OTR And Weekend Topic Suggestions
OK, folks, I really need your help. I am going on the road from tomorrow until next Tuesday. So I am going to be using a lot of your topic suggestions. Please give me your best effort!
Also, I have gotten some questions about the meet-ups in California. One thing to note; I doubt I will be dining at these events but the first two are located at establishments with kitchens. By all means, come when you can and leave when you want. I’m sure the owners would appreciate any business you choose to give them.
This is what I want to see discussed:
When all this settles out, taking energy costs, global warming, quality of life (crime, schools, health care, culture, etc), availability of jobs, costs (purchase, insurance, taxes etc) into account, where will the best places in the US be to buy a home in the coming 3-5 years?
Economcially viable, transit-oriented urban areas with large and diverse job markets, reasonably funded public employee pension plans and uncorrupt state and local governments.
New York fails on the last two counts.
Economcially viable, transit-oriented urban areas with large and diverse job markets, reasonably funded public employee pension plans and uncorrupt state and local governments. I think you just excluded the entire USA!
Yeah, pretty much. What other cities have transit plans?
Chicago? The pension plan is a total disaster?
SF? One-fourth the size of Chicago, and the same budget size? Can we say “corrupt”?
LA? No public transportation.
Boston? No jobs. One-fifth of the population is now students.
What’s left?
Los Angeles does have mass transit. It doesn’t serve every part of the megalopolis, but for those homes lucky enough to be along the subway, light rail, and major bus lines, it’s provided a drastic relative increase in real estate values.
Given that energy costs will likely remain high, housing in mild coastal climates will, after adjustment, be in high demand. Otherwise, I’m afraid the template is Meerkat Manor…
I’m constantly amazed at all the rail they put in the LA area since I moved away 30 years ago. Isn’t that working out? When he was alive my brother used to take it from Long Beach to downtown and take the bus to Pasadena to visit my dad. Now you could take the train all the way I think.
“Los Angeles does have mass transit. It doesn’t serve every part of the megalopolis, but for those homes lucky enough to be along the subway . . . ”
LA has a SUBWAY system?! I never knew that, and I LIVE in California. Damn, I need to put down the remote & get out more often.
You wouldn’t know that LA has a subway system unless you lived near one of the few stops. I have only ever seen one of them, and only then because I happened to go to the building in Hollywood where it is located. LA’s subways don’t go much of anywhere useful - for example, one of the above-ground sections runs almost to the airport but stops a few miles short.
LA does have a ton of buses, but they suffer from the same problems that cars do - the ludicrous traffic.
So while LA can claim to have mass transit, it’s not of much use to most people who live here.
“So while LA can claim to have mass transit, it’s not of much use to most people who live here.”
That seems to confirm what the opponents of rail were saying - that the place was just too spread out for it to be practical. That’s why I was so surprised to see it making inroads. London is spread out too but they have trains in every direction.
sm landlord
thanks for that subway clarification. I usually take pride in my hermetic, recluse status but that lack of knowledge gave me a moments pause.
now I can confidently resume my usual rants. you, sir, have saved me a weeks worth of new & improved extra strength Prozac.
What do you imagine a 8.0 shocker would do to the city of angles underground?
Mind, the gap!
When I lived in LA I took the train for a year from Newhall to Pasadena. A 45 minute trip took 2 hours ONE way! I saved money, but it took forever!! I had to take 2 trains to get there and go through downtown to get to Pasadena. VERY Ridiculous! I now ride BART straight to work from Walnut Creek. It takes me 45 minutes to get to work on only ONE train!! MUCH, MUCH better!! I love San Francisco! You can have LA with their horrible traffic and metro system. It’s AWFUL!! I really hate LA! Would NEVER go back!
“What do you imagine a 8.0 shocker would do to the city of angles underground?”
Lad - that’s one of the reasons that the LA Metro is one of the most expensive underground rail systems in the world - IIRC it costs several millionper yard for the seismic safeguards, on top of construction costs.
Another reason the LA Metro system sucks - two really - is NIMBYism and special interests.
There’s no link to the Westside (wha?) because lots of people in places like Beverly Hills don’t want a station in their ‘hood.
Too many people from East L.A and other ‘undesirable’ places, not to mention the homeless might, just might, decide to alight in BH, thereby lowering the tone of the place.
Plus, all that filled ditch construction would make the place look messy…
Word is, plans are afoot to finally extend it to places west - where people would actually use it, but its a long battle to get permission from some of the cities on the way.
Also - talk about shooting yourself in the foot - one of the lines goes from Downtown to Long Beach, and conveniently misses LAX.
Why?
Because, when they were planning the line - and the obvious link to the airport (for all those people who weren’t planning to drive to there) the Taxi drivers lobbied long and hard to stop it. They were worried about loss of income, because if people could actually get to LAX without using a taxi, then their business would go down.
Which is probably true to some extent - but the needs of the few definately overcame the needs of the many in this case.
So - you get the ba$tard child of compromise - the line takes you to a bus station, where you have to disembark, wait for a shuttle, re-embark, which then takes you into LAX. Which, obviously, puts a lot of people off trying to do it. Almost every other major city in the world has mass transit to the airport, except for L.A
Unfortunately, special interests have hamstrung what could have been a halfway decent system, into something that almost no one uses, because the trains don’t go to where people need them to.
As an added bonus, the tunneling company had never dug a subway before, if I remember correctly…
L.A. is good if you live close enough to your work to bike it. The terrain is flat and weather is usually good.
The traffic for cars suck, but bike riders are immune to traffic jams.
Economically viable, transit-oriented urban areas with large and diverse job markets, reasonably funded public employee pension plans and uncorrupt state and local governments.
Assuming that the answer is A.) very few or B.) none, I’m curious what will happen to the US urban landscape over the next two decades.
Will our cities devolve back into ’70s-style chaos, replete with diminished services, higher crime and decaying infrastructure?
Will the escalating price of oil put a damper on flight away from urban cores, as the population readjusts to higher density living with less reliance on the automobile?
Could we actually see a resurgence of rural and (non-factory) farm life? Will rising commodity prices finally force us back into regional food consumption, instead of moving products willy-nilly all over the country?
We fail “Big Time” on the last two counts also….
I think you need to add “consistent future water supply” to the mix.
I don’t think a transit system is viable in all areas of the country.
I know very few people who work in the downtown area(of Dallas or Fort Worth). I know more people who live in the downtown area and commute to the suburbs than vice-versa.
eastern NC within Cape Carteret County might be good
lots of 50’s yankees w no kids to go to school
eastern NC within Cape Carteret County might be good
I’ll keep it in mind. Thanks.
I would say a home type business that requires very little startup costs in a new area. And most importantly all your business equipment is paid for.
Eg: Photographer video DJ, because i think your ability to keep prices low will be the deciding factor in getting work.
But again spread out places like Charleston SC will eat up a lot of gas costs and while they have a good public transportation to downtown it also limits your job prospects to the outer areas without driving.
So here is a good question what is the smallest city with 24/7 public transportation?
what is the smallest city with 24/7 public transportation?
Not 24 hour, but free!
Clemson SC
http://www.catbus.com/
DJ, I think home entertainment will be big as more and more people can’t afford to get out and shop for entertainment anymore.
I’m all for home entertainment, my wife has a different opinion.
anycdj — drop me a line, I’d like to talk to you about video making, RE: Mac and FCE, I’ve got a couple ideas and would like to discuss.
editor[at]carbuyersnotebook[dot]com
Great Lakes states will be the best bets (leaving out Chicago, whose river already flows the wrong way). How come?
Low costs of housing now.
Fresh water. Unlike the south, the southwest, California, the Great Plains, the Rocky Mountains.
Crops. Crops grow from rain water, not from the aquifer or huge subsidized public works projects, such as Florida or California. Crops not dependent upon irrigation such as the Great Plains. (See water, above).
Cheap houses, food, and water, something the rest of the country will be begging for in four years.
Energy? Local natural gas for heating. Coal for generating electricity.
Schools? Head for the burbs, away from the big city.
Culture? Second or third tier museums. But world class medical (Mayo, Cleveland Clinic).
And when wages drop and raw materials rise, and it becomes economical to manufacture in the US again: Dust off the old mills and plants. Ocean transport? Been happening for decades from the major great lakes ports.
Weather? Ha ha, you’re eating, you’re working, you got water, you’re warm and sheltered. Deal with it.
There’s a reason the Great Lakes states grew up like they did well into the 20th century. The real bubble is in the southwest, west coast, florida… only those are slow-moving bubbles lasting several decades. The tide will return to the great lakes
You make some really good points. And it may be my bias as a New England native, but there is something really satisfying to the soul about a lush green landscape. Rocks and dirt can be spectacular, but they aren’t as restful over the long term.
Polly, want to thank you for the non-profit info the other day.
Very welcome. There is a lot of info out there. As an archeologist, you could certainly come up with a valid educational purpose and come up with some good activities. The most important thing to remember with non-profits is that you are almost always dealing with 2 levels of regulation - state and fed - and satisfying one doesn’t necessarily finish making the other happy.
Another believer in the running out of water BS? You got played.
Ha ha. Sort of like, another believer in the housing bubble bs?
Check this out, from today’s Telegraph:
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/06/05/ccwater105.xml
Here’s one I came across that has some serious implications:
‘A poll conducted in 2005 by Susan P. Ascher, president of The Ascher Group, in conjunction with Fairleigh Dickinson University, from a random sample of adults in economically prosperous New Jersey, indicated fewer than 20 percent of them believed they were financially ready for retirement. Almost eight in 10 of those employed stated they had not set aside sufficient savings to support their retirement.’
‘For workers between the ages of 18 and 54, the readiness numbers dropped to one in 10. Three-fifths of those who had stayed in the workforce past the traditional retirement age of 65 believed they did not have the financial resources necessary to retire.’
‘Nationally, one-quarter of our boomers now can’t retire because of concerns about income security,’ says Ascher. ‘Unfortunately, many haven’t planned. Pension declines and health care cost concerns are among the top reasons. Every time we have a financial crisis we seem to get stupider as a society. Instead, we should be reevaluating our rainy day plans.’
‘Ascher comments that the United States has become a nation of heavy debtors. She points out that even high-end earners making $100K annually or more are overspending regularly, with a “Wall Street” mentality to disperse every dollar in sight.’
‘She also says that the current economy is a bitter pill to swallow for those who have invested nationally in real estate. The sub-prime credit crunch is heavily affecting this group.’
