December 7, 2007

Bits Bucket And Craigslist Finds For December 7, 2007

Please post off-topic ideas, links and Craigslist finds here.

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Comment by A.B. Dada
2007-12-07 05:36:33

Wow, all the for sale signs are gone in my neighborhhod, overnight!

Oh wait, it snowed 9 inches. Guess they’re just hidden.

Not that they’re doing much good. Ooen houses wearing boots? Moving in 5 degree weather? No thanks.

Comment by NYCityBoy
2007-12-07 06:02:25

Having a house for sale during wintertime is the worst nightmare imaginable. I did it in Minnesota in February. Trying to keep that slush and slop from getting everywhere is almost impossible. You curse the sand trucks every day. Something tells me these people won’t have a choice but to keep their houses on the market. Tick tick tick. Time’s running out for the FBs.

Comment by Professor Bear
2007-12-07 06:09:46

FBs should just take their homes off the market for the holidaze and wait for the red hot springs sale season to bring back the buyers. I am going to tell my several relatives with homes on the market to wait until after the Souper Bowl.

Comment by SubKommander Dred
2007-12-07 06:57:42

Professor Bear;
Yeah, that’s the ticket! just tell to wait until after the Superbowl. Why, everyone knows that’s when housing sales are sure to take off! At least, that’s what some realtor said to me last year, before the last Superbowl…

SubKommander Dred

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Comment by zeropointzero
2007-12-07 07:36:51

Superbowl? Everyone knows the market is nothing until “March Madness” ends. And then there’s the traditional Easter slump. And Memorial day is a dog. And who is out shopping from 4th of July through Labor Day. Then it’s back to school, so who wants to deal with that - and before you know it, the Christmas decorations are up at the mall …..

Comment by Professor Bear
2007-12-07 07:49:50

…the Christmas decorations are up gunshots are ringing out at the mall…

Comment by Chad
2007-12-07 11:32:06

“…the Christmas decorations are up gunshots are ringing out at the mall… ”

Isn’t it sad. My wife was about 200 feet away from it when it happened. She is fine. It has been a surreal experience. I can’t even imagine what it was like for the surviving victims.

Comment by patient renter
2007-12-07 11:11:28

You do know, this is the exact same “strategy” that everyone and their mom attempted to employ this spring. We all know how that worked out.

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Comment by hwy50ina49dodge
2007-12-07 06:04:25

Re: For Sale signs…drill two 1/2″ hole…attach a 3′ piece of rope…give to local kids to side down the hill in the park. ;-)

Comment by Matt_in_TX
2007-12-07 07:15:58

Local out-of-use neighborhood church in a small building near me was for sale for several years. Across the street was another such building. The one across the street was recently remodeled and is now in use with a new parking lot. The first tiny church building still languished. Then after a few months they put steel girders under it, picked it up and MOVED it out.

Still a for sale sign on the lot, but progress of a sort.

Comment by AnonyRuss
2007-12-07 07:53:24

Buy now or be snowed in forever.

Comment by Pondering the Mess
2007-12-07 10:11:01

Would you say the winter weather is part of the “Mortgage Freeze Plan?” Hehehe…

Comment by kahunabear
2007-12-07 05:40:14

Kahunabear’s 1st Annual Christmas List

Hopefully, you will be able to find all the items those hard to shop for HBB bloggers desire.

Comment by Professor Bear
2007-12-07 05:45:57


Comment by hwy50ina49dodge
2007-12-07 06:07:25

Good thing I haven’t made coffee yet! ;-) Way Cool!

Comment by de
2007-12-07 06:24:32

Made my morning - after I weped coffee off the screen. Great job!

Comment by P'cola Popper
2007-12-07 06:47:33


Comment by phillygal
2007-12-07 07:27:14

“6″ - too funny

Comment by Chip
2007-12-07 09:32:01

Great job - funny, funny.

Comment by cassiopeia
2007-12-07 10:41:56

kahunabear, I’m ROTFLMAO… that was way cool

Comment by kahunabear
2007-12-07 13:36:13

Thanks folks!

Comment by Professor Bear
2007-12-07 05:48:14

Bush’s subprime bailout
Published: December 6 2007 23:37 | Last updated: December 6 2007 23:37

George W. Bush should get some good headlines. The US president on Thursday rode into the subprime mortgage mess, trumpeting a series of measures to try to dull the pain for distressed borrowers. But will the plan really help? Is it even workable? Is it simply storing up a bunch of problems down the road?,dwp_uuid=e8477cc4-c820-11db-b0dc-000b5df10621.html

Comment by matt
2007-12-07 06:30:32

Hang on Subprime Sam! Optimus Bush will save you from the evil Deceptibanks!

Comment by NYCityBoy
2007-12-07 06:50:08

Funding and wardrobe for Optimus Bush has been provided courtesy of the Evil Deceptibanks.

Comment by Pondering the Mess
2007-12-07 10:13:23

Funny, but Optimus Prime would never go along with Bush’s plan. Megatron, however, would love it!

Need new names for Transformers in this game:

- Optimus Sub-prime: Thinks he’s a leader like the real Optimus, but he’s just… well… sub-prime

- Mega-loan: Optimus Sub-prime’s enemy, he likes loans that blow up after a while.

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Comment by txchick57
2007-12-07 06:57:54

Got my puts already. I know this garbage will probably rally more but I don’t want to be tethered to the 1 minute chart the rest of the month.

Comment by matt
2007-12-07 07:09:10

Odd that the Hang Seng hit 30k and rolled over.

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Comment by Chad
2007-12-07 11:36:44

And I thought you were taking the month off. . . :)

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Comment by dennisd
2007-12-07 06:59:54

I hope the voters punish the Republicans in the next elections. I know I will. Personally, I’ll probably vote Libertarian.

Comment by exeter
2007-12-07 07:47:53

ABAR=anybody but a republican

Comment by BP
2007-12-07 07:59:10

Hillary is fully behind the plan in addition she wants to take 5 billion on our tax dollars and give it directly to the FB in order they keep their homes.

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Comment by exeter
2007-12-07 08:02:39

And the neo-cons wanted to destroy SS…… but they didn’t. Not to say they won’t keep trying.

Comment by Blano
2007-12-07 08:10:04

As it stands, SS has already been destroyed, by both parties.

Comment by auger-inn
2007-12-07 08:15:46

While we are on the subject of gov’t plans. I found this interesting this morning.
Pardon the early morning tin foil.

Comment by exeter
2007-12-07 08:19:01

Feel free to forfeit your contributions my friend. I demand they make good on mine or I’m paid back in full.

Comment by packman
2007-12-07 11:17:58

While we are on the subject of gov’t plans. I found this interesting this morning.
Pardon the early morning tin foil.

All right - got to call BS on that one - or at least potential BS. An easy explanation for the i-beam being “cut” cleanly at an angle is that there’s a good chance that two i-beams were welded together at that point, at that angle, and the beam just gave away across the weld - the weakest point.

Not that I would entirely discount some kind of 9/11 conspiracy. That’s weak evidence at best though.

Comment by bluprint
2007-12-07 11:35:55

SS is a ponzi scheme, it’s well recognized that ponzi schemes are unsustainable.

Comment by josemanolo7
2007-12-08 01:52:56

read through the comments. there’s a link to explain the cut. basically, the cut was the result of the demolition, not the collapse.

Comment by Ernest
2007-12-07 09:33:46

ABAR=anybody but a republican

How about anybody but the status quo weather they be Rep or Dem? Doing the same thing over and over again…

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Comment by Ernest
2007-12-07 09:47:54


Comment by exeter
2007-12-07 09:52:06

I agree with the fundamental premise but I disagree that rep and dems don’t have viable candidates. Ron Paul would make monumental changes for the benefit of all for many years to come. Kucinich, Obama or Edwards are excellent candidates but who does the media focus on?? The bought and paid for used car salesman Romney and Rudy “I’m not a transvestite swinger” Guiliani and Hillary “I’m not bought and paid for” Clinton.

Comment by patient renter
2007-12-07 11:14:39

Yep. Ron Paul is ANYTHING but your typical republican. He’s more Jeffersonian :)

Comment by Ernest
2007-12-07 12:12:15

I never said they didn’t although they are very few. Most want to continue the behemoth in both parties. I agree wholeheartedly about Paul but he is a rare exception. I couldn’t disagree more about either Edwards or Obama. Hillary lite. Big government, big spenders just like GW and invasion friendly.

Comment by Professor Bear
2007-12-07 14:24:58


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Comment by Chad
2007-12-07 11:38:21

“I hope the voters punish the Republicans in the next elections. I know I will. Personally, I’ll probably vote Libertarian. ”

What’s the point of hating or bashing any party? They all suck.

Comment by lavi d
2007-12-07 12:22:07

I hope the voters punish the Republicans in the next elections. I know I will.

Remember, one party in congress and the other in the white house. It’s the only way to limit the mischief.

Of course, a libertarian president would certainly throw a sizeable wrench in the works for both the “major” parties. It’s just highly unlikely any time soon.

Comment by jsocal
2007-12-07 09:59:10

Poor Bush - there is no way for him to win.
He gets hammered if he doesn’t do enough to satisfy the sob sisters (a la Katrina) and hammered if he does too much (a la this bailout).
If he did nothing, today’s headlines would be reading, “Racist and elitist Bush administration doesn’t care about low income sub-prime borrowers.”
But as folks have said already, in reality this plan will not “do” anything to save the majority of FBs or the economy.
If we’re lucky, this “plan” will keep congress from getting involved and really mucking things up.

Comment by Salinasron
2007-12-07 11:01:56

Just maybe if Congress would have focused more on the business of the country then trying to appease the radical left by trying to push 50-60 bills through Congress to limit action in Iraq we could have gotten a handle on the fraud angle. OTOH, even people like Bob Brinker was putting down callers trying to explain the housing mess by saying they aren’t making anymore ocean front property when discussing FL and CA.

Comment by exeter
2007-12-07 11:13:53

Ron said a funny. lmao

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Comment by newAzResident
2007-12-07 12:42:44

After leaving Mississippi and seeing Bush’s handling of Katrina, just hope Socal, there is no earthquake while he is still in charge!

Comment by Army No. Va.
2007-12-07 11:51:02

I don’t want my rate frozen! I want them to raise my interest rate to 15% and lower my principal balance by $300K! I’ll pay on time, or even ahead of time! I swear! :-)

Comment by Desertdweller
2007-12-07 21:31:02

didja notice W gave out the WRONG phone #.. and that was with a teleprompter..
someone give him a pretzel. now.

Comment by Professor Bear
2007-12-07 05:49:26

The Not Paulson Bailout
December 6, 2007; Page A18

Comment by Chip
2007-12-07 09:44:16

Isn’t there a term for that, when a person or institution promotes an action and then when it has gotten what it wants, tries to absolve itself by saying, “Sorry, shouldn’t have done that, won’t do it again”? But the damage is already done.

I think it is something more sophisticated that “Lyin’, sleazy sumbitches,” but I can’t recall the term or phrase.

Comment by Professor Bear
2007-12-07 05:53:40

New Era Republican Values: Meddling with the economy is OK, provided it helps get a Republican to get elected.

December 6 2007: 10:42 AM EST

Paulson’s bailout may boost GOP’s prospects

Free-market Republicans may not like the fact that he’s meddling with the economy, but his efforts may serve them well come November ‘08, says Nina Easton.

Comment by NYCityBoy
2007-12-07 06:07:47

Free-market Republicans
Santa Claus
The Easter Bunny
The Tooth Fairy

Which of these are you most likely to actually see? It should probably read “Free to screw the market Republicans”.

Comment by Professor Bear
2007-12-07 06:20:37

A Good Viola Player?

Comment by Mikey(2)
2007-12-07 07:06:23

All these years we’ve been hearing the Repubs demonize the Dems for big government and disrupting with free markets, when all along their real issue was not ecxess government spending and free market disruption, but about WHAT the money was spent on and to WHOSE benefit. Shameful.

Comment by exeter
2007-12-07 07:34:19

So who are the beneficiaries of my tax dollars Mikey(2)?

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Comment by Mikey(2)
2007-12-07 08:05:47

So who are the beneficiaries of my tax dollars Mikey(2)?

Only The Shadow knows. I’ve no problem with people wanting government to promote their interests; it’s the lying about it that bugs me.

Comment by bill in Maryland
2007-12-07 09:03:21

Punishing the Republicans is fine and honorable.

Punishing the Republicans by voting for equivalent government meddling is not honorable and not a fix.

Punishing the Republicans by voting for Libertarians is sending a message of being AGAINST GOVERNMENT MEDDLING, PER SE.

It boggles my mind when people say they will vote for Socialist Hillary to punish Socialist Bush.

Comment by Chip
2007-12-07 09:48:04

Bill — I agree with all that. I hope this gives a huge boost to Libertarian Party candidates and libertarians who are, as a practical matter, members of the Rep/Dem parties, such as Ron Paul. Can’t wait to see what he writes about all this.

Comment by Gwynster
2007-12-07 09:51:02

Funny, I don’t know a single Dem who is for HC and I’m in northern CA.

Comment by Vermonter
2007-12-07 12:01:51

I’m in northern VT and I don’t know any either. Hillary’s main stronghold of popularity seems to be in the media.

Comment by gb
2007-12-07 12:36:14

I have this little fantasy - when Hillary gets elected or her poll numbers start looking bad against the republican candidate Bill Clinton will show up and say “Ok honey you’ve done good work, now run over there and try to fix that healthcare thingy again”. He will turn back to the reporters asking “any Questions for me? I’ll be handling Mrs. Clintons responsibilities for now on.”

Comment by sf jack
2007-12-07 12:37:47

Oh, there’s plenty of Hillary fans in this part of northern California.

Most of the Dems around here who are not proclaiming fondness for Hillary are just playing games. They had hoped a viable alternative would emerge, but when it comes right down to it - they will vote for HRC.

And this, among their cheerleading, perhaps is what the media recognizes.

Comment by ET-Chicago
2007-12-07 08:56:41

To pretend that the current incarnation of the GOP is in any way fiscally responsible is laughable. At best.

And not a single one of them believes in the so-called “free market,” not really. It’s been reduced to a talking point.

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Comment by exeter
2007-12-07 07:08:23

Where does the idea come from that republi-tards are capable and proficient in economic policy issues? Based on their performance, the only market they have cornered is hypocrisy, empty and evil ideologies like spending your way to prosperity and demonizing anybody and everybody who has brain enough to see and speak against their warped insane mantra of “we know what we’re doing, trust us”.

