Bits Bucket And Craigslist Finds For December 2, 2007
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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I just put in a comment in yesterday’s AZ thread that is worth repeating.
There are situations where the last sale price can be completely wrong, and yet not be fraud. For example, Zillow shows my purchase price of the house I previously owned as a several hundred thousand dollars. The value at the time I bought it was actually nearly $1M.
Here’s the explanation. When I got divorced I bought the half of the house I didn’t own from my ex. The records then showed that what I paid for the house as only the cash that I paid the ex! Not only did it not show the real value (which was what I owned plus what he owned = equity plus loan) but it only showed the 1/2 equity exchange excluding the loan (I took over his half of the loan too). So the sale number reported was only 1/4 or so of the “real” price. Yet there was no “fraud” just an inability of the recording system to account for anything but the standard transaction.
That’s a good point but how would fraud be buying a house for 1/4 of it’s real price? Wouldn’t mortgage fraud involve getting a mortgage for way more than the house is worth/sold for and then pocketing the difference? I thought fraudulent transactions tended to push up comps, as the “buyers” (ahem) tended to make sure sellers walked away happy to keep them quiet.
Vermonter, I think he is suggesting people on the forum oten say “in 2004 it sold for 250K, then in 2005 sold again for $1M”…. suggesting that there is no way a price went up 4x in 1 year and that in itself is the smoking gun (the $1M price being fraud).
Supect the suggestion came from a she - not a he.
Right roundsparrow. It would look like the value of the house went crazy in just a few years because of that mis-recorded transaction.
It’s not a mis-recorded transaction. It did exactly what it’s supposed to do - give public notice of who has a claim on that piece of property.
It just so happens that people use these records to determine the value of property now that they’re so easy to search via computer.
Let me clarify a bit. If a human were to examine the records it would be obvious what happened. It’s handled differently everywhere, but of course the human looking at it would know the local custom.
The “problem” comes in when a computer scrapes the records and tosses them into a database without any human taking a look. The system, developed on a national level, makes whatever assumptions are needed to get 95%+ “accuracy” at the national level.
The “problem” is with Zillow, not your county recorders office.
I have seen this happen — where someone has sold a strip of land to their neighbor for $5,000 with Zillow then reporting it as the sale of the entire property for just $5,000. After about 8 months, the record was somehow corrected.
The other half of the house was sold to me at market price based on the average of two appraisals. What I am trying to say is that the price that was recorded was NOT at that real value, but as the actual cash that was exchanged, which only covered the equity that I had to buy. It didn’t count the half of the equity that I already owned, nor the entire loan (which I was already responsible for half, then took on the other half).
Sorry if this is confusing I was just trying to point out an example where if the deal done wasn’t a standard deal, the recording of the deal could be a mess because the system didn’t have a way of handling it. To someone who is just looking at the recorded sale price — 3/4 of the value of the house isn’t shown. 2/4 because I already owned that half, and another 1/4 because I took over the debt of my ex. Only 1/4 is shown since that was the cash for equity transaction.
But ,any appraiser that is doing their job would research all comps used and determine why there was a out of the ordinary sale or transfer of ownership .
It really doesn’t matter anymore because there are so many foreclosures, auctions , and desperation selling going on, that in so many places those sales are going to start sitting the prices .
That brings up another point . How can appraisers seriously appraise property when the lenders might freeze teaser interest rates for stressed borrowers . All these bail-out plans seriously mess with valid market determinations of value ? The powers are messing with market forces to the point where appraisals are a joke now .
I believe that in Maryland that’s what the transaction type tag is for. Normal sales are taged as “arms length,” and your transfer wouldn’t be.
It would appear that the new view in the UK is that house prices will trend down ,but we can’t cut rates as this would lead to inflation and put sterling on the toast rack with the dollar.
http://www.sundayherald.com/business/businessnews/display.var.1874447.0.bank_likely_to_increase_rates_despite_signs_of_a_downturn.php
exactly opposite to what I heard today on Dutch television: the prospects for real estate are better than ever! Inflation is raging in Europe and will probably increase. This means that incomes and rents will increase (in many countries rents are tied to official inflation numbers) so home prices can only go up. At the same time, the ECB is stuck in a corner because of the sliding dollar and the complaints from big companies about damage done to them by the strong euro. So the ECB cannot raise rates and is more likely to cut rates to help big business (and the politicians with their overspending), and obviously low rates are great for real estate. The Dutch realtors and banks still expect Dutch homeprices to rise by at least 4% in 2008 (but obviously, they are not exactly independent experts).
“The Dutch realtors and banks still expect Dutch homeprices to rise by at least 4% in 2008 (but obviously, they are not exactly independent experts). ”
When the stuff eventually hits the fan, say in the next year or so, the same experts are going to express great surprise and say thisngs like ‘We could not have predicted this outcome in a million years.’
I think that US is just ahead of other countries and is showing them their future crises. Europe, India, China etc are all going to get hit badly because all are blowing big property bubbles.
.. the US is just ahead of other countries
it’s a long, thin convoy of Titanics on foggy night, winding their way through the bergs.
Race to the bottom.
Not Titanic’s I think, but K-class subs.
http://en.wikipedia.org/wiki/Battle_of_May_Island
Wasn’t Japan ahead of all other countries? Aren’t we just following their lead?
I looked at going to Grad school in Sweden, Holland and London last year….the tuitions weren’t bad it was the rent I couldn’t afford. The dollar was much higher then too.
Mugsy, I’m pretty sure you could find a spot in student housing in Sweden. It’s been a whie since I was in school there (Lund), but I was set up pretty cheaply in a dorm.
same in Netherlands, depending on location. In my city student homes for the local (small) would-be university are renting for about 75% below market price. The locals hate it, because this subsidy comes out of their own pockets. And the students are mostly spoiled children from wealthy foreigners; they don’t need this kind of subsidy. Of course in cities like Amsterdam it is a lot more difficult, looong waiting lists for affordable student housing.
Um, how could you not afford Swedish rents? They are capped by the government at ridiculous levels. A dorm room (private bath, shared kitchen) in Gothenburg goes for $400 a month.
(Continuing my own post). A studio or 1 bedroom apartment would be like $500-600 a month. (Of course, these price controls leads to an acute lack of rentals, but the ones that exist are affordable).
Inflation is ticking up in many states accross Europe. My former homeland has highest price increase in this decade; and it is expecting to go up next year do increasing food prices. I’m expecting for national bank to keep increasing rates, and this will slow down real estate. Currently, they are running highest building boom since late 70’s, but the rate of construction output had slowed from double digits in 2005 to about 3%. It is matter of time, when full-blown recession will start in Europe. I red article where they expecting recession to start in 2008/2009 and last till 2011…
All true, but aside from the housing issues, isn’t British manufacturing harmed by the awfully high price of the Pound? The UK imports a lot of food, so maybe the high pound, in a welfare state with guaranteed income, amounts to a subsidy for the poor.
The chief executive of Countrywide Financial ,Angelo R. Mozilo , has been sued by a pension fund that accused the company of helping executives pocket improper gains by artificially inflating its stock price through share buybacks.
The pension fund, the New England Teamsters and Trucking Industry Pension Fund, accused Mr. Mozilo, other Countrywide executives and its board of gross mismanagement for improperly using $2 billion in cash to repurchase stock…
The shareholder derivative lawsuit was filed by the securities class-action specialist Coughlin Stoia Geller Rudman & Robbins. Shareholder derivative actions allow a shareholder to bring claims of mismanagement on behalf of the company.
The lawsuit names six executives in addition to Mr. Mozilo, eight directors, five former directors and Countrywide’s auditor, KPMG.
http://www.nytimes.com/2007/10/31/business/31lend.html?_r=2&oref=slogin&oref=slogin
If the economy/market rolls over, I think you’ll see a lot of this and not just in the real estate sector.
But they won’t win. They would have to find a “smoking memo” planning the artificial inflation by a stock buy back AND admitting that it was an improper use of the money. Executives and the board have a lot of leeway with the business judgement rule.
They might have a chance with a jury nullification. Look for more motions to dismiss than you ever saw before.
How about the homebuilders? They were all doing buybacks as their share prices trended down. This is at the same time that executives were cashing out hundreds of millions in stock and options. That is ripe for a lawsuit. Everybody will be suing everybody in the next year or two. It would be a great time to be a lawyer.
I would guess the time the lawsuits start flying might handily coincide when some of the big builders start declaring BK. Can’t squeeze blood out of a rock…
*If*, tx? Surely you jest!
Ya don’t mess wit dem Teamsta’s.
The Teamsters against Countrywide. Who do you root for?
The lawyers.
Ya think the concrete will turn orange when they put Mozilo in it ?
Couldn’t have happened to a nicer guy.
Gee, wasn’t he in the business to help the poor and downtrodden get in on the housing “property ladder”?
What a pig!
I sincerely hope they take every dime he has embezzled, including his home and put him out on the street.
In America, I know this will never happen because he can afford to buy better “justice”, but one can dream.
On the street he could get an even better tan.
“In America” ? - Yeah, maybe - Its still less corrupt than any other nation on earth ……. without doubt !
Sorry, I don’t believe that. Iceland, Norway, Denmark and Sweden are probably far more honestly run and managed. Especially Iceland.
Even Iceland has a housing bubble:
http://www.iht.com/articles/2006/04/14/business/wbiceland.php
They’re not making more ice, dont cha know.
Lived in Sotckholm for 2 years. Trust me, lots of corruption.
Iceland and Greenland are the places to invest. Once global warming happens, they will be lush tropical paradises with mountain vistas clearly visible from coastal surfing communities. Meanwhile, all of California will be a vast, human-free desert. (Black sarcasm off…)
Ironic, since Iceland is one of the few places where they ARE making more land (volcanoes and all).
