Greenspan: An Accident Waiting To Happen
Some housing bubble news from Wall Street and the Washington Post. “The chief executives for two of the nation’s dominant mortgage-finance companies traveled to Wall Street yesterday. Richard F. Syron, Freddie Mac CEO and Fannie Mae CEO, Daniel H. Mudd, forecast continued declines in home prices. Syron predicted home prices would ultimately bottom out at an average of 10 percent below their peaks, and Mudd predicted average peak-to-trough declines of 10 to 12 percent nationally.”
“But Syron outdid Mudd in expressing remorse for past business decisions and in describing the trouble that may lie ahead. If home prices decline by 30 percent, as one noted economist has said could happen, ‘We’re all going long apples and boxes to sell them in,’ Syron said, invoking an image from the Great Depression.”
“Syron traced the trouble in the mortgage business to a housing bubble and accepted some responsibility. Fannie Mae and Freddie Mac contributed to the problem by spreading the message that everybody should own a house, he said. In fact, many people who should not have owned houses bought them, he said.”
“One questioner accused Syron of making a strategic error in failing to adjust to clear signs of looming trouble as early as 2005. Syron agreed that Freddie Mac should have tightened its lending standards sooner. Although Freddie Mac was an early bear about the real estate market, he said, it did not foresee the severity of the problem.”
The Associated Press. “The chief executive of Freddie Mac estimated Tuesday the mortgage finance company will lose an additional $5.5 billion to $7.5 billion over the next few years as the housing crisis worsens and home-loan defaults rise.”
“‘I honestly think it’s going to get tougher before it gets better,’ Syron said.”
“While the mortgage crisis has brought a rising wave of foreclosure notices into public view, less evident have been ‘pictures of people standing with furniture on the lawn’ after being forcibly evicted from their homes, Syron said. ‘As that begins to happen, and it will happen, I am afraid of the impact that this has.’”
From Bloomberg. “Bank of America Corp. CEO Kenneth Lewis said losses from the credit markets will be higher than the $3 billion estimated last month. The second-biggest bank by assets after Citigroup Inc. will set aside another $1.3 billion in the fourth quarter to cover losses, mostly at its home equity and credit card units, he said.”
“Lewis said writedowns for debt instruments known as collateralized debt obligations, or CDOs, are ‘unknowable.’”
“Lewis said fourth-quarter earnings will be ‘quite disappointing” and credit markets ‘will probably remain challenging into next year.’ The ’subprime crisis has created considerable dislocations in the capital markets’ that probably will stretch into 2008, Lewis said.”
“‘We expect charge-offs to increase next year, particularly on the consumer side,’ Lewis said in response to a question.”
“Wachovia Corp., the fourth-biggest U.S. bank, may double its provision for loan losses in the final quarter and said it can’t predict when credit markets will return to normal.”
“Wachovia will set aside $1 billion to cover bad loans, an increase from the previous estimate of $500 million to $600 million, the company said today in a regulatory filing.”
“Writedowns in October and November tied to securities backed by subprime mortgages and collateralized debt obligations already equal the $1.34 billion pretax loss reported for the entire quarter ended Sept. 30, it said.”
“‘None of us know what inning we are in,’ CEO Kennedy Thompson told investors.”
The Orlando Sentinel. “Local governments will be able to withdraw no more than a quarter of the $12 billion they have invested in a Florida-run investment fund before next spring — because the fund doesn’t want to sell the investments at a loss.”
“Investing agencies, including many in Central Florida, also found out that at least $350 million of their cash is tied up in investments whose ratings are so low that their value ‘truly is a question mark,’ according to Simon Mendelson, a top manager with BlackRock, an investment firm hired by the state to salvage the pool.”
“It won’t be known until later next year, when the investments mature, whether they’ll be worth anything, he added.” “BlackRock segregated about $2 billion in ‘nonperforming’ investments in an account separate from an additional $10 billion that the SBA maintains is in highly rated and safe investments.”
“SBA officials say they cannot sell off investments, even the good ones, because the market for them is bad. They hope that if held long enough, they will eventually pay off.”
From Reuters. “Bank of Canada Governor David Dodge says banks must work together to resolve one corner of the Canada’s troubled debt market, a Canadian newspaper reported.”
“The soon-to-retire governor said all banks will be hit if the asset-backed commercial paper market collapses, losses widen from leverage, and credit constricts and borrowing dries up. ‘We have a collective interest in the whole thing not going into a shambles.’”
“Dodge said losses can multiply because of leverage. ‘Because they’re levered, the amount of global assets that would be affected if all this went down would be eight or 10 times the nominal value of the notes, so you’re starting to get into the C$200-billion, quarter-trillion-dollars’ worth.’”
“‘So everybody, including the international banks, have a real interest in trying to somehow get this thing resolved because if these go down and a whole pile of SIVs (Structured Investment Vehicles) elsewhere go down, then you’ve got an immense number of these assets being dumped on the market at the same time,’ he said.”
The Guardian. “Kazakh President Nursultan Nazarbayev promised on Wednesday to prevent any local bank from collapsing, and criticised credit ratings downgrades as ‘not objective.’”
“A credit crunch caused by the U.S. subprime mortgage crisis has hit Kazakhstan’s fast-growing banking sector hard, prompting Standard & Poor to downgrade the country’s sovereign ratings in October. On Tuesday, Standard & Poor’s cut its outlook again, this time to negative from stable for eight Kazakh banks.”
“Data showed earlier in the day that growth in real estate prices slowed to around 50 percent year-on-year in November from a peak of over 70 percent during summer months. Month-on-month, prices were almost unchanged in November.”
“‘The fact that the ratings agency pointed to longer-term refinancing and asset quality risks, rather than the short-term liquidity problems, as the main issues Kazakhstani banks face is very negative for the industry,’ UniCredit said in a note.”
From Newsroom Finland. “Finnish insurer Tapiola said Wednesday that the growth in Finnish house and flat prices seemed to be grinding to a halt.”
“Vesa Immonen, the head of Tapiola’s real estate investment branch, said signs on the housing market indicated a cool-down, adding the time properties spend on the market had risen markedly.”
“Julia Gavin sold more than a house a week as the Spanish real-estate boom peaked last year. Now that business is drying up, she’s sharing leads with competitors, reckoning a partial commission is better than none at all.”
“‘We’re up to our ears with work, but no sales,’ says Gavin, who works near Madrid. ‘It’s horrible.’”
“Spain is suffering collateral damage from the collapse of the U.S. market for mortgages to the riskiest borrowers and the swoon in U.S. real estate. Spanish banks have exceeded their European peers in tightening lending standards, prompting a plea from Prime Minister Jose Luis Rodriguez Zapatero not to strangle growth.”
“‘The end of Spain’s ‘fat’ years will hit the whole region,’ said Ralph Solveen, an economist at Commerzbank AG in Frankfurt.”
“Three-quarters of Spain’s 60,000 property companies may end up bankrupt, according to Fernando Rodriguez de Acuna M., an analyst at a real-estate research firm in Madrid. ‘They’ve been caught by the two things at once, the demand problem and the liquidity problem,’ he says. ‘Everyone is going to have problems.’”
“Spanish banks’ own borrowing costs are rising — when they can borrow at all. Banco Bilbao Vizcaya Argentaria SA, Spain’s second-largest bank, was able to sell just a quarter of a 6.3 billion euro ($9.3 billion) bond issue backed by mortgages and corporate loans, a person familiar with the deals said.”
“Bankinter SA pulled a sale of at least 500 million euros of mortgage- backed notes.”
“Gavin and her clients are paying the price. In one case last month, she says, she thought she had a sale after three months of negotiations among buyer, seller and mortgage lender. Then Ibercaja SA, a Spanish savings bank, refused her client a loan covering the 168,000-euro ($247,000) purchase price.”
“The bank said it had concluded the client was overpaying for the property in El Escorial, near Madrid. ‘The banks are coming up with a million excuses not to give loans,’ Gavin said. ‘They don’t want to take any risks.’”
From CNN Money. “Former Federal Reserve Chairman Alan Greenspan in a commentary published Wednesday argues that Fed policy under his leadership was not the cause of the housing bubble that precipitated the current crisis in financial credit markets, as some have charged.”
“Instead he argues in the Wall Street Journal that the credit markets melted down in August because ‘risk had become increasingly underpriced as market euphoria, fostered by an unprecedented global growth rate, gained cumulative traction.’”
“And he says that if it hadn’t been problems with rising defaults of subprime mortgages and declining home prices, some other problem in some other market would have triggered the crisis.”
“‘The crisis was thus an accident waiting to happen,’ he writes.”
“‘I do not doubt that a low U.S. federal funds rate in response to the dot.com crash, and especially the 1 percent rate set in mid-2003 to counter potential deflation, lowered interest rates on adjustable-rate mortgages (ARMs) and may have contributed to the rise in U.S. home prices,’ he wrote. ‘In my judgment, however, the impact on demand for homes financed with ARMs was not major.’”
