The Decline In House Prices Is Not Stopping
Some housing bubble news from Wall Street and Washington. “Profits in the Japanese banking sector have taken a 1.2 trillion yen (£5.3 billion) hit from the US sub-prime mortgage crisis and the country’s central bank has said that worse turmoil may be on the horizon. Seiji Nakamura, a board member of the Bank of Japan, said yesterday that it remained ‘uncertain when adjustments in the US housing market will end.’”
Dow Jones Newswires. “A pair of banks on Thursday said they will invest about $1.5 billion in French-owned bond insurer CIFG Services. The injection will come from Banque Populaire Group and the Caisse d’Epargne Group, two French cooperative banks that own controlling stakes in CIFG’s parent, Natixis. The companies said the move will allow CIFG to keep its AAA credit rating with the three rating agencies.”
“Without the credit enhancement provided by companies like CIFG, Ambac Financial and MBIA, the rating agencies are more likely to downgrade the CDOs further. And ratings downgrade in turn could decrease the value of those debt pools further and possibly trigger forced selling by investors who cannot hold instruments without AAA ratings.”
“According to a report in The Wall Street Journal, CIFG had direct exposure to residential mortgage-backed securities of $1.9 billion, most of which were backed by subprime mortgages, another $4 billion in CDOs that are backed by subprime mortgage loans and $1.4 billion in ‘claims-paying resources.’”
“Fitch Ratings has downgraded its ratings for six collateralised debt obligation asset managers and $29.8bn of CDOs with exposure to US residential mortgages. On Pimco, Fitch pointed to distress in its Pacific Coast CDO before the sub-prime crisis, as well as its Costa Bella vehicle issued in December which has ’significant exposure’ to distressed sub-prime assets.”
“Separately, Derivative Fitch, a unit of the global ratings agency, has downgraded $29.8bn of CDOs with exposure to US residential mortgages, bringing its total CDO assets downgraded to $67bn.”
“The agency said in a statement: ‘The updated assumptions reflect increased probabilities of default, reduced recovery assumptions and increased correlation with respect to recent vintage subprime residential mortgage-backed securities and structured finance CDOs.’”
From The BBC. “There has been a slump in the number of mortgages being approved for home buyers by UK banks. The British Bankers Association said that in October its members lent 44,105 mortgages for house purchase. That was 19% fewer than in September, and 37% down on October 2006 when more than 70,000 mortgages were lent.”
“The figures suggest that the housing market is about to go through a significant slowdown due to high prices and higher borrowing costs.”
‘”October’s data provide evidence of a rapidly slowing mortgage market and of consumers limiting their personal borrowing,’ the BBA’s director of statistics, David Dooks, said. Last month also saw a big fall in approvals for remortgaging.”
From Thisismoney UK. “Subprime mortgage lender Kensington Group has turned its back on its traditional market in favour of low-risk products. Kensington CEO Alison Hutchinson said: ‘Tough times call for tough decisions.’”
“Melanie Bien, director at independent mortgage broker Savills Private Finance, said: ‘Kensington was the original subprime lender, whose success encouraged many other lenders to move into the sector. If Kensington can see no opportunities in subprime, what chance have other lenders with less experience got?’”
The Economist. “Northern Rock, it seems, is everyone’s problem. The bank, once Britain’s fastest-growing mortgage lender, is now a wreck. Having turned to the Bank of England for an emergency bail-out in August, it is unable to repay its loans unaided.”
“There can be no good ending to this sorry saga, which had its origins in slack supervision, bad central-bank calls and a panic-stricken rescue. Nationalisation looks the best choice of a bad lot, for it aligns risks and rewards most closely and keeps control in the hands of those who have most invested. But there should be no illusions that it is anything but a mercy killing.”
The Irish Times. “With an estimated 10,000 empty apartments in the Dublin area, builders are opting to rent them out rather than try to sell them, says Fiona Tyrrell. The vast majority of these are new apartments which have either failed to sell or have not been put on the market.”
“Meanwhile, Dermot O’Leary, economist from Goodbody Stockbrokers, says that stock levels of unsold homes in Ireland ‘has risen steadily.’ There are now 42,000 second-hand homes for sale - equivalent to a 12-month supply of housing stock, he says. Some regions are more affected than others, according to O’Leary.”
“One in 15 properties is on the market in both counties Cavan and Roscommon, he said.”
“General Motors Corp. has ‘no further obligation’ to inject capital into former finance unit GMAC LLC after a $1 billion infusion earlier this year.”
“The November 2006 agreement to sell 51 percent of GMAC to a group led by Cerberus Capital Management LP ended any need to fund GMAC beyond $1 billion, Randy Arickx, GM’s executive director of investor relations, said.”
The Wall Street Journal. “GMAC Financial Services and its owners are exploring options to salvage its unprofitable mortgage arm, and they are undertaking a debt buyback of as much as $750 million, with a long-term eye to the industry’s recovery.”
The New York Times. “It’s not just subprime anymore. Freddie Mac, the government-sponsored mortgage lending enterprise, said this week that enough borrowers were defaulting on loans made this year or last that it needed to mark down the value of the loans by $1.2 billion.”
“How many of those loans were subprime? None.”
“The borrowers may not have qualified as subprime, but many of the loans should have raised questions before they were made. ‘The underwriting standards declined,’ said Anthony S. Piszel, Freddie Mac’s chief financial officer. ‘That was across the board.’”
“Those who made loans and expected to sell them quickly did not care much about assuring that the loans would be repaid. It turns out that the financial wizards who made it easy to transfer risk also assured that more risks would be taken. They produced innovations like ‘No income, no assets’ loans, which, Mr. Piszel said, ‘found their way into prime space.’”
“As Mr. Piszel told me, ‘As long as house prices were going up, it cured all evils.’”
From Conde Nast Portfolio.com. “James Hamilton took a dive into the balance sheets of Fannie and Freddie. And he’s found some pretty scary figures: The total ‘book of business’ held by Fannie and Freddie between them is now $4.7 trillion, mostly in the form of mortgage-backed securities as opposed to outright mortgages. That means their $65 billion in capital is just 1.4% of their book of business.”
“Fannie and Freddie have been reasonably good at avoiding subprime: their $170 billion of subprime MBS is just 3.6% of their total book of business. But it’s still $170 billion, which is 2.6 times their total capital.”
“The problem FRE has is that the 38% of its book concentrated in ‘06 and ‘07 vintages has very different characteristics from the overall book: 39% Alt-A, 44% IO and 14% option arm. (WHAT were they thinking, these past 21 months, enquiring minds want to know?)”
“It’s a very good question: Freddie Mac was not founded with the idea that it would buy a pool of mortgages 44% of which were interest-only.”
From Bloomberg. “Freddie Mac, the second-largest U.S. mortgage-finance company, may report wider losses than it forecast as the slump in credit markets worsens, Moody’s Investors Service said.”
“‘Continued deterioration in the mortgage market, resulting in further decline in these books, may lead to credit losses in excess of their 11 basis point loss forecast,’ Moody’s analysts Brian Harris and Craig Emrick wrote in the Nov. 21 report.”
“New York-based Moody’s said changes in legislation or government support for Freddie Mac’s housing mission would lead to a ratings downgrade, which it called ‘highly unlikely.’”
From MarketWatch. “While the headlines have been full of stories on the credit crunch, subprime mortgage mess and the real estate bubble, a lot of ordinary homeowners have figured they were immune from the problems.”
“An online real estate community reported Tuesday that home values nationally are down more than 5.5% compared with a year ago, with many markets being hit much harder.”
“As a result, more than 15% of homeowners nationwide who bought their home in the last year are now underwater. The number is slightly worse for consumers who bought their home two years ago.”
