The Solution Some Consider Impossible
-By The Mysterious Flying Miser
It wasn’t long ago that most Thought Leaders were publicly denying the existence of a housing bubble, perhaps even unkindly. Now past the denial phase, many have skipped the mea culpa and jumped directly into bargaining phase. Below is a list of delightful ideas being seriously considered by People Who Know. Can you tell which thing is not like the others?
www.ritholtz.com/blog/2009/03/solving-the-housing-crisis/
by John Mauldin:
“Long-time readers know that I have been growing more and more bearish of late. I have been writing for a long time that we are in for a long period of slow muddle-through growth as the twin crises of the housing bubble and credit bubbles require time to heal. Today, we look at a serious proposal for cutting the time to healing for at least one of those bubbles (housing), and at least keep the other (credit) from getting worse. This is the most serious idea I have seen that could actually make a realpositive (sic) contribution to the economy and help put us back on a growth path.
“(Recently), the Wall Street Journal published an op-ed by my friend Gary Shilling and Richard LeFrak. They offer a simple solution for the housing crisis: give foreigners who will come to the US and buy a home resident status (green cards). … The links to the (PDF) white papers are:
www.rgemonitor.com/financemarkets-monitor/255760/the_housing_crisis_and_bankruptcy_reform_the_prepackaged_chapter_13_approach
“In (our) paper, we propose a plan that will help reduce the costs from foreclosure by, in effect, giving the homeowner the option to force a renegotiation on the owner or owners of the loan. This option takes the form of what we call a prepackaged Chapter 13 bankruptcy, in which the mortgage is automatically readjusted in line with the decline of housing prices in the homeowner’s ZIP code. The homeowner ends up with positive equity in his house, so that he will either maintain the house or sell it outside foreclosure, and the creditor ends up with a claim of greater value than the foreclosure price of the house. Because both parties are made better off, the cost of credit should not increase in the long run, and taxpayers do not have to subsidize the scheme. The plan is premised on the assumption that widespread negative equity mortgages, as a consequence of the popping of the housing bubble, are the chief cause of the crisis, rather than loss of income caused by the recession, which the plan does not address.”
http://www.reuters.com/article/pressRelease/idUS138046+08-Dec-2008+BW20081208Reuters
“… Noted economist Dr. Mark Dotzour says bold government action can get the market back on track. In his new white paper, the chief economist for the Real Estate Center at Texas A&M University offers a … solution to fixing the housing crisis, one that involves more than simply devising ways to keep people in their homes.”
“‘We need to lower the depreciation schedule for investors who buy troubled houses to around five to seven years,’ he said. ‘And if we really want to solve the problem quickly, offer these investors 0 percent capital gains tax if they hold the properties for more than five years.’
“Dotzour’s (PDF) white paper is available online at:
http://recenter.tamu.edu/pdf/1884.pdf
From “How America Can Escape the New Great Depression” by Michael A.Kamperman:
“The government simply needs to crank up the printing press and buy every U.S. Treasury bond it can get its hands on. This idea flies in the face of conventional wisdom and will have many detractors. Most of these detractors didn’t see the problems we face today coming. Most of these detractors have told us we could not return to a 1930s-style depression. Most of these detractors told us that the rest of the world had decoupled from the U.S. economically and that the global economy would grow even if the U.S. went into recession. This solution is outside of the box of conventional wisdom, and some consider it impossible. We need to listen to new voices and new ideas because the old voices restating the same old ideas have not been able to put the Humpty Dumpty credit markets back together again.”
From The Atlantic, by Felix Salmon:
“Amazingly, (the housing mess can be solved) with just one policy: a decree that whenever a bank forecloses on a home, the current occupant has the right to remain in the property indefinitely, simply by paying the fair-market rent. Banks are killing each other by racing to sell their foreclosed houses as quickly as possible, before they fall further in value; this policy would force a cease-fire that would help all of them. It would also put an end to the equally destructive syndrome of soon-to-be-foreclosed-upon homeowners trashing their houses before they’re kicked out. This plan might not single-handedly end the recession. But it would certainly help.”
From Weiss Research:
“With the goal of avoiding quick fixes and fostering a healthy, long-term recovery, Weiss Research offers the following proposals to federal regulators and legislators:
1. Closer monitoring and prompter action by the Federal Reserve to help avert run-away asset price inflation.
2. Better enforcement of existing predatory lending statutes.
3. Better protection of borrowers through a model akin to one recently established between the Office of Thrift Supervision (OTS) and three subsidiaries of American International Group.
4. Greater focus by regulators on banks and thrifts whose mortgage performance measures are showing the most stress.
5. Suitability requirements for the mortgage lending industry.
6. Rather than a ban on specific lending practices, limiting them to the uniquely qualified borrowers for which they were originally designed.
7. Federal training, education, licensing, and testing standards for mortgage lenders.
8. Assignee liability for secondary market buyers of home loans.
9. More focus on developing programs that promote saving for a down payment.”
Michael Larson concludes: “These solutions cannot be painless. But in order to pave the way for a sounder future, many of the sacrifices that were avoided in the past may have to be made in the present.”
And then there is this from our resident blogger. “What most people see as the problem, I see as the solution. What’s going to to help Las Vegas and Arizona…the reason that it grew for years (was) that there was cheap land. You could get a house for $100,000. When we get back to that, Arizona will heal.”
“The biggest challenge we face is…we have to get back to an economy based on something other than buying and sellling each other houses…and taking out loans and spending them on cars and vacations.”
This is another solution. it is a possible solution.
Government, get out of the way. Let the prices fall. Get out of every business and stick to the Constitution.
The government that governs best, governs least.
No, no, Bill, you are wrong. We need to listen to this idiot.
“… Noted economist Dr. Mark Dotzour says bold government action can get the market back on track. In his new white paper, the chief economist for the Real Estate Center at Texas A&M University offers a … solution to fixing the housing crisis, one that involves more than simply devising ways to keep people in their homes.”
Let’s encourage all out real estate speculation so that the real estate centers can keep pumping out troglodytic criminals. The only thing that needs to be fixed is this guy. Why don’t I just mail my income tax payments to my local a–hole speculator?
I’m going to go kick something now. I hope I can find a real estate agent wandering the neighborhood. They better hope they have help insurance.
Here is the problem…Wall Street is simply playing another game…this foreclosure issue is going to go on and on for years…MR.Smith has a 300K mortgage..and is underwater by 100K..value of home $200K..falls behind on his mortgage..as soon as he is 4 payments behind his Lender A sells the note to Lender B..(bank of NY is heavily into this)..Lender B pays between 5 cent to 50 cents on the dollar…and starts foreclosure….Mr. Smith is frustrated and doesn’t know why the new lender won’t work with him..Well simply put…Mr. Smith has no equity..but Lender B has plenty and will actually make a PROFIT if he forecloses and sell it off…this is going on all day long..
Most of the homes that are really foreclosures that are not listed are the ones that are still owned by the original lender..if that note has been sold..the next lender is happily getting the property foreclosed on and listing it…
I have been watching this steadily for the last 18 months..and the pattern is still the same…
and the 2nd bank buyer whether into the house for 5% or 50% will not lower their price to a buyer because of pure greed and government backing, meaning no pressure to sell!
If the bank is in for 5% sure they can mark it down, but if they sell for 50% of the original value, then they have a 1000% markup profit. Good for 3q earnings.
We need to keep government in it big time, so that they can justify hiring millions of additional clerks, thus providing incomes to the long term unemployed. