On The Wrong Side Of A Real Estate Boom
The Summit Daily News reports from Colorado. “Winter stormed into Aspen in a major way in December, smashing at least one record for total snowfall accumulation at a local ski mountain. Aspen was quiet, at least compared to what March is usually like. Advance bookings for last week were 53 percent, compared to 78 percent of capacity for the same week last year. The real estate margins might be sagging even more. Along Highway 82, which cuts through the town’s middle, a resident of a small house that dates to the mining era said her house a year ago was worth $3 million. Today, it’s worth maybe half that, she said. The same house, if located in Denver, looks to be worth about $200,000.”
“At the Aspen Institute’s Energy Forum, a volunteer mentioned that he had been forced to spend a day at his condominium, getting it ready for a showing. He hoped to sell it, he said, and cut his losses. His mortgage payment was nearly $7,000 a month.”
“He had gotten out of the housing market once before, he said. That was in 2006, and he had been spooked by the rapidly escalating prices. But then prices had kept on rising, so he jumped back in. A lot of people then were sure that the rules didn’t apply to Aspen.”
The Steamboat Pilot in Colorado. “Trailhead Lodge is a $71 million condominium project that broke ground in summer 2007. The five-story building comprises 184,000 square feet. A July 2007 sales event saw 62 of 86 condominiums go under hard contracts with an aggregate value of $56 million. The developers expect the sales to begin closing soon.”
“The development intends to use the next two years to pursue city permits on the balance of the project, which tentatively includes another large condominium building and townhomes.”
“‘Three years from now, the development plans for all of the parcels should be complete,’ Pearson said. Optimistically, those projects could be built in another 2 1/2 years, Pearson said. If the Steamboat real estate market still is in the doldrums beyond that point, it will ‘be a bad sign for Steamboat,’ he added.”
The Park Record in Utah. “Condo owners owed money by Deer Valley Lodging are not happy. Among numerous complaints…sent directly to The Park Record, the most common has been that it was illegal for Premier Resorts, the parent company of Deer Valley Lodging, to withhold payments.”
“Sanford Kassel, a California attorney and owner of multiple Park City condos, said in his state it would be considered criminal. ‘We all know it’s tough times, but it’s wrong for Deer Valley Lodging to tap or otherwise use money that is not theirs, but due owners,’ he said in an interview on Thursday.”
The Daily Herald in Utah. “There were tears and sniffles among the family of prominent local Realtor Ron K. Clarke in the crowded courtroom of U.S. District Judge Ted Stewart as he handed down a sentence on Thursday to Clarke, a key figure in an illegal property flipping scheme that resulted in inflated property tax valuations and multiple foreclosures in the upscale Riverbottoms area in Provo. For his part in the scheme that resulted in more than $5 million in losses, Clarke was sentenced to 41 months in federal prison with no parole.”
“In Thursday’s sentencing, Clarke and Bradley Grant Kitchen, David R. Bolick, Steven Wells Cloward and Jeffery David Garrett were described by Stewart as ‘men of stature and status, success and privilege, that chose to follow their most greedy instincts to lie, cheat and steal.’”
“Stewart, in issuing their sentences, said the defendants are ‘part of a larger corruption in our society that has led to the current economic problems that confront this nation and the world.’”
“Clarke admitted to falsifying property sale values, in some cases by more than $1 million per transaction over the actual sale price on the Wasatch Front MLS, in order to create false comparables in the Riverbottoms area to help him sell neighboring homes at higher prices. Through the fraudulent use of straw buyers, inflated appraisals and ‘flip’ sales, each defendant deceived lenders into funding two consecutive purchases on the same property, sometimes only a day or two apart, prosecutors said.”
“‘I crossed the line. I blame myself and humbly ask for forgiveness for what I’ve done. I deeply wounded my family, destroyed my career, devastated my reputation. For the rest of my life, I will live with that,’ Clarke said.”
The Salt Lake Tribune from Utah. “Everything about the tidy rambler in this desirable west-side Davis County neighborhood makes it a candidate for a quick sale. Everything, that is, except the price. At $299,999, it appears to be priced at least $30,000 too high, considering that a new-home builder will set you up with a similar home brand new for around $270,000. (In fact, one is waiting.)”
“It’s a situation that’s playing out all along the Wasatch Front. It can be difficult for anyone who has not been on the wrong side of a real estate boom to understand why their home isn’t selling at what they consider a ‘fair’ price (I’ve been there). But it doesn’t matter what you paid for a home, what it appraised for two years ago, how much you spent on home improvement, how much you owe on your mortgage or what you think your property is worth. All that matters is, what are buyers willing to pay.”
“Ryan Kirkham, president of the Salt Lake Board of Realtors, said some sellers will contact a Realtor and say, ‘I need to sell my home, what is the market value?’ Then there are the folks who say, ‘I need to sell my home, and here’s what I need to get for it.’”
“The latter, he says, often end up with homes that wither on the market. ‘You have to realize a home is worth only what the market will bear,’ he said. ‘Some people understand that, and they get their homes sold, and some don’t.’”
“In most cases, sellers who need to sell cut their asking prices, maybe multiple times. In many areas of the Wasatch Front, builders are following suit. Still, some sellers wait, hoping for a miracle. You can’t blame them. Most of us have watched helplessly as the values of our stock and retirement portfolios have declined. Watching your home equity slip away is almost the final insult.”
“In Farmington, when I visited the homebuilder’s office for the second time and the sales lady explained that prices for new homes had just been cut again, the price made that existing home going for $299,000 an even worse deal than before. Would I be interested in a new pricing sheet, she asked?”
The Arizona Republic. “In March, home sales soared to levels not seen since 2005, foreclosures fell for the first time in a year and prices showed signs of leveling off in some areas. Several Valley cities, including Phoenix, Avondale, Glendale, Peoria, Surprise and Goodyear, posted record sales in March, even beating monthly sales figures from the housing boom of 2005-06.”
“There were 3,377 foreclosures in metro Phoenix during March, almost 2,000 less than in February. At the same time, foreclosure cancellations nearly doubled to 3,168 last month. Preforeclosures hit a new high of 10,689 in March.”
“The average sales price per square foot of a Valley foreclosure home has held steady at $66 for the past three weeks. The Valley’s overall average price per square foot fell in March to $83 from $89 in February.”
“About two-thirds of all Valley home sales are foreclosure properties being resold. ‘There aren’t that many foreclosure homes on the market now,’ said Mike Orr, a real-estate agent..who is in the process of buying a foreclosure home in Queen Creek for $94,000. ‘Many of those deals will soon be gone. April will be the turning point for the housing marke. People are beginning to perceive we are at the bottom, and there’s no reason to wait to buy anymore.’”
