The Proverbial Race To The Bottom
Some housing bubble news from Wall Street and Washington. The Guardian, “Construction firm Taylor Wimpey is looking for white knight to rescue it from a disastrous $30m-plus investment on Florida’s Gulf of Mexico coast. The company has abandoned its efforts to develop any kind of property on 2.5 acres of edge-of-the-water prime real estate at Clearwater Beach and is looking for a buyer for the land.”
“The developer bought the hurricane-damaged, 217-bedroom Adam’s Mark Hotel in mid-2005 at a top-of-the-bubble price of $31.5m (£15.12m). Now the company has decided that the Florida condo market is completely overbuilt – it is believed there are 800 condos on the market in the Clearwater Beach vicinity alone.”
“News of the Clearwater Beach debacle follows a few days after Taylor Wimpey gave downbeat estimations of its US operations and cut the value of its bank of US plots by $360m or 15% from $2.4bn.”
The Independent. “House sellers were this weekend warned not to put their houses up for auction as they are unlikely to sell because of the state of the housing market.” “According to new figures obtained by the Sunday Independent, three out of four houses up for auction this year have had to be withdrawn because of lack of interest.”
“Dublin estate agent Peter Wyse said: ‘Last year, 80 per cent of auction houses were sold at or just after auction. This year, it is the total opposite with 80 per cent of houses being withdrawn because of lack of interest. We are advising people not to use auctions right now.’”
“Elsewhere, as many as 35,000 home owners are set to fall into negative equity after a new report warned house prices will plummet by eight per cent next year. The bad news emerged from a report by Goodbody Stockbrokers that the average value of homes would drop by five per cent this year, meaning a drop of 13 per cent in just two years.”
“Goodbody chief economist Dermot O’Leary said the slide into negative equity would affect mainly those who took out 100 per cent mortgages, which were first introduced in 2005. However, Mr O’Leary played down the potential impact on homeowners.” “He said: ‘It only becomes a problem if the mortgage becomes unaffordable.’”
“Construction activity fell for the fifth month running in October when the sector declined at a marked rate. The latest fall has been linked by firms to weaker new orders, according to new figures from Ulster Bank.”
“While the employment indicator only really began to fall in July, the decline accelerated in October with the index just above the low of March 2003.”
“‘A sharp reduction in supply remains the best guarantee builders have that prices can be maintained. In the past 10 years, new house prices rose by 300pc. So far this year, they have fallen by a little more than 3pc,’ said Pat McArdle.”
The Financial Post. “Canadian Imperial Bank of Commerce’s writedowns related to the U.S. housing market are now estimated at $753-million, the bank said, as banks around the world continued to rack up tens of billions in losses from the panicked credit markets.”
“CIBC has written down 44% of its $1.7-billion U.S. residential CDO and RMBS portfolio, and there could be more losses to come. ”
“‘We continue to see future risks to CIBC given recent explosive growth in more exotic credit instruments,’ said Blackmont Capital analyst Brad Smith.. ‘We expect losses may continue to emerge regarding CIBC’s CDO portfolio.’”
From Bloomberg. “Losses from the falling value of subprime mortgage assets may reach $300 billion to $400 billion worldwide, Deutsche Bank AG analysts said.”
“Wall Street’s largest banks and brokers will be forced to write down as much as $130 billion because of the slump in subprime-related debt, according to a report today by New York- based credit analyst Mike Mayo,. The rest of the losses will come from smaller banks and investors in mortgage-related securities.”
“Deutsche Bank’s Mayo expects writedowns at HSBC, UBS AG, Royal Bank of Scotland Group Plc and Barclays Plc to be ‘ballpark $5 billion or so’ each, he said.”
“About $1.2 trillion of the $10 trillion of outstanding U.S. home loans are considered to be subprime, Mayo said in the note. Loss rates on about $200 billion of securities based on derivatives linked to subprime debt will run to as high as 80 percent, Mayo wrote.”
“Citigroup Inc.,Bank of America Corp. and JPMorgan Chase & Co., the three largest U.S. banks, reached an agreement on the structure of an $80 billion fund to help revive the market for short-term debt, a person familiar with the talks said yesterday.”
“The banks are pushing to have the fund in place by year-end because SIVs are unable to get short-term credit to finance their higher-yielding investments. The plan still has to win the confidence of investors.”
“‘The whole thing is flawed,’ said Josh Rosner, whose New York-based firm analyzes structured finance and real estate investments. ‘As opposed to recognizing losses, we’re trying to roll those losses into the future, regardless of the sanity or safety and soundness of doing that.’”
“The asset-backed commercial paper market has been shrinking for 13 straight weeks in the U.S. and last week declined the most in two months. The net asset value of SIVs has fallen to 71 percent of initial capital from 102 percent in June, Moody’s said last week.”
“International Securities Trading Corp. in Dublin said today it’s writing down at least 70 million euros ($102 million) from holdings of SIVs.”
“A SIV needs the approval of three-quarters of its senior debt holders before it can sell assets to the fund, analysts say. The structure for the super-SIV that the banks agreed to Nov. 9 may lower that requirement, according to the person briefed on the discussions. The fund may also impose fees of as much as 100 basis points, or 1 percentage point, the person said.’
From Fortune Magazine. “Two things stand out about the credit crisis cascading through Wall Street: It is both totally shocking and utterly predictable.”
“Wall Street always rides a wave until it crashes. As the fees roll in, one firm after another abandons itself to the lure of easy money, then hands back, in a sudden, unforeseen spasm, a big chunk of the profits it booked in good times.”
“‘The fee engine becomes so huge that these products take on a life of their own,” says Tiger Williams, CEO of a leading financial services firm for hedge funds. ‘Everyone rationalizes that it’s safe because they’re making so much money. But it’s far from safe.’”
