Every diet from Dr. Atkins to Dr. Zimmerman has a simple idea at its core, whether it is counting calories or carbs or something else.  The Wall $treet Journal embraces these differences between various diet philosophies and attempts to apply these to managing personal debt, especially credit cards.  It sorta works, too, except for the Grapefruit Diet.  Yuck!

cringely Blog Blog, credit cards, debt, debt diet, diet, video, Wall $treet Journal

I’ve been thinking a lot about the $700 billion that Congress has earmarked for bailing banks out of the mortgage crisis, or what we used to refer to as the mortgage crisis.  Remember the Treasury was going to buy-up bad mortgages for more than they were really worth then decided, instead, to inject capital directly into the banks.  This latter capability, which was literally forced on the Treasury by Congress, is not in itself a bad deal because as the banks recover so will the value of the bank shares now owned by you and me.  Or at least that’s what Paul Krugman tells us.

And maybe it’s true, but there sure doesn’t seem to be much lending going on, is there?  And wasn’t that the whole point of this bail-out?  So far the only upside I can see for you and me is that we ought to be able to go into any big bank in America and demand to use the bathroom as shareholders, but even that concept is as-yet untested.

So the first $350 billion of the total $700 billion has been used for something completely different from the original pitch and the result of this change of course is doubtful.  Things may be better for the banks but they aren’t better for any of the rest of us.  Bankers are magnanimously foregoing bonuses while regular folks are more and more foregoing salaries.

But enough of this pissing and moaning, what I wonder is whether we should have seen this coming?  And the answer – at least in my case – is “yes.”  Whether you or the guy down the street or Hank Paulson should have seen it coming or not, I should have, and I am sorry for not having brought it to your attention.

The reason I should have known this was going to happen is because of an experience I had about 30 years ago working on a research study for the U.S. Department of Agriculture.

We were looking at how information technology could help agriculture.  Farmers in Kentucky were given access to Department of Agriculture computers to look at all available data in near real time.  They could check weather forecasts, crop yields, prices, look at economic projections – whatever was available to the Secretary of Agriculture was available to those farmers, each equipped with a little Texas Instruments paper terminal connected to the government through a telephone and an acoustic coupler.

This was pre-Internet, remember.

We were able to look at how much each farmer used the system and what they looked for.  We could then relate that to their crop decisions, planting plans, and ultimately trace the flow of information right into their bank accounts at the end of the season.  Or that was the plan.

Here is what we learned.  Some farmers used the system a lot, some very little.  But no matter how much they used the system, none of the farmers seemed to make any farming decisions based on that data.  They just did what they had done the year before.  Yet at the end of the year nearly all the farmers made more money than they had the year before – more money than we expected them to given that they hadn’t seemed to make any operational changes based on the new information.

Was this a placebo effect?  Was just having the data enough to make the famers more successful? That was very unlikely.  So a team flew to Kentucky to do interviews and find out what was up.  Alas, I didn’t go on that trip, but I can share with you what they learned.

The farmers didn’t change their operations because they generally felt they were already optimized.  There wasn’t that much to change without making bold moves like, say, deciding to no longer be a farmer.  But the new information did give them insights in areas where most of them hadn’t been active before.  Most of the farmers were using the Department of Agriculture data to guide them in hedging their crops by trading futures.  They had data better than and earlier than the traders in the pits at the Chicago Merc and used that advantage to make more money for their farms and families.

Why didn’t we think of that?

Jump with me now back to the $700 billion bank bail-out.  The banks were given $350 billion as capital injections aimed at getting them to give more loans.  The money was exactly analogous to the information we gave to the farmers in Kentucky.  But just like those farmers, it was soon obvious to the bankers – some of whom had the money literally FORCED on them – that more lending wasn’t in the best short-term interest of the bank – short-term interest being these days the only kind of interest that apparently matters.

So the money flowed to where it would do the most good in the view of the bankers receiving it, which was generally for bolstering reserves against the Winter they all saw approaching or for financing acquisitions of weaker banks.

We shouldn’t have been surprised it worked out this way.  But had we thought this through for more than a minute, maybe we would have done something else with the money – something more in the interest of the people actually paying the bills.

What a novel idea!

cringely Blog agriculture, bank bail-out, Blog, commodity trading, crisis, farmers, information technology, Kentucky, mortgage, research

Actually, we don't have kill them.  The mortgage brokers are dying on their own, or rather with the vigorous help of the banks.  Tens of thousands of mortgage brokers are currently out of work, their firms shut down, as part of the current financial crisis.

