My rant about the recession

[bull]

One good thing about the economic downturn is that I'm not getting nearly as much junk mail as before. Anyone else notice you don't see many (if any) credit card applications and mortgage refinance offers these days?

I do have an honest question about the whole mortgage quandary though: why don't these creditors make any effort to attract those with good credit to switch? Seems like any other business would lower their prices (in this case it would be lower interest rates) to attract more solid customers but it seems they're all just sitting on their hands waiting for us to spend money we don't have. Back prior to the early 80s you couldn't get a credit card or a home loan without good credit and now, until recently anyway, my dog could have gotten a Visa card with a $10,000 limit.

IMO this is a correction in the way finances in the US have been conducted for the past 20-30 years or so. Like a forest full of dead wood being cleared by a strong wind, individuals and businesses that have been overleveraged for years are finally being pared. In a nutshell, this country has relied too heavily on credit and debt, from the top down, and now it looks like we're paying the piper.

That and there's nothing for us to base our economy on because we make almost nothing in the US anymore except new homes and a few other odds and ends. And if I understand it correctly isn't/wasn't the economy based on the housing market which is based largely on mortgage debt? And weren't people being told they could buy more house than they could afford? I know we were told that back in 1995 and again in 2000 when we bought our first and second home. In 2000 we were told we could afford a $250,000 house but we knew better and we paid $167k. Even that was tough to manage and in many ways it still is. So how many people believed the Realtors and creditors who told them so spend $100k more than they should? Most of those who are in trouble now would be my guess. Add to that big credit card bills, big car payments and a bunch of other expenses we never used to have (cell phones, internet, cable, $1,500 TV sets, etc.) and it's a recipe for disaster.

Anyway, there's my rant for the day. I hope everyone here is doing well financially. Or at least ok.

[BB1]

What economic downturn. 

[NHCharger]

In 2000 we were told we could afford a $250,000 house but we knew better and we paid $167k. Even that was tough to manage and in many ways it still is. So how many people believed the Realtors and creditors who told them so spend $100k more than they should?

When my wife and I shopped for our first house in 1983 that's the first thing we noticed. After the Realtor "qualified" us she went right to the maximum. when I asked her how would we be able to save any money for a rainy day with that huge payment she looked at me like I had three heads. Realtors income is based on commission so obviously the more you spend the more they make.

What's funny/ironic is that a large part of the cause of this recession is the same as the recession from the early 90's. The banking industry. Last time is was the savings and loan crisis. What bothers me is that the oversight committee's in congress turned a blind eye to what was going on in the banking industry, and now the same people are the ones that are going to "rescue" us. I'm not going to name names and turn this into a political thread, but anyone can do the research and find the truth, not the rhetoric.

It's going to take years for this to all shake out. Most everyone has to take some blame. Too much CC debit, living beyond your means, not reading the fine print on the paper work from the mortgage companies, not saving for a rainy day assuming everything was going to be all peaches and cream for the next fifty years.

[RECHRGD]

When the whole economic system is based upon how much debt you can carry, somethings got to give sooner or later.  We never seem to learn.

[dodgecharger-fan]

So how many people believed the Realtors and creditors who told them so spend $100k more than they should?

When we bought the house we're in now, about 7 years ago, we put in a conditional offer based on selling our old house and obtaining finance. When someone else put in an offer, we had to waive our conditions or walk away.

It took a two minute conversation with the bank that holds my mortgage to get the go ahead. They called it bridging my mortgage, but it amounted to carrying two mortgages up until I sold the old house.

My Realtor fell off his chair when I called him back in less than 20 minutes and waived our conditions. He had never ever had that happen.

I had no real idea. I called the people that could say yes or no and they said yes...  I knew I could handle the payments for about 6 months, but after that, I'd be screwed.

As much as it made me feel like a big wheeler and dealer, I suspected (and now know) that it had more to do with the system than with me.

It was scary, but it all worked out in the end. The really stinky part through it all was all the low-ballers trying to get my house for half the asking price. Their Realtors were floored when the offers were flat out refused rather than signed back with a counter offer... I had my Realtor tell any Realtor approaching him with an offer that they better be serious or they're wasting everyone's time... We sold within 10K of our asking price.