“‘We are so used to the fantasy that real estate is a great investment and that it always goes up in value that we’re surprised when it doesn’t,’ says author Marc Eisenson. ‘This is a scary place to be, and a lot of people who never expected to get here are watching the waters rising — particularly if they have adjustable-rate mortgages — and their home values sinking.’”
“Former Federal Reserve Chairman Alan Greenspan said he has ‘no particular regrets’ and that the deepening slump in the U.S. housing market isn’t a result of his policies.”
“‘Markets are becoming aware of the fact that the decline in house prices is not stopping,’ Greenspan said today in Oslo. ‘I have no particular regrets. The housing bubble is not a reflection of what we did, as it is a global phenomenon.’”
“The collapse of the U.S. subprime market ‘was a shocker because no one expected it,’ Greenspan said.”
The Housing Bubble Blog on December 11, 2004. “Pricing bubbles often end in a parabolic rise, which we probably saw last year. It is no surprise that what is holding up the market now is lending to so-called subprime borrowers. I view this as bad news for this market as these folks will be in financial trouble even faster.”
“Consider that the risk to mortgage lenders increases, suggesting some desperation for borrowers. ‘Overall, new originations of subprime mortgages totaled an estimated $375 billion through the end of September, a figure that marked a 63 percent year-to-date rise. Putting that number into perspective, one out of every six new residential mortgages made this year has gone to a credit-impaired’..borrower.”
From Reuters. “Former Federal Reserve Chairman Alan Greenspan said on Friday that U.S. house prices have not bottomed out after a crisis in the subprime mortgage market.”
“‘The markets are becoming aware that the decline in U.S. housing prices is not stopping. It is at an unprecedented pace compared to the last 50 years,’ Greenspan told a financial audience.”
“He said the housing bubble had burst and the market was ‘a good deal away’ from its selling climax — a point at which sellers ultimately lower their prices to match lower bids.”
“This was reflected in the large stock of unsold homes and low turnover, which will be overcome only once people start believing such assets are undervalued.”
“He said central banks should concentrate on alleviating the economic fallout from burst asset bubbles because they had few methods to prevent them and ‘lean against the wind.’”
“‘There doesn’t seem to me that there is very much evidence that we can do much about them,’ said Greenspan, who oversaw Fed policy during the dot-com bubble and the start of the present housing bubble. ‘Irrespective if we could identify them, we could not do much to defuse them,’ he said of asset bubbles.”
The Nashua Telegraph. “The House of Representatives has passed a mortgage reform bill that is as remarkable for what it doesn’t do as for what it does. It doesn’t include a bailout of borrowers or lenders.”
“The Mortgage Reform and Anti-Predatory Lending Act of 2007 seeks to prevent borrowers and lenders from making dumb choices. It doesn’t help troubled borrowers and lenders who made poor decisions in the past.”
“The bill ‘cannot undo what happened, but it makes it much less likely that it will happen in the future,’ Rep. Barney Frank, the measure’s architect, said a few hours before the House passed it last week, 291-127. ‘The fundamental principle of the bill is not to put remedies in place to deal with these problems when they occur, but to stop them from occurring in the first place.’”
“Bursting housing bubbles have exposed bad lending practices. From 2003 until early 2007, mortgage lenders grew ever more lax in their lending decisions. House prices skyrocketed in many markets because nontraditional loans made it possible for buyers to overreach.”
“Thus, loose lending led to higher house prices, which led to looser lending, which led to still higher prices. Now the vicious circle is working in reverse.”
“Frank and co-sponsors came up with a bill that tries to arrest any future cycles of loose lending and skyrocketing prices.”
“Rep. Ed Royce said the bill has ‘murky language (that) would invite litigation from every borrower who misses a payment.’ He added that ‘the main loser will be the subprime borrower who will pay higher rates – if he or she can get a loan at all.’”
“Other Republicans warned that it would be foolish for Congress to restrict credit at a time of falling home sales and house prices.”
“But that argument didn’t carry the day, as the majority of the House agreed with Maxine Waters, who said that the foreclosure rate has almost quadrupled in her state in the last year. ‘Clearly, we need to prevent the now widespread practice of getting people into loans that they can’t afford,’ she said.”
“The debate over mortgages moves to the Senate, where Christopher Dodd,who chairs the Banking Committee, has blamed the mortgage meltdown partly on regulators who, he says, haven’t exercised their full authority.”
“It’s not the best time to be selling a house in much of the country. But increasingly, it’s a good time to build or renovate one. The housing slump has pushed down prices on everything from lumber and drywall to labor and design fees.”
“It’s a striking contrast from the heady days of the real-estate boom, when builders and contractors could hardly keep pace with demand, prices of materials soared and a six-month wait to start a kitchen renovation was commonplace.”
“A few months ago, Mike Bowes remodeled the bathroom and guest bedroom of his $200,000 condo in Las Vegas. The job, which cost $14,000, included a walk-in shower, a new vanity, bamboo flooring in the guest room and retextured plaster on the walls and ceilings.”
“Last year, the same work would have cost nearly twice as much, he estimates, ‘and I would have had to beg someone to do it.’ Now, the commercial roofing sales manager is planning to upgrade his kitchen, living room and porch. While prices remain low ‘I’m going to keep going,’ he says.”
“Amy and Bob Phillips of Tucson, Ariz., began work on a four-bedroom, Adobe-style house in February. With newly lower pricing on a variety of items, including stucco, wood and labor, the Phillips were able to afford upgrades such as solid wood doors, glass doorknobs and steel garage doors on their $800,000 budget.”
“The couple bid out a backyard pool themselves. By pressuring contractors to lower their bids, the Phillipses have knocked $8,000 off the cost. ‘We’re definitely playing people off each other, and they’re definitely dropping their prices,’ says Mrs. Phillips.”
‘It’s not the best time to be selling a house in much of the country. But increasingly, it’s a good time to build or renovate one. The housing slump has pushed down prices on everything from lumber and drywall to labor and design fees.’
That remodeling and contruction material prices were also caught up in the larger housing bubble was another matter accurately predicted by this blog.
MSM zero, HBB score?
It’s probably still a bad time to put any remodeling money into a house, since values are dropping faster than it takes the time to remodel.
But who cares about house value if you plan to live in the house for 30 more years?
I disagree. It’s a great time to remodel if you want remodelling done. Two years from now, a lot of the contractors who are trying to hang on by doing cheap remodelling now will just be ’structurally unemployed’ and unavailable for work. The lumber, drywall, et cetera will be produced at a much lower clip, and won’t see the discounting. So, the time to have the work done is before the mechanisms of supply have adapted to the crash. I assert Mr. Bowes is doing the right thing here.
It’s not going to help his overall home value, but it will increase the pleasantness of his life, which is how I read his goal.
And you can also do the work yourself. I’ve done drywall, wallpapering, just finished painting my house myself. And I am by no means handy with tools. Just use common sense, plan and you can save yourself thousands of $$$s.
“a lot of the contractors who are trying to hang on by doing cheap remodelling now will just be ’structurally unemployed’ and unavailable for work”
Well I’m not so sure about unavailable for work. I think they’ll just go independent and under the table.
Exactly, except on jobs requiring heavy documentation or repeated inspections.
“Amy and Bob Phillips of Tucson, Ariz., began work on a four-bedroom, Adobe-style house in February. With newly lower pricing on a variety of items, including stucco, wood and labor, the Phillips were able to afford upgrades such as solid wood doors, glass doorknobs and steel garage doors on their $800,000 budget.”
WTF? Guy’s I got to say I love this site. But am I the only one that sometimes feels like I’m living in some kind of ” Alternate Universe”?