As for the Teamsters vs. Mozilo, I’d vote for the Teamsters. Burying Mozilo and the rest of the crooks like him in concrete would be a good start! Yeesh - rob a bank for a few thousands dollars, you get 20 years. Rob thousands of people for millions of dollars, you get a nice golden parachute, a big bonus, etc.
I’m guessing that the teamsters wern’t complaining when it looked like it was working.
Union pension plans made a lot of money in the late 90s and early 2000s by investing in CDOs. They were beating inflation by a good 8 percentage points, the last I saw. If they are still heavily invested in that stuff, they are being reamed.
A federal judge has named two New York pension funds lead plaintiffs for five class-action lawsuits accusing Countrywide Financial , the largest US mortgage lender, of inflating earnings and overstating its ability to weather the housing slump.
District Judge Mariana Pfaelzer in Los Angeles on Wednesday appointed New York State Comptroller Thomas DiNapoli, who oversees the New York State Common Retirement Fund, and the New York City Pension Funds as co-lead plaintiffs for the investor lawsuits, court records show.
She found that the pension funds, with a combined loss of “over $100 million,” had the largest stake of any prospective lead plaintiff. The judge also said the funds had considerable experience in similar cases and accepted their statement that they planned to vigorously protect all plaintiffs’ interests.
http://www.cnbc.com/id/22043614
that’s good news, lets hope it marks a new trend against all these companies and their corporate gangsters that made huge (personal) profits from subslime.
I thought Sarbanes-Oxley was the magic bullet to clean up all of the shenanigans? I guess not.
Yes, well, sarbox don’t mean diddly if it isn’t enforced.
Corporations by definition are irresponsible entities. I know this goes against the grain of the “free market” crowd, but corporations need very heavy, draconian regulation if they are to be allowed to exist as a legal entity and do business. They have all the rights, and more, but none of the responsibilities, of individual people. If you or I did half the stuff that corps do, we’d be behind bars at best, or swinging from a rope, lynched by our neighbors as a menace to the community.
So, in order to calm down the free market crowd who I’m sure want to give me a good ass-flaming right about now, how about this? “Free markets”, fine. Without the corporate veil. Let companies operate as aggregates of inviduals, just as they do, but without the designation of a corporation. Let everyone be individually responsible and unable to hide behind corporate irresponsibility. What could be freer than that? Betcha there would be better more effective, products and services out there, as each individual employee realizes they actually have some responsibility, not only to customers and clients, but each other.
I need a million of you guys to come over to my garage this afternoon. We’re gonna watch the Raider game and build a 747. I’ll supply the beer.
I would love to come over and watch Duante Culpepper break the hearts of Raiders fans the way he used to break the hearts of Vikings fans.
Couldn’t agre more, palmetto!!!!
I get the feeling that pension funds stupidly risking OPM is going to be an oft recurring theme. This case could set a precedent as to which party gets an unfair share of the blame.
I started looking for what’s in the Florida pension fund, and if it’s looking at losses equivalent to the state’s short-term fund, that found this…a history of financial mismanagement under Jeb Bush chairing the SBA…
Man, that pension fund has gotta been fugly, Bush still ducking reporters.
“the State Board of Administration (SBA) repeatedly engaged in poor investment practices under the watch of its Board of Trustees, chaired by Gov. Jeb Bush. Despite warnings from inside and outside the SBA, the trustees failed to correct these problems, leading to a stunning loss on Enron stock nearly three times greater than that of any other state retirement fund.”
http://www.afscmefl.org/enron.html
Well, now, it all sort of interlocks, doesn’t it? After all, “Kenny Boy” was a Bush crony. Gawd, this is disgusting.
Also under Jeb’s watch, the Florida Pension Fund bought Edison Schools, even though articles like ,a href=”http://money.cnn.com/magazines/fortune/fortune_archive/2002/12/09/333467/index.htm”>this one were widely circulating. This Florida teacher is still fuming.
profithttp://www.eschoolnews.com/news/top-news/index.cfm?i=35478&CFID=880995&CFTOKEN=29781183
Acting through a captive money management firm, the Florida Retirement System–whose members consist primarily of public school teachers and other public-sector employees–will pay off the debts and buy out the shareholders of the for-profit education firm Edison Schools Inc., it was revealed Nov. 12.
Reported price tag: $174 million.
The Florida Retirement System is chaired by Republican Gov. Jeb Bush, who supported the purchase despite vigorous objections from teacher unions and some investment experts. The decision to buy Edison, which has used school technology as a key sales point in its efforts to take over troubled public schools, is the most controversial move by the $92 billion pension fund since 2001. That’s when the fund lost a reported $325 million buying plummeting shares of Enron stock…
I love how the public school teachers now own Edison Inc. I doubt it is a sound investment, but it is delicious irony. Can the state, if it continues to lose money, just wind it down?
Wasn’t Edison linked to Neil Bush ?
More Florida news…additional billion withdrawn before freeze.
The downgrades in Florida show the far-reaching effects of the bursting of the housing bubble as complex investment vehicles once marketed as high-yielding, safe havens are now backed by collateral investors don’t want.
Late yesterday, the board disclosed that an additional $1 billion was withdrawn from the pool just before the freeze, reducing its size to $14 billion, a 48 percent decline for the month. On Nov. 29, state officials said the pool held $15 billion.
Representatives of pool participants from schools, cities and counties said they would press Governor Charlie Crist and the Legislature next week for a cash infusion. Kevin SigRist, deputy executive director of the State Board of Administration, said the board can’t promise to make them whole. (per Bloomberg this a.m.)
high-yielding, safe havens??
high-yielding, safe havens .. high-yielding, safe havens .. hmm..
Of course! High-yield and safe!
Say it often enough with one eye closed and it almost makes sense.
Military intelligence
Jumbo shrimp
High-yielding safe haven
Real estate investment
bad lay.
shadow market
“Military intelligence
Jumbo shrimp
High-yielding safe haven”
Fine pewter
Cash infusion … and where might that come from? Crum - this will jack up outbound U-Haul rates some more.
Last year we talked about Floridians relocating to N and S Carolina, but now we’re hearing about problems there, not to mention water shortages throughout the southeast. Where to go? Maybe Kansas.
Walter Burien has investigated what pension funds REALLY have socked away - I leave the group to determine the tin-foil hat rating for this site: http://www.cafr1.org Interview with Walter on Rollye James: http://www.mystreamingserver.com/Archives/WalterBurien.mp3
Bottom line: they have their ways to screw the few who are left to pay taxes, again.
sorry, try http://www.cafr1.com
Today’s online edition of New York Times has a story about some norwegian towns that lost a pile of money by investing in Citibank led SIVs.
U.S. Credit Crisis Adds to Gloom in Arctic Norway
By MARK LANDLER
Norwegian towns that lost millions in bad investments fear that they will have to cut local services…
This “globalization” is really working out swell, isn’t it?
The question has to be, “at what point do people realize that the American financial establishment has lost its credibility?” It will need to be rebuilt and that is going to take a lot of time and many prison sentences.
I doubt will see many perp-walks. This will all be attributed to “unforeseen conditions” and poor business decisions.
I am very disgusted with the legal system in this country, anymore. There should be some aggressive investigations and prosecutions, but the story will be that the various agencies are too understaffed. I have experienced this first-hand. Easier to just overlook the “piccadillos”.
SOX was supposed to bring credibility back after the Enron et al. kind of fraud. All that SOX did was to increase paper work, hurt work flow in good manufacturing companies, create job opportnities for tons Econ, Accounting & Finance grads. The brightest silver lining to the unfolding mess is the huge hit to the US “financial engineers”. Nobody should trust these parasitic, bonus-eating suits.
What SOX does do is make the CEO and CFO responsible for a design of internal controls that prevents fraud, basically making them responsible for anything that happens down the food chain. With the new auditing standards the focus is on auditing internal controls and forcing companies to adapt and become responsible for their internal controls. In the past the audits were geared to just making sure the numbers were right with only a basic level of understanding what internal controls should be that make that number right. So better the internal control better the number. In the end it is better for auditors to nail companies on internal control problems rather than just ignore them find out what the number is and then book and adjustment to fix with never correcting why the number is wrong in the first place.
SOX sux… my own experience at one tech company was seeing the engineering budget absolutely gutted, while at the same time the bloated accounting/finance depts were expanded. Let’s stop manufacturing/designing/building anything here, and focus on the front-facing facade. No long-term strategic risk in that, right?
Lobbyists going into overdrive before Bush leaves office…
WASHINGTON , Dec. 1 — Business lobbyists, nervously anticipating Democratic gains in next year’s elections, are racing to secure final approval for a wide range of health, safety, labor and economic rules, in the belief that they can get better deals from the Bush administration than from its successor.
http://www.nytimes.com/2007/12/02/washington/02lobby.html?hp
It would take a few months at most to reverse all those rules. The months would be just to sort out which ones were passed to neutrally implement a rule that needed to be clarified - yes, they exist, some stuff isn’t important enough to lobby over it - and which ones were capitulations to special interests. As a matter of fact, you could do it the other way and nix everything implemented in the last year or so of the administration and then slowly bring back the OK ones. Regs are purely an animal of the executive branch.
Waste of time and money. Also, for an example, the people who are civil service (not political appointees) in a place like EPA or consumer saftey, tend to belive in environmental protection or consumer safety. That is why they don’t work for the polluters or the people who want to build cars with flimsy roofs. They will be delighted to roll back the rules that the lobbyists write and submit for approval to the political appointees/future lobbyists.
“There’s a growing sense, a growing probability, that the next administration could be Democratic,” said Craig L. Fuller
Do ya think?
I don’t want either. I’m sick to barf point of most politicians from both sides of the fence. I want a whole new system, or the whole “old” system, based on the Constitution, which neither one of the parties seems to think exists.
