On Mon, Oct 27, 2008 at 12:51 PM, erik mattheis <zero at gozz.com> wrote: > Both links found via google. Predatory lending has been in the news for > like, a decade, I thought it was common knowledge to everyone in the US ... > not sure if Neil Bootrz ever reported on it though ... ha ha! I don't know or care who Neil Bootrz is. Recent studies have shown that watching 24 hr news channels causes brain cancer, infertility, and a tendency to attack ideas by attacking whom they are associated with. The link you cited is a case of fraud and there was a lawsuit. Fraud is certainly a problem that has been around for a very long time -- much longer than a decade -- and I fully support government actions to curtail it. The claim that lending documentation fraud is the cause for the mortgage mess implies that it is a huge systemic problem. Something about blaming lending documentation fraud for everything we are seeing in the housing markets and the ripple effects in the economy just doesn't pass my "does that make any damn sense" filter. If there was rampant fraud and everyone has been talking about it for a decade, then the question becomes: why wasn't anyone going to jail? Fraud prevention is one thing government SHOULD have their hands in... they must have been sleeping. Or, perhaps, the incidence rate wasn't any higher than "normal" levels and was being handled using normal legal channels. It sounds like either government wasn't doing its job in curtailing fraud, or the claim that it was a systemic problem is overblown. It's a bit of a scapegoat that Congress has used so that their own actions are not blamed. The only thing that has given me a little bit of hope is watching the House Oversight Committee on c-span starting to dig into the role that Congress played in this mess. I hope something useful comes out of those hearings. One thing to consider -- just a thought exercise... Let's suppose that banks felt pressured to lend to individuals where the likelihood of default was higher than their normal standards. This would result in lower or negative profit. One way to counteract this loss is to reduce other costs/risks, perhaps around changes in interest rates after origination. Perhaps that would lead to lenders pushing ARMs in these risky cases. For the less principled in our business world, perhaps that would encourage predatory lending practices. Would that mean that it's Congress's fault that there is predatory lending? No, and the businesspeople committing fraud should be thrown in jail. But the issue is not black and white, and there is certainly still room for considering whether Congress influenced such practices with its market intervention. Government plays a dangerous game when it starts manipulating the balance between risk and reward. I wouldn't expect anyone to be able to understand every possible long-term effect of seemingly beneficial legislative actions. -- Matt Warden Cincinnati, OH, USA http://mattwarden.com This email proudly and graciously contributes to entropy.