Bits Bucket For April 16, 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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Long & Foster program pays mortgage if buyer loses job
By Lorraine Mirabella | lorraine.mirabella@baltsun.com
12:57 PM EDT, April 15, 2009
Long & Foster Real Estate Inc. has rolled out a program designed to help pay a buyer’s mortgage for up to six months if the homeowner loses a job.
As the housing market struggles with a slowdown in sales, high inventory and plummeting values, the real estate company hopes to boost buyer confidence and help sellers differentiate their property, Long & Foster said.
The firm said it hopes to ease potential buyers’ fears about what might happen if they buy a home and then get laid off.
“Although this is a great time to buy residential real estate for many, there’s still a lot to consider,” said Mary K. Weddle, executive vice president of The Long & Foster Cos., in a prepared statement.
http://www.baltimoresun.com/business/realestate/bal-longandfoster0415,0,735097.story
This is just buying RE bundled with some dubious insurance.
What if the company goes bankrupt? That insurance is pretty worthless.
You could also see it with “negative selection bias”. The most dubious people will buy the stuff, and then “lose their job”. You don’t want to be in the same boat as them.
This is gonna fail.
I remember when “insurers” would “insure” you only against unexpected losses for which, at the time the contract was entered into, the insured did not have inside information as to whether the loss would actually occur. A third party company is not likely to be in as good as a position as the potential “insured” to determine that person’s risk of job loss. Thus,this theoretically leads to perverse results.
I think you just described moral hazard.
And why securitization is an exceptionally bad idea if the originator of the security isn’t forced to hold a percentage of the offering.
Hey, if we could just now take these bad mortgages, package them up, and sell them some how… Hmm… we can make money!
Oh, wait - that scam has already been done!
Wouldn’t that insurance prevent the broker from having to buy back the loan from investors if the new home buyer misses a payment? When RE was hot I heard Realtors offering first year free (paid by them) if you use their broker. I figured this is what they were doing.
wow, sign me up
add a new car
furniture w a 2 year to pay scheme
it’s all good
And get the government to pay the premia!
It’s already happening out here. I posted an article about this sometime last week.
“Long & Foster Real Estate Inc. has rolled out a program designed to help pay a buyer’s mortgage for up to six months if the homeowner loses a job.”
This program sounds like moral hazard incarnate. Suppose I buy a home, then tell the boss to go F himself. Perhaps Long & Foster have figured out a way to shift the moral hazard liability to someone else (the Federal government comes to mind as a likely insurer of last resort)?
The real unemployment rate? Try 15.6%
The official US jobless rate, now 8.5%, excludes millions of people — among them those who have given up on finding work and those forced into working fewer hours than they’d like.
By Catherine Holahan
MSN Money
An 8.5% unemployment rate is unmistakably bad. It’s the highest rate since 1983 — a year that saw double-digit unemployment, nearly 30 commercial bank failures and more than 15% of Americans living below the poverty line.
But the real national unemployment rate is far worse than the U.S. Department of Labor’s March figure, announced today, shows. That’s because the official rate doesn’t include the 3.7 million-plus people who are reluctantly working only part time because of the poor labor market. And it doesn’t include the workers who have given up scouring want ads for seemingly nonexistent jobs.
When those folks are added to the numbers, the unemployment rate rises to 15.6%. In March 2008, that number was 9.3%. The Bureau of Labor Statistics began tracking this alternative measure (.pdf file) in 1995.
So the MSM is hopping over “the second straight weekly decline” in initial jobless numbers, but what’s really going on?
First off, last week’s claims were revised up to 663k - so last week didn’t really see a decline, did it? Second, no where did I see mention that last week was truncated by the spring holidays and that that might have accounted for the fall to 610k.
Winston is getting sloppy.
Winston works for the DMV
Poor Winston.
This business of “revising” the previous week’s economic figures after the media has moved onto other things is getting ridiculous.
If we told the truth up front, people would realize that things are getting worse. Can’t have that - Buy, Buy, BUY!!!
A person who has a part-time job is now counted as unemployed?
I think the proper term is “underemployed”.
You mean chronic underemployment. Welcome to post 1983 USA.
How about SEVERELY Under Employed
I’ve never worked in a cubicle, and its been untold years since i operated a cash register. All needed skills today
And the “bar” just keeps getting higher. If you you can’t clear the bar you will be cast out and will spend the rest of your life doing part-time menial work.
The book “Bait & Switched” chronicles this quite well. There is a reason so many people end up in non benefitted, commission only jobs (realtors, mortgage brokers, insurance, cars, etc.)
The bar……THEY TOOK THE BAR!!!!!
Not in the U3 index.
I was surprised to find out that one of the reasons Texas Governor Perry is because Texas would be required to pay unemployment insurance to part-time workers.
I had previously thought part-time workers were covered.
Gov Perry is…what?
A know adulterer preaching “family values”?
I shouldn’t have skipped my coffee this morning.
Gov Perry is refusing the part of the Federal stimulus money that would extend unemployment benefits by 6 months.
IIRC, stimuIus would extend unemployment benefits by 6 months PERMANENTLY ( IOW, even when unemployment is 3%). That’s the rub for some governers. They perceive to be a hardship for small business.
Do you have a source for that?
Unemployment for part-times, unemployment for spouses forced to relocate, and use of “alternate base period” to estimate benefits based on the workers current job rather than the first quarter of the previous year are the only 3 things I have seen in print.
The later two, not having much effect on small business at all.
Oh….I thought the name “Skip” implied you just might randomly skip parts of the sentence.
And yet barred from collecting unemployment in some states. However, some people, such as myself, choose to work part-time. I have a fancy title and really low pay, though. I’m really only there because I want to keep current stuff on my resume. I also have one of those rare situations where I get free childcare.
It also does not include people that have never been “employed” like illegals and college students that have been unable to find their first job out of school. A lot of people in my business, construction, work “off the books”. I’m sure they are not counted.
State unemployment rate hit 9.4% in March
Updated: Apr. 16, 2009 2:15 p.m.
Wisconsin’s unemployment rate rose to 9.4% in March, the Department of Workforce Development reported Thursday.
The state lost 8,700 non-farm jobs last month and has shed more than 112,000 jobs since March 2008.
Nationally, unemployment reached 9% in March
http://www.jsonline.com/business/43111002.html
Local article naming a new underclass: the “used-to-have-enoughs.”
http://www.detnews.com/article/20090416/OPINION01/904160360/1008/Masculine+meltdown++When+men+brush+aside+old+ideals++they+become+nearly+irrelevant
That’s what happens when men think that getting a low interest rate on a mortgage is some sort of personal “accomplishment”.
These people have essentially no job security, and the jobs they can get do not pay well. For the most part mortgages aren’t even in the picture. Manufacturing, construction, and repair have become stagnant economic backwaters as employment growth has gone to creative work and management for which men are often not well prepared.
And even those new “knowledge” jobs are being offshored as we speak.
Yep the only job worth having will soon be CEO and money manipulator.
Scientists?? We don’t need no dam scientists!
Just like we don’t need manufacturing, engineering, ect ect.
That’s just capitalism doing its thing, whether we like it or not.
That really isn’t true at all. Check the numbers to see, but manufacturing has been shedding jobs like crazy. Other sectors like nursing have been hiring or at least relatively stable. Creative work can’t get shipped overseas because of cultural divides. Humor sells and rarely translates. Management is stuck where work is done and products are delivered and can only be squeezed so much before operations start to loose control.
Also, look at the reasoning path taken here. This thread starts with traditionally male dominated sectors being in bad trouble. Then in two steps we find that woman’s work is engineering and science? Not really. Engineering and science are also male dominated and very closely linked to manufacturing. Entertainment, marketing, and customer service have been growing, but somehow are not worth mention because that is only money, because that is only–c’mon and say it–woman’s work. Do manly men put their energy into being truly funny? No, they are too stolid and committed and all that. Do manly men no how to make a product that appeals to a mass audience? No, that would mean empathizing with weirdos and creeps. Do manly men love to work out people’s problems together verbally? That will be the day. Man dig big hole, man work hard all day, man carry heavy thing, ugh–none of that matters any more. Mother figure takes the time to find jokes that work, mother figure listens to what various weirdos say they like, mother figure can work things out with the angry creep because she knows we all get our panties in a twist sometimes. Follow the money and the value and it all leads back to mommy. Daddy can help push, maybe.
How about mortician? Don’t see that being outsourced anytime soon.
Soylent green is made of people!
“Other sectors like nursing have been hiring or at least relatively stable.”
Not true. My wife is graduating from nursing school in May and the only places where nursing jobs are available (apparently) are some spots in the Midwest and South. Unfortunately, I’m going to NJ for medical school next year and the nursing job market in that state is absolutely terrible. Several state hospitals have been closed and multitudes of experienced nurses have been laid off - leaving almost no openings for new grads. Of course, these laid-off nurses have saturated the job markets in Eastern PA and NYC as well, leaving my wife with relatively few job opportunities anywhere in the area.
Believe me, the “nursing shortage” of the past few years has now become history. So many nursing schools were opened to meet “future demand” that the nursing job market has simply become flooded with qualified applicants. Add in a total economic meltdown with plenty of layoffs and the picture starts looking even worse.
“……mother figures……”
What is your weird fixation on mommy?
I’ve always worked in shops that were almost 100% male.
EVERY woman (no matter what age/ethic group/orientation/whatever) that has worked with me say they prefer working in a 100% male shop vs. one with 100% women.
Why? For the most part:
-Without exception, a shop with women in the majority will be the cattiest, most back stabbing bunch you will ever work with in your life. (I’ve observed this repeatedly……..everyone is all sweetness and light, until one of them leaves the office, then out come the knives).
-Guys show up to work, and don’t bitch/cry about everything under the sun, especially personal/home stuff that has NOTHING to do wit what they are getting paid to do.
-If a guy has a problem with another guy, they will confront each other and work it out, or go into seperate corners and work around the problem. Women won’t let it go; they take disagreements as some kind of personal affront/”emotional abuse”, and sneak around behind each others backs, committing character assasination.
These aren’t my observations……this is what the women that I’ve worked with tell me.
This is all true, too. Sure, there are some men who do this (to some extent) and there are women who don’t. And that old saw that women gossip and men don’t is crap–they just waste time jawing about different things, like sports betting (though in the South, men gossip plenty about the workplace, I’ve noticed–but the most severe backstabbing seems to be a female thing). I just don’t know why women act this way, but I guess it’s a pecking order thing. In social groups, women form this pecking order. At work it’s a mess because that ’status’ may not match up to work ’status’ so some women will do ANYTHING to try to get a leg up on their “enemy”.
I work with some really great women at my work place, but there are a passel of wanksters too. Drama lama ding dong.
The NY Times has an article on steel pipe being imported from India because US &Canada steel mills can’t handle the demand any more:
http://www.nytimes.com/2009/04/16/business/economy/16pipe.html?em
Interestingly, it is cost effective to ship steel pipe from India.
“… can’t handle the demand any more:”
BS. They can’t handle the “sell for less than cost” criterion.
People would be surprised what’s cost effective to ship long distances. In the mid-1990’s while working air cargo freighters I saw them load stuff onto 747s that you’d swear would go by container ship - each and every night.
One example that stands out was a load of auto tires chartered by Volkswagen - an entire plane stacked to the gills with ordinary car tires.
Wait until everyone finds out that Indian steel is radioactive or somehow tainted like the chinese drywall.
I am sure they could have bought the pipe from Bethlehem steel or Corus.
I have seen Indian made manhole covers in my neighborhood.
I am sure they could have bought the pipe from Bethlehem steel I thought Bethlehem Steel has been defunct since 2003.
They shipped those HUGE cranes used to take containers off of container ships to here in Norfolk. It’s kind of ironic, since one figures they will be unloading Chinese goods. The cranes were massive on the ship. Should be the APM terminals in Portsmouth VA.
Uncle has/had been downsized so many times in the steel industry, that 2 yrs prior to retirement at 65, he was ousted with minimum wages etc. Really sad what those corps did to the industry. Poof.. but the mgrs go on and on and…
“…..load of auto tires chartered by Volkswagen…….”
That air freight charge for a load of tires is a lot cheaper than shutting down a factory for a day or two, if they have no tires at the factory.
I’ll bet the reason they were shipping tires is that their normal delivery was delayed for some reason. Overnight Air Freight is the grease that keeps the “Just in time” manufacturing system working.
Good find, Blano:
There are things an American man is supposed to know. And if he does not know them, he at least has been told that he should somehow know them, even if they are a detriment to him.
As I have argued in my book, “US Guys,” the American man has been taught that while it is better to avoid a fight, he should have been in a fight; that honor cannot always be defended with reason. He should never admit fear. He should strive to put the blade in his adversary’s chest, not his back.
An American man should know how to load and fire a gun. He should know how to hunt and how to clean a fish and how to make a fire. He should know how to ride a horse, bet on a horse, bet on the stock market and bet on the cards.
A good man should never speak anything but well of his woman in public, and she should return the favor. An American man should have been raised in church, rejected the church and eventually found virtue in the church.
The American man should be educated. He should work. He should live within his means. He should be able to recite poetry and have bits of true philosophy at his fingertips. He should be able to play an instrument and know how to help a rose grow.
An American man should dress and speak his language well. He should be able to tell good stories. He should be handy and mechanically inclined, and yet his nails must be clean. A man should have children and love them, even when they don’t love him. And in the course of his life, a man’s children should return to find some virtue in him.
This is what an American man should be. But no such man has ever existed. No man probably ever will…
Being a man is harder than it looks, huh?
And that’s just the undergraduate course…
Hahahah!
THAT’S the money quote of the day, right there!
The ONLY hard part about being a guy Olygal, is dodging women with their crazy lists. The rest is all gravy
Did I already tell you I was going to bite you when I get a chance?
Because I am.
That list makes me feel sooooooo, ordinary.
Blano, thank you for that article. I am rather unsentimental, and it brought a tear to my eye.
The Huffington Post
Robert S. McElvaine
Author, historian, political activist
Posted April 16, 2009 | 07:32 AM (EST)
Banks Declare War on America
Read More: Amex, Bank Of America, Banking Crisis, Bankruptcy, Banks, Capitol One, Citibank, Class Warfare, Credit Card Rate Increases, Credit Cards, Economic Crisis, Financial Crisis, Great Depression, Greed, J.P. Morgan Chase, New Depression, Populism, Recession, Business News
“F.U., USA!”
New Coalition of Bankrupters Launched:
F U, U & U & F the USA
…
Rise up Americans! Open your windows and shout (or, much better, telephone, email, or write the President, your senators and member of Congress, television and radio stations, your newspapers, blogs–and your friends and neighbors) and shout:
“We’re mad as hell, and we’re not going to take it anymore!”
