Different River

”You can never step in the same river twice.” –Heraclitus

September 24, 2008

McCain suspends campaign to return the Senate; Reid says he’s not welcome

Filed under: — Different River @ 5:49 pm

McCain just announced he’s suspending his campaign and returning to
Washington to deal with the financial crisis.

… It has become clear that no consensus has developed to support the Administration’ proposal. ….

Tomorrow morning, I will suspend my campaign and return to Washington after speaking at the Clinton Global Initiative. I have spoken to Senator Obama and informed him of my decision and have asked him to join me.

He’s even stopping his advertising and requesting that Friday’s debate be postponed.

In his usual manner of bipartisanship, Harry Reid told McCain NOT to come back.

June 19, 2008

Why is the price of gas so high?

Filed under: — Different River @ 10:20 am

Part of the reason for the increase in the price of gas is increased demand from China and India, and supply problems in Nigeria, Venezuela, and Mexico. But the demand increases have developed over many years, and the supply problems over several months — so why the rapid increases on a week-to-week basis?

One reason is the falling value of the U.S. dollar relative to other currencies. Bryan Caplan wrote this up very succinctly, with some good back-of-the-envelope calculations:

Oil is sold on world markets, and the dollar is now very weak. What would the dollar price of gas be today, if the dollar were as strong as it was back in 2002? Here’s a back-of-the-envelope calculation (gas price data are here; exchange rate data are here):

Today a dollar buys you .6451 Euros, and it takes $4.134 to buy a gallon of gas. Suppose the dollar were still at parity with the Euro, as it was on 11/23/2002 (actually 1.0030, but who’s counting?). In that case, a dollar would buy you (1/.6451)=1.55 times as much. So a gallon of gas would be only $2.667.

The actual price of gas back in the third week of November, 2002 was $1.451. So to a first approximation, if the dollar had been stable, gas prices would have risen by about 80%, instead of 280%.

Admittedly, the U.S. is a big player in world oil markets; if the dollar had been stronger, it would have partly raised the world price of oil, and thereby the domestic price of gas. So maybe a stable dollar would have left gas prices 100% higher rather than 80%. If you adjust for the fact that some costs of gasoline (refining, taxes) are purely domestic, maybe gas would have been 150% more expensive even given a stable dollar.

Note that this has nothing to do with “price-gouging” or even with the oil companies at all. Granted, oil companies that own their own oilfields are making a lot of money now — but those that buy oil on the open market and then refine it into gasoline are not necessarily making money at all.

May 16, 2008

High Oil Prices? Blame Enron!

Filed under: — Different River @ 4:06 pm

Two Democrats in the Senate have now found our why gas prices are so high: It’s Enron’s fault!

The article is here. The claim is that:

what lawmakers have called the “Enron loophole,” which was created in 2000 largely at the request of Enron Corp[,] … exempted electronic markets for large traders from government oversight.

The energy trading provision gives the Commodity Futures Trading Commission enhanced authority to detect and prevent manipulation in the electronic energy markets, create audit trails, require more
transparency in transactions and increase financial penalties for cases of market manipulation.

This of course, has nothing to do with why oil prices are high. And it will not cause oil prices to fall. It will just create a bunch of extra paperwork that will allow the CFTC to get a better view as it watches oil prices rise.

The senators [Carl Levin, D-MI, and Dianne Feinstein, D-CA] said the recent increase in unregulated energy trading
by speculators was partly to blame for higher oil and natural gas prices.”

This makes about as much sense as saying that parachute manufacturers are partly to blame for gravity.

The appetite of Democrats for kooky conspiracy theories should never be underestimated….

February 13, 2008

Was there a housing bubble?

Filed under: — Different River @ 11:28 am

Alex Tabarrok argues that if you look at long-term data, there was not. As one who correctly predicted the timing of the current downturn (but made no prediction about the magnitude), I find this quite interesting, and quite likely correct.

Full story here.

Only 40% of doctors and nurses wash their hands?

