My Santelli-Like Rant For Monday, March 9
CNBC's Rick Santelli started this (see below). Now it's my turn to vent.
I’m angry because so many people bought homes they had to know they couldn’t afford with mortgages they shouldn’t have used.
I’m also angry because somehow many of these same people thought that the price of their home would always rise and interest rates would always fall. If they were told that the price of their home would always rise and interest rates would always fall, why did they believe it? What were they thinking? Better question: Were they thinking? Even better question: Should they ever be trusted to buy a home again?
I’m angry because it’s now my responsibility to participate in fixing this situation. But I’m even angrier with everyone who refuses to look past his or her nose and admit that fixing the situation is necessary. If economic recovery in the U.S. depends on getting the credit markets working, if we can’t get the credit markets working until the mortgage situation is fixed, and if fixing the mortgage situation requires providing some type of bailout to those who bought homes they couldn’t afford with mortgages they shouldn’t have used, why does the notion that this has to be done get so many people angry? Get over it!
I’m angry because it’s so hard to get the point across that helping financial institutions that are in trouble is being done not to bail out those companies but rather to bailout the economy as a whole.
Finally, I’m angry at Rick Santelli, who I thought was a reporter rather than a commentator.
your rant
Do you know whether there's been any estimate of the percentage of loans made since 2005 that appear to involve lender fraud?
Do you know whether there's been any analysis comparing the educational level of those receiving subprime loans and those granting them? More specifically, do you know whether there's been any study documenting the academic study of finance or economics on the part of those who obtained subprime loans? Do you know whether the study of personal finance or economics is part of the mandatory school curriculum in k-12 schools in the US?
Can you describe the evidence in the popular media during the period 1998-2008 that would have led those who obtained subprime loans to conclude that the value of houses does not always go up? Can you name financial commentators who predicted the housing bust and indicate what t.v. and radio appearances they made during this period and what column space they were offered in national and regional papers and magazines?
Can you identify any form of investment someone making the median income could have made during the period 1998-2006 that would have performed as well as an investment in private real estate? If you invested in a savings account, or TIPS or CDs for example, how would your return in this period compare the increase in the value of your home? I understand that these investments are not comparable, but let's for the sake of argument consider the possibility that many do not.
If you had access to any of the information I requested above, would your analysis change?
"Even better question: Should they ever be trusted to buy a home again?" Do you think there's a possibility that rants like yours might obfuscate the moral culpability of those who ran the banks, made the loans and leveraged the securities?
Myself, I actually did ok in the market during the Bush years and even today - because when I read John Snowe's "kindler, gentler SEC" speech, I decided that the market would be run by crooks, enabled by the political elite and cheered on by media. I also knew that I didn't know enough to time a ponzi fraud and went into capital preservation mode. But I was a securities fraud litigator - and I wouldn't expect most folks to share my cynical views about Wall Street and their friends in Congress and the media.
From where I sit the folks who made and profited from this mess have made their bonuses and avoided arrest. Given this state of moral affairs I'm more than happy to help out the homeowners who were screwed, even if their own ignorance and/or wishful thinking were part of aetiology of this mess.
I suppose like Snowe's speech, your rant is an earlier indicator of the conventional rhetoric to come: blame the victim.
Kill the leveraged firms with negative net worth.
Arnold Kling and Peter Schiff have the solution.
Kill these firms. Radically de-leverage the economy.
Kill default swap economy. Kill the overly credit dependent sector of the economy.
Kill the sectors of the economy dependent on Fed generated inflation / credit.
Get back to producing things. Get back to paying for what you have and creating the material wealth that allows you to purchase it.
Don't give more money to the parasites. Kill them.
They draining the life blood of the productive and sound firms.
Kill them.
I am mad that people like
I am mad that people like santelli told people that their houses would rise forever and that interest rates would be low forever. The bank is supposed to manage risk, and allocate capital on a risk reward based metric.
G.E.
It would be interesting to see more analysis and discussion of G.E.
http://www.bloomberg.com/apps/news?pid=20601109&sid=ahTjC_Oo8SkU&refer=home
Immelt Says ‘Armageddon’ Will Leave GE and Him Intact (Update2)
By Rachel Layne and Peter Robison
March 9 (Bloomberg)
Is Credit / Debt the "lifeblood" of the economy?
What Mish said:
http://globaleconomicanalysis.blogspot.com/2009/03/is-debt-lifeblood-of-...
Do borrowers get to decide whether they get a bank loan?
Is it not the entire point of a bank to determine if people can pay off a loan whether it be a personal loan, a business loan or a mortgage. and then make decision whether or not to lend, and (2) at what interest rate.
If you lie on a mortgage application then you have committed a fraud and you have no one but yourself to blame. Otherwise, since when is it anyone's but the bank's responsibility to determine to whom it lends?
How about next we get mad a babies who took candy from strangers.
This is simply history repeating itself over and over again. A flood of investment capital leads to worse and worse projects getting funded. Latin America, then savings and loans, now the entire banking system.