November 9, 2007

One Of The Most Challenging Markets In Recent History

Some housing bubble news from Wall Street and Washington. Bloomberg, “Fannie Mae, the biggest source of money for U.S. home loans, reported that its third-quarter loss doubled and said credit costs will increase as the housing slump deepens. The net loss of $1.39 billion, or $1.56 a share, was caused by a $2.24 billion decline in the value of derivatives contracts used to protect against defaults linked to its $723.2 billion of home-loan and mortgage-bond holdings, the Washington-based company said today.”

“CEO Daniel Mudd said the housing market will worsen. Fannie Mae confronts ‘one of the most challenging mortgage and housing markets in recent history,’ Mudd said. The company ‘is not immune to the challenges facing the mortgage markets.’”

“Credit losses this year have risen to as much as 6 basis points from about 2 basis points, Mudd said in a Sept. 27 interview. Fannie Mae, which owns or guarantees about 20 percent of the nation’s $11.5 trillion residential mortgage market.”

The Associated Press. “The results also marked a significant milestone for Fannie Mae: They brought the company current in its financial reporting for the first time since 2004, when a massive accounting crisis tarnished its reputation and swept the top executives from office.”

“New York Attorney General Andrew Cuomo said Wednesday that he has issued subpoenas to government-sponsored lenders Fannie Mae and Freddie Mac. Cuomo said he wants to know about loans Fannie Mae and Freddie Mac purchased from banks, including Washington Mutual.”

“The subpoenas also seek to find out how the government-sponsored companies handle appraisals. ‘If true, the appraisal practices described in the complaint would violate Fannie Mae’s requirements for loans we purchase from lenders or securitizers,’ said Brian Faith of Fannie Mae.”

“Fannie Mae and Freddie Mac were created by Congress to make home ownership affordable for low- and middle-income people.”

From CNBC. “At the very end of the hearing, Sen. Schumer asked the Fed Chairman Ben Bernanke what his recommendation would be should the Congress increase the loan limit that the GSE’s are allowed to purchase (the limit now stands at $437,000).”

“Bernanke replied simply, ‘A million.’”

“So when did a million-dollar home become low, moderate, or even God-forbid middle income?? According to the National Association of Realtors, the median price of a home is around $220,000, and I know I don’t have to explain the meaning of median to an economist, but come on!”

“Apparently Mr. Bernanke thinks that instead of letting the housing market correct itself, that we should just take one of the most trusted types of lending institutions out there and let them play with the big boys and their big bad mortgage backed securities.”

“Never mind that the market went completely haywire during the recent housing boom, and was fed by often negligent mortgage products, and that perhaps the focus should be on bringing affordability back at least into the nearest stratosphere.”

“Have we learned nothing these past few months?”

“In a letter to Cuomo, sent today, Office of Federal Housing Enterprise Oversight Director James Lockhart said Fannie and Freddie should not have to stop these purchases from Washington Mutual, ‘which you have not charged or subpoenaed, unless certain conditions stipulated by you are met.’”

“Lockhart also said Fannie and Freddie both retain the credit risk of the mortgages it buys and securitizes, unlike private label issuers of mortgage-backed securities. ‘Consequently, they have no economic incentive to knowingly purchase or guarantee mortgages with inflated appraisals,’ Lockhart wrote.”

“Wachovia Corp., the second-largest regional bank, said mortgage-related losses total $1.7 billion so far this quarter, more than the lender reported for the previous three months.”

“The value of the bank’s holdings have continued declining in November, with all asset classes ‘extraordinarily volatile,’ the company said in a filing with the U.S. SEC.”

“The weakening markets, which Wachovia estimates could get worse over the last two months of the quarter, cut the value of the bank’s CDO holdings by more than 60 percent. As of Sept. 30, Wachovia had $1.8 billion in CDO exposure; after the writedowns, the exposure is now $676 million.”

“Wachovia has an additional $2.1 billion of exposure to more traditional subprime mortgage-backed bonds. The value of those holdings remained steady in October as hedging strategies offset losses.”

From Forbes. “Germany’s Allianz, Europe’s largest insurer reported heavy subprime losses at its subsidiary Dresdner Bank. The company said that that the credit market turmoil had a 575 million euro ($846.1 million) negative impact, including 350 million euros ($515.1 million) in adjustments to the valuation of asset-backed securities.”

“‘If the market turbulence continues we cannot rule out further write downs or the necessity to draw on liquidity facilities,’ said the company.”

From CBC News. “Canadian Imperial Bank of Commerce said Friday it expects to take a charge of $463 million in the fourth quarter related to exposure to the U.S. subprime mortgage market. In mid-August, CIBC said it had about $1.7 billion US in the troubled U.S. mortgage market — as much as $1 billion of it relating to subprime mortgages.”

“Standard & Poor’s said Thursday that a collateralized debt obligation, or CDO, managed by State Street Corp. began liquidating its assets, prompting the ratings firm to slash the investment vehicle’s credit grades as much as 18 levels.”

“Carina was originally a $1.5-billion CDO issued in September 2006, according to data compiled by Bloomberg News. Senior note holders of the CDO decided to liquidate, S&P said. The firm didn’t identify the senior investors.”

“The securities will be sold at ‘what will most assuredly be depressed prices,’ S&P said.”

“More than $350 billion of CDOs comprising asset-backed securities might become ‘distressed’ because of credit-rating downgrades, Morgan Stanley said in a report Thursday.”

“Country Garden Holdings Co. and South Korea’s Hyundai Capital Services Inc. were among six global borrowers that delayed at least $3.5 billion in sales of U.S. corporate bonds in the last two days.”

“Country Garden, China’s most profitable builder, failed to attract investors for its proposed sale of $1.5 billion in notes even after offering yields of as much as 10%, according to people familiar with the deal, who declined to be identified because no announcement had been made.”

The Wall Street Journal. “Investors are fast losing confidence that bond insurers, who provide a financial anchor for roughly a trillion dollars in debt, will weather the credit-market storm.”

“Rising defaults on subprime mortgages and downgrades to bonds’ credit ratings are intensifying the fear that insurers of mortgage-related securities will be hit. Bond insurers agree to cover interest and principal payments in the event of default.”

“Analysts and investors expressed frustration with what they feel is a lack of detail about the complex securities known as collateralized debt obligations, or CDOs, that Financial Group Inc. insures. ‘They won’t tell you what deals they own,’ said Ann Rutledge, a principal at a structured-credit consulting company. ‘It’s the granular information that matters.’”

“Historically, Ambac and other bond insurers have been a conservative bunch. Like many on Wall Street, however, bond insurers got caught up in the mortgage frenzy and strayed from their roots.”

“Ambac insured $29 billion of CDOs backed by subprime mortgages, the most among U.S. guarantors, according to J.P. Morgan research, which expects the company to take a loss of $4.4 billion on that exposure.”

“According to Fitch Ratings, guarantors have written insurance on more than $80 billion of CDOs that pooled subprime-mortgage bonds.”

“‘They did it very aggressively, and a lot of it was underwritten in the last few years’ when loan underwriting standards were poor, said Thomas Abruzzo, a managing director at the ratings company.”

The Street.com. “Real estate vulture funds are scouring the U.S. for distressed housing developments and land sites being sold at cheap prices by homebuilders looking to clean up their balance sheets.”

“‘The market changed in the last 90 days,’ says Rich Knowland, a partner with a Seal Beach, Calif.-based fund that is looking for land opportunities on the West Coast. Distressed opportunities are starting to emerge in California and other overheated housing markets.”

“They’re seeing profit in buying the housing sites today –many of which are selling at 50% or greater below their peak 2005 values — with the aim of flipping them or selling homes at the projects in two years or more.”

“Today, finished home sites and raw land are now being sold by homebuilders for 50% to 75% discounts off peak 2005 values in the formerly hot regions, says John Peshkin, CEO of Starwood Land Ventures. For urban markets, prices have generally dropped about 25% in these states; the peripheral areas may have had 80% to 90% declines.”

“In some peripheral areas, sellers can’t even catch bids on communities under development and raw land, he says. ‘We’re not seeing too much competition. Everyone is getting ready and is afraid to catch a falling knife,’ Peshkin says.”

“‘We see in certain situations where that is loosening up, not by choice. Many deals have debt. Prices have to go down to be moved,’ says Knowland, who joined Pacific Terra earlier this year after leaving his post as regional VP of Lennar’s Orange County, Calif., division.”

The Courier Times. “Toll Brothers’ homebuilding revenue fell 36 percent in the fourth quarter, and its cancellation rate on new home contracts rose as the housing market slump continued. Robert Toll, CEO of the Horsham-based luxury homebuilder, said October was a slower month than September.”

“Cancellations for the quarter totaled 417 homes, or 38.9 percent, compared to 23.8 percent in the third-quarter of the year and 36.7 percent in the fourth quarter 2006.”

“‘We do think this is worse than it was in ‘88,’ the last time the market slumped, Toll said.”

The New York Times. “The housing market is horrible in most parts of the country, says the chief executive of the luxury home builder Toll Brothers, and he fears it will not get better until the newspapers stop saying how bad it is.”

“Toll Brothers, which has operations in 22 states, said yesterday that it expected to take a write-down of $250 million to $450 million because of declining land values when it reports results for the quarter that ended Oct. 31.”

“Robert I. Toll, the CEO, handed out grades for 37 markets that the company operates in, and most got a mark of F or worse. The lowest grade went to Las Vegas and Tampa, Fla.”

“‘The fact that I differentiate between F, F-minus and F-minus-minus’ shows just how bad things are, he told analysts during a conference call. He said those grades ‘go from miserable to outright purgatory.’”

“The company said many of the canceled home purchases were for its more expensive homes. The average price of new orders in the quarter was $646,000, but the average price of canceled orders was $788,000.”

“He said a survey of Toll customers who canceled contracts showed that only 11 percent reported trouble getting mortgages. More either had personal financial problems or were unable to sell the homes they already owned. ‘People who just wanted to walk’ accounted for 17 percent of the cancellations, he said.”

“‘Translation, they’ve read one too many Times articles, and decided now is not the time to buy a home,’ he said.”




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222 Comments »

Comment by Ben Jones
2007-11-09 10:27:17

‘we should just take one of the most trusted types of lending institutions out there and let them play with the big boys and their big bad mortgage backed securities.’

