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"This Is What Happens When You Lend Money to Poor People"
Why Michael Lewis is a god among men:
So right after the Bear Stearns funds blew up, I had a thought: This is what happens when you lend money to poor people.
This is the lede of a hilarious piece on what the hell happened in the sub-prime mortgage kerfuffle. Other lessons Lewis has learned (and managed to articulate with his tongue stuffed into his cheek) about the poor--and "by poor, I mean anyone who the SEC wouldn't allow to invest in my hedge fund":
* I trusted these people to get their teams of lawyers to vet anything before they signed it. Turns out, if you're poor, you don't need to pay lawyers. You don't like the deal you just wave your hands in the air and moan about how poor you are. Then you default.
* It was my fault, for not studying the poor more closely before I lent them the money. When the only time you've ever seen a lion is in his cage in the zoo, you start thinking of him as a pet cat. You forget that he wants to eat you.
* Lending money to poor countries was a bad idea: Does it make any more sense to lend money to poor people? They don't even have mineral rights!
Lewis is right, as always, underneath all the jokes. Money culture matters--people with no money do think differently about money than people who have lots of it. So for those wondering how class war looks to the Other Half, here it all. Laid out for you in black and white by a man who is pretty sure that the moment he got "out of touch with 'poor culture.'" was when he "stopped flying commercial." Awesome.
For more Lewis, read Matt Welch on Moneyball.
|9.6.07 @ 10:48AM|#
KWV- Should a journalist, even a Yale-educated one, really be snarking about po' folks?
|9.6.07 @ 10:53AM|#
Who am I supposed to bail out? People who took mortages out on
houses they couldn't afford, or those who gave them the mortages?
To both groups my response is "You made your bed, now lie in
it."
Oh yeah, "And quit whingeing."
:-|9.6.07 @ 11:09AM|#
If you're PC you're not a libertarian. No rules, just
right.
Not that you might not be a dick...just sayin'.
|9.6.07 @ 11:09AM|#
The article is sort of funny but I wonder why KMW linked it here - isn't Lewis mocking the rich man's patronizing indifference to the plight of the poor? I say this is odd because libertarianism is a wealthy man's philosophy, not a poor man's.
The Extispicator|9.6.07 @ 11:11AM|#
In an "amen" to J sub D, I would add that I don't feel the need to bail out multibillion dollar investment banks, neither to I feel the need to bail out the irresponsible borrowers. Not just for justice reasons of "the idiots should have known what they were signing," but also because they won't need bailing out. Where I live, the foreclosure docket is so backed up that people have 18-24 months before the auction actually happens. Add to that the 6 months or so they were behind on their mortgage before the foreclosure was filed, and you have people living free in a house for 2+ years. They should be able to save enough to put a down payment on a new home, or even buy their own house at auction for the now-deflated value.
|9.6.07 @ 11:12AM|#
J sub D is right. I don't have much simpathy for Lewis. Yeah, some poor people take advantage of bankruptcy laws, but most don't. Just like a handful of companies take advantage of limited liability laws. That is why I wouldn't sign a $10 million dollar deal with a LLC that has $1 million in assets. Microloans are great, but I would fund them with disposible income, not the grocery budget.
carrick|9.6.07 @ 11:12AM|#
I say this is odd because libertarianism is a wealthy man's
philosophy, not a poor man's.
I was a libertarian 30 years ago when I was married with 2 kids and
struggling to pay the bills each month.
Political, social, and economic freedom have as much to offer the
poor as the rich.
|9.6.07 @ 11:15AM|#
I don't want to assist the po' folk who lost their overpriced
houses and I don't want to assist the rich SOBs that lost money
when the po' folk they loaned money to lost their overpriced
houses.
But I will. Because John Edwards or W or somebody somebody will
"care" enough to force me to.
|9.6.07 @ 11:20AM|#
"Because John Edwards or W or somebody somebody will "care"
enough to force me to."
Amen to that. Ugh.
robc|9.6.07 @ 11:24AM|#
Dan T,
I have noticed on a couple of threads today you have gone back to
your trolling ways. Did actually contributing to threads get boring
for you?
|9.6.07 @ 11:25AM|#
Actually, big-state liberalism is the wealthy man's philosophy.
They've already got theirs, and can bribe the appropriate
government officials to keep it that way. Of course, the Dan T's of
the world have a difficult time distinguishing between
"libertarian" and "Republican", apparently.
As to the actual substance being presented here, it's really not
that complicated, and in fact has an important libertarian lesson
involved about major institutions being irresponsible with other
people's money.
Banks loosened their lending standards to give zero-down,
stated-income loans (and not primarily to the poor, either), for
the simple reason that they no longer held onto the mortgage note
as they had in years past--they packaged it up and sold it as an
"investment". They were, in effect, being generous with Wall
Street's money. And, of course, "Wall Street's money" is really
YOUR money, via your stocks, pension fund and 401k.
The media's focus on subprime is misplaced. The problem is not
primarily that lenders were giving loans to borrowers with low
credit scores, but that they were giving out adjustable-rate loans
to all classes of borrowers that they knew (or should have known)
would ultimately be unpayable. Giving a $500,000 home loan to a
household with $50k income doesn't make sense, regardless of that
household's credit record. The lending industry fudged the numbers
by using adjustable loans with low introductory rates and
encouraging borrowers to lie about their income on their loan
application. A combination of greed and short-sighted desperation
sucked these borrowers in, when they should have known it would end
badly.
|9.6.07 @ 11:30AM|#
Dan T,
I have noticed on a couple of threads today you have gone back to
your trolling ways. Did actually contributing to threads get boring
for you?
Some threads deserve to be trolled a little, like this one.
Although I'm really just wondering why KMW linked to a piece that
seems to be out of character for H&R.
Rhywun|9.6.07 @ 11:31AM|#
i'm a bit confused.
Me too. To me "tongue in cheek" means he's doesn't really believe
what he's saying. I don't get that impression at all from this
piece (except the bit about "feeling good about investing in poor
people"--that's clearly a load of crap).
|9.6.07 @ 11:32AM|#
Of course, the Dan T's of the world have a difficult time
distinguishing between "libertarian" and "Republican",
apparently.
