Mellon-ization, Austerianism, and Grexit
“Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate…
It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.”
-Andrew W. Mellon
This quote of the advice that Secretary of Treasury Andrew Mellon allegedly gave to President Herbert Hoover is famous, though mostly in the form that omits the second part. But it is exactly there that the ethos of Austerianism shines through. Which I would summarize as “high living is not for the undeserving” where “undeserving” is defined basically as anyone not in Andrew Mellon’s economic class. A class in which Mellon was an elite among the elites, take this from his Wiki entry Andrew Mellon.
Areas where Mellon’s backing created giant enterprises included aluminum, industrial abrasives (“carborundum”), and coke. Mellon financed Charles Martin Hall, whose refinery grew into the Aluminum Company of America (Alcoa). He became the partner of Edward Goodrich Acheson in manufacturing silicon carbide, a revolutionary abrasive, in the Carborundum Company. He created an entire industry through his help to Heinrich Koppers, inventor of coke ovens which transformed industrial waste into usable products such as coal-gas, coal-tar, and sulfur. He also became an early investor in the New York Shipbuilding Corporation.
Mellon was one of the wealthiest people in the United States, the third-highest income-tax payer in the mid-1920s, behind John D. Rockefeller and Henry Ford. While he served as Secretary of the U.S. Treasury Department his wealth peaked at around $300–$400 million in 1929–1930.
Mellon was a member of the South Fork Fishing and Hunting Club (whose earthen dam failed in May, 1889, causing the Johnstown Flood), and he belonged to the Duquesne Club in Pittsburgh. Along with his closest friends Henry Clay Frick and Philander Knox (also South Fork Fishing and Hunting Club members), Mellon served as a director of the Pittsburgh National Bank of Commerce.
Which gets to my point. Clearly Mellon’s (apocryphal) advice was not to suggest that HE be liquidated, that HIS way of life would have the ‘rottenness’ purged, that HE would have to work a harder more moral life. No instead the liquidation was destined for those who never should have been in the market in the first place, the “less competent people”, thus allowing all the real assets underlying the investment bubbles to be picked up cheaply by “the enterprising people”. For example the members of the South Fork Fishing and Hunting Club and the Duquesne (town) Club.
My assertion is that this same underlying ethos of the “undeserving” (mostly but not just the poor) against the hard-working “deserving” (including but not exclusive to industrial and financial magnates) operated long before Mellon and long after him and fuels Austerianism today. Creditors are hardworking and deserving of their returns, debtors are not. And this includes not just individuals but whole countries. Like Greece. So in a pinch the right answer is to “liquidate farmers, liquidate stocks” while leaving those with deep capital to pick up the pieces.
A final note before turning this over. Under this ethos the phrase ‘shared sacrifice’ has a specialized meaning. Because the proposed sacrifices are very often in the form of pension ‘reform’ (i.e. cuts) and an increase in tax on consumption, which is to say a direct attack on the ‘high living’ of the ‘undeserving’. What you don’t see in general, and certainly not in the case of Greece, is any acceptance by creditors that ‘sacrifice’ require any significant tax on capital or haircut on financial investment. Business investment maybe, that is the ‘liquidate stocks … liquidate real estate’ piece of Mellon’s prescription, and driving small business to ruin is just an unavoidable part of ‘sacrifice’. But at no point was Mellon, or today the IMF or the ECB suggesting that any real burden should fall on hard working deserving bankers.
In this regard it is interesting to parse the first paragraph from Wiki and see Mellon’s role. Was in an industrialist? Building factories and producing goods? Kinda, in a special way:
Aluminum: He “financed Charles Martin Hall”
Silicon Carbide: He “became the partner of Edward Goodrich Acheson”
Created a whole industry: “through his help to Heinrich Koppers”
Shipbuilding: “became an early investor”.
In modern terms he was not an ‘entrepreneur’, instead he was an ‘venture capitalist’ cum banker. Too very different roles with the second (I would argue) replaceable in a way that the first is not.
Ok – Webb doesn’t like the bankers:
“But at no point was Mellon, or today the IMF or the ECB suggesting that any real burden should fall on hard working deserving bankers.”
