john maddente | midwestern clarity

B ack in 2007 while waves of defaults occurred after sub-prime loans "reset" (an adjustable rate mortgage payment that increases after the prime interest rate increases) I asked one Loan Officer,  "Why did lenders write variable rate notes when they knew many borrowers had little capacity to make higher payments down the road?" What I heard in reply was that as risky as these credit bets were, if conventional higher fixed-interest rates were used, the borrower could not have qualified for as much of a loan.   My reaction?  Exactly. I'm reading a book by Bethany McLean and Joe Nocera - All The Devils Are Here - The Hidden Story Of The Financial Crisis (Portfolio/Penguin).  I'm learning more about the origin of sub-prime lending and the players behind it, but I'm struck by a rhetorical question the authors pose in Chapter Six, concerning the line between predatory lending and what I have called predatory borrowing : "But in the larger s...

Cameron and I are jousting again.   Wikipedia image This time the fodder is an hour-long interview with hedge fund manager, Kyle Bass which Cameron and I both viewed with great interest.   Taped last month, I encourage you to view it too . Cameron writes... “ John,  I watched that video, thank you for forwarding it. It was very insightful. There were a lot of things that really popped out but one especially. Bass states that Washington has a spending problem, but in the same breath he states that the solution is simple. He states we need to raise revenues 2 1/2% and reduce expenses by 5%.     Which is exactly what I wish Washington would do, but the Republicans stance against no new taxes and no compromise on that issue is hardly going to get that accomplished .” My reply to Cameron... Cam, Note that the spending reduction Mr. Bass calls for is two times the tax increase he calls for.  Perhaps that’s because giving (additional)...