“Even after the record $8.4 billion writedown for bad debts at Merrill Lynch & Co., the unprecedented ouster of three chief executives within five months and the elimination of $84 billion of market value at the five largest securities firms, Wall Street still is poised to report its second-most profitable year.”
“And 2008 may be better.”
“‘As the bombs are dropping and the mines are exploding, it’s a bit of a surprise,’ said Kenneth Crawford, who helps oversee $950 million at St. Louis-based Argent Capital Management LLC, which holds Morgan Stanley and Merrill shares.”
“Les Satlow, who oversees $450 million at Cabot Money Management, said he’s more bullish on prospects for investment banks than commercial banks. ‘The securities firms have less exposure to the consumer and greater exposure to overseas capital markets, which have a reasonable chance of remaining solid,’ Satlow said.”
From Reuters. “Blackstone Group president and chief operating officer Hamilton James said on Monday that the subprime mess that hit Wall Street banks appears to be getting worse. ‘The subprime black hole is appearing deeper, darker and scarier than they thought,’ James said, referring to investment banks.”
“But James added that Blackstone is starting to ‘go long’ the subprime market, after a successful bet against the sector that played out over the last 18 months. ”
From MarketWatch. “Embattled mortgage lender Countrywide Financial Corp. in a regulatory filing conceded that if its credit ratings fall below investment grade, its access to the public corporate-debt markets ‘could be severely limited.’”
“As of Sept. 30, up to $5.5 billion of Countrywide’s custodial deposit accounts on deposit with the bank could be affected if the credit rating fell into junk status, according to the filing.”
“The company said 4.9% of subprime mortgages were pending foreclosure at the end of the third quarter, up from 2.9% a year earlier.”
“To this day, Countrywide’s CEO Angelo R. Mozilo says his beleaguered company did nothing wrong during the loose-lending craze that is now unraveling nationwide with record foreclosures and mountainous losses. Instead, Mr. Mozilo considers himself and his company to be victims of financial forces beyond their control.”
“At a conference sponsored by the Milken Institute about two weeks ago, for example, he explained that borrowers forced lenders like Countrywide to lower their mortgage standards. The industry faced special pressure from minority advocates to help people buy homes, he said. Now, the government must help by increasing loan limits at government-sponsored enterprises like Fannie Mae and Freddie Mac, he added.”
“‘No one, including Mr. Mozilo, could have foreseen the unprecedented combination of events that led to the problems borrowers, lenders and investors face with many of these loans today,’ said Rick Simon, a Countrywide spokesman.”
“‘The biggest self-inflicted wound here is they should have pulled back in ’05 and ’06 when you had these competitors doing all sorts of crazy things. Angelo talked about the danger but somehow went for the market share gains anyway,’ said Sy Jacobs, a former banking analyst and founder of a New York investment fund.”
“For Countrywide…this remains one of the burning and still unanswered questions. Why did the company’s chief, who routinely warned of his rivals’ lax lending practices well before the mortgage market cracked, ultimately allow Countrywide to ardently embrace those practices?”
“‘People who get themselves in trouble are good at self-hypnosis. That is why they are such good salesmen — they convince themselves about the story,’ Bruce C. N. Greenwald, a finance professor at Columbia Business School, said. ‘He was not selling houses. He was selling a dream. And he had lived in a world where there had been no defaults for so long that he didn’t believe they could happen.’”
“Central to Mr. Mozilo’s…strategy was…to constantly snare market share from rivals. While this strategy benefited Countrywide throughout much of its history, when mortgage lending was a more plain-vanilla affair, it turned perilous during the past three years. By then, competition among mortgage bankers was so fierce that the only way to gain share was to loosen underwriting standards.”
“‘To the extent that more than 5 percent of the market was originating a particular product, any new alternative mortgage product, then Countrywide would originate it,’ said a former financial executive at Countrywide who was granted anonymity because he was concerned about legal action from the company. ‘Apply that principle to anyone’s business and it would get you in so deep — it’s the proverbial race to the bottom.’”
“When an appraiser hired by your mortgage company confirms that the house you bought is worth what you paid, that’s reassuring. But what if the appraiser was pressured to fudge the number?”
“Perry Turner, an appraiser in the Richmond, Va., area, said pressure to inflate values is so widespread that ‘it amounts to organized fraud by loan officers based on their need to generate fees and close deals, and then pass the loans on to Wall Street’ where they get packaged into the mortgage bonds that are now experiencing heavy default rates and losses to investors.”
“‘And they all think they’re never going to get caught,’ said Turner.”
National Mortgage News. “Loan abuse story of the week: ‘I attended a mortgage event in Chicago last year and sat at a lunch table with some LOs from California. Two men were bragging how they made up to five points on subprime payment-option ARM deals. My processor was with me and it made both of us sick.’ — Kathy from Washington.”
“Dublin estate agent Peter Wyse said: ‘Last year, 80 per cent of auction houses were sold at or just after auction. This year, it is the total opposite with 80 per cent of houses being withdrawn because of lack of interest. We are advising people not to use auctions right now.’”
One maddening thing about the extended English World of selling Real Estate, is their use of auctions, not like we in the states think of auctions, but more like an individual home being auctioned off, instead of what is typically done here, with a fixed price, that is negotiable.
This means that the Irish real estate bubble has gone off the burner, and is cooling rapidly.
ALADIN, at least your comment appears to rationalize an otherwise INSANE paragraph from the Dubliner. How could it be (I asked myself) that 80% of auction properties are failing to sell, and yet the drop in overall prices is reported as only 8%? Talk about total illiquidity!! - anyway, you clarified things a little bit - their “auction” is not our “auction.”
“Today, the ultimate vision that must be dealt with is that the largest asset in most Americans’ lives, their home, is dropping in price, while the cost of financing…is rising,” Annaly Capital Management CEO Michael Farrell wrote in a note to shareholders last week.
