patrick.net

I think even loan-sharking should be legalized. Of course, illegal collection practices should not be tolerated. It is a civilized society after all. But if a consumer is willing to borrow at 2000% annualized interest rate, no one should stop him.

Just read this on Yahoo news. Very short article, so reposting the complete text.

http://news.yahoo.com/s/nm/20070411/bs_nm/usa_subprime_congress_dc_1

Lawmakers propose aid for subprime borrowers

He said he planned to introduce legislation soon.

You know what sucks StuckBA? It wouldn't be so bad but 2 years ago when I would debate the housing bubble with my friends I even outlined the blame game and the bailout hero legislators.

This is the first time my blood boiled after reading a bailout news. Till now I was cynical and dismissing these as political stunts. But the wording of the article is so pathetic, so irresponsible and so shameless. Not a single word of counter arguments.

This about sums it up for me:

Skibum said:

...as I see it, Frank’s solution may indeed deter bondholders from freely funding subprimes (via deterrence), but it seems to be a convoluted solution to a convoluted problem...

Should these investors be liable for compensating the end user (FB)? Probably not, I’d say. This thing smells to me like a convenient excuse for someone in Congress wed to trial lawyer lobbying money to find another tort for trial lawyers to bank money from.

Malcolm said:

If you buy into a ponzi ...then don’t go looking for someone to blame. Certainly not the guy all the way at the end of the chain who ended up with the junk note.

Aha! I just figured it out, it’s not the lawyers for the FBs. They’re too small, it is the lawyers for New Century and those big players that must be behind this. God, all you have to do is follow the money trail. They are the ones losing big by having to take back the loans, and they now need someone to share the cost never mind the fact that the purchase contracts are crystal clear.

While the anti-bubble housing bear in me likes the fact that Frank's law would immediately crash the MBS easy-money mortgage lending market (probably overnight), I think it's basically punishing the least guilty actors (retail bondholders), while also giving a free pass to the people most responsible for the whole mess --namely, the Wall Street firms & banksters who setup the whole MBS risk-transferrence scheme to begin with. And it would create a whole new market for class-action lawsuits to mainly benefit trial lawyers and FBs, many of whom (though not all) were guilty/complicit themselves.

Money tree and those payday guys actually work out to be in the hundreds of percent. Since a lot of the JBRs use them and literally now depend on them they don't seem to want to punish them. Am I the only one who finds this hysterically funny?
Everytime someone mentions protecting those borrowers Jesse Jackson shows up with his 'rent a mob'.

As in the Sheriff / Courts refused to cooperate.

Send in the national guards! :)

Well, it is a different story if a person lacks the mental capacity, unless that person should reasonably have such capacity.

Everytime someone mentions protecting those borrowers Jesse Jackson shows up with his ‘rent a mob’.

LOL. That guy has done nothing useful for society. At least he's marginally more respectable than Al Sharpton.

Harm, the only thing I could even consider from the other point of view is maybe taking out the cherry picking clauses, but those are only for basically blatant bad loans that default in the first few months. The bond holders hold the bag of dilluted risk during the normal rate of defaults. It is so clearly that some powerful entities are getting jammed right now. I have to add that these subprime originators were rolling in the dough when times were different. You want to talk about excess we're talking Lear jets, indoor jogging tracks, the whole shabang. The stockholders did very very well also.

He happened to be in a couple of photos and videos with ML King and has shrewdley captitalized on it ever since. I almost have to respect him for that. He is the William Hung of Civil Rights.

Honestly though these guys were just operating off of lines of credit. Going back to the car analogy, if I get a loan and buy a car, then use it in a bank robbery, how is the bank liable?

If I take a line of credit and lend it to some desperate guy at Russian mafia interest rates, how is the bank liable?

He is the William Hung of Civil Rights.

Malcolm,

Man, you're on a roll.

One or two more befor I have to pack up. I think we should take China to international court for wrecklessly funding Congress's spending spree.

After a while you've gotta just laugh at this stuff. All these little pinhead bureaucrats running around trying to fix the mess they created, and then blaming the marketplace. I just can't take it seriously anymore.

FYI,

Just released are the minutes from the last Fed Reserve meeting in March:

http://www.federalreserve.gov/fomc/minutes/20070321.htm

If you haven't already noticed, the stock market doesn't like what it sees. My take on the minutes is that surprisingly to many, the Fed is still significantly concerned about inflation risk, and they are at least implying they are willing to raise rates further if inflation measures don't behave. On the other hand, I've always suspected that they would like to ideally continue to threaten rate raises without actually doing it, at least not until after the 2008 elections.

