31 July 2008

Odd That We Think The Victims Are The Ones Who Put No Money Down

I put this comment up at Thought-Mesh, but thought that it was worth cross-posting here:
One of the interesting things about the subprime mortgage mess is that, in part due to underestimating the risk and in part due to federal subsidies, banks went on a lending spree giving mortgages to a bunch of people who couldn’t otherwise have bought a house. Now that some people can’t afford the houses they wouldn’t ordinarily have been able to buy, it’s a terrible tragedy. But unless we think that before the spree, lenders found every last person who would pay off their mortgage, there are clearly people today who own homes who otherwise wouldn’t. The banks, on the other hand, are staring into the abyss.

It’s an odd sort of capitalist scandal that allows the poor to buy houses and punishes the bankers.


Bret said...

Yeah, it's hard for me to get too wound up over those who lost a house that they couldn't possibly afford under any circumstance and have to move back into an apartment where they would've been any way. A little traumatic to be sure, but really not much of a set back.

aog said...

I swear you (or one of the post-Juddians) has written that almost word for word before. I can't find it off hand, although I did manage to dig up the "free market torpedoer" quote finally.

Harry Eagar said...

I could contemplate the discomfort of both the banks and the injudicious (or worse) borrowers with great calm.

The scandal comes in the losses of jobs, savings, security, access to lending facilities etc. among the people who were neither lenders nor borrowers.

Perhaps you also think that peddling smack on the street corner is a victimless endeavor, at least among the willing buyers and sellers?

David said...

Harry: Name one. More to the point, name two.

I mean, I'm sure that out of 300 million Americans there's someone in that situation, but that's not exactly the major problem facing the country.

To take just one example, according to this handy-dandy internet thingy, 30 year fixed rate mortgages are averaging 6.31% this week. That's higher than its been for most of the Bush administration, but historically low and, I think, lower than it had been up to mid-2002. If rates are low, there's no credit crunch.

Harry Eagar said...

Well, though I don't have their names on me, I've been writing stories about layoffs here -- 70 at one company last week -- that the managers blame directly on the collapse of the California real estate system.

It's difficult, right now, to disentangle the effects of oil and mortgage fraud in my county, but the results are very bad. It looks as if job losses are already in the thousands.