My contention is that Reasonoids are the ones who have said
trouble, given the philosophy exspoused around here that liberty
means "the right of a handful of people to accumulate as much power
as they can".
|9.6.07 @ 11:33AM|#
I'm really just wondering why KMW linked to a piece that
seems to be out of character for H&R.
I think the piece illustrates how all the caterwauling about the
subprime meltdown doesn't just give good old
you-buttered-your-bread personal responsibility short shrift when
it comes to the homeowners, but investors too.
|9.6.07 @ 11:34AM|#
The bankruptcy reform played a part in this. A lot of people
refinanced as a desparation move to avoid bankruptcy. Lewis is a
dick and there is really nothing funny about the article. I am
frankly surprised and disapointed that Mangu-Ward finds it so
funny.
My favorite part is the "poor people can just work harder to get
out of debt" line. Yeah, just like wall street types work harder
after they have squandered their investors money or CEOs work
harder after they run their companies in the ground costing 1000s
of jobs. Not like none of them run to Washington for a hand out or
take hundred million dollar golden parachutes as rewards for
complete and total failure of anything.
I have absolutely no sympathy for the banks in this. They made
risky loans and charged huge interest rates as a result. Had the
housing bubble not burst and those loans been paid off, the banks
would have made a killing off of the outragous interest rates. As
it was, it didn't work out and that is just too damn bad.
robc|9.6.07 @ 11:40AM|#
I have absolutely no sympathy for the banks in this. They
made risky loans and charged huge interest rates as a result.
Had the housing bubble not burst and those loans
been paid off, the banks would have made a killing off of the
outragous interest rates. As it was, it didn't work out and that is
just too damn bad.
I agree. I bolded the one part because that makes it clear that the
banks were just running a legal pyramid scheme. And like all
pyramids, only the first movers make any money.
carrick|9.6.07 @ 11:45AM|#
Lewis is a dick and there is really nothing funny about the
article. I am frankly surprised and disapointed that Mangu-Ward
finds it so funny.
I interpreted the article as a caricature of rich (big time rich,
not upper middle class). I don't know who Lewis is, but I didn't
get the impression that this was intended to reflect his true
personal feelings.
|9.6.07 @ 11:45AM|#
Robc,
I have had conversations with people with graduate degrees in
finance and economics and had them tell me with a straight face
that the housing market was an absolute sure investment and that
prices will rise forever. No kidding, they actually beleived that.
The simple fact of all demand curves being curves and the common
sense point that since not everyone or even a significant minority
will ever be able to afford a million dollar home and therefore
prices have to stop rising sometime meant nothing to them. It is
mass insanity.
|9.6.07 @ 11:47AM|#
Carrick,
You may recognize Michael Lewis as the author of "The New New
Thing" about the glory days of Jim Barksdale and Netscape; and
husband to former MTV News correspondent Tabitha Soren.
|9.6.07 @ 11:47AM|#
"I interpreted the article as a caricature of rich (big time
rich, not upper middle class). I don't know who Lewis is, but I
didn't get the impression that this was intended to reflect his
true personal feelings."
I see that and I still don't think it is funny. Moreover, Ward
pointed out that she thinks it is funny because it is true. I don't
find his points to be particularly funny or true.
|9.6.07 @ 11:48AM|#
So how's the deregulation of the mortgage industry working
out?
Oh, look, poor people - they're stupid, ha ha ha.
John,
It's not the banks that are the problem, but the hybrid non-banks
that were allowed to jump into the market and play wild west.
J sub D,
You'd prefer, perhaps, that the cost of this debacle come out of
your 401k and IRA as the stock market melts down in the face of
massive defaults? We're all lying in this bed, one way or the
other.
|9.6.07 @ 11:53AM|#
"You may recognize Michael Lewis as the author of "The New New
Thing" about the glory days of Jim Barksdale and Netscape; and
husband to former MTV News correspondent Tabitha Soren."
OMG, now I remember this guy. They named their daughters "Dixie and
Tallulah". No shit. He wrote this God awful set of articles in
Slate about how hard life was being a rich yuppie with his news
babe wife and noxious children. He is a serious douchebag.
|9.6.07 @ 11:55AM|#
Joe,
True enough about the hybrids. That said, the worst thing we could
do is bail them out. Let the banks fail. As far as the debtors go,
they just go back to renting. Loosing your house sucks, but if you
still have a job and an income, it is not the end of the world,
especially when you didn't have any equity in it to begin with.
carrick|9.6.07 @ 11:57AM|#
OMG, now I remember this guy. They named their daughters
"Dixie and Tallulah". No shit. He wrote this God awful set of
articles in Slate about how hard life was being a rich yuppie with
his news babe wife and noxious children.
I remember those . . I may need to rethink whether or not the
linked article is satire or craven stupidity.
|9.6.07 @ 12:04PM|#
John,
STOP CALLING THEM BANKS! It's a smear on the good name of
banking.
These shmoes weren't banks. They were scam artists or, at best,
gamblers.
As for your point, I can't see any value in bailing out the
irresponsible lenders as with the S and L bailout, but the
homeowners are a different story. The entire real estate market is
taking a nosedive, and that has always meant a deep recession. I'd
support some efforts aimed at softening that landing, maybe by
making it easier for banks or nonprofs to help the easier cases
with more favorable terms.
robc|9.6.07 @ 12:05PM|#
You'd prefer, perhaps, that the cost of this debacle come
out of your 401k and IRA as the stock market melts down in the face
of massive defaults?
Yes.
|9.6.07 @ 12:08PM|#
"The entire real estate market is taking a nosedive, and that
has always meant a deep recession."
Maybe it needs to. It is over valued. Recessions happen. We will
have one again. If the next recession resulted in more affordable
housing, that wouldn't be the worst thing that could happen. I
don't see how living in a world where the median house price is 10
times or more the median yearly income a particularly healthy
situtation.
|9.6.07 @ 12:09PM|#
Did some of you forget to put your snark hats on today? Carrick is exactly right. He is mocking the people that would actually expect poor people to have a team of lawyers to "vet their contracts". He is not laughing at poor people. He lives in Berkeley, fer chrissakes.
|9.6.07 @ 12:10PM|#
Further, the people who bought houses on mortgages they could afford for the purpose of actually living in the house, won't be effected by a drop in housing prices that much. It is the speculators and house flippers who will get killed and well like I said above, that is just too damn bad.
lunchstealer|9.6.07 @ 12:13PM|#
Oh, great. He's back on his "Libertarians want babies to die" kick. See what happens when you take him seriously?
|9.6.07 @ 12:17PM|#
robc,
That may be a perfectly responsible and appropriate take, but the
"not my problem" argument isn't true. This is a giant shit
sandwich, and we're all going to get to take a bite, one way or
another.
