borkafatty writes:
have to !!!!!first! hehe!,,,
borkafatty | 01.30.08 - 3:11 pm | #

Neal writes:
Don't throw good money after bad...

The new sophisticated consumer.
Neal | 01.30.08 - 3:12 pm | #

franz writes:
Consumers are not walking away. They are making a rational business decision to cut their loses.
franz | 01.30.08 - 3:13 pm | #

ac writes:

BTW, I've heard the YouWalkAway.com folks have some new sites in the works:

YouWalkAwayCreditCards.com
YouWalkAwayMarriage.com
YouWalkAwayArmedForces.com
YouWalkAwayKids.com
YouWalkAwayCollege.com

Welcome to the new easier, less stressful America folks.

ac | 01.30.08 - 3:14 pm | #

ucodegen writes:
In the form of those borrowers, the banks thought they had a 'fish' hooked on the line.. but it got away. Maybe the banks should review 100%+ financing policies. If the borrower doesn't have skin in the game, what is to prevent them from walking?

Why isn't this kind of obvious to these guys?.. or am I some sort of freakin genius? -- sorry, had to add that because the comments coming from these guys, Wall Street and the media just makes me shake my head.
ucodegen | 01.30.08 - 3:17 pm | #

scav writes:
Hey, my company walked away from my earned vacation days in an asset buyout. I'm sure it's legal and I'm sure anything I could do in a similar circ. isn't - still, ain't the law fun?

All I want is www.YouWalkAwayIraq.com
scav | 01.30.08 - 3:20 pm | #

Cal writes:
Similiar evidence from DQ regarding Californians just walking away:

"Most of the loans that went into default last quarter were originated between August 2005 and October 2006. The median age was 22 months, up from 15 a year earlier, indicating that the pool of at-risk home loans is getting larger. "

"Of the homeowners in default, an estimated 41 percent emerge from the foreclosure process by bringing their payments current, refinancing, or selling the home and paying off what they owe. A year ago it was about 71 percent. The increased portion of homes lost to foreclosure reflects the slow real estate market, as well as the number of homes bought during the height of the market with multiple-loan financing, which makes 'work-outs' difficult. "

http://www.dqnews.com/RRFor0108.shtm

So much of the California market was investment / flips so walking away is easy. The other part of it was people believing their home was an investment (why else would you pay so much for a crappy box) therefore, again, business decisions apply.
Cal | Homepage | 01.30.08 - 3:20 pm | #

Yal writes:
BB: are you watching $TNX ?
Yal | 01.30.08 - 3:21 pm | #

callous writes:
Based on Tantra's description of a "Ruthless" borrower, I hope that there's some kind of Ruthless Flag that gets turned on in these people's credit report and they get to suffer the consequences forever.

Seriously, if you're any kind of credit extender - from the cable company on up - what kind of penalty do you impose on these people in order to extend them services?
callous | 01.30.08 - 3:21 pm | #

FOB writes:
I didn't live in Texas during the oil bust, but in Oklahoma people were not 'just willing to file bankruptcy and walk away.' More like, they lost their jobs and agonizingly had no other choice. The stress and hopelessness of the situation caused much depression and other sociological problems. No one that I knew of walked away if they had a choice.
FOB | 01.30.08 - 3:22 pm | #

Kevin writes:
"ucodegen writes:
In the form of those borrowers, the banks thought they had a 'fish' hooked on the line.. but it got away. Maybe the banks should review 100%+ financing policies. If the borrower doesn't have skin in the game, what is to prevent them from walking?"

500 years of Jewish history lost...
Kevin | Homepage | 01.30.08 - 3:23 pm | #

Fair Economist writes:
The banks would have gotten away with it if it weren't for the enormous size of the housing bubble. I doubt people are walking for 5% negative equities - you need drops larger than that. Even if they deluded themselves into believing there was no overall bubble, everybody knew house prices in particular area could and did drop. They could have refused low-down loans in unaffordable areas. With that little change alone I doubt the bubble would have inflated to the point to endanger the entire system.
Fair Economist | 01.30.08 - 3:24 pm | #

Average Joe writes:
That didn't take long:

Bloomberg says Bear Stearns in predicting a full point cut at the next meeting.
Average Joe | 01.30.08 - 3:25 pm | #

ac writes:

I wonder if this all started when the US "walked away" from it's obligation to pay back it's foreign debts in gold, during the Nixon administration.

