October 15, 2008 at 10:01 am
schleep (10/14/2008)
There were also NINJA loans: No Income, No Job, No Assets (collateral).Really now, who in their right mind could think these would ever be repaid, regardless of what the models predicted?
I read in the paper about a gardener who had two homes with mortgages of more than $500,000 on each. The article didn't explain if he had intended to sell the first home but hadn't closed before the second was finalized, or if he was "investing" on the side, but it seems to me the lender for the second home was at fault there.
October 15, 2008 at 10:04 am
Tripwires have been around for awhile. If you pay attention, every once in awhile trading gets halted.
I want to say some were done after the crash in 85/86 and more were done in the 90s. Not sure how they're set now, hopefully someone does though.
I don't understand how they get approval to use a model to actually change their capital requirements and prove that over time. The space shuttle tests new computing hardware and software by having it run in the shuttle, same inputs, but it mirrors another system and they compare the performance and results later before it's put into production. Same thing should happen here.
Allowing this into production before it's proved definitely was a problem and it made the leverage issues worse than they should have been.
October 15, 2008 at 10:11 am
Steve Jones - Editor (10/15/2008)
I'm not sure there was a lot of forcing loans. There have been numerous interviews from lots of brokers that were making upwards of $50k a month, that they were always searching out new loans and offering them to people because of the profit. Even when there were soldiers and others that qualified for other loans.
This is what I find unconscionable. It ought to be a legal requirement that the consumer is advised if they qualify for special loan terms if they have certain qualifications.
Failure to provide notice of such alternative loans should give the consumer the right to demand the loan terms be altered to the best level they qualify for once they learn of the alternative loan, with a rebate of the additional costs they incurred due from the person who wrote up the loan (make the mortgage writer personally liable for failure to advise the borrower). That would result in a little more concern for the little guy.
October 15, 2008 at 10:17 am
jpowers (10/15/2008)
Steve Jones - Editor (10/15/2008)
I'm not sure there was a lot of forcing loans. There have been numerous interviews from lots of brokers that were making upwards of $50k a month, that they were always searching out new loans and offering them to people because of the profit. Even when there were soldiers and others that qualified for other loans.This is what I find unconscionable. It ought to be a legal requirement that the consumer is advised if they qualify for special loan terms if they have certain qualifications.
Failure to provide notice of such alternative loans should give the consumer the right to demand the loan terms be altered to the best level they qualify for once they learn of the alternative loan, with a rebate of the additional costs they incurred due from the person who wrote up the loan (make the mortgage writer personally liable for failure to advise the borrower). That would result in a little more concern for the little guy.
But this is a capitalist society, and caveat emptor applies to everything. If I go to the grocery, should they offer me ten cents off my milk just because the grocery around the corner is selling for less?
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How best to post your question[/url]
How to post performance problems[/url]
Tally Table:What it is and how it replaces a loop[/url]
"stewsterl 80804 (10/16/2009)I guess when you stop and try to understand the solution provided you not only learn, but save yourself some headaches when you need to make any slight changes."
October 15, 2008 at 10:26 am
jpowers (10/15/2008)This is what I find unconscionable. It ought to be a legal requirement that the consumer is advised if they qualify for special loan terms if they have certain qualifications.
Failure to provide notice of such alternative loans should give the consumer the right to demand the loan terms be altered to the best level they qualify for once they learn of the alternative loan, with a rebate of the additional costs they incurred due from the person who wrote up the loan (make the mortgage writer personally liable for failure to advise the borrower). That would result in a little more concern for the little guy.
it should be noted here, that in many, many cases they already were violating existing laws and regulations.
[font="Times New Roman"]-- RBarryYoung[/font], [font="Times New Roman"] (302)375-0451[/font] blog: MovingSQL.com, Twitter: @RBarryYoung[font="Arial Black"]
Proactive Performance Solutions, Inc. [/font][font="Verdana"] "Performance is our middle name."[/font]
October 15, 2008 at 10:28 am
Steve Jones - Editor (10/15/2008)
...I don't understand how they get approval to use a model to actually change their capital requirements and prove that over time. The space shuttle tests new computing hardware and software by having it run in the shuttle, same inputs, but it mirrors another system and they compare the performance and results later before it's put into production. Same thing should happen here.
