We Need More/Better Government Oversight

[jcd11235 0]

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Well, I consider myself well-respected in the field of common sense.

Respecting one's own knowledge on a topic and being respected by one's professional peers are two wholly different things. For example, I bet W. considers himself to be a good, if not great, president.

Besides, common sense does not always lead to the correct answer, and is rarely an adequate substitute for knowledge.

Common sense says Time in transit for an object can be found by dividing distance traveled by the velocity.

Common sense says a fair coin, observed from start to finish, and flipped without any intent to manipulate the results, has an equal probability of landing on either side.

Common sense says the Monty Hall problem offers a choice with 1:1 odds.

In each case above, common sense leads to an incorrect solution.

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If people are dumb enough to get themselves locked into a loan they cannot pay for, it's their fault.

Yes, the borrowers share in the blame. No one is denying that. But the lenders and the fed are also to blame.

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Of course, your actuaries would be out of the job if they admitted it was that simple.

Comments like these make it apparent that you have little idea what actuaries actually do, or why they are good sources of information on these sorts of topics.

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[Lefty 0]

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The loans, and the terms, are all disclosed.

See, this is what I'm talking about. To be clear, I stopped talking about the housing crisis at large after my first post in this thread. From then on it's been about the responsibility of individuals to look out for their own necks. The loans and terms are disclosed to the borrowers. Therefore, if the borrower accepts the deal, it's their fault if it was a rotten deal.

Provoking a reaction isn't the same thing as saying something meaningful.
-Calvin

[CanuckInUSA 0]

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If I eat food I know is contaminated I should not blame others for my choices.

What if you eat food that you purchased at the grocery store and that you assume was safe but in reality was contaminated? I am all for personal responsibility, but we make assumptions about the food supply and sometimes the food supply is tainted with things like e-coli. I am going to stay out of the mortgage debate, but I would like to know that the food at the grocery store is safe to eat. But this isn't always the case.

Try not to worry about the things you have no control over

[Lefty 0]

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Well, I consider myself well-respected in the field of common sense.

Respecting one's own knowledge on a topic and being respected by one's professional peers are two wholly different things. For example, I bet W. considers himself to be a good, if not great, president.

Besides, common sense does not always lead to the correct answer, and is rarely an adequate substitute for knowledge.

Common sense says Time in transit for an object can be found by dividing distance traveled by the velocity.

Common sense says a fair coin, observed from start to finish, and flipped without any intent to manipulate the results, has an equal probability of landing on either side.

Common sense says the Monty Hall problem offers a choice with 1:1 odds.

In each case above, common sense leads to an incorrect solution.

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If people are dumb enough to get themselves locked into a loan they cannot pay for, it's their fault.

Yes, the borrowers share in the blame. No one is denying that. But the lenders and the fed are also to blame.

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Of course, your actuaries would be out of the job if they admitted it was that simple.

Comments like these make it apparent that you have little idea what actuaries actually do, or why they are good sources of information on these sorts of topics.

My comments about common sense and actuaries were tongue-in-cheek. As far as the mortgages go, I'll keep saying it until I'm blue in the face that on an individual basis, the terms and conditions of the loan were spelled out to the customer. The lender and the borrower can speculate all they want to about the future of the housing market and how it may or may not sweeten their deal, but ultimately both parties agreed to the contract as it was written on the paper.

Provoking a reaction isn't the same thing as saying something meaningful.
-Calvin

[lawrocket 3]

Out of all of the people that I have spoken to, I have not seen ONE SINGLE INCIDENT where the terms of the loan were not disclosed. Not a single one of them.

How do people feel when someon sues a dz and complains that "I wasn't told I could break a femur doing this." Or, "I had no idea the sport was so dangerous."

Really? It says so right there on the waiver you signed.

"Well, I thought it was just a scare tactic. I didn't think they actually MEANT it. It's so unfair." You'd tell that person to stick it where the sun don't shine.

So, what we have are thousands of Scott Lutz's out there, "I didn't expect for my parachute to come off." "I had no idea I should dhave steered away from the power lines." Only now people are saying, "We need governmental oversight to prevent Scott Lutz from pulling his cutaway handle instead of his BOC! We need regulations to make sure that no parachute can land in the vicinity of power lines!"

My wife is hotter than your wife.

[Lefty 0]

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If I eat food I know is contaminated I should not blame others for my choices.

