What Can We Learn And What Do We Do Moving Forward?
Some housing bubble news from Washington and the Wall Street Journal. “Cities and counties with some of the worst fallout from the nation’s housing slump also are seeing a sharp upswing in vacant homes, a trend economists say might set up further declines in home prices. The national homeowner vacancy rate, which gauges the number of vacant homes on the market, rose to 2.8% in the fourth quarter, according to Census Bureau data.”
“That was up from 2.7% in the previous quarter and matched the record set in the first quarter of last year.”
From Bloomberg. “Democratic presidential candidate Hillary Clinton said she is proposing a $30 billion, two-year program to help homeowners and communities hit by rising foreclosures.”
“‘We’ve seen unprecedented Fed actions over the last several days to address the crisis on Wall Street, but nothing to address the crisis on Main Street,’ Clinton said in a telephone interview.”
“The Fed helped engineer the sale of Bear Stearns Cos. to JPMorgan Chase & Co. Those steps are ‘not enough,’ Clinton said. ‘It’s obviously part of what we have to be doing, but it’s only dealing with some of the symptoms and not the underlying cause of the crisis.’”
“House Financial Services Committee Chairman Barney Frank has proposed legislation including $10 billion to help states and localities purchase mortgages. Frank and Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, also want to expand federal guarantees for restructured mortgages, legislation Clinton has co-sponsored in the Senate.”
“Clinton wouldn’t say how her new plan would be paid for. ‘You don’t pay for stimulus packages by definition,’ she said.”
The New York Sun. “Capitol Hill is finally taking notice of the Federal Reserve and its unprecedented programs to pour liquidity into the market. As banks borrowed a staggering $19 billion a day from the Fed this week — an increase of more than 1,800% over last week — and adjusted to the fact that the Fed had helped shield Bear Stearns from insolvency, members of Congress are beginning to question the impact of these decisions.”
“Treasury Secretary Henry Paulson and the Bush administration have so far resisted efforts by Rep. Barney Frank and Senator Dodd to stave off foreclosures through broad government support for homeowners who can no longer afford their mortgages.”
“The administration is ‘going to have to live with helping Wall Street and doing nothing for Main Street,’ a spokesman for Mr. Frank, Steven Adamske, said. ‘The only way to fix this is solve housing crisis.’”
From Reuters. “Paul Volcker, a former head of the U.S. Federal Reserve, in an interview with Charlie Rose on PBS television, said the country’s troubles are the inevitable consequence of a bubble in housing that was clearly unsustainable.”
“‘I don’t think this crisis is over,’ he said. ‘It’s quite a serious matter. We’ve seen the Federal Reserve take more extreme measures in some respects than any that have been taken in the past to deal with a financial crisis, which raises some real questions.’”
The LA Times. “The Fed’s job is simple: Don’t let the economy get too excited or too depressed. To do that, it gives the nation a steady supply of economic Zoloft. But Bernanke seems freaked out that his meds aren’t working…For two weeks, he’s been acting like it’s the last scene of ‘It’s A Wonderful Life,’ only instead of giving cash to a kindly if slightly schizophrenic George Bailey, he’s giving it to investment bankers.”
“So really, it’s nothing like ‘It’s a Wonderful Life’ and a lot like ‘Scarface.’”
“All of his extreme action is predicated on the myth that we’re entering the Second Great Depression. We’re not. The run on investment banks Bernanke thought would occur this week didn’t happen.”
“More important, nobody besides the Fed is panicking. People are bummed because their houses are worth less, but people were bummed because their tech stocks were worth less, their alpacas were worth less and their Ugg boots were worth less.”
“”But your average American isn’t freaking out. A CNN poll this week showed that people’s main economic fear is inflation — which is what you get when you print a lot of money, like the Fed is essentially doing by giving so much away.”
“I appreciate the Fed’s frantic gestures, but housing prices really are plummeting, and I’d rather hit that bottom as soon as possible. It’s a hard choice, but I’ll take lower inflation, less national debt and a stable future over job growth right now.”
The Washington Post. “The record of longtime Federal Reserve chairman Alan Greenspan — worshipped by business leaders and dubbed ‘Maestro’ in a 2000 biography by The Post’s Bob Woodward — is getting a critical look as his successor Ben S. Bernanke wrestles with problems that began on the Maestro’s watch.”
“In an interview yesterday, Greenspan said the Fed wasn’t to blame. He said that global forces beyond the control of the Federal Reserve had kept long-term interest rates low, fueling the housing bubble earlier this decade.”
“‘Those who argue that you can incrementally increase interest rates to defuse bubbles ought to try it some time,’ he said. ‘I don’t know of a single example of when interest rate policy has been successful in suppressing gains in asset prices.’”
“Greenspan also argues that the Fed…has less influence over long-term rates, which he asserted were more important to housing prices. Even after the Fed starting raising short-term rates, long-term rates did not rise. He said that at the time ‘it became apparent that we lost control’ of long-term interest rates ‘as did the Bank of England and all the central banks. As a consequence, we had very little ability to put a brake on the rise in home prices.’”
“Kenneth Rogoff, a Harvard economics professor and former chief economist at the International Monetary Fund, says that ‘the important point…is the philosophy of monetary policy that says ‘you don’t pay attention to asset prices when they are rising, only when they are falling.’”
“In reality, Rogoff adds, ‘if you cut interest rates when asset prices are in free fall, then when asset prices are rising while indebtedness is rising all over country, you need to raise rates. He actively chose not to do that.’”
“Alan Blinder, a Princeton University economics professor who was vice chairman of the Fed under Greenspan in the mid-1990s, said that Greenspan ‘brushed off’ warnings — most notably from fellow Fed governor Ned Gramlich — about mortgage abuses and dangers.”
“‘Lending standards were being horribly relaxed, and the Fed should have done something about that, not to mention about deceptive and in some cases fraudulent practices,’ Blinder said. ‘This was a corner of the credit markets that was allowed to go crazy.’”
“Gramlich, who died last fall, proposed that the Fed send examiners into the consumer lending offices of Fed-regulated bank holding companies, which he said originated about 30 percent of subprime loans. In a speech last Aug. 31, Gramlich said ‘this whole subprime experience has demonstrated that taking rates down could have some real costs, in terms of encouraging excessive subprime borrowing.’”
“Moreover, he added, there was ‘a giant hole in the supervisory safety net. It is like a city with a murder law but no cops on the beat.’”
National Public Radio. “The Federal Reserve took historic steps earlier this week to save investment bank Bear Stearns, in an effort to stop panic from infecting Wall Street. But the credit crisis isn’t just a problem for the investment community, says former Treasury Secretary Robert Rubin, it is also ‘a Main Street problem’ that could affect all Americans.”
“As such, Rubin says policymakers must examine the series of events — and the failures in the regulatory process — that led to the current crisis of confidence in financial markets in order to prevent a similar crisis in the future.”
“‘There were a goodly number of observers who felt over the last three, four, five years that excesses may well have been developing in the financial markets … but I don’t know of anybody who foresaw the combination of circumstances that has occurred here,’ says Rubin, who serves on the executive committee of Citigroup.”
“Rubin cites the confluence of events that allowed things to spin out of control — including historically low interest rates and ratings agencies that gave top marks to complex financial instruments with risks that weren’t clearly understood. The market relied on those ratings.”
“‘All evidence suggests that should not have been done,’ he tells Renee Montagne. ‘The question,’ he says, ‘is what can we learn from this and what do we do moving forward?’”
The Times Online. “It may be difficult to believe but speculators are shrugging off the bleak outlook for the housing market by continuing to invest in new-build developments in the hope of turning a quick profit. Many of them are lured by stories of the substantial gains made at the height of the boom.”
“But today, despite falling house prices and warnings about the growing risks of buying off-plan, investors are still buying flats and houses with the aim of ‘flipping’ them on to another investor before the building is complete.”
