Contrary To What Everything Appeared To Be
Some housing bubble news from Wall Street and Washington. “Sales of new one-family houses in July 2007 were at a seasonally adjusted annual rate of 870,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 2.8 percent (±12.0%)* above the revised June rate of 846,000 and is 10.2 percent (±12.3%)* below the July 2006 estimate of 969,000.”
“The seasonally adjusted estimate of new houses for sale at the end of July was 533,000.”
From MarketWatch. “Home builders have piled on incentives, including offering free vacations and new cars, to sell homes and reduce inventories. Such incentives are not subtracted from the sales price reported to the government.”
“Sales are reported when a contract is signed, not at the closing of the sale. Home builders have reported a large increase in cancellations in recent months. Cancellations are not reflected in the government data, so the reported sales are likely overstated.”
From CNN Money. “Builders, worried about a big glut of unsold homes on the market, cut price. The average price of a new home sold in the period fell to $300,400, down 3.4 percent from a year ago.”
“While the median price edged up 0.6 percent to $239,500 from a year earlier, it’s still off 8.8 percent from the record high hit just last March. The July 2007 median is also below the full-year reading for 2005 and 2006.”
“‘I suspect builders were pulling out all the stops to get those homes sold,’ said Stuart Hoffman, chief economist for PNC Financial Services Group. ‘But given what’s happened with the mortgage market since, it’s clearly going to be materially worse in August than it was in June and July.’”
The Chicago Tribune. “Despite a $2 billion vote of confidence from Bank of America Corp. on Wednesday, Countrywide Financial Corp.’s debt ratings are under review by Moody’s Investors Service for a possible downgrade.”
“In a conference call, John McMurray, Countrywide’s chief risk officer, said subprime tightening includes the elimination of the 2/28 program, the curtailment of 100 percent financing, added restrictions on first-time home buyers, and increased credit score requirements for interest-only loans.”
“‘In prime, guideline cutbacks include curtailment of 100 percent financing and adjustments to 95 percent financing,’ McMurray said. And, ‘as with subprime, more restrictions are under way.’”
“‘If we went back a year or two and you were in the marketplace at that time, what would you have done differently?’ Citigroup analyst Brad Ball asked Countrywide management. ‘Would you have put in place the actions that you have under way today?’”
“Angelo Mozilo, Countrywide’s CEO, struggled to answer and eventually borrowed a phrase from former U.S. Sen. Howard Baker, who said of scandal-plagued Richard Nixon, ‘What did the president know and when did he know it?’”
“‘Our volumes, our whole place in the industry, would have changed dramatically,’ Mozilo said, ‘because we would have arbitrarily made a decision that was contrary to what everything appeared to be: Values going up, and no delinquencies, no foreclosures, and we suddenly stop the music and say that we’re not going to’ offer certain products.”
“‘It would have been an insight that only a superior spirit could have had at the time.’”
“As CEO, Mozilo said he constantly asks himself: ‘What should I have known and when should I have known it, and what should I have done about it? Would we do things a lot differently, knowing what we know now? Absolutely. We would have done a lot of things differently. But we didn’t.’”
The Street.com. “By discrediting virtually every step taken thus far to help the housing market and the mortgage industry, Countrywide Financial CEO Angelo Mozilo killed Wall Street’s buzz about the credit crunch being over.”
“‘I don’t see the light here,’ he added, noting that the current financial panic is among the worst he’s seen in 55 years.”
“The message from the banks Countrywide typically borrows from has been, ‘We’ve got our own problems,’ said Mozilo in the CNBC interview.”
“The mortgage executive had no kind words for the Fed either, saying the central bank has done nothing to help Countrywide with its liquidity problems. The Fed’s discount rate cut…is useless to Countrywide because it cannot borrow there for regulatory reasons.”
“After Mozilo’s gloomy comments, it was hard for the markets to perceive Bank of America’s $2 billion stake in the company as anything but opportunistic for BofA, which like many banks and Wall Street firms faces some of its own liquidity and balance sheet issues amid the credit crunch.”
“Indeed, Bank of America’s little ‘confidence boost’ was quite a lucrative trade for the mega-bank, and maybe better considered in the context of distressed investing.”
The Boston Globe. “Countrywide Financial Corp. tried to calm depositors and home buyers yesterday with assurances it would continue operating in Massachusetts and nationwide.”
“Some real estate agents no longer refer their home buyers to Countrywide, the nation’s largest mortgage lender, because they fear it would be unable to fund the mortgage at the closing table, loan brokers said.”
“Keith Shaughnessy, president of Foundation Mortgage Corp. in Littleton, said he received two requests for mortgages from real estate agents who a few weeks ago would have sent their clients to Countrywide.”
“‘The realtors have a nagging fear, because of what’s happened to them in the past two months, of loans dying at the closing table,’ he said. Some agents now seek him out for mortgages, he said, because he can secure loans with commercial banks, in which realtors still have confidence.”
“Bank of America’s purchase of $2 billion worth of Countrywide preferred stock is effectively a loan with a 7.25 percent interest rate. The securities can be converted to shares of Countrywide stock for $18 a share.”
“The investment occurred five days after Countrywide drew down a $11.5 billion line of credit from its banks to replace funds that Wall Street investors no longer can provide by purchasing mortgages.”
“Bruce Marks, the CEO of a Boston group that provides…loans to potential homebuyers, brought about a dozen homeowners to Washington yesterday who said they were lured into risky and expensive loan agreements by Countrywide Financial Corp., which the homeowners said charged higher interest rates than promised, then imposed heavy fees when the buyers had trouble making payments.”
“‘They bullied us,’ said Jamie Washington, a Boston woman who said Countrywide jacked up the interest rate on her and her husband’s home loan to more than 11 percent just hours before closing.”
“When the Washingtons failed to persuade the buyers of their previous home to use Countrywide as a mortgage lender, the company threatened to refuse to release the cash for their new house, she said.”
“Cynthia Bryant, one of the panelists, said Countrywide refused to accept a late payment last year. The 42-year-old single mother of four, with a home in Pomona, Calif., has filed for bankruptcy to stop the rate from climbing on her interest-only loan.”
“‘We want [Office of Thrift Supervision] to go back to Countrywide, and we want them to say ‘We are going to require you to restructure loans,’ ‘There’s too much focus out there now on how investors are hurting, how lenders are hurting,’ he said.”
