I am criticizing self-professed experts. I have never called myself an expert on anything. Since I arrived in San Diego in 1973, I have inveighed against financial engineering, phony accounting, greed, excessive debt at all levels, too much liquidity — the sins that brought us down. But in mid-2007, I wrote a column for the Reader. I correctly said that “stocks are propelled by financial engineering, not product engineering.” I predicted a market collapse. But I said it would come in two or three years. Actually, the calamity began to gain momentum only a few months later, and the following year was an utter disaster.

Maybe I should apply to President Obama as an expert on the economy. Or on goldfish.

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Comments

pellis Sept. 16, 2009 @ 1:23 p.m.

I think there may be a fundamental problem with trying to proactively regulate a system that is so complex, nobody fully understands it. At best, it seems like all we can do is reasonably react to the current state of the market. The market will continue evolving as people discover new inefficiencies to exploit and I just don't know if anybody is up to the challenge of understanding it all. I think the average person wants to take comfort in believing that there's someone at the helm who has the knowledge and control over the market to steer the boat, but I personally don't think that's even possible.

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SurfPuppy619 Sept. 16, 2009 @ 1:23 p.m.

Ben Bernanke = Claims as of yesterday that the recession/depression is over- (as Joe Wilson said to Obama in the Joint Session, “Liar!”)

Alan Greenspan = "Mr. Bubble"

Henry Paulson = Another Goldman Sachs yahoo.

These are now the only people who run the government's finances, all over paid, greedy, yahoo graduates of the Harvard Business School who work on Wall Street at the elite firms and self deal all day long-and basically brough our country to the edge of collapsing.

OK, I gave my little rant. More news. Michael Moore was on the "Jay Leno Show" last night and he has a new movie coming out on October 1, 2009. And before anyone gets on an anti-liberal MM is a commie bandwagon let me say this- he suppsoedly goes after BOTH parties in thsi new movie and really brings to light all this hanky panky going on in the financial services sector and Washington and Washington's attempts to regulate the financial services sector.

Anyway, Leno saw the movie and said it is very balanced and not like the previous two “documentaries" that were certainly made with a bias from the start- although I did like “Sicko” and “Fahrenheit 9/11”.

New movie is called “Capitalism: A Love Story” and I will go see it the day it opens.

http://www.imdb.com/title/tt1232207/

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Don Bauder Sept. 16, 2009 @ 5:08 p.m.

Response to post #1: You make an excellent point, and the fact that global variables are now so complex and interwoven makes the task even more difficult. Best, Don Bauder

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Don Bauder Sept. 16, 2009 @ 5:14 p.m.

Response to post #2: I read about Moore's latest movie. There is a new Gordon Gekko film coming out, too. I enjoyed the first Gekko film and have also enjoyed three or four Moore films: Roger and Me, Sicko and Fahrenheit 9/11. There was a good one about guns and Columbine but I am wondering if that was Fahrenheit 9/11. Or was it a different one? Best, Don Bauder

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Don Bauder Sept. 16, 2009 @ 5:19 p.m.

NOTE: I did see four Moore films. Bowling for Columbine, dealing with guns, came out in 2002. I enjoyed it, as I enjoyed the others. Best, Don Bauder

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SDaniels Sept. 16, 2009 @ 5:55 p.m.

4: Bowling for Columbine dealt with guns, and Fahrenheit 9/11 with the government bungling of 9/11.

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smileforonce Sept. 16, 2009 @ 8:20 p.m.

Don:

First off, great article! Really enjoyed it, and I think you'd have more fun being a Goldfish expert than an advisior to Obama right now--not the easiest job in the world! So here's my take.

The only thing that was being traded was default risk. Why would they (AIG) worry about managing it? To good to be true ratings on shady MBS's from Moody's = less capital set aside and astronomical leverage. Voila!!!!

Eveyone freaked, bubble broke, companies died overnight, big players bought the CDS protection (synthetic short sale) knowing, encouraging, and excited that these companies were going to zero and then were made whole and very rich.

So Don, how do you feel about the talk of the credit market risks and Asset Backed Securities (ABS) that are floating around loaded with auto loans, credit card debt, student loans, and home equity loans?

With so many out of work, prime for default, and losing their jobs in large numbers, wouldn't that be the next inevitable crisis looming?

