Severe Correction Is Expected To Be Nationwide
Some housing bubble news from Wall Street and Washington. MarketWatch, “Mortgage giant Fannie Mae Wednesday said it sees increased credit losses and falling home prices next year as the housing correction continues to play out. Fannie Mae is forecasting a peak-to-trough decline of between 10% and 12% in home prices for this housing cycle. The lender said it expects 2008 credit losses to be between 8 and 10 basis points, up from a range of 4 to 6 basis points this year.”
“The lender said there is a ’severe correction’ in the U.S. housing market. ‘The decline is expected to be nationwide and is estimated at about one-half of the magnitude of the decline experienced in Southern California in the early 1990s,’ it said.”
“The information was posted on Fannie Mae’s Web site in a road-show presentation supporting its offering of $7 billion in non-convertible preferred stock, which the company unveiled on Tuesday. Fannie Mae is also slashing its dividend by 30%.”
“Daniel Mudd, Fannie’s president and CEO, said the steps are designed to serve the mortgage market. ‘The market needs us to be there — and we believe this plan will help us do that,’ Mudd said in a statement.”
“Fannie Mae estimated its mortgage portfolio at $723 billion in November.”
From Fortune Magazine. “Could Fannie Mae be the next large financial company to announce billions of dollars of market losses on bonds backed by distressed mortgages? That certainly seems possible after the government-sponsored mortgage giant announced plans Tuesday to bolster capital.”
“While…subprime and Alt-A mortgage-backed bonds are only a small proportion of Fannie’s overall mortgage holdings, their combined value of $76 billion is almost double Fannie’s $40 billion of capital.”
“Fannie Mae’s quarterly financial filing for the third quarter said Fannie had $42.2 billion of private-label subprime securities and $33.8 billion of private label Alt-A securities. It’s possible that the AAA subprime securities are trading at a much steeper discount…than the 2% discount that Fannie Mae applied in the third quarter.”
“A Wall Street bank that trades AAA-rated subprime bonds is currently quoting prices for such bonds of around 88 cents on the dollar, or a 12% discount, for loans made in 2006, and 78 cents on the dollar, or a 22% discount, for loans made in 2007.”
“A similar exercised can be applied to the $33.8 billion of Alt-A securities. Many of these so-called ‘liar loans’ are likely to go bad. For instance, as part of its rescue this week of ETrade, hedge fund Citadel appeared to pay roughly 60 cents on the dollar for ETrade’s Alt-A loans.”
“That was a special deal in which Citadel was able to get seemingly attractive terms, but it shows the skepticism about the credit quality of Alt-A loans.”
From Web CPA. “As the subprime mortgage meltdown grows, some experts are starting to see the resulting fallout rivaling corporate scandals of earlier this decade, like Enron.”
“Former Securities and Exchange Commission Chairman Arthur Levitt expects to see more massive writedowns on the way. Last week, he told Bloomberg News that he thinks the Financial Accounting Standards Board should force the banks to close a loophole that lets them keep the structured investment vehicles holding subprime debt off their balance sheets.”
“‘These banks claim these entities were separate,’ he said. ‘If so, then why are billions of dollars being spent bailing out these companies? Evidently they were not as separate as claimed in their accounting.’”
“Experts are beginning to question whether increased regulation will help. ‘We seem to fly from one crisis to another,’ said FASB Chairman Robert Herz at the IFAC World Accountancy Forum in New York. ‘When I go abroad nowadays, [I see] we’re losing credibility. It doesn’t play on Main Street anymore and it doesn’t play in most foreign capitals.’”
From Reuters. “The Financial Accounting Standards Board is requiring companies to disclose more about the market values of their investments, under the FAS 157 and FAS 159 rules that went into effect for fiscal years beginning after Nov. 15.”
“In the end, that sort of transparency is what investors will demand anyway, Jim Quigley, CEO of Deloitte Touche Tohmatsu, said at the conference.”
“‘The market forces will be the way that the correction will occur,’ Quigley told Reuters. ‘It’s clear that there’s not the transparency that everybody wants and needs there, but the marketplace is going to adjust to that. People won’t buy until they have the information that they need.’”
“The first of a new round of investor claims was filed against Bear Stearns Cos. on Wednesday for its role in managing two mortgage hedge funds that collapsed earlier this year, securities lawyers said.”
“A group of lawyers for 11 investors with combined $62 million in losses says that Bear continued to sell shares of the funds this spring, when the subprime market was melting down.”
“‘Officials at Bear Stearns engaged in a concerted effort to conceal the true state of affairs at both of these hedge funds for an extended period of time,’ said lawyer Steve Caruso of Maddox, Hargett & Caruso, one of four firms representing the fund-of-funds manager.”
“As one of Wall Street’s top underwriters of mortgage-backed securities, Bear Stearns knew or should have known these markets had become extremely unstable, said Ryan Bakhtiari of Aidikoff, Uhl & Bakhtiari.”
“‘My gut feeling is these funds were used as a dumping ground by Bear Stearns,’ said Bakhtiari.”
“A structured investment vehicle (SIV) managed by Dutch bank Rabobank and Citigroup has sold almost half its assets, 4.5 billion euros ($6.6 billion), as the fund could not find sufficient refinancing, Rabobank said on Wednesday.”
“‘The market has dried up. It is all related to what is happening in the United States,’ a Rabobank spokesman said, confirming a report in Dutch daily Het Financieele Dagblad about the declining size of the fund, called Tango Finance.”
“The fund currently holds about 5.5 billion euros in assets, down from 10 billion euros in the summer, and could reduce its holdings further to reduce investment risks, the spokesman said.”
“‘Basically, what Tango is doing now is called unwinding,’ he said, adding that the market value of Tango’s currently held assets is about 97 to 98 percent of their nominal value.”
“The spokesman declined to say whether Tango has been making losses or whether cooperatively-owned Rabobank would put the SIV’s assets on its balance sheet if they could not be sold.”
“A spokeswoman for Citigroup, which wrote down $6.8 billion in the third quarter and could face more losses on assets, said: ‘Citigroup has no responsibility for the funding of Tango.’”
From MSNBC. “One proposal announced this week by Treasury officials would freeze interest rates on adjustable mortgages for borrowers who are currently keeping up with their payments.”
“‘There is value in these loans,’ said Sheila Bair, chairwoman of the Federal Deposit Insurance Corp. ‘They can’t perform at the reset (rates) because those resets were never realistic. They can perform at the starter rate.’”
“‘I think there a dearth of good ideas,’ said Mark Zandi, chief economist at Moody’s.com. ‘This is a very difficult problem to tackle for policymakers. There is no magic bullet.’”
“Critics of bankruptcy reform say the change could have a chilling effect on new lending, because lenders could no longer count on original loan terms surviving a bankruptcy challenge.”
“‘We need people to be comfortable making home mortgages,’ said Chris Mayer, a Columbia University economist. ‘If I were a lender right now looking at making a new loan, I would be pretty nervous.’”
“Zandi believes that eventually the government will have to set up what amounts to a mortgage clean-up fund, similar to the Resolution Trust Corp. that was created to buy up loans after the collapse of the savings and loan industry in the late 1980s.”
“But the idea of using taxpayer dollars to head off foreclosures still faces opposition…based on mail received by msnbc.com.”
“‘In most cases both lender and borrower are getting what they deserve,’ wrote Lee Goodridge of Marion, N.Y. ‘Maybe it’s about time these lenders stopped scheming and scamming, and borrowers start living within their means instead of trying to outdo the Joneses, let alone keep up with them. Why should the government be doing anything with this?’”
“‘When will people take personal responsibility for their actions?’ wrote Greg Gagola of Tallahassee, Fla. ‘Borrow what you can pay back. Read your contract. If you do not understand your contract, hire a real estate lawyer. We as a nation need to take responsibility for what we do.’”
The Washington Post. “It was Charles Mackay, the 19th-century Scottish journalist, who observed that men go mad in herds but only come to their senses one by one.”
“We are only at the beginning of the financial world coming to its senses after the bursting of the biggest credit bubble the world has seen.”
“What’s important to understand is that this isn’t just a mortgage or housing crisis. The financial giants that originated, packaged, rated and insured all those subprime mortgages were the same ones, run by the same executives, with the same fee incentives, using the same financial technologies and risk-management systems, who originated, packaged, rated and insured home-equity loans, commercial real estate loans, credit card loans and loans to finance corporate buyouts.”
“It is highly unlikely that these organizations did a significantly better job with those other lines of business than they did with mortgages.”
“The banks got the bright idea of buying up a bunch of mezzanine tranches from various pools. Then, using fancy computer models, they convinced themselves and the rating agencies that by repeating the same ‘tranching’ process, they could use these mezzanine-rated assets to create a new set of securities — some of them junk, some mezzanine, but the bulk of them with the AAA ratings more investors desired.”
“It was a marvelous piece of financial alchemy, one that made Wall Street banks and the ratings agencies billions of dollars in fees. And because so much borrowed money was used…the whole thing was so highly leveraged that the returns, at least on paper, were very attractive.”
“No wonder they were snatched up by British hedge funds, German savings banks, oil-rich Norwegian villages and Florida pension funds.”
“What we know now, of course, is that the investment banks and ratings agencies underestimated the risk that mortgage defaults would rise so dramatically that even AAA investments could lose their value.”
“If all this sounds like a financial house of cards, that’s because it is. This may not be 1929. But it’s a good bet that it’s way more serious than the junk bond crisis of 1987, the S&L crisis of 1990 or the bursting of the tech bubble in 2001.’”
From Marketplace. “Ramon Brayan was the first person in his family to graduate high school, to finish college, to get an MBA. He began repaying his debt to his mom in Thanksgiving of 2001, when he bought her a brand new house. A cousin lured him into real-estate finance. He started working for Resmae, a subprime mortgage lender. He made $30,000 in a single month.”
