The easiest answer, too late

Re: the whole subprime-mortgage, debt-as-commodity mess:

It seems to me that heading this off would’ve been as simple as making it so that if a bank that gave a loan wanted to pass it around like that they’d have to get permission from the people that owe them on the loan first — who would obviously overwhelmingly opt for “no”.  Besides, these rules for the most part are conjured up from thin air anyway, much of the scandal surrounds regulatory accidents spawning an entire pyramid scheme that wouldn’t exist otherwise.  Weren’t changes to previously agreed upon contracts supposed to be consented to by both parties anyway?

Oh, wait, that kind of transparency is for commoners w/o government backing.  My bad…

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About b-psycho

Left-libertarian blogger & occasional musician.
This entry was posted in economics. Bookmark the permalink.

4 Responses to The easiest answer, too late

  1. Pingback: Psychopolitik 2.0 » That an’ a couple bucks’ll get you some O.E.

  2. Pingback: Psychopolitik 2.0 » We don’t need no stinking papers!

  3. Dave says:

    B Psycho,

    Typical loan documents give the lender the right to assign, transfer or sell the note at its choosing even with your typical run of the mill balance sheet lender or local bank.

    The borrower is agreeing to this as it signs the documents. From the borrowers perspective, who gets the check really shouldn’t matter and I think that’s the case to most borrowers since no borrower I know has ever raised an objection to their loans being securitized.

  4. B Psycho says:

    So basically a lack of foresight all around. Borrowers didn’t realize it could matter who has the loan, and lenders didn’t realize “provide questionable loan->bundle and sell loan->print money” was unsustainable.

    Standard form documents are the worst. See what shutting off negotiation or even the quaint idea of reading things before you sign them gets us?

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