Where is all the outrage???

blackredyellow

mammasan wrote:

I'm actually a graphic designers and wouldn't know anything about financing if it came up and gave me a lap dance. What I do know, through research is some of the basic ideas a borrower should know before even applying for a loan. Before I even bought my home, I checked my credit score to make sure that I had a good enough credit history and score to get a good fixed rate loan. I sat down, with my then wife, to go over our finances to see what we could afford to pay monthly. It doesn't take a genius to do these thing prior to buying a home.

Exactly... no one is forcing you to buy a house. You are choosing to make the largest financial decision of your life, you should at least be responsible enough to do a little bit of research into the process. And if you don't, you shouldn't be rewarded because of your negligence or ignorance.

catch22

mammasan wrote:

I'm actually a graphic designers and wouldn't know anything about financing if it came up and gave me a lap dance. What I do know, through research is some of the basic ideas a borrower should know before even applying for a loan. Before I even bought my home, I checked my credit score to make sure that I had a good enough credit history and score to get a good fixed rate loan. I sat down, with my then wife, to go over our finances to see what we could afford to pay monthly. It doesn't take a genius to do these thing prior to buying a home.

i agree those are good ideas. but plenty of people don't have the tools for even these most basic financial processes. our schools teach people to be quiet, listen to the authority, and memorize. they teach nothing about how to learn or think. there are no practical skills. and i suspect more people are duped by greedy lenders than are simply recklessly indifferent in trying to live beyond their means.

catch22

blackredyellow wrote:

Exactly... no one is forcing you to buy a house. You are choosing to make the largest financial decision of your life, you should at least be responsible enough to do a little bit of research into the process. And if you don't, you shouldn't be rewarded because of your negligence or ignorance.

people don't know HOW to do this kind of research. it's a skill that isn't taught and should be.

blondieblue227

I took personal finance in high school. Balance check book, how to know how much money you’ll get off in a sale, etc.

Get this,
It was an extra curricular class. Not even mandatory.
Ha!

blackredyellow

catch22 wrote:

...and i suspect more people are duped by greedy lenders than are simply recklessly indifferent in trying to live beyond their means.

I'll disagree... Just look at the people who you work with or go to school with on a daily basis. I see plenty of people everyday who buy expensive cars that probably don't fit in their budget, or brag about the new flat-screen TV they just charged at best buy, or the new coach pocketbook that they paid $500 for, etc.... I manage a box office at an arena, and you'd be amazed at the number of people who have cards decline when trying to buy concert tickets. And instead of thinking that maybe they can't afford to go to a show, they whip out another card, and say "try this one".

People have become so materialistic and expect such instant gratification, that they overextend themselves everyday.

catch22 wrote:

people don't know HOW to do this kind of research. it's a skill that isn't taught and should be.

But should the burden be put on our economy with bailouts if buyers go ahead enter contracts that they don't understand?

DriftingByTheStorm

blackredyellow wrote:

Exactly... no one is forcing you to buy a house. You are choosing to make the largest financial decision of your life, you should at least be responsible enough to do a little bit of research into the process. And if you don't, you shouldn't be rewarded because of your negligence or ignorance.

i agree.
i think the issue here is that the BANKS should most certainly be aware of the risks involved and are VERY CAPABLE of assessing a buyers legitimate purchasing power.

And THAT is where i have a HUGE problem,
because, while the buyer most definately SHOULD have known his financial capacity, the bank DID know absolutely his capacity (or at least COULD have made that assessment, if it had not chose to WAIVE that ability with a "liars loan")

BECAUSE IT IS THE BANKS GETTING BAILED OUT HERE, and by-and-large NOT the consumer\buyer.

Sure "Project Hope", or whatever the fuck it is called, is working to refinance terms between lenders and QUALIFIED borrowers in distress, but more than anything that only serves self-interest on the part of the banks, who get to keep shity loans on their books at SOME sort of profit, rather than writing them off as a total loss.

But the REAL BAIL OUT is geared SOLEY at the banks,
and THAT is my BIG BIG BIG BEEF.