The News prints articles like this couple who are such savy shoppers that thay can now afford a ” Real Wood” door on their 4 bedroom house and still stayed under their ” $800,000 Budget.”
How can people like this even dress themselves much less have the money to afford an 800k house? This is a Bargain? WoW we got a wood door and a Steel garage door and only spent 800K!
I only wish when I was in the construction biz I could of found a few of these people , I would have been a whole lot richer. Well, probably not, because I’m too darn honest and fair.
I know sometimes it makes people feel good when they realize there’s a lot of people in the world ” not quite as Blessed as themselves, but when I read so much crap in the News that’s just insane , it makes Me sad to realize what the World I live in has become.
When I was in school, I thought “Most Kids” had the brains to survive in this World, You always had the couple of ” Slow Ones”, but even those who weren’t top of the class had pretty good common sense.
I never really considered myself a genius. I was told I was, but I know there are some which could dwarf my intelligence. I just wanted to be an average Guy in an average World.
When I was younger I never much cared what went on in the ” Rest of the World” , I didn’t think the Government , Banks and average Joe’s acting stupidly could affect Me that much. Wow, did the world change.
Sorry for rambling on, I’m kind of in a mind meltdown right now. That’s kind of the point of this post. I know there are some intelligent , common sense people on this blog.
Do You ever feel if You read one more stupid article by some so called ” Expert” , or watch our ” Genius President” give another speech, or see one more ” act of stupity” from someone You know or in the news, ” That Your Head is Going to EXPLODE”.
Please tell Me I’m not the only one.
Most on these blog probably with you.
I don’t ‘get it’ either. $800,000 into a house and they think thaat squeezing real woods doors out of the budget is a big deal?
How big is that house? Has to be at least at or over 4000 sq feet. Given how small households are these days, who needs that much space. (And who is going to clean it? Not me.)
RTH up = is retail going to provide bail?
negative savings rate to the moon Alice”
“The collapse of the U.S. subprime market ‘was a shocker because no one expected it,’ Greenspan said.”
You’re going to have to come up with a more elaborate lie than that, I suggest you contact the NAR for advice.
I’d still like to see someone punch him in his big fat lying mouth. That’s like saying the collapse of the dotcom or tulip bubble was a shocker.
“The collapse of the U.S. subprime market ‘was a shocker because no one expected it,’ Greenspan said.”
I expected it and have anxiously awaited it for 2 years now. Can I get a $150,000 speaking engagement ?
“I expected it and have anxiously awaited it for 2 years now. Can I get a $150,000 speaking engagement ? ”
LOL.
No kidding…I did’nt take a single economics class in college and put together what was happening years ago–as a direct result of Greenspan’s overkill rate cuts. I can’t believe he actually had the balls to say this…
“Former Federal Reserve Chairman Alan Greenspan said he has ‘no particular regrets’ and that the deepening slump in the U.S. housing market isn’t a result of his policies.”
DOC
No kidding…I did’nt take a single economics class in college and put together what was happening years ago–as a direct result of Greenspan’s overkill rate cuts.
Did’nt[sic] Nor apparently take spelling or grammer as an undergraduate.
It is truly amazing how many now claim this. But Ben is only one on this blog that has the proof as shown on his December 11, 2004 blog. Back then Ben had virtually no readers or commentors other an occassional comment from Ms Penelopy. IMHO rather than tooting ones horn, one should be thankful that Ben continued his blog though those periods when most were not focused on housing issues and those who were just happened to be fortunate enough to stumble upon Ben’s blog.
Relax buddy or chica. A lot of people knew something was wrong. Ben’s blog gives us a perfect place to share what we already knew as well as learn new things. We all are indebted to this blog for so much valuable information, but it doesn’t mean we arrived here by mistake.
Grammar is spelled with an “a” not an “e” by the way.
What…RES…because we don’t have a blog of our own that means we didn’t see things coming or don’t understand? How retarded and arrogant is that?
I expected, and was not even in the business at the time. Just a normal intelligent guy. Greenspan will go down in infamy for his part in perhaps the worst economic collapse of our lifetimes. Is this guy an idiot or a liar? Im still on the fence.
The collapse of the U.S. subprime market ‘was a shocker because no one expected it,’ Greenspan said.”
The man is demented…Andrea Mitchell too.
Nobody expected it my ass. Everyone that said that it would happen was laughed at, and made mockery of. If a simpleton like myself could see what was ahead back in 2003, and they did not, that makes them either liars or not capable of holding the title that they have. In either case they should not thrown in jail for fraud or imposing as a professional of the united states government.
Correction should read they should be thrown in jail for fraud or imposing a professional of the u.s. government
“Nobody expected it my ass. Everyone that said that it would happen was laughed at, and made mockery of.”
Not everyone. In fact, very few of us were ringing the alarms back in late 2004. And we were characterized as loons, socialists and irrational stupidity like “you want us to lose in Iraq”. As someone mentioned earlier, the stupidity just makes my head explode.
It’s called greed my internet colleague…greed. I know so many people who now have made a lot of money on RE….but they have the audacity to sit around a coffee table and preach to me how alot of us missed the boat or didn’t take a chance like they did.
The arrogance and greed is all over the place. Unfortunately ALL the wrong people are getting ahead.
It looks like there’s a fire on the mountain. I think the world governments will have to get involved to stop a worldwide depression. To think that a bunch of middle and lower class American slobs are at the root of this mess is hilarious. The egghead PhD’s and MBA’s were outsmarted by the GED’s
“I think the world governments will have to get involved to stop a worldwide depression.”
That’s the one thing we DON’T want to have happen. Slippery slope, IMO.
On the other hand, that’s probably the idea. Seems the central banks have been busy cooperating with each other, no? Worldwide depression would be a good excuse for a “worldwide” government.
I’m really worried that the treasury will encourage banks to make interest-only loans perpetual.
I don’t think so, as that implies no repayment of principle in this world or the next. Lenders would perceive a risk that loan contracts could be retroactively modified to deny repayment of principle, which would tend to dry up sources of loanable funds.
Also, I am quite skeptical of the legality of the Federal govt stepping in to modify mortgage contracts; sounds like this might violate the Tenth Amendment to the Constitution.
“The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”
http://en.wikipedia.org/wiki/Tenth_Amendment_to_the_United_States_Constitution
While I agree with you, and hope the feds never attempts to do this, I suspect they would invoke the “commerce” clause to justify such meddling. I am sure the vast majority of mortgage deals involve crossing state lines at some point.
‘I suspect they would invoke the “commerce” clause to justify such meddling.’
Can you cite a specific provision of the Commerce Clause which would justify the Treasury Department’s (or any other governmental entity, for that matter) retroactively modifying the terms of an at will, signed lending contract between two private parties (borrower and mortgage lender) to the benefit of one side (the borrower) and detriment to the other side (lender)? This sounds unconstitutional (if not un-American) to me, though I am not a constitutional scholar by any stretch of the imagination.
Aside from this, I have a hard time imagining a Republican administration backing up such extraordinary Federal government intervention, which would clearly set a very bad precedent towards the future willingness of lenders to put faith in contract enforceability. This is not exactly the point in the credit cycle when you want to be passing measures that inadvertently discourage lenders from making loans (although there could be a silver lining if lenders took home a message that bad underwriting could result in mandatory punitive forbearance).
Ben Jones, do you have an opinion on this? (I recall you took a business law course in college; I did not).
The professor is correct. Special A+ for the professor. Good try rainmayun.
Correctness does not matter when this government decides to do something.
Our supreme court is not much better than Pakistan’s.