Mortgage brokers are hunter-gatherers who function in the wholesale mortgage ecosystem.  They bring supposedly qualified mortgage applicants to the big banks and lending companies and somehow are able to get us through the loan process for less money (to the bank) than if the banks had done the loan directly (called a retail sale).  So for the bank it is cheaper to go through a broker than for you to walk in the door down at the corner branch, which makes no sense to me and only shows how inefficient banks are on that level.

Banks prefer to deal with truckloads of money, not wheelbarrows full.

But if mortgage brokers are so helpful to the banks, then why are they dying?  Because the banks in this financial crisis would rather first kill the mortgage brokers than their own retail operations.  The banks are confident that, when conditions improve, the brokers will grow back overnight like mushrooms.  They'll give up their barrista jobs at Starbucks and go back to bilking us for thousands in loan fees like they think God intended.

As it is with nearly everything else in this crazy market, then, the wholesale mortgage business is operating the opposite of how it should.  Banks are paying MORE, not less, because they view that as the better way to make more, not LESS, which is of course backward.

Why are we surprised?

But don't feel sorry for your ex-mortgage broker.  Just order from him or her a vente non-fat vanilla latte with extra foam.

cringely Blog banks, Blog, financial crisis, mortgage, mortgage broker, real estate

Joe Nocera, a financial columnist for the New York Times, two weeks ago busted JP Morgan Chase by revealing that the bank intended to use the $25 billion given to it by the U.S. government not for lending to customers but rather for acquisitions and other stuff. Nocera listened-in to a Chase conference call reported here:

</a http://www.nytimes.com/2008/10/25/business/25nocera.html>

Tough news for Chase, eh? Generally speaking the big banks that accepted $125 billion over the last 10 days don't intend to lend ANY of it — or didn't until Nocera's column hit. His may have been the most valuable — and expensive — piece of financial journalism in history. And as a result Chase is now coming up with a plan to rework 80,000 primarily alt-a mortgages by lowering interest rates, possibly converting some mortgages to fixed rates, or even forgiving some principal. Yeah, right. It's all described here:

</a http://www.nytimes.com/2008/10/25/business/25nocera.html>

Now we come to the good part. The loans Chase is adjusting are coming primarily from two recent and troubled acquisitions — WAMU (that's where my mortgage lives) and EMC Mortgage, which was part of Bear Stearns (and is where my mother-in-law's mortgage lives). To get the spectre of Nocera off its curmudgeonly shoulders, Chase had to announce the workout program this week even though the details aren't supposed to be ready for another 2-4 weeks. This puts the bank in a very difficult position that it is handling through the simple expedient of….. more lying.

The idea of this program, like the IndyMac and CountryWide programs that preceded it, is to change the terms of troubled loans in order to help homeowners stay in those homes — the idea being in part that foreclosures are more expensive and should be avoided if possible. So these are troubled loans — loans where homeowners have had to have been, at least for awhile, in default. But with only half a program announced, how can we expect mortgage holders to respond? They'll stop paying, if course, which is exactly what Chase DOESN'T want them to do.

Listen, to be considered for this program, we're led to expect, homeowners need to be in default. Yet as part of the announcement the bank has strongly suggested homeowners not continue to be in default because that might make them ineligible.

Huh?

You have to have gotten behind on your payments to qualify, but if you get any further behind on those payments, you might then become suddenly UNqualified. It's as though there is a sweet spot of just enough — but not too much — financial default.

This is hooey and an insult to all involved. If you want to be included it is clear that the best move is to stop paying your mortgage or you'll never get a chance to participate. And saying that homeowners who haven't paid their mortgages for 2-3 months are now supposed to somehow find the money just as the economy get WORSE, not better, well that's crazy and the bank has to know it.

The truth is they intended not to announce anything yet except Nocera interceded (bless him) so now Chase will spread some horse manure on the story in hopes of minimizing the damage. All of which leaves me with the question of where this falls under the Truth in Lending statute?

cringely Blog Blog, mortgage crisis, New York Times, Nocera

[youtube]http://www.youtube.com/watch?v=XnnfTNmLcNo[/youtube]

Naomi Klein on the Global Financial Crisis

cringely Blog bail-out, Blog, global financial crisis, Naomi Klein, privatization

So the Federal Government is pouring $700 billion of OUR tax money into banks and the financial system all with the goal of loosening credit and giving you and me our HELOCS so we can remodel a bathroom.  BUT IT ISN'T WORKING!!!!  Rather than getting easier, it is getting harder — a lot harder — for even consumers with good credit to get mortgages: #mce_temp_url#

 

Does this make any sense to you?

