Saturday, November 20, 2010

Burn, baby, burn

Coming from someone who has never held a mortgage, and whose financial life was the height of complication when I had a couple revolving CDs that kept escaping me, the idea that people have allowed transactions to get as complicated as this is astounding. A chart created by Dan Enstrom shows the complex, convoluted, redundant process that is his mortgage as it becomes something called a security.
I realize that I have never taken accounting classes or passed the series seven test, but I did pass AP Biology (more or less) and I think that when it is easier to track genetic mutation and perform DNA tests than it is to comprehensively explain a mortgage (Or your taxes, or the fine print on credit cards, or why the government is allowed to print money on a whim, or why the electoral college exists at all) then it is clearly time to work toward streamlining the system.And by streamlining, I don't mean introducing new paperwork to have one's mortgage "fast-tracked" or automatic cc-ing of documents to various organizations -- I mean hack and slash blitzkrieg wherein the structure is rebuilt with third graders as primary comprehensibility consultants. When we don't understand how our money works, how can we be expected to use it wisely? Why are we surprised by the recent foreclosure confusion?

Things that are allowed to be complicated for no reason?
Music videos by OK GO.
(For best results click the video. Embedded version cuts off right side a bit.)

1 comment:

Steve R. said...

One of the problems with our financial system is that we are attempting to create "wealth" through financial "magic" rather than real work. Transaction fees associated with the creation of the securitized mortgages do not create wealth. The reality is that transaction fees reduce the value of the underlying assets.

The financial institutions, to generate transaction fees, reduced lending standards to the point that those who would normally not be able to buy a house were able to do so. In the end, like a Ponsi scheme, the whole house of cards collapsed.

Now we have a mortgage crisis where the former homeowners are being forced into a degree of poverty through foreclosure. Of course those who made the loans and obtained commissions from the transactions, in some cases, became rich.