• hmmmm (unregistered) in reply to Nick
    Nick:
    Yes, but I think that's the point: This was on the AExcor end of the check: so WTFSE had determined to deliver physically while AExcor didn't know this because they thought it was not to be delivered physically.

    I've seen a bug like that before (not quite this serious) what goes out to the exchange will come back through the exchange as being publicaly traded for all to know.

    Generaly there should be a system which will match up what went out with what came back in, and if there is a big mismatch will generaly throw a tantrum and ask for someone senior to step-in

    I guess if that senior someone was Brad...

  • Nick (unregistered) in reply to ajd4096
    ajd4096:
    Delivery points are real, this story is not.

    The article mentions that the company also automatically handles physical trades. Probably the merchandise was shipped to one of these fixed delivery points, and the system arranged for a shipping company to pick up the goods and transport them to their final destination (usually a plant/warehouse/storefront, but in this case Brad's office address.)

    Best WTF in a long time.

  • James (unregistered)

    I think in real life what would likely happen is that the trader would be stuck 'selling' the coal back to the producer for a loss--with no physical moving of product.

    On the flipside, Southwest Airlines bought futures of Jet fuel, when it was around $2 per gallon in early 2008. When it went up to $4 and above later in the year, they happily took delivery at $2 while their competitors were paying $4.

  • syskill (unregistered) in reply to md5sum

    You jest, but software developers make similar arrangements with VCs, along the lines of "This program I haven't written yet will sell 20,000,000 copies; give me money now and I'll give you a share of the profits."

  • syskill (unregistered) in reply to md5sum
    md5sum:
    soft-:
    too_many_usernames:
    How on earth has nobody yet mentioned that TRWTF is futures trading?

    Whoever thought of that scam deserves some kind of prize for convincing people that it's not a scam.

    hardly a scam if it allows food producers to be able to afford to produce food...

    I'll sell you 20,000 copies of a program I haven't written yet... :D

    You jest, but software developers make similar arrangements with VCs, along the lines of "This program I haven't written yet will sell 20,000,000 copies; give me money now and I'll give you a share of the profits."

    (Apologies for the dupe comment/lack of quotation in the previous one.)

  • delenit (unregistered) in reply to Ben
    Ben:
    Rick:
    zahlman:
    [something idiotic]
    XML is NOT a WTF, XML without an adequate validating schema is.

    Ah, an "adequate" schema. So XML is fine, it's just that all the users are idiots. Except you, of course.

    Naw, just zahlman, spouting those ill-informed absolutes. Oh, and maybe you. That was a pretty basic logic fail, there, "all b's are c's". Also, l2BBCode before you start bashing perfectly cromulent statements. sheesh.

  • delenit (unregistered) in reply to Ben
    Ben:
    [ quote user="Rick" ][ quote user="zahlman" ]XML is NOT a WTF, XML without an adequate validating schema is. [ /quote ]

    Ah, an "adequate" schema. So XML is fine, it's just that all the users are idiots. Except you, of course.

    snicker ... i think i see why you hate xml, ben... it's so hard to remember to close ALL of the tags you open!!!

  • Carl T. (unregistered)

    This warms my miner's and hubristic so and so hating heart :-) Thank you.

  • Central Harlem Anonymous (unregistered) in reply to Central Harlem Anonymous

    The article to which you linked agrees 100% with my assessment -- the commodities get delivered to a standardized location specified in the contract. There may be more than one standardized location, but unless you happen to live or work at one of them, there is no way the commodities would be delivered to you personally.

    Perhaps the original poster worked at a firm where a trader accidentally allowed some futures contracts to physically settle. Perhaps he is even right about the computer code responsible. Otherwise, the story is nonsense.

  • Kensey (cs)

    Somebody on a newsgroup I used to frequent once told the story of when his company in New Zealand was building computers intended for someone in a really dodgy SE Asian nation (one that doesn't bother holding elections any more). The buyer's local currency was practically useless in anyplace real, so the buyer offered to swap teak wood for computers. The sellers ended up with ten tons of teak.

