New at Reason
Steve Chapman reveals Hillary Clinton's brilliant scheme for the economy: Take from the lenders, give to the borrowers, and do whatever else it takes to become president.
Comments to "New at Reason":
Eric Dumbassero! | February 18, 2008, 7:52am | #
How come "reason" isn't covering this story about how illegal immigrants are stealing our jobs.It's only the biggest story of the weekend that every mainstream libertarian news is covering.
Eric Dondero | February 18, 2008, 8:35am | #
Isn't it amazing, both Hillary and McCain get bashed mercissly here at Reason, but Hussein Obama gets a complete pass. Reason even implies that Hussein Obama is a "civil libertarian" in a recent post.Obama has a perfect 100 score from the Marxist ADA.
Yeah, Hillary sucks. But she scored a 92 on that same survey. That makes her a 1970s version of Communist Vietnam, but Obama the reincarnation of Pol Pot.
Bingo | February 18, 2008, 8:46am | #
I'm not agreeing with Dondero but Steven Chapman is going to need to turn in his libertarian credentials if he keeps this up.I wasn't aware the American Dental Association has a Marxist tilt. You learn something new every day.
Taktix® | February 18, 2008, 9:01am | #
I'm not agreeing with Dondero but Steven Chapman is going to need to turn in his libertarian credentials if he keeps this up.I recall someone posting a while back that if you give everyone a blank slate, they will project what they want upon it. A perfect example of this, from Chapman's article, is quoted below:
Obama is not a staunch free marketeer, but he grasps the value of markets and shows some deference to economic laws.Ha! You believe that? I've got some land in Florida for sale, too.
Call me.
Episiarch | February 18, 2008, 9:06am | #
I still can't tell if it would be better to have Hillary or Obama as president. Hillary would polarize everybody and very possibly cause a GOP resurgence in Congress, which would cause massive gridlock.Obama seems better than her, but that's what's dangerous about him--Congress would be willing to work with him more.
It's good thing I don't vote because actually choosing would be like picking what caliber of bullet I want to be shot with.
Maybe Hillary will follow Gordon Brown's example and nationalize the financial sector. That will fix the problem. Maybe she will nationalize Centex, too.
Of course the American Dental Association has a Marxist tilt. Who was it who backed putting flouride in the water supply to poison our precious bodily fluids?
Marcvs | February 18, 2008, 9:13am | #
You keep using words like "Communist" and "Marxist". I do not think they mean what you think they mean.Oh, and his name is Barack Obama you fucking racist.
Butler T. Reynolds | February 18, 2008, 9:19am | #
Among his main proposals are tougher enforcement of laws against fraud and deception and mandates for "easy-to-understand information" for borrowers -- ideas few advocates of economic freedom would find objectionable.That's also an idea that few advocates for economic freedom would find necessary.
This current mortgage crisis has little to do with fraud and everything with idiots buying homes that they had no business purchasing. (This includes middle and upper income idiots.)
Have you ever gone back and looked at that huge stack of papers that you signed without reading when you closed your mortgage?
There are already regulations just like this to make sure that we understand what in the heck a mortgage is. The most obvious result of any new regulations of this nature would be to just make that stack larger.
BTR
I'm liking the Rational Responders Cop Girl. She can no-knock raid me anytime.
From the Keystrokes of John Q. Public... | February 18, 2008, 9:27am | #
I wonder what interest rates would be if they were determined by private savings and not the Federal Reserve?joe | February 18, 2008, 9:33am | #
mutually agreeable and economically valuable transactionsYou know, economically valuable. Like giving someone a mortgage they can't afford but convincing them they can, because you're going to sell it as part of an IBD package and don't have to worry about whether it goes into default.
THAT kind of economically-valuable transaction.
Episiarch | February 18, 2008, 9:37am | #
Like giving someone a mortgage they can't afford but convincing them they canI didn't realize bankers had mastered mind control, joe. I mean, stopping someone from figuring out "can I handle paying x amount each month with my current income" is some powerful Jedi mind tricks.
"You will take me to Jabba now. You serve your master well."
Gilbert Martin | February 18, 2008, 9:41am | #
"I wonder what interest rates would be if they were determined by private savings and not the Federal Reserve?"The fed can set the fed funds rate and discount rate and effect interest rates at the short end of the yield curve but it does not set or control longer term rates. The market determines that.
R C Dean | February 18, 2008, 9:43am | #
Too many word:Gilbert Martin | February 18, 2008, 9:45am | #
"I didn't realize bankers had mastered mind control, joe"LOL
Now you know that a basic tenet of liberalism is denying that people are responsible for their own actions. It always just HAS to be somebody else's fault.
BTS | February 18, 2008, 9:46am | #
Dondero, wanna source that survey you quote? Just so I can see it exists?Daniel Reeves | February 18, 2008, 9:48am | #
You can't really look at Obama's plan for the school districts (they need more money, as if they're not already wasting their money on extracurricular utilities already), Obama's health care plan (Hillary's minus mandates), and Obama's plans for our economy ("here let me help you with that") and say that he's going to be great. Can't the writers on reason bash Obama at least once?Aresen | February 18, 2008, 9:48am | #
More likely, she´ll pull out her broomstick.
her policy rests on the assumption that upon arriving in the Oval Office, she'll open the closet and find a magic wand.
BTR
I´d agree that more regulation isn´t ideal, but the fact is that, for most people, a mortgage document is virtually incomprehensible. (I worked as a bank loans officer for several years and I couldn´t fully understand the documents myself.)
A simple disclosure of: Interest rates, how long they are effective, how much money the borrower will have to pay back and what penalties the borrower will have to pay would go a long way to making the business much fairer. I´m surprised some company hasn´t used that as a marketing ploy already: ¨With Forever Mortgage Company, you will pay an effective rate of 5% over the term of the mortgage. It will cost you $X to pay it back.
Gotta go now. They´re closing here.
robc | February 18, 2008, 9:49am | #
Gilbert Maring,The fed can set the fed funds rate and discount rate and effect interest rates at the short end of the yield curve but it does not set or control longer term rates. The market determines that.
I remember reading some economist back in the late 90s talking about how the fed basically follows the market. Like with any other price control, if they get too far off market price, in either directions, it leads to shortages (too high and no one will borrow at that rate, too low and the supply will be used up quickly).
Elemenope | February 18, 2008, 9:50am | #
Now you know that a basic tenet of liberalism is denying that people are responsible for their own actions. It always just HAS to be somebody else's fault.Now you know that a basic tenet of conservatism is affirming that people all have economics degrees and millions of dollars, and if they have problems it's CLEARLY their own fault.
IMHO, both assumptions are fucking stupid. Sometimes it's a person's fault, and sometimes they are victims of circumstance. Often, [gasp!] it is a combination of the two.
