Sunday, April 27, 2008

laugh riot! or maybe just plain riot

Turns out that proposed Fed regulations of mortgages might cool down the subprime mortgage market to the dismay of mortgage companies. It might be hard to understand why representatives of a crumbling financial services infrastructure would want to prevent changes to the rules that made the crumbling possible in the first place.

It's not all that hard to explain. See, the mortgage company gets to keep the interest you pay no matter what, so there's an incredibly strong vested interest for them in being able to make loans to absolutely anybody. Continuing to make predatory loans to people who really don't have the means, and selling them on the idea that the housing market will continue to skyrocket, and all the rest of it, is was very lucrative.

Okay, I'll try again. After I finished my Ph.D., I spent two years teaching for per-class "adjunct"* pay - $1700 a course, $2000 a course, that kind of thing. One academic year I made about $10,000. My student loans were coming due. My (now ex-)wife was unemployed. And I had a credit card with a $28,000 limit.

What I figure is, the mortgage people took a long hard look at Citibank, Chase, Discover, and other credit card companies' business models, and said to themselves, "Shoot, a fella' could have a pretty good weekend in Vegas with all that stuff." (They got me, too. By the time I made it to California, having been underpaid for my labor for four years - which is way under the standard for advance-degree candidates in the humanities - I owed north of $30,000 on credit. Obviously, more income would have helped, but that's another, very long and tedious story.)

It's not exactly creative genius, I'll admit. The mortgage people just took up the credit card plan, applied it to housing, convinced federal regulators to look the other way, created a huge inflation in housing prices by giving out absurdly large loans, and then sold the debt on an open, speculative market that everyone admitted nobody really understood.

You know, I quoted that line from Dr. Strangelove, or How I Learned to Stop Worrying and Love the Bomb, thinking it was just a funny way to express the epiphany mortgage lenders may have experienced, but now I think it has more parallels than I initially intended.

"Mr. President, I'm not saying we wouldn't get our hair mussed, but I do say no more then ten to twenty million killed, tops. Depending on the breaks."


*The term "adjunct," as a name for contingent academic labor, is regarded as deeply offensive by most in the contingent academic labor movement. It connotes being disconnected, non-essential, merely additive, when in fact the contemporary higher education system across the US, Canada, and Mexico absolutely depends on a large quantity of non-tenure-track, non-permanent academic employees. The most proper name for this class might be "faculty experiencing highest levels of exploitation and least rewards and security," but that's a bit unwieldy. I like to refer to us jokingly as "tenuous-track." How about "screwed"?

No comments: