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I, Cringely - The Survival of the Nerdiest with Robert X. Cringely
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The Pulpit
Pulpit Comments
July 04, 2008 -- Independence Day
Status: [CLOSED]

If we can't find leadership in our elected representatives, we're going to have to find it among ourselves, and replace those elected representatives with true leaders. We, the people, bear this responsibility. We cannot shirk it.

George Falcon | Jul 04, 2008 | 3:01PM

I was amazed at how many tools are out there.
Looking to buy? Do it without a realtor and get 75% of the commission - buysiderealty.com
zilpy.com | trulia.com | iggyshouse.com | housingmaps.com | zillow.com | franklymls.com | roommateclick.com | rentometer.com

Don Clark -Atlanta | Jul 04, 2008 | 3:07PM

Nobody ever said technology would change human nature... Still, a very nice piece of writing. Have a nice weekend !

Jn | Jul 04, 2008 | 3:11PM

Strange. I wrote this column pretty much word for word ten years ago, in a small town in SW Florida, for an advertising rag. "Disintermediation" was the title, and it caused such a backlash that my column was cancelled.

Turns out the local realtors, hardware store, and TV and lawnmower parts people didn't WANT the locals to know they could find and order things online, much cheaper than going through the local 100% markup artists.

People who don't use the Internet for information, in buying and in selling, will pay the usual Darwinian price, since all our sense organs are merely information gathering devices to make us more efficient in competition for scarce resources.

Ormond Otvos | Jul 04, 2008 | 3:16PM

George I agree about elected representatives but sadly 'we the people' won't accept bad news. If a politician got up there and said "we're screwed, we gotta raise taxes 10% or we'll all be bankrupt in 10 years" (which isn't that far from the truth), we'd kick their butts out the door. The unwashed masses want a smiling face to pat their heads and tell them everything will be ok...even when it won't be.... Moo!

Lee in London | Jul 04, 2008 | 3:18PM

Mortgage brokers can lie just as easily in person as over the internet. The sub-prime crisis has nothing to do with the internet. It mirrors every other wave of Wall-street fraud and mischief that has come before it: the dot-com disaster, the pension failures of a few years ago, the S&L scandal, the low-margin rules leading up to the depression. Each one permitted a huge transfer of money from the middle class to the rich, either directly, or via tax-funded bailouts. The internet may have been the medium for the current problem, but it did not create the problem.

Leigh Chase | Jul 04, 2008 | 3:22PM

Young and lovely wife! Petty us with old and ugly wife! :-(

Sub-prime should have been stopped at the start. However it was packaged, they must include worst case sceniors information (highlighted!)so that anyone would know. Let's not just arrested two BS people, Get all of those who was negilent in passing along bad products to investors.

Tony | Jul 04, 2008 | 3:23PM

"(my kids think I TYPE for a living)" :-D, 40 years ago, I "did my papers".

Great article.

Adam Bell | Jul 04, 2008 | 3:28PM

For a long I've been annoyed that companies that I do business with (example banks, credit card companies, etc.) don't see me as customer but as a 'marketing opportunity'.

I recently signed up with IngDirect bank and have been very pleased with the difference between them and my other bank (Bank of America).

We need more such companies that are glad to have us as customers and just chickens available for further plucking.

Russ | Jul 04, 2008 | 3:37PM

The rule of the marketplace has been and always will be CAVEAT EMPTOR. Buyer beware. No one can protect you. Ebay purports to protect you but come on....they let the same Ukrainian memory stick scammer register and reregister with the same name and address and everytime he reverses paypal charges stiffing the seller.

What is good about the internet is everyone is learning business. Ebay is econ 101 for the masses and that benefits NOT-Democrats in the long term.

As for the current oil situation / dollar collapes.....we will not exit this period until we drill DRILL DRILL our way out.

The dollar is collapsing and will continute to do so until we hit the oil futures market with open season drilling with no holds barred. Think it will not happen? Resistance is futile....the pain will be ratcheted up till you tap out and cry uncle.

Fred x | Jul 04, 2008 | 3:55PM

As usual Bob, you continue to be a voice of reason in an otherwise noisy media circus. Your columns go far beyond the limits of “techy” columns and get right down to it. Keep up the good work. Love your documentaries.

Greg | Jul 04, 2008 | 4:01PM

The irony of the situation is that the individual has much more power and flexibility when it comes to all matters commercial, but as the comic-books rightly teach us, "With great power comes great responsibility", as well as greater risk. That's the part that people don't want to face. Furthermore, the Nanny State, seeing more bad consequences from the failed education system it runs, punishes the rest of us by bailing people out from mistakes caused by their own stupidity and ignorance.

The Internet, modern law and modern economics has empowered the individual in ways that had never existed up until now. But in order to properly use these new opportunities more and more education is needed, and yet so many people are less and less educated. And of course, when stupid people screw up their lives they vote for politicians who promise to protect them from themselves, and we get the grotesque out-of-control government we have today.

The more important lesson of the liberty our forefathers fought and died for, and our servicemen and servicewomen still fight and die for today, has been lost:

You cannot exercise freedom without exercising responsibility. Freedom without responsibility is anarchy.

And the corollary, which more and more describes the peoples of the West:

The only way you can be relieved of your responsibility is to become a slave.

If we continue our infantile trends towards wanting to and trying to eliminate all the bad consequences of our decisions we will eventually end up at one or the other extreme:

Anarchy or Slavery

ConceptJunkie | Jul 04, 2008 | 4:15PM

Ye gods: please stop re-defining what a recession is. You may want to believe we're in one, but according to the *objective* data we are not. Recessions are not based on gut feelings, intuition or the price of tea in China (which is, generally, what all these cries of "recession, recession--the sky is falling!! RUN!!" seem to be based upon).

It's bad enough we see reality re-defined nearly every day by the media, politicians, etc. but let's not start doing it in what are, generally, incisive, intelligent, columns. If you want to help talk us into a recession (the media and some politicians seem to be desperate for one for the past two years going strong), that's your perogative, but that doesn't make it so.

Thank you.

ECM | Jul 04, 2008 | 4:16PM

To Fred x, drilling for what?

Eventually drilling for a dirt because that's all you're going to find. Oil is a non-renewable resource ... Meaning, get out from behind the wheel.

Bob, your wife is right but on the wrong time scale. You should buy some vacant lot up in the hills (over 250 feet in elevation) and deed it in your will to your grand-children. They'll be glad you did.

Charles-A Rovira | Jul 04, 2008 | 4:17PM

I think some people get the cart before the horse with respect to the subprime meltdown, and fail to see its true root causes. In my mind, the fundamental problem from which all woes flowed was a failure to understand the true nature of risk inherent in financial instruments, specifically securitized bundles of mortgages "backed" by the value of the underlying assets - private residences. This was a top-down failure, starting with big financial institutions, not Mary Doe fudging loan apps down at the Countrywide office. The accepted mathematical models for risk determination were (and still are) based on a flawed view of the fundamental nature of risk based on predictable Gaussian distribution when in fact large dynamical systems such as financial markets (or weather, or earthquakes) are anything but Gaussian or predictable. (I particularly recommend Nicholas Nassim Taleb's two books, Fooled by Randomness and especially, The Black Swan for anyone interested in following this idea.)

