If you can read this, either the style sheet didn't load or you have an older browser that doesn't support style sheets. Try clearing your browser cache and refreshing the page.

(Some Guy) Amusing Sharia mortgage company on the verge of bankruptcy. Susan Pigg reports   (moneyville.ca) divider line 38
More: Amusing  
•       •       •

6802 clicks; posted to Main » on 19 Oct 2011 at 1:12 PM   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»   |    Get this fabulous T-Shirt and impress the methane out of your friends! shirt it!



38 Comments   (+0 »)
   
 
DavidVincent
2011-10-19 01:15:05 PM
Good catch subby!
 
chaddsfarkprefect
2011-10-19 01:16:06 PM
FTFA: ... leaving more than 173 people fearful they may lose their homes.


Will Mr. Canada give them new ones?
 
ArkAngel [TotalFark]
2011-10-19 01:17:43 PM
Do they really think calling the interest by another name will fool Allah?
 
Brontes
2011-10-19 01:18:13 PM
Not sure why you think this is funny? Our banking system is ridiculous. At least these guys were trying an alternative.
 
ch2cch3
2011-10-19 01:21:45 PM
Brontes: Not sure why you think this is funny? Our banking system is ridiculous. At least these guys were trying an alternative.

PIGG
 
meddleRPI
2011-10-19 01:22:29 PM
ArkAngel: Do they really think calling the interest by another name will fool Allah?

"Interest? No, this isn't interest. It's.... Chinterest. Totally different thing. We're square with Allah now, right?"
 
meddleRPI
2011-10-19 01:24:06 PM
Brontes: Not sure why you think this is funny? Our banking system is ridiculous. At least these guys were trying an alternative.

It's not even an alternative at all. It's a comical rhetorical game to sidestep a 1000+ year old practice, but in reality the only difference between it and our banking system is that in the Sharia system, the homeowner gets screwed harder.

Kind of the opposite of what was intended, there....
 
TheDumbBlonde [TotalFark]
2011-10-19 01:27:22 PM
Then don't "borrow" the farking money, asshole.
 
Bondith
2011-10-19 01:28:21 PM
Brontes
Not sure why you think this is funny? Our banking system is ridiculous. At least these guys were trying an alternative.

First off, this was in Canada, and our banks aren't *quite* as farked-up as yours are. Secondly...

UM would buy a property then lease it to a client so they were paying rent instead of interest. Some homeowners complained that the firm would also charge extra fees.

...I don't see how that's an improvement. Is UM paying a mortgage on the property, or did they buy it outright? (I have absolutely no idea how business and finance works. Do corporations take out mortgages, or is that just for individuals?) Secondly, unless there's some sort of rent-to-own clause (and there may well be, the article is skimpy on details), they'll be renting forever and never actually own their own home (which my parents keep telling me is important). Also, while Allah apparently hates interest, he seems to be fine with service fees, hidden fees and crippling balloon fees.
 
TruckeeTrees
2011-10-19 01:29:46 PM
TheDumbBlonde: Then don't "borrow" the farking money, asshole.

Ed Zachary.
 
Shazam999
2011-10-19 01:34:15 PM
Qayum Mian knew he was paying a premium on his Markham house for the seven years he used UM Financial - he estimated up to 2 percentage points more than if he'd gone through a bank - but was happy to pay the price "because my conscience was satisfied."

So wait. He pays more than what a bank charges, and that's NOT usurious?
 
Brontes
2011-10-19 01:34:51 PM
Bondith: Brontes
Not sure why you think this is funny? Our banking system is ridiculous. At least these guys were trying an alternative.

First off, this was in Canada, and our banks aren't *quite* as farked-up as yours are. Secondly...

UM would buy a property then lease it to a client so they were paying rent instead of interest. Some homeowners complained that the firm would also charge extra fees.

...I don't see how that's an improvement. Is UM paying a mortgage on the property, or did they buy it outright? (I have absolutely no idea how business and finance works. Do corporations take out mortgages, or is that just for individuals?) Secondly, unless there's some sort of rent-to-own clause (and there may well be, the article is skimpy on details), they'll be renting forever and never actually own their own home (which my parents keep telling me is important). Also, while Allah apparently hates interest, he seems to be fine with service fees, hidden fees and crippling balloon fees.

In an Islamic mortgage transaction, instead of loaning the buyer money to purchase the item, a bank might buy the item itself from the seller, and re-sell it to the buyer at a profit, while allowing the buyer to pay the bank in installments. However, the bank's profit cannot be made explicit and therefore there are no additional penalties for late payment. In order to protect itself against default, the bank asks for strict collateral. The goods or land is registered to the name of the buyer from the start of the transaction. This arrangement is called Murabahah. Another approach is EIjara wa EIqtina, which is similar to real estate leasing. Islamic banks handle loans for vehicles in a similar way (selling the vehicle at a higher-than-market price to the debtor and then retaining ownership of the vehicle until the loan is paid).

