patrick.net

People keep trying to drag some puritanical MORALS into it.

The bank loans you money to buy a house. They have the house as collateral. You stop paying, they keep the house. It's a BUSINESS DEAL in which the responsibilities of each party and their results are outlined. That is all.

Same with any other debts. As for example the CREDIT CARDS in original post. The financing entity has made an estimate of your likelihood to repay (or not) and assigned interest rates, penalties, fees etc. based on the simple fact maybe you won't. Why you think they jack up rates to 29% and demand fees at every turn, because they are looking for their angle to extract maximum blood from host.

Thus I find it laughable when people side with the BANKSTERS on moral grounds. Morality doesn't enter into it, they apply numbers and risk analysis. The attempt to lever some responsibility for you to eat Mac & Cheese and live like a pauper to keep up payments you can't really afford is just a veneer for them. It sometimes gets them the results they want, so they will use it. But how many banksters going around offering to pre-emptively cut payments or balance for people that clearly need it? None. Morals only apply when it benefits THEM. For something that won't benefit them, then they point to contract law. Contract lets them put people on the street and morality be damned.

Vicente says

The bank loans you money to buy a house. They have the house as collateral. You stop paying, they keep the house. It’s a BUSINESS DEAL in which the responsibilities of each party and their results are outlined. That is all.

Bingo, give Vincent the SMITR prize.

Houses are worth what ever the deal will yield.
That fundamental flaw will always keep houses over priced. Until they abandon that practice, there will continue to be neighborhoods, with 45K investor cash only deals, right next door to 435K listing.

Both only equally opposing far ends of the scale no doubt.

Vicente says

the financing entity has made an estimate of your likelihood to repay (or not) and assigned interest rates, penalties, fees etc. based on the simple fact maybe you won’t.

Vicente - Awesome ...... that is what I am trying to say but couldn't find the right words. The banks calculate the risk and charge accordingly. Part of their business model is that some people won't pay. They know this ... yes, hence the 29% interest rates. Some poor fool is paying this ....

Credit used to be a lot more importaint (valuable) than it is today. When people couldn't pay they were RUINED, not insulated from the reality of it. That's because money used to be real, not the crap we throw around. Wait until money isn't really money anymore.

I applaud the original poster for being true to himself. Congrats on your haul.

Given the actions of this administration and the fed, I believe that only drastic actions of people like MacombMichgan can put a stop to the outrageous lending practices of the big banks on Wall Street. Not only do these lending practices produce debt slavery, but the effects on the whole economy, house prices, costs of goods and services, etc. are disproportionately affected with respect to the base incomes of the average citizen.

MacombMichgan, you are my hero.

Hey,

Seems the poster played by the rules. If you were in his situation what would you do? Take advantage of what the law offered you. Hate the game, not the player.

Bravo, MM! I like your post. I am especially impressed that you returned the security deposit and notified your tenants. The haters on this forum seem to view the banksters (i.e. financial crooks) on the same level that you and I see your renters. The banksters get bailed out by Uncle Ben. Have you seen the latest post on Mish's site? I can't wait to see if MSM picks up the Senator's bashing of Bernanke.

Looks like MacombMichigan committed bankruptcy fraud. Did he dsisclose his interest in the Mexico property in the documents filed with the bankruptcy court?

Actually, you 'stuck' it to your fellow American taxpayer.. Thanks!

Macomb acted in his financial best interest. Shouldn't we expect participants to use the system as it is designed to further their own selfish interests? Isn't that what banks, Senators, lenders, lawyers ... well, everyone does? Show me the saints. Those who would appyling labels, like "deadbeat" and "dumbshit", are applying an expectation that people will not act in their own self-interests and implying that they would act differently in the same situation. I commend their courage.

Macomb, thanks for the post.

Interesting case study. Yes, it is very easy to game the system on all levels, from credit card fraud all the way to the trillion dollar heist Wall Street pulled of. But of course nobody did anything illegal, that's the main problem. As long as it is legal to pull stuff like that you'd be a sucker not to take advantage of the situation. Personally I advocate a return to debtor's prison. For deadbeat CEOs, go after their personal belongings, their house, their Porsche, their Yacht, etc. Only iron fisted punishment can restore any fiscal integrity to this society. But as long as stealing is perfectly legal it will be impossible to change behavior. Actually you'd be a sucker not to do it.

Husan Furst says

Looks like MacombMichigan committed bankruptcy fraud. Did he dsisclose his interest in the Mexico property in the documents filed with the bankruptcy court?

