patrick.net

I don't know, and I think that's sort of a stupid suggestion (though I know you're always looking to mulligan your own bad bets).

I know somebody who was a housing investor/speculator. He mostly knew when to call it quits and walked away with a few hundred thousand, but still lost six-figure amounts on some of his later investments. His brother, doing the exact same thing, went from one point having over a million dollars in cash to having absolutely zero (obviously he reinvested it in more bubble property). He had to declare bankruptcy and lost every penny he ever invested, including what he originally put in out of his own savings. Should the guy that got out of the speculative madness be paying his brother who was being even more greedy?

The way I see it, those who were attracted to the bubble and kept staying in the game were being just as greedy as those that bailed. The only difference is that the ones that bailed made the right bets, and went against the conventional norms.

This wasn't insider trading. As somebody that sold on the "up" side, I can tell you I received an enormous amount of condescending shit from people who thought they were going to make a fortune on real estate. Beyond the legal and logistical impossibilities of my profits going to them, it's pretty hard to argue in even a theoretical "should there" sense that they are entitled to the gains scored by somebody who got out of the game. The losers can take solace with the fact that they were likely warned by their friends exiting the system, but their greed got the better of them. As soon as they learn to stop abdicating personal responsibility, they will be better people to themselves and to society.

I agree, a clawback on personal levels like this is a terrible idea. Where would you stop? Would you try to claw back salaries from mortgage underwriters and realtors who profited more than you think they should have? Might as well give up on capitalism at that point.

I would advocate for a clawback of executive pay for people who ran their companies into the ground while committing fraud. Putting lots of effort into prosecuting that is worthwhile in my opinion.

It is unfortunate that our financial system is as volatile as it is. It detracts from a society that rewards hard and productive work, because the casino effect can overshadow personal income. It ends up causing people to waste lots of time trying to game a system. It also encourages companies to allocate resources poorly.

YesYNot says

Where would you stop?

Exactly. Regardless of whether you're for or against the idea of a clawback, it would be essentially impossible to implement in a practical manner.

I agree the practicality is nearly impossible, but I'm talking about principle. While some (like Klarek) demand that those who got in during the bubble pay a heavy price, why not those who got out? Just in time? Windfall profits?

Seems to me they are ill-gotten gains from casino capitalism, which means you endorse casino capitalism when you profit from it, but no relief for the victims of the scheme.

And, by the way, life is full of mulligans...I don't know why you repeat that all the time?

(and for the record, this is not vindictive. I'm just wondering aloud if it could be done, do you think it would be fair, and why or why not?)

CL says

I agree the practicality is nearly impossible, but I’m talking about principle.

I don't see the principle. When you invest you take on risk. Some win, some lose. The losers aren't justified taking back their losses, they should have been aware of that risk before they participated. Should we also give people back their money after they leave Las Vegas?

Now, as far as the investors who purchased "AAA" rated securities from wall street firms who misrepresented the value of those assets, that's another story. They sold troubled mortgates while at the same time took out bets against those assets. They knew they were sugar coating crap and lied about it. But that's another issue.

CL says

I’m just wondering aloud if it could be done, do you think it would be fair, and why or why not?)

No. Why not? Fairness is relative.

That said, I'd love to see the all the bubble buyers and sellers paired up in one big room to exchange their views on fairness. I'd predict a riot.

Thanks Shawn. I know we've explored the losers here ad nauseum. I thought we'd explore the winners for once. Is it market savvy? Were they smarter, more gifted? Lucky?

If the winnings were unearned profits, why couldn't they clawback? Weren't stock purchases made during the flashcrash cancelled? Was that unfair?

Capitalism is supposed to reward hard work and entrepreneurial spirit, not this stuff.

Someone suggested once, that if I walkaway and don't pay for a time, that I should donate the money to charity. Couldn't the same be said of those who profited by this debacle?

That's principle...when you agree with an idea whether it hurts you or helps you, right?

Define unearned. Does someone have to work hard for money to be earned? What about investors? They make money from taking on risks. One person took on the risk of purchasing a home and then sold the home for a higher price. Someone else took on the same home and sold at a lower price.

The flashcrash trades were reversed because they were believed to be computer error. But the home prices reached during the bubble weren't due to some glitch. People actually believed in the prices they were paying and made those purchases. They may have never been able to do so if the banks had been more repsonsible, but that doesn't change the fact that those transactions happened.

