I agree with Salty... my first thought was "take the money and run!"
Second thought was "stupidity is usually its own best punishment."

When, during the Carter/Clinton/BarneyFrank era, it switched from 'Everybody should have the Right to own a home' to "Everybody Should AND Must Own A Home," I knew things were going to go to hell soon. We sold our Silicon Valley home in 9/05 for about nine times what I'd paid for it 26.5 years earlier. Today, it trades for 10-11 times the '79 price.

When government turned Redlining into a disease that could only be cured by making sure that Anyone and Everyone who Wanted a House Must be eligible for a Mortgage that will Let Them Buy One, Barney and the other Libtards were ecstatic.

Houses stopped being Homes and suddenly became Investments... investments to be flipped using the Next Bigger Fool paradigm.

Worked beautifully. Subsidize something and make it too much cheaper to own than it 'should be' in a free market, and bubbles blow up instantly.

What I have trouble understanding is why more people today Can't Seem To Get that the explosion in Student Loans has identical roots.

College too expensive? Encourage easier payments with teaser rates, balloon payments and lifetime terms. Demand explodes. More customers get sucked into the broken market and the default rate later skyrockets.

Sound like the Housing Bubble remix? Nah, couldn't be...

Very sad.

If you have a BB&T branch near you, go into the lobby sometime and take a look at artwork that might be on display. I wish the Gulch had a way to upload a pic; I'd show you one that clearly displays the values and virtues of Objectivism, pictured as building blocks. The other artwork, some of it by Bryan Larson, is truly uplifting. Check out his art on the web. Some of those I've seen on BB&T walls.

Yes, isn't that the strangest thing you could ever imagine. If you ever get the chance read Mark Twain's and Will Roger's humor and material about politicians, government, and the people.

Free market "competitive" banking without the carte blanche to create legal tender from nothing. Banks have practiced fractional reserve banking (mostly against the law) for centuries, and governments doing that would be no better (and worse if that was the only legal tender.) Competition is what makes a better system. A single currency is worse, not better, because it centralizes power to destroy. Many competing currencies to make trade easier, backed and guaranteed by labor or commodities and the market can decide every minute the rates for the currencies based on the best current information including the fraction in reserve. Exchanging currencies and paying a tiny fee for the exchange can be much more honest and economical than having a central authority that steals from productivity of individuals by purposely trading against their customers as Goldman Sachs has brazenly done for years without any punishment. In addition the current system guarantees that there will be collapses and defaults that benefit only the banks because there is purposely not enough money created to pay the interest and the principle on loans made. The system is designed for failures to benefit the banks.
Yes, multiple competing currencies is easier to do today than it has ever been, and it would be a big improvement in transparency and in ethics over the current rigged system. Will it require ingenuity and changes? Yes, but so does every thing that improves life.

There is a pattern of reprisals from the Obama regime over the past 6 years. Mess with us or show us up and we will get you, seems to be the message. It looks to me that the only people more crooked than the Obama crew is the Clintons.

I wish I could believe in that, but I can't. I've seen too many people commit ripoffs and get away with it. All it takes is the right set of government connections.

I, too, consider banking as practiced today to be theft, but I don't see how any part of that picture would change if the Fed were eliminated. What do you think would replace it? I would expect one of two things: either another central bank (but government owned) steps in, like Jefferson's Bank of the US, or, fractional reserve banking is abolished in favor of some system like Social Credit in which only the government is allowed to create new credit.

What we'll never see again is where any bank could issue currency and let the market decide what it was worth. That would mean there's no single standard of value over the whole country. The ability to buy things from distant places would either disappear, or you would have to pay someone to trade your money, probably at a discount, for whatever kind your trading partner accepts. Nobody wants that problem. I'd love it if I'm wrong about this.

In the long term, yes, you're quite right.

However Zen, rose colored glasses have been working in the halls of government for a decade or more. I suppose the spin doctors feel that if you say it often enough, people will believe it. What I can't get my head around is the fact that they're right.

If you wish to be successful, you'd better. Rose colored glasses don't actually change the color of reality.

I think being a landlord could work out with good people, but we are about 250 miles away from this property, and I don't want to have to be going up there to take care of things. I'm pleased to have taken as small a loss as we did. Real estate just doesn't seem to be a good investment right now, at least in my part of the country, unless you can make it produce income, as you are doing by renting.

An interesting footnote to the story is that the bank was required to take bailout money during the meltdown, even though their paper losses were minimal. They returned all of the bailout money the first day that they were allowed to do so. Now, the Feds seem out to get them. Six months to a year ago, seventeen banks were given a stress test. Sixteen passed, BB&T failed, even though their numbers were better than the others by far. When the financial press questioned the auditors about why the bank failed, the answer was, "It was a qualitative judgement", whatever the hell that means in this case, and would not elaborate any further. Oh and for the record, their stock is doing just fine.

All of this just goes to show that one can remain fairly clean in that slime pit if one chooses to.

Being a landlord is not my forte, though I am doing it now - fortunately with two people who are laid back and honest. You seem to be more organized than I am, though, and I thought it might be your cup o'tea. I do observe that people who have productive rental properties have a Very Good Income. And the investment is in a format that Uncle Sam cannot easily take away. I recall my mother telling me that during the Great Depression, the people who had rental properties still had some money. They did not get paid their full rents, but generally they got at least a few dollars per month, which was more than most people had.

