Are Subprime Lenders The Devil?
Readers suggested a topic on subprime lenders. “Are Mozilo and the other subprime lenders the Devil, and has the loss of folk wisdom by Americans gotten them into the HELOC/cash out refi mess? I refer to the old idea that the Devil isn’t a powerful being who can coerce people into giving up their souls (like the government), but rather someone who has to trick them into doing it (like a businessman).”
“The devil will give you worldly goods, power or knowledge now but later…well, we’ll worry about that later.”
“Stories of this type demonstrated an age-old skepticism by Americans of those offering something for nothing, and asking people to sign a contract. Americans expected to have to work for things, or give something up to get something else.”
“Very different from ‘genie’ cultures where three wishes are offered with nothing in exchange. Of course, in many countries like that poverty borne of years of low effort was suddently reversed (for some) by oil popping out of the ground.”
“The argument for Mozilo being the Devil: in each case a person has an illiquid asset with a temporarily inflated value — houses with values puffed up the housing bubble, or the souls of the greedy. Both the Devil and the subprime lenders offered a way to monetize the inflated value of that asset before it depreciated back to a realistic level.”
“The case against the subprime lenders being the Devil is this…in none of the ‘deal with the Devil’ stories was Satan ever accused of disguising the eventual cost of the up-front benefit.”
A reply, “People (vast majority) can be brainwashed and one can create a culture that makes people very susceptible to, or easy victims of, propaganda. Maybe we have that condition whereby people are very easy to brainwash in the areas of politics, economics (finance) and investments.”
One noted, “Many Americans have evolved into people manipulated by soundbites. Whoever applies the sound bite with the strongest emotional power wins the dollars from these people.”
“People who can think past sound bites become immune to the manipulation and end up with the dollars.”
One said, “I don’t believe anyone needs ‘coercion’ to enter into the arena of ‘the devil.’ Man is lead of his own lusts–innate. It takes power to resist ‘the devil.’”
The San Francisco Chronicle from California. “Roger Abraham stands in his driveway, one hand holding the newspaper, the other sweeping across the homes on Brentwood’s Solitude Street. ‘This one,’ he points, ‘this one, this one.’ All empty.”
“Hundreds of families have lost their homes to foreclosure since the beginning of last year, and in a sign of more to come, at least 1 out of every 16 households has received default notices.”
“‘Brentwood is kind of the poster child for what’s going on in the housing market,’ said Howard Sword, the former community development director. ‘We were so active in the years where the subprime finance creative tools got rolled out, we were issuing like 1,400 to 1,600 building permits a year.’”
“Dave Myers, was the first buyer at Trilogy at the Vineyards by Shea Homes, closing in October 2006 for around $750,000. The unfinished amenities and housing downturn have chopped 40 percent off the value of his home, he said.”
“‘Trilogy was advertised as the place ‘where dreams take flight,’ he said. ‘Well, pretty much they’ve flown away. We’re now the house on the dirty hill that doesn’t have any trees, and doesn’t have any vineyard, and doesn’t have a clubhouse.’”
“On the horseshoe formed by Margaret Lane and Handel Way, about 15 homes have been resold, foreclosed or traded for less than the value of the outstanding loan, said Dave Thornton, who bought on the block two years ago.”
“In the struggle against blight, he had taken to mowing the patch of lawn between his driveway and his erstwhile neighbor’s. He recently gave up, deciding it was less trouble to let it die. The line where green turns to tan now marks the property line.”
“Thorton and his wife moved to Brentwood in 2006, thinking they’d found the quintessential little-town neighborhood for their three children. ‘When we first moved in, there were a lot of good people, neighborhood watch types,’ he said. ‘They’re all gone. There is no sense of community here.’”
The Daily Page from Wisconsin. “Alicia Emerson always dreamed about owning her own home. But what she bought was a house of cards.”
“Looking back on her experience, Emerson realizes she was too trusting of promises made by the Minnesota-based mortgage company that approved a $248,000 loan for her and her boyfriend even though their joint income was less than $50,000 a year. Now she gets it — she signed up for a subprime mortgage.”
“‘They told us we could refinance when the construction was finished with a negative amortization mortgage, which would make our payments between $800 and $900 a month,’ says Emerson. ‘But when the time came, they told us that kind of loan was no longer available, and our payments were going to be $1,700 a month. There was no way we could afford that.’”
“The hot housing market fueled an explosion of high-risk subprime mortgage loans. People with no down payment and an income too low to qualify for a standard ‘prime’ mortgage found they could get a home loan with a low introductory interest rate and the promise that they could refinance when that rate expired.”
“Underlying this whole scheme was the assumption that the housing boom would never end and houses would continue to increase in value. It was a bad bet.”
“Last year, many subprime borrowers discovered they couldn’t refinance because their houses had lost value, so now they owed more than their properties were worth. This caused a nationwide spike in foreclosures — nearly 1.3 million in 2007, an increase of 79% over 2006.”
“Emerson and her boyfriend moved into their new Mount Horeb house in August 2006. Faced with payments they couldn’t afford, they tried and failed to find a house mate. They also tried selling the house, and found they couldn’t do that either. They were trying to refinance to a loan with lower payments when Alicia’s boyfriend lost his job.”
“She ended up taking out a new mortgage in her name alone, from a different lender, with payments of $1,100 a month. She also took out a second mortgage for $28,000 to help her catch up on other financial obligations. Then, Emerson and her boyfriend spilt up. She was left with a house and a mortgage she could not afford.”
“‘It was awful,’ she recalls. ‘I was living in the biggest mistake of my entire life, and I didn’t know what to do about it.’”
“Before a foreclosure sale was scheduled, her house was purchased from her mortgage company as a ’short sale.’ She thinks the buyer got it for about $100,000 less than its market value.”
“Emerson has moved to Georgia, where she hopes to make a fresh start. But her troubles are not quite over. Although the short sale satisfied the first mortgage, she still owes about $30,000 on the second mortgage. She’s consulted with a bankruptcy lawyer to try to get that debt reduced, but she may have to declare bankruptcy.”
“One thing’s for sure: Emerson has lost all interest in becoming a homeowner again. ‘After all that’s happened,’ she says, ‘I’ve decided that renting is not so bad.’”
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The real Devil is falling prices. Sub-prime lenders and their customers, on both ends, ignored the fact that the Devil was lurking out there. Actually, all types of lenders, including “prime” lenders, were negligent are going to be Devil’s victims. As to bottom in prices…
http://www.safehaven.com/showarticle.cfm?id=10204&pv=1
…2. Nothing will stop real estate values from continuing their decline; they will continue to fall, from coast to coast, category to category, setting up an eventual “crash” when a global systemic event takes the entire market out at the knees. Just laugh in the face of those who say real estate is bottoming now or will bottom “later this year,” in 2009 or any other time in the next five years (at least). Certainly there won’t be a “bottom” until a meltdown of one sort or another comes to pass and until most conclude that buying real estate is a losing proposition. Anyone who says we’ve reached bottom in the meanwhile surely has something to sell you (probably real estate or stocks).