What if you eat food that you purchased at the grocery store and that you assume was safe but in reality was contaminated? I am all for personal responsibility, but we make assumptions about the food supply and sometimes the food supply is tainted with things like e-coli. I am going to stay out of the mortgage debate, but I would like to know that the food at the grocery store is safe to eat. But this isn't always the case.

Lawrocket made a better post than mine regarding this argument on the previous page, take a look at that.

Provoking a reaction isn't the same thing as saying something meaningful.
-Calvin

[Lefty 0]

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Out of all of the people that I have spoken to, I have not seen ONE SINGLE INCIDENT where the terms of the loan were not disclosed. Not a single one of them.

How do people feel when someon sues a dz and complains that "I wasn't told I could break a femur doing this." Or, "I had no idea the sport was so dangerous."

Really? It says so right there on the waiver you signed.

"Well, I thought it was just a scare tactic. I didn't think they actually MEANT it. It's so unfair." You'd tell that person to stick it where the sun don't shine.

So, what we have are thousands of Scott Lutz's out there, "I didn't expect for my parachute to come off." "I had no idea I should dhave steered away from the power lines." Only now people are saying, "We need governmental oversight to prevent Scott Lutz from pulling his cutaway handle instead of his BOC! We need regulations to make sure that no parachute can land in the vicinity of power lines!"

Well put.

Provoking a reaction isn't the same thing as saying something meaningful.
-Calvin

[lawrocket 3]

However, as a continuation...

People seem to be forgetting (not zippo - he's got a handle on the grand scheme) that these banks were ALSO taking stupid risks. And they are paying the price - in droves.

The banks are suffering. have a look at this website: http://ml-implode.com/

And, to go back:

The companies providing insurance to the bonding companies ARE facing some serioius troubles. Some insurers are lookign at splitting up - to separate their municipal business from the CDO business. Warren Buffet's offer was funny - he only wanted the municipal part of it. He wouldn't touch the CDO.

The fact is, the municipal business is keeping these companies afloat. Wihtout it, these sureties would go under. The bond insurers would suffer a lowered credit rating, with a ripple on the bonds themselves suffering a lower rating.

The problem faced is that these bonding insurers - and surety companies themselves - made quick profits without appreciating the risk profiles. They got caught up in the moment and dviated from good practices - much like the unsavvy buyers.

If these companies were to tank there would be a pretty big ripple. But a goverment bailout would, in my opinion, be a disgusting corporate subsidy.

My wife is hotter than your wife.

[jcd11235 0]

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Was government oversight necessary in the dot com bubble?

That still has nothing to do with the mortgage crisis. That was a new market, and even the experts did not know how the market would behave over the long term, since there was a lack of historical data. Economists have a pretty good understanding of how the housing market reacts to different stimuli, since there is an abundance of historical data.

However, let's imagine for a minute that the two are similar, despite significant differences, just for argument's sake. Who was the Fed chairman during the dot com bubble and the recent housing bubble?
Hint: It was the same person during both periods.
Why would a previous policy mistake mitigate the responsibility for this one? Are you implying that two wrongs make a right?

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Resell them to whom? That's right - OTHER BANKS!

No, not typically. In relatively rare cases when a bank needed to diversify its portfolio to include more long term, low interest investments backed by real property, perhaps one bank might purchase mortgages from another bank, but most banks are not short on mortgages. More commonly, the mortgages are rolled up en masse and sold to investors on the secondary market, such as Fannie Mae or Freddie Mac. I don't believe either of those organizations claims to be a bank.

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[lawrocket 3]

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Was government oversight necessary in the dot com bubble?

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That still has nothing to do with the mortgage crisis. That was a new market, and even the experts did not know how the market would behave over the long term, since there was a lack of historical data. Economists have a pretty good understanding of how the housing market reacts to different stimuli, since there is an abundance of historical data.

There were a bunch of rookies engaged in it - it was new to them, as well. Gramm-Leach-Bliley brought a bunch of other players in it. The bonding insurers (sorry zippo, I think I've figured out what you were saying) had never really gone in so much for the CDO bonds and it was pretty untested territory for them. Ambac and MBIA went through induring these bonds WITHOUT real due diligence.

Again - it was untested. New ideas and new ways of trying things led to some issues.

