Finally, the Rich Are Getting Their Fair Share: Manhattan Condo Dwellers Line Up For FHA Subsidies

Your RDA of crazy pills: The Federal Housing Administration is now guaranteeing loans on high end condominium units on the island of Manhattan. The FHA's plunge on the poor little rich folks in America's wealthiest 23-square-mile area is as ill-advised as it is unnecessary, but it's being described -- like seemingly everything these days -- as a "game changer." From Bloomberg:

The FHA, created in 1934 to make homeownership attainable for low- to moderate-income Americans, is now providing a lifeline to new Manhattan luxury condominiums after sales stalled. Buildings featuring pet spas, concierges and rooftop lounges are applying for agency backing to unlock bank financing for purchasers. The FHA guarantees that if a homebuyer defaults on his mortgage, the agency will pay it.

At least nine Manhattan condo developments south of 96th Street have sought approval for FHA backing since the agency loosened its financing rules in December, according to a database of applications maintained by the U.S. Department of Housing and Urban Development. The change allows the FHA to insure loans in new projects where only 30 percent of units are in contract, down from at least 50 percent. About 1,900 apartments in New York's most expensive neighborhoods would be covered by the applications.

Regular readers will recall that where the FHA goes, poor lending standards and high rates of default follow:

"It's not an accident that the FHA is offering this -- not private lenders," said Christopher Mayer, senior vice dean at Columbia Business School's Paul Milstein Center for Real Estate in New York. "An unfilled condominium complex is not the kind of thing that a bank looking to rebuild its balance sheet on real estate is looking to do."

In New York City, the priciest urban U.S. housing market, the FHA insures loans of as much as $729,750, and permits buyers to borrow up to 96.5 percent of the price.

Note that a low equity stake correlates with default more highly than any other factor in real estate. And this applies at the grand level as well as at the individual level -- even in Manhattan. Witness Tishman Speyer and BlackRock, which in 2006 put down a mere $112 million to purchase the $5.4 billion Stuyvesant Town complex, and finally defaulted earlier this year.

But for prospective New York condo defaulters there's even more good news. A New York judge today invoked a Johnson-era paperwork law to enable buyers to get out of paying for condos that had dropped in value after they were purchased.

I believe that leaves us with just one question: Why is anybody paying for anything anymore?

Comments

[Marshall Gill]

Well, since they are not going to end the FHA anytime soon, shouldn't the rich have access like everyone else in the name of equal protection and fairness?

[Citizen Norhing]

Yeah! And Food Stamps, too!

[Leona Helmsley]

Please, Haute Cuisine Stamps.

We have standards.

[Aresen]

And how in Hell are you, Leona?

[Leona Helmsley]

It's too damn hot. I rang the bell but nobody came.

[Leona Helmsley]

What good is a bell without a servant? I look forward to the day when you little people learn the true meaning of service.

[The Angry Optimist]

Leona Helmsley hate is nothing but naked anti-Semitism. Shame on you all.

[The Little People]

We're learning right now.
Would you like fries with that?

[Leona Helmsley]

Fries, Little Person?! Did you not hear what I just said about haute cuisine?

Those flap-like things on the side of your head, they are called ears. They are for listening to your betters.

[Leona Helmsley]

Oh, and on your way out, do speak to "Mister" TAO. His attitude is even worse than yours.

What kind of name is TAO, anyway? Is he some kind of Chinaman? How distasteful.

[waffles]

the angry optimist? and I AM HAUTE CUISINE

[Hazel Meade]

Really, in the name of equal protection and fairness, why should the state be taxing renters and giving the money to homebuyers?

As if renters don't get fucked over enough, the government has to set up programs that effectively transfer wealth from them to homeowners?

[Chris Grayson]

+1

"As if renters don't get fucked over enough, the government has to set up programs that effectively transfer wealth from them to homeowners?"

[Jeffersonian]

As a homeowner, I can't disagree.

[BakedPenguin]

Just another in a long line of screw jobs. The homeowners who'll benefit know they'll benefit. The renters are dispersed and generally don't see how they're getting screwed.

angryrenter.com used to advertise here a lot, but they either weren't getting the response they wanted here or stopped advertising altogether.

[Federal Dog]

"shouldn't the rich have access like everyone else in the name of equal protection and fairness?"

The point of welfare subsidies is that some people are destitute and need them to survive.

People now seem to be redefining welfare not as necessary public support for the helpless and impoverished, but as everyone's right -- regardless of need -- to take benefits and force other people to pay for them.

[BeltwayLurker]

Couldn't have anything to do with that blue state vs red state shit could it.

[Wind Rider]

Never buy retail. Go FHA instead!

[Ken Shultz]

"The FHA guarantees that if a homebuyer defaults on his mortgage, the agency will pay it."

Hopey McChange would never let that happen.

Seriously though, it was bad enough when they were bailing out Wall Street investors with our future earnings, now we're underwriting their condos too?

It may get worse before it gets better, but if people don't wise up pretty soon, we may end up lookin' back at this as the good ol' days.

Everybody sing...

"Girls were girls and men were men.
Mister we could use a man
like Herbert Hoover again.

Didn't need no welfare state.
Everybody pulled his weight.
Gee, our old LaSalle ran great.

Those were the daayyYYYYYyys!"

[Marshall Gill]

What's the matter Ken? Even though I can understand your opposition to subsidized housing, shouldn't everyone be treated the same? Isn't it unfair to afford benefits to one group and not another? Since we can't end housing subsidies, we should embrace their expansion in the name of fairness and equal protection. Why do you wish to discriminate against people because of their financial lifestyle choices? Why do you hate Liberty, Ken?

[Tulpa]

Is this some sort of joke or are you really this stupid?

[wylie]

Why do you hate Liberty, Ken?

Check your sarcasmometer Tulpa.

[robc]

He is making an argument made on an entirely different thread. I like it, good satire.

[Marshall Gill]

He is making an argument made on an entirely different thread. I like it, good satire.

Thanks Rob.

[The Angry Optimist]

Tulpa - even though it is sarcasm, does he have a point or does he not? It is an interesting question, if you ask me.

[MNG]

It's only an interesting question if you think fairness means having the same rules for everyone. This of course gets you to Anatole France's great quote about the rich and the poor being equally prohibited from sleepiong under bridges. Fairness could also mean treating like cases alike, and to the extent people with gobs of money are not like people without then different treatment would be what is fair.

Jesus had this insight when he said the poor widow who gave the penny was doing something greater than the wealthy guy who gave hundreds.

[The Angry Optimist]

It's only an interesting question if you think fairness means having the same rules for everyone.

Yes, and...?

Jesus had this insight when he said the poor widow who gave the penny was doing something greater than the wealthy guy who gave hundreds.

This is why Christopher Hitchens's and John Stossel's send-ups of Mother Teresa are so important - to put an end to religious nonsense like this.

[Tulpa]

Jesus had this insight when he said the poor widow who gave the penny was doing something greater than the wealthy guy who gave hundreds.

This is why Christopher Hitchens's and John Stossel's send-ups of Mother Teresa are so important - to put an end to religious nonsense like this.

From a purely moral perspective, it's not nonsense at all. Do you think that Bill Gates donating a million dollars to a food bank is morally more significant than a single mother, who also holds a full time job, volunteering for four hours every week at a soup kitchen? I'd like to think there are some limits to the extent Objectivists are willing to trash basic human decency to advance their sterile philosophy, but you guys do often surprise me.

[Ken Shultz]

Regardless, Obama ain't now Jesus.

...and Jesus sure as hell didn't advocate havin' Matthew the Tax Collector steal money out of the widow's paycheck to give to the Rich Young Ruler!

[Tulpa]

It was TAO, not I, who was taking the steal from the poor to give to the rich side of this argument, Ken.

[The Angry Optimist]

It was TAO, not I, who was taking the steal from the poor to give to the rich side of this argument, Ken.

I never said anything like that. Now you are just a liar.

[Tulpa]

Obviously you didn't say it explicitly, but if you support housing subsidies for the wealthy, then you do support taking tax money from the poor (stealing, according to libertarian doctrine) and giving it to the rich.

[Hazel Meade]

Obviously you didn't say it explicitly, but if you support housing subsidies for the wealthy, then you do support taking tax money from the poor (stealing, according to libertarian doctrine) and giving it to the rich.

The operative distinction is between renters and homebuyers. Not rich and poor. If housing subsidies are extended to everyone, then the wealth transfer goes from renters and existing homeowners, to homebuyers.

[The Angry Optimist]

Do you think that Bill Gates donating a million dollars to a food bank is morally more significant than a single mother, who also holds a full time job, volunteering for four hours every week at a soup kitchen?

What, am I supposed to give her accolades for her "larger sacrifice"? Is that the definition of morality now?

[Tulpa]

What, am I supposed to give her accolades for her "larger sacrifice"? Is that the definition of morality now?

Doing a morally good thing that hurts you in some way is more significant than doing a morally good thing that involves no real sacrifice on your part, yes.

If that's not the case, then Bill Gates is automatically 100x morally superior to all the poor schlubs who are never going to make a million dollars in their lives, because he can donate $100M to charity without feeling the slightest pinch. And granting the wealthy automatic moral superiority is a bit to social Darwinist for my tastes.

[prolefeed]

Doing a morally good thing that hurts you in some way is more significant than doing a morally good thing that involves no real sacrifice on your part, yes.

You addressed this remark to TAO, who is, like me, an Objectivist, and considers sacrificing and hurting yourself to be evil.

If helping those less unfortunate feels like an imposition rather than something that gives you joy and satisfaction, then don't fucking do it.

[Tulpa]

Hence my statement above that Objectivism is a sterile philosophy that requires throwing out basic human decency, and that I might as well argue with my toaster.

[The Angry Optimist]

So the amount of pain has a direct correlation with the morality of the act?

If that's not the case, then Bill Gates is automatically 100x morally superior to all the poor schlubs who are never going to make a million dollars in their lives

That does not necessarily follow. I may not find giving to charity all that valuable in determining someone's morality. What I find especially repugnant is that you think the amount of pain one goes through is a good yardstick for morality.

Which, in case you didn't know, makes you a fucking monster.

[Tulpa]

Whether an act is moral or not does not depend on the amount of pain or suffering or loss of opportunity it involves. A suicide bomber who kills innocent civilians obviously endures a great deal of lost opportunity and possibly some pain, but that does not make his or her actions virtuous.

