It’s Like Playing Monopoly With Fake Money
Some housing bubble news from Wall Street and Washington. Bloomberg, “Northern Rock Plc, lost 243.5 million pounds ($483.4 million) in the 12 months ended Dec. 31, the company said in its annual report published today. ‘The 2007 results reflect the impact of deteriorating market conditions and the effects of significant liquidity and funding constraints on the company,’ the Newcastle, England-based bank said. The company doesn’t plan to erase losses until 2011.”
“‘If the mortgage market gets harder and the housing market gets softer, there is no question it will become more challenging for us,’ said CEO Ron Sandler. ‘We anticipate loan loss provisions will increase over time.’”
“The government nationalized Northern Rock, the first U.K. bank to suffer a run on its deposits in 140 years, in February after a five-month search for a private buyer failed. The bank owes nearly 24 billion pounds to the Bank of England, down from 26.9 billion pounds at the end of 2007, and said it plans to repay the emergency aid in 2010.”
“Sandler, who took over as chairman after the bank was nationalized, plans to sell half of Northern Rock’s assets and cut about a third of its workforce to repay the government’s loans and return the bank to private ownership.”
The Evening Standard. “London house prices are no higher in real terms than they were a year ago, new figures show. Chartered surveyor Anna Jolly, 29, put her three-bedroom flat in Battersea Square on the market for £400,000. A few weeks later she received an offer at £25,000 below the asking price.”
“She said: ‘I remember it clearly because it was the day that Northern Rock crashed. At the time I thought I could do better so I hung on for a few more weeks. We had a lot of viewings but no more offers, so I eventually accepted the original offer. I realised the way the market was going and realised it wasn’t bad under the circumstances.’”
“In Sneath Avenue, Golders Green, the owner of one four-bedroom house has had to cut her asking price by a fifth in less than three months. She put the Thirties property on the market for £750,000. A month later she reduced it to £729,000 and three weeks later to £699,000.”
“Today, estate agency Moreland cut another £100,000 off. Edward Gilbert of Moreland said: ‘It’s gone from being ridiculously overpriced to being very, very competitive. We expect to sell it within days.’”
“Ed Stansfield, property analyst at the Capital Economics consultancy, said: ‘Hopes that the housing market is experiencing little more than a short-term wobble look increasingly forlorn.’”
“Howard Archer of analysts Global Insight added: ‘There are fewer mortgages available and they are more expensive. “We expect house prices to fall by at least five per cent both this year and in 2009. If the economy suffers extended weak growth, this will trigger a sharper fall in prices.’”
“‘If both sellers and buyers start expecting prices to fall sharply, there could be a flood of sellers putting their houses on to the market,’ he said.”
The Associated Press. “The Bush administration Monday proposed the most far-ranging overhaul of the financial regulatory system since the stock market crash of 1929 and the ensuing Great Depression.”
“The plan would change how the government regulates thousands of businesses from the nation’s biggest banks and investment houses down to the local insurance agent and mortgage broker.”
“It would ask Congress to establish a federal Mortgage Origination Commission to set recommended minimum licensing standards for mortgage brokers, many of whom now operate outside of federal regulation. Treasury Secretary Henry Paulson rejected charges that it was lax regulation of mortgage brokers and the financial industry that had led to the current problems.”
“‘I do not believe it is fair or accurate to blame our regulatory structure for the current market turmoil,’ he said. ‘I am not suggesting that more regulation is the answer or even that more effective regulation can prevent the periods of financial market stress that seem to occur every five to 10 years.’”
“Senate Banking Committee Chairman Christopher Dodd said in an appearance on CBS’ ‘Early Show’ that it was not a failure of the regulatory scheme but ‘a failure of leadership’ that led to the current crisis.”
National Mortgage News. “For three months now a source familiar with the situation has been telling us that Carrington Capital Management — which bought the servicing platform of now-defunct subprime giant New Century Financial Corp. — has been having (shall we say) some financial challenges.”
“This past week it was reported that Carrington, the brain child of former Salomon Brothers executive Bruce Rose, is trying to persuade investors to lend it $200 million to replace its current bank lines. The obvious question is this: Have his current lenders become ‘risk adverse’?”
“Readers (have) been kind enough to share their thoughts on a variety of topics affecting the mortgage industry. ‘Over the past 12 to 18 months the mortgage brokers of this country have been slandered, defamed and egregiously designated the scapegoats of ’subprime-gate.’ They have lost their jobs, their businesses and their industry as a result of selling exotic mortgages created and distributed by big banks and Wall Street.’”
“‘The banks created, packaged and sold their subprime products through far reaching and sophisticated sales channels. The facts are that these people stole the broker industry. They created the Ameriquest’s of the world and they encouraged everyone to sell their programs. If you didn’t sell it, the company down the street did…The fallout from this mess will not only cripple the broker industry and its people, it will hurt borrowers more than one can imagine.’ — Joe Adamaitis, Direct Mortgage.”
The Denver Post. “When Torrence James was finished serving a federal prison sentence for dealing cocaine in 2004, he took one of the few white-collar jobs then still available to convicted felons. He became a mortgage broker.”
“Last week, Chief U.S. District Judge Edward W. Nottingham sentenced James to 12 years in prison for mortgage fraud. Many of the luxury properties that James and six other defendants skimmed became party pads as they fell into foreclosure, devastating local property values.”
