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REQUIEM

Below are the two final essays to be posted on Allegiance and Duty Betrayed. The first one is written by a friend -- screen name 'Euro-American Scum' -- who, over the past four years, has been the most faithful essayist here. He has written about everything from his pilgrimage to Normandy in 2004 to take part in the 60th–year commemoration of the invasion, to his memories of his tour in Vietnam. His dedication to America’s founding principles ... and those who have sacrificed to preserve them over the past 200+ years ... is unequaled. Thank you, E-A-S. It has been a privilege to include your writing here, and it is a privilege to call you my friend.

The second essay is my own farewell. And with it I thank all of the many regular visitors, and those who may have only dropped in occasionally, for coming here. I hope you learned something. I hope a seed or two was planted. But, even if not, I thank you for stopping by ... 25 March, 2010

8/17/2007

Over Extension and Bad Management

For Sale.jpg

When our children were in high school they both worked, after school and weekends, at a local fast food restaurant. It wasn’t a McDonald’s/Burger King national franchise; it was a small, one-of-a-kind mom-and-pop place that specialized in bar-be-cue sandwiches.

The owners, a young couple whose dream it had always been to own such a place, roasted their own turkeys, hams, beef and pork in the natural juices and served them on a variety of homemade rolls, from sourdough to poppyseed. They also served up a small number of side dishes (fries, onion rings, etc.), beverages, and ice creams for dessert.

Combining the above with curbside service (i.e., the servers would take your order at, and deliver it to, your car), that was it. A simple menu, but one that was unlike any other offered in the area, and one that was mostly ‘homemade’.

The place was extraordinarily popular. The parking lot was always full. And the business was well run, with one or the other of the owners generally there overseeing the operation, and half a dozen high school students or young adults manning the cash register and preparing the orders.

Then the owners began to set their sights on ‘improvement’.

The menu was changed, adding many new items – items that all of the other fast food franchises served. Emphasis on ‘variety’ became the business motto, and, in the process, the simple uniqueness of the place evaporated. Many more part-time workers were hired, and the place simply became a lot more hectic, and less well organized.

Over time, the atmosphere in the restaurant became the typical frenzied one seen so often elsewhere. The young employees became overworked, under-dedicated and disillusioned, and the owners became increasingly frustrated with demands on their time and the new and different procedures that had to be developed in order to cope with the addition of so many new items on the menu and the new distributors with whom they had to deal.

Customer loyalty began to wane, as the business struggled to survive, and, a mere year after the ‘expansion’, the once-thriving eatery closed, leaving a forlorn and crooked ‘For Sale’ sign as the only lingering evidence that it had ever existed.

Why do so many of us insist on fixing that which isn’t broken? Why do we not acknowledge and value the kind of pride in accomplishment that should be engendered by being both useful and unique? Why are so many of us determined that bigger means better? Why do we refuse to recognize the blessing of successful simplicity?

Over-extension and bad management decisions.

Along a similar vein to my own personal recollections above, but capable of exerting a significantly larger negative influence on countless lives, fortunes, and futures …

What was General Motors thinking when they started lending money to high-risk, low-credit-rated people to buy houses? I can easily comprehend the business logic and appeal of providing financing for the purchase of GM cars, but ... houses? Talk about moving from a focused winning strategy to a diversified losing one.

In 2006 General Motors appeared to have resurrected itself, thanks in part to selling 51% of its best-performing division -- GMAC -- to buyout firm Cerberus Capital Management. But instead of printing money, the finance company is now courting disaster because of its mortgage operation, Residential Capital (ResCap), a lender whose subprime mortgages comprise a full fifth of its revenues.

At GMAC's investor conference last month, CEO Eric Feldstein assured attendees that subprime lending is being slashed, but he also acknowledged that ResCap could weigh down all of GMAC for the rest of the year, and beyond. This admission marked a major shift from 2005, when ResCap accounted for nearly half of GMAC's net income.