And as far as the tech bust, yeah, experts DID know how it would perform. Experts know that companies that do not turn profits will fail. Experts know that pumping $10 million into a couple of super bowl ads to generate business for a 6 month old company is not good for debt ratios. Experts know that stock options are risky ways to pay employees. Experts knew that the MASSIVE investment into the dot com industry was going to do well for some, and destroy far more.

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Why would a previous policy mistake mitigate the responsibility for this one? Are you implying that two wrongs make a right?

No, I am not saying that. What I am saying is that the gnerate public seems to have short memories. We were five fucking years off of a mania bust and right into a new one.

My wife is hotter than your wife.

[jcd11235 0]

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on an individual basis, the terms and conditions of the loan were spelled out to the customer. The lender and the borrower can speculate all they want to about the future of the housing market and how it may or may not sweeten their deal, but ultimately both parties agreed to the contract as it was written on the paper.

I don't disagree. What I disagree with is your assertion that only the borrowers are to blame. That assertion is incorrect, and cannot supported by the facts. As you stated, "both parties agreed to the contract as it was written on the paper." Thus, both parties share in the responsibility for agreeing to terms the debtors are unable to comply with. Creditors are not without blame if they make loans to debtors that cannot afford to pay back those loans, or if they accept insufficient collateral on those loans.

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[kallend 2,150]

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Sorry, but as a believer in personal responsibility I do not accept your rationale.

Should we all be personally responsible for testing our food for e-coli, salmonella, listeria, or prion contamination?

Nice try. If I eat food I know is contaminated (or take out a loan I know I cannot afford) I should not blame others for my choices.

How do you know it to be contaminated if you haven't tested it and it's NOT the government's job? Are you a microbiologist?

...

The only sure way to survive a canopy collision is not to have one.

[kallend 2,150]

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Sorry, but as a believer in personal responsibility I do not accept your rationale.

Should we all be personally responsible for testing our food for e-coli, salmonella, listeria, or prion contamination?

This is a different story. I compare it to eating food after the expiration date on the chance that it will still be good.

If there was a disclosure statement on the food that said, "This food is presently safe and affordable. But, in three days, this food will be bad and your system may not be able to tolerate it and it will make you sick. So, think clearly about whether you will be eating it later on."

.

Nice dodge.. WHO is assumed to know that the food is safe in the first place, if the only responsibility for testing it is your personal responsibility? Do you trust the store and the entire supply chain? Are you a microbiologist with the necessary skills to make your own determination, or just a lawyer?

Do you believe that the government has a role in assuring the safety of our food, or is it 100% our own job to do it?

...

The only sure way to survive a canopy collision is not to have one.

[jcd11235 0]

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Out of all of the people that I have spoken to, I have not seen ONE SINGLE INCIDENT where the terms of the loan were not disclosed. Not a single one of them.

In a legal sense, the "fine print" of a contract may well be adequate disclosure. In the real world, however, that is not always the case. People are often rushed through closings. I've also heard first hand accounts from people who arrived at closing only to find the contractual terms to be substantially different from the terms expected based on previous communications with the lenders. Some home buyers had no realistic alternative to going forward with the purchase. For those buyers, it doesn't really matter if they were forced to sign by the lender or because of circumstances, they felt compelled to sign anyway.

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[kallend 2,150]

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Out of all of the people that I have spoken to, I have not seen ONE SINGLE INCIDENT where the terms of the loan were not disclosed. Not a single one of them.

How do people feel when someon sues a dz and complains that "I wasn't told I could break a femur doing this." Or, "I had no idea the sport was so dangerous."

Really? It says so right there on the waiver you signed.

"Well, I thought it was just a scare tactic. I didn't think they actually MEANT it. It's so unfair." You'd tell that person to stick it where the sun don't shine.

So, what we have are thousands of Scott Lutz's out there, "I didn't expect for my parachute to come off." "I had no idea I should dhave steered away from the power lines." Only now people are saying, "We need governmental oversight to prevent Scott Lutz from pulling his cutaway handle instead of his BOC! We need regulations to make sure that no parachute can land in the vicinity of power lines!"

I think you are missing the point because you are a professional whose job is to read and understand "the fine print". You'd probably be at a loss to figure out if your food was safe or if a component on an airplane was about to fail.

Other people have different skill sets from yours. I imagine there are people who can make determinations on food safety or product safety for themselves, but haven't a clue about contracts. I have been an expert witness on a number of engineering failure cases where people with no engineering expertise got themselves hurt or killed in situations that would make any engineer's hair stand on end. OTOH, I have a really hard time understanding the arcane details of the bond market or the derivatives markets.