‘The results also marked a significant milestone for Fannie Mae: They brought the company current in its financial reporting for the first time since 2004, when a massive accounting crisis tarnished its reputation and swept the top executives from office.’

Sorry Ms. Olick, this is as corrupt a situation as this country has ever seen and on the largest scale ever. And for those partisans out there, why is the OFHEO boss defending Fannie in this investigation?

Comment by Matt
2007-11-09 10:38:37

He’s pissed Cuomo beat him to the punch.

Comment by txchick57
2007-11-09 10:40:22

That’s true. This is all about politics.

Comment by palmetto
2007-11-09 10:58:06

“In a letter to Cuomo, sent today, Office of Federal Housing Enterprise Oversight Director James Lockhart said Fannie and Freddie should not have to stop these purchases from Washington Mutual, ‘which you have not charged or subpoenaed, unless certain conditions stipulated by you are met.’”

Politics, yes, with the subtext of states’ rights vs. the Federal Government. Individual states are just starting to wise up to the fact that lack of effective or enforced rules and regulations at the top is like $hit flowing downhill and they’re on the losing end. This is happening in other areas as well, like illegal immigration. We seem to have either a rogue federal government or a completely moribund, insane federal government yawing to and fro like a rudderless ship.

That’s what happens when you have a federal income tax. The fed gubmint takes the money from the citizens and forces the states to beg it back. That’s why I’m all for abolishing the fed income tax. Let the states boost their sales taxes and decide what to send the Fed, if anything.

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Comment by ET-Chicago
2007-11-09 11:44:44

We seem to have either a rogue federal government or a completely moribund, insane federal government yawing to and fro like a rudderless ship.

Or C.) a little bit of both, depending on the issue.

 
Comment by Devildog
2007-11-09 13:37:28

Right now I’m in the middle of a volume on the Revolutionary War and it strikes me how very similar our time is to that time. Just substitute the federal government for Brittian and the States for the colonists and we’re back where we were 230 years ago.

The reason the Civil War was such a disaster was basically it was a fight between two central governments for power (although this was purposefully obscured by the Confederate government). But what would happen if ALL the States cede from the union together and return to the governmental boundaries set forth in the constitution?

While I would like to see that, I won’t be holding my breath…

 
 
Comment by Professor Bear
2007-11-09 11:09:48

And it’s about cover ups. If the U.S. taxpayer can be brought in to guarantee GSE-securitized debt, then perhaps any evidence of fraudulently-inflated appraisals will magically disappear?

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Comment by hd74man
2007-11-09 11:37:40

PB~

Personally, I think the Cuomo action has let the cat outta the bag relative to the enormous amount of collusion, conflict of interest, and coercion which has transpired in the origination game over the last decade.

This is big time corruption. Enron is small potatoes to to the mess that’s bubblin’ up at the moment.

I’m surprised these housing agencies aren’t filing some sort of class action suit against the federal and state appraisal standards boards for letting this all get so out of hand.

 
Comment by aladinsane
2007-11-09 11:58:25

I agree…

enron ripped off California to the tune of around $30 billion, and at the time it seemed like all the money in the world…

Seems like chump change, now.

 
 
 
Comment by Ben Jones
2007-11-09 11:11:21

‘He’s pissed Cuomo beat him to the punch.’

I don’t agree. It seems to me that which ever circle holds the White House gets to use the GSEs as a cookie jar. And then an opposing group will typically take up positions against the GSE’s. All the while, both parties try to appear to be fighting for various positions, but being careful not to endanger the cookie jar itself, as they hope to control it at some point.

Comment by Professor Bear
2007-11-09 12:00:31

Awesome theory! But I am wondering whether the cookie jar is bottomless? If so, how does it get perpetually refilled? If not, when will it run out of cookies?

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Comment by aladinsane
2007-11-09 12:39:20

Slipping your hand in and out of a cookie jar is easy, until you try and take a fistful of fiscal cookies out, and your hand is stuck at the mouth of the jar, and extraction is strictly a no-go…

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Comment by bluto
2007-11-09 13:28:11

The GSEs have been a Democratic/Congressional cookie jar for most of their lives. The administration has been fighting pretty hard to put very tight limits on their activities (while congress fights for a freer hand for them). OFHEO’s regulatory limits are pretty well defined by statute (much more than other financial regulators).

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Comment by kckid
2007-11-09 13:47:20

Bernanke’s Plan to Pick Your Pocket

http://www.fool.com/investing/value/2007/11/09/bernankes-plan-to-pick-your-pocket.aspx

Federal Reserve Chief Ben Bernanke has had some pretty stupid ideas lately. He’s been pouring money into the economy via cheap rates and other injections, despite evidence that — outside housing — things are moving along OK. That has decimated the dollar, and it wasn’t enough to rescue Wall Street, since markets have been getting pummeled daily ever since the last cut.

But yesterday, in his testimony to congress, Bernanke floated a truly atrocious idea: Stick taxpayers with a federal bailout in the jumbo mortgage market.

If Bernanke’s congressional brain fart becomes law, taxpayers will no longer just be serving as the backstop for private companies charged with assisting in the national goal of expanding affordable housing.

Bernanke and Schumer need to be disavowed of this horrible idea immediately. Fannie and Freddie’s history plainly shows that the government’s meddling in mortgage markets can have amazing unintended consequences. It’s not just unfair to ask taxpayers to provide the financial muscle for the next unforeseen blowup — it’s completely unnecessary.

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Comment by ThomasPS
2007-11-09 14:37:16

This is what you get when you trade a manufacturing based economy to a service based economy. Everyone is out like a shark trying to nail every single dollar you make.

 
 
Comment by Blano
2007-11-09 10:49:48

The Washington types are going to start circling the wagons.

Comment by Housing Wizard
2007-11-09 18:55:12

The government backed loans were spared somewhat during the last 3 years of the boom because they had the loan limits and a little more conserative underwriting . Now BB and friends want to raise the limit to 1 million .Look, the people that created this mess need to come up with a better idea to mend the problems than finding a entity to pass risky loans to .
Nothing in the law said that i million dollar loans need to be available . I lived during a time when rates were at 15 %to 17% on a Ist TD mortgage, and if you wanted a million dollar loan you had to put 50% down .Nobody was going around saying that the government had to provide loans because other funds were to expensive at the time . BB has exceeded his position in thinking that the duty of the FEDS is to provide bubble money to keep a bubble inflated by suggesting that even short term the gov. should back loans and provide funds in a declining market ,even Jumbo loans .Loan investors don’t want to catch a falling knife and either should government backed loans want to catch a falling knife . BB and his Senator/Congress friends show no proof that the market has bottomed to make the appraisal risk for gov. backed loans being prudent at any loan level at this time ,unless you want to call it a bail out for Wall Street and lenders . Save the tax dollars for something else that will be more needed as this mess unfolds .

 
 
 
Comment by exeter
2007-11-09 10:40:44

“Everyone is getting ready and is afraid to catch a falling knife,” Peshkin says.”

Is it my imagination or are these corporate criminals reading this blog everyday……

Comment by hd74man
2007-11-09 11:28:37

RE: Is it my imagination or are these corporate criminals reading this blog everyday…

Of course they are.

The posters here have been on top of the direction of this housing debacle and attendant issues months before the MSM and politico talking heads even had a clue.

I know the guys over on my Harley-Davidson investor website think we’ve got a chrystal ball or are doing some sort of voodoo because so much has evolved as called from right here on Ben’s blog.

Comment by Houstonstan
2007-11-09 11:38:23

HD: Are you long HOG?

Looks like it completed a nice ABC bounce. I’m thinking about shorting.

Comment by hd74man
2007-11-09 13:58:00

Houston~

I held a long position in HOG for 18 years.

Best stock I ever bought.

I got totally out about 6 months ago.

The time to short was when it ran to $74! like last June/July.

I had intended to short @ like $63/64 but waffled (thank God). The company has been known to surprise.

t’s back down to like high-40’s now. Personally, I think it’s back to the mid-30’s if this recession pick’s up.

$22k motorcyles as a discretionary purchase in a bad economy is a tough sell. I’m think much of HDI’s growth over the decade was driven by HELOC loans.

Check out HDI Message Board @ RagingBull.com. Won’t find a more knowledgeable group anywhere else.

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Comment by REhobbyist
2007-11-09 15:56:28

Nicely done, hdman. Hope you had a lot of shares. If only everyone could suppress their greed like you did, we wouldn’t be here on this blog now!

 
Comment by dimedropped
2007-11-09 22:37:49

Friend of mine is a general manager of a HD dealship…..says they are tanking.

 
 
 
 
 
Comment by nhz
2007-11-09 10:42:17

“Bernanke replied simply, ‘A million.’”

“So when did a million-dollar home become low, moderate, or even God-forbid middle income?? According to the National Association of Realtors, the median price of a home is around $220,000”

a one million dollar home will be low income soon enough if this idiot is not stopped. I think the B-52 guy is perfectly clear this time: he wants to devalue the dollar in the near future by 50-75%.

Comment by matt
2007-11-09 10:48:02

I don’t see how, asset backed still in a tailspin.
http://research.stlouisfed.org/publications/usfd/page17.pdf

 
Comment by KayLaw
2007-11-09 10:49:06

Until yesterday, we thought I had melanoma. I don’t and I’m fine, but when I was worried about my life I swore I wouldn’t let this stuff upset me so.

Sorry, but I seem to be back to my old POed self. A million dollars? Okay, so Bernanke and Cramer are definitely on my list. I can’t help it. It just makes me so angry!

Comment by are they crazy
2007-11-09 11:11:59

Kay: glad to hear that you are OK. Regardless of your health, it’s natural to be p*ssed at injustice. Go easy on yourself.

Comment by KayLaw
2007-11-09 11:17:20

Thank you, are they crazy. And yes, I think they may be crazy. :-)

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Comment by REhobbyist
2007-11-09 15:58:49

Good, Kaylaw.

 
 
 
Comment by Olympiagal
2007-11-09 12:53:16

Well, that is good news! You should have a party to celebrate.
And don’t be angry–think of the mass media as a rigged reality show/fascinating documentary covering the antics of less evolved primates. That’ll cheer you up. Maybe.

 
 
Comment by Ben Jones
2007-11-09 10:51:47

With that comment I now think BB is just dumb. No reason for one million, so why not 800k or 2 million. Dumbest statement from a Fed guy ever, IMO.

