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Captain Coma

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  1. Attributed to Napoleon.

    Napoleon also said this:

    Experience also shows that the biggest mistake in general administration is trying to do too much. The result is that one lacks the essential.

    I wish somebody could make New Labour (and especially Brown) understand that. As for HMRC, look at how the tax code has expanded under this administration, with inevitable results.

  2. Most of us are now experiencing negative real interest rates. Not only are our savings losing their buying power under prevailing rates, but speculators realise Mervyn hasn't the bottle to raise rates and defend the pound other than w/ the treasury's support. They also have no bottle and will only do this in the middle of a sterling crisis. This makes shorting sterling a zero risk prospect. That ensures a falling pound and an increase in the sterling cost of imports. It also effectively guarantees a sterling crisis.

    All in all therefore, one can see that savers are being encouraged to spend and thus increase consumer demand, whilst speculators are being encouraged to act so as to increase imported inflation.

    In short the current state of monetary policy can only sensibly be described as inflationary.

    And yet Mervyn sees inflation falling, just because the dollar value of commodities is suffering a correction, and unemployment looks a tad worse (keeping wage settlements low).

    Ouch. Very good points.

  3. I was on the train this work and I heard this anecdote (I always thought people made stories like this up on here but I actually heard this this morning!)- man and a woman talking and she was talking about someone she knows who has a BTL mortgage & who didnt get it together to remortgage fast enough so ended up on the variable rate- his mortgage has gone up £500 a month!! His interest rate went from 4.19% to 7.19%. :o

    £500 a month is incredible- I complained when my landlord put my rent up £30 quid a month and that is the only rise in 4.5 years- £500 a month just defies belief in my eyes! :blink:

    By the way, this is in the economic miracle that is Brighton!

    You might find it incredible, but it's going to be increasingly common.

    If you borrowed, say, £250,000 (not unusual in Brighton, I'd imagine) at 4.19% over 25 years, repayments would be £1360.49 (or £872.91 interest only). If the interest rate resets 3% higher at 7.19%, monthly repayments would rise by £457.93 to £1818.42 (or by £625 to £1497.91 interest only).

    My god, I didn't realise how brutal the gearing on IO mortgages was! You pay more for what is, essentially, an option to buy at some future point, and get royally screwed in the process. Financial suicide (but then so is buying anything for £250K at 100% unless you are rich and drunk).

    Ahoy hoy

  4. Im probably the only one, but i preferred Birmingham before it was 'regenerated',

    I was there between 1975 and 1983 (from 10 to 18 years of age). *Memory Lane flash*. Yeah, it was great as a teenager, and the dilapidation was part of the magic.

    I remember how elegantly deserted it used to be around Queensway, the few cinemas, the subway complexes; the yucky old Bull Ring and the rag market down Digbeth; Woodruffe's music store where we used to while away Saturday afternoons, and the weird hippy shop around the back; the quiet of Sun Hill; then later the Elbow Room in Handsworth and God knows how many great little gig places. That mad huge comic place I used to get copies of National Lampoon from, when Yank stuff was strange and exotic. The Costermonger!

    All gone now to shiny corporate shit.

    I came from London and now I'm back in London, but I look back on Brum (where I was always a bit of an outsider) with great and lasting fondness. Many of my loves are there.

    And if you take the piss I'll fight you I will!

    Edit: spelling as usual

  5. Ah, the dubious joys of shared ownership:

    Our shared ownership dream home turned into a disaster

    Mira Bar-Hillel, Property Correspondent


    A couple who got on the property ladder through a shared ownership scheme have dismissed the concept as a disaster.

    Special needs teacher Andrew Howard, 29, and his partner purchased a 40 per cent share of a new flat in Leytonstone from Newlon Housing Trust less than two years ago.

    When he was offered a new job in Norfolk he thought it would be a straightforward process to sell the property and relocate.

    But their experience of ownership and trying to sell has left the couple, who have a two-year-old daughter, in despair.

