Bits Bucket For September 28, 2008
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
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A House of Cards divided against it’s constituency cannot stand.
“When you ain’t got nothin’, you got nothin’ to lose”
(I always forgive the double-negative on such a great line)
I got plenty of nothin’
And nothin’s plenty for me…
While preachers preach of evil fates
Teachers teach that knowledge waits
Can lead to hundred-dollar plates
Goodness hides behind its gates
But even the President of the United States
Sometimes must have to stand naked.
It’s alright Ed, it’s life and life only.
A stitch in time saves nine.
“…it’s constituency…”
Just what exactly is the constituency in this case?
The fog of whore…
I think that is a very good question.
Whom am us anyway?
Pogo: “We have met the enemy, and they are us.”
“If you’re gonna be dumb, you better be tough”
You may not be beautiful, but you sure are dumb.
“Faint heart never buttered no parsnips”
Did I miss something?
My last scorecard was the voters from the right *and* left hated the bailout idea. And each day that goes by, I’m pretty sure that more and more Americans think it’s a “Really Bad Idea”.
However, thanks to a randomly set deadline and pressure from a lame duck Administration, highly paid lobbyists, and high net worth contributors, Congress felt the need to “do something” lest they be blamed for Depression II, which will be happening anyway regardless of if we bailout the bankers responsible.
Personally, I’m willing to see my life savings wiped out (seriously - I know how to start over) if these guys end up working at McDonald’s where they belong. It’s looking like I won’t be given that option, however.
Has something happened since “Happy Smiley Faces” press conference last night, at which all the wrong people were smiling and declaring it was a done deal (again)? That would be awesome.
Just listened to reporter this morn that the current CEO of GS was in the room while Paulson was negotiating the AIG deal…there is no shame left….
Serious question:
What would be the consequences of no bailout?
I’m not the smartestperson in this room, I know that.
Other rooms I may be, but not this one.
Would not a Depression be a result?
I mean, maybe the money is better spent on a massive update of US roads/bridges and solar panels wind farms.
But, just what would happen with no bailout?
No one can answer that, which is why this feels exactly like Wall Street demanding that we pay for their screw ups. Heck, no one can really answer why this week is so darn critical compared to 2 weeks ago.
Could something big and bad happen? Sure. I’m okay with taking my chances at this point versus a guarantee of throwing money at the people who cause the problem in the first place.
My opinion is that there would be discovery on the stock market as to what stocks had value or not .Financial stocks would of taken a big beating of course ,in other words true stock value discovery would of occurred . That would of made the stock market correct ,but you should be investing for the very long term in stocks anyway . So some people would of had a sort term loss ,but if they held long they would re-coup maybe if the company didn’t go BK. They were afraid of a run on the stock markets questionable companies as well as a run on the banks .
The government isn’t going to be able to stop this price discovery of the true value of things like stocks and the financial sectors being lower priced stock . The bail out of banks basically keeps that stock value higher because the taxpayer is bailing out the bad assets of the bank .
Goldman would of taken a beating in spite of it being a good asset bank or not as the stock market tends to punish the whole financial sector when it doesn’t have confidence or doesn’t know the true value .People would of taken money out of banks even if they had FDIC insurance or even if the banks was not one that would fail . Basically Paulson caused the panic by trying to stop that price discovery that the natural market would of come to . I just didn’t know it was the governments role to stop the greater market from price discovery ,and the governments role to determine who the winners and losers would be . The bail out would greatly benefit Goldman Sachs in that its stocks would not take a beating because its just part of the whole financial sector
that would of taken a beating . Paulson still has holdings in Golden Sachs ,so in my view he should of disqualified himself as a conflict of interest party in this .
So the bail-out is just changing who the winners will be and who the losers will be . This is something that I don’t think the government has any business doing because it keeps wealth ,that would of been losses, in the hands of rich .Look at it like the government is controlling the Casino losses .
The government could of just injected cash for months while the banks took their losses or went BK or asked for a loan for more time to write off their losses (not forcing mark to market ). The government could of injected liquidity in the markets will directly funding loans and than putting insurance on them ,which would of been more prudent and performing loans and therefore more saleable in the secondary market .
So this is a bail-out for Bad Banks and a attempt to control the price discovery of the true value of things ,is much like the attempt for the market to discover the true value of real estate right now .
There hasn’t been a serious explanation for where the figure BN 700 came from or why it had to be all at once that I’ve heard of.
Last I heard, the money was to be broken up into installments, which is at least better, since it allows time to stop if it’s not working and, more importantly, also gives people more time to organize, etc. against it or for alternatives to be put forward.
700 Bn is 5% of 14 Trillion, the GDP of the US. Now if you believe this is the end of it, then please send in your donations now to my fund. This is just opening the door to more and more bailouts by these crooks. Notice also that the unbridled authority is not off the table they just don’t mention that now.
Are we screwed? Looks like it to me, in another year we shall be sure, then the sheeple might look to doing something but until they can actually see the effect on their lives they won’t react. I heard it was 50/50. 50% NO!! 50% Hell NO!! That won’t win many reelections.
“if you believe this is the end of it, then please send in your donations now to my fund.”
sorry, that’s not what I meant at all. less up front now is better than an immediate 700BN transfer with no oversight. “Better” is relative, and doesn’t neccessarily mean “good” or even “fine”.
To me this bailout smells a lot like the banks hunting down the sovereign wealth funds about a year ago. The reason then to raise money quickly was that that banks saw losses coming on quickly that would have devastating effects on their stock prices and impair their ability to raise badly needed capital.
Today, I think the banks (and Hank Paulson) see urgency in an approaching wall of Credit Default Swaps swamping the system, and quickly want to get a bailout of mortgage related assets before the problems move on to the next asset categories. After all when the levies break, everyone is going to be in a heap of trouble, and there will be no sympathy for last years problems in mortgages.
There is no stopping this train wreck, there is only the opportunity to slow it down by spending trillions of taxpayer dollars along the way.
Here’s some of today’s concluding thoughts from Ben Stein, the money and business columnist for the New York Times:
“One final little thought bubbles into my mind: Maybe the bailout should not be of the banks at all, but of homeowners themselves. Maybe if we make the government the buyer of last resort of homes, we will stabilize the markets, stabilize the debt associated with the markets and take the gain out of the credit-default swaps for the speculators. Yes, price would be a huge issue, but so it is for Mr. Paulson’s plan for buying debt from banks.”
“Why not? We do it for farmers. Why not for the individual homeowner? Oh, right. Because Treasury secretaries don’t know any of those people.”
http://www.nytimes.com/2008/09/28/business/28every.html
Why does anyone listen to Ben Stein in the first place?
About a year ago he wrote more than one column decrying that there was/would be a credit crunch and saying “it is all contained.”
Ben Stein is one of the few journalist critical of the bailout plan, so I thought his comments were interesting as it relates to today’s blog topic and the general public’s skepticism on the bailout.
I agree with you that in general his advice is hard to swallow. On a blog like this one with many renters a hypothetical bailout of homeowners might be tougher to take than a bailout of banks/investors, so I understand your attack.
Maybe if we make the government the buyer of last resort of homes, we will stabilize the markets, stabilize the debt associated with the markets and take the gain out of the credit-default swaps for the speculators.
————————-
Somebody’s isn’t carrying this to its full conclusion: what does the govt do with the houses after they’ve bought them?
Rent them out, and rents go down, lowering the fundamental value of housing (calculated as price/rent ratios).
Sell them back onto the open market, and you’ve still got the same buyers who want to pay the same price as when the FBs owned the same houses. It won’t prop up prices.
Bulldoze them or hold them off the market indefinitely? Hard sell when there really is a demand for those homes. They just might end up running the few remaining buyers out of town.
Bottom line: prices HAVE TO fall. It’s not a matter of “if” but “when.” Do we prolong the recession/depression or do we get it over with more quickly so that we can refocus our attention on the REAL economy (actually producing things that people need and want).
If there were no bailout, the companies which deserved to fail, would. We sure wouldn’t want that to happen, would we? That would be cruel and unusual, far worse than preying upon innumerable borrowers and investors while absconding with hundreds of millions of dollars as CEO of a financial institution. I mean, it’s only fair to lay this on the public.
If there’s a great depression II , there won’t be a McDonalds.
I know how to start over ??
I don’t….
“Freedom’s just another word for nothing left to loose”
Kris Kristofferson’s “Me and Bobbie McGee”
The U.S. is gaining freedom, every week.
Since you have it in quotes and all, it’s really:
“Freedom’s just another word for nothing left to lose”
Honest question: I see ‘lose’ and ‘loser’ spelled as ‘loose’ and ‘looser’ over and over again. Is this some sort of “interwebs” slang?
looser
Tooks one to no one!
light’in up dude, get loose.
light’in up dude, get loose ??
Exactly…Whats the big deal ?? Are we here for a vocab test ??
pop quiz for the interweb!
please use the following correctly in a sentence:
loose
lose
loos
nonplussed
chuffed
The nonplussed commuters worried that the loose bolts holding down the loos would lose them time.
They were chuffed when the bloke came to fix them before the 10.40 to Guildford left from platform 16.
OK, 2 sentences…..
hee, speeding pullet, A+! Extra points for bringing “bloke” into the mix.
Our quiz next week: explain the bailout plan in rhyming slang.
LOL Ella!
I don’t know if I can explain it in proper BBC Received English, let alone in Sturm ‘n Drang
“I see ‘lose’ and ‘loser’ spelled as ‘loose’ and ‘looser’ over and over again.”
We need loser lending restrictions.
been there, done that.
Sang by Janis Joplin
If I recall correctly, Gordon Lightfoot also recorded a version of “Me and Bobbi McGee”.
Kris Kristofferson wrote it, Roger Miller sang the first recorded version.
The Dems just gave the Pubs a big stick to beat them over the head with come November. Already Schafer(R) was whacking Udal(D) on Meet the Press this morning. Moreover, if the markets crash (cough) and the economy slides into recession anyway (cough), what are they going to tell their remaining constituents and where are they going to get the money to fund Depression era programs? Plan accordingly. This sucker is going down.
Yeah, Bush’s henchmen, Paulson and Bernanke, pulled off a fine snow job. The Dems are complete idiots. McSame should benefit heavily from this.
UH My Name is EUGENE…..some levity today
http://www.youtube.com/watch?v=FeZlXJtLhMQ
Called my congress man friday, rep Jerry Lewis. Told the staffer if he votes for this bail out he will be out. I think there getting a lot of this type of call.
Please post a link to any kind of list that emerges of how this vote goes down, so the American voters can finally have their say on this backroom deal.
I thought Jerry Lewis was secretary of state?
Constituency??? Since when??? Did something happen over the weekend??? Have our fearless comrades in DC changed our status?
Shut up, you angry consumer. Learn your place.
Anybody long the market this week? You would think there will be giddy feelings abounding on Broad Street, Water Street and Wall Street. They may have people fainting in Greenwich, CT due to over-stimulation.
Constituency is just a few short letters apart from Constitution, but miles away…
“angry consumer”
Correction. Since I was “priced out forever” in 2006 I am really an angry RENTER. Hence I am a non party member with the lack of rights and considerations to be expected of any subversive—–”burn him”
Since I saw this coming does that mean I get to cut in the bread line?
I think saying “I told you so” in the bread line is probably not a good idea ;). But then again, maybe you’re not interested in being the Miss Congeniality of the bread line?
When 95% of the public responding is against this cockamamie cash grab by the Gulfstream set, the results may be revolting, should the grab go through…
The lawmakers, as far as I can tell, are trying to smooth their constituents ruffled feathers by convincing them it will keep their home values high! The sheeple don’t want to lose ‘all that money’ they thought they had….
If these Guys & Gals are going to pass legislation in the face of 70 mil + - angry voters maybe it tells us how fragil a problem we have…
Behind Insurer’s Crisis, Blind Eye to a Web of Risk
By GRETCHEN MORGENSON
Published: September 27, 2008
“…The only Wall Street chief executive participating in the meeting was Lloyd C. Blankfein of Goldman Sachs, Mr. Paulson’s former firm. Mr. Blankfein had particular reason for concern.
Although it was not widely known, Goldman, a Wall Street stalwart that had seemed immune to its rivals’ woes, was A.I.G.’s largest trading partner, according to six people close to the insurer who requested anonymity because of confidentiality agreements. A collapse of the insurer threatened to leave a hole of as much as $20 billion in Goldman’s side, several of these people said….”
http://www.nytimes.com/2008/09/28/business/28melt.html?pagewanted=1&_r=2&ref=business
Some people get bailed out and some are tossed to the JP Morgans of the World. GS, gotta love ‘em.
“A collapse of the insurer threatened to leave a hole of as much as $20 billion in Goldman’s side, several of these people said….”
2000: gaping hole in the U.S.S. Cole, 17 dead
2008: gaping hole in the $$ Gold, $20 Billion debt
From Wikipedia:
Blankfein earned a total of $53.4 million in 2006, making him one of the highest paid executives on Wall Street. His bonus reflected the performance of Goldman Sachs, which reported record net earnings of $9.5 billion. The compensation included a cash bonus of $27.3 million, with the rest paid in stock and options. Blankfein earned a total of US$67.9 million in 2007, he will receive US$26.8 million in cash, and US$41.1 million in restricted stock and options.[3]
I assume this is factual, but one nevers know. It would be too depressing to research.
Think of how much restricted stock wealth he could still lose in 2009. that might make you feel better
Isn’t this, er, illegal?
Nah. No court review will be allowed.
You are asking if this Administration was involved in something illegal!?!
Do you want to see the list?
I don’t see the advantage of preserving AIG in its present form. They have multiple subsidiaries, that if sold off, would potentially generate enough $$$ to pay the government back for its bailout.
The insurance unit responsible for Goldman’s counterparty risk could then stand on its own and be sold back to Goldman to manage as they see fit. After all, no one asked them to put all of their eggs in one basket, even if they did see the writing on the wall when it came to mortgage backed securities.
Paulson’s bailout of AIG was an effective bailout of GS. The fact that this was glossed over by the media is sickening.
Didn’t Buffets 5 bil put him position to “cherry pick” the sweet parts of AIG ??
a very astute observation…
If you are interested to find out real cause of the current financial fallout here is the interesting material for you, fellow HBB site readers, to be familiar:
http://www.pbs.org/wgbh/pages/frontline/shows/wallstreet/weill/demise.html
It starts with Glass-Steagall Act and goes through the stages of how further the greed of our financial “wizards” eliminated that important cornerstone-safeguard, to bring us in today’s United States Bankruptcy…
gal,
Thanks for the link.
We walked through our old neighborhood in the Financial District yesterday. There are more condo conversions coming. I think they should just convert The New York Stock Exchange and Federal Reserve (not federal at all) builiding over to condos and be done with it. I really hate seeing that giant American flag draped on the stock exchange. That flag still stands for something and nobody that died for the ideals of this country died for those lying, cheating ba$tards that populate that building.
Don’t you ever sleep?
Any idiot can wrap a flag around himself and ask you to die for him (W being the most recent example). The only greater fool is the person who winds up doing the dying, especiallywithout asking any questions first.
Some bozo recruiter from the Army called to speak with my daughter (a HS senior). I told him to go to hell.
” I think they should just convert The New York Stock Exchange and Federal Reserve builiding over to condos and be done with it.”
Ha!
How much would the White House fetch? Maybe they can pay for the bailout with that.
It is for rent. Just contribute and you get a sleep over.
Father leaves nine children at Nebraska hospital
“Parents are abandoning teenagers at Nebraska hospitals, in a case of a well intentioned law inspiring unintended results.
Over the last two weeks, moms or dads have dropped off seven teens at hospitals in the Cornhusker state, indicating they didn’t want to care for them any more.
