First! It's not surprisng: Fannie's and Freddie's automatic underwriting systems allowed DTIs far higher than even subprime's outrageous DTIs. That is on top of interest only arrangments. In subprime, the borrower was required to pay principal and interest. It comes down to the arrogance of the people wth better credit being better people.
Nemo -
you would be surprised - but then, the term 'white trash' is probably no more welcome in polite company than any other derogatory term to describe an entire group of people - in this case, those no longer in their prime of financial health.
There my be a higher proportiion of delinquent sub-prime loans but in total dollars and number of loans there are far more delinquent alt-A and prime loans.
Long treasuries getting kicked in the teeth today. Almost daring BS Bernanke to step in and defend. What is the line in the sand on price he is likely to say NO MAS and throw everything at it ?
Nades, if you have followed this blog long enough, you would realize that many posters had (wrongfully) blamed the mortgage debacle entirely on minorities who were given loans they supposedly were not qualified to repay. Nemo is being sarcastic.
At the end of the year, just under 90 percent of mortgages were performing, compared with 93 percent at the end of September 2008.
Ouch, that's quite a jump. Wonder what the end of Q1-2009 gonna look like.
Barley observes:
What is does not say is WHY?
"The reasons for high re-default rates are not clear"
How can we find a solution when we dont know the root cause of the problem.
We know the problem. Tanta explained it in no uncertain terms years ago. many posters then and the few that remain also know the answer. The problem is not the problem nor even the disease. The problem is a self interested aversion to the cure. Indeed the denial runs so deep that many have convinced themselves that the cures are worse than the disease itself. Thus all these schemes that avoid less debt, debt discharge and foreclosure.
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"There are far more prime loans than subprime loans - and the percentage of delinquent prime loans is much lower than for subprime loans."</div>
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<div class="js-singleCommentText">You're right. My bad.</div>
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"World Bank President Robert Zoellick openly admitted the plan to eliminate national sovereignty and impose a global government during a speech on the eve of the G20 summit."
HMMM How many of the rating agencies used a 10% default rate to stamp a AAA on those MBS's??????????? Hmmmm silly me they forgot to put a zero next to the one.
I thought I would neve own a house and now thanks to everyone who did not vote for that nut case Bob Barr, I now have the chance to own a piece of every single house in the country. America what a country.
<h1 id="StoryContent_TopPageNavigation_Headline" class="storytitle">Fannie, Freddie paying $210 million to keep staff</h1>
<h2 id="StoryContent_TopPageNavigation_Headline2" class="storytitle">Mortgage giants' conservator says payments needed to support house prices</h2>
@Bearly: "What is the line in the sand on price he is likely to say NO MAS and throw everything at it ?"
Looks like the line in the sand is when the ten-year yield tries to cross above 3%, based on the chart and the timing of the Fed's announcements and purchases. Also looks like the market will be challenging the Fed again in short order. But the market still hasn't eroded away the half-percent plunge in yield that the Fed produced with the announcement.
What's the economic rationale for paying one's second position loan if you have no equity?
...crickets...
It was a stupid question that already frames its answer. But debt is not truly a question of economic rationales, it is something more complex, such as carrying out one's responsibilities and duties. But then, the 'economic rationale' people tend to be the ones that have never served in the military, refuse to get involved in anything that doesn't serve their own self-interest, and otherwise love to point out how stupid it tends to be to actually carry out one's commitments.
And oddly, it tends to be the 'economic rationale' people that are the hardest on deadbeats . There is a fancy psychological framework for that, actually - and it is quite common in the U.S. these days.
BB talking exit strategy has scared the crap out of the bond market this afternoon. With 10%+ of gdp budget deficits and 100 Trillion of unfunded baby boomer liabilities, trying to supress inflation with a non-monetization exit strategy will propbably insure the Fed loses it's political independence.
Br'er - That post did not need a reply. How do you say it...somewhat self evident. As a long time reader/poster, I was going to remind CR that the line he used was a Tanta invention..but he knows this.
We personally know 1/2 dozen parties who bought additional homes and then walked away from the initial underwater owned homes. There's no rocket science involved figuring an abundantly underwater home (regardless the type of loan) will be walked away from - ESPECIALLY if they have an additional home to move into.
"The Federal Deposit Insurance Corporation (FDIC) today issued its list of state nonmember banks recently evaluated for compliance with the Community Reinvestment Act (CRA). The list covers evaluation ratings that the FDIC assigned to institutions in January 2009"
This blogger argues that china is going to move to a gold based system and have been planning for many years. I think it is worse, China is going to argue for a gold based system and eschew it for the noose around our kids necks. Our government will give it to them. How else willthey be able to help us?
“My administration,” the president added, “is the only thing between you and the pitchforks
This is obvious bullshit .the banks and their political whores in DC need each other. This is nothing more then a planted feel good story for the sheep.
<div class="js-singleCommentText">Dope Alert: do you have a link to the Obama pitchfork comment?</div>
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<div class="js-singleCommentText">http://www.politico.com/news/stories/0409/20871.html</div>
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<div class="js-singleCommentText">Wow! Didn't think O had it in him. Patience seems to be wearing thin.
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But then, the 'economic rationale' people tend to be the ones that have never served in the military, refuse to get involved in anything that doesn't serve their own self-interest, and otherwise love to point out how stupid it tends to be to actually carry out one's commitments.
Certainly not my father - my father expects everyone to lie, cheat, and steal, and lives his life accordingly.
He is also wrong, but then, he did most of his working life in marketing.
I wasn't kidding about how many problems that Americans identify are not external, as generally espoused, but actually internal.
Just like 'economic rational' is a clever way to say 'what value should my word have when it is not to my personal benefit to keep it' - but frame it like that, and somehow, the economic rationale people think you are challenging their lack of character, which is just not acceptable in polite company.
"to extend regulation or oversight to all financial markets, instruments, and institutions, including hedge funds, which are individually or collectively of systemic importance [meaning US firms], so as to limit the risk to financial stability from gaps in our systems;"
(I have no link, it was eMailed by MrsBSR from Financial Times - that I can't read from here)
But President Barack Obama wasn’t in a mood to hear them out. He stopped the conversation, and offered a blunt reminder of the public’s reaction to such explanations. “Be careful how you make those statements, gentlemen. The public isn’t buying that.”
He sounds like a bodyguard, guess the bankers will get the bill when they are coughing up the campaign donations. He sure isn't on the publics side as the fleecing continues non-stop.
The prime loan fiasco is a prime example of how destructive wall street's "financial innovations" truly are.
In a matter years, wall street transformed housing from a savings vehicle to an ATM/toxic asset class. An entire generation has been been swindled by wall street and madison avenue.
We should have let wall street fail. That would have been the only way to truly help main street.
The notion that we have to save wall street to save main street is a crock. Double speak. Disgraceful propaganda.
r
Actually, I have a client who is paying the second but not the first, because she can pay that one.
In her case, it does make some sort of sense. In Dec 07, or Jan 08, she came to me having already had a Final Summary Jdgt of foreclosure against her. I said I'd ask it to be set aside. Before taking her money, I carefully explained to her that it prolly wouldn't work. Well, the opposing atty didn't show up, and the judge granted the order. I explained to her that the opposition would file a motion for Summ Jgt again. She said ok, she'd have the money by that time.
They never have. She's been paying the 2nd only now since then, has prolly not paid on the first since the summer of 07. Has this file fallen down a crack or what? Stuff like this makes me think that firing people is really a money loser. Accounting is really bs isn't it? Accounting is supposed to let you know where you are, financially, right? Not!!
Fannie's and Freddie's automatic underwriting systems allowed DTIs far higher than even subprime's outrageous DTIs.
True, and don't even think these were all "full doc".
I have seen reliable evidence that as late as 2008, before Fannie made changes to DU, that 70% of borrowers applying as full doc were given some level of documentation waivers. But because the borrower was not requesting stated income (supposedly), these are classified as full doc.
Of course what was really happening is every originator knew what it took to fill out an application so it looked good enough to DU to get doc waivers. Lots of questionable income on those apps.
Then of course you had policies and pricing where a borrower could intentionally go stated on a Fannie/Freddie loan if the FICO was high enough, as if a FICO isn't easy to manipulate (i.e. authorized credit card users).
So, since I am Democrat almost entirely due to the Party's stand on social issues and now Iowa of all places has legalized gay marriage, why do I need a President like Obama? The states are getting there without him. If he wants my vote again, I think he should get out of the way of the folks carrying pitch forks.
I'm no longer worried about China. Their bond holdings just aren't large enough to dominate the market, especially now that (a) they're not accumulating the way the were previously, and (b) Bernanke has (in effect) made it clear that he'll buy them out (with less-valuable, but still valuable dollars) if need be. China can't afford to exit quickly because then they won't get full value on their holdings. They can't afford not to exit because they don't want to be all in dollars and it's also quite likely that they're going to need the money for domestic purposes anyway. So the bleedoff will continue.
As for Lawyerliz - it's not that hard to make stuff, and the fact that the factories happen to be in China right now doesn't mean that we couldn't make the stuff here (again) if it made economic sense to do so. So if they "decide not to sell us stuff", or not to buy treasuries, I'd view that as a long-awaited return to a healthy world order. Not a calamity.
It was a stupid question that already frames its answer. But debt is not truly a question of economic rationales, it is something more complex, such as carrying out one's responsibilities and duties. But then, the 'economic rationale' people tend to be the ones that have never served in the military, refuse to get involved in anything that doesn't serve their own self-interest, and otherwise love to point out how stupid it tends to be to actually carry out one's commitments.
Stop taking yourself so seriously. Dawg already knew the answer. My snarky reply was intended solely to get a cheap laugh. Did I succeed?
