Believe It Or Not, They Have Found Another Way To Blame Poor People


University of Texas at Dallas economist Stan J. Liebowitz drops a huge bomb on conventional wisdom about the real estate bubble: This has not been a "subprime" mortgage crisis at all. In fact, subprime mortgages in some categories are still not defaulting at record-high levels.

Instead, by far the most important determinant of default -- and the common feature of nearly all defaults since 2006 -- is whether the mortgage has an adjustable interest rate:

The mortgage data do not suggest that subprime loans went bad first, followed by Alt-As and then prime loans. Instead, the data suggest that adjustable rate mortgages (ARMs) went bad first, with the rise occurring at about the same to for both prime and subprime ARMs. Foreclosure rates on fixed rate mortgages (FRMs), both prime and subprime, barely participated in the foreclosure outbreak, having much smaller and much later increases in foreclosures.

To understand why this is important, please consider how widespread the belief in the subprime crisis really is. The president believes it. The media believe it. I believed it, and if you want to play gotcha on me, here's your chance.

I can not speak to the quality of Liebowitz's data, which are drawn from the Mortgage Bankers Association's National Delinquency Survey. But the case he puts together is pretty damned interesting. And it makes intuitive sense: If you're flipping or buying a second home or betting on the come, you want to reduce your short-term exposure. And we already know that being underwater on a mortgage is the primary factor in the decision to default.

Back at the end of the Bush Administration (were we really so young back then? will we ever learn to laugh again?), there was a fad for a financial metaphor drawn from epidemiology: that the crisis began with subprime loans but could begin to "spread" to prime loans. In fact, however, prime default rates began spiking at the same time as or even slightly before subprime default rates. But while the role of ARMs was getting a lot of attention at the time, nobody defined it as the reset crisis or the recast crisis.

So for example, at the moment Federal Reserve Chairman Ben Bernanke was giving this May 2007 speech about the sub-prime crisis, there was already a year's worth of data showing that prime and sub-prime loan defaults were growing, in percentage terms, at almost exactly the same rate. (Sub-prime loans have higher ordinary default rates.)

Prime and subprime loans show similar recent default patterns.

Bernanke of course had a personal stake in deceiving the public in this way. He himself was carrying an adjustable-rate mortgage at the time, which he has subsequently managed to refi -- thus locking in an attractive rate before raising interest rates on the rest of us.

But why was everybody else so eager to believe it? Liebowitz suggests a possibility: "The subprime story provided an easy scapegoat: subprime lenders."

Even more convenient are the scapegoats who don't get any attention: subprime borrowers. Nobody would doubt that subprime borrowers, who are most likely to have low incomes and little financial experience, must be the leading edge of the default phenomenon.

Except that it seems to be untrue. A low-income, bad-credit borrower who is serious about owning a home is more likely to keep making payments in hard times than a higher-income, good-credit person who has arranged his purchase so as to have little or no equity in the house.

Major pieces of the conventional wisdom about the mortgage collapse continue to fall apart on inspection. We know, for example, that houses still sell when you cut the asking price, that unemployment is not a major factor in defaults, that modifying loans does not help bad borrowers. If Liebowitz is right about ARMs as the main cause of defaults, we will, as he says, "have very different economic explanations for the defaults and very different remedies." We'd also have a better understanding about why all efforts to treat the situation are just making the patient worse.

But there's a class element here too. The right hates poor people and the left loves them to death. But both agree that the poor must not be left to make their own decisions on financial matters. My friend John Hope Bryant says the difference between being broke and being poor is that being poor is a state of mind. Apparently it's a state of mind you can be in even if you're rich. The sad part is that once upon a time good New Deal liberals were leading the drive to get poor people the tools to help themselves:

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  1. "We'd also have a better understanding about why all efforts to treat the situation are just making the patient worse." Tim, I knew you would bring health care into it.

    1. Don't worry... Chad will eventually wander in here and really make it about health care.

      1. Good Morning reason!

  2. Bernanke of course had a personal stake in deceiving the public in this way. He himself was carrying an adjustable-rate mortgage at the time, which he has subsequently managed to refi -- thus locking in an attractive rate before raising interest rates on the rest of us.

    Nobody's stopping you from getting a fixed rate loan.

    Interest rates have never been (and really can't get) any lower. Dec 2009 is a good time to convert an ARM to a fix rate, and you don't need any fancy insider knowledge to figure that out.

    1. When you control the interest rate you don't need insider information. And Bernanke actually locked in an interest rate that's higher than the "exploding" rate he had after his reset. He has been decidely less than forthright throughout the recession.

      1. The Fed funds target rate is currently at zero*. Bernanke** can't do anything else *but* raise rates.

        I will concede that his statements documented in the Calc Risk blog, are, at best, inexplicable, and in any case have a WTF-ness.

        *technically the target is a range of 0-0.25%

        **or his successor, if the left/right Blame-Bernanke coalition gets enough traction for either his re-appointment to be withdrawn or for it to be not approved in the Senate (I don't see either as particularly likely though)

        1. While unlikely,Bernancke can take rates negative.

          THe 25% of "homeowners" with mortgages underwater can't even dream of a refi at a fixed rate.

          1. Effectively, a 0% is a negative interest rate, since the "real" interest rate is the official rate minus inflation. Since inflation is non-negative, a zero nominal rate from the Fed is a negative real rate.

            Just one more way that the taxpayers are bailing out the banks.

            1. We did have some deflation this year, actually.

              1. Silence, you fool!
                Hyperinflation is coming!
                Buy gold!
                Buy gold!
                RON PAUL!
                RON PAUL!

              2. We did have a few months of deflation, but we're up +1.8% since November last year.


            2. i would claim that the interest rate is what fuels inflation, as its basically setting the rate that new money will come into circulation. Its just that said inflation effect is not instant, as the market have yet to register the increase in the money pool. When they do is when inflation happens.

            3. I am quite aware of that.I have large cash savings.

              I wouldn't rule out negative interest rates by a charge on deposits.Unlikely,but they fear deflation enough to go for it if the data warrants.

      2. I assumed the lines about Bernanke's mortgage were a hilarious joke. I couldn't imagine anyone seriously contending that Ben Bernanke would have a hard time getting a good mortgage refi, or that his doing so would offer some real insight.

    2. I do think that if we are going to have a FED (which I oppose), we should make sure the chairman owns his home outright. Just as a general principle.

      1. I do think that if we are going to have a FED (which I oppose), we should make sure the chairman owns his home outright

        It would be more effective to put him on a fixed income.


      2. Better yet he should come from and live on a different planet.

        1. Not my planet, Earthling.

        2. Better yet he should be beaten with sticks by trained baboons every night. And then shat upon by the untrained ones.

  3. The right hates poor people and the left loves them to death.

    This is obviously supposed to be tongue in cheek, but an outsider might not realize that.

    1. The left only cares about the poor when they can be used as props and shills for more votes. Nothing cements a perpetual re-election rate like having millions of people on the dole.

      1. The data shows that the "millions of people on the dole" favored McCain by over 55%.

        1. Being brainwashed into living on the public trough isn't limited to party affiliation, shrike. Unfortunately, Rs sell that snake oil as well - just a different formula.

        2. If that's true, shrike... how did Obama manage to win?

          1. How did Obama win Maine or New Hampshire?

            All those Live Free or Die folk on the "dole"?

            You're not buying the ACORN bullshit are you?

            Quit listening to Beck - he is full of shit.

            1. I don't listen to Beck.

              As for your view of "live free or die", you show your true colors with your contempt for that concept.

              1. You're wrong. I'd love to see the LP gain major party status.

                I just don't pretend the GOP will cut spending - history shows they never have.

                1. If that's true, shrike, why do you speak like a Democrat?

                  1. Because I am first and foremost an anti nation-building secularist ACLU guy.

                    Very libertarian/liberal - voted for Obama for this reason - Ron Paul was fine too.

                    Quibbling about a top rate of 35 or 37% is less important. And no party will cut spending. Bush spent far faster than Clinton did.

                    Its that easy.

                    1. Speaking highly of either Brand X Party, save for their few-and-far-between true statesmen, is a fools' errand, shrike.

                      I can count the number of politicians I can trust on two hands... with two fingers left for the remaining ones I cannot trust.

                      Guess which fingers.

                      But expecting help from the government is like mailing a post card to the fire station when your house is engulfed in flames... help is not going to arrive in time, and it's not going to be all that helpful in either case. Nothing against firemen, just pointing out they're not all that good at saving a home when it's beyond saving.

                      Do you get the metaphor?

                    2. Because I am first and foremost an anti nation-building secularist ACLU guy.

                      Very libertarian/liberal - voted for Obama for this reason

                      So, you voted for the guy who expanded the Afghanistan war, kept the office of faith based initiatives (after a name change) and fell in love with the Patriot act when convienent for him.

                      Good job, shrike!

                    3. And how has that worked out for you? Thanks for helping give us Hopey Mc Change.

                2. Democrats aren't cutting spending. In fact, their plan calls for more spending and tax increases - which is just as toxic a plan as cutting taxes and increasing spending.

        3. Really? McCain won 77% - 22% among those people?

      2. The left Politicians in general only care about the poor anyone else when they can be used as props and shills for more votes.


        1. Thanks, Tulpa. But right now, it's the Dems who are mining that vein; when it comes back around to the Rs, they'll grab their shovels with gusto.

      3. And as cynical as I am, I still believe that the true lefties mean well and sincerely think that the policies they are programmed by their leaders to advocate will help the poor. Fortunately or unfortunately, their leaders are a bunch of craven scoundrels who care about little besides expanding their power. (I include the "fortunately" possibility only because some of the more heinous lefty ideas are prevented from being implemented only by politicians' reluctance to risk losing their power)

        1. I'll concede that some liberals may actually care about the plight of the downtrodden... but I can't agree with their methods, in general, for fixing the problem. Their track record over the decades hasn't done much more than perpetuate the malady.

          1. Indeed. Then again my method of throwing them out on the street and starving them to death hasn't helped much either, so maybe I shouldn't talk.

            1. Never give up hope, Tulpa... though I would have a slightly more humanitarian approach:

              Force politicians to live like lower-class folks. Put 'em in duplexes, driving ten-year-old used cars, and no cable TV. Make 'em clip coupons and live on ten bucks an hour. They can have online access - but only dial-up. AND, their kids have to go to the nearest public school.

              Put Pelosi in that life, as an example to the rest, and she'll crack faster than a Gitmo detainee forced to listen to Wang Chung albums 24/7.

              1. faster than a Gitmo detainee forced to listen to Wang Chung albums 24/7.

                That is when AL Qaeda discovered what we are truly capable of doing. 'Fear the Chang' ought to be on the lips of all enemies of the Republic.

                1. Damn, didn't change that to a 'u' fast enough.

                  The Chung Has Struck.

                2. You know that idea brings a whole new perspective to the joke in The Spy Who
                  Shagged Me about Wang Chung. You know the comment Scott Evil had about Dr. Evil calling his giant laser, The Allen Parsons Project, where Scotty replies "I'm sure Operation: Wang Chung will be a huge success.

            2. I think your average lefty can sincerely claim that they care deeeply for the downtrodden.

              The average lefty also wants someone else to do something about them and god no, don't bother them about getting their hands all dirty doing some of the lifting. Those people are smelly and grungy and will probably try to steal from you, if given half a chance.

              1. "Those people are smelly and grungy and will probably try to steal from you, if given half a chance."... and they have cooties too.

                1. Slurp! Slurp!

              2. A lot of lefties I know volunteer at soup kitchens and the like, so that's not a fair characterization either. Why are we so invested in our opponents being not merely mistaken but hypocritical as well?

                And of course there are plenty of libertarians who complain to no end about government overreach, but are unwilling to lift a finger in their own lives to do something about it. Some of them even write for Reason!

                1. Tulpa, "Whenever two good people argue over principles, they are both right." People who cut and run don't comprehend this precept.

                2. Why are we so invested in our opponents being not merely mistaken but hypocritical as well?

                  Perhaps because it can expose people's true beliefs. E.g.: Democrats who oppose school vouchers because it "undermines the public school system," but don't send their own kids to public schools.

                  1. or perhaps because it can expose people's true beliefs. E.g.: Libertarians who oppose public healthcare because it undermines their true belief that the poor/infirm & uninsurable need to die.

                3. I did say "average." Yes, I know several lefties who put their efforts where their mouth is, at least in part. I don't think that you'll ever get a full accounting of leftist give-aways, no matter how many soup kitchens or homeless shelters you volunteer in.

                  However, I know many more who simply think there "oughta be a law" or that everyone should be getting ponies because life isn't fair.

              3. Not true! I'm a lefty who's hosted a homeless shelter (and found out half our guests had jobs) and now works for a food bank.

      4. ...As evidenced by, for example, by the tremendous decrease in poverty and child hunger resulting from Great Society programs?

    2. How about: The right hates poverty and the left has made it an industry.

  4. It should be easy to verify this hypothesis by running the data against bank/loan type.

    For instance, Great Western (purchased by Wachovia) specialized in lethal option ARM's. Of course, Wachovia was spirited away to Wells Fargo at practically no cost (and a $30 billion tax credit) before they would have gone belly-up.

  5. In one of joe's last fits of sanity before he went off the deep end, he pointed to the work of an economist who made similar points when blaming the CRA was the hip thing to do for those of us who have calloused libertarian souls, and I had to concede the economist he cited made a good argument. However, this goes to show once more, though the welfare state is harmful to the poor by instilling dependency and encouraging lax cultural mores, the middle clash entitlements (may not have been subprimed, but the middle class mortgage market is fixed like a prize fight) are the real threat to our long term prosperity.

    1. +1, alan. The idea that government is a universal fix-it tool/first-aid kit, will be our undoing someday. Paying for an ever-expanding welfare state will soon gobble up more than we can afford.

      1. Someday is here now.

    2. the middle clash entitlements

      Though this period marked the height of their press pleasing bullshit, the middle period Clash albums really were their best.

      1. i actually like Big Audio Dynamite...

      2. Don't make fun! He has a lisp!

    3. I always found that the "blame the CRA" thing was a good way to separate those who actually had an understanding of what was going on from those who didn't. If every loan that could be remotely tied to the CRA had gone bad all at once but everything else was normal, it would have simply been a bad week for the banks and everyone would shrug. There wasn't remotely the volume or total loaned value there for it to make a dent.

      Not to defend the CRA in any way shape or form, but I care about the machete in my back far more than the thumb tack I stepped on.

        1. All right already with the +1's. We need thumbs up/thumbs down buttons on each comment. Get it done!

          Also, how come I've never seen anyone get a negative point total for their comments?

          1. Because nobody's thought of it yet.

            1. I meant negative values for comments btw. I did not mean "thumbs up".

              Now a middle finger up, when appropriate, could be useful.

            2. DailyKos does it that way. If your comment slips into the negative, it's hidden from non-trusted users.

              Call it "Community Censorship"

              1. Yeah, YouTube does the same thing, but if you want to see the hidden comment you just click Reply and it appears. The ostensible reason for the things is to filter out vapid, off-topic, or abusive comments, as well as spam, but unfortunately people tend to thumbs down anything they disagree with.

                1. The ostensible reason that DailyKos does it so that trolls can't post comments and have Bill O'Reilly put them up on his show as evidence of "hateful, extremist" leftists.

                  What it means in reality is that any dissenting views are immediately silenced and hidden from the delicate eyes of leftists.

          2. -1.

            We don' need no stinkin' thumbs.

          3. I've seen negative numbers. The one that sticks out was a comment chock full of racist bullshit and someone called him on it with a negative number and verbal correction.

      1. Not to defend the CRA in any way shape or form, but I care about the machete in my back far more than the thumb tack I stepped on.

        Same with SCHIP. I shrugged when the expansion of it passed a few years back (reinforced long established bad practices in the health care market, but minimally so), but you really can't just shrug at the health care bill that is on the table now.

        1. I'm still perplexed as to why SCHIP covers "children" way past the age of eighteen.

          1. Well, when you pass by a group of college kids on the way to the best pizza joint in the town, unfortunately near a college campus, and this group consists mostly of white boys with corn rows, playing hacky sack in the middle of the street baring skint of knees, and there are cars honking at them to get out of the way, do you get the feeling they can take care of themselves? Of course, you and I would chuckle to see them ran over and praise Darwin, but Pelosi being a mother . . .

            1. Good point.

        2. SCHIP is bad (among other reasons) for extending "welfare healthcare" to the truly middle class(who can afford to buy it) .What's next? Are we going to extend foodstamps to the median income, or above?

      2. It's not just the loans tied to CRA. It's the precedent and general level of risk taking. The same is true of Fannie and Freddie, they didn't hold the majority of MBS, but their willingness to hold and create MBS that were more risky lowered the standard overall. If it's okay for them to do it's okay for us in the private sector. (and look how much profit we are taking!) Blaming anyone one thing is a mistake and shows a lack of understanding. I've heard your exact argument used for Fannie and Freddie not having a role in this mess. And I think while not wholly false, it is misleading and too simplistic.

        1. CRA also had a huge hand in the glut for housing and creating an unbalanced market. Which had a direct role in the mortgage meltdown. Especially the latter half.

        2. Fannie & Freddie I put a large amount of blame on, though that is subject to who you blame when an agency does a job just like Congress asks of them when that job is terrible and should not be done.

          Though the blame for what they've done since they caused all this by far eclipses what they did to cause it.

          1. Question: How much of the market do I have to pervert before it affects more than just the agency doing the perverting?

            IE - you state CRA loans are small in comparison, but that seems to be the same faulty logic that couldn't deal with the risk uncertainty as well as it doesn't take into account the dynamic system of a mostly free market.

            What happens if in neighborhood X, 10% of the loans are CRA and purchased at higher prices than necessary?

            The main point is that for government to truly pervert a market through crappy incentives, they don't need to be responsible for a majority of the transactions to do this effectively.

            1. Now that's a multiplier effect I can believe in...

            2. What happens if in neighborhood X, 10% of the loans are CRA and purchased at higher prices than necessary?

              I still see the affect as minuscule because of the range of houses that got caught up in the insanity. If a 30k house costs 33k, how much difference does that actually make to the 300k+ market?

              The main point is that for government to truly pervert a market through crappy incentives, they don't need to be responsible for a majority of the transactions to do this effectively.

              My main point was that if I were to make a list of government perversions of the market that caused this, CRA doesn't make the first page. I'd love to see it repealed, but it would be much more productive to destroy Fannie & Freddie (and burn their offices to the ground and salt the ashes), phase out the mortgage interest deduction (for practical purposes, I'd say to just cut the cap down to zero over 5-10 years - it's my fantasy so I can assume they'd actually go through with that rather than doing one year "fixes" for eternity), and obviously repealing all the shenanigans they've pulled over the last 2-3 years in order to prevent house prices from recovering to affordability.

              Oh yeah, and a Constitutional amendment prohibiting the government from stepping in to save any private company for any reason ever. Then after that I'd get around to repealing the CRA, we'll say by dinnertime on my inauguration day or so.

    1. You still have me, but no hugging.

    2. They have medication for what ails you Tim

  6. I'm suprised it's taken this long for someone to examine the data and draw this conclusion; Whilst I'm not sure what the difference between prime and sub-prime mortgages are, my mother and I have both recognized the danger of Adjustable Rate Mortgages; when mortgage rates are low, the mortgage payments start low. Many people who got an ARM with a low starting rate could not handle the increase in their monthly payments when the rate increased. I'm still amazed it's taken several years for someone to report on this.