John,
I agree, the real estate market is overvalued and needs to correct
itself. That's why I'm talking about softening the landing, not
propping it up.
|9.6.07 @ 12:19PM|#
have had conversations with people with graduate degrees in
finance and economics and had them tell me with a straight face
that the housing market was an absolute sure investment and that
prices will rise forever. No kidding, they actually beleived
that.
They must be well under 30, then. The last U.S. real estate bubble
peaked in 1989 and bottomed out only about ten years ago.
Further, the people who bought houses on mortgages they could
afford for the purpose of actually living in the house, won't be
effected by a drop in housing prices that much.
True. But the problem is that housing prices had gotten so stupid
by 2004 that very few buyers (on the coasts, at least), were buying
with responsible mortgage--even the ones were buying homes, not
"investments". Not all will default, obviously, but it only takes a
small increase of defaults at the margins to make the markets go
nuts.
I'm with you on the speculators, though. They gambled and lost. At
least in Las Vegas they keep putting free drinks in your hand while
you piss your money away...
|9.6.07 @ 12:20PM|#
"And finance is one thing you should never engage in with the
poor. (By poor, I mean anyone who the SEC wouldn't allow to invest
in my hedge fund.)"
The article is a satirical caricature, and it's actually spot-on
(and brutally funny).
Anyone who thinks otherwise is a twink.
TIA.
|9.6.07 @ 12:21PM|#
Anyone who can't tell Michael Lewis is joking should have a sarcasm detector rammed down his throat.
|9.6.07 @ 12:21PM|#
When I was a kid, my parents frequently told me (usually in
conjunction with the repair of a bloody head wound) "That's what
you get for being stupid."
Many people learn not only from their own mistakes, but from their
observations of the mistakes of others. Many (if not most) people,
as they watch somebody stumbling down the street clutching his head
as blood oozes between his fingers and trails down his forearms,
will say to themselves, "Whatever that guy was up to, I'm not gonna
do it."
Let 'em all bleed, sez I.
wsdave|9.6.07 @ 12:24PM|#
Dan T.,
"...given the philosophy exspoused around here that liberty means
"the right of a handful of people to accumulate as much power as
they can"."
Actually, liberty means the right of EVERYBODY to accumulate as
much of everything as they can. Its not just a handful, Dan;
liberty is for all.
|9.6.07 @ 12:32PM|#
He is not laughing at poor people.
Maybe not, but KMW seems to be.
The article is a satirical caricature, and it's actually
spot-on (and brutally funny).
Anyone who thinks otherwise is a twink.
That might be true, if satire were funny. But as it is, that is not
the case. Satire breaks the rule that if you have to point out to
someone that something is funny, it is not funny. Therefore it
fails the funny test. Now please stop bruising my ribs with your
elbow.
sign me,
twink
theOneState|9.6.07 @ 12:34PM|#
Having read the whole article, I think that it's clearly parody. But "hilarious" is too strong of an adjective and may have the wrong bearing.
|9.6.07 @ 12:34PM|#
Being an obnoxious dick does not equal having a sense of
humor.
Add this entry to the growing pile of garbage that is KMW's H&R
posts.
|9.6.07 @ 12:42PM|#
Put me in that camp that has no idea what Lewis OR KMW are
really trying to say -- except that KMW seems to take special
delight in the demise of the poor. That kind of attitude is what
makes people think "libertarian=a-hole"
I also love all the people around here who believe so much in
freedom of expression that anyone who disagrees with them is a
"twink" or needs something rammed down their throats. I say most
libertarians, in my experience, are as intolerant and power-driven
as those they supposedly oppose. Well done to them on being the
faction of the ultra-bourgeois -- and for convincing ordinary
people that they have something to gain from giving power to those
"twinks" -- the same "twinks" that brought you the same "free
market" fly-by-night crap that has now screwed thousands of working
families many of you label as "the poor."
lunchstealer|9.6.07 @ 12:42PM|#
It is the speculators and house flippers who will get killed
and well like I said above, that is just too damn bad.
Yeah, I have no sympathy for these folks. I love the fact that just
as they're getting their own TV shows on TLC just as their world is
imploding.
I do have a problem with the idea of giving hefty fine-print
contracts to people who are obviously poorly educated. There should
be multiple choice questions that people should have to get right
before certain contracts can be signed and enforced. If you've got
a click-through license that, for example, requires the
installation of adware that will hijack your browser (a la the old
Gator warez) then a 'click accept' should not make that license
enforceable. The same is true for any home-as-collateral loan that
involves sudden changes in the monthly payment or other
easy-to-activate things which could cause good-faith-but-naive
people to default.
|9.6.07 @ 12:44PM|#
Some of these poor people must have skills. The ones that
don't could be trained to do some of the less skilled labor -- say,
working as clowns at rich kids' birthday parties. They could even
have an act: put them in clown suits and see how many can be
stuffed into a Maybach. It'd be like the circus, only
better.
That is just damned funny.
Anyone who missed the humor should really consider acquiring a
sense of one and having the stick up their ass removed.
The Wine Commonsewer|9.6.07 @ 12:44PM|#
STOP CALLING THEM BANKS! It's a smear on the good name of
banking.
Ha, ha, ha, ha, ha, thump.
That's me laughing my head off at the very idea that banking has a
good name.
|9.6.07 @ 12:47PM|#
JW -- Post again after your home is foreclosed on and see how
funny it is. Or better yet, print off copies of the article and
distribute them to those in your community who have been
screwed.
Oh, and thanks for being such a fascist as to think everyone should
have the same sense of humor as you. Very cosmopolitan.
The Wine Commonsewer|9.6.07 @ 12:49PM|#
The same is true for any home-as-collateral loan that
involves sudden changes in the monthly payment or other
easy-to-activate things which could cause good-faith-but-naive
people to default.