Dawg framed it as an economic consideration, not an ethical one. Carrying out one's committments and questions about honor become more difficult when the pantry has nothing in it except stale bread.
'Dawg framed it as an economic consideration, not an ethical one. Carrying out one's committments and questions about honor become more difficult when the pantry has nothing in it except stale bread.'
No, that is exactly the time that it becomes more important, since that is the only way to separate out the people worth your time and those who aren't.
But this is more properly Pavel's place to comment - he tends to have a much better way to phrase and discuss such fundamental aspects of human societies, especially ones that were never so rich as the U.S.
Unemployment peaked at 25 percent during Great Depression (1932) with less severe indebtness at all levels and USA was not dependent on foreign raw materials and oil. There were no supersized service sectors and outsourced industrial sectors.
This depression could mean 30-35 percent unemployment rate easily, so much worse the situation really is. All-out collapse of US economy.
Probably. Not a crack per se, but it is probably on someone's desk in a pile, and they know it is a problem file but don't want to deal with it. The person handling the case might have messed up and forgot to schedule a lawyer for the first meeting, and doesn't want to deal with owning up to it. So it just sits and sits. Eventually they will get to it, but it might be this time next year.
You would have to see the chaos in these shops to believe it. Many used to handle foreclosures and REOs on spreadsheets, because there was so little volume. It never got that far. You had a problem, either cash out refi to pay the mortgage or sell for a profit.
[ would also like to add that the movement in financials and REITs today is not normal]
They need to run 'em up a lot before takin' 'em back down ahead of earnings. Wall St creates zero wealth. Wall St is a perpetual wealth skimming machine.
prime? sub-prime? It doesn't matter anymore. The problem is those graphs are getting bigger, unemployment has no end in sight, and we are in for a rough ride these next few months.
FRE & FNM were the fountain of wall street's liquidity. I know people who started securitizing mortgages many years ago at Bear, Lehman and Kidder. I also understand how the risk was "swapped" from banks and brokers onto the government via FDIC & GSE guarantees.
I'm Angry, I'm a Saver, but I'm not angry because I'm a saver.
I'm with Lawyerliz on the institutional memory thing.
A lot of people I've met who have spent too much time in management ranks think that just because you have similarly-skilled bodies in positions with the same titles, that an organization will continue to function correctly despite high turnover (or even low turnover if the lost person is the one that actually mattered).
It's an extension of the Mythical Man-Month (excellent book of that title). We might call it the Myth of Organizational Stability. It's even better when the new team keeps the names for all the old processes but changes the details in such a way that the real purpose of the process is lost, but no one can tell because the language is the same.
who do you think leaked the story to the Politico? The bankers or the administration?
Great question. Clearly, I don't know, but Politico claims to have had multiple sources for the article.
If I had to guess, I would say they got at least one source from the administration.
I did watch the CEO public statements and interviews immediately following the meeting and it was clear that they were less than jubilant while of course trying to put a good face on the process. I was pleased with that since it said to me that someone had injected a sense of reality into the meeting.
Obama's public statements to date have been far too supportive of the banks, but that's his plan . . . save them, if possible. We'll see if it works.
Heck, tho the secy & I never stopped entirely doing real estate, we are losing our skills at closings and getting better at foreclosure defense and evictions. I asked her to print out a certain form contract out of the computer, and she couldn't remember where it was for a while it had been so long. So you have the skills getting dull thing. And then you have the business being decimated. and THEN you have the factory shut down and the machines sold off and the people dispersed. Maybe you can restart ok, and then, maybe you can't.
"SEC Said to Weigh Two Plans for Short-Selling Limits "
“This is an opportunity to send a clear message that there is a new sheriff in town, that things have changed and that you can once again have faith in investing,” U.S. Senator Ted Kaufman, a Delaware Democrat, said in an interview yesterday. Kaufman is one of six senators who sent a letter to Schapiro dated April 1 urging her to “address abusive short-selling.”
And when it comes to financial stuff, faith and confidence is and always has been a really bad idea. For reasons that are, I trust (!), more obvious than ever.
As for Lawyerliz - it's not that hard to make stuff, and the fact that the factories happen to be in China right now doesn't mean that we couldn't make the stuff here (again) if it made economic sense to do so.
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We already make most of the stuff we need: food, shelter, clothing. It's just that we don't want to pay 'high prices' so we get sucked into the Walmart mentality-- lots of cheap stuff, rather than a small amount of higher quality stuff. So the Chinese production has taken over retail shoes, clothes, small appliances, etc, etc. Even paint pigment. Getting Americans to buy higher-priced, non-sweatshop stuff is not easy. People don't see the hidden costs, and they have no idea of the end game issues.
"In the short term, my biggest concern is how do I make sure people get back to work," Obama told a joint news conference with German Chancellor Angela Merkel before a NATO summit.
"Once we've stabilised the economy, we're going to have to start bringing (down) these huge deficits that our government is running," he said. "Families are going to have to be more prudent about spending and save more," he added. http://www.reuters.com/article/governmentFilingsNews/idUSL365903620090403
He gotta get these debt slaves back to work to pay for bailing out campaign donors.
" In large part, the loans were result of acquisitions of loan portfolios from third parties where borrower credit scores at the origination of the loans were not available."
In and industry as responsible as that, is is truly shocking that we have financial problems.
Hmmm, how about requiring pictures of all of the factories in china where the stuff it made--real pictures of the people and where they live, to be attached to your basic cheap t shirt.
Or a $2.00 surcharge added to each and every supercheap garment, to be paid by, oh, Pavel & the Vatican to the factory people of China directly.
Also, I have had a bit of difficulty just a few times lately getting something of a quality I deem sufficient.
No, that is exactly the time that it becomes more important, since that is the only way to separate out the people worth your time and those who aren't.
Because nothing is more heroic than Japanese soldiers who threw themselves on grenades after finding out the Empire surrendered. Yeah, those suicidal banzai charges sure helped Japan rebuild in 1946, you bet.
If there was insufficient info, why did they want to purchase the loan portfolios? Newbie MBAs with no actual knowledge of the industry making decisions?
I blogged and posted on CR back in Dec 2007 and got a full ration of abuse for it. The position then, a mere 15 months ago was seen as antisocial. Since then we've seen that the counterparties to retail loans have worse than no moral content. There's no social or political or religious construct that suggests default under the terms of an agreement are amoral or immoral in the current circumstances.
r Hmmm, how about requiring pictures of all of the factories in china where the stuff it made--real pictures of the people and where they live, to be attached to your basic cheap t shirt.
I would agree, but it's dangerous for the people who take the pics-- IIRC there have been some beatings, arrests, etc. The labor movement is not welcome in socialist China. Pretty ironic.
Or a $2.00 surcharge added to each and every supercheap garment, to be paid by, oh, Pavel & the Vatican to the factory people of China directly.
Don't start, or hell be back with that 'you don't know the power of the Dark Side' routine.
Also, I have had a bit of difficulty just a few times lately getting something of a quality I deem sufficient.
Yes, as Tanta noted, Talbots et.al. have gone downhill for professional clothes. I've gone to J.Crew, which doesn't totally solve the Chinese problem by any means. Saipan and Macao are not solutions. Lately I've been hitting the upscale consignment shops for 'professional' stuff like suits-- that works, and it goes with the recycling thing.
sportsfan says: Today, 12:05:12 PM PDT
Br'er Dawg, do you want an apology or a medal for having no sense of moral obligations?
I want people like you to realize there's a difference between my being able to see these events far in advance and my approving of them. This is by far not the first time you've made that conflation.
There may be no legal construct that suggests default is immoral, but there sure are social, political and relgious constructs that suggest otherwise.
I disagree. Default is an aspect of these agreements. Obey the terms of the default and you've done nothing wrong. Maybe you want to get all code of Hurambi here but I think you'll find that business is just business.
Br'er Dawg, do you want an apology or a medal for having no sense of moral obligations?
There may be no legal construct that suggests default is immoral, but there sure are social, political and relgious constructs that suggest otherwise.
One word: SUCKER!
What are you, a cop or a banker, that you think people should listen to that sort of rubbish?
Only born and bred dopes play fair "to prove a point" when the other guy came equipped to cheat. The point you're going to prove is that the cheating side cheats best when it cheats alone, and will frequently exhort you to fair play to preserve the advantage.
r
BONDS. 3.5 to 3.72 in the space of 24 hours. When bond trading makes a 6.3%+ move in a day, what does that tell you?
Oh, and another big issuance coming next week. Certainly we can get that yield below 3.5 on the 30 year. Remind me again what the risk-free rate of return for 30 years? Is it close to 6%?
Now, 10957 days in 30 years with annual return under 4%, but this IN ONE DAY? This is good, this is sustainable, this is true healing. Indubitably.
Gold down, Stocks strongly up, bonds scooping, and the G20 glee club are gladhanding and kissing each other. I feel my confidence returning swimmingly.
Dont forget when,
"The wicked king of parody
Is kissing all his enemies
On the seventh day
On the seventh week
The tyrant's voice has softened now
But just for one forgiving hour
Before the rise of his
Iron fist again"
Regression to the mean, regression to the oppression, regression to a depression.
Since I've already bored the board with enough of my social views for the day, how about this old chestnut concerning the morality of discharging an obligation?
An old man was on his death bed. He wanted badly to take all his money with him. He called his priest, his doctor and his lawyer to his bedside. "Here's $30,000 cash to be held by each of you. I trust you to put this in my coffin when I die so I can take all my money with me." At the funeral, each man put an envelope in the coffin. Riding away in a limousine, the priest suddenly broke into tears and confessed that he had only put $20,000 into the envelope because he needed $10,000 for a new baptistery. "Well, since we're confiding in each other," said the doctor, "I only put $10,000 in the envelope because we needed a new machine at the hospital which cost $20,000." The lawyer was aghast. "I'm ashamed of both of you," he exclaimed. "I want it known that when I put my envelope in that coffin, it held my personal check for the full $30,000."<img src="http://www.funnyhumor.com/viewcount.php?type=joke&id=761&s=" border="0"/>
Br'er Dawg, do you want an apology or a medal for having no sense of moral obligations?
