America's new subprime shanty-towns

Stefan Jones

Not Hooverville.

Bushton. Roveston. Greenspan Heights.

bardfinn

#76:

Uhm, have you not been paying attention?

The Federal Government is funded by us, down here, in the lower-to-middle-class. George Bush’s administration gave the ultra-wealthy many, many tax breaks.

The rich are rich because they figured out ways to not have to give up money that came into their hands.

Having the federal government ‘bail out’ this problem is like bailing from one boat into another.

P.S.: Encouraging people to not pay the debts that they are /legally required/ to pay is Incitement – in and of itself a crime. I’m not a lawyer, so don’t take my word for it, ask your own lawyer.

goose bandit

Oh, man. This story just keeps getting worse. Another article about Tent City, from the front page of today’s LA Times “California” section:

Ontario Stakes out its new rules for Tent City

noen

Chimpyville.

Crunchbird

Wow, that’s a misleading headline . . . this story describes one tent city in one California community, where the overwhelming majority of the population are homeless for reasons unrelated to the sub-prime mortgage issue. I’d say the reason Cory hasn’t seen “this” story in the US media is because “this” story as he’s defining it doesn’t actually exist.

Takuan

well done America!

We look forward to a cultural renaissance and blossoming of gritty new art and writings in the grand tradition of the Dust Bowl and the Gangster Years!

The film alone will be magnificent! Too bad about all the blighted lives, misery and suffering. Ahhh, well, whaddya gonna do?

zuzu

@ RRSafety

First, whoever said Bear Stearns is insulated from their actions, they lost 98% of their value and lost the company over the course of 12 months. That is not insulation, so your argument fails.

There is a huge difference between “bailing someone out” (which the government has specifically not done) and providing liquidity to the system. … But then again, if you don’t even know the very basics of what the problem is, how could you possibly identify a possible solution even when it is being carried before your very eyes.

The problem is inflation. Creating more inflation to stave the withdrawal symptoms is not a solution. “Creating liquidity” is creating inflation! Having the Federal Reserve give JP Morgan a “discount window loan” and forcing them to buy Bear Stearns at $2/share with that money is a bail-out. Bear Stearns should fail like any other insolvent business would have to; anything else is corporate welfare.

Furthermore, there is a big difference between the fact that investors know Bear Stearns should fail which is what their collapsed stock price indicates, and the market action of actually going insolvent. Stock price is really only tangential to the cashflow of a business. Stock price has as much to do with the solvency of a business as a fuel gauge has to do with gasoline providing fuel for your car.

zikzak

There seems to be a lot of talk about how the people who are losing their homes are to blame, that they made a bad financial decision and should have read the contract with a lawyer, etc.

I was thinking about another common cause of recession – people getting laid off and fired, and how you can make the same kind of hard-line personal responsibility argument:

“Look, those people got those jobs knowing they could be fired at any time – they should’ve read their employment contract more closely. If they were smart they would’ve gone to night school and studied to become tenured professors! They made a gamble to stake their livelihood on a risky factory job, and now they have to take responsibility for it.”

It’s interesting how the same argument seems absurd when taken out of the context of loans and debt. I think this is because we have a deep cultural ethos linking debt to a sense of personal responsibility – if you can’t or won’t pay back what you owe, you’re worthless and a social failure…much more so than if you just lose your job.

Charlie Wade

I’m sorry but for most of them, there is something more than just getting their house repo’d that is making it that hard for themselves. Getting your house repo’d doesn’t preclude you from doing what the rest of us do: rent.

I think we need to get away from feeling sorry for people because they were greedy and/or stupid and get into a house they would inevitably be unable to afford.

I feel badly for them that they are homeless, as I do for all homeless people. But to blame their homelessness on having their home repossessed? I just don’t buy that.

Takuan

“if you can’t or won’t pay back what you owe, you’re worthless and a social failure…”

only if it’s under a million

Marshall

You didn’t hear about it from the US media, because the whole country is in serious denial. Get ready to wallpaper your tenements with dollars folks!

Takuan

All very well and good for you if there are just a few poor people. What will you do and say when they grossly outnumber you?

noen

America was conned – who will pay?

Indeed, it is somewhat surprising that there is not already rioting in the streets, given the gigantic fraud perpetrated by the financial elite at the expense of ordinary Americans.

There’s still plenty of time for that. Now where did I put that length of rope?

Ghetto_Stiletto

Wow. I just watched John Carpenter’s “They Live” and my friends and I were making fun of the “Hooverville” that Roddy Piper et al. were living in — though it did remind me of areas in Echo Park and East LA. These people better find themselves some SUNGLASSES, fast!

willibro

Taku, that might be your aftershave. But if so, don’t mourn, organize:

Long-haired preachers come out every night
To tell you what’s wrong and what’s right
But when asked how about something to eat
They will answer in voices so sweet:

You will eat, bye and bye
In that glorious land above the sky
Work and pray, live on hay
You’ll get pie in the sky when you die.
That’s a lie

And the starvation army they play
They sing and they clap and they pray
‘Till they get all your coin on the drum
Then they’ll tell you when you’re on the bum:

You’re gonna eat, bye and bye, poor boy
In that glorious land above the sky, way up high
Work and pray, live on hay
You’ll get pie in the sky when you die
(Dirty lie)

Holy Rollers and jumpers come out
They holler, they jump, Lord, they shout
Give your money to Jesus they say
He will cure all troubles today

And you will eat, bye and bye,
In that glorious land above the sky, way up high
Work and pray, boy, live on hay,
You’ll get pie in the sky when you die.

If you fight hard for children and wife
Try to get something good in this life
You’re a sinner and bad man, they tell
When you die you will sure go to hell

You will eat, bye and bye
In that glorious land above the sky
Work and pray, live on hay
You’ll get pie in the sky when you die

Workingmen of all countries, unite
Side by side we for freedom will fight
When this world and its wealth we have gained
To the grafters we’ll sing this refrain:

Well, you will eat, bye and bye
When you’ve learned how to cook and to fry
Chop some wood, it’ll do you good
You will eat in the sweet bye and bye

Yes you’ll eat, bye and bye
In that glorious land above the sky, way up high
Work and pray, and live on hay
You’ll get pie in the sky when you die
That’s a lie….

Takuan

Leading Economic Writer: Financial Meltdown A “Gigantic Fraud”
Says Americans “duped” by “serpent-tongued” elite

Steve Watson
Infowars.net
Monday, March 17, 2008

Propel This! – Submit to Propeller.com

A leading economic journalist has described the current financial crisis as a “gigantic fraud”, the fallout of a deliberate and preconceived profit agenda to enslave the middle classes in a debt bubble.

The economics editor of the London Guardian, Larry Elliott, has hit out at the global financial elite in a refreshing piece that marks a rare shift away from the establishment hackery we are used to from the corporate media.

In an article titled America was conned – who will pay? Elliot writes:

Indeed, it is somewhat surprising that there is not already rioting in the streets, given the gigantic fraud perpetrated by the financial elite at the expense of ordinary Americans.

[...]

justONEguy

@#4 posted by Charlie Wade , March 17, 2008 9:32 PM

People conned into a sub-prime mortgage, often when they were not told of other options or if they were presented with distorted facts could hardly be called “greedy and/or stupid”. Don’t lose sight of where the real greed lies in all of this: the bankers and the credit corporations that since the Reagan deregulation orgy have had carte-blanche.