Absent outright fraud and distortions of the market by government
interference, I never buy the argument that sharks are luring
people into traps with predatory lending practices. Everybody knows
the score going in and everybody is willing to bet on the come, ie,
that housing prices and their financial position will rise fast
enough to allow them to accommodate the bumps in interest or the
balloon payments.
The alternative is to prevent marginal individuals from bettering
their lives by restricting the credit market.
Sometimes things just don't work out. That's called life.
|9.6.07 @ 12:49PM|#
I also love all the people around here who believe so much
in freedom of expression that anyone who disagrees with them is a
"twink" or needs something rammed down their throats.
Clearly I was being deadly serious, as evidenced by my referencing
an actually-existing piece of technology like the sarcasm
detector.
|9.6.07 @ 12:53PM|#
That may be a perfectly responsible and appropriate take,
but the "not my problem" argument isn't true. This is a giant shit
sandwich, and we're all going to get to take a bite, one way or
another.
Very true. But, how is this different from the societal cost of
other improper behavior, say, causing accidents by running red
lights or people having high fat diets? Sure, pass all the laws you
want to keep everything "soft." Enjoy your over-legislated
future.
Of course, this is the same country that now believes once you are
involved in a horrible event of a suitable size, you deserve a
govt. payout of cash. The rest of you who suffer in bite-sized
portions through no fault of your own, tough shit.
|9.6.07 @ 12:54PM|#
I thought it was hilarious. I figured since the author lived in Berkely, he's a prick. Nonetheless, the article was clearly a satire and very funny.
The Wine Commonsewer|9.6.07 @ 12:56PM|#
He is not laughing at poor people.
Nope. He's laughing VERY HARD at poor people.
The Wine Commonsewer|9.6.07 @ 12:57PM|#
Joe, most mortgages are, in fact, sold. That is not unusual in the least.
|9.6.07 @ 12:58PM|#
JW -- Post again after your home is foreclosed on and see
how funny it is. Or better yet, print off copies of the article and
distribute them to those in your community who have been
screwed.
You see, I read the contract I was signing and I waited for the
market to be very favorable in my direction before I signed my
mortgage. I didn't scramble out into the street and buy the first
overpriced house I saw because, well, everyone else was doing
it.
I also try not to buy things I can't even begin to afford. I know,
I know. Weird.
Sometimes, you have to take some hard knocks so you don't do
anything so stupid again. That applies equally to both sides in
this issue.
Oh, and thanks for being such a fascist as to think everyone
should have the same sense of humor as you. Very
cosmopolitan.
Pot. Kettle. Black.
Seriously. Take the stick out of your ass.
dhex|9.6.07 @ 1:07PM|#
If you're PC you're not a libertarian. No rules, just
right.
Not that you might not be a dick...just sayin'.
hokayyyyyyyy.
anyway, so uh yeah his routine is being a dick, right?
really, what's the funny part? is it a satire of someone being an
asshole and pretending there weren't a lot more layers to this than
"poor people" and whatnot?
also i'm much more of a bear than a twink thanks.
dhex|9.6.07 @ 1:07PM|#
oh crap
If you're PC you're not a libertarian. No rules, just
right.
Not that you might not be a dick...just sayin'.
hokayyyyyyyy.
anyway, so uh yeah his routine is being a dick, right?
really, what's the funny part? is it a satire of someone being an
asshole and pretending there weren't a lot more layers to this than
"poor people" and whatnot?
also i'm much more of a bear than a twink thanks.
|9.6.07 @ 1:12PM|#
TWC,
Very nice. It's obvious which industry you're in, so it's not
surprising you'd try to blur the distinction between legit and
sleazy lending practices.
JW,
Very true. But, how is this different from the societal cost of
other improper behavior, say, causing accidents by running red
lights or people having high fat diets? Having high-fat diets
doesn't make me fatter, so it's not like that at all.
Running red lights is a much better comparison, and we do have laws
against that. But then, I'm so beloved of the over-regulated future
that I think it's a good idea for that to be illegal.
|9.6.07 @ 1:14PM|#
I never buy the argument that sharks are luring people into traps with predatory lending practices. Everybody knows the score going in...I just foreclosed on a widow.
|9.6.07 @ 1:16PM|#
Looks like a lot people have a lot of motivations to tell
themselves pretty stories to convince themselves that their lack of
concern for others is ethical.
Yep, everybody but you is stupid or thoughtless or something.
Serves 'em right.
Sic semper libertarian.
|9.6.07 @ 1:20PM|#
Having high-fat diets doesn't make me fatter, so it's not
like that at all.
Are you saying that you don't buy into the craptacular theory that
if someone does something that somehow, some way, induces a higher
cost of services into "society" that we have every right to
regulate their behavior?
Outstanding old boy! There's hope for you yet.
Running red lights is a much better comparison, and we do have
laws against that. But then, I'm so beloved of the over-regulated
future that I think it's a good idea for that to be
illegal.
Me too! There's those great minds working in harmony again.
So, at what point do you say that a gross, societal economic burden
requires guvmint intervention in the form of some direct aid?
dhex|9.6.07 @ 1:21PM|#
joe you've gone perma-cunt on us.
why?
i mean i didn't see the humor in the above piece (perhaps a bit too
"new yorker" for my tastes) but beyond the percentage of people who
got legitimately fucked over by people who defrauded them, or
followed the letter while ignoring the spirit of the law and other
related scumfuckery, there seems to have been a whole lot of greedy
people. not all of them were lenders. a lot of them were people who
thought they were going to somehow stay head of borrowing more than
they could afford forever.
that *is* stupid and thoughtless behavior, just like fraud is
wicked behavior.
The Wine Commonsewer|9.6.07 @ 1:24PM|#
Very nice. It's obvious which industry you're in, so it's
not surprising you'd try to blur the distinction between legit and
sleazy lending practices.
If you knew your butt from breakfast I might be offended. Since I
am not in the lending or banking business and you can't tell the
diff between satire and reality it's tough to work up any
significant irritation. Nice try though.