If the government doesn't have to pay off its debts, why should I?

Seriously.

ac | 01.30.08 - 3:26 pm | #

ille_vir writes:
Nice, AC. Too damn funny. Especially the second one.
ille_vir | 01.30.08 - 3:26 pm | #

Elvis writes:
"I doubt people are walking for 5% negative equities - you need drops larger than that."

People bought and paid too much, because they expected their homes to appreciate. When the appreciation turns to 5% depreciation (5% of $500k is $25k which is a significant amount to most), they will walk, especially if they have skin in the game. Easy come. Easy go.
Elvis | 01.30.08 - 3:29 pm | #

Elvis writes:
Meant "no skin" in the game.
Elvis | 01.30.08 - 3:29 pm | #

Fair Economist writes:
Based on Tantra's description of a "Ruthless" borrower, I hope that there's some kind of Ruthless Flag that gets turned on in these people's credit report and they get to suffer the consequences forever.

The consequences for being a ruthless borrower will be minimal because the system's survival depends on keeping them in the housing market. We already have too many houses. The more people get ejected from the housing market, the more severe the shortfall of potential owners, leading to lower prices, even more foreclosures, and more broke banks. The PTB will realize this and act to bring the foreclosees back in, somehow.

Ironically the ruthless borrowers will do better than the "ruthful" ones. Down payment requirements are going to go up (already have, actually). Ruthless defaulters will tend to have money left over for down payments. Borrowers who hang on til they're broken will have nothing left for a down and will probably still be an unacceptable risk until the housing market turns up.
Fair Economist | 01.30.08 - 3:30 pm | #

Ella writes:
Tanta & CR

OT:

I am having trouble reading the text of the post because the auto insurance ad is covering the text. Can you tell me how to shrink the ad?

Thanks
Ella | 01.30.08 - 3:31 pm | #

MAB writes:
Rational home owners are just walking away? Makes sense. But it seems to me the lenders also acted rationally. Consider:

1. They loan money that doesn't exist.

2. They receive huge bonuses during the boom (and some even receive large severances during the bust).

3. They get bailed out by the Fed, the Gov't and the taxpayer.

This is the folly of the Fed's never ending bailout policies. Its a win for a few and a lose for far too many.
MAB | 01.30.08 - 3:31 pm | #

Barley writes:
Got mixed feelings on this one. Consumers should belly up and meet the terms and spirit of the contract. Yet, companies have the resources and experience to manage every event so as to max. profits including how to write and read the contract.

Maybe this is a case of sellor beware?


PS O/T but: Have you ever read your homeowners insurnace contract?
Barley | 01.30.08 - 3:38 pm | #

rich writes:
Maybe once or twice a century, big things change. "Just walking away" is a big change for Americans, but it's happening. Deny at your peril.

There will be many types of debts and taxes that people (and companies) just walk on. In fact, probably all.

The real question is...how else will big things change...i.e., what other major changes in behaviors or values are linked? I think:

* More austerity and saving.

* Less trust of big institutions, especially financial.

* More tax protests and evasions.

* More mobility, especially away from the Rust Belt. I really think the Rust Belt is done for. I define it mainly as Michigan, Ohio, Indiana, Pennsylvania and NJ. They'll all default on GO bonds in the next decade or two.
rich | 01.30.08 - 3:39 pm | #

Kirk Spencer writes:
Callous, nice one-sided view. Try this analogy on for size.

A bar decides to use "stated age" for its age check. The underage kids get caught with alcohol. By your reasoning, only the kids should face punishment.

Let's tweak it a bit to more accurately reflect the situation.

Among the 'kids' are some 19-20 year olds - enlisted soldiers. This state is one that allows beer or wine at 18 but you have to be 21 for harder stuff. These kids - sorry, soldiers - had actually shown ID for their beers, but were waived when they ordered boilermakers.