, Moody’s cut ratings on $33 billion of debt of structured investment vehicles (SIVs). SIVs, off-balance sheet bank affiliated structured financings, total more than $300 billion, and are a threat to find their way back on to bank balance sheets.
There is no sign of a viable SIV bailout fund, despite ongoing talks including the U.S. Treasury, Citibank and others.
And as losses and provisions mount daily, bank balance sheets are pinched, leaving less still to lend…………………
“We are witnessing the piercing of a worldwide debt bubble.”
The “reserve price” in a RE auction is typically around the amount of the unpaid loan balance.
It is truly not surprising that auctions are not moving inventory right now.
For example, I went to a RE auction for Santa Clara county this month….
Guess what? 95% the homes being auctioned, had loans that were originated in 2005 and later.
Would you want to bid for a house that was purchased during the peak of the bubble? With bids starting at a bubble loan amount?
‘It only becomes a problem if the mortgage becomes unaffordable.’
- says the “Hang in There” kitty.
That’s pretty funny.
And, unlike my humor, rather wholesome. How refreshing!
Or, if the FB’s realize that they are overpaying for a property by about 100%. Let’s see, continue to pay for a house that is worth half of what I am paying or walk away and live ot fight another day. Hey, I don’t even have much invested in this thing since I did not put a downpayment. And I already had bad credit anyway?
Yeah right, as FB’s see their value go down like a stone, you better believe they will be walking away whether they are in distress or not.
‘It only becomes a problem if the mortgage becomes unaffordable.’
- says the “cram it up there” joshua tree :-0
“We are advising people not to use auctions right now.”
Either people are complaining that they “don’t know” the value of their RE, or they’re trying to hide the true value by witholding their propery from the auction market. You can’t have it both ways.
There is a parallel between the IB SIVs problem and the individual seller’s auction problem. In both cases, the holders of devalued assets are unwilling to lower the price to a level where it will sell, due to fears about discovering how low the market price may have recently fallen.
One thing I don’t quite understand with the “assets”.
Can’t they hold on to the MBS/CDO and collect revenues on that? If it is an asset and has some value then they should be able to eek out some return.
Unless of course its yeild is well below inflation or something crazy like that.
Or unless, of course, the collateral which supports the value of said assets is plummeting in value.
Or the source of the money (the mortgage payer) dries up and blows away like a pile of dog$shit in a dust devil.
Definately. A CDO is coupon for a certain fraction of the revenue. e.g., the first 5%. So if all mortgages pay, you make out like a bandit. Now let’s say mortgages default in a large block. Very quickly, the income stream becomes zero.
Yes, zero. In a good market, a CDO is expected to eventually become worthless after the owner of it is paid very well for their risk. In a bad market a CDO owner might only be paid back 10% to 20% of their investment before being informed its worthless.
Guess which way we’re heading.
Got popcorn?
Neil
“Can’t they hold on to the MBS/CDO and collect revenues on that? If it is an asset and has some value then they should be able to eek out some return.”
You would think so, if they “owned” the asset. If they financed the “asset” with borrowed money the eeked “return” would have to be greater than the interest rate on the borrowed money.
The result is the same as the S&Ls 25 years ago when the interest on their short term borrowing went up while the returns on long term loans stayed the same.
Bankruption.
My thoughts exactly. Neither really “want” to know what their asset is worth for as long as they can hold out. Until they mark to market they can live in their fantasy world. I wonder how the bonuses will look this year and what will happen after bonus time?And as for FBs, well I am wondering if they will squeeze that last little bit out of their credit cards to make it a Merry Christmas for junior and then give up the ghost after the new year.
“‘No one, including Mr. Mozilo, could have foreseen the unprecedented combination of events that led to the problems borrowers, lenders and investors face with many of these loans today,’ said Rick Simon, a Countrywide spokesman.”
—————————————————————————
If you tell a big enough lie, people will believe you! (I think Goebels said that..)
Sure applies in this case.
a single foreclosure is a tragedy. a million is a statistic.
Then Mr. Mozilo gets paid to much for the work he is “supposed” to be doing. A four year old could have run the company better than this idiot.
‘ If you tell the lie enough times, the people will believe you’, —Hillary Clinton
“Losses from the falling value of subprime mortgage assets may reach $300 billion to $400 billion worldwide, Deutsche Bank AG analysts said.”
Ha! That’ll seem like chump-change in another 4 months.
The key being “losses from sub-prime”. Wait until they add the Alt-A and prime losses on top of sub-prime.
I’m sticking with my initial estimate fo $1 trillion.
“For Countrywide…this remains one of the burning and still unanswered questions. Why did the company’s chief, who routinely warned of his rivals’ lax lending practices well before the mortgage market cracked, ultimately allow Countrywide to ardently embrace those practices?”
“Central to Mr. Mozilo’s…strategy was…to constantly snare market share from rivals. While this strategy benefited Countrywide throughout much of its history, when mortgage lending was a more plain-vanilla affair, it turned perilous during the past three years. By then, competition among mortgage bankers was so fierce that the only way to gain share was to loosen underwriting standards.”
And so one of the worst Brobdingnagians in the business, who constantly tried to “Swift-boat” competitors, by besmirching rivals’ lax lending, was not afraid to slither under the limbo stick of lax lending, himself?
“And so one of the worst Brobdingnagians in the business, who constantly tried to “Swift-boat” competitors, by besmirching rivals’ lax lending, was not afraid to slither under the limbo stick of lax lending, himself?”
He was forced to do that. He had to pay for his grand-children’s education. There are 9 of them. How could he do that without taking down the American financial system?
Let’s see here…
The grandkids could go to community college, learn something useful, then go out and get jobs. They could join the service and have Uncle Sam pay for a good chunk of their education via the GI Bill. They could get merit-based scholarships.
I could go on, but…
So Mozillo tried to “Swift-boat” his competitors?
You mean Mozillo told the public that many of the stories they heard of sound (if not heroic) lending practices by competitors were demonstrably false?