    Turns out annual teak consumption in NZ was < 1 ton annually. Similar figures obtained for any other country nearby. The only place they could send it and hope not to collapse that country's teak market was the US, where ten tons of it probably wouldn't have sold for enough to cover shipping across the Pacific.

  • codeReign (cs) in reply to md5sum

    deal 1/8 of one cents each. (must be have a functioning XMPP support system)

  • P.M.Lawrence (unregistered) in reply to too_many_usernames
    too_many_usernames:
    Aaron:
    ... Without futures and derivatives we would have insane price volatility in every area of the market. You could end up paying $26 for a bag of oranges today, $2 next month, and not be able to find them at all come February. You'd basically have to become an independent commodities trader just to keep your own finances in check.

    ...

    Even before we had standardized futures contracts, manufacturers and distributors had private contracts that were very similar. Every volume discount works like this; the purchaser commits to buying a certain number of units, but almost never pays all at once or takes delivery all at once. This type of contract is almost as old as currency itself.

    What I'm guessing that you really have a problem with is...

    If we didn't have these monetary instruments, the world economy would all but collapse. Please do your homework before spouting nonsense.

    Considering that some very cursory research shows that there wasn't such a thing as a futures market until about 1880 (I expected it to be older than that to be honest) I think claims that the futures market keeps the economy from collapsing are a bit exaggerated. Also, I don't agree that the futures market keeps prices from changing: notably, petroleum-related products seem to have their prices change daily from time to time. I'll admit that price swings could be worse without it, but I'd need more evidence than for which I'm willing to switch at the moment.

    Another important distinction I'd like to make is that I don't have a problem with futures contracts - I have a problem with trading futures contracts, because they add middlemen and turn them into monetary vehicles instead of contracts for goods and services between people that make and use those products. This is the same issue I have with treating houses as investment vehicles instead of, well, houses. And I think we're all fairly familiar with what happened because of that particular situation.

    So while I may be guilty of not clearly stating my opinions, I'm fairly certain I indicate when they are opinions as opposed to facts. I'm here for discussion and, hopefully, learn things as well - and I'm open to correction with sufficient facts.

    The thing is, all you really need to stop wild swings between cash and physical commodities in a free(ish) market is, forward contracts - which were around a lot earlier than futures. With those, prices get locked in as between producers and consumers, and you don't get middlemen. Futures are like chains of forwards on forwards and so on, but they need a legal thing called novation so that responsibility doesn't unwind. That is, if you simply set up chains of forwards, a failure at any point would mean everybody in the chain would pick up responsibility for final delivery if the next link didn't; you wouldn't be able to trade and walk away to the next trade.

    Of course, the older method was having fixed market prices and penalties for breaches.

  • ContraCorners (cs) in reply to Mason Wheeler
    Mason Wheeler:
    WhiskeyJack:
    If by "tiny fraction more" you mean "twice as much", sure.

    Using mortgagecalculator.org, $200,000 mortgage, 5% interest over 30 years: monthly payment is $1,073.

    Over 10 years: monthly payment is $2,121.

    Maybe prices are different where you live, but here in the Seattle area, at least, any house you can find for only $200K is either too small or too poor-quality to want to raise a family in.

    Addendum (2009-12-01 16:49): Also, I don't know exactly how mortgagecalculator.org calculates its mortgages. What I do know is personal experience: how my family did it. We bought a house when I was in high school. Every month, when she paid the bills, my mom would send in an extra $20 on the mortgage. Just $20 extra. At the end of the first year, we were more than four years into the 30-year schedule.

    Yes, diminishing returns kick in as time goes on and the principal-to-interest ratio rises, but here we are, 11 years later, with it almost completely paid off. (IIRC there's two standard-schedule years left.) It could be done by now with a little more extra at the start, but things were really tight for us back then and that $20 was literally all we could afford.

