Ragoczy
09-19-2008, 05:54 PM
Unless you've been living under a rock (at least in the US), you know about the current financial market woes brought on by the "mort-gage crisis".
So who's to blame for this mess that our great-grandchildren will likely still be paying for?
Home Buyers
Foreclosures, the root cause of the "crisis", are caused by people not paying their mort-gages. Curiously, the banks frown on this practice and retrieve their collateral (the house).
Why aren't people paying their mort-gages? Well, mostly because they can't afford them. They signed up for adjustable rate mort-gages that are now, surprise, adjusting upward and the higher interest rates make for a payment they can't afford. Or they got a more exotic loan, like interest-only or "option", in order to get a more expensive house and the result of those loans is that they can't now make their payments.
When I bought my house, I had a choice. There was a nicer house up the street that I could have "qualified" for, but I wasn't comfortable with the size of the payment. I had a choice of loan vehicles -- I could have gotten a much lower payment (and the nicer house) with an adjustable rate instead of fixed. I made a responsible choice because I didn't want to be in a position of possibly losing my home one day.
Others made different choices.
If you sat down at the closing table and signed the paperwork for a loan that you now can't afford because of the terms of the loan ... it's your fault!
mort-gage Brokers
These are the guys between the home buyer and the mort-gage underwriter. They do the paperwork. They sell the loans to the consumer.
Guys, I know you don't have a fiduciary responsibility to the buyer. You're under no legal obligation to look out for their interests, you're just businessmen. But when the family of four sits across from you agreeing to a loan that'll take 40% of their income today, but 60% when it adjusts in three or five years ... doesn't human decency mean you have to tell them they're being fucking stupid?
I know they'll just go down the street to the guy who'll write the loan that'll let them get the home they can't afford, but ... it's your fault!
mort-gage Underwriters
These are the bastards who came up with these stupid loan vehicles and set the guidelines for who "qualifies" for them. Now, mort-gage loans used to be pretty simple:
"We'll loan you X dollars for Y years at Z interest rate -- here's what your payment will be."
Then they got fancy:
"Here's your payment for the first five years. After that, the interest rate will adjust every year based on this esoteric formula tied to some financial index you've never heard of. You won't know what the payment will be until then and neither do we."
"Better yet, we'll write you a loan where you only have to pay the interest. That'll keep your payment low. Sure, you'll never pay it off, but that's okay because your house will always go up in value."
"Better, better, how about this: You don't even have to pay all the interest! You decide if you want to and if you don't, we'll just tack that little bit extra onto the principal every month. Don't worry, your house is going to double in value every two years, right?"
Fucking dumb asses ... it's your fault!
mort-gage Underwriter Executives
Why'd those companies come up with such stupid loan vehicles in the first place? Well, somebody thought it'd be a good idea to tie executive compensation to the amounts of loans written.
Curiously, once the executives cleared a few tens of millions in bonuses, they really didn't care what condition they left the company in.
Greedy bastards ... it's your fault!
Investment Bankers
You thought buying this shit was a good investment? Somebody pays you $300,000 a year to make that decision?
Stupid, stupid people ... it's your fault!
Community Activists
Not all of the bad loans were made out of greed; some were made because the banks were blackmailed into it.
So here's how the conversation goes:
Community Activist: "You're not making enough loans to people in this community."
Bank: "People in that community are poor and have crappy credit, they're unlikely to pay back the loans."
CA: "That's discrimination!"
Bank: "Well, yes, we discriminate against people who probably won't pay us back."
CA: "That's racism!"
Bank: "No, we could give a shit about race ... if they could pay us back, we'd be happy to give them the money ... we're greedy banker bastards, weren't you paying attention?"
CA: "We're going to file complaints with the government and sue you!"
Bank: "Well, fuck. Fine."
Boy, you guys sure did your communities a hell of a service here. Where are you now for those families who are losing their homes? Oh, right, you're blaming everyone else ... it's your fault!
Congress
The group that writes the laws to regulate the banking industry. Stewards and custodians of the public trust. Servants of the people.
In 2005, Congress was warned that FannieMae/Freddie-Mac were cooking the books to artificially increase their balance sheets and pump-up executive compensation. They were warned that this practice was dangerous and that an eventual collapse of the mort-gage industry would have far-reaching negative effects on the entire financial system. They were presented with a Bill to place sufficient regulations on the industry to avoid this.
Congress didn't pass the Bill.
Curiously, the member of Congress to receive the most in lobbyist contributions from FannieMae/Freddie-Mac over the last twenty years was the head of the Finance Committee, Chris Dodd.
