Homeowner forecloses on Wells Fargo office, becomes folk hero
agentgenius.com
agentgenius.com
It seems to me that their value add is negligible compared to how they're rewarded.
[Edit: Or maybe they're "features", not bugs.]
"The Securities and Exchange Commission is proposing two new disclosure requirements for offerings of asset backed securities. See the RevisedRegAB site for details on the proposal."
You're not the only one guilty of this, everybody tend to overestimate their contribution to the world. How many times did you hear/read about a business guy / manager saying that programmers are a disposable commodity? Saying that "the entire financial industry is ready to be replaced with a lot of very short shell scripts", you are acting exactly the same way.
Did you forgot about the dot-com bubble when the tech industry was the one guilty of being over-rewarded for what was often was no value (pet.com)?
But what is the financial industry accomplishing today that they didn't accomplish 25 years ago? As far as I can see, the most useful innovation has been the ATM machine (which is indeed quite useful). The rest of it? Is the economy running better? Does the financial system allocate capital more effectively? If not, then why are they taking home so much more money?
I'm not going to argue that they're not smart -- they're plenty smart, I'm sure there are a lot of people in finance who are smarter than me. It just seems that those smarts have been applied towards rent-seeking and value extraction rather than "building things people want".
Whether cheap money is a good or a bad thing in the long run, I guess that has yet to be seen.
Maybe they've made some bookkeeping and overhead improvements that allow them to add a point less or something like that, but it's not like they had some genius idea that allowed them to lower from 18 to 5.. it's just tracking the inflation rate. (and/or the fed funds rate which is related to inflation).
(Side note: my ATM snark was stolen directly from Paul Volker, who was the guy who stopped inflation in the late 70s early 80s by jacking up the fed funds rate. Credit went to Reagan of course. Better hair.)
In fact, the lower the rate, the more we all borrow and bid up prices for things. Most of that inflation since 2001 has been in things that the government likes to overlook, such as oil and housing. But the inflation does actually exist, whether they wish to ignore it or not.
Going to market rates would go a long way to fixing the distortions, to be sure. But many things would not survive in that environment and have only been viable because they've been able to shift the true cost via inflation to the larger economy.
Credit went to Reagan for selecting Volker and letting him do his job.
We'd be far better off if fewer people had been able to "afford" to buy houses in the last 10 years.
As far as how many permits you need to open a bank, the answer is "a lot less than you did 25 years ago", due to continued lobbying pressure. I'm all for phasing out obsolete or poorly considered/implemented regulations, of course, but it seems that the regulations everyone wants to get rid of are those that limit risk. So they can be more "dynamic" in their search of profits. Then when they go belly-up, we're stuck with the tab.
Buddy of mine estimates that he was personally responsible for a fraction of a % of the housing meltdown. He got out in 2007. Hasn't had to work since then. Good thing regulations didn't stop him from making all that money while the getting was good :)
Businesses have far more tools to hedge various risks (FX, commodities, etc) - thanks to the financial sector, Apple is in no danger of dying should the RMB spike.
Retail investors are capable of trading for $8 or less, and the bid/ask spread has lowered significantly.
It's now drastically easier for retailers to sell goods on credit, and it's vastly easier for customers to pay electronically. 10-15 years ago, you couldn't swipe your ATM/credit card at the grocery store.
ETFs are undercutting mutual/index funds, drastically reducing the cost of saving for retirement.
Structured products allow far more people to trade with each other than ever before.
Microfinance [1] is available to lower income people, albeit with relatively high default premiums. (Admittedly, many people criticize this.)
It's not necessarily running better - there have been harmful changes as well. The Intel IPO could no longer happen today, for instance, and in the future far more companies to go public Facebook style than Intel style. But that doesn't change the fact that the financial industry has accomplished a lot.
(Of course, I'm not denying that they also rent seek.)
[1] Maybe "minifinance" is the appropriate term. Payday loans tend to be 10-100x bigger than third world microfinance.
On the flip side, credit cards are currently riddled with serious, yet solvable security problems. Identity theft is one. ATM skimmers is another. There are also pretty grim privacy implications to the way things work. Finally, banks used to do some rather ridiculous things with penalty rates and fees until they were prohibited by law.
