It Did Get Crazy In Florida
The News Press reports from Florida. “Missing garage doors. Boarded up windows. Dug up landscaping. Holes in roofs. Projects started, then abandoned. For lack of a better term, call it the ‘new blight.’ Homes, throughout the county, in gated communities, well-to-do subdivisions and starter-home neighborhoods are being trashed or stripped bare when banks foreclose on the owners. Fort Myers Realtor Marc Joseph said he’s seen it all - ’stripped appliances, stripped kitchens, carpet gone …’ But, he said, there are many foreclosures that are brand new that can be purchased for 30 to 40 cents on the dollar.”
“Maura Granger-Bohl has witnessed the problem from the front yard of her home in the gated community Gladiolus Preserve in south Fort Myers. ‘Down the street there’s a house in foreclosure. The bank owns it,’ Granger-Bohl said. ‘One day, this van pulls up and the people go inside. They start taking stuff out of the house … cabinets and shelves and anything they could carry out. They even took the garage door off.’”
“Police were called, but they couldn’t figure out who owned the home, so nothing was done.”
From CNN. “When you are called before this court, it’s the end of the line. You are about to lose your home. This is foreclosure court in Fort Myers, Florida. At this point in the legal process, all that’s needed is a judge’s signature. CNN was in court Friday to witness the process, which takes seconds. It’s called the ‘rocket docket.’ On some days the court hears up to 1,000 cases.”
“Dave Cabiness lost his home of 15 years. He stopped making his house payment in October 2007. He has a mortgage of $235,000, while his home is worth only $160,000. ‘My business decision is to take my lumps and start over,’ he told CNN. ‘We have five years of inventory of foreclosed homes here. The values are still going to continue to go down.’”
The Miami Herald. “Ferdinand Bristol, owner of a small home-repair business, lost most of his livelihood in the housing crash and feared his small home on Dewey Street in Hollywood would be next. After seeing a television ad, he turned to Outreach Housing, which enrolled him in a plan that reduced his mortgage payment by almost $500 a month.”
“Bristol said he thought his loan had been modified successfully, which prompted him to spread the word to about 20 friends, all of whom, he claims, were told to make their mortgage payments to Outreach. ”I don’t sleep at night,’ Bristol said. ‘I feel responsible. I feel miserable.”’
“Eva Etienne, a Broward County taxi driver, said she paid Outreach more than $9,300 over six months for help in saving the Miramar home she had bought three years ago for $322,000. The money is gone, Etienne said. ”I know I have to move, but I don’t know when,’ said Etienne.”
“The hope that drove thousands to sleep outside overnight in Fort Lauderdale to apply for subsidized housing turned to outrage Saturday morning as throngs were sent home empty-handed. More than 5,000 arrived hours earlier than expected and began pushing against metal guardrails and police when an announcement came that there were not enough documents to go around.”
”’There are no more applications,’ a Fort Lauderdale police officer called out over a megaphone at 8:15 a.m. ‘Your presence here is a waste of your time.”’
From NBC 6. “A South Florida organization that helps families move back into their foreclosed homes has done it again, and the family said they will not leave without a fight. The home at Northwest 8th Avenue and 135th Street in unincorporated Miami-Dade County was foreclosed as a result of a fraudulent refinance scheme by a lender, the organization said.”
“The homeowner, Carolyn Connolly, said she is reclaiming the home. ‘Down with the bank,’ she chanted.”
The Daily Business Review. “Gulben Degirmenci thought she would take advantage of the booming housing market in 2006 and upgrade to Sapphire, a condominium complex planned within walking distance of Fort Lauderdale beach. Degirmenci put down a $96,000 deposit and hoped to sell her existing condo for $400,000 to make the deal work. Then the bubble burst. These days, Degirmenci thinks she’d be lucky to get $300,000.”
“‘Basically I knew I no longer could afford to buy this place, so I was hoping I could get part of my money back,’ she said. ‘I knew I couldn’t afford to sell.’”
“Miami attorney Robert Cooper…who has filed various suits on behalf of buyers seeking to get out of purchase contracts…prefers state court where he finds judges more friendly to depositors. What about the fact that many buyers are simply bailing for financial reasons? Cooper says so what.”
“‘According to the law, it was an illegal sales practice to sell these condos and tout them as investments,’ he said. ‘The developers’ sales staffs were actively doing that. They were telling everybody they were going to be making money, ‘We are going to flip this for you,’ and people were believing that.’”
The Palm Beach Post. “The wave of foreclosures in Florida continues to batter condo and homeowner associations, which have been forced to cut expenses and raise fees…according to a survey of 1,589 property owners released Monday by Hollywood law firm Becker & Poliakoff.”
“Lenders, for their part, say such criticisms oversimplify the complexity of foreclosure. Alex Sanchez, head of the Florida Bankers Association, said members of his trade group pay assessments as they’re required to. As for complaints about lenders dragging their feet, he said a backlog of foreclosure cases means it can take 18 months to take title to a property. ‘We like to rehabilitate the property and get it off our books,’ Sanchez said. ‘We don’t want to hold property - why would we?’”
“It ain’t exactly an affordable housing activist’s dream, but the slowdown in Palm Beach means entry-level homes now are available for less than $1 million. During Palm Beach’s boom, an entry-level teardown cost $2 million, says Palm Beach Realtor John Pinson. Now, there are half a dozen single-family homes on the island for less than $1 million.”
“‘That’s something, to have properties priced under $1 million,’ Pinson says. ‘It’s been a long time since that was the case.’”
The St Petersburg Times. “In 2006, at the height of the most recent building boom, the median sale price for a home in Hernando County was $178,500. This month, it’s $95,000. ‘I’ve never seen anything like this,’” said Stuart Glover, president of Palmwood Builders, whose father started the company when Stuart was a boy. ‘It’s been three full years now,’ he said. ‘In January of ‘06, the spigot shut off. Sales just went off a cliff.’”
From Consumer Affairs. “A class action lawsuit has been filed on behalf of homeowners experiencing problems with drywall manufactured in China, just as the Consumer Product Safety Commission ramps up an investigation. The drywall, installed in homes in Florida, may be emitting sulfuric odors, potentially exposing homeowners to respiratory health problems. The emissions can also corrode air conditioning coils and wiring, posing a potential risk of electrical fire.”
“Most of the complaints have come from homeowners in Southwest Florida, although the scope of affected homes remains to be seen. Miami-based Lennar Homes, the nation’s second-largest homebuilder by volume, has confirmed that KPT drywall was installed in some of its homes, and says it is taking steps to address the issue.”