  7. I wonder what effect the bubble itself had on this. As the assets value rises and less equity was needed to move into the higher valued asset you are essentially turning prime borrowers into subprime borrowers by moving the borrower's ratios out of what would be prime.

    Something along these lines would account for supposed prime borrowers leading the way.

  8. Interesting post. And that was a good movie, from what I remember -- have to put it on the "queue".

  9. Anyone have data about the rate of defaults by income bracket? That would resolve the debate.

  10. The right hates poor people and the left loves them to death.

    This doesn't gybe with my experience. The right wingers I know want poor people to escape poverty, and the left wants to enslave them and turn them into a permanent, dependent voting bloc.


    1. Folks on the right want the poor to work for a living. Folks on the left want them to vote for one.

      1. So incredibly true. If nothing else, you know what to expect from the GOP, rather than the do as i say, not as i do bullshit of the Democrats.

    2. I've always felt that the real problem was that the Right often doesn't care about inequality, blindly insisting that society is a meritocracy when it isn't and that people are poor as a result of laziness.

      The Left on the other hand encourages the poor to be lazy and entitled, thus keeping society from becoming a meritocracy and bringing about the equality they so claim to love. The Left does a better job at convincing the poor to care about issues that are in their worst interests, like environmental regulations, minimum wage laws and unions.

      1. Hobo -

        It could be because the term "inequality" itself has very little meaning as meritocracy will be defined differently for different people.

        Too many quotes to chose from, but this one seems good:

        Freedom is essentially a condition of inequality, not equality. It recognizes as a fact of nature the structural differences inherent in man ? in temperament, character, and capacity ? and it respects those differences. We are not alike and no law can make us so. ? Frank Chodorov

        1. Indeed. Heck, even "equality" is ill-defined. If I have two apples and you have two oranges, equality demands that the govt step in and give me one of your oranges and you one of my apples, so that we have the same possessions.

          Never is it considered that I might prefer apples and you might prefer oranges, so that both of us are worse off after being "equalized".

          1. & what's odd - for people like me who notice the reality, others will call me heartless.

            It's not as if I don't see things I think are patently "unfair" in society. It's not that I don't wish for those things to be different and it's not as if I don't support organizations that seek to change the things I think are "unfair".

            I just don't support the guys with the guns deciding what's "equal" as historically that has ended in well known disasters.

            BTW - one thing I can easily think of as "unfair" is the difference between a poor person, a middle class person, and a rich person being charged with a crime they didn't commit.

            Poor person? Waits in jail for a year and a 1/2 because they can't afford bail. Goes to trial with likely bad attorney. Probably goes to jail.

            Middle Class? Gets out of jail on bail, has a decent lawyer, trial goes forward. May or may not go to jail.

            Rich? Bail easy - might not even get processed. Has the best lawyers and investigators and PR people money can buy. If not a huge public figure, the trial will likely never happen and if it does, they will very unlikely to be wrongfully convicted.

            1. Well, libertarians do support equality before the law.

              1. Yes - equality of opportunity - I support that as well.

  11. What percentage of primes and sub-primes are ARMs? I have the general impression that a very high percentage of sub-primes are ARMs. If lots of sub-primes are ARMs and few primes are ARMs, then we can still blame sub-prime.

    1. You can always blame subprime because even in the best of times defaults are much higher on those, and the total number of subprime defaults now are much higher than the total number of prime defaults (dunno what subprime defaults account for in dollar value). What's interesting here is that prime and subprime began behaving the same way over the same period of time -- provided they were ARMs. And to the extent the two categories differed, subprime may even be behaving better: Defaults on subprime fixed rate mortgages, for example, are still below their historic highs, though all other categories passed previous highs in 07 or 08.

      Anyway, the study's five pages long and they let they download a free guest copy. If anybody wants to give it a hard look, well, the comments are always open -- and threaded, for your pleasure.

      1. There is nothing about threaded comments that are pleasurable.

  12. Off-topic, but does anyone know when the podcasts will be updated? I understand the slowdown for the holidays, but I was really getting to like playing a few games of freecell while listening to the latest articles.

  13. I don't think the pieces are being put together here. If tons of people getting ARMs are defaulting and modifying the loans doesn't help then it does not follow that the terms of the ARMs caused the defaults. It implies the exact opposite: the behavior of the people who got ARMs, poor or rich, are causing the foreclosures. The evidence as presented here points to borrowers taking ARMs to make risky bets on real estate they couldn't afford. I don't see what's new about this.

  14. Lots of people bought houses they couldn't afford.

    This included poor people, stupid people, investors, etc.

    Fuck them all. They can rent.

  15. Atrios has been saying "It's not about subprime" and worrying about waves of resets for a year.

  16. You anti-Bush Americans keep going on about his deficit spending but the debt binge was a universal phenomenom. It was going on everywhere. It was the spirit of the age. It was global. Massive amounts of the toxic stuff was funnelled through the City of London. Why do you think the UK is in a mess, and Spanish property. What are all those lovely tall empty buildings doing in Pudong? Get off your Bush-explains-everything syndrome for God's sake. In the last two years of Bush's reign the Democrats were in control of Congress enough to clamp down on the spending. Did they? Did they get their supporters to march the streets against earmarks? And Barney Frank is the epitome of fiscal discipline and sobriety? And how many Fannie Mae and Freddie Mae executives were sacked for cooking the books - and then served as advisers to Obama. Jesus!

    1. You're new here, aren't you?

  17. WSJ: The Price for Fannie and Freddie Keeps Going Up
    ...New research by Edward Pinto, a former chief credit officer for Fannie Mae and a housing expert, has found that from the time Fannie and Freddie began buying risky loans as early as 1993, they routinely misrepresented the mortgages they were acquiring, reporting them as prime when they had characteristics that made them clearly subprime or Alt-A.

    In general, a subprime mortgage refers to the credit of the borrower. A FICO score of less than 660 is the dividing line between prime and subprime, but Fannie and Freddie were reporting these mortgages as prime, according to Mr. Pinto. Fannie has admitted this in a third-quarter 10-Q report in 2008.

    An Alt-A mortgage is one in which the quality of the mortgage or the underwriting was deficient; it might lack adequate documentation, have a low or no down payment, or in some other way be more likely than a prime mortgage to default. Fannie and Freddie were also reporting these mortgages as prime, according to Mr. Pinto. ...

    ...But because of Fannie and Freddie's mislabeling, there were millions more high-risk loans outstanding. That meant default rates as well as the actual losses after foreclosure were going to be outside all prior experience. When these rates began to show up early in 2007, it was apparent something was seriously wrong with assumptions on which AAA ratings had been based.

    Losses, it was now certain, would invade the AAA tranches of the mortgage-backed securities outstanding. Investors, having lost confidence in the ratings, fled the MBS market and ultimately the market for all asset-backed securities. They have not yet returned.

    By the end of 2007, the MBS market collapsed entirely. Assets once carried at par on financial institutions' balance sheets could not be sold except at distress prices. This raised questions about the stability and even the solvency of most of the world's largest financial institutions. ...

  18. I always found that the "blame the CRA" thing was a good way to separate those who actually had an understanding of what was going on from those who didn't.

    The Financial Crisis and the CRA
    ...How many of the troubled Fannie/Freddie loans were also used for CRA purposes by banks that originated them? It's impossible to know; regulators haven't done a rigorous assessment. Nor have CRA advocates pushed for any performance tracking. But they were certainly implicated in our present situation. One chief executive of a significant New York bank recently told me that Fannie Mae "scooped up" all of the CRA loans he originated. As economist Russell Roberts of George Mason University points out, Bank of America reported that nonperforming CRA-eligible loans were a significant drag on its third-quarter 2008 income. Its earnings report states: "We continue to see deterioration in our community reinvestment act portfolio which totals some 7 percent of the residential book. . . . The annualized loss rate from the CRA book was 1.26 percent and represented 29 percent of the residential mortgage net losses."...

  19. If you're flipping or buying a second home or betting on the come, you want to reduce your short-term exposure.

    Is this some perversion that even I haven't heard about? Betting on the come? What do you bet on? Distance? Volume? Pearlescence vs. viscosity?

    You are a sick, sick man, Tim.

    1. It a craps term. As in "Mom, if you were in a German Scheize video, you'd tell me, right?"

      1. Craps?

        If Tim thinks pooping and ejaculation are related, the proper term is blumpkin.

        Which I hear Warty demands from Episiarch every morning. Which is why you should never have breakfast at their place.

        1. Damn it, while looking up blumpkin, I discovered blumpkeena and brown chin syndrome. Nice.

          1. The number of ridiculous blumpkin variations on Urban Dictionary is truly daunting. Daunting and astounding.

            1. My New Year's Resolution is to keep telling you all things you'd rather not know.

              1. So it is the same as last years and the year before that?

                1. I am as constant as the North Star.

                  1. Foolish consistency, hobgoblin, etc.

    2. I didn't know you could make money off of it. Slurp! Slurp!

  20. It is my understanding that Americans have a right to property, wealth and good health, and that, because of Skyrocketing Health Care Costs?, many have had to choose between giving up their homes or letting Grandma die. This is what I have learned by watching The News. I believe The News. Especially Diane Sawyer. She's empathy wrapped in warmth and surrounded by a big, furry hug.

  21. First of all, Tim, your link to your own article provides no concrete evidence that "we know unemployment is not a major factor in defaults." Furthermore, it is an asinine, erroneous assertion. I got a "subprime" mortgage and was grateful for the opportunity to buy a home. But when you lose your employment abruptly, especially when your job is tied to the real estate industry (and lots are), and you aren't elligible for Uncle Sam to cut you a check every fucking month for your unemployment situation, it's difficult to keep up with a mortgage payment.