WHY DO YOU THINK THEY TOOK SUCH ASTRONOMICAL "RISK" IN LENDING TO THESE FOOLS?

Because they KNEW there WAS NO RISK because Big Government ALWAYS bails out Big Banks. ALWAYS.

catch22

blackredyellow wrote:

I'll disagree... Just look at the people who you work with or go to school with on a daily basis. I see plenty of people everyday who buy expensive cars that probably don't fit in their budget, or brag about the new flat-screen TV they just charged at best buy, or the new coach pocketbook that they paid $500 for, etc....

People have become so materialistic and expect such instant gratification, that they overextend themselves everyday.

i agree this society is overly materialistic and instant gratification seeking, but i don't know anyone living like this. they just don't understand this stuff and are intimidated. i get asked the most basic questions by friends about legal things, because nobody knows or understands it and even one year of law school puts me up on them. i see the same thing in finance. i don't know anyone buying flat screen tv's they can't afford, but i know plenty who have been screwed because they relied on the word of the phone salesmen or credit card offerer because that person knew more and was able to trade on their superior knowledge and expertise to allay the friend's doubts.

not that the friends shouldn't be held responsible for doing it. i'm just saying that it's not some reckless 'keeping up with the jones' thing for most of them. it's their willingness to trust the expert because they are at a disadvantage in terms of knowledge. consumers need more information. they need better education so people feel comfortable asking questions and doing research to know where they stand. and we need to lay some serious regulation and consequences on predatory lenders.

both sides of this problem need to be addressed. not just the one.

catch22

blackredyellow wrote:

But should the burden be put on our economy with bailouts if buyers go ahead enter contracts that they don't understand?

no. im' not on board with the bailout. i'm just saying the blame for most of this falls on predatory lenders looking for their quick score and that we need to keep these assholes in line.

case in point, the wamu guy mentioned earlier. he promotes a culture of prowling for the subprime mortgages. he endangers wamu by these practices. he encourages the banks to saddle people with mortgages they cannot afford and that the banks KNEW they couldn't afford. his policies destroy those people's lives and finances. it wrecks wamu's financial stability and will probably lead to a lot of firings and cutbacks. but in the short term, profits soared, stockholders got rich as hell, and when the shit hit they fan, they still made a fortune. he walks away with a stern frown and a multi-million dollar retirement package. the feds will guarantee those loans, but the loan recipients are still fucked and so are many mid- and low-level wamu employees who will be cut to maintain profits so the stockholders don't see any dip in their income. that's what the fed money goes to... the people at the top never feel any of this. thus, there is no incentive to play nice. they can take all the risks they want with no fear of consequence.

that's actually why i oppose the bail out. i want the investors and execs to burn for this. but they won't. they won't even be inconvenienced. that's fucked. those people at the bottom are going down no matter what. those at the top should lose millions and feel the hurt too.

blondieblue227

catch22 wrote:

i agree this society is overly materialistic and instant gratification seeking, but i don't know anyone living like this. they just don't understand this stuff and are intimidated.

i do.

and it's not intimdation...
it's : 'ew, nobody's stopping me! i can have this this and this. who cares about the future?'

Piper At The Gates

It all proves that great old American adage: You can get a lot more money with a briefcase than with a gun.

freindlyfired

Please lets not confuse the issue here.. borrowers borrowing more than they can afford has absolutley nothing to due with lenders lending on "market value" and suffering balance sheet losses on reduction of value.

Its not about people not being able to pay their mortgages, its about Fannie&Freddie holding receivables at 5 on properties worth 2. In the end they (F&F) made bad investments becasue they cant foreclose on the properties, sell them and payoff the receivable and recoup their investment. Plan and simple, any other explanation is B/S.

If the borrower cant pay the monthly mortgatge then they can be foreclosed on and they are out in the cold. If the lenders made bad investments (lending money on inflated FMV of property) then they are out in the cold, scratch that, then they run to the govenment with there lobbyist and promise to take care of the incumbents.

Absolutlely nothing has been done for the Shmoe that purchased the house and cant pay for it, and nothing should be. There are limited cases where the mortgages were reworked but it only applied to less than ten percent of the total.

John Budge

freindlyfired wrote:

Our government is bailing out Freddie and Fannie in a free market capitalistic economy.

Not newsworthy enough?

Where are the conservatives that call for limited govenmental involvement, and deregulation?

Where are the pro lifers that worry about how much money the government spends on helping teens get abortions?

Where are the people that cry about free lunches, handouts, government sponsored social programs like welfare etc...?

Where are the free market economists that place the responsibility on the the buyers and sellers and the choices they make?

Where are all the liberals that call for our government to help out the little guy during tough times?

I could go on and on...

I don't know about the others, but the cons are too busy fawning over their beauty queen "maverick".

catch22

Piper At The Gates wrote:

It all proves that great old American adage: You can get a lot more money with a briefcase than with a gun.

very true. and a lot less jailtime. they look after their own.

freindlyfired

Michael Hudson is a former Wall Street economist specializing in the balance of payments and real estate at the Chase Manhattan Bank (now JP Morgan Chase & Co.), Arthur Anderson, and later at the Hudson Institute (no relation). In 1990 he helped established the world’s first sovereign debt fund for Scudder Stevens & Clark. Dr. Hudson was Dennis Kucinich’s Chief Economic Advisor in the recent Democratic primary presidential campaign, and has advised the U.S., Canadian, Mexican and Latvian governments, as well as the United Nations Institute for Training and Research (UNITAR). A Distinguished Research Professor at University of Missouri, Kansas City (UMKC), he is the author of many books, including Super Imperialism: The Economic Strategy of American Empire (new ed., Pluto Press, 2002.

Mike Whitney: On Friday afternoon the government announced plans to place the two mortgage giants, Fannie Mae and Freddie Mac, under “conservatorship.” Shareholders will be virtually wiped out (their stock already had plunged by over 90 per cent) but the US Treasury will step in to protect the companies’ debt. To some extent it also will protect their preferred shares, which Morgan-Chase have marked down only by half.

This seems to be the most sweeping government intervention into the financial markets in American history. If these two companies are nationalized, it will add $5.3 trillion dollars to the nation's balance sheet. So my first question is, why is the Treasury bailing out bondholders and other investors in their mortgage IOUs? What is the public interest in all this?

Hudson: The Treasury emphasized that it was under a Sunday afternoon deadline to finalize the takeover details before the Asian markets opened for trading. This concern reflects the balance-of-payments and hence military dimension to the bailout. The central banks of China, Japan and Korea are major holders of these securities, precisely because of the large size of Fannie Mae and Freddie Mac – their $5.3 trillion in mortgage-backed debt that you mention, and the $11 trillion overall U.S. mortgage market.

When you look at the balance sheet of U.S. assets available for foreign central banks to buy with the $2.5 to $3.5 trillion of surplus dollars they hold, real estate is the only asset category large enough to absorb the balance-of-payments outflows that U.S. military spending, foreign trade and investment-capital flight are throwing off. When the U.S. military spends money abroad to fight the New Cold War, these dollars are recycled increasingly into U.S. mortgage-backed securities, because there is no other market large enough to absorb the sums involved. Remember, we do not permit foreigners – especially Asians – to buy high-tech, “national security” or key infrastructure. The government would prefer to see them buy harmless real estate trophies such as Rockefeller Center, or minority shares in banks with negative equity such as Citibank shares sold to the Saudis and Bahrainis.

But there is a limit on how nakedly the U.S. Government can exploit foreign central banks. It does need to keep dollar recycling going, in order to prevent a sharp dollar depreciation. The Treasury therefore has given informal assurances to foreign governments that they will guarantee at least the dollar value of the money their central banks are recycling. (These governments still will lose as the dollar plunges against hard currencies – just about every currency except the dollar these days.) A failure to provide investment guarantees to foreigners would thwart the continuation of U.S. overseas military spending! And once foreigners are bailed out, the Treasury has to bail out domestic American investors as well, simply for political reasons.

