"This Is What Happens When You Lend Money to Poor People"

Why Michael Lewis is a god among men:

So right after the Bear Stearns funds blew up, I had a thought: This is what happens when you lend money to poor people.

This is the lede of a hilarious piece on what the hell happened in the sub-prime mortgage kerfuffle. Other lessons Lewis has learned (and managed to articulate with his tongue stuffed into his cheek) about the poor--and "by poor, I mean anyone who the SEC wouldn't allow to invest in my hedge fund":

* I trusted these people to get their teams of lawyers to vet anything before they signed it. Turns out, if you're poor, you don't need to pay lawyers. You don't like the deal you just wave your hands in the air and moan about how poor you are. Then you default.

* It was my fault, for not studying the poor more closely before I lent them the money. When the only time you've ever seen a lion is in his cage in the zoo, you start thinking of him as a pet cat. You forget that he wants to eat you.

* Lending money to poor countries was a bad idea: Does it make any more sense to lend money to poor people? They don't even have mineral rights!

Lewis is right, as always, underneath all the jokes. Money culture matters--people with no money do think differently about money than people who have lots of it. So for those wondering how class war looks to the Other Half, here it all. Laid out for you in black and white by a man who is pretty sure that the moment he got "out of touch with 'poor culture.'" was when he "stopped flying commercial." Awesome.

For more Lewis, read Matt Welch on Moneyball.

Comments

Number 6 | September 6, 2007, 10:48am | #

KWV- Should a journalist, even a Yale-educated one, really be snarking about po' folks?

Number 6 | September 6, 2007, 10:49am | #

KMW, that is. Sorry about that.

J sub D | September 6, 2007, 10:53am | #

Who am I supposed to bail out? People who took mortages out on houses they couldn't afford, or those who gave them the mortages? To both groups my response is "You made your bed, now lie in it."

Oh yeah, "And quit whingeing."

dhex | September 6, 2007, 10:57am | #

so his routine is he's a dick?

i'm a bit confused.

:- | September 6, 2007, 11:09am | #

If you're PC you're not a libertarian. No rules, just right.
Not that you might not be a dick...just sayin'.

Dan T. | September 6, 2007, 11:09am | #

The article is sort of funny but I wonder why KMW linked it here - isn't Lewis mocking the rich man's patronizing indifference to the plight of the poor? I say this is odd because libertarianism is a wealthy man's philosophy, not a poor man's.

The Extispicator | September 6, 2007, 11:11am | #

In an "amen" to J sub D, I would add that I don't feel the need to bail out multibillion dollar investment banks, neither to I feel the need to bail out the irresponsible borrowers. Not just for justice reasons of "the idiots should have known what they were signing," but also because they won't need bailing out. Where I live, the foreclosure docket is so backed up that people have 18-24 months before the auction actually happens. Add to that the 6 months or so they were behind on their mortgage before the foreclosure was filed, and you have people living free in a house for 2+ years. They should be able to save enough to put a down payment on a new home, or even buy their own house at auction for the now-deflated value.

jtuf | September 6, 2007, 11:12am | #

J sub D is right. I don't have much simpathy for Lewis. Yeah, some poor people take advantage of bankruptcy laws, but most don't. Just like a handful of companies take advantage of limited liability laws. That is why I wouldn't sign a $10 million dollar deal with a LLC that has $1 million in assets. Microloans are great, but I would fund them with disposible income, not the grocery budget.

carrick | September 6, 2007, 11:12am | #

I say this is odd because libertarianism is a wealthy man's philosophy, not a poor man's.

I was a libertarian 30 years ago when I was married with 2 kids and struggling to pay the bills each month.

Political, social, and economic freedom have as much to offer the poor as the rich.

Legate Damar | September 6, 2007, 11:15am | #

I don't want to assist the po' folk who lost their overpriced houses and I don't want to assist the rich SOBs that lost money when the po' folk they loaned money to lost their overpriced houses.

But I will. Because John Edwards or W or somebody somebody will "care" enough to force me to.

kohlrabi | September 6, 2007, 11:20am | #

"Because John Edwards or W or somebody somebody will "care" enough to force me to."

Amen to that. Ugh.

robc | September 6, 2007, 11:24am | #

Dan T,

I have noticed on a couple of threads today you have gone back to your trolling ways. Did actually contributing to threads get boring for you?

ChrisO | September 6, 2007, 11:25am | #

Actually, big-state liberalism is the wealthy man's philosophy. They've already got theirs, and can bribe the appropriate government officials to keep it that way. Of course, the Dan T's of the world have a difficult time distinguishing between "libertarian" and "Republican", apparently.

As to the actual substance being presented here, it's really not that complicated, and in fact has an important libertarian lesson involved about major institutions being irresponsible with other people's money.

Banks loosened their lending standards to give zero-down, stated-income loans (and not primarily to the poor, either), for the simple reason that they no longer held onto the mortgage note as they had in years past--they packaged it up and sold it as an "investment". They were, in effect, being generous with Wall Street's money. And, of course, "Wall Street's money" is really YOUR money, via your stocks, pension fund and 401k.

The media's focus on subprime is misplaced. The problem is not primarily that lenders were giving loans to borrowers with low credit scores, but that they were giving out adjustable-rate loans to all classes of borrowers that they knew (or should have known) would ultimately be unpayable. Giving a $500,000 home loan to a household with $50k income doesn't make sense, regardless of that household's credit record. The lending industry fudged the numbers by using adjustable loans with low introductory rates and encouraging borrowers to lie about their income on their loan application. A combination of greed and short-sighted desperation sucked these borrowers in, when they should have known it would end badly.

Dan T. | September 6, 2007, 11:30am | #

Dan T,

I have noticed on a couple of threads today you have gone back to your trolling ways. Did actually contributing to threads get boring for you?

Some threads deserve to be trolled a little, like this one. Although I'm really just wondering why KMW linked to a piece that seems to be out of character for H&R.

Rhywun | September 6, 2007, 11:31am | #

i'm a bit confused.

Me too. To me "tongue in cheek" means he's doesn't really believe what he's saying. I don't get that impression at all from this piece (except the bit about "feeling good about investing in poor people"--that's clearly a load of crap).

Dan T. | September 6, 2007, 11:32am | #

Of course, the Dan T's of the world have a difficult time distinguishing between "libertarian" and "Republican", apparently.