Have a great vacation.
|9.6.07 @ 1:26PM|#
I do have a problem with the idea of giving hefty fine-print contracts to people who are obviously poorly educated. There should be multiple choice questions that people should have to get right before certain contracts can be signed and enforced. If you've got a click-through license that, for example, requires the installation of adware that will hijack your browser (a la the old Gator warez) then a 'click accept' should not make that license enforceable. The same is true for any home-as-collateral loan that involves sudden changes in the monthly payment or other easy-to-activate things which could cause good-faith-but-naive people to default.
And "people who are obviously poorly educated" is defined
by ...? You? Me? The man behind the tree? That's patronizing a
little bit don't you think.
If you don't understand a contract, hire someone to review it for
you. Surely our vaunted and excellent public education system has
taught people to ask for help if they don't uunderstand somthing.
Those that took out mortgages that they didn't understand and can't
afford have only themselves to blame.
BTW, If any minors got some of the "predatory" sub-prime mortgages
they should be voided. Anyone else, suck it up, buddy.
|9.6.07 @ 1:29PM|#
Looks like a lot people have a lot of motivations to tell
themselves pretty stories to convince themselves that their lack of
concern for others is ethical.
I'm for people to have the option to learn from their mistakes. I
know I don't touch hot stoves as much as I did from when I was
3.
We're all better off overall when people behave responsibly and not
cause a larger burden to others through ignorance, apathy or
carelessness. Even better when we don't have to have The Man drop
the hammer on them from on high to get the message through to them.
Don't you agree?
The Wine Commonsewer|9.6.07 @ 1:31PM|#
Well, actually, I did recently foreclose on a widow. As a predator I sold her my house for zero down and let her move in some years ago. Since her credit sucked I carried the loan myself. She has never paid a payment on time and has consistently been two to four months behind at all times. I finally was forced to take action given that she's now six months behind in her payments. I've never been able to understand why someone who earns 40 grand a year can't pay a 600.00 per month payment, but I guess that's how it works sometimes with us illegitimate lenders.
|9.6.07 @ 1:36PM|#
TWC--You bastard! I bet you kicked her dog on the way out
too.
Now go wax up your mustache.
|9.6.07 @ 1:37PM|#
But the problem is that housing prices had gotten so stupid by 2004 that very few buyers (on the coasts, at least), were buying with responsible mortgage--even the ones [who] were buying homes, not "investments".
I have ZERO sympathy. There's no reason-none-these
people could not have continued to rent for five more years, and
let the "crazy" market pass.
The Wine Commonsewer|9.6.07 @ 1:39PM|#
JW, actually, she has one of those cute little long-haired lap
dogs that you can clip by the legs to a mop handle and use to clean
the floor. Wouldn't never kick a useful dog like that.
On the downside I don't know if I'll ever be able to get the dog
pee smell out of the wood floors. Or maybe that's cat pee.
Looking for the wax.
|9.6.07 @ 1:39PM|#
STOP CALLING THEM BANKS! It's a smear on the good name of
banking.
Ha, ha, ha, ha, ha, thump.
That's me laughing my head off at the very idea that banking has a
good name.
Mr. Commonsewer wins the thread! Banking has been legalized
thievery for a long time in this country.
|9.6.07 @ 1:39PM|#
joe, I realize your sense of moral superiority keeps you warm and cozy at night but could you spare the rest of us the sight of your self-delusions? It's alternately sad and pathetic.
SPD|9.6.07 @ 1:56PM|#
TWC,
I'm curious... why did you sell her the house in the first place if
she was such a high credit risk? What is her explanation for
falling so far behind on payments, assuming she's fully aware of
what the consequences might be?
40k/year after taxes = approx. 28K.
28K - 7200/year in rent = 20.8K left over. On the surface, she
should have enough to cover it.
Again, no outstanding debts to speak of for this widow? Medical
bills? Utility/cable/phone payments? Groceries? Car payments? Auto
insurance?
Jennifer|9.6.07 @ 1:57PM|#
I have ZERO sympathy. There's no reason-none-these people
could not have continued to rent for five more years, and let the
"crazy" market pass.
Amen. There is no "right" to buy a house in a given market at a
given time. A few years back I wanted to buy a house, saw that
prices had risen much higher than inflation, and thus continued to
rent rather than agree to any of the thousand "too good to be true"
mortgage offers I got in the mail almost every day.
So I did the responsible thing, and spent the last several years
renting, living below my means and banking the difference ... and
now I'm supposed to support the use of my tax dollars to bail out
some greedy fool who, with a financial situation identical to mine,
chose to lock herself into a mortgage loan she can't possibly
afford to pay back? Furthermore, these are the same people
who overinflated the market so that I couldn't afford to buy a
house in the first place.
Here's my radical plan to acquire financial security: don't borrow
more money than you can afford to pay back. If you want something
you can't afford, go without until you CAN afford it.
Sounds crazy, I know, but it just might work.
|9.6.07 @ 2:01PM|#
Jennifer, joe is shocked by your ability to convince yourself that your lack of concern for people who are less responsible than you is somehow ethical.
Greg|9.6.07 @ 2:03PM|#
Clearly I was being deadly serious, as evidenced by my
referencing an actually-existing piece of technology like the
sarcasm detector.
I used to have one of those, but for some reason it
started to smoke and vibrate about two dozen posts ago, and now it
is just sitting on the desk looking at me accusingly.
|9.6.07 @ 2:23PM|#
And all those people with the 20 pages of fine-print contracts
who are supposed to "hire someone to explain it to them"--uh, not
really. If the lawyer is charging per the job, he's going to blitz
through the paperwork, and if he's charging by the hour, you're
looking at $150-220$/hour down the drain.
Plus, I don't know about elsewhere, but here in Illinois we didn't
even get to see a sizable percentage of the paperwork until the
very last day, which was a madhouse, and the title insurance people
were screaming at us to get out of their offices, etc. So not as
simple as you think.
A lot of the mess developed because of the slicing-and-dicing of
mortgages into CDOs by the financial engineers, who then blithely
slapped a "AAA" rating on it (in collusion with the rating
agencies) and sold it as a great-no-fail investment vehicle.
Unfortunately, it looks like the analysed risk was not the actual
risk....and since no one knows where the financial pitfalls are
hidden, due to the opacity of the instruments, they're staying away
from EVERYTHING that is vanilla-pure, government-backed bonds.
|9.6.07 @ 2:28PM|#
and if he's charging by the hour, you're looking at $150-220$/hour down the drain.