Comment by Blano
2007-12-07 07:56:18

Yet we’re supposed to trust the gubmint withthe national health care BS. Riiiiggghhhhtttt. Good luck with that.

Comment by exeter
2007-12-07 08:05:45

Blano…. I see you didn’t defend against my assertions. In fact you didn’t even deny them.

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Comment by NYCityBoy
2007-12-07 08:36:00

Why would anybody even try to discuss anything with a Partisan of such degree as you? It’s not worth wasting breath or bandwidth.

Comment by exeter
2007-12-07 08:48:36

Lighten up NYCboy. If the idea that I, and many others are fed up with the lying, theft and graft of those who want to separate me from my wallet makes me a partisan, then so be it. But feel free to accept said graft and theft for yourself…. just don’t include the rest of us.

Comment by NYCityBoy
2007-12-07 09:18:08

You’re telling me to lighten up, partisan? You are the one blowing the a$$ gasket and typing nonsense.

Comment by ET-Chicago
2007-12-07 09:32:01

Why would anybody even try to discuss anything with a Partisan of such degree as you?

I’d say Exeter provides some much-needed balance in these parts.

I don’t agree with everyone here, either, but lots of people who don’t align with me ideologically make interesting points or have perspectives I don’t normally hear in Bohemian Commie Pinko Fantasyland.

Comment by Ernest
2007-12-07 09:39:52

Let’s face it. We have a big pile of crap here and partisan politics is what keeps it going. Voting for frick or frack won’t change anything.

Comment by exeter
2007-12-07 09:47:54

First I’m a “partisan”. Now I “type nonsense”..

Some people are just never happy.

Comment by NYCityBoy
2007-12-07 09:48:21

“partisan politics is what keeps it going.”


Comment by NYCityBoy
2007-12-07 09:52:12

“First I’m a “partisan”. Now I “type nonsense”..”

Partisan rants are nonsense. The fact you think that blindly following any party will lead to a perfect world is the definition of nonsense. The fact that you can’t understand this is what makes you a partisan.

Comment by exeter
2007-12-07 10:11:01

What party am I following NYCityBoy? Show me where I’ve endorsed a single specific candidate? To suggest that my disgust with the supplyside corporatist agenda is a tacit endorsement of any party is simple minded at best.

Comment by Mikey(2)
2007-12-07 10:11:21

Partisan rants are nonsense.

Not true. It’s one thing to say a party sucks; it’s another to blindly follow another. The former, if supported by facts, which exter’s was, involves critical analysis. The latter, which I didn’t see coming from exeter, is indeed nonsensical, as what the party stands for is subject to change.

I agree with exeter on the Repugnicans.

Comment by NYCityBoy
2007-12-07 10:56:18

“What party am I following NYCityBoy?”

It looks like you’ve cleared your name, exeter. You are not a partisan like some others. Still, I think you’re smoking crack if you think Edwards is an “excellent candidate”.

Comment by exeter
2007-12-07 11:12:36

Allow me to correct you. I don’t smoke crack or use any drugs for that matter and I KNOW John Edwards is an excellent candidate.

Comment by NYCityBoy
2007-12-07 11:51:40

Excellent candidate for what?

Comment by NYCityBoy
2007-12-07 12:22:18

Sorry. I didn’t realize you had typed “KNOW” in capital letters. You must be right about that lawyer that seeks the leftmost position on all of the issues including the housing issue.

Comment by NYCityBoy
2007-12-07 12:49:07

Rescue Homeowners at Risk of Foreclosure: Many foreclosures can be avoided by timely help, such as renegotiating loan terms, finding a new lender, or catching up with past payments. Preventing foreclosures can also prevent vicious cycles that can bring down whole neighborhoods. Edwards proposed a national Home Rescue Fund to help prevent foreclosure. The Fund would work through local non-profits, government agencies, and community financial institutions. If necessary, the Federal Housing Administration, Fannie Mae, and Freddie Mac could work with community lenders to create affordable refinancing alternatives for these families.

This was taken directly from the John Edwards website. It pretty much hits on every point that HBBers are completely opposed to. What a great guy!

Comment by CA renter
2007-12-07 21:17:10

I’m with exeter! :)

Not partisan, but the right-wing wants to put even more money into the corporatists pockets. The left-wing pols claim to want money going into the pockets of J6P.

Personally, after all this bailout talk, there is really no option but Ron Paul…as much as I disagree with him about some very important points.

The govt needs to be turned upside-down. Maybe RP can rock the boat enough to get some serious changes pushed through (like letting the WORKERS actually keep the money they earn, rather than increasing profit margins which gets morphed into executive compensation).

Comment by uptown
2007-12-07 12:00:58

Most seniors already trust the government with their health care…it’s called Medicare. In 2006, payments by Medicare totaled $374 billion.

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Comment by NoVa Sideliner
2007-12-07 14:29:40

Most seniors have no choice BUT to trust Medicare. It’s not really optional — or perhaps I should notify my HR department to please stop taking out that tax from my wages?

Comment by Austrian School
2007-12-07 14:40:18

Do they have much choice? Sheesh.

I’ve butted heats with exeter before. He has something in common with many here in that he doesn’t like the way things are currently going with the Bush. The difference is that while most here are free market libertarian types and he’s a democrat. He sees a powerful government as an agent that can be used for protection of the people from evil corporations. Libertarians see the powerful governement as the problem as it is always corrupted by specific business interests. Without its power, it wouldn’t be the target of corruption.

Comment by Desertdweller
2007-12-07 21:46:48

Austrian.. you are incorrectly ‘assuming’ that exeter is dem. It is the republicans since Reaguns that have perpetuated the myth that they wanted “small gov” when all the while making more orgs and more jobs Within gov all along. Or is it all people who get into gov make more room for their friends? Anyway, I don’t believe dems want any more interference at all nor bigger gov. Just more accountable gov. How would that be, a gov that was accountable for the things that are already set up. Not MORE warfare/military, but all the things like education. Just Accountability and good business practice in all things necessary for our USA.
But so far since reaguns, Bush 1 and 2 etc and the republican congress/senate will we ever see accountability or honesty.
I way get them all out.

Comment by ET-Chicago
2007-12-07 09:10:17

I’ll have to look around for it, but I’ve seen a graph of 20th century US economic growth divided by presidential administration. Most of the significant “up” years occur under … Democrats.

Comment by ET-Chicago
2007-12-07 09:49:34

Well, not as exciting as I thought, but interesting. The research looks at “excess market return” using stock market gains and T-bills as the baseline. No GDP, per capita wealth, etc. is utilized. Still, for the curious:

NYT article on the findings

The academic paper cited (warning: PDF)

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Comment by Pondering the Mess
2007-12-07 10:19:05

Interesting point, although one could argue the difference between real growth and Bubbles. Clinton had a Bubble, Bush had a Bubble - we’re a Bubble economy now.

I think much of the arguing over Republican vs. Democrat really comes down to 2 things:

- Notions of what the parties represent that may no longer be true, or may never have been true.

- Personal (and perfectly justifiable) dislike of members of power in a given party that have corrupted the party on a local level and/or stolen the attention of the party on a national level. Not all Democrats are like Clinton, not all Republicans are like Bush, but they get all the attention and anger.

Comment by rentor
2007-12-07 12:46:33

The FB’s are primarily the low income earners. Who were given homes they couldn’t afford thanks to GWB promising to increase home ownership. This at a time of unbridalled offshoring and outsourcing. Citizens incomes have suffered. These people could have voted Kerry in.

I expect record low turn out favoring Dems since GWizz has done a number on conservatives.

Comment by Professor Bear
2007-12-07 05:56:01

The subprime suckers who paid on time
Posted by: Peter Coy on December 06

Comment by Professor Bear
2007-12-07 06:03:27

Peter Schiff, a perma-bear who rails against America’s overspending ways, thinks that some of the people who were bailed out are going to end up defaulting when the rate freeze ends in five years anyway, and knowing that they won’t take care of their properties. He calls it “the mother of all bad ideas.”

Who is Schiff to suggest underwater owners can’t be bailed out again in another five years, something like the way FEMA used to run the flood insurance program in the Mississippi flood plain (every ten years or so, there was a “100-year flood” which entitled the inundated homeowner to a newly-constructed home in the flood plain)?

Comment by nhz
2007-12-07 06:12:15

yes Professor Bear, I agree that this looks like just the first inning of the biggest bailout ever. Even the Dutch newspapers describe it as kind-of-a-bailout (with local governments putting up special bonds to support the plan, ultimately the taxpayer is going to pay for this I assume). I do agree that maybe it won’t help and just postpone the inevitable. But with more initiatives like this in the pipeline I’m sure politicians will be able to shift most of the burden to savers and foreigners. Let’s hope that if foreigners and investors get burned by this plan they put up a fight that stops more initiatives in this direction, but I don’t think that is very likely. Most of these investors are probably state/pension funds who only play with OPM, and will be more than happy to buy even more of this toxic crap if it gets approved by Paulson and his Wall Street cronies.

Comment by Ben Jones
2007-12-07 06:19:46

‘yes Professor Bear, I agree that this looks like just the first inning of the biggest bailout ever.’

Possibly you guys can’t read. There is hardly a single positive piece on this plan in the media today. Sorry for your masochistic fantasy, but it isn’t going to happen, IMO. Actually, the fallout looks to be just the opposite.

“I am reading and hearing about home foreclosures and how we need to have the government involved. Why? They were adults who bought these homes, signing a contract which was their responsibility to read and understand. Now, our government is taking time and tax money to “fix” this problem while people today are having a hard time even getting a home loan? Will the government next help those with less-than-perfect credit get a loan? I think the mortgage companies and the borrowers were both greedy in getting these loans; if they lose the homes, well, that is the risk they took.” LAURIE FLEMING Ceres

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Comment by Professor Bear
2007-12-07 06:24:06

Ben — Are you working through the anger stage of the HB stages of grief?

Comment by Ben Jones
2007-12-07 06:26:28

As I said on another thread, I am very excited this AM because this plan has aroused exactly the opposite reaction that the bail-out crowd wanted. Again sorry for the loss of your fantasy.

‘President Bush acknowledges it’s ‘no perfect solution.’ Treasury Secretary Henry Paulson says it’s ‘no silver bullet.’

‘The plan negotiated by the Bush administration to freeze the low introductory rates on subprime home loans appears likely to help only a fraction of the homeowners who face huge jumps in their mortgage payments.’

‘Homeowners dialing up their mortgage companies to get their current rates frozen could be disappointed. The White House plan doesn’t force mortgage companies to give eligible homeowners a break. It is voluntary.’

Comment by Professor Bear
2007-12-07 06:29:57

I am perfectly happy to see “my fantasy” go straight down the drain.

Comment by Groundhogday
2007-12-07 06:29:59

The stories are not just negative, but largely dismissive. Everyone can see this Bush plan for what it is: all hat and no cattle. We will look back year from now at the foreclosure charts and probably not even see an inflection in the exponential growth curve.

Comment by Professor Bear
2007-12-07 06:36:44

“…all hat and no cattle.”

Money talks, BS walks.

Comment by Blano
2007-12-07 06:37:34

Perhaps we’ll see class action lawsuits against participating lenders by borrowers who either aren’t eligible, or who are able to pay their higher rate loans timely.

Comment by hwy50ina49dodge
2007-12-07 06:39:08

“It is voluntary”… like our Military…how many American Son’s & Daughters of the Executive Branch & Senators are wearing fatigue’s?

Comment by palmetto
2007-12-07 06:40:52

True, Groundhog. Even as this plan, er, uh, fantasy was being announced, foreclosures hit a new high. Last night the news was full of hyperventilation over the plan along with the reports of the level of foreclosures.

Comment by Professor Bear
2007-12-07 06:48:45

Apparently not everyone is against the plan. Some commentators have even gone so far as to suggest it is not a bailout.

Jim Cramer’s Stop Trading! 12/6/07: Save Fannie and Freddie
posted on: December 07, 2007

Comment by de
2007-12-07 07:01:31

Does Cramer have any creds at this stage of the game?

Comment by Professor Bear
2007-12-07 07:02:08

Here is a money quote if ever there was one:

Cramer commented, “I’m tired of hearing that this is a bailout. Who cares? I’m about the money.”

Comment by NYCityBoy
2007-12-07 07:20:30

All I want for Christmas is Jim Cramer’s two front teeth.

Comment by Mikey(2)
2007-12-07 07:24:43

Cramer commented, “I’m tired of hearing that this is a bailout. Who cares? I’m about the money.”

This is exactly what the plan is about: taking care of the gamblers, er, investors who made bad bets, er, investments. Who cares that the plan flies in the face of hundreds of years of contract law? To hell with the law if it deprives me of making a buck!

Comment by Hoz
2007-12-07 07:45:53

“…Indeed, there were rumblings of rebellion among some institutional investors. “Why would anybody in his right financial mind agree to a five-year price freeze, especially when we’re staring in the face of possible inflation?” asked Roger W. Kirby, managing partner at Kirby McInerney, which has represented investors in class-action lawsuits over securities. “Mr. Paulson has overestimated the generosity of people on Wall Street.”…


Comment by ex-nnvmtgbrkr
2007-12-07 08:01:22

Pro Bear, you’re taking this devils advocate thing to the extreme. Try Valium

“Concerning Fannie Mae and Freddie Mac, Cramer said, “They’re totally insolvent! Give me a break. They’re completely and utterly insolvent. Its just we’re not allowed to say it. … The only reason I mention those two … is that those two are less likely to go after me.” He identified fear of liability as the reason more people are not telling the whole truth about the mortgage problem. “It’s like when Enron filed a lawsuit against me. … It’s a good thing they went out of business.” ability to recover.

He called that right. What he’s wrong about is their


Comment by BP
2007-12-07 08:16:14


With all due respect I do think this plan will work. Let me explain why. The type of people who took these loans do not care about 2 years from now they only know today they get to live in a McMansion for pennies on the dollar (teaser rate payments). So what if the house is going down in value they still get to live in the “good areas”. They are living for today and 5 years from now is so beyond their thinking it might as well be 100 years from now. Many of these payments are lower than they could rent a good apartment. Ask yourself why would they still walk away from their homes? They will have to pay rent anyway, right? This plan is disgusting but I think it will keep people in their homes and take many off the market within the next year or two.