“Economists have a pretty good idea what got us into this mess. They are not quite as sure what will pull us out. So far, they are not too cheery about the immediate prospects for recovery for Arizona’s real-estate-driven economy. In Arizona, a recovery appears farther away, largely because of the huge inventory of homes on the market. More than 60,000 are listed on the Arizona Regional MLS. And that isn’t counting thousands more than could hit the market when they are foreclosed on or when investors holding on to properties decide they want to sell. And with a shrinking number of jobs, it is not likely to attract the thousands of newcomers it needs to buy up the homes soon.”
“The stimulus bill was expected to save or create about 70,000 jobs in the state. Since the recession began in December 2007, the state already has lost 192,700 jobs, about two-thirds of those in the past six months.”
“Byron Schlomach, an economist with the Goldwater Institute, wants the federal government to back off and let market forces work. ‘If you’re going down, what you need to do is hit bottom and go from there,’ he said. ‘The problem is that the government has been continually creating an environment where we really don’t know when we are going to hit the bottom. . . . Until we get to a point where market forces are free to sort themselves out, the government really prolongs that uncertainty more than anything else.’”
“Pinnacle West Capital Corp.’s real-estate subsidiary, SunCor Development Co., will attempt to sell $400 million in housing developments and golf courses - most of them in Arizona - to reduce debt and focus on commercial building, the company announced.”
“‘Effectively, we will no longer be a home builder,’ said spokesman Alan Bunnell.”
The East Valley Tribune in Arizona. “The controversial Las Vegas developer who is master-planning the State Land Department’s most prized property in the East Valley filed for bankruptcy protection for 32 of his companies this week. Jim Rhodes filed a bankruptcy petition for the corporations under Chapter 11, which allows the companies to continue operating while they are financially restructured.”
“Rhodes was a largely unknown figure in Arizona when he showed up with little notice to a December 2006 state land auction for the property known as Lost Dutchman Heights. He bought the 1,011 acres south of Baseline Road, and with it the right to master-plan the balance of the property, for $58.6 million.”
“However, what was not known by state officials at the time of the sale was that Rhodes had admitted to making illegal campaign contributions to powerful politicians in Nevada, and that he had been repeatedly and successfully sued there over allegations of fraud, theft and self-dealing by investment partners and others who he had done business with.”
“‘Like many of our other recent purchasers, he has been granted extensions on payments,’ said Jamie Hogue, deputy director of the State Land Department, when asked if Rhodes has been making his payments on time. ‘Depending on what happens, if payments aren’t made in the future that land could come back to the state.’”
The Review Journal in Nevada. “Rhodes, who does business as Rhodes Design and Development, has sold only 27 home sales in Clark County so far this year as of Sunday, down from 86 home sales in the first quarter of last year, according to Home Builders Research.”
“Rhodes said his company’s Chapter 11 bankruptcy was caused by the recession. ‘The economic crisis affecting Las Vegas, along with the inability to secure alternative and cost-effective financing, has hurt homebuilders harder than any other industry, particularly independent companies such as ours,’ Rhodes said in a statement.”
The Las Vegas Sun in Nevada. “Sales of homes priced at $1 million or higher is at a standstill. Home Builders Research reported that in February only one new home priced more than $1 million closed escrow. That is pushing the new-home median price to a monthly low of $219,900, a decrease of $63,100 or 22 percent from February 2008, Home Builders President Dennis Smith said.”
“‘That speaks kind of loud,’ said Richard Plaster, founder of custom-home builder Signature Homes. ‘It says there is no market.’”
“Only nine new-home closings were more than $500,000, Smith said. A decrease in condominium sales contributed to that decline since only 15 high-rise units closed in February, Smith said. In February 375 new homes sold, an increase of 100 from January, but the February number was still down 58 percent from 2008, Smith said. For the first two months of 2009, Smith said the 659 transactions were 1,114 fewer or a 63 percent drop from January and February 2008. That includes 14 apartment conversions.”
“Smith put the median price at $145,000, a one-month decline of $10,000 or 6.5 percent. That’s a year-over-year decrease of $90,000 or 38.3 percent. Smith said new listings posted by Realtors show prices will continue to decline. The listing price fell 8 percent in February compared with January and is down year-over-year by 41 percent.”
“The inventory remains flat even though the number of existing-home closings has been strong, Smith said. New listings are keeping pace: 4,954 new single-family homes and 1,204 condominiums and town houses were listed in February. Among the listings, 39 percent are bank-owned properties. Eighty percent of the existing-home sales are bank owned, Smith said. Short sales account for more than 30 percent of the listings, but only 9 percent of the sales through Realtors, he said.”
“Las Vegas is in the midst of a housing meltdown. Nevada’s foreclosure rate has led the nation for most of a year. Defaults and repossessions are on the rise. And home values are 30 percent off their high marks. Enter Jeremy Aguero, a principal of the consulting firm Applied Analysis and the region’s most prominent economic forecaster.”
“In the weeks after Aguero’s presentation, however, a series of unfortunate events blew through Las Vegas like a desert sandstorm. Growth on the Strip screeched to a halt and turned backward: visitor volume fell, gaming and sales revenue declined, unemployment rose and the housing crisis deepened.”
“Aguero was not alone in missing the crash. Others in Nevada’s relatively small ranks of economic analysts saw conditions as much sunnier than they were, including leading UNLV economist Keith Schwer and gaming industry analysts. Their opinions reassured businesses considering expansion and Nevadans considering major purchases. Go ahead. No need to hunker down.”
“So just how did economic forecasters miss so badly — and continue to miss even as late as last spring?”
“Aside from gaming industry experts, Nevada has relatively few economic analysts. The two most prominent are Aguero, who has a degree from UNLV but is not an economist, and Schwer, an economist who runs UNLV’s Center for Business and Economic Research, publishing a monthly economic analysis as well as issuing an economic forecast twice a year. Aguero is the best known. He’s done work for a blue-chip roster of clients, including the Nevada Development Authority and the Southern Nevada Homebuilders Association.”
“In late 2007, Aguero did a study for the Southern Nevada Homebuilders Association detailing the softening of the local economy, and the housing market specifically. But Aguero predicted a soft landing. ‘Based on historical business cycle trends, the timing of major resort project openings and a review of current conditions, we expect that the residential market will see evidence of a gradual recovery by late 2008.’”
