Tuesday, December 11, 2007
Further to the "Bush plan" to help subprime borrowers
I realize that Paul Krugman is a "liberal" economist/journalist, but in addition to the source I cited in my previous post ("Sweet Spot, 12/07) about the effect of Bush administration's "plan" to deal with the subprime loan debacle (namely, that it's a cruel hoax and a charade) check out Krugman's analysis in yesterday's NYT. His view: That it's an ineffective, industry-driven attempt to preempt a Congressional effort to deal meaningfully with the crisis. In other words, a cruel hoax and a charade.
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3 comments:
Krugman's NYT article, rather than obscure ranting, makes some arguably good specific points. Perhaps more importantly it helps hold open the the door in hopes that Barney Franks and Congress will take action.
However, anyone who applied for such a loan should have been required and acknowledged reading, the Federal Reserve's 33 page "Consumer Handbook on Adjustable-Rate Mortgages," from www.newyorkfed.org/publications. One glance at the frank and independent, if not shocking, explanation of the financial product would have dissuaded anyone with 2 cents of diligence from proceeding.
Contracts are (initially at least) structured to the benefit of the party writing the Agreement on the theory that the other party would read and have an opportunity to or be in a position to negotiate the instrument - but these are of course so overwhelmingly lopsided and unilateral that it is hard to comprehend how we ever got to this point without regulatory intervention in the first place.
Expand that last comment about regulatory remission to include negligence, or oversight lacking on the part of the administration before the situation grew to this level of crisis.
Ya know, as someone (with three decades of lawyering--representing consumers, no less) I can report that if the product, say a shiny car, or a shiny lower-price mortgage, appeals, the fine print seems irrelevant.
I feel for those who bit at the bait of ARMs. Indeed, ARMs should be the subject of intense regulation, with videotaped representations given to the mortgagees and notarized lists of disclosures. Plus jail time for infractions by the lenders. After all, doesn't Islam forbid the charging of interest on loans? Aren't the money-lenders among those who Christ threw out of the temple during Passover?
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