Comment by aladinsane
2007-11-09 10:55:05

(triple-bbb rated) is just that.

 
Comment by palmetto
2007-11-09 10:59:34

“BB is just dumb.”

I agree. He has the posture of a smacked a$$.

Comment by bubbleglum
2007-11-09 11:11:21

I think he was just trying to pi$$ Ron Paul off for getting smacked hard by Ron a few days ago.

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Comment by Professor Bear
2007-11-09 12:08:39

No way. His off-the-cuff $1m GSE guarantee remark represents a major policy shift, and will lead to rapid action in Congress to codify the remark into another bailout measure.

 
Comment by sleepless_near_seattle
2007-11-09 14:01:34

“…will lead to rapid action in Congress to codify the remark into another bailout measure.”

And hopefully rally the minions once again to vigorously oppose it, a la the amnesty bill.

 
Comment by jbunniii
2007-11-09 16:40:09

I wonder why Greenspan hasn’t weighed in on this stupid idea yet. He hasn’t been able to keep his mouth shut for several months now.

 
 
 
Comment by Darrell_in _PHX
2007-11-09 11:03:21

The GSEs back the low end of the market. The portion of the market generating the lowest fees, most likely to default and the ones taking the biggest hits.

Upping the limit now so that the GSEs can make bigger fees from true top-end buyers may be MORE about keeping the GSEs solvant than about protecting falling house values.

 
Comment by DC_Too
2007-11-09 11:06:28

Oh I don’t think he’s dumb. Did you hear Jim Rogers on Bloomberg the other day? He called the Chairman “a madman.” I thought it was really funny. Now I’m not so sure…

Comment by sohonyc
2007-11-09 12:55:17

He’s not dumb. And he’s not a madman.

This is nothing short of abject terror. Bernanke is staring straight into the maw of a full on financial collapse the scale of which the world has never seen. The only way through this minefield is to devalue the dollar to the point where the US is a nation with a vastly lower standard of living. Inflation hasn’t even begun to set in yet. Get ready for a gas at the pump to come in at around $8. Oh you think that’s going to cause financial collapse? Yeah. It will. But that won’t bring the price down.

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Comment by Professor Bear
2007-11-09 11:07:44

The dumbest part in my opinion is the belief that Fed social engineering can do a better job of managing the economy than the invisible hand. Certainly the former chair of the Princeton Econ dept has read Hayek, or understands why the centrally planned Soviet economy did not survive?

Comment by CHILIDOGGG
2007-11-09 11:35:20

“The concept of the Invisible Hand is nearly always generalized beyond Smith’s original discussion of domestic versus foreign trade. Smith himself participated in such generalization.”

http://en.wikipedia.org/wiki/Invisible_hand

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Comment by jbunniii
2007-11-09 16:42:01

Nothing wrong with generalizing if the model or metaphor remains valid in the general setting. Mathematicians do it all the time.

 
Comment by Mary Lee
2007-11-09 20:37:16

There’s that sort-of invisible hand, and the ever-increasing frequency of black swans…. Some ride this is shaping up to be.

 
 
 
Comment by Hoz
2007-11-09 11:07:44

There have been a lot of stupid statements from the Federal Reserve Board members over the years.

my favorite:

“Economists searching for reasons why some nations are richer than others have found that those with a wide belief in hell are less corrupt and more prosperous”

Comment by nhz
2007-11-09 11:10:14

are they talking about Afghanistan?

then maybe not because they don’t need to believe in hell, they already have it everywhere around them.

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Comment by CHILIDOGGG
2007-11-09 11:25:35

do you have a link for this remark?

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Comment by Hoz
2007-11-09 11:58:10

It was from The St Louis Fed in 2004, I can’t remember the link but it was in a paper on ‘Differences in wealth in nations’ or some such drivel.

 
 
Comment by In Colorado
2007-11-09 12:22:17

“Economists searching for reasons why some nations are richer than others have found that those with a wide belief in hell are less corrupt and more prosperous”

In that case Latin America should be very prosperous and corruption free.

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Comment by aladinsane
2007-11-09 12:58:20

“Hell isn’t merely paved with good intentions; it’s walled and roofed with them. Yes, and furnished too.”

Aldous Huxley

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Comment by jbunniii
2007-11-09 16:44:11

those with a wide belief in hell are less corrupt and more prosperous

If this were true, then Latin America would be the least corrupt and most prosperous region in the world. Doesn’t anyone spend fifteen seconds testing stupid theories like this against reality before positing them?

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Comment by jbunniii
2007-11-09 16:45:08

Oops, I should have spent fifteen seconds reading Colorado’s response before echoing it!

 
 
 
Comment by nhz
2007-11-09 11:08:07

he keeps the 2 million figure for his next speech. Anyone know the median home price at the end of the Weimar Republic?

 
Comment by watcher
2007-11-09 11:14:26
 
Comment by tweedle-dee (not dumb)
2007-11-09 11:31:20

He is beyond dumb. This is economics 101 stuff. He must have a hidden agenda. We just saw what throwing liquidity does to a housing market. It makes it stupid. And now he wants to throw more $$ at it ? Doesn’t make any sense.

Fannie Mae shouldn’t be allowed to backstop mortgages. They should have to sell all their exposure off to the market. That would keep them honest. As it is right now, they have almost unlimited power to do stupid things. Thank God for the current limits they do have, or they could be uber stupid !

 
Comment by ronin
2007-11-09 11:52:58

I think they made B be the one to throw out the M-number. That way they make themselves out to be demonstrating fiscal responsibility by ‘only’ raising it to 900k. B is just a sock-puppet, and can be made to say or do all kinds of things.

Comment by Professor Bear
2007-11-09 13:19:43

Great point! If objections are raised that make them scale back the size of the guarantee to a more affordable figure like, say, $750K, then no big deal…

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Comment by joesixpack
2007-11-09 13:14:38

I didn’t see it on the tube, just wondering, did BB hold his pinky in an upward orientation and touch it to the corner of his mouth when he said “one miiiiillion dollars”

Comment by txchick57
2007-11-09 13:37:49

groovy baybee

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Comment by Blue Skye
2007-11-09 14:07:59

“With that comment I now think BB is just dumb.”

Dumber than even Greenspan?

 
Comment by Michael Viking
2007-11-09 14:36:20

He looked completely dumb and lost when he said it. The smile on the congress-critter’s face seemed telling to me, too, almost like he was just trying to pull one over on BB and considered himself wildly successful. “What do you think? 2 million? 3 million? 1 million?” “ahh “1 billion (I swear he first said billion)…1 million. 1 million” said with a “as good a random number as any other - let me out of here” look.

 
 
Comment by Lisa
2007-11-09 11:02:52

“A one million dollar home will be low income soon enough if this idiot is not stopped. I think the B-52 guy is perfectly clear this time: he wants to devalue the dollar in the near future by 50-75%.”

I think BB is scared shitless. He and his Wall Street pals know a financial tsunami is coming. They’ll do what they can, but it’s only CYA. Really, I don’t think they can do anything meaningful to turn the tide at this point. The problem is too big, too expensive for the government to “fix.”

Comment by aladinsane
2007-11-09 11:18:14

(triple-bbb rated) willingly parachuted onto the deck of a fully engulfed aircraft carrier, and is flaming the fires, rather than putting them out…

Mission Accomplished

His compensation?

30 Pieces of Silver and 15 minutes of Fame (2/1)

 
Comment by Earl 288
2007-11-09 11:23:17

Lisa, I think you have it pegged!!!

 
Comment by spike66
2007-11-09 13:24:08

I think Lisa is right, but that means he’s not that stupid, just scared witless. The rest of the clowns, in the admin and the congress, with the exception of Paul, seem to think this is maybe a problem, but somehow manageable.

 
Comment by dimedropped
2007-11-09 22:49:33

“Abandon all hope, ye who enter here.” That response from BB was good reason to be afraid.

 
 
Comment by Professor Bear
2007-11-09 11:05:12

“he wants to devalue the dollar in the near future by 50-75%.”

And when will J6P see the wage inflation needed to help him afford his $1m home on the golf course?

Comment by nhz
2007-11-09 11:11:48

wage inflation? no problem with negative rates, although the 1M home will probably not be on the golf course (near a toxic waste dump is more likely).

 
Comment by Ben Jones
2007-11-09 11:14:57

Exactly right. If things are so inflationary, why aren’t wages rising and interest rates soaring.?

Comment by aladinsane
2007-11-09 12:12:30

We are in that never never land of between and betwixt deflation and inflation, a lull between the next skirmish…

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Comment by edgewaterjohn
2007-11-09 12:11:53

Never, this is crunch time. That’s why overlaying this crisis with 70s stagflation, while a tempting comparison, is invalid. J6P is about to see the downside to $25 DVD players - there will be no wage inflation! Neo-liberalism (European terminology) is so much more advanced than in the 70s.

 
 
Comment by mikey
2007-11-09 11:28:13

In 2006, the median annual household income according to the US Census Bureau was determined to be $48,201.

They CAN’T HANDLE a $250,000 overpriced POS never mind a million dollar McMansion MILLSTONE tied AROUND their NECK Assclown Ben :)

 
Comment by reuven
2007-11-09 11:54:04

If they manage to prop the bubble up for another year or two, it will make true what some of us have been saying for the past few years: Only POOR people will be able to buy houses.

If you had $1M in the bank, you wouldn’t want to buy a house whose value could “pop” like a balloon at any time! You’d be on the hook for the difference if you need to move and sell the home.

Only penniless people can “afford” to this.

Of course, it’s the non-savers (and the non-taxpaying class) that’s been the worst offenders so far. Raising the GSE limit to $1M will simply reinforce that trend.

Comment by nhz
2007-11-10 05:31:02

exactly, and the situation in some parts of Europe proves your point; I think BB and Congress want to move in that direction. Bread, circuses and free homes for the lower ranks of the populace - they couldn’t care less about the ones one step above as long as they pay their taxes / mortgages.

 
 
Comment by BubbleViewer
2007-11-09 11:57:43

I think I will choose to live in a teepee, rather than pay these inflated prices.

Comment by reuven
2007-11-09 15:06:04

I think the dollar:wampum exchange rate is now US$1.9 : 1 wampum. So it may be more expensive than you think!