“He continued: ‘Moreover, we believe that there is a very real potential that a housing shortage, and more specifically, a workforce housing shortage, will emerge by late 2009 or 2010.’”
“In interviews with the Las Vegas Sun for this story, Aguero defended his firm’s work and said the Sun is unfairly cherry-picking only those findings that turned out to be untrue. He also noted that almost no one predicted the swift and sharp downturn.”
“He said the recession was unforeseeable. ‘Do we believe that when we did the (housing) report and modeled out employment, growth and expectations, that a housing shortage would come earlier rather than later? Yes,’ Aguero said. ‘Did we foresee the type of global financial catastrophe in the last quarter of 2008? Surely, we did not.’”
“Florida, whose economy also relies on growth, rode the real-estate boom until the bust as well. The behavior was driven in large part by the state’s history of adding 1,000-plus people a day for the past 30 years, with only a few exceptions, said Gary Mormino, a historian at the University of South Florida who has written a social history of the state.”
“Outside of an occasional newspaper article on a housing scam artist, Floridians didn’t hear much bad news, he said. ‘The doomsayers were not audible,’ Mormino said.”
‘Several Valley cities, including Phoenix, Avondale, Glendale, Peoria, Surprise and Goodyear, posted record sales in March, even beating monthly sales figures from the housing boom of 2005-06.’
Yes, and the same thing happened in Californias central valley. Look everybody, we’re just like Stockton!
When I saw this in the Republic, (top-front page of course) I wasn’t really surprised. For those not in this area, this is THE paper. Apparently not ashamed of their cheerleading going into this, they now are getting the pom-poms out again.
Meanwhile, builders are folding left and right, land is being dumped on the market, and the state still has millions more acres it sits on. Here’s one for you Republic; we’ll grow again when people can buy a lot for a few thousand dollars. Do we want that to happen sooner, or later?
Hey Ben, I know most of us are trying to figure out when it might be safe to buy a home again. The right time is probably going to differ widely by region, price range, where interest rates go, etc.
I would like to suggest a topic where we try to figure out what the recovery will look like, and how we might know it has begun.
As far as this latest cheerleading story goes, we all know where the newspapers get most of their revenue. The advertisers would not be happy if the newspapers didn’t cheerlead every chance they get. This also explains why so many newspapers are going bust. After “missing” the stock bubble AND the housing bubble, the trust is gone.
Long gone.
Just about every day someone asks me about a bottom. These Vegas numbers for early 2009 show more of what we’ve seen for years now; every time someone says, ‘it can’t get any worse’, it does.
Sure, it’s gonna work out regionally. But here’s the 2 big reasons I think it’s unwise for anyone to suggest buying houses; the economy and the overbuilding. Here locally, we’re sinking job wise and overbuilt in very expensive houses and condos that will almost certainly end up as apartments. Nobody can say what will happen to people who buy into those markets. Will the condo go bust? Will the HOA do the same?
I know a bunch of folks who have lost jobs or are close to it. When will that turn around? The housing market, IMO, won’t lead us out of recession. This is why I argue that we should be focused a sustainable post-bubble economy, not ‘loosening credit’ and ’stimulating house purchasing.’
Ben, what do you make of the Phoenix sales numbers? I have kind of lost track of the numbers lately. The article in the Az Republic said somewhere around 7500 houses sold last month. ZipRealty was at 65K a couple of months ago and is at 52K now or about 7 months inventory at last months sales rate. Todays Republic stated that Boomers and early retirees are picking up bargains. I would be interested in your insight. Thx.
‘the Phoenix sales numbers’
In every market that has a large number of REOs, the lenders are dropping prices until they sell. So of course, sales happen.
‘More than 60,000 are listed on the Arizona Regional MLS. And that isn’t counting thousands more than could hit the market when they are foreclosed on or when investors holding on to properties decide they want to sell. And with a shrinking number of jobs, it is not likely to attract the thousands of newcomers it needs to buy up the homes soon.’
And I’ll add that a good chunk of the foreclosures aren’t on the MLS, here anyway. And don’t forget there are probably thousands of houses in Phoenix where no payment has been made in a while and the foreclosure hasn’t happened yet. The article even mentions 3k plus cancelled foreclosures in March alone. That doesn’t mean the FBs will be able to make the payment.
Also, 7k sales and 10k notices of default?
This is a complicated picture. IMO, no one person or group has all the pieces to the puzzle.
“In every market that has a large number of REOs, the lenders are dropping prices until they sell.”
I can’t wait til this actually happens in Seattle. From what I can tell, lenders are still holding most of their REOs off the market here.
‘lenders are still holding most of their REOs off the market here’
If you think about it, it makes sense. They have been doing the same thing here in Flag. It is a couple of years behind Phoenix and a year or so behind Sedona. So they use pocket listings with preferred brokers or just don’t foreclose and hope for a better price than the worst markets.
This stuff isn’t rocket science. These guys are simply maximizing returns. But if a market had a bubble, they all end up more or less the same.
And don’t forget there are probably thousands of houses in Phoenix where no payment has been made in a while and the foreclosure hasn’t happened yet.
I know of a few people (direct, not word of mouth) that, in the LA exurbs, have broken 18 months sans a house payment and still no foreclosure. It is a year too early to call a bottom anywhere (if then…).
I know of a half dozen close friends and family that are employed today who will not be employed in the Fall.
Where are they going to find work to pay the mortgage?
Got Popcorn?
Neil
Because of the changes last week where the lenders ‘DONT’ have to mark to market the property they have taken back; this will end BADLY. The bubble will last another 3 or 4 years. IMO
Here is an anecdote to back up your point Ben:
My credit union just lowered the rate on “premier” money market accounts (>$50k) from 1.1% to 0.45%. Why? Their reserves are too large relative to lending. No one wants to borrow, and those that do have a poor credit profile. How will pumping money into the financial system fix this? There is plenty of money, just few good lending or investment options for that money.
my credit union is offering green checking where they are going to pay 4% on money but you must use a debit card 12 times a month on the checking account - good way to get away from credit cards and earn higher money on your money
Like I said what if the banks had Billions and Billions to loan at 700 fico but all your customers have 600…then what?
——————————————
and those that do have a poor credit profile
It’s impossible for “all your customer [to] have 600″. FICO just grades on a curve. As some are dropping down, others are moved up relative to them. The responsible should be seeing their scores go up as the bad news moves the irresponsible down.
I did not know that. Thanks!
“FICO just grades on a curve.”
Oh that just makes me feel so much better about where this will all end! Beam me up Scotty; there’s no intelligent life on this planet.