    Mr Howard paid £79,000 for his share of the £195,000 two-bedroom flat, which carried a monthly rent and service charge of £347 until it shot up to £433 in April.

    The couple's problems began shortly after they moved in. They included:

    • Rubbish not collected for five weeks because of poor access to the bin sheds.

    • A lift out of service for 11 days.

    • A broken front door which had no handle and remained unsecured for nearly two weeks.

    Mr Howard said: "We could not do any repairs ourselves because we were mostly tenants. When we complained, Newlon were invariably rude and unhelpful and treated us as though we were the problem."

    Things became much worse when they asked about selling their share of the flat, thinking the trust would buy it.

    "When we suggested this, Newlon refused point blank, claiming they had no money to do so," said Mr Howard.

    He made a formal application to sell in April but discovered that under the terms of the lease he had to give the trust first option and up to eight weeks to resell the property, for which it would claim an agent's fee of 0.75 per cent.

    Mr Howard had the flat cleaned and painted ready for viewings but heard nothing from Newlon for two weeks.

    The couple were then contacted by valuers, to whom they were asked to pay £300 in addition to paying Newlon's £400 legal costs and for a home information pack.

    By early June the trust had still not put the flat on the market and told Mr Howard the eight-week period when it had sole agency rights would only begin when it appeared on a website marketing shared ownership homes. Newlon also said it had a list of interested buyers but these never materialised, claimed Mr Howard. He added: "In July, after many fraught phone conversations, Newlon finally allowed us to use our own estate agents, who at least tried to market the flat properly. "But by then the market had gone flat and the holiday season had started."

    The final blow came this week, when Newlon assistant director Sunita Parbhaka told Mr Howard she wanted to contact their mortgage lenders, Nationwide, to "find a way to help you".

    According to Mr Howard, she said she wanted to discuss repossession of the flat even though the couple had never been in arrears. Mr Howard said: "I am appalled a charity which is meant to help people like us would want to force us into repossession and extract money from us at every turn."

    He now considers shared ownership, the flagship of Labour and Tory affordable housing policies, a "scam". He said: "With shared ownership you have 100 per cent liability and zero per cent rights."

    A Newlon spokesman said it had tried to help the couple. He added: "We have not failed in our obligations to the owners of the flat, nor have we threatened them with repossession. We sympathise with people finding it hard to sell their homes in the current housing market."


  6. Appears naïvely optimistic to me, and reading it, I had a feeling that in years to come we would think, reading over this again, that the analytical tools used to produce a report such as this were completely inadequate to estimate the true catastrophe that was about to engulf not only the housing markets, but the entire economies, of the countries under discussion.

    Ireland 20% off. They're having a laugh (e.g.).

  7. I recall Ezra Pound, poet and unrepentant fascist, hence critic of capitalism, had a mad idea he called "stamp scrip", whereby bank notes would be date coded, and would deteriorate in value over time unless they were circulated via consumption/investment. In other words, Pound thought that to counter the effect of rich men clogging up society with vast wealth, they should spread it around (on pain of financial penalty) to the benefit of general prosperity.

    In the poems I think the metaphors were digestive/psychological: good regular movements rather than constipation and choleric distemper (intestines = economy).

    Complete madman, but possibly the best poet of his time.

  8. Yes, I heard sh1t-for-brains Hutton on 5 Live bleating that the gov should waste taxpayers' money on bailing out the property market.

    And this is the same sh1t-for-brains Hutton whose wife runs a BTL empire (he's another of those charming greedy capitalist holier-than-thou millionaire lefties).

    So the situation is this: sh1t-for-brains Hutton is introduced as some egghead economics genius, chairman of this-and-that we-know-best Incorporated, but in reality he is asking for us to bail out his missus' strangulating BTL business (it WILL be losing money as we speak).

    But worst of all, the BBC says not a word about sh1t-for-brains Hutton's vested interest in this matter.

    I was so angry, I think that today was the day my last vestige of respect and tolerance for the BBC, which has been dying for years, finally gave up the ghost.