My contention is that Reasonoids are the ones who have said trouble, given the philosophy exspoused around here that liberty means "the right of a handful of people to accumulate as much power as they can".

Matt | September 6, 2007, 11:33am | #

I'm really just wondering why KMW linked to a piece that seems to be out of character for H&R.

I think the piece illustrates how all the caterwauling about the subprime meltdown doesn't just give good old you-buttered-your-bread personal responsibility short shrift when it comes to the homeowners, but investors too.

John | September 6, 2007, 11:34am | #

The bankruptcy reform played a part in this. A lot of people refinanced as a desparation move to avoid bankruptcy. Lewis is a dick and there is really nothing funny about the article. I am frankly surprised and disapointed that Mangu-Ward finds it so funny.

My favorite part is the "poor people can just work harder to get out of debt" line. Yeah, just like wall street types work harder after they have squandered their investors money or CEOs work harder after they run their companies in the ground costing 1000s of jobs. Not like none of them run to Washington for a hand out or take hundred million dollar golden parachutes as rewards for complete and total failure of anything.

I have absolutely no sympathy for the banks in this. They made risky loans and charged huge interest rates as a result. Had the housing bubble not burst and those loans been paid off, the banks would have made a killing off of the outragous interest rates. As it was, it didn't work out and that is just too damn bad.

robc | September 6, 2007, 11:40am | #

I have absolutely no sympathy for the banks in this. They made risky loans and charged huge interest rates as a result. Had the housing bubble not burst and those loans been paid off, the banks would have made a killing off of the outragous interest rates. As it was, it didn't work out and that is just too damn bad.

I agree. I bolded the one part because that makes it clear that the banks were just running a legal pyramid scheme. And like all pyramids, only the first movers make any money.

carrick | September 6, 2007, 11:45am | #

Lewis is a dick and there is really nothing funny about the article. I am frankly surprised and disapointed that Mangu-Ward finds it so funny.

I interpreted the article as a caricature of rich (big time rich, not upper middle class). I don't know who Lewis is, but I didn't get the impression that this was intended to reflect his true personal feelings.

John | September 6, 2007, 11:45am | #

Robc,

I have had conversations with people with graduate degrees in finance and economics and had them tell me with a straight face that the housing market was an absolute sure investment and that prices will rise forever. No kidding, they actually beleived that. The simple fact of all demand curves being curves and the common sense point that since not everyone or even a significant minority will ever be able to afford a million dollar home and therefore prices have to stop rising sometime meant nothing to them. It is mass insanity.

gorgonzola's foil | September 6, 2007, 11:47am | #

Carrick,

You may recognize Michael Lewis as the author of "The New New Thing" about the glory days of Jim Barksdale and Netscape; and husband to former MTV News correspondent Tabitha Soren.

John | September 6, 2007, 11:47am | #

"I interpreted the article as a caricature of rich (big time rich, not upper middle class). I don't know who Lewis is, but I didn't get the impression that this was intended to reflect his true personal feelings."

I see that and I still don't think it is funny. Moreover, Ward pointed out that she thinks it is funny because it is true. I don't find his points to be particularly funny or true.

joe | September 6, 2007, 11:48am | #

So how's the deregulation of the mortgage industry working out?

Oh, look, poor people - they're stupid, ha ha ha.

John,

It's not the banks that are the problem, but the hybrid non-banks that were allowed to jump into the market and play wild west.

J sub D,

You'd prefer, perhaps, that the cost of this debacle come out of your 401k and IRA as the stock market melts down in the face of massive defaults? We're all lying in this bed, one way or the other.

John | September 6, 2007, 11:53am | #

"You may recognize Michael Lewis as the author of "The New New Thing" about the glory days of Jim Barksdale and Netscape; and husband to former MTV News correspondent Tabitha Soren."

OMG, now I remember this guy. They named their daughters "Dixie and Tallulah". No shit. He wrote this God awful set of articles in Slate about how hard life was being a rich yuppie with his news babe wife and noxious children. He is a serious douchebag.

John | September 6, 2007, 11:55am | #

Joe,

True enough about the hybrids. That said, the worst thing we could do is bail them out. Let the banks fail. As far as the debtors go, they just go back to renting. Loosing your house sucks, but if you still have a job and an income, it is not the end of the world, especially when you didn't have any equity in it to begin with.

carrick | September 6, 2007, 11:57am | #

OMG, now I remember this guy. They named their daughters "Dixie and Tallulah". No shit. He wrote this God awful set of articles in Slate about how hard life was being a rich yuppie with his news babe wife and noxious children.

I remember those . . I may need to rethink whether or not the linked article is satire or craven stupidity.

joe | September 6, 2007, 12:04pm | #

John,

STOP CALLING THEM BANKS! It's a smear on the good name of banking.

These shmoes weren't banks. They were scam artists or, at best, gamblers.

As for your point, I can't see any value in bailing out the irresponsible lenders as with the S and L bailout, but the homeowners are a different story. The entire real estate market is taking a nosedive, and that has always meant a deep recession. I'd support some efforts aimed at softening that landing, maybe by making it easier for banks or nonprofs to help the easier cases with more favorable terms.

robc | September 6, 2007, 12:05pm | #

You'd prefer, perhaps, that the cost of this debacle come out of your 401k and IRA as the stock market melts down in the face of massive defaults?

Yes.

John | September 6, 2007, 12:08pm | #

"The entire real estate market is taking a nosedive, and that has always meant a deep recession."

Maybe it needs to. It is over valued. Recessions happen. We will have one again. If the next recession resulted in more affordable housing, that wouldn't be the worst thing that could happen. I don't see how living in a world where the median house price is 10 times or more the median yearly income a particularly healthy situtation.

JasonC | September 6, 2007, 12:09pm | #

Did some of you forget to put your snark hats on today? Carrick is exactly right. He is mocking the people that would actually expect poor people to have a team of lawyers to "vet their contracts". He is not laughing at poor people. He lives in Berkeley, fer chrissakes.

