Bits Bucket For March 17, 2009
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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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Bernanke May Need ‘Massive’ Asset Buying to Counter Contraction…
March 17 (Bloomberg) — Chairman Ben S. Bernanke and Federal Reserve policy makers may have to ramp up their purchases of mortgage securities and other assets after the economy and job market deteriorated further since they last met.
The Federal Open Market Committee, gathering today and tomorrow in Washington, needs to redouble its efforts after the central bank’s balance sheet shrank 17 percent from a $2.3 trillion December peak, Fed watchers said. The retreat came even as Bernanke acknowledged the chance that the unemployment rate will exceed 10 percent for the first time in a quarter century.
“It takes massive balance-sheet expansion to generate significant easing in financial conditions,” said Andrew Tilton, an economist at Goldman Sachs Group Inc. in New York who used to work at the Treasury. “More needs to be done.”
This week’s FOMC meeting could mark a shift toward more aggressive monetary expansion to fight deflation after demand waned for many of the Fed’s existing programs. One top consideration is an increase in the pace and size of a $600 billion program to buy bonds issued and backed by U.S. housing agencies such as Fannie Mae, analysts said.
Other measures could include everything from purchases of Treasuries to corporate bonds, Tilton said. The Fed has already agreed to work with the Treasury on implementing a program to revive consumer and business loans, which the Obama administration has said could reach $1 trillion.
Bernanke may need to buy the whole world before this ends. The man can apparently just write a check for whatever he wants. Who honestly believes the FED really has this kind of power. When the public mass of idiots begins to question how then things will get sketchy rather quickly.
The real problem is that even if there were magically no bad assets out there ever again, we still wouldn’t go back to the stupid lending practices of yesterday. People who used to buy securitized debt won’t do it until they know the debts that were securitized have been properly underwritten. The infrastructure needed to properly underwrite that level of debt doesn’t exist. It never existed.
You can bring back some level of very cautious, keep it on the banks books lending. You can’t bring back the party.
Have a nice day. Pick up your free toaster on the way out the door.
“The real problem is that even if there were magically no bad assets out there ever again, we still wouldn’t go back to the stupid lending practices of yesterday”
And there’s a corollary to that.
Most of the actions the Government is taking seems predicated on the belief that house prices will rise again. That’s how they plan to get a return on their stimulus “investment.”
When 40% of all car sales two years ago were paid for with HELOC money, it’s no wonder that sales are down 40% this year. Lending money to the car companies won’t change the fact that there won’t be a supply of free money again until the next major boom/bust cycle (probably 40-60 years away–it takes a new generation with no memory—if the United States survives.)
I wish you were right about this, but according to this:
http://www.abalert.com/ranking.php?rid=1758
there were at least $150 billion worth of asset backed securities issued last year.
And as long as we have cautious lending, housing prices will need to keep falling to match (declining) incomes, so more banks will become insolvent.
Bubbles Ben Bernanke is just going to monetize all of it before this is over, and we’ll be stuck “enjoying” the $10 loaves of bread, $5 a gallon gas, etc.
Polly:
Well put.
To add to the toaster image, I conjecture we are returning to days when Green Stamps had value, when savings were important. That, in spite of government efforts to try to pry us free from our dollars.. with more Masterminded credit schemes.
No, the party is not coming back any time soon.
Even with the paltry interest paid for savings, those dollars still belong to the savers. There’s comfort in that.
OK, you’ve got me. What’s a Green Stamp? I clip coupons (then often don’t use them because I don’t want to eat the stuff the coupon lets you get), but I’ve never done a Green Stamp.
Kids these days. . .
You got several coupons, in the form of “stamps”, with each purchase. There were S&H Green Stamps, some kind of blue stamp, etc. You pasted them into a book which, when full, entitled you to free mercendise at a special outlet store.
Got it. Actually, one of the local grocery stores did an in-house version of that a few months ago. I got a very nice stir-fry pan. The clerks gave you way more stamps than you earned, though. I’d buy $12 of stuff (should have been worth one stamp) and get 6 of them.
Green Stamps will always have a place in my heart. My first fishing box (Which I still have) I got at the Green Stamp store when I was like six years old. It was my payoff for helping Mom paste the stamps in the little books. I was given all the one cent stamps.
One year when our house was robbed, they took all the stamp books I had filled out. Boy was I mad!
Dumbest idea ever.
Even Buffett and Munger figured out that if everyone was collecting green stamps, you should buy the company that does the stamps.
Then devalue the currency (= stamps) which they did, and shaft everything.
I once tried explaining this concept about airline miles to someone in 1995 saying it was a waste of my time since the currency would get devalued before I got anywhere, and guess what, it did!
- FPSS (has never done airline miles ever!)
When I was a kid, my friend’s mom smoked so many KOOL cigarettes that she collected enought KOOL stamps to win a KOOL sailboat (styrofoam hull probably still in a landfill somewhere unlike her KOOL lungs).
Nobody I talk to ever believes me that the ideal number of airline miles to have is always zero. You can get them if you want to (though you should never let collecting them influence your choice of airline), but you should always be trying to get rid of them as soon as possible.
Gold Bell gift stamps and Betty Crocker points. I still have some of the stuff I got for collecting those, back when I had time. Quaint, like making my own clothes back when it saved money.
Wow.. Green Stamps were huge. Stores all over. Then there were Blue Chip stamps IIRC. That started to muddy the waters a bit and it all went away.
Yes Green stamps and Blue Chip stamps.
So isn’t it true that smiling Al Gore is trying to bring back Green Stamps?
In recent weeks I have spoken with two bank managers and seven small business owners that I know. No one that I talked to has experienced credit line cuts or rate increases. I know in my case none of my two bank lines of credit have been cut, and the local bankers I have talked to say they have not been cutting credit lines, however they are scrutinizing new applications more closely. Is anyone on the HBB hearing anyone they know in business getting hit with higher fees and line cuts? Just curious.
Card Issuers Choke U.S. Businesses With Rate Hikes, Limit Cuts…
March 17 (Bloomberg) — Susan Woodward isn’t renewing the lease on her music boutique and internet cafe in Jackson Hole, Wyoming, after nine years. The reason: doubling interest rates on her credit cards.
“My business is seasonal, so we count on credit to stock the store at the end of the slow season and prepare for the busy season,” said Woodward, who canceled her Citibank and Capital One credit cards in February after learning that rates would climb to 19 percent from 10 percent. She said she always made timely payments and kept low balances.
Almost three-quarters of U.S. companies with fewer than 500 employees are experiencing a deterioration in credit or credit- card terms at a time when half of them depend on credit cards as a primary source of financing, according to a December survey by the National Small Business Association, a trade group with more than 150,000 members.
The increase in credit-card costs has forced some business owners to stop using their cards, and at the same time declining credit limits are cutting their access to cash, said Todd McCracken, president of the Washington-based NSBA. Twenty-eight percent of small businesses surveyed by the NSBA said they had their card limits or lines of credit lowered in the second half of 2008.
Bank loans are drying up as an estimated 70 percent of U.S. banks have tightened standards for small-business loans, based on a Federal Reserve
I know Europe is different, but what I hear from small business owners and on the internet is similar.
Of course some companies (mostly bigger ones) have credit problems, but those are the ones that have been walking on the edge for years, expanding their debt every time again as much as possible while lacking a viable business model; they deserve to have their credit lines cut. And probably banks are more cautious now with the millionth internet/financial services etc. startup. I don’t know any example of someone with a sound business who has credit problems.
There are other problems for small business that are far more important, like (still) skyrocketing rents, huge drops in turnover etc. (which of course partly has to do with less refi/mortgage activity) and sometimes more competition from bigger companies that get huge government handouts. In my country small business has no access to all this bailout money, but the big companies know exactly how to keep the tax money flowing in their direction.
The expectation that credit should be issued to them and at a low rate is ingrained in peoples minds but why.
Not a big advocate for banks, but who on this blog would loan this person money, unsecured no less. At what rate would you even consider it, 50%, 100%. What security could a “music boutique and internet cafe ” have to offer.
That depends. Loan them my money, no way! But, if I can take my money and multiply it 10-1 then the equation changes BIG time. Now I can take my 1000 dollars, lend out 10,000 at 10%, and; at the end of year 1, I’m already up 100%. That’s a totally different lending situation then any individual can home to emulate, and it’s the reason that banks can take such a small “spread” between what they pay for money (interest on savings) and what they make on money (interest on loans). When you’ve got a federal “OK” to leverage up that far, your whole risk model changes (and, frankly, it shouldn’t change, a bad loan is still a bad loan. But when you know that that you’ve got that kind of interest coming in, the greed begins to overwhelm you).
And don’t forget that when the bet goes bad, the banker still gets his bonus and the taxpayers get the bill.
An appropriate quote about bankers:
“Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves.” -Andrew Jackson, 7th US President, 1828
Pondering the Mess …Can’t express how much I like the quote you posted from Andrew Jackson .
It’s for tourists. I imagine they are very, very seasonal and could predict the revenues for a season just by asking the local hotels what the pre-booking numbers look like. If she bothers.
If she “bothers” ???
Most tourists are passers-by on the way from Yellowstone, they don’t even stay in town. Even if they did, hotels will not disclose their booking numbers. Even if the hotels did, two months out, such numbers change in a flash. Even after the season, some ski resorts do not disclose their numbers.
RE: What security could a “music boutique and internet cafe ” have to offer.
LAMO…probably more than a credit default swap sold by AIG.
LAMO ?
He’s speaking “Yoda” today.
I have to tell you: there are school trips to Yellowstone, and if they stay in the Park, there is not much Internet. Jackson Hole is the first town on the way out, if they go south (likely, as everyone wants to go by the Tetons). And a lot of tourists, young and old, will look for an Internet. Do you think the kids want to look at all the antlers in the main square.
This credit culture has got to stop, somehow.
Borrowing >> stocking the shelves >> selling >> pay back the bank. This is insane because you’re constantly in a hole, a little deeper each time.
Whatever happened to: save up >> stock with money in the checking account >> sell >> replenish checking account, hopefully with a little than you started with? Cash cushion. You would only need credit for start-up and carefully thought-out expansions.
Well never mind, I think I know what happened. People cost more money than customers want to spend, businesses too dependent on consumer spending, credit is inflationary etc…
The credit culture has been going on longer than you think.
Farms have operated that way for many many years.
If you include the government, the culture goes back to the beginning. The United States had credit prior to defeating the British and actually becoming the United States.
If you include religious culture, credit has been a part of our culture since the time of the Pharaohs.
I own a small business with zero debt. Everything is paid for including the land and buildings. Its tough out there. The only credit contraction I see is from the factory’s. I think they are having trouble collecting from the businesses they sell to so they are cutting back the credit lines. It also might have something to do with our location being in Bakersfield.
RE: think they are having trouble collecting from the businesses they sell
Seems the architectural crowd is gettin’ hosed.
wttp://www.boston.com/business/articles/2009/03/17/architects_say_finances_are_shaky
SH$$tty bank did the same to me 8.1% to 24% never a late or over limit in 18 years
So when my card expires in 3 years citi will give me the boot…..
They dont want a great customer like me at such a low interest rate
Will Citi be around in three years to boot you?
I just got a CD offer from Citibank today and had the same thought that Citi might not even be around, FDIC backing notwithstanding. I’ll go to our local bank for .021 for a 12 month instead of Citi’s .025. With such low rates, it’s not like I would retire on the difference anyway.
Maybe they picked up on no reportable income Don’t they give you a reason when they change the terms?
NO they have until jun 2010 to skrrew u over anyway they can, after that they have to give reasons and an appeal, that’s when the new law takes effect….
They won’t give you the boot. I haven’t paid interest on my citibank visa card in 15 years.
RE: Woodward, who canceled her Citibank and Capital One credit cards in February after learning that rates would climb to 19 percent from 10 percent. She said she always made timely payments and kept low balances.
Capital One just jacked my rate from 7.99% to 17.9% on a miniscule $17k line. Maintained the account for 15 years primarily for biz related purchases. Like this gal-ratio always under 30%. Never a late payment.
AmEx went to 10% from 6.9%. Same deal.
Again-the legit, honest, intelligent people are taking it up the wazoo because the cc biz development clowns made bad bets on who they lent money too.
And Helicopter Ben has the audacity to say the recession will end in the 3rd quarter of next year.
Ha! Ha! Only idiots can’t ready between the lines. No cc-no HELOC’S for a 70% consumption based economy.
Back to the 70’s we go.
Looks like no more nightly Domino pizza’s and chinese take-out for all the soccer mommies spoiled little brats.
Wife wanted to take advantage of Capital One’s credit card offer of balance transfer and 0-% for 15 months. Two of those months were taking up with faxing and refaxing and mailing them her “identity theft kit” of information which they never seemed to get. During this period where they were losing our information they sent us 2 offers per week for the same card they weren’t able to extend us.
Finally, the card is here, whoopee. Asked idly while activating the card if they could raise the credit line from 15k. “No. we’ll send you a letter explaining why.” I can guess: Likely because my wife signed up for it and she doesn’t work. I’m now on the card as an authorized user, but not legally obligated to pay the bill, according to the phone person. Wierd.
So they are still fronting 15k credit limits to unemployed people with otherwise good credit
Is anyone on the HBB hearing anyone they know in business getting hit with higher fees and line cuts?
None of my personal credit lines have been cut, though my interest rates were raised from around 8 to 12 percent “due to economic conditions”. I called one of my card companies, Chase, and asked for a lower rate. They said I qualified for a rate adjustment and brought it back to 8 percent. All of my cards have credit lines around 25K and only one has a balance, a few thousand at 0 percent because of a transfer offer.
A small-mid size business I know has cut all credit lines to it’s customers, primarily landscapers… COD only. They pay cash for their inventory and haven’t seen any cuts to their credit that I’m aware of. However, they are in cash conservation mode, having cut back on hours and staffing significantly over the last 6 months and delaying hiring until they see an uptick in business for the spring season. Normally, they would be going full-bore right now…
Another anecdote, a family member who runs a small tax preparation business mentioned to me that he polled all 700 or so filers he has worked with over the last few months in regards to their current employment status. Of the 700 he talked to, only 3 said they were currently unemployed. Some had seen a cutback in pay or hours, but were still gainfully employed. I realize this may not be a good statistical sampling in terms of size or demographic, as those who are paying top dollar for tax preparation are probably not disenfranchised workers. I still find these numbers interesting, as this region of Mass. has an official unemployment rate of close to 10 percent…
Father does tax prep in Florida for one of the national chains (more of a hobby). Said business is way slow.
From what I hear, this family member’s business is also down significantly from last year. I’m guessing more people trying to save money by doing it themselves…
Co-worker works part time for a guy who owns a chain tax prep business in Florida (earning extra cash to pay off credit cards, good for her). Says business is way down compared to last year. Business is closed on Sunday this year and she is only getting Saturday and a few hours during the evenings 2 days a week.
Last year she could essentially work as much as she wanted to 7 days a week until 10:00 P.M.
Maybe that’s why we got this tax service here that pays these guys to dress up in ridiculous statue of liberty costumes and work as sign spinners in front of the place. They are even out there after dark with those high power lights you use when you are painting a room shining on them LOL.