“‘Demand in those days was driven by the expectation of rising prices - the dynamic that fuels most asset-price bubbles,’ he added. ‘If low adjustable-rate financing had not been available, most of the demand would have been financed with fixed rate, long-term mortgages. In fact, home prices continued to rise for two years subsequent to the peak of ARM originations.’”
“While he was chairman of the central bank through January 2006, Greenspan always denied there was a bubble in the nationwide U.S. real estate market, saying only that a certain number of metropolitan real estate markets could see declines in home values.”
“‘The root of the current crisis, as I see it, lies back in the aftermath of the Cold War, when…market capitalism quietly, but rapidly, displaced much of the discredited central planning that was so prevalent in the Third World,’ Greenspan wrote.”
“Greenspan also wrote that he believes there was little the Federal Reserve could have done to prevent credit markets from seizing up this August.”
“‘After more than a half-century observing numerous price bubbles evolve and deflate, I have reluctantly concluded that bubbles cannot be safely defused by monetary policy or other policy initiatives before the speculative fever breaks on its own,’ Greenspan wrote.”
“In the article, Greenspan predicted credit markets would recover from the current crisis only when the inventories of newly built homes have been mostly liquidated, and deflation in housing prices ends.”
“‘That will stabilize the now-uncertain value of the home equity that acts as a buffer for all home mortgages, but most importantly for those held as collateral for residential mortgage-backed securities,’ Greenspan wrote.”
The Mercury News. ” As Alan Greenspan tours the world promoting his memoir, an average of 12,000 Californians and 55,000 homeowners across the nation receive a foreclosure notice every week, the highest in American history.”
“Next year, a record 2 million adjustable rate home loans are scheduled to spike upward nationwide, putting 1.4 million homeowners at risk of foreclosure. We are at the tip of the iceberg in a rapidly accelerating mortgage meltdown, and the prime cause started with the former Federal Reserve chairman’s policies.”
“By reducing the federal funds rate to a mere 1 percent in 2003 and refusing to increase it for a year, Greenspan and the Federal Reserve created the economic conditions for rampant investor speculation and a loosening of loan underwriting standards as lenders frantically competed for market share.”
“Greenspan shunned increased regulations, even though he has now admitted knowing about abuses in the subprime loan industry.”
“Blinded by the irrational exuberance of surging home prices, Greenspan promoted the non-traditional mortgages that have devastated so many homeowners. In a speech on Feb. 23, 2004, Greenspan stated consumers were paying too much for fixed-rate mortgages and asked lenders to provide ‘greater mortgage product alternatives to the traditional fixed-rate mortgage.’”
“When a person of Greenspan’s influence and stature promotes alternative mortgage products, lenders and consumers listen.”
“For many homeowners, especially the hundreds of thousands that have already defaulted, there will be very little the state or federal government can do. They can thank Greenspan. Maybe he can donate the profits of his book to those families who have already lost their homes.”
It has gotten to where Greenspan is about the only person on the planet who doesn’t think the Fed and other central banks are largely responsible for this mess. So, main-stream media, while CEO’s are forced to admit mistakes and take huge losses, does the Fed get to write its own report card?
He is despicable, isn’t he. Tooling around in limos and private jets while the “victims” of his policies get thrown out of their houses (which admittedly, they should never have bought).
“‘The root of the current crisis, as I see it, lies back in the aftermath of the Cold War, when…market capitalism quietly, but rapidly, displaced much of the discredited central planning that was so prevalent in the Third World,’ Greenspan wrote.”
Yeah, that’s it…blame it on the concept of market capitalism as if it is as bad as marxism. The only problem with the current incarnation of market capitalism is the infestation of instead of the marxist equivalent of central planners - the central bankers such as yourself, Greenspud.
discredited central planning = stock price controls through Greenspan puts
IMO I think the “Ownership Society” policy was more about Foreign policy than Domestic…..Bush wanted desperately to move on the Middle East….9/11 and Greenspan’s help allowed him to do it….The sheeple where awash in money and the good times so they did not give a rats ass what our foreign policy was…
I think “ownership society” was a way to socialize risk and remove safety nets for the working class. Convince them that by letting them own homes and invest their retirement money they were getting choices and treated like the upper classes. Get them to line up behind caring more about business profits than their own wages. Let them think they were one of the big boys because they had money in the stock market. They only touted to possible benefits and never talked about the risks. What a sham.
Awesome. That’s exactly what it was - table scraps.
Goodness only knows how many little revolutions were averted by Chevy introducing a redesigned pickup or Sony releasing the Wii. (snark)
Comment by are the crazy…excellent point my friend. The master rip off is at hand and the sheeple are just too stupid to know better.
Free markets for those chasing tables scraps (us), Treasury Dept bailouts for the corporations….. at our expense of course.
Is it too much to ask that our leadership take away the key to the treasury from Wall St and big business?
Exeter…another great point.
“Is it too much to ask that our leadership take away the key to the treasury from Wall St and big business?”
And give it to whom? The “sheeple”? The folks who can’t be trusted to buy within their means, to take out a mortgage that can actually be paid back, to oversee the investment of their own SS money? Folks laughed at and mocked routinely on this blog?
Or maybe to their representatives in government, whose paramount interest is holding on to the brass ring by spending more money than can be collected through a tortuous tax code so that they can purchase their job security at our expense?
Like in war, the foot soldier dies taking the hill and the General remains some distance behind in relative safety to plan for ultimate victory. In this case, Wall Street tycoons are the generals and J6p is left to take the hill, for better or worse.
“And give it to whom? The “sheeple”?”
Well whos friggin money is it anyways??? And how is it “given” to anyone went it is ours to begin with? How about restoring the US Treasury? Better yet, how about all those tax cuts we’ve been promised but instead went to those wealthy elite while shifting the burden to us? Noooo… That might make mockery of the entire charade of the last 25 years. Those who allowed the theft from “the people” by wealthy interests might have to admit they were wrong. And those who committed said theft may have to return the money.
Get real.
My husband and I wonder whether we all could muster up a pitchfork and a torch to protest what’s being happening over the past 30 years.
Anyone thought about organizing a protest at one of his book signings?
That would be hilarious! Ask him to sign your mortgage. “can you write, bubbalicious?” How much would that go for on eBay?
C.H.A.N.G.E. has already protested at a Greenspun Booksiging, course is a protest still a protest if its just a couple of people, I suppose so(?).
http://www.youtube.com/watch?v=S5wfNnV6vTU
I’m not going to shed a tear for these “victims”…these are the same sc&um who knew exactly what they were doing when they signed the dotted line WITH THE INTENTION of selling their houses 6 months later for $100K more.
It is too bad Greenspan, the filth that he is, is getting away with it…but no remorse for owners…sorry.
Agreed. While I have some pity for the truly stupid, I have none for those who were both stupid and greedy.
He is despicable, isn’t he. Tooling around in limos and private jets while the “victims” of his policies get thrown out of their houses (which admittedly, they should never have bought).
The victims of his policies are the few percent of Americans (maybe 5% at best) who pay taxes and have substantial savings.
He supposed to be retired. He needs to crawl back under that rock he hid under before he decided to sell a book.
Aparently once a public figure retires now you can’t get rid of them any more. Bill Clinton started it, now we get stuck with occasional blatherings from Jimmy Carter, Al Gore (the worst) and Greenspan.
I wish they’d all shut up already. They all were bad enough when in office, it was such a relief when they were finally gone. But it’s become a nightmare - like the terminator they just keep coming back.
Yes let’s not blather about glob al warming or the fact that our oil addiction and failed war/foreign policy has enriched our good friends in Iran, Saudi Arabia, Russia, and Venezuela, all at the expense of the middle and upper middle class in the US.
I didn’t realize that once you retire from a job you are supposed to fade away. Clinton started it - really? So we’ve never heard from a former president before Clinton, or any other retired public official? There’s no presidential libraries? Gore the worst? Yep he’s been really evil since he left office.
Acutally, Teddy Roosevelt started it. Try reading some history.
Americans have the historical knowledge of an ant and the memory of a gnat.
Thank you Ann - I couldn’t decide whether to cry or scream after reading that one.
In modern history is was Clinton. In my life time he’s the first president to have an ego so big that he has to be in the headlines constantly. I still remember when 9/11 happened he was out of the country and it took him a few days to get back. As soon as he set down he had a press conference the jist being he was back in country and now everything would be OK. The worst terrorsit attack in the history of our country and it was all about him (except when i came time to dish out blame). Just disgusting.
Before Clinton ex-presidents were actually expected to be dignified and distinguished, to keep their mounths shut about policy they didn’t have the inside scoop on. And no one seemed to have a problem. Even Jimmy Carter kept his trap shut for 20 years until he saw Clinton running his yap and the MSM eating it up.
Disgusting.
Actually Carter was off doing diplomatic meetings for the US AND winning Nobel Prizes - and that was long before Clinton.
