Letters to the Editor
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That's Too Insulting For Words!
"Yeah, let's keep those complex loans away from those poor negroes, they clearly aren't smart enough to understand them."
Thanks Barney.
If there was fraud, that's one thing. If people made stupid investment choices, that's a matter for them and the lender from which they borrowed to make that stupid investment choice.
It's really pretty simple, folks: if you don't understand it, don't sign it. If you can't afford to buy it without taking on a loan you don't understand, don't buy it.
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Re-Title
Barney Frank is absolutely right, of course. However, your headline to this report is VERY misleading. Please change it to say BARNEY FRANK ON THE "DEREGULATION" WARPATH.
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It'd be nice if it was that simple.
Anonymous, it'd be nice if it was that simple. It isn't.
Many financial agreements are essentially designed to be complicated enough to be difficult to understand without help. And then the "help" that most people are given is too often intentionally deceptive ... just not *quite* deceptive enough to be illegal. Or often when it is deceptive enough to be illegal, nobody is enforcing the regulations, because the targets are only "stupid" poor people.
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If You Drink Poison, You Deserve to Die!?????
These poison mortgage products had no skull + crossbones labels on them. They were served up by charming, expert mortgage-broker bartenders. Come on, Anonymous!
American conventional wisdom from Alan Greenspan and Ronald Reagan on down always has been that home ownership is the best, safest, most wonderful investment possible. Americans who bought homes deserved education and prorection. They do not deserve foreclosure and eviction.
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Foolish choices?
It's rather a trite response to say "well, if THEY made foolish choices, a pox upon them..." or words to that effect. It's simply not that simple.
In point of fact, having been through a number of sales and refinances in the time period, when every so-called professional involved in the transaction-- real estate agents, mortgage brokers and banks-- all tell you what a great deal you're getting, you tend to believe them.
Researching the arcane points of mortgage financing is difficult and confusing, to say the least. Purposely so, I believe, as the various participants in the lending process directly benefited from keeping the mechanics of the process hard for the average Joe to fully comprehend.
I was lucky, as I have a legal background and relations in the real estate business, so I had access to more information and explanations than most. Even so, I got burned once myself with a Countrywide loan product, but that's a whole other tale...
Foolish choices may have been made by some, but I venture to guess that many, many more were inveigled into their decisions with the wilful encouragement of their salesperson, their brokers and their bankers. And, in point of fact, with the encouragement of the Chairman of the Fed...
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Greenspan the Great Amoralist
The Greenspan legacy was to spread economic risk as uniformly as possible. You might think his role as Fed Chief would be to take a neutral risk adverse approach to the economy, but all economists have a sworn allegiance to growth, and the enemy of economic growth is savings.
Under Greenspan the economists discovered an untapped source of savings, home equity. To further demostrate their turpitude, these scam artists refused to acknowledge what they were doing. Home equity has never been counted as personal savings, while it was being plundered as a source of consumer spending, and new wealth.
It matters little if we beleive these loans were the equivalent of selling fire water to the Indians, what was happening away from the scene, is what matters. Fixed income investors were being robbed of their right to make a decent income from their savings. Greenspan punished savers, and rewarded borrowers, especially those with no collateral, and no prospects. The right to make a moral decision about your money, was circumvented by the Great Amoralist, Alan Greenspan. Borrowers are bailed out by savers. The raid on equity will continue, probably at the hands of hedge fund managers, who now own America's land, and the homes which are built upon them. A recent quote suggests that there is grave concern that another great transfer of land ownership will occur, as it did during the first Great Depression. Certainly they have set the stage, and washed their hands of the matter, more beautifully than a hundred Pontius Pilates.
When this economy collapses the very bonds which were purchased by people who needed safe investments, will probably default. There is nothing kind that can be said of his tenure.
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Free-Market Zombies
Part of what's so laughable about Anonymous's "let them eat bankruptcy" attitude is that the smart money guys recognize the threat posed to markets (growth, profit, etc.) by true laissez faire policies. If people can't trust loan brokers and lenders to advise them wisely, they'll stop going to loan brokers, they'll stop borrowing, and the whole credit market will contract. The real estate industry recognized this a long time ago and accepted regulation for that very reason -- if you can't trust a realtor not to rip you off, why would you use one? And if you can't trust anybody to help you through a complex transaction like a real estate purchase, maybe you'll find something else to do with your money.
Deregulation is good for one thing, and one thing only: It provides a one-time-only opportunity for the sharks and crooks to jump in, make an enormous killing, and then try to fade into the woodwork as all hell breaks loose. (Can you say "Enron?") The very notion that a society as complex as ours can operate smoothly, or at all, without regulation is preposterous. But an awful lot of people seem to have drunk that Kool-Aid.
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It Almost Is That Simple
OK, I'll make this concession. I feel sympathy for anyone who was deceived by someone who had a fiduciary duty to them. Brokers don't count. Mortgage brokers don't count.
If someone didn't have _their own_ lawyer in there, reviewing the documents, I have zero sympathy.
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The flip side of the coin
There are good arguments to be made that the mortgage industry needs tighter regulation - at a minimum, more disclosure requirements.
But be prepared for the chorus of howls that will occur should more stringent regulation come to pass. There will be plenty of people who simply won't qualify for a more traditional loan because of bad credit, insufficient income, etc. Then there will be a lot of handwringing about home ownership is outside the reach of many, and how unfair that is.
Those of you arguing for more regulation can't have it both ways. More regulation will likely equal more conservative lending, meaning that many people with less than stellar financial histories will be shut out. That won't sit well given that Americans seem to think they have some sort of right not just to be home owners, but to own as big a house as they want.