There may be no legal construct that suggests default is immoral, but there sure are social, political and relgious constructs that suggest otherwise.
You mean like Jubilee in the Judeo-Christian tradition or the edict against loaning money with interest in Islam? There are plenty of religious constructs that were put into place to prevent oppressive debt from building to the current point.
I won't argue that a person who honors their commitments should be respected. Nor will I argue that a person who is incapable of honoring them should be scourned. It's not that simple.
Most contracts between businesses and consumers are written to be vastly in favor of the business. Many current business practices are intended to be deceptive; to trick the consumer into a financial trap. One small example -- universal default clauses in revolving credit agreements. Is that ethical? Is that fair?
So we're in a situation where business has, over the last 25 years, come to be dominted by sociopathic practices (if not sociopathic individuals). It's a world where a contact isn't a contract -- it's the starting point for the next round of negotiations.
So in a limited instance, a contract written to be broadly favorable to business turns out to be favorable to the consumer -- and so business asks that the consumer ignore his contractual RIGHTS in favor of behaving "ethically" or "honorably". Business hasn't done either of those in decades: it's just taken 25 years for ordinary people to understand that BofA (for example) isn't your friend. Busines is just business.
So if you borrow money from your sister in law, then I'd argue that you may have a ethical or honor-bound obligation to pay her back. But if a contract says that you can return the collateral in lieu of payment, you're just honoring the contract. Nothing more, nothing less.
It's way past time that we treat the unethical or dis-honorable ethically or honorably, just as it's way past time that we tolerate the intolerant.
Nor will I argue that a person who is incapable of honoring them should be scourned.
Nor would I ever argue that. Impossibility is just that.
The question is whether a person who has the ability to honor a commitment can choose to dishonor that commitment out of financial self-interest and still claim to be a moral person.
That's like saying one is true to their marriage if they only had sex with others to satisfy the need of the moment.
Ok, me personally, I'd always pay back my obligations unless I was starving.
But then, I've never gone hugely into debt in the first place. I've always aimed at paying debt off completely. but I think this is a change--the goal changed from paying the debt off completely, sooner or later, to the goal being to make next month's monthly payments with no thought that the debt would ever be paid off. When your goal is solely to make those monthly payments, encouraged thoroughly by credit card companies, et al.,
your entire mindset changes.
And at some point, honoring debt becomes like shooting yourself in the head. Should you have ever let yourself get to that point? No. Should you, having been fooled, with or without complicity, turn yourself into a slave? well, no I don't think so.
If you go too far with the not honoring debt thing, no one will offer to loan anybody any money at rates other than usurious.
<h2>"Ex-mortgage co. president guilty of defrauding HUD</h2>
<
p>The Associated Press
<
p>RIVERSIDE
The former president of an San Bernardino County mortgage company has been convicted of a scheme to defraud the government out of $23 million.
John Varner, who headed Mortgage One Corp. in Hesperia, faces 41 years in prison for filing false tax returns and defrauding private lenders and the federal Department of Housing and Urban Development.
Varner was convicted Wednesday in Riverside County Superior Court after a nearly four-week trial. He is the 15th defendant convicted in a wide-ranging investigation into fraud by Mortgage One and Riverside-based M-1 Capital Corp.
The defendants were accused of submitting fraudulent loan applications for unqualified borrowers and then selling them to banks.
Prosecutors say more than 1,000 of the 3,800 federally insured loans approved by the two companies went into foreclosure.
"Hmmm, how about requiring pictures of all of the factories in china where the stuff it made--real pictures of the people and where they live, to be attached to your basic cheap t shirt.
I would agree, but it's dangerous for the people who take the pics-- IIRC there have been some beatings, arrests, etc. The labor movement is not welcome in socialist China. Pretty ironic. "
$2 a day beats no job. Anything that threatens the short term employment is hated by workers.
r
I still remember the day when I was in grade-school, hanging out during summer vacation, and some of the older kids wanted to play kickball with some of us younger kids on the block. It was clear a few minutes into the game that the odds were hopeless for the younger kids, but most of the little kids couldn't see it, and the bigger kids wanted to feel powerful by winning. Seeing the trap we had fallen into, I clamored to mix up the teams. The older kids offered to tilt the rules in our favor instead, knowing that it wouldn't matter if our team only needed to get 2 outs, or even 1, when we had no chance of getting any outs whatsoever as the ball boomed over our heads with every pitch. But my little teammates just didn't get it. The system the big kids had set up was grossly unfair and the little kids were doomed. My inner Incredible Hulk took over, and I jumped on one of the bigger kids, sat on him, and pounded him in the face until he conceded my point.
Today, i see financially-ignorant people signing contracts which are grossly disadvantageous, written by financial experts who prey upon their ignorance. Then the contracts blow up and the honorable people continue to play by the rules to which they've agreed, even though it was the system that was bad. The ignorant masses sense that they are doomed, and the wolves-in-bankers'-clothing offer to tweak the rules a little here and there, but it is the whole system which is wrong. Unfortunately I've had my Hulk bred out of me in the past decades and cannot bring myself yet to grab a pitchfork. But if you ask me to condemn those who break out of an exploitative "contract" that they did not understand (in part because they trusted the regulators of the system to ensure such contracts would be fair), I cannot do it.
I stand with the Dawg. Honor is a more subtle concoction than simply "keeping one's word". Particularly when the dealings were not fair and honest.
Come on guys, honor left the building a long time ago. It's now a matter of survival. Watching crooks complain about dishonorable borrowers really starts to grate though.
r
Lawyerliz writes: "...the goal changed from paying the debt off completely, sooner or later, to the goal being to make next month's monthly payments with no thought that the debt would ever be paid off..."
Which is almost an exact definition of the difference between "hedge finance" and "speculative finance" (see e.g. Kindlebarger, Manias, Panics and Crashes). In hedge finance, the organization (it can be an individual or a business) has the cash flow to both pay interest and amortize the debt on a reasonable schedule. In speculative finance the cash flow can pay the interest but not amortize, and the debt must be rolled over. The third level is Ponzi finance, where the cash flow isn't sufficient even to pay the interest and increasing debt is required.
What we are seeing now is the crushing of those who were trapped in a speculative-finance mode when the supply of credit contracts and the debts can no longer be rolled over. Those who entered foolishly-but-honestly into this mode, with their eyes open, are still morally obligated to try to repay their debts. But those who were misled into such a debt trap (and here there's a grey area) have much less of a moral obligation. An example of the latter would be someone with no knowledge of finance who was told by a person in a position of financial authority that they "qualified" for a particular loan, when in fact the loan was toxic and would blow up 2-3 years later. Particularly when the financial authority falsified the paperwork and especially when they also failed to make it clear to the borrower that the terms of the loan were not fixed.
Honor is a more subtle concoction than simply "keeping one's word". Particularly when the dealings were not fair and honest.
Wisdom Speaker, I think a distinction can be made between those who refuse to be gamed by the system and those who are gaming the system. I did not see that in Dawg's comment.
Also TCA mentioned 'incapable of honoring" commitments. I could even take that from 'impossibility of performance' to 'impracticality of performance' in certain circumstances, especially when collateral damage is involved.
But let's not equate refusing to keep one's word with keeping one's word. There remains a world of difference between the two.
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We already make most of the stuff we need: food, shelter, clothing. It's just that we don't want to pay 'high prices' so we get sucked into the Walmart mentality-- lots of cheap stuff, rather than a small amount of higher quality stuff. ...scone
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Precisely. I think the biggest problem we face is that country is so divided. That makes it hard to break the grip of the special interest lobbies. Especially the banking industry. But we'll eventually break the banking monopolies or so i hope..
r r will I argue that a person who is incapable of honoring them should be scourned.
Nor would I ever argue that. Impossibility is just that.
Impossible in a very non-emphatic way, sure. The more heroic the "impossible" gets, the more unconvincing it sounds to me.
The question is whether a person who has the ability to honor a commitment can choose to dishonor that commitment out of financial self-interest and still claim to be a moral person.
I have signed a lot of contracts. They have clauses to deal with inability to perform, as a rule. It is not "immoral", it is Section 4, Clauses 3-10.
Get a grip, it's a business deal. A loan to trade value for land. Deals go south man, it happens. Lenders have to do due diligence for a reason. They charge interest for a reason. they keep your credit score for a reason. That's because they're assuming risk. Yes, there's a compelling reason to pay them back. You'd ever like to be lent money again! They do talk among themselves so!
The lenders made the deals under false pretenses and under usurious terms. The assumption was they would all fail and Uncle Sugar would come in and bail it all out. Here we are, here the inevitable is happening, and no, I don't think it's a big deal to walk away from the deal. Any idiot at the bank should have seen that, and in fact, they did.
That's like saying one is true to their marriage if they only had sex with others to satisfy the need of the moment.
Or like saying that Allah won't send you to hell for eating the flesh of an unclean animal, if it is the only food available?
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<div style="float: left;">Well, Br'er Dawg, you've found someone of your ilk in Comrade Byzantine Ruins. </div>
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<div style="float: left;">Now, with your point taken to its logical extreme, cheating is not immoral. </div>
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<div style="float: left;">No. I've had this same duscussion many times but I must admit usually with those who can read. Your attempt to put words in my mouth is rejected. These option contracts to purchase are virtually airtight as to both obligations and consequences. Pretty much the only reason we are in such dire economic straights is because no one is enforcing those terms. </div>
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Thanks for the link, Black Star Ranch. The global financial system requires a global government to regulate it. The new world-wide government will have the power to overrule national laws, policies, and regulations. Members of the Well-Read Right Wing saw it coming. They were right.
