tag:blogger.com,1999:blog-7905515.post6857343321806416331..comments2024-03-14T11:09:32.759-05:00Comments on Falkenblog: Book Review: All the Devils are HereEric Falkensteinhttp://www.blogger.com/profile/07243687157322033496noreply@blogger.comBlogger9125tag:blogger.com,1999:blog-7905515.post-78573064682430866512010-11-16T19:27:51.845-06:002010-11-16T19:27:51.845-06:00There is another type of defaulting borrower who y...There is another type of defaulting borrower who you don't hear much about. These were upper middle class people who put bids in on lots of homes. Many were real estate agents. They got 100% LTV loans to buy the houses on the strength of their high incomes and excellent credit scores, plus the fraudulent claim that they intended to use the house as a primary residence. They immediately listed the house for sale at 20% over what they paid, and never made a payment on the loan. Usually they found a buyer before the bank foreclosed, and walked away with cash. Sometimes they didn't and they walked away, letting the bank sell it for them.<br /><br />This was neither the first part of the mortgage market to unravel, nor was it the biggest. But it was bigger than anything that crashed earlier, and might have been a tipping point. I don't mean we would have been fine without these people, but they accelerated problems at a key time, and shook faith in what looked like high-quality loans. They might have pushed some institutions into panic mode, or over the edge, a bit earlier and harder than would have happened otherwise.<br /><br />I have read no criticisms of these people, nor seen any calls to investigate the issue and punish the wrong-doers, or claw back the profits. Here is a group I can't see any sympathy for. They weren't poor or desperate or yearning for a decent home. They weren't motivated by any possible sense of public good. They clearly violated long-standing and well-understood laws.Aaron Brownhttp://www.eRader.comnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-5424114241488516682010-11-15T07:31:00.229-06:002010-11-15T07:31:00.229-06:00From Jully 2005
http://www.businessweek.com/bwdai...From Jully 2005<br /><br />http://www.businessweek.com/bwdaily/dnflash/jul2005/nf20050726_4208_db013.htm<br /><br />"A Housing Boom Built on Folly<br />Disproportionate tax incentives are keeping the market's rise in overdrive. We need to correct the balance"<br /><br /><br />"It seems that everyone from Wall Street to Main Street to Capitol Hill is watching the biggest housing-market boom in history with awe and dread. Awe because trillions of dollars in new wealth has been created ($5 trillion since 1996) and the home-ownership rate has reached a record 69% of U.S. households. Dread because the boom is attracting so much speculative investing that a growing number of market watchers fear that a bust is inevitable and will end in economic catastrophe.(...)"<br /><br /><br />luckluckyAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-42855515196734207132010-11-12T09:40:11.360-06:002010-11-12T09:40:11.360-06:00There were a number of people who understood what ...There were a number of people who understood what was going on. Look at the archives of the Calculated Risk web site. Or read some of the stuff William Black was writing 15 years ago.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-79358015769365655212010-11-09T15:07:39.152-06:002010-11-09T15:07:39.152-06:00the book makes it clear that everyone was ultimate...the book makes it clear that everyone was ultimately chasing profits, trying to gain or just maintain market share. <br /><br />There you have it ... the core driver of capitalism - profit - created the crisis.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-81908317656294403872010-11-09T01:29:10.472-06:002010-11-09T01:29:10.472-06:00@lovastor
> "dmfdmf is speaking as if this...@lovastor<br />> "dmfdmf is speaking as if this is the first time that the FED has printed money."<br /><br />I am speaking on the assumption that the average reader of Falkenblog understands how the monetary system works and the dangers of unsterilized bond purchases (i.e. QE2) leading to runaway inflation. <br /><br />I am speaking on the assumption that readers can see that the same socio-political dynamics that led to the mortgage crisis (as discussed in Eric's post) will lead to a failure to stop inflation before it escalates out of control. <br /><br />I am speaking on the assumption that others here see the degeneration of the culture and the absence of civility and respect for others and their property and the implications if connected to the above. I.e, if hyperinflation hits (and I think its unavoidable) the under 30 crowd will not politely stand in soup lines like their great-grandparents did but they will riot in the streets and burn down the inner cities thus requiring Marshal Law and the first step to a permanent dictatorship.