In theory, Islamic banking is an example of full-reserve banking, with banks achieving a 100% reserve ratio. However, in practice, this is not the case, and no examples of 100 per cent reserve banking are observed.


Like I said, at least they are trying something different then the system we have in place. They are theoretically a full-reserve bank. Take a look at fractional reserve and see how loony it is.
 
december
2011-10-19 01:35:07 PM
FTFA: Qayum Mian knew he was paying a premium on his Markham house for the seven years he used UM Financial - he estimated up to 2 percentage points more than if he'd gone through a bank - but was happy to pay the price "because my conscience was satisfied."

your conscience is an idiot Q.
 
ricochet4
2011-10-19 01:35:25 PM
Sharia? Don't like it.
 
Shazam999
2011-10-19 01:36:55 PM
Brontes: Like I said, at least they are trying something different then the system we have in place. They are theoretically a full-reserve bank. Take a look at fractional reserve and see how loony it is.

There's really no difference in what they do. Money's fungible, and they're trying really hard to not make it fungible, and failing miserably.
 
Wolfmanjames [TotalFark]
2011-10-19 01:39:52 PM
Something's not kosher halal...
 
Brontes
2011-10-19 01:42:15 PM
Shazam999: Brontes: Like I said, at least they are trying something different then the system we have in place. They are theoretically a full-reserve bank. Take a look at fractional reserve and see how loony it is.

There's really no difference in what they do. Money's fungible, and they're trying really hard to not make it fungible, and failing miserably.

I don't that that is true, though someone please correct me if I'm wrong. The islamic bank is purchasing the asset from seller and then selling the asset to the buyer at a higher cost to cover the time value of money. Money is not created in this scenario because the bank has to have the money on-hand to purchase the asset in the first place.

Compare this to our system, where the bank DOES NOT purchase the asset, but loans money (which is created and put into the system) and only has to have a small fraction of the loan on hand to comply with fractional reserve laws. In one system, the bank must have the assets in place (Islamic law). The other system, the bank creates the money and loans it out (our system).
 
mbillips
2011-10-19 01:42:44 PM
You know the Bible bars lending money at interest, too, right? Jews are allowed to lend to "foreigners," but not their "brothers." Deuteronomy 23:19-20. The Catholic church banned lending at interest in the Middle Ages, equating it to theft.

Fortunately, we actually learned something about finance since 700 AD. I'm sure Muslims will get around to that eventually.
 
theknuckler_33
2011-10-19 01:43:54 PM
My sister's husband is a Muslim and I think follows this concept of not being able to profit without working. I think this is a loose interpretation of the Muslim 'law'(?) against usury. Anyway, I find it funny the way he deals with it though. Basically, he's not allowed to profit without working. But he'll still put a bet down on a game. He put a few hundred down on a Philadelphia Eagles game we were all going to a couple years ago and won, but since he wasn't allowed to profit personally from it, he used the winnings to pay for all (well, part) of our other tickets. He also plays poker, but consider playing poker 'work' in the sense that it takes logic, calculation, personality skills, etc. to win, so he's ok with keeping money that he wins in poker.

/csb
 
TruckeeTrees
2011-10-19 01:50:35 PM
Brontes: Shazam999: Brontes: Like I said, at least they are trying something different then the system we have in place. They are theoretically a full-reserve bank. Take a look at fractional reserve and see how loony it is.

There's really no difference in what they do. Money's fungible, and they're trying really hard to not make it fungible, and failing miserably.

I don't that that is true, though someone please correct me if I'm wrong. The islamic bank is purchasing the asset from seller and then selling the asset to the buyer at a higher cost to cover the time value of money. Money is not created in this scenario because the bank has to have the money on-hand to purchase the asset in the first place.

Compare this to our system, where the bank DOES NOT purchase the asset, but loans money (which is created and put into the system) and only has to have a small fraction of the loan on hand to comply with fractional reserve laws. In one system, the bank must have the assets in place (Islamic law). The other system, the bank creates the money and loans it out (our system).

When I sold my house, I got a check for $xxx,xxx from Wells Fargo Bank - the bank that "loaned" the buyer the money. That sounds like the bank actually purchased the house. What the fark are you talking about?
 
ReverendJasen
2011-10-19 02:01:08 PM
Brontes: Compare this to our system, where the bank DOES NOT purchase the asset, but loans money (which is created and put into the system) and only has to have a small fraction of the loan on hand to comply with fractional reserve laws. In one system, the bank must have the assets in place (Islamic law). The other system, the bank creates the money and loans it out (our system).

