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Economics
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I did not say I was in favor of a government bail-out (point of fact I think this check scheme is as much of a joke now as it was in 2001).
What I AM saying is that perhaps some formal standards need to be put in place regarding lending to get rid of the problem children in the system (those that survive this debacle)… the pay day lenders (that are already banned from peddling their wares with service men and women), the loan shark credit cards, the title loans, the no-equity home loans, the no-document home loans, etc.
I mean, if we are going to allow Loan Sharking, then lets be honest and above board about it and let the Mob legally get back in the business… broken knee caps are less of a detriment to the national economy the sub-prime backed loan investment vehicles :-D
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But we do have standards for lending. If you are a prime candidate you get a reduced interest rate. If you are a sub-prime candidate (high debt, poor payment history, etc) you get a much higher rate. Also, sub-prime loans are not backed up by Sallie Mae but are instead backed by the bank and/or high risk investors.
If you don’t want to take the risk of losing it all, DO NOT LEND THE MONEY. Do I get a bail out for my CompUSA stock? (In case you are unaware, CompUSA is out of business.) No. Why? There are at least as many share holders of the now worthless CompUSA stock as there are people losing their homes! Maybe more!
Because it is NOT the government’s job to regulate the banks or the stocks. If you want the government to back your high risk loan, then enlist for a couple of years and get your VA Home Loan certificate. Give something to the country before you ask something from the country for a change.
Screw em. It’s harsh, but common. These are people who allegedly hold a high school diploma (or GED) so they should be expected to be able to handle basic arithmetic. They should be able to take their income and subtract their bills from it to determine if they can make the payments, right? We have such a thing as bankruptcy which will secure your house at an interest rate set by the government, right?
These people have options. They just don’t like them. Well, guess what. If I eat nothing but doritos, oreos, ice cream and sugared soda I’ll have options too, deal with obesity, change my diet and/or go to the gym. I may not like the options, but then they are the consequence of poor life choices. (BTW, that is NOT my diet. I live on almost nothing but vegetables and fruits now. Though, I do eat a lot of fish for the protein. And no, I will not come begging you to pay for my medical expenses if I get heavy metal poisoning from the fish either!)
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@Cmdr:
Because it is NOT the government’s job to regulate the banks
Actually, this IS one of the defined powers of our Government and goes all the way back to Alexander Hamilton.
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No. It is the government’s job to print the money. I don’t remember seeing anywhere in the Constitution that states, specifically, that the US Government will run the banks and make sure they play nice.
Unless you can point to one specifically. In which case, I’ll admit I was wrong and no longer view President Jackson as a hero for crippling the Bank of America or United States Bank or whatever the one bank was in his day.
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Originally it was derived from the melding of the Commerce and Treasury clauses, and dates from 1791 (with the Constitution being ratified only 2 years earlier) That of course is at a Federal level.
State level regulation of banking pre-dates the Constitution by many, many years.
New York since 1782 as an example. -
But it’s not actually in the Constitution. So it’s a job they kinda adopted, but not a duty that they were assigned. So let’s get them out of it. If the people want the Feds to run the banks, let them pass an amendment to the constitution!
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You make it seem so simple Jen. Remember that most of our nation doesn’t even know what is needed for an amendment to the Constitution, their too busy playing their Nintendo wii and watching American idol to care.
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@Cmdr:
No. It is the government’s job to print the money.
Not after 1913. ~ZP
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I do not recall ever saying that the FEDS need to establish banking standards to prevent the type of fiasco in the banking industry that has occurred since late 2000, I think I said “government” (and truth be told, I personally think it was pressure from Washington to open up the floodgates of lending in order to spur the economy that CAUSED our current problem.
Amendment 10 gives the power to regulate banking to the states… if it is not indeed an implied power of the Feds as a result of the Commerce and Treasury clauses (which has been the consistent ruling since 1791…)
Either way, banking standards CAN indeed be government imposed. Many are, but apparently lending standards need to be added to the list since the banks can no longer be trusted to even engage in practices for their own elf interest, beyond their SHORT TERM self interest anyway…
And again that is part of the problem with the current economy… very few businesses are looking at the long term anymore, only the next fiscal quarter or the next stock dividend or next option they can cash in. Short term thinking is what destroyed Enron, what bankrupted WorldCom, what put Safety Kleen into Chapter 11 (and threatens to do to them again only 4 years after emerging the first time), ad infinitum ad nauseum; with the banks being no exception to the rule.
