|Christiano Ronaldo and David Beckham
have absolutely nothing to do with finance.
‘Puter just figured he could drive blog traffic
by giving the ladies something nice to look at.
‘Puter’s in process of refinancing his mortgage. He is paying off an outstanding balance on his home equity line of credit at the same time. ‘Puter’s lending institution is giving him a 2.75% rate on a 15 year term mortgage, no points. Not too shabby. Best of all, ‘Puter figures he can pay off the debt in about 5 years and 9 months, assuming his kids don’t go to college.
As regular readers of ‘Puter’s words of wit and wisdom know, ‘Puter’s company is in the financial industry, and as such, ‘Puter is more than passingly familiar with promissory notes, mortgages and just about anything else you can think of that might be involved in commercial and residential secured lending. ‘Puter’s seen some of the most complex loan documents ever devised, usually after the loan has gone horribly wrong and the credit is involved in litigation.
And yet the federal government mandates lenders treat ‘Puter as if he were an illiterate moron. ‘Puter has signed more good faith estimates delineating loan terms than you can shake a stick at. ‘Puter can’t recall how many times he’s been shown paper telling him the amount he’s borrowing, the term, the interest rate, whether the interest rate is fixed or variable and the property pledged as collateral to secure to the debt, not to mention the various fees and charges appended to one’s mortgage.
But why? Why should a lender have to show a borrower anything other than the final documents? A lender shouldn’t have to do so. It is incumbent on the borrower to know and to understand the deal he is entering. Read the damned documents. It is not incumbent on the counterparty to negotiate against itself. If you are too stupid to check mortgage rates and compare the fees associated with a loan, that’s not the bank’s problem, that’s your problem. It is not unfair or advantage taking to provide a borrower deal documents, provide the borrower opportunity to read the documents and/or consult counsel and close the deal.
Liberals want to protect the weak-minded and lazy among us from themselves. Hence, lenders find themselves hamstrung by nonsensical disclosures. Tell them what they’re signing. Tell them again. Use these forms. Hell, the forms are more complex than the actual borrowing documents themselves. Still, it matters not to liberals, marching through society, making excuses for idiots, dedicated to insulating
Nothing — NOTHING — is going to protect a moron from himself. Morons are going to sign whatever deal that gets put in front of them, whether it’s good, bad or indifferent. And the notion that it is somehow the government’s job to protect people from the consequences of their own actions if galling. Absolutely galling.
Now that you’ve got ‘Puter on a roll, let’s talk about the housing bubble. You know what caused the housing bubble? One thing and one thing only. Mutual greed. You know want caused the housing bubble’s bursting to be calamitous? Government regulation.
First, the mutual greed. Banks were greedy, as were the investment bankers securitizing mortgages, as were the mortgage brokers marketing shady loans for high fees, as were Fannie Mae and Freddie Mac leveraging their government guarantees into immense profits. Plenty of blame in the financial sector. But you know who else was to blame? Every stinking borrower who treated his house like an ATM knowing damned well that the money would have to be repaid someday. ‘Puter has not seen any criminal cases brought by state attorneys general alleging widespread fraud. You know why? Because the people sitting in underwater houses and sending jingle mail to their banks knew damned well what they were doing, sucked money out of their houses and spent it. So the liberals can just shut the heck up about the EVUL BANKRZ!!1!!one!! and go back to their halcyon days spent smoking weed in their parents’ basement rec rooms, playing XBox with their similarly situated pals, attending My Little Brony conventions and being ironic. Sh!t heads.
Second, the government regulation. Our liberal government betters decided that everybody should own a house. Not only should everybody own a house, but the simple fact that you didn’t have a house, coupled with an acceptable melanin content in your skin, entitled you to a lucrative cause of action against any lending institution you could find. It didn’t matter if you were an unemployed serial bankruptcy filer with a crack habit and a yard long criminal record, if you were a minority, you could get a loan. To this end, liberals in Congress passed laws (Community Reinvestment Act) to ensure the right people (i.e., their voting base) got loans. In this, liberal feel-good agencies like the FDIC, OCC and FSLIC used their regulatory power to bully banks into making horrible loans that never should have been made. And, of course, no discussion of the housing bubble and government regulation conspiring to create the most toxic brew since DDT walked the face of the earth (ZOMG!!1! OH NOES!11!! TEH DDT!1! SILUNT SPREENG!!1)would be complete without Fannie and Freddie who conspired to spread bad loan contagion far and wide by purchasing, bundling and distributing the craptacular loans.
So where was ‘Puter? Oh, yeah. the Nerfing of society. There’s one thing and one thing only that is arguably effective at preventing bubbles: legally enforced personal responsibility. You enter a bad deal, sucking money out of your house and the market crashes? That’s your problem, bub. File bankruptcy or pay your debts. Banks lent out money to bad risks? Tough toenails, Mr. Hedge Fund Guy. Sell your place in the Hamptons and enjoy the funemployment line. Fannie and Freddie went long in CMBS, only to lose their shirts when the music stopped? Sorry. There’s no effective government guarantee. Liquidate your assets and let your shareholders eat their losses. Only the knowledge that you will not be insulated from the consequences of your decisions keep markets, and hence our economy, functioning.
Imagine if you knew that you could borrow as much as you wanted, spend as much as you wanted and you’d never have to pay a dime back. What would you do? Any rational actor would borrow and spend well beyond his means to repay the debt. And that’s what the government is bent on doing now. House underwater? No problem. You don’t have to pay. Bank made crappy loans? No problem. The Fed will keep rates artificially low until you can recapitalize so your shareholders and depositors won’t flee. Your publicly traded auto company made really crappy labor agreements? No problem. We’ll ignore the law, cram down secured debt holders and fully fund your union pensions, allowing the entity to survive in a zombie like state, doing the government’s bidding by overproducing shitty electric and solar vehicles that about as attractive and comfortable as a porcupine in heat.
We’ve learned exactly nothing from the 2008 crash. In fact, our government has taken away exactly the wrong message. The liberals in power are doubling down on the very policies that caused the housing bubble and its horrible correction in the first instance. If only consumers had more forms to sign, more disclosure, more knowledge surely that will prevent the next bubble. If only we more intrusively dictate a private bank’s lending policies, we can surely outsmart the market. Wrong. The knowledge liberals are giving consumers and lenders is that no matter what they do, and no matter their motivation (good or ill), there will be no consequences to their actions whatsoever. So long as they’re voting Democrat, Big Government will always be there to protect them from the big, bad Real World outside.
While the liberals’ Land of Make-Believe where actions have no consequences is a nice place to contemplate as you’re doing bong hits and listening to Justin Bieber sing Maroon 5’s greatest hits (your guilty pleasure) while waiting for your next round of Modern Warfare 2 to begin, it’s no place you’d actually want to live.
The last time we let the liberals decide how best to live, they gave the world Communism (motto: “When the left commits genocide, it’s OK, because the glorious proletariat empowerment ends justify the bloody undesirable slaughtering means.” Or, as the Obama campaign puts it, “Forward!”).
Let’s not make the same mistake again.