This system probably did people some good in the 90s, but right now it seems inefficient and dated. I believe that with modern technologies it's definitely possible to create something much better.
I clearly remember doing so 15 years ago.
Regardless, you certainly didn't do it in 1986 (which is jbooth's timeline).
Microfinance is a rounding error, and structured products almost put us in the Oklahoma dust bowl about 18 months ago.
... wait, you're extolling the virtues of payday loans? As if loaning money at a high interest rate to financially unsophisticated poor people on bad terms is a new idea?
Goldman and many others make money off prop trading. Goldman mostly does market making (trying not to hold positions for a long time), others take longer positions (Lehman, Paulson). They do a much better job of speculation than in the past - as an anecdote, Warren Buffet claims value investing based on technical analysis is almost impossible these days. I.e., there are far fewer undervalued companies than there used to be.
I have no strong opinion on microfinance/payday loans. They seem to fill a consumer need, and as far as I know they didn't exist in the past. (I also really wish people would stop being inconsistent about it - if you think Grameen bank is good but EZ Cash is bad, at least explain why Bangladeshi poor deserve it but US poor don't.)
...structured products almost put us in the Oklahoma dust bowl about 18 months ago.
You'll have to educate me on this one. Structured products cause topsoil depletion?
RE: prop trading and market making.. now you're getting there. That's where they make all their money, right? Is the economy, say, twice as well off from a financial allocation standpoint compared to 25 years ago? If not, how are the trading desks pulling in twice as much money without being extractors?
This varies year by year. In recent years, prop desks have either gained (Goldman) or lost (Lehman) huge amounts of money.
But this isn't always true. Sometimes services are the big moneymakers. Prime brokerage (allowing hedge funds to outsource their back office) was big up until the crisis nuked many hedge funds, for example. In a good year, classical IBanking (IPOs, M&A, etc) can be big. Big banks run many desks at either a small loss or small profit just for the purpose of keeping the lights on. When the market changes and that desk becomes important, they rake it in.
Is the economy, say, twice as well off from a financial allocation standpoint compared to 25 years ago? If not, how are the trading desks pulling in twice as much money without being extractors?
They could capture a larger portion of the new value being created. Suppose they created 100 units of value in the past, and captured 25% of it. Now suppose they create an extra 50 units of value, but capture 50% of it. Before this change, the banks captured 25 units of value, the world 75 units. After, the banks capture 50 units of value, the world captures 100 units.
As for payday loans, they always existed to some extent (loansharks were always present, as were pawnshops), but they only got into full swing in the 90's. The internet made tracking defaulters easier, competition in electronic banking made the transfers cheaper, and the Clinton-era wave of bank deregulation eliminated many state level interest rate caps (California's was lifted in 1996, for example).
Then I talk to friends who work in finance and I see that insane amounts of resources are being thrown into this stuff. Like, truly insane, you're in this industry, you've probably seen it.
Apple makes an iPad, they get money, consumers get iPads.
Goldman makes a subsecond trading system, they get money, consumers get... ???? If consumers and non-financial businesses don't care about the price of AAPL stock within a second or a minute, then how come Goldman makes so much money creating that price stability? What is broken here? It seems like a tail wagging the dog scenario to me.
Smaller bid/ask spreads, greater liquidity.
Of course, HFT is just a high tech sideshow to the rest of the market. It's not anywhere near as big as you think. Do some simple math - multiply daily share volumes (here is NASDAQ http://www.nasdaqtrader.com/Trader.aspx?id=DailyMarketSummar... ) by the fraction of trades done by HFT (estimates range from 25%-75%) and multiply that by a typical profit of a tenth of a cent. You don't get a huge number.
My major beef here isn't people making money for doing stuff I think is useless.. I think Us Weekly and People Magazine are useless but I don't begrudge the editors their paychecks. My beef is how much talent is being sucked up into a game that doesn't seem to provide any outside benefit. If all of those people were building actual products and services that people paid for (as opposed to basically hacking the finance system for profit), I feel like the nation and world would be a lot better off for it. In short, I think it's a market failure that they can make so much money without actually creating anything.
