Wednesday, August 08, 2007

Up and Down

When the price of gasoline goes up, the press coverage of gasoline price increases also seems to rise proportionally.  But when the price of gasoline goes down, it garners little attention or press.

Gas prices continue to drop

Posted by John Venlet on 08/08 at 07:45 AM
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Tuesday, August 07, 2007

Nine Out of 10 Would Be Wrong

Here’s the headline as posted by Yahoo! News: Nine in 10 Americans say ban texting while driving

There is no doubt in my mind that if an individual is behind the wheel of a car they should not be fussing around texting messages via their cell phone or other electronic device, because they’re not paying attention to the road.  You see individuals doing this all the time, though, and their texting typically interferes with smooth traffic flow as they tap, tap, tap away at their cell phones and such and neglect the accelerator or drift over into another lane or off the shoulder of the road.  Idiots.

Even though these texting individuals are idiots, and a nuisance and a hazard, a law restricting texting would simply be a window dressing hastily installed to appeal to the just as idiotic nine out of 10 clamoring Americans who appeal to the state for every little thing.

Posted by John Venlet on 08/07 at 09:27 AM
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Monday, August 06, 2007

The Root of Subprime Woes

The weeping and gnashing of teeth, over the woes of the subprime lending market, and its negative effect on Wall Street, have not abated over the past week while I ignored newspapers, teevee, and all other media in favor of days spent on the west coast of Michigan soaking up the sun and enjoying the company of my extended family and friends.

As I read the many articles on this subject, I find myriads of supposed solutions bandied about.  These include blurbs which inform us that lenders are no longer offering 2/28 subprime ARMs, which is no big deal, as subprime lenders will still be offering 3/27 subprime ARMs.  Additionally, one can read headlines which announce No money down vanishing as mortgage option, which is just another illusory subprime woe solution waved before your eyes like a magic wand.

Plenty of blame is being cast about, also.  It’s Wall Street’s fault, it’s the subprime lender’s fault, it’s a decline in real estate values fault, and on and on.  But the actual root of the subprime market meltdown is the individual mortgage made to the high risk borrower, and the riskiness of each individual subprime mortgage has been ignored as thoroughly as the emperor strolling down the street in his new clothes.

You see the game cannot be played until one individual high risk borrower is approved for a loan, and then another, and another, and another is approved until enough high risk loans are pooled together to sell as a security.  The root of the subprime lending market’s woes is the individual mortgage, and here is why this is so.

Subprime mortgage lending standards are simply too loose, and all the players in the subprime market, from the borrower, to the subprime lender, to Wall Street have ignored this.

Consider, a borrower approaches a subprime lender, drawn in via subprime lending advertisements promising debt relief, easy cash, and a blind eye cast on poor payment histories and credit over extension.

The high risk borrower applies for a subprime mortgage and is approved.  This is a good thing.  What is not a good thing is pretending that the qualification criteria for the subprime loan are sound.

For example, subprime lending standards allow a borrower to spend up to fifty-five percent (55%) of their gross monthly income on their house payment and other outstanding monthly debts combined, whereas on “A” paper loans made to financially sound borrowers, the maximum allowable is typically thirty-eight percent (38%).

Perhaps more importantly, a subprime borrower’s current bad debts and collections are not, in the majority of cases, required to be paid off or brought current, but are simply allowed to continue festering, which of course results in the subprime borrower remaining a subprime borrower in the future.  Certainly there is no doubt that a subprime mortgage helps the subprime borrower out of their current financial jam, but the fix is a temporary fix, and the salve of the subprime mortgage soon wears away, and the subprime borrower ends up, in most cases, in worse financial straits than prior to their applying and being approved for a subprime loan.

Subprime lending’s woes begin, and can end, with the qualification and approval process of the individual loan.  This does not take state intervention through additional regulation of the industry.  The problem can be solved by the subprime lending industry players themselves, through an open eyed assessment of the risks involved in lending to subprime borrowers and, more importantly, not ignoring the risks.

Posted by John Venlet on 08/06 at 07:13 AM
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Get A Life

Arriving home from vacation, one should not have to read this.

In a move that might make some people scratch their heads, a loosely formed coalition of left-leaning bloggers are trying to band together to form a labor union they hope will help them receive health insurance, conduct collective bargaining or even set professional standards.

What’s even worse, is an individual, specifically Susie Madrak who runs the blog Suburban Guerilla, evidently a Che Guevara wanna be, spouting out this nonsense.

“I think people have just gotten to the point where people outside the blogosphere understand the value of what it is that we do on the progressive side,” said Susie Madrak, the author of Suburban Guerilla blog, who is active in the union campaign. “And I think they feel a little more entitled to ask for something now.”

Listen, little Susie, you’re not entitled to anything, you have to earn it.

Bloggers Consider Forming Labor Union

Posted by John Venlet on 08/06 at 05:45 AM
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