Comments on: U.S. senators have deal on housing rescue bill

By: bile

bile — Fri, 23 May 2008 12:18:56 +0000

It’s hard to say where the money is going exactly but very likely food and obviously Wall Street. You can see the volatility of the market in all aspects. I think generally it’s safe to say, yes. Though as the money is debased people tend to invest in things with actual value so likely they’d be buying up commodities anyway. The extra money is just pushing out the timeframe in which some people will be making malinvestments.

By: beetlbumjl

beetlbumjl — Fri, 23 May 2008 12:06:08 +0000

I like your second link bile. On the subject of gov’t created bubbles, do you think the latest round of rate cuts are responsible for excess money sloshing around and finding its way into the oil/food/commodities run up?

By: bile

bile — Thu, 22 May 2008 19:08:38 +0000

It’s right up there with pawnshops, payday lenders, and vulture capital: a blight on society that we will always have with us as long as we have vulnerable people and unregulated “entrepreneurs” to pocket what little money they have.

Give me a break. As if these people who use those services don’t understand what they are getting into. The reason a payday lender exists is because people need to be able to get cash quick. It’s their own inability to live within their means that causes the demand for them. They aren’t vulnerable just bad with money.

Anyway… the guy speaks nothing of government interference. For that look here, here, and more generally here.

By: beetlbumjl

beetlbumjl — Thu, 22 May 2008 14:45:37 +0000

This is an extremely long winded explanation I found last night, but if you bear with it and ignore the editorializing, I think it’s pretty decent.

By: beetlbumjl

beetlbumjl — Thu, 22 May 2008 13:51:31 +0000

Good point. In many cases people either didn’t know what they were getting or were consciously playing hot potato hoping to unload the house before the bomb went off. Time is up and I have little faith that bills like this won’t eventually pull the taxpayer at large into this mess.

By: invisipunk

invisipunk — Thu, 22 May 2008 13:43:22 +0000

I’m a bit ignorant on what all happened during this "crisis". I understand these people got ARMs but people have gotten ARMs before without any problem. What was the economic trigger to cause these people’s rates to go up so high that they had to choose foreclosure? Was this mainly tied to inflation?

By: bile

bile — Thu, 22 May 2008 12:19:31 +0000

There is a difference. I should have been more specific. I meant in this housing bubble subprime meltdown "subprime". According to Wikipedia: In the third quarter of 2007, subprime ARMs only represented 6.8% of the mortgages outstanding in the US, yet they represented 43.0% of the foreclosures started. Subprime fixed mortgages represented 6.3% of outstanding loans and 12.0% of the foreclosures started in the same period. They always talk in the media about raising monthly payments as the reason for the problem and those obviously are ARM.

By: beetlbumjl

beetlbumjl — Thu, 22 May 2008 02:29:11 +0000

I think there is a difference between a subprime loan and one that’s adjustable. Most subprime loans (or at least portions of mortgages) are probably adjustable, but I don’t see why you couldn’t loan money to someone who’s subprime at a high fixed rate. Searching for "fixed rate subprime" returns some hits verifying its existence anyway. Subprime loans have existed for long time, but the criteria to get one has weakened only recently. Exhibit A (though he committed fraud and might not have been subprime, let’s all laugh at him still.)

By: bile

bile — Wed, 21 May 2008 10:34:09 +0000

I think its fairly clear that the GSEs are unconstitutional. Far worse, as with all government agencies, the will do more harm than good. The injection of money outside of the natural flow causes boom busts. It diverts capital into areas which are not optimal. Look at all the price issues we have today. Food, school, energy, housing, healthcare. Each sector the government has heavily intervention and the costs in those sectors have risen far faster than any other. The problem with this and any other bill like it is that they are just proping up bad debt. These people should not have homes. Period. They can’t afford the payments. The prices were artificially high because of the governments bubble but giving these people a break is no different than the government going around guarenteeing loans to businesses which have failed. Its bad business and on a large scale its bad for everyone in the economy. Its a waste of resources.

Beetlbum is right about the math too. These guys are not any smarter than the average guy despite the general “well they know better” attitude many US subjects have. They don’t have the money to be doing this anyway so the whole thing is a dance with the numbers in an attempt to make it look like they are trying.

Can we please try not to use the word “subprime?” Its used to trick people into thinking these loans are something new, different and bad. Subprime is just an adjustable rate morgage and everyone knows what that is.