Sheesh - you know what they pay special ed teachers? Not much. And it's terribly hard work. So the poor guy got a break; it's not like he's was defrauded anybody. Banks, now, that's a different story.

Clawback = lack of own personal responsibility.

CL says

If the winnings were unearned profits, why couldn’t they clawback? Weren’t stock purchases made during the flashcrash cancelled? Was that unfair?

Capitalism is supposed to reward hard work and entrepreneurial spirit, not this stuff.

I'll play with that argument. Had I not put my place on the market, the guy who bought it would have bought another place. A lesser deal let's say. While he did me a service by ridding me of my home during the bubble, I did him a service by selling a house which (he thought at the time) was a real steal.

If I knew ten years ago that the housing bubble were imminent, and if I timed my purchase and sale accordingly (I didn't), then it wouldn't be a stretch to call those gains undue, even if scored legitimately.

But what you are arguing here is that those who escaped the bubble (with profits) took advantage of those who bought in. You didn't respond to my above post, but I'll say it again: it was not insider trading. It was far more unpopular to get out of the market than it was to get in. I had a number of bubble-buying idiots accuse me of jealousy simply for warning them that the market was unsustainable. Had they heeded my advice, I would never once think that they owed me anything (despite doing them a greater service than any high-commission financial adviser ever would give them). Yet because they opted to be greedy dipshits, I should reimburse them for their (banks') losses?

thomas.wong1986 says

Clawback = lack of own personal responsibility.

Bubble-buyers that are most vocal tend to paint a bad picture of abdicated responsibility for the rest of them who are living up to their purchasing decisions.

klarek says

I’ll play with that argument.

That's all I'm asking. And frankly, don't ascribe any value system to me that I don't have. I don't give a shit about money.

That said, do play with the idea I've posited. I'm asking if you would have the same value system whether you'd be on the winning side or losing side, and not because I was on one side or the other. Just philosophizin'.

@Landru3000 ---I agree, as a former teacher of students without learning disabilities, I can't imagine the challenges there. Still, I suspect he knew what he was doing and saw the market and played the market. It smacks of undeserved wealth, at least to me. Now, if you want to argue teachers' wages should be increased, I'm all for it.

@Shawn...define "glitch". :) I'd say this is one mother of a glitch---people going bankrupt, losing their homes, low-level underachievers gaining untold wealth, people who can't afford homes allowed to stay, people who can are moving out---strategic defaulting---,

failed nations, failed megafirms, bankrupt states, etc. I'd say this was one hell of a glitch!

The question I'm positing is a twist on the line I see here all the time, that losers are losers and they deserved to lose. Did the winners "deserve" their winnings?

If they did not, does morality dictate they return or donate the gains--as was recommended to me?

(And nobody should take this question personally. I sure as hell didn't when some literally attacked me previously. It's just a random thought about justice--unenforceable justice)

CL says

That said, do play with the idea I’ve posited. I’m asking if you would have the same value system whether you’d be on the winning side or losing side, and not because I was on one side or the other. Just philosophizin’.

It wasn't just a question though, it was an assertion: the gains were undeserved.

I reinvested my 401k away from the stock market in 2007. Is there an argument to be made that I owe those who didn't? When I take out a credit card at a low APR, is there an argument that I owe money to those with a high APR? If I buy a shirt at Macy's on sale, would it be fair to say that my discount was at the expense of the person that bought the same shirt at full price?

I mentioned above that this is not insider trading. That is, when you were getting all excited about buying your house during the housing bubble, a small fraction of people with the same available information you had took a stand against the mainstream. They had to endure the condescending and nauseating self-congratulations of people that spent metric assloads of money which wasn't even theirs, and on a purchase which they expended no time analyzing.

It's an entertaining question, for sure. But to suggest that there is a moral argument for someone who went against the grain with nothing but their own intuition to pay up to people that gambled with the bank's money is really pretty funny. You seem to think that crony capitalism is the same thing as capitalism. That, or you don't understand capitalism at all.

CL says

The question I’m positing is a twist on the line I see here all the time, that losers are losers and they deserved to lose.

Losers do deserve to lose. In this case, they get to walk away without losing their shirts. Hardly losing unless you're delusional enough to think that a forfeit equals a win, or that a fold entitles one to the pot. Speaking of which, are you in default yet?

