Comments on: I Didn’t Get the Memo

By: Tim

Tim — Sat, 14 Apr 2007 23:18:55 +0000

Someone has to explain to me why this is sub-prime thing is such a crisis. The way I see it, private individuals made bad choices and couldn't repay debts they never should have taken out in the first place. The two groups that get spanked are the borrower and the lender, which is to say both the now out of business brokers and the backers of Mortgage Backed securities. Those that got hurt were the people that lost sight of the risks involved.

To which I say, tough luck for you.

If the government stays out of it, the lesson to be learned is 1)make sure you don't borrow more than you can repay 2)make sure you don't lend to people that probably won't be able to pay 3)if you decide to lend to people that can't repay, make sure the interest spread reflects the risk that you are taking.

If the government does get involved their nanny-esque over reaction is sure to crush access to capital to those of adverse credit that are capable of staging a comeback. It is going to remove all the demand to the housing market that was added when they found loans for the sub-prime group.

Someone from econ 101, remind me what happens when you decrease demand in a market like housing while increasing supply.

By: Tim

Tim — Sat, 14 Apr 2007 23:18:53 +0000

To which I say, tough luck for you.

Someone from econ 101, remind me what happens when you decrease demand in a market like housing while increasing supply.

By: Matt W

Matt W — Sat, 14 Apr 2007 22:41:35 +0000

How is the consumer actually being hurt here? By being able to buy what they want when they want it? By being able to borrow at low rates? By being able to afford a nicer house than you could normally expect (even if you did get foreclosed, you would have had this house for more years than 0, which is how many you would have had it otherwise)?

The consumer will only be hurt by this if the government over reacts, makes some types of mortgages illegal or highly regulated, and thus cuts off options for the American consumer. I even heard one politician kicking around the idea of making credit card annual fees mandatory, since he claims that the current system has late-fee paying low income consumers subsidizing the rewards and cash back of the high end consumers. Obviously, something like this is not good for the consumer in the end.

By: Cam

Cam — Sat, 14 Apr 2007 12:09:15 +0000

I agree that there should be no worry of the “culture” of capitalism. But I would’ve thought you’d mention the role of government money printing in the setting of below market interest rates.

By: Craig

Craig — Fri, 13 Apr 2007 22:17:01 +0000

Here comes Schumer:
http://www.10nbc.com/news.asp?template=item&story_id=22038

By: Consumer Mortgage Reports

Consumer Mortgage Reports — Fri, 13 Apr 2007 21:19:06 +0000

Want to start off and say that what you are doing with your business is right on and I agree with that.

If we are understanding John Tamny correctly, I believe that he is referencing that fact that many CEO's, roughly 100 mortgage lenders both public and private have mortgaged our future for their short term, "I want to be the next Donald Trump" ideology.

Where this becomes wrong and not metaphorically applicable to the dot com bust of the late 90's is that, like no other time in history the effects are hitting the consumer directly. This is what makes this scenario unique.

They are not hurting investors, they leveraged the American consumer for their short term successes.
If this is not what John Tamny meant, then he should have.