Xodarap

Silly BBers… The whole reason that there’s a “Chicken or the Egg” debate about *some* things is *because* that debate is purely academic (ie, merely philosophical). In THIS case, we know which came first: the lending industry saw an opportunity for profit via the gross misleading and manipulation of a gullible/greedy/desperate/whatever public. The reason that the con artist is at fault in a scam is just as much a causal reason as it is a matter of intent. Here we have both: causal and intent. They set up an “operation” with malicious intent. After that, it doesn’t MATTER *why* people bought into it. It doesn’t matter if the people bought into it because they were greedy or stupid. Regardless of pragmatics and legality, both the malicious intent and the premeditation leave the lending industry squarely at fault.

Ethics classes should be mandatory…

Takuan

ah,the memories! The fat, lazy bluebottles, the congregation vainly wafting the sticky air with japanned fans and the wheezing of the pump organ…

Halleluah brother!

zuzu

America was conned – who will pay?

“The politics of failure have failed. We need to make them work again.”

Of course, a “new New Deal” will be born of exactly the kind of state of emergency where we’ll really see the fascism kick into high gear. Each successive day is looking more and more like Alex Jones will be vindicated.

noen

HA HA, beat ya.

Antinous

Getting your house repo’d doesn’t preclude you from doing what the rest of us do: rent.

Try renting with a low FICO and a foreclosure on your record. Landlords do check, you know. Most people who get foreclosed spend every last dime trying to prevent it. That leaves them with no first /last/deposit. It’s not that simple.

Antinous

However, America wasn’t conned. America bought houses that they couldn’t afford. Then America pulled non-existent equity out of those houses so that they could buy Hummers. America was greedy.

Zed

2004: Alan Greenspan tells us how we’re wasting money with fixed-rate mortgages and how “American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage.”

And now Americans have alternatives to traditional houses.

Takuan

it’s not NICE to beat the elderly….. and treacherous

wolfwitch

Others have said similar, but I wanted to chime in…

I’m kinda disappointed at some of the “tough shit” posts here. These people didn’t necessarily KNOW the trouble they were getting into. Believe me- new home salesmen in particular a few years ago should have the same reputation as a lot of car salesman. You could walk into any development anywhere with terrible credit and dubious income and they would put you into any home you wanted. Builder’s buy-down incentives and variable-rate mortgages with no-money-down made it relatively easy. They all sold people on the “American Dream” of home ownership. Was this a mistake? Of course- but it’s more the fault of the banks and builders that did it than the people who were enticed by it.

It’s important to keep in-mind too- everyone expected housing prices to continue to go up (even though real estate has been artificially high in many parts of the country for years) and at least hoped that interest rates would stay low. The majority of people don’t “expect” that the economy is going to tank. They also have a reasonable expectation that their wages will increase as time goes on, which also didn’t happen for most.

There are a lot of people in really bad situations right now- and just callously blaming them for it is wrong. The blame lies with the banks and other corporations who were responsible for allowing the situation to happen to begin with, and with the government for their complete lack of any real economic plan (short of bailing out said banks and corporations, and their multi-millionaire board members).

And- just TRY renting somewhere with bad credit. It doesn’t happen. You can live in a cash-only run-down motel, but you are probably safer and better off on the street or in a tent on a vacant lot. You can’t even get into a trailer park without good credit anymore.

mgabrysSF

re: rentals – you can rent with bad credit as long as you have income and a good rental record. My rental record is spotless, and I haven’t had any problems getting apartments. My general credit rating is slowly getting back to health.

I’m guessing the people who think otherwise have either jerked their landlord around or haven’t rented to any large degree.

paddysat

Charlie (#4), I agree with you. The loans that these mortgage companies were offering should NEVER have been allowed in the first place. All of these foreclosures are happening due to those horrible, misleading variable interests loans. These “home owners” took a HUGE gamble accepting these loans when the ceiling was apparent.

I too feel badly for the loss of their homes but WTF were they thinking to accept these HORRIBLE loans in the first place!?! I too have sympathy but I also admit that my sympathy is limited.

If you are offered a home loan where your first year (or more) of payments goes toward the interest and nothing toward the principal – gambling on a hypothetical increase in property value – then you cannot afford to buy a home.

It is really sad that this is happening. Yet again, I am ashamed and embarrassed for my country.

willibro

Takuan, thanks so much for the musical interludes starting @#43. It’s been a long time since I was reminded of “O Lucky Man”, not to mention Al Smith or Horst Wessel. And as usual, yours are, by far, the most *useful* contributions to this discussion.

Antinous

Can I patent the phrase “compassionate but unsympathetic”?

noen

Already taken by Bush, Antinous.

Takuan

Well, if the credit rating stigma is so dire, then time for a new industry fabricating new identities and new credit ratings. Where’s the crime in starting over with a new name, if you aren’t intending to steal?

zuzu

However, America wasn’t conned. America bought houses that they couldn’t afford.

Yet for some reason investment banks such as Bear Stearns (and soon Lehman Brothers) are insulated from the consequences of their reckless lending by the central banking system with bail-out money creation from the Federal Reserve. How odd.

Who are we scapegoating again? Is this like blaming the USA economy circling the drain on “building too many houses”?

zuzu

Ethics classes should be mandatory…

Certainly not. We have too many normative judgments in education as it is. “Business ethics” classes are a euphemism for “moral hygiene”.

The problem is essentially classist: a select few are privileged by the government to have a different set of rules to play by than everyone else. This classism is caused by monetary policy, and monetary policy exists fundamentally because governments do not want to admit that economies are complex systems beyond their control. Else government would lose its God-like status in the eyes of the people — that government can fix any situation by people voting for it.

Antinous

I’m guessing the people who think otherwise have either jerked their landlord around or haven’t rented to any large degree.

Since the post is about people whose homes have been foreclosed…………….. . . .

Stefan Jones

It takes two to tango. The people in this documentary may have been short sighted and over-hopeful about their prospects, but they were also victims of con jobs.

All those shabby, exploitive loans should never have been offered in the first place. The buyers were convinced they could handle an obligation that any reputable banker would know they weren’t ready for. Faked employment and financial condition records, high-pressure salesmen, badly explained terms and conditions . . . it’s a swindle.

The strip-mining developers, bankers, and mortgage hucksters deserve to be on the street as much as these people.

noen

It’s really perverse the way that people keep blaming the mark for falling for the con. I don’t understand that attitude. Sure… the con artist depends on the gullibility and greed of his target but it isn’t that hard to work out who bears the moral responsibility here.

And it isn’t like these people fell victim to one unscrupulous salesman. Everybody was telling them this was ok. Hell, Greenspan kept loan rates at %1 in order to feed the bubble. The government and the media said all was good and right in the world. Come on in, the water’s fine!

cardinal_richelieu

Why don’t you hear about it on US media? I can’t believe that you honestly asked that question! You got it from the BBC and not the US media because the BBC doesn’t get down on their knees and pucker up to the US federal government – or any government for that matter.

The BBC has always been renowned for their fierce independence and their emphasis on the facts – whatever the cost.