“Some new developments, particularly those in the London Docklands, are still changing hands faster than they are being built.”
“Amid the slowdown, it is in estate agents’ interests to drive the market in flipping. Jaimie Beers, an agent at the new homes division of Franklyn James in Canary Wharf, which specialises in trading off-plan properties, says: ‘Flipping used to be a very specialist thing; only big players would do it. But I’ve flipped property for all types of people from nurses to people working in Canary Wharf who see the new developments go up every day.’”
“According to Beers, the surge in flipping is being fuelled by a lack of property for sale. ‘There was very little completed stock for sale last year and investors were finding it hard to find finished properties that would give them decent returns, so they went for off-plans instead.’”
“‘Some of the flats at The Icon building have turned hands at least three times. Some even more. The building will not be finished until mid-2009,’ says Beers.”
From CNN Money. “Yolanda Cruz knew soon after she refinanced her home two and a half years ago she had a problem. She thought the $1,478 monthly payment quoted by her mortgage broker included taxes and insurance.”
“In fact, Cruz says she asked the broker repeatedly if those costs were included and was reassured they were. ‘We just took his word for it, and unfortunately that’s not what it was,’ Cruz said.”
“Soon, she began receiving tax bills from her town of East Windsor, Connecticut. She couldn’t afford to pay them. ‘I feel I was taken advantage of,’ Cruz said.”
“Cruz, who sought help from the Connecticut Fair Housing Center, tried for months to resolve the problem. All the while she continued to make the monthly payments at rate that she had agreed to in 2005, $1,478. The problem: That payment didn’t cover her taxes or her insurance.”
“‘The problem is, the servicer doesn’t have the power to renegotiate a loan,’ said Erin Kemple, the Connecticut Fair Housing Center’s Executive Director. ‘Because they don’t actually own the loan [they can't] make changes to the payment plan. All they are doing is managing this loan for a group of investors, so there’s no way that the investors can be asked, ‘Can we rest this loan?’”
“Borrowers like Cruz may be offered a temporary repayment plan, which keeps foreclosure at bay, but tacks the owed money onto to the back of the loan.”
“‘The payments in this kind of workout are unaffordable to the homeowner,’ said Diane Cipollone of the National Fair Housing Alliance. ‘And sometimes homeowners sign it anyway…But soon they default on the repayment plan, and that’s counterproductive.’”
“With an apparent stalemate between lenders and borrowers, will people be forced to go into foreclosure or even to just walk away? ‘Yes,’ said Connecticut Fair Housing’s Erin Kemple. ‘The simple answer is yes.’”
‘I don’t know of anybody who foresaw the combination of circumstances that has occurred here,’ says Rubin, who serves on the executive committee of Citigroup.’
When I saw this it reminded me of an email I got long ago. It was 2006, I think. A very official looking one from the director of Bear Stearns. (I don’t know or remember if it was a director or the director, and I don’t know if there are more than one).
He asked me to give him a call. So I did, and his secretary answered. She said he wasn’t in and took my phone number. I never heard from them again.
What are the odds you can publish that letter?
I guess I could if I could find it. Anybody know who were the directors of BS in 2006. I could probably find it in gmail.
Given the low turnover, my guess is that the current list might be an easy place to start:
http://investing.businessweek.com/research/stocks/people/board.asp?symbol=BSC
(I couldn’t locate a historical list quickly.)
Try to find our who their vice president of risk management was at the time. Perhaps he was fired between the time he sent the e-mail and the time you called, for being too conservative.
A little more info from Mergent Online:
Directors
First Middle Last Name Titles
James E. Cayne Chairman Age 72 Started 1985 Annual Compensation 250,000 Bonus 17,070,746 Restricted Stock Awards 14,838,829 Other Compensation 6,154,315
Henry S. Bienen Age 67 Started 2004 Compensation 55,000 Restricted Stock Awards 92,500
Carl D. Glickman Age 80 Started 1985 Compensation 96,000 Restricted Stock Awards 67,500
Michael Goldstein Age 65 Started 2007
Alan C. Greenberg Age 79 Started 1985 Annual Compensation 250,000 Bonus 9,000,000 Restricted Stock Awards 7,612,500 Other Compensation 3,057,772
Donald J. Harrington Age 61 Started 1993 Compensation 69,500 Restricted Stock Awards 67,500
Frank T. Nickell Age 59 Started 1993 Compensation 47,500 Restricted Stock Awards 67,500
Paul A. Novelly Age 63 Started 2002 Compensation 62,500 Restricted Stock Awards 80,000
Frederic V. Salerno Age 64 Started 1992 Compensation 56,500 Restricted Stock Awards 67,500
Alan D. Schwartz Chief Executive Officer, President Age 57 Started 1976 Annual Compensation 250,000 Bonus 16,237,150 Restricted Stock Awards 14,014,065 Other Compensation 5,233,207
Vincent Tese Age 63 Started 1994 Compensation 144,500 Restricted Stock Awards 67,500 Other Compensation 19,250
Wesley S. Williams Age 64 Started 2004 Compensation 78,500 Restricted Stock Awards 67,500
“who were the directors of BS in 2006″
Wasn’t that the NAR?
It’s all hindsight for us but it appears your blog is and has been quite influential.
What other bits of stuff you got Mr. Jones?
Well, perhaps not influential enough in the not too distant past.
I recall an exchange in early June of 2007 here on the HBB.
I was poking fun at that guys Cioffi of Bear, who ran those first two “crap funds” (as I called them) into the ground and how he, at a public conference in February 2007 (just before public revelations of trouble with them), said that roughly “the environment has changed, amateurs creating and securitizing in this game are going to be done…”
And then a poster “from Wall Street” said “I have a message for you” - basically saying to me and others to “shut up, you don’t know what you’re talking about…”
And then, finally Chip or Palmetto or somebody said to the guy “from Wall Street” something like “well, get a grip - you guys don’t understand affordability.”
And two months later, in August, the big rumblings began!!
Wish I could take the credit for that, but I think it was Chip.
Ralph Cioffi
He ran those “Enhanced Leveraged… [blah, blah, blah]” funds that kicked this whole thing off! Remember all the talk of models from Wall Street?
“We’ll fix this model, that model didn’t see this… [more blah, blah, blah].”
And then I delighted in, for the rest of the summer of 2007, asking:
“Hey!
All you hedgies and banker Pig Men:
‘How’s your model lookin’ today?!”
P.S. to exeter - most who know me call me “Jack”
So then, in October of 2007, I confirmed that “Wall Street” didn’t understand affordability - models be damned.
I posted here how I conversed with a guy who did analytics (models) for one of the ratings agencies and relatively recently had left to go over to one of the I-banks.
He talked about how complex the models were, and fancy this and fancy that, and how they went back “around 15 years”… but he seemed mystified as to why the models broke down (recall that trouble was noticed finally in August, if not somewhat earlier in February).
And it just proved the old adage, “garbage in, garbage out”.
They didn’t have any data from the “tipping over” of the last housing downturn. It appeared it was just ignored (and suprisingly to me, this guy wasn’t that young).
In any case, anyone from “Wall Street” really paying attention here a year ago or more has to better off than others who did not - if, of course, they acted on what they “learned.”
But who really knows…?
ummm….. WTF do I have to do with these mad rantings?
Perhaps it wasn’t you - ha!
Someone recently here wondered if my name was “Jack”…
As for “mad rantings” - I think of you as more the “mad” than the “ranting” - your comments are usually one or two sentences regurgitating the “best” of Mother Jones or Daily Kos!
You left out librull. You know… those people who don’t bow to the billionares club.
John Kerry is a billionaire.
John Kerrys wife is a billionare.
And then, finally Chip or Palmetto or somebody said to the guy “from Wall Street” something like “well, get a grip - you guys don’t understand affordability.”
Sounds like that Ralph guy who does not like my postings regarding affordability in the Tampa bay area. If Ralph understood economics and finance, he would understand the problems in the housing market in general as well as the Tampa market.
