Subprime mortgages and heavy debts bigger threat to US than terrorism (NABE survey shows)

[Lone_Star_Dem]

August 27 2007: 4:42 AM EDT

WASHINGTON (Reuters) -- The risk of massive defaults on subprime mortgages and heavy debts now poses a bigger threat to U.S. economic prosperity than terrorism, a panel of U.S. business economists said on Monday.

"The combined threat of subprime loan defaults and excessive indebtedness has supplanted terrorism and the Middle East as the biggest short-term threat to the U.S. economy," the National Association for Business Economics said.

The conclusion was based on a survey of 258 NABE members conducted between July 24 and Aug. 14 and updates one done in March.

Only 20 percent of members said terrorism was now their top concern, compared with 35 percent in March.

http://money.cnn.com/2007/08/27/news/economy/subprime_threat.reut/index.htm?postversion=2007082704

Makes you want to just look at them and go, well DUH! doesn't it?

[YOY]

1. Bin Ladin: "Dogs of the infidels! Lost another one to Ditech!"

n/t

[Lone_Star_Dem]

2. .

:spray: :thumbsup:

[YOY]

3. I've noticed a new trend though: Student Loans being pushed HARDCORE

I'm now seeing student loans are being advertised on TV (G4, MTV, etc...)

The information they persented in the 30 second slot was not only one-sided, but blatantly catering to college students' lack of foresight.

As someone who JUST got his grad school loans under control, it sickens me to see the same folks going after a new market.

[Lone_Star_Dem]

4. Some of the student loan offers my daughter gets are insane

The interest rates are comparable to credit card rates. One of them, either Capital One or Citibank, wanted to give a 40k flat loan and charged 19% interest which began accumulating at the beginning of the loan with no payments until after graduation. I shudder to imagine starting out in life that far in debt.

This raises an interesting point I'd not thought of before. More families are now going to have bad credit due to the foreclosure rates raising in the US. Their older children will not be able to get mom and dad to cosign on a student loan and will be subjected to higher interest rates as a penalty.

[wicket]

6. Best of luck to you & your daughter in navigating financial aid hell

I graduated from college in 2000. As someone in severe need of financial aid it was a constant battle. Now some of these companies have started contacting me trying to switch out of my fixed rate student loan to one of their "exotic" loans. I don't think so!

[YOY]

7. Citibank was charging me nearly 9% on 30K.

We would not have been able to pay that off for YEARS. I had to have MY PARENTS help my 32-year-old-married-with-child self out by paying it off and paying them privately the same amount that Citi was charging me for 1/6 the years. They'll get the whole thing faster if I can.

I despise Citibank. They asked me if there was anything else they could do for me on my (thankfully) last conversation with them a few weeks ago. My answer was "Yes, never expect anything from me or my family ever again. No amount of marketing can repair your reputation in my eyes." <Click>.

I wish I coulda kicked the CEO in the shins for good measure. It was a student loan. Not money for a Hummer!

Many young students fall in the trap with these scum. Young and possibly irresponisble is what they seek. In debt for a majority of their lives is a goal. I wouldn't mind if they fell off the face of the earth.

In "Sicko" Micheal Moore touched on the idea of graduating with huge debt and working constantly under the fear that you cannot pay that debt if you do not perform well (as well as losing medical insurance.) I hope his next film touches on this. I've read a few books that do.

[MissB]

10. Yeah, I talked about that below.

They are horrible options. My niece is attending a private christian university in another state to become a public school teacher. She is getting very little in terms of student financial aid from the private university.

Dh and I pointed out that she could move back to her house and attend the local public university and work part time and end up with no more debt that she'd already accumulated.

Getting the private loan on top of the federal student loans meant that she'd have about $300 a month to live on once she was gainfully employed. She got up and left our house in anger - at us- when we pointed that out (she was over to ask us to cosign a private loan). Sigh.

[MissB]

9. I don't know if there were any private student loans back when I was in college.

I graduated in '96. I'm sure private student loans were an option, but I simply don't think I've even noticed advertisements for them until last year. Now they are everywhere.