“One of the companies James and his crew defrauded was New Century Financial Corp. of Irvine, Calif., which is now under federal investigation for fraud itself.”
“New Century is in bankruptcy after paying its executives millions in bonuses and stock options. Its three founders made more than $40 million selling stock between 2004 and 2006 as the company apparently made loans to anyone with a pulse. When the company is liquidated, its shareholders will receive a penny to 25 cents on the dollar.”
“New Century had a ‘brazen obsession’ with making subprime loans, turning ‘a blind eye’ to a ‘ticking time bomb,’ according to an independent report released last week that was commissioned by the Justice Department.”
“New Century wrote $357 million worth of mortgages in 1995, the year it was founded. In 2006 it wrote $60 billion. How did it grow so fast? Liar loans.”
“The 580-page report from examiner Michael Missal, which was more than five months in the making, concludes that New Century’s auditor, KPMG, failed to exercise due care in reviewing the books, leading to misstated financial results.”
“KPMG has said it ’strongly disagrees’ with the report’s findings.”
“‘It’s an Arthur Andersen re-do,’ said Lynn Turner, the former chief accountant for the U.S. Securities and Exchange Commission, who now sits on the U.S. Treasury’s committee on the auditing profession. ‘We’re right back where we were in pre-Enron days.’”
“‘Some things blow up occasionally,’ said John Bazley, a professor at the University of Denver’s Daniels College of Business. ‘People make mistakes.’ In the case of New Century, KPMG may have had to constantly re-value complex securities stuffed into Byzantine portfolios, Bazley explained.”
“‘It’s a Wall Street issue more than an accountants’ issue,’ said Bazley. And a very complicated one at that. Meantime, it’s a good thing they got that Torrence James guy. What a menace to society he was.”
The Boston Globe. “The bellwether spring housing market is around the corner, but the nation’s credit crunch means it’s more difficult for buyers to obtain mortgages. Timothy Warren Jr., CEO of a Boston real estate and research firm founded by his great grandfather, Willard Warren, answered questions about Massachusetts’ market for Boston Globe reporter Kimberly Blanton.”
“Q.What do you expect for foreclosures this year? A. The number of foreclosure deeds filed in 2007 was 7,653. The number of petitions, the first stage of the process, was 29,607 - a record. I expect both numbers to continue to climb. And the number of people entering the foreclosure process increased dramatically in the second half of last year…Distressed properties are dictating the whole market in many communities.”
“Q. Is the credit crunch on Wall Street making it harder for everyone to get a loan? A. Yes. It’s due to tightening loan standards and less liquidity. Lenders don’t want to take risks anymore…The number of single-family home sales was down about 10 percent for all of 2007, though the pace accelerated at the end of the year. It wouldn’t surprise me if this year it’s double that.”
“Q. Could government have prevented this crisis?”
“A. In hindsight, the government made a lot of mistakes. Perhaps the Federal Reserve fueled ‘irrational exuberance’ in real estate prices by keeping interest rates low. The easy money, low interest rates with low documentation requirements, and 100 percent financing just made it too tempting for people to jump in. People assumed prices were going to keep rising and refinancing was going to solve any problem they had of meeting their mortgage payments. It’s like playing Monopoly with fake money.”
The Vicksburg Post. “For Vicksburgers facing foreclosures, futures appear murky. Most houses up for foreclosure are vacant, regardless of location — whether their owners lived beside the manicured lawns of the county’s most expensive subdivisions or packed tightly within central Vicksburg’s oldest neighborhoods.”
“Some of them reflect the financial world’s ‘teaser-rate’ mortgage loans, which have fluctuating interest rates depending on financial markets. Those loans usually start out lower and increase over time.”
“But local attorney David Sessums said the adjusted ratings are not necessarily the cause of the foreclosures in which he has acted as trustee. Instead, he said, they reflect a downturn in the fortunes of homeowners.”
“‘Three years ago, you saw a really nice occasion. Young couples were happy about getting a house,’ Sessums said, adding details on loan terms are often overlooked — buried inside ‘an inch- to an inch-and-a-half-thick’ stack of paperwork when people sign for a house.”
“‘He who has the gold makes the rules whether they read them or not,’ Sessums said.”
The Tennessean. “While the housing slowdown has caused many homebuilders to pull back, Centex Corp. has kept building.”
“On the edges of popular Middle Tennessee communities — Brentwood, Hendersonville and Franklin — the Dallas-based homebuilder is forging ahead with a strategy that takes aim at the market for homes priced at $250,000 and below, a portion of the local market it views as underserved.”
“‘We’re servicing the family buyer,’ said Wes Patterson, the company’s division president. ‘Our price points start in the 130s ($130,000). … It’s difficult to match that price in the places where we’re building.’”
“Often ignored during the housing boom, these lower-priced homes could now become a potential life buoy for the struggling construction industry, some believe.”
“Two years ago luxury homes priced at $500,000 and above drove Nashville’s construction market, as homeowners stretched their finances or cashed in on rising prices to move into fancier abodes.”
“Now homebuilders say their best sales — or at least, the smallest declines — have been in moderately priced homes.”