 

In one sense you could say that thing like this take time, turning supertankers isn't easy, yadda, yadda, yadda.  But I actually think it is something else.  I think the financial markets have figured that maybe there is ANOTHER $700 billion that could be coaxed out of the government.  And they aren't going to stop lending without it.

cringely Blog Blog, mortgage crisis, mortgage requirements

We're in trouble and by “we” I mean the whole darned planet. What started as a mortgage problem in the U.S. has blown into global financial paralysis that threatens us all with recession and maybe even with depression. I know I'm feeling depressed, how about you? The crisis seems immune to any and all efforts to fix or end it. NOT passing a $700 billion mortgage bailout can send Wall Street into a tailspin, for example, but then finally passing the bailout didn't seem to improve things, either. The Federal Reserve and Treasury Department are running out of tools and time yet still the system flirts with suicide. So I say it is time to take a completely different view of the problem and to look to a new leader to solve it, in this case Jack Welch.

 

Jack Welch is the retired chairman and CEO of General Electric who took the company during his 23-year tenure from being worth about $14 billion to about $410 billion by really MANAGING the business and concentrating on creative use of capital. I've written columns and columns deriding managers as a profession but none of that applies to Jack Welch and GE, where managers really manage — they manage the heck out of the place and to generally good effect. Jack Welch built that system, he has time on his hands, I say let's give him a new job.

 

There is very little difference, in fact, between the global financial system and General Electric. Welch saw GE entirely in terms of cash flows and the application of capital to those parts of the business where it would do the most good. Welch also thought in terms of continuous quality improvement, which is virtually unknown on Wall Street OR in Washington, where such things aren't even talked about, much less measured.

 

I've been thinking about this crisis and a lot of it comes down, I believe, to a fear of failure especially on the part of the banks. There is no credit available to anyone, anywhere, no matter what the credit rating or score. This is because the banks are frozen by fear to the point where they won't even lend to each other much less to customers. This fear of failure seems to be pretty much guaranteeing failure. And the regulators are now throwing what will soon be trillions of dollars at trying to break these bankers out of their paralysis. But I think there is a better way: use this very fear of failure as a motivator.

 

Before we get to Jack let's deconstruct this current psychological crisis on the part of the banks. They aren't lending money because they are afraid it won't be repaid. They won't lend even to each other because banks seem to be failing all over yet there hasn't been an instance yet when an overnight loan has resulted in default. So what's the problem? More properly, what is the outcome the banks fear?

 

They fear going out of business either through honest failure or through being forced to merge or having their deposits taken away by the Federal Deposit Insurance Corporation (FDIC). In short it comes down to fear of losing their licenses, because as a highly regulated industry the banks can only do business at all with the permission of government. Right now they are totally fixated on the idea that if they lend money and it isn't repaid the government will pull their licenses. Yet the government has made it clear that the most important thing is to LEND MONEY, breaking this credit paralysis. All the banks know this but none of them want to be the first to take the big risk of lending money.

 

You do it! No, you!!

 

Enough of this crap. What if Jack Welch was the U.S. banking czar? We know the result of all such crises these days in the U.S. is the appointment of a czar — a new government official drawn from industry and charged with cutting across agency lines and streamlining an ultimate solution. We did it in energy and terrorism and I'm sure we'll do the same thing now so let's just think ahead a bit. Let's assume that's the case here and that whatever President is in office names Welch. What would Jack Welch do?

 

If Welch ran the U.S. banking system like he ran GE, he'd kill the bottom 10 percent of banks every year and fire the lowest 10 percent of bankers.

 

What impact would that have on the system? Would it make it better or worse? Well it couldn't be worse, could it?

 

Doctors have a way of measuring pain. It seems our brains can only focus on one pain source at a time, so if you have a pain in your gut you really don't notice the pain in your ankle. So there is a device called a palpometer that goes on your arm or leg and is calibrated to produce standardized and replicable levels of pain. Put this gizmo on, turn up the pain, and when you get to the point where the patient suddenly goes from saying, “My head hurts,” to “My leg hurts,” then you know how much pain they are in.

 

This was all pre-waterboarding mind you.