Americans vs. Predators: Demand a Strong Federal Usury Law
President Obama and Democrats (one would hope a number of Republicans, too) should join together to say to the bankrupters what the first President Bush did to Saddam Hussein after the invasion of Kuwait: “This will not stand!”
Let us insist that laws be enacted that establish a federal usury standard at a reasonable rate and that such rates be made retroactive for all credit card accounts. (There will, of course, be howls about the sanctity of contracts, but the fine print that allows one contractor to change the rules whenever he feels like it and to do to the other essentially whatever the hell he wants to should not be considered a valid contract.)
We can call the battle Americans vs. Predators.
A federal usury law with real teeth will be tough on South Dakota and Delaware, but they chose to legalize larceny and they have benefitted long enough at the expense of millions of others.
As we protect our commerce from seafaring pirates off the African coast, let us also reclaim our country and our economy from these land-based American pirates.
{Historian Robert S. McElvaine is Elizabeth Chisholm Professor of Arts & Letters at Millsaps College…}
The unintended consequences… usury laws are simply price fixing below the market. You are not being “used” if you choose to borrow money. If the credit card company wants to charge you 30% interest, then I am sure you can probably find some private individual looking for a 20% return. If your risk of default in this environment justifies a 30% rate, then you probably shouldn’t be borrowing.
Other unintended consequences, someone who may be able to borrow at 30-40% will simply have no credit after they pass this law. Who is the government to prevent private parties from contracting with each other?
Laws can not replace personal responsibility! Often, laws undermine personal responsibility (FDIC, SEC, Stocks, FDA, etc).
“Laws can not replace personal responsibility!…”
Lets eliminate speed laws, especially around elementary schools
Lets eliminate domestic abuse laws
Lets eliminate any laws regarding carrying any sort of weapon
Lets eliminate laws regarding pouring motor oil down the toilet
Bugs: “eh, I think this is going to go on for a while?”
A. Where did VTD state in general laws shouldn’t exist?
B. Obviously usury laws are in a different class than the ones you list above. The key element is agreement by all interested parties, without harming anyone. If someone agrees to pay exorbitant interest - they believe it’s to their benefit. Usury laws remove that benefit. It’s as simple as that.
Environmental, speed, etc. laws are intended to protect innocent parties, where one of the two parties has no control over being screwed over by the other party. Such is not the case over usury laws, where both parties are in control and have a perceived benefit.
Very, very fundamental difference. Anyone who can’t see that is a fool.
The same thing is true of minimum wage laws, by the way. They are fundamentally morally wrong, because they remove and/or lessen benefits that would otherwise exist.
I don’t follow your logic with the minimum wage laws.
If a particular labor pool does not have collective bargaining power how is there “agreement” by all interested parties? Unless the employees are all independent contractors the company already receives certain tax and legal benefits from the State.
If the State disallows a particular type of union action(strikes by garbage collectors or police for example) or a particular corporation practices union busting, it further constrains the worker’s free speech and could be construed as a violation of the First Amendment if the police interfere with pickets.
If a corporation benefits from laws that not only give it preferred benefits and protects it from collective bargaining actions from workers, then the only way for workers to have fair representation is to use the law to their benefit as well with respect to wages.
Last I check “labor pools” and “unions” etc. are all made up of individuals, each of which has the option of deciding whether or work at a job for a given salary or not, and are not forced at gunpoint to accept a lower salary than the value of the service they provide. There is no slavery in the United States - at least not legal slavery. If someone doesn’t like their wage - they’re free to quit their job and go work at a higher paying company.
All the “free speech” crap is smoke and mirrors to obfuscate the real issue, which boiled down is simply control vs. freedom.
Okay, well let me try again:
1. Unless you are an *independent contractor (you didn’t make that distinction), you are an *employee and therefore the government gives the corporation that hires a certain number of employees clear legal and tax benefits, as well as particular responsibilities that are not negotiable in worker *employee contracts. Large corporations like Walmart have clear advantages over individuals in negotiating. Go to irs.gov if you want details.
2. When did free speech become crap or “smoke and mirrors”? Monopolies that drive out small local businesses and hire an army of expensive lawyers don’t have equal bargaining power with the average worker in a particular community. It’s not a free labor market and never will be under those circumstances.
“…each of which has the option of deciding whether (to) work at a job for a given salary or not,…”
No. They don’t. Period.
You do keep up with current events, right?
Most people don’t look at a minimum wage from the right angle IMHO.
Minimum wage laws are regulations, and when something is regulated you get less of it under a free enterprise system. Where most people go wrong is that they think a minimum wage does nothing to the number of jobs available when in fact a minimum wage decreases the number of LEGITIMATE entry level jobs available. That is why many entry level positions are filled with those willing to work outside the regulation, contract workers, interns, illegal aliens, etc.
OK, so what current event is it that actually *forces* someone to take a job at a given salary? Give me a law number please. Or if you want a newspaper article where someone (who wasn’t a criminal) was forced at gunpoint to work at any job.
Like Everclear sang, let me say: don’t tell me about what I have to or don’t have to do when there’s rent to pay and no income.
And as others have said above, when the law limits the ability of workers to act collectively, the picket, and to strike, clearly there is a power imbalance there–like the contract between big telcos and the hapless customer, this is not “meeting of the minds”. (Of course, some judge decided to uphold EULAs a few years back, so we’re merrily further along the way to the corporate state, where individuals have no rights.)
Sure, min wage makes chitty fast food and big box stores less profitable. Maybe even puts a few poorly-run restaurants and retailers out of business. Boo hoo. If we spent more on savings instead of consumption, we’d have money to invest on R&D (which are, btw, good jobs) which leads to growth, which means more jobs. At our period of greatest growth the min wage was FAR higher in real dollars than now.
If you’re going to argue that anyone can enter into any contract at any time, why not just bring back indentured servitude? Seriously, there is no legal or moral difference whatsoever.
you had me up till the motor oil one.
Those are all laws that protect the general public from specific actions by individuals. The personal responsibility liabilities are to the individual taking the chances and making the choices that affect them personally.
These two viewpoints expressed back to back is an exact definition of the contrast between conservative and liberal views regarding what the role of the government should be.
-Nanny state or personal freedom and responsibility environment.
Heavy indebtedness has no effect on the lives of others? O RLY?!
Some dumb dumb will always patronize the local loan shark. Know what? I don’t care. Bring back usury laws. One more piece of the puzzle in “too big to fail.”
Oh, and you do realize that there’s another side to “agreeing to high interest rate”–and that’s the bank. If the rate were capped, banks would reject certain customers, meaning less defaults. As long as “anything goes” it’s a race to the bottom to cater to sub-prime customers, and we ALL pay in higher prices and then having our tax dollars lavished on bailouts and our future dollars then destroyed by inflation. All so we can laugh at a few suckers? That’s mighty expensive entertainment.
“Laws can not replace personal responsibility!…”
Lets eliminate speed laws, especially around elementary schools
Lets eliminate domestic abuse laws
Lets eliminate any laws regarding carrying any sort of weapon
Lets eliminate laws regarding pouring motor oil down the toilet
Bugs: “eh, I think this is going to go on for a while?”
Yes, but all of these laws can be easily subverted by irresponsible people anyway. The government can attempt to provide “justice” by punishing the perpetrators after the crime has been committed, but the laws themselves don’t replace responsibility.
An oft-quoted Libetarian axiom: Utopia is not an option.
Thus, laws and regulations.
Yes, but only up to a point. Libertarianism is sort of a grudging, reluctant acceptance of laws and government. Yes, anarchy and/or utopianism aren’t real options, but neither are command economies or truly socialist governments.
Bull, lending money at 30% to 40% is nothing but legalized loan sharking.
You are assuming that the 30 or 40 is always justified. I have heard of people with damn good credit, who pay in full every month who when they checked had a 39% rate. (Nice run on sentence, huh?)
So what exactly is wrong with that?
Are these “people” being forced at gunpoint, or even by law, to take out these 30-40% loans?
If they have good credit - why are they not going to the bank and getting a 5-10% loan like everyone else?
If you’re car breaks down and you have no other way to get to you $8/hour job…I guess you aren’t being forced at gunpoint, but what other choice is there? Asking a middle class white guy to sympathize or understand the lives of poorer classes, whether inner-city blacks or gypsies in eastern europe…it’s like asking a deaf person to compose a symphony.
Just to let you know, I pay in full every month and have never run a balance.
So you don’t see anything wrong with a credit card company raising the interest rate retroactively on debt you’ve acquired?
Borrowing money at a 30 to 40 percent rate is no benefit to any borrower.
It’s great for a borrower who’s facing 1042% in bounced check fees (The average APR for bounced check fees is north of 1000%, which makes the 200% the pay day lender charges a relative deal). It’s stupid decisions in both cases, but after you’ve already made the stupid decision, it’s better to limit the cost.
“So you don’t see anything wrong with a credit card company raising the interest rate retroactively on debt you’ve acquired?”
Is there an agreement when the credit card is acquired that the rate won’t change? If not then no, I don’t see a problem with it.
If I were the borrower I would either:
A. Pay off the card and cancel it, or
B. Transfer to a different card with lower interest, and cancel the first.
I did a lot of B actually when I was first married and had debt - it’s amazing the competition between credit card companies. You can play them against each other and pay practically zero interest, if you’re willing to work at it some.
“Borrowing money at a 30 to 40 percent rate is no benefit to any borrower.”
Says who? If your choices are:
A. Borrow at 30-40%, or
B. Starve
Wouldn’t A be a benefit?
I would submit that anyone who pays above 20% on any credit card for any extended period is financially stupid, and deserves what they get. It’s not the responsibility of financially prudent people to be forced to compensate for financially stupid people, which is what usury laws do.
Such compensation only encourages financially stupid people to remain financially stupid, because it reduces the penalty for being so. Is that what you want?
usury laws are simply price fixing below the market.
Correct. Oh, there need to be some usury laws. There should be a transition. But if the rate does not justify the risk, the solution is to not lend. We have been through this cycle before.
Last time I looked, when society goes out of their way to ‘punish banks’ we see the banks fold and otherwise ‘hunker down’ and restrict lending. Long term a good thing. But this removes a ‘natural lubricant’ of the economy.
Got Popcorn?
Neil
“But this removes a ‘natural lubricant’ of the economy.”
Getting scr***d by banks without lubricant sounds painful.
“…but the fine print that allows one contractor to change the rules whenever he feels like it and to do to the other essentially whatever the hell he wants to should not be considered a valid contract.”
Foghorn Leghorn: “Now listen here son, I say pay attention…when you bought that $1.00 x4 rolls of toilet paper using your Target card and your payment got lost in the mail…It allows me to raise the interest rates from 18.9%…to 33.7%…on ALL of your credit cards. See boy, isn’t that easy to understand? Why?… because I says so son, I’m am the Rooster after all boy, and you is just a little chicken hawk.”
“That kid’s about as sharp as a bowling ball.”
“Now listen here son, I say pay attention…when you bought that $1.00 x4 rolls of toilet paper using your Target card…”
BTW you DID apply fo that Target card and you DID agree to the terms and conditions. You had a choice; accept use the card or not. If you don’t like the terms and conditions, pay cash for your toilet paper. US Cash still has the imprinting “This note is legal tender for all debts, public and private”.
Yep.
Cash is cheaper than credit, except for the impulsively uninformed.
“It allows me to raise the interest rates from 18.9%…to 33.7%…on ALL of your credit cards.”
Actually, Congress already changed the law to make that illegal. I don’t know when it takes effect, though. (Maybe this summer?)
Late next year.
It takes effect in 2010. That is why you are seeing all these interest rates and fees going up up and away.
Why are they getting upset now? Because their cards suddenly carry a 24.99% rate instead of a 12.99% rate?
He who lives by the loan dies by the loan. NONE, and I mean none, of the banks’ recent behavior should come as a surprise.
Well YOU know Edge
People NEED to do thing when cash is not available. So you borrow hoping to pay back later.
But to jack up interest rates on a PERCEIVED chance of default is so DUMB i dont even want to hink about it
It will cause Millions to say FU to the banks and use refillable credit cards or secured ones…
Banks are giving us the middle finger when we didn’t do anything to deserve it…..
And CONgress gave the banks till june 2010 to give us the middle finger after that date they have to explain why the increase and to allow people to respond.
The unintended consequences… usury laws are simply price fixing below the market. You are not being “used” if you choose to borrow money.
</i.
Recent story on NPR: Indian farmers who are using “modern” agriculture practices like fertilizers and pesticides to increase crop yields. One of the unintended consequences is too much strain on the water table, thus farmers have to purchase more powerful pumps to access water at deeper levels every year. The story talked about how most farmers are going into debt to the tune of $5000 or more for these pumps, without which they couldn’t irrigate given current conditions. Banks are beginning to deny the farmers loans because they are already heavily indebted… also mentioned, interest rates that often top 25 percent.
There is a reason ursury laws exist (or should exist). Speaking about personal responsibility makes for a good sound bite, but doesn’t begin to describe the impact bankers have on people’s lives. These farmers are being given a choice: borrow money at ursurious rates that you will probably never be able to pay off or lose your livlihood.
Now, one can argue that sooner or later the farmers will fail anyway, but try explaining that to a husband and father who is trying to support his family by the only means he knows how…
Sorry, close italics…
Mass farmer suicides as another unintended consequence.
http://www.counterpunch.org/sainath02122009.html
‘The number of farmers who have committed suicide in India between 1997 and 2007 now stands at a staggering 182,936.’
‘The spate of farm suicides – the largest sustained wave of such deaths recorded in history – accompanies India’s embrace of the brave new world of neoliberalism.’
‘What do the farm suicides have in common? Those who have taken their lives were deep in debt – peasant households in debt doubled in the first decade of the neoliberal “economic reforms,” from 26 per cent of farm households to 48.6 per cent.’
Same with Monsanto.. they sell to the farmers their patented seeds, then if the farmer doesn’t want to buy anymore, the lawyers beseige the farmer until he acquiesces because of pressure, lawsuits that break him etc. And if the seed blows into another farmers land, the lawyers for Monsanto engage in multiple lawsuits breaking this farmer too. And the vicious cycle goes on.
The situation should be, if you don’t like doing business with someone you can and should be able to change. But giant corps have the $ and the will to break people. Just like the banks, cc corps etc. Thank you W for passing those anti bk laws, except for corps.
