Deadbeat nation
in [Design]
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From: krw on 8 Jun 2010 18:16 On Tue, 8 Jun 2010 09:57:33 -0700, "Joel Koltner" <zapwireDASHgroups(a)yahoo.com> wrote: ><dagmargoodboat(a)yahoo.com> wrote in message >news:2a479702-06d7-4ad7-ae37-8495aaff06f6(a)d37g2000yqm.googlegroups.com... >> No! I think you're missing something important--the taxpayer pays for >> it. Directly. Freddie and Fannie and AIG pay off the losses, the >> "renegotiated" mortgage amount, then Mr. Obama's Treasury Secretary >> pays them, with our money. > >If there was ever a good time wherein the political winds were that >restructuring Freddie, Fannie, AIG, etc. such that they only made loans to >people "very highly unlikely" to default, it would be now. Surely you're joking. Look at who is running the show. >But I'm not crossing my fingers that's going to happen. Whew! I thought you were going to hold your breath. >Heck, the banks have figured out that there's lots of money to be made from >people with truly awful credit -- people who 30+ years ago would have *never* >been able to obtain, e.g., an unsecured credit card. But now to them it's >just a question of, "can we make money off this person before they default -- >which we fully expect they will?" -- no moral judgment whatsoever as to >whether or not engaging such a person is a proper thing to do in the first >place; the only thing that matters is the money. I don't think that's true. They can't make money without getting the principal back. Sure, if they can bounce checks en route, that's "great", but they still need the principal back. Even 30% interest is no good on a bankruptcy. >That's wrong too. Seems to me they're doing just as much to "wreck everyone's >honor" as all those folks defaulting on their mortgages and still squatting in >their (former) homes. Nonsense. The contract has been agreed upon. The banks are not the ones nullifying the contract. >> That creates a system where everyone loses _except_ the defaulters, >> who steal their gain from the rest of society. > >Most don't even realize this is happening in most cases, James. You're going to have to explain that inside-out one (too much indirection).
From: krw on 8 Jun 2010 18:18 On Mon, 07 Jun 2010 23:53:03 -0700, Robert Baer <robertbaer(a)localnet.com> wrote: >Paul Hovnanian P.E. wrote: >> dagmargoodboat(a)yahoo.com wrote: >>> On Jun 5, 9:06 pm, "Paul Hovnanian P.E." <P...(a)Hovnanian.com> wrote: >>>> dagmargoodb...(a)yahoo.com wrote: >>> [snip] >>> >>>>> But let's be clear about what "renegotiate their mortgage" means. It >>>>> means the buyer wants the bank to take the loss. >>>> In part, yes. It means the buyer is thinking of mailing back their keys. >>>> In a bad real estate market, that means the house will sit on the banks >>>> books as an unperforming asset for months. Or years. While the >>>> neigborhhood thieves strip it of copper wiring and plumbing. Or the >>>> banks and buyer can negotiate a deal which will keep some money coming >>>> in. >>> Blackmail, basically. Pay, or I'll make you lose even more. >>> >>> And we're back to your original question of creating moral hazard. >>> With any given case it may indeed be cheaper for the lender to pay >>> $150k rather than fight. But overall, if this financial reward, plus >>> society not just removing any stigma and penalty from default, but >>> actively promoting it--like the NY Times--encourages a stampede of >>> defaults, the system collapses. >>> >>> "When plunder becomes a way of life for a group of men >>> living together in society, they create for themselves >>> in the course of time a legal system that authorizes it >>> and a moral code that justifies it." -Frederic Bastiat >>> >>> Or it would, except the taxpayer's backstopping all this anyhow. >>> >>> The whole thing turns into a tragedy of the commons: it's in each >>> citizen's interest to grab what he can from the kitty, but in so >>> doing, the kitty is busted. >>> >>> "Everyone wants to live at the expense of the state. >>> They forget that the state wants to live at the >>> expense of everyone." - ibid >>> >>>>> That's wrong. It's unfair. >>>> The next time an airline defaults on a loan, 'fair' would be the >>>> creditor seizing its assets and padlocking them. >>> The difference is we're talking about a quarter of America voluntarily >>> defaulting as a financial strategy, and isolating them as a matter of >>> policy from the customary consequences. >> >> That's a bit of an exaggeration. Its more like 10% that are behind on >> payments. >* Being behind on payments is FAR DIFFERENT than snubbing a legal contract. If you mean that "being behind on payments" is a proper subset of "snubbing a legal contract", OK... <...>
From: Joel Koltner on 8 Jun 2010 18:44 Hi Keith, <krw(a)att.bizzzzzzzzzzzz> wrote in message news:a2gt06p2r1rbndot1iot16eafjchoss8hb(a)4ax.com... > On Tue, 8 Jun 2010 09:57:33 -0700, "Joel Koltner" > <zapwireDASHgroups(a)yahoo.com> wrote: >>If there was ever a good time wherein the political winds were that >>restructuring Freddie, Fannie, AIG, etc. such that they only made loans to >>people "very highly unlikely" to default, it would be now. > Surely you're joking. Look at who is running the show. Well, yes, but there are elections in November... >>Heck, the banks have figured out that there's lots of money to be made from >>people with truly awful credit -- people who 30+ years ago would have >>*never* >>been able to obtain, e.g., an unsecured credit card. But now to them it's >>just a question of, "can we make money off this person before they >>default -- >>which we fully expect they will?" -- no moral judgment whatsoever as to >>whether or not engaging such a person is a proper thing to do in the first >>place; the only thing that matters is the money. > > I