Enochrewt

I didn’t get a chance to read all of the comments,but I completely agree with #12 and that’s the nitty gritty of it. These people made stupid deals and now they are paying for it. It’s not the government’s fault, not the people that didn’t take these dumb loans’ fault, and it certainly isn’t my fault. And yeah, the people that made these bad loans are paying for it too. Arguing that the workers didn’t have a say is is BS. If you feel like your work is dishonest you don’t have to do it.

I like the “compassionate but unsympathetic” phrase. It’s time to take Darwin a little more seriously folks.

Antinous

building too many houses

I live in a city where maybe 5% of the housing is new and empty. The condo complex next to me was built about four years ago and has sold roughly five out of fifty units. Yet, building continues unabated. The developers have to keep building to keep the money flowing from the lenders. Home construction in the US has become a pyramid scheme.

goanddo

I see some opinions that mortgage borrowers should have read their loan documentation more carefully. But alas, the literacy level is such that 21% of our population can’t calculate the difference between two numbers in the same chart. The process of first predicting future income, then future loan payments, then comparing the two, is just beyond most people.

What’s more, this level of literacy is not unique to the US. Though Americans are not stars in this area, our literacy levels are comparable to most of those in Europe.

http://www.nifl.gov/nifl/facts/IALS.html
You have to look at the Users Guide to see what the numbers mean. http://www.statcan.ca/english/Dli/Metadata/ials/1998/guide-e.pdf

Faced with a document they can’t understand, people turn to other means of making decisions. For example “the bank wouldn’t loan me the money if they didn’t think I could pay it, because then they lose money,” or even simpler, “everyone else is doing it.”

One question is, knowing how bad most of us are at making complex decisions, what, if anything should the government do about it? One response of the Bush administration has been No Child Left Behind.

It makes sense in an idealistic way. The administration wants everyone to be able to take responsibility for their actions (privatizing social security comes to mind too), and so they’re giving them the tools to do so. Except it’s not working. Nor does literacy seem to be all that high in most places (except Sweden and maybe the Netherlands, great role models for the Bush administration).

Songe

I don’t know who can be blamed for the fact that where there is hammer there is anvil.

Can you blame the hammer? Can you blame the anvil?

zuzu

Home construction in the US has become a pyramid scheme.

Indeed, but let’s not conflate cause and effect.

zuzu

The BBC has always been renowned for their fierce independence and their emphasis on the facts – whatever the cost.

Just don’t fuck with the state monopoly (BBC) on radio and television.

Takuan

and to think that people move away from me when I ride public transportation, just because of the soundtrack leaking from my antennae

noen

This however, is teh awesome!

Chicken Game

â€œâ€˜I refinanced a couple of years ago and pulled out $100,000 and put in a fabulous pool,â€™ he said. â€˜Now Iâ€™ve got this fabulous pool and fabulous house, but itâ€™s not worth anything. Why shouldnâ€™t I be building equity over the next four to five years instead of playing catch-up?â€™â€

â€œThe man said he has not made a mortgage payment for five months.â€

â€œâ€˜Iâ€™m playing the bank game,â€™ he said. â€˜Iâ€™m playing chicken with them. I already got them to agree to put (the unpaid) payments on the tail end of the loan. What Iâ€™m really pushing them to do is to (adjust my mortgage) for the current market value and write off the rest. Iâ€™d love (to have it) lopped down to a $450,000 basis rather than $710,000.â€™â€

â€œIf the bank wonâ€™t negotiate, heâ€™ll walk away, the man said.â€

Antinous

Sure… the con artist depends on the gullibility and greed of his target but it isn’t that hard to work out who bears the moral responsibility here.

You obviously haven’t worked in the real estate industry. The moral responsibility belongs squarely with the homebuyers. You know, those people who stared out the window looking bored while I tried to explain the purchase contract to them. The ones that wanted a 110% loan so that they could buy an RV as part of their home purchase. The ones with the 500 FICO score and a foreclosure.

How about my friend who got foreclosed so that he could buy his wife a boob job, then declared bankruptcy to get out of his towering Amex bill. Despite skipping out on a myriad of debts (thus raising my credit card rates), he’s still making extravagant, unnecessary purchases using handy-dandy PayPal one-time credit cards. You’re infantilizing the American public. Not without reason, mind you, but that’s why we’re in this mess. A complete unwillingness to take responsibility for one’s choices.

agoodsandwich

Seriously. There is far more going on with THESE people than the current mortgage trouble. If they could just recently afford ANY mortgage, why can’t they afford rent?

Also, every time I hear about somebody’s “ever increasing mortgage payment” I wonder, why do so many people have adjustable rate mortgages? Why did so many people get into interest-only mortgages in the last few years? Sure, there have been abuses in the finance industry, but people need to take some responsibility for themselves, and READ THE EFFING CONTRACT! Avoid the balloon payments, and take the fixed rate. Just take the fixed rate, already!

agoodsandwich

“One question is, knowing how bad most of us are at making complex decisions, what, if anything should the government do about it? One response of the Bush administration has been No Child Left Behind.”

Because the government makes everything better.

samba00

Actually, this has been covered several times in the L.A. TImes, but rather than focus on how the people ended up there, it focused on the City of Ontario’s (where the camp is located) efforts to evict all of the camp residents.

zuzu

focused on the City of Ontario’s (where the camp is located) efforts to evict all of the camp residents.

Kent Brockman from Channel 6 (KWZ) is making a live news report.

Kent: Oh, we have lots of names for these people. Bums, deadbeats, losers, scums of the earth. We’d like to sweep these people into the gutter, or if they’re already in the gutter, to some other out-of-the-way place. Oh, we have our reasons. They’re depressing, they wear ragged clothes, they’re “crazy”, they smell bad.

zuzu

One question is, knowing how bad most of us are at making complex decisions, what, if anything should the government do about it? One response of the Bush administration has been No Child Left Behind.

NCLB exacerbated this problem, because “teaching for the test” completely precludes critical thinking and creative problem solving. The inability of many people to comprehend complex decisions results from a mixture of too much schooling (i.e. not enough learning) and the popular failure of people to practice family planning, which is primarily due to “the pill” being unavailable over the counter (OTC). (Prescription requirement for oral contraceptives is purely a moral judgement by the FDA, not a genuine medical concern.)

gleepwurp

I find it saddening that we see our president in widely televised speeches boasting about his economic stimulus package at the same time that citizens who lost their homes are living in places that look like refugee camps in the third world.
The fact that the BBC reports this while our own networks ignore it really rubs salt in the wound.
We only see camps like this on television when they appear in other countries. You would think news of these camps closer to home would be a big story. I can only conclude that the US media doesn’t report it because they don’t want the majority of Americans to know about this dirty secret.
I’m not inclined to judge the people in the camp harshly; I’m sure there are as many reasons why these homes have been lost as there are people in the camp. The basics of troubleshooting any problem is recognizing a persistent problem, attempting to find the root cause and addressing the root problem. Since housing foreclosures are on the rise and housing prices are in a tailspin, clearly we have a problem. I don’t really hear a lot of constructive criticism of the problem or serious talk of solutions from the people who are in a position to implement the same.

mtnrunner2

Greed is obviously not the problem, since if they were greedy they would not have taken action that was going to put them out of business.

What we are seeing is the inevitable product of government meddling in the housing industry.

Banks made the high risk loans precisely because our government encourages them to, by bailing them out if they fail, by keeping interest rates artificially low, by enabling artificial entities such as Freddie Mac and Fannie Mae, etc. etc.