Comment by Professor Bear
2007-12-07 08:26:14

“What he’s wrong about is their…”

What happened to that post?

Try Prozac.

Comment by Carlsbad Renter
2007-12-07 09:24:12

What I find interesting about the bail-out is that it stops interest rates on subprime climbing, correct? What many don’t think about is that in the last two years people had negative amoritization loans where the loan rate my have been 5%, but they weren’t even paying that (you know, 1.9% + 4% tacked onto the principal of the loan). Therefore, even if people were force to pay the principal plus the 5%, they would have been buried. This bailout is not going to help at all. I sure as hell can’t afford a $350k 2 bedroom 2 bath condo (and I’m an engineer!!!). Next year is going to be a good year.

Comment by Professor Bear
2007-12-07 06:22:43

“shift most of the burden to savers and foreigners”

No offense, NHZ, but I am hoping for more foreigner and less saver ;-) (Of course, savers who are not hedged by now are asking for trouble…)

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Comment by nhz
2007-12-07 07:17:50

I hope Ben is right and that this whole initiative is nothing more than a futile, on-time attempt to prevent the inevitable. As mentioned before, I think the reaction to this plan (both national and international) is important for what happens next. Apparently it is seen as some kind of taxpayer bailout in Europe (but the papers could be wrong of course, maybe it is EU investors/pensioners and not US taxpayers that get stiffed).

Still, I am not confident that this is the last proposal we will see in trying to stop the tide. We might see a sliding scale with more public money at risk in future proposals (either by government guarantees or more plain money printing). At least this first proposal managed to plow billions of stock exchange money back to the RE crowd on Wall Street yesterday.

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Comment by Professor Bear
2007-12-07 07:37:06

My 2008 predictions:

1) Housing price deflation in the U.S. will continue unabated as the bailout-induced tempest-in-the-teapot blows over.

2) NHZ’s country will soon experience the uncontained spillover of the U.S. subprime debacle in the form of falling residential real estate prices.

Comment by txchick57
2007-12-07 07:47:26

I’ll reprise my prediction made a week or so ago:

Newspaper headline dated 12/7/08

“Bailout Begain With Great Fanfare and Hopes, Ended in Disappointment and Failure”

Comment by sweeny texas
2007-12-07 09:16:43

Ben, I hope you’re right about the future prospect of federal bailouts. But I agree with nhz.

If the government let’s this thing play out like they should, several large banks and brokerage firms will go bankrupt. Dozens of multi-national corporations will lose millions of un-insured deposits.

I just can’t see them letting that happen without pushing the mother of all bailouts up the heiny of my workin’-man brethren.

Comment by shakes
2007-12-07 11:36:16

I personally see this bailout plan about pure panic in the government. They are trying to stem the tide of foreclosures in order to prevent the economy coming down with it. If they can slow down the rate at which this meltdown can occur it will give them the soft landing they desire. Lower interest rates will ease on the other end as well. I have noticed that 15 and 30 year FIXED mortgage rates have dropped to the same they were back in 04. If the governments bailout wont work for you since you make too much money, then they will lower rates low enough that those people will be able to get alternative loans via traditional means. YES I know that that means they will have to come up with cash they do not have but a small percentage will be able to get a new fixed product. Every little bit counts. The Fed has already tipped its hand by lowering interest rates to save the economy. The question still remains? Will this increase in liquidity be enough to slow the rate to where we avoid an overall economic meltdown? If so, it will cause unintended asset inflation in other speculative markets. What markets will those be? or if it fails to stem the tide enough to matter then how does one protect their savings in order prevent being taken down with everyone else. So far I am in Hedge funds that short the RE market, REIT’s, Shorting the US Dollar. What other investment vehicle can one use to protect against the 2 possible outcomes. Oh yea I am am in oil, gold and gold mining companies as well. Can one short the consumer?

Comment by combotechie
2007-12-07 13:52:16

“YES I know that means they will have to come up with cash that they don’t have …”

You’d be amazed at how people without means can somehow come up with cash when the proper incentives are applied.

Comment by hwy50ina49dodge
2007-12-07 06:18:37

“…some of the people who were bailed out are going to end up defaulting when the rate freeze ends in five years anyway..”

Where’s the incentive?…keep paying 61% of their take home pay to live in a house that is falling in value…or…get the heck outta Dodge & become a renter in Peroria. ;-)

Comment by Mikey(2)
2007-12-07 07:19:23

Exactly hwy - Everybody’s looking at the interest rates, but I would bet that most of these people were stretched beyond their means at the original interest rate. And how many of them do you think are prepared for maintenance costs, property tax increases, job losses, and other unexpected costs?

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Comment by Pondering the Mess
2007-12-07 10:24:24

Well, none of that matters since “real estate always goes up!” and “everyone wants to live here” and finally “Prices no longer matter.”

Oh, wait… that’s all BS created by the REALTORS! Oops!

Comment by Desertdweller
2007-12-07 22:01:32

all kinds of people don’t have extra $ now. all kinds of hardworking folks are not making what the gov says US citzns are making. Job improvement..? where. Lucky for the engineers. Note to self..get engineering deg.

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Comment by AKron
2007-12-07 12:17:47

I think this ‘plan’ is going to fail, and fail quickly. The ‘mortgage renegotiations’ are just what the lenders/servicers feel they have to do anyway (in a small percentage of cases) to maximize cash flow, and their service agreements (with bondholders/conduits) are sufficiently ‘fuzzy’ to let them do it. The gov’t role is just to take credit. The other idea, that local governments should sell bonds to refi houses, is just a turkey. For one thing, states already have their own housing authorities (in Alaska, the Alaska Housing Finance Corp.) that are already issuing bonds and doing starter home/affordable housing etc cr@p. Many of these quasi-government lenders are probably about to go insolvent along with Freddie and Fannie. If they are not issuing extra bonds to bail out the FB now, they won’t start just because Paulson told them that it was a good idea.
Finally, the only real (temporary) solution is to convince foreign investors to keep piling up the greenbacks and loaning money to the U.S. so the credit binge can continue. That is the whole game right now. Pushing more gov’t borrowing and trumpeting rate freezes is not going to soothe the anxieties of foreign central banks and investors (not to mention U.S. pension funds, etc.).

Comment by NotInMontana
2007-12-07 06:38:34

I am SO confused - I could have sworn the earlier reports said FBs had to be current on payments - ?

Comment by de
2007-12-07 07:03:24

Too many of them went into forclosure in the past 24 hours.
They had to cut some slack :-)

Comment by hd74man
2007-12-07 08:01:25

RE: I could have sworn the earlier reports said FBs had to be current on payments - ?

Also must have to have 3% equity position in your home.

Fat chance with 0% down and a 12% value decline since purchase in most markets.

Comment by Lurkeeloo
2007-12-07 08:33:02

3% equity? That’s a cinch. In fact, if they can find an appraiser (shouldn’t be hard) who could say they have 15% equity, could we let them take a HELOC at the same fixed rate while they are at it? After all, they are strapped for cash and it would really help…

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Comment by Lisa
2007-12-07 09:36:17

“Also must have to have 3% equity position in your home. Fat chance with 0% down and a 12% value decline since purchase in most markets.”

This morning’s San Francisco Chronicle ran a front-page, negative story on the bailout plan. But no mention of the fact that you can’t be underwater on your mortgage. I guess they didn’t want to scare the “Alt A Bay Area” into wrapping their heads around that possibility.

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Comment by Chip
2007-12-07 09:56:57

Lisa - I was surprised to read Kathleen Pender’s very negative review of the plan in yesterday’s SF Chronicle (online) and even more surprised that the online vote being taken showed 90% against the plan — such a reaction in the center of bleeding-heart city says a lot, IMO.

Comment by Not_In_Montana
2007-12-07 10:20:12

“This morning’s San Francisco Chronicle ran a front-page, negative story on the bailout plan. ”

Oh they probably want more, more, more…it’ll never be enough anyway.

Comment by Chip
2007-12-07 15:39:27

NIM - actually, the vote was 90% flat-out against and only 4-5% in favor and 4-5% wanting more.

Comment by azrenter
2007-12-07 18:24:02

most of them had 80% on the first and 20% on the 2nd, before the value dropped out. now they are under water for the 1st and 2nd.

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Comment by Justin
2007-12-07 07:32:10

I’m probably the only person in America who actually likes this plan. It basically allows the banks to freeze the rates of people who’s homes they don’t want to go into foreclosure. Which will hopefully cause a more orderly downturn in the market.

I want prices to fall, I just don’t want housing to take the economy with it. And this seems like it might ease that a little bit. And if it doesn’t, well then we’re right back where we started.

Comment by Groundhogday
2007-12-07 07:43:22

Actually, I more or less agree with your general objectives. I just don’t see how this plan will actually accomplish anything.

1) Folks underwater will largely walk away.
2) We won’t see many mortgages reworked until comps fall far enough to make investors realize keeping a borrower in the house at a discounted rate is better than a foreclosure.
3) Unfortunately, as prices fall more and more borrowers will be underwater and chose to walk away.

The will only end when we hit rent-equivalent home prices (and probably overshoot). When the monthly nugget is less than equivalent rent, the FB’s will choose to stay in their homes.

Comment by Professor Bear
2007-12-07 07:52:15

You are in good company, as Cramer likes it, too :-)

Comment by Justin
2007-12-07 09:41:59

Heh. Cramer is entertaining. And for that reason I like him. It’s also why I like Paris Hilton and Britney Spears.

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Comment by ACH
2007-12-07 10:14:36

I just don’t understand all of this. The SIVs, CDO’s, etc. are still being artificially supported. They still don’t know the actual worth. It will NOT help housing sales at all since there are actual loan requirements and there is still a glut. So, this appears to be complete BS.

I like Cramer, too. I just don’t want to see his “boys” as he exits an SUV going to a nightclub. For that matter, I really didn’t need to see Brits and Paris’ gurly bits either.


Comment by simplesimon
2007-12-07 08:00:18

what like the runup in housing and mortgage financing was orderly. 300% gains is normal, orderly and efficient in a span of 3-4 years? Is there gold or better yet oil buried below this homes? no-normal and orderly comes after it corrects.

Comment by nhz
2007-12-07 08:54:37

yes, hard to imagine that there can be an orderly unwinding of this historic bubble; even more so in Europe with 500-1200% gains in 10-15 years time. But we don’t know for sure where the disorderly stuff will hit. The major damage might as well occur outside the housing/financial markets if Wall Street and the central banks remain in control.

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Comment by Desertdweller
2007-12-07 22:10:13

Morocco, Spain, France, Italy, you name it and the shows all showed developments in these countries, like Morocco, going through the roof pricewise by the minute.

Comment by edgewaterjohn
2007-12-07 08:08:37

A kinder, gentler real estate crash?

Funny UCLA echoes that sentiment - they seem to think people will lose their houses but not their jobs.

Goldilocks all the way down.

Comment by Professor Bear
2007-12-07 05:57:53

News Analysis
On Mortgage Relief, Who Gains the Most?
Published: December 7, 2007

WASHINGTON, Dec. 6 — At least one thing is clear about President Bush’s plan to help people trapped by the mortgage meltdown: it is an industry-led plan, not a government bailout.

Comment by Groundhogday
2007-12-07 06:21:32

“One of the financial industry’s lead negotiators estimated that at most 20 percent of subprime borrowers whose payments will increase sharply over the next 18 months — 360,000 out of 1.8 million people — would qualify for rapid consideration of a special five-year freeze on interest rates.

The number of people who actually obtain help would be smaller, because each borrower would face tests aimed at weeding out those considered too hopelessly in debt and those who make too much money to justify relief.”

Summarizing all of the reported analyses published this morning, 150k might be eligible. Of those, perhaps only 100k will actually chose to accept the plan and continue paying…

Have to agree with Ben on this, it is the biggest non-story of the year.

Comment by Professor Bear
2007-12-07 06:42:46

It’s kind of funny to generate such a strong backlash over a plan that will help less than 10% of the 2m FBs in line for resets…

Comment by palmetto
2007-12-07 07:11:57

It generates a backlash just because of the concepts embodied in the plan. If you make too much money, and have the ability to sustain the increases (in the eyes of the lender) you’re screwed. If you are too mired in debt already, you’re still screwed. But if you are marginal and might be able to sustain the initial rate, you’ve got a chance.
Very weird. But even weirder is the term of the grace period. Five years. Which would indicate to me that this is the amount of time the lending industry thinks it will take for “the market to come back” to where the FB can sell the home for what is owed to the lender.

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Comment by Professor Bear
2007-12-07 07:25:40

How could a policy whose likely immediate effect is to dry up whatever sources of loanable funds remain intact post-credit-crunch possibly result in “the market coming back?”

The only way this makes sense to me is if a subsequent policy is soon to be announced for the govt to step up to the plate as mortgage lender of last resort, complete with taxpayer-provided loan guarantees up to $1m, or whatever figure is pulled out of the air at the next gathering of high muckety-mucks.

Comment by jim A
2007-12-07 07:28:48

Well triage is the first step of any plan to deal with the rising tide of foreclosures. Them that need no help and them that are beyond help won’t be part of any plan. The real question is, can we find enough people in the middle to have a significant affect upon a foreclosure-driven RE market? The thing is, the definition of a “comparable” is that the sale involves an arms length transaction by a typically motivated seller and a typically motivated buyer. As foreclosures peak and short sales peak, those sales become “typical.” IMHO. If only the desprate are selling, all sales will be as desperation prices.

Comment by jim A
2007-12-07 07:35:52

PB, I see three possibilities:
1.) The plan is to give them enough time to come up with an actual government bailout plan as you describe.
2.) The plan is to imply the above so that the markets stabilize while all the talking is going on.
3.) The Idiots are simply a cargo cult hoping that if they hold off collapse a little while, the appreciation fairy will return and grace the economy with all tha free money.

I’m betting on three, personally. Of course it is probably true that when THE PLAN fails to bring the foreclosure rate down to 2003 levels, the PTB WILL work on a bigger bailout.

Comment by Brian in Chicago
2007-12-07 08:03:41

Very weird. But even weirder is the term of the grace period. Five years. Which would indicate to me that this is the amount of time the lending industry thinks it will take for “the market to come back” to where the FB can sell the home for what is owed to the lender.

5 years is also perfect timing if you think the next president will be a one-term Democrat.