Love 'em or hate 'em, but if someone profited so greatly and to the point they have you're panties in a wad, because you didn't, and you want to "Claw back". Then you've got the work flow of how winners and losers work, confused.

No way I'll give anything back.

I got in RE in Europe between 1997 and 2002, before they were "printing" money. In the late 90s RE was unsexy. After the rent/buy ratio got out of whack starting in 2003, I stopped buying. It was very hard and it took a lot of discipline not to be swallowed by the bubble. Between 2003 and 2007 sometimes I felt I was missing out, that there was a new paradigm. Every new price increase felt bittersweet: on one side, my net worth was going up, but on the other risk takers were acting and making instant fortunes. I could have doubled up. And doubled up again. But I didn't. These were rentals with long term retirement goals.

At some point I realized that not only I couldn't afford to buy with the rules I had set up for myself, but I also couldn't afford NOT TO SELL... That was 2006-2007. I sold 7 and kept 2 places as cash cows to cover my own rent...

Now were these underserved gains? Something felt wrong at the time. I saw my buyers so deep into debt (and ecstatic about it). I wondered how this would all turn out. Gravity always finds a way, but this was devastating.

CL says

The question I’m positing is a twist on the line I see here all the time, that losers are losers and they deserved to lose. Did the winners “deserve” their winnings?

I'm not sure if the people who bought into the bubble hype and lost their life savings deserved to lose it, but they made the decision, and for the most part I think they own the consequences. Do I have sympathy for the people who were misled, weren't well informed, or weren't able to comprehend what they were signing up for? Yes, I do. But I'm also for personal responsibility. Admittedly I also have some anger for "the idiot masses" who drove up prices. It meant that I had to buy a smaller, less desirable house than I otherwise would have. I wasn't willing to overextend myself -- I wasn't willing to put 0 down and take a 3/1 option ARM. But "they" were, and as a result "they" drove houses up beyond what reasonable and prudent buyers would have. So I buy the lesser house, still overvalued (I understood what I was doing), I ended up losing money when I sold, and I as a taxpayer have to bail the banks and the underwater homeowners out of the mess. So really it's hard, from that perspective anyway, to conclude that "they" deserve a clawback from those who made money on the whole mess.

Lets imagine that I had bought a house 15 years prior, and I saw the bubble come, and I decided to sell the house right at the peak. Did I deserve the "extra" profit I got? I suppose I didn't do anything specifically to earn it, but I did decide to sell (because of the high price), so it seems reasonable that I get to keep the money. If I have to give the money back do I get the option to buy the house back at a fair price? So, at least for the "is it practical?" part of the question, my answer is a resounding nope.

I find the stock example helpful, too. I invest a small portion of my retirement savings in individual stocks. For the most part I am making very infrequent and long term buys. But I'm opportunistic, too. When one of my stocks seems overvalued, I sell it. And if I think something is too cheap, I may buy it. Often I think to myself "the damn market is overreacting to [good/bad] news again, and I'm going to take advantage of it." Should I return some portion of my profits because it becomes obvious in hindsight that the market was overreacting? It would definitely change the dynamics of the stock market.

It seems, though, that unwitting investors in a ponzi scheme who profit from it are made to pay back their gains. I guess that seems a little more reasonable.

At the end of the day the people who got caught up in the mess with an underwater house were greedy, misinformed, incapable of self restraint or too dumb to understand what they were doing. I take big decisions seriously, make sure I understand them, have a good control of my emotions, and have been taught well about finance by my parents. As a result I tend to not make horrible decisions. Is it fair? No. Is it my responsibility to make it fair? I'm not sure, but I don't think so.

CL says

But his paper gains equal someone else’s real losses.

Ah, someone else gets it. All the profits people made (bankers, speculators, or just got lucky) are on the back of home debtors. Their money in the bank is just the flip side of the home debtors mortgage.

Clawback? Not unless you want to suspend the rule of law.

I'd be all for devoting billions to the investigation and prosecution of fraud at the highest levels which was rampant. But given that the US government devoted about 10 times as much money investigating Clinton's blow job, as it did the financial meltdown (forget about actually prosecuting anybody), it's pretty obvious the fix is in.