“They were tired of their parenting role,” according to Todd Landry of Nebraska’s Department of Human and Human Services, quoted in USA Today.
Under a newly implemented law, Nebraska is the only state in the nation to allow parents to leave children of any age at hospitals and request they be taken care of, USA Today notes. So-called “safe haven laws” in other states were designed to protect babies and infants from parental abandonment….”
http://newsblogs.chicagotribune.com/triage/2008/09/father-leaves-n.html
This should be in the Onion. Sad
He should be castrated. Sterilized, at a minimum.
I wish some of my neighbors would do this.
You must have a sweet castle, king.
I do indeed, and it’s paid for.
nice keep, as well?
Of course. My donjon is where I spend much of my time.
figured as much.
Lol. I appreciate your concern.
i’ve been looking for a castle with little upkeep, preferably with a flying buttress.
I would love to take my neighbors kid…the one who puts garbage in my bushes, and drop him off at a hospital at the other end of the state.
Same Here!! lol A large % if kids in this country are so stupid, even the smart ones.
Lane
“A large % if kids in this country are so stupid,”
They have a number of strikes against them. Their parents, a completely dumbed-down, psychologically controlled school system, sh*tty polluted food that scrambles their brains, etc. Instead of criticizing kids, it would be more useful to ask why they are “stupid” and perhaps, at some small level, confront the problem and try to do something about it.
Hey don’t be so hard on the stupid people. Capitalism requires stupid people in order to function properly.
When you are stuck with a bad parent or parents, life has dealt you a quite a bad lot from day 1, regardless of your income level.
People before the age of welfare would leave their children in orphanages and monasteries when it became clear they couldn’t take care of them. This isn’t really a “new” problem. In the modern era, we’re just used to throwing money and social workers at the problem.
The guy with 9 children sounded like he *may* have been doing the right thing. If mom was really holding the family together…the kids may be better in the long run without him.
My problem is: If you are not sure how good of a parent you might be you should stop at 2 or 3 kids. I hope he dies like his stupid wife. I know this sounds mean but I`m just sick and tired of paying for other people kids. Now as od today I have to buy there houses too.
Lane
A new family value of placing no value on families.
From what I’ve always heard, this is a “Christian” nation of “family values”…every child is a wanted child. Ask Sarah Palin.
Surely there are lots of pro-life people willing to take on this burden? I hope all those church tax exemptions are going towards something besides subsidizing politicking by preachers.
… every child is a wanted child … Surely there are lots of pro-life people willing to take on this burden?
Surely.
It shouldn’t be an issue, right.
I mean … right?
FWIW, I have met people who will put their money where their mouth is on this issue (and by that I mean they adopt).
I would be willing to adopt, and provide a good home for a child.
I am unwilling to submit to background checks, and write bank checks for the “privilege”.
I read the article yesterday. This is really sad. People like that should have never been allowed to have children.
Never have been allowed?
Sounds like a plug for eugenics.
Who decides?
Why you do Bill of course
Maybe giving them comprehensive sex education, free contraceptives and access to early-term terminations without threat of death and/or exclusion for all concerned, would also help?
Oh, and parental leave, sick/vacation pay without possible loss of employment, wages that can actually support families, health care the poor can afford, and decent access to universal childcare, for those that chose to keep them?
Not trying to start a flame war, really
Sounds like the UK — the common man’s paradise — right, sp?
Ah, there’s LOTS wrong with the UK, Joe.
But on the subject of personal reproduction, they’ve been able to keep hold of the more commonsense legislation, and stopped the religious zealots (from all faiths) from setting up viewing chairs in everyone’s bedroom. You have to hand them that.
About the father of the nine kids: “The Omaha World-Herald reported that the man had a “history of unemployment, eviction notices and unpaid bills – and a psychologist’s determination that he lacked common sense.”
I hope that hospital has room for an awful lot of children if this is the criteria for abandoning them. Is common sense really in the DSM-IV?
Giving up and walking away is a bad habit to fall into. It’s always hardest the first time, but subsequently becomes easier.
Giving up and walking away is a bad habit to fall into.
———————————————————————–
Isn’t that what the pols just did in their give-a-way to the Wall Street Sharpies?
I think everyone’s missing the point about his wife dying.
He’s obviously emotionally unstable, and it sounds like his wife did all the work WRT childcare.
There should be resources to help people in situations like this (and yes, he should be sterilized).
Guess childcare isn’t “not work” after all…
One more time
Comment by jeff saturday
Sep 28th, 2008 at 9:34 am
THE WASHINGTON HILLBILLIES
Come and listen to my story bout a man named Dodd
refied his house but it seemed kinda odd
saved eighty grand but he said he didn`t know
law makers get a break cause they`re friends of Angelo
Mozillo that is , CountryWide , Bad loans
Well the first thing ya know Angelo is in some trouble
he say`s HEY DODD NOW THEY SAY I CAUSED A BUBBLE!
Dodd say`s fine I`ll just sponsor us a bill
tell em that they need it and I`ll sell it on the Hill
Well the moral of the story that you all should know
better vote em out if they`re friends of Angelo
or one day soon we`ll be shootin at our food
Bernankes got us lookin at two hundred dollar crude
Oil that is , black gold , OPEC tea
And now it`s time to say goodbye to you and all your kin
and Dodd would like to thank you all for kindly chippin in
you`re all invited back again to this localitee
to pay another trillion for their bogus LTV
Loan to value
Kick your shoes off
Ya`ll come back now you here
That was excellent!! Well done.
rob
Eagerly awaiting the press conference where they celebrate this turd. If you put lipstick on a turd, is it still a turd? Dems are going to get flushed for this thing.
cool- may put alladinsane out of biz
saturday rocks on Sunday!
good job, jeff.
Milburn Drysdale: [dictating a letter to Miss Jane] … and furthermore, if you are late on your mortgage payment one more time you will be thrown out into the street…
Jane Hathaway: Chief, she’s eighty-five years old and in a wheelchair!
Milburn Drysdale: Oh, I’m sorry, I didn’t know… change that to read, you will be wheeled out into the street.
A bit of history leading up to the death of Wall Street:
http://www.nytimes.com/2008/09/28/opinion/28chernow.html?_r=1&ref=opinion&oref=slogin
And now the Great Depression
Barry Eichengreen
28 September 2008
“…First, the Fed now, like the Fed in the 1930s, is very much groping in the dark. Every financial crisis is different, and this one is no exception. It is hard to avoid concluding that the Fed erred disastrously when deciding that Lehman Bros. could safely be allowed to fail. It did not adequately understand the repercussions for other institutions of allowing a primary dealer to go under. It failed to fully appreciate the implications for AIG’s credit default swaps. It failed to understand that its own actions were bringing us to the brink of financial Armageddon. …
Absorbing the shock is more difficult this time because it is internal to the financial system. Central to the problem are excessive leverage, opacity, and risk taking in the financial sector itself. There has been a housing-market collapse, but in contrast to the 1930s there has been no general collapse of prices and economic activity. Corporate defaults have remained relatively low, which has been a much-needed source of comfort to the financial system. But this also makes resolving the problem more difficult. Since there has been no collapse of prices and economic activity, we are not now going to be able to grow or inflate our way out of the crisis, as we did after 1933. …”
http://www.voxeu.org/index.php?q=node/1718
“…the Fed now, like the Fed in the 1930s, is very much groping in the dark…”
Did they have bazookas back in the 1930s? Shooting off a bazooka in the dark and hitting one’s foot can be quite painful.
Bazookas are WW2 vintage, the 30’s were all about Thompsons, Hunter S.
“America… just a nation of two hundred million used car salesmen with all the money we need to buy guns and no qualms about killing anybody else in the world who tries to make us uncomfortable.”
“Since there has been no collapse of prices and economic activity, we are not now going to be able to grow or inflate our way out of the crisis, as we did after 1933.”
Suggestion to Fed economists: Try including asset prices in your monetary policy models.
A neutron bomb just went off, the economy is still standing, but….
…but the U.S. Septic Bank remains.
now everything is a “CRISIS”
requiring lots of big gov
“Here one of the world’s leading economic historians identifies the relevant Great-Depression lessons. We won’t see 25% unemployment as in the 1930s, but double digits are not out of the question.”
Notes on a Scare Card:
Generally women didn’t work much in the 1920’s-30’s, and men were the breadwinners for a family in most households.
Compare and contrast to today’s situation where most families can only make it on 2 incomes…
tick tick tick tick tick tick tick tick tick tick
Eliminate affirmative action, NOW. So us white guys have a snowball’s chance of finding / keeping a job…
In the 1930’s a woman doing a man’s job (anything other than traditional women’s work) was considered somewhat of a traitor to her kind, with so many men out of work.
A completely different set of morals, almost incomparable to today…
This is eerie; I thought Strom Thurmond passed away in 2003?
Eliminate affirmative action, NOW. So us white guys have a snowball’s chance of finding / keeping a job…
——————————————————————
white guys don’t worry. white guys are the “tax-paying” sucka base for this country. Oh, BTW, your tax money is well spent so don’t worry suckas.
Most people in the 30’s also grew or hunted their own food locally, and rarely sought medical care except in dire emergencies. Your social security was the number of children you had. If you didn’t work, you starved.
Ummm…
Actually, I would consider that rather a strength. Zero income when the sole breadwinner loses their job means no food and no way to pay the bills for the entire family. 1 breadwinner out of work means a reduction in household income, but there’s money to feed and cloth the family.
It could be a strength, unless you’ve pinned your future payments of either renting or mortgage, food & energy on 2 incomes, which unfortunately is a weakness for all too many families.
“Actually, I would consider that rather a strength.”
no, it’s not at all. If we consider “breadwinner” to mean an adult in the household who earns needed things such as food and shelter payements, then
first, consider: requiring 2 breadwinners effectively doubles your chance of a breadwinner losing their job.
second: in a family with 1 breadwinner, but 2 parents, the second (non-working) parent can step in to supplement or replace the income a fired or ill breadwinner.
Having 2 breadwinners is fine. But needing both incomes for houehold + food expenses is a time bomb.
Single parents fall into the first category, unfortunately. The trick is having someone in reserve. If you think of it this way, even less people can afford the house they’re living in…
Two incomes seems like a strength to me as well. It is better to lose 1/2 of the family’s income rather than all of it.
For a family living at the margin of their income—-e.g. committed to spending all of it based on past decisions like buying too much house—-I think the comparison is relatively close.
Obviously the households best able to adapt will be those who earned two incomes but always tried to ensure that they could get by on one if necessary, by avoiding being “overcommitted”. Overpaying on housing is the easiest way to have blown this.
“Two incomes seems like a strength to me as well. It is better to lose 1/2 of the family’s income rather than all of it.”
Unless 1/2 the family’s income is required to make ends meet.
If you need both incomes it is a weakness. If the second income goes to things you want (as opposed to needing) and/or savings it is a strength.
Look, if food and rent costs $200, and you have 2 parents each earning $100, then if either loses their income you are toast. Two people working = double the chance of a job loss or illness disrupting one wage.
If you have 1 parent earning $200 and the second parent either a) makes nothing b) makes an extra $200 that goes into savings or luxuries than that same one income loss is replaceable by the second. If dad gets sick, mom goes into the workforce (or vice versa). If mom already works, than money that goes towards luxuries or savings is used for rent and food. It’s a safety net.
Many families require both incomes to cover the mortgage. People bid based on both incomes and it is art of the reason they were bid so high. If one income is lost, the house goes out the window.Do you see?
You nailed it, ella!
You have to think of a “non-working” spouse as unused, income-earning capacity.
If the SHTF, that spouse can add to or supplement the existing income.
Why was it called the Great Depression
Should it not be called the Bad Depression
How was your day Jeff ?
I had a great day , thanks for asking.
And how is your Depression
Well that`s great too.
How is your Depression ?
Not so good , in fact I`m having a Bad Depression.
Pfizer & Eli Lilly are doing very well in this market, as sales for anti-depressants are way up this year (for real).
RE: anti-depressants
I have heard that there appears to have been an uptick in the prescribing of such in southern Marin.
And as well, all the “life coaches”, massage therapists and yoga instructors are beginning to take an income hit.
Get outside and enjoy the outdoors!
yes, and then the life coaches, massage therapists and yoga instructors need anti-depressants. It’s a vicious cycle
Eichengreen says we won’t have 25% unemployment b/c the dollar will be so low that US exports to the BRICs will boom. I guess that’s reassuring?
Questions of interest moving forward, and personal hunches about possible answers:
1) How will the bad mortgage debt be purchased in order to make sure the price is right?
Hunch No. 1: The purchase will be made subject to the pretense that the loanowner is not in trouble and will be able to continue making payments until the balance of payments are due, even after a crushing reset, thereby rewarding the current owner of the toxic loans the value of a free insurance policy against the guaranteed-to-fail feature built into option ARM contracts.
Note that market value of these mortgages reflects the probability of default. If the market currently assesses a probability of default under the existing contract near 100%, then this approach would produce a massive windfall for current owners of the bad debt, which I am guessing is part of the plan.
2) What will be done to help protect homeowners who became victims of the bad loans?
Hunch No. 2: Once Treasury owned the mortgages, it would be in a position to modify contracts to levels that enabled homeowners to stay in their homes. While unfair to anyone who avoided buying a home they could not afford, not to mention anyone who already lost their home to foreclosure because the rescue was too late for them, this approach will be touted as a means of preventing a much larger crisis due to the ongoing feedback loop between falling home prices and increased incentives for underwater homeowners to stop paying their mortgages.
3) What will be done to prevent moral hazard going forward?
Mr Market already took care of it — take a look around Wall Street for the evidence.
4) Will it all work?
You can be the judge and jury on that one…
“4) Will it all work?”
If you mean will we muddle through? Will we survive? If that’s what you mean then my answer is “Yes”.
In fact a lot of us ordinary folks will do quite well.
Actually, I should have said “Will it work as advertised.” I also am confident we will collectively muddle through.
5) There will be a dramatic increase in Federal Government employment.
I believe we will muddle through ,but I think that there is not enough talk about how this is borrowed money for the bail-out and borrowed money is much more expensive than money you really got to
pay off a loss . Wall Street turned the taxpayers into a sub-prime borrowers who has to pay a big price . Just figure out how costly 2 trillion in grants to wall street costs if you add the interest cost on this borrowed money. This is why it is a much bigger bail-out than they would like the public to believe .
Prof;
“Questions of interest moving forward, and personal hunches about possible answers”
Always have appreciated your thoughts on what is going on, thank you.
Following up on something hinted at the other day, when do you see interest rates going double digits?
Deflation still a possibility?
My personal take on the Fed’s conundrum:
- They would like to keep interest rates low, in order to avoid crushing a debt-ridden economy with higher rates, which could result in massive losses to asset owners (esp. very wealthy constituents) and assets sold at fire sale prices. Thus they will do whatever they can to keep interest rates low.
- Interest rates are the price of money, and as any decent undergraduate microeconomics text will show, suppressing the price of a good (money) below the market clearing level will quickly result in a shortage (e.g. liquidity vacuum).
- The money & bond markets have smelled a big whiff of inflation, not to mention default risk (akin to a deer in the forest smelling a raging wild fire from miles away) and are trying to price in premiums for inflation and default risk. The implication is that the supply of loanable funds has shrunk the equilibrium price (interest rate) has accordingly increased, and money markets will not right themselves until interest rates go up to reflect the new economic reality.
- Throwing $700 bn (or any amount of money, for that matter) at a money market in disequilibrium is akin to opening an oxygen cannister in outer space. Soon the cannister will also contain a vacuum.
All of this is just my own humble opinion; my crystal ball is broken at this point.
