Comment on FCIC Report

It’s a shame that the conclusions of the FCIC report turned into yet another polarized political debate.  It’s good that the report has substantial descriptive work, since knowing what happened is often more important over the long run than knowing what one group or another thinks is the cause or the solution.

I was surprised that there was no mention of the 1998 change to the tax law that allowed serial tax-free sales of primary or secondary homes.  That allowance, amounting to $500K per year for a married couple who managed to alternate “primary” and “secondary” homes, gave small time investors (house flippers) the potential for earning the equivalent of a million dollars a year in ordinary income for buying houses or condos and throwing on a coat of paint and buying granite countertops and premium appliances.

Anyway, I just had a look at my own description of the causes and magnification of the problem and my proposed solution that I wrote back in the spring of 2008, months before Lehman, AIG, Fannie-Freddie, etc.

https://mindonmoney.wordpress.com/2010/04/12/roots-of-the-meltdown/
https://mindonmoney.wordpress.com/2010/04/12/the-blame-game/
https://mindonmoney.wordpress.com/2010/04/20/invisible-leverage/
https://mindonmoney.wordpress.com/2010/06/11/two-years-ago/

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3 Responses to Comment on FCIC Report

  1. Michael Bean says:

    Howard-Enjoy reading your contributions at UrbanSurvival. The comments about the ice dams and roof problems with the new storm are appropriate here too in the Colorado mountains, where it has just started to snow and we’re looking at 40 below wind chills in the next day or two.

    Anyway, your story about the insurance scam a month or so ago has hit me too. I built a replica medieval castle, a large Tim “the tool man” Taylor kind of project, and the insurance hassle is overwhelming. AIG, now Centex or something like that, sent out an appraiser who came up with a replacement value of over $300/square foot! The appraiser said “it was the law” that ‘they’ had to replace the entire thing, from the fences a quarter mile away, to the slab, well and septic, structure, etc., if I were no longer here to do it. What the hell do they expect, a tactical nuke? Colorado Revised Statutes only says the insurance amount “should not exceed” the replacement value(great to have the state law tell you you “should” do something). And who is “they?” The appraiser, the insurance company, my heirs? In true conspiritorial fashion, AIG is scamming us into getting way over-insured, with outrageous premiums, so that the only way we can afford the insurance is with a very high deductible. Since the majority of claims are for relatively smaller dollar amounts, they get away with out having to pay for normal claims, while soaking us for outrageous premiums. But what else to expect from the good folks at AIG?

    Good luck with your battle with your insurance company.

    Michael Bean

  2. ericswan says:

    And then turn around to a reinsurance CUSIP trader where the insiders make big money selling your policy to Mr. Deep Pockets.

  3. Conscience of a conservative says:

    The Brits had their own version of FCIC and their conclusions are of a different paradigm. Something that is not always appreciated is that the crisis was global. Good read.

    http://commission.bnbb.org/banking/sites/all/themes/whichfobtheme/pdf/commission_report.pdf

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