 

Right now all the bankers are afraid to lend money because they are afraid of failure. As the new banking czar Jack would much rather have them be afraid of HIM. If the bottom 10 percent of bankers were fired every year and the bottom 10 percent of banks had their branches and deposits redistributed, wouldn't they be more afraid of THAT than of making bad loans? Their motivation would still be to make GOOD loans, but the penalty for making NO loans would be there, too.

 

Our problem then is that we're throwing money at something we should be handling using a different regulatory tool — licensing.

 

U.S. bank regulators should go to all the banks this afternoon and say, “You aren't making loans, which is part of the definition of what it is to be a bank. If you aren't acting like a bank by tomorrow we'll take away your banking license and transfer your deposits to another bank that WILL make loans.”

 

Problem solved overnight.

 

It's only one part of the problem, of course, but this solution will cost a lot less than $700 billion. It will cost nothing.

 

And if you think it won't work, then you don't know Jack.

cringely Blog banks, Blog, Cringely, government regulation, mortgage approvals, mortgage crisis

So we're in this terrible economy, banks are shutting down or being taken-over all over the country, and it's because people aren't paying their mortgages, right?

 

Wrong.  Only about 5-7 percent of mortgage holders right now have stopped paying.

 

While about three times as many homes are going into foreclosure these days than is the historic norm, such levels aren't themselves capable of sending the banking sector into such a tizzy.  No, it required the double whammy of a change in accounting standards (called mark-to-market) followed almost instantly by the brutal application of those new standards, after which the standards were then relaxed again after some firms died as a result. Think of it as a financial neutron bomb killing only the banks but not their deposits. It sounds like yet another scam to me.

 

Here's how it works.  Under Generally Accepted Accounting Procedures (GAAP) the issue is how lenders (mainly banks) value the loans on their books. Apparently there was an accounting rules change not long ago that forced them to value the loans moe conservatively, valuing them at what they could be sold for that day in the current market (marking to market).  This change forced writedowns of subprime and alt-a loans resulting in big paper losses for the banks which put them in positions of having inadequate liquidity (not enough deposits backing the loans).  The banks were then insolvent, had to raise capital, couldn't raise capital and failed or were taken over.

 

Now here's the key point that I think is being missed.  The accounting rule change forced loan values to be marked-down severely while at the same time MOST MORTGAGE HOLDERS WERE CONTINUING TO MAKE THEIR PAYMENTS ON TIME.  Right now only 5-7 percent of subprime borrowers are in arrears yet the value of their loans have been marked down 60-70 percent.  There's a disconnect here.  The write-downs are far in excess of what is justified on the basis of loan performance.

 

Was this crisis precipitated, then, by an accounting change?  Sure there's a lot of bad lending going on, but most borrowers are still paying their bills.  IndyMac, CountryWide, WAMU and others failed for precisely this reason, yet now that they are gone the rules has been eased.

 

I think the rule was bad in the first place and while those banks might have failed anyway, they shouldn't have failed for this specific reason.

cringely Blog accounting rules, alt-a, bank failure, Blog, GAAP, mortgage, sub-prime

Given that this current financial crisis supposedly started with problem mortgages, how do you tell if you have one of those?  I have this gut feeling that there are more people out there who have sub-prime and alt-a mortgages and don't even know it.  After all, I've never heard a mortgage broker try to sell something with a name like sub-prime or alt-a, but I know that at least one of my mortgages (I have two — on two different houses) definitely IS from one of the despised categories.

 

So what does it even mean to have a so-called “sub-prime” mortgage?  Here is the technical definition of sub-prime according to Wikipedia:

 

“Subprime borrowers have a heightened perceived risk of default, such as those who have a history of loan delinquency or default, those with a recorded bankruptcy, or those with limited debt experience. Although there is no standardized definition, in the US subprime loans are usually classified as those where the borrower has a credit score below a particular level, e.g. a FICO score below 660. Subprime lending encompasses a variety of credit types, including mortgages, auto loans, and credit cards.  Subprime could also refer to a security for which a return above the “prime” rate is received, also known as C-paper. In the United States, mortgage lending specifically, the term “subprime” can be applied to “non conforming” loans, those that do not meet Fannie Mae or Freddie Mac guidelines, generally due to one of an array of factors including the size of the loan, income to mortgage payment ratio or the quality of the documentation provided with the loan.”

 

So if that's the definition of sub-prime, how does that vary from “alt-a?”

