Financial News

[Balta1701]

Economists at the New York Federal Reserve have concluded that a controversial 2005 law backed by banks and credit card companies pushed more than 200,000 people into foreclosure and exacerbated the subprime mortgage crisis.

 

Consumer advocates fought hard against the law, which made it much more difficult for individuals to alleviate credit card debt in bankruptcy. This inability of homeowners to eliminate other debts, the New York Fed economists conclude, in turn made borrowers unable to pay off their mortgages, spurring foreclosures.

 

Despite opposition from public interest groups, the 2005 law easily cleared both chambers of Congress and was signed into law by President George W. Bush. In a paper released Tuesday, New York Fed researchers Donald P. Morgan, Benjamin Iverson and Matthew Botsch determined that the law sparked about 116,000 additional subprime mortgage foreclosures a year after going into effect.

Link

[Jenksismyhero]

Man, f*** the government for holding people accountable for their actions! Those assholes.

 

Seriously, how people ignore the first step in this - that a ton of people were stupid, not understanding how money, debt and compounding interest works -is beyond me. This article makes no sense to me, other than to blame Bush yet again.

 

[Balta1701]

Man, f*** the government for holding people accountable for their actions! Those assholes.

 

Seriously, how people ignore the first step in this - that a ton of people were stupid, not understanding how money, debt and compounding interest works -is beyond me. This article makes no sense to me, other than to blame Bush yet again.

Adding some additional data, as of 2009, somewhere in the neighborhood of 62.1% of bankruptcies were caused directly by medical bills. Of that population, 78% had insurance at the time, but were still bankrupted because of unexpected expenses/copays.

 

Presumably, although its' not catalogued there, a large additional number of bankruptcies were caused by job losses.

 

Therefore, the problem of compounded interest not being understood and causing bankruptcy is of course, much less important than the problem of Health Insurers that don't provide health care.

[StrangeSox]

Man, f*** the government for holding people accountable for their actions! Those assholes.

 

Seriously, how people ignore the first step in this - that a ton of people were stupid, not understanding how money, debt and compounding interest works -is beyond me. This article makes no sense to me, other than to blame Bush yet again.

 

Nah, the first step is the large percentage of medical bankruptcies, as Balta points out. The second step is predatory lending with incredibly high interest rates and reams of confusing legal documents offered to anyone and everyone. The third step is people not understanding intentionally dense and convoluted financial instruments and loans/credit, and not necessarily because of stupidity or not grasping the basics of money and debt.

[Jenksismyhero]

Adding some additional data, as of 2009, somewhere in the neighborhood of 62.1% of bankruptcies were caused directly by medical bills. Of that population, 78% had insurance at the time, but were still bankrupted because of unexpected expenses/copays.

 

Presumably, although its' not catalogued there, a large additional number of bankruptcies were caused by job losses.

 

Therefore, the problem of compounded interest not being understood and causing bankruptcy is of course, much less important than the problem of Health Insurers that don't provide health care.

 

"I'm not sure that it is correct to say that medical problems were the direct cause of all of these bankruptcies," he says. "In most of these cases, it's going to be medical expenses and other things, other debt that is accumulating."

 

Awful mortgages plus piss poor money management was the cause moreso than an increase in medical bills. Probably made things worse for people, but it wasn't THE cause.

 

 

 

[StrangeSox]

Awful mortgages plus piss poor money management was the cause moreso than an increase in medical bills. Probably made things worse for people, but it wasn't THE cause.

 

Uh, keep reading after that quote. The medical bills can place a heavy burden on a family that's doing ok or even just treading water without them being stupid, having piss-poor money management, or falling into any other derogatory category that makes it easy to dismiss their plight and its causes.

[Jenksismyhero]

I'm not denying there aren't outliers and that there are some people who did everything right and still got screwed. But I also don't buy that the cause of the foreclosures was Bush closing a credit card debt loophole and insurance companies screwing people over.

