Former Treasury Sec'y O'Neill says "NO MORE SUBPRIME MORTGAGES!"

To Thomas, What "our" people (the irony) know is that if you want housing on par with any tier of income, you better earn that tier of income. This is not an issue of racism, dignity, or respect. This is an issue of common sense. It's that simple - get over your OWN racism before you try to engage in a topic like this.

Yes another Matt :-) The only reason I don't like the 20% rule is it does not equal saving for your down payment but instead paying more to rent! Look at liability insurance, mandating everyone to have it equaled increased liability premiums. I had a great driving record but since I was young and did not have credit established my rates went up drastically once the law passed. I'm not against down payments because it is smart business but the greed which has caused our current problem would contribute to the average American having less saving because of higher rental rates. Government needs to regulate and not mandate business decisions. Business should not be told to make bad loans so not to appear they are discriminating a class of people. If business feel you are credit worthy they could careless what your skin color is, because the only color they see is green. Government should not save companies that make bad decisions unless it was the government regulations which caused the problem, which in the current case there is a little of both. In short this is America and the government needs to fix the problem they created and let business make money or go under. For every business that closes due to poor management another one will open to take its place.

As a banker I can tell you first hand that sub-prime mortgages are still being developed and purchased by Freddie and Fannie, credit swaps are still bought and sold by the billions daily. We passed a "bail out" package but didn't place any controls on the industry.

This is the most racist bunch of posters I have ever seen. Supporting a race monger will not put people in homes and further the American dream. This will effect Africans the most and you people know it. This is our country too and we have a right to affordable housing on par with the rest of white America. Not to worry what you people think. Obama will see to it that we are treated with dignity and respect.

Hes not entirely right. If a house costs, say, 250,000 and a buyer puts down 10% (25,000.00)add closing costs of around 4% minimum thats 35,000 hard earned money. If credit is good, most people are not going under for 35,000. O Neal just shows his ignorance. If 20% is good, how about 30%? What the hell, make them pay cash. Jerk.

You're nearly 10 years late on this proposal.

Gee, what a novel concept, only make loans to people who can resonably be expected to repay them. The 20% rule was a good limit. If you can't come up with the self discipline to budget your money to save up the 20% you won't be able to budget well enough to make the mortagage payments. I spent my first few working years living on as little money as possible while saving every penny I could to put 20% down on my first home. Anybody can do it, it just requires discipline and not making tons of expensive impulse purchases. I ate beans, rice, and mac & cheese for those first years, didn't have color TV or cable either. A lot of people today, especially recent college graduates, expect instant gratification and don't want to have to wait to buy anything. If you can't pay cash, don't buy it.

I agree with Frank R. I purchased my first home as a subprime borrower, and now own 4... all paid down below the 80% threshold. There's nothing wrong with subprime loans, but lending institutions need to be given discretion in who to lend to once again, and assume the risk for lending to those people. Fannie and Freddie, being GSEs, should return to their function of buying mortgages with the total debt against the property less than 80% of the value to free up bank capital, and maintain that strict rule. Any bank originating a loan or credit line to push the debt to value ratio above 80% should be required to buy the mortgage. The bailout is failing and will ultimately fail because it does nothing to address the lack of transparency in the financial markets. It does nothing to strengthen the rules to protect consumers from fraud. It does nothing to ensure proper valuation of risk or disclosure of that risk from the originator to the buyer. The system has been exploited by fraudsters, and will not be righted until consumer confidence returns, no matter how inexpensive housing becomes.