I guess I should have specified that derivative volatility declines after a big report. For instance soybean option volatility declined several percent Tuesday even though futures prices rose over 5% that day. That price increase was the largest in over a month.
p style="">Well, Br'er Dawg, you've found someone of your ilk in Comrade Byzantine Ruins. Now, with your point taken to its logical extreme, cheating is not immoral.
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p style="">No. I've had this same duscussion many times but I must admit usually with those who can read. Your attempt to put words in my mouth is rejected. These option contracts to purchase are virtually airtight as to both obligations and consequences. Pretty much the only reason we are in such dire economic straights is because no one is enforcing those terms.
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Has anyone done a study of how unemployment rates effects housing foreclosures? The chart shows the Q4 numbers, with Prime and Sub Prime really accelerating in growth from the previous quarters. But Q1 has seen 2.1 million people lose their jobs, a significant increase over any previous quarter in this recession. Won't that significantly worsen foreclosure rates? (I remember reading a recent news article saying many Americans live one-to-two paychecks away from financial ruin.) And does anyone remember what the banks were using as their baselines for foreclosures? Looking at the chart, and the Q4 growth rates for Prime and Sub Prime, it would be my guess that the banks have underestimated the foreclosure rates, but anyone who can support or correct me with some info, please do. TIA.
Byz, I've been in a lot of business deals, authored many of those clauses and both prosecuted and defended defaults.
The lenders made the deals under false pretenses and under usurious terms. The assumption was they would all fail and Uncle Sugar would come in and bail it all out. Here we are, here the inevitable is happening, and no, I don't think it's a big deal to walk away from the deal.
I have actually advised people to walk away from those properties, specifically where two or five year resets were involved and the terms were onerous. But then I don't pretend to be a moral advisor to anyone.
The case Dawg wants to make is that a person has a reasonable mortgage, but property values in general have declined and so he should just walk away . . . or buy the house across the street for $200k less than he owes, move and default. I don't see those situations as equivalents.
That's especially true in a non-recourse state like California.
When we move farther out to seller financing on vacant land for speculative purposes, then default is factored in with the seller-financing, the non-recourse nature of the loan serves a social goal and there is nothing immoral about deeding the property back.
But let's keep in mind that blanket statements rarely cover every situation with equal force.
I guess I should have specified that derivative volatility declines after a big report. For instance soybean option volatility declined several percent Tuesday even though futures prices rose over 5% that day. That price increase was the largest in over a month.
Let's make an example of what we'll call "positive default". We'll take example man, Virtual Dawgbot. He becomes entranced by the house across the street in a rising RE market. Perhaps it is the place in town farthest from public transit, or perhaps the roof is shaped like a giant surf board. Whatever, VDB is willing to pay economic rent to live there.
He concludes his deal for the surfboard cabana with no bus service. He bids farwell to his Virtual Dawgbot Lair, and mails the keys to the servicer with a note. We grant that the servicer is not such an absentee landlord that it can appreciate a forfeiture of equity in a rising, liquid RE market on a house that, by the nature of the example, is bound to be snapped up quickly.
Now by mailing the bank these keys which essentially have all his equity torn up attached and also the future proceeds from the sale, you are telling me the Virtual Dawgbot did a bad thing? Because that is what I perceive you are outlining.
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Shocked!!!
First! It's not surprisng: Fannie's and Freddie's automatic underwriting systems allowed DTIs far higher than even subprime's outrageous DTIs. That is on top of interest only arrangments. In subprime, the borrower was required to pay principal and interest. It comes down to the arrogance of the people wth better credit being better people.
I took too long to type my comment. Believer Jeff beat me!
Huh. I didn't realize that many low-class non-white people got prime mortgages.
on-whites?
Nemo -
you would be surprised - but then, the term 'white trash' is probably no more welcome in polite company than any other derogatory term to describe an entire group of people - in this case, those no longer in their prime of financial health.
short everything...
:-$
"First lien loans."
Fine but remember every single one of these banks with the 80 part of an 80/20 is also the 20 part of some other banks' 80/20.
Question for the commentariat: What's the economic rationale for paying one's second position loan if you have no equity?
heh heh
Nemo made a funny
Starting to look to me like we are gonna find out during the unwind that the US economy last actually grew some time between 1976 and 1986.
'...that the US economy last actually grew some time between 1976 and 1986.'
Yep - and that the last 20 years have been full of neglecting necessary maintenance on a surprising variety of necessary things.
All part of the dynamic post-industrial utopia we were all sold as being part of morning in America.
It looks like we gave up the farm at the G20 meeting.
All US companies and firms that are deemed to have a systemic risk are to be adjudicated by an INTERNATIONAL BOARD - no longer under US control.
What is does not say is WHY?
"The reasons for high re-default rates are not clear"
How can we find a solution when we dont know the root cause of the problem.
Nemo, I though Jas said he owns his home free and clear.
I didn't realize that many low-class non-white people got prime mortgages. - Nemo
Don't you remember all those 2005-2006 vintage "stated race," "stated socioeconomic strata" loans? [cue up "The Kinks - Low Budget"]
The CR headline is totally misleading. The article itself says:
"This decline in credit quality was evident in all loan risk categories, with subprime mortgages showing the highest level of serious delinquencies."
Anyone that thinks there are a higher percentage of prime loans that are delinquent is smoking crack.
There my be a higher proportiion of delinquent sub-prime loans but in total dollars and number of loans there are far more delinquent alt-A and prime loans.
"We're all subprime now!" As applicable as its ever been. Scary stuff.....
Black star ranch- do you have a link to that?
Long treasuries getting kicked in the teeth today. Almost daring BS Bernanke to step in and defend. What is the line in the sand on price he is likely to say NO MAS and throw everything at it ?
"heh heh
Nemo made a funny"
I dont get it tho....
Nades, if you have followed this blog long enough, you would realize that many posters had (wrongfully) blamed the mortgage debacle entirely on minorities who were given loans they supposedly were not qualified to repay. Nemo is being sarcastic.
At the end of the year, just under 90 percent of mortgages were performing, compared with 93 percent at the end of September 2008.
Ouch, that's quite a jump. Wonder what the end of Q1-2009 gonna look like.
r
Barley observes:
What is does not say is WHY?
"The reasons for high re-default rates are not clear"
How can we find a solution when we dont know the root cause of the problem.
We know the problem. Tanta explained it in no uncertain terms years ago. many posters then and the few that remain also know the answer. The problem is not the problem nor even the disease. The problem is a self interested aversion to the cure. Indeed the denial runs so deep that many have convinced themselves that the cures are worse than the disease itself. Thus all these schemes that avoid less debt, debt discharge and foreclosure.
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Anonymous, 10:29
Did you read the post?
"There are far more prime loans than subprime loans - and the percentage of delinquent prime loans is much lower than for subprime loans."
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<div class="js-singleCommentText">“Anonymous, 10:29
Did you read the post?
"There are far more prime loans than subprime loans - and the percentage of delinquent prime loans is much lower than for subprime loans."</div>
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<div class="js-singleCommentText">You're right. My bad.</div>
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"World Bank President Robert Zoellick openly admitted the plan to eliminate national sovereignty and impose a global government during a speech on the eve of the G20 summit."
World Bank President Admits Agenda For Global Government
Zoellick is a former Executive Vice President of Fannie Mae and advisor to Goldman Sachs. He was later a foreign policy advisor to George W. Bush.
Sorry, a link to conclusory statements made by Infowars is not a sufficient bibliography.
HMMM How many of the rating agencies used a 10% default rate to stamp a AAA on those MBS's??????????? Hmmmm silly me they forgot to put a zero next to the one.
I thought I would neve own a house and now thanks to everyone who did not vote for that nut case Bob Barr, I now have the chance to own a piece of every single house in the country. America what a country.
<h1 id="StoryContent_TopPageNavigation_Headline" class="storytitle">Fannie, Freddie paying $210 million to keep staff</h1>
<h2 id="StoryContent_TopPageNavigation_Headline2" class="storytitle">Mortgage giants' conservator says payments needed to support house prices</h2>
<
p>>>
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p>This isn't even funny anymore.
"We're all sub-prime now!"
You mean, we're all prime now.
Prime, sub_prime, Alt-A; all different houses, but on the same dead-end street.
Tales from the Coast
Black Star - that looks like class warfare!
@Bearly: "What is the line in the sand on price he is likely to say NO MAS and throw everything at it ?"
Looks like the line in the sand is when the ten-year yield tries to cross above 3%, based on the chart and the timing of the Fed's announcements and purchases. Also looks like the market will be challenging the Fed again in short order. But the market still hasn't eroded away the half-percent plunge in yield that the Fed produced with the announcement.
<i>Question for the commentariat: What's the economic rationale for paying one's second position loan if you have no equity?</i>
...crickets...
What's the economic rationale for paying one's second position loan if you have no equity?
...crickets...
It was a stupid question that already frames its answer. But debt is not truly a question of economic rationales, it is something more complex, such as carrying out one's responsibilities and duties. But then, the 'economic rationale' people tend to be the ones that have never served in the military, refuse to get involved in anything that doesn't serve their own self-interest, and otherwise love to point out how stupid it tends to be to actually carry out one's commitments.
And oddly, it tends to be the 'economic rationale' people that are the hardest on deadbeats . There is a fancy psychological framework for that, actually - and it is quite common in the U.S. these days.