BTS | February 18, 2008, 9:51am | #
Wait, never mind, this must be the ADA you're talking about.http://en.wikipedia.org/wiki/Americans_for_Democratic_Action
The funny thing is, it's staunchly anti-commie. Hmm, and another funny thing is, while conducting my own little google search, the only person I see calling them marxist (and fascist) is YOU, Eric.
Really, now I can't speak for the Urkobold, or anyone else, but the reason I hate you is because you're an lying cock who fabricates material, then copies it and calls it "truth"
How about getting some real statistics that actually mean what you say. Oh, and how's Rudy doing? Oh, and Mitt?
robc | February 18, 2008, 9:53am | #
Now you know that a basic tenet of conservatismAre there any conservatives posting on this thread? We had a liberal posting, we have many libertarians posting, why do we need to know the tenets of conservatism?
robc | February 18, 2008, 9:55am | #
Basic tenet of robcism:Figuring out interest rates and etc is a middle school math skill.
Gilbert Martin | February 18, 2008, 9:58am | #
"Now you know that a basic tenet of conservatism is affirming that people all have economics degrees and millions of dollars, and if they have problems it's CLEARLY their own fault."It doesn't make any difference whether you have an economics degree or not - you are entirely responsible for your own actions and your own welfare in any and all circumstances.
The people who took on a loan they couldn't afford didn't "have" a problem - they created their own problem. No one put a gun to their head and made them do it.
joe | February 18, 2008, 9:59am | #
I didn't realize bankers had mastered mind control, joe.Well then, I'm one up on you, because I did realize that libertarians go into deep denial of objective reality at the first hint of problem that their ideology renders them incapable of addressing.
Maybe you should go back to Econ 101, and learn about assymetrical information and how it distorts market transactions.
How cowardly to pretend that this simple, basic, oft-observed, universally-recognized problem needs to be described in the language of psychic powers. But how sadly typical.
joe | February 18, 2008, 10:01am | #
Sometimes it's a person's fault, and sometimes they are victims of circumstance. Often, [gasp!] it is a combination of the two.And here's the really important part: people did not magically become stupider or less responsible between 1997 and 2002. Ergo, stupidity and irresponsibility on the part of borrowers does not explain the mortgage meltdown.
robc | February 18, 2008, 10:01am | #
joe,Whats the asymetric information in the mortgage industry? If anything, it is the borrower knows how much he is lying on his application.
joe | February 18, 2008, 10:03am | #
I don't believe you are actually dumb enough not to know that, robc, so I'm not going to answer you. You damn well know what the assymetry in the relationship between a bank and homebuyer is.The fact that playing dumb is such a necessary part of libertarians' argumentation should suggest something to them.
robc | February 18, 2008, 10:03am | #
joe,people did not magically become stupider or less responsible between 1997 and 2002.
This isnt a given. If, for example, we assume people are getting more irresponsible with time, then, in fact, responsibility may have decreased in that time frame. If every generation is less responsible than the previous, as the old fogeys always argue (and Im becoming one and agree with them :)), then there would have been more young people getting loans in 2002 than in 1997, just on basic demographic trends. Thus, less responsibility.
Oh, yeah, and backwards thinking. Once you know your conclusion - there were no structural problems with the mortgage industry that could be solved with better standards, so it must have been a surge of stupidity among the general public - then it just becomes a game of figuring out how the assumptions you need can be assumed into existence.
robc | February 18, 2008, 10:06am | #
joe,No, I really dont know. The banker fucking gives you a piece of fucking paper with every piece of fucking information on it. With my first mortgage, I read every fucking piece of paper. I also bought my first home from someone selling by owner, so I hired my own property lawyer because I knew nothing about the process. The bank was going to provide someone at closing, but I brought my lawyer instead to make sure I understood everything that was going on. This cost me a little extra, but was well worth it to me. There was ZERO information I didnt have that I needed to know.
robc | February 18, 2008, 10:08am | #
Oh, and that purchase was in 1998. Were these people in 2002 hiring a external lawyer and bringing them to closingS? If not, then they were less responsible than I was in 1998.joe | February 18, 2008, 10:08am | #
But setting aside the finger-pointing and Episiarch's dodge, I'm sticking with my original statement: the mortgage companies giving out these loans then selling them as derivatives, and the homeowners taking them out, were NOT engaged in "economically valuable transactions." They were engaged in economically destructive transactions.It is a matter of blind faith that a transaction must be valuable if the people involved choose to engage in it. As we see, millions of times over, with the foreclosed mortgages, the lost pension funds, and the collapsing lenders, transactions can be economically harmful, to the parties involved and to society as a whole, despite being entered into freely.
joe | February 18, 2008, 10:10am | #
fuckty fuckity fuck fuckNot playinig, robc. If you actually don't understand, I'm not going to waste my time bringing you up to speed. But I don't think that's what's actually going on; I think you're just playing dumb.
Either way, it would be a waste of time to try to explain this to you.
robc | February 18, 2008, 10:12am | #
They were engaged in economically destructive transactions.This I agree with. But, I assume that people can make that decision for themselves. On both sides. It is no different than the baseball trade that hurts both teams.
kinnath | February 18, 2008, 10:15am | #
Stupid people make bad decisions on a regular basis. Smart people make bad decisions occasionally. Throw in a little greed, and the whole population has short-term bout of systemic stupdity. Then reality sets in.This is the birth and death cycle of every bubble. Government cannot change this without regulating every fucking aspect of private life.
joe | February 18, 2008, 10:15am | #
If the mortgage meltdown was only hurting the particular borrowers and lenders involved, then the "They knew what they were getting into. I say, let 'em crash!" line from Airplane would make more sense.Net loss of jobs last quarter, during what should be the good part of the business cycle, as the real economy was finally getting strong and picking up real steam after the 2001 recession.
joe, I am only saying this because I care - there's a lot of no-alcohol beer brands on the market that are just as tasty as the real thing.
robc | February 18, 2008, 10:16am | #
joe,No, I really dont understand. I dont know why you dont want to educate me, Im not playing with you. Im a very smart guy, maybe thats why you think I really understand and maybe I should, but I dont understand what information the borrowers dont have.
It will take you all of one or two sentences to explain it to me. Im teachable. I really dont understand your point about assymetry.
Gilbert Martin | February 18, 2008, 10:18am | #
People have the right to make decisions for themselves and with that right comes the responsibility to live with the consequences of the decisions they make.It isn't the responsibility of the government to bail them out - at the expense of other people who were more prudent with their decision making.
joe | February 18, 2008, 10:20am | #
Endless semantic argumentation aimed and defining away observed, documented, and well-understood problems, and avoiding getting into the substance of the issue, is too common a dodge to tempt me at this point.Gilbert Martin, see 10:15.