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I agree, it was the GOVERNMENT encouraging banks to make bad loans that caused this mess. So why should we let GOVERNMENT attempt to clean it up?
As for Amendment 10, I agree. It’s the state’s job. Not Bush, not Clinton, not Congress, not the Senate. For me, that’s Blago’s job. Or Mayor Daley, whoever.
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Illinois was the state with the ninth most home foreclosures for last year.
We had a total of 91 homes foreclosed on. Yea, that’s right, 91. Not even 100. 91 out of millions of homes. Sounds like we have an epidemic alright!
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@Cmdr:
Illinois was the state with the ninth most home foreclosures for last year.
We had a total of 91 homes foreclosed on. Yea, that’s right, 91. Not even 100. 91 out of millions of homes. Sounds like we have an epidemic alright!
What?!? I think you missed the 3 zeros on the end of that.
91 foreclosures? Does that even sound remotely plausible?
Illinois actually had 90,782 foreclosures in 2007.
Here are the total 2007 foreclosure figures for the country listed by state:
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Whatever happened to personal respbsility? did these people have guns to their heads when they signed their mortgage papers? The rest of us shouldnt be punished by higher taxes for the stupidity of others.
thats not to minimize the crisis (which is very much real). a drop in equity directly correlates to decreased consumer spending, and the credit/insurance crisis is still inthe opening act.
but thats not to say we should print money and hand it to people (which is essentiuallu what the “Stimulus package” is). if the people i work with are any indication of the public, the money from those rebate checks in june will go straight to china and Japan. Hello Sony Flatscreen!
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I think the loaners and loanees have equal blame here.
Shouldn’t take a loan you can’t payoff.
Shouldn’t give a loan they can’t payoff.
Both are ignorant, but I almost want to tip the scales of stupidity in favor of the bank or mortgage company. They could have said no or denied the loan. Research who your money is going to.
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I misheard.
Still, 91,000 foreclosures.
Now, homes for sale in Chicago and the collar cities, according to Realtor.com, is 659,478
Now, if you figure that’s a very small percentage of the total number of homes because it does not include the Suburbs, the Quad City area, the Joliet area, the Peoria area, the St. Louis area (we have suburbs of the city, but not the city itself) the Bourbonaise area, the Champaign area or the Moline area; you know, the other major civilian centers of the state, you can EASILY see how pitiful that number really is.
Best I can guestimate from Realtor.com - because you cannot just to a state search - we have roughly 6,381,686 homes at any given time. I’m taking that number by taking a 10 mile radius around major metropolitan area, multiplying by 10 and dividing by the number of metropolitan areas to get an average. (For very large areas like Chicago, I took major areas and averaged those for the city, like Gurnee, Schaumburg, Elgin, Wilmette, Chicago, Chicago Heights, etc.)
91,000 foreclosures / 6,381,000 homes = 1.4%
Wow. So like 1% of people give or take a few percent in my UNscientific population, in Illinois, lost their home to foreclosures. We need to change THE ENTIRE banking system, expand government at the highest rate since FDR and give them unprecedented power over our lives to protect 1%?
What’s the High School Graduation Rate in Illinois? According to the US Dept of Education only 72.2% of Illinois citizens graduate from High School.
Perhaps if the SAME government that screwed up education fixed THAT, the 1% of home owners who can’t do simple arithmetic and thus are losing their homes wouldn’t be in that situation?
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In the article I linked to the right most column tells you the % of households.
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Whatever happened to personal respbsility? did these people have guns to their heads when they signed their mortgage papers? The rest of us shouldnt be punished by higher taxes for the stupidity of others.
And I should not be penalized becaused I, as a good faith borrower who is paying their mortgage FASTER than agreed, bought a house in a neighborhood where banks improperly loaned money to people with NO ability to repay their loans. Those foreclosures take money away from ME be devaluing my home.