However, given that an act is morally good, the difficulty of doing it does contribute to the significance of the act.

[The Angry Optimist]

However, given that an act is morally good, the difficulty of doing it does contribute to the significance of the act

Why?

[Tulpa]

Why?

It's a nonrational principle that most people would agree with.

Any philosophy, even Objectivism, must have compelling nonrational principles at its base. You can deny it if you want, but you're throwing out a basic tenet of humanity in the process.

[Big Cat Kahuna]

...good thing that hurts you in some way is more significant than doing a morally good thing that involves no real sacrifice on your part

Very Catholic sentiment. And completely wrong. Sacrifice is never a a meaninful gauge of morality. To the extent that you suffer or damage yourself in the process, you are behaving immorally. You assume that there is some type of moral equivalency here between Mr. Gates and the poor widow. There is not. There can never be. The significance can only ever be relevant to the parties involved. It is meaningless to state otherwise.

[Tulpa]

To the extent that you suffer or damage yourself in the process, you are behaving immorally.

I guess there are no Objectivists in foxholes, then. What do you think about the macrofeline's statement, TAO? Had you been killed in the line of duty, would that have made your volunteering for the Army immoral?

[cynical]

True, but it's workable to have the same rules for everyone, if we're talking about benefits that don't change much per-capita. It would be inverting that saying, basically -- the rich would be just as entitled to public housing and food stamps as the poor. It's just that the marginal value to them versus to the poor would be negligible.

[MNG]

Sure, I agree if I read you right.

[wylie]

Jesus had this insight when he said the poor widow who gave the penny was doing something greater than the wealthy guy who gave hundreds.

It's a greater, nobler, act for the giver, not the receiver.

I'm sure the guy with nothing would much rather have the $100 from the rich guy.

[MNG]

That works both ways. Just as it is more of a burden for the poor giver to give his relatively meager amount, it is more of a benefit, perhaps more necessary, for the poor reciever to recieve the benefit. If we have limited resources to give and want to do the most good with what we have, then it makes sense to give it to the poor rather than the rich.

[Marshall Gill]

If we have limited resources to give and want to do the most good with what we have, then it makes sense to give it to the poor rather than the rich.

Who is this "we" ass-wipe?

Note the looters definition of good. Giving to the "poor". Because everyone knows that those rich bastards don't need as much as they have. They certainly shouldn't be able to claim what they earned as their own.

Why are the poor, poor? Because they were born that way?! Does it ever, ever have anything to do with bad decisions?! What about dependency? Amazing how those who claim to care, ala MNG, are more than willing to create vast numbers of dependents.

I posit that it is the Leftard, who would turn people into dependents, who not only doesn't care about the stupid, but who willfully exploits them for personal congratulations. They would shield them from anything which might lift them up out of dependency, all in the name of "caring".

Citing Jesus and declaring that you don't believe in fairness in public policy in the same thread! I wonder if the MNG turd argues things that even he doesn't believe?

[MNG]

Of course it sometimes has to do with poor decisions. But certainly not always. Either way, there I'm is no reason to allow anyone to suffer any amount more than may be necessary to change behavior. As for dependency that's such an overblown claim on the right: the poverty rate was much higher when government benefits were much less (in 1959 over 50% of black families were in poverty, now it's more like 22%).

And well, yes, everyone does, or should, know that the rich need any given percentages of their incomes less than the poor as the basic minimum necessary costs to live are the same for each while the former would have much more than the latter to meet these needs even if taxed at the exact same rate.

And I don't say I don't believe in fairness, I just have a different idea of fairness than you. But you're rather dim and likely missed that. It's ok, I wouldn't want you to suffer to much from your stupidity 🙂

[Marshall Gill]

As for dependency that's such an overblown claim on the right: the poverty rate was much higher when government benefits were much less (in 1959 over 50% of black families were in poverty, now it's more like 22%).

??? WTF? You really are a class bigot, aren't you? The arbitrary line of "poverty level" is a reflection of dependency? If someone is getting enough government benefits that they are over the "poverty level", recently adjusted by wealthy people in Washington, they simply can't be dependents?

They are lesser people, and either must be sheep permanently taken care of by the good shepherds of government or they must be shielded from reality because they aren't smart enough to learn from hard lessons, like the smart people do?

Dude, in the age of wiki and google you should know the meaning of the word dependent.

[prolefeed]

MNG: And I don't say I don't believe in fairness, I just have a different idea of fairness than you.

Since your idea of fairness involves robbing people, and throwing them in jail if they protest the robbery too loudly, then yes, we do differ on what is fairness.

[MNG]

Of course by using the term "robbery" you beg the very question at stake, but more to the point even if I concede what you are getting at by that robbery is indeed not the worst thing in the moral universe, and if worse things can be ameliorated by it then it's the right thing to do.

[The Angry Optimist]

Of course by using the term "robbery" you beg the very question at stake

No he did not. You do not know what "begging the question" means.

robbery is indeed not the worst thing in the moral universe, and if worse things can be ameliorated by it then it's the right thing to do.

Then carving you up to save five or six people using your healthy organs is the right thing to do.

Seriously, when you are going to give up the ghost on this thoroughly evil and bankrupt philosophy?

[MNG]

"Then carving you up to save five or six people using your healthy organs is the right thing to do."

Wow, someone took philosophy 101!
I guess you missed the day when they list all the horrible hypos that non-consequentialist theories lead to.

But iirc your real problem is you want to be able to have deontology and consequentialism when it suits you. Good luck squaring that circle!

As to begging the question: you don't think robbery assumes something crucial, that the taking is wrong ("unfair") and that the person whose possessions I take to give to the third person "deserves" ("owns" in some moral sense [unless you really do find mere possession to be the only moral criteria to ownership]) it in some argument ending sense? Why should my side concede that?

[The Angry Optimist]

I guess you missed the day when they list all the horrible hypos that non-consequentialist theories lead to.

But iirc your real problem is you want to be able to have deontology and consequentialism when it suits you. Good luck squaring that circle!

So, your answer to the "carving you up hypothetical" is that other bankrupt ethical systems also lead to bad things?

Stunning rejoinder, sir!

you don't think robbery assumes something crucial, that the taking is wrong ("unfair") and that the person whose possessions I take to give to the third person "deserves" ("owns" in some moral sense [unless you really do find mere possession to be the only moral criteria to ownership]) it in some argument ending sense?

In the immediate, you are talking about taking things from person A, to benefit person B, even though person A had nothing to do with the misfortunes of person B. That is generally unjust.

What you are attempting to do is generalize this out of your own specific example, which is not going to work. Context is key, and you are providing absolutely none.

[The Angry Optimist]

But iirc your real problem is you want to be able to have deontology and consequentialism when it suits you. Good luck squaring that circle!

By the way, a smart guy like yourself forgot one of the traditional normative ethical systems.

[Marshall Gill]

It's only an interesting question if you think fairness means having the same rules for everyone.

If it isn't, can you define it for me? Equality of outcome?

Glad to hear that you do not think that fairness is a basis for public policy!!!!

[MNG]

I defined it above goofball:
"Fairness could also mean treating like cases alike"

You really are dim, eh?

[Hazel Meade]

"Fairness could also mean treating like cases alike"

Except that you keep creating new "cases" by making finer and finer distinctiontions that make like cases unlike.

[#]

this is one of the problems in advocating things in the name of "fairness." Define exactly what that means.

[kinnath]

It's only an interesting question if you think fairness means having the same rules for everyone.

When it comes to government, this is the only possible meaning that "fairness" can have.

[MNG]

Sez you.

I mean really, why should I accept that?

[Tulpa]

Umm, no. If the point of the government program is to help people buy a house who couldn't otherwise, it's clear that fairness will exclude people who can afford a house with their own resources (though perhaps not a house in their preferred neighborhood).

[The Angry Optimist]

. If the point of the government program is to help people buy a house who couldn't otherwise, it's clear that fairness will exclude people who can afford a house with their own resources

Well, is it fair to have such a program in the first place, that, by its nature, discriminates against the successful and steals from them through no fault of their own?

[MNG]

Sure, again it depends on what "fair" means. Here you just use "fair" as "wrong", it would be wrong (unfair) to take money from x to give it to y. But now we are arguing about what is morally right and wrong (which fairness arguments are really about) and we both know how badly you do at that TAO (I don't think you were ever willing to give your foundational general ethical rules back in the day).

[Marshall Gill]

But now we are arguing about what is morally right and wrong

So you DO think that we should legislate based upon morality. Yours and not others, of course.

Why is it morally right to take from one person and give to another based solely based upon your or the government's definition of need? We are not discussing charity given of one's free will.

[The Angry Optimist]

So you DO think that we should legislate based upon morality. Yours and not others, of course.

Marshall Gill, he is just going to say that outlawing theft and murder is "legislating morality". Then you are going to say "We outlaw things that violates the autonomy and rights of others", and then he is going to do some handwaving nonsense about "positive rights" and get more and more sophistic and arrogant.

Let's just save ourselves some time, eh?

[MNG]

And since "things that violates the autonomy and rights of others" are considered morally wrong, I'd just let ol' Gillie know that he was, yes, legislating morality :).

[MNG]

I think need to be just as valid as a criteria for who deserves what as "what one happens to have right now."

[The Angry Optimist]

I think need to be just as valid as a criteria for who deserves what as "what one happens to have right now."

So lay out your case for anyone ever owning anything. And by owning, I do not mean "temporarily renting until 'smart' people like MNG decide it can be used better elsewhere".

[MNG]

I think I've stated before TAO that, like Hume, I find property only has utilitarian value. In general systems of ownership are good if those systems of ownership promote the maximization of overall welfare. Whenever an exception would do that better then violating property rights would not only be allowable, but morally commanded.

[The Angry Optimist]

Oh, and what measuring device are we using for "human welfare" again? Is it happiness "units" this time?

Also, you should recognize that you are basically saying "we need rules that are good for us...except when those rules offend my sensibilities. Then the rules can be broken."

That is surely going to lead to a stable and prosperous society...the whims of the emotional! Hooray!

[The Angry Optimist]

But now we are arguing about what is morally right and wrong (which fairness arguments are really about) and we both know how badly you do at that TAO

You are just making that up. Time and again, you have been shown the logical absurdities that result from your train of thought, and time and again you just get more arrogant instead of thoughtful. *Yawn*.

