Posts Tagged ‘borrower’

“Not for nothing do we have such a preposterous financial system.  The borrower buys things he doesn’t need with money he doesn’t have.  The lender lends money that no one ever earned or saved, at the lowest interest rates in history, to borrowers who can’t pay it back.” –Bill Bonner

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“Not for nothing do we have such a preposterous financial system.  The borrower buys things he doesn’t need with money he doesn’t have.  The lender lends money that no one ever earned or saved, at the lowest interest rates in history, to borrowers who can’t pay it back.” –Bill Bonner

Money Storage

Posted: February 23, 2016 in Money Matters
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“A borrower takes your money and uses it.  He doesn’t just store it for you; that is what safe deposit boxes are for.  When you deposit your money in a bank, it’s the same thing.  You are making a loan to the bank.  The bank doesn’t store your money in a safe on your behalf; it uses it to balance its books.” -Bill Bonner

Sweden, Denmark, and Switzerland all have negative interest rates.  Negative interest rates mean the lender literally pays the borrower for the privilege of lending him money. It’s a bizarre, upside-down concept.  But negative rates are not some European anomaly.  The Federal Reserve discussed the possibility of using negative interest rates in the U.S. at its last meeting.  When you deposit money in a bank, you are lending money to the bank.  However, with negative rates, you don’t earn interest.  Instead, you pay the bank.” -Nick Giambruno

Borrow More?

Posted: January 25, 2015 in Debt
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“The more you borrow, the more you had better prepare to pay back.  Sooner or later, every debt is paid, if not by the borrower then by the lender.” -Bill Bonner

Borrow a Penny?

Posted: November 16, 2014 in Money Matters
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“Don’t ever borrow a penny.  As soon as you understand interest, you will only be a lender.  You will never be a borrower.” -Porter Stansberry

Well, here we ago again.  Up until now, most of the “questionable” home loans available since the housing meltdown have been rural development loans offered through the USDA.  The questionable part in my mind are the “no down payment required” and “guaranteed loan” aspects.  But, according to a Reuters article, Wells Fargo is again planning to jump back into the “subprime” market.  Why?  Because they are experiencing a downturn in revenue.  Hmm, does this seem like a sound business decision?  (GM is also selling cars to subprime customers to help their sales).  Does this sound promising?

Some interesting points from the Reuters article makes me scratch my head:

1.  “…loosening of credit standards could boost housing demand…”  Shouldn’t demand for housing be boosted because people can actually afford them?  Isn’t it a false demand by any other standard?

2.  “To avoid the taint associated with the word ‘subprime’, lenders are calling their loans ‘another chance mortgages’ or ‘alternative mortgage program’.”  Does changing the name of something actually make it better?  Does duping people make these mortgages safer?

3.  “If the borrower does not meet those hurdles and later defaults on a mortgage, he or she can sue the lender and argue the loan should never have been made in the first place.”  Seriously, then why do we make the purchaser sign on the bottom line?  That point was missed during the initial crisis; purchasers were simply considered victims.  Everyone wants to blame the bank.  Thank you Dodd-Frank!

4.  “Subprime mortgages were at the center of the financial crisis, but many lenders believe that done with proper controls, the risks can be managed.”  I am sure they thought the same thing last time.  Risk is guaranteed to be risky; a la the recent death of the snake handling pastor.

5.  “The bank is looking to lend to borrowers with weaker credit, but only if those mortgages can be guaranteed by the FHA.  Because the loans are backed by the government, Wells Fargo can package them into bonds and sell them to investors.”  And there we have it!  Guaranteed by the government!  In other words, by the American taxpayer!  Let’s see, what would I provide to the American consumer if the government will guarantee it?  Anything!  The second part of the quote explains exactly what they were doing before, turning them into investments.  Subprime investments,  I’ll pass.

It looks like the strategy must be paying dividends.  According to the Wall Street Journal, “Household debt jumps as banks loosen up.”  Wells Fargo knows what works to get people borrowing.  The interesting thing is that they still haven’t resolved all of their issues with Fannie Mae and Freddie Mac from the original crisis, but see no issues with stepping back into those familiar waters.

All I can say is, good luck with that….