I think the quote should read, “I don’t know of anybody aside from those spoilsport realists who foresaw how runaway greed and corruption could possibly crush the US economy. Now, get out there and buy a house today! My bonus depends on it!”
‘I don’t know of anybody who foresaw the combination of circumstances that has occurred here,’ says Rubin, who serves on the executive committee of Citigroup.’
I sent an email warning the Dallas Fed of the housing bubble in March 2005 via a reporter who had just taken a key position with the Dallas Fed. I find it interesting that Rubn and others are playing the denial game.
I first heard about a bubble forming back in March of 2002. It was at an Arizona Small Business Association talk given by University of Arizona economist Marshall Vest. I recently thanked him for that warning.
rubin ran hi-ho away
then greenspin
I’m surprised nobody asked this: what was the gist of the email??
–
“For his ability not be able to “foresaw the combination of circumstances that has occurred here” he was among the Business Week’s Three Saviors of the World Economy (Greenspan and Summers were the other two) in late 1990s. Is there any common characteristic among the three? This way we would know in advance who the clueless are. In particular, does Bernanke have anything in common with the three? I don’t think that Rubin was an economist before he became the trader at Goldchain. Most economists are clueless, or act clueless, about the troubles ahead.
Jas
Well I for one happen to think Bob Rubin is a helluva lot sharper than the crew we have now. His comments were from an historic perspective. In 2001 WS had it’s back up against the wall, and… securitization looked like a great moonlighting gig? I’m sure no one on the street ever imagined sub/Alt A would become a primary growth engine for underwriting for more than a short time.
Remember, Robbie Stephens was bought out by FleetBoston for $2 bil. in 2002! For those that may not recall RS was a BA tech trading firm. (Not long after it was sold for pittance and HUGE write-off) But I think it shows where people’s heads were at, at the time?
“We’ll bang on this for a couple of quarters until tech/equities recover”.
I don’t believe in 2001 anyone figured that FIVE years later they’d still be beating on it like a rented mule? BUT… since it was “riskless” (and VERY lucrative) they let it hit the wall at top speed.
“In fact, Cruz says she asked the broker repeatedly if those costs were included and was reassured they were. ‘We just took his word for it, and unfortunately that’s not what it was,’ Cruz said.”
took his word for it? bwaaaaa
“She thought the $1,478 monthly payment quoted by her mortgage broker included taxes and insurance.”
Why?
The fact that Rent-A-Center doesn’t pay your electric bill if you get a TV from them should have tipped her off.
Not the same thing. Most mortgages payments do include taxes and insurance. Some don’t even give you the option of paying it yourself (which I would prefer). Plus the mortgage company tells her they are included.
Sure, she could have looked at her mortgage papers and found out, but let’s face it, at least half the population isn’t smart enough to understand those forms. The “experts” who deal with that stuff everyday should be held accountable if they can’t tell the truth to people.
Last mortgage I got was at a newer local CU that had just jumped in the mortgage biz, and when I asked about tax and insurance they said oh yeah, be sure to put some money aside for that, we’re not set up for it yet. I was shocked, I thought that was always done by escrow people.
I’ve always made sure NOT to have an escrow account. If you’re disciplined, it’s better to handle the taxes and insurance yourself, because you can earn interest on the money as it’s accumulating, and you can cut your monthly costs (for a very brief time), if something unforseen happens, like temporarily losing a job.
Have a story about a neighbor with an escrow account. They went to Hawaii — first vacation in about 15 years without the kids — and the first day they were gone, a fitting on the toilet broke off and flooded the entire house (inches of water everywhere).
The lender had “forgotten” to send the insurance payment, so they had to go through a whole lot of trouble trying to get insurance to pay for it — after legal wrangling, etc…you can just imagine.
Shutting off the main water valve in your residence whenever you leave the house overnight is by far the best insurance against that kind of catastrophe. If you want the job done right, do it yourself.
She was told it was PIMI
What I don’t get is that if she asked if it was included, and he said yes, why didn’t she then say, “Can you show me where in the documents it says that?” I can almost understand not reading through the whole thing - not excuse it, but understand it. But if you actually know that property taxes and insurance is sometimes included in the payments and sometimes not, why not ask to be pointed to the place in the document where that is stated. If you can ask the question she did ask, why not ask the follow up?
Because she heard an affordable number. Most people hear what they want to hear. I plead guilty myself.
Fuzzy, I ‘ve responded to the un-realestate blog in the St Pete times, usually backing up your comments. My sister is a HS teacher in Pasco ( 9 years) 38,000/yr salary. I use that as a median salary to justify, my belief, that tampa housing is still 30% overpriced.
If she would have looked at the docs she signed - several of them would have made it very clear that T and I were NOT being escrowed. Yeah, I know, that’s asking alot…
When I get a mortgage I have to specifically request not to have T&I escrowed. Additionally, you have to sign a waiver and they even try to get you to pay a special “fee” (you can get it waived if you complain loudly enough) so that they can “check” and make sure you’re actually paying it.
Joel Stein looks kinda young…so I’ll forgive him for leaving out one “Key” word in his “opinion” article:
“But your average American isn’t freaking out.”
Rewrite:
But your average American isn’t freaking out…yet
Here we go with the yets again. He makes a great point. Everywhere I go, people are going on with their lives. Foreclosures are up, house prices are down. The stores are a little emptier. But I don’t see any freaking out. The people in these foreclosure stories are increasingly glad to be out from under the loan.
The only ‘crisis’ is from sniveling politicians and Wall Street suits losing their ass. What I do hear people concerned about - daily - is daily costs. Gasoline, food, etc, are killing peoples budgets and jobs are shaky. The media and the PTB should wake up to our real problems in this country, and quit focusing on trying to prop up unsustainable house prices. (and corporate balance sheets)
What I do hear people concerned about - daily - is daily costs. Gasoline, food, etc, are killing peoples budgets and jobs are shaky.
And of course those problems have NOTHING to do with the dollar dropping like a stone or the enormous overhang of debt in this country. Right?
Note that I don’t have any solutions to offer for these problems. That’s because there aren’t any.
I could not have said that any better. Well said.
Well, I can say is this Ben…you don’t have the “development” of the “internet” and all that “it” touches… like many circles around a venn diagram… that takes care of 10 years starting around 1991… and… you don’t have a financial vector to inflate & distribute via $100,000 / $200,000 / $300,000 “personal equity gains… that takes care of the last 7 years.
So what do you have… looking forward?…A “row, row, row, your boat economy” based on people fixing up their cars while listening to click & clack?…using lawyers to sue each other? Drugs? spending money curing everyone of “medical” ailments? military expenditures via “terrorism” suppression? Well, I guess all of the above…plus I just saw a article saying that Blogging is a $$$$$$$$ billion dollar industry…but until mortgage rates get to 14+ % ( I know, I a nut) the “beast” is not dead…yet.
“The only ‘crisis’ is from sniveling politicians and Wall Street suits losing their ass. What I do hear people concerned about - daily - is daily costs. Gasoline, food, etc, are killing peoples budgets and jobs are shaky. The media and the PTB should wake up to our real problems in this country, and quit focusing on trying to prop up unsustainable house prices. (and corporate balance sheets)”
This is the crux of the situation, IMHO. But many of these costs are high because of the manipulations to prop up Wall Street. I keep thinking about the story of the “vanity trade”, where some trader wanted to be the first to cause oil to go to $100.00, just because he could. I let loose on my representative about this the other day. Not that she has a clue what to do, but I did give her some ideas. Abolish or nationalize the FED, for one. Shutting down Wall Street until it can behave wouldn’t be a bad idea either. Why not? If you really think about it, would the world end if Wall Street didn’t exist? People need to live their lives and I’m sure the world would go on spinning without Wall Street and similar exchanges.
“Why not? If you really think about it, would the world end if Wall Street didn’t exist?”