You want these kids and soldiers to have a permanent record for breaking the law, but apparently no mark of any sort on the bar staff or owner.

No.
Kirk Spencer | 01.30.08 - 3:40 pm | #

Markel writes:
Gee, if I were concerned about consumers walking away, I'd cram down their mortgages to current value myself. Better to get something in cash than a white elephant POS house to add to your vast REO portfolio that no one will buy anyway.

Guess he's not really that "concerned."
Markel | 01.30.08 - 3:41 pm | #

wawawa writes:
Living 90 days rent free is not bad at all.
wawawa | 01.30.08 - 3:43 pm | #

Barley writes:
"You want these kids and soldiers to have a permanent record for breaking the law, but apparently no mark of any sort on the bar staff or owner."

Yup! We have been breeding children who apparently have no sense of responsibility or accoutability and I have seen many cases where parents blame society for their kid's actions. Please! Maybe this is what we are seeing here in this walkaway behaviour - "I am not responsible for my actions"
Barley | 01.30.08 - 3:45 pm | #

callous writes:
Fair Economist: I understand that overall the market wants as many consumers as possible, but I expect individual lenders to act rationally (funny, I know) in pricing risk into those individuals in the future.

And, to be fair, we're hopefully not talking about 10% of the population, but more like 1%. Excluding SoCal, of course.

You are right about them saving money over ruthful buyers, and unfortunately part of the correction mechanism for that was taken away with the suspension of the mortgage forgiveness taxation.

Having walked away from one house, I doubt The Ruthless will be too eager to put their hard-absconded cash into another. That is perhaps where they "pay" - huge downpayment requirements for those of extreme risk. They're allowed to play the game again, but this time chained to the property.

Still, if I were the cable company, I'd want to see some green up front. (well, except that it doesn't actually cost the cable company anything to provide marginal(*) service, so their risk position for bad creditors is near zero.)

(*) That's not a value judgment on cable service, BTW, no matter how true it may be.
callous | 01.30.08 - 3:45 pm | #

Barley writes:
"Excluding SoCal, of course" LoL!
Barley | 01.30.08 - 3:47 pm | #

tg writes:
wonder if this all started when the US "walked away" from it's obligation to pay back it's foreign debts in gold, during the Nixon administration.

Tin foil hat alert for below link


http://www.safehaven.com/article...rticle- 9358.htm
tg | 01.30.08 - 3:49 pm | #

Barley writes:
January 30, 2008 3:36 PM EST

NEW YORK--(BUSINESS WIRE)--

Fitch Ratings has downgraded the following ratings on FGIC Corporation (FGIC Corp.) and its financial guaranty insurance subsidiaries Financial Guaranty Insurance Company (FGIC) and FGIC UK Ltd:

FGIC

FGIC UK Ltd.


As Fitch announced on Dec. 17, 2007, when it placed FGIC on Rating Watch Negative, the company has a modeled capital shortfall of more than $1 billion at the 'AAA' rating threshold. The existing capital deficiency, which Fitch now believes totals approximately $1.3 billion, resulted from rapid credit deterioration in FGIC's insured portfolio in particular: transactions backed by structured finance collateralized debt obligations backed by subprime residential mortgage-backed securities (RMBS) and direct exposure to RMBS, namely prime second-lien mortgages. The downgrade places FGIC's IFS ratings at a level commensurate with an 'AA' rating stress level under Fitch's most recent capital modeling
Barley | 01.30.08 - 3:51 pm | #

Anonymous writes:
"I really think the Rust Belt is done for. I define it mainly as Michigan, Ohio, Indiana, Pennsylvania and NJ. They'll all default on GO bonds in the next decade or two"

The Rust Belt has water (think of Atlanta's 90 day supply this past summer), resources and cheap land. I wouldn't bet against a mass migration out of the southwest and nascar country in the next 15 years.
Anonymous | 01.30.08 - 3:53 pm | #

Anoy-a-mous writes:
Thank you, I am an Idiot, keep them comming.
Anoy-a-mous | 01.30.08 - 3:53 pm | #