Business is way up for us in GA with insurance and taxes…issue we found is that during the bubble many CPA’s bought buildings, financed fancy computer equipment. took on lots of staff and so on..now..they can’t cut back on their prices..hubby and I have a small shop operation, with one P/T who is retired and happy to be doing something..so we are getting load of business from people/businesses who want to SAVE money!!!
Funny how those that were considered “cheap” during the boom are now looked up as “conservative” or “frugal.”
RE: Mass. has an official unemployment rate of close to 10 percent…
Yeah, somehow I don’t see the denizens of Lawrence, Lowell, Springfield, Brockton, New Bedford, Fitchburg, or any other of these massive unskilled immigrant shitholes which exist on state welfare and an underground economy of drug money and cash only services, really needing the services of a fee based tax preparer.
My dentist give me a cash discount. If I pay for a crown at the time he sends the mold to the lab, I presume he gets a better cost with the lab too.
Dennis:
That’s part of a bigger trend. More and more dentists are offering 5 percent or more for cash payments. Some had recently invested $175,000 for equipment to make same-day crowns in office so patient doesn’t need to come back and have it “seated.” My spouse had mulled buying one of those expensive units but passed, not wanting any debt.
Say ah!
And talking about dentists — mine said they were booked solid for 6 weeks (with a smile in their voice). My thought was that’s because people know they are getting laid off, so getting their treatment done now.
Like me.:-)
Calling combotechie
Potential Buyer…
Spot on observation. In central Calif., the waiting lists are growing longer at many dental offices, fueled by upcoming layoffs. Gottschalks recently decided to liquidate, for example, and a lot of the chain’s people are taking health benefits now while they can.
Biased sample. Only employed people would hire someone to do their taxes for them. Unemployed would go to free places - lots of churches help people do their taxes, for example.
My financially irresponsible friends are having their credit lines cut. Personally, I have not had any of my credit lines cut.
Update: the McMansion couple have the McMansion up for sale..losing everything..5.5 million dollars in loans and headed for BK…told hubby he may try to buy a house in the development next door at 600K??????…WTF??…ahh..every heard of downpayment, credit and income!!!
I just don’t think that the financially irresponsible get it yet???..the party is over…
And this is a problem, why?
I’m seeing exactly the same thing; I have more credit available then I could use in a few years (just running it up and never paying it off), but, then again, I have a high 700’s FICO and a low DTI.
Those who have been living on credit, on the other hand, now seem to be unable to find anyone stupid enough to give them more.
Again, I ask, what’s the problem here?
2009 First-Time Home Buyer Tax-Credit Fact Sheet
Please consider the SOURCE or endorcement on this link at the BOTTOM of the link page. NAHB
I received a 3 page factoid letter with Q & A information and a reference link to this website from a reatywhore that is UNDER contract to find FB and GF for their over-priced REO’s( bank owned RE)
I haven’t verified the accuracy of this information.
Have a Happy St. Paddy’s Day everyone
http://www.federalhousingtaxcredit.com/home.html
Pardon me for raining on this small business credit parade, but I’m here to report that (gasp!) my business is NOT looking for credit. Yes, you read that right: Arizona Slim’s graphic design and photography studio is not looking for credit.
So, how do I finance my business growth? Well, in a couple of ways:
1. I work hard at getting better at what I do. Getting better means that I can charge more for my work. And combining that with my typical level of frugality means that I have more cash available to finance growth.
2. I save up and pay cash for things.
Good for you. But why the self satisfied attitude. Your business seems to be a micro business, instead of a small business. You seem to imply that others, in different circumstances, are all irresponsible idiots.
Wow! I’m going into business !
I’m gonna do the same thing as Slim did.
Just as soon 16 yr old with a friggin Phd in photgrahpy shows me how to change the lens on my Cannon Rebel Ti:(
Sweet camera. I’ve got the same one.
Wmbz, as I read the article, your comments do not contradict it. You are talking about lines of credit, whereas the businesses affected were using consumer credit cards. (Many on this board have discussed their travails with consumer credit cards since the onset of the credit crunch. It’s very much YMMV, as different scores, balances, and issuing companies may result in different outcomes.)
At the end of the article, they noted that banks have tightened standards on offering lines of credit, exactly as you noted.
I didn’t see this come through here, but it probably did.
March 12th on Yahoo Finance: discussion of how credit card companies are dropping credit limits to below the current balance. Forcing people to pay off the card and close it, or pay the penalties.
Detroit mayoral candidate will fit in well with his constituents. Facing a reset, he’ll just walk.
“I don’t think we’re much different than many people in Detroit”….
http://www.detnews.com/apps/pbcs.dll/article?AID=/20090317/METRO/903170366
Politicians believe they live in a vacuum, that their behavior does not have a long term corrosive effect on society at large.
Politicians believe they are a product of their society, hence the idea of rising above it is absurd. “Keep it real.” (Real dumb.)
Excellent!
That means the deflationary storm has just started. When this becomes widespread, it becomes the norm.
Sounds great!!!
Wohoo first to post! Still seeing knifcatchers in DC area. I was in Woodbridge looking at this forclosure (looked like prior Section
and it had 3 tiny room and smelled like cat urine (probably left the cat in protest). The bank was asking 91k. It looked like 3rd world squaller inside though it sold for $420k in 06′. It was on .4 acres right across from a park and it had a huge detached double garage. The house needed to be torn down. There must have been 6 people there looking at with me… Still on Redfin with no offers.
Oh, the humanity!
I didn’t even know you could get 0.4 acres of raw land for $91K in the DC area, much less a house, no matter how nasty. Handyman special lowball $70K, maybe.
In some parts of DC they’d probably pay YOU $91K to take 0.4 acre. Didn’t someone post the other day about a new DC tax on vacant land? Some properties really do have negative value.
Woodbridge is waaaay outside of DC proper, in Virginia. When I was growing up it was called “hoodbridge”.
Hahahaha!! Yes, it’s an hour commute at least. Ugly traffic. Ugly area (due to sprawl). No way it’s worth that much (as you say, the structure is krrrrep).
I never heard “hood bridge” but that might explain why Occaquan Woods residents were petitioning the post office to change their zip to Occaquan. (Now THOSE were some HOA nazis! I didn’t live there–thank heaven. I don’t understand, really, why anyone would.)
When I lived in Lake Ridge, my LL insisted on writing Lake Ridge on the mail, even though it was Woodbridge zip. The PO was used to it.
So was this the area by Route 1, or more in the Lake Ridge area? Do tell.
Hey, I didn’t live in Woodbridge. I just heard the stories. To get there from my neighborhood we would’ve had to have driven for hours, passed Lorton, and the Bunny Man. No thank you.
Woodbridge was one of the poorest regions in the area back then.. and no doubt still is.
Woodbridge is in Virginia and is about 20 miles south west of DC itself.
Which means the commute during rush hour is..what? Hour and a half?
Yeah if not longer, seems like every morning’s traffic report has a back up starting about 5 miles south of there. There’s a big mall and Ikea in Woodbridge, and honestly on weekdays during the day and Saturdays, I’ve been in stop and go traffic on the way to Woodbridge. There is a rail line that runs through Lorton, and might continue through woodbridge, but that’s almost an hour ride into DC proper.
Misssssssssssed by that much
Sounds like Maryland!
Plenty of dolts still “snapping up affordable” junk that goes for 5x median income for the area… with quality that is either: Post War, poorly maintained junk, or modern junk built by illegals. And then there’s the condo/townhouse market, where people pay the type of money you’d expect for a detached home and get to deal with HOA fees on top of that just for the honor of living jammed together with other people (many of home are probably underwater on their “investment.”)
Brilliant!
sorry, that should be “many of WHOM are probably underwater on their investment.”
At any rate, the Kool Aid is still trickling along in Maryland because “everyone is rich here.” I’ve about given up - even if housing prices DO become affordable again here, there’s always some DINK’s out there with $1,000 total in assets who are willing to take on a mortgage at 5x their combined incomes just to have 4,000 square feet for them and maybe 1 child (who’ll probably be raised by the kids grandparents anyway.) before losing the house to the next group of idiots in 5 to 10 years. No way that a guy with 1 income and who refuses to live in debt can compete with those morons.
+1
Exactly my feelings. I have officially given up in NOVA. At least the stimulus bill funded the Dulles rail project so I will be a short bus ride from the metro by 2013.
But honey, you don’t understand–it’s right on top of the METRO.
Wife and I are trying to get our heads around the real value of this $8k rebate. We’re really not sure what to think of it. In the end, if our assumptions hold true (we have serious doubts about our assumptions), we agree that home buyers will lose $600 rather than gain $8k.
Assumptions:
1. Homes will sell for $8K more than without the stimulus (if they do sell at all)
2. On Dec 2, every home will loose $8k in value.
3. Because it’s a tax rebate, the earliest you’ll get the 8K is Feb, 2010.
Stimulus effects:
a. Due to assumption 1, the realtor fees will be based on a selling price 8k higher, meaning the realtor fees are $480 higher than without the stimulus. (6% x $8,000)
b. Due to assumption 3, you will pay interest for 6 months [my own average assumption] on the 8k, $200. (5% mtg rate x $8,000 for 6 months)
c. If you have points on your loan, the points will be applied to temporarily higher price (assumption 2).
e. On a side note, based on assumption 1, home appraisals for all homeowners could be temporarily increased by 8k, leading to higher municipal tax rates for every property owner.
On a tax note, if you buy now, you can claim the 2009 credit on your 2008 return and get the money now.
to Asparagus
I have been wondering about the $8k too. I am thinking housing will come down more than 8K so it might be better to wait anyway. Everyone seems to be jumping on housing and buying where it is below 150k
so I like how you put the numbers and the gain and losses based on realtors inflating things again and banks still wanting to give 1st time home buyers a house with only 3.5% down with an FHA loan.
If I can rent in the same area less than what I would pay on a mortgage, it seems it is better to rent.
The rent versus buy still gets me because some are living in paid off housing while I am still scrambling for renting. Yet renting I can move to other areas but sometimes have to because rents went so high.
I hear ya. Part of why we’re talking about the stimulus is that we are seeing some pretty good homes where the mortgage+taxes are approaching our rents.
But we’re still holding off for now.
Next year they will have a 15k rebate.
I’m on board.
To be honest what I’m holding out for is down payments to be 100% tax deductible.
Interest payments are tax deductible, why not down payments?
Tax deductible downpayments reward people who save and get their money from savings accounts to buying “toxic” assets.
No, they will lose more then 600 dollars. You’re neglecting the effect of leverage.
Giving a homeowner 8K towards their downpayment allows them to borrow another 40-80K towards the home! That’s the amount that you have to look at, this 8K rebate isn’t 8K in home value, it’s MUCH more then that. That’s the reason that the government has done it this way, they know that it’s going to be leveraged 5 to 1 (with a 20% downpayment) or more. So that 8K becomes at least 40K in additional “buying power”.
Once that benefit lapses, you will see home prices take another sizable leg downward, far more then the 600 dollars you calculated above. The reason home prices went up 200K in my area (Palm Beach) in a few short years was exactly the same, people were allowed to use more leverage; with a constant 5-1 (20% downpayment) leverage ratio it never would have happened. Moving from 5-1 to infinite leverage pushed home prices up 100-200%. If you buy an 80K home (granted, that’s hard to do); with this stimulus, your right back to infinite leverage (no money down), which will greatly inflate the value of these properties.
IMHO, you have to wait until this has passed, and the next leg down begins. If not, you are looking at an almost certain 40-80K loss when the credit is revoked. Trust me, I’m as unhappy as you are about it, I’m getting serious about buying, and was targeting the end of the year. This measure pushed my timeframe back another 6+ months.
Interesting analysis of the sting of the tax credit Mike.
Leverage! Ahh. I forget about that sometimes.
Your point makes me think of the lenders in all this. How are they accounting for this rebate?
If my brother didn’t have any downpayment money, I’d lend him 8K with the understanding that I get the rebate when it comes. The bank would never know that he really doesn’t have anything.
That would be a “silent second” and would be illegal. Just sayin’.
and if banks are back to looking at bank statements they’ll see where it came from and when.
Also, don’t forget that interest rates can only go up! It may take a few years before someone dares to raise them, but when that happens house prices will fall.
A couple of points:
- Good call on the leverage. That’s what this is all about - keeping housing unaffordable so people buy overpriced assets wtih toxic loans and so the banks make money with fees, refinancing, etc.
- I’m not convinced that the $8,000 refund is going to go away. Why won’t it be raised to $10,000 next year? The government has infinite money (thanks to the printing presses) to throw at this, all of which is being spent to hide the truth and keep housing unaffordable and the crooked banks “solvent.” I think it’ll be years before we stop seeing attempts to prop up the prices at any cost.
Right now, if I had to bet, the incentives to buy are only going to get better.
What I fear is that Obama brings in an ass-kicker to turn the whole thing upside down, F’ing banks and F’ing underwater borrowers.
Then I’d be left waiting for tax free downpayments while the real deals happen.
That was my take on it. Most people still buy the maximum house they can possibly afford using the “howmuchamonth” rule.
But I think you got #2 backwards. House prices will go UP $8,000, won’t they (or at least not decline for a month or so), to make up for the Government’s handout? The only thing the Government’s “affordability” schemes do is raise the prices of housing.
Which was the goal all along, of course.
Until we see a return to REAL down payments (not 3.5% joke downpayments), REAL interest rates, and an end to government attempts to prop up prices, housing will not be affordable for years (if ever) for all of us “stupid” people who believe in responsibility, not living in debt, not committing mortgage fraud, etc.
EU bubble update:
ECB council member Stark said today that the ECB is close to the bottom in rates. EU inflation has been edging up lately, and although it is below the official 2% target expectation now, that may change soon. Stark explains that cutting rates to 0% like in the US and UK is NOT a good idea. In daily life I still see inflation almost everywhere (except in petrol prices and stocks, but to me that is disinflation).
On another note, some new details about the Dutch housingbubble were published this week. The average Dutch mortgage is for 114% of the original home purchase price; of course some of these homes are now out of the danger zone because of continually rising prices (not everyone refinances to the max). According to one of the big insurance companies, for 40% of Dutch homes with a mortgage the mortgage amount is higher than the price that could be realised on the open market when the home has to be sold. Just imagine what happens when Dutch homeprices really start dropping …
Many of these mortgages are I/O loans where no principal is paid down (but as you know, in Netherlands homeprices can only rise, so nobody cares …). It is still very easy to get a 100-120% mortgage here.
Sales of new homes in Netherlands have now dropped by nearly 70% on a yoy basis. The RE mob is warning for a ‘huge price explosion’ if the government is not quickly pulling out all the stops to stimulate sales of new homes (of course they have many suggestions how to do this, at the cost of the taxpayers). Somehow I doubt that a price explosion is possible after more than 1000% price increase …
Oversupply and lack of demand always result in price “explosions”!
or implosions…what’s a little prefix among friends?
Your remarks sound US dollar bearish. Especially with Bernanke threatening to pump pump pump.
But so far the dollar seems to want to stay put (Japan and Switzerland intervening to make their currency cheaper can’t be hurting).
the reasoning seems to be that because the US and UK are monetizing their debt and letting their currency drop (potentially), they will be the first to get out of the recession.
And because the ECB ‘does not take the right measures’ to kickstart the economy, the slump in Europe will take longer. Total nonsense IMHO, but you can read this time and time again in the EU press (and probably outside EU as well).