How does this affect the bubble? They acknowledged many times both the slowdown in housing and the subprime mess, but basically blew them off as not too severe and therefore manageable. In the best possible world, they are saying, "let's let the housing chips fall where they may." Worst case, they are clueless.

My overall read? They are starting to get worried about stagflation as a real possibility.

Malcolm,

We'll obviously have to agree to disagree re: Prop. 13. My biggest beef with it (in its current form) is two-fold:

Claim1: It purports to "protect" low-income seniors from being "thrown out into the street".

Reality1: It "protects" ALL long-time property owners --including some very wealthy holding/shell companies that were specifically created to exploit Prop. 13. All that matters is when the property was purchased --there is no means testing.

Claim2: It purports to "protect" all homeowners from large tax hikes due to excessive inflation and speculative bubbles.

Reality2: It provides the lion's share of inflation/bubble "protection" to people who bought a long-time ago (maximum protection goes to those who bought in or before 1978), and does virtually nothing for younger, recent buyers. Essentially, it just transfers to the property tax burden --via inflation-- from old to young, regardless of an individual's (or holding company's) ability to pay.

I don't like tax systems that claim to make things "more fair" then do precisely the opposite. I don't like tax systems that appeal to people's emotions ("don't throw grandma into the street, you callous brute!"), but are mainly structured to help out those who least need helping (rich Boomers and holding companies).

What would turn me into a Prop. 13 supporter? A:

(1) Extend the 1978 tax basis to EVERYONE. If I buy a house tomorrow, then I get the same 1978+2%/yr tax basis as Mr. Rich McBoomer and ACME Land Holding Co. Inc.

Or...

(2) Severely means-test/restrict Prop. 13 to apply ONLY to low-income seniors. Specifically EXCLUDE corporations, rich people, and do not allow seniors to automatically transfer their tax basis to heirs (unless those heirs also happen to be low-income seniors).

There is no free lunch. Someone has to pay --always. It's just a matter of who and how much.

Kitty, nice try. I have a little bit of trouble with tying some bondholder at the end of complex chain which is legally set up in an evolved market with someone who is a direct party to a crime. But good job on the creativity.

HARM, even if I agree totally with the realities of the situation what's wrong with them. What is fundamentally wrong with a system that makes it easier not harder on people over the long term. Now we can say home ownership is not fair because it shelters people from rent increases. I say that is a good thing.

Checking out, look forward to logging on later.

In the case of fraud against a FB'er who really did get tricked, the amount he would be owed is :

His downpayment
His court fees
His loan fees
His principal payments
The ability to either
1) Walk with no foreclosure/debt forgiveness/etc
2) Mandatory no-charge refi to a fixed rate mortgage at the lower of the current rate or the average rate at the time of the original loan.

Those should come out of the MBs pocket, then the originator's pocket, before they get passed further upstream. That level of liability being passed all the way to the MBS assuming that the institutions on the way fail is reasonable. And it would be relatively easy to price into the model.

However, you shouldn't be able to sue the people who bought into the MBS. The damages above should be guarenteed in cases of fraud, but tryign to get 'emotional distress' and 'punative damages' and all that crap. MBs and originators could be sued for that till the cows come home, but passing that kind of legislative crap onto grandma's retirement account is not cool.

skibum :

I have been positioning for a stagflation for some time now. I would love to proved wrong. But if it happens, I PRAY TO GOD, the Maestro Greenspan gets blamed and ridiculed for what he did to the economy. It will partially offset the pain of stagflation.

Damn italics again. Forgot to proofread my comments.

Your point sounds good, let’s look at it in detail. First, get one thing straight, renters are the end payers of property taxes not the landlords. Property tax is is just an operating expense to us, and we pass the costs onto you. Next, the argument higher taxes are needed to fund schools is propaganda. The lottery was supposed to fix all of that it’s failure is proof of what happens when you tax for the sake of taxing. Next, every few years we have bond measures which promise to be a cureall for schools, and when they pass it almost becomes a free for all, the following election there are even more bond measures.

California is something like 48th in spending per pupil when adjusted for cost of living. And yes, California is still growing, so we need to keep passing bonds to pay for infrastructure growth.

And no, you can't just "pass on" operating costs to tenants, if you believe that, you are not really a landlord. You get to charge what the market will bear, not what you need to cover your costs. And in rent-controlled areas, sometimes not even that.

As a note, it should be obvious that I meant that he got the settlement if he walked, or he gets nothing if he keeps the house and takes the free refi into a sane loan.