Pretty much. I like how he blames the credit card companies for raising his interest rates. My guess is he was using revolving balances to pay off his cards, and more than once rolled balances into a mortgage. He's a small-time leech riding the bubble. I think it's fine. I only wish I had the guts to basically shit on my self-respect and lie to myself by taking on more debt than I could afford. I wish I had the strength to do what I know is wrong, all in the pursuit to get whatever I want. I wish I couldn't do 3rd grade math. But I'm not that stupid, or vain, or jealous. Unfortunate for me.

Paint yourself into a corner and then just "oopsie, I can't pay, its your fault". Why not? When the most powerfull/respected elements of our society are committing the exact same fraud (bankruptcy, pension default, common stock dillution, ect) in broad daylight and getting away with it, the time for the serfs to rebell is upon us. We should all thank the original poster for lighting the way.

Hi Macomb,

I for one felt really happy for how things worked out for you. I know too many bankers who have had their mansions, jets, copters an yachts subsidized by the average taxpayer like me. If everyone in America jut stopped paying their debs then we could re-establish a new better banking system and drive those dishonest taxpayer supported bankers out of business

Husan Furst says

Looks like MacombMichigan committed bankruptcy fraud

No crime or fraud was committed. Everything was disclosed according to the time frame required by law. My contract with the banks and the credit card companies is very clear - I don’t pay, they take back the condo (they did not lose money on the deal). The credit card companies gave out unsecured loans. This is their business model that they make (made) billions on, now their money is made from fees. A certain percentage of people will fall on hard times and will not be able to pay – again this is what their business is and the risk of this is figured into their business plan.
Maybe it is important to point out. All payments were being made and on time until my work hours were reduced. When I was one day late on a payment they raised the rates to 29% - soon the others followed with the rate increase. The minimum payments went through the roof and I could not pay. This was the beginning of the end. I was an unsophisticated investor, wheeler dealer trying to play like the big boys – I lost.

Awww, you're a victim? Poor guy.

The reason that credit card interest rates shot thru the roof is because of savvy investors such as yourself. Go ahead and pat yourself on the back all that you want, but remember that your post is self-congratulatory about how you screwed the system.

I'll bet your mother is so proud of you.

Well done, sir.

Only when smart individuals start playing the game to their advantage will the silly Greenspan/Bernanke/Wall Street easy money shenanigans stop.

Hey, I mean it about being polite.

You can say you don't approve or don't like the guy, but don't just call him names. I'll delete some of the insulting comments.

gittinsm says

Actually, you ’stuck’ it to your fellow American taxpayer.. Thanks!

I disagree. The credit card companies are professional lenders. They are corporations without souls or emotions, not individuals. They should not cry when unsecured debt gets defaulted on, and they should definitely not get any bailout from our taxes. If interest rates go up because loans are being defaulted on, good. We need higher interest rates.

The bigger crime is corporate control of government, privatizing profits and socializing risk.

Don't hate the player, hate the game.

I personally would never do something like this myself. I live a relatively modest existence and don't buy things I can't afford. (Which unfortunately has meant not buying a house.)

But the way our system works, this type of behavior is not only possible but rewarded.

I do think it's bad form to brag about these types of financial dealings in a public forum such as this (where your identity is protected.) But let's not get too righteous about it. Ultimately, if you can make the decisions MacombMichigan did and live with them, more power to you.

Nomograph says

BTW, this story clearly illustrates that the CRA did NOT cause the housing crash. People like MM caused the housing crash.
It’s unfortunate that there are so many bad actors like MM that can’t govern themselves. This is EXACTLY what leads to more government regulation to prevent these people from stealing. Believe it or not, there are millions of people like MM that require a nanny state government to protect them from themselves. The only alternative is to throw them in jail. So unfortunate.

