Distributed Credit Without Distributed Income IS - By Default - The Definition Of Distributed Control Fraud.

   (Commentary posted by Roger Erickson)

"My New Loan Shark Is Great. She Lumped 10x More MiddleClass Debt Into One Permanent Beating - Spread Out Over 30 Generations!"

And, of course, liars auto loans and liars student loans also can't hurt.

What's next? Liar's Private Social Security Loans? Just imagine the marketing options.

"Borrow for retirement NOW! Get taxed until you're 70, and then enjoy free lodging in a debtors prison."

Sounds like a helluva deal! TINA says the only way to retire is to rob some other class?

A "study" says a return to Liars Loans (extending distributed credit, but NOT distributed income) would be "no big deal." Bullshit.

Why offering 3 percent downpayment mortgages is not a return to lax lending

"... researchers at the Urban Institute – and, more recently, the chief executive of Fannie Mae – said [a bad] outcome is unlikely. 

The researchers -- Taz George, Laurie Goodman and Jun Zhu – analyzed the performance of low down payment loans backed by Fannie Mae in the recent past. (Fannie accepted 3 percent down until late 2013.) They found that the default rate for loans with 3 percent to 5 percent down were very similar to the default rates on loans with 5 percent to 10 percent down. They also found that very few borrowers got the lower down payment loans (peaking at 3.4 percent in 1999). And nearly all of those who did had top-notch credit. 

Their analysis concluded that the proposed change would be “no big deal.”

This article misses the point completely, and therefore does more harm than good. The REASONS they give for arguing for low mortgage down payments and rates actually enable Control Fraud while not helping the aggregate at all.

All distributed citizens need is enough distributed income to purchase what they are capable of producing.

Distributing credit but not income IS - by default - one definition of Control Fraud.

"Let*s look at the substance and not the shadow"

Define "recent?" How about "similar?" At least "very few?" Nah! Don't bother. The ex Middle Class seems convinced already. They're still as gullible as ever. And, of course, no mention of distributed net income (gross income minus net taxes) whatsoever.

Decide for yourself. There are additional self-serving statements by bankers in the article.

Let's publish our own 'study.'

Why NOT listening to banksters about Fiscal Policy is a return to aggregate sanity.

After all, we're now all experts on that topic. Without enough feedback, posters here easily forget that 99% of the electorate are not on board with what we already consider obvious.

Same Old Story

Commentary by Roger Erickson

Saw this today on twitter.

INET Economics @INETeconomics6h
"Banks simultaneously create new private credit and new money – this is a fundamental macroeconomic variable." INET Sr. Fellow Adair Turner.

Ostensibly, banks should primarily denominate real credit extenstion with fiat currency bookkeeping, thereby allowing dynamic, diverse liquidity. When bankers do that, they are really acting as market-makers between suppliers & receivers of dynamic- & static-value credits.

Even then, the range of useful credits that banks selectively "liquify" has to be actively regulated ... or else a foolish population and it's options are soon parted.

Any bank that's using it's own imagination to "create" credit de novo (without underwriting standards), is

a) either putting it's own capital at risk (market maker for it's own, extended credit; covered by static asset capital requirements), or

b) is in the business of making liars loans?