I agree with you on wasting talent winning a race rather than creating new value: http://news.ycombinator.com/item?id=2093334
But I don't agree with you that the majority of the finance industry falls into that category. Most trading is not a race. HFT is not representative of the financial sector. The entire HFT sector is only about $20B, which is a little more than double Goldman's profits last year.
Call me once they accept that they made millions of loans they shouldn't have made and accept that the losses are as much theirs as the homeowners.
And when they follow their own damn procedures, which they're still showing no sign of doing.
Then we'll see about some respect.
Anyone who claims this was very predictable and didn't make a bet is full of it.
Or do you also have a problem with giving money to the needy?
So my error was not that I was full of it, just that I lacked the financial knowledge to maximize the benefit of the money that I had used to support my bet.
It's not about predictability, it's about timing!
Pretty much everyone except Wall Street and Washington knew by the middle of 2008 that bubble is about to burst. Of course very few if anyone predicted when exactly and to what extent it was going to happen. I got burned by mistiming my short and underestimating how devastating the crash will be.
Think about what you're actually saying here. If pretty much everyone knew then 401k account holders would've hedged their bets or moved into safer places. Instead they took a bath with the rest of the economy.
Your 20/20 hindsight vision is amazing. I can't wait for you to tell me who will win the 2008 superbowl.
I stand by my claim that pretty much everyone knew by the end of summer of 2008 that bubble was deflating.
Hedging can turn on yourself. Southwest was very successful at hedging rising oil prices until they weren't rising anymore, then their hedges almost bankrupted them.
My frustration is with someone claiming that they knew or that it was very predictable when they were simply WORRIED it would happen. Many of us worry about a lot of things. That doesn't mean when something finally goes wrong we get to say "see? I knew it would happen."
One example:
http://www.businessinsider.com/embarrassing-wall-street-emai...
That was about a 1.5 years before the $%$% really hit the fan. There are other e-mails floating around with investment brokers gloating about selling off "pieces of $%$@" to people. They knew what they were doing & profited handsomely from it, they have yet to really pay any price for it.
I'm simply saying the original poster didn't know what he claims to have known. It's hindsight nonsense.
Many people saw the dislocations in the market long before the crash, but would have gone bankrupt shorting that irrationality.
It's just damn hard to get the timing right.
http://graphics8.nytimes.com/images/2005/06/15/business/arm3...
My excuse was: it wasn't clear how to, there's always a timing issue (it's not necessarily enough to know it's inevitable, you gotta know when), and it's hard when you don't have a lot of other people's money to play with.
The answer to how it was done is in Michael Lewis's book, The Big Short. After learning how that guy did it, I don't feel so bad for not figuring it out.
Only if they do something useful, in a reasonably efficient manner. Can you truly say that most of the financial sector operates this way?
True, some of IT is also run by selling deliberately crappy software. But only some, and that's not an excuse for other industries.
In a larger sense, it's true that essentially all programming jobs could be outsourced. The fact that programming jobs are vulnerable to this and executive jobs aren't is because those executives have much more control over money, and a larger supply of it. This will not be true forever, and you are slowly going to see the financial industry leak out of New York into other parts of the world, where people will do things like replace mortgage agents with small shell scripts.
Just because something is true today doesn't mean it will be true forever.
You forget that while tech entrepreneurs made some money in dot-com IPOs, the financial industry made an absolute killing.
You also seem to imply that everyone is rewarded according to the value they add, leaving out the possibility that a group of people get together and form a de facto monopoly, which is somewhat reminiscent of the big players in the IPO industry.
Would you pay 6% over and above the price of a new car, to the car salesman as his fee?
I'm actually shocked this extremely ignorant, flame-bait comment has got so many upvotes on a site like hacker news which, in theory, is supposed to be a community of pretty smart and educated people.
1) He made a "Qualified Written Request" to Wells Fargo (W.F.). I don't know exactly what the request was for though. Presumably an explanation of mysterious charges from W.F.
2) W.F. failed to acknowledge within 20 days and/or act within 60.
3) He filed a suit in small claims court regarding this failure to respond and won by default, since W.F. failed to show up in court.
4) W.F. failed to pay the judgment (?), so he went to the Sheriff to have them place a levy (fine) on Wells Fargo via (presumably) their property.
