Buying a house is a hugely intimidating process. At least it was for me. It was more expensive than what I make in years — incomprehensibly more expensive than anything else in my whole world — and I felt like I was signing over the rest of my life when I signed the papers.

Which brings me to the papers. There was a stack of them, I think it was six inches high (around 15cm for those of you who live in the civilized world). Theoretically, you read and understood every word before signing. There was what felt like a damn ceremony, where I went to some office, and signed papers for a few hours. If I started reading any of them, there was a pregnant stage wait. I could just feel the professionals thinking, “Oh my God. If this pointy-haired buyer keeps doing this, we’ll be here all day!” I’ve got news for them. If I’d read all those papers, we would have been there for several weeks.

So, in some respects, I was one of those ignorant buyers you hear about. (For instance, Krugman discussing the subprime situation, “the hundreds of thousands if not millions of American families lured into mortgage deals they didn’t understand.”) The only real difference between me and them was that when I tried to make sure I had a real estate agent I could trust, I was lucky and turned out to be right. But — and that’s a legal hole you could drive a bankruptcy through — if I’d been wrong, there could have been anything buried in that mountain of paper and I wouldn’t have known until the bills arrived. That’s true even though I’m absurdly over-educated, can do statistics and calculus, and understand a little bit about accounting and finance.

Given how easy legal obfuscation has made it to cheat people, all the professionals in the real estate and finance industries who had a part in this process do bear a great deal of the guilt for creating the situation we’re in. I’m not arguing with Krugman or anyone else who says that. The heaviest costs of digging ourselves out of this hole should fall on the financiers. Agreed.

It’s also clear that some buyers really were actively and unethically (if not criminally) cheated. There are too many stories of creditworthy people being steered toward higher-profit subprime loans when they could have qualified for ordinary ones. People whose ignorance was used to cheat them should have that wrong made right at whatever cost to the damn financial industry. I’m completely agreed on that, too.

However.

Some of the ignorant buyers were more than just ignorant. They were greedy, just like the bankers. Unlike the bankers, the only people they’re ruining are themselves, but the fact remains that they were not the unwilling dupes of Wall St.

They were willing. They were out there, scooping in the free money with both hands. I had people tell me that it didn’t matter how much a house cost because the monthly payments were “only” $3000, or whatever. (I live in California.) That’s called charging whatever the market will bear, but it didn’t seem to matter, because everyone knew that houses would coin hundreds of thousands of dollars a year for them from now till doomsday. I saw people re-mortgaging their houses to their maximum, then-current market value so that they could go buy Stuff.

Some buyers weren’t paying close attention to the terms of their loans because they thought none of that mattered. The money was going to keep growing forever.

That’s exactly the same mistake Wall St. made, and for the same reason. If we’re ever to get a handle on Enron-style scamming, we’re going to have to acknowledge that the greed of some of us little people is right in there with the greed of the big people, creating the problem. Our greed may be a lot smaller than theirs, but there’s more of us.

And that’s why I get angry when I read about all the poor people lured into loans by Wall St. Suddenly everyone’s transformed into a Hispanic family who had trouble reading the contract.

Bullshit. There are plenty of people out there who didn’t know because they didn’t want to know. There always are and there always will be. So when we’re thinking about reforms to the financial system to prevent these sorts of meltdowns in the future, let’s try to remember that the rules are there to stop the little people from going crazy, too. The financial industry is a problem, but it’s not the only problem.

Crossposted to Shakesville
Technorati tags: politics, subprime, debt, housing, current events

Social security is not in crisis, but even economists I respect say that Medicare really is a looming disaster. Huge scary numbers get tossed out whose extent can only be understood by using a faster-than-light spacecraft.

I’m not an economist, and I don’t know the best solution to solve the financial issues. But I think an important point is being missed by starting with the costs and going on from there. This is medicine, not banking. Economics is the last link in this particular series, not the first, so we need to think outside the (economics) box to really have any sense of what we’re up against.
Read more »

James Surowiecki writes about sovereign wealth funds, which are pots of money used by governments to buy things. Qatar, for instance, thinking of buying the British supermarket chain, Sainsbury’s, and Dubai thinking of buying P&O which is a contractor for security in some US harbors.