“In a preemptive strike, Lennar Homes has already filed suit against KPT, Banner Supply, and Taishan Gypsum, another China-based drywall manufacturer. In its complaint, the builder insists that, ‘Lennar stands alongside its homeowners as a victim.’”
The News Journal. “Residential construction permit activity last year fell 29 percent across Volusia and Flagler counties, including a 14 percent drop in the fourth quarter. The sliding numbers are not surprising to local home building officials.”
“‘Realtors say things are happening and foreclosures are moving, but until we get ride of the existing inventory, our industry will not come back. We need the inventory to go away,’ said Sue Darden, executive officer for the Volusia Home Builders Association.”
The Orlando Sentinel. “NewBroad Street Realty’s spacious office, on the main drag through Baldwin Park Village Center, has the latest touch-screen video monitors to show off the neo-traditional homes for sale in Baldwin Park, the mixed-use development in northeast Orlando. But right behind the glitzy office is a weedy lot that was once destined for upscale, high-rise condominiums and town homes overlooking Lake Baldwin. Another parcel nearby was planned for mid-rise condos. Both projects are on hold for now as the local real-estate market struggles to find stable ground.”
“Part of the explanation, said Scott Hillman, president of Fannie Hillman & Associates, is that higher-income buyers are having as much trouble getting a mortgage as everyone else — maybe more so. ‘Lenders were burned, so they’ve really cracked down, and you can’t blame them. For a time, they were loosey-goosey, and now they’ve gone way over to the other extreme,’ Hillman said.”
“David Welch, an Orlando real-estate agent who bought a home in Baldwin Park four years ago, said he figures his own home there has lost about $250,000 of its value since the market’s peak. ‘We contracted [to build] at $650,000, before the real blow-up in prices, and I think it peaked at about $1.1 million. It did get crazy,’ Welch said.”
From CBS 4. “Once a boom town for development as the city fathers of Las Vegas developed it into a family friendly town. Now Forbes magazine reports the sagging economy has earned Sin City a new title – the Most Abandoned City in America. Four Florida areas; Miami/Miami Beach/Ft. Lauderdale, Orlando, Jacksonville and Tampa also made the top 15.”
The Daily Advance. “With all the money being doled out of Washington these days, some folks are angry. I received a call from a reader last week upset about the housing segment of Obama’s stimulus package. She said that she had acted financially responsible over the years and now ’selfishly’ feels that others are being rewarded for their lack of fiscal discipline.”
“She went on to say that when she purchases stock and loses money, it’s her loss and she alone must bear it. She sold her condominium in Florida last year when she chose to relocate to North Carolina. ‘I took a terrific loss,’ she said. ‘But it was my decision. I don’t expect anyone else to pay for my mistakes or lack of good judgment. I probably shouldn’t have bought in Florida in the first place.’”
‘Police were called, but they couldn’t figure out who owned the home, so nothing was done.’
This is what I’ve seen and posted in the comments about. Many of these houses are in foreclosure limbo, especially if it isn’t very valuable. And the government is just making things worse. The longer the situation drags out, the lower the price the lender can get, the more damage the property sustains. People who need to sell in the area suffer.
Way to go DC!
Ben’s right, of course.
I’ve seen entire subdivisions of these. It’s a crime, just a wasted resource.
Heck they could have dumped all the section 8 people in them…
At least it would not have deteriorated so fast
Heck they could have dumped all the section 8 people in them…
At least it would not have deteriorated so fast
You’re kidding, right?
There’s no more destructive force in the world than Section 8. Whole neighborhoods turned to ghettos.
I’ve seen it first-hand. Perhaps there is more oversight, with the bloated housing administrations now, but when the places get trashed, they usual blame the “owner” for not repairing and maintaining the property.
ALL government intervention in the housing markets should be PERMANENTLY terminated.
There’s no more destructive force in the world than Section 8.
How about Alt-A CMOs?
Option-pay mortgages
and then Sec. 8.
the original model–where they handpicked ‘good candidates’ for public housing–is the only one that works.
what about rent control?
there is an economics teacher out there who shows his class pairs of pictures and you have to try and pick which comes from a rent control neighborhood and which is a picture of bombed neighborhoods (e.g. post WW II)
the price of housing has to be kept up….no matter what.
“Bristol said he thought his loan had been modified successfully, which prompted him to spread the word to about 20 friends, all of whom, he claims, were told to make their mortgage payments to Outreach. ”I don’t sleep at night,’ Bristol said. ‘I feel responsible. I feel miserable.”’
Next up: “entreprenuers” breaking into limbo homes, changing the locks, and renting them out while claiming to be the landlords. And when the real owner gets around to finding the properties, they’ll try to collect a second back rent payment from the tenants.
One thing for sure — good times coming for those who ain’t got nothing, and so have nothing to lose. Bad times for savers, no matter how careful they have been.
WT
ALERT see this at the end:
“former mortgage brokers and real estate agents”
Same article.
“Loan modification companies offer, for an upfront fee or monthly retainer, to negotiate with lenders to save homes. The pitch includes assurances that billions are available to bail out homeowners — and that lenders are eager to avoid foreclosing.
In the worst cases, the firms do nothing and pocket the money. Others make an earnest but unsuccessful attempt to help, then refuse to refund clients’ money. Either way, homeowners lose thousands of dollars they could have paid their lenders.
Steve Dibert, who examines delinquent mortgages for signs of fraud by the broker or lender, said the number of illegitimate operators has multiplied as the mortgage meltdown has worsened. His project, called MFI-Mod Squad, is a clearinghouse for complaints.
Most people jumping into the business are former mortgage brokers and real estate agents, he said.”
——–
Words, ehh, escape me… ehh. help.
Like a dog that returns to its vomit…
Or like a dog that eats its own poop.
From one fraud to another… this is what happens when the law is slow or unwilling to prosecute white collar crime!
We “fiddle” a little with the track switches and signal the run-away freight to come down the grade at full speed…all is well ?
“From one fraud to another… this is what happens when the law is slow or unwilling to prosecute white collar crime!”
Like Bernie Madoff … $50 billion in con games later, he still lives a life of luxury in his Manhattan penthouse!
Doing time is for the little people, same as paying taxes. How droll. Fetch me another martini would you Jeeves.
There’s already a guy in Florida who moves homeless people into foreclosed homes. They pay nothing and he makes nothing due to him being an activist. His name is Max Rameau if you care to look it up.
IMO, activists like Max Rameau are doing something of a public service - housing homeless people in empty, abandoned houses, something the government apparently won’t/can’t do. And they are not charging outrageous (and fradulent fees) to do so. No comparison to the rampant white collar organized crime that is being ignored (again) by govt “regulators”.