Just because some people are moving up and others are moving down doesn’t necessarily mean that a given bank’s customers aren’t below minimum. One would expect responsible people whose scores are moving up to look at high prices and pass. Irresponsible people whose scores are moving down want loans (why not? they say) but don’t qualify. Makes sense to me.
“FICO just grades on a curve.”
Yep. But that isn’t a problem. Just float the minimum FICO to keep the same relative risk (from the FICO part of the underwriting). e.g., minimum FICO of 725 vs. 700.
I had a very frustrated friend who didn’t understand, during the bubble, why his FICO was stuck lower. When the home ATM broke… he suddenly shot up as his competition, who made all of the payments thanks to a fresh HELOC, went down…
Got Popcorn?
Neil
The bottom out of housing won’t come until after the bottoming out of layoffs and job losses. In fact, I don’t think housing will go into a steady recovery until the job climate in general improves. By that, I mean corporations have to stop treating employees like migrant lettuce pickers, to be hired and discarded in some mild form of Enron’s rank-and-yank.
If Americans move every 7 years on average, if mortgages are 30 years on average, and if the cost of buying/selling a home is 6% + closing etc, then maybe the best way to live is out of a cheap used SUV.
Good point. And in some states you have to pay a transfer tax on top of the hairdo 6% tax.
Ben, yesterday the wife and I went up to Jerome, AZ, just for some sight-seeing.
I could not believe some of the “developments” I saw along the Verde Vally - Cottonwood stretch! I hope all these folks are independently wealthy or bought for cash.
One of the sights to see were the snow topped San Francisco Peaks in the distance. Anyway we had lunch upstairs at the Haunted Hamburger where the view is very nice. The place is pretty “cozy” in that any normal speaking conversation carries through the whole room.
Well the group conversation yesterday what what else, housing prices in the “Valley” - Phoenix, Scottsdale, Paradise Valley, Tempe, Mesa. One guy was going on and on about how people were losing out on their “low bids” because other people were “stepping up” and overtopping their bids. I think he was either a broker or mortgage pusher - but at least 5 times he said “all I see is upside!”
Now, whenever the “experts” can only see upside - I try to visualize downside.
Before we left, I asked him if he was from the valley, he said yes, Phoenix. I said I was from Mesa, and that I thought that unemployment in the valley could go over 20% by next year, so I’d wait before buying. Nobody at the big table of 8 had
any comment besides “Oh”, so I smiled and left.
Now, those snow capped peaks in the distance reminded me to ask you, can you make sure cobaltblue gets a “blue” HBB
T-shirt? I don’t think I’d look pretty in pink.
The Verde Valley is a disaster. I was living in Sedona for a while in 2003. I came back a year later and the bubble/speculation had spread from Sedona proper to little places in the VV like Cornville, which was the butt of jokes when I first got here.
What’s killing the VV is the medium sized builders went in there and put up huge subdivisions. I have some foreclosure work to do down there in the morning.
BTW< what’s the most popular dog in Cottonwood? A meth lab.
I like Jerome, but there was speculative building even up there. (Did you know Jerome was the first capitol of AZ?) I’m glad you liked the peaks. I have a great closeup view from my front porch. I read yesterday of an old timer in Flag who said the first time the peaks weren’t snow capped year round was when he got back from WWII. I’ll be sure about the T-Shirt. Pink, right? (Ha)
We love the Verde Valley, but the vistas are being ruined by the McMansions, same as Sedona (wow ! ) and the prices seemed outrageous the last time we were out that way in both locations ( 2005 ). That being said, boy have prices dropped. I called yesterday on a couple of foreclosures around Anthem. One broker told me he had sold a 1300 sq ft ranch to his “lucky” nephew at $ 300,000, and now it’s being listed at short sale for $ 95,000. He has two offers on it. I’m looking at Queen Creek too, although I’ve never actually been to that city. Good prices.
Ben —
Vernon Smith’s WSJ Op-ed piece yesterday was a shot across the bow of Obamanites who think the way to fix the economy is to stimulate some faux demand for housing at a time when households should be focusing on shoring up precautionary savings. He takes issue with the monetary explanation for the root cause of the great depression suggesting instead his alternative hypothesis, which is that many people bought homes at a point in time when the economy was in a severe contraction. Obamanite housing stimulus may have the same effect.
Thanks for the feedback Ben. I think you have the right idea.
“I know most of us are trying to figure out when it might be safe to buy a home again. The right time is probably going to differ widely by region, price range, where interest rates go, etc.”
In Florida it will not be for years.
Here rentals prices are plunging as well as prices.
I’d suggest looking at Case-Schiller data for a particular area.
“Sales of homes priced at $1 million or higher is at a standstill. Home Builders Research reported that in February only one new home priced more than $1 million closed escrow. That is pushing the new-home median price to a monthly low of $219,900, a decrease of $63,100 or 22 percent from February 2008, Home Builders President Dennis Smith said.”
Hey Mr. President - if you are using median figures, a house selling at $219,901 is the same as a house selling for $1 mil. If you are so worried about the median, you can raise the median by lowering the price on all the $1 mil homes to $500,000 and actually sell them!
“He had gotten out of the housing market once before, he said. That was in 2006, and he had been spooked by the rapidly escalating prices. But then prices had kept on rising, so he jumped back in. A lot of people then were sure that the rules didn’t apply to Aspen.”
And emotion trumps logic yet again.
Yeah, $7k a month for an Aspen condo. Does anyone know what an Aspen apartment goes for?
This guy is toast.
All from today’s Craigslist for W. Colorado, all in Aspen:
$1550 Aspen Studio ski-in ski-out (One block from lift 1A)
$1800 / 2br - 2br/2ba apartment available immediatly
$2200 / 2br - Fully Furnished Aspen core Condo
$5500 / 4br - BEAUTIFUL ASPEN 4 B/4B HOME
Lots of listings…
Gotta look carefully at those Craigslist rentals in ski areas. A lot of the ones that look reasonable turn out to be weekly asking rates.
Salt Lake falls into that category as well. We check regularly on SL furnished sublet listings but stick with Extended Stay lodging for the time being on our trips up north. Expecting the asking prices to come down any day now that ski season is ending. There are whole newly condo buildings sitting mostly vacant, spread over much of the valley.
If you’re a skiier there’s some nice end-of-season deals at the resorts that include lodging and lift tickets. And Utah has been getting pounded by new snow! I talked to relatives outside Park City who where working on getting out from under three feet of fresh pow pow.