From Reuters. “Market turmoil set off by the U.S. subprime meltdown has taken a toll of bankers across Europe and analysts say many more could lose their jobs before the crisis runs its course.”
“‘The capital markets are a cruel master. One minute you are munificently paid and the next minute you are toast. It’s part of the explicit conditions of employment,’ said a partner at a financial consultancy based in London. ‘I expect we will see a round of people let go for misdeeds and others will leave because they are no longer needed.’”
“The owners of stricken state lender SachsenLB aim to sell the German bank quickly after its near collapse under heavy losses from U.S. subprime mortgages and other risky debt, sources familiar with the matter said.”
“Germany has taken the brunt of the European fallout so far from problems stemming from subprime home loans as two of the country’s banks have almost collapsed.”
“European Union market watchdogs are to meet with credit rating agencies to discuss their role in the U.S. subprime mortgage crisis that has roiled financial markets globally. The leading rating agencies include Standard & Poor’s, Moody’s and Fitch.”
“EU Internal Market Commissioner Charlie McCreevy said last week he was reviewing a voluntary code used by credit rating agencies as they appeared too slow in warning about problems in the U.S. subprime mortgage sector.”
“Germany’s VDP association of banks supplying money to the property market said rating agencies offered the only on-going quality control for structured finance products.”
“The more complicated the product, the fewer investors there were who could evaluate them on their own.”
“‘Hence, many investors rely heavily on external ratings (probably some of them exclusively). Therefore, some agencies might be tempted to push market developments in the direction of complex structures,’ VDP said in its submission.”
“Millions of Americans feel it when the market swoons, and the Federal Reserve no doubt had them in mind when it slashed a key short-term interest rate Friday.”
“To some observers, the Fed’s unusual action was a sop to the investment bankers, securities traders and hedge-fund managers who fanned the subprime mortgage boom and other excesses of the easy-money era.”
“They, and to a certain extent the homeowners who tapped into the frenzy to spend beyond their means, are taking the blame for the market mess and, in the eyes of some, should take the hit.”
“‘They have to pay a price for the risks they have taken,’ said Stanley Nabi, chief strategist at New York-based Silvercrest Asset Management. ‘They’re paying it now.’”
“There is a running debate about the wisdom of the central bank giving Wall Street the financial equivalent of a get-out-of-jail-free card, allowing the industry to curtail losses from its risky bets on subprime loans and leveraged corporate buyouts.”
“Shouldn’t a hedge fund holding too many subprime bonds be allowed to fail, and an investment bank stuck with unwanted bonds from a leveraged buyout take a hit to earnings? ‘The Fed is protecting these guys on the theory that they’re protecting the economy,’ said Richard Bove, an analyst at Punk, Ziegel & Co.”
“The Fed itself is caught in the blame game. Under former Chairman Alan Greenspan, the central bank created fertile ground for the housing frenzy by keeping interest rates at historic lows.”
“‘From the Federal Reserve to Wall Street, which developed new and sundry types of mortgage products, to people who stretched themselves further than they should have, everybody shares responsibility,’ said Jim Paulsen, chief investment strategist of Wells Capital Management.”
“‘There is a whole list of accomplices in this crime, and it includes the rating agencies, the brokers that packaged the mortgages, the hedge funds and other investors that bought the securities, and the regulators who didn’t watch the process carefully,’ said Brian Hamilton, CEO of a financial research firm. ‘As a result, there are a lot of somewhat innocent bystanders who are going to get burned.”
Note, the links at the Census Bureau website are PDF files.
Ben, you are a “superior spirit.”
How does that feel?
I think it is a round-about way of dodging the blame for him. As if one needed to have super-natural powers to have seen this coming.
well.. you’re wise to remain humble.. and that is true proof of a superior spirit, imo.
“‘It would have been an insight that only a superior spirit could have had at the time.’”
Mozilo is a lying sack of sh!t. He knew nothing as he was cashing out those shares…
“Sales of new one-family houses in July 2007 were at a seasonally adjusted annual rate of 870,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development.”
Why don’t these stoopid, lazy financial journalists bother reporting on the rate of overbuilding? Based on recent DOC data, the rate of new home construction is about 1,381,000 per year, which implies a current rate of additions to unsold new home inventory of 511,000 per year, before adusting the new home sales number for order cancellations.
This is grade school arithmetic — my seven year old son could do it.
I cannot wait to see what the existing home sales numbers will be.I have a feeling they will fall off a cliff.As ben noted earlier new homes are canabilizing existing homes due to incentives.Have not heard one of these brilliant economists mention this yet.
Before or after the “seasonal adjustment”. Remember, they’ve probably already revised last month’s data (no headlines when they do this) to minimize the blow for this month. Then they’ll seasonally adjust the numbers so that it’ll look flat instead of down.
What I love most about these “statistics” is the margin of error:
“This is 2.8 percent (±12.0%)* above the revised June rate of 846,000 and is 10.2 percent (±12.3%)* below the July 2006 estimate of 969,000.”
So, within the margin of error, this 2.8 percent gain could actually be as much as a 9.2% drop?
I also love the way that they shop for a point of comparison so that the statistic will always reflect an increase. I’m still waiting for an upcoming headline that says “New Home Sales Up 12%” (over same-month-period from 1854).
On the bright side…if anyone tells you again that the FED needs to cut rates during the coming month - just remind ‘em that July new home sales were UP.
Dupontguy39: I think the 12% MOE is to 2.8% i.e. the 2.8% can be 2.8*(1+/-0.12)%. Multiplicative, not additive.
At least they tell you the margin of error. Many reports don’t even do that, which means that their numbers are completely worthless.
This is all before the August hiccup, fall sales will be much worse.
CNBC was talking about turning the corner. I am in disbelief about the elitist establishment that now runs the media. Whatever happened to reporting the news, the only source seems to be “talk radio” and internet blogs.
This kind of reporting helps market makers and hedge funds.
I expect bottom is quite aways away.
“‘I don’t see the light here,’ he added, noting that the current financial panic is among the worst he’s seen in 55 years.”