And, of course, the competitors couldn’t answer Mozillo’s “Swift-boat” charges because they were true.
So I guess if you make true charges and you did the same practices as those you charge, that’s “Swift boating” somone.
The funny thing is, I don’t remember any of the “Swift boat” veterans claiming they did heroic things. I don’t recall them gaining anything, personally, by making their allegations. In fact, they opened themselves up to nothing less than a horrific libel suit by one of the richest men in America (assuming anything they charged could be refuted).
Doesn’t sound like the same thing Mozillo did, does it?
Trashing a combat veteran on Veteran’s Day is neither appropriate nor decent. Since you lack a moral compass, let me be blunt: STFU.
“Swift-boating”
http://en.wikipedia.org/wiki/Jonathan_Swift
What the? Your comment makes no sense at all, nor does it seem to be in response to anything anyone has said.
Xiaoding,
I’m assuming you’re a foreigner, since you seem clueless as to the references. Jag is taking the opportunity to slime John Kerry, awarded the Purple Heart in Vietnam, on Veterans Day, resurrecting tactics used by the swift boat group, an extremely nasty and dishonest group of smear artists, paid for by the repugs.
What you call “slime”, I call the truth. I have never heard Kerry refute the charges, nor has he released the records that would clear the matter up. I find your comment unwarranted. I’m tempted to say J. Kerry can fight his own battles, but that seems to be the question at hand.
There was a satirist once named “Swift”…
way back when
He did say that borrowers made him do it.
“‘No one, including Mr. Mozilo, could have foreseen the unprecedented combination of events that led to the problems borrowers, lenders and investors face with many of these loans today,’ said Rick Simon, a Countrywide spokesman.”
Did this statement piss anyone else off besides me?
No one? I know a few thousand of them and they all hang out here!
No one could have predicted that when the levee breaks, Tan Man will have no place to stay.
Not even the big house?
Who would have predicted that when the levee breaks, the city floods! (sacrasm off)
The good thing about the cycle is they can not re-write history this time. We have covered it and archived it, they can not escape the truth.
good luck with THAT.
This one also pisses me off.
“The industry faced special pressure from minority advocates to help people buy homes, he said. Now, the government must help by increasing loan limits at government-sponsored enterprises like Fannie Mae and Freddie Mac, he added.”
What a bunch of slimeballs.
Tanta @ CR had a great piece yesterday on what a lie this is, she brought back some old quotes…they can run (lie) but they cannot hide! The bloggers will win in the end.
How many low-income minorities were enabled to buy $1m+ homes? ($1m is BB’s proposed limit for the size loan the GSEs could purchase and insure, courtesy of Uncle Sam.)
I don’t know of any minorities that could buy any house..
Shoot, most of us non minorities were out of the mkt long before the final price escalations..or at least I thought I-MOI couldn’t afford the payment so I didnt’ go shopping.
It’s got nothing to do with minorities or anyone else buying a house. It’s to give the banks a place to offlaod their to unload the toxic jumbos that are already in the bag. Nothing from the FED is about Poeple! It is always about the banks.
WTF? Raising the loan limit to a million is intended to help minority home buyers? Why are they so stuck on preserving astronomical bubble-inflated house prices? I know, I know. The answer is obvious. Gotta keep propping up those CEO salaries.
Yes, the people who can afford to pay for a $1 million dollar house are IN THE MINORITY. Where have you been?
“underrepresented minority” = the share of the U.S. wealth distribution that can afford to buy a $1m home
Ugh.. To buy a 1M dollar home, you should have a HH income of what?? About 350-400K yearly?
And you want me to help subsidize people with this kind of income? Come on! How about this… If you can afford a 1M dollar home, you do NOT need a subsidy from the govt to help you, you can pay market rate for the loan, whatever that rate may be.
That’s just criminal, putting the taxpayer on the hook to support home values that less then 1% of the population can possibly afford.
The F-word GSEs are at it again. They will become the new Countrywide, and the US government will become the ultimate bagholder. Or are they planning on selling it all to the Dutch?
“selling it all to the Dutch? ”
When the curtain falls, the new owners will be Petro$ based owners (like Prince Bandar) and Soverign funds, mainly Chinese, controlled via Blackstone etc., In less than 10 years, most US assets have to be transferred to foreign control to pay for the deficits & debt, public & private.
Whereupon we seize it all back and give ‘em the middle finger. See how other countries like that.
Actually this one really pisses me off.
“At a conference sponsored by the Milken Institute about two weeks ago, for example, he explained that borrowers forced lenders like Countrywide to lower their mortgage standards. The industry faced special pressure from minority advocates to help people buy homes, he said. Now, the government must help by increasing loan limits at government-sponsored enterprises like Fannie Mae and Freddie Mac, he added.”
Really, THE BORROWERS forced you? At gun point I presume?
RE: “At a conference sponsored by the Milken Institute about two weeks ago, for example, he explained that borrowers forced lenders like Countrywide to lower their mortgage standards.
Whatta snake!
Apply the same logic to the real estate appraisers….
well, er…I guess I gotta punch the number I’m told-everybody else is doing it.
This bathering about Countrywide’s ethics sure can provide a lot of appraiser with a get out of jail free card.
Particularly when he’s now blaming the borrowers for “forcing” CW to make exotice loans. What a pussy (pardon my french).
“Two men were bragging how they made up to five points on subprime payment-option ARM deals.”
Pay-Op ARM’s were the 5 point specials for the crooks. 2 on the front, 3 on the back. Kinda sounds like a gang rape, and it is actually.
And my family and friends wonder why I have zero sympathy for anyone losing their job in this mess…
Have I got an article for you, Crispy. Straight outta today’s Arizona Daily Star:
Ex-First Magnus workers struggle to find equal pay
Thanks!!! I put up a post about this
“Just one reported finding a better-paying job.”