(I don't think you were ever willing to give your foundational general ethical rules back in the day).

you just made that up too.

[MNG]

Well, give it to us then bright guy.

[The Angry Optimist]

Yes, MNG, that ought to be good for a laugh. I give you my ethics and you sit here and sophistically nitpick them apart based on irrelevant and unintelligible standards until you consider yourself "Da Winner".

No, thanks. I will pass. Show yourself to be genuinely interested and open, then maybe. Right now, you're just an Attention Whore.

[MNG]

Oh, I'm not interested, I know your philsophy is lame. I've read Rand and argued with you before, talk about yawn! I just like reminding you that you really have no philosophy at all. I've given you mine over and over: the right act is that which maximizes overall welfare. You've always left that blank after the right act, because you are at least smart enough to suspect that it would be fairly easy for me to produce examples where you would not get the result your ideology demands. And your ideology keeps you warm at night, so we must avoid that...

[The Angry Optimist]

the right act is that which maximizes overall welfare.

Except that necessarily involves self-immolation, a la the "carving you up" hypothetical. Tell me specifically why you should not be carved up and have your organs donated to six other needy people, based on the moral principle you just outlined above.

[prolefeed]

I've given you mine over and over: the right act is that which maximizes overall welfare.

Overall welfare defined by whose criteria? "welfare" defined how? By this criteria, the "right act" could be considered stealing everything from Americans and divvying it up among the poorer countries in the world.

Or stealing all of MNG's possessions and giving them to people I personally consider more worthy.

Or ...

This isn't a moral system, it is looting justified by sloppy rationalization.

[prolefeed]

MNG's morality:

Sees someone who he thinks is suffering unnecessarily. Pulls out gun, robs someone he thinks looks overly happy. Gets ready to hand some over to the person he wants to "help", mulls over what his finder's fee ought to be, then decides, dammit, he's not happy enough and pockets 99%, gives the remaining 1% to the person to be "helped" to ease his conscience.

[Tulpa]

Well, is it fair to have such a program in the first place, that, by its nature, discriminates against the successful and steals from them through no fault of their own?

I don't think FHA is a legitimate use of government, but there are legitimate functions of govt that are available to the poor but not the rich and justly so. For instance, public defenders, pay for serving on a jury, etc.

[prolefeed]

I don't think FHA is a legitimate use of government, but there are legitimate functions of govt that are available to the poor but not the rich and justly so. For instance, public defenders, pay for serving on a jury, etc.

These are all functions that could be financed via charitable donations rather than governmental theft.

And serving on a jury, as currently practiced, involves conscription, which also should be abolished.

[Tulpa]

You're right! There is a biblical basis for Objectivism.

ISAAC: Aynrandaham, where is the money to fund public defenders?

AYNRANDAHAM: Charitable donations will provide the necessary funds, but only from people who feel uplifted by giving money to defend alleged murderers and rapists with a ton of evidence against them.

ISAAC: But where is the pool of jurors from which to draw a fair jury of the accused's peers?

AYNRANDAHAM: The basic human desire to feel uplifted by serving on a jury, will provide volunteers in the correct proportions to ensure a fair trial.

My advice when dealing with Objectivists is, whatever you do, don't let them tie you to an altar.

[MNG]

+100

[The Angry Optimist]

Boy, Tulpa, I sure hope you are pleased with the company you are attracting.

Oh, and, ah-ha-ha...Ayn Rand as a religion. It is to everfucking laugh. How bitingly original.

[Tulpa]

How bitingly original.

The truth has a habit of being unoriginal.

[The Angry Optimist]

The truth has a habit of being unoriginal.

If acting consistently on a set of principles, rationally derived from observed facts, is religion, well then pass the hat, brother.

[Tulpa]

principles, rationally derived from observed facts

Principles that are derived from anything are not principles. That's a shell game.

[Tulpa]

Boy, Tulpa, I sure hope you are pleased with the company you are attracting.

Like my half-uncle always used to say, a stopped cock is right twice a day.

[prolefeed]

So, you're saying that liberals who profess their support for the need for public defenders, will not voluntarily shell out any of their own money absent coercion?

Are you also saying that a volunteer army based on paying people what the value their service at won't work, that only an army of conscripted quasi-slaves will work? And that the same applies to jury pools, that we couldn't possibly get anyone to serve on one by offering a salary sufficient to get enough people to voluntarily serve for that pay?

[Hazel Meade]

For instance, public defenders, pay for serving on a jury, etc.

But those are things that are explicitly needed to implement equal justice. We give poor people public defenders to MAKE SURE that the rules are applied equally and fairly to them. Not to apply special rules to them that correct for economic unfairness.

[MNG]

Er, but isn't it exactly applying a special rule to them that corrects for economic unfairness? Only the indigent get the counsel, and they get it because of their indigent state.

[Hazel Meade]

No. It's a case that applies specifically to the function of rule enforcement.

We're advocating a simple set of minimal rules, which are the same for everyone and are uniformly enforced. The uniform enforcement part entails special exceptions to ensure that wealth doesn't play a role in the uniform enforcement of the rules. But you can't generalize from that to the rules in general. Uniform rule enforcement is a neceesary function that doesn't imply alteration of the rules themselves.

[MNG]

If you realize inequality makes the enforcement of rules unequal to the point of neccesitating equalizers, why not apply that logic to some of the rules themselves? Surely "equal enforcement" is a rule itself, one you see is farcical in situations of economic inequality.

[Hazel Meade]

If you realize inequality makes the enforcement of rules unequal to the point of neccesitating equalizers, why not apply that logic to some of the rules themselves? Surely "equal enforcement" is a rule itself, one you see is farcical in situations of economic inequality.

You don't see the difference between changing the rules to make the outcomes more equal, and having a special class of rules that are dedicated to the equal enforcement of equal rules?

Why don't we just get rid of the enitre justice department and hold all trials by popular vote? Why not just have the public vote on a different set of laws for each individual?

[Tulpa]

Are you talking about equality under the law or equality of outcome? If the former, a person defending him or herself should be treated equally under the law, so that's not a justification for public defenders.

If the latter, there is no way in God's green earth that a defendant with public defender can be expected to have an outcome equal to one with a gold-plated New York defense attorney.

[Hazel Meade]

a person defending him or herself should be treated equally under the law

They should be, but we're not ruled by omniscient robots, so we need a special class of rules that are dedicated to rule enforcement amoung a bunch of human beings.

[Tulpa]

So a person defending themselves isn't treated equally under the law compared to a person with a public defender...but a person with a public defender is treated equally under the law compared to someone represented by Ted Olson and David Boies.

One or the other, not both.

[Hazel Meade]

I think you are missing the point here. The GOAL of having public defenders is to get to equal enforcement of the rules. I'm not arguing that the rules actually ARE sucessfully enforced equally all the time. I'm arguing that having a special class a of rules pertaining specifically to how the main rules are to be enforced is a necessary function of the justice system, and that THAT is WHY we have public defenders.

It's got nothing to do with creating laws that treat individuals differently. It's about how we get to uniform enforcement of uniform rules. Now, you might come up with some alternative to the jury trial system that does a better job at it. I don't care. But like it or not we have one and the REASON we provide public defenders is a function of attempting to enforce equal rules equally. It is NOT an effort to change the laws themselves to give poor people special treatment. To conflate the two is to conflate the functions of rule-creation and rule-enforcement, which our society long ago decvided should be entirely separate.

[Tulpa]

If legal representation is a facet of rule enforcement, then equality would demand that all defendants have the same quality of representation. So, everyone would have to use the services of a public defender, no gold-plated defense attorneys for the wealthy.

My position on this is that public defenders represent a utilitarian trade-off. It's in the interest of society to prevent innocent people from going to prison, so we want to make sure that criminal defendants have a lawyer to prevent them from going to jail simply due to poor legal knowledge etc. However, we can't afford to provide a lawyer to every criminal defendant, so we means-test it. (Personally I think indigent defendants should have to pay the public defender some nominal amount, perhaps proportional to their income. It makes little sense to have a cutoff below which you get a free lawyer and above which you get soaked.

[Hazel Meade]

Yes, justice probably would be more equal if we required everyone to use a court-appointed defender. But whatever.

My point is that you can't use public defenders as an example of how it can be just to trailor general rules to income, because public defender provision belongs to a special class of rule-enforcement rules.

Saying it generalizes is like saying that because the referee isn't allowed to touch the ball, it's permissible to create a special rule saying a specific player can't touch the ball.

[Hazel Meade]

Or, more aptly, creating a rule that says that the players who have scored the most points in their careeer history should have a limit on the number of points they are allowed to score.

And then saying "Well, we don't let the referee score points, so that justifies it".

[Chris Grayson]

+1

"Seriously though, it was bad enough when they were bailing out Wall Street investors with our future earnings, now we're underwriting their condos too?"

[Chad]

The feds should pass a law that mandates 20% down on all real estate, and forbids any home-equity loans that bring your balance below 75%.

If you can't save 20%, you can't own a home. Period.

[Marshall Gill]

Short Chad: The government must pass laws to protect the stupid people.

[MNG]

Shorter Gill: I like seeing stupid people suffer.

[The Angry Optimist]

Why 20? Why not 21, just to be super-duper sure that no one ever takes a risk ever? Why not 50?

[AA]

MNG:

Maybe there would be less stupid people if we would quit trying to hide risk all the time? Just a thought.

[MNG]

Ah, social darwinism.

Y'know, for the kids!

[The Angry Optimist]

You would be surprised at the results you get when you treat adults as adults.

[MNG]

Where "treat as adult" means "refuse to help when they suffer". Hey, it's for their own good (or better yet, for the good of everyone!). But of course arch-libertarians don't want to have what is in the good of the poor or society as a whole as a metric for judging acts so that's disengenuous.

Tough love is so sweet...

[AA]

This depends on how you're defining "help." If setting up a system where they know they can make any mistake they want and they will get bailed out, then I don't think that is "help." On the other hand, if you mean individuals or groups giving help to the less fortunate out of the kindness of their hearts, I'm all in, sign me up. that sounds a bit more genuine, sounds like the kind of help we should be encouraging.

[The Angry Optimist]

Like I always say, MNG, I will take you seriously when you start advocating for a 95% tax on everybody in the United States under the logic that the poor of Africa and Asia need it more than we do.