Filed under: — Different River @ 10:50 am

From the AP, via David Williams’ Health Business Blog:

Turns out installing alcohol-based handwashing gel dispensers in hospitals and encouraging staff to use them isn’t enough to prevent infections. … The issue was studied at a hospital in Nebraska, where gel use doubled but infection rates didn’t budge. It’s not surprising to learn that one tactic isn’t sufficient to control infections. Still, whenever I read about the poor record of hospital safety and quality it makes me mad. From the Associated Press:

More gel dispensers were put in the units, and usage rose from 37 percent to 68 percent in one unit and from 38 percent to 69 percent in the other. Compliance for hand washing of any kind in most hospitals is estimated to be about 40 percent, according to experts, although some hospitals do better.

Can you imagine a 40 percent compliance rate in any other business besides health care?

  • Pilots going through their pre-flight checklists completely 40 percent of the time?
  • Accountants calculating profit and loss correctly 40 percent of the time?
  • Hamburger flippers putting all the ingredients on a Whopper 40 percent of the time?

No way. We shouldn’t tolerate it in health care either.

(Boldface added.)

“Don’t treat the old and unhealthy”

Filed under: — Different River @ 10:43 am

News from the (British) National Health Service (NHS), which is the UK’s universal health care system:

Don’t treat the old and unhealthy, say doctors

By Laura Donnelly, Health Correspondent
Last Updated: 2:09am GMT 28/01/2008

Doctors are calling for NHS treatment to be withheld from patients who are too old or who lead unhealthy lives.

Smokers, heavy drinkers, the obese and the elderly should be barred from receiving some operations, according to doctors, with most saying the health service cannot afford to provide free care to everyone.

Fertility treatment and “social” abortions are also on the list of procedures that many doctors say should not be funded by the state.

The findings of a survey conducted by Doctor magazine sparked a fierce row last night, with the British Medical Association and campaign groups describing the recommendations from family and hospital doctors as “out­rageous” and “disgraceful”.

About one in 10 hospitals already deny some surgery to obese patients and smokers, with restrictions most common in hospitals battling debt.

Managers defend the policies because of the higher risk of complications on the operating table for unfit patients. But critics believe that patients are being denied care simply to save money.

Nice to see that in a universal health care system, everyone has equal access to care, and no one is denied care just so the insurance companies can save money.

I’d like to see the presidential candidates comment on this!

November 19, 2007

Praying for a livelihood, or “The Spirituality of Retail”

Filed under: — Different River @ 3:35 pm

The traditional Jewish prayers recited daily include a couple of prayers for a livelihood. This sounds reasonable — after all, if you don’t at least have food and shelter, you can’t do much of anything spiritual or helpful. But modern life has a way of making daily prayers for this sort of thing seem kind of anachronistic. I mean, in a society in which most people are farmers or merchants, it makes sense — every day can bring good or bad weather, many or few customers, and so on. Even if you are generally successful, you never know whether you’ll make money or lose it on a given day.

Yet, nowadays most people work in jobs with fixed hours and fixed paychecks — I get paid the same amount every two weeks, regardless of how the week goes. Sure, in the long run people get laid off or fired, employers go our of business, raises are given (and could be high or low), and so on — but a typical person does not experience these events on a daily bases. Most employers give raises no more than once a year or less, and even most people who get laid off experience this no more than a few times per lifetime, not every day.

Still, there are a few professions in which one’s income is subject to day-to-day fluctuations in factors that appear beyond one’s (apparent) control, as Rabbi Yaakov Salomon noticed, in “The Spirituality of Retail”:

Want to feel God’s loving involvement in your every day life?

Open a store.

That’s right. One of the most spiritual things you can ever do with your life is to go into retail.

I went to school on the Lower East Side of Manhattan. In the late 60′s and early 70′s …

But my favorite location was actually a rather obscure street — Allen Street. It was known for only one commodity — neckties.

Now I was no tie freak when I was a teenager. So what drew me to that unsung boulevard? It wasn’t the ties at all.