Daniel Reeves | February 18, 2008, 10:23am | #
The experience with which someone can better judge could be considered asymmetrical information when utilized. Is that what you're talking about, joe?kinnath | February 18, 2008, 10:25am | #
To put things in perspective, here in the heartland sales of new homes where down slightly from the record setting pace the year before. Average prices continued to rise. I could hardly care less about the speculators on the two coasts that drove housing prices through the roof.Gunter | February 18, 2008, 10:25am | #
I say we go back basics: draft Ron Paul for a third-party run, portray Obama as a watermellon-eating welfare sambo who´s just itching to stick his shlong in a white girl, and watch the money pour in from Nazis and the KKK. Forget Hillary, Obama´s a gift. We need the "old" Ron Paul.P Brooks | February 18, 2008, 10:25am | #
Donald Luskin has a pretty good post on subprime loans.[I]n the New York Post, economics professor Stan Liebowitz writes that the subprime mortgage problem is in large part due to government mandates on lenders to lend money to poor people
robc | February 18, 2008, 10:27am | #
If the mortgage meltdown was only hurting the particular borrowers and lenders involvedAnd the companies buying the packaged mortgage instruments and the individuals investing in those companies and people who didnt take risk of a mortgage correction into account when they priced property in their neighborhood.
Really, Im trying to figure out who got hurt who didnt make some sort of mistake in the process. Not to be like Rand with the train tunnel scene, but everyone on board has some responsibility. :)
The lack of properly accounting for risk seems to be the major mistake that everyone involved made. Risk assessment is an advanced topic. Unlike interest rates, it isnt a middle school skill. But, then again, there is the guy who saw it all coming and was yelling it out to everyone and built the hedge funds around the mortgage crash. I think his two funds brought in $17 billion in 2006-2007. Its not like the rest of us couldnt have read the tea leaves too (not that most of us were in a position to capitalize like he did, but could have avoided some losses.
Daniel Reeves | February 18, 2008, 10:27am | #
robc, willful ignorance still creates a disadvantage in information. Being able to access the information and knowing it are two different things.But I seriously think joe is being snobby. Just tell him and shut up. If you tell him, you sound a lot more intellectually superior than someone who says, "you should know, but I won't tell you."
joe | February 18, 2008, 10:28am | #
Dan,That's one aspect, but really, the levels of assymetry in a transaction between someone who originates mortgage for a living and most people taking out mortgages are legion.
robc | February 18, 2008, 10:28am | #
Episiarch,Name one no-alcohol beer as tasty as the homebrewed Uerige doppelsticke alt clone I was drinking last night?
P Brooks | February 18, 2008, 10:29am | #
the mortgage companies giving out these loans then selling them as derivatives, and the homeowners taking them out, were NOT engaged in "economically valuable transactions." They were engaged in economically destructive transactions.And were encouraged to do so by government initiatives.
joe | February 18, 2008, 10:30am | #
robc,How about, everyone with money in an index fund? How about, everyone who purchased a home in most markets in the country? How about, the 1-2% of the labor force that will be out of a job over the next 2-3 years because of the recession?
Are those broad and innocent-enough categories for you? Because those people have all taken serious economic hits.
joe | February 18, 2008, 10:33am | #
P Brooks,You will get no argument from me on that. Government mortgage policy has been awful for, oh, I'd say about 7 years.
Barney Frank was screaming about this problem years ago, but nobody was listening.
kinnath | February 18, 2008, 10:36am | #
How about, everyone with money in an index fund? How about, everyone who purchased a home in most markets in the country?Every part of my 401K is down 5% to 10% since the beginning of 2008. The sooner the bubble breaks, the sooner my 401K will recover.
How about, the 1-2% of the labor force that will be out of a job over the next 2-3 years because of the recession?
If you are worried about these people, then provide assistance directly to them. Far more efficient than keeping a bad economic situation going.
Are those broad and innocent-enough categories for you? Because those people have all taken serious economic hits.
Life is not risk free.
robc | February 18, 2008, 10:36am | #
joe,1. Index Fund: Those who invest in index funds realize they invest in financial markets. Those chose to keep their money there.
2. Home purchasers:
A. They could have chosen a different market, North Dakota is still going up. :)
B. Like I said above, risk assessment. I knew when I bought last fall that I was buying in a falling market that probably hasnt hit bottom. (My current home was put on the market at $210, I got it in low $180s. $210 was probably a reasonable starting price 2 years ago, wouldnt have got it, but a good point to start negotiation from. Will it still be worth $180 in 2-3 more years? I dont know, but Im knowingly taking the risk, mainly because I expect to be there the rest of my life)
3. Are we going into recession? There are still doubts. That 1-2% should have chosen a recession proof job.
Episiarch | February 18, 2008, 10:36am | #
robc, my statement was a paraphrased quote from Real Genius.Non-alcohol beer is an abomination.
Gilbert Martin | February 18, 2008, 10:38am | #
If the economy is temporarily boosted by wads of money being deployed on bad loans, then the economy has to take the hit when the those loans go into default. There is no free lunch.The real macro-reason behind all this is the federal reserve creating too much money for too long a time period. It continually tries to insulate the market from the effect of asset bubbles created by prior rounds of it's own meddling.
joe | February 18, 2008, 10:38am | #
P Brooks,The problem with that Luskin post is that loans to poor people in redlined areas represent only a tiny fraction of the bad loans that have so harmed the industry, and only a tiny fraction of the accounts on the books of the mortgage companies that have run into such trouble.
There's a one-drop rule that seems to apply in so much libertarian political thought - if you can find any example of government involved in a problem, the entire problem is therefore defined as a government problem, and all other factors can be ignored. So we see people like Luskin, attempting to argue that Countrywide was giving ARMS for McMansions in the suburbs to people who could just barely afford their payments at the teaser rate because of anti-discrimination-in-lending standards.
joe | February 18, 2008, 10:40am | #
kinnath,Why are you addressing me with arguments about what to do about the problem now that a bubble has burst?
I haven't written anything about that. I've been writing about what created the problem and how to avoid such problems in the future, not how to handle the fallout.
Life is not risk free. No kidding. That's why we have things like handrails, steel-toes, and lending standards.
robc | February 18, 2008, 10:41am | #
Non-alcohol beer is an abomination.I agree. I have forgotten that bit from Real Genius, havent seen that movie in a decade or so.
Elemenope | February 18, 2008, 10:41am | #
And here's the really important part: people did not magically become stupider or less responsible between 1997 and 2002. Ergo, stupidity and irresponsibility on the part of borrowers does not explain the mortgage meltdown.Due to circumstances and trends, though, both they and banks became less risk-averse...which is a smart sort of stupid, in my book. Many factors play into the meltdown, but robc does have one decent point (overplayed): ultimately, people who couldn't afford these mortgage loans were taking them, and they thus bear some responsibility for that decision.
Now, on the other hand, you make a good point in that banker-jedi-fu powers re: obscuring the real costs of adjustable rate mortgages and making pie-in-the-sky predictions about realty appreciation probably convinced those who knew no better to take risks they otherwise would not have.