‘The subprime mess has some people postponing retirements,’ says Ascher. ‘Miami has 34 months of real estate inventory available, creating a problem for pricing and sales. I don’t see the national real estate market changing towards the better for one to two more years.’
RE: ‘Nationally, one-quarter of our boomers now can’t retire because of concerns about income security
Beantown Glob ran a column in the biz section the other day which simply stated-You want middle-class financial security thru-out your life-DON’T GET DIVORCED!
However, with a current US 50% divorce rate it’s a forgone conclusion that huge numbers will working until they die or live drastically reduced living standards, despite all the feminist propoganda that men are obsolete (LMFAO!)
Ain’t nothing gonna change this demographic.
I thought I read that the 50% divorce rate was somewhat overstated because it included serial divorcees. There’s a demographic of people whose divorce rate is much lower than 50% - first timers who wait until their mid-20’s or so to get married (also reasonably high incomes, etc).
Of course this is hearsay because I’m going to be too lazy to look this up.
Has anyone out there read something similar?
Either way, divorce is very expensive.
Divorce should be cheaper as housing costs go down. The biggest expense in divorce is paying for two households. Especially when one or both are mortgaged.
Yes it is, however the alternative can be more expensive. Married at 43, no children. Divorced at 52. No children. Lots of real estate, sold off in 2000.
I have never been happier. You want to know whats worst than being alone and single, alone and married.
lol
RE: You want to know whats worst than being alone and single, alone and married.
LOL-Well put, LC.
However, IMHO, having no kids really changes the paradigm of a divorce structure.
It’s the mid30’s-40’s crowd w/ either little kids or HS age headed off to college that get totally trashed.
My -ex ran off to Hawaii after our divorce and proceeded to file BK 2 years later; leaving me with $43k per year tuition bills at Rensselaer Polytech for my son.
All I can say is it sure can crumble in a hurry.
Haw! Awhile back my dear little grandma sat me down and told me I should think about getting married and having a family. I put on my sweetest, most innocently inquiring expression–it wasn’t a very good expression, as it gets little use–and asked her, ‘Oh, yes? So I can be as happy as you and grandpa are? Happy like that?’
Never ever ever heard another word on THAT subject.
Olympiagal,
Here’s a grenade for you all-
since I am a bomb thrower, I would like to make a comment about marriage-
I have in the last couple of years contacted former girl friends after 30 years (Univ. alumni website) and before I could ask them how they were doing, they prompted by stating—
My husband has been good to me!
WTF is that for a response. The second thing they asked for were pictures.
Are these women who earned their money the hard way and are they looking for something they missed. Betting on the wrong horse? (ps-disclaimer I was and am not the best catch in the DNA pool).
One final point, none said the word “love” in their comment about their spouse. Now what does that tell you about the baby boomers. Just so I am not anti-female, the men I know are looking around (who are married) for younger women.
The state of marriage is not a happy situation. And to quote from our present and past presidents, “the state of the union” is fine, NOT!!!
Oh, _MY_!!! You do have a way with words, Olygal…
Lostcontrol:
I think of marriage as a (very) limited partnership. No kids, no commingling of funds. That keeps a lot of the usual conflicts out of the stadium.
It took me awhile (and 2 declined proposals) to find a guy who agreed.
Just lost my fiance due to a mental health condition (read: total breakdown). It sucks and hurts to lose my best friend, but I am looking at it from an economic perspective.
Costs: 4k the past year in entertainment
Savings: A cool 1M by not having to pay for her lavish wanna be lifestyle and future divorce proceedings including alimony and child support
NOTE: Hookers would have cost a lot more than 4k over the past year
I miss her but it’s better not to have to deal with these kind of problems when she doesn’t want to help herself.
That sucks, but you made the right choice. You can’t argue with denial.
“no commingling of funds.”
I agree with that, though I thought I was the only one. I don’t even see how a couple could manage a common check book. And I’ve seen too many couples slide into debt, each passively blaming the other, or doing this little bribe dance, I won’t say anything about [your foolish purchase] if you don’t say anything about mine.
My hubby was kind of a spendthrift but he seems to make a point of letting me know he’s paid up his card, I guess because I’m so judgemental about others’ debt problems. We still spend too much.
My husband and I have a very different relationship too. We have no funds other than the comingled kind. Somehow that works for us but neither of us are stereotypical in our personalities. Our strengths are very much opposite what men and women are expected to be like. I research and negotiate for the vehicles. He cooks. I like looking feminine but I think like a guy.
I almost always had a boyfriend before meeting him but it just always seemed that when that M word started showing up, I started to feel like they wanted to make me into their housekeeper/stay at home & wait by the door/personal organizer. Ugh! Then I’d make sure things went downhill from there.
I was sort of planning on spending my days in this ongoing cycle (I got kind of good at snagging those decent raises even w/all the nights of going out) when I met the keeper.
I’ve always thought since we were free of all those expectations brought on when you try your best to live up to social mores, that we ditched an awful lot of guilt and games. The same weird humor was the glue after that. We couldn’t leave each other. Nobody else would get us.
No co-mingling of funds? What a great way for one spouse or the other to keep secrets for a very long time. Little bit of white powder? Got a fetish for 2000 pairs of shoes? A propensity for hookers? Secrets destroy marriages. No matter how much one tries to hide it and control it, said secret ultimately obliterates whatever there was that made you a couple in the first place. It’s far easier to just get the crap out in the open, even if little by little. The reason most don’t is fear of rejection. If you’re spouse left you for a wierd sexual fetish or a eating problem then said spouse wasn’t worth a turd in the first place.
Well said, exeter!
We do both - we each have personal accounts but have a joint account ’slush fund’ for rent, bills, food, vacations etc.
We each put a set amount in the joint accounts every month, and keep the money in our personal accounts to do with as we please.
Its worked for us.
Elizabeth Warren (Harvard Law), who’s done a ton of work on debt and bankruptcy, said that the single largest predictor of bankrutcy was having a child.
And the “average” divorce rate is not very predictive. Divorce is strongly dependent on class and education. The richer and more educated get divorced at a far smaller rate than the poorer and poorly educated. This matters hugely for fairly obvious reasons.
Not true in my case or those I know!
The high rate is due to a lack of common goals. Who is willing to sacrifice if each is working against the other?
My marriage consisted of two college ededucated individuals with their own homes, some debt and no children. During the marriage, four real estate properties and no kids. 8 years later, with no children and the liquidation of most properies and no CC debt, (only long term real estate debt), we shut it down. It was a race to the court house steeps to file the paperwork.
My mistake, was giving advanced notice. My insignificant divorce lasted two years in court at the cost to me of around $16k.
Never again!!!!!!!!!
lol
Issue: Divorce is a marriage related problem.
Solution: Stay single FOREVER or DIE IN THE ATTEMPT
Couldn’t you make the argument that the Boomer’s delayed retirements will actually be good for the economy? If Boomers remain net producers well into their 70’s rather than net consumers, won’t that help GDP?
Yep, you can.
I read it argued this way. Let’s imagine that you are on an island with 10 people. Assume for the moment that a normal “state” on this island is to have 8 of those people working and 2 consuming because they are children, disabled, or whatever. Let’s say 3 of these workers save a tremendous amount of money and decide to retire pretty much all at once.
Now we have an island with 5 consumers and 5 producers. Since noone has died consumption remains close to the same. However, 5 workers must produce for the same level of consumption as 8 workers did previously. The end result in that scenario is inflation: prices rise as labor becomes more scarce than money.
The Boomer retirement is not just a pure economic issue - it’s a demographic one as well. You can’t just say, well if the Boomers had all saved, we wouldn’t be in this mess with their retirement. It’s one of the many reasons why I think we need to revisit the idea of retirement in general.
You’ve got it exactly right! That’s what people don’t get.
The only way out is for us to have loaned lots of money to the rest of the world, so we could have a claim on their future production in the future. But guess what!
You can retire with full SS benefits and still work. How is that going to work out - a wash?
At least they’ll be paying into SS while they’re pulling money out of it.
Also since most will have a problem finding high-paying jobs (over $102,000) when they’re 65+, most will be paying their full 6.5%.
That certainly can’t hurt the projected deficit.
Doesn’t Survivor fit the mold?
I would go further and say that even if it lowers GDP, it would still be a good thing.
GDP is an odd measurment. It is held up as the indicator of economic health, but considering how it measures, I don’t think it’s a very good indicator at all. For example, if a person borrows money and then buys a Escapade, that increases GDP. Increased GDP is generally held up as better health but is it really a healthy thing to borrow money at say 6 years and 8% to buy a vehicle?
I think in general something that encourages fiscal conservatism among large numbers of individuals will improve the overall health of the economy in the long run even if it causes GDP to decrease in the short run.
We are heading for crisis, no doubt. The “live for today” folks expected permanant house poverty for those coming after to fund their retirements.
We can’t go back to the pre-retirement days of joining the kids in the family home, because the generations heading for old age now are those who dumped on the kids in divorce and single parenthood. The kids won’t take them, and we shouldn’t make them.
Continuing to work will be an option for those with health, but this runs into the obesity epidemic.
Looks like tax increases, the continued running down of the infrastructure, and the collapse of the public school system, as the 50s and 60s generations grab for money.
We can’t go back to the pre-retirement days of joining the kids in the family home, because the generations heading for old age now are those who dumped on the kids in divorce and single parenthood. The kids won’t take them, and we shouldn’t make them.
It amazes me how short sighted some parents are in handling their kids. I’m not sure all families were better at before the concept of retirement but the idea that you were raising the person that would give you a home when you were unable to work might have given some of them some pause to consider their actions.
Recall Kafka’s Metamorphisis?
The lead character is working and supporting his aging parents, when he turns into a beetle.
Without his income. His father who had seemed sickly suddenly starts working again and no longer seems so. They take in borders. And when his presence becomes an increasing burden, they let the young person — now a beetle — die off rather than provide health care.
Hmmm.
Kafka came from an incredibly abusive home and his writings should be read with that in mind (Alice Miller writes about this). Maybe not really representative of what could happen, unless we keep monkeying with that genetic stuff.
Read his book “The Trial” -very appropriate for today. A man is put on trial by some unknown organization for some unknown crime. Then read the AP article about the special US prison ships.
RE: Looks like tax increases, the continued running down of the infrastructure, and the collapse of the public school system, as the 50s and 60s generations grab for money.
Already happening here in Mazzland.