THERE IS ABSOLUTELY NOTHING TO SUGGEST THAT THINGS ARE IMPROVING IN THIS ARENA; IN FACT, as lenders get more skittish, financing gets tougher to find by the day and more cash down is required, THINGS ARE GETTING MARKEDLY WORSE. REAL ESTATE VALUES ARE IN FULL DECLINE, AND THERE IS A LONG WAY TO GO. It’s the top of the second, not the bottom of the eighth.
Credit Suisse projects that by 2012, 12.7% of houses in the United States — roughly 6.5 million homes or ONE IN EIGHT — will have been foreclosed upon (I think it will eventually be worse than that). Regardless, that projection alone is enough to cause significant strain on the U.S. economy, and that strain will only lead to more asset deflation. Suffice to say post-bubble real estate deflation has a long way to go, my friends.
Property sales require a willing buyer, a motivated-enough seller and an agreeable lender and there aren’t now — nor will there be — enough of these folks to go around for possibly a generation. Buyers, in particular, will become ever-harder to come by.
When “the government” starts bulldozing entire tracts of houses — and they will at some point — in an attempt to do SOMETHING about chronic and persistent housing oversupply and blight, we’ll start talking about “the bottom.” Until then, there is no bottom.
…
Jas
“The devil is falling prices”
That’s like blaming a refrigerator pushed off a high rise for killing a guy on the street. Falling prices = gravity
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What was meant is that lenders didn’t take falling prices (the Devil lurking in the background all along) into consideration. Of course, they were turning a blind-eye to that probability. They were counting on passing the risk to third, forth, fifth parties via securitization.
Jas
Agreed — falling prices is the economic analogue of physical law, not religious dogma.
“Credit Suisse projects that by 2012, 12.7% of houses in the United States — roughly 6.5 million homes or ONE IN EIGHT — will have been foreclosed upon (I think it will eventually be worse than that).”
Can somebody stop over and get me out of my fetal position?
Yeah, that’s a pretty horrific number. Can someone break it down? Does that mean from today until 2012, meaning about 2-3% of all the homes in the US will foreclose every year until then?
I agree, if that number proves to be correct, it will be quite the bloodbath. Remember, all those people will not only lose their homes, but will be unable to buy again for MANY years. That effectively removes a buyer from the market and adds supply, all in one swoop of the pen.
Wow.
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“Does that mean from today until 2012, meaning about 2-3% of all the homes in the US will foreclose every year until then?”
Only under an optimistic scenario. If one assumes that 15-20% Annual Rate of nationwide decline, that began in July 2007, continues and further assume that the decline is much greater in the most troublesome states (AZ, CA, FL, NV) in terms or mortgage lending abuses then the annual foreclosure rate if 2-3% would be very optimistic.
From March 2001 to April 2003 the US lost 2.7M jobs during a very mild recession. What if the US loses 5M jobs during 2008-09? During 2001-03 the home prices were going up.
Job loses and declining home prices are a deadly combination for foreclosures!
Jas
Not every house is a home. If 20% of all houses are owned by speculators, a 12% foreclosure rate means that only a little more than half of the speculator properties will be foreclosed on.
I’ve read that 40% of the foreclosures aren’t even occupied.
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“Does that mean from today until 2012, meaning about 2-3% of all the homes in the US will foreclose every year until then?”
Only under an optimistic scenario.
If one assumes that 15-20% Annual Rate of nationwide price decline, that began in July 2007, continues and further assume that the decline is much greater in the most troublesome states (AZ, CA, FL, NV) in terms or mortgage lending abuses then the annual foreclosure rate of 2-3% would be very optimistic.
From March 2001 to April 2003 the US lost 2.7M jobs during a very mild recession. What if the US loses 5M jobs during 2008-09? (During 2001-03 the home prices were going up). During the last housing price decline that began in 1989, preceding the recession of 1990-91, the nationwide decline was very small (peak to trough was –8.3% over a 4+ year period) and recession wasn’t made worse by massive foreclosures.
Simultaneous job loses and declining home prices, at 15-20% rate, are a deadly combination for foreclosures! They feed each other, i.e., the economy enters a vicious cycle.
Jas
Maybe this will help.
5. The “Wealth Effect” will morph into the “Broke Effect.”
after the litany of fears, there is a link to buy gold at the bottom of the article
these guys are just as evil as RE agents and loan officers, preying on the gullible
LOL! Yeah, if put a couple of gold flakes in a bar soap and one can wash away all one’s sins.
Man, you’re scaring me. Because of our down payment, if the market value of our house went to the 1999 level, we’d be fine. But beyond that, well, we’d be screwed.
“Credit Suisse projects that by 2012, 12.7% of houses in the United States — roughly 6.5 million homes or ONE IN EIGHT — will have been foreclosed upon”
Hi Jas,
This is a mind-boggling stat. I would be interested in seeing where this data came from. Can you please supply the source? Thanks. s
Tanzilo is greedy and evil incarnate….
Now we know why Uncle Buck is sick.
The ‘Real Cost of Money’ is a Minus 8%!
The cost of borrowing money at the Fed Funds 2% rate serves as a benchmark. If one uses the official Consumer Price Inflation index, then something close to a 4% CPI is the prevailing figure. The ‘Real Cost of Money’ is Minus 2% but only if one resorts to a bogus CPI figure posted. But wait! The USGovt reported CPI is a joke. Its purpose is to minimize Social Security annual increases, to limit federal pension lifts, to offer low phony inflation adjustments to many other statistics like economic growth (GDP), and to maintain a charade for selling USGovt debt wrapped in USTreasurys at low yield.
The divergence of the CPI from reality is a story in itself. The ‘Shadow Govt Statistics’ website removes nonsense, gimmickry and hedonic adjustments. The SGS folks offer a shadow of great value. The true Consumer Price Inflation is shown as raging near 10%, as its divergence from the baseline false statistic is widening steadily. This means the cost of borrowing money at the Fed Funds 2% rate is over 8% lower than the CPI. So money really costs MINUS 8%, which breeds speculation, and rewards it heavily. This differential is astonishing in its magnitude. Both ends will pull the differential wider, even lower rates and even higher CPI in future months. That fuels speculation and a broad attempt to seek effective inflation hedges (energy and medals) in protection.
Story in today’s Bradenton Herald (Fl):
http://www.bradenton.com/local/story/597080.html
Excerpt 1:
“He and his wife closed on their $522,500 home in December 2005. Five months later, they were sued for foreclosure and are still fighting to save their home.
Initially, Wilson says, he and his wife were told the payments on the 2,200-square-foot home on a large lot with a pool would be $2,500 a month, including taxes and insurance.
Instead, when Wilson and his wife got to the closing table, they learned their payments would be about $700 more, he says.”
Excerpt 2:
“I’m not trying to weasel out of anything. If I owe you $530,000 I’m going to pay it,” says Wilson. “Make this loan work with $2,500 (payments) like you initially said. And everyone walks away a winner. If you can’t do that, let us out.”
Mr. Wilson bought (?) the home in December 2005 for a sales price of $522,500 and a mortgage of $530,000 (from the article). That indicates he had no money in the game. Foreclosure proceedings began 5 months later; apparently no payment was ever made.