Over-extension, and bad management decisions.

What was H&R Block thinking, while engaging in the same thing? Offering short-term loans against tax refunds is brilliant, nearly risk-free, and extremely lucrative, but it's a giant leap from there to becoming immersed in subprime mortgages.

After suffering a major financial beating, H&R finally unloaded its subprime mortgage division, but got a bargain basement price for dumping it. H&R had valued the division at $1.3 billion as recently as this past srping, but the buyer offered a H&R less than 40% of that amount, and bought it for what would once have been considered a song.

Multiply the above two subprime debacles a hundredfold, and you are able to envision the ultimate in what one could call ‘ill-conceived product extensions’. Actually, I see little difference in what I believe the ultimate effects will be between victims of the short-sighted subprime expansion and the fate of our local mom and pop restaurant – except that the far-reaching subprime debacle will have financial tentacles whose negative effects will cause much more than the vision of a small, deserted mom-and-pop store in rural Lancaster County with a crooked, aging ‘For Sale’ sign hanging in the window.

~ joanie

48 comments:

Anonymous said...

Well said.

marcus aurelius said...

I've known many such businesses in my life- small businesses that have found their niche and then they decide to expand beyond their area of expertise and the whole business begins to fall apart.

You can always improve on success, but too often the "improvement" turns out to be an anchor instead of a sail because the focus is lost.

You make a good comparison with the subprime mess.

john galt said...

You have a way of saying things that combines everyday life with global issues. That's a talent.

Proudpodunknative said...

Good comparison from local to national.

Good summary:

Over-extension and bad management decisions.

robmaroni said...

A brilliant analysis, Joanie! Absolutely brilliant!

Minuteman23 said...

I'll say it again even though I know it always fall on deaf ears. You should consider running for national office.

3timesalady said...

Beautifully analyzed, Joanie. Too many people have so much, and they are successful without realizing it. Then the desire to "do more" takes over and ruins the whole thing. It's too bad that young couple wasn't happy with the successful business they had. Do you know what they're doing now?

Anonymous said...

This is a great essay.

Al said...

The obvious difference between the two situations is that the owners of the mom and pop place, with perfectly good intentions, tried to expand their business. They were people who had done others good in the course of running their business, especially the young people they employed.

In comparison, unlike the mom and pop store owners who hurt no-one and actually benefited the youth who worked for them,

with their move into lending money to high-risk, low-credit-rated people to buy houses GM was preying on suckers.

Led by their hot shot finance people who "crunch numbers" and collect their outlandish bonuses every Christmas, GM "expanded" into the business of taking in pathetic, desperate, starry-eyed suckers.

The Money Store, active in certain sections of the US with Phil Rizzuto as their kindly spokesman in late night TV ads,
gave loans to people with bad credit to buy houses. And as I heard from more than acquaintance, the kindly Money Store was brutal in repossessing the homes they lent money for—with even a single late payment.

Preying on such clueless, uneducated suckers has been going on for centuries

I see no comparison between the two business operations, the mom and pop owners who benefited their whole community, and the GM operators who preyed on the weak.

marcus aurelius said...

Al,

Your comments are valid, but you missed the point of the article.

C.W. wasn't comparing the intentions of the two. She was comparing the idea of achieving success with a "focused" business model and then over-expanding by moving into areas that stretch economy to the breaking point.

I agree with you that the motives of the two are probably very different, but motive wasn't the subject of this article. Over extension and bad management, whatever the motive, was.

Joanie, I sent this article to a friend whose son owns a small sportsman's shop in Minnesota. He is thinking of extending his inventory to include things like kayaks, and many other expensive inventory items, even though he is doing a very good busniess by limiting himself to more common sporting goods. His father (my friend) has advised him against the expansion, for the same reasons you talk about here. I know he will appreciate your article.

john galt said...

Al, you gotta be kidding. Do you honestly believe these subprime lenders made all these loans just so they could be saddled with a mountain of foreclosures? No lending organization relishes foreclosures. They're a nuisance, and they almost always cost money instead of creating profit.