    I am no victim by any means. I had very little savings, a $50,000 degree burden (worthless), a sick parent, and sundry mistakes and extenuating circumstances. I ended up in an awful shitty spiral of financial ruin.

    I was watching a presentation of Fool's Gold by Gillian Tett on cspan and at the end, an executive from JP Morgan (may have been Citi), who was in the audience, made a comment that went something like this: "no mortgage crisis, no financial crisis." Well, from my personal experience, "no fucking employment crisis, no fucking default crisis."

    Government (HUD and Congress via Fannie and Freddie) meddling in home ownership and the mortgage market caused this fiasco. As far as I am concerned Alt-A's and ARM's are subprime. Greenspan (the great bubble inflator himself) loved ARM's.

    Nevertheless, I'd say unemployment contributes substantially to any and every type of financial default for the average person. It's simply preposterous to assert otherwise.

    1. Your flawless logic and reasoning in taking your individual situation and expanding it to a universal rule to which any contra opinion "[is] simply preposterous to assert otherwise" makes me wonder how you ever would have miscalculated your ability to handle the burdens that you took on.

      1. I didn't "miscalcaculate" anything, you shitface. Quite a few of my personal choices have been foolish and woefully uninformed. I certainly made mistakes - as indicated by my comments. But, asshole, I didn't "miscalculate" the unforseen assistance of a single parent with cancer and the unbelievable emotional and financial toll that takes. And that "burden" wasn't unsurmountable before work evaporated. My mother lost her battle with cancer about a month before Big Financial melted down. My father died unexpectedly a month before that. Oh, and my uncle a month before that. Go fuck yourself OMG.

        I didn't use "flawless logic and reason" and expand it to a "universal rule," idiot. Re-read my comment, shitbird. The average American (who doesn't know what the fucking Federal Reserve is and lives pay check to pay check) that loses their income will likely default on some form of credit. My statement (which is obviously my fucking opinion and unbounded by my personal experience) asserting that a loss of income substantially contibutes to credit defaults (whatever form) is perfectly logical, you fucking prick.

        Thanks to your astute analysis of my comments, and some epiphanic reflection, I don't think I would have taken on a mortgage if I just would have "calculated" that lump in my mother's breast a couple of months after closing on my first American dream home.

    2. As the link indicates, the Federal Housing Finance Agency has "unemployment" accounting for fewer than a tenth of all defaults, with "excessive obligations" dwarfing that figure. There's also this from recent congressional testimony by Laurie Goodman.

      As for your moniker and personal story, I have mentioned before that nobody can top me in sob stories from the last three years. I am unemployed and have suffered all the catastrophic losses the politicians jabber about. I have every incentive to default. I decide not to. You made a different decision. I hope luck gets better for both of us in this decade.

      1. I am unemployed and have suffered all the catastrophic losses the politicians jabber about.

        You had swine flu?

        I decide not to.
        You and Harry Truman. Not a huge fan of Harry's politics, but the man did repay his debt instead of avoid it. Not a common think even in his day.

      2. How are you posting threads on H&R if you're unemployed? Does Reason have a gremlin?

      3. Tim, I read most of the posts on Reason, but am unaware of your sob stories. But, brother, I'll go toe to toe with you any day of the week. But what's the fucking point really? Someone always has it worse off!

        What I have is every incentive to become a statist. But luckily I have taken the time to become more informed. My mother, after teaching special needs children for decades, decided to change jobs after utter frustration with the bureaucratic nightmares that exist in our beloved public schools. She endured for as long as she did because of the "benefits." Unfortunately, that COBRA bullshit ran out a coulple of months before being diagnosed with cancer. Now, if we didn't have a cumbersome health care system tied to employment, that may not have been a problem. Fortunately, she was the beneficiary of some magnificent charitable programs. But now that we are on the verge of reform bullshit, I guess that won't be a problem anymore, huh!?

        I have no problem accepting responsibility for uninformed choices I made. I feel like I exhausted all resources that I could with my home (perhaps not) and don't want to lose it. In the end, I think it will be better for me and, frankly, the market.

        For someone who is still stuggling with employment, I think unemployment is the biggest obstacle facing the economy (besides the congressional shitbirds ruling us). It seems to me it is going to take something drastic like the Fair Tax to invite the type of capital formation and incentives needed to "jump start" the economy and create jobs. Actually, forget that, I just realized Obama had a jobs summit - already taken care of!

  22. What several posters said: kinda "Duh!".

    One can hope the interest on the national debt is not adjustable-rate.

    1. Actually, it is. The Fed has been financing an unusually large percentage of the deficit at the short end of the yield curve recently that means, effectively, that portion of the deficit will "reset" soon.

      1. Still, one can hope.

  23. Al Stephenson was a New Deal liberal? I always thought he was an old-fashioned businessman Republican.

    1. I was thinking of the writers who put the words in Al's mouth. Though of course, in those days, they may have just been CPUSA memebers.

  24. Perhaps it is due to the way in which the results are presented. But two issues concern me: 1. we don't know how the data was parsed; 2. the term sub-prime is used rather loosely in general. Most of the articles I have read on this issue sub-prime means that the borrowers were much less qualified than what lenders historically demanded. The majority of these applicants got mortgages with little or no down payment and an ARM. There were other applicants that met all of the standard requirement that opted for an ARM. When I purchased my last two homes I was encouraged to take an ARM rather than a FRM. I did not. Because of the way that the author defines sub-prime, I am not persuaded by his argument. My own anecdotal experience with friends and acquaintances that are underwater with both ARMs and FRMs does not match what professor Liebowitz says. Those that are in default are those that do not have the financial wherewithal to make their payments. They wouldn't have qualified under the old rules and thus are by the definition used by the general media and most of the population, sub-prime.

  25. I'm afraid the same people here who say that it is wrong to take food or meds from person A to give it to a starving or sick person B can't lecture anybody on the subject of caring for the poor.

    1. As a Libertarian who has given probably far more in time and money to the poor than MNG, I want to have some say in who gets my contributions.
      I am in Nevada and after watching some "poor" people drop over $500 into a supermarket slot machine then go on to buy groceries with food stamps, my disgust at government run welfare hit a new low.
      The MNG folks are all in favor of taking my money then using it to buy the votes of the "poor". I want some say in who dips into my pocket, but the statists can't allow that.

      1. I understand that. But on this site before I've posed the following hypothetical: A, B and C are all stranded somewhere. A is starving or will and B has food or medecine that will save A's life, but refuses to give it to A. Should c take it from B and give it to A? To answer no is to value property rights over human welfare.

        1. that should read "starving or ill"

          1. You are wrong. The point you miss is that there is more to it than "C taking from B to give it to A".

            Once C gets to decide who gets what, human welfare for everyone else becomes worse, instead of just your hypothetical hungry person. Because A doesn't exist in a vacuum, he is even worse off, because the stable society which might feed him is less so.

            This is why the Leftist doesn't really support "human welfare". Property rights and the rule of Law promote human welfare more than wealth transfers and bureaucratic regulation.

            1. "Property rights and the rule of Law promote human welfare more than wealth transfers and bureaucratic regulation."

              To the extent this is so then I'm all for the former over the latter. Of course what I'm talking about are situations when the two plainly conflict. It may be rare but it's easily concievable, and so, what then?

              1. Easily "conceivable", sure, but not easy to make exist in practical reality. There is almost never a situation like the one in your hypothetical, MNG!

                Consider, for that to be true, the following would also have to be true:

                1. Person B is the *only* one with medicine.
                2. Person B must not actually need the medicine he has.
                3. Persons A, B & C have to essentially be the only people in existence.
                4. The resource in question must be so incredibly scarce as to not be obtainable by any other means than force.

                I mean... I can go on, but the overall point here is that your hypothetical is ridiculously oversimplified - as they typically are in these situations - such that it is insanely unlikely that it would ever happen in real life.

                That is - EXCEPT - in situations where monopolies are protected by law.

                If I could buy drugs from any manufacturer who wanted to make them, then medicine production gets a huge boost, prices fall towards equilibrium and demand is then handily met. At that point, the poor sick person A has no trouble finding the treatment he needs and in the event that he still can't afford it, Person C (and B, if he's not a complete dick) can help.

                In your scenario, Person B is probably only holding on to said medicine because letting go of it would come at what he perceives of as a very high cost - for example, what if *he* gets the disease later? If the resource is incredibly scarce, he's looking out for his own future well-being (yes, over the present well being of Person A).

                But why is Person A's life *today* worth more than Person B's life *tomorrow*? Especially when the needed commodity is already in possession of Person B?

                The situation you post is comically dumbed down.

                1. "comically dumbed down" is an understatement for describing that retarded troll.

                2. It also lacks context. How did A get into the situation where he needs medicine? It this the first time he needed it or the tenth? What it the likelihood that B will need medicine in the future? How much supply does B actually have?

                  1. Exactly my point here. Real life situations aren't so simple...

  26. Libertarian* hierachy of concerns
    1. Property
    2. Contracts
    3. The welfare of actual human beings

    *Well, the "purists" at least

    1. Nope. What the Libertarian believes is that 3 is most likely to occur if numbers 1 & 2 are secured.

      You wish to give a man a fish and claim that I want him to starve because I would teach him to fish. My beliefs actually uplift him while yours only uplift yourself.

      The true irony is that I don't do it for him, but for myself. Intending only to improve my own condition, the invisible hand also improves that of my fellows. The Leftist claims "good intentions" and the result is that the aim of their intentions, the poor, are worse off as a result of them. No matter, the Leftist really doesn't care about results, they only care about caring.