I never actually counted, but there must have been 20 little shops on Allen Street, and all of them sold neckties. All of them! I kid you not. Not only that, they all sold the SAME neckties! Same colors, styles, fabrics, patterns — and all for pretty much the same price.

I remember times when I would walk over to Allen Street from my high school and just stand on the sidewalk and watch, as people sauntered by the shops and occasionally entered and made a purchase. I would wonder to myself, “What made someone choose to walk into one store rather than another?”

There didn’t seem to be any rhyme or reason for it, since they were all pretty much the same. When it dawned upon me that perhaps the ‘x’ factor was the service people received, I personally visited some of these establishments and found no perceivable difference from one store to another — same grouchy and grumpy reception.

That’s when I felt a Heavenly Presence. Who else could be guiding those tie-less customers into each store? Although we all possess free will and each customer did indeed choose the store he wanted to patronize, there seemed to be no compelling reason to select one store over another! To me, the only plausible explanation was that they were being personally herded by the Almighty’s invisible hand.

So anytime I needed a spiritual lift, I just zipped up my parka, headed over to Allen Street, found a good spot, and waited. Invariably, I saw God quietly at work.

November 16, 2007

“Bad” News from Iraq

Filed under: — Different River @ 11:29 am

Sometimes, people often say the media is biased. Sometimes, they say the media focuses too much on bad news. Sometimes, they are so right it’s almost funny.

Note that the story quoted below is not a parody. It is not from The Onion, or Scrappleface, or some other humor-focused publication. It is from the quite mainstream McClatchy Newspapers, which include such papers as the Raleigh News & Observer, The Miami Herald, and others, and it appears on Yahoo News.

You have to see it to believe it:

As violence falls in Iraq, cemetery workers feel the pinch

By Jay Price and Qasim Zein, McClatchy NewspapersTue Oct 16, 2:40 PM ET

NAJAF, Iraq — At what’s believed to be the world’s largest cemetery, where Shiite Muslims aspire to be buried and millions already have been, business isn’t good.

A drop in violence around Iraq has cut burials in the huge Wadi al Salam cemetery here by at least one-third in the past six months, and that’s cut the pay of thousands of workers who make their living digging graves, washing corpses or selling burial shrouds.

The burials aren’t expensive, usually $200 or less, but many people draw their income from them.

When a family arrives— after going through the indignity of having the coffin searched repeatedly for explosives— the body is taken to be washed at one of five family-owned businesses. Female bodies are washed by teams of women. Men wash the male bodies.

The bodies are then carefully wrapped in white cotton shrouds, made in factories in Najaf that also export them. Then the bodies can be taken to the tomb of Imam Ali for a ceremony that includes circling the imam’s tomb.

After prayers, the coffin is borne to the gravesite. There, professional preachers are paid to recite verses from the Quran. The family and the gravedigger remove the body from the coffin and ease it into the grave, placing the head in a niche dug at the end of the grave that faces Mecca.

“Certainly, when the number of dead increases I feel happy, like all workers in the graveyard,” said Basim Hameed, 30, a body washer. “This happiness comes from the increase in the amount of money we have.”

So if “the surge is working,” they can blame Bush for the decreased income of Iraqi cemetery workers!

May 9, 2007

Wisconsin Orders Mandatory Gas Price Gouging

Filed under: — Different River @ 7:11 am

No, that’s not a typo. AP reports:

MERRILL, Wis. – A service station that offered discounted gas to senior citizens and people supporting youth sports has been ordered by the state to raise its prices.

Center City BP owner Raj Bhandari has been offering senior citizens a 2 cent per gallon price break and discount cards that let sports boosters pay 3 cents less per gallon.

But the state Department of Agriculture, Trade and Consumer Protection says those deals violate Wisconsin’s Unfair Sales Act, which requires stations to sell gas for about 9.2 percent more than the wholesale price.

Bhandari said he received a letter from the state auditor last month saying the state would sue him if he did not raise his prices. The state could penalize him for each discounted gallon he sold, with the fine determined by a judge.