I think it's a bit short-sighted to blame MM for the housing crash. For every one of him, there are 100s of people who have no idea what the terms of their mortgage are. Banks in this country are set up to screw people. It's their business model. Only the smartest of us are able to see through it and avoid the danger. People like donald trump go out and borrow huge amounts of money for a business venture. He does this with 10 different ventures at the same time. 70% of them fail. Those 7 corporations file bankruptcy, and the other 3 just keep on making him richer. Everyone sees this as perfectly ok and business as usual. The business world operates on a different ethical and moral standard. To them, there's nothing wrong or bad about using the terms of any contract to screw your creditors. It's just business. The banks issuing mortgages and credit card debt to consumers operate with this attitude. But us consumers are expected to uphold our end of the bargain! We promised! It would be just wrong to not repay the mortgage! Why should the consumer operate with a different set of rules? They're happily excepting an unlevel playing field. If corporations behaved the way consumers are expected to behave, we wouldn't have this financial crisis. So I have no problem at all with consumers who use the rules of the contracts they signed, and the law, to improve their situation. Every time I hear "they shouldn't have signed up for a mortgage they couldn't afford", I hear, "the bank shouldn't have written a mortgage to someone who couldn't afford to repay it." The bank was in a far better position to determine whether a person is able to repay. That's why we (are supposed to) have a mortgage qualification process.

brdnrohan says

I do think it’s bad form to brag

You are correct, and I am finding myself back peddling to defend myself. The original post was written with cynicism and sarcasm. It is not something that I am proud of but felt the story should be told.

gittinsm says

Actually, you ’stuck’ it to your fellow American taxpayer.. Thanks!

The government and the banks controlling it stuck it to the taxpayer. Any bank that writes crazy mortgages and hands credit cards out like candy deserves to go under. Wall Street should be a wasteland right now. Smaller, smarter banks would be growing to fill the crater they left. Instead, fresh money and taxes were delivered to wall street by helicopter.

how much tax do you owe on all that forgiven debt?

I hate the bastards as much as anyone but 2 wrongs dont make a right

Hi Macomb,

I for one felt really happy for how things worked out for you. I know too many bankers who have had their mansions, jets, copters an yachts subsidized by the average taxpayer like me. If everyone in America jut stopped paying their debs then we could re-establish a new better banking system and drive those dishonest taxpayer supported bankers out of business

Don't you have taxes to pay on all that forgiven debt?

Bravo!! You are definitely one of many in this Great Country we call America. People the Government
and the Banks have let all of us Down the toilet because the stimulus was only a bailout for the Banks!

Banks were Bailed out and are now sticking it to the American Consumer by creating the illusion that
they are going to help us ? They are not!! Ok the only solution would then be to write down all current Mortgages to the current Market Value and Modify the loans so the whole Mess could be cleaned up!! The Banks already wrote down the Value of all their current Assets ie ( Bad Loans )that was what the Bailout was for!! Yet they have not and probably will not pass those write downs on to the consumer because they want to devalue the Assets (ie loans) but not Modify loans at any reduction of principle only interest. So why should I keep my Home which is currently under water lets say I owe 500k but the Value is only 300K. The bank is only offering to Modify at the 500k and will not reduce principle because they want to strap you with a long term note in the hopes that the value will come back someday??? The only option is to Short Sale the property and go Buy A Foreclosure which they are selling at the Current Market Value ie 300k or less. I have more... got to go call my Bank and start the Short Sale.....

The banks most definitely calculate in exactly how many people aren't going to pay. They also calculate in how many they can say "you have to pay us!" and will actually do it. They calculate in lots of factors. If they completely fail, they can close up shop or they can talk to the government and say here are the options we close up shop and destroy the American economy or you help us out. The government weighed it's options and said it's too expensive not to prop you up.

The home owner might not have to legally pay back the loan, but it's a business decision for them as well. How much will this cost to walk away from? How much of their time will be spent trying to get rid of debt collectors? How much will it cost to get a lawyer to sort through everything? For most, it's not worth it, and just the banks letting it be known they're going to make it hard is enough to keep many people paying. They don't have to, but they've decided it's the best path for them. Unfortunately many simply don't understand their options because they're not business minded people, they're consumers.

MM isn't necessarily bragging, but could be. She played by the business rules that the banks and credit cards set forth, which they deemed to make them the most money and didn't do too badly in the end. Had some of her investments paid off, she would have made a fortune.

A venture fund company is looking for something like 1 in 20 businesses to succeed and 19 to fail. Their biggest gamble is knowing when to pull the cords on the 19 bad ones, when they're sure they're dead. They openly gamble with their money, knowing 1 will succeed and make them extremely wealthy. It's the same systems banks, and credit cards use. They enter in all the facts and figure out which bets are the best.

If regulation changes, then those companies will go away and new ones will form. They've always been there. Thousands of years they've been practicing.

People don't have to use their products, they just do it because they want to. No one is forcing credit cards on someone, no one is forcing them to charge big bills up. They do it themselves. It's unfortunate that they don't understand it's healthy for them. But they will take anything that is offered to them.