The subprime lenders are hurting and if you think that pain was intentional you need to think again.

Anonymous said...

No major lending company--banks, mortgage companies, etc--wants foreclosures, especially during a time when there is a housing slump. Houses in my area (suburban D.C.) are sitting on the market for a year or more, and price reductions are happening all the time. Banks and mortgage companies have enough overhead without worrying about reselling foreclosed properties. Any financial business that loans to risky investors with the idea of foreclosing on their property is nuts.

all_good_men said...

You are right about the mom and pop operation helping the community. However, when they over extended themselves, they helped no one. They lost their business and the youths lost the jobs.

Now let me understand this about the mortgage companies. They loan money to undeserving people so they can foreclose and then be stuck with a property which has to be unloaded instead of making 6 or 7 percentage points for 15 to 30 years on several hundred thousand dollars. I think not. They took a chance and the undeserving took a chance. Both lost. That is business. Risk a lot; lose a lot.

Al said...

The difference is no-one bails out the mom and pops.

The US government rushes in to bail out the big boys.

Those types of mortgage products should have never been allowed to see the light of day to begin with.

Where were the regulators and the lawmakers?

They also have responsibility, but look at all the people who fed at the greed trough while the housing boom was in full swing.

They (lawmakers/regulators) weren't going to get in front of that train, it would be political suicide.

cw-patriot said...

John Galt and all_good_men, you are right on the money when you state that mortgage companies avoid foreclosure like the plague. Mortgage lenders are often willing to make substantial concessions to stop home foreclosure and keep the consumer in his home.

I have been working with banks and mortgage companies for twenty-five years. When a homeowner is late with a monthly mortgage payment, generally three entities are eventually hit: (1) the mortgage company that did not receive its principle and interest payment, (2) the town in which the property is located, that did not receive its real estate tax payment, and (3) the insurance company that did not receive its homeowners insurance preimum. Despite the fact that they have not received their money in a timely manner, none of those three entities is ever eager to foreclose.

The mortgage company is not in the business of marketing homes, nor does it want to be. The town is never eager to turn tax bills over for delinquent collection because of the added paperwork involved and the additional fees for such collections. And the insurance company does not want to permanently lose a client.

Those who are owed generally offer flexible options once a payment has been missed. And, contrary to what seems to be a prevalent belief among consumers, mortgage companies really do want to find a way to help consumers stay in their homes.

One option they often offer is a catch-up plan. Say you fell $5,000 behind in your mortgage payments while you were unemployed. Now you have a job, and you can afford your regular mortgage payment plus $1,000 a month. The lender would let you catch up for five months.

Some lenders will add the past-due amount to the back of the loan, in effect extending it a few months, thirty years out.

Others will divide the past-due amount over the loan's remaining term, increasing each monthly payment by a few dollars.

If the borrower is substantially delinquent -- generally six months or more -- another common method of dealing with the inability to pay is conversion of the past due amount to principal and re-amortizing the loan, possibly at a lower interest rate. Often this temporary (or, in some cases permanent) interest rate reduction is enough to pull things back together.

In rare cases, the lender might modify the loan by reducing the rate, or offering a "post sell", in which payments on the past-due amount are deferred until the house is eventually sold, whenever that might be.

These, and many other options to deal with missed payments, are commonplace.

In twenty-five years of dealing with this sort of thing, I have never heard of a home being foreclosed upon after a single missed payment. That would be ludicrous in that it would not benefit any of the parties involved.

~ joanie

Al said...

.
I am delighted to hear that the world is such a friendly place and that mortgage companies are so kindly.