    Mason, I think you may be mistaken or mislead here.

    I played a few "what if" games in Excel (I know, I know... Excel is TRWTF, but it can do some basic math). The only numbers I can get to that even come close to what you describe end up with the "extra $20" being an increase of over 74% which is hardly a "tiny fraction" of the original payment.

    If you borrow 5,000 at 5% over 30 years, then your payment will be $26.84 and after 4 years, you'll owe $4,681.53.

    If you pay "an extra $20.00" each month, that would be a payment of $46.83 and "at the end of the first year" you'd owe $4,680.67. This satisfies your contention that at the end of the first year you were four years into the 30-year schedule BUT as I said above you haven't increased your payment "a tiny fraction" you've increased it more than 74%.

    In short,

    1. there are no real housing prices where $20 extra each month cuts 3 years off your repayment schedule in the first year AND

    2. cutting any significant time off your payment schedule will require a significant increase in your monthly payment.

    addendum I just checked my figures again. After 11 years of paying the extra $20, you'd owe $961.39, basically satisfying your contention that after 11 years your mom had nearly paid off her mortgage. However, I have to reiterate that this required more than a tiny fraction increase in her payment AND starts off from a mortgage amount that wouldn't even buy a parking place in Seattle (let alone where I live - Boston).

    Addendum (2009-12-01 21:21): Sorry, two typos...

    a) the higher payment would be $46.84.

    1. After 11 years, Mason's mom would owe $435.44 (which oddly enough is ~2 standard-schedule years...slightly less).
  • ChiefCrazyTalk (unregistered) in reply to Jon Daniel
    Jon Daniel:
    Nice picture too, good old Pittsburgh, PA. Part of me wonders if this actually happened in Pittsburgh, we have plenty of large warehouses that have been converted to office buildings, as well as tons of coal mines along the three rivers. ;)
    And I used to work for a major energy trading company in Pittsburgh - but their office was not on a pier.
  • AJ (unregistered) in reply to Forumtroll

    [quote user="Forumtrollit turned out that the scrap metal shitment was mostly consisting.[/quote]

    Awesome, a new word.

    Shitment: A delivery no-one wants.

  • Merle McClelland (unregistered)

    Using Google, I can't find any references to a company with the name "Æxecor", "Aexecor", or "Execor", other than in various versions of the text of this story at numerous web sites. I suspect that "Æxecor urban legend" will be showing up on Snopes.com shortly.

  • Xythar (unregistered) in reply to Merle McClelland
    Merle McClelland:
    Using Google, I can't find any references to a company with the name "Æxecor", "Aexecor", or "Execor", other than in various versions of the text of this story at numerous web sites. I suspect that "Æxecor urban legend" will be showing up on Snopes.com shortly.

    Even if this is true you're not going to find anything searching for the name because TDWTF anonymises submissions (changing names to protect the guilty, etc). You'd be better off searching for the specifics of the story in general terms.

    Bit weird that this article isn't told from the point of view of the submitter though.

  • TP (unregistered)

    Yes, this is definitely the best wtf we've seen in long time.

    It has all the elements:

    1. virtual property
    2. real property and unexpected interaction of the two.
  • Alex Papadimoulis (cs) in reply to Xythar
    Xythar:
    Bit weird that this article isn't told from the point of view of the submitter though.

    It's always fun to mix it up a bit; the submitter requested anonymity, so I could either make up a name for the protagonist or... take this route.

  • The Web is the Root of All Info (unregistered) in reply to P.M.Lawrence
    Comment held for moderation.
  • seriosuly? (unregistered) in reply to Merle McClelland
    Merle McClelland:
    Using Google, I can't find any references to a company with the name "Æxecor", "Aexecor", or "Execor", other than in various versions of the text of this story at numerous web sites. I suspect that "Æxecor urban legend" will be showing up on Snopes.com shortly.

    Ummm yes, Alex would have changed the name of the company..