Do you think they can afford to pay for their utilities? Or its just a roof over their heads. I can only imagine what the bathrooms would look like with no water turned on!
Many of the homeless in Fla. are on disability and get some sort of check. (Problem is when they want to spend the whole check on likker + coke.)
@potential buyer,
Nasty as a flop house with no utilities turned on must be, I bet it beats a cardboard box under the freeway any day of the week. That said, I’d much prefer they be housed in state mental institutions, where sanitation, food, medical & psychiatric care are provided.
@not a gator,
I’m know a high % of homeless people have drug/alcohol and/or serious mental problems. Thing is, there are drug-addicted, mentally unbalanced people in every country. And yet, only one industrialized country (US) seems to have trouble providing basic shelter for them. Ditto for providing all of its citizens the most basic, bare bones universal healthcare coverage. But when it comes to Wall Street and overseas military adventures… THE SKY’S THE LIMIT!!!
I’m“I know” or “I’m aware”.“That said, I’d much prefer they be housed in state mental institutions, where sanitation, food, medical & psychiatric care are provided.”
Harm, it used to be that way but our court system decided it was unconstitutional at least 30 years ago.
And yet, more help from Washington (Maimi Herald article)
“While legitimate firms can indeed help borrowers wade through the tricky loan restructuring process, housing advocates and state regulators suspect that a large number of businesses offering to help consumers modify their mortgages may be predatory. Some fear that the $75 billion plan President Barack Obama announced last week to subsidize new loan terms for millions of American homeowners will draw even more shady operators to the niche.”
I am against all modifications, but if they have to be done, there is a simple solution to this. They should eliminate all middle men and have modifications done directly with Fannie and Freddie.
At the typical working pace of govt agencies, and when you realize that such agencies have an excessive chiefs-to-indians ratio, F and F may have enough staffers to handle 1,000 mortgages a month between them.
The pipeline would be empty somewhere around, oh, say 2209.
“will draw even more shady operators”
Is that even possible? How can they get any more shady than they already are? Then need to shut those very official sounding numbnutted bastards down ASAP.
They need to say: No 3rd Parties are -authorized- to negotiate on your behalf. Deal DIRECTLY with your lender!
File FTC complaints on the web and TV ads; contact the USPS for any solicitations that arrive by mail.
USPS has the strongest penalties–the words “mail fraud” ought to deliver the proper chill.
FTC is pretty good about following up on complaints and does have the power to shut these jokers down. I have been remiss–should have filed a complaint about that stupid “Obama stimulus” ad on here (but I kind of wanted Ben to get the money). FTC action in rare cases results in prison terms. However, if these jokers are dumb enough to send their scam through US Mails, they may be going on an all-expenses-paid trip to the Big House! In the mean time, FBI will be slowly catching up to their li’l frauds during the boom time.
But somebody has to file a complaint. HBBers, if you know ANYONE who has gotten fraudulent solicits through the mail, PLEASE urge them to contact the USPS at once.
not a gator,
It’s almost as if we’re allowing the creation of a “Fraud Farm League” where fresh recruits are brought under the wing of more seasoned con-men to make sure there’s a fresh bumper crop every year?
Many times in a fraud case regulators find that victims get scammed a -second- time by the same cons promising to get their money back! Anyone seeing a pattern here?
Many of the MB’s that are now in serious legal trouble had no previous criminal record ( let alone financial fraud ) and had been in the business in some cases less than a year before they “learned the ropes”. In my mind there’s nothing about the current way mortgages are handled left to salvage. How did we get to this level?
I’m with not a gator on making reports to USPS in the case of suspected mail fraud. I know from personal experience that once the Postal Inspectors get involved, there’s gonna be trouble.
Back story: I got ripped off on eBay nine years ago. Since part of the transaction took place by mail, I sicced the Postal Inspectors on the seller.
Seller turned out to be someone other than the gal I was dealing with. She was working in concert with the mastermind of the scheme. He got sentenced, had to liquidate property in order to pay restitution, and oh, did I enjoy that restitution check.
“mortgage broker” as a profession simply should not exist… all they did was match borrowers to lenders, which the borrower could have done themselves with a computer. The enormous fees they were paid were money down a rat hole. Perverse incentives.
there’s another story I just caught in the New-Press about a house party in a foreclosed home where the revelers did $75,000 damage - yeah, Fort Myers -party town.
http://tinyurl.com/an7c53
I’m going to visit my mom in Fort Myers next weekend - I’ll give a Dallasite’s perspective on the carnage.
RE: More than 5,000 arrived hours earlier than expected and began pushing against metal guardrails and police when an announcement came that there were not enough documents to go around.”
”’There are no more applications,’ a Fort Lauderdale police officer called out over a megaphone at 8:15 a.m. ‘Your presence here is a waste of your time.”’
Wimps…
The Brits and Euro’s would have brought their sacks of rocks and bottles, and let their displeasure be known to the gendarmes on duty.
US sheeple bleated a few times, rattle their fences, and then scurry back to their “debtor’s prisons”, er…underwater home’s to watch a re-run episode of “BattleStar Gallactica”.
‘…and then scurry back to their “debtor’s prisons”, er…underwater home’s to watch a re-run episode of “BattleStar Gallactica”.
Well, someone sure is frakin’ grouchy today. And it’s Battlestar Galactica’. One ‘l’.
Go drink some beer and relax, is what I suggest. Fantasize about ‘6′, that’ll help.
I prefer to fantasize about Starbuck myself. Or at least I did before she became all weepy, back in love with a Cylon, and hoping to be a Cylon herself. They just don’t make women like they used to.
I am kinda infatuated with Starbuck myself. But, you know, bink, cheer up. She’s a complex gal. I’m pretty sure she will soon lay off the ex-wifely ministering and crying and crap and be right back to drinking too much and shooting people. Then we can both go back to thinking about her.
While you guys are fighting over 6, I swoop in for De’anna! And then I have her dress up like Xena. Hey Luuuuucy!
And PLEASE NO BSG SPOILERS! Some of us have to wait for Netflix. Thanks.
MrBubble
I like the ORIGINAL Battlestar Galactica. And Buck Rogers, too!
I like the ORIGINAL Battlestar Galactica
AKA Cattlecar Ponderosa. Well I’m glad somebody likes it.
Well, I like the original ‘Battlestar’, too. That’s understandable. The new one is a zillion times better, but oldies are goodies.