OK, time to re-raise my radical proposal, which got hooted down when I tried it a year ago. My long-term, fail-safe solution for drastically reducing and improving bloated, corrupt government:
Government workers can’t vote. Local government workers can’t vote in local government elections, state government workers can’t vote in state government elections, and federal government workers can’t vote in federal government elections.
To me, the conflict of interests is obvious, but there are plenty of government workers on this blog who disagree, so, OK, go ahead and start screaming.
In the eleven years I was a federal employee, I voted Libertarian for every office and voted against all bond referendums on the California ballots.
What’s fail-safe about this plan?
There are plenty of situations in which those with a conflict of interests - possibly even the majority - would not vote in such a way as to directly benefit them in their current government jobs. Nonetheless, there is a marked tendency for people in government to be pro-government. In long run, I am convinced enough excess would be eliminated at the margins to halt and partially reverse the runaway size and scope of government.
I notice lots of minorities are pro-minority, and tend to vote for policies that benefit them. If we don’t let them vote on issues directly affecting them, then we can gradually reduce the bloat caused by these policies.
If we’re throwing out ideas that are going to cause an uproar, I have a similar one to yours:
Anyone individual receiving government assistance gets a fractional vote after a grace period (say, 6 months). This is to protect against people who are not contributing to society from getting to dictate how the tax dollars are spent. I’d say a fractional vote as they still deserve to be represented. But, ultimately, why should someone who doesn’t pay any taxes, gets a yearly $3k check for each child they have (is that what the child tax credit is these days?) get to vote on policy that determines how tax receipts are spent? 6 months after you stop receiving any tax subsidies, your full vote is restored.
This includes those on SS, receiving farm subsidies, child tax credit, etc. I think deductions should be treated seperately. This would hopefully stop those in trouble with housing from voting themselves a bailout, etc. Perhaps being a government employee puts you in this category as well, as Paul suggested.
Of course, you need to consider exceptions such as those who are permanently disabled and thus can’t work, etc. Not sure how to address those cases.
Thoughts?
J
Thor - “Minorities” don’t have the right to tax and regulate; governments are the only ones with that power. It’s a fundamental difference.
I’m not in favor of fractional voting or even disqualifying people based on government assistance. If the programs are bad they should and can be changed through more limited government.
I would not, however, be averse to voting being limited to property owners or those paying income taxes. Other citizens would also be permitted to vote, but should pay a nominal poll tax, say $10.
I’m not in favor of fractional voting or even disqualifying people based on government assistance. If the programs are bad they should and can be changed through more limited government.
I think that’s the common theme between your proposal and mine, though. They make it easier for those who are contributing to make those changes to limit government. Otherwise, I think you’ll find what we’ve seen lately - government programs expanding to provide services to even more people, because they can vote themselves such things (even if they’re not contributing taxes). I’m not for disqualifying voters outright.
I would not, however, be averse to voting being limited to property owners or those paying income taxes. Other citizens would also be permitted to vote, but should pay a nominal poll tax, say $10.
Ignoring the suggestion regarding property owners, I don’t see how your proposal of those who pay taxes being able to vote being very different than mine. In theory, it is the same - those who are contributing get to have a voice. Those who don’t contribute don’t have a voice (or in my proposal have less of a voice).
I wish I could remember the quote…something about democracy working until the people realize they can vote themselves benefits from the public coffers…at that point, it breaks down as everyone wants to get more than they give (that whole greed thing). I would argue that my proposal (and your later one) protect against that.
J
OK, and thanks, but I want to return to my original point:
Government workers are fundamentally different from other forms of workers. They work for organizations which have power over us in ways that no others have. It is dangerous to lose sight of this. Because of this, they should (IMO) be subjected to oversight and control of their ability to increase this power (which of course limits out freedom). A very effective means of doing this would be to curtail their voting privileges.
“OK, time to re-raise my radical proposal, which got hooted down when I tried it a year ago. My long-term, fail-safe solution for drastically reducing and improving bloated, corrupt government:”
Dad used to say one long sheet of paper with taxes on the front and voting on the back. Don’t pay taxes, don’t get to vote!
Hmmm… how about firefighters and police. No voting there too? Teachers? Military folks?
I’m okay with that, as long as all employees/contractors/investors of Boeing, GE, and Raytheon are prohibited from voting in any election where they may be handsomely rewarded with more pork-barrel military-industrial-complex spending.
Pretty soon nobody can vote, since we’ve all got some sort of vested interest. Even all but the most extreme libertarians (and I have many leanings in that direction).
Government workers are fundamentally different from other forms of workers. They work for organizations which have power over us in ways that no others have. It is dangerous to lose sight of this. Because of this, they should (IMO) be subjected to oversight and control of their ability to increase this power (which of course limits out freedom). A very effective means of doing this would be to curtail their voting privileges.
—————————-
Now, replace “government workers” with “corporations” and you get another perspective.
Corporations (the more monopolistic, the better) have very deep pockets and can bend the rules in ways that ensure the greatest benefit for themselves.
It’s why we need extremes on both sides (very pro-union) to balance things out. Too much power on either side & it gets ugly. The balance has been tilted in favor of corporations for a very long time now. It is about to change (populist movement gaining strength) because the sheeple are finally starting to wake up and realize they’ve been fv*ked by corporate greed for too long.
BTW, former govt worker & spouse is govt worker. I routinely vote “NO” on new bonds, write (using another name) to council members requesting that they not raise salaries or increase capital expenditures.
Not all govt workers are in favor of waste, and many private-sector employees vote in favor of every bond.
I’d rather see an IQ test and/or a test regarding a prospective voter’s understanding of economics and current events.
Careful… with the way the US is heading, the only employment option left will soon be the government (or Walmart!) - it would be a small problem for us if government workers - everyone - couldn’t vote!
I DO like the idea of those on public assistance - welfare, etc. - not getting a full vote. I don’t see why some worthless junkie leech should have the same say as I do in how things are run, especially since he’ just going to vote himself my money!
I also wish there was some way to screen out the ignorant. If you can’t figure out what the governor is responsible for, you can’t vote for him, for example. In Maryland last year, we had a perfectly good Republican governor replaced with a worthless tax and spend Democrat because “the people wanted to send a message to Bush about the war in Iraq.” The “people” - Maryland’s idiot voters - were apparently too stupid to realize that state governors HAVE NO SAY in national matters like the war in Iraq. Because of their ignorance, now our new Dear Governor is raising our taxes across the board. They are all upset, but if they weren’t stupid, this could have been prevented.
If you don’t understand what you’re voting for, you shouldn’t vote.
People who seriously believe in individual freedom and liberty, and a country that avoids Washington’s “needless foreign entanglements,” have a simple choice: Ron Paul or the status quo.
http://www.ronpaul2008.com/
Amen, brother. Here’s your alternative.
Partisan politics is what perpetuates the crap we are dealing with here. If we don’t get away from it and clean house we might as well bend over and kiss our asses goodbye.
Wary…
http://news.bostonherald.com/business/general/view.bg?articleid=1048135
no details anywhere
one fact , the taxpayers & savers get screwed in the end
“Should subprime rates reset, those rate increases would put added financial burdens on homeowners.”
How unfair. These people would actually have to deal with the terms of the contract they signed? That’s not very American.
This short article makes it clear that this plan is a joke. You have Barney Frank sitting on the fence (add joke here). It states how complex the securitization process is. Nobody knows who owns the paper on the mortgage for Holly Heloc and Frankie Foreclosure. I agree with those that think this plan will fall like the Hindenburg.
A lot of older folks live on fixed income; as prices rise, their cost of living goes down. Why isn’t the AARP visibly upset and complaining about the destruction of the US currency?
Because AARP is just another big “player” in the political game. They are interested in keeping a large membership and bringing in the cash to support themselves. They don’t really care so much about their members as they care about keeping their revenues.
The official position is that INFLATION is 2%. B.S.
It is about 7-8% or more. No reasonable person could believe the government numbers; they are mere fabrications. Given the real inflation numbers, the Federal Government would need to give all the retirees on SS an additional 30% increase in income to make up for the loss of purchasing power. That would cost the taxpayers a bundle and would essentially push the deficits into a death spiral. I don’t think AARP is really much concerned about the REAL problems with this govt. and its debt issues. They just want good PR.
aarp is too busy selling ins,investments etc
they’re non profit ?
I sent another lengthy reply that was gobbled up by the spaminator, i guess.
I won’t repeat it, but in summary:
The fake inflation numbers should be a much greater concern. Using real inflation data, all retirees would need a 30% “pay-raise” to keep up. That’s not going to happen. Exchange rates aren’t the problem, it’s TOO MUCH SPENDING, via FED printing of cash, based on non-existant reserves.
Diogenes — I’m 99% sure that the time it takes your post to appear is directly related to its length. There may be an algorithm in the blog/post management software that causes it. To test, draft one-sentence and a very long paragraph in a WP. Post the long one, followed immediately by the short one. Not positive, but I think the short one will appear first.
If one believes the inflation numbers are “fake” (I’m talking about being off by 5% or so, not 1%), then one also believes that participants in the largest and most liquid market in the world are willing to continuously and systematically trade U.S. government securities at significantly negative real interest rates. That is difficult for me to swallow. I know, I know - even guys with as much credibility as Rogers think inflation is much higher, but as much as I like him, I don’t buy it. We’ll likely see 7% inflation in the future, but not today.
The United States has a neg-am mortgage with the People’s Republic of China and the House of Saud.
Paul,
You are probably right. I haven’t seen prices going grossly up in the past 5 years, except in Housing, food, fuel, medical expenses, insurance, education, and all those other things the FED doesn’t count as being NON+core.
With housing dropping, that may off-set some of it, but everything is not based on the price of Chinese imports.