Improvement on “Eats, shoots and leaves” grammar:
The implication is that the supply of loanable funds has shrunk and the equilibrium price (interest rate) has accordingly increased,…
P.S. I believe the passage I penned above is a fair characterization of the macroeconomic budget constraint.
Thank you.
Hunch No. 2: Once Treasury owned the mortgages, it would be in a position to modify contracts to levels that enabled homeowners to stay in their homes. While unfair to anyone who avoided buying a home they could not afford, not to mention anyone who already lost their home to foreclosure because the rescue was too late for them, this approach will be touted as a means of preventing a much larger crisis due to the ongoing feedback loop between falling home prices and increased incentives for underwater homeowners to stop paying their mortgages.
Any efforts to help deadbeat homedebtors will backfire! Why? Suppose you paid too much for you home, but didn’t get an adjustable mortgage, and are current in your payments. Then your neighbor, Danny Deadbeat, who used to brag to you about the killing he was making in real estate, and has a HELOC’d hummer in your driveway, gets a cramdown and a mortgage reduction thanks to Chris Dodd…
You will do the math and walk away from your home. No matter how much money you put in/down, if you can buy the same house down the block for half the price, it’s not worth it to stay. The anger of watching Danny Deadbeat being treated by a poor victim will make the decision easy.
This scene will repeat itself millions of times across America.
You provide a good illustration of how Democrat attachments to the bailout bill could prove extremely expensive.
Rather than walking away, I think the incentive will be for current homedebtors to stop making payments, so that they become “distressed” loans as well, and can negotiate a cramdown of their own.
Why go through the disruption and expense of moving when you can re-purchase your OWN home at a half-off sale??
I asked this of Alad in a thread from Friday, and it was left behind. I’d like to here from Alad and any other posters who’ve plumbed the depths of doomerism.
_____________________________
Original post:
My real question is this (because you’re a smart guy): are you really going to give a crap about your wealth in a Mad Max scenario? Seriously.
I’m not making fun of you either. I lived in NYC pre/post 9/11 and decided that I could no longer stand packing a bugout bag every day and wearing sneakers because I might need to run… I finally said, “f%ck it” and left. If your daily routine involves preparation for collapse/death, you need to:
1. See a shrink
2. Quit/start drinking
3. Move
4. All the above
Maybe you are truly insane, and that’s cool, but I can’t imagine your friends and family letting you go that far down the hole. At some point you have to fight for something.
Suggestion: Join the Mormon church, get your 1-year food storage, disaster plans and international escape network in place, and sleep well at night.
“get your 1-year food storage”
And at the end of one year?
Start praying fervently…
Get your hunting rifle, fishing pole and baseball shoes (the real ones - with spikes) and shoot/catch/pick your food. There’s plenty of deer and apples in them thar fields. Grab a plastic bucket to catch drinking water.
You also can eat rodents and insects. And raid local zoos. And morgues.
And, one can eat a pine tree. “Didya ever eat a pine tree? Many parts are edible”…Euwell Gibbons. May he RIP.
See? The world ain’t comin’ to an end. Though it may change a tad.
Pine trees aren’t so edible. I remember my stomach ache vividly. Don’t let the name “sugar pine” fool you, nor the testimony of John Muir.
They contain a lot of nasty chemicals just to avoid being eaten.
Much truth to what you say Eudemon….I grew up next door to my Portugese grandparents…Even though we were in the city they grew & raised at least 90% of what they consumed in the back yard of a 7500 square foot lot…When I see how much fruit that goes to waste in my own backyard I think about my grandparents and how zero was wasted…Jarred everthing…I ate fruit all winter…
Have you ever tasted a pussywillow?
“international escape network in place”
Unfortunately, wherever you go, there you are.
How can you be in two places at once when you’re not anywhere at all?
” are you really going to give a crap about your wealth in a Mad Max scenario? ”
While I in no way think we will hit even close to that scenario, I do think there will be food shortages, waiting in line for staples, necessities etc. I still am not getting why people having 6 months of food, supplies, extra gas ,a small stash of PM’s etc. is radical ,or insane?
Having gone through more than a few hurricanes I can tell you the local Walmart ran out of even toilet paper 2 days before the storm hit.
If you don’t have at least 90 days of supplies stashed, to me: Is the definition of insane. Example is the SE gas shortages. They knew they were running out ,and yet all those fools didn’t buy a couple of 5 gal. cans and at least have enough to get home.
“”I still am not getting why people having 6 months of food, supplies, extra gas ,a small stash of PM’s etc. is radical ,or insane?”"
Most people would call that prudent but some people believe that we humans are so advanced and “progressive” that we have completely eliminated the bad times that have befallen us throughout human history. You place your bets…
RE: Having gone through more than a few hurricanes I can tell you the local Walmart ran out of even toilet paper 2 days before the storm hit.
If you don’t have at least 90 days of supplies stashed, to me: Is the definition of insane.
WOW~
You make a very good point concerning J6P’s ability to cope in an emergency be it from natural disaster or the coming major socio-economic dislocation.
It’s like are all these idiots who live in hurricane alley completely fookin’ brain-dead?
Where the hell are these people’s “bug-out” trunk
to be thrown into the back of a car or truck when the sirens sound?
Way to much work. Might take away from catching the current episode of Dancing with the Stars
I especially like the the ones who decide to ride the storm out, after specific evacuation orders, and then scream for HELP when they are on the verge of drowning on their rooftops.
And then if they get lucky and are able to survive the initial hit, they emerge from their abodes competely amazed that the utility infrastructure around them has completely disintegrated and where the hell is the government to get them water and food.
Did people learn absolutely nothing from the experience of Katrina?
Everyone living in an area prone to weather shock should have a copy of US Armed Services Survival Manual which contains an apprendix noting 35 key items (excluding first aid kit necessities) which a person would need to survive for an extended period of time.
Of course to apply the principles contained in this manual involves somer personal initiative like reading; (58% of the US populace haven’t read a complete book since HS)
and the expenditure of a monetary sum to purchase of said survival items. However, since this might mean giving up the daily ration of cigarettes and lotto tickets or putting gaz in the cabin cruiser for the weekend, everybody blows it all off with the attitude-shit always happens to the other guy.
I confess to have very little empathy with those who haven’t the brains or personal initiative to personally protect themselves in a disaster, especially after the enormous amount of media attention following Ivan and Katrina.
I always wonder why people choose the gloomy scenario. There tends to be some tin foily hats rampant around here. Someone who believes in the meltdown, please describe to me how it’s going to happen. Please tell me why I need PM’s to make through. I am worried about the economy, but I’m not worried about the U.S. turning into a Mad Max movie. If it ever does, 95% of the population would be gone.
“I’m not worried about the U.S. turning into a Mad Max movie.”
I used to worry about such contingencies, until I learned to love the debt bomb.
I have family who waited in line for an hour yesterday in South Carolina, waiting to fill a gas tank. They are on a brief visit, and described the scenario as eerie, especially given the hurricane which caused the shortages hit two weeks ago and five states over.
Our infrastructural systems have few alternate pathways.
I probably have one of the more gloomy outlooks on this mess simply because I understand what hyperinflation really means. I have studied the 1989 Russian collapse and seen research regarding the “collapse gap”. Essentially, the larger you are the harder you fall.
Hyperinflation will come one day and, unless they pull a 1970’s style miracle, that day is probably near. Mathematically you can not get a nation out of a debt hole by taking on more debt.
When you realize that hyperinflation means an end to electric power for most people along with an end to gas supplies and food then you realize HOW bad it will get.
People are too dependent upon a fragile infrastructure that is dependent upon exponential debt growth and foreign imports. In a best case scenario people would be given time to adapt, learn new skills, live on less. I do not think we will be given that time.
An analogy, comparing the economy to an air plane. We have been flying high so long that people have assumed that we do not need landing gear (sound money, wood heat, canning supplies, off-grid living) and so forgot how to use it and consumed the parts for other uses. This means that our “fall back” position is much farther than simply going back for a safe landing and trying to fly again…. it means we will crash and burn (many deaths in the process) and have to build a new plane.
The roman empire collapsed and the whole society lost many great advances because of a breakdown in the division of labor. 200 years after the roman collapse, Kings had lower quality pottery than the peasants under the roman empire simply because the knowledge was lost.
It happened before, don’t think it won’t happen again.
I visited a friend in Latvia in the mid ’90s.
Many people in the city had little summer houses, well shacks really. No running water, out houses, and some sort of masonry wood burning stove for a kitchen. These houses were not the least bit secure. Any healthy man could easily break in. This and the fact they were occasionally used meant nothing of value was ever kept there.
As you may recall, Latvia was once part of the USSR.
In spite of this, it seemed that every place I visited, there were a pile of coins on a shelf someplace. When I asked about the coins, everyone would laugh at me. The coins were old USSR Rubles. In a place that was desperately poor, no one would steal these.
Great book
‘Join the Mormon church…’
But what if you don’t like wearing magic long-johns? What if the whole, for want of a better phrase, ‘errant and absolutely astounding kookiness’ of the thing is bothersome? Verily, what if rigid and repressive paternalistic hierarchical authoritarianism is annoying unto you? What if you experience a ‘burning in the bosom’ when you read the Book of Mormon and it isn’t the spiritual fire of the Holy Ghost telling you it’s true, but is only an attack of heartburn from all the tacos you ate last night? Heartburn AND a case of wild giggles when you read how the Lamanites stopped being dark-skinned and became ‘fair and delightsome’, once they stopped being naughty and listened to Moroni. (And that’s just the start of the endless comicalness).
Now, I can’t remember when the Caucasianizing beauty treatment of the reformed brown-skins happened, but it would be some time after the New World saw the introduction of horses, sheep, grapes, wheat, forged metal, Moroni pennies, etc etc. Maybe Jeebus made all those relics and animals and plants magically vanish without a trace from any genetic, cultural, or historical legacy to be found in South America by historians, anthropologists, biologists, etc.
Hmmm. It’s a poser. Maybe He was testing the faithful, see.
In any case, there just MIGHT possibly be other alternatives to becoming a Mormon. No, really, it’s true. For instance, a years supply of food can be obtained from Safeway’s without you having to be a Mormon. They don’t frisk you to check for your Temple recommend, not in these depraved and wicked modern times. They’ll just take your money and let you have the food and there you go, back to your house and your fair and delightsome ways.
Or, I guess if you happen to be a person of color, back to your house and your full-body skin-display of obvious moral turpitude. You’ll still have your cases of food, right?
Whatever, look, my point is, we can all of us buy all the food we want, and maybe we should, as long as those little green pieces of paper in our wallets still have some pretence of value. And we should buy a Book of Mormon for our Armageddon stockpile, too, because verily, if laughter is the best medicine then that invaluable book will keep the chuckles coming for a lonnnng time past when the aspirin and bandaids run out.
Where are you going to keep 1 years supply of food? Who is going to protect that food? The police, fire rescue or FEMA? Don’t police have families of there own to protect when this supposed chit hits the fan? A full meltdown will be everyone for themselves, there will be no law. Just don’t bring a knife to a gun fight.
This is why I don’t see this massive meltdown I guess. Tough times and bread lines……sure. Complete and utter chaos……nope.
As a physics professor pointed out in my lecture many years back, “There is no such thing as a free lunch.” Do you believe (like the govt apparently does) that there is such a thing as free insurance? I concur that one can take care of the food storage problem w/o a Temple Recommend, but how about the global social network?
Maybe my post wasn’t clear. I have preps for regular to not-so-regular contigencies, including: weapons, ammunition, water, food, specialized tools (siphon, battery powered tire inflater and whatnot)… I lived through the ice storm in Rochester in the early 90’s. We had nothing for two weeks and it was the dead of winter. It wasn’t a big deal.
I see events like Katrina as normal. I’m asking the doomers, that are making financial preps for a complete collapse, what’s the point? If Alad became king of America because he had all the gold in the world, what then? Why even prepare for the contingency?
Riht on, Muggy. But, that being said, if you dont know how to prepare, or, live in cramped quarters, or live where you dont want to be when the SHTF, a small sack of PM’s will get you what you need…like the old song.
All I want is a pair of those fabulous underwear.
Try EBay…
I can’t speak for Alad, but Most outcomes happen somewhere in the middle lane. Complete Madmax?, or happy gentle dollar landing? ..I doubt it. But to not realize a financial storm is brewing. 10 trillion Natl. debt, another couple more on the burner, SS,and entitlements going bye bye. I truly hope the powers that be can turn a hat trick, but likely our dollar,and easy access to cheap money/food/gas is entering a new dawn. Plan accordingly..IN ADVANCE of that possibility. Katrinas’ in the gulf: are you firing up the margarita blender or buying your Beans, and TP?
Forget that plan — too expensive.
LDS garments sold on eBay
Religious clothing brings seller more than $1,000
Deseret Morning News/February 17, 2004
By Leigh Dethman
No need to join the church, just do what Oly says go shopping for 1 yr supply food/water ++, get a generator, stock up on candles, get lots of books and games, and well, save for a rainy day.
Another issue I’d like to discuss is, “What’s your goal?” The reason why I’d like to hear from everyone is because there seems to be two types of bloggers now
1. Professional investors
2. J6Ps looking for a reasonably priced house
I admire those of you who play the markets, but I would consider myself mostly a J6P that just wanted to understand why homes were so expensive and learn about the homebuying process. When Ben blasts the “poor taxpayer” posters I get it, but I also don’t really care about wht the markets are doing overall. What pisses me off is that Main St. and Wall St. are entangled now. I realize I can’t escape this, but I just want to live my damn life, pay my bills, raise a family, coach little league… you know, the whole white picket fence thing.
That being said, if I have a shot at raking in a few bucks while this thing tanks, I’ll take it, but at the end of the day I’d rather not think about some currency trader in Japan when I’m shopping for a damn house.
‘there seems to be two types of bloggers now’
I don’t know about that. It was funny when on Friday someone posted, ’sorry off-topic’ and some info about a builders earnings, and then said, ‘back to your regularly scheduled program.’
I see people post here a couple of dozen times a day and never even mention housing. It’s like this is iwantmymommy.org.
Complaining about the government is a freaking joke. Where was the outrage when these idiots ran up $50 trillion on your tab? Moaning about some tax amount now is like complaining about the desk design of your bankruptcy court judge. Meanwhile, prices are down 40% in California! There isn’t opportunity there? I spend every spare moment I have researching local markets and REOs. Pretty soon, I expect to be the most knowledgeable REO expert in N AZ.
Ben,
We ought to have a daily pacifier thread, for those that must suck on somebody’s teat, real or imagined.
There was a time three years back or so when trolls used to come on board to ridicule anyone who suggested the housing market was somehow connected to Wall Street. Apparently those trolls were either lying, or missing something important.
“Prices are down 40% in California.” The missive:
The day of apocalyptic reckoning is upon us…. I hope you’ve got strong stomachs to digest the upcoming plague of market misery.
YOY prices were down for existing and new homes this past week….
As a result, grown men will cower and cry, wring their hands, and plea for their mommies.
God help us all. The pain will be unbearable.
“I see people post here a couple of dozen times a day and never even mention housing.”
The credit that made the housing bubble possible was derived in large part from demand asset backed securities and the profits generated therefrom. The tightening of credit will also likely depend on how this industry works out its problems. I view it as the most important variable having an impact on where housing prices will be in 3 years. The timing and duration of the bottom are dependant on macro economics where housing may not be specifically mentioned. Understanding how this will play out is the key to profit from the situation. That said I will honor your wishes not to discuss larger issues related to housing if that is your desire, or post where you direct.
I think your post is right on track with issues that should be talked about.
“The tightening of credit will also likely depend on how this industry works out its problems. I view it as the most important variable having an impact on where housing prices will be in 3 years.”