But you also liked the old Buck Rogers? The ‘old old’ version of 1950–I saw part of that once, in college, had a nutter boyfriend who was one of those crazy people who get obsessed with scifi lore and history and he got it from some arcane source, unlike me, who is totally and entirely reasonable and balanced about scifi stuff*. Or do you mean the ’sort-of old’ version, with Gil Gerard? Eric Gray? And the stammering retarded robot with the metal pageboy? And the stammering retarded robot’s even MORE annoying bossy necklace what was alla time spouting dumb thoughts in a prissy accent?
Hahahahaahah! That’s funny.
*I once tried to make a metal exoskeleton so I could be the utterly awesome robot girl in ‘Metropolis’. I only quit when I almost chopped off a thumb.
I have Caprica’s (season one) red dress, her platinum wig, and contacts to darken my eyes to Tricia Helfer’s hazel colour. My partner freaked out when I appeared as Caprica Six without any warning - not a fan of Caprica, terrified actually. Fun, fun, fun.
‘I have Caprica’s (season one) red dress, her platinum wig, and contacts to darken my eyes to Tricia Helfer’s hazel colour. My partner freaked out when I appeared as Caprica Six without any warning - not a fan of Caprica, terrified actually. Fun, fun, fun.’
I am so in love. In a platonic way, of course. Mostly.
Seriously, though, I completely approve. From my own experience, appearing ‘without any warning’ is necessary to the presentation. By ‘freaked out’ do you mean screaming? Crying? Ran out the door and climbed a tree?
Tell us all more about your activities! I sense there’s some fascinating stories that will enhance a rainy day.
First she did a doubletake - (obviously I couldn’t have been anyone else in our house in our little village at the edge of the world) - but she didn’t “recognize” me underneath the persona. She admitted it was an amazingly effective portrayal, especially with Caprica’s cold, toothy, great white shark smile, but it gave her the willies.
The Caprica Six character is easy to do because it is all artifice. Natural Tricia (Natalie Six) really doesn’t look like Caprica at all. Tricia has custom wigs - that she hates - and has been through a few (the bleaching in season one made her real hair break and fall out in clumps). But consumers can get the synthetic version - Wigs by Pierre 578 “Billie” in Light Blond/HRR which is an alarmingly good match. Certainly good enough for a BSG party or Halloween.
Oh well, no more Caprica Six at home. But with the hazel contacts, I can part my hair in the middle and look like Natalie Six. Bwahahahaha
Ok, so we get bored here. Yes, we could have some fun on a rainy day in the PNW
Hmmm, post got eaten
Try again.
She did a doubletake as she couldn’t “recognize” me underneath the get up. Admitted it was astonishingly effective, especially when I flashed Caprica’s great white shark smile. But “Caprica” gave her the willies.
Oh well, with the hazel contact lenses, I can easily be Natalie Six. Bwahahahaha!
The Caprica wig is from Wigs by Pierre 578 “Billie” in light blond/HRR. Quite good enough for BSG parties and Halloween.
Best hopes for fun on rainy days in the PNW
RE: Go drink some beer and relax,
After runnin’ thru the Beantown Glob and WSJ early AM, the last thing I am is “relaxed”.
Think I’ll go get a Mike’s Hard Lemonade though.
BTW-”Battlestar Ga”L”actica is a sop To SFGal for yesterday.
Personally, I can only handle re-runs of Seinfeld and the 3 Stooges.
Oly –
I see below that you are a Fritz Lang fan. We both seem to go in for the same Tarkovsky, so do you have any other Lang faves? The only other I’ve see is “M”.
MrBubble
PS: Do you hear Kraftwerk’s “Metropolis” when you see the word? Do you hear Queen songs from the 1984 re-make? Or is it just the man in my head or the mariachi static on my radio?
There is a reason Homeland Security has established a domestic force with the U.S. military, and with crowds like this gathering, no surprise. How long will the populace be placated with beer and television?
Instead of quelling citizen uprisings, security could better be deployed at our borders… but that assumes Washington shows some leadership out of the quicksand.
Otherwise, 5,000 pushing and shoving may look, in retrospect, like a Zen prayer gathering.
With beer and TV? A long time, I think. The original bonus marchers asked for “beer and bonus”, and I presume the call for bonus was so they could buy the beer
Seriously, if the best a bunch of unemployed, disgruntled ex-military can pull is to camp out on the Mall and moan about the pharmacologically active substance ban du jour, and this is in the “pull ‘em up by the bootstraps” early 20th century, before suburbs and “you only pay if you win” lawyers, I think it’s safe to say that any civil unrest we see here is going to be more on the level of bathos than pathos.
Not everywhere is as laid back as Gainesville.
touché
Here’s Case-Schiller for Miami graph.
http://www.miamicondoforum.com/?p=1270
If you click graph it zooms.
I love rollercoasters!
Even places that supposedly didn’t bubble are down around 10 percent.
I’ve never seen anything like this,’” said Stuart Glover, president of Palmwood Builders
It might be a result of having your head up your ass for 40 years.
He probably wasn’t alive in the 20’s to see it the last time, but he could have read about it.
He only had to be lucid during years 2000-2006. That genre is when he should have been saying “I’ve never seen anything like this” making current events seem much more sane.
“…….stopped making his house payment in October 2007….”
So, this guy has been living rent-free for almost 18 months? If I could have done the same with my rent payment, I’d have 20 grand plus hidden somewhere. Which would make a nice down payment on a house out here in flyover country.
Great……..millions of people squatting for years at a time, rent-free in foreclosed homes, while the rest of us dumb-sh#ts pay rent, How does this change the rent-to-own calculus?
“Dave Cabiness lost his home of 15 years”
From previous just a bit, but how do we explain ‘this’ guy’s situation? He’d been making payments JUST FINE for a decade and half and now he’s SOL? Was it b/c he went 100% Financing in 1994? You know back when -everyone- made a minimum down payment of 20%?
I know, I know, he HELOC’d the hell out of the place, that’s only too obvious but I think stories like this merit further examination as we continue to lean mightily on the impact of Zero Down.
X-GSfixer and ALL my fellow HBBrs
X-GSfixer wrote this:
“’…….stopped making his house payment in October 2007….’”
“So, this guy has been living rent-free for almost 18 months? If I could have done the same with my rent payment, I’d have 20 grand plus hidden somewhere.”
—-
—-
“I’d have 20 grand plus hidden somewhere.”
And, this is EXACTLY what they ARE DOING.
I have been saying this for a while. This is COMMON in South Florida.
It is UNDERreported. Guess they figure they have some social responsibility to not report it too much. (whatever)
The maintenance/engineering guy in my building stopped making payments last year and is putting money into the stock market and suggesting to others in my building that they do the same. Condos in my building sold North of 450K.