 
Comment by hd74man
2007-11-09 17:57:54

RE: I think I will choose to live in a teepee

A yurt on a couple acres doesn’t make for a bad rural retreat.

 
 
Comment by laonlooker
2007-11-09 12:34:30

I commented on this yesterday so I am copying and pasting it here, since is seems appropriate. The short of it? It seems that BB is succumbing to the pressure of irate congresswoman.

http://www.websitetoolbox.com/tool/post/sdcia/vpost?id=2279488

Anybody see this? It is about Ben Bernake testifying before congress. It’s funny and sickening at the same time. Apparently, a congress woman from Orange County complained to BB about the spiraling home prices and demanded that BB do something about it. Of course, this woman is currently vested in housing prices right now.

The original story does not have a link but it was posted by Robert Campbell, who is rather reliable so I posted it here.

Comment by reuven
2007-11-09 14:19:50

I don’t see why complaining about falling home prices should seem any less ridiculous than complaining about falling Beanie Baby prices, or any other item that was overvalued in the past.

 
 
Comment by Chicago Bubble Blog
2007-11-09 12:40:57

“Bernanke replied simply, ‘A million.’”

These people are sooo out of touch with the middle class, it’s insane!

Comment by Sabrina
2007-11-09 15:14:23

Not really. This IS the middle class in the San Francisco Bay Area. There are whole counties where the average house price is very close or above $1 million.

Outside of a few select major metropolitan areas, I don’t know who is helped by moving the cap to $1 million.

Comment by reuven
2007-11-09 20:22:14

This 1700 sq/foot house on my block sold last month for over $1Million:

http://farm3.static.flickr.com/2138/1880528120_a24f59a70c_b.jpg

Of course, the previous sale was for $1.4 Million just a few months earlier!

Even though this is *my block* where I own a paid-up house, I’d welcome a price drop of 50%. These prices are nuts!

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Comment by palmetto
2007-11-09 10:46:59

“‘Translation, they’ve read one too many Times articles, and decided now is not the time to buy a home,’ he said.”

Translation: They’ve seen one too many Toll houses and decided they’re just not worth it.

Comment by Darrell_in _PHX
2007-11-09 11:06:59

Notice that he doesn’t say the pree reports are wrong.

My inference is that he wants to truth to get secret.

Translation: Yeah, it truely is a horrid time to buy a house, but I wish the sheeple weren’t figuring that out!

 
Comment by snake charmer
2007-11-09 11:18:16

Palmetto, check out our grade–an F-minus-minus!!! Yet even with that mark we still have three giant malls being built within five miles of each other in Pasco County. Talk about spitting into the wind. I think Tampa’s next grade will be an “incomplete.”

Comment by seattleguy
2007-11-09 11:56:20

No, an “incomplete” implies that one could still pass. F-minus-minus-minus maybe …

Comment by bicoastal
2007-11-09 12:14:47

How about “expunged”? At our place, this means: not only are you forced to withdraw with no hope of ever re-enrolling, but your name is stricken from the college records.

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Comment by SFC
2007-11-09 12:19:52

You guys in Tampa are the Delta House of real estate:
Dean Vernon Wormer: Zero point two… Fat, drunk and stupid is no way to go through life, son. Mr. Hoover, president of Delta house? One point six; four C’s and an F. A fine example you set! Daniel Simpson Day… HAS no grade point average. All courses incomplete. Mr. Blu - MR. BLUTARSKY-TAMPA… ZERO POINT ZERO.

Comment by snake charmer
2007-11-09 15:27:18

LOL. One of my favorite scenes.

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Comment by dimedropped
2007-11-09 22:55:14

“7 years of college down the drain”

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Comment by diogenes (Tampa)
2007-11-09 13:17:19

I love being at the very bottom.
It clearly shows how ridiculously overpriced things got here the past 5 years………..houses for poker chips, flippers everywhere…..and according to the NAR…….it’s economic fundamentals.
Baby-boomers, rich foreigners, running out of land, blah, blah.
Well, I guess not.

 
 
 
Comment by arroyogrande
2007-11-09 10:47:45

“Fannie Mae, the biggest source of money for U.S. home loans, reported that its third-quarter loss doubled”

Hey, I’ve got an idea, we should have the government explicitly guarantee Fannie’s loans, and let them handle loans up to a million dollars!

Comment by Professor Bear
2007-11-09 11:02:04

That might make it easy to cover up any potential evidence they securitized loans supported by fraudulently-inflated appraisals.

 
Comment by Darrell_in _PHX
2007-11-09 11:13:16

The ability to lie well. They ability hide the truth, when the truth is at risk of leaking out and truely shutting down the U.S. economy.

If Cuomo shows that the GSEs are at as much risk as the other lenders, and if people stop buying their securities, then what little activity there is in the housing market truely stops.

Comment by sohonyc
2007-11-09 13:11:54

“…hen what little activity there is in the housing market truely stops.”

…and then there’s that little tidbit about full scale economic collapse.

 
 
 
Comment by Jas Jain
2007-11-09 10:49:24


“‘Translation, they’ve read one too many Times articles, and decided now is not the time to buy a home,’ he said.”

They needed no articles to decide that now (2004-2006) was the best time to buy. They just followed the crowd. Monkey see monkey do…

Could it be that the articles these days actually make sense?

Jas

Comment by Mikey(2)
2007-11-09 11:31:50

Translation: the truth hurts.

 
 
Comment by arroyogrande
2007-11-09 10:54:40

OFHEO Director James Lockhart: “Fannie and Freddie both retain the credit risk of the mortgages it buys and securitizes…Consequently, they have no economic incentive to knowingly purchase or guarantee mortgages with inflated appraisals”

James, there was no credit risk when housing prices were ‘always going up’. Therefore, there *was* an economic incentive to guaranteeing (and making money off of) mortgages with inflated appraisals.

Gee, can I be a director at OFHEO too? What are the qualifications?

Comment by DC_Too
2007-11-09 11:11:54

You have to have a life-long, financial relationship with the industry before you get to regulate it. From the OFHEO’s website:

“Mr. Lockhart co-founded and served as managing director of NetRisk, a risk management software and consulting firm serving major financial institutions, banks, insurance companies and investment management firms worldwide. He also has an extensive background in financial services including insurance, investment banking and pensions.

He has served in senior positions at National Reinsurance, Smith Barney, Alexander & Alexander and Gulf Oil, in Europe and the U.S. He has served as a member of the American Benefits Council’s Board of Directors and serves on the Advisory Board to the Task Force for the Critical Review of the US Actuarial Profession.”

Comment by Kid Clu
2007-11-09 14:16:43

“You have to have a life-long, financial relationship with the industry before you get to regulate it.”

This could be why we have the financial problems we are facing today.

 
 
 
Comment by Professor Bear
2007-11-09 11:00:19

“At the very end of the hearing, Sen. Schumer asked the Fed Chairman Ben Bernanke what his recommendation would be should the Congress increase the loan limit that the GSE’s are allowed to purchase (the limit now stands at $437,000).”

That verbal exchange makes far more sense in context of the Cuomo investigation of possible GSE purchase of mortgages backed by fraudulently-inflated appraisals. Though I doubt it will work, this looks on the face like a desperation effort to put the U.S. taxpayer on the hook for insuring the value of GSE debt whose value may have been fraudulently inflated.

Comment by ronin
2007-11-09 11:59:17

“At the very end of the hearing, Sen. Schumer asked the Fed Chairman Ben Bernanke what his recommendation would be should the Congress increase the loan limit that the GSE’s are allowed to purchase (the limit now stands at $437,000).”

A staged question by a stooge in the audience, attempting to appear off-the-cuff.

 
 
Comment by ET-Chicago
2007-11-09 11:01:37

Robert I. Toll, the CEO, handed out grades for 37 markets that the company operates in, and most got a mark of F or worse. The lowest grade went to Las Vegas and Tampa, Fla.

‘The fact that I differentiate between F, F-minus and F-minus-minus’ shows just how bad things are, he told analysts during a conference call. He said those grades ‘go from miserable to outright purgatory.’

Get ready to hand out a lot more of those F-minus-minuses, Mr. Toll.

(You’re lucky you’re only in Purgatory.)

 
Comment by Blano
2007-11-09 11:02:23
 
Comment by flatffplan
2007-11-09 11:03:41

Mudd gets a raise and Raines get 100k a month for life
pretty good for government clerks
“can’t fire me”

Comment by hd74man
2007-11-09 11:44:20

Chrysler is toast.

Their cars are junk as are GM and Ford’s.

And I’ve been a Ford man all my life.

Big Three managment just doesn’t get it.

Comment by vozworth
2007-11-09 12:11:31

the big three must die in order for a new detroit to live again. And it comes with the destruction of the notion that cars can only run on gas.

Comment by MrBubble
2007-11-09 12:57:58

But why don’t they want cars that don’t run on gas? Follow the money.

Dealerships and parts manufacturers make tons of money on parts (replacement and repair)

Number of parts in an average internal combustion car = 100s

Number of moving parts on a Telsa Roadster = 12

I know that there are problems with cars like Telsa (affordability, battery life, battery disposal, battery production, etc.) I just wonder who’s holding up development.

Also, I wouldn’t be surprised if Big Oil and the Big 3 were in bed together. An electric car can run on fungible sources of electricity and that will cut out Big Oil. But I don’t want to get all tin-foil hat, so I just follow the money. “Some people…got ta have it!”

MrBubble

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Comment by Mary Lee
2007-11-09 21:06:40

It’s Tesla. Not even going that far, 30% to 40% of cars sold in Europe have those nifty new diesel engines…you know…the ones with pep, 50-60 mpg, last forever?

At a Mazda dealer, I asked about importing a diesel model. The salesman insisted Mazda didn’t build one. He later found it online, and apologized. I didn’t buy his Mazda, but would consider it with the diesel.

 
 
Comment by hd74man
2007-11-09 18:04:48

RE: the big three must die in order for a new detroit to live again. And it comes with the destruction of the notion that cars can only run on gas

We are PIG-CAR nation.

I saw scores of attractive, fuel efficient automobiles on the motorways of England when I went in ‘05.

At the time an imperial gallon of gaz in USD was $8.50.

My rental Spanish built Altea with a 1.8Liter turbo-disel/6-speed manual trans got 61mpg, and was able to cruise with the Bimmer heavyweights on the M25 @ 90kph.

