5 ms·

Didn't these people learn in grammar school that two wrongs don't make a right?

by tjmaxal 16y ago

MichaelSalib 16y ago
In economic terms, two wrongs can certainly make a right. In many cases, having these people move out would serve no purpose other than to destroy the houses' values as well as the values of the surrounding homes. People who stay in their homes prevent squatters from moving in and perform some maintenance. Banks often make economically foolish decisions regarding foreclosure for a whole host of reasons. Plus, after reading articles like http://www.mcsweeneys.net/links/panoramaexcerpts/Ali.html http://www.mcsweeneys.net/links/panoramaexcerpts/Ali.html regarding how mortgage servicers and banks deal with foreclosure, I'm disinclined to believe that they are ever acting in good faith.
- tptacek 16y ago
  Wait, you're saying you came by your principles on this issue through a McSweeny's article about a couple who knowingly stated an income 12x their real income to buy a house that they could only hope to afford if the housing market continued to appreciate stratospherically, and who then blamed the economy when their completely untenable loan blew up? You do realize that it's perfectly reasonable to be disgusted with the mortgage originators, the Wall Street financiers, the CDO managers, the CDO manager's clueless investors, and the feckless homeowners who got into bed with them, right?
  - MichaelSalib 16y ago
    The article I linked to is not fiction. Do you have reason to believe that the attorney who wrote it was lying? And yes, I think the homeowners there pretty awful. But the banks didn't determine that they were awful before they acted in bad faith; they acted in bad faith from the get-go, for everyone, whether or not their actions merited such treatment. And from where I sit, it seems like the banks and servicers are the ones who completely failed to do any due diligence and then blamed the economy when their unsustainable loans proved, well, unsustainable. The average person is functionally innumerate. They are going to make poor decisions regarding quantitative matters, especially quantitative matters couched in ways that are deliberately obfuscated. This is not true of the average bank. I expect better from them.
    - tptacek 16y ago
      It's not fiction. But it's McSweeney's. It wasn't edited for accuracy or logic or fact-checking or bias; it was edited to make it read well. I like McSweeney's probably almost as much as you do, but would hesitate to cite it in an argument about economics! Your other two grafs don't actually rebut anything I said. Yes. Banks bad. Very bad! Also: require Thomas to sit on hold to wait to talk to someone in Bangalore about mortgage. Ridiculous fees, too! Bad! Unfortunately: still not OK to defraud them. Contracts with bad evil banks? Still valid.
      - MichaelSalib 16y ago
        It wasn't edited for accuracy or logic or fact-checking or bias In general, I do not expect main stream publications to be able to edit articles regarding economics. Journalists and editors are astonishingly ignorant of basic economics, to say nothing of statistics or law. There's a reason that economics professor Dean Baker keeps an entire blog devoted to correcting the idiocies and distortions found in traditional reporting (see http://www.cepr.net/index.php/beat-the-press/ http://www.cepr.net/index.php/beat-the-press/ ); it is the same reason that economics professor Brad Delong regularly lambastes major newspapers on his blog by chanting "why, oh why can't we have a better press corps?" (see http://delong.typepad.com/sdj/better_press_corps/ http://delong.typepad.com/sdj/better_press_corps/ ). So the fact that this article didn't appear in the Washington Post (where I've read "fact-checked" articles which presumed that inflation does not exist) doesn't really trouble me. It is written by an attorney and officers of the court are generally subject to sanction if they misrepresent cases. I like McSweeney's probably almost as much as you do Um, I don't read McSweeny's; I read this article because it was linked from an economics/policy blog I respect. Unfortunately: still not OK to defraud them. I don't believe the behavior in question falls under fraud statutes. This is surprising: generally we expect corporations to act in their best interest taking full advantage of their rights under the law, even if doing so violates the spirit of the law. How odd that we apply such different standards to individuals.