5 years to traffaic gridlock.
I’ve been saying for a long time that a contributing factor for these bubbles (dot-com, housing) are boomers with money, trying to increase that retirement nest egg with a gamblers mentality. They’d like to retire at sixty-two, but w/o guaranteed pensions they are scared sh*tless that they’ll have to work till they drop. I won’t shed a tear, at some point in their working lives they had a chance to think ahead, they chose not to.
They’d like to retire at sixty-two, but w/o guaranteed pensions they are scared sh*tless that they’ll have to work till they drop.
I think the other part of the issue is that some of them delayed gratification in important areas such as career changes, travel, etc. I think it’s only increased the gambler’s mentality. There’s no plan “B” - they dumped too much of their lives into their careers for the mid 3-4 decades of their lives thinking they’d have “time” after they retired.
It’s easy to rant on about any age group looking for instant gratification but I in the boomers I see a fair amount of people that gave up a whole lot of family time, etc looking for that gold ring of retirement or early retirement.
The concept of retirement makes people weirdly dump all their dreams into the last 3 decades of their lives. If at age 20, you knew that you would have to work until you were physically or mentally unable to in some capacity, how would you map out your life? Wouldn’t be less likely to delay career changes, more likely to move to new jobs if this one was working out, etc? Wouldn’t family time and travel earlier on be more important? “Life pacing” becomes a theme when you throw away the whole retirement concept.
(Wouldn’t family time and travel earlier on be more important? “Life pacing” becomes a theme when you throw away the whole retirement concept.)
Exactly. My wife and I both worked part time when the kids were little, and I worked a flexible schedule until recently to be with them after school some days. I wouldn’t give those days back for anything.
People who did 60 hours a week burn out and need to stop to find value in their lives. I like working and expect to keep doing it, and in the second half of my career — age 50 to 75 — I can always do the 60 hours if someone makes it worth my while.
It comes down to sacrificing your wants. You get a stable marriage, and live on one income with the other sacrificed for child care, given away, or saved for a retirement that might never be necessary.
Right on, WT. I’ve always thought it would be interesting if people retired for the first 20 years of their lives with some kind of small pension, then resigned themselves to working forever and making whatever they wanted of it.
And by that I mean the first 20 years of their work lives, essentially meaning they’d go to work at around age 40.
That’s kinda what I did - traveled the country playing in bands for 20 years then had to get a Real Job around age 40. I don’t recommend it.
And I wasted my youth away playing in bar bands. It was fun for 6 months.
Yep. Took lot of drinking to convince myself was still worthwhile.
Excellent topic, and personally relevant as well. I’ll be turning 40 this year. I think that makes me officially “middle aged”.
How can that be? I am 62 and “middle aged”.
Only my feet, blood pressure, and hairline (or lack) diasgree.
No problems with blood sugar yet??
Topic: Which of the last RE redoubts will fall next?
FEATURE-As layoffs bite Wall St, New York real estate hit
http://www.reuters.com/article/marketsNews/idINN1823695720080605?rpc=44
NEW YORK, June 5 (Reuters) - While most of the United States has suffered a housing slump over the past two years, home prices in New York’s Manhattan have been largely unscathed, propped up by demand from Wall Street bankers and the island’s limited housing supply.
That could change as the housing crisis comes back to bite the banks that securitized sketchy mortgages, leading to layoffs on Wall Street and smaller bonuses for bankers who keep their jobs.
“The market today is showing a significant reduction in new deals,” Hall F. Willkie, president of real estate firm Brown Harris Stevens in New York, said of residential real estate in Manhattan, New York City’s richest borough.
…
I expect Manhattan to be the last, and hardest, to fall, since it is different there.
NY is one of the Case-Shiller markets with the lowest rate of decline. It has something to do with the 445 days it takes to foreclose in this state, IMO.
There was a high ranch in Islip that just sold for $225K in 1 weekend; a $95K ranch sold in 5 days in Mastic Beach. People are picking off these 2002-2004 circa priced homes as they come available, otherwise nothing is selling.
Out here in Suburbia, the defining characteristic is what buyers can afford, and get approved for — and its far lower than the previous $400K peak median.
As Dad says, all the homes listed for sale in the $350-600 range are just taking up space on MLS. They will never sell at those prices.
My sister and I occasionally have an opportunity to talk to elected officials. They have moved from scoffing at our opinion of a permanent price meltdown, to being eerily quiet. And the same goes for our faves, local school board employees, who used to comment they would just raise the mill rate when values go down.
The real story here is the high percentage of local employees who live off the tax dole — this is one of the few places where they still talk about raising taxes as a way to keep everyone’s welfare-by-another-name checks rolling along. The time will come pretty soon when civil servants’ median income is double the private sector on LI, and the populace might wake up.
For locals with a long memory, the Long Island economy probably never recovered from the end of the Cold War, when Grumman went out of biz — my guess is that’s when civil service employment and salaries started to climb.
“The real story here is the high percentage of local employees who live off the tax dole — this is one of the few places where they still talk about raising taxes as a way to keep everyone’s welfare-by-another-name checks rolling along.”
I call it the “white welfare” system. It costs one hell of a lot more per person than the “black welfare” system everyone was screaming about 15 years ago. And it isn’t something anyone dares to talk about.
But look at the bright side — the can always cut state school aid to NYC, devastating the city’s schools, to increase it for the rest of the state, letting the payroll grow. That’s what they did in the mid-1990s — and after 9/11. They are talking about eliminating all extracurricular activites and extra help after school here now, before the real estate budget comes out after November.
I call it the “white welfare” system. It costs one hell of a lot more per person than the “black welfare” system everyone was screaming about 15 years ago. And it isn’t something anyone dares to talk about.
————————-
Let’s talk about it.
What would you do to fix it?
Assume that you have to maintain the same level of service, etc., how would you cut costs?
What would the ramifications be if you cut pay and benefits?
What about privatization of public services? What are the pros and cons?
Do public employee unions prop up wages in other, private sectors since private employers have to compete for employees?
Does the money used by government disappear, or does it end up going back into the economy? Do the civil servants hoard cash (like the ultra-wealthy), or do they spend it in their communities? Do local establishments get a return on their investments — both in buying the public services (police, fire, infrastructure, education, etc.) AND by having those public employees patronize their businesses?
Manhattan is crashing as we speak.
I can’t provide hard data with statistical significance tests but you can see the moving vans, the fear, the “wishing rent” apartments staying empty which is hugely expensive, the aggressive mailings by restaurants and RE firms, and “coupons” galore.
I sent a comment to a local reawhore who was running an ad hyping a “special, two-week price”. I asked her if any sane person would believe the seller would reject an offer at the same price after the two-week period expired. She failed to answer my question.
‘She failed to answer my question.’
Maybe you didn’t speak slowly enough or use simple, easily grasped words.
It became clear to me firsthand this morning that agents are getting reaaaalllyyyy cranky. I called one to ask if a certain house was an approved short sale. There was a reasonable chance it might be given that it is empty, there is a $700K mortgage on it, a lis pendens was recently filed, and there was no fancy or flowery description in the remarks - but a quick check of the public record showed it was not bank-owned.
I didn’t mention any of that to the agent - just asked the short and simple question, and I apparently managed to offend.
Jumpy indeed.
kim
I also noticed exactly what you commented upon a few months ago. I posted a summary of my conversation with the “annoyed” realtor on the other end.
you just know they are majorly pissed at having to endure a loss of commission handling all these REO’s. for them it’s a depressing lowclass way to earn a living, fielding never ending calls from ‘bottom feeders’ and ‘vultures’ who are out to make every penny squeel in pain! no more heady times of free-spending get it NOW before it goes up sales of high easy comish.
oh dear, oh DEAR !! can’t you just FEEL their angst? Don’t you CARE? nah, me neither. as they say so often when a deal stinks but still ends up in their favor; “nothing personal, it’s just business”. hell yYEAH it’s “just bidness” that I lowball the deal to save my bank account every cent I can. hell YEAH it’s”just bidness” to look out for #1.
aww, Mr Realtor is upset that the business practices used so well BY him are now turned AGAINST him. In fact, that true for most business’ these days. consumers have more of a level playing field or even an advantage and that just ENRAGES OUR OVERLORDS. heh heh !!!
so Mr. Realtor, drop the useless attitude of acting offended already. if you cant or wont handle current business conditions, GET THE FHUCK OUTTA THE WAY for someone ELSE WHO WILL, you obsolete meat puppet. I know you scorned REO’s in the past but just jump on the latest bandwagon & sing their praises like you were an advocate of ‘em forever. HI-LA-RI-OUS !!!
(as to that overused, pithy, catch-phrase, I say BULLSHIT!! until humans are replaced w/machines, ALL BUSINESS IS PERSONAL. )
1. Will Escrow legal Doc’s ever be less than 30+ pages?
2. Should real estate fraud in any form over $25,000 be consider a mandatory Felony charge?
3. Will the Gov’t and the homebuilding industry, including the financial players ever create homes that can be purchased without requiring x2 full time incomes with college degrees?
O.K., now I need to make my morning joe …
Is the stock market going to crash soon?
Is there any reason to invest in American stocks?
Is the debt scam going to eat the country up from the inside out?
Will homes ever be a good place to put your money?
Can we look at the concept of globalization? Free flow of capital and labor. If you want to get to the root of our problem, you may want to start at the source. Its not like the US lacks in resources-skill, labor, and ingenuity.
As a side note, the US is the 800 lb (dropping at 10lbs/yr?) in the room. We still are the largest consumer country in the world, though it is declining in worth.
Yes
Yes
Yes
and hell NO
That was easy
That was funny SU
Should real estate fraud in any form over $25,000 be consider a mandatory Felony charge?
Depends on what counts as “fraud”, but mostly I don’t think criminal charges are necessary. I think that term has been over used. My feeling is that when some crappy mortgage broker looking for a buck sells a crap mortgage to a retard too lazy to see that the total mortgage amount is obscene compared to what he makes and sells it to a bank too lazy or greedy to look into whether the mortgage can possibly be good, then all those players deserve what they have coming.
If there is something that legitimately is fraud (and I’m using that term in a laymen sense as I don’t know what it means legally), such as a bait and switch at the end, then there is civil recourse for that already in place. As an extreme example, lets say a borrow signed papers for some mortgage terms and the lender or broker then replaced those papers with something else and forged the borrowers signature. In that case, I think we would all agree the borrower is not at fault. I don’t see how criminal charges are really necessary, since the borrower isn’t really liable for anything at that point. I would think the borrower would have a position to sue for compensatory and punitive damages in civil court rendering criminal charges moot.
But that’s just me.
Well, looking back over the last 7 years in America…all lot of folks ought to be charged with a felony… because the National “collective effects” have certainly been criminal. imho
What about the people who took loans and lied about their income or stated it would be a primary residence when in truth it was an investment property?
Those people should be charged with felonies or at least punished through the criminal system.
Good question. I don’t know what the law says about that and I guess I don’t have my mind made up about what it SHOULD say.
The thing is, should all lying be criminal? I don’t think lying in general should be considered criminal (and I don’t believe it is in practice). So, if you write a contract with someone and lie about your ability to fulfull that contract I don’t think that should be criminal either. Failure to fulfill the contract should be itself be worked into the contract (and is also handled in conjuction with existing contract law which itself is derived in part from hundreds of years of common law).
It seems to me, that if you loan someone money (in your example it would generally be the bank), the borrower’s statement of income is part of the contract. If it’s not, it should be and it is the reponsbility of the lender to ensure that it looks after it’s own affairs with regard to how it lends money.
If the lender fails to cover the possibility of the borrower lying about residence or income, then why should we the taxpayers (who fund the criminal system) care? I believe private property rights and derivitives are important (e.g. rape or assualt fundamentally violates private property) but contract violation issues should be between the participants of the contract only.
I think when we have laws like “you can’t lie to a lender”, that is a way for taxpayers to subsidize the banking business. The law is to the benefit of the lender at the cost of the general taxpayer (who fund enforcement of the law). I would suggest that the lender should take care of their own costs of doing business.
Good comment.
I may be wrong, but I understand that mortgage documents include a statement at the bottom along the lines that ‘all information containted in this document is true to the best of my knowledge, and anyone falsifying information commits a federal offense’
I completely agree with everything you said but people who signed a contract containing knowingly fradulent information should not get off the hook. These people shouldn’t receive a penny of bailout money. Prosecution is a long shot - but having a few wind up in the slammer could be a great deterrance for future borrowers.
I may be wrong, but I understand that mortgage documents include a statement at the bottom along the lines that ‘all information containted in this document is true to the best of my knowledge, and anyone falsifying information commits a federal offense’
I’m not sure about this point. If what you say is true, as I spelled out in the last post, I don’t see any reason why we need the force of government in this transaction. The lenders should verify (or not…their choice) claims made by the borrower.
I completely agree with everything you said but people who signed a contract containing knowingly fradulent information should not get off the hook.
I think I agree with this statment…sorta. It’s depends on what hook we are talking about. I don’t think lying should be criminal (in most cases) and so I’m not letting anyone off the hook, just suggesting they shouldn’t be on that particular hook to begin with. With regard to the fact that these liers may have lied their way into holding a turd decreasing in value every day…well they shouldn’t be let off that hook either (including via bankruptcy).
These people shouldn’t receive a penny of bailout money.
I agree. Nor should anyone else.
Prosecution is a long shot - but having a few wind up in the slammer could be a great deterrance for future borrowers.
Removing the foreclosure/bankruptcy laws would also help act as a deteerrance for wasting resouces (money). And it would accomplish the deterrance without increasing criminal enforcement costs and in fact by decreasing the tax payer money spent on managing bankruptcy courts.
http://www.marketwatch.com/news/story/moodys-warns-may-downgrade-aaa/story.aspx?guid=%7B54658305%2DD005%2D4292%2D8653%2D232FF511DA15%7D&dist=msr_3
Moodys may downgrade AMBAC and MBIA.
One of the comments on this story suggested that the TAF window could no longer accept collateral that was insured through one of these monolines after they were downgraded, and that this was an immense change that would mark the acceleration of the credit unwind.
I was hoping for some HBB discussion on the subject.
Also on another site there was a some discussion of an Asian Monetary Fund that should allow 13 Asian nations to divest themselves of dollar reserves and allow them to remove themselves from under the IMF umbrella. Latin American countries were reported to be setting up something similar w/Venezuela making loans. Brazil was reported to be considering a tax on incoming currencies mirroring the Swiss’s negative interest rates of the 70s. This is because they want to protect their sovereign currency from a flight to safety from others.
This discussion was meant to highlight that other nations were moving away from US dollar as reserve currency and was part of thread on the timing of and prerequisites for hyperinflation.
I think those are all *excellent* topics.
1) The Day of Reckoning would definitely come a lot sooner once the true rating of these agencies became known.
However, the phrase “there are none so blind as those who will not see” is particularly apropos to the latest batch of Wall St. wunderkind.
2) The divestment of US dollars by foreign sovereign funds and central banks would undermine Bernanke’s financial alchemy and would have a disastrous effect on energy prices. Bring it on! It’s the only way to get some real changes in our
lack of anenergy policy and finally get serious about keeping American jobs in America.The U.S. Dollar is a joke, and Bernanke is an idiot.
He jumped way too fast to lower rates and has been much to aggressive to provide ready cash to insolvent companies.
Will they change the TAF rules? That would defeat the purpose of giving away piles of money for trash paper.
I think we are in serious trouble real soon. Unfortunately, all of my holdings are in dollars, including most of my savings. The Fed will boost the banks, meaning providing them with all the money they want. It was supposed to be on “Good Collateral”, but we all know that the loans are worthless. The borrowers of real estate will default, and the traders that leveraged all the derivatives can’t make good on their bets.
The Fed NEEDS to dry up the supply and dump the TAF completely, but the business sector would slow down precipitously. That would be deflationary.
Bozo Bernanke won’t let that happen. He thinks Greenspan is a genius. Keep those “asset values” flying high.
Term Auction Facility was created by Wall Streeters for Wall Streeters, the same jackasses who wring their hands over “government intervention” ruining their sham economy.
Repeat after me: “Privatize the profits, Socialize the Losses”.
Now that they have everyone’s pension funds, they have the whole nation held hostage by the balls. They can’t be trusted to police themselves, so this is one instance where I support a ‘nationalization’ of the industry, since we can’t even expect to get anything back for our Social Security payments anymore.
The statement from the fed reserve dissenter today was interesting, huh? Plays right into this discussion.
Don’t know why I can’t find a link.
I would love to see a topic where we dig up old quotes from both housing bulls and bears between 2003 and 2005. For instance, here’s a good one from a 2004 Forbes article that questioned the substainability of the housing price increases:
“‘Prices will keep rising,’ says Bob Toll, CEO of Toll Brothers, one of the nation’s biggest homebuilders, because restriction on building will limit the number of new homes coming to market. How will buyers afford ever-rising prices? ‘People will spend a bigger and bigger percentage of their incomes on housing,’ he says. ‘We could become more like Europe, where people will live with their parents for years until they can afford a house.’”
Here’s the link to the original article: http://tinyurl.com/4xf836
Likewise, I would like to see quotes from people who were calling the bubble back in 2005 or earlier.
..
Ahh, yes.
I remember that quote. It was posted and drew many a chortle on here.
The New Paradigm where people routinely live with parents until the tender age of 45 when they can scrape up enough money to start a family and get into a 50 year mortgage.
The irony of it all…
..
The funny thing is that the economic principles for that phenomenon are contradictory. If everyone’s living at home until they’re 45, that would drive the demand for housing down, thus driving down prices.
The principle could only apply if there’s a true land shortage, e.g. like in Japan and Hong Kong, and some very small select areas in Europe. However that won’t happen in the U.S. until about 200-300 years from now, if that. Probably more like about 500 years.
And it all depends on population growth vs. shrinkage. Part of the reason why Japan’s home prices have been falling and stagnant is that the population of Japan is now *decreasing*. Thus in the net - Japan is experiencing more land availability over the long run, not less!
Somehow the Real Estate Mavens forget that people die, and when they die - they free up land. For this reason I think real estate won’t actually be a good investment in the U.S. until the baby boomer death curve is done - like about 30 years from now.
There is a land shortage in urban areas. Considering that now >70% of the US population is in urban areas (as opposed to rural), it has made that land wildly expensive relative to what it used to be.
Does anyone track historic urban-to-rural price ratios, or has that remained essentially constant?
“There is a land shortage in urban areas. Considering that now >70% of the US population is in urban areas (as opposed to rural), it has made that land wildly expensive relative to what it used to be.”
Since the effects of those higher land costs (setting aside temporary higher bubble costs everywhere) can at least partly be offset by higher density, do costs of individual housing units in urban areas necessarily have to be significantly higher than those in less urbanized areas?
Thanks to the housing bubble, the same thing has happened anyway. Different road, same destination.
The only thing keeping us away from 50 year mortgages is the deflation that needs to happen, despite what the MSM thinks or says.
And when he said it, he thought it was good news!
The health care industry also expects a larger and larger share of income.
But OPEC has trumped them both.
Me thinks Bob Toll didn’t poll very many parents before making this assinine quote.
“When you see reference to a new paradigm you should always, under all circumstances, take cover. Because ever since the great tulipmania in 1637, speculation has always been covered by a new paradigm. There was never a paradigm so new and so wonderful as the one that covered John Law and the South Sea Bubble - until the day of disaster.”
John Kenneth Galbraith
What color is your economic parachute?
“What color is your economic parachute?”
Hey - I remember that book! Wow, that brings me back. That was big in the late 80’s right?
OK - so from Googling it - I guess it’s a regularly-updated periodical book, not so much on economics as on career/job search. I remember it from my early job hunt days.
Paradigm…oh I remember: I kept hearing “paradigm shift” back in the late 90s. My dumbass boss even used it in 1998 in a sales meeting and I knew then it had jumped the shark.
Was it about the dot com boom?
What Effect Will the Economy Have on Arizona Residents (Zonies) Vacationing in SoCal?
How much revenue will San Diego and Orange County loose this summer? 5, 10, 15% or more?
Government revenues are way down in AZ (per my mole) and the govenor is starting to pull back the spending where she has the ability. The state legislators are dragging their feet and letting a Dem Govenor scold them for it. Just amazing.
“What Effect Will the Economy Have on Arizona Residents (Zonies) Vacationing in SoCal?”
I’m hoping for a lot (not taking a shot at those from Arizona) as less summer traffic would be great.
“How much revenue will San Diego and Orange County lose this summer? 5, 10, 15% or more?”
You might see the same types of declines noted in Las Vegas. People still go, but spend less by staying for shorter periods of time and/or staying in cheaper accommodations, eating at cheaper restaurants, etc.