  • T.C (unregistered)

    This is indeed the mother of all XML WTFs!

  • Balog Pal (unregistered) in reply to Anon
    Anon:
    Pete Bassett:
    Best WTF in a long time.

    Seconded. Really quite spectacular!

    Absolutely.

    Though I don;t get one part. Even with "physical" flag at false how can one hold such a trade contract at/past its due date? Thought you must get rid of itin some way. If so, there must be some other WTF.

  • George Nacht (cs)

    My God, and I thought that ordering 50 barrels of stamping ink instead of 50 bottles (like I did 10 years ago) was Mother of all Office Supplies bummers....

  • nmp0906 (unregistered)

    This was a nice change from the apparent trend of shorter, cut/paste articles. In fact, this narrative is well written and hardly technical that I can share the WTFs with my non-techie friends!

  • tudza (unregistered)

    A touching story, but is it true? The only reference I find to this is situation when I do a Google search trace back to this same article.

  • sng (unregistered)

    when you are writing code that will communicate with another code, do not assume that that your assumptions are correct. Check the doc or ask for confirmation. Your boolean may be true/false, my boolean may be 1/0. And look what happened

    For want of a nail, the shoe was lost For want of a shoe, the horse was lost For want of a horse, the battle was lost For want of a battle, the kingdom was lost.

  • StarLite (unregistered)
    Brad was no longer thought of the senior trader at Æxecor; instead,he was the guy who accidently bought all that coal
    Had me floored :D
  • Jack Donaghy (unregistered)

    "Try to imagine for a moment how you would unload a mountain of coal worth million-and-a-half dollars."

    How about eBay.cn? (Buyer pays actual shipping cost.)

  • Anonymous Cow-Herd (unregistered) in reply to Ben

    [quote user="Ben"][quote user="Rick"][quote user="zahlman"]XML is NOT a WTF, XML without an adequate validating schema is. [/quote]

    Ah, an "adequate" schema. So XML is fine, it's just that all the users are idiots. Except you, of course.[/quote]

    Poor craftsman, etc. If the nail is bent over, it was probably the user's fault for beating it with the handle of the hammer instead of the head.

  • Shinobu (unregistered) in reply to SR

    One of the best stories in a while. Could be the perfect plot for a television comedy episode. Of course, the programmers deserve some of the blame too, but they were very conveniently not in the hall where Brad was confronted with his coal. SR: I think that must have been the inspiration of the name, yes.

  • paul (unregistered) in reply to Shinobu
    This is the same issue I have with treating houses as investment vehicles instead of, well, houses. And I think we're all fairly familiar with what happened because of that particular situation.

    Sorry for the long post, i've cut quite a bit out.

    So the issue with treating houses with investment isn’t the fact that people treat the houses as an investment (it’s quite a sane thing to do, land companies do this all the time) it’s treating your house as an investment without understanding the risk involved and having your mitigating strategy.

    A Landlord offsets risk by often ensuring they have equity within the property, they also get a good year on year return on the asset, they are in it for the long haul because the asset is very hard to liquidate, especially for commercial properties. The landlord is seeking a percentage increase in value above interest rates over a 5 year period, they are also looking for an income yield (like earning a dividend from stock) from the property over that period as well. The same goes for a general land holding investor, but they are in for a much longer haul and act a little bit more like VC’s, they buy huge quantities of huge land, with the hope that one of them becomes the next major place to be and they can make huge returns on the original investment, their strategy is to buy cheap and lots of it and try and guess how a city will expand.

    VC’s take huge equity in companies for relatively small amounts of cash (compared to the potential value) because the risks are high, for every 10 one works, for 100 one hits it big (made those figures up because I couldn’t be bothered to research). The VC can’t liquidate their investment easily (if at all), and they mitigate this risk by taking their huge equity chunk.