STANDARDS of lending are what is required. And since the banks have chosen to ignore the standards they held for 200+ years in order to gain a quick buck thorugh loopholes in the various debt laws passed by Congress, then it is indeed Congress’s responsibility to FIX those holes they created AND to protect my home value from negative valuation caused by their previous actions that were designed to create fraudulaent short term gains by banks.
Congress passed the laws that allowed this to happen. Congress therefore is stuck with fixing their own mistake, preferably NOT at my expense…
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I agree, not to mention the fact that greedy bankers, investors etc, will tell Joe Shmuck - this ARM is the way to go for you! Your payment is only going to be $5 for the next year guaranteed! There is some chance that the payment will increase at some point, but the economy is so great you won’t have to worry about that! This kind of deception is reprehensible to me. The reason we have rules, laws and regulation is to protect those that don’t have the knowledge experience or ability to protect themselves.
Just to clarify I am one of those people that will most likely profit from the hosing down turn, When I decide that it looks like we’ve hit the bottom I am going to start buying. We’re not there yet…
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@ncscswitch:
And I should not be penalized becaused I, as a good faith borrower who is paying their mortgage FASTER than agreed, bought a house in a neighborhood where banks improperly loaned money to people with NO ability to repay their loans. Those foreclosures take money away from ME be devaluing my home.
Yeah, but the loaner doesn’t like paying off early - they want to make as much interest off you as possible.
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@ncscswitch:
STANDARDS of lending are what is required. And since the banks have chosen to ignore the standards they held for 200+ years in order to gain a quick buck through loopholes in the various debt laws passed by Congress, then it is indeed Congress’s responsibility to FIX those holes they created AND to protect my home value from negative valuation caused by their previous actions that were designed to create fraudulent short term gains by banks.
A) I agree that law abiding citizens that did NOT violate their contractual obligations to the banks and thus are not causing strain to the body republic should NOT be forced to pay for the ones who did violate their contractual obligations to the banks.
B) I disagree that Congress has to fix anything. The banks made their own choices. “You made your bed, now you have to lie in it.” Anyone with a brain that decided to engage it would have told you half a decade ago that these interest only loans are a very bad idea. And for generations we’ve known that balloon payments and points and ARMs are bad ideas! This is not Congress’ fault, it is the consumer’s fault and the bank’s liability.
C) If we were to get legislation from Congress in this regard, it better be as either an amendment to the constitution giving them the right to even make laws in this regard; or to protect the federal government from the stupid decisions of the people and the banks. But then, I’m not entirely happy with FDIC. I’d prefer if banks just gave you the option of more interest or FDIC protection through a private insurance agency.
D) I still say the best solution to the “housing crisis” (which is barely 20% of the unemployment crisis, which isn’t even a crisis since we have statistical full employment in this nation) is to sit back and watch what happens. Maybe even raise the federal interest rate to about 6 or 7% so people could invest and make some money. You cannot earn a return on your money at 1% or 2% (or for savings accounts, I think we are all the way up to 0.005% APR now. That’s 0.00005 for those who don’t realize the percent sign moves the decimal two spaces to the left.)
If the Fed raised the rates to 7 or 8%, which is NOT that bad really, it’s still WAY lower then the 20-some% we were paying under President Carter, people could invest in US Savings Bonds, US Treasury Bonds, get better rates at the banks for savings and checking accounts, etc.
Today’s Mortgage rates have been fluctuating between 5.5% and 6.5% for about a year. Meanwhile, the Federal Prime Rate (according to the AP 8 hours ago) is 3%. That means we can pretty much assume that there’s about a 2.5-3.5% markup on mortgage interest. So if the Prime was raised to 5% we’d be looking at 8.5-9.5% APR on Mortgages (with zero points, 30 year fixed, no balloon, and not a jumbo loan.)
What’s the difference in monthly between 6.5% and 9.5% (the two upper limits)?
According to Realtor.com, if you have 20% down on a $495,000 home (which is mid range in Chicagoland) at 6.5% APR you will pay $2,503 per month.
and
According to Realtor.com, if you have 20% down on a $495,000 home (which is mid range in Chicagoland) at 9.5% APR you will pay $3,330 per month.
That’s $800 more. However, your Savings interest, your commercial and governmental bonds will also rise in rates from 1 or 2% to 6 or 7% as well and will make up the difference easily.
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