    It is an absolute disgrace. Shame on the lot of these rotten lefty bast*rds.

    Edit: sperlinge

  9. See MarketTicker ...

    Washington Mutual (WAMU) about to go t*ts up after Wall Street closes tomorrow evening. Roubini also checking this one. Apparently WAMU refiused to honour IndyMac counter cheques a few weeks back during the run on that wretched bank, but then under (Fed?) pressure accepted them with an eight-week delay in honouring. Question is, will WAMU be there in eight weeks to cough up the cash. Apparently not, if the word on the street is hip.

    Only according to rumours, mind you ...

    Dominoes, baby! Coming to a town near you soon.

  10. When I were a lad (in t'olden days) you needed to have been around a fair while and made over hundred posts before being cheeky enough to ask mods if you could gear up to being one of them what could start threads. You applied, they sent it 'fore comittee, and t'verdict were handed down, yay or nay.

    How on earth does a bloke on his second post go about bein' able to start threads?

    Occurs to me, young 'uns, that if yer want to keep trolls off yer lovely forum, ye'd best not be giving absolute green newbies the right to kick off new threads an' all!

  11. It seems remarkable that nobody (in gov or media) has suggested that the astonishing collapse in working class support for Labour might have been at least partly linked to the smoking ban. This is anecdotal, mind you, but I now find nothing less than sheer raging hatred for the (middle class, nannying etc) Labour gov among those who were previously its natural and taken-for-granted voters. Irrational and emotional on their part it might be, but if a British bloke or woman can't have a pint and a fag down their local boozer anymore, then the powers-that-be have crossed a fatal line. I have heard from people who have always been natural Labour cannon fodder who will now never ever vote for them again for this reason. It's way beyond hatred, actually. More like murder in their hearts.

  12. But won't most of this money have to come from Jonny Foreignor? But who's going to buy British Government bonds if they move the goal posts even right at the start of a recession.....all confidence in the Gbp will surely disappear and it will be time to sell UK debt, certainly not buy. Maybe the situation is worse than we thought.

    [WARNING: rant coming up ...]

    Of course you are right. After the catastrophic misallocation of capital under Brown's chancellorship comes complete disaster with the defenestration of sterling and the return of "crack-pipe" inflation (we need more money every half hour - no! - twenty minutes - no! - ten minutes no! ....).

    Who was it on this site that said about Labour, "empty heads vote them in, empty wallets vote them out"?

    Somebody else said, excellently, that if somebody was really going to do you over horribly, so that you would be hurt so badly you would never be the same person again, that they would always explicitly tell you that's what they were going to do (e.g. "grind your bones to make my bread").

    Looking back, I think that that's exactly what Brown was doing as Chancellor when he was banging on about "Prudence" and "no more boom and bust". In reality he was telling us he was going to f**k us like we'd never been f**ked before. If anybody truly believed his mad hubristic claims then they deserved everything they got. That's what Brown meant. And collectively if not exclusively, we believed him as our greed got the better of (some of) us. He was telling us he was going to mutilate the UK beyond recognition. He might not even have known himself at the time that that was what he meant or what he darkly and secretly wanted. It's like Guderian asking about Hitler in January 1945: "Does he actually want to lose?"

    Of course he does! That's what Brown always wanted. To destroy, to immolate, to take everything and everybody down with him in his barren, anti-matter version of existence. Watch the scorched earth policy over the next two years, for example. If Brown isn't going to survive then nobody will. His shock after he became PM was suddenly to realise that his dreams were really always nightmares, the visions turning to ashes in his hands. I would guess he didn't even know himself what he was or had become. Now he knows, though, or at least it is dawning on him in the bunker, as the prowling insomniac turfs secretaries out of their chairs and throws mobile phones against the wall. I can imagine his pallor, the trembling hand and sunken eye that betrays the realisation that there is no way out of this mess. His triumph was really always about death and abnegation. The twisted socialism in what passes for his soul decrees that everybody should be as wretched as the most wretched there is - that's equality, see?