Irrationality is bad for stress level. Try some xanax.
“In modern history”…how do you define that, since Clinton left office?
You’re just making yourself look more foolish. Quit while you’re behind.
Maybe Devil you frustration is that Bill is still very popular and sought after. Then again, I’ve had the pleasure of meeting him several times and have spoken with many staunch conservatives that upon actually spending time with him find him to be one of the most charasmatic and personable public figure they have ever met. How with all the current really bad guys you could dig so deep in the hate bill bag is beyond me. As to your allegations about Carter or what Clinton has done - you really need to learn about history as Ann suggests - you are really embarrassing yourself here with your partisan and ill informed charges. I’m just very surprised at your level of personal hatred towards one person when there’s a huge pack of scum out there.
Anyone remember Nixon? He got IMPEACHED and removed from office and He was still running around the World , doing Diplomatic work , probably more than when He was President.
Guess they don’t teach History in school anymore.
I long for those days of Clinton peace and prosperity. He wasn’t one of our best presidents, but compared to what we have now he looks pretty good. Then again, the bar is set pretty low right now.
“Americans have the historical knowledge of an ant and the memory of a gnat. ”
Speak for yourself. That sort of witless generalization is the surest sign of a second-rate mind.
I think you might be having a problem with recent history. Before Clinton was Bush 41. What was he going to talk about, selling influence to defense contractors? I’m not sure he had interests outside of espionage and pork rinds. Before him Reagan, who didn’t have a great post-Presidency public speaking career because he’d never recovered from being shot; Carter, who did in fact have a lot to say about a lot (see above); Ford: and Nixon, who resigned in shame and crept into ignimony. I don’t know why we didn’t hear a lot from Ford — maybe public anger about the Watergate pardons never faded — but Carter has been a very active ex-President, and there are good reasons why we didn’t hear a lot from Nixon, Reagan or Bush 41.
You guys must really drink the Clinton kool-aid. He’s about the only person I can think of off the top of my head that makes Bush look clean by comparison. And that’s quite a feat. It’s distressing to see people who have been indoctrinated to the point that they think there’s a difference between the parties and candidates.
And Crazy if you want to brag about meeting Clinton go right ahead. While I never have, one of my cousins got roped into shaking his hand once. He was unimpressed and didn’t brag. And he washed his hand.
I didn’t vote for Clinton and I didn’t vote for Bush, but got stuck with them both anyway. What’s your excuse?
Comment by spike66
2007-12-12 13:22:25
“Americans have the historical knowledge of an ant and the memory of a gnat. ”
Speak for yourself. That sort of witless generalization is the surest sign of a second-rate mind.
Really? The only ‘historical’ examples offerred by 95% of the US seem to extend back not more than 25-35 years.
Ask any recent high school grad who was Harry Hopkins or William McKinley, what was the Teapot Dome, who was Tip O’Neill or Joseph Cannon or Daniel Webster, what were the economic and social causes of WWI, was there a war between Germany and France in the 19th century and why, who first proposed a national healthcare system in the US - and, two of my favorites
(1) why was there an American Revolution - I’ve even heard college grads say it was to throw out the British who had taken over our country!
(2) what started the Civil War and was it primarily to end slavery that it started - and college grads say it started because it was to end slavery. DONG -wrong answer.
Sorry to disappoint you but all my multiple post-secondary degrees are from 1st class institutions,
This is my excuse: I voted for Clinton in 1992 to get a BTU tax. I pretty much care only about climate change. He failed me, but that’s why I voted for him.
But, at issue was your misconception about ex-Presidents’ public lives, not Clinton’s legacy.
Rionn,
I’m talking about constant press releases and statements - basically grand standing. Perhaps I was unclear in my original statement. There’s no problem with continuing to do their thing whatever that happens to be, but when they try to upstage the current elected/appointed official it smacks of egotism and a sick individual.
There is a big difference between what Carter did during the Reagan, Bush 41 and Clinton years, and what he’s done during the current Bush’s time in office. He initially kept a pretty low profile and when he got press it was for something he was doing for some charity or other. Nothing wrong with that. But to try to make headlines by attacking the sitting president goes way beyond the line. There used to be a time in this country when people/parties could disagree and still be civil. Aparently that is a thing of the past.
And Crazy I’ve agreed with many of your other comments you’ve posted, but you really have me wondering on this one. I honestly don’t get how someone who is obviously intelligent and can see through so much BS in one area (the housing bubble) can be so party line in another area. Or did you stumble on the housing mess because you were looking for something to hate Bush about? Nothing wrong with that, just be objective and hate both sides when they do the same thing…
RE: you really need to learn about history as Ann suggests - you are really embarrassing yourself here with your partisan and ill informed charges. I’m just very surprised at your level of personal hatred towards one person when there’s a huge pack of scum out there.
AYC-So who the fook appointed you the HBB comment cop?
Your petty little Oprah digs are irritating.
hd74man,
Sorry to burst your bubble but I’m not partisan (I would’ve included more Repubs in my original comment, but as has been previously noted for one reason or another they’ve pretty much kept their mouth shut after leaving office). You’ve been on this blog long enough that you should know I dislike what both parties have become. I apply the same standards to everyone and right now most everyone in federal elected office gets an “F”.
I have not been inaccurate on anything I’ve said, yet the liberals seem to come out of the woodwork if an unfavorable yet accurate statement is made about one of their idols.
hd74man,
Oops, just realized your comment was for ATC not me.
I think it has to do more with what age they are when they leave office. Teddy Roosevelt was only 51 when he left office. Clinton was only 55. Reagan was 78.
I beg your pardon. Rude beyond worth responding to. I’ll move on now.
Clinton may have charisma, but so what? He’s still a fool, a traitor, a criminal, and an all around scumbag.
I am find it most interesting as to what engenders such utter hatred of Clinton. By all accounts, he was a very centrist president - signed NAFTA into law, reformed welfare, and exercised a foreign policy entirely consistent with that of his predecessors. He was also a very popular president - but his 65% approval rating upon leaving office doesn’t expose the 20-25% who are filled with revulsion at the mention of his name.
I don’t think the personal indiscretions or subsequent legal missteps account for the intense disapproval. I think it started even before that - and likely a leading cause the cause of the impeachment proceedings. Presidents before and after have lied more often on matters of vastly more consequence.
I’ve heard one theory that his relatively centrist stance was perceived as a threat by the political right. He who owns the middle wins the election.
Maybe it’s just the echo chamber of talk radio. It’s comforting to simply trace back all our problems to those evil liberals. In fact, the roots of our problems are much more complicated… like how vested interests on all sides pervert the system for their own gain. Certainly lots of that in the credit/housing bubble (and collapse
)
Ewwww, DD, you used the “liberal” word. We be scared. So, if someone disagrees with you, trot out the L word, just like a DittoHead. You don’t know the meaning of the word. And GOPs have mostly been silent after they left office because why? Too much fishing and golfing occupying their time? Anybody who obsesses about Clinton obviously has issues that go beyond political ideology.
“Actually Carter was off doing diplomatic meetings for the US AND winning Nobel Prizes - and that was long before Clinton.”
Guess I’m confused about the timeline and the plural “Nobel Prizes” here. Carter won a single Nobel Peace Prize in 2002.
“Anyone remember Nixon? He got IMPEACHED and removed from office and He was still running around the World , doing Diplomatic work , probably more than when He was President.
Guess they don’t teach History in school anymore.”
“On Saturday, July 27, [1974] the House Judiciary Committee approved its first article of impeachment charging President Nixon with obstruction of justice. Six of the Committee’s 17 Republicans joined all 21 Democrats in voting for the article. The following Monday the Committee approved its second article charging Nixon with abuse of power. The next day, the third and final article, contempt of Congress, was approved.”
“On Friday, August 9, [1974] Nixon resigned the presidency and avoided the likely prospect of losing the impeachment vote in the full House and a subsequent trial in the Senate. He thus became the only U.S. President ever to resign.”
That happened between steps 3 and 4 below. Technical impeachment occurs after step 5.
Modern Impeachment Procedure:
1. Impeachment resolutions made by members of the House of Representatives are turned over to the House Judiciary Committee which decides whether the resolution and its allegations of wrongdoing by the President merits a referral to the full House for a vote on launching a formal impeachment inquiry.
2. The entire House of Representatives votes for or against a formal impeachment inquiry, needing only a simple majority (a single vote) for approval.
3. If approved, the House Judiciary Committee conducts an investigation to determine (similar to a grand jury) if there is enough evidence to warrant articles of impeachment (indictments) against the President. The Committee then drafts articles of impeachment pertaining to specific charges supported by the evidence. The Committee votes on each article of impeachment, deciding whether to refer each article to the full House for a vote.
4. If the House Judiciary Committee refers one or more articles of impeachment, the entire House of Representatives votes on whether the article(s) merit a trial in the Senate, needing only a simple majority for approval.
5. If the full House approves at least one article of impeachment, the President is technically impeached and the matter is referred to the U.S. Senate. The House then appoints members of Congress to act as managers (prosecutors).
6. The trial of the President is held in the Senate with the Chief Justice of the U.S. Supreme Court presiding. The President can be represented by anyone he chooses. He may appear personally or leave his defense in the hands of his lawyers.
7. The entire Senate may conduct the trial or it or it may be delegated to a special committee which would report all the evidence to the full Senate.
8. The actual trial is conducted in a courtroom-like proceeding including examination and cross-examination of witnesses. During questioning, Senators remain silent, directing all questions in writing to the Chief Justice.
9. After hearing all of the evidence and closing arguments, the Senate deliberates behind closed doors then votes in open session on whether to convict or acquit the President. The vote to convict must be by a two thirds majority, or 67 Senators. If this occurs, the President is removed from office and is succeeded by the Vice President. The Senate’s verdict is final and there is no right of appeal.
To Devildog,
I don’t know what the hell are you talking about. If Clinton still is the president, we certainly would not in this housing mess.
Bush W is worse than just a crook, he should have been impeached several years ago, and if we didn’t have the Congress from hell, or better known as worthless wimps, he would have been impeached. Our government is no better than they have in Venezuela.
“The only ‘historical’ examples offerred by 95% of the US …”
Perfect. Another witless generalization. You are truly tedious.
No housing mess if Clinton were President.
Wow he is even more magical than I thought. I really like the way he prevented the Dot Com bubble, oh wait, he didn’t. Maybe he could have installed some kind of force field around the WTC and the Pentagon to prevent the 9/11 attacks. Hmm, with all of that power I guess I wish he was still the President.
Clinton’s administration begged the Bushies to pay attention to Al Queda when Bush took office in January 2001. But oh no, they didn’t want to hear any of it, rather Cheney held his secret meetings with the oil companies and ‘lil Bush took off to his faux ranch in Texas. So, yes, there is some magical power in keeping your eye on the ball.
So the GSE’s are going hat in hand to the gubmint. Is socialized housing next? Put all the food stampers in McMansions? How do they propose to pay for this?
we already have that
hud-fha
these gov clerks making over a million kinda annoy me as a taxpayer
“Put all the food stampers in McMansions?”
You mean some are not already?
Those are the squatters, gubmint didn’t put them there.
You mean some are not already?
The delay in putting food stampers in McMansions was due to a shortage in food stamps. Once the goverment prints more food stamps than it has in revenues, the expansion in McMansions will resume.
WTF: record low interest rates down to 1% a few years ago. I thought it was a super great deal but didn’t buy for other reasons. G-span must be on acid or something. He’s just passing the blame. Former gold bug Rand disciple turned government meddler.
Greenspan is actually using the same form of argument many of us use when arguing against bailing out FB’s.
Easy financing did not force any borrower to buy a house for more than he could afford.
Likewise, low interest rates did not force anyone to lend money imprudently.
You can quite reasonably argue that the responsibility lies with the borrower in the first case and with the lender in the second case. However, it is disingenuous to claim that just because no one was *forced* to act stupidly, that they weren’t going to act stupidly of their own free will. It is perfectly obvious in both cases that they would.
I’m actually agree with Greenspan that the cause of asset bubbles is just “irrational exuberance.” Low interest rates were just an enabler.
“‘Demand .. was driven by the expectation of rising prices ..snip..
‘If low adjustable-rate financing had not been available, most of the demand would have been financed with fixed rate, long-term mortgages. In fact, home prices continued to rise for two years subsequent to the peak of ARM originations.’”
He’s got a point there, imo. Bubble buyers did not care about prices, and did not really care about monthly costs. They were all sure a continuing rise in price would make it work.
Just as the Fed will learn that low rates today cannot (and will not) force anyone to borrow, low rates then did not force anyone to borrow.
Low rates did not force anyone to borrow.
Low rates casue investors to go looking for better returns, and they found those returns in MBS. The demand for MBS disconnect lenders from risk, and resulted in lower lending standards. Lower lending standards created false demand and decoupled price from affordability.
Low rates were the trigger. Sure, once the trigger was pulled the detonation had to run its course. But, gubment could have dampened it a lot with new regulations of the mortgage industry or stricter enforcement of the existing regulation.
The truth is, that gubments were too busy spending the increased tax revenues to bother asking if it was going to result in a crash.
I don’t think low rates were the trigger. The trigger was simple — a willingness to lend with no proof of income and a loan of up to 100% of financing. They would still have bought at 5% ‘teaser’.
That was a sympton of the underlying factor of too much cash laying around. When cash is cheap, people get lots of it, and when they have lots of it, they spend it on ever more risky investments. The changing standards was just a form of “lower price” money trickling down to individual borrowers.
Warren Buffet, about a week or so ago (maybe a few weeks?), bought some junk bonds at something like an 11% yield I think it was. He had a ton of cash and decided to put some of it in a more risky investment.
On the other hand, when capital is hard to come by, just like anything else people are more careful with it. So in net, when the Fed changes the availability of money, it distorts how people would otherwise behave with regard to that money (riskier investments, malinvestments, lower standards, etc).
This blame game is played on a circular board .. round and round we go and no matter where you stop, you win.
also… low rates did not force lenders to punt all lending standards. They did not have to abandon evaluating risk appropriately and lending accordingly.
I didn’t buy at 1% because I was still taking personal responsibility for my finances and assessing risks. At the time there was trouble in my industry and while I ultimately remained employed, during the tumultuous time my concern was preparation for the worst. It would have been stupid to yoke myself to a debt without reasonable assurance of financial stability.
Lenders are supposed to by definition review applications for loans with scrutiny and evaluate repayment ability and assess risk accurately.
They failed to do their fundamental job. Low interest rates didn’t cause the failure. It merely served as an opportunity to lure in potentially more borrowers into their customer pool. They ultimately threw all fiduciary responsibility out the window. The blame belongs with the greedy lenders. Others can share in the blame for being part of the series of events that resulted in this ongoing crash… but the lenders weren’t forced at gunpoint to abandon lending standards. They were compelled by greed.
If low adjustable-rate financing had not been available, most of the demand would have been financed with fixed rate, long-term mortgages.
Well - no he does not have a point.
(1) Payments on prinicpal and interest with an ARM were lower at the outset than they would have been with a fixed. People would either not have bought or bought something less expensive if they had had to go with a fixed.
(2) Payments were a LOT LOT lower with option ARMS and hybrid ARMS than they would have been with a fixed. Instead of a $450,000 townhouse with an option ARM, the buyer would have ended up with a $200,000 or so townhouse.
If all loans had been fixed, because of the payment/income relationship, buyers would have been purchasing LESS expensive properties. That would have depressed the price surge. Not enough buyers for the $500,000 McMansion? Lower the price or build smaller McMansions in order to lower the price.
Even if buyers didn’t care about the price, they still had to be able to make the montly payment until their hash-induced dreams of appreciation and riches came true.
(3) OF COURSE prices contiuned to rise even after the largest number of ARMs were orginiated. They were still peddling ARMs (and getting looser in the lending standards.) There were still buyers fueling demand with their ARMs in hand and the sellers were still believing they could get rich.
The demand for ARMs didn’t decline because buyers were backing off from the prices. The demand declined because
(a) sooner or later you run out of fools to buy your snake oil; and
(b) sooner or later some of the fools stop being fools and get out of the game when they see the on-rushing train.
we gotta remember it was a mania .. crazy from the get-go. People don’t think logically or react reasonably. No matter what the barriers, the speculators and investors and J6Pk FBs would have found a way to get into the hot market.
“Against stupidity, the gods themselves contend in vain.”
Freidrich Schiller “Die Jungfrau von Orleans” (Maid of Orleans) 1801
Instead of a $450,000 townhouse with an option ARM, the buyer would have ended up with a $200,000 or so townhouse.
Or no townhouse at all, as before the bubble began to deflate, I can’t remember seeing a listing for a townhouse at that price…
I do think that its mostly the banks fault. If the banks had not lowered their standards and willingly loaned $$ to anyone who could breathe, buyers would have been limited to properties they could afford. The runup in prices would not have occurred. But the banks wanted to make $$ selling the securities to Wall Street, and they would stop at nothing to make as much $$ as they could. Consequences be damned.
Greenspan is actually using the same form of argument many of us use when arguing against bailing out FB’s.
Easy financing did not force any borrower to buy a house for more than he could afford.
Likewise, low interest rates did not force anyone to lend money imprudently.
You can quite reasonably argue that the responsibility lies with the borrower in the first case and with the lender in the second case. However, it is disingenuous to claim that just because no one was *forced* to act stupidly, that they weren’t going to act stupidly of their own free will. It is perfectly obvious in both cases that they would.
I actually agree with Greenspan that the cause of asset bubbles is just “irrational exuberance.” Low interest rates were just an enabler.