This thing is eating posts so I’ll try once more
“Comment by Professor Bear
2007-11-23 13:24:43
I don’t think so, as that implies no repayment of principle in this world or the next. Lenders would perceive a risk that loan contracts could be retroactively modified “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”
http://en.wikipedia.org/wiki/Tenth_Amendment_to_the_United_States_Constitution
Okay, you got the basically got the answer right as in ‘no the government can not alter contracts’. But WOW! Please do NOT engage in DIY constitutional law analysis. You are so-o-o-o-o-o-o far off base on the reasoning that you ended up in another galaxy.
I practiced law, including doing Constitutional litigation, for over 30 years.
10th A had nothing to do with anything. You can NOT read words in the Con literally without understanding the over 200 years of case law behind them.
Bottom line is that is it question of substantive and procedural due process plus some law about contracts.
The Con forbids the taking of property without due process and just compensation.
A contract which gives the parties both rights and responsibilities is called a ‘chose in action.’ A contract is property in the sense that you ‘own’ the rights that derive from the contract. Here there are lenders/investors who own the loan and have the right to receive so many dollars as principal and so many dollars as interest as it accrues until the debt is repaid.
No government - state or federal - can just pass a law saying that the creditor is only going to get paid back 50 cents on the dollar of the principal or have to take less money in interest than was agreed. That is a ‘taking’ of the creditor’s right under the contract without (1) due process - like in a bankruptcy court or (2) just compensation.
If such laws were passed, someone (most likely the taxpayers) would have to foot the bill for the amount of the debt and/or interest that the creditor was not going to get. That is as likely to happen as a snowstorm on a 90 degree day.
The fed or states can pass laws restricting the amount of interest which can be charged on a debt BUT those laws can only apply prospectively, not retroactively or they become unlawful ex post facto statutes under another part of the Con.
Apparently some of you had a ‘law’ class in B school. Those classes did not, nor were they designed to, teach the law in any area (let alone Constitutional). They are simply designed, and intended, to alert business people as to things which involve questions of law so they will be aware of them and know to call a lawyer. Sort of like learning the 7 warning signs of cancer or learning that if you have a temperature of 105, it is time to call a doctor.
Greed is a universal human trait regardless of education level.
Don’t blame them for everything…….don’t forget to include Wall Street, the Federal Government, and all of our trading “partners” who have kept their export oriented economies running, by financing the consumer consumption in the US.
I don’t think this would have gotten nearly as crazy if all this money from all over the world hadn’t been made available, under such reckless terms.
A Fiscalful of Yen…
“Profits in the Japanese banking sector have taken a 1.2 trillion yen (£5.3 billion) hit from the US sub-prime mortgage crisis and the country’s central bank has said that worse turmoil may be on the horizon. Seiji Nakamura, a board member of the Bank of Japan, said yesterday that it remained ‘uncertain when adjustments in the US housing market will end.’”
its official, the losses from mortgages are now over 1 trillion.
(only in yen so far)
Rock is dead, they say…
“Northern Rock, it seems, is everyone’s problem. The bank, once Britain’s fastest-growing mortgage lender, is now a wreck. Having turned to the Bank of England for an emergency bail-out in August, it is unable to repay its loans unaided.”
you mean a bank that couldn’t make good loans can’t repay back a few billion?
“But that argument didn’t carry the day, as the majority of the House agreed with Maxine Waters, who said that the foreclosure rate has almost quadrupled in her state in the last year. ‘
- We bid Maxine’s Cabinets for her kitchen remodel - about 80k for the cabinets only. Her husband is an ex - ambassador and he is to be addressed as ‘Mr Ambassador … WTF!
Guess where her district is? Los Angeles with lots of mexicans and blacks….she will protect them from getting hoodwinked.
Sobay,
LOL…80k for cabinets, and she reps the poor, the downtrodden and the illegal. Any clue where she made her money?
“(WHAT were they thinking, these past 21 months, enquiring minds want to know?)”
They apparently were thinking of expanding market share — not exactly a wise move when credit markets are hunkering down, IMO.
The Associated Press October 31, 2007, 3:47PM ET
Market share surges for Fannie, Freddie
By ALAN ZIBEL
More from BusinessWeek
WASHINGTON
Fannie Mae and Freddie Mac regained dominance of the mortgage market in what was a disappointing third quarter overall as investors shied away from riskier loans, a new trade publication report says.
The market share of the two publicly traded, government-sponsored mortgage giants Fannie, created by Congress years ago to help keep the housing market liquid, had declined in recent years as Wall Street made an aggressive push in the $11 trillion market for investors of complex securities of pooled mortgages.
As loan defaults continue to surge, especially among riskier borrowers, and the market for mortgage-backed securities plunged, Countrywide Financial Corp., Wells Fargo and Co. and other lenders returned to Fannie and Freddie to buy their loans.
In the third quarter, Fannie and Freddie purchased $342.3 billion in mortgages and mortgage securities, up nearly 3 percent from the second quarter, Bethesda, Md.-based Inside Mortgage Finance calculates.
Their purchases accounted for about 60 percent of the $570 billion in home loans originated in the 3-month period. That’s not bad for two firms that had a 37 percent market share last year.
http://www.businessweek.com/ap/financialnews/D8SKDOE81.htm
the much coveted market share gain.
Looks like that market share gain helped them catch falling knives in mid flight…
http://www.marketwatch.com/tools/quotes/intchart.asp?submitted=true&intflavor=advanced&symb=FNM&origurl=%2Ftools%2Fquotes%2Fintchart.asp&time=8&freq=1&startdate=&enddate=&hiddenTrue=&comp=fre+&compidx=aaaaa%7E0&compind=aaaaa%7E0&uf=7168&ma=1&maval=50&lf=1&lf2=4&lf3=0&type=2&size=1&optstyle=1013
“There can be no good ending to this sorry saga, which had its origins in slack supervision, bad central-bank calls and a panic-stricken rescue. Nationalisation looks the best choice of a bad lot, for it aligns risks and rewards most closely and keeps control in the hands of those who have most invested. But there should be no illusions that it is anything but a mercy killing.”
I thought the happy ending was to come in the form of a marriage of Northern Rock to GMAC?
one out of every six new residential mortgages made this year has gone to a credit-impaired’..borrower.”
Ah, a new class of handicapped.
One in six? This author is more optimistic than myself. For the record, I’m normally very optimistic. But enough stupid loans will really muck up the world economy.
One in three is far more likely the final failure rate. Note: I do predict reasonable attempts to keep people in homes. Yes, I make fun of the current ‘attempts.’ Those are to save people who should be kicked out. One day we’ll get to saving ungreedy workers. But that day is at least 18 months away. Handicapped? Only mentally.
Got popcorn?
Neil
“‘The markets are becoming aware that the decline in U.S. housing prices is not stopping. It is at an unprecedented pace compared to the last 50 years,’ Greenspan told a financial audience.”
Why couldn’t he have spoken this clearly when he was Fed chairman?
“Why couldn’t he have spoken this clearly when he was Fed chairman?”
Because he was too busy being a fraud and a shill.
It was his job to get the American consumer to go deeper and deeper into debt to ensure that Wall Street made larger and larger profits.
With $400 billion annual deficits and a looming Social Security implosion, the economy HAD to grow, and FAST to keep debt as % of GDP small…. who cares if it was false GDP based on ever increasing debt that we could never pay back?
Now, he works for the bankers. It is his job to get the Fed to lower interest rates to save his new masters..
Con-men is slang for Confidence Men. As long as consumers are confidently being confided to by Confidence Men as to the confidence of our economy then we are all confidently consumers. “Consumer” is not having to say you’re sorry.
“He said the housing bubble had burst and the market was ‘a good deal away’ from its selling climax — a point at which sellers ultimately lower their prices to match lower bids.”
How does ‘a good deal away’ translate into time units?
“This was reflected in the large stock of unsold homes and low turnover, which will be overcome only once people start believing such assets are undervalued.”