[BigBlackDodge]

In 2000 we were told we could afford a $250,000 house but we knew better and we paid $167k. Even that was tough to manage and in many ways it still is. So how many people believed the Realtors and creditors who told them so spend $100k more than they should?

When my wife and I shopped for our first house in 1983 that's the first thing we noticed. After the Realtor "qualified" us she went right to the maximum. when I asked her how would we be able to save any money for a rainy day with that huge payment she looked at me like I had three heads. Realtors income is based on commission so obviously the more you spend the more they make.

What's funny/ironic is that a large part of the cause of this recession is the same as the recession from the early 90's. The banking industry. Last time is was the savings and loan crisis. What bothers me is that the oversight committee's in congress turned a blind eye to what was going on in the banking industry, and now the same people are the ones that are going to "rescue" us. I'm not going to name names and turn this into a political thread, but anyone can do the research and find the truth, not the rhetoric.

It's going to take years for this to all shake out. Most everyone has to take some blame. Too much CC debit, living beyond your means, not reading the fine print on the paper work from the mortgage companies, not saving for a rainy day assuming everything was going to be all peaches and cream for the next fifty years.

100%!

BBD

[RallyeMike]

I hear ya Bull. My credit card solicitations have gone from 6-7 per week to maybe 1. Capital One alone used to send 2-3 per week.

I'm going to guess that the next thing coming after they print all the new money for the bailouts and other programs is inflation like we had in the 80's ?

[Mike DC]

     
We borrow money from China to buy disposable chinese products. 

Washington & Wall Street tell us that doing more of this is a sign that our economy is getting healthier.  Our televisions & houses & SUVs are bigger than we had last year, so we actually believe them.





It all works fine as long as our national debt can be repaid with Monopoly money.   

So in recent years we've tried our best to turn our US dollars into monopoly money by overprinting it. 

   


That policy works fine as long as the public & world doesn't become aware of what we're doing. 

So we've recently stopped releasing any figures on the amount of US dollars that are really in circulation, and we've cooked the books on offical inflation figures.

[bull]

Another thing I wonder about is how they pump this newly printed money into the economy? Do people line up at the mint with paper bags like they do at WalMart on Black Friday? How is this cash distributed?

[Todd Wilson]

Another thing I wonder about is how they pump this newly printed money into the economy? Do people line up at the mint with paper bags like they do at WalMart on Black Friday? How is this cash distributed?

Good question! I'd be glad to have them fill a duffle bag for me! I'd kick start the economy with a few hundred million in cash in my pocket.


Todd

[Mike DC]

Getting it into circulation? 

Hell, that's easy.  The govt just cuts another loan with Asia and then continues to spend more money that it never had. 


It's been going on for decades now.

[71EV2RT]

Yep, We (The United States Govt.) just borrow more foreign money, that will never get paid back. It's enough to make you sick if you think about it too much.

[Mike DC]

Hey, we wouldn't have it any other way.  All we have to do is stop voting for anyone that keeps overspending. 

[PocketThunder]

If you have good credit you can still get a good loan.,   I bought our house back in May and i got a good rate on a 30 year fixed.  I'm living the old fashioned way, moma stays at home full time with our 3 kids and we live on my salary only, and within our means.  (which translates to my Charger fund is zero right now  )  but not for long. 

[hutch]

best best is to never owe anyone money.  If you need to borrow to get a house, then make sure you can put 20% down or you dont have the money to buy the house in the first place. 

Credit Cards are bad unless you are a business and need something fast. But for the everyday joe, getting in debt or using debt as a way to improve your life will always lead to your destruction.

[Todd Wilson]

best best is to never owe anyone money.  If you need to borrow to get a house, then make sure you can put 20% down or you dont have the money to buy the house in the first place. 

Thats not a reasonable thing to say for most people out there.  Stop and think about 20%. It could take 10 years for someone to save 20% on a 100000$ house. They could be 1/3 of the way paid off by the time they get the 20% saved  and the house they were saving for has probably went up in value in 10 years so now they are saving more.  Buying a house is probably the only good thing you can do with credit as long as you get a real loan from a real bank at a fixed rate. And buy a house within your income means. A real bank will only loan you that amount.


