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by Rob Horning

13 May 2009

This post from Mike at Rortybomb is the most lucid explanation of what banks got out of making loans to people who obviously had no chance of keeping up with their payments. As long as prices were rising, it worked out better for the banks if borrowers were subprime, fell behind on their payments, and had to refinance, paying fees and prepayment penalties to the banks.

Let’s assume that the bank thinks house prices will rise. If house prices rises 10% during that 2-year time period, the homeowner now has ~12% equity in the home, ~3.5% (4%, adjust for the new house cost) of which is transfered to the bank in form of the prepayment penalty. In addition to a high interest rate, they get a jackpot 4% every time this crap loan is recycled.
So this loan has value for the bank if housing rises, and lower value if housing decreases. Because of the quick recycling of these loans, where they refinance every two years, it is direct exposure. Instead of providing consumers with loans so they can buy homes, they are instead taking bets on house prices, using consumers as people who sit in and look after the homes they are betting on. The purpose is less to get consumers to build good equity but rather find ways to transfer equity from the home to the bank itself.

As Mike explains, the upshot of this is that banks were actually looking for bad borrowers—they weren’t forced by the Community Reinvestment Act. And the idea that the banks were performing some kind of civic service by expanding the pool of homeowners is now exposed to be the bogus alibi that it always was.

Banks are generally in the brokering business, matching investment funds to worthy investments and managing the risk associated with that to earn their keep. They aren’t supposed to be in the business of making bets themselves—their advantageous position when it comes to accessing capital comes at the cost of not putting themselves in risk’s way themselves. The sort of thing that Mike describes in the post exemplifies how banks inflated the housing bubble and expanded the percentage of the profits that went to the financial industry. We have yet to see any regulatory changes that would put a stop to it. Mike recommends reinstating the ban on prepayment penalties—that seems a good place to start.

by Sarah Zupko

13 May 2009

Back in 1972, the London Symphony Orchestra recorded a live version of the Who’s Tommy over two nights at London’s Rainbow Theatre. Many special guests appeared, including most naturally Who lead singer Roger Daltrey. This version of Tommy is being reissued on 26 May by Ode Records and here’s a sample.

Roger Daltrey with the London Symphony Orchestra
“I’m Free” [MP3]

by PopMatters Staff

13 May 2009

Wilco’s new album drops June 30th on Nonesuch with the understated title Wilco (The Album). The band is streaming the record over on their web site.

Wilco (The Album) [Stream]

by Mike Deane

13 May 2009

When Cam’ron released “I Hate My Job” a number of months ago, I was very impressed, but as single after single from his latest album, Crime Pays, leaked (of course they weren’t real leaks), I held less and less hope for the the album. And then, yesterday, it came out, and it was about as strong as I could have hoped for, but with some real stand outs.

There was a lot of build-up for this album, but as it turns out, Cam’ron was just hyping the album with weird lies. It’s like when he claimed that “Killa Season” the movie was going to be a musical, it was most certainly not (I think there was one performed song in the movie). Cam’ron came out with some big talk - that none of the songs that had leaked (“Bottom of the Pussy Hole”, “I Hate My Job”) would be on the album (they are); that there would be no guest spots (there are); that he was going to release a video every week until the album came out (he didn’t). And so, what we get is another sort of good Cam’ron album.

It’s certainly better than Killa Season, as he’s gone away from the darker beats and has returned to some of his old playfulness, but it’s not what it could’ve been. I write this, but for me, Cam’ron is still the most exciting character/lyricist (I am not a lyrics purist or aficionado) in hip hop, but like a number of fans, I want Cam to return to his Purple Haze days.

by PopMatters Staff

13 May 2009

Chateau Marmont remixes the latest single from Röyksopp’s latest album Junior. Dan Raper said of Junior: “The Norwegian duo seems determined to be optimistic and extroverted throughout, and in doing this, the album might end up being its best yet.”

Röyksopp featuring Robyn
“The Girl and the Robot” (Chateau Marmont remix) [MP3]

//Mixed media

Indie Horror Month 2016: Executing 'The Deed'

// Moving Pixels

"It's just so easy to kill someone in a video game that it's surprising when a game makes murder difficult.

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