As I said-Detroit just doesn’t get it.

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Comment by tresho
2007-11-10 00:36:59

Most auto makers (the Detroit 3 included) produce vehicles with small turbo diesels that get the kind of mileage you quote. AFAIK, none are available in the US market.

 
Comment by rj
2007-11-10 18:59:56

Volkswagon Jetta. Diesel. 40 mpg.

 
 
 
Comment by In Colorado
2007-11-09 12:17:47

As the dollar continues to tumble, we Americans had best get used to the idea of “entry level” imports costing 40-50K. Even the ones that are assembled here still have a very high foreign content percentage, and will be priced accordingly.

Then again, the domestics have a lot of Canadian content, o they will be boned as well.

Comment by Northeastener
2007-11-09 15:42:12

As the dollar continues to tumble, we Americans had best get used to the idea of “entry level” imports costing 40-50K.

LOL, you are so right. That’s why I said “screw it” and went out and bought my ‘07 Infiniti with all the goodies. If inflation really take off, I’ll be paying the loan off with less valuable future dollars, while the same vehicle will undoubtedly increase in price because of dollar depreciation/yen appreciation.

I’ll drive this thing 10 years or until gas hits $10/gal. It’s got everything I could want in a car except good gas mileage, but most cars that do 0-60 in 5.8s and have AWD don’t get better than 20mpg anyway.

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Comment by sleepless_near_seattle
2007-11-09 12:45:43

I don’t get these generalities. What doesn’t Ford get?

I have one as a company car and love it. I drove an Escort in college and for 5 years after to 150K miles, no problems. I wish, as Vozworth states, that they would get more serious about other technologies and put less reliance on P-Us and SUVs and I realize that “individual results will vary”, but as far as quality and style my car is great.

Comment by MrBubble
2007-11-09 13:10:50

Every time I get into a small, US rental at the airport, there is something wrong. Tons of road noise, windows that don’t seal, rattling, poorly designed instrument panels, etc. I could upgrade, but I am a cheap-ass. The Toyotas and Hondas are always fine. And my mom has a comparably priced Hyundai that runs like we the people.

On the other hand, my dad drives a Kia that is a three cylinder sh!t box.

I dunno what I’m trying to say. Lost my train of thought. I guess all of the nice driving experiences in my recent past, in terms of styling and performance and comfort, have come in non Big 3 autos.

Then again, I haven’t taken my own car out of the garage in three months since I bought a bike (made in China, d’oh). It’s a 1993 Benz 190E that is a tank and cannot be killed. My carbon footprint will be the size of a midget child’s…

MrBubble

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Comment by sleepless_near_seattle
2007-11-09 13:49:57

I must say that I probably wouldn’t buy my current vehicle. Not because it’s not good, but it’s an Escape, and doesn’t fit what I need right now. I inherited it from another employee. But it runs great, no squeeks, no rattling.

If I were to buy a new compact, I would probably buy the Civic.

I just don’t understand most of the generalities I hear, especially about Ford. I’m pretty sure I wouldn’t buy GM or Chrysler, but I think American car bashing has gone too far such that people overlook some good offerings.

Having said that, I have rented the Kia sedan (Sonata?) and liked it. Plus they have 10Y/100K warranty.

 
Comment by phillygal
2007-11-09 14:16:01

That’s good to know. I’m shopping for an Escape. Friend let me drive her vehicle last winter while she was in Florida. It was good in weather.

Waiting a few more weeks for incentive season.

 
Comment by Evil Capitalist
2007-11-09 14:39:27

When I bought a car myself or when I helped someone to buy a car, I always played a game of chicken with dealerships:

To do that you only need as many dealerships as you can find in your area together with their fax numbers. What you do is you compose a nice little message saying exactly what you are looking for and that you have a certain number in mind. Whoever gets closest to your number or better first gets the deal. Of course you send the same fax with the cover sheet that indicates you are faxing the same thing to -all- dealerships, which is really difficult to miss by leaving all fax numbers in the CC field.

So far using this trick i obtained 8 cars at invoice - 2 to invoice - 4% as at the end of the day floorplan financing costs money and the more units dealership sells the bigger end of the year payoff they get.

 
Comment by sleepless_near_seattle
2007-11-09 15:19:03

Good work, EC. The “internets” really give us leverage to do so these days.

Phillygal,
My Escape is a 2005. My last car that I bought and have driven since May, when I got the Escape, was a ‘98 Jeep.

If I didn’t have the Jeep I’d probably keep the Escape as my weekend plaything once the company lease runs out. As it is, I’ll probably sell it at that time.

I’m a little torn as I’ve gotten 250K miles out of the Jeep and it’s my “off-road, beat the snot out of it car.” It keeps takin’ it so I keep dishin’ it and doing whatever maintenance when needed. Much cheaper than having a payment, etc. But I really do like the Escape too, as it drives more like a car. Responsive handling, good suspension, and fairly quiet for a “lower-end” SUV. A LOT has changed since 1998, that’s for sure.

My only complaint is that it’s AWD so it sometimes seems like a gas hog.

 
Comment by are they crazy
2007-11-09 15:26:17

I have a 2005 Hyndai Sonata and it totally rocks. Checked Consumer Reports before I went shopping and it said for the money it was great. I knew exactly what I wanted. We spent one Saturday shopping dealerships and it was dreadful - they hated that I knew what I wanted and was sure I didn’t want a new car. Went on line and in 10 mins found what I wanted at a price I wanted and picked it up the next day. Only had 11K miles on it and every feature they had. Put nearly 50K miles on it in the first 2 years and have never needed any work. They sure have improved those little suckers.

 
 
Comment by REhobbyist
2007-11-09 16:59:34

Sleepless, you’ve been driving the only fuel-efficient cars Ford makes. All of their emphasis for years has been on gas guzzling trucks and SUVs, and large luxury sedans that Ford executives like to drive. My dad designed for Ford for 30 years, and I buy Ford Focus cars, but we have always been frustrated that they never retooled in the 70s to compete with Toyota and Honda. They could have easily competed, but they just didn’t. It drives me nuts. Now they’re blaming their problems on their workers.

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Comment by travanx
2007-11-09 23:14:48

The styling is terrible on most American cars. The fit and finish is just sad. Why are they guzzling gas on such wimpy engines? They handle like junk.
I don’t like most German cars because they are basically very expensive Japanese cars that aren’t as reliable.
The Japanese have got most of the market right on with designs, fuel efficiency, reliability, and fit and finish.
Though I think Nissan leaves something behind by assembling in Mexico.
I guess in the end I really like American or Japanese made Hondas and Toyotas.
Please get rid of unions. And please let a Japanese company guy go over to FoMoCo, GM, or Cerberus. Please oh please.

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Comment by AndrewHac
2007-11-09 13:03:18

Toyota rocks !!! I owned a brand new Toyota Corolla 1999’s LE, drive-out price from the dealer $16,5000. I am still driving it as speaking with 169,000 miles on it; 34 miles/gallon.

Beat that ? FORD, CHRYSLER, GM…

Comment by cashedin05
2007-11-09 20:04:21

Won’t beat it but I got a nice 99 Olds 88LS with all the bells and whistles. 205hp V6 with 19 mpg city and 29 mpg highway.

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Comment by travanx
2007-11-09 23:18:14

It doesn’t matter if you have a V6, if a honda or toyota with an Inline 4 with less HP and less Torque can go faster and get better gas mileage. Thats something I just don’t get about American cars. I was reading how the new Pontiac?? GT has a v8, and could only think my little Acura RSX is probably faster with a 2.0L I4 and will easily get better MPG.
Can’t really say anything about keeping a car for a long time though. That makes a lot of environmental sense to me before any of the other reasons to keep a car for as long as possible.

 
Comment by peter wiener
2007-11-10 00:31:42

There is no such as thing as “…a nice 99 Olds 88LS…” and never was. Most American passenger cars have been junk right from the drawing board thru to production. Resale value statistics confirm this - go and try to buy a good condition reasonable mileage for the year used Toyota / Honda / low end BMW / Mercedes / Audi! They retain value for differenrt reasons, BUT THEY ALL RETAIN VALUE SIGNIFICANTLY BETTER than US made cars.

As a former lender to used car dealers where I had to inspect potential collateral of fleets of all makes of used vehicles and as a car enthusiat, that Detroit has no place in the modern world of car production and should be ashamed, regardless of the reasons for their production, for the absolute shite products that they have foisted on the American public (everyone else anywhere else is too smart with their money to buy American crap)for so long. I pray for their imminent demise.

 
Comment by rj
2007-11-10 19:11:26

Toyotas are designed to break at 100k miles. That’s why I’ll never buy one. My dad’s 1985 Jeep CJ7 went 255k miles on the original engine and original transmission before it broke. It cost him $9500 brand-new. I want to buy a car, and then run it til it breaks. Why I bought a Jeep brand-new in 2004.

 
 
Comment by Mary Lee
2007-11-09 21:14:12

‘05 Corolla - bought w/11k miles on it for $15k…..roaring toward 130K miles (husband drives a lot for work)….38 mpg, always…. like my 80-mph, window cracked, A/C on trip north a year ago…still swallowing 1 gal per 38 mpg

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Comment by aladinsane
2007-11-09 11:08:07

“F” stands for FAIL, no matter how one parses it…

“Robert I. Toll, the CEO, handed out grades for 37 markets that the company operates in, and most got a mark of F or worse. The lowest grade went to Las Vegas and Tampa, Fla.”

“‘The fact that I differentiate between F, F-minus and F-minus-minus’ shows just how bad things are, he told analysts during a conference call. He said those grades ‘go from miserable to outright purgatory.’”

Comment by Houstonstan
2007-11-09 11:51:31

I’d rate it FFFF.

Meaning ‘Fecking Fecker is Fecking Fecked”

 
 
Comment by tweedle-dee (not dumb)
2007-11-09 11:09:05

“Have we learned nothing these past few months?”

FINALLY someone in power understands what the hell happened and what is going to happen ! FINALLY. FINALLY. Give that man a cigar !

I can’t believe how STUPID everyone is about this. I have lost ALL respect for BB. The guy is an idiot.

Comment by bicoastal
2007-11-09 12:20:13

The man is Diana Olick. Don’t know if she smokes cigars.