    He'll make sure we all get there.

    I know, I know, why don't I get off the fence and say what I really think.

    Edit: spilleng

  13. It seems very wild-west to me... it rhymes with the sort of stories that remain from early western financial institutions (banks; stock markets - etc.)

    Funny you should say that. The Venetians and Catalans took dodgy bankers and brokers very seriously indeed:

    In Venice a guarantee of 3,000 lire was required in 1270 before a moneychanger banker was allowed to set up in business. In Barcelona, from 1300, book entries by credit transfer legally ranked equally with original deposits among the liabilities of bankers. Those who failed were foirbidden ever to keep a bank again, and were to be detained on bread and water until all their account holders were satisfied in full. In 1321 the legislation there was greatly increased in severity. Bankers who failed and did not settle up in full within a year were to be beheaded and their property sold for the satisfaction of their account holders. This was actually enforced. Francesch Castello was beheaded in front of his bank in 1360.

    In the light of all that's gone on lately, perhaps having such a sanction might have served to keep the Applegarths of this world in line. Do you think that sort of legislation might be introduced retrospectively, as with car tax? Could it possibly apply to (ex-) chancellors also?

    Perhaps the Pakistanis have the right idea.

    (from Peter Spufford, Power and Profit: The Merchant in Medieval Europe, London, Thames & Hudson, 2002 - a wonderful read, by the way)