John | September 6, 2007, 12:10pm | #

Further, the people who bought houses on mortgages they could afford for the purpose of actually living in the house, won't be effected by a drop in housing prices that much. It is the speculators and house flippers who will get killed and well like I said above, that is just too damn bad.

lunchstealer | September 6, 2007, 12:13pm | #

Oh, great. He's back on his "Libertarians want babies to die" kick. See what happens when you take him seriously?

joe | September 6, 2007, 12:17pm | #

robc,

That may be a perfectly responsible and appropriate take, but the "not my problem" argument isn't true. This is a giant shit sandwich, and we're all going to get to take a bite, one way or another.

John,

I agree, the real estate market is overvalued and needs to correct itself. That's why I'm talking about softening the landing, not propping it up.

ChrisO | September 6, 2007, 12:19pm | #

have had conversations with people with graduate degrees in finance and economics and had them tell me with a straight face that the housing market was an absolute sure investment and that prices will rise forever. No kidding, they actually beleived that.

They must be well under 30, then. The last U.S. real estate bubble peaked in 1989 and bottomed out only about ten years ago.

Further, the people who bought houses on mortgages they could afford for the purpose of actually living in the house, won't be effected by a drop in housing prices that much.

True. But the problem is that housing prices had gotten so stupid by 2004 that very few buyers (on the coasts, at least), were buying with responsible mortgage--even the ones were buying homes, not "investments". Not all will default, obviously, but it only takes a small increase of defaults at the margins to make the markets go nuts.

I'm with you on the speculators, though. They gambled and lost. At least in Las Vegas they keep putting free drinks in your hand while you piss your money away...

Dr. Kenneth Noisewater | September 6, 2007, 12:20pm | #

"And finance is one thing you should never engage in with the poor. (By poor, I mean anyone who the SEC wouldn't allow to invest in my hedge fund.)"

The article is a satirical caricature, and it's actually spot-on (and brutally funny).

Anyone who thinks otherwise is a twink.

TIA.

Graphite | September 6, 2007, 12:21pm | #

Anyone who can't tell Michael Lewis is joking should have a sarcasm detector rammed down his throat.

P Brooks | September 6, 2007, 12:21pm | #

When I was a kid, my parents frequently told me (usually in conjunction with the repair of a bloody head wound) "That's what you get for being stupid."

Many people learn not only from their own mistakes, but from their observations of the mistakes of others. Many (if not most) people, as they watch somebody stumbling down the street clutching his head as blood oozes between his fingers and trails down his forearms, will say to themselves, "Whatever that guy was up to, I'm not gonna do it."

Let 'em all bleed, sez I.

joe | September 6, 2007, 12:23pm | #

But the worst actors here took the money, sold the mortgages, and ran.

wsdave | September 6, 2007, 12:24pm | #

Dan T.,
"...given the philosophy exspoused around here that liberty means "the right of a handful of people to accumulate as much power as they can"."

Actually, liberty means the right of EVERYBODY to accumulate as much of everything as they can. Its not just a handful, Dan; liberty is for all.

smacky | September 6, 2007, 12:32pm | #

He is not laughing at poor people.

Maybe not, but KMW seems to be.

The article is a satirical caricature, and it's actually spot-on (and brutally funny).

Anyone who thinks otherwise is a twink.


That might be true, if satire were funny. But as it is, that is not the case. Satire breaks the rule that if you have to point out to someone that something is funny, it is not funny. Therefore it fails the funny test. Now please stop bruising my ribs with your elbow.


sign me,

twink

theOneState | September 6, 2007, 12:34pm | #

Having read the whole article, I think that it's clearly parody. But "hilarious" is too strong of an adjective and may have the wrong bearing.

Jim Bob | September 6, 2007, 12:34pm | #

Being an obnoxious dick does not equal having a sense of humor.

Add this entry to the growing pile of garbage that is KMW's H&R posts.

Democratic Republican | September 6, 2007, 12:42pm | #

Put me in that camp that has no idea what Lewis OR KMW are really trying to say -- except that KMW seems to take special delight in the demise of the poor. That kind of attitude is what makes people think "libertarian=a-hole"

I also love all the people around here who believe so much in freedom of expression that anyone who disagrees with them is a "twink" or needs something rammed down their throats. I say most libertarians, in my experience, are as intolerant and power-driven as those they supposedly oppose. Well done to them on being the faction of the ultra-bourgeois -- and for convincing ordinary people that they have something to gain from giving power to those "twinks" -- the same "twinks" that brought you the same "free market" fly-by-night crap that has now screwed thousands of working families many of you label as "the poor."

lunchstealer | September 6, 2007, 12:42pm | #

It is the speculators and house flippers who will get killed and well like I said above, that is just too damn bad.

Yeah, I have no sympathy for these folks. I love the fact that just as they're getting their own TV shows on TLC just as their world is imploding.

I do have a problem with the idea of giving hefty fine-print contracts to people who are obviously poorly educated. There should be multiple choice questions that people should have to get right before certain contracts can be signed and enforced. If you've got a click-through license that, for example, requires the installation of adware that will hijack your browser (a la the old Gator warez) then a 'click accept' should not make that license enforceable. The same is true for any home-as-collateral loan that involves sudden changes in the monthly payment or other easy-to-activate things which could cause good-faith-but-naive people to default.

JW | September 6, 2007, 12:44pm | #

Some of these poor people must have skills. The ones that don't could be trained to do some of the less skilled labor -- say, working as clowns at rich kids' birthday parties. They could even have an act: put them in clown suits and see how many can be stuffed into a Maybach. It'd be like the circus, only better.

That is just damned funny.

Anyone who missed the humor should really consider acquiring a sense of one and having the stick up their ass removed.

The Wine Commonsewer | September 6, 2007, 12:44pm | #

STOP CALLING THEM BANKS! It's a smear on the good name of banking.

Ha, ha, ha, ha, ha, thump.

That's me laughing my head off at the very idea that banking has a good name.

Democratic Republican | September 6, 2007, 12:47pm | #

JW -- Post again after your home is foreclosed on and see how funny it is. Or better yet, print off copies of the article and distribute them to those in your community who have been screwed.

Oh, and thanks for being such a fascist as to think everyone should have the same sense of humor as you. Very cosmopolitan.

The Wine Commonsewer | September 6, 2007, 12:49pm | #

The same is true for any home-as-collateral loan that involves sudden changes in the monthly payment or other easy-to-activate things which could cause good-faith-but-naive people to default.