What bankers is he talking about? The ones who ruined Greece, Venezuela, Argentina and even Puerto Rico? If that is what Webb means, then he is saying that is the Central Banks (and the bankers who run them) of these countries that should be held up for blame and consequence.
No US banks have lent a dime to Greece in the last seven years. The IMF has, and Greece failed to pay them back. The ECB has lent gazillions. No German or French commercial bank has extended new credit.
In Japan, the central bank has printed money so that debt has reached 240% of GDP. This will end badly. Who will be to blame? Not the commercial banks.
In the US, the Federal Reserve bought $4Trillion of long term securities in just the past few years. Nearly a quarter of all public debt in now in the hands of the Fed. This “felt good” while it was happening, but the after effects will not be pleasant. In sixty days the process of reversing ultra loose monetary policy will begin.
So I’m with Webb on this one. Hang the bankers. But lets hang the right ones. The ones that have and are continuing to cause the problems; and that would be the Central Bankers.
Horseshit. Commercial banks had plenty of exposure to Greece back in 2009 or so when Austerianism was first imposed. What has bappened since is that successive rounds of financing by European Central Banks and the IMF have covered those positions and reduced exposure even as they drove Greek government debt through the roof.
When real estate was booming without end in Spain and in Greece and oh yes the United States commercial banks were all over that shit. After the crash the various governments and Central Banks used all kinds of mechanisms to bail out banks, including but not limited to “Too Large to Fail”. And as a result the exposure of those banks to the bad loans they extended has been mostly eliminated. But in Europe the Central Banks have decided that they will just extract the subsidies that flowed through to commercial banks and bond investors by imposing Austerianism on the PIGS (Portugal, Italy, Greece, and Spain) or what should better be called PIIGS (because Ireland got included) and if the Europeans had their way would have been PIIIGS (before Iceland told them to piss up a rope).
The problem is at base not Central Banks but instead the entities that control them directly or indirectly in whole or in part which is to say commercial banks (in the U.S.member banks of the various regional Feds).
Anyone who doesn’t believe that Central Banks ultimately answer to bond holders and commercial bankers hasn’t been paying attention to something I call ‘history’. Which neither started nor stopped with Secretary Mellon.
Here’s where the “criminal responsibility” of today’s situation comes in.
Scotsmen like Mellon (Scots-Irish) and Carnegie (and my Great Grandmother) were raised in a sort of pecuniary Calvinism where you demonstrated you were one of the elect by cleaning your plate like you were starving and squeezing your black slaves/servants for a dime of work for every penny they cost at auction. If you were born rich like Mellon, you adopted the rags to riches myth of your friend Carnegie. But either way, your success was a moral triumph understood in religious terms and honestly believed.
One suspects commenter Bkrasting above does not come from the same tradition. Indeed, if there is a more secular collection of white people in the world than “the troika”, I’d be surprised. These folks are full of actual facts about the world–the exact figures surrounding quantitative easing, the exact measure of primary surplus required of Greece–and yet these facts are simply a new scripture of the same old pecuniary Calvinism.
That’s what makes it criminal. These folks have had the benefit of a liberal education. Oliver Blanchard’s mother did not wield a whip to correct his immoral youth, like my Great Grandmother used on my Grandfather (named Stuart, after the Scots Kings).
What gives? How much humanism can one be exposed to and still blame the poor for their own lot?
Yes, yes, yes. I haven’t read a lot of
KarlMax Weber but there is no question that he was onto something with this book (Wiki summary):
The Protestant Ethic and the Spirit of Capitalism
and it is no coincidence that the founders of English economics were Scots or from Manchester (for example Adam Smith)
On related topic I have always thought that a key flaw in Classical Economics is the belief that rational economic actors work on the principle of accumulation and so are always and only motivated by ROI as an end in itself as opposed to using ROI as a means to ends that include consumption and display. My training was in medieval history and so by definition involved peoples and societies that existed before the Protestant Reformation. And it is clear as clear that the upper reaches of society were not motivated by accumulation, that is getting rich for its own sake, but instead used riches as a means to an end. For example medieval merchants who grew rich tended to use their wealth to move up through the gentry to the aristocracy which in turn required conspicuous consumption in the way of lavish manor houses and accompanying entertainment of guests. Along of course with tremendous expenses in the ways of dowries that allowed their daughters to marry up. And this continued even beyond the Reformation among those who leaned more towards aristocratic High Church Anglicanism rather than Low (or maybe middle) Church Methodism, Presbyterianism and Quakerism.