Let me know what you think!

And buy my one page book entitled "Don't buy things you can't afford."

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Fred Williams Sept. 16, 2009 @ 10:22 p.m.

Lt. Col. (Ret.) Walter Crandell, combat veteran of three wars, used to tell me about "experts":

"An "Ex" is someone who used to...and a "spurt" is a drip under pressure."

It's truly stunning that the administration chooses to listen ONLY to those who have been so dramatically, publicly, and disastrously wrong.

If our government had even a shred of intelligence we'd have someone like Nassim Taleb as Treasury Secretary.

See:

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pellis Sept. 16, 2009 @ 10:33 p.m.

Nassim Taleb came up with a successful investment strategy based on a human psychological observation. That investment strategy has worked out very well for him so far, but that doesn't in any way make him an expert or qualified to be the Treasury Secretary. Plus, the guy is completely full of himself.

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Fred Williams Sept. 16, 2009 @ 10:33 p.m.

More Taleb:

On Obama and Geithner:

Speaking truth to power at Davos:

Interviewed with along with his friend Benoit Mandelbrot on the News Hour (fractal geometry and chaos theory genius):

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Fred Williams Sept. 16, 2009 @ 10:38 p.m.

Pellis, yes he's abrasive.

But he's also correct.

The D.C./Wall Street liars are really smooth and likeable.

But they're also dead wrong.

I'll take abrasive but right over smooth talking fraudsters any day, thank you.

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SDaniels Sept. 16, 2009 @ 10:39 p.m.

"...Benoit Mandelbrot(fractal geometry and chaos theory genius):"

and most importantly, author of the paisley craze!

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SurfPuppy619 Sept. 16, 2009 @ 11:04 p.m.

I did see four Moore films. Bowling for Columbine, dealing with guns, came out in 2002. I enjoyed it, as I enjoyed the others. Best, Don Bauder

By dbauder

I really enjoyed “Sicko” and “Fahrenheit 9/11”, but the Columbine movie was just too biased in the anti firearm propaganda. He made some good points but it was very biased-like all anti gun advocates- and was too over the top in it's bias.

I am pro 4th Amendment-even though I own no firearms. I believe everyone has the right to arm themselves for self defense.

I look forward to the new MM move on October 1. Too bad you live in CO Don, we could get the crew here together and all of us could go see it opening night.

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SurfPuppy619 Sept. 16, 2009 @ 11:06 p.m.

And buy my one page book entitled "Don't buy things you can't afford."

By smileforonce

OMG...did that make me laugh! I just spit my coke onto the screen.......

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David Dodd Sept. 16, 2009 @ 11:08 p.m.

Fred, Taleb is beyond abrasive, he's a total jerk.

Two hour-long podcasts with Russ Roberts from George Mason/Stanford fame...

On the financial crisis: http://www.econtalk.org/archives/2009/03/taleb_on_the_fi.html

On his "black swan" B.S., err... I mean theory: http://www.econtalk.org/archives/2007/04/taleb_on_black.html

If he makes money, then good for him, but there isn't anything I took out of these podcasts that gave anyone a clue as to how.

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SurfPuppy619 Sept. 16, 2009 @ 11:12 p.m.

By Fred_Williams

EXCELLENT INTERVIEW- those two have far more insight into economics than the yahoos from Goldman Sachs who are running gov fiance today.

Pellis, yes he's abrasive.

But he's also correct.

The D.C./Wall Street liars are really smooth and likeable.

But they're also dead wrong.

I'll take abrasive but right over smooth talking fraudsters any day, thank you.

By Fred_Williams

I'M WITH YOU 100% on this post.

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Fred Williams Sept. 16, 2009 @ 11:37 p.m.

Matt Tiabbi has more on Goldman Sachs here:

http://www.rollingstone.com/politics/story/29127316/the_great_american_bubble_machine

It should make every American very, very angry that the same crooks who got us into this mess are still in charge.

Refried, my friend, I think the links you posted do more to bolster Taleb's case than diminish it.

At the minimum, Taleb is honest enough to say when he doesn't know something...unlike the Goldman Sachs fraudsters running our economic policy today.

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David Dodd Sept. 16, 2009 @ 11:57 p.m.