The immense short term profitability of subprime securitization led to an insatiable demand for paper to securitize, which led to pressure on mortgage originators to produce more and more of it. And why should a mortgage officer scruple (aside from the knowledge that each mistatement of fact on an application to a Federally chartered financial institution is a separate felony count, punishable by, as I recall, 5 years imprisonment and a $20,000 fine)? The government was not bothered by the widespread practice - the law was not enforced with respect to individual borrowers, and the oversight agencies took the reassurances of the financial institutions and their risk managers at face value. Politicians have law degrees, not finance degrees (not that that would have saved them), and anyway, they were making housing "affordable to people who never had a chance before" to experience bankruptcy and foreclosure. The ultimate infelicity was that easy mortgages fueled the speculative bubble in real estate prices, which in rising "confirmed" the "value" of the overpriced homes which collateralized the portfolios of paper. As my sons would say, "Sweeeeeet!"

So there is blame enough to go around, but in the end, it was the ready market for crappy paper that created the mess, and ultimately it was bad philosophy and mathematics that created the ready market. That, coupled naturally with the age old truth of mankind observed in the early 1500's by Sebastian Brant: "Die Welt, die will betrogen sein." - "The world wants to be deceived."

Popeye | Jul 04, 2008 | 4:21PM

Bob's an intellectual, so he's forgiven. If he or you don't think this time really is differnt, and if you think the muckities don't know what's going on? There's no excuse for being stupid! Get smart folks; http://www.amazon.com/When-Markets-Collide-Investment-Strategies/dp/0071592814
Not an easy read but one which touches on what's sorta going on. Also read; http://www.amazon.com/Futurecast-Superpowers-Populations-Globalization-Change/dp/0312352425

Joe Bailey | Jul 04, 2008 | 4:22PM

To all the Fred xers out there that want to drill, DRILL, DRILL our way out of this mess.

First of all, oil OIL OIL is not the answer ... OIL merely offers more CO2 for the atmosphere, which we can't allow.

The only real answer is CONSERVATION and INNOVATION.

djeff | Jul 04, 2008 | 4:32PM

One weird idea comes to mind: distributed lending.

Imagine a site where people come and ask for loans providing some basic details. Of course, certain designated intermediaries without an interest in the transaction would verify and measure up this person to say if he's legit, his credit score, etc.

Other people come in and bid to take part of the action. In other words, he starts off by asking for a 6% mortgage. People come on and say, "Yeah, I'll take a piece of that action: $100 for 12%." Others can some on, look at the numbers and go, "I'll outbid you: $100 for 10%." And so it goes until the shares of the debt are all bid for at certain rates. In fact, there will be a spread: 50% of the debt is paying %20, 30% is paying %10 and 20% is paying 6%." The site then figures out the actual interest rate required to pay out those positions and charges and collects from the customer.

As time goes on for the term, people can sell out their position for cash: "I've got $100 at 6% for 1 year on a good credit risk. I'll take $104 right now."

There is something similar for microfinance where people can bid on people's requests for microloans in the 3rd world.

Travers | Jul 04, 2008 | 4:38PM

Popeye that's a great idea. I'll take that action 100%.

Happy 4th Bob. I agree, there's too much of what essentially is fleecing in commerce these days. It's not just eBay, it abounds in the material world as well. But in my reading every day, I see a constant push towards a more 'customer' oriented way of thinking. Look at Seth Godin. Look at Valeria Maltoni.

Change is all around us. Still, I say
Be an American. Make a ruckus!

Jon | Jul 04, 2008 | 4:47PM

Prosper.com is pretty close to Travers suggestion

Jason | Jul 04, 2008 | 5:18PM

Leigh Chase has it right. "The sub-prime crisis has nothing to do with the internet." Choose one or more:

1) massive fraud by borrowers lying on applications
2) lenders enabling fraud by lax fact checking
3) securitizers misjuding riskiness
4) securitizers moral hazard (If they lose, government has to bail them out or economy melts. If they win, they keep it all.)

So it looks to me that what we need is better enforcement of existing law rather than reform. And current government policies seem to make future crises more likely, not less. Son of S&L!

Dave | Jul 04, 2008 | 5:32PM

Hey, it's just like all those SLAs we never read. Maybe everyone who ever got a loan on the internet is liable for something they never read.

Tony Patti | Jul 04, 2008 | 5:47PM

eBay's move was rejected by the Australian government this time round:

http://en.wikinews.org/wiki/EBay_Australia%27s_PayPal_only_policy_blocked

and a press release by eBay has been issued saying they are reversing their decision for now:

http://www2.ebay.com/aw/au/200807.shtml#2008-07-03085521

Whether their decision is based mosty around the ACCC ruling or around the mass 'bailing' of customers is unclear.

Paul King | Jul 04, 2008 | 5:53PM

Ebay and 'customer service' in the same sentence, but not accompanied by foul language? I've never seen that before. Ebay has the foulest and most corrupt, most nasty customer service that I have ever encountered in my entire life. Worse than Southwestern Bell had before they were subsumed into AT&T, and then AT&T took the reigns to make it even more terrible. I think Jaba the Hut has better customer service than Ebay.

In my opinion, Ebay and Paypal should be footnotes by now because of their customer service. I am waiting, hoping, & praying for the day when we talk about those two in the same way we discuss AOL. Any company that tries so hard to step on its customers' privates with mountain-climbing boots should be destroyed.

Gregory Scott | Jul 04, 2008 | 6:03PM

"Don't tell George W. Bush, but we are in a recession"

Which is an odd thing to say when the economy is growing. Funny how when a Democrat is president it takes 6 months of the economy being below zero before a recession is declared, but when the GOP is in charge all that has to happen is that the economy doesn't grow as fast as it did before.

Charming.

Lloyd | Jul 04, 2008 | 6:04PM

She was a very nice lady, too?

She was? She effectively said we made up your income so you would qualify for the loan. Please sign these legally binding lies so we can send your load app through.

She had the ethics of a con artist. That's not nice at all.

Michael R | Jul 04, 2008 | 6:09PM

Bob,
For some (non-technical) insights into the whys of these antics, see the recent books of social pioneer and street fighter, Jane Jacobs: Systems of Survival, and Dark Ages Ahead. Short, great reads.
I guarantee you will right us a column from a new point of view that will knock our socks off.

Don Huff | Jul 04, 2008 | 6:19PM

What?! Newspapers have real estate ads??? We just bought and sold a house and didn't look at a single newspaper for an ad. We were sort of bemused, though, by the lack of effort by most agents to fully utilize the internet. The only time I read a newspaper is if it is free. But then what do I know - I'm just one of those "America hating" blog readers.