[MNG]

Because you can't take a step in the right direction unless you jump to the destination I guess...It's like Zeno's paradox or something.

I mean, I can't take any of your calls for lower taxes seriously until you abolish all taxes or something.

[The Angry Optimist]

I mean, I can't take any of your calls for lower taxes seriously until you abolish all taxes or something.

You, as a utilitarian, measure the moral worth of actions based on their utility. Handing over great amounts of American wealth to foreign poor, specifically in Asia and Africa where the poor really are on the verge of starving, would, act for act, have more utility for people than continuing to baby America's spoiled "poor".

Of course, because I am not a utilitarian, I should not be judged on the same standard, so your above statement I quoted is facially false.

[AA]

I was thinking moral hazard. But yes, its always for the kids! Teach them about the risks of life, and they are likely to take less of them. Sounds like a sensible solution to me.

[Ron L]

To lefties, an education = "social darwinism"

[Ken Shultz]

Has anyone else ever heard of a Social Darwinist championing individual rights over the needs of the government?

If there's a Social Darwinist among us today? It's the guy who's always calling for each of us to make sacrifices for his vision of the common good.

[MNG]

"Has anyone else ever heard of a Social Darwinist championing individual rights over the needs of the government?"

The intellectual founder of social darwinism Herbert Spencer did so, and pretty much everyone else associated with that philosophy.

Dude, you are totally clueless about what social darwinism is. This is inexcusable in an age with google and wikipedia.

[The Angry Optimist]

Can you outline, specifically, what is so inherently offensive about Social Darwinism?

It is a common cry of lefty folks such as yourself, but given that poor people vastly out-reproduce the wealthy, it has never made any sense to me as a "criticism".

Also, what specifically is wrong with have society slowly evolve to be more fit? And do you not assume that social programs are not evolutionary when you make that criticism? In fact, if you think that welfare programs contribute to the health of humanity and its overall "fitness", it would be you who is Social Darwinist.

[Tulpa]

What's inherently offensive about Social Darwinism is that it presumes the wealthy are "fitter" than the poor, and additionally that this difference in fitness will be passed on to their respective offspring.

Of course, the name "social Darwinism" was not chosen by its proponents, and indeed is used to refer to a very diverse set of philosophies, ranging from attempts to justify the free market system on a collectivist basis to explicitly calling for policies that benefit the wealthy at the expense of the poor...but they all have that disgusting presumption peeking out of their bowels.

[cynical]

So we aren't talking about some sort of cultural analogue for evolution using memes, then?

Still, "evolution" as a policy is seems fairly ridiculous both on the pro- and anti- side, much like eugenics. Evolution is a natural fact. You can be pro- or anti-magnetism or pro- or anti-gravity, but the universe doesn't give a shit, and it isn't going to stop making things that can't go on stop going on.

[The Angry Optimist]

What's inherently offensive about Social Darwinism is that it presumes the wealthy are "fitter" than the poor

Not necessarily.

additionally that this difference in fitness will be passed on to their respective offspring

That would be Lamarckism, more accurately speaking.

Look, the point is that a socialist/eugenics-proponent can just as fairly be accused of "Social Darwinism". Also, given that MNG wants to sacrifice the wealthy and productive to the poor, and the poor breed like rabbits, you could say he is a Social Darwinist, because he wants to give more the class that is already reproducing more successfully than the other classes.

[MNG]

TAO
You act like "social darwinism" was not some actual historical school of thought rather than some abstract idea about the evolution of societies. All law and no history do not a bright guy one make 🙂

[The Angry Optimist]

Many, many philosophers and historians make the case that Social Darwinism can just as easily be applied as an epithet towards your "side's" history with racism, class warfare and eugenics. Don't bore me with your condescension.

[Tulpa]

TEAM RED TEAM BLUE TEAM DARWIN

[MNG]

My sides history with racism and warfare?

Is this the part where everybody who was a member of the Democratic party and had abhorrent views gets trotted out as if the current political party situation has been set in stone since the founding of the republic.

If so, let me start. Robert Byrd was in the KKK!

[Tulpa]

That would be Lamarckism, more accurately speaking.

As a wise man once said, not necessarily. Darwinian evolution also depends on the inheritance of advantageous characteristics from parents; the difference with Lamarck is only that acquired characteristics cannot be inherited, only innate ones. But that's not really relevant -- I would dispute the inherent superiority of the wealthy and powerful, whether acquired or innate, upon which social Darwinism depends (unbacked assertions of "not necessarily" aside).

Also, given that MNG wants to sacrifice the wealthy and productive to the poor, and the poor breed like rabbits, you could say he is a Social Darwinist, because he wants to give more the class that is already reproducing more successfully than the other classes.

I'll follow my rule of saying one positive thing a day, and thank you for comparing the family life of the poor to rabbits rather than roaches as you sat in your top hat, squinting through your monacle as you smoked a cigarette through one of those black tubes like FDR and the Penguin had. Talk about perpetuating a stereotype!

But anyway, reproduction is more than just fertility; a child who does not survive or is not set up to reproduce him or herself is not helping to spread one's genes. So while poor people may have many children, the rich are aided by higher rates of infant mortality, violent crime, incarceration, and inadequate education to get a good source of income among poor offspring. So it's not all bad for you Darwinists.

[MNG]

Social Darwinism is also often criticized as cruel and ironically as horribly utilitarian. It proposed that by not helping the poor they and their ways would die out leaving only the fitter and their ways. While ameliorating the suffering of the poor would reduce suffering they argue that such suffering should be allowed for the sake of "social evolution" to reach a state of less overall suffering.

[Hazel Meade]

The thing about social darwinism....

IMO, poor people are totally capable of rising out of their situaton through their own effort. And are better off doing so.

Ironically, to me it seems that the leftists are the ones claiming that the poor are inferior by taking the position that they need special help to become not-poor.

[Ken Shultz]

"Dude, you are totally clueless about what social darwinism is. This is inexcusable in an age with google and wikipedia."

Most people associate Social Darwinism with eugenics and Nazis--ignoring individual rights for the common good--regardless of what wiki says.

I have no problem with the idea that our individual rights are a social adaptation, like language and government, and especially in a thread about the Obama Administration and Congress taking advantage of working people to force them to pay for Wall Street investors' losses and underwrite Manhattan condos?

...I have no problem citing the individual rights of working people as an argument against forcing them to make sacrifices for Obama's misguided vision.

And if Obama's supporters don't want him associated in the minds of most people with what most people think of when they think of Social Darwinism?

Then they should encourage him to stop acting like what most people think of when they think of a Social Darwinist.

Everyone has to make sacrifices for the sake of the common good? Is there any way to describe Obama in a nutshell more succinctly?

Working people are being forced to underwrite Manhattan condos. Time to wake up, Buddy Ro. Good intentions don't count for squat.

[Ken Shultz]

All these weird laws needed, just to try to stop our politicians from bailing out people who make risky loans and buy risky investments?

Why?

Why not just make a law that specifically prohibits our politicians from using tax payer money to bail out real estate loans?

...then anybody could borrow from anyone that wanted to lend to them--and no one would give a crap!

Least of all me.

[Aresen]

But Ken, then there wouldn't be any need for self-serving bureaucrats to insert themselves into the transaction.

Somebody has to protect the people from predatory lenders!

/snark

[Ken Shultz]

It remains astounding to me that despite all the rage and anger we're seeing out there, people are still reluctant to blame our politicians for the evil things they did.

There is no regulatory solution that will stop the President and Congress from collectively squandering our future earnings on bailing out Wall Street investors and the UAW pension fund.

We just get the ballot box. We get to hold them responsible at the ballot box.

And if despite everything we've seen happen over the past few years, the American people still seem to think the problem was--not what George Bush, Barack Obama and a boatload of incumbents did with our future earnings! Oh no, it wasn't that!

If we still think the problem is that there needs to be more regulation?! ...then there's no hope for us.

Then the next boatload are just gonna use their elected status to rape us all over again. Why wouldn't they?

The economic crisis is still upon us! And after we got raped? We didn't blame the rapists! We blamed a lack of rules against rape!

*canned laughter*

Why not beat the crap out of the American people and rape them again?! They won't do anything about it anyway! How 'bout another round of stimulus?! Why not?!

[Pope Jimbo]

Clearly there is a need to regulate the lubricant industry.

It is clear from the grouchy sentiments of the electorate that too many contaminants like sand are making it into our precious KY supply.

The pain you are feeling Ken isn't caused by our raping of every orifice we can find, but from the poor quality lubricant we used before violating you.

Surely a new cabinet level department of lubricant is what is called for in this situation.

[wylie]

Lube Czar.

[Chad]

Still blaming the bubble on the big bad gub'ment, eh?

As always, libertarians must blame all failures of the market on the nearest government program. It's a failsafe and irrefutable logic.

[Ken Shultz]

Why shouldn't we blame our politicians for what they did?!

I wish the rest of 'em had gone just like Lehman and Bear!

94 banks, last I checked, have gone out of business this year--and no depositors have lost a penny! That's the market at work.

$750 billion or so. That's what our politicians did. Why shouldn't I blame the government for what the government did?!

Has the whole world gone mad?

[JW]

Has the whole world gone mad?

Nah, just the TEAMBLUE dickwads. Business as usual.

Doncha know Ken? We haven't bailed out enough irresponsible and parasitic borrowers *yet.*

[MNG]

http://www.senate.gov/legislat.....vote=00212

Quite a few R's were down for this, and a few D's against...

[Chad]

The government made some errors that contributed to the problem, but overwhelmingly, it was a standard market bubble, made worse by the fact that the bubble largely occured in a $600 trillion derivatives market.

Of course, in your fantasy world, ever market bubble, from tulips to derivatives to comic books, was caused by da gub'ment....somehow.

[SF]

I'm not sure the cause of bubbles are as important as the response. "Buyer beware and take your lumps" vs "we must DO something". Seems like Ken's angst (and that of many non-political junkies) is about what was done in response to the bubble.

[Chad]

SF, many people "taking their lumps" did nothing wrong, and many people are the very center of shit storm, who profited wildly handsomely, are paying little penalty at all. And I am NOT talking about the bailouts.

