Tuesday, March 18, 2008

You're on your own

By Libby

Work was brutal yesterday and I had an unexpectedly early call this morning, so I didn't post last night and I'm likely to be off line for most of the day today. I may try to do a quick links at lunchtime and maybe some of the cobloggers will have time to post but otherwise you might amuse yourselves by cruising the comments at this post, which turned out to be a most interesting discussion between Dale Franks of Q & O and a bunch of the regs here.

In any event, this is the last day of my current work rotation so I will definitely be back sometime this evening. And for all those who celebrated St Paddy's Day, I hope that drinking like an Irishman didn't leave you with too big a hangover.
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Blogger lester said...

if you enjoy reading confusing threads alot you can also check out this


gold chronicles. the board is mainly "austrian" so the freidman and krugman-ites might be alarmed. ethics are not really our strong suit

10:07:00 AM  
Blogger rockync said...

I guess I'm late to the party on this one, but after reading the comments, I thought I'd throw out a few of my own.
I don't think we've had a government with the least little concern for the people in 100 years. The federal government has become an entity unto itself. Every politician out there is a self-serving crook with no regard for their constituients. Is it any wonder we all feel so disenfranchised?
That said, every administration has had the power to try to enact changes and regulations that would have prevented the mortgage crisis morass, but failed to do so. Even though lending practices vary state to state, they ALL must comply with federal regulations.
As Mr Franks points out,"For instance, the FDIC--while not perfect--does tend to jump in when consumers complains about predatory lending. The trouble in this case was that...no one was complaining because as long as the homeowner had an asset whose value was appreciating, they could always sell the house, make a ton of money on the sale, and clear the mortgage. Once housing values started to decline...well, it was too late to look into the problem."
But I think he's also missing the point; first "no one" was complaining - that would be the banks who were making record amounts of money off of non-savvy consumers who did not realize until too late that they had been taken by predatory lending practices. The banks made these practices ever easier by offering 100% loans. So then anyone with $500 and even marginal credit could go get a property. Problem was many of these people ended up with ARMs and ballon type loans that ensured the homeowner would be in over their heads within a very short period of time. So no, they weren't complaining - they didn't know they had anything to complain about.
All markets, but especially the so called bubble markets, didn't have a naturally occuring property appreciation; the market values were appreciating at wildly inflated prices because of the lack of supply vs demand CAUSED BY THESE SAME LENDING PRACTICES! Once these borrowers with the outrageous interest rates or maturing balloons could no longer hold on and began losing their homes in record numbers, well the housing prices did just what any moderately informed person (that should have been anyone in the banking industry) should have known they would do; the value dropped like a rock!
I'm a real estate broker in a fairly stable market, and I also handle foreclosure properties. Even we have been affected, though. Early on in this process, when I had to do price opinions on foreclosure properties I had people jumping up and down because just 2 years earlier the value was so much higher. But, it wasn't a true value; it had been artificially inflated by the unprecedented numbers of home loans being generated.
Perhaps, as Mr Franks points out, regulations of banks on a federal level may impede some people from becoming homeowners, but better they get financial counselling, learn to budget and save money so that when they do get that house, they'll be able to keep it.
But that's not all that is creating a negative effect on the economy; now we have these same predatory practices in another virtually unregulated arena- credit cards! Anybody can get one or three or eight. Be late with one payment and your interest rates will go through the roof! Even if your are a responsible card holder, your rates are skyrocketing so the banks can recoup on all the bad cards out there now. Those same people who lost their homes each had cards maxed out to the tune of tens of thousands of dollars.
Get this; I have several cards, most of which I don't use much and don't keep balances on. I received a notice just the other day that one of my cards has been cancelled because I didn't use it enough. Go figure,huh?
Now we have people declaring bankruptcy in record numbers, so what DOES the government FINALLY DO!? Why they protect the card companies (banks) from being included in a bankruptcy. So what happens to people who have lost their homes and are now hopelessly in debt? They add hundreds of thousands of bodies to that area below the poverty line.
It is glaringly ovious that the banks aren't going to behave in a fiscally responsible manner, so our only choice is to regulate some of the worst practices on a federal level so all states will have to comply. I'm no proponent of government interference, in fact I loathe to suggest such measures, but the industry simply won't correct itself. Of course, this is never going to happen because the feds are in bed with the financiers.
Manufacturing has left our shores, we produce no sustainable product to employ and enrich us. I've heard the argument that we produce information systems and technology, but how many of those jobs are now offshore in other countries?
No, we are headed for a bad time. I saw the cracks in the wall a long time ago, so I can't imagine that those "experts" that should have seen this coming didn't.
What will happen now is the divide between the "haves" and the "have nots" will continue to widen at an alarming rate and swallow the middle class whole. We will have the rich and the poor.

11:43:00 AM  
Blogger rockync said...

Geez, that was an excessively loooong rant! Sorry Libby!

11:44:00 AM  
Blogger Libby Spencer said...

LOL Rocky, it was a great rant. You should have left it at the other post though so everybody would read it. It's not too late to copy and paste it over there.

Lester, as you know, I'm not really that interested in economic theory and I'm shocked that thread took off like it did. But I'll try to have a look at your link later. NO time at the moment.

1:37:00 PM  
Blogger rockync said...

OK, I'll copy it over there,too. But you know it does little good. For those who believe no more proof is needed; for those who don't, no amount of proof will ever be enough...

1:55:00 PM  

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