Bhandari, who bought the station a year ago, said he worries customers will think he stopped the discounts because he wants to make more money. About 10 percent of his customers had used the discount cards.

Dale Van Camp said he bought a $50 card to support the local youth hockey program. It would have saved him about $100 per year on gas, he said.

So, there you go. Set higher prices, get sued for price gouging. Set lower prices, get sued for “unfair sales.”

December 12, 2006

Stem Cells from Live Babies in Ukraine

Filed under: — Different River @ 2:12 pm

As predicted, now researchers are reportedly using stem cells not (just) from embryos, but from born-alive infants killed for their stem cells. This according to the BBC, which (understatement alert!) is not exactly a right-wing news source. (Boldface in the original.)

Ukraine babies in stem cell probe

By Matthew Hill
BBC Health Correspondent
Tuesday, 12 December 2006, 09:34 GMT

Healthy new-born babies may have been killed in Ukraine to feed a flourishing international trade in stem cells, evidence obtained by the BBC suggests.

Disturbing video footage of post-mortem examinations on dismembered tiny bodies raises serious questions about what happened to them.

Ukraine has become the self-styled stem cell capital of the world.

There is a trade in stem cells from aborted foetuses, amid unproven claims they can help fight many diseases.

But now there are claims that stem cells are also being harvested from live babies.

Wall of silence

The BBC has spoken to mothers from the city of Kharkiv who say they gave birth to healthy babies, only to have them taken by maternity staff.

In 2003 the authorities agreed to exhume around 30 bodies of foetuses and full-term babies from a cemetery used by maternity hospital number six.

One campaigner was allowed into the autopsy to gather video evidence. She has given that footage to the BBC and Council of Europe.

In its report, the Council describes a general culture of trafficking of children snatched at birth, and a wall of silence from hospital staff upwards over their fate.

The pictures show organs, including brains, have been stripped – and some bodies dismembered.

A senior British forensic pathologist says he is very concerned to see bodies in pieces – as that is not standard post-mortem practice.

It could possibly be a result of harvesting stem cells from bone marrow.

Hospital number six denies the allegations.

November 16, 2006

Milton Friedman, Z”L

Filed under: — Different River @ 1:36 pm

Milton Friedman, the world’s greatest exponent of economics, has passed away.

Reuters reports:

SAN FRANCISCO, Nov 16 (Reuters) – Milton Friedman, the free market economist and winner of a 1976 Nobel Prize, died on Thursday morning of heart failure, a spokeswoman for his family said. He was 94.

Friedman’s ideas played a pivotal role in forming the governing philosophies of world leaders like Margaret Thatcher and Ronald Reagan.

He preached free enterprise in the face of government regulation and advocated a monetary policy that called for steady growth in money supplies.

The influential economist died in a hospital in the San Francisco area, the spokeswoman said.

More extensive obituaries — no doubt written years in advance — are available from several different sources, and no doubt more are coming.

October 13, 2006

A Bank Robbery — for Free Room and Board

Filed under: — Different River @ 2:28 am

People often complain about how criminals in jail get “free room and board” paid for by tax dollars. But most of them would gladly give up the “free” stuff in excahnge for some actual freedom. Yet, we’ve heard the stories — probably urban legends, but maybe true — about how homeless people commit petty crimes in the winter to get into the warm jails for a few months. Now, we have a true story — and it seems even sadder than that:

COLUMBUS, Ohio (AP) — A man who couldn’t find steady work came up with a plan to make it through the next few years until he could collect Social Security: He robbed a bank, then handed the money to a guard and waited for police.

On Wednesday, Timothy J. Bowers told a judge a three-year prison sentence would suit him, and the judge obliged.

“At my age, the jobs available to me are minimum-wage jobs. There is age discrimination out there,” Bowers, who turns 63 in a few weeks, told Judge Angela White.

The judge told him: “It’s unfortunate you feel this is the only way to deal with the situation.”

