The tl;dr Special
Had to pay a bill in Mahwah this afternoon. After that, since I had a coupon, I went to Mahwah Pizza & Pasta for lunch to give them a try. They had a grand opening recently and I hadn't been there yet. So okay, I went in and saw that it was a pretty standard pizza place, with decor maybe a bit above average. Took a look at the menu and their lunch specials. Handed the plump guy behind the counter the coupon and he told me that it was expired. Huh? The expiration date was 10/7/2007 and it was only September. After a little while, a wiry older fellow came out to see it and said that it was valid.
Anyway, I didn't want to start with anything too complicated, so I just ordered a personal pizza with pepperoni topping. It turned out to be 12 inches in diameter! Not bad though. The thin crust was crispy. However, I'm overall ambivalent about the place and still puzzled by that fellow's date interpretation snafu. I'll decide if I'll go again on the next coupon mailing.
Time for another insurance project. Last year, I tackled the problem of liability. For example, if someone stepped through the door and immediately fell over dead from exposure to a rare mold that I didn't even know was living in the kitchen sink, I'd prefer that the insurance company handle the lawsuit, right?
This time, I'll tackle the flipside of insurance coverage, that being personal property. Yeah, I know. Most people consider this first before the other, but I think it's easier to replace a bunch of stuff than your entire estate. Anyway, this year, I worked on inventorying my stuff. Put together a list of everything worth more than a trivial amount. Also decided to inventory my books and with over 1000 of those, boy, was it ever a project! I put the result up on my aNobii shelf to have something to show for the effort.
Then I read my renter's insurance policy, which is apparently a bad thing to do if one wishes to remain ignorant of gaps in coverage. For example, only $1000 in electronic equipment is covered if it happens to be in an automobile at the time. So better not have a break-in if there are GPSes, digital cameras, and phones on the passenger seat! On the other hand, I'm covered for the loss of up to $2500 in silverware. Which is a bit much considering that I probably have $10 in silverware total from discount stores. I also have $1000 in coverage on furs, although I don't think they mean fursuits. :) The real problem, however, is the $200 coverage limit on coins and money, which is rather low for anyone with a coin collection.
So I got to thinking... since coins don't take up much room, maybe buying insurance coverage on those will cost less if I stick them in the safe deposit box. (The bank's own insurance typically does not cover safe deposit box contents so you'll still need to have that insured on your own.) In researching that option, I came across this web page, from Commerce Bank itself, suggesting that safe deposit box insurance may be offered by their insurance department. Called them this afternoon and no, they don't have that kind of insurance. Ugh. I think the only option now is to call Homesite and see if they can add coverage to the policy at a reduced rate if those items are in a safe deposit box. So this still needs work.
I saw this poll in my newsfeeds today: Who's Most to Blame for the U.S. Credit Problems?
What's funny is the Federal Reserve doesn't even appear in the list of suspects. It's as though the Fed is a mysterious entity that no one understands, the man behind the curtain, so they cannot be at fault. In fact, I think the bulk of the responsibility for the subprime mortgage mess lies with the Federal Reserve. While borrowers, lenders, investment banks, and hedge funds all had their part in it, the housing bubble and subsequent excesses and speculation would not even have started if the Fed, under Greenspan, hadn't attempted to bail out Wall Street after the Nasdaq bust by cutting the Fed Fund rate to 1% and growing money supply at double-digit year-over-year rates. (Estimated M3 is now growing by 14% annually!) In fact, it didn't actually work. Anyone who was in QQQ at the peak is still underwater. All it did was transfer the bubble over into the real estate sector.
Now, it looks like Bernanke is following in the same vein as Greenspan. His response to the July/August correction was to cut the discount rate by half a percent, with indications that a cut in the Fed Funds rate will follow at the mid-September meet. When is the Federal Reserve going to give the big banks and hedge funds some discipline? Or is the game now to keep coddling them, sending the market into riskier and riskier territory, until the inevitable mega-bust?
Anyway, let's do a rundown of the other prime suspects in the poll.
The Borrowers
First, I need to clarify that I do believe people should take responsibility for their own debt. We should all live within our means and save up, rather than borrow, for our purchases whenever possible. In reality, not everyone is going to live up to that ideal. Show them super-low interest rates and they'll bite. People who went for subprime mortgages were near bankruptcy anyway, so they had very little to lose, but potentially a lot to gain from rising home values. Whether or not they knew better, could we really blame them for taking the leap?
The Lenders
It was just business for the lenders. With the flood of liquidity and low interest rates, they ran out of quality borrowers really quickly. What else do you expect them to do? Sit on the money and not lend it out? Lenders are all in competition with one another, so that's a recipe for going out of business. They did what they had to do to reach out to borrowers with lower credit quality. Even to illegal immigrants in some cases. Had money and credit been tighter, they'd have been more selective about who they underwrote mortgages for, but the Federal Reserve screwed that up. Besides, all the lenders had to do was package up the mortgages and sell those to...
Investment Banks
... who slice those mortgages into tranches and sell those to...
Hedge Funds
Part of the problem is securitization. The people who end up holding those mortgages are so far removed from the borrowers that they are in no position to judge who can repay the mortgage and who can't on a case-by-case basis. Back in the old days, which was maybe only 2 or 3 decades ago, the hometown bank loan officer himself had to vet your mortgage application and the bank itself took a hit if you didn't pay. So they had to be careful. Now, it's off his hands as soon as he packages the mortgage up and sells it. So why even take the time? Let someone else's retirement fund take the hit if the subprime borrower goes delinquent.
In the end, it all falls back to the Federal Reserve. They had half a decade to step in and reimpose tight money but they didn't even try. Their stance, according to Fed Governor Mishkin, is that "the task for a central bank confronting a bubble is not to stop it but rather to respond quickly after it has burst." Which is a recipe for getting into asset bubbles and credit messes again and again.