Add this to the incentives from Washington to not to pay and this throws a monkey wrench into a lot of scenarios.
“The maintenance/engineering guy in my building stopped making payments last year and is putting money into the stock market and suggesting to others in my building that they do the same.”
How is that stock market thingy working out for him?
LOLOLOL
got to be better than the mortgage payment thingy would have gone. He can get Obama to pay his mortgage while he buys crappy stocks. Everybody wins.
How is that stock market thingy working out for him?
Ironically, better than paying rent.
The depression showed the only way to fix this is to quickly get the homes into the hands of those who can afford to maintain them. It doesn’t matter if its at 10 cents on the dollar. Unoccupied homes quickly create blight and slums.
What’s worse is the sheeple seem to be doing this as a herd.
Interesting times ahead…
Got Popcorn?
Neil
I just know this Housing Horror Show isn’t going to end well…
Can I have my popcorn to eat under my blanket ?
But for 15 years he DID make the payments! So 180 loyal and timely payments, made-on-time. Can’t speak for others but had that been me I’d be fighting tooth and nail.
My guess is that a lot of people that are simply blowing off payments to stockpile cash are probably more thinking along the lines of setting themselves up as drug dealer or smut producer than putting it into the stock market?
+1, X.
Why are the begging-to-be-asked follow-up questions never posed in these articles?
“You’ve been living rent-free for 18 months?”
“Why is your mortgage triple what you paid in 1992?”
“Where’d all the refi money go??”
“How much of the fraudulence in your refi wasn’t written in the fine print above where you signed?”
Where is the sob story in all this??
So they have to f***ing rent now.
Just like me.
Thanks to them.
“My business decision is to take my lumps and start over…”
That’s what my decision could very well be…and soon.
Wow! Are you saying what I think you are saying?
I really don’t see the value to taking a hit beyond my 20% down payment. Business is slow and making ends meet is difficult. So yes, I’m saying what you think I’m saying.
Bad Andy,
You’ll never hear anything judgmental from me. Again, even for determined bubble bloggers, bubble sitting ain’t easy and “renting” isn’t what it used to be! Whether your own decision or fatigue from having weak handed LL’s sell out from underneath you, it’s exhausting.
Very recently a principle and founding member of our local bank went completely belly-up. Don’t get me wrong, after forcing me into a “buy or move” scenario I haven’t shed a tear for this clown. I’m a little upside down, HE is out in the street w/ eternally f’d up credit and a collapsed empire!
I keep trying to tell people there aren’t any “winners” here but…
Hey, I’m living proof of if you can’t afford it, you just can’t afford it. The mortgage alone isn’t my problem. Add in the taxes, insurance, and HOA and I’m paying out more than is coming in. As soon as the savings is gone obviously I can’t keep that up.
Bad Andy,
Keep in mind what realtwhores said for about 3-4 years as this thing inflated. “Careful what you wish for, if RE plummets in value we’ll ALL be screwed!” ( or words to that effect )
More and more I’m coming aware that unless you’re already fabulously wealthy, have zero leverage in real estate and critical mass to live off THE most conservative of investments, we’re ALL going to dread this!
At what point is being a renter no longer an advantage? When you’re out of a job and burned through your savings/dwindling unemployment benefits and can’t pay your RENT, how is a defaulted GF any worse off than you? Or are we all hoping it all stops just short of that?
Getting tempted to sell because I don’t want to have to deal with maintance at some point.
“At what point is being a renter no longer an advantage? When you’re out of a job and burned through your savings/dwindling unemployment benefits and can’t pay your RENT”
You’d actually be better off in a home going into foreclosure, at least you could stay there rent free for many months. If you rent and can’t pay, you are out in 30 days unless you actually want to deal with the court system and eventual eviction. And I suspect your foreclosure would look better on your credit report than your eviction.
‘Add in the taxes, insurance, and HOA and I’m paying out more than is coming in. As soon as the savings is gone obviously I can’t keep that up.’
Nope. You can’t. And it probably makes little sense to shoot your savings wad all the way to empty, before you make that choice.
Sigh. Things are getting difficult, no doubt of it. I have heard a couple sad stories just in the last few weeks. This is people I know, not a buncha deliberate as*sholes, because I don’t consort with deliberate a*sholes, (unless it’s my kin, and we can’t help it, that how we was made); No, no….these’re just regular people, neither stupider nor smarter than your average bald semi-evolved monkey, doing the best they can.
The PNW–that’s where I am—was late to the ‘Consequences and Collateral Damage Party’, but I shall hereby notify you all:
We’s catching up. And we’s catching up hard.
potential buyer,
Fair enough! As we’ve seen from recent reports there are people out there living rent free for upwards of 18 months? ( Try doing THAT in an apartment complex! )
But my broader point was that “Unemployed w/ NO Prospects” is pretty much the same for both renter and loanowner. More broadly still, even if you -are- a true homeowner, how is it in the Win Column when the brunt of your neighbors are being foreclosed/evicted and *not paying their HOA’s/taxes?
Maybe the “survival nuts” had it right all along? Other than that crowd, I don’t see a-n-y-o-n-e walking away unscathed.
Perhaps the mortgage industry lobbyists could write a “Taser FB & GF Non-Payment Law”
Squatter at 4 o’clock high…Light him up… zap…zap..zap
“The hope that drove thousands to sleep outside overnight in Fort Lauderdale to apply for subsidized housing turned to outrage Saturday morning as throngs were sent home empty-handed. …After the crowd left, Northwest Fifth Avenue was littered with McDonalds bags, Gatorade bottles, strollers, plastic lawn chairs, coolers and comforters — enough to fill three dumpsters, English said.’
Hmmm. I’m beginning to perceive what some HBBers mean when they lightly mention a passing disapproval of Section 8 renters. THREE FULL DUMPSTERS of crap?! Just sorta slobbered all over the place?
Hooray. Yay. The lucky, lucky future neighbors of these folks…
My experience with Section 8 renters has been they rarely pay their portion of the rent on time and leave the place a complete and utter mess. I’ve helped manage a few different properties like this.
And once things go down hill and you try to evict, don’t expect anything of any value to be left undamaged. I have a friend who had a section 8 renter he couldn’t get rid of.. she kept repeatedly breaking his appliances. There was nothing he could do but keep paying for repairs while the eviction process crept through the system.
But most Landlords are DUMB repeat DUMB and would never consider paying her to move.. in exchange don’t damage anything
but then most landlords who rent to section 8 are DUMB.