Todd

[Mike DC]

 
I've learned a big, simple, valuable lesson from my father about borrowing money:



My father has spent his career in private lending at a major nationwide bank.  He makes a living deciding whether or not to lend HUGE (much more than he'll ever have himself) amounts of money, and what the terms will be. 

And when it comes to his own life & family, he will not borrow money EVER, for ANYTHING he doesn't have to.  He has a loan on his house (almost paid off) and that's it.

He will literally buy a brand new $30,000 car with a single check on the day he drives off with it.  Not because he's that rich (this might happen once every 4-7 years), but because he's that unwilling to take out a unnecessary loan over anything. 

[moparstuart]

 
I've learned a big, simple, valuable lesson from my father about borrowing money:



My father has spent his career in private lending at a major nationwide bank.  He makes a living deciding whether or not to lend HUGE (much more than he'll ever have himself) amounts of money, and what the terms will be. 

And when it comes to his own life & family, he will not borrow money EVER, for ANYTHING he doesn't have to.  He has a loan on his house (almost paid off) and that's it.

He will literally buy a brand new $30,000 car with a single check on the day he drives off with it.  Not because he's that rich (this might happen once every 4-7 years), but because he's that unwilling to take out a unnecessary loan over anything. 

We need alot more people in this country like that !!!!!!

[hutch]

best best is to never owe anyone money.  If you need to borrow to get a house, then make sure you can put 20% down or you dont have the money to buy the house in the first place. 

Thats not a reasonable thing to say for most people out there.  Stop and think about 20%. It could take 10 years for someone to save 20% on a 100000$ house. They could be 1/3 of the way paid off by the time they get the 20% saved  and the house they were saving for has probably went up in value in 10 years so now they are saving more.  Buying a house is probably the only good thing you can do with credit as long as you get a real loan from a real bank at a fixed rate. And buy a house within your income means. A real bank will only loan you that amount.


Todd

And thats my point.  When I was first coming up you saved 10 years for a house if you wanted a house.  Everyone living off easy credit is what has caused this mess.  You go buy a house with nothing down and then the house market goes down, you owe more than your house is worth. Then what?  its just like flushing money down the crapper in interest payments and you never end up  building true equity.  A real bank will only loan you 80% loan to value. That's 20% down.    That is in large part what caused this mess.  No one saves anymore or lives within their pay.  People walk up with good credit and buy a house with zero down are the same people that use a credit card to buy a big mac.  Next thing you know, that big mac ends up costing 50 bucks in interest payments before its ever paid off if it is ever paid off.

Save, dont borrow, Its a ponzy deal and its blowing up on us now.

[bull]

I tend to follow the advice of a guy named Dave Ramsey when it comes to debt. http://www.davesays.org/ Basically he says it's ok to have a home loan as long as you are not in debt elsewhere and are working toward paying your house off early. There are areas where I disagree with him but I think his logic would probably win out over mine in those areas if we were to debate.

Here's his baby step plan:

1. $1,000 to start an Emergency Fund
2. Pay off all debt using the Debt Snowball
3. Three to six months of expenses in savings
4. Invest 15 percent of household income into Roth IRAs and pre-tax retirement
5. College funding for children
6. Pay off home early
7. Build wealth and give! Invest in mutual funds and real estate

[Mike DC]

 
The problem these days is that you can't truly avoid the overborrowing trend when EVERYONE else is participating in it.  You can stay out of debt yourself, but you can't avoid the lifestyle problems that come once the cultural average of everything has been reset higher with everyone's deficit spending in mind.


--------------------------------------------------------------------------


Say you just want a relatively new house, and you want to live in a nice neighborhood with decent public schools.  You want to buy what you can afford but not overreach.  This sounds like a reasonable goal, doesn't it?  Your parents' generation could do this.  A couple generations ago you could still do that in a small house. 

But not now.  Now that EVERYONE else is overbuying, you can only find small houses in the form of older areas with worse school districts.  You can no longer get the advantages of a new house & decent school districts unless you throw in with everyone else and overbuy yourself a McMansion on borrowed money like they do. 