Now that many of CFC’s rivals are out of business and there is talk about stamping out recently-popular crazy lending practices, it may be in the tan man’s best interest to hasten the economy into a slump, as this would help convince all those sellers to come down from the ledge and lower their list prices. The market is currently in a liquidity freeze, as the demand side of the market cannot touch the supply side at 2005 prices, given the exotic subprime lending bridge has collapsed into the river and drowned the lenders who provided it.
Nice metaphor.
“By discrediting virtually every step taken thus far to help the housing market and the mortgage industry, Countrywide Financial CEO Angelo Mozilo killed Wall Street’s buzz about the credit crunch being over.”
Do you hear that, America? it’s all Angelo Mozillo’s fault you’re homeless and on the street! He didn’t engage in enough “happy talk” to make Wall Street happy! He’s your culprit!!!!
Mozillo doesn’t have to engage in happy talk because he dumped most of his stock . Nice time to retire . I think he mentioned that he had 9 grandchildren that needed to go to college .Ok ,so now that leaves millions and millions left over after the grandkids get their education Moillo . If his retirement date had been set up years in advance at when the stock dumps would be ,I would be more impressed .
In that it was so clear in the early part of 2006 that the demand was going down monthly and cash backs and incentives were becoming necessary to make deals ,it should of been clear to everyone that the party was over .
If he is smart he put some aside for the lawyers he is going to most definitely need. Is there any chance he doesn’t become the mortgage industry’s Ken Lay?
He failed miserably yesterday. As if he didn’t care. Perhaps it was bitterness, but then again, why should he care? He’s out of options.
He failed yesterday? He was brutally frank in admitting that there is no hope left in real estate, we are certain to have a long severe recession. If anything, he should be admired for not sugarcoating. I am not suggesting he should be forgiven for his past sins.
Yep, he failed. He failed to deliver on the confidence building scheme.
Mozilo demonstrates the honesty of man who has already dumped millions of dollars of his own company’s stock.
Maybe he wants CFC to file Chapter 11 so he can cherry pick the assets out of bankruptcy with his windfall.
Countrywide has been doing this sleezy lending for at least 10 years. When I used to sell real estate I used to discourage my buyers from using mortgage companies, Countrywide included. I’d hand them a phone book open to the yellow pages section that listed banks and told them to check around and pick one. The closing costs for these mortgage companies are nothing short of highway robbery. Countrywide has always had the most foreclosures in our newspaper, more than any other lender. I’m talking 10 years back clear to the present.
Fu** Angelo Mozilo. Fu** him straight to hell. The following comment made me sick, made me want to punch him straight in his fat face:
“The mortgage executive had no kind words for the Fed either, saying the central bank has done nothing to help Countrywide with its liquidity problems.”
Go screw yourself Angelo! The job of the Fed does not include keeping your POS outfit afloat. A blind half-wit could see that this pyramid scheme would all come to a nasty halt, and yet you guys kept on lending. I hope Countrywide crashes and burns, and that Angelo does the perp walk.
HAHAHA well said CA Guy
(Oh, the Tan-Manitty!)
“the tanman/tan-manitty”- LOL. A bit OT: While I’ve read alot regarding this fellow, I’d never seen so much as a picture of the guy, until a couple of days ago on the PBS Nightly Business Report. I’d associated his name with Mozilla, as in the web browser… And when I finally see him, there was an uncanny resemblance to the lizard (or should I say dinasour?) icon the browser uses. Not that I judge anybody on appearances, I’m no prize myself and that would just be “cold-blooded.”
Everyone take a deep breath, calm down, and repeat after me: “Real Estate only goes UP!!!”
Your hired. Go get your license and join the fun.Read my lips, “buy now or be priced out forever”.
I’m tired of being 1984′d. Is anyone else tired of th BS?
Is anyone else tired of th BS?
Bet those 2 failed German banks are.
Scammed to the hilt.
I was reading the news the other day and 1984 immediately sprang to mind. The bs being spun is truly disgusting. Our economy is screwed, and the big boys are only delaying the inevitable so that they have time to cash out before it all collapses. I used to love America, and spent four years serving it in the Marine Corps. These days I’m not so sure…
Very Very, quite contrary
How does your confidence grow?
With iffy sails and cocky shills
Like so many ducks in a row
The housing numbers are baked and the stock market is rigged. I have no faith that we are operating in a free market anymore. The rich are suckering the average joe into overpriced crapboxes with crappy mortgages. They are also suckering joe six pack into an overpriced stock market while they unload their shares. It’s Bizarro world.
“I have no faith that we are operating in a free market anymore.”
You mean at some point in the past you once did? Now that’s Bizzaro world
Joe six-pack should lowball bids on stock just like real estate .
No, no, Wizard. Remember, as agents say, lowballing is rude and insulting to homedebtors.
sarcasm /off
– Judge Smales
“It’s easy to grin when your ship comes in, and you’ve got the stock market beat”
I have mixed economic emotions about the current situation.
Casa$Loco,
Apparantly you are behind the inflation curve since you are averse to stocks. Could have bought a house in 1997 and could have invested in Vanguard S & P 500 index fund when I started into the S & P - back in 1989. Way ahead.
Go ahead and hide your money under the mattress. What’s your favorite flavor of dog food now?
Bill, you really need to get laid.
That’s kind of a bold and sweeping declaration, there, NYCityBoy.
Just ’cause Bill urges us to hide bucks in the mattress?
Besides, who doesn’t? Haw!
Free market? Our monetary system is similar to what Locke described in Leviathan. We select a small group and allow them to enrich themselves in exchange for maintaining a stable financial system for the rest of us. Without this privileged group running the system, we would have financial chaos and our lives would be nasty, brutish and short. If Goldman Sachs or the Renaissance Hedge Fund go down, then we (regular people) will suffer.
In politics, this thinking was discredited by the 19th century and democracy has become the norm. It has proven itself superior to the monarchies that Locke was defending.
However, the monetary system is still awaiting innovation and revolutionary change. The current system is weakening and the recurrent crises are evidence of that. We are probably one or two systematic shocks away from the creation of a brand new system enabled by new technologies and “financial engineering” that is commensurate with our democratic ideals.
I’m pretty sure the Levithan was Hobbes. That’s definately where the nasty, bruthish, and short quote comes from.
Locke was the foundation of the socal contract.
Oops - got them reversed. Thanks
NP, it’s actually easy to flip them thought they are opposites since you tend to review them at the same time.