Just think about the asshat trader at Bear Sterns who lost EIGHT BLEEPING BILLION DOLLARS, who is riding off to a sunset in the Hamptons. Indeed, pretty much everyone in the management of Lehman and Bear Sterns is set for life. And what about all the jackholes big and small that were peddling these scam mortgages? Are they wiped out and living under a bridge somewhere? Nope. They kept the damned loot. When are you going to see that the market has a fundamental "bailout" built right into it....that if you gamble big and win, you are rich. Gamble big and lose, and the worse you can do is zero (or more practically, bankruptcy)?

[Chad]

Btw, Ken. I would REALLY love for you to explain how the early 90's comic book bubble was the government's fault.

http://en.wikipedia.org/wiki/Comic_book_collecting

Have fun!

And if you can't see how this was the EXACT SAME THING that just happened on Wall Street, well, you are deliberately dense.

[MNG]

+1

[The Angry Optimist]

And if you can't see how this was the EXACT SAME THING that just happened on Wall Street, well, you are deliberately dense.

What I saw was a "lesson learned" instead of a "bailout" and "TARP".

[MNG]

I think Chad was arguing that the cause of both bubbles was similar, not the response (or lack thereof). Or perhaps better put, that we need not resort to government shenanigans to explain bubbles as they can happen quite commonly in markets with little government intervention.

[The Angry Optimist]

As you say, I think we have demonstrated here that things are worse because government is so involved, something even you have to admit.

[MNG]

I'm not sure how we could prove things are worse because of governmental involvement. Surely you are not relying on the fallacy you yourself have been so vocal about TAO: post hoc ergo proctor hoc...

[The Angry Optimist]

I'm not sure how we could prove things are worse because of governmental involvement.

First, it's "propter hoc".

Second, what makes more sense to you? That government involvement made the bubble worse, or no? You yourself said that you would normally be inclined to believe that government involvement makes things worse, commensurate to the level of aforementioned involvement. Now you are asking for what...proof of something you stated below you are inclined to believe?

I know you do not like the answer of "common sense economics", but there lies your answer.

[Ken Shultz]

"I'm not sure how we could prove things are worse because of governmental involvement."

You know? The problem is that it isn't just the government involved.

Before the government got involved, you know what my personal exposure was to Wall Street's bad investments?

Zero.

After the government's involvement?

Now I'm on the hook for $700 billion!

How can that make me better off?

Now I'm on the hook for the UAW pension fund?

How can that make me better off than I was before?!

How completely snowed do you have to be to think you're better off for being on the hook for Wall Street's bad investments?!

Whatever money we lose on this is comin' out of your paycheck!

Before? It wasn't.

[MNG]

I said government intervention can be correlated with bad outcomes, but it's a pretty complicated relationship so it certainly doesn't follow...

[Ken Shultz]

"I think Chad was arguing that the cause of both bubbles was similar, not the response (or lack thereof)."

Well just for the record, then...

There's this thing called the economic cycle, and there isn't much that's predictable about it--except, that tops will materialize and they will pop...

As sure as the sunrise. Old saws like "The market correctly predicted five of the last two recessions" are predicated on that. Lehman and Bear doubling down on subprime loans (with tons of leverage) long AFTER the subprime bubble burst in July of 2007 is perfect evidence of that...

They thought the housing market would come back, and they bet the farm on it--and for very good reasons too... Those firms are essentially no longer in existence because of those subprime bets--but they didn't go under until more than a year after July of '07! They had a full year to unwind those wrong investments--but ONLY hindsight's 20/20. The market may be the best predictor of the future, but nobody knows the future in real time...

Nobody knows where the bubbles are for sure and when they've really popped until long after the fact--that's what markets are all about. And the best way to deal with a popped bubble is a free market...

TARP was created out of the fear that the rest of Wall Street would go like Bear and Lehman did--but looking back, that would have been the best thing that could have happened. The loss of Bear and Lehman were nowhere near as destructive to the economy as TARP is.

Now, we're sledging through an economy where the government's still holding mortgages it paid hundreds of billions of dollars for that aren't worth anywhere near that much... And those homes and mortgages aren't being repriced because the government's holding them, and that's injected a world of unnecessary uncertainty into the market--and that effects just about everything.

There's no way pissing away $700 billion in future consumer discretionary spending was a net plus for the economy. And the stupid things our government continues to try to do to spur the economy because of the effects of its stupid decisions in the past continues to compound the problem.

Making it harder for small business owners to tap the equity in their homes is just one example of many.

[Chad]

That's exactly my point, MNG. Bubbles happen without government intervention, and the comic book example is an easy proof of this.

The fundamental cause of the real estate bubble was the same as the comic book bubble. The details were different, and various laws and regulations may have effected it one way or the other, but it's primary driver had nothing to do with government at all.

To my libertarian friends: ask yourself why your beloved Texas did not experience much of a bubble. Perhaps it has something to due with the regulations I posted at the top of this thread? Mine were simply exaggerated versions of what Texas has built into its constitution. Canada's laws are similar as well, and again, they were largely untouched by the bubble.

The reason this bubble was so painful was that it was leveraged over 30:1. Regulating such insane leverage ratios out of existence is the ultimate key to preventing this from happening again.

And don't pretend the "market" has a good reason to prevent leverage. It will always be to the economic advantage of individuals to borrow heavily, make big bets, and walk away if the shit hits the fan. The market really has no solution for this problem at all.

[Ken Shultz]

Who said the government caused the housing bubble?

Did you think I said our politicians caused the housing bubble?

Our politicians caused the bailout--and the economic aftermath of that. ...and they should be held responsible for what they did.

[Butts Wagner]

The fundamental cause of the real estate bubble was the same as the comic book bubble.

The psychological causes were the same. But were comic book purchases aided by easy loans that were backed by government?

Who said the government caused the housing bubble?

Did you think I said our politicians caused the housing bubble?

The government didn't cause the bubble, but they surely helped to make the bubble bigger.

What madlibertarian guy says at 1:22....

[Ken Shultz]

"The government didn't cause the bubble, but they surely helped to make the bubble bigger."

That's my take, more or less...

Markets would still have tops and bottoms even if there was no government or credit.

Governments and credit can and do make tops higher (and lows lower), although I still say anybody who was looking for classic market signals (like inflation) that we were approaching a high sure would have been--quite reasonably--surprised by this pop...

It came like a thief in the night.

Somebody was asleep at the credit quality switch--there was a lot that people bought and sold as investment grade quality that just plain wasn't. ...but given the data people had at the time, people weren't being unreasonable...

Like I said, hindsight's 20/20. ...and market tops and market bottoms are features of the cycle--no matter what the government does. They can do things to exaggerate the extremes, but the features will always be there. And sometimes, even given perfect data in real time, people will reasonably conclude that things are better than they really are.

[#]

but the comic book bubble wasnt based on enormous levels of leverage, which is influenced by government policy. So the comin book bubble losses are onyl on those who make the purchase, nit the whole financial system.

From a dollar perspective, the tech bubble bursting in the 90s was larger than the housing bubble. But the prior was not leveraged, so you didnt have a systemic disaster. The housing bubble was. And this heavy amount of leverage would not have happened if not in part being due to government policy.

[Ken Shultz]

"Btw, Ken. I would REALLY love for you to explain how the early 90's comic book bubble was the government's fault."

I haven't bothered looking.

If you think I'm blaming the government for market corrections, you're out of your mind.

The government is no more to blame for market corrections than it is to blame for winter.

The government squandering taxpayer money to try and stop winter from happening?

That's something so stupid only a government would try to attempt it.

Once again, our politicians really are to blame for what they did...

And the problem was the bailouts. They did them. What they did is their fault. I hope you can follow that.

Our politicians are to blame for the stupid decisions they made--and deciding to squander some $700 billion of our future earnings to bail out Wall Street for its bad investments was a stupid thing to do.

It accomplished nothing except making things worse. I wish they'd let the market do to other institutions what it did to Lehman and Bear. Oh, but no!

George Bush, Barack Obama and a boatload of incumbents decided to squander more than $700 billion fighting the market--and that wasn't necessary. They didn't need to do that; they chose to. They decided to do that.

...and they're responsible for what they decided to do.

I hope some of this is getting through.

[Ken Shultz]

Here's a headline from the Huffiana Post, from January 15, 2009...

"TARP Vote: Obama Wins, Senate Effectively Approves $350 Billion"

http://www.huffingtonpost.com/.....58292.html

The first thing Barack Obama did when he got into office was squander $350 billion in taxpayer money on bailing out Wall Street for their bad investments.

Why shouldn't I blame Barack Obama for what Barack Obama did?

Why shouldn't I blame Congress for what Congress did?

Why shouldn't I blame George Bush for what George Bush did?

[Ken Shultz]

Seriously, if Barack Obama, George Bush and Congress had squandered $700 billion (or more) on bailing out the comic book market?

I wouldn't blame market forces!

Guess who I'd blame? I'll give you three guesses!

A: Barack Obama, George Bush, Congress.

[Chad]

Here is what you need to have get through YOUR head, Ken.

Let's assume Goldman Sachs has a value of $100,000, and that the managment holds 20% of the equity. Let's assume they also pay themselves 20% of any profits as a bonus, before handing the rest to shareholders (which includes themselves, of course).

Now, let's say some brilliant Goldman trader comes up with a new scheme that has a 50% chance of generating $150 billion in profit, and a P chance of blowing up and losing $200 billion.

First, it is obvious that this is a horrible bet and it should never be made. Yet this bet WILL be made.

First, from the point of view of the investors, this is actually a *winning* bet. Why? Because of the limited liability of corporations and bankruptcy, which limit the downside risk to $100 billion. Since the shareholders in my hypothetical keep 80% of the profit, their upside is $120 billion. So from their perspective, it's profitable but highly risky. With the particular numbers of chosen, it is largely a wash, but could be modified to favor either direction.

But what about from the perspective of MANAGEMENT? Well, if the deal goes bust, they lose $20 billion in equity. But if the deal goes well, they pay themselves $30 billion AND gain $30 billion in equity. This bet is clearly a good deal for them, and you can be damned sure that they will attempt to make it.

Now wait! This is the vaunted "free market".....no gub'ment in sight! Why the hell is a corporation undertaking a deal that on average is a money loser?

The answer is that limited liability, bankruptcy protection, and agency (the mis-alignment of investor and management interests) are all market failures. Getting rid of agency is impossible, and getting rid of the first two would unleash a whole host of problems that would be even worse.

