Shakedown: America's subprime lenders

[red states rule]

Real Wages Rose 2.2 Percent Over The Past 12 Months Ending In January. This is substantially faster than the average rate of the late 1990s economy, and it means an extra $1,279 in the past year for the typical family with two wage earners.

Real After-Tax Income Per Person Has Risen By 10 Percent – More Than $2,900 – Since President Bush Took Office.

The Economy Has Now Experienced Over Five Years Of Uninterrupted Growth, Averaging 3.0 Percent A Year Since 2001.

The Dow Is Up Over 37 Percent Since The President's Tax Relief Took Effect. The NASDAQ is up more than 50 percent over the same period.

Since August 2003, more than 7.5 million jobs have been created, with 2 million jobs created over the last 12 months.

If this is a bad economy - give me more

 

[Mr.Conley]

every 8-10 years this happens.....forgot what the deal was in 75 and then again in 84 .... then 93 and now 07.....the economy cycles....blame the subprimes......if wall street did invest in stupid shit the sub primes wouldn't exist....

You can look at the that way of course. Eventually something's going to off the economy, but we shouldn't encourage it.

 

[manu1959]

You can look at the that way of course. Eventually something's going to off the economy, but we shouldn't encourage it.

not sure we encouraged it.....there are bad apples in all walks of business and stupid consumers.....the media and wallstreet and to a certain extent the alan greenspans of the world create self fulfilling prophsies....

a large portion of america has been willing the economy to tank...they got thier wish.....they should shut up and be happy

 

[red states rule]

You can look at the that way of course. Eventually something's going to off the economy, but we shouldn't encourage it.

the same way the Bush tax cuts were to cripple the economy?

 

[Mr.Conley]

not sure we encouraged it.....there are bad apples in all walks of business and stupid consumers.....the media and wallstreet and to a certain extent the alan greenspans of the world create self fulfilling prophsies....

a large portion of america has been willing the economy to tank...they got thier wish.....they should shut up and be happy

God, yea. The entire situation with Greenspan was riddiculous. He's been out of a job for a year now and the man can still move markets. Got to give him props for holding that sort of power.

Other then that I agree with you: people are stupid. This whole subprime business is stupid, and might put us in the crapper. The sad thing is that the entire situation could have been avoided. People should have made more informed choices about their loans. These companies should have watched who they were loaning to. The government should have realized the effects the bankruptcy bill was going to have and done better.

All I want is a perfect world. Is that too much to ask?

 

[red states rule]

God, yea. The entire situation with Greenspan was riddiculous. He's been out of a job for a year now and the man can still move markets. Got to give him props for holding that sort of power.

Other then that I agree with you: people are stupid. This whole subprime business is stupid, and might put us in the crapper. The sad thing is that the entire situation could have been avoided. People should have made more informed choices about their loans. These companies should have watched who they were loaning to. The government should have realized the effects the bankruptcy bill was going to have and done better.

All I want is a perfect world. Is that too much to ask?

Years ago libs were bashing banks for have to strict lending requirements

Are you people ever happy?

 

[BaronVonBigmeat]

What's behind the subprime lending debacle? Did consumers and lenders suddenly get stupid for some odd reason? Or, did the federal reserve create a shitload of new money, and then people used it recklessly?

The easy money policy of Greenspan’s Federal Reserve, beginning in the summer of 2000, lured in the suckers: creditors and borrowers. The FED sent a false signal to the credit markets. "Look at the low interest rates today. See? Lenders are ready to lend!" But interest rates were not low because income-seeking private creditors were ready to lend their own money and forego present consumption. Rates were low because the central bank was creating fiat money to buy Treasury bills. There was additional money for buying T-bills, but no reduced consumption of goods and services by lenders. Result? Economic growth and misallocated capital.

This period of monetary expansion ended under Bernanke, beginning in February, 2006. The result a year later is defaulting mortgage lenders and defaulting homeowners.

In order to keep the expected recession of 2001 from becoming a major recession, the FED started printing money in advance in late 2000. Then, to keep 9-11 from causing a stock market collapse, which was beginning to happen, the FED accelerated the rate of monetary inflation.

http://www.lewrockwell.com/north/north518.html

 

[boedicca]

Lenders have been emboldened to take greater risks on home loans due to the Bush Administration's rework of the bankruptcy laws. In turn, they gave credit to anyone with a pulse.

Lenders did make stupid loans (and stupid debtors signed up for them) - but you are mistaken if you think that foreclosing on these loans is going to be good business for them. They are going to be saddled with marginal real estate that will have to be sold for pennies on the dollar in order to liquidate the inventory. I doubt the business plans for these lenders included driving their customers into bankruptcy due to the changes in the law.

 

[jasendorf]

Lenders did make stupid loans (and stupid debtors signed up for them) - but you are mistaken if you think that foreclosing on these loans is going to be good business for them. They are going to be saddled with marginal real estate that will have to be sold for pennies on the dollar in order to liquidate the inventory. I doubt the business plans for these lenders included driving their customers into bankruptcy due to the changes in the law.