The Huffington writer is “professor of arts and letters” and “author, historian, activist.” Instead of expending all his energy complaining, why doesn’t he organize and run a credit union where he can lend money at a lower interest rate, even zero if he chooses.
Oh, wait. With no business experience, very little real world experience, and probably little common sense, he wouldn’t get very far in that endeavour.
“Come down, come down from your ivory tower…”
“Let us insist that laws be enacted that establish a federal usury standard at a reasonable rate and that such rates be made retroactive for all credit card accounts.”
Won’t happen. GDP would fall too much if the credit culture quit overpaying for everything. Can’t go making the recession worse afterall.
I’ve always understood regulation to mean establishing a price FLOOR, i.e. higher prices, so that big fish couldn’t undercut the little fish and become a monopoly. These people should be demanding a usury law making unsecured loans at LESS than 30% illegal.
Hahahahaha.
+100
The unintended consequence may be that many CANNOT pay 30% interest on their ccd debt. So they go to BK court and pay some fraction of it back at 5% interest. This of course ends their borrowing career. On a large enough scale this fooks the banks.
You mean like right now?
B I N G O, B I N G O, B I N G O and BINGO was his NAMEO
Just let them sue you and get it dismissed in court…If course it wastes everyone’s time…and its boring sitting in court…so there is no need to be proactive and file for BK
Banks and Credit Card Companies be careful what you wish for:
Bankruptcies surge despite 2005 restrictions
http://tinyurl.com/ct5jxk
It should now be obvious to all that the change in bankruptcy laws were created because the long range financial forecast models did not show a pretty picture.
Something I tried to post last week: they knew. THEY KNEW back then.
How does sudden cc interest rate increases impact small businesses?
Imagine the impact of a rate increase on governments. An increase to even 6% would probably cripple them all.
“The main moral argument is that usury creates excessive profit and gain without “labor” which is deemed “work” in the Biblical context. Profits from usury are argued not to arise from any substantial labor or work but from mere avarice, greed, trickery and manipulation. In addition, usury is said to create a divide between people due to obsession with monetary gain. Most importantly, usury is the derivation of profit from biological time, which is linked to life, considered sacred, God-given and divine, leading to excessive worrying about money instead of God, thus subjugating a God-given sanctity of life to man-made artificial notions of material wealth.”
-Wikipedia (usury)
If lacking any moral consideration, you must face the fact in real life that if your interest is too high, the borrower will default and you will collect nothing.
One does not milk the cow to death nor eat the seed corn. There are real consequences to doing so.
Goodbye GMC & Pontiac. Is it possible that GM is getting serious about restructuring??
GM may drop Pontiac and GMC brands: report
Wed Apr 15, 2009 10:16pm EDT
NEW YORK (Reuters) - General Motors Corp, facing a June 1 deadline to restructure under U.S. government oversight, may drop its Pontiac and GMC brands as part of broader cost-cutting moves, Bloomberg reported, citing people familiar with the matter.
The two brands are being studied as part of talks with an Obama administration task force assessing whether GM can be restructured without bankruptcy, sources told Bloomberg on Wednesday.
GM’s Chevrolet, Cadillac and Buick brands are likely to be safe, the news agency reported.
GM had said earlier it would keep Chevrolet, Cadillac, Buick, GMC and Pontiac while selling or closing Hummer, Saab and Saturn.
The fact that they’re “studying” this stuff means they still don’t get it. This is just as silly as the UAW’s so-called “sacrifice” of the jobs bank. Some of these brands should have been dropped years ago.
I’m at the point where I wish they’d just be done with the BS and let the car companies sink or swim on their own so we can start working past it.
I’m at the point where I wish they’d just be done with the BS and let the car companies sink or swim on their own so we can start working past it. Yah, it’s like getting bled to death by bedbug bites.
Yes, there’s a tremendous opportunity being lost here. A decision is being made to preserve the past over shepherding in the future.
Normally I would agree with you. But the economy is not in the shape to survive the shock of a GM shutdown.
They best thing is to get rid of all of the surplus brands. Why can Toyota get by with three brands when GM needed eight+ (’+’ for Opel and other non-US brands, Toyota sells Toyota, Lexus, and I count ‘Scion’ as a brand too.)
Got Popcorn?
Neil
Never did understand why they had Chevrolet and GMC. Can’t tell the difference between them. Anyone explain it to me?
No reason for both GMC and Chevy. They keep GMC around because it’s supposedly profitable, but I suspect most of that profitability died with the end of the SUV era.
GM can survive some sort of restructuring, but only if it goes Chap 11. At this point, Chrysler is in such bad shape that it honestly needs to go Chap 7. I’m not even sure that the Fiat merger is going to do anything to save that mess given the fact that Fiat doesn’t want to contribute any capital to the arrangement (and with good reason).
That’s all well and good, but cutting brands is going to make them profitable how? They will save like 5$ on the hood ornaments?
8?
GMC
Chevy
Buick
Olds (whoops, scratch that)
Pontiac
Cadillac
Saturn
Open
Vauxhall
Holden
Saab
Hummer
That’s 11, now that Olds is dead.
My favorite Got Popcorn Neil,
You announce yesterday you are buying a house in the Winter, and then today, stick up for bloated and alcoholic GM.
Calling on all bloggers for an HBB Intervention.
Never did understand why they had Chevrolet and GMC. Can’t tell the difference between them. Anyone explain it to me?
Not me. I absolutely suck at brand identification, unless it happens to be a frog or a moss or a tree. And those are hardly ever driven.
I simply cannot keep track of what sorts of accessories or watches or electronic devices are most desirable and why they are, which I have come to realize confers a complete immunity to advertising efforts aimed at me. (Besides, it’s how you wear it. ‘Style’ doesn’t come with a brand. *lofty sniff * )
Now, I do know what MY car and truck are, because I’ve have them for a long time and gradually came to remember, after a year or so. And I know what a BMW is, sort of, and that those are evidently statusy or something, because I was recently in one and the jerk who was driving wouldn’t pull over and let me rescue an azalea that someone had dug up and flung to the curb, on the grounds that it would be messy in his BMW, and I perceived that it was a statusy thing. I mean, it wasn’t even a very big azalea! Can you imagine?
Some people.
Hmmmph, you’re only saying that because there is no BMW theme song for you to sing.
My last truck is a GMC. They were the ones that led with premium options, years before the same thing would show up on the Chevy trucks. I have a sunroof, leather seats with seat heaters and 6 way positioners, and a multiple CD player - non of which the Chevy truck would have as options. They both have the same engine and tranny, color choice and tires. Big GMC on grill, not a bowtie, and Sierra on rear tailgate, not Silverado. Can’t tell from the side, though.
Basically, they’re studying the cost of closing dealerships. Car dealers are exceptionally well connected and have had very, very protective laws drawn up for their benefit, so closing a brand is a costly endeavor. If I were in a decisionmaking role at GM, I’d want to know what the langauge of each state’s laws is, how many dealers I had in each state, any options to offer a dealer to get them to accept at a lower cost (like switching to a Chevy dealership) and all those things require a decent amount of man effort.
One to many…Take your best shot for success…Dump Buick also…
“One to many…Take your best shot for success…Dump Buick also…”
Out of respect for our father’s Buicks and their father’s Buicks, we bow our heads for a brief moment of silence please.
While not their most exciting line, it turns out that Buick is one of the most reliable cars made in the world.
Weird ain’t it?
Lost my post with tiny url.
MORE trouble in Hog Heaven…
With earnings down, Harley to cut more jobs
By Rick Barrett of the Journal Sentinel
Updated: Apr. 16, 2009 11:00 a.m.
In its second job loss announcement since January, Harley-Davidson Inc. (HOG) said Thursday that it’s cutting up to 400 more positions, including up to 80 at its Milwaukee-area factories.
http://www.jsonline.com/news/wisconsin/43090407.html
I find it hard to believe that few people can afford a $20,000 motorcycle.
Foreclosures slow down in Palm Beach County, Treasure Coast
Palm Beach Post staff and wires
Thursday, April 16, 2009
WASHINGTON — Foreclosure filings slowed in Palm Beach County and the Treasure Coast in the first quarter, research firm RealtyTrac said in a report released this morning.
In Palm Beach County, 5,264 properties were in some stage of foreclosure, down 20 percent from the fourth quarter of 2008 but up 11 percent from a year ago, RealtyTrac said.
In Martin County, 768 homes were in default, up 1 percent from the previous quarter and up 68 percent from the first quarter of 2008.
In St. Lucie County, 3,671 homes were in foreclosure, down 3 percent from the previous month but up 64 percent from the previous year.
Nationallly, Irvine, Calif.-based RealtyTrac reported that the number of American households threatened with losing their homes grew 24 percent in the first three months of this year and is poised to rise further as major lenders restart foreclosures after a temporary break.
The big unknown for the coming months, however, is President Barack Obama’s plan to help up to 9 million borrowers avoid foreclosure through refinanced mortgages or modified loans. The Obama administration expects its plans to make a big dent in the foreclosure crisis. But it remains to be seen whether the lending industry will fully embrace it, despite $75 billion in incentive payments.
The faltering economy is causing the housing crisis to spread. Nationwide, nearly 804,000 homes received at least one foreclosure-related notice from January through March, up from about 650,000 in the same time period a year earlier, according to RealtyTrac Inc., a foreclosure listing firm.
In RealtyTrac’s report, Nevada, Arizona, California and Florida had the nation’s top foreclosure rates. In Nevada, one in every 27 homes received a foreclosure filing, while the number was one in every 54 in Arizona. Rounding out the top 10 were Illinois, Michigan, Georgia, Idaho, Utah and Oregon.
In March, more than 340,000 properties were affected, up 17 percent from February and 46 percent from a year earlier.
Foreclosures “came back with a vengeance” last month and are likely to keep rising, said Rick Sharga, RealtyTrac’s senior vice president for marketing.
Nearly 191,000 properties completed the foreclosure process and were repossessed by banks in the quarter. While the number was down 13 percent from the fourth quarter of last year, it is expected to rise through the summer and then possibly taper off.
Fannie Mae and Freddie Mac, the big mortgage finance companies, together with many banks had temporarily halted foreclosures in advance of Obama’s plan. Now armed with the details about which borrowers can qualify, the mortgage industry has begun foreclosing on ineligible borrowers.
The Treasury Department has signed contracts with six big loan servicing companies - including Citgroup, Wells Fargo and JPMorgan Chase. Many have already started processing loans as part of the government’s “Making Home Affordable” plan.
“We need to get the long-term solutions for these folks,” Shaun Donovan, Obama’s housing secretary, said in an interview.
In the coming months, Donovan said, there are still likely to be increased foreclosures, especially from vacant houses, second homes and those owned by speculators. None of those properties will qualify for a loan modification. However, he remained optimistic that overall foreclosures could start to decrease this summer.
But even industry executives who emphatically support the plan emphasize that it’s success isn’t guaranteed.
“The effectiveness of the plan overall obviously is going to depend on the level of industry participation,” said Paul Koches, general counsel of Ocwen Financial, which collects loan payments on subprime loans.
Many borrowers and consumer groups claim the modifications offered by the lending industry don’t do enough to help cash-strapped homeowners, despite more than a year of public prodding from regulators. Fewer than half of loan modifications made at the end of last year actually reduced borrowers’ payments by more than 10 percent, data released last month show.
Plus, the lending industry has been swamped by the unprecedented wave of calls from distressed borrowers. “You can’t wave a magic wand and make the loans suddenly modified,” Sharga said. “They’re all individual transactions.”
“You can’t wave a magic wand and make the loans suddenly modified,” Sharga said. “
Maybe they could click their ruby slippers together and say there are no bad loans, there are no bad loans.
Isn’t that exactly what they’ve been doing?
Your post suggests a hint of sarcasm. Surely you aren’t suggesting it isn’t working? Haven’t you seen the earnings numbers? They’re makin’ money like gangbusters.
Pay attention…sheesh, do I gotta do everything?
I Declare that I am rich, intelligent, tall, strong, handsome and virile!
Well, on the internet dating sites anyway. And they believe me!
for a while.
And would you like to venture a guess how many loans the Obama program has modified? ONE, yep, just one loan. Bawahahahahahaha
http://tinyurl.com/d7atga
How can they not mention that there was a (voluntary) foreclosure moratorium in effect for some of this period?
No doubt. And those moratoriums seem to have passed.
http://money.cnn.com/2009/04/16/real_estate/foreclosures/index.htm?postversion=2009041607
Just in time for the spring market. Yippee!!
After a moratorium low, NODs spiking in San Joaquin Valley. Mounds of REOs not on MLS. Fire sales coming?
Not so much “fire sales” as torchings. I’m surprised at how many abandoned houses around Cleveland are simply being burned down for one reason or another.
In the ZIPs I track, the dwellings are not usual arson targets.
FWIW, saw a lot of boarded buildings in the Nati on a recent visit. But some of the housing stock isn’t worth saving.
The government is truly clueless as to exactly how many buyers lied on their loans.
The government is truly clueless as to exactly how many BUYERS, LENDERS, APPRAISERS, MORTGAGE BROKERS & BROKERAGES lied on their loans.
There. Fixed it for you.
[JPM] J.P. Morgan’s awaiting govt guidance on TARP payback:CEO
ECONOMIC REPORT
Housing starts dive 10.8% in March
Green shoots of hope wither as building permits drop to record-low level
By Rex Nutting, MarketWatch
Last update: 8:50 a.m. EDT April 16, 2009
WASHINGTON (MarketWatch) - Building permits fell to a record-low level in March and construction on new homes dropped sharply again after a big gain in February had raised hopes of a recovery, the Commerce Department estimated Thursday.
Housing starts fell 10.8% in March to a seasonally adjusted annual rate of 510,000 from 572,000 in February. It’s the second-lowest rate since the 1940s. January’s 488,000 pace remains the post-war low.
It was much weaker than the 550,000 annual rate expected by economists surveyed by MarketWatch.
Meanwhile, building permits dropped 9% to a 513,000 seasonally adjusted annual pace, the lowest on record. Permits for single-family homes fell 7.4% to a 361,000 annual rate, the second-lowest on record.
Starts are down 48% in the past 12 months and are down 78% from the peak three years ago. Starts are down 51% in the first three months of the year compared with the same period last year. In all of 2008, 905,000 homes were started.
Building permits are down 45% in the past year.
Before anyone jumps in here with the optimistic view that a nearly complete shutdown of the home construction industry should solve the inventory problem, let me point out that something like 361,000 homes entered the foreclosure pipeline last month. So it sounds like there will be plenty of foreclosure homes available for purchase over the next few years to make up for the dearth of new construction.
Yes Mr. Bear,…but just think of the “bidness” opportunities for interior / exterior house painting & rat elimination!
