by Bill McBride on 12/07/2008 07:30:00 PM
Sunday, December 07, 2008
From Stephen Mihm at the Boston Globe: So, you want to save the economy?
First a correction, I'm not a "veteran of Wall Street" - please don't tar and feather me! (I retired as a senior executive and board member of a public company)
Here is a nice comment:
Calculated Risk quickly developed a cult following for its sophisticated analysis of economic data, for rapidly crunching numbers into readable graphs, and for the knowledgeable posts of Tanta, a guest blogger with razor-sharp prose and an almost limitless enthusiasm for exposing the inner workings of the mortgage industry. Tanta had worked as a mortgage banker, and the blog created an instant platform for this one thoughtful - and worried - insider. Today, her posts have become legendary as a prescient warning cry about the current financial meltdown.On timing - I started this blog at the beginning of 2005 just to figure out what a "blog" was. Of course I needed something to write about, and I chose the obvious housing bubble and inevitable bust. Tanta started by commenting on some of my early posts as we were both trying to figure out who the eventual bagholders would be; suspecting all along that it would probably be all of us - the taxpayers.
Last week, the author of Calculated Risk announced that his co-blogger Tanta had died of ovarian cancer at age 47. The news flashed from blog to blog, eliciting tributes by everyone from ordinary readers to the Nobel Prize-winning economist Paul Krugman. Tanta had a graduate degree in English, it turned out; her name was Doris Dungey, and her formidable financial expertise came from a job inside the mortgage industry coupled with deep curiosity about a complex problem. Her obituary ran in the New York Times, and when it did, it was the first time most of her devoted readers had seen her real name.
I've always loved Tanta's discussion of stated income and the term "bagholder", from What's Really Wrong With Stated Income
We use the term "bagholder" all the time, and it seems to me we've forgotten where that metaphor comes from. It didn't used to be considered acceptable to find some naive rube you could manipulate into holding the bag when the cops showed up, while the seasoned robbers scarpered. I'm really amazed by all these self-employed folks who keep popping up in our comments to defend stated income lending. It is a way for you to get a loan on terms that mean you potentially face prosecution if something goes wrong. Your enthusiasm for taking this risk is making a lot of marginal lenders happy, because you're helping them hide the true risk in their loan portfolios from auditors, examiners, and counterparties. You aren't getting those stated income loans because lenders like to do business with entrepreneurs, "the backbone of America." You're not getting an "exception" from a lender who puts it in writing and takes the responsibility for its own decision. You're getting stated income loans because you're willing to be the bagholder.Also on timing, here are some of Tanta's comments to a post I wrote in June 2005 - notice she was complaining about stated income then too.