Hillary's "let's just freeze foreclosures" is a stupid plan, primarily because it short-circuits the risk factor which would bring the markets back to sanity. On the other hand, standing by and doing nothing is also stupid, because the fallout of a rash of bankruptcies and credit failures that will inevitably follow such a foreclosure sweep will cripple other portions of the economy.
Plus, people's lives will be ruined. I hear that matters to some people, too.
joe | February 18, 2008, 10:43am | #
robc,Straining to come up with a post-facto course of action that would have allowed people to avoid their problems is not the same thing as demonstrating that their actions were so irresponsible.
Were you telling everyone to take their money out of index funds and move to North Dakota in 2001? Of course not. Ergo, arguing that people "could have" taken some implausible course of action that only makes sense in hindsight doesn't get you a single inch towards proving that their actions were irresponsible.
robc | February 18, 2008, 10:44am | #
joe,If it makes you happy, I dont think the mortgage problem is primarily a government problem. They played a role, but smaller than the role played by primarily 3 groups:
1. Idiot borrowers
2. Idiot lenders
3. Idiot financial companies who failed to price the packaged mortgage instruments properly.
robc | February 18, 2008, 10:45am | #
joe,Were you telling everyone to take their money out of index funds and move to North Dakota in 2001? Of course not.
No and yes. No because Im a believer in dollar cost averaging and yes in that I told people back then to stop living in CA and move to middle america instead of whining about housing prices.
I still think I was right on both. I dont try to time the markets and I know the coasts are evil places to live.
joe | February 18, 2008, 10:47am | #
Glibert,There were asset bubbles long before there was central banking. Ever read about tulips?
Sadly, bubbles are a natural, market-driven phenomenon, or at least they can be. Government activity can certainly worsen them, and I agree with you that Greenspan's low-rate-all-the-time tenure and unwise counsel about ARMs worsened this one, but good policy can even them out.
kinnath | February 18, 2008, 10:48am | #
Why are you addressing me with arguments about what to do about the problem now that a bubble has burst?I haven't written anything about that. I've been writing about what created the problem and how to avoid such problems in the future, not how to handle the fallout.
My apologies. Since the source article compared Clinton's and Obama's plans to deal with the collapse of the housing market, I was assuming you were addressing that point.
robc | February 18, 2008, 10:50am | #
In additon to my last post: Im one of those people who claimed we had a housing bubble early on, but also claimed that housing bubbles dont burst (except in localities), they deflate and that eventually prices were going to stagnate for 10-15 years in the high prices areas of the country (maybe falling somewhat in the highest) until reality caught up. I was wrong, and thus any money I lost in investments is my own damn fault.joe | February 18, 2008, 10:51am | #
robc,If "idiots" can do this much damage to the entire economy - and not just themselves and each other, but the whole economy - then that's why we need guardrails. And don't give me that crap about "we don't know" if we're going to technically meet the academic definition of a recession. The economy has taken a serious hit, and millions of people are going to be harmed by it. That's bad enough.
We require railings on the balconies of highrise buildings, not just so that idiot condo owners won't kill themselves, but also so that they won't kill people going about their business on the sidewalk by falling on them.
Elemenope | February 18, 2008, 10:52am | #
It doesn't make any difference whether you have an economics degree or not - you are entirely responsible for your own actions and your own welfare in any and all circumstances.Hmm. At first I was thinking about being snarky, but I'll give you:
...you are [almost] entirely responsible for your own actions and [the impetus to better] your own welfare in any and all circumstances.
It is nearly absurd to claim that a person is responsible for *all* of their actions *all* the time. Free will is not a resource of infinite depth, and it can be diverted with a lever big enough. Also, freedom of choice (and responsibility) is attenuated by the length and breadth of options available. Sometimes, there are no good options. Still, I will grant that most of the time, in most situations, a person has a sufficiently good option and sufficiently free hand to hold a majority of responsibility.
On the other hand, the second part I'm willing to give you far less. A person is responsible for *attempting to change for the better* their circumstances. You can't very well complain that your life is shitty if you never act to attempt to rectify it. However, there are portions of a person's life that can be insurmountably bad regardless of their choices. Do you seriously blame a person in a war-zone for their present condition? A child with AIDS? A schizophrenic?
Absolutism in these areas are precisely where conservatism and the ideology of personal responsibility deserve to be ridiculed, just as liberal "society-made-me-do-it" often deserves derision for its deemphasis on obviously willful self-destructiveness and/or laziness.
robc | February 18, 2008, 10:53am | #
Here is an interesting question:Should we even be trying to prevent future bubbles? Isnt it possible that boom/bust cycles are actually the best way to do things? Even though it means pain for some people in the bust part of the cycle?
To make a lame sports analogy: I prefer break but dont bend defenses in football. You end up with boom/bust games but I think its better overall, although that may depend on your style of offense.
joe | February 18, 2008, 10:56am | #
robc drives around with the plans for every bridge he drives over, and inspects the support beams before crossing.He also carries around lead swabs and bacteria-culture tests whenever he goes into a restaurant.
And don't even get me started on his practice of climbing into elevator penthouses to confirm the equipment's condition.
Because robc not only knows that he is responsible for his own welfare, but understands enough about each of the particular risks we face in life to know precisely how much and what type of individual due diligence is appropriate for every one of those risks.
robc | February 18, 2008, 11:05am | #
No, joe, I just take my chances. But I do as much due diligence as I think the risk deserves. That has meant avoiding certain restaurants at times. I almost fell to my death twice hiking on the Matterhorn, but I dont think the Swiss need to put up guardrails, I should have been less of an idiot. (Laying down and stretching out over a 500+ ft dropoff to get a picture wasnt the wisest idea in retrospect. Especially when I got past the balance point and my feet started lifting off the ground.)Is taking a lawyer to your closing the first time you get a mortgage really unreasonable or unusual? It might just be paranoia on my part. I assume a lawyer hired by the bank represents the bank's interests, which may or may not be mine.
edna | February 18, 2008, 11:06am | #
How about, everyone with money in an index fund? How about, everyone who purchased a home in most markets in the country? How about, the 1-2% of the labor force that will be out of a job over the next 2-3 years because of the recession?in order:
there are two types of players in index funds. there are the financial sharpies, for whom this is all part of the landscape. and there are folks like me, who use them as a major part of a retirement account. don't weep for me, though, i didn't put all my money in two years ago and pull it all out now. over the course of my life until i retire, the return would be terrific.
i honestly can't say that i'm an expert in the demographics of the gimmick loans, but around here (near napa), the typical gimmick loan "victim" got a house for a pretty minimal down payment, paid a monthly mortgage, took a deduction for it (i.e., already took a subsidy from you and me), and had a house to live in during that time. if you amortize the minimal (in some cases *zero*) downpayment over the several years before the implosion, what the "victim" got was a nice place to live for a couple of years in a nice neighborhood at a pretty good rental rate.
although you're free to predict the direction of the unemployment rate, you're not free to turn this from future tense to (in the next sentence, which i didn't quote) past and present tense. it's a prediction, not an existing fact.