Well, it certainly is unfortunate. Normally, I’d say that someone who does that should be punished by not being sent to jail, since it’s what he wanted. In fact, the prosecutor considered making that argument:

Prosecutors had considered arguing against putting Bowers in prison at taxpayer expense, but they worried he would do something more reckless to be put behind bars.

“It’s not the financial plan I would choose, but it’s a financial plan,” prosecutor Dan Cable said.

But note that in this case the fellow didn’t actually really steal the money at all. he “stole” it from the teller, then immediately handed it to a guard at the very same bank. If he had changed his mind after teh incident but before trial, I bet he could even have argued at trial that he didn’t actually commit a robbery. (This would depend on the details of how robbery is defined in the law.)

(Hat tip: Orin Kerr.)

October 10, 2006

Edmund Phelps

Filed under: — Different River @ 5:32 am

I would not be an eocnomics blogger if I did not mention that this year’s Nobel Memorial Prize in Economics is going to Edmund Phelps. But I can’t give a better explanation of, or collection of links to, his work than Tyler Cowen’s.

September 21, 2006

Price Gouging (2)

Filed under: — Different River @ 11:12 pm

If the increase in gasoline prices was caused by price gouging on the part of oil companies, is the recent decrease in gasoline prices due to price gouging by drivers?

I’m just askin’….

August 7, 2006

“Oil Companies Care Only About Short-Term Profits”

Filed under: — Different River @ 2:29 am

Yet another myth was shattered today — the myth that oil companies don’t care about anything but short-term profits, and will do anything to get them unless government regulators control them. BP Exploration Alaska, Inc., a unit of British Petroleum, annouced they are shutting down the entire Prudhoe Bay oil field — accounting for half the production of Alaska North Slope oil. They are doing this because they found some corrosion in the pipeline that carries the oil out — in other words, there’s a risk of leakage, which would be an environmental disaster.

Major Alaskan Oil Field Shutting Down

Aug 6, 10:40 PM (ET)

By Mary Pemberton

ANCHORAGE, Alaska (AP) – In a sudden blow to the nation’s oil supply, half the production on Alaska’s North Slope was being shut down Sunday after BP Exploration Alaska, Inc. discovered severe corrosion in a Prudhoe Bay oil transit line.

BP officials said they didn’t know how long the Prudhoe Bay field would be off line. “I don’t even know how long it’s going to take to shut it down,” said Tom Williams, BP’s senior tax and royalty counsel.

Once the field is shut down, in a process expected to take days, BP said oil production will be reduced by 400,000 barrels a day. That’s close to 8 percent of U.S. oil production as of May 2006 or about 2.6 percent of U.S. supply including imports, according to data from the U.S. Energy Information Administration.

The shutdown comes at an already worrisome time for the oil industry, with supply concerns stemming both from the hurricane season and instability in the Middle East.

“We regret that it is necessary to take this action and we apologize to the nation and the State of Alaska for the adverse impacts it will cause,” BP America Chairman and President Bob Malone said in a statement.

Malone said the field will not resume operating until the company and government regulators are satisfied it can run safely without threatening the environment.

Of course, the “regulators” wouldn’t have even known there was a problem if the company hadn’t said so.

This will, unfortunately, increase oil prices, and thus the price of gasoline and anything else made from oil. Here’s the estimate:

A 400,000-barrel per day reduction in output would have a major impact on oil prices, said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo.

“Oil prices could increase by as much as $10 per barrel given the current environment,” Emori said. “But we can’t really say for sure how big an effect this is going to have until we have more exact figures about how much production is going to be reduced.”

Some cynics will say that this is a plot by BP to increase oil prices. But that’s wrongheaded — BP can only benefit from high oil prices to the extent that they can sell oil. When they are selling less oil, they make less. The ones who will make money off of this are all the other oil companies — in other words, BP’s competitors. Shutting down the oil fields hurts consumers a little, helps competitor’s a little, and hurts BP a lot. But in the long run, it’s the right thing to do.