BB talking exit strategy has scared the crap out of the bond market this afternoon. With 10%+ of gdp budget deficits and 100 Trillion of unfunded baby boomer liabilities, trying to supress inflation with a non-monetization exit strategy will propbably insure the Fed loses it's political independence.
I didn't know the CRA covered prime jumbo loans?
Whoops. Forgot JS-Kit no likey HTML tags.
Br'er - That post did not need a reply. How do you say it...somewhat self evident. As a long time reader/poster, I was going to remind CR that the line he used was a Tanta invention..but he knows this.
None of us are prime now!
We personally know 1/2 dozen parties who bought additional homes and then walked away from the initial underwater owned homes. There's no rocket science involved figuring an abundantly underwater home (regardless the type of loan) will be walked away from - ESPECIALLY if they have an additional home to move into.
"The Federal Deposit Insurance Corporation (FDIC) today issued its list of state nonmember banks recently evaluated for compliance with the Community Reinvestment Act (CRA). The list covers evaluation ratings that the FDIC assigned to institutions in January 2009"
http://www.fdic.gov/news/news/press/2009/pr09051.html
Per Denninger, Triad is just paying 60 cents on the dollar now as they wind down and lack money. With PMI going down this has to hurt more.
And now the alt-As begin to kick in as well...
OT: Can anybody hook me up with Jim the Realtor's "Detroit River" video?
This blogger argues that china is going to move to a gold based system and have been planning for many years. I think it is worse, China is going to argue for a gold based system and eschew it for the noose around our kids necks. Our government will give it to them. How else willthey be able to help us?
KRUGMAN TOTALLY MISUNDERSTANDS CHINESE PLANS! « Culture of Life News 2
MrsBSR is teaching me html stuff like this bold thing..... Nothing worse than a hobby gardener with a little coding knowledge
Token Bull, here is Jim's Detroit River video.
Enjoy!
<h1>Hostages taken, at least 6 wounded in NY state</h1>
Yahoo! 404 - Page Not Found
“My administration,” the president added, “is the only thing between you and the pitchforks
score +10 for BO, finally - after all the bs footwork, he lands a solid uppercut
“My administration,” the president added, “is the only thing between you and the pitchforks
This is obvious bullshit .the banks and their political whores in DC need each other. This is nothing more then a planted feel good story for the sheep.
What's there to worry about ? Look @ REITs & Banks RUN up the wall of worry.
SRS & FAZ getting pulverized.
BTW, what's wrong with pitchforks? I use one daily.
Dope Alert: do you have a link to the Obama pitchfork comment?
Black Star--per thread below, where was your pitchfork made?
And err, if it was, what WILL we do, if they refuse to sell us any?
"We're all subprime now" has mutated a bit into "We're all unemployed now."
Subprimers weren't qualified for the loan in the first place. Primers are 'becoming' unqualified as their source of income dries up.
No surprise there.
Dope Alert: do you have a link to the Obama pitchfork comment?
Jim, I can't believe Obama actually said that . . . at least not in public.
<div class="js-singleCommentText">Dope Alert: do you have a link to the Obama pitchfork comment?</div>
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<div class="js-singleCommentText">http://www.politico.com/news/stories/0409/20871.html</div>
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<div class="js-singleCommentText">Wow! Didn't think O had it in him. Patience seems to be wearing thin.
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But then, the 'economic rationale' people tend to be the ones that have never served in the military, refuse to get involved in anything that doesn't serve their own self-interest, and otherwise love to point out how stupid it tends to be to actually carry out one's commitments.
Dad?
'Dad?'
Certainly not my father - my father expects everyone to lie, cheat, and steal, and lives his life accordingly.
He is also wrong, but then, he did most of his working life in marketing.
I wasn't kidding about how many problems that Americans identify are not external, as generally espoused, but actually internal.
Just like 'economic rational' is a clever way to say 'what value should my word have when it is not to my personal benefit to keep it' - but frame it like that, and somehow, the economic rationale people think you are challenging their lack of character, which is just not acceptable in polite company.
The G20 Draft Communique includes the following:
"to extend regulation or oversight to all financial markets, instruments, and institutions, including hedge funds, which are individually or collectively of systemic importance [meaning US firms], so as to limit the risk to financial stability from gaps in our systems;"
(I have no link, it was eMailed by MrsBSR from Financial Times - that I can't read from here)
But President Barack Obama wasn’t in a mood to hear them out. He stopped the conversation, and offered a blunt reminder of the public’s reaction to such explanations. “Be careful how you make those statements, gentlemen. The public isn’t buying that.”
“My administration,” the president added, “is the only thing between you and the pitchforks.”
http://www.politico.com/news/stories/0409/20871.html
He sounds like a bodyguard, guess the bankers will get the bill when they are coughing up the campaign donations. He sure isn't on the publics side as the fleecing continues non-stop.
http://www.politico.com/news/stories/0409/20871.html
bo comment
sportsfan,
http://www.huffingtonpost.com/2009/04/03/obama-to-bank-ceos-my-adm_n_182896.html
I hope this isn't just talk.
The prime loan fiasco is a prime example of how destructive wall street's "financial innovations" truly are.
In a matter years, wall street transformed housing from a savings vehicle to an ATM/toxic asset class. An entire generation has been been swindled by wall street and madison avenue.
We should have let wall street fail. That would have been the only way to truly help main street.
The notion that we have to save wall street to save main street is a crock. Double speak. Disgraceful propaganda.
r
Actually, I have a client who is paying the second but not the first, because she can pay that one.
In her case, it does make some sort of sense. In Dec 07, or Jan 08, she came to me having already had a Final Summary Jdgt of foreclosure against her. I said I'd ask it to be set aside. Before taking her money, I carefully explained to her that it prolly wouldn't work. Well, the opposing atty didn't show up, and the judge granted the order. I explained to her that the opposition would file a motion for Summ Jgt again. She said ok, she'd have the money by that time.
They never have. She's been paying the 2nd only now since then, has prolly not paid on the first since the summer of 07. Has this file fallen down a crack or what? Stuff like this makes me think that firing people is really a money loser. Accounting is really bs isn't it? Accounting is supposed to let you know where you are, financially, right? Not!!
Fannie's and Freddie's automatic underwriting systems allowed DTIs far higher than even subprime's outrageous DTIs.
True, and don't even think these were all "full doc".
I have seen reliable evidence that as late as 2008, before Fannie made changes to DU, that 70% of borrowers applying as full doc were given some level of documentation waivers. But because the borrower was not requesting stated income (supposedly), these are classified as full doc.
Of course what was really happening is every originator knew what it took to fill out an application so it looked good enough to DU to get doc waivers. Lots of questionable income on those apps.
Then of course you had policies and pricing where a borrower could intentionally go stated on a Fannie/Freddie loan if the FICO was high enough, as if a FICO isn't easy to manipulate (i.e. authorized credit card users).
What happend to Comrade Rally Monkey? I appreciated his comments very much!
I would also like to add that the movement in financials and REITs today is not normal. Somebody is pumping those sectors like crazy.
Fannie, Freddie Quietly Lift Moratorium on Foreclosures
Fannie, Freddie Quietly Lift Moratorium on Foreclosures « The Washington Independent
Per Denninger, Triad is just paying 60 cents on the dollar now as they wind down and lack money. With PMI going down this has to hurt more.
Yup, the agencies are getting paid for 40% of those losses with IOUs from a company that just got a going concern letter.
I wonder if 40% of that $210MM is going to be paid in Fannie IOUs?
Re: "between you and the pitchforks"
[warning: partisan political rant follows]
Obama has just about completely lost me. Consider two recent news items:
1) Obama's cringe-inducing bow to the Saudi king. (WTF? Why on earth?)
YouTube - Did Obama bow to Saudi King Abdullah, or was he cleaning the floor?
2) Iowa Supreme Court invalidates ban on gay marriage.
Iowa first Midwest state to allow gay marriage
| Reuters
So, since I am Democrat almost entirely due to the Party's stand on social issues and now Iowa of all places has legalized gay marriage, why do I need a President like Obama? The states are getting there without him. If he wants my vote again, I think he should get out of the way of the folks carrying pitch forks.
If Politico's reporting is correct, it seems Obama did make that statement in the private meeting with bankers. Good. Hope they took it to heart.
I still can't see him saying anything like that in public . . . at least not yet.
I'm no longer worried about China. Their bond holdings just aren't large enough to dominate the market, especially now that (a) they're not accumulating the way the were previously, and (b) Bernanke has (in effect) made it clear that he'll buy them out (with less-valuable, but still valuable dollars) if need be. China can't afford to exit quickly because then they won't get full value on their holdings. They can't afford not to exit because they don't want to be all in dollars and it's also quite likely that they're going to need the money for domestic purposes anyway. So the bleedoff will continue.
As for Lawyerliz - it's not that hard to make stuff, and the fact that the factories happen to be in China right now doesn't mean that we couldn't make the stuff here (again) if it made economic sense to do so. So if they "decide not to sell us stuff", or not to buy treasuries, I'd view that as a long-awaited return to a healthy world order. Not a calamity.
It was a stupid question that already frames its answer. But debt is not truly a question of economic rationales, it is something more complex, such as carrying out one's responsibilities and duties. But then, the 'economic rationale' people tend to be the ones that have never served in the military, refuse to get involved in anything that doesn't serve their own self-interest, and otherwise love to point out how stupid it tends to be to actually carry out one's commitments.
Stop taking yourself so seriously. Dawg already knew the answer. My snarky reply was intended solely to get a cheap laugh. Did I succeed?
Dawg framed it as an economic consideration, not an ethical one. Carrying out one's committments and questions about honor become more difficult when the pantry has nothing in it except stale bread.
'Dawg framed it as an economic consideration, not an ethical one. Carrying out one's committments and questions about honor become more difficult when the pantry has nothing in it except stale bread.'