[StrangeSox]

I'm not denying there aren't outliers and that there are some people who did everything right and still got screwed. But I also don't buy that the cause of the foreclosures was Bush closing a credit card debt loophole and insurance companies screwing people over.

There's no single cause of the massive amount of foreclosures over the past several years, but this certainly didn't help. Mounting medical bills didn't help. Confusing, complex lending practices and banks lacking any financial or ethical lending guidelines in pursuit of more profit didn't help. Complex but ultimately garbage financial instruments that caused trillions of dollars to evaporate and the economy to crash didn't help.

 

And, yes, people borrowing more money than they could ever reasonably expect to repay certainly didn't help. However, laying the blame on stupid, dumb people who can't manage money ignores the root causes of the problem. Like ever-rising medical bills, stagnant or shrinking real wages, job off-shoring, unethical lending, heavily marketed credit and loans and a real lack of any decent financial education for most people.

[Balta1701]

I'm not denying there aren't outliers and that there are some people who did everything right and still got screwed. But I also don't buy that the cause of the foreclosures was Bush closing a credit card debt loophole and insurance companies screwing people over.

If you'll note, I explicity included the section of the article that stated the number of foreclosures they thought it caused. Their number was about 200k.

 

The year over year foreclosure numbers from the crisis years have been 1-2 million.

 

It wouldn't have fixed the problem if we hadn't passed that stupid law, but "it didn't cause the worst financial crash since 1929" is not a defense for adding in several hundred thousand foreclosures.

[Jenksismyhero]

There's no single cause of the massive amount of foreclosures over the past several years, but this certainly didn't help. Mounting medical bills didn't help. Confusing, complex lending practices and banks lacking any financial or ethical lending guidelines in pursuit of more profit didn't help. Complex but ultimately garbage financial instruments that caused trillions of dollars to evaporate and the economy to crash didn't help.

 

And, yes, people borrowing more money than they could ever reasonably expect to repay certainly didn't help. However, laying the blame on stupid, dumb people who can't manage money ignores the root causes of the problem. Like ever-rising medical bills, stagnant or shrinking real wages, job off-shoring, unethical lending, heavily marketed credit and loans and a real lack of any decent financial education for most people.

 

[Balta1701]

Let's put it this way....do you think there is a significantly higher %age of financially inept people no than there was in 1985, 1970, 1955, or 1940?

 

If so, well, I'd be surprised actually, with the proliferation of stock ownership, for example, people have simply had to deal with those issues much more often. So I'd actually disagree with that.

 

If people haven't gotten worse at managing their money than they were 15, 30, 50 years ago, then it's worth asking if something else changed...like say, regulations and banks willingness to lend to people with no credit check.

[StrangeSox]

 

Ignorance doesn't imply stupidity.

 

I wanted to make sure you didn't think I was dismissing any personal responsibility of all people who end up in bankruptcy or foreclosure.

 

I just don't like it when the responsibilities of all of those who profit are dismissed.

Edited February 9, 2011 by StrangeSox

[Balta1701]

A mini "Flash-Crash" seems to have hit Apple yesterday.

[Harry Chappas]

Let's put it this way....do you think there is a significantly higher %age of financially inept people no than there was in 1985, 1970, 1955, or 1940?

 

If so, well, I'd be surprised actually, with the proliferation of stock ownership, for example, people have simply had to deal with those issues much more often. So I'd actually disagree with that.

 

If people haven't gotten worse at managing their money than they were 15, 30, 50 years ago, then it's worth asking if something else changed...like say, regulations and banks willingness to lend to people with no credit check.

 

15,30, 50 years ago people would put their money in a bank and get 3% interest and watch that grow, live a nice life and get a pension from the non-public or public sector. They would live to their menas and banks would make certain that risk was low when giving away money.