“Brayan: Then your mind starts wandering. You see it as, OK, I made 30 this month, it’s going to stay like that. You know, me being a business person as well, I’m like, let me buy some more property and hold onto it.”
“Ramon sold that American Dream. And he bought it, too. He purchased the home for his mom, another for himself, his childhood condo and an investment property. All four have adjustable-rate mortgages. All four are subprime loans.”
“Ramon leased an office to go into business for himself. Then the mortgage market crashed. Now, he’s out of a job, and he’s on the hook for $16,000 a month.”
“Brayan: You pick up the mail and there’s like, a ton of bills, and you see a lot of money going out of your bank account and not as much money coming in. I’ve worked really hard to get to where I’m at, I don’t want to lose it. So how do I keep it?”
“Ramon’s looking for a job back in ad sales. He was forced to rent the house be bought for his mom. (She’s) back in their cramped childhood condo. A framed photo of Ramon in a cap and gown hangs by her bedroom door.”
Nationwide? No national market or bubble?
Oh, and how nice that Moodys’ Zandi is calling for the taxpayer to clean up his mess. You guys at the ratings agencies should be the first to walk the plank.
‘it’s a good bet that it’s way more serious than the junk bond crisis of 1987, the S&L crisis of 1990 or the bursting of the tech bubble in 2001.’
There will probably be more fiat central bank blips dissapear from hard drives, but as some posters have pointed out, really just a lot of credit scores will get dinged, and peoples lifestyles will be pulled in, and the mortgage guy making $30k a month will have to hand out coupons; but lets not overstate things. This is going to happen, and we might as well let it teach a few needed lessons along the way.
“Fannie Mae is forecasting a peak-to-trough decline of between 10% and 12% in home prices for this housing cycle.”
I’m beginning to think that prices are going to go down by that amount in all the markets that didn’t have big price run ups, with much more severe declines in those that did. A 20% plus average correction level is more like it, unless Paulson manages to extend the buyer-seller standoff to foreclosures and shut down the real estate market for years until inflation brings real prices down.
“The banks got the bright idea of buying up a bunch of mezzanine tranches from various pools. Then, using fancy computer models, they convinced themselves and the rating agencies that by repeating the same ‘tranching’ process, they could use these mezzanine-rated assets to create a new set of securities — some of them junk, some mezzanine, but the bulk of them with the AAA ratings more investors desired.”
This is what I still cannot fathom. We are talking about AAA losing 100% of its value based on this. How can they have done this? BTW, Moody’s bought Economy.com (and founder Zandi) not too long ago. Zandi probably thought the Moody’s name would improve his outfit’s credibility.
N VA near DC is already off by the 1988-1993 cycle of 15%
more to come
I think it is a bright spot even conservative institutions are announcing to the media we have at least another 5% down to go. Is it too optimistic, of course, but at least Joe6Pack gets the message. Dont pay current prices! No more talk of soft landing. Now media uses “burst” and “collapse.” I view this shift as monumental although most still underestimate the problem. We have reached the stage of acceptance of a problem. At least we killed additional appreciation which would have made it worse before the final end game.
“A 20% plus average correction level is more like it, unless Paulson manages to extend the buyer-seller standoff to foreclosures and shut down the real estate market for years until inflation brings real prices down.”
I think prices need to and will fall 40 to 50%. That will bring them back to historical valuations versus rent and incomes.
Don’t forget that we have historically high inventory to clear and that will take firesale prices to get rid of. Prices will have to fall to the point that all these FBs can really afford a home or even lower.
And Paulson can’t do a thing about this. Even if he does save some people from losing their homes, there is still the current backlog to clear. The only thing that will help is if everyone suddenly made about 25% more money.
“The only thing that will help is if everyone suddenly made about 25% more money.”
There will be no appreciable wage inflation in this cycle.
“The only thing that will help is if everyone suddenly made about 25% more money.”
Don’t give them any ideas, like taking Federal tax to zero and adopting a Japan-style ZIRP.
I don’t think anyone here would mind if the Federal tax rate went to zero for a while! You must have meant Fed Rate.
Question for the board:
A brand new house in Chandler AZ, builder “Wants it sold”. I’m thinking of making an offer of exactly 75% of current list, and plan to live there for 8 to 10 years or more. Is this the right time or do I wait? Finances are not a problem.
AZ,
I wrote some offers this summer on properties that were supposed to have desparate sellers. I offered them the 1997 price (either what they paid or a nearby comp) plus 4% annual, compounded of course. The answer was always “go fly a kite”. I’m not coming back into the market until I see JoeCheapChardony eating beans out of a can on a streetcorner while begging for change.
“I don’t think anyone here would mind if the Federal tax rate went to zero for a while! You must have meant Fed Rate.”
No, I meant the Federal tax rate. Someone would have to be truly insane — or unethical, or both — to wish even more Federal debt on our future generations than they will already be saddled with.
AZ_owner — if I were looking out there, I’d take the assumed value of the lot, cut it in half, then add back in the square footage, at the price I think reasonable times 80% or maybe 90%. To be sure, I’d compare that to 1998 prices + 3% per year.
“Need to Sell” is not the same as “Going to Sell.” When I sold, I told anyone interested that it was a Dutch Auction, and it was. That’s the only method that will work today, if someone really wants to sell and sell soon. All IMO.
Deal Reached on Mortgage Rate Freeze
By THE ASSOCIATED PRESS
Published: December 5, 2007
WASHINGTON, Dec. 5 (AP) — The Bush administration has hammered out an agreement to freeze interest rates for certain subprime mortgages for five years to combat a soaring tide of foreclosures, Congressional aides said today.
These aides, who spoke on condition of anonymity because the details have not yet been released, said the five-year moratorium represented a compromise between desires by banking regulators for a longer time frame of as much as seven years and industry arguments that the freeze should only last one to two years.
Another person familiar with the matter said the rate-freeze plan would apply to borrowers with loans made at the start of 2005 through July 30 of this year with rates that are scheduled to rise between Jan. 1, 2008, and July 31, 2010.
The administration said President Bush would speak on the agreement at the White House on Thursday, and the Treasury Department announced that Treasury Secretary Henry M. Paulson Jr. and Housing and Urban Development Secretary Alphonso R. Jackson would hold a joint news conference Thursday afternoon with officials of the mortgage industry.
Treasury officials also announced that there would be a technical briefing to explain more of the details of the proposal.
Mr. Paulson, who has been leading the effort to devise a plan, said on Monday that the program would only be available for owner-occupied homes — as a way to make sure that the break is not granted to real estate speculators.
The plan emerged from talks between Mr. Paulson and other banking regulators and banks, mortgage investors and consumer groups trying to address an avalanche of foreclosures that are feared as an estimated two million subprime mortgages reset from lower introductory rates to higher rates.
The higher rates in many cases will increase monthly payments by as much as 30 percent, making it extremely difficult for many people to keep current with their loans.
The plan is aimed at homeowners who are making payments on time at lower introductory mortgage rates but cannot afford a higher adjusted rate.
Through October, there were about 1.8 million foreclosure filings nationwide, compared with about 1.3 million in all of 2006, according to RealtyTrac Inc. of Irvine, Calif. With home loan defaults still rising, the trend is expected to worsen next year.
The plan represents an about-face for Mr. Paulson, who until recently had insisted the mortgage crisis could be handled case by case. But he and other administration officials became convinced that the tide of foreclosures threatened by the resetting of mortgage rates represented such a severe threat that a more sweeping approach was needed. They opted for a proposal that was along the lines of a plan put forward in October by Sheila Bair, head of the Federal Deposit Insurance Corporation.
Mr. Paulson and other federal regulators began holding talks with some of the country’s biggest mortgage lenders, mortgage service companies, investors who hold mortgage-backed securities and nonprofit groups that provide counseling for at-risk homeowners.
Under the typical subprime loan — those offered to borrowers with spotty credit histories — the rates for the first two years were at levels around 7 percent to 9 percent. But after two years, those rates were scheduled to reset to levels around 9 percent to 11 percent.
For a typical $1,200 monthly mortgage payment, the reset could add another $350 to the monthly payment, greatly raising the risks of loan defaults by homeowners struggling with the current payment.
The wave of mortgage foreclosures threatened to make the most severe slump in housing even worse by dumping more foreclosed properties onto an already glutted market, further depressing home prices and shaking consumer confidence.
The deepening housing slump has already roiled financial markets, starting in August, as investors grew increasingly concerned about billions of dollars of losses being suffered by banks, hedge funds and other investors.
The administration plan is designed to deal with the crisis by letting subprime borrowers who are living in their homes and are current on their payments to avoid a costly reset for five years. The hope is that by that time the housing downturn will have stabilized, clearing out the glut of unsold homes and halting the steep slide in prices that is hitting many parts of the country.
With sales and prices once again rising, the expectation is that homeowners will be able to renegotiate their current adjustable rate mortgages into a more affordable fixed-rate plan.
The housing crisis has become an issue in the presidential race with two Democrats, Hillary Rodham Clinton and John Edwards, putting forward their own proposals this week that would go further than the administration.
Mrs. Clinton said her own proposal that would impose a 90-day moratorium on foreclosures and freeze the rates for five years or until they had been converted to fixed-rate loans was a better approach that would help more people.
“Although the administration is finally giving the foreclosure crisis the attention it deserves, it seems that President Bush is going to give struggling homeowners far less than they need,” she said in a statement.
Mark Zandi, chief economist for Moody’s Economy.com, called the administration plan a good first step, but said the government eventually will have to go further given the problem’s size and the threat to the economy.
”This is the most serious housing downturn we have seen in the post World War II period,” Mr. Zandi said. ”It is a threat to the broader economy. The risks of a recession are very high.”
