Lending is a good thing, yet the lending is not occurring. Nor was it going on in good faith before. While some could, a majority aren't.
Yes, the market is largely frozen...unless you've got some hard asset to put against it, you're just not getting one. And the cause of this is multiple, but it's primarily due to defaulted loans. And it doesn't take a majority of borrowers defaulting to cause the crunch...92% of mortgages are being paid.
America was built on risks, but the lack of risks being taken now cannot balance out the crazy 'packaging' of the loans that occurred before. The collapse was instigated by many different facets of the banking industry, not just a few bad eggs.
I am from Rhode Island, if the Savings and Loan collapse that occured there didn't collapse the economy, then a few mortgages in Florida shouldn't have destablized the world economy.
This goes back to the idea of good faith loans. You're right, but that's not the whole story. People weren't having their arms twisted to sign up for those crappy adjustable-rate and teaser rate mortgages. But they weren't betting on the bubble bursting and leaving the credit industry, the economy, and their own ability to pay in shambles, either. Lenders were indeed giving out risky loans based on the idea that they were guaranteed by government agencies, who immediately lost their asses with the toxic debts.
These agencies (federal reserve, FHA, Fannie Mae/Freddy Mac, etc) were created in order to give "free" (read: taxpayer) money to guarantee bad loans (many of which were originally mandated by the government anyway). By removing the fear factor of giving/taking bad loans, as well as artificially lowered interest rates in the wake of the dot com bubble burst that lead to cheap money and even more subprime lending, there arose a speculator market that further destabilized and helped usher in the housing market collapse.
Tax payers aren't footing the bill, China is. They're gonna want more than money in exchange for this debt. Money is meaningless to a country like China. They want powet and are getting it the same way we defeated the USSR, just through different means.
I agree, but consider this: in a government "of/by/for the people", we are just as liable for ChiCom loans as those who took out the home loans. And, like them, we can't pay it back. Power and influence is the only way it *can* be repaid. But like an old school street thug racket, we'll either pay up or do continually more and bigger favors that know no end because there's no dollar sign attached. And it's worse here, because there simply ain't enough money out there to pay it back!
In the end, you can't legitimately blame all the lenders for doing what they do. You can, however, blame individuals for gambling on the bubble, and you can blame (and vote out) politicians who act as the dealers at the table.