 
 
Comment by watcher
2007-11-09 11:10:30

State Street Corp. began liquidating its assets, prompting the ratings firm to slash the investment vehicle’s credit grades as much as 18 levels.”

MY GOD. This stuff is almost completely worthless, and the banks have how many trillions of it? This isn’t a liquidity crisis, it is an insolvency crisis. Better make sure all of your deposits are insured, and I would get out of money markets completely.

Comment by Hoz
2007-11-09 11:19:05

I am waiting to read BAC’s 3rd Q report this afternoon (along with the rest of the world).

I wish to see how bad it really is.

Comment by Blano
2007-11-09 11:44:44

Do you have a quick and easy link to where we can read it?? Thanks.

Comment by Hoz
2007-11-09 12:11:53

I am getting it emailed to me as it comes out. But it is always posted under SEC filings; look on any detailed stock quote page and it should have a link.

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Comment by Blano
2007-11-09 12:36:57

Thank you.

 
 
Comment by Hoz
2007-11-09 12:37:09

“…Subsequent to September 30, 2007 the credit ratings of certain structured securities (i.e., CDOs) were downgraded which among other things triggered further widening of credit spreads for this type of security. We have been an active participant in the CDO market and maintain ongoing exposure to these securities (see pages 78 and 90 for a further discussion of our CDO exposure). We expect these significant dislocations in the CDO market to continue, and it is unclear what impacts these dislocations will have on other markets in which we operate or maintain positions. …”

BAC Q3

http://tinyurl.com/2n5anq

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Comment by Hoz
2007-11-09 13:01:54

Morgan Stanley’s analysis
“In addition to our above concerns, if we begin factoring in escalating energy prices, the collapsing U.S. dollar and a possible wobbling in the emerging markets, we become even more convinced that the markets aren’t braced for the downturn,” Morgan Stanley said.

“We see more losses emanating form CDO portfolios, and continued derisking that will only put pressure on the financial sector going forward,” the bank said. “Even though financials are much cheaper today, we remain extremely cautious on the sector.”

Reuters
http://tinyurl.com/2nfwd4

 
Comment by Hoz
2007-11-09 13:22:34

Just reshorted the profits I took earlier in the financials.

:>)

 
 
 
 
Comment by flatffplan
2007-11-09 11:41:31

18 levels ? got a link
is that possible

Comment by Hoz
2007-11-09 13:30:16
 
 
Comment by vozworth
2007-11-09 11:48:10

Regulators to probe ratings agencies
By Michiyo Nakamoto in Tokyo

Published: November 9 2007 01:35 | Last updated: November 9 2007 01:35

A task force set up by an umbrella group for global securities regulators is to examine the role of the credit rating agencies in the subprime crisis and accompanying market turmoil.

The International Organisation of Securities Commissions (IOSCO), which represents more than 100 securities regulators including the US Securities and Exchange Commission, the UK Financial Services Authority and the Japanese Financial Services Agency, said the objective of the task force was to identify any implications for securities regulators arising from the subprime crisis.

***********************************8
looks like the regulators are mounting up.

 
Comment by oxide
2007-11-09 12:08:06

And put the deposits where? In the mattress? I have an eventual down payment to protect.

 
Comment by sleepless_near_seattle
2007-11-09 14:05:01

“Better make sure all of your deposits are insured, and I would get out of money markets completely.”

And put it where?

 
 
Comment by Professor Bear
2007-11-09 11:17:54

Is the credit crunch contained to the financials?

Credit jitters and tech stocks lead Wall St lower
By Chris Bryant in New York
Published: November 9 2007 14:07 | Last updated: November 9 2007 18:01

US stocks fell sharply this week as credit market losses at financial companies and worries about a decline in corporate spending on technology unsettled US equity markets.

Confidence in the tech sector’s ability to rise above mortgage-related problems evaporated amid worries about falling technology budgets at big banks. An index of large-cap technology stocks was on track for its worst weekly performance in more than five years.

http://www.ft.com/cms/s/0/702321a6-8e47-11dc-8591-0000779fd2ac.html

 
Comment by WT Economist
2007-11-09 11:18:39

“‘We do think this is worse than it was in ‘88,’ the last time the market slumped, Toll said.”

You mean real estate goes down? Looks like the amnesia is wearing off.

 
Comment by Professor Bear
Comment by ET-Chicago
2007-11-09 11:33:24

Apple’s taken a real whack in the past couple of days, too.

 
Comment by Professor Bear
2007-11-09 12:13:26

GOOG stock appears to have a Plunge Protection put in place around the $672 level.

 
Comment by MrBubble
2007-11-09 13:13:38

It sure was a nice short at $743 the other day. It was a Vegas, baby move on my part, but it worked out. Better to be lucky than good.

 
 
Comment by tweedle-dee (not dumb)
2007-11-09 11:22:14

“One Of The Most Challenging Markets In Recent History”

This is a gross understatement. Anyone care to tell me when the housing market was worse than it is now ? When was the last time that house prices were falling across the country and mortgage companies were suffering a liquidity crisis ?

Its like he is calming the market, trying to fool people that don’t understand the immense MAGNITUDE of the current situation.

Lets face something. The US is in DEEP trouble. And so is anyone that holds MBSes or trades with them. That pretty much means the WORLD ! Collectively the world lent a bunch of people way, way more money than they could afford. And now the world is going to pay the price.

Comment by rally monkey
2007-11-09 11:32:35

“When was the last time that house prices were falling across the country and mortgage companies were suffering a liquidity crisis ?”

Not only that, but the prices are still insanely high, way, way out of line with incomes, so it has to get much worse.

There are still a ton of people who have seen prices fall 10, 15% and think everything will get better in the spring. They ain’t seen nothin yet.

Comment by Houstonstan
2007-11-09 11:59:50

RM: I concur with you. It will be a major awakening when they comprehend this has been a permanent change in the market and the RE doesn’t always go up and they’ll realize 1st hand what an illiquid assett is.

 
Comment by tweedle-dee (not dumb)
2007-11-09 12:17:03

“They ain’t seen nothin yet.”

I SO agree. This is going to get supremely ugly before it gets better. Its just starting now !

 
 
Comment by lazarus
2007-11-09 11:43:40

“Lets face something. The US is in DEEP trouble.”

Truer words have never been spoken. The US will continue to be in trouble until it starts looking at its warts in the mirrors and stops living a lie. Then and only then will it achieve the greatness that the founding fathers meant for it to have.

 
 
Comment by dude
2007-11-09 11:23:08

So, going long on WM yesterday is looking pretty good today. I added to it. I got dinked out of my CDE short for a couple bucks gain. I’m still thinking about that one, but I’m looking for a pretty good correction in PMs through next week, they’re due.

 
Comment by Big V
2007-11-09 11:25:02

So, what do you guys think. How low will the S&P go? What plans should we have for shorting it in earnest?

Comment by Earl 288
2007-11-09 11:36:38

If you really want to short the S&P, the way to go is with ProFunds Ultra Bear,(URPIX)

 
 
Comment by txchick57
2007-11-09 11:26:17

Barclay’s debunks 10B write down rumor and says it’s awash in liquidity.

Just so you know . . .

Comment by aladinsane
2007-11-09 11:28:37

It’s awash in the debt blue see, sans lifeboat.

 
 
Comment by aladinsane
2007-11-09 11:26:39

“New York Attorney General Andrew Cuomo said Wednesday that he has issued subpoenas to government-sponsored lenders Fannie Mae and Freddie Mac. Cuomo said he wants to know about loans Fannie Mae and Freddie Mac purchased from banks, including Washington Mutual.”

“The subpoenas also seek to find out how the government-sponsored companies handle appraisals. ‘If true, the appraisal practices described in the complaint would violate Fannie Mae’s requirements for loans we purchase from lenders or securitizers,’ said Brian Faith of Fannie Mae.”

A man has one hundred dollars and you leave him with two dollars, that’s subtraction… (Fannie) Mae West

 
Comment by rally monkey
2007-11-09 11:36:51

Tax question:

For years we heard the flippers brag about not having to pay taxes on their home gains as long as they lived in the house for 2 years. When these people are forced to unload their house for a loss, do they get to claim a tax deduction?

If there’s any justice they won’t be allowed to.

Comment by Houstonstan
2007-11-09 12:07:41

No. My understanding they could be on the hook for loan forgiveness.

I’d heard politico’s yakking about changing that IRS rule in the interim but I wasn’t aware of it being law.

 
Comment by In Colorado
2007-11-09 12:27:03

For years we heard the flippers brag about not having to pay taxes on their home gains as long as they lived in the house for 2 years.

Which is why the toxic loans did not reset for two years. They were built for flippin!

 
 
Comment by Michael Randallbard
Comment by Houstonstan
2007-11-09 12:05:26

I hope not. I’m still in the country and haven’t bought enough silver or ammo.

Can we push it out a few years?

Comment by flatffplan
2007-11-09 12:18:09

gun maker’s stock way up today

 
 
Comment by Professor Bear
2007-11-09 12:06:25

Take it at face value off a web site devoted to PM sales…

 
Comment by Blue Skye
2007-11-09 12:13:52

Those “top market analysts” are always on top of things aren’t they? I wonder what this guy was saying a year or two ago.

Comment by Heliben
2007-11-09 15:14:53

He was saying exactly the same thing a year or two ago (or five for that matter). I’ve been an avid reader of his newsletter since December, 2002 and began loading up on gold at $350 as a result. His message about the future of the USD has been consistent.

 
 
 
Comment by WantsOut
2007-11-09 11:40:16

“Fannie Mae and Freddie Mac were created by Congress to make home ownership affordable for low- and middle-income people.”

From CNBC. “At the very end of the hearing, Sen. Schumer asked the Fed Chairman Ben Bernanke what his recommendation would be should the Congress increase the loan limit that the GSE’s are allowed to purchase (the limit now stands at $437,000).”

“Bernanke replied simply, ‘A million.’”

I knew I was a little behind the curb, but when “low-middle income” qualifies? for a million dollar home I have a huge disconnect. It should qualify you for a white jacket!

Comment by phillygal
2007-11-09 14:10:22

His remark really does sound Doctor Evil-ish.

