Evil Bankers 4

There is quiet talk of an agreement by which bank will only pursue a certain number of foreclosures a month. While this may seem to be a wonderful idea on its face, here is the dark underbelly that waits. When a bank has 100 options that they can pursue for forclosure and only 10 forclosures that they can pursue and still stay under their cap, what do you think happens? I can tell you for sure. I have noted that the property on which foreclosure happens the most readily is the property that is similar in value to the remaining outstanding mortgage value. Sometimes this means that the property was purchased at a good value, but all too often it means that the property has had a significant portion of its mortgage paid off, or a significant amount of money was put down on the property from the start.


Those that found a good value have lost little, but those that put their whole savings into their new home or have lived in their home for 10 years and find that their mortgage has been foreclosed after only the minimum amount of time; this situation is devastating. In many cases, these individuals have never missed a payment before losing their job and/or have absolutely nothing to fall back on. My heart goes out to these victims. However, the banks are literally forced into this behavior by a secret policy that gives them no alternative. They cannot practice foreclosures fairly and this method certainly suits their best interests.

I have seen for myself, these unbalanced practices and could not figure out why this was occurring until a friend (that works for a bank) told me of this policy.  I can certainly see how this is supposed to help, and I know that for some, it is.  But before there were so many foreclosures to pursue that they were all given a cushion period to come current on their debts.  Now only the homes that are in the worst distress
and will eventually be subject to foreclosure once their current occupants figure out how under-water they are, are being given any leniency at all.
For this reason alone, this policy is pure garbage.  I can appreciate the intent, but the outcome is worse then the initial problem.

Can we please get the out of our businesses?  Just sit back and steal your taxes.  Do what you can with those, but leave things that you cannot possibly understand alone!  The banking industry is not broken, but the government's attempts to make it altruistic certainly are.

FHA Standards

The Federal Housing Administration is currently considering more stringent lending requirements and higher borrowing fees.  The new FHA standard will require borrowers with less than a 580 credit score to put down a minimum of 10 percent of the cost of the home.  Most banks that lend through the FHA require at least a 620 credit score.  Concerns that continued losses in the mortgage values could necessitate futher government bailouts have feuled this move.  Although any credit tightening is welcome, the agency will not propose an increase in the minimum downpayment for high credit scoring borrowers, currently 3.5 percent.

Although builders and realtors see this as punative, the previous regulation loosening that occurred in the late 1990s and caused the current recession, had to be reigned back in.  Many homebuyers are still spending over half of their pretax income on housing.  One could argue that continuing to allow that would be deemed "predatory lending."

The Jubilee Act "Evil Bankers 3"

The Jubilee Act for Responsible Lending and Expanded Debt Cancellation (HR 4405) cancels impoverished country debt, prohibits harmful economic and policy conditions on debt cancellation, mandates transparency and responsibility in lending from governments and international financial institutions, and calls for a U.S. audit of debts resulting from odious and illegitimate lending.

Beginning in the 1960s it was decided that everyone in the world should have a good standard of living.  To that end, government-backed low-interest loans to third world countries came into vogue.  These loans were given and taken based on advice from international consultants.

The consultants came in and advised countries that they could make a good return for infrastructure developments.  A dam would supply power that could then be sold to the populace.  Roads would bring the countryside into the metropolitan commerce arena.  Airports can increase both commerce and tourism.  Add these benefits to low-interest loans and you have an opportunity that almost any governing body would recieve well.

The down-side was the cost over-runs and compounding interest costs.  Many of the governing bodies of these developing countries did not see the brick wall coming, until it hit them in the face.  Once the debt began to spiral out of control, for many nations there was no escape.

Some of the countries were run by dictators that used the money for their own personal benefit.  Many of the citizens of these countries never had a shot at a better life as a result of their government's greed.  However, many of the other country's governors were doing their best to give a better life to their countrymen.

The capitalist in me thinks that anyone lending money for the express purpose of the return, deserves their return.  However, when you send in used-car salesmen (no disrespect meant to those few in the profession that maintain their honor and dignity) in fancy suits to overstate the expected value of an investment, maybe you should get a haircut on your return. 

After a defeat by neglect in the Senate in 2008, the bill was re-introduced on December 17th, 2009 with actual bi-partisan support.  Just like so many Americans that owe more than their asset is worth due to the current mortgage crisis, I feel that some of these scammed countries should just walk-away from their debts.  This solution is good enough for the citizens of America, so why not for the third world countries?

I guess I just don't understand why the government feels the need to pass a law forgiving debts that some countries should just walk away from.  Perhaps they are creating a moral platform that they can use when we have to walk away from our own soon-to-be unserviceable debt.  Or just as likely, it is an attempt to be viewed as generous in the face of a situation that otherwise has no upside at all.  Either way someone decided to make the loan with the knowledge that their investment could be "at risk."

