12/31/09 London, England – It’s one of those days. Reading the financial press is a delight; the big challenge is deciding what to laugh at first.
Take your choice. There’s Martin Wolf, writing in The Financial Times, with a claim that is so staggeringly conceited, the gods must have marked him for punishment before the ink was dry. He thinks economists should be thanked, not merely for saving the world economy…but for saving civilization itself. We will come back to this later…after we’ve had a chance to catch our breath.
There’s another report in The Financial Times about our hometown, Baltimore, Maryland. A few years ago, the city’s meddlers bawled and whined about how the banks had “red-lined” Baltimore’s urban center. Red-lining was the practice of not lending to people who were not likely to pay their mortgages. Finally, Congress passed a law requiring the banks to lend to poor credit risks – which is how the subprime industry got so big. The banks then discovered that lending in minority areas was a goldmine – as long as they could lay the paper off on someone else. Eventually, all the pieces were in place. The feds required it. The feds helped fund it with low rates. And Wall Street securitized it…taking much of the risk away from the lenders themselves. Pretty soon, the banks were “reverse red-lining,” actually targeting poor people so they could lend them money.
“We’ve had people in our office who were qualified for a mortgage based on their Ebay earnings or their gambling income,” says a local housing do-gooder.
Which just goes to show we were right. If you’re going to make a really big mess of things, you need taxpayer support.
Well, now the sub-prime loans have blown up. In the third quarter of 2009 alone, 15% of sub-prime mortgages were in foreclosure; nearly 30% were delinquent. So, now the poor people are complaining that lenders took advantage of them…and rather than admit that they should have left well enough alone, the meddlers are blaming the banks for sharp credit practices. The city of Baltimore is actually suing Wells Fargo for “reverse red-lining,” which just goes to show how shameless these politicians can be.
And guess what? The city will probably win. They’ve got a hotshot, ambulance chasing lawyer on the case. He’s already won a ‘reverse red-lining’ case against a bank. And he’s got a motive to win; he’ll make millions on the case. All he needs is a jury of nitwits to stick it to Wells Fargo.
Bill Bonner
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill’s daily reckonings from more than a decade: 1999-2010.
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It shouldn’t be to difficult to find that jury of nitwits in this country.
Just make it a requirement that any prospective jury member must have voted for Obama in the last presidential election or GW Bush in the 2000 and 2004 presidential elections.
As I see it the supply of nitwits is unlimited.
TK, niiiiiiiiiiiiiiiiice! Humorous even from the grave.
The jury wouldn’t be nitwits: Wells Fargo took a ton of money from TARP and they bought Wachovia with our money. So go ahead and stick it to them.
Here in LA, we saw “ochenta/veinte” (borrow both the twenty percent down plus the mortgage) loans to illegal aliens, for $500,000 ghetto houses, now worth 200K…and falling.
BB,that bout sums it up! Red lining,i wuz RL’in my sports car the other day 4 2 long and i almost sent a piston thru the block! Hope i don’t end up like James Dean? Oh Well! Our economy has a big whole in its block from RL’in. Anybody know a good mechanic???
Actually “redlining” was the practice of drawing a line through a map and declaring everyone on the wrong side of that line to be uncreditworthy, regardless of their individual circumstances. Government attampted to rectify resulting inequities by requiring a quota of loans to be granted on the wrong side of that line, regardless of their circumstances. Both methods failed to perform due diligence for each applicant. Blame the resulting problems on laziness by banks and do-gooders both.
Don’t feel bad for Wells Fargo. Any judgement levied against them will be paid by the taxpayers.
“with a claim that is so staggeringly conceited, the gods must have marked him for punishment before the ink was dry.”
Nice.
Whatever you do, don’t go to law school:
bigdebtsmalllaw.wordpress.com
Everybody screwing everybody else. The lawyers in the middle sucking up the juice and depositing it in foreign banks. I just love this society going down the toilet faster than the Titanic. So this is the kind of value we’re trying to sell to ‘failed states’?