FT Woods writes:
Walking away: I'm surprised car repos aren't way up.
FT Woods | 01.30.08 - 3:54 pm | #

Rob Dawg writes:
SoCal jokes already? Mrs. Dawg just called from the new facility under her aegis. Lancaster, no... Quartz Hills, much classier. She was marveling over the mile after mile of 4br/2.5ba 2400sf homes spaced 10 feet apart. Most likely both adults are away at work in Los Angeles. These people aren't going to see a dime of appreciation for at least a decade. That is if they stick it out. They just plain aren't going to do that unless we bribe them.
Rob Dawg | Homepage | 01.30.08 - 3:57 pm | #

callous writes:
Kirk Spencer:

No. I did not make a statement about lending institutions, rating agencies, real estate agents, brokers, their roles, responsibilities, or relative faults.

They have their own situation to deal with that I did not explore with the "Ruthless Flag" post.

The kids+beer analogy doesn't really hold water, so I'm not going to pursue it. If we were talking about homeowners being prosecuted for fraud, it would be more appropriate.

Not that I'm against that.
callous | 01.30.08 - 3:57 pm | #

Tom Stone writes:
Geez,Hammond is a wet blanket.If he just had a date with leslie Appleton-Young I am sure he would cheer up,that gal has a great dentist,and she would remind him that it is all about consumer attitudes! I wouldn't be surprised to see this market turn around as soon as the Raiders win the Superbowl.In 2020.
Tom Stone | 01.30.08 - 4:01 pm | #

scav writes:
"Yup! We have been breeding [CEOs] who apparently have no sense of responsibility or accoutability and I have seen many cases where ]Companies blame "Market Forces"] for their kid's actions. Please!"

Economics ain't Gravity.
scav | 01.30.08 - 4:10 pm | #

lama writes:
ac,
I heard the owners of Isoldmyhouse.com have started a do it yourself divorce mediation site; Iscoldmyspouse.com

...don't everyone laugh at once.
lama | 01.30.08 - 4:14 pm | #

MAB writes:
ac,

Regarding Nixon & gold.

1971 is when money became nothing more than fiction. It no longer reflects actual work. This is the essence of inflation.

Here's some perspective of what is possible without that pesky gold standard:

Currently, with the help of some clever bankers, I'm securitizing the color green. I'll be slicing and dicing it into numerous shades of blue and yellow. All but the equity tranches of yellow are AAA rated with yields expected at 200 basis points above 10 year notes.

Today's rate cut has increased the value of my new asset class immensely as investors around the globe are now clamoring for yield. According to my bankers it has something to do with inflation and negative yields. I dunno.

Anyway, my new financial product is environmentally friendly so a lot of socially conscious individuals and funds are bidding up the prices. You can get rich and feel good about being green.

Green party candidate Larry Larouche is a spokesman as is former professional quarterback Vinny Testaverde (vinny green head for non-goomba's). Alan Greenspan is particularly fond of our innovative product and claims it will fill the void left by the disappearance of the Berlin Wall.

BTW, We're saving RED for when the Great Wall disappears.
MAB | 01.30.08 - 4:22 pm | #

ericblair writes:
This is a case of good-for-the-goose good-for-the-gander. In the last couple of decades, the Powers That Be have lauded every sociopathic Ivy League CEO who clawed his way to the top by firing divisions of blameless staff and raiding pension funds, and calling it "just business". Fairly or not, people's perceptions are that modern businesses are uniformly ruthless, and I don't see much to challenge that. At this point, the big banks crying in their beer about the nasty greedy untrustworthy homeowners has more than a little whiff of hypocrisy.

If someone is in breach of contract, there are legal mechanisms in place to deal with it. If the industry and the governments have starved these mechanisms half to death in the name of efficiency and saving a few bucks, that's hardly the homeowners' fault.
ericblair | 01.30.08 - 4:27 pm | #

Anonymous writes:
Rich-

The upside-down walking masses should be organized and the rest of us mobilized to demand much bigger financial system changes as a result of this failed Ponzi Scheme.