      1. Nope. What the Libertarian believes is that 3 is most likely to occur if numbers 1 & 2 are secured.

        Despite any evidence to the contrary...

        1. Despite any evidence to the contrary...

          Which you have failed to provide.

          Africa should be a wonderful continent by your (MNG & Chad) lights - the governments there have, by and large, very little respect for property rights or contracts, and there's plenty of foreign aid welfare, so it should be a paradise. Why isn't it?

          1. Baked
            Maybe the hundreds of years of harsh colonial rule?

            But on another note Baked I'm not disputing the utilitarian value of libertarian ideas like Chad, I'm disputing "deontological" libertarianism.

            1. During colonial rule in many African nations the economy was directed to supply raw materials and cash crops rather than industrial development. National lines were drawn by outsiders with little appreciation for national affinities (tribes that hated one another were lumped together into the same nation). It's little wonder that many of those nations are'nt very developed.

              There are some other factors at work too, covered in works like Guns, Germs and Steel and works on institutional economics.

              1. MNG, by definition, and by practice, libertarianism is far more concerned with the welfare of human beings than collectivism. Hundreds of millions do not get slaughtered as a direct and proximate result of the former.

                1. LM
                  I didn't say that as an empirical matter libertarian rules do not foster human welfare better than certain collectivist schemes, I said that when libertarian rules do not foster human welfare the latter should trump the former.

              2. National lines were drawn by outsiders with little appreciation for national affinities (tribes that hated one another were lumped together into the same nation).

                MNG, this (and your other statements about colonialism) are true. However, look at India, which is now starting to take off economically. Many of the exact same conditions applied there as well: a divided population that hated each other; it was used essentially as a large plantation.

                Most of the world was a former colony at some point. Some countries fared better than others economically, and property rights, and a legal system that could address contracts were important components.

                1. Ugh.

                  "...Some countries fared better than others economically. Property rights, and a legal system that could address contracts were important components of those nations' better performance."

                2. I understand your point, but not all colonies were treated equally (the treatment of English colonists in America was much better than the colonized Africans in Africa, for example).

                  I'm also not sure India is a great example. A lot of India is still incredibly poor, and the tensions of the British drawn lines is seen in the headlines nearly every day. The GDP per capita in India is lower than that of the Congo...


                  1. Yes, a great deal of India remains incredibly poor. But they also have a population of 1 billion +, while the Congo has 4 million - and its per capita GDP is artificially inflated by oil & mineral revenues, which India lacks. I would say the average Indian has a much better chance of doing something with their life than the average Congolese.

                    Also, India is only now making the transition to a freer economy in a lot of industries. They still have a lot of regulations left from the era when (literal) Marxists made up 40% of the government.

                    You are right about the differential treatment of the colonies. This was one of the reasons I chose India - since they did not have it easy as a colony. Perhaps South Korea would be a better example - they were brutalized under the Japanese, then suffered a horrible civil war, and had a fairly authoritarian government for a good twenty five years after that. Today, they are free and wealthy.

                    1. I'm not sure it's fair to discount Congo's higher GDP per capita because of its natural resources, every nation has some advantages and disadvantages there (India has a coast line that some land-locked nations which score higher, like Swaziland, would love to have).

                      I'm also not sure Korea is a good example. The US propped S. Korea up a good deal during the Cold War.

                      But look, this could go on and on, my point is that there are a myriad of factors that contribute to a nations current economic statuts. I probably agree with you that liberalization of the economy and joining in worldwide trade are positive factors for the most part for most nations. If I were an advisor for a third world leader I would advise a market economy and rather liberal trade policy.

                    2. We can agree to disagree - on this and the other issue.

                    3. Seriously though I really would bet that the majority of the things you and I would recommend a third world nation to do to improve their lot would be the same...

                    4. MNG,

                      What about the old fable of the ants and the grasshopper? The grasshopper worked hard all year to store food for the winter while the ants lazed around in the sun. If winter comes and a judge were to give the starving ants each an equal percentage of the grasshopper's food, out of concern for their welfare, what incentive would the grasshopper have to work as hard next year, if he is lucky enough to make it through the winter - and what incentives would the ants have if they know they can rely on surviving on the hard work of others anyways?

                      A simple story, but it compactly explains the libertarian viewpoint on welfare economics. If the ants worked hard as well because they knew that otherwise they'd starve, everyone would be better off, and there would likely be plenty left over to help those who are unable to work due to incapacity.

                    5. I should also note that libertarians in general have a positive view of human nature because we believe few people are cruel enough to let someone who can't help themselves starve to death.

                      If in your theoretical example, A, B and C were stranded and person B at no fault of his own happens to have no food, it's most likely that A will do his best to share with him because he would feel too guilty to watch him starve, and making sure he stays alive and happy would be in A's best interest if there is possibility for escape, building shelter, locating more food, etc and also if A cares about his safety, as a desperate B would likely attack him for it otherwise.

                    6. Such a positive view they believe that it's impossible for humans to make rational decisions or democratically decide anything. Instead they believe that humans need constant incentives to keep from eating their young and that only the blind force of social darwinism is to be trusted.

                      Libertarians in general have a cynical anti-humanist view of their fellow man.

                    7. It's the other way around -- the ants worked all summer while the grasshopper played and frittered its time away.

                    8. Ah sorry - either way it still works...

                    9. It's an absurd view that assumes crippling injury and laziness to be the only causes of poverty.

                    10. It's an absurd view that assumes crippling injury and laziness to be the only causes of poverty.

                      Yes it is absurd, like most strawmen.

              3. Note the term you used there MNG:

                "...the economy was directed to supply..."

                Do you see the flaw in this? When economies are "directed" to supply goods, they usually fail miserably to do anything *but* what they were directed to (and even that they do poorly).

                For instance, while Cuba's economy has been "directed" to supply all manner of fun pleasantries for Fidel Castro and his mates, including loads of weapons - they forgot to supply toilet paper to the common man.

                When economies are left undirected, they supply whatever it is people are willing to trade for... Then all you gotta do is take a look at Maslow to see what will be cheapest & most abundant (food, clothing, shelter, then security, sex and other fun stuff).

                And Chad... STFU... There is no "evidence to the contrary" except when you pull disingenuous bullshit.

            2. Fuck that. India was under 100 years of harsh colonial rule. have THEY done differently?

            3. Maybe the hundreds of years of harsh colonial rule?

              If that were true, then the countries which had colonial rule the longest would be the worst off. In reality, the opposite is more frequently true, with colonized countries (at least until they were "decolonized") doing better than long-independent African countries.

              1. Wasn't it the story of the grasshopper and the octopus?

      2. "What the Libertarian believes is that 3 is most likely to occur if numbers 1 & 2 are secured."

        That's defensible. But see my hypo above.

        1. Desert island ethics? In a larger society, there would almost certainly be someone willing to help voluntarily.

          If you want to go back to the desert island, say C takes that food and medicine from B, and saves A. C, as a progressive, can now feel very self-righteous. But say B was saving that medicine because B had the exact same condition as A. B didn't tell them this, because it was none of their fucking business. Now B dies as a direct result of C's theft. Are you okay with that?

          Also, even if that was not the case, what if B finds C stealing, and resists? Should C beat B into submission? Should C murder B to save A? Are you okay with that? What level of force is acceptable?

          You can't see all the potential ends of your actions. And that fact is perpetually lost on modern liberals.

          1. If B was saving that medecine for the exact condition then we are comparing a human life to a human life and the decision is probably different. My point is that the criteria for deciding the decision is "what promotes human welfare" rather than "property rights must be respected in all cases" or "the initiation of force is always wrong."

            I agree with you though that everyone should think more about unintended and hard to foresee consequences, and that their existence is a good reason to be very hesitant before acting.

            1. Problem is, it's not clear what "promoting human welfare" means in a given situation. In your hypothetical, you're assuming C is The Right Person In Charge, with perfect knowledge of the correct course of action to "promote human welfare" and no desire to abuse his or her power. One of the advantages of libertarianism is that it's designed to work with the wrong people in charge (which is the rule, not the exception).

          2. you're talking about people like they were mere letters! real people! you cruel, cruel, cruel libertarian bastard!!! -sob-

            1. Haha, someone likes his caricatures! Like a teddy bear to the young they provide some people with a simpler, more calming world...

              1. nah.. the whisky does that. the caricatures are just for entertainment.

        2. The last line was a bit unfair in regards to you MNG, but it's one of the main reasons why libertarians are usually such absolutists about property rights - there is no way to know what negative consequences the violation of property rights will result in.

          1. The problem with modern libertarians is that they have no concern for the obvious consequences of their actions.

            1. The welfare state destroyed a whole host of private, voluntary charitable organizations that provided the same services as the welfare state does. The leftist's problems with charities wasn't that they were ineffective, but that they didn't provide basic necessities as a "right".

    2. #3 is dependent on #1 and #2.

    3. Actually, many libertarians, including purists, care about #3 more than #1 or #2. However, they consider that a personal choice and leave the government out of it. Let government handle #1 and #2 and individuals can handle #3 if they so choose.

      1. robc
        See my hypo above. It's not hard to imagine a situation where property rights and human welfare collide, even if, like me, you think it doesn't happen all that regularly. What one chooses in such a hypo is telling.

        1. I can totally understand a libertarian who says "property and contract rights are right to the extent that they contribute to human welfare" but not one that says "property and contract rights can trump human welfare." Rights and moral rules are good ideas to the extent they promote the good of actual human beings, but not when they don't. Man is the measure of such things, or to use another ancient saying the Sabbath was made for man, and not man for the Sabbath...

          1. What would be the purpose for property and contract rights if not to contribute to human welfare? Just a tool to oppress the masses?

            "Trump human welfare"? There is a big difference between "I don't care if it promotes 'human welfare' or not" and "Even though it does not promote "human welfare" I support it."