Comment by Mikey(2)
2007-12-07 08:11:45

Very weird. But even weirder is the term of the grace period. Five years. Which would indicate to me that this is the amount of time the lending industry thinks it will take for “the market to come back” to where the FB can sell the home for what is owed to the lender.

I think it’s a bet that theFB’s wages will rise enough over 5 years to make the payments affordable. It’s consistent with that old school “Buy as much house as you can afford” mentality, because your income will always go up.

Does income always go up?

Comment by Pondering the Mess
2007-12-07 10:31:20

I agree with the notion that this is a just a trial balloon for the Super Bailout. Some ideas:

- Super Bail Out Plan: Government becoming the main lender to all. Huge houses for everyone, absurdly large loans, etc. Of coures, the system will somehow work out that the people with the worst credit and who are least likely to pay the loan will get the most help. Savers and those who make more than the median income will probably be barred from assistance; that way, we can rent out crummy apartments while our tax dollars help bums buy McMansions and rims for their Hummers.

- They are just trying to pass the buck to the next President or beyond. 5 years is a very convenient amount of time, don’t you think?

- Wages will not rise. Trust me, that’s the LAST thing the banks, debt-pushers, and other crooks want - people being able to afford to buy things instead of basically renting them forever from the bank.

Comment by Ben Jones
2007-12-07 10:44:37

‘a trial balloon for the Super Bailout.’

IMO that’s more paranoid fantasy. I have asked this on the radio and elsewhere everytime this comes up since 2005: this country borrows $3 billion per day. Where the heck is the money going to come from? And don’t say that the Fed will just print it. First, it’s illegal. Second, the central banks have said consistently and in unison for years that they need to drain the liquidity swamp. They have already printed too much and they know it.

One other thing to consider for the inflationists out there; the US dollar, weak as it is, is the Fed’s single source of power. Considerable power. If they were to let the currency crash, it stands to reason they would lose this power (see Mexico). With massive entitlements ahead, I think they will ultimately fail, but they can keep their power for a decade or more, and I can’t see them giving it up to save some hedge fund a few bucks or condo flippers in Miami. A market this large can’t be bailed out, IMO.

Comment by Professor Bear
2007-12-07 14:09:15

“They have already printed too much and they know it.”

Ben — Glad you have faith in the Fed’s judgment on this.

Comment by gb
2007-12-07 14:54:04

IMO Paulson and Bernanke have hacked Ben Jones’ login. Ben Jones has been tied up and locked in a closet.

Comment by Professor Bear
2007-12-07 16:06:23

“Ben Jones has been tied up and locked in a closet.”

Scary thought.

Comment by Northeastener
2007-12-07 07:53:59

It’s kind of funny to generate such a strong backlash over a plan that will help less than 10% of the 2m FBs in line for resets…

It sets a horrible precedent for the future. Instead of letting the market correct naturally, the government is pushing private industry into bailouts for speculators and marginal borrowers. It is the true definition of Moral Hazard.

All here understand that these “marginal borrowers” distorted the market by creating greater demand than would have occured in a “normal” housing market. This demand priced out many fiscally responsible buyers from the market. That these subpar borrowers should receive special treatment from the industry and government and benefit from their financial imprudence is repugnant. It is a slap in the face for all who are fiscally responsible…

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Comment by Chip
2007-12-07 10:04:08

“It’s kind of funny to generate such a strong backlash over a plan that will help less than 10% of the 2m FBs in line for resets…”

It’s because of the PRINCIPLE involved. Welching on a contract. Even small children understand the nature of a contract (agreement) and get truly pissed when the other party reneges.

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Comment by AKron
2007-12-07 14:08:25

I also think the backlash illustrates another fact that both parties seem to forget: generally, people are for assistant to the poorer among us… as long as they do not end up materially above people who are working harder/making more money. Nothing boils the blood of someone in the working class more than seeing a non-worker (for instance) in a nicer place then they have, eating better food.

Comment by CA renter
2007-12-08 00:04:38

Good point, AKron.

Comment by zeropointzero
2007-12-07 07:46:32

How are they going to perform the necessary triage, MBS-holder research/consent, qualification/confirmation and paperwork modification on all of these folks? And, all this work ain’t “free” for the mortgage companies.

Comment by are they crazy
2007-12-07 09:05:17

Exactly - the devil is in the details. They claim that the plan is needed because the mortgage companies don’t have time/resources to go through all the resets on a case by case basis. So, how are they going to work this one?

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Comment by david cee
2007-12-07 09:09:41

There are many aspects of Secretary Paulson’s proposal that critics can find fault with. The one that troubles me the most and reeks of a “lender” rather than “homeowner” bailout, is the proposal to have state and local governments issue tax free municipal bonds in order to assist in the refinancing of problem mortgages.

First of all, that shifts the responsibility of dealing with those loans to the tax payers and away from the lenders who initially created the loan. In addition, since most bonds are 30-year obligations, this shift is not only for the present taxpayers, but for their children and their children’s children. It is simply wrong to shift the burden from private corporations, namely banks, to taxpayers.

Comment by az_owner
2007-12-07 10:05:11

The one that troubles me the most and reeks of a “lender” rather than “homeowner” bailout, is the proposal to have state and local governments issue tax free municipal bonds in order to assist in the refinancing of problem mortgages.


I’m game, if they pay 12% tax free, and are backed by the Fed gov.

Comment by Pondering the Mess
2007-12-07 10:33:58

Nah, don’t worry - the “Debtor Bonds” will be rolled into our pensions plans.

There will be much “surprise” when the sub-slime borrowers default. I am sure that “nobody could have predicted it.”

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Comment by CA renter
2007-12-08 00:08:25

I’m just as worried (if not moreso) about the FHA expansion.

Are the taxpayers insuring these mortgages? I’ll put this on record now: the FBs will default. Either the taxpayers will be liable for the losses or the banks will take the hit.

I’m voting that the banks who got us into this mess take the losses, thank you very much!

Comment by Incredulous
2007-12-07 14:41:50

Paulson says this isn’t the silver bullet? Wasn’t he saying just two days ago that HE was the silver bullet?

Many of the comments above echo what I posted yesterday, and got blasted for. The plan is a fraud designed to keep fake housing values on the books so that the lenders don’t have to admit to their losses (and give up their bonuses), cities can continue taxing “homeowners” at inflated values, and citizens can continue believing that everything is fine and dandy. I have no doubt that many of the criminals involved, including the Tan Man, have made deals with the Government to stay out of jail in return for their “cooperation.” Paulson’s enormous conflicts of interest alone should have set off alarms in every newspaper office in America.

The plan will not work, but it will buy time while another and another and another are hatched, all to no purpose other than protecting big businesses from crashing and local governments from going bankrupt. The idiots who concocted it freely admit one of their goals was to keep property “values” from falling–these being the same fake, hyperinflated, fantasyland property values that made everyone in America think he or she was suddenly rich and could live just like their favorite characters on television.

I still remember the 20 Something twit in Miami who found a condo she just HAD to have because she loved the hoked up kitchen so much. She said she DESERVED it, at Mommy and Daddy’s expense. I wonder if Mommy and Daddy have now thrown her off her overpriced balcony, or if she’s lining up for victim’s compensation.

Comment by kckid
2007-12-07 05:59:20

Global Warming Vote on Snowy Day in Washington

According to a November 11 Washington Times editorial, the bill would require companies to scale back emissions, costing Americans $4 trillion to $6 trillion over the next 40 years.

That would work out to $494 a year from every man, woman and child – more than 303 million Americans – a significant burden on the U.S. economy.

Inhofe, the ranking Republican on the EPW Committee, said he was optimistic the bill wouldn’t make it into law, despite overwhelming support from committee members.

“We’re in there, it’s going to be marked up and then passed out right on party lines,” Inhofe said. “The thing I think that will kill this will be the same thing that killed the McCain-Lieberman bill two years ago and that is this constitutes – or that bill constituted – a tax increase 10 times greater than the Clinton-Gore tax increase of 1993. Now this is far greater than that, and yet there’s really no guaranteed benefits from it.”

Comment by nhz
2007-12-07 06:06:14

funny isn’t it, that using LESS energy is supposed to cost trillions?
plain political nonsense IMHO.

I do believe it could cost trillions to companies like Halliburton and all their well-connected friends, but for the average consumer serious efforts to conserve energy will pay of handsomely (if the government does not try to meddle with it like they do now in Europe with CO2 certificates, energy certificates for homes etc.).

Comment by exeter
2007-12-07 07:12:28

It won’t cost us wage earners a penny. It might hit the corporatists pretty hard but they have all the cash anyways.

Comment by Flatlander
2007-12-07 07:30:13

Yeah right, corps won’t ever pass on the cost of compliance to the consumer . . . I’m sure they will just accept smaller profits, NOT. I smell inflation.

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Comment by exeter
2007-12-07 07:33:02

And “the consumer” won’t buy the overpriced stuff.

I kinda like free markets. Don’t you?

Comment by Ramennoodlesoup
2007-12-07 08:20:25

Yeah, I’ll be sure to stop buying cars, electricity, gasoline, etc.

Free markets = market - government.

Comment by exeter
2007-12-07 08:23:12

Nice work. Now name us one free market. Take as many guesses needed.

Comment by In Colorado
2007-12-07 08:23:38

People will continue to buy essentials. Maybe demand for flat screen TVs might fall off a cliff, but people still need bread, eggs and milk.

Comment by Brian in Chicago
2007-12-07 08:35:28

Corporations need to start thinking in terms of “everything we send up into the air is something we bought and then threw away”

The cheap and easy stuff will cut out 30% or more of your targeted reductions and will help pay for implementing the rest of it. The increased efficiency and/or selling of previously wasted materials will offset a huge portion of those costs, if not exceed them. Then you can’t forget about the corporate taxes of all the new businesses that will be working on this and the purchasing power/income taxes of the employees.

I’m sure that government regulations are the worst way to go about reducing pollution - what is really needed is for the polluters to realize on their own how beneficial it is.

I grew up in an area where our electricity was from coal-fired power plants. When I was in high school, the school district hired some consultants to come in and analyze their energy usage. $50,000 in fees later, the school system was saving $500,000 a year in energy costs with no noticeable difference in comfort levels. That translates to a direct reduction in carbon emissions from reduced electrical needs.

My sister used to be a chemical engineers for a very large chemical corporation. They spent a lot of effort trying to figure out how to turn every single waste product they produced into something useful that they could sell. After a few years, selling the “waste” products was more profitable than the core business.

Comment by nhz
2007-12-07 09:07:01

Brian in Chicago: good points, I think there are many opportunities in this area.

In my newspaper today there is a story about how the regional power company (a monopolist that is 50% owned by local government) is consulting on ‘energy efficient homes’. Many new homes in the area get a huge (expensive) heat pump system that runs on electricity; because of that ‘efficiency’ the government provides extra subsidies and some tax incentives. Normally homes would be heated with systems running on natural gas (and partly solar heat); quick calculations show that the heat pumps are using far MORE energy than the normal gas heating (electricity produced mostly with natural gas and some coal here). And to top it off, these homes have a contract where you have to buy your power from this same power company for the next 20 years - and they decide about the electricity cost! For the consumer it is a bit less uneconomic, because of different taxes on electricity and natural gas. Still, just the yearly cost for the heat pumps is already higher than the total energy cost for other more basic homes without any ‘energy efficient’ label. Another example of how government regulation (together with corporate greed) can make things worse instead of better.

Comment by ET-Chicago
2007-12-07 09:25:45

My sister used to be a chemical engineers for a very large chemical corporation. They spent a lot of effort trying to figure out how to turn every single waste product they produced into something useful that they could sell. After a few years, selling the “waste” products was more profitable than the core business.

Good anecdote. That’s the kind of innovative thinking (and financial result) that can spur increased efficiencies and greener methodologies in our country.

Comment by Flatlander
2007-12-07 09:38:04

People will continue to buy essentials . . . but people still need bread, eggs and milk

Thank you Captain Obvious!

Comment by Pondering the Mess
2007-12-07 10:37:47

I just appreciate the irony of discussing energy conservation after our nation has gone on one of the most wasteful sprees of energy in years. How much energy was wasted cutting down forests and paving over farms to build huge, energy-inefficient McMansions so people have a place to park their 8 MPG Hummer?

Nice… maybe we should have some sort of “energy waste fee” sent out to the McMansions owners as part of the “mortage freeze and global warming act of 2008″ or something?!

Comment by Skip
2007-12-07 10:53:55

When I was in high school, the school district hired some consultants to come in and analyze their energy usage. $50,000 in fees later, the school system was saving $500,000 a year in energy costs with no noticeable difference in comfort levels

Here in Texas we air condition empty schools every summer from June-August.

Comment by Asparagus
2007-12-07 07:39:48

The phrase “Global Warming” is something greens and scientists are trying to get away from.

“Climate change” is considered to be more accurate.

Warmer weather is too narrow to capture the effects.

Also, you can imagine from the title of the article, it probably irks the heck out of them. -Global Warming Vote on Snowy Day in Washington-

Comment by kckid
2007-12-07 09:06:03

This should be a cake walk for any eco-warriors that are up to the challange.

$125,000 will be awarded to the first person to prove, in a scientific manner, that humans are causing harmful global warming. The winning entry will specifically reject both of the following two hypotheses:
UGWC Hypothesis 1
Manmade emissions of greenhouse gases do not discernibly, significantly and predictably cause increases in global surface and tropospheric temperatures along with associated stratospheric cooling.

UGWC Hypothesis 2
The benefits equal or exceed the costs of any increases in global temperature caused by manmade greenhouse gas emissions between the present time and the year 2100, when all global social, economic and environmental effects are considered.

Comment by MrBubble
2007-12-07 12:54:00

Unfortunately, that’s not nearly enough money to produce original research that would prove something to people that aren’t willing to comprehend the data that are already out there.

Picture of Gore on the web page, which means that somebody has a political axe to grind. Once again, it’s not a political issue. It’s a scientific issue being bandied about by people who just try to poke holes. “What about fluctuations in solar insolation? How do you know that it’s anthropogenic?”

Um, do you know anything of the carbon cycle or stable or cosmogenic isotopes?. No? Then what’s the point in arguing with you?

Climate change is happening. Read the full IPCC report and learn something. These people are the Cramers and Kudlows of climate science.


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Comment by Chip
2007-12-07 10:07:29

Did our Dear Leaders condition this on China doing the same? If not, why not?