If we take the risk out of the market, will the rewards also be taken away?

Evil Bankers 2

The bankers are being scolded by the government almost every day it seems. They knew the loans that they were making were garbage and asked if someone else would be willing to take the risk that they may not be repaid.  In return for not taking the over-all risk, the banks were willing to give up the majority of their interest payments.  The bankers then took the loans and packaged them for resale.  These packages were then sliced-up, repackaged along with pieces from other packages and sold to investors.  When this system blew up, who got the blame?

The government says that it is the bankers who are evil and need to be punished. And I am sure that the government is correct.  Aren't they always?  These evil men supplied a service that the people wanted so badly, that the government felt forced to strong-armed the bankers into providing.  Let me be clear about this.  The bankers did NOT want to give loans to people that, very likely, would not be able to repay the loans.  They were intimidated by the government to give loans to people that did not have good enough credit to warrant the loan.  When straight coercion did not supply lax enough standards for the Barney Franks of the world to be happy with, the government agreed to back the loans through their puppets Fannie Mae and Freddie Mac.

Under pressure from the gov't and with guarantees from Fannie and Freddy; the bankers knew that they had to act.  They still knew that the loans were garbage and did not want them on their own books, but they had to give the loans out.  Even though the government was backing the loans, the bankers knew that they could be left "holding the bag" when the bubble burst.  They devised a method, described above in paragraph one, to absolve themselves of the insane risks that the government had foisted on them back in the '90s.  Its only flaw was that it worked too well.

I would like to take a moment here to talk about investors in general.  When you go to work for someone, you get paid for your work.  However, when you decide to let your money work for you through investments, you take a risk.  That risk is that you could lose your invested money. You may be fooled by a stock broker, or you may just make a bet on a losing horse.  Either way, you take a risk while hoping for a return.  You just better be sure you due a lot of research because without risk, there is no reward.


The investors, be they institutional (insurance companies, hedge funds, etc.) or private, they bet that should the repackaged loans that they were buying would either not default, be worth more than the loan amount should they default, or be paid off by the government (Fannie/Freddie).  These investors felt that they had found a way to “beat the market” and it turns out that they did.  Unfortunately, in this instance the market was the government.  Even worse, the government gets its money (in one way or the other) from the people.  Yep, me and you paid off the investors.

You can try to blame this on the bankers all you like, just be sure that you navigate carefully around the facts.

1. the government forced the bankers to make risky loans
2. the government guaranteed the loans (because the bankers would not make the loans even after #1)
3. the banks sold the loans: I wouldn’t want to have that junk on my books either
4. the investors bought the loans without researching what it was that they were buying
5. when the loans went into default, the government paid the investors off

There are a couple of failures here.  The investors did not do their due diligence.  The government had no right to put taxpayer money on the line to give loans to people that could not afford the loan payments.

Saying that the bankers caused this mess is like saying that someone facing a firing squad should not be standing front of all those guns.  This mess was completely avoidable.  Just make sure that the demented old folks running this country keep us safe. It is not the government’s job to make your life better; it is their job to make sure you have the freedom to do so for yourself.

Evil Bankers 1

Are bankers inherently evil?  Shakespeare says, "Neither a borrower nor a lender be."  Does following or not following this advice make someone evil?  That is an answer I am not capable of giving.

I have met some remarkable people in my life and many have left indellible marks on my choice of lifestyle.  When I was 13 years old, I was given a peice of advice that has stayed with me in the many years that have follow.  He said that if someone asked you for money, you should not look at it as a loan that has a time limit, but rather a gift.  If you are willing to part with the money, you should not count on getting it back.  Should the money return to you, consider it a gift.  If you cannot part with money on these terms, then you should not part with your money at all. 

Bankers certainly cannot part with money on anything nearing the terms outlined above.  The reason is that they are building a business on the difference between the have and the have-nots.  In thier model, the have-nots need the bank's service to make housing, transportation (cars), and other high-cost items more affordable.  In the banker's minds, they are merely providing a service in giving the have-nots the means to live life more comfortably in the here-and-now.  They provide financing (lending) to people so that they can buy things immediately that they would otherwise have to wait to buy.  This process does not make items more affordable, in fact, it makes them less affordable.  By charging interest "borrowing fee" on the loans made to these items, the banks can generate an income from the lent monies.

This process has been in place for hundreds of years.  And I personally do not see the harm in it.  bankers give out mony and expect both the money lent as well as a nominal fee back in return.  This fee is adjusted given the likelyhood that the borrower will pay back the money according to the schedule agreed upon.  Pretty evil with someone actually holds you to the promises you make.