MarkInSF says

But given that the US government devoted about 10 times as much money investigating Clinton’s blow jobs, as it did the financial meltdown (forget about actually prosecuting anybody), it’s pretty obvious the fix is in.

That much... really? (insert blow job joke here)

Clawback...sounds tantalizing. Let me see.. If a Realtor sent a bus to the homeless shelter to find "qualified buyers" ...and told them how to sign on the dotted line to get "cash back" at closing...or told them they had thousands of Obama bucks just waiting for them...if they only bought a house....even though they walked from the last one...The same for the mortgage brokers who specialized in NO DOC loans...the No Income No Job and No Assets....the people who made BIG bucks out of the obviously fraudulent DPA or Down Payment Assistance programs using and manipulating religious or social organizations to sell houses to buffoons who didn't and don't know how to save a nickle...and they want a mortgage debt for the next 30 years..

They need more than "Clawback"...they need to be prosecuted fro fraud...along with the cheerleaders who touted and promoted it. IT IS FRAUD.....so the money must be returned...and PRISON sentences imposed....Maybe we can put the most serious offenders in GITMO with some of Dick Cheney's waterboard specialists? Hmmm. But I just rent and watch....and laugh....

TerriDeaner- Which Clinton? The Blue Teal bison or Mr. Wonderful?

Oh come now investor90, that is naugh-TEEE!

Sorry CL, I think this is a good topic and I don't want to derail it. I probably shouldn't have posted that earlier comment!

I paid $40 for a steak at a restaurant last night, and it turned into poop in my toilet today. I'm sure the restaurant made a decent profit by buying the raw steak at about $8 (only a 16oz steak) and selling it to me for $40 . . . the labor of meat flipping on the grill for a few minutes couldn't possibly have been worth $32! Can I have my "lost money" clawed back from the restaurant owner?

Oh yes, let's also talk about clawing back lottery winnings. I mean, someone has to bear the responsibility of not telling me the winning number ahead of time.

Good one.

Yeah, it's not the fault of the guy who knew when to sell, that the government (taxpayer) was (is) socializing the risk and losses of the banks. He or she took the risk, and got the reward.

A much better argument can be made for penalizing the banks and it's high level employees, as well as others for their role in essentially risking our tax dollars. At least have their bonuses go to the government, even if it's only for symbolic purposes (not to put a dent in the deficit). That could be a warning to others who assume taxpayer bailouts if their investments don't work out. Claw those bonuses back !!

marcus says

A much better argument can be made for penalizing the banks and it’s high level employees, as well as others for their role in essentially risking our tax dollars.

Exactly. Like I've said before, this is not insider trading or asymmetric information. We're talking about consumers with the same available information. Some made the right decisions, which in retrospect were completely obvious. Others made the wrong decisions, and in retrospect you have to wonder what the hell they were smoking. To insinuate that the ones who played it smart are somehow in principle owing money to those who were not is so absurd that I doubt the majority of those who lost could even agree to it. Just the ones that blame others for their own decisions.

And yes, the "insiders" a la the banking industry is always fair game IMO. I don't think anybody is due their profits except those who bought AAA-branded junk.

CL says

The question I’m positing is a twist on the line I see here all the time, that losers are losers and they deserved to lose. Did the winners “deserve” their winnings?

Reality framed my response better than I could. The steak analogy is apt.

And as klarek and Roberto alluded to, someone bailing on housing in 2005-06 was unheard of for the most part. Not only were people ridiculed for suggesting home values were ripe for a crash, but people were ridiculed for simply not joining the madness and buying. It was an openly-hostile environment. For someone with no prior knowledge of the bubble (not speculating with 104% financing on multiple properties) to have correctly assessed the situation, made a decision which they were openly and ruthlessly being criticized for; that decision being a calculated move to bail on a market due for a crash for which there was absolutely zero historical precedent for that prediction.; whoever had the courage to pull the trigger on that absolutely "deserves" the profits from the decision.

People seemingly have forgotten what it was like 5 years ago, and for that matter, the nature of housing and the market in general. To suggest your plan was to sell your home and move into a rental based on just a hunch that your property was going to tumble in value in the next 1-2 years, was a BALLSY move in 2006. People were mocked for this behavior right up until Countrywide tanked in spring of 2007, and by winter 2007 this seemed to be a brilliant plan. Now that the crash has set in, observers (particularly those either burned by the housing market game, or those who didn't have the gaul to act on their own suspicions, get in early, and get out in time as they saw others do) want to ascribe terms like, "Undue, Unjustified, Undeserved" to the money those who sold in 2005-06.