Comment by Groundhogday
2007-12-07 06:01:55

The CCN online link to the story below is titled: “Subprime plan offers limited relief” (and the http address has “bush_plan_limited” in the string)

The article itself is titled: “Bush subprime plan offers help to 1.2M”

The latter title contradicts the story content, which includes quotes from two analysts stating that only 145k to 240k homeborrowers will be eligible. Looks like a little heavy handed editorial involvement, huh?

Comment by Professor Bear
2007-12-07 06:05:46

You aren’t accusing the editors of deliberately lying, are you?

Comment by Groundhogday
2007-12-07 06:13:30

Someone needs to get there story straight, huh?

As the foreclosure crisis deepened it became apparent that many sensible modifications were being shot down because investors would not agree to them. An analysis by Moody’s earlier this autumn revealed only about 1 percent of resetting ARMs had been modified this year.

The administration had to use its powers of persuasion to get investors aboard at all,…”.

The crux of the problem is quite simple: housing prices are still too high. Investors look at assessed values and comps, and think their collateral is worth more than it really is. The sooner prices fall the sooner investors will agree to wholesale modifications.

Comment by Asparagus
2007-12-07 06:15:38

“…chief executive of the Neighborhood Assistance Corporation of America, …, “The number of borrowers affected by the plan is very small, but it sets the precedent and standard so that more borrowers can be helped down the road.”"

This plan is so arbitrary. People like this guy are dangerous. When lawsuits come, rather than fall apart, I’m afraid this plan will be expanded.

Comment by Rally Mitigation Team Member Bob
2007-12-07 06:28:58

“which includes quotes from two analysts stating that only 145k to 240k homeborrowers will be eligible.”

Meaning it likely will only help 25k of them, since all the others will be determined ineligible due to overstating income on their liar loans.

Comment by Professor Bear
2007-12-07 06:34:49

“…due to overstating income on their liar loans.”

You really think ‘they’ will check whether FBs have incomes? I doubt it…

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Comment by joeyinCalif
2007-12-07 06:49:30

the game has been exposed.. everything will be checked and doublechecked.

Comment by Professor Bear
2007-12-07 06:56:23

“…everything will be checked and doublechecked.”

If you are right about this, then perhaps a vanishingly small number of FBs will qualify for the teaser freezer, plus a massive amount of lending fraud could be exposed in the process of determining who qualifies! You are getting my hopes up…

Comment by joeyinCalif
2007-12-07 07:15:23

as others have suggested, it could amount to nothing but campaign lip service.. They’re not including caveats like “this is not a cure” by accident. There is no cure.

Comment by cami
2007-12-07 07:54:35

“If you are right about this, then perhaps a vanishingly small number of FBs will qualify for the teaser freezer, plus a massive amount of lending fraud could be exposed in the process of determining who qualifies! You are getting my hopes up…”

Okay but if you lied about your income what are the chances that you can actually afford the home? Also, if you lied and you know that they are verifying loan info, wouldn’t it make more sense to quietly exit (Stage Right)?

Comment by joeyinCalif
2007-12-07 08:11:10

ah yes.. someone forgot to include an amnesty provision in the plan.. But why throw 200,000 people in jail at tax payers expense when they are already imprisoned in their own homes..

Here’s a plan.. If any FB defaults give them a thorough background check, specifically their loan apps.. That will prevent more foreclosures than this rate-freeze will.

Comment by Rally Mitigation Team Member Bob
2007-12-07 10:51:53

“Okay but if you lied about your income what are the chances that you can actually afford the home?”

That was the point I was trying to make earlier, but I wasn’t clear enough. My bad.

Comment by matt
2007-12-07 06:37:14

This gives the mortgage industry a blank check. They are going to follow the rules? Hah!

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Comment by exeter
2007-12-07 07:18:24

The plan is VOLUNTARY. The smirking chimp even said so. You don’t expect the WallSt/Penn Ave CrimeSyndicate to actually help FB’s with their own money do you?

Comment by edgewaterjohn
2007-12-07 08:12:40


A tally needs to be kept on how many the Tan One works out. Fingers and toes ought to do - no need for a calc.

Comment by Chip
2007-12-07 10:10:29

“Fingers and toes ought to do”


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Comment by wmbz
Comment by Professor Bear
2007-12-07 06:11:28


Comment by NYCityBoy
2007-12-07 06:15:26

I just saw a bunch of the Wall Street boys lighting hundred dollar bills with Cuban cigars. They tell me “everything is just fine”.

Comment by hwy50ina49dodge
2007-12-07 06:26:05

The “Bunker Monkeys” live! ;-)

Cramas$: “They no nothing…NOTHING!”

Comment by Fred Fry
2007-12-07 06:07:26

My two cents on alternative ways to help ‘distressed’ borrowers:

Interest Only - Worse than Renting

Have a great weekend!

Comment by Professor Bear
2007-12-07 06:12:56

“Would you care for a falling knife with that McMansion you’re renting?”

Comment by Professor Bear
2007-12-07 06:19:12

I liked this passage.

P.S. I changed “windwalls” to “windfalls” in the original version, though upon reflection, “windwalls” don’t seem out of the question.

Imagine if the Government rushed and acted to limit rising house prices.

Just think of the outrage from the homeowners who were planning on large cash windfalls when they finally sold their homes into a rising market.

These are the same people who are in trouble now.

Comment by flatffplan
2007-12-07 06:46:48

“and what if stocks go up over 100 points”?
question for Ted Kennedy………remember

Comment by exeter
2007-12-07 07:15:40

That would be a HBB’ers dream date Stucco.

Comment by NYCityBoy
2007-12-07 06:12:49

Today’s phony number will be the jobs number at 8:30 a.m. This number is brought to you by The U.S. Government, creators of such fictional statistics as the CPI number and the GDP report.

Comment by hwy50ina49dodge
2007-12-07 06:31:13

Where oh where is art thou? Damn it!… I can’t function without the M3 & Sir Greenspent BOX INDEX! ;-O

Comment by NYCityBoy
2007-12-07 06:48:52

94,000 jobs created. Wages up .5%. Doesn’t that make it harder for the Fed to cut? The rate cut junkies might go through some withdrawal. We will see how today plays out. I would expect the market to give back some gains but nothing shocks me any more.

Comment by cactus
2007-12-07 07:03:21

Jobs are created and wages are up yet the FED wants to cut for the benifit of the banks and Wall Street. Helping out the FB is pure politics.

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Comment by de
2007-12-07 07:09:41

Yep, and S@P fut ures gained pre-market

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Comment by AnnScott
2007-12-07 08:56:51

94,000 jobs (or so says the BLS’s usually guess-method)

It takes 120,000 jobs a month for the economy to absorb the new entrants to the job market.

Wages up .5%

Minor problem - the actual rate of inflation (not that silly ‘core’ inflation) is up around .6%

Put it in context - context is everything.

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Comment by Gwynster
2007-12-07 14:58:36

Actually it’s worse then that. Accounting for inflation, wages have declined since 03′. It’s right there in the new release.

Comment by WT Economist
2007-12-07 06:57:42

The WSJ has a good C1 article on why it is hard to come up with an accurate jobs number when the economy turns. Expect a big annual revision next March 1.

Comment by aladinsane
2007-12-07 06:23:51

Methinks our country is even more unprepared for what’s about to hit it, than it was 66 years ago…

Comment by Devildog
2007-12-07 07:09:59

I hear ya. The, natives are now begining to notice something is up and are getting restless. It’s important to realize that being stuck in a stampede is remarkably similar to being stuck in a rip tide. The trick is to avoid going with the flow, but to get out of the flow path instead.

When it becomes useless to warn people to prepare for what’s coming because it has arrived, all you can do is take care of yourself and your family. Knowing what’s coming in advance is a great advantage to survival in all facets of life…

Comment by txchick57
Comment by hwy50ina49dodge
2007-12-07 07:00:49

“Keep money matters at arms length. Keep your close ones closer.”

Mom, why are we moving?…We can’t pay the *new* mortgage payment.

Comment by cactus
2007-12-07 07:17:14

“Repricing of the Planet,” Save the banks and kill the dollar full speed ahead.

Comment by Chip
2007-12-07 10:34:40

In the “Where’s Debt Being Stuffed?” post in the Most-read pane there, I like the graphic of the Liquidity pyramid. I hope this link will get to it:

Comment by Devildog
2007-12-07 06:27:20

Moodys has a pretty grim report out predicting a 30% decline in house prices (which is pretty close to what many here have speculated) and that there will be no improvement until 2010. I guess it’s getting old putting lipstick on that pig…

Comment by FairEconomist
2007-12-07 07:06:08

30% is only in the hyperbubble markets like Stockton and south Florida. Overall they’re predicting 13%. It’s a very optimistic forecast, since Stockton and south Florida are basically already there and even nationally we’re already down 5%. I suspect the estimate is based on what would be “fair value”, where expected appreciation balances the additional cost of owning. The problem is that as long as houses are headed down, there’s no expected appreciation, so usually crashes proceed to cash flow balance, another 20-30% off.

Comment by Devildog
2007-12-07 07:14:08

On closer review you’re right I misread originally. Still, they are starting to admit there will be no turn around for at least several years. And while a 15% national price decline is significantly off, it wasn’t that long ago that “experts” scoffed at the idea that realestate could go down.

Comment by NYCityBoy
2007-12-07 07:18:39

What is so laughable is that there are already a ton of areas that are down 25% or more from the peak.

Comment by Frank Giovinazzi
2007-12-07 08:08:32

More to the point, asking prices have been reduced 10 to 25% — and are still not selling.

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Comment by Blano
2007-12-07 08:15:48

Exactly……and some of those areas were non-bubble ones.

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Comment by CA renter
2007-12-08 00:56:45

Prices in our old neighborhood are already down about 35%. Still have to drop by another 20% to be affordable for the people who traditionally buy there, IMO.

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Comment by Chip
2007-12-07 10:43:37

Prices are down 30% in Florida and there is more reduction to come. Where people are misled is that the MSM habitually reports prices asking prices as if they are closed-and-sold prices. Even in the blog, we often read posts where someone says “homes are selling for” and they are referring to selling prices. The correct phrase is “homeowners are wishing for.”

Totally IMO, it is more useful to use a point in time as a reference for where prices will be by the end of the bust — whether you choose 2003 or 2001 or 1998 or other, that, I believe, is the best common ground for such predictions. It smooths out the vagaries of the run-up among different areas of the country.

Comment by Chip
2007-12-07 15:42:10

Botched that writing. Should be:

Where people are misled is that the MSM habitually reports asking prices as if they are closed-and-sold prices. Even in the blog, we often read posts where someone says “homes are selling for” and they are referring to >asking

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Comment by Pondering the Mess
2007-12-07 10:41:48

Let me guess - they expect wage inflation to make up the difference between incomes and housing prices, even after 30% off.

Too bad that’s not going to happen!

Comment by txchick57
2007-12-07 06:28:58

Smith and Wesson down 22% this morning. Now there’s a FB play we can all get behind!


Comment by Professor Bear
2007-12-07 06:32:41

Stay away from shopping malls this holiday season and you won’t have to worry about Smith and Wessons…

Comment by Ernest
2007-12-07 10:01:58

“Stay away from shopping malls this holiday season ”

And buses.

Comment by kckid
2007-12-07 06:37:08

The Joe Horn effect?

Comment by Chip
2007-12-07 10:45:07

Crap. I hope it’s not because people think the Supremes will screw with our 2nd Amendment rights.

Comment by jinwnc
2007-12-07 06:30:32

Up 94,000

Comment by Professor Bear
2007-12-07 07:05:35

Sounds like the FOMC may need to vote for a “surprise” FFR hike to stem growing inflationary pressures in the economy?

Comment by edgewaterjohn
2007-12-07 08:17:36

With that many I expect better service at the drive-thru!

Comment by wmbz
2007-12-07 06:34:57
Comment by Chip
2007-12-07 10:49:18

LOL. HELOC = “Perma-Hock”

Comment by Tom
2007-12-07 06:37:14

Just wanted to let everyone know that the petition has come back to life and added an enormous amount of signatures in the last 24 hours. Also, Good Morning America contacted me about a piece they are running this morning.

Comment by jim A
2007-12-07 08:07:37

And that was written almost four years ago. The idiot idea that we’ll just see prices slide back to those of two or three years ago still seems to be the dominant one among most economists in the media. Some of us wondered about prices four years ago, and since then we’ve seen an explosion in supply.

Comment by jim A
2007-12-07 09:11:11

oops, supposed to be a comment on wmbz’s link above.

Comment by simplesimon
2007-12-07 08:29:01

send this petition to all your elected officials too. lets see who signs it.

Comment by CA renter
2007-12-08 01:00:55

Thanks for your petition, Tom. We signed during the first round through the blogosphere.

Please let us know what happened with GMA.

If you need any help with any of this, please let us know on the bits bucket thread (& repeat in case some of us missed it).

Thank you for your efforts!!!!!! :)

Comment by watcher
2007-12-07 06:46:21

BOE loses control of monetary policy:

There were fears in the City last night that the Bank of England has lost control of monetary policy after expectations for money market borrowing costs rose - despite the Monetary Policy Committee cutting interest rates.

Experts warned that it was a sign that the credit crisis could escalate over the Christmas period, even though the Bank has now embarked on a major series of interest rate cuts for the first time in almost eight years.

It coincided with a chilling warning from the Organisation for Economic Co-operation and Development that the UK economy is heading for a major slowdown next year - and possibly a “significant slump” in house prices.

rate cut fails to deliver:

The Bank of England Governor had presented the markets with a Christmas gift few of them anticipated receiving only a week ago: an interest rate cut two months ahead of expectations.

But from a glance at the City’s trading screens yesterday afternoon, you would hardly have guessed it. Money market borrowing costs were on the up, rather than heading downwards; share prices were in the red; the pound had strengthened.

Comment by Professor Bear
2007-12-07 06:59:14

“major slowdown” = non-recession

Comment by watcher
2007-12-07 07:35:02

BOE cut may spur faster inflation:

Dec. 7 (Bloomberg) — The Bank of England, struggling to fend off an economic slowdown, may instead be giving itself a new inflation headache.

The reduction, the first in two years, may make it harder to keep consumer prices under control. Britons’ expectations for the cost of living are the highest in two years, and inflation accelerated above the central bank’s 2 percent target for the first time in four months in October.