Allowing this into production before it's proved definitely was a problem and it made the leverage issues worse than they should have been.
Engineering the Space Shuttle is a kind of special case, and even that has not been devoid of failures.
As has been pointed out elsewhere, modelling works well in common situations, often does poorly in exceptional ones. If you 'prove out' your business model too much it's obsolete (or someone else has already run with it) and you're left with nothing. You must take reasonable guesses against the unknown. Alas, exceptional circumstances occur much more often than we would like (a town near me was destroyed by a '500 year flood', rebuilt, and hit 10 years later with an almost identical one).
In the real world, modelling of business decisions is always on the fuzzy side (which is part of what makes business dynamic), mistakes and successes occur all the time. Occasionally, however, one hits that 500 year (which might be 500 years for that particular event, but there are lots of different ones possible) that everyone analyzes in hindsight.
Unfortunately, like generals always fighting the last war, the knee jerk reaction is to try to stop the specific details which are perceived as leading to the current crisis.
...
-- FORTRAN manual for Xerox Computers --
October 15, 2008 at 11:07 am
jcrawf02 (10/15/2008)
jpowers (10/15/2008)
Steve Jones - Editor (10/15/2008)
I'm not sure there was a lot of forcing loans. There have been numerous interviews from lots of brokers that were making upwards of $50k a month, that they were always searching out new loans and offering them to people because of the profit. Even when there were soldiers and others that qualified for other loans.This is what I find unconscionable. It ought to be a legal requirement that the consumer is advised if they qualify for special loan terms if they have certain qualifications.
Failure to provide notice of such alternative loans should give the consumer the right to demand the loan terms be altered to the best level they qualify for once they learn of the alternative loan, with a rebate of the additional costs they incurred due from the person who wrote up the loan (make the mortgage writer personally liable for failure to advise the borrower). That would result in a little more concern for the little guy.
But this is a capitalist society, and caveat emptor applies to everything. If I go to the grocery, should they offer me ten cents off my milk just because the grocery around the corner is selling for less?
No but if the grocery store is offering military personel ten cents off of any milk product and somene in full military unifrom comes to the register with milk and the cashier who knows about the discount but because they work on commision decideds to not say anything and rings the milk up at full price justifying it because the customer did not ask for the discount, then YES the store should refund the difference and maybe then some for attempting to cheat the customer.
The store has the right to sell milk at whatever price they want but what they do not have the LEGAL right to do is apply discounts in a non-uniform manner in order to maximize profits. For one it's bad customer service whcih means bad business and it also hurts the image of bussinesses in general as well as capitalism. If every business ran treated their customers like as if they were at a used car lot then it wouldn't take long for the consumer to tire of the current system and be easily swayed to something like socialism.
"Only Capitalists can kill Capitalism; by exploiting it's core principals at the expense of and to the detrement of the general public instead of working with the principals of the free market to benefit all."
Kindest Regards,
Just say No to Facebook!October 15, 2008 at 11:13 am
"Only Capitalists can kill Capitalism; by exploiting it's core principals at the expense of and to the detrement of the general public instead of working with the principals of the free market to benefit all."
I like this quote. Who said it originally?
😎
October 15, 2008 at 1:27 pm
Matt Miller (10/14/2008)
Let's not forget one of the biggest factors the various models forget to deal with...the power the model itself wields on the underlying system it was designed to monitor. By allowing lots and lots of people access to using that info, you end up in some sick observer's paradox. The models designed to predict problems end up causing the problem.IBM's revenue is off by a penny, which triggers an alert on someone's system, which tells EVERYONE, and next thing you know, IBM is in the tank, just because everyone acted on the same info.
A basic principle of modern physics is that observation changes both that which is observed and the observer.