Another issue is that no one knows for sure why the dollar has been rising lately; we will find out soon if the current stocks rally has legs …
another statistic: according to the banks, the Netherlands has the highest proportion of mortgage debt relative to GDP in the world (no surprise really …).
Another article about Dutch mortgages says that until about 1996 (five years after the start of our bubble), most mortgages were relatively ’safe’ with 5-30 year fixed rates and hardly any I/O, 110-125% etc. After 2000 mortgages that played the stockmarket (don’t know US word for this …) became more popular - the monthly payment is lower in that case because the assumed return from investing in stocks is higher compared to standard mortgages - but of course, the risk was higher too, as many found out recently.
After 2004 attention switched completely to I/O mortgages because they offer the lowest monthly payments; now 50-60% of all Dutch mortgages are I/O. Many of these are without any downpayment, sometimes 110-125%. Scary, but the RE mob and the kleptocrats say there is no problem at all. I still read the ‘it’s different here!’ stories on a daily basis, even on investment forums etc.
Do we really want the best and brightest in banking?
This is, of course, only if you believe that we have to pay these guys millions of dollars to retain them (in the major banks), a theory I don’t believe. But, even if it is true; do we really want our best and brightest people working in banks?
I would argue, no, we certainly do not. We want our best people working in research, medical, technical, and military endeavors, NOT figuring out another new, and “innovative” way to scre* over the American public. Banking isn’t that hard, it doesn’t require a 180 IQ to run a financial company or a hedge fund. Why do we want encourage (financially) our smartest people to go into a field where their brainpower is simply not needed (or used to develop financial weapons of mass destruction) instead of fields where they can do some good for the human race? What “good” comes from banking? I concede that it offers a valuable service, and it’s a needed part of the capitalistic society; but does it really produce any “goods”. In fact, I would argue, more often then not, it stifles innovation and produces much more harm then good for the majority of the players in the field.
Why would we want to cajole the smartest people in society to work in a system that has a very cloudy “value prop” for the majority of society? Also, we all know that banking isn’t that complicated, you get money from one guy, multiply it by 10, and then lend it to someone else. We’ve been doing it for a few hundred years, there’s simply not that much work that still needs to be done to further refine the system. In fact, most of these refinements have, at the end, led to massive disruptions in the system as a whole (the refinements were not effective, they worked short term, but then blew the whole thing up).
I really think, as a matter of public policy, that allowing these banks to continue to pay insane salary levels is not serving the good of the American people. Almost any other industry in the country would benefit more from these incredibly smart people working in their organizations then the banks do. It’s as if we’ve taken our best people and put them all to work refining the process for making sugar. We KNOW how to make sugar, we don’t need a bunch of 180IQ folks sitting around trying to figure out a better way to do it. In fact, I would argue, taking that much brainpower and putting it to work on a “solved” problem is inherently dangerous. Because they cannot accept the status quo (the solution to the problem) they have to justify their existence by refining and changing the solution; which, as we have now seen, isn’t a good idea when the current solution is the RIGHT solution already.
It’s like we took the greatest math minds from the current generation and put them to task on refining the way we do addition. We don’t NEED a “better” answer to the + sign, we’ve already figured out how addition works. However, if you put enough brainpower behind a “problem” (which isn’t really a problem at all), let me tell you, we will figure out a new way to do addition that, a few years later, we will discover isn’t as good as the old way was!
There are simply MUCH more pressing problems in this society that can actually benefit from the minds that are currently being sucked up by Wall St. Would the world be a worse off place if the best minds from this generation wound up in biomedical research, IT development, green-energy research, or pretty much any other research or highly skilled profession (medicine, etc)? I would argue that no, the world would not be worse off, and, in fact, would be much better served through the “correct” allocation of genius/high IQ to the problems that we still have unsolved.
Banking has been solved; and it’s been solved for 100’s of years. There’s no reason to keep trying to re-invent the wheel, and “steal” the best and brightest minds to work on a problem that already has a solution.
Of course, that’s if you believe that the reason these banks have to pay 1M a year per person in bonuses is to retail the “best and brightest”, which I personally don’t ascribe to. However, the point stands, do we want our best people working in a field that’s frankly, not all the difficult?
There was a lot of growth in the financial industry. Growth attracts resources. So, naturally a lot of our intellectual capital resources went to the financial industry.
The real sin is for this nation to pretend these resources cannot be reassigned to other productive uses, to pretend we need this (….) banking capacity when we only need this (..) much, and to pretend our world would end if these people did something else with their time.
There was growth in the construction industry too. But not many people in the construction industry were making a M a year, and almost none of the “best and brightest” wound up heading to the construction industry to become a foreman.
I agree there was growth, there will always be growth in financial services (because of inflation). However, all the heavy lifting in banking was LONG AGO taken over by computers. The quants sitting around aren’t trying to figure out how to balance a checkbook, they are trying to figure out how to engineer a new derivative that they can sell to some shmuck and then have it blow up a few years later (after they are all rich as he** and it doesn’t matter anymore).
Banking capacity can be increased with IT resources, and, even if it couldn’t, we are horribly “overbanked” in this culture! There’s simply no reason for any of these banks to try to re-invent the wheel and have all these “geniuses” on board anymore. It’s a SIMPLE business, stop trying to make it so hard.
Exactly. Here’s another radical idea. Banks should no longer be allowed to be private profit making enterprises.
Banks take money for the government and lend it out in attempt to fatten the wallets of their owners and management. Get rid of the middlemen and nationalize the whole lot. Get rid of wacky derivatives and ’shadow’ banking BS.
After that’s done, dismantle the Fed and then revisit the whole interest rate scam that perpetuated by the PTB that keeps the rich, rich and the poor, poor.
Marx is just running through my blood this AM!
Sheesh. Just get rid of banks. Repeal their corporate charters amd liquidate them. No need to nationalize anything.
180 IQ = 1 in 3,000,000. Sorry, most of those bozos
in wall street are a lot dumber than that.
They are Liberal Arts majors after all…6 business classes, 1 econ, 10 electives and you too can be a Wall Street Wizard.
The quants were mostly math and physics majors (with some EE guys and CS guys thrown in) the sales folk were Liberal Arts (lots of history). One bright guy creating products sold by mostly good looking bozos still means most of the people were bozos, but depending on the size of the operations could mean that a majority of the nation’s best and brightest are in amongst the bozos.
Good points, Michael. I would add that we don’t really know if these people even ARE the best and the brightest, just that they say they are.
I find offensive the constant comparisons with athletes and entertainers, and the claims that the “superstars” of finance have to be paid like Kobe Bryant to make banks and the economy perform optimally. These analogies are complete BS because no disinterested party can VERIFY that we are really getting superior work from these people.
Every sports fan knows who Kobe Bryant is, and can observe his performances live or on TV. By contrast, practically nobody knows who these supposed über-quants are or what, if anything, they do. The real requirements to get one of these quant jobs are cynicism and political connections.
Yeah, I agree, I’m just conceding the point that are indeed the “best and brightest”, but that’s certainly an area for MUCH argument! I think that their is certainly a good conversation about if those M dollar + salaries actually got them something that they couldn’t have obtained for 100K/yr.
I think one reason to consider paying them well is the same reason the girl at the register makes so much more than the people in the stock room. These guys have their hands all over our money, you would think that a high salary would be enough to keep them from stealing from us, but when there is no regulation and no enforcement and failures get bailed out you see the check out girl pocketing a lot of cash. The short term incentive bonus is another problem, no one looks at what’s best long term for the company. They need to tax short term bonus’s much more aggressively, and give a modest cut to people who take their bonus as monthly stock that has to be sold in exactly 5 years. No more gaming the system, no more insider trading, just focus on long term growth and the stability of the company.
You regulo-philes never cease to amaze me. So you think it’s a great idea to pay a banker, say, $1M in annual compensation (which essentially comes from taxpayer money at this point), then have a high tax rate on this compensation, and then pay a bunch of regulators, say $100K/year each (also from taxpayer money) to determine the right tax rate on short vs. long term comp, and also define the length of the term which constitutes short v. long term, and then of course also watch closely over the $1M bankers to see if they’re being honest and doing good jobs running their quant models or whatever, and this is a great way to run an economy? Amazing.
I don’t think there’s a regulator left that isn’t funded from a stipend on the industry. Some of the stipends are tax dollars, but enough of the industry isn’t nationalized to say all of it is tax dollars, yet.
In that case the regulators essentially owe their livelihoods to the industry. How independent and effective are they likely to be in safeguarding the public interest?
And you non-regulophiles think that if we just did away with laws everything would work out fine. Now that is truely a fantasy world.
I said nothing about a million dollars or what bankers should make, I said one reason to consider paying bankers well.
The definition of short term and long term is less important than defining exactly when stock given as a bonus must be sold. We essentially have legalized insider trading. CEO’s accumulate stock, then if they decide to cash out they can manipulate earnings statements prior to their desired sell date. I think they should have no say in when their stock is sold. They should not be able to borrow against their stock or options as Ken Lay did. Every share of stock given as a bonus should have a to be sold date stamped on it.
RE: We want our best people working in research, medical, technical, and military endeavors,
Yeah, that disabling HEAT RAY crowd control rig the Army dreamed up is just what we want our best minds to focus their energies on.
On line just in time too.
Probably got a couple parked in the AIG and DC Capital building’s parking garages to zap all those idiots stupid enough to take to the streets to protest their future empoverishment
I’ve had similar thoughts over the years. I once worked for a major technology company, and it pained me that the senior designers all had PhDs in EE or material science compared with the management who merely had BAs and maybe an “executive” MBA (e.g. sitting around eating donuts at Pepperdine University for a couple of weeks). Yet the management types got paid at least 10 times what those PhD engineers got paid.
And the government wonders why young people don’t want to go into engineering.
The executives with their BAs hired the lobbists to convince the government to issue a few gazzilion H1B visas. May not be book smart, but they got what they wanted.
Maybe we could send all these bright financial folks back to undergraduate school to get the training necessary to solve such problems. Then they can graduate and fight the H1-B’s for an entry-level $52K job as they pay off $30K in loans while raising their kids. Not to mention enduring the ridicule reserved for the geeks among us.
After the six/seven-figure high life, who would be willing to do that?
This assumes *we* actually *allocate* people to this or that industry. I think they allocate themselves. At some point it became cool to say you were going to be an investment banker. Ooh-ah, I’m impressed.
Apparently, these are the same people that couldn’t quite grasp the concept of negative numbers back in junior high
Actually, banking is HARDER than rocket science. I can tell you off the top of my head how far you have to be from the center of the Earth to be in geosynchronous orbit, or how long it takes the Earth to spin 360 degrees around it’s axis on average.
But I’d have to use a spreadsheet and a non-linear programming solver to figure out how many days the bank thinks are in a period used for the purpose of calculating the interest they pay me, versus how many days in a month for the interest I pay them.
Historically, figuring out the date of first Sunday after the first ecclesiastic full moon after the vernal equinox was a tough and lucrative problem in orbit mechanics. (Answering the question: which day is Easter?
). This is child’s play compared with figuring out the end of the monthly statement period using my bank’s proprietary algorithm. They must have a very fast computer dedicated to this task.
test
My business credit line got cut from 2.3 millin on amex to 1 mil and they wont let me go a penny mre. I was using all of it when my account manager called and apologized and said i have to pau the 1.3 million by the end of the month. Luckily i was well capitalized and have not been hit by the slow down YET so i was more than happy to pay it off. Pinced a lot but better prepared for whats to come. I can see how a small business can go under for no fault of theirs bcos of credit line cuts. Infact a few of my friends have basically lost it all because their vendors supplied the auto parts industry and the customers went bk. Being asian we save a lot so personally they are fine for now but nu business as the customers have no money and yoy cant extend credit after getting burned already. I personally spend 1/15th of my income and see people drive S550 mercedes and put their kids in private schools and fly 1st class and laugh bcs they take it all for granted and cant deal with it when it gets bad. We live well but i’ll be damned if my wife and kids dont realize the value of money. Nobody gets things when they want if. They wait for it. No instant gratification. My kids want a $100 item and ask me 3 times if we can afford it. I like that.
“We live well but i’ll be damned if my wife and kids dont realize the value of money. Nobody gets things when they want if. They wait for it. No instant gratification.”
Music to my ears! If we only had more parents teaching values to their children over the years, the mess we are all facing might not be so large. I only hope the ones around you might follow your example in the future.
Here I go hoping again.
I have to admit, I have not seen any Plum card ads recently. Am Ex knows that a lot of small businesses are going to be trampled as this recession goes on, and they would rather shut down everyone than do the WORK to figure out who is good for the cash and who isn’t.
Dear Am Ex,
Hire some human beings to actually do the work, analyze a few business plans, review some financial statements. That is how bankers are supposed to earn a living.
Have to say..I do have my kids in private school..but that was factored into the mortgage payment before we bought..so we knew how much of a house we “could” afford…not the fantasy land amount we were quoted!
But my kids do understand that was a choice and a expensive one!…they don’t ask for expensive items and are pretty happy with whatever they get..and they are teenagers!!!….
We have run out business WITHOUT credit for 20 years..just never saw a need for it(we don’t have inventory to worry about)…if we needed office equipment we just bought it..and there has always been plenty of start up companies in the area who spent the money on new equipment/furniture only to have it on the auction block later for pennies on the dollar!!!!
Citizens’ reassessments hit some homeowners hard
By JEFF OSTROWSKI
Palm Beach Post Staff Writer
Monday, March 16, 2009
LAKE WORTH — Walter Baker is reeling from sticker shock: The insured value of his Lake Worth home has nearly tripled to $300,000, a jump that increased his windstorm insurance premium with Citizens Property Insurance Corp. from $1,300 to $3,000.
“I don’t think this is right,” Baker said of the 130 percent increase on his 2,200-square-foot home.
Citizens officials and insurance regulators say they feel the pain of homeowners like Baker, but after years of allowing insured values for some properties to languish, the state’s largest insurer is playing catch-up. Earlier this year, Citizens began the yearlong process of scrutinizing property values for 350,000 coastal properties that get their wind-only coverage from the state-run carrier.
Unlike private insurers, Citizens didn’t automatically raise property values each year as policies renewed - leaving many policyholders underinsured. After the severe hurricane seasons of 2004 and 2005, Citizens paid many claims that totaled more than the insured value of properties that were destroyed by storms.
“While it may feel a bit painful for someone to see their replacement value go up, Citizens is a subsidized entity,” said Jeff Grady, president of the Florida Association of Insurance Agents. “Everyone has a stake in seeing that those values are right.”
lol
The dark side of prices only go up.
If the ‘homeowner’ doesn’t like the insurance rate, pay off the mortgage and go ‘naked’ without insurance. Oh… wait… not spending everything wasn’t ’sophisticated.’ Ummm… Suck it up. Florida no longer has the funds to subsidize Citizens. This isn’t going to help the Florida real estate market one bit…
Got Popcorn?
Neil
Citizens paid many claims that totaled more than the insured value of properties that were destroyed by storms.
Why? IMHO THIS is part of the reason you don’t want the government in the insurance business. No private insurer would, in effect say: “Here, take this money that you never asked for, because I’m your uncle sugerdaddy.” At least not if there wasn’t a loan involved. But because this “insurance” was regarded as some sort of government benefit, these people got more money than they paid for.
