Comments on: This is what happens when you lend money to poor people.

This is what happens when you lend money to poor people.

GrammarMoses — Sat, 08 Sep 2007 06:22:31 -0800

"I had no idea how my open-handedness could be made to look, after the fact. At the time I bought the subprime portfolio I thought: This is sort of like my way of giving something back. I didn't expect a profile in Philanthropy Today or anything like that. I mean, I bought at a discount. But I thought people would admire the Wall Street big shot who found a way to help the little guy. Sort of like a money doctor helping a sick person. Then the little guy wheels around and gives me this financial enema. And I'm the one who gets crap in the papers!" -- Michael Lewis on the subprime meltdown

By: ph00dz

ph00dz — Sat, 08 Sep 2007 06:34:58 -0800

Michael Lewis is rapidly becoming one of my favorite writers... "Moneyball" shocked me in terms of how interesting it was.

By: beagle

beagle — Sat, 08 Sep 2007 06:40:52 -0800

Poor people, my ass. (Yes, I realize his tongue is somewhere in his cheek.) Most of the subprime borrowers now defaulting are people who bought McMansions nobody had any business building, nobody had any business buying and nobody had any business financing, instead of buying reasonably sized and priced houses with conventional mortgages like the rest of of. In my rural neck of the woods, where nobody builds ridiculous houses and developments on spec, nobody is defaulting on subprime mortgages, either. I haven't seen any data, but I would bet the average subprime defaulter has a family income in the six figures, or close to it.

By: paulsc

paulsc — Sat, 08 Sep 2007 06:44:56 -0800

I guess noblesse oblige is really dead. The guy bought a subprime portfolio at a discount, expecting to make a profit; things didn't go well for him. The poor aren't to blame for his losses, he is. He's not only a schmuck, he's a poor investor, and a whiny loser (if perhaps one with his tongue planted ruefully in his cheek, for this piece), to boot.

By: Shohn

Shohn — Sat, 08 Sep 2007 06:44:57 -0800

I think he makes some interesting points, but the firmness with which his tongue is planted in his cheek gives the whole piece an aura of comedy. He can't be taken seriously this way (but maybe he doesn't want to be). beagle has a good take on this; I tend to agree. I hate those McMansions and everything they've done to finance, construction, and the urban landscape.

By: blacklite

blacklite — Sat, 08 Sep 2007 06:45:10 -0800

I guess this was supposed to be really hilarious, huh?

By: psmealey

psmealey — Sat, 08 Sep 2007 06:45:53 -0800

I would bet the average subprime defaulter has a family income in the six figures, or close to it. I would bet not. Most people making six figures have pretty good credit and would qualify for much better than subprime rates. Subprime loans typically go to people with bad credit and cannot qualify for loans at prime or better.

By: quonsar

quonsar — Sat, 08 Sep 2007 06:58:22 -0800

hey! there's outrage being nurtured here, psmealey! don't fuck with it!

By: madamjujujive

madamjujujive — Sat, 08 Sep 2007 06:58:51 -0800

Oh no - are those damn lucky duckies going to win yet again?

By: Gervais Brooke-Hamster

Gervais Brooke-Hamster — Sat, 08 Sep 2007 07:16:18 -0800

That's not a financial enema. A financial enema is when, due to a slip-up on the part of an-online bill payer or the US Postal Service, a credit card payment arrives days late, and your credit card company decides to charge you $40 and jack your rate to 20.99% APR besides.

By: Afroblanco

Afroblanco — Sat, 08 Sep 2007 07:17:59 -0800

What a load of hogwash. The whole reason behind the subprime crisis is the securitization of debt. My guess is that most of the people who bought the bad debt didn't even think about where it was coming from. They just thought that it was a safe investment; just like any other promising-looking number that rattles off the ticker. More a lesson in "buyer beware" then anything else.

