have a certain credit rating, have a certain income, had to have a certain down payment.

Well, the Democratic Congress under Mr. Clinton decided that these "rules" were racist. They discriminated against "poor" people and African-Americans. Everyone deserves to own their own home was their Battle Cry.

So they passed the Affordable Housing Act. This made banker loosen up the rules, not verify income, lower the amount the Down Payment had to be to buy a house.

People bought house that they actually couldn't afford. Since there were SO many new people in the Market to buy houses that House Prices climbed very high very quickly, but Banks were Forced to make these loans.

The only way they could get the payments low enough for people to pay was with a type of loan that start out low, but after 5 years the Payments Increase drastically.

These Increases started happening in 2006 and 2007. People could NOT make these increased house payments, they Defaulted on their loans and walked away from their mortgages, dropping the houses on the Banks.

So, knowing this, which I know....I have a really hard time understanding why Mr. Obama Blames Mr. Bush for our Economic Recession. The EVENT that really started the Recession of 2008 was the Affordable Housing Act, written by Barney Frank (democrat) and signed into law by Bill Clinton (democrat) in the 1990's.

Just to help you with a simple budget that I learned in the 60's growing up, but is not taught anymore:

1/4 of your monthly salary should go for lodging, 1/2 should go for food, utilities clothing, car, ins, gas, and 1/4 to savings-for retirement, college, emergency.

Minimum wage is about $1200/mo so your rent or house payment should be $300 or less per month, unless you are married or a roommate that makes minimum wage, then you can afford $600/mo.

Did you know you can buy a house in KC, MO for $50,000, which has a payment around $300/mo.?

I saw 12,000 jobs yesterday on indeed.com for KCMO.

Ask your Eco Proff what he thinks about Urban Metropolis Living vs Small City. Which has more opportunity to a better quality of life, etc.

Thanks for your question. And no, I doubt she was a Republican.

Definitely a Republican.
YES, there is such a thing as price gouging, it is when a certain company or group has the majority of the resources, or services that are desperatly needed at a given time, and because of the fact that they are the only one's who have the ability to provide what is needed at the time (which is why we have monopoly laws), they can drastrically raise their prices to unreasonable levels because they know that the people don't have a choice in the matter. They NEED those goods or services, no matter what the cost.

As for your second question, it is both parties' fault's that the loan was even given. The barrower should have known that they have no business asking for that amount of money, but it is also the institutions' fault for giving the money because they either, one: KNEW the barrower had no means of paying the loan back, or two: did not care to find out if the barrower could pay the money back. ALOT of what happenned with the housing bubble bursting was the banks were not adhering to the truth in lending acts that were already in place, and were lying to encourage people to get loans they could not afford purely because of the money rip they were going to make off the extra interest they wee going to get.
Your teacher is severely misinformed, and is clearly a typical brain washed Republican. Make your own decisions on better information than she is offereing.
-Ben

Price gauging only occurs when there is an extreme shortage and businesses jack up prices tremendously - usually after a natural disaster. Otherwise companies have to compete for business. And yes it is borrowers fault for taking out loans they could not afford and it's the governments fault for forcing banks to make loans available to people who would not normally qualify

See back in the late 1990's Clinton, Obama and other lawmakers pressured lenders to come up with creative ways to loan to undesireables. They said that everyone should be able to own a home. If lenders tried to deny these people then these lawmakers would try to call it discrimination. Lenders were stuck between a rock and a hard place

If you could give loans to people without any risk would you? Essentially that is what banks did because if they failed the government would insure the bank 100 percent for the loss. The banks made money on the process/fees so they were happy to give out as many loans as possible. Also, they could create securities out of this process which creates more money to lend for these mortgages. Your teacher is right by saying they shouldnt feel sorry for them...but most people dont realize its the government that caused the bubble and all the people to believe that housing prices will continually go up and everybody can get rich if you buy a house.

No - it always has been and always will be the fault of the individuals who took a loan they knew they couldn't afford.