In the end, limited liability and bankruptcy ARE bailouts, bigger than the ~$100 billion that the government will eventually spend on TARP. And unfortunately, they are impossible to remove from the markets.

[Chad]

Whoops, Goldman's value was supposed to be assumped to be $100 billion in the second sentence.

[Ken Shultz]

"Here is what you need to have get through YOUR head, Ken."

I'm not sure what you're saying or why it's relevant to what we've been talking about.

Traders, investment banks, investment bank managers, et. al ...their losses are typically limited. So what?

The people who willingly choose to put their money at risk should be the ones who lose their money. If you borrow against a house and can't pay the loan back, you lose your principle--why isn't this as it should be? The people who extended credit to borrowers who couldn't pay--they do and should lose their principle. Why isn't this as it should be?

You choose to put your principle at risk--so your principle is at risk.

If you can't see the difference between that and putting working people on the hook for investors who lost their principle--working people who didn't sign a loan, who didn't choose to extend anyone any credit?

Then you're being willfully somethin' or other.

I would argue that from a practical standpoint, for the good of the economy, it's reasonable to assume that the people who purposely put their principle at risk were the people who were best prepared to take the losses...

You seem to be suggesting that class hatred of investment bankers somehow justifies putting third party working people on the hook for losses sustained by the willing clients of investment bankers?

...or is that just because investment bankers didn't make the investments themselves and didn't take personal losses, then working people should likewise be on the hook for losses?

...either way, that just doesn't make any sense to me.

[Chad]

Ken, re-read my hypothetical and ask yourself who loses if the bet goes under? The answer is ANY creditor of the gambling firm, regardless of whether they had anything to do with the bet. So the firm that performed janitorial services for the gambler company may take a huge hit, because of something they had nothing to do with. Clearly, they should be more "responsible", and...errr....I have no idea what it is you expect them to do. Demand immediate payment for everything? That'll never work.

And btw, I have never suggested bailing out homeowners. Three missed payments, and they should be on the street immediately. And of course, the loans should be full recourse.

I just don't understand how someone as smart as you can't see the obvious fact that the people who gambled (and won) often walked away unscathed from this mess, and it had NOTHING to do with TARP. Which, btw, is now looking like it will only cost us about $100 billion, not the $700 billion you keep pretending was "spending", when in fact it was it was mostly used to purchase investments. I don't know about you, but I don't count my 401k contributions as spending.

Just look at the ex Bear Sterns and Lehman folks, who WEREN'T bailed out. Are they shivering under the bridges during the winter, or banished to the debtor slave pits
forever, as their debts could never be repaid? Of course not. They simply lost their jobs, kept the fast majority of what they had looted, and then started over again somewhere else. There is obviously no downside that is even remotely comparible to the upside, even without bailouts. My numbers up above make this very explicit.

[Ken Shultz]

"Just look at the ex Bear Sterns and Lehman folks, who WEREN'T bailed out. Are they shivering under the bridges during the winter, or banished to the debtor slave pits forever, as their debts could never be repaid? Of course not. They simply lost their jobs, kept the fast majority of what they had looted, and then started over again somewhere else."

Even if what they did was criminal fraud, I don't understand how compounding that injustice through TARP justifies inflicting that injustice on every taxpaying American.

How does the injustice of not hurting investment bankers justify inflicting suffering on every taxpaying American through TARP?

[Ken Shultz]

"Just look at the ex Bear Sterns and Lehman folks, who WEREN'T bailed out. Are they shivering under the bridges during the winter, or banished to the debtor slave pits forever, as their debts could never be repaid?"

I think this is part of the conceptual problem we're having here...

The working people of America aren't on the hook for $700 billion because of what Bear and Lehman or their executives did...

We're on the hook for $700 billion because of what Bush and Obama and Congress did.

I have never lost sight of that fact. I think sometimes you do.

[mad libertarian guy]

I'm pretty sure government didn't flood the comic book market with trillions of dollars to people who could not pay it back, and do so under mandate of law.

[Chad]

Those firms are essentially no longer in existence because of those subprime bets--but they didn't go under until more than a year after July of '07

The firms may not be in existence, but you can be certain that most of its management is sitting pretty, having kept the vast majority of the money they paid themselves but clearly didn't earn.

That's the problem, Ken. Management of any firm will always have the incentive to make wild bets. Heads, they win. Tails, they are shown the door...but keep most of what they have already looted.

This problem, called agency, is a very potent market failure and lies at the core of most bubbles.

[Ken Shultz]

Fascinating...class hatred?

...as a justification for stupid public policy? In defense of politicians who put us on the hook for Wall Street's losses?!

It's hard to believe class hatred could lead to stupid public policy, but believe it or not--it does!

Meanwhile, there's an election coming up in a couple of months involving a slew of politicians who voted to put working people on the hook for Wall Street investor's losses...

Whose side are you on?

[Butts Wagner]

As a 10 year old in the early 90's, could I have gone to a bank and asked for a loan to buy loads of comic books by putting down 3.5%? I probably spent at least $100 on comics in the early 90's. Let's say that's 3.5%, I could have gone home with something like $3000 worth of comics if the comic market was equivalent to the housing market. Would you have given me that loan?

Let's say a 30 yr old comics fan had $1000 to spend on comics in 1991, would you have given him a $29k loan to buy comics expecting the guy to pay you back like $450/month? Would the guy even take the loan?

[Isaac Bartram]

Surely, you're not serious that a small scale speculative bubble in a fringe activity is the same as the real estate bubble?

One main difference seems to be that the comic book market readjusted itself when the bubble burst without the goverment coming to me and you and everyone else to bail out the speculators and financiers. Otherwise, I think I would have heard about it.

Frankly, I'm a little disappointed. Usually your much smarter than to try to draw such harebrained analogies.

Realestate bubble can indeed occur abvsent govt intervention. They are localized (EG the Florida land boom of the twenties, when land prices in some counties reached levels they would not see again til the seventies and eighties) and they are self correcting absent intervention.

And, one more thing, correcting out of a bubble means that prices must fall to equilibrium levels. All the government intervention is directed at propping up property values (because homeowners vote) which means the market can never correct.

[Chad]

They are not the same thing, but they are born of the same thing.

[Isaac Bartram]

Comic book buyeres were not getting highly leveraged government guaranteed loans pushed by a national policy to expand comic book ownership.

The problem was not the housing bubble itself, it was that government policy made the housing bubble a nearly national phenomenon and that government policy since the exposure of the housing bubble has been directed at keeping it from correcting.

Again, was there or was there not a government bailout of comic book speculators and financiers? You'll have to tell me I didn't bother to read your linked article.

[Ken Shultz]

I think there's a danger of losing people in the minutia.

I'm not saying you're wrong, but regardless of whether the government made the market top higher, it's completely 100% responsible for the bailout. The bailout wasn't any more inevitable than anything else our politicians vote on...

So, why can't we just blame the politicians for what they voted on and leave it at that?

Why can't we just blame Obama for what he did and leave it at that?

[JW]

It's a failsafe and irrefutable logic.

Glad to have you on board, Chode!

[MNG]

+1 Chad. Since there will always be some government the libertarian need only look hard enough to find some government to blame every bad thing on. Note it doesn't work both ways: when something good happens there was inevitably some government going on but we here that the good happened DESPITE the government! It's a totally religious type of viewpoint, it will always "work."

A more honest tack would be to have as a hypothesis: the higher the government intervention, the worse of things will be. Sadly, as this is falsifiable I find many libertarians don't go there...

[MNG]

BTW
Of course when I say "falsifiable" I don't mean false. I actually think it will be true far more than not, but not always and absolutely so, and that's what peels off the true believers...

[J sub D]

Still blaming the bubble on the big bad gub'ment, eh?

Yessiree Bob. Only an idiot would conclude otherwise. Go read this fine analysis of the housing market debacle and subsequent credit freeze (pdf) if you wish to stop sounding like a partisan ill-informed dumbshit.

1000+ goddam pages of financial reform bill and not a fucking paragraph in there dealing with Fannie, Freddie and the FHA. Our congresscritters are obviously in a state of denial.

[MNG]

J sub
I don't think one should not cite a libertarian think tank's "analysis" when berating another's partisanship. If the author had concluded otherwise his "analysis" would not have been printed by their "journal." Now that's peer review!

[The Angry Optimist]

Are those the logical fallacies of "poisoning the well" and "ad hominem" I detect?

Why, yes, yes they are.

[MNG]

We've discussed your inability to understand the full import of what it means for something to be a logical fallacy before TAO. To say something is a fallacy is just to say it doesn't necessarily follow, not that it's not a good guide. As a general guide I take partisan think tank "analyses" with a grain of salt thought yes, it doesn't follow necessarily that they are always faulty.

[J sub D]

Making the rash assumption that you read the article in question, perhaps you'd like to make a point by point critique of it. Point out some misstatemants of fact, logical inconsistenceis, groundless conclusions etc.

But that's not gonna fuckin' happen is it?

[Isaac Bartram]

That's what I thought, Ken.

Why do we need a law?

All we need is for the government to stop guaranteeing loans and people make whatever kind of deals they want to.

[Isaac Bartram]

...and let...

Typos people can usually be interpretted from the context, but missing words can render a comment totally without meaning.

[Paul]

I have a better idea. Structure the loan anyway you want, but if the borrower can't pay it back, it's on the lender instead of the taxpayer.

That way the lender has an incentive to...... awww fuck it.

[Jeffersonian]

Ever hear of mortgage insurance?

[Isaac Bartram]

Mortgage Insurance is what the FHA provides.

Of course, the premium structure is totally actuarilly unsound but when has a trivial detail like that mattered when setting government policy.

[Isaac Bartram]

BTW, not entirely on topic.

During the S&L meltdown, a bunch of private mortgage insurers went bust too.

History doesn't just repeat, it re over and over again.

[Ken Shultz]

I suspect it is on topic, especially when you consider Japan's reaction to the S&L meltdown, etc...

...which is a lot like our TARP program.

20 years later, they were still trying to figure out what to do with all those bad loans.

Can't sell 'em at market 'cause that would make the politicians who overpaid for 'em look bad...

It's the same situation we're in now. We walked right into the same trap.

And there were people jumping up and down mad as hell about it at the time!

I was one of them.

[John Tagliaferro]

The government needs to stop leaning on lenders to make those loans that you are mocking. Let the lenders lend at whatever level of caution they are comfortable with.