That would be the receptionist. You know, the -80 IQ high school bimbo that greets you the moment you walk in. I would never hire one. I leased a digital phone switch at $180 per month, instead of the pretty face at $2000 a month. The phone switch never talked back, and I always got my calls.
Hey now, a close friend of mine lost his job as a loan officer pushing those loans, and he was unemployed for a good while… oh wait a minute, I’m not feeling any sympathy for him either! And surprisingly, he lives pretty poorly. What happened to all those commissions he should have got, I have no idea. (I think his base salary was nearly nothing.)
Anyway, he said he needed a job now, and I told him he ought to get into foreclosure processing and collections because he already has a relationship with that future customer list. “Hi, remember me, I sold you the mortgage back in 2005? How’s it going? Good? No? Oh well. Anyway, I’m here to take the house back…” He wasn’t amused at my suggestion.
I found out in fact that his office packaged one of the loans for someone in my own office, and they have a mortgage that started at over 9% (ouch!) and by now has adjusted up to 12.xx%. They had crap credit to begin with, but this mortgage sealed their fate. They lived in the same house for over ten years, but now they’re actually leaving the state and leaving the house behind — jingle mail!
RE: because he already has a relationship with that future customer list.
I’d think he’d be lookin’ for some illegal plastic surgeon to change his facial appearance.
People with $200k deficiency judgments against them can get a bit testy.
Construction firm Taylor Wimpey is looking for white knight to rescue it from a disastrous $30m-plus investment on Florida’s Gulf of Mexico coast.
“I will gladly pay you Tuesday for a bailout today.”
“I will gladly pay you Tuesday for a bailout today.”
Ha Ha! Love it! No spinach for you.
Wednesday
Harm!
I’ve been laughing for the past 1/2 hour over your post!! Too funny.
Taylor “J. Wellington” Wimpey gave downbeat estimations of its US operations and proclaimed he would gladly pay for a mortgage on Tuesday for one one written today !
“‘The whole thing is flawed,’ said Josh Rosner, whose New York-based firm analyzes structured finance and real estate investments. ‘As opposed to recognizing losses, we’re trying to roll those losses into the future, regardless of the sanity or safety and soundness of doing that.’”
I was thinking about this angle earlier today. Suppose the party in power wanted to defer the SOL moment until after the 2008 presidential race was over. Could the Superfund SIV help the cause?
All the incumbants will be trying this. While trying to distance themselves.
Somehow I just don’t see the significance surrounding next year’s election. First, this global mess is just too big. Secondly, even if it were possible to pull off all it would do is stick a weak G.O.P. candidate with the mess, right? And that would virtually ensure eight Dem years starting in 2012. As for the other side of the aisle - the Dems just want in, and they can plausibly deny any mess they inherit on the outgoing admin. So where’s the incentive for either party to put this off?
I can’t see the election connection. If today’s white house could delay things a year, why couldn’t the next guys delay things another four years.
I suspect the banks would like to bury the bad stuff for about 100 years
Reg appraisers … When I sold earlier this year we were panicked because there was a contingency that the appraisal meet the sale price. The appraisal was drive by! I was very thankful as I got $350 sf for a 2 unit condo and promptly exited stage door left.
RE: The appraisal was drive by!
Just shows ya how out of control all the shit was at the end.
Any sort of conformance to appraisal or underwriting standards was literally just thrown out the door.
Just a total free for all. LOOT THE SYSTEM-BABY!
Your small ancedotal comment simply demonstrates how really, really enormous all this mortgage corruption is.
These MBS bag holders got squat.
You heard it here, folks. The bubbles of the world are popping in their due time, the US will not lose its place in the world after all. Everyone’s screwed!
http://money.cnn.com/2007/11/12/markets/dollar.ap/index.htm?postversion=2007111210
“People are screwed.”
-Big V
I was Long the USD/CHF and Short EUR/USD since last thursday evening. Closed all positions this morning around 6:30am pacific time and made some very nice profits.
The dollar is oversold, even with the stock market getting hammered the dollar was not dropping like rock. Soon, the other currencies will correct slighty.
I was wondering if people were noticing that the European bankers were printing money even faster than the Fed. Staggering amounts like 250 billion.
Not to mention if the dollar collapses and we can’t buy anything then prices collapse everywhere.
We are also the leading exporter and as the dollar goes down we will increase market share.
Its the vicious part of this cycle begining.
“We will all go down together”
Billy Joel… goodnight Saigon
“House sellers were this weekend warned not to put their houses up for auction as they are unlikely to sell because of the state of the housing market.” “According to new figures obtained by the Sunday Independent, three out of four houses up for auction this year have had to be withdrawn because of lack of interest.”
WRONG, WRONG, WRONG and… WRONG!
If unrealistic “2005 peak prices or bust” greedbag sellers lowered their prices to what current buyers are willing to pay (quaintly known as the “market price”), then they are quite “likely” to sell on any day. Unless you happen to live in Chernobyl or Love Canal, there is no “lack of interest” among prospective buyers if the price IF THE F**KING PRICE IS RIGHT.
I’m so tired of having to write these MSM doofusses and ’school’ them in market economics 101.
No kidding Harm! These aren’t auctions at all! Let me be the friggin auctioneer, I’ll get them all sold in about 10 minutes! They trying to tell us that not one of those would sell for a dollar? Or is it the magic reserve number that comes out of the thin air that isn’t being hit? I’m tired of these assh*les being quoted and not called on their stupid remarks. Let them try a REAL auction sometime and see what happens!
I’ll bet they would sell at pre-bubble prices. It seems to me the sellers are the ones not interested in selling. If they were serious they would price for the current market.
“‘No one, including Mr. Mozilo, could have foreseen the unprecedented combination of events that led to the problems borrowers, lenders and investors face with many of these loans today,’ said Rick Simon, a Countrywide spokesman
- So Mo could not possibly conclude that Juan Sixpack and his 22K Per year salary could not service a loan of 500K?????
