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DanKarmelSecondPaper 10 - 28 Apr 2010 - Main.MarkBierdz
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| | | It's not only the actor that's being cast in a certain light, but the deal itself which is being burdened with all sorts of extraneous notions. Leff notes that we are a society that is skeptical of gifts - "You don't get something for nothing." For borrowers whose homes are underwater, the problem is not that they were mistakenly convinced they were giving something in return, but rather that they are mistaken about exactly what that something was. When you take a mortgage, you borrow money in exchange for a promise to either pay it back or forfeit the security. Banks can lend money to the government for 30 years at a rate of 4.625%. Borrowers need to look at the rates they are paying on their mortgages and ask one simple question - why are they charging me more and what does that mean about the promise that I made? Once they understand what that promise actually was, they will know it was not to help the bank hedge its bets.
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Hi Dan, I'm just going to read back a bare-bone outline of your essay. I'm not even sure what it's about, so maybe if I give you a simple reiteration of my understanding, you can see if you expressed yourself clearly.
Introduce Leff and explain the creation of value as being necessary to the deal
- Borrowers bought into this idea, but we don't care about this
- Some smart investors bought into this idea as well, but they're so smart, how can we explain this?
Oh simply they didn't bear the risks.
Although Leff isn't useful to describe the deal, he's useful to describe what happened after the deal (seems to contradict what you said in the first paragraph). Also you're describing what happened after the deal from the perspective of the borrower, who beforehand you weren't interested in.
- Borrowers are altercast as homeowners, increasing their unwillingness to walk away from the deal
- Borrowers, while not thinking they were getting a gift, could (or should?) have been aware that it was not really a good deal for them. (is this your conclusion?)
So my take on what you said is that I don't know really what you're saying. Your essay is scattered and doesn't really finish its thoughts. I don't understand what you are trying to say. My suggestion is that you pick a thread of thought in your essay and develop it more thoroughly. Your essay needs a big-time rewrite though. Rewrite it when you get the time, and I'll do a more substantial edit. I think at this point your thoughts are too incomplete for me to really add anything of value.
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