Two wrongs don't make a right but I don't hold any real grudge against Malcomb, though
I hope that the lesson of frugality is the best strategy, or he will eventually get trapped in
financial mess if not careful.

The bigger issue is the system, guys like Malcomb are small numbers in a very corrupt system.
Malcomb had no bailout money, loss of income, and unsustainable lossed to stocks and housing.
The big fish run the country, make no doubt about this, they have all kinds of options and
free government guaranteed bailouts, bonuses, salaries, and other entitlements.

I think it is safe to say that Thomas Jefferson would be far more concerned with the elite society,
than some guy who made a few bad judgements and was able to find the light of day.

If you really want to stick it to the credit card companies - STOP USING THEM. If everybody stops using them, they're gone.

Our economy will be dysfunctional until people can find stability in their lives. A family is a long term commitment. A mortgage is a ( if you can't get out of it when you need to) long term commitment. But on average, jobs last only a few years now. How can anybody KNOW whether they're going to be able to meet a long term commitment successfully with it all dependent on something that has become progressively unreliable. In ten short years, huge numbers of people had to shift from being dot.com engineers to real estate brokers - jobs which have little to do with each other. Just as in Weimar Germany, as people found their incomes could not support the basic necessities of life, they turned to speculation. Gaming the system. Just like we are doing now. The ones who smugly proclaim they "live within their means" come out of the woodwork during the bust period, the ones who make millions on things like Pets.com come out during the boom. But beneath it all is a system rotten to the core. A system, a government, a central bank who cares nothing for the American people.

Is it perhaps the attitude of the MM 'haters' that creates the opportunities for the Banks to play the system to its advantage?

This is an excellent post by MM. It is an example of how moral hazard is created through easy credit. The problem is that when the loses started, the financial institutions needed to be accountable for the failure by failing. But the loses instead were socialized. The justification by the government was TBTF or systemic risk (barf!).

What MM did was allowed by corporations that knew they could do it without any downside risk or the real possibility of failure. This is corporate communism. Any real company that was lending with the real danger of the possibility of failure would have pulled back and not made the large unsecured credit card extension or mortgage loans to MM without a great deal more scrutiny.

Two things happen in communism as we are starting to see. One is that people stop working hard and doing the right things because they are not going to benefit from doing the right thing (MM is a perfect example). The second result of corporate communism is that our currency eventually collapses due to the weight of failure it continues to socialize.

Corporate communism is the result of people pursuing unrelenting personal self interests. And then people and corporations justify their actions by saying it was for the public good (corporate) and by playing the victim (personal) as MM did with his example. Both actions by big corporations and individuals are taken without regard to the right and wrong of such actions in a communist system.

The federal government only reflects the lack of moral convictions that our electorate possesses, and as a result our elected officials have allowed the corporations to grow without controls and without failure.

Capitalism without failure will eventually lead to communism or socialism. In essence, we have become here in the US at least partially a communist state. Once this process starts, as is has, it is difficult to prevent this process from continuing without a great deal more pain than if we would have done the right thing in the first place. The right thing was not allowing big corporations to become so big and so influential that they become “too big to fail.”

Welcome to the second American revolution. Right now communism is winning hands down. MM is only a symptom for the ongoing plundering of our once great society.

One bankruptcy, one foreclosure and you are out of credit market for life. That's the way to fix broken credit system.

a bit harsh, but I do agree with dadab.

Give me a break, if that were true of the banks that were just bailed out I would say fine. Also include Doctors, one malpractice incident and give up your license.

nubbers says

Is it perhaps the attitude of the MM ‘haters’ that creates the opportunities for the Banks to play the system to its advantage?

Wow - you just hit the nail on the head. Exactly !!!! Incredible observation.

m. m. i approve of your gambit,although i have been meeting all my own financial obligations. when the bottom really falls out of this economy many will follow your path. A debt jubilee is probably where we are headed in this country in next two or three years.

I must be from the old school. I remember years ago, to get a credit card you need to qualify. Example: Where you work, Salary Amount, work history, etc. I remember being excited getting my first credit card in my 20's to establish my credit. At that time the Banks had to know everything about you. So my first Credit Card was a Mobile Gas card. Later, Master Card and Visa's were born.
I have to blame the Banks for not doing their part, they started giving money away without question, or just a few simple questions, nothing like the old days. How does someone get a Credit Card if they are not working? Today, friends would tell me they would received a credit card in the mail and all they need to do is answer a few questions, Bingo the card was ready to charge until their hearts content. The Bottom line. the Banks stop doing buisness the old fashion way and got really greedy by collecting more and more on the interests.