The thing that nobody bothers to talk about is that Wall Street is totally disconnected from reality. Or maybe it’s just considered a given and there’s no point in commenting. Stock prices rise and fall in relation to what random people decide they are worth for random reasons. These reasons rarely have anything to do with the fundamentals - the actual profits of actual companies, the actual markets of goods and services. A profitable, well-run company can see its stock price rise or implode by the whim of the market, not because of damaging new info coming to light about the company, because of a new product, because of quarterly losses or profits, or anything tangible, but just because of wild market swings. Back in olden times, people actually researched their investments, looked into companies annual reports, etc. Now day traders can swing prices up or down from hour to hour. And sometimes this frightens me. If you remove the speculation from WS and left only the “real,” what would be left? A smoking crater?
Agreed, though it all ties into the same problem. The Wall Street Pigs are freaking out since they may only get $10 million this year in bonuses and may have to sell the second weekend yacht. All the “common-folk” are freaking out because they aren’t sure how they are going to afford food, gas, etc. on their lousy, semi-part time, service sector job (assuming they keep it, of course!)
Editorial in today’s NYTimes blasts the privatization of profits, socialization of losses. About time.
http://tinyurl.com/35wxy6
Excellent article, SaladSD.
Average Americans will start to freak out if and when their friends and families start to loose their jobs. If the job losses go beyond those directly related to the real estate industry, there will be some level of panic. Couldn’t predict how much and thank goodness, I don’t have to.
You can drive less, change grocery and restaurant habits and even turn the heat down or the AC off without too much loss of your sense of self. The unemployment office induces panic.
I agree. I think the idea that a person willing and able to work but is unable to generate the money to feed their families is the freakest part about depression type scenario.
polly,
All I can say is that in the Texas bust, panic wouldn’t have described what most people felt. Sure, there were suicides. We’d read about them in little short articles on page C. But for most, it was a dull realization of the situation we were facing. People I knew were too focused on getting work, changing careers and the like.
That’s why I have long maintained that any political push on house prices will eventually give way to a broader concern about jobs. That’s what became the publics mindset in Texas anyway.
“it was a dull realization of the situation we were facing. People I knew were too focused on getting work, changing careers and the like.
That’s why I have long maintained that any political push on house prices will eventually give way to a broader concern about jobs.”
That’s the bottom line, IMO. Maybe it will finally dawn on the Washington snivelers that people who don’t have jobs, don’t buy houses and they don’t buy much of anything else, either.
Not just jobs, but this time, Baby Boomers are much closer to retirement, and will lose much of their savings.
With the demise of Social Security, Medicare, defined-benefit pension plans, etc., the retirees will be hurting. Oh, and let’s add 1% interest rates on “safe” accounts and inflated costs for everything that is necessary, and I think things will be very, very bad.
Then, you have the Gen-Xers who will have NO money, no house, no savings, no healthcare and no retirement savings…
Maybe it’s how we define “panic,” but I am not looking forward to the next few years (decades?).
Most of the pain could have been prevented if the M.F.’ers (sorry) who control the country’s money (Wall Street/corporations, regulators and politicians) were kept on a tight leash.
Too bad most Americans are so apathetic and uninterested to understand that it is not only our right, but our duty and obligation to keep the government in check.
How about this idea: The housing bust could be good for the economy? Imagine a fairly well-off family making 150K, maybe 9K a month after taxes. They are struggling to hold onto their mcmansion at 6K per month after rate increases.
Once the home ATM “breaks” and the bank won’t fix it, they start budgeting, cutting corners everywhere they can to save their american dream. The savings start to dwindle. Finally, they are broke and throw in the towel, they bury their pride, send the jingle-mail, and join the lowly renters in a $1500 apartment.
Now that sucks for the bank that was getting their interest payments, but all of a sudden they have a lot of cash. Maybe they can eat out more, buy some stuff, rent a self storage unit, buy a new car, take a vacation, go see a ballgame or movie, send the kids to private school.
The economy can go on, jobs will just be shifted out of the real estate/banking industry into well, everything else. That is what truly scares the greedy pigs.
Rally,
You just made the point that prices will have to fall, no matter what. The sooner we get there, the better.
Any govt intervention to drag this thing out will only serve to prolong the recession and lead us closer to a depression.
It truly is a parallel reality. Folks gassing around in their Denalis as if it’s 1999, meanwhile we have a war going on. According to last night’s CNN coverage of the 5 year anniversary, only 3% of the news stories today mention the war/occupation in Iraq, because we’re all bored with it. Bored? Another example of most Americans not having skin in the war, which is a false reality. One way or another, we are all going to pay the piper.
My friend’s son was one of a handful who survived a recent house explosion in Iraq. Yes- we have skin in the game.
Like the old saying, “If you neighbor loses his job, it’s a recession. If YOU lose your job, it’s a depression.”
Ben,…and to prove to you that I’m an “optimist” and have “faith” in the future of the American people, even Texans (wink wink txchic)…see I haven’t given up on my “public” education just…yet
I offer you this as a tidbit of proof:
“The tall tale has been the special object of serious study by Texas folklorists James Frank Dobie and Mody Coggin Boatright.qqv As Dobie observes, the Texas tall tale has changed in nature since 1940. Earlier Texas humor “bragged on the worst.” Instead of cutting out a longhorn from the thick brush of South Texas, for instance, a cowboy gave up and rode away when he saw a rattlesnake try to crawl into the brush and have to back out. “Now,” says Dobie, “we are veering rapidly to the California style of bragging,” as “so many Texans…have felt called upon to justify their Texan pride.” The Texan of Dobie’s time modestly explains to a New York friend that though his forty acres is not a ranch and has no brand or name, “some people call it downtown Houston.” Boatright calls “tall lying” an art. The tall tale is made up of authentic details rather than generalized exaggeration, and these details are ludicrous in their combination. It includes such circumstantial detail as names, places, and tangential facts. In structure, “it begins plausibly and builds carefully to a climax, and the narrative must not topple until the climax is reached.” One tall tale relates that at his noon break on a hot autumn day of knocking cornstalks, a farmer went for a swim in the creek. As he dived in, the southwest wind dried up all the water. Before he crashed on the rocks, a flash flood filled the creek up again. Before he could come up, he was trapped as a sudden blue northerqv froze the surface. But he didn’t drown because the sun came out to melt the ice, and the farmer climbed onto the bank with no injury besides a sunburn.”
http://www.tshaonline.org/handbook/online/articles/FF/lxf1.html
(For more details go here):
http://en.wikipedia.org/wiki/J._Frank_Dobie
Hedge funds are the only ones freaking out. Will it spread? Time will tell as there are still more bad bets to be unwound.
Well, to be accurate, I think you have to say “some” hedge funds.
I can recall at least one semi-regular poster here in 2006 (and perhaps earlier) who was running was some kind of fund.
And he clearly saw what was coming and I would suppose acted accordingly.
I meant the ones that did the bank run on bsc.
i am trapped on my block here in nyc- a new “luxury condo”
is having problems with window panes falling out due to 50 mph winds.
Didn’t that happen in Boston in the John Hancock building about a billion years agao? Seems that architects can’t predict the possibility of a strong wind any better than the titans of Wall Street can predict that real estate won’t always go up.
Had nothing to do with the wind loading and everything to do with what was seen as minor change in the detail attaching the window to the frame material.
PS:Architects don’t determine wind loads. Structural Engineers do.
Using the trial and error method…
As it turns out, yes.
After the Hancock Tower fiasco (the Prudential building is down the road, they had a good laugh) IM Pei did another building almost on stilts next to the Charles River. The entrance to the building was through 4 revolving doors.
When the wind would blow down the Charles, the revolving doors locked up. A wind block sculpture was built as an after-market addon.
That is an architect that might do well to learn more about the Bernoulli effect.
(None of the after-market solutions worked perfectly. Hurricane Gloria still took windows out of the building. Flying glass everywhere, it was a great party.)