Dave Wesely | Jul 04, 2008 | 6:51PM

I suppose it's fair to blame President Bush for the current economic downturn since he enjoyed such endless praise from people like Bob for all the years of growth we've had while he was in office. We remember all of the "thank you Mr. Bush" columns on this site as houses were doubling and sometimes tripling in value.

Who could have ever guessed that wouldn't last forever...

voxer | Jul 04, 2008 | 6:57PM

That's quite an interesting story Bob, I'll probably be forwarding a link for this article to some acquaintances at the SEC. What you state that "very nice lady" did sounds a lot like mortgage fraud to me. They've been arresting people for that as of late and if she did it to you chances are she did it to others, probably many others. You should probably expect a call from someone in law enforcement.

Paul S | Jul 04, 2008 | 7:30PM

For the very first time I strongly disagree with you.
The housing foreclosure problem is just a rerun ot the S&L crisis of a few years ago.
After that, rules were put in place to keep it from happening again. We can thank Phil Gramm for undoing those rules and, more than anyone else for causing the current mess.
One can only wonder how much dirty money he made off of the deal. The !@#$%^&* on the hill just turned their backs and pretended not to notice what he had done. Business as usual.
"Gramm wrote the laws that collapsed the Depression-era barriers between investment and commercial banks and gave the go-ahead for banks to diversify into unregulated, untested areas. Such deregulation helped fuel the current mortgage crisis."
Let's give credit where credit is due.

POED at con-crass | Jul 04, 2008 | 7:37PM

Once again, I am amazed that people seem to think the Internet REPLACES people/rationale dialogue vs. simply making connections. The web truly has morphed from being all about information retrieval to being all about making connections. And yes, the net does this far better than a newspaper could ever hope to do. But people still have to be involved. To make sense, to apply principles and good judgement. Anything less is asking for trouble.

Robert S | Jul 04, 2008 | 7:42PM

Well come on Bob,

Start a Craiglist yourself!!!

You surely have enough knowledge to get the db backend built and enough connections to get the word out. The free model works fine for Craiglist and even 'plentyoffish' earns a decent return from google ads on a db site the bloke built himself. Then you won’t be a subprime kind of guy and the wife can retire from RE.

Good luck

Paul | Jul 04, 2008 | 7:57PM

Great analysis of the mortgage crisis by Popeye.

The people selling the liars loans had no incentive to stop it because they immediately sold off those bogus loans -- and were under tremendous pressure to make as many bad loans as possible.

So what's a politician to do? Maybe nothing (in terms of long-term fixes). The market has taken care of it, without the unintended consequences of laws written by nitwits in Washington.

P.S. I've now failed the Captcha test about 12 times, even with my glasses on. Bob, isn't there a better way? Makes the Internet so un-fun.

eatapc | Jul 04, 2008 | 8:07PM

Come on Bob, I don't think you're telling the whole story. If the home loan wasn't justified by your true income, chances are it was going to put one or two hundred thousand dollars into your pocket from that refinance. I know people that took the money, and, oops, when the housing bubble crashed, got caught when they couldn't handle the reset from low "tickler rate" to true rate. So you just knew the old adage, if it looks too good to be true it probably is.

The Internet provides more information and service at a lower price, It's not a vaccine against stupidity.

jon | Jul 04, 2008 | 8:27PM

Bob, I think you may get paid what you deserve if you didn't lie about not making a lot of money. Your ability to take complex issues and trivialize them is some valuable skill.

Nicole B | Jul 04, 2008 | 8:38PM

I used to work in local cable advertising, part of which was a photo-classified channel on the cable system. Every Realtor(r) in town listed on the channel, even though every one of them hated it and hated dealing with us (we did our best, but it didn't bring in enough money to have a full-time producer sitting around waiting for the phone to ring, so they thought we were terrible). Anyway, one of our salespeople and I were talking about it over lunch one day, and I thought if they hated the channel so much, why didn't they pull their contract? What he said sticks with me today: "If one Realtor(r) sees another walking down the street in a sandwich board ringing a bell, they'll all have them in a week."

The US real estate business is full of pure greed (and absolutely no creativity. It needs to be exercised. Hopefully the subprime mess will weed the bad ones out, but I doubt it. Where are the lawsuits?

Eric | Jul 04, 2008 | 9:24PM

O.K. I'll tone it down a little.
I still think that congress deserves most of the blame.
They saw what happened during the S&L meltdown and
wrote regulations to prevent future problems.
Then they deregulated/removed/loosened those regulations.
Then the wolves moved in and ravaged the sheep.
I think that you must admit that some people made and kept a lot of money out of this at our expense.

PO@con-gross | Jul 04, 2008 | 9:57PM

Financial markets are international, while regulations are national. Thus there is tremendous leeway for unregulated nefarious activities. We are now paying the price.

Richard Sherman | Jul 05, 2008 | 12:03AM

Bob,
I've been reading your columns for a while now and have always been impressed, but I think you must have been in a hurry with this one! You whined "why the heck the Internet, which was very involved in enabling a lot of this bad behavior, didn't do even the smallest thing to help save us...." Who is "Internet" who was supposed to save us? The same "they" who caused the (debated) recession? Why are we supposed to be saved? Because it's fair? Also, I don't understand why you're using financial market terms to describe the Internet, which is much more than just a marketplace. And why use only one example, Craigslist which in one sense is a miniature Internet itself, in that part of the discussion?

Michal | Jul 05, 2008 | 1:24AM

The problem, of course, is that the government will just bail out all the bad loans so there's no reason to lend prudently.

pwb | Jul 05, 2008 | 5:06AM

You did not get the 330,000 loan, wife is selling RE (junk today Gold 2morrow); both ofUare mad; internet is open and you write of it's evils and beneficials. You are guru now blubblinging. A day late & dollar poorer is that it? and par for the course for all of us.. soon you'll (s/he) surf in for the spoils. We're all YOU and Wife w House and Home. Wife won't have to work, yet wive's WANT to work. To much crystal & leisure will do this too. You're ego is showing and her pet is too. Lost opportunity is why I read cringe; (you) it's for info that expands those idiots actualy getting a payroll ck/bonus and not working. sailing when not at the boardroom table is sad, but deriguor these days. Warning, live in the right state to keep your spoils when it unfurls and it will. Flordia tops the heap. Keep the mansion, go to jail and stay at home; access the spoils of cash, money, dividends, bonds, thrust funds, trust funds, the list is ENDLESS. Sir Black is only 2 blocks from home in Palm Beach. Wealthy real estate has no factor in from "regular" real estate values. Law & pricing for the rich and poor is real. If nothing else, be glad to meet new people via your wife on sales that exceed your turned down 333,000. Ego aside, it's another world as is your observations to cyberspace and corps. Congrats, enjoy both worlds. We are listening and awaiting. L

LSC | Jul 05, 2008 | 5:09AM

Funny how some people (including, apparently, you) see your story as a description of what's wrong with the internet loan market, when in reality the internet has absolutely nothing to do with it.

