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Politics : View from the Center and Left -- Ignore unavailable to you. Want to Upgrade?

To: Cogito who wrote (105346)	3/3/2009 12:31:19 AM
From: cosmicforce	Respond to of 540841

< imprudent home buyers are to mostly blame > Let's analyze in the dynamics of a game with the teams of players. Was any of this predictable? This is like the obese being to blame for eating the junk food that is produced, marketed and prominently displayed at relatively low unit cost. Human beings have three biological cravings driven by relative scarcity in nature - salt, fat and sugar. So clearly when a manufacturer or restaurant chain hires food scientists who know this, there can be a profit to be made on the set of neurotransmitters that reward this consumption. We can blame fat people or we can say it is like cocaine addiction, a predictable medical problem. Clearly if in a situation one person has more knowledge and control than another, there is a fiduciary or at least a moral component to this relationship. People can argue a moral component doesn't exist but that really doesn't change the game. Ignorance vs. knowledge: who usually wins? Knowledge. To circle back to loans, a forth biological need, shelter was used to promote universal home ownership, touted as a good thing by both Parties - I was skeptical and disagreed. Property ownership has some very high costs - it is one of the few assets that is taxed at a rate where, if tax payment stops, in very few years the entire asset could be transferred to the government. Poor people aren't generaly used to this concept of wealth transfer. If they have grandma's ring, it is their ring forever until they sell it or give it away. The government benefits by this ignorance, or at least inexperience. Who knew more about this possibility, the government or the taxpayer? Well the government hires people with finance backgrounds, so it would seem that they violated a trust as the public servant. The mortgage deduction is of far more benefit to people with high income than for the poor. The costs of upkeep are not deductible on a personal home, but are when it is rented to someone for profit. Also, the poor tend to have interruptions in their income stream, so without a resource buffer, home ownership can sink someone more quickly than rental fees can which change more predictably. Then there is damage like wind and termites, water, infestations, and other situations that can cause random spikes in expenses, none of which most poor people have the experience or resources to plan for. Again, if you are a person with no experience owning a home, who knows this more? You or the bank? I think the bank. So, maybe it is their fault that they tried to satisfy another basic need, shelter. We used to have a qualification process. I almost didn't get my mortgage which was at 30% of income - I was marginal 20 years ago. In their greed to grow profits at an unsustainable 15% rate, banks had to compromise on that threshold. Pretty soon the compromises got so severe that they were giving loans to people that were almost guaranteed to default as soon as the economy stalled. The government didn't mind because they'd own the house on taxes due and we started seeing this happen in urban areas two to three years ago. There were elderly people had relatives helping them take out seconds when there was no reasonable mechanism for repayment. Whose fault is that? Well, IMO, the more knowledgeable of the two parties: the people with the CPA or MBA. The illiterate with no history of math or financial skill, less so. This may sound socialist to someone - big brother watching out for everyone. I think of it as an issue of equity. Do we opt for a system where the knowledgeable can predate on the ignorant? I guess so. The shell company is left holding the bag. I think this was criminal fraud against the public and shareholders. Let's prosecute.