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Politics : American Presidential Politics and foreign affairs -- Ignore unavailable to you. Want to Upgrade?

To: DuckTapeSunroof who wrote (44941)	8/18/2010 11:35:28 AM
From: TimF	Read Replies (1) \| Respond to of 71588

Yes that's her own words but it doesn't say what you say it says. "It's not that I think that it is necessarily untrue that the wealthy are more likely to default on mortgages that they could pay. Indeed, I think it is probably almost definitionally true, at least the way I think of strategic default." Note the bolded word. She doesn't say what you say she says, she says its probably the case. "Probably X" != "X" Also note that the comment is about strategic defaults, not about the number of defaults; and so its entirely consistent with my observation - "She did not say the rich are strategically defaulting at a higher rate. She said she suspects they might be, while pointing out the data at hand does not tell us this". They could be strategically defaulting at a higher rate while defaulting at a lower rate or the same rate. Also her comment was not about the data. She didn't say the data support such a conclusion, she said its almost definitionally true, apparently thinking that if your are wealthy, at least if your very wealthy, then almost any default is likely to be strategic. That if your debt level is so high compared to your assets and income that you can't pay the debt, then you aren't wealthy. She's essentially defining any default by a wealthy person or at least a very wealthy person, as a strategic default. Once you do that, then of course their strategic default rates will be higher (unless they almost never default), but its a tautology, it doesn't really tell us anything. Its defining X as Y, and then proving that Y=X. If instead you look at what the data says (or what she says about the data if the issue is what she says) the data only shows us that defaults happen more often on large loans then smaller ones. I don't see why that would be so surprising. It would make sense that both strategic and non-strategic defaults happen more often on such loans.