Mortgage defaults up 67% in California - MarketWatch

http://www.marketwatch.com/News/Story/Story.aspx?siteid=netscape&dist=netscape&guid=%7B1075F84E-0DCE-4484-B8D2-024F9E64D029%7D

Mortgage defaults spreading, AIG says - Aug. 9, 2007

http://money.cnn.com/2007/08/09/news/economy/bc.aig.subprime.reut/index.htm?postversion=2007080909

Subprime Fiasco Exposes Manipulation by Mortgage Brokerages


http://www.bloomberg.com/apps/news?pid=20601109&sid=a8VFwgtdQ9FM&refer=home

- California mortgage defaults hit 10-year high

http://www.inman.com/inmannews.aspx?id=63974

etc etc etc ad infinitum

john galt said...

Nobody said mortgage companies are "kindly." A few of us have just pointed out that it doesn't pay for them to foreclose, and they do just about everything they can to avoid doing so. Your headlines don't refute any of that. When the payer misses more payments than the mortgage company can handle, default becomes an unavoidable necessity.

Do you want to explain why the person you know had his house repossesed after missing ONE payment? There has to have been a lot more involved than ONE missing payment.

all_good_men said...

From one of your linked articles, Al, and repeated in all the others:

Since the beginning of 2006, more than 50 U.S. mortgage companies have put themselves up for sale, closed or declared bankruptcy, according to data compiled by Bloomberg.

Yeah, those sneaky mortgage companies sure did show those poor naive homebuyers, didn't they? They "connived" themselves right out of business. (/sarc)

And isn't that the whole premise for this article? "Over Extension and Bad Management"? You better be careful what you post or you might just wind up proving the article's point. LOL!

kathymlynczak said...

This is a good colummn. Even though there have been exceptions, the majority of the subprime lenders were just as foolish as the people whose houses had to be foreclosed on.

I'll repeat one of the questions above. Do you know what happened to the young couple that had owned the mom and pop business Joanie? What are they doing now? Just curious.

daveburkett said...

The mortgage company is not in the business of marketing homes, nor does it want to be. The town is never eager to turn tax bills over for delinquent collection because of the added paperwork involved and the additional fees for such collections. And the insurance company does not want to permanently lose a client.

Do you define this description as "kindly"? If not, lose the sarcasm. If so, maybe you could enlighten the rest of us. You seem to read a lot into posts that isn't there just so it lines up with your view of things.

Foreclosures are expensive and time consuming, almost always resulting in a loss for the mortgage holder.

Anonymous said...

Al, you sound like Jonathan Edwards, practically word for word.

Anonymous said...

I think the economy is doomed. But I have doom insurance.

Max Shapiro said...

CW, you hit the nail on the head.

You would think these lending companies would have seen this disaster looming. Handing out ARMs for 100% of a home’s value to people with low credit is a formula for disaster if the economy heads south, which it will. The stupidity of people in positions of supposed authority in the business world is amazing.

smithy said...

Right now there are about 44 million mortgages in the U.S., and less than 14 percent of them are subprime. And only about 13 percent of those are late on payments (1% of the mortgage market), with the majority of late payers "working through their problems" with the banks.

(http://www.foxnews.com/story/0,2933,292780,00.html)

I assume the "working through" is in one of the ways you mentioned above Joanie.

Anonymous said...

Al,

Just because foreclosures are up does not mean the mortgage companies are not trying to protect their investment.

Also, who is foreclosing? I would not be surprised if a large majority of the foreclosures are investors (flippers) that got their hand (and maybe their whole body) caught in the cookie jar. If you look at the “sub-prime” market, most mortgages are being paid on time. This is also true for the standard mortgage market. The media are wetting their pants because some things are not right.

Al said...

kathymlynczak said

"the majority of the subprime lenders were just as foolish as the people whose houses had to be foreclosed on."
__________________________________

GREED is a tool with which to manipulate others.

calbrindisi said...

Thanks, Joanie. Nice comparison between a sad local story and a national one that could have major repercussions as it plays out. I'm thinking that this sub-prime mess will be the chink in the armor that uncovers the debt-ridden economy and the worthless dollar, and then watch the sparks (and the accusations) fly.

Al said...