My BF has his PhD in philosophy; my DH ’s MA is in poli sci. If I don’t keep on top of stuff like that, I become the laughing stock of the dinner table. I still flip Bentham and Mills depending how much wine has been consumed >; )
You have a BF and a DH? If those mean what they usually mean, you are all very liberated!
“Locke was the foundation of the socal contract.”
Gwynster - LOL - great typo.
OMG LOL there is a great cartoon in there somewhere
Rigged? OK. Simple rule. “A fool and his money will soon be departed.” Don’t particapate. Don’t buy stocks, don’t buy bonds, don’t buy a home. Put your cash money some where safe. Mattress maybe. What a bore think is. From the day we were born. No where is it written our lives will be easy. How people collectively decided a home in SF is worth $700 K is beyond my understanding, but thats the reality. I enjoy my life, they can enjoy their monthly mortgages. I know alot of rich people, and they don’t care to know you or spend two minutes trying to cheat you. They have their own troubles. Rent don’t buy…and enjoy your life. Complaining is worthless.
RE: I enjoy my life, they can enjoy their monthly mortgages.
Some twit journalist noted in today’s Beantown Globe, that after decades a homeower comes away a house, whereas the renter keeps on payin’…
I think I’ll take memories of trips to Europe, rather than camcorded blips of backyard weenie roasts on the rear deck Hibachi, because I was payin 50% of my take home pay to put a fookin’ roof over my head.
No price on some things in this life.
One of the problems with a completely free market model is that it is prone to degenerate into crony capitalism, rigging markets and baking numbers. There is a bigger incentive to compete by bullying and scamming than there is to compete by making better products.
But if you tried to prevent bullying and scamming, then you begin regulating, and it won’t be a free market anymore.
I regard the free market more as an idea that demonstrates how markets would tend to move if left to their own devices instead of a goal to strive for. There is a reason why a free market has never really existed.
“The Fed itself is caught in the blame game. Under former Chairman Alan Greenspan, the central bank created fertile ground for the housing frenzy by keeping interest rates at historic lows.”
Bernanke brought it on himself by caving in a moment of panic.
But it seems he only lowered the miki-mouse rate that only banks can borrow from and no mortgages are indexed to. So far he’s been holding the line as best he can under all this political pressure in my opinion.
Yes he is no Volcker, but he is no Greenspan either.
I was thinking — if we see a mass exit from homeowners with at least $1 equity into the rental market, the banks should be happy with this outcome. Normally when a first time home buyer gets a used home, the previous owner pays off their loan and gets a new one — so you still have the new additional loan. If that previous owner rents, you take one loan out of the market, relieving pressure on banks to find money.
Owners->Renters are definitely a key element for banks to recoup liquidity. I guess what we need right now is more first time buyers coupled with fewer “new” home sales (which create demand for new loans rather than re-loans).
For me, I’m hoarding more than ever. I usually put 60% of my paycheck into gold and silver, but now I’m holding straight dollars, even with the inflationary devaluation concerns. I’m asking my non-debted friends and family to do the same. I figure if we can hoard $200,000 this year as a group, that is $2 million in liquidity lost. How about getting 100,000 free market HBBers to cash out $10,000 a piece this year (which equals $1 trillion, but actually reduces liquidity by $10 trillion), causing massive deflation and really screwing Wall Street and the Federal Reserve up permanently?
I’d even go so far as to sell all my gold and silver for cash dollars, and hoard those, too. The fear of inflation can be destroyed if we can end the Fed by destroying liquidity in the market due to the fraudulent and criminal fractional reserve banking system.
billion, not trillion. Bad math today.
SIXTY percent?? My hero!!!
Helps to have bought my first small ghetto condo at 17 for cash. 34 now. Just caught a falling knife a month ago buying a foreclosed home that we’ve been wanting (the exact house) for 12 years. Paid about 30-40% over market, but no mortgage so who cares? Going to die in this house (hopefully in 60 years+ haha) so I don’t mind catching an interest-free knife, haha.
Us savers are key to dismantling the Federal Reserve and the fractional reserve banking system. We need to withdraw from savings and money market accounts and any cash holdings that allow for loaning out against our reserves. Screw the market and Wall Street, I’ll sell crepes or walk Paris’ dog if that’s what I have to do.
I only have enough left in the bank now to back the checks I write each month. The rest is either invested in shorting the market, or cash. Wish I could save 60% like you, but we’re close at 50%, although 50% of not much isn’t a whole lot.
It’s a worthy goal that I look forward to attaining as well. I’m still trying to rebuild from a divorce (I’m 46) and currently save barely a thing, despite my frugal lifestyle and lack of spending…an income issue. The last few years have been one big “ah ha” moment in terms of money, lifestyle, investing etc. Much to think about, including what I’ve learned and discovered on this board.
RE: Going to die in this house
The most famous last words I ever heard during my 23 years in the appraisal biz.
Screw the market and Wall Street, I’ll sell crepes or walk Paris’ dog if that’s what I have to do.
Sell a better crepe and the world will beat a path to your door.
At least I would.
And: I know someone here in Chicago who rounded up most of her first downpayment ($20,000-ish) via dog walking and dog training … her side job. You can make a lotta money walking dogs for yuppies.
Hopeless. The Fed can pump up liquidity by lowering reserve requirements. The system will collapse when the financial institutions stop trusting each other which is what is beginning to happen now.
Fed can print $$ faster that we can hoard $$.
Fleck weighs in-
http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/CentralBanksAreStealingFromTheAverageCitizen.aspx?
“By discrediting virtually every step taken thus far to help the housing market and the mortgage industry, Countrywide Financial CEO Angelo Mozilo killed Wall Street’s buzz about the credit crunch being over.”
The party is going great, and then all of the sudden Hamziloton (homage to the king of the tan) opens his trap and it’s back to plan B.
Wow, the pleas for a ‘bailout’ are humming today. Suspect they will increase in the months ahead. Ford CEO, BIll Gross…
This will be a major campaign topic in the upcoming elections.
Disgusting.
The big three might as well crank up the crooked employee discounts again.I am not buying a new car anytime soon.I have a 2004 chevy colorado that will keep me going for a long time. Just got my insurance lowered to 25/month. I freed up enough money to have a decent meal tonight.