No, that is exactly the time that it becomes more important, since that is the only way to separate out the people worth your time and those who aren't.
But this is more properly Pavel's place to comment - he tends to have a much better way to phrase and discuss such fundamental aspects of human societies, especially ones that were never so rich as the U.S.
Do not click on this link. It is being saved for he who answers to the name
YouTube - Illuminati: Game or Blueprint for World Domination 3 of 3
Do not click on this link. It is being saved for he who answers to the name
YouTube - Illuminati: Game or Blueprint for World Domination 3 of 3
sportsfan:
who do you think leaked the story to the Politico? The bankers or the administration?
The prime loan fiasco is a prime example of how destructive wall street's "financial innovations" truly are.
Fannie and Freddie are a long way from Wall Street, my friend.
I am in no way blaming them for the mortgage mess, I don't believe they created it, but they sure did a damn good job chasing it down the drain.
These are the people who were supposed to know better.
still on orders to 'not underestimate the rally'
"...why do I need a President like Obama? The states are getting there without him"
Yeah, the Federal Government is so 90's......
The youtube link is why we do not want a collapse. These people own weapons!
Obama to Bank CEOs<i>“My administration,” the president added, “is the only thing between you and the pitchforks.”
</i>
I'd give $100 for the video of the faces and sounds of the CEOs after this was said.
Especially the use of the word 'pitchforks'. Somebody on the WH staff is reading blogs.
The youtube link is why we do not want a collapse. These people own weapons!
Unemployment peaked at 25 percent during Great Depression (1932) with less severe indebtness at all levels and USA was not dependent on foreign raw materials and oil. There were no supersized service sectors and outsourced industrial sectors.
This depression could mean 30-35 percent unemployment rate easily, so much worse the situation really is. All-out collapse of US economy.
I do believe my pitchfork nonsense was supposed to be snarky.
And I hope you are right. Institutional memory is lost rather more quickly than one might expect.
anybody watching the unreal short squeeze on srs
Has this file fallen down a crack or what?
Lawyerliz
Probably. Not a crack per se, but it is probably on someone's desk in a pile, and they know it is a problem file but don't want to deal with it. The person handling the case might have messed up and forgot to schedule a lawyer for the first meeting, and doesn't want to deal with owning up to it. So it just sits and sits. Eventually they will get to it, but it might be this time next year.
You would have to see the chaos in these shops to believe it. Many used to handle foreclosures and REOs on spreadsheets, because there was so little volume. It never got that far. You had a problem, either cash out refi to pay the mortgage or sell for a profit.
[ would also like to add that the movement in financials and REITs today is not normal]
They need to run 'em up a lot before takin' 'em back down ahead of earnings. Wall St creates zero wealth. Wall St is a perpetual wealth skimming machine.
prime? sub-prime? It doesn't matter anymore. The problem is those graphs are getting bigger, unemployment has no end in sight, and we are in for a rough ride these next few months.
The Latest from Ritholz:
S&P500 Percentage Swings
CRM, are you talking days, weeks, or months? The power behind this move in mindblowing.
http://finance.yahoo.com/echarts?s=fnm#chart4:symbol=fnm;range=my;compare=c+aig+fre+wfc;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined
Ghostfacedinvestah,
FRE & FNM were the fountain of wall street's liquidity. I know people who started securitizing mortgages many years ago at Bear, Lehman and Kidder. I also understand how the risk was "swapped" from banks and brokers onto the government via FDIC & GSE guarantees.
I'm Angry, I'm a Saver, but I'm not angry because I'm a saver.
Actually paying for things is for the little people.
It looks like we gave up the farm at the G20 meeting.
All US companies and firms that are deemed to have a systemic risk are to be adjudicated by an INTERNATIONAL BOARD - no longer under US control.
And, after the outrageous regulatory failures in the US, this is a problem how?
I'm with Lawyerliz on the institutional memory thing.
A lot of people I've met who have spent too much time in management ranks think that just because you have similarly-skilled bodies in positions with the same titles, that an organization will continue to function correctly despite high turnover (or even low turnover if the lost person is the one that actually mattered).
It's an extension of the Mythical Man-Month (excellent book of that title). We might call it the Myth of Organizational Stability. It's even better when the new team keeps the names for all the old processes but changes the details in such a way that the real purpose of the process is lost, but no one can tell because the language is the same.
who do you think leaked the story to the Politico? The bankers or the administration?
Great question. Clearly, I don't know, but Politico claims to have had multiple sources for the article.
If I had to guess, I would say they got at least one source from the administration.
I did watch the CEO public statements and interviews immediately following the meeting and it was clear that they were less than jubilant while of course trying to put a good face on the process. I was pleased with that since it said to me that someone had injected a sense of reality into the meeting.
Obama's public statements to date have been far too supportive of the banks, but that's his plan . . . save them, if possible. We'll see if it works.
Heck, tho the secy & I never stopped entirely doing real estate, we are losing our skills at closings and getting better at foreclosure defense and evictions. I asked her to print out a certain form contract out of the computer, and she couldn't remember where it was for a while it had been so long. So you have the skills getting dull thing. And then you have the business being decimated. and THEN you have the factory shut down and the machines sold off and the people dispersed. Maybe you can restart ok, and then, maybe you can't.
"SEC Said to Weigh Two Plans for Short-Selling Limits "
“This is an opportunity to send a clear message that there is a new sheriff in town, that things have changed and that you can once again have faith in investing,” U.S. Senator Ted Kaufman, a Delaware Democrat, said in an interview yesterday. Kaufman is one of six senators who sent a letter to Schapiro dated April 1 urging her to “address abusive short-selling.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=aam0yoEfEvV8&refer=home
Is all short selling deemed abusive?
And when it comes to financial stuff, faith and confidence is and always has been a really bad idea. For reasons that are, I trust (!), more obvious than ever.
As for Lawyerliz - it's not that hard to make stuff, and the fact that the factories happen to be in China right now doesn't mean that we couldn't make the stuff here (again) if it made economic sense to do so.
.
We already make most of the stuff we need: food, shelter, clothing. It's just that we don't want to pay 'high prices' so we get sucked into the Walmart mentality-- lots of cheap stuff, rather than a small amount of higher quality stuff. So the Chinese production has taken over retail shoes, clothes, small appliances, etc, etc. Even paint pigment. Getting Americans to buy higher-priced, non-sweatshop stuff is not easy. People don't see the hidden costs, and they have no idea of the end game issues.
"In the short term, my biggest concern is how do I make sure people get back to work," Obama told a joint news conference with German Chancellor Angela Merkel before a NATO summit.
"Once we've stabilised the economy, we're going to have to start bringing (down) these huge deficits that our government is running," he said. "Families are going to have to be more prudent about spending and save more," he added.
http://www.reuters.com/article/governmentFilingsNews/idUSL365903620090403
He gotta get these debt slaves back to work to pay for bailing out campaign donors.
" In large part, the loans were result of acquisitions of loan portfolios from third parties where borrower credit scores at the origination of the loans were not available."
In and industry as responsible as that, is is truly shocking that we have financial problems.
Hmmm, how about requiring pictures of all of the factories in china where the stuff it made--real pictures of the people and where they live, to be attached to your basic cheap t shirt.
Or a $2.00 surcharge added to each and every supercheap garment, to be paid by, oh, Pavel & the Vatican to the factory people of China directly.
Also, I have had a bit of difficulty just a few times lately getting something of a quality I deem sufficient.
No, that is exactly the time that it becomes more important, since that is the only way to separate out the people worth your time and those who aren't.
Because nothing is more heroic than Japanese soldiers who threw themselves on grenades after finding out the Empire surrendered. Yeah, those suicidal banzai charges sure helped Japan rebuild in 1946, you bet.
If there was insufficient info, why did they want to purchase the loan portfolios? Newbie MBAs with no actual knowledge of the industry making decisions?
I blogged and posted on CR back in Dec 2007 and got a full ration of abuse for it. The position then, a mere 15 months ago was seen as antisocial. Since then we've seen that the counterparties to retail loans have worse than no moral content. There's no social or political or religious construct that suggests default under the terms of an agreement are amoral or immoral in the current circumstances.
The Latest from Jesse:
SP Futures Hourly Chart at 3 PM
r
Hmmm, how about requiring pictures of all of the factories in china where the stuff it made--real pictures of the people and where they live, to be attached to your basic cheap t shirt.
I would agree, but it's dangerous for the people who take the pics-- IIRC there have been some beatings, arrests, etc. The labor movement is not welcome in socialist China. Pretty ironic.
Or a $2.00 surcharge added to each and every supercheap garment, to be paid by, oh, Pavel & the Vatican to the factory people of China directly.
Don't start, or hell be back with that 'you don't know the power of the Dark Side' routine.
Also, I have had a bit of difficulty just a few times lately getting something of a quality I deem sufficient.
Yes, as Tanta noted, Talbots et.al. have gone downhill for professional clothes. I've gone to J.Crew, which doesn't totally solve the Chinese problem by any means. Saipan and Macao are not solutions. Lately I've been hitting the upscale consignment shops for 'professional' stuff like suits-- that works, and it goes with the recycling thing.
Br'er Dawg, do you want an apology or a medal for having no sense of moral obligations?
There may be no legal construct that suggests default is immoral, but there sure are social, political and relgious constructs that suggest otherwise.
"So the Chinese production has taken over retail shoes, clothes, small appliances, etc, etc. Even paint pigment."
You mean our pharmaceuticals?
"Even paint pigment."
You mean our pharmaceuticals? - Outsider
sportsfan says: Today, 12:05:12 PM PDT
Br'er Dawg, do you want an apology or a medal for having no sense of moral obligations?