History will otherwise show that there was a failure of the US citizenry to come together to take back the reins of an out-of-control, gamed financial system.
.
Anonymous | 01.30.08 - 4:31 pm | #

dearieme writes:
IceColdMyCola.
dearieme | 01.30.08 - 4:32 pm | #

Aheadofthecurve writes:
In the eagerness to blame bankers, mortgage brokers, relitters and flippers (all of whom deserve blame), no one is mentioning the people who made out the best in this whole mess-the sellers. Yes, Mr and Mrs Lucky Homeowner who bought a little bungalow in SoCal for $ 250,000 with $ 25,000 down in 1995 and sold it for $ 800,000 in 2005, a return on investment of over 30x in 10 years. Sure the bankers, brokers, relitters, etc. got a cut, but it was nothing compared to the big fat hunk of cash that Mr and Mrs LH made. Not even close.
Aheadofthecurve | 01.30.08 - 4:46 pm | #

Speed writes:
It's hard to blame the sellers. I'd sell my Nissan for $100,000 if someone offered it. Would it be my fault if he defaults on his loan?
Speed | 01.30.08 - 4:53 pm | #

HARM writes:
callous writes:
Based on Tantra's description of a "Ruthless" borrower, I hope that there's some kind of Ruthless Flag that gets turned on in these people's credit report and they get to suffer the consequences forever.

As long as there's also a permanent "ruthless flag" for unscrupulous lenders, that's ok by me.
HARM | Homepage | 01.30.08 - 4:58 pm | #

HARM writes:
HARM to the "shocked, just shocked, I tell you" Wall Street easy-money pimps:

Chickens, meet roost.
HARM | Homepage | 01.30.08 - 4:59 pm | #

Anonymous writes:
Aheadof- There you go again....my gosh, please discern a symptom from a cause for once....PLEASE!
.
Anonymous | 01.30.08 - 5:00 pm | #

Aheadofthecurve writes:
Speed-If you and all car owners were able to severely limit the number of cars so that anyone who needed one would be forced to overpay, maybe.

Anonymous-why are you afraid to identify yourself? The cause was overpriced homes. The funky financing is the symptom, because people couldn't afford the overpriced homes without it. I'm not absolving the bankers and brokers who had a responsibility, if only to their shareholders, to know better. Still, no one's hands are spotless here.
Aheadofthecurve | 01.30.08 - 5:07 pm | #

HARM writes:
Ironically the ruthless borrowers will do better than the "ruthful" ones. Down payment requirements are going to go up (already have, actually). Ruthless defaulters will tend to have money left over for down payments. Borrowers who hang on til they're broken will have nothing left for a down and will probably still be an unacceptable risk until the housing market turns up.

Yet another reason why the banskter's hypocritical lectures about FB "ethics" is a load of horsesh*t and totally irrelevant.

The banksters have the gold (or rather, the credit) and made the rules. And the rules said: borrow recklessly and lie on your credit applications and be rewarded with everlasting asset appreciation. Save and act responsibly, and be outbid and priced out forever.

Consumers "got the memo" and started acting unethically --the way banksters encouraged and rewarded them to act. And now they're being criticized for behaving this way?
HARM | Homepage | 01.30.08 - 5:09 pm | #

Fair Economist writes:
Callous: I understand that overall the market wants as many consumers as possible, but I expect individual lenders to act rationally (funny, I know) in pricing risk into those individuals in the future.

Except for the truly ruthless, it *is* rational to lend to them. It's rational to take a hit to your credit report to duck 150,000 of mortgage debt. But, it's not rational to walk from a house which has equity, nor is it worth it to stiff the cable company. These people are actually good credit risks - better than the ones who go in over their head and stay there.

That said, it may very well happen through an "FHA SecondChance" program.

And, to be fair, we're hopefully not talking about 10% of the population, but more like 1%. Excluding SoCal, of course.

And FL and AZ and NV and CO and MI and OH and GA and....

Having walked away from one house, I doubt The Ruthless will be too eager to put their hard-absconded cash into another. That is perhaps where they "pay" - huge downpayment requirements for those of extreme risk. They're allowed to play the game again, but this time chained to the property.