Jan

Excellent article. But let's not forget Jimmy Carter's input with the Community Reinvestment Act which told bankers to dramatically ease up on the credit lending requirements OR Bill "Wet Cigar" Clinton to put the CRA on steroids.

I don't need a lecture on history of banking. The history is replete with bankers encouraging both sides of every dispute to go to war so they could finance the distruction and be on hand to finance the rebuilding, after foreclosing on the losers and siezing property legally. Of course the banksters believe they will be repaid when they make loans. Its guaranteed when you can create the loans from nothing and manipulate the US government to pay when any foreign governmment or private debtor can't pay. It doesn't matter if they were a good risk or not. You look at the history again.The bankers arranged the passage of the fed for their own benefit. They also have run the US treasury for decades and manipulated legislation to make it possible to lie to their customers about investments they are selling, assuring the customer of the value, and then take the opposite position they recommended.
Yes, the banksters did initiate it.
While fractional reserve banking existed in the past it rarely included the ability to create the legal tender accepted worldwide.
Check you premises.

We calculated as we went in that even if we took a substantial loss, it would be cheaper than paying rent for six years, and gave them a lot nicer place to live. With the loss, it cost us about $200 a month, which is a good deal. We paid cash, so we had minimal closing costs, and it worked out. We really don't want to be landlords! It would bother me to see someone tear the place up.
I just don't understand how the buyers are going to handle the loss when they will have no equity.

Nice article thanks.

I absolutely believe in cheater's never win. Goldman should have been allowed to collapse, then be replaced, at market sale prices, by the second tier bankers. As the gov't handled there are no long term benefits for customers or competent bankers, because after the fine all is forgiven and Goldman-Sachs is still deal maker of choice. I'm stating clearly that sucks, it flies in the face of everyone trying to better their business by doing a better job.

You've obviously never heard or believed the adage, "cheaters never win." The financial meltdown isn't fixed. The problem loans are still on the books somewhere at cost (so much for sarbanes oxley). The comeuppance is still down the road, and all the bad actors are going to get theirs.

I challenge you to go as far back in history as you care to, and show us a single case of bankers lending money to people who they knew couldn't pay them. I haven't been able to do so. Therefore, what I was obviously looking at was an anomaly; they typically have a special cause. That cause was the Community Redevelopment Act, backed up by government thuggery, viz, not allowing a bank to expand, and threatening them with legal action if they didn't do as "requested." Fractional reserve banking has been in effect for centuries, and no bankers went off the reservation, so your argument that they collectively lost their minds because of that lacks intellectual rigor. Whenever you see an industry doing something as dumb as the financial meltdown, look at the government. They're the only ones that stupid. And if you're still not convinced, just ask yourself why the government insisted on bailing out a bunch of "criminals," and why were government backed agencies (Fannie and Freddie) willing to buy those mortgages and package them into toxic paper and sell them all over the world? This isn't absolving the bankers of moral culpability (even though you've seen what happens to whistleblowers), but the bankers didn't initiate this.

Hard to imagine a banker actually espousing a rational philosophy. Doing the right thing regardless of how it made him look to his peers. You would think that other bankers would want to emulate the man, but that would require a move toward rational thinking on their part. Objectivism may not be a blazing fire, but the spark is there and refuses.to die.

I am an executive coach by profession - working closely for 6 to 18 mos with c-level execs of mid-cap companies and various entrepreneurs to raise the quality of their game and the magnitude of their achievements. If one of them works with me for as long as a year, then they HAVE, in essence, read a primer in Objectivist business - though they don't realize it.... ;-)

Stealth "Objectivismization" I call it. Lol

I will explain more when I speak at the upcoming Atlas Summit. (http://bit.ly/1AtYY4J and http://bit.ly/1SyXuMj)

I will defend this a bit. My houses have generally been purchased with the closing cost bundled in. Why not? The interest rate for doing this is low and while I can manage (eg pinch pennies on) ongoing cash flow, I generally buy at the margins of what I can afford and so am short of cash at closing. (Thus I take a little step upwards with each house.) This means that I struggle a bit, but I eventually own good equity in a worthwhile property. (It does not hurt that I tend to be attracted to 'white elephant' type houses, which I then improve.)

Townhouses and condos are a lot more risky. I have seen a number of folks sell those at a loss.
I am sorry that you are taking a loss on your townhome, Mammaemma. Have you considered keeping the place and renting it out to some of the next set of dental students coming into the school?

Jan

Thanks saltydog great read I reposted on Facebook for more to read.

The small farmers bank in my area works the same as it should I submit budget, expenditures of previous year and prove I have the means to repay my loans.

Very good article. Unfortunately, those people seeking mortgages, who were not qualified, were prompted by politicians to threaten civil rights actions fi they were denied. They lost in a variety of ways. They banks who went for it, did as well, while the Federal Reserve banks did fine. Blacks were told they deserved what they had not yet earned through saving. They were told they should have houses. All the while politicians were going along with the UN on Agenda 21, which would end private property rights. They were handing blacks what they intended to then ultimately take back from them, to please the UN's idea that private property ownership is "unsustainable" and should be in government/UN hands. The blacks were basically screwed over by the same politicians for whom they were urged to vote. Proving once again, rely on yourself and your ability to earn and not on promises of so-called altruism.