don't think that's true. They can't make money without getting the > principal back. The aproach there is hand them a relatively low credit line (say, $500-$1500 or so) so as to limit your own downside. Your analysis is correct, though -- there are still some people who even today aren't going to get unsecured credit cards, it's just that those people are a lot fewer and further between than it was 25+ years ago. >>That's wrong too. Seems to me they're doing just as much to "wreck >>everyone's >>honor" as all those folks defaulting on their mortgages and still squatting >>in >>their (former) homes. > Nonsense. The contract has been agreed upon. The banks are not the ones > nullifying the contract. That doesn't completely absolve them of responsibility, in my opinion. A classic example here would be drug regulation: It's very clear that if a drug pusher manages to get someone to try heroin, it can turn even the most upstanding individual into the kind of monster who'll spend all the food and mortgage money on more heroin and even revert to theft to maintain the habit. Now, there's quite the gulf between a drug pusher and a banker and I do realize this is a slippery slope argument and that the issue of personal responsibility comes into play as well... but the fundamental premise is the same: Any time one person engages another in a manner that has a reasonably foreseeable and significant chance of encouraging bad behavior, at the very least the person doing so bears some moral responsibility for the outcome -- and it should come as no surprise then, that as a society we've decided there often ought to be some legal repercussions as well. (Terms like "foreseeable" and "significant" up there being subject to endless debates, of course.) Oh, and I do think you should be able to smoke all the joints you like and buy all the handguns you want. :-) Heroin and howitzers... mmm... not so much. >>> That creates a system where everyone loses _except_ the defaulters, >>> who steal their gain from the rest of society. >>Most don't even realize this is happening in most cases, James. > You're going to have to explain that inside-out one (too much indirection). I'm saying that I think Arthur is correct, but also that I don't think a lot of defaulters even realize that they're stealing from society as a whole (rather than just "sticking it to the man" -- the bank)... and that I Want To Believe that if more defaulters realized this, well, they wouldn't actually be defaulting quite so often. ---Joel
From: Paul Hovnanian P.E. on 8 Jun 2010 18:56 Robert Baer wrote: > Paul Hovnanian P.E. wrote: >> dagmargoodboat(a)yahoo.com wrote: >>> On Jun 5, 9:06 pm, "Paul Hovnanian P.E." <P...(a)Hovnanian.com> wrote: >>>> dagmargoodb...(a)yahoo.com wrote: >>> [snip] >>> >>>>> But let's be clear about what "renegotiate their mortgage" means. It >>>>> means the buyer wants the bank to take the loss. >>>> In part, yes. It means the buyer is thinking of mailing back their >>>> keys. In a bad real estate market, that means the house will sit on the >>>> banks books as an unperforming asset for months. Or years. While the >>>> neigborhhood thieves strip it of copper wiring and plumbing. Or the >>>> banks and buyer can negotiate a deal which will keep some money coming >>>> in. >>> Blackmail, basically. Pay, or I'll make you lose even more. >>> >>> And we're back to your original question of creating moral hazard. >>> With any given case it may indeed be cheaper for the lender to pay >>> $150k rather than fight. But overall, if this financial reward, plus >>> society not just removing any stigma and penalty from default, but >>> actively promoting it--like the NY Times--encourages a stampede of >>> defaults, the system collapses. >>> >>> "When plunder becomes a way of life for a group of men >>> living together in society, they create for themselves >>> in the course of time a legal system that authorizes it >>> and a moral code that justifies it." -Frederic Bastiat >>> >>> Or it would, except the taxpayer's backstopping all this anyhow. >>> >>> The whole thing turns into a tragedy of the commons: it's in each >>> citizen's interest to grab what he can from the kitty, but in so >>> doing, the kitty is busted. >>> >>> "Everyone wants to live at the expense of the state. >>> They forget that the state wants to live at the >>> expense of everyone." - ibid >>> >>>>> That's wrong. It's unfair. >>>> The next time an airline defaults on a loan, 'fair' would be the >>>> creditor seizing its assets and padlocking them. >>> The difference is we're talking about a quarter of America voluntarily >>> defaulting as a financial strategy, and isolating them as a matter of >>> policy from the customary consequences. >> >> That's a bit of an exaggeration. Its more like 10% that are behind on >> payments. > * Being behind on payments is FAR DIFFERENT than snubbing a legal > contract. But its a precondition. So some of the 10% who are behind may catch up. Some intend to walk away from the loan. As this latter group is a subset of the 10%, it could be a lot less than 10%. The problem is that the law doesn't recognize a middle ground. Once the bank decides you have missed too many payments, you are out on your butt. And they are sitting on an abandoned piece of property in a poor market that may get vandalized and never be sold to recover the principle again. Smart people negotiate to minimize their losses. Crazy people stand their ground in the face of doom. I don't want crazy people running my bank. -- Paul Hovnanian paul(a)hovnanian.com ---------------------------------------------------------------------- Have gnu, will travel.
From: Joel Koltner on 8 Jun 2010 20:15
Gee, James, we have so much more common ground than I thought. :-) I completely agree with your response there! |