Absent outright fraud and distortions of the market by government interference, I never buy the argument that sharks are luring people into traps with predatory lending practices. Everybody knows the score going in and everybody is willing to bet on the come, ie, that housing prices and their financial position will rise fast enough to allow them to accommodate the bumps in interest or the balloon payments.

The alternative is to prevent marginal individuals from bettering their lives by restricting the credit market.

Sometimes things just don't work out. That's called life.

Graphite | September 6, 2007, 12:49pm | #

I also love all the people around here who believe so much in freedom of expression that anyone who disagrees with them is a "twink" or needs something rammed down their throats.

Clearly I was being deadly serious, as evidenced by my referencing an actually-existing piece of technology like the sarcasm detector.

JW | September 6, 2007, 12:53pm | #

That may be a perfectly responsible and appropriate take, but the "not my problem" argument isn't true. This is a giant shit sandwich, and we're all going to get to take a bite, one way or another.

Very true. But, how is this different from the societal cost of other improper behavior, say, causing accidents by running red lights or people having high fat diets? Sure, pass all the laws you want to keep everything "soft." Enjoy your over-legislated future.

Of course, this is the same country that now believes once you are involved in a horrible event of a suitable size, you deserve a govt. payout of cash. The rest of you who suffer in bite-sized portions through no fault of your own, tough shit.

The Wine Commonsewer | September 6, 2007, 12:54pm | #

I just foreclosed on a widow.

montaigne | September 6, 2007, 12:54pm | #

I thought it was hilarious. I figured since the author lived in Berkely, he's a prick. Nonetheless, the article was clearly a satire and very funny.

The Wine Commonsewer | September 6, 2007, 12:56pm | #

He is not laughing at poor people.

Nope. He's laughing VERY HARD at poor people.

The Wine Commonsewer | September 6, 2007, 12:57pm | #

Joe, most mortgages are, in fact, sold. That is not unusual in the least.

JW | September 6, 2007, 12:58pm | #

JW -- Post again after your home is foreclosed on and see how funny it is. Or better yet, print off copies of the article and distribute them to those in your community who have been screwed.

You see, I read the contract I was signing and I waited for the market to be very favorable in my direction before I signed my mortgage. I didn't scramble out into the street and buy the first overpriced house I saw because, well, everyone else was doing it.

I also try not to buy things I can't even begin to afford. I know, I know. Weird.

Sometimes, you have to take some hard knocks so you don't do anything so stupid again. That applies equally to both sides in this issue.

Oh, and thanks for being such a fascist as to think everyone should have the same sense of humor as you. Very cosmopolitan.

Pot. Kettle. Black.

Seriously. Take the stick out of your ass.

dhex | September 6, 2007, 1:07pm | #

If you're PC you're not a libertarian. No rules, just right.
Not that you might not be a dick...just sayin'.

hokayyyyyyyy.

anyway, so uh yeah his routine is being a dick, right?

really, what's the funny part? is it a satire of someone being an asshole and pretending there weren't a lot more layers to this than "poor people" and whatnot?

also i'm much more of a bear than a twink thanks.

dhex | September 6, 2007, 1:07pm | #

oh crap

If you're PC you're not a libertarian. No rules, just right.
Not that you might not be a dick...just sayin'.

hokayyyyyyyy.

anyway, so uh yeah his routine is being a dick, right?

really, what's the funny part? is it a satire of someone being an asshole and pretending there weren't a lot more layers to this than "poor people" and whatnot?

also i'm much more of a bear than a twink thanks.

joe | September 6, 2007, 1:12pm | #

TWC,

Very nice. It's obvious which industry you're in, so it's not surprising you'd try to blur the distinction between legit and sleazy lending practices.

JW,

Very true. But, how is this different from the societal cost of other improper behavior, say, causing accidents by running red lights or people having high fat diets? Having high-fat diets doesn't make me fatter, so it's not like that at all.

Running red lights is a much better comparison, and we do have laws against that. But then, I'm so beloved of the over-regulated future that I think it's a good idea for that to be illegal.

joe | September 6, 2007, 1:14pm | #

I never buy the argument that sharks are luring people into traps with predatory lending practices. Everybody knows the score going in...I just foreclosed on a widow.

joe | September 6, 2007, 1:16pm | #

Looks like a lot people have a lot of motivations to tell themselves pretty stories to convince themselves that their lack of concern for others is ethical.

Yep, everybody but you is stupid or thoughtless or something. Serves 'em right.

Sic semper libertarian.

joe | September 6, 2007, 1:17pm | #

I'm going on vacation. I hope your banks foreclose.

JW | September 6, 2007, 1:20pm | #

Having high-fat diets doesn't make me fatter, so it's not like that at all.

Are you saying that you don't buy into the craptacular theory that if someone does something that somehow, some way, induces a higher cost of services into "society" that we have every right to regulate their behavior?

Outstanding old boy! There's hope for you yet.

Running red lights is a much better comparison, and we do have laws against that. But then, I'm so beloved of the over-regulated future that I think it's a good idea for that to be illegal.

Me too! There's those great minds working in harmony again.

So, at what point do you say that a gross, societal economic burden requires guvmint intervention in the form of some direct aid?

dhex | September 6, 2007, 1:21pm | #

joe you've gone perma-cunt on us.

why?

i mean i didn't see the humor in the above piece (perhaps a bit too "new yorker" for my tastes) but beyond the percentage of people who got legitimately fucked over by people who defrauded them, or followed the letter while ignoring the spirit of the law and other related scumfuckery, there seems to have been a whole lot of greedy people. not all of them were lenders. a lot of them were people who thought they were going to somehow stay head of borrowing more than they could afford forever.

that *is* stupid and thoughtless behavior, just like fraud is wicked behavior.

The Wine Commonsewer | September 6, 2007, 1:24pm | #

Very nice. It's obvious which industry you're in, so it's not surprising you'd try to blur the distinction between legit and sleazy lending practices.

If you knew your butt from breakfast I might be offended. Since I am not in the lending or banking business and you can't tell the diff between satire and reality it's tough to work up any significant irritation. Nice try though.

Have a great vacation.