RE: Walter Baker is reeling from sticker shock: The insured value of his Lake Worth home has nearly tripled to $300,000, a jump that increased his windstorm insurance premium with Citizens Property Insurance Corp. from $1,300 to $3,000.
“I don’t think this is right,” Baker said of the 130 percent increase on his 2,200-square-foot home.
Better buck up there, Walt.
You, as homeowner, are a sitting duck. Much, much higher carrying costs comin’ down the pike, especially as residential taxpayers will be footin’ the load from the muni revenue crash resulting from the bankrupt commercial sector.
What you need to do is throw up a rental over your garage while construction prices are low, so you can then lowball for a tenant and knock the shit outta the income streams of all those professional large scale apartment crowd, thereby increasing your property taxes even more!
I think it’s called renewing the American dream in our lifetime.
Citizens is a mess. They have all of the riskiest properties in Florida and a Republican legislature that won’t allow them to raise rates to a point that would make them actuarially sound.
So they are doing this to get the revenues they need. Keeps the Reps looking good (we made sure Citizens didn’t raise their rates!), while boosting cash.
No way this guys house is worth that kind of money in Lake Worth. Poor bastard. Sucker’s born every minute.
Insurance is one of the main reasons we left FLorida..images of being 92 years old, in retirement, sitting in a lawn chair outside my FEMA trailer fighting with the insurance company after a hurricane blew it away was just too much for me…
We have a few elderly widows in my ‘hood. A few of us nicer neighbors board up the windows & check on them after the storm. We talk to contractors for them to make sure they don’t get ripped off.
Lots of neighborhoods don’t have nicer neighbors & I really don’t think these gals (and guys) should be left in those positions at that age.
Replacement cost has nothing to do with market value or tax assesment, or the value of the land. It is the cost of rebuilding in place, which has gone down.
Strangely, when I bought in ‘99 I initially bought insurance for the amount listed under “structure” on the assesment. After all, the LAND is not likely to burn down, just the house on it. But I got a call from the mortgage company insisting that I get insurance to the tune of the entire amount that I paid.
Business
Economic crisis raising spectre of public unrest
The Star Phoenix March 2, 2009
While Britain’s government was gearing up to announce yet another massive injection of funds to save the country’s troubled financial sector, police in London were preparing for a more sinister side of the crisis.
According to the Guardian newspaper, police are expecting this winter of shock will turn into a “summer of rage,” as newly unemployed and until-recently middle-class workers increasingly take to the streets in anger.
David Hartshorn, the London police service’s superintendent responsible for public order, is anticipating people who only weeks ago wouldn’t have dreamed of taking to the streets in anger will start to vent their fury — particularly if they believe the banks that have received billions in taxpayer bailouts are providing executives with unseemly bonuses.
The situation had Germany’s Der Spiegel remembering the “South Sea Bubble” of 1720 — one of the first speculative bubbles and bursts in British history. A parliamentary committee back then suggested the solution was to sew up the guilty speculators in sacks with poisonous snakes and toss them into the Thames River. It was enough to make one shudder for the poor snakes.
RE:Economic crisis raising spectre of public unrest
hahaha…Suit guys take biggie monies!
Yu no stoppa?
Where dat Barney Frankie guy?
Obamaland no more Numba #1, GI
http://www.washingtonpost.com/wp-dyn/content/article/2009/03/16/AR2009031600640_pf.html
Really? Obama’s popularity is waning? Could it be because he was simultaneously promising hopeful change while being handed an overflowing platter of steaming, noxious dung? Why on God’s green earth he thought running for president at this moment in time was a good idea, not only for him, but (and especially) for the future of black America, still has me bewildered. By the time his term is over, this country will say “never again,” to a black president. He should have thrown the election and let McCain clean up the mess he and his party did such a stellar job creating.
Obama is not black. He’s a white guy with a father from Africa. If he were black he’d never have had a chance of being elected.
BS. It’s nothing to do with color. Much to do with grandiosity and lack of insight, IMO.
No, it’s because he promised change and then surrounded himself with the same old corrupt jokers and continued to do what politicians do. Lie to get in office, then do things that hurt the general population.
Watch “The Obama Deception.” I’m interested to hear feedback. It talks about the mortgage issues and housing bubble. Of course, it claims it was allowed to happen on purpose.
RE: let McCain clean up the mess he and his party did such a stellar job creating.
And let’s give a big pat on the back for that amendment constructed by Senator Chris “Countrywide VIP” Dodd (D) from CT, to facilitate the $170 mil bonus’s for
all the AIG crowd. I wonder if he included a rider to allow the firm to purchase a gross of bulletproof vests.
http://www.foxbusiness.com/story/markets/industries/finance/dodd-cracks-aig—time/
http://www.washingtonpost.com/wp-dyn/content/article/2009/03/16/AR2009031602961_pf.html
Apparently, not even Dodd had time to read the final version of his own amendment lololol. And the president’s promised 5 day public review period ended up how long?
This is inevitable.
But will it happen in the US? Protesting is a cultural tradition in much of the world. Americans are allowed to do it, but are very inclined not to bother. Also, the large land mass makes it hard to coordinate and expensive if you want to really concentrate on the federal government. By location, my office should be protest central. We get them every once in a while, but not that much.
but are very inclined not to bother.
They are only not inclined to bother because they have been rich for so long.
When push comes to shove, everything changes.
They don’t bother because they’re still working. If I lose my job, booooy, it’ll be college all over again!
Hopefully we get some good music out of it all.
I’ve been thinking this for a long while. It seems we get better music during periods when people are angry about something.
I had a similar theory about war.. but all these wars have gotten us is Kid Rock National Guard anthems. Ugh.
Yeah, but this time around we’re OLD and don’t like the new music. It’s quite possible that there’s some really good rap inspired by the GWOT and we couln’t be PAID enough to listen to it. Just like the greatest generation would never have put away their Johnny Mathis LPs to listen to Edwin Star’s “War.”
No, if it were good music, we all would have known about it. Personally, I think we’ve become too complex and blasé a society to be moved by Forrest Gump soundtrack. Springsteen and Bono put out some sledgehammer protest music and few people cared.
and art.
You know it’s one thing for random bloggers to vent and discuss executing a few banksters. But it’s quite another thing to hear it from a mainstream op-ed writer like Charles Krauthammer (of WaPo fame). Here’s what he said the other day….
I’m all in favor of keeping this heaping opprobrium. I would deny them the bonuses if possible. I would be for an exemplary hanging or two. Have it in Times Square, invite Madame Defarge. You borrow a guillotine from the French and we could have a party.
Just how pissed are we becoming?
Oy vey.
Senator Grassley is now calling on the AIG executives to COMMIT SUICIDE.
http://www.chron.com/disp/story.mpl/ap/nation/6314615.html
But I would suggest the first thing that would make me feel a little bit better toward them if they’d follow the Japanese example and come before the American people and take that deep bow and say, I’m sorry, and then either do one of two things: resign or go commit suicide.
Maybe I’m weird, but there is something I sorta admire about a culture where the leadership atones for FUBARs by self-administering the ultimate penalty.
True, it can go too far……a guy in his 20s should be allowed a few FUBARS, while keeping him out of positions where he can do real damage.
CEOs, CFOs, Board of Directors, anyone making millions in salary, should have ritual suicide for FUBARs written into their contracts.
Judge Judy was on Larry King Live last night. When quizzed about the Madoff incident, the judge replied, “I’m surprised he hasn’t committed suicide”.
Lots of people talking about this act more than I recall. I also get the sense that it is becoming far more PC to discuss suicide.
Had a couple of interesting HBB days. On Sunday I visited in open house (2 bed, 1 bath) in a nice old neighborhood here in Sacramento called Curtis Park. It was sold three years ago for $412,000, but a loan was taken out at the time for $519K. No improvements have been made, and it’s new on the market for $399,000. The agent told me that the “owners” hope to sell it, move back with their parents, and save for a cheaper house. It will be interesting to see if they find a knifecatcher, or if it goes on to short sale, followed by foreclosure. The nicer old neighborhoods here have kept their prices high, but I think that they’ll continue to fall. The lesser neighborhoods crashed last year.
Yesterday I had a Craigslist day. My son’s girlfriend and I have signed up for group golf lessons, and I got two nice sets of used ladies’ clubs for $145, including balls, tees, shoes and gloves. I looked at three sets of clubs, all in junk-packed garages in suburban McMansions in subdivisions 30 miles outside the city. Cars parked in driveways despite 3-car garages. Yeesh.
“Cars parked in driveways despite 3-car garages. Yeesh.”
Very typical. Our small garage will not fit two cars even if immaculately clean. (We’ll… two civics, but nothing bigger.) But our neighbors are amazed on how we make regular trips to Goodwill to keep down the junk quota! (Reminds me… one is due…)
Part of the reason I’m loving renting a tiny home is that its forcing the wife and I to downsize the junk. Oh, we’ll keep certain items that we wish we had the room for now.
Two years ago, everyone was selling ‘due to a corporate move.’ (It wasn’t true 2/3rds of the time…) Now the Realtors ™ falsely state that its due to a need/desire to move in with family. I guess in 2007 it wasn’t cool to say ‘ditching California for an area we can afford.’ In 2009 it probably doesn’t help the sale to say ‘owners are broke and must move back in with mom and dad.’
Got Popcorn?
Neil
‘move in with family’
=mama has social security
…and needs someone to “take care” of her.
. . . junk-packed garages in suburban McMansions in subdivisions 30 miles outside the city. Cars parked in driveways despite 3-car garages.
We have some of this here in Boise. Essentially all the houses in my subdivision have 3 car garages. Nice for me: both my cars fit inside and there’s enough space for a workshop and my canoe. But several of my neighbors have them packed full of stuff. My one neighbor always bitches and moans about having to scrape the night’s snow off his SUV prior to driving to work in the morning. Talk about clueless. . .
I always kept my girlfriends from spending too much time with my mother. Just can’t lead to anything good.
Tee hee, Jon. My kids are young. She is new to town and hasn’t made many friends yet. And that gives my son more time to play basketball.
How come AIG bonus contracts are sacrosanct, while employment and pension contracts are not?
What is so special about financial wizards who cast billions of dollars of shareholder wealth into the sea that the federal government has to step in to make sure their compensation contracts are honored, while mom and pop on Main Street who worked so hard and always played by the rules get the short end of the credit crunch stick?
Good question, PB. The govmint is collectively insane and that’s the only answer that satisfies the question. Don’t try to fathom insanity, it is what it is.
Shut AIG down. Send it to bankruptcy court. End the charade. AIG is an insolvent fraudulent farce. Politicians need to stop pretending they are outraged. They are the ones enabling this kind of behavior. All the shenanigans would stop the minute BK papers hit the docket.
I couldn’t agree more, mrktmaven. Shut it the hell down. But that would put an end to Goldman Sucks and we can’t have that now, can we?
“But that would put an end to Goldman Sucks…”
That would be a bonus to the U.S. of A. so far as I am concerned. Has any other firm gone to greater lengths to infiltrate top ranks of the U.S. government and loot the U.S. Treasury?
It makes one wonder if there’s more shorting potential in GS.
Now, last year I didn’t touch them because they were so well connected, but last year was last year. Will the anger hit a boiling point?
Say yes, please say yes.
Not yet.
We already own 80% Buy the last 20% at 2 cents on the dollar and dismantle it.
I really miss those AIG commercials with the fat kid with the milk-mustache. And what happened to the one with the guy who only thinks about butterflies because AIG has got his back? How’s he doing right now?
Devil’s advocate again…AIG is insurance. Maybe if AIG gets just enough money to pay some of the claims (claims = dead mortage asset) filed by the banks, then the banks will regain confidence. So instead of bailing banks out of all their bad debt, or bailing FB’s out of all of their debt, they can effectively “leverage” the TARP money to erase more debt with less money.
I have to admit, I’m uncomfortable with the way Obama spoke a few weeks ago when he said “Look I know you’re angry, I get it, but we HAVE to get credit flowing again, have to prop up the banks… etc.” It sounds to me like he bought whatever line he was fed by Geithner/Summers.
Enough of the blanket statements like “keep credit flowing.” I’d like some technical details. I don’t need to understand it, I just need to know that they understand it.
Six months ago I get a letter from my auto insurance company, 21st Century that they have been bought and they are changing their name to AIG Auto Insurance. Now I get a new letter saying they decided to keep the old name. HAHA
There are problems with both bankruptcy or not. There isnt an option for partial bankruptcy. If BK is filed all the contracts including bonus contracts, and CDS are invalidated, and they become unsecured creditors. However many derivitive contracts are written so that a bankrupt company cannnot collect after bankruptcy, even if they are in the money. Lehman forfeited $50B in contracts bue to them by declaring bankruptcy.
The pension and bonus contracts cant be invalidated short of bankruptcy. Union contracts might be renegotiated with the threat of bankruptcy.
My personal inclination is to let them go bankrupt. The government can decide after who gets their CDS contracts honored if there is a compelling case for the national interest
“Six months ago I get a letter from my auto insurance company, 21st Century that they have been bought and they are changing their name to AIG Auto Insurance. Now I get a new letter saying they decided to keep the old name. HAHA”
21st century was partially owned by AIG. AIG absorbed 21st Century for a brief time, then spun off 21st Century recently. I’m glad to have 21st Century back out from under AIG. The service was better under 21st Century than AIG.
Can’t let the Europeans think we are deadbeats. That would be the end of the Democratic party’s hopes that the world will start loving us again. They can ignore the Chinese thinking we are deadbeats, since they aren’t trendy enough yet to count.
Well, the insurance company actually MAKES money. I suspect Warren Buffet would buy the good parts
Playing the devils advocate, is there any chance some of these companies might come back to operate at a profit? If this is the hope, paying your top ppl what they are worth (i.e., what they could get elsewhere) is the only way to prevent a brain drain. If you dont keep the top ppl, there is nothing to bring back. Consider the doors locked. Note that I am speaking in theory and don’t know the “worth” of any of the individuals involved.
Also why is Obama “outraged.” His family is partying like rock stars on the tax dollar. He certainly doesn’t believe in leading by example nor that the same rules should apply to him.
I say no way: the ‘top people’ will try to leave with or without any bonus. Who, that could go elsewhere, would stay to be part of this highly public charade?
I doubt the same people that got AIG into so much trouble will bring the company back. They shouldn’t be hiding behind contracts either, when so many ‘insurance’ contracts were signed that couldn’t be honoured without govt help.
Give them a choice. This year’s bonus or next year’s salary, but not both.
“Playing the devils advocate, is there any chance some of these companies might come back to operate at a profit?”
Is there any chance the hordes of unemployed workers might come back to provide a valuable service? The money thrown into the toilet to pay AIG bonuses could be put to much better use shoring up Mom’s & Pop’s depleted pensions or providing them with some unemployment benefits until they can get back on their feet.
As to the brain drain, that’s AIG’s problem, not the government’s. Rival corporations that did not just record the largest loss in the history of American business should have first pick at employing whatever talent is freed up if AIG can no longer afford to retain its top people.
too bad they can’t label all these AIG employees with the huge amount of money that they have cost the company / the taxpayers. With a clear label, I doubt anyone except maybe some really criminal companies would be interested in hiring these workers.