From the article they are still living in the home in MAY 2008 and have never made a payment.
The Bradenton Herald is using this story as the kickoff in a series on foreclosure victims.
If this first report is an indication, the BH has some very tough, analytical, professional reporters, (sarcasm).
BTW, it was a given that the kickoff victim was going to be black or hispanic.
‘where dreams take flight,’ he said. ‘Well, pretty much they’ve flown away.
Astute,… very astute …call me Al and let’s start an institute.
Dictionary.com Unabridged (v 1.1) - Cite This Source - Share This
as·tute /əˈstut, əˈstyut/
Pronunciation[uh-stoot, uh-styoot]
–adjective
1. of keen penetration or discernment; sagacious: an astute analysis.
2. clever; cunning; ingenious; shrewd: an astute merchandising program; an astute manipulation of facts.
[Origin: 1605–15;
“Roger Abraham stands in his driveway, one hand holding the newspaper, the other sweeping across the homes on Brentwood’s Solitude Street. ‘This one,’ he points, ‘this one, this one.’ All empty.”
If he wanted neighbors, maybe he shouldn’t have bought a house on Solitude Street, out there in Hicksville.
I still cannot fathom why people thought it was a good idea to buy million-dollar houses out in the middle of farm country, before the area is even developed. If you’re going to take a risk like that, you should get the property for a commensurately low price. It’s a bad deal on its face: the developer wants to take all of the appreciation related to what the area might become after development is complete and the trees are mature. You as a buyer are supposed to pay for this up front? Not.
“‘They told us we could refinance when the construction was finished with a negative amortization mortgage, which would make our payments between $800 and $900 a month,’ says Emerson. ‘But when the time came, they told us that kind of loan was no longer available, and our payments were going to be $1,700 a month. There was no way we could afford that.’”
Stupid people will always be their own worst enemy, can’t change that!
Get your money for nothing and your chicks for free…
Duck L’Orange might be the devil?
After all, he’s a tanning professional and would never allow himself to burn.
Great post, Satan sounds about right. Two recent examples from my neck of the woods.
Yesterday I took the kids to the park and met a guy who was there with his kids. He had purchased a house a block or two away in 2005 with a 5year ARM. He was having a hard time getting an assessment that would allow him to move into a 30 year fixed, ie he must have bought the house right up to his limits. Then he tells me that he bought it from a “friend” who was a banker, and his “friend” also gave him his mortgage. The trifecta the banker off loaded his house at the peak, paid no realtor commission, and got a fat commission for the mortgage. What a great “friend”
The second example was in 2006 when I sold my home. The guy who bought it worked for a land scapping company. Put down a whopping 2% and had 3 different loans at closing. When I saw this I asked his realtor if she really thought he could afford the house and her response was. Oh I’m friends with his family and his brother is the mortgage broker. There again “what a friend, what a brother”. The brother gets 3 commissions for each of the loans, the realtor gets a commission as well “Out of his pocket because I told her they would have to jack up the sale price to cover her commission if they wanted to buy it” I sold FSBO.
Selling your family and friends up the river for a few bucks sounds like the work of SATAN to me.
“Selling your family and friends up the river for a few bucks sounds like the work of SATAN to me.”
But in the years you mentioned it was all good because real estate was going up and would always go up and everybody got to enjoy a slice of the ever-growing RE pie.
People forget the public mood of just a few years ago, of the effects of the RE mania on the thinking of millions of sheeple. Many brokers and lenders thought their were doing the buyers a favor by shoehorning them into suicide loans. Many of them ended up commiting financial suicide just as did their clients.
SATAN does his best work with the lazy, and greedy people of the world.
Satan dines on all flesh–human flesh. The remainder of the animals operate through instinct-not reason.
O well. another realtor and lender would have hooked them later. The fish with open mouths,[ready to sign up] were fish bait from the start.
“You was my brother, Charley, you shoulda looked out for me. … I coulda been somebody, instead of a bum, which is what I am, let’s face it. It was you, Charley.”
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“Underlying this whole scheme was the assumption that the housing boom would never end and houses would continue to increase in value. It was a bad bet.”
As Bernanke assured the Congress, during testimony in March 2007 when asked about home prices declining, that home prices, nationally, will not decline but the price increases will decline to 3-5% annual rate. He peddled the earlier Greenspan line that the “froth” was only in some areas, but nationally there was no price bubble and no threat of prices declining.
The Devil of future price declines was lurking all along but people refused to see.
Jas
“…will not decline but the price increases will decline to 3-5% annual rate…”
Oops…
For the sake of argument, I’ve got to take up the opposing position here. Demonizing subprime lenders only make the job easier for the pols and helps them continue to build their cult of the hapless FB.
Ultimately the individual makes the decision to buy a house and ultimately it is that individual’s responsibility to get the facts straight before doing so. That, and the reality that had a lender refused credit during this boom they would have been labeled as discriminatory.
When buying I always made it a point not to listen to “friends”, go only to lenders I knew and had good dealings with, and hired a lawyer for every transaction - no matter how simple. My mortgages were both fixed and ARM and in each case the choice was tailored to what I was trying to accomplish.
Sorry, but if a wrench turnin’ community college grad like me could steer clear of trouble during this boom then what’s the excuse for all these FBs? Maybe everyone is not so “equal” after all? Awwww, he said it. So there.
Right there with you. The lenders were just offering a LEGAL product that the market demanded. The fact that people were willing to hang themselves out to dry using these loans is NOT their problem.
Think for yourself, and then make decisions. Business (all) is in the business of MAKING MONEY. They are never going to give you good advice, and are always going to try to take you for as much as they can.
This is not the fault of the lenders. This is the fault of the borrowers, plain and simple. The lenders are paying the price (many going under, massive losses, etc), what more do we want from them.
The ability to think for yourself is not the same as “smart”. I know many incredibly intelligent people who you could sell a sno cone to in Alaska, they just don’t have the interest/ability to independently think and break away from the herd.
Michael ,I agree with your post ,but in a lot of cases the loan wasn’t legal because of the fraud . Some of the loans the industry was offering were flawed and defective because they were based on people’s incomes going up to be able to afford the adjusted up payment . As you said ,the lenders will pay the price in defaults ,but many markets were inflated based on some sort of fraud .One of the jobs of lenders (IMHO)is to prevent fraud and the lenders failed in every way in this regard . It didn’t help that appraisers knew they would starve if they didn’t produce “hit the mark appraisals .” So, all parties involved in the contract ,including the borrowers, do not have “clean hands ” and the system was corrupt , IMHO.
Yes, but look how many FBs have come forward and now admit that the lender/broker doctored their salary? They are accomplices - pure and simple. They knew something was not the truth and didn’t do anything to stop it. What law could have prevented that?
Apparently not those laws spelling out the penalties for committing fraud.
let’s not forget Gary Watson, Leslie, David, NAR and CAR for promoting home prices never ever go down.
What greater incentive could there have been to buy a home with no money if you could refinance it as home prices never ever go down.
‘After all that’s happened,’ she says, ‘I’ve decided that renting is not so bad.’
