Dear Libertarian Asshat

I keep coming across this argument in various forms:

<i>when the govt. does stoopid stuff to manipulate away from the economics it doesn't like (i.e. requiring mortgage lenders to make bad loans while promising to whitewash them through a federal mortgage bank) and the mortgage banks make billions writing high-risk loans and dumping the risk on the govt. (Countrywide anyone), and then Wall Street builds complicated derivative instruments tied to the generally low-risk investment in home-mortgages (which are very reliable when you require a significant downpayment AND proof of income - which went away in the 90's to make home ownership a dream-come-true for people that couldn't afford to buy homes.....</i>

This one was from a self professed libetarian on a thread on Charlie Stross's blog.  The problem with this argument, and my goodness it's pernicious and sticks around is that it's almost 100% wrong in every detail.

They're referring to the CRA loans which were designed to help out people on lower incomes than would otherwise normally get a loan, and those, potentially with spottier credit.  This was a big part of Conservative thinking for a while, especially in the UK.  Get the poor to buy their home and they'll vote for you.  Margaret Thatcher, that great liberal softy, was very big on this.

Anyway, apart from the racist sub-text - the poor people often being non-white, there's a problem with this theory.  The CRA loans represented at most about 20% of the total mortgage bundles that got into trouble.  And second, the actual, regulated CRA loans didn't get into trouble at all.  In fact they generally have a better repayment rate than the already low default rate of the traditional market.  You don't believe me?  Google: CRA loan default rates - loads of articles.

The problem wasn't the government.  The problem was good old fashioned greed.  As soon as work of the mortgage and credit derivative markets got out and that they would buy, quite literally, any old mortgage paper, especially given the first rounds of sub-prime were working so well, then it was open season on the insane, enormous, no-income, no-ID loans that became popular.

Although, when I say the problem wasn't the government.  I'm actually wrong.  The problem was the government only started to care about this when the Top 5 Banks started playing chicken with each other over liquidity in late 2007/early 2008 - where, for example, Morgan Stanley would start making cash calls on Lehmans pretty much to see if they'd blink.

What turns my stomach is that nobody is serving time for this.

Thanks dog...

I may have mentioned that about 4 weeks ago the puppy broke her foot.  It was a fairly clean break and the vet was perfectly happy that the foot would heal and young Tara would be non the wiser.  Anyway, 4 weeks have crawled by and we had our 7th follow up today with added X-Rays.

The Good News: break is healing well and looks to be nice and straight and not requiring any surgery.

The Not Good News: she'll need the splint for another 2 weeks.  The skin infection that apparently thrives under tightly wound bandages in warm humid weather is thriving even under the onslaught of 2 weeks of antibiotics.

So, another $400 bill, another e-collar (she's on her 4th since we started) and another two weeks of drugging our cute little lab puppy morning and night.

This really does suck. 

Dear Neighbours...

Why is it that when you have spaces in front of your house on YOUR side of the street, you park in front of my house.

Did you not think there was something you could have done while sitting in your frucking car OUTSIDE my house while I had to carry my drugged dog from my car, infront of your house, past you while you finish that important phone call, up the steps to my house and then I have to go back to close the boot on the car?

Did you?  Maybe?  Just a bit?

You madam are an inconsiderate piece of crap.

Sorry.  I am annoyed. 

Compounding Errors

I let fly earlier at a Libertarian.  He responded and as I don't want to pollute Charlie's Blog with it.  I'll do it here :)

I do not intend to blame mortgage disaster on the poor, but on the deregulation pursued by politicians ignorant of economics in the name of home ownership for the poor. Granted the issue escalated to grave proportions because people were buying jumbo mortgage homes with no $ down and unreliable future earnings.

Seriously?  Seriously?  This is EXACTLY what I have a problem with, not just with Libertarians but with huge swathes of the largely American conservative right.

First: the mortgage market wasn't really deregulated, at least not in the way they're thinking.  Yes, the government backed certain mortgages to a certain point - but as I understand it you still had a loan acceptance process (Chris? You might be clearer on this than I) - you still had, frankly good loans to people who just wanted to own their own home, after we'd had a property boom that made it unlikely.

The issue escalated because the market OUTSIDE of the government regulated one, was just that. UNREGULATED.

There were no rules on who you could loan to, or what you could do with them.

To make matters worse, you could then take a massive spread bet on the loans succeeding AND make money off that.

But it wasn't just home loans, it was home refinancing - where you could take out loans on your property, on insane terms, with no valuation of the property to buy shit that the government in 2001 needed you to buy to deal with the fact there was a recession.

The rest is, as they say, history.

Now we're left with a seriously damaged credit market, a huge personal debt burden and a nasty mess to clean up.

The only thing that is certain, something that Hank Paulson and Tim Geithner knew back in 2008 - we haven't thrown anywhere near enough money at this crisis and the current "race to the bottom" in terms of who can be the most austere is a major fucking error that we'll sadly have to live through.