Tim —
If you are taking Ben’s comment personally, I believe you are making a mistake. Your inside look at the world of securitization has been very insightful.
Thanks. I wasnt taking it personally as in upset, but sometimes wonder if it is viewed as off topic. I try to keep them to the bits bucket, but have slipped sometimes.
We have all slipped..No big deal..Keep bringing the info…
but sometimes wonder if it is viewed as off topic…
——————
Not sure how others might view it, but it is certainly the MOST ON-TOPIC information on the blog.
I agree with you, and have always contended that we have witnessed the greatest **credit** bubble, and that housing prices (rising or falling) are just a symptom of what’s going on in the credit markets.
Thank you for your insights, Tim!!!
‘Pretty soon, I expect to be the most knowledgeable REO expert in N AZ.’
I expect you already might be, Ben, and are just being modest.
Anyway, to my other thought. So, Muggy observes 2 kinds of bloggers here:
1. Professional investors
2. J6Ps looking for a reasonably priced house
I’m not either one. I’m not a pro investor and I already have a reasonably priced house. Were I to be asked: ‘What’s your goal?’
What’s my GOAL?!! My fooking GOAL was to do what I could to prevent in any small, pitiful way some little part of the destruction of the natural world, the rapacious pillaging of our beautiful home, just hang on and hope it would end, do what I could to save anything, while the forests and trees, oh, countless forests and streams and frogs and other small lives were consumed in the hot fire of greed–that this horror would lessen when the craziness came crashing down, THAT was all I ever wanted.*
And lo. Behold.
And now I believe I shall go sit in a forest and look around and rejoice on this fine and lovely Sunday.
*One more thing. I have a long list of developers and builders I’d like to see skinned and eaten alive by Bigfoot. But I accept that I may have to be patient on that one.
Heard that tying them down naked with strong rope and pouring honey over them also works.
Just a thought.
I also wonder who the REO holder will be once Gov takes on the bad loans.
‘Heard that tying them down naked with strong rope and pouring honey over them also works.’
But Muir, wouldn’t that be wasteful of delicious honey? Although I suppose I could spare a third of a cup, for such a good cause, and just smear it around smoothly like with a frosting spatula.
Another problem is: I don’t want to see any loathsome developer panty-bits. I hate them all enough when they have their clothes ON. How about we sew up some loincloths with little logos reading ‘I R Evil and I Deserve This’ and then someone else who isn’t me attaches them onto the struggling developer, while I daintily avert my girlish eyes and hold the third a cup of honey and the spatula, awaiting my part of the activities? And they’re scratchy loincloths, in really tacky colors.
Okay, then! With the issues being resolved, we all must now conclude that the idea is indeed sound and good. Thanks, Muir!
Ben,
So you are starting with what you know best , N AZ. Makes sense. Can you talk about what’s happening with land vs. houses on the REO front there?
Ben -
Okay, you created a challenge. It looks like I need to one up on the complaint/wasting time department. *grin*
Why are you wasting time *now* looking for foreclosures? There’s been no significant shift in psychology yet. Fire sales happen when people are begging you to offload their land and/or house. Wake me up when people start to look at their houses like they’ve caught the plague.
I agree with you that it’s stupid to moan about this bailout package. I mentioned my own stupidity in stressing over it yesterday. The national debt is enourmous and dwarfs this package. Social Security obligations are also huge compared to this.
Why this weekend is important to me has to do less with the actual dollar amount and more with the idea that an unpopular Congress will be (probably) passing a highly visible and unpopular bill against the direct will of the people. Moments like this cause change.
And there’s no escaping that this moment is a direct result the housing bubble. None.
Ben, I was the one who interrupted the bailout discussion and posted the KB housing numbers.
What has amazed me is that a few months ago those poor financial numbers would have been a pox on the market, but now it doesn’t matter how many poor financial numbers come along from unemployment to foreclosure numbers, the market makers seem to ignore them because the bailout will supposedly fix everything.
I think there will be ample opportunities to profit from the ongoing downturn, but until the rules are set it’s difficult to know which way to go. How can any kind of market prosper when the rules are changed at the whim of a government employee, such as halting short sales on financial firms. I had a few puts on MS and ZION, which were doing quite well until the government changed the rules with its proposal to bail out the world. Laws and rules are being bastardized daily and that leads to confusion and doubt, which can lead to paralysis.
prosper when the rules are changed ??
Get used to it…It happens all the time…Part of the
risk/rewrad analysis that needs to be made every time…Check out the “Tax Reform Act Of 1986″ and I believe it was retro-active….It crushed thousands of Real Estate Syndications literally overnight…
sorry..Dyslexia kicking in..; rewrad = reward
I agree that complaining about the gubmint is a joke. But most days, I’m just a guy, with a family, who wants to live his life unencumbered by the OG Bankster Mafia.
If I had to guess, Palmetto, Diogenes, Bill in Carolina et. al. are in similar positions, like, “hey, I just want a reasonably priced home!” Contrast that with Hoz, Alad, Voz, and some of the issues discussed on Patrick. It’s amusing to read people debating about “fooled by randomness” to the point that they are fooling themselves by randomness.
I like your bootstraps attitude Ben, and I enjoy reading the financial heavy-hitters’ posts. But seriously, here’s the line, the truth is I’m J6P and I missed the boom and bust because I had an ounce of suspicion, not majestic, market-predicting powers.
I’m not sure I’m saying anything, sorry.
perhaps there is opportunity somewhere… but where? This morning, looking through the real estate section in Sonoma (town of) and if there is a credit crisis, financial meltdown, you can’t tell.
The only difference between the real estate section now and the ones in 2002, 2003, 2004, 2005, 2006 is that now there are many more East Side properties. Everyone thinks their house is either a million + property or worth no less than half a million.
The only places going for prices that track with the median income are in the area where they relegate the immigrants.
Additionally, the newspaper tries to get creative by hiding a few trustee sale notices on various pages… and when the defaulter is of ethnic persuasion you can see the name and property address prominently. When the name is maybe someone WASPy sounding… it is hidden and if the property is on the “deserving” side of town the loan defaulter’s name might be absent entirely.
So, prices down 40% in California? Who cares? Prices tripled in most areas of California in the last 8 years. When prices are down to the mean from where they took their departure from reality and economic fundamentals, then talk to me about opportunity.
Meanwhile, prices are down 40% in California! There isn’t opportunity there?
—————————————————–
40% off when houses increased in price by 500%. No opportunity here yet. Let’s wait a few more years and maybe then we will start to see real opportunities.
that’s right! 40% is NOTHING compared to the rise of 300-500% for some stucco $hitbox or converted chicken coop.
Like I said earlier, I combed the RE section of the weekend paper and nobody has gotten the memo that Sonoma is not the center of the universe full of pixie dust. They still think IT is different here. There is a lot of money here that isn’t impacted by the current economy… they have so much they don’t need to worry about a thing.
There is no opportunity to buy here until the median home not in the hood is much more in line with incomes, or basically reverting to 1999/2000 prices. Then we will have something worth talking about.
This catastrophe is unfolding so slowly that it provides everyone the opportunity to adjust. Big Brother is becoming a bigger and bigger player in the markets. If the trend continues, you need to plan accordingly.
As Big Brother spends more and acquires more equity in financial firms, there will be less capital for free enterprise — less free market equity means less dividends which means less investor appetite. As Big Brother increases regulations on financial firms, capital will be more restrained and so will growth. Every action has an equal and sometimes unintended reaction.
I am part of a small cabal of professionals who don’t play the stock market. I study it, pretend I am invested in it, and look at how it affects the world around me…but I never decided to trust it.
I’ve instead invested my money in my education, in my business, and in taking care of my health. All other investments are secondary, as I fully intend to work until the day I die.
I trust a house though, but I consider houses to be places to live, and not an ATM. I just bought one, but only because it costs me the same as rent, and I don’t care what its value drops down to over the next few years.
its value drops down to over the next few years ??
Exactly…It only matters when you sell…I over paid for my house when I purchased it by at least 20%…Worse yet, I knew it !!! I wanted it, could afford it, so I bought it….I will likely never leave…
Mug,
I’m sort of in the same situation, and my objectives are similarly low key. Thankfully, now that I am out of New England, I have a good job. It is demanding. Walking my dog ( - a magnificent animal, and more so with extended walking) and reading to re-center are non-optional activities. I have neither the time nor the desire to hover over arbitrage opportunities, although I take nothing away from those who do. Have the time and desire, that is.
Doesn’t mean I’m lazy. I have put two children through college, and am prepared to do the same for the third. Neither of them has a dime of student debt, or had to compromise on taking the tough courses by working during the school year.
Doesn’t mean I’m profligate. Have been saving 15% of my income forever, allocated to funds I find congenial. That’s my retirement.
I feel in no hurry to buy my ultimate safe house. Once I can buy it free and clear, I will have 100 acres with woods, water and bottom land. Won’t happen tomorrow. May not happen. The community has to be right, and that is assessed one person at a time. The hourglass is running. But it makes me happy to think about it.
I strive to comport myself gracefully in my daily interactions, such as they are. Naturally, I do not breathe the same air as the masters of the universe. I am very happy doing rigorous work to a world class standard, and flying under the radar.
One could say I live a Jane 6P kind of life. One could cast me as a sheeple, without even the redeeming quality of consumption. It is possible that I will be in reduced circumstances, but I will be in company. I do not know of a realistic scenario that would support a zero sum game on a scale this massive.
P.S. - Mugs, I went to grad school in Rochester, and lived through Rochester winters. I can envision setting up my good tent in my living room, and forcing my dog to live in there with me, to generate and conserve heat. I can envision using my LED lanterns for light. I can envision instant coffee made with Esbit tabs , and dehydrated food meals. But in those temps, one’s stored water would freeze in the apartment. Hence, hard to get water for instant coffee, reconsituted camp food, and toilet flushing. How did you get around that? Thanks.
The plumbing still functioned normally. We left the kitchen sink on to keep the water flowing to prevent freezing. The only adjustment there was to place a rag underneath the faucet to prevent drip sounds driving us bonkers.
For heat, we had a wood burning stove and burned wood!
We lost no meat as it was simply placed on our back porch and stayed frozen. None of us could leave since the streets were filled with downed power lines and ice-encrusted branches and sometimes trunks.
Me family sat around the fireplace at night and talked. We went to bed around 7 or 8… who knew what time it was anyway…
This went on for two straight weeks. Nobody died, there was no gunfire, nobody offered us gold for our grilled burgers, there was no hoarding. We slept in sleeping bags and dressed on layers.
Neighbors even shared generators to run sump pumps to prevent basement flooding. The horror!! I thought for sure everyone was going to knock out my gold teeth so the could make 24″ rims for their cars.
Negotiators need to settle final details of rescue
By CHARLES BABINGTON – 38 minutes ago
WASHINGTON (AP) — After a breakthrough on a $700 billion Wall Street bailout, lawmakers and Bush administration now must settle the final details on a rescue intended to keep credit flowing and avert a crippling recession.
…
Despite the changes made during an intense week of negotiations, the heart of the program remains President Bush’s original idea: spend billions of taxpayer dollars to buy mortgage-backed securities whose value has plummeted.
Serious question.
What would happen if no bail out was done?
I am not the smartest guy in this room.
Would the money be better spent on a massive update of roads/bridges and solar panels/wind turbines?
If no bailout were done would a Depression be a result?
“If no bailout were done would a Depression be a result?”
The nationally-televised message from the CIC and top Working Group deputies this week suggested that the choice was between a bailout by this weekend or a financial disaster. Those of us who have been paying close attention saw the looming financial disaster years ago (you can actually go back to my posts of late 2006 for specific examples). Speaking for myself, I believe hard times for these times are in store no matter what happens now, but suggesting that the (current) bailout proposal is a panacea to avoid disaster, and that it has to be passed immediately or else, is a good way to panic economically ignorant Congress folk into quick action.
w’ll see about disaster I guess - just heard that the bailout decision is postponed until wednesday?
Good! I was hoping there might be a natural experiment available to test whether the claim that the deal had to get done by this weekend or else was truth or fiction.
BTW, can you furnish a link? Because so far, all the major news media outlets on the internet say the deal is done already.
Financial Times
Long and exhausting road to compromise
By James Politi and Daniel Dombey in Washington
Published: September 28 2008 19:34 | Last updated: September 28 2008 19:34
It was 12.30am on Sunday after a whirlwind of tense negotiations and Barney Frank, chairman of the House financial services committee, was still able to make the corridors of Capitol Hill ring with laughter.
“The good news is that it is entirely likely that within a few days I won’t have to speak to any of the people who are here,” he told reporters, flanked by Hank Paulson, Treasury secretary, and congressional leaders.
PB: my TV news mentioned sunday evening that the voting will be on Wednesday. Don’t know if this is correct and could be that it is already a done deal.
However, judging from todays markets it is not done yet
“you can actually go back to my posts of late 2006 for specific examples”
I know. Under a previous name I’ve been around since just before this Blog.
I know they do not have neither $1 or B$700, still, I think it is a serious question. Wouldn’t the effort be better served on roads, bridges solar panels and wind farms? And, if it is going to be misspent, does it avert anything?
Still, I do understand your answer.
I was not able to answer you questions on REDisC auction… server refuses to let it go through. I’ll try tomorrow, it was entertaining.
“Would the money be better spent on a massive update of roads/bridges and solar panels/wind turbines?”
Which money do you have in mind? Do you think there is $700 bn or $1 t sitting in a big vault somewhere, just waiting around for Congress folk to decide how to spend it?
1933: Our government is the world’s largest creditor, and oil producer.
2008: Our government is world’s largest debtor, and oil debt producer.
==============================================
Diamond-Jubilee Cocktail:
4 shots of whatever you have left in your liquor cabinet, garnished with a dash of entitlement.
Serve shaken, not stirred.
LOL!
Maybe we need a ’sarcasm’ tag?
Just posted my own 2 sheet rear window message since that is where congress is going to give it to me anyway
“Congress’s Wall Street bailout screws taxpayers,
will you get your kiss?”
Local observation from Atlantic City, NJ: The local paper has two pathetic RE-related stories.
The first is about “cutting edge” realtor who takes prospective buyers on bicycle tours of houses on market. Guy boasts that 20% of his sales are generated with this gimmick– no total numbers, of course. There’s also an accompanying picture of the guy and a client on bikes. He looks like Jabba the Hut in a bike helmet; Babyboomer client looks like a smaller slug with a little hair. By the way, cllient’s looking for investment rentals.
Second item is five questions and answers about financial meltdown with the paper’s business editor. “Cut-to-the-chase, bottom line” gist of the column is that ALL of us are responsible, so it’s only fair that All of us pay. I wish this guy would just beat his own breast and keep his fist off mine.
Actually, I’ve always thought that the best way to see a neighborhood is by riding around on a bike. You can hear the noise level, you can see the people. You can get a feel for the crime level.
Rumor floating around that BOA is going to close out and recind all credit cards or those with a credit score below 750 as of 10/1. Anybody else hear this or in the know about such things?
http://www.ireport.com/docs/DOC-97300
Maybe B of A is trying to rid itself of the losses of deadbeat illegals, and deadbeat jingle mailers. No lawsuits if they tie it to FICO’s. Universal Default issues on walk aways, possibly? If it is true.
Will WFB be next?
Very interesting idea, but likely just a rumor.
Boy will this Kill America………..
You have to have a card just to rent movie and if you need to pay a bill last minute a CC works every time…or you have to overnight a money order…or pay $15 to debit your checking account within 4 hours
They have all sorts of fees you dont know about….
And whats worse is major companies like Best Buy Circuit city Comp Usa, I think even Macys…If you wanted to pay a their credit card in person to avoid the fees, or because you just happen to be shopping there….. they CAN”T take your money!