Discuss the what, where and why of pricing and who is buying at what price. In the mid Hudson Valley, I see NOTHING moving in the 275k-to 600k price range. 600k+ is selling for cash but that price range doesn’t make a market. Anything priced under 200k appears to have activity and contracts.
What will happened to the huge inventory priced between 300-600k? None of it is selling, presumably because underwriting is tight but that price range is the widest swath of the RE market. I personally know sellers in this price range who bought before they sold and consequently “own” 2 houses and the best way to describe them is immobilized. They can’t make a hard decision and it appears it will be made for them eventually. Either way, the empty house has to be maintained and heated to 50 degrees in winter so fuel prices are a consideration. Simply put 300-600k prices has been the meat and potatos of the RE crime syndicate and it’s no longer producing. In fact, the product is rotting on the vine.
Vomit warning!!!
Article from today’s Boston Globe. I’ve driven through this developement. One just sold for 950K. You can shake your neighbors hand out the window. All’s good.
http://www.boston.com/news/local/articles/2008/06/05/more_room_to_roam_sets_houses_apart/
grey poop-on
RE: Vomit warning!!!
I currently reside in Ipswich, and have to admit to gagging when I read the article.
Hell, the town just had to do a multi-million dollar Prop 2 1/2 override to fund the schools. Cops with their dirty little detail work make $150k, with most of the revenue dough coming from residential property taxes.
Plus the town was recently designed as having more regulatory committees and advisory boards than any other small town in America. You can’t fart without a permit.
The behind the scenes snicker is that this development is smack dab in located in Mosquito Alley-so be sure to keep your TV tuned to Equine Encephalitis warnings
I figure the pricing for this development is clearly based on projected inheritances for local husband and wife teams.
Good fookin’ luck to the developers.
What’s the closest large employer to Ipswich, Seabrook? Someone in Newburyport?
Again with the clustering-open space thing. We should all be like a French village. Open space is nice if you have naturally growing vegetation and don’t need to plant lawns and install irrigation. I assume it works back east or around the lakes.
Here in MT they take these ideas and apply them to dry, barren hayfields, and we end up unirrigated weed patches or huge boring bluegrass lawns with a few obligatory norway maples and honey locust thrown in. Bleah.
What I don’t understand is why they think clustering the houses is any more “environmentally sensitive” than spreading the houses out, letting the homeowners take care of their own yards (even leaving them in a “natural” state, if they should desire), and letting everyone have a little space.
**Same number of houses on the same amount of land.** How is clustering houses any more “responsible”?
When houses are spread out, the area looks even better, and property values are more likely to be maintained, IMHO.
I live in an area of one-acre and half-acre lots and with mature trees it has a parklike feel. And it’s been shown that homeowners take much better care of their own “defensible space” than they do of open space. If open space equals a nice hardwood forest, fine, but if it’s some dreary topography like we have here it’s a bloody waste.
Sounds like a gorgeous place…lucky you!
Agree that people would be much more likely to take care of their own space than the “open space” developers plan, and the HOAs charge way too much to maintain that space, IMHO.
hd47man, I’m in Ipswich regularly. Check out 58 Topsfield rd. Was a REO 3 or 4 months ago when I looked at it. The inside is appaling. No sale info at Salem Deeds but I’m sure I saw a sale or refi for 400+ in the last few years.
Oh, yeah it was condemned by the town at the time I saw it.
How about eviscerating the FED as a topic
http://www.bloomberg.com/apps/news?pid=20601088&sid=azJ3IDPrjLiE&refer=home
Do foreclosures always go up? And when will asking prices finally reflect the glut of foreclosures coming back on the market? I can wait forever if necessary, as renting is still cheaper than owning.
Home foreclosures set record in first quarter
By JEANNINE AVERSA – 37 minutes ago
WASHINGTON (AP) — Home foreclosures and late payments set records over the first three months of the year and are expected to keep rising, stark signs of the housing crisis’ mounting damage to homeowners and the economy.
The latest snapshot of the mortgage market showed that the proportion of mortgages that fell into foreclosure soared to 0.99 percent in the January-through-March period. That surpassed the previous high of 0.83 percent over the last three months in 2007.
Inspired by that post, I’m wondering if we could discuss the number of people putting off the inevitable with the help of credit cards.
Are there any published data that points to numbers and how many people would start defaulting on other loans once revolving credit is shut off? Is there any data that analyzes time frames to default against numbers of those reaching that point?
For awhile there I used to see that housing was being blamed for consumers having less to spend. Now all i hear is gas and food is causing people to spend less.
What has more of an effect on consumer spending??? no more housing atm or the rising costs of gas and related items???
“What has more of an effect on consumer spending??? no more housing atm or the rising costs of gas and related items???”
Costs of gas and related items affect everyone. The “housing ATM” was only available to those owning housing. I’m not sure which is bigger in the aggregate. The “housing ATM” effect may be more noticeable. Not only will no “new” money be available to support spending, previously borrowed money will now have the be paid back depressing future spending - sort of the same cannibalization of future sales noted in housing.
This is what I want to see discussed:
Good recipes for ramen noodle dishes. We could print them up and generously distribute them to Realtor associations for their remaining members to utilize and enjoy.
For verily, do we not read in the Bible: ‘And above all things have fervent charity among yourselves: for charity shall cover the multitude of sins’ (1 Peter 4:8)
Verily, we do read that. See, we exercise charity toward our realtor brethren and sistren (those that are human. There’s got to be a few, right?) AND we thereby obtain a sort of ‘get out of sinning’ token or point or however it is that Sweet Baby Jeebus keeps track. Is how I interpret this scripture.
By recipe I mean one of those transfigurations of ramen that your aunt makes for summer pot-luck BBQ’s, where the noodles are all sauteed, crunched up and sprinkled over spinach leaves; that sort of ramen recipe effect. Not just dumping in a half a cup of peas and a carrot and calling it ‘Twirly Delight’.* Even a realtor can figure out how to just dump in peas. Wellll, PROBABLY can figure it out.
* I made a fair amount of ‘Twirly Delight’ in college. Ahh, those were the days.
Pretend the instant noodles is real pasta .. add canned clams. Just don’t tell mom what you did..
Browned cubed spam in romen noodles, chopped green onions, add pepper to taste.
A Hawaiian favorite!
Here we go again. Dissing Ramen, one of my favorite foods.
Steam a little broccoli and carrots, cook two packages of ramen with one of the soup packets, when cooked, drain off the liquid MSG and dump noodles on the vegetables.
I love it!
and I have one of the best salad recipes of all times…cabbage, green onions, bell pepper, ramen noodes, Japanese-style dressing. People lose their minds over this salad. Truly.
that would be “noodles”
jeez
I ate ramen like crackers in college.
Open Coke, Open flavored ramen packet.
Consume
“for charity shall cover the multitude of sins”
Bongo!! I mean, Bingo! (flippin’ keyboard)
You hit on the reason I’m going to start giving more money to animal rescues, and I mean SOON!!! Like as soon as I finish typing this very word…
And don’t forget Ben, you guys, though it’s not really charity, as he sure as heck EARNS his keep.
(OK, as soon as I finish typing THIS very word…)
Is the next problem a credit crisis… I think it is.
Meredith Whitney, the analyst who was one of the first to trumpet the woes of Citigroup and other major U.S. banks last year, says the credit crisis is “far from over.”
Next on deck, says Whitney, currently a banking analyst at Oppenheimer & Co., is the consumer sector, which is about to get hit hard.
“A lot of the credit market problems since last July will bleed into the consumer,” Whitney told Bloomberg TV.
“There is so much investor sentiment to the effect of ‘Let’s just have it be over.’ The problem is that consumer losses will mount, so bank managements will be caught off guard and have to reverse revenue.”
Two basic issues arise for the banking sector and economy, Whitney says.
“First, there has been an over-reliance on consumer liquidity coming from the securitization market. For example, for every dollar of mortgages put on bank balance sheets since 2000, seven times that rate has been securitized,” she notes.
“So as a result of the securitization shutdown, consumer liquidity will be constrained.”
The second problem is credit cards, she says.
“Regulators who clearly gaffed on the housing bubble will make up for lost time,” she says.
“They will make it so prohibitive for credit card lenders to make profits, which may be a good thing in the long term, that they will take $2 trillion off consumer balance sheets.”
For example, the new regulations announced by the Fed to cut back on onerous practices from credit card issuers will simply lead them to reduce the amount they’re willing to lend to consumers, Whitney says.
“Consumers will get it from all sides,” she says. “Consumer spending will decline, and consumer defaults will pick up.”
That’s bad news for the economy, Whitney points out. “Everyone will get a higher cost of borrowing,” she says.
“There’s only $800 billion of credit card debt outstanding, but over $4.7 trillion of unused lines outstanding. So when you cut that back substantially, everyone effectively gets a pay cut. No longer can you manage your cash flow.”
And obviously this situation doesn’t bode well for the biggest credit card issuers: JPMorgan Chase, Bank of America, Citigroup, American Express and Capital One, Whitney notes.
“Credit card issuers can’t raise rates, so they will cut back on all loans. Credit cards will have meaningfully lower profit potential.”
Whitney says some of the securitization market will rebound but not enough to prevent the economy from taking a major hit.
“The vast majority of securitizations have been shut down since July,” she points out.
And what’s the impact of that? “Over the last four years the average quarterly run rate was over $200 billion in mortgages originated,” Whitney says. In the first quarter of 2008, that figure dropped to $33 billion.
“I don’t think that comes back,” she says. “If you’re a fund manager, will you invest in mortgage-backed securities when there’s such a tarnish on them? You will get sued by your clients. So there’s a buyers’ strike.”
Result: Tight money, tight credit, and an economy on the skids.
I want a topic where we discuss what will be the future of suburbs and population shifts if we have a permanent increase in gas prices at current levels or higher.
I depends on which suburbs. On a bike in the suburbs you have the same accessiblity you have walking in the city at 1/3 the density, because you move at 3X the speed.
The far from anything exurbs? Good place to put the homeless.
Agreed. It could be formed as the outlook for urban, suburban, and exurban locales.
I think we are just beginning to see the carnage in the exurbs. Even at 1996 pricing, a house in Palmcaster, for example, doesn’t pencil out compared to buying in the San Fernando or San Gabriel Valleys. This is especially true of 2 income households who underwrite 2 commutes.