Almost all consumer durables and non-durables, clothing, used cars, airplane tickets, etc. - like I said, I’m not arguing that inflation may be a little higher than reported and will likely get higher still - but just want to say there are many, many people who are not unreasonable and who do not think inflation is currently 7-8% or more, as your post indicates.
Food prices are the most significant since people see them increasing all the time… Prices of vegetables, milk, dairy pruducts (butter, cheese, heavy cream) had rised sharply, as well sugar, flour… You can skip buying TV, DVD, designer clothing, but not groceries. I noticed sharp increase for food in restaurants and dinners especially in my favorite places. It will take a time before the crowd will thin out, but people will seldomly cut dinning out. Even during war, post WWII and during brutal communism, restaurants were full since it was only place were people could escape reality of the daily life.
‘If one believes the inflation numbers are “fake” (I’m talking about being off by 5% or so, not 1%), then one also believes that participants in the largest and most liquid market in the world are willing to continuously and systematically trade U.S. government securities at significantly negative real interest rates.’
Its the only game in town?
Shadowstats.com is a definitive source of identifying phony government numbers.
I don’t know where you live, but groceries here in Oregon are easily up 8% yoy. Then we do have the gasoline/various forms of energy raises….. Local electric service sent out notices to expect a 13% increase this year. Need we also look at medical ins?
http://www.shadowstats.com/cgi-bin/sgs/
Read the entire site, including the section on CPI.
This lying started in the JFK admininstration and has continued (with a new set of more inventive liars every new administration) since.
Contrary to the number diogenes quoted, the pay raise for people on SS (and military and federal pensions) should be about 75% by the numbers John Williams calculates. In order to get them he had to ‘reverse engineer’ the changes made in each change of calculations.
That’s a lot of money, folks.
i guess it’s because the elderly poor don’t purchase necessities from overseas, while the ones with money don’t care..
All the daily necessities produced by the manufacturing sector have Made in China who have a billion or so slaves working for the US citizens. I don’t see inflation there. However, there is inflation in the price of domestic produced necessities (e.g., food).
true.. there is some inflation, but a search turns up no complaints from AARP as arlingtonva surmised. Why is that?
I suppose the elderly-experience is that there is no extrordinary inflation to make a fuss over.. and who cares about Forex anyway..
Bull!!
I qualify as elderly… the most important things to me are food prices and energy costs, both of which are going up like a rocket.
I do NOT belong to AARP and will never belong to AARP. It does not represent me… and it does not represent the elderly. It represents only itself.
de makes a point that bears emphasis. AARP *does not* represent a very large number of older people in this country. There are a lot of people who do not agree with the political positions that AARP espouses, and refuse to have anything to do with them. There are also a number of people who are nominally members for the access to insurance and such, but who do not support many of the organization’s policies.
Unfortunately there is no equivalent organization offering similar bennies and lobbying clout, but without the limousine liberal politics.
Goes up
Detailed analysis of our local loans:
Top 10 subprime lenders by total of high-rate loans made in Kern, 2004-2006
1. WMC Mortgage, $704 million
2. New Century Mortgage, $673 million
3. Long Beach Mortgage, $553 million
4. Countrywide Home Loans, $549 million
5. Argent Mortgage, $469 million
6. Fremont Investment & Loan, $339 million
7. Option One Mortgage Corp., $253 million
8. Wells Fargo, $214 million
9. Ameriquest Mortgage Co., $199 million
10. Encore Credit Corp., $192 million
Top 10 Kern lenders, traditional loans, 2004-06
1. Countrywide Home Loans, $2.8 billion
2. Wells Fargo, $1.4 billion
3. Bank of America, $804 million
4. Washington Mutual, $786 million
5. World Savings Bank, $706 million
6. GMAC Mortgage, $500 million
7. Kern Schools Federal Credit Union, $383 million
8. IndyMac Bank, $365 million
9. SunTrust Mortgage, $345 million
10. Sierra Pacific Mortgage, $300 million
http://www.bakersfield.com/hourly_news/story/299831.html
$27.3 billion — All home mortgages originated in Kern County between 2004 and 2006
$8.1 billion — Value of subprime loans made in Kern County from 2004 to 2006
19.5 percent — Percentage of Kern mortgages that were subprime in 2004
40 percent — Percentage of Kern mortgages that were subprime in 2006
54 percent — Percentage of subprime loans made to local borrowers earning more than $64,659 — 50 percent more than Kern’s median household income in 2006.
I cant wait until all these 2006 loans reset. Its going to be ugly.
Crispy, do you really think this will be a problem?
Look at it this way, we’ve got the “ownership president” working with the “financial innovation” Federal Reserve, working with a “lassez-faire” Justice Department.
I’m sure the leadership will find a way to save all the over-extended borrowers from forclosure.
What about the rate freeze?
Question is what are the local credit unions holding in HELOC loans?
Probably a lot of worthless paper. You are correct, the local CU were handing out HELOC to anyone with a pulse.
http://rabbit-hole-journey.blogspot.com/2007/11/campaign-contributors-of-media-anointed.html
Crispy & Cole,
The list you provided reads like a list of the media-annointed, corporate cartel-approved Hollow Men of the Republicrat Party’s list of presidential candidates. Note the stark contrast between who’s funding these Wall Street marrionettes, and the “little guys” who are funding Dr. Ron Paul.
http://www.ronpaul2008.com/press-releases/54/ron-paul-rises-above-giuliani
Despite Giuliani being Wall Street’s favorite errand boy, and his campaign being backed by Goldman Sachs and the usual bankster suspects, Ron Paul - relying on small individual donors - raised more money last month. Ron Paul is still the longest of long shots, but it is enormously encouraging that tens of thousands of Americans are rallying to the one and only champion of individual freedom and responsibility in the 2008 Presidential race.
Here come da judge…
http://www.wrisley.com/bonner.htm
Interesting, wmbz. But it probably just represents a delay - the mortgage documents can be traced and reproduced.
It appears that realtor.com may have taken down its ‘market conditions’ reports. These are reports by individual used home salesmen (aka realtors) that discuss market conditions in their areas. Most are the typical lies but I was noticing more and more that actually described the true state of the real estate market. I wonder if a bit of honesty was too much for the used home dealers and they decided to purge the market conditions reports. Maybe they are temporarily taking it down until they can review and approve (i.e. censor) all of the reports.
I’m having trouble creating a link, but if you go to http://www.realtor.com, the link to “Market Conditions” is on the left margin under the heading “Tools”.
tools
roflow
they use to puff it up like mad
under the heading “Tools”
I believe Bernanke and Paulson also belong under that heading.
I emailed them asking why no market conditions. Probably won’t get an answer. I emailed a question to my state realtor assn. website a while back and the message came back marked “undeliverable.” Great organization.
“It appears that realtor.com may have taken down its ‘market conditions’ reports.”
Bad idea here — something like the National Weather Service taking down its satellite weather maps as a Cat-5 hurricane approached.
You appear to be right. I clicked on “Market Conditions” and then “California”. This gives me a blank page where I normally would have found the “Costa Mesa” link and clicked on it. (To find the usual lies and misinformation. Realtors complaining about the media and blogs, quoting Gary Watts, yacking about how it’s a buyer’s market, buyers are on the sidelines, yadda yadda.)
Maybe the bald-faced lies got to be too much even for realtor.com. Nah, they’re probably just worried about a lawsuit or something.
If it quacks like a duck…………
The NAR also removed its laughable anti-bubble reports:
(Google it and click on the first link:)
http://www.realtor.org/research.nsf/pages/anti-bubblereports/
Thornberg interview on Bloomberg:
http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/vSZn84rvBkQA.asf
Buyer-seller standoff in Manhattan, per the New York Times
http://www.nytimes.com/2007/12/02/realestate/02cov.html
“But for every bearish buyer there remains a seller brimming with confidence.”
“Buying real estate in the U.S. is going to be the fashion for the next two years…The foreigners are going to buy everything.”
I guess they are going to buy all the stocks, too. Not sure about all the debt.
It’s different in Manhattan — even the Great Roubini says only 10% down on NYC apartments (at the trough, presumably…).
I remain unconvinced, as NYC’s Koolaide seems spikier than even CA’s seemed a few years ago. But time will tell…
I rented a studio co-op in Brooklyn (downtown, directly adjacent to Brooklyn Heights) in the mid 90’s that I could have purchased for $35K. The owner had paid over $80K.
Guess NYC real estate only goes up.
Was this due to economic malaise in the City or ghetto migration?
Not ghetto migration or economic maliaise. A housing bubble in the 1980s followed by a bust, along with a demographic kicker — the entire baby boom generation moving into the parenting phase and trying to move from condos and coops to homes.
What WT Economist said.
The only alleged issue with the nabe at first was I had to walk past squeegee guys at the base of the Brooklyn Bridge. Then they got kicked out and the Nation of Islam guys passing out pamphlets to african american drivers took over.
I never had a problem or even a significant interaction with either group. The squeegee guys were only interested in drivers and the Nation of Islam guys were only interested in black people.
Landlord bought in a bubble. The most lenient co-op board in the city let owners rent for 6 years. So I rented for about 3 1/2 years for $725 a month and paid off $70K of student loans in less than three years.
As I posted a couple of days ago, I was offered a basic 9-unit walkup apartment on W. 16th St. in 1982 for $225K, when interest rates were in the mid-teens and rents were around $400/unit. OK, it’s a long time ago, but the point is the price-to-rent ratio - watch out if/when rates rise.
there are studios on the UWS selling for $300K (in the past 2 years) that sold for $35K in the early ninities….
… my point being that there is plenty of room for a fall of plenty more than 10% — and it will take a lot longer than 2 years to bottom.
but one thing that’s different about manhattan co-op’s is that you not only don’t find ‘no-money down’ but you are quite likely (at the higher end especially to find 100% cash payment required — in addition to several $$$MMMM in liquid assets to boot.
that tends to have a ’stabilizing’ effect on certain markets.