Yes, Greenspan was an accident waiting to happen… and, it did happen, unfortunately.
Time for the Greenspanvilles, like Hoovervilles of old!
I will keep saying this till i am blue in the face:
Most Crisis happen because nobody in Greenspan’s, Bernake’s Bush’s any corporate executives have employees like me being hired who would alert my boss to these types of potential problems, since i read a lot of alternative media.
I’ll bet you your next paycheck nobody in Schumer’s or Hillary or heck even Obama’s office reads this blog. Or else they would not be in favor of a bailout.
Most bosses I’ve worked for would be insulted if anyone tried to tell them anything worthwhile. Last one was insulted by anyone trying to tell him that there was anything he didn’t know. So of course he bumbled about and walked into every institutional minefield and got paid big bucks to try to undo all his screwups. He moved to IE and was shopping for houses within a couple of days of arriving. I suggested in early 06 that maybe renting a year because it looked like the market was poised to crash and it was a new job and area for him. He asked if I had RE license and when I said no he said he saw no reason to listen to me. Paid $900K + $200K in upgrades!
Aw, a heartwarming story just in time for the holidays. Hope he enjoys the 6-figure price drop.
“Instead he argues in the Wall Street Journal that the credit markets melted down in August because ‘risk had become increasingly underpriced as market euphoria, fostered by an unprecedented global growth rate, gained cumulative traction.’”
No one wants to hear your inane blatherings as you attempt to shift your blame for the coming implosion you senile old fool.
Gotta disagree with you on this one. Although the fed may have made it possible they didn’t convince people to “buy” more McMansion than they could afford–the realtorwhores did that. Yes, many contributed but who did the most cheerleading? Honestly, how many joe 6 packs even know who Greenspan is? How many read economic reports or even understand one? I do now blame our gov for delaying the inevitable housing price drop since this bust began.
I guess I am the minority here…but being in the minority is what brought me to this blog and my happy rental situation. What is most important is how do we make money on this fiasco
we are a minority within a minority..
as far as making money, what i gleaned from a previous column says go short on the State of New York.
It will be worse elsewhere, in my view. But that doesn’t mean it will be good here. New Yorkers are used to paying taxes and not getting public services. The rest of the country is in for a rude surprise.
It will be worse in NY because everyone (yourself included) thinks it is different there. Watch “Cinderella Man” to see how different it turned out in the 1930s.
Are you suggesting the Fed does not ‘control’ prevailing interest rates and consequently has no influence over business investment decisions?
The Fed enabled the mess, but the mortgage bankers pulled the trigger by writing suicide loans.
Yes they have influence, but how much is determined by me the buyer. Cars are at 60 mo no finance charge, but if the car is a POS and over priced do I blame the bank after I bought it? of course not. Caveat Emptor
Look at mrtgage rates now. Fed rate cuts didn’t do much to lower mortgage rates. There has been a recent detachment which is new since Aug.
Don’t get me wrong, I dont think the fed did a stellar job given the obvious diffuse asset inflation but they did not generate the mad dash to buy a house “before we run out of land” That was RE whore marketing.
Men go mad in herds but find reality one at a time.
Fed absolutely does not control the lending rates. In fact, fed has nothing to do with them. If someone reminds me tomorrow i will break it down the way it was broken down by a pair of EVPs from different banks to me when I asked them “How on earth are you willing to offer me a prime - 2% unsecured credit line or 2% APR credit line secured by some equipment?” The overall answer was “Well, duh, we have been selling shares and that’s how we are getting capital”
Greenspan could care less about owning up to this mess as he was the master of market bubbles that have ruined the finances of millions of people. In fact, he was seen as the hero for lowering interest rates to 1% in mid 2003 in response to the dot com meltdown that he created.
“And he says that if it hadn’t been problems with rising defaults of subprime mortgages and declining home prices, some other problem in some other market would have triggered the crisis.”
Only non-attentive fools believe this crap.
Translation to Greenspan’s remarks:
“I didn’t know it was loaded!”
Weekend Topic:
Is it time to disband the FED? They seem to be doing more harm than good. Exhibit A: dotCom bubble. Exhibit B: housing bubble. Exhibit C: blatant manipulation of stock market.
Is it time to disband the FED?
No, the global economy will do it.
“By reducing the federal funds rate to a mere 1 percent in 2003 and refusing to increase it for a year, Greenspan and the Federal Reserve created the economic conditions for rampant investor speculation and a loosening of loan underwriting standards as lenders frantically competed for market share.”
Weird Al Greenspankovic & co. were looking through an entirely different pair of rose-colored glasses, methinks…
Syron predicted home prices would ultimately bottom out at an average of 10 percent below their peaks,
dude, it’s already off 10 headed for 20%
Better get those apple carts out, Freddie and Fannie, so you can lay claim to the best street corners.
10% is in the rearview mirror.
this will really make you mad:
WASHINGTON (AP) — A House committee is scheduled to vote Wednesday on legislation that would permit judges to shrink the size of home loans for bankrupt homeowners - a mortgage-mess remedy supported by consumer advocates and ardently opposed by the lending industry.
Many Democrats say the proposal is a better way to help homeowners than a plan to freeze interest rates announced by the Bush administration last week and negotiated with lenders and investors
http://tinyurl.com/2f64yh
Talk about freezing up the residential credit markets. Wow. This would be unbelievable interference in a private contract. How would you like to be a pensioner who gets hurt because your pension fund essentially takes a hit because the government TOOK YOUR MONEY and gave it to someone who made a foolish decision.
If you’re on a pension and your holdings are are backed by RMBS’s, you’ll be needing to get down to Wal-Mart and apply for a job. Your pension is toast.
Can you say “Moral Hazard”?
While this will slow the rate of forclosures on the market, it will kill the credit markets. Housing prices will crash.
This move in openly deflationary as well. Deflating the amount of debt and contracting money supply.
The moral hazzard is so bad. Basically you tell the wage earner to quit their job and work at McDonalds so you go bankrupt. Run up lots of credit card debt and sell what you buy off and don’t report it.
Then get a payment plan in place along with a cram down. Poof 300-500K of income!
Then go back to find better work. I’m sure I have this slightly screwed up but if you are in a two wage household you get a tax divorce and the wife “rents a room”. Give the she ran off and left the kids. Built in sob story and candidate for big cram down.
After judge leaves wife goes back to work. You have damaged credit but HUGE amounts of cash in a deflating enviroment.
Basically you tell the wage earner to quit their job and work at McDonalds so you go bankrupt. Run up lots of credit card debt and sell what you buy off and don’t report it.
NO THEY DO NOT GET A CRAM DOWN!!
Only if they can get through a CHpt 13 reorganziation which means having the income to pay the bills as ordered by the court for 3-5 years.
Don’t have the income because quit or lost a job? Bills to high every to get paid even in part? Get converted to a Chpt 7 and everything goes and the lender forecloses.
Okay these thing is rejecting a link to a written explaination that is making all of you hysterical without cause:
(1) Cram downs only happen in Chpt 13 reorganizations - not a Chpt 7 liquidation.
(2) Bankruptcy courts modify contracts all the time in a reorganizaton -secured, unsecured,….
(3) Until just a few years ago, bankruptcy courts modified mortgages and did cram downs.
(4) In a reorganization, the debtor has to follow thecourt payment plan for 3-5 years.
(5) 60% of those who start in a Chpt 13 end up in a liquidation because they can’t keep up the payment schedule. They go into a Chpt 7 and the lender forecloses (unless they can catch up and stay current on the mortgage.)
If you knownothngabout bnakruptcy law, you don’t understand the history of it or what goes on.
Calm down.
Isn’t this the way it was before they changed the BK laws a few years ago?
And won’t Bush veto this? It favors people over banks, and that’s not his MO.
Correct. Although the change that stopped BK courts from modifying mortgages was in the 90s.
It is really no big deal. When the airlines were all whizzing in and out of bankruptcy reorg, the loans for all their planes and equipment were being modified the same way.
Not a big shock to the credit folks that such things can happen.
(BTW, sorry for the typos above. My hands are not doing very well today on the keyboard. I was always such a terrible proofreader, & I paid my staff very well to do it for me. I ’see’ what I meant to type and not what I did.)
And how about when builders declare bankruptcy? Buyers lose their deposits. Some people lost $100k on a Kara development here that went under last year.
They get in line with all the other unsecured creditors. Odds are not good.
HUGE mistake to ever put down a deposit without it being locked in an escrow account that requires the consent of both the seller and buyer for the release of the funds. Developerneeds money - they borrow it. They do not use the deposit.
Not sure yet what I think about this specific proposal, but in general I think that easier bankruptcy makes lenders more cautious. Borrowers will always tend to be optimistic and to take too much risk - naive ones even more so. The harder the hit lenders take when things go wrong, the fewer risky loans they will make. The root of today’s problem is that there was/is too much easy credit. The sooner we unwind this, the better: let the borrowers go bankrupt and do without credit for awhile, let the lenders take their losses, let prices drop, and let everyone learn a lesson and not do it again for another 50 years or so.