Banks should not be lending to high-risk customers in the first place, they should insist on making the most profit possible by making loans to people with good credit so they get their money back. However, if they do that then they are tagged as discriminatory against the poor.

We can expect to see such crises repeated again and again until our government stops coddling the unsuccessful and steps out of the picture.

The proper solution is get the government entirely out of manipulating the home loan markets, which would get banks back to making sensible loans to customers who can actually pay, and let all parties suffer the consequences of any bad decisions rather than unjustly shifting responsibility to the rest of the public and prolonging the misery.

And if you wish to found a private charity to help those who lost homes, you are free to do so.

Takuan

“A complete unwillingness to take responsibility for one’s choices.”

The Bush America, top to bottom.

zuzu

Sure, there have been abuses in the finance industry, but people need to take some responsibility for themselves, and READ THE EFFING CONTRACT!

Read up on bounded rationality and imperfect contracting sometime. This is practically a textbook example, which explains the moniker of “predatory lending” being applied.

The causal problem, however, is the game theory perspective of the lending institutions, in which the central banking system biases them in favor of malinvestment in extremely risky loans, because the lending institutions will not absorb the costs of failure. They win whether mortgagers default or not.

Jeff

“P.S.: Encouraging people to not pay the debts that they are /legally required/ to pay is Incitement – in and of itself a crime. I’m not a lawyer, so don’t take my word for it, ask your own lawyer.”

My speech is protected. Let the Feds prove incitement. My lawyer just told me that would be next to impossible. He makes too much money to be wrong (in theory). So, I’m not worried. Here, I’ll say it again in terms that are more vicerally pleasing: Americans, take your country back! DO NOT PAY the banks a cent. They are responsible for this. And unlike most of the cowards out there, I use my real name when posting.

Antinous

I wonder, given that BB readers are all over the place, if everybody quite gets the Southern California lifestyle. Riverside County, where I live, has one of the highest foreclosure rates in the country. 20 year olds who work behind the counter at Del Taco drive Escalades, Navigators, BMWs. People drive cars that cost three times their annual pay! This is considered normal here. That way of thinking goes a long way toward explaining why we have such a high foreclosure rate.

thejynxed

It doesn’t help matters any that these banks and investment companies based all of their loan packages, etc on the silly assumption that home prices would continue to rise exponentially. When they stopped rising, the house of cards collapsed.

Antinous

The chumps who lent these dupes money are just as guilty.

Most of them are unemployed now with little hope of employment. The real estate boom created thousands of new, inexperienced, not-too-bright real estate agents and lenders looking to get rich quick. They didn’t, but they did manage to help destroy the economy.

noen

You know Antinous, I can’t even imagine thinking the way the people you describe think. Seriously, that’s way outside of my experience.

On the other hand

“We can expect to see such crises repeated again and again until our government stops coddling the unsuccessful and steps out of the picture.”

I don’t see social Darwinism as a solution either. Oh yay, socialism for the rich and capitalism for the poor. What a wonderful world that would be. Shanty towns in every metro and ragamuffin children selling their bodies on the street. Just so we can feel superior.

One boy,
Boy for sale.
Come take a peep.
Have you ever seen as
Nice
A boy
For sale.

mgabrysSF

#155 – homes have banks – not landlords. Difference.

zuzu

That way of thinking goes a long way toward explaining why we have such a high foreclosure rate.

But does it explain the actions of those extending the credit? What outcome would a creditor expect from such a contract?

Antinous

Five years ago there were three occupations here: realtor, waiter, whore. Now there’s just waiter and whore.

TomLamond

I call bullshit on this. I saw a version of this story on BBC America. They pointed out that most of these people are homeless due to drug addiction or mental illness.
Even the ones that claim to be part of the sub-prime meltdown are suspect. How do we know they’re not spending all their money on meth?

dfred

I live in Canada. Canadian media with its European counterparts covered the tent cities in California many times over the last few months! While American

Now the USA not only became Police state but it seems that news are being censored now!

Antinous

But does it explain the actions of those extending the credit?

It’s the same mindset all the way up. Your realtor encourages you to buy what you can’t afford because that’s how she gets paid. Your lender fudges your documents to get you the loan because that’s how he gets paid. The underwriters play along with the sham because, without loans, they don’t have jobs. And at the very top, the ultra rich sit spider-like, waiting for the capital to return to them. Does it ever change?

Teresa Nielsen Hayden / Moderator

My hairdresser was telling me about visiting her mother in Atlanta before the collapse started, and seeing ads that said you could buy a house with a $1.00 down payment. Someone who can only afford a $1.00 down payment can’t afford to own a house.

I heard another story from a guy at Eschacon who’d been working for a firm that processed the mortgage paperwork these lenders were generating. He said the people in his company kept noticing the same homebuyers’ names going past on multiple applications. The loan officers would submit applications for mortgages, and if any of them bounced they’d rejigger the numbers on it (reclassifying certain kinds of income, altering previous estimates, etc.) and resubmit it. That’s grossly irresponsible.

There were greedy people on both sides, but there were also hapless people who wanted to own their own home and start accumulating equity. That’s a basic American ambition. They got sold mortgages they couldn’t handle. They didn’t know they couldn’t do it. That’s not necessarily their fault either. A lot of people just don’t understand interest, the same way a lot of people just don’t understand statistics. It’s one of those common mathematical blind spots.

The people who made a profit selling them those mortgages knew better. That’s the class that’s uniformly guilty of shortsighted greed, not the homebuyers who’ve run themselves ragged trying to hold on to homes they’re bound to lose.

Takuan

And at the very top, the ultra rich sit spider-like, waiting for the capital to return to them. Does it ever change?

no

LeadPipe

Sky. Is. Falling.

goose bandit

The video clip is a little misleading. From what I understand, this is one particular tent city in Ontario, CA (not exactly LA; part of the Inland Empire) and not one of thousands (yet).

I first heard about it in this article with a somewhat deceptively uplifting headline in the LA Times “Ontario Opens Arms to Homeless” (2.3.08).

Then, a little over a month later, this one: “Tent City Evicting Homeless who are not from Ontario”(3.14.08), as mentioned by Sambaoo in a previous comment.

Though the BBC video isn’t too specific, the accompanying BBC article is a little more clear. The video gives the impression that most of the people living in Tent City are homeless because of the “sub-prime meltdown.” Referring to the man in the video :

“There are thousands like him across California- people whose inability to finance their mortgages has cost them their homes; many thousands more across the US.

But in Tent City, at least, he is in a minority – few are here as a direct result of the housing crash.”

Obviously, this is still completely terrible and f***ed up, just not quite in the way that the brief video implies. Even the headline of the BBC article has a far different tone than that of the video:

“Tent city highlights US homes crisis”

vs. the way more alarming (and plural)

“Tent cities spring up in LA.”

Not that too many people read the rapidly shrinking LA Times anymore, but they did report it before the BBC.

Jack

Guys, if you think that is bad, you should look at the dollar versus practically any other foreign currency.

Iâ€™m no expert on things, but I do like buying some vintage Japanese toys off of Yahoo! Japan auctions. And holy crap! Just in the past week the Yen exchange rate from the dollar went from 103 Yen to $1 on (3/10) to 97 Yen to the $1 today (3/17).