“Aguero was not alone in missing the crash. Others in Nevada’s relatively small ranks of economic analysts saw conditions as much sunnier than they were, including leading UNLV economist Keith Schwer and gaming industry analysts. Their opinions reassured businesses considering expansion and Nevadans considering major purchases. Go ahead. No need to hunker down.”
“So just how did economic forecasters miss so badly — and continue to miss even as late as last spring?”
Easy..like most economic forecasters, they failed to step outside, open their beady little eyes and they to see which way the wind was REALLY BLOWING…Doh !
“Aside from gaming industry experts, Nevada has relatively few economic analysts. The two most prominent are Aguero, who has a degree from UNLV but is not an economist…”
Classic. Absolutely classic.
Reminds of that advertising spokesperson: “I’m not a doctor, but I play one on TV…”
no, this was not ultimately a matter of ignorance but a matter of money–there was nobody audible in Vegas making predictions who wasn’t getting paid by the housing industry…
Something that’s always stuck with me is quotes that flew around for years starting in 2005 or so that Las Vegas has a net inflow of 5000 people a month. Bastard statistics if I ever saw any - would any locals care to comment on this?
Sheesh…I left out “failed to see”
I better shut up and pay more attention with my income taxes
mikey,
We’re in Turbo Tax h*ll too. The importing of our broker’s statemenr didn’t work completely, so we have to manually input purchase prices from our statements. What a waste of time.
I think you’re technically supposed to do that anyways. Whenever I import trades it always pops up a giant warning from my brokerage that says “we do NOT verify your cost basis, please check manually”.
This is the first year ever I haven’t had a single problem with my tax software, btw. I may play the lottery.
bink
Thanks for the insight. This is the first year we used any importing feature, so we were a put surprised.
The lottery sounds like a plan. I use to think it was a poor man’s addiction, but now I’m game.
“This is the first year ever I haven’t had a single problem with my tax software, btw. I may play the lottery”
haha
Good deductive reasoning.
haha
If the Treasury Secretary failed to pay all his taxes without legal consequences, does that mean the rest of us can short the IRS and only make it up if we get caught? (Fair disclosure: We always pay our taxes in full on the assumption that the Treasury Secretary exemption from legal repercussions does not apply to our household.)
“…….For the rest of my life, I will live with that.”
One wonders how much of a “scarlet letter” this kind of conviction will actually be, since this kind of stuff seems to be SOP in any number of businesses.
Haven’t seen too many fraudsters in homeless shelters lately……most seem to be doing better than I am.
Is a fraud conviction becoming the functional equivalent of a speeding ticket?
Is a fraud conviction becoming the functional equivalent of a speeding ticket?
Ya, and the FBI is the functional equivalent of a broken speed camera.
Sounds more like the celebrity-typical ‘heartfelt apology’ that comes after some big scandal or the other. America, of the short attention span, forgives and forgets, and the celeb trots blissfully off to the next big scandal 6 weeks after leaving the rehab center du jour.
“Is a fraud conviction becoming the functional equivalent of a speeding ticket?”
I’d say no. You still have a much better chance of getting a speeding ticket than being convicted of fraud.
The Sunday U-T finally had a couple of articles on the rampant fraud in San Diego County and the investigations that are finally underway. One of the maddening things is this second round of fraud is being committed by many of the same people in the industry that committed the first round of fraud during the period or rising prices. If there had been aggressive fraud prosecution a few years ago, how many of the people now committing a second round of fraud would be in prison instead?
Where is Watts now???
Slim checking in from Tucson.
Was at one of those movers -n- shakers luncheons this noon. It was in Downtown Tucson and the guest speaker was Hizzoner the Mayor of Tucson, “Sunshine” Bob Walkup.
Unfortunately, Bob’s sunny disposition wasn’t so much in evidence. He was talking about our local economy and its effect on the city budget. Before the current bust, there was quite the boom. And, yes, Bob echoed Mike Hein, his city manager (who I thrashed a few weeks ago in a different HBB comment-a-rama), when he said that “No one saw this coming.”
I almost shot right through the roof of the Manning House.
But it gets worse. Mayor Bob is convinced that the key to revitalizing Tucson lies in revitalizing its Downtown area. Sorry, Bob, but nearly a hundred million dollars have been blown on that effort already. And your constituents — and the state legislature — are not amused.
In fact, the legislature is threatening to take the Tax Increment Financing punchbowl away.
Alas, our city fathers have a-ways to go on understanding things.
revitalizing its Downtown area.
That generally consists of condemning struggling but honest mom-and-pop stores and restaurants and turning the land over to national chains who go belly up 4 years later.
You been spying on my town?
My ex-inlaws lived in Tucson, and I’ve been to that fair city about 15 times over the years, and although we saw the sights that there are to see there many times, we never, ever made it to downtown Tucson. So that tells ya something.
Most of us avoid Downtown unless we have jury duty or something equally fun. You know, like a tax audit.
Hee hee. My late father-in-law had his wallet stolen in the latter part of the ’80’s when we went for dinner at some restaurant on the Miracle Mile, and that was that - no one in the family ever went over there again. Ever. Probably 6 times worse for crime now.
“Outside of an occasional newspaper article on a housing scam artist, Floridians didn’t hear much bad news, he said. ‘The doomsayers were not audible,’ Mormino said.”
Excuse me, but the doomsayers were vocal. People like Mormino just wouldn’t take out their ear plugs…
You mean it wasn’t just a matter of a little “froth” in Florida as Grennie said!?
Replace “little” with “extreme” and “froth” with “fraud” and I think you’ve got something worth saying.
When all else fails America, revitalize the ye old western opera house with a few more million or gentrify the historic slaughterhouse with another luxury condo/plaza/coffee emporium. The big money tourists and buyers will come in droves..never fails
That reminds me of the diaster of downtown Los Angeles. The Grand Ave project is dead (Eli Broad - of K&B homes was the cheerleader/partner), and now a new plan to revitalize the area is born. Even lipstick can’t change downtown L. A.
Where is this “downtown L.A.” of which you speak? I’ve been there a lot, and all I’ve seen is smog and suburbs as far as the eye can see.
You’re not looking past the old cliche. Look again, you might be surprised.
Deer Valley Lodging:
One of the properties they manage is the “Lodges at Deer Valley”. Asking 1.4 m three years ago for a unit in the new addition (we looked, played dumb, listened to the spiel..). Today, found only one for sale at 1 m.
Nightly rental was supposed to be $ 1400, that’s what we were told at the time (yes, I did roll the eyes to heaven).