    A day trader has all sorts of tricks to mitigate losses, one trick will be for every equity they buy they put out an opposite ‘put’, this (loosely speaking.. brokerage fees, premiums etc) cancels out any gains or losses. What’s the point? Well it becomes like a bank account with a chunk of cash in there you can’t get to, but you can get the interest you make of it. Stocks yield dividends, by owning the stock you get those dividends which will if the trader is any good yield above interest rates (The put’s are where the entire derivatives side makes this possible, without derivatives this strategy wouldn’t work.. it’s a big complex web).

    The trader will normally close out everything at the end of the day, leaving them with a net gain, depending on the type of trading they are doing they don’t like to leave trades open till the next (so they can only make each day hopefully better than interest rate gains, or small loses.. if you leave it open for longer periods of time, the risk of major movement in the markets increases.. draw a probability tree where left is a 5% increase, right is a 5%decrease, there is big potential to make big looses or big gains after several days). The trader will also diversify, having all your investment in products that track the same is a baad idea.

    Energy companies have books that take months to liquidate, however this is built into the pricing.

    So if you notice with all this scenarios, the investor always has a mitigating risk strategy, if it’s property, equities, derivates or lumps of coal

    So this is the problem when Joe blogs goes and buys his house as an investment, all the above people are working to a model that takes into account liquidity, risk, income yields etc (why there is probably more money in risk software these days than ever before), they crunch big numbers to balance out the gains and losses. When Joe Bloggs buy’s his house, he can’t liquidate on the day if the house prices drop, he is basically become a trader that has brought stocks with no puts, and is locked into an asset that he can’t shift quickly...

    Joe Blogs just assumes that because month on month the house as increased in price then it will always to do so, so do idiots that stick their savings on the stock market thinking the same thing.. when the bubble bursts, the safe trading fund take a hit but they’ve mitigated for this, the guy with the house goes into negative equity and is basically bust.

    The big complex structured mortgage products that caused the current crisis are another debate.

  • Anonymous (unregistered) in reply to ajd4096
    Comment held for moderation.
  • Anonymous (unregistered) in reply to Xythar
    Xythar:
    Merle McClelland:
    Using Google, I can't find any references to a company with the name "Æxecor", "Aexecor", or "Execor", other than in various versions of the text of this story at numerous web sites. I suspect that "Æxecor urban legend" will be showing up on Snopes.com shortly.

    Even if this is true you're not going to find anything searching for the name because TDWTF anonymises submissions (changing names to protect the guilty, etc). You'd be better off searching for the specifics of the story in general terms.

    Bit weird that this article isn't told from the point of view of the submitter though.

    The stories are anonymised you gibbering simpleton!

  • Anonymous (unregistered) in reply to Anonymous
    Comment held for moderation.
  • Asmodeus (unregistered) in reply to Don't hate me Jesus

    This is very true. I worked on a project, that was'nt yet coded. There were no tech specs. Well, it was in a stage of dream but our client already advertised this product. Advertisment was a picture of office guy, who was saying: "I use this product for years and can't live without it".

  • Bulletmagnet (unregistered) in reply to Forumtroll
    Forumtroll:
    ... it turned out that the scrap metal shitment ...

    That is so ... appropriate.

  • Anonymous Cow-Herd (unregistered) in reply to Asmodeus
    Asmodeus:
    This is very true. I worked on a project, that was'nt yet coded. There were no tech specs. Well, it was in a stage of dream but our client already advertised this product. Advertisment was a picture of office guy, who was saying: "I use this product for years and can't live without it".

    Windows Vista, by any chance?

  • //Rumen (unregistered)

    Brad sounds like a douche bag anyway.

    I love to see and hear about Karma in action! Maybe there should be a 'Summer's Eve Awards' section?

  • Central Harlem Anonymous (unregistered) in reply to TP
    TP:
    Yes, this is definitely the best wtf we've seen in long time.

    It has all the elements:

    1. virtual property
    2. real property and unexpected interaction of the two.

