[thechat] Hiding from Elections Now

Matt Warden mwarden at gmail.com
Mon Oct 27 12:56:09 CDT 2008

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

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

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

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