No, Pei designed the building so that the arch did NOT face the river. Someone else decided to rotate the building 90 degrees with the resultant aerodynamic effects.
(Supposedly one reason they plonked Calder’s The Great Sail down nearby–to break up the air currents from the river.)
No, Pei designed the building so that the arch did NOT face the river.
??? So no windows would face the charles river or boston? That’s hard to believe.
(Supposedly one reason they plonked Calder’s The Great Sail down nearby–to break up the air currents from the river.)
The scale model used for testing in the wind tunnel is also on the campus not too far from the full-scale version. Naturally, it is called “The Little Sail” by the locals. And when decorating the Great Sail, one is obligated to provide scaled decorations for it’s little cousin as well:
http://hacks.mit.edu/by_year/1996/smile_sail/
Architects merely determine where the windows go. The structural engineers try to make it work, but someone forgot to tell them how hard the wind blows. Structural engineers carry huge malpractice insurance policies.
Something like this happened in the Gould Simpson Building on the University of Arizona campus. It wasn’t due to the winds — it was due to something gone wrong in the glass manufacturing process.
“Architects don’t determine wind loads. Structural Engineers do.”
Uh, what about wind engineers . . . there are a few who do wind tunnel testing on models of buildings to prevent this same thing from happening again. I know of a company in Ft. Collins, CO - CPP Wind Engineering, they model wind loads on to be built buildings around the world.
Story I heard was that the model had been tested in a wind tunnel, but they had done the testings at a discrete number of angles, and it turned out the critical one (at which the JH turned into “the world’s biggest wing”) was half-between two of the angles they had measured at….
Odd topic. The GC is erecting steel and during one of my rounds today I found sag rods that support channel iron girts blasting right through a framed opening. My first call was to the designer, NOT the architect.
Duct tape- fixes everything
“But today, despite falling house prices and warnings about the growing risks of buying off-plan, investors are still buying flats and houses with the aim of ‘flipping’ them on to another investor before the building is complete.”
Okay, what does “off plan” mean?
I gather it means buying based on looking at the blueprints as opposed to buying something that’s already been built. Pre-built vs. seeing the actual unit.
It means you’re buying before actual construction has begun. Then, months later, as construction nears completion, you try to sell it for a profit.
“Greenspan also argues that the Fed…has less influence over long-term rates, which he asserted were more important to housing prices.”
I agree with half of it — long term rates didn’t rise as the Fed raised long term rates, because of excess savings pouring into the country. In effect, we were like one of those emerging markets that end up with currency crises as a result of hot money pouring in and out.
But the mortgages that took the bubble the next leg up, even after they were out of line with incomes, were ARMs. Short term rates fueled those.
I think it was greed more than rates that fueled the bubble. China raised rates and reserve requirements numerous times and their stock market continued to climb.
“The Federal Reserve took historic steps earlier this week to save investment bank Bear Stearns, in an effort to stop panic from infecting Wall Street.”
Most of the media have this story wrong. The Fed buried Bear Stearns. It opened the window to other investment banks for the first time since the depression. The fed did not save Bear; it saved the other IBs.
The Fed Packages Corruption as Sound Public Policy:
http://www.creators.com/opinion/david-sirota.html
“The Fed helped engineer the sale of Bear Stearns Cos. to JPMorgan Chase & Co. Those steps are ‘not enough,’ Clinton said. ‘It’s obviously part of what we have to be doing, but it’s only dealing with some of the symptoms and not the underlying cause of the crisis.’”
Dealing with symptoms is EXACTLY what this proposed bail out plan will do. The underlying problem is that homes cost too much. The only way to fix this is to get them to come back to fundamentals, not by rewarding greedy and impatient people that it off more than they could chew (while artificially sustaining home prices).
“House Financial Services Committee Chairman Barney Frank has proposed legislation including $10 billion to help states and localities purchase mortgages. Frank and Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, also want to expand federal guarantees for restructured mortgages, legislation Clinton has co-sponsored in the Senate.”
I used to think there was a conspiracy out there because I couldn’t imagine that anyone in a position to make these kinds of decisions could be that stupid. The scary part is, I am now convinced that, yes, they really are that dumb. Worse, they can take us all down with their foolishness.
The answer is so simple. Homes don’t sell because they are aren’t affordable to real buyers. If they would just quit meddling, the problem would fix itself.
I don’t think it would be a bad idea that government be the purchaser of last resort for mortgages. At least we will hold something concrete in return for our money that is going to eventually be needed for a bail out, and be in a position to protect those properties from desturction. T
he markets are looking for a bottom. If the government bought and held property at a price that only banks eager to dump repos would find attractive , the home supply would begin to shrink and a bottom would be found. Holders of the toxic paper could reason that those mortgages most likely to fail would only lose X dollars, which may lead to more confident valuations.
These properties could be sold, dare I say it, at a profit in 5 to 10 years. Perhaps they are leased until then. But, no, government purchasing property for the intention to prop up unaffordable prices is not at all what I am suggesting.
Umm…purchasing property with the intention of propping up prices is **exactly** what you are proposing.
You claim that the market is looking for a bottom, and that part is correct. “The bottom” is where people earning slightly above median wage can buy a median-priced house.
Under NO CIRCUMSTANCES should the government buy or insure mortgages for anyone other than for new mortgages — which can be refi’s of existing mortgages — that qualify based on traditional standards (30-year, fully-amortizing, fixed-rate loan with 20% down payment, 28% max DTI ratio for PITI payments, 6 months reserves, stable job, etc.).
Foreclosure, without recourse, is an absolute GIFT to the FBs, and they ought to kiss their lenders’ butts for allowing them to walk away from their crushing debt.
How do you know they are dumb, and not just trying to maximize campaign contributions from their base?
Corpus Crispy
“Moreover, he added, there was ‘a giant hole in the supervisory safety net. It is like a city with a murder law but no cops on the beat.’”
“As banks borrowed a staggering $19 billion a day from the Fed this week — an increase of more than 1,800% over last week —”
Would this be the now included “investment banks”, if so are they just gambling with this money in the market to try and make up for their loses?
You can’t borrow from yourself, when you’re broke.
(or that’s how it used to be…)
Of course they are just gambling with it.
That’s what irks me about all this “saving the system” nonsense. The investment banks, executives, etc. don’t care about the system - all they want is every last dollar and asset from everyone. The Fed can try to lend them money so they can “fix the problem” but they won’t fix anything - they’ll just go out and blow it on some other stupid gamble and come back to the Fed in a few weeks, begging for another hit. They are like druggies with cheap credit as the drug. Unfortunately, we have to suffer the consequences of their actions, but I am not sure which is worse: the banks lose and we get the Greater Depression, or the banks win, and we’re all reduced to serfs living in mud huts. Remember, for the banker, executive, etc. there is no middle ground - they either own everything, or they are working to cheat you out of what is rightfully yours so they can end up owning everything.
There’s some good stuff to laugh and cry about in this galery. A few too many people blaming gas prices for the fact they’re broke (is 5-10 bucks a week really that hard for people to make up somewhere else?).
http://money.cnn.com/galleries/2008/news/0803/gallery.real_stories/
“But the credit crisis isn’t just a problem for the investment community, says former Treasury Secretary Robert Rubin, it is also ‘a Main Street problem’ that could affect all Americans.”
The problems are already affecting all Americans. Home prices are falling, foreclosures are mounting, bankruptcies are soaring, and people are walking away. Main Street is already feeling the pain.
Main Street has been feeling the pain for decades as they’ve been making up for declining/stagnant purchasing power with ever-increasing debt. They thought debt = wealth, but they are beginning to sense that something’s not quite right with that scenario.
“Democratic presidential candidate Hillary Clinton said she is proposing a $30 billion, two-year program to help homeowners and communities hit by rising foreclosures.”