It is why a lot of Anglo-American capitalists and neo-classical economists generally don’t understand why the French take seven weeks of vacation and the Spanish two hour lunches when they could be making money. They just don’t understand how and why consumption could be a goal. (Which doesn’t mean they don’t spend a lot of money on the ‘right’ things, like yachts and country clubs and golf and skiing and arts etc, just that that is not how Protestants keep score)
Should be “Max Weber”
(Thanks much! Fixed. Bruce)
I hadn’t realized Pete Peterson was Scotch.
Why don’t we go back to discussing the proximate causes of the Greek debt.
And are there any credible economists who know a way Greece can say no thank you to the Euro and return to prosperity… at least “reasonable” prosperity.
Well Stiglitz and Krugman are urging a No vote. Two economists, two Nobel/Sverige’s and so too credible to me. Also have spent much of their careers decrying the Mellonization of the Poors in favor of the Banksters.
Greece is almost unique in Europe that it’s major ‘export’ industry, i.e. the one that draws in foreign currency and so cuts balance of trade is actually internal – that is tourism. Seems to me that an adoption of the drachma followed by devaluation would snatch back a lot of tourism that in recent decades has gone to Southern Spain.
But at this point they are experiencing 25% unemployment, close to the U.S. peak during the Great Depression and are fielding demands to cut pensions even further from the 40% cut they already took. To see a “return to prosperity” through a Mellon/IMF regime of further austerity, of banging their head harder and harder in hopes of getting a better result is the definition of insanity. As well as testing Sir Maynard Keynes’ observation that “In the Long Run we are all Dead”.
In my mind the proximate cause of the Greek debt was a kleptocratic government that alternated between two families/parties since WWII and allowed tax evasion by their wealthy supporters on a massive scale as well as over-promising on the government services side. And then lying about their actual levels of debt. This went along well enough supported by the same housing boom that lifted a lot of boats around the world and hid a lot of similar tax evasion and theft by a lot of wealthy elites everywhere. Which when it came crashing down required governments and central banks in the U.S. and Europe to cover the banks’ exposure to bad debts. In the U.S. this was TARP in Europe is was the IMF and the ECU lending money to Greece to pay off commercial banks. A task that is almost complete but which gave the Greek people no relief but instead required them to enter into Great Depression status even as their tax dollars went to service debt to outside lenders. “Liquidate Labor” indeed.
To add insult to injury the current government has proposed that instead of cutting pensions it undertake an active program of cracking down on tax evasion by Greece’s own economic elites. But the Troika either in cynical disbelief that they can pull this off, or in class solidarity with their fellow elites in Greece insist that this can’t be done, that the only way out is to crack down on Greece’s version of Social Security..
Which I think for you Dale would fall into the category of “Same shit, different day”.
Greece is betting that the EU will not allow them to just writet off $1 trillion in debt. The EU is betting that things really could get even worse if the Greeks don’t just accept perma-depression to service never-ending debt. I don’t see the latter as viable. In fact I see the most likely outcome is a return to the military dictatorship Greece had before 1968 as the only way to keep the Poors down. Against that the risk of exiting the Eurozone seems worth taking.
“I see the most likely outcome is a return to the military dictatorship Greece had before 1968 as the only way to keep the Poors down. Against that the risk of exiting the Eurozone seems worth taking”.
A military dictatorship that keeps the “poors” down is a risk worth taking?
Before the military intervenes there would have to be major upheaval in the streets. Anarchy is the road to the military taking over. There would be no tourism boom as this unfolds. There would be shortages of everything. The banks would not be able to open – they have no hard currency left.The economy would implode.