Geez, I hope the "debt jubilee" can wipe out my $86k+ in student loans that I'll be paying off until I'm eligible for Social Security.

I applaud you MM. Almost three years ago I was up to $29K in credit card debt. I had been a perfect credit consumer up to that point. But after coming to the Bay Area to go to grad school and enter into a field where I get paid peanuts I knew I was in trouble. See, I went to school and worked full time. I finished my 3 year grad school degree (I had a specialty that required an extra year) in 3 years. I worked my a** off. I made only $12 an hour because that's what people get paid in my industry to do some really difficult work that needs to be done by somebody (mental health field).

BTW, I spent the $29k on rent, groceries, gas, health insurance, etc. I got nothing glamourous and I took no fancy trips. I just needed to meet basic living expenses which were exhorbitant here in the good ol' Bay Area.

Then I spent over 7 months after graduation without the aid of student loans to cover living expenses and credit card payments looking for an internship where I could be paid a living wage (not a high wage at all, since they don't exist for my line of work). I was still making $12 an hour. Obviously I had to use more unsecured credit. Once I finally landed that paid internship I was so far under I couldn't possibly keep making payments on a debt that just kept building due to increased interest because all of a sudden the banks discoverd that my "debt ratios" were "undesirable" even though I paid on time every time on each of my credit cards. I think I was up to 30% on most of my interest rates even when I was paying everything on time. I got very disgusted and discouraged. I tried negotiating with each bank and credit card to bring payments in line with what I could afford so that I would actually be able to pay down balances. Do you know what the banks did? They raised my interest rates again and increased my minimum payments.

That put me in the position of having a job where I was paid just enough to finally meet living expenses and to make only some debt payments like my car loan and student loans, but not enough left over for the close to $1000 in total minimum payments on my credit card debt. What was I to do? I had played by all the rules so far and the banks weren't willing to negotiate with me in good faith so we could work something out so I could meet my financial obligations.

Instead of going bankrupt I signed up for a debt settlement program. I stopped making any payments because I was advised that banks won't negotiate until you are behind in payments. Isn't that ridiculous? And they created much of the problem in the first place by raising all my interest rates and minimum payments just because they didn't like my "debt ratio" even though I was making on time payments for all cards. So, I decided to stop paying. It was the best thing I ever did. I paid $400 a month into a trust account that would build until I had enough money to bargain with each credit card company as they were willing to settle.

It took 3 years, but now I'm credit card debt free. I've settled with all of these banks and cards. Yes, I borrowed from Mom to help with the last one, but bank Mom has great interest rates (0%) and I can pay her back over time and she won't raise my minimum payments. I give her payments each month toward my debt to her and I'm slated to be done with paying her back in a couple of years.

I can get a credit card now. My "debt ratio" is now favorable and my credit scores have come back because I'm paying off my car loan on time, every time and I'll be done with that in April 2010. Do I want a credit card again? Hell no! I don't want to get into that trap again where I hand my power away to banks who don't care whether or not I can eat or put a roof over my head while paying them back. They showed me no mercy or compassion as a loyal "on time" payer on my accounts for years.

So MM, my hat's off to you. Just don't get another credit card again. I won't. Hopefully that will change things so that these banks will start offering cards with terms that make sense for both parties. If (and it's a big if) the banks ever offer any cards that have fair lending practices again where they can't change the contract at a whim every time the wind blows in a different direction, then maybe I'll consider getting a credit card.

I won't hold my breath.

Nomo,

I am sorry about your son.

Your letter reminds me that Bush's daughters did not serve in Iraq, nor did many other close family of the Congress that authorized that adventure. It's a safe bet that no kids of senior execs in companies that got taxpayer bailouts, and yes, are getting their bonuses partially paid with taxpayer bailout money, had any kids go to Iraq either.

How would you feel about a "wealth tax" (different from an income tax,but maybe a high-income surtax, too) to help out the families of our enlisted, who may have stressed out spouses trying to make loan payments and juggle child care while they're serving in hostile places? Maybe if those elites could make a small sacrifice like that, our military can reserve its stress for the job they're doing instead of the financial pressures they leave (actually, carry with them) during their deployments.