“The Fed helped engineer the sale of Bear Stearns Cos. to JPMorgan Chase & Co. Those steps are ‘not enough,’ Clinton said. ‘It’s obviously part of what we have to be doing, but it’s only dealing with some of the symptoms and not the underlying cause of the crisis.’”
The underlying cause of the crisis is that property prices got too high. Prices are still too high, and the (necessary) corrections- the inevitable reversions to the mean- are causing pain. Stupid loans exacerbate the problem- but the problem is: people paid too much. Do the politicians really not understand this? It seems like they, or their advisors, would be smart enough to figure it out.
I hope they are just flat out lying to us; that they have made a political calculation that honesty with the populace would not be in their best interest. If they’re actually so dumb as to not understand the basics driving such a major economic issue, we’re really in trouble as a country.
I agree. Nothing is going to help this mess until prices come down. You cannot bailout current mortgage holders unless the next person to buy the house buys at a price they can realistically afford. Keeping prices propped up at current levels helps nothing in the long run.
If the problem is that Jack paid too much for his house, how is the solution making sure that Joe does the same?
I agree. If the problem is that Jack paid too much for his house, how can making John also pay too much be the solution?
Well put. But your proposals for solving the housing crisis are totally f*cked…keeping people in ‘their’ homes is nice, but what happens when it is time to sell? How are new buyers supposed to afford massively inflated asset prices that ‘always go up’, even when their wages aren’t?
Why is it that the most shortsighted and ill-informed politicians are always the ones making the most important decisions?
Well, they can print more money, or tax renters, or some other stupid thing. Yes, I know it won’t work, but they will try everything to keep this scam going a bit longer.
I like Baker’s solution. Nationalize Bear Stearns just like Northern Rock and give it a good enema.
http://www.truthout.org/docs_2006/031708J.shtml
This is normal reaction to a BK. The 0.05473 shares of JPM for each share of BSC is a token to give it the semblance of stability.
The turmoil in the US Treasury markets from Tuesday through Yesterday were JPM liquidating some of BSC’s at risk positions.
One of the reasons JPM was willing to assume control of BSC was JPM is the counterparty to a lot of the crap and can ‘cross wash’ the garbage.
Northern Rock was like a small company that self insures health insurance, one little cancer wipes out the self insurance.
The government is guaranteeing $30B secured by loans that may end up going bad. JPM is guaranteeing $300B. The best thing that can happen for JPM is for the BSC shareholders to vote it down, then BSC declares BK. The shareholders get squat, JPM gets some real assets unpledged.
I would rather be in the government’s position than JPM’s position.
“I would rather be in the government’s position than JPM’s position.”
Well, aren’t we in the government’s position, so to speak?
Thank you Palm.
Yes we the taxpayers are the government.
Well, as you can probably tell from my posts, SanFranGal, I’m not too sophisticated when it comes to matters financial. Spend less than you make, income greater than outgo, buy low and sell high is about all I know.
When it comes to government, all I know is I’m paying for it, far less than some, but I’m still paying my share. Not to mention the stinkin’ paperwork. That frosts my patootie more than paying. If I failed to file state sales taxes or make a small $5.00 mistake, you’d think I was guilty of mass murder. These turds in suits screw the pooch so that there’s supposedly an imminent collapse of the system and the FED uses MY (and YOUR) money to make it right? And so quickly and simply, too. All tickety-boo in a neat little package. Ever been involved in a tax dispute? Then you know how long that can drag on. Ask txchick. She’ll tell you.
Anyway, if daBoyz get to keep their bonuses, their mansions, their private schools for their useless progeny, where’s mine for being a part of their success? Oh, yeah, that’s right, I’m getting a few hundred from the stimulus package.
I think you should reexamine the question, ‘Who is the government’. Not saying you are wrong, I just disagree with you.
Hoz, you’re one of the most astute posters on this board, a gentleman and a scholar and I would never presume to be on the opposite side of an argument with you in matters financial.
My admittedly rather naive statement is based on the theory that the US government is supposed to be of, by and for the people. In practice, it is clearly not working out that way. I still like to think I have a share and a stake in the US and therefore feel the need to contact my rep and Senators and assert that they work for me. Clearly, their staffers think I’m some sort of a nut.
Hoz,
Still working on my second cup of coffee. Would you please clarify your statement; “I think you should reexamine the question, ‘Who is the government’. Not saying you are wrong,…”
Thank you.
Under the current form of government in the US, politicians are bought and sold like commodities. Congressman Ron Pauls list of contributors.
RON PAUL (R)
Top Contributors
US Army $66,535
US Navy $52,336
Google Inc $52,250
Microsoft Corp $45,116
US Air Force $44,733
US Postal Service $23,817
Lockheed Martin $22,411
Boeing Co $21,088
Cisco Systems $19,076
Verizon Communications $17,918
AT&T Inc $17,756
General Dynamics $17,208
Hewlett-Packard $16,967
Northrop Grumman $15,757
US Dept of Defense $15,540
Apple Inc $15,501
Ibm Corp $15,192
Wachovia Corp $15,128
Raytheon Co $15,029
General Electric, etc.
Does anyone really believe that Microsoft et al are giving Congressman Paul’s campaign moneys without receiving benefits down the road?
Looking at contributions from corporations and legislation enacted, one is forced to conclude that all politicians are owned.
recent major examples include:
Bankruptcy reform act - look at how much money was donated by banks.
Medicare reform act - see pharmaceutical donations
H.R. 1852: Expanding American Homeownership Act of 2007 -see Bank donations again
etc, etc. etc.
“Hoz, you’re one of the most astute posters on this board, a gentleman and a scholar and I would never presume to be on the opposite side of an argument with you in matters financial.”
Palmetto,
I merely have book learning.
Astute - Not per my kids who call me a whole bunch of things.
The great thing about modern finance is flexibility - unheard of 20 years ago. This results in debates. A push of a button and millions of dollars or Yen or Dong fly around the world. The same innovation that banks and financial houses employ are now available to the 100 share investor. This is to me amazing and wonderful.
My admittedly rather naive statement is based on the theory that the US government is supposed to be of, by and for the people. In practice, it is clearly not working out that way.
I don’t think it’s been that way for a very long time.
A push of a button and millions of dollars or Yen or Dong fly around the world. Yet another push of the button, and the world goes bankrupt. A mixed blessing.
Pardon me, gentlemen and ladies for chiming in. I’m all about all of us being able to trade at the click of a mouse, but I would rather be the fly on the wall when the information (that I don’t hear about until after the event) get disseminated to all of the “in the know”. By that time everything that I have already lost or gained (through luck) has been booked.
If you only make or lose money due to luck you may want to rethink your trading strategies.
All the information is available. There are few surprises. Mostly the stock market trades on news that is three days old or older. It just takes one person to realize ‘this is good or bad’ and the stock soars or tanks. Many times, I have picked the right stock for the right reason and seen it languish for weeks. Then boom explosion.
The homework is filtering out the garbage. The same 5 primary questions about any news items gets rid of most of the junk. Who, What, When, Where and Why.
Who benefits
What does it really mean
When is this happening
Where is the money going
Why are they doing this
You can add questions that fit the circumstance, but the more important one is “where is the money going”.
“…when the information (that I don’t hear about until after the event)…”
What happened in the last two weeks that was not mentioned in the news previously?
RON PAUL (R)
Top Contributors
What’s amazing about this list is that fully ten of the top 20 funding sources were either defense contractors or outright agencies of the government itself, yet under a Ron Paul regime many of them would presumably find themselves out of work. This is a textbook example of cognitive dissonance!
From Reuters. “Paul Volcker, a former head of the U.S. Federal Reserve, in an interview with Charlie Rose on PBS television, said the country’s troubles are the inevitable consequence of a bubble in housing that was clearly unsustainable.”
“‘I don’t think this crisis is over,’ he said. ‘It’s quite a serious matter. We’ve seen the Federal Reserve take more extreme measures in some respects than any that have been taken in the past to deal with a financial crisis, which raises some real questions.’”