Yeah, they may stay out. I'm not at all sure letting them back in will save the system. But it will happen anyway. The PTB have to try.
Fair Economist | 01.30.08 - 5:11 pm | #

Cobradriver writes:
Aheadofthecurve | 01.30.08 - 4:46 pm |

My old man tried like hell to get rid of all the rentals. He sold a couple of duplexes before the crash. How bad did it get...How about 300 times current rent. I'm sorry,if someone buys a duplex at that ratio you are speculating and NOT investing. Oh,both were bought zero down...

Chris
Cobradriver | 01.30.08 - 5:11 pm | #

Speed writes:
"If you and all car owners were able to severely limit the number of cars so that anyone who needed one would be forced to overpay"

I agree. That would be a monopoly. And if all the houses were owned by Microsoft, then you'd be right.

But in this case, these are individual owners, and no one was forced to overpay for anything. They gladly signed on, sometimes standing in line to do so.

And no one NEEDS to own a car or a house.
Speed | 01.30.08 - 5:16 pm | #

Anonymous writes:
Aheadof- 'the cause was overpriced homes'

Sorry, not so, justy another symptom.

You see, the Ponzi Scheme was the real cause....go to the latest CR posts about the demise of the primary cogs in the fraud wheel.
Anonymous | 01.30.08 - 5:21 pm | #

MAB writes:
Cobradriver,

300 times current rent????? Inconceivable! And now we are cutting rates in response to tens of thousands of those kinds of deals blowing up? What a disgrace.
MAB | 01.30.08 - 5:45 pm | #

JudgeSmales writes:
I have really come around on this topic.

Sixth months ago, I would've been morally outraged at FBs simply walking away after gaming the system.

While that still irritates me, I realize they're only taking advantage of the lenders' failure to perform proper underwriting.

It's in the contract: if they don't pay, the lender takes back the collateral (the house).

It's the lenders' collective fault that they removed the one sure firewall between borrowers hanging in there or not hanging in there: not requiring down payments.

In the "old days," borrowers struggled to keep their homes because their down payment (perhaps their life savings) was at risk of being totally lost. Now, it's what the heck, take the damn house. I was only borrowing it for a while. Now you can have it back. See ya later, Charlie.

The bankers screwed up, and now they are supposedly shocked and "concerned" that borrowers who gamed the system in the first place are going to game it again to get out of the contract? Tough.

-- Judge Smales
"You'll get nothing and like it"
JudgeSmales | 01.30.08 - 6:21 pm | #

Aheadofthecurve writes:
Speed-People do need houses and, outside of certain very large cities, they really do need cars. Not to rehash old ground, but there have been supply constraints put on housing that drove prices up. Interest rates certainly were a factor, but if supply were completely elastic, prices would have stayed affordable even at 0% interest rates.

Is your residence a purchase (like a car) or an investment (like a stock)? To me, it's the former and frankly, I have only the vaguest idea what my home is worth. So as long as I enjoy it and can afford it, I don't lose sleep over how much it's worth. I guess that's why this whole discussion leaves me wondering. But if your point is that bankers should have exercised common sense even if borrowers did not, I certainly agree. Their shareholders would be thanking them if they had.
Aheadofthecurve | 01.30.08 - 6:53 pm | #

Grace writes:
What gets me is this:

Mr. Flipper, who bought 20 houses in 2005, now discovers that 10 are worth far less than he paid. The other 10 are worth more than he paid. He wants to "walk away" from the 10 that are under water but keep the other 10 that are profitable. All the houses are in different states.

???? How and why is this legal? I've seen posts like this on some of the foreclosure boards.
Grace | 01.30.08 - 7:33 pm | #

bklyn_rntr writes:
The ponzi finance model has been around for a long time as follows:

lend, sell loan into securities markets but hold onto servicing rights, manage loan payments in a manner to maximize fees for servicer, screw borrower to maximize fees until default. close account, offer SAME defaulting customer new credit, repeat servicing/fees game.