        deleted 16y ago
        [deleted]
- yummyfajitas 16y ago
  People who stay in their homes prevent squatters from moving in... Squatters living in a home owned by a bank prevent squatters from moving in?
  - MichaelSalib 16y ago
    There are different varieties of squatters. Drug addicted transients are not equivalent to small business owners with roots in the local community who happen to have an emotional attachment to that particular house. Given the choice of squatters, I'd prefer to have squatters with a non-zero income.
    - yummyfajitas 16y ago
      I'm taking issue with your language. It's not "their house", it's the bank's house. They are squatters themselves, so they don't keep squatters out. If you said "people who squat in homes they used to own may perform maintenance and keep out a worse breed of squatters than themselves", I would have had no objection.
    - tullius 16y ago
      I don't know what the probability of "drug addicted transients" moving into a foreclosed suburban house is, but I do know that people aren't going to be strongly incentivized to keep up maintenance on a house they will be vacating soon.
      - MichaelSalib 16y ago
        Judging by http://www.theatlantic.com/magazine/print/2008/03/the-next-slum/6653/ http://www.theatlantic.com/magazine/print/2008/03/the-next-s... I'd say the probability is nonzero. And I'm pretty sure the owners described in the article will perform some critical maintenance like making sure vermin don't infest the house and fixing leaks because no one, not even a renter, wants to live in a place water rains down on them in their living room or where they have to dodge raccoons. Again, there are degrees of maintenance. They won't be incentivized to put in a new deck or repaint the whole house, but a lot of the value destruction associated with foreclosure has to do with simpler things: animals taking residence, water damage, thieves stealing the wiring/plumbing and ruining the walls in the process, etc.
- MichaelSalib 16y ago
  I forgot that many people on HN can't distinguish between normative and positive claims, so let me clarify: I don't think this behavior is terribly ethical, but I do think it can produce more efficient economic outcomes. There are many of unethical acts that improve economic efficiency.
  - tptacek 16y ago
    I agree with you that the likely effect of them turning in the keys to their houses is that those houses will be vacant probably for the better part of a year, which will damage other good-faith occupants of neighboring houses and produce no economic good for either the lender or the buyer. I think the only thing I could really wish for here is a system that captures some of the funds that these people are spending on trucks or business schemes and, in exchange for some long-term plan to keep them in their houses, get them to start paying back into their commitments. It is certainly true that the financial system shoulders some of the blame for this untenable situation. A pox on all their houses, then.
    - MichaelSalib 16y ago
      a system that captures some of the funds that these people are spending on trucks or business schemes and, in exchange for some long-term plan to keep them in their houses, get them to start paying back into their commitments There have been several proposals that would accomplish this, including Dean Baker's Own to Rent ( http://tpmcafe.talkingpointsmemo.com/2007/08/19/own_to_rent_the_way_to_save_su/ http://tpmcafe.talkingpointsmemo.com/2007/08/19/own_to_rent_... ); I believe all of these proposals have been vociferously opposed by the finance industry. One reason is that it would probably force banks to mark down the values of their assets to something more realistic. I believe these proposals would be very popular though with the general public....