J sub D | September 6, 2007, 1:26pm | #

I do have a problem with the idea of giving hefty fine-print contracts to people who are obviously poorly educated. There should be multiple choice questions that people should have to get right before certain contracts can be signed and enforced. If you've got a click-through license that, for example, requires the installation of adware that will hijack your browser (a la the old Gator warez) then a 'click accept' should not make that license enforceable. The same is true for any home-as-collateral loan that involves sudden changes in the monthly payment or other easy-to-activate things which could cause good-faith-but-naive people to default.

And "people who are obviously poorly educated" is defined by ...? You? Me? The man behind the tree? That's patronizing a little bit don't you think.

If you don't understand a contract, hire someone to review it for you. Surely our vaunted and excellent public education system has taught people to ask for help if they don't uunderstand somthing. Those that took out mortgages that they didn't understand and can't afford have only themselves to blame.

BTW, If any minors got some of the "predatory" sub-prime mortgages they should be voided. Anyone else, suck it up, buddy.

JW | September 6, 2007, 1:29pm | #

Looks like a lot people have a lot of motivations to tell themselves pretty stories to convince themselves that their lack of concern for others is ethical.

I'm for people to have the option to learn from their mistakes. I know I don't touch hot stoves as much as I did from when I was 3.

We're all better off overall when people behave responsibly and not cause a larger burden to others through ignorance, apathy or carelessness. Even better when we don't have to have The Man drop the hammer on them from on high to get the message through to them. Don't you agree?

The Wine Commonsewer | September 6, 2007, 1:31pm | #

Well, actually, I did recently foreclose on a widow. As a predator I sold her my house for zero down and let her move in some years ago. Since her credit sucked I carried the loan myself. She has never paid a payment on time and has consistently been two to four months behind at all times. I finally was forced to take action given that she's now six months behind in her payments. I've never been able to understand why someone who earns 40 grand a year can't pay a 600.00 per month payment, but I guess that's how it works sometimes with us illegitimate lenders.

JW | September 6, 2007, 1:36pm | #

TWC--You bastard! I bet you kicked her dog on the way out too.

Now go wax up your mustache.

Son of a! | September 6, 2007, 1:37pm | #

But the problem is that housing prices had gotten so stupid by 2004 that very few buyers (on the coasts, at least), were buying with responsible mortgage--even the ones [who] were buying homes, not "investments".

I have ZERO sympathy. There's no reason—none—these people could not have continued to rent for five more years, and let the "crazy" market pass.

The Wine Commonsewer | September 6, 2007, 1:39pm | #

JW, actually, she has one of those cute little long-haired lap dogs that you can clip by the legs to a mop handle and use to clean the floor. Wouldn't never kick a useful dog like that.

On the downside I don't know if I'll ever be able to get the dog pee smell out of the wood floors. Or maybe that's cat pee.

Looking for the wax.

smartass sob | September 6, 2007, 1:39pm | #

STOP CALLING THEM BANKS! It's a smear on the good name of banking.

Ha, ha, ha, ha, ha, thump.

That's me laughing my head off at the very idea that banking has a good name.

Mr. Commonsewer wins the thread! Banking has been legalized thievery for a long time in this country.

JasonC | September 6, 2007, 1:39pm | #

joe, I realize your sense of moral superiority keeps you warm and cozy at night but could you spare the rest of us the sight of your self-delusions? It's alternately sad and pathetic.

smartass sob | September 6, 2007, 1:45pm | #

I just foreclosed on a widow.

Mr. Commonsewer wins the thread twice! Awesome!

SPD | September 6, 2007, 1:56pm | #

TWC,

I'm curious... why did you sell her the house in the first place if she was such a high credit risk? What is her explanation for falling so far behind on payments, assuming she's fully aware of what the consequences might be?

40k/year after taxes = approx. 28K.

28K - 7200/year in rent = 20.8K left over. On the surface, she should have enough to cover it.

Again, no outstanding debts to speak of for this widow? Medical bills? Utility/cable/phone payments? Groceries? Car payments? Auto insurance?

Jennifer | September 6, 2007, 1:57pm | #

I have ZERO sympathy. There's no reason—none—these people could not have continued to rent for five more years, and let the "crazy" market pass.

Amen. There is no "right" to buy a house in a given market at a given time. A few years back I wanted to buy a house, saw that prices had risen much higher than inflation, and thus continued to rent rather than agree to any of the thousand "too good to be true" mortgage offers I got in the mail almost every day.

So I did the responsible thing, and spent the last several years renting, living below my means and banking the difference ... and now I'm supposed to support the use of my tax dollars to bail out some greedy fool who, with a financial situation identical to mine, chose to lock herself into a mortgage loan she can't possibly afford to pay back? Furthermore, these are the same people who overinflated the market so that I couldn't afford to buy a house in the first place.

Here's my radical plan to acquire financial security: don't borrow more money than you can afford to pay back. If you want something you can't afford, go without until you CAN afford it.

Sounds crazy, I know, but it just might work.

Graphite | September 6, 2007, 2:01pm | #

Jennifer, joe is shocked by your ability to convince yourself that your lack of concern for people who are less responsible than you is somehow ethical.

Greg | September 6, 2007, 2:03pm | #

Clearly I was being deadly serious, as evidenced by my referencing an actually-existing piece of technology like the sarcasm detector.

I used to have one of those, but for some reason it started to smoke and vibrate about two dozen posts ago, and now it is just sitting on the desk looking at me accusingly.

Pig Mannix | September 6, 2007, 2:15pm | #

I just foreclosed on a widow.

You da man! Can I wear your shirt tomorrow?

grumpy realist | September 6, 2007, 2:23pm | #

And all those people with the 20 pages of fine-print contracts who are supposed to "hire someone to explain it to them"--uh, not really. If the lawyer is charging per the job, he's going to blitz through the paperwork, and if he's charging by the hour, you're looking at $150-220$/hour down the drain.

Plus, I don't know about elsewhere, but here in Illinois we didn't even get to see a sizable percentage of the paperwork until the very last day, which was a madhouse, and the title insurance people were screaming at us to get out of their offices, etc. So not as simple as you think.

A lot of the mess developed because of the slicing-and-dicing of mortgages into CDOs by the financial engineers, who then blithely slapped a "AAA" rating on it (in collusion with the rating agencies) and sold it as a great-no-fail investment vehicle. Unfortunately, it looks like the analysed risk was not the actual risk....and since no one knows where the financial pitfalls are hidden, due to the opacity of the instruments, they're staying away from EVERYTHING that is vanilla-pure, government-backed bonds.