<br /><br />I am speaking on the assumption that most people here are not so stupid as to play Russian Roulette on the rationalization that the last time you played nothing happened. (i.e., the FED printed money before and got away with it)<br /><br />>"if we had social networks coupled with people whom did not think during the eras of the great recessions and depressions when money was printed and we collapsed into a dictatorship, then his premise might be plausable [sic]."<br /><br />This sentence makes no sense.dmfdmfnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-68286783631958099212010-11-08T23:20:23.440-06:002010-11-08T23:20:23.440-06:00It's disingenuous for you to point out that &q...It's disingenuous for you to point out that "85% of the mortgages were to take money out of a house ('cash-outs'), as opposed to buying a house" and still base your argument against sympathy for borrowers on the premise that "the homes bought with fraudulent statements, teaser interest rates, and no money down, [were not] something they truly owned." You are smart enough that you know plenty of people were sold credit cards, sold crap they didn't need, and then sold a mortgage that put their house on the line in exchange for a lower interest rate than the credit card debt. These are people who understood the terms of neither their credit card nor their mortgage. I too am sometimes fond of the argument that stupid people deserve to lose their money to smart people, but when such a game culminates in stupid people losing their homes that then sit boarded up because the bank can't find anyone else who will pay a reasonable price for them while at least 10% of the nation sits unemployed and growth is in the toilet, it's possible that our "smart people" went a bit too far and destroyed not only their victims but also their own game. You should reckon with this possibility rather than blaming the least sophisticated party, who were sold to by people with very sophisticated marketing, legal and financial plans who nonetheless utterly failed to manage the risk even to their own corporations and shareholders, much less the nation at large.najdorfnoreply@blogger.comtag:blogger.com,1999:blog-7905515.post-31733816799056712602010-11-08T18:48:18.305-06:002010-11-08T18:48:18.305-06:00This is a very good review, balanced and insightfu...This is a very good review, balanced and insightful. I have been especially puzzled by the argument that synthetic CDO's furthered the bubble and made things worse. Any losses were balanced exactly by gains. It seems totally bizarre. <br /><br />You are also correct about the options people were getting to buy homes. If homes had appreciated the same people would have been big winners -- instead they rented at no money down. They took a gamble, the losers were the ultimate savers who invested in these assets.Barry W. Ickeshttps://www.blogger.com/profile/02752613826710235482noreply@blogger.comtag:blogger.com,1999:blog-7905515.post-7000945814130935252010-11-08T15:09:15.702-06:002010-11-08T15:09:15.702-06:00dmfdmf is speaking as if this is the first time th...dmfdmf is speaking as if this is the first time that the FED has printed money. If we had social networks coupled with people whom did not think during the eras of the great recessions and depressions when money was printed and we collapsed into a dictatorship, then his premise might be plausable.Anonymoushttps://www.blogger.com/profile/08609037759679622933noreply@blogger.comtag:blogger.com,1999:blog-7905515.post-60534355756956612352010-11-08T10:56:27.915-06:002010-11-08T10:56:27.915-06:00Great review... but sadly the mortgage crisis seem...Great review... but sadly the mortgage crisis seems so "yesterday". Now, with QE2 & etc, we have the FED brewing a currency crisis and the destruction of the US dollar. The same institutional and government motivations that were behind creating the mortgage crisis are alive and well at the FED. Who can be against jobs, helping the 'victims' of the mortgage crisis and stimulus to get the economy going again? And why cut spending and create Federal, State and Local budgets within our means when the FED can just print more $$$ and rescue us? No need for tough choices. It seems likely any warnings will fall on deaf ears again but the endpoint now is the destruction of the whole US economy and collapse into dictatorship.dmfdmfnoreply@blogger.com