Road starts have to be up.
Idiot starts are at an all time high.
IKE
+100
Maybe I am crazy, but isn’t housing starts being down good news for millions of Americans worried about the ever declining value of their homes and the financial institutions that hold the mortgage notes on such homes? It is even probably best for the home builders although they may not realize it. Why build what you cannot sell at a profit. I view housing starts falling as a better economic indicator that the market will turn sooner rather than later rather than vice versa. More supply in an overpriced market of rising unemployment would be disasterous.
I’m not questioning you Prof, but some articles make it sound like this is bad for the economy, and I just don’t see it.
Bad short term maybe, good or better long term.
Tim,
And more importantly, finally getting off of the “REIC go’round” once and for all!
Never was a legit growth engine to begin with.
If the builders are slowing construction, it’s because they believe that demand will fall (could they be right for once?) They’re predicting a lack of confidence in the market. So you’re right that it is in fact good news for helping reduce inventory to come in line with demand, but such economic factors are irrelevant compared to the almighty confidence.
And even if they remain eternally rosy and confident, they’re getting their balls handed to them by their bankers now anyway.
Besides, builders make their livelihood by building; that’s their profession.
If they have to back off building because nobody’s buying their product, they’re in trouble. In fact, I’m surprised there haven’t been more outright bankruptcies among builders at this point. How are Pulte and Centex even still in the position to merge? How are they selling enough houses to stay afloat at this point?
Last month when housing starts increased the stock market soared, we were coming off the bottom. So why isn’t the stock market tanking since housing starts decreased this month?
Because the stock market no longer has anything to do with what goes on outside of Wall Street.
Excellent news for the wetlands, farmlands, forests, and wildlife preserves surrounding our cities. Conversions of natural lands to pavement has dropped to a 65 year low, excellent news for our furry friends.
Just came back from the resort island of Roatan (off Honduras - best diving in the western world).
For sale signs are everywhere. The locals tell me for the first time locals are selling. Also, the government just raised the minimum wage resulting is a large wave of layoffs (especially hit the service sector).
They also tell me American visitors are down drastically (no more home equity money for vacations). But other Central Americans tourists are filling in the gap. The locals hate them - call them the cheapest people in the world. Welcome to the post bubble economy for resort islands.
International tourism is down to all destinations, not just South America.
Did you get a sense of how much development had occurred there over the past decade, or how much local prices had inflated?
House Hunter’s International show on HGTV has had several shows on American’s going down to Roatan to purchase houses. It looked very beautiful.
Everyone on the show was cashing out of the US and moving down there permanently. I’m sure there are no jobs there to support yourself, so it wouldn’t surprise me if the stock market/housing crash has made all those self-sufficient early retirees a little less self-sufficient.
Interesting. I’d like to go somewhere like that, maybe I can get a good deal. I’m addicted to craigslist and haven’t seen too many great deals. I mostly look for scuba equipment and music instruments/hardware. People don’t seem to be in that much pain yet (Not trying to be a vulture, but I like toys).
VBVB,
Never rule out the Philippines! ( Especially for those into scuba diving? ) The wife grew up just a few miles from what is considered one of the best dive spots in the world, Apo Island.
The Aussies have a little hotel there but often, with ice at a premium and shipped in from the mainland, actually a larger island, beer is served at room temp. We bought a home there in the 80’s and built another closer to the beach in the 90’s.
Since then it’s attracted people from all over. Especially northern europeans. Nice enough folks, not big on baseball or conversation though? Built huge expensive mansions just b/c it was “cheap”. Satellite dishes and swimming pools now though. No more retired U.S GI’s in bamboo huts.
RE: Never rule out the Phillipines…
Hey Din/OR~
Have you ever visited the remnants of the WW II fortress batteries on Corregidor Island? I understand there is one 16 in. gun still mounted, and a barrel off in the brush.
Any Bataan stuff left?
I’ve met one survivor of the Death March in my travels.
On my list to things to do…
Totally jealous! But glad you got to go. I was going to go for a few months when I was “between jobs.” Had my plans ready and then, alas, landed a job. (I’m not complaining BTW)
How was the diving?
In the past I have argued for the government to get out of the road business, but many people were unable to imagine how the free market would provide roads. There is a new book (http://mises.org/story/3415) that is worth looking over before you dismiss private roads out of hand.
Presumably once the govt is no longer responsible for road maintenance my taxes would be significantly reduced and the money would be paid to private industry in the form of tolls?
How would we promote competition so we can choose the most competitive route to work?
Look what happened to Califirnia when we tried to privatize electricity. All of a sudden 1/5 of our major electricity plants were out of comission on “routine maintenance” wink wink nudge nudge so prices could be jacked to the moon.
Funny, after re-regulating, all of a sudden the missing electricity was found again and the shortage ended.
The reality is that forced monopolies never work in the interest of the public. They are simply scams to force more money from people. Here in California our water rates are being raised 40% under the guise of a suddenly discovered water shortage.. It goes on.
Private roads & Private prisons = $$$$$$$
one way ticket (91 Toll road)… Anaheim to Corona…12 miles = $6.65
As if going to Disneyland for a day wasn’t already an expensive proposition.
“One way ticket to Corona”
Sounds like a song in there!
12 miles = $6.65 Every Californian wants to go there!
You raise a good point — for-profit companies running prisons is a highly problematic model. In the corporate quest for ever higher margins, both the inmates and the public end up losers.
The difference in running a road vs. prison for profit is that in the prison industry, nobody really cares if you screw over your customer base.
Consumers, not customers.
“The difference in running a road vs. prison for profit is that in the prison industry, nobody really cares if you screw over your customer base.”
The said thing is, this sentence is literally true - in the worst way.
Although I’m a hard-line libertarian, the notion of “corporate prisons” still gives me chills.
Mandatory sentencing guidelines were created expressly to provide income for corporate prisons.
There is no such thing as “private” or “free market” government solutions to social services that require impartiality. They are nothing but scams.
Back up.
CUSTOMERS, not consumers. I just cringe when people/corps use and misuse this term.
for-profit companies running prisons ??
Hope I get this right…..The cause is the criminalization of mundane acts and the effect is more prisons per capita than anywhere in the world…
The prison-industrial complex thought out its business model better than the Big Three, apparently.
Mandatory sentencing guidelines were created expressly to provide income for corporate prisons.
What about the judges in PA that were taking kickbacks for sentencing juveniles to private jail. I was looking ofr a link to it - it was all over the news a few weeks ago, but then I found this : http://www.nytimes.com/2009/04/06/opinion/06mon4.html , and I’m way more pissed off. I’m also about to make another drink.
It’s worse than that. Mandatory sentencing guidelines were created expressly to provide income for corporate prisons.
government to get out of the road business ??
Lets get government out of MOST business including Police & Fire…Its just, organized/legitimized thievery…
Yes, but… it’s said that the reason the Japanese tolerate organised crime the way they do, is that they understand how much worse unorganised crime would be.
You’d rather have Blackwater, where you have absolutely no recourse because everything is proprietary information? No way. Have you been watching “24″ to see how this would play out? Paying taxes for public services gives you the right to complain.
In the 19th century, this country had private fire companies. When the alarm went out, several companies would show up to the fire and literally fight each other for the right to put out the fire and charge the owner.
Often, the buildings burns to the ground, people and animals died and nearby structures were threatened.
This also meant that resources could not and would not be shared and large fires could not be contained.
Sound like a good system to you?
General Growth files for bankruptcy protection
Mall Owner-2nd largest in U.S.
http://www.reuters.com/article/newsOne/idUSLG52607220090416
And they are going with a new “Corp” name change:
Somewhat General Growth
Wrong! The new name is “General Shrinkage.”
And they are going with a new “Corp” name change: For the next 2 years, they will be called “General Stagnation” & after that “General Collapse”
Good find, I was just going to post this. They own the 3 biggest malls in my area Eastern WA / N. Idaho…. But hey, the banks are doing GREAT!!!! Buy, buy buy!
Chicago-based General Growth Properties, the second biggest mall operator in the US, filed for bankruptcy today. Shares in General Growth, which closed on Wednesday at $1.05, have fallen 97 percent over the past 12 months.
Our operational model is sound,” Thomas H. Nolan Jr., the company’s president and chief operating officer, said on a conference call early Thursday morning, citing “the unprecedented disruption in the real estate financing markets and the need to extend maturing debt” as the reason the company filed.
General Growth’s reorganization efforts will likely focus on selling off properties. It has already suspended its stock dividend, cut its workforce by 20 percent and stopped virtually all new development.
Clearly, so “sound” that you went bankrupt.
Failure is the new success.
General Growth must have Winston on retainer.
Winston? I think I missed something. Who is Winston?
Its from “1984″. You can read it free here - http://www.george-orwell.org/1984/index.html
Do it to Julia!
Winston has become something of a cult figure around here
When I read that book, along with Animal Farm, Brave New World, Farenheit 451 and the other classics I never dreamed I would see a day when I would actually LIVE them.
Where’s the exit from this freak show?
Where’s the exit from this freak show?
Yeah, I wanna know, too. Let me out!
*bangs on the wall *
I feel like puking!
Sleeper Cell, you were already living in them. As Ben said it here multiple times - you were just not paying attention.
With grave reservations, opens Olygals cage and releases her upon an unsuspecting public
With grave reservations, opens Olygals cage and releases her upon an unsuspecting public
Whereupon she bite his hand, ungratefully, and then skips away into the woods singing ‘Born Free’ loudly and not very prettily.
“It has already suspended its stock dividend, cut its workforce by 20 percent and stopped virtually all new development.”
A sound operational model, indeed.
What’s left if you’re a real estate company?
Your existing holdings aren’t cash flowing.
There’s no credit available for more development, and even if there was there’s basically no demand for whatever you’d build. After being adjusted for population, GDP, etc, the US currently has 6x more retail/commercial real estate square footage than the next country on the list. That’s not sustainable.
I wonder if this should have been a Chapter 7 effort rather than a Chapter 11.
I’d heard a brief ditty on the radio that no malls would close because of it. I found that unbelievable for a company going into BK.
The “New” roll over money is going to be expensive and there will likely be a cash call on the partnerships to reduce the higher debt coverage ratio’s required by the lender…All together that means the rate of return has fallen dramatically pushing the effective values down possibly putting some of them upside down if they needed/wanted to sell…
I thought it was agreed that nobody would go out business at this point so that we can keep the market going UP!
Hahaha yeah I thought we were taking pages from the Japanese game plan in the ’90s - turn down Fed interest rates to zero, talk up the economy like it’s better than it’s ever been, and ignore the elephant standing in the middle of the room.
“Chicago-based General Growth Properties, the second biggest mall operator in the US, filed for bankruptcy today.”
And on this “great” news SRS closes down 8.35%. Bizarre world!
Biggest real estate bankruptcy in US history. General Growth collapsed after spending $11.3 billion to buy commercial-property developer Rouse Co. in 2004 only to get caught in the credit crunch and a U.S. recession that has cut spending and property values.
Classic!
Not to worry! The headline news clip said the malls will continue operating without interruption.
The Mall is too big to Fall….where’s Timmy ?
Obama announcing big spending on high speed rail. While I’m against taxpayer spending on this, and clearly it’s unconstitutional, I can see that this will further strengthen the large cities and weaken the value of rural areas.
Maybe this is a diversion from the success of yesterday’s Tea Parties.
The January Stimulous Act appropriated 8 billion for this purpose. The money has already been earmarked. It also changed the definition of “high speed” from an average speed of 150 mph to able to attain a max speed of 150 mph (a bicyle going steeply down hill perhaps).
“The January Stimulous Act appropriated 8 billion for this purpose.”
The earmark is for Harry Reid (D). The $8B is specifically earmarked for a high speed rail connection from Anaheim to Las Vegas. Really good use of general taxpayer money.
The “Disneyland-Disneyland” Express.
Cue the Monorail song from the Simpsons…
Seriously though, what’s sorely needed more than even high speed rail is a grade separated multitrack bypass for freight trains around the entire Chicago bottleneck. Over the long term nearly the whole country’s mfg. would benefit from that.
That and the absolute Cluster-fk that is the Northeast Corridor.
Screw the ‘bullet train’ nonsense. I’ll settle for trains that run reliably and on time. We gotta walk before we can run. Hell, in a lotta sutuations we aren’t even at the CRAWLING stage.
This country is FUBAR to a ridiculous degree.
It will probably come when the major western railroads (UP, BNSF, CN) eventually merge with one of the eastern railroads (NS, CSX).
Chicago is an interchange hub, switching cars for destinations east and west. A coast-to-coast merger will reduce/eliminate the need to go thru Chicago, at least for the railroads merged.
I don’t necessarily think mass transit is automatically a good idea, but why is it unconstitutional??
I think its in the 2nd Amendment:
Congress shall make no law respecting an establishment of mass transit, or prohibiting the free exercise of automobile driving; or abridging the freedom of motorcycles, or of the dune buggy; or the right of the people peaceably to assemble in large traffic jams, and to petition the Government for building of new highways.
I can see that this will further strengthen the large cities and weaken the value of rural areas.
I think hyperinflation and oil depletion will do far more to destroy rural areas. Surely the portion of the rural population that commutes to work in the city or lives off of people who commute to work inthe city will be destroyed. If you can actually work and produce something of value in the country, ie areas with mining and agriculture, then you are probably safe.
Actually, what manufacturing we have left is moving to the rural areas for the property and other tax breaks as well as, believe it or not, easier transportation.
The large metro areas have become too big for efficient transportation. Combined with the constant increase in taxes, rural American becomes a bargain.
Nothing would be neater than rail lines that move as fast as planes, running on maglev. This is something that would be great for future generations. If your going to spend money, at least it will be something that changes things for real.
Maglev is a non-starter. It’s an energy hog, and does strange things in the vicinity of its electromagnetic field. Track is hard to lay and harder to change once laid. It is super expensive, a big part of the cost being in the copper used in magnets along the entire track.
There are technical challenges with intersections / branches (not impossible but just hard to do). There is a good reason Maglev hasn’t taken off in the 80+ years of its existence.
Let me put it another way. Maglev is a great way to tackle the problem of unemployment of lawyers in the country.
Having said that, I probably ride the Maglev more than any of you here
100% in agreement, VB.
See, I don’t get this at all. Here in california they’re talking about high-speed rail from SF to LA, and I ask, why? People are having no problem getting from SF to LA and back again using airports and planes. Where’s the need for additional expensive transport between the two cities? They’re served just fine as it is.