********
We can’t count how many posts here and elsewhere three years ago or more said (in some variation):
“‘Do the Volcker’ and drain the liquidity cesspool before we all drown!”
********
“Kenneth Rogoff, a Harvard economics professor and former chief economist at the International Monetary Fund, says that ‘the important point…is the philosophy of monetary policy that says ‘you don’t pay attention to asset prices when they are rising, only when they are falling.’”
“In reality, Rogoff adds, ‘if you cut interest rates when asset prices are in free fall, then when asset prices are rising while indebtedness is rising all over country, you need to raise rates. He actively chose not to do that.’”
********
I say: “Many, many thanks to Alan Greenspan and the ‘Do Nothing’ Fed!”
Exactly Jack!
Most “western” educated minds do not “stand under” that: “Do nothing” only works if you a Taoist sage.
GO U.C.L.A. Thanks to all the good folks in Oregon that help Kevin out with the gasoline money to move to Westwood!
hwy50 -
I saw the Bruins in January. I cannot say I was cheering for them at the time, but they were impressive (particularly the kid from Oregon), even without some of their regulars (injuries).
Ben Howland is an excellent coach; his style coming west has influenced the whole Pac-10 to play better defense.
No slipups and they should be in the fight the whole way…
The Fed seems to treat recessions like they are a terminal disease to be avoided at any cost… Recessions are normal, natural and even “healthy” for the economy… They are the “hangover” after an economic binge. The Fed will only make things worse by acting in such a frenzied manner to avoid a recession at all cost…
Hear, hear!!! Thanks for the reality check!
This fear of recessions you mention, which I agree are an integral part of capital’s cycle, where does this fear come from?
Does this “fear” stem just from the fact the pigmen might not get a huge bonus next year? Or is it something else? Might it stem the PTB having doubts about the ability of an economy based on consumers/service/speculation to weather a real crisis?
“Where does this fear come from?”
Our society has “evolved” to the point where no pain, discomfort, ill health, depression, hurt feelings, responsibility for one’s failures, political “incorrectness”, etc. is really accepted anymore. Have a kid who has a little too much energy? Well, he has ADHD, here’s some Ritalin for him. “Doctor, I’m depressed, what can you give me?”, “Here a prescription for Prozac”. “Your house is about to be foreclosed on, here’s a bailout. You’re just a victim after all.” How many euphemisms and politically correct terms have been invented in the past 20-30 years to cover up the true meaning of conditions and realities. There must be thousands.
Our society lives in a fantasy world, unable or even unwilling to face reality. It’s no wonder we can’t possibly have a recession, we must feel good and be happy all the time no matter how dark the underneath reality or if feeling bad and sad today may make us happier and better people in the future. However, the laws of the universe eventually rear themselves and force us back to what’s real. Economically, we may be at that tipping point and when that goes so will all other illusions that the economic times of “spending beyond our means” had us believe were true or were important.
Similiarly, our forestry policy of not allowing natural fires to burn through the underbrush has manifested itself into the Super Wildfires suffered in SoCal. The heat is so intense that it pulverizes everything, including the old trees which have high fire tolerance, whereas a normal wildfire would actually cause the environment to thrive in the next seasons.
A credit collapse would resemble that forestry policy you decry.
To do that, it gives the nation a steady supply of economic Zoloft. But Bernanke seems freaked out that his meds aren’t working… ISTM it’s more like a manic-depressive who only takes his lithium when he feels blue. You can’t keep the highs and skip the lows..
Hiliary:
$30 billion only prevented Bear Stearns from triggering a meltdown on Wall Street, but didn’t save any of their shareholders from economic catestrophe. Why do you think $30 billion will do anything to help the 2.5 million (or more) homeowners facing either voluntary or involuntary foreclosure? Barney Frank has a more effective idea, but what do you think it will cost the banks and bondholders to reduce the principal on their loans 40-50% at once?
Is this the same mariner who made me a kind offer of a rental after the fire at my apartment building? If so, hello, and I hope you are doing well.
I can only hope this windbag is posturing for votes with homedebtor bailout talk, and that she too realizes it’s futile to attempt keeping these fish on the mortgage hook when they can see with their own eyes that rent is 50% below their monthly worm — as soon as the masses awaken to this fact no bailout plan will ever work since nobody will want it.
$30 billion only prevented Bear Stearns from triggering a meltdown on Wall Street, but didn’t save any of their shareholders from economic catestrophe.
That was no economic catastrophe, just a loss of 98% of their imaginary per-share value. That has happened to many stockholders in the past & will continue to happen in the future as long as there are stockholders who make bad bets or who support corporate boards who make bad bets.
Barney Frank has a more effective idea, but what do you think it will cost the banks and bondholders to reduce the principal on their loans 40-50% at once? For most banks that would mean they go bankrupt and out of business. For anyone who really needs a loan (many businesses in their usual course of operations) that would mean they couldn’t get a loan, they too would go bankrupt & out of business. For the employees of these former businesses, that would mean unemployment. There is more than one way to cause a meltdown that would not be confined to Wall Street.
I have no idea what’s going on, but another Realtor (TM) bites the dust.
http://www.latimes.com/news/local/la-me-call21mar21,0,3572208.story
“When Hsiao Hsu and her husband moved into the multimillion-dollar, 6,000-square-foot compound in the hills near West Covina, they had fulfilled a dream.”
That is so sad. I don’t care what part of Covina you live in, it is all surrounded by gang territory. If you have that kind of money in LA you’re supposed to move to someplace nice like Sierra Madre, San Marino, or La Canada.
On the tv…they reported that they had hired “tree trimmers” the day before…maybe just a coincidence…maybe nothing…maybe
Speaking of hire help…i saw this in the classified section of our little rural newspaper:
Help Wanted!
Must be able to… SHOW UP
call: (661) 000-0000
A sign out front read: “Warning: All activities are recorded to aid in the prosecution of any crimes committed against this facility.”
Uhhh . . . doesn’t this seem kinda like an odd sign to put on the front of your house?
Odd? Nope. Not in Southern California.
This is a strange case. It does seem random…so far.
Odd? Nope. Not in Southern California.
Really? Interesting. This is a sign I would expect to see plastered to the door of liquor store in particularly rough area of town, not a gated “compound.” Well, let’s hope they caught something worthwhile on tape . . .
are they still searching the house for the perp?
6000sq ft jesus
they found gloves? is oj in town ?
Can’t read rest of article; getting over the shock of [partially] agreeing with Hillary.
‘It’s obviously part of what we have to be doing, but it’s only dealing with some of the symptoms and not the underlying cause of the crisis.’
Now, I don’t think it’s part of what we have to be doing by any stretch of the imagination, but shockingly she’s right that it’s not dealing with the underlying cause. Which is, of course, the perception that big banks will get a government bailout, and therefore they don’t have to price in risk, or suffer losses when their leveraged Vegas-style gambles inevitably fail. If we could deal with that cause, we could likely prevent another bubble like this one.
Personally I’d be floored if she’s smart enough to know the actual cause, or any of her plans do anything positive to address it, but it’s encouraging to think she said something partially true, if even accidentally.
Free Viagra & homes for all…
“Clinton wouldn’t say how her new plan would be paid for. ‘You don’t pay for stimulus packages by definition,’ she said.”
Presidential candidates are smart!
You mean they’re self-sustaining?? (sarcasm off)
“‘You don’t pay for stimulus packages by definition,’ she said.”
Only in the bizarro world of government accounting can such a statement make sense. This is right up there with calling tax cuts “spending” and tax increases “enhancements”. In related news, the Ministry of Truth has announced that the Dictionary of Newspeak will now be updated quarterly through the next election cycle.
Won’t say how she plans to pay for her “mandated” health care plan either.
She still plan to freeze mortgage rates for 5 years?
Keep this woman away from the bongwater.
no more gov “help”
all the programs they come with breed failure
this one is from community bankin bill and the 2003 extension of same
flat, is that you?