Just like you used to be able to buy decent sized new cars and trucks for decent amounts of money.  Whereas now you can't refuse to invest in power acessories even if you want to.  If you want a pickup, you're gonna overbuy like everyone else.  And if you can't afford to overbuy a new vehicle then you have to spend almost as much money overbuying a used version.  Of course the used ones are all just as over-optioned as the new ones, and less reliable to boot.




And then there's education.  Just try to find a typical state college that doesn't provide you a huge nice new dorm room in exchange for tuition that's twice what it really needs to be. 



The list goes on and on.  This stuff is literally wrecking our lives and destroying our families.  Our kids wouldn't be so messed up if we were at home raising them, instead of letting the media raise them while we're pulling triple shifts to pay for all this unnecessary garbage. 

[bakerhillpins]

If you have good credit you can still get a good loan.,   I bought our house back in May and i got a good rate on a 30 year fixed.  I'm living the old fashioned way, moma stays at home full time with our 3 kids and we live on my salary only, and within our means.  (which translates to my Charger fund is zero right now  )  but not for long. 

We are doing the same thing with the family and finances. That is why I don't own a Charger. Yet! 
Now that all there kids are in school the wife has a part time job where she works from home, so we have some extra income to help get a few projects paid for and she works the hours that are convenient for us.

Bryan

[bakerhillpins]

I tend to follow the advice of a guy named Dave Ramsey when it comes to debt. http://www.davesays.org/ Basically he says it's ok to have a home loan as long as you are not in debt elsewhere and are working toward paying your house off early. There are areas where I disagree with him but I think his logic would probably win out over mine in those areas if we were to debate.

Here's his baby step plan:

1. $1,000 to start an Emergency Fund
2. Pay off all debt using the Debt Snowball
3. Three to six months of expenses in savings
4. Invest 15 percent of household income into Roth IRAs and pre-tax retirement
5. College funding for children
6. Pay off home early
7. Build wealth and give! Invest in mutual funds and real estate

Good advice. The wife and I didn't buy a house until we paid off all of our loans, cars/CC included. Then we bought the house taking advantage of little down but ignored the "qualified" limit and stuck with our own. We have been able to buy our cars with cash and even leveraged a 0% CC cash advance for a year to buy our minivan. It was wicked cool, buy it with cash from the CC and leave our $30k in a high interest account for a year. We got PAID for our car loan! 

I always have put away 10-20% of income for retirement and some for the Kids college. If you can avoid debt you can really take advantage of the system. But its hard to do and you have to give up on that consumerism that lots of folks practice.

Bryan

[RECHRGD]

 
The list goes on and on.  This stuff is literally wrecking our lives and destroying our families.  Our kids wouldn't be so messed up if we were at home raising them, instead of letting the media raise them while we're pulling triple shifts to pay for all this unnecessary garbage. 

I totally agree!  As most of you know, I'm a old fart.  When growing up in the 50's & 60's easy credit was just coming into it's own and my parents fell right into the trap.  We had a beautiful home in a nice neighborhood, new cars and all the latest stuff.  When it was all said and done, Dad died at 59 with nothing.  The bank had the house, their one car was 5 years old and there was no insurance for Mom.  She had to start all over.
What makes it even worse today is that everything changes so fast that what you buy today is considered junk tomorrow.  Your two year old computer won't run the latest programs, your TV won't pick up digital signals, every room in your house is not pre-wired for all the latest electronic information and entertainment technology, your cell phone doesn't have a camera, your almost new car doesn't have side airbags or onstar.  Now everybody is convinced that we should all turn GREEN because the sky will fall if we don't.  Forget that the planet has been heating and cooling since the beginning of time.  We must all buy more efficient cars, home a/c and heat units, light bulbs, laundry detergent and bla, bla, bla.  Ever notice that the more efficient products cost twice as much as the old standard stuff?  Everything is a money grab.  Oh, and while we are at it we better get some solar panels and wind generators to supplement that evil power off of the utility grid.  By the time your payback for the initial investment is done, the systems will most likely need total replacement.  I could keep going here, but you get the point.  We're toast.    Bob

[bull]