Translation for bubble sitters: DON’T BUY YET.
Greenspan is a hack. Didn’t he publicly encourage people to use ARMs a few years back when interest rates were super low? Stupid!
Didn’t the original ARMs back in the 80s just follow the current rate through the changes? I didn’t realize until this blog that when they talke about ARMs now they mean starting at ridiculously low rate and adjusting to ridiculously high. I guess that’s the subprime part.
..and I meant to add, it sounds like AG’s perception was as out of date as mine. Not possible!
As I recall, interest rates were scary, but prices weren’t nearly as out of line with income. Add to that I don’t think people walked away quite as much. I think many held on, paid the price and rode it out.
Interesting point. ARMS have always been a bit dangerous and a gamble, but through the wonders of modern financial engineering, they have been reinvented as modern weapons of financial mass destruction. With the added twist of passing off the ticking time bombs to a second group of victims, the securities investors.
It was actually a pretty elegant scheme. I’m still waiting for the perp walks when this mess unwinds a bit farther. It’s going to be interesting to see how the charges are constructed.
ARMs started becoming popular in the 1980s, when the conventional rate was 10% (or more). They usually adjusted annually, as I recall, and you STILL HAS TO QUALIFY, like a conventional mortgage. Overall, a slightly riskier way to get into a house, but it was not unreasonable at the time to assume that you could sell, or refinance in a few years to a lower interest rate.
Contrast this to the current ARM, with it’s “teaser” rate and “Fog a mirror” qualifying, when interest rates on 30 year fixed loans were at an all time low, especially when you considered the rate of inflation.
No its not just subprime. Subprime relates to loaning to buyers with bad credit. ARM adjustments, for all buyers (even those with stellar credit), are usually set to rise at a higher rate than general interest rates, especially if a low teaser rate is offered. They have to get their money back somehow. The ARM is never a bargain for a “real” homeowner. It may have benefits for investors or flippers who know they will have to get out in a short time frame. Anyone taking out an ARM who intends to actually live in the house and stay there for awhile was just an easier mark (mortgage brokers push them even to ppl that could qualify for the fixed because they usually get a better commission). With a few exceptions, its a product for morons sold to marks.
I got an ARM back in ‘93. It started 1.5% below the fixed rate of the time. It was locked for 5 years, then could adjust 1% a year with max adjust of 5%. It did happend to work out as rates were lower in ‘98 than ‘93. The money I saved on the lower interest rates for the 5 years was just enough to cover the cost of refi.
Why did I get an ARM? Because I didn’t know that my Realtor and my mortgage broker were my enemy in the transaction. I honestly believed they were working for me, and they told me the ARM was my best choice. I didn’t realize that they got paid more if they got me to a bad deal.
Now I know better.
Yeah, okay that’s the original kind of ARM I remember and it did work out well for a lot of people. I’ll bet you that’s the kind of ARM Greenspan was thinking of, too. Kind of scary if he was as out of the loop as a layperson like me was.
I bought my first house with an ARM in the late 80s, but it wasn’t a teaser rate, just slightly lower than fixed, for which my income didn’t then qualify. To avoid PMI, I put down 20% with a temporary loan from my sister. I lucked out, though, since the rate fell substantially during the 12 years I owned my home, and my loan amount was “only” about $60,000. I recall the ARM capped at 12%, and the highest it ever got was 9%, lowest about 4%.
That 1 in 6 credit impaired borrower number will grow to 6 of 10 in the near future. Just who in the hell is gonna qualify for all these $hitboxes now Mr. G?
“who in the hell is gonna qualify for all these $hitboxes now Mr. G? ”
Or, who’s going to WANT to qualify for $hitboxes?
The sheeple are beginning to figure out…
(1.) They’re frickin’ tasteless, ugly, cloned pieces of crap.
(2.) They’re built too damn close together. (don’t swing that golf club outside–lest you risk skull-fracturing your McNeighbor on the back-swing)
(3.) Contruction quality is a joke.
(4.) Heating and cooling bills are astronomical.
The homebuilders should be drawn and quartered for building these greed-minded, money grinding monstrocities. I cringe when I drive buy them. Fire-up the bull-dozers!!
DOC
“McNeighbor”
LOL
“Rep. Ed Royce said the bill has ‘murky language (that) would invite litigation from every borrower who misses a payment.’ He added that ‘the main loser will be the subprime borrower who will pay higher rates – if he or she can get a loan at all.’
That’s the way it was suppose to work you dummy. Ever heard of “price to risk”? Politicos…do they ever think before they speak?
‘The fundamental principle of the bill is not to put remedies in place to deal with these problems when they occur, but to stop them from occurring in the first place.’
It appears Barney Frank and fellow Congressmen just implemented a policy for “leaning into the wind” to preempt future housing bubbles.
Contrast this to AG’s remark:
“He said central banks should concentrate on alleviating the economic fallout from burst asset bubbles because they had few methods to prevent them and ‘lean against the wind.’”
The bottom up is what is gonna get us.
Let’s say that I am 58 and have lived in my house for 30 yrs and have paid off my mortgage. I am ready to move into something smaller. Marketed properly I would expect my $5oo,ooo house to sell to a family of 5, say in their mid 40’s. They, in turn, must sell their moveup 2nd house to a 30 something just starting out. Say $300,000 home.
So I am looking for a 30 something with a Score of 700 or more and at least $30,000 cash and a steady job who wants to live in a 20-30 year old house that needs work to help me retire.
I am also hoping that my 40ish buyers want an older house to make a project like their last one. I am also praying that some builder won’t knock $100,000 off some new house out there. Or worse yet an REO firesale property driven by a regulator forcing a bank to get it off the books.
OK so retirement is wayyyyyyy over rated. Like Erik the viking just burn my body in my now, $200,000 house.
I should say….my $200,000 Lot.
Dime,
Speaking as one of those ~30ish buyers with $$$ in the bank, and a stellar credit score, I wouldn’t be in a rush to try to sell. I’m waiting for the bottom, which I’m guessing we’ll start seeing around mid 2009, give or take a quarter.
Sorry about your retirement plans, but it isn’t my job to pay for your margaritas and the beach house.
Got tequila?
Freshman
Don’t blame ya a bit kiddo. Truthfully that was never my plan personally. Retirement is a bad deal.
God bless dimedropped. Nice to see there are still some Boomers out there whose ‘retirement plan’ doesn’t hinge on financially raping & looting from their kids and grandkids.
Can houses go back to being shelter and money pits now?
Yeah, here’s to crazy artist types like me who prefer dramatic colors and LIKE tile counters! What’s the point of owning a home if you’re constantly warned to keep it bland and beige for resale value sake. I say, let them eat paint!
Ditto
Oh stop with the ‘its the boomers’ fault nonsense.
I do volunteer counseling on financial matters for households. The ones I see coming in the door who have been stupid enough to buy more than they could afford using funky motgages are the 20-40ish group. They just had to have it now. They ‘deserved’ it and were ‘entitled’ to get into their ‘dream house.’ A link on one of these posts went to an article where a 29 year old with a biology degree was whining that she couldn’t sell her former house ($269,000) after she went off and bought her ‘dream’ house at $460,000 or so and is not carrying 2 mortgages. Real easy solution for people like that -they just have to learn to say ‘I can not afford it and have to wait.’ The problem is self-denial and patience are concepts about which they are totally clueless - thanks to parents who believed their darling should have anything they wanted right now and denied them nothing.
If you buy a house for $100,000 and 20 years later it has appreciated by the historical rate of 3% or so a year, then it would sell for around $180,000. Great- you nearly break even on the purchase price plus all the money paid in interest. You are probably in the hole as far as the costs of routine maintenance and repairs. Now you want to go to a smaller house so you sell, and buy one 1/2 the size for about the same cost as you paid for the first one with around $80,000 left to stick in the bank. That is where the idea of ‘funding retirement’ came from.