          2. In your hypothetical, what if B didnt exist at all? Then A would be just as screwed. A's position is "natural" and he shouldnt have got himself in it.

            Another hyopthetical: If aliens came to me and said that I could either push a button that would kill MNG or they would blow up the Earth, my choice, I would tell the aliens to go fuck themselves. I value your worthless life that much. 🙂

            1. Actually, I would probably push the button, but I would feel really bad about it.

              1. Then again, you cant give aliens that kind of power - they will abuse it, I would tell them to fuck off.

                1. And your decision would have cost every life on earth to cease.

                  Well done. That's some philosophy you have there.

            2. You'd be either a fool (who cannot add) or someone who cares more about whether your own hands are dirty than human life if you did that.

              Also, people often don't "get themselves into" being ill robc.

              If B didn't exist there would be no moral dilemma. I don't think that helps you any. What is the right thing to do in my hypo, and why? I say steal the stuff and give it to the dying fellow because I value human life. You say do not because you value property. Hence you prove my original assertion to be correct. You're welcome to your anti-human philosophy, it's just disturbing to most humans.

              1. My own hands are the only ones I have to care about. I do what is right and let the universe take care of itself. Better dead than enslaved to aliens.

                If you steal and give it to B, I would, as a judge, give you the lightest sentence within the law. But I will have no problems convicting you of theft. I thought the jury in A Time to Kill made the wrong decision too.

              2. I care more about my soul than my life. You could even call that utilitarian if you want. 🙂

                I would sacrifice myself to save the Earth, but I wont sacrifice you.

                1. Your selfishness would cost all of humanity every possible moment of joy it could have. Interestingly, I would die in either case since I do live on earth. I won't deny that there's something admirable in such a philosophy, but there's a bit more madness to it imho :)...

                  Thankfully though these hypotheticals are pretty rare and in 99.9% of all cases consequentialists and deontologists will probably make the same moral choices.

                  1. Dont blame me, its the aliens that are fucking murdering you. What selfishness? Valuing my soul? Its the only eternal thing Ive got.

              3. Also, people often don't "get themselves into" being ill robc.

                Bull and shit.

                1. You think every sickness that people get they get because of their actions? Like young children that die of cancer? That's more incredible than your moral philosophy robc.

                  1. I didnt say "every". But "often" is quite accurate.

                    1. Well, I agree it is often the case that people get sick because of the lives they lead, but it's also often the case that people get sick without having done anything to do so. I'd say thousands if not hundreds of thousands or millions of such cases even if a minority. In other words "frequently."

              4. In robc's hypothetical, the aliens are probably going to blow earth up anyway.

        2. What is "human welfare"?

          1. All we need to know in this example is that it involves the suffering and death of a human being. Is alleviating that justification for violating property rights? I should think those who care about human beings, their welfare and lives would say yes, those who care more about property rights should say no.

            1. Per my comment just below, deontologists like myself are perfectly willing to expropriate property to save someone from suffering & death. My question is aimed at understanding what precisely the criteria are for determining whether property rights are valid in a non-deontological methodology.

              The upshot is that deontologists care about human welfare broadly understood, but if you define "human welfare" narrowly as the interpersonal sum of all pleasure units experienced by organisms of Homo sapiens, then deontologists would say that that is not the measure of all things.

              1. I'm not sure we have a disagreement then. I'm talking about people who would say it is always wrong for one to expropriate property to save someone from suffering & death.

                1. No, I don't think we have a disagreement, but the ethical foundations of our political philosophies are still interesting to explore. I think too many people think of lifeboat scenarios and infer from them that deontology is silly. Of course, equally difficult dilemmas can be posed to utilitarians. Ultimately, we can't choose our methodology based on which one gives us the result we want.

                  1. I think lifeboat scenarios are like the saying "Bad cases make bad law". Personally, I still with James T Kirk on this, there is no such thing as the no-win scenario. Modify the scenario to make it winnable. And dont allow the creator of the scenario to tell you otherwise.

                    1. Yes, that was another thing - why can't Persons A and C come up with some way to trade Person B for the medicine in question... Surely their combined resourcefulness would be enough to find something of higher value to Person B.

                    2. In the vast majority of real-world scenarios they would - but it's nevertheless perfectly legitimate to wonder what is right to do if B were just an obstinate, mean motherfucker.

                    3. Sure - what if e were just an obstinate, mean motherfucker?

                      How did he manage to acquire the medicine/food/etc. to begin with? If he was just a mean motherfucker, then it's reasonable to assume that he didn't acquire it by working with people... So if that's the case, then he either stole it or produced the thing himself.

                      If he stole it, then he has no legitimate claim on the thing to begin with.

                      If he produced it himself, he does - but what's stopping someone else from making more of the good in question?

                      All of these things raise more questions in reality than they answer. It makes no sense in real life at all.

                      If obstinate motherfucker "Person B" stole the whatever - then taking it back is the defense against aggression - so we don't worry about that case. If obstinate motherfucker "Person B" managed to invent or produce something no one else has been able to create on this desert island then how is he protecting his idea? He doesn't have a government to back up some kind of patent, it's not like he can stop anyone else from copying him... And if it's an idea that needs a lot of resources or work to do - how the hell did the obstinate motherfucker make it happen to begin with?

                      The whole hypothetical is just so chock full of holes I find it hard to take very seriously. If you leave it on the surface, sure MNG has a point, one guy could cock up the whole thing and cost someone their life. But in reality, this just doesn't happen without force being involved. If I come up with an ingenious new method of say, transporting water - perhaps I design an Archimedes screw and some aquaducts... It's not hard for you to copy my design. It's not like there's a patent office and an FBI prosecuting you if you copy me. I just don't see how the kind of situation MNG postulates is actually possible in the real world... Not in a libertarian world anyway. As far as I can tell it can only exist in a world where the obstinate motherfucker can be protected by IP or is a thief.

                    4. Oh... Also........... If he *isn't* actually just a jerk, but he has reason to dislike Person A and doesn't want to trade with him for some other reason (perhaps Person A isn't trustworthy and stole from Person B?) then obviously he's not insane, and he's not just doing things to be a jerk... So why would that justify taking from him?

                  2. I'd tend to agree. Deontology is very utilitarian 99% of the time, hence "rule utilitarianism."

                    I'm not sure what you meant upthread about a "hiearchy of concerns" for the deontologist, but I can imagine a deontological philosophy that says "never steal from anyone" and also "never make a choice that directly results in the death of another" and then holding that the latter would trump the former if they ever conflicted.

                    1. Sort of... If there's a conflict among principles ("maxims"), though, that indicates that we need a further criterion to determine which maxim to apply in a given circumstance. All maxims should be traceable to a fundamental, atomic particle - such as Kant's Categorical Imperative ("always act so as to treat other persons as ends in themselves and not as means only").

                      This process has some practical implications, of course. A utilitarian might say that property should be (re-)allocated to whoever values it most. In a lifeboat scenario, a deontologist could sanction expropriation, but only with full compensation. A utilitarian, even a rule-utilitarian, might see no need for compensation, depending on what the empirical calculus reveals. Also, a deontologist could never advocate intentionally taking the life or damaging the body of an innocent (except an innocent threat), even in a lifeboat scenario. A rule-utilitarian could.

                2. I think the goal of C should be to convince B to give to A, not expropriate.

                  Or C could plant some damn crops and grow A some food.

                  1. Whats funny here is clearly the welfare and life of A is important to you. Just not as important as property rights.

                    1. Why is human life worth less to you than property rights? Do property rights exist for people or vice versa?

                      I think it has more to do with "responsibility" to you (neither B or C is "responsible" for A's condition therefore they morally need not act). This is funny to me because I almost put "responsibility" up there with property as things purist libertarians often hold more important than actual human welfare. Sometimes I mockingly refer to libertarians as "propertarians" or "responsibilitarians" as the situation calls for...

                    2. I want my five minutes back.

                    3. Sorry for the philosophy break cliche guy. I've got to go anyway as the bowl games are starting here in the wonderful Eastern Time Zone of MD, you can get back to marathon masturbating. I recommend you google Strap on Stars .com, you'll be glad you did!

                      And for my more thoughtful debaters, have a pleasant day.

                    4. Sorry for the philosophy break cliche guy...you can get back to marathon masturbating.

                      You would have the address, Ming.

                    5. It has nothing to do with "property rights". I care about the life way more than the property, but it isnt MY property, so I have no decision to make.

                      Interestingly, you bring up C expropriating the property from B. But what about A taking it himself? Do you see any difference? Does A have to rely on C or can he take the food directly from B? If B defends it, can A kill B in order to feed himself?

                      For me, this is all easy. No stealing means no stealing. But, if C is allowed to take from B to give to A, then clearly killing B if he says no (that is what the g-men do now) is okay too. And why use the middleman?

                      I think A should just suck it up and die.

                    6. "I think A should just suck it up and die."

                      Yes, as I said, you care less for human life than you do property rights. It's better for you for A to die than for him or C (you're right it matters not in the example) to violate the property rights of B. That's warped dude.

                    7. dude, you just said that C should murder B in order to feed A, and you call me warped?

                    8. Who isnt valuing life now?

                    9. I never said he should murder B to feed A. But certainly he could beat him up to feed A if the suffering he prevented in feeding A was greater than the suffering administered to b in the ass whooping. Because for me the suffering of human beings is more important than rules apart from human beings.

                    10. There are no rules apart from human beings. All humans suffer. All humans will die, you cant end either.

                      And, yes, you did agree to murder B. If B defends his food well enough, beating him up wont be enough, you will have to kill B to feed A.

                      And you say A can do it himself. So now you have valued A's life over B's life, solely because, for whatever reason, A has less food than B right now.

                      Where the fuck does that come from? And some people complain when we say that the left hates success.