And that will become the new mantra of the next few decades, I hope. [A "bitter" renter waiting to buy...]
Local observation: I was looking at Zillow and REO’s sure lower the comps drastically here in the OC. The 92683 zip shows few homes for sale, but REO’s are at least $100K below “normal” homes for sale in the same neighborhood. As foreclosures explode, I have a feeling REO’s going to be the new norm (esp. as long as sites like Zillow puts them in equal footing as non-REO’s).
a specific home — click “Map & Search” tab and zoom out to see other homes for sale at much higher prices.
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“The argument for Mozilo being the Devil”
Let us apply the Golden Rule — Would Mozilo have made the same loans with his own, or his mom’s, money? The answer is: no, never in million years. Making loans is not the same as selling soap, or cars, for that matter.
Schumpeter talked about the future catastrophes when bankers behave like salesmen. He thought that a good banker (lender) is one who says no and makes himself unpopular. Mozilo wanted to be very popular by helping people, especially less sophisticated, realize the American Dream. He thought that he was doing philanthropy. With other people’s money!
Jas
Mozilo has a mom?! Do you really think so? I thought he oozed up, or bifurcated, or fissioned or something to arrive on this particular astral plane.
Yikes. The poor poor woman. Imagine the shame and helpless horror she must feel.
I tend to think the apple doesn’t fall far from the tree. I’ll bet she’s a piece of work herself.
That’s a myth.
Look who you’re talking to. Olygal!!!
It sure was a windy day when that apple fell from the tree.
Remember that article where David Lierah was talking about his mother commenting on what she read about him?
“Property sales require a willing buyer, a motivated-enough seller and an agreeable lender and there aren’t now — nor will there be — enough of these folks to go around for possibly a generation. Buyers, in particular, will become ever-harder to come by.”
Amen. Think of all the FB’s out there. Candidates to trade up? I think not. And for those who lose their houses, they either can’t or probably won’t want to buy a house for many, many years.
Here in the Bay Area, sales are down by almost half in some areas versus 2007, and probably down 70%+ since the peak. There just aren’t that many willing & able buyers at these prices.
The pillars of bubble demand have crumbled, including move-up buyers, liar loans and myriad variety of subprime loans, to name but a few.
I was watching some political punditry show and I think it was George Will who said that Mencken or some such person once said that the Dems were the evil party and the Reps were the stupid party. I’m not getting into some political partisan debate here, it is just that then I realized that evil and stupidity are at least close cousins, if not the same thing, when you consider that a lot of evil comes from stupidity. So stupidity might just be the Devil here.
Having said that, I always like to keep a pulse on Ruskin, Florida, because I want to see what housing prices are doing. In my search on realtor.com, I added other nearby areas to the search, one of the areas being Palmetto, Florida (not to be confused with my screen name. Palmetto happens to be a town just north of Bradenton, Florida and south of Ruskin.) I was shocked at the number of lower end foreclosures (less than $100,000) that are showing up and it is growing all the time. There’s a certain part of Palmetto that has a large African American and Hispanic population. I plan on taking a trip to scope out some of these houses, but I’d be willing to bet that these houses were sold to minorities on a subprime basis. That really sucks. Most of these people don’t need any further de-stabilization in their lives. I’ve also spoken to my sis up in Connecticut and in some communities, like Danbury, where many houses were sold on a subprime basis to minorities, it’s a completely sad story. Many of these people were thrilled, they never thought they could own a home or get a mortgage (and they were, in essence, correct) that when they were shoehorned into a home, they were like “Pinch me, I’ve got a house!”. Neighborhoods started to upgrade as people began to fix up their homes and take care of the property. Then, when they find out they really can’t afford it, they become bitter and trash the place, making these upgraded neighborhoods worse than before. Sad. And indeed evil.
However, it goes back to my premise of evil being stupidity. Most of these people, minority and otherwise, who took out subprime loans, cannot think for themselves. They are so used to being told what they can and can’t do by others in life, that they themselves cannot decide whether or not they can afford a home. If the bank tells them they can afford it, then it must be true.
Hey Palmy, come on down and I’ll buy you a cold one.
“Most of these people, minority and otherwise, who took out subprime loans, cannot think for themselves.”
This one’s a very tricky topic. Who’s responsibility is it then? Once the individual is absolved of having the ultimate responsibility it opens the flood gates to all sorts of mischief. I’ll argue that stopping the buck with the buyer remains the best way to have avoided this. Otherwise we’re left with a patchwork of shoddy uneforceable laws whose only reason for existence is to protect some people from themselves.
I disagree. I think that the buck stops with the LENDER, not with the buyer. Yes, many buyers cannot think for themselves; but I don’t think that we need laws to help us, the free market should work in this case. The lenders will (or have) stopped making crazy loans to those who can’t afford them, so that problem is solved, and will never happen again.
Once the lenders are using their own money, all of the sudden, stupid/crazy loans are going to just disappear. Nobody got smarter, but all of the sudden, the subprime crisis ends…
Hmm…. What happened?
“I disagree. I think that the buck stops with the LENDER, not with the buyer.”
I’m with you on this one. When I bought in ‘96, the bank would not qualify me for more than 3x annual gross income for a purchase price. And I had to make a down payment, document my income, hit debt to income ratios, having savings in the bank, etc. There just wasn’t any way to buy at 5x, 6x, 7x+ annual income with nothing down. It wasn’t allowed. Period.
It was ALL about proving you could afford to pay back the loan, because in those days, the banks kept the paper. With the secondary market vanishing, I have to believe those standards will be making a come back.
You have a point, but I’ll have to stick to my belief that the buyer remains the single most important actor who initially set this whole mess into motion.
People buy stuff all the time based on emotion and half-baked advice. The only party that can really know if a house purchase can be affordable (over the long term and accounting for all reasonable contingencies) is the buyer. No lender can ever fully determine the true capacity of an individual buyer to pay it all back - they can only classify the level of risk and charge accordingly.
I don’t think it’s that tricky. It appears tricky because the “buck stops here” mentality really doesn’t work well outside of artificial, single-point of command structures.
The premise that there should only be one person who bears all of the responsibility doesn’t fit this situation. I’m all for individual responsibility, but in the same spirit, the individuals in investments banks who placed foolish bets on subprime mortgages should also bear personal responsibility for those decisions. By unnaturally forcing all of the blame on the shoulder of the house buyer, you are absolving the people in banks who made foolish bets in the subprime market.
I don’t see any problem with saying that both the lender and the buyer need to suffer the consequences of their decisions. If you absolve the lenders, they’ll just start another bubble in a different asset class under the excuse of responding to “market forces.”
I always thought that “evil” as a concept was a little bit of a caricature. No one, even people who committed vile atrocities, ever woke up in the morning and decided to be evil, like a comic book villain. Even Hitler and Stalin believed they were working for good.
This why I think demonizing Mozillo and other Captains of Subprime does little good. The root cause of the problem is pure old-fashioned greed: It deluded people into taking actions against their own self-interest. Mozillo & Co may have nudged people along a bit, but anyone who does not continually and critically examine his choices is quite capable of deluding himself, without any outside help.