 

Again, from Wikipedia:

 

“An Alt-A mortgage, short for Alternative A-paper, is a type of U.S. mortgage that, for various reasons, is considered riskier than A-paper, or “prime”, and less risky than “subprime,” the riskiest category. Alt-A interest rates, which are determined by credit risk, therefore tend to be between those of prime and subprime home loans. Within the U.S. mortgage industry, different mortgage products are generally defined by how they differ from the types of “conforming” or “agency” mortgages, ones guaranteed by the Government-Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac.

“There are numerous factors that might cause a mortgage not to qualify under the GSEs' lending guidelines even though the borrower's creditworthiness is generally strong. A few of the more important factors are:

• Reduced borrower income and asset documentation (for example, “stated income”, “stated assets”, “no income verification”)
• Borrower debt-to-income ratios above what Fannie or Freddie will allow for the borrower credit, assets and type of property being financed
• Credit history with too many problems to qualify for an “agency” loan, but not so many as to require a subprime loan (for example, low scores or serious delinquencies, but no recent charge-offs or bankruptcy)
• Loan to value ratios (percentage of the property price being borrowed) above agency limits for the property, occupancy or borrower characteristics involved

“In this way, Alt-A loans are “alternatives” to the gold standard of conforming, GSE-backed mortgages.”

 

Okay, so an alt-a is a type of sub-prime mortgage but generally not as bad as a pure sub-prime, whatever that is.  I think the key distinction in these things is the FICO or credit score.  Alt-A borrowers tend to have scores above 660.

 

So do you have a sub-prime mortgage?  If you have a non-conforming loan like a jumbo you are some form of sub-prime no matter how high your credit score of how low your loan-to value ratio.  If you have a low-doc or a no-doc loan it is non-conforming and also sub-prime even if you aren't.  You have a sub-prime loan if your mortgage is interest-only or some funky variety like an Option ARM.

 

As a result there are probably a lot more sub-prime mortgages and mortgage holders than you'd expect.  I'm one because I have a jumbo.  Are you?

cringely Library alt-a, Blog, mortgage, sub-prime

This is the first of a zillion-part thread on how the heck we got into this financial mess in the first place.  With reader feedback and a lot more reading I'm sure I'll get close to the real reason, but you have to start somewhere, why not here?

My young and lovely wife, showing what might be overoptimism or maybe artful timing given the economy but more likely just general disappointment with me, has decided to embark on a career in real estate sales. She has taken classes and passed tests, joined one of the very best local firms, and hurled herself into the business of selling historic Charleston homes while they still have some value and the termites haven't finished their work. And along the way, while mastering the Multiple Listing Service, she learned an important fact that was news to us both: people no longer find houses for sale by looking in the local newspaper. They use the Internet, instead.

The irony here is that — at least in these parts — the local paper seems chock-full of real estate ads. But according to her teachers down at the MLS university, those listings are simply vestigial, like little toes we all have but probably don't need for balance or, indeed, for anything at all. Real estate brokers put ads in local newspapers because their customers expect them to do so, not because they actually help sell houses.

I'm sure there are exceptions to this rule, but if 80 percent of all houses for sale in the U.S. are eventually sold NOT because of any newspaper listing, tradition or professional pride aside, at some point we can expect real estate newspaper advertising to eventually disappear. Chock up more bad karma for the newspaper industry, where this fact has to have been long known, and which is apparently in even worse trouble than we thought.

But this post isn't about the newspaper industry or even about the real estate industry. It is about the lack of friction in our commercial lives brought about by the Internet and an emerging thought in my mind that maybe it is time we as a people took action to change some things.

Let me explain.

It's not that newspaper ads work so poorly for selling real estate, it's that Internet advertising works so well. You can put more words on a web ad than you could ever put in the newspaper for the same money. You can put more and bigger pictures, virtual tours, Google maps. You can put Zillow virtual appraisals and links to lenders, home inspectors, and the local Chamber of Commerce. Internet house listings can be searched in a zillion ways that newspaper listings cannot. In the time it takes to find a house — any house, maybe even the wrong house — in the newspaper and then go see it, well in that amount of time using the Internet you can find the house, order an inspection, get a loan, and make an offer on the darned thing. It's like crossing house-hunting with air hockey.

But is it all good?

Don't tell George W. Bush, but we are in a recession, which is making me look more critically at the Internet as a marketplace. There's a lot of good about the Internet market, of course. Auction sites like eBay help us get rid of our junk and then help us replace it with new junk. The web has made comparison-shopping for houses and cars and disposable diapers almost a contact sport. And we're sure as heck better equipped than we were before to claim all that money that's been waiting for us with some bank manager in Nigeria.