“‘They have buying power, they’re well-funded, and they made some huge decisions competitively,’ said MarketGraphics President Edsel Charles.”
“Centex’s focus toward lower-priced housing in Middle Tennessee is part of a nationwide strategy to shift its focus back to its longtime strength — starter and first-time move-up homes, said Jay McCanless, a housing industry analyst in Nashville. Many other companies are doing the same.”
“‘You saw a lot of builders who saw prices appreciate and try and stretch themselves a little bit,’ McCanless said.”
“Several owners who bought into Concord Place during the housing boom have opposed plans to expand their neighborhood. The new section of homes will have layouts similar to their houses, but with prices that have been reduced to reflect the slower housing market. They fear this will undermine the value of their homes.”
“‘I love my home,’ said Christopher James, who bought a four-bedroom, three-bathroom house in Concord Place for $290,000 in September 2006. Now, Centex is advertising similar homes for $220,000.”
“‘If they start selling for that price, I will be upside down,’ he said.”
“Patterson said the pricing in the new section reflects smaller lot sizes and a weaker real estate market. ‘Pretty much everyone … is facing the same thing,’ he said.”
“Other companies are expanding with projects at similar price points. Reston, Va.-based NVR Inc., which does business locally as Fox Ridge Homes, plans to start construction soon on communities in Sumner and Rutherford counties where the bulk of the homes will be priced $250,000 and below.”
“Atlanta-based Beazer, meanwhile, has communities in Bellevue and Hermitage aimed at lower- and middle-income buyers. Neither firm said it has intentionally taken aim at lower-priced homes, as Centex has done. But, as the economy has soured, both expect those will be a greater part of their sales.”
“‘It’s not any conscious effort on our part, but our sales are generally coming out of that price point,’ said David Hughes, Beazer’s Nashville division president. ‘We’re not (speculating), but if we were to, we would definitely (speculate) in that.’”
“Senate Banking Committee Chairman Christopher Dodd said in an appearance on CBS’ ‘Early Show’ that it was not a failure of the regulatory scheme but ‘a failure of leadership’ that led to the current crisis.”
I believe we have feckless, irresponsible leaders because we have become a feckless, irresponsible people. This is an institutional response to a cultural problem.
sort of like drunks are now alcaholics and aids is a big worry
end of the roman empire stuff
all gov programs promote failure
all gov programs promote failure
Are you serious, or just trying to play some kind of a “role” (the requisite right-wing message board crank)?
The two are not quite mutually exclusive. He can be the right wing board crank and really believe it.
I don’t think all gov’t programs promote failure, however many do provide an incentive to take actions that can result in failure. For example, bankruptcy promotes many people to load up on debt in order to start a business knowing that if the worst happens they can declare bankruptcy and be freed from their creditors with a lot less hassle than having wages garnished until possible eternity.
Now, you can argue that bankruptcy allows people to take risks that could not be taken otherwise, and allows successes that otherwise would have been much more challenging because people will take risks that they otherwise wouldn’t take. You could also argue that if bankruptcy were not an option and people couldn’t just walk away from debt then creditors would offer credit much more cheaply because risk would be greatly reduced thereby making credit much more available to anyone who wished to partake of it.
You can make similar arguments pro and con with a lot of other programs such as food assistance, public education, social security, medicare etc. They provide a fallback mechanism, and by providing that fallback mechanism they allow people to accept mediocracy/failure.
If this guy were in Japan he would be required to jump off a tall building!
“It’s like playing Monopoly with fake money.”
Isn’t that *just* like playing Monopoly?
Since 1964 there has been no real money.
Why was gold standard money, “real money”? It was still just someone deciding what something was “worth”.
I know what happened in 1973. What happened in 1964?
The United States debased the hard currency. No more silver in it.
RE: The United States debased the hard currency. No more silver in it.
I think in Roman times it was called coin clipping.
You can always tell the direction of a society and culture by the quality and dimension of it’s coinage.
Pretty hard to distinguish a quarter from a nickel these days.
A Denarius from the era of Julius Caesar was nearly pure Silver, and 25 of them was equal to one Gold Aureus. A few hundred years later some Roman figured out how to Silver wash bronze coins to give them the appearance of being Silver, and it fooled the populace for awhile, until they figured it out.
The rate of exchange went to over 4,000 Denarii to one Gold Aureus, as a result.
News flash about how “today” differs from “the good ol’ days” of 25 B.C. : There are now 6 billion people on the planet. The population grows by 200,000 per day. Let’s give up on comparing the present to the distant past, shall we?
Basic human nature hasn’t changed 1 iota since the days of old.
Stack that up against your 6 Billion…
Yeah, I think its much better to keep repeating the same mistakes over and over again.
Why learn from experience?
One too many sips of the kool-aid my friend. Put the glass down. If we don’t look back at the stoopid things we’ve done, we are sure to step in the steaming pile again.
“I am aware that some technical defects can be pointed out in the gold standard, but it has one virtue that more than outweighs them all. It is not, like paper money, subject to the day-to-day whims of the politicians; it cannot be printed or otherwise manipulated by the politicians; it frees the individual holder from that form of swindling or expropriation by the politicians; it is an essential safeguard for the preservation, not only of the value of the currency unit itself, but of human liberty.”
Henry Hazlitt
one more for kicks!:
“Gold is money and nothing else.”