August 4, 2006

Shop Talk

Filed under: — Different River @ 6:35 am

The Economist magazine has an article on economists with blogs.

Hat tip to Megan McArdle, who writes for The Economist, blogs at Asymmetrical Information under a pseudonym, and is currently guest-blogging at Instapundit.

July 24, 2006

A Cure for Alzheimer’s Disease?

Filed under: — Different River @ 10:36 pm

I’m checking around to see if anyone I know can verify if this is for real. (Translation: I sent an e-mail to one guy I know who used to do research in this field.) If you have any insights or information, please chime in by posting a comment.

This is from the Herald-Sun of Melbourne, Australia:

New hope for Alzheimer’s cure

By Robyn Riley, July 23, 2006

In a world first, Melbourne scientists have developed a once-a-day pill that they claim may cure Alzheimer’s disease. Human trials of the drug start next month.

The drug — called PBT2 — was developed by a team from the Mental Health Research Institute of Victoria in collaboration with Melbourne-based Prana Biotechnology.

“It is a major breakthrough and very much a Melbourne discovery,” said Prof George Fink, the director of the Mental Health Research Institute.

“Though much depends on the next phase of human clinical trials . . . early results indicate this drug offers hope to people with Alzheimer’s disease,” he said.

The revolutionary drug stops the buildup of a protein called amyloid.

Many scientists accept amyloid is a major cause of Alzheimer’s as the protein is thought to cause the brain to “rust”.

Prof Fink said the drug could significantly prevent Alzheimer’s developing or delay the on-set of the brain disease for many years.

Early clinical testing has confirmed the drug is fast-acting. Levels of amyloid dropped by 60 per cent within 24 hours of a single dose.

It found also that PBT2 suppresses the impairment of memory function.

More human studies begin in Sweden next month and Australians will join a major international trial of the drug next year.

Alzheimer’s is a progressive and fatal brain disease. It is the major form of dementia, a disease that affects one in four Australians over the age of 60.

Prof Fink said the institute was optimistic about the results of clinical trials and said the drug could be on the market within four years.

(Hat tip: Slashdot)

The “John Stossel question” is, how many people will suffer, die, or go beyond the point of help in those four years it takes to get the drug through regulatory hurdles? I’m not saying I’d take the drug on the say-so of a newspaper article, but that seems and awfully long time to test a drug for a disease that can be fatal or completely debilitating within four years, or even less. Especially when you consider that the drug has already passed Phase I clinical trials — that is, it has already been found to be safe.

So if it’s not likely to hurt people, and no other effective treatments are available, what is the problem with making the drug available now, to patients willing to take it without the Phase II trials showing whether it works or not?

July 1, 2006

A Day That Should Live In Infamy

Filed under: — Different River @ 10:00 pm

If anyone were paying attention, that is.

On this date in 1921, West Virginia imposed the first state sales tax.

June 15, 2006

Population and the “Mommy Wars”

Filed under: — Different River @ 10:00 am

I don’t have time to pull out quotes at the moment, but here are several angles on the dual debates of (1) whether we are headed for overpopulation or underpopulation, and (2) whether motherhood is beneficial/good/enlightened or oppressive/evil/neanderthal.

OK, I’ll pull one quote. Emily Yoffe cites the main benefit claimed for the “childfree lifestyle” and why it’s bogus:

As one woman wrote: “My husband and I are childless by choice and I heartily encourage all younger friends to consider it. It is the most wonderful lifestyle, free of whining and sniveling and mini-vans.”

What is going on when there is so much scorn for parenthood—the way a society perpetuates itself? Fertility rates are much in the news these days. The United States is rare among developed nations in that it is still producing children at a replacement rate. But many countries collectively agree with the people who wrote to me—that children are a tantrum wrapped in a diaper and not worth the trouble. So, Germany, Italy, Japan, and Spain, among others, are going down the demographic tubes, with shrinking pools of young workers to support growing masses of seemingly immortal retirees.