Deer Valley Lodging has it listed at 700, high season. They take about half, maybe 40 percent. Let’s say the owner gets 400 a night. Rents out 70 nights during season that’s 28 K. ..y’all go figure. Now with this “scandal”, the owners are talking about the numbers, and admit that nothing much gets rented outside the ski season…y’all go figure.
The hilarious thing, it now dawns on some of them, that they have bought a unit in a condo hotel. I.e., can’t do as they wish with their unit. Hilarious !!
Sagesse
Do you have any knowledge of how some of those newer high-end properties are doing in PC? I’m thinking of Silver Star just north of town and the Sky on Main (street). tnx
Silverstar is managed by the very same company that has not paid the owners. For high end, go to Empire, or to the St. Regis, and no, no idea how they are doing.
Those Silver Star units are cool looking, kind of like mine shaft chic LOL, but $1 million + seems like a lot for an attached condo.
The recovery looks like falling foreclosure rates, falling unemployment rates, stable prices, and strong sales. Right now all we have is strong sales due to knife catchers who ignore the other three factors. One wonders how many brand new landlords are jumping in with both feet without understanding anything about allowances for vacancies and repairs, not to mention evictions due to the still rising unemployment.
Under certain circumstances it might make sense to buy and hold or buy and rent, but folks looking for the bottom need to put down the bong.
many brand new landlords are jumping in with both feet ??
Yep..and it is holding prices up a little higher than the real sharks want to pay…I think part of the problem is the low yields on savings…Some, just say, what the heck I am not earning anything on the cash…That I suspect is going to change in the next few years…Then we will have a housing market with its foundation built on sub-5% money…What happens to the value of your house, that you bought with sub-5% money when you are trying to sell it to someone that may have to pay 8% + ??
O-o-o-o-o-o-o, brand new landlords. Here’s a story from the Arizona Slim file!
The story starts with a neighbor sending an e-mail about a rental house across the street from where he and his mom live. (They’ve been in the neighborhood since, oh, about 1970.)
The rental house was bought by one of those “get rich in real estate” wonderboys back in 2005.
Anyhoo, it seems as though the wonderboy’s current tenants are real party animals. And the neighbor has had to call 911 many times. Seems that the party animals like to disturb the peace in the wee hours of the morning.
Things like that make me mad. You see, I have a real aversion to being awakened in the wee hours of the morn. Especially by inconsiderate party animals. And my neighbor is a disabled vet who takes care of his 85-year-old mother. In short, they really need their sleep.
So, here’s my reply to the neighbor’s e-mail…
Per the [Pima County] Parcel Information Search, here’s the ownership of the property…
[Landlord's name. Listed as residing at the property. He doesn't live there.]
Now, you know and I know that he’s as resident on that property as we are. As in, he’s not living there. Hasn’t been since 2006.
And the Pima County Assessor has the place listed as Residential Owner Occupied.
Residential Owner Occupied, my foot. Our whizbang real estate investor non-neighbor/landlord of lousy tenants isn’t paying the correct level of property tax. [Residential owner occupied is taxed at 10% of assessed value. Residential rental rate is 14%.]
So, if you’re really feeling evil, call [our County Supervisor] Richard Elias’s office and report this property as being improperly recorded on the County Assessor’s rolls.
[BTW, the county is *finally* recognizing that there are a lot of improperly recorded properties around here. Been a lot of fraud the past few years. They're now notifying owners of properties that they'd best be honest in how they report the occupancy status. Or else.]
Interesting seeing where Ron Clark is heading. I am familiar with the guy and he is the epitome of everything that is wrong with the real estate industry. He had the corner on the market on the largest homes in Utah county at one time.
He got a lot of the listings on the big houses because he was able to get the sold. Well, I see how he got them sold.
I wonder how his arrogance will hold up in the state pen??
Would never buy a condo/TH, but I just saw a foreclosure listing in Sacramento for $42k for a 3/2 1066sqft in 95825, which works out to $37/sqft. Not the best neighborhood, but far from the worst. The thing sold for $288k in 09/2005. It’s described as a “light fixer.” Note, there’s a HOA fee of $279/month. So figure ~$500/month if financed with a 30yr, 5% with 20% DP.
For frame of reference, we’re paying $925/month for a 2/2 1050sqft apartment in a similar quality neighborhood. I’d wager that we’ll be seeing ~$50/sqft for single-family homes within 12-18 months (still around $90/sqft).
Small wonder the Fed is desperate to restart housing market inflation by whatever means necessary.
TimesOnline
Toxic debts could reach $4 trillion, IMF to warn
Gráinne Gilmore, Economics Correspondent
Toxic debts racked up by banks and insurers could spiral to $4 trillion (£2.7 trillion), new forecasts from the International Monetary Fund (IMF) are set to suggest.
The IMF said in January that it expected the deterioration in US-originated assets to reach $2.2 trillion by the end of next year, but it is understood to be looking at raising that to $3.1 trillion in its next assessment of the global economy, due to be published on April 21. In addition, it is likely to boost that total by $900 billion for toxic assets originated in Europe and Asia.
Banks and insurers, which so far have owned up to $1.29 trillion in toxic assets, are facing increasing losses as the deepening recession takes a toll, adding to the debts racked up from sub-prime mortgages. The IMF’s new forecast, which could be revised again before the end of the month, will come as a blow to governments that have already pumped billions into the banking system.
Paul Ashworth, senior US economist at Capital Economics, said: “The first losses were asset writedowns based on sub-prime mortgages and associated instruments. But now, banks are selling ‘plain vanilla’ losses from mortgages, commercial loans and credit cards. For this reason, the housing market will play a crucial part in how big the bad debt toll is over the next year or two.”
I am curious how the estimated “deterioration in” US-originated toxic assets could have increased from $2.2 tn to $3.1 tn between January 2009 and April 2009. That is an increase in deterioration of $900 bn over the course of only three months. Why is the accounting for toxicity so unstable?
I doubt they are taking into account factors such as the rapidly degenerating economy.
The real “quasi” math looks more like
1 forclosure - 5 lost jobs, 200K in bailout money and a $100K loss to the bank, losses in tax revenue, losses to local hospitals forced to treat the newly uninsured (lost their jobs) and of course unemployment payouts resulting in higher unemployment insurance…
This then generates another foreclosure along with 3 credit card defaults and some car repos.
This then leads to 8 lost jobs ………
Sounds like an ongoing death spiral is in the works for the next little while. But not to worry — our economic leaders (some of the same ones who delivered the “subprime is contained” message back in 2007) have assured us the economy will bottom out by year-end 2009.