[Hazel Meade]

If the government would stop guarenteeing loans, the banks might have an incentive to do that anyway.

What's the point of having the government back home loans, if they are just going to making it illegal to hand them out to anyone who couldn't otherwise get one anyway?

[The Angry Optimist]

Chad - then, next thing you know, you are going to be bitching about how poor people cannot afford houses because those mean ol' banks will not front more than 80%.

So, so predictable.

[Chad]

Not at all. If you can't come up with 20%, rent.

We have too few renters right now anyway. It's part of the reason the job market is so FUBAR'd...many people are stuck with homes in the wrong places.

Of the five newest people in my company, three are still stuck with out-of-state homes. The other one managed to sell at only a modest loss. I, being the only one without such baggage, had a much easier transition.

[Amakudari]

The simple reality is that this has nothing to do with private mortgage lending. That's dead. The government doesn't need to put restrictions on private mortgage lending because it doesn't exist, except to funnel things into government-guaranteed GSEs. If it wants to restrain bad lending (which isn't a huge problem now anyway), it should probably start with conforming mortgage rules.

I think it would mostly be reactive, though. Banks are hypercautious about mortgage lending these days and probably will be for decades unless they can slough the risk off on the feds.

[Hazel Meade]

How much do you want to bet that if we hadn't had a housing bubble, Chad's tune would be very different?

[Chad]

You would lose, Hazel.

You are forgetting that I am not a big fan of people living in big homes in the first place. Additionally, I see no reason whatsoever for the government to favor ownership over renting.

[DesigNate]

"I see no reason whatsoever for the government to favor ownership over renting."

Well at least we can agree on that.

[Kreel Sarloo]

Well, I agree to the extent that Congress should end all government programs to guarantee or subsidize loans with less than 20% down on real estate.

If lenders are stupid enough to make such loans without government guarantees and without Fed easy money more power to 'em.

Show od hands, how many of you think a significant number of lenders would make such loans without government guarantees and without Fed easy money?

Satandard libertarian disclaimer that, of course, Congress should end all government programs to guarantee or subsidize loans, period.

[Kreel Sarloo]

That comment was addressed to Chad|8.13.10 @ 9:34PM.

The threaded comments are so long that it might not be obvious.

I might add at this point that I do disagree with Chad that "The feds should pass a law that mandates 20% down on all real estate, ..."

It should be enough for them to say, "if you do stupid things with your own life and your own money, get yourself out of it. We're not going to bail your ass out."

[Brandybuck]

Nah, to much work. Just get rid of fannie/freddie and the bailouts.

[Paul]

At least nine Manhattan condo developments south of 96th Street have sought approval for FHA backing since the agency loosened its financing rules in December

Oh THAT'S the "deregulation" that the left keep talking about. Gotcha.

[Some Guy]

It's really a shame that most people leave out the FHA when talking about the need to abolish Fannie & Freddie.

I prefer to say, "Eliminate all mortgage subsidies" so I cover them along with various other minor players and the mortgage interest deduction in one small descriptor.

[wylie]

This is fine. I want these Richy McRichersons all trapped in their highrise condos. Nowhere to run when the peasants come to get their money back.

[?]

Stuy Town 2006: $5.4 billion. Stuy Town 2010: $2 billion.

And that's with five inches of ambient cocaine accumulation.

[Isaac Bartram]

There's the market self-correcting. It works in Comercial RE and Rental RE.

Ain't gonna happen in single family, condo and coop ownerships, though. The Feds will continue to prop it up.

Those votes are just to important.

There is still a price, of course. Absent a market correction the economy will remain in a slump for a long long time.

[Amakudari]

Well, Ackman's buying the place and taking on the $3 billion 1st mortgage. Has to deal with non-eviction for rent-stabilized apartments, which are somewhere around the majority, and try to get people to buy into a co-op.

He's got balls. The kind of balls that has you create a fund that only invests in Target and subsequently loses 90% of its value in a year, but balls nonetheless.

[Pandora Bracelet]

It is a good news!!!

[The Rich]

It's a hell of a game if you can get big enough not to fail. I highly recommend it. Pass the Cristal.

[Congressional Black Caucus]

This is racist!!!!

[John]

http://gkurl.us/g5o

This guy is great.

[Cata]

boring! i want to talk about the mosque. please put something up.

[MNG]

If the mosque were only subsidized! And maybe with money from an inheritance tax! 300 post thread, easy.

[The Angry Optimist]

Someone invite the Anarchrist back.

[Manny Romahn]

Kinda scary when you think about it dude.

lou
http://www.anonymous.shop.tc

[jo desnon]

Dude thats kinda scary when you think about it.

http://www.web-privacy.at.tc

[John]

http://roissy.wordpress.com/20.....-part-two/

I do my best to be positive. But we are doomed. Doomed.

[J sub D]

Then - outhouses, dysentary and malnutrition. Avergae life expectancy 45.

Now - indoor plumbing, swine flu (Pandemic!!! sheesh)and obesity. Average life expectancy - 80.8 years.

Yeah, we are so fucked.

[John]

We have all of that thanks to who we once were. You can't have a society filled with slugs and expect to go anywhere. The people before us built all the stuff you mention. Exactly what are we doing to improve on it?

[J sub D]

Were I to list all the innovations in technology, improvements in standard of living, more efficient business models, nations no longer ruled by corrupt tyrannical regimes and the previously hated/discriminated against who are now mainstream Americans that has happened in my lifetime I would be here for months typing away.

Yeah, sometimes I get discouraged by the seemingly bottomless pit of human stupidity that I see around me daily (who doesn't?), but an objective view of recent history indicates that improvents in the state of human affairs are continuing, most likely at an accelerated rate.

[John]

I wouldn't want to live 60 years ago either. But that doesn't mean that we haven't digresed in a lot of ways or couldn't perhaps learn a bit from the people who did.

[MNG]

Pedal, pedal, John!

[mad libertarian guy]

Is it really pedaling to understand the idea of the human condition?

Dickwad.

[John]

No it isn't. but MNG is generally a dickwad and his only pleasure in life is trying to score cheap points against those who are not.

[MNG]

Er, yeah. John makes a generalized dumbass statement like "The people before us built all the stuff you mention. Exactly what are we doing to improve on it?" and J sub rightly answers that a list of innovations and improvements during his lifetime alone would be quite long" and John pedals back to a much more rserved point "I wouldn't want to live 60 years ago either. But that doesn't mean that we haven't digresed in a lot of ways or couldn't perhaps learn a bit from the people who did."

No pedaling there!

I imagine you don't know the Tour de France involves pedaling either...

[John]

No there isn't. The point is that we are doomed because our society has become so debased. That doesn't mean we haven't made progress but because the progress we have made is going to be undercut by the nature of our society.

It is the kind of subtle distinction that you routinely miss on here. Sometimes I think you are stupid. But then I think that you are just a dick who refuses to see obvious distinctions when it suits you. Then I realize it really doesn't matter since the effect is the same.

[dbcooper]

Some more from that bottomless pit of human stupidity:

http://video.nytimes.com/video.....eches.html

[John]

Oh my God. That Tkacik woman is just appalling .

[dbcooper]

She should change her name to something like "Squeaky Fromme" and join a cult.

People like that really have no business being published ...

[Butts Wagner]

woman is such a generous term...

[P Brooks]

Did the federal government ride to the rescue of the comic book hoarders? Did they but up all the comic books at the purchase price? I apparently forgot that part of the story.

[John]

Or the baseball card collectors? The 00s have been horrible for nerds and geeks everywhere. Yet, no federal bailouts or price supports. How long before we stop this oppression of nerds?

[MNG]

Is that a fair comparison? I mean, how many other businesses rely on comic books as opposed to credit?

TARP seemed wrong to me. It's a classic case of socializing costs while for years profits had been privatized. Having said that the rationale was at the least that since so much of the economy depends on financial institutions they could not be allowed to fail or ripple effects would be quite extensive. Not so with comic books.

[The Angry Optimist]

Oh well, if it is soooo big then it cannot be allowed to fail...is that what I am hearing?

[MNG]

Sort of, the argument was more like it was "integral."

[Some Guy]

So what would have been the problem with bankruptcy?

[Chad]

TARP wasn't the problem. We had to prevent the ship from sinking, even if it saved the rats who chewed the holes in it.

Not throwing a few hundred top bankers in prison over this affair, however, was an absolute injustice. They were committed obvious and gross fraud, and I don't understand why this isn't obvious to prosecutors and juries. Betting against something you are selling is a prime example.

Frankly, if I were king, 50 top bankers would have lost their heads. I am not joking. The next 500 would have been stripped of absolutely everything they own and imprisoned forever. Their families would have been thrown on the street with nothing but burlap sacks, and all their assets transfered to the states. Additionally, all employees of the bailed-out firms would have been forced to disgorge all bonuses from the last ten years, with interest. If that requires them to sell everything they own, so be it. No bankruptcies allowed.

THAT would have prevented this shit from happening again.

[Isaac Bartram]

Frankly, if I were king, 50 top bankers would have lost their heads. I am not joking. The next 500 would have been stripped of absolutely everything they own and imprisoned forever. Their families would have been thrown on the street with nothing but burlap sacks, and all their assets transfered to the states. Additionally, all employees of the bailed-out firms would have been forced to disgorge all bonuses from the last ten years, with interest. If that requires them to sell everything they own, so be it. No bankruptcies allowed.

What....

HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA...

after all those...

HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA...

contributions...

HAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA...

they made to the Democrats.

Stop it Chad, you're killing me.

[Amakudari]

God damn is that a fucked up fantasy.

[Ron L]

Chad|8.14.10 @ 3:24PM|#
"TARP wasn't the problem. We had to prevent the ship from sinking, even if it saved the rats who chewed the holes in it."

"We" as in the assholes who ran freddie and fannie; the assholes who caused the sinking to begin with. Is that your "we", Chad?

[Isaac Bartram]

Actually, "the assholes who ran freddie and fannie", among others, were "the rats who chewed the holes in it".

But for some reason Chad thinks they were innocent bystanders.

There were, to be sure, some sleazy operators in the private sector, but for the most part people were acting in a way that was logically consistent with the incentives created by government policy.

[Ron L]

I tossed off a throw-away line to Chad; you did better.
Chad is ignorant enough to presume those acting in response to government distortions represent the 'free market'.