National security and dislike of foreigners aside, there’s another angle to all this that you won’t see discussed too often in the financial press. Surowiecki mentions:

“The prospect of American companies being sold to foreign states is, to be sure, disconcerting. But it’s a problem of our own making. The reason that sovereign wealth funds are so flush with cash is all the dollars we spend on oil and Asian consumer goods. If we want to consume far beyond our means, then, one way or another we’re going to end up selling off assets to pay for it.”

But what he doesn’t discuss is why those dollars are spent that way. It’s not consuming beyond our means that’s the real root problem — or at least it’s not only that. A big part of it is decades of kleptocratic government policy.
Read more »

We have a year to go, and already I’m tired of noticing how diseased some people are when it comes to women. Something about having to take a woman seriously as candidate for president seems to make these people break out.

Well, fine. I’m a big advocate of letting people do whatever they like in the privacy of their own homes. But when you’re in public, do cover up all the pus-filled boils.

The thing that really gets to me is all the jerks in the public eye — the talking heads, even the candidates themselves — who let the crap come out as if it was something perfectly normal. It means that to them it is perfectly normal. And that’s the most tiring, depressing, and soul-destroying thing of all. It’s not the knowledge that there are all kinds of bigots out there. I know there are. What’s so awful is that sexism is not something they have to hide. What’s so awful is what that means about everybody’s attitudes, not just theirs.

One recent example is the McCain staffer talking about “how to beat the bitch.” Once it got out, did McCain have to fire the person? No, he turned it into a fundraising event.

Imagine the reaction if Obama was the frontrunner, and the staffer had said, “How do we beat the nigger?”

That’s the difference I’m talking about. These days, racism has to be covered up, at least in public. It is Not Okay. But sexism is frivolous to worry about when we have “real problems.” Any women who are offended should lighten up and “get over it.” Or they should “have a sense of humor.”
Read more »

Seriously. I’m beginning to think they’re the source of all evil. Think about it. Insurance companies are at the heart of the US health care disaster. This post is an off-the-cuff rant, so I can’t be arsed to dig up the links, but go read Paul Krugman, Ezra Klein, Kevin Drum. Even I have a post about it. It’s obvious to the meanest intelligence.

But what brought this on is that my neighbor is cutting his trees to ten feet high. (Pollarding is the technical term.) I like those trees. They’re almost the only trees left on my street. This is a low rent district, full of little, ramshackle houses. With trees, it looked like something out of Harry Potter. Without trees, it looks like a slum. Even more important, the hummingbirds who visit my feeders live in those last few trees. They are currently Not Happy.

Now, my neighbor is a nice guy, so I went out to moan at him about what he was doing.

“It’s the insurance,” he said. “If I don’t cut them shorter, they won’t insure the house.”

What he means, of course, is that they’ll insure it, but they’ll want bags more money in case a branch comes off in a high wind and knocks off a roof tile or two. The trees themselves are too small and too far from any house to fall right over on one.

So, because the few little trees might, someday, cost the insurance company a few hundred dollars, it’ll either jack up premiums to the point where he has to pay hundreds extra every goddamn year, or it wants them gone. The neighborhoods I live in, nobody has an extra few hundred a year, so all the trees disappear, one by one.

This is the third neighborhood I’ve lived in during the last decade or so where I’ve seen this happen. Multiply that times thousands of neighborhoods, because I’m sure it’s the same thing everywhere. Then calculate how much CO2 that residential urban forest could have taken up. Calculate the increased heat island effect because the trees are no longer there to evaporate acres more water. Calculate the increased air conditioning used because there are no trees to throw shade. Calculate everything, and there’s only one conclusion.

Insurance companies (help) cause global warming.

Why aren’t we regulating the piss out of these bastards, and making it impossible for them to aid and abet the murder of trees?

Crossposted to Shakesville

Everyone’s heard the falafel story by now:

The FBI sifted through customer data collected by San Francisco-area grocery stores in 2005 and 2006, hoping that sales records of Middle Eastern food would lead to Iranian terrorists.

The idea was that a spike in, say, falafel sales, combined with other data, would lead to Iranian secret agents in the south San Francisco-San Jose area.

However, as the astute commenter, r@d@r points out on Krugman’s blog:

interesting assumption, considering the fact that one of the more prominent brands of falafel in this town is a kosher one, made by israeli immigrants.

Maybe if They hadn’t abbreviated it to “humint,” there would still be some humans in the system who could apply some intelligence to the ill-gotten garbage coming in.

cross-posted to Shakesville

[jalbum_iframe_album:/photos,450,350]