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Frank Boettcher

On Mon, 13 Oct 2008 09:16:08 -0700 (PDT), wrote:

Well, I just can't see this as a smoking gun.

Frank Boettcher wrote:
Sorry for that. *If many are like you we will be doomed to repeat..

Did you read Dave's earlier post in this thread? There are a lot of
elements coming together to create this implosion... he called it 'the
Perfect Storm' which is apt. There is no one single cause.

1st- the rate of default, as a percent, has not gone up all that
much... less than a 10% increase overall IIRC

Won't take the time to research to dispute those figures, but doesn't
take much to tilt the scale, open the flood gates.

The flood gates won't open unless there is a market collapse, caused
by loss of confidence... say for example, if you are watching a market
downturn and suddenly find out your insurance company is bankrupt &
defaulting.... then you sell for whatever you can get.

Like I said, it's not just one single root cause.

I guess I've been trained for an entire career in problem solving to
always look for the root cause. There always is one. Sometimes
difficult to find but it is always there. That one thing by which all
other contributing factors could not evolve, develop, or impact. So
you can believe what you want and we'll disagree.

2nd- even if you take a dim view of poor people getting mortgages, and
insist they would take a mortgage no more seriously than they would
paying rent, it's hard to fathom why they would go to the trouble...
it's time consuming and complicated to apply for a mortgage.

Loan originators make it fairly easy these days.

And the reason why there are 'loan originators' in the first place is
the banking deregulation about reselling mortgages.
For the past few years, most banks have been shucking their mortgages
as fast as they can. All they were doing was originating loans for the
fees generated, so why would they care about risk?

I think I posted earlier that an individual left my employ, gave up
twelve years tenure and a bright future as one who "adds value to
something that is mined or grown" to become a loan originator. *This
confused me, I didn't know why, thought this was just a bank clerical
job. *No, he said, you can make a ton of money, the gov has fixed it
so any warm body can qualify, I make my commission and the loan gets
passed on to Fannie and Freddie.

Well, he certainly was not fully informed on the business. I bet he's
not making a "ton of money" any more.

Actually as often happens in cases like this, he made his, got out and
bought a resturant franchise.

The CRA is part of what went wrong, but without the other pieces
falling into place... deregulation, lack of accounting oversight, lack
of diligence, and exeptions to reserve requirements... the mess would
be so much smaller as to not be worth a front-page headline.

Some people are determined to blame Allan Greenspan for keeping
interest rates so low that credit was almost free to banks & other
financial institutions, and so they couldn't resist gambling with this
almost-free money. And he certainly played a part (although some of
his more lucid public comments, back in the day, were on the need for
consistent accounting & auditing standards and the need for diligent
risk assessment). People only hear what they want to hear!

You can't have diligent risk assessment if the government is
threatening you with discrimination charges if you do not give loans
to people who cannot and should not have them. So the system gets set
up to pass them on mostly to a couple of psuedo private industry
giants that actually have a tacit government guarantee with no
oversight.

And I'm not saying now nor have I ever said that there were not many
contributing factors and that every individual and entity looked at
the game board and asked themselves "how can I profit from this set of
rules"? I'm just a big believer in the root cause theory. Maybe you
are not.

Frank
Regards- Doug King