[hmm]

If I were king I'd forgive the stupid fucking of my kingdom. Then let them go about their lives. Every village needs an idiot.

[hmm]

hmm, stupid fucking people...

[P Brooks]

I've got my eye on one of those swoopy old streamliner American la France fire trucks; The government should give me a low-interest guaranteed loans so I can buy and restore it. After I spend two years and $218,000.- restoring it, I'll take it to the auction.

If I only get $11,000.- for it at the auction, the government will pay off the loan for me. I think that's fair.

Compared to the costs of the other jobs they have "created and saved" I'm a fucking bargain.

[John]

My A Rod rookie card is only worth half of what I paid for it. Where is my bailout?

[The Angry Optimist]

How is that possible?

[John]

It is not. I was just being a smartass.

[Butts Wagner]

Actually, that 1989 Fleer Ken Griffey Jr. rookie card has not increased in value since 1994. Where's my bailout? The guy hit 600 homeruns, he lived up to his billing. Clearly, buying lots of packs of 89 Fleer and opening them was not a bad investment.

[P Brooks]

An intersting little tidbit:

The dilemma results from Allen's decision to have BP plug the well with cement from the top after injecting a layer of mud to push gas and oil back into the reservoir, some petroleum engineers said. Leaving the mud in place, then pushing it up and out with cement pumped in from the bottom through the relief well would have been a better way to proceed, they said.

"It would have been easier and safer to kill the well with the relief well," Les Ply, a retired petroleum engineer, said yesterday in an e-mailed message. "When it is cemented from the bottom, you can be assured the well is dead."

Business Week

"I'm from the government, and I'm here to tell you what to do."

[John]

Thad Allen is a Coast Guard admiral. If you want to know how to board a boat and search it for drugs or how to send a helicopter out to fish someone out of the ocean, he is your man. But he has no experience in the oil industry. You or I would have had a better chance of running that well. In fact we would have probably done better because we don't have the egos that go with being an admiral and might have actually listened to the people who knew what they were doing.

[The Angry Optimist]

I always argued with people that those glorified Border Patrol agents should not be considered "military".

[John]

Me to. I work with a lot of Coasties. And I always have to catch myself to keep from referring to them as something other than "military". They are very touchy about that.

[J sub D]

Occasionally the Navy assisted the Coasties with drug interdiction mission in international waters. The crew naturally received Coast Guard decorations for their participation in these crushing entrepreneurship exercises.

My comment to those unfortunate enough to both get stuck with the job nad then wear a ribbon from the Cosst Guard was

I'd rateher get caught wearing a bra than Coast Guard ribbon.

[John]

There is one exception to that, the Coast Guard Rescue swimmers. Those guys are badasses. They literally fly out in hurricanes and jump out of the bird and swim out and save people. You couldn't get me in the helicopter at gun point letalone get me to jump out of it into the water.

[J sub D]

I'm not really denigrating their professionalism anymore than I'm really serious when I call Marines grints, jarheads or gate guards. Nor am I serious when I refer to the US Air Farce. You know how it works.

[John]

I know. Gate Guards. I will have to remember that one. I work with some thoroughly noxious former Marines.

[The Angry Optimist]

As if there are any other kind. (Dad, you're the exception).

[John]

No there are not. And my father is the exception to. Although, when I was a kid he never wanted me to join.

[The Angry Optimist]

yours too? My former-Marine father basically said "boy, you join the Marines and you can pack your shit and never come back".

"Uh, yes sir"

[John]

He wasn't that radical. but he made it clear that it wasn't a good idea. And he was a good marine who liked it.

[J sub D]

My fingers are extremely uncooperative today. Fortunately y'all (Chad excepted) are smart enough to sift through the typos.

[Path to Asia]

The American government does not have the political will to be honest with the American people about our financial condition. The politicians will most likely take the easy way out by printing us into hyper-inflation rather than admit their folly and take the responsible action of implementing Greek-style austerity. Either way, it's not going to be pretty. Expect major social upheaval and unrest throughout the country, if not outright anarchy. At the very least, I expect we'll start seeing some European traditions such as general strikes that will be very disruptive to daily life. We help Americans move to Asia for jobs and prosperity. Learn more at http://www.pathtoasia.com/services/

[Alice Bowie]

I'm stay'n in America.

However, I agree with your statement. This will ONLY lead to bubbling up the NYC Real Estate.

And BTW, although FHA is going to get involved with Condos/Coops, most of the inventory is Coop. And, Coops have pretty strict guidelines on borrowing. Most require 25%-30% down and a significant amount of them require that the Coop be purchased in Cash.

[Isaac Bartram]

Gee, and the government never ever overuled a private agreement, did it?

I mean Coop boards have no right to place such onerous requirements on millionaires wanting condos.

WE NEED A LAW!!!!!!!!

[Alice Bowie]

The government should NOT have lower standards than the private sector. ONLY QUALIFIED persons should purchase a home. It is NOT a right to own.

[Isaac Bartram]

Part of the whole point that many commenters here are trying to make is that the goverment DOES HAVE lower standards than the private sector.

A private sector with sensible lending practices does not suit the governments policy goal of making it possible for people to buy homes they can't afford.

Hence, easy money, guaranteed mortgages with no equity etc.

That's what got us to here.

And this is about as good as anywhere to bring it up. Do any of the people bitching about derivatives and MBSs and the like realize that they would never have been nearly so wideaspread if lenders making government encouraged loans hadn't needed to find some instrument to spread the risk of so much bullshit credit.

[Chad]

So when Countrywide in the gang were hawking their no-doc NINJA loans on late night TV, it was all da gub'ments fault. Yeah.

You guys really have some odd form of a brain plague.

Btw, Countrywide wasn't bailed out.

[Isaac Bartram]

Countrywide et al were operating in a logically consistent way in the environment that the Fed and Congress had created.

Just as the malefactors in the S&L crisis acted in a logically consistent way in the environment that the Congress created with the Carter S&L deregulation.

[hmm]

What about a right to PWN?

[Isaac Bartram]

Canada's laws are similar as well, and again, they were largely untouched by the bubble.

No, Canada's laws are different that the US laws in that they do not guarantee low down payment loans.

Also, the Bank of Canada requires higher reserve requirements on federally chartered banks than the Fed does on US banks. So there we may be on the same wavelength.

But, lending institutions are still pretty much free to make loans on what ever terms they think will profit them.

Needless to say, only the most highly rated customers of a bank will get a real estate loan for more than about 80% of the valuation.

[Chad]

The technical details of Canada's and Texas's policies are different, but the practical effect is the same: You need a substantial downpayment. Seriously, 10% should be the absolute minimum, by law.

[Isaac Bartram]

Yes, but my point is that absent these kinds of guarantees lenders are a lot more prudent.

Both Canada and Europe pretty much demonstrate that. Banks are less regulated but also less speculative because they are also more conservative and cautious in there lending practices. American liberals find this kind of thing terribly unfair (you are an exception, apparently :)).

I'm taking the fact that these countries don't have the loan guarantee policies and easy money and did not have as bad a housing bubble that even if government policy didn't cause the bubble, it certainly exacerbated it.

It's a shame really. One of the traditional paths to a more comfortable life for the thrifty working man was to invest in one or a number of rental houses (this often came after buying a duplx or triplex and living in one unit).

The inflation of property values due to Fed easy money and FHA loan guarantes has blocked that path pretty much for ever.

But then if I've come to know one thing it's that if there's a politician with a significant in America today that's interested in people making their own way out of poverty I don't know of him.

[Isaac Bartram]

...with a significant following....

[Isaac Bartram]

Canada and Europe pretty much demonstrate that. Banks are less regulated...

By the way, I did not misstate that.

Glass-Steagall ostensibly was repealed so that US banks could compete with the British, German, Swiss and Japanese giants in international markets.

Now , it's true that many of those banks are in trouble now too but not nearly so badly.

I'm not entirely sure why some countries banks are in more trouble than others but monetary policy (easy American money versus tighter Swiss and German money) would seem to be one thing, but subsidies and loan guarantee policies seem to be another.

IOW, the problem isn't that the government doesn't prohibit bad lending practices, it's that it actively encourages them.

[Amakudari]

Well, Glass-Steagall was originally a proactive measure. Bank deposits were guaranteed by the FDIC, thus generously subsidizing banks at a higher risk of bank runs. To prevent those deposits from making their way into the high-risk i-banking world, commercial and investment banking were separated. Other countries have deposit insurance, but it's usually been fairly small amounts (I think 20k euros for the eurozone).

I think you need to either keep both or get rid of both. I'd heavily prefer the latter, because anyone who's ever worked at a bank knows what risk budgeting is. Basically, you have a certain level of exposure you're willing to take to risks in return for profits. If the government guarantees you against bank runs, you'll just take risks elsewhere; it certainly doesn't limit the risk in the system.

[Isaac Bartram]

I pretty much know the history and the rationale behind Glass-Steagall. And I agree with your other observations.

In fact I believe your last sentence should be plastered in huge block letters on billboards all over the country.

I know that the huge increase in SLDIC that made the S&L crisis so much worse were snuck into the conference commitee version of the "deregulation" bill that Jimmy Carter signed. It had never been in the bills that either of the House voted on. I'm not sure when the FDIC limits got raised, but the program, like most, started out fairly modestly.

[Isaac Bartram]

Oh, and that deregulation bill that Jimmy Carter signed, that's the one that almost everyone blames on Ronald Reagan. The people who wrote it were the Democrat controlled Congress of the day to.

One thing you've got to hand to the Democrats, they've got that whole re-writing history thing down, distilled to a fine art as it were.

The Republicans are learning, though.

[hmm]

By law people shouldn't be able to say shit "by law" when referencing an act between two consenting parties.

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[Ron L]

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Hey, Lou! I think you got a buddy!

[Brandybuck]

Sad story: A friend is buying a brand new condo in Palo Alto. He is bragging about the 10,000 tax credit he is going to get on a million dollar condo. He claims that the recession is over because these condos are selling out.

Meanwhile in my middle class neighborhood a few miles south of libruhl central there are more for sale signs than you can count.

[JB]

Fuck, fuck, fuckity fuck.

When the shit hit the fans, I will take solace knowing that even death won't save these bastards. Their screaming will continue in hell.

[e']

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[louis.vitton]

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[Merchant]

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