My niece was looking at taking on nearly $70k in private student loans (because she'd maxed out her federal loans) to become a public school teacher. Dh and I tried very hard to counsel her against such an action, and refused to cosign the papers for her. I have no idea if another family member agreed to be a cosigner.

When we looked at the loan info she had from one of the companies (iirc, it was one of Capital One's subsidiaries), it looked like the interest was definitely not deferred while she was in school and the interest rate could change up to a horrendous maximum.

[YOY]

12. The IR can and will be changed up, missb

Get her out now! NOW! Anyway you can!

What Capital One and many like them are doing is predatory. Parents have to be made aware of this. Many college students (especially undergrads) have little fiscal responsibility and graduation seems so far away, but this will come back and bite her.

There is a reason why student loan debt is an issue that needs to be brought to attention more. The system is basically unregulated and completely predatory.

To quote the bard, "Neither a borrower nor a lender be; for loan doth oft lose both itself and friend, and borrowing dulls the edge of husbandry."

[MissB]

13. I wish I could.

:(

She came to dh and myself because she wanted us to cosign the loan, not for advice. We gave her advice, after laying out exactly what the terms of her getting that loan meant to her future financial well being.

She literally slammed our door behind her when she left.

Our kids won't be saddled with student loan debt at all. We started 529 plans when they were young and if worse came to worse, I could return to work just for that reason - to pay for their college educations.

[YOY]

14. Good for you you did your best.

And that deserves a hug: :pals: You really did do the best you could with your neice. She will remember that you tried to stop her, but I am sure you did your best.

My wife and I have already started squirreling away for our daughter and have made plans like you. College should be free, but it's not... A well educated workforce is in the interest of the government, but a poorly educated one votes Republican...

[wicket]

5. ROFL

:rofl: :rofl:

[JohnyCanuck]

8. JH Kunstkler: There's an economic shit-storm a brewing

His latest blog entry:

Back to School

August 27, 2007

Bad financial paper, like rust, never sleeps. We may be in the traditional torpor zone of late summer when the whole nation takes off on vacation, but worms are still turning in the compost heaps of securitized alphabet debt (MBSs, CDOs, CLOs, et cetera) behind the glass banking towers in places like Wall Street, London, Frankfurt, and Shanghai, and the odor from all this garbage blowing 'round the world grows stronger by the day.

Transfusions of loss-cover-loans from the Federal Reserve have enabled the The Big Fund Boyz to spend a last weekend or two rubbing elbows in the Hamptons with transcendent beings like Diddy and Kelly Ripa. The Boyz gather along the dunes at twilight, bongs in hand, to gaze at Hedge Fund Island, looming off-shore in the gray Atlantic mist, and they notice something alarming: the island, which the BFB's built themselves over the past ten years, seems to be either floating out to sea or perhaps just sinking!

The scores of billions of dollars and euros that central banks have poured into the maw of losses lately will only paper over the essential problem for another few weeks, at most. The damage to global structured finance has been done, and it can be stated rather precisely: a widespread recognition that it's not possible to get something for nothing, after all. And that when you hold a lot of paper that was gotten for nothing, and put it up for sale, nothing will be offered for it. What a surprise.

he task of people holding power now in the finance sector (which itself may be a conceit at this point) is to manage the rapid dissolution of hallucinated wealth in such a way that as few people as possible notice that x-trillions in dollar denominated pixels have vanished from the hard drives. Sooner or later, though, millions of shlubs dependent on pension checks, or annuities, or monthly payouts of one kind or another will notice that something has stopped landing in the mail box. Re-po men with bad haircuts and tattoos will be driving other peoples' cars to the auction barn. Young people accustomed to thrilling paydays will discover that their services are no longer required in the mortgage origination business, and will instead have to memorize dozens of excruciating formulas for different sorts of beverages more or less based on coffee. Millions of realtors will enter second childhoods as they move back in with Mommy and Daddy, who themselves must now change their plans, since it is no longer possible to flip the 1956-vintage raised-ranch in Hempstead to buy that half-million condo in Maui.

SNIP

http://jameshowardkunstler.typepad.com/clusterfuck_nation/2007/08/back-to-school.html

[SpiralHawk]

11. A hawk wing wig-wag for Johnny C.

Great article.