I call bull$hit on Roubini. Ten percent, my a$$. If we go into a worldwide economic slowdown the foreigners aren’t going to be worried about propping up Manhattan real estate. Layoffs are intensifying here. The mood around us is one of great uncertainty. There are developments all over the City that are nearing completion. Except for the dream that foreigners will save it all, the fundamentals are melting away.
Plus, people want to act like this whole city is Disneyland. There are still a lot of bad things lurking, including the potential for neighborhoods to degentrify in a hurry. Time will tell but I sure think Manhattan has the rose-colored glasses on.
BTW, can any Manhattanites reading here let us know whether cab drivers and hair dressers are still investing in Manhattan real estate these days? That information might give us non-New-Yawkers a hint about how well your residential real estate prices will hold up going forward…
I hate cab drivers so I stay out as much as I can but I have heard them talking about buying real estate in the past. Immigrants love buying real estate. The Indians live for it. I don’t go to a hairdresser but the talk of real estate in this area has turned very somber at all levels. I see no elation whether the discussion is concerning New Jersey, Long Island, Westchester, Manhattan, etc.
http://tinyurl.com/29wgrv
They talked about Weber’s apartment on CNBC on Friday. They said last year he could have gotten $30 million. That to me would signal a 25% drop in one year. So, what the heck is Roubini spouting about? He is usually very good. I hope he doesn’t come down with a case of “the stupids”.
“I don’t go to a hairdresser but the talk of real estate in this area has turned very somber at all levels.”
Last time I was in NYC I heard a personal anecdote about a fellow’s hairdresser investing in real estate. It’s no different here in SD — my wife’s hair dresser is also a real estate invester.
not exactly per the NYT .. i’m not a subscriber so i Google for some part of a sentence, like “bearish buyer there remains a seller brimming”
Usually another source pops up.
This time it popped up at:
http://realestatetalk.org/real-estate/real-estate-buyers-and-sellers-stalemate/
Perhaps the NYTimes article sited the source.. perhaps not.
No, realestatetalk cited the NYT.
Incomes in NYC are simply huge. I don’t think this will continue much longer. These people are in for a lot of pain.
I can’t think of a more deserving group.
Really? Everybody in Manhattan? You seem to forget all those sleaze factories in Cali like CFC, and everyother subslime lender in the Golden State. At least Bloomberg runs a balanced budget and has set asides anticipating a reduction in tax revenues. Let me know how things work out for you with a multi-billion state budget shortfall, skyrocketing foreclosures, and more financial carnage guaranteed. Enjoy the sunshine, sucker.
Ziss is Anold Shwatzinegger talking to you now, and let me tell you sumzing, you azzhoole……..
spike —
Are you a true-blue New Yawker? Because you seem to have personalized my comment. All I really meant to suggest is that New Yawkers are in deeper denial that Caleeforeeans, which will eventually make the collapsing bubble popping more painful there. But if New Yawkers took umbrage over my flippant comment, then all the better…
P.S. Most of the subslime lenders in CA that are not already out of business look to me like they are headed down that path. At this point, only bailouts may be able to save them.
Bear,
man, you are truly passive aggressive. I have to echo Txchick’s take.
You don’t know jack about NY, so why so hostile? I know the out-of-town hicks have a long tradition of fear and loathing towards Manhattan, so it does put you safely in the same crowd with your republican heroes like cheney and rumsfeld.
Spike — You are just simply agressive. Lighten up
P.S. I seriously have nothing against New Yawkers, but I love to rile their unfounded hubris.
As noted, NYC had a severe RE downturn in the early 90s. And everything now hangs on the Wall Street bonuses, and the spector of WS layoffs.
As for the elusive “rich foreigners’–I’d like a follow-up on the NYTimes story of about a month ago, including the Irish carpenter with 7 unsold spec homes back in Eire who bought a condo on Wall Street ( bleak, totally non-residential area) for 750k. The truly wealthy do not buy stupidly, which is why the 10+million market in Manhattan is somewhat frozen. But the ambitious FBs from overseas might continue to buy middle-class apts. for a while…until the carnage in overseas markets
hits. I like Joey’s metaphor of a string of Titanics…
Serious money is at home anywhere, and Dubai seems to be the favorite du jour. Manhattan is not a need-to-be place anymore.
I agree with you Spike. But I see little addressing of the issue that there is a ton of inventory coming online in Manhattan and Brooklyn. I don’t know about the other boroughs. I spend 95% of my time in Manhattan and the rest either going up to Westchester or LaGuardia.
I can hardly wait to live in a country where the nice places are owned by the wealthy foreigners and the scraps… by us.
That is when the revolution begins my friends. When enough of us are on the outside looking in - in our own country.
Who’s Who in the Housing and Mortgage Bubble, by Catherine Austin Fitts
Shows just how many people and institutions were profiting in one way or another.
Who’s Who in the Housing and Mortgage Bubble
I don’t believe this stuff is true…Show Me!
‘As the housing and mortgage bubble was a component of the “strong dollar policy,” the same players are also present in the other components, including the suppression of the gold price (a necessary step that preceded this bubble as the suppression of the gold price turns off the financial “smoke alarm”) and the refusal to produce audited financial statements for the US government from fiscal 1995 to date (as required by law) thus allowiing trillions to go missing from the US government.’
Regarding suuppression of the gold price, GATA (Gold Anti Trust Action) has ample evidence
GATA articles
Regarding the Pentagon’s refusal to produce audited financial statements, how about CBS News:
Pentagon Missing 2.3 trillion
catherine austin fitts is a bit of a conspiracist/’really big picturist’ — heard her on coast to coast a few weeks ago (not the best reccomendation for either of us!)….
The terms “conspiracy” and “conspiracy theory/theorist” are rhetorical devices designed to deflect uncomfortable questions. Most people hear those terms and use them as a euphemism for “crazy.”
What you often find is that the people being labeled as “conspiracy theorists” are in fact accomplished, highly respected individuals. Austin Fitts was a partner at Dillon Read, a Wall St. investment bank with a long history, and was Asst. Secretary of HUD. Hardly a “kook.”
Hear hear! The “conspiracy theorist” label is indeed one of the most effective and low-cost mechanisms for instantly putting one’s conspiracy above careful scrutiny.
So far, it looks like the “conspiracy theorists” on the HBB have been entirely correct in their predictions.
Prof Bear: If you’re not familiar with Catherine Austin Fitts, you might want to take a long look at the entire Solari website. Incredible, ethical, honest woman…….whose life and business were ground to a halt when she dared to help communities use proprietary software which would enable them to build strong communities from the inside.
It’s a long and telling example of how perverted what passes for government and crony-capitalism has come in this country.
Took my daughter to shop in SJ yesterday. Went to the Westfield Mall (Steven’s Creek). A lot of shoppers, few if any sales and very few buyers. Remember this was the first of the month payday weekend. Lot’s of people in food court and Starbucks. On the way home stopped in at the outlet stores in Gilroy. Lot’s of people at Starbuck’s in both the walk up and drive through lines. The biggest shock was standing room only in Coach Store (about half of which were men and a large asian group) buying like crazy. I think the cheapest purse was somewhere around $190. My daughter and wife couldn’t believe the insanity. My daughter saved all her money and will see what the local outlet stores in Cannery Row have today in Monterey.
“The biggest shock was standing room only in Coach Store (about half of which were men and a large asian group) buying like crazy.”
Coach. LOL! My sis and I were talking about that company a while back. Their leather goods used to be very well made and when I wuz a pup, most self-respecting prepster girls had a Coach bag made in the USA. It was a sign of “understated” status. Then, of course, they started making their goods in South America and Asia. All Coach has left is its name. My sis says that now you see bank and store clerks blowing half a week’s pay on a Coach bag, thinking that having one somehow gives them admission to the upper ranks, whereas now, unless it’s a vintage Coach bag made in the USA, it’s considered sort of a tacky wanna be item. By the time these brands become accessible to the hoi polloi, they’re considered declasse.
Salinas, if your womenfolk want Coach bags, tell them to be on the lookout for the vintage ones at thrift stores, consignment shops and estate sales. Or even on ebay. And they should look for the ones made in New York or the US, not in Costa Rica, China, or Turkey. According to my sis, the current crop of Coach bags have lost their cachet and only the vintage ones really have any status. I dunno, she’s in the biz, so I believe her.
Thanks for the info but no they don’t want Coach Bags. They were just shocked to see people crammed into a purse store like a subway car at quitting time when other stores were producing no or little sales.
“They were just shocked to see people crammed into a purse store like a subway car at quitting time when other stores were producing no or little sales.”
Amazing, isn’t it? I’m gonna have to tell my sis about that one. I guess the Coach name is still strong even in its descent.
Maybe it was a freakish herd mentality? Seeing more people than usual in one store, it attracted more people, and they attracted more people. Kind of like the buying overpriced POS stucco boxes the last 5 years.
That probably does have something to do with it, bill. If I went out on a crowded city street and started peering up at the sky, I guarantee I’d have a bunch of other people doing the same thing shortly, if only because they were curious.
My wife works at the head office of Coach in the City. All the bags are now mostly made in China and Asia (Japan & Korea) representing the fastest growing markets. They have about twice a year sample sales for the head office employees. This year, they have about 10 times as much returned samples (or unsold stuff) as last year a good sign of a saturated market.
http://www.dirtyscottsdale.com/?p=1303
Surry County, VA fixer-upper for sale…dog kennels thrown in for free.
http://www.signonsandiego.com/uniontrib/20071202/news_1h02vick.html
the (kennel) area “needs a real good cleanup.”
A peroxide bleach works pretty well on blood stains.
“A peroxide bleach works pretty well on blood stains.”