I’d love having a high-speed rail from LA to SF. Flying has become a royal pain these days, and the I-5 is often bumper to bumper through the San Joaquin Valley.
I think it’s a great idea. Our tax dollars, which created the interstate system, have been subsidizing car companies for fifty years. Now we’re subsidizing japanese car companies while ours fail. So why not move on? Makes sense to me.
I know everyone loves to hate on Obama, but he is actually investing hear in the US rather than spending trillions picking fights overseas.
The 2nd amendment thing is an incredible stretch. In any case, what are the interstates if not “mass transit?”
Waste of money, it won’t be cheaper than a plane ticket anytime soon, plus they are slower than airplanes. What’s more the infrastructure for airports is already built. This just sounds like a permanent jobs program.
slower than airplanes The cost of fuel will continue to increase year by year, and eventually air travel will be only for the military and the superrich. There’s no future in air travel, barring a miracle. Even now many ocean going ships are going much slower than the old time sailing ships did, to cut down their fuel consumption. Rail travel is extremely fuel-efficient, and can use different energy sources than autos & airplanes. I don’t see the point in “high speed” rail, but just restoring the functionality of the US railroads to a 1945 level would be a big step forward.
“…….no future in air travel……”
Trains will replace air when it is significantly cheaper and the time penalty is minimal. Currently the airlines are CHEAPER than AMTRAK for any given trip of any distance.
Take your typical 737-800 vs, your typical Amtrak long distance train. How many people can that 737 shuttle between LA and Chicago (for example) in a given 72 hour period, vs. that Amtrak train set?
Then figure what it costs to run a trip each way. True the train will burn less fuel, but the LABOR costs are a heckuva lot higher. (6-7 crewmen total each trip for the 737, vs. 70? 80? for Amtrak)
The one commodity that CAN’T be replaced is TIME.
Air travel is high-speed rail without all the tracks and ground infrastructure (and the associated environmental problems/impacts).
AS long as there are smart guys out there working the issue, and can make a buck off it, the “fuel problem” will take care of itself.
None of this applies if you think/want to revert back to some version of a 19th century economy and transportation system.
RE: yesterday’s Tea parties…
Gunning up…called here a year and half ago. This blog is always way ahead of the curve.
http://online.wsj.com/article/SB123984046627223159.html
It would be great to have them do high speed rail, but why don’t they sit down and think about how it’s being done.
If I was appointed lord ruler for a day this is what I’d do.
Chart a straight line on the map between Union station in LA and the strip in Vegas. Bore and line 2ea. 2 meter tunnels along that line. The center point of the tunnel would be about 2km deep between Barstow and Baker.
On each end of the tunnel a station is built powered by a large turbine. A vacuum is pumped on opposing ends of each tunnel.
Get the picture?
Nuts, I know. My back of the envelope has this as a 1hr. trip to Vegas from Union station and the tunnels would cost 375 million each.
Keep in mind that a tunnel with equivalent altitude of 16K meters has twice the groundspeed for the same energy or drag.
A vehicle experiencing 100mph equivalent at sea level would actually be traveling 200 mph. 100mph on a perfectly straight perfectly level roadway is a no brainer.
rouse and Zell were smart, except for that Tribune buy
His admission that the Tribune was a mistake was all over the news here yesterday.
Newspapers in Chicago are so bad off that even “Streetwise”, our local homeless newspaper, is in dire straits.
Streetwise = Panhandler Paradise
One of the more dubious Chicago institutions that I do NOT miss.
Streetwise is much better off than the kingpins.
From Gaper’s Block today:
Following news of StreetWise’s financial problems, more than $40,000 has been pledged or donated to help the paper fill its $75,000 budget gap.
I suspect the Sun-Times and Tribune have much bigger gaps to fill.
BTW, five years ago I knew a half-dozen people with good jobs at the Tribune. (First place I interviewed in Chicago, too.) None of them are there anymore — they got out in time, luckily. None of them had or have good things to say about the Tribune, either.
Florid-land, deep in denial.
http://www.inhabitat.com/2009/04/15/florida-announces-worlds-first-solar-powered-city/
Florida Announces World’s First Solar-Powered City
Because what they need is more building. Right?
When you think of it, hasn’t the whole state of FLA always been “solar powered”?
I believe the whole planet is solar powered. You have an excellent point.
France isn’t. They are 85% nuclear.
“The community will run entirely on a 75 megawatt, $300 million solar-powered generator.”
Entirely? I guess bedtime will come early, especially in the winter months!
Best of luck to them, but I don’t understand their thought process in regards to transportation. Everyone will have electric cars? Why not a modern electric light rail system like many cities in Europe (and some in the US)? It’s available and viable right now, while electric cars aren’t.
This isn’t about logic or practicality.
That would make sense, and in New Future, good ideas are not allowed!
Now, BUY! a Florida solar home today since they aren’t making anymore sunshine!
Hmm I still have a classic air-cooled Cray supercomputer in storage (j90 series) along with power hungry Silicon Graphics systems. I bet I wouldn’t be welcome at that community. Powered by Sun. Err.
From CNN headline:
“Stocks open higher after government reports number of people filing for unemployment falls. More soon. ”
Yes. Cause 610,000 people filing for initial claims is sooooooo much better than 660,000 filing for initial claims.
it’s in the red now, and most likely stays in the red by closing. Smart Money has left.
Look at last week’s data, it was revised up to 663k - when last week they trumpeted a decline. Plus, last week was a short week due to the holidays.
If memory serves, then initial claims above 400,000 are considered to be in recession territory. At 610,000, we are in recession-and-a-half territory.
The good news: Things are getting worse at a slightly less horrific rate.
The Quiet Coup
http://www.theatlantic.com/doc/200905/imf-advice
The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government—a state of affairs that more typically describes emerging markets, and is at the center of many emerging-market crises. If the IMF’s staff could speak freely about the U.S., it would tell us what it tells all countries in this situation: recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time.
by Simon Johnson
Mr. Johnson was interviewed at length on NPR’s Fresh Air yesterday. A good listen. Details in yesterday’s Bits.
I listened to part of Simon Johnson on Fresh Air yesterday. Not a good listen for me, his writing is far more persuasive than this interview was.
Really?
I thought it made a nice companion to the Atlantic piece, which was both more big picture and somewhat pedantic.
I’ll state what I did last week - we’re going to hear more and more about “breaking the financial oligarchy” in the coming months a years. That’s great except for one thing - the solution presented will be to replace it with international “oversight” by organizations like the IMF. Somehow the mainstream media will conveniently leave out the fact that the financial oligarchy is not a United States entity, but an international entity, and such replacement/oversight will only be slightly shifting its center of gravity, and not a fundamental change at all.
P.S. by “shifting of gravity” I mean geographically and governmentally shifting them - surface level changes to appease the masses. The names and the behaviors at the core of the oligarchy will not change.
You’re probably right, unfortunately.
But that doesn’t mean that oligarchy-busting shouldn’t be attempted.
Yeah I know. Education is the first step, which I why I post a lot about them on the interwebs.
Unfortunately though it cuts too much into my time. It’s a weakness.
I keep an eye out for the black helicopters - some day they’ll get me.
not a fundamental change at all It looks like the US is trying to globalize its financial oligarchy.
8 Ball, “Is the US is trying to globalize its financial oligarchy?”
Definitely
I posted a P.S. to my comment above, that hasn’t shown up yet. No - there is no such exclusive U.S. financial oligarchy. It has its roots in Europe actually, not the U.S; in London, Austria, Germany, Lexembourg and such. The U.S. is a relative latecomer, though has grown since the 19th century to be the “center of gravity”. Nevertheless the oligarchy still includes international participants as well, and as such we wouldn’t be “exporting” it internationally, just shifting its center of gravity back to where it once was - in Europe.
Did the American Revolutionaries fight for the idea that King George III needed more “oversight”?
No they didn’t but keep in my that the Tories and the crown were the conservative element of that time. It was the radicals that fought and won indepedence (temporarily) from the moneyed elite. There is nothing radical about a top down directed rebellion for the benefit of the top.
Ending Weyerhaeuser as Shareholders Know It Is CEO’s Obsession
By Peter Robison and Christopher Donville
April 16 (Bloomberg) — Weyerhaeuser Co. agreed to protect land around a historic waterfall east of Seattle in 2004 in exchange for rights to build houses nearby. The deal worked well for the waterfall.
Dirt plots marked with blue and orange stakes outnumber finished homes in a Snoqualmie, Washington, neighborhood where Weyerhaeuser carved subdivisions out of a hillside. Record profits from real estate in 2005 turned to $847 million in losses for the company last year. So much residential property is for sale in Snoqualmie that there’s a three-year backlog, said George Isaacs, a local real-estate agent.
“Remember the movie ‘The Perfect Storm?’ We’re in that boat right now,” Isaacs said.
The misadventure in Snoqualmie helps explain why the largest U.S. lumber producer is in a financial crisis so deep it turns down the heat in its offices to save money and is contemplating upending its corporate structure after 109 years to become a real estate investment trust.
Other U.S. timberlands managers have converted to REITs to slash corporate taxes. The move would reward Weyerhaeuser shareholders, who hold their annual meeting today at the headquarters in Federal Way, Washington, by returning most profits to them as dividends. At the same time, it may force the spinoff of more non-timber assets.
The company has been shedding them under Chief Executive Officer Daniel Fulton, who has closed 10 wood-products mills this year, halved capital expenditures, sold off packaging businesses, frozen salaries and eliminated almost half of the workforce, now at 19,850.
55 Degrees
A record $1.2 billion loss on $8 billion in revenue last year and the likelihood of negative cash flow through 2010 put Fulton into “conservation” mode, said Joshua Zaret, an analyst with Independence, Ohio-based Longbow Research.
“His priorities are stemming the cash leakage and battening down the hatches,” said Zaret, who has a “neutral” rating on the shares.
Weyerhaeuser has lowered the thermostat at headquarters to 55 degrees on weekends and after hours, said Bruce Amundson, a spokesman who wears a sweater when he works late. Fulton also cut costs this month by shutting a public bonsai garden, eliminating one full-time and one part-time position.
“We missed the depth and severity of this homebuilding crisis,” Fulton, 60, who headed the real estate unit for seven years before becoming CEO last April, said in an interview. “The primary business going forward is the one we started with in 1900, which is timberlands ownership and management.”
Wow. I live in Bellevue which is between Seattle and Snoqualmie. I can’t believe folks were buying into that Snoqualmie frenzy in 2005. Take a look at Craigslist, there are tons of homes for sale in that area. They just opened a Casino in Snoqualmie on Snoqualmie tribal land. The biz is slow there.
Plum Creek lumber is going RE too. The govt were in a bidding war to keep forest lands from trophy home builders. Aren’t they all kinda late for the party?
Weyerhauser, DRWhoreton, Toll–was there ever a difference? I see none. Except maybe Weyerhoser gets to sell itself the lumber from the forest after they clear-cut it in order to build the cra*p-shacks. I’ve seen Weyerhoser in action a number of times, most recently with a Quadrant Home project, and their plans, actions and power-suited prosti*tutes are the same plans, actions, and pros*titutes that show up at any other big planned development. Only the names change; ‘Maple Farms Lane’, blah blah, ‘Piney Creek Ranches’ (where the pines have all been clear-cut, the creek buried in gravel and pavement, and 1/5 an acre ain’t a ‘ranch’. etc etc…on and on.)
Wait–why’m I gettin’ grouchy!! Come to think of it, things is goin’ just TERRIFIC! I mean, Weyerhoser actually has to turn down the thermostat!
Oh, the humanityyyyyyyy…
HAHAHAHAHAaHaH! Oh, gosh, that’s lovely!
Let’s not forget about the 24% jump in foreclosure in Q1 2009 when the moratorium has ended.
Anecdotally, my SIL has just filed for a short sale on one of her 4 properties in LV. If short sale fails, guess where it’s going next.
Talking about wage deflation which could translate to price deflation. Best Buy has just announced that they will cut wages up to 25% on some of their work force and layoff a few. Retail is in deep Chit.
“Talking about wage deflation which could translate to price deflation. Best Buy has just announced that they will cut wages up to 25% on some of their work force and layoff a few. Retail is in deep Chit.”
bbbbbbbbbbbbut inflation is right around the corner!!!! I swear!!!!!
I am going to teach free classes to help my University survive. This is a form of wage deflation. People are going to get inflation along with wage deflation for a while. Now, what gives first? The irresistible force (inflation) or the immovable object (deflation)? Cost-of-Living increases may be back in style.
Roidy
The only deflation I’ve seen are houses, cars and wages. My daily costs have risen by 25%+.
Best Buy cutting wages? Holy cow, their store employees only make $12hr! Maybe they need to raise the price of the cables they buy for $2 and sell for $60 a little more.
I’m posting this link not because of the content, which is allready well known to HBBers, but because of the way in which it’s presented.
This is MSM/PTB propaganda at it’s best. Look closely at the word choice used and how it seeks to paint saving and frugality as pathological behavior. At no point is the validity of the hyper-consumer culture even brought into question here - it is simply assumed to be an eduring given with no other possible alternatives.
http://www.msnbc.msn.com/id/30240529
This is not news, this is thought control. This is Winston.
But we’ve known this all along. Did you miss all the memos for the last five years when they p*mped RE all day long?
Why this new obsession with Orwell? It’s always been thus.
I first read 1984 in the springtime - so the returning sunshine reminds me of it - the same is true of The Great Gatsby, I’m silly that way.
The penny drops.
Great post, pathetic article.
What completely eludes most is the fact that frugality is forced on most people and in that sense, it’s not frugality but survival. How come I never saw a single soul frugal between years 2001-2006? They aren’t frugal until doom is right in front of their face.
“…it’s not frugality but survival.”
Exactly, and that’s why I bristle at these attempts to paint our instincts for protecting ourselves and our families as irrational behavior.
They don’t give a hoot about manufacturing, or even employment, they just want us to resume taking on debt at rate greater even than yesteryear.
Good point.
I was just going to post that link. Yeah, pretty unreal that they’re spinning frugality as a bad thing.
“Economists say many still-flush consumers are handcuffed by psychological traps that cause them to tighten their purse strings even though economic hardship is not their reality.”
What is a “still-flush consumer”? Someone with a dollar left in their bank account?
Sickening.
Kind of interesting that the examples of the new Flush/Frugal are both employed by the Government…
Look at those bad, bad savers!
I bet at the end of the month, they haven’t spent all their money, and that is “Un-’merikan!” Can’t have that - everyone needs to be in debt! Gotta keep the parasite class happy!