This is like asking if the survivors of the Titanic sinking "deserved" to live. Should the survivors have to pay restitution to the departed's families? Why? For simply surviving a trip that they did not? There were plenty of people who sat around laughing at the notion that the thing was going under, even when all evidence pointed to it being a foregone conclusion. Far fewer correctly assessed the situation, and quietly headed for the exits (lifeboats) as fast as possible. The reason most of the lifeboats went out half full is not because the ship was being run by a bunch of incompetant dolts, it was because the vast majority of those onboard simply refused to believe what they were being told by the experts. To suggest that those first dozen or so people who got on lifeboats didn't "deserve" to live any more than any of those who perished is true in an existential sense, but one cannot dispute that they made a very wise decision in the face of overwhelming sentiment to the contrary, and they thus escaped death. Just because those who died did not deserve to die, does not mean those who escaped didn't deserve to live.

In this instance, unless someone did something abjectly immoral (like grabbed a grandmother out of a lifeboat, tossed her overboard, and then took her seat) then they deserve to live just as much as anyone else. In much the same way, the average homeowner who sold during the bubble peak did not hold a gun to their buyer's head, forge signatures on mortgage documents, directly pay off an appraiser to bump up the value, or bribe the mortgage company to issue a loan to someone who didn't qualify....then the seller is not responsible for the losses incurred by the buyer, period. It's all a game. The fact that 99% of America didn't understand that housing is not intrinsically a rock-solid, zero-risk game with constant appreciation guaranteed, doesn't mean that those who DID understand this and made their choices in kind are either a) responsible for compensating buyer for losses, or b) do not "deserve" to keep the proceeds.

The only parties who do not deserve to have made money are the assholes on wall st who gambled everything, like the poor homeowner, and got raped by the market.....and then got billions of dollars handed back to them. If you make a wise decision, you deserve the reward. If you make a poor decision, you deserve the consequences. What is undeserved is making a horrendously foolish decision, getting whored by the market, and then being handed all your losses back by the Federal Government. That is undeserved.

A clawback would have been more socially just than having taxpayers and savers bailing out the big banks, the debt speculators, etc. However, it is impossible to clawback now. The profit taking occurred years ago and the financial trail is too convoluted. A clawback on a per-case bases involving investors suing institutions for financial fraud would have been possible back in 2006-2007, but the government was too much in bed with the bankers to do this.

Really, what the government should have done was simply let the courts back in 2007 hear cases from both US investors and foreign investors regarding the fraudulent packaging of mortgage back securities. Sure, a lot of big banks would have gone down, but that would simply open the market to all the little banks with little to no exposure to the fraudulent securities.

Other than that, the government should have simply done nothing. No printing money, no redistributing resource by "stimulating" one area of the economy at the expense of other areas, and no artificially low interest rates -- the only way to stimulate an industry is by taking resources from and thereby depressing some other industry. Government policies are always doom to fail when they address the symptoms of a problem instead of the causes. The cause of all the financial mess we have today is simply the misallocation of vast resources into an overpriced housing market. The solution is simply to stop misallocating resources to this pig.

Specifically, it is cheap money that got us into the second great depression. And the fed's solution is more cheap money. That's like trying to save a person from drowning by pouring buckets of water on him.

People who risked their capital and made profitable decisions should keep the profits. Duh! otherwise why would anyone invest?
If you screw up and lose money on an investment take your lumps. God knows I made some stupid decisions and lost a lot of money but it would never occur to me that the people who made wise decisions should forfeit their profits.
Now if people made money from scams and fraud, that's another matter. The bankers certainly should be made to forfeit their bonuses for example

CL says

Capitalism is supposed to reward hard work and entrepreneurial spirit, not this stuff.

Is that really the point of capitalism? It sounds more like a strategy. I think the purpose of capitalism is more about freedom; the ability to choose what path of work or business you want to pursue in life. But the freedom of that choice also comes with the ability to fail.