 

People are lazy now and use credit to extend what they couldn't get 25 years ago. A bank has no problem charging you 30% interest on a credit card if you miss one payment. Many, many people are ignorant to these things and simply pay their minimum balance and go about to get more credit which continues to mount. Banks don't really care if you default as they are getting interst at a higher rate then they are paying to make up for the defaults.

 

The housing market is just a bigger plan of this. I used to drive around the suburbs of Chicago and wonder where the wealth for the $400-$600K homes came from. I found out a few years later. People also will just walk away from their home as they have no equity or do not realize the impact of walking away. Oh wait, a bank will give you the money again so just walk away.

 

Fiscal responsability is not as great as it was 20 years ago and nowhere near what it was 40 years ago.

[StrangeSox]

Wonder if this has anything to do with it...

 

It's gotten worse since then, spiking up to about 50% in 2007.

http://press.take88.com/wp-content/uploads...ncomes-2007.pdf

[Balta1701]

The housing market is just a bigger plan of this. I used to drive around the suburbs of Chicago and wonder where the wealth for the $400-$600K homes came from. I found out a few years later. People also will just walk away from their home as they have no equity or do not realize the impact of walking away. Oh wait, a bank will give you the money again so just walk away.

 

Fiscal responsability is not as great as it was 20 years ago and nowhere near what it was 40 years ago.

You write this as though it's a bad thing.

 

If a Business were to invest several hundred million in a large, real-estate investment, say a multi-building skyscraper development, and the market were to go bust, such that there was no way their investment would be recouped, would that business continue investing in construction? Not a chance. They'd walk away in a quarter second if it was the right financial decision.

 

Walking away from a severely underwater home is very often the correct financial move and should be viewed as such.

[Balta1701]

15,30, 50 years ago people would put their money in a bank and get 3% interest and watch that grow, live a nice life and get a pension from the non-public or public sector. They would live to their menas and banks would make certain that risk was low when giving away money.

 

People are lazy now and use credit to extend what they couldn't get 25 years ago. A bank has no problem charging you 30% interest on a credit card if you miss one payment. Many, many people are ignorant to these things and simply pay their minimum balance and go about to get more credit which continues to mount. Banks don't really care if you default as they are getting interst at a higher rate then they are paying to make up for the defaults.

The other part of this is that 40 years ago, you could legitimately sustain a middle class lifestyle on a single family income.

 

Since then, it's moved to where you've required 2 incomes to support a middle class family, then to the point where a 2 income household still can't keep up with its own health care costs.

[Cknolls]

The other part of this is that 40 years ago, you could legitimately sustain a middle class lifestyle on a single family income.

 

Since then, it's moved to where you've required 2 incomes to support a middle class family, then to the point where a 2 income household still can't keep up with its own health care costs.

 

 

Education is still a bargain!

[Balta1701]

Education is still a bargain!

Yeah, there's another one...college costs are the only thing rising at a comparable rate to health care costs over the last 20 years.

[Y2HH]

The other part of this is that 40 years ago, you could legitimately sustain a middle class lifestyle on a single family income.

 

Since then, it's moved to where you've required 2 incomes to support a middle class family, then to the point where a 2 income household still can't keep up with its own health care costs.

 

You're forgetting a few VERY important things here...conveniently I might add. Because this is complete bulls***.

 

40 years ago, on a middle class income, you didn't own 3 HDTV's, 2 cars, take expensive vacations to Disney or Vegas once a year and eat out 4 days a week. The reason why you need 2 incomes now, for most families, is because they overspend. A lot.

 

Now lets add in the fact most people own 2+ cell phones, 2+ computers, have a huge cable bill, a home phone they don't use, and whatever else. These are costs people simply didn't have 40 years ago, nor would have have taken them on. If they couldn't afford cable, they didn't have it. I know I grew up without cable and without a VCR, too. Having 1 of something used to be good enough. Now, it seems most families need need 1 for each person. Hell, I even see little kids with cell phones, then hear the parents complain about not having enough money!

 

I work, my wife doesn't. I'm middle class. We are doing well.