Message to me from Florida friend:

___________________________________

In the morning I drive along a 14 mile stretch of road that parallels the Indian River (no houses are built on the river side, no room).

On the opposite side I counted approx. 86 various for sale, for rent, or for lease signs.

Good indication have how many speculators are in trouble
___________________________________

Another note :

http://www.boston.com/business/globe/articles/2007/08/17/2_big_firms_add_to_crisis_in_mortgages/

This is rolling thunder, watch the collateral damage.

I'm wondering how many out of work construction workers are defaulting on their truck loans and when all these people that have bad credit because of this mortgage collapse try and buy vehicles it won't be easy, probably will put the new automobile market into a state of collapse.

John Cooper said...

Joanie--

This may be an oversimplification, but it's my belief that there are two types of people in the world.

1. Those who seek to master nature (e.g. the engineers, technicians, builders, designers, machinists, welders, carpenters, miners, foresters, bakers, et.al.) IOW, those who produce things of value that people will voluntarily purchase, and ...

2. Those without the ability to produce anything of value who, in order to survive, seek to rule over other people (e.g. the lawyers, politicians, etc.)

This is not to disparage the value of good management, but it is my belief that the latter category are always the ones who rise to the top of the hierarchy, not the former.

John Cooper said...

For Max Shapiro, who wrote:

"You would think these lending companies would have seen this disaster looming."

It wasn't a matter of not seeing, it was a matter of not caring. There was absolutely zero risk involved for them. They knew that the government (e.g. us taxpayers) would bail them out if things went wrong.

The subprime lenders lost nothing over all this - the Fed is buying up all their bad debt and letting them off the hook.

IOW, the Fed is secretly shaving a little sliver off of every dollar we own, making that dollar less valuable.

But nobody will notice - at least that's their theory.

robmaroni said...

All good points, Cooper. Can't disgree with a word of it.

cw-patriot said...

John, I am torn about this subprime debacle. While I certainly believe that some unscrupulous lenders did rely on the fact that the government would bail them out if their management decisions caused business to turn south, at the same time I can’t waste my sympathy on (most of) those who borrowed at the subprime rates and got stung.

Many lenders advertised subprimes by appealing to the ‘move on up in the world’ psychology. Other, more honest, lenders tried to make it clear that the subprime loan should only be used as a short-term solution that would allow the borrower to clean up his credit and then presumably apply for a conventional mortgage.

I have read in several reliable sources that a full eighty percent of subprime borrowers are people who already own their own home, and who use the subprime loan, and the cash equity that results, more or less as a home equity loan in order to pay off mounting credit card debt, in the hopes of refinancing into a lower rate at a later time. Some even use the cash equity payment to move into a bigger home.

That gives little credence to the idea that subprime lending is aimed at providing the opportunity for homeownership to those who otherwise would not be able to afford a home of their own. Instead, it appears to have promised a way to clear up a troubled credit history, without also changing the personal excesses that caused the bad credit history in the first place. It would appear that those who have run into trouble with this scenario may have continued to consume beyond their income level.

What we’re seeing now is just the tip of the iceberg. If the government steps in, it will be sanctioning yet another consumer credit binge, on the backs of the average American taxpayer.

And blaming the lenders (unscrupulous though a fraction of them may be) for preying on unsuspecting borrowers – especially considering all of the above – would be analogous to blaming the bartender for the drunk.

It’s all about personal responsibility. And, should the government step in and bail out those involved in the subprime debacle, it will once again be a glaring example not of the government looking out for ‘the little guy’ (that is never a logical explanation for government interference in anything), but yet another example of socialist income redistribution packaged as government (*cough*) altruism. Just ask the two venerable (*encore cough*) senators from New York, who were among the first to call for the government to step in.

One of the most important foundations in socialist doctrine is, after all, the removal of personal responsibility.