  14. Sorry, couldn't resist this (from MarketTicker):

    Famous Quotes on the Great Depression. . . . . . .
    1. "We will not have any more crashes in our time."
    - John Maynard Keynes in 1927
    2. "I cannot help but raise a dissenting voice to statements that we are living in a fool's paradise, and that prosperity in this country must necessarily diminish and recede in the near future."
    - E. H. H. Simmons, President, New York Stock Exchange, January 12, 1928
    "There will be no interruption of our permanent prosperity."
    - Myron E. Forbes, President, Pierce Arrow Motor Car Co., January 12, 1928
    3. "No Congress of the United States ever assembled, on surveying the state of the Union, has met with a more pleasing prospect than that which appears at the present time. In the domestic field there is tranquility and contentment...and the highest record of years of prosperity. In the foreign field there is peace, the goodwill which comes from mutual understanding."
    - Calvin Coolidge December 4, 1928
    4. "There may be a recession in stock prices, but not anything in the nature of a crash."
    - Irving Fisher, leading U.S. economist , New York Times, Sept. 5, 1929
    5. "Stock prices have reached what looks like a permanently high plateau. I do not feel there will be soon if ever a 50 or 60 point break from present levels, such as (bears) have predicted. I expect to see the stock market a good deal higher within a few months."
    - Irving Fisher, Ph.D. in economics, Oct. 17, 1929
    "This crash is not going to have much effect on business."
    - Arthur Reynolds, Chairman of Continental Illinois Bank of Chicago, October 24, 1929
    "There will be no repetition of the break of yesterday... I have no fear of another comparable decline."
    - Arthur W. Loasby (President of the Equitable Trust Company), quoted in NYT, Friday, October 25, 1929
    "We feel that fundamentally Wall Street is sound, and that for people who can afford to pay for them outright, good stocks are cheap at these prices."
    - Goodbody and Company market-letter quoted in The New York Times, Friday, October 25, 1929
    6. "This is the time to buy stocks. This is the time to recall the words of the late J. P. Morgan... that any man who is bearish on America will go broke. Within a few days there is likely to be a bear panic rather than a bull panic. Many of the low prices as a result of this hysterical selling are not likely to be reached again in many years."
    - R. W. McNeel, market analyst, as quoted in the New York Herald Tribune, October 30, 1929
    "Buying of sound, seasoned issues now will not be regretted"
    - E. A. Pearce market letter quoted in the New York Herald Tribune, October 30, 1929
    "Some pretty intelligent people are now buying stocks... Unless we are to have a panic -- which no one seriously believes, stocks have hit bottom."
    - R. W. McNeal, financial analyst in October 1929
    7. "The decline is in paper values, not in tangible goods and services...America is now in the eighth year of prosperity as commercially defined. The former great periods of prosperity in America averaged eleven years. On this basis we now have three more years to go before the tailspin."
    - Stuart Chase (American economist and author), NY Herald Tribune, November 1, 1929
    "Hysteria has now disappeared from Wall Street."
    - The Times of London, November 2, 1929
    "The Wall Street crash doesn't mean that there will be any general or serious business depression... For six years American business has been diverting a substantial part of its attention, its energies and its resources on the speculative game... Now that irrelevant, alien and hazardous adventure is over. Business has come home again, back to its job, providentially unscathed, sound in wind and limb, financially stronger than ever before."
    - Business Week, November 2, 1929
    "...despite its severity, we believe that the slump in stock prices will prove an intermediate movement and not the precursor of a business depression such as would entail prolonged further liquidation..."
    - Harvard Economic Society (HES), November 2, 1929
    8. "... a serious depression seems improbable; [we expect] recovery of business next spring, with further improvement in the fall."
    - HES, November 10, 1929
    "The end of the decline of the Stock Market will probably not be long, only a few more days at most."
    - Irving Fisher, Professor of Economics at Yale University, November 14, 1929
    "In most of the cities and towns of this country, this Wall Street panic will have no effect."
    - Paul Block (President of the Block newspaper chain), editorial, November 15, 1929
    "Financial storm definitely passed."
    - Bernard Baruch, cablegram to Winston Churchill, November 15, 1929
    9. "I see nothing in the present situation that is either menacing or warrants pessimism... I have every confidence that there will be a revival of activity in the spring, and that during this coming year the country will make steady progress."
    - Andrew W. Mellon, U.S. Secretary of the Treasury December 31, 1929
    "I am convinced that through these measures we have reestablished confidence."
    - Herbert Hoover, December 1929
    "[1930 will be] a splendid employment year."
    - U.S. Dept. of Labor, New Year's Forecast, December 1929
    10. "For the immediate future, at least, the outlook (stocks) is bright."
    - Irving Fisher, Ph.D. in Economics, in early 1930
    11. "...there are indications that the severest phase of the recession is over..."
    - Harvard Economic Society (HES) Jan 18, 1930
    12. "There is nothing in the situation to be disturbed about."
    - Secretary of the Treasury Andrew Mellon, Feb 1930
    13. "The spring of 1930 marks the end of a period of grave concern...American business is steadily coming back to a normal level of prosperity."
    - Julius Barnes, head of Hoover's National Business Survey Conference, Mar 16, 1930
    "... the outlook continues favorable..."
    - HES Mar 29, 1930
    14 "... the outlook is favorable..."
    - HES Apr 19, 1930
    15. "While the crash only took place six months ago, I am convinced we have now passed through the worst -- and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us."
    - Herbert Hoover, President of the United States, May 1, 1930
    "...by May or June the spring recovery forecast in our letters of last December and November should clearly be apparent..."
    - HES May 17, 1930
    "Gentleman, you have come sixty days too late. The depression is over."
    - Herbert Hoover, responding to a delegation requesting a public works program to help speed the recovery, June 1930
    16. "... irregular and conflicting movements of business should soon give way to a sustained recovery..."
    - HES June 28, 1930
    17. "... the present depression has about spent its force..."
    - HES, Aug 30, 1930
    18. "We are now near the end of the declining phase of the depression."
    - HES Nov 15, 1930
    19. "Stabilization at [present] levels is clearly possible."
    - HES Oct 31, 1931
    20. "All safe deposit boxes in banks or financial institutions have been sealed... and may only be opened in the presence of an agent of the I.R.S."
    - President F.D. Roosevelt, 1933
    Quotes #5 and #8 are very famous remarks by Irving Fisher, who at the time was managing the Yale endowment funds. It didn't go well from there.
    These were very intelligent people back in their time. Their thoughts on what would happen next were way off the mark. What was said, sounded good and was reassuring.
    It leaves a lot of doubt about what you can take for granted in todays newspapers
    Note, quote 20 refers to the fact that it became illegal to own gold as an American citizen. The government was making sure no one was holding out on them. You had to trade your gold in for currency. This was FDR's way of keeping everyone honest--government excluded.