If I were to venture a guess I’d say the next 5 years will see significant increases in urban population densities as people try to mitigate the spiraling cost of energy.
The only counter argumetn to this that I can see as valid is that the current shock for high energy prices will do such terrific damage to the economy that demand destruction will put a significant dent in worldwide oil consumption. This could be enough to pull us all back from the edge of the peak oil cliff.
I think the suburbs are safe. It’s the exurbs that are in serious danger. Anyone who bought a home in an exurb 10-20 miles away from the city centers will probably be sorry in the next 5-10 years.
Is 10-20 miles really an exurb, or an unreasonable commute distance?
I live about 6 miles from work, and that commute in city traffic only takes me maybe 20 minutes and one fill-up per month (for a 1998 Honda Civic that gets around 30mpg). And I consider that a short, convenient commute.
I thought an exurb would be more like 100+ miles commute?
Spain, Irland and Britain,
There’re some big bubbles popping in Europe. They’re about where we were a year ago, in the denial stage. It be fun to get a bit more info what’s cooking over there right now. Not sure how they financed their bubbles. Maybe they’ll return the favor and our banks get stuck with some of their bad loans?
Is home design going to change now? Cheaper homes built in factories and assembled at the site? Energy effcient homes smaller with fewer windows better insulation? I think there will be a backlash against all the large expensive crap built in the bubble years. Many large home builders will just go out of business anyway. Will new smarter home builders replace them?
In Phoenix very large 2 story homes were built with dozens of large windows facing west a very bad design in my opinion. Dark screens cover all these windows anyway so why are they designed in?
“Is home design going to change now?”
You betcha. Good topic, IMO.
The elements of good energy-efficient design are basically known quantities. And some aspects are merely common sense — building to maximize natural light and prevailing air patterns, for example.
The question is, will architects, developers and contractors utilize energy-efficient design? Will municipalities incentivize it? Will consumers seek it out?
Or will the Crapbox Reign Supreme?
“Or will the Crapbox Reign Supreme?”
Good question. Most of the new stuff priced in the slow as molasses price range of 300-600k is McStuccoShacks. Considering the spiraling cost of utilities, I see nothing but the headache ball in store for these abominations.
Would someone please tell me what is the big deal with natural light in bedrooms? Most of what happens in my bedroom is sleep and a few other bed-based activities and most of those happen at night. The only time I want a lot of light in my bedroom is when I try to make sure I’m picking out navy blue socks instead of black ones or vice versa and a small lamp on the dresser works just fine. Lots of windows in the bedroom is pratically a mantra on House Hunters, like it is some sort of holy grail. Now, in a living room or kitchen, fine. Windows are great (though I want enough blank walls to take all the book shelves). But NOT in the damn bedroom.
Windows in the bedroom — many (if not all) residential building codes require one window of a certain size, in case an occupant has no other way to escape a house fire or similar emergency.
What is with the ‘Master Bedroom’ thang?
I use my bedroom to - gasp - sleep, so why have an area the size of a football field to put a bed and a couple of bedside tables in?
Make my bedroom cozy and leave the rest of the square footage in the living room, where I do all my living.
Another thing the US is singularly failing to do is to give tax-breaks and discounts to people wanting to retrofit thier houses to save energy. Is it possible to get help with installing solar panels, or insulating walls with recycled materials, or even building new using ‘unconventional’ materials like strawbales?
A few years back, the UK got really serious about stopping heat ‘leakage’ - to the point where councils would look at houses through infra-red cameras and record the heat signatures. Property owners were then responsible for addressing the problem, but were also given discounts, tax breaks etc to do it in a green way.
It cost the local govt a bit more, but was balanced out by the fact that the newly refurbished houses cost less to heat,cool and power themselves, thus reducing their carbon footprints.
Yep, the “master bedroom’ — a 20 x 20 foot room with a supplemental sofa, armchair and gas fireplace, none of which get used.
My other favorite is the ‘Master bathroom’, a 15 x 20 foot room containing a tub, a massive tiled shower with seats and enough tile for a subway station. Tell me again why I need 300 square feet to shave my legs?
Then there’s the eat-in kitchen and the dining room, both equal in size and the same distance from the kitchen.
I wouldn’t be surprised if we start to see a shift in local buiding traditions. For example, in the South it is common to use 2×4 studs for exterior walls. In contrast in the north (as I understand it) it is common to use 2×6 which allows for additional insulation.
If energy costs (including especially electricity) continue to rise I could see it happening that you start to get more people building with 2×6 to save on air conditioning and heat.
I’m curious, at what point does diminishing returns kick in on this? Is there any where they build 8 inch exterior walls to get even more R rating??
I’m sure it’s possible but not cost effective. A lot of the new construction is better insulated than in the past, but the builders do the minimum necessary. They also install the cheapest HVAC systems. This mistake alone can cost 20-40% on utility prices.
Just putting an extra layer of insulation in the attic can make a huge difference in utility costs. Also unplug the old kegerator in the garage.
2×6 common in the northeast?? Its code.
My first and so far only house had 2×2 studs with plywood sandwich construction. A kit home that came up on a truck from Ohio, probably took 1 day to build. The owner prior to me put a 1 inch foam wrap around it. It actually wasn’t too bad to heat. The foam sandwich construction is supposed to be a pretty efficient way to insulate, although I think they use more foam now. SIPS??
I’m doing a sandwich panel building right now. 4″ roof, 3″ sidewall, both sides steel skinned. It’s a nice system. Metl-Span is the vendor.
They already have factory houses outside of Toronto. Not what you would think though as manufactured housing (AKA - mobile homes) but actual proper stick built houses constructed in a temperature controlled factory right in the middle of the subdivision. They can work on the houses 24 hours a day inside away from the elements and when its ready roll the houses out on big trailers and drop it onto the poured basement foundation. Pretty fascinating stuff as keeps the workers happy as everything is done inside and the quality is topnotch with very quick turnaround times .
http://www.thestar.com/living/article/299102
Four lifetimes ago for a year I worked for HUD/FHA in NoDak and SoDak. One project was building a few hundred standard housing units in an enclosed building, on an indian reservation, and then hauling them to prepoured concrete basements. Very few overhead utility lines to travel under on the res. It was cost competive with on-site stick built, but overall not worth the trouble.
Great topic.
Almost certainly the McMansion goes away. People start buying smaller homes with less wasted space. Who needs a formal living and dining room that is used 1-2x a year? Who needs four bedrooms when 2-3 will do?
Smaller homes that are more efficient are the future. Applicances can use a lot of changes too, especially HVAC units that run constantly.
“I have gotten some questions about the meet-ups in California”
Can someone post a link to the discussion? I haven’t had time for extensively reading THBB for some time now; I’d be interested in meeting up.
afaik, there has been no discussion. I think you’re supposed to email Ben with “OTR” (on the road) as the subject to get his schedule.
We need a Ben Jones East Coast trip in the future…
Yeah, Ben, I think you’ll have to follow up w/a multiple stop NE, mid-Atlantic, Florida trip.
I do too!
AG. contact ben jones.
FED says banks need to cut dividends
http://biz.yahoo.com/rb/080605/usa_banking.html
Sacrilege.
here’s a serious topic suggestion.. wtf can we / will we do with tens of thousands of abandoned McMansions and lesser sized abodes sitting in half finished developments, 50 miles from civilization?
Ghost towns are not an option. They do have a highest and best use and it’s not as coyote lairs or Black Widow breeding pens..
While my instincts tell me there’s lots of opportunity here, my imagination has so far failed me.
Divide them up, and turn them into retirement communities or housing for the disabled and addicted. Along with those who care for them. Anyone who doesn’t have to go to work.
Hell of a zoning fight, though.
Illegal immigrants will fill them.
No worries.
Also, they will be used as breeding pens to re-populate the declining population base. Think economic growth.
It’s all good.
Here’s another bomb throwing issue-
Marriage is on the rocks! Its been known for a ever. Women want responsibility for support of children that she is stuck with to birth and support. Men want sex!
So lets kiss off religious weddings and get down to the basics. All women should have signed contracts from lovers to support her and the off spring of 3 minutes of passion or have a birth control pill (by the way, birth control pills have, if I understanding, a detrimental effect on women’s health).
Maybe, we should provide playboy mags to all the men, since they still be relied upon whether you are single or married.
IMHO
PS, I want to say both parties have valid arguments. My problem is people in general. I guess I should say, I am now concern more about my dog than any humans that I have met in my lifetime.
lol
At least my dog is loyal and covers my back!
If he heads for hills, then I will follow. He seems to have more sense of impending immediate disaster than most humans!
Me too for the most part.
Women of this web,
your a female, what are women looking for in a long term relationship?
I can understand support for children, but other than what, whats going on? The US has real problems and those problems can be solved at the most basic level, the individual. The next level up is the family unit.
I suspect that everyone is in for the shock of their life. Their will be consolidation above the individual level, ie., the family level. If problems at the family level are not resolved, then we are truly doomed. This is the core unit of any human society.
In the past, it was wedding arranged on the basis of assets and income. Are we returning to that or have we ever left it?
Somehow or some way these problems at the family level must be resolved. This involves the laws in which operate on as a society.
The Public needs a clear understanding of the rights and responsibilities in martial relations. It has gotten so complicated. I suspect most people’s understanding is the TV program “Devoice Court” along with other day time TV programs.
imho
In a long term relationship? Companionship, of course. That is the whole point of a long term relationship - for there to be someone familiar there. So all the stuff that goes with companionship - someone to make me laugh and laugh at my lame jokes; someone to sit on the sofa with me and to drag me off that sofa because it is too easy and there are more interesting things to do, but I sometimes don’t bother when it is just me because going alone is too lonely; someone to give me a reason to go to bed early; and someone to make me spend a little more money because same as with interesting things to do, I sometimes don’t bother to spend it when I am the only one who will benefit from the stuff. And I want someone to talk to who isn’t completely nuts. My mother is nuts (not senile or medically impaired, just nuts). I can already talk to someone who is nuts whenever I want (which is no where near as often as she wants).
My last date spent 10 minutes telling me on the phone about how he checked with the restaurant to see if they had brown rice and they didn’t but the used to before, but it was really too late to figure out if there was another place nearby that did and was I sure I was OK with that because he could just barely tollerate it though he didn’t like it. I should have cancelled right then and there. The date was even worse.
Lostcontrol -
I don’t know how serious you are here. I’m just throwing this in to encourage a little balance here - not all marriages function and end like yours.