“When a person of Greenspan’s influence and stature promotes alternative mortgage products, lenders and consumers listen.”
Only if they’re lazy morons. “Influence and stature” (i.e. appearances, a front, facade, Potemkin Village) have no bearing on whether someone is telling the truth. Do your own DD. Verify everything.
Aparently there is a great number of Americans (and foreign investors for that matter) that are lazy morons.
They should have at least checked to make sure that the things they put their money into had AAA ratings by Moody’s and/or S&P.
Oh, wait … they did do that.
Nope - they should have realized that anything aside from cash on hand involves risk. Banks fail, people lie, housing goes down, rating agency employees are thieves and liars and do not have your interests in mind.
There is ALWAYS risk when you invest - there is no such thing as a SAFE investment - that is what the ‘return’ is for - to compensate for RISK. If you want to put your money at RISK and don’t want to determine the amount of risk on your own - pay someone else to do it - but don’t whine when it turns out they are lying thieves.
Hint - most everyone on Wall Street is a lying thief. You give your money to a lying thief, you better plan on losing it.
There is no such thing as a free lunch. You can’t have your cake and eat it too.
Agreed, there is no such thing as a “safe” investment, but some investments are riskier than others. Bond ratings are supposed to reflect that risk, those AAA bonds were incorrectly rated, and it wasn’t an accident. Lots of people made big bucks in the process.
Syron does an extended dive, a 30% gainer, with full rotation, out-remorsing his rival easily, into the pool of depression, he goes…
Here’s the 1st set of Marks to Model:
5.9 6.0 5.8 6.0 5.7 6.0 5.9
“But Syron outdid Mudd in expressing remorse for past business decisions and in describing the trouble that may lie ahead. If home prices decline by 30 percent, as one noted economist has said could happen, ‘We’re all going long apples and boxes to sell them in,’ Syron said, invoking an image from the Great Depression.”
Yeah, because leaving housing at current, absurdly unaffordable levels is GREAT for the economy, as is making debt-slaves out of everyone. Maybe we’ll just have massive wage inflation to “fix” the housing problem - right!
“While the mortgage crisis has brought a rising wave of foreclosure notices into public view, less evident have been ‘pictures of people standing with furniture on the lawn’ after being forcibly evicted from their homes, Syron said. ‘As that begins to happen, and it will happen, I am afraid of the impact that this has.’”
I knew a lot of people who bought into the “buy as much house as possible” theory to the point where they really didn’t have much in the way of furniture. So, at least they won’t have to stand in the lawn with it. There’s a bright side to everything!
We saw something similar back in the late 80s. Mega price development with the dirt starting at $500000 for 5 acres and the house then $1000000 - in 1986. Across the road you could buy a whole farm for $4000 an acre.
People bought the things - after all,they were moving out to fox hunting country don’t cha know and would get to hobnob with all of us who were into the ‘country sports’.
About 2 years later, the guy from the electric company was telling me that he had more turnoff/turnon call outs after service was cut off for non-payment in that development than anywhere else in town. They couldn’t afford the electric to run the AC.
We lived about 1 mile away and found it very funny. The suckers didn’t realize that those of us who lived there for the ‘country sports’ bought a lot lot lot less expensive properties because we were chronically broke from the costs of the livestock and the sports.
‘country sports’
Like what? Cow tipping?
“I knew a lot of people who bought into the “buy as much house as possible” theory…”
I know a lot of these folks also here in the Bay Area. No one wanted a modest first home. No one wanted a townhome. Everyone stretched into homes that should be way beyond a first time buyer UNLESS you can fully document that you can geuinely afford that place.
Got a bit of Suzie Orman’s show on CNBC last night. Even she is now saying if you don’t have a 20% down payment and can’t afford a fixed mortgage for 15 or 30 years, you can’t afford to buy a house.
Amen.
Tell me about the “buy as much home as you can” theorists. One guy I know subscribed to that. He bought a home then tore out the back end and rebuilt. Also redid the backyard. Must have spent a boatload of coin. This is all in a nice ‘hood too. He also had a side company going, which was an albatross around his neck. Finally sold that, but the guy is still working long hard hours and he and the wife have two kids and an au pair for them since she works long hard hours as well.
Life is too short to be chasing some Madison Ave. dream. Give me the easy route, i.e. short commute, home lunches, wife or husband (our case wife) at home, debt free, HOA free, maintenance free, etc.
I just don’t get it. Why do people feel the need to live like this? Life is too short for this kind of stress and pressure to make ends meet.
OCDan, you’re describing my parents’ back-door neighbors to a tee. If these people haven’t HELOC-ed themselves into the stratosphere, I’d be shocked. My family’s waiting for the big crash. (Did I mention that these neighbors own a construction business, one that my mother suspects is in a major slowdown?)
So Agree - what most people think is the “american dream” I see as a nightmare. Clawing your way through job BS, wage slaving for an over sized and over priced mcmansion that costs way too much to heat & cool, takes forever to clean and keeps all the family in their separate cages. And to get from your job to your house, you have the pleasure of rage inducing commutes to places too far from home to have any relationship kids’ school. Spending what little time off from the job buying unnecessary crap, eating at overpriced underwhelming restaurants and trying to cram in every chore you don’t have time for during the week. It’s all rats on the wheel looking to me.
I toured one of those McManisons I mentioned above -friend had an art exhibition at them for special suckers….uh ‘invitees.’ I had known the realtor for years and he ws one of the good ones.
I walked into this 1986 $$ $1,000,000 house, looked up at the 28 ft vaulted ceilings and said “how do you clean out the cobwebs? and, oh my god - the heating bill!” in a tone heard by 1/2 a dozen invitee/suckers. The realtor almost went through the floor and hustled me off with a ‘let me show you the master bedroom wing’ and muttered all the way “For chrissakes Ann SHUT UP - the builder can’t have them thinking about that stuff!”
Would have been nice to hear her saying that a couple of years ago when it may have mattered to a few folks.
Auger, in most cases it would have fallen on deaf ears. People who are about to commit financial suicide for 30 years don’t want to hear it. They are only concerned with keeping up. Warp 10 on that HELOC!
No one wanted a townhome.
Being a single person, a townhome would be fine by me, if it means that the owner’s association keeps their noses out of my garage (I like to do my own light-to-medium maintenance/repair work on my vehicles).
“Greenspan shunned increased regulations, even though he has now admitted knowing about abuses in the subprime loan industry.”
Which further makes the case for strong consumer protection laws considering real estate transactions involved hundreds of thousands of $$$$.
the regs and gov “help” created this monster
read the community banking bill
there’s no free market here
True consumer-friendly regulation would have helped –e.g., requiring full-doc for all loans, requiring 10% down, not allowing negative amortization, etc.
Instead, what we got were moral hazards: Greenspan’s 1%, tax subsidies for speculators, and socialized risk for the banksters (GSEs & their Wall Street buddies slicing/dicing toxic crap into MBS/CDOs & selling to investors).
Let’s not confuse MORAL HAZARD, SUBSIDY or BAILOUT with real REGULATION.
“True consumer-friendly regulation would have helped –e.g., requiring full-doc for all loans, requiring 10% down, not allowing negative amortization, etc.”
EXACTLY. There was no mechanism in place to protect the end user of the garbage that was legally marketed to them. The sooner they legislate some laws protecting the end user, the better off we’ll be. Those new laws can’t be passed soon enough.
anyone have a summary of the new financial alchemy plan ?
whoops, it looks like it may be running out of gas already
It creates a lot of liquidity.
Liquidity is not the problem, the problem is credit insolvency.
There is no moneys, there is no good credit, there are a bunch of alcoholics looking at a cheap discount booze store without any acceptable means to buy.
This goldilocks action, the last refuge of the incompetent, kills the dollar.
There was a dude on CNBC when I was home for lunch giving this exact argument.
Banks won’t lend to each other because they don’t trust they’ll get paid back. There is plenty of liquidity, just an unwillingness to lend. Lower interest rates won’t help.
This latest move to coordinate injections is, in his opinion, a sign of weakness. It says things are worse than previously believed. It makes people LESS likely to lend to each other.
The latest action by the Fed to coordinate liquidity injections by the world central banks reminds me of King Canute sitting on his throne by the seaside surrounded by his courtiers and ordering the incoming tide to stop. When the tide washed over him he turned to his subjects and told them about the limitation of his powers. The problem with the Fed and the other central bankers is that they don’t want to accept that they have similar limitations.
‘…Maybe he can donate the profits of his book to those families who have already lost their homes.”
Good idea! Assuming anyone actually IS buying the book written by such an astoundingly short-sighted, craven, foolish, and just plain old idiotic wobble-lipped toady.
Why would they? The moany man obviously got everything wrong, and then deliberately made things waaaayyyy wronger.