Who gets hurts the worst in this scenario? The pensioners, of course. The same folks that Webb is trying to protect.
I want to be sure you understand I am on your side in this. Someone the other day on AB said the debt had something to do with the Greek government taking the advice of Goldman Sachs and borrowing money to invest in a currency swap gamble… a game i don’t understand, but it sounded as if now that the gamble failed the banks are acting all innocent and demanding to be repaid the money that was borrowed.
As for Krugman et al, I was hoping to hear what they actually thought would work. Maybe I need to get a subscription to the Times.
I guess if it was me, I’d default and go back to selling miniature Parthenons to tourists at low low rates. And growing grapes and olives.
But I had forgot about the military dictatorships always lurking in the background.
And my comment on that other thread was that we ARE looking at a conspiracy on the part of the banks and international corps to rule the world. Of course this makes me some sort of conspiracy theorist, doesn’t it.
Krasting I don’t know whether I could have phrased my comment a little better or whether your reading skills are just deficient or whether you are just trolling. But for you to take this:
“A military dictatorship that keeps the “poors” down is a risk worth taking? ”
“In fact I see the most likely outcome is a return to the military dictatorship Greece had before 1968 as the only way to keep the Poors down. Against that the risk of exiting the Eurozone seems worth taking.”
is moronic. What part of “against that” (military coup in the event of continuing misery of accepting austerianism) of “risk of exiting the Eurozone” (in the case of a ‘No’ vote provoking the IMF/ECB further) don’t you understand.
I suppose there is some possibility of a path that ALSO leads from ‘No’ to coup. And perhaps YOU feel it is more likely. But don’t put words in MY mouth.
My comment to Bruce was to Bruce Webb.
As for Krasting, it’s really more of his nightmare cartoon version of how the world works. Not that he’s wrong.. and not that Bruce W’s phrase about “the risk worth taking” is unambiguous… at least to me…
but if there is going to be rioting in the streets, it’s just as likely the military would be the cause of the rioting… and the military would certainly want to get back in good with the banks, so you can be sure that they would impose order discipline and austerity.
As fpr hard currency, the United States ran on a pretty wobbly currency for a number of years until patriotism and Hamilton created a reliable american currency. it is not lost on me that “the bankers” were the biggest benefactors of Hamilton’s plan, but that is still different from a regime of “austerity” imposed by what looks to me like a “foreign conspiracy.”
Dale two secrets to reading Krugman without a subscription. First if you link directly to his blog it doesn’t seem to trigger the paywall.
Or Mark Thoma at Economists View almost always excerpts the bulk of Krugman’s column and always links through, probably to the same link as above. Plus Mark is good people, I have been following EV since its very first day.
I am no fan of Krasting, but I think in this case you really could make yourself a little clearer.
Yeah, Mark Thoma seemed a good person. But I don’t read a lot of blogs, and I wondered if any of those folk had laid out a “plan” where “no” leads the Greeks out of the woods.
My point is that Pete Peterson isn’t Scottish. Which means he wasn’t raised in the pecuniniary Calvinist faith. Which means he’s not an earnest believer in a misguided faith, he’s just a jerk.
Well Dale in following the blogs I have discovered a couple of things.
One there is no provision for just kicking a member country out of the EU.
Two there is nothing that would prevent Greece from continuing to use the Euro as their currency. For example Ecuador is not the only country that officially uses the U.S. dollar as THEIR currency. And for that matter back in my Navy days (1977-1981) cabdrivers and bartenders just about anywhere would take dollars. Greece could be out of the Eurozone altogether and still have bar and restaurant prices posted in both currencies, tourist Euro’s will still spend. Even if Greece officially goes back to the Drachma.
So what Greece is faced with is having the ECB cut ties with their banks. On the other hand the Greeks point out that the Troika simply cutting off Greece might require writing off $1 trillion in debt. Which would be a hell of a debt load off the shoulder of Greece in what would be some form of involuntary bankruptcy.
