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FRED
03-30-07, 11:32 AM
http://www.itulip.com/images/antgrasshopper.gifThe Ant and the Grasshopper, Then and Now

by Eric Janszen

The Ant and the Grasshopper, Aesop (620–560 BC)

In a field one summer's day a Grasshopper was hopping about, chirping and singing to its heart's content. An Ant walked by, grunting as he carried an apple.

"Where are you off to with that heavy thing?" asked the Grasshopper.

Without stopping, the Ant replied, "To our ant hill. This is the third apple I've delivered today."

"Why not come and sing with me," said the Grasshopper, "instead of working so hard?"

"I am helping to store food for the winter," said the Ant, "and think you should do the same."

"Why bother about winter?" said the Grasshopper; "we have plenty of food right now."

But the Ant went on its way and continued its work.

The weather soon turned cold. All the food lying in the field was covered with a thick white blanket of snow that even the grasshopper could not dig through. Soon the Grasshopper found itself dying of hunger.

He staggered to the ants' hill and saw them handing out corn from the stores they had collected in the summer.

Then the Grasshopper knew: It is best to prepare for the days of necessity.

The Ant and the Grasshopper, iTulip (2007)

In the check-out line at Circuit City, a Grasshopper is pushing an over-flowing shopping cart with a flat panel TV teetering on top of a pile of components for a home entertainment system. He's singing along with his iPod, playing through ear buds at top volume. An Ant stands behind him, holding 20 feet of telephone extension chord.

The Grasshopper yanks one of the ear buds out of his ear and tells the cashier as he tosses him a credit card, "Just did my third cash-out refi in two years to pay down my credit cards. Now I can charge them back up to the limit again. Woo-hoo!"

As he's walking out, he turns around and grunts at the Ant who is buying the cheap extension chord with cash.

The next day, the Ant finds himself standing behind the Grasshopper in a checkout line at the local Home Depot. The Grasshopper is holding an invoice for his dream kitchen, complete with granite counter tops and stainless steel stove and refrigerator, plus installation. The Ant is holding an electrical switch and a screwdriver.

The Grasshopper turns around, yanks one of the ear buds out of his ear and says to the Ant, "Dude, what are you gonna do with that?"

The Ant replied, "Fix a broken light switch."

"I'd just hire someone to do it," snorted the Grasshopper as he pulled out his credit card for the cashier.

The Ant paid cash for the light switch and screwdriver.

Two years later, the economy went into a deep recession and unemployment rose to 15%, although the government still reported unemployment around 5%, as it always does. The Ant is surfing his favorite housing bubble web site and sees a member posting under the name "Grasshopper." Grasshopper says he got laid off from his job, and his 2 year ARM just adjusted from $2,500 to $5,200 a month. With all the defaults in subprime mortgages, the banks have tightened lending standards so he can't refi into a cheaper fixed rate mortgage. He's being foreclosed on and the phone is ringing off the hook from credit card companies demanding payment. "HEEEELP!" screamed the Grasshopper.

Another member posted a list of links, and told the Grasshopper not to worry, help is on the way.

NJ pol wants to aid subprime borrowers (http://dailyrecord.com/apps/pbcs.dll/article?AID=/20070329/UPDATES01/703290398)

Congress must aid subprime victims: consumer group (http://www.abcnews.go.com/Politics/wireStory?id=2950367)

Thousands set to lose homes to loan tricksters, sez Chuck (http://www.nydailynews.com/money/2007/03/26/2007-03-26_subprime_is_bigtime_bind.html)

Then the Grasshopper knew: No reason not to pile on debt and save nothing. The government will force all the Ants (taxpayers), who are not responsible for your distress, to bail you out with their savings. The financial firms that created securitized debt products out of the bad loans and sold them on the market, and lenders and banks that made the bad loans and issued too much credit, who made huge profits in the process and are at least partly responsible for the mess, will pay nothing of the cost to clean it up nor compensate the Ants. A few small lenders will go out of business, but the largest lenders and banks–the biggest gainers and offenders–will not be allowed to go out business, are "too big to fail." The bulk of the externalized costs go to the Ants, in the form of more public debt for their kids to pay off some day, who are least responsible for it.

Millions of grasshoppers have taken the lesson to heart.

"Household debt, which ranges from home mortgages to credit cards, now totals about $10 trillion, or roughly 115 percent of personal income. In 1945, debt was about 20 percent of disposable income. For six decades consumer debt and spending have risen faster than income. Debt, as we all know, can't permanently rise faster than income, and given their age, baby boomers must at some point soon begin to repay mortgages and save for retirement, which will mean less consumer spending."