Fred: But with Taleb, I was left with the feeling that while he's certain about what is/was wrong (and I don't argue with him about that), he had very little to say about what was right, or even better. If you listen to (or have listened to) both hours of the podcasts, this is the most striking peculiarity in Taleb's interviews.

Keeping in mind that Roberts is a Hayekian, I've listened to him talk to strict Keynesians and reach some sort of common ground, or at least, some understanding that I could either agree with, disagree with, or ponder. With Taleb, there's no room for any of that. I found him to be pompous, and other than his reputed awesome portfolio (of which he refuses to share any broad notion of what his formula for investment is), I have no notion why he acts this way.

It makes it very difficult to understand exactly what direction he would move if he was in charge, only that it is assumed he would certainly move away from where we are currently.

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antigeekess Sept. 17, 2009 @ 12:30 a.m.

For all who liked Moore's "Sicko," Robert Greenwald's Brave New Films has a new one called "Sick for Profit."

http://www.youtube.com/user/bravenewfilms

http://sickforprofit.com/

The site's got a cool ap for writing a new tagline for CIGNA, whose current one is "A Business of Caring." My brand new contribution:

C.I.G.N.A. "Care Is Generally Not Allowed." :)

But my favorite comes from contributor Anders in New York:

"Not giving a f*ck about you and your little problems is our business."

:D

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antigeekess Sept. 17, 2009 @ 12:36 a.m.

"...Benoit Mandelbrot(fractal geometry and chaos theory genius):"

"and most importantly, author of the paisley craze!"

Funny, Daniels. I just wish that vid would load.

Been looking for a decent large poster of the Mandelbrot set -- preferably in gold/amber tones -- for ages. Let me know if you come across one.

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SDaniels Sept. 17, 2009 @ 12:42 a.m.

My James Gleick (Chaos: Making a New Science) has a set detail in saffron and browns. Small, though. Tried a poster place online?

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SDaniels Sept. 17, 2009 @ 12:49 a.m.

re: #19: Bruce McCall in the Sept 7 New Yorker has a spoof on med insurance brochures called "Fibrillations," which begins:

"Welcome to the monthly newsletter about your health-insurance problem, not ours."

And I love this part--instantly meaningful to any HMO member who has ever had to function as her own part-time billing clerk:

"Q.& A. of the Month

Q: My current statement lists two hundred and thirty-one charges for "brain surgery," even though I have had no brain surgery. How can I rectify this?

A: Invalid question. Brain surgery is not covered under your plan."

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antigeekess Sept. 17, 2009 @ 12:57 a.m.

I didn't know Jiminy Gleick did art. :)

"Tried a poster place online?"

Yeah, but not in a while. I'll resume the search again at some point.

Also in that color scheme, I really like this one by my YouTube friend UnAsleep:

Her paintings are done like "automatic writing."

I discovered her through her other YouTube channel, UnAsleep. Utterly brilliant stuff. The best channel of its kind on YouTube (that I'm aware of).

I have a feeling that it may not be your cup of tea, however. :)

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Fred Williams Sept. 17, 2009 @ 1:04 a.m.

Refried, one of the reasons I admire Taleb is precisely because he doesn't claim to know all the answers. That's his major point...we have to recognize the limits of our knowledge.

That said, he's very clear that eliminating VAR would go a long way in clarifying financial institutions' true exposure to risk. Just that one change would have immediate dramatic effects, involving short term pain, but giving us all a fighting chance of doing better in the future.

Remember, with the same Goldman Sachs crooks in charge as last year we've had zero reform of the system. All we've done is reward the ones who crashed the economy.

Don't be lulled by smarmy sweet talk. Taleb's angry for good reason...he was sounding the alarm for years and no one in government paid any attention.

Unbelievably, we're still not paying attention.

What's needed is a fundamental reassessment of our economic goals in this interconnected world. It's not a matter of just tweaking the system a bit to get things back to "normal".

Instead, we're going to get more of the same. This "crisis" isn't over...I doubt we're even in the middle yet. I predict yet another fall because NOTHING has has changed. Our so-called leaders keep repeating that we're out of the worst of it, but they're ignoring the massive debts still swirling around the system and the inevitable inflation that will follow the pumping of so much money into the system to pay off the crooks.

Until we deleverage, something Bauder and Taleb agree must be done, we're subject to the same risks as a year ago.