But Jaun sixpack has a landscaping business on the side that was paying him $18K a month.
Perry Turner, an appraiser in the Richmond, Va., area, said pressure to inflate values is so widespread that ‘it amounts to organized fraud by loan officers based on their need to generate fees and close deals, and then pass the loans on to Wall Street’ where they get packaged into the mortgage bonds that are now experiencing heavy default rates and losses to investors.”
“‘And they all think they’re never going to get caught,’ said Turner.”
They aren’t worried about being caught because their ISN’T any Accountability, Justice and Punishment for White Collar Crime in the US anymore.
Just ask Neil Bush and his buddies of Silverado Savings and Loan
And that America, is the really SAD part.
1/3rd of a Trillion Dollars…
Raptured away.
“Raptured away.”
LOL - that’s the first time I’ve seen that term used in the context of HB implosion –has a nice ring to it. Perhaps all the hedgies can start using it in their press releases. “Your CDO investment capital hasn’t disappeared, it’s been “raptured away…”, “your money has been ‘called home’”… “your portfolio is ‘in a better place’”.
In case of Rapture
…………………
This home will give no loan
I second this sentiment. Now lets just hope that some Wall Street bonuses are raptured away this year!
harm: rapture isn’t a verb
Your CDO was caught up in the rapture
“Wall Street always rides a wave until it crashes. As the fees roll in, one firm after another abandons itself to the lure of easy money, then hands back, in a sudden, unforeseen spasm, a big chunk of the profits it booked in good times. The fee engine becomes so huge that these products take on a life of their own.”
My way of putting it is that the financial services industry, with all its smart people, seldom does things that are completely stupid. It does things that are smart until they reach the point of excess, and then become stupid. The stupid people pile in after the smart people have made their money, and insanity results.
Homeownership is good and smart — up to a point. Just like tying executive compensation to the success of the firm (stock options). Or devising new financial instruments to allow smaller and weaker companies to access the financial markets (junk bonds). To cover just a few good ideas gone bad.
many of these are just financial innovations to make the books look better than they are. This is why banking crises (plural) occur.
Seems to me that a company (firm, whatever) ought to limit the annual compansation of any employee so that no one can make enough $$ to live like a snake-king for the rest of their lives after working for only a few short years, and then leaving the company in shambles.
Anyone else have any ideas on how to prevent this?
WIsh that would happen.
Too many slimeballs in gov and corp America to get that changed now.
I might have changed careers if I had known how easy it was to ‘rape/pillage/leave in shambles RICHER beyond belief’.
big v
hard to stop CEO’s from looting/destroying a company, as the same over-agressive type-A behavior that got them in the executive suite also applies to their well-crafted, lawyer assisted, self-serving compensation & golden parachute.
The company directors/board hope the CEO’s will use their “talents” for greater profits, a synergy even, but as you pointed out, it’s a can’t lose deal for senior execs no matter what happens to the company.
I pinpoint the corp. dont-give-a-damn-at-all starting in the 70’s. At least before then the corps put up a pretense of caring about the rank n file. When the execs went globe hopping & saw saw the utter slavery the rest of the world toiled under, they just got all the more greedy to change the US back to the fuedal system.
After all, who will stop em? Profit above all else. Profit is supreme. Just look at big oil. They & everything associated have written Americas plans for the last 100 years.
Rollerball is happening right here, right now.
rant off - for now
aqius: what about the arguement that senior executives knowingly used their position to enrich themselves at the expense of their companies and therefore their gains should be seized. Doesn’t seem all that complicated.
Of course, there’s the Costco experience:
But the most remarkable thing about Sinegal is his salary — $350,000 a year, a fraction of the millions most large corporate CEOs make.
“I figured that if I was making something like 12 times more than the typical person working on the floor, that that was a fair salary,” he said.
Of course, as a co-founder of the company, Sinegal owns a lot of Costco’s stock — more than $150 million worth. He’s rich, but only on paper.
http://abcnews.go.com/2020/Business/story?id=1362779
How is this for Race To The Bottom?
“Overworking is the hallmark of the day,” he said. “My whole list of patients, except for the few who are independently wealthy, are all working much harder than they’ve ever worked. They feel a foreshortening of time. They have no time whatsoever to do anything but work and sleep.”
And because of that, they aren’t leaning on family or getting the support they need.
“Here you have people living not really in the moment, but just going on a treadmill without taking any stimuli in,” he said. “They don’t relax. They don’t sleep.”
http://www.burbed.com/
“Therapists see surge in patients stressing over their home values”
People working like slaves?
Jas
“To this day, Countrywide’s CEO Angelo R. Mozilo says his beleaguered company did nothing wrong during the loose-lending craze that is now unraveling nationwide with record foreclosures and mountainous losses. Instead, Mr. Mozilo considers himself and his company to be victims of financial forces beyond their control.”
I’m a victim of coicumstance!
– Curly Joe Stooge –
Actually, “Curly Joe” was a later Stooge, wasn’t he? Not the same as “Curly.”
“Nov. 12 (Bloomberg) — Even after the record $8.4 billion writedown for bad debts at Merrill Lynch & Co., the unprecedented ouster of three chief executives within five months and the elimination of $84 billion of market value at the five largest securities firms, Wall Street still is poised to report its second-most profitable year.
And 2008 may be better. ”
Says a lot about the massive profits that these financial companies - who contribute virtually nil to society - make.
At least the oil/energy companies - massively profitable and corrupt as they are - contribute something tangible to society by providing energy for businesses, homes, and transportation.
But Merrill Lynch is “an astonishingly well run company”.
For anybody that hasn’t seen this, give it a watch. This is how you forever destroy your credibility.
http://tinyurl.com/2edehd
RE: This is how you forever destroy your credibility.
The antithesis of what Jim Rodgers was saying the other day.