- South Carolina Governor Mark Sanford, 2006

(So far, the government is only talking about bailing out subprime borrowers. But it's only a matter of time before everyone who over-borrowed gets bailed out, by redistribution of savings via public borrowing, taxation, or inflation, or a bit of each. The Ant-ist work and money ethos is simply too politically unpopular.)

iTulip Select: The inside scoop (http://www.itulip.com/forums/showthread.php?t=1032).
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Uncle Jack
03-30-07, 12:16 PM
yep, so much for personal responsibility.

jk
03-30-07, 12:47 PM
a bunch of grasshoppers will bite the dust before the bail-out is in place. timing is everything.

and the bailout will likely perpetuate, not relieve the grasshoppers' debts. the main beneficiaries will be the holders of the mbs and cdos.

Ann
03-30-07, 01:09 PM
a bunch of grasshoppers will bite the dust before the bail-out is in place. timing is everything.

and the bailout will likely perpetuate, not relieve the grasshoppers' debts. the main beneficiaries will be the holders of the mbs and cdos.

Hey, look! Just came across this little grasshopper...

With the changing outlook on the sub-prime mortgages, is it still feasible to search for these types of loans?

I recently applied for a loan and my FICO is about 730, I wanted to put 5% down and my income to debt ratio is about 50.7%. The house is in the middle of an attempt to rehab so is has no flooring and needs a lot a work. When I had the property appraised, they came back with a list of problems and said the property was "sub-standard", no kidding. The lender gave a huge laundry list of things that would need to be corrected, floors installed, walls cleaned, windows replaced and on and on: all before they would be willing to approve a loan of $112,000. Is this the direction all lenders are going?
What direction is the sub prime lenders heading, anyone?!!

http://www.reiclub.com/forums/index.php/topic,26423.0.html

Uncle Jack
03-30-07, 03:03 PM
the main beneficiaries will be the holders of the mbs and cdos.

Don't you mean to say that the main beneficiaries will be future buyers of these items, after they are selling for pennies on the dollar?

grapejelly
03-30-07, 03:17 PM
the only thing strange about your story is this...the corn that the ant is handing out...it's being turned into ethanol...:(

jk
03-30-07, 06:43 PM
Don't you mean to say that the main beneficiaries will be future buyers of these items, after they are selling for pennies on the dollar?
mbs and cdos are selling at a discount now, but ALL holders of mbs and cdos, whether the original purchasers or later purchasers, will benefit from the bail out. the later purchasers will make big profits, while those who just hold on will have their losses reduced.

Rajiv
04-01-07, 04:49 PM
Good article on <a href="http://civillibertarian.blogspot.com/index.html">Thomas Paine's Corner</a> - <a href="http://civillibertarian.blogspot.com/2007/03/grand-theft-realty-or-how-to-make.html">Grand Theft Realty, or, How to Make a Killing in Real Estate</a>



I was in a local gas station store a few weeks back. There was a fellow in there, probably in his early eighties. He was describing how he handled his finances to much more youthful listeners, a group common to any small town store anywhere in the country. His words were meant to sting and shame.

"I never spend money I don't have. I live within my means. And if I start to run short of money, I do without."

Everyone is hearing and reading about the subprime lending problems. Many are tortuously predicting the collapse of the American economy based upon what has occurred in this banking swindle. I'm less convinced about the impact of the subprime debacle, less convinced than I am about its occurrence being just another sordid affirmation of human nature and the American way.

I've always lived like the old guy in the store. I know, if you cannot afford something without the bank getting involved, you're a fool to think those guys at the bank work for nothing.

But, I'm also not sure anyone is aware what in fact has occurred. And if they are mildly informed, they're certainly not aware of the fact that the swindle is continuing and accelerating even as the subprimes are going bust. Human nature is human nature.

I have little sympathy for those whose lives are being turned upside down because they bought into mortgage swindles to purchase real estate that was so over-valued as to make anyone gag upon the credulity of the easily suckered. The price of residential real estate over the past ten years, longer in some areas, has been driven into the stratosphere of ridiculousness. What fed this price increase is the liquidity in the mortgage industry, and not any real value in the American dream these fools were being sold. The rise in price was simply unsustainable, and housing had to come down. But everyone got in on the act, an act that can best be described as how to make real estate unaffordable for an ever larger segment of American society.