                    11. But you declared your preference for moral rules apart from human welfare in the discussion above where you declared it would be better to have all human existence be ended than to have the moral rule be violated. A world of rules not violated and no people is better in your mind than one of people and a rule violated. It's the most anti-human, anti-life philosophy I can imagine.

                    12. You think a choice that would save a life but violate property rights is a wrong one. It's clear which you find more important. You can have property, I'll take human life thank you.

                    13. I dont have a choice to save a life. Moral rules are absolutes. It has nothing to do with property rights. I wouldnt sleep with your wife to save your life either.

                    14. how 'bout if it killed him?

                    15. "I dont have a choice to save a life."

                      Sure you do. You could walk over there and take B's food/meds (lets say he left it out while he's sleeping so no nitwit gets on a tangent about whether you physically could take it from his grasp). Your legs work and your hands. You know how to walk over there and pick it up and carry it to where A is. You choose not to because you think its worse to violate B's property right than to not save C's life. We get that.

                      You know, you used to call me "slaver." In the same spirit I think I'll call you the "Anti-Human, Anti-Life Monster" :). But really, it's noon and the game is now on, it's always a pleasure debating first principles, but I really must go.

                    16. But Im pro human (B) and pro life (B). Why doesnt the life of B matter to you?

                      I seriously think you value A more because he is poorer and/or lazier.

                    17. Before going to sleep, B booby trapped his food/medicine. C dies trying to collect it. D the cop shows up. Does he point and laugh and yell DARWIN or does he arrest B for murder?

                    18. And you are a slaver. You have enslaved B to work for A.

                    19. Moral rules are absolutes.

                      This is where you get off on the wrong track. No code of conduct invented by humans is absolute or adequate to every circumstance. That you believe this is probably why your view of life often tends toward the absurd.

                    20. No code of conduct invented by humans is absolute or adequate to every circumstance...except for mine.


                    21. This isnt life v property. This is A's life v B's life. You, for whatever reason, value A's life more than B's.

                      What if B literally sacrificed 30 years of his life (he was an NFL player) in order to collect up the food? I dont know how B got the food, but unless he stole it, I dont see how anyone taking it from him isnt harming his LIFE, not his property.

                    22. But MNG, you're *NOT* taking "human life over property", you're arbitrarily selecting one human life over another.

                      You are now in the "playing god" category - because, as robc just said, if Person B doesn' want to give up the Food/Medicine/whatever, the only way to acquire it is by force. Since we're arguing the principle, at what point does it become *not ok* to take it?

                      If B defends himself successfully against A & C, then what? A beating isn't enough to take the object... Killing is now the only alternative.

                      So all you've done is transfer suffering or death from one human to one other human. What's worse is that while the first situation was a random, natural or self-imposed act, the second situation is one where *you* are consciously choosing to harm someone.

                      I just don't see how you can sit there and pretend you're in it for the welfare of human life....

                    23. I value life so much that I would rather see it ended than enslaved. It is the quality of the life that matters, not the quantity.

                      Another hypothetical. Aliens enslave humans. They announce that if anyone tries to overthrow them, they will just destroy the planet and move on. You have the ability to join a rebellion with a small but possible chance of succeeding (maybe 5 or 10%). Do you join?

                      I do. And if caught, it wont have been me that killed off the Earth.

                    24. Actually, worded that wrong, I would rather see it enslaved, because that can be recovered from, but I think you know what I mean.

            2. There's an option missing here. Namely that if C is so hot to see that A gets B's property, C cooperates with B and makes a trade for something B (who doesn't need the medicine so probably doesn't value it as much as something they do need) wants more than the medicine, THEN C can give it to A without having to steal it. A win-win-win where everybody gets what they want. It's called the free market. It's also the basis of civilized society (cooperation).

            3. You're also forgetting one possible scenario: B sees that C is trying to steal his extra food and medicine, so he throws it into the ocean out of spite. Now A is even worse off than if C had tried to trade with B for it.

              Indeed, this is similar to what's happened historically when a government seizes property in the name of "human welfare". Look up the govt-caused famines in the early years of the USSR and PRC for examples.

              1. Well, the Kulaks weren't destroying food out of spite, they just didn't bother working to grow crops because they knew the thugs would steal it.


                1. Actually it was a combination of both. The failing to grow crops was of course the more important part, but I'm in the hypothetical universe here...

          2. Apparently, Eco, it's a Constitutionally-protected right. Or so we're told.

    4. Deontologists don't think in terms of "hierarchies of concerns," but in terms of ends, means, and side constraints on those means. For deontological libertarians thinking rightly, "property" is not an end in itself. It's a side constraint on action.

      And it's also not the case that all deontological libertarians think that it is always wrong, even in emergency situations, to appropriate property for the benefit of the sick & starving. But that's not the society we're living in.

      1. How about this scenario and test of first principles: A garbage dump needs to be built but no one wants it in their neighborhood. Option A: The government pays some neighborhood twice the market value for their homes in order to move. Sounds good until you realize that depends on using tax money coerced from other people. Option B: force people to move. Option C, the garbage dump does not get built, eventually creating a huge public health problem.

        1. In option A, the "other people" in question could have avoided the extra taxes by allowing the dump to be built in their neighborhood.

          1. And if this trade-off is not worth it to them?

            1. Then tough noogies. In a densely populated area, rubbish removal is as essential a service as police or fire departments, and taxes are justified to pay for it.

              If you're talking about a rural area, that's a different story; but in that case, you don't have the public health worries.

              1. Fine, but then the "don't initiate force" argument for whatever reason is out the window. You're saying that if there's a conflict between the values of public health and the non-initiation of force, the former trumps the latter, if necessary.

                1. Why is the collection of garbage by government necessary in the first place? I lived for years in an area of the country that did not have gov't trash collection. You paid for trash collection yourself. In such an environment, no force enters into the equation at any level. If you keep your property in such a fashion as to cause negative externalities that affect public health, your neighbors are justified in acting collectively against you. Until then, not so much.

                  1. I'm talking about a garbage dump (or landfill) not garbage collection. The dump needs to be built somewhere - getting people to agree to have it built in their neighborhood, or getting them to move, without using tax money is the question.

    5. So, liberals saw Les Miserables once, and now they think stealing is OK. At least you are honest.

  27. If Liebowitz is right about ARMs as the main cause of defaults, we will, as he says, "have very different economic explanations for the defaults and very different remedies."

    Remedies for defaults? That's the problem; we need to stop trying to "remedy" defaults and just let them happen.

    And the root cause of much of the problem is the magical transformation of houses from places to live to financial assets.

    I blame the realtors.

    1. Now is the perfect time to buy or sell a home.

      1. Can someone send the squirrels to bite this person's nuts off?!

      2. Hey man, it is a decent time to buy... Though... It's a much much better time to rent.

  28. My New Year's Resolution is to keep telling you all things you'd rather not know.

    As long as it's for my own good.

  29. "This home will NEVER be worth less than it is right now!

    "What are you waiting for?"

  30. can't lecture anybody on the subject of caring for the poor.

  31. There's not a lot of data in the article. It's not hard to see all mortgages acting the same. The real question is why. And that is only lightly touched on. If the reason I stated above, basically moving people into homes that when the adjusted rate occurs pushes them into a subprime situation, then you haven't really discovered anything but a shift in the subprime population when the ARM adjusts.

    Part of the problem is thinking of subprime loans (not really the right term imo) as a fixed or finite definition of a person. But what happens when you purchase a home and can barely cover it or are barely in the traditional market, the ARM adjusts and the rates are higher and your home value drops, you have now effectively moved a traditional or prime borrower into the subprime borrower range. Subprime isn't just how much you make and your credit score. (again really not the phrase to be using) It's the risk associated with your ability to pay the bill.

  32. Have ARM rates gone up? I thought rates have been consistently low lately.

    1. I'm not sure on increases. I know teaser rates played a role. Another question would be how much of a rate increase would be required to start pushing traditional borrowers into a troubled zone.

      Anecdotally I know people spending a significant portion of their income on a home because of a slight readjustment coupled with employment problems. Like I said the mess is not one single thing and looking for a magic bullet is never the way to figure out what the fuck is going on. Unless of course you live in Oz or Wonderland, then it might be a magic bullet.

    2. It depends on the quality of the ARM you got. A friend of mine can easily refi into a fixed rate, but he cant get a fixed rate anywhere near where his ARM keeps adjusting to. It has moved twice, each time down in rate. So, his initial 5 year rate was the highest he has paid.

      For example, if you have an ARM that adjusts annually to prime + 1%, that would put you at 4.25% right now, as prime is 3.25%. You would be better off staying in the ARM, for now, if that is what you had.

      Many lower quality ARMs, however, are more like prime+5% (or worse), so that would be 8.25% right now.

      1. I agree. I was assuming a scale from worst to best case. Since all the variables in this are essential on a scale of worst to best case.

        1. Just checked with my friend, his is at prime+0.75%, caps that keep it from adjusting upward too quickly, had no teaser rate at beginning, etc. Small community bank with 2 branches that had no interest in selling on the loan.

  33. *shakes fist at squirrels*

    can't lecture anybody on the subject of caring for the poor.

    A fascinating characterization. Note the explicit infantilization and projection of helplessness.

  34. "Subprime" implies increased risk, which should be (but is not) reflected in the terms of the loan, either by a higher interest rate, or a higher down payment.

    An adjustable rate might make sense if there is an expectation of lower interest rates in the future; not much likelihood of that, these days.

  35. Some experts argue the program has impeded economic recovery by delaying a wrenching yet cleansing process through which borrowers give up unaffordable homes and banks fully reckon with their disastrous bets on real estate, enabling money to flow more freely through the financial system.