Comment by cynicalgirl
2007-12-07 06:52:18

Does anyone know if this “plan” will include people who are upside-down on their homes? CNN was reporting yesterday that it wouldn’t, but I have yet to see anything in writing.

Seems that would eliminated almost everyone.

Comment by Professor Bear
2007-12-07 06:57:54

My fondest hope: That eligibility criteria are stringently enforced.

Perhaps almost nobody will qualify for a teaser freezer?

Comment by aladinsane
2007-12-07 07:03:40

Would Paulson (fudge$icle) stick all of the teaser-freezer loans in a stainless steel fridge?

Comment by Chip
2007-12-07 10:58:28

Another poster noted that “upside down” will be defined by the appraiser, so the term becomes pretty squishy.

Comment by crash1
2007-12-07 06:52:59

ENR magazine is reporting a general slowdown in K-12 school construction nationwide. According to this article, LV is seeing a slowdown of new student growth from a recent 10,000 to 12,000 per year to only 6,000 this year. Broward County is losing 3,000 to 5,000 per year.

Comment by flatffplan
2007-12-07 07:09:39

but still raising taxes- the municipal unions, scarier than terrorism

Comment by flatffplan
2007-12-07 07:03:09

will any soviets lose their jobs w this crakerjack reporting?
While housing prices increased only 3.2% nationally in the year ended June 2007, according to the Office of Federal Housing Enterprise Oversight (OFHEO),

Comment by WT Economist
2007-12-07 07:03:11

One of the things I like “best” about the bailout plans is that only those with 3 percent equity or less in their homes are eligible.

The lenders knew these loans wouldn’t be paid. The plan was to bleed the borrower as long and as much as possible, then foreclose and sell for more because “real estate always goes up.” If housing prices were not going down, there would be no foreclosure crisis as far as Paulson was concerned. There would be a foreclosure opportunity — increased hegemic wealth and pauperization.

Well, if the original plan will work, go through with the foreclosure and grab that equity.

But if the lender will have bad loss severity, keep bleeding the borrower.

Comment by zeropointzero
2007-12-07 08:02:59

Very insightful. Yep - keeping the train running at 4, 5, 6, 7 percent or whatever is a much better proposition than thinking you’ll ever collect 10, 11, 12 percent resets — or, that you’ll even be able to get 80% of loan values back via forclosure.

Comment by jim A
2007-12-07 09:13:51

Well the idea is that if you’ve got more equity, you can sell. Of course, who does that appraisal?

Comment by Larenter
2007-12-07 09:29:27

I find this aspect of the plan to be really funny. Now we will be seeing appraisers “pressured” to lower their appraisals!! Please help to drive DOWN the prices!!! VERY FUNNY!!

Comment by Mike
2007-12-07 07:07:19

I find it interesting that the administration, via Godfather Henry Paulson and ‘Him-who-I-never-listen-to anymore’, wanted to freeze the interest rates of FB’s for 5 years “Until the property market is stable.” 5 years, huh? According to other interested parties like that joke bad organization the NAR for instance, we are either at the bottom or near the bottom (”Now is a good time to buy!”) and 2008 should see the market recover.

Of course that’s b.s and we know it BUT, does the administration know something we don’t know with their 5 year projection? That would bring us to 2012 before a recovery. Seeing as this administration lies and cheats and twists EVERYTHING and is especially adept at putting a positive spin on situations that are obviously not positive (”You’re doing a heck of a job, Brownie,”) I figure their 5 years could easily be translated in 7 to 10 years. Does that mean we are looking at 2015 to 2018 before this mess is over?

Comment by Professor Bear
2007-12-07 07:16:34

…nothing like price controls to “thaw out” a market which has already slowed down due to a liquidity freeze.

Comment by Professor Bear
2007-12-07 07:19:01

“Does that mean we are looking at 2015 to 2018 before this mess is over?”

Not to suggest it could ever happen here, but Japanese home prices steadily declined from 1990 until at least 2005 (I haven’t checked lately…).

Comment by exeter
2007-12-07 07:23:55

“Of course that’s b.s and we know it BUT, does the administration know something we don’t know with their 5 year projection?”

If that were fact, that would suggest the Bush administration is either;

a) Strategic in their thinking
b) Dishonest and deceptive

Comment by joeyinCalif
2007-12-07 07:32:59

does the administration know something we don’t know


Comment by Arwen_U
2007-12-07 07:07:56

Renae Merle at the Washington Post writes her story on “angry savers” . . .

Those Who Avoided Risk Call Plan A Raw Deal

Comment by Justin
2007-12-07 07:34:58

It’s amazing how people have interpreted this. It’s not a bailout!

Comment by simplesimon
2007-12-07 08:44:16

not at all. its called meddling with your psyche. 60+% dont like govt meddling. But their doing it anyway. you figure the rest out.

Comment by joeyinCalif
2007-12-07 07:40:41

what the hell are savers bitching about .. Is the world supposed to stop turning because some couple is saving and avoiding debt?

If anyone thinks FBs are getting a sweat deal, call one up and offer to trade places.

Comment by Professor Bear
2007-12-07 07:45:07

Lines for a Grave-Stone

Man alive, that mournst thy lot,
Desiring what thou hast not got,
Money, beauty, love, what not;

Deeming it blesseder to be
A rotted man, than live to see
So rude a sky as covers thee;

Deeming thyself of all unblest
And wretched souls the wretchedest,
Longing to die and be at rest;

Know: that however grim the fate
Which sent thee forth to meditate
Upon my enviable state,

Here lieth one who would resign
Gladly his lot, to shoulder thine.
Give me thy coat; get into mine.

-Edna St Vincent Millay-

Comment by CA renter
2007-12-08 01:53:11

Nice one, GS!

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Comment by WT Economist
2007-12-07 07:44:10

You think savers are angry now, wait until they means test Social Security — based not on how much the retirees earned over their careers, but on how much they have left.

Comment by In Colorado
2007-12-07 08:37:15

Yet another incentive to go underground and stuff the mattress with cash (or gold). Of course if your house is free and clear you’ll have to put in your kids name and “rent” it from them.

Comment by Pondering the Mess
2007-12-07 10:46:12

“From each according to his abilities, to each according to his needs.”

Comment by WT Economist
2007-12-07 13:24:36

That would be nice. But the reality is “from each according to their stupidity, to each according to their greed.” Under their former system or ours.

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Comment by hwy50ina49dodge
2007-12-07 07:09:43

Why don’t we just have the Federal Gov’t Nationalize Google & Apple, then tell them that they can’t sell ANYTHING until… they find a way to provide 100% home ownership & complete health coverage for everyone…if they have any problems…have them give Warren Buffett & Richard Branson a call. ;-)

Comment by txchick57
Comment by hwy50ina49dodge
2007-12-07 07:31:36

“…And I have a message for every homeowner worried about rising mortgage payments: The best you can do for your family is to call 1-800-995-HOPE.” ;-)

Comment by Larenter
2007-12-07 09:34:46

200 Years of contract law down the toilet! If the judge (I forget where) threw out that homeowner foreclosure case a few weeks back because it could not be deturmined who owned the loan, how is this going to impact this wonderful plan? I sincerely believe the remaining mortgage credit is going to dry up really fast coming up here soon. Who in the hell would want to lend anyone in the US $$ to buy a house if the contract could be changed mid-stream???

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Comment by Matt_in_TX
2007-12-07 18:21:28

1-888 instead of 1-800.
Local lady seems nice. Don’t bother her ;)

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Comment by Blano
2007-12-07 08:29:14

I don’t see anything here which prevents the 2nd mortgage from foreclosing even if they’re current on the first.

Comment by simplesimon
2007-12-07 08:47:19

they have to buyout the first.

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Comment by vthousingbear
2007-12-07 07:40:18

OK, so an unknown amount of subprimers will get a rate freeze. My question is: what happens to the owners of the mortgages and the MBS’s (and the MBSBS’s, ad infinitum). Who covers the interest rate spread that the theives won’t be getting?

IMHO, the real bailout will happen behind closed doors, when the FED, congress and the White House crank the printing presses and pay off these crooks for the money they’ll be losing. Or am I just a crazy conspiracy theorist?

It’s funny how the MSM doesn’t cover this little aspect of things at all.

Comment by txchick57
2007-12-07 07:44:10

That’s because the vast majority of people are too busy looking for pictures of Paris Hilton’s underwear on the internet.

Comment by Robert in florida
2007-12-07 07:52:37

what underware?

Comment by Professor Bear
2007-12-07 08:06:20

You’ve confused Paris with Brittany.

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Comment by txchick57
2007-12-07 08:13:36

Yeah, I can’t tell one vacuous bimbo from another.

Comment by auger-inn
2007-12-07 08:34:03

Beaver, the animal that eats men’s brains.

Comment by Ernest
2007-12-07 10:11:00

Got a link? :)

Comment by Mikey(2)
2007-12-07 07:40:42

Question: If this is not a government bailout and is merely a voluntary plan amongst the lenders, why was the government a party to the discussions? Surely the bright guys who orchestrated these loans could have come up with this “solution” on their own; what need for the government? There’s more to this plan than is being reported.

Comment by dba
2007-12-07 07:44:36

same reason the Fed got everyone together during LTCM and other financial crises. there are too many conflicting interests and you need a somewhat neutral party to stroke the egos and try to work out a deal

Comment by Professor Bear
2007-12-07 07:54:56

Thanks to the moral hazard created by the LTCM bailout and other Fed bailouts on Greenspan’s watch, we now have a global level of systemic risk that is too big to bail.

Comment by AC
2007-12-07 11:03:20

LTCM was indeed a government coerced bailout. Read the book “When Genius Failed” and you will see that the Gov induced and influenced all kind of events around LTCM to protect the interests of key players. Warren Buffet offered to step in and buy the whole thing for a cash but his offer was rejected because of his one condition - ALL the current mgmt of LTCM would be fired for causing the mess. The big boys couldn’t accept this and instead the gov enabled collusion, price fixing, and anti-competitive activities. No, the gov didn’t write checks but coerced others to do things that under normal circumstances would have violated securities laws.

Comment by Professor Bear
2007-12-07 12:08:22

And next thing you know, the size of the “lightly regulated” hedge hog industry mushroomed beyond belief, as did the use of exotic, illiquid financial instruments whose value is difficult to determine.

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Comment by Hoz
2007-12-07 08:03:22

In order to implement the proposed bailout, the Federal government had to provide an opinion from the IRS concerning interest and principal repayments for gain/loss provisions.

Comment by kckid
2007-12-07 09:22:23

This is probably a trial balloon or the first phase of more government intervention. “A Marshall Plan for Mortgages” by Jesse Jackson in today’s WSJ means there is probably a lot more (rhetoric) to come in the future. Obviously, Mr. Jackson has not read The Forgotten Man and governments role in prolonging The Depression.

Comment by Kim
2007-12-07 12:41:28

“Surely the bright guys who orchestrated these loans could have come up with this “solution” on their own; what need for the government? ”

To provide the coffee and doughnuts (at taxpayers expense)?

Comment by Professor Bear
2007-12-07 07:40:48

Did someone tell the Wall Street bulls that a strong jobs report indicates building inflationary pressures, and building inflationary pressures increase the Fed’s incentives to tighten?

Comment by Professor Bear
2007-12-07 07:41:57

Wow! That was a cool bungee jump in the headline indexes. Heck of a job there, PPT.

Comment by Professor Bear
2007-12-07 08:31:02

Gravity seems to be increasing on The Street…

Comment by Professor Bear
2007-12-07 09:52:41

Mr. Bull must have just refilled his viagra prescription. Or did I miss a bad economic news release that led to yet another stock market rally?

Comment by Professor Bear
2007-12-07 11:18:29

Mr. Bull got it up but is having great difficulty getting it off.

Comment by ACH
2007-12-07 10:40:17

Ok, Prof B. I admit it. I told them. I’m sorry, and I won’t do it again.

Comment by txchick57
2007-12-07 07:52:37

Here’s a good comment from another insider on the Greenberg blog from yesterday:

On 12/07/07 Mike wrote:
Kudos to all posters this is a great forum.

I am an insider like Mark Hanson and work for a lender in wholesale mortgage banking. I agree with 99% with his analysis. I am all cash, short nothing, with no bias or agenda.

State and Federal regulators did little to investigate when fraud was reported. This left people like Mark and me in no position to be whistle blowers and stop trillions of dollars in loans from being made. DO NOT SHOOT THE MESSANGERS. We were in a position where we could report what we saw, when we saw it. I personally saw and stopped fraud on a weekly basis and alerted my superiors of problems.

Mark, what say you on this? If you are not guilty of anything, spell it out clearly for the readers.

The fraud by borrowers, brokers, realtors, appraisers, lenders (aka mortgage bankers, my peer group), and investment banks will continue to ripple across the broader economy.

Believe it or not, the riskiest loans now being originated are FHA and VA. I saw a 100% LTV FHA loan for a borrower at a 50% debt ratio and 591 FICO score full doc with only 2 months on the job and no reserves. The 3% required down payment was money laundered from the seller through a non-profit to meet HUD rules. HUD tried to ban this practice in May but, a federal court ruled in October that the practice should be allowed. Every major lender allows the use of money laundered funds because as long as FHA guaranties the loan, they don’t care. If you can pass the risk down and retain no liability, why care? I do care, HUD does care, but the courts do not. I believe the view of the Feds and Wall Street is that any aggressive loan products that remain on the table should stay as long as possible to delay the coming collapse.

I estimate that in real terms over $6 Trillion of equity in residential real estate in the U.S. will be lost over the next 3 years. With or without a bailout, this will be very ugly. Lending standards have just begun to tighten a little on the prime side and will continue. Fannie and Freddie are unsure of what the bailout will be, so they are raising capital before they turn from mud to crap. GSE loan guidelines are changing as we speak.

Consumer credit and spending is the life blood of the economy and it will contract significantly as a result of these events. Neither rate cuts, nor rate increases can save us now. There is no magic bullet.

At this point recession is a given, ruling out a depression is wishful thinking.

FHA Secure, Teaser Freezer, and Arnold’s Foreclosure Termination strategy in California are all a joke.

The mortgage bail-out is starting just like the Iraq War, with bad information and wishful thinking. Powell told us Iraq had the weapons and Bush said the war would be paid for by Iraqi oil. We are now in over $1 Trillion with no end in sight. No weapons, or payments in oil have been found.