J.P. Morgan
“It is quality rather than quantity that matters.”
Lucius Annaeus Seneca
“This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the ‘hidden’ confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard”
- Alan Greenspan in Capitalism - The Unknown Ideal
Extraordinarily ironic coming from the mouth of the man who oversaw the greatest hidden confiscation of wealth in American history.
I believe the new version uses an electronic banking system with a Visa debit card. You don’t even get to use real fake money
The last I heard they were going to make coinage with iron as the zinc and nickel was worth more than the underlying currency….we are all now rust..( $100. worth of nickels are worth $125 ) You could always melt your paper dollars…oh wait.
Sorry, I meant the new version of Monopoly uses a debit card instead of the fake color money we grew grew up with. I would never buy it.
http://www.amazon.com/Hasbro-114-Monopoly-Electronic-Banking/dp/B000OOLNTY
ugh. “fake colored money we grew up with”
In Rust We Trust
The FED is now accepting monopoly money at the discount window as loan collateral.
I found that quite funny, until I realized that Monopoly money had more use/value than the MBS they were allowing now.
Who is the Next Bear?
http://www.minyanville.com/articles/MER-jpm-bac-LEH-BSC-fre/index/a/16480
“In Sneath Avenue, Golders Green, the owner of one four-bedroom house has had to cut her asking price by a fifth in less than three months. She put the Thirties property on the market for £750,000. A month later she reduced it to £729,000 and three weeks later to £699,000.”
“Today, estate agency Moreland cut another £100,000 off. Edward Gilbert of Moreland said: ‘It’s gone from being ridiculously overpriced to being very, very competitive. We expect to sell it within days.’”
Wrong. It’s gone from being *insanely* overpriced to merely ridiculously overpriced .
“‘I do not believe it is fair or accurate to blame our regulatory structure for the current market turmoil,’ he said. ‘I am not suggesting that more regulation is the answer or even that more effective regulation can prevent the periods of financial market stress that seem to occur every five to 10 years.’”
This guy really is insane.
Maybe, but that’s better than the guy under criminal investigation at HUD. Reagan’s HUD guy went to jail as well. If there is one agency Republicans don’t care about, it’s HUD. So they put in some thief who won’t complain when they cut the budget, and this is what they get.
the welfare agency- why not change the name back
Didn’t Jack Kemp run HUD for a while?
And Clinton had Henry Cisneros. Maybe they should just have a jail bar door for the Secretary’s office and save some time.
Do Republicans care about any agency, outside The Department of Corporate Welfare?
Glad to see some people calling this crap for what it is: more deregulation. Insanity.
Just maybe as bad as foreclosure.. Man looses everything due to craigslist add offering his valuables for free.. without his permission - even his horse.
http://seattletimes.nwsource.com/html/localnews/2004302237_webhoax24m.html
What freakin idiot would just show up at someones house with no one there and start taking things because a craigslist ad said they could?!?
“What you talkin bout *grand theft* Judge? Eyes got me a leaglised one hunnerd purcent document o paper fromin the indernet right heer!”
Sounds like a really, really p****d off ex wife to me.
Now he can now collect on his insurance. A pretty scam? I’ll wait for the rest of the articles.
More proof what low lifes most Americans are!
Careful, cowboy, careful…
The fallout from this mess will not only cripple the broker industry and its people, it will hurt borrowers more than one can imagine.
“Neither a borrower nor a lender be.” These words have been known to every schoolchild for, oh, about 405 years. No excuses.
Oh Brother, that Drama Queen is more sorry over lost commissions than consumers having to prove they can pay a loan back.
Leave it to Shakespeare to get to the heart of the matter.
Polonius was a tedious old fool. Never understood the Ipod of the age.
Over the past 12 to 18 months the mortgage brokers of this country have been slandered, defamed and egregiously designated the scapegoats of ’subprime-gate.’ They have lost their jobs, their businesses and their industry as a result of selling exotic mortgages created and distributed by big banks and Wall Street.’”
“‘The banks created, packaged and sold their subprime products through far reaching and sophisticated sales channels. The facts are that these people stole the broker industry. They created the Ameriquest’s of the world and they encouraged everyone to sell their programs. If you didn’t sell it, the company down the street did…The fallout from this mess will not only cripple the broker industry and its people, it will hurt borrowers more than one can imagine.’ — Joe Adamaitis, Direct Mortgage.”
Going back to the old saying of our parents, “And Honey, if someone told you to jump off the Brooklyn Bridge would you do it?”
No one told these brokers to sell this junk..simply put they accept the bribes(back end payments) to peddle the junk..they knew it was crap, they knew that the borrower could never afford the home they were getting, they knew that some of these borrowers could be put into a fixed rate loan but instead CHOSE to go for the worse product because it paid them more money..They jumped off the bridge to join EVERYONE ELSE, like Joe says and now you want a life boat..I don’ think so!
QUALIFYING for a loan based on money down, proof of income, employment and good credit standing…YOUR RIGHT JOE..GEEZ that would REALLY REALLY hurt the borrower!
REGULATION, REGULATION,REGULATION!
Like I said many moons ago ,nobody sent down a memo saying something like “give us every fraudulent loan you can get your hands on .”
