Google gets mortgage lecture

October 28th, 2008, 3:45 pm · 13 Comments · posted by Mathew Padilla

I recently visited Google’s headquarters in Mountain View to talk about my book for an hour and answer questions. I confess I was a little nervous, but after it was over about a dozen people waited in line for me to sign a copy of the book, so I felt like a minor celebrity (of course, Google gave out about 60 free copies to employees).

About 42 minutes into this talk, I answer questions including the first one from an employee who vehemently disagreed that the mortgage industry and related derivatives need more regulation. Unfortunately, viewers can’t see him, but his question is clear. After the talk was over, I had coffee with that libertarian and a handful of others from Google and we debated the value of a free market. The coffee was free — Google must have at least 10 cafes with free food and drinks for employees, with much of it excellent. I had a memorable sushi lunch.

Click on the video, or, if that doesn’t work CLICK HERE.

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Liar Loan says:

October 28, 2008 at 4:14 pm

Matt-

Can the Register not even afford coffee??

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Mathew Padilla says:

October 28, 2008 at 5:44 pm

Liar Loan,

We can afford coffee, though I won’t speak to lunches. Google has free coffee machines and other free food and drinks everywhere. But more importantly, Google appears to have vast resources to support employees and their ideas. Interesting contrast to….(i have said too much already)

Jason says:

October 28, 2008 at 6:21 pm

Thanks. I needed both those laughs!

Curious says:

October 28, 2008 at 9:36 pm

If the GSE default rate was so low, then why did they fail?

Random Internet Being says:

October 29, 2008 at 4:11 am

So … if I just show up at Google HQ, can I eat for free … or, uh … do I have to forge a name tag first?

The speech was great. I have a general understanding of the current crises, but you filled in a lot of blanks for me.

Thanks

Ding says:

October 29, 2008 at 6:13 am

Enjoyed your presentation but was disappointed in your rebuttal to the libertarian who stated that FDIC was the cause of the S&L crisis.

Having debated the point with the libertarian off-camera, can you offer a better rebuttal now?

Shnaps says:

October 29, 2008 at 6:57 am

Hi Mathew - After an extended delay, I just finished the book over the weekend. I enjoyed it thoroughly, esp. from the chapter “A Warning from Lewie” until the end. I’m a little biased, cuz for me it had the added novelty of having a number of individuals I actually know popping up at various points throughout the narrative.

Next, I plan to loan it out to a friend who doesn’t work in the mortgage biz to see what he thinks of it.

Best of luck on the book sales; I will continue to recommend it to folks whenever they ask me “How did this crisis happen?” And people ask me that a lot.

October 29, 2008 at 8:47 am

Ding,

I support FDIC insurance for one reason: it avoids panic. Even sound banks can be victims of depositor runs based on false rumors.

However, I agree with the Google employee on the point that because of FDIC insurance customers do not monitor what banks are doing with their money. That is not to say that most people would in fact constantly monitor their bank’s operations were not for FDIC insurance, but some would.

I am willing to accept this downside to FDIC insurance.

My conclusion is that the government has to be more transparent about which FDIC insured institutions it is reviewing and the result of those reviews.

The S&L crisis was a combination of inflation and deregulation. An increase in FDIC contributed to the S&L crisis but was only a part of it. It was the FDIC combined with allowing individuals to own S&Ls, allowing them to invest heavily in commercial real estate and junk bonds, and allowing them to have a large portion of brokered deposits. One can’t pin the entire S&L crisis on FDIC insurance.

And in this crisis it was firms that did NOT have FDIC insurance (they did not take deposits) that were among the biggest leaders in reckless lending and creation of subprime related derivatives, from Ameriquest to Bear Stearns.

Hoover says:

October 29, 2008 at 10:06 am

I’m struck by the fact that only a quarter of Google employees know what Fannie Mae is, even at this stage.

Perhaps they were just being shy and not putting their hands up…

Cthulhu says:

October 29, 2008 at 3:59 pm

The idea that customers do monitor what their banks do with their money doesn’t seem entirely consistent with the South American financial crises, for example. When you don’t have FDIC insurance, you don’t get more responsible banks. You get more panics.

Opponents of FDIC insurance have not paid attention to how people view banking institutions in countries that have had widespread bank failures. When there is no trust in the banking institutions, people either put it under their mattress or move their money to foreign banks that do receive government backing. I’m not sure how impairing access to capital and shipping financial services jobs overseas advances libertarian objectives.

shadow735 says:

October 29, 2008 at 4:07 pm

Google employees have it great some of them can bring their dogs to work, I wish I could do that. Then I would have a stress reliever right at my side 24/7.

SUVGuy says:

October 30, 2008 at 5:47 pm

Dude!

You totally caved to the only meaty question. The one about how gov backing eliminates the need for a lender to pay for risk.

There is no response, so why would I buy your book?

October 31, 2008 at 8:44 am

SUVGuy-

The book is a pretty fair look at the rise and fall of some key mortgage players over the past several years. You would do well to read it.

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