If anyone wants to see a "Financial Nuclear Winter" that will make the Great Depresson look like a minor down turn then let Paul O'Neill head the Treasury Department. His claim that everyone must have 20% down to buy a home will crush this economy. Sub-prime and alt-A loans have issues and were used and abused in the past. But that doesn't mean every house must be purchased with 20% down. Does he realize that every home purchase with either VA or FHA financing doesn't require 20% down? These loans do require the ability to pay back the loan using proven debt ratios, an acceptable credit history and verifiable source of income. What fantasy world is he living in? As a mortgage banker for the past 20+ years I can tell you the vast majority of buyers do not have 20% down. That doesn't mean they can't afford the house nor that they have no incentive to make their payments. I have bought 5 homes in my time, never once having 20% down. I have never missed a payment or even come close to defaulting. At age 45 I still might not own a home if I had to come up with 20% down. I would have had had to stop funding my retirement savings as well as college savings plans not to mention life and disability insurance policies. Does he not recognize the role housing plays in our economy? What about the wealth and stability created through homeownership? I really don't think the majority of Oboma supporters would have voted for a required 20% down homeownership plan. Oh what a great economy we will have if we all simply pay cash for our cars, payoff every credit card at the end of the month and put 20% down to buy a house. It is just so simple, gosh why didn't I think of that! Oh by the way, don't send your kid to college if you can't pay cash for that (remember student loans are evil too!) Good luck to all and by the way, I have some rental property if you need a place to live.

I have been saying this for years. I was a loan officer at a large global bank and the loans we were required to give to unqualified borrowers was dumbfounding. I say abolish the Community Reinvestment Act and get back to the 20% down we used to require. If you look in any neighborhood in America today, you will see that there are several homes that are not taken care of properly. Home ownership is a privilege, not a right. Many people should not own homes, as they are not now, nor will they ever be responsible enough to manage a home and the incumbent responsibilities.

Why is it that the most sense comes from "former" gov,t officials, and "wanna be" gov,t officials

Here's my suggestion for a bailout. How about we use all the bailout money to pay off the mortgages (or some portion thereof) of all the people who are current, didn't get a sub-prime and didn't suck the equity out of their homes? This would give a lot of working people a good deal of disposable income to pump back into the economy and create jobs. Auction off all the foreclosed homes to investors who have to pay cash. This would create opportunities in the rental market which has been dead thanks to "lets let everyone own a home".

Logic has to agree with O'Neil. Let's face it, we would not reach in our wallets and loan most of these people money. A comment that we dropped below 20% already in some markets adds validity to the fallacy of subprime lending. Allowing the unqualified and unproven the same privelege of those who have earned their way through life. History shows this has never been successful. IF the buyers had placed 20% down, then the housing would not have crumbled. How many foreclosures have equity still sitting on the table - zero. The balance is maxed due to 100% financing or add on home equity loans. They already sucked all they could from this asset. To walk away from something you never invested in is not a loss. Place tens of thousands into something and lose it, then it is real loss. The alternative, live in something less, manage your finances, work extra, be a family. Climb your way to the top. Our first job was not at the Director or VP level, yet somehow we are all owed a prime piece of real estate as our first asset.

My comment was directed to the 'Matt' who stated "Lastly, this guy O’Neil was our Treasury Secretary?? No wonder the economy is ruined!" Too many Matts in this forum.

Matt, straight up, you are a dope! You and the other Lalaland liberals are the ONLY reason why we are in this awful mess. You are ruining our economy and country with your stupidity. When are you going to learn? After every single cent is gone to ridiculous porky programs? God help us if somebody doesn't stand up and exhibit a little common sense during this fiasco.

The middle class can't afford 20%? but they can afford the $1500/month for a $150,000 home and the expense of owning a 150,000 home over the next 30 years regardless of what ups and downs may come in the economic future. What's wrong with saving for 5 years to come up with the 20%. I still don't own, but I'm not stupid enough to try and get a 100,000 loan making 25k per year. I sure don't expect anyone to pay it for me. Wake up America, the world doesn't owe you shit!

"Can’t put down 20% for a house? TOO BAD, you’re on your own now. O’Neill says we all need ‘tough love’ to get us out of this mess." I'm glad to hear someone finally saying what needs to be done as a first in many steps to fix what is ailing this economy. It's way over due!! Thank you Mr O'Neill!!!!

Could not agree more. People who have "no skin in the game" generally have no incentive to do what is right. This includes owning a home, and - ultimately - it includes how one votes. If you have nothing invested - you are one of the 40% who use government services but pay no income taxes - it is easy to vote for the person who promises to redistribute the most taxpayer funds to you. Never mind that it might be bad for America and that everyone else must pay for what you take. How's this for a radical thought - maybe voting rights ought to be tied to paying into in the general US income tax system. Some additional comments on this are at benclearsight.blogspot.com.