I want people like you to realize there's a difference between my being able to see these events far in advance and my approving of them. This is by far not the first time you've made that conflation.
There may be no legal construct that suggests default is immoral, but there sure are social, political and relgious constructs that suggest otherwise.
I disagree. Default is an aspect of these agreements. Obey the terms of the default and you've done nothing wrong. Maybe you want to get all code of Hurambi here but I think you'll find that business is just business.
ot: the shooting at ICS is the third mass shooting this week...
Someone made a video of vacant Chinese skyscrapers
YouTube - Chinese Economy 2009
Br'er Dawg, do you want an apology or a medal for having no sense of moral obligations?
There may be no legal construct that suggests default is immoral, but there sure are social, political and relgious constructs that suggest otherwise.
One word: SUCKER!
What are you, a cop or a banker, that you think people should listen to that sort of rubbish?
Only born and bred dopes play fair "to prove a point" when the other guy came equipped to cheat. The point you're going to prove is that the cheating side cheats best when it cheats alone, and will frequently exhort you to fair play to preserve the advantage.
r
BONDS. 3.5 to 3.72 in the space of 24 hours. When bond trading makes a 6.3%+ move in a day, what does that tell you?
Oh, and another big issuance coming next week. Certainly we can get that yield below 3.5 on the 30 year. Remind me again what the risk-free rate of return for 30 years? Is it close to 6%?
Now, 10957 days in 30 years with annual return under 4%, but this IN ONE DAY? This is good, this is sustainable, this is true healing. Indubitably.
Gold down, Stocks strongly up, bonds scooping, and the G20 glee club are gladhanding and kissing each other. I feel my confidence returning swimmingly.
Dont forget when,
"The wicked king of parody
Is kissing all his enemies
On the seventh day
On the seventh week
The tyrant's voice has softened now
But just for one forgiving hour
Before the rise of his
Iron fist again"
Regression to the mean, regression to the oppression, regression to a depression.
r
Br'er Dawg, Sportsfan:
Since I've already bored the board with enough of my social views for the day, how about this old chestnut concerning the morality of discharging an obligation?
An old man was on his death bed. He wanted badly to take all his money with him. He called his priest, his doctor and his lawyer to his bedside. "Here's $30,000 cash to be held by each of you. I trust you to put this in my coffin when I die so I can take all my money with me." At the funeral, each man put an envelope in the coffin. Riding away in a limousine, the priest suddenly broke into tears and confessed that he had only put $20,000 into the envelope because he needed $10,000 for a new baptistery. "Well, since we're confiding in each other," said the doctor, "I only put $10,000 in the envelope because we needed a new machine at the hospital which cost $20,000." The lawyer was aghast. "I'm ashamed of both of you," he exclaimed. "I want it known that when I put my envelope in that coffin, it held my personal check for the full $30,000."<img src="http://www.funnyhumor.com/viewcount.php?type=joke&id=761&s=" border="0"/>
The Latest from Jesse:
Non-Farm Payrolls: Revisio ad Absurdum
GOld DOWN
Treasuries DOWN
Dollah Down
WTF ?
Br'er Dawg, do you want an apology or a medal for having no sense of moral obligations?
There may be no legal construct that suggests default is immoral, but there sure are social, political and relgious constructs that suggest otherwise.
You mean like Jubilee in the Judeo-Christian tradition or the edict against loaning money with interest in Islam? There are plenty of religious constructs that were put into place to prevent oppressive debt from building to the current point.
I won't argue that a person who honors their commitments should be respected. Nor will I argue that a person who is incapable of honoring them should be scourned. It's not that simple.
Well, Br'er Dawg, you've found someone of your ilk in Comrade Byzantine Ruins.
Now, with your point taken to its logical extreme, cheating is not immoral.
Defaults are merely a potential outcome of agreements. They are not morally equal to performance of agreements.
But your like-minded commenter takes it one step further: not only is business just business; now cheating is just business.
r
Sportsfan,
Well, not to be an a##h*l#, but isn't it?
Most contracts between businesses and consumers are written to be vastly in favor of the business. Many current business practices are intended to be deceptive; to trick the consumer into a financial trap. One small example -- universal default clauses in revolving credit agreements. Is that ethical? Is that fair?
So we're in a situation where business has, over the last 25 years, come to be dominted by sociopathic practices (if not sociopathic individuals). It's a world where a contact isn't a contract -- it's the starting point for the next round of negotiations.
So in a limited instance, a contract written to be broadly favorable to business turns out to be favorable to the consumer -- and so business asks that the consumer ignore his contractual RIGHTS in favor of behaving "ethically" or "honorably". Business hasn't done either of those in decades: it's just taken 25 years for ordinary people to understand that BofA (for example) isn't your friend. Busines is just business.
So if you borrow money from your sister in law, then I'd argue that you may have a ethical or honor-bound obligation to pay her back. But if a contract says that you can return the collateral in lieu of payment, you're just honoring the contract. Nothing more, nothing less.
It's way past time that we treat the unethical or dis-honorable ethically or honorably, just as it's way past time that we tolerate the intolerant.
ATM card, old story, but a good one.
We have all sorts of ways to rationalize immorality.
Again, there is no crime in being immoral; there's just no morality in being immoral.
@Evil
Thanks for the video, Evil. Hugh Hendry is kinda hot...
We live our momentary day glories.
Maintain composure through voodoo-doll philosophies.
These great and magnificent idols which will reward our intellectual toil, certainly they will.
The treasure of our false god enduring in cupped hands like the tide.
Harvesting sand in the haboob and winnowing our breadstuff in a whirlwind.
Soon to sleep on swords, scavenge for grass soup and grubs.
Nor will I argue that a person who is incapable of honoring them should be scourned.
Nor would I ever argue that. Impossibility is just that.
The question is whether a person who has the ability to honor a commitment can choose to dishonor that commitment out of financial self-interest and still claim to be a moral person.
That's like saying one is true to their marriage if they only had sex with others to satisfy the need of the moment.
<i>GOld DOWN
Treasuries DOWN
Dollah Down
WTF ?</i>
Also, SRS down.
We live in <b>casino capitalism</b>.
Seems that some clever hedge funds are building a screw-the-doomers trade.
Find temporary correlation, look for momentum and place bets. Get in and out before the other players notice they're losing.
If there is any financial regulation I'd like to see: I'd like to see hedge funds heavily regulated.
Anyone notice that Dylan Rattigan is off CNBC? He was the only one entertaining on that channel.
Anyways that whole Obama thing was probably just him asking for 2012 campaign contributions. Shake'em down BHO!
Ok, me personally, I'd always pay back my obligations unless I was starving.
But then, I've never gone hugely into debt in the first place. I've always aimed at paying debt off completely. but I think this is a change--the goal changed from paying the debt off completely, sooner or later, to the goal being to make next month's monthly payments with no thought that the debt would ever be paid off. When your goal is solely to make those monthly payments, encouraged thoroughly by credit card companies, et al.,
your entire mindset changes.
And at some point, honoring debt becomes like shooting yourself in the head. Should you have ever let yourself get to that point? No. Should you, having been fooled, with or without complicity, turn yourself into a slave? well, no I don't think so.
If you go too far with the not honoring debt thing, no one will offer to loan anybody any money at rates other than usurious.
<h2>"Ex-mortgage co. president guilty of defrauding HUD</h2>
<
p>The Associated Press
<
p>RIVERSIDE
The former president of an San Bernardino County mortgage company has been convicted of a scheme to defraud the government out of $23 million.
John Varner, who headed Mortgage One Corp. in Hesperia, faces 41 years in prison for filing false tax returns and defrauding private lenders and the federal Department of Housing and Urban Development.
Varner was convicted Wednesday in Riverside County Superior Court after a nearly four-week trial. He is the 15th defendant convicted in a wide-ranging investigation into fraud by Mortgage One and Riverside-based M-1 Capital Corp.
The defendants were accused of submitting fraudulent loan applications for unqualified borrowers and then selling them to banks.
Prosecutors say more than 1,000 of the 3,800 federally insured loans approved by the two companies went into foreclosure.
Published: Thursday, April 2, 2009 19:26 PDT"
Speaks for itself
The former president of an San Bernardino County mortgage company has been convicted of a scheme to defraud the government out of $23 million.
Piker.
"Hmmm, how about requiring pictures of all of the factories in china where the stuff it made--real pictures of the people and where they live, to be attached to your basic cheap t shirt.
I would agree, but it's dangerous for the people who take the pics-- IIRC there have been some beatings, arrests, etc. The labor movement is not welcome in socialist China. Pretty ironic. "
$2 a day beats no job. Anything that threatens the short term employment is hated by workers.
SRS holders getting punished.
r
I still remember the day when I was in grade-school, hanging out during summer vacation, and some of the older kids wanted to play kickball with some of us younger kids on the block. It was clear a few minutes into the game that the odds were hopeless for the younger kids, but most of the little kids couldn't see it, and the bigger kids wanted to feel powerful by winning. Seeing the trap we had fallen into, I clamored to mix up the teams. The older kids offered to tilt the rules in our favor instead, knowing that it wouldn't matter if our team only needed to get 2 outs, or even 1, when we had no chance of getting any outs whatsoever as the ball boomed over our heads with every pitch. But my little teammates just didn't get it. The system the big kids had set up was grossly unfair and the little kids were doomed. My inner Incredible Hulk took over, and I jumped on one of the bigger kids, sat on him, and pounded him in the face until he conceded my point.