AC | September 6, 2007, 2:28pm | #

and if he's charging by the hour, you're looking at $150-220$/hour down the drain.

It doesn't seem unreasonable to pay a lawyer $500 to review a contract worth several hundred thousand dollars. If you can't afford the lawyer, you can't afford the house.

joshua corning | September 6, 2007, 2:28pm | #

Laid out for you in black and white by a man who is pretty sure that the moment he got "out of touch with 'poor culture.'" was when he "stopped flying commercial."

How can someone be called poor if they can afford an airline ticket?

joshua corning | September 6, 2007, 2:33pm | #

Me too. To me "tongue in cheek" means he's doesn't really believe what he's saying.

The tongue in cheek is that these people really are not poor...they are just dumb.

Loans in the hundreds of thousands are not given to poor people.

Poor people cannot afford airline tickets.

see the trend here?

carrick | September 6, 2007, 2:36pm | #

Plus, I don't know about elsewhere, but here in Illinois we didn't even get to see a sizable percentage of the paperwork until the very last day, . . .

Gee, I don't know about Illinois, but I got three business days to cancel the deal without penalty. And I read every effing line on every effing piece of paper that I signed or initialed.

joshua corning | September 6, 2007, 2:40pm | #

My favorite part is the "poor people can just work harder to get out of debt" line.

Actually that is funny. The pretext is that the obvious solution to getting out of debt is to spend less money. Sympathy for the vast majority of people in debt (those who have not been put there by our fucked up criminal system) is often predicated on ignoring the fact that they are spending more on themselves then they can afford.

"I bought a house bigger then i can afford and buy lots of crap I really do not need, please give me free money."

That is funny shit.

P Brooks | September 6, 2007, 2:40pm | #

The SCENE:

A Bridge- far, far, below, a trickle of water can be seen, glittering in the brilliant sunlight. Above, large black birds circle patiently, awaiting the conclusion of our drama.

Genius A (gazing downward): Wow, that sounds like fun, but...

Genius B (poking him playfully on the shoulder): What could go wrong? I'll be right here, holding the other end of the bungee cord! G'wan, jump!

Genius A: Geeeeronnnimoooh!

Genius B: So long, sucker! Happy landings! (suddenly observes that the bungee cord rapidly snaking over the bridge railing has become entangled in his spats) Haaaalp! Save me, somebody!

Dan T. | September 6, 2007, 3:03pm | #

Next time Radley posts one of this stories about some innocent grandma shot by a SWAT team, I'm going to respond that there's no reason to feel bad for her because she should have been smart enough to not live in an area that's likely to be raided by a SWAT team.

We'll see how that goes over.

mediageek | September 6, 2007, 3:11pm | #

I bought a house in February.

My first house.

Not knowing much about financing a house, I did my research, talked to several lenders, and went a-googlin' for info.

Within the first day or so of my research, it became patently clear that only an utterly braindead imbecile would get an ARM or Interest Only loan.

And yet there are people here in this very thread who think I should feel some sort of pity for all of the assholes out there who are now collectively holding a gun to the head of the US economy.

carrick | September 6, 2007, 3:13pm | #

Next time Radley posts one of this stories about some innocent grandma shot by a SWAT team, I'm going to respond that there's no reason to feel bad for her because she should have been smart enough to not live in an area that's likely to be raided by a SWAT team.

Do you really believe this is equivalent, or are you just pissing in the pool again?

mediageek | September 6, 2007, 3:21pm | #

Carrick-

You really have to ask that?

Jennifer | September 6, 2007, 3:35pm | #

Jennifer, joe is shocked by your ability to convince yourself that your lack of concern for people who are less responsible than you is somehow ethical.

And he's right to be shocked. I'm about to go on a six-figure spending spree financed entirely by credit cards, and since I can't possibly afford to repay such a debt I am preemptively shocked by those of you who will callously refuse to let the government bail me out of the hole I'm about to dig for myself. You call yourselves "ethical?" I call you heartless bastards for expecting a grown-up to live within her means.

Of course, instead of forcing the taxpayers to bail me out, maybe the ethical thing to do is force my boss to give me a 500 percent raise. That way, I can afford to pay my debtor's bills like a responsible person.

carrick | September 6, 2007, 3:36pm | #

rhetorical question

Dan T. | September 6, 2007, 3:40pm | #

Do you really believe this is equivalent, or are you just pissing in the pool again?

Neither, it's an exaggerated statement to prove a point. You can always rationalize your lack of empathy by congratulating yourself for having the foresight to avoid the problem that others did not.

Dan T. | September 6, 2007, 3:42pm | #

And he's right to be shocked. I'm about to go on a six-figure spending spree financed entirely by credit cards, and since I can't possibly afford to repay such a debt I am preemptively shocked by those of you who will callously refuse to let the government bail me out of the hole I'm about to dig for myself.

The problem with your analogy is that you're assuming that people who bought houses that were later foreclosed upon understood that they couldn't afford them from the outset yet bought them anyway.

The Wine Commonsewer | September 6, 2007, 3:47pm | #

TWC rarely wins a thread and has never won a thread twice. [gets a little teary eyed]

Thanks SASOB

carrick | September 6, 2007, 3:56pm | #

Neither, it's an exaggerated statement to prove a point. You can always rationalize your lack of empathy by congratulating yourself for having the foresight to avoid the problem that others did not.

But you are implying some moral equivalence betwee people who get into financial problems through there own ineptitude (with or without encouragement from unscrupulous lenders) and innocent people that get shot by the state (regardless of whether or not the WoD is justifiable).

That is not just an exageration. That is offensive.

Dan T. | September 6, 2007, 4:01pm | #

I'm just saying that if people can congratulate themselves on being smart enough to avoid financial problems then I can congratulate myself on being smart enough to avoid being shot by a SWAT team.

My real point, of course, is that we shouldn't be so judgmental towards people who inadvertantly find themselves in financial difficulties. There but for the grace of the free market go I...

wsdave | September 6, 2007, 4:04pm | #

Dan T.,
"The problem with your analogy is that you're assuming that people who bought houses that were later foreclosed upon understood that they couldn't afford them from the outset yet bought them anyway."