Fannie and Freddie have been loading up on risky mortgages for ages, under-stating the risks largely to increase their stock price so that their CEOs can pay themselves tens of millions of dollars in salary and stock options. Now they are essentially insolvent, as the principal itself is in question. There was widespread criticism of this year after year after year. Why was nothing done?

Hudson: Fannie and Freddie were notorious for their heavy Washington lobbying. They bought the support of Congressmen and Senators who managed to get onto the financial oversight committees so that they would be in a position to collect campaign financing from Wall Street that wanted to make sure that no real regulation would take place.

On the broadest level, Treasury Secretary Paulson has said that these companies are being taken over in order to reflate the real estate market. Fannie and Freddie were almost single-handedly supporting the junk mortgage market that was making Wall Street rich.

The CEOs claimed to pay themselves for “innovation.” In today’s Orwellian vocabulary financial “innovation” means the creation of special rent-extracting privilege. The privilege was being able to get the proverbial “free ride” (that is, economic rent) by borrowing at low-interest government rates to buy and repackage mortgages to sell at a high-interest markup. Their “innovation” lies in the ambiguity that enabled them to pose as public-sector borrowers when they wanted to borrow at low rates, and private-sector arbitrageurs when they wanted to get a rake-off from higher margins.

The government’s auditors are now finding out that their other innovation was to cook the accounting books, Enron-style. As mortgage arrears and defaults mounted up, Fannie and Freddie did not mark down their mortgage holdings to realistic prices. They said they would do this in a year or so – by 2009, after the Bush Administration’s deregulators have left office. The idea was to blame it all on Obama when they finally failed.

But at the deepest level of all, the “innovation” that created a rent-extracting loophole was the deception that making more and more bad-mortgage loans could continue for a prolonged period of time. The reality is that no exponential rise in debt ever has been able to be paid for more than a few years, because no economy ever has been able to produce a surplus fast enough to keep pace with the “magic of compound interest.” That phrase is itself a synonym for the exponential growth of debt.

read the rest here:

http://www.counterpunch.org/

know1

catch22 wrote:

i agree those are good ideas. but plenty of people don't have the tools for even these most basic financial processes. our schools teach people to be quiet, listen to the authority, and memorize. they teach nothing about how to learn or think. there are no practical skills. and i suspect more people are duped by greedy lenders than are simply recklessly indifferent in trying to live beyond their means.

How did you survive all the brainwashing, then?

It makes me sick when people blame things on "society" teaching them something. People can take responsibility for what they know and what their own individual opinions are.

catch22

know1 wrote:

How did you survive all the brainwashing, then?

It makes me sick when people blame things on "society" teaching them something. People can take responsibility for what they know and what their own individual opinions are.

did i say brainwashing? i don't think i did. i said i think our education system does a terrible job of preparing people for real life concerns. we learn a boatload of irrelevant information and very little that is practical. home economics is practically a synonym for "joke" in our high school parlance.

i "survived" because i had two parents to teach me these things. they had the money to give me weekly allowance to be placed in a savings account. they were able to set up starters accounts with a local bank. they taught me how to handle finances, how to save for things, what interest was, what happened if i overdrew, etc. all of this came from my parents. even WITH all that and even having taken classes at law school dealing with property, this stuff is still confusing and a struggle to wrap one's head around at times. some people (such as yourself) really get off on financial planning, and that's cool. but it doesn't come so naturally to everyone.

some children do not have two parents, or do not have enough money to provide this training to their children, or never received this training themselves. i think rather than having these kids memorize hamurabi's code of laws from 10,000 years ago in sumeria (i'm pretty sure 2 of those are wrong), maybe we should teach them things like managing finances, what an interest rate is, how to get a mortgage and what it means, how credit is determined.

i'm not saying people should not be responsible, but i think we also need to give people the tools to exercise good judgment and resist those who would take advantage of them. that's all.