There's a heart-rending story in the Times about people whose million-dollar homes are being foreclosed: [link]

scrappy - my thoughts with you and your family.

Tommy, do you have evidence that the credit crunch is directly caused by mortgage brokers failing to verify employment? It's not. It's not because of widespread wrongdoing by mortgage brokers, like some kind of conspiracy. Leaving aside whether this guy's behavior in a deposition is in any way related to the claims in the lawsuit, Bear's collapse, the litigation against Merrill, Lehman's freeze-out in the credit markets were not caused by that. Major market shifts are often blamed post hoc on some kind of moral failing, because that explanation seems to make sense to voters and newspaper readers. But it doesn't really work that way. In this case, the default rate of subprime loans was assumed to be the same as it always was. When that changed-- even slightly-- the entire market got cold feet and banks heavily invested in those instruments-- or trading with counterparties that invested in those instruments-- found they were severely illiquid, because they couldn't value those investments with confidence. A loss of confidence in major market players has ripple effects that effectively shut off the credit tap, meaning deals can't get done and no one wants to be in the market. But I assure you, it was not related to some kind of mendacious conspiracy on the loan-writing level. It was a miscalculation of risk. It's a simple run on the bank.

I think there were failings. (I'll let you decide to what extent they were "moral" failings.) We used to have regulatory structures to prevent this sort of thing: many of them were repealed under Clinton, and further weakened under Bush. Too much market worship. Too much, "he governs best who governs least". Bankers and financial markets need tough regulation; weakening those regulations is never good for anybody, including the banks and financial institutions.

So high-risk mortgages get packaged up and sold as AAA securities, with no mendaciousness involved? Huh. How about that.

It was a miscalculation of risk. It's a simple run on the bank.

I... guess I call this the dumb part of the equation. I'm aware I'm more risk-averse than most, but I thought the whole point of gambling was to be able to cover your bets. Why is it that risk-miscalculations always tend to favor the riskier bet?

So what are folks up to this weekend?

I'm going to the land of no internets tomorrow to visit family over Easter, and also to try on bridesmaids dresses. It is going to be a laugh riot this weekend, oh yeah.

OH and Tommyrot, don't have time to dig it up, but there is a lot of evidence of deliberate fraud - both at the mortgage broker level, and at the packager level.

In this case, the default rate of subprime loans was assumed to be the same as it always was.

But I assure you, it was not related to some kind of mendacious conspiracy on the loan-writing level. It was a miscalculation of risk. It's a simple run on the bank.

Did the default rate climb because of changing market conditions, or because the risk of the loans were deliberately being mischaracterized? I think it's some of both.

[link]

So what are folks up to this weekend?

Tonight: Sing at Maundy Thursday service at my church.

Tomorrow: Stay home with AB, whose daycare is closed

Saturday: Get hair cut and colored

Sunday: Easter music marathon! (3 services, first beginning at 7 a.m.), followed by yummy Easter dinner celebrating end of our semi-vegetarian Lent with ham