By: beagle

beagle — Sat, 08 Sep 2007 07:28:47 -0800

Most people making six figures have pretty good credit and would qualify for much better than subprime rates. They would, if they and the banks did not collaborate to put them into much more expensive real estate than they can afford at prime rates. Where they ought to buy a $300,000 house, they buy a $500,000 house with an ARM. That makes them a subprime borrower for the size of the loan.

By: TheOnlyCoolTim

TheOnlyCoolTim — Sat, 08 Sep 2007 07:30:35 -0800

I would like to read this as complete satire but I feel like there's a core of seriousness underneath it. So, ATTN: MICHAEL LEWIS: If I ever meet you, hope I've forgotten about this article, because I would surely be inclined to kick you in the nuts.

By: psmealey

psmealey — Sat, 08 Sep 2007 07:40:26 -0800

I understand what you're saying, beagle, but I think you might be confusing a standard ARM with a subprime loan. In the scenario that cite, (obviously YMMV) a borrower who can qualify for a $300k 30 year fixed loan, by and large is usually able to get an ARM at or below the prime rate set for the term of the loan (usually 5 years). This does not does not automatically make the ARM subprime. Subprime loans, are fairly specific financial instruments aimed at people with low incomes and terrible credit histories that could not qualify for either fixed or adjustable rate mortgage loans.

By: beagle

beagle — Sat, 08 Sep 2007 07:52:48 -0800

psmealey, distinction grasped. The fact is, however, McMansion borrowers are defaulting as well, which certainly contributes to the credit crunch.

By: Optimus Chyme

Optimus Chyme — Sat, 08 Sep 2007 07:57:30 -0800

This is a weirdly aggressive, unfunny little column. It's very clear that "oh heh just joking here folks wink wink" but god help me, I think he actually believes the core of his argument.

By: pyramid termite

pyramid termite — Sat, 08 Sep 2007 08:17:59 -0800

a ____ and his ____ are soon _____ any minute now, he's going to start figuring it out

By: Admiral Haddock

Admiral Haddock — Sat, 08 Sep 2007 08:37:18 -0800

Folks, it's a parody. And it's actually pretty funny.

By: SassHat

SassHat — Sat, 08 Sep 2007 09:15:42 -0800

Let's eat their babbies.

By: rakish_yet_centered

rakish_yet_centered — Sat, 08 Sep 2007 09:35:16 -0800

While I am a fan of Lewis (I read Liars Poker and the Left Tackle book), I think there needs to be a licensing program for comedians. It seems to work for dentists and accountants. It would make MeFi a much faster read, with little loss

By: jscalzi

jscalzi — Sat, 08 Sep 2007 09:36:30 -0800

Yeah, it's pretty clear it's a parody; whether the parody is a good one is another issue entirely. I first saw it when I saw people getting outraged, and I didn't believe that Bloomberg would run something that clueless. Then I read the whole thing and got the intent. I spent a fair amount of time over the last few years telling friends and family that they were high if they got a bigger mortgage with an ARM, and convinced at least a few of them to get a house within their means on a 30-year fixed mortgage. It seems to have worked by and large, save for the folks who believe that as it is now (meaning then, with the fed rate near 0%), so will it always be.

By: jragon

jragon — Sat, 08 Sep 2007 10:05:59 -0800

I spent a fair amount of time over the last few years telling friends and family that they were high if they got a bigger mortgage with an ARM When we were house hunting 3-4 years ago, we got the same kind of PDF print-out from several places: They'd hand us a sheet with 5 columns. At the top, the first column would say "$1300 a month". The last one would say $2200 a month". The first was interest-only and the last was fixed 30-year. The temptation to just look at the top, not do our research, and pick the lowest price was there. But fortunately I'm the kind of person that's always told I "overthink things". So rather than "going with the flow", or "relaxing", I studied the crap out of my options. Thank god. (side note: I ended up going with interest-only with the full knowledge of the risk, and knowing I'd refi to fixed rate within a year, which we did. We actually pulled it off, but a lot of my friends/co-workers weren't so lucky.)