Anything you want to confess? We’re listening.
DO NOTmix peroxide and bleach. You will get chlorine gas, among other nasties.
That’s actually a pretty darn good deal for SE Va - mid-400s for a 4500 sq ft brick house on 15 acres built in 2003 and apparently - despite the canine activity on the property - in real good shape. This is rural, but not the middle of nowhere. There’ll be better buys before this mess is over, but that could be one of the best buys to date.
Blood stains on the premises tend to reduce the value of any property, especially when the reason for them is highly publicized and unsavory. (I guess dog blood is preferrable to the human sort, though…)
Well the first foreclosure has come to our development. There are about 500+ sfh and towns here and we are about 35 miles from DC in rural MD. The house (5/3.5, 2700sf, finished basement) was purchased in 2003 for $305K with a $275K fixed (unknown) rate mortgage from NVR. In Sept 04 the husband was removed from the deed and there was a refi. $275K 7/1ARM 5.5% initial from Countrywide. Also a 50K HELOC from Countrywide was also taken out. In Oct 05 another Countrywide refi for $400K 7/1 ARM 6.625% initial. In Dec 06 another Countrywide refi for $427K 3/1 ARM for 6.75% initial. In Apr 07 it went on the market for $625K. Current comps should have placed it at $540K. No takers on the high price and no attempts at price reductions so it went off the market in July 07. In Dec 07 it showed up on Realty Trac under auction with a $470K price and $526K price… dual listings. I am sure this same scenario is being played out all over the country. I can only imagine what the $150K pulled out of the equity was used for. Our taxes here are really low (1% or $4K for 2007 for this house) and our insurance is pretty low too (prob about $450/yr for this house) so that doesn’t even factor into the foreclosure drama.
It was likely pi$$ed away on, “It’s all about me vanity consumption.”
Why shelter-in-place is a good idea:
1) Why not design homes in fire hazard areas to be less prone to burning to the ground?
2) A shelter-in-place community may help shelter downwind non-shelter-in-place communities from a Santa Ana-driven firestorm.
Why might they not be a good idea?
1) They encourage a certain breed of male to stay put against better judgment even after mandatory evacuation orders have been issued:
“I didn’t feel like I was being a hero,” Costa said. “I just felt that I was doing the right thing because ’shelter in place’ is designed for you to stay and defend your home.”
2) They may legitimize more future piecemeal development in remote areas, further stretching the reach of thin firefighting resources.
3) Next time the folks who stick around to defend their homes with garden hoses may not be so lucky.
My personal predictions:
1) SD developers will use the outcome of the current fires to justify building more shelter-in-place communities in indefensible areas.
2) Used home (and new home) sales people will use the low number of casualties from this year’s fires as a selling point to downplay any concerns raised about settling in a wildfire hazard zone.
3) Macho men with garden hoses in hand will go up in smoke during some future version of the Witch Creek Fire.
http://www.signonsandiego.com/uniontrib/20071202/news_1n2shelter.html
Macho men with garden hoses in hand will go up in smoke during some future version of the Witch Creek Fire.
Isn’t that what insurance is for?
http://www.nytimes.com/2007/12/02/business/02every.html?ref=business
Ben Stein claims that a negative analysis by a Goldman economist is Goldman trying to manipulate the economy down to make money off its shorts.
Assumption in the paper is that US real estate could actually go down by 15%. Ben disagrees. After all that has never happened before.
Speaking of which, here is a somewhat serious question for a Sunday. Does it really matter if all US real estate goes down 15% or some other number? A big chunk of US real estate has no mortgage on it at all. When we are talking about the economic impact of failing SIV’s and credit crunches and all the rest, only the falling value of the mortgaged stuff matters and that should be concentrated in the areas with bubbly prices, shouldn’t it? And the biggest impact is from the stuff with recent vintage mortgages and that is even more concentrated in bubbly areas.
Lost values in areas with lots of paid off mortgages or mortgages originated over 10 years ago will have a little “wealth effect” impact on spending, but not that much.
I just wonder if the whole “US prices as a whole won’t go down that much because this little town in Indiana has no bubble” is a straw man (irrelevant) as well as a lie (in the areas where prices didn’t go up much the bubble kept prices from falling the way they should have given the local economy)?
Any ideas?
(Does it really matter if all US real estate goes down 15% or some other number? A big chunk of US real estate has no mortgage on it at all.)
That’s been discussed here, and the question is, how many homeowners fall into different categories. I’ve estimated the decline in property value needed to restore affordability at $5 trilllion.
But for me, it doesn’t matter if the value of my house drops 40%, because it’s paid up. How many in that situation?
Homeowners who overpaid or HELOCed, but who can make the payments and don’t have to move, will be house-poor going forward, depressing consumer demand. But that won’t add to financial woes other than their own.
Then there are those who cannot pay (or who have little enough to lose to walk away even if they can), plus the usual losses due to job loss/health/divorce.
That is the scary share of the pie. Not only may be get extra foreclosures, but the loss severity will be vastly greater for the investor. When prices were soaring, the loss severity was zero because foreclosed houses could be sold or refinanced for a profit.
I guess the question is what share of Americans will have how much equity left if prices everywhere in the country drop to traditional affordability.
I think you are misunderstanding me. My question is whether the people who claim that the credit crunch disasters will happen if US real estate goes down X% (lets use 15 as the example) are looking at the wrong stats. I think the credit crunch problems might happen if the bubbly areas go down 20% (which has likely already happened in a lot of them) or perhaps a bit more, even if the overall numbers don’t hit 15% based on some weird way of counting the overall numbers. By the way, do they include government owned land in that stat? Do reduced values in some areas “count” more than reduced values in other areas?
The wealth effect issue is real, but I think less important than the credit crunch issue. The state and local government revenue issue is also real, but since they can raise the mil rate, they can mitigate it for a bit (until they are voted out of office for raising the mil rate).
I think that whether it’s 15% or 75% is missing his bigger point.
Should Henry M. Paulson Jr., who formerly ran a firm that engaged in this kind of conduct, be serving as Treasury secretary? Should there not be some inquiry into what the invisible government of Goldman (and the rest of Wall Street) did to create this disaster, which has caught up with some Wall Street firms but not the nimble Goldman?
Ignore the 15% part of his article. The bigger message there is that there is a conflict-of-interest that should be expunged. It’s a worthwhile read (for the MSM, less so for regular folks here.)
“Does it really matter if all US real estate goes down 15% or some other number? A big chunk of US real estate has no mortgage on it at all.”
The marginal buyer in 2005 was of the ‘qualifies for a loan because he is still breathing’ variety. Marginal buyers set market prices for everyone else (including those whose mortgages are paid off), because they are the ones whose purchases today become tomorrow’s comparable sales.
“…become tomorrow’s comparable sales.”
I should add that last period’s ‘comps’ are the main input to the statistical sausage grinders that produce price indexes (median sales price, Case Shiller/S&P, etc) which are somewhat-misleadingly used as measures of local real estate’s current market value.
“Does it really matter if all US real estate goes down 15% or some other number? ”
It matters to local, and state coffers that depend on revenue raised through taxation to support local and state infrastructure and government worker salaries. Which still begs the question, will this be the year for a Nevada state income tax?
“Which still begs the question, will this be the year for a Nevada state income tax?”
They can still cut benefits like dental and vision before raising other taxes.
“Does it really matter if all US real estate goes down 15% or some other number? A big chunk of US real estate has no mortgage on it at all.”
I think it matters quite a bit. You are forgetting that the majority of homeowners have a “psychological mortgage” on their house. Whether they owe on it or not they come to believe what the place is worth. This impacts their short-term confidence / happiness and long-term planning. If they see the value of that psychological mortgage slipping it will have a huge impact on them. Their spending habits will change. Their plans for the future will change. Their overall sense of happiness and well-being will change. I don’t think the house is ever really “paid off” for most people. They always have something more to invest in it.
I think the -15% number in itself says nothing; are we talking nominal or real numbers?
If you look at Shillers research, real estate can easily go down 70-80% in real (inflation-corrected) value from a top; and 2006 in the US sure looks like a top. In the current financial climate minus 70-80% real could be more than 90% nominal drop. Obviously, if we get deflation (extremely unlikely IMHO) the nominal drop might be smaller. Such 70-80% real corrections in the average home price have happened many times in the Netherlands over the last 400 years. Nobody remembers, because tops like the current one usually happen only once every few generations; and the slide down on average took even more than a generation.
Of course the heavily manipulated CPI/GDP etc. numbers will make it difficult to see what is really happening with home prices …
Dean Calbreath’s journalism at the SD Union Tribune is much appreciated.
Today he serves up a delectable dollop of San Diego schadenfreude.
Others are worse off than S.D. in real estate
December 2, 2007
When you live in a cul-de-sac, it’s easy to forget that there’s life beyond your traffic circle. And in a cul-de-sac like San Diego, it’s just as easy to think that you’re at the highest pinnacle or lowest depths of all that there is in life.
You’re either “America’s finest city,” with the country’s best climate and most vibrant high-tech sector – remember the Telecom Valley and Biotech Beach slogans of a few years ago – or you’re Enron by the Sea, with the worst housing market, most expensive gasoline and most insurmountable problems of dwindling water supplies, immigration, corrupt politicians and congested highways. Take your pick.
For better or worse, none of those superlatives is true. Except maybe the bit about the climate. And during these turbulent times, that should be welcome news.
Yes, we’ve got lots of problems emanating from the popping of our real estate bubble. No, those problems won’t go away anytime soon – probably not before spring 2009 at the earliest. Yes, there are growing signs that the credit crisis is spreading beyond subprime borrowers to prime borrowers as well as to commercial loans.