Here’s a question for my fellow HBBers:
Who is supplying the money to the Federal Reserve for the loans given to investment bankers?
“Who is supplying the money to the Federal Reserve for the loans given to investment bankers?”
Here’s how I think it works, SFBAG: The Fed goes to its ledger (or computer), writes or types in the amount saying “Owes us thirty billion”. It then lends that out to the investment bankers, but if they can’t get it back from the investment bankers, WE (US taxpayers) pay it back to the FED. Neato, huh? Did you agree to that? Because I sure didn’t. Who agreed to that on our behalf? Paulson?
Seriously, I’m not kidding. The Federal Reserve just makes up the money out of thin air. Really. It does. They used to do it writing in a ledger with a stubby little pencil, but now they’re all sophisticated with computers and keystrokes and stuff. Presto! Billions and billions of dollars! Consider the IRS a forced collection agency for the Fed. If the FED can’t get it back from daBoyz, they’ll take it out of our hides one way or another.
I hope the shareholders of BS shoot down this crap.
I hope the shareholders shoot it down. Then I amke some real moneys.
That’s great, Hoz. And I think they are going to shoot it down, at least from what I’ve been reading.
There appear to be enough votes to approve the take under.
Source: Bloomberg
30% of the shares are held by employees and for the ones that stay after the merger they will receive 0.25 shares of JPM (vs 0.05473 for Lewis, Cayne et al). Bond firms have bought approximately 30% of the outstanding stock this week, the number of naked shorts however is very scary (A naked short is when there is more stock created than authorized by the company). IMHO the only way to safely play this is long the Bear Stearns preferred stock. This lets anyone get in on the bailout. (Do not argue with the Federal Reserve -it just wastes breath)
BEAR ST 5.49 PFD G (BSC-PG)
I strongly advise anyone considering doing anything with regard to BSC to get their head examined. There are a lot of ways to lose money before this settles.
I had that thought, but at the time I had it I was seaside at a villa near Girona with no wifi.
I may have needed my head examined but the urge has since left me so I think I’ve recovered.
.25 SHARE =$11 OR SO…Stay after the merger, what if they fire 5,000 before the merger?
The FED keeps creating money like that and interest rates will go up. Who will loan to the FED if they think it will immediatly get loaned out to insolvent banks ? When Japan did this BS with their banks the rates stayed real low for them because Japan had lots of savers to get money from. I don’t know were the US government plans to get the money from to bankroll this bailout effort ? its not coming from its citizens with their negative savings rate. And what about the Iraq war? Wait I think I just saw our Social Security surplus fly out the window !
The Federal Reserve Banks, collectively the US bank of issue, just create the money. The Fed credits the account of the borrower and debits loans receivable. It works the same way when the Fed buys securities (credits the selling bank’s account, debits government securities owned). It’s how the Fed creates money. The opposite actions destroy money.
Dude is in Spain, many crane, no rain.
I love Catalunya in the spring. Barcelona Bubble?
Begur, to be specific. It’s been lovely. Barcelona, one of my favorite cities.
Construction going on like there’s no tommorrow, for sale signs everywhere, and apparently very low occupancy.
I’d put Catalunya on your list of places to buy a vacation villa post-bubble.
Now off to deutschland. (Leipzig unt Berlin)
revisionist history is great.
Mr. Alan Binder wrote a most beautiful paper on the wonderful acts of Mr. Alan Greenspan Aug 4, 2005. Mr. blinder is as wishy washy as they come.
Mr. Gramlich was a tool and when given opportunities to change the course of the Federal Reserve chose to stick with Mr. Greenspan’s positions. see “Subprime Mortgage Lending: Benefits, Costs, and Challenges” May 21, 2004 FRB
Mr. Volker ” But it has surprised me that this board seems to have an unspoken - even maybe spoken - feeling that you don’t dissent, that is not the case historically, certainly not with Arthur Burns. It wasn’t the tradition when I was chairman. And that seems a little odd to me because it hasn’t been a tradition over a period of time, and I guess that reflects to some degree the fact that he [Greenspan] has been there so long and had this kind of centre of attention for so long.
I do not think you should dissent for frivolous reasons, and I think it is important for the central bank as much as possible to show a united front. I don’t doubt that. But it gets to the point where people think it is somehow impolite to dissent-I think that goes a little too far. ”
Mr. Milton Friedman on Alan Greenspan: “His performance has indeed been remarkable. There is no other period of comparable length in which the Federal Reserve System has performed so well. It is more than a difference of degree; it approaches a difference of kind. For the first 70 years after it opened in 1914, the Fed did far more harm than good… We would clearly have been better off for those 70 years if the Federal Reserve System had never been established.”
The list goes on and on. There was one dissenting voice in 1994 on the Federal Reserve Board over concerns that the actions by the Federal Reserve would lead to bubble markets. She was replaced.
Who was the “she was replaced.”
Ms. Minehan, First Vice President,
Federal Reserve Bank of Boston
“Mr. Alan Binder wrote a most beautiful paper on the wonderful acts of Mr. Alan Greenspan Aug 4, 2005. Mr. blinder is as wishy washy as they come.”
Success has a thousand fathers; failure is an orphan.
Alan Blinder was an economic guru to the Clintons…he of the “who needs manufacturing, we have a service economy” mind, who encouraged outsourcing jobs and industries.
Lately,he’s repented his earlier enthusiasm. Schmuck.
Sorry if this was posted already.
Some people just don’t give up.
sorry the link is here.
From Bloomberg. “Democratic presidential candidate Hillary Clinton said she is proposing a $30 billion, two-year program to help homeowners and communities hit by rising foreclosures.”
You know what we need? A law to prevent the Government from calling someone a “homeowner” if they don’t have at least 51% equity in the home. We can call it “The Defense of Homeownership Act”.
Amen!
“Treasury Secretary Henry Paulson and the Bush administration have so far resisted efforts by Rep. Barney Frank and Senator Dodd to stave off foreclosures through broad government support for homeowners who can no longer afford their mortgages.”
I fear what will happen to this country economically if we get a Democrat as president and these wacky schemes from Barney Frank and his ilk get implemented!
Imagine propping up home prices to save Sally Specuvestor and Harry Howmuchamonth! Responsible Americans will still avoid purchasing homes, savers and productive taxpayers will be left to pay for it, seniors who bought and paid for their homes will have to pay higher property taxes (because of inflated values from the propped up prices), etc.
Can’t any of these people see that the best way to make housing “affordable” is to let the prices go back to normal? This means, of course, that people who got in way over their heads should have to give the house back to the bank. Most of these folks aren’t losing anything anyway, esp.with no down payments.
Rep. Dick Armey was being nice when resorts to name calling with Barney Frank! Barney’s luckey he didn’t get slapped!
If this comes to pass, I think Atlas will finally “Shrug”.
What’s surprising is that, until a couple of years ago, I wouldn’t hesitate to identify myself as a “Democrat!” I’ve lost all faith in the Democratic party. They don’t care about sticking up for the little guy! They just want to stay in power by buying votes with MY money!
‘ya just haven’t had your cup filled to overflowing until you’ve seen Ted Kennedy serenade a crowd in Spanish-
http://www.youtube.com/watch?v=PrNFxS9Hk6Q
Another Democrat/Libertarian here (yes, they can co-exist
) who’s seriously considering voting for Ralph Nader. Doing more research, but can’t get over the feeling that both Repubs and Dems are NOT representing “We the People.”
“Paul Volcker, a former head of the U.S. Federal Reserve, in an interview with Charlie Rose on PBS television, said the country’s troubles are the inevitable consequence of a bubble in housing that was clearly unsustainable.”
“‘I don’t think this crisis is over,’ he said. ‘It’s quite a serious matter. We’ve seen the Federal Reserve take more extreme measures in some respects than any that have been taken in the past to deal with a financial crisis, which raises some real questions.’”
This guy sounds like a bitter renter.