 
 
Comment by jetson_boy
2007-11-09 11:40:54

Jesus. The stories just keep on coming don’t they? One thing I’d be curious to know and think I know the answer to is that is this in fact the first time in US history that the housing market crashed the economy versus the economy crashing housing? It seems like a total converse of the norm. If so, that’s absolutely horrible because unlike normal recessions where people have safe-havens in the form of savings and a secure living situation, people now do not have this backup plan. The results I fear will be nasty- far more so than any recession in recent history.

Comment by Professor Bear
2007-11-09 12:05:03

“One thing I’d be curious to know and think I know the answer to is that is this in fact the first time in US history that the housing market crashed the economy versus the economy crashing housing?”

No. Check out the 1920s Florida land bust which preceded the 1929 Great Crash on Wall Street by several years for one example.

Or seven times since 1955 (not including the current episode) when a 25-percent-plus decline in residential construction occurred. In each of seven such episodes, there was an overlapping U.S. GDP recession. The direction of causality is quite hard to establish, as there is obviously a great deal of feedback between residential construction, the broader housing market and the rest of the U.S. economy.

 
 
Comment by tweedle-dee (not dumb)
2007-11-09 11:41:47

David Tice tells it like it is…
http://www.bloomberg.com See the interview videos. Says there isn’t anything the Fed can do now, says interest rates were too low for too long and is now calling for the S&P to drop by 50-60%.

Comment by Professor Bear
2007-11-09 11:58:11

“…now calling for the S&P to drop by 50-60%.”

I guess he does not believe in the PPT’s ability to keep the market propped up (such as today’s amazing lock of the DJIA on 13,100)?

Comment by tweedle-dee (not dumb)
2007-11-09 12:19:57

Isn’t that a beautiful lock they have ? Right at 13,100. Save 13,000 at all costs.

Wasn’t yesterday beautiful too ? Down nearly 300 points and it comes back to nearly zero. Bravo.

But sooner or later they aren’t going to step in. The Fed can’t support the whole market and traders are getting wise. Its 2PM now… it will be interesting to see where today ends up.

Comment by jetson_boy
2007-11-09 12:41:39

Indeed, and just like yesterday, it appears that the market is doing precisely the same, which is that things somehow mysteriously pick up in the last hour ( which can be attributed to 401k’s)

Honestly, it’s getting a tad repetitive these days. HUGE losses in the morning, coupled with either extremely narrow gains or slight losses with occasional major losses on a dependable, weekly basis.

(Comments wont nest below this level)
Comment by nhz
2007-11-10 05:45:38

same story on the EU markets, the pattern is getting somewhat predictable and the tool seems to be manipulation of the S&P futures.

 
 
Comment by WantsOut
2007-11-09 13:31:14

It was the speed of the recovery that blew me away. In a matter of a couple minutes 200 lose wiped away. I kept hitting refresh on my browser and 197,167,142,97,63, well you get the idea.

(Comments wont nest below this level)
 
 
 
 
Comment by WT Economist
2007-11-09 11:48:10

“Though Bernanke’s proposal was short on details, it apparently would overcome that opposition by putting an explicit federal guarantee on loans of up to $1 million.”

Two ways to read this. Either Bernanke has just proposed having the taxpayer take on an explicit guarantee of Fannie and Freddie’s debts. Or has just proposed having the taxpayers guarantee houses with mortgages of $418K to $1 million, but not $417K or less.

Comment by Professor Bear
2007-11-09 11:51:16

“Or has just proposed having the taxpayers guarantee houses with mortgages of $418K to $1 million, but not $417K or less.”

The GSE mission is providing for affordable housing. Apparently, the upper end of the affordable price range has just been redefined to reach up to $1m.

Comment by WT Economist
2007-11-09 12:07:41

Their mission is mostly middle income housing. Evidently $417K or less is now low-income housing, to be defunded like the projects.

 
Comment by In Colorado
2007-11-09 12:35:28

Apparently, the upper end of the affordable price range has just been redefined to reach up to $1m.

Lets see, @ 6% APR, no money down (new paradigm), 30 year loan, the monthly P&I would be a “mere” $5995. Yeah, that’s affordable. I’ll take 4 if they throw in a Hummer.

 
 
Comment by Rally Mitigation Team Member Bob
2007-11-09 13:12:39

Or third, Bernanke is an academic elitist buffoon who has no grasp of the declining standard of living for the middle class, and thinks debt is the key to prosperity for the sheeple.

Someone got on my case a few weeks back because I alleged that Bernanke would lower the FFR and tank the dollar just to save da boyz on the Street. Still think he’s so great now, whoever you were?

 
Comment by Groundhogday
2007-11-09 20:31:48

Median family income multiplied by 2.8 (conventional standard) should yield a reasonable cutoff for GSE lending:

National : $46,326 median : $129,713 loan
Seattle, WA : $49,297 median : $138,032 loan
San Jose, CA : $70,921 median : $198,579 loan

The current $417,000 limit is ALREADY DOUBLE WHAT IS REQUIRED to help lower and middle income families buy homes, in the major US market with the highest median salary (San Jose, CA).

I’m just quantifying what has been posted before, but it is shocking to see how little people can REALLY afford relative to prices even in the non-bubble areas.

Raising the GSE limits won’t make a bit of difference unless they also change the standards for a conforming loan.

PS—————
I also computed loan limits for affordability assuming max PITI at 28% of gross monthly median income, 6% interest, 30 year loan, 2% annual taxes and interest, and 20% down. The results were almost identical to the simple 2.8 x income posted above.

National : $46,326 median : ~$130k loan
Seattle, WA : $49,297 median : ~$140k loan
San Jose, CA : $70,921 median : ~$200k loan

 
 
Comment by Professor Bear
2007-11-09 11:49:11

Wouldn’t it be wise to wait for the results of Cuomo’s investigation into appraisal inflation before rushing to put a U.S. taxpayer-provided guarantee behind $1m GSE-securitized loans?

Bernanke sets out jumbo mortgage plan
By Krishna Guha in Washington
Published: November 8 2007 15:36 | Last updated: November 8 2007 15:36

Ben Bernanke, Federal Reserve chairman, on Thursday put forward a plan to help revive the secondary market for jumbo (large denomination) mortgages that would involve Fannie Mae and Freddie Mac, as well as credit guarantees from the federal government.

Mr Bernanke told Congress he would support raising the limit on the size of the individual loans eligible for securitisation by the government-sponsored mortgage finance entities from $417,000 to $1m (€680,000, £475,000) on a temporary basis. ;-) ;-) ;-)

http://www.ft.com/cms/s/0/d0d9639a-8e0e-11dc-8591-0000779fd2ac.html

Comment by Housing Wizard
2007-11-09 19:44:55

No reason to have a “on a temporary basis ” raise in the limit unless you were planning a bail out of current bagholders of mortgage debt IMHO .
PB ..this whole plan of using government backed loans to not only combat a tight money market, but to funnel already written bad paper to a new bagholder stinks .

I think the old Housing Wizard has said it all along that this was going to be the big plan (anybody can look back at my predictions ).
First the government spinners try to spin that borrowers are victims ,never mind that the borrowers, the lenders ,appraisers ,real estate agents ,and builders were just fraudulent gamblers in the real estate market that was corrupt in every way . Add to that that the regulators ,the Feds ,Lenders, Congress/Senate , rating agencies ,and planning commissions failed in their job to regulate ,control ,and combat faulty/fraudulent lending or control money supply ,or housing supply . Add that the MSM was controled by the advertisers that were the Corporations that were making record profits .

Than this big entity ,usually called Wall Street ,gained such power during the years of the fake boom ,while they expanded in global markets, while getting new cheap labor over seas ,and law and order went down the tube . Add that Greenspan kept the interest rates low and …well .

Can you really expect that all the makers of this mess are going to want any remedy other than a sweep everything under the carpet and try to seek a bail out ,so the lack of law and order and breach of duty by all these agencies are noticed ?

It has been clear to me that the policy makers /gamblers would go this route ,which is making the taxpayers the final bagholder for their folly and corrupted service to Wall Street .

Save the tax money for a more noble purpose that will be needed down the line .Let the blame fall as it should because you cannot expect the parties that allowed this mess to be the same parties that clean up the mess .

 
 
Comment by reuven
2007-11-09 11:49:40

A Million Dollar Mortgage should be for a $1.25 Million Dollar home, with a 20% downpayment. How anyone can stand there with a straight face and suggest that the GSE loan limit should be $1M is a mystery to me.

Also, house prices are DROPPING. Everywhere! So why isn’t anyone proposing LOWERING the limit to, say, $350? That would make some sense.

Comment by oxide
2007-11-09 12:12:56

Good point. Start requiring 20% again, and it won’t matter what Fannie’s limit on mortgages will be, because there won’t BE any mortgages for Fannie to buy.

Comment by sleepless_near_seattle
2007-11-09 13:42:44

Sounds like quite the conundrum!

 
 
Comment by Darrell_in _PHX
2007-11-09 15:24:33

$350?? Yeah.. limit the GSE’s to covering dog houses. ;)

 
 
Comment by Joe G
2007-11-09 12:17:00

Following up on a thread yesterday that Neil started, I personally think that raising the cap would accelerate the downturn as stated below. And i think it is unlikely the cap will be raised because there is not a lot of political support outside California for $1,000,000 Fannie conforming loans. Also, by the time our Congress gets around to enacting a cap change, Fannie could very well be insolvent with its current batch of conforming loans as witnessed by todays troubles.

For those that think the government can will nilly force Fannie to buy any loan, I’d say you are mistaken. Fannie does have shareholders and I don’t think there is a lot of support for using Fannie’s balance sheet as a dumping ground for toxic jumbos.

I guess what’s amazing is that for the most part the write-offs have related to residential mortgage related securities.

Yet the banks are loaded with residential mortgage loans in their portfolios which have not been securitized and are thus reflected at their original cost. Yes some banks have increased their reserves modestly. But no where near the level that the decline in their mortgage securities portfolio suggests.

But what is the difference? If you securitize a mortgage it’s tradable and I guess you need to try to mark it to market. But a similar loan may sit on the balance sheet at full value. That loan may have worse prospects. I understand some of this is in bank stock prices, but I believe that investors may be naively assuming that once the MBS/CDO problem is accounted for everything will be okay. It seems to me that may clean up some of their mortgage securities portfolios, but further provisioning will be ongoing to cover increased delinquency problems in their loan portfolios. If the banks’ residential mortgage portfolios were marked down similarly to their residential MBSs it would seem that many banks would be insolvent.

