

The Subprime Loan Machine: Software to Screen Home Buyers - dpapathanasiou
http://www.nytimes.com/2007/03/23/business/23speed.html?ex=1332302400&en=6f66aa60bde29224&ei=5090&partner=rssuserland&emc=rss&pagewanted=all

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codewhisperer
The linked article should be taken in context -- it was published almost a
year ago, when the public attitude about lending practices was quite different
(and the nytimes does tend to reflect and follow public attitudes). For a
sense of the period, look at this review of Senate Hearings on lending
practices published the day before:
<http://www.nytimes.com/2007/03/23/business/23lend.html>

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edw519
"codewhisperer" - lol

Wish I would have thought of that.

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dpapathanasiou
This reminds me a little bit of what the younoodle guys are trying to do, but
applied to a different domain.

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redorb
This is a more "real" application of the technology then YouNoodle. Although
on the abstract it is the same idea.

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pius
They're just now doing this?

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create_account
It's a story of how the mortgage industry took to computer models over time
(and how they were abused in the subprime mess).

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apathy
It's more than that, though -- if you look at this in the context of generic
data projection and 'intelligence amplification' software, some (perhaps
positive) aspects of the subprime boom were logical outgrowths of more
powerful tools for reviewing borrower credit histories.

And some of the hugely negative aspects of the subprime mortgage market (and
resulting credit crunch) were logical outcomes of Wall Street's insane greed,
coupled with derivative financial instruments that allowed risk to be packaged
as CDOs without due diligence or oversight. Give Wall Street a loophole (hell,
give any poorly regulated industry a loophole) and the outcome is predictable.
Couple the loophole with automated tools that allow irresponsible people to
conduct transactions in the blink of an eye -- an unsupervised ML project, as
it were, with an algorithm appropriate only for supervised learning -- and you
get a massive financial shockwave...

This is not entirely different from the computer-trading aspects of Black
Friday, but due to the lax oversight of the fundamentals, it will likely have
much longer-lasting aftershocks. It's unclear whether our next president will
have the character to fix the underlying problems, but as usual, the tools
have no morals -- it is only their users. And I've never seen any indication
that a moral being can survive on Wall Street, at least not en masse.

