Sunday, October 21, 2007

Why I don't read MSN Money

Make builders, lenders fix the housing mess - MSN Money

Wow, so I just read this Jim Jubak guy and reminded myself about why I read the PF blogs instead of the MSN Trash. FTA:

Remember Enron? The company claimed revenues of $111 billion in 2000 only to file for bankruptcy in 2001 when it turned out that revenues, profits and asset holdings were either wildly overinflated or didn't exist at all.

Losses to shareholders were variously estimated at $60 billion to $80 billion. Those are huge numbers. But when you add up all the fines and settlements paid by the parties the courts decided were responsible for at least part of the fraud, it comes to less than $10 billion.

Right good, the SEC has no teeth, it can't prevent you from losing money if the company lies. No shit, welcome to 2007. Enron, Worldcom, Nortel... all names to make you wince, except, oh yeah, this crap has been happening for decades.

He basically uses this opening paragraph to run off into a segue about Beazer and other home builders and he actually brings up the fact that Beazer employers violated federal law and that shareholder are out billions in the drop:

Whether the fines Beazer eventually pays are $15 million or $150 million, however, they won't do anything to help investors recoup the $1.5 billion they've lost in the stock as it plunged to $8.38 on Oct. 17 from $47 a share at the end of 2006. The best those folks can expect from an Enron-style settlement is pennies on the dollar.

Again, no shit! Welcome to the shark tank, this isn't new, the company cheated both the consumers and stock holders, surprise, surprise! If you thought the SEC was going to be your magical shining knight on a white horse and save you b/c the company "cheated", then you were sadly mistaken. I'd feel for you and deliver my sympathies, but it doesn't really take a genius to know that this stuff has happened dozens of times since the SEC was instituted in the 30's.

The SEC has no teeth, they cannot recover the money you will lose when a non-solvent company reveals the level of their "cheating". The SEC is not a risk management tool. You've been told.

So now, Jubak wants the greedy lenders to made responsible for fixing up new deals for the people to whom they gave all of these bad mortgage loans. Of course, he's not actually giving specific ideas on how to do this, let's put the onus on the cheats, right? This whole "good ideas" thing is pretty hard.

How the heck are lenders supposed to help? These are people who signed up for mortgages without taking a credit check? You bought a house worth several years of your salary without a credit check!?! Clearly these are people who missed the whole Caveat Emptor life lesson and no lender in their right mind actually wants to help these people out, that's why they had to cheat to get the loans in the first place, duh!

Obviously, the lenders took advantage of people with a poor grasp of financial concepts or people who were too greedy and wanted a place they couldn't really afford. In either case, malice or ignorance, there is only so much that you can do to protect people from themselves. It would be great to catch all of these dirty business people, but it's really a loser's game, there's just too much money in housing (and cars) to keep the sharks out of the tank. Plus, if you're going to take a mortgage without running a credit check, let's face it, you deserve to be broke and homeless for a while.


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