Section 8 to a serious landlord:
Govt. money always comes on time, anything you can get out of the tenant is gravy
Unfortunately a lot of the time the tenant is responsible for 30% or more of the rent. Sure when the tenant is $100 and the government is $700 it’s fine. But when it’s $200 from the tenant and $300 from the government…you may as well not rent it at all.
Sure, lawn chairs, coolers, and strollers aren’t terribly expensive items, nonetheless they do cost money and the fact that they were left behind like that during tough times should be a blaring siren to those that think they can legislate fairness and impose an agenda of blatant social engineering.
It is not just Section 8 renters that litter. Go to your local suburban soccer field at the end of the day and see all of the bottles and other trash left behind.
My experience is that Americans of all classes expect someone to pick up after them. This may be common in other cultures, but I don’t have direct experience to confirm it.
I’ll bet that there were no trash bins available for folks that are inclined to use them. And after having been there all night I’ll bet most of them were not entirely alert and left with a righteous anger.
I can see it now - “Honey, where’s the stroller?” ” I thought you had it.”
All of the bottled water that came from NYC’s drinking water supply and Starbucks cups.
When the niece and nephew were playing soccer at the local playing fields, parents, teams and coaches made sure trash was hauled out when the games were finished.
It never ceases to amaze me how often people leave trash behind.
Whenever I head out to the woods I take extra bags and police up trash in the immediate area. There’s always litter even when you hike 10 miles into the back country.
When I go shooting, I collect tons of brass casings and pick up my own brass. Good brass that can be reloaded.
My philosophy is pack out your own trash plus extra. If everyone did that we’d at least have a picked up environment (putting it all in a landfill is another story).
Good on ya, absolutely. I pick up trash, too. My own theory is that litterbugs should be captured, strapped down, and forced to consume their litter. Cigarette butts, shoes, used diapers, ALLLLLL of it.
But, you know, I’m not a barbarian. They can have salt, mustard, and all the water they need to help ‘em get it down.
Best idea I’ve heard yet! Can we make them eat dog poop too?
Yeah, I’m with you on the lucky neighbors part. There’s a Section 8 house not far from here. Been a never-ending source of problems to the other people on the block.
Except, of course, for the family of (I suspect) illegal aliens with a passel of kids who live across the street. The Section 8 offspring are their playmates.
The other parents keep their kids away from these two houses.
The other parents keep their kids away from these two houses.
You are breeding racism and bigotry.
Wait till some government agents find out about it!!!
Keep in mind, you have a “community organizer” in the White House. He will get the rest of the “community” to get you in line with our multi-cultural, multi-racial, nation of immigrants (except for the majority of us born here), fairness-mandating, socially-sharing, “it takes a village” community organization. So, there!! We’ll get you to be more “tolerant” of other people.
If I hadn’t seen this was Broward, I”d think those people were from my neighborhood.
This used to be a really peaceful, clean neighborhood full of respectful neighbors.
Slowly, lowlives have crept in amongst the otherwise hard-working blue-collar and low-paid white collar folks. Lawns are going to crap. Maintenance is a thing of the past with rot and decay. And somehow, after years of spotless streets, it’s the McDonalds and KFC and Wendy’s litter along with beer bottles left in parking areas and loud bass in cars driving by or parking for necking, a bass at volumes that rattles the glass in the house.
YOu know, we pay a lot that could go to our retirement to keep the place neat, the lawn tended, the roof tight, and the house painted. It irks me no end that Section 8-ters (and yes, theyve moved in) who don’t give a damn cause it’s not THEIR property, so why should they worry about litter, etc–they’re messing it up for everyone.
I want to help the needy. But why do so many of the needy seem to be the yelling, diaper-poop left in street, junk food refuse strewn types in my neck of the woods? Geesh.
Could someone please stimulate me or just loan me some money. I want to go buy something and I have run out of money and credit. I cant pay you back but I will be helping the economy. Just a little patriotism is all I ask.
Well if you wanted stimulation you should have come to Vegas.
(that wasn’t an offer. I’m just sayin, it’s Vegas)
“The homeowner, Carolyn Connolly, said she is reclaiming the home. ‘Down with the bank,’ she chanted.”
Your real problem Grandma is those 10 mooching relatives you are supporting.
Why all the hostility towards the banks lately?
I mean, after all, just a scant few years ago the lenders were these folks’ best friends - helping to unshackle them from the bondage of equity. Where do they think all those shing new baubles came from? If they looked at their paychecks they’d have realized that it wasn’t from their labor.
Really. If they are mad at the people they aren’t paying back, they shouldn’t be mad at the bank. They should be mad at all their neighbors. After all, that’s who is going to end up screwed.
It was that way during the depression. Then they wondered why it took so long to restart the financial system…
Its going to get interesting as the sheeple relearn why one should save for a rainy day…
Got Popcorn?
Neil
You act like that money was a loan. Everyone knows that home equity is a gift from the money fairy and not withdrawing it is like the worst thing you can do, ever. It’s terrible, horrible, just awful. I heard it is just like stuffing your money in a mattress.
Wickedheart,
Well exactly. At the very least home equity loans are to be paid back by ’someone else’ as you move up the property ladder.
If you are a person that has a home that’s fully-paid-for, I’d say you were a person that didn’t manage their finances very well. ( Did I get DL close enough? )
Yeah, you got it.
Back to Grandma. There were 4 other adults besides Grandma and Grandpa. Oh and two teenagers too. 6 people capable of working. Why did Grandma have to take out a reverse mortgage? Who does this to their Mom and Dad?
I have this creepy neighbor who lives with his Mom and Dad, 45, no job and lives with his parents. He used to come over all the time before he found out we have lesbian kooties. I got to talk to your husband it’s important. Translation, important means creepy neighbor needs beer money and wants to sell us crap wood. My husband told him he couldn’t afford his wood because we have 2 kids in college. He told him we should throw our kids out, seriously, he told him that.
‘He used to come over all the time before he found out we have lesbian kooties.’
That’s funny. And he wasn’t over even more, once he found out?
That guy really IS weird! Stay the heck away from him!
Too funny! Yeah, we have plenty of examples like that in OR. 45, living at home ( w/ NO plans to leave ) but they don’t get your… lifestyle?
Then you tell them you don’t have a woodstove and spend the majority of your time rummaging for preservative/toxic soaked “things that will burn” and they REALLY freak out!
We got the lesbian kooties from our neighbors. Creepy neighbor wanted to borrow a chainsaw, yeah, a chainsaw! Who borrows a chainsaw? Somethings you just don’t borrow, toothbrushes, underwear, chainsaws. Anywho, when my husband told him we didn’t have one but our neighbors did he looked horrified and said ” Haven’t you heard they are lesbians? My husband said yeah, so? Creepy neighbor hasn’t spoken to us since. Man I wish I knew it was so easy.
