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The subprime mortgage situation is reaching a crisis point, warranting multiple stories in multiple sections of the WSJ every day. Here's what was on page A4 today:

• Subprime Troubles Bite Into Office-Space Sector

• Subprime Mortgage Woes Are Likely to Spread

• Mortgage Woes May Help Revive FHA

The last of those stories is especially interesting, as it recounts the growth of subprime lenders, which used to teasers like low initial rates and interest only payment periods to lure people away from FHA loans, which are subsidized by the government to expand credit offerings for low-income borrowers.

For decades, the FHA was a major backer of mortgage funding for borrowers with poor credit. But the FHA's share of the market has dropped sharply in the past decade as hordes of aggressive subprime lenders wooed away borrowers with an array of seemingly attractive options, including no-money-down mortgages and interest-only payments. The subprime players also offered faster approvals, instant home appraisals, less paperwork and fewer hassles, winning over consumers even though subprime mortgage rates were generally higher than rates for FHA-insured mortgages.
In other words, bankers chasing profit exploited the sector's ignorance, greed, laziness, and impatience -- but who should be held accountable?

Honky-tonk legend Johnny Horton has a song with a chorus that goes, "If there's such a thing as overloving you, then overloving you is what I'm gonna do." I thought of this when I read this EconLog entry in which Arnold Kling speculates about how so many dubious subprime loans were made and to whom. If there's such a thing as overborrowing, is overborrowing what people are inevitably going to do?

In his post, Kling rejects the idea that the defaults happen particularly in regions where speculation was most rampant, pushing mortgages out of line with wages, and instead argues that subprime borrowers are essentially subprime human beings:

My guess is that the typical defaulter today is not some prudent individual who happened to buy a home that strains his paycheck. Instead, my guess is that the typical defaulter is somebody who is poor at managing spending and credit. Of course, either defaulter is going to appear to be "over his head."

Is taking out a bad mortgage a personal failing, a de facto proof of vanity (I have to have the biggest house to show people what a successful person I am...) if not outright fraudulence (...and I'll fudge my income data to get it!)?

The Economist's blog has a slightly more generous analysis:

Some people, undoubtedly, were just folks with bad credit who were thrilled to find that they suddenly qualified for a mortgage. Others were people whose income was not stable enough or high enough to get them into a house with a regular mortgage; that group ... priced out of housing in bubbly markets.

Ironically I suspect that the latter group is probably in bigger trouble than the merely chronically irresponsible. The former group probably has the money to make their mortgage payment; they just don't manage it well. The threat of foreclosure is a great thing for focusing one's mind on financial matters.

The latter group on the other hand, is almost mathematically certain to be unable to meet their mortgage payment when the rate adjusts, unless there has been some sizable improvement in their financial circumstances. They will have to default if they can't sell.

I am less sanguine that the chronically irresponsible would suddenly start making payments under the threat of foreclosure -- this is a variation on the conservative line of thinking that assumes people need to be disciplined by economic hardship to make prudent moral choices. It seems more likely that the chronically irresponsible lack the fundamentally ability to manage money -- its a deficiency of a kind of cultural capital. They lack the training and familiarity with a way of life that generates savings and prioritizes prudence. I don't think economic hardship instills that cultural capital all of a sudden. It just inflicts suffering.

So the latter group are victims of the bubble, and the former have just been waiting for a reason to be more efficient. It seems more responsibility for the subprime market tanking rests with the "unscrupulous lenders" of liberal rhetoric -- the banks that had incentives to make loans without having to worry what effect the loans would have on the recipients or whether they could pay them back -- the loans would be immediately sold off to be lumped into CDOs. Under the guise of expanding opportunity to a marginalized group, they effectively exploited them, which is generally what happens in the absence of regulation -- advantages are leveragaed against the disadvantaged until they have nothing left to offer. That's simply the logic of the system.

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70. The Horrors - "Machine"

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Hitchcock, 'Psycho', and '78/52: Hitchcock's Shower Scene'

Alfred Hitchock and Janet Leigh on the set of Psycho (courtesy of Dogwoof)

"... [Psycho] broke every taboo you could possibly think of, it reinvented the language of film and revolutionised what you could do with a story on a very precise level. It also fundamentally and profoundly changed the ritual of movie going," says 78/52 director, Alexandre O. Philippe.

The title of Alexandre O. Philippe's 78/52: Hitchcock's Shower Scene (2017) denotes the 78 set-ups and the 52 cuts across a full week of shooting for Psycho's (1960) famous shower scene. Known for The People vs. George Lucas (2010), The Life and Times of Paul the Psychic Octopus (2012) and Doc of the Dead (2014), Philippe's exploration of a singular moment is a conversational one, featuring interviews with Walter Murch, Peter Bogdanovich, Guillermo del Toro, Jamie Lee Curtis, Osgood Perkins, Danny Elfman, Eli Roth, Elijah Wood, Bret Easton Ellis, Karyn Kusama, Neil Marshall, Richard Stanley and Marli Renfro, body double for Janet Leigh.

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The Force, which details the Oakland Police Department's recent reform efforts, is best viewed as a complimentary work to prior Black Lives Matter documentaries, such 2017's Whose Streets? and The Blood Is at the Doorstep.

Peter Nicks' documentary The Force examines the Oakland Police Department's recent reform efforts to curb its history of excessive police force and systemic civil rights violations, which have warranted federal government oversight of the Department since 2003. Although it has its imperfections, The Force stands out for its uniquely equitable treatment of law enforcement as a complex organism necessitating difficult incremental changes.

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Mary Poppins, Mrs. Gamp, Egyptian deities, a Japanese umbrella spirit, and a supporting cast of hundreds of brollies fill Marion Rankine's lively history.

"What can go up a chimney down but can't go down a chimney up?" Marion Rankine begins her wide-ranging survey of the umbrella and its significance with this riddle. It nicely establishes her theme: just as umbrellas undergo, in the everyday use of them, a transformation, so too looking at this familiar, even forgettable object from multiple perspectives transforms our view of it.

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