The government has no Constitutional power to interfere with the free markets unless the markets are inherently incapable of addressing devastating problems on their own (and maybe not even then). There has been no failure of the free markets here. As has been stated on this thread over and over again, many lenders and many borrowers made devastating financial decisions. Those decisions were made by both sides, and the consequences need to be born by both sides. To force taxpayers who live within their means, and always take care to avoid impulsive, reckless financial decisions, to bail out those who have not is an abomination.

Then again, the American government’s hallmark is disguising socialist abomination as legislative compassion. And to hell with the Constitution.

Orwell and Rand appear more prescient with each passing day.

~ joanie

SharonGold said...

This is a great thread! Lots of information and intelligent comments.

stonemason said...

What we’re seeing now is just the tip of the iceberg. If the government steps in, it will be sanctioning yet another consumer credit binge, on the backs of the average American taxpayer.

And blaming the lenders (unscrupulous though a fraction of them may be) for preying on unsuspecting borrowers – especially considering all of the above – would be analogous to blaming the bartender for the drunk.


Spot on!

Anonymous said...

Bush Rules Out Subprime Mortgage Bailout:

http://www.consumermortgagereports.com/bush-rules-out-subprime-mortgage-bailout/

Let's see how this plays out among the pro bailout crowd. Hillary will have him labeled as "heartless."

Anonymous said...

One of the most important foundations in socialist doctrine is, after all, the removal of personal responsibility.

And blaming the lenders (unscrupulous though a fraction of them may be) for preying on unsuspecting borrowers – especially considering all of the above – would be analogous to blaming the bartender for the drunk.


Bingo!

Al said...

"– would be analogous to blaming the bartender for the drunk."

I disagree.

This attempt at an analogy fails.

If the "drunk" knew nothing about the subject and was suckered in to place himself in the precarious position

BY SOMEONE WHO WAS VERSED IN THE SUBJECT

then the attempted analogy would hold.

This one falls flat on its face.

As Aristotle said,

ANALOGY IS THE HABIT OF GENIUS.

Tom Bergman said...

Part of personal responsibility is making informed decisions. If you make a decision because you were "suckered in by someone versed in the subject" then you haven't done your own homework, and you are just that---a SUCKER.

All of us run into people all the time who try to have us make decisions that benefit THEM and not US. Responsible people do some homework before making decisions that affect them personally. Irresponsible people don't.

What kind of a fool would make a major financial agreement concerning something he knows little about when talked into it by "someone well versed?"

You sound like a bleeding heart political liberal who believes that people don't have the ability to make their own decisions because they're at the mercy of others who are more devious. That kind of argument leaves the door open for government interference in the free market, which is exactly what is going to happen here.

CW's analogy was spot on. Your argumemnt is weak and full of liberal flaws.

marcus aurelius said...

Once again, you're reading what you want to instead of what is actually written.

I think Joanie's purpose in making the bartender-drunk analogy was to say that you can't blame the provider of a service for the fact that the user made bad decisions.

It's the same thing with blaming the gun manufacturer for what people do with their product.

You're looking at the analogy from the wrong perspective, and even though I suspect you aren't a liberal, Tom Bergman is right, you're argument sounds like something you'd read on Daily Kos.

Anonymous said...

Orwell and Rand appear more prescient with each passing day.

Ain't it the sorry truth.

Anonymous said...

These people who property is being foreclosed can read. Everything about their loan was disclosed in the mortgage documents. If the borrower did not read or did not understand, they should have had a lawyer represent them. I did for all the properties I purchased. The extra money could have saved them their house.

cw-patriot said...

kathymlynczak and 3timesalady,

I don't know exactly what happened to the young couple that owned the place. I do know that they are no longer together, she works in an office somewhere in the area, and he no longer lives in Lancaster County.

Al said...

Sorry, Tom

Your post reads like the typical leftie wailing in his agony and pulling out for the billionth time his tired ad hominum attack apparatus once he can't handle the subject he has gotten himself into.

