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Posts Tagged ‘violation of moral hazards’

Barack Really is Going to Pay Her Mortgage

Posted by Larry Doyle on March 26th, 2010 8:24 AM |

My blood is boiling. Why?

The assault on the principles of free market capitalism is escalating with news that banks are poised to start reducing principal balances on certain mortgages.

I empathize with those who are strapped, but I have never felt more strongly on a topic than this principal reduction. Despite any and all bulls*%# put forth by those in Washington, the principal reduction program is an enormous escalation of the violation of moral hazard which our country sadly continues to embrace. I have no doubt it will expedite the development of a socialized housing finance system.

Do not think for a second that banks will take the hit on these principal reductions. Who will take the hit? Me and you. Those who have worked hard, saved, played by the rules, and taught our children to do the same. (more…)

More Bank Fraud

Posted by Larry Doyle on January 16th, 2010 12:53 PM |

The bailing out of our largest financial institutions was a violation of moral hazard of the greatest magnitude. With that violation well in place, America is now facing violations of other moral hazards. What do I mean?

The mortgage modification program is a joke because the banks holding the mortgages have no incentive in modifying them. Why? Because, to a very large extent, if the bank modifies the primary mortgage then it has to write off the value of a second lien, if in fact a second lien exists. Given the amount of equity borrowers took out of their homes, there are a lot of second liens outstanding.

How are the banks handling these second liens? Violating a moral hazard and committing fraud in the process. A report from CNBC, Big Banks Accused of Short Sale Fraud, highlights this reality.  The report outlines: (more…)

Barack Obama: Federal ‘Helicopter Parent’

Posted by Larry Doyle on June 21st, 2009 9:47 AM |

Happy Father’s Day!!

Is Barack Obama anything more than a federal version of the dreaded “helicopter parent?” I’m serious.

We have all witnessed overbearing and overprotective parents hovering over their offspring from youth soccer through middle school teasing and all the way into the workplace. In my opinion, our nation now suffers from generations nurtured without true hardship or failure.

We are now paying the price.

What truly drives and motivates many to succeed? (Please understand that I do not define success as purely monetary.) However one defines success, there is little doubt the greatest motivation is always the fear of failure. That fear does not abate as one attains ever higher levels of achievement. Why? The intangible quality, the fear of failure, is embedded in the character of an individual from a very early age.

How does one “develop” that intangible quality? Take risks and fail. Obviously, I am not encouraging taking imprudent risks that would place one in a position of excessive physical, mental, emotional, or monetary harm. However, I strongly encourage individuals from an early age to move outside their comfort zone in order to experience the discomfort associated with the fear of failing. In so doing, the foundation for success will be poured and then cemented.

Against this backdrop, I have mixed feelings about the launching of the new Consumer Protection Finance Agency. Why? I appreciate helping people gain a greater understanding of financial principles and products. At the same time, however, I fear many consumers may view this agency as a “safety net” that will preclude or prevent ill-conceived or inappropriate products from coming to market in the first place. Why may they think that?

A consumer who witnesses violations of moral hazards at almost every level will come to expect the same for them at the personal level. Many consumers are already experiencing these situations to a degree via the non-economic refinancing of their mortgages through the Freddie Mac and Fannie Mae ‘piggy bank.’

Please do not confuse my writing with a lack of willingness to help and assist people. In fact, I sincerely hope Sense on ¢ents plays an ever increasing role in promoting financial literacy. However, the greatest help and assistance starts at home and in the classroom.

Obama should be pounding and overemphasizing principles of strong family units along with the necessity for educational advancement. I give Obama credit for his timely message, “We Need Fathers to Step Up,” but we need this message not only on Father’s Day but 365 days a year. I know that education is a major initiative within the Obama administration, but I do not hear or see an airing of the cold, brutal facts primarily within our urban education systems (i.e. a 50% high school dropout rate in major urban settings).

In summary, I believe our nation suffers financially and morally from a system promoting an overprotective sense of entitlement when what we truly need is a reemergence of the fear of failure that stemmed from The Great Depression.

I hope that readers do not view my writing as cold, but rather more in the spirit of a parent who wants to see every individual and community achieve true and lasting success.

Happy Father’s Day to all the Dads in the world who are “allowing” their children to fail.

LD






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