They don't "create" money. They pay you (or rather the previous owner) real money they had on hand.
Now, they then use creative accounting to make your loan an asset on their sheets, so you could argue that this is fake money since they don't have it yet.

Anyway, being theoretically full-reserve doesn't mean squat if they aren't actually full-reserve. I could theoretically be president of the US. I don't think I'll go around telling people that I am though.
 
yert
2011-10-19 02:03:16 PM
Brontes: Not sure why you think this is funny? Our banking system is ridiculous. At least these guys were trying an alternative.

It's not just funny, It's halalious

/try the veal
 
This text is now purple
2011-10-19 02:06:35 PM
theknuckler_33: He also plays poker, but consider playing poker 'work' in the sense that it takes logic, calculation, personality skills, etc. to win, so he's ok with keeping money that he wins in poker.

If it makes you feel better, state gaming commissions also consider (fair) poker a game of skill.

It's regulated differently than slot machines are.
 
Brontes
2011-10-19 02:08:24 PM
TruckeeTrees: Brontes: Shazam999: Brontes: Like I said, at least they are trying something different then the system we have in place. They are theoretically a full-reserve bank. Take a look at fractional reserve and see how loony it is.

There's really no difference in what they do. Money's fungible, and they're trying really hard to not make it fungible, and failing miserably.

I don't that that is true, though someone please correct me if I'm wrong. The islamic bank is purchasing the asset from seller and then selling the asset to the buyer at a higher cost to cover the time value of money. Money is not created in this scenario because the bank has to have the money on-hand to purchase the asset in the first place.

Compare this to our system, where the bank DOES NOT purchase the asset, but loans money (which is created and put into the system) and only has to have a small fraction of the loan on hand to comply with fractional reserve laws. In one system, the bank must have the assets in place (Islamic law). The other system, the bank creates the money and loans it out (our system).

When I sold my house, I got a check for $xxx,xxx from Wells Fargo Bank - the bank that "loaned" the buyer the money. That sounds like the bank actually purchased the house. What the fark are you talking about?

Where do you think that money comes from? Do you think Wells-Fargo had that $159k sitting around in a vault? If they did, that would be full-reserve banking. If you think that, I encourage you to look at how money is created. Sorry, the video is a bit long.
 
Odd Bird
2011-10-19 02:10:29 PM
ArkAngel: Do they really think calling the interest by another name will fool Allah?

Do you believe in God?
No. I believe in a reasonable rate of return.
images.wikia.com
 
lockers
2011-10-19 02:19:41 PM
Brontes: Do you think Wells-Fargo had that $159k sitting around in a vault?

Yes, wells fargo has 159k sitting in an electronic account to pay that check. If they didn't they would be bankrupt. I think you are confused about how fractional reserve lending works. The fraction part is how much of it's deposits it needs to keep, not on how much money it needs to pay towards a check.
 
Joe Blowme
2011-10-19 02:21:12 PM
Islam, is there anything it can't fark up?
 
Jixa
2011-10-19 02:46:24 PM
Was the irony tag on vacation or just celebrating Sukkot.
 
TheDumbBlonde [TotalFark]
2011-10-19 03:08:31 PM
Jixa: Was the irony tag on vacation or just celebrating Sukkot.

It was subjugating it's wife.
 
theknuckler_33
2011-10-19 03:18:04 PM
This text is now purple: theknuckler_33: He also plays poker, but consider playing poker 'work' in the sense that it takes logic, calculation, personality skills, etc. to win, so he's ok with keeping money that he wins in poker.

If it makes you feel better, state gaming commissions also consider (fair) poker a game of skill.

It's regulated differently than slot machines are.

Oh no, I totally agree. I'm playing a tournament tonight (private)... can't wait!
 
BarbadoSlim
2011-10-19 03:25:04 PM
The Religion of Peace.
 
puddleonfire
2011-10-19 04:08:07 PM
UNCLEAN!!!
 
Lord Farkwad
2011-10-19 04:21:03 PM
ch2cch3: Brontes: Not sure why you think this is funny? Our banking system is ridiculous. At least these guys were trying an alternative.

PIGG

img713.imageshack.us
 
Mouser
2011-10-19 05:46:48 PM
mbillips: You know the Bible bars lending money at interest, too, right? Jews are allowed to lend to "foreigners," but not their "brothers." Deuteronomy 23:19-20. The Catholic church banned lending at interest in the Middle Ages, equating it to theft.

Fortunately, we actually learned something about finance since 700 AD. I'm sure Muslims will get around to that eventually.

Give the state of our banking system these days, I'm not so sure we have anything to boast about here.
 
profplump [TotalFark]
2011-10-19 08:59:19 PM
Brontes: Where do you think that money comes from? Do you think Wells-Fargo had that $159k sitting around in a vault? If they did, that would be full-reserve banking. If you think that, I encourage you to look at how money is created. Sorry, the video is a bit long.