For housing prices to come back in line with income “growth” they would have to drop significantly more than 10%, or everyone would need to get one hell of a raise in the next few months.
It’s not as if income levels and housing prices are a ‘loose’ relationship. They represent a hard and fast ratio that can *not* be stretched for extended periods.
So what’s it going to be: A major correction of 50% or whopping salary increases of 100%?
fannie mae can forecast all they want, but here in miami zip code 33145 which is a medium class neighborhood prices have declined since 12-2005, about 60%. I have actually researched this, because I could not believe it at first.
thanks
Inflation won’t bring real prices down until we have massive wage inflation. Here in Maryland, the “Tax me!” state, we’d need about a minimum of a 50% raise across the board to a 100% raise to get the median house affordable on the median salary. Somehow, I don’t see that happening! Besides, inflation is “contained,” so no raise for anyone who is not an executive.
I wonder what college this $30k millionaire went to? MBA? Worthless if you ask me. If you dont even understand the basics of what is going on!
crispy&cole,
Don’t be hatin’! Maybe that’s what they’re teaching these days? Ramon was just trying to live the American Dream (TM). NO! Not the one where you work hard and save money just to buy a home!?
The one where you retire wealthy at 30 without really breaking a sweat! Sheesh. Now the kid’s on the hook for 16 G’s a month. I’ll bet mom will be proud when she (and her meager posessions) are out in the street!
lmfao!!!
DinOR,
Don’t go changin’!
Come one guys, he had to work really hard to screw all those people over.
not really. “I can make your mortgage 1%”…forever…and wall street gave him the tools. now print out some crazy amortization charts with taking the difference each month and depositing in to a savings account paying 5% and whalla..your home is paid off in 14.8 years. i have personally seen the game in action and it is quite convincing. Until after you go home and think about it and go…what a crock of dung. some in the business will attest…break out every chart in the world to sell this garbage product…and i mean garbage product to average j6p. it is actually a very sophisticated product that has appeal for…well… sophisticated wealthy people who dont need a mortgage
young, hungry, fearless, less experienced-they were the perfect fit. Seasoned, stable, modest-you were sweeping up after these “kids”. No borrower wanted to hear the realities of what could happen with their garbage loans. No manager, realtor, builder ect…wanted to hear anything with downside. So a bunch of us 1st stringers were forced to the bench to sit it out. I think these chips have to lie where they fall. the 30k a month guy is out…i am still in the game.
simplesimon,
Such excellent points! I’ve really been grappling with how to describe this for some time and you’ve done that with flair!
Recently I’ve described “the boom” as being “amateur driven” or “amateur lead” but putting the “1st stringers” on the bench ( and then being told to STFU) says so much more! The boom was definitely tailored for a “younger more agile” crowd. There just wasn’t time to think running red lights to a condo lottery drawing!
Well said Sir!
yep. it not like i missed the boat. its more like they kept me hogtied to the bow or stern until the fiasco ended. the problem is the key players were on bridge barking orders at the crew. if a crew member barked back..they wound up next to me on the bridge or stern. now that the ship sank only those bound to the bow or stern washed up…again…this is my second go round. we dont sell fancy bs products since we know they can hurt j6p. but sometimes j6p doesnt listen or is told not to listen. We simply did not fit the hidden agenda. Im gonna sell you a payment thats not going to go up…no frills. Your not going to get excited because the jerk around the corner is selling you half the payment. Hey im going to sell you a product where your mortgage balance goes down not up…Im going to tell you that you can’t afford this payment…yes folks its that easy! but i will show you how you can afford the payment.
“Brayan: You pick up the mail and there’s like, a ton of bills, and you see a lot of money going out of your bank account and not as much money coming in. I’ve worked really hard to get to where I’m at, I don’t want to lose it. So how do I keep it?”
He could have shoveled that 30K per month into a savings account, or a mutual fund. Instead he swung for the fence and struck out. Now he’s broke. Imagine that his 30K per month pipeline would suddenly dry up. Did he sleep through the finance and economics classes? Or did he simply become star struck, believing that he would be a multi millionare by the age of 30?
Just wait until he realizes that he will never latch onto another gravy train like this ever again, and that he’ll be lucky to land a job that pays 5K per month. That’s when he’ll find out how worthless his no-name MBA actually is. Maybe he can work his way up to a 7-11 store manager position.
This guy is merely another example of the fact that “highly educated” has little or no correlation with “wise” or “intelligent”.
And these are the people who will be in charge of the country in 25 years.
Scary.
The phrase that best fits this guy and the millions like him is “Educated beyond thier Intelligence”
intelligence is seldom understood. If memory were a good indicator, my computer “knows” billions of things and can recall them with machine precision. So it is not what you know, but what you do with what you know… More than that of course but a start…
txchick said:
“And these are the people who will be in charge of the country in 25 years.”
They’re already in charge…
“Or did he simply become star struck”
I’m going w/ star struck! His boss was driving a 100k sports car and going to Vegas for the weekends. (Younger guys have a tendency to be impressed by that stuff). Older guys tend to think about the last time they had a hangover like THAT, first. I think *simplesimon is spot on b/c the slightest hesitation in buying into the boom meant your boss (or clients) simply went on to the next guy! No questions asked. There wasn’t even time to say, “sounds great, mind if I finish reading this and get back to you?” No. You had to be onboard heart and soul from day 1. Not as easy for ppl that have been burned before!
Star struck
If you’re not inside, you’re *outside*!
Yep, it actually said he was lured into the real estate business! I checked the article twice….
Clearly, he’ll need some counciling………….
Remember kindergarten and this little song…”what goes up, must come down”.
Maybe Ramon flunked kindergarten.
Ramon is a stupid-a$$ name for a boy so he is being haunted by that stupid image since the day he was born. No wonder why he makes stupid decision ! Ramon, what kind of a freak-a$$ name is that ?
Name your kid something grand and worthy like Abraham… Just don’t name your kid “George” or “Dubya” if you don’t want your kid to eat spoiled rotten egg for lunch donated by the whole school cafeteria bunch…
can’t touch me
F Raines 100k a month for life ,yo
Close. Try $125k/mo and life-time medical benefits including dental and vision. Dis-b-da gravy train!
Ben,
Even if the government wanted to set up something akin to RTC, no way Jose.
In terms of managebility: time, resouces, and money–this baby is huge!
I know you know this–I should e-mail the great and wonderful Zandi and give him a big ol knot to the head!
Ya just can’t make this stuff up!
Leigh
Right, there are important differences. The RTC was in part cleaning up for failed, Federally guaranteed depositories that had a $100k limit per account. This goof thinks we should pick up the tab for non-guaranteed outfits like Countrywide, whose boss made how many hundred millions, putting FBs into million dollar, redundant, McMansions?
Forget it Zandi and forget it Wall Street. Where’s my pitchfork?
Seriously, I told folks a couple of years ago that when this mess hit the fan, I was going to march on D.C. if they thought I was going to chip in to pay for this fraud. I’m thinking armed revolt isn’t too far off in the distance.
Push is going to have to eventually meet shove, when lifestyles of the entitled reaches the final chapter, 7.
Where’s my pitchfork?
I believe it’s just where you left it, next to your hangman’s noose from earlier today. LOL, you have the best toys.
AND, the RTC wasn’t a bail-out really, but a controlled liquidation that anyone could take part in. And many did.
AND, many of the ppl that bought the RTC “notes” made out quite well as I recall. They were kind of like strips (bot @ a discount) and matured rather nicely. At least I don’t recall anyone complaining?
I remember a lot of whining at the time that some jes’ plain folks had bought RE properties–sometimes multiple properties–for a song.
Seemed kind of silly, seeing as the auction was public and all that. Not some sort of Halliburton no-bid contract deal.
I remember this really modest looking couple on the teevee who had bought a home for themselves, cash, for a few thou.
Couldn’t really understand why they were being demonized … heck, still don’t understand it today.
Because they saved their money, didn’t live in debt, did their research, and picked up the pieces after some other “playah!” burned out. Those are the greatest crimes in our debtor society.
Yes, RTC had limited scope and the resources to LIQUIDATE.
Perfect.
You get the pitchfork, noose and I’ll get the horses.
You pitchfork ‘em up onto the horse, I’ll fasten the noose and slap the horse (OK…you can slap the horse).
Death by the short drop hanging…said to be most slow and painful!
We just have too much fun here!
Leigh
This appeared at NovaBubbleFallout just now, any takers? flatff?
Bond insurers are going under fast. Will the feds (or somebody) step in? Asset backed will go nowhere until this happens.
Nationwide? No national market or bubble?
The Home depot call centers that will close Jan. 28 are in Chicago, Dallas and Tampa, Fla.
This news should help reduce the housing and consumer spending in the areas mentioned!
http://krugman.blogs.nytimes.com/2007/12/04/ted-spread/
On LIBOR etc.
You guys at the ratings agencies should be the first to walk the plank.
——————-
As you probably already know, I couldn’t agree more, Ben!
Hang on here. They expect the correction to be “severe” yet it will be 1/2 of the downtown experienced in the early-mid 90s? I think that’s backwards. It will be twice as severe. At least.
“The lender said there is a ’severe correction’ in the U.S. housing market. ‘The decline is expected to be nationwide and is estimated at about one-half of the magnitude of the decline experienced in Southern California in the early 1990s,’ it said.”
We’ve had the biggest bubble in history with the riskiest financing in history and the decline will only be one half of the early 90’s decline?! Ron, I agree with your at least twice as severe scenario.
I predict there will be at least twice as much propaganda as there was during the early 1990s bust.
I agree.
I was reading “Mortgage fallout felt by GOP” in the LA Times, and was amazed by this line: “A majority also think that mortgage companies should be required to freeze lending rates to sub-prime borrowers who are at risk of default.”
