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What's in your junk mail? ::
It occurred to me yesterday that the stream of credit solicitations in the mail has ended. No more offers for home equity lines, credit cards, debt consolidation. The only exception in the last month or two has been the couple of banks from whom I do have credit cards: they try to get me to use cash advance checks.
I remember being disturbed 5 or 6 years ago when my stream of email spam expanded from porn and male enhancement products to include mortgages. The junk faxes tacked on the wall at work expanded from timeshare/vacation solicitations to include mortgages.
So I am sorry if this appears un-American or something, but I consider it a good thing that those solicitations and that era of promiscuous lending is over.
In Compelling Banks To Lend At Bazooka Point, Mish writes:
We are in this mess because banks lent money to anyone and everyone including those with no possible means of paying the money back.
The US is in a recession, consumers are cutting back discretionary spending, there is rampant overcapacity in every sector but energy, and there is no reason to go on a lending spree. Furthermore, there is no reason for any qualified buyer to want to borrow. Why would any responsible party want to expand in this environment? The only people who want to borrow significant sums of money now are the very people banks should not want to lend to.
Thus the best thing banks can do with that money is sit on it. Yet the penalty for sitting on it is the difference between what the Fed will pay on bank reserves and the 5% interest banks have to pay at bazooka point for borrowing money they did not want in the first place. If banks do start lending like Paulson wants, defaults are guaranteed to increase dramatically.
What I do find in my mail are many solicitations from charities. It seems that every charity I ever gave money to is desperate for me to give them more. It makes me sad; how much of the money I gave them do they use to send me more desperate pleas? (Yes, I can go research that and factor that into my decisions.)
The same goes for catalogs (three in Tuesday’s mail alone). I guess the manual for How To Have A Good Christmas Shopping Season includes sending a catalog to everyone who’s bought something from you in the last 3 years.
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2 comments
Hi Doug,
Long time...
“In Compelling Banks To Lend At Bazooka Point, Mish writes:
We are in this mess because banks lent money to anyone and everyone including those with no possible means of paying the money back.”
I’m not sure I completely agree with the premise. Yes, credit was lots easier to get for a while, but I’ll bet the majority of borrowers that had to default were confident in their ability to pay, had jobs, and didn’t expect their jobs to tank, get shipped overseas, or just disappear. Furthermore, many sub-prime lenders deliberately misled people into taking loans (who admittedly might have been naive or unrealistic about owning a home)with the intent to foreclose; of course, they didn’t anticipate a depressed housing market. Nobody expects the Spanish Inquisition, either.
We’re still getting credit card offers and junk mail here, but the other interesting signs of the times are the radio and television commercials for debt-consolidation. The tone of some of the consolidation services is pretty slimy, almost insinuating that if these people only paid $500 on a $150k IRS tab, you can get away with it, too.
And the scams for flipping foreclosed homes: “There’s never been a better time to get into the expanding foreclosure market!” Right you are...
At the local mini-mart, there are at least two magazines on the rack dedicated to listing foreclosures.
So how’s your smoking going? I moved on to the next phase and dropped 40 lbs.
Best,
Marty
– Marty Cutler, Friday, 21 November 2008, 10:53 PM PST
Hi Marty!
I don’t buy the idea that many sub-prime lenders deliberately misled people into taking loans with the intent to foreclose. To me it’s a case of incompetence being a better explanation than malice. Too many loans were originated by agents, securitized and sold. The buck was passed. Capitalism is very efficient at maximizing short-term gain for individual entities and creating longer-term risks for society as a whole.
Apropos to current events, you may have seen the news that Downey Savings was shut down on Friday. Downey Memories is a little snapshot of that era of easy credit. Calculated Risk was just posting this weekend about how the regulators of the lenders were being accused of being asleep at the wheel in 2005.
I started to quit smoking in August 2006. I tapered down to nothing with the help of the nicotine patch, but had some relapses where I would buy a pack, and smoke it in a couple days or a week, then go cold turkey and not buy another. I smoked my last cigarette on December 31, 2006.
Cheers!
Doug
– Doug, Sunday, 23 November 2008, 9:42 PM PST
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