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The biggest problem with predatory lending is the salesmanship and opacity of terms that make the financial impact unclear to the person buying the loan. In th

by jforman 14y ago

The biggest problem with predatory lending is the salesmanship and opacity of terms that make the financial impact unclear to the person buying the loan. In this case we're talking about extremely savvy investors who were given an offer that they accepted eyes wide open. If this was a bum deal, any anger should be directed at the directors/board rather than the government.

smsm42 14y ago
As I said in other comment, would you be willing to support this notion for any deal? E.g., if the offer is very clear and not opaque at all - say, you are in desperate need of a job, and some employer offers you a salary that is 10% lower than legal minimal wage and 20% lower that is common in your profession, and openly says this is because of your gender and race and he knows you gender and race are lazy and unproductive, but since he's low on money he's willing to hire you for low price - would you say such clear and open offer be fine? Current law considers it illegal and unfair, do you reject this concept and would you vote for a politician that would support repealing such laws and declare any voluntary contract which is clear to both sides to be legal? If you would, you would find yourself in very tiny minority in contemporary America. Most people think that some deals are unfair even if both sides agreed on it - and unfairness may stem from many things, difference in power one of them. Powers of AIG management and US government at that moment were obviously very different - so why it is inconceivable to consider that it may be that US government used his advantage to deal unfairly? We know lots of other cases where people in power used their powers to deal unfairly, why it couldn't happen in this particular case? It may or not may happened indeed - that's why you need a court to figure it out - but I don't see, in current legal system, how you can reject the notion that it can be possible in principle.
- icambron 14y ago
  > 10% lower than legal minimal wage and 20% lower that is common in your profession, and openly says this is because of your gender and race That completely breaks the comparison you're trying to draw. Paying someone less than minimum wage and paying them something different because of their gender or race are all explicitly illegal. A tough deal offered to AIG is none of those things, and it does not follow from "these specific things are illegal" that "any generalization of those things is therefore illegal". If the comparison weren't so speciously constructed, I'd also complain that comparing the behavior of the government towards a multi-billion dollar corporation to the behavior of lenders towards a poor person is pretty lame. Legality aside, the actual advantage the US government had was that no one else wanted to loan AIG money. That's a pretty good reason to give them tough terms. The US would just be making a sweetheart deal with AIG otherwise. One way to think about it is that the most obvious alternative is for the US not to have bailed them out at all.
  - smsm42 14y ago
    The question whether the government actions in this case were legal or not is up to the court for decide. But if you accept the premise that some voluntary contracts can be not OK despite their being voluntary, you can not object to AIG's claim that they were wronged by saying "but it was voluntary!". You know already being voluntary is not enough - either you have to abandon this notion or you have to abandon your objections to AIG. >>>> Legality aside, the actual advantage the US government had was that no one else wanted to loan AIG money. That's a pretty good reason to give them tough terms. Do you always accept this premise? Say, nobody would be willing to lend you money - because of recent bankruptcy. Would it be OK for some shady outfit to offer you a 30% a day loan, and have you agree that if you don't return it all they get to beat you up at their heart's content? If you're hungry enough you may voluntarily agree, would it make you OK? Would it make it OK if you were sick and nobody would agree to treat you without upfront payment, but one establishment would agree if you promise to give them 95% of all your future income - would it be fine then? Or is it fine only when done to other people, especially ones investing in an evil corporation? >>>> The US would just be making a sweetheart deal with AIG otherwise. There's a lot of way between unfair deal and sweetheart deal. Most deals fall into the spectrum between them.

by jforman 14y ago

smsm42 14y ago

As I said in other comment, would you be willing to support this notion for any deal? E.g., if the offer is very clear and not opaque at all - say, you are in desperate need of a job, and some employer offers you a salary that is 10% lower than legal minimal wage and 20% lower that is common in your profession, and openly says this is because of your gender and race and he knows you gender and race are lazy and unproductive, but since he's low on money he's willing to hire you for low price - would you say such clear and open offer be fine? Current law considers it illegal and unfair, do you reject this concept and would you vote for a politician that would support repealing such laws and declare any voluntary contract which is clear to both sides to be legal? If you would, you would find yourself in very tiny minority in contemporary America. Most people think that some deals are unfair even if both sides agreed on it - and unfairness may stem from many things, difference in power one of them. Powers of AIG management and US government at that moment were obviously very different - so why it is inconceivable to consider that it may be that US government used his advantage to deal unfairly? We know lots of other cases where people in power used their powers to deal unfairly, why it couldn't happen in this particular case? It may or not may happened indeed - that's why you need a court to figure it out - but I don't see, in current legal system, how you can reject the notion that it can be possible in principle.

icambron 14y ago
> 10% lower than legal minimal wage and 20% lower that is common in your profession, and openly says this is because of your gender and race That completely breaks the comparison you're trying to draw. Paying someone less than minimum wage and paying them something different because of their gender or race are all explicitly illegal. A tough deal offered to AIG is none of those things, and it does not follow from "these specific things are illegal" that "any generalization of those things is therefore illegal". If the comparison weren't so speciously constructed, I'd also complain that comparing the behavior of the government towards a multi-billion dollar corporation to the behavior of lenders towards a poor person is pretty lame. Legality aside, the actual advantage the US government had was that no one else wanted to loan AIG money. That's a pretty good reason to give them tough terms. The US would just be making a sweetheart deal with AIG otherwise. One way to think about it is that the most obvious alternative is for the US not to have bailed them out at all.
- smsm42 14y ago
  The question whether the government actions in this case were legal or not is up to the court for decide. But if you accept the premise that some voluntary contracts can be not OK despite their being voluntary, you can not object to AIG's claim that they were wronged by saying "but it was voluntary!". You know already being voluntary is not enough - either you have to abandon this notion or you have to abandon your objections to AIG. >>>> Legality aside, the actual advantage the US government had was that no one else wanted to loan AIG money. That's a pretty good reason to give them tough terms. Do you always accept this premise? Say, nobody would be willing to lend you money - because of recent bankruptcy. Would it be OK for some shady outfit to offer you a 30% a day loan, and have you agree that if you don't return it all they get to beat you up at their heart's content? If you're hungry enough you may voluntarily agree, would it make you OK? Would it make it OK if you were sick and nobody would agree to treat you without upfront payment, but one establishment would agree if you promise to give them 95% of all your future income - would it be fine then? Or is it fine only when done to other people, especially ones investing in an evil corporation? >>>> The US would just be making a sweetheart deal with AIG otherwise. There's a lot of way between unfair deal and sweetheart deal. Most deals fall into the spectrum between them.