Come on. Don’t be so hard on Mr. Magoo. He really does believe everything he says.
Gal, you were on the roll of the day. Such words are to live for.
“While the mortgage crisis has brought a rising wave of foreclosure notices into public view, less evident have been ‘pictures of people standing with furniture on the lawn’ after being forcibly evicted from their homes, Syron said.”
Polish the resume, Dick. You are too honest for the job.
Greenspan, one term describes him; Jerk-Off.
When I rough-estimated some numbers a year ago and said that industry losses could be almost a trillion dollars, I admitted at the time that it sounded like crack-monkey numbers pulled from a hat, and that nobody would believe losses could get that large. It sounds a lot more realistic now, when the lenders wrote off $46 billion last quarter and are talking about their losses doubling this quarter. Using those amounts, in just two quarters we have $138 billion in losses. There’s no reason to think that the hemorrhage of losses will be stemmed in 1q 2008 either because nothing has changed. Foreclosures are still at very high levels, REOs are high, the real estate market is falling. This would add another $100 bn or so to the total, nearing or breaching a quarter of a trillion dollars in write-offs in just three quarters.
So, who wants to buy some derivatives or MBSs?
$10 trillion in mortgages was created the last several years, not to mention inflated stock prices on wall street. I think the losses will end up being considerably greater than $1 trillion.
I saw a $450B number yesterday as possible exposure. Not crazy. Large banks keep dropping numbers like $10B here and there, and this doesn’t mention all the smaller entities that may not so publicly reveal their losses.
Kia, I think before all is said and done by 2012, when the resets start to slow (although who really knows), but based on that new chart making the rounds, I would say that you are probably half right.
I am thinking that it will be closer to 2 tril.
BTW, I think Hoz posted the list of losses yesterday. Total was already greater than 70 Bil. Which if doubled for the next quarter would put us at 200+bil.
One trillion in financial losses is not crazy. After all, the back of the envelope decline in home prices required to restore affordability is $5 trillion.
“One trillion in financial losses is not crazy.”
The funny thing is, if you would have said that 8 months ago, people would have looked at you like you were a little kid that didn’t understand “big numbers”.
No, no, Billy, that’s $5 BILLION, *not* TRILLION. Cute kid.
But arroyo, he did post that trillion dollar number. I watch for Kia’s posts and I remember seeing that and doing a double-take. He’s not one for hyperbole, so that number stuck with me.
Me. But they are still overpriced. Big time. When they start quoting 55c on a dollar, i will pick up some at 25c on a dollar.
Ask not what inning you are in, but what you can do for your company…
“‘None of us know what inning we are in,’ CEO Kennedy Thompson told investors.”
And yet these clods are paid enormous sums to know these things.
And if it turns out that they really didn’t know these things and end up costing their outfits money, they get paid enormous sums to resign.
Translation: we know, but if we say it out loud, our company’s stock will crash through the floor, and our stock options won’t like that.
If home prices decline by 30 percent, as one noted economist has said could happen, ‘We’re all going long apples and boxes to sell them in,’ Syron said, invoking an image from the Great Depression.”
total complete BS. we had much greater than that in appreciation. He drank the kool aide.
This is BS in the major markets. 30% off 700 still means you need a 490K loan. Still won’t work for people. I talk to people all the time and they say they couldn’t afford to buy their own home at half a mil and these people make decent money, 60-100K.
Homes have to come back to 200-300K range even in South OC.
“‘None of us know what inning we are in,’ CEO Kennedy Thompson told investors.”
It’s the first day of a five day test and the players are breaking for tea.
“When a person of Greenspan’s influence and stature promotes alternative mortgage products, lenders and consumers listen.”
I still think AG was not aware of what was going on with the newer ARMs. Not an excuse, but it’s scary to think how out of touch they are at the top. An ARM at a decent rate for 700+ fico would have been okay per se, but not the teaser-rate, high-to-higher-rate monstrosities they morphed into.
Freddie Mac = Top Ramen
“SBA officials say they cannot sell off investments, even the good ones, because the market for them is bad. They hope that if held long enough, they will eventually pay off.”
Dang it! Shoulda held on to those Enron shares a little longer.
Japan all over again
“Local governments will be able to withdraw no more than a quarter of the $12 billion they have invested in a Florida-run investment fund before next spring — because the fund doesn’t want to sell the investments at a loss.”
They’re not just going to give it away.
And sure, wink, wink, the market value of those MBS/CDO/SIV is going to improve. They are going to wait until most of the smoke has cleared and quietly usher that dead paper out the back door, replaced by something the Florida taxpayers paid for some other way.
“SBA officials say they cannot sell off investments, even the good ones, because the market for them is bad. They hope that if held long enough, they will eventually pay off.”
And i’m holding all my losing horse racing tickets and lottery tickets in the hope that if I hold them long enough, they will eventually pay off.
I noticed this as well. It’s apparent that whoever runs this investment pool doesn’t understand basic economics. If there is no market for something by definition it is not a good investment.
It could be (certainly should be) that the securities in the fund have short maturities, due within the next 12 months or less. I can easily imagine that even securities which will pay as scheduled would be impossible to sell at full value in the present market.
“Three-quarters of Spain’s 60,000 property companies may end up bankrupt..”
I wonder if Spain is to the U.S. like Florida is the the national market?
spain is still way hot on HIVtv
‘In my judgment, however, the impact on demand for homes financed with ARMs was not major.’”
BS. The fact that something like 77% of all home buyers in the Bay Area used some form of ARM, option-A loans is proof enough that Mr Greenspan is entirely incorrect.
“BS. The fact that something like 77% of all home buyers in the Bay Area used some form of ARM, option-A loans is proof enough that Mr Greenspan is entirely incorrect.”
Absolutely. While people were signing on for exotic loans, fixed rate products were at lows not seen for decades. But those are harder to qualify for, AND you have to pay principle + interest and have no payment flexibility.
While people were signing on for exotic loans, fixed rate products were at lows not seen for decades. But those are harder to qualify for, AND you have to pay principle + interest and have no payment flexibility.
One need look no farther than the lender.
“When a person of Greenspan’s influence and stature promotes alternative mortgage products, lenders and consumers listen.”
When E.F. Greenspan talked, unfortunately people listened.
“When Wanda opens her mouth even EF Hutton shuts up.”
from “Wanda whips Wall Street”
[I]f these go down and a whole pile of SIVs (Structured Investment Vehicles) elsewhere go down.
Dodging dodgy debts, Dodge?
This new plan is doomed to fail, banks won’t lend and folks won’t buy until asset prices stabilize. Some knife catchers out there but not enough to matter.
Buffett: “You can’t turn a financial toad (into a prince) by kissing it or by securitizing it or by transferring its ownership to somebody else,”
P.S. Since he has joined the chorus of gloomsters forecasting a recession, should we conclude he is backing HC?
http://www.reuters.com/article/bankingFinancial/idUSN1155908120071212
http://www.teaparty07.com
let the revolution begin!
“…to protest the oppressive and unconstitutional inflation tax -
which has enabled a flawed foreign policy, a costly war and the sacrificing of our liberties here at home.”
Shrub & Greenspent’s Legacy: Together, they enjoyed warm & distant reflections of their past “Official Policies”… while dining on “wagyu beef short ribs”:
This is… the “coming attraction”… from China no less:
Lao Tzu…Tao Te Ching… Translation by Gia Fu Feng and Jane English
Chapter: Seventy-Five
Why are the people starving?
Because the rulers eat up the money in taxes.
Therefore the people are starving.
Why are the people rebellious?
Because the rulers interfere too much.
Therefore they are rebellious.
Why do the people think so little of death?
Because the rulers demand too much of life.
Therefore the people take death lightly.
Having little to live on, one knows better than to value life too much.
Where did Greenie learn to use the language he does? I have never heard anyone use words like he does that tend to deflect the listener from reality.
He’s on record as saying he invented “Greenspeak” to obfuscate what he was really saying and mislead his listeners without being accused of lieing at a later date.
i think greenspan once said, “if you think you understood what i said, then either i misspoke or you are mistaken.”
success = humpin the taxpayers
Neighborhood Housing Services of Greater Cleveland. “If we have 100 people walk through the door, we probably have a success rate of 20 to 25 percent.
What a flabby assed, lying, p.o.s Mr. Magoo is with his
“It’s not my fault,” crap. You could have gone into any Borders or Barnes and Noble bookstores over the past 5 years and picked a dozen books from, “The Mess Than Greenspan Made,” to “The Coming Real Estate Crash,” off the shelf by authors de-crying that dickhead’s methods which centered around one thing - printing confetti dollars 24/7, three hundred and sixty five days a year for several years….but guess what? Don’t worry about a Washington insider Hack like Mr. Magoo. He will still drag his flabby, wrinkled sorry ass around the rubber chicken circuit, collecting his $75,000 fee, telling people how the economy works.
