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moneybox
The Subprime Good Guys
These mortgage lenders loan to poor people, strengthen communities,
and are still making a profit. How do they do it?
By Daniel Gross
Posted Saturday, Nov. 15, 2008, at 7:42 AM ET

I will give you a different perspective from my own words.

Higher interest rates encourage debt reduction and government for cheap
money broke the controls and this counter balance. Then investors
abandoned the loan market as it had a negative ROI and created a
liquidity problem. Compound it with people not paying their debts,
further liquidity issues arose. Some investors actually borrowed cheap
money to lend elsewhere for profit! Others borrowed to pay other debt.
It wasn't just a US thing. You could borrow yen at 1% from Japan and
lend it to the US for 2% and make 1% for nothing. Banks loved it as it
further multiplied and leveraged them so they could lend more.

Government liked it because for a debtor, which is most voters, want
and love low interest rates as they have financed their whole lifestyle
on cheap under priced debt. With interest rates below inflation is was
the way to go.

Poorer people were encouraged to buy homes there really couldn't have
afforded otherwise. This added even more ponzi debt to the system. A
nation life style funded on leveraged debt and the democratic congress
asleep at the wheel encouraged it happen.

Then someone defaulted. And the whole bank/government pyramid scheme
unravelled. No one got paid back their money so they couldn't pay back
others. So people and banks stopped lending money because at 4% you
want to be really sure you get paid. Without these assurances, you
would have to be nuts to 1) lend money below inflation and 2) lend
money you are not going to get back.

Now you have every debtor and fiscal mismanaged company from coast to
coast threatening the government for tax payers money or job loss.

Don't you like socialism, it is like 100 rats in a cage fighting for
the same piece of cheese. 99 of them will get nothing as even the US
government isn't big enough, and certainly not productive enough to
make 100 peaces of cheese for nothing.

The reckoning for socialists, government leaches and debt junkies is
coming. Those with no debt or very positive net worth at the bottom of
this are going to do quite well.

Well done. You have an excellent grasp of the economics of things.
What do you do, if I may ask?

Eisboch

UNIX/Linux Administrator/designer/architect consultant (Information
Technology), hobby is investing and finance.

Fishing and boating when I get the chance. Which isn't often enough.

Where are you in Canada if *I* may ask. My favorite fishing is in NE
Ontario in the Kenora area.

If Kenora, that is in the NW of Ontario on the north side of Lake of the
Woods. Not to far east from the middle of the country. Me, I live further
west, across the border north of Great Falls Montana by about 6 hours drive,
Calgary Alberta. 1 gruelling days drive or 2 easy days to drive there from
here. While Calgary has great river trout fishing, it does not compare to
NW Ontario.

But know Kenora, Rainy River, Quetico, Shebandowan areas pretty well. Was
lucky enough to have grandparents on one 38 mile long loaded with fish lake,
spent endless summers fishing, boating and canoeing many lakes north east of
Rainy River, many not on a map either. Did we catch fish back then. I
remember tossing back in 20" walleye calling them minnows. I wish I got
pictures of the rainbows in a small walk in canoe type lake called Tear
Drop. 5 lb small mouth, what a hoot, last time I went there 7 years ago I
got bursitis nailing some 60+ of those in 3 days. The doctor I saw living
in Wisconsin at the time said right away, "...fishing injury, what did you
catch?". The best times are fishing for sure.

Over due to go back too, in fact planning to in 2009. Can't convince the
wife to retire there, know where we can get a nice home on a lake at a real
good deal right now. But really can't afford two places in retirement
(yet). Might try 2-3 weeks in early September after the yahoo's are off the
lakes. Going to hog tie my wife and bring her if I have to, living in a dry
farm belt is not my style.