    No, the best WTFs are true, and this one clearly isn't. See the discussion above about physical delivery points. All the amusing parts of this story are nonsense.

  • Someone too lazy to login (unregistered) in reply to Anonymous
    Comment held for moderation.
  • R (unregistered)

    Ha ha WTFSE

  • Grovesy (cs) in reply to Someone too lazy to login
    Someone too lazy to login:
    Anonymous:
    ajd4096:
    Central Harlem Anonymous:
    Note from Alex: But, after spending sometime researching commodities... turns out this happens every now and then.

    A link to another "a guy I know heard about another guy" anecdote.

    Delivery points are real, this story is not.

    They were at a delivery point. After all, Æxecor is an energy trader in the warehouse district and have their own mooring and storage facilities. Plus, this is near the site of an old coal fired power station that genuinely did take large deliveries on a regular basis (now defunct though). So yes, it was an actual delivery point and no, there is nothing you can do to disprove that. What now, hotshot?

    Delivery points - from what I think I've learnt from reading this thread - in the context of a futures contract means something specific; they're specified by the seller, not the buyer.

    If the commodity is delivered to a final end point, it's because someone organized for it to be transported from the delivery point.

    I suspect there is confusing arising because some people are using the term in its context specific meaning and other people are using it in the more general meaning.

    Ye I think the same phrase is being used and it's causing confusion.

    In the context of a Futures contract, the delivery point is specified in the contract and must be WTFSE approved delivery point for that type of commodity (I guess if you buy gas and it's being transported as liquid gas there are only a few terminals around the world which can cope with this)

    From what I take from this, 1.) The trader wanted to place a futures contract, but instead got some kind of physiscal non futures trade --- this being the WTF.

    2.) The seller didn't just decide to drop the coal of at the traders desk, a third party was used to sort out the movement from the sellers location, (or the specified delivery point in the contract) to pretty much the traders desk which was the end-delivery point, (which used to have a large number of heavy goods being dropped at)

  • Forumtroll (unregistered) in reply to Bulletmagnet
    Bulletmagnet:
    Forumtroll:
    ... it turned out that the scrap metal shitment ...

    That is so ... appropriate.

    It was an honest typo, but coming to think of it, it was indeed fitting.

    CAPTCHA: persto. persto = rancid pesto?

  • Mike Dimmick (unregistered) in reply to too_many_usernames
    Comment held for moderation.
  • yoyoyoyo (unregistered) in reply to Central Harlem Anonymous

    Correct, but coal futures used to be done by NYMEX, not CME.

  • yoyoyoyo (unregistered) in reply to yoyoyoyo
    yoyoyoyo:
    Correct, but coal futures used to be done by NYMEX, not CME.

    Oops. This was a response to an earlier post:

    This story doesn't smell right. Futures contracts are highly standardized, including standardized delivery provisions. They *don't* deliver to your workplace or home.

    For example, the CME coal contract specifies "Location of Delivery: Delivery Shall be made F.O.B. buyer’s barge at seller’s delivery facility on the Ohio River between Mileposts 306 and 317 or on the Big Sandy River with all duties, entitlements, taxes, fees and other charges imposed prior to delivery on or in respect to the product paid by the seller. Delivery shall be made in accordance with applicable Federal, State and local laws."

    While it is possible for a trader to accidentally allow futures to physically settle, the story would end with a bunch of irate phone calls from the people at the standard delivery location, not a barge showing up outside his office.

  • yoyoyoyo (unregistered) in reply to Mason Wheeler
    Mason Wheeler:
    Keith Brawner:
    Mason Wheeler: You are kidding, right? Or are you seriously implying that you not pay someone for a service that they perform.

    No, not at all. What I'm implying is that the service hasn't truly been performed until the resident, not the bank, owns the home, and that pretending otherwise is criminally negligent and directly responsible for last year's housing crash.

    If salesmen and loan agents want to make money for their work, let them make money for their work the same way the rest of us do: on a set rate for their time. Change commissions from "primary source of income" to "bonus for a job well-done" and you'll see a lot more well-done jobs.