    Edit: spelling, etc etc

  15. I love MarketTicker:

    Rumor going around right now that....
    Okay, you guys remember the conceptual split of FGIC & ABK (and any others) into a "Good Bank" and a "Bad Bank" (which was previously rumored to be immediately challenged in court by the banks which would be screwed by such a deal) NOW the word is....
    That the banks which would be screwed by having their CDO's stuck with the insurance from the "Bad Bank," instead of tying it up in court for God knows how long....
    The word NOW is that these banks are being offered equity in the "Good Bank" to make them "whole."
    I have no idea how much equity, but presumably, it's a lot.
    So, instead of the banks ONLY getting screwed by having their garbage insured by the Bad Banks, will accept this situation in exchange for being significant equity owners of the Good Banks.
    This is actually what is being discussed right now behind closed doors in New York... although, I need to say, RUMOR ONLY.
    Heh heh heh...
    Spitzer and FGIC & ABK tried to end-run the banks, got threatened with "Instant Litigation," and will now end-up giving over to these same banks the very pieces that Buffett would have paid a significant amount of Jing for just a few days ago.
    This means that FGIC & ABK shareholders are about to get turned and rolled.
    MBIA, watch your back.
    /just what I'm hearing....

    And more:

    Let me say again that this is just a rumor.
    What I am hearing is that these conversations going on right now are extremely fluid -- they're not working from any kind of prepared outline, it's not like a Congressional Hearing with a script and a schedule -- they're making it up as they go along. It's just a small group of people trying to wrangle through a deal which will, 1. keep the whole thing out of court (by agreement of the Banks), and 2. Get the approval of Spitzer, while, 3. not stepping on very many toes of the people who have the Jurisdiction to regulate & enforce because their approval will be required in the end.
    The way it'll work is that:
    1. Banks will still have their crap covered by the close-to-worthless insurance offered by the bad bank.
    2. They'll agree to not litigate, and in exchange for this they'll get equity in the Good Bank. They will also not have to show their balance sheets in a public courtroom where they will indeed become public record, which means that all the toxic garbage can remain hidden.
    3. Current shareholders on FGIC & ABK and possibly others will get diluted badly as the banks get a large chunk of the ownership of the Good Bank(s).
    4. To stop future shareholder actions here requires some regulatory approvals.
    Apparently, FGIC & ABK management are okay with this -- ABK actually was the one who sought to break itself -- see the news stories now floating around there about this.
    There is real pressure to get the Muni rates down NOW, and this is Spitzer's main concern (along with re-election).
    RUMOR, folks.
    That's all it is.


  16. It seems walking away is or will become a rational economic decision in the USA. Read this level-headed and concise article from the WSJ:

    The Rise of the Mortgage 'Walkers'

    By Nicole Gelinas

    Feb 8, 2008

    Fitch Ratings, while telling investors last Friday to expect additional "widespread and significant downgrades" on $139 billion worth of subprime loans, has cited a new factor in their "worsening performance."

    "The apparent willingness of borrowers to 'walk away' from mortgage debt," the analysts noted, "has contributed to extraordinary high levels of early default" on loans issued during the 18 months before the mortgage bubble burst. It expects losses to reach 21% of initial loan balances for subprime mortgages issued in 2006 and 26% for those issued in early 2007.

    Such behavior, where not precipitated by willful fraud, shows that American homebuyers supposedly duped by their lenders aren't so dumb. They're perfectly capable of acting rationally without political interference.

    While mortgage fraud has abounded in recent years, voluntary foreclosures are not by themselves evidence of a newfound irresponsibility on Americans' part. To be sure, until recently, mass-scale voluntary foreclosures were unthinkable. But markets have changed, and people are changing their behavior in response.

