Monday, July 21, 2008

Foreclosure and Attendant Intellectual Bankruptcy

Another thing Steve forwarded to me was a link to a recent item by Bill Moyers on PBS, regarding foreclosures and sub-prime lending. It was of interest to him and to me, because we both once lived in Cleveland in the St. Hyacinthe neighborhood, which sits adjacent to Slavic Village. Friends always mistakenly referred to our home as Slavic Village. Turns out that Slavic Village has been hit harder by foreclosures than any other place in the US. The item infuriated me.

The bias shown by Moyers and so many others is astonishing. The rush to blame capitalists is profound. I understand they are blinded by their anti-capitalism ideology, but how can you miss that there are two parties in any given loan agreement?

Moyers refers to 'predatory lending'. I'm not sure exactly what this is supposed to mean, although it is clearly an attempt to paint a picture of the savagery by a powerful agent of a feckless innocent.

I call bullshit.

The person obtaining the loan knows his situation. He knows if he can afford to make payments or not. So, if someone knows the chances are good that they cannot make payments, and they take the money anyway, isn't that at the very least an act of fraud? Nobody forces the borrower to sign the documents. Certainly, nobody forces them to spend the money. They do this happily.

Cuyahoga County Treasurer Jim Rokakis gives two illuminating passages.
You'd tell them, "I don't have any money." "No problem, we don't, you don't require a down payment." Or, "I have a horrible credit score." "No problem, we're not gonna let that get in the way." "But I don't even have job." "No problem. We're not gonna document your income."

A couple of things come to mind. Collusion. Fraud. Two guilty parties who should go to jail. More Rokakis:
And the real victim here is the person that lives on that block, that person who pays their taxes, plays by the rules, has done nothing to deserve what they're facing today, which is a devastated neighborhood, with their most valuable asset, their home, now worth virtually nothing. That's the victim.

Government does have a legitimate role to play here- protecting the innocent homeowners Rokakis describes. I believe in the free market, but I no more support this savagery than I support warlordism on the basis of a 2nd Amendment defense.

Let those who took bad loans suffer the consequences fully. Let those lenders who issued bad loans also suffer the consequences fully. No bailouts for these bad actors. If the lenders have any assets left, that's where you turn to restore the properties, to the extent it can be done, in the name of protect the innocent neighboring property owners who did nothing wrong.

So, let's not merely call it 'predatory lending'. Let's also call it 'fraudulent borrowing', or even 'predatory borrowing'. It takes two to tango on this one.

Here's the piece. Try to stay with it, through all of the BS rhetoric. It ain't easy.

The item treats this area as though it was doing great, and then the sub-prime lending started, and suddenly the neighborhood began to ring the bowl. Nothing could be further from the truth. Slavic Village began it's decline immediately after WW2, when the Ferro Motor Company shuttered and moved out to suburban Brookpark, as did much of the increasingly affluent population. Slavic Village became an area of 'starter homes'- a place you bought your first home, but also a place you left as soon as you could trade up.

I left St. Hyacinthe in 2000- long before the sub-prime phenomenon was in anyone's awareness. I was offered the opportunity to buy the house across the street from me in 1998, as I was interested in working to build the neighborhood up. I declined. The asking price? $11,000. The problem was the horribly sunken foundation.

There was another house down the street I looked at. It was a double. I was told I couldn't go upstairs. Why? There was a family squatting there. I also couldn't go into the basement. I was told this right as I nearly fell down to the basement floor- because the staircase had collapsed, and silly me, I expected it to be in place. The living room floor was hard wood, but it had a hole in it about 3' in diameter. It looked like a cannon ball had been shot through it. But this wasn't the HMS Indomitable. What in the world caused that?

The asking price was $5,000. I laughed at the realtor and told her, "You can pay me $5,000 and I'll take it."

That realty check might have been nice, you know, to make the piece seem like it was dwelling in the real world, just a bit. In infuriated me to watch, knowing that millions of American views would be sitting and watching, going, "wow, look how the lenders wrecked that place". It just isn't true. It was largely wrecked already. that's why I gave up and left in 2000 for the suburbs myself.

Shoddy, shoddy journalism. Yet still of interest.

On a more positive final note, good to see my old college radio buddy Brian Davis. He's long had a passion for helping the homeless that I respect greatly.

1 comment:

Doug said...

I probably would have figured it out on my own, but I was glad to have gotten a bit of a heads up from my good friend from college who was the first of our circle to get a home. He was just laughing at the amount of money the bank was willing to lend him and his wife. But, he knew what he could reasonably afford and bought a house for between 1/3 and 1/2 of what the bank said they would lend them.

That reinforced the notion that, when the time came for me to buy a house, I shouldn't be relying on lenders or anyone else to give me an opinion of what I could afford to spend.