Some bankers encourage their customers to lie. They do this whether the customers come to them by the internet or walking in the door. And many many people foolishly sign legal documents (such as loan papers) that they haven't read, or even fraudulently sign them when they _know_ that the statements in them are false. You didn't. Good for you.

Our current mortgage (a classic 30-year fixed, negotiated over the internet to refinance out of the death-trap ARM we took from a local brick-and-mortar bank because it was all we could get approved for in time for the closing on the house) is quite satisfactory and involved no fraud. But we did have to hunt for it.

(On the other hand, we found our house by a method older than newspapers...we drove around neighborhoods we liked, looking for "For Sale" signs.)

Matt | Jul 05, 2008 | 5:26AM

eBay is still trying to force us to use PayPal, they lost a battle but the war is still on.
Oztion is the best Aussie alternative.

Rob | Jul 05, 2008 | 5:45AM

You're basically saying the guns kill people. Like hell they do (they don't). The Internet like our own 10 fingers is a tool for us to use. If we use it wisely (hence responsibly) we can achieve new things and new goals. Use it stupidly (and irresponsibly) and we will be eating dirt as a consequence. The issue is elsewhere: The individual needs to be aware that he's responsible for the freedom that was given to him and ultimately it's up to him and no on else. You've written it yourself: you declined a loan that was based on a baseless number and no one but you cared about it (broker's reaction).
The Internet is based Libertarian ideas and tries to promote Libertarian thinking. Most of human kind just isn't capable of Libertarian way of life :-(

John Doe | Jul 05, 2008 | 7:45AM

There is an interesting article on the subprime mess here: http://www.takimag.com/site/article/the_diversity_recession_or_how_affirmative_action_helped_cause_the_housing/#When:01:24:00Z

The short version is that the Clinton and Bush administration set up racial quotas for mortgage loans and companies could get in trouble for not meeting these quotas. This means a lot of people were getting loans that didn't qualify.

Then other people figured out how to package these loans and resell them, so they weren't actually taking the risk. Other people figured out how to take advantage of the new borrowers who couldn't understand the paperwork they were signing. Selling them houses at inflated prices and interest rates, so default was almost certain.

Joel Upchurch | Jul 05, 2008 | 8:41AM

I'm a Florida real estate atty, er, a FORMER Fla real estate atty, and I'm here to tell you that this sort of stuff happened with all non internet firms as well.

Also, plenty of uncollectable mtges were granted
to people who didn't tell a fib, much less a lie, because the lending standards were so incredibly low.

If they had qualified you for that loan that you obviously couldn't pay back, with your true salary, would you have taken it?

lawyerliz | Jul 05, 2008 | 8:47AM

Hey John: has it ever occurred to you that if most of humankind isn't capable of the libertarian way of life, then perhaps society shouldn't be structured that way?

responsiblecitizen | Jul 05, 2008 | 10:04AM

I view this as a problem with the technology deployed for submitting loans. It used to be that you filled out a loan form with all your information and it was submitted to a loan analyst for approval.

The computer could have just replaced the analyst by requiring a two step process by which the processor submitted data and program approved it. Instead, the program smarts were put into the display application. Now all processors could see the business logic and know what information it was required in order to pass an application.

It probably didn't help that processors got paid by how many loans they processed. Loans only become bad long after the processor got paid.

Rich | Jul 05, 2008 | 10:12AM

Bob,

Did your wife really become a real estate agent in the slowest market in recent history, AND while the internet is rapidly eating away their very existence???

mkkby | Jul 05, 2008 | 10:58AM

Bob,

A Realtor at an open house for a lovely, little ranch house recommended a mortgage broker who could really do wonders for my husband and myself. We met with him and tried to give him a realistic picture of our situation. We were reassured that we could qualify for the loan.

When we went in to sign the paperwork for the pre-approval, a different person met us to complete the paperwork. The numbers had been "improved" to assure we would get the loan. I paused for a long time with pen in mid-air above the signature line. I finally put the pen down. "I'm sorry I can't sign this, I said."

During the week that followed my email and voice mail was filled with messages from the broker rationalizing that no one was "intentionally" trying to cheat. Looking back on it now, I realize the we narrowly missed being one of the "unfortunate" homeowners.

Regular brokers were caught up in irrational mortgage exuberance, too.

CK Wilde | Jul 05, 2008 | 12:45PM

eBay's mistake was to look for sheep to shear in Australia instead of in the neighboring New Zealand.

Now seriously, a bank that lends $300,000 without having a human being oversee the process is looking for trouble, unless the fine print allows them a back door to arbitration, for example. There's a really good cover story in Business Week regarding arbitration in which customers are being screwed.

Tomas Sancio | Jul 05, 2008 | 2:51PM

If I loaned you money to buy a house and a mortgage is signed, then we should be prohibited to sell the mortgage to someone else. In other words, we should be stuck with each other until the mortgage is paid off.

T Jordan | Jul 05, 2008 | 2:59PM

Bob,

Your wife should spend some time at http://www.bloodhoundrealty.com/BloodhoundBlog/

,dave

Dave Barnes | Jul 05, 2008 | 4:02PM

Everybody is pretending like the sub-prime mess is somebody else's fault. The fact is, a lot of people and then the government were pressuring banks to find a way to loan money to low income people so they could by homes. Once the system was in place it was easy then to make loans to anyone. Never mind their ability to pay it back. Banks did exactly what we wanted them to do. They stopped asking for collateral and they stop looking at your income. Because thats just mean and unfair, only loaning money to those who can afford it. We all got exactly what we deserve. Except of course those of us honest enough not borough money we couldn't pay back.

corntrooper | Jul 05, 2008 | 5:04PM

Good luck to your wife. My wife was in real estate several years ago and basically split off from her firm when it became apparent the broker was more interested in sucking money from his "partners'" bank accounts than actually performing his job. If you ever want to see when a profession is on its way out all you have to do is count the number of ethics hours that are required for continuing education. Either you have ethics or you don't.
No amount of hours is going to "give" you ethics, it only teaches what the regulators are looking for now.

Patrick | Jul 05, 2008 | 7:58PM

I don't know if ebay here in Australia is losing customers or not, as I've seen no news articles to that effect. I know that for myself, I can no longer be bothered with the hassle of ebay when I add in the margin that Paypal takes. However, they are still enforcing the paypal only rule in a very sneaky way.. http://www.smh.com.au/news/web/ebay-still-forcing-sellers-to-use-paypal/2008/07/04/1214951011001.html

Oliver Townshend | Jul 05, 2008 | 11:52PM

About 5 weeks ago, This American Life had a whole hour dedicated to the sub-prime mess. Very interesting report

What it came down to is a few things:


  • Banks no longer keep their mortgages. In the old days, you get a mortgage from a bank, and they were stuck with it for 15 to 30 years. They certainly made sure you could afford it because if you couldn't, they'd be stuck with the house. Now, mortgages are sold almost as soon as the ink dries. The bank can sell the loan and make a profit. If you default, it's someone else's problem.