It applies to any system, but has its strongest effect on essentially chaotic systems where vast amounts of observation are possible, like markets.
- Gus "GSquared", RSVP, OODA, MAP, NMVP, FAQ, SAT, SQL, DNA, RNA, UOI, IOU, AM, PM, AD, BC, BCE, USA, UN, CF, ROFL, LOL, ETC
Property of The Thread
"Nobody knows the age of the human race, but everyone agrees it's old enough to know better." - Anon
October 15, 2008 at 1:34 pm
GSquared (10/15/2008)
Matt Miller (10/14/2008)
Let's not forget one of the biggest factors the various models forget to deal with...the power the model itself wields on the underlying system it was designed to monitor. By allowing lots and lots of people access to using that info, you end up in some sick observer's paradox. The models designed to predict problems end up causing the problem.IBM's revenue is off by a penny, which triggers an alert on someone's system, which tells EVERYONE, and next thing you know, IBM is in the tank, just because everyone acted on the same info.
A basic principle of modern physics is that observation changes both that which is observed and the observer.
It applies to any system, but has its strongest effect on essentially chaotic systems where vast amounts of observation are possible, like markets.
Heisenberg is driving in his car and gets pulled over for speeding. The cop walks up to his window and asks "Sir, do you know how fast you were going?" Heisenberg says, "No, but I know where I was..."
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How best to post your question[/url]
How to post performance problems[/url]
Tally Table:What it is and how it replaces a loop[/url]
"stewsterl 80804 (10/16/2009)I guess when you stop and try to understand the solution provided you not only learn, but save yourself some headaches when you need to make any slight changes."
October 15, 2008 at 1:45 pm
jcrawf02 (10/15/2008)
Heisenberg is driving in his car and gets pulled over for speeding. The cop walks up to his window and asks "Sir, do you know how fast you were going?" Heisenberg says, "No, but I know where I was..."
Heh. And Not.
Like Schrödinger's cat, I both did and did not die laughing when I read this.
:)|:(
[font="Times New Roman"]-- RBarryYoung[/font], [font="Times New Roman"] (302)375-0451[/font] blog: MovingSQL.com, Twitter: @RBarryYoung[font="Arial Black"]
Proactive Performance Solutions, Inc. [/font][font="Verdana"] "Performance is our middle name."[/font]
October 15, 2008 at 3:07 pm
Lynn Pettis (10/15/2008)
"Only Capitalists can kill Capitalism; by exploiting it's core principals at the expense of and to the detrement of the general public instead of working with the principals of the free market to benefit all."
I like this quote. Who said it originally?
😎
Lynn - Thanks for the compliment, I did.
Kindest Regards,
Just say No to Facebook!October 21, 2008 at 3:44 am
I checked the references and the New Scientist article refers to the collapse of LTCM in 1998 which nearly caused a global collapse. This is analysed here and here (Wikipedia).
The Wikipedia reference mentions a quote attributed to John Maynard Keynes
The market can stay irrational longer than you can stay solvent.
(As quoted in The Politics of Public Fund Investing: How to Modify Wall Street to Fit Main Street (2006) by Ben Finkelstein
This indicates that the economy may operate in an apparently irrational (chaotic?) manner and (to get almost back on topic 🙂 ) any amount of Data Analysis may be frustrated by anomalous behaviour!
BTW,the latest issue of New Scientist covers discussion of the fact that most economic models and policies assume a goal (requirement?) of continuous growth, often exponential, which obviously cannot be maintained indefinitely - we live on a finite planet!
Derek
October 21, 2008 at 8:16 am
YSLGuru (10/15/2008)
Lynn Pettis (10/15/2008)
"Only Capitalists can kill Capitalism; by exploiting it's core principals at the expense of and to the detrement of the general public instead of working with the principals of the free market to benefit all."
I like this quote. Who said it originally?
😎
Lynn - Thanks for the compliment, I did.
I think Galbraith's line fits even better:
"Under capitalism, man exploits man. Under communism, it's just the opposite."
...
-- FORTRAN manual for Xerox Computers --
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