According to Taibbi (and Bauder) our government has been taken over by Wall Street. Since they're the ones truly in charge, Taleb will continue to be ignored or even vilified. That's a tragedy, and we're all going to pay the price.

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antigeekess Sept. 17, 2009 @ 1:09 a.m.

Fred said:

"Anti: Try this,

http://mandelbrot.collettivamente.com/"

Thanks, Fred. I've seen the generators before. Fun to play with, but my printer doesn't do 24x36. :)

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Don Bauder Sept. 17, 2009 @ 9:17 a.m.

Response to post #6: That's my recollection. Both were good. Best, Don Bauder

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Don Bauder Sept. 17, 2009 @ 9:21 a.m.

Response to post #7: I think a blowup in securitized credit card debt may well ignite the next crisis. And remember, the securitized mortgage crisis is hardly over. It has just been covered up. Best, Don Bauder

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Don Bauder Sept. 17, 2009 @ 9:25 a.m.

Response to post #8: Yes, the idea of having the Federal Reserve being the major regulator of banks is repugnant. Nobody was more wrong about the onset of this crisis than Greenspan, Bernanke, and their underlings. Another suggestion: Nell Minow, daughter of Newt Minow, as head of the SEC. She would shake Wall Street up. Mary Schapiro is incapable of doing so. She is a long-time beltway hack -- part of the system that brought us to the brink. Best, Don Bauder

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Don Bauder Sept. 17, 2009 @ 9:27 a.m.

Response to post #9: Is he any more full of himself than Larry (Always Wrong) Summers, Obama's chief economic advisor? Best, Don Bauder

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Don Bauder Sept. 17, 2009 @ 9:31 a.m.

Response to post #10: There are a lot of people out there who saw this coming and should have been named to posts, had they wanted them: Joseph Stiglitz, A. Gary Shilling, James Grant, Henry Kaufman, Nouriel Roubini et al. If they were deemed too old or too honest to take a post, they should have been named as advisors. Best, Don Bauder

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Don Bauder Sept. 17, 2009 @ 9:35 a.m.

Response to post #11: How about Robert Shiller as a top advisor to Obama? He is not abrasive, and he has a very good batting average. Best, Don Bauder

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Don Bauder Sept. 17, 2009 @ 9:41 a.m.

Response to post #12: Chaos theory is worth studying. Among the reasons: as this stock market spirals ridiculously because of the ocean of liquidity, there will be no pressure to reform Wall Street. Thus, we are setting ourselves up for another crash. Some big, unexpected trauma could touch it off. Best, Don Bauder

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Don Bauder Sept. 17, 2009 @ 9:43 a.m.

Response to post #13: Moore's Wall Street firm will probably come to our little town some time next year. Best, Don Bauder

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Don Bauder Sept. 17, 2009 @ 9:48 a.m.

Response to post #14: A century ago, economists preached, "Don't buy what you can't afford." But once Keynesianism took root in the 1930s, the shibboleth became "Don't save; spend. Private virtue is public folly. Buy what you can't afford." Best, Don Bauder

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Don Bauder Sept. 17, 2009 @ 9:52 a.m.

Response to post #15: I didn't read The Black Swan but my friends who did thought there was a lot of meat in there. Best, Don Bauder

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Don Bauder Sept. 17, 2009 @ 9:54 a.m.

Response to post #16: The Goldman Sachs people are not only smooth liars; they run the government. Best, Don Bauder

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Don Bauder Sept. 17, 2009 @ 9:55 a.m.

Response to post #17: Tiabbi has written some great stuff, and not just on Goldman Sachs crooks. Best, Don Bauder

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Don Bauder Sept. 17, 2009 @ 9:59 a.m.

Response to post #18: Interesting post. The purported experts who follow Hayek and Keynes are still debating. That's what this column was all about. Best, Don Bauder

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Don Bauder Sept. 17, 2009 @ 10:02 a.m.

Response to post #19: Hopefully, insurance companies will come under the microscope as this healthcare controversy goes on. Yes, they turn down applicants for so-called pre-conditions; they drop insured people after conditions arise; they don't pay claims as they should. Etc. This must all be thoroughly aired. It won't be. Best, Don Bauder

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Don Bauder Sept. 17, 2009 @ 10:05 a.m.