There’s some chance. Almost all the government support has gone to collateral payments (tied to AIG’s credit rating), these payments are necessary because AIG’s rating dropped not due to the underlying quality of the insured risk (or more properly termed swapped risk). If the risks end up being at what AIG estimated them to be (remember defaults really haven’t been a problem, yet) AIG will get the collateral payments back.
The reason the employees who created the mess are getting bonuses, is that those collateral payments can be increased if a party takes positions opposite AIGs (new positions drive the price up forcing down AIG’s credit rating forcing additional collateral to be posted). Right now there’s no market for these securities, so a new bidder could cheaply force down prices. So if those traders left, the first thing they could do is make AIG’s hole deeper, so as unpalatable as it is, they’ll get paid until there’s more liquidity in the market for AIG’s book.
Perp walks for the highest 2000 “earners” in AIG. Then jail cells.
For what? Being incompetent?
Larceny and professional misconduct.
If there are cases of theft then I’m with you. To the extent they didn’t act in the best interest of their shareholders seems like mostly a civil issue to me.
But it seems that these companies (AIG et. al) have their hand out just like everyone else and I can’t get behind a “perp walk” just for that. Goodness, if we threw everyone in jail who ever wanted/received unearned money from the taxpayer…who would gaurd the jail?
Congress on the other hand has responsibility to not dish out cash to all their rich buddies and campaign contributors. That crew I would happily hang myself and not lose a minute of sleep.
I agree with you about congress. The entire thing is a scam but BJ is correct in that we will never get an invoice for this but I’ll stand by my assertion that this is theft on a grand scale and should be prosecuted.
I don’t even see incompetency. If you work for a company that pays you based on generation, and doesn’t care so much about the results, why is it incompetent to focus on generation over results? Horrible results and huge pay. It might not be pretty, but knowing how milk the system seems like competence to me. The ppl that warned of the risk, and as a result, had reduced generations because they killed deals were let go or made a few hundred thousand. Meanwhile, the risk takers were being paid millions. Ethics and competency are two different things.
Considering the rocket science talent base that has been lured into finance in the past twenty years, I find it pretty hard to buy the incompetence defense for AIG’s failure. It seems more plausible that they took advantage of the too-big-to-fail bailout policy that the Fed put into place long ago (e.g., in the case of LTCM). Policies that reward failure will naturally result in large bonus payments to those who successfully execute a plan to fail.
The ppl that warned of the risk…were let go
I was thinking (when I wrote that statement) of the leaders who ignored the warnings or set up pay structures that encouraged bad behavior. Everything else you say I agree with.
what about the guys that were short real estate and banking?
Yes, the short sellers are to blame for this whole mess.
The Daily Show went after short sellers last night. Kinda sad to see a show that is usually fairly intelligent sink to that level. I guess we all have limits to our knowledge.
On one hand, it’s hard for me to like the idea of betting that someone is going to fail. Especially when negative, self serving info can be spewed out faster than anyone can reasonably address.
OTOH, anyone who shorts companies by ignoring the BS/PR and does the research that proves that the published numbers are crap, should have a mechanism to be rewarded for it. Especially since the business media is in the cheerleading business nowadays.
Anyone who got rich by shorting anyone associated with this financial meltdown deserve it. At least the cash is in “smarter” hands now.
on the other hand, aren’t the current AIG bonuses pocket change compared to what ML, Citi, GS etc. were paying their topmanagers last year (after receiving various forms of government aid)? I remember the total amount was often over a billion per company, for a relatively small group of managers. Failed EU banks, similar story (bonus pool per company often way over 1 billion).
for sure US is now doing better than Netherlands; over here there is outrage on the street as well about skyrocketing incomes and huge bonuses for taxpayer-saved banksters, but our government is doing nothing (they claim that they have no legal options to do so). The only thing that happened is that they pressured the top management (top three or so in the company) of ING, Fortis and a few others to cut or eliminate their private bonus, as an example. No doubt these managers are compensated for this under the table, e.g. with more stock options or even higher incomes.
Would be interesting if Obama really can reverse these AIG bonuses, it might set an example for Euroland as well.
regarding the AIG bonuses:
1. the contracts are last years business. pay the bonuses but just don’t pay any future bonuses.
2. meh…the bonuses are small compared to the entire bailout package… not big deal.
3. come on now…don’t you think the AIG execs should be left alone so they can concentrate on bigger issues.
hmmm…those arguments worked so well for our governemnt.
1. That last years business is the business that collapsed the entire company.
2.The unit in London that is getting the bonus money were the ones responsible for the extremely risky deals that went bad.
3. The people getting the bonuses don’t even live in this country.
4. If we pay these bonuses to the people in London, Parliament might pass a law to put them into a sack with poisonous snakes and be thrown in the Thames.
5. The Thames is not very clean by the time it gets through London.
6. London Bridge might fall on them as they are floating past in their snake infested sacks.
What a horrible thing to do… to those poor helpless snakes! Otherwise, I say go for it.
I think this focus on bonuses is a huge smokescreen. It plays on people’s emotions, but hides what is really going on.
This is not an AIG specific thing. The public is against the entire WS b@ilout. BB’s 60 minutes PR campaign was to raise support for more of this type of behavior. The outrage we are reading about is the public’s response.
What politician is going to muster the courage or ‘political will’ to step between Main Street’s pitchfork and a Wall Street banker’s arse? B@ilout envy is alive and growing. Washington enablers better be listening.
Mainstreet’s pitch fork, please
Mainstreet has been grumbling but I see no pitchforks, wake me up when the first riot occurs, when bank windows are smashed, when CEO’s homes are broken into and their cars vandalized. The US is docile beyond belief. I went to a hastily called protest when the bailouts started. I came late, but we all could have fit at one table.
I expect the shooting to start shortly after the first underwater FB with a gun collection sits staring at his prize piece currently being auctioned on ebay, whose eyes drop to the mysterious “third party billing” charge on his phone bill for the third month in a row while he’s on a 45 minute hold to beg the biller to stop defrauding him after the phone company has told him there is nothing they can do about it.
Why all the outrage at AIG and none toward the retards that gave them all that money? Why is B Frank acting so po’d? He is the one that passed the law that gave them that money. He KNEW where it was going. The money was cast into the sea by Congress and the Treasury (and some came from the Fed).
You give a kid your grocery money and then act all indignant and surprised when he spends it on candy. What a bunch of f*ktards.
We’re not supposed to be p.o’d at Barney Frank because he’s not from the same polical party as George W. Bush.
Which is why our two-party system has to go. Our political system is as big a failure as AIG, lehman etc.. Giving the Dem. party a free pass is = taking the sheeple on a different route to the shearing shed.
How to get rid of the 2 party system:
Combine every 2 congressional districts into 1 and send the top 3 vote getters to Washington.
I never heard all this pandering and squealing for two party replacement a few years ago….
boo hoo hoo….. whaaaaaaa! (kick feet) mommeeeee!
Senator Chris Dodd (D-Conn.) on Monday night floated the idea of taxing American International Group (AIG: 0.9783, 0.1982, 25.41%) bonus recipients so the government could recoup the $450 million the company is paying to employees in its financial products unit. Within hours, the idea spread to both houses of Congress, with lawmakers proposing an AIG bonus tax.
While the Senate constructed the $787 billion stimulus last month, Dodd unexpectedly added an executive-compensation restriction to the bill. That amendment provides an “exception for contractually obligated bonuses agreed on before Feb. 11, 2009,” which exempts the very AIG bonuses Dodd and others are seeking to tax. The amendment is in the final version and is law.
Also, Sen. Dodd was AIG’s largest single recipient of campaign donations during the 2008 election cycle with $103,100, according to opensecrets.org.
Dodd’s office did not immediately return a request for comment.
One of AIG Financial Products’ largest offices is based in Connecticut.
Dodd, Fwank and a whole host of others should be dressed in orange, sharing a cell with some big strong sweaty mens.
Fwank might like that.
Just a logical extension of the friends of Mozzillo program….
End the system of Wall Street financing of our politicians if you want to see an end to Congressional financing of Wall Street bonuses.
Hmm. Financial Wizard Sleeves.
While I think AIG is making very foolish decisions wrt bonuses, shouldn’t the representatives that We the People elected to handle our problems have thought things through a bit more before handing out our money?
I’m much more annoyed at Nancy and Barack than AIG.
I like the idea that Sen. Grassley promoted yesterday on what the executives of AIG should do in repentance.
Iowa’s Sen. Grassley wants AIG executives to repent, says he isn’t really advocating suicide
Grassley’s initial comments came during an interview Monday with Cedar Rapids radio station WMT. They went further than remarks he has made in the past about corporate executives and public apologies.
“I suggest, you know, obviously, maybe they ought to be removed,” Grassley said Monday. “But I would suggest the first thing that would make me feel a little bit better toward them if they’d follow the Japanese example and come before the American people and take that deep bow and say ‘I’m sorry,’ and then either do one of two things: resign or go commit suicide.
“And in the case of the Japanese, they usually commit suicide before they make any apology.”
http://biz.yahoo.com/ap/090317/grassley_aig.html?.v=2
Wanted to repost this from PB yesterday. “Privatize the gains and socialize the losses” just doesn’t get any more blatant than this. The unbridled audacity is - amazing.
——————-
Comment by Professor Bear
2009-03-16 20:56:20
How much of the money Goldman Sucks is thinking about investing in distressed debt came their way in the form of TARP bailout funds?
Goldman fund eyes distressed debt market
By Henny Sender in New York
Published: March 16 2009 23:34 | Last updated: March 16 2009 23:34
Goldman Sachs is asking investors in its $15bn private equity fund for approval to shift much of its remaining uninvested money into distressed debt in a stark indication of just how dysfunctional the buy-out business has become amid the meltdown in credit markets.
In recent months, many private equity firms have quietly shifted their focus to buying debt at a discount as they are unable to pay for acquisitions with cheap flexible debt as they could during the boom years. Goldman is now seeking to do likewise.
—————————–
U.S. Housing Starts Unexpectedly Increase on Condos
March 17 (Bloomberg) — Housing starts in the U.S. unexpectedly surged in February from a record low on a rebound in condominiums and apartments that signaled builders cut too deeply as the credit crunch intensified at the end of 2008.
For the rest of the story:
http://tinyurl.com/cyv6xo
For all “bitter renters” …maybe they will over-build!
For all “Landlords”…keep increasing the rents for your loyal renters!
What’s next… 1200 sf homes?
Lucy’s 5 cent advice: “Charlie Brown…you’re such a Blockhead!”
ECONOMIC REPORT
Housing starts surge 22% on apartment building
Single-family building permits rise 11% in February:
WASHINGTON (MarketWatch) - Boosted by an 82% increase in construction of apartment buildings, U.S. housing starts surged 22% in February to a seasonally adjusted annual rate of 583,000, the Commerce Department estimated Tuesday.
Apartments? Failed condo projects…
Yep.
Probably being finished by someone who bought the land for 10 cents on the dollar, labor at 70% of bubble prices, and material 50% off.
How many of these projects will be abandoned 1/2 done?
Got Popcorn?
Neil
Yeah but again, how is this suddenly starting to happen? Where are builders starting to find the credit to do this? Who’s potentially going to be able to buy these starts? And why haven’t most builders gone out of business at this point?
We’re getting some 1000 high end condos in Norfolk, VA. At the same time, vacancies are at an all time high, and rents are starting to sink.
“For rent” signs in windows of apts all over San Francisco. That’s new and different.
But riding my bike down 3rd Street (Mission Bay) it is remarkbale to see all the cranes and new condos going up. Lots of workers, no idle equipment - it was humming. It’s like a whole new city is being built.
Many for rent signs on newly built buildings, too.
C’mon let’s drive those prices down!
The new bubble.
Build build build!!!!!!!! lmao.
This is it. Builders who have been able to survive starting up again.
“I’m a builder, I build”
Once these guys get wiped out and add there apts to the heap of inventory, I think we’ll go from the road to the bottom, to the high speed train to the bottom.
“Home sales up despite falling prices!!!!!”
Allllll aboardddddddddddddd..chug chug chugchugchug
My thoughts exactly, have at it boys. Go make a big, big, big splash!
I remain amazed at the number of new structures still going up around town. I’ll drive a route I haven’t been on for a while and I’m like, “WTF? Where’d that building come from?”
This week I happened to drive through the North / California intersection (in Humboldt Park) for the first time in at least six months. A band I used to be in had a rehearsal space (in a building that really should be condemned) a few blocks away for many years, so I used to visit quite frequently. Not a nice stretch of Chicago street even in flush times. Dilapidated buildings, litter everywhere, high traffic, noisy, prostitutes, drugs — and this is after the bubble hit its stride. That stretch of North Ave. appears to be returning to seed, and the shiny new condo is a few doors down from a transient hotel. Not a location to get stucco with a depreciating asset.
Good luck with that, FBs!
Make no mistake about it - as prices continue falling the number of people who think we’re at a bottom (in prices) is increasing. I think we really have hit the bottom in terms of the number of housing starts - heck they’ve been at historic lows the last few montys, and by a long shot.
The number of knife-catchers increasing. This, combined with the $8k tax credit, will IMO cause the pace of price drops to slow, and I think already is in some places. However prices will still continue down for a long time, and be flat for a very long time after that. The overhanging inventory and still-rising foreclosure rates are seeing to that.
In terms of prices - we’re in for a very long and flat U; right now we’re at the cusp of where the downslope starts flattening out.
Maybe I’m more privileged than I thought I was, but how an $8K credit for an item of nebulous value can affect one’s decision to buy or not seems ridiculous.
The knife catchers are definitely out, but I’m not convinced that prices are about to flatten out. We are approaching a long term of baby-boomer retirement where battered retirement accounts are forcing would-be sellers to hold on to their prices as long as they can, awaiting that assumed rebound that is not going to occur. I personally know several people who are waiting for the market to “come back,” as if the decline in prices - as opposed to the run-up - was an anomaly.
Actually I didn’t say prices were about to bottom out any time soon - instead I specifically said “prices will still continue down for a long time”.
All I’m saying is that I think the *rate* of decline is going to lessen, and may already being doing so.
Regarding the $8k credit - you’d be surprised. While you’re right that that in itself is certainly no cause to jump back in - I’ve talked with a couple of people who have stated that this will push them off the fence into buying.
Keep in mind that the housing market of the future is going to be vastly different that that of the last 8 years. Instead of people buying $500k homes, they’ll be buying $150k homes; both because of falling prices and just that they’ll be buying smaller homes, including condos. An $8k gain on a $500k home is relatively meaningless, but an $8k gain on a $150k home is quite significant, especially when compared with flat inflation levels.
Not that I’m trying to justify that as a reason to buy a house - heck no. I’m just saying it’s one factor in the Greater Fool equation, that tips the scales towards more fools. More fools means prices will fall slower than they otherwise would.
If anything, the rate of decline needs to continue to increase in most places.
I just talked to a few relatives in a resort-ish town on the banks of Lake Erie here in Ohio. Even as of early this year, houses were still selling at wishing prices and real estate sales are just now starting to slow down. The area just had it’s first REO short sale, and the everyone was abuzz with the fact that it sold for a “shocking” $51k less than the wishing price. After commenting on how the recession could cripple the area’s only real industry (tourism), I had to endure the onslaught from various people telling me that there was “no recession around here” because, after all, “we’re within one gas tank’s driving distance of millions of people” and “they’re still going to come because people still need vacations”.