That worked so long as income kept pace with inflation. Now, for about 5 out of the past 6 years, income did not keep up with inflation, and the 6th year, there was only a .9% gain.
“Appreciation” is an illusory concept. If your $100000 house ‘appreciates’ to $147,000, so what? To go out and buy one just like it would cost you $147,000 so you are not ahead.
It wasn’t those who are 50 - 61 fueling the buying binge. That age group remembers all too well the economic events of the late 70’s, mid-late 80s and early 90s where jobs went south and housing crashed but interest rates were 10% or better. ARMs make most of age group very very nervous. That was the first age group to learn about things like ‘down-sizing’, RIFs, temporary contract work without benefits, pensions disappearing and jobs for those without 3 college degrees melting away like snow in July. In fact, here are household incomes by age:
age group between 29 and 34 with $48,896
age group between 55 and 64 with $50,400
age group between 35 and 44 with $56,785 (late boomers are 42)
age group between 45 and 54 with $61,111 (and paying for kids’ college to boot)
The 29-34 year olds make within $1504 a year of the oldest boomers and the 34-44 year olds make $6385 MORE than the oldest boomers and are only behind the younger boomers by $4326 a year or $360 a month or about $2 an hour for 2080 hours of work. There is a gap of $12215 a year between the 29-34 year olds and the 45-54 year olds or about 25% of what the 29-34 years old earn. That is a 15 year age spread so it worls out to an income differential of about 1.66% for every year of difference. Generally the longer one is in the labor force, one gets paid more for having greater experience and skills - or at least until you hit 55 and are considered a real liabilty for emloyer-sponsored health insurance.
The idea that the booomers en masse are going to sell up and move to CA or AZ or FL is a myth. First, based on the income data, they can not do it more than anyone else could. Second, peole establish their lives in an area where their family, friends and activities are. The vast majority, let alone all of them, are not going to abandon that and move just for the sunshine. Another delusion perpetuated by realtors and their lackeys.
James Hamilton’s analysis of the GSE picture is a tour de force — definitely worth the read.
http://www.econbrowser.com/archives/2007/11/freddie_mac_and.html
Missing from the discussion: Consideration of the implications of the GSE subpoenas for political viability of relying on the GSEs for part of the “solution” to the mortgage mess. I wonder if academic economists are generally even aware of the situation, or if they believe it is too unimportant to mention?
New York Widens Inquiry on Mortgages
Louis Lanzano/Associated Press
Andrew M. Cuomo, New York’s attorney general, announcing his expansion of an investigation of suspected collusion involving mortgage lenders and appraisers.
By BLOOMBERG NEWS
Published: November 8, 2007
The New York attorney general, Andrew M. Cuomo, has subpoenaed Fannie Mae and Freddie Mac as he expands his investigation into what he calls “widespread” collusion between real estate appraisers and lenders, including Washington Mutual, to inflate home values.
http://www.nytimes.com/2007/11/08/business/08mortgage.html?ref=business
This one is for TXChick and others interested in Texas, where real estate always goes up.
From today’s WSJ:
John Wayne’s Widow Cuts Asking Price
“Pilar Wayne, the widow of John Wayne, is trying to sell her Fort Worth, Texas, home for just $100,000 more than what it cost back in 1998.”
“The Peruvian-born actress, who was married to the Duke for 25 years until his death in 1979, has cut her asking price to $2.3 million, from $2.6 million when she listed it this summer.”
“The home is in a roughly 700-acre gated community, Mira Vista, in the southwestern part of the city. Ms. Wayne’s current husband, Jesse Upchurch, chairman of travel-agency network Virtuoso, paid about $2.2 million for the newly built house on a half-acre in 1998, records show.”
“The 9,000-square-foot house has six bedrooms, one of which Ms. Wayne uses as an art studio (she sells her oil paintings). There’s also a pool, a hot tub, an elevator and five fireplaces and it’s adjacent to a Tom Weiskopf-designed golf course.”
I wonder if they are renting in Newport Beach?
What a lame way to try and sell a home. John Waye’s old home is probably worth a bit extra for the bragging rights. His widow’s home with a new husband? No… that’s his home and should be sold as such.
Jesse Upchurch, chairman of travel-agency network Virtuoso, paid about $2.2 million
While I wish the couple happiness, don’t use the Duke’s name to sell Mr. Upchurch’s home.
Got popcorn?
Neil
“Without the credit enhancement provided by companies like CIFG, Ambac Financial and MBIA, the rating agencies are more likely to downgrade the CDOs further. And ratings downgrade in turn could decrease the value of those debt pools further and possibly trigger forced selling by investors who cannot hold instruments without AAA ratings.”
As the credit enhancers get downgraded, the wall street paper resulting from mortgage securitizations will have limited buyers. It already is having a crippling effect on the big investment banks and responsible for the recent write downs and 30%+ drop in value of their stock (i.e., write downs are required because they cant get this stuff of their books anymore). As the economic collapse continues and the rating agencies drop ratings based on stricter scrutiny of the industy after this major f*up, I question if there will ever be AAA credit enhancers again. Thus, the creature that caused and allowed the existence of loans made with limited due diligence will starve to death. Back to the days 20% down and great credit scores to qualify, as Banks will be unable to unload worthless mortgages to Wall Street. The credit crisis is also causing wall street to make developers post massive amounts of collateral to comply with financial covenants. Leverage is a powerful thing. We saw what it does on the upswing. The next three years we will see what happens on the downswing. It will be a mess.
RE: It will be a mess.
Trillions have been leveraged from a cesspool of fraudulent and deceptive origination; piss poor underwriting; coerced and corrupt appraisals; with much of the paper backed by collateral of severely depreciated housing stock situated in crap locations.
LYING AND GREED RAN THE SYSTEM!
Any form of oversight, regulation, and control was non-existant!
Even Greenspam himself didn’t have a clue!
Unlike the “this too shall pass crowd” As an insider in and out of hundreds of houses, I don’t believe the problem to be remotely repairable.
It’s too big.
Also, debt guaranteed by an insurer generally carries the rating of that insurer. If the insurer is downgraded then so is the insured debt, which of course lowers its market value. That means that such debt (mortgage, municipal, corporate) held in a trading portfolio is written down. More “one-time” losses.
True. Not only can Wall Street not be able to sell the paper representing interests in the applicable mortgage pool, which will trim their desire to seek mortgages, regardless of credit quality, to securitize and slap insurance or a letter of credit on, as the credit enhancers are downgraded, expect billions and billions in more writedowns as the investment banks are left holding paper declining in value. This is not their business. There business is to sell it (with the exception of the residual) and move on, not to securitize and hold. Wall Street is very crippled right now and I see no light at the end of this tunnel.
By how much will this decline: 12 bathrooms, 8 fireplaces, 7-car garage. And no one living there.
http://www.bestskiproperty.com/idx/single-family/9955074/details.html
As if the place isn’t big enough…some of the photo’s have been stretched out of proportion to make rooms look bigger.
Not enough stretching in all of Photoshop to make that place worth $11 mil.
“The collapse of the U.S. subprime market ‘was a shocker because no one expected it,’ Greenspan said.”
These guys don’t seem to realize you can only build a house of cards to a certain height before it all comes tumbling down. The REAL shocker is that Greenspan was NOT expecting the collapse of the U.S. subprime market at all.
With all these lies & incompetence, it’s now official; we’ve become a third-world country.