We must all buy more efficient cars, home a/c and heat units, light bulbs, laundry detergent and bla, bla, bla.  Ever notice that the more efficient products cost twice as much as the old standard stuff?  Everything is a money grab.  Oh, and while we are at it we better get some solar panels and wind generators to supplement that evil power off of the utility grid.  By the time your payback for the initial investment is done, the systems will most likely need total replacement.  I could keep going here, but you get the point.  We're toast.    Bob

It's the latest fad and the latest way for people to make money. The green movement is the newest hot business opportunity right now. There are a lot of guilty people out there and they'll spend big money to feel better about themselves. I say let them spend all they want on the green products and maybe the mediocre results will make them happy. Meanwhile the rest of us can conduct business as usual. Let them pay for it all. It reminds me of that SETI (Search for Extraterrestrial Intelligence) BS. Why are we spending all this money on searching the heavens for alien life? I say let the aliens pay for it. Let the little green men spend the money finding us.

[hutch]

Let the little green men spend the money finding us.

LOL,  right on brother.

[Charger_Fan]

I simply refuse to buy anything on credit.
I gave up any desire to 'keep up with the Joneses', so no need for a new car, huge theater system, massive house (although I would like a massive garage ), etc. I buy old, cheap used cars. If I don't have the money for it, I don't buy it. Period.
And Christmas does NOT get put on any card...Christmas costs do NOT continue past December 24th.
Seeing some of the crap people buy...and the McMansions around here & some of the vehicles people drive amazes me. It makes me smile with the assumption that most of those are financed right to the eyeballs, though.

After what I've been through financially in the last 20 years, there's no way in hell I'm borrowing money for anything again, unless I'm absolutely up against a wall. I finally clued-in about 6 years ago & I have slowly dug myself out from under all my financial crap! Just last October, I jumped on the chance to finally get rid of my 13.6% 2nd mortgage, 7.5% 1st & refinance it all to a 5.5% 15 year mortgage. That is the ONLY debt I have right now & I shortened my mortgage by 4 years. I'm happy as hell!
10 years ago, I would have never dreamed that I could be sitting here today with my house payment as my only credit type debt.

About 3 years ago, I found Dave Ramsey on the radio & discovered that I was already doing a lot of the things he says to do. I don't agree with everything he says, either & feel guilty sometimes that I don't try harder, but then I think back to the rough times & how much better off I am now. Then I feel better.
Sometimes I've pondered borrowing money to restore my Charger...but you know what? I'd rather be debt free a whole lot more than seeing my Charger in fresh paint.

I think these bailouts are a huge mistake & will only serve to compound the problem. These companies (including that friggin' AIG) should have been allowed to fold & let the chips fall where they may. So we go though a rough spell for a while, I think we would have come through the other side in better shape, and far sooner than we will at this rate.
This whole thing is just crazy. I think it's going to get a lot worse before it gets better, too.

[bull]

I think these bailouts are a huge mistake & will only serve to compound the problem. These companies (including that friggin' AIG) should have been allowed to fold & let the chips fall where they may. So we go though a rough spell for a while, I think we would have come through the other side in better shape, and far sooner than we will at this rate.
This whole thing is just crazy. I think it's going to get a lot worse before it gets better, too.

Failure is a part of life and a part of growth, learning and becoming better. Throwing money at the problems is not going to fix them for very long.

[hutch]

http://www.youtube.com/watch?v=fBPmc7JdneY

[Todd Wilson]

best best is to never owe anyone money.  If you need to borrow to get a house, then make sure you can put 20% down or you dont have the money to buy the house in the first place. 

Thats not a reasonable thing to say for most people out there.  Stop and think about 20%. It could take 10 years for someone to save 20% on a 100000$ house. They could be 1/3 of the way paid off by the time they get the 20% saved  and the house they were saving for has probably went up in value in 10 years so now they are saving more.  Buying a house is probably the only good thing you can do with credit as long as you get a real loan from a real bank at a fixed rate. And buy a house within your income means. A real bank will only loan you that amount.