I wrote the author who replied that his boss, the editor, slipped that in there. Funny, the comments section wasn’t available for this story. Propaganda? You bet!
Propaganda + abandonment of 200 years of contract law…
At least they’re getting warmer.
I thought that at first, too. But then I remember he’s talking *nationwide* here, not just the “frothy” California market, etc…
Sounds reasonable… there’s a lot of people in the flyovers ya know…
As a nation, we’ve had a price / income ratio of 3 for many decades. This bubble pushed the national ratio to 4.5+. What is it? $230K/$50K = 4.6….
On a national basis, prices have to fall 34% or incomes need to jump by 50% to return to a historic norm.
“‘When will people take personal responsibility for their actions?’ wrote Greg Gagola of Tallahassee, Fla. ‘Borrow what you can pay back. Read your contract. If you do not understand your contract, hire a real estate lawyer. We as a nation need to take responsibility for what we do.’”
It is safe to say, in general, Gagola will not be elected or appointed to any public office.
None of this will happen anyway, because this simple fact will effectively kill the program…
“One of the biggest problems is that many homeowners at risk of default qualified for loans during the easy-lending boom when underwriting standards were much more lenient. Those who got their original loan without providing proof of income will now have to do so when they ask for new loan terms. Many of them may not qualify.”
And hopefully FBs will be tossed in prison for mortgage fraud if and when their real incomes do not match the amount they fabricated on the original mortgage application. End of story, game over.
I was watching the senate hearing on CNN livefeed during lunch. There was talk of using a court hearing much like a bankruptcy hearing to determine affordability and suitability. How many FBs will be able to survive a hearing of that nature? Not many.
The other topic that was brought out was that if the FB applies for and gets a court-adjusted mortgage, where the creditors would be taking a financial hit equal to their losses if the home foreclosured, this means that they don’t receive their PMI or other title ins claim money as this funds are only disbursed after foreclosure. very Interesting.
“When will people take personal responsibility for their actions?” wrote Greg Gagola of Tallahassee, Fla.
Is this guy a real person?
One of the great things about reading this blog for almost two years now has been the motley array of bizarrely-named folk Ben has highlighted.
‘When I go abroad nowadays, [I see] we’re losing credibility. It doesn’t play on Main Street anymore and it doesn’t play in most foreign capitals.’
This is what someone in the financial regulation business told me. It used to be that for underwriters, their reputation and credibility was the crown jewels that had to be protected, lest they lose all their business to their competitiors. But what if all U.S. underwriters lose their reputation and credibility. The foundation for our financial marketplaces is gone.
And frankly, all that effort to “restore credibility” after the dot.com disaster seems to have done nothing but set up the public for another scam.
I once had a “web” argument with a “web” buddy as to the fairness of a decade long crackdown on street crimes (committed by poor minorities) combined with no prosecution of white collar crimes. His point was that street crimes are concentrated and can destroy a neighborhood, wheras white collar crimes are dispersed and cause less acute harm. But can white collar crime at a sufficient scale destroy the economy?
And frankly, all that effort to “restore credibility” after the dot.com disaster seems to have done nothing but set up the public for another scam.
Indeed, though the scam this time around seems to have impacted plenty of institutional and financially savvy investors as well. Much of that can be directly traced back to the puffed-up ratings of CDOs and other financial instruments.
Moral: You can’t polish a turd, even if you disguise it as an AAA tranch.
You can polish a turd. Once at a soveneir shop I say a guy selling Big Turds covered in Shellac.
People will try and sell anything, and some people will buy anything.
White collar crime–mortgage fraud–IS destroying neighborhoods. You should have emailed your buddy that article from the syndicates last week about FB’s in working class neighborhoods being decimated by foreclosures.
The reputation of the City of London as a leading financial centre was built on three words - “Dictum meum pactum” which is Latin for “my word is my bond”. I am afraid that this is something that Paulson and the banks don’t seem to understand in their quest to mitigate the losses from the subprime crisis. It will simply destroy the credibility and integrity of the American financial system and lead to money flowing to where words in binding contracts still count for something.
I agree with these comments. Paulson and friends are so busy trying to put out the fires they started, they have no time to consider what long-term and possibly permanent damage they have done to the US as a financial centre. As this plays out, watch the exodus from NYC to London, Dubai and Hong Kong intensify. I expect the damage to be structural and long-term.
Spike - I’m more cynical than you about this. I think they know and they don’t care. There may come a time when the pigmen permanently leave the country they raped, to live elsewhere.
oh, so London has more credibility than Wall St? keep dreaming … that’s the birthplace of the SIVs. oh, so you will only do business with banks, IBs, brokers based out of Dubai? hahahahahah
Where exactly is that place where words in a binding contract still count? We’ll see what happens as Europes housing bubble breaks.
“‘There is value in these loans,’ said Sheila Bair, chairwoman of the Federal Deposit Insurance Corp. ‘They can’t perform at the reset (rates) because those resets were never realistic. They can perform at the starter rate.’”
Yeah, Sheila - well, how about you blow me? The resets were never realistic. What a crock. Too bad, they were real enough that everyone signed on the dotted line.
“those resets were never realistic”. We were just kidding about those. It’s all good fun.
Have you done your Christmas shopping yet?
lol-thats really funny. she just discovered it now. my old man calls it asleep at the wheel. let the free market digest what it can in refinances and the rest fall by the wayside. hows my plan sound? these firms made alot…i mean alot of money over the past 5 years. One bad year and say 25% giveback wont kill them. If it does then ok. they were never as smart as they thought they were.
it is the teaser rates that were never realistic !
“Mortgage giant Fannie Mae Wednesday said it sees increased credit losses and falling home prices next year as the housing correction continues to play out.”
I guess it is obviously time for Fannie Mae to prop up and mop up the mess then.
‘The decline is expected to be nationwide and is estimated at about one-half of the magnitude of the decline experienced in Southern California in the early 1990s,’
What a joke.
The 90’s decline was not nearly as LEVERAGED as this one. Keep dreaming eCONomists!
Keep dreaming eCONomists!
Remember Crispy,
Economics was invented to make Astrology look respectable.
And the rise of real estate prices prior to the early 90’s wasn’t nearly as steep.
I was wondering if someone was going to point that out. Of course these are the same people that did not see any bubble at all so take it with a grain of salt. I am confused what they mean by that though, are they saying that the national decline will be 1/2 that of the S. Cal decline in the early 90’s or are they saying that S. Cal decline will be 1/2 that of the early 90’s downturn??
I was just thinking the same thing. It’s like NAR they adjust their predictions of the future to match the current situation so that the reader always thinks things are just about to get bettter.
They are using the same ole averages BS to make it not sound as bad as it is.
They are hoping while some markets will make 90’s california look like a picnic, some markets which haven’t seen a bubble or are in a bubble still will pull the Numbers up Nationwide.
Everyone with any sense knows or should know , all numbers can easily be pushed to look a whole lot better then they are.
Here in my county land prices have dropped 50% plus and houses that are selling are selling 35% or less then last Year on the same home. But our Median home price has only went down 1.8% . It’s different here.
No kidding. What is it about this chart that tells FNM that this correction cycle will be smaller than previous ones?
Oh, wait a minute! (I had it upside down!) My bad.
I like this one on Youtube
http://tinyurl.com/33pnge
Real estate prices adjusted for inflation on a roller coaster
“A group of lawyers for 11 investors with combined $62 million in losses says that Bear continued to sell shares of the funds this spring, when the subprime market was melting down.”
Since when is it against the law for Wall Street firms to unload overvalued assets on greater fools?
Since when is it against the law for Wall Street firms to unload overvalued assets on greater fools?
It’s not, unless you represent a bag of sh*tt as AAA-rated prime cut sirloin. Then its FRAUD.
Since when is it against the law for all Street firms to unload overvalued assets on greater fools?
When it is done in a fraudulent way that is knowingly and intentionally providing false information. It all depends on the state in which the transaction took place and the definition of those state statues or by definition of federal statues as it applies to the specific case.
“The lender said there is a ’severe correction’ in the U.S. housing market. ‘The decline is expected to be nationwide and is estimated at about one-half of the magnitude of the decline experienced in Southern California in the early 1990s,’ it said.”
I was around when the so cal empire of real estate fell apart in the early 90’s, a tiny bubble compared to this world-wide one…
In fact, combined with murky finance, i’d venture to say this one is 100x as severe.
Once again: the chart.
Oooh. I thought you meant the OTHER chart.
I saved that one.
Thanks,
Leigh
“The chart of my monthly weight gains during the holiday season makes the last weeks run up in stocks look flat”, said hoz noshing on some Big Butt popcorn.
Good for you, my friend!
I got out of them a while back, weak stomache and all!
LOL–Congrats!
Leigh
Shoot, weight gains, Jeesh. I’m thinking stock gains. LOL.
Leigh, I will close out profits no later than the 21st of December. I never count profits until closed. Everything is getting closed this year. Like my weight, the one thing I believe is taxes will never be lower in the US than now.
Given the surging stock market, strong jobs report, and news of rising productivity, it seems as though the U.S. economy is doing just fine. Given underlying economic strength, the housing market should hold up w/o a bailout, right?
and no further rate cuts and WOS (war on savers) is required either
I miss Volker
And the fact that they keep cutting tells you someone is lying.
“I miss Volker”
I do, too.
“Given underlying economic strength, the housing market should hold up w/o a bailout, right”?
Absolutely! That’s how I read that report. No real problems as long as folks have a paycheck. Phew… For a minute there I thought we had a wee problem.
Depends? (I’ve been reading too many Alad posts)!