This is from a ‘top’ Utah realtor’s website, posted on 2/15/07:
“Real Estate Market is Healthy; Inventory Declining
Many industry experts and analysts predict that the real estate market in 2007 will remain on par with the results recorded in 2006. And this is a good thing – 2006 was the third strongest year for home sales since the National Association of Realtors began tracking sales in 1968.
Current inventory levels nationally are at about 6.6 months, (6 months of inventory is considered a “balanced market”), and the National Association of Realtors forecasts that during the first six months of 2007, inventory levels will continue to decrease, reaching balanced market status for the second half of 2007. In 2008, the National Association of Realtors predicts a stronger year, with 5 – 7% appreciation in home values.”
Sounds like some serious money to be made. Anyone know a number of a good realtor in the area that can guide me though the process?
ROFLOW !
realwhores will sck you dry
ROTFLMAO
Balanced inventory? Well, a few suckers will fall for this. We’ll have our comps on the way down. But as credit tightens, a greater fraction of the buying pool will be cautious informed buyers. Salespeople do not like that type of buyer for a good reason. They demand value.
This market is years away from value.
Got popcorn?
Neil
Memo to Mr. Greenslime:
I’m so glad you lived to see the outcome of your policies. You created this mess by keeping the interest rate around or near zero, which created an artificial environment for real estate to grow out of control. The blame clearly belongs to you.
You also cheered on the bubble as it grew, encouraging the growth of sub-prime loans and ARM’s.
Now?
You’re dragging your sorry carcass out in public to explain things, make alibis, cover up for wrecking and destroying an economy.
It’s all a bunch of gibberish, lying and pointing the finger at everyone else.
It won’t work, though. As the economy craters, the fingers will be pointing at one person.
Better get yourself some REAL good security.
Why is everyone blaming Greenspan, the lenders, the brokers and the realtors for this mess? This has nothing to do with any of them. This is YOUR fault. Yes, you. Well, only you voters.
You’ve supported candidates for 30+ years who love fractional reserve banking. Part of the FRB system is this creation of mad money, money that initially is taken advantage of by the elite, who then are a display of success to the middle and lower classes. I don’t blame anyone but the borrowers, who didn’t listen to simple economics or even read their contracts, and the voters, who support and love the system of fiat currency combined with the more fraudulent fractional reserve banking.
More laws in Congress will do NOTHING, because the money will still be created. And you, the voter, will keep voting for people who support fiat money and fractional reserve banking. For me, the entire issue of government comes down to those two items. I don’t care about civil liberties, war, welfare, big government, the MIC, or any of that. If you return to a strong currency, and full reserve banking, the rest of the problems will disappear, overnight, as the money just won’t be there to squander on anyone.
Greenspan just did what the voters asked him to do, not just Wall Street. Congress keeps doing what the voters approve of. Lenders will lend if borrowers will sign their names and lives away for 30 years.
Blame the voter and the borrower — they’re the two who put us in this mess.
Most voters and borrowers are just plain old people stumping along doing the best they can. Sure, greed is an ugly coiled worm in the apple heads of most people, and humans should think better and not be so stupid every single chance they get. In fact, the opposable thumbs thingie was probably a bad idea to begin with and we would all be happier as apes. Too late now, though, dammit.
But I don’t think voters and borrowers are the only culprits in this horrid mess, no way. Representatives and policy makers who should have known better and ‘experts’ who lied and kept on lying are at the roots of this wretched situation.
In my opinion.
Well said DaDa… The seeds were sown 27 years ago with the warped illusion that we can spend our way into prosperity.
My bank gives me credit cards with a 70k limit but I decide whether or not to spend the credit. The fed caused massive asset inflation with its low cost of $$ but did not create the pseudo demand in the housing market. The RE 6 %r’s did with their lying propaganda machine. As I see it the fed loaded the gun but the RE clones convinced the sheeple to put it to their heads and pull the trigger. If you rely on the govt to prvent you from hurting yourself you too shall soon be extinct. You cannot outlaw stupidity. I don’t want or need some govt idiot deciding my finances…if I did i would live in warm sunny tropical CUBA. The idea that the fed is responsible for the purchase of crap by some of the population boarders on socialism. I have had much in common with the other readers here but I can’t understand the idea that “big brother” should prevent me and my countrymen from hurting ourselves (vomit). Caveat Emptor still true 2000 years later.
“The idea that the fed is responsible for the purchase of crap by some of the population boarders on socialism.”
Puleez with that silliness. You tacitly admitted that the Fed’s lose monetary policy was in fact responsible for the insane borrowing by people. Did the thought ever occur to you that a pair of friggin sneakers with a swoosh on the side wouldn’t be $150 if it weren’t for loose monetary policy? God gave you a brain… use it.
You tacitly admitted that the Fed’s lose monetary policy was in fact responsible for the insane borrowing by people.
No, I said the fed made it possible to borrow money cheap. The fed didn’t make people borrow money to buy overpriced things. That may be more than you can comprehend.
And if the fed didn’t allow for cheap dollars, people wouldn’t have borrowed.
Thanks for playing.
‘ I can’t understand the idea that “big brother” should prevent me and my countrymen from hurting ourselves (vomit). ”
????…..We’re only asking to return to the way it was done from the beginning of banking in America until just a few years ago…. like how our founding fathers expected it to be with protecting our strong currency et al.
If there was not enough liqudity your complaints would be valid. The whole purpose of the fed is to assure liqudity within our economy. That is why it was created to prevent a 1920’s type stock crash. They over did their job when the fed was trying to stimulate the economy and lowered rates too far and too long and created asset inflation but, Big Al did not make you or anybody buy an overpriced Mcmansion or crappy NIKE shoes as the idiot above referenced. Thats like blaming VISA/AMEX because I have a big credit card debt after they gave me a 3% rate and I bought all the crap I wanted at the mall. This is a free market economy. Nobody had to buy. I never bought a house and save a bundle as a renter. I will probably buy later and the money saved will be reinvested.
Maybe I will rob a 7-11 with a handgun and blame smith & wesson for it since they made it possible for me!
What happened to accountability?? Or should I expect big brother to take care of that for me also?
We can only surmise that you’re young and your experience is limited to the borrow and spend mantra.
Basically, unlike the “borrow and spend is bad” guy actually gets that he needs to borrow and spend wisely. I know, this concept is too advanced for those who are pissed off that someone else bought WV ranch you were looking at.
“The collapse of the U.S. subprime market ‘was a shocker because no one expected it,’ Greenspan said.”
Even at his level he prefer to be stupid then guilty.
–
“Those who made loans and expected to sell them quickly did not care much about assuring that the loans would be repaid. It turns out that the financial wizards who made it easy to transfer risk also assured that more risks would be taken. They produced innovations like ‘No income, no assets’ loans, which, Mr. Piszel said, ‘found their way into prime space.’”
“As Mr. Piszel told me, ‘As long as house prices were going up, it cured all evils.’”
Recipe for “legal” financial crimes made easy. Easy does it!
Jas
Here’s a link to the House bill (pdf link at bottom of page — wouldn’t open on my balky computer)
http://www.house.gov/apps/list/press/financialsvcs_dem/press102207.shtml
Comprehensive Mortgage Reform and Anti-
PredatoryMortgage Lending Legislation Introduced in the HouseThe worst-case scenario is anyone’s guess, but some believe it could become very bad.
“We haven’t faced a downturn like this since the Depression,” said Bill Gross, chief investment officer of PIMCO, the world’s biggest bond fund. …
“Its effect on consumption, its effect on future lending attitudes, could bring us close to the zero line in terms of economic growth,” he said. “It does keep me up at night.”