But on the plus side, we’re still doing better than a lot of other places throughout the state and nation. And there are reasons San Diego probably will continue to perform comparatively well (with the emphasis on “comparatively”) during what could turn out to be a severe national recession in 2008.
http://www.signonsandiego.com/uniontrib/20071202/news_1b2dean.html
“When you live in a cul-de-sac,”
I still get a kick out of that term… Cul-de-sac = bottom of the bag.
Those who don’t have a clue about maths or personal finance are highly prone to becoming victims of ARMed robbery.
Don’t rely on instincts! Just do the math. And always beware of that which seems too good to be true.
Mortgage parley
Couple renegotiates home loan to stave off soaring adjustable rate
By Melanie Stevens
December 2, 2007
When Michael and Suzanne Hornbeek moved from upstate New York to California three years ago, they were willing to deal with the higher cost of living and a smaller house in exchange for a more lucrative career opportunity, a warmer climate and a relaxed Southern California lifestyle in which to raise their two young children.
EARNIE GRAFTON / Union-Tribune
Suzanne and Michael Hornbeek are trying to find a way to keep the Poway condo where they live with their children, Sophia and Sebastian.An interest-only mortgage they took out three years ago was set to adjust to a much higher interest rate.
They knew the transition from their quarter-acre property and home in Buffalo – which they bought for $128,000 – to their $440,000, 1,400-square-foot Poway condo wasn’t going to be easy. The low-interest loan they were offered through Countrywide helped sweeten the move, though it seemed like a rate too good to be true.
As it turns out, the couple’s instincts were right.
Upon purchasing their home in 2004, the couple accepted a $352,000 interest-only mortgage at 4.97 percent, a rate that was set to adjust Nov. 1 of this year. When they asked Countrywide a few months ago, they learned the rate would initially increase to 7.97 percent this month, and then could continue to increase by 1 percent every six months to a cap of 11.97 percent.
In dollar terms, that meant an extra $880 a month – with more potentially to follow.
“We understood the situation with loan adjustments to be that after our first three years, our low rate would increase to the rate that everyone else is buying at right now,” said Suzanne, 38. “We didn’t realize that we would see an increase of our monthly mortgage payments by several hundred dollars or that we’d now be facing this uphill interest rate climb that we’re not going to be able to afford.”
http://www.signonsandiego.com/uniontrib/20071202/news_lz1b2mortgage.html
“We didn’t realize that we would see an increase of our monthly mortgage payments by several hundred dollars or that we’d now be facing this uphill interest rate climb that we’re not going to be able to afford.”
Well, Suzanne, then you are a moron.
The truth is, I don’t believe you. This stuff is VERY EASY to figure out. You just wanted in on the “property ladder” and it hasn’t worked out. Prices are falling, not climbing.
Hand over the keys or re-fi, or pay the bill.
You won’t see me crying any tears.
By the way, for those bleeding hearts that feel sympathy for these folks and others like them, remember this:
It is the actions of people like this, that acquired property at a price they could clearly not afford, by postponing the eventual day of reckoning that have cause prices everywhere to be inflated.
The lives of frugal and prudent people have been severely impacted by the actions of these folks. The are the CAUSE of the housing bubble.
If they had simply said “No, that price is too high, we won’t pay that”, they would have no problem and California real estate would be affordable.
With the help of shill Realtor ™ at their side, they were convinced to get aboard the fast-track train to financial success with the easy=credit=no down payment =no payments till 2010=you can’t lose real estate “investment”.
Thanks for screwing the rest of us.
“Well, Suzanne, then you are a moron.”
Looks like Suzanne didn’t research this one…
“Upon purchasing their home in 2004, the couple accepted a $352,000 interest-only mortgage at 4.97 percent”
Munch, munch…Best part is their real interest rate has probably been closer to 8% for the past 3 years, while they were paying the teaser 4.97% they’ve been negatively amortizing, and the principal (grown from $352K to ~ $385K) will now amortize over the remaining 27 years. Ouch! And funny at the same time. Sorry Mr. and Mrs. Greater Fool, no REFI or HELOC for you. Next forclosure!
Got diversified assets?
“We understood the situation with loan adjustments to be that after our first three years, our low rate would increase to the rate that everyone else is buying at right now”
Let me get this straight…she thought that she would be paying way under what everyone else was paying (interest wise) for a few years, after which she would be paying only the same as everyone else?
In other words, she thought she had won the lottery, and outsmarted the dolts who were taking the going rate.
My guess is she thought that San Diego real estate always goes up, which I guess is the same as saying she thought she had won the lottery.
Troubles in Trump land
Towering troubles?
By Kathy Bergen and Susan Diesenhouse | Tribune staff reporters
December 2, 2007
The acid test is just about to begin. (downtown Chicago)
As soon as Trump International Hotel & Tower, the city’s first new-construction condo-hotel, gets a city permit to begin its phased opening, developer Donald Trump will find out for sure whether Midwesterners and others are willing to fork over megabucks to buy a pad in his luxury inn.
Though hawking a killer brand at a killer site, the flamboyant salesman is aiming to ink sales at a time when the residential real estate market is plummeting and the once-hot condo-hotel trend continues to chill.
http://www.chicagotribune.com/business/chi-sun_trump_1202dec02,0,2660769,full.story?coll=chi_tab01_layout
Politicians don’t count FBs. They count votes. Walk away.
“…and a relaxed Southern California lifestyle in which to raise their two young children.”
Doesn’t sound too relaxed to me.
I had a relaxed environment in Sou Cal renting a tiny studio for $1000 per month close to the beach. Simple life and perfect climate. No kids, no pets, no needless taking on more and more stress and responsibility. Why buy when you can rent cheaper than a property tax payment?
I agree. Who needs the stress of raising families when we can insource as many as we need?
Mamacita, donde esta Santa Claus?
Donde esta Santa Claus?
And the toys that he will leave.
Mamacita, oh, where is Santa Claus?
I look for him because it’s a Christmas Eve.
I know that I should be sleeping,
But maybe he’s not far away,
Out of the window I’m peeping,
Hoping to see him in his sleigh.
I hope he won’t forget to clack his castinet,
And to his reindeer, say,
“Oh Pancho, Oh! Vixen, Oh! Pedro, Oh! Blitzen,”
Ole! Ole! Ole! cha cha cha.
Mamacita, donde esta Santa Claus?
Oh! Where is Santa Claus?
It’s Christmas Eve.
Mamacita, donde esta Santa Claus?
Who needs “the stress of raising families”? I do, for one. I had a great single life, but it pales in comparison to the happiness & sense of purpose I get from my kids & family life. Is it hard at times? Definitely, but in my experience, nothing worth having comes easily.
The hull is cracking.
Distant music soothes the night.
Icy water waits.
And Poseidon brandishes the world’s largest joshua tree.
“The hull is cracking.”
Good one. I was just going to post that it feels to me as if the wheels are coming off the system all over the US. Maybe that’s not a bad thing, if we can get a set of new wheels to put back on the vehicle. Got an email today from a buddy about how the US is not respected around the world mostly because the rule of law seems to have been busted out, in all a number of areas, from immigration to finance to government.
The latest real estate mantra: …Land is about the only thing that can’t fly away.
Anthony Trollope 1867
http://miami.craigslist.org/rfs/496108510.html
The ad in Miami has been “flagged for removal”. Here’s another one from New York.
“http://newyork.craigslist.org/mnh/fns/494683978.html
…Land is about the only thing that can’t fly away.
That’s precious. Here we have sinkholes. So, maybe it won’t fly away, but it may not be usable for other than a land-fill.
My junk cars are going anywhere either, but nobody wants them.
Aren’t going………….sorry.
maybe it won’t fly away, but perhaps land just
floats away in FL.
Anthony Trollope must be the patron saint of tax collectors.
More debt.
http://www.contraryinvestor.com/imagesCImain/margindebtspx113007.png
Just remember that debt is wealth.
As long as you are short!
In that case, today’s debt is your future wealth…
With the adjustable rate mortgages, the lenders tried to snooker the borrowers (shift the risk), but it looks to me that they really snookered themselves.
I hope us honest bystanders don’t end up taking it in the shorts.
“I hope us honest bystanders don’t end up taking it in the shorts.”
That’s standard operating procedure.
(Plus, people want to act like this whole city is Disneyland. There are still a lot of bad things lurking, including the potential for neighborhoods to degentrify in a hurry.)
This is something I happen to know a lot about. De-gentrification really doesn’t happen here. Something else does.
Think of NY area demography as two circles moving outward.
In the first, older housing is passed down to the less well off as it reaches 50 years old. That happened to inner areas of NYC before 1950, areas further out in the 1950 to 1980 era, and places like eastern Queens more recently. That wave is now heading to the older suburbs, which may be about to experience rapid “urban decline.”
The second circle is gentfication, moving outward from Manhattan. Some cities have that second wave, and others don’t Despite “Disneyland,” however it is only in the past few years that NYC has stopped getting poorer overall, ie the second wave hasn’t been completely offset by the first.
The waves do not move backwards. Ie. the physical and demographic effects do not reverse due to housing price changes.
In bubbles the gentfication wave moves forward, and urban decline stops. In busts the urban decline wave moves forward, and gentification stops. Where you have the appearance of negative gentfication, it will be in speculative gentrification areas where the gentrification never actually occured except in the minds of “investors.”
It is also related to the demographics and income. If the demographics stagnates it makes harder to increase housing prices. Looking into population structure of the NYC metro, it does not look too well. It has high percentage of aging babyboomers, young people rather starts family everywhere else than in Manhattan. Big population growth in NYC is fueled by immigration, but if this will stop with present anti-immigration policies, NYC will definatelly stagnate and even see significant decline of population.