Response to post #20: Watch out; you may show that the chaos theory is sound after all. Best, Don Bauder

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Don Bauder Sept. 17, 2009 @ 10:06 a.m.

Response to post #21: See response to post #20 above. Best, Don Bauder

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Don Bauder Sept. 17, 2009 @ 10:08 a.m.

Response to post #22: We subscribe to the New Yorker but I haven't seen that one. Sounds great. Best, Don Bauder

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Don Bauder Sept. 17, 2009 @ 10:13 a.m.

Response to post #23: I thought I saw some subliminal messages there. Best, Don Bauder

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Don Bauder Sept. 17, 2009 @ 10:17 a.m.

Response to post #24: I liked the visuals more than the music. But I am hopelessly old-fashioned. Best, Don Bauder

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Don Bauder Sept. 17, 2009 @ 10:20 a.m.

Response to post #25: We have not only rewarded the Wall Streeters who caused the crisis. We have rewarded the regulators who looked the other way, or were too dense to see the storm clouds gathering. Best, Don Bauder

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Don Bauder Sept. 17, 2009 @ 10:22 a.m.

Response to post #26: Get a new printer, thereby helping give the economy a jolt. Best, Don Bauder

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Dennis Sept. 17, 2009 @ 11:59 a.m.

Response to Post #1 I think there may be a fundamental problem with trying to proactively regulate a system that is so complex, nobody fully understands it.

I think there is a fundamental problem with having a system that is so complex nobody understands it! Like "Too big to Fail" a system or set of financial instruments that no one understands should not be allowed to exist.

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SurfPuppy619 Sept. 17, 2009 @ 12:20 p.m.

I think a blowup in securitized credit card debt may well ignite the next crisis. And remember, the securitized mortgage crisis is hardly over. It has just been covered up. Best, Don Bauder

By dbauder

The blowup in Student Loan debt is already upon us-and it is sparking serious problems right now.

Read Sallie Mae's financial statements, they are going to implode sooner or later, and I am sure the feds will "rescue/save/prop up/[insert gov money printing plan backed by ordinary taxpayers here]" the SLM Corp.

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Don Bauder Sept. 17, 2009 @ 2:06 p.m.

Response to post #48: As I have said on this blog many times, the essence of white collar fraud is contrived complexity. Most derivatives -- particularly the noxious ones -- fall into that category. There should have been criminal prosecutions in some of the derivatives cases, just as there should have been criminal cases against individuals in big banks that hid liabilities offshore. And there should be criminal prosecution now in the cases in which big Wall Street firms, particularly Goldman Sachs, are using computers to makemassive trades 1/3 of a second before another market-moving trade is made public. That is front-running, and is illegal. Period. Institutions considered too big to fail should be broken up. No institution should be too big to fail. Bring back Teddy Roosevelt! Best, Don Bauder

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Don Bauder Sept. 17, 2009 @ 2:08 p.m.

Response to post #49: It's that old story: you know something in the economy is going to happen, but you don't know when, and you don't know the intensity of the reaction. Best, Don Bauder

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PistolPete Sept. 17, 2009 @ 2:29 p.m.

It has been said that there is a sucker born every minute. The biggest sucker of them all isn't even alive and was born 233 years ago......

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SDaniels Sept. 17, 2009 @ 2:53 p.m.

re:#49:

"Read Sallie Mae's financial statements, they are going to implode sooner or later, and I am sure the feds will "rescue/save/prop up/[insert gov money printing plan backed by ordinary taxpayers here]" the SLM Corp."

SurfPuppy, am I going to have to pay back the 50K in loans or what? If I call them right now, will they be in a mood to negotiate?

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SurfPuppy619 Sept. 17, 2009 @ 4:27 p.m.

SurfPuppy, am I going to have to pay back the 50K in loans or what? If I call them right now, will they be in a mood to negotiate?

By SDaniels

In a word, yes, you are going to have to pay back what you borrowed. But only what you borrowed-no unearned bogus fees and costs. If you borrwed X amount of dollars, make a decent living off of your degree and can pay the money back then you have a moral and legal obligation to do so.