That's been the model in credit card financing for years and in the last 5 years it was the game in mortgages too. The banks/PTB allow a "ruthless" system to flourish that is designed to push the weakest borrow as close as possible to financial ruin (without actual ruin of course). In the past 15 years, borrowers have defaulted many times on their credit card debt and EVERY TIME, the banks came back offering more credit. Why wouldn't any consumer/sucker who's played this game (and is already poorer for it) not believe that the mortgage game is the same??
bklyn_rntr | 01.30.08 - 7:33 pm | #

muzical chairzz writes:
AHC

You mean I really should have just said, "I will not participate in this scheme, my house should only be priced $25k more than I paid 7 years ago so I won't sell you my house (which I bought for $250k) for the $660k that the one next door just sold for. Nosirreee, You can have it for just $275000 and I'll cover my friendly relitter's fee too"

Mr & Mrs Lucky were NOT the cause whatsoever. However, where ever there is a loser, there is a winner. M & M Lucky did come out ahead in this case.

However, many Lucky's were actually Lucky Fools who put that back down on a $50k SUV and a $1.5mill house. Even the Lady Luck couldn't help them now.
muzical chairzz | 01.30.08 - 8:48 pm | #

NYT writes:
I wonder what those who criticize the homeowners for "walking away" think of the banks (Citi, RBS, Barclays) who walked away from Mitchells and Butlers in the middle of a refinance leaving them in the hole for STG274M.

I guess J.C. Flowers must have had lousy parents too. Why else would he invoke the M.A.C. to walk away from the Sallie Mae deal.

Businesses exist to maximise their profits in a legal manner. For years we've been told this is the duty of the directors and management.

But somehow when it comes to a person's own finances and his own family's wellbeing they're supposed to repudiate the chance to legally maximise their own financial situation.

I'd say that would be a tough sell to most people.
NYT | 01.30.08 - 9:38 pm | #

neil writes:
Judge Smales said:
It's the lenders' collective fault that they removed the one sure firewall between borrowers hanging in there or not hanging in there: not requiring down payments.

Well phrased. I'm going to be borrowing that a lot over the next year.

NYT notes:
Businesses exist to maximise their profits in a legal manner. For years we've been told this is the duty of the directors and management.

Yep. I don't blame people from walking away from stupid decisions. Part of what keeps America growing faster than most areas in the BK laws... Well, now is the time to apply amply.

We will see huge population mobility. Bubble states will be losers. The "rust belt" really needs to look into their job laws/education-systems and understand why they fail to attract new industries.

Got popcorn?
Neil
neil | Homepage | 01.31.08 - 12:28 am | #

rent_to_own writes:
callous - '...credit extender - from the cable company on up - what kind of penalty do you impose....'

Well, the credit extender could simply get used to being paid cash before extending their service, but that sort of eliminates the idea of credit extension, doesn't it?

And yet, amusingly, many people seem to think having a bad credit score is a harsh penalty, and only slowly are they waking up to the fact that a good credit score simply means that they are part of a system of greater fools - and the people previously considered the greatest fools, those who pay horrendous interest rates, are turning out to be winners, or at least no longer are they the bagholders - they simply walk away from their losses without penalty, apart from their ruined credit.

As if most of those people should have ever been extended any credit to begin with.

I tend to be pretty harsh in my perspective - anyone in debt has already earned the penalty of keeping a monstrously dysfunctional system creaking along, over the edge of a cliff.

The Great Depression brought many changes to America - what is happening now will undoubtedly do the same. Including the fact that 'credit' is likely to be seen as something that only stupid or ruthless people touch. Few people will care about a credit score - they will instead care about how much money they have. Yes, I know, such a quaint way of thinking, one that completely misses the point of financial engineering as the base of America's dynamic economy, the envy of the entire world.

Though at this point, I don't think envy is the right world to describe how the world looks at America.

America will soon have to get used to paying in something other than the implied credit of dollars for what the world produces. OPEC comes to mind, off the top of my head. And considering how many non-Americans will be left holding the bag, don't expect any sympathy for a nation of deadbeats.
rent_to_own | 01.31.08 - 2:44 am | #