Everyone thinks they’re special, evidently.
This is why the dead cat bounce on Wall St. is just that - people still seem to think the economy is going to come roaring back any day now. We’ve got a LONG way to go down in some areas, and many people’s still need some ego size reduction surgery.
And I’m still a bit aghast at the fact that these people think they’re going to be saved because they’re within driving distance of so many people in Michigan and Ohio. Michigan’s unemployment rate tops 10%, Ohio’s rate is nearly 9%, and most of the industry in the nearby area (i.e., Toledo, Detroit, and Cleveland) is based around the disastrously poor performing auto industry. LOTS of people are currently getting laid off from their automaker/supplier jobs, and these people think that tons of people are STILL going to come rushing in to vacation? The relatives are even discussing adding onto their newly purchased house. Why? How do so many people still seem to feel secure in this economy?
I’ve noticed that many of the area’s malls and shopping centers seem to be more jam-packed than ever before. WHO is still confident in spending so much money? Are people just determined to blow all of their available credit until they can’t anymore? When is the Greed Economy really going to end?
“I’ve noticed that many of the area’s malls and shopping centers seem to be more jam-packed than ever before”
I see this also, but the question is, are they buying things there? Thats what you need to watch for. Every store I’ve entered into the last 6 months has lots of looky-loos and no lines at the check-out.
Or maybe not everyone is broke? I went out to celebrate a friend’s 30th b-day on Saturday. It was an upscale steak joint and the place was filled to capacity. And I doubt everyone was having water and salad.
I strongly disagree packman, which is unusual.
Couldn’t there be a simpler explanation for the starts?
If the builder already owns the land, they may decide to build and sell at a 30% markup, and totally discount the land value.
As far as prices go, I do not think we are anywhere near a bottom of the U.
OT.
Speaking of U’s… the T Shirts, yesterdays Bits.
SFgal, designing t shirt now, with a big U or L. Deep V doesn’t represent the economy well for a HBB tshirt! Taking your suggestion.
And
Packman, Ahansen was at the LV get together and was the lucky survivor of Bear attack. She looks terrific. Was in People mag.
“doesn’t represent the economy well for a HBB tshirt! ”
Make the T shirts transparent.
Transparency; the ultimate goal.
Maybe - but what would have changed in February to trigger that, vs. say last fall, or last spring?
Agree that we’re not near the bottom of the U - see my response above to Mikey.
One piece of data is this - homebuilders unsold inventory has fallen - by quite a lot actually. E.g. Toll Brothers backlog in Sep. 2007 was $2.85B. In Dec. 2008 it was down to $1.04B. While some of that decline is is due to price drops - much of it is not. They have indeed been selling more houses than they’ve been building, for a while now, because carrying costs are killing their bottom lines. What I suspect is that now their starting to actually sell out in some areas, and are starting to build again. So this might explain that while sales might still be down (I’m not sure), starts can be up.
P.S. Don’t get hung up on the whole “up” vs. “down” thing - people hear “starts are up” and picture some kind of boom (or recovery in this case). This is very much not the case - starts are still way way below the previous record of 800k back in 1991.
Yeah what the heck is up with this jump in starts, anyway?
http://money.cnn.com/2009/03/17/real_estate/housing_starts/index.htm?postversion=2009031709
CNN Money claims they were up 22% in Feb. Why? How?
It would be nice if these articles posted a graph over the last 3-5 years. That might put things in perspective. I suspect there is some seasonal component as the weather warms housing starts increase. That 22% is compared to the month prior I believe.
Here is a graph:
Housing starts
You can adjust to whatever period you want. Note how today’s 583 number is still extremely low. A “22% jump” is kind of like if you have $10 in your bank account, and someone gives you $2, and you claim “WOO HOO - I’m 20% richer!”. It’s all relative.
My feeling is that builders just build. They have nothing else to do.
If I were a builder I would be pitching the lenders soooo badly right now with the following:
1. labor costs are down
2. Materials costs are down
3. We can underprice the competition
The problem with this arguement is that it’s too early. This builder is going to get undercut by a competitor.
I cut that too short:
1 year from now a competitor is going to go to a bank with the same arguements.
I wonder what this means. They report big gains in the Northeast. But where in the Northeast?
There was a huge surge in permits in NYC last summer, as builders had to “start construction” by June 30 to qualify for an expiring tax break — no property taxes for more than a decade.
Could it be they actually got funding to BUILD all those units?
And in some areas of NYC - such as Long Island City - there was a bunch of permits /construction of higher rise condos and hotels.. I think there was a rush to get in before some zoning changes…
Funny as they are trying to sell one bedroom condos for the same price (now) of a house farther out in Astoria…
How does this compare to seasonal variations in years past? I would imagine thres not a hell of a lot of building starting in dec/jan?
Times are tough all over! Germany is suffering its worst economic slump since World War 2. To offset a drop off in business, a popular brothel in Berlin is offering clients unlimited access to all its ladies for €70, which includes an all-you-can-eat-and-drink repast. That’s $90.00 in U.S. currency.
? I guess unlimited access in this case means a free look, and the €70 is only for the food (even that would be cheap for such a place I think …).
And strange, because usually this kind of business (like gambling and booze) does well in a recession.
Guess in Germany the “worst since WWII” hump would be pretty hard to get over. If it gets bad enough to get over that hump - then pretty much that’ll be The End.
Not before it “deep-six” first, before the hump.
Madoff should become US secretary of treasury instead of going to jail. At least this man has experience running a Ponzi scheme.
The Chiniese are worried about their US investments…no shit Sherlock!
Furthermore, Madoff actually calls a ponzi-scheme a ponzi-scheme and admits the whole thing was a giant sham. This fact makes him far more honest and reputable than ANY bank CEO or ANY politician running this show. Make Geithner go live in the penthouse with an ankle bracelet and the scary wife.
I tend to agree. In fact, but for the fact that he managed money for charities, I don’t think I’d feel any antipathy for him at all. He gave a customer base of foolish wealthy people exactly what they wanted. And when he got in over his head, he confessed and plead guilty.
Compare to the behavior of the Enron execs, or Chris Dodd and his contributions from AIG and favorable mortgages, or Charlie Rangel, or Timmy Taxcheat.
(The charity scams were a big eye opener. When I give to a charity, I want the money to go to help people–or cats and dogs–not to be invested aggressively.
In fact, but for the fact that he managed money for charities, I don’t think I’d feel any antipathy for him at all. He gave a customer base of foolish wealthy people exactly what they wanted.
Yep. Agree. The destroyed charities is the part that saddens me, as well. Elie Wiesels’ charity, for instance. All gone. That upset me tons. But the rich folks who simply thought Madoff had insider knowledge and wanted to share the ride?
Boo-foooookin’-hoo.
What’s really getting my goat is that some of these Madoff victims are crying for a bail-out from the govt.
Some are sueing the SEC.
WTF!
Investing is a gamble. Get over it. I mean, I do feel bad for some of these folks, like the old lady who lost millions and is now working as a maid, but what was she thinking???? ALL her money in one place???
Also, the losses are MUCH smaller than people claim, because they’re claiming the inflated values.
Suppose I invested $1,000,000 with Madoff, with 12% returns, for 10 years. Madoff’s return would tell them they had $3.1 million.
In actuality, if these people had put the money in an S&P 500 fund instead, they’d have $500,000 now. (And that’s not a crazy assumption, given that these people wanted to AGGRESSIVELY INVEST this money)
So take everyone’s “loss” and divide by some 6 (if they’ve had their money in for 10 years) to get a more accurate figure.
reuven: I think you are incorrect about this. In Ponzi schemes, by definition the biggest number is those who entered recently and who obviously lost everything. The number who have been in for 10 years or so must be relatively small (you could do the math, but I’m a bit too lazy for that).
I have seen several examples recently from some Ponzi schemes in the Netherlands (much smaller scale than Madoff, but the whole idea was very similar) and you could calculate fairly accurately, in hindsight, when the scheme would go bust and how many people would lose their money.
>>>At least this man has experience running a Ponzi scheme.
PAH!!! That is the funniest thing I’ve read in a while. I might have to use that myself.
Goldman extends lifeline to over-leveraged employees:
NYTimes
By LOUISE STORY
Published: March 17, 2009
Goldman Sachs got its bailout. Now some of its bankers, those aristocrats of Wall Street, apparently need a bit of a bailout too.
Goldman, which accepted billions of taxpayer dollars last fall and, as learned Sunday, was also a big beneficiary of the rescue of the American International Group, is offering to lend money to more than 1,000 employees who have been squeezed by the financial crisis. The loans, offered via e-mail last week, could range from a few thousand dollars to hundreds of thousands.
Working at Goldman has long been regarded as a sure path to riches. But Goldman’s employees are losing money on their personal investments — particularly in Goldman’s own elite investment funds, which have been considered one of the perks of working at the bank.
Now these funds have stumbled, and some Goldman employees who financed their gilded lifestyles by borrowing in good times are suddenly short on cash needed to meet commitments to their personal investments in the funds. “It’s a problem with the culture of spending,” said Gustavo Dolfino, the president of Whiterock Group, a Wall Street recruitment firm. “No matter how much you have, you spend like you have a lot more.”
Darn. Guess they’ll have to start slumming it at Embassy Suites.
“…has its perks: The nightly manager’s happy hour features free beer and popcorn.”
Neil’s Popcorn & Ben’s Beer…Hey, I resemble that remark!
Motel 6 has brand new decor.
(I happen to like Motel 6. Rode out the Loma Prieta earthquake in one - very solid and well built hotel. Freeways and highway bridges falling down all over San Francisco and we didn’t even lose electric power.)
Ha ha. I used to stay there all the time when I worked in lower Manhattan. Nice hotel. I don’t remember it being cheap though. Rates were $300-$400 a night. This was back in the 2000-2001, just before the .bomb era. Good times indeed.
I just threw up.
This is awesome!
They still don’t get it. That means there is money to be made in the markets.
ROFL, I think you made my day. I was already grinning at their borrow and spend lifestyles blowing up, but you just had to point out the upside to the rest of us.
Because it is freakin’ obvious, and I’m like the Clown Prince™ of obviousness.
“Because it is freakin’ obvious, and I’m like the Clown Prince™ of obviousness. ”
LOL!
All hail the Clown Prince!
LOL.
Why does the Parable of the Unforgiving Servant (Matt 18:21-35) come to mind?
“No matter how much you have, you spend like you have a lot more.”
Until you can’t….
At which point there’s only one thing left to say:
BWAHAHAHHAHAHHAHAHHAHAHHAHAHHAHAHAHHAHAHHHHHH!!!
No wonder I didn’t last in that culture - not Goldman, but one of their favorite law firms. Eveyone else was refinancing their student loans from 10 years to 25 years while I lived in a studio and paid mine off in less than 3.
No more reservations at Dorsia?
Whoo Hoo My GF did NOT get laid off at the Metropolitan Museum of Art…and its her birthday!
Neither did I!
So I assume then we won’t be seeing any posts from you after 9pm tonight right?
Congratulations. That is great news. Love the Met. The new Greek and Roman halls are amazing.
Newpaper Going Paperless - Seattle Post-Intelligencer
A newspaper actually goes paperless. Are they hurting that bad or are they just ahead of the curve?
http://www.seattlepi.com/
They are BEHIND the curve.
Their REAL competition has done it for the better part of ten years, and has ironed out the kinks in the problem. They are playing catch-up now that the RE ads have gone away.
As much as I know most of the stuff in the local paper is horsesh*t, I still like reading it in the morning with my coffee to wake up. Booting up the mac is just not the same experience.
Sooner or later everyone with that attitude dies out, or becomes economically irrelevant.
For the rest of us who have no problem booting the computer, and are not going to pay for the paper, they still need to provide the service.
You reboot your Mac every morning? Ours runs for months without rebooting, and the only time we do reboot is after installing an OS patch.
Ex-trader turn teacher: now kids: “$1 * 100 fake money, put into a pool to buy houses over valued by 200% and in 3 years what do you have? Yes, Jimmy?”
Jimmy: “Nothing? Because it’s all fake?”
Ex-trader turn teacher: “Go see the principal, you are in detention young man!”
N.J. taps Wall St.’s jobless to fill instructor shortage
Tuesday, March 17, 2009
BY STEVE CHAMBERS
Star-Ledger Staff
In a move that could turn unemployed Wall Street traders or pharmaceutical workers into classroom instructors, the Legislature unanimously approved a pilot program yesterday to fast-track public school certification in the areas of math and science.
Supporters called the bill a win-win for both the economy and the public school system, which is pressing to beef up math and science curriculum even as it faces a looming shortfall of teachers in those fields.
The 18-month pilot programs overseen by the Department of Education and implemented, in part, at Montclair State University will focus initially on financial services employees rocked by the recession’s disastrous impact on Wall Street.
This is funny but if you actually saw the quality of the math and science teaching, you’d actually think this was a good idea.
I volunteer to teach math to the smarter kids in Harlem. Let me just say this - if these are the “smartest”, then by comparison with the “real” smartest out there, they’ve pretty much already missed the boat in life.
FPSS –
We have something in common here, as I used to volunteer as a math literacy tutor in the St. Louis black community. One of the best math students I ever had was a destitute 40 yr old black woman who had a very inadequate grade school education. It always thrilled me to see the light bulb go on in her brain when I taught her something.
By contrast, I have also tutored people who convinced me that not everyone is mentally wired to understand mathematics. Fortunately, my kids are not of that fabric; in fact, they are very low maintenance when it comes to math tutoring needs.
The purpose of high school mathematics seems to be:
(a) to develop some basic math skills, and
(b) to learn how to reason logically.
From both these points of view, I think most schools get an F.
Oh, and it definitely leaves the best and brightest behind. It’s not enough to do endless proofs of Euclidean geometry. You must know WHY you are doing them. What’s the structure here? What is REALLY happening?
A few years ago I went and taught a calculus class to these smart kids, and asked them WHY they were doing this? Not one had an answer. They really never grasped that there was a meta-structure to the whole thing, and that meta-structure was actually quite simple - approximating non-linear things via linear structures which we understand completely.
But how would educating the sheeple make it any easier to sheer them? If they learned to think on their own and reason things out for themselves, they might not have put on the yoke of serfdom and bought a stupid-huge house that they couldn’t afford, a Hummer or 3, etc.
Gotta keep the sheeple stupid to keep exploiting them - just make sure that they THINK that they are smart! Argh!
This is an excellent point which I have thought about on and off for years.
I do not believe there is any solution. It’s everyone for themselves really.
Don’t forget that very few high school students will grasp any of what you’re talking about, even the smarter ones. Sure, brain cells peak around 16, but it’s the connections that count. Darwin published, when, in his 40’s?
HS students should be developing high proficiency, learning the basics of critical thinking and how to set up and simplify problems. It’s also good if they can do their own derivations and begin to understand how everything fits together. The “survey course” theory of math education is, to me, DOA, and trust me, they don’t teach it like that overseas.
However, what you’re talking about them not getting is college-level stuff. Once you have grappled with some non-linear systems you start to discover very quickly why you are using all these ‘models’.
“But how would educating the sheeple make it any easier to sheer them?”
Legalize marijuana.
what you’re talking about them not getting is college-level stuff
There’s no such magic delineation in the real-world. Either you present it so that they get it or you don’t.