Look, ma, no slowdown…
Wall St shrugs off bond insurer concerns
By Anora Mahmudova and Michael Mackenzie in New York
Published: December 5 2007 13:59 | Last updated: December 5 2007 19:47
Wall Street stocks were higher on Wednesday after a closely-watched report forecast much larger private-sector employment growth in November than economists were expecting.
In mid-afternoon trade the S&P 500 was up 1.2 per cent at 1,481.01 while the Nasdaq Composite climbed 1.7 per cent at 2,663.80. The Dow Jones Industrial Average was 1.2 per cent higher at 13,411.63.
http://www.ft.com/cms/s/5d4c8954-a2c0-11dc-81c4-0000779fd2ac,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F5d4c8954-a2c0-11dc-81c4-0000779fd2ac.html&_i_referer=http%3A%2F%2Fwww.ft.com%2Fhome%2Fus
A little OT, but if we’re talking about nationwide effects - who will they sue?
The snow brings a new problem with the high number of foreclosures in the Twin Cities. All those empty homes mean no one is around to clear the sidewalks.
Kathy Nitschke shovels out her own property, but sees that no one is looking after the vacant home in her Minneapolis neighborhood.
“A lot of traffic through here, so it’s unfortunate when they don’t clean things up,” said Nitschke.
In Minneapolis, there are 50 percent more homes in foreclosures this year than last. In St. Paul, there are four times more vacant homes than in 2006.
It means more work for the city–both Minneapolis and St. Paul have a rule, stating snow must be cleared within 24 hours.
If a sidewalk stays covered in snow for more than a day, a letter is mailed to the address. If nothing happens, city crews come and do the work. The city of St. Paul charges $160 an hour, while Minneapolis charges $300 an hour—plus a $103 citation.
“We only have limited resources to do the work,” said Minneapolis city spokesman Mike Kennedy.
If there are no homeowners to pay the snow removal costs, it will be forwarded to the bank that owns the foreclosed home.
The city of Minneapolis told 5 EYEWITNESS NEWS it answered more than 100 calls reporting snow-covered sidewalks on Monday alone.
That’s great they do that in the Twin Cities. I wish it were true here in Chicago. I walked across at least twenty unshoveled properties in the half mile from the bus stop this morning.
I pass this way every day - most of the same houses that do not shovel also hire lawn&garden in the summer - for 25 foot wide lots! I guess houseloaning brings no responsibilities - only rewards - nowadays.
Maybe Chicago can figure out a way to tow people’s houses. If they can do it with 1% of zeal with which they tow people’s cars, you wouldn’t see a snowflake last 10 seconds on a sidewalk in this town.
True true.
The city has towing + wanton ticketing down to a science. An Evil Science.
They need to put a “boot” on the front door until the snow gets shoveled and then pay a fine to get it removed.
Moodies says MBIA is in trouble.
http://www.bloomberg.com/apps/news?pid=20601087&sid=ae3ViyHy8EE8&refer=home
I wonder how many MBS holders were counting on MBIA type companies to keep their investments safe ?
This is going to get very interesting.
MBIA (as well as the other bond insurers) are in trouble because of a failed business model. These firms require a ‘AAA’ rating to justify existence. If the companies ratings go south, the company has no future value. There are no other companies that require a ‘AAA’ to survive. The business model was wrong from the start.
There must have been a good deal of pressure on the credit ratings firms to keep those ‘AAA’ ratings intact.
This part of the original post rang a whole carillon of bells with me:
“Ramon’s looking for a job back in ad sales. He was forced to rent the house be bought for his mom. (She’s) back in their cramped childhood condo. A framed photo of Ramon in a cap and gown hangs by her bedroom door.”
And why is Slim’s belltower going full-tilt? Because, over the years, I’ve been asked why my business does little or no advertising. Well, I’ll tell you why: It’s because of having to deal with ad sales reps like Ramon.
The advertising field is full of ‘em, and I don’t trust ‘em further than I can swing a bull by the tail.
I keep wondering when Tucson’s Home Loan Executives is going to show up in the obituaries.
I was in sales in Tucson in 2003-2005 and I marveled at the empire the owner (of HLE) built.
And, I once applied for a mortgage from Hunter Sampsel (CEO of American Home Mtg in Tucson) We finally gave up after he kept missing deadlines and losing our papework.
Please take note if you are naive enough to think the financial system in the USA isn’t one of the most corrupt in the world:
You are watching in real time, The Financial Gangsters Of Wall Street in full recovery (from losses) mode. One of the heads of The Wall Street Financial Gangster families, Godfather Henry Paulson, is pulling out all stops to protect the family interests. That means several plans have been put into operation to stem the financial losses of the familes caused by the sub-prime meltdown.
With the aid of their minions at the SEC and the Fed and several corrupt (some of the many) politicians and with Godfather Henry Paulson in a position of power in government, you can be sure that a lot of your tax dollars will be put to work to bail out the FB’s which, in turn, will bail out Da Boyz.
Actually, Godfather Paulson and the familes couldn’t give a sh*t about the average Joe Sixpack FB’s. These are simply moves to protect The Wall Street Financial Gangster family interests who, “Steal more money with a briefcase thean they could with a gun, and they, “Never Go Against The Family”.
By manipulating the stock market, as the Financial Gangsters are at the moment, they will continue to plunder and rape the 401k’s and mom and pop accounts. Then, by getting tax payer dollars to prop up the massive bad debts they have accumulated because of greed, Da Boyz will have fully recovered and replenished their coffers sometime in 2008. That will ensure they get back to collecting multi-million dollar bonus payouts come Xmas 2008 to make up for any shortfall (lol) they might have this year.
As a side issue, once again, please tell your friends and co-workers, if the politicians EVER get to passing legislation where, instead of the government managing Social Security, the new legislation will mean switching to private accounts on Wall Street, it will simply be another 401k type money box which the Financial Gangster familes can steal and plunder from. Of course, they will “skim” all the time but it times such as this, they will be working overtime.
I don’t even use the 357 plan at work (401k for gov’t employees) because of the fees, lack of transparency, and lousy choices. F*** that. Roths for me.
Great post Mike, always enjoy reading your thoughts on this mess.
I was one of very few people in my circle (at the time) who held to reason privitising social security is/was a really bad idea.
Other than the boys skimming (so true), I hold most Americans would plunder them (look at todays mess, and my unscientific hunch probably would hold true).
Best,
Leigh
Leigh. yesterday I heard the figures on IF you put 10k in 2000 into the Dow …how much your return on it would be IF you left it alone etc. IF you allowed to LET the gov make SS private.
The figures were it went up 100, it went down 300, it went up and down and up and “you and I” would have made MAYBE $200. over the last 7 yrs. That is all. So this privatization idea is crap.
Just wanted to add that tidbit I heard on a money channel yesterday.
Another great point Desert…no guarantee in the stock market or the managers of said stocks (us or a manager picking stock)!
Skip, that’s cheap! Mike spoke elloquently on how daboyz would skim the heck out of ‘em.
Leigh
I read somewhere that its costs the SS Admin 0.2% to manage the program.
I can’t even imagine what Wall Street would take as a commission every year to manage it.
Please explain how the government managing my SS account isn’t just another Gangster family holding my money? Hmmmmm?
A decent gangster will let you profit as long as he can wet his beak. That’s how he stays in business. The government gangster, once SS is insolvent, will eventually
stealredistribute my freaking money, which is a forced contribution to myself and not a tax, to someone moreinclined to vote for himneedy.“Fannie Mae is forecasting a peak-to-trough decline of between 10% and 12% in home prices for this housing cycle. ”
Who writes this stuff ? Home prices have already fallen 10% or more in most areas. Is the decline over ? I think not !
Its incredible what gets accepted as fact without debate in society today. How did that statement ever make it to press ?
Twee Dee,
All of these CEO’s quotes are two years behind.
I wonder if they are surrounded by quants looking at a model that just isn’t doing the job. They are still using data from the last 20 years that says prices go up, and the late 80’s are the worst that can possibly happen.
At this point, I’d rather have the guys from the World Series of Poker at the helm than a bunch of quant’s from MBA programs. Good poker players have good instincts. Quants are limited by their data.
Asparagus,
From Wiki:
Quants: “The disciplines of finance, mathematics, statistics and computer science are now linked. A corporation whose risk management policy compels it to lock in a foreign exchange rate must deal with a foreign currency derivatives trader. The trader bases his pricing and hedging decisions on the behavior of a Brownian motion, determined by statistical estimation of parameters and simulated under probabilities that differ from those of the real world, a simulation justified by the profound mathematical and financial dual ideas of change-of-measure and risk-neutral pricing.”
Quantitative analyst work in the financial markets, developing and implementing mathematical models to assist the activities of traders and risk managers.
They do not interact with or at the street level.
The old wall street boys were poker players of a sort, a bit more educated. Human interaction and killer instinct. They too work in the financial markets, and develop analysis strategies to sell their products.
Herein lies difference and possible solution? We need more humans in the process!
Leigh
The press has been a major cause of this bubble. They start with what they consider to be a platform of “impartiality”, and then quote verbatim from the most biased sources in the world (as if they are authorities) thereby becoming infinitely biased themselves.
If I had a dollar for every time the media quoted David Lereah without getting a contrasting quote from a non-biased economist I’d be stinking rich.
It’s not that the media is intentionally biased — they’re frankly just dumb and easily manipulated. They believe with the naivety of a small child that those at the highest positions of their industries are impartial and scholarly “authorities” worthy of being quoted by supposedly impartial publications.
(And then of course, there are the openly biased publications who live off real estate classifieds — but that’s a whole other story).
But this isn’t anything new. The media created the dot com bubble in exactly the same way. They’re weak, easily controlled and spineless.
“The Financial Accounting Standards Board is requiring companies to disclose more about the market values of their investments, under the FAS 157 and FAS 159 rules that went into effect for fiscal years beginning after Nov. 15.”