There is an old saying (attributed to many) that if you owe the bank $10,000 the bank owns you. But if you owe the bank $10,000,000 you own the bank. In that sense Greece is not powerless here.
Oddly enough and bringing this discussion full circle, Peter G Peterson is actually a Greek-American. His father George Peterson was an immigrant born Georgios Petropoulos.
So while PGP isn’t Scottish, he is a first generation American embued with a fairly standard immigrant ethos of thrift and savings. That is first generation American shopowners are often more stereotypically Scottish in behavior than Robbie Burns every thought to be.
thanks. I hope the Greeks beat the Persians again.
but as for the Scots
see note to Thornton below
Tom Bozzo sent the following to Facebook. It is called simply ‘Greece’ and is by Steve Randy Waldman (not to be confused with AB’s Robert Waldmann or the political blogospheres’ Paul Waldman)
A really excellent piece laying out the history of Greek participation in the Eurozone and the pathologies of the elites in both Greece and the EU generally. That is what I would have said in this post if I was both smart and actually informed (rather than chumming the waters like I often do).
Another good piece here, this one from Lawyers, Guns and Money
David Attewell: Putting the Greek Referendum in Context
What happens when we permit the Federal Reserve or any Central bank to redefine moral hazard? The market fails and the people end up with debt they did not create directly.
Below is a quote from Waldman’s article simply called Greece, which gives an excellent explanations of the various results of moral hazards.
“For the record, my sophisticated hard-working elite European interlocutors, the term moral hazard traditionally applies to creditors. It describes the hazard to the real economy that might result if investors fail to discriminate between valuable and not-so-valuable projects when they allocate society’s scarce resources as proxied by money claims. Lending to a corrupt, clientelist Greek state that squanders resources on activities unlikely to yield growth from which the debt could be serviced? That is precisely, exactly, what the term “moral hazard” exists to discourage. You did that. Yes, the Greek state was an unworthy and sometimes unscrupulous debtor. Newsflash: The world is full of unworthy and unscrupulous entities willing to take your money and call the transaction a “loan”. It always will be. That is why responsibility for, and the consequences of, extending credit badly must fall upon creditors, not debtors. There is one morality tale that says the debtor must repay, or she has sinned and must be punished. There is another morality tale that says the creditor must invest wisely, or she has stewarded resources poorly and must be punished. We get to choose which morality tale we most use to make sense of the world. We do, and surely should, use both to some degree. But if we emphasize the first story, we end up in a world full of bad loans, wasted resources, and people trapped in debtors’ prison, metaphorical or literal. If we emphasize the second story, we end up in a world where dumb expenditures are never financed in the first place.” Steve Randy Waldman
A “military dictatorship” the USA’s reward for dumping the socialists.
“Pecuniary Calvinism” the presumption that greed is good and it is virtue to own 10’s of thousands of square feet of luxury abodes while the veterans who kept ISIS out of your hair pan-handle.
US can figure out how to get the F-35 to win, with enough money it can have the F-35 do what the F-4 did in Vietnam while impoverishing more of the damned to make the world safe for “pecuniary Calvinism”.
Moral hazard among the select is “pecuniary Calvinism” the American “state of grace”.
Greed is good justifies a huge human suffering to prevent moral hazard among the masses.
Moral hazard among the masses is socialism.
Ilsm, my hope is the Greek people vote no, and leave the failed purpose of the euro which was one nation in common purpose.
Plus, Paulson’s hedged fund in Greek debt cost him what TBTF cost the USA.
yes, exactly. but here is a point Waldman forgets to mention:
“creditors” have been making “bad” loans for five thousand years
exactly so they can foreclose and either resell the collateral at a huge profit, or so they can entrap the borrower into debt slavery.
thanks for the leads. I’ll look into them. at least have the satisfaction of moral justification while i watch the military restore order.
[oops. that’s probably one of those ambiguous phrasings; just to be clear I am in general opposed to military dictatorships.]
Coberly, the USA almost eliminated that type of investment during TR to FDR.
Then in 70s anything elite, person or business should not be encumbered by law, but by moral hazard. Now we have neither law or moral hazard.
ilsm, though not good for the military or combat; the F35 does support some where around 400,000 jobs.