I’m confused. I thought frugality was good because it will save the planet from overheating. Aren’t we supposed to be driving less and staying at home reading by our energy efficient light bulbs instead of throwing more carbon into the air? Aren’t we supposed to be cutting back on manufacturing so the oceans don’t rise and the polar bears don’t sink? If we’re not buying then we’re not having to transport goods and burn hydrocarbon fuels. Doesn’t saving and not spending equal smaller carbon footprint?
Silly me, I forgot that we’re supposed to produce, consume and then buy carbon offsets.
Well I’m kinda in that category. I’m doing as well as ever but am spending less and finding ways to cut more. Buying stuff was making me ill to my stomach. Like when you get a new car, get over the newness in a few days and the reality of the new expense sinks in. I get that way about even less expensive purchases now.
That feeling predates the bubble.
InMontana, don’t you love America? What a commie you are!
As for me, I just can’t think of anything I want to buy. Maybe a motorcycle at some point, if I see an incredible deal from some FB getting foreclosed on and moving into the mother- in- laws basement or something? And a chainsaw, maybe. The one I have is too big for my girly arms to manage.
Wait, wait, no….my handy shopping list says I need some celery, Q-tips, corn tortillas, stamps, and a shower-curtain liner. I’ll buy those!
Rejoice, economy, rejoice! You are saved!
I just helped out as well. Bought 2 new pants at $15 each! Wrinkle free, all cotton slacks no less!
Hooray!
And then there’s the 25% increase in everything I need everyday! So I’m contributing even more without trying!
Thank god my income is deflating so we can get this economy turned around even quicker!
What kind of pants? Did they have a daisy embroidered on the pocket?
You forgot the important details, man.
I just spoke with a friend who is a municipal tax collector. She told me that she’s been getting lots of calls lately from people who are crying and sobbing because they can’t pay their property tax bills. Most of them are in $500k homes and have lost jobs. Many bankers, I suspect.
Where?
I know of people scrambling to sell 2nd homes. Often the 2nd homes are investments in desirable suburbs of LA. Hmmm…
Got Popcorn?
Neil
or strawberry pickers!
In NW NJ, which is technically “commutable” to NYC, but it’s a 90 minute ride, so you’d have to be crazy to do it. That’s why I’m guessing they’re mostly bankers.
Millions do. I did for three years.
Inner ring = won’t live there.
Middle ring = can’t afford to live there.
Outer ring = can barely afford it, but the commute is a killer.
Carpool.
MIL, wife and I were on the phone with an insurance rep regarding the policy on the shack wife and I live in(owned by MIL). The rep stated “something has to be done with these grossly inflated housing prices because policy holders are paying waaaaay to much”.
When an element of FIRE (albeit low level element) is squealin’ like that to customers, I know this is far from over.
This PPIP crap is pissing me off more and more. Never before has the financial/political oligarchy moved so swiftly to loot this country as it is now.
————————-
Ray Dalio, who runs one of the largest hedge funds in the world, wrote a letter to his investors explaining why Bridgewater wants no part of Tim Geithner’s trash-asset-purchase plan. He says that he thinks most big funds will decline to participate, leaving PIMCO, Blackrock, and a few others to run off with the taxpayer loot (and later be bashed for it).
The only way the plan can work is if the investors buy the assets at low prices, the banks sell them at high prices, and the taxpayer covers the difference. Dalio is worried that, eventually, taxpayers will figure that out.
While we were initially considering participating in the Legacy Securities PPIP program, we decided against it based on how it is designed. Some of our investors asked for our reasoning, so we will explain it to you all.
taken from the letter from bridgewater to its investors:
As you know, unlike many others, we don’t think that most of these assets are all that cheap because we think that the debt problems will be worse than most others expect, we believe that the legal foundations of creditor rights will be in jeopardy and we think that liquidity in this environment is worth a lot. With these considerations, we find some of these assets a bit cheap, but not cheap enough to buy.
When the program was announced we were originally interested because with the non-recourse leverage (i.e. the ability to put the bad loses back to the government) we thought some of these assets could go for cheap enough prices to lead us to buy. However, as things now stand, very little leverage is actually being offered….we don’t have enough information to even assess the value of the program in aggregate.
Additionally, we have concerns about the execution of the Program. As we see it, the government is essentially creating a new asset class and severely limiting those who can buy it, which will substantially limit demand and increases the perceived risk of collusion. The way the buying is envisioned, two different types of buyers will be created — one with a very limited number (e.g., five) of managers who have access to leverage/put via PPIP, and the rest who don’t. So, unless you’re one of the five, you won’t get the benefits, and being one of the five has strings attached that make it difficult to act as a fiduciary.
Though we don’t understand why that was done, we presume that it was for good, unavoidable reasons, but it makes us not want to participate and it makes us question the breadth of interest that we will see in the program. That is because those who are selected as PPIP Managers (i.e. these five funds) will be in conflicted positions because the Treasury has expectations of how these managers should behave (like they should buy large amounts) because the whole program’s success hinges on how these five behave, yet, at the time of applying to be one of the five, they presumably don’t know the pricing and terms, or even exactly what will be sold. We couldn’t, and we wonder how other managers can, make commitments to be one of the five without knowing these things. We could not make assurances to both the government and our investors. It would require the investors to have a lot of blind faith, especially as the managers are clearly in a conflict of interest position because they have both the government and the investors to please and because they will get their fees regardless of how these investments turn out.
Then there is the issue about the political risk, which we are more concerned about because there will be such a limited number of managers being allowed to participate in this program that it raises possibilities of them colluding because they all know each other. Either these investments will make a lot of money for their investors or the government will lose a lot of money — in either case, there will be reasons for politicians to complain and to focus on the five winners to see how they “abused” the system.
Additionally, quite frankly, the plan isn’t straightforward. Essentially it is to let private investors buy these assets cheaply and to simultaneously let the banks sell them at high prices at the expense of the taxpayer. So it gets around the transfer pricing problem because the public doesn’t understand the value of the leverage/non-recourse loan.
If this plan gets scrutinized, which seems likely, there’s a lot about it that could cause controversy. Maybe we are misunderstanding it, but from what we seem to understand, given all of these issues, it looks to us like the sort of thing that the S.E.C. and other regulators wouldn’t allow if those of us in the private sector did it. Anyway, as it now stands, we don’t want to participate for these reasons.
————————-
from the economist, 4.10:
“Britain’s Cayman Islands, for example, is home to more than half of the world’s offshore hedge funds, according to IFSL Research. Rumour has it that the first choice of domicile for fund manager investing, along with the U.S. Treasury, in American banks’ toxic assets is Grand Cayman.”
Note that the Caymans are a vastly larger home to tax shelters than is Switzerland. Somehow they’re not getting much attention in the media. I wonder why?
American’s are very bad at geography.
and grammar.
and Math.
We run a helluva Ponzi though.
just wanted to balance the thread.
Because Switzerland is the historical home of tax havens and secret swiss bank accounts.
Like the same way mobsters are portrayed in the media even though they don’t really exist like that anymore.
Or every mention of the California coast involves surfing.
I had something a little less innocent in mind.
The Caymens wanted to eliminate the competition. The Swiss probably keep financial info a secret while the Caymens probably allow the financial elite to know who else is illegally using the Caymens. That gives them leverage when they say want a congressman to vote one way or another. That’s my guess.
Wasn’t really the theory I had in mind, but I like the way you think - that could well be. That’s a dangerous game though - moreso than just elementary school tax evasion, even for the big guns.
I was thinking something a little more innocuous - simply that the evaders could keep evading if they moved all their money to the Caymans (and Bahamas), and also appease the masses by “exposing” (and removing) some of the tax evasion in Switzerland. Just a big red herring. That and/or someone from UBS or Credit Suisse pissed someone else off, or maybe just fell out of favor.
Not only that but it’s a lot more fun to cruise to the Caribbean than it is to fly to Switzerland. Except for the skiing, of course. But oh what great diving!
Very gradually the American electorate realizes it’s being systematically defrauded by the financial industry colluding with their own government. The anger/publicity about executive bonuses, taxes, etc. is misplaced.
Ifn only.
Link to the original? I want to send this to both my senators and my entire congressional delegation.
I got that second hand - will try to dig up an original link though. I would imagine it will be google-able in a couple of days.
link
So I *did* post a link. Taking a while to show up though.
Obama the NKM and his henchmen steal trillions from the U.S. taxpayer; and the liberal left cheers wildly because in their opinion, “Bush was worst”.
Evidently the complete and total economic and moral bankruptcy of all of their cherished positions and programs does not alter the fact:
Spending someone else’s money has become their religion.
And they are true believers.
Look out below.
And Paulsons 700 billion no strings attatched TARP plan was not theft??. The fact that the previous administration looked the other way while the real fraud was occurring was not theft?Heck they even went out of their way to prevent state prosecutors from going after the banking boys.
Nope this runs far deeper than any one administration. How many Tea Parties happened as our deficit went from 4 trillion to 10-11 trillion from 2000 to 2008? I was out protesting this crap the week before with many that voted for Obama. You should hold your own party accountable as well.
If gov used the money to create jobs than I’d have no problem with stimulus spending. Using it to enrich gamblers and thieves is crap. I’d held out hope that they wanted to slow things down for an orderly FDIC takeover of these failed banks, but that hope is fading, we’ll see what happens after the stress test but I suspect confetti and champaigne and horns.
The FBI was also ORDERED to not investigate much of the fraud that was taking place.
Ordered by the White House through the Justice Dept..
Yeah, it’s Obama fault.
I’m starting to “feel dirty” about all of this, and I don’t mean a “good dirty” , either. Like I’ve started living in a frequently used, seldom cleaned port-o-let during Mardi Gras. Like bad nasty.
This will never get right. This economic mess will just lead down a path to a chronic, degrading impoverishment of us and our fellow Citizens. Oh yes! We are really putting in a bottom in all of this. Yes, the worst is done. There will be no better, though. Not for us regular people.
Roidy
“The only way the plan can work is if the investors buy the assets at low prices, the banks sell them at high prices, and the taxpayer covers the difference. Dalio is worried that, eventually, taxpayers will figure that out.”
In other words, hedge funds and banks can only make out like bandits by stealing from everyone else.
Bailouts And Manipulations
Save Wall Street At The Expense
Of Main Street
By Larry Chin
4-15-9
Wall Street is in the midst of a huge rally, primarily sparked by two recent occurrences.
The first was the “surprising” announcement that Citigroup, JP Morgan Chase and Bank of America — major “zombie” banks laden with “toxic assets,” on the verge of collapse, and the recipients of billions in government (US taxpayer) bailout money — mysteriously posted profits this year. Wells Fargo, regarded as one of the healthier big banks, and a recipient of $25 billion, also reported a profit last week, rallying the stock markets again before the Easter holiday.
We now know, based on insider reports from securities traders, that a massive fraud and manipulation by AIG funneled “bailout” funds (US taxpayer money) to AIG’s counterparties, the very same big “toxic” banks that are now posting profits.
The second big event occurred when the Obama administration and Congress threw out “Mark to Market” rules. Banks and financial institutions, which by law were previously obligated to price, or “mark,” the toxic holdings to the current market price (honestly take huge losses), now have carte blanche to magically erase all of these losses, and price these toxic assets however they wish.
In other words, Wall Street has been given the green light to lie — with the full blessing of the Obama administration and Congress. “Toxic assets”? Gone, just like that.
In yet another example of collusion and cover-up, federal regulators have told the nation’s largest banks to “keep quiet” about their performance in the Obama administration’s “stress tests”.
This blatant cover-up, ordered at the top, prevents negative news from spoiling the bogus Wall Street rally. Obama himself will announce the results later, after he and his economic minions have had a chance to “manage” the data.
So much for accountability. So much for transparency and disclosure. So much for the populist hot air and propaganda gases spewing from the Obama administration, Ben Bernanke’s Federal Reserve, Tim Geithner, and Larry Summers.
The momentum from the latest fabrication and the latest fraud must not be broken. The worst is over, according to the new noise, and the constant “are we there yet?” yammering from CNBC. No, it’s already time for The Recovery, despite the fact that the worst economic crisis since the Great Depression began mere months ago, and despite the fact that the “toxins” — the magnificent bubble of derivatives, leverage, hedging and other interlocking Ponzi finance schemes that began the crisis to begin with — are still out there, still unpopped.
The books are cooked and the numbers are faked anyway. Why not? Who’s going to know?
So while the US auto industry is strong-armed into massive restructuring, and the common people of Main Street are told to get used to the suffering, Wall Street is not only given a free pass, but the additional gift of back-door swindles and a massive cover-up.
“This blatant cover-up, ordered at the top, prevents negative news from spoiling the bogus Wall Street rally. Obama himself will announce the results later, after he and his economic minions have had a chance to “manage” the data.”
The government will release the stress test results only AFTER it has put the uptick rule and whatever other anti-short measures it came come up with in place. The ponzi scheme continues, so I sit in cash.
“The ponzi scheme continues, so I sit in cash.”
Welcome to the Club of Some, including me.
Me too.
Of course!
It is all fraud - fraud on a staggering level - and it doesn’t matter because everyone is either going to buy into it (and become poor) or stay out of it (and become poor.)
It’s all about reducing everyone to the lowest common dominator so the loot can go to the bankers and their buddies.
But what’s at play here is psychology. What to real leaders do when things look the darkest? How did Alexander The Great, Hannibal and George Washington rally their troops to fight against overwhelming odds? They inspired people! They invoked courage and belief in a cause. The stock market is a heard of cats and the administration has instilled some measure of confidence. I will bet that if Obama can keep his high approval numbers things actually will get better. (Ronald Reagan did the same thing but he set up a flawed economy model “trickle down”, that lasted finally crashed in 2007/2008. We won’t know if Obama’s model will last any longer for 10-15 years but for now ‘bad news is good news’.
Does confidence cure insolvency?
I just consulted the online Magic 8 Ball:
“While there be raging inflation?”
Outlook not so good
“Will Muggy lose his job?”
Absolutely!
“Should we all be stuffing our pants with ingots?”
My sources say no
“Does Ben eventually rule the world?”
Absolutely!
“Will ET and Muggy start a pre-apocalyptic indie band and revive the underground?”
Yes
I dunno, doesn’t look too bad
Two more:
“Does Palmy road rage on 275?”
My sources say no
“Do we really have to feed the squirrels?”
Maybe
“Does Palmy road rage on 275?”
On 275, no. But stuck behind a golf cart in Sun City Center? You Betcha!
Oops! I wrote “while” instead of “will.”
8 Ball, “Will WAMan make fun of me?”
Definitely
“Will ET and Muggy start a pre-apocalyptic indie band and revive the underground?”
