in the last 7 days...
phil has elevated the game like Mile High Stadium with 12 comments.
beth is in Striking Distance like Bruce Willis & boats with 11.
Joe is closing quickly like Circuit City with 8.
Tiffany! is right up in there like ill-fitting swimwear with 8.
prof. fancy pants has 5 and is intense like the circus.
DirtyDanSin has 4 and is on fire like a pile of tires.
jon has 3 comments and needs to raise the stakes like when the camping trip is over.
Stace has 2 & needs work like me before I got hired.Phil sent me this video earlier this week. Ron Howard directed it, and it’s about overhauling financial regulation. Here’s more info.
do the right thing for once and share this (on facebook) or
(on twitter)
category: a very serious video
→ 22 comments so far ↓
1
c lo
// Mar 6, 2010 at 5:12 pm
Lol @ “can I be ambassador to cancun”
2
jake
// Mar 6, 2010 at 5:14 pm
@c lo: Yeah, that’s my favorite part, too.
3
Joe
// Mar 8, 2010 at 5:32 am
I’m not sure what they are asking for. Some sort of special government agency to watch over the banks to prevent them from offering things that people might get themselves into trouble with or something?
“How come the gov let me take out this stupid reverse-amortizing loan and buy all this stuff on my 30% apr credit card?”
Ron Howard’s politics, and all related “gov is the parent people are the children”-type politics are lame.
4
Joe
// Mar 8, 2010 at 5:32 am
And they don’t help us get to mars at all.
5
beth
// Mar 8, 2010 at 9:39 am
I missed the Cancun part the first time around – awesome!
6
April
// Mar 8, 2010 at 10:06 am
“I didn’t know when I put the Iraq war on my credit card I would be paying 20%” Me either Former President Clown shoe and mine was just a 4 dollar paintbrush.
7
jake
// Mar 8, 2010 at 12:32 pm
@Joe: I don’t think they’re intention is to get rid of anything a person might get themselves in trouble with, but rather to monitor and regulate products and services specifically designed to fleece the populace through manipulation and deceit.
You know how politicians are expected to not be tricky with their constituency? It’s like that, except with “bankers” instead of “politicians” and “customers” instead of “constituency”.
8
Joe
// Mar 8, 2010 at 12:51 pm
What products and/or services did they sell people that were “specifically designed to fleece the populace through manipulation and deceit?”
As to the second part: one) no, I don’t know that really and two) politicians are public servants. Bankers otoh are $$ servants.
I agree that banks need to be regulated, but that has more to do with their inner processes not their consumer wing. For that part I just refer to the ancient calculation “S/m = 1″.
9
phil
// Mar 8, 2010 at 3:45 pm
Joe & Jake the idea is that for example credit card terms and conditions have to be written so that they are only a page long and actually say what rate people are going to pay. Negative amortization loans would have to explain that it means that you owe more at the end of the term than you did at the beginning etc.
Joe public education is an example where the state is the defacto parent. Since we haven’t done our job as a society in terms of educating people financially we’re trying to put a band-aid on it by creating this (tiny) agency.
Jake, you know who really makes products deliberately designed to fleece the populace through manipulation and deceit? The North Face when they say their clothing is 100% breathable!
10
Joe
// Mar 9, 2010 at 2:01 am
If the credit card doesn’t tell you the rate you have to pay, don’t sign the credit card contract man.
If you don’t want to own less of a house than someone who didn’t buy a house, don’t get a negatively amortizing loan.
If you are tricked by either of the above, than you are a sucker. There is one of you born every minute so there should a club you can join with a full and believing membership, maybe you can have a group trip to vegas or I can come in and give you all a 3 card monty demonstration. Just know that it is immoral for people to let you keep your money.
11
Chris
// Mar 9, 2010 at 3:00 am
I do not think the govt should be involved other than requiring lending institution to provide simpler and concise reading material for the idiots who really should not be borrowing money. They should not regular the loan products a lending institute issues.
When I bought my house, I chose a 5/1 ARM after weighing all the options. I did not base my buying power on bonuses and stocks (like many others), I based it on my cold hard cash downpayment and salary. Hell, my mortgage payment ended up being cheaper than my rent.
Yes, there was a ton of paper work, but their were only a couple important pages: the financial terms, as in:
(a) You pay this much for 5 years
(b) You pay more after 5 years, we are not sure how much, but it is the risk you are taking.
So, I signed the 5/1 ARM loan knowing I had no idea where it was going after 5 years, just that I knew I was not keeping the house for 5 years. And this worked out, minus the fact the idiots who borrower and did not pay back made our housing market crumble and I lost money on the house.