Bear,
IMF is in a semi-annual forecasting mode. Forecasts discussed in January were made last September. The April forecasts will be fresh(er). Still a big increase over 6 months, but IMF like most others, had not fully accounted for the deterioration in standard mortgage based paper, while non-mortgage securitized debt issues continue to decline with the global economy. Expect bigger numbers to come.
NEW YORK (Reuters) – The vacancy rate for U.S. apartments hit a three-year high in the first quarter and asking rents dropped the most in at least 10 years as the number of excess apartments on the market ballooned, according to real estate research firm Reis Inc.
And the figures are forecast to get even worse as more apartment buildings are expected to open this year, increasing supply, and as the U.S. employment picture gets uglier, Reis said.
national vacancy rate 7.2% in Q1, up 0.60 % from prior quarter and 1.1 % from a year earlier.
cyclical low of 5.5 % was in Q3 2008,
Reis expects the picture to get a lot darker as “we are arguably only at the beginning of the current downturn.”
Behind the rising vacancy rate is a build-up of available apartments. The number of vacant apartments added was 31,878 units in the first quarter. This was the largest amount of excess apartments the sector has seen since the first quarter of 2002 and does not include empty condos for rent.
Asking rents fell by 0.6 percent to $1,046 per month, the largest single-quarter decline since Reis began reporting quarterly performance data in 1999.
Effective rent, which factors in months of free rent, and other concessions and freebies, fell 1.1 percent to a monthly rent of $984.
Some 22,833 units came online in the first quarter of 2009, and Reis expects a total of over 90,000 units to come online through 2009.
“…and does not include empty condos for rent.”
More and more developers here thing they’re being clever by switching their projects into apts. The race to the bottom between them and the accidental landlords is on!
“we are arguably only at the beginning of the current downturn.”
But nonetheless, and despite the fact that the real onset of the downturn was the crash of the Markit subprime ABX indexes back in December 2006 (27 months ago if my subtraction is correct), the downturn will bottom out by year-end 2009, right?
A good day for sanity in the markets.
SRS took off today.
SKF as well.
I like this invisible hand thing, I hope it slaps the bankers.
Congrats to those on the right side of the trade today.
Too bad most of my SRS was purchased at an even higher price!
Where’s FPSS and voz? I wanna hear them continue their thread from yesterday.
RE: “‘I crossed the line. I blame myself and humbly ask for forgiveness for what I’ve done. I deeply wounded my family, destroyed my career, devastated my reputation. For the rest of my life, I will live with that,’ Clarke said.”
tsk, tsk…”I humbly ask…”
You can be damn well assured that when the money was flowing, this loser was the arrogant, self-absorbed, load mouth at the bar, exhorting his own business savy, while denigrating those who were extraneous to the grabbing of real estate monies via the application of unbridled greediness and corruption.
More of these slimebags need to headed to the can.
And WTF Judge, why the hell couldn’t you have at least given this sleaze an even 48 months!
HD:
Man you got that one right, I met so many Loud mouth windbags over the last 3 years…its staggering, couldn’t even hold a conversation with them.
And most of them were advertising on CL for “employees” or glorified telemarketers aka: “loan officers” All berating you for not wanting to work for free and Make $100K in your first year….
I challenged all of then to pay me $30K and you can keep all that extra profit for yourself…not 1 took me up on the offer.
Many of these “90k millionaires” will end up in jail and getting 41 months is still better than nothing.
Unfortunately, the “truly wealthy millionaires” are equally corrupt but treated completely differently. They get free taxpayer handouts, golden parachutes, bonuses, and maybe even an elite government job.
April 7 (Bloomberg) — The Treasury’s chief watchdog for the U.S. financial rescue program is probing whether American International Group Inc. paid more than necessary to banks including Goldman Sachs Group Inc. after the insurer’s bailout.
Neil Barofsky, special inspector general for the Troubled Asset Relief Program, opened an audit last week into whether there were attempts made by New York-based AIG or the government to reduce the payments, according to an April 3 letter to Representative Elijah Cummings. The Maryland Democrat had requested the probe last month along with 26 other members of Congress.
I think another important question is did these big guys illegally get paid first. I posted an article the other day that suggested that some regional banks were going to take it on the chin because of what sounded like incomplete AIG payouts.
He said the recession was unforeseeable
Someone needs to get this man an internet connection
Right on. I’m sick of hearing from people that they had no way of knowing that the downturn was coming. You don’t have to have much knowledge of economics to know this, just a little bit of common sense and knowledge of history. Every time in history that there has been a run-up in prices of something (in this case housing and stock prices) with no fundamentals to back up the increase, it has always had to return to the baseline. It’s impossible to get something for nothing!
Just wait until their boy Larry Summers is appointed Fed chairman. You ain’t seen nothing yet…
DAVID WEIDNER’S WRITING ON THE WALL
Government Sachs is in control
Commentary: Investment bank has strengthened its position through bailout
By David Weidner, MarketWatch
Last update: 12:01 a.m. EDT April 7, 2009
(Editor’s Note: Starting Thursday, catch “Writing on the Wall” on WSJ.com as well as MarketWatch).
NEW YORK (MarketWatch) — Lloyd Blankfein must be the luckiest guy on Wall Street.
He leads one of the Street’s biggest bailed-out firms, but unlike other companies propped up by taxpayers, Blankfein’s Goldman Sachs Group Inc. is far more profitable. And it’s poised to become a more influential force with greater market share.
Different from American International Group Inc. or Citigroup Inc., Goldman hasn’t had to forfeit an ownership stake in its firm, and its shareholders — many of them management and employees — have benefited. Goldman shares trade above $100. That’s less than half of where Goldman shares traded at their peak, but far better than the $1 and $3 that AIG and Citigroup shares trade for, respectively.
Since the fall of Bear Stearns Cos. a little more than a year ago, Goldman has taken more than $20 billion in taxpayer cash through loans, payments and backstops. Goldman’s latest bailout coup was a $12.5 billion paid out of AIG’s $180 billion government cash infusion.
Until it was fully extricated, Goldman always characterized its exposure to AIG as “immaterial,” and that its $20 billion notional exposure to AIG was hedged. Turns out that it was — through government bailouts that didn’t exist when Goldman entered the contracts.
Even former New York Luv Guv Eliot Spitzer told journalist Fareed Zakaria on Sunday that he thinks something smells.
“The web between AIG and Goldman Sachs is something that should be pursued,” Spitzer said. “Why did [those payments] happen, what questions were asked, why did we need to pay 100 cents on the dollar for those transactions if we had to pay anything, what would have happened to the financial system had it not been paid?”
Move along…. nothing to see here.