Yes
We should get in Mr. Bubble’s good graces, as he reportedly has a doomsday shelter, a large cache of hootenanny instruments, and a generator. It would be ideal to have the ability to rock post-apocalypse as well, I think, flippin’ the bird to the credit-crunched flesh-eating zombies outside the door.
Muggy,
Ask one for me will ya?
Will a beautiful woman go cruising naked with Skye this season?
Awesome!
I’m glad you’re getting your info from an informed oracle, Muggy, instead of some crazy extraneous source.
I am blessed with a mysterious wisdom source as well. In my case with a Magical Plastic Oven Mitt from Arby’s. I got it at a yard sale for 10 cents. Made in China in 2003. It’s a perky red and white, and its got a blue-eyed face even, which lends gravitas to the pronouncements that appear in the little smiling mouth slot when you pull the oven mitt thumb!
Lessee…
“Am I pretty princess?”
Yes, yes, yes! (I thought as much. *modest titter *)
“Is Muggy going to lose his job?’
Outcome uncertain.
(So, see, the Magic Mitt is more positive than the 8-Ball, Muggy.)
“Will ET and Muggy start a pre-apocalyptic indie band and revive the underground?”
Yes, yes, yes! (Well, there you go! Get going, guys! Don’t defy the Magic Oven Mitt!)
“If things get all Mad-Maxy and Armageddony, should I wear black leather with piercings and chrome studs, and maybe even a creepy china face mask perched on my head and way too much makeup and drive a motorcycle around while being wicked and oafish?”
Definitely.
(Okay, then! It’s settled! I mean, I was planning on it anyway, but it’s nice to have Magic Mitt confirmation of my plans.)
“Should I go eat more ham?”
No.
No? NO? WTF? What a retarded oven mitt! I don’t know if I can trust it anymore.
This just in
FED gov outlaws magic 8 ball, they must all be turned in for replacement with a FED supermagic 8 ball.
Can we print our way into prosperity?
A: Yes
Should I invest all my money in the stockmarket with GS
A: Yes
Has housing reversed course?
A: Yes
Hahahaahah! That’s funny.
We were talking about Bozeman, Montana in a late thread yesterday. Just got word that another engineering company in Bozeman has basically shut its doors (all but one or two employees gone). The Bozeman fantasy home prices can’t last much longer.
In Billings, the hospitals (major employers) are in hiring freezes and have done some layoffs. Yes, even the untouchable medical industry is having trouble. Engineering firms here are also running out of work. Reduced hours are common, and there are some layoffs.
All these things are definitely affecting young professionals (i.e., target new homebuyers). Some now have house payments but no job. Some have jobs, but will probably be thinking very hard before buying in this economic climate!
Yellowstone County boasts in its low unemployment rate (4.7%, up from 3% last year), but this will get worse. And even if it stays the same, we’ve been replacing high paying jobs with $10/hr Cabela’s jobs. What do you think, good time to buy?
Cabela’s HQ is about a 2 hr drive from here.
You know you live in Podunk when the town hospital is a major employer.
The Nation — A reader emails to make a very interesting point about Goldman’s plan to issue $5 billion common stock in order to pay back its TARP funds:
You’ve probably seen the news about Goldman Sachs: The investment bank, after posting $1.7 billion in profits, is planning to pay back its TARP money so it can escape from compensation restrictions.
Last fall, Goldman also raised capital from Warren Buffett, who got a sweet deal: $5 billion worth of preferred shares paying a 10% annual dividend.
The TARP money, on the other hand, is $10 billion with an annual yield of 5% - that’s a much better deal for Goldman.
So shouldn’t Goldman pay Buffett back first, which Goldman can do with a 10% penalty (i.e. it would cost Goldman $5.5 billion to pay back Buffett early)?
That would leave the firm with more equity on its balance sheet and roughly the same annual dividend payments on the preferred shares. Better for the shareholders, the bondholders and the firm as a whole.
Of course Buffett’s money comes with no executive compensation restrictions, and that’s the key. Goldman in its announcement this morning said it would set aside $4.7 billion in salaries and bonuses. That’s 50% of its quarterly revenues, a higher proportion than last year.
Why would anyone want to invest with these criminals?
Q: Why would anyone want to invest with these criminals?
A: There’s a sucker born every minute (at least).
More importantly, there’re really only 2 reasons a company would issue more stock.
1. They desperately need the cash.
2. The stock is way overvalued and they would be stupid not too.
I am not sure which of the 2 it is, but you certainly got to be a sucker to buy into that mess.
Was there ever really any question of why Goldman is paying back the TARP?
Or for that matter - whether they actually ever needed it in the first place?
They can’t pay back Buffett without paying the TARP first (unless they get Treasury’s approval–and why would treasury have any reason to let them pay off another investor first?). That’s one of the factors that makes them want to repay the TARP money.
Goldman’s purpose, like any business, is to make money.
It is up to society to determine whether their business is socially beneficial or socially detrimental. Society does not allow criminal enterprises, even though they are highly capitalistic.
If Goldman’s business is societally detrimental, eventually it should be severely limited or eliminated.
“it should be severely limited or eliminated.”
By whom, the government? GS is the government.
Calpers May Buy TARP Assets on ‘Glimmer of Hope’ (Update1)
April 15 (Bloomberg) — The California Public Employees’ Retirement System said it plans to buy assets of Citigroup Inc. and other financial companies under the U.S. government’s $700 billion Troubled Asset Relief Program.
Calpers, as the largest U.S. public pension manager is known, is setting aside “billions of dollars” and is ready for more investments, Henry Jones, a Calpers board of administration member, said in a speech in Seoul.
The fund may buy “assets of these financial companies such as Citi and the others, assets that they’re trying to get off their balance sheets,” Jones said in an interview after the speech. Pension funds in Massachusetts and other states are also considering expanding their holdings of so-called distressed assets.
http://www.bloomberg.com/apps/news?pid=20601087&sid=at8Z943Q4ByY&refer=home
Calpers got the gambling bug a while back and can’t seem to shake it.
Let me get this straight: The very companies and organizations that got burned by these investments the first time are buying more of the SAME DAMNED investments that burned them?
What. Am. I. Missing. Here?
Seriously. We’re screwed.
This can’t be real.
Isn’t this doubling down??
Sounds like they have a glimmer of hope that some big PPIP subsidies might spill into their lap.
This rally in the stock market is for real.
Moreover, in spite of what many believe, it is entirely reasonable and logical.
With the threat of the printing presses and massive spending, it is and was a foregone conclusion that money would have to go somewhere. The only question was where?
With the massive money being plied into the banks, the answer should also have been clear.
As to Real Estate, there are some neighborhoods in my neck of the woods where prices will not go down further; and others where the biggest price declines are yet to come.
“Markets are never wrong - opinions often are.”
Looks like you can consider this short squeezed, at least somewhat. I need to do some stop losses. I’ll keep some open though.
(shakes head)
The sad thing is - I know exactly of what you speak, and was planning for it - getting out of shorts due to the coming inflation. However I think it’s still got a lot of time to work through the system before it shows up. I think that this current rally is more due to the smoke-blowing by the administration and media about the supposed bottom, and recovery around the corner. We all know it’s not true, but then - we aren’t the average investor.
Signed:
- Lost all remaining faith in the free markets.
One-month T-bill is at 0.01%.
That’s a boatload of fear in my opinion.
YMMV.
Yeah I know, I know. Unfortunately I’m butting heads with the old adage “the market can remain irrational longer than you can remain solvent” or something or other. Not that I’m in danger of going insolvent - I’m just running up against my pain threshold for my “play” money, and not really willing to dip into real retirement savings to fund my gambling.
“I think that this current rally is more due to the smoke-blowing by the administration and media about the supposed bottom, and recovery around the corner.”
Methinks you underestimate the Fed’s willingness and ability to prop up the stock market on a permanently low plateau.
My 401ks and IRAs are starting to look better. I agree with the inflation thesis and that you should never be fully out of stocks.
I still have some money in stocks. If it goes up high enough, I’ll sell. But given the printing press, the money won’t be going into bonds.
In the same boat, probably should sell remaining marbles in equities before the rally collapses. That business about a five-year horizon doesn’t seem to mean much these days.
It never did.
It was the myth of the ultimate bull-market 1983-2007.
The same BS was bandied around between 1955-1968-ish with a final upswing for the Nifty Fifty bubble before things went into a tailspin.
We live and we learn.
Say, still expecting a rockin’ Friday?
The markets merely reflect the current thinking of the participants. They can be, and often are, wrong. When I think market participants are delusional I refrain from participating.
I have around 25 to 30% of my net worth in stocks of some sort, mostly resources and other inflation hedges. I’m even less in bonds. Mostly cash (risky, I know).
I doubt I’ll ever go to the 70% that good ole Abby JC used to pontificate as being the best mix.
packman,
This was a blown opportunity by the President to start along a new road of an economy not ruled by Wall St.
I sense you understand that my statements do not reflect any personal agreement with what has happened.
I’m just trying to play the hand dealt correctly.
WT Economist,
I’ve been long all week and plan to remain so.
I’m still mostly cash.
Have banks recieved more or less money from the Fed than they have already lost on bad bets??
Didn’t you hear the banks haven’t made any bad bets, just look at how they marked their assetts. Someone said Goldman marked some of theirs at 91 cents on the dollar. It’s pure gold.
Mass suicide of farmers in India. Apparently over inability to repay their crop loans.
Over 1,500 farmers in an Indian state committed suicide after being driven to debt by crop failure, it was reported today.
The agricultural state of Chattisgarh was hit by falling water levels.
“The water level has gone down below 250 feet here. It used to be at 40 feet a few years ago,” Shatrughan Sahu, a villager in one of the districts, told Down To Earth magazine
“Most of the farmers here are indebted and only God can save the ones who do not have a bore well.”
Mr Sahu lives in a district that recorded 206 farmer suicides last year. Police records for the district add that many deaths occur due to debt and economic distress.
In another village nearby, Beturam Sahu, who owned two acres of land was among those who committed suicide. His crop is yet to be harvested, but his son Lakhnu left to take up a job as a manual labourer.
His family must repay a debt of £400 and the crop this year is poor.
“The crop is so bad this year that we will not even be able to save any seeds,” said Lakhnu’s friend Santosh. “There were no rains at all.”
“That’s why Lakhnu left even before harvesting the crop. There is nothing left to harvest in his land this time. He is worried how he will repay these loans.”
Bharatendu Prakash, from the Organic Farming Association of India, told the Press Association: “Farmers’ suicides are increasing due to a vicious circle created by money lenders. They lure farmers to take money but when the crops fail, they are left with no option other than death.”
Mr Prakash added that the government ought to take up the cause of the poor farmers just as they fight for a strong economy.
“Development should be for all. The government blames us for being against development. Forest area is depleting and dams are constructed without proper planning.
All this contributes to dipping water levels. Farmers should be taken into consideration when planning policies,” he said.
This article is from The Belfast Telegraph
Crap.
I saw an interesting show on NOVA the other day, on ice sheets. They made the statement that approximately 1 billion people get their water from the Himalayan ice sheet melt, and being that they’re shrinking - there’s a rather imminent threat there for a huge chunk of the world’s population.
I wonder if that’s the case here, if their water table is going down so much might it be from just less flow from the Himalayan melt?
(caveat - absolutely no in depth research or thought on my part - just putting it out there off the top of my head)
Double Crap.
Hey, wonder if the bore wells have anything to do with the dropping water table, huh? It’s a race to the bottom.
A plaque at Casa Grande says the water table used to be 10 feet below the surface. Trees could grow.
Then farmers with bore wells.
It is odd that the farmer complains the crop is so bad that he won’t save any seed this year, but he owes Sterling 400 for the seed he used this year???
Heck, in the US it’s illegal to save seed now, it’s all patented and genetically modified, and it’s so expensive a lot of farmers do have to borrow money to plant.
We’re more hosed than we know.
It’s worse than that…
You really DON’T want to know.
OK. I got to admit I’m wrong on the market. The spinmeister is at full force today. Spinning bad news into good. The stock market is heating up even though the news are bad everywhere.
1. Most pundits seem to be calling for a rebound for the economy in early 2010.
2. It appears that the forward thinking nature of the market is pricing this in…
3. …which, in turn, has caused multiple pundits, news agencies, etc to claim that the economy has bottomed…
Talk about self-fulfilling prophecies. Nice circular definition there.
We’re saved!
The flame of your last match gives great hope of life saving warmth next to a roaring fire, then it goes dark.
If you bought a house and no one was around to hear it, would it still make a snapping sound?
What is the sound of one door clapping?
no, apparently they make a ’snap’ when investors purchase - or so I am told.
A complete city block in Northern Detroit documented by pictures
http://www.sweet-juniper.com/2009/04/singularity.html
That’s an awful image of human wreckage.
Thanks for posting, though.
Thanks so much for rekindling less-than-fond memories of growing up in another wreck of a former industrial mainstay, St. Louis.
We don’t have enough money, they don’t want to go back to Congress, and they don’t want to do it in an open way and they don’t want to get control” of the banks, a set of constraints that will guarantee failure, Stiglitz said.
The return to taxpayers from the TARP is as low as 25 cents on the dollar, he said. “The bank restructuring has been an absolute mess.”
Rather than continually buying small stakes in banks, weaker banks should be put through a receivership where the shareholders of the banks are wiped out and the bondholders become the shareholders, using taxpayer money to keep the institutions functioning, he said.
Nobel Prize
Stiglitz, 66, won the Nobel in 2001 for showing that markets are inefficient when all parties in a transaction don’t have equal access to critical information, which is most of the time.
The Public-Private Investment Program, PPIP, designed to buy bad assets from banks, “is a really bad program,” Stiglitz said. It won’t accomplish the administration’s goal of establishing a price for illiquid assets clogging banks’ balance sheets, and instead will enrich investors while sticking taxpayers with huge losses.
“You’re really bailing out the shareholders and the bondholders,” he said. “Some of the people likely to be involved in this, like Pimco, are big bondholders,” he said, referring to Pacific Investment Management Co., a bond investment firm in Newport Beach, California.
Bigger Losses
Stiglitz said taxpayer losses are likely to be much larger than bank profits from the PPIP program even though Federal Deposit Insurance Corp. Chairman Sheila Bair has said the agency expects no losses.
“The statement from Sheila Bair that there’s no risk is absurd,” he said, because losses from the PPIP will be borne by the FDIC, which is funded by member banks.
“We’re going to be asking all the banks, including presumably some healthy banks, to pay for the losses of the bad banks,” Stiglitz said. “It’s a real redistribution and a tax on all American savers.”