Wonderful idea!! If only they'd go through with it!!! People do not have the stomach for pain anymore!!

I totally disagree. First this plan is not going to do anything for the curent situation, only (in theory) prevent future economic crises. If these options are taken from the averaga American to buy a home (as most middle-class familys don't have 20% to put down on a home) O'neil says "too bad, then nobody gets a home." This would only cause the market to get worse, because nobody is buying homes, which is what started the collapse of the housing market to begin with. Also there is an entire Mortgage Insurance industry set up to help people buy homes and drive the housing market up. When this is not abused by the lenders and real estate brokers to get their commissions, it works well. So cracking down on lender fraud is much more promising than preventing people from buying a home. Lastly, this guy O'Neil was our Treasury Secretary?? No wonder the economy is ruined!

Yes! I've been saying this for 5 years, as I watched housing stocks go up up and away beyond the realm of reasonableness. There is no constitutional right that everyone must own their own home. I dont know when that became "the american dream" espoused as an American right. Some people, may NEVER own their own home; it depends on their industriousness, ability to earn, save, control spending, and let's face it, luck. So government mandates to make loans "available" to all people, many who have shown their inability to repay their previous debts, created this mess. Combine that mandate with the fifty ways to loan 200,000 to anyone with no job, make a $3,000 fee, and flip that loan to some other sucker, was gas to the fire, and has pushed this country to the brink of madness. I hope the 20% rule is codified into law, along with other regulations that force people to earn and save. Bring back the 1950's now.

Liz: This is the type of work that you are famous for, wonderful Interview.Paul O'Neal is a straight shooter, and you coaxed from him real (inside baseball) insight on todays problems, that face the markets and Main St. . The portion on the Auto Co's was the most insightful treatment of why and how the Government should help the Industry, and under what conditions, ie renogitate contracts to make the business model REALLISTIC. Again wonderful job.

RE: Liz-Vision with O'Neill "No More Subprime Mortgages". Absolutely! O'Neill's my man! 100% right! What is there about the word "Subprime" don't the dem's understand?!!! And I understand that Fanny and Freddy are still buying up Subprime and Alt-A loans (as per requirement rules set up during the Clinton Admin). Really dumb and dangerous. Just keep doing things same as usual and expect different results. NOT!!! Cut out the subprime and alt-A junk. AND: The floating gas tax idea was stolen from me. That's right! Only Pres. Bush and Berneke just wouldn't listen to me. I got tired of harping about it, but if they started doing this even back a year ago they could have prevented the big run-up in oil speculation this summer and the subsequent collapse. My idea was also to have this managed by the Fed with rules that the proceeds should be used to build up the strategic reserve for times of shortage. Without oil stability how can we run our industries. There is so much volatility now it's impossible to plan. As far as Bailouts go: How about if the elected Liberals donate 50% to their own bailout fund and quit messing with tax payer money. They are always so liberal as long as they don't have to contribute directly.

Absolutely! O'Neill's my man! 100% right! What is there about the word "Subprime" don't the dem's understand?!!! And I understand that Fanny and Freddy are still buying up Subprime and Alt-A loans (as per requirement rules set up during the Clinton Admin). Really dumb and dangerous. Just keep doing things same as usual and expect different results. NOT!!! Cut out the subprime and alt-A junk. AND: The floating gas tax idea was stolen from me. That's right! Only Pres. Bush and Berneke just wouldn't listen to me. I got tired of harping about it, but if they started doing this even back a year ago they could have prevented the big run-up in oil speculation this summer and the subsequent collapse. My idea was also to have this managed by the Fed with rules that the proceeds should be used to build up the strategic reserve for times of shortage. Without oil stability how can we run our industries. There is so much volatility now it's impossible to plan. As far as Bailouts go: How about if the elected Liberals donate 50% to their own bailout fund and quit messing with tax payer money. They are always so liberal as long as they don't have to contribute directly.