Best,

Vitaliy

In all this sub-prime cesspool, there is one category I would like to see in jail. Those salesmen who approached poor people on a $2000 a month pension and sold them a mortgage with a 1% interest rate (for 1 day) and then wrote up the income of these poor people as $8 900 a month. These salemen and women KNEW were selling these poor people a mortgage that they would never be able to repay. Their bosses knew it and encouraged it.

Then while these poor clients began defaulting on their mortgages the nominal income record on the mortgage forms ensured that the false security in these securities remained hidden. Their bosses wanted to get rid of these failing mortgages so they were quickly re-packaged as securities sold the world over qhile in fact they were worthless. The world is now paying in loss and hardship for the actions of these ‘salesmen’ and ‘saleswomen’.

Oh, pundits of the financial and legal world, please tell me: Does this crisis not have its origin in fraud, and why are the fraudsters not in jail?

Unless someone can prove to me that it is not fraud, and especially if the government is you and I as several writers have claimed and yet nothing has been to jail these fraudsters, then I have nothing against the government helping the poor people who were mis-sold those mortgages. These were the people who were most disadvantaged, these were the people who were screwed first and worst. Most of them have been turned from poor but surviving honest citizens into homeless people, chased by debt and in risk of jail for the rest of their lives.

Then how is it that all the great educated banking and finance staff in the world bought these ‘securities’ without checking? Is time and a fast buck and another car so important to this category that they didn’t do the basic checks? If Goldman Sachs did their homework and studiously avoided these securities, why didn’t the others? Was it because the others were involved in the fraudlent mis-selling in the first place?

When people went into 2 yr ARMS they were betting that home prices would continue to appreciate, they were wrong and they lost.

The government is now all about setting up tighter lending standards. Bad idea. The cow has already left the barn and the tighter lending standards that have been put in place by the lenders are resulting in foreclosures going up because people can’t refi out of their short term ARMS.
Wall Street, the lenders and homeowners all made millions over the last 5 years and now we need to let the cycle takes it course and let the chips fall where they may.
So what if somebody gets foreclosed on, it is not like they can’t go rent a home to live in. They are not going to be living on the street.

I understand the thought behind not bailing all people out and how logical the thought process is for that point. People knew what they were getting into. People were gaming the system. If the game doesn’t work, you pay the price… I agree completely.

HOWEVER, if that is the case, then it needs to be a standard held to all cases, all situation, all social-economic levels, public, private, corporate. And, quite simply, it is not. We forgive/forget the executives in the option dating scandals. We allow businesses, but not John Q Public to walk away from financial woe via bankruptcy. We bail out those involved in the S&L crisis. Oh, we bailed out the airlines multiple times.

Frankly we actively damn John Q Public for being dumb, irresponsible, gaming. Yet the same high risk activities when taken by executives, entrepreneurs, money managers are forgiven, viewed upon as strengths (having vision, maximizing alpha, maximizing a loophole) This is what I find amazing. It really should be flip flopped because the latter is much more educated on what they’re doing than the average home buyer.

I simply do not think that we can take your position on the home buyers without seriously examining our values elsewhere.

It took every bit of will in my body to not sign onto a mortgage I cannot afford, while all my friends and neighbors did. I am not yet convinced that I didn’t make a mistake, as the house prices have left me behind and I may never catch up. Currently, with a 50 bp easing, I am still the one looking like a fool.

There is another segment though, the desperate and the marginalized. These people were not so well informed or able to navigate our complex personal economy and its promoters. To them, the pressures were felt more deeply, the dangling of easy credit like setting a drink in front of an alcoholic. Sure, they too signed a contract. Laws may not have been broken, perhaps, but the tactics and opaqueness and pressure may not be something many mortgage brokers will brag about to their mothers. Let’s face it, there is a segment of our society that is exploited for their ignorance and lack of spophistication and desperateness. We can hide behind the signing of contracts, but I would not bank on that getting me into heaven.

Keet up the good work.

With appreciation,
Charley Neer