If we do not think of cost of the F35, think of it as a new form of TARP; maybe not good for the common man. But it helps the .01%.
I am going to regret this.
Do you understand that a foreclosure or an auto repossession costs the creditor a huge amount of money?
Most loan defaults do cost more than the loan was written for originally.
E Michael you might want to look into the business model for the burgeoning sector of automobile ‘title loans’. They work the price of repossession in the loan itself by loaning strictly on the resale value of the car and essentially ignoring the credit history of the borrower. Basically it is a reverse ‘rent to own’ like that that the poor use to buy refrigerators or TVs.
“Ms. Price’s loan demonstrates one unique feature of the title loan. It is completely asset-based. With few exceptions, title lenders have no interest in whether a consumer can afford to pay back the loan, or even make the monthly interest payments. Ability to repay is simply not part of the underwriting process. Nor need it be in order for lenders to collect their debt, and then some. Since lenders lend at 40% of value or less, they can always rely on the car if the borrower stops making the monthly payments. This also may explain why some title lenders also sell used cars. As one new Title Lender’s sign reads, “Buy here, pay here.” Only in this particular context would a lender make a loan like this to someone who makes just $980 a month. By structuring a loan with $580 monthly payments, from a person who makes less than $1,000 a month, a lender can virtually assure that it will end up with the payments for some period, and then, the car. “
I don’t count title loans as auto loans. Large market of course, but a sliver of the total auto lending market.
Eventually the government will chase these neanderthals out of business, many are now taking refuge on Indian Reservations.
Repossessing a home is more complicated legally but not always that difficult in practical terms.
While I was in the process of losing my condo I was sitting at home and heard the doorbell ring. When I opened the door the people blurted out that they didn’t expect anyone to be at home, because they were just there to change out the locks. Prior to my actually being served with an eviction notice and without the sheriff actually doing the dirty deed, no they were just going to lock me (or as may have been my renter) out on the street with all my belongings locked inside.
This was Wells Fargo in Washington State and ultimately they were forced to stop and pay a big fine. Because it was thoroughly illegal. But Wells was among major retail banks one of the biggest players in the more predatory types of sub-prime loans and unlike most other lenders kept the notes and servicing in-house. So in contrast to other lenders who just securitized and sent the actual mortgage note one direction and the security another and went to the next loan, Wells had a business model in place that just assumed a high level of foreclosure.
So no I DON’T know that foreclosures or auto repressions costs ALL creditors a HUGE amount of money or indeed much money at all. I mean it is not as easy as pawnbroking where you already have the goods in your hands as security for the loan. But as in the case with my condo if you have on constant contract a repo man for the cars or a locksmith for the houses and are ruthless enough to just leave borrowers stranded or homeless you can streamline the procedure quite nicely.
Well another huge slice of the auto market, and something concentrated at the medium high end, could be called the ‘self repo’ market. Otherwise known as leasing. In that case the lender trusts he will get paid near full value of the car and then have the borrower meekly hand over the keys at the end of the lease period.
I also spent a lot of time in the County Building Department and Tax Office and had a surprising amount of interaction with various types of property title documents. And depending on your market segment it is astonishing how many properties are ‘bought’ on RECs or Real Estate Contracts. This is especially so for properties with mobile homes or for ostensible vacation properties (many of whom are lived in year round by lower income folk attracted by the comparatively low price to a regular SFR). And once again under a REC you don’t actually gain title until the end of the loan. In those cases it is not even a foreclosure action but instead a much simpler eviction one: “Quit or Pay Rent”.
If the whole process was THAT burdensome you wouldn’t have so many signs around certain neighborhoods that say “For Sale by Bank”. Not every foreclosure is a tragedy. Not for the lender.
Traditionally these tactics were mostly left to a specific lender category called ‘hard money lenders’ or often ‘hard money guys’. I dealt with some of these guys and they tended to be ‘colorful’ in the old ‘Guys and Dolls’ sense, if not mobbed up then the next best thing. At least at the retail level.