This will be great for sorting out problems of fiscal fiascos in the future, but does nothing in regards to the fasb one pulled, in not releasing information, this past November 15th…
Remember, remember the 15th of November
The financial, treason and plot
I know of no reason
Why financial treason
Should ever be forgot
The FAS 157 & FAS 159 rules have loopholes large enough to steer an oil carrier through. Goldman Sachs already uses the new rules and they reported Bilions and Billions in Level 3 accounting. Mark to Model are the new rules. Except were there is a comparable trade, that is why the E*Trade transfer is so significant. Under best case conditions AA or better paper is trading at 40% discount (this assumes all the other stuff is 0 value). Deutsche Bank in the Q3 had it marked at 10% discount. Other banks took similar valuations.
I saw that ETFC thing for what it was immediately and shorted the sucker at $6. Amazing it took so long for others to figure it out. I’m just sorry I covered.
Nice trade young lady, I will short it once it declares BK.
Some stupid people out there! they tried of offer us loans with ARM’s and we said no! I was 26 at the time, first time home buyer. They kept giving me excuses like are you really going to live there 5 years from now? Don’t you want to make some money kid? etc.
It’s called common sense so I don’t feel sorry for these people… we are actually enjoying the ride! Our goal now is to pay off all our debts so we can pay cash for a vacation home… CASH!!
Congrats on paying off all the debts!
Speaking of which, I borrowed money from a wealthy college friend back in ‘05. It was used to buy some equipment for my business.
And, waddya know, I now have enough money to pay the balance down to zero. I let him know that a check from me will be coming his way. Yee-hah!
Once you save up enough $$$ to pay CASH for your vacation home, you should RENT it! This way, you can have a ‘vacation home’ in a different place every year
That’s the way my family did it when we stayed in vacation homes. We also took our vacation home (a family-sized umbrella tent) with us on other trips. Sometimes we did both.
Some housing bubble news from Wall Street and Washington. MarketWatch, “Mortgage giant Fannie Mae Wednesday said it sees increased credit losses and falling home prices next year as the housing correction continues to play out. Fannie Mae is forecasting a peak-to-trough decline of between 10% and 12% in home prices for this housing cycle. The lender said it expects 2008 credit losses to be between 8 and 10 basis points, up from a range of 4 to 6 basis points this year.”
I hate to sound unprofessional but BS like this is what gets people in trouble. A 10% decline in the value of housing would be the equivalent of losing $1.5 - 2 trillion USD depending on how much you estimate all housing is worth. That will sting. I call BS on this because there’s no way housing can be sustained at current prices. A 40% - 70% decline in prime areas (cities and areas that have bona fide strong local economies) is likely; much greater declines will be elsewhere. Crappy cities like Compton and Camden NJ could see 95%+ declines. No I am not making this up; if we actually had sustainable economic activity then yes, I would agree with the people here saying we will have only 50% declines and inflation and the usual Pollyanna predictions. However, economically the US economy is a perpetual motion machine; problem is, they don’t exist in the real world. If 70% of the GNP is consumer spending, and if housing is the last thing to provide consumer spending, is it realistic to assume that housing will only fall 10%? Nationwide, I’m not really how much housing will fall since every region of the country is different. Also, if housing falls, pretty much everything else falls, including commodities and stocks since housing has been the driver of inflation since probably the late 90s. This is why I argue that average inflation for the last 10 years is probably around 12 - 15% annually.
“If all this sounds like a financial house of cards, that’s because it is. This may not be 1929. But it’s a good bet that it’s way more serious than the junk bond crisis of 1987, the S&L crisis of 1990 or the bursting of the tech bubble in 2001.’”
FINALLY someone tells it like it is. FINALLY. It had to hit them in the face before they realized it, but at least now we see the magnitude of the situation.
Actually, the current mess might rival the 1929 crash yet. Depends what happens when the losses really start being realized. We’ve only seen the tip of the iceberg so far.
From Yahoo Headlines-AP
“Wall Street rallied Wednesday after new data showed the U.S. economy is in good shape and that another interest rate cut is still a possibility. The Dow Jones industrial average rose more than 150 points.”
Sorry, does not compute. If the economy is in such good shape we wouldn’t be expecting a rate cut would we ?
I was thinking the same thing. The markets have gotten stupid. Time for a crash to clear out the gene pool.
after the first of the year.
BTW, AIG says ‘08 like ‘07 for housing - decline of 5-7% nationwide. Maybe a beginning of a recovery in ‘09 if ‘08 doesn’t get worse than this year.
They are looking for “stabilization” in inventory.
Feh.
Who is going to be providing the loans for this party?
It’s simply government and Wall Street propaganda, packaged, tied in a nice bow, delivered right to your door by Maria Bimbolini and Joe Pissani, etc, on the CNBC Business Comedy Show.
When Joe Sixpack is assured by a smiling, soothing tv anchor or by b.s artists like Larry “Sniffer” Kudlow, who try to convey that they are the source of truth, (lol) Joe breathes a sigh of relief that everything is fine.
Actually, wonder of wonders, I think even Joe Sixpack is starting to realize it’s b.s. I’ve had a few conversations with “ordinary people” lately and most say the numbers from the government on employment and the Fed on inflation are a joke. One even said the employment numbers are high because they are crappy, minimum wage jobs or government jobs. Kind of took me by surprise because this guy is a “huntin’ and fishin’” guy with no interest in finances or government. Most people are very skeptical about the Fed’s “2% inflation” crap. One of my neighbors said he didn’t understand how the Fed could say that inflation was only 2%. I explained to him that the numbers didn’t include food, energy or property prices. I thought he was going to have a heart attack laughing. He said, “So if I don’t eat, don’t drive a car, don’t live in a house where I need heat and light, then there’s no inflation? Is that it.” I told him the Fed does include rental prices. He just stood there shaking his head.
I think we are getting to the Abraham Lincoln phase: “You can fool all the people some of the time - and some of the people all the time - but you cannot fool all the people all the time.”
If there is one teensy thing I know is that when Maria Bimbolini starts spouting off ..don’t believe a word she says. She is only spouting corp propaganda. When she was speaking re: my current indust..her “facts” her hyperbole was ridiculous. It all sounded just like she had the CEo speaking in her ear. Nothing was even close to reality.
Soooo, when it comes to everything else..blah blah blah economy blah blah. And the other guys as well.
“If the economy is in such good shape we wouldn’t be expecting a rate cut would we”
As Casy Serin would say, “It’s all good”.
use of logic is prohibited due to national security issues.
I noticed Squawk Box lately shows analysts expect federal fund rates to be below 4% in a year. 2 weeks ago their expectations were below 4.5%.
Buy gold.
I’m actually looking at charts trying to find an entry to short gold. Again, next year, not right now.
Hmm, I’m looking for another gold spike (maybe the last for a while) when the US crash finally hits the world economy (read: Asia).
But you tend to trade more short-term than I do.
China and the Arabs have enough US dollars to easily buy up all the gold in the world. What else are they going to do with all their toxic debt money? Gold is not going down. Once the shit really hits the fan those people will be looking to buy something of value, something not printable. Seeing as how China was blocked from buying US companies and the Arabs don’t need us for anything really, they dump and tranfer their savings to real money en masse.
I can envision a time when gold may be a good short, but I don’t expect it soon. I believe it still has a big upside. The PM “bubble” is one I certainly am happy to see inflate…
I’m looking at the late first quarter of ‘08 probably. Not anytime soon.
Just reported here in Germany: Deutsche Bank expects rates of 3 percent next year.
This economy is not being all it can be.
Grow to the sky or die.
I’m starting to wonder if this whole housing bubble story is a myth created by the PTB to justify bailout measures to benefit REIC insiders. All signs at the moment point to no recession and ongoing economic strength.
Yea, Bear. speak more to that.
Co worker says it is bumpy but BULL Roarrrrrrrrr
I dont’ see it but do tell!
George Orwell couldn’t have said it better. The economy is in good shape and the gov plans to cut rates??????????????? So come on now, go out and invest my little bites. Picturing shark in Finding Nemo.
The new mantra:
“Buyers do not want to pay more than what seller’s bought for.”
Hey, if they bought in the past FOUR years I ain’t looking to pay anywhere close to what they got on the hook for.
LOL. Exactly. In fact, I want to buy for what the sellers bought for in say….1996.
I’ll give someone 1997 prices, which were we crawled out of our bottom and I’ll give them 4% annually as a return on investment which is fair. But that home had better have been maintained while they had it.
Anyone thinking they are getting 150% gain on a 2001 price is dreaming (or living in Davis).
Which is a thought that the sellers could/should have entertained when they bought.
“A structured investment vehicle (SIV) managed by Dutch bank Rabobank and Citigroup has sold almost half its assets, 4.5 billion euros ($6.6 billion), as the fund could not find sufficient refinancing, Rabobank said on Wednesday.”
It seems to me that the SIV had a fire sale. But what is discount of this fire sale in current situation?
“‘The market has dried up. It is all related to what is happening in the United States,’ a Rabobank spokesman said, confirming a report in Dutch daily Het Financieele Dagblad about the declining size of the fund, called Tango Finance.”
“The spokesman declined to say whether Tango has been making losses or whether cooperatively-owned Rabobank would put the SIV’s assets on its balance sheet if they could not be sold.”
Tango Argentinian or Zimbabwe?
Het verruckte Nederlander–Trix are for kids!
They must have meant ‘Tango Uniform’.
“‘Officials at Bear Stearns engaged in a concerted effort to conceal the true state of affairs at both of these hedge funds for an extended period of time,’ said lawyer Steve Caruso of Maddox, Hargett & Caruso, one of four firms representing the fund-of-funds manager.”