Say what you will about the ol’ Russian system but they had phenomenal textbooks. They had figured out a way to teach the Central Limit Theorem to eigth-graders!
Was it simplified and kinda wrong? Of course, but they were demonstrating the concept in real kiddy-terms. And it worked!
So I call pure and utter hoo-ey on your position.
I did mostly math tutoring with the Children’s Aide Society on the Upper West Side. Most of the kids were 12. One was obviously good with numbers - very proficient with long multiplication and division. So I started teaching him algebra. Why not? He was willing and loved the attention. Problems? Oh yeah. I don’t think he had never faced an idea he didn’t understand instantly before. He couldn’t handle being corrected because it had never happened to him. I bet his teachers were so delighted to have a kid who could do the work at the assigned level, they never bothered to give him anything harder to keep his interest.
We worked on it a bit and he made some progress and he was sure proud of it at the end of the school year, but I worry about him still. You can’t succeed in life if you don’t know how to learn something that is hard for you to understand the first time around and you can’t stand being corrected.
+1
This is a real problem. Smart kids need to know that there is a lot beyond their ability. Without that, there is no particular reason to strive.
You pretty much summarized why I ended up an economist instead of a mathematician
No kidding. What attitude! -
There’s a misperception that because one is proficient in a given subject area that he is capable of teaching in that area. The same poor assumption is made in industries involving the sciences, where once-productive employees are promoted to management.
Fair point but it’s better than the teachers who actually have absolutely no clue about the subject which seems to be the overwhelming case in math and science.
Worse, they are there because of “seniority”. Heaven help us all!
+10
I once had a teacher who was great in English or social studies but had gotten assigned to teach 11th grade math. DISASTER. I ended up having to retake the material in college as an elective.
I saw a previously A student come to him in tears because she was failing the unit … she was failing because he was presenting materially incorrectly, because he didn’t understand it himself. I was having trouble with a problem and asked him for help and he got the wrong answer. (Prob. & statistics)
Probability & Statistics, Combinations & Permutations should never, ever be taught by someone who doesn’t both know the subject intimately and can relate it well.
Worse, they are there because of “seniority”. Heaven help us all!
I shall tell you all a sad story, for a rainy day.
‘Seniority’ would have been better than the reason ALL my high-school math teachers were teaching math. Every single one of my math teachers were coaches who were dragooned into teaching math in order to save the money a ‘real’ math teacher, such as one who could add, would have required. I’m pretty sure Coach Steele, for instance, could not even add, because he didn’t have the right number of digits on his furry paws. I had him for my sophomore, junior and senior high school years and he never did anything but sit in front of the classroom and talk about football and reminisce about his wild youth. It didn’t matter if you learned anything, all you had to do was sit there and listen and then every now and then hand in a scribbledy on paper with some numbers scrawled on it. Yes, really.
If you were a cute girl, you didn’t even have to bother with the scribbley paper, all you’d have to do was listen with wide respectful eyes and sometimes giggle every now and then, and pretend that the glistening mass of curly black and white hairs spurling forth luxuriantly from his v-neck t-shirt did not repulse and frighten you, and baybee, you’d pass.*
*Which is, in fact, how I passed. And it’s also why every time I try to add something up it comes out to be ‘fifty-eleven’. Every. Single. Time.
Yes, thank you, Utarr educational system, thank you.
More damage to the jobs report!
Caterpillar lays off 2,454 workers in 3 states
PITTSBURGH (AP) — Caterpillar Inc. announced a fresh round of job cuts Tuesday, laying off more than 2,400 employees at five plants in Illinois, Indiana and Georgia as the heavy equipment maker continues to cut costs amid the global economic downturn.
In the latest cuts, the Peoria, Ill.-based company said 2,365 support and management workers had been laid off for at least six months and 89 workers had been let go permanently. Some 245 of the 2,365 layoffs had been announced previously.
http://biz.yahoo.com/ap/090317/caterpillar_layoffs.html
didn’t they tell obama just a few weeks ago that they would not lay people off if the stimulus passed?
Actually, they made it really clear that the stimulus would’ve no impact on their decision-making.
No, that’s what Obama said they said, which they didn’t.
Well, actually it’s what Barry’s teleprompter told him to say! LOL!
I found this data about Virginia’s forclosure problem.
http://www.dhcd.virginia.gov/vfptf/PDFs/Foreclosure%20Data%20Presentation%20-VHDA.pdf
Nice. The problem list does not mention the rapid price increases of homes, of course. Only that the price is going down.
Still, good to see Hampton Roads/Virginia material.
If only there was price per square foot data for our area.
I’d just like to throw this little post out here.
We went through all sorts of stages of loosening of credit:
Lower reserve requirements in the 1990s
Lower rates from the 90s on to later 00s
Quantative easing… 0 rates and massive buying of over priced assets
So, we are still in a rate lowering cycle. Not sure where we go from here.
Also, the general plan seems to be to take money from taxpayers and give it to banks. Then banks will loan our money back to us at high rates. Well, even if the rates are not high they will probably try to make us buckle with fees.
This will all end very badly.
Hope that O gets his head out of his backside. Get someone that represents the people in the treasury department and starve the Fed.
Anyhow, China/Arabia should start the process by cutting our credit cards up soon.
I’m not up for being a victim of any banker man. Individuals owe it to themselves to:
1. Immediately sever any banking relationship with a bank that imposes fees to conduct normal business.
2. Avoid loans as much as possible, taking them on only to achieve a well planned and thought out goals, and limiting the amount and term of the loan to the greatest extent possible.
Life’s a struggle, what else can ya say?
It doesn’t matter if you do business with the bank or not.
The government is running up that debt for you.
And it was a republican president and democratic houses that started this little joy ride. And it continues.
We really need a secure government institution, like a treasury bank for business and other people to put their money to keep it out of the hands of hedge funds and investment banks.
Hard to do when nobody has your back.
I think it requires an ever increasing rate of inflation to sustain itself.
Hyperinflation=default
Deflation=default
Trying to figure how close we are to the endgame here. Was hopeful government wouldn’t allow banks to drag the few of us on the sideline under too. Seems not.
We are heading twords the government shoots the survivors section of the crisis.
Hyperinflation=default
Deflation=default
The hyperinflation default occurs much later than the deflation default, thus that is the route they will choose.
Stop enabling TBTF institutions. It’s really that simple. Let them fail.
March 17 (Bloomberg) — U.S. Representative Barney Frank said lawmakers working to overhaul financial regulation amid the worst economic crisis since the Great Depression must “figure out how we avoid ever again being in this situation.”
Since it`s St. Patrick’s Day
A man is using a urinal in an airport when a little man in a green suit walks up next to him hops up on a little stool, takes out an enormous unit and begins to relieve himself.
The shocked man says excuse me, I normally don`t notice things like this but how did such a small man get such an enormous unit?
The little man in the green suit says, I am a leprechaun and I wished for it.
The man looks around and sheepishly asks, could you wish one for me too?
The little man says, I could but I would have to have my way with you first.
The man thinks to himself, I am not in my city no one will ever know and tells the little man in the green suit, O.K.
The little man takes him in a stall, hops up on his stool and begins having his way with him. The little man begins asking him questions.
What`s your name?
John.
Where do you live?
St. Louis. Look, could we just get this over with.
Sure John, just one more question, how old are you?
32
John isn`t that a wee bit old to be believing in leprechauns?
hahahaha
This sounds like what our government is doing to us…
“How did you get so much money?”
“I wished for it out of thin air..”
“Could you wish some for me too?”
“Sure, but first I have to have my way with you in order to ’stimulate’ you”
Aren’t we all to old to believe in free lunches!
Well, the walk away trend is near peaking, because it was on the front page of Yahoo!Finance:
Thoughts on Walking Away From Your Home Loan
by Ron Lieber
Monday, March 16, 2009
yeesh. All we need now is the cover of Time!
I don’t think the masses have yet begun to walk away. It gets brutal going forward.
CLICO, with assets in excess of over $24 billion, only requires capital of $3 million. This compares for example with banks which must have capital equivalent to a minimum of 8 per cent of its assets. Thus, a bank of CLICO’s asset size would have at least $2.0 billion of capital; regulatory capital requirements for the insurance industry is only now being developed.
This is from Trinidad & Tobago. A scandal that hasn’t hit the front pages because it is “too small to fail”.
If I were a resident of T&T, I’d move my money to gold on the spot.
I mean, why lever 10:1 or even 60:1 when you can lever 8000:1?
Why buy gold not US dollars?
Same difference.
If you look at the local correlation, gold and USD have been moving together over the last few months.
As long as you make a killing on the way up and can either fold up or get bailed out on the way down, 8000:1 leverage makes perfectly good sense…
I’ve heard that the fountains at the White House are shooting out green water for St. Paddy’s Day.
Must be the color of our money going down the drain?…;-)
The original idea of mass eduction was that if you had a educated
Society ,they would make intellignet decisions about that Society as well as be a productive benefit to that Society .
Some highly educated people flocked to Wall Street to use their brains to fleece Main Street and other investors .
So this implies that education isn’t enough and some moral training ,or law and order , or strick regulations to protect the Public would also be needed in a functioning Society .
You can’t legislate morality.
There will always be some fraction of humanity that will use their intellect for nefarious purposes, and you can’t just say “regulation” because then these nefarious people will make sure that “their” people get into regulatory positions.
You can’t just wish away these things.
FPSS …If you have no way of regulating corruption ,and law and order is impossible ,than you need to give it all up . You have a goal to have a fair and just and regulated system of law and order ,and just because you can’t achieve the goal 100 % ,you will achieve the goal within a acceptable margin .
We can’t catch all the criminals on the streets either at any given time ,but no reason to stop having a strong law enforcement that would cut the number of crimes down .
Apparently the financial system was not even policed at all in the name of de-regulation and the concept that the Business World would police itself and not shoot itself in the foot ,or the concept of capitalism would have a invisible hand that would correct itself .
There is always the risk of any given system to go into a corruption cycle given enough time . There are alot of people that do not commit crimes because they are afraid of punishment . How many would commit crimes of greed or fraud if they were told they could police themselves . Human nature is such that like you said you can’t make a person moral who isn’t .
Hard questions need to be asked as to why America has not had nothing but junk concepts crammed into their brains . The training and programing has been a entitlment Society that deserves to get rich quick ,and buy ,buy ,buy things because they will make you happy . If you don’t have the money to buy ,take out a loan you can’t repay . The movies have glorified creeps and
psychopaths . America was being brainwashed into
buying houses they couldn’t afford that they needed to submit liar loans to get .
On the good side our religious Society of the past gave moral training to some degree and the family values programs of the past were a form of moral training . The point is that a Society must have law and order and people can’t step on each others toes and anyway that this training is given ,it is needed for a functioning society . The fact that gangs now run amuck in this culture is a bad testimony .
The crash itself will force people into re-examining their values maybe and somtimes pain and suffering teaches a person what is wrong ,or amoral ,or not pratical .
So, I guess I am saying that alot of damage has been done and
it won’t be healed overnight . I’m not trying to wish away the corruption ,corruption has to be purged and beaten with a stick . It will take a long time for the lessons of the Ponzi -scheme party to sink in . As I have quoted this unknow Author many times , I will again ,” A Society that does not dole out reward and punishment in a just manner is doomed to fail .”
You go over there, wave your flags, and go about changing the system.
I will be over here betting with my capital which way things are likely to turn out.
Everyone should spend their time doing whatever they please. That’s capitalism.
Ok FBSS …You go out and spend your time as you wish and I will spend my time trying to perserve your right to do what you want .
You cannot have legitimate regulation unless it is peer to peer regulation. As soon as you give one person “authority” to regulate another you have slavery. If you want to prevent fraud you have to take individual defensive action. If that means voluntarily working with others then that is fine. As soon as you cross the line and start telling others what they may or may not do then they have a right to defend themselves from *you*.
Every regulatory agency in the country is owned by the industry it is supposed to regulate and they use this power to create monopolies. Clearly your system has failed.
You cannot change the nature of government. It will always use its monopoly on violence to grow. No constitution can restrain a government.
The purpose of government is to create a single source of violence. We voluntarily give up our right to kill to the collective (government) and hope the collective doesn’t use its right on us.
The only thing worse (for the vast majority) is living in societies that haven’t given up that right.
And once you have given up that right, all other rights are subject to the collective.
Come on you guys ,I want freedoms just as much as the other guy ,but in a World that has this much population it requires some law and order and rules of the game . We have the law-makers and the law enforcers and the High Court to consider the Constitution . If the system is corrupt, than it needs to be corrected .
Your suggesting that anybody ,the government or otherwise ,that imposes limitations is usurping your right to do exactly what you want . Why would one think that a call for law and order , or justice ,or absence of corruption is Flag waving ? I think my desire is to keep some of the known American ways of certain freedoms
are achieved by regulations and law and order .
I’m kinda surprised these guys lasted as long as they did.
http://www.cnbc.com/id/29737915
It sure must be nice to work for a failed company recieving taxpayer hand-outs!
Reuters - American International Group, which has received $180 billion in taxpayer money to stay in business, created 73 millionaires with bonuses of $1 million or more in 2008, New York’s Attorney General said on Tuesday, releasing details of a probe into payments at the insurer.
It gets worse. Retention bonuses for employees leaving the company.
March 17 (Bloomberg) — American International Group Inc., the insurer under fire for handing out bonuses after its $173 billion government bailout, budgeted $57 million in “retention” pay for employees who will be dismissed.
someone suggested that if Geithner wants to do something, he can start with publishing the names and address of all those who received these bonuses. Maybe also add how much money their branch lost in 2008.
It would be much easier to just list the names of the people who approved the funds, every member of congress who voted for TARP.
Fight the real enemy.
What do they expect when they give out blank checks with no requirements to corrupt Companies that couln’t pay their unregulated and leveraged Casino bets .
This is absurb that after the fact they now want to regulate the crooks that they gave the money to without requirements . This was Hank Paulsons and the Fed Chairmans big idea that they put out the fire first and than look at regulations and requirement
and all the things that created the problems .
They gave 160 billion to a Corrupt unregulated orgination (AIG)that they refused to bust or let go belly up ,when they could of directly given restitution to Companies that would of been affected by that corrupt Company .
It would be the same as saying lets give Madoff 60 billion to pay his debts because the investors need to be bailed out .Maddog couldn’t make good on his promises either as AIG can’t .
Unemployment really ratcheting up in WA state (WARNING PDF):
http://www.workforceexplorer.com/admin/uploadedPublications/3672_statecounty.pdf
Here’s an idea- make college tuition even more unaffordable:
http://www.theolympian.com/northwest/story/790305.html
GM playing the game for more taxpayer money, saying BK would mean liquidation. Please no more scare tactics to try to feed at the public trough.
Liquidation might be the best alternative (to a reorg BK), sell off the pieces to those that can run a car mfg business at a profit. Instead, it seems we’ll have the walking dead for years to come. Car sales aren’t going back to 16 million/year anytime soon. Better to get small and mean. Liquidation is probably the best way to do this.
http://news.yahoo.com/s/ap/20090317/ap_on_bi_ge/gm_wagoner
it must be tough being Bernank-kee-ohh-dubba-G
comin up with funky a** sh*t nearly every single day
whatcha gonna do?
smoke em out….very little chatter bout the money on his mind ya’ll..best get you’rn, afore’rn I get mine.
vozzie, vozzie, quite contrary
how does your garden grow?
short black goo-ey stuff, perchance?