Something really, really scary and really big is happening out there folks.

jireva

I didn’t realize it had gotten this bad. Does anyone know if this is happening outside of California also?

Mindpowered

“Yet for some reason investment banks such as Bear Stearns (and soon Lehman Brothers) are insulated from the consequences of their reckless lending by the central banking system with bail-out money creation from the Federal Reserve. How odd. ”

Oh they are not insulated from their actions

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a.WZcjaU572w

The entire system is undergoing collapse. There were a few people who did well out of this mess, but trust me. I work in the business and the pain is being liberally spread top to bottom. From PIMCO and CALPERS to those living in the shanty towns.

” (Jimmy) Cayne (Ex Pres of Bear Stearns) still owns 5 percent of Bear’s stock, the value of which fell under the JPMorgan buyout to $11.7 million from $333 million four days ago. Last month, Cayne paid $27.5 million for two adjacent 14th-floor condominiums at New York’s Plaza Hotel overlooking Central Park, according to city property records.”

Looks like he might be joining them in tent city.

However to blame wall street or the home buyer misses the point. When the ride started wall street couldn’t get off. The biggest shareholders in pubco’s and hedge funds and the like are pension funds/mutual funds. The massed contributions of Teachers, policemen, Firefighters, gaffers, construction workers etc.

However these pension funds don’t have enough money to meet their retirement requirements (the tech collapse dented their growth). Hence they push whomever they hold shares in for extreme market beating growth. Driven by low interest rates and fueled by consumer greed housing was too big for wall street not invest in and take risks in. And of course the inevitable happened.

Fundamentally the booms and busts of the last 30 years are driven by these funds trying to meet their obligations of a massive retiring population which is supported by a much smaller generational cohort.

When your parents see how their retirement is dented. THEN you’ll see riots in the streets.

Takuan

Poor people are poor people -
And they don’t understand
A man’s got to make whatever he wants-
And take it with his own hands.

Poor people stay poor people -
And they never get to see
Someone’s got to win in the human race-
If it isn’t you, then it has to be me.

So smile while you’re makin’ it-
Laugh while you’re takin’ it-
Even though you’re fakin’ it-
Nobody’s gonna know.
Nobody’s gonna know.

It’s no use mumbling.
It’s no use grumbling.
Life just isn’t fair-
There’s no easy days
There’s no easy ways
Just get out there and do it!

And sing and they’ll sing your song-
Laugh while you’re getting on-
Smile and they’ll string along-
And nobody’s gonna know.
Nobody’s gonna know.
Nobody’s gonna know.
And nobody’s gonna know.

zuzu

Something really, really scary and really big is happening out there folks.

“Go back to bed America, your government is in control again. Here, here’s American Gladiators, watch this; shut up. Here you go America. You are free to do as we tell you.” — Bill Hicks

Mindpowered

“Something really, really scary and really big is happening out there folks.”

Oh it’s not scary. It’s normal. When the perception is that the supply of money exceeds the demand, the value will drop.

The US government stopped telling everyone how much it was printing, so we all decided there was a bad reason why they did this.

If it wants to restore confidence in the dollar, the first step is to tell us how many of them there are in the first place. Until that time, you’d be best to have some precious metals tucked away in a corner.

jancola

@44,

California has one of the highest foreclosure rates in the country, so it is worse here. However, Los Angeles has the largest homeless populations in the country, it had this large population long before the foreclosure crisis, and tent cities are nothing new. I doubt all of these homeless are in their situation because of subprime lending.

Takuan

fear not

We all want justice but you got to have the money to buy it
You’d have to be a fool to close your eyes and deny it
There’s a lot of poor people who are walking the streets of my town
Too blind to see that justice is used to do them right down

All life from beginning to end
You pay your monthly installments
Next to health is wealth
And only wealth will buy you justice

There’ll always be a fool who insists on taking his chances
And that is the man who believes in true love romances
He will trust and rely on the goodness in human nature
Now a judge will tell you that’s a pathetic creature

All life from beginning to end
You pay your monthly installments
Next to health is wealth
And only wealth will buy you justice

Money, justice
Money and justice
Money, justice

ellewilson

“I think we need to get away from feeling sorry for people because they were greedy and/or stupid and get into a house they would inevitably be unable to afford.”

Hmmm. The sentiment above is quite the double standard. There are “greedy” and “stupid” people everywhere, I suppose. But somehow the very rich ones who take enormous risks out of stupidity or greed (Jimmy Cayne, Bear Stearns) deserve a lot of sympathy and pity in the form of a giant government bail out. But people in the lower income brackets? If they are greedy, stupid or use poor judgment, they deserve nothing but derision, right?

zuzu

Fundamentally the booms and busts of the last 30 years are driven by these funds trying to meet their obligations of a massive retiring population which is supported by a much smaller generational cohort.

Fundamentally the booms and busts are caused by the Federal Reserve setting interest rates.

Takuan

When there’s a bluebird singing by your window pane
And the sun shines bright all day through
Don’t forget boy
Look over your shoulder
‘Cause there’s always someone coming after you (la la la la)

When everything in life seems just as it should be
At last success seems just around the door
Don’t forget boy
Look over your shoulder
‘Cause things don’t stay the same forever more (la la la la)

Hope springs eternal in a young man’s breast
And he dreams of a better life ahead
Without that dream you are nothing, nothing, nothing
You have to find out for yourself that dream is dead (la la la la)

Dead (la la la la) repeat to fade

Takuan

They used to tell me I was building a dream, and so I followed the mob,
When there was earth to plow, or guns to bear, I was always there right on the job.
They used to tell me I was building a dream, with peace and glory ahead,
Why should I be standing in line, just waiting for bread?

Once I built a railroad, I made it run, made it race against time.
Once I built a railroad; now it’s done. Brother, can you spare a dime?
Once I built a tower, up to the sun, brick, and rivet, and lime;
Once I built a tower, now it’s done. Brother, can you spare a dime?

Once in khaki suits, gee we looked swell,
Full of that Yankee Doodly Dum,
Half a million boots went slogging through Hell,
And I was the kid with the drum!

Say, don’t you remember, they called me Al; it was Al all the time.
Why don’t you remember, I’m your pal? Buddy, can you spare a dime?

Once in khaki suits, gee we looked swell,
Full of that Yankee Doodly Dum,
Half a million boots went slogging through Hell,
And I was the kid with the drum!

Say, don’t you remember, they called me Al; it was Al all the time.
Say, don’t you remember, I’m your pal? Buddy, can you spare a dime?

agoodsandwich

I maintain that there could not be predatory lending without willing prey. Conned or not, at some point you have to sign a contract, and you have every opportunity to know what you’re getting into.

I bought my modest home a few years back, and I read every bit of the contract. The loan officer, builder, and title company were all surprised that I was actually reading it as I was signing the mountain of paperwork. Why would you not read it? Why would you walk into a commitment like that uneducated? three years ago there were historically low interest rates, yet so many people signed on to variable rate deals.

Finance companies foolishly offering bad loans to consumers who foolishly accept them. It takes two.

Takuan

Flags high, ranks closed,
The S.A. marches with silent solid steps.
Comrades shot by the red front and reaction
march in spirit with us in our ranks.

The street free for the brown battalions,
The street free for the Storm Troopers.
Millions, full of hope, look up at the swastika;
The day breaks for freedom and for bread.

