[clue-talk] The stimulus bill

[Angelo Bertolli]

On Fri, Feb 6, 2009 at 9:53 PM, Jed S. Baer <cluemail at jbaer.cotse.net>wrote:

> On Fri, 6 Feb 2009 21:23:30 -0500
> Angelo Bertolli wrote:
>
> > Subsidizing mortgages not withstanding, I think you'd at least agree
> > that the mortgage crisis we're in right now has way more to do with
> > banks/loan officers/whoever not doing their risk assessment "properly."
>
> Can't imagine why you'd think I'd agree with that. There will, of course,
> always be bad loan officers, and bad decisions made in the private
> sector. One of the best remedies for this is to let the market punish
> such actions, as it will, when allowed to do so.


... because it is admitted even by admission of the biggest proponent of
freeing the financial markets (Greenspan).



> But how about examining exactly who it was who incentivized this whole
> housing bubble. This video is oversimplified, but nonetheless informative.
>
> http://www.youtube.com/watch?v=1RZVw3no2A4 (bonus usage of music from
> "Carmina Burana") (and yes, the pro-McCain schtick at the end makes me
> gag)
>
> And bad loan officers and lending institutions could not have gotten away
> with such practices on the scale we've seen without the government's
> foolish meddling. If nothing else, without being propped up by the
> largesse of Fannie and Freddie, investors would have reacted quite
> strongly. Because when money is on the line, bad loans won't get made for
> long -- neither the banks nor their investors can afford it.


Hey, I'm not going to argue with you that it didn't help, but Countrywide
didn't make those loans just because of Fannie and Freddie.  The "predatory
lending" was practiced because the floor hadn't fallen out beneath them ever
before.  They probably at least half believed they were doing their
customers a favor by giving them houses that would increase in value.  But
of course they were going to take their cut.  Before the crisis happening, I
remember thinking "dang houses are getting way to expensive," and being told
"yeah but you still make money because they never go down in value."

I just don't think you can attribute this level of crisis to the subsidies.

I think something also needs to be said about how companies are allowed to
report their earnings and assets.  Again, there needs to be regulation
(which last I heard they were going to relax again because of the crisis) on
how the banks are allowed to report their mortgages.  I mean, is it really
fair if I go around telling everyone that I have $25,000 because I loaned
Jed some money and when he pays it back, that's how much I'll have?

Angelo
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