And i personally just wont put a cash deposit in an ATM. I’d rather stand in line and hand it to a teller.
What a way to cause a bank run… cancel my credit card will you - take that withdrawal slip,and that, and cash in the Christmas Club too!
I just wrote Senator Fiengold…Wisconsin.
His vote
and all who vote for this bailout are going to be listed on the net. When this bailout backfires in the next two months…maybe sooner, he wont be able to get elected to a school board, let alone the Senate.
I also wrote Senator Kohl, but I don’t expect an answer from the lazy idiot.
I also wrote to Feingold three times this week. Got a (canned) response to all three emails laying out his concern about the bailout plan.
I also sent the same emails to Kohl and to my congressman, Tom Petri (R). Have heard nothing from either of them, other than a “thank you for your input” auto-generated email from Petri’s office…
I’ve written to my senators, my congressman, Obama and McCain over and over again opposing the bailout in any form. Today I started calling and was shocked when I got a live person at Congressman Duncan Hunter’s office! He sounded tired but was nice as I told him that not only was I completely opposed to the bailout but that I would work tirelessly to get anyone who votes for it unelected in the next cycle. The joy of being an independent is that I can vote anyway I want and work to get rid of or keep anyone who ignores the will of the people.
Protesting the bailout may not do any good, but it certainly won’t do any harm.
Bailout: Rescue promised in pieces
http://tinyurl.com/3l4o2j
The last attempt by Wall street at fleecing of America has begun
Since the financial market is already in pieces, I suppose it is fitting the bailout should come in pieces as well.
When the bailout fails to work, I expect a major backlash from the general public, who have just been alerted on national TV of the urgent need to pass this package immediately or else…
P.G.S. Bear,
People are stupid. They will forget as soon as American Idol or Bandstand or House is on. Or in my case the beloved Green BAy Packers. (At least I know my own Bias)
Simple additions to the Rescue bill that Congress opted to omit.
No Hedge funds investments can be bought
no ridiculous bank investments can be bought
Require all off sheet items be disclosed in entirety.
Mandate leverage no more than 8:1.
Wimpy milk toast congress.
The bail-out failed because of all the attachments to the bill. If Congress had just given Mr. Paulson the $700 billion as he first proposed then the housing market would have been saved and we wouldn’t be in this soup line.
Two pertinent questions:
1) How much house can you buy for $1,344 a month on a 30-yr fixed mortgage at current interest rates (say 6 pct, which is very near the current rate according to Freddie Mac)?
2) What is the vacancy rate if latent vacancies (e.g. new homes never yet sold and foreclosed homes not yet on the market) are included in the calculation?
Assuming no downpayment for illustration purposes, as I am guessing not that many folks who are not already homeowners have $35,000 or so stashed away in their rainy day funds for a 10 pct downpayment.
According to my MS Excel calculation ( =PV(0.06/12,360,-1344) )
the net present value of $1,344 spread over a thirty year loan at 6 pct is $224,168, which is also my rough guesstimate of the budget limit on the fundamental purchase demand which will eventually buoy the San Diego housing market once a bottom is reached, assuming interest rates don’t rise and the economy does not get much worse. Screw the bogus CUHSP affordability estimates.
Would-be investors should keep one thing in mind before doing anything rash: All real estate is local.
Rents climb in vacancy squeeze tied to foreclosures
By Roger Showley
STAFF WRITER
September 28, 2008
Apartment rents in the county increased 2.49 percent in the last six months while vacancies decreased 1.38 percentage points as homeowners lost their properties to foreclosures and renters found themselves unable to buy.
MarketPointe Realty Advisors said in its semiannual survey of 804 large apartment complexes with a total of 115,576 units that the average rent this month stood at $1,344, up from $1,312 in the March survey and $1,291 last September.
MarketPointe President Russ Valone said the rental increase was the largest in recent years and likely to increase further.
“It will move out a little more if we continue to see really tough economic times,” Valone said.
The vacancy rate dropped to 2.25 percent after rising from 2.58 percent a year ago to 3.63 percent last spring.
Valone said the figure does not include individual homes and apartments that were foreclosed and rerented by new owners and investors. But he estimated that the overall rental vacancy rate countywide is somewhere between 2.25 percent and 4.4 percent, the figure published by the state early this year that reflects all rentals, not just large complexes owned by companies, partnerships and institutional investors.
I will try to contribute meaningfully and humbly.
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“Would-be investors should keep one thing in mind before doing anything rash: All real estate is local.”
“How much house can you buy for $1,344 a month on a 30-yr fixed mortgage…?”
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In South Florida a mortgage can easily be less than HOA /taxes for a condo or single family house for a new purchase.
A condo I was interested in for investment purposes has HOA of $603 / month, taxes of $1700 / year, listed at $84,100. Rents go for $1150-$1250. Rents have steadily gone down during the past year. Anecdotally ,BadAndy said in the vicinity of 20% and I would agree. They are predicted to continue to go down.
Continuing the example above, you find Historically that these condos sold for 65K-90K during the 90s and sold 65K-90K during the 80s!
They sold then for 250K-300K during 2002-2007.
I could buy one tomorrow for 75K + renovation costs of 15K = 90K, and lose money.
So, I’ll make it simple and calculate 90K:
Each month: HOA $603, mortgage $ 449.66, taxes $141 = $1193.
I have seen these condos drop in prices almost weekly. These are nice condo high-rises, gated….
“assuming interest rates don’t rise and the economy does not get much worse.”
I’ve thought a LOT about that.
At some point it DOES make sense to buy, on the example above, I would but at 45K total cost.
That example is in 33401 West Palm. Further South the glitzy Brickell Gables, Grove & Pinecrest say 33131-133-129-145-134-157-156-158, it’s MUCH more difficult. Taxes for single family homes that were bought in 1997 for $175K-$220K went in 2005-2007 for $600K, accordingly if I were to buy, taxes would be $7000-$9000 a year!
$750 a month for taxes. If no HOA then, if I’m lucky, $200 / month for insurance (+ maybe flood insurance) and if no HOA I still have to reserve for upkeep.
Same situation as Palm Beach except worse. More overbuilding, more for rent signs.
Would I buy a condo in those zip codes today? No.
Single family? Maybe, at 1997 prices in good condition. (Not quite there yet.)
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p.s.
Went to the REDC auction yesterday. Boy, could I make people’s blood boil if I recounted what I saw.
“Went to the REDC auction yesterday. Boy, could I make people’s blood boil if I recounted what I saw.”
Please do tell! Inquiring minds want to know…
Is the REDC a (stealth) federal govt agency?
It sounds like the REDC is encouraging infestors to fly in from all parts of the planet to participate in local home sales auctions. Do they mention anywhere in their ads that California home prices have recently been falling at a 40 pct YOY rate, or that foreclosures have recently been piling up faster than lenders can market them?
Try not to catch yerself a falling knife…
140+ properties in San Diego County and more!!
When: Saturday Nov. 1, 2008
Where: San Diego Convention Center - Exhibit Hall E 111 W. Harbor Drive, San Diego, CA 92101.
Time: Registration begins at 8:00 a.m. Auction starts promptly at 9:30 a.m.
OPEN HOUSE DATES: 11AM to 4PM on 10/18/08, 10/25/08 and 10/26/08.
AUCTION REMINDER: $5,000 cashier’s check or cash, a personal checkbook and photo ID is required to Bid for this auction.
Well, if I MUST
And, if not to someone as generous as you, then to whom would I tell?
Let’s see! Carnival anyone? Loud blaring music from dozens of massive speakers, hundreds of people, the auctioneers in tuxes. Their helpers also in tuxes but they carried whistles which they would excitedly use as they jumped up and made furious hand motions. One BIG screen with the property currently under auction. Two other screens with the number IDs of the previous properties that were either sold or “sold subject to seller confirmation.” These were important according to one of the auctioneers as these could come back on the block if no contract was written up (and many did.) More on that in a second.
Before I forget, you needed $5,000 in cash or cashiers check to bid. I learned of the auction just Friday, went to the bank (Regions) and asked for $5,000 cash. It took 3 (THREE tellers’ drawers to round up that much cash!
And, AND, hold on… wait for it… WAIT… they would not have more cash until Tuesday when their delivery arrives!
end of first part (got steamed up and need coffee)
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Well, if I MUST
And, if not to someone as generous as you, then to whom would I tell?
Let’s see! Carnival anyone? Loud blaring music from dozens of massive speakers, hundreds of people, the auctioneers in tuxes. Their helpers also in tuxes but they carried whistles which they would excitedly use as they jumped up and made furious hand motions. One BIG screen with the property currently under auction. Two other screens with the number IDs of the previous properties that were either sold or “sold subject to seller confirmation.” These were important according to one of the auctioneers, as these could come back on the block if no contract was written up (and many did.) More on that in a second.
Before I forget, you needed $5,000 in cash or cashiers check to bid. I learned of the auction just Friday, went to the bank (name not mentioned on purpose) and asked for $5,000 cash. It took 3 (THREE tellers’ drawers to round up that much cash!
And, AND, hold on… wait for it… WAIT… they would not have more cash until Tuesday when their delivery arrives!
end of first part (got steamed up and need coffee)
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Now, if your bid “won,” then, one of a number of girls (they were all constantly clapping) came and escorted you to a waiting area. From what I could see, they verified that you were a registered bidder and that you at least knew what property you had bid on. After they had in that area a number of such people they were then escorted to an area behind a screen were loan officers were waiting. YES! Loan officers. Hence, why properties would be recycled back to the block! Some properties were cash only, derelict, roofing problems with water intrusion and you still had bidding.
Some people did have a lot of cash and came with their own brokers (more on that later)
part 3 if this post shows up.
Last and final attempt to post today, I’ll repost tomorrow.
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Well, if I MUST
And, if not to someone as generous as you, then to whom would I tell?
Let’s see! Carnival anyone? Loud blaring music from dozens of massive speakers, hundreds of people, the auctioneers in tuxes. Their helpers also in tuxes but they carried whistles which they would excitedly use as they jumped up and made furious hand motions. One BIG screen with the property currently under auction. Two other screens with the number IDs of the previous properties that were either sold or “sold subject to seller confirmation.” These were important according to one of the auctioneers, as these could come back on the block if no contract was written up (and many did.) More on that in a second.
Before I forget, you needed $5,000 in cash or cashiers check to bid. I learned of the auction just Friday, went to the bank (name not mentioned on purpose) and asked for $5,000 cash. It took 3 (THREE tellers’ drawers to round up that much cash!
And, AND, hold on… wait for it… WAIT… they would not have more cash until Tuesday when their delivery arrives!
end of first part (got steamed up and need coffee)
-
Now, if your bid “won,” then, one of a number of girls (they were all constantly clapping) came and escorted you to a waiting area. From what I could see, they verified that you were a registered bidder and that you at least knew what property you had bid on. After they had in that area a number of such people they were then escorted to an area behind a screen were loan officers were waiting. YES! Loan officers. Hence, why properties would be recycled back to the block! Some properties were cash only; derelict, roofing problems with water intrusion, and you still had bidding.
Some people did have a lot of cash and came with their own brokers (more on that later)
part 3 if this post shows up.
What kept coming to my mind as I witnessed this was “sheeple” a word I never use. But yet, they did look like sheep. Although all the auctioneers and their helpers were men, these escorts were women, I thought about that even in the midst of all the whistles going off and the constant loud over many speakers “Do I have 90? 90? 90? 85 90!…” Why women as escorts? Less threatening?
This was not a “no reserve” auction; hence the “sold” and “sold subject to confirmation” the auctioneers made a %5 commission over the bid price which becomes the purchase sale price.
This guy with his broker started talking to me. His mistake. I look like I have a lot of money, 3 year old Sperry top-siders, no socks and instead of the mandatory in Palm Beach Bermuda shorts and brand name top, I wore faded jeans and long sleeved dress shirt rolled up with my prescription sunglasses. He told me of the 400K condo he bought a little while back at a steal from the high 600s and paid cash for and how the rental on that property is down to $2000 from $2800 (ouch, figure at least $600 HOA and $400-600 towards taxes. Guy is sure that Real Estate will rebound in 2-3 years and will be double what he paid for it. He left worried after speaking with me, sort of glassy look in his eyes.
I was going to bid 15K for a condo, after an hour of looking I decided it was not worth my time and left my bid for 15K written in the back of my bidder card as a back-up bid for the property with my number.
I do not expect a call.
My take on the event.
Crisis? What crisis? As the auctioneer said at the beginning of the auction just before the first property came on the block, with the bail-out imminent, and low interest rates… “now is the time to buy!”
Thanks for that post. Last month I was considering going to a REDC auction in Chicago, strictly for education and entertainment, since none of the properties for auction were of any interest. After reading your post, I’m glad I didn’t go.
I attended pre-auction inspections for REDC in the Tampa… a complete freakin’ joke, unless you’re looking to pay 20% off peak for pieces of shit in the ghetto.
Nothing good… yet…
I have a question for the blog: does anyone find it just the tiniest bit odd that all these financial firms are going down and yet, we haven’t heard of more homebuilder BKs? Lennar, Toll, KB, Centex et al are still standing. WTF? I mean, if the lenders are going down, shouldn’t they? I don’t get it. I know WCI and a couple of others bit the biscuit, but shouldn’t there be more?
Homebuilder BKs are a minor story compared to this year’s Nightmare on Wall Street.
Rubber Biscuit?
Have you ever heard of a wish sandwich? a wish sandwich is the kind of a sandwich where you have two slices of bread and you hee hee hee wish you had some meat…
http://www.youtube.com/watch?v=jYyBZE0kBtE
Your question gets to a crucial point about where we are headed. These big builders are still standing because they function on cash flow. The losses they have reported are due to land writedowns, which don’t effect current period cash. Lennar just reported a $49 million loss, but they had a gross margin of 18%! Most of the others are showing similar results. WCI went down because of a concentration in an especially weak area; Florida condos.
What this means going forward is that until prices fall enough, they will continue to overbuild.
Conversely, so long as they continue to overbuild, downward pressure on prices will continue to build.
“they will continue to overbuild.”
But I wonder where the cash flow is coming from? If banks don’t have money to lend and people can’t get loans, how is this possible? Maybe they are financing themselves, being their own bank?
I’ve said it a half dozen times, but just in case….
Florida cost to build under roof per sq ft is -$50.
WITH granite, marble floors, jacuzzi, foil backed plywood at $16 /sheet instead of $4 plywood, soil compacted to %104 density, first rate workmanship on masonry, plumbing, mechanical (AC), everything, even millwork for crown molding, my cost $62 /sq. My buddy with excellent workmanship and materials but no bells and whistles all came in at $47, Others, either, in the trade or crazy like me that built owner-builder and sub-contracted out work, same story.
Mercedes homes and other similar builders, my best guest: $45.
Their cost from permitting to Certificate of occupancy for a 1600 sq foot under a/c home with a 360 sq ft garage and a small back porch with minimal landscaping demanded by the county, slightly above 90K.
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Since they already own the lots, they WILL build.
meant to say “plywood at $16 /sheet instead of $4 OSB”
The only reason they would not build is if they need to finish the lots.
Some builders who are in trouble are selling their finished lot inventory at less than half finishing costs. Those not in trouble are building slowly, or building to order.
The real answer as to why homebuilders are not going under is leverage. The former Wall Street firms went under because they were leveraged 30x with the borrowings being short term, and their investments illiquid once asset values started to fall.
Homebuilders generally do not have that much leverage–and as Ben notes above, as long as they can generate some cash by building homes and selling them for more than the vertical construction costs (which you note above are not that high), they can sustain their debt and keep alive.
Short-sale listings create a strange market dynamic
By Ryan Ratcliff
September 28, 2008
Over the summer I moved to San Diego to start a new job at the University of San Diego. We moved in August, but started shopping for a house in San Diego in mid-May.