It doesn't seem unreasonable to pay a lawyer $500 to review a
contract worth several hundred thousand dollars. If you can't
afford the lawyer, you can't afford the house.
|9.6.07 @ 2:28PM|#
Laid out for you in black and white by a man who is pretty
sure that the moment he got "out of touch with 'poor culture.'" was
when he "stopped flying commercial."
How can someone be called poor if they can afford an airline
ticket?
|9.6.07 @ 2:33PM|#
Me too. To me "tongue in cheek" means he's doesn't really
believe what he's saying.
The tongue in cheek is that these people really are not poor...they
are just dumb.
Loans in the hundreds of thousands are not given to poor
people.
Poor people cannot afford airline tickets.
see the trend here?
carrick|9.6.07 @ 2:36PM|#
Plus, I don't know about elsewhere, but here in Illinois we
didn't even get to see a sizable percentage of the paperwork until
the very last day, . . .
Gee, I don't know about Illinois, but I got three business days to
cancel the deal without penalty. And I read every effing line on
every effing piece of paper that I signed or initialed.
|9.6.07 @ 2:40PM|#
My favorite part is the "poor people can just work harder to
get out of debt" line.
Actually that is funny. The pretext is that the obvious solution to
getting out of debt is to spend less money. Sympathy for the vast
majority of people in debt (those who have not been put there by
our fucked up criminal system) is often predicated on ignoring the
fact that they are spending more on themselves then they can
afford.
"I bought a house bigger then i can afford and buy lots of crap I
really do not need, please give me free money."
That is funny shit.
|9.6.07 @ 2:40PM|#
The SCENE:
A Bridge- far, far, below, a trickle of water can be seen,
glittering in the brilliant sunlight. Above, large black birds
circle patiently, awaiting the conclusion of our drama.
Genius A (gazing downward): Wow, that sounds like fun, but...
Genius B (poking him playfully on the shoulder): What could go
wrong? I'll be right here, holding the other end of the bungee
cord! G'wan, jump!
Genius A: Geeeeronnnimoooh!
Genius B: So long, sucker! Happy landings! (suddenly observes that
the bungee cord rapidly snaking over the bridge railing has become
entangled in his spats) Haaaalp! Save me, somebody!
|9.6.07 @ 3:03PM|#
Next time Radley posts one of this stories about some innocent
grandma shot by a SWAT team, I'm going to respond that there's no
reason to feel bad for her because she should have been smart
enough to not live in an area that's likely to be raided by a SWAT
team.
We'll see how that goes over.
|9.6.07 @ 3:11PM|#
I bought a house in February.
My first house.
Not knowing much about financing a house, I did my research, talked
to several lenders, and went a-googlin' for info.
Within the first day or so of my research, it became patently clear
that only an utterly braindead imbecile would get an ARM or
Interest Only loan.
And yet there are people here in this very thread who think I
should feel some sort of pity for all of the assholes out there who
are now collectively holding a gun to the head of the US
economy.
carrick|9.6.07 @ 3:13PM|#
Next time Radley posts one of this stories about some
innocent grandma shot by a SWAT team, I'm going to respond that
there's no reason to feel bad for her because she should have been
smart enough to not live in an area that's likely to be raided by a
SWAT team.
Do you really believe this is equivalent, or are you just pissing
in the pool again?
Jennifer|9.6.07 @ 3:35PM|#
Jennifer, joe is shocked by your ability to convince
yourself that your lack of concern for people who are less
responsible than you is somehow ethical.
And he's right to be shocked. I'm about to go on a six-figure
spending spree financed entirely by credit cards, and since I can't
possibly afford to repay such a debt I am preemptively shocked by
those of you who will callously refuse to let the government bail
me out of the hole I'm about to dig for myself. You call yourselves
"ethical?" I call you heartless bastards for expecting a grown-up
to live within her means.
Of course, instead of forcing the taxpayers to bail me out, maybe
the ethical thing to do is force my boss to give me a 500 percent
raise. That way, I can afford to pay my debtor's bills like a
responsible person.
|9.6.07 @ 3:40PM|#
Do you really believe this is equivalent, or are you just pissing
in the pool again?
Neither, it's an exaggerated statement to prove a point. You can
always rationalize your lack of empathy by congratulating yourself
for having the foresight to avoid the problem that others did
not.
|9.6.07 @ 3:42PM|#
And he's right to be shocked. I'm about to go on a
six-figure spending spree financed entirely by credit cards, and
since I can't possibly afford to repay such a debt I am
preemptively shocked by those of you who will callously refuse to
let the government bail me out of the hole I'm about to dig for
myself.
The problem with your analogy is that you're assuming that people
who bought houses that were later foreclosed upon understood that
they couldn't afford them from the outset yet bought them
anyway.
The Wine Commonsewer|9.6.07 @ 3:47PM|#
TWC rarely wins a thread and has never won a thread twice. [gets
a little teary eyed]
Thanks SASOB
carrick|9.6.07 @ 3:56PM|#
Neither, it's an exaggerated statement to prove a point. You
can always rationalize your lack of empathy by congratulating
yourself for having the foresight to avoid the problem that others
did not.
But you are implying some moral equivalence betwee people who get
into financial problems through there own ineptitude (with or
without encouragement from unscrupulous lenders) and innocent
people that get shot by the state (regardless of whether or not the
WoD is justifiable).
That is not just an exageration. That is offensive.
|9.6.07 @ 4:01PM|#
I'm just saying that if people can congratulate themselves on
being smart enough to avoid financial problems then I can
congratulate myself on being smart enough to avoid being shot by a
SWAT team.
My real point, of course, is that we shouldn't be so judgmental
towards people who inadvertantly find themselves in financial
difficulties. There but for the grace of the free market go
I...
wsdave|9.6.07 @ 4:04PM|#
Dan T.,
"The problem with your analogy is that you're assuming that people
who bought houses that were later foreclosed upon understood that
they couldn't afford them from the outset yet bought them
anyway."
I have complete faith in the American educational system, and am
certain that NOBODY would be allowed to graduate high school
without being able to do basic math.
|9.6.07 @ 4:18PM|#
You can always rationalize your lack of empathy by
congratulating yourself for having the foresight to avoid the
problem that others did not.