I noticed something else in the letters from nonparents that I had experienced myself: They have an unrealistic sense of the passage of time—or at least the passage of parental time. They seem stuck on the notion that being a parent means forever climbing a Mt. Everest of diapers (and what happens to these punctilious couples if a spouse ends up needing diapers?). Diapers pass in a snap. It all goes so fast. When our daughter turned 6, my husband and I realized with a pang that we were already one-third of the way through the time she would live with us. And I worry that the writers have an unrealistic sense of their own passage through time—believing they’ll forever feel that nothing is more important than building their career or taking that next trip.

I’ll go you one better. Before we had kids, Different Wife was hoping she’d have triplets or quadruplets — an entire family, without having to go through pregnancy more than once! Apparently, she thought pregnancy was the hard part. I tried, based on my “experience” as the oldest of five children, to explain that pregnancy was the least of it both in time and impact, but what did I know, I was male, how should be be so arrogant…. Pregnancy is, mainly, the only part of parenting that doesn’t have many benefits offsetting the costs, but that’s not what she meant…

June 14, 2006

A Real Estate Financing Blog

Filed under: — Different River @ 8:00 am

I don’t know how I made this oversight, I somehow forgot to put this on the blogroll when I started reading it a few months ago, but one blog I’ve been reading a lot lately is Searchlight Crusade, which is about mortgages, real estate financing, and the like. The author is a loan broker and (former?) real estate agent.

If you are thinking of buying a house, this is the blog to read. If you already bought a house, learn what you (probably) can do better next time, or when you refinance. If you want to understand the housing bubble, go there for an in-the-trenches view.

The single most important fact on this blog is the fact that mortgage rate “locks” are not really locks — the mortgage broker/lender/bank may give you a “30-day lock” (or 45- or 60-day lock), but they are not actually legally obligated to loan you the money at the “locked” rate.

[M]any mortgage providers will play a game of wait and hope. They tell you they have a certain loan when they in fact do not, hoping the rates go down to where they do. Or they’ll tell you about a rate they actually have, but wait to lock it hoping the rates will go down so they can make more money because when the rates go down, the rebate for a given rate goes up.

Note, please, that they usually have zero intention of finishing your loan if the market doesn’t move downwards enough. Whether it’s National Megabank with a million offices, or Joe Anonymous working out of their home, their motivation is to do what it takes so they make money, and they will keep sweet talking you as long as they possibly can. They’re certainly not going to work for free, and many of them will not do it at all rather than compromise their usual loan margin. If you allow them to play this game, when you finally give up in disgust, they still have several weeks after you apply with someone else where they’re the only ones that can possibly have the loan done, and if the market moves down during those weeks, they’re covered. If you could have gotten a better loan during that period, you likely would. But because you were quoted a price that didn’t exist and believed it, they’ve got what looks to a consumer to be a competitive advantage. And if they call after you’ve cancelled their loan and say that they can close the loan now when the new provider you just contracted with isn’t ready yet, most people will go ahead and sign the papers because This Loan Is Ready now.

And this is complete legal! They have no obligation to loan you anything at any particular rate or any particular terms until you sign the final papers — and if you back out then, you lose your deposit (sometimes called “earnest money”) on the house. Which is probably thousands of dollars, often 2% of the value. Plus the deposit you might have made with the movers. Plus, you may have already sold your old house, and have no other place to live. In other words, you are over the barrel, and it’s an excellent time for a not-so-honest broker/lender/bank to squeeze another few thousand dollars out of you — or worse, another $300 a month for the next 30 years. (The scary thing is, he says that even though 80-90% of buyers who notice the discrepancy cave, many don’t even notice they are signing up for higher payments than they agreed to.)

And Searchlight has a proposed solution to this — get a backup loan. In other words, apply for two loans — perhaps one from the guy who said the other guy’s deal was too good to be true — and make the final choice at the closing table. Assuming they both actually show up with the money, which they may not.

Let’s just say I discovered this blog about two months too late. :-(

Next time, I’m going to get a backup loan. Maybe two or three backup loans.

Powered by WordPress