Having kept a close eye on housing developments over the past several years, I thought (as many do) that I would have sellers falling at my feet begging for the opportunity to sell me their home, and that, in the words of my (UCLA Anderson Forecast) colleague David Shulman, “If I don’t insult the seller with my offer, I’m paying too much.”
The reality on the ground turned out to be quite different. We looked at around 80 homes, got outbid four times, rescinded one offer and finally started escrow at the beginning of August.
The key insight I’ve gained over this summer is that short-sales (a lender-approved sale of the home for less than the value of the existing mortgages) cast a shadow over the entire market.
Interesting how RR’s decision process appears oblivious to the housing finance implications of September’s Nightmare on Wall Street…
Are there really people still out there with buckets of money and boxes of stupid who will fall for this?
Dollhouse sale: $169,000
ASSOCIATED PRESS
September 28, 2008
BATTLE CREEK, Mich. – Like many homeowners around the country, Gerry and Cindy Mann have struggled to sell their house during the past year.
So they decided to use a more creative sales approach: Sell a miniature replica of the home for $169,000 and get the real thing thrown in for free.
other novel (I think …) idea: a British couple started a lottery with 25 Pound tickets sold on internet, with the chance to win a British estate (old home on a large lot with some small vacation cabins). They sold something like 50.000 tickets (many to foreigners, of course) which covers the minimum amount they wanted to get for their property …
Well, I guess if they can’t get the National Trust to take it off their hands, they need to find another way to keep the Ormalu polished…. those Stately Piles cost a fortune to maintain.
BTW - do you know which estate is was?
yes, I guess there is a reason why they didn’t try to sell it outright. I googled it up and it is mentioned on the August 26 page of housepricecrash.co.uk. You can probably find out more from there, the estate is in Devon.
It didn’t look very attractive to me. Plenty of similar properties in France for a fraction of the price; but of course in France you don’t have the huge appreciation potential you have in the UK
The New York Times had a recent stories on (desperate) incentives, but for the wealthier set:
http://www.nytimes.com/2008/09/28/realestate/28cov.html
“Tours, art exhibits, fashion shows, book signings and children’s’ fairs are all being experimented with”…
“It’s wasting their time,” she said. “Nobody who’s spending $13 million on an apartment cares about your free vacation to Disney World. Oscar parties? Chocolate tastings with five different chocolatiers? Who’s going to go out of their way to go to that? Those kinds of buyers will think, ‘If you need a gimmick to get me in, there’s something wrong with this apartment.’ ”
I see the fact that the SD Union Tribune Sunday Home section has moved well past the denial stage of the housing bubble stages of grief as a promising sign that a bottom will some day be reached in the San Diego housing market.
Advertising sticker attached to p. 1 of my dead-tree copy of the Sunday SD Union Tribune:
HOME AUCTION
400 Bank-Owned Homes
Across Southern CA.
October 7th-12th, 2008
No minimum starting bids!
Learn more and see complete property listings at
SanDeigoHouseAuctions.com
Call for a free brochure
1.866.508.4872
HUDSON & MARSHALL
San Diego real estate investors: BE THERE OR BE SQUARE!
Can anyone provide the date/time to the post this weekend outlining the yen-carry trade? I’ve tried google, the search box and reviewing all posts (thoughtful/funny/sad/barbed, not necessarily mutually exclusive) and just can’t locate it. Thnaks.
You used to be able to buy $60,000/year worth of “I-Bonds”. During the peak of the dotcom bubble, they were paying 7%! I knew back then that a 7% sure thing was better than pets.com stock, and we put in the maximum for each of us. (It was $30,000 worth of physical paper, and they allowed another $30K if you got the electronic ones on-line, to promote the new on-line service)
In 2007, our Government lowered the amount you can purchase to $5000!
http://www.treasurydirect.gov/news/pressroom/pressroom_reducedpurchaselimit.htm
They official quote from the Treasury about this was “Most of our customers didn’t purchase more than $5000, so we eliminated those less-popular options”
So here’s the update!
I went to the bank Friday to buy my $5,000 worth. Guess what the base interest rate on I-Bonds are now:
0 %
That’s right! They’re now selling 0% bonds!
http://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iratesandterms.htm
Why is NOBODY SCREAMING about the WAR ON SAVINGS? It seems that we’re keeping the interest rates artificially low so Harry Howmuchamonth can stay in his adjustable-mortgage-financed McMansion another month…
“That’s right! They’re now selling 0% bonds!”
Yes, there was heavy demand for them and people fleeing MM accounts that were “breaking the buck” or what have you. Panic stations.
No one owes you interest, right? On the other hand, you can choose a different investment.
Which makes it a good time to go into MM funds.
I don’t think the Roman Empire, nor their numbering is coming back, king.
A fear of deflation??? I’d gladly take 0% with no risk to principle in a highly deflationary environment.
“Why is NOBODY SCREAMING about the WAR ON SAVINGS?”
There is an identification problem in the data, as a willingness to purchase bonds paying 0 pct nominal interest may represent bets on future deflation (i.e., California home prices dropping 40 pct per year and such).
“The limit was last set at $5,000 (issue price) in 1973.”…
When was it that we needed to WIP? 1974. What’s $5000 in 2008 dollars? It’s a lot more than $5000. This seems like a key indicator that they think another round of inflation is coming…Since you’re buying some, I guess you think this is a good bet against inflation?
maybe nobody is screaming because there is no way to escape this madness anywhere in the western world (and even beyond sometimes)?
In Europe it isn’t much different, except that wages are rising much faster than in the US apparently (faster than official CPI, while rates on savings accounts and Treasuries are often below official inflation). Harry howmuchamonth is still doing extremely well in Europe, with his home appreciating every year and his debs erased by inflation. People with savings or those who are selfemployed are getting severely punished (has never been different since the inception of the ECB, ten years ago).
Bread and circuses, I guess …
This bailout is going to pass, our elected representatives are not listening, and a taxpayer revolt is useless in the face of unlimited IRS power to sieze and garnishee. So what does an unhappy citizen do?
Strike back where it’s weakest, at the lenders. If there was a debt repayment strike or slowdown the cash flow restriction would be felt at the highest levels of Wall Street in just days. If a fair fraction of mortgage’s were payed two to three weeks late the impact would be immediate and attention getting.
from John Hempton,
“At that point there is no creditors and the economy collapses. The trust needed to make capitalism worked has been removed. I am not a conservative - but I will argue - along with many conservatives - that the most important function of government in a capitalist society is provision of a framework by which property rights can be defined and enforced as this is the key to making a capitalist society function. The Government is now acting as if the framework does not apply to them. That is bad whatever your political persuasion.”
—–
the story goes like this. WM had a technology based run on deposits. This was plain to see by the watchers. On the 24th, nobody would buy the equity. 25 septemeber…ALL RIGHTS of creditors were confiscated by the Government.
In an orderly society, property rights are well defined. By property rights, I mean specifically “claims on money, real estate, and any real assets.” Now go back and read the quote again.
—
Who are the creditors, what are they buying, and why? (this is the interest rate question)
Who is really getting rescued, and who is gonna get thrown under the bus? (this is now a soveriegnity question)
“Mongo only a pawn in game of life”
Fortis is on the auction bloc…
——-
By Reed Stevenson and Philip Blenkinsop
AMSTERDAM/BRUSSELS (Reuters) - Fortis (FOR.BR: Quote, Profile, Research, Stock Buzz) faced a takeover or break-up as European Central Bank President Jean-Claude Trichet held emergency talks with Dutch and Belgian lawmakers to restore faith in the Belgian-Dutch financial group.
——–
it aint just us.
Justice?
Not to worry.
The Federal Reserve has it all contained.
In the last 3 weeks they have front loaded $370B into the financial system. Just a mere bagatelle, but it took the “other loans” up from $22B to $229B. Securities increased +59B as did other assets + 81B to make up the $369. That is a lotta moneys to throw into a seemingly bottomless pit.
And the US congress thinks $700B is going to be enough? lol
And even though Congress really F*k’d up this rescue plan, 96% will still be reelected.
Emergency Hold up Asset Values going to vote on Monday.
Zero Reserve Requirements when appropriate.
Mark-To-Market pricing, elminated.
oh yeah,
Fortis is now under state control, no Auction and no longer for sale.
Fortis Receives EU11.2 Billion Rescue From Benelux Governments
By Martijn van der Starre
Sept. 28 (Bloomberg) — Belgium, The Netherlands and Luxembourg invested 11.2 billion euros ($16.3 billion) in Fortis, Belgium’s biggest financial-services firm, partially nationalizing the bank in a move to restore investor confidence.
Brussels and Amsterdam-based Fortis will also sell its stake in ABN Amro Holding NV’s banking unit, Belgium’s Prime Minister Yves Leterme said a press conference today.
For Related News: Search of Fortis and Dierckx: NSE FORTIS FILIP DIERCKX Top Fortis stories: FORB BB TCNI WWTOP
Last Updated: September 28, 2008 17:46 EDT
Is this what Bush & company had in mind?
From The Times
September 27, 2008
John McCain falters as bailout swamps US election
Tom Baldwin in Washington and Suzy Jagger in New York
The Wall Street bailout threatened to swamp the US election last night as John McCain abruptly left Washington to face Barack Obama in his first presidential debate, with a planned $700 billion rescue deal teetering on a knife-edge.
The Republican nominee appeared to blink first in a game of the highest stakes as he raced down to Mississippi for the debate. He had previously pledged to remain in the capital until a deal to save the banks was agreed.
I heard a pundit claim on Friday morning that McCain plays craps and Obama plays poker in private life, and that their strategies reflect that.
I do not know if it is true. Anyway, he described the above move as McCain blowing on the dice with a cocktail waitress on each arm…then I saw this:
http://www.nytimes.com/2008/09/28/us/politics/28gambling-web.html
Risk felt comfortable (even popular) while times were good, but now that everyone’s fleeing to safety, I’m not sure the whole maverick thing is as appealing. I am starting to picture these overleveraged houses as zombies, lurching into all sorts of places. I think they are currently chasing McCain. Maybe they were insulted that he didn’t know how many houses he had himself.
Who will they attack next? I will not be heading alone into the basement anytime soon!
I see the serious rumblings of a populist revolt stemming from the bailout-related breakdown of the Main Street-Wall Street coalition that buoyed the Republican party for the past 28 or so years… The Democrats should be in good stead, come November, unless they manage to blow it (again).
Main Street vs. Wall Street, and a certain sneaky guy in the middle of it all
In a post this morning, I promised more to come on the question of how this bailout debate exposes a fraying of the longstanding Main Street-Wall Street alliance inside the GOP. So here we go.
Let me first explain what that is. “Main Street” means, in short, the right-wing populist aspects of the current GOP–guns, God and gays, abortion, rallying the decent common folk against the coastal elites, etc. “Wall Street” means, literally, Wall Street — more specifically, the pro-corporatist policies that the party puts in place once voted into office by the people on Main Street: the tax cuts for the wealthy, the stern opposition to almost all regulation and oversight of the private sector, the denial of a human role in climate change (because to acknowledge would imply the need to do something about it, and that means regulations and oversight), a host of policies like that.
Get the little people to vote you in. Give them a small tax cut and lots of symbolic stuff that has no actual price tage. Give the store to the big people. That’s the Main Street-Wall Street alliance.
This bailout proposal puts them at each other’s throats far more directly than I can ever remember in my adult lifetime. The decent common folk (almost all white, it should be mentioned) are usually egged on by right-wing populist talk radio jockeys and by politicians to aim their ire at the brown illegals or the homosexuals or the Harvard pointy-heads. Now they’re being egged on against the bankers. It’s a modern first. And the stakes are fascinating, and high.
Excellent article GS.
“Get the little people to vote you in. Give them a small tax cut and lots of symbolic stuff that has no actual price tage. Give the store to the big people. That’s the Main Street-Wall Street alliance.”
Ben, you keep insisting that people stop worrying about the government, and look to opportunities in the marketplace.
Unfortunately I have two daughters in high school, and the subprime way our state and local governments have been run threatens the remainder of their education, and in NY the opportunities have yet to emerge.
The question is, do you believe that, after the fall, real estate will present a better investment than stocks and bonds? You have to manage the former, not the latter.
experience from Netherlands (don’t know if it applies in the US, but a warning anyway):
after our -40% housing market crash in 1979/1980, the market went nowhere in most of the country for about ten years. Those who purchased right after the crash had to wait ten years (at 8-10% rates) before the home values started appreciating. I don’t know about cash flow for rental properties, but I guess it wasn’t easy to make money with housing in those days, with those rates.
After those ten years of course it was a completely different story (mostly thanks to Alan Greenspan), but hardly anyone could have predicted that. I know several RE professionals who sold their home at the end of the eighties because they expected values to go further down as a result of high and rising rates. In hindsight, that was the contrary indicator to get into the market
The only advantage in ‘buying early’ (during or shortly after the crash) was that you could pick up some very special properties at a high discount. But that was only attractive if you really wanted to live there for the long run, certainly not attractive as a ‘trade’.
I can relate to the ten years without appreciation scenario. The ex and I purchased my current home here in Wisconsin in 1994 for $119.9k. We divorced in 2004 and I bought her out of her half of the property when the house appraised at $159,900. Peak bubble price on my property: probably in the low $170’s sometime in 2006/2007. Today, I probably would be lucky to get $159,900 for it.
Meanwhile, I pay $2700 per year property taxes (and rising) plus $600 in homeowner’s insurance.
Real estate: Not my worst investment idea ever,but it certainly hasn’t resulted in riches for me (or for the ex). It’s just a place to hang my hat at the end of the day, and a place for the kids to call “home”.
other credit crunch fallout:
Fortis, the largest bank in the Benelux and one of the bigger EU banks is on the block today, after the value on the stock exchange kept crashing (mostly on apparently false rumours) over the last weeks. Fortis has trouble digesting its purchase of Dutch ABNAMRO bank from last year, mostly as a result of the credit crunch. Banking authorities are trying to force an agreement this evening before Oz and Asian exchanges open; they are afraid that otherwise banking stocks might go into a downward spiral tomorrow.
At this moment two solutions are mentioned, one of them a partial nationalisation of Fortis and the other one a sale of parts of the bank to a foreign bank. From the UK news I got the impression that there too more nationalisations are in the works over the weekend. The taxpayers will have a lot to chew on next week, both in the US and Europe. Shareholders will have a bad day as well (just like US shareholders in financial stocks over the last year).
On another note, this afternoon a Dutch professor in financial risk management explained on TV that the US subprime situation cannot happen in Europe, because we have a gentleman agreement between EU banks that they will not make any loans above 4x income. He failed to explain how in Netherlands the median home can cost 8.5x median income.
One of the many homebuyer / home improvement programmes explained again how important it is to get on the property ladder, even if you have zero cash. Don’t blink for starter homes costing 200K or 300K euro (even if you are single and have to take a 10x income loan), it’s buy now or be priced out forever and as soon as you have your own how, the money starts to roll in. They explain starters how you can ‘create value’ instead of throwing money away by renting; not a word about potential risk. Europe (at least the mainland) is still in complete denial regarding their housing bubble.
this is going to take many, many years …
latest news: Fortis will probably be aquired by french bank BNP Paribas. In that case my money is going to be protected by inflationist Sarkozy ;-(
A housing related experience today, Dutchess Co, NY
Subject property: 2500sqft shack, 3 bay garage under house, built circa 2001, on 3 acres of wooded, untillable lot.