    And even if one or both of the real-estate agents is cut out of the picture, there's still a loan agent involved on the bank's side. How often do you hear of someone paying cash for a house?

    Idiot! This would kill the mortgage business! Nobody's going to originate mortgages because they may or may not get a few thousand dollars 10, 15 or 30 years from now!

    Furthermore, the interest cost of a good 30-year mortgage is about 60% of the price of the home, which isn't bad when you think about it. It's a 30 year loan! That's a lot of time to not have money!

  • Brad Something (unregistered)

    This story boils down to trader x had commodity y physically delivered to location z, so it can easily accommodate embellishments, for example the delivery guy's accent, or the xml code, etc. Essentially, every "guy at my firm" anectdote is the same. Therefore, this story doesn't even have to be real to be true.

    Robert from Vampire Squid has 36 tons of a physical gold delivery, rejected and sitting in a port gold depository in Perth. For this story there's a phone call at 3:00 in the morning, a crocodile dundee accent, with nobody around except some energy traders. These errors do happen, but occurrences are like hitting the reverse lottery.

  • Calli Arcale (unregistered) in reply to yoyoyoyo

    [quote user="yoyoyoyo"][quote user="Keith Brawner"]Mason Wheeler: You are kidding, right? Or are you seriously implying that you not pay someone for a service that they perform.[/quote]

    No, not at all. What I'm implying is that the service hasn't truly been performed until the resident, not the bank, owns the home, and that pretending otherwise is criminally negligent and directly responsible for last year's housing crash.

    If salesmen and loan agents want to make money for their work, let them make money for their work the same way the rest of us do: on a set rate for their time. Change commissions from "primary source of income" to "bonus for a job well-done" and you'll see a lot more well-done jobs.

    And even if one or both of the real-estate agents is cut out of the picture, there's still a loan agent involved on the bank's side. How often do you hear of someone paying cash for a house?[/quote]

    Idiot! This would kill the mortgage business! Nobody's going to originate mortgages because they may or may not get a few thousand dollars 10, 15 or 30 years from now!

    Furthermore, the interest cost of a good 30-year mortgage is about 60% of the price of the home, which isn't bad when you think about it. It's a 30 year loan! That's a lot of time to not have money![/quote]

    Agreed; it's absurd to suggest that their job isn't really finished until the loan is paid off. They're not collections or billing agents. They're loan agents. Their job is to originate loans, so they probably ought to be paid for that instead of somebody else's job.

    I do think banks would be wise to lay off on the bonuses a bit. In many respects, by incentivizing loan origination so much, the banks brought about their own doom. Their loan officers, highly motivated to originate loans, originated a lot of bad ones, because there really are only so many good loans that can be made. In the short term, it was very very good; banks were suddenly making lots more interest than they would have otherwise. But then these risky loans started going into default. Banks allowed this to happen because they believed that packaging the stinky loans with the good ones would adequately reduce the risk; however, they had severely underestimated both the total risk and the influence the defaulted stinky loans would have on the good ones, by depressing the value of the remaining, non-defaulted real estate backing all of these loans, good and bad alike.

    BTW, as to the wisdom of a 30-year-loan, I think it's quite reasonable for a property which you intend to inhabit, assuming it's a fixed-rate-loan. You can always choose to pay off before the loan matures, saving you considerable interest. But if things go badly for you down the road, you may be glad of that lower monthly payment. Shorter loans definitely give you lower total interest, and often lower interest rates (because it reduces the risk the bank has to bear). But be careful of overextending yourself on the monthly payment. Note, however, that in the first few years you will be paying almost no principal unless you send additional principal payments.

    We refinanced our first house, swapping the 30-year-loan for a 15-year one with lower interest once we had both gotten raises. It increased our monthly payments significantly, but allowed us to pay down the principal much faster. This gained us a lot more money when the time came to sell the property.

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