J sub D | February 18, 2008, 11:06am | #
You know, economically valuable. Like giving someone a mortgage they can't afford but convincing them they can, because you're going to sell it as part of an IBD package and don't have to worry about whether it goes into default.Dammit, we've got to protect the simple childlike poor, who are completely unable to make rational economic decisions without the government's wise, benevolent, and fiscally prudent (what is the national debt these days anyway?) protection. And those businessmen have to be protected from buying a pig in a poke as well. Lord knows that MBAs or pension fund managers should actually be held responsible for their own decisions.
If mortgages become more expensive ar harder to get as a result of the government's altruistic intervention in the home loan business, making it harder and more expensive for a fiscally responsible buyer to finance a home, that's OK because we have good intentions, and people who don't pay their voluntarily incurred debts are the real victims after all.
That's pretty much it, isn't it joe.?
J sub D | February 18, 2008, 11:15am | #
If "idiots" can do this much damage to the entire economy - and not just themselves and each other, but the whole economy - then that's why we need guardrails.Look at all of the good folks who have lost their jobs in the auto industy. The government should have stepped in and prevented the big 3 from giving those overgenerous contracts to UAW workers. (And from producing the Pinto and the Vega).
Where were the guardrails?
Fluffy | February 18, 2008, 11:17am | #
Joe,I was a principal in a mortgage bank for many years. I would submit to you that the existing mortgage regulations played a substantial role in producing the current crisis.
To understand why, it's important to understand that money is a commodity. As such, it naturally wants to be priced as a commodity - and everyone in the mortgage industry [and just about every financial services industry, really] who isn't a discounter spends all of their time trying to figure out how to avoid having their product treated as the commodity it is.
One way they do this is by trying to sell "service" or a "relationship" with the customer. The overwhelming majority of subprime customers who got hosed got hosed by local loan officers who convinced the borrower they were friends. Minority customers in particular were undone by judases in their own communities. The problem was particularly bad in churches. But that's not the part of the problem I'd like to talk about today.
The part of the problem I'd like to talk about is the federal disclosures currently mandated for home loans. These documents date back several decades and were designed to deal with an earlier "problem" - the fact that many consumers refused to shop for a loan on the basis of price, and like anyone who doesn't look at the price tag, these borrowers tended to get fleeced. The Good Faith Estimate of Settlement Charges and the Truth In Lending statement were designed to provide pricing information to borrowers in a format that would be consistent across all lenders and that would be comprehensive. And except in cases of deliberate dishonesty, these documents actually do that job pretty well - they provide a way for borrowers to identify and compare information about the price of a loan in terms of its rate, points, and associated fees.
The problem as usual is the unintended consequences of the existence of these regulations. Providing price information in a consistent format tended to increase the commoditization of mortgage loans - particularly fixed-rate mortgage loans - driving down net margins for lenders and brokers. Since mortgage lenders and brokers want to make money, products gradually evolved to escape this commoditization process.
As it turns out, the federal disclosures are not very good at communicating non-price loan terms to borrowers. At all. The TIL tends to underestimate total borrower payments for ARM loans [for various technical reasons I won't go into here]. The TIL also contains extremely vague language when it comes to prepayment penalties. And the impact of negative amortization on the total cost of a loan is almost completely overlooked. As a result, over time lenders discovered that they could increase the value of their loans by incorporating negative amortization, steep ARM reset margins, and prepayment penalties into their products.
Not only were these time bombs in loans not adequately revealed by the standard disclosure documents, I would argue that the standard disclosure documents actually made them look more appealing. An ARM loan with a low initial rate, but with all of these abusive features, actually looks cheaper on the existing GFE and TIL than a vanilla fixed rate loan. And when the government has put disclosures in place and spent a couple of decades training consumers to rely on those disclosures, that's a bad situation.
The Paulites tend to focus on the Fed's responsibility for creating the subprime mess with excess liquidity, but I think we should not overlook the way the existing regulatory system created a moral hazard that certain mortgage industry figures were happy enough to exploit. When you tell borrowers that the mortgage industry is heavily regulated and put all these disclosures in front of them, you help to lull them to sleep.
Gilbert Martin | February 18, 2008, 11:21am | #
"There were asset bubbles long before there was central banking. Ever read about tulips?"I never said there weren't. But some asset bubbles have been caused by central bankers attempt's to manange the economy. And the recent one's we've had are ones that were.
Gilbert Martin | February 18, 2008, 11:30am | #
" Do you seriously blame a person in a war-zone for their present condition? A child with AIDS? A schizophrenic? "It doesn't matter whether I blame them for their condition or not - I am still not responsible for their welfare unless I choose to be on an individual basis.
Government has no authority to mandate charity.
There are no affirmative rights and there are no affirmative obligations.
You are born, you have the right to be left alone by the government unless you have actively done something to harm someone else and then you die.
That's all there is and ever should be.
R C Dean | February 18, 2008, 11:35am | #
Are those broad and innocent-enough categories for you? Because those people have all taken serious economic hits.And every single one of them was investing in securities, taking risks in return for hoped-for returns.
So now some of those risks came home to roost. Boo-fuckity-hoo. If you wanted guaranteed returns with no risk, buy CoDs.
The same thing goes for all these people who suddenly can't afford their mortgages. Absent outright fraud by the lender (of which there have been few to no accusations), they were making a bet - either that the real estate market would continue to go up allow them to lay off their house at a profit, or that their income would go up so they could actually afford their mortgage.
They made these bets in hopes of reaping economic returns. They lost those bets. Boo-fuckity-etc.
Elemenope | February 18, 2008, 11:40am | #
You are born, you have the right to be left alone by the government unless you have actively done something to harm someone else and then you die.That's all there is and ever should be.
That seriously breaks down in times and in places where people are *not* left alone. Libertarian utopia only works *after* it's established. What about a hypothetical world...where governments more or less interfere all the time in the lives and well-being of their citizens?
Do we just say, um, "Fuck 'em", as you seem to imply?
joe | February 18, 2008, 11:41am | #
J sub D,Most of the loans that are going belly-up were not made to poor people. Strike one.
Having less information than a professional in a field is not "simple or childlike," it is the natural state in which even educated professionals live, as they go through their lives - I guess that whole "bridge/elevator/restaurant" thing went over your simple, childlike head. Strike two.
And every recession in American history has seen significant slowdowns, or even reversals, in the growth of homeownership, because the primary issue keeping the poor from being able to buy homes is a lack of wealth. Regulations which prevent the sort of business practices that sent our economy into a recession would help the poor increase their wealth by promoting growth, not restrict that opportunity. You might have noticed that the greatest increase in homeownership rates took place in the two decades following the New Deal, with its regulation of the financial sector. Strike three.
Your argument is shit, J sub, but damn, I bet it felt really good to call a liberal an elitist who hurts the poor, and that's what really matters, right?