At higher levels they wear a lot nicer suits and have names like ‘Bain Capital’. But the business model is often the same: lend money to hard-pressed clients, squeeze them for all the payments possible, then seize control of the property/enterprise and strip its asset value before tossing the dried husk away. All’s good if you price in the cost of attorney’s fees into the initial loan or investment.
no need for regrets.
i can understand that foreclosure would cost the lender money.
can you understand that i was talking about predatory lenders and not honest lenders?
yes, Wells Fargo is bad guys.
I bought a friend’s loan from Wells to save my friend from foreclosure… something Wells was doing while pretending to be working out a “new” payment plan according to whatever Federal program it was that was encouraging that. Meanwhile they refused to accept payments, but kept adding interest and penalties for “non payment” .
Mr friend could never get to talk to the same person twice let alone the people who should have been preventing the front line people from lying to him about his new payment plan.
I bought the loan, with the help of a lawyer, days before foreclosure. Wells added enough in “attorney’s fees” to double the amount that was actually owed on the loan.
Very, very bad people. Yet their business prospers and all the government watchdogs smile benignly.
A car lease is in no way, shape or form a “self-repo” program. It is a car rental. In addition, every lease program I have seen in more than three decades gives the lessee the first option to purchase the car at a price set at the time the lease is started.
I think in terms of real estate you are talking about a relatively small market. With some few exceptions(where the property value greatly exceeds the market value), foreclosures are unbelievably expensive for the investor. Perhaps the money made by the servicer on a foreclosure is what you are thinking about.
I do regret it, since “predatory” was not in your original post. Further, you seem to be confused over originator and investor. The profits taken by the banks at origination(predatory or not) have nothing whatsoever to do with what happens to the creditor(investor) at the time of foreclosure. Of course, there are some few loans that are portfolioed by the originator, though none of those are intentional.
we always end up like this. i never mentioned banks or auto loans in my comment to which you replied with anticipatory regret. the “predator” was implied by the description of the practice: lending more than the property would ever be worth to the borrower (but not to some future purchaser), or more than the borrower would ever be able to repay and be done with, but kept forever in debt paying “interest” that doesn’t quit.
i believe this to be historical fact, but you could check out “Debt: The First Five Thousand Years” and if that doesn’t convince you, I can find a few more anecdotes.
As for Wells Fargo: well, I got to watch them operate twice, and if they were not expecting a profit from foreclosure it is hard to account for the way they lied to the borrower.
I am going to speculate that you only know a very narrow aspect of the business, and you are probably quite honest in your dealings. But there are “loan sharks” out there and always have been. It’s only recently that they have had international power… or maybe not.
You seem to be a little rigid in reading the words of others: if they don’t fit exactly the way you would have said them, you either can’t understand them at all, or think they are lying to you. Again, this is a pretty common occurrence among human beings.
And I’ll risk mediating between you and Bruce. you seem to think that the lender is okay as long as the terms of the loan are followed.
You don’t seem to think there is anything wrong with relying on the unsophistication of the borrower to charge usurious interest while expecting to make a profit even on default. Or, for example, in our dear government’s case: lending to a child for “educational” purposes without caring about the quality, or honesty, of the “education”, but pursuing the loan repayment against the borrower in circumstances that result in destitution… even into deep old age.
Now, I don’t “know” that about you, but it is the guess I make after reading your defense of the lenders. We seem to have had very different life experiences, but that shows up in every subject we talk about.
It is completely clear that we have a failure to communicate and that discussion with each other is a total waste of time.
Bruce Webb: “In modern terms he was not an ‘entrepreneur’, instead he was an ‘venture capitalist’ cum banker. Too very different roles with the second (I would argue) replaceable in a way that the first is not.”
The term was “merchant banker”. It was replaced by “venture capitalist” some time after WWII, maybe in the 1950s.
This is a serious opportunity for Putin. It’s a bit early for Russia to do much, but I can hardly wait for the first state visit or other such overture.
Kaleberg right you are.
But I did qualify it by saying “in modern terms”. Precisely so that people could zero in on the difference.