The problem people are running into in SL's are the scams with the big companies like Sallie Mae, NelNet, First Marblehead and others, as well as private lenders, who are engaging in straight up fraud in many of the loans they service-like bumping interest rates above the contracted rate, intentionally forcing defaults when a person is unemplopyed or cannot make a payment for lack of work or enough pay if they are working, adding in bogus "collection fees and costs". That is where the fight is going in the student loan sector. Fighting the fraud that permiates it.

Oh, They will not negotiate any part of a student loan.

I am in a high level lawsuit with SLM right now, and it is going to be (hopefully) a watershed moment in SL scammimg.

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pellis Sept. 17, 2009 @ 6:15 p.m.

Response to #11:

He's not in a position to be a "fraudster." He doesn't have to try to distill unimaginably complex interactions to the general public to explain why their retirement funds are worth half as much as they were five years ago. The problem with putting anyone at the captain of this ship is that they will very quickly have to explain things that they can't possibly know. So either they lie to themselves and tell you the truth, or they lie to your face. Take your pick. Nobody will get to that position by telling the truth.

Additionally, Telab's in a position where people think he's a market expert due to his success. While I agree that his uniquely psychological investment strategy is sound and has worked out for him very well, I don't think he's any more of an expert than the million other people who share his opinion of what we should be doing with the market at this point in time. You don't have to go far to find someone who has been predicting this downfall for years now.

Response to #48:

I agree with this to some extent, but stifling complexity stifles innovation and growth. Furthermore, how much do you dumb/shrink/regulate it? It's a balancing act between speed of growth and safety, or greed and fear.

I don't have any problem with derivatives at all. I don't even have a problem with leverage, as long as you have the cash to back it. I feel like all these banks just went into the Wall Street casino and bet a bunch of money they didn't have. When the casino came to collect and the money wasn't there, the government had to hit the reset button. It's fun to argue about what would happen if we implemented the ideas of this expert or that for the reset button, but I don't think it matters too much in the long run. We won't ever get the right answer.

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Don Bauder Sept. 17, 2009 @ 7:29 p.m.

Response to post #52. That would be 1776. Hmmmm. Best, Don Bauder

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Don Bauder Sept. 17, 2009 @ 7:32 p.m.

Response to post #53: I agree that the government will come to the rescue of Sallie Mae. Nobody knows that better than Sallie Mae. So I don't think it will be in a mood to negotiate on your loan. Best, Don Bauder

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Don Bauder Sept. 17, 2009 @ 7:36 p.m.

Response to post #54: I would like to cover your lawsuit. My email address is don.bauder@mac.com and my phone is 619-546-8529. Best, Don Bauder

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Don Bauder Sept. 17, 2009 @ 7:47 p.m.

Response to post #55: Addressing your two points: how many so-called market "experts" have lasted? They're experts while their luck lasts, but then they inevitably take a pratfall. Second, you're not against leverage as long as people have the money to pay back the debts. This assumes that people and institutions have an inherent goodness and self-control that I don't believe exists. Heavy debt normally leads to speculation. When the government bails out the gamblers, we have a moral hazard problem. This is why we have set up ourselves for another big crash. When? Wish I knew. Best, Don Bauder

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David Dodd Sept. 17, 2009 @ 7:50 p.m.

Oh hell yes, Surfpuppy, SMACKDOWN!

Take no prisoners!

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SDaniels Sept. 17, 2009 @ 9:24 p.m.

Hey SurfP, I should qualify: I am an honest borrower of student loans, and have always planned on paying them back. Unfortunately, I have health issues that have not let me make the most of my degree, and I can only teach part-time.

The problem with SM is that even though I remain a full-time student (maintaining matriculation), they find any little excuse to take me out of deferment and start charging the monthly payment. If my department forgets to cross a 't' or dot an 'i,' SM tells me I am going to go into default while my files are being updated, and that I'd better pay up. I end up paying school fees AND loans at the same time.

They are even more inflexible than credit card companies, and if they could, I'm sure they would @#$@#% with the APR, too. Thankfully, they have to stick to the rate I agreed on when I consolidated...right?

I agree, give 'em hell! :)

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Don Bauder Sept. 18, 2009 @ 6:41 a.m.

Response to post #60: "No prisoners!" is SurfPuppy's battle cry. Best, Don Bauder

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Don Bauder Sept. 18, 2009 @ 6:45 a.m.