Dondero, do you realize that Americans for Democratic Action (I presume thats what you mean by ADA) was founded in part to remove socialist and communist influence from the Democratic Party in the 1940s? They're a liberal group, but I'm not sure how you can call them "Marxist" since their origins are explicitly anti-Communist.
joe | February 18, 2008, 11:43am | #
Oh, and J sub,Look at all of the good folks who have lost their jobs in the auto industy. The government should have stepped in and prevented the big 3 from giving those overgenerous contracts to UAW workers. (And from producing the Pinto and the Vega).
Since I'm not the one who argues that every bit of government intervention is exactly like every other bit of government intervention - since I'm the one who frequently shreds this argument - it's absolutely no skin off my nose that you can think up an example of a completely different problem that a completely different type of regulation would have failed to solve.
I do agree that the "libertarian" Obama meme is false and projecting onto a blank slate like so many do with Obama.
joe | February 18, 2008, 11:48am | #
RC,Expressing your lack of concern for people suffering from a problem is not the same thing as demonstrating that that problem is irrelevant.
If a tax had caused the market to drop like it has, you would be howling "Think of the children!" from the highest steeple you could find - EVEN THOUGH the people who bought stocks were taking a risk.
It is better for the econonomy to be strong than weak. Duh. That your concern for people harmed by a weak economy is selective tells us absolutely nothing about the cause of the problem or the best way to avoid similar situations.
jimmy smith | February 18, 2008, 11:51am | #
A little off the track but I'm thinking of taking a mortgage out to buy a new car. I can get a good Mercedes for about a 100k or so. I'll be able to finance it for 30 years at about 6-6 1/2 percent. The car dealer and the bank says it makes sense, I could have that car I've always dreamed of and my credit cards are maxxed out now. I dunno, I could use some advice on this. Besides, I'll have my old car paid off in another year or so anyway and my new loan would have lower interest. What's a "rollover"?joe | February 18, 2008, 11:52am | #
Fluffy,Loans made to poor people in redlines areas are a tiny fraction of the bad loans.
People have been trusting mortgage companies' qualification judgements as credible for a long time, and not just since those disclosure forms came out. When you lull people into believing that business won't act irrationally against its own interest, as market-fetishists have been doing for a few decades now, you're lulling them to sleep.
And finally, there were forerclosures long before modern financial regulations. Many more, in fact, and happening in the midst of much lower rates of homeownership.
Gilbert Martin | February 18, 2008, 11:54am | #
"That seriously breaks down in times and in places where people are *not* left alone. Libertarian utopia only works *after* it's established. What about a hypothetical world...where governments more or less interfere all the time in the lives and well-being of their citizens?"What about it?
I take no responsibility for government actions that infringe on the rights of others. I didn't tell the government to do it.
There are no utopias, libertarian or other wise.
What I am talking about is the notion of collective responsibility vs the notion of individual responsibility.
"Do we just say, um, "Fuck 'em", as you seem to imply?"
Me refraining from assisting someone does not constitute fucking them. I can only do that by actively doing them harm.
Fluffy | February 18, 2008, 11:57am | #
You might have noticed that the greatest increase in homeownership rates took place in the two decades following the New Deal, with its regulation of the financial sector.How do you figure that?
The New Deal financial regulations had almost nothing to do with housing. And then there's the problem of accounting for that 25 year lag in time between 1933 and the real beginning of the suburban housing boom.
Housing rates definitely grew as a result of government intervention, but not New Deal intervention. The VA and massive investment in highway construction had much more to do with it than any financial services regulations of Rooseveltian vintage.
Having less information than a professional in a field is not "simple or childlike," it is the natural state in which even educated professionals live, as they go through their lives
Joe, I would submit to you that very few people who called 5 lenders and compared their offers before getting a loan get ripped off. Some people like that may have gotten fucked because they bet wrong on real estate, but as a general rule the kind of equity stripping, churning, and steering that took place in some subprime transactions just didn't happen to those people. And that doesn't require expert status. You just have to be anal, or even just be a dick.
Hussein Obama? You trying some weird guilt by association there or something, Eric?
Jennifer | February 18, 2008, 12:01pm | #
People have been trusting mortgage companies' qualification judgements as credible for a long time, and not just since those disclosure forms came out.I was offered a mortgage a few years ago, and for all that I suck at mathematics it took me only a few minutes to crunch the numbers and realize that "too good to be true" deal was indeed unrealistic. So I said "no;" maybe they said I was qualified but I knew damned well I wasn't. It doesn't take a professional mathematician to look at how much money you make versus how much money you're expected to pay, and see if the former is enough for the latter.
But let me guess: the MORAL thing for me to do is continue living in my crummy apartment whilst I pay higher tax rates to bail out the fools who took out mortgages they couldn't possibly afford. I suppose maybe I should've taken out that mortgage a few years ago too, and then screamed about how I'm a victim desrving of a bailout when the adjustable-rate mortgage went up to a number higher than my actual take-home pay.
I say let the chips fall where they may. If that means dumbass mortgage companies go out of business because they kept doing stupid things like making $300,000 loans to people with $25,000 annual salaries, so be it. The dumb companies go under and the good ones thrive.
prolefeed | February 18, 2008, 12:03pm | #
I've bought two houses -- they disclose everything relevant to the transaction. Stacks and stacks of paper, with you getting carpal tunnel syndrome from signing and initialing everything.If you go through all that and then claim you're a fucking victim because you didn't know what the interest rate could be because you didn't bother reading what you signed, and you didn't bother getting a non-adjustable loan so there wouldn't be any surprises, and you want to seize someone else's taxes to bail you out, you're not the victim, you're the perp.
robc | February 18, 2008, 12:04pm | #
joe,People have been trusting mortgage companies' qualification judgements as credible for a long time
Ive got 2 responses, the first is "no they havent" but that probably isnt true, Im just projecting from myself. Which leads to my 2nd, which is "then they are idiots".
When I bought my first home, back in 1998, as we discussed above, I called up the bank for preapproval, well before I had found a place. I had already decided a max of 100k (I was going to put 20% down - I figured I could afford the payments on an 80k loan - I ended up buying a place for 115 instead, but 100k was just a rough guideline). The bank told me they would loan me up to 220 or something like that. I literally (and I mean the word literally, literally) laughed at the mortgage officer. A 220k mortgage would have broke me. At this point, I realized you had to calculate these things yourselves because the banks werent trustworthy. I think I probably already suspected that, but that moment verified it for me.
joe | February 18, 2008, 12:04pm | #
How do you figure that?Uhhh...by looking at homeownership rates by year?
I know, your ideology tells you homeownership rates cannot go up in the aftermath of an increase in financial regulation. And yet, it did.
Your ideas about how government regulation influences the economy of logical, internally consistent, and incapable of making accurate predictions about the real world. This means that at least one of your Ps is wrong.
BTW, once again, as so often happens, you managed to read a statement in which I rebutted a theorized causal relationship between government and economic performance as one in which I theorized a causal relationship. Why does this keep happening?