I think these guys are smoking from the same bowl as NAR.
http://www.truckinginfo.com/news/news-detail.asp?news_id=59465&news_category_id=6
I found a 3 bedroom SFH for sale in my Phoenix zip code. 15 year mortgage at 5% interest is lower than my monthly rent in the zip. Price is $145,000. All I saw on a real estate site was the crystal blue swimming pool in the back yard. Not sure if it’s a severe fixer upper. Built in 1989. It’s tempting but I’m busy on the east coast, don’t get paid time vacation, and I need to do my homework before getting in. I think I can wait a couple of years. Looks like blood is running on the streets but in two years it could be rivers of blood. Location is great. Not too far from central Phoenix.
I’m thinking I may be able to afford to both convert my traditional nondeductible IRA to Roth in 2010 and buy a house. I have more than enough $ in government securities to buy the house with no payments. Estimated property taxes? $1400. But I’m thinking of buying in Las Vegas in 2010 instead of Phoenix.
Liberty Dollar says raid was political
Came just after delivery of 60,000 Ron Paul dollars
The company makes and distributes Liberty Dollar barter currency in various denominations and announced that it had been closed down by a raid of FBI and U.S. Secret Service officers who confiscated gold, silver, platinum, medallions, documents, “everything but the desks and chairs.”
“For approximately six hours they took all the gold, all the silver, all the platinum, and almost two tons of Ron Paul Dollars that were just delivered… They also took all the files and computers and froze our bank accounts,” von NotHaus wrote in an urgent notification of the situation to supporters
http://www.worldnetdaily.com/news/article.asp?ARTICLE_ID=58978
“These medallions are privately produced products and are not backed by, nor affiliated in any way with, the United States Government. Moreover, prosecutors with the Department of Justice have determined that the use of these gold and silver NORFED “Liberty Dollar” medallions as circulating money is a Federal crime.”
….
“Do you realize how stupid it is to say the green stuff is ‘real’ and the gold & silver is ‘fake’… You must work for the government!” he wrote.”
http://usmint.gov/consumer/index.cfm?flash=yes&action=hotitems
O’er the land of the free…
http://www.fool.com/investing/general/2007/11/30/paulsons-plan-to-punish-the-public.aspx?source=iflfollnk0000003
Paulson’s Plan to Punish the Public
In short, bankers and loan-servicing outfits are going to lower interest rates on strapped borrowers so they don’t lose their houses. How much, how long, and who qualifies are all still up in the air. No doubt, this will sound good to those folks who signed on for mortgages they can’t actually afford. It will also look good to politicians angling to score points before the next election, and to bleeding hearts everywhere. It will also look good to select mortgage-industry players — like Countrywide Financial (NYSE: CFC) and Citigroup (NYSE: C), which could really use a government-led bailout.
Unfortunately, this ill-conceived salve will ultimately punish the silent majority of Americans, people who didn’t go out and make boneheaded financial decisions over the past half-decade. Let’s take a look at why.
Paulson’s plan means fewer homes dumped back on the market at lower prices, where they belong. Now that he’s a politician and not the CEO of Goldman Sachs, Paulson apparently believes that the market shouldn’t be allowed to correct on its own. He’s wrong about that, and he’s wrong to support any plan that will only delay the inevitable. Better the quick, painful correction than the decades-long, slow bleed that he’s nurturing now. For evidence of how ugly things get when policymakers try to coddle the financial industry rather than let the market apply its harsher, faster, medicines, just take a look at how long the banking mess continued in Japan.
Of course, a decade from now, if the economy is still suffering because of an ill-conceived housing bailout plan designed to win favor with the public and cover the economic hind-end of his boss, George Bush, Paulson won’t have to issue any gomen nasai. He’ll already be long gone, retired to his millions.
You and I will pay the bills.
I thought I was seeing red in a big way. Check out this dude…
“It’s an idea so naively populist and antimarket that you would think it came from Hugo Chavez, Evo Morales, or Mahmoud Ahmadinejad, if not for its cringe-inducing, Beltway-wonk moniker: the Hope Now Alliance.”
Hope Now…Isn’t that what passengers do on a plane that’s going down, just before they reach the point of Kissing Their A$$ Good-bye ?
Saving subprime homeowners
Published: November 30 2007 14:40 | Last updated: November 30 2007 18:46
As a general rule, the more grandiose the title, the less achievable the objective. The White House wants its “Hope Now Alliance” initiative ready by the end of the year. This aims to alleviate the worst effects of an estimated $500bn of subprime mortgage rate resets in 2008.
http://www.ft.com/cms/s/16dbd90a-9f52-11dc-8031-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F1%2F16dbd90a-9f52-11dc-8031-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
Hope Now Alliance = banks hoping for more money NOW?
Please let me know if I’m on the right track here. As I understand it, currently in California many borrowers who have not refinanced have NON-RECOURSE LOANS.
The FB’s with these loans have the right to walk away and mail the keys to the bank.
———————
Definition of non-recourse loan: A secured loan (debt) that is secured by a pledge of collateral, typically real property, but for which the borrower is not personally liable. If the borrower defaults, the lender/issuer can seize the collateral, but the lender’s recovery is limited to the collateral. If the property is insufficient to cover the outstanding loan balance (for example, if real estate prices have dropped), the lender is simply out the difference.
———————
HOWEVER, IF the FB refinances, they LOSE their NON-RECOURSE status.
I would assume that if a FB takes the bail-out bait and calls the lender to get their interest rate increase frozen, then this revision in the contract would switch their mortgage from NON-RECOURSE to RECOURSE.
After their interest rate is frozen the FB cannot walk away from their home without losing everything: money in savings, 401k, cars… and having their wages garnished. Seems similar to the new BK laws. It’s the new indentured servitude (but didn’t the servant get their freedom after they paid for 7 years, rather than 30 years or more paying on an inflated mortgage?).
I am wondering if one reason that these bail-out plans have been announced with such vague language is to test the waters to see if the public catches on about the downside for the FB’s.
FB’S: Don’t take the bait! Preserve your right to walk away from an upside-down mortage. This right is the most valuable thing you have in this uncertain time. Be sceptical! When was the last time a bank just did you a favor without something in it for them??!!
“The FB’s with these loans have the right to walk away and mail the keys to the bank.”
If this post is correct, then I strongly suggest that all Californians who got stucco with unrepayable debt should *not* take the bait on this R-can New Deal program. Let the big IB’s hold the subprime bag, as they are the only entities in the U.S. economy sufficiently deep pockets to do so. Besides that, their rocket scientist financial analysts are largely responsible for the mess at hand, so poetic justice would be fittingly served.
Just drop off the key, Lee…
And set your-self free.
“When was the last time a bank just did you a favor without something in it for them??!!”
A banker is a fellow who lends you his umbrella when the sun is shining and wants it back the minute it begins to rain.
– Mark Twain –
Larenter,
great post. thanks.
Question for Mr. Ben Jones:
Does this “New Mortgage Interest Deal” meet your definition of a bailout? And if so, do you think it is likely to move forward, or remain a talking point that never gains critical political mass?
Just wondering, as I am trying to forecast the eventual score in our long-running debate about whether bailout measures will be passed…
Experts: Bailout Not Complete Solution
By ALAN ZIBEL | AP Business Writer
3:41 PM CST, December 2, 2007
WASHINGTON - If lenders temporarily freeze low introductory interest rates on home loans made to risky borrowers before they soar, it would be a modest fix for the country’s fractured housing market.
The problems are so far-reaching, analysts say, that an emerging Bush administration-backed plan — nicknamed “teaser-freezer” by one economist — won’t spare many borrowers, or bankers, from the pain of escalating foreclosures and defaults.
Edward Yardeni, an economist who runs Yardeni Research in Great Neck, N.Y., called the plan “better than doing nothing,” but added that it is “not necessarily going to make a big dent in the foreclosure problem that’s facing us” because thousands of borrowers still might not be able to make their monthly payments.
http://www.chicagotribune.com/news/nationworld/sns-ap-subprime-bailout,1,4115533.story
TxChick57, did you catch this?
The “Other” Credit Market
Confirms your uneasy feelings, no?
Sounds like Wall Street needs a bit more religion to function properly.
Economy
Subprime Bailout: Good Idea or ‘Moral Hazard?’
by Eric Weiner
(Conceptual image shows a mannequinn holding up a house made of cash
:-) 
)
Chad Anderson
Saving wounded financial institutions is good for the economy, some economists argue. But others warn against intervention, lest we fall prey to “moral hazard:” Bail out someone who has engaged in risky behavior and you’re likely to encourage that behavior in the future.
NPR.org, November 29, 2007 · Should the federal government bail out lenders and borrowers caught up in the subprime mortgage crisis? It’s a simple question but, like everything else surrounding the high-risk, high-cost loans, the answers are far from simple.
On the one hand, dozens of financial institutions are in trouble; if they falter, so too might the economy as a whole. Home foreclosures are on the rise, and that’s certainly not good for anyone—not for the homeowners or the banks or the real estate industry.
Therefore, the argument goes, the government should do everything within its powers to prop up ailing lenders and homeowners, just as they’ve done in the past with other troubled industries, from airlines to savings and loans.
Not so fast, critics say. What might look like prudent financial first aid is, in reality, bad medicine. It’s called “moral hazard,” and it’s a concept any parent of a 5-year-old can understand: Bail out someone who has engaged in risky behavior and you’re likely to encourage that behavior in the future. Or, as The Wall Street Journal once put it, moral hazard is ”the distortions introduced by the prospect of not having to pay for your sins.”
http://www.npr.org/templates/story/story.php?storyId=16734629
How low can the dollar go?
Published: December 3 2007 02:00 | Last updated: December 3 2007 02:00
What is your theory about why the current administration in the US has allowed the dollar to fall? John van Slyke Jr.
http://www.ft.com/cms/s/0/53c8c084-a142-11dc-9f34-0000779fd2ac.html
Let’s hope you (and I) are wrong and Ben is right about the bail outs.