Todd

And thats my point.  When I was first coming up you saved 10 years for a house if you wanted a house.  Everyone living off easy credit is what has caused this mess.  You go buy a house with nothing down and then the house market goes down, you owe more than your house is worth. Then what?  its just like flushing money down the crapper in interest payments and you never end up  building true equity.  A real bank will only loan you 80% loan to value. That's 20% down.    That is in large part what caused this mess.  No one saves anymore or lives within their pay.  People walk up with good credit and buy a house with zero down are the same people that use a credit card to buy a big mac.  Next thing you know, that big mac ends up costing 50 bucks in interest payments before its ever paid off if it is ever paid off.

Save, dont borrow, Its a ponzy deal and its blowing up on us now.

I agree with what you are saying except the 20% down deal is just not possible by most. They cant save that kind of money.   Theres nothing wrong with buying a house with 0% down. The problem is people buying more house then they can afford and doing it with some funky loan thats caused the problem we are in.  In most times people can buy a house and live in a better hood making a house payment that is less then rent. And as much as people are to blame for living beyond their means  the finance companies are just as much to blame for being stupid to make these loans anyways. But it was ok to do this because our elected officials thought it was a good idea and ok'd this mess we are in now by saying they would back up the loans.


10 years ago when I bought my house we sat down (me and realtor) with the bank and they said how much you make. Checked my credit and said this is how much of a house you can buy. They had some calculation that so much % of your pay check should be used for housing. At that time I thought they were crazy as I couldnt afford that.  I ended up buying a house at half the $ I was qualified for. 10 years later I am still in the house.  My value has went up and its went down some but I havent lost $ yet on this house.

You get a chance to buy a house do it! But do it the right way!

Todd

[Todd Wilson]

I tend to follow the advice of a guy named Dave Ramsey when it comes to debt. http://www.davesays.org/ Basically he says it's ok to have a home loan as long as you are not in debt elsewhere and are working toward paying your house off early. There are areas where I disagree with him but I think his logic would probably win out over mine in those areas if we were to debate.

Here's his baby step plan:

1. $1,000 to start an Emergency Fund
2. Pay off all debt using the Debt Snowball
3. Three to six months of expenses in savings
4. Invest 15 percent of household income into Roth IRAs and pre-tax retirement
5. College funding for children
6. Pay off home early
7. Build wealth and give! Invest in mutual funds and real estate

I enjoy listening to his radio program.  I am like you I agree with most of what he says. His system only works if people are making decent $ with the ability to redirect funds to pay something off. There was a time in my life I was working a job and barely making ends meet. I was single. I had no debt,I had no credit. It was a crap shoot every day if my vehicle would start or not. 2 days before pay day i was digging in the couch cushions scrounging up enough change to go buy a few boxes of the cheap mac and cheese so I could eat. Investing in mutual funds or saving simply wasnt possible.

Todd

[Mike DC]

   

There's nothing theoretically wrong with borrowing money.  Not even with borrowing a large sum, paying very little down, and ultimately committing a lot of money just to interest before it's all said & done.



The problem with too much easy credit is when people start living on credit for everything they purchase, instead of just getting "ahead of the wave" by a few month's worth of salary and then living on earned cash as the norm.  The credit card industry has been working the public into more and more  debt this way in the last few decades and it's getting scary.  That industry has crossed the line into predatory lending a long time ago IMHO.   



The problem with large low-down-payment housing loans is when people borrow money on the assumption that the house will appreciate indefinitely.  This is speculation, pure and simple.  It's gambling.  It's no different than borrowing money to buy a bunch of stocks. 

It's not a horrible practice on principle either (at least for those who do it knowingly and can realistically afford it).  But the banking & real estate industries need to stop pitching this idea to home buyers as if this is something other than flat-out gambling.

[89MOPAR]

An example I can give - In Feb 2005 I was buying the house i am in now.  At the time i could maybe come up with maybe 5% of the price, and pay for the closing costs with cash. 
I was offered a loan where you could pay your choice each month...
1.  Principal + interest
2.  Principal only
3.  Interest only
4.  Nothing that month !
of course this was an adjustable rate loan as well, with its own complications of payment vs interest rate vs LIBOR, etc.
   Then I was offered an 80% 1st mortgage @ 5.5% for 30 years, with a 15% 2nd mortgage for 15 years @ 7.5% .
The problem was the 2nd mortgage had a balloon payment of about $22K at the end, basically you were paying interest only on it for 15 years !
  I asked the Mortgage broker where people came up with the money to pay off the balloon payment. She said the mortgage industry wasn't worried, most folks just refinanced in the future to handle the balloon.  Yeah, of course they like that !!  More refinancings meant more origination fees for the broker.

