I have a land line (God knows what for!) and I am receiving 10 calls a day from telemarketers. About four are for ‘warranties’ and ‘extended warranties’ — apparently my dealership has leased its client list — and the other six are for opportunities to ‘fix’ my mortgage, eliminate my ‘repricing baloon payment’, or get a great deal on new low downpayment/ low interest rate mortgage.

What was Malcolm’s line in Jurassic Park. Oh yeah….”You didn’t earn the knowledge for yourselves, so you don’t take any responsibility for it. You stood on the shoulders of geniuses to accomplish something as fast as you could, and before you even knew what you had you patented it and packaged it and slapped it on a plastic lunchbox, and now you’re selling it, you want to sell it!”

I am not supporting the credit card industry, just using part of it as an example for securitiation. Their bad habits are not germaine to the arguments of the sub-prime meltdown.

They are, in fact, accountable to certain standands. If they are a national bank, they are regulated by the OCC. If they are a credit union, by the NCUA, etc. But I take your point.

One of the ‘transparency’ problems is that the regulators move, and rightly so, slowly in the face of innovation spurred by increased competition. Credit issuer’s are lemmings — any innovation will spread across issuers within a couple of months. When AT&T introduced the “no-fee” card, the others fell in line with similar offerings within two months, and a year later you couldn’t find a card with annual fees. (as an example).

Charles Schumer attacked this “openness’ issue with the Fair Credit and Charge Card Disclosure Act of 1988 which mandated disclosures of the terms and conditions in boxed tables and specifing type fonts and sizes. These disclosures, now found in every offering, are known in the industry as the “Schumer box”.

The problem with the Schumer box is that is functions the same as the magicians right hand — that is to say it distracts the audience from what the left hand is doing. And what the left hand is doing is to:

Decrease the grace period, over which you owe no interest on purchases from the traditional 1 billing cycle to as low as 15 days.

Eliminate grace periods on cash advances.

Provide for additional overlimit fees, late fees, inquiry fees, etc.

Design in interest rates which decrease slowly with good payment history, and increase exponentially with a single missed payment.

Perform arbitrary portfolio repricing by giving you the option to either pay up your balance and leave or to acceed to the increased rate.

Create reverse balance transferrals.

Create extensive list opt-ins for affiliates.

All of which are disclosed in a minimum of eight pages of 6 point text. And all of which are being done to offset the essentially dead telemarketing channel and the abysmal return of direct mail solicitations. This has lead to the death of monoline card issuers. There are none left. All card issuers are now part of larger financial depository institutions.

So consumers are left holding the stick when all this occurs, but by the time any regulatory body addresses it, the industry has moved on — or disappeared.

When you have interchange fees that aren’t even directly charged to consumers but get passed on to them in the end of the way the system is clearly broken.

When the lead up to the Great Depression is taught, it is with a smug disassociation from the human ignorance, greed, and imprudence that causes people to accept risky collateral in massive quantities with the thin hope of not causing a global disaster. Congratulations, crappy history teachers & students, you’re now 0/2 on that count.

And Rob, either as a person or as a bot, represents the worst of these. He’s either hoping to get slave wages for spamming threads manually or he’s the result of a programmer selling his slim skill at bot-writing to a disgusting marketing firm that makes no contribution to the betterment of mankind whatsoever.

So, for those of you playing the home game:
1) Don’t fear story problems.
2) Don’t get instantly-approved for anything.
3) Don’t reward people whose efforts to make a quick buck cause a global financial meltdown. Even people who rebuild their homes in a flood zone in a hurricane alley are more deserving of a hand-out than these people. They dug their own flood plain and spun up their own hurricane.

This is a key reason why the general government reaction to the subprime meltdown should be “too bad, you made your bed, now lie in it”. Targeted bailouts may make sense in some cases, but the vast majority of lenders, borrowers, and middlemen were all trying for a quick buck, and need to pay the price.