  • There's a ton of new money out there from China and India looking for safe investments. Trillions of new dollars. American treasuries paid extremely low rates, and during the Clinton administration, there were less and less treasury notes to buy. At one time, the Clinton administration eliminated the 20 year treasuries.

  • The mortgage market was considered rock solid and safe. For almost 50 years, default rates on mortgages were low and mortgages pay a decent rate. Once Wallstreet figured out a way to monetize mortgages, the race was on to sell as many as possible to investors. The This American Life story goes through how the market started out fairly strict, but the standards started dropping because of the mad dash to feed this market

The program can be found at This American Life and is called The Giant Pool of Money. The episode costs about a dollar and is well worth the cash. There's a shorter free version on NPR called Global Pool of Money Got Too Hungry.

In the TAL version, you meet a guy with no job who got a tremendous loan, a former bartender who became one of the largest mortgage brokers in the country, and hear the story how one tiny Nevada bank became a major player in this market.

I worked for Bank of America as a programmer, and the stuff we were doing scared the bleep out of me. We were taking loans, packing them together, dividing them up into slices, then combining those slices into other instruments, dividing those up, and maybe repeat the process a half dozen times. It took us hours to calculate out the value of these instruments, and the assumptions we made were just ridiculous. I never understood how you can package up a bunch of bad loans, add a bit of pixie dust, then claim the resulting instrument is investment grade stuff.

I left the company about a year and a half ago before things dropped out of the market. I thought things were absolutely crazy there, and apparently I was right.

Robert Cringely:

It wasn't the fact that your loan came from the Internet that had the invalid income. My local bank would have done the same thing. As one person said on the TAL show, when we said that you can state your income and we won't check because it's a nodoc loan, we're asking you to lie.

David W. | Jul 05, 2008 | 11:54PM

You are on the ball when it comes to ebay/paypal and customer service. I had a health issue and couldn't ship some items a couple of years ago. No problem, I didn't take the money out of the PayPal account... Both PayPal and eBay refunded the customer's money, (double) and hit me with the charges / fees / etc. and suspended my accounts. Suspended accounts can't print out their histories (on both sites) and no one would talk to me to get the needed records to dispute the claims, nor would they even TRY to help resolve this.

On another note, the Sub-Prime mess is a lie. Less than 25% of the defaulted loans were from sub-prime borrowers. A real issue is that people who had 700+ credit scores couldn't pay their bills. Many because the economic infrastructure is collapsing and this is being hidden from the unaffected folks by calling it a "Sub-Prime" collapse. i.e. Only people who had bad credit (

I'm a Dot.Com guy who went into the Mortgage industry for a few years starting in early 2002. Even now that I'm back into the computer field, and have direct access to bank / mortgage records, I've found that the original loans (That are now failing or in default) were written against people with higher credit scores (700+), but they are now unable to pay their bills. Many due to economic downturns, downsizine, etc.. Some had a lifestyle that kept them living paycheck to paycheck, so they were unable to adjust when layoffs, and other factors, overtook them.

Chip | Jul 06, 2008 | 12:06AM

You talk about the Internet removing economic friction as though that were inevitably a good thing. It does seem to me that even in engineering, friction can sometimes be a positive, useful force (brakes, for example!). In the Internet economy, a little 'friction' would be seriously desirable. It's the frictionless nature of email which makes spam viable, for example. And a little friction in slowing down the ease of loan applications would surely be desirable.

David | Jul 06, 2008 | 12:24AM

What the internet is showing us is that we do have a voice, look at how pushy salespeople get shund from social networks when they falsely engarnish their solution(product).

You didn't mention Angie's List, sites like this, give the people the power to influence and resolve situations a lot better than the BBB or Relevant inspectors.

In time we will see that we can use the internet to help us govern our selves and release some of the heavy work the officials hate to do.

Video and Verification are the main costs, Can't wait for T1 to the house when we can finally choose our media source ourselves. But, what has to first happen is that "We" have to take back our internet "its your(the people) net", don't forget this. We keep on telling this to China.

CraigsList and AngiesList do this down to the "long tail", hence gives power back also to the local companies that do a good job. Its the new age of community commercials and social networks.

What the world needs to do is:
Save Energies of all kinds. like doing things right or learning to do them better and if someone has a good idea He should get the royalties from any company that wants to use it in their area, lets go global to save the Earth and change the patent laws. That's what I say...
Have a nice day...

Jean-Luc | Jul 06, 2008 | 1:24AM

Why do Real Estate agents ALWAYS have to put their pictures on their ads and listings! I'm sure they are all very nice people, but they always look smug and overconfident when I see their pics on shopping carts, bus stops, and leaflets.

I know thay are a necessary part of society, but I deplore them for their supposed vanity. IT makes my stomach turn.

Steve Dorsey | Jul 06, 2008 | 10:37PM

It's not the toes we no longer need. It's the toenails!

Chad | Jul 06, 2008 | 11:36PM

Bob, I guess you never bought anything from eBay Australia. The fraud is so rampant I prefer to take my chances on Hong Kong, and Eastern Bloc Countries. If Australia is the country the item I want is in, I will not buy it, or I would pay three times more to get it from a "reputable site". At least with Paypal, eBay could police the fraud.

Martin Schwabe | Jul 07, 2008 | 1:36AM

"Why do Real Estate agents ALWAYS have to put their pictures on their ads and listings"?

Back in the 1970 & early 80's when I started, Real Estate agents did NOT put there pictures on there cards and everthing else. Then Woman started getting into residential Real Estate and most of them had there pictures on there cards, to maximize there assets!
After a while everyone had to do it or you looked like you had something bad to hide, like your mug. Many agents try to look "Confident" becouse that is what they think you want in an agent, and if they "over do it" then they tend to over do everthing.

g-man | Jul 07, 2008 | 1:37AM

The problem with eBay/PayPal is that they somehow got the idea that *they* run an online store, and that all the people buying items are *eBay Customers*. BZZT! Wrong. eBay/PayPal are only service providers, and not very good ones at that. People *selling* items are EB/PP's actual customers, and they just keep making changes that upset them for no particular reason. (By either hiking fees or implementing poorly designed/tested technology "improvements".)

And, yes, EB/PP do seem to believe that both sides of the equation (buyers and sellers) are sheep which should be immediately be sheared. eBay should be required by the US Government to accept Google Checkout. To me, it is just a blindingly obvious restraint of trade to maintain the PayPal payments monopoly. There is no reason that Google Checkout couldn't implement any API eBay makes public, and work with eBay just as well as PayPal.