There are 2 main ways to make a living. Go to work everyday, put in your time and then collect a check at the end of the week. Or take risks with your own capital in a business or investment idea of your own. The first option carries very little risk, the worst that can happen is you lose your job and have to find another one. The second option carries much more risk. You can lose everything, and if you're using leverage you can lose more than you started with.

The moment people started looking at their homes as "investments" rather than a place to live they stepped into the world of the second group of people. And a lot of those people did that without the proper knowledge of how to do so and lost because of that. But capitalism gives no forgiveness to those who take risks in ignorance. We only have laws to protect people who were intentionally mislead by others in the risks that they took. Unless somone acheived a gain due to fraud on their part I don't believe there is any principle in forcing them to pay their profits back.

Also, I think the very idea of giving back profits just because they seem "unearned" would destroy capitalism. Who would be willing to take any risks if they knew their profits could be taken away afterwards when the losers screamed "not fair"?

I think the claw back approach is for jealous stupid financially un-educated people looking for revenge against there own buyers remorse. I own and run a hedge fund in Seattle. Around spring 2005 I liquidated all my real estate holdings I did not outright own. I did a real nice thing for my friends and advised them to sell now and get out before they were under water. During that time I was flipping Bank owned REO for shortsale. I made a killing on short sales that are now under water. However if the people who bought the houses want a clawback, thats not going to happen. They felt they were paying a good price and they qualified.
On the hedgefund side. Most of these people don't understand how money works. So that is there fault, not mine.
Now on the hedgefund side of life. I made a killing shorting GS, and Morgan Stanley, my clents made millions and I made 10' of millions, all legal and legitimate, want to clawback on me; can you outrun a Metal Storn phalanx gun. I think not.
Clawback is just an idea financially uneducated peole want to use to get revenge on the rich guy. SCrew your dumb people. This blog should be used to tell the housing crisis as it unfolds, not a forum for stupid poor people; they only have themselves to blame.

Do you know who was BIG on clawbacks?

The Khmer Rouge.

Why should you clawback profits of anyone who made money during the housing bubble? What about everyone who made money during the tech bubble? Should that money be clawed back? Anyone who things clawbacks are a good idea is jealous that they did not profit from the bubble. Well, too bad. I missed out on the tech and gold bubbles (yes, gold is in a bubble), and in no way do I think people who profited from them should have to return their profits.

Reality says

I paid $40 for a steak at a restaurant last night, and it turned into poop in my toilet today. I’m sure the restaurant made a decent profit by buying the raw steak at about $8 (only a 16oz steak) and selling it to me for $40 . . . the labor of meat flipping on the grill for a few minutes couldn’t possibly have been worth $32! Can I have my “lost money” clawed back from the restaurant owner?
Oh yes, let’s also talk about clawing back lottery winnings. I mean, someone has to bear the responsibility of not telling me the winning number ahead of time.

Fair enough, but what if there were malfeasance in the "market" for meat? What if you, as the consumer, were paying $40 for meat because the entire country said there were forces at work making meat more expensive? So, the canard goes, steak that used to cost $16 is now $40. If you want to eat, you'll need to pay up. Of course, you can always eat hamburger, but it too was affected by the fake run on steak.

If after the fact, the meat suppliers were found to be manipulating the meat market (insert any artificial influence you'd like here), could not consumers be able to morally complain to the restaurant that they were hoodwinked? And wouldn't the restaurant go to his suppliers for redress?

Another analogy would be private used car sales. If you sell a car as-is to an unsuspecting buyer on the street, and the engine falls out in less than a mile-- You are under no legal obligation to refund the money, but I'd suggest you are under a moral one. Are you?

As far as legalities are concerned, if the consumer were protected by a "lemon law", would he be moral in seeking protection under the laws of his state? Or should he simply fall on his own sword and shout his praise for Capitalism and all of its wonders? In the dog-eat-dog capitalism many espouse here, you'd say there would be no moral obligation. But I'd bet you that countless citizens do this every day, because their code says that it's the right thing to do.

Not such a good idea.

Some of us put two and two together in '05 and '06 and sold, leaving $$ on the table, and took a lot criticism for it. It smelled like 1989 all over again and it was time to get out.

At the time, it was normal to do a Tax Deferred Exchange into a more expensive investment property to defer the taxes. Some of us just paid the taxes and took criticism for that too. It truly smelled like time to get out.

Lots of taxes and lots of criticism.

You cannot go with the crowd and make any headway.