Reduced consumption, stricter lending environment and zero economic growth are actually good for our country. I just need a couple of simple meals a day and am willing to coninue to rent a cheap apartment. I wish the same lifestyle upon all my fellow countrymen & women. Hopefully economic growth will be negative. I know I’ll lose part of my accumulated wealth. About 25% of my assets are in stock market and nothing makes me happier these days than to see the stock indces plunging.
On an average, we have been so wasteful and debt-ridden that a decent cleansing is not a bad thing at all. I still have my doubts. There is the PPT headed by BB itching to pull a Green-scam by lowering rates to 0%, but I hope and pray that the citizens of this great country are taught an unforgettable lesson, such as the one taught around 1929. Amen.
“Other Republicans warned that it would be foolish for Congress to restrict credit at a time of falling home sales and house prices.”
Why does this not surprise me and where is the outrage? The mere suggestion that public policy should be framed around their borrow and spend ideology is outrageous. These republicans with their rotten to the core extremist monetary and fiscal ideas should be hung from light poles.
This gets to the core of how we, as citizens of a revolutionary experiment envisioned 200 years ago, determine our destiny. Being reduced to consumer-bots is rotting us from within. Where do we go from here?
>>“Other Republicans warned that it would be foolish for Congress to restrict credit at a time of falling home sales and house prices.”
That is in line with the 27th Amendment to the Constitution, which states that it is the duty of Congress to keep house prices high within local communities.
“The collapse of the U.S. subprime market ‘was a shocker because no one expected it,’ Greenspan said.”
I am sure that if Allen Greenspan had been the Dutch Central Banker during the Tulip Mania of the 1600’s where the price of a single tulip bulb reached the price of a house, he would have said the same thing.
“The collapse of the ‘was a shocker because no one expected it,’ Greenspan said.”
i told you housing would drop a lot…hahaha…me thinks a lot of people will take a bath. Goodbye to the good old days of 2005, welcome to the nightmare of 2008.
Got lube?
“One in 15 properties is on the market in both counties Cavan and Roscommon, he said.”
Real estate is caving in Cavan and common in Roscommon…
Fannie and Freddie pullback would devastate economy
Fri Nov 23, 2007 4:19pm EST
…
Taking Fannie Mae and Freddie Mac out of the home loan business would flatten the already listless real estate market, said Robert MacIntosh, chief economist with Eaton Vance Management in Boston.
“It would be devastating,” he said. “Why would anyone consider buying a house if the two biggest ultimate credit givers and lenders to the housing industry shut down?”
Well, for one, prices might actually once again become affordable without the background influence of the GSEs snapping up subprime loans. Secondly, there might actually be less appraisal fraud risk to the buyer (but I guess we should wait the outcome of the NY AG’s investigation before drawing conclusions on that topic).
http://www.reuters.com/article/reutersEdge/idUSN2318057620071123
“Comment by Professor Bear
2007-11-23 13:24:43
I don’t think so, as that implies no repayment of principle in this world or the next. Lenders would perceive a risk that loan contracts could be retroactively modified “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”
http://en.wikipedia.org/wiki/Tenth_Amendment_to_the_United_States_Constitution
Okay, you got the basically got the answer right as in ‘no the government can not alter contracts’. But WOW! Please do NOT engage in DIY constitutional law analysis. You are so-o-o-o-o-o-o far off base on the reasoning that you ended up in another galaxy.
I practiced law, including doing Constitutional litigation, for over 30 years.
10th A had nothing to do with anything. You can NOT read words in the Con literally without understanding the over 200 years of case law behind them.
Bottom line is that is it question of substantive and procedural due process plus some law about contracts.
The Con forbids the taking of property without due process and just compensation.
A contract which gives the parties both rights and responsibilities is called a ‘chose in action.’ A contract is property in the sense that you ‘own’ the rights that derive from the contract. Here there are lenders/investors who own the loan and have the right to receive so many dollars as principal and so many dollars as interest as it accrues until the debt is repaid.
No government - state or federal - can just pass a law saying that the creditor is only going to get paid back 50 cents on the dollar of the principal or have to take less money in interest than was agreed. That is a ‘taking’ of the creditor’s right under the contract without (1) due process - like in a bankruptcy court or (2) just compensation.
If such laws were passed, someone (most likely the taxpayers) would have to foot the bill for the amount of the debt and/or interest that the creditor was not going to get. That is as likely to happen as a snowstorm on a 90 degree day.
The fed or states can pass laws restricting the amount of interest which can be charged on a debt BUT those laws can only apply prospectively, not retroactively or they become unlawful ex post facto statutes under another part of the Con.
Apparently some of you had a ‘law’ class in B school. Those classes did not, nor were they designed to, teach the law in any area (let alone Constitutional). They are simply designed, and intended, to alert business people as to things which involve questions of law so they will be aware of them and know to call a lawyer. Sort of like learning the 7 warning signs of cancer or learning that if you have a temperature of 105, it is time to call a doctor.
I’ve been thinking long and hard about this one. While I respect the diligence and intricacy of those practicing law, I don’t agree with the assertion.
I believe the US Constituition is an amazingly simple document, one that an ordinary citizen is capable of understanding without the interpretation of lawyers. I believe the authors intended it to be so, and placed very close attention on the language used.
I believe the complexities introduced by lawyers is to some extent part of the problem. Actually, most of the problem, if you add in the pronouncements of justices whose interpretation is too often that of political or social leanings, or worse, the contrived machinations of the language to meet some preconceived expedient of social engineering.
I don’t think 1 year of college b-school is necessary to understand the Constitution. I think a high school education is sufficient.
I do agree that to practice litigation around it a lot of experience in procedure and study of precedent is helpful. But I don’t agree that we must leave the interpretation to the lawyers.
This thing eats posts so I’ll try again…..
“Comment by Professor Bear
2007-11-23 13:24:43
I don’t think so, as that implies no repayment of principle in this world or the next. Lenders would perceive a risk that loan contracts could be retroactively modified “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”
http://en.wikipedia.org/wiki/Tenth_Amendment_to_the_United_States_Constitution
Okay, you got the basically got the answer right as in ‘no the government can not alter contracts’. But WOW! Please do NOT engage in DIY constitutional law analysis. You are so-o-o-o-o-o-o far off base on the reasoning that you ended up in another galaxy.
I practiced law, including doing Constitutional litigation, for over 30 years.
10th A had nothing to do with anything. You can NOT read words in the Con literally without understanding the over 200 years of case law behind them.
Bottom line is that is it question of substantive and procedural due process plus some law about contracts.
The Con forbids the taking of property without due process and just compensation.
A contract which gives the parties both rights and responsibilities is called a ‘chose in action.’ A contract is property in the sense that you ‘own’ the rights that derive from the contract. Here there are lenders/investors who own the loan and have the right to receive so many dollars as principal and so many dollars as interest as it accrues until the debt is repaid.
No government - state or federal - can just pass a law saying that the creditor is only going to get paid back 50 cents on the dollar of the principal or have to take less money in interest than was agreed. That is a ‘taking’ of the creditor’s right under the contract without (1) due process - like in a bankruptcy court or (2) just compensation.
If such laws were passed, someone (most likely the taxpayers) would have to foot the bill for the amount of the debt and/or interest that the creditor was not going to get. That is as likely to happen as a snowstorm on a 90 degree day.
The fed or states can pass laws restricting the amount of interest which can be charged on a debt BUT those laws can only apply prospectively, not retroactively or they become unlawful ex post facto statutes under another part of the Con.
Apparently some of you had a ‘law’ class in B school. Those classes did not, nor were they designed to, teach the law in any area (let alone Constitutional). They are simply designed, and intended, to alert business people as to things which involve questions of law so they will be aware of them and know to call a lawyer. Sort of like learning the 7 warning signs of cancer or learning that if you have a temperature of 105, it is time to call a doctor.