Move along….
April 7 (Bloomberg) — The Federal Reserve’s requests for loans to buy asset-backed securities fell 64 percent from last month as investors balked at visa limits and possible political efforts to tax earnings.
Let’s hope that TALF can be put to rest. It’s time to let the FDIC close down these banks and let the shareholders and management reap the real rewards of their gambling.
Goldman Sucks was Obama’s largest political contributor.
There are are no presidents or congresspeople….just Goldman Sachs.
GoldmanGovernment of the sheeple, by the Sachs, for the Sachs, shall not perish from the earth.This post is for Prof. Bear.
SAN DIEGO (AP) — Twenty-four people have been indicted on racketeering conspiracy charges in a mortgage fraud scheme in San Diego that collected about $9 million by fraudulently inducing lenders to provide loans to people who didn’t qualify.
An indictment unsealed Tuesday claims the ringleader was a known gang member who tapped people in the mortgage industry to participate in the scam.
Prosecutors allege defendants fraudulently provided loans to unqualified buyers and funded loans in amounts that exceeded the home value.
“…the ringleader was a known gang member who tapped people in the mortgage industry to participate in the scam…”
So now that they have busted this mortgage broker, how many more will they have to catch before San Diego’s mortgage market can resume prudential operation?
First time posting here. It’s an honor. You guys are a daily dose of sanity.
Glad they caught the ‘fake millionaire’. Surely there are thousands like him.
Here in Vancouver us bears are still waiting for our crash, which lags you all by roughly 2 years - our peak was May 2008. A small detached house here in vancouver starts at 800K-900K.
And regarding timing the bottom: By comparing the California graphs to the Vancouver ones (they ar identical with a two year phase lag), we here up north have a quite accurate crystal ball. It worked all the way up, will work better on the way down (more data points).
Best regards from the frugal bear arit, transmitting from the bubbliest city in the world.
arit
Welcome arit! May all your bubble bursting dreams come true. And as you go through the loooooooooooong process I hope we see more Vancouver updates from you.
Dearest Meredith,
My darling……..it has been a struggle, but I had managed to put what we had behind us……then I saw you again on on TV yesterday, and was only reminded again of the reasons that I became your stalker to begin with.
You looked so beautiful, as you attempted to extinguish the firefly-sized light at the end of the tunnel that Maria Bartiromo was trying to ignite.
Armageddon never sounded as sweet as it did when you spoke of it.
I can only contrast your appearance with that of Maria, who appearance suggests that the years of cheerleading in the face of an ever-bigger financial hurricane are beginning to take their toll. Her haggard appearance, saggy jowls, and lapses into Brooklynese suggest times are catching up with her. Her optimism in the fact of facts was illustrated by the following exchange (paraphrased)
Meredith: “The banks suck, but the mark-to-fantasy rule changes announced recently makes State Street suck marginally less than all the other banks”
Maria: “So, you LIKE State Street?”
May I remind you of all the benefits you could receive by committing to a relationship with me, you humble admirer. Along with all the “personal services” that I have mentioned previously, I could also whisk you away, and let you partake in some of our unique regional forms of relaxation and entertainment, such as buffalo-tipping, tornado chasing, yelling insults about inbreeding to the funeral-picketing spawn of the Phelps family, and finding out who the old time farmers are, by giving the “two fingers of the left hand-on-the-steering wheel salute” wave, when you meet a truck on the highway” …….(the REAL country folk will return this wave).
Don’t wait too long, my dear. We may be soul-mates, but I can only wait so long. Call me…….as you know, the restraining order forbids me from calling you.
Yours always,
X-GSfixer
Her husband is gonna mess up yo face, bro…
Funny yet scary. Excuse me while I go take a shower to wash this post off and try to figure out if I should call the writers of SNL or the Federal authorities.
I personally have nothing against the wealthy, so long as they are not also thieves. Of course, some times a little theft provides a useful means to get ahead of the sheeple flock.
Leaders
The rise and fall of the wealthy
The rich under attack
Apr 2nd 2009
From The Economist print edition
Going for the bankers is tempting for politicians—and dangerous for everybody else
STONES thrown through a banker’s windows in Edinburgh, workers “bossnapping” executives in France, retrospective 90% tax rates proposed in Washington, and now a riot in London as G20 leaders arrived for their summit (see article). A sea change in social attitudes that could have profound effects on politics and the world economy is under way.
The rich are certainly not the only targets in the current populist backlash. Frightened by the downturn, people are furious with politicians, central bankers and immigrants. But a rising wave of anger is directed against the new “malefactors of great wealth”. Today’s villains are a larger and more global bunch than the handful of American robber barons Teddy Roosevelt denounced a century ago; and most of them are bankers and fund managers, rather than owners of trusts and railroads. Yet the themes are similar to those at the end of that previous gilded age: rising inequality—the top 0.1% of Americans earned 20 times the income of the bottom 90% in 1979 and 77 times in 2006—and a sense that the greedy rich have cheated decent working people of their rightful share of the pie.
Some of this cheating has been of an old familiar sort: building Ponzi schemes and bribing politicians to secure favourable deals. There are greyer areas, in which the rich hide their cash in tax havens and get tax law written to their advantage—witness the indefensible treatment of private-equity profits. But what makes the rich’s behaviour so galling for many critics is that their two greatest crimes were committed in broad daylight, as they were part of the system itself.
Let me guess about what these crimes were: (1) TARP? (2) PPIP?
Stephen Roach: “I don’t think the (G20) Summit accomplished much in signaling the end of the crisis… Recovery will be anemic, tentative and very fragile at best.”
The Economist goes all revolutionary…
The two great cheats
The first charge is that the rich created a new form of heads-I-win-tails-you-lose capitalism. Traders and fund managers got huge rewards for speculating with other people’s money, but when they failed the parent company, the client and ultimately the taxpayer had to pay the bill. Monetary policy contributed to this asymmetry of risk: when markets faltered central banks usually rescued them by cutting interest rates.
The second charge is that the bankers and fund managers were not doing anything useful. Unlike the “deserving” rich entrepreneurs who set up Microsoft and Google, the “undeserving” traders and brokers just shuffled money around the system to nobody’s profit but their own. The faster the money went round, the larger the financial sector loomed in the rich countries’ economies. At its peak it contributed 41% of domestic American corporate profits, more than double the rate two decades ago. As finance grew, the banks got ever bigger—too big to fail, eventually, so when they tottered taxpayers had to prop them up. Far from epitomising capitalism, the undeserving rich undermined it: it was socialism for the wealthy.