Bernanke said in May “sub-prime is contained”, “no spill over”, “100 Billion in losses tops”. Bush emphatically told us repeatedly there will be “no bail-outs.” Then FHA Secure was to be “revenue neutral.” Now we’ve been told the new “Teaser Freezer” bailout will be completely private and use “no tax payer money.” Don’t believe any of it. They are just buttering us up for what is to come. Bush is hoping he can keep punting and pass the buck to the next guy.He should have said “Read my lips, no new bailouts.” Like father like son.

Republican pandering politicians = bailout.

Democrat pandering politicians = bigger bailout.

No bailout = Depression instead of recession.

I reluctantly support the elephants over the jack asses. I will hold my nose and vote Republican in ’08 because I don’t want everything nationalized. Think Clinton & Castro holding hands with Cuba as the 51st State.

People have asked how to profit, here’s my take.

Buy residential income real estate (1-4 units for the capitalized or 5+ units for the well capitalized) in areas where demand for affordable rentals is high. Get fixed low rate financing and make sure your DSCR (debt service cover ratio) exceeds 1.40. Look for cap rates that are least 2.5% above your fixed rate cost of funds. If you’re buying in today’s market, look for cost of funds no higher than 7-8% depending on your market and cap rates of at least 9.5%. If you don’t know what any of this means learn over the next year or so. Things have come no where close to bottoming yet. Buy at least a half a dozen properties like this and it will make you rich over the next 10 years.

Short term, all markets can be irrational. Presently, I am not in the market. Cash is king.

If I were in, I’d be short M.I. companies, mortgage bankers, home builders (I think all go BK over next 18 months), home supply retailers, investment banks, anything that lacks transparency or liquidity and is in any way, shape or form tied to housing. I would also short anything that relies heavily on borrowing or lacks liquidity. If you’re in trouble in this market, weak balance sheet or lack of liquidity may equal BK. Commercial market is over bid and many REITs will get hurt.

I’d be long anything, except the above, that benefits from a weak dollar. Companies that make things people buy more of when money is tight, like cheap fast food should do well. China will likely allow the yuan to appreciate more so they can gobble up our assets at better prices. Solid assets denominated in yuan should outperform many assets over the coming decade. China will continue to grow, 8% with or 5% without us. I would not buy anything with a P/E over 18.

If you think this overblown, I suggest you buy call options on financials and builders now. Then, get in line for food stamps and section 8 just in case you’re wrong.

Herb, if you want to talk to me directly ask me to email you. I am still employed and will not allow my name or company name to be put in print. Privately, I will give you my name and talk openly and honestly about whatever you want but prefer to remain anonymous as long as I continue to work in this industry.

I’ve put it out here so I want responses. Please tell me what you think.

Comment by phillygal
2007-12-07 10:27:32

State and Federal regulators did little to investigate when fraud was reported. This left people like Mark and me in no position to be whistle blowers and stop trillions of dollars in loans from being made. DO NOT SHOOT THE MESSANGERS. We were in a position where we could report what we saw, when we saw it. I personally saw and stopped fraud on a weekly basis and alerted my superiors of problems.

This is why government attempts at fixing the boo-boo are disingenuous, to use an overworked adjective. The laws in place were not enforced, so government effectively complied with the banksters to enable a bunch of greedheaded fellow Americans. Now GWB, Hilbillary, Jesse Jackson et al. are supposed to get credit for coming to the rescue?

As a jeweler I know used to say: Go sell it in Hong Kong.

Comment by shakes
2007-12-07 12:23:19

txchick, GREAT POST. It adds clarity to us laymen that have no opportunity to gain access to inside knowledge / sentiment. I, too, have been shorting the market but through structured index hedge funds since I do not have the knowledge / insider information that allows for a solid ability to properly risk manage. Your insights and posts have given me greater confidence is what I already believe is going on and I am stepping outside my cautious box and taking a few chances. I am about managing risk and risk is easily mitigated with the proper information / controls in place to ensure one does not ‘go for broke’ and then wonder how they got there.

Comment by txchick57
2007-12-07 08:09:20

LOL! 8K more before this guy disintegrates before our eyes

Comment by ChrisO
2007-12-07 08:43:31

I love how you have to read very carefully to figure out that this is an ad for a $700,000 condo. In Texas. Uh-huh.

I know a lot of Texas folks don’t consider Austin to really be part of Texas, however… :)

Comment by Kim
2007-12-07 12:50:08

Up at the top it says “offerred at 308,000″.

Bet this guy sees all the web hits and thinks he has a gold mine. LOL

Comment by txchick57
Comment by joeyinCalif
2007-12-07 08:42:24

A nuance of the above is that senior trauches of CDO now have a higher certainty of pay-outs while the junior trauches now may be worthless. These junior trauches will sue like crazy as this thing unfolds.

Sue about what? Junior tranches might already be worthless.. mighta been worthless last week.. who knows their value?
If they don’t have a known market value, it is gonna be really tough to convince a judge that someone suffered a loss due to the rate freeze..

Comment by Hoz
2007-12-07 08:18:03

Hot economy still inflation prone: Dodge
Bank of Canada governor sees lingering problems due to credit crisis
“…In his semi-annual testimony to the Senate banking trade and commerce committee, Dodge gave no indication of whether the bank, which cut rates by a quarter of a point earlier this week, would cut them further at its next rate review meeting in January.

His comments came as the central bank issued a report that the Canadian economy was in good shape to weather the global financial turmoil resulting from the U.S. housing market meltdown and the fall in the greenback against most currencies, including the loonie.

“There will be some impact on the Canadian economy directly through credit spreads and availability, and indirectly through the effects on the U.S. economy,” it said in its latest Financial System Review.

“The effects on the Canadian financial system, however, should be mitigated by the strong balance sheets of financial and non-financial corporations built up through years of strong growth and substantial profits.”

Yet it also warned that there is a “low” risk that the U.S. and global financial and economic situation could deteriorate more than expected.

If that occurred, the greater-than-expected slowing in the economy of the U.S., and possibly globally, together with a rise in the loonie would “increase stress on Canadian businesses, households and financial institutions….”

Edmonton News

Comment by hd74man
2007-12-07 08:20:11

How bad is it?

Just found out a first cousin who has been employed as a loan processor and underwriter for a variety of banks and mortgage operations for the last 22 years got her pink slip last week from the Wells Fargo operations center located in Portland, ME.

When Portland ME (the last bastion of any type of a normal economy in the state) processor/underwriters with 22 years experience are getttin’ the axe, you can readily assume that the RE biz in Maine is pretty much dead.

Comment by exeter
2007-12-07 08:51:36

That’s very ominous for the RE tards in ME. I doubt they’re paying attention to such minor details though.

Comment by Hoz
2007-12-07 09:10:52

WAMU is shutting down its Seattle brokerage office 125 people bye-bye.

Comment by Diggs
2007-12-07 14:48:43

I went to my local Savings Bank of Maine today and the bank manager was explaining to a woman that her and her husband needed to come in soon and sign a form to get some money back. The manager says the bank is giving back 3 months of mortgage interest to its customers. Of course the woman gets all excited and asks what this was all about/ why would they do that? The manager replied “Oh, it’s just something the bank decided to do to help the states economy. It is money you paid in interest, we are giving some back”

Yeah right! I am not sure what it means exactly, but it sure seems odd.

Comment by CA renter
2007-12-08 02:36:49

Interesting. Let us know if you find out what that’s about, please!

Comment by Hoz
2007-12-07 08:40:49

The Copley Press, Inc.
La Jolla, CA
San Diego, CA
The San Diego Union-Tribune offered employee buyouts in an effort to cut dozens of positions amounting to about 6 percent of its workforce. The newspaper told employees on Monday that the move is a response to challenging industry conditions. It said it will consider layoffs if enough people do not leave voluntarily. An internal memo lists at least 83 targeted positions, including 43 in the newsroom. The newspaper has 1,422 employees. Circulation has declined at the Union-Tribune and at newspapers nationwide as readers migrate to the Internet and other media such as cable TV for news, information and entertainment.
Source: Associated Press Worldstream - December 4, 2007

Comment by zeropointzero
2007-12-07 08:47:57

There was something in the Washington Post yesterday (I believe) that stated that they now made more money off their Kaplan Educational services division (SAT, LSAT preparation - I don’t know what else) than they did from newspaper operations. They did a big round of buyouts a couple years ago at the Post, as well.

Comment by josemanolo7
2007-12-08 03:26:22

they are 4/5th crap anyway. i like their ads.

Comment by Hoz
2007-12-07 08:42:52

The Home Depot Inc.
Atlanta, GA
Tampa, FL
Brandon, FL
Chicago, IL
Dallas, TX
The Home Depot is going to lay off 750 people in the Tampa Bay area and is expected to close its Brandon call center on January 28th, and an additional 200 at smaller sites in Chicago and Dallas. The call centers handled quotes and follow-up calls for customers who go into Home Depot stores and order window, door and flooring installations. After January, those tasks will be handled by local store employees. Home Depot has eight remaining call centers across the country and the company plans to keep them intact for now.
Source: The Atlanta Journal-Constitution - December 5, 2007

Comment by Matt_in_TX
2007-12-07 18:29:38

As far as I’m concerned, all they do is answer calls like: “I was supposed to be called by one of your shifty contractors 3 weeks ago. Why haven’t these out-of-work bums even called me yet?” Is it because HD already has my money, and if the contractor actually does the work,HD will have to give some of it to them?

Comment by Hoz
2007-12-07 08:46:58

“Jays Foods, which produces Jays and Krunchers! potato chips and also the brand name O-KeDoke popcorn, entertained takeover bids through Friday, and today will ask the bankruptcy court to approve its sale.”

Alas Neil, no more O-KeDoke popcorn.

Comment by ET-Chicago
2007-12-07 09:57:53

Crap, I hope Jay’s survives with recipes intact.

I’m a fan of their potato chips.

Comment by rms
2007-12-07 09:02:42

In California this Monday is the deadline for property taxes. :)

Comment by Hoz
2007-12-07 09:06:49

What is most enjoyable about this BS, “Hope to be President Plan ” is the revolving around credit scores. (Aside from no consideration for HELOCs.)

We all know how good the credit agencies did. Wells Fargo had a medium score of 750 and Well’s losses only doubled.

Comment by jim A
2007-12-07 09:15:51

Well that keeps the plan aimed strictly at the subprime market. The problem is, the rising tide of foreclsures isn’t limited to subprime mortgages.

Comment by Hoz
2007-12-07 09:40:04

This BS plan is smoke and mirrors. By itself a non-event. There were other events yesterday that were far more significant.

Comment by arroyogrande
2007-12-07 09:54:27

“There were other events yesterday that were far more significant.”

Point us in the right direction, brother Hoz…which events?

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Comment by Darrell_in_PHX
2007-12-07 11:50:40

“Home foreclosures shot up to an all-time high in the third quarter, fresh evidence of the problems afflicting distressed homeowners amid the housing meltdown.
The Mortgage Bankers Association in its quarterly snapshot of the mortgage market released Thursday said that the percentage of all mortgages nationwide that started the foreclosure process jumped to a record high of 0.78 percent during the July-to-September period. That surpassed the previous high of 0.65 percent set in the prior quarter.”

Highest ever, fastest rate of increase, the rate of increase is still increasing.

Another aspect of the story is that 57% of the new foreclosures are Alt-A and prime. It is not a sub-prime issue anymore.

Comment by Gwynster
2007-12-07 14:52:56

For me, it was the dog and pony show also known as Nov jobs report.

Comment by Matt_in_TX
2007-12-07 18:31:26

How about several CDOs defaulting? (or whatever the correct technical/procedural term is.)

Comment by Lisa
2007-12-07 10:22:19

“Well that keeps the plan aimed strictly at the subprime market. The problem is, the rising tide of foreclsures isn’t limited to subprime mortgages.”

This has me worried. Next year, will we see a similar plan for AltA and Prime borrowers??

Comment by Patricia
2007-12-07 09:17:38

Am I being overly pessimistic, or is this country going into the toilet? This morning I hear about a CEO who is being forced to pay back 400 million dollars, but the newscaster says “don’t feel too sorry for him, he has 800 million in stock options”. 800 MILLION.
God forbid you pay the employees a working wage. Keep cutting wages so nobody can make a damn living, send all the jobs overseas, pay the illegals, oh and now Cargill is recruiting from Puerto Rico, they are part of the U.S. you know, so its legit. I’m not a socialist, but spread the wealth a bit. There are two ends of the spectrum, socialism and slave labor. Why don’t we meet in the middle somewhere. Mr. CEO can have 80 million, and the other 720 million can pay Joe and Jane. This madness has to stop somewhere, I’m all for capitalism, but COME ON!!!

Comment by simplesimon
2007-12-07 10:30:13

see now thats where “trickle down economics” came from. Look what that has done so far. oh and i lean republican. both groups have done a great job of fleecing america imo.

Comment by Jas Jain
2007-12-07 11:22:30

You forgot the “trickle up poverty” part of the trickle down.


Comment by CA renter
2007-12-08 02:41:38

You forgot the “trickle up poverty” part of the trickle down.
Exactly what got us into this mess, IMHO.

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Comment by jim A
2007-12-07 12:50:54

Well the IDEA was that this 9 figure-are would buy stuff made by people working for wages, and everyone would be happier. Of course all this extra money has been incestously pumped again and again through Wall Street and inflated asset prices. It’s going to end badly.

Comment by Chip
2007-12-07 11:53:32

I can’t think of anything that could better boost libertarianism as the best political concept for this country. Disclosure - I’m a registered Libertarian. What made me so was getting sick of all this stuff many years before the rest of you seem to have.

Comment by Carlsbad Renter
2007-12-07 14:12:55

My goal: to become that CEO.

Comment by Hoz
2007-12-07 09:17:44

from Morningstar

“…Housing is a bellwether component of GDP, and resides in the “investment” category. Housing tends to lead overall economic results, especially at economic turning points. The recent housing news has been, well, very bad:

Residential Fixed Investment: With the preliminary estimate for third-quarter 2007 GDP now in, we have had seven consecutive quarterly declines in residential fixed investment. Since World War II, we haven’t had a string of declines this long and severe without a coincident, or imminent, national recession. In the past year, permits for new housing starts have fallen sharply.