Who in the heck is your insurance company?????
Good move azdude, drive it into the ground. No need to buy anything new for quite some time as the car lots, pawn shops, etc. fill up with goodies from all the failed homedebtors. Big Three’s gotta be hurtin’ bad.
The discounts are around here already, but it won’t affect me. That’s ’cause I never buy a new car, and likely never will. Good, used is good enough for me.
–
“‘There is a whole list of accomplices in this crime, and it includes the rating agencies, the brokers that packaged the mortgages, the hedge funds and other investors that bought the securities, and the regulators who didn’t watch the process carefully,’ said Brian Hamilton, CEO of a financial research firm. ‘As a result, there are a lot of somewhat innocent bystanders who are going to get burned.”
This qualifies as — a system of the crooks, by the crooks, and for the crooks. Of course all overseen by our govt.
Jas
What crime? People went to the lenders to buy homes the appreciated 100% in 4 years. The lenders are beholding to their stock holders…no doc loans, 0% down payments, 110% financing might have been reckless, but crimminal? What a bore. Simple lending rule…document income….no more than 3x gross salary. maybe 4x with a risk premium. the bonds are worth something 65 cents to par? Once the market can figure out value…the machine starts going again. A crime would be if Fredi Mac or Fredit Mai get to sevice jumbo loans. Why should the public shoulder loans over $420 K. thats a crime if it happens.
“Why should the public shoulder loans over $420 K.”
Amen to that. By making jumbos a pain-in-the-a** to obtain and to pay for, price declines can start with vigor at the higher end and force everything else below down, in rough proportion.
RE: This qualifies as — a system of the crooks, by the crooks, and for the crooks. Of course all overseen by our govt.
I think the entities noted below would agree with you.
Makes ya proud to be an American, doesn’t it?
No wonder we’re internationally detested.
“The owners of stricken state lender SachsenLB aim to sell the German bank quickly after its near collapse under heavy losses from U.S. subprime mortgages and other risky debt, sources familiar with the matter said.”
“Germany has taken the brunt of the European fallout so far from problems stemming from subprime home loans as two of the country’s banks have almost collapsed.”
Wow, and isn’t this weird since Germany didn’t has a housing boom like most of Europe .I guess Germany just likes to invest in high yield MBS’s. I don’t think some of these Countries that get burned are going to feel good about America .
Did the people helping people commit fraud think about what they were doing to this Country by passing on fraudulent loans to the secondary market ? Any kind of fraud ends up hurting people . People that cheat on Insurance claims don’t think about how the Insurance Companies just end up raiding the prices for everyone .It becomes very hard to live in a world where 75% of the people want to cheat 25% of the people .
“It becomes very hard to live in a world where 75% of the people want to cheat [the remaining] 25% of the people .”
Wiz — nicely put.
“‘They bullied us,’ said Jamie Washington, a Boston woman who said Countrywide jacked up the interest rate on her and her husband’s home loan to more than 11 percent just hours before closing.”
“When the Washingtons failed to persuade the buyers of their previous home to use Countrywide as a mortgage lender, the company threatened to refuse to release the cash for their new house, she said.”
Stop in the name of loan
before the suing starts
(think it over) didn’t you bully us?
(think it over) didn’t you bully us?
I’ve known of your
Your cash release rights
When you didn’t
Kowtow to Angelo’s advice
Maybe this happened
But only once or twice
And is that sweet interest rate
Worthy of financial hate?
(think it over) didn’t you bully us?
(think it over) didn’t you bully us?
Smells Like MBS Spirit
Load up on loans
tell your friends
Its fun to lose
And to pretend
this has value
My bank assured
I know I know
A dirty word
How Low(x 15)
How Low will it go
When the suckers bought its less dangerous
Here we are now
so just pay us
I feel stupid and contagious
Here we are now
Entertain us
A CDO
An LBO
A CLO
My equity Oh
Yea
Im worse at what I do best
And this note I shove up you *ss
Our little group has always been
And always will until the end
How Low(x 15)
How low will it go
With the lights out its less dangerous
Here the bonds are
Just pay us
I feel stupid and contagious
Here we are now
Entertain us
A CDO
An LBO
A CLO
My equity Oh
Yea
And I forget
Just what it takes
And yet I guess it makes me smile
I find it hard
that you bought us
Oh well, whatever, nevermind
How Low(x 15)
How Low will it go
“‘It would have been an insight that only a superior spirit could have had at the time.’”
–Countrywide CEO referring to mortgage implosion.
So I guess Ben and every one of us who posted here on HBB warning of what was to come are “superior spirits.”
Spirits from the 1929 crash no doubt…..returning to save us.
It’s been said here before but bears repeating-
A recession returns the money to its rightful owners.
The parallels to 1929 just got more annoying last Friday. In both cases, when an overinflated stock market started to show signs of fatigue, a Fed chief named Ben lowered the discount rate.
The guy in the ’20s, Ben Strong, called his liquidity injection “a little coup de whiskey to the stock market.
Thanks to all that recommended those single malt Scotches!
Much appreciated.
tasting notes?
–
So, those who forecast the Greater Depression to begin during 2008-10 qualify as supreme spirits?
Mozilo must be haunted by the ghost of the Housing Bubble past.
Jas
“‘It would have been an insight that only a superior spirit could have had at the time.’”
–Countrywide CEO referring to mortgage implosion.
My God, I’m a librarian and I saw it coming for two years. The guy thinks he can get away with a statement like that? How about “I was one massively greedy dude.”
Nobody cares what a Punk says…
“Shouldn’t a hedge fund holding too many subprime bonds be allowed to fail, and an investment bank stuck with unwanted bonds from a leveraged buyout take a hit to earnings? ‘The Fed is protecting these guys on the theory that they’re protecting the economy,’ said Richard Bove, an analyst at Punk, Ziegel & Co.”
Nobody cares what a Punk says…
Yes, but does he feel lucky?
“Bank of America’s purchase of $2 billion worth of Countrywide preferred stock is effectively a loan with a 7.25 percent interest rate. The securities can be converted to shares of Countrywide stock for $18 a share.”
If you have not been paying attention, someone was trying to goose the commercial paper market and stop the run at CFC by splashing BofA’s brand endorsement into the crisis management communications mix. Had it been another straight up 2 billion bailout loan on top of the 11.5 billion bailout loans, we would be posting to a different story.
