[ExI] A new low
J. Andrew Rogers
andrew at ceruleansystems.com
Fri Dec 21 23:38:31 UTC 2007
On Dec 21, 2007, at 2:50 PM, aiguy at comcast.net wrote:
> The goals of the loan bail out problem are four fold as I see it.
> 1. Help customers who were duped into dubious loan terms from losing
> everything by helping them obtain conventional loans even though
> their credit may remain borderline.
Duped? It was people who exercised poor judgement on both sides of
the deal. House flippers and other assorted idiots applying for loans
they clearly could not afford (and willful ignorance is no excuse
before the laws of economics) and lending companies underwriting
objectively dubious investments (and then selling packages to other
companies who did zero due diligence).
Almost everyone that got burned deserved to get burned. The lesson is
not supposed to be "we'll bail you out every time you do something
stupid with your money". What next, is the Federal government going
to cover gambling losses in Las Vegas?
> 2. Prevent runs on the banks that made too many of these loans and
> keep the bank themselves from defaulting and prevent the federally
> insured deposits from having to paid by the government.
Allowing the banks to get burned would be an excellent outcome. Short-
term pain for long-term benefit that would ultimately cost the economy
> 3. Prevent the real estate bubble from collapsing by too many
> homes being repossessed in too short of a period.
This would be a desirable outcome. It would allow people with sound
financials to buy a home that otherwise could not because of idiot-
inflated house prices. There is no right to have one's house
appreciate in value (or at least not lose value) every year, nor would
it be the first time housing markets have deflated in most people's
> 4. Prevent the US economy from entering a recession/depession due to
> 1, 2, and 3.
Get some perspective, mortgages and related are a tiny percentage of
the economy. The day-to-day movement of the stock market creates and
destroys orders of magnitude more wealth than the worst case losses of
the entire sub-prime mortgage fiasco.
> And remember the last time major banks collapsed in the United
> States we had a little thing called the Great Depression.
Completely unwarranted breathless hype.
J. Andrew Rogers
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