Response to post #61: That is the purpose of this blog: giving 'em hell. We don't observe the kindness normally granted the feminine gender, which means that Fannie Mae and Sallie Mae get whacked as much as Freddie Mac. Best, Don Bauder

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SDaniels Sept. 18, 2009 @ 8:35 p.m.

Mr. Bauder, you're a crack up. SurfPup has his lawbooks and you have your pen-as-sword. Whack away, sir, on behalf of all of us starving students. :)

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SurfPuppy619 Sept. 18, 2009 @ 9:38 p.m.

They are even more inflexible than credit card companies, and if they could, I'm sure they would @#$@#% with the APR, too. Thankfully, they have to stick to the rate I agreed on when I consolidated...right?

By SDaniels 9

Yes, Sallie Mae is inflexible because they can do things no other creditor in America can do-for the time being anyway.

People who get sick, or have other health problems, or lose employment, are very good examples of how the system can be manipulated by the loan holder.

Although there are applications to discharge SL debt for serious illness, it is rarely granted.

Sallie Mae WANTS to default your loan-so they can front load 40% of your loan balance as "collection costs and fees"-without actually incurring any collections costs ( I bet you didn't think that was legal-did you).

After they front load that 40% of bogus fees and costs they will then try to force you into one of the income contingent, 25 year repayment loans (requiring you to affirm all the bogus costs and fees). Then the meter keeps ticking, and if you make it to the end of the 25 years you will have an IRS tax bill bigger than your student loan.

Elizabeth Warren is working with Obama on many, many things-one of which is the SL problem. She was a law professor at Harvard Law School that had written extensively on the student loan problems-so I predict reform in Obama's first term on SL's, as well as several other issues Warren is working on (one of which is holding Timothy Geithner accountable for TARP funds).

CA used to have a program for teachers called APLE, where the state paid back a portion of SL's for teachers under specified conditions-you may want to look into that if you have not already.

LAST-I would double check the interest rate you consolidated with, to a current loan statement. It is VERY common for Sallie Mae to raise this rate above the contracted rate-usually .5 to 1.5 points above. That would be a 25% increase on a 6% rate.

Also keep an eye on any charges they add in for a forebearance or deferrment too.

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Don Bauder Sept. 19, 2009 @ 7:04 a.m.

Response to post #64: I had a friend (age 88 at the time, now deceased) who had all his money tied up in Fannie Mae paper. I told him I had done a computer search of all the currently outstanding paternity suits against him. It was amazing: Fannie Mae Calhoun of South Carolina, Fannie Mae Beauregard of New Orleans, Fannie Mae Cohen of the Bronx, and finally, Fanne Mae Foxe of Washington, D.C., the stripper known as Fanne Foxe who more than 30 years earlier had ruined the career of former Speaker of the House Wilbur Mills, who also had a booze problem. My friend replied, "My lawyers assure me that I have meritorious defenses in every one of those paternity suits." He also thought Fanne Foxe was too old to get pregnant by that time. He may have been too old to make any of them pregnant, but he wouldn't admit that. Best, Don Bauder

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Don Bauder Sept. 19, 2009 @ 7:08 a.m.

Response to post #65: This is very, very interesting information on Sallie Mae. It's one controversy I have only followed a bit. I can see now that I will have to bone up on what appears to be the Sallie Mae scam. Best, Don Bauder

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Don Bauder Sept. 19, 2009 @ 8:22 a.m.

OOPS! AND MORE ON WILBUR MILLS. I erred in post #66: Wilbur Mills was not Speaker of the House. He was chairman of the House Ways and Means Committee from 1957 to 1975 and was known as the "most powerful man in Washington." He entered a few Democratic primaries in the 1972 presidential race, but did poorly. In the mid-1970s, he was intoxicated and driving erratically with Fanne Foxe (an Argentine stripper) in the car. The cops stopped Mills and Foxe (who actually had another name), jumped into the Tidal Basin to escape arrest. But there was a scandal, of course. Another time, seemingly drunk, Mills accompanied Foxe's husband to Fanne's backstage dressing room, and there held a press conference. He resigned as chairman of the committee and soon left Congress. He went through AA and spent the rest of his life helping alcoholics. He died in 1992. During the scandal period, the joke was "She had the ways and he had the means." Best, Don Bauder

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