    "The choice we appear to be making is trying to modify our way out of this, which has the effect of lengthening the crisis," said Kevin Katari, managing member of Watershed Asset Management, a San Francisco-based hedge fund. "We have simply slowed the foreclosure pipeline, with people staying in houses they are ultimately not going to be able to afford anyway."

    Mr. Katari contends that banks have been using temporary loan modifications under the Obama plan as justification to avoid an honest accounting of the mortgage losses still on their books. Only after banks are forced to acknowledge losses and the real estate market absorbs a now pent-up surge of foreclosed properties will housing prices drop to levels at which enough Americans can afford to buy, he argues.


    1. This is the exact argument Ive been making about the whole mess. We would have been better off to let all the failures occur, deal with 2 years of a really nasty economy (maybe even a depression). Instead, we are going to get a decade+ of suck.

  36. Mrs. Charles should have stayed with Nicky.

    1. Don't Myrna Loy's reactions sell the whole scene? Awesomeness sqared = Myrna Loy.

  37. I wonder if ARMS in other countries like Canada, although not the exact same, behave the same, and why.

  38. I suspect that the real problem is not ARMs per se, but interest-only ARMs. My mortgage was fixed-rate for the first five years, then was set to adjust with only a small boost over prime. We've since refi'ed to a full fixed rate, but if we'd stuck with the ARM, we'd actually be paying less right now. There's nothing intrinsically financially wrong with having a variable-rate mortgage.

    1. I suspect that the real problem is not ARMs per se, but interest-only ARMs.

      Yeah, I meant to put in a caveat: The post was written with exactly this presumption.

      1. Or maybe it was an assumption. I can't remember. It was the first day of the 2010s. We were all a little crazy.

        1. Talk to your doctor, Tim. Premature nostalgia in men of "a certain age" is usually a forerunner of worse things to come.

  39. Stan J. Liebowitz? That guy doesn't even know how a typewriter works...

  40. Well, that is what they do bestisnt it!


    1. I just wanted to point out that "Dusty Minor" is a pretty awesome pseudonym, and I will adopt it if I ever become a glam-punk star.

      1. Try these on for size:


        Aqua Teen Hunger Force... assemble!

  41. ...data showing that prime and sub-prime loan defaults were growing, in percentage terms, at almost exactly the same rate.

    Maybe, maybe not.

    Origins of an American Kleptocracy

    New research by Edward Pinto, a former chief credit officer for Fannie Mae and a housing expert, has found that from the time Fannie and Freddie began buying risky loans as early as 1993, they routinely misrepresented the mortgages they were acquiring, reporting them as prime when they had characteristics that made them clearly subprime or Alt-A. [...]

    It takes only a cursory examination to suspect that misdirection plays a key part in the latest act of the ongoing crisis theater of the absurd. Misdirection to distract attention from the key complicity of GSEs in the crisis. Misdirection to deflect scrutiny away from the political personalities from both sides of the aisle responsible. Misdirection to conceal what could only be described as the most damaging acts of accounting and securities fraud in the history of accounting, securities or fraud.

    Precious few assumptions are required to come to conclusions laying responsibility for the largest economic disaster in recent memory at the feet of the GSEs.

    shrike's a guy? Coulda fooled Melvin Udall.

    1. shrike's a guy? Coulda fooled Melvin Udall.


      1. Implying that shrike is a woman is incredibly insulting to women.

        shrike is, well, a trollish in-between. It looks like an orchid.

  42. What is "human welfare"?

    It is objectively quantifiable.

  43. Awesomeness sqared = Myrna Loy.

    Truer words were never spoken.

  44. The threads were better in the aughts.

    1. The threads were better because they werent threaded.

      1. Unthreaded threads? 'Tis a riddle for the Teens. Or is it the Tweens?

        1. Yeah, I believe the proper term is "nested", not "threaded". For some reason the second term has caught on. MARKET FAILYUR!!!!!1!!!

          1. I believe the proper term is "nested", not "threaded".

            I prefer a nest to a thread. The former is warm and comfortable; the latter sticks in your teeth.

  45. If it's true, it's not surprising. Even if it's not true, it is well conceived.

  46. Moral rules are absolutes.

    Untrue. Morals are a learned belief, not a law of nature that can't be bent.

    1. i thought "mores" were social conventions...

      1. From my high school social studies back beyond the mists of time, I remember social conventions being classed as "folkways", "mores", and "taboos" in increasing levels of severity. I think the folkways mostly consist of points of etiquette that are not enforced by law, but mores are taken more seriously.

    2. That is a conclusion, you forgot to include any actual argument. In other words, it's a baseless assertion.

      Try harder.

      1. Its a pretty easy one to prove. Go to some place with a shitty, weak, corrupt government. Shoot someone. Watch as you don't immediately get caught or struck by lightning.

      2. A poor person posting on a blog at 1:33 AM? Either your local library has some seriously late Sunday hours or you're full of shit.

        1. Saturday hours, that is, which is even less likely.

  47. Blaming the Poor is what the right does and the CATO institute is as right wing as they come.

    We poor people don't need tips on how to be good bourgeois conservatives, we need an economy and a society that doesn't kill people for not being competitive in a winner take all game of chance.

    1. Deathrace 3000 is a game of skill, not of chance.

    2. Market competition *isn't* a "winner take all game of chance" though. Economic activity, as such, is additive in nature! When you and I get together and trade, we each walk away better off than before, that's the deal. And when competition is applied in the marketplace, it's poor people - as you claim to be - who win the most. Companies compete with each other to serve YOU. They compete with each other to provide the best and most highly valued products at the lowest cost. This means you get a better quality of life without as much work in a competitive, free economy. In a planned economy, the opposite happens.

      This is why the 99% of Americans own TVs (meaning... even all the poor people!) where as the poor people of North Korea or Cuba are starving to death and lack running water or electricity...

      And last I checked, "society" isn't killing anyone, but I know how fun hyperbole can be when you don't know what you're talking about... Good times.

  48. My reason for not agreeing with Tim Cavanaugh's post is that apparently, since 1993, Fannie Mae and Freddie Mac have been increasingly systematically reporting as prime loans loans that were in fact subprime. It was the corruption of these GSE's that makes any statistical claims of the sort Liebowitz makes suspect from the beginning.

  49. Look what I found from 200

    Fannie and Freddie Polish Image With Subprime-Loan Purchases
    Freddie Mac and Fannie Mae said they expect to buy tens of billions of dollars of newly created subprime mortgage loans over the next few years to help prop up the roughly $1.3 trillion subprime market as lenders tighten their credit standards or flee altogether.

    The move shows how the two government-sponsored companies are redeeming themselves on Capitol Hill by depicting themselves as part of the solution to surging defaults on subprime mortgages, those for borrowers with weak credit records or high debt in relation to income.

    The promises to help such borrowers are bolstering their support in Congress just as lawmakers debate legislation to tighten regulation of Fannie and Freddie, both emerging from accounting scandals. That makes it less likely that Congress will back longstanding calls from the Federal Reserve and others for tight constraints on the amounts of mortgages they can retain as investments, currently around $1.4 trillion, or 14% of U.S. home loans outstanding.

    Congress has grown increasingly worried in the past few months that rising defaults on subprime loans will soon lead to a record wave of foreclosures, depriving hundreds of thousands of families of their homes. That worry has overshadowed earlier warnings from the Bush administration that Fannie and Freddie, chartered by Congress to support the housing industry, had grown so large that they could set off a financial crisis if they fail to manage their interest-rate risks correctly.

    Rep. Barney Frank (D., Mass.), the chairman of the House Financial Services Committee, said at a hearing on subprime problems Tuesday that the companies' capacity for buying and holding mortgages is proving useful. That, he said, undercuts the notion that their mortgage holdings "are this 'bad thing.'"...

    1. '200' should be '2007'

    2. Yes. Barney Frank is retarded, he's entirely complicit in the housing bubble, he's shilling for the same policies that got us into the financial mess in order to "get out of it".

      1. Chad should be here to defend the completely innocent Barney Frank. I'm surprised he isn't already.

      2. The definition of insanity is doing the same thing over and over again and expecting different results.

        Of course, before the 60s, Mr Frank would have been considered mentally ill for another reason...

  50. "But both agree that the poor must not be left to make their own decisions on financial matters"
    I don't think either the left or the right thinks this. Who? How?

    1. Are you kidding? Neither Republicans, nor Democrats have any interest in letting the poor make their own decisions... On food, housing, finance, wages & employment, parenting, retirement planning, health care... Name it and the poor, primarily, shouldn't be allowed to make uncontrolled decisions on it according to most pols.

  51. Re ARM v. subprime: it's not an either/or thing.

    The truth was that the vast majority of subprime loans were ARMs; subprime lenders used the "2/28" and "3/27" exploding ARMs as tools for hiding just how unaffordable their loans were. They were the perfect vehicles for bait-and-switch salesmanship and for ensuring that borrowers would soon have to refinance (as their interest rate and monthly payments shot skyward), allowing "loan-flipping" subprime lenders to keep rolling over borrowers' loans, adding in new fees and collecting "prepayment penalties" while giving them very little new money. The whole process was sort of like the cartoon snowball rolling down the skislope.

    To say that subprime ARMs were the leading edge of the mortgage crisis is not to say that there weren't lots of unaffordable, fraud-tainted loans in the "Alt-A" and "prime" mortgage markets too. Many of the products and tactics that had been tested and popularized in subprime -- exploding ARMs, bait and switch, loan-flipping, no-documentation "stated income" loans, etc. -- were copied and adopted by non-subprime lenders. The result: a massive disaster for American homeowners and the global economy

  52. With many new announcement about the wizard of oz movies in the news, you might want to consider starting to obtain Wizard of Oz books series either as collectible or investment at http://www.RareOzBooks.com.

  53. I saw that and hense is why I asked about it

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