Business/Finance

Upside-down homes, strategic defaults and our moral obligations to the banking industry

It goes without saying that we should all be mindful of our obligations, be they legal, ethical, spiritual, or, in the case of one Eldrick Tont “Tiger” Woods, marital. But I have to tell you – I just fucking love it when an industry manufactures a category 5 shitstorm out of thin air and then lectures me about my moral duties.

If I might appropriate some phraseology from my colleague Dr. Slammy and popular conservative telepundit Stephen Colbert: Thomas Kelly, a spokesman for J.P. Morgan Chase & Co., can gargle my velvety smooth mansack….

25 replies »

  1. “What about the message they will send to their family and their kids and their friends?”

    I believe the message they will receive is that people shouldn’t be able to fuck with other people’s lives and demand that they get away with it.

  2. I completely agree. Any amount lent in excess of what can be recovered in foreclosure is the bank’s problem. Indeed, this is why housing in America is unaffordable. Banks drive up prices by lending at a multiple of the foreclosure value. It’s no surprise that people get in over their heads when they borrow to purchase houses at prices beyond anything they can reasonably afford.

  3. You know, Morgan Stanley doesn’t exist apart from its shareholders: everything depends on whether or not you believe shareholders should be immune from participating in liabilities of the corporation. It might be entirely correct to told hold each and every one of Morgan Stanley’s shareholders pay their share in the unpaid balance of these loans.

  4. Well, if you borrow money, you should pay it back. Simple as that. The borrowers should have run the numbers by a lawyer or CPA and received a professional opinion before jumping into the real estate market. Nobody held a gun to their heads and forced them to sign on the dotted line. It’s always convenient to blame others when one’s irrational, foolish, emotional decisions go south. It’s dishonorable to not pay one’s debts. Really, when you think about it, if your word is no good, than what is?

    • Because it’s always either/or, right? There’s no such thing as BOTH people being at fault? Like, if an absolute sociopath of a con man suckers me and I sign my firstborn away, well, it’s MY fault, MY responsibility, MY bad, 100%, right?

      There’s just no way that the con man could be guilty of anything, too, right?

  5. The problem in your logic is that there was no con. You should read Mackay’s book,”Memoirs of Extraordinary Popular Delusions and the Madness of Crowds.” Here’s a link to download that book,
    http://www.gutenberg.org/etext/24518

    It’s an old maxim that the only people that can be conned are the very greedy, or fools. If it looks too good to be true, it probably is. PT Barnum and Runyon talked extensively about cons

    You omit the fact that there was a huge bull market in real estate for 6 years, and it’s the nature of people to change their behavior during bull markets and easy money. People were optimistic, and when it all came crashing down, they got caught with their pants down.

    Yeah, in the case of a debt, there are no shades, it’s just black and white if you have any honor at all. Do I feel bad for those people who lost? Sure I do. But they made a decision to speculate, and you can lose when you put money at risk. That’s the reality of the situation. But I also have a deep admiration of those sagacious enough to have seen this coming and managed to short the sub-prime market. That short trade was a work of art, and the people who managed to short the sub-prime made billions, and I say bravo to that.

    In the case of the ARM’s that killed so many people, they were doing two trades at once…..speculating on continued rising real estate prices(bigger fool theory), and speculating on interest rates going down when the readjustment came due. The banks writing these notes were just satisfying a market need, as the madness of the crowd demanded such mortgages, so they supplied them…..at a price. The appetite of the market will always be satisfied, as free markets are bigger than governments. That’s just the nature of the beast, and it’s all just a big game anyways. In every game there will be winners and losers.

  6. That Telegraph article is bunk. We’ve had the dreaded “world government” for years. It’s called the World Trade Organization and it’s already capable of overturning national laws. Funny, i haven’t noticed the conservative defenders of freedom and national sovereignty that ran the US for the previous 8 years do anything about that.

    Oh wait, that’s because they aren’t conservatives at all, but neo-liberals itching for a “happy ending” from the invisible hand.

  7. Lex, it might be bunk in your opinion, but I hope you have plenty of resources saved to weather this coming shit storm in your bunker in the North woods. World government is not going to bail you out, and just because you are a bona fide liberal doesn’t mean you’ll be running things. If anything, things will be worse for y’all. Quit whining about the invisible hand…..you sound like one of those whiners who couldn’t make it to the big leagues and bitch for the rest of their lives about the game.