“…continually and critically examine his choices…”
Well put.
“I don’t believe anyone needs ‘coercion’ to enter into the arena of ‘the devil.’ Man is lead of his own lusts–innate. It takes power to resist ‘the devil.’”
Resist the devil, and he will flee from you.
(Take it from someone known to wear Jesus sandals occasionally
)
I’ve got a pair of sandals, made by Jesus.
Professor Bear ….That why civilization came up with the “rules of the game “,so humans don’t kill each other in the pursuit of the greedy insecure self that lurks in every human .
Now only does it take power to resist the Devil ,but it takes a Society that will punish if one does not resist the Devil .
Too bad God did not create humans smart enough to achieve the lofty religious ideals of peaceful and harmonious coexistence.
“And the Lord God saw everything that He had made, and behold [it was] very good….Gen 1:31
Everything is good for the purpose for which it was created.
When will the FB’s admit that they bought into the easy money ,buy now and refinance later real estate scheme that was promoted on a National level ?
Was the media warning people about toxic loans and inflated prices ,or was the media advertising the next great spot to invest in real estate ?
The housing mania was really a stupid scheme that relied on toxic loans and greater fools ,but fraud became necessary to keep the party going also . Thanks to Wall Street ,the money kept coming to fund this absurd real estate scheme .
IMHO ,you don’t mess with food and you don’t mess with shelter ,so the Devil really got it’s way this time . For the entire Nation/World on every level to be this brainwashed into a fake real estate scheme is a telling sign that people are always tempted by easy money . Never before were so many people willing to commit loan fraud while they were helped by the professionals they trusted . Didn’t the borrowers parents teach them that if they have to lie to get a loan ,something is wrong ? It’s amazing how few people reported crimes by these agents or lenders until real estate went down and the the FB realized they were the fools . The industry had all the fake answers for the sheep that bought into the housing scheme like “Rich Baby Boomer will buy your condo “,”You can always refinance or sell or pull out money and live off your house because real estate always goes up.”
Human potential for falling for get rich schemes goes back to the urge for efficiency . It’s efficiency to get rich quick rather than work years for it . Even plants search for the shortest and quickest route to the sun to the point the plant will contort its vine to get the sun .Ok, forget it, I’m really going nuts this morning . The Devil made them do it because the human seeks the quickest route to the Sun . I think I will go watch some TV for a while .
“The Devil made them do it because the human seeks the quickest route to the Sun.”
Excellent metaphor. Almost everyone wants to be financially set, and almost everyone wants stuff, leisure, and beauty, but achieving such things can be tedious, if not impossible, for a fair percentage.
I don’t blame stupid people for jumping on the bandwagon, but didn’t any of the smart ones realize that there had to be an endless stream of unsophisticated buyers with access to easy credit to keep the mania going–each selling to the next sucker downstream? This was a classic pyramid flim-flam, with everyone selling back and forth to each other, and prices escalating for absolutely no reason other than fraud and orchestrated frenzy.
Keeping up with the proverbial Joneses is expensive and exhausting. Why does anybody bother? In the end, it doesn’t make a whit of difference, especially to the Joneses eternally fixated on their own navels.
Hello, Incredulous. And just like pyramid scams, hope springs eternal. I think many people feel locked out of any sort of prosperity in the US, especially since the advent of globalization. Sure, I can criticize many of the FBs all I want, and I have. But for some, hope took the place of intelligence and critical thought. They’ve been looking for a brass ring and found it in the housing bubble. So they made a desperate grab for it. The conditions were ripe for this bubble. Flim-flam, lying, fraud, superstition, all these things came into fashion with the Bush administration and people were just following the lead of “their betters”, the politicos and the Wall Street boyz. They have learned the deck is stacked against them by “their betters”.
Personally, I think it is time for a second Declaration of Independence, in which people declare their freedom from globalization, corporate fascism, the FED and Wall Street, and set up another system with hope and education working together.
The Declaration Of Independence gives us the right to kick the treasonous bums out of office (it actually says, it is our duty). It would be nice,if we Americans had the chutzpah. The DOI is an interesting document, we should use.
Hi Palmetto,
I don’t think it will happen, but, then, I thought “Clockwork Orange” depicted an inconceivable future. Dumb me.
“Personally, I think it is time for a second Declaration of Independence, in which people declare their freedom from globalization, corporate fascism, the FED and Wall Street, and set up another system with hope and education working together. ”
I’ll second that!
“Keeping up with the proverbial Joneses is expensive and exhausting. Why does anybody bother?”
And which party, the lender or the borrower, was the one trying to keep up with the Joneses? Lenders had to compete because they are a business and must address their competition - buyers OTOH - did not have to compete with anyone and could have opted to take the kids to the zoo on some Saturday afternoon instead of touring houses with some slimy agent.
‘Human potential for falling for get rich schemes goes back to the urge for efficiency . It’s efficiency to get rich quick rather than work years for it . Even plants search for the shortest and quickest route to the sun to the point the plant will contort its vine to get the sun’
Well, and the fact is, there have got to be lots of people for whom this massive crazy ‘Lending and Pretending’ time has worked out well, or even very, very well. Not every greedy over-stretched homebuying liar will end up boo-hooing on the pages of a newspaper article on foreclosures, to be ridiculed by and become the merry butt of cruel HBB jokes. Alas.
Unfairly, some greedy get-rich-quickers surely DID. And that makes me mad, especially if they are developers. I hate those guys. (I may have mentioned that once, in passing.) So I’m going to go ahead and hope that such as these fall off their yacht in Tahiti and get eaten by sharks. Sharks that take a long time, and also, they are ugly sharks.
Like a nurse shark, with all those gnarly looking teeth? Although, I don’t think they eat people - what a waste of those fabulous choppers.
Olympiagal, what do you REALLY think of developers?
If you could see what they’ve done to Florida, you could write one of your witty novellettes in about ten seconds flat, and if there is any justice, it would be an instant best-seller.
novellettes = novelettes. Sorry. I didn’t proof.
Liar Loan = Lucifer Loan
‘Are subprime lenders the devil?’
For the first time posting I didn’t even bother to read the articles first. I saw the thread title and just zipped on down here to shout a resounding ‘YES.’
Of course, they are but a few of the devils, in a vast roiling, seething muddiness of evil-doing greedy wretches, but I like to see devils called as they are.
No one ever went broke underestimating the intelligence of the american people. Or something to that effect. The crime has been done, now the payback begins, no matter who is at fault we are all going to pay in one way or another until things balance out. Smarter people will survive well others not so much. Just keeping a roof over your head will be tough in the next few years, and food, that is still up in the air, way up.
We need to turn ploughshares into collateralized loans.
MY ONCE EVERY COUPLE OF YEARS, BIG LONG POST
by Auction Heaven in ‘07
Back in 2004, I was posting long litanies on this blog detailing what the real problem is, and was. It hasn’t changed at all, but we are further along in the process.
Basically, since capitalism defeated communism America has been moving toward Globalization. This is why the terrorists are trying to kill us. We have been successful beyond our wildest dreams.