Also, I was thinking about the issue of raising the GSE conforming loan cap and how that would affect the mortgage market and the home price market. Contrary to most investors’ expectations, I think it would accelerate the problems. I’m curious what you think. Here’s my logic:

If Congress raised the conforming loan limit to $1,000,000 that would surely cover a large segment of the jumbo market. I guess Fannie and Freddie might like this because it would increase their growth prospects. But these loans would have to meet GSE guidelines. If I remember correctly, a conforming loan must have a 20% downpayment (or mortgage insurance if that’s not met) and has debt to income constraints. I think the constraints are that you can use 28% of your gross income for housing related payments and your total debt service to income (car payments, student loans, credit cards…) can approach 35%. Surely many existing jumbos meet this criteria. I would assume that the GSEs would require a new appraisal/income verification on an existing loan so that they knew that the loan met their guidelines. All new purchase loans would need to meet this criteria. This would make these jumbo loans more liquid which is what is desired.

The problem is that this would force the entire jumbo market to adhere to GSE guidelines. And guidelines mean you need to qualify using sensible lending criteria. But the home price market isn’t sensible. Prices are still out-of-whack relative to incomes. It is now more likely that any new purchase would have to meet the downpayment and income guidelines. This would have the effect of causing prices to drop to meet the guidelines. Why would a bank (Countrywide or Wells) originate a non-conforming jumbo that didn’t meet the new GSE guidelines when they could make a jumbo that meets the guidelines? The conforming jumbo can then be packaged and sold as a MBS. Is it likely that a non-conforming jumbo could be sold? Who would buy it? Does a bank really want another 100% LTV, stated income jumbo on their balance sheet that nobody wants to buy? I doubt it. This would add liquidity to the conforming jumbo market but force the entire mortgage market into conforming guidelines. Personally, I doubt the guidelines would be liberalized. That was the old problem. So it kills the non-conforming jumbo market and forces everyone to adhere to GSE standards. These would be better loans but would make it much harder to qualify. My guess is that it would rapidly cause the entire home price market to re-price to these standards. Short-term that would cause a lot more problems with the existing mortgage stock that doesn’t meet the guidelines. It would likely cause problems in Fannie and Freddie’s (and other lending institutions) existing conforming portfolios due to further pressure on home prices.

Also, if the loan didn’t meet guidelines, then I would have to assume that someone will need to be the insurer. Given the destruction of MTG, PMI, RDN, ABK, MBI, etc, I have to believe that the price of mortgage insurance has just skyrocketed. If the government/GSEs are going to insure this problem, they too would need to be paid to compensate for the risk. My guess is that this insurance would be too expensive and force the conforming loan limits.

There’s no such thing as a free lunch.

Is anybody talking about this?

Comment by WT Economist
2007-11-09 13:33:24

Perhaps they’ll waive all the conforming requirements too.

 
 
Comment by aladinsane
2007-11-09 12:23:26

“Bernanke replied simply, ‘A million.’”

Dr. Evil: I demand the sum… OF 1 MILLION DOLLARS.

Comment by In Colorado
2007-11-09 12:37:41

And upon receiving the ransom, Dr. Evil went ahead and bought a 4 bedroom ranch in Mission Viejo, and 3 series BMW with the cash.

Comment by aimeejd
2007-11-09 12:51:11

And a fur coat for Mr. Wigglesworth.

 
Comment by stuman
2007-11-09 15:09:17

Ranch?

 
 
 
Comment by Lisa
2007-11-09 12:45:48

“I personally think that raising the cap would accelerate the downturn as stated below. And i think it is unlikely the cap will be raised because there is not a lot of political support outside California for $1,000,000 Fannie conforming loans.”

I think you’re dead on about this. The coastal markets that have the highest home prices are blue states. We didn’t vote for Bush & Co, so I can’t imagine that bailing us out is high on their to-do list.

But I do think that Californians think that raising the cap will save the RE market. So, this may be more CYA talk. You’re right, if they slap traditional GSE standards on the jumbo market up to $1MM, the market is toast.

 
Comment by watcher
2007-11-09 12:47:57

The 3pm PPT stick save starts early today. Will they take it green?

Comment by packman
2007-11-09 14:26:39

We have our answer. PPT apparently went out golfing.

 
Comment by Professor Bear
2007-11-09 14:42:34

Looks like the goaltender took a hard slap shot to the face mask…

Comment by REhobbyist
2007-11-09 17:22:09

I think the PPT worked fine. Not a shred of good news all week, and a slew of bad news. A 600 point drop for a week is great, especially when you finish above 13,000.

 
 
 
Comment by Mike
2007-11-09 12:48:15

So Bernanke figures the amount loaned by GSE’s should be increased to $1 million when the average price in the USA is $220,000. Folks, we need one more department in Washington. “The Politicians and Washington Hacks Department of Psychiatric Examination”. Anyone up for elected office would have to be mentally evaluated before they can start work. That includes the Fed chairman AND the President and Vice President of both parties. Jeez, if you go for some jobs you have to take a lie detector test but you can get elected to the highest office in this country on nothing but b.s and the gift of the gab.

Comment by simplesimon
2007-11-09 13:30:40

i second that one. i dont think that they have the ability to raise the caps much either. I believe it would go against their bylaws and why they started fannie to begin with. by the way it does nothing to defuse risk. lending 100k to 10 people is more responsible then lending 1,000k to one person. just fundamentals baby-just fundamental.

 
 
Comment by aladinsane
2007-11-09 13:03:32

“I’m afraid of losing my obscurity. Genuineness only thrives in the dark. Like celery.”

Aldous Huxley

 
Comment by tweedle-dee (not dumb)
2007-11-09 13:04:06

Raising the limit to $1M is a moot point. Who would qualify ? Nobody has any equity in their present home. Even if they could sell it in today’s market. Nobody seems to have any cash for a down payment. How would anyone qualify for a $1M mortgage ? Its all stupid !

Comment by joeyinCalif
2007-11-09 14:13:10

i dont think it’s about homes .. it’s about loosening up the constipated secondary market..

 
 
Comment by marksparky
2007-11-09 13:15:43

awww, so much bad news—-”let us recovery”! Thought you’d enjoy this blog entry I saw on a local real estate blog yesterday (bloggers’ spelling not corrected):
“Imagine beiing hit with a hurrican like Ivan and themarket moves upward, then 12months later the largest damaging hurricane Katrina hits a few miles to the west of us on the Alabama Gulf coast and you know what you have. Instant, dead stop, mo movement and we have been that way since Katrina. Insurance rates, mortgage issues and a downturn in the over supply of product and price too high. BUT the media needs to get off the real estate markket and let it correct itself and quite telling the consumer bad news. There awre good deals to be found and people will buy if the national media would let us recovery. Media needs to stop talking negative and start talking possibilities available.”

Comment by Darrell_in _PHX
2007-11-09 15:19:23

Sentament echoed by Toll Brothers…. It is the job of the media to lie to the sheeple. Stop telling the truth and start spreading whatever bull dung is necessary to get people to buy these overpriced stucco boxes!!!!

 
 
Comment by simplesimon
2007-11-09 13:35:33

it will all be corrected next year. all will be good next year. we do have elections you know. the spinning should begin right after the superbowl. :)

Comment by sleepless_near_seattle
2007-11-09 13:57:27

I agree. One side says the ills are innumerable to count. The other side appears to be trying to hold the dike until January 21, 2009.

 
 
Comment by aladinsane
2007-11-09 13:40:08

“Life is not a matter of holding good cards, but sometimes, playing a poor hand well.”

Jack London

 
Comment by jbunniii
2007-11-09 15:27:08

The net loss of $1.39 billion, or $1.56 a share, was caused by a $2.24 billion decline in the value of derivatives contracts used to protect against defaults linked to its $723.2 billion of home-loan and mortgage-bond holdings

A naive question: shouldn’t something that is used for protection actually protect you?

 
Comment by jbunniii
2007-11-09 15:56:48

more traditional subprime mortgage-backed bonds

Isn’t this an oxymoron?

 
Comment by jbunniii
2007-11-09 16:05:26

Standard & Poor’s said Thursday that a collateralized debt obligation, or CDO, managed by State Street Corp. began liquidating its assets, prompting the ratings firm to slash the investment vehicle’s credit grades as much as 18 levels.

I love that they have a model that is so fine-tuned that it can distinguish between 18 levels of credit grades, yet so completely divorced from reality that it assigned an AAA grade to essentially worthless mortgage-backed securities. I am reminded of people who spend lifetimes researching the fine details of tea leaf reading, astrology, technical analysis of stockmarkets, the bible, etc., etc.

Comment by sleepless_near_seattle
2007-11-09 18:21:53

“I love that they have a model that is so fine-tuned that it can distinguish between 18 levels of credit grades, yet so completely divorced from reality that it assigned an AAA grade to essentially worthless mortgage-backed securities.”

That’s a good point and probably another blatant piece of evidence that they really do know what’s going on but can no longer game or save the system.

Then again, you don’t know what it’s worth until someone offers to take it off your hands.

 
 
Comment by Fuzzy Bear
2007-11-09 16:25:00

“Have we learned nothing these past few months?”

The Fed has not learned, because their head(s) is stuck too far up the butts of the Bush administration and Wallstreet! It’s the ole pass the costs back to the taxpayer to bail out Wallstreet.

 
Comment by seattle price drop
2007-11-09 18:17:30

I’m so relieved that discussion of Fannie Mae is starting to enter into the broad picture, in whatever form.

Hopefully, the eventual outcome will be the complete demise of this organization, which has done nothing but inflate the price of homes way past affordable limits in it’s brief lifespan. Bernanke’s snide request for a one million dollar limit is just the final proof that anyone needs to hear.

The fact that he would dare suggest such a thing in a country where the median wage is below 50K ……evil.

Comment by Housing Wizard
2007-11-09 19:51:54

You can’t expect the parties that allowed the mess to be the parties that clean up the mess . It’s called CYA . Protection is the very reason why these clowns are in a big hurry to get a faulty remedy to the loan loss before the degree of breach of duty and corruption is out in the open .

None of what took place in at least the last 5 years is going to pass the legal test ,the smell test , and at the very least alot of people closed their eyes to foul play in business .

 
 
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