He was pretty upset with me when I told him I didn’t want to burn plywood and landscape timbers. They actually have family members camped in their driveway now!
My oldest daughter who visiting came in the house and complained he was leering at her. Later on he tells my husband, ” I don’t want you to think I’m a pervert but your daughter is hot.” I don’t think he’s the brightest crayon in the box…
Memo to Country Gardens: nobody lived there because of your “awesome” location. They lived there b/c it was cheap. You have raised your rent too high for your out-of-the-way, non-quiet, ancient apts. Kindly lower it or enjoy your 15% vacancies.
Memo to the Polos: looks like you missed a few words on your roadside ads. It reads: “5 minutes from UF.” I believe that should read: “5 minutes from UF Beef Teaching Unit.”
Memo to Jefferson At 2nd, re: your “ridiculous amenities”: it is indeed ridiculous, that anyone would pay such a premium to live next to Porter’s
QuartersCrackshacks & 24-Hour Prostitutionarium on account of a couple of treadmills, a key-entry laundry room, and a multi-deck parking garage with spooky corners.You know how you drive by these places, in particular …The Jefferson… with its spectacular view of the dojo! And you’re like, “Hey, look, I guess they did sell some of this after all, there’s bikes on balconies!” Well, it finally occurred to me. The career of condominiamanagment now consists of running around town stealing expensive-looking bicycles so you can throw them on street-facing balconies of un-bought condos. EVERYBODY LOCK YOUR BIKES UP GOOD UP IN THAT GAINESVILLE ‘CAUSE CONDO PEOPLE BE STEALING THAT ASS!
When are the shacks EVer going to get affordable again in this fackackta town, omg? I ain’t paying no “price reduced!!” $190,000 for your tinykins chert house, fools!
One of my all-time favorite bubble articles was the San Diego piece about a condo tower that apparently staged eye candy in the adjacent building during a sales event. A cheerleader-taut woman doing aerobics in a sports bra and spandex, and a buffed-out shirtless man reading a book. Some of those places wouldn’t sell now if Bar Refaeli lived next door.
snake charmer,
One of my all-time favorites too. The comments added by the poster were simply golden. The cheesy way the whole thing was staged to leave the sucker ( er, uh… “buyer” ) think they were buying into this totally hot lifestyle was a sure sign SD was going down in flames!
DJ pumping out the groove and plenty of alcohol. Oh and neg. am loans!
Do you have a link? I looked for the article a couple of months ago, but couldn’t find it.
‘A cheerleader-taut woman doing aerobics in a sports bra and spandex, and a buffed-out shirtless man reading a book. Some of those places wouldn’t sell now if Bar Refaeli lived next door.’
I somehow missed that article, and that makes me sad, because that is funny as blazes. Also sad.
Man. And I bet it worked good, too, and that makes it even funnier and even sadder.
Sometimes I think that we all made a big mistake when we climbed down out of the trees and let all our fur fall off and decided to use the opposable thumb thingies to do tricky obscure crap like smelt ores and button shirts and write option-ARM loans.
In fact, I’m getting more sure of it by the day.
I heard dat, bro’! Now I know where my damn bikes went last summer. I kept expecting to find them all up in some ditch somewhere.
Anyway, Jefferson is just stealing Campus View Condos’ shtick. They had the ‘bikes on balcony’ thing going on back in 2006.
Check out the foreclosures on Realtytrac. Then check out the listings on Gainesville.com. The bull hockey flies fast and deep in Hogtown.
PS–My private name for the Gainesville Dojo is Gainesville depot, ’cause it’s an old rail depot. Get it? Okay, maybe you had to be there.
I love the new “snarlin’ dog” depotdojologo. It’s so graphically punchy, it just has to be raising some property values. Is Campus View the ones they built on that annoying little cut-through road from Archer to Depot road, you know what I mean, you’re headed east on Archer and you stay way right and then cross 13th street to get on Depot which you only want to be on in the first place because you didn’t have the sense to take 16th? And then you try to race up to the light like you used to be able to when this was nothing but a little singlefamilyhome hamlet and there were just a few stray pets and toddlers to worry about but now you can’t because now that it’s condowonderland there’s 43 contractors parked in the middle of the road with their damn duallys and you end up having to wait about 9 minutes for that “no right turn” redlight where it tees by the PKYonge Laboratory School and training ground for the addicts of the future? Is that Campus View, or is Campus View the spectacular red New Orleans looking stuff over by the Krispy Kreme across the vaaaaaast empty field where the thriving commerce used to take place before we all lost our minds?
T-Shirt Idea for Florida meet-up:
Don’t blame me, I voted for Mexican drywall!
Don’t blame me, I voted for Ron Paul.
Don’t blame me, I’m a renter.
Don’t blame me, I’m a retard and I talk like Barney Frank.
Don’t blame me, I didn’t buy everything in sight on credit like a good little american.
Or, how about…
Don’t blame me, blame my frugal parents.
Don’t blame me, I live within my means. (Like my frugal parents.)
How about:
Blame me: I curbed my consumption.
Don’t blame me, I just mocked it all the way down!
Right now in Florida things definitely have the feel of a bewildered society eating its seed corn to stay alive. Culture here has always been thin, and I don’t have a good feeling about what’s going to happen once our remaining resources are gone. In a way we’re fortunate to have had a cold winter, because hot weather and hot tempers are a dangerous combination.
For cryin’ out loud. It’s a CYCLE, people! It’s not gonna stay down forever.
I mean this respectfully, but you should consider yourself fortunate that you are both American and a member of a generation that tends to believe that. I am repeatedly on record as saying that, especially in this state, we will not return to “normal,” because normal has permanently changed. Time will tell which one of us is correct.
The real question of whether we will return to normal hinges on the question of what “normal” even is. It’s probably not something any of us have seen in our lifetimes, so I tend to agree with you, snake charmer. BIC is probably still dollar-cost-averaging into the stock market.
Agreed;
I think what we had for the last 25 years was NOT NORMAL, and what we going to transend to is normal, and your NOT going to like it…
People are going to have to work for their money, and not borrow it…
“”"Debt is going to bring this country to it’s knees, there will be tears..”"”
One of the ways NYC handled the housing surplus during the depression was to pass the “new” tenement house law. Every unit had to have its own plumbing, and units had to have central heating, by a certain date.
With rents low, some landlords found it was not worth upgrading. So all through the Lower East Side, “old law” tenements were boarded up above the commercial ground floor.
What would be an equivalent?