Didn't these people learn in grammar school that two wrongs don't make a right?

by tjmaxal 16y ago

Didn't these people learn in grammar school that two wrongs don't make a right?

In economic terms, two wrongs can certainly make a right. In many cases, having these people move out would serve no purpose other than to destroy the houses' values as well as the values of the surrounding homes. People who stay in their homes prevent squatters from moving in and perform some maintenance. Banks often make economically foolish decisions regarding foreclosure for a whole host of reasons. Plus, after reading articles like http://www.mcsweeneys.net/links/panoramaexcerpts/Ali.html http://www.mcsweeneys.net/links/panoramaexcerpts/Ali.html regarding how mortgage servicers and banks deal with foreclosure, I'm disinclined to believe that they are ever acting in good faith.

tptacek 16y ago
Wait, you're saying you came by your principles on this issue through a McSweeny's article about a couple who knowingly stated an income 12x their real income to buy a house that they could only hope to afford if the housing market continued to appreciate stratospherically, and who then blamed the economy when their completely untenable loan blew up? You do realize that it's perfectly reasonable to be disgusted with the mortgage originators, the Wall Street financiers, the CDO managers, the CDO manager's clueless investors, and the feckless homeowners who got into bed with them, right?
- MichaelSalib 16y ago
  The article I linked to is not fiction. Do you have reason to believe that the attorney who wrote it was lying? And yes, I think the homeowners there pretty awful. But the banks didn't determine that they were awful before they acted in bad faith; they acted in bad faith from the get-go, for everyone, whether or not their actions merited such treatment. And from where I sit, it seems like the banks and servicers are the ones who completely failed to do any due diligence and then blamed the economy when their unsustainable loans proved, well, unsustainable. The average person is functionally innumerate. They are going to make poor decisions regarding quantitative matters, especially quantitative matters couched in ways that are deliberately obfuscated. This is not true of the average bank. I expect better from them.
  - tptacek 16y ago
    It's not fiction. But it's McSweeney's. It wasn't edited for accuracy or logic or fact-checking or bias; it was edited to make it read well. I like McSweeney's probably almost as much as you do, but would hesitate to cite it in an argument about economics! Your other two grafs don't actually rebut anything I said. Yes. Banks bad. Very bad! Also: require Thomas to sit on hold to wait to talk to someone in Bangalore about mortgage. Ridiculous fees, too! Bad! Unfortunately: still not OK to defraud them. Contracts with bad evil banks? Still valid.
    - MichaelSalib 16y ago
      It wasn't edited for accuracy or logic or fact-checking or bias In general, I do not expect main stream publications to be able to edit articles regarding economics. Journalists and editors are astonishingly ignorant of basic economics, to say nothing of statistics or law. There's a reason that economics professor Dean Baker keeps an entire blog devoted to correcting the idiocies and distortions found in traditional reporting (see http://www.cepr.net/index.php/beat-the-press/ http://www.cepr.net/index.php/beat-the-press/ ); it is the same reason that economics professor Brad Delong regularly lambastes major newspapers on his blog by chanting "why, oh why can't we have a better press corps?" (see http://delong.typepad.com/sdj/better_press_corps/ http://delong.typepad.com/sdj/better_press_corps/ ). So the fact that this article didn't appear in the Washington Post (where I've read "fact-checked" articles which presumed that inflation does not exist) doesn't really trouble me. It is written by an attorney and officers of the court are generally subject to sanction if they misrepresent cases. I like McSweeney's probably almost as much as you do Um, I don't read McSweeny's; I read this article because it was linked from an economics/policy blog I respect. Unfortunately: still not OK to defraud them. I don't believe the behavior in question falls under fraud statutes. This is surprising: generally we expect corporations to act in their best interest taking full advantage of their rights under the law, even if doing so violates the spirit of the law. How odd that we apply such different standards to individuals.
      - deleted 16y ago
        [deleted]
yummyfajitas 16y ago
People who stay in their homes prevent squatters from moving in... Squatters living in a home owned by a bank prevent squatters from moving in?
- MichaelSalib 16y ago
  There are different varieties of squatters. Drug addicted transients are not equivalent to small business owners with roots in the local community who happen to have an emotional attachment to that particular house. Given the choice of squatters, I'd prefer to have squatters with a non-zero income.
  - yummyfajitas 16y ago
    I'm taking issue with your language. It's not "their house", it's the bank's house. They are squatters themselves, so they don't keep squatters out. If you said "people who squat in homes they used to own may perform maintenance and keep out a worse breed of squatters than themselves", I would have had no objection.
  - tullius 16y ago
    I don't know what the probability of "drug addicted transients" moving into a foreclosed suburban house is, but I do know that people aren't going to be strongly incentivized to keep up maintenance on a house they will be vacating soon.
    - MichaelSalib 16y ago
      Judging by http://www.theatlantic.com/magazine/print/2008/03/the-next-slum/6653/ http://www.theatlantic.com/magazine/print/2008/03/the-next-s... I'd say the probability is nonzero. And I'm pretty sure the owners described in the article will perform some critical maintenance like making sure vermin don't infest the house and fixing leaks because no one, not even a renter, wants to live in a place water rains down on them in their living room or where they have to dodge raccoons. Again, there are degrees of maintenance. They won't be incentivized to put in a new deck or repaint the whole house, but a lot of the value destruction associated with foreclosure has to do with simpler things: animals taking residence, water damage, thieves stealing the wiring/plumbing and ruining the walls in the process, etc.
MichaelSalib 16y ago
I forgot that many people on HN can't distinguish between normative and positive claims, so let me clarify: I don't think this behavior is terribly ethical, but I do think it can produce more efficient economic outcomes. There are many of unethical acts that improve economic efficiency.
- tptacek 16y ago
  I agree with you that the likely effect of them turning in the keys to their houses is that those houses will be vacant probably for the better part of a year, which will damage other good-faith occupants of neighboring houses and produce no economic good for either the lender or the buyer. I think the only thing I could really wish for here is a system that captures some of the funds that these people are spending on trucks or business schemes and, in exchange for some long-term plan to keep them in their houses, get them to start paying back into their commitments. It is certainly true that the financial system shoulders some of the blame for this untenable situation. A pox on all their houses, then.
  - MichaelSalib 16y ago
    a system that captures some of the funds that these people are spending on trucks or business schemes and, in exchange for some long-term plan to keep them in their houses, get them to start paying back into their commitments There have been several proposals that would accomplish this, including Dean Baker's Own to Rent ( http://tpmcafe.talkingpointsmemo.com/2007/08/19/own_to_rent_the_way_to_save_su/ http://tpmcafe.talkingpointsmemo.com/2007/08/19/own_to_rent_... ); I believe all of these proposals have been vociferously opposed by the finance industry. One reason is that it would probably force banks to mark down the values of their assets to something more realistic. I believe these proposals would be very popular though with the general public....