I’m not so sure the path of destruction isnt long the pain of price inflation for the things you buy and grindingly slow deflation in the things that you own…..
long blubbering pain,
short hope
In the long run, we are all dead.
But in the short run …
..The Epic re-Session will where? you smooth out.
I find it difficult to want to speak the same laungage as the asians…..
my home is different.
dont get upset.
thats just how it goes.
a deaf laotion is a lingy lingerer…
+1
Hi clue!
We missed ya.
Yeah, are you and Vozzie having an affair? You seem to disappear together all too frequently.
I even posted the Punch line prior to seeing your comment.
layin back……Jobs are still significantly weak, housing will only bottom out in price as a function of high interest rates, transactional volumes in the indicies should start to slow down.
Aint no more bubbles gettin created.
only bubbles currently existing can blow up….
dollars not my problem, its “yalls” whoever “you’se guys” is.
Why did you Punch my sockpuppet?
clue is a delicate flower.
Chrysler LLC is studying how it could pull operations out of Canada if it doesn’t win wage and benefit concessions from the country’s auto union that are considerably larger than those given to General Motors Corp.
Obama, Dodd Outraged at AIG Campaign Cash
by Scott Ott
(2009-03-17) — As the furor over AIG executive bonuses threatened to bring the current economic recovery to a halt, President Barack Obama and Sen. Chris Dodd today threw fuel on the fire, announcing their “fierce outrage” upon hearing that the insurance giant had given each of their campaigns more than $100,000 last year.
“While AIG was collapsing, and her executives crawling to DC with hat in hand,” said Sen. Dodd, D-CT, “my campaign, and then-Senator Obama’s were getting what can only be termed influence bonuses from the same firm. Naturally, I knew nothing about this, and I’m now seething with anger at the injustice.”
President Obama and Sen. Dodd were the two largest recipients of campaign contributions from the beleaguered company, and the only politicians to garner six-figure amounts from AIG in 2008 — $103,100 for Sen. Dodd and $100,332 for presidential candidate Obama.
AIG, which has received $170 billion in taxpayer cash from the federal government since September, gave more than $585,000 to Congressional and presidential candidates last year, favoring Democrats 3-to-1 over Republicans.
In unrelated news, Sen. Dodd proposed legislation requiring AIG political gifts to be returned to the U.S. Treasury, “exempting only those campaign contributions made before November 4, 2008.”
The senator’s office immediately issued a statement declaring that Sen. Dodd was not aware that he had proposed such the exemption.
Outstanding article. Will the sheeple ever grasp that congress holds the purse strings, and that the banks hold congress’ puppet strings?
The whole AIG bonus thing is one big old red herring to take the attention away from the audacity of the bailouts themselves, which are literally 1000x the scale of these bonuses, and also away from the other bailout recipients - JPM, Citibank, BofA, Goldman Sachs, etc.
That’s all it is. Sure AIG is guilty - but no more so than these other institutions, who are getting virtually attention, especially with regards to bonuses, even though they’re just as guilty.
virtually no attention (?)
(I am sure the editorial omission was due to a fit of pique…)
Yep - thanks for the correction.
Captain Renault: “I’m shocked, shocked to find that gambling is going on in here!”
– Casablanca (1942) –
“President Obama and Sen. Dodd were the two largest recipients of campaign contributions from the beleaguered company, and the only politicians to garner six-figure amounts from AIG in 2008 — $103,100 for Sen. Dodd and $100,332 for presidential candidate Obama.”
BwaHahAhahahahahahahahahahahahahaaaaaaaa!!!!!
They seem defenseless, no?
Will summer come to the Hamptons this year?
Writer Andrew Rice trudged the highways and byways of the playground of the rich and famous during the winter finding that the real estate and lending meltdown that has sacked Main Street America has now hit the upscale vacation home market, where a home with a $1.5 million mortgage, a classic Hamptons house, was recently sold at auction on the steps of Southampton Town Hall for $500 to the only buyer present — a bank representative.
He details his trek in a detail-loaded article for The New York Times.
Here are some scenes from his journey:
1. Former Lehman Brothers chief executive Joseph Gregory, who has had his Bridgehampton house on the market since July (debut price $32.5 million), is now considering putting the eight-bedroom manse with 200 feet of oceanfront on the rental market, where one Web site shows, Rice says, about 500 listings for summer. Will supply outstrip demand?
2. With hard times on Wall Street, the usual summer-place euphoria hasn’t materialized. Prices appear to have dropped about 10 percent but because there are no buyers the figure is anything but rock solid. Those who bought during the price spiral of 2006 and 2007 appear to be in the most trouble, Rice observes.
3.A real estate agent tells Rice “in the Hamptons we tend to see people that don’t really need to sell.” The next week, the price of the “Hampton’s starter home” she was showing has dropped another $50,000. It was down from $2.2 million to $1.8 million at that point.
4. A seller in the exclusive Georgica neighborhood delicately skirts the real issue – foreclosure – as the price of the five-bedroom house slides from $6.5 million to $5 million.
5. John Brady, a broker with Prudential Douglas Elliman Real Estate, has developed a specialty working with sellers wo are in over their heads. His company, instead of emphasizing the upscale stock, is advertising his short-selling skills.
- LIISA MAY
http://weblogs.newsday.com/realestate/blog/2009/03/will_summer_come_to_the_hampto.html
A Few More AIG Culprits (with bonus pandas)
Saturn Scott
“In addition to all of the nicely deconstructed madness over the AIG bonuses, there’s this second story today, about the ways that AIG used its bailout money to essentially bail out other firms. Reading about this made little sense to me, so I went crawling through the Internet today to see if I could make it make sense to myself. Since I do this through writing, anyone who passes by here today is either a victim or beneficiary of my compulsion.”
The rest of the story:
http://tinyurl.com/cpzqjm
I wouldn’t so much mind the FIRE rescues if the perpetrators were strung up by their toes instead of getting paid $1m bonuses.
Why bailout money goes to banks, not us
Carolyn Lochhead, Chronicle Washington Bureau
Tuesday, March 17, 2009
(03-17) 04:00 PDT Washington — As President Obama promised Monday to halt the $165 million in bonuses to disgraced financial wizards at insurer AIG and announced a new $15 billion government lending program for small businesses, ordinary people were asking a simple question: Why not give the money to them to buy a new car or pay off a mortgage or just deposit in a bank?
Not so fast, experts say. Although it sounds like a great idea, writing checks to people would not prevent more bank failures and much worse economic fallout.
On its face, the idea seems reasonable. Taxpayers are spending $700 billion to rescue banks and nearly $800 billion on the stimulus package. That comes to $1.5 trillion, which doesn’t even count the trillions in emergency lending undertaken by the Federal Reserve.
If Washington had simply taken the $1.5 trillion and cut a check for each of 140 million U.S. workers, each would get $10,714.29.
With such a sum in hand, they presumably could buy a new car, or pay off credit card or mortgage debt, or go to Nordstrom, or vacation in San Francisco, or simply deposit the money in local Citibank branch or some other foundering institution.
But that probably would not prevent a major financial institution from failing and making today’s economy even worse.
“Because we live in this world of an elaborate pyramid of credit, we are now in this bizarre position where the U.S. government is bailing out German banks but not bailing out ordinary mortgage owners in the Central Valley who made the equivalent of bad decisions about who to invest with,” said Gregory Clark, an economic historian and chairman of the economics department at UC Davis.
If AIG had defaulted on its obligations to creditors, its credit would have been damaged, causing cascading defaults throughout the financial system that most economists believe would have turned the Great Recession into the Great Depression II.
Instead, the government has spent $170 billion rescuing AIG, which in turn paid money to European banks Societe Generale and Deutsche Bank and to those poster children of the financial meltdown, homegrown Goldman Sachs and Merrill Lynch. Even California got back $1.02 billion parked at AIG.
TBTF = over and above the law
This article features the cutest darn picture of a bear about to devour a hapless little squirrel who is trying so hard to protect his hoard of nuts.
COVER STORY: ECONOMY
Stop Saving Now!
As consumers hibernate and investors hoard cash, the economy is withering. This new age of thrift is understandable. But for a recovery to take hold, Americans will need to start taking risks again.
By Daniel Gross | NEWSWEEK
Published Mar 14, 2009
From the magazine issue dated Mar 23, 2009
…
In the grip of a bubble mentality, we—as investors, consumers and businesses—blithely assumed risk and convinced ourselves it was perfectly safe to do so. We bought houses with no money down, took on huge amounts of debt and let the booming stock and housing markets perform the heavy lifting of saving. After all, new technologies, securitization and derivatives permitted financial wizards to slice, dice, sell—and, ultimately, banish—any type of risk. But the intellectual scaffolding surrounding that culture of debt and risk has fallen along with the stocks of Citigroup and AIG. And now the zeitgeist has spun 180 degrees. Squeeze your nickels, slash debt, stop gambling. In January, Nevada’s casinos reported, gamblers lost 14.6 percent less money than they did in January 2008. “The precautionary behavior of every entity in the global economy has gone up,” Mohamed El-Arian, CEO of the giant bond-investment fund PIMCO, told NEWSWEEK. “We’ve gone from an age of entitlement to an age of thrift.”
Some of you may remember my post on Friday wherein I requested an intervention lest I purchase some real estate which I planned to look at over the weekend. As promised, here is my report.
The land is stunningly scenic. Fairly steep hillside with lots of pine trees and beautiful rock formations. Not great for growing crops, but wonderful to look at or walk through.
The main house has a lot of character (and I mean that mostly in a good way.) It seems fairly solid with metal siding and roof and solid wooden beams. The layout is unusual but seems very livable. First floor has a rustic kitchen. The counter seems to be covered with a sheet of copper. The stove and refrigerator are probably 15 years old. There is a full bath with a stacked washer and dryer next to the kitchen. There is a good size living and dining area with windows looking south (which is into the hill.) There is a small alcove to the north east corner with a daybed. Between the alcove and the kitchen is a beautiful spiral staircase. Upstairs is a loft/living space with a walkout french door to west. The north west corner has a bedroom and a full bath. The northeast corner has a den/bedroom with a door to a balcony. Overall it seems solidly built but somewhat rugged looking. Definitely built by an artist.
Up the hill about 25 yards is a small building with electricity and a bed and windows facing south (again into the hill). Probably about 180 sq ft total. No plumbing but bleasantly finished.
About 25 yards southwest from there is an outdoor hot tub built into a rock formation. The mechanism is a “Snorkel” brand. Not sure if it is functional but the woodwork needed a little maintenance.
East of the main house about 50 yards is the “studio” This is another metal-sided, metal-roofed building about 30 ft by 70 ft. with a lot of south facing glass. The west end has a roll-up door and the first 20 or so feet is a garage/shop/storage area. Most of the remaining area is a large, finished “living” area. The northeast corner has a tiny sleeping room and a full bathroom. There is also a small kitchen in this corner.
About 20 feet further east of the studio is an octagon shaped building about 16 feet across which is fitted as a bedroom. Again there is electricity in this building but no plumbing.
There are also two small storage buildings which are missing doors or windows but could quickly be made weatherproof. Probably about 120 sq. ft each.
The real estate agent went to the courthouse today to get more info and promised to fax it to me in the morning.
We do not know for sure where all the 100+ acres are compared to the house, but we are fairly confident that all the land we walked on is part of the property. We walked about 250 yards up the hill from the house but did not get to the top of the ridge. Saw some gorgeous rock formations.
As I said yesterday, if we buy this place it will be for the benefit of our spirits rather than our bottom line.
Schmendrick
Interesting. Is the main house heated with electric or propane? Be sure to get a well test including flow and potability. Mortgage lenders would prob require that, but I think you said earlier you are paying cash. Pot test may fail for coliforms, which is not a big deal (boosts immunities!), but can be a chit in the negotiation.
Who pays these hack journalists for spewing pro-bailout propaganda?
WaPo
The Costs of Bailout Rage
Ruth Marcus
Wednesday, March 18, 2009; Page A13
Could we put down the pitchforks for just a moment and have a reasonable discussion about the bonuses at American International Group?
No, I didn’t think so. Here goes anyway.
I get the outrage. It’s galling to pay $165 million to a bunch of wealthy traders to clean up a mess that they, or at least their company, made.
I get the political fix in which President Obama finds himself. The sums are staggering — if not to Wall Street, then to everyone else who’s ever worked for a living. The public is worked up, increasingly convinced that its money is being flung around recklessly, to a gang of extortionists at AIG and at European banks, without any hint that the fundamental problem is being fixed.
As a result, the administration’s already dim prospects for obtaining another boatload of money for the bank bailout have gotten even dimmer. This presents a huge problem because of the likelihood that another enormous sum will be needed. The president’s budget envisions $750 billion, and even that may not be enough.
So I understand Obama’s railing against the bonuses — but I think he may be making a mistake, both short-term and long-term.
“This is a corporation that finds itself in financial distress due to recklessness and greed,” the president said on Monday. “Under these circumstances, it’s hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay. I mean, how do they justify this outrage to the taxpayers who are keeping the company afloat?”
Well, because in the short run, hammering the AIG employees to give back their bonuses risks costing the government more than honoring the contracts would. The worst malefactors at AIG are gone. The new top management isn’t taking bonuses. Those in the bonus pool are making sums that for most of us would be astronomical but that are significantly less than what they used to make. Driving away the very people who understand how to fix this complicated mess may make everyone else feel better, but it isn’t particularly cost-effective.
Too bad they were not banished to a distant solar system before they cast billions and billions of dollars into the sea which had to be repaid out of the U.S. Treasury’s kitty. And where does she get off suggesting the bonus pay is linked to fixing the mess? My understanding is the bonus agreements were set in stone before the mess unfolded.
AIG Firestorm Raises Alarm For Other Firms
By David Cho and Binyamin Appelbaum
Washington Post Staff Writers
Wednesday, March 18, 2009; Page A01
The firestorm over bonuses paid by insurance giant American International Group has triggered alarm at other financial firms, threatening federal efforts to draw private investors into economic recovery programs.
It is a critical juncture for the Obama administration. Officials at the Federal Reserve and the Treasury Department are increasingly worried that the controversy could discourage investors from joining a new government effort to revive consumer lending as well as a separate plan that relies on private money to buy toxic assets from banks, sources familiar with the matter said. Treasury officials planned to outline that second program as early as this week.
The attack by lawmakers on AIG pay has provoked renewed complaints from some financial company executives that federal involvement in business decisions is making it difficult for struggling firms to return to profitability. In particular, executives say they need to offer bonuses to keep and motivate their most valuable employees and are already seeing an exodus of talent.
But lawmakers are outraged that many financiers continue to be rewarded despite their role in fueling the current crisis. Some on Capitol Hill say the financial industry should be smaller and its jobs less lucrative.
Financial firms should be smaller — so small, in fact, that they have to compete like all the American workers, many of whom have lost their jobs not due to any fault of their own, but rather due to the malfeasance-precipitated sh!t storm that is raining down on Main Street from Wall Street. Smaller financial firms would be more easy to regulate and would not necessitate too-big-to-fail bailout insurance from the Plunge Protection Team.