I wouldn't pretend to know what % of the people in bad mortgages called around, but I'm willing to believe that many didn't. A lot of people just didn't know enough about how sleazy some of these mortgage companies are, and figured that "they wouldn't give a loan if I couldln't afford it." That's not a wholly irrationaly decision to make - the "bankers" know more about this than ordinary people, and in theory, the "bankers" have a strong disincentive to avoid giving out bad loans.
Eric Dondero | February 18, 2008, 12:06pm | #
The best reason NOT to vote for Obama:Justin Raimondo is now switching his support from Ron Paul to BHO. He says that BHO is the "best on opposing the War."
Fluffy | February 18, 2008, 12:07pm | #
People have been trusting mortgage companies' qualification judgements as credible for a long time, and not just since those disclosure forms came out. When you lull people into believing that business won't act irrationally against its own interest, as market-fetishists have been doing for a few decades now, you're lulling them to sleep.OK, now we're moving the discussion a bit farther afield.
Until late 2007, the data on these loans was telling the street guys that they weren't acting irrationally. That's the "cheap money" part of the problem. The housing boom masked foreclosures because troubled borrowers could almost always just sell for a profit.
I thought we were talking about the current foreclosure crisis as it relates to customers being put into loans that were effectively traps. If you want to talk about the fact that the models underlying loan pricing in general were whacked because of the data set that came in from 2001 to 2006, that's a different issue.
And finally, there were forerclosures long before modern financial regulations. Many more, in fact, and happening in the midst of much lower rates of homeownership.
I don't consider the existence of foreclosures to be a problem. If X% of people are given loans, Y% will default on those loans and lose their security. That is not a particularly surprising fact to me and does not constitute a problem that needs to be solved. Again, I thought we were talking about those aspects of the current situation which are unusual or anomalous.
I take no responsibility for government actions that infringe on the rights of others. I didn't tell the government to do it.
Here's the only problem I see with that: if the economic outcomes produced by free markets are just, that implies that the economic outcomes produced by unfree markets are unjust.
Since we currently live in a society with an unfree market, that further implies that the economic outcomes experienced by participants in our unfree market have been unjust. What, if any, recourse do those who have experienced unjust outcomes have? Are they entitled to be made whole - or if that is impossible, to compensatory treatment of some kind?
Elemenope | February 18, 2008, 12:07pm | #
Me refraining from assisting someone does not constitute fucking them. I can only do that by actively doing them harm.You're on a boat, and a stranger on that same boat is swept overboard by a freak wave. They will drown if you do not throw them a life preserver.
Now, in what way exactly would you not be fucking them by doing nothing? It sounds like an ostrich theory of ethics to me...
Cesar | February 18, 2008, 12:08pm | #
Obama is a blank slate people project their hopes (or fears) onto.That includes the people who say hes the Muslim Manchurian candidate, btw.
R C Dean | February 18, 2008, 12:08pm | #
If a tax had caused the market to drop like it has, you would be howling "Think of the children!" from the highest steeple you could find - EVEN THOUGH the people who bought stocks were taking a risk.Not really - right now, lots of people I know are getting out of the market because of the increasing likelihood that taxes will go up and crater the market. Those who stay in, well, risk, reward, boo-fuckity, etc.
Expressing your lack of concern for people suffering from a problem is not the same thing as demonstrating that that problem is irrelevant.
And demonstrating your concern for people suffering from a problem is a long, long way from demonstrating that some kind of increase in state control is the answer.
You look around the banking and finance sectors, and one thing you find is that the major government interventions all create moral hazard - they remove some of the risk from transactions, which means that people then go on to take on more risk than they can afford because they know they will be bailed out.
Unfortunately, systems that are carrying too much risk tend to have cascade failures, where all the risk chickens come home to roost at the same time.
State intervention may or may not alleviate short-term pain, but it will almost certainly guarantee that we will have more frequent and/or severe financial crises in the future.
J sub D | February 18, 2008, 12:10pm | #
Most of the loans that are going belly-up were not made to poor people. Strike one.Even better if true. Fuck 'em.
Having less information than a professional in a field is not "simple or childlike," it is the natural state in which even educated professionals live, as they go through their lives - I guess that whole "bridge/elevator/restaurant" thing went over your simple, childlike head. Strike two.
Professional advice when making the biggest investment in your life? What a fucking concept! No, joe that is a sieve of an argument. If you buy a used car on the word of the seller, you are a fool. If you buy a home mortgage on the word of the seller, you are also a fool. And fools get took. Yesterday, today and forever, fools will get taken. It is not my problem and I don't appreciate do-gooders trying to make it mine.
So your premise is that midlle and upper class people took out loans that they couldn't afford to pay and somehow it is the lenders fault. Is that it? Fuck the borrowers for being stupid, fuck the lenders for being imprudent, and fuck the financial geniuses who bought the packages. I do expect this will be beneficial to renters of houses and property management firms. Good for them.
joe | February 18, 2008, 12:10pm | #
Yes yes, that's nice that you're all so much smarter and better than other people. Me too; I've gotten four mortgages in the last nine years, and did just fine with all of them.Nonetheless, people haven't gotten stupider or less responsible in the past 9 years, so that cannot account for the change. What HAS changed are the business practices of the lending industry.
Once again, if the fallout from this was only limited to the lenders and borrowers themselves, the line from Airplane would go down a lot easier, but those of us who got boring mortgages and signed up for 401ks are already taking a hit (as are homebuilders and their employees, and workers acros the economy), as the economy, the housing market, and the stock market are swirling around the drain.
Now that the deed is done, there probably isn't much that can be done to avoid the recession by bailing out lenders and borrowers. That's why I've been talking about how to keep this from happening again.
robc | February 18, 2008, 12:16pm | #
Fluffy,Here's the only problem I see with that: if the economic outcomes produced by free markets are just, that implies that the economic outcomes produced by unfree markets are unjust.
I dont think that works. It is possible for both the free market and the unfree market to produce just results. Maybe. Your statement isnt intuitively obvious to me.
economist | February 18, 2008, 12:21pm | #
I don't particularly care if Obama has "more deference to economic laws". He still has essentially the same view of individual rights and liberties as Clinton, which disqualifies him for my vote.robc | February 18, 2008, 12:22pm | #
That's why I've been talking about how to keep this from happening again.Better risk pricing by the purchasers of the packaged mortgages is all it takes. If they had priced them lower, the lenders would have been more careful in the loans they gave out. Ditto the insurers of those packages. Considering the losses, I think the big boys have learned their lesson. This is how things improve. Billion dollar losses tend to teach lessons well.
those of us who got boring mortgages and signed up for 401ks are already taking a hit
Your mortgage is fine, no hit there. If your 401k is invested in any of the companies from above, then you, as an owner, share the responsibility for the improper pricing.
economist | February 18, 2008, 12:23pm | #
joe,The reason homebuilders are taking a hit is that home prices are lower because of the housing bubble that was caused, in part, by artificially low fed interest rates and an irresponsible fed promise to bail out the market.
robc | February 18, 2008, 12:25pm | #
The free market is a cruel but effective teacher. How many of the people walking away from their homes because of a sub-prime mortgage gone sour will make that same mistake again?How many 20-somethings who havent yet bought a home will avoid the problem because of this crisis? How many young kids will never do something like that because of watching their parents make this mistake?
