The securitization of mortgages, health care, and education.
All were simply fund-managers monetizing other peoples misery, and now many are realizing every party line is the same BS. People are angry, but often for the wrong reasons since wall-street washes accountability by design.
Unfortunately, ridiculous wealth and miserable populations seem a desirable trade in some cultures.
> People are angry, but often for the wrong reasons since wall-street washes accountability by design.
Counterpoint: just as we treat everyone involved in money-laundering as criminal, it is morally obligatory to treat everyone involved in responsibility-laundering as blameworthy.
"Remember the human" is a critical feature of every good social construct, but fundamentally impossible for some of the laundering business constructs that are considered ideologically mandatory today.
Generational wealth theft does seem like a fair thing to complain about. Mortgages became a lever: most countries have regulations saying what lending ratios people can have, who is and is not eligible, etc. Want to control inflation over the long run? Raise interest rates and destroy the buying power of a generation. In the UK this is even more flexible, as we tend to only fix our mortgage interest rates for a few years. I gather in the US rates are fixed for the life of the mortgage, or close to it.
The odd generation of young males still living with their parents after college is enough of a reality check for many.
I just find it fascinating people think this is somehow a controversial observation. Of course, I also welcome facts that say everything is fine, because it makes me feel more hopeful about their futures. =3
None of the actual empirical economic data in the US resembles your statement - average household sizes have gone down over time, real incomes have gone up, and Gen Z wealth is doing fine.
It is true in the UK but that's simply because 1. the UK economy is doing pretty badly in general 2. you really, really don't build enough new housing.
If housing construction was unrestricted it wouldn't matter much what interest rates were at.
All of those articles are about economic performance before 2019, which was bad, but now we live in 2024, which is a different year where the economy is good. In fact it's as good as it's been in decades in the US. (Not so good in other countries partly because we caused inflation in their currencies.)
Note the media sector of the US economy is doing kind of badly and is mostly staffed by neurotic people who live in NYC, which means they tend to write negative articles no matter what.
I'm guessing this is in reference to the first shitheads to decide manufacturing synthetic investment instruments backed by home mortgages was a good idea?
Definitely a fantastic idea that ended well for all parties. GTFO. It beggars belief that folks would, even for a moment, consider participating in such a naked attempt to whitewash this.
> A widespread misconception about mortgage securitization is that it was created to make Wall Street rich. …
> Mortgage securitization, and secondary sales of loans, and other mechanisms cause mortgages to migrate from the banking sector to pools of capital which are more structurally insulated against the interest rate cycle.
At the end of the day, the reasons these choices exist is to make someone rich. The mechanism (shielding from interest rate cycles) is just an implementation detail.
It's not just an implementation detail. In the 80s there was a big event known as the S&L crisis (https://en.wikipedia.org/wiki/Savings_and_loan_crisis), where an interest rate spike which was not adequately shielded led a substantial fraction of all US mortgage lenders to fail.
Adding leverage to the housing market probably isn't a net good thing.
Especially when you have a mismatch between demand for desirable housing and the available supply.
It is interesting that when you look at the US, some of our most expensive markets (housing, healthcare, education) have tight regulations on supply and federal policy response focused on subsidizing buyers (rather than addressing the structural supply problems).
> Adding leverage to the housing market probably isn't a net good thing.
The leverage part isn't necessarily a good thing as it increases house prices to some extent (how much, I don't know).
But what would be an alternative? Even if buying a house all-cash was the only choice, a house would still be very expensive because it does take a lot of real materials and labor.
If we complain today that raising a 20% down payment towards a million dollar house is very difficult, would it be any easier if that house cost (let's say) 600K but you have to raise the whole 600k up front?
I'm generally against having debt, but mortgages are a wonderful thing.
What answers do we get if "market" isn't part of the platform?
If we start with the question "how do we affordably house the most people possible", I'd think we end up with something like "the state owns the housing stock and leases it out on a long-term basis with very tight (and obviously political-third-rail) restrictions on pricing and allocation".
The comments I replied to are pretty specifically talking about government supported 30 year fixed mortgages, rather than mortgages in general. I guess I could have spelled out the context I thought was implied?
Commodities are good. They're cheap and don't need ceremony to buy.
The opposite is when distribution is controlled by someone subjectively judging if you're worth having it. This is very bad for minorities (the judger will be racist) and women (the judger will make you pay for it with your body).
Example in the US is the mass manufactured Sears homes, which whites in the South hated because they'd sell to blacks.
Conversely I remain surprised to this day that several hundred execs didn't end up with multi-decade long prison sentences for bricking the global economy with this bullshit.
This is another widespread misconception. The mortgages that got the economy in trouble were the no-doc, no income verification type mortgages - ie “non conforming”.
By definition, a non conforming loan isn’t backed by Fannie and Freddie. I had multiple non conforming loans I got before the crash. Yes they ended up just like you suspect.
This is a delicious ironic quote from a from 2007 article.
After Sept. 1, Freddie will no longer invest in subprime mortgages that have a "high likelihood" of payment shock and foreclosure, the company announced on Tuesday.
Are you denying the fact that a “non conforming loan” by definition means it isn’t eligible for Freddie and Fannie backing?
I’ve had 5 first mortgages in my lifetime and only one was “conforming”.
My latest one was a unit in a condotel where I live the majority of the year. No government institution would ever back and no income verification loan on a mixed use commercial/personal secondary home.
I'm reporting observed reality homeboy. I watched thousands of loans a week get pumped through the system with everything from income verification fields left blank to literally fraudulent (as in the loan officer got tech support on the phone to help them generate random numbers) information get pushed through with zero pushback. A point for you to consider: "non conforming loan" is only a meaningful phrase when the criteria for non conforming loans is actually being verified.
After Sept. 1, Freddie will no longer invest in subprime mortgages that have a "high likelihood" of payment shock and foreclosure, the company announced on Tuesday.
What bothers me is that in various european countries - the UK, in my case - right wingers who created the mortgage market in the 1980s successfully pinned the global financial crisis on politicians.
You’re both wrong. I’ve worked with some of the people who invented these products and still had to double check your reference to make sure I was correct. I was—Milken didn’t popularise mortgage securitisation. Ranieri did.
Milken did not ”[popularize] mortgage securitization”. Ranieri was at best his contemporary; he was not inspired by Milken. Your own article is a good source on this.
> read the article
I recommend Fabozzi’s Fixed Income as an introductory text if you’re drawing the (incorrect) conclusions that you are from that FT article.
> All were simply fund-managers monetizing other peoples misery
No, mortgage securitization simply provides a simple, consistent product that you can sell to investors. Securitization was created by the government, not by a banker.
It allows homeowners to access capital that they otherwise couldn't - it's a pretty limited pool of investors willing to buy individual, non-conforming mortgages.
If mortgages weren't securitized, then the government would need to provide the funds for all the mortgages - which means a lot less mortgages.
And I have no idea what "securitization" of healthcare and education means. It sounds like you learned a new word and just use it to replace "bad things I don't like".
All were simply fund-managers monetizing other peoples misery, and now many are realizing every party line is the same BS. People are angry, but often for the wrong reasons since wall-street washes accountability by design.
Unfortunately, ridiculous wealth and miserable populations seem a desirable trade in some cultures.
Thank god it is not my task to try and fix it =)