It was the risk I, as an adult, knew I was taking, and I say “Fuck you uncle sam, I do not need you to protect me from making bad decisions.” Just as it is the risk I take when I invest in stock or funds.
I agree banks should not have lent money to some of these idiots. It was bad business on their part, with no positive return. Which is why I stopped working with some of these banks and financial companies. And also why some of them folded.
12
jake
// Mar 9, 2010 at 1:24 pm
@Chris: By “banks should not have” do you mean “banks should have been regulated in a way that kept them from being able to” or do you mean “banks should have used their own judgment in deciding not to (and if they did it again– and contributed again to the economy going down the drain– well, shit happens and at least the principles of free market capitalism are intact)”?
As pertains to “idiots” and so forth, I know a person or two who were taken in by these shamsters, and I can say that while they may not be the intellectual giants that you guys are, they’re also not idiots. The main thing they’re guilty of is having the expectations that things are how they seem, that financial institutions are fair and forthright, and that their interests are not being preyed upon. They’re also guilty of what 9 out of 10 people are guilty of: optimism.
Sure, if the guys running the shell game get you to believe that it’s easy to do, and they’re experienced in this kind of thing so trust them when they say someone like you can do it just fine, you’re responsible when it turns out they’re lying. But that doesn’t absolve the shell-gamers of responsibility; there’s a reason why the cops come and run them off. What this regulation wants to do is to make the con-men say upfront “it’s not really as easy as it may seem, the odds are against you on this one and you probably shouldn’t do it, but of course there’s a chance you’d guess the correct shell so you can always try” (although my guess is this analogy falls on deaf ears because no-bank-regulationers are also probably no-con-artist-regulationers).
Another way to look at it is to ask ourselves the following questions:
- Is it a problem that these idiots were finagled into borrowing what they couldn’t pay back (leading to such things as Chris losing money on his house)?
IF ‘YES’ THEN:
- Should we try to keep it from happening again?
IF ‘YES’ THEN:
- If we leave things the way they are, can we reasonably expect the next wave of idiots to make the same idiotic mistakes?
IF ‘PROBABLY’ THEN:
- If we require the finaglers to simply make better information available to the idiots, can we expect the finaglers do anything more than the negligible-effect minimum requirement?
IF ‘PROBABLY NOT’ THEN:
- Isn’t the only remaining option to regulate the financial products that were (and can again be) used to create this mess?
13
Joe
// Mar 10, 2010 at 1:25 am
You lost me at “finagled.” Nobody was finagled Jake. People got greedy and wanted more than they could afford and made some very risky, very short-sighted decisions to get that.
Have you taken out a loan before? There is the “truth in lending” page where it lays out explicitly what you will be on the hook for for the loan you buy. If anybody was surprised by their interest rate being adjustable after 5 years who were on a 5 year ARM, then yes, I will say that you, and I, everyone we know, and everyone else on this board are smarter than them.
What really happened is that people bet on housing prices continuing to go up unsustainably and to not crash until after they were ready to sell their houses. That didn’t happen so the piper had to be paid. Nobody was tricked by anything aside from their own greed and or risky behavior. Its like saying Smith* was finagled into asking for another card when he already had 17.
*Mutual friend who enjoys gambling especially wildly.
14
beth
// Mar 10, 2010 at 9:31 am
Gentlemen, may I just say: BOOOOOORRRRRRRRRIIIING!
15
Joe
// Mar 10, 2010 at 9:36 am
If you don’t like it turn off the station. Maybe M can recommend some videos you can watch.
16
beth
// Mar 10, 2010 at 9:41 am
HAHA!
17
heypal
// Mar 10, 2010 at 12:12 pm
Gotta say I’m with Joe, here. It comes down to educating yourself about the process and what’s going to happen. If they do something that wasn’t in the contract, then they’ve done something illegal and you have recourse. If not, then they have followed the spirit and letter of the contract and you have none. They will try to make money. It’s their role in the world. If they get it by tricking you, that’s one thing, if you give it to them through ignorance, that’s another.
It’s a shame that people learn these lessons the hard way, I did when I was younger, but that’s the way the world works.
18
heypal
// Mar 10, 2010 at 12:14 pm
Here’s something to watch if you’re bored of this conversation:
http://www.youtube.com/watch?v=YluDS-6LoB4
19
beth
// Mar 10, 2010 at 3:20 pm
@heypal – yay!
that was a tad more my cup of tea, thank you!!
20
Chris
// Mar 10, 2010 at 4:22 pm
If people do not understand what they are buying, then they should not buy it. There is no excuse. If you are told your interest rate will fluctuate monthly after 5 years, then you have to understand that it there is about a 50% chance it will be more than you pay now. People took the risk anyway, even though they knew they could not handle it. They borrowed money from banks which told them, “Yeah, you do not need a down payment, just get two loans”, or “Yeah, you can factor in your bonuses and stock grants”.