He recommended shorting all investment banks.
But ML IS a well run company. It’s in much better shape that all the others. It’s true. I may buy stock in it, at the right time, since it seems to be a scapegoat for the rest of the crooks. After the election…?
Wall Street Executive: “[I am] worried about a recession, not a normal one, but a very bad one, the worst since the 1930s”
http://tinyurl.com/2wgksn
Just don’t say the “D” word. (Rhymes with recession.)
The article describes the shocking possibility that the Dow may fall to the level it was at a few years ago, say around 10,000. To me that is just a return to fair value, not a catastrophe.
The question is: What happens to gold, oil and foreign currencies?
And here I thought I was the only one who thought that the current Dow was really worth about 10k, but not much more.
Nope, you’re not alone. A 10K Dow will be a sign of progress to me.
Count me in on that one. A 10,000 Dow would be just about right.
““‘People who get themselves in trouble are good at self-hypnosis. That is why they are such good salesmen — they convince themselves about the story,’ Bruce C. N. Greenwald, a finance professor at Columbia Business School, said. ‘He was not selling houses. He was selling a dream. And he had lived in a world where there had been no defaults for so long that he didn’t believe they could happen.’”
Brainless Zombies! BAHAHAHAHAAHAH ! Im sure glad Im reading this today.. the wait was worth it.
More people In my office are forced to sell and move… and Im in Silicon Valley folks… Its goes to say.. even here the mortgage meltdown is happening. In my prior job at a $5B internet company in Sunnyvale, Y!
“Jerry, just remember, it’s not a lie if you believe it.”
- The Honorable George Constanza
“““‘People who get themselves in trouble are good at self-hypnosis. That is why they are such good salesmen — they convince themselves about the story,’ Bruce C. N. Greenwald, a finance professor at Columbia Business School, said. ‘He was not selling houses. He was selling a dream. And he had lived in a world where there had been no defaults for so long that he didn’t believe they could happen.’”
Tolstoy had this kind of person pegged. He wrote that they did not treat ideas seriously, they were just useful thoughts, to be changed as soon as they were no longer useful. “Truth”, literally, means nothing to this kind of person. They are convinced whatever they say is true, even if one sentence contradicts the previous.
Here IT comes folks..the “Crunch that Stole Christmas” and a FEW down the road !
“To this day, Countrywide’s CEO Angelo R. Mozilo says his beleaguered company did nothing wrong during the loose-lending craze that is now unraveling nationwide with record foreclosures and mountainous losses. Instead, Mr. Mozilo considers himself and his company to be victims of financial forces beyond their control.”
Just listen to the Icky Orange Man. You know, the best possible use for this wicked primate would be to be turned into a pair of boots for me. I like boots. And he would match one of my favorite leather jackets, come to think of it.
On the downside, I probably wouldn’t wear him much–the cooties, the feculence, and the subtle aura of wretched corruption. Not even Febreeze could get that out, I bet.
Besides, any boot worth it’s salt has to have a good sole.
But at least you’d have the heel part down.
And you wouldn’t have to worry about PETA attacking you, since your boots would be made of nonanimal material (carrot, that is).
OK, just one more, I promise:
But they might be kind of uncomfortable to wear, due to the forked tongue.
Ahahahaw! Super posts, Big V.
More entries in the race to the bottom.
http://biz.yahoo.com/ap/071112/fitch_cdo_ratings.html?.v=2
Toxic waste indeed
“Everyone rationalizes that it’s safe because they’re making so much money.”
The fact that you’re making so much money should alarm you that it’s NOT safe!
The answer to the stock market mini-bubble and the massive property bubble revolves around one word. Capitulation.
So much fear has to be generated, that speculators and investors decide to obey the #1 cardinal rule where investing is concerned. That rule being, “Preservation of Capital.”
When that mass capitulation psychology event takes place, the final drop to where there is “Blood On The Streets” will have arrived.
I’m not sure how close we are to that event but, as Professor Schiller (who was right again) has said, investing and speculating appear to follow the “Theory Of Herds”. Once the head of the herd starts to turn (watch any documentary which shows animal herds like bison or wilderbeasts in full flight) and you can see how, when the leaders turn, the gigantic following herd turns on a dime and follows. However, it does take that one single (usually un-predictable) moment when the leader of the herd suddenly does turn.
Actually, in the past this mess would have caused a crash long before now but (sadly) people have seen the manipulators like the Bernanke’s and the Mr. Magoo’s step up to bail out their Financial Gangster pals on Wall Street time and time again and figure THEY (the investors and speculators) will be safe from financial destruction as long as they hold onto the Financial Gangsters Of Wall Street’s coat tails.
Thus, “capitulation” which cleans out the festering sore, is hard to predict these days. Worse, that gang of crooks and financial manipulators who run America’s financial system (the SEC, the Fed and the Financial Gangsters of Wall Street aided by Washington corruption) keep slapping band aids onto the problems while hiding much of the truth hoping they can stop the bleeding. It never works but it does prop up the mess for a little longer until, eventually, market forces takes over.
In the case of the USA, that market force could be the abandonment of overseas investors, who are the life blood of the US financial system, will finally realize that they are pouring their money into institutions (Wall Street) so corrupt and un-accountable that they just cannot follow what is happening to their assets or investments and decide to get out.
Where the property market is concerned, Florida and California might lead the way to “capitulation” but again, the financial manipulation, fraudulent government statistics concerning inflation and employment, etc, might keep the mess bubbling longer.
We need some “herd” leaders to collapse. So far, CountryWide was a great candidate for failure but, as we have seen The Financial Gangsters have thrown CountryWide a few life lines to stop the company from sinking into bankruptcy - where it deserves to be at this point. Only when these failed companies (builders and banks) are allowed to sink beneath the waves under the weight of greed, incompetence and bad management, can a foundation be put in from which to start re-building.