5) W.F. fails to pay the levy (??), so the property is put up for sale by the Sheriff's department.
(I put question marks in all the areas where the article isn't clear)
Here's the first Google result for Sheriff's sale: http://www.hudclips.org/articles/what-is-a-sheriff-sale-how-...
It's basically a foreclosure, so the headline is only sort-of misleading.
From what I read, it sounds like the guy just won a court claim in local court against WF, and got the Sheriff's office to concur that the company was somehow in the wrong. I thought foreclosure was repossession of a house when the borrower is in default?
I do know that my (other) uncle owns a car repair business and has the towing contract for the town police department. Whenever they tow abandoned cars, he charges a daily rate. If no one steps forward to pay the bill, at some point he can get the title for the car and own it. You would think people would claim their cars, but in a lot of situations there is evidence in the car (drugs, guns, etc) that the police take and then he ends up with a car on his lot nobody wants to claim. Six months later, he forecloses on it and ends up owning a car. Sometimes it can be a really nice car too.
So foreclosures/seizures/liens are not always banks evicting families that are late on their mortgage, I just don't understand all the details.
"As a music event promoter, he says he's put up a lot of posters, but these were the most satisfying he's ever hung."
Maybe the other 99% doesn't even read the statements and just go and pay.
For them, it's all profits. Even paying this man and their attorneys to get to a settlement doesn't make a dent to the revenue they're receiving of the other 99%.
--snip-- He learned about RESPA which allows a Qualified Written Request (QWR), a letter that a loan holder can send to their mortgage servicer who is legally obligated to acknowledge within 20 days and take action within 60 --snip--
Real Estate Settlement Procedures Act: http://en.wikipedia.org/wiki/RESPA
Is this not possible in the USA?
What's more likely is that due to changed circumstances this guy wouldn't qualify for his loan again. So while a bank can't force you to leave because your credit situation has deterioated, you are effectively locked in because another bank wouldn't want you. The same can happen in Australia (and will probably be happening in increasing amounts in the coming years).
I have built software for American mortgage lenders and Australian mortgage lenders (and UK ones, for that matter). The three countries have very similar systems, although the USA has a much wider variety of product options, the laws around originating and terminating loans are pretty similar. This is not surprising, all three countries have laws evolved from the same system, and mortgages are a very old legal construct.
A deteriation in his credit might be : loss of job, reduction in income, another loan default (say, car loan or credit card) or the value of his house being less than the mortgage (most likely I would guess).
In effect he just wants the mysterious charges removed so he can manage his budget. As long as you're paying your mortgage the bank can't touch you. In reality Wells Fargo are probably trying to get him to leave of his own accord.
This sounds like a mortgage rate increase is in turn requiring a larger insurance policy. Honestly it's hard to parse that sentence in a way that makes sense to me.
I admit the article is incredibly unclear, but I don't see how an increase in mortgage rate would result in increased insurance premiums.
I am not sure if that's what happened in this case, but it does make sense to me.
I think a demonstration that you can do today what was unthinkable a little more than a decade ago is a point well worth reading whatever you don't like about the home description.
* rental property
* work space (perhaps he has a recording studio?)
* renovation for future sale
* housing for family
The article doesn't say he lives alone with his butler.
The 6 bedrooms are probably all tiny <300 square feet, with closets that can't hold more than 3-5 items of clothing.
I'd be surprised if the entire house was more than 2500 square feet.
This isn't a 6000 square foot McMansion like you're thinking it might be.
My house was built in 1905 in a mining community. It was 2 bedrooms originally. A queen bed wouldn't fit in either one. We ended up combining them into one decent sized bedroom.
Before electricity, there was nothing else to do in a bedroom besides sleep. No sense in making it bigger than it had to be.
So, it looks just as bad as it ever did except now it's convertible. We can remove the door's roof anytime we want. At least moving the bed back downstairs when we move in a few months will not be as big of a hassle.
The home is charming but I can't tolerate the neighborhood any longer.
Time to work on the resume and work on getting back out to California.
... I speak of whittling, of course.
http://en.wikipedia.org/wiki/Tudor_architecture#Typical_feat...
http://www.youtube.com/watch?v=J6hijsqO8H0 (Europe - where the history comes from.)