So successful is our way of life that it is being adopted by people who never dreamed they’d be adopting it. Let’s face it, free market capitalism is envigorating. Contrary to what some of the socialist/communist types out there might say, it isn’t so much that we’re ‘pushing it’ on other countries, it’s just that it freaking works. It works so well, that in some ways, it’s come back to haunt us.
What the hell is he talking about, you’re probably asking.
I am talking about wages and land values.
As capitalism becomes the way of life adopted by the entire planet, which it is, there is one significant downside risk for Americans.
Prices.
Prices must adjust DOWNWARD to meet the prices of the rest of the world. As this happens, prices in the rest of the world go UP to meet America. Eventually, equilibrium is reached and the system as a whole functions with less financial interruptions.
But we aren’t there yet. Not even close.
In the wild stage between the overthrow of communism and the complete adoption of capitalism we’re about 2/3 of the way.
Mr. Bernanke knows this, as did Mr. Greenspan.
They have both written extensively about it, but it isn’t sexy and tends to be complicated so it doesn’t get much press.
It is, however, the Truth.
There is a day coming when the wage of a drywaller in Los Angeles will be exactly the same- or close to- the wage of a drywaller in Brazil. And Russia. And Indonesia. Same with housing prices.
There will be gives and takes, obviously, but I’d like to focus on some of the good things to come. For instance, living in another country, or even owning property in another country, won’t be the hassle it is at the moment with all the passport problems and stability problems involved with foreign governments. Eventually, the world will be one big market, with very little difference between one market and the next.
This DOES NOT MEAN that VARIETY will suffer, and local cultures will be ’stamped out’. In fact, the opposite will occur. Local cultures will thrive- eventually- under Globalization, in much the same way the indian cultures of the American Southwest are now making a comeback. They found a way to integrate themselves, yet not become absorbed- in the world culture. The indians have achieved this through casinos, and they work very, very well. Yes, I have firsthand knowledge of indian casinos. And no, I don’t have any complaints.
At the very same time that many of these tribes are operating their casinos, a new wave of indian pride has emerged. Indians are getting back in touch with their original culture AS WELL AS thriving in the global marketplace. It’s wonderful to see it in action, believe me. It also goes against what many of the anti-Globalists have been preaching, as they throw their malotav cocktails on television news reports.
So what the hell does nay of this have to do with housing?
American housing needed to adjust to global pricing to become competitive. That’s what it’s doing now. That’s where the Federal Reserve knows it has to go.
What was NOT expected by the Federal Reserve was the backlash.
The Fed simply DID NOT count on a massive wave of Americans quitting their day jobs and turning into house flippers after 9/11. Christ, I didn’t even see THAT coming, and I’m pretty damn on top of things.
Yes, 9/11 threw a wrench into Globalization- but on the other hand- it provided an opportunity. Accidentally, by having to invade two countries that we hadn’t been expecting to invade, Globalization now stands at becoming a possibility even faster than many had imagined.
Some may scoff at the idea that we are ‘bringing democracy to the middle east’, yet this is exactly what we are in fact doing… albeit a bit clumsily, for sure.
The plan to integrate the middle east into Globalization wasn’t envisioning it happening any time soon. Now, all that has changed. There are some estimates that say that the entire middle east may become a free market capitalist region by the 2020’s. I would say that this is very possible.
But let me be clear: This isn’t a case of Americans running around ‘pushing this’ on other countries. It’s more a case of us ‘introducing it’, and the other countries taking it, and running with it. As soon as people learn how to make their own money, and make a profit, capitalism is very very hard to stop. It’s a cat that just won’t go back in the bag, if you will.
So, you asked about The Devil, and who that might be in our current situation.
I’d say The Devils are those WHO KNEW where we are headed, such as Mr. Mozilo, and used his or her knowledge to decieve innocent or even greedy people into believing otherwise. Everyone with a brain, including Mr. Mozilo knew this was a bubble- meaning the prices, just like oil right now- were not justifiable- and took advantage of people.
I believe that having knowledge means you have a social duty to EDUCATE and HELP other people. Using your knowledge to TAKE ADVANTAGE of others is not fair, in my opinion. Many of the banks, including Mr. Mozilo’s, did just this, and that’s why I have been fighting so hard AGAINST a bailout of any kind for anyone.
In conclusion, America has to go through a period of deflating prices on just about everything to become competitive with the rest of the planet in Globalization. Our prices will eventually come down, as their prices go up. It’s just the way things are going to be. For the moment, yes, we will go through a short period of hyperinflation. This will not last long, as many of the people here on Ben’s blog have pointed out.
So as for Globalization, one can choose to fight it, go along with it, educate people about it, or take advantage of people.
I choose to Educate people about it.
Sorry if that was the longest post of all time, but I do think that on occasion someone needs to set the record straight about where we are and where we are going. My track record on this blog speaks for itself.
I say things that are often irritating, or jolting, or even laughable- but often turn out to be true. That’s because I know where this ballgame is headed. Once you see The Big Picture, everything else just falls in line.
The current threat of veto from President Bush really is a stunner, though, I must say. A nice surprise. Proves he’s much smarter than many of us gave him credit for. Looks like he got an education from Mr. Greenspan, Mr. Buffet and Mr. Bernanke.
I really do worry about his safety, however.
You can’t go up against that many billions of dollars and sleep easy.
The poor guy is probably having a lot of very tough nights.
Stay on the right path, Mr. Bush, stick to your guns, and we just might make it through this.
Now I’m going to go back to lurking, since most of you are right on track and don’t need my help.
Congratulations to all of you, once again, for raising your voices loud enough that you got the President’s attention- OVER THE BANKS. That is no small victory. You should all give yourselves a pat on the back, for sure.
Sorry for the enormously long post, once again, but it did need to be said. You may all feel free to throw stones at me now, if you wish.
Eventually, when the kinks of Globalization get worked out, most of us will be very, very happy with the benefits. It’s just going to be a bit of a pain in the ass getting there, is all. Only 1/3 of the way to go.
Peace.
Where do you stand on the timing of “auction heaven”? Through the lens of hindsight, 2007 appears a bit premature.
I picked that name three years before 2004. Back then, if I recall correctly, it made a lot of bulls very angry. Most of them laughed at me. Yes, I know- and knew- just like you, that most of the Real auctions weren’t going to happen until 2010 or so. I just wanted to make the bulls do a double take about their certainties of +15% gains in the housing market. I wanted to make them think twice. It was never intended as a perfect name.
It was a declaration of War, is what it was.
Auction:
I really think you underestimate how DUMB most America have become. I am having the worst time in my life getting a job.
Everything from people not retuning emails to never answering a telephone or a message. Its damn impossible to walk in to a company and just ask for a job anymore…..Then when you get anyone its usually some Clueless Paris Hilton fluff bunny.i cant tell you the last time i actually talked to an ADULT about a job.
I think You totally underestimate how many dumb people got hired over the last 10 years and what if they get promoted? Did you ever go into a Mortgage office and see the cute airheads selling you a mortgage….WHERE WERE THE ADULTS?
Then, Afghanistan is back to growing record poppy crops, and Religious morons are killing each other over a childish taunt:
My god is better then your god, if you don’t believe me i will kill you”
And you call this progress?