For the last time the call will now be blown;
For the struggle now we all stand ready.
Soon will fly Hitler-flags over every street;
Slavery will last only a short time longer.

Flags high, ranks closed,
The S.A. marches with silent solid steps.
Comrades shot by the red front and reaction
march in spirit with us in our ranks.

Takuan

think I’m kidding?

Mindpowered

Thank you for the copy of Mises. It’s very interesting to read a text from the time America was on the Gold Standard.

However. Interest rates are cut/raised after the fact. What gets the balls rolling are the( estimated) 20 trillion dollars held in pension funds moving in one direction. And believe me. It like a herd of buffalo.

http://en.wikipedia.org/wiki/Pension_fund

zuzu

However. Interest rates are cut/raised after the fact. What gets the balls rolling are the( estimated) 20 trillion dollars held in pension funds moving in one direction. And believe me. It like a herd of buffalo.

Can you elaborate on why they all move in one direction? What’s the cause? How do they coordinate to do so?

Mindpowered

Well…

Like me they’ll pay an analyst a small fortune for a detailed prediction of where the market is going and what asset class will outperform, and what is the correct amount of risk to take on given the rules of the fund etc.

Then they’ll get a phone call saying so and so made 30% in three months investing in a hedge fund that specializes in a yen backed carry trades, or credit default swaps or any of the many other exotic financial concoctions of which sub-prime mortagages were part of.

And their common sense will go right out the window.

Of course it helps that as far as the US is concerned San Francisco, New York and Boston
are where the money is managed and there really only is a few thousand people who make the calls.

Very easy to get in herd mentality when surrounded by people saying the same things every day.

Mindpowered

To put this in perspective, the entire capitalization of all the companies the NYSE is 18.9 trillion dollars. China’s economy is 1.27 trillion dollars.

Essentially when these funds move into a market in a large way they cannot get out except very gradually. Unless they want to collapse the system and then everyone loses everything. Hence when they get caught, like now there is little choice for them but to sit it out and gradually move into other assets, like Gold, Oil, Wheat, Copper etc.

Mindpowered

And Finally

““Glass-Steagall protected bankers against themselves,” Eveillard said. “Bankers are sheep. They don’t mind going over the cliff if everyone else goes over the cliff.””

http://www.bloomberg.com/apps/news?pid=20601109&sid=aDSFgf3DHR_A&refer=home

NikFromNYC

“I call bullshit on this. I saw a version of this story on BBC America. They pointed out that most of these people are homeless due to drug addiction or mental illness.”

Whores in NYC are better then? So I’ll save my airline tickets to try to find a girl who likes me since I saved her from actual tragedy. Katrina sounded good, but why bother since scammers had already taken over, unlike us true Don Juans.

The English are still a bit EXTREMELY mad at us in the USA for that crazy Declaration of Independence that relied on universal morality rather than just another war or two, which we won with help from France, after the Boston Tea Dump.

“We hold these truths to be self-evident that all land-owners are created equal…”

I think that’s called inductive logic, as in it’s fun to go camping in tents, like at Burning Man, or various Henry V or Napoleon campaigns. So they lack antibiotics?

Philanthropist Bob Wallace, a Microsoft Millionaire died at Burning Man. Didn’t drink any water, after over indulging in MDA-tainted ecstasy, and some literally poor girl mounted him and his heart filled up with love, then exploded.

Jeff

The Great Depression caused a lot of people to jump out of windows. Then the federal Government started the big public works projects like the federal highways. This gave people work. Now, if the federal government did that today, we could be sure of one thing: lots of Mexicans would be doing work that Americans won’t. Poor America, lots of dreams, lots of crazy psychology.

Bat Guano

After the orgy of fingerpointing is done, can we all agree that something broke, and is still breaking, and needs to be fixed?

#116 — societies aren’t run by Darwin. Though in the long run, you could say they are. If the society doesn’t correct the problem, then the society becomes the ultimate victim.

What I mean is, Darwin isn’t going to fix the problem in a manner that we would find satisfactory.

rrsafety

Great discussion… but not alot of light be shed on the issue.

- First, whoever said Bear Stearns is insulated from their actions, they lost 98% of their value and lost the company over the course of 12 months. That is not insulation, so your argument fails.

- Second, to the person who said that you can’t rent in the Inland Empire with a low FICO score…LOL.. people are begging for renters in that area right now. If you thought you could afford a house, you can definitely afford to pay rent.

- Third, no matter what government program is installed, people who don’t pay their mortgage will have to leave one way or the other. Why should I pay for someone else’s mortgage? We have government programs to assist people to buy homes that entail having to learn how to actually buy a house wisely. I suggest folks use them.

Danny O’Brien

Are we allowed to say that these people didn’t read the contract, and we should still help them? Or does our compassion only exist for people as smart as we’d like to be or smarter?

Ugly Canuck

How about :The Bush regime encouraged the financial system to rip off people by not requiring adequate explanation or disclosure of risk in an easy-to-understand form of these complex financial instruments (or by even permitting these Instruments to arise) – the politicians abandoned the people it was their only duty to protect by Regulation and Law – which are the only tools that the politicians have.And note the Banks are all Creations of the Law, allowed to exist because they are to serve the public interest not the interests of their shareholders or most especially their Managers.

Oh yeah let the Banks “self-regulate” – Fed rates 1%(or less) for Banks (of all kinds, it appears) and 5% (or more) for the most rock-solid borrowers. Tell me, if the Markets Rule how a borrow-happy US Govt borrowing trillions for war doesn’t push up interest rates? keeping War cheap by regulating interest rates for Gov. borrowing? Good money after bad?

The Boomers will have no health care insurance and their “pensions” (Based on Stock returns?) will be inflated away. This is the “Opportunity Cost” of the present situation.

And it is the Governments fault for failing to regulate and rule (and yes govern) the greedy money-men . The function of the Law is to protect the Weak and Ignorant against the depredations of the Clever and Powerful. What good is it otherwise? Otherwise, the Law becomes only the handmaid of Tyranny and Despotism.

In all, a grotesque subsidization of the least-productive paper shufflers (traders) by the people who earn their bread by the sweat of their brow, mediated facilitated and encouraged by this god-awful Disaster of a Leadership Class.

Svenski

The subliterate cinephile is either not paying attention or is an idiot. There has been lots of coverage of this homeless camp in the media. Even John and Ken on KFI spent a couple of hours talking about it a few weeks ago. They had the Mayor of Ontario on air as he explained his poorly conceived plan to take all of the homeless out of the Ontario’s various parks and consolidate them in one place where they were to be housed and fed along with providing adequate sanitation and security. The plan was to get the homeless out of the various parks where they were camped out, pissing all over the place and generally making the parks areas that families avoided. That worked out fine for couple of weeks until hundreds of homeless from other cities and counties heard about the government handout and descended on Ontario for their free meal ticket. This has nothing to do with the sub-prime loan market and foreclosures. These people were bums to begin with.

Also, Ontario is forty miles from Los Angeles and is in Riverside County.

The BBC is completely spinning this.

rrsafety

“The Bush regime encouraged the financial system to rip off people by not requiring adequate explanation”

Please show me where the disclosure requirements for home mortgages were less under Bush than under Clinton.

