Friday, August 31, 2007

Things that Make You Go, "Hmmm..."

Is it just me, or have you wondered just where Jenny Craig has been throughout the Larry Craig Airport Pottygate saga?

Think about it: You never see Jenny Craig and Larry Craig in the same place at the same time.

I just wonder whether they might be one and the same, (a la that Michael vs Janet Jackson thing...) and living a double life has finally caught up with them.

Would explain the Congressperson's unusual behavior in that bathroom stall...

Also, I have held my tongue throughout the Michael Vick affair.
Pardon the pun, but I really saw no benefit to “piling on,” or kicking a dog while he was down.
Seriously, what kind of punishment should be meted out to this guy?

The NFL is talking about lifetime suspension.
I disagree.
Let the man play ball for what ever pro team will have him, with one important caveat:
He can play as long as he wins.
First time he loses, just electrocute him.
Or hang him.
After all, the punishment should fit the crime, right?

Speaking of crime and punishment, what is the rationale behind the White House seeking a rule change within the Federal Housing Administration (FHA) to provide some relief for folks falling behind on their mortgages? The thinking is that people who bit off more than they could chew (or should have been allowed to chew) would be allowed to refinance under the federally-insured loan program.

I have a few problems with this.
First, it blatantly rewards the stupidity of lenders who bent the rules, or turned a blind eye to reality in providing loans to people that on any other planet could not have qualified.

Second, it eliminates the consequences the rest of us must acknowledge for defaulting on a loan, no matter how skanky the underwriting.

Third, and this is personal, if the greedy lenders and shady borrowers get away with this, does that make the rest of us who bought houses within our means, and have continued to pay our mortgages without fail, just a bunch of chumps?

Coincidentally, the banking establishment pushed really hard last year to get a change in the bankruptcy laws. It’s now much harder to discharge debt under the new rules. I think there is some culpability that must be acknowledged in the creation of an impossible situation for many people: Banks have become thinly veneered dealers of financial crack, offering dimebags of easy credit.

When they get people hooked on the opiate of instant financial ability, and ignore the fact that putting folks in expensive houses with limited ability to pay and minimal (or zero) down payment in the deal, they’re going to walk when forced to choose between making an escalated mortgage payment and buying groceries. All the while, these same banks are papering the mailboxes of these people with multiple offers of easy credit. There seems to be a huge disconnect within the financial community between cause and effect, actions and consequences.

I’ve got zippo sympathy for investors who knowingly bought up large blocks of subprime commercial paper, sucked in by the attractive rates of return they promised. Did these people forget one of the most primal tenets of finance: The higher the rate, the higher the risk?

Now they’re holding the bag on a few billion dollars worth of loans gone bad, which has tainted their credibility, and shriveled up the supply of money available for lending to more credit-worthy borrowers.

The answer is not lower lending rates necessarily. The share of mortgages that are subprime are a fraction of a fraction of the total lending pie, and dropping interest rates just because one sector went FUBAR is a perfect example of the tail wagging the dog.

The answer is not change the FHA rules, either.
Why infect that system with this subprime virus?

The answer is to force the bankers and lenders and borrowers who are all complicit in this mess to face the consequences of their irrational actions.

If President Bush wants to offer a government solution, great: How about creating an incentive for lenders to work out plans with their delinquent borrowers? I don’t know—give away tax credits for lenders who are able to keep people in their homes; there’s a novel concept.

In other words, create the solution within the structure or sector that created the mess, and not infect the rest of the economy any more than it has already become exposed.

Special Thanks to Chris X. Blayney and Vincent T. Rowe for submitting some of the graphics found in today's post.

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