 

My friend, family of 4, single income, also doing very well. Also middle class.

 

Fact is, you CAN live on a single middle class income...just like they did 40 years ago, IF you live middle class. I know 6 people, very close to me, and we all do it this way, our wives do not work, and we work a single job. From a police officer to a system administrator...it can be done, you just can't own all of these things, run up credit cards you can't pay off in full...nor can you eat steak every night, either. It's actually QUITE simple to do, if you choose to do it.

 

It's important to keep in mind here the quality of a modern middle class life is far higher than what it was 40 years ago. Middle class families used to eat out for special occasions, now they do it a few days a week...because it's Tuesday and they 'don't feel like cooking themselves'.

 

Live within your means, and you'll see how easy it is. Just like they did 40 years ago. Also, note I'm not directing this at YOU, in specific...just generalizing based on what I see out there.

 

I will say one key difference is the cost of a home vs 40 years ago. Housing is *still* inflated. 40 years ago the cost of a house was (at max) 2 years income, if not just 1 year. Now it's usually 4+ years income.

 

However, my key point remains. People live beyond their means today, because it's easy to do with easily accessible lines of credit, etc. I just refuse to do so. It can still be done...it's just most of us WANT 2+ televisions, 2+ cars, etc., even if we cannot afford it.

Edited February 12, 2011 by Y2HH

[Balta1701]

So, no one owned goods that would be deemed luxury goods 30 years ago?

 

All you're doing is stating that the luxury items of today didn't exist 30 years ago and therefore everyone is worse at managing money.

 

And I'll note 1 more point...you also explicitly blamed the credit providers in your effort to defend them...by saying that they were happy to provide people lines of credit that they wouldn't pay off.

[Balta1701]

Here's a different way to look at that data. It used to be that as worker productivity increased, that money made its way down to the workers. Starting around 1980, that changed. Median income today is, inflation adjusted, almost unchanged from 1980. The U.S. worker is working harder, longer, and getting paid less per hour for it.

 

 

[lostfan]

F***, I'm just off lately.

 

If I read a Wikileaks document, have I committed a crime?

For me, it is.

 

Not actually reading it (because in most cases I have legitimate access), but accessing it via an unauthorized medium (the commercial Internet). Just because classified information appears in public doesn't mean it's de facto declassified so if I started browsing Wikileaks at work it'd be treated like any other security violation.

[Balta1701]

For me, it is.

 

Not actually reading it (because in most cases I have legitimate access), but accessing it via an unauthorized medium (the commercial Internet). Just because classified information appears in public doesn't mean it's de facto declassified so if I started browsing Wikileaks at work it'd be treated like any other security violation.

There's actually a real issue here...If the Congress wants to make a law reacting to the things Wikileaks has done...or if the intelligence service wants to evaluate what impact it has had on say, the Tunisian uprising...how do they do that if it's illegal for them to look at the documents?

 

The Congressional Research Service's official job is to investigate issues at the behest of Congress to help Congress make laws, but they're not allowed to view the Wikileaks cables. So how can Congress possibly react to those events if they're not allowed to gain any information from them?

[lostfan]

There's actually a real issue here...If the Congress wants to make a law reacting to the things Wikileaks has done...or if the intelligence service wants to evaluate what impact it has had on say, the Tunisian uprising...how do they do that if it's illegal for them to look at the documents?

 

The Congressional Research Service's official job is to investigate issues at the behest of Congress to help Congress make laws, but they're not allowed to view the Wikileaks cables. So how can Congress possibly react to those events if they're not allowed to gain any information from them?

The intelligence services already are reviewing the documents. You may have heard of the CIA's version of it, the Wikileaks Task Force (WTF).

 

BUT, if the government wants to make those documents accessible to people who ordinarily don't have security clearances/authorization to view them they will do it. What I said only applied to everyday rules for the 2 million or so people that have security clearances. I'm allowed to look at all those things, I just can't do it, say, right now, while I'm at home.