Second, mortgages don’t need explanation and they are not complex. You borrow money and pay it off over thirty years. You can either have a fixed payment or a floating payment. That is all you really need to know.

To the buyers: get a mortgage you can afford.

To the lenders: make sure the borrower can afford it.

To the investment banks: accurately price the risk of mortgage back securities.

To all three groups: you made this bed, lie in it.

sasquatch

Welcome to the new America. It’s starting to look more and more like the great depression.

yesno

A lower dollar might help America rebuild an industrial base. A low dollar coupled with high technology and high wages could move us towards more automated manufacturing. So there’s an upside.

Maybe this mortage meltdown will finally make people realize this: Real Estate. Is. NOT. A. Good. Investment.

You are never better off spending more to own, than you would be to rent the same property. Never. It is always better to take the difference and invest it elsewhere.

And “spending more” includes the money you are spending on maintenance and taxes. Renting is a great way to outsource the hassle of owning, also.

The only people who make serious money off real estate, do so from development– by buying in an area that, because of their actions or those of others, is about to notch up its economic activity. Bubbles aside, land and buildings in stable economic areas appreciate at a rate that about tracks that of the economy. Bonds are a better investment than this, often.

Jeff

Oh, the world is so unfair. Rest assured, while the Fed will let the average Joe sink, because he made a bad investiment, that same Fed will come out and help the Fat Cat bankers. We need to really deal with the entire issue of people being greedy. What’s the answer, socialism?

mannakiosk

I’m a bit confused about how the economy works…

People are losing their homes because the economy is in bad shape. To save the economy, money will be pumped into banks and/or the stock market etc.

So, to help the poor, money must be given to the rich?

I think it would be a better idea to give money to the people who’ve lost their homes and other poor people. They would probably inject all that money straight into the economy (by buying food and renting a place)…

Is the system this fucked up or what is my major misunderstanding here?

DreadLetterDay

You know what, look at them. Look at those people who went about looking like easy victims for financial sharks, just look at them with their disgustingly low FICO scores. How dare they think they can just walk around tempting sharks like that and get away with it, bite free?

They were asking for it.

That’s to say, they were using some sort of shaped sounds and saying they wanted a place to live, might have been English I don’t know, but I’m not quite sure what they were saying.

Not my fault they couldn’t see i was out to ride them, not my fault they were pumped full of messages telling them that these loans were going to make all their dreams come true. Not my fault they couldn’t and can’t make out the difference between reality and fantasy, even if their major media, trusted community organisations and government organisations all tell them to put their trust in a bearded man in the sky who sees and guides all that they do and will help them get everything they ever wanted so long as they just believe…

Not my fault. I had to rape ‘em. If not me, then someone had to.

They were asking for it.

Antinous

Urban Dictionary Word of the Day

Jingle Mail

Jingle mail is the package containing the keys to your house that you send back to the bank when the interest rate on your adjustable-rate or IO/neg-am mortgage resets, or the property tax bill gets reassessed at double what it was two years ago, or you find out that heating and AC and repairs cost a ton of freaking money, or you lose your job because of the recession that’s coming with the housing crash, and you can’t make the payments any more.

My neighbor put up the Escalade and the Beemer that he bought with his third HELOC for sale, and has been having garage sales every week for the last month to raise cash … I give it about 90 days till he sends in the jingle mail.

Jcyreus

@ #66 The system is that screwed up, sadly enough.

However, having our govt to pump $ into the economy by bailing out banks will only serve to lengthen our recession, devalue the dollar and create inflation like we have never seen before. It might not be the great depression, but it will be darn close.

Remember 2000-2001 stock market crash as a result of the dot-com boom? That “recession” was short lived, do you know why? Because businesses were allowed to fail (w/o being bailed out) then new opportunities were formed, which rejuvinated the US economy…which is how capitalism is supposed to work. (lots more where that came from on Jcyreus dot Com)

Gladstone

If we heard about this story in the U.S. media, then Greg Palast would be a household name, too. (www.gregpalast.com)

totorodoo

I don’t know if the blame game is going to solve anything.
Does it matter who is at fault?
This problem needs to be resolved. It’s bringing down our economy.
The ripple effects are there.

I work at a car dealership. Sales are really down.
Our commercial sales would usually keep us afloat. But, business are not buying. Many of them are landscapers, maid\cleaning, and construction.
Also, the business that cater to the landscapers and construction crews.
It’s bad.
Except, the Government workers and contractors. They are booming.
Especially, anything having to do with the war.

I guess the war is the answer. Just kidding.
But, that’s how Hilter got Germany out of it’s depression. By gearing it up for war. And we all know how that turned out.

To summarize: Blaming doesn’t work. It needs to get resolved quick.

On a side note: Many of the used car salespersons left to sell real estate. No kidding.

cardinal_richelieu

Zuzu : what has an illegal radio station got to do with the reputation of the BBC?

HPHovercraft

You can’t con an honest man. If, when looking into the possiblity of taking out a home mortgage loan, these people didn’t stop and think for the ten seconds required to realize that they were gambling with their home life for the next thirty years, then frankly there’s not much I can do except shake my head and thank my own personal diety of choice that I was not raised to be a greedy idiot.

And really, that’s what it comes down to. The lenders were behaving in a reckless and stupid manner. The borrowers behaved in an equally reckless and stupid manner. As much as I’d like to help my fellow man, how far are we supposed to go to prevent our brethren from kicking themselves mercilessly in the dick when they plainly intend to do so regardless of our efforts to the contrary?

I deeply resent the insinuation that the government ought to remove our freedom to fail. It is by failure that we learn, and by learning that we eventually succeed. I don’t need the government to tell me that variable-rate mortgages are a dangerously stupid idea. I don’t need Big Nanny to sit on my chest and prevent me from living beyond my means. So either I’m some kind of nascent financial genius, or these people are a particularly Darwinian variety of moron.

Antinous

Why don’t you hear about it on US media?

Because US citizens have lost the ability to read? This stuff is reported in the LA Times, OC Register, NYT all the time, including their online editions. I read at least three major news stories per week about this. Here’s some other news:

â™¥ All those people who lost their houses had pets. They often can’t keep them when they become renters. There’s a pet holocaust going on at animal shelters in Southern California.

â™¥ The people with the houses that they couldn’t afford? They have cars that they can’t afford, too. Eventually, they just leave them on the side of the road. And stop going to work. What will happen to the economy when the car industry dies?

â™¥ All those pools? They’re green now (and not in a good way) because nobody is caring for them. And they’re breeding disease-carrying mosquitoes in the trillions. Vector Control had to get helicopters to do aerial surveys so that they can break into the abandoned properties and dose the pools.

â™¥ Empty houses get vandalized. When the economy gets back to a point where people can buy again, the houses will be derelict. Several people have resorted to arson just before foreclosure, because we don’t already have enough fires in Southern California.

California leads the nation, so fasten your seatbelts. It’s going to be a bumpy ride.

Nato Welch

SHRUBURBS!

zuzu

@120 HPHovercraft

I deeply resent the insinuation that the government ought to remove our freedom to fail.

Indeed! Tell that to the central bankers who literally said Bear Stearns was “too big to fail”!

rrsafety

The number of pure fallacies in this discussion is remarkable.