Yes, they clearly have $159k sitting around (not necessarily in cash, but at least in deposits with the central bank) because otherwise they couldn't give that money out. It's real, honest-to-dog, central-bank-issued, M0 base money. The money created by fractional-reserve banking exists in bank customer's demand accounts, not in withdrawals or other payments the bank makes -- the value of the created money cannot be directly extracted from the bank.

That being said, factional-reserve banking in combination with the practice of considering demand account balances to be money in and of themselves does create new money. When you deposit a $2 bill the bank has $2 in cash they can give out and you still have $2 in your account after they do. In a full-reserve system the bank would have to decrease it's own lending ability by $2 when it handed the $2 bill back out, but in a fractional-reserve system they only have to reduce their lending capacity by some fraction of that $2, and the difference between those two values is "created" money that didn't exist before the loan happened.

But this isn't a repeatable process that leads to runaway inflation as money cycles through the system -- there are only two times it can happen. The first is when the reserve requirement is changed (i.e. banks can increase the spread between their deposits and their loans), and the second is when new base money is added to the system (i.e. when the central bank issues money). So the net effect is that the amount of "money" in the economy is some multiple of the amount of they amount of money issued by the central bank, but that multiple is fairly stable. There's some volatility created by the normal flow of money -- there may be more deposits or more loans in one period than another -- but unless there's been a recent monetary policy change it's safe to assume that all of the money "created" by fractional-reserve banking has already happened and taking out a new loan doesn't significantly impact the amount of money in the system.

Fractional Reserve Banking (new window)
Demand Deposits (new window)
Money Creation (new window
Money Supply (new window)
 
mbillips
2011-10-20 12:10:06 AM
Mouser: mbillips: You know the Bible bars lending money at interest, too, right? Jews are allowed to lend to "foreigners," but not their "brothers." Deuteronomy 23:19-20. The Catholic church banned lending at interest in the Middle Ages, equating it to theft.

Fortunately, we actually learned something about finance since 700 AD. I'm sure Muslims will get around to that eventually.

Give the state of our banking system these days, I'm not so sure we have anything to boast about here.

There was nothing wrong with our banking system until they repealed Glass-Steagall in the '90s Allowing banks to speculate in the stock market with tiny marginal investments is retarded, but it doesn't have anything to do with the centuries-old fractional reserve lending system.
 
Tatterdemalian
2011-10-20 10:11:23 AM
And yet those of us who told them this would be the result are not given any credit at best, and more typically accused of being part of a magical conspiracy that destroyed a system that would have saved the world were it not for our evil hook-nosed mustache-twirling Jewish capitalist ways.
 
Shazam999
2011-10-20 05:26:08 PM
profplump: Brontes: Where do you think that money comes from? Do you think Wells-Fargo had that $159k sitting around in a vault? If they did, that would be full-reserve banking. If you think that, I encourage you to look at how money is created. Sorry, the video is a bit long.

Yes, they clearly have $159k sitting around (not necessarily in cash, but at least in deposits with the central bank) because otherwise they couldn't give that money out. It's real, honest-to-dog, central-bank-issued, M0 base money. The money created by fractional-reserve banking exists in bank customer's demand accounts, not in withdrawals or other payments the bank makes -- the value of the created money cannot be directly extracted from the bank.

That being said, factional-reserve banking in combination with the practice of considering demand account balances to be money in and of themselves does create new money. When you deposit a $2 bill the bank has $2 in cash they can give out and you still have $2 in your account after they do. In a full-reserve system the bank would have to decrease it's own lending ability by $2 when it handed the $2 bill back out, but in a fractional-reserve system they only have to reduce their lending capacity by some fraction of that $2, and the difference between those two values is "created" money that didn't exist before the loan happened.

But this isn't a repeatable process that leads to runaway inflation as money cycles through the system -- there are only two times it can happen. The first is when the reserve requirement is changed (i.e. banks can increase the spread between their deposits and their loans), and the second is when new base money is added to the system (i.e. when the central bank issues money). So the net effect is that the amount of "money" in the economy is some multiple of the amount of they amount of money issued by the central bank, but that multiple is fairly stable. There's some volatility created by the normal flow of money -- there may be more deposits or more loans in one period than another -- but unless there's been a recent monetary policy change it's safe to assume that all of the money "created" by fractional-reserve banking has already happened and taking out a new loan doesn't significantly impact the amount of money in the system.

Fractional Reserve Banking (new window)
Demand Deposits (new window)
Money Creation (new window
Money Supply (new window)

Ah, I see someone decided to learn how money works.
 
Displayed 38 of 38 comments

Redisplay/refresh comments

This thread is closed to new comments.

Continue Farking
Submit a Link »
From the Fark Shop:
More from the Fark Shop »