I have complete faith in the American educational system, and am certain that NOBODY would be allowed to graduate high school without being able to do basic math.

JW | September 6, 2007, 4:18pm | #

You can always rationalize your lack of empathy by congratulating yourself for having the foresight to avoid the problem that others did not.

I have plenty of empathy for people in dire straits. Even if it were their fault; everyone is entitled to make mistakes.

Right up to the point where they go "So what? Gimmee, gimmee, gimmee."

JW | September 6, 2007, 4:24pm | #

Next time Radley posts one of this stories about some innocent grandma shot by a SWAT team, I'm going to respond that there's no reason to feel bad for her because she should have been smart enough to not live in an area that's likely to be raided by a SWAT team.

You come here because you got tired of being punched in the mouth at bars, right?

carrick | September 6, 2007, 4:25pm | #

Everyone makes mistakes. Smart people do stupid things on regular basis.

The primary difference between smart people and stupid people is that smart people recognize when they have done something stupid and then they try to rectify it.

Stupid people think the results of their stupidity are someone else's fault.

wsdave | September 6, 2007, 4:26pm | #

mediageek,
"Within the first day or so of my research, it became patently clear that only an utterly braindead imbecile would get an ARM or Interest Only loan."

Actually, the Interst Only loan option can be quite useful. For example, if you were to invest the difference 'twix the IO loan and a fixed rate, you may be able to profit prior the 5 year rate increase. You still need to be able to cover the higher payment later, however.

The Wine Commonsewer | September 6, 2007, 4:27pm | #

SPD, why did I sell her the house in the first place? Big Sigh. Long Story.

Basically, I had known her and her husband for quite some time. They had bought a house from his brother on a five year note (30 due in 5) and were unable to refinance at the end of the term. The brother, being a jerk, gave them the boot despite a five year track record of good payments.

I had a small rental that was vacant that I was going to sell anyway and because they had a good track record with the brother and they were desperate I let them move in and carried the loan myself. 20 years, fixed payments.

Her husband died unexpectedly a couple of years ago and there apparently was some life insurance because she brought the payments current at the time.

The last time I was kicking her out she begged me not to and I relented. The condition was that every Friday on pay day she had to buy a money order for $125.00 and mail it to me to be received by the following Wednesday. She was pretty good on that for a while, then she missed one, then another, then she missed four weeks worth. And now, she's god knows how far behind but I did get her to move out without having to go to court, so that's a blessing. Pretty sure she got the last of her stuff out over the long weekend.

Mostly her excuse is you know how I am with money, I am so sorry

Over the last nine years, I've pretty much done everything possible to make sure that she could keep the house. [pats himself ruefully on the back]

I once asked her how she expected to pay 1,000.00 in rent for an apartment if she couldn't pay 600.00 a month to own her own home. Duh. This is So Cal, even the worst crap holes in the worst part of town cost more than six bills a month.

Some people will just go out of their way to sabotage themselves no matter how much you try to help. I've known quite a few of those people in my life.

Graphite | September 6, 2007, 4:31pm | #

My real point, of course, is that we shouldn't be so judgmental towards people who inadvertantly find themselves in financial difficulties. There but for the grace of the free market go I...

"Why, I had *no idea* a reverse amortization, adjustable-rate mortgage might come back to bite me in the ass! I'm an innocent victim here!"

This reminds me of Dave Barry's imitation of smokers who blamed tobacco companies for their health problems: "You know why I continued to suck hot tar and ash into my lungs for decades? Because I honestly believed the tobacco companies when they said it posed absolutely no health risk whatsoever!"

The Wine Commonsewer | September 6, 2007, 4:31pm | #

Pig, shirt went out UPS Next Day Air about fifteen minutes ago.

The Wine Commonsewer | September 6, 2007, 4:52pm | #

If the lawyer is charging per the job, he's going to blitz through the paperwork, and if he's charging by the hour, you're looking at $150-220$/hour down the drain.

Two thoughts:

1. If you want the job done right, then you're hired.

2. If you actually think a lawyer will help protect your rights then investing a thousand or two for sound advice with respect to the biggest financial transaction you will ever make isn't really money down the drain.

ChrisO | September 6, 2007, 4:56pm | #

Actually, the Interst Only loan option can be quite useful. For example, if you were to invest the difference 'twix the IO loan and a fixed rate, you may be able to profit prior the 5 year rate increase. You still need to be able to cover the higher payment later, however.

True, if you can afford to write your own check for the entire purchase amount of a house, it can make sense to take out an I/O loan and pay as little as possible until the loan resets. You'll still be writing a check for the same amount five years later, so no biggie.

Unfortunately, I'm going to guess that about .0001% of I/O loans made in the last five years fell into this category.

SIV | September 6, 2007, 5:01pm | #

You'd prefer, perhaps, that the cost of this debacle come out of your 401k and IRA as the stock market melts down in the face of massive defaults? We're all lying in this bed, one way or the other.

It won't come out of everybody's funds.You can short in an IRA. 401k s offer money market funds.
Bubble re-inflations and propping up markets hurt people too. Equity index funds aren't insured deposits,they are supposed to go down when shit like this happens.

ChrisO | September 6, 2007, 5:01pm | #

And all those people with the 20 pages of fine-print contracts who are supposed to "hire someone to explain it to them"--uh, not really. If the lawyer is charging per the job, he's going to blitz through the paperwork, and if he's charging by the hour, you're looking at $150-220$/hour down the drain.

If you can't afford a few hundred bucks to have a lawyer go over a real estate contract, perhaps you can't really afford to buy the house.

Plus, I don't know about elsewhere, but here in Illinois we didn't even get to see a sizable percentage of the paperwork until the very last day, which was a madhouse, and the title insurance people were screaming at us to get out of their offices, etc. So not as simple as you think.

This type of bullshit goes on everywhere. As a buyer, you should always insist on getting the paperwork at least a couple of days before closing. And if you see any shenanigans or get any pressure at closing, then threaten to walk out. That has a way of clarifying the minds of the real estate types...

Naughty, Naughty Moose | September 6, 2007, 5:11pm | #

"That's me laughing my head off at the very idea that banking has a good name."

*gazes at TWC's neck stump lovingly, if not with a little fervent lust...