I have plenty of empathy for people in dire straits. Even if it
were their fault; everyone is entitled to make mistakes.
Right up to the point where they go "So what? Gimmee, gimmee,
gimmee."
|9.6.07 @ 4:24PM|#
Next time Radley posts one of this stories about some
innocent grandma shot by a SWAT team, I'm going to respond that
there's no reason to feel bad for her because she should have been
smart enough to not live in an area that's likely to be raided by a
SWAT team.
You come here because you got tired of being punched in the mouth
at bars, right?
carrick|9.6.07 @ 4:25PM|#
Everyone makes mistakes. Smart people do stupid things on
regular basis.
The primary difference between smart people and stupid people is
that smart people recognize when they have done something stupid
and then they try to rectify it.
Stupid people think the results of their stupidity are someone
else's fault.
wsdave|9.6.07 @ 4:26PM|#
mediageek,
"Within the first day or so of my research, it became patently
clear that only an utterly braindead imbecile would get an ARM or
Interest Only loan."
Actually, the Interst Only loan option can be quite useful. For
example, if you were to invest the difference 'twix the IO loan and
a fixed rate, you may be able to profit prior the 5 year rate
increase. You still need to be able to cover the higher payment
later, however.
The Wine Commonsewer|9.6.07 @ 4:27PM|#
SPD, why did I sell her the house in the first place? Big Sigh.
Long Story.
Basically, I had known her and her husband for quite some time.
They had bought a house from his brother on a five year note (30
due in 5) and were unable to refinance at the end of the term. The
brother, being a jerk, gave them the boot despite a five year track
record of good payments.
I had a small rental that was vacant that I was going to sell
anyway and because they had a good track record with the brother
and they were desperate I let them move in and carried the loan
myself. 20 years, fixed payments.
Her husband died unexpectedly a couple of years ago and there
apparently was some life insurance because she brought the payments
current at the time.
The last time I was kicking her out she begged me not to and I
relented. The condition was that every Friday on pay day she had to
buy a money order for $125.00 and mail it to me to be received by
the following Wednesday. She was pretty good on that for a while,
then she missed one, then another, then she missed four weeks
worth. And now, she's god knows how far behind but I did get her to
move out without having to go to court, so that's a blessing.
Pretty sure she got the last of her stuff out over the long
weekend.
Mostly her excuse is you know how I am with money, I am so
sorry
Over the last nine years, I've pretty much done everything possible
to make sure that she could keep the house. [pats himself ruefully
on the back]
I once asked her how she expected to pay 1,000.00 in rent for an
apartment if she couldn't pay 600.00 a month to own her own home.
Duh. This is So Cal, even the worst crap holes in the worst part of
town cost more than six bills a month.
Some people will just go out of their way to sabotage themselves no
matter how much you try to help. I've known quite a few of those
people in my life.
|9.6.07 @ 4:31PM|#
My real point, of course, is that we shouldn't be so
judgmental towards people who inadvertantly find themselves in
financial difficulties. There but for the grace of the free market
go I...
"Why, I had *no idea* a reverse amortization, adjustable-rate
mortgage might come back to bite me in the ass! I'm an innocent
victim here!"
This reminds me of Dave Barry's imitation of smokers who blamed
tobacco companies for their health problems: "You know why I
continued to suck hot tar and ash into my lungs for decades?
Because I honestly believed the tobacco companies when they said it
posed absolutely no health risk whatsoever!"
The Wine Commonsewer|9.6.07 @ 4:31PM|#
Pig, shirt went out UPS Next Day Air about fifteen minutes ago.
The Wine Commonsewer|9.6.07 @ 4:52PM|#
If the lawyer is charging per the job, he's going to blitz
through the paperwork, and if he's charging by the hour, you're
looking at $150-220$/hour down the drain.
Two thoughts:
1. If you want the job done right, then you're hired.
2. If you actually think a lawyer will help protect your rights
then investing a thousand or two for sound advice with respect to
the biggest financial transaction you will ever make isn't really
money down the drain.
|9.6.07 @ 4:56PM|#
Actually, the Interst Only loan option can be quite useful.
For example, if you were to invest the difference 'twix the IO loan
and a fixed rate, you may be able to profit prior the 5 year rate
increase. You still need to be able to cover the higher payment
later, however.
True, if you can afford to write your own check for the entire
purchase amount of a house, it can make sense to take out an I/O
loan and pay as little as possible until the loan resets. You'll
still be writing a check for the same amount five years later, so
no biggie.
Unfortunately, I'm going to guess that about .0001% of I/O loans
made in the last five years fell into this category.
SIV|9.6.07 @ 5:01PM|#
You'd prefer, perhaps, that the cost of this debacle come
out of your 401k and IRA as the stock market melts down in the face
of massive defaults? We're all lying in this bed, one way or the
other.
It won't come out of everybody's funds.You can short in an IRA.
401k s offer money market funds.
Bubble re-inflations and propping up markets hurt people too.
Equity index funds aren't insured deposits,they are supposed to go
down when shit like this happens.
|9.6.07 @ 5:01PM|#
And all those people with the 20 pages of fine-print
contracts who are supposed to "hire someone to explain it to
them"--uh, not really. If the lawyer is charging per the job, he's
going to blitz through the paperwork, and if he's charging by the
hour, you're looking at $150-220$/hour down the drain.
If you can't afford a few hundred bucks to have a lawyer go over a
real estate contract, perhaps you can't really afford to buy the
house.
Plus, I don't know about elsewhere, but here in Illinois we
didn't even get to see a sizable percentage of the paperwork until
the very last day, which was a madhouse, and the title insurance
people were screaming at us to get out of their offices, etc. So
not as simple as you think.
This type of bullshit goes on everywhere. As a buyer, you should
always insist on getting the paperwork at least a couple of days
before closing. And if you see any shenanigans or get any pressure
at closing, then threaten to walk out. That has a way of clarifying
the minds of the real estate types...
Naughty, Naughty Moose|9.6.07 @ 5:11PM|#
"That's me laughing my head off at the very idea that banking
has a good name."
*gazes at TWC's neck stump lovingly, if not with a little fervent
lust...