    A decade ago, most people started off with enough equity in their homes to make foreclosure irrational from a financial standpoint. Consider: If you made a 20% down payment on a house, prices would have to fall by 20%, almost immediately, before you lost all your money and had much incentive to walk away. This scenario was unlikely, particularly since an independent appraiser had assigned a clear value to the home. Foreclosure was remote, absent a personal financial crisis, for another reason: Every month your mortgage payment would reduce your debt and increase your equity, giving you more room for prices to fall.

    But over the past few years -- until last spring -- banks and the mortgage-backed securities investors who bought the loans the banks packaged weren't demanding substantial down payments; they were happy with 5% or even nothing down. They also didn't worry about whether or not borrowers were building up equity. "Interest-only" loans, quick mortgage refinancings to cash out any equity, and other inventions often led to just the opposite.

    Now the bloom is off the residential mortgage-backed securities (RMBS) rose. And some borrowers, even those who can theoretically afford to keep their homes, realize they owe much more than what comparable houses in the neighborhood are selling for -- and think that prices won't rebound anytime soon. So they're walking away, according to anecdotal reports as well as recent statements by top executives of both Wachovia and Bank of America.

    In most cases, once a homebuyer splits, the mortgage-securities investors are stuck with the loss. In some states, including California and Arizona, this provision is the letter of the law. In others, the bank forgives the balance of the loan -- a common practice that's unlikely to change now, given the criminal and civil investigations banks are already sweating through.

    Essentially, mortgage-bond investors, seemingly unwittingly, sold homebuyers a put option, without properly pricing it, and now homeowners are exercising that option. Moreover, prime borrowers in many markets face the same incentives.

    Yes, this behavior is new -- but only when it comes to houses. Americans have long been able to cut their losses from bad investments and start over. It stands to reason that when the market made houses into yet another speculative investment, Americans would do the same.

    Borrowers acted rationally in response to market forces and incentives during the bubble: Buy a house because prices always go up; you can't lose. Many are acting rationally now: Mail the keys back and un-borrow the money, because prices are sinking fast while the debt isn't. When the house was purchased not as a first home but as a rental investment, the decision is even easier.

    Imagine: Politicians keep saying that Americans need protection from their big, bad lenders -- but that protection is already there.

    Of course, there's a price. Mortgage "walkers" will take a hit to their personal credit rating. Yet this once-forbidding punishment may be discounted. That's because, just as when markets change their behavior, people change, when people change their behavior, markets change also.

    If hundreds of thousands of people with decent work histories are going to have less-than-stellar credit because of foreclosures this year and next, they won't suffer so much as in the past. Many walkers are going to want to buy houses again some day; and when they do, lenders are going to want to make money lending them money to do so (hopefully requiring a good down payment). Investors searching for yield likely won't bypass what could be a large pool of borrowers.

    This rapid transformation shows that the continuing political hand-wringing over what to do about failed mortgages isn't needed. It's beginning to dawn on lenders and their agents -- who assumed that borrowers who could afford to do so would make payments no matter what -- that they could be stuck owning hundreds of thousands of houses at a minimum. This realization will pressure the companies administering those mortgage loans to renegotiate more quickly with borrowers in cutting loan balances. Thus, some version of the "Paulson plan" would have happened without Treasury Secretary Henry Paulson's pressure on the capital markets in December.

    Nobody is going to debtors' prison. Nobody is going to have to toil for 30 years and sacrifice their kids' future to pay off burdensome loans that they're stuck with forever because they overreached. (Even if banks and mortgage administrators pursue judgments for post-foreclosure loan balances, there's always bankruptcy as a last resort.)

    As for Sen. Hillary Clinton and her proposed "moratorium on foreclosures": She may soon find that borrowers, not just lenders, are screaming to let them act within their contractual rights.

    Ms. Gelinas is a chartered financial analyst and a contributing editor to City Journal.


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