I totally understand about being underwhelmed by humanity in general. Just be careful about breeding the bitterness.
Frankly, I think the benefits of BC pills FAR outweigh (most of ) the side effects. And there are soooooo many other BC options out there nowadays that there’s zero excuse for an unplanned pregnancy.
How many ‘unplanned’ pregnancies are really unplanned? The girl at my old office went off the pill without telling her husband and the resulting pregnancy was ‘unplanned’ according to her.
that she is stuck with to birth
In the U.S. (my response is U.S.-centric it may not apply elsewhere) women have the unilateral decision as to whether to have a child or not. Men don’t have any choice in the matter. Being that the case, barring some agreement beforehand, women are as a matter of fact always unilaterally responsible for a birth. So I’m not sure how you can say any woman is ever “stuck with” a birth.
What?? Men can have vasectomies or use condoms. Or be chaste. Aaaaack what a concept, eh.
Women can take BC, use some device, or choose abortion. I think women get tired of doing all the BC work while the guy thinks he’s entitled to play around. All it takes is one drunken lapse to get in trouble, and some women don’t think they should have to kill the baby to keep from inconveniencing the man. But plenty do.
I didn’t say there weren’t measures men can take to help prevent pregnancy. Reread my post. I was responding to the notion that a woman can ever be “stuck with a birth.”
So lets kiss off religious weddings and get down to the basics.
Religious weddings are a pretty new notion. Only royalty had those.
In the 1800’s, Texas instituted the concept of common law marriage due to the number of people just shacking up together.
“In the 1800’s, Texas instituted the concept of common law marriage due to the number of people just shacking up together.”
You mean the bull$hit line that we somehow “lost” our family values back in the 60’s is truely bull$hit? You don’t say!
Another bomb throwing item-
We know from the study that their are “boom/bust cycles. Why do we refuse to accept that in human populations? I suspect that are more now (and possibly more in the future) than the planet’s ecosystem can support.
What makes us human, from a beyond the present moment, is we can see our eventual death. This is what makes us different than the rest of the animal kingdom. So why is it that humans attention span shrinking?
Just thought I would throw this grenade out there for a response.
What makes us human is a matter of debate. Language? Planning? Tool use? Representational art? Spirituality? Human attention span has always been dominated by the short term, but now we discuss climate change and dark matter and many other oddities that previous generations were free of or relatively unencumbered by.
The carrying capacity of the globe is what we want it to be. Already the Earth is to a large degree a human engineered thing with the vast majority of usable land and fresh water already in play. We can continue to modify the planet and our own lives. Do we all want to live like Americans, or would living a little be more like Indians be okay? Even making a few Indian inspired changes to the diet of the common man could save huge amounts of resources, especially when accounted for in geologic timeframes.
Your idea of pervasive boom and bust cycles is not so much a thrown bomb as it is a lack of understanding of the power of human, social, and ecological adaptation.
What are good investments these days? I cancelled my Schwab account last year. The stock markets are truly disconnected from reality, I’m mostly out of them for now. Just where do you put your 401k/IRA money today? I’m not even sure MM are safe now - is Fidelity really that solid?
My bank sent me an announcement today. Their rate for CDs is 3.2% FOR A 3 YEAR TERM. And they say its a great deal at that rate/term!!! In the trash it goes.
@ this late hour, alchemy is still being performed…
Paper into Gold
one o’clock on a thursday in Cali?
what hour is this, zero hour?
zero hour: issuance of debt obligations is no longer an NPV positive…….higher than high rates? or higher than higher high rates….?
go long anything but the dollar when the 30 day tbill is under the FFR…..Libor?
somebody owes me some f-cking money.
skf was a hundred bucks not two weeks ago…..where’s the 16% off last year? Oh, its tied up in the 40% of the Banks asses…
hmmm…..
My best financial is not oil or oil services….its smokes…
abolish the stigmata……buy Altria… I know personally it might be difficult, ethically, to own Altria (MO) and QCLN at the same time…. but thats the reality.
its not ethics…. its what is money, and where does the money go?
why did oi; rally over 4 dollars in a a day…. interesting times…I still think oils is due for a 100-105 pullback…
then you will really shake my hand/
apoligies for the intrusion.
I would like to know what future scenarios keep people here potentially awake at night. I’m not talking TEOTWAWKI type things. But what kinds of unfolding events related to the housing bubble seem rather plausible and make people’s anxiety go up?
Thanks!
Unplanned pregnancies and having to buy a house in this current market.
Crime, crime, and more crime. The local news last night did a story highlighting the almost 40% surge in property crime since the beginning of the year. Panhandlers (some proffesional, will get in their BMW parked out of sight and drive off at dusk) on almost every street corner, some brazzen enough to assault your car and/or you in it. Several weeks ago, I went to my first “gun show” to price various firearms. For those who have never heard of a gun show, imagine a traveling flea market with guns, really popular in Texas. I’ve been eyeing a 12-gauge pistol grip Mossberg for the house (wife, two kids at home) and may even see ’bout one a dem fancy conceal/carry permits for a pistol in the family car.
Boy do I hear ya! I’ve recently started locking myself in my car when I stop at a gas station after starting the pump because I keep getting accosted by individuals wanting spare change cuz they’ve ran out of gas and can’t get to work.
I’ve ran into those types also. 9 times out of 10 they’re scammers. They’ll canvas the area, get maybe $15-20 out of people, and you’ll see them jump into a car and drive off without needing gas! Don’t fall for it…
W said it best: “Fool me once, shame on…shame on you. Fool me,…you can’t get fooled again.”
I worry about property crime…but I’ve always been that way. I frequently get up at night to scout around having “heard a noise.”
I’m in a temporary housing situation now, but once I get settled in to a permanent location (probably some time later this year or early next) one of the projects on the top of my list is a total surveillance system around the entire property. I might not always be available to prevent crime, but if it does occur I want to be able to identify and hunt the motherf****r down so I can stick my foot in his ass.
The collapse of a huge number of small businesses and the impact this will have on the economy as we may find out that too many of them were focussed entirely on wants not needs. I’m talking about closet organizers, scrapbook suppliers and consultants, gift basket makers, spas, anything related to the wedding industrial complex, doggie day care and cat psychics, college consultants that guide children through a 10 year planning process to get into Tufts, etc.
A lot of these are classic second earner jobs and our current standard of living requires the second income. What if it all goes poof? There is the slightest possiblilty that it will all match up - that the people who bring in the second incomes will loose their jobs but everyone will be lowering their standard of living (if you think life is better with a $100 haircut instead of a $20 one) all together and all will be well - sort of like JP Morgan buying Bear Stearns and all of a sudden they don’t have to worry about their risk as counterparty to the credit default swaps backed by Bear. But I don’t think so.
These businesses seem to go poof on their own all the time anyway. I can’t believe all the dumbass flower shops, boutique furnishing joints and niche restaurants are started up by - who, doctors’ wives? Lawyers wives? Or some worthless flake who came into big bucks somehow, only to blow it on an ill-conceived business? They come and go all the time here. It shouldn’t matter to me, I guess, but I keep wondering what on earth are they thinking - and when they go to sell the business, why should anyone help them get out from under it?
There was a gourmet place started here by a local guy who was a chemistry scholar who then went into some business venture, investment banking or whatever, then came back here to start what he thought was God’s Gift to Greek & Italian cuisine. Only he knew how to prepare the dishes properly! He spent a fortune on the place, because he was going to do it right! But the food was just,…average. Place was packed for a couple months like any new restaurant. A year later he has to close up. The place (an old JB’s Big Boy) is still for lease two years late. I just shake my head at this stuff.
Guess that’s why I’m not in business for myself.
The comment about doctors is true. We have the first panic sell on our street (all offers considered, 20% off, etc the 1st week he put the place on the market for sale). Turns out this person is a doctor and decided to invest (apparently every cent he had and all he could HELOC) in a new specialty restaurant and lost everything. The restaurant is now boarded up and he and his wife moved out of their house after dark one night last week.
Biggest news item we’ve had since our priest ran away with one of the members of the church a few years ago.
LOL - you only have to watch ‘Ramsey’s Kitchen Nightmares’ on BBC America to see that overweening egos and restaurants are the perfect way of stripping yourself of your nest egg.
The majority of restaurants never make it to thier first anniversary.
Its hard work, and not suited to dillitantes.
I’m wondering when Bed Bath and overpriced will go BK, there way overpriced and don’t sell anything you can’t get at target or wallmart way cheaper, thinking of shorting there stock….
Be careful.
I’m short, and losing $$.
They suck, and will probably experience some shrinkage, but they seem to manage their cash well.
Check their balance sheet first.
Good luck!
Technology failures, power delivery failures, information stream failures, water delivery failures, earthquake, famine, revolution, flood….you know, end of times shit.
its the revolution stuff that exacerbates the water and food failures.
A leader steps to the fore…
Cuomo, ratings agencies agree on mortgage reforms
By Riley McDermid, MarketWatch
Last update: 3:30 p.m. EDT June 5, 2008
NEW YORK (MarketWatch) — New York state’s attorney general said Thursday that his office reached agreement with the three largest credit-rating agencies on reforming the way in which residential mortgage loans are valued and rated.
At a news conference, Attorney General Andrew Cuomo said the reforms include a new fee-for-service structure, additional disclosure standards about how a loan was rated, new criteria for reviewing individual loan originators, due-diligence reforms at the loan level, and representations and warranties from investment banks.
“The mortgage crisis currently facing this nation was caused in part by misrepresentations and misunderstanding of the true value of mortgage securities,” Cuomo said. “The tremendous reach of this crisis cannot be understated. Our entire economy continues to feel aftershocks from the collapse of the mortgage industry.”
Ben,
I would like to have a topic about your website. When you started it, why, and how many hits you have per day? Once the bubble bust is over and old news what do you plan to do?
Here’s a weekend topic you may want to censor:
Where’s the panic, where’s the outrage, whats the problem?
How is MY life getting better?
Srongest business plans (recall I called private placement of foreclosures in December 07)/
Muni-solar, LNG waste management….junebugs to a porchlight. See, if you roll up the munis in solar you lock in the commercial solar, and that ties to the residential..same with the LNG fueling station, rolls up the waste management, and urban transport, outside electric….whitch should be a water flow (or burning oil or coal…or nuke), but water is food….or is it oil….
next bubble…..defined above.
Tax Appetites:
muni and commercial solar, wind, LNG.
commercial solar, wind.
residential?
you gotta sell baby…probably be a lease. with a lock down monthly.