Unfortunately, silly buyers and stupid "investors" have been losing since '07, over and over.

In 2016, looking back on this huge mess will be a very sad time for humans. The Stupid-Age.
Like walking around all day with toilet paper hanging out of your britches.
Just how stupid can people be. Read anything about humans from 2006 - 2016.
And, there's nothing anybody can do. They just won't stop, look and listen.

Are you from the future?

The group of people who actually lost money is very very very small.

Most all bubble buyers paid with 97%+ loans. (no down payment).

Then they live for free for 2 to 3 years while I wait for the bank to foreclose on them so I can maybe outbid 3 other people on thier still overpriced 40 year old home?

How can we as taxpapers clawback 2 years of free rent since the Feds are making banks extend and pretend? THATS a topic we should discuss also HOW TO SPEED UP THE FORECLOSURE PROCESS and kick all the weak hands out of thier homes. But thats pointless with the feds runing the economy like the CCCP.

When will the crash end and prices be stable? When all people either upside down or who cannot afford thier house are removed and replaced with people who can. (don't hold breath)

Lets remember the bubble was the disease and the crash is the cure.

I bought a $30,000 Honda in 2001. Today it is worth $5,000. Can I get a clawback of $25,000 from Honda? Where's my money?

CL says

Fair enough, but what if there were malfeasance in the “market” for meat? What if you, as the consumer, were paying $40 for meat because the entire country said there were forces at work making meat more expensive?

What? This happens all the time. Have you ever bought a beer at a baseball game, or popcorn at a movie theater?

I'm not sure why it matters if the market was manipulated or not -- if the meat prices were artificially elevated or not. You decided to buy the steak, and nobody made you. You'd do better to talk about staple foods, or maybe even gasoline -- things that people "have" to buy.

CL says

If you sell a car as-is to an unsuspecting buyer on the street, and the engine falls out in less than a mile

If I knew that the engine was about to fall out, maybe. But if I didn't know...the car was sold as-is. Would I feel bad about it? Yeah, I would. Would I give the guy his money back. Maybe some of it. Maybe not. I'm not really sure how that relates to buying a house that someone is later willing to pay a lot more for, and selling it to them.

I have entertained the idea, but I don't think it has legs.

@CL

Nobody put a gun to your head to force you into buying a house (although some wives did force their husbands into buying; there's even an NRA ad hinting at the power of the wife; to that problem, the remedy is divorce! or grow a set of balls and tell her you'd leave if she can't put family financial security ahead of looking good among her chatty low self-esteem fratricidal "friends"!)

Regarding the lemon car analogy, if you find a structural problem with the house that the seller should have disclosed; e.g. if the house collapsed on you a week after you moved in, of course you'd have legal recourse. However, when was the last time any seller of used cars would take the car back years later because you think you overpaid?! There's nothing wrong with the car as a transportation device, and there's nothing wrong with the house as a shelter; you just overpaid! How is it fair to reverse something like that years after a mutually consenting exchange? The whole idea is ridiculous and immature . . . just like the immaturity in pushing a wiser spouse into buying a house in order to show off relatives and friends during the boom to begin with!

There were plenty good advice against buying at the peak, if you cared to find them. Patrick has been running this site since 2004. I started renting shortly after the stock market bubble crashed in 2000 . . . thinking that the housing market would crash within 3-5 years. Looking back, I could have bought a house in 2002, paying next to nothing down, then tapping it like an ATM machine to pay cars, boats and vacations . . . then after 2007, as a homeowner with negative equity in that case I could have stopped paying altogether and stayed in the house for free for a few years. Since I didn't take advantage of the system like that, can I "claw back" the free car, free boat, free vacation and free housing for a few years?!

Free market means that individuals have the right to participate in the price discovery process . . . so that resources can be directed efficiently through the dynamic competitive bid-and-offer process. If you want the government tell you how much a house should be worth and how much your own output should be worth . . . well there's Cuba and North Korea for that. The problem with those system is of course that those god-like government officials always give themselves much more than they give you, just like on the slave plantation, where housing, food, clothing, education and medicine are all free, except the standards of service is at the discretion of the "leaders/real-owners." You have to take your own chances if you want to have a say in what is most important to you; i.e. private property rights means absorbing consequences for your own decisions; the first and foremost private property right is self-ownership!