By: ikkyu2

ikkyu2 — Sat, 08 Sep 2007 10:20:43 -0800

What a load of horseshit.

By: fuzz

fuzz — Sat, 08 Sep 2007 10:21:15 -0800

It's not surprising that people here don't realize this is a parody. It perfectly captures the thinking of the Wall Street traders I've known.

By: blacklite

blacklite — Sat, 08 Sep 2007 10:27:30 -0800

I am pretty sure everyone here realizes it's a parody, to those of you who have been pointing it out. But it doesn't seem to effectively lampoon anyone, it's just summarizing the opinions of a lot of people. It's sprinkled with a tiny bit of occasional hyperbole but for the most part I can't see anyone with money do anything other than give it a little smile. It feels like the political humour (if you could even call it that) equivalent of public masturbation. There's not even a seed of point here. Maybe next time around he could write an article on black Americans. That sounds like a good idea. "It's a parody!"

By: Thorzdad

Thorzdad — Sat, 08 Sep 2007 10:45:39 -0800

It's not surprising that people here don't realize this is a parody. It perfectly captures the thinking of the Wall Street traders I've known. Exactly. I read through the thing and I could hardly keep my blood pressure down for exactly the same reason. I know people who honestly do think like that. They would read that column and shout "Right on!" And given the forum, I have a feeling many of the people reading the thing probably fall into that category.

By: caddis

caddis — Sat, 08 Sep 2007 12:04:10 -0800

Rest assured folks, this is a parody. Michael does not own a hedge fund, is not a Wall Street big wig, nor even in the financial business anymore. He's an author and he has just skewered the hedge fund guys who recently received real financial enemas. Nice post.

By: caddis

caddis — Sat, 08 Sep 2007 14:08:41 -0800

The Million Mercedes March of Hedge Fund Managers on Washington

By: sotonohito

sotonohito — Sat, 08 Sep 2007 14:50:43 -0800

Why is it being proposed that any tax dollars be spent on a bail out here? I mean, a bunch of bastard bankers gave a bunch of poor credit risks a loan on terms that the poor credit risks were higly likely to default on. Now we're supposed to be surprised and help the poor, pitiful, bankers by giving them billions in tax dollars? I know the Republicans like idea of private profit and socalized risk, but why would anyone who earns less than a million a year go along with this idiocy?

By: haveanicesummer

haveanicesummer — Sat, 08 Sep 2007 15:09:10 -0800

Are you people really saying "I know he's only pretending to be one of these guys, but I want to punch guys like that... soooooo I'll punch him!" ???? Do you want to throttle the writers at The Onion?

By: 1adam12

1adam12 — Sat, 08 Sep 2007 16:54:43 -0800

This would be a lot funnier if I didn't personally know people who think and talk like this. I've found that the rich, particularly the rich who didn't make their own fortunes or had a big leg up that they don't acknowledge, do blame the poor for being poor. And they also tend to talk about "the elite" with a serious face. So forgive me while I laugh not.

By: Skeptic

Skeptic — Sat, 08 Sep 2007 17:09:14 -0800

I'd say that it is a clever parody, flawed by the fact that, unfortunately, the subjects of the parody are, by and large, beyond it.

By: caddis

caddis — Sat, 08 Sep 2007 18:15:27 -0800

This would be a lot funnier if I didn't personally know people who think and talk like this. I hear you. I personally know Michael. He is pretty much the exact opposite of this. The essay is a joke and if you can't take it too bad for you.

By: Artful Codger

Artful Codger — Sat, 08 Sep 2007 19:53:04 -0800

This barb, and some other thing I've read in the financial papers lead me to believe that the greater business community realizes that the subprime fiasco is the fault mainly of the initial lenders who developed and flogged those stupid mortgage products in the first place, and the investors who bought the paper issued by those stupid lenders without due diligence. So I think that the financial community itself is distancing themselves a bit from the mess, and I hope they let most of those idiot lenders implode.

