4 ms·

In some cases, I can agree with you. There are predatory practices that shouldn't even be legal. But this guy went out and borrowed $100k to put directly into

by tghw 17y ago

In some cases, I can agree with you. There are predatory practices that shouldn't even be legal. But this guy went out and borrowed $100k to put directly into risky investments. He also bought four houses at zero down, maximizing his risk of default. He wasn't suckered into this, it was a calculated move to try and get rich quick. Then it blew up in his face, and while that is not his fault directly, he's clearly smart enough to have known the risks. Now that his (not so) little bet has gone against him, he doesn't want to pay it back? I call bullshit.

jacquesm 17y ago
Not really. Banks have a fiduciary responsibility to lend out their money with some caution. The banks colluded because they too wanted to make a pile of money quickly, then when it all blew up they went after all the collateral leaving the private individuals holding the debt after the foreclosure.
- ams6110 17y ago
  Yeah I'm really split on this myself. On the one hand he should have known better than to take on that much debt. On the other hand, the people offering him such easy credit should have to face the consequences of the risks they were taking by lending money to overextended borrowers.
- tghw 17y ago
  I don't disagree, but that doesn't absolve him of responsibility. He is as much a perpetrator of this as the banks are. If he'd needed the money, that would be one thing, but he took unnecessary loans to do speculative, risky investing.
  - mschy 17y ago
    I doubt he understood that he was doing speculative, risky investing. Mid-bubble, I can't count how many people told me that the market can only go up, or who looked at me like I was insane when I said I was watching month-over-month sales to try to avoid getting creamed when the bubble inevitably burst.
breck 17y ago
> he's clearly smart enough to have known the risks. I'd say the opposite: he was too smart for his own good. He was an Economics major(like me). He was likely taught economic theory based on rational behavior. During those years, credit card companies sent absurd numbers of 0% offers to everyone over 18. If he didn't borrow money at 0% and reinvest it, that would have been irrational and gone against everything he was being taught in school. I'm assuming he had a few things working against him: - Limited knowledge of the world and no first hand experience of a recession. - Dangerous knowledge from Economics class that teaches you people act rationally, without emotion, according to a simple utility maximizing function. - Employees in the financial industry who earned their incentives based purely on the amount of money being borrowed in the short term, with no consequences if the debts turned out to be bad. - Very limited understand of probability and statistics. I've met very few people in my life who have adequate schooling in these subjects. I had a similar experience(though luckily on a smaller scale) my senior year of college. I was given a $50,000 line of credit from Bank of America, despite the fact that I'd never held more than a summer job or made more than $8,000 in a single year. If I had walked into my local bank and asked for that kind of loan, my banker would have laughed in my face. But Bank of America gave it to me just by filling out a form and making a phone call. The system was absurd and many people were screwed. Banks should have known better. They've been around for hundreds of years while myself and many others have been around for about 20. The lenders should have been smart enough to have known the risks.
- tghw 17y ago
  It's quite a stretch to paint him as a victim here. If he'd needed the money, that would be one thing. But he took unnecessary loans to do speculative, risky investing. Sure, the "system" should have known better, but so should he. I was also an Econ major. At no time did I become so out of touch with reality as to actually believe that people behave rationally when it comes to economic decisions. Calling that information dangerous is just disingenuous. The banks failed at risk management, that we know. But there is individual responsibility as well. Every person who got a mortgage with a payment that was more than their take home pay is equally culpable in the subprime crisis. And people like this guy are even more to blame. I know people are bad at probability and statistics, but we shouldn't give them a pass on basic arithmetic.

by tghw 17y ago

jacquesm 17y ago

Not really. Banks have a fiduciary responsibility to lend out their money with some caution. The banks colluded because they too wanted to make a pile of money quickly, then when it all blew up they went after all the collateral leaving the private individuals holding the debt after the foreclosure.

ams6110 17y ago
Yeah I'm really split on this myself. On the one hand he should have known better than to take on that much debt. On the other hand, the people offering him such easy credit should have to face the consequences of the risks they were taking by lending money to overextended borrowers.
tghw 17y ago
I don't disagree, but that doesn't absolve him of responsibility. He is as much a perpetrator of this as the banks are. If he'd needed the money, that would be one thing, but he took unnecessary loans to do speculative, risky investing.
- mschy 17y ago
  I doubt he understood that he was doing speculative, risky investing. Mid-bubble, I can't count how many people told me that the market can only go up, or who looked at me like I was insane when I said I was watching month-over-month sales to try to avoid getting creamed when the bubble inevitably burst.

breck 17y ago

> he's clearly smart enough to have known the risks. I'd say the opposite: he was too smart for his own good. He was an Economics major(like me). He was likely taught economic theory based on rational behavior. During those years, credit card companies sent absurd numbers of 0% offers to everyone over 18. If he didn't borrow money at 0% and reinvest it, that would have been irrational and gone against everything he was being taught in school. I'm assuming he had a few things working against him: - Limited knowledge of the world and no first hand experience of a recession. - Dangerous knowledge from Economics class that teaches you people act rationally, without emotion, according to a simple utility maximizing function. - Employees in the financial industry who earned their incentives based purely on the amount of money being borrowed in the short term, with no consequences if the debts turned out to be bad. - Very limited understand of probability and statistics. I've met very few people in my life who have adequate schooling in these subjects. I had a similar experience(though luckily on a smaller scale) my senior year of college. I was given a $50,000 line of credit from Bank of America, despite the fact that I'd never held more than a summer job or made more than $8,000 in a single year. If I had walked into my local bank and asked for that kind of loan, my banker would have laughed in my face. But Bank of America gave it to me just by filling out a form and making a phone call. The system was absurd and many people were screwed. Banks should have known better. They've been around for hundreds of years while myself and many others have been around for about 20. The lenders should have been smart enough to have known the risks.

tghw 17y ago
It's quite a stretch to paint him as a victim here. If he'd needed the money, that would be one thing. But he took unnecessary loans to do speculative, risky investing. Sure, the "system" should have known better, but so should he. I was also an Econ major. At no time did I become so out of touch with reality as to actually believe that people behave rationally when it comes to economic decisions. Calling that information dangerous is just disingenuous. The banks failed at risk management, that we know. But there is individual responsibility as well. Every person who got a mortgage with a payment that was more than their take home pay is equally culpable in the subprime crisis. And people like this guy are even more to blame. I know people are bad at probability and statistics, but we shouldn't give them a pass on basic arithmetic.