Now say i had gotten the crappy [ for me and America] 1st example of loan.  Where would it be now ?  Sliced and diced into some sort of Collateralized Debt Obligation.  Lots of banks would own little pieces of it.  Lots of other banks and pension funds would be selling insurance swaps, betting some other holder of this debt would fold.  The most part of all this wouldn't be regulated by any agency , since the "default swaps" and "derivatives" were , "too complicated to regulate, would stifle ingenuity if regulated, and the banks would police themselves". [ Actual reasons your Congress used to justify not regulating this crud ]
   Guess what , when people police themselves, GREED takes over.

There is a old legal term called "insurable interest", basically it started back in England a few centuries ago. A Couple of old ladies ran a "retirement home" . They weren't related to their boarders.  They took out insurance policies on the old geezers, than killed them. Then collected the insurance money.  Eventually they were caught.  The law was then made that in order to insure someone [ life insurance] you had to be related.  I would not be allowed to take out life insurance on Bull or Todd Wilson, because I have no insurable interest in them.  I would profit if they died early, and since we aren't related why would i care [ just an example, i love the D-C.com members], in fact I'd be happy for that outcome.
   This is basically what happened with all these default swaps and shitty loans. They got passed on and on. People take out insurance agianst loans being paid back, or insurance against certain companies, that will pay out if that company fails. The total value of the bets is supposed to be 65 TRILLION dollars !!   Almost all unregulated by any state or federal agency.
   How about we limit the amount of times a mortgage can be sold to 2 or 3 times    That might help.
  Does anyone know how much the Secretary of the Treasury made from salary and options while employed at Goldman Sachs [ a huge wall street investment bank / broker] ??   500 MILLION $$  !!
  Do you think there might be a coincidence with that and the fact that about 1 Trillion dollars is now earmarked to help financial firms , yet they can't afford 30 billion to help the BIG 3 Auto Co's
  2 months ago Citigroup corp tried to file a federal lawsuit because they had competition trying to buy Wachovia [ a failing bank ]. Now last month the government guaranteed 300 Billion of Citigroups  debt [ much of it derivative related] ....   Where the heck were they going to get the money to buy the assets of Wachovia
   Its F***N incredible.  There really is two worlds, one for the corporations with the money and political connections, the other for us.

One more tale to relate.  A chiropractor I know used to work for a small Portland financial firm while going thru school.  They specialized in "subprime" finance in credit cards, like the 29% interest rate type, or the "prepaid" type.  At one point they did a mass mailing which specifically was sent [ they buy lists ] to people Known To Have Poor Credit.  Out of 100,000 pieces mailed, they got nearly an 80% return rate of people who wanted a credit card. They had to hire 40+ people to work in the mailroom section.  The owner of the Portland firm sold his company to Household Finance Co - he walked away with 42 million $$.   How many of those folks do you think fell behind on their payments.... Think any of those unpaid balances are being held by firms which are now getting bailouts ??
  Maybe its time to re-instate a Debtors Prison.....
 

[Todd Wilson]

of course this was an adjustable rate loan as well, with its own complications of payment vs interest rate vs LIBOR, etc.
   Then I was offered an 80% 1st mortgage @ 5.5% for 30 years, with a 15% 2nd mortgage for 15 years @ 7.5% .
The problem was the 2nd mortgage had a balloon payment of about $22K at the end, basically you were paying interest only on it for 15 years !
  I asked the Mortgage broker where people came up with the money to pay off the balloon payment. She said the mortgage industry wasn't worried, most folks just refinanced in the future to handle the balloon.  Yeah, of course they like that !!  More refinancings meant more origination fees for the broker.

That is a new twist on buying a house I had not heard of before.  10 years ago when I bought my house there was a program to help people buy a house without a big down payment and I think it was part of the government but you still got a fixed rate loan. Wasnt any BS other then you and the house had to qualify in the program. A first time buyers deal.  It appears it is still easy to get the house the system just put in some more stuff to put money in their pockets quickly.