SPD|9.6.07 @ 5:19PM|#
TWC,
It sounds like you did everything you could. You were probably
easier on her than a bank or a federal housing agency would have
been. Bottom line, it sucks for both of you.
Now, next Friday come and she didn't have the rent/
So out the door she went...
I believe John Lee Hooker knew what the widow was going
through.
|9.6.07 @ 5:24PM|#
J sub D,
You'd prefer, perhaps, that the cost of this debacle come out of your 401k and IRA as the stock market melts down in the face of massive defaults? We're all lying in this bed, one way or the other.
The stock market won't "melt down" over this.
And if it does then it's my fault for investing solely in financial
service institutions.
Wait, I didn't. I dinn't want to expose myself to the risk of
investing in just one sector of the economy. joe, if you or anyone
else, countless business startups fo example, do risk it all in
their business dealings, more power to you.
As The Stomach Turns|9.6.07 @ 5:46PM|#
STOP CALLING THEM BANKS! It's a smear on the good name of
banking.
WTF? John FINALLY agrees with FDR on something and joe STILL has to
get pissed at John.
Russ 2000|9.6.07 @ 6:10PM|#
There's no reason-none-these people could not have continued
to rent for five more years, and let the "crazy" market
pass.
When the housing market was insane, the rental market was decent
for renters. At one time I had done the math to consider selling my
house at its inflated price and moving into a large apartment. If I
had 23 years to go on my mortgage instead of 7, I probably would
have done it. I gave more thought to selling my house and buying a
house for cash on the outskirts of the metro area. Only my hatred
of driving stopped me from doing that. But life without a housing
payment sure was tempting.
|9.6.07 @ 6:16PM|#
This is what my mother-in-law just did. Sold her paid-off house
for a monsterous profit, had her broker invest the money and she
moved into a swank apartment high-rise down the street, one of the
nicest in the city.
She pays the rent with the return on the investment.
The Wine Commonsewer|9.6.07 @ 6:40PM|#
John Lee Hooker was great.
Oh, and BTW, she's late 30's and blond. If you're lonely, AA, and a
Born Again, she's available. She's got a good union job working for
a grocery chain.
The Wine Commonsewer|9.6.07 @ 6:42PM|#
A lot of people have sold off the homestead and fled to cheaper climes to pay cash for a house and not be saddled with a payment. Nothing wrong with being debt free and no house payment.
The Wine Commonsewer|9.6.07 @ 6:49PM|#
It's a smear on the good name of banking.
I have zillions of banker stories. Like the one where the bank
jacks around my guy for weeks demanding this paperwork, that paper,
this tax return, that credit report, nickel and dimed to death.
Finally I say to the loan officer:
This guy has a million dollars deposited in your bank, stellar
credit, and his 3.5 million dollar house that he wants to borrow
800,000.00 against is free and clear. Why are putting him thru the
wringer?
She says: He who has the gold makes the rules, and slams the phone
down.
|9.6.07 @ 7:11PM|#
This guy has a million dollars deposited in your bank,
stellar credit, and his 3.5 million dollar house that he wants to
borrow 800,000.00 against is free and clear. Why are putting him
thru the wringer?
If I were him I'd have just made a witdrawal.
(Although, I guess, he might have had some reason not to do so that
I'm not aware of)
|9.6.07 @ 7:18PM|#
Next time Radley posts one of this stories about some
innocent grandma shot by a SWAT team, I'm going to respond that
there's no reason to feel bad for her because she should have been
smart enough to not live in an area that's likely to be raided by a
SWAT team.
What we are shooting people who bought over priced homes they could
not afford?
Oh wait, no we aren't this is just happening in Dan T's fucked up
little soap opera in his head.
|9.6.07 @ 7:26PM|#
My real point, of course, is that we shouldn't be so
judgmental towards people who inadvertantly find themselves in
financial difficulties. There but for the grace of the free market
go I...
Bullshit, you are also judging them as in need of government
assistance. How is that stance any less judgmental then mine?
|9.6.07 @ 8:16PM|#
If you're lonely, AA, and a Born Again, she's available.
(emphasis mine)
Hmmm. If those letters stand for what I think they do, I think
there's a good part of your explanation right there.
highnumber|9.6.07 @ 8:19PM|#
People are offended by Michael Lewis?!
Indeed, these are the end times.
The Wine Commonsewer|9.6.07 @ 9:36PM|#
BG, I'da walked with the money, 10-4 and frankly, I suggested he
do just that. The immediate hassle factor was the main reason he
didn't. However, once he entangled himself from some pressing
obligations he took his money down the street.
Hmmm. If those letters stand for what I think they do, I think there's a good part of your explanation right there.
Yes it was, but getting sober didn't help. Don't know why. Last
time I checked dope and booze cost more than coffee and donuts for
the daily meetings at the ALANO Club.
Like the Eagles said.....
Yer still the same old girl you used to be.
|9.6.07 @ 10:24PM|#
TWC
Bad habits are bad habits.
Sad, but true.
We help our friends when we can, but sometimes they are beyond
help.
dhex|9.7.07 @ 12:50AM|#
People are offended by Michael Lewis?!
it was one of those new yorker cartoons involving monacle-crackings
and "well i never" type declarations but everyone involved is a
pigeon.
yeah that shit's never funny.
highnumber|9.7.07 @ 9:31AM|#
dhex,
That's not Lewis' vibe at all. His style, usually, is down to earth
and smart. I think y'all aren't getting this. That's fine, but it's
weird to see people getting their undies in a bunch over him.
highnumber|9.7.07 @ 9:47AM|#
By the way, his masterpiece is not Moneyball, but Liars' Poker. Also very timely, being about the birth of mortgage backed securities.
|9.7.07 @ 12:39PM|#
By the way, his masterpiece is not Moneyball, but Liars'
Poker. Also very timely, being about the birth of mortgage backed
securities.
As the Human Piranha would put it, "You buy a house worth eight
times your annual income with an ARM at the peak of the national
housing market, and you get your face ripped off!"
highnumber|9.7.07 @ 9:09PM|#
Finally I got the opportunity to read the article.
And I'm even more dumbfounded by the offense taken.
And by dhex's New Yorker cartoon analogy.
Thank you, Ms Mangu-Ward, for pointing me toward the column.
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