This in from Tucson: First Magnus ex-employees can’t get to their 401ks:
http://www.azstarnet.com/allheadlines/197929
Comments on this story:
http://regulus2.azstarnet.com/comments/index.php?id=197929
What’s in your 401k?
A lot, maybe….but they can’t touch it!!!
It’s a karmic response courtesy of the HBB spirits.
What’s with that thumbs-up/thumbs-down system on the comments page? What’s “below your threshhold”? If enough people don’t like what you say, it’s hidden? p.s. I always read the thumbs-down posts anyway.
so much for maxing out your 401k.
“Flores said she was counting on her last paycheck, of around $1,500, to pay her rent and car payment, among other expenses. Now she is facing eviction, she said, and she is selling plasma for gas money.”
no money saved for a rainy day? selling the plasma is just another thing the bubble bloggers predicted.
I think she means blood plasma, not plasma tv.
Blood plasma lines instead of soup lines . . . soon we’ll hear about a glut of blood plasma on the market.
She may be selling more than one kind of plasma. Need a TV anyone?
Sell the car, sweetheart, that takes care of the gas problem.
RE: Flores said she was counting on her last paycheck, of around $1,500, to pay her rent and car payment, among other expenses. Now she is facing eviction, she said, and she is selling plasma for gas money.
Next month there will be lottsa FB’ers right behind ya in the blood line, honey!
Former Tucson First Magnus employee Bryant Keefe said he doesn’t want to tap his 401(k).
“But if it’s between making the mortgage payments and cashing that out, then we’ll cash it out,” he said.
Exquisite, five-star irony.
OK, so what gives? Why is the stock market going up today?
Anticipating a rate cut, or maybe the big boys already got the call, as they did last week before the rest of us. In related news the dollar is being hammered and PMs are up.
A quarter point rate cut wont do sh@t.They would have to cut about 200 basis ponits to do any good. I hope they don’t cut rates myself.Sink or swim from here on out.
I have no idea who is buying stock right now.I think there are some betting we have hit bottom and going right back up. Probably the serin types.
Look at the volume though.
Carry Trade
http://tinyurl.com/2lvgnp
Or just one last run before the fall, as in this fall. Time to get the house in order, sweep out all the dirt and lock the doors and windows. I swear (I’m applying here for ’superior spirit’ status) that this current lift will run until shortly after the Sept. Fed meeting, then will rapidly fade as the realities of home sales, loan resets, expanding unemployment and genuine consumer fear is finally understood. One piece of coal in the Christmas stocking.
The PigMen are pumping the rate cut and the sheeple are buying it.
sucker rally
the volume has been drying up even if you use 50 days as the average to smooth out the huge volume of earlier this month. the Sp500 bounced off yesterday’s high.
if today was such good news volume should be double and we should have broken through 1472 and went up way above that. even wednesday’s big up move was on low volume and most of the volume was after 3pm. woudn’t be surprised if someone just dumped a bunch of t-bills into the market to trick the quant trading programs into thinking the crisis is over. market was pretty weak thursday until people started dumping t-bills.
don’t know about next week, but after labor day all the traders get back from vacation and the hamptons and that’s when the real fun begins.
remember market was up right after katrina blew through new orleans. i was amazed. come september the market tanked over 15% by october. i heard what happens is in september the funds start dumping all their losers for the year and they start rotating into other sectors. a lot of losers this year
As CEO, Mozilo said he constantly asks himself: ‘What should I have known and when should I have known it, and what should I have done about it? Would we do things a lot differently, knowing what we know now? Absolutely. We would have done a lot of things differently. But we didn’t.’
Let’s see… You should have known that lending $500K to somebody earning $50K was stupid. You should have known that all along. You should have known that housing prices were not going to continue growing at 10% per year indefinitely. You should have known that it was your loose lending practices that was creating a whole pool of buyers, thereby driving up prices.
I sure wish I were CEO of Countrywide. Look like a fool, but at least get compensated millions for it.
I think because of the dumb a** new housing report. People will run all over this weekend telling everyone the values of houses are finally going up.
I’m fed up with cheap shots about Mozilo’s skin. (Numerous references on this blog to the “tan man” and to the “walking melanoma” immediately come to mind.) Please, no more ad hominem attacks.
Instead, let’s appreciate a nation where anyone, regardless of the color of his skin, can grow up to become CEO of a Fortune 500 company.
Luv,
Jen
No need to be so thin-skinned about it.
The references are literally to his tan, they are not racially motivated. Have you seen his picture? He’d give George Hamilton a run for his money.
http://www.forbes.com/static/pvp2005/LIR7G33.html
Mozillo’s skin tone is a serious matter. I had been watching his CNBC appearance on the internet and then came home and watched in glorious HDTV. OMG, what has he done to himself. He’s like the picture of Dorian Grey. The more bad loans he makes the more the melanoma builds up. Seriously, he looked like a Visine-eyed blinking brown toad. With his money and quick access to L.A.’s plastic surgeons and derma-abrasion/laser skin-surfacing, there is simply no excuse for him.
I call him Tangelo.
You could make about 333 human skin belts out of him…
For your lizard friends~
RE: You could make about 333 human skin belts out of him…
For your lizard friends~
LMAO…Comedy Central has got nothin’ on this place!
That is such a freakin’ good idea!
Pretty belts. I love pretty belts. Why, I already have some shoes his color!
Plus it would save the lives of 333 innocent lizards. Aladinsane, this is a winning idea all over the place.
Tangelo Tanzilo.
Ok….so tan man was out on the beach a little too long….instead of being at the office counting up the foreclosures….can you blame him….give the guy a break.
But he’s icky, Jen. He’s an icky scary posturing Orange Man. Oh, and also a duplicitous sneaky bastid, by most accounts, and one who said things were fine, then sold a bunch of shares right before admitting there might be some few tiny little problems with his company, etc. etc.
My mortgage is with Countrywide, 30 year fixed of course, and I had soooo much pressure to go with an ARM loan, I finally had to get really firm on the subject. Their agents did their best to completely shaft me, just so they could get more commission money. I don’t like Countrywide in general.
Besides, without cheap shots, I’d be almost shotless. Do you want to deprive me of an innocent pleasure?