Existing Home Sales: GDP is based on current production. Used car sales and existing home turnover do not directly enter into GDP, except for the services produced by dealers and realtors. But housing turnover has important indirect effects on retail sales and other services activity. The news here isn’t good, either. Existing home sales fell for the eighth straight month in October, falling 21% below year-earlier levels, reaching the lowest sales pace since 1999.

New Home Sales: New home sales tend to provide more timely reads on housing activity, as they are based on contracts signings, not closings. In October, new home sales remained basically flat with September levels, which had reached the lowest annualized sales pace in 12 years. More ominously, the median sales price of a new home fell by the most for a single month in October since 1970, a nasty recession year. 1970 may feel like yesterday, for some of us, but this means October had the biggest monthly price drop in 37 years.

Housing Prices: Many markets around the country are experiencing flat to slightly higher prices. On average, however, prices are declining significantly, and the declines seem likely to get more pervasive. According to the Case-Shiller Index, a national average of prices fell at a particularly sharp 17% annualized rate from the second quarter to the third quarter. Derivatives contracts are pointing to further deterioration in the year ahead.

Foreclosures/Credit Quality: There are few signs of any recent improvement on this score. On Nov. 29, data services firm RealtyTrac reported that home foreclosure filings nearly doubled in October from a year earlier. On Nov. 30, the Mortgage Insurance Companies of America reported that the default rate on insured mortgages rose to the highest level since August 2001, amid the last recession. In early December, the Mortgage Bankers Association reported that new foreclosures hit a record high in the third quarter, and for the second consecutive quarter….”

Comment by mike
2007-12-07 09:18:08

Long Island home prices continue to sink and sales continue to ebb.

The contracted median home price for Long Island dropped by $25,000 last month, an overall decrease of about 6.5 percent from November 2006, according to the Multiple Listing Service of Long Island.

This November’s contracted median home price in Nassau County was $439,000 and $370,000 in Suffolk compared to $465,000 in Nassau and $395,000 in Suffolk one year earlier.

In Suffolk, 28 percent fewer contracts were written in November, as compared to November 2006. In Nassau, contracts declined by 18 percent.

The number of houses for sale in Nassau and Suffolk increased last month, according to MLS. The inventory of residential properties for sale last month was 24,329, an increase of 1,559 from the same time in 2006, but a slight decline from the October 2007 supply.

Comment by Hoz
2007-12-07 09:29:21

“The American consumer is the big gorilla on the demand side of the global economy,” Roach of Morgan Stanley said. “As the slowdown goes from housing to consumption, we’ll find the world is not as decoupled as it thinks.”

Comment by az_owner
2007-12-07 10:26:45

My sentiments exactly. Everyone hates the big fat overconsuming American, until he stops buying all their excess production.

If/when our collective gaping maw closes a little, the producers of Europe, Canada, Japan, India, and especially China are going to do everything they can to pry it open again. When the fat man stops eating, the restaraunt goes out of business.

Comment by brahma30
2007-12-07 14:36:25

Things are changing fast in BRIC, the economies there are increasingly local. Sure they export a thing or two but the belief that our overspending is a entitlement for life is not true.

Comment by Observer
2007-12-07 10:28:51

It has mystified me why anyone thinks the world economy is decoupled from the American consumer. The market of Chinese and Indians selling stuff domestically is tiny compared to the stuff they sell to Americans. Its laughable why anyone would think otherwise. What’s more as the American consumer buys less, China, India, and the rest of world will have less need for American exports. One day the world may be decoupled from the American consumer but that day is not here yet.

Comment by In Central Bank We Trust
2007-12-07 17:58:11

That’s partly why they have to lower the U.S. $ fast so that consumers elsewhere can make up the purchasing power lost by U.S. consumers.

Comment by watcher
2007-12-07 10:39:27

I suppose it is a question of terms. I’d bet there are more cell phones in China and India than in America. Bicycles too. The real issue though isn’t manufactured consumer goods; we don’t care if a bunch of Chinese sneaker or TV factories close. The important consumption now is in commodities and that is not slowing. China is opening something like one new power plant a week; there are over 100 cities there with population over a million and their growing wealth means they will improve their standard of living by consuming more.
We will have to compete with these countries to get everything from food to energy to metals, and we owe them money.

Comment by Observer
2007-12-07 10:51:53

Thank goodness then that their one-child policy will cut their population in half in 50 years. However, India will be a bigger competitor for commodities in 50 years than China will.

Comment by Olympiagal
2007-12-07 09:37:21

Comment by exeter
2007-12-07 07:18:24
The plan is VOLUNTARY. The smirking chimp even said so. You don’t expect the WallSt/Penn Ave CrimeSyndicate to actually help FB’s with their own money do you?

Voluntary…oh, golly, the comedy. That was my favorite giggling part of the drivel/bailout plan, and the single most significant word that should cause every HBBer to calm right down and cast aside their tinfoil chapeaux.
Voluntary?! Ahawhawhaw!
And none of the rest of this fabulous ‘mortage rate freeze’ makes sense or is workable, either. Why don’t these fools simply go make some jam or crochet a doily or do something useful?

‘Smirking chimp’.

My new favorite description. Thanks, exeter.

Comment by Mikey(2)
2007-12-07 10:23:35

To borrow a phrase from Jon Stewart: “Heh, heh, heh, heh….”

Comment by sm_landlord
2007-12-07 10:04:40

Check out today’s Chart of the Day:

Nice charts of the “decline”.

Comment by txchick57
2007-12-07 10:38:43

Maybe it’s time to revisit the Takers and the Leavers

Comment by sleepless_near_seattle
2007-12-07 17:12:06

My sister turned me on to Quinn. Great read!

Comment by WT Economist
2007-12-07 11:09:22

In New York, it’s different here. Sure the suburban market died two years ago, but it’s different in the city. Sure the outer boroughs died last year, but it’s different in Manhattan and getrified areas of Brooklyn.

OK, so the NY Sun reports prices are falling in fringe areas of Manhattan and gentrified Brooklyn

But so what. Until prices fall on 5th Avenue, Park Avenue and Central Park West, bitter renters are fools and there is no bubble.

Comment by edgewaterjohn
2007-12-07 11:44:04

That’s like reading about the Red Army fighting block by block to the Reichstag. An irresistble large force on its inexorable march to the center of cities and towns everywhere.

Comment by arroyogrande
2007-12-07 13:38:58

Mortgage interest rate trends…fixed rate 30 year, conforming vs. jumbo:

It looks like the rate difference between conforming and jumbo is going up again…about 80 basis points and increasing…

About the same rate difference for 5/1 I/O ARMs, Jumbo vs. conforming:

Comment by Professor Bear
2007-12-07 14:00:00

Pop quiz:

What is the monthly payment on a 30-yr-fixed mortgage loan of $450,000 used to purchase a California starter home at the recent jumbo lending rate of 6.6 percent?

According to my back-o-the-envelope calculation, that loan would run you $2,873.96 / mo for thirty years. (That is just the monthly mortgage payment, which includes interest and principle amortization, but does not consider property taxes, PMI, insurance, maintenance, HOA dues, Mello Roos, etc.)

There has never been a better time to be a subprime Option ARM borrower who qualifies for a teaser-freezer!

Comment by arroyogrande
2007-12-07 13:55:48

Henry Paulson - what should the next step be? Take more loans into the FHA…by lowering the down payment requirement!

Henry Paulson:”The Administration is taking action to help homeowners, and I’ve called on Congress to do the same before they leave for the year. They need to pass the President’s FHA modernization proposal which, by lowering the down payment requirement, increasing the loan limit and allowing risk-based pricing, will make affordable FHA loans more widely available.”

I just love the fact that these fixes to the problem of overly loose credit are being “solved” by loosening credit.

Comment by Professor Bear
2007-12-07 14:46:32

The FHA Modernization Act would:

1) Create a new, risk-based insurance premium structure for FHA that would match the premium amount with the credit profile of the borrower . It would replace the current structure, in which there is standard premium amount for all borrowers, while still protecting the soundness of its Insurance Fund. FHA would have the flexibility to charge higher-risk borrowers a slightly higher premium, and to charge a lower premium for low-risk borrowers.

2) Eliminate the current statutory three percent minimum down payment, reducing a significant barrier to homeownership . FHA’s existing down payment requirement does not meet the demands of today’s marketplace, where most first-time homebuyers put down two percent or less. The “new” FHA would offer a variety of down payment options.

3) Increase and simplify FHA’s loan limits . FHA’s loan limit in high-cost areas would rise from 87 to 100 percent of the GSE conforming loan limit and in lower-cost areas from 48 to 65 percent of the conforming loan limit. This change is crucial in today’s housing market. In many areas of the country, the existing FHA limits are lower than the cost of new construction, eliminating FHA financing as an option for buyers of new homes in those markets. FHA has simply been priced out of the market in other areas, such as California, where FHA insured only about 5,000 home mortgages in all of 2005.

Comment by reuven
2007-12-07 18:01:42

This is the most obscene thing I’ve seen all year!

Comment by Housing Wizard
2007-12-07 23:05:03

FHA …the new sub-prime low down lender on the block to re-spike the punch bowl of easy money , The public will say that its a great move not thinking that it will cost taxpayers money when the loans default (because the insurance won’t be able to cover the loses ).

Stop this easy credit cycle ,you killing America .

(Comments wont nest below this level)
Comment by CA renter
2007-12-08 02:57:56

This is precisely what I’m talking about when “hand-wringing” about the bailout.

I don’t think the 5-year freeze is the problem. They are trying to divert our attention away from the FHA & GSE portions of the bailout. Also, the $190 million “budget” awaiting congressional approval ($120MM for “NeighborWorks” and $50MM for HUD’s mortgage counseling programs). We know that original budgets often get jacked up as time goes on. They are trying to open the floodgates. If we give them an inch, they will take a mile.

Also, I’m concerned about the state & municipal tax-exempt bonds. Are these bonds going to be guaranteed by the taxpayers in the event of default???

I think we need to for a taxpayers’ advocacy group so we can carefully monitor and report what these cretins are up to — and be ready with lawyers and media contacts to fight whatever burdens they try to foist on the taxpayers.

Comment by Majisto
2007-12-07 15:15:07

Here’s a fun typo I found…I’m watching the price chase down the market on this one:
Look at the tax info!!
I believe the orig list price was in the 700K’s…

Comment by Majisto
Comment by reuven
2007-12-07 18:00:16

I just read the articles in the WSJ about the teaser freezer to make sure I understand it. At first I thought maybe this wasn’t the worst thing to do. After all, the banks are partially responsible for selling lousy products to stupid people. (There’s a concept in Jewish Law that one shouldn’t put “a stumbling block before the blind”. Taking advantage of someone’s foolishness is a perfect example.) So forcing the banks to freeze the rates may have been an appropriate punishment for their behavior.

(Of course, I put at least half the blame on the greedy howmuchamonth getrichquick borrowers, too).

But after reviewing how this works, I think it’s lousy!

Why? Because if you can afford the adjusted rates, the freeze doesn’t apply to you! So if you have means, but were foolish enough to get an adjustable mortgage when fixed rates were at a 40-year low, you have to pay.

If you were a little dishonest and took a mortgage that you knew damn well you couldn’t pay after reset unless a miracle occurred, you get a GIFT!

That’s not fair!

A much fairer thing would be to find the set of people who

1. Actually are living in the homes
2. Only have one mortgage
3. No HELOC, etc
4. Had a 100% accurate and truthful mortgage application

and freeze the rates for 2 1/2 years, regardless of means to pay back the adjusted rate.

This is still a very small set of people, and doesn’t introduce the “moral hazard” that the current scheme does.

If I had a mortgage that reset to 11% and the person next door to me was at 8% merely because he’s poorer than me, I’d simply walk away from the house (assuming it was no-recourse and was upside-down). I’d feel like a big sucker if I did anything else.

(The other side to this is it’s not going to “help” anything, and I think any attempts by the government to prop up house prices is disgusting and immoral. But that’s another story.)

Comment by Housing Wizard
2007-12-07 22:57:19

Rewarding the liar loan borrowers is the part about the bail out plan that I don’t like either . If they are going to do this bail out plan it should just apply to all toxic adjustable rate loans from 2005 onward ,if the borrower owner occupied from the inception of the loan and can prove that they cannot obtain financing because of either a crash in price or inability to qualify for a new loan because it is no longer available ,than so be it . Remember FB’s were sold the idea by the industry that they could just refinance these toxic loans (stupid for borrowers to believe such lies,I know ). We are assuming that any borrower that would be interested in this program would be ones that wanted to continue to own and live in their property .

So, if we let borrowers off the hook because of the mania defense ,we should just let all owner occupied borrowers off the hook with loans that would adjust up to 10 to 12% or more. A good qualified buyer with some equity can obtain a new loan on their own ,maybe a new 30 year fixed .

The only grounds that I can really find for allowance of “teaser freezers”, is the fact that the original financing that was available when these FB’s took out the loans is no longer available in the marketplace and the appraisal would never hit now ,so you have to use the freezing of old money,(which means no new money is extended ). Also, because Jumbo Loan money is in short supply ,many Jumbo loan borrowers cannot obtain refinancing they need and expected to obtain when their loan adjusted .

But, the whole bail out plan is a can of worms and the devil is in the details . You would think lenders could on a case by case basis do whatever makes sense in terms of preventing a foreclosure (that would cost them more ) without needing the government to get in on this . I’m sure that there is some back room promise that the lenders will be relieved when they get some government backed loan programs in the works that can relieve these lenders of their bad loans .

The borrowers were set up for a big fall when they took out a loan that needed to be refinanced in 2 to 5 years . The lenders qualified borrowers based on the teaser rates (and of course many borrowers lied and didn’t really qualify for the teaser rates ). Now the lenders are in a credit crunch in which they do not have new money funds to refinance these loans ,(would any lender want to refinance these high risk loans(?) ….hell no ) Would any investors want to buy all of Countrywide Fundings loans that they are holding the bag on .

If there was a serious attempt to not make any more new money bad loans ,and not rekindled this easy money low down faulty lending joke,and just keep some borrowers from foreclosure ,than it might be the best recourse the lenders have . But if the government gets to the point where they become the sub-prime lender of choice for new easy money for purchases in the near future ,or relief lenders for the current bad loans ,than its a bad deal for the taxpayers .

I guess if you had a defective product ,as a company you might have to re-call it ,but the government would not pay for your re-call of your defective product (toxic loans with faulty underwriting ). So I go back to the lenders cleaning up their own problem and apply it to all affected homeowners as you would a defected product re-call .

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