Fluffy | February 18, 2008, 12:26pm | #
BTW, once again, as so often happens, you managed to read a statement in which I rebutted a theorized causal relationship between government and economic performance as one in which I theorized a causal relationship. Why does this keep happening?Hey, if that wasn't what you were trying to say, my bad. But generally people introduce facts to show causation.
I know, your ideology tells you homeownership rates cannot go up in the aftermath of an increase in financial regulation.
"My" ideology tells me no such thing. When have I ever said anything of the kind? If anything, my beef whenever we argue about planning is the state's investment in the suburban single family home.
That's why I've been talking about how to keep this from happening again.
This particular problem won't happen again, but if your aim is to find a way to prevent people from making bad decisions during a mania, I honestly don't know if that can be done.
joe | February 18, 2008, 12:26pm | #
Fluffy,I thought we were talking about the current foreclosure crisis as it relates to customers being put into loans that were effectively traps.
Yes, we are. And one of the reasons people fell into those traps is because they trusted the mortgage companies, for the two reasons I provided above. We're not going far afield; we're talking about exactly the same thing we've been talking about since you responded to my comment; whether people who got into these loans were operating in a system of information assymetry.
I don't consider the existence of foreclosures to be a problem. Me neither, it's the dramatic increase in foreclosures, and the harm its done to the economy, that is the problem.
Again, I thought we were talking about those aspects of the current situation which are unusual or anomalous. We are. Once again, I was resonding to YOUR point. You really need to stop bringing up points, then telling me I'm track by responding to them.
RC,
State intervention may or may not alleviate short-term pain, but it will almost certainly guarantee that we will have more frequent and/or severe financial crises in the future. Is this the part where I cross myself, or where I beat my breast three times, Father? In reality, we have had zero (0) depressions and bank runs since the New Deal.
J sub D,
It is not my problem and I don't appreciate do-gooders trying to make it mine. Have you looked at your 401k lately? How about gotten your home appraised? How about tried to get a new job? This IS your problem, one way or another, because of the ripple effects it has caused throughout the economy.
OK, this is the last time I'm typing this, so pay attention: How about, everyone with money in an index fund? How about, everyone who purchased a home in most markets in the country? How about, the 1-2% of the labor force that will be out of a job over the next 2-3 years because of the recession?
Are those broad and innocent-enough categories for you? Because those people have all taken serious economic hits.
That is cut and pasted from a comment I made hours ago. Feel free to rebut or disagree with it, but anyone else who raises the "it's not my problem, I didn't take out a dumb mortgage" argument as if it refutes what I've written is going to be mocked mercilessly.
"The free market with discipline them and keep this from happening again" is particularly inapt to this situation. The market has been sending very, very strong signals about lending to people without making sure they can pay back the loan for hundreds of years. And yet, here we are.
joe | February 18, 2008, 12:32pm | #
robc,Better risk pricing by the purchasers of the packaged mortgages is all it takes.
And also, a pony.
I'm sure human nature with change precisely on schedule, and neither lenders nor borrowers will allow greed to lead to overly-optimistic projections about borrowers' ability to pay. This will start tomorrow, at 1:21 PM EST.
economist | February 18, 2008, 12:32pm | #
joe,Maybe you missed how government interference in interest rates and irresponsible government promises affected the market?
Gilbert Martin | February 18, 2008, 12:34pm | #
"You're on a boat, and a stranger on that same boat is swept overboard by a freak wave. They will drown if you do not throw them a life preserver.Now, in what way exactly would you not be fucking them by doing nothing? It sounds like an ostrich theory of ethics to me..."
I wouldn't be because it wasn't me who knocked the guy out of the boat. His welfare is not fundamentally my responsibility.
I really don't care what your opinion is about ethics because that's all it is - your opinion.
joe | February 18, 2008, 12:34pm | #
economist,If the economic growth was staying level, and this was just a case of people shifting their money from home purchases to rentals, you might be right.
But it's not; there is an absolute decline in both the economy, and what people are putting into the housing sector as a whole, so while rental property owners and management companies might see a gross gain, we're still talking about a big loss across the housing sector, and the economy as a whole.
Fluffy | February 18, 2008, 12:35pm | #
It is possible for both the free market and the unfree market to produce just results.Shhhhhhh! If that is true, there's less reason to be an economic libertarian, if your interest in crafting your laws is to have a just society.
robc | February 18, 2008, 12:35pm | #
The market has been sending very, very strong signals about lending to people without making sure they can pay back the loan for hundreds of years. And yet, here we are.People read the signals and stopped doing it. Im not sure your point here, unless you are complaining about the lag between signal and response. Try getting a sub-prime 125% loan now. Cant be done. In fact, part of the current problem is the lenders have read the signals so well that they wont give fixed rate loans as refis to many of the people with arms because they dont qualify under current standards, which are tougher than the standards 2 years ago.
joe | February 18, 2008, 12:36pm | #
economist,Maybe you missed my description of the libertarian One Drop Rule?
robc | February 18, 2008, 12:36pm | #
If that is true, there's less reason to be an economic libertarian, if your interest in crafting your laws is to have a just society.My interest is maximizing freedom. I know that will lead to a just society. There may be other just societies, but I dont care, because I want freedom maximized. That is my goal.
economist | February 18, 2008, 12:38pm | #
joe,While I can see how fear over housing markets might affect the entire economy, I don't see how a government policy that harms some for the benefit of others so that they can have a false sense of security is a positive development.
economist | February 18, 2008, 12:38pm | #
joe,You'll have to repeat the One Drop Rule.
robc | February 18, 2008, 12:39pm | #
I'm sure human nature with change precisely on schedule, and neither lenders nor borrowers will allow greed to lead to overly-optimistic projections about borrowers' ability to pay.This crisis is just further proof of the following:
Bulls can make money. Bears can make money. Pigs lose money.
If greed leads you to being overly-optimistic then you deserve the smackdown you receive. Those who want to maximize their earnings but without being greedy, will determine the proper amount of risk they can afford to take. And it will be less than this time around.
P Brooks | February 18, 2008, 12:40pm | #
What's a "rollover"?Once the Mercedes dealer has you bent over his desk, you'll find out.
joe | February 18, 2008, 12:40pm | #
People read the signals and stopped doing it.Apparently not, robc. There is this thing in the United States that is called "the mortgage crisis," which involves a whole lot of loans that have been made on terms that the recipients cannot repay. Not only have they no