Claim1: It purports to “protect” low-income seniors from being “thrown out into the street”.

They can sell and live very well in luxurious assisted living condos. The one across from Stanford Shopping Center looks amazing.

Claim2: It purports to “protect” all homeowners from large tax hikes due to excessive inflation and speculative bubbles.

More incentives for residents to favor market processes and oppose NIMBYism. :)

Ideally there should not be a property tax. If there must be be let's make it a consumption tax and charge according to utility (e.g. rental) value.

Starting to look like a bailout might actually happen:

http://news.yahoo.com/s/nm/20070411/bs_nm/usa_subprime_congress_dc_1

Would Bush veto this?

Uh... I was in no way suggesting that Hi-Yield funds "appreciating" 25-30% in '02 was a stroke of genius. There's nothing to gloat about there.

Remember ( Randy H was in the trenches on this one) and telecoms were defaulting left and right. In fact defaults on non-investment grade bonds were running 10-12% at the time. And STILL people were throwing money at this!

What we keep glossing over is that w h e n you are retired you have to maintain at least a min. std. of living. If you don't have true critical mass... well then you have to chase yield (and in a lot of cases take on a helluva lot more risk than you otherwise would).

This is the REIC eating everyone else's lunch. Stock meltdown drove money into MBS/REIT's bidding up prices, driving down yields. Creating...? What? Even cheaper money for the REIC to feed from!

Blaming bondholders makes about as much sense as bayoneting prisoners for drinking out of a puddle on the Bataan Death March.

What we should do is make a Patrick wiki and whenever a newcomer veers into a discussion that we have already covered in detail, just point them to the wiki. If they have something to add to the topic that has not been already covered, they can add their two cents there.

Only half joking....

California is something like 48th in spending per pupil when adjusted for cost of living. And yes, California is still growing, so we need to keep passing bonds to pay for infrastructure growth.

Infrastructure can be privatized.

We should spend more on students but that can be financed by Casinos. Also, perhaps religious groups should sponsor and run more schools.

Stock meltdown drove money into MBS/REIT’s bidding up prices, driving down yields.

That's one part of the reason. Other is reduction of short term rates by Fed. I remember opening an ING Direct acconit because it was paying the highest APR (in FDIC world) of ...gasp... 2% !

So all these people who are arguing about bondholders being held responsible, should do even more root cause analysis. Why in the world did a bondholder even went that route ? Because other yield avenues were eliminated. And who kind of forced them to do that ?

SFBB,

Solid post. Finally some sense. I can't see anyone objecting to that. Of course assuming the FB can prove they were defrauded.

Next Thread Someone Please Explain “Pocket Listings”

2nd life member bailout of 3 italian girls who were trying to sell a parcel of island land but a landbot owned by "landbaron merlin" purchased the whole parcel ripping the girls $2000us--- read the fascinating story here--

http://tinyurl.com/39hth9

come on patrick posters !! I am confident in the collective collaberating mindsets here that you can indeed develop some "open source" programming to "stop the insanity" within the linden's TOS guidelines, of course, and create a
"virtual utopia" for patrick posters to live in happily ever after.

@randy please take us there metaworldbaron!!!
all of us technosexual metrosexual ckin2u wannabees

randy our father in virtual heaven
internet be your name
thy virtual kingdom come
thy wannabee life be won
on 2ndlife as it isn't here on earth
give us this day our daily linden dollars
and forgive us our bots
as we forgive those that have bots against us
and lead us not into TOS
but deliver us from real life
for thine is the surrealest kingdom
of opensource knowledge forever and ever
amen

StuckInBA,

Exactly. I'm sure there were a number of conversations with these seniors before they were reduced to eating "cat food" (MBS/Junk)

We need to cover cartoon real estates soon.

@bruceb,

Amen brother! LOL!

Peter P,

Why don't we get the hydrogenated fat industry and the madrassas together. While we're at it, let's make sure they think algebra and calculus and the internet are evil, so they can't build sophisticated bombs.

Are you sure you're not a sushi fueled jukubot here to inflict chaos on us? :)

Are you sure you’re not a sushi fueled jukubot here to inflict chaos on us?

Let me dig up some futurist.typepad.com articles and get back to you.

@bruceb

/sigh
/wretch

My only regret is that I didn't think of the idea of a landBaronBot myself.

As for the incantation. "Oh my".

I should perhaps think about making a novel out of all this. After all, this is becoming far stranger than fiction, on so many levels...

Peter P,

Yum, futurist bait...

Awesome conclusion to Friday Night Lights tonight. Definitely the best show of the year, possibly the best TV show ever.