Reccomend visiting the Tenement Museum on Orchard street.
http://www.tenement.org/
It was one of those buildings that was sealed up for decades. Interesting exhbits, as they were able to trace the history of the actual families that lived there during different waves of immigration. Is set up to show the living conditons at each time period. Very much worth a visit.
1. I get a kick out of everyone blaming the big banks and wall street. Before things got that far up the ladder there was an RE agent and mortgage broker from a small finance company who then sold off the paper to the larger institutions. The latter trusted the former to do due diligence.
2. The Obama bill was not intended to bail out the masses; All smoke and mirrors. It was intended to stem the foreclosure tide not to help the sheeple.
3. I for one am amazed at how this circus is evolving and the speed of some of the events. It seems like it is only this week that the talking heads are starting to realize that this is globalization event. Next?
Bawahahahaha, Are you serious? So you are telling me that the so-called “smartest guys in the room” had no clue what they were investing in and they had no obligation to do due diligence. Come on.
I’m going to have to agree w/ salinasron here. Early on, it became obvious that there was no way local lenders could handle this kind of volume. Where to go w/ all this re-fi frenzy and flipper mania?
Who can handle that brand of volume? Hmm..?
The observation that this should have been more closely monitored at the point of origination was the only correct one Hank Paulsen had! The more time goes by the more we’re getting whistle blower affirmation that they -were- skeptical of appraisals etc. but by that time there was intense competition for deal flow. Oops, too late.
There’s no thread like a Florida thread! I’ve been lurking here for some time, and would like some advise from the Fla locals with on the ground knowledge.
We are thinking of retiring to SW fla maybe this fall, Pinellas, Manatee or Sarasota preferably. Is it still best to plan renting for a year? From what I’ve seen on the broker’s sites, sellers are still dreaming, while foreclosures are either in not so hot areas or being held off the market. I also think the Feds would like to keep foreclosures off the market, period.
Pinellas seems overcrowded, but has lots of activities. Are any nice parts of Pinellas, maybe the beaches or other nice areas, priced right, either to rent or buy? How about Sarasota areas like maybe Siesta Key, Palm Aire, or University Park?
Is Lakewood Ranch livable for a retired couple, or is that mostly built for young families?
Any guidance would be appreciated. I’m hoping you folks will have a meet-up some time in Florida.
why move to Fla? bad taxes there
Well, I’ll give you a tip right now. “Advice” is a recommendation that someone gives you. When they do so, they “Advise” you.
So. Advice. Even though I’m not in FL, I would suggest you rent, not for price reasons, but but for location reasons. You can’t really get a feel for the neighborhoods of an urban area just by visiting or hanging around for a few weeks - you really have to live there awhile. Rent until you have a better idea of where you want to live. Then rent there. Then consider buying. Otherwise you could find yourself buying and wishing, a year or two later, that you lived in a different neighborhood. If you buy right away it’s just that much more difficult to move.
+1 and I live in FL and have lived in many places in FL
We had moved back to Florida, back in 2006, and decided to rent before we purchased, just to check things out….
WELL!!…1 1/2 yrs later, after surveying the situation, we bid farewell to Florida for good, and moved to North Carolina..
Taxes on a $300K house are $1600/yr, with HO insurance @ $500/yr…With the money we saved from all the fixed expenses, we can vacation in Florida for 2-3 mos a year….
I’m an offical snowbird now…
‘Lenders were burned, so they’ve really cracked down, and you can’t blame them. For a time, they were loosey-goosey, and now they’ve gone way over to the other extreme,’ Hillman said.”
You mean like asking for a downpayment, proof of income, and proof of assets…….you mean that kind of extreme?
Sorry to ask again, can’t locate pics of Las Vegas.
Only lavi_d has uploaded some (in the Bits Bucket). We should designate one kind sole that everyone can e-mail their pics to, then that person should stick them all in one online album. Who was the person that did that last time? We should have all these pics added to the previous album (the CA album). Does anyone even remember who that person was? Was it Ouro Verde?
The pics from the old photobucket have now been replaced by pics of ahansen. This was the old link:
http://s292.photobucket.com/albums/mm1/anngogh/
I think Ann Gogh put them up. So I guess we should get someone (not me) to collect everyone’s pics and start up a new bucket.
IMHO FL has a long ways to go, between the years of 2000 and 2007 FL RE seen as much as 150% gain’s , Now given all he jobs and the new economy I would expect the markets to drop even further.
Great article on FT
How bank bonuses let us all down
By Nassim Nicholas Taleb
Published: February 24 2009 19:53 | Last updated: February 24 2009 19:53
One of the arguments one hears in the compensation debate is that the bonus system used by Wall Street – as John Thain, former Merrill Lynch chief executive, put it – is there to “reward talent”. While I find this notion of “talent” debatable, I fully agree that incentives are the heart of capitalism and free markets – but certainly not that incentive scheme.
In fact, the incentive scheme commonly in place does the exact opposite of what an “incentive” system should be about: it encourages a certain class of risk-hiding and deferred blow-up. It is the reason banks have never made money in the history of banking, losing the equivalent of all their past profits periodically – while bankers strike it rich. Furthermore, it is thatincentive scheme that got us in the current mess.
Take two bankers. The first is conservative. He produces one annual dollar of sound returns, with no risk of blow-up. The second looks no less conservative, but makes $2 by making complicated transactions that make a steady income, but are bound to blow up on occasion, losing everything made and more. So while the first banker might end up out of business, under competitive strains, the second is going to do a lot better for himself. Why? Because banking is not about true risks but perceived volatility of returns: you earn a stream of steady bonuses for seven or eight years, then when the losses take place, you are not asked to disburse anything. You might even start again, after blaming a “systemic crisis” or a “black swan” for your losses. As you do not disgorge previous compensation, the incentive is to engage in trades that explode rarely, after a period of steady gains.
Here you can see that this mismatch between the bonus payment frequency (typically, one year) and the time to blow up (about five to 20 years) is the cause of the accumulation of positions that hide risk by betting massively against small odds. As traders say, they have the “free option” on their performance: they get the profits, not the losses. I hold that this vicious asymmetry is the driving factor behind investment banking.
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Finally, I was involved in trading for 21 years and I can testify that traders consciously play the free option game. On the other hand, I worked (in my other job as risk adviser) with various military organisations and people watching over our safety. We trust military and homeland security people with our lives, yet they do not get a bonus. They get promotions, the honour of a job well done and the disincentive of shame if they fail. Roman soldiers signed a sacramentum accepting punishment in the event of failure. This is prompting me to call for the nationalisation of the utility part of banking as the only solution in which society does not grant individuals free options to look after its risks.
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