Predatory Borrowers

Tyler Cowen at NYT writes: "IT’S NOT JUST THE LENDERS There has been plenty of talk about “predatory lending,” but “predatory borrowing” may have been the bigger problem. As much as 70 percent of recent early payment defaults had fraudulent misrepresentations on their original loan applications, according to one recent study. The research was done by BasePoint Analytics, which helps banks and lenders identify fraudulent transactions; the study looked at more than three million loans from 1997 to 2006, with a majority from 2005 to 2006. Applications with misrepresentations were also five times as likely to go into default."

So keep that in mind as Washington Democrats (and some Republicans) want you to bail out people who fell for creative financing and then made it worse with fraud.

Kip at Stitch in Haste calls them consenting adults. "What is so "cruel" about being unsympathetic to those who deserve no sympathy? Competent consenting adults, hoping to game the system, got burned -- not by any "predatory lender" but by their own miscalculation (dare one say "their own greed"?). They could have stayed out of the housing market. They could have waited until their finances and credit improved. They could have done their homework before they signed the forms. They could have been, forgive the repetition, competent consenting adults."

Bill Fleckenstein says we've run out of bubbles--capitalism has boom and bust cycles: "We have experienced a wild, drunken binge, and we are going to have a hangover. But the best policy for the country would be to accept the hangover, head to the gym, start working out, and get stronger and healthier for the next go-round."