You are correct about the ‘dumb’ doing well in the last 8 years.
Totally true.
Hang on.
Smart people are coming back in style. Just hang on.
brilliant post, thank you ah
Gracias.
I’m good at the long term. For short term wisdom, and long term wisdom… listen to txchick57. That’s a genius, right there.
Interesting post. But can the natural world withstand the successful Globalization you envision? We may win the battle and lose the war. Bill McKibben, who wrote Deep Economy, thinks we only have until 2012 to sort out our carbon emission problem. This is based on a new research paper published by the head climatologist at NASA.
Auction - You may be right or wrong about the big picture… but in one important way that you seem to be off base. Correct me if I’m misreading your post but it sounds like you are suggesting that the process of globalization will play out WITHIN A SINGLE HUMAN LIFESPAN such that the US worker alive today will see a benefit (???).
The entire history of the US was based on the dream of each generation doing better than the last. This dream is ending and it will not die quietly. We cannot fathom what directons the herd of sheeple will run in once the reality of their fate sets in. The shift in fortunes for the majority of US workers started about 30 year ago. The end of the dream of continual progress for each generation was made less visible by additional family members entering the paid workforce, then by extending credit to everyone. This 30 year growth of credit and debt culminated in the latest mortage/credit card/student loan orgy. Now we are entering the crash.
I agree with you that a person who does drywall in Los Angeles will eventually have pay and expenses similar to the person who does drywall in a developing country. BUT this will not happen in our lifetimes. The person doing drywall in Los Angeles will have a worse standard of living than his or her father who did drywall in Los Angeles, their offspring doing drywall in Los Angeles will have a more harsh existence still.
Eventually all wages and expenses for workers will reach equilibrium and there will be an opportunity for workers to improve their lot. Generations will be born and die off before this happens.
Personally I believe that we (as in “we the people,” the taxpayers, the vast majority) should be playing the game of globalization to win. Instead we elect leaders who serve multinational corporations. To our government, the US people are nothing special, just one played out market among a sea of other markets. The most expedient way to profit is to just exploit the ripest market then move on. We, via our elected leaders, sold our seed corn.
You may be correct about how long this might take. It might take longer than I envisioned. On the other hand, things are moving rapidly.
On the point of the US somehow ‘winning’ Globalization, I don’t think that’s possible, or even wanted. It would be like Orlando beating New York, or Nashville beating Lousiville. If we’re all one market…one global market… why must we focus on beating each other?
I understand where your idea comes from.
You want to see America ‘gain’ something from this.
We already have. We have a head start. In fact, we have the biggest head start in the history of earth.
What matters, is how we use it.
For the past 8 years, we chose to flip houses. Not a stellar way to spend our time, when we still have AIDS to cure, and cancer to beat.
We got our priorities wrong, is what happened.
Thus, the way to ‘win’, if that’s what you want, is to get back on track. Innovation, not house flipping, was America’s head start.
We need to get back to being Rebels, instead of Followers, to do this.
What I meant by “winning globalization” is that we act with policy intended to better the life of the average US person: the US taxpayer - - the employers of the US government - - me - - the majority of the people.
We should benefit from the policies and laws enacted by OUR government - - instead of what is happening which is the EXACT OPPOSITE!
We are on the losing end and the winners are the multinational corporations who have bought and own our government. We are, in terms of the US people, playing globalization TO LOSE!
Basically giving corporations the benefits of doing business in the US, and then paying them to screw the US people and move operations seeking the lowest cost workers that they can find on the planet.. and then going cheaper… and cheaper. We cannot compete with nations that are working a business plan to better the lot of their people and PLAYING TO WIN!
Our system of education burdens our youth with tens and even hundreds of thousands of dollars of student loan debt = our youth cannot compete with countries that are maximizing and benefiting from the talent of their people and PLAYING TO WIN.
Even in terms of the health and environment the US is working backasswards against its own people, importing cheap foodstuffs grown with known cancer causing chemicals that are outlawed by other countries to protect their people, again because they are PLAYING TO WIN! We import cheap products manufactured in ways that harm our interconnected environment, the ultimate PLAYING TO LOSE!
We play to lose by not supplying a safety net for US workers. If you saw the film Sicko you may remember the uninsured man that had to choose which amputated finger to reattach based on the cost? Well, he might have been a more productive globally competitive worker with all his fingers attached. Yet another policy demonstrating that the US is not PLAYING TO WIN!
And this is not a zero-sum game! The US worker winning does not mean that the African worker must lose. Explain to me how any of the above examples of how the US worker could WIN means that anyone else must lose.
We need government policy that amounts to a business plan with the goal of “WINNING” to better the lives of US workers.
Winning is not our current goal. Far from it. There is not even the pretense that acting in the good of the people is our goal. Our government is not even lying to us - they don’t have to. We accept our fate.
We as a people have accepted the tenents of the “ownership society” and know that our government serves the few. We believe that we have the opportunity, if impossibly unlikely, to rise to the status of the few and benefit from US policy. We are, in the majority, gamblers. We deserve our fate. (The minority, the realists, on this board are the ones that suffer from the grief of seeing what we as a people are doing to ourselves.)
We as a country have sold our seed corn. The gold coins are in the pocket of the multinational corps and they have moved on to greener pastures.
‘Sicko’ was a fantastic film, and in my opinion, should have been best Documentary.
You make a number of very good points, and your frustration is backed up well by current events and states of the economy.
All I’m trying to say is that, we, as Americans, are simply going to have to go through short term pain to get to long term gain. That’s it. That’s the message.
Here’s an analogy…
You’re the older brother. You have one younger brother. You both play basketball. Since you’re older, you’re taller.
But- being a ‘good’ older brother, you have taught your younger brother well. Even though he’s almost a foot shorter than you, all the knowledge you’ve passed on has taught him the game, and he knows it well.
Since you’re taller, though, you feel pretty good about teaching him the game. You can still snuff him, easily, any time.
Flash forward a few years.
Surprise. Your brother is now taller than you, and looking at a full ride scholarship to Indiana, while you’re looking at getting your first big job.
It does bother you that your little bro grew taller than you, and that he is going to get a full ride, but there are benefits coming you can’t imagine.
For instance, let’s say he gets the scholarship, becomes a star, then goes pro.
One day, you get a call.
Your little brother wants you to apply for a job with the Los Angeles Lakers. The job might quadruple your salary.
Since you were good to him, he’s being good to you.
This is what I’m talking about.
Does that make any sense? I hope it does.
It’s all about cooperation, and helping others become Independent- not Dependent.
Teach a man to fish, versus giving him a fish. That sort of stuff.
So, yes, there is short term pain involved in the equation. And no, there isn’t anything anyone can do about it.
Your little brother is getting taller.
So, my advice is, keep being a good person, suck it up, and deal with it.
Maybe one day, he’ll get you a better job.
you can’t become a winner by focusing only on the obstacles
obstacles will always be there, stay focused on opportunities
the “woe is me” handwringing is tiresome
Maybe we can sell Amway!
