Editor's Choice

Using consumers for housing bets

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.

In Americana music the present is female. Two-thirds of our year-end list is comprised of albums by women. Here, then, are the women (and a few men) who represented the best in Americana in 2017.

If a single moment best illustrates the current divide between Americana music and mainstream country music, it was Sturgill Simpson busking in the street outside the CMA Awards in Nashville. While Simpson played his guitar and sang in a sort of renegade-outsider protest, Garth Brooks was onstage lip-syncindg his way to Entertainer of the Year. Americana music is, of course, a sprawling range of roots genres that incorporates traditional aspects of country, blues, soul, bluegrass, etc., but often represents an amalgamation or reconstitution of those styles. But one common aspect of the music that Simpson appeared to be championing during his bit of street theater is the independence, artistic purity, and authenticity at the heart of Americana music. Clearly, that spirit is alive and well in the hundreds of releases each year that could be filed under Americana's vast umbrella.

Keep reading... Show less

From genre-busting electronic music to new highs in the ever-evolving R&B scene, from hip-hop and Americana to rock and pop, 2017's music scenes bestowed an embarrassment of riches upon us.


60. White Hills - Stop Mute Defeat (Thrill Jockey)

White Hills epic '80s callback Stop Mute Defeat is a determined march against encroaching imperial darkness; their eyes boring into the shadows for danger but they're aware that blinding lights can kill and distort truth. From "Overlord's" dark stomp casting nets for totalitarian warnings to "Attack Mode", which roars in with the tribal certainty that we can survive the madness if we keep our wits, the record is a true and timely win for Dave W. and Ego Sensation. Martin Bisi and the poster band's mysterious but relevant cool make a great team and deliver one of their least psych yet most mind destroying records to date. Much like the first time you heard Joy Division or early Pigface, for example, you'll experience being startled at first before becoming addicted to the band's unique microcosm of dystopia that is simultaneously corrupting and seducing your ears. - Morgan Y. Evans

Keep reading... Show less

This week on our games podcast, Nick and Eric talk about the joy and frustration of killing Nazis in Wolfenstein: The New Order.

This week, Nick and Eric talk about the joy and frustration of killing Nazis in Wolfenstein: The New Order.

Keep reading... Show less

Which is the draw, the art or the artist? Critic Rachel Corbett examines the intertwined lives of two artists of two different generations and nationalities who worked in two starkly different media.

Artist biographies written for a popular audience necessarily involve compromise. On the one hand, we are only interested in the lives of artists because we are intrigued, engaged, and moved by their work. The confrontation with a work of art is an uncanny experience. We are drawn to, enraptured and entranced by, absorbed in the contemplation of an object. Even the performative arts (music, theater, dance) have an objective quality to them. In watching a play, we are not simply watching people do things; we are attending to the play as a thing that is more than the collection of actions performed. The play seems to have an existence beyond the human endeavor that instantiates it. It is simultaneously more and less than human: more because it's superordinate to human action and less because it's a mere object, lacking the evident subjectivity we prize in the human being.

Keep reading... Show less
3

Gabin's Maigret lets everyone else emote, sometimes hysterically, until he vents his own anger in the final revelations.

France's most celebrated home-grown detective character is Georges Simenon's Inspector Jules Maigret, an aging Paris homicide detective who, phlegmatically and unflappably, tracks down murderers to their lairs at the center of the human heart. He's invariably icon-ified as a shadowy figure smoking an eternal pipe, less fancy than Sherlock Holmes' curvy calabash but getting the job done in its laconic, unpretentious, middle-class manner.

Keep reading... Show less
5
Pop Ten
Mixed Media
PM Picks

© 1999-2017 Popmatters.com. All rights reserved.
Popmatters is wholly independently owned and operated.

rating-image