I only care about one thing;
WHEN will we see these thieves doing the perp walk???? The entire system reeks of theft, payoffs and corruption from Wall St to Pennsylvania Avenue and none have been held accountable thus far. Not one.
exeter,
did you ever think its all of them. a hand only has 5 fingers…you have to blame, wall street, buyers, builders, realtors, sellers, speculators, flip that house :), mortgage folks, banks for lax lending guidelines and the end buyer of all the worthless junk. govt for not stopping it.
This was allowed to happen by our leadership. We were LED there. Had there been laws that protected people from their own naivety this would not have happened. Where were the “free marketeers”? The were pickpocketing anyone they could. Unregulated markets don’t work, won’t work and have NEVER worked.
Seems to me that if unregulated markets didn’t work, we wouldn’t be experiencing this “correction” currently underway, right?
Did the thought ever occur to you that the magnitude of destruction would be far less if there were policies enforced before the sheep headed for the slaughter house?
Doubtful.
Agree, exeter.
It is impossible to have a true “free market” as long as there are humans involved.
Until everything is automated (and no human has control over the machines — and cannot receive benefit, one way or anoter…), we must have regulations.
I blame them all!!! But mostly, I blame the people who ‘bought’. I am a complete economic dummy and why did I know something was wrong. Of course, I got a good education here, and I am now able to use the scientific language of gf, io arm, lmao, haircut, mbs, fb, cdo, j6p. I figured out all of the terms without outside help.
I like BOHICA…
Safety in numbers principle is definitely in effect here…
“But the idea of using taxpayer dollars to head off foreclosures still faces opposition…based on mail received by msnbc.com.”
I really really hate that use of the word “still”. The MSM uses that word all the time to imply that a change of thinking is needed and inevitable - e.g. the U.S. “still” doesn’t have universal healthcare, or we “still” allow private ownership of guns, etc. etc.
There is no “still”. We have always objected to using taxpayer dollars to bail out foreclosees, we do now, and we always will!!! Because it’s wrong to use taxpayer dollars to reward bad decision making. It’s not some archaic principle that’s “not with the times”.
Arghhhh.
Rant off.
But some, mostly FB’s, don’t object. Just like I don’t object to replacing the ripoff HMO’s with a regulated system administered by something other than…… ripoff HMO’s.
get an 80/20 plan or HSA
no law says you have to use an HMO
Leave it to Flat to make excuses for the corporate socialists.
are you still angry?
Bush to outline 5-year rate freeze plan: sources
http://www.reuters.com/article/politicsNews/idUSWAT00853020071205?feedType=RSS&feedName=politicsNews&rpc=22&sp=true
President George W. Bush is expected to outline on Thursday a plan to freeze mortgage rates for five years for many U.S. homeowners facing sharp increases in their monthly payments, industry sources said on Wednesday.
Teaser-freezer agreed, set at five years.
http://www.msnbc.msn.com/id/22116043/
OK let’s play devil’s advocate. Let’s say you had one lender confronting one borrower on one house in this environment — and ARM set to adjust upward to 50+ percent of income, falling housing prices, foreclosured homes swamping the market.
It would obviously be in the interest of the lender to cut a deal to reduce the severity of its loss. It happens in commercial real estate, where many of these stupid loans came from, all the time.
Perhaps what is happening is a wholesale version of that, made neccessary by the sheer scale of the disaster and the fact that there aren’t enough special service employees and courts to process the tidal wave.
So how much does this freeze add onto the back end of loan ? It has to be a lot to be worthwhile to the banks. Thinkthe borrowers still won’t walk away once they find out how much they now owe ?
if the contract alteration is agreed to by all parties with NO money coming from the u.s. american taxpayer then i could give a shit. if that was the case then why do you need the government involved at all?
the reason the governemnt is involved is because they are going to force the terms with taxpayer money.
and that my friend is marxism.
f@$% and limbaugh, levin, and hannity think hillary is a marxist.
Don’t drag Karl Marx’s good name into the mud … maybe Marx Bros.
Would Karl Marx have advocated stripping the economic surplus from the working class to bail out stupid decisions by capital? No, really, this is a serious question.
Stop laughing, I’m trying to keep a straight face.
OK.. I’m calling WAMU. I want my 6% fixed (which I earned due to my good credit) reduced to 3% for the next 5 years.
You know, Jeff, that’s actually a great idea. If thousands and thousands of mortgage borrowers called their lenders/servicers to say they want the same treatment, the crescendo of complaint would be heard on up the food chain. May not cause a reversal, of course, but a lot of noise can’t hurt, either.
So a 5 year extension to the crisis. I think I’m turning Japanese, I’m turning Japanese, yes I thinks so……..
that’s the tune- we’ve done all the same things like Japs huge public works programs
At least there is a public benefit from public works.
No benefit from bailouts.
So Hillary and George are of like minds on the teaser freezer. Ain’t that cosy? Hillary holds Paulson in “high regard”, so does George.
If Hillary becomes prez, and all the big money says she will, expect a seamless handover of George’s policies…and no investigations into any scandals or misconduct on Wall Street’s part…when you own the executive branch, you own a nice little insurance policy.
Rupert murdoch and even GW seem suportive of her. That has to tell you something.
I am awaiting the next slam, class action lawsuits by shareholders against the banks. Particularly any that bought stocks before September 10 in Citigroup after August 3, 2007; Bank of America August 9; Wells Fargo Aug 22; Wachovia Bank Aug 21 . I would love to be a class action lawyer bringing those suits.
Those investors should have been reading this blog, where SOMEONE (lol) suggested puts on those banks/brokers back in April or May.
The 3Q reports are full of crap, “there will be no material damage from subprime” . Shorting the banks was and is very profitable. No matter how you do it- buying puts, shorting stocks or shorting Bank Bonds.
“If all this sounds like a financial house of cards, that’s because it is. This may not be 1929. But it’s a good bet that it’s way more serious than the junk bond crisis of 1987, the S&L crisis of 1990 or the bursting of the tech bubble in 2001.’”
It cannot be distinguished with any certainty whether this is a 52 card standard house of cards, or perhaps a synthetic version with 520 cards playing…
Who knows?
This is the Goldilocks economy so it is probably the “exploding snap cards” from the most excellent Harry Potter novels.
Cards, Exploding Snap
Cards specially made for the game of Exploding Snap (see), such that the cards may blow up at any time (GF22)
See Exploding Snap.
Occasionally used to build a house of cards, which can get interesting (GF22).
agreement reached ?
who pays the vig and how many thousands of lawyers and new gov parasites will we have to pay for to separate the wheat from the chaff?
or will everyone just get bail?
Just cut a check for each home owner for 100K. It would be cheaper than what is being proposed.
You’re thinking too much like a responsible citizen. The FBs would go shop at China-Mart with that money now that they’re ‘out of a bind’.
“Whew, that was a close one, let’s go shopping.”
LOL
And save the “economy”, duh.
(In quotes because the consumer-based economy is an oxymoron, if you consider the original meaning of the word.)
President Bush will rescue some subprime borrowers and for the homes that are owner occupied.
http://biz.yahoo.com/ap/071205/mortgage_crisis.html
Yeah, and he was going to save New Orleans and rebuild it too. As I recall, the Feds couldn’t even deliver water.
Yeah, and he was going to save New Orleans and rebuild it too. As I recall, the Feds couldn’t even deliver water.
The Feds did deliver water when the poorly constructed levies failed and flooded the area.
There are way more FB’s out there who just came to the hard realization that they signed a document saying their income is way more than they do make, or ever have made.
When this rate freeze spikes foreclosures and causes even more chaos into the lending system, the adminsitration will still not understand the term “Unintended Consequences”. They will however hang a “Mission Accomplished” banner outside the US Treasury as they exit into Bolivian. (My favorite thing Mike Tyson ever said)
I agree with exeter…it’s crooks all the way down.
Dollar lovers…
If the bailout came to pass, your day of wreckening is coming soon.
Lawmakers in Washingon are near final agreement on a proposed $400 billion bailout of SUV buyers. The massive amount of debt taken on by drivers in an attempt to ensure that their vehicles are significantly bigger than their neighbors’ vehicles has resulted in millions teetering on the brink of bankruptcy. “We need to keep these people in their Hummers, at whatever cost to taxpayers” said Treasury Secretary Henry Paulson. Paulson is expected to announce details of the plan as soon as Wednesday, said sources familiar with the matter. With more than 2 million drivers facing higher interest costs and the possible loss of their oil-company-friendly vehicles if they cannot meet the payments, the future of US overconsumption is at stake. The White House on Friday said it was appropriate to build a “bulwark” against the SUV sector’s woes. “After all”, said President Bush, “it would not be American for us to live within our means and be responsible for our own financial decisions. Those who failed to spend themselves deeply into debt should pick up the tab to keep real Americans riding high.”
–Patrick
In true ONION fashion.
“It is highly unlikely that these organizations did a significantly better job with those other lines of business than they did with mortgages.”
Geez — the MSM writers have co-opted our message…
Yeah, well get use to it…Ben’s HBB is now the source spring of things relative and truthful…”they’re” drinking deeply every day, first read Ben’s HBB blog…then write the byline for tomorrow’s deadline…smart, creative…free!
“We are only at the beginning of the financial world coming to its senses after the bursting of the biggest credit bubble the world has seen.”
“What’s important to understand is that this isn’t just a mortgage or housing crisis. The financial giants that originated, packaged, rated and insured all those subprime mortgages were the same ones, run by the same executives, with the same fee incentives, using the same financial technologies and risk-management systems, who originated, packaged, rated and insured home-equity loans, commercial real estate loans, credit card loans and loans to finance corporate buyouts.”
“It is highly unlikely that these organizations did a significantly better job with those other lines of business than they did with mortgages.”