The front line mortgage agents and real estate sales people took the easy way out when they found out they could make big money putting fools into toxic loans they didn’t qualify for ,IMHO .
The borrowers went along with these sale pitches by the front line commissioned sales people . Wall Street didn’t do any quality checking apparently and had everything to gain by passing off these loan bundles to the loan investors at AAA ratings . By the time the foreclosures started coming in it was to late .
Make no mistake ,bad loans/liar loans can’t get by unless they are set up by more than just the borrower . Nobody in management or underwriting was checking the thieves and they just passed the risk up the chain of commissioned profit and fee takers .It was the front liners that were blackmailing the appraisers . But, more importantly the entire market turned into a ” close your eyes to sins mania “,whereby everyone was sleeping on the job and just out for the all mighty buck,including many borrowers. So many businesses and even the media was benefiting from this fake real estate market .The real estate myths and investment lies took on a life of their own as the market heated up more and more ,while the watchdogs relied on real estate going up to cover all sins while everybody took their piece of the action .
The above is why you need to have regulations and strong watch dogs . As far as I’m concerned the rules/laws were already violated because there are laws against loan fraud , blackmailing and all the other cheap shots that went on during the boom . Why are the powers acting like current laws weren’t violated already ? Big lie to make it seem like new laws need to be made rather than going after the current law-breakers .
They always do this “there oughta be a law” stuff when there IS a damn law. They need to enforce the extant laws and start putting people UNDER THE JAIL.
Another fun one is the recent rash of sexual offender legal nonsense. Rapist Bill gets caught for rape and it’s discovered he raped three other people and spent some time in jail for a couple of the previous rapes. So Rapist Bill goes to jail again for the fourth (known) rape. When he gets out, because of “tough new laws,” he’s forced to sign a registry so everybody can look him up online and know they’re living next door to Rapist Bill, a sex offender. But see, here’s the thing, Megan’s Law et al are not “tough new laws.” They’re weak, superfluous piles of PR bull. Rapists need to live in JAIL. JAIL, JAIL, JAIL. They do NOT need to be let out of jail to make more room for drug offenders and to allow pols to go on TV and scream about how they’re tough on crime, look at this terrific new stopgap they came up with, now the monstrous 3-time childripper has to put his mugshot up on a website.
Oh, look, everyone colluded to look the other way and now a bunch of evil moneyswine have caused widespread misery and a busted economy, perhaps a decades-long depression for the whole entire world. Some more of that oldtime bankerhankypanky we remember from the 20s! Let’s write more stealing law to repeat in slightly different words the stealing law everybody ignored to allow this to happen. Then let’s elect a committee to explain the new stealing law to bankers so this never happens again. Or we could put them in JAIL. JAIL. JAIL.*
*here’s my reference for this wild new JAIL idea: http://www.youtube.com/watch?v=nwX-aZixthM&feature=related
“‘I love my home,’ said Christopher James, who bought a four-bedroom, three-bathroom house in Concord Place for $290,000 in September 2006. Now, Centex is advertising similar homes for $220,000.”
“‘If they start selling for that price, I will be upside down,’ he said.”
The sad fact is that prices have to and will come down. The high leverage stunt man loans provided an artificial market where Mexican migrant workers making $12k/yr could leverage a $700k house purchase.
Wall street realizes now that this is unsustainable.
As this leverage starts to disappear through fully documented loans limiting leverage to 3x or less and 15 to 20% down, the house prices will come down.
The secondary market to purchase these loans are not buying unless priced for risk at much higher rates.
“‘If they start selling for that price, I will be upside down,’ he said.”
I just had a neat idea. One condition for any future bailouts is that the we must make the victims actually stand upside-down while begging for their handouts. They should also be made to wear funny hats. I’m going to pen a letter to my congressman suggesting this.
I think this guy would rather see the whole economy turned ‘upside down’ with bailouts just so he can hold on to the fake equity in the little crapbox that he loves so much.
He reminds me of one of the little kids I used to play Monopoly with years ago who would throw the game and all the pieces up in the air when he started losing.
I have yet to live in a structure that loves me back.
I’m beginning to think that our government will do everything in their power to make sure that prices do not drop much further. I’m getting really disillusioned.
Feel free to contradict me.
The government will try to do everything in its power to prop up housing prices. It doesn’t mean it will work. About the only way it would work is if the government propped up wages, too. Look around you. See that person driving the Lexus? Or the family that took the lavish vacations? Probably got them by HELOC-ing the house to death. And some were even using the increasing equity in their homes to actually help pay the mortgage. Many people are in debt up to their eyeballs. Just nobody talks about. Or, they lie about it.
All this wealth was just an illusion. It only existed on paper. Most of it can’t be serviced. Now that banks are terrified, the easy credit spigot is shutting down. Oh, yes. The government will keep trying to mitigate the damage. But I think it’s an effort in futility.
Now, what can I get you to drink?
Keep in mind that time is an element here. The longer they can postpone the inevitable drop, the better (for some)…
Maybe if they had started 2 years ago. Now they just offer platitudes since it’s an election year.
I too am feeling the same.
Never thought I would, but I have recently considered a motorhome;–it would be mine, mobile, and managable. [and probably better built than any sfh's in past 7 years].
“‘It’s a Wall Street issue more than an accountants’ issue,’ said Bazley. And a very complicated one at that. Meantime, it’s a good thing they got that Torrence James guy. What a menace to society he was.”