SPD | September 6, 2007, 5:19pm | #

TWC,

It sounds like you did everything you could. You were probably easier on her than a bank or a federal housing agency would have been. Bottom line, it sucks for both of you.

Now, next Friday come and she didn't have the rent/
So out the door she went...

I believe John Lee Hooker knew what the widow was going through.

J sub D | September 6, 2007, 5:24pm | #

J sub D,

You'd prefer, perhaps, that the cost of this debacle come out of your 401k and IRA as the stock market melts down in the face of massive defaults? We're all lying in this bed, one way or the other.

The stock market won't "melt down" over this.
And if it does then it's my fault for investing solely in financial service institutions.

Wait, I didn't. I dinn't want to expose myself to the risk of investing in just one sector of the economy. joe, if you or anyone else, countless business startups fo example, do risk it all in their business dealings, more power to you.

As The Stomach Turns | September 6, 2007, 5:46pm | #

STOP CALLING THEM BANKS! It's a smear on the good name of banking.

WTF? John FINALLY agrees with FDR on something and joe STILL has to get pissed at John.

Russ 2000 | September 6, 2007, 6:10pm | #

There's no reason—none—these people could not have continued to rent for five more years, and let the "crazy" market pass.

When the housing market was insane, the rental market was decent for renters. At one time I had done the math to consider selling my house at its inflated price and moving into a large apartment. If I had 23 years to go on my mortgage instead of 7, I probably would have done it. I gave more thought to selling my house and buying a house for cash on the outskirts of the metro area. Only my hatred of driving stopped me from doing that. But life without a housing payment sure was tempting.

JW | September 6, 2007, 6:16pm | #

This is what my mother-in-law just did. Sold her paid-off house for a monsterous profit, had her broker invest the money and she moved into a swank apartment high-rise down the street, one of the nicest in the city.

She pays the rent with the return on the investment.

The Wine Commonsewer | September 6, 2007, 6:40pm | #

John Lee Hooker was great.

Oh, and BTW, she's late 30's and blond. If you're lonely, AA, and a Born Again, she's available. She's got a good union job working for a grocery chain.

The Wine Commonsewer | September 6, 2007, 6:42pm | #

A lot of people have sold off the homestead and fled to cheaper climes to pay cash for a house and not be saddled with a payment. Nothing wrong with being debt free and no house payment.

The Wine Commonsewer | September 6, 2007, 6:49pm | #

It's a smear on the good name of banking.

I have zillions of banker stories. Like the one where the bank jacks around my guy for weeks demanding this paperwork, that paper, this tax return, that credit report, nickel and dimed to death. Finally I say to the loan officer:

This guy has a million dollars deposited in your bank, stellar credit, and his 3.5 million dollar house that he wants to borrow 800,000.00 against is free and clear. Why are putting him thru the wringer?

She says: He who has the gold makes the rules, and slams the phone down.

BG | September 6, 2007, 7:11pm | #

This guy has a million dollars deposited in your bank, stellar credit, and his 3.5 million dollar house that he wants to borrow 800,000.00 against is free and clear. Why are putting him thru the wringer?

If I were him I'd have just made a witdrawal.

(Although, I guess, he might have had some reason not to do so that I'm not aware of)

joshua corning | September 6, 2007, 7:18pm | #

Next time Radley posts one of this stories about some innocent grandma shot by a SWAT team, I'm going to respond that there's no reason to feel bad for her because she should have been smart enough to not live in an area that's likely to be raided by a SWAT team.

What we are shooting people who bought over priced homes they could not afford?

Oh wait, no we aren't this is just happening in Dan T's fucked up little soap opera in his head.

joshua corning | September 6, 2007, 7:26pm | #

My real point, of course, is that we shouldn't be so judgmental towards people who inadvertantly find themselves in financial difficulties. There but for the grace of the free market go I...

Bullshit, you are also judging them as in need of government assistance. How is that stance any less judgmental then mine?

Isaac Bartram | September 6, 2007, 8:16pm | #

If you're lonely, AA, and a Born Again, she's available.

(emphasis mine)

Hmmm. If those letters stand for what I think they do, I think there's a good part of your explanation right there.

highnumber | September 6, 2007, 8:19pm | #

People are offended by Michael Lewis?!

Indeed, these are the end times.

The Wine Commonsewer | September 6, 2007, 9:36pm | #

BG, I'da walked with the money, 10-4 and frankly, I suggested he do just that. The immediate hassle factor was the main reason he didn't. However, once he entangled himself from some pressing obligations he took his money down the street.

Hmmm. If those letters stand for what I think they do, I think there's a good part of your explanation right there.

Yes it was, but getting sober didn't help. Don't know why. Last time I checked dope and booze cost more than coffee and donuts for the daily meetings at the ALANO Club.

Like the Eagles said.....

Yer still the same old girl you used to be.

Isaac Bartram | September 6, 2007, 10:24pm | #

TWC

Bad habits are bad habits.

Sad, but true.

We help our friends when we can, but sometimes they are beyond help.

dhex | September 7, 2007, 12:50am | #

People are offended by Michael Lewis?!

it was one of those new yorker cartoons involving monacle-crackings and "well i never" type declarations but everyone involved is a pigeon.

yeah that shit's never funny.

highnumber | September 7, 2007, 9:31am | #

dhex,

That's not Lewis' vibe at all. His style, usually, is down to earth and smart. I think y'all aren't getting this. That's fine, but it's weird to see people getting their undies in a bunch over him.

highnumber | September 7, 2007, 9:47am | #

By the way, his masterpiece is not Moneyball, but Liars' Poker. Also very timely, being about the birth of mortgage backed securities.

Graphite | September 7, 2007, 12:39pm | #

By the way, his masterpiece is not Moneyball, but Liars' Poker. Also very timely, being about the birth of mortgage backed securities.

As the Human Piranha would put it, "You buy a house worth eight times your annual income with an ARM at the peak of the national housing market, and you get your face ripped off!"

highnumber | September 7, 2007, 8:58pm | #

Nice, Graphite! It's been a while since I read it.

highnumber | September 7, 2007, 9:09pm | #

Finally I got the opportunity to read the article.

And I'm even more dumbfounded by the offense taken.
And by dhex's New Yorker cartoon analogy.

Thank you, Ms Mangu-Ward, for pointing me toward the column.