...

The only sure way to survive a canopy collision is not to have one.

[jcd11235 0]

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And as far as the tech bust, yeah, experts DID know how it would perform. Experts know that companies that do not turn profits will fail.

Experts also know that new companies often have a few years, sometimes several years, of losing money before they begin to turn a profit. Amazon was a company that did not anticipate making any profit for several years, yet did not fail.

The dot com bust didn't occur because companies weren't making profits. It occurred because the companies were being sold at inflated values, since no one really knew how to value companies in an industry based on companies whose assets were largely intangible, who offered goods and services that also were largely intangible, and often new.

Math tutoring available. Only $6! per hour! First lesson: Factorials!

[billvon 3,120]

>How many million of pounds of tainted beef do we have to feed to our
>kids at lunch before we take this seriously?

If you "take it seriously" then buy better food for your kid.

>I have never heard as many food system horror stories than with the
>Bush admin in charge.

I heard about an equal number during the Reagan and Clinton years.

>The ENTIRE mortgage mess that we are dealing with now is due
>ENTIRELY to the fact that the market is unregulated.

What mess? People made dumb purchases and then paid the price for their stupidity. Companies made dumb loans and are now suffering. That's as it should be.

>Also, speculation needs to be removed from food and energy markets.

?? So you want government to better regulate markets, but you also want to them to take action to cause a market crash? Because removing speculative investment would do just that, and make 1929 look like a day in the park.

[kallend 2,150]

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>How many million of pounds of tainted beef do we have to feed to our
>kids at lunch before we take this seriously?

If you "take it seriously" then buy better food for your kid.

.

How do you determine what is "better"? Are we all supposed to be able to determine for ourselves if the lettuce we buy at the supermarket was tainted with e-coli in the fields 2,000 miles away?

...

The only sure way to survive a canopy collision is not to have one.

[billvon 3,120]

>How do you determine what is "better"?

Choose a supplier you trust. Alternatively, choose food certified to a given standard, like ISO 22000:2005, by an independent organization. Alternatively, just trust the government. Take your pick.

>Are we all supposed to be able to determine for ourselves if the lettuce we
>buy at the supermarket was tainted with e-coli in the fields 2,000 miles
>away?

Nope. But we can read and see what the food is certified to (if anything.) And I can guarantee what I grow in my back yard. (Well, a bird might poop on it, but I can live with the risk.)

[kallend 2,150]

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>How do you determine what is "better"?

Choose a supplier you trust.

You mean, one that hasn't YET made anyone sick?

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Alternatively, choose food certified to a given standard, like ISO 22000:2005, by an independent organization. Alternatively, just trust the government. Take your pick.

>Are we all supposed to be able to determine for ourselves if the lettuce we
>buy at the supermarket was tainted with e-coli in the fields 2,000 miles
>away?

Nope. But we can read and see what the food is certified to (if anything.) And I can guarantee what I grow in my back yard. (Well, a bird might poop on it, but I can live with the risk.)

I think even you would have a hard time becoming self-sufficient in food AND holding a job as an engineer.

...

The only sure way to survive a canopy collision is not to have one.

[Lefty 0]

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on an individual basis, the terms and conditions of the loan were spelled out to the customer. The lender and the borrower can speculate all they want to about the future of the housing market and how it may or may not sweeten their deal, but ultimately both parties agreed to the contract as it was written on the paper.

I don't disagree. What I disagree with is your assertion that only the borrowers are to blame. That assertion is incorrect, and cannot supported by the facts. As you stated, "both parties agreed to the contract as it was written on the paper." Thus, both parties share in the responsibility for agreeing to terms the debtors are unable to comply with. Creditors are not without blame if they make loans to debtors that cannot afford to pay back those loans, or if they accept insufficient collateral on those loans.

I completely understand your point, and it is a good one. The lenders are indeed to blame in part for making a deal with a debtor who can't pay, but only in regards to whether they themselves profit from that deal or not. What I am talking about is from a legal standpoint, the contract was entered into knowingly and willingly by both parties. The creditors accept a certain risk in that the debtor may not be able to pay them back. The debtor accepts a risk in that if they are not able to pay, there will be consequences. If the two parties find the risks vs. rewards acceptable, then there is no reason each party should not be held to bear the consequences if their end of the deal sours. Again, I am only referring to the dealings between an individual and a mortgage broker. The larger "mortgage crisis" is something else entirely.