Public Servants, my ass ... it's your fault!
So who's to blame for this mess that our great-grandchildren will likely still be paying for?
Home Buyers
Foreclosures, the root cause of the "crisis", are caused by people not paying their mort-gages. Curiously, the banks frown on this practice and retrieve their collateral (the house).
Why aren't people paying their mort-gages? Well, mostly because they can't afford them. They signed up for adjustable rate mort-gages that are now, surprise, adjusting upward and the higher interest rates make for a payment they can't afford. Or they got a more exotic loan, like interest-only or "option", in order to get a more expensive house and the result of those loans is that they can't now make their payments.
When I bought my house, I had a choice. There was a nicer house up the street that I could have "qualified" for, but I wasn't comfortable with the size of the payment. I had a choice of loan vehicles -- I could have gotten a much lower payment (and the nicer house) with an adjustable rate instead of fixed. I made a responsible choice because I didn't want to be in a position of possibly losing my home one day.
Others made different choices.
If you sat down at the closing table and signed the paperwork for a loan that you now can't afford because of the terms of the loan ... it's your fault!
mort-gage Brokers
These are the guys between the home buyer and the mort-gage underwriter. They do the paperwork. They sell the loans to the consumer.
Guys, I know you don't have a fiduciary responsibility to the buyer. You're under no legal obligation to look out for their interests, you're just businessmen. But when the family of four sits across from you agreeing to a loan that'll take 40% of their income today, but 60% when it adjusts in three or five years ... doesn't human decency mean you have to tell them they're being fucking stupid?
I know they'll just go down the street to the guy who'll write the loan that'll let them get the home they can't afford, but ... it's your fault!
mort-gage Underwriters
These are the bastards who came up with these stupid loan vehicles and set the guidelines for who "qualifies" for them. Now, mort-gage loans used to be pretty simple:
"We'll loan you X dollars for Y years at Z interest rate -- here's what your payment will be."
Then they got fancy:
"Here's your payment for the first five years. After that, the interest rate will adjust every year based on this esoteric formula tied to some financial index you've never heard of. You won't know what the payment will be until then and neither do we."
"Better yet, we'll write you a loan where you only have to pay the interest. That'll keep your payment low. Sure, you'll never pay it off, but that's okay because your house will always go up in value."
"Better, better, how about this: You don't even have to pay all the interest! You decide if you want to and if you don't, we'll just tack that little bit extra onto the principal every month. Don't worry, your house is going to double in value every two years, right?"
Fucking dumb asses ... it's your fault!
mort-gage Underwriter Executives
Why'd those companies come up with such stupid loan vehicles in the first place? Well, somebody thought it'd be a good idea to tie executive compensation to the amounts of loans written.
Curiously, once the executives cleared a few tens of millions in bonuses, they really didn't care what condition they left the company in.
Greedy bastards ... it's your fault!
Investment Bankers
You thought buying this shit was a good investment? Somebody pays you $300,000 a year to make that decision?
Stupid, stupid people ... it's your fault!
Community Activists
Not all of the bad loans were made out of greed; some were made because the banks were blackmailed into it.
So here's how the conversation goes:
Community Activist: "You're not making enough loans to people in this community."
Bank: "People in that community are poor and have crappy credit, they're unlikely to pay back the loans."
CA: "That's discrimination!"
Bank: "Well, yes, we discriminate against people who probably won't pay us back."
CA: "That's racism!"
Bank: "No, we could give a shit about race ... if they could pay us back, we'd be happy to give them the money ... we're greedy banker bastards, weren't you paying attention?"
CA: "We're going to file complaints with the government and sue you!"
Bank: "Well, fuck. Fine."
Boy, you guys sure did your communities a hell of a service here. Where are you now for those families who are losing their homes? Oh, right, you're blaming everyone else ... it's your fault!
Congress
The group that writes the laws to regulate the banking industry. Stewards and custodians of the public trust. Servants of the people.
In 2005, Congress was warned that FannieMae/Freddie-Mac were cooking the books to artificially increase their balance sheets and pump-up executive compensation. They were warned that this practice was dangerous and that an eventual collapse of the mort-gage industry would have far-reaching negative effects on the entire financial system. They were presented with a Bill to place sufficient regulations on the industry to avoid this.
Congress didn't pass the Bill.
Curiously, the member of Congress to receive the most in lobbyist contributions from FannieMae/Freddie-Mac over the last twenty years was the head of the Finance Committee, Chris Dodd.
Public Servants, my ass ... it's your fault!