“It’s a real redistribution and a tax on all American savers.”
This is what I have been preaching here for years already. Glad that a Nobel Laureate sees it my way.
Stiglitz was also concerned about the links between White House advisers and Wall Street. Hedge fund D.E. Shaw & Co. paid National Economic Council Director Lawrence Summers, a managing director of the firm, more than $5 million in salary and other compensation in the 16 months before he joined the administration. Treasury Secretary Timothy Geithner was president of the New York Federal Reserve Bank.
‘Revolving Door’
“America has had a revolving door. People go from Wall Street to Treasury and back to Wall Street,” he said. “Even if there is no quid pro quo, that is not the issue. The issue is the mindset.”
“The issue is the mindset.”
Right — it is a club mentality where the members make sure to take care of their own at the expense of everyone else. These are hardly the sort of people you want to run an egalitarian (cough!) government.
Nice club.
If they let you in.
By the way, Vanity Fair, of all places has a play by play with phone calls, who was calling who, at what time in the evening, at the time of Lehman’s collapse.
Ahhh, I’m sure you can guess who the players were.
“If they let you in.”
No thanks.
By the way, Vanity Fair, of all places has a play by play with phone calls, who was calling who, at what time in the evening, at the time of Lehman’s collapse.
Vanity Fair has a long history of excellent reportage. Don’t count ‘em out just because of all the dumb ads.
I love, LOVE, Vanity Fair!
Their political and economic coverage is great.
It’s me that did not find this out until recently (2 years ago) this rare gem.
I’m prepaid through 2011.
Esquire, Vanity Fair and Portfolio have been running some pretty amazing articles regarding the financial scene lately.
Stupidest idea ever: The Ownership Society
Briefing
Home ownership
Shelter, or burden?
Apr 16th 2009
From The Economist print edition
The social benefits of home ownership look more modest than they did and the economic costs much higher
IN A scene from the film “It’s a Wonderful Life”, a happy couple is about to enter their new home. Jimmy Stewart, whose firm has sold them the mortgage, reflects that there is “a fundamental urge…for a man to have his own roof, walls and fireplace.” He offers them bread, salt and wine so “joy and prosperity may reign for ever”.
That embodies the Anglo-Saxon world’s attitude to home ownership. Owning your own roof, walls and fireplace, it is thought, is good for householders because it helps them accumulate wealth. It is good for the economy because it encourages people to save. And it is good for society because homeowners invest more in their neighbourhoods, engage more in civic activities and encourage their children to do better at school than do renters. Home ownership, in short, benefits everyone—not just the homeowner—and the more there is of it, the better. Which is why it is usually encouraged by the government. In America, Ireland and Spain, homeowners can deduct mortgage-interest payments from taxable income.
Yet the worldwide crash was bound up in this supposed miracle of social policy. The disaster began with defaults on American subprime mortgages, a financial instrument designed to spread home ownership among the poor. It gathered pace after the failures of Fannie Mae and Freddie Mac, two government-sponsored enterprises that provide cheap home loans. As a result, the home-ownership rate in America has fallen for four years, the first time that has happened in a quarter of a century. In 2008, 2.3m families lost their homes or faced foreclosure—double the average before the crisis—reducing the home-ownership rate from 69% in 2004 to 67.5% at the end of 2008. The number of owner-occupied dwellings also slipped in Britain in 2007-08 for the first time since the 1950s.
Heard on NPR news this morning: Maybe 3m more American households will face foreclosure by year-end 2009.
Sweet!
Also sweet is that I got a notice on my door about my lease renewal in the South Bay here. The rent for the next 6/10/12 months will be 20% less than my current rent. And this is a mile and a half from the beach sand!
Hoorah!
And I was ridiculed because a 40-something year old man should own a home! Thanks for your post! Renting is freedom! Home ownership is slavery to the tax state.
Here is a classically flawed argument from The Economist magazine: The notion that home ownership is good for society ignores the fact that home ownership is an endogenous variable.
A more compelling argument, in my opinion, is that until lending standards went berserk over the past decade, home ownership was a signal that a household was financially solid. The same traits which make a household financially stable are also good markers for other socially beneficial behavior, such as holding down a job, caring for one’s children (including encouragement to study and do well in school), participating in community activities, making charitable contributions, voting, abiding by the law and faithfully paying the rent on time (for those responsible citizens who choose to not own homes).
Briefing
Home ownership
Shelter, or burden?
Apr 16th 2009
From The Economist print edition
The social benefits of home ownership look more modest than they did and the economic costs much higher
…
Where the heart is
The main arguments for home ownership, though, are not primarily economic, but social. Home ownership, argue those who want to expand it, benefits society because it encourages stable, more law-abiding communities; it makes people more likely to vote in local elections and join clubs; and it benefits future generations because, it turns out, the children of homeowners do better at school and have fewer behavioural problems than children of renters.
On the face of it, the evidence for these claims is strong. In America homeowners are less likely to move than renters, so areas with a lot of homeowners are more stable. According to the 2007 American Housing Survey, homeowners stay where they are for about nine years whereas renters move every two.
In fairness to The Economist writers, they later tear down their own argument in the same article. And they conclude with this gem:
Adam Smith wrote in “The Wealth of Nations” two centuries ago, “a dwelling-house, as such, contributes nothing to the revenue of its inhabitants.”
The traditional value of home ownership was supplanted by the value of home debtorship.
Those two thing are obviously not the same, but the banks, etc. would like people to believe they are because it enriches them.
Stability: Well I rent and I move around every 12 months in the quest for the greatest $ per hour. So no.
Law abiding: No. I won’t explain.
Vote: Yes, but now I’m thinking of not voting anymore.
Join clubs: Okay I will start the atheist capitalist never-married 50-year old guy club. One member. So no, not a clubby type of person.
Future generations: No. World has too many people. Becoming an idocracy anyway. Why should I want to help bring a kid in the world only to be the only smart one in a class of idiots?
“Vote: Yes, but now I’m thinking of not voting anymore.”
I can totally relate to this situation.
Great article on why Turkey is strategic, geopolitically speaking:
War, Oil And Gas Pipelines
Turkey Is Washington’s Geopolitical Pivot
By F. William Engdahl
4-14-9
The recent visit of US President Obama to Turkey was far more significant than the President’s speech would suggest. For Washington Turkey today has become a geopolitical “pivot state” which is in the position to tilt the Eurasian power equation towards Washington or significantly away from it depending on how Turkey develops its ties with Moscow and its role regarding key energy pipelines.
If Ankara decides to collaborate more closely with Russia, Georgia’s position is precarious and Azerbaijan’s natural gas pipeline route to Europe, the so-called Nabucco Pipeline, is blocked. If it cooperates with the United States and manages to reach a stable treaty with Armenia under US auspices, the Russian position in the Caucasus is weakened and an alternative route for natural gas to Europe opens up, decreasing Russian leverage against Europe.
For Washington the key to bringing Germany into closer cooperation with the US is to weaken German dependence on Russian energy flows. Twice in the past three wintersWashington has covertly incited its hand-picked President in Ukraine, Viktor Yushchenko to arrange an arbitrary cut off of Russian gas flows to Germany and other EU destinations. The only purpose of the actions was to convince EU governments that Russia was not a reliable energy partner. Now, with the Obama visit to Ankara, Washington is attempting to win Turkish support for its troubled Nabucco alternative gas pipeline through Turkey from Azerbaijan which would theoretically at least lessen EU dependence on Russian gas.
Link to full article: http://tinyurl.com/cr7yuw
It’s looking like I get to go to Istanbul this fall. I have a friend who is doing a graduate exchange on Byzantine and Ottoman empires.
Fed is considering expanding TALF to include commercial real estate. I thought we had left the bottom of this recession already, it is all roses from here. Why then the concern about commercial real estate?
http://online.wsj.com/article/SB123991092969726305.html
PCE and RI are the bottom.
its almost here. one look at 741 on the S&P and recovery story emerges…might get one last look at SRS….banks are almost concluded with intense consolidation. CRE is the 09 story of the last look back.
Wells Fargo’s profits may be less than meets the eye
Gimmick No. 1: Cookie-jar reserves.
Wells’s earnings may have gotten a boost from an accounting maneuver, since banned, that it used last year as part of its $12.5 billion purchase of Wachovia Corp.
…
Gimmick No. 2: Cooked capital.
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Gimmick No. 3: Otherworldly assets.
Look at Wells’s Dec. 31 balance sheet, and you’ll see a $109.8 billion line item called “other assets.” What’s in that number? For that breakdown, you need to go to a footnote in Wells’s financial statements. And here’s where it gets comical.
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Gimmick No. 4: Buried losses.
How quickly investors forget. One week before Wells’s earnings news, the FASB caved to pressure by the banking industry and passed new rules that let companies ignore large, long-term losses on the debt securities they own when reporting net income.
http://www.bloomberg.com/apps/news?pid=20601039&sid=a6sv0hG.nW7g&refer=home
Thanks for the link. I’m having quite the heated argument with some folks about Wells Fargo.
P.S. All the more reason why I think something’s definitely rotten in the state of Denmark. This past month there seems to be an incredible amount of game-rigging going on, with a huge stock market rally as a result.
“How quickly investors forget. One week before Wells’s earnings news, the FASB caved to pressure by the banking industry and passed new rules that let companies ignore large, long-term losses on the debt securities they own when reporting net income.”
How can stock market investors be collectively stupid enough to fall for balance sheet position falsification through legally sanctioned accounting fraud?
I’m getting the impression that this whole bailout is creating a “Reverse Robin Hood Effect”. I may be melodramatic, but I’m getting a sneaking suspicion that the early part of the 2000’s may be one of the greatest transfers of wealth from the outsiders to the insiders since colonial times.
The stock market sells dreams of riches. It’s very seductive.
I’m watching a PBS piece on the Gold Rush in California. Very difficult to get to California, utter lawlessness, squalor, murder, rape, ethnic cleansing. A woman who was not a prostitute was viewed with astonishment by the miners. And yet people came, drawn by dreams of riches.
BTW, the show is “The West: 1848-1856: The Speck of the Future” by Ken Burns. Very interesting.
It ain’t fraud if the gov says it’s legal.
Anyways, that’s quibbling, hasn’t the government channeled enough money to make them solvent?
Oh, don’t fret those nasty mortgages and what-not.
Inflation and enough accounting magic and….
I heard Yale economist Barry Nalebuff on APM’s Marketplace tonight propagating the false theory that the reason Americans are not buying houses right now is because of fear of falling prices. He claims that with government sponsored home price insurance, the confidence problem could be solved, and Americans could start confidently buying homes again.
Perhaps the prices in New Haven are much more reasonable than in San Diego, but at least in the area where I live, the median used home offer price on the MLS is close to ten times area incomes. Unless you degrade lending standards back to 2005 levels of debauchery, insurance is not going to get you buyers willing and qualified to borrow the amount needed to make a purchase at these multiples of incomes. And what’s worse, there are, by many recent estimates I have seen in print, something on the order of hundreds of thousands of foreclosure homes that have yet to hit the market. How does Nalebuff’s confidence conjecture square with a glut of product for which there is no fundamental demand?
My biggest concern with his proposal (which, by the way, sounds quite a bit like a sales pitch for a product that he has developed) is that from what I know of government-sponsored anythings, there is a good chance this insurance program could end up inadvertently providing a taxpayer subsidy to investors and fraudsters who are interested in purchasing real estate that always goes up at whatever price and by whatever means necessary.
I’m not buying because:
1) I don’t want to turn a cash hoard into an illiquid, depreciating asset with high transaction and carrying costs. I can improve my net worth by getting what little interest I can in CDs. Very little. But it’s still positive. As some astute commentator said (Will Rogers?), “I’m not so concerned with the return ON my money, but the return OF my money.”
2) I have no interest in funding a speculator’s retirement with my hard earned cash plus indebtedness. Prices are still unaffordable.
Now, I do feel like rent is a waste. But it’s currently marginally less of a waste than the other option - buying. I am sold on the benefits of owning. But not at the cost of beggaring myself. I’ll keep working on my net worth by saving and investing, and perhaps prices will eventually become affordable again.
Of course - there is the stealth tax that is looming - inflation. How to hedge against that?
Hobson’s choices.
New horror genre: Financial thrillers, including zombie banks and vampire pensions.
Financial Times
Vampire pensions could be a corporate nightmare
By Charles Millard
Published: April 16 2009 21:57 | Last updated: April 16 2009 21:57
While economists worry about “zombie” banks holding back lending, vampire pension plans may soon be stalking a company near you. The underfunding of America’s corporate defined benefit pensions poses a daunting challenge, threatening not only their 40m beneficiaries but the entire US economy.
Recently enacted funding rules require underfunded pension plans, and that’s most of the big ones, to suck needed cash from salaries and jobs just when suffering companies need scarce resources to survive. Under 2006 legislation, companies that have underfunded pensions must put extra funds into their pension plan to close the gap within seven years. After precipitous drops in assets, most plans now have serious funding gaps.
For example, according to Watson Wyatt consulting, at the end of 2008 the pension system in the US had approximately $2,100bn (€1,589bn, £1,407bn) in liabilities but only $1,600bn in assets. That was before the downward gyrations of the capital markets this year.
Closing this gap could cost $50bn- $100bn in additional annual pension contributions at a time of unprecedented reduced corporate earnings. Some large companies have stated that such funding commitments would drive them to file for bankruptcy.
There you go being negative again!
Haven’t you learned to Winstonize the news by now?
From savingsbonds.gov:
http://savingsbonds.gov/indiv/research/indepth/ibonds/res_ibonds_iratesandterms.htm
5.64% interest on I-Bonds. But you can only buy 5000 USD a year. Pity.
http://savingsbonds.gov/indiv/products/prod_ibonds_glance.htm
But, the interest rate is high because inflation is already moving up, per the first table (I-Bonds are inflation-protected).
Madison Wi sales down 20%
Sales data show 320 homes and condos were sold in Dane County in March, compared to 403 sold last year and 552 in March 2007.
For the first quarter of 2009, 684 homes were sold in Dane County, a 25 percent drop from the 921 homes sold the first three months of 2008 and 45 percent below the January-March sales of 1,244 homes in 2007.
The average sale price of a Dane County home in March dropped more than $29,000, or 12 percent, from $243,368 to $214,049.
The median sale price also fell in March, going down $13,500, or 6.4 percent, from $210,000 to $196,500.
The number of new listings in Dane County dropped 28 percent in March compared to March 2008, with 1,072 new listings in the month compared to 1,495 new listings a year ago.
The total number of listings in Dane County was 4,712 in March, slightly below the 4,856 active listings in March 2008.