    I’d also revisit the WTO, as you need a better understanding of what it does and it’s functions.
    http://www.wto.org/english/thewto_e/whatis_e/10mis_e/10m01_e.htm. The WTO can overturn trading REGULATIONS, and change tariffs, but actual signed laws….only congress with the president or the Supreme Court can do that. Now, the UN attempts to mess with our laws with UNICEF trying to eliminate handguns through treaty. Never will work in the USA…..at least you better hope they don’t disarm the population by treaty.

  8. Jeff: I’ve never asked for a dime from my government. The structure of my employment allows me claim unemployment (without having to look for work to get it) during the short periods that i’m not putting in my 40. Never have claimed it. I don’t expect to be bailed out by anyone. And as far as i can tell, the average grain trader receives a hell of a lot more subsidies than i ever have.

    Do you really expect me to be hurt by your use of “liberal” as a pejorative? When it comes right down to the brass tacks, i’m probably more conservative than you by far because i believe in actually conserving things, like my community and our resources and our way of life.

    I realize that your self-worth is tied up in your definition of “success” being the only definition. If it wasn’t, you wouldn’t spend so much time trying to counterbalance your lack of real self-esteem with all the bragging about how much money you have. But don’t assume that everyone holds the same definition of success.

    Mine is simply to be able to provide a sturdy roof over my head; good food to eat; the fulfillment of my basic, monetary needs; and to live in a healthy community. And most importantly, my definition of success is to attain those things without taking food out of the mouths of others or money out of their pocket so that i can call myself “rich”.

    All that is possible by following real, conservative principles…well it would be if there weren’t so many people like you fucking it up so that you can “make it”. Maybe you should try actually working. You know, adding value instead of just skimming off the top. You might like yourself more.

    I won’t argue that the next 3 to 20 years will constitute a shit storm; in fact, i’ve argued for roughly 15 years that my lifetime will see the fall of the United States. I used to care, but i don’t anymore. I’m not afraid of the possibility of the gulags, civil war, pestilence or even death. Nor am i any more afraid of the “world government” bogeyman than i am of the al Qaeda bogeyman.

    Your afraid because you’ve based your life on the pursuit of ephemeral bullshit and you don’t want to lose it. You see, my lack of “having made it” grants me freedom. I really don’t have anything to lose, so i have nothing to fear. Today is as good a day to die as any other.

    Don’t forget what Jesus said, “It’s easier to pass a rope through the eye of a needle than for a rich man to enter the kingdom of heaven.” Now, i’m not a Christian, so i don’t care about getting into heaven. But i know that you are. Maybe your fear stems from the knowledge that you won’t be getting into heaven because you “made it”.

    *And btw, that’s the correct translation of that verse. The Camel through the gates of the city is a Medieval misinterpretation of a bad translation from the Greek.

  9. Oh yeah, and isn’t trade what it’s all about? Isn’t that the be-all-end-all of our miserable human existence? Isn’t it through the wonder of “trade” that you dispense “justice”?

    I know what the WTO does, and i know that it does no good for me or my fellow man whether he lives down the street or on the other side of the planet. The fact remains that it’s a supranational organization capable of overturning laws that democratic communities might pass to protect themselves from the likes of you.

    So i guess what you’re saying is that you’re for world government when it’s a world government that works for you, but you’re against world government in all other forms. Swell.

  10. Lex, Seriously dude, you need to revisit your facts as your apparent lack of knowledge of the WTO is putting you down the wrong path.

    Another thing, grain traders aren’t government subsidized(farmers and exporters do receive subsidies), we accept risk and when are wrong lose money.

    Sweet deal you have with the unemployment office.

    I am against any form of world government….period. I don’t even like the UN so get over it and stop putting words in my mouth.

    As for definition of success, it’s always easy to make excuses when you’re on the other side. Excuses, victim mentality, and a heavy dose of pseudo-intellectualism keep you going.

    Your game is way off.

  11. Little riled, Jeff? What, did i hit a raw nerve or something? When did i claim victimhood? And go back and read the fucking comment: i don’t claim the unemployment when i’m not working. I live on my savings, which i accrue by being fiscally conservative.

