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John Adams Blog

The blog of The Antient and Honourable John Adams Society, Minnesota's Conservative Debating Society www.johnadamssociety.org

Wednesday, February 07, 2007

You Stupid, Stupid Consumers

The WSJ Opinion Journal lashes out today at Congress as they prepare to hold hearings on predatory lenders in the recent housing boom.

The noted banking expert Jesse Jackson is scheduled to be a featured witness at today's hearing . . . Senator Chris Dodd . . . is in high dudgeon, threatening legislation and talking about the American dream becoming a nightmare for those who can't make their mortgage payments. [snip]

Related to this is the contention, made by the same populists on the current "predatory lending" rampage, that banks make money by charging them "excessive" interest. But, if anything, the recent spate of bankruptcy among subprime lenders suggests that they were charging too little interest to compensate for the credit risk they were taking by lending to people with bad credit histories. [snip]

Quickly rising prices made a lot of people giddy on both sides, and it's now clear that loans were offered and taken that should not have been. Both the asset-price increases and the lending risks were also facilitated by a prolonged period of easy money, courtesy of the Alan Greenspan-Ben Bernanke Federal Reserve.

Was I wrong to re-fi into a 4% 5/1 ARM three years ago? Not in the least. I was able to put the money I saved on interest back toward principle. That is, until it started going to legal fees and skyrocketing property taxes (now THERE's a matter for investigation). Now that the additional funds are not going to legal fees, (I thank you in advance for your belated congratulatory notes) that money can go to work earning an additional 4% so that when my ARM adjusts upward in a couple of years, there will be no pain. This is not rocket science.

Blogger Sloanasaurus said...

IT reminds me of a story many years ago of a friend and his new girlfriend at the time (now ex-wife). The girlfriend was a partime waitress at Friday and made about $600 a month. She later went to buy a car, a brand new Grand Am. The dealer said the payment would be $500 a month. Knowing that she made $600, she said WOW, I can get it! She bought the new car.

It was only a month later when the first payment came due that she realized she had other bills such as rent and food.

8:31 AM, February 07, 2007  
Blogger Scribbler de Stebbing said...

Perhaps lenders should simply require an IQ test in lieu of the mountains of financial records.

The real purpose of this post was to include the phrase, "The noted banking expert Jesse Jackson." ROFLMAO.

8:48 AM, February 07, 2007  
Blogger Air Marshall said...

I know people wont believe this, but when I was in the Mortgage Biz in 1965 people defaulted on their loans and we foreclosed their Mortgages. These people lost their houses. It was later found that the reason they did was because we had lent them money to buy a house with.

9:49 AM, February 07, 2007  
Blogger Scribbler de Stebbing said...

I'm shocked, shocked to find that lending has been going on for over 40 years! What did Congress know and when did they know it? Dastardly.

9:56 AM, February 07, 2007  
Blogger Sloanasaurus said...

I am surwe the Democrats would really like to make it impossible for lower income people to borrow money anyway. After all, using debt is one way to get out of the poor house - that could threaten the democrats voting base.

A better system would be for the government to provide the house and require the lower income person to pay a corresponding tax back to the government every month. The only catch is that the government gets to keep the house.

Wait... isn't social security the same system.

12:23 PM, February 07, 2007  
Anonymous Anonymous said...

Closer to home, it sounds like AG Swanson is about to make it impossible for poor people to buy a house, thus solving the problem.

3:51 PM, February 07, 2007  
Anonymous Anonymous said...

This Crap Doesn't Help At All! I Need Some Good Info. For My History Project, And This Is Deffinetly Not IT!

2:33 PM, February 20, 2007  
Anonymous Anonymous said...

Your Clock Is Also One Hour Behind. C'Mon!

2:35 PM, February 20, 2007  

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