2 Comments for “Option ARM Reset Payments to Explode with Devastating Consequences”

1. Louise

   July 9, 2010 - 1:09 am

   Less banks means that the remaining banks have far more power. Also the big elephant in the room is commerical property, these are usually five year loans and the amount the property is worth is now hugely less than when the loan was taken out in the boom, banks holding these loans can not even roll them over because there is going to be huge facancies in commerical properties for years due to unemployment numbers so the owners can not pay their payments.
2. Dan

   July 10, 2010 - 8:52 am

   The large banks packaging mortgage-backed securities are guilty as sin, yet ARMs are a form of gambling, pure and simple, based upon expectations of ever increasing home values directly resulting from an inflationary, government created moral hazard. Banks anticipated that inflation would result in higher home prices ad infinitum, guaranteeing their collateral, while home buyers assumed their gamble was in investment. Virtually all the financial crimes committed stem from inflation, or “stealth tax,” in which purchasing power is robbed from wage earners and particularly savers, year in and year out. The need to insure against the confiscation of wealth through inflation has led to the need to obtain a return on investment that exceeds the rate of inflation, and naturally people sought such relief through home ownership. Millions of home-buyer investors lost out, but so did those who listened to the utter b.s. of “investment advisors” playing on the aura of credentialism with those phony letters behind their name, like CFA (Certified Financial Advisor), etc., where the local con artists in your town took a course or two, sat for an exam, and were given a license to con their family, friends, and neighbors to entrust their money to their care.

   The gist of countless books on the subject of “investment advisor” performance makes it clear that, on average, these frauds statistically must under-perform the market to the extent of their fee, usually 2% of assets under management for rubes on Main Street, which when compounded amounts to theft when compared with investing in simple index funds with negligible management fees. If you miss the point of this, their services are therefore worth less than nothing. These are the cruds we used to call “stock brokers,” who still dress in Brooks Brothers’ costume and work in faux-posh offices giving the appearance of substance where none exists. When I was invited for an interview by Morgan Stanley Dean Witter some years ago, I was shocked by the discussions I had with the manager about fleecing clients by touting mutual funds that had the highest built-in fees. Even more disturbing was his recommendation to start building one’s “book” by preying upon family members, mining college alumni groups, one’s church, former business associates, etc. If what’s going here isn’t clear, suffice it to say that the product is unsellable without hard-core training in psychological manipulation of the mark in which the con artist abuses the trust of those most entitled to it. Anybody who calls an investment advisor out of the clear blue is a fool. They know no more about the market than you do if you follow it, and couldn’t get a call back from the mail room at their headquarters. They’re the bottom of the barrel on Wall Street. They take credit for “making” money when times are good–as any ten-year-old could–and blame the market when they lose your life’s savings. My guess is that the predatory banks trained their salesmen (“bankers”) in these same techniques and those “bankers” were and remain as uninformed as your investment advisor.

   As for the subprime meltdown, it was a moral hazard on a staggering scale, and the direct result of a leftist political agenda stemming from the Community Redevelopment Act; a report of the Boston Fed on redlining now known to be utterly bogus; and, not least, the actions of Barney Frank, whose live-in “spouse”, as Frank referred to him, Herb Moses, redefined the criteria for judging creditworthiness. The “Four C’s” of banking, that is, credit, collateral, capacity, and character, which are the basis for any sound loan, were deemed a violation of civil rights, and the floodgates of taxpayer money went flowing to those who had no credit, no collateral, no capacity to repay, and no evidence of moral character. It is no stretch, therefore, to say that our government is a moral evil, promoting vice as it does by inducing gambling by those unable to afford the loss, while punishing virtue in the form of saving and thrift through inflation. The government intends to confiscate wealth through inflation, pass it into the hands of the financial cabal and parasitic, captive voting blocks on the dole, and productive Americans now have nowhere to turn to protect what they’ve virtuously saved. Those who were purely gamblers in the housing free-for-all deserve no sympathy. The reality, however, is that in nearly all those foreclosed homes, you’d see the wreckage of dreams left about on the floor, children’s play things in the backyard, while Barney Frank, Joe Biden, Nancy Pelosi, Christopher Dodd, and the complicit Republicans wring their hands over cocktails and feasts from Whole Foods at their summer homes. We can’t even “vote the bums out” since only those pre-selected by the media to do more of the same can pass the media vetting and become candidates in the first place.

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