Take this one for instance, “People are losing their homes because the economy is in bad shape.” That is not true. People are losing their homes because they took out a mortgage they could not afford and will never be able to afford. That is why foreclosures are up. Not because of a bad economy. If you don’t know what they problem is, how can you possibly offer a solution.

As for the government helping the “fat cat bankers”, tell that to the owners of Bear Stearns LL…

There is a huge difference between “bailing someone out” (which the government has specifically not done) and providing liquidity to the system. It is the liquidity that will allow mortgages to be rewritten and refinanced. ll f y b-hng about helping out small borrowers should be in favor of more liquidity. Bt thn gn, f y dn’t vn knw th vry bscs f wht th prblm s, hw cld y pssbly dntfy pssbl sltn vn whn t s bng crrd bfr yr vry ys.

zuzu

@103 Cardinal Richelieu

The BBC has always been renowned for their fierce independence and their emphasis on the facts – whatever the cost.

Although I understand that the BBC Trust is supposed to keep its broadcasts politically neutral (and generally seems to do some fine journalism), I just think that’s a funny statement to make about a state owned organization claiming total control over all radio broadcasting in the UK (except for, what, University York Radio and the Isle of Man?).

goose bandit

Thank you, Svenski and Antinuous! Apparently if something isn’t on television, 99.9% of the US population doesn’t hear about.

I posted the links to two of the original LA Times articles earlier in the comments as well as the noticeably less alarming print version of the BBC story the video clip is based on.

carlo

Hey, what time is it? Isn’t American Idol on?

Jamie Sue

Individuals and institutions both share the load when it comes to blame.

However, I do believe that the lack of consumer education has a lot to do with the shear numbers of loans that were taken out. I own up to being one of those people who is nearly illiterate when it comes to finances. The prospect of dealing with a loan or interest or any type of life changing mathmatics is terrifying for me. There are other things I am better suited for. Each person has thier strengths and weaknesses. In response to this crisis I hope a set of consumer education guidelines regarding lendning rates and practices is developed.

kster

Jeez, for those of you that missed out on the aftermath of Hurricane Katrina, don’t worry, looks like they’ll be opening a franchise near you soon…

jonathan_v

The people who took out the failing mortgages were conned to some extent… but to a far larger extent, they were absolute idiots and irresponsible.

The real-estate and mortgage industry convinced consumers to buy bigger… and would qualify them for HUGE loans based on rising housing costs.

The dialogue was something like this:

Realtor: Why move in 5 years when your family grows? Buy bigger now. We can finance it.

Bank: Take a X year loan, and we’ll do it at the variable rate, so you SAVE money

Bank (to self): SAVE money until the interest rate rises… then we make a killing!

The realtors work on a % commission, so they’re always trying to inch prices up. I was once shown a rental in NYC that was just way overpriced, so I walked out. When the landlord asked me outside, I said “1500? I’ve seen 4 nicer places on this block for 1100 from another agent this week. you want too much.” She replied “1500? I was asking 1050″ – and just looked at the real estate agent who tried to weasel out of it, then said “I thought i could get you more for it”.

The banks were all hoping to turn 5% interest rates into 11% rates through the variable rate scheme… they approved everyone for the low-end of the cash, but never thought through the “wait… what if people can’t pay on the high end?!?”

My point is this: a lot of consumers were convinced into buying bigger than they could afford by the industry that got tanked. They’re both responsible.

Collision Bend

Cory,

I wonder why I found out about this from the BBC and not US media.

There is a reason you haven’t heard about this from the American media: they can’t verify the story.

Let me just say right off that I am not denying that there is a mortgage crisis here in the U.S.; there is however, a great deal of difference between valid journalism and something created for its’ own sake. Who made that video? What are their credentials? Who is the editor — the gatekeeper for truth and accuracy?

Case in point: I live in Cleveland, Ohio, where the mortgage crisis is hitting just about as hard as anywhere else. We have a 15% mortgage foreclosure rate here (or something like that — it’s huge).

Recently, a French journalist arrived to do a story on the crisis in Cleveland, and he went to a house just inside the city (error #1: he reported he was in Shaker Heights, a suburb), where a dog stood in a window. He claimed, in his story, that the prior owner was so bad off that they left the dog behind.

The truth behind the dog is that the home was purchased from someone who had been transferred out of Cleveland to another city. The new owner, a developer/remodeler, left his dog there to guard the house, as thieves steal copper pipe and other metals to sell as scrap — for a high price.

The facts are archived at http://www.cleveland.com, the main web site for the Cleveland Plain Dealer — who detailed the Frenchman’s poor journalism in a front-page story.

The French journalist never bothered to investigate the story, never bothered to check the facts, and just reported what he figured would be “award-winning” journalism. No checks, no balances. Absolutely nothing to prove validity — and you are expected to believe every word.

Just because it’s on the Internet doesn’t automatically mean it’s true, especially if it comes out of the U.S.

goose bandit

Guys- this WAS first reported in the US media. See Samba00 (#26) and my (#42) previous comments.

cardinal_richelieu

Zuzu : just because the BBC receives state funding, that doesn’t mean that they don’t try to maintain a large amount of independence from the UK government. Look at the fallout over Dr David Kelly and the 2003 Iraq war dossier when the BBC refused to back down and reveal their sources when the UK government pressured them to. If that was the US, the news networks would have immediately folded like a pack of cards.

And if the BBC owns the radio transmitters, I think that entitles them to claim control over them, don’t you think?

Robert

Here’s the thing. We all know Three Card Monty is a scam. Yet people still play it. Is it because they’re stupid? Maybe. The fact of the matter is that we don’t live alone. We live in a society, and people in that society are of all kinds and types.

The fact of the matter is that Americans are typically not finance-savvy. That’s just the society we live in. It’s a fact.

So stop trying to say that we should kill off the majority of our society because they’re not as educated or savvy as they should be. If you do that, the society will collapse, taking you with it.

Jeff

I live near the tip of the iceberg–Detroit. I suggest that everyone stops paying banks anything! Have a credit card with a ballance? Let the Feds pay it for you. Have a loan of any kind? Let the Feds pay it. This country is in serious need of a good ol’fashioned depression. And you know what’s going to save us? All the money controlled by the top 1% of the population. Let the f-cking ultra-wealthy help, since it’s because of them that we are here. Rich bankers, fund managers, CEOs…GREEDY, greedy, greedy SOBs. And then let’s take George Bush and throw him into prison for the rest of his life. Or longer.

bardfinn

My wife asks me why we don’t have a car, when other people who make “less than we do” have cars; I shall have her read this article – and the comment, especially about kids in Cali driving BMWs – and the record profits of ExxonMobil and the lavish lifestyles of the oil-owning people of Brunei, Saudi Arabia, the Sudan, the UAE …

My co-workers wondered why I have never and never intend to invest in the IRA we have; I am forbidden by law and like my job too much to explain it to them.

My parents wanted to know why I didn’t buy a house, when the rates were so low.

Only in modern America can living the lifestyle of an ascetic be rebellion.

zuzu

Cardinal Richelieu, agreed. Except:

And if the BBC owns the radio transmitters, I think that entitles them to claim control over them, don’t you think?

I was remarking more to that it’s illegal for others to build towers and broadcast. The USA has a similar problem with the FCC, but the reason stations like Radio Caroline were setup was because no one else but the BBC monopoly was allowed to start their own station.

America's new subprime shanty-towns

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