    Right, the subsidies don’t go directly to you. They go to the grower, allowing you to buy low and sell high (particularly for export). So technically, your hands are clean but you reap the benefits. In fact, you reap more benefits than the producers who get the subsidies and certainly more benefits than the workers around the world who have to buy the grain to eat…the price of which you’ve pushed up so that you can make money doing nothing.

    I’ve said it before and i’ll say it again and again and again. You’re not a conservative. You’re a neo-liberal. Accept it and quit giving conservativism a bad name.

  12. Ayn Rand summed it up best when she said,

    John Galt said,
    The symbol of all relationships among such men, the moral symbol of respect for human beings, is the trader. We, who live by values, not by loot are traders, both in manner and spirit. A trader is a man who earns what he gets and does not give or take the undeserved. A trader does not ask to be paid for his failures, nor does he ask to be loved for his flaws. A trader does not squander his body as fodder, or his soul as alms. Just as he does not give his work except in trade for material values, so he does not give the values of his spirit—his love, his friendship, his esteem—except in payment and in trade for human virtue, in payment for his own selfish pleasure, which he receives from men he can respect. The mystic parasites who have, throughout the ages, reviled the trader and held him in contempt, while honoring the beggars and the looters, have known the secret motive of the sneers: a trader is the entity they dread—a man of justice.

    She was right…..you know.

    Jeff

    • It’s true. No profession could possibly ever as noble as the trader. I imagine Martin Luther King, Jr., Mother Teresa and Gandhi could have done even more good in the world had they known a thing or two about pork bellies.

  13. Sam,

    You are as close minded in your righteousness as the people you like to lambaste, and you don’t even see it at all. Chill out

    Jeff

    • An Ayn Rand disciple who thinks the pinnacle of human achievement is being a futures trader accuses someone else of being closed-minded. Man, that’s like Tim Donaghy bitching about point-shaving.

  14. I find it incredible that anyone would assign to ‘ TRADE ‘ the narrow definition of the spiv playing the slot machines and gazing into a crystal ball to make future judgements on whether stocks will rise or fall. In England today the spiv is spat upon from a very, very great height.

    Some of the greatest trade of all is in the exchange of ideas, the continuation and co-operation of individual effort (often combined) and the building of entire systems of thought and subsequent application based upon said knowledge development . The value of the true giants and greats has never been honestly measured by coinage. The list of the real producers is long and money reflects not upon their worth.

    A house is worth A…the market assigns + B. The house is still worth A in terms of what it is supposed to provide for the evolved animal inside. Of what value is money today when it is ever greater credit that people are asked to use when purchasing their most basic requirement to shelter and which the speculators have made of it something else entirely? And if the evolved animal cannot rent either where is he/she to go. To the projects? To the streets of London? Any street, anywhere? Once that evolved animal left with its fellows in the millions from Europe….

    An individual may not care but the combined strength of many people often do and can bring into play a democratically elected government that reflects that will to effect social change and bring hope to the poorest and most vulnerable. But that route is blocked as there are so few men of good will who have the ear of our politicians instead once again it is the wealthy, out of touch ‘conservatives’ at the top who guard and conserve THEIR society, THEIR system, THEIR money, THEIR way of life. We are all just expected to play along too.

    Today more and more people fall out of the middle class and into the bottom class…soon they will be linking arms with the poor of yesteryear. Eventually, when enough people are pissed off by the system and excluded there comes change. History tells us the story of revolt, revolution and change time and time again.

  15. Bwahaha. Ayn Rand. She couldn’t think her way out of a wet paper bag. (And yes, i have slogged my way through her crippled prose.) She’s a black mark on the fine, Russian tradition of philosophical novels.

    Let’s take just one example. She was an ardent Atheist, but was too incompetent to formulate an argument for her Atheism. Her weak defense was “you can’t prove a negative”. That’s patently false. Most of high, Indian philosophy is based on proving negatives. (See Nagarjuna and “no independent origination”) What she was really saying is that she couldn’t prove a negative.

    But carrying on with her Atheism. If one applies any thought (i mean any thought at all) to her “philosophy”, one quickly comes to the realization that it is incompatible with religion in general and Christianity in particular. Yet her adherents tend to proclaim themselves to be both Randian and Christian. That they are incapable of seeing the inherent contradictions probably explains why they’re attracted to a seventh rate philosopher like Rand. To be fair, at least Rand was consistent with her own philosophy and was an ardent Atheist.

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