Most people hire a lawyer, a real estate agent, a medical doctor, an accountant etc. because they are not a professional in the subject and need expertise beyond their own layman's level.

Otherwise they would handle their own legal problems, property deals, medical problems, accounting and IRS matters, etc. themselves.

Children also go school, and people take swimming, dancing, piano lessons trusting in the teacher to be a professional in the area and bring them along properly.

The professions of the lawyer, real estate professional, medical professional, accountant would not exist if everyone were capable of understanding and handling everything they needed in those areas themselves.

The lameness of your question speaks for itself:

What kind of a fool would make a major financial agreement concerning something he knows little about when talked into it by "someone well versed?"

Most people don’t understand every detail of the contracts they sign when they buy a house, a business, etc.

But they expect those representing them to protect their interests.

The prisons are filled with flim flam artists, con-men, cheaters of every type.

And at the same time many of the biggest scammers run around free and even get US government bailouts when their own scams start dragging them under.

Tom, I expect your next post to make use of the technique from the leftie playbook of wildly accusing whomever does not agree with you of being “mentally ill,” etc

invoking words from the sacred “religion” of the leftie—their beloved psychiatry.

Go to it, Tom.

Tom Bergman said...

Al, I'm going to assume that you never bought a house.

You talk about people needing to hire a lawyer, accountant, etc. because they can't handle situations that need those professionals themselves.

You ask any responsible person who has ever bought a house and they'll tell you that you NEVER buy a house without having a real estate lawyer at your side. HE reads the papers and serves as YOUR legal representative. Anyone who was taken in by these subprime lenders wasn't responsible enough to hire a real estate attorney, or else they didn't want to spend their money on such a sensible thing.

I wouldn't dream of commenting on your mental health and I don't know how such a ridiculous comment got into this discussion. It flew right out of left field and only you know why.

daveburkett said...

Ditto Tom Bergman.

John Cooper said...

"The result of shielding men from the effects of folly is to fill the world with fools" --Herbert Spencer

Having posted that, my son the mechanic got an education about sub-prime lending earlier this year.

His original mortgage (Ameritrade) company sold his mortgage to HSBC (formerly Household Finance Co.), which "forgot" to withhold for taxes and insurance from his monthly payment for about 9 months. Then they hit him with it all at once and naturally he was unable to pay the $9,000 HSBC demanded.

Let's face it, my son is thirtyish and has other things (e.g. women) on his mind. For some reason, he simply didn't notice the good deal he was getting on his mortgage payments.

I think HSBC did it to him on purpose with the intent of taking his home. His home is still worth about three times the value of outstanding mortgage. HSBC has computer programs which monitor their collateral, and if I were a betting man, I would bet they selected his home for "special treatment".

Well, daddy and mommy and sister bailed his sorry a** out, and hopefully he learned a lesson and won't be one of Spencer's fools.

John Cooper said...

Joanie--

I thought about opening a restaurant once, so I read up on what it was like to manage a small one.

The book described in painful detail that most owners started work at 3AM every morning to prep for breakfast - baking biscuits, frying bacon, etc. - and worked until about 10PM - staying late to keep the books for the day and order supplies for the next.

The book went into great detail about how your employees would steal from you, not show up at the worst times, etc., etc. The book went into great detail about the sly methods your suppliers would use to cheat you.

Undaunted by these hard facts, I approached the local regulatory agency with my plans. That was the last straw. Those clowns acted as if the investment of my life's savings was *theirs* to manage. They told me how many tables I had to have, how many restrooms, what kind of parking, etc., etc.

So maybe the owners of that great sandwich shop of your youth just got tired of being used?

Anonymous said...

http://www.economicsbriefing.com/2007/08/major-banks-borrow-2-billlion-from.html

*Traditionally, Discount Window borrowings have only been done by _banks facing short-term liquidity problems_*_._ Last week, in a conference call, *as the Fed attempted to add liquidity to the markets, _it encouraged major banks to borrow from the Window by telling them it was " a sign of strength"._*