Of course - this leads to my other question. Where are Google Auctions? Google is in an ideal position to create an eBay competitor. And, they could offer sellers the choice to pay a higher commission if an item is sold through advertising on the Google AdWords network. (On most items, I would be happy to pay a higher commission as long as I didn't also have to pay for the AdWords ad itself.)

Johnathan Grant | Jul 07, 2008 | 3:21AM

The eBay saga is not over yet, look what's in store for us all (no pun intended) from an Ebay insider:

http://blogs.smh.com.au/mashup/archives//019361.html?page=2#comments

RIPebay | Jul 07, 2008 | 3:38AM

The next big sub-prime will be for oil. I do not think that oil price has raised to this level because of shortage of oil. The cost is this high because, the banks who have lost money in real estate sub-prime cases are heavily hedging on oil and hence the sharp increase in oil price. If this is not controlled, soon we may see another sub-prime.

http://www.eservicebazaar.com

Vijaya | Jul 07, 2008 | 6:24AM

"Don't tell George W. Bush, but we are in a recession

Cringely needs a better dictionary.

Are times hard? Yes.
Are we suffering from StagFlation? Undoubtedly.
Could we be heading into a recession? Possibly.

But we are not in a recession just because a bunch of attention-grabbing talking heads say so.

A recession is defined as six consecutive months of negative growth. This has not been met - yet.

Wizard Prang | Jul 07, 2008 | 10:36AM

I don't really think disintermediation did a whole lot to inflate the subprime bubble, it was (as so many bubbles are) driven by government (in)action. Glass-Steagall was repealed, interest rates were slashed (to inflate after the dotcom bust and 9/11) then kept too low too long, and mortgages got sliced and diced and repackaged so thoroughly that mortgage-backed security (MBS) holders are having difficulty foreclosing since they can't find the title paperwork!!

Almost all of this had nothing to do with the internets. If computer technology is to blame for anything, it's for the risk model voodoo math and the enabling of complicated MBS and CDO (collateralized debt obligation) products. And your wife definitely picked a great time to go into Real Estate, I'd say it'd be like going to school to be a web designer in August 2000 or so..

Dr. Kenneth Noisewater | Jul 07, 2008 | 11:05AM

Bob (a.k.a. Mark Stephens - http://en.wikipedia.org/wiki/Robert_X._Cringely), yet again you present me with cause to out you as both an idiot and a fraud yourself.

You hate Bush, we get it. That does not justify calling low economic growth a "recession". Growth is inherently POSITIVE, meaning the economy is GROWING, however slight the growth may be, the economy is not RECEDING, which would indicate a RECESSION, which we are not in.
You know this, but are a blatant, biased boob which is why you make idiotic comments like that.

As to the mortgage mess. It comes down to two things:
1) Rich people are greedy.
2) Poor people are stupid.

The reason banks don't care if people can pay the loans or not is because they just re-sell them anyway and the people they resell them to don't care either because they own the house and if the (mortgage) buyer can't pay, they resell the same house to someone else. And they don't care if that someone else can pay either, because they just wash, rinse and repeat effectively renting the house out to people who will never be able to own it.

Poor people want all they can get and don't care how they get it and aren't smart enough to realize that equity and ownership are the reasons to buy a house with a mortgage.

When I was looking for a house I saw an ad on TV for $300,000 worth of house for $700 a month. Having already run the numbers that was so far out realistic it couldn't possibly be true, so I never gave it a second thought.

Thank Rock financial and their "quick and easy" loan applications (no W-2's!!!) for assisting in the grand rip off. Why would anyone trust something as important as a house to a company that doesn't even want to verify income?

Boys and girls, if you're so damned stupid that you got yourself buried in a mortgage you couldn't afford - the problem is YOURS.

And so the blame.

V-O-R | Jul 07, 2008 | 11:33AM

It's too bad the media continues to bury the fact that most of these 'sub-prime' mortgages were simply ARM's. I wasn't so dumb to go for an ARM when I got my mortgage, but I also got less of a house than my friends did who went with the ARM. With their fancy houses they had better work parties, and almost certainly benefited financially. Now, when the rates adjust they demand _my_ money (in the form of tax redistribution) to bail them out? Sorry, Charlie, you've got yours.

Bill McGonigle | Jul 07, 2008 | 1:49PM

I especially appreciate popeye's steers to the Taleb books, for lately I have been writing on the following: (a) the default worldview of every creature is magical; that is, the senses of creatures great and small report only Change, seemingly uncaused and uncausing, agentless and agencyless--which we know to be fantastic because absolutely no change is uncaused; but also that (b) offsetting their default magical worldview, creatures great and small, to varying degrees, instinctively perform Science--that is, they discover, through operations done on records of perception acquired through experience and stored in memory, *non*fantastic, *non*magical agency and use it to predict futurity. ("Sick the last time I ate those red ones; eat the yellow ones instead." "Those stripes associate with Hurt; avoid." And so on.)

The concept that "the world wants to be deceived" is a bit harsh; rather, until the scientific instinct operates (or is allowed to operate) sufficiently for a creature to be able to determine and ascribe, and therefore predict, Agency, ascriptions of Fantastic Agency serve as thought-stopping placeholders until fantasy becomes impractical ("impractical" as in "those who didn't believe this nonsense died/failed to thrive/were selected out").

[P] In a very useful sense, Intelligence can be gauged by a creature's ability to defantasize the surface presented him by his senses. So here's a thought topic for exploration: [P]

[P] Exactly how is our Internet empowerment to search for real estate online "eliminating the middleman" if that empowerment only comes to us wafted on a cloud comprising multiple silicon fabs, CPUs with millions of transistors apiece, thousands of telecom engineers and installers, fiber fabs and computer and display designers, fabs and distributors, and the electrical power grid that feeds them all? Ah, yes: *At the point of use* it appears that the middleman has been eliminated--but actually many, many more middlepersons have been intercalated between you and your object. The purpose of a labor-saving device is reduce your labor while *increasing* labor, intercalating more middlemen, beyond your immediate senses such that the tool in your hand appears magically and appears to be magical.

[P] Always solve, never stop solving, the surface presented you by your senses. If someone offers you a sweet, mind-numbing thought-stopper--"it is what it is" "absolutely free" "no documentation loan"--refuse it. *Never stop solving the surface presented you by your senses.*

David Newkirk | Jul 07, 2008 | 1:51PM

A couple of things:

1) Lenders had loosened up their lending requirements in part because of CONGRESS. After badgering mortgage companies for years that they discriminated against minorities, lenders (underline COUNTRYWIDE) started giving just about anybody a loan, along with some nice jumbos for new McMansions for some certain Congressmen.

2) Now that mortgage companies (underline COUNTRYWIDE) are in the hole, those same Congressmen (like Chris Dodd) are trying to bail out their old buddies at taxpayer expense, meaning that as a married father of two(who can't afford a house) I'll have to pay for simply being one of the responsible people.