I agree with a lot of your post AH ,but I’m not so trilled with this idea of a Global Market and that this is the only route . IMHO ,a Global Market might be good for Corporations ,but not good for the American worker .Also, you can’t have different Nations playing by different rules ,yet expect each Nation to be able to compete on the same level .
While this American Nation spent decades improving the lot of the average worker ,so that the Corporations would have to share their profits and provide decent working conditions ,this last decade the powers did everything to break down those hard won gains for employees in American History .
It will reach a point where Americans will need decent wage jobs ,or the whole ball of wax goes down the tubes in favor of the profits and efficiency of the Corporations .
Capitalism is a good thing on a level playing field with rules of the game in place .I don’t see anything wrong with developing political policies in favor of the survival of the life style that Americans enjoyed for years that encouraged a strong middle class with amble wages . Only when you have a rich and poor class making up the majority does corruption flourish and freedom becomes a idea that can not be lived out in practice .
As this plays out, we’re going to understand that we actually have more in common with people from other countries than we thought.
What must be eliminated, is corruption.
This is why America leads, and is leading Globalization.
Law and Order ain’t just a TV show. It’s what truly seperates us from the rest.
As Globalization stabilizes, I believe you’ll see most of the other nations of the world attempt to create an American system of Law and Order.
Sure, we might have acted like total idiots for the last 8 years by flipping houses, but hey, we weren’t running around killing each other, at least.
That’s all meant to say that you don’t have to worry about losing your American values. You aren’t losing them. Other people are copying them.
Help them.
Help Africa. Help stabilize it. Help get Africans clean water and education.
It will all come back to help you, and your future generations of children- in spades.
You can’t help people unless they want to help themselves. You can build schools, but you can’t force them to learn. You can build purification plants, but you can’t force the people to maintain them. We are $53 trillion in debt, including SS and Medicare. I say we start paying off our own massive debt first by pulling our military out of every corner of the planet and start rebuilding our own infrastructure and schools.
Yes, this is the scary part.
The part where people feel like Protectionism actually makes sense. All it means is that people didn’t count on a ‘victory’ coming back to have any sort of negative effects.
I realize many of you don’t like Mr. Greenspan.
You believe he is the person to blame for the housing bubble.
I would still disagree with this.
Mr. Greenspan did not force people to take the free money- and go flip houses for eight years. It wasn’t his job- nor is it Mr. Bernanke’s job, to tell people what to do with the money.
If they did, we’d be living in a Socialist society, not capitalism.
Therefore, I would argue that all of the factors that make you want to become isolationist, or protectionist…
…have come from the misjudgements of your fellow Americans.
There are many, many smarter things we could have done with that free money Mr. Greenspan gave us.
The smart people on this board are actually angry at the stupidity of their neighbors, and what they did with the money.
I would say before you freeze up the borders, and pull back from all the contact we currently have with the world…
…you need to give the backlash that’s happening a bit more time to play out.
In other words, the stupid folks that have made all of our lives a living hell for the last 8 years- you know, the idiots down the street with the 5 HELOCS, the 4 houses (all underwater) and the four cars- all leased- these are the idiots who are being flushed out over the next few years.
Give it time.
Smart people, and being smart, will come back into fashion.
In the stages of grief, we are currently at Anger. Next comes Bargaining.
We still have a long way to go. A lot more flushing.
Don’t go Protectionist just yet. Hang on. You’ll see in time it will pay off, or you can hunt me down, and tar and feather me.
“I realize many of you don’t like Mr. Greenspan.
You believe he is the person to blame for the housing bubble.”
—————————————-
In Greenspan’s defense, he didn’t create RE bubbles in Ireland, Spain, New Zealand, Canada, Turkey, etc.
but that kind of talk doesn’t sell many Krugerands
Time for me to go back to lurking for a while, and STFU.
You folks are doing fantastic on your own.
Keep going.
Thanks to Mr. Jones and all the brilliant minds on this blog, we are smarter as a country. No kidding.
Peace.
But Greenspan may be responsible for keeping US interest rates too low, when the US dollar was the major reserve currency for the world. This led to overconsumption and excessive debt everywhere. One job of our central bank is to keep currency stable, and the main reason the USD was stable was that China propped it up so they could keep their industrialization bubble going. The combination of a large government deficit and low domestic interest rates should have pushed the dollar down years ago.
People respond to incentives. Americans had no incentive to save and constant enticement to borrow - so surprise, surprise, surprise, they didn’t save and financed their consumption with borrowing. Which, at 18+% compounded interest, there was never ANY hope of repaying on the scale that it eventually reached.
And don’t forget that the Fed, though “independent”, is part of the same government that was blithely and spectacularly breaking all records for deficit spending. Structural government deficits require trade deficits. It may have been incompetence and “going along”, not conspiracy, but it was coordinated and it was unfathomably destructive.
To get out of this, we need to return to positive savings and a structurally balanced budget, which will at least in the short term require a trade surplus. Unpayable debts will be erased to some very large degree (either through forgiveness, default or bankruptcy). There may be high inflation as well. OUCH! That’s gonna hurt.
Auction, Your views are pretty simplistic: You need to travel more. Iran had an American system of Law and order enforced on them and look where that got them.
I’m with Jerry on this one. There are multiple pre-requisits to getting a modern society. People have to want it.
Nobody will ever answer the question on how the American worker is going to compete with slave labor from other countries without reducing their standard of living to the level of the slave worker from other Nations.
It’s one thing to engage in trade between Countries and it’s another thing to give all the American jobs to people from other Countries .A import tax should be added to any Corporation that brings junk in from other Countries .What kind of idealism could suggest that you cut your own throat so the rest of the World can advance ?
If the developing Nations want to copy America ,let them do it ,but we don’t need to give up the American way of life in order for the outside World to get ahead .
This Global market concept is a faulty one and it’s just a bunch of spin from the Corporations . Unless you have a World that is playing on the same playing field ,you can’t have a global market that benefits any one but the Corporations .It might be a great concept that the Corporations can go anywhere in the World and find the cheapest way to make a product ,but it will get to the point that the Americans won’t even be able to buy the cheap products if they don’t have jobs .
The Corporations are short sighted in that they expected to get products produced and serviced by cheap labor and than sell those products to Americans at a tidy profit ,while at the same time they were slow but sure taking the jobs from Americans or reducing benefits .
As I said before ,you can’t even suggest that Americans can compete with slave labor from other Countries without reducing the American lifestyle to one that is something I don’t think most Americans really want if they thought about it at all . Americans could boycott all products not produced by labor in America and show the Corporations that they won’t play this self-serving game the Corporations came up with .
With a Global slave employment market determining labor costs ,you have just leveled out the playing field to the lowest level of survival . Let the world come up to the prior standards of America ,rather than America going down to standards of wages and working conditions that exist in these Countries that the Corporations are so interested in .
You cannot put the cart before the horse and expect that Countries will move into a higher standard of living when they have no rules or laws that will insure that they move up the wage ladder . It won’t work ,I tell you ,it won’t work . Even in America the advancement of the worker rights was a slow hard fought battle . Now I admit that the Unions went a little to far with their demands ,but this was no call for the Corporations to sell out America .