I did not lose money due to the loan product… far from it. I do not blame the institution which sold me the loan, because they had stringent requirements requiring down payment, basing loan amount on my salary income and based my rate on my real credit score. The losing money part was due to property value loss in the neighborhood, which I bought into b/c (a) I thought it would appreciate (b) I was going to keep the home for 5 years then move to a bigger place. I sold the house in less than 3 years b/c I got job at Yahoo! 5 months after buying the house (in Atlanta) and moving to CA.
People have to understand that they purchase loans from an open market, the prices and rates fluctuate. No different from buying/selling homes, stocks or funds on an open market. In fact, almost everything we buy comes from an open market. I prefer it this way.
I would prefer the govt only puts in some guidelines as to how products are presented to the people, no different from the FDA guidelines for listing ingredients and nutrition on the outside of your groceries. I do not favor anything which requires govt approval in the sense of the FDA with regards to drugs… which is where this consumer protection agency is heading.
I would say if an institution wants to introduce a new product, then it needs to provide a prospectus to it’s current customers, which are really they stake holders as the institution is leveraging their deposits. No different from my mutual funds telling me they are changing the portfolio. This gives me a chance to pull my money out and go else where, which, I truthfully have done.
I would disagree with federal regulation of new products, because the product may not be favorable to majority of american, but there are some, like me, who prefer higher risk products.
I would hope that these institutions would make sound business decisions when approving loans or selling the products, but that is not the gov’t responsibility to ensure they do… it is the executive management, the board of director’s and the share holder’s responsibility.
If any thing this new agency should simply require clarity :
a) Require institutions to provide prospectus for new products
b) Require institutions to provide financial updates on regular basis (quarterly/annually) to all customers, which include deposits, loans, and defaults.
c) Require institutions to clearly label products according to guidelines. ie “Your rate is X for Y months, and variable there after”… actually, my loan document has this
No more.
21
jake
// Mar 10, 2010 at 4:25 pm
@Beth: That attitude is what makes these problems never get solved.
@Joe: Sorry for “finagled”, I thought an equally emotionally-charged word in response to “idiot” and “sucker” would prove some kind of point, but I think all it proved is that it doesn’t help to respond to negativity with negativity. That said, I’ll keep using the terminology anyway because it’s easier than coming up with harmonious labels.
Anyway, to use your Smith-playing-blackjack metaphor: It is like that, only if the dealer encourages Smith’s choice by saying “I think it’s a safe enough bet that I’m also going to bet on it (oh, by the way, here’s a page of jargon that you need to sign before making the bet, don’t worry it’s just the standard stuff… yeah right there at the bottom)”. Except the dealer knows that the odds are very poor, and isn’t really taking the bet, he’s just taking commission off of Smith’s bet while bundling his own bet up with a bunch of other bets to sell as a group to someone who also doesn’t really understand exactly how risky the purchase is because current lack of regulation allowed the bet-bundle to be labeled at the wrong risk-level. In the end, Smith and just about everybody else in the casino (except the dealer and other dealers like him) are left with their pockets hanging out of their pants like basset hound ears.
Anyway, trying to figure out if it’s the fault of the idiots who idiotically got finagled or of the finaglers who finagled the idiots is less important than figuring out how to fix the problem in the system, so that en masse default doesn’t happen again. Since there’s a sucker born every minute, can we expect the supply of bad-loan-getting idiots to go away? Unlikely. Since it’s a good way to cash in on high-liability payoffs with none of the actual liabilities, can we expect the finaglers to abstain from finagling? That’s doubtful.
So we’re left with two options:
1) Keep with the philosophy that regulation is bad, and it’s more important that the government keeps its hands off the market than it is that ethically-questionable recession-inducing financial products aren’t free to wreak havoc on America’s individuals, families, Main Street, Wall Street… um… small businesses… um… y’know, the middle class and stuff… Detroit… town hall… (i.e. “don’t really do anything about it”).
2) Keep with the philosophy that Adam Smith was really smart with his laissez-faire and all that, but sometimes the health and wealth of our current and future society has to take precedence over the sanctity of 200-year-old economic principles. (i.e., “do something about it”).
I realize that what I say isn’t likely to change the minds of Joe, Chris and heypal because we have deep-seated core beliefs regarding “hands off” and “hands on” as far as the government is concerned, but fuck it. Butt fuck it.
22
beth
// Mar 10, 2010 at 5:58 pm
Which altitude? Hey, I’m nearly done paying off my student loans, and my interest rate is at a four year low… I figure it’s time to go buy a jewel encrusted boat now. See ya!
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