RE: Only when these failed companies (builders and banks) are allowed to sink beneath the waves under the weight of greed, incompetence and bad management, can a foundation be put in from which to start re-building.
Too far gone…The US goes a $$$ trillion in hawk to the foreigners every 15 months.
Only the ownership of 180 million guns will keep us from being foreign debt slavery serfs.
All those spoiled rotten GEN XYZ chuckleheads on 60 Minutes last night are in for a rude awakening.
Looks like the King of Pop was also using his home as an ATM. Who says the problems are restricted to the lower end of the market?
Largely overlooked amongst the more compelling financial headlines of recent weeks is the continuing slow-motion financial meltdown of Michael Jackson that will—unless Ken Griffin or similar comes charging to the rescue—likely see the Fortress real estate portfolio expand to the tune of one less-than-highly-desirable Southern California residence.
The creepy pop diva has defaulted on a $23 million loan, secured by the Neverland ranch. Fortress is reportedly trying to unload the loan but, stunningly in today’s market for inadequately-collateralized mortgage obligations, hasn’t found any takers. The property’s value was assessed last year at just over $17 million, a number that is unlikely to have increased since.
Couldn’t have happened to a nicer fella.
“Where the property market is concerned, Florida and California might lead the way to “capitulation” but again, the financial manipulation, fraudulent government statistics concerning inflation and employment, etc, might keep the mess bubbling longer.”
Buyers in my neck of the woods (West Central Florida) are catching falling knives. A condo right by mine (I’m renting) just sold. I did a little sleuthing, the full sales price hasn’t been posted yet on the property appraiser website, but the clerk of the court has a deed and mortgage documents at $120,000, fixed rate, although it doesn’t show what the fixed rate is. At least, I’m assuming fixed rate, since the ARM rider wasn’t checked. I’m also assuming they put some money down, but the note isn’t posted in public records either. So, bubbling is still going on, but more like turning down a boiling pot to medium heat.
At peak, condos in here sold for as much as $225,000. Waterfront and all that. This sale set a new low comp, but we’ve a ways to go until we see $50,000.
Appraisers are in a no win position. There was and a preceived value that they were and are chasing and with no to the minute guild lines it is very subjective as to what a house is really worth. Our house built in 2000 and we refi in 2005 to a lower 5 1/8 for 15 years I felt like they were under the true value. So I guess we had a honest one. As far as all banks and all ceo`s out to get me I don`t feel that way. I had my lawyer explain to me what my contract meant in to someone with a 1 year of college reading level, he did that, plain and simple. If my all brick house drops in value so be it, it does not matter. I`m not taking up for appraisers, I don`t even no one but they that is a job you can not win in a shifting environment.
Regards,
Lane
Actually, I feel a little sorry for a lot of appraisers. It’s becoming quite well known that the realtorwhores and carpet bagger brokers would only deal with appraisers who did as they were told and agreed to the numbers the realtorwhores wanted. Appraisers have to eat and have families to feed like most of us but that’s what happens when corruption as practised by realtors and brokers seeps into the system.
I’m sorry Lane, I don’t think I understood your post. What point were you trying to make?
“Les Satlow, who oversees $450 million at Cabot Money Management, said he’s more bullish on prospects for investment banks than commercial banks. ‘The securities firms have less exposure to the consumer and greater exposure to overseas capital markets, which have a reasonable chance of remaining solid.”
I thought this quote was hysterical. What a great left handed compliment! So commercial banks are toast?
This mortage mess can bring out the bleeding hearts we don’t want people to be in trouble or better yet lose their houses to health issues or a unjust job loss, but the investors that is another story.They knew darn well the game was rigged in their favor and they wanted to turn big profits in a short time on the backs of all good people who now must suffer because of their greed. It must be done foreclose on them, don’t write legislation to save them, no small business gets bailed out, you open a business you take your chances if the mortages compaines go broke to bad let’s just lay the cards out on the table and the losers pick up what’s left and walk away you did it to yourself, Joe citizen should have no vested interest in bailing you out sorry
“Citigroup Inc.,Bank of America Corp. and JPMorgan Chase & Co., the three largest U.S. banks, reached an agreement on the structure of an $80 billion fund to help revive the market for short-term debt, a person familiar with the talks said yesterday.”
“The banks are pushing to have the fund in place by year-end because SIVs are unable to get short-term credit to finance their higher-yielding investments. The plan still has to win the confidence of investors.”
“‘The whole thing is flawed,’ said Josh Rosner, whose New York-based firm analyzes structured finance and real estate investments. ‘As opposed to recognizing losses, we’re trying to roll those losses into the future, regardless of the sanity or safety and soundness of doing that.’”
When all you are holding is dog turds, repackaging them as tootsie rolls seems at best a limited option….save us Uncle Ben!!!!
Lane
when you said ” I had my lawyer explain to me what my contract meant to me … ” , you did something that most borrowers neglect;
exercise. careful. planning!
SO MANY TIMES the bloggers here have gnashed teeth about sloppy greedy borrowers not using common sense, much less to the point of spending some time/cash to get legal advice re the refi contract.
Well Done !!
In some states, they use attorneys (not RE agents) to buy/sell houses. I guess it makes sense, since the buyer’s agent only makes $$ when you buy, and works for commission at that.
http://www.cnbc.com/id/21752756
“The bottom line: If you’re in a hole, you have to stop digging, says financial advisor Barry Glassman. Borrowing may be only a temporary fix to a longer-term problem. You may not be able to make the purchases that you want or more drastic steps may have to be taken to change your lifestyle. Live within your means. Cut back on expenses until you’re in the clear.”
NOW you tell us….
No mention here about the news on E*Trade. DO you think my assets at E*Trade are safe if they go bankrupt. Should i move my assets to another brokerage?
I think you should ask for a copy of your stock certificates. At least take a screen shot. They don’t own your stocks, they just broker them.