No need to take out a policy on me. I am gonna live for ever!   


Todd

[Mike DC]

   

Maybe its time to re-instate a Debtors Prison.....

Man, debtors prison never went anywhere.  Just ask anyone who's lived below a certain income bracket for at least a couple years straight.

It's not technically illegal to be broke, but realistically it is.  We just have minor laws criminalizing all kinds of relatively normal behaviors, and then we imprison only those who can't pay the fines. 



And look at the situation when you get paroled from any real crime: 

If you commit a crime that should carry about 2 years, first you'll get a 5-year sentence and then they parole you in 2 years.  Then you have to pay monthly for all kinds of court things.  Ankle bracelets, mandatory "anger management" classes, etc.  If you can't keep up with the payments (which can amount to literally hundreds of dollars a month, and often continue for a couple years until the original sentence time is finished), then this counts as a "violation of parole" and you get re-incarcerated for the rest of the years.

It's an interesting way to treat people who just got out of jail, since the things that drives people into jail in the first place are so often related to being poor. 

[hutch]

   

Maybe its time to re-instate a Debtors Prison.....

Man, debtors prison never went anywhere.  Just ask anyone who's lived below a certain income bracket for at least a couple years straight.

It's not technically illegal to be broke, but realistically it is.  We just have minor laws criminalizing all kinds of relatively normal behaviors, and then we imprison only those who can't pay the fines. 



And look at the situation when you get paroled from any real crime: 

If you commit a crime that should carry about 2 years, first you'll get a 5-year sentence and then they parole you in 2 years.  Then you have to pay monthly for all kinds of court things.  Ankle bracelets, mandatory "anger management" classes, etc.  If you can't keep up with the payments (which can amount to literally hundreds of dollars a month, and often continue for a couple years until the original sentence time is finished), then this counts as a "violation of parole" and you get re-incarcerated for the rest of the years.

It's an interesting way to treat people who just got out of jail, since the things that drives people into jail in the first place are so often related to being poor. 

Debtors Prison was not about being broke, It was about owing money and having no intention of paying it back.  Our culture of using money that is not ours is new.  You should never borrow money if you cant pay it back.   

Inflation of prices and the greed of wanting things you cant afford is what has caused all this mess.  People are worked up that they cant get a loan for a car when the issue is, why do cars cost so much in the first place?  Inflation and central banking have drove this nation into a wall.

[bull]

Inflation of prices and the greed of wanting things you cant afford is what has caused all this mess.  People are worked up that they cant get a loan for a car when the issue is, why do cars cost so much in the first place?  Inflation and central banking have drove this nation into a wall.

The same could probably be said about the insurance industry. IMO this is why a night's stay at the hospital costs more than four nights at the Hilton and a bent fender costs more to fix than many cars are worth. But maybe we shouldn't go there.

[Mike DC]

Debtors Prison was not about being broke, It was about owing money and having no intention of paying it back.  Our culture of using money that is not ours is new.  You should never borrow money if you cant pay it back.   

Inflation of prices and the greed of wanting things you cant afford is what has caused all this mess.  People are worked up that they cant get a loan for a car when the issue is, why do cars cost so much in the first place?  Inflation and central banking have drove this nation into a wall.

Yeah, but if we reinstated Debtors Prison, would there be any fair distinction for the "intent to repay" issue?  I don't think so. 


Eventually the system would be letting Wall Street moguls go free, because the $100 million that they lost for the taxpayers was just an "unintentional business failure."   Meanwhile the system would still be imprisoning the poor bus driver because he "never intended to repay" those $40,000 in medical bills for his wife's cancer treatments. 
 
 
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I agree this current situation is very unfair and frustrating.  But in the big picture, I don't think we want the system moving any farther in the direction of giving out jail time for money owed. 

I think we'd make all kinds of progress if we even just forced some real PERSONAL consequences on the guilty guys right now.  Like when you get convicted of some money-related crime a the Wall Street level like accouting fraud, then you actually get jailed for decades as if you stole that much at gunpoint.