Today, i see financially-ignorant people signing contracts which are grossly disadvantageous, written by financial experts who prey upon their ignorance. Then the contracts blow up and the honorable people continue to play by the rules to which they've agreed, even though it was the system that was bad. The ignorant masses sense that they are doomed, and the wolves-in-bankers'-clothing offer to tweak the rules a little here and there, but it is the whole system which is wrong. Unfortunately I've had my Hulk bred out of me in the past decades and cannot bring myself yet to grab a pitchfork. But if you ask me to condemn those who break out of an exploitative "contract" that they did not understand (in part because they trusted the regulators of the system to ensure such contracts would be fair), I cannot do it.
I stand with the Dawg. Honor is a more subtle concoction than simply "keeping one's word". Particularly when the dealings were not fair and honest.
Sportsfan,
Here is the nickel tour of where I am stuck on the morality of default issue:
Plain vanilla contract: default = not honoring your word, thus immoral.
Option contract (option-holder has right but not obligation to perform): default = acceptable under original terms of contract, thus not immoral.
I wonder if Dawg and Byz are arguing, inter alia, that these contracts contain sufficient terms at the outset to be considered option contracts.
SRS holders getting punished.---------------------------------------
Volatility generally drops after a major economic report (like , the unemployment report).
Come on guys, honor left the building a long time ago. It's now a matter of survival. Watching crooks complain about dishonorable borrowers really starts to grate though.
There goes the neighborhood!
r
Lawyerliz writes: "...the goal changed from paying the debt off completely, sooner or later, to the goal being to make next month's monthly payments with no thought that the debt would ever be paid off..."
Which is almost an exact definition of the difference between "hedge finance" and "speculative finance" (see e.g. Kindlebarger, Manias, Panics and Crashes). In hedge finance, the organization (it can be an individual or a business) has the cash flow to both pay interest and amortize the debt on a reasonable schedule. In speculative finance the cash flow can pay the interest but not amortize, and the debt must be rolled over. The third level is Ponzi finance, where the cash flow isn't sufficient even to pay the interest and increasing debt is required.
What we are seeing now is the crushing of those who were trapped in a speculative-finance mode when the supply of credit contracts and the debts can no longer be rolled over. Those who entered foolishly-but-honestly into this mode, with their eyes open, are still morally obligated to try to repay their debts. But those who were misled into such a debt trap (and here there's a grey area) have much less of a moral obligation. An example of the latter would be someone with no knowledge of finance who was told by a person in a position of financial authority that they "qualified" for a particular loan, when in fact the loan was toxic and would blow up 2-3 years later. Particularly when the financial authority falsified the paperwork and especially when they also failed to make it clear to the borrower that the terms of the loan were not fixed.
Honor is a more subtle concoction than simply "keeping one's word". Particularly when the dealings were not fair and honest.
Wisdom Speaker, I think a distinction can be made between those who refuse to be gamed by the system and those who are gaming the system. I did not see that in Dawg's comment.
Also TCA mentioned 'incapable of honoring" commitments. I could even take that from 'impossibility of performance' to 'impracticality of performance' in certain circumstances, especially when collateral damage is involved.
But let's not equate refusing to keep one's word with keeping one's word. There remains a world of difference between the two.
<i>
We already make most of the stuff we need: food, shelter, clothing. It's just that we don't want to pay 'high prices' so we get sucked into the Walmart mentality-- lots of cheap stuff, rather than a small amount of higher quality stuff. ...scone
</i>
Precisely. I think the biggest problem we face is that country is so divided. That makes it hard to break the grip of the special interest lobbies. Especially the banking industry. But we'll eventually break the banking monopolies or so i hope..
r
r will I argue that a person who is incapable of honoring them should be scourned.
Nor would I ever argue that. Impossibility is just that.
Impossible in a very non-emphatic way, sure. The more heroic the "impossible" gets, the more unconvincing it sounds to me.
The question is whether a person who has the ability to honor a commitment can choose to dishonor that commitment out of financial self-interest and still claim to be a moral person.
I have signed a lot of contracts. They have clauses to deal with inability to perform, as a rule. It is not "immoral", it is Section 4, Clauses 3-10.
Get a grip, it's a business deal. A loan to trade value for land. Deals go south man, it happens. Lenders have to do due diligence for a reason. They charge interest for a reason. they keep your credit score for a reason. That's because they're assuming risk. Yes, there's a compelling reason to pay them back. You'd ever like to be lent money again! They do talk among themselves so!
The lenders made the deals under false pretenses and under usurious terms. The assumption was they would all fail and Uncle Sugar would come in and bail it all out. Here we are, here the inevitable is happening, and no, I don't think it's a big deal to walk away from the deal. Any idiot at the bank should have seen that, and in fact, they did.
That's like saying one is true to their marriage if they only had sex with others to satisfy the need of the moment.
Or like saying that Allah won't send you to hell for eating the flesh of an unclean animal, if it is the only food available?
New Thread: Chrysler Pier Loans Still Haunting Banks
http://www.calculatedriskblog.com/2009/04/chrysler-pier-loans-still-haunting.html ( 0 comments ...You could be FIRST! )
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<div class="js-singleCommentText"> ATM Card, I don't know if they consider it an option contract.
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r
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<div style="float: left;">sportsfan says: Today, 12:21:06 PM PDT</div>
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<div style="float: left;">Well, Br'er Dawg, you've found someone of your ilk in Comrade Byzantine Ruins. </div>
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<div style="float: left;">Now, with your point taken to its logical extreme, cheating is not immoral. </div>
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<div style="float: left;">No. I've had this same duscussion many times but I must admit usually with those who can read. Your attempt to put words in my mouth is rejected. These option contracts to purchase are virtually airtight as to both obligations and consequences. Pretty much the only reason we are in such dire economic straights is because no one is enforcing those terms. </div>
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Thanks for the link, Black Star Ranch. The global financial system requires a global government to regulate it. The new world-wide government will have the power to overrule national laws, policies, and regulations. Members of the Well-Read Right Wing saw it coming. They were right.
Global shock doctrine.
Nothing wrong with a pitchfork poking a banker's ass.
I guess I should have specified that derivative volatility declines after a big report. For instance soybean option volatility declined several percent Tuesday even though futures prices rose over 5% that day. That price increase was the largest in over a month.
r
<
p style="">sportsfan says: Today, 12:21:06 PM PDT
<
p style="">
<
p style="">Well, Br'er Dawg, you've found someone of your ilk in Comrade Byzantine Ruins. Now, with your point taken to its logical extreme, cheating is not immoral.
<
p style="">
<
p style="">No. I've had this same duscussion many times but I must admit usually with those who can read. Your attempt to put words in my mouth is rejected. These option contracts to purchase are virtually airtight as to both obligations and consequences. Pretty much the only reason we are in such dire economic straights is because no one is enforcing those terms.
<div>
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Don't you like me as your second head, Dawg? =)
Second head? I thought that was Dryfly. S'Okay. There's so many slow tasty morsels these days none of the heads are going hungry.
"Come on guys, honor left the building a long time ago."
Honourable people buy everything with cash. Buying with credit is just another way of wanting something NOW when you don't have money for it.
Has anyone done a study of how unemployment rates effects housing foreclosures? The chart shows the Q4 numbers, with Prime and Sub Prime really accelerating in growth from the previous quarters. But Q1 has seen 2.1 million people lose their jobs, a significant increase over any previous quarter in this recession. Won't that significantly worsen foreclosure rates? (I remember reading a recent news article saying many Americans live one-to-two paychecks away from financial ruin.) And does anyone remember what the banks were using as their baselines for foreclosures? Looking at the chart, and the Q4 growth rates for Prime and Sub Prime, it would be my guess that the banks have underestimated the foreclosure rates, but anyone who can support or correct me with some info, please do. TIA.
r
Get a grip, it's a business deal.
Byz, I've been in a lot of business deals, authored many of those clauses and both prosecuted and defended defaults.
The lenders made the deals under false pretenses and under usurious terms. The assumption was they would all fail and Uncle Sugar would come in and bail it all out. Here we are, here the inevitable is happening, and no, I don't think it's a big deal to walk away from the deal.
I have actually advised people to walk away from those properties, specifically where two or five year resets were involved and the terms were onerous. But then I don't pretend to be a moral advisor to anyone.
The case Dawg wants to make is that a person has a reasonable mortgage, but property values in general have declined and so he should just walk away . . . or buy the house across the street for $200k less than he owes, move and default. I don't see those situations as equivalents.
That's especially true in a non-recourse state like California.
When we move farther out to seller financing on vacant land for speculative purposes, then default is factored in with the seller-financing, the non-recourse nature of the loan serves a social goal and there is nothing immoral about deeding the property back.
But let's keep in mind that blanket statements rarely cover every situation with equal force.
Ed S., thanks for the distinction in types of loans.
I've never said breaching a contract is a crime. It isn't.
The person doing the breaching just can't call himself moral for having done that.
I guess "financially astute," would work, but not "moral." There's nothing moral about it.
I guess I should have specified that derivative volatility declines after a big report. For instance soybean option volatility declined several percent Tuesday even though futures prices rose over 5% that day. That price increase was the largest in over a month.
Let's make an example of what we'll call "positive default". We'll take example man, Virtual Dawgbot. He becomes entranced by the house across the street in a rising RE market. Perhaps it is the place in town farthest from public transit, or perhaps the roof is shaped like a giant surf board. Whatever, VDB is willing to pay economic rent to live there.
He concludes his deal for the surfboard cabana with no bus service. He bids farwell to his Virtual Dawgbot Lair, and mails the keys to the servicer with a note. We grant that the servicer is not such an absentee landlord that it can appreciate a forfeiture of equity in a rising, liquid RE market on a house that, by the nature of the example, is bound to be snapped up quickly.
Now by mailing the bank these keys which essentially have all his equity torn up attached and also the future proceeds from the sale, you are telling me the Virtual Dawgbot did a bad thing? Because that is what I perceive you are outlining.
Name says it all. Thanks Byz.
Test, Test
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