Trying to make me feel sympathy for these lenders who will be selling these homes for "pennies on the dollar" isn't working. Why? Because it's a lie. They'll still sell those houses for decent amounts. I've seen it in my neighborhood and others... in fact, I just saw one in my neighborhood which was foreclosed on and sold for less than 1% less than what it was sold for previously in 2003. During that time, the bank likely got a good hunk of the almost-strictly-interest payments and is now selling it for what its worth. That's good business is you can get it.

It has more or less made "home lending" into "renting" only without any obligations for upkeep and maintenance.

 

[boedicca]

I'm not trying to garner sympathy for lenders who extended credit to people who were high risk prospects. All I am claiming is that if the Apolcalyptics are accurate, the flood of foreclosed homes will cause a liquidity crisis for lenders regarding this inventory. It will not be a windfall for them.

 

[jasendorf]

It will not be a windfall only because they exploited the stupid farther than they should have. They saw that it worked with the financially marginal... so they moved on to the group just below them... then the group just below them... problem is that they took their greed to such extremes and believed so strongly in the Bush Administration's bankruptcy changes that they have brought this on themselves.

 

[boedicca]

Then it's rather ironic that Bush's bankrtupcy law changes actually hurt the constituents you think he was trying to benefit.

 

[glockmail]

In other words... "There's a sucker born every minute, and they deserve to be suckered."

Caveat emptor

 

[jasendorf]

Then it's rather ironic that Bush's bankrtupcy law changes actually hurt the constituents you think he was trying to benefit.

Their hurt will be minimal at best... they simply overate at the buffet. It's a great deal until you hurt yourself.

 

[boedicca]

You are contradicting yourself. If the market is suddenly awash with hundreds of thousands of foreclosed homes, prices for houses at that level will collapse, the lenders will have to dump the inventory at low prices thus taking a bit hit. Either this is a catastrophe for them as well as the borrowers, or you are overhyping the issue.

 

[jasendorf]

You are contradicting yourself. If the market is suddenly awash with hundreds of thousands of foreclosed homes, prices for houses at that level will collapse, the lenders will have to dump the inventory at low prices thus taking a bit hit. Either this is a catastrophe for them as well as the borrowers, or you are overhyping the issue.

Will the economy as a whole be hurt? Yes. Will the market be hurt as they try to dump these homes into the market? Yes. Will the stock market eventually be hurt by all the bad loans making their ways into high-risk securities? Yes.

Will the companies that made these loans be hurt to the same extent? No. They've made the money they expected to make and will not take the hit nearly as hard. Why? Because they wrote the original loan... with language that insulates them far more than it insulates all the other players. (Not to mention that manyof these loans will be covered by federal assurances)

 

[boedicca]

I am continuously amused by people who delude themselves that businesses benefit by driving their customers into such a state that they are unable to pay.

 

[red states rule]

I am continuously amused by people who delude themselves that businesses benefit by driving their customers into such a state that they are unable to pay.

Libs said the Bush tax cuts would cripple the economy as well. Libs will never understand basic economics

Besides, to your average lib, businesses are not in business to make a profit - libs see them in business to pay the maximum amount of tax possible to fund government programs

 

[Bullypulpit]

There is plenty of blame to go around in the sub-prime lending game. You've got the stupid mooks who haven't the faintest concept of what the words "self-restraint" mean. You have the mortgage industry bottom-feeders who will cheerfully give these people mortgages. You have home-builders who will sell their new-builds to these people who clearly can't meet the monthly payments in order to get the properties off their books, once that happens it's someone else's problem. It's the same sorry song-and-dance that sent the credit card industry crying to their congressional whores, Democrat and Republican, resulting in the travesty of a bankruptcy law we now have.

My wife wife is an escrow officer and loan underwriter for a high-end title company. The amount of revolving credit debt, even people who don't have to worry about sub-prime lenders, is staggering. She tells me that the average credit card debt she sees is in the neighborhood of $30,000, and savings are a fraction of that.

In a rational society, these people would not be given any loans until they had demonstrated their ability to accept the financial responsibility. The mortgage companies would not extend loans to these people until they had gone through a process, requiring a couple of years minimum, of credit counseling and debt repayment. Builders would not sell their new-builds to those who clearly need to go through the above process I just described.

The unrealistic urge to gratify one's desires, instantly, is driving the whole mess. But, that's a problem that's been building in this country for decades. It's not going to get cleaned up any time soon either.

 

[Bullypulpit]

I am continuously amused by people who delude themselves that businesses benefit by driving their customers into such a state that they are unable to pay.

With the emphasis in markets having shifted from long-term growth to short-term gain, it should surprise no one that sub-prime lenders have been, until recently, flourishing. These sub-prime lenders didn't drive their 'customers' "...into such a state that they are unable to pay...". Many of those 'customers' couldn't pay to begin with. Only by extensive massaging of the loan applicant's income and credit numbers can they be made to appear able to pay. Is it unethical...? Yes. Is it illegal...? Yes. It's called loan fraud, and it is a felony, and it happens every day.

It continuously amuses me that people like you continue to underestimate the power of human greed and stupidity.