You would think that after watching the Dot-Com Bubble and the Housing Bubble play out that nothing would shock me.
Then today I saw this.
It has come to this. Unable to save enough for retirement with traditional investments, baby boomers in search of yield are becoming their own private Countrywide Financials.
Yea. This will end well. Not.
Barry Jekowsky wanted to build “legacy wealth” to pass down to his children. But the 58-year-old orchestral conductor, who waved the baton for 24 years at the California Symphony, didn’t trust the stock market’s choppy returns to achieve his goals. And the tiny interest earned by his savings accounts were of no help. Instead, Jekowsky opted for an unlikely course: He became a subprime lender, providing his own cash to home buyers with poor credit and charging interest rates of 10% to 18%. It may sound risky, but “it helps me sleep better at night,” he says. “Where else can you find [these] returns?”
Loaning 401k money at 18% interest to some poor shmuck makes you a loanshark. The only difference is that Barry probably won't be breaking anyone's legs. That makes Barry a dumb loanshark.
Forgetting for a moment the questionable logic behind this growing trend, has anyone considered the moral implications of making high-interest loans to poor people? Isn't that the place for amoral corporations?
Critics say they are gambling with cash they cannot afford to lose. If borrowers stop paying the loans, lenders may not be able to take back the cash they invested, which could put their retirement at risk. On a larger scale, there’s also the threat of a new wave of foreclosures. “You’ve got unsophisticated lenders and unsophisticated buyers [and] it sounds like a very risky combination,” says Doug Miller...
I think Americans have watched too many Hollywood movies. When things aren't working out "The Hero" does some risky, Hail-Mary play that always works and everyone lives happily ever after.
Let's not forget who's taken us to this place: the Federal Reserve.
Remember all those interest rate cuts and QE money that the Fed has thrown at the thieving Wall Street banks and their wealthy clients?
I remember bringing up the moral problem of giving money to thieves. Too many people ignored the point and instead answered "We have to do it to save the economy!"
Well, there was a cost above and beyond the money we threw at thieves so they could give themselves larger bonuses. People lost the ability to save money for retirement in an honest way. Now they have to take crazy risks in disreputable way.
What all these lenders have in common, however, is their willingness to lend to borrowers with low credit scores. In some cases, they do not even check their scores...Some will even consider borrowers while they’re in foreclosure.
Oh, yeah. This will all end well. For certain.
What it sounds like to me is the small carrion eaters are picking the bones of the carcass that the big Wall Street predator has abandoned after making its kill and feasting on the middle class.
And speaking of Wall Street predators, they have moved onto another part of the economy. Well, actually, they are looking to screw over the same working class people that they already screwed over once before.
the latest product peddled by large banking interests, even though they look almost exactly like the mortgage-backed securities that were a primary driver of the financial crisis. These new securities, backed by rental payments, also have real-world implications for millions of renters, who could end up turning in their monthly checks to Wall Street-based absentee slumlords.
The irony is rich: Wall Street created the conditions for millions of foreclosures, then they sweep in to buy up the homes and rent them out, often to the same people they kicked onto the street.
Wow. You know you are running out of suckers when you are looking to screw over the exact same people a second time.
What it sounds like to me is that Wall Street either has run out of ideas, or run out of honest people to steal from. Either way the game is coming to an end.