Ben, are you making these quotes up man? I am laughing and crying at the same time….STOP!
Q. Is the credit crunch on Wall Street making it harder for everyone to get a loan? A. Yes. It’s due to tightening loan standards and less liquidity.
I call BS on this. It is making it harder for unqualified people to get loans, which is exactly the correct outcome. I bet most of us on this blog could walk into a bank and have a (prime) mortgage approval in hand almost immediately, if we wanted to be so stupid as to buy in this market.
I generally agree that loans are available to those who are qualified. However, I spoke to a banker that I know recently and he said that I shouldn’t ask him for a 30-year fixed jumbo since his bank doesn’t have a relationship with anyone who will provide them.
I’m not saying that I couldn’t get a 30-year fixed jumbo, but I may need to walk into a few banks before I find one that is willing to give me one.
“I bet most of us on this blog could walk into a bank and have a (prime) mortgage approval in hand almost immediately, if we wanted to be so stupid as to buy in this market.”
I’ll write a check but thank you.
make the victims actually stand upside-down while begging for their handouts. They should also be made to wear funny hats
AND NO PANTS. LET IT ALL HANG OUT IN THE WIND FOR ALL TO SEE. NO MATTER HOW UGLY.
There’s a guy who I occasionally see at one of the nude beaches here on Maui. He strolls around very proudly and does yoga poses, including standing on his head. My friend named him “d**k beacon.”
surprised you don’t call him paulson.
What a horrific visual.
I recently learned two slang phrases for walking around while wearing a shirt but not pants: “shirtc*cking” and “Donald Ducking.” Who knew that this phenomenon was so common as to merit two colorful nicknames?
instead of 10 new gov agencies why not just make RE 10% down and fire all these useless tools
20%
I wonder if we could ever see the day, when 50% down becomes the requirement or if you have to post a “bond” of some sort with the lender to cover some period of PITI.
In a world without credit, everything is 100% down.
On a mostly rhetorical tangent, tonight I was wondering if it’s possible to link the easy credit of the last 10 years to a broader decline in American work ethic and character. In broad strokes, why should I work harder to improve my life when I can pull and pull and pull more credit and live WAY beyond my means? When that catches up to me, I’ll just pull more credit. If I play that game for 5 years, that could be a full 10% of my lifespan (especially without health insurance). 10 years of easy living on other people’s money could easily be 15-20% of my entire life. It ceases to be “easy living now, pay the piper later” and closer to “easy living for a major portion of your adult life, who knows what will come after that”.
Why have integrity? Why do the right thing? Give me 70 years of credit & refinancing and I’ll live a shallow, worldly life. Is it so different from a lifetime of drug addiction? Ok 70 years is a bit much. Can I squander your money for 25 years? You think I can’t figure out an exit plan in the next 25 years? Screw character.
“I hope a lot of people come to my funeral. And I hope those people say, ‘That guy owed me a lot of money.’” -Jack Handy
I think credit has ruined a lot more than our economy.
I believe my Dad told me that 40-50% down was required during the Korean War except for vets. Any old timers know if this was true?
Just start arresting people. Start on Wall Street and work your way over to D.C. Build bigger prisons, as the need arises. Solves a lot of problems without creating any new agencies.
“Sen. Christopher Dodd of Connecticut said he welcomed the plan offered by Treasury Secretary Henry Paulson, but questioned its relevance in addressing falling home prices, rising foreclosures and the imminent threat of recession.”
It seems that he is more concerned about the price of his own home. What about me Senator? You want to outprice me forever? I want to buy and own a home too.
“Senate Banking Committee Chairman Christopher Dodd said in an appearance on CBS’ ‘Early Show’ that it was not a failure of the regulatory scheme but ‘a failure of leadership’ that led to the current crisis.”
Oh, and Dodd isn’t part of the current leadership? I’m defending the Bush admin. and I’m not taking a cheap shot at a Dem. I really hate how it’s always the other party’s fault.
Where were Dodd, Kerry, Frank, Paulson, et. al., while the bubble was inflating?
Oh, a bubble can only be spotted in hindsight. What BS.. how come we here and many others elsewhere saw this coming years ago? It sure wasn’t clairvoynce. (or was it?)
Not until Jan. 2007, he wasn’t. He was in the minority party up until then, which, in the way Washington works, makes him about as relevant to what passes Congress as, oh, you and me.
IOW, not very.
There are plenty of people who can share blame for this bubble, but Democrats in Congress are not among them, since they were out of power between Jan. 1995 and Jan. 2007.
I knew you were going to say that…
Trying very hard to introduce legislation to put some oversight and regulation into what was happening. The were rebuffed by the Republicans, who controlled Congress, and the Bush Administration every time. When some of the States tried to do this, the Bush Administration also stopped them.
As they were in the minority they had no power to pass bills.
“When Torrence James was finished serving a federal prison sentence for dealing cocaine in 2004, he took one of the few white-collar jobs then still available to convicted felons. He became a mortgage broker.”
See, I learn so much from this blog. I thought that mortgage brokers turned into criminals, not the other way around.
Oh well, it doesn’t change the story’s ending.
Lehman brothers is in serious trouble.
Stock down after hours.
http://seekingalpha.com/article/70589-a-look-at-bank-and-broker-default-risk?source=etrade
They just sold some more stock to raise cash! This, after the FED just loaned them a bunch of cheap money.
No, no…. Their ability to sell $3 billion in stock is proof of their health of their balance sheet. Just ask them, that’s what they’ll tell you.
With the shares carrying a liquidation preference of $1,000 each,
Yowza, anyone know where they stand in the liquidation line?
Whoops, price-per-share is also $1K. Nothing crazy here after all.
RE: Treasury Secretary Henry Paulson rejected charges that it was lax regulation of mortgage brokers and the financial industry that had led to the current problems.”
Simply based on this comment, Congress should be calling for Paulson’s resignation.
He just doesn’t get it.
if we get really lucky, maybe Congress will call for Congress’s resignation..
not likely though…
none of them get it…
..and the ones that think they do are truly dangerous, because they think they can fix it
Hey HD,
I think your pretty familiar with the North Shore.
I’m thinking about the following listing as a summer home…
What might your thoughts be?
http://www.realtor.com/search/searchresults.aspx?mlslid=70692595&ml=3&typ=7
Pen,
The Palladium windows in the great room are so 2005. I would open with a $5.45MM bid and hold at $5.6MM. Don’t chase in this mkt.
..but with an interest only loan, the pmts wouldn’t be all that different between $5.45MM and $5.6MM..
Sen Dodd is saying the same thing.
“Senate Banking Committee Chairman Christopher Dodd said in an appearance on CBS’ ‘Early Show’ that it was not a failure of the regulatory scheme but ‘a failure of leadership’ that led to the current crisis.”
It’s not the regulations, it’s the failure to do due diligence by the Bush Administration.
But there are those on this board chastising him for saying this.
WTH?
http://www.nytimes.com/2008/03/31/washington/31cnd-jackson.html?_r=1&hp=&adxnnl=1&oref=slogin&adxnnlx=1207001740-OvUrSw2F0I2UHHNMuSdWfA
Not Paulson, but close… Someone should take his passport cause charges (should be) eminent.
” Housing secretary Alphonso R. Jackson resigned on Monday, saying that he needed to devote more time to his family. ”
Ok, this ‘more time with family’ claim has finally reached absurdity - threatening to knock off, “check is in the mail”
Re: Northern Rock and the Brits
I just returned from England and was most distressed to find that not only did my dollar not go far (I already knew it wouldn’t) but Internet access had become dramatically more expensive. 3 pounds/10 min? No thanks. I resolved not to miss you guys too much while I tried to keep up as much as my husband would allow between sightseeing — it was his first trip.
FWIW, this is what I saw (I apologize in advance for the inability to cite my sources — we were traveling very lightly):
The media there is still in denial. I managed to grab the Financial Times (anyone know why it’s printed on pink paper?) a couple of days in London, and the writers seemed to be teetering on the brink of panic. They know something very, very bad is coming. Still, they are loathe to admit it. Their stories are filled with “if”s and “perhaps”s, and many many mentions of the word “subprime”. No reference to simple overextension on the part of well-qualified borrowers, no mention to very low median incomes, no mention of the word “bubble”.
Prices have come down some, and I saw many, many for sale and for let signs (Underground Zone 4 and farther out). The real estate frenzy has slowed down quite a bit from when I was there in July. Asking prices are still way too high, especially considering that most of these houses are attached and many are very old. (I fell in love with London when I was at Oxford for a time, but having looked at it with slightly more wizened eyes, the capital city has lost its luster. I still love the countryside and the trains that whiz you through it, but I’ve realized that’s largely because of the lack of buildings.)
And, you guessed it, everybody’s blaming us, as though they didn’t have 125% loans over there. Now, our Kings of Wall Street deserve mush of the blame, granted, but if you think those thuggish financial imperialists in the City weren’t getting fat off similar deals they made to their less astute countrymen, you are mistaken.
Case in point: I saw a BBC World News piece bemoaning the indebtedness of British youth; they highlighted one young lady with 30K pounds of credit card debt who had recently purchased a zero-down flat with — get this — three other girls, thinking it would be a “good investment.”
And another BBC commentator said, “I know I haven’t said this on-air before, but I’m going to say it now: British real estate prices will fall precipitously.” The anchorwoman went silent and still.
The most telling comment came from a businessman in the BA Lounge at CDG (we got bumped up due to the Terminal 5 fiasco — I don’t think I’ll ever be able to afford business class, though it is one of my cherished dreams for 10+ hour flights). I overheard him griping with unfathomable disgust, “This is all the result of some adolescent traders trying to reap more fees.”
Uh, no, sonny Jim.
It’s far deeper and wider than that as you will very quickly discover.
It’s good to be back to the HBB.
Welcome home, and I second all your observations based on my own recent trip across the pond. It looked to me that all of London was for sale, and Catalonia also, only Catalonia was for sale and vacant.
Welcome back.
Thanks for the report.
I hope you and your husband were able to enjoy the trip. Anything in particular stand out?
In London? Spaniards. Lots and lots of them.
I’m fluent in Spanish (4 years of college Spanish and 2 years teaching English in Santa Ana — oh the irony of that statement)
but have never been to Spain.
Nevermind. I could ask a question in Spanish on the tube and at most sights and have a dozen people respond.
Americans? Just me. My husband is an eh-saying Canuck.
In Paris, the ratio flipped. Few Spaniards, many more Americans.
Apparently, we are less intimidated as a nation by a 1.56 exchange rate than 2.03.
Or, as the Insane One rightly said, it could just be that British food is absolute rubbish. My husband finally got sick of Indian (it’s about the only food I’ll eat there) and made me go to McDonald’s… for a $10 salad. Nice.
We only bought food, fancy tea from Harrod’s (my mom’s request), Cadbury chocolate (for my dad), and some kitschy posters for a buddy’s and my classroom that will hopefully inspire one of my students to imagine what life would be like outside Anaheim.
A teacher can dream, can’t she?
I’ve lived on little more than Tandoori chicken for weeks at a time, while under the influence of London…
Speaking of business class… At a Christmas party 2+ years ago, I won 2 business class tickets anywhere in the world served by Northwest/KLM. Picked Italy. Business class was WONDERFUL from the U.S. to Amsterdam and back. No other way to go…. Until I looked at the price of those tickets. $4000 per person(list). 3-4x the price of coach (2 years ago). Looks like shopping around you can get them for “only” 2-3x coach.
Man was that fully recliming seat confortable… but that is a lot of extra cash!
Yeah, we looked into Virgin’s Premium Economy, but that was an extra $1000 X 2. Highly unlikely, given my mate’s penury.
Oh, and check this one: I asked at the gate from LAX if we could be moved into an exit row and the attendant said, “Sure, for $200. That’s the charge for exit row seating.”
WTF? When did they start charging people to sit in the exit row? Is this to capitalize on tall, corpulent Americans or on he ones who feel that they are more likely to survive a crash if they are the first ones out the door? Is this the premium you pay to avoid being stampeded in an emergency situation? They should call it the “Trample-Aversion Fee.” What happened to first come, first serve on the exit row?!?!
I don’t know, but I’d like the Fed to investigate, as I’m sure this too will come under their newly minted powers, if Paulsen gets his way.
Rant off.
Back in the day…
I bribed my way into 1st class a few times, on less than full international flights
Baksheesh Airways
A company flew me biz class in 2000 across the pacific. Didn’t find it much different than coach, but I was younger then.
Welcome home…Nice report, thanks. I have no idea why the FT is printed on pink paper.
When was it founded? Is it some strange reference to the British Empire being designated “the pink bits” on world maps during the “the sun never sets on the British Empire” era?
From wikepedia “In 1893, the FT turned salmon pink—although later credited as a marketing masterstroke that made it immediately distinguishable from its competitor, the similarly named Financial News (founded 1884) this move was in truth inspired by economy—pink paper being cheaper than white.”
That reminds me on an old joke.
Q: “What is pink and hard in the morning????”
A: “The financial times crossword”.
“And, you guessed it, everybody’s blaming us, as though they didn’t have 125% loans over there.”
Bravo! Bravo! I get so tired of the foreign hypocrisy. Throw Spain in too. Don’t get me wrong, I love Britain and Spain but the rhetoric lately is off base.
Maybe we can all do a swap. The Brits will buy all our crap after the American crash. Then the pound goes into the toilet. We come back with the cash and buy all their UK crap. In the final phase, we just do a barter trade and call it all even.
http://www.cnbc.com/id/23882856
“Forget Paulson’s Pledge, What About Bush’s Bailout?”
“I’m of course going to go back to my never-ending argument that while I understand the need to help borrowers, I still say that many of these fixes support unhealthy home prices. This housing market must correct, and that’s going to hurt, just as necessary surgery hurts. Forcing lenders to forgive principal is essentially asking them to let borrowers steal.”
Guess I should have done a 90% refi of my house instead of an 80%. All the more debt to be forgiven when the house that was worth $235K when I refied in Feb bottoms out somewhere below $150K.
(A house on my street, and one the next street over sold within weeks of me refi for $220K. Both are larger. It took 9 months for my appraised value to go from $250K to $235K, and 3 weeks for it to drop from $235K to $210K. So, I really am now at 90% based on what a new appraisal would value the house at….. How much you want to bet the new sale prices were 10% under the appraised value so that the new buyers could bu ywith $0 down and still get 90% ltv loans. Now we have a new market value for the next transactions to be 10% under!)
I heard the guy that had 3 hotels on Park Place and Boardwalk, lost all of them to foreclosure last week…
Be careful out there~
I like Krugman’s take on the Paulsen plan.
“The Dilbert Strategy”
http://www.nytimes.com/2008/03/31/opinion/31krugman.html?_r=1&ref=opinion&oref=slogin
Ladies & Gentlemen:
Without further ado, may I introduce you to the scapegoat for the housing bubble…
Mr. Torrence James
“‘It’s a Wall Street issue more than an accountants’ issue,’ said Bazley. And a very complicated one at that. Meantime, it’s a good thing they got that Torrence James guy. What a menace to society he was.”
The Associated Press. “The Bush administration Monday proposed the most far-ranging overhaul of the financial regulatory system since the stock market crash of 1929 and the ensuing Great Depression.”
The most far-ranging overhaul since 1929? AP sure is impressed by changing the acronyms of regulatory agencies.