Greenspan should be charged with criminal fraud for the way he fu*ked up the the US economy.
it aint just Greenie….
US cannot pay for…Home Loan Bailout, Social Security Bailout, Iraq War…. all due and payable
the farce is at zero hour… the longer the bullies wait for the number to come in on the stock market the smaller the exits are gonna be when the rush is on for the exit…..its gonna be brutal, ugly, and painful.
I swear to God. I’ve never seen ANYTHING like today. And I’ve been doing this for well over 20 ytears.
I take it you are going to have Mr. Magoo along with Ebenezer Scrooge over for Christmas dinner this year.
Sheesh, tell us how you really feel about ol’ saggy face & lips.
Funny…my mother-in-law, fisher extraordinaire of discount DVD bins, just picked up an old cartoon “Mr. Magoo’s Christmas Carol,” with Magoo as a passable Scrooge.
The kids love it. Especially Christmas Present’s subtle eye-roll when Magoo/Scrooge says how much he pays Bob Cratchit (i.e. only slightly less than my Scroogy firm pays me.)
Now, now - as tight-fisted as Scrooge was, he didn’t try to take Cratchett’s house, nor did he manage to bring down England’s financial system.
Truthfully, Scrooge seems like a grumpy saint who at least did his job when compared to the manipulative scumbag that is Greenspud (and the rest of his kind).
“The chief executives for two of the nation’s dominant mortgage-finance companies traveled to Wall Street yesterday. Richard F. Syron, Freddie Mac CEO and Fannie Mae CEO, Daniel H. Mudd, forecast continued declines in home prices. Syron predicted home prices would ultimately bottom out at an average of 10 percent below their peaks, and Mudd predicted average peak-to-trough declines of 10 to 12 percent nationally.”
Mac and Mae went up the hill
To fetch a pail of water.
Mac fell down and broke his crown,
And Mae came tumbling after.
We out-discredited the 3rd World, that’s the root cause?
“‘The root of the current crisis, as I see it, lies back in the aftermath of the Cold War, when…market capitalism quietly, but rapidly, displaced much of the discredited central planning that was so prevalent in the Third World,’ Greenspan wrote.”
Shorter Greenspan:
The Berlin Wall fell down in 1989, therefore I had to jack interest rates down to insane bubble-blowing levels in 2002.
“A credit crunch caused by the U.S. subprime mortgage crisis has hit Kazakhstan’s fast-growing banking sector hard, prompting Standard & Poor to downgrade the country’s sovereign ratings in October. On Tuesday, Standard & Poor’s cut its outlook again, this time to negative from stable for eight Kazakh banks.”
Decision time for me…
Do I get rid of my 1st National Bank of Borat stocks?
Bulls: It’s not helping but we want more.
Bears: It hurts between the butt cheeks.
BB via CNBC’s Liesman: Who me? I know nothing.
Is it time to disband the FED?
I don’t understand…it’s OKAY for home prices to go up 120% but it’s NOT OKAY for home prices to come down 30%? What a bunch of a#oles to say the least.
You obviously have not gotten the memo that says everything just goes up in this country no matter how it is done or what its effects are.
For example…
-Home prices
-Barry Bonds homerun total
-Church growth (this one I think I love the most)
-Business growth
-Stock market (this one gives the megachurch people a run)
-PMs
-Beanie Babies
-Sportscards
-insert your own here
“Mmmm…yeahhhh..did you get the memo ?” — Lumberg
Lewis said fourth-quarter earnings will be quite “disappointing” and credit markets “will probably remain challenging into next year.”
I know I’ll be contributing my fair share of disappointment, ’cuz I sure as hell won’t be using my BofA credit cards to be making big-dollar purchases anytime soon.
The new judge of American Idle…
“Investing agencies, including many in Central Florida, also found out that at least $350 million of their cash is tied up in investments whose ratings are so low that their value ‘truly is a question mark,’ according to Simon Mendelson, a top manager with BlackRock, an investment firm hired by the state to salvage the pool.”
“In the article, Greenspan predicted credit markets would recover from the current crisis only when the inventories of newly built homes have been mostly liquidated, and deflation in housing prices ends.”
There is a prediction which is hard to argue with…
“credit markets would recover…when…deflation in housing prices ends.”
Duh. When the collateral can get back to covering the loans, investors will stop panicking. Thanks for the insight, Alan.
Ad, as far as I know, this in itself is not a true statement…some of these loans need house prices to get back to 2005-2006 PEAK prices, so not only do you need to stop house price deflation, you need to start house price *inflation* again to make everything “safe” in the lending arena. If the last housing crash was any indication, you would have to wait 10 years (or more) to see the same (nominal) prices as you saw at the peak.
This “credit thingy” could take a while.
“‘So everybody, including the international banks, have a real interest in trying to somehow get this thing resolved because if these go down and a whole pile of SIVs (Structured Investment Vehicles) elsewhere go down, then you’ve got an immense number of these assets being dumped on the market at the same time,’ he said.”
Be careful…
This particular type of vehicle is prone to rollover and play dead.
As many people think that gov rarely downsizes, I thought I would share a link: Pentagon prepares for downsizing
(although they are contractors not civil service or armed forces)
http://www.washingtonpost.com/wp-dyn/content/story/2007/12/11/ST2007121102370.html?hpid=topnews
not since 1929, yo
they were even hiring during the depresion
…”The Defense Department has said that it plans to send about 100,000 civil service employees home without pay because of a budget dispute…”
Sounds like civil service to me?
Ben, when you wrote:
“Greenspan: An Accident Waiting To Happen”
did you actually mean
“Greenspan, An Accident Waiting To Happen”
Crude oil up over $4 and climbing: thank Bernanke.
http://quotes.ino.com/chart/?s=NYMEX_CL.G08&v=i
apparently increasing oil prices are a good sign
Oil prices jump to $94 on fresh hopes that the global economy could remain robust after a joint central bank plan.
you cant have it both ways:
its either 3% interest rates and 130 bucks a barrell
or
6% interest rates and 60 bucks a barrell
——-
folks the commodity copmplex aint crashin. maybe a correction, but prices are going higher across the board, and that spells deflation of the ficticious capital as it relates to hard assets.
DOW is negative! Holy moly! Sell em!
my opinion only
Doubt they will let it close red today. Send in the goons for the 3:30 stick save.
yeah, this may be the most important close of the year. Made some money though, hahah.
Note that it’s the pictures that concern him.
Good point. People don’t read much, but they look at pictures.
I found this interesting 2004 Article:
“Jeanne Rowe, 67 years old, had expected to work for several more years as a technical writer for a mortgage company before selling her home in Costa Mesa, Calif., and retiring elsewhere with her husband, Fred, a former manager at a coffee-roasting company.
But Mrs. Rowe says her four decades of working in the mortgage business taught her that there is a cycle in housing: After seven to 10 boom years, she says, ‘the bottom can drop out.’ As for the latest boom, she figures, ‘there has to be an end because people can’t afford to buy houses anymore.’”
The NAR’s contribution to the article: “Economists hotly debate whether the housing boom is leading to another bust. ‘The boom continues,’ declares David Lereah, chief economist of the National Association of Realtors. While Mr. Lereah forecasts a slowing of price increases, he argues that strong demand from immigrants and the children of baby boomers will keep the market firm over the next decade.”
Exactly why NAR should be in every lawyer’s gunsights.
“Although today the term subprime evokes some uncomfortable feelings, we should pause for a moment and recognize that the increased use of subprime products over the last 13 years resulted in millions of new mortgages,” Steel said. (Reporting by Patrick Rucker; Editing by James Dalgleish)
http://www.reuters.com/article/bondsNews/idUSN1255439820071212
The Orlando Sentinel. “Local governments will be able to withdraw no more than a quarter of the $12 billion they have invested in a Florida-run investment fund before next spring — because the fund doesn’t want to sell the investments at a loss.”
Another “spit out my coffee” moment! I can’t imagine how much poorer I’d be if I followed that “never sell investments at a loss” rule.
10% off the peak? In Vegas banks are already offering foreclosures for 30-35% off peak prices and still no interest and they’re starting to pull them off the market hoping for a rebound next year because “they just can’t give them away”. 50% off peak by this time next year is in the bag and I wouldn’t be shocked to see 60-65% off peak in 2009/10 and close to 75% off peak for condo converts in some of the crappier areas of town.
‘The banks are coming up with a million excuses not to give loans,’ Gavin said. ‘They don’t want to take any risks.’
Well, it is their money, and that of their investors. If only American banks had been so prudent!
US currency intervention.
http://www.theglobeandmail.com/servlet/story/RTGAM.20071212.wcomment1212/BNStory/International/home
“The Federal Reserve has the most powerful tool to stem a freefall in the dollar — raising interest rates or, despite the slowing economy, signalling an end to any further rate cuts. But this policy shift could entail an unacceptably large economic cost, by exacerbating the U.S. housing market slump and the credit squeeze gripping financial markets”