Just as an aside, I know a guy from Japan who actually went to Nigeria once to pick up some of that unclaimed money. It didn't exist and he felt lucky to get home at all.

The theme of disintermediation — of eliminating middlemen — has been a driving force in the Internet for as long as commerce has been allowed on the web. But what happens when the middleman you just eliminated had as one of his or her jobs the task of keeping us from being ripped off?

Tasks that are harder to accomplish are also less likely to be foolishly accomplished, which is why so few of us make trips to Nigeria.

That's not the way we are supposed to view things, of course. Ideally the Internet as a research tool is supposed to give us all the information we need in order to resist any allure the Internet has as a tool of fraud or misadventure. But this attitude ignores many of the fundamental forces at work in most sales situations where the simple fact is that we want to buy, the seller wants to sell, and so any countervailing forces are purely voluntary, which is to say often nonexistent.

Take our current national economic mess, the so-called sub-prime mortgage crisis. I like to think that I'm not a subprime kind of guy, but pretending to work as I do (my kids think I TYPE for a living) the world may not always see me the way I would like to be seen. So last year, in what we didn't know were the waning and idyllic pre-subprime days, I tried to get a new mortgage. Of course I used the Internet to get the loan because, as we all know, when banks compete I win. And within a few days, without having to actually meet with or even speak to another human, I found myself offered a $336,000 mortgage.

It was SO easy. Fill out a few online forms, make some choices, and there I was, about to close that loan. But then I did an odd thing. I carefully read the papers I was about to sign (I'm one of THOSE people). And in that residential loan application, right on line something or other, was a number that didn't make any sense to me at all. It was labeled “total household income” and was almost twice the pitiful amount I actually earn.

From where did that number come? It certainly never came from me. Since my signature would be at the bottom of this application I wanted to make sure everything was correct, so I called the mortgage broker. For the first time we spoke. She was a very nice lady, too, and explained that number was the variable required for all the ratios to be correct so I could qualify for the loan.

“But it isn't true,” I said.

“Do you want the loan or not?” she asked.

Not.

I wasn't so principled as cowardly, but maybe that doesn't matter: I did what I knew was the right thing for me, which was to walk away from the loan. But evidently a lot of other people took the other course and today are having trouble paying for their houses, which is a big part of the reason why we are in this current economic mess.

This little drama of mine explains the credit crunch better than Federal Reserve chairman Ben Bernanke ever would. Securitization of mortgages works just fine unless the mortgages are based on lies. Lenders turned a blind eye to bad loans and bad loan candidates because another company assumed the risk by bundling these loans and reselling them on a global market.

What has caused the credit problems to extend beyond subprime borrowers to just about everyone is the simple fact that lenders can't act so sloppily now, but having turned that blind eye for so many years they have no idea who is telling the truth anymore. So they don't trust anyone.

And that brings me back to transparency and disintermediation and why the heck the Internet, which was very involved in enabling a lot of this bad behavior, didn't do even the smallest thing to help save us from ourselves?

I suppose it was because there is no money in virtue, no easily measurable value in NOT having those banks compete so I could win only to eventually lose.

Do these loan referral outfits like LendingTree and LowerMyBills and the many, many others EVER say, “Wait a minute, pardner, there's no way you can qualify for any loan, much less that no-doc super-jumbo you have your eye on?”

No.

In their defense, these companies are never actually faced with that question, which is ultimately asked not of them but of their customers, the lenders, and we know how much self-restraint those people have: almost none.

Here's why I bring this up. It is clear to me that government (ANY government, not just the U.S. federal government) and Wall Street have no idea whatsoever how to handle the current crisis. They are just trying to look busy while protecting their own interests and allowing those affected to muddle our way through this mess to some kind of solution. It's not that they don't want to be helpful (if the cost of being helpful is low enough) but that they simply don't know HOW to be helpful. They can't be educated and they can't be changed. Certainly they wouldn't consider any course that would curtail government authority or commercial opportunity.

So I figure we're on our own. And if we are really, truly on our own, we shouldn't pretend that we're not, that some agency that doesn't know its IP address from a hole in the ground will take care of us and make this all better. If we're on our own we should solve our own problems using the tools at our disposal. Which brings me back to the Internet, where it ought to be possible for a change to use all that transparency and economic friction reduction to actually do something FOR us, rather than something TO us.

cringely Blog Blog, financial crisis, history, mortgages, real estate