NVP after depreciation of 7 years…..0, ZERO to the leaseback, abandoned equipment. Whats the TAX appetite?
I make shit up…cuz Im a dumb hillbilly.
in the words of nyCityboy…: “Go F-ck yourself!)..
ask yourself this:
if an “emerging market family of 14″ is up against a “fully developed market family of 4.5″….who gets the glory and where is survive?
14 vs. 4.5
not good odds, unless the whole mother-f-cker is on the line//
lucre for the glory? or survive?
this is also a good, go long ratio…unbalanced, as it were/.
Is a bottom at hand? Donald Kohn emphatically says “no.”
PAGE ONE
Real-Estate Woes of Banks Mount
Lenders Dumping Bad Loans at Discount;
Regulators See Losses Continuing
By MICHAEL CORKERY, JONATHAN KARP and DAMIAN PALETTA
June 6, 2008
Federal regulators warned Thursday that banking-industry turmoil would continue as financial institutions come to terms with piles of bad loans they made to finance the construction of homes and condominiums.
Until now, most of the damage to banks from the housing crisis has come from homeowners defaulting on their mortgages. But amid a dismal spring sales season for new homes, loans to home and condo builders are looking increasingly shaky. Banks have begun to dump them at what will likely be steep discounts, setting the stage for billions of dollars in fresh losses.
“As long as the housing market is on a downward path, as long as those prices continue to fall, I think there’s a risk that the losses could continue to mount on a variety of loans,” Federal Reserve Vice Chairman Donald Kohn told the Senate Banking Committee Thursday.
There are cracks in the marbled walls of the Fed, as some insiders are now openly worrying about moral hazard issues.
Insider Joins Critics of the Fed, Faulting Credit-Crisis Programs
By Greg Ip
Word Count: 853
In a striking insider’s critique, a Federal Reserve policy maker said lending programs the central bank has created to combat the credit crisis distort private markets, encourage risky behavior and could endanger the Fed’s independence.
Federal Reserve Bank of Richmond President Jeffrey Lacker’s remarks, made Thursday in a speech in London and amplified in an interview, show that concerns that outsiders, including former Fed Chairman Paul Volcker, have raised about the Fed’s actions — in particular its rescue of the investment bank Bear Stearns Cos. — are shared by some inside the Fed.
Is there a possibility the regional Fed banks will openly revolt against Geithner et al? One could only hope…
Two Fed Bank Presidents Warn About Lending to Securities Firms
By BLOOMBERG NEWS
Published: June 6, 2008
Two Federal Reserve Bank presidents warned in separate speeches on Thursday that the central bank’s decision in March to lend to securities firms might sow the seeds of further financial crises.
Quick fixes often seem great initially but not so great later on. And I have to point out that financial crises are already not all that uncommon these days.
Fed Official Says Rescues May Create More Risks
Richmond Fed President Jeffrey M. Lacker is not the only skeptic.
By Neil Irwin
Washington Post Staff Writer
Friday, June 6, 2008; Page D01
In a sign of widening skepticism within the Federal Reserve system of the central bank’s rescue of Bear Stearns, the president of a regional Fed bank said yesterday that such actions may make financial crises more common.
I want to second this as a topic…Lacker, Plosser and Bullard are now making serious noises about the direction of the Fed, and folks who watch these things cite how unusual this is, for governors to speak out so publicly against prevailing Fed policy. Even more warning flags being hoisted publicly.
Perhaps Bullard will end up in the role as a defender of the proud St. Louis Fed tradition. William McChesney Martin, Jr. came out of that milieu.
His most famous quote about his central banking philosophy was that the job of the Federal Reserve is “to take away the punch bowl just as the party gets going,”[1] referring to the need to raise interest rates when the economy is at its most active.”
Sounds like the March 16 crisis response has strong inside support at the Fed — NOT!
“In times of financial crisis, the understandable central bank imperative is to alleviate the stress.” Lacker said. “But the expectations such actions engender could very well make future crises more likely.”
Others with close ties to the Federal Reserve system have expressed misgivings. The presidents of the Kansas City Fed and Minneapolis Fed have voiced concerns similar to those of Lacker, if not as directly. Former Fed chairman Paul Volcker said that the actions were on the edge of the central bank’s legal authority.
Just yesterday, Philadelphia Fed President Charles Plosser said in a speech that the central bank should explicitly define in what situations it will intervene to protect an institution, because if officials simply use their discretion, it might encourage the taking on of too much risk.
Former St. Louis Fed president William Poole has attacked the actions explicitly as an undue interference in markets, and Vincent Reinhart, a senior staffer at the central bank until last summer, called it “the worst mistake in a generation.”
In an interview yesterday, Reinhart said that the rumblings of discontent reflected a sense that the central bank’s mission has changed without much forethought.
“You go back a few years, there was a settled consensus about the role of a central bank,” said Reinhart, now a resident scholar at the American Enterprise Institute. “That has changed very rapidly, and the changes were driven by events. It’s not clear anyone internalized the longer-term issues when they were solving that day’s problems.“
Housing Pain Hits Prime Borrowers
Foreclosures Increase As Troubles Worsen Outside of Subprime
By RUTH SIMON
June 6, 2008; Page A5
Mortgage delinquencies and foreclosures continued to surpass record levels in the first quarter, as the prolonged decline in home prices and shifting economic conditions trapped a growing number of prime borrowers.
Delinquencies and foreclosures increased at the fastest pace for borrowers with prime adjustable-rate mortgages, according to the Mortgage Bankers Association, though borrowers with subprime ARMs still account for the largest share of troubled loans. The number of new prime ARM foreclosures increased by 29,000 to 117,000 in the first quarter, while the number of new subprime ARM foreclosures increased by 20,000 to 195,000. This is the first time prime foreclosures have grown faster than subprime foreclosures, the MBA said.
Did the elephants under the rug ever really leave, or is it just that they were well-hidden from the MSM view for the past few months? I realize the Fed threw Megabanks, Inc some rather largish short-term loans as a life line, but don’t those have to be repaid?
The Short View: Credit crisis returns
By John Authers, Investment Editor
Published: June 5 2008 19:55 | Last updated: June 5 2008 22:23
On Thursday, the market’s worst fears were realised. MBIA and Ambac Financial, the two biggest monoline bond insurers, lost their triple A credit rating from Standard & Poor’s.
Had this happened at any point in the first three months of this year, when the entire stock market appeared to be ebbing and flowing on the fortunes of the monolines, it would have started a rout.
Obvious question: Did MBIA and Ambac Financial losing their triple A credit rating start Friday’s rout?
Which country’s banks are more thoroughly screwed?
European banks harder hit by credit crunch
By Gillian Tett in London
Published: June 5 2008 19:55 | Last updated: June 5 2008 19:55
Foreclosures hit a record high _ and more coming
from The Associated Press
(An auction sign is posted at a house under foreclosure in East Palo Alto, Calif., Thursday, June 5, 2008. Home foreclosures and late payments set records over the first three months of the year and are expected to keep rising, stark signs of the housing crisis’ mounting damage to homeowners and the economy. Associated Press © 2008)
WASHINGTON June 5, 2008, 04:14 pm ET · The foreclosure hammer is hitting ever harder. People lost their homes at the highest rate on record in the first three months of the year, and late payments soared to a new high, too — an alarming sign that the housing crisis and its damage to the national economy may only get worse.
Mozilo Sought Better Rates for Some
Reuters
Countrywide CEO Angelo Mozilo has helped borrowers, including two former CEOs of Fannie Mae, obtain mortgages. The practice is legal but could cause a problem for Fannie if its officials received special treatment.
Isn’t there a name for this sort of thing? I am not sure “bribery” exactly captures it; perhaps “influence peddling” would nail it?
Countrywide Friends Got Good Loans
Mozilo Sought, Received
Better Rates for Some;
Problems for Fannie Mae?
By GLENN R. SIMPSON and JAMES R. HAGERTY
June 7, 2008; Page B1
Countrywide Financial Corp. makes mortgage loans through a vast network of offices, brokers and call centers. But a few customers have gotten their loans a special way: through Countrywide Chief Executive Angelo Mozilo.
[Chart]
These borrowers, known internally as “friends of Angelo” or FoA, include two former CEOs of Fannie Mae, the biggest buyer of Countrywide’s mortgages, say people familiar with the matter.
One was James Johnson, a longtime Democratic Party power and an adviser to Sen. Barack Obama’s campaign, who this past week was named to a panel that is vetting running-mate possibilities for the presumed nominee. Another was Franklin Raines, a onetime Clinton administration budget director, who left Fannie Mae amid an accounting scandal in 2004.
There is nothing illegal about a mortgage firm treating some borrowers better than others. But if Fannie Mae officials received special treatment, that could cause a political problem for the government-sponsored, shareholder-owned company.
There is nothing illegal about a mortgage firm treating some borrowers better than others. But if Fannie Mae officials received special treatment, that could cause a political problem for the government-sponsored, shareholder-owned company.
Its code of conduct, a spokesman said, “requires the disclosure of potential conflicts of interest and prohibits acceptance of substantial gifts, including loans with preferential terms, from an organization seeking to do business with the company without prior review and approval by the company.” The spokesman said the code has been in effect since the early 1990s.
Hopefully Fannie Mae undertook prior review and approval of these special low-interest loans, or else there might be the appearance of “substantial gifts, including loans with preferential terms, from an organization seeking to do business with the company without prior review and approval by the company.”
Recession Fears Reignited
Unemployment rose sharply and payrolls shrunk for the fifth consecutive month, increasing the likelihood that the U.S. is in a recession. The news — along with surging oil prices — dashed lingering hopes that lower interest rates and fiscal stimulus were sufficient to help the U.S. economy right itself.
PAGE ONE
Investors Rattled as Slump Sinks In
By MARK GONGLOFF and JOANNA SLATER
June 7, 2008; Page A1
U.S. stocks sold off Friday, in a cousin of the panicky one-day busts that gripped the market earlier this year.
But while those swoons grew out of the credit crisis and worries about specific financial institutions such as Bear Stearns, the latest tumble seems to mark a new phase. Broader worries about the economy — increasingly strained by soaring oil prices and a sagging job market — are sinking in.
Villains in the Mortgage Mess? Start at Wall Street. Keep Going
By Kathleen Day
© 2008, The Washington Post
Article Last Updated: 06/06/2008 07:42:25 PM MDT