I feel pretty positive their tendrils of fraud and deceit extended from the tap root to the tip-top of the corporate tree, and missed not one opportunity to earn a dishonest buck, in the bargain…
I wouldnt say this is the biggest credit bubble ever. Japan takes the cake for the sheer craziness and scope of backing stock market assets with inflated real estate assets…ON TOP OF BORROWING MONEY.
What I find really funny in all this is that nobody can forecast !
We have all these high profile Wall Street experts with their high salary financial experts and nobody can see this coming or how far it will go.
You want to know how far it will go ? I’ll tell you. And it won’t cost you a dime.
House prices will fall until the backlog inventory is cleared and builders aren’t adding to it. Ie until the margin in building a house is zero. Remember that housing material prices are falling, so is labor and so is land. And so are building margins. I’m guessing new house prices will fall by 30% from where they are now, if not more. Depends on how cheap land goes.
The inventory will clear when people get out of their current mess and can afford the houses being offered with traditional financing terms. Like 25% down and a 15 year mortgage.
So, we have a long, long way to go, both in terms of house prices falling and in terms of time to get there. House prices may fall really quickly now as the resets accumulate and the foreclosures get liquidated. But getting J6P solvent again is going to take a long time. A really long time, like 5 to 10 years.
How much spare change does J6P have every year ? 5-10K ? How much is he under water ? $50 to 100K ? How many years will it take ? 5 to 20, depending on wage inflation and stuff.
Now knowing this let start to project the future. Millions and millions of people are going to be underwater on their mortgages and be in touch financial shape. House prices will decline like crazy. Banks are going to take a huge hit. Mortgage originators are DONE. Mortgage insurers are DONE. NOTHING is isolated.
Its time to stop dreaming and to start facing the facts. Due to the shear size, you can’t buy your way out of this problem. What are you going to do, give every homeowner under water $100K ? Lets stop this nonsense !
Even if you could freeze the rates on mortgages right now, you will never get anyone to buy a MBS again !
This situation needs to play out. Period.
Another thing I am amazed at is that the public doesn’t hold the current government responsible for this mess.
Greenspan was in charge of the money. Freddie and Fannie (GSEs, right ?) are IN THE MORTGAGE BUSINESS ! How was this allowed to get so out of hand ?
Now instead of holding the government responsible, people are looking to them to provide the bailout, to be the WHITE KNIGHT for the very situation they CREATED !
We have our priorities wrong ! We should be focusing on prevention, not after the fact cures !
The best part of it all is that some people won’t even realize the government was partially to blame. They will see them as heroes for providing the bail out.
This all makes me SICK. As does the DOW rising nearly 200 points today.
Good comment.
To the rate freeze: House prices will fall, either through more foreclosures or, if rates are freezed, through a dead mortgage market. Which investors will want to invest money into mortgages if the government can easily modify them to their disadvantage ? The same is true for the suggested cram-downs, to let bankruptcy courts modify mortgages.
I thought you might my story interesting! I made an offer on a COuntrywide foreclosure in Socal (My home recently burned down so I actually have to buy to get my replacement money from insurance). The remax agent told my realtor she was not interested in my ridiculous offer of $500k cash (no financing) for a house that was being offered at under $700k. It proves that realtors really think they are special. Truthfully, it would be nice if evenone of them knew what the word MACROECONOMIC even meant.
I don’t eventhink she presented the offer as she then said Countrywide had countered at a thousand dollars higher than what the company website lists the house for.
She can have the house.
a) Why are you using a Realtor ?
b) I would have fired her on the spot for not making the offer. YOU are in charge, not her.
Make the offer. You never know what they will say until its in front of them. $500K CASH is not easy to come by these days.
I think what Pat is saying is that the *seller’s* agent refused to present the offer to Countrywide, not that Pat’s realtor refused to make the offer. And Pat probably doesn’t have the power to fire Countrywide’s agent.
It’s no secret that F*cked Lenders are still in “we’re not going to just give it away” mode. It sucks for Pat, though, given the insurance issue.
Offer 100k less. Besides, your offer was way too generous. Maybe you should stick around here and read up a little bit.
I would insist from the seller’s realtor a written rejection of your offer signed by C-Wide. I believe they are legally obligated to present ALL offers to the seller. (not legal advice)
That said, I’d forget ALL the realtors. See if you can find the Loss Mitigation Group at C-Wide and make the offer yourself directly to them if you really, really want the house.
That said, I’d forget ALL the realtors. See if you can find the Loss Mitigation Group at C-Wide and make the offer yourself directly to them if you really, really want the house.
————————
I second that.
The administration plan is designed to deal with the crisis by allowing subprime borrowers who are living in their homes and are current on their payments to avoid a costly reset for five years. The hope is that by that time the housing downturn will have stabilized, clearing out the glut of unsold homes and halting the steep slide in prices that is occurring in many parts of the country.
Dammit! At the very least, these Repbulicans can go through the motions of being fiscally conservative! Manipulating a market to prop up house prices seems counter to what our more Conservative party should be standing for.
And I don’t think it will help!
Plus, the freeze should have to other caveats: 1. No HELOCs or seconds and 2. a 100% truthful loan application (i.e., if they didn’t file a tax return of the amount equal to their stated income, then no freeze & the Fed should collect the tax, as well.)
Will these homeowners be getting any equity during the freeze? Or are the banks effectively being forced to rent the homes.
“Manipulating a market to prop up house prices seems counter to what our more Conservative party should be standing for.”
R-can price controls = Nixon again…
just figuring on getting incomes in line with overpriced houses.
Im not bettin on overpriced incomes for the unwashed masses.
No, no - incomes cannot be allowed to rise. If they did, people might have time to something other than work 2 minimum-wage jobs to scrape by. If that happened, people might start asking questions regarding our gutted economy and how we got there, or - even worse - saving money to gain some measure of security and freedom free from the blessings of Big Brother. Can’t have that!
Wages will NOT rise during this cycle, IMHO.
Another option would require government to buy and own all these properties using taxpayers’ money. However, inventory of homes goes up from various builders, sellers, and foreclosures; hence, there must be time limit for bailout (only these who bought past five years?). Inventory alone will cause headache to government and the financial market. How government will decide which property is suitable for bailout and which is not? How it will deal with surplus of empty homes? What value of this home would be? Market value or government set up price? Maybe Greenspan can wave magical wand (and do some piruette) and all this exploding inventory will magically disappear and this miracle would solve some real estate pain…Either way I see government bailout ineffective, while using my taxes on it.
“Will these homeowners be getting any equity during the freeze? Or are the banks effectively being forced to rent the homes.”
I said it before and I’ll say it again, this is just “Government imposed SFH rent control.” It isn’t going to work. Any slack cut for these losers will just end up somewhere else on the ‘how much’a month it a’gona cost me plan’. Where’s the ATM to pay off all that accumulating CC debt. Who’s going to buy in a neighborhood with subsidized housing with artificially high house prices?
“Who’s going to buy in a neighborhood with subsidized housing with artificially high house prices?”
That’s where I am planning to rent, as there will be plenty of vacancies to choose from.
It is all fun and games until some f***ed “investor” burns down a condo building, taking a life or two in the process, not to menrion the innocent’s possessions. I cannot actually believe that I really do worry about this at night. And I rent!
Who’s going to buy anything if mortgages of any kind are nearly unavailable to obtain? Now that the banks have rigged the game, good luck finding investors to fund their future loans.
Question: are the financial institutions still going to be paying high rates of return to the investors in the high-risk tranches? And how are they going to do so with the funds obtained from payments on teaser rates? This whole thing is amazingly fishy, and I suspect it falls apart sooner or later.
Sooner….
I think the total number of people that have their rates frozen will be VERY small.
This smacks to me of trying to aleviate fears so that people will go out and spend money for Christmas. All style, and NO substance. Even the daily announcements of how a deal is immenant are jut to keep it “in the news” on a daily basis.
Arnold’s announcement was hear one day, gone the next. This one they are dragging out as long as possible to have maximum consumer impact….
Long run, it can’t work.
You’re probably right about Christmas. At this point they’ve probably given up trying to stretch until next November.
Is the government doing enough to resolve the subprime mortgage crisis?
http://money.cnn.com/POLLSERVER/results/36237.html
I don’t know how accurate on-line polls are (lets face it, if we’d believe the Internet Ron Paulson would be president, 9/11 never happened, and we didn’t land on the moon), but it’s encouraging that a significant number of people thing we’re doing TOO MUCH. Let’s hope the advisers who measure which way the wind is blowing for the candidates pick up on this.
1929 had a lower debt-to-GDP than 2007, about 2.5-to-1 vs. ~ 4-to-1.
So, it was a good WaPo article but way too optimistic.
The rate freeze is indeed Nixonian. It’s largely a political move in an election year (OK, 2008 is but a few weeks away).
It’s also bad economics. There’s nothing wrong with re-negotiating some loans but they have to be done between two consenting parties. Maybe a bank/CDO investors won’t reset ARM’s to 11% if that is a walk-away deal but there’s no reason to freeze rates at 1-2-3% either. Free market would probably settle on 7%-8% for the time being.
The Gov meddling will have the same effect as it always does - the opposite of what was intended.
It may save some ARM owners’ homes but will bulldoze everyone else.
It’s funny but people (I think it was on ABC’s site) accuse Ron Paul of “drifting away” from the “message” by talking about the gold standard and gold-backed currency. far be it for the political wonks to actually understand economics.
We’re all Keynesians now.
Isn’t any kind of freezing of rates going to cause more problems with lenders less willing to lend and investors less willing to buy mortages?
And from that less home sales both existing and new?
So a bailout for a certain small segment of the population for continued declines in sales for the forseeable future?
Maybe I’m missing something?