Must-Read from Michael Lewis
By Arnold Kling
Self-recommending, as Tyler would say. Lewis profiles someone who bet against subprime loans. Although you really must drop everything to go read the whole thing, here is one tidbit:
Next, the baby nurse he’d hired back in 1997 to take care of his newborn twin daughters phoned him. “She was this lovely woman from Jamaica,” he says. “One day she calls me and says she and her sister own five townhouses in Queens. I said, ‘How did that happen?’ ” It happened because after they bought the first one and its value rose, the lenders came and suggested they refinance and take out $250,000, which they used to buy another one. Then the price of that one rose too, and they repeated the experiment. “By the time they were done,” Eisman says, “they owned five of them, the market was falling, and they couldn’t make any of the payments.”
Your public servants in Washington are hard at work developing loan-modification programs to deal with this. Have a nice day.
[UPDATE: More “nice day” readings:
How Iceland collapsed
Human Frailty Caused the Crisis, by Thaler and Sunstein (reputed to be Obama faves). But I wonder, do humans check their frailty at the door when they become public officials?
Treasury Not Planning to Buy Bad Loans, Assets. Everything but, I guess. So the amount of the $700 billion that will be used for the purpose stated in the bill will be zero? zilch? nada? And the Congressmen who voted against the bill were the ones who were being irresponsible?]