Details: Realtor sign went up June2008, “in contract” sign up two weeks ago, tag sale sign up last Friday. Wife suggested we drop in sale after church today so we did. Wife made the mistake of asking how much owner got. “$400k( grrr!) but could have gotten 450 6 months ago. Buyer is a local step up buyer, we’re getting a divorce. We paid 200k for it”. I commented that he’s fortunate because he couldn’t get 250k for it two years from now”. He asked if I really thought so, and I said yes.
So here we are, 3 years past peak price/sales volume and these people are still getting their fantasy asking price and act as if getting 100% gains in 7 years on their initial outlay is typical and anyone who suggests otherwise has descended into madness. This sale might be an anomaly right now as it is the first sale I’ve observed in many months.
http://www.larouchepub.com/other/2008/3538biggest_swindle.html
Paulson’s Bailout: The Biggest Swindle Ever Pulled.
Compare “political extremist and conspiracy theorist” LaRouche’s blasting of the bailout to the meally-mouthed drivel offered up by McCain and Obama.
http://www.larouchepub.com/other/editorials/2008/3538crooks_2_jail.html
LaRouche: “No Bailout - Send These Crooks to Jail!”
http://www.larouchepub.com/eiw/public/2008/2008_30-39/2008-38/index.html
The cover of the 09/19/08 edition of EXECUTIVE INTELLIGENCE REVIEW shows a photoshopped image of Barney Frank, Chris Dodd, and Paulson in a jail cell for their role in the housing bubble debacle. In a perfect world, maybe.
I just think its very important to know that Hank Paulson did a stock dump of Golden Sachs stock right before the market turned and than he became the Treasury Sec.. Just look up the record of when he dumped the lions share of his stock …..Think about what the CEO of CountryWide
(the TAN MAN ) did in the way of dumping stock right before his exit .
He needed to sell in order to become Secretary.
He needed to become Treasury Secretary in order to sell (those who are forced to sell because of moving to public service get tax breaks).
Ode to Bowie…
Ground Control to Major Kong
Ground Control to Major Kong
Take your pro-rated deals and put armageddon off?
Ground Control to Major Kong
Commencing countdown, no bank bomb runs
Check inflation and may Goldman’s love be with you
Ten, Nine, Eight, Seven, Six, Five, Four, Three, Two, One, Lift-off
This is Ground Control to Major Kong
You’ve really made the grade
And the papers want to know whose shorts to beware
Now it’s time to leave the bubble if you dare
This is Major Kong to Ground Control
I’m selling through the back door
And I’m floating money in a most peculiar way
And the Congress looks very sold off today
For here
Am I sitting in cyberspace
Far above the world
Planet Earth is blue
And there’s nothing I can do
Though I’m past one hundred thousand comments
I’m feeling very still
And I think my computer knows which way to go
Tell my wife I love her very much (she knows!)
Ground Control to Major Kong
Your circuit’s dead, there’s something wrong
Can you hear me, Major Kong?
Can you hear me, Major Kong?
Can you hear me, Major Kong?
Can you hear….
“ am I floating round the cyberband
Far above the Moon
Planet Earth is blue
And there’s nothing I can do.?
http://www.youtube.com/watch?v=uhSYbRiYwTY
Here is a radical idea for the democrats. Tie the bailout to immediate withdrawal from Iraq. This was their 2006 campaign promise, but Bush said he would never go along. Well now Bush needs their vote.
The money printing presses used for Iraq can be redeployed to helping (gifting) the banks.
Amidst the unprecedented turmoil on Wall Street, San Diego used home sellers are staying the course.
Here is some highly sophisticated analysis of the implications of the Nightmare on Wall Street for local real estate investing from the San Diego Union Tribune’s Real Estate supplement:
A truly secure investment: Why real estate may be better than Wall Street for investing
by Steve Rodgers
President and CEO, Prudential California Reality
This month, in an unprecedented week of financial turmoil, investors saw several of Wall Street’s most established and respected icons take a nose-dive into uncharted territory. With the collapse and near-collapse of firms like Lehman Brothers, AIG and Merrill Lynch, both shareholders and employees of these institutions saw a veritable evaporation of the value of their investments.
Real estate’s image as an investment has been tarnished lately by recent market declines. However, the recent Wall Street activity raises the question about real estate as a better long-term investment.
While most investors understand the risks associated with the stock market, most did not anticipate such a free fall, with stocks that were valued at over $50 per share suddenly worth almost nothing. For example, according to Marketwatch.com, in less than one year’s time, Lehman Brothers’ stock price went from a 52 week high of $67.73 per share (November 14, 2007) to a 52 week low of five cents per share (September 18, 2008). Many long-term employees saw their retirement assets collapsing, along with the fruits of a career of hard work.
…
And while the falling stock of Wall Street icons creates a loud thud, San Diego County homevalues will continue to quietly yield great dividends for the long-term investor.
———————————————————————————-
I guess it is different in our zip code (92127), as my wife just pointed out the August DataQuick numbers show used home SFR sale prices have dropped by 24 pct in only one year.
I know it is different in our zip code, as all real estate is local, but DataQuick reported an August median sale price of $700,000, versus a current median list price of $1,299,000, according to San Diego ziprealty.com used home inventory listing. That would be a $699,000 (99 pct) premium of current median list price versus recent median sale price. How long can that continue before something gives? (It has been continuing for some time now, though the bid-asked gap has recently widened somewhat.)
I really hope this Bailout Bill doesn’t involve allowing programs like Nehemiah to continue. Kinda odd that no one working on the bill is talking about things they are trying to include in it. Except for the golden parchute speaches pointed toward making us feel fuzzy inside. It started at 3-4 pages and is now 120+ pages.
Wall Street Journal
* POLITICAL DIARY
* SEPTEMBER 28, 2008
Partners at the Destruction
Fannie, Freddie and just about everybody.
By JOHN FUND
We will look back on the failure of Congress to reform the government-sponsored enterprises at the heart of the mortgage meltdown as one of the most expensive derelictions of its duty ever. Fannie Mae and Freddie Mac used their lobbying clout, political contributions and even charitable largesse to charm or bully anyone demanding reform in their lending practices. [Barney Frank]
The Bush administration certainly didn’t cover itself in glory either, for example issuing news releases in 2005 touting the introduction of “zero down-payment ” mortgages through federal housing programs designed to encourage home ownership.
But the administration at least tried to warn Congress that the GSEs should be reined in. Gateway Pundit notes that President Bush publicly called for GSE reform 17 times this year before Congress finally passed a bill increasing oversight of Fannie and Freddie — though by then it was too late.
I’ve seen campaign signs in the vicinity where some ironyist has sharpied out in blue, the white “L” from the sign, so it reads:
McCain
——-
PA IN
Nice. Someone has unique insight.
The New Deal it is not.
The government’s biggest economic bailout since the Great Depression is aimed not at relieving unemployment or reforming questionable business practices, but at resuscitating financial markets debilitated by lousy bets on the housing market.
Put simply, the hastily crafted plan lawmakers agreed to in principle on Sunday is intended to revive jittery and fragile banks on Wall Street with enough money — by using taxpayer funds to purchase billions upon billions of their worst mortgage-related assets — so that lending, the lifeblood of the American economy, flows freely again.
If it is working, signs will emerge almost immediately in the interest rates on U.S. bonds and in an array of obscure — but crucial — financial benchmarks.
Loans — particularly those made from one bank to another — would be more available and less expensive in a matter of days, if not weeks.
http://www.businessweek.com/ap/financialnews/D93FSCG80.htm
Are we to believe that removing dodgy assets from the hobbled banks will boost lending? We need to restore the negative psychology and it will do the trick. I would like to think new lending standards along with buyer’s willingness to buy houses at reasonable prices should be taken into account. Our dumb leaders missed the boat on this one.
just listen to the comments coming from Chinese (and other Asian) financial experts these days about the US market turmoil, what caused it and what this bailout is going to accomplish …
I guess these opinions don’t get published in the US newspapers (not in EU newspapers either…). Instead we get a continuous stream of stories about Chinese product quality scandals (all Chinese candy products removed from Dutch supermarkets, just to be sure!!), or how badly they treat their disabled citizens (do they run that crap in the US too?). All to convince the sheeple that China is a third world country that has no chance whatsoever to ever be equal to the mighty USSA…
I have no idea if it will boost lending or not, but one reason it might is because with a bailout there will be a clear removal of moral hazard. At that point, why not lend, since if the debtor can’t repay the loan, the government will make good?
hello all- long time reader, very occasional poster. Thanks to all for the education of a lifetime: the information on this and a few other favorite sites has been at times brilliant, fascinating, shocking, and always entertaining.
Thanks to Ben and the hbb, I didn’t buy in fall ‘05 when I had a wild hair up my a$$ to do so! Every financial move I’ve made has been to my benefit thanks to this site. I’ve actually EVOLVED as a human being from reading this blog, simply through reading the brilliant postings of you great folks, thinking “I had NO IDEA we were allowed to be that smart!”
I’m currently as prepared for whatever is going to come of this mess as I can be: money is squared away as safely as I know how, friends and loved ones are up to speed with what I’ve learned here, cupboards are full, powder is dry, conscience is clear. I’m now focused on learning to ‘live lean’: hunt, gather, box, figure out clever ways to generate cheap power. Basically learning to suppress fear so that I’m not overwhelmed by it in an emergency.
The best way to suppress fear is to simply busy your mind with intelligent things instead of sitting there dwelling on it. To that degree, I’m beefing up my book collection.
There’s been a ton of book suggestions on this blog, and I’ve never been disappointed with the ones I bought or borrowed on the advice here. I’ve just been lax in writing down the titles, and am too busy to try to look them up in old posts.
So on this worrisome, wet (here on East Coast) Sunday, I was wondering if anyone felt like offering a top five book list. Maybe a book from each of five categories:
1. Surviving a harsh emergency living condition (fave books on Great Depression, Dust Bowl, WWII era, or even wilderness survival). My suggestion is “People of the Abyss” from Jack London: the book that kicked off his golden era and inspired “Call of the Wild”, where he voluntarily lived as a vagrant in turn of the century London, experiencing the harshness of workhouses and dog-eat-dog poverty.
2. Fascinating earth science reading. My pick is “A Short History of Nearly Everything” by Bill Bryson. He started off as a travel writer but has expanded to books about history and language (which I suppose most travel books are anyway :-D). “A Short History” has him taking all those impenetrable topics like Einsteins theories, the Big Bang, the evolution of life, you name it, and translating them into a language that couldn’t be breezier or more enjoyable to read. It’s my very favorite book. If textbooks all adapted his brillaint writing style, we’d all be on our multiple Ph.D’s because we’d never want to leave school!
3. The book that has open your mind the most in a spiritual sense. My pick is “A New Earth” by Eckhart Tolle. The man has made an evolutionary leap on how we should approach the concept of God. It instantly marginalized the 100+ self help books I’ve read over the past decade. It got famous as one of those Oprah books, but don’t let that discourage you.
There are a lot of amazing books coming out that are reconceptualizing faith: reading them is like reading this blog. They make one feel ahead of the curve, and privy to remarkable brilliant information that most people are too afraid to attempt to understand.
4. Financial/housing book. Here is where I dont’ have a suggestion: practically every single thing I know about either topic, I learned here.
Maybe it’s a book on investing, maybe its on housebuilding, maybe its on bubbles or crashes themselves.
5. A good old fictional yarn. It’s hard to narrow down to one, so just pick the first one that comes to mind. The first to come into mine is “Life of Pi” by Jann Martel. It was just a really, really good book.
Please take a minute to respond. If 10 people respond, thats 50 good leads! Once again, thanks to Ben and the HBB for the education of a lifetime.
-Hunky Dory
Thanks for the book list. Personally, when there is turmoil, I turn to the classics. I read Dante’s Inferno a very long time ago in high school, and it’s amazing how it’s all coming back to me now. The whole thing about getting your just desserts. Of course, Dante did not have to deal with sleazy bankers, so it’s up to us to imagine what circle of hell they belong in, hanging upside down being force-fed toxic paper. Don Quixote comes to mind too. I did not understand the half of it because I was too young when I read it, but it is talking to me now, because it deals with one big question that this bubble brought to the fore in the past few years. If you are virtuous, does it mean that you are mad? Many people in this blog have bemoaned their own virtue, realizing that they would have gotten ahead if they had bought a house, drained the equity and then walked away with a neat sum of cash. Yet, they did not do. All Quixotes are lovable…
Thanks to Ben and the HBB for the education of a lifetime
I am sure most people on this blog share the same sentiments including myself. Thanks Ben and the Hbb crowd
I’ll give it a whirl…
1. Down and Out in Paris & London. Orwell’s 1st book written in 1933, a chronicle of his low-life low-down world as a fledgling writer/busboy during the worst period of the Great Depression.
2. Surely You Must Be Joking, Mr. Feynman?. Nobel Prize winning prankster Cal Tech professor Richard Feynman, a genius that was able to see things in a different light, and had fun along the way.
3. Power of Myth. I’m not spiritual, so Joseph Campbell’s ideas make the most sense to me. I understand the need for heroes that our imaginations demand of us, but am wary of most of them.
4.Extraordinary Popular Delusions and The Madness of Crowds. MacKay’s old school history of the Dutch tulip bubble, John Law’s land bubble and more. Lots of other weirdness as well.
5. Earth Abides. George Stewart’s sci-fi end of the world due to a nasty virus. Written in the late 1940’s, Stewart paints a great picture of the breakdown of society when nobody’s there to tend it, except for a few people, whom the story follows for many years.
Like to add “Alas Babylon” by Pat Frank, written in the 1950s, after a nuclear war has taken place between Russia and the US, as a result of a conflict in the Middle East. It is about how a group of people living in a river community in North Florida survive and interact. One of my fave books. I think Frank was a spook at some point. He sure understood the Cold War jargon of the 1950s.
thanks!
Alad,
Glad to see you like what I recommended “Earth Abides” to be one of your fav books. It has become my favorite sci-fi books. Lucifer Hammer is another great read about what happens to civilization after a earth is hit by an asteroid.
Another good read is “The Jehovah Contract.” The book is categorized as SF. It is about an assassin hired to kill God. The author is Victor Koman. I’ve already read this one twice and ready to read it again.
1. hysterical realism.
title: Electric Kool-aid Acid Test. Tom Wolfe
2. after the beat.
title: The Dharma Bums. Jack Kerouak
3. philosophy.
title: The Examined Life. Robert Nozick
4. mind the gap.
title: They Thought They Were Free. Milton Mayer
5. inflation is real.
title: 36,000 The New Strategy for Profiting From the Coming Rise in the Stock Market. James K Glassman.
my personal favorite:
“You Cant Read”, but thats only for Happy People. The book itself is a bully, so go cry to mommy with all your safely squared away moneys.
**caution**
I only pick on people I like
“5. inflation is real.
title: 36,000 The New Strategy for Profiting From the Coming Rise in the Stock Market. James K Glassman.”
The premise was good, just Mr. Glassman’s math skills were deficient (correct math would be around 22,000). He supports Sen McCain as his economic adviser. What me worry?
The New Deal it is not.
The government’s biggest economic bailout since the Great Depression is aimed not at relieving unemployment or reforming questionable business practices, but at resuscitating financial markets debilitated by lousy bets on the housing market.
Put simply, the hastily crafted plan lawmakers agreed to in principle on Sunday is intended to revive jittery and fragile banks on Wall Street with enough money — by using taxpayer funds to purchase billions upon billions of their worst mortgage-related assets — so that lending, the lifeblood of the American economy, flows freely again.
If it is working, signs will emerge almost immediately in the interest rates on U.S. bonds and in an array of obscure — but crucial — financial benchmarks.
Loans — particularly those made from one bank to another — would be more available and less expensive in a matter of days, if not weeks.
http://tinyurl.com/4mhrr8
Are we to believe that removing dodgy assets from the hobbled banks will boost lending? We need to restore the negative psychology and it will do the trick. I would like to think new lending standards along with buyer’s willingness to buy houses at reasonable prices should be taken into account. Our dumb leaders missed the boat on this one.