Yeh, regardless of skin color or brains.
Apparently you all haven’t realized that Ben Jones is a spoof troll (not just an ordinary troll).
Ooops - I mean Jen Bones.
I thought that Jen was just being dry as a bone, and that many missed it.
To paraphrase a great man,
Mozillo should be judged by the content of his character, not by the orange-ness of his tan.
Jen, honey, I think you meant that this is a nation where anyone, regardless of the content of his genes can grow up to become CEO of a Fortune 500 company.
I only say this because it is a well known fact that American Home Mortgage Investment Corp here in San Diego was being run out of a small think tank located in the new Monkey Trails exhibit at the zoo. Also, my dog, a husky named Thunder, had a brief stint as VP of finance at Dana Capital Group in the OC before he decided the commute was too long, plus he thinks paperwork is just a place to take a dump.
Did you guys catch the ‘tan man’ making predictions to the press today of future recessions and all kinds of bad things to come?……C’mon ‘tan man’……lighten up a little!
Yeah, don’t be so negative, guy. It’ll make wrinkles appear in your pretty and attractively tinted hide and that will in turn diminish the value of the 333 pelt belts that aladinsane proposes be made from you.
I LOVE THIS BLOG!!
required reading: “Brace yourself for the insolvency crunch”:
http://tinyurl.com/2ph73x
Good piece, thanks.
My favorite writer on such topics — and Hoz’s least favorite (though I’m wondering if Hoz eventually will come around).
To clarify, I see Ambrose as a tenacious and masterful Exposer of Dastardly Deeds.
LOL, even Mr. Evans-Pritchard gets it right once in a while. I just cannot ever verify his source.
OK — that’s progress!
Unless someone comes up with something better, the chances of a direct US taxpayer financed bailout are increasing daily. The US government will NOT allow a depression to occur - ‘moral hazards’ nonwithstanding.
I proposed this a while ago, and I will again for comment:
The government offers special tax-free “homeownership bonds” that pay about 8%, only available directly to US citizens that are NOT in credit trouble - savers, etc. They then make market-rate interest loans (7%?) available to about 75% of the FB’s that are otherwise faced with 12 to 15% ARM adjustments. Some of these FBs pull out of the nosedive, some don’t. Having the foreclosures trickle in over the next decade rather than all in the next year prevents some of the crash. The other 1% difference is funded by additional fees on any non-conforming loan made by any FDIC insured bank. Loaning $300k to 1.5 million FB’s would require raising about $450 billion with these bonds. You’d better believe I’d redeem my 4.7% T-bills for an 8% “home bond”.
I know this would be a bailout just like any other, but at least it gives non-bubble-participants a bit of a reward for not being stupid. Comments?
Creative, innovative.
I’m guessing it would end up more like a $50 billion program not $450 billion. There is nothing that can be done about the fraud which is a huge chunk of the problem. Then there are the California prices which drove people into these exploding ARMs. People couldn’t afford a fixed mortgage at 5.5% so a 7% fixed rate isn’t going to save them.
Inflationary, to be sure.
Actually, that’s pretty damn good. But can such a program hold off the 2-up, 3-down death sprial that’s coming? It would save a few as SD is right to point out, but two things happen: most can’t make the payments anyway, and it does nothing for on-going sales. The slide must finally play out until prices work for incomes. Maybe what we’ll get is 4 or 5 years of 10% inflation.
“..only available directly to US citizens that are NOT in credit trouble..”
This part is DOA at the nearest Circuit Court..
You’d set up an arbitrage environment. Joe Private Citizen would get into the leveraged carry-trade business.
“In a conference call, John McMurray, Countrywide’s chief risk officer, said subprime tightening includes the elimination of the 2/28 program, the curtailment of 100 percent financing, added restrictions on first-time home buyers, and increased credit score requirements for interest-only loans.”
In summary, subprime tightening includes the elimination of subprime lending.
“‘There is a whole list of accomplices in this crime,…”
Something from your ‘hood Ben…politics, fraud, real estate…
“and so it goes…” … Kurt Vonnegut
Arizona congressman to retire amid probe
Three-term Rep. Rick Renzi, an Arizona Republican facing a federal inquiry into his family’s insurance business
FBI agents in April raided a Sonoita, Ariz., business owned by Renzi’s wife, Roberta. Law enforcement officials confirmed in October that they were scrutinizing a land swap that netted Renzi’s former business partner, friend and campaign donor $4.5 million.
http://news.yahoo.com/s/ap/20070824/ap_on_go_co/renzi_retirement
40 minutes to go… busy day today, … must be all the reassuring news about how housing is getting ready to blast off again
Dow 13,337.82
Up 101.94 (0.77%)
NYSE Volume 1,689,114,000
(“‘Our volumes, our whole place in the industry, would have changed dramatically,’ Mozilo said, ‘because we would have arbitrarily made a decision that was contrary to what everything appeared to be: Values going up, and no delinquencies, no foreclosures, and we suddenly stop the music and say that we’re not going to’ offer certain products.”)
in other words, our ego needed us to be a top lender and make lots and lots of money.
Mozilo: Grand Duke of Flipperotamia, 2001-2007
Haven’t yet run the numbers on the new sales yet, but just completed a quick analysis of several Phx zips on resales. One of the realtors sends out newsletters with the closings each week. DISMAL. And this is mostly prior to the full liquidity crisis peak (so far). Drumroll please……
Resales resales zip # wks
Zip Area 06 (aug 2-8) 07aug 3-8 listings invent
85326 Buckeye 14 4 988 211
85390 Wickenburg 1 2 160 68
85396 Buckeye 5 0 368 infinity
85009 Phx 11 3 261 74
85383 Peoria 24 5 905 155
85338 Goodyear 32 6 1269 181
generally, a 70-80% decline in volume, Y-O-Y. At this rate, somehow I don’t think everything will be worked out by 1Q08 !!
LOOK OUT BELOW!
Sorry, the headings got a bit mashed:
zip
area
2006 Aug 2-8
2007 Aug 3-8
current zip listings
# weeks inventory
Apologies if this has already been posted, but is it just me, or is the Fed possibly signaling a new strategy to bail out the banks?
See New York Fed Affirms It Accepts Asset-Backed Paper.
Just trying, but failing to get the CP market funded to kep money markets solvant.
