And The Fastest Growing Bank Asset in 2017 Was… Subprime

Submitted by Simon Black of Sovereign Man

They say that goldfish have the shortest memory in the Animal Kingdom… something like 3-seconds. But it turns out this isn’t actually true. Researchers at the Israeli Technion Institute of Technology conducted an experiment in 2009 proving that even the tiniest fish could be trained to recall certain sounds after as long as FIVE MONTHS.

According to another study from the University of Chicago, Dolphins ostensibly have the best memories in the Animal Kingdom, and in an experiment were able to recall a distinct whistle after 20 YEARS.

Then there are bankers… financius dumbassus, a curious species not fully related to the Animal Kingdom, somewhat descended from protozoa, who display truly bizarre behavior when it comes to memory function.

Case in point: Throughout the mid-2000s, bankers engaged in woefully short-sighted, self-destructive behavior by loaning their depositors’ money to risky borrowers who put no money down to buy overpriced houses.

These loans called ‘subprime mortgages’. And before long, some even more self-destructive bankers began packing thousands of these subprime mortgages together into gigantic bonds, which bankers would trade among themselves.

Everybody in the financial system was in on it.

The mortgage brokers raked in huge fees for closing individual loans. The investment bankers made money packaging the loans into subprime bonds. And the ratings agencies (like S&P and Moody’s) made money slapping pristine “AAA” ratings on these bonds, essentially promising the world that they were RISK FREE.

Looking back they obviously weren’t risk free.

Banks were making risky loans to borrowers who had a history of not paying their debts based on the premise that home prices only increase in value. And when home prices started to fall, the entire apparatus collapsed in late 2008.

You’d think that the entire financius dumbassus species would have learned from this experience.

But you would be wrong.

And that’s because financius dumbassus has an incredibly short memory. Not even a decade after these loans nearly brought down the entire global economy, SUBPRIME IS BACK.

In fact it’s one of the fastest growing investments among banks in the United States.  Over the last twelve months the subprime volume among US banks doubled, and it’s already on pace to double again this year.

Bottom line– financius dumbassus is once again back to its old ways… making risky loans to borrowers with pitiful credit.

What could possibly go wrong?

Leave it to financius dumbassus to try the same thing again and expect a different result. It’s textbook insanity.

Of course, they don’t call it ‘subprime’ anymore. Now it’s called “non-QM”, meaning “non qualified mortgage.” But it’s exactly the same thing– borrowers who don’t qualify for a conventional loan because of their pitiful credit and inability to make a down payment.

It’s as if they think they’ll be able to avoid the same consequences simply by changing the name. It’s genius! As a friendly reminder, financius dumbassus isn’t making these suprime/non-QM loans with its own money - they’re making these loans with their depositors’ money. YOUR money.

Comments

WhackoWarner css1971 Tue, 04/03/2018 - 17:02 Permalink

ultimate gain is foreclosure.

Switched from everyone can afford a home (circa 1950's)  to WE OWN EVERYTHING....circa now.  And rape fees all the way.

Robosigning.    Baby Boomers being lured into reverse mortgages.  People unprepared for any real interest rates.

 

Subprime?  Stupid.  Rents are climbing faster than home values here.   I owe my life to the company store.

In reply to by css1971

True Blue WhackoWarner Tue, 04/03/2018 - 18:23 Permalink

Rents are climbing faster than home values here

Because the last sub-prime debacle allowed certain people and corporations close to the Fed's QE money spigot to buy up all the 'distressed' properties for which their banking cohorts knowingly made bad loans. And played up one side and down the other; as those knowingly bad loans were used to fleece muppets into covering the banks ass -ets under the guise of AAA ratings as 'mortgage backed securities.'

Why should their behavior change? They perpetrated a massive fraud and got away with it; not only got away with it, but got away with a fat profit from both sides of the trade, taxpayer bailouts, and huge bonuses. As an additional perk, they can rent those 'distressed' properties they bought through Section 8 and have the government pay noncompetitive high rents while hammering the surrounding property values (putting/keeping people underwater) just in time to wash, rinse and repeat.

Again, why change behavior that is so richly rewarded? Some clever criminal figured out that they could rob a bank, bankrupt it, get taxpayer money to 'bail them out' and use that to buy the bank at garage sale prices; then rinse and repeat the whole cycle a decade later. <Shocked>

In reply to by WhackoWarner

GUS100CORRINA Tue, 04/03/2018 - 15:53 Permalink

And The Fastest Growing Bank Asset in 2017 Was… Subprime

My response: More FRAUD and GRAND THEFT being promited by the banksters. Did everyone notice the BUYING that took place today around 2:30 PM? Coincidence?? NOT!!!!

crazybob369 Tue, 04/03/2018 - 16:25 Permalink

Then there are bankers… financius dumbassus, a curious species not fully related to the Animal Kingdom, somewhat descended from protozoa, who display truly bizarre behavior when it comes to memory function.

Statement made my day.

And of course, let us not forget about the sub-sub prime auto loans. Auto loans have topped well over 1 trillion dollars, most of them in the sub-prime category. What could go wrong? Loan on an asset that is worth less than the loan, to people who can't afford to make the payments.

A brilliant, winning strategy.

Stormtrooper Tue, 04/03/2018 - 16:26 Permalink

"Throughout the mid-2000s, bankers engaged in woefully short-sighted, self-destructive behavior by loaning their depositors’ money to risky borrowers who put no money down to buy overpriced houses."

Wrong again.  The banksters don't want depositors money because they have to pay miniscule interest on it.  And they don't need it because they don't actually loan out "money".  They loan out fiat currency counterfeited electronically at the time that the poor suckers "taking a loan" close on the loan.  Then they demand interest on the currency that they just counterfeited.  To top it off, they sell the loan created with bogus money to some other sucker to lock the asset onto their books.

LawsofPhysics Stormtrooper Tue, 04/03/2018 - 16:33 Permalink

Correct. In other words, it is much, much worse/corrupt than you think as these fuckers continue to issue debt and create all the currency they want with NO REAL WORK, NO REAL RISK, and NO new collateral requirements!!!!!

Everyone else must perform real work and face real risk in order to earn their currency/debt notes, but not the fuckers in banking and finance...

 

In reply to by Stormtrooper

3-fingered_chemist Tue, 04/03/2018 - 19:35 Permalink

Subprime is the hottest market because that's all that is out there for customers. How many worthy individuals credit wise can there be in the US? How many likely need loans? Banks don't make money unless they can churn that fiat from the Fed and skim off the top. It is a game of hot potato though. The moment they create a loan in the subprime realm, they are selling it off to the pension fund that is looking for yield.