Thursday, February 22, 2007

Methinks thou doth protest too much...

There have been a lot of articles in the news lately concerning "subprime" mortgages and "non-conventional" mortgages which, to put it bluntly, banks have been using to exploit the poor. These loans were given to people they knew could not qualify for a "traditional" mortgage.

Instead of giving the applicants a reasonable loan at 0.5-1% interest, which they can actually afford most of the time, the banks choose to say that these customers are at "high risk" of defaulting on their loan (which is obviously fully collateralized in the first place, so I don't see how that matters in the least). So what do they do? They charge people an unsustainably HIGH interest rate.

Now, can you say "moral hazard," class?

The banks actually CAUSE the conditions they say they're afraid of, by charging people more than they could afford. If they really wanted to help these people, they would have charged them a LOWER interest rate than normal, because they are poor. Instead they rig up unstable loans and then act surprised when adjustable rate loans and other flaky mortgages raise their payments to the point the poor can no longer afford them.

Aside from the point that these people working at the highest levels of these banks are nominally Christians and Jews, and should therefore not be charging their co-religionists interest in the first place, this practice of charging the poor more for a loan than you would charge a rich person is clearly oppressing and exploiting the poor. They say their goal is to "increase home ownership," but it's clear in real life their goal is to "squeeze every bit of money from them they can before they toss them out onto the street" in foreclosure.

So it's clear to me that they aren't "afraid" that the loans will be in default. It is axiomatic that when you engage in actions that you know cause a behavior, then that is the behavior you WANT to happen, not the behavior that you're trying to avoid.

Get this? The banks are purposefully driving people into foreclosure. They want this to happen, because if they didn't want it to happen, they could stop just about every foreclosure instantly by offering to exchange the unstable loans for an extremely low fixed rate one.

Problem solved.

But you will never see this happen, because the "problem" is not the foreclosures. They actually make money on foreclosures, believe it or not. The "problem" for them is only that they didn't get to exploit the poor family as much as they had wanted to.

I can't say this enough: the robber barons who run these corporations are not your friends. They aren't trying to help you. Their only goal is to make money off of you, by whatever means they can - including screwing you. They will do anything they think they can get away with to get your money, and that includes forcing you into foreclosure on purpose when there is no earthly reason for them to do so but greed.

Remember that, class.

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