This is what they knew:
“Fed bends rules to help two big banks
If the Federal Reserve is waiving a fundamental principle in banking regulation, the credit crunch must still be sapping the strength of America’s biggest banks. Fortune’s Peter Eavis documents an unusual Fed move.
By Peter Eavis, Fortune writer
August 24 2007: 4:40 PM EDT
NEW YORK (Fortune) — In a clear sign that the credit crunch is still affecting the nation’s largest financial institutions, the Federal Reserve agreed this week to bend key banking regulations to help out Citigroup (Charts, Fortune 500) and Bank of America (Charts, Fortune 500), according to documents posted Friday on the Fed’s web site.
The Aug. 20 letters from the Fed to Citigroup and Bank of America state that the Fed, which regulates large parts of the U.S. financial system, has agreed to exempt both banks from rules that effectively limit the amount of lending that their federally-insured banks can do with their brokerage affiliates. The exemption, which is temporary, means, for example, that Citigroup’s Citibank entity can substantially increase funding to Citigroup Global Markets, its brokerage subsidiary. Citigroup and Bank of America requested the exemptions, according to the letters, to provide liquidity to those holding mortgage loans, mortgage-backed securities, and other securities.”
http://money.cnn.com/2007/08/24/magazines/fortune/eavis_citigroup.fortune/index.htm?cnn=yes
This artcle reveals the desperation of the situation. Forget about puts and cash get you some guns and ammo. Unreal.
Changing the rules for the big guys…..what a shock!!!
Interesting volume in the march DJX puts, 1k at the 90 strike yesterday and 1233 at the 88 strike today. Seems like a long way down for a hedge. (index at 133)
“The owners of stricken state lender SachsenLB aim to sell the German bank quickly after its near collapse under heavy losses from U.S. subprime mortgages and other risky debt, sources familiar with the matter said.”
“Germany has taken the brunt of the European fallout so far from problems stemming from subprime home loans as two of the country’s banks have almost collapsed.”
The 3 French funds that triggered the slide only had a few billions exposure, why did the ECB have to pump in $250B or more ?
I find it interesting that there have not been any articles regarding homeowners who are well..still homeowners that are in properties that are worth less than original asking price and are not facing foreclosure. I would think that their would be some statistical charts plotting areas like CA and Fl showing how many years it will take these homeowners to return to their original sold price.
seems like it’d be difficult to structure such a piece and make it interesting.. lemme try.
Maybe 9 of 10 current homeowners don’t plan on moving, didnt use the house as an ATM, can well afford to carry the house and will hunker down and wait out this storm, for however many years it takes.
hmm.. nope.. i’ve failed.. this is not the kinda thing that sells newspapers or TV commercials.
Based on the old wisdom that the average homeowner (and maybe renter, can’t recall) moves every 7 years, I think “9 of 10″ is too optimistic. Even if nobody moved anywhere, I think that assuming less than 10% of owners used HELOCs or HE loans is a real stretch.
Nevertheless, I think you’re right in that the numbers would be hard to come by and there probably would not be enough fire in such an article.
rough stats are 110 million US households.
Foreclosures are already about 1 million.. Estimate about 2 or 3 million foreclosures total.. and then double it, just for good measure, to 5 mill.
That’s still around 5%, or 19 of 20 who just need to hang in there till it blows over.
In all the exultation here about lenders, appraisers, speculators getting their just “rewards” in this collapse I think there’s a large group of people caught in the middle of this mess and lost.
There are a lot of homeowners, I am one, who did not buy in the bubble, did not speculate and try to flip a property, who did not refinance their homes. And, as life has a way of doing, there are circumstances that come up that may be forcing those owners to sell into a rapidly declining market. They may be able to cut their price more than someone with no equity, but house prices in many areas are still generally too high for them to go into something else.
I really believe these people, and I’d venture to say there are more of them than flippers and house-as-ATM owners, are really going to be hurt. They can’t sell their houses but have to sell. What do they do?
Just my opinion, but for every sleazeball in this real estate casino the past few years, there are many who never played who are going to hurt and lose through no shenanigans of their own. What becomes of this forgotten group in all of this?
If they hadn’t bought during the bubble, and haven’t done a cash-out refinance, they should still be able to sell and get out whole.
Just read on Brokers Outpost that Bank of America is dicontinuing ALL stated income products via brokers! I cannot remember if changes take affect today or September 1st. Hopefully this will prompt others in the industry to undergo similiar tightening…
Century 21 CEO sleezoid on CNBC yammering how incomes are up and jobs are plentiful. Amazing as incomes are down.
How do these liars get away with it?
I’ve been trying to figure out who this mozilo guy is for a few weeks. I thought that it was referring to the browser. So he’s the CEO of Countrywide - okay I get it now.
Was looking for a college apartment yesterday and that was depressing. I looked at essentially tenement houses - and safety concerns immediately popped into my head. I talked to a realtor today to look for apartments and houses or townhomes as buying something is an option.
She basically told me how bad things are in housing there. People coming in crying about getting wiped out (or worse) in foreclosure. A lot of the stuff that gets talked about here. The economy is holding up reasonably well - it’s just that the housing stuff is killing balance sheets. Some of the stuff that she sent me were REOs and properties that have been on the market for quite a while. Scared me off of buying anything.
We will likely rent something next week and move in late in the week. Apparently there is a lot of pain out there.
Before Neil asks, no, we don’t have any popcorn left. I’ll have to pick some up one of these days.
if i were young and strong, willing to work.. and needed a roof over my head (and some popcorn money) i might go to a local bank or lender and offer my services as a “property manager” on a single abandoned REO .. perhaps do some yard work.. keep the riff raff from invading, in exchange for paying rent.
“When the Washingtons failed to persuade the buyers of their previous home to use Countrywide as a mortgage lender, the company threatened to refuse to release the cash for their new house, she said.”
…the Washingtons are spouting pure BS. They must have got this from a Simpsons episode.
“The mortgage executive had no kind words for the Fed either, saying the central bank has done nothing to help Countrywide with its liquidity problems. The Fed’s discount rate cut…is useless to Countrywide because it cannot borrow there for regulatory reasons.”
I thought CFC owned a thrift, through which it would have access to the discount window? Are they prevented from using it for funding their normal loan pipeline?