Provoking a reaction isn't the same thing as saying something meaningful.
-Calvin

[billvon 3,120]

>You mean, one that hasn't YET made anyone sick?

Yep. Any inspection/certification/quality program can miss things. The good ones don't miss much.

>I think even you would have a hard time becoming self-sufficient in
>food AND holding a job as an engineer.

Fortunately, Amy has a rigging business that she operates out of the house, so she's home most of the time!

But in any case, I have no desire to be self-sufficient. During the summer when we are growing a lot we get at most 30% of our food from our garden/trees, mainly citrus, avocado, beans, peas, tomatoes, broccoli, squash and peppers. A few melons. Now if I could just figure out what to do with all those vietnamese guavas . . .

[jcd11235 0]

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Again, I am only referring to the dealings between an individual and a mortgage broker. The larger "mortgage crisis" is something else entirely.

On an individual basis, yes, I agree. The problem were seeing now is that common practices, such as stated income loans and ARMs that are not indexed to anything meaningful, have caused an unusually high number of people to default on their mortgages. Combined with falling housing prices, this affects far more than an individual lender and borrower; it has detrimental effects on a large portion of the entire economy.

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[lawrocket 3]

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I think you are missing the point because you are a professional whose job is to read and understand "the fine print".

There is very little fine print to these things. Much like a skydiving waiver. It's pretty easy to comprehend.

On top of that, who out there DIDN'T know that they were getting an ARM? Those who got them KNEW it was an option - not a fixed.

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Other people have different skill sets from yours.

Yes. And it's good to put this out to all - "PEOPLE! A couple of hundred bucks spent on an attorney BEFOREHAND can save you tens of thousands in the future." I've only had, in all my years, TWO people want their money back after speaking to me - and they were both unhappy with me saying, "You're screwed."

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OTOH, I have a really hard time understanding the arcane details of the bond market or the derivatives markets.

I understand that. But this isn't understanding the complexities like that. The are confusing when secured by deed of trust or mortgage. But, everybody I have seen has had the numbers pretty clearly printed and easily understood.

Word to the wise out there - Don't sign stuff you don't read. If you don't understand, ask questions.

Most of them I spoke to actually could explain to me EXACTLY what they were getting into. And now it's a raw deal for them.

I spoke to one lady who bought her house in 1994. She pulled out 60k in 2003. Refinanced again for 92k in 2004. Refinanced to pull out $180k in 2005. And then for $350k in 2006, taking $160k for herself! The home was worth $350 in 2006. She couldn't afford it. "Where did that last $160 go?" To lots of things. And the house was now worth $270 and getting foreclosed.

This was NOT the person you speak of, but someone rather common (though the most extreme).

You shouldn't have problems with a statement that says, "monthly payment of _____.
Adjust to _______ after 12 months with a maximum monthly payment of ________.
Adjusts to _____ after 24 months with a maximum monthly payment of ______."

And they are surprised when the payment increases $500 when they KNEW it could have increased by $800.

My wife is hotter than your wife.

[kelpdiver 2]

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The dot com bust didn't occur because companies weren't making profits. It occurred because the companies were being sold at inflated values, since no one really knew how to value companies in an industry based on companies whose assets were largely intangible, who offered goods and services that also were largely intangible, and often new.

This sounds exactly like the housing boom/bust. Sold at inflated prices, lots of people rushing in to make a buck without experience in the purchase/sale of assets with intangible value.

Governments have been trying to smooth out economic cycles for a long time and they still aren't able to. Saying "increased oversight" would solve this problem is ridiculous. They laid the groundwork for this one - in addition to changes Lawrocket mentioned, I'll point out the tax code change in 96 or 97 giving the 250/500 exemption on sales, and the incredibly cheap money supply in 2002. This wasn't just a Bush action, so expecting that these same people can do more to prevent it later is silly.

This is a self correcting problem, and I think we'd be better off swallowing the pain now rather than prolonging it. Banks that overextended can take losses or go out of business. People who haven't been paying their mortgage for the past 6 months or year can get throw out - no more rent free living. They might have lost their house, but having paid nothing for it, did they really lose it, or just borrow it for a while?

As for meat - probably should have its own thread. But there are definitely ways for consumers (well, certainly around here) to pay for quality.