Brain. Cash only, please.

[elfs]

Jim Manzi explains the crisis.

I strongly recommend that you read this article, because it explains what happened to our economic system. Manzi doesn't emphasize enough just how much "leverage" there was in the system; when he talks about fourth parties buying up the rights to the fragmented mortgages sold by third-party bundlers, and the fifth parties buying up fourth party assets, and so on, he doesn't mention important confounding factors: the ability of brokers to create leverages as large as a hundred to one, the failure of regulators to assess this problem as it was happening, and the rating agencies' willingness to mark bundleds of subprime mortgages as AAA. When you buy a product with the expectation that it can be collateral on a hundred times as much credit paper, and the next guy does that on the paper you sell, and the next guy, a hundred-to-one leverage ration become a million-to-one.

Last week, Standard & Poors let slip that at the weekly meeting of their soverign rating committee, the US Treasury's AAA rating came up. If the US loses its AAA rating, then any incentive for other nations to buy our bonds dries up overnight and the only thing we have for servicing our debt is our internal resources: you and me. Right now the debt is $47,000 per person. Are you ready to start paying the interest on a $47,000 loan? (And don't forget, if you have kids, I hope they've got jobs, because that's $47,000 per person, working age or not.)

What this issue doesn't answer is why I and my family, who have a prudent ordinary mortgage, should have to pay either for the bad mortgages of people who bought irresponsibly, or for the failures of financial institutions to properly regulate themselves, or hand over $700,000,000, as much as the combined annual budgets of the Departments of Defense, Education and Health and Human Services, of my money to Hank Paulson to do whatever he wants: "Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency." (no, really, that's the language in Paulson's proposed bill).

Let it all fail. If we want to keep government out of business, now is the time to do it.

(And yes, I deliberately put on Warren Zevon to write this.)

Comments

[ionotter.livejournal.com]

Don't forget, a great deal of these loans are what the sellers and brokers called "nigger loans". I'm sure you can figure out the racist logic in that name, but just like any other financial issue involving poor people, the brokers were strongly encouraged to use any means necessary to sell the house.

It's not so much that a few million people bought a home with the intent to flip it? 99% of those people were told by "professionals" that they could afford it.

My landlord is one of those people. He bought the house I'm staying in with one of those loans, and now I'm taking care of the place. I've looked through the documentation on the loan and all the paperwork, and I've found sub-clause after sub-clause after sub-clause that makes no sense whatsoever to me, but probably makes a whole lot of sense to a criminal wearing a suit and tie.

Yes, we can lay a portion of the blame on people who jumped into these loans.

But lets not forget, these people were coddled, pampered and stroked into trusting "the professionals". They brought in their pay stubs, records and other things and "did the math" with them. And on paper, it really, really, really DID look like these people would finally...FINALLY have a slice of the American Pie that their parents had.

Don't forget that, hon.

My parents bug me every time I call, asking when I'm going to settle down with a "real job", get a boyfriend and buy a house of my own. That kind of pressure only quintuples when you've got kids griping about moving to another apartment. People don't want to move, they want roots.

And these people trusted the professionals to at least do the legal thing, if not necessarily the right thing.

Which is why we're all here, now.

So don't blame the buyer. They're only 10% to blame. Blame the movers, shakers and thieves behind the curtains.

[elfs.livejournal.com]

On the other hand, I can see the argument that a lot of people bought with the anticipation that they would be able to refi with a bigger equity when their home value improved, or they thought they'd get a raise, or a better job, and be able to keep up with the payments. I know at least one family that bought outside their means because they wanted to move into a district with better schooling. Housing prices in districts with good school accelerated more than the average.

I have no doubt that crooked loans are part of the problem. (Anyone who thinks that Fannie Mae and Freddie Mac were "forced by policy" to giving out bad loans needs his head examined.) But so too were consumers who thought that the rise would never end, and they'd be able to ride the curve forever.

[stephaniesmom.livejournal.com]

have no doubt that crooked loans are part of the problem. (Anyone who thinks that Fannie Mae and Freddie Mac were "forced by policy" to giving out bad loans needs his head examined.) But so too were consumers who thought that the rise would never end, and they'd be able to ride the curve forever.

Thus the lack of Common Sense these days. Nothing goes forever in this world. "What goes up, must come down" isn't just a cliched proverb. I've seen so much of the younger generation of parents thinking that they needed to buy expensive houses, and then turn around and work 2 or more jobs each because that's what they "had" to do to give their kids the best in life.

Nevermind the bad policies, these idiots supporting the crap have a hand in it too. We simply moved a little further out and bought something we could afford!

[doodlesthegreat.livejournal.com]

It gets better:

http://www.bloomberg.com/apps/news?pid=20601087&sid=aoDmO_d0IJSU&refer=home

The investment bank no longer exists, thanks to last week's meltdown.

[antonia-tiger.livejournal.com]

The UK spent GBP 20.5E9 on WW2, less than GBP 500 per person.

The US spent about $2200 per person. I'm not sure of the exchange rate at the time, nor how lend-lease is figured.

Inflation can be argued about--those figures are 1945 value--but the usual converion pute the US expenditure on WW2 at about $38000 per person at current dollars.

Compared to the actual war, the Marshall Plan was small change.

Anyway, $47,000 per person from about twice as many people: these professional bankers have cost the USA about two and half times the cost of WW2.

(The USA had 14.3% inflation in 1947)

On the other hand, the Real per-capita GDP has increased a lot (though it didn't really start until the 1960s), and WW2 has moved from a three-year bill to barely more than one year.

How much of that extra money is from the banking industry which has just collapsed, I dread to think.

[gromm.livejournal.com]

Don't forget: roughly 50% of the population is "unemployable": too old, too young, or infirm. So it's not just your kids you have to pay for, it's your parents too!