The sub-prime problem isn't the market as much as it's government trying to fix the market, and the cure is always worse than the disease(see the effects corn-based Ethanol has had on food and fuel prices for more proof). Now everybody has to pay for the mistakes big-stupid-leftist-government has made. Not that PBS would care to do a FRONTLINE special on it.

JB | Jul 07, 2008 | 3:05PM

So do you think your wife will be successful as a new real estate agent in 2008, precisely because home buyers need a trained advocate to look into things offline that they can't effectively do themselves over the Internet? That seems to be the point you were driving at, although you never quite got around to making it.

I wish your wife well, because I think that there is still a need for the services that licensed real estate agents can provide, along with other professional human beings in other areas of commerce and finance.

Wheat Williams | Jul 07, 2008 | 3:22PM

Following a previous comment, I have also had a very positive experience with ING's online bank. They are very focused on a positive customer experience. I have only used their checking account, but I know they offer home loans as well. They are one of the few banks that didn't get crunched by the sub-prime crisis because they refused to make those loans to begin with.

Bruce_R | Jul 07, 2008 | 3:30PM

Peer-to-peer loans has the potential to make things interesting for banks. The link below is of an interesting interview about just that. Why put your money in a .5% savings account while the bank lends it at 8%?

http://www.bai.org/bankingstrategies/2008-may-june/cover/

Forest | Jul 07, 2008 | 4:19PM

"It was labeled "total household income" and was almost twice the pitiful amount I actually earn. She was a very nice lady, too, and explained that number was the variable required for all the ratios to be correct so I could qualify for the loan."

Good for you Bob. I spent 2 hours reading my loan agreement, much to the chagrin of my wife and the loan officer, and understood everything before I signed. If people accepted or did not even bother to read the contract to make sure everything was correct before they signed for a lifetime of debt and then got their houses repossed I say tough luck. Learn for next time and do a better job and apply lessons learned.

"Do these loan referral outfits like LendingTree and LowerMyBills and the many, many others EVER say, "Wait a minute, pardner, there's no way you can qualify for any loan, much less that no-doc super-jumbo you have your eye on?""

Why should the lending agencies look after your best interest. No one is more interested or barring mental issues should be more interested in your best interest than yourself. Take the time to educate yourself and REMEMBER your signature on a document binds yourself and maybe your Soul (yeah a signature is that important) to the terms of the agreement and potentially the legal precedents that have been ruled on in contracts containing similar terms. How do you get to Carnegie Hall -- PRACTICE, PRACTICE, PRACTICE; How do you minimize the risk inherent in a signature -- EDUCATE, EDUCATE, EDUCATE.

"Here's why I bring this up. It is clear to me that government (ANY government, not just the U.S. federal government) and Wall Street have no idea whatsoever how to handle the current crisis. They are just trying to look busy while protecting their own interests and allowing those affected to muddle our way through this mess to some kind of solution."

Hallelujah and amen to the massive opportunity being created RIGHT NOW for those who can operate in all of the chaos and have some money to invest. Remember -- LOVE the CHAOS, the chaos is your friend, however do your best to minimize any and all risk because friends can turn.

"If we're on our own we should solve our own problems using the tools at our disposal."

Again this is mostly true and who better to look after your own best interest than yourself. This is not to say that all inherent risk can be taken out of the equation, however residual risk can be minimized.

David Cramer | Jul 07, 2008 | 4:27PM

Bob,

You state quite clearly that the U.S. is in a recession, however the fiscal numbers from the first quarter show otherwise. The economy has slowed, but a recession is defined as two quarters of _negative_ growth, now slowed positive growth. There was roughly 1% growth in the first quarter, which means that we are not currently in a recession. Maybe we are recession-bound, but we're at least another quarter away right now.

Andy | Jul 07, 2008 | 4:34PM

I work with a friend of mine operating a web based store. Both of us were layed off from computer related jobs, and the job search sites seem to have so many competing for the same jobs, that we were rarely getting interviews. So we pooled our money and started the web site. At first we lined up suppliers to sell mainly computers and parts, but found that the margins are tight. I had work experience with supply chain equipment, like handheld bar-code and RFID equipment, so we lined up suppliers to offer those products as well. Such products are mainly business to business and If we were to attempt to guage the econnomy by the number of requests we get, you think the econnomy was booming.

On a negative note the sub-prime meltdown has banks running so scared, we cannot get cash flow loans to cover the cost of products for orders we have already received. Since our suppliers require that a business like ours be in business for more than 2 years before doing net terms, we have to pay for the product up front, thus limiting what we can do to the cash we have on hand. The banks are so gun shy they will not act on a sure thing and would rather do the high risk house loans.

Many banks suggest going to the SBA, but the SBA's own site states that they will not do anything for businesses younger than 3 years and require those to have credit scores better than a 700. It used to be a business could go to the SBA if they had been denied by 3 or more banks. Not any more.

Exo

Exothermic Reaction | Jul 07, 2008 | 6:42PM

Cringely,

Several friends and I have started what we hope to be one of the buy side disruptive sites you are looking for (SeeClickFix.com). Internally we reference Craigslist frequently.

Our site is focused on local non-emergency issues. Think graffiti, potholes or dumped trash. We've found that reducing the time it takes a citizen to report an issue to the appropriate responsible organization dramatically increases the average joe's willingness to engage in the process.

I'd love to hear what you think.
-Kam

Kam | Jul 07, 2008 | 8:26PM

Long ago, when the world was very young, Frank Herbert (yes, the guy who wrote Dune) wrote a few novels about a future in which things went very smoothly indeed. Government had become efficient, rules were implemented easily...and it all was horrible, because it all was moving faster than humans did. Accordingly, there was put into place a branch of the government devoted to sabotaging the rest of the government. Results were predictably amusing. I think the books are out of print...as are the novels he wrote in which you really REALLY didn't want to take your case to court because the losing lawyer was eaten. Or some such.

Efficiency is overrated. Life is messy. But this is not news...30 years ago, when I went to refinance a mortgage taken out at a high interest rate, I found out that the mortgage broker had put a wrong salary amount into the original contract...after I'd signed it. So it goes.

AlanK | Jul 07, 2008 | 9:36PM

A recession is commonly defined as two consecutive quarters of negative GDP growth. Not six months, not what the news casters say, etc.

On top of that, the BEA (http://www.bea.gov/) puts out the quarterly GDP information as soon as they have it. Then it is revised as needed.

Basically the BEA declares the start and end periods of a recession after the fact. You have to be in at least the start of the third quarter of negative growth before you can say that "we are in a recession" and then the BEA may disagree with you and/or revise the numbers.

The European model is to wait until the information is sure to be correct, then publish it. We publish, then revise.

ChrisM | Jul 08, 2008 | 1:30PM

A couple of thoughts about the Mortgage crisis:
How many other people who were put in situations like yours didn't even bother to read the completed application? On the other hand, if they couldn't figure out a basic budget and see that their income didn't match their expenses, maybe this will be a wake up call.

