She should have NEVER been allowed to borrow money in the first place. Now the house sits vacant, forclosed on, and she never needs to pay back a dime of the $145,000 or the $30,000 grant. She sold off all the appliances and funriture for dope and a car. So Ive seen it happen.
Yep. The Morgenstern book is great - and here is the best summary of all. THE GIANT POOL OF MONEY
http://www.thisamericanlife.org/radio-archives/episode/355/the-giant-pool-of-money
suggested to me by friend -
conservative financial planner, accountant.
"
Davidson and Blumberg take you, the listener, along on their reporting journey where you meet (and in some cases may even like) the people who did the borrowing, the bundling, the loaning, the deceiving, and the profiting until it becomes clear that everyone involved is culpable."What makes this story interesting is that it's not a simple case of some bad actors, some criminals victimizing people," said Davidson, who began working with Blumberg on the story in February. "Sure, there were criminals at every step of the chain. But the core of this story is that almost everyonefrom borrowers, to brokers, to bankers and wall street investorseffectively worked together: deceiving themselves and each other into believing that they could create massive wealth with little risk. Almost everyone involved was a victim and a victimizer at the same time."
The benefit of having two smart narrators is that they interrupt one another if something sounds puzzling, then explain it to listeners in a conversational style as if they were sitting together in a coffee shop.
They also masterfully translate economic gobbledy gook.
To explain why a $70 trillion (yes, trillion) global pool of money shunned investing in the safe U.S. government and went instead into risky mortgages, Davidson and Blumberg played a clip from former Federal Reserve Board chairman Alan Greenspan that would go over the heads of most of us. They even apologize for quoting the inscrutable Greenspan.
Then Davidson translates. What Greenspan is really saying is, Davidson tell us, is: "Hey global pool of money, screw you. You are not going to make any money on U.S. Treasury bonds for a very long time. Go somewhere else!"
My friend said this series was the absolute best he'd heard and he substantiated every major point.
He's an old-fashioned guy. old school values. He said that almost every contact person at the financial institutions/banks
he worked with was urging him to join in during 1996 - 2007. they each made HUGE commissions off of every transaction.
The transactions were bundled and resold as 'mortgage securities' - and MORE HUGE commissions were made
as these 'phantom' financial instruments got passed around and up the line - with 'insurance' attached to guarantee
the viability.
I asked him what was at the root??? He's a very old school conservative man: he said -
the loose regulations that allowed the creation of 'securitized' financial instruments - fake things.
Time was, a mortgage was 'held' by a local or (at most) regional bank. If it tanked, local people/banks
felt the hit. But new regulations (pushed by banks etc) let them bundle the mortgages, sell the bundle
as a 'security' and let people buy and sell shares, betting on the repayment of the loan.
Why do this?? Because every person in the chain made HUGE commissions at every step.
He's really an old values person and has a clear-eyed view of people - no idealist. Says greed is behind
every part of this and all the barriers that ought to be in place were wiped out by the industries who paid
their lobbyists to 'de-regulate' and somehow the market would keep the greed restricted. So thats whats happening
now. But the cost is horrific and paid mostly by the people at the bottom of the pyramid or ordinary people
not connected with the institutions caught as the rest of the economy tumbles.
He's right - this series made sense of this mess and his assessment was something I could trust.
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