By: sotonohito

sotonohito — Sat, 08 Sep 2007 20:40:28 -0800

Artful Codger This would be the same financial community that didn't do much about it, that let it happen with nary a complaint? Screw 'em. Let the entire "financial community" go down in flames. They're parasites, and worse, they're *stupid* parasites. They "earn" billions by attending three martini lunches. They "work" by holding a few golf meetings with one another. Let them try real work for a change. No one who did this, or approved of this even by silence, is competent to manage a McDonald's, and the sooner they are relieved of any responsibility the better off the world, and the economy, will be.

By: sotonohito

sotonohito — Sat, 08 Sep 2007 20:52:16 -0800

Ok, maybe that was too harsh and bitter. But I'm tired of all the slack people cut the movers and shakers in our economy, and especially tired of seeing my tax dollars spent bailing out the fantastically rich when they do stupid shit like this. And I'm tired of the financial community putting on its "gee, we never saw that coming" act when rich parasites screw people over. We saw it with the S&L mess, we saw it with Enron, and we're seeing it today. *AFTER* the fact the oh so serious and thoughtful financial community tut-tuts and says its a terrible thing these few bad apples did. Before the shit hits the fan the financial community is falling all over itself to explain how brilliant these bold captains of industry are and why its an honor to be allowed to invest in their sure fire, never fail, buisness plans. Maybe there are decent, intelligent, non-insane, people in the financial community. All I know is that if they exist they don't say much. Which brings me, I suppose, to the point of my screed: why is anyone listening to the financial community given that they've got such a lousy track record? You said "So I think that the financial community itself is distancing themselves a bit from the mess", but to me it appears that the financial community is the ones behind the mess. I mean, the folks who loan money at interest are part of the financial community, yes?

By: caddis

caddis — Sat, 08 Sep 2007 20:58:30 -0800

They "earn" billions by attending three martini lunches. They "work" by holding a few golf meetings with one another. Good Lord, that was ignorant. You are obviously too ignorant to work in that community if you can say that.

By: TheOnlyCoolTim

TheOnlyCoolTim — Sat, 08 Sep 2007 22:14:35 -0800

Are you people really saying "I know he's only pretending to be one of these guys, but I want to punch guys like that... soooooo I'll punch him!" ???? I have to say that it seems like based on people more familiar with the guy's work or even the guy that it is indeed complete parody - but it hits so close that without that knowledge it seemed like the writing of one of the parody subjects expressing their sincere viewpoints with a decent helping of hyperbole.

By: subaruwrx

subaruwrx — Sat, 08 Sep 2007 22:59:45 -0800

Uh, psmealey, Not everyone who makes over 6 figures in a household has good credit. Salaries in the bay area alone make it easy to make $100k, but knowing how to manage money takes more than making money. Case and point, I make over 6 figures by myself, and with my wife, we almost make $200k per annum. By your rationale, we should be qualifying for prime mortgages, but we are not. We cant even qualify for subprime. All those years of goofing off for me and her student loans make it difficult to get back up over 700.

By: psmealey

psmealey — Sun, 09 Sep 2007 06:01:37 -0800

Uh, subaruwrx, I think you missed the part where I said "most" and "YMMV", of course there are exceptions, and that you live in the Bay Area puts you in another universe entirely.

By: flabdablet

flabdablet — Sun, 09 Sep 2007 06:08:31 -0800

No way was this mess predictable!

By: revgeorge

revgeorge — Sun, 09 Sep 2007 07:46:51 -0800

TheOnlyCoolTim: "it seemed like the writing of one of the parody subjects expressing their sincere viewpoints with a decent helping of hyperbole." That sounds like a pretty good definition of satire.

By: TheOnlyCoolTim

TheOnlyCoolTim — Sun, 09 Sep 2007 08:15:07 -0800

It's close, but there's a subtle difference to me. Someone saying "Let's turn Iraq into a GLASS PARKING LOT," probably isn't serious either way. However, in the context of an anti-war site it's satire, but in the context of Free Republic it's just a hyperbolic expression of the desire to blow things up.