Remember during the mortgage boom (before it busted)? I was getting dozens of Real estate spams per day, now that number has gone to 0 (some of that is due to a better spam filter, but the concept is still valid). Let's face the it, spammers are criminals, and those who used their services were accomplices in their crimes. Play with fire and you are going to get burned.

DWL | Jul 08, 2008 | 3:33PM

The Internet is a tool and we are the tool users. How the tool effects our life is in how we use it. For good or ill, we have done this to ourselves. We being all of us, bankers and bank customers included.

We provide the rules in which the tool is used. If we allowed the game to be rigged, than why are we complaining now? Fix it and move on.

It is sometimes a painful learning experience that a democracy is a participatory government (unless it is not a democracy). If you don't want bad things to happen, get involved and do something about it.

James | Jul 08, 2008 | 4:22PM

wait a second. you think the little toe is vestigial? you clearly don't play any sport of any sort.

and i find it terribly easy to blame government for society's problems. given that it is the people who elect their government (and thus an ideology), the blame comes back right back at us. however, needless to say, it's always the poor and voiceless that get screwed.

in my view, the blame always (and i really think this is true of every single type of social injustice that exists in a society) lies with the media. journalists should have an obligation to discuss these things with maturity and without bias. they rarely do, anywhere in the world.

pd | Jul 09, 2008 | 12:05PM

A recession is defined as two quarters of negative GDP growth. I'm not seeing in the stats here: US GDP

The politicians and talking heads telling us how bad things are aren't showing up in the numbers. Sure things are slower, but that's not a recession.

Bill | Jul 09, 2008 | 3:36PM

For all the anecdotes about mortgage fraud there is no way that fraud by borrowers runs to the types of numbers we see in the media. Beware of such a simple explanation for what took place.

What has happened is that until this all sorts out the value of investor's mortgage portfolios are impaired because they are not readily marketable. When value is impaired the owner of the portfolio must write down the value which results in a loss.

Will C. | Jul 09, 2008 | 4:31PM

Lee in London - yeah, and when someone can prove to me that the taxes we pay are not being wasted on useless stuff - and we still don't have enough money, then I'd agree to tax increases. There's way too much waste in govt to even consider higher taxes.

Now, back to the article - the problem is, always was, and always will be greed. Pure and simple, making money in the short term will always win out over the long term 'what's really good for the country'. No one cares about tomorrow if they can make money today, and that includes our wonderful elected officials. The only way to prevent more issues like this is to outlaw greed - good luck!

Jim Cray | Jul 09, 2008 | 6:47PM

I interviewed at LowerMyBills.com in Santa Monica. The entire tech dept was young Indian guys. (Those dancing cowboy graphics were done somewhere else). They asked me some nonsense questions and I could tell by their attitude they had no intention of hiring me. So I sent an email to the hr dept and told them to watch out because the Indians had taken over. Then I got a response back from the CEO blasting me as a racist and that I would never work for the company. So then I found a site on the internet that detailed the number of H1bs. LowerMyBills had more visas then they had tech employees. This was after the dot coms had dropped and by then most of my friends in tech had been laid off. The CEO made a fortune selling the company. It didn't occur to me at the time that one reason for all the foreign people was they didn't want questions about the issues you raised. The programmers needed to come up with an algorithm to produce the number for your salary. Any American would realize this is not proper. The foreign guys wouldn't even realize it's wrong. Then you have these mostly women selling the mortgage who can just blame the software for producing the number and it's not their responsibility. This is what is ruining America.

Frank P | Jul 09, 2008 | 8:08PM

Matt Coffin is the LowerMyBills founders name. He actually threatened me so he could make a fortune off his scam. Someone should put him in a coffin. That's what it's going to take to clean up this country.

frank palardy | Jul 09, 2008 | 8:12PM

Two words: Angie's List.

elmegil | Jul 09, 2008 | 10:18PM

I don't see intermediaries as being protectors, particularly when it comes to real estate agents and mortgage brokers. Both parties get paid a commission at the time of transaction when a home is sold, regardless of whether such a sale makes any sense.

Their interest is to see people borrow more money to buy more expensive homes, so they can take a larger cut, and to do the transaction faster, so they can earn more commissions per year.

There were plenty of intermediaries in the sub-prime crisis, and they weren't there protecting us.

Ben Supnik | Jul 10, 2008 | 11:15AM

But, why where the lenders so sloppy?

Believe it or not, it's because the Germans, French and Italians didn't have enough children.

http://www.atimes.com/atimes/Global_Economy/JE20Dj05.html

The monster and the sausages May 20, 2008

bob | Jul 11, 2008 | 1:56PM

The folks arguing that we're not in a recession remind me of the arguments about 'prescriptive' vs 'descriptive' dictionaries. Prescriptionists think words mean what is written someplace; not what the person speaking actually intends to say. They are always behind the curve.

How was a recession defined before this most recent one? I don't know but I do know it was different. As someone pointed out, defining the start of a recession is a lot like defining the start of a drought. It isn't unitl it doesn't rain for a long time that you even begin to realize it hasn't rained in a long time--the drought started after the last time it rained. Definition 1. Then you realize it didn't actually start until the ground was a certain dryness. Definition 2. Then you realize a drought is actually getting less water than you anticipate; that it isn't getting no water at all. Definition 3.

The US participates in a world economy. If every other country advances three steps and we only advance one step, then we have receded in the economy even as we "advance." This latest recession (the one we actually are in) won't be correctly defined for at least 3 or 4 years, because it requires a more inclusive definition than just the USA's GDP.

The problem with "presciptive-oriented" people talking economics is that economics--like language--is the sum of people's choices in how they behave--it is not the sum of how they _should_ behave.

MikeM | Jul 11, 2008 | 2:51PM

I think one of the reasons the realty profession is going downhill is the percentage clause. I've heard Realtors--officially licensed ones--cannot offer hourly services. Therefore, they get six thousand more dollars for selling a $400,000 home than they do a $300,000 one. That's the failure on their side to regulate their own costs. Where it fails the homeowner is that Realtor gets nothing--nada--if the home doesn't sell so it's in the Realtor's best interest to enticed the homeowner into taking _any_ offer. The homeowner 'loses' whatever money the offer falls below the asking prices; the Realtor appears to lose 6% of that money, but actually gains the commission. Ask any homeowner about turning down a "reasonable" offer when it's the only one on the table.

There is a perverse incentive there. As homeowner, I'd prefer a to pay a flat fee for work done because that means the incentives work more in my favor.

MikeM | Jul 11, 2008 | 2:58PM

Here is a really good video explaining the subprime mortgage problems.

The video explains discrepancy in risk-adjusted returns for these financial brokers. They made obscene amounts of money without taking on any risk. Assets are no longer a function of value but a function of liquidity.

Foreign institutions such as Chinese banks hold a large amount of mortgage backed securities. Warren Buffet said that the US was a master at getting other countries to purchase our bad debt (paraphrased).

Not The Lender | Jul 11, 2008 | 3:44PM