Not for the faint of heart…
Despite incessantly urging other countries to adopt its way of doing business, America has always had one economic policy for itself and another for the rest of the world. Throughout the years in which the US was punishing countries that departed from fiscal prudence, it was borrowing on a colossal scale to finance tax cuts and fund its over-stretched military commitments. Now, with federal finances critically dependent on continuing large inflows of foreign capital, it will be the countries that spurned the American model of capitalism that will shape America’s economic future.
Which version of the bail out of American financial institutions cobbled up by Treasury Secretary Hank Paulson and Federal Reserve chairman Ben Bernanke is finally adopted is less important than what the bail out means for America’s position in the world. The populist rant about greedy banks that is being loudly ventilated in Congress is a distraction from the true causes of the crisis. The dire condition of America’s financial markets is the result of American banks operating in a free-for-all environment that these same American legislators created. It is America’s political class that, by embracing the dangerously simplistic ideology of deregulation, has responsibility for the present mess.
In present circumstances, an unprecedented expansion of government is the only means of averting a market catastrophe. The consequence, however, will be that America will be even more starkly dependent on the world’s new rising powers. The federal government is racking up even larger borrowings, which its creditors may rightly fear will never be repaid. It may well be tempted to inflate these debts away in a surge of inflation that would leave foreign investors with hefty losses. In these circumstances, will the governments of countries that buy large quantities of American bonds, China, the Gulf States and Russia, for example, be ready to continue supporting the dollar’s role as the world’s reserve currency? Or will these countries see this as an opportunity to tilt the balance of economic power further in their favour? Either way, the control of events is no longer in American hands.
http://www.guardian.co.uk/commentisfree/2008/sep/28/usforeignpolicy.useconomicgrowth
“Pelosi: Rescue is not a bailout but a `buy-in’ ”
The spin to sell the bail out to the masses has started.
Paulson on 60 Minutes: “We must protect the American people by robbing them.”
The Logic: Let’s make sure the lions are fed so they won’t eat the sheep.
It’s ransom…pure and simple.
When I heard that on Bloomberg radio this afternoon, it reminded me of a quote from the movie SLC Punk. Dad tells his kid, “I didn’t sell out, I bought in”.
No gas in Atlanta.
Georgiagirl,
How are people coping?
No golden parachutes.
Paying bills sucks, paying attention to the Bills (4-0) is better.
The Bill’s start has people smiling here in western NY. The last time the Bills were 4-0 was 92.
Yes. Very impressive. combined record of opponents: 4-11. None better than .500.
Next opponent: @ Kenmore West High School
ZZZZzZzzZzz…
My apologies if this has already been posted.
I don’t know about you, but this scares the H@ll out of me:
Nouriel Roubini: “It is a disgrace that no professional economist was consulted by Congress or invited to present his/her views at the Congressional hearings on the Treasury rescue plan.”
My nephew waited 6 hrs and gave up, he still a some gas. My niece had to drive almost to Alabama to find gas. People are just driving around looking for gas and if they find it, wait in line and the lines go all the way out into the street. I was able to get gas Friday so I’m O.K. for now. Everyone is filling up and I think that has caused a problem too. Why is Atlanta out of gas but nobody else? I talked to friends in Fla. and they have gas and also family lives about an hour from here and they have gas. Can’t figure it out. What happened?
32 years of outlawing the construction of new oil refineries is what happened.
Get it?
The environmentalist moonbats that have been flitting around since the late 1960s are directly responsible for your inability to fill your tank today.
Think about that while you waste hours looking for petrol.
Perhaps if the moonbats would have allowed construction of new refineries, the Southeast today would have alternative sources of refined oil. But alas, you don’t. Hurricane Ike shut down your sources of refined oil two weeks ago.
Those refineries are out of commission…and thus, so are you.
Yawn.
Someone’s been listening to Cro Magnon AM radio again.
We are not impressed.
No, actually Eudemon is correct - NPR has defined the problem as Boutique gas required for the Atlanta area - since refineries shut down and are marginally productive (takes a while to convert different types of gasoline and they are still not at 100%). If you remember, after Katrina, the boutique gas regulation was temporily suspended, but no provision for this was allowed this time (I think it is EPA?).
For Florida - gas comes in Port Everglades from refineries in the Bahamas, which are still running. No shortage in S.FL that we have been aware of.
Financial Times
Leaders call for tighter financial rules
By Sundeep Tucker and Jamil Anderlini in Tianjin
Published: September 28 2008 19:23 | Last updated: September 28 2008 19:23
The global financial system is in urgent need of more scrutiny and greater co-operation between national regulators if it is to avoid repeated crises, top policymakers and bankers warned at the World Economic Forum at the weekend.
As influential decision-makers from the US, Europe and Asia assembled in Tianjin, China, for the annual summer meeting, a consensus emerged over the need for more government regulation of financial markets in the wake of the global credit crisis.
Feinstein - constituents 1000 to 1 against:
http://tinyurl.com/4ezbj7
“Sen. Dianne Feinstein’s office has heard from about 50,000 constituents since Congress began considering a financial rescue plan about a week ago — and “only one of a thousand supports it — whatever it is,” the California Democrat said.”
The mob is angry and united. Congress has the backing it needs to get this right to the extent that’s possible, not give Wall Street what it wants.
Obama Slams McCain for a ‘Katrina Like’ Response to the Bailout Bill
September 28, 2008 4:03 PM
ABC News’ John Berman, Ursula Fahy, Matt Jaffe and Sunlen Miller
Report: The Obama-Biden ticket brought out their wives for a rally in Detroit before 35,000 people this Sunday afternoon.
Sen. Barack Obama, D-Ill., spoke about the economic bailout bill’s progress, giving bipartisan credit for being close to passing a plan.
“Thanks to the hard work of Democrats and Republicans, it looks like we have a rescue plan that includes these taxpayer protections. It looks like we will pass that plan very soon.”
Obama continued to be critical of Sen. John McCain’s reaction to the economic crisis– and for the first time today had tougher words, saying McCain’s response was similar to Bush’s response during Katrina.
“I think Senator McCain just doesn’t get it – he doesn’t understand that the storm hitting Wall Street hit Main Street long ago. That’s why his first response to the greatest financial meltdown in generations was a Katrina like response. Sort of stood there. Said the ‘fundamentals of the economy are strong.’”
latest news
Plan likely to give gov’t equity in firms that sell assets
Short-sale ban disrupts trades for hedge funds
Short sellers, convertible arbitrage, relative value managers hit hardest
By Alistair Barr, MarketWatch
Last update: 6:54 p.m. EDT Sept. 26, 2008
SAN FRANCISCO (MarketWatch) — The short selling ban has boosted shares of many financial companies, but it’s roiling the $2 trillion hedge fund industry.
That’s because managers have been left with limited access to one of their most important investment tools. Short sellers, who specialize in betting against shares, along with convertible arbitrage funds and so-called relative value managers have been among the hardest hit, investors said this week.
“If this goes on longer, it will become much more problematic,” Bill Ferrell, head of hedge fund investment firm Ferrell Capital Management, said in an interview. “Whenever government intervenes in a free market, you’re playing with fire.”
“If this goes on longer, it will become much more problematic,”
I nominate this for best understatement of 3Q 08. A doozy of a quote for a doozy of a quarter.
They might be plumbling the depths but they’ll never comprehend the duration.
The S&P 500 P/E is 13.5 according to Morningstar:
http://quote.morningstar.com/Index/Quote.aspx?Ticker=SPX
The yield is 2.4%.
Russel 2000 is 16.2 for P/E
Nasdaq price to prospective earnings is 18.1, which is plausible, since it’s more aggressive than the Russell 2000 and S&P 500.
I thought the historic P/E of S&P 500 is 17.
Not bad! Probably not a good idea to be completely out of equities.
Historic PE is 9.5; historic PE for the 1990s is 20 - just like the roaring 20s. Historic Bear Market PEs are 6.5. So what will the PE be next year with projected earnings between $45 and $65 for the S&P 500?
There is obviously plenty of blame for the republicans , but I have not seen one politician on either side accept any blame , or place any blame on the people who took out loans they couldn`t and didn`t pay back. I just saw a dem congressman from Illinois who they said was an economic advisor in the Clinton administration say this is all the republicans fault deregulating and the congress will do what they have to . I am not blaming any dem so hold the attack.
The Glass-Steagall Act of 1933 established the Federal Deposit Insurance Corporation (FDIC) in the United States and included banking reforms, some of which were designed to control speculation.[citation needed] Some provisions such as Regulation Q that allowed the Federal Reserve to regulate interest rates in savings accounts were repealed by the Depository Institutions Deregulation and Monetary Control Act of 1980. Provisions that prohibit a bank holding company from owning other financial companies were repealed on November 12, 1999 by a bipartisan, conference committee version of the Gramm-Leach-Bliley Act signed by President Bill Clinton.[1][2]
Financial Times
Big fixes for big market collapses
By John Dizard
Published: September 28 2008 22:39 | Last updated: September 28 2008 22:39
There are two parties in the continuing struggle over the nature of the US government’s support of the private financial system. Not Republicans and Democrats. You could call them the “stealths” and the “explicits”. The Paulson plan, as it has metastasised, is an example of a “stealth” initiative. It injects capital through the purchase of assets at prices above balance sheet marks or market prices. An “explicit” alternative would be government purchases of preferred stock, or debt with equity warrants so taxpayers have a chance to make a profit. Gradually, the stealth strategies are losing out to the explicit strategies. That is what has been at the heart of the House Republican-White House-Congressional Democrat fight.
Even if the government was to use a “stealth” approach to buy all the “troubled assets” at par, which it won’t, the banking system would still need a great deal of new capital, as in hundreds of billions of dollars. All the reforms proposed for how the financial sector does business will lead to more core capital required for a given level of lending, trading, and economic activity.
I was just about to post on this very thing:
“While the plan broadly aims to prevent banks from profiting on the sale of troubled assets to the government, there is an exception made for assets acquired in a merger or buyout, or from companies that have filed for bankruptcy.
This detail could allow JPMorgan Chase & Co. to sell toxic mortgages and other assets it gained control of last week when it purchased Washington Mutual Inc. for a higher price than the failed thrift paid for them.”
Morgan will not sell what it stole.
I don’t suppose it applies to the Bank of America purchase of Countrywide, though, does it?
New debt limit: $11,315,000,000,000.
That’s $38,000 per capita.
Update: Michael Hall writes:
Section 128 changes effective date from Oct 1 2011 to Oct 1 2008 for this section of current law:
SEC. 202. INCREASED FLEXIBILITY FOR THE FEDERAL RESERVE BOARD TO ESTABLISH RESERVE REQUIREMENTS.
Section 19(b)(2)(A) of the Federal Reserve Act (12 U.S.C. 461(b)(2)(A)) is amended–
(1) in clause (i), by striking `the ratio of 3 per centum’ and inserting `a ratio of not greater than 3 percent (and which may be zero)’; and
(2) in clause (ii), by striking `and not less than 8 per centum,’ and inserting `(and which may be zero),’.
TITLE 12 > CHAPTER 3 > SUBCHAPTER XIV > § 461
Amendment of Subsections (b) and (c)
Pub. L. 109–351, title II, §§ 201–203, Oct. 13, 2006, §§ 201–203, 120 Stat. 1968, provided that, effective Oct. 1, 2011, this section is amended— (1) in subsection (b)(2)(A), by striking “the ratio of 3 per centum” and inserting “a ratio of not greater than 3 percent (and which may be zero)” in clause (i) and by striking “and not less than 8 per centum,” and inserting “(and which may be zero),” in clause (ii); (2) in subsection (b)
This will allow banks to hold zero reserves if the fed says so.
Looks like a lota hair of the dog there…
New York Times
News Analysis
Wall Street Seeks Signs of Response in Markets
By VIKAS BAJAJ
Published: September 28, 2008
Washington hopes its sweeping bailout plan will get credit flowing again.
But will it work on Wall Street?
That is the $700 billion question swirling around the biggest financial bailout in American history. The first answer will come on Monday from the credit markets, where this crisis has unfolded for more than a year now.
As details of the plan trickled out on Sunday, few economists saw the rescue as a quick fix. Even if the frozen credit markets thaw a bit — and many analysts say they will — the good old days of easy money are over for now. The stock market, which has lost about 17 percent this year, is bound to remain volatile. To many, a recession seems unavoidable.
The first big question, however, is whether some semblance of calm will return to the credit markets. If the plan works as hoped, market interest rates that have been stuck at unusually high levels should start to ease.
If that happens, banks and corporations would be able to borrow money at lower rates than they have in recent weeks, said Mark Zandi, chief economist and founder of Moody’s Economy.com. Since Lehman Brothers sank into bankruptcy, rates on short-term corporate i.o.u.’s have shot up. Investors have shunned all but the safest of investments, like Treasury bills and notes. Last week, prices of two-year Treasury notes rose for a fifth straight week, a run that has reduced their yield by about a third of a percentage point.
“The most important thing is to see money markets normalize,” said Mr. Zandi, who has advised the presidential campaign of Senator John McCain, Republican of Arizona. “If banks start lending to each other that would be a very positive sign and that would be key.”
How to Manufacture a crisis?
stop manufacturing. its so easy a generation could do it.
“Rep. John A. Boehner, R-Ohio, the House minority leader, said he was urging “every member whose conscience will allow them to support this” to back it, but officials in both parties expected the vote to be a nail-biter.”
There is still time to call your representatives and tell them to stick this plan where the sun don’t shine…
So the first bank the US will save is in China:
“…The Industrial and Commercial Bank of China, for example, has $151 million in bonds issued or linked to Lehman; China Merchants Bank has $70 million of Lehman bonds; and the Bank of China has $75.62 million of Lehman bonds. …
Andy Xie, an independent economist who was formerly Morgan Stanley’s chief Asia economist, said the United States needs to accept that a large amount of U.S. assets must be transferred to other countries’ ownership. “If the U.S. is not willing to accept that,” Xie said, “they will have to print money and the dollar will fall. And we will be headed toward a global financial meltdown.” ”
WaPo
Just tender the Lehman debt, the US Gov will cover it, if they don’t then we won’t buy any more US Treasuries. Traders are not happy in Asia tonight.
PETER BRIMELOW
Another case of collusion?
Commentary: It’s time to take a hard look Washington as well as Wall Street
By Peter Brimelow, MarketWatch
Last update: 12:56 a.m. EDT Sept. 29, 2008
…
Bottom line: LTCM seems to have been bailed out because it was well-connected. Its connections were significantly to Goldman Sachs, which in turn was extremely well-connected to federal government. Its former CEO, Robert Rubin, was Treasury Secretary at the time.
By an amazing coincidence, another former Goldman CEO, Henry
Paulsen, is orchestrating the current bailout.
Significantly, the books revealed that LTCM has made itself the “chosen instrument” of, for example, the Italian government in its efforts to groom the Italian bond market in order to join the Euro. LTCM repeatedly cornered the Italian bond market with the Italian government’s tacit connivance, even though this was devastating to Italian small investors.
Dunbar wrote of LTCM that by the end of 1997: “Governments treated it as a valued partner, to be used whenever markets weren’t efficient enough to achieve macroeconomic goals.”
My questions: What governments? What goals? Are subprime mortgages just a later example?
How long has this sort of collusion been going on?
After the Panic of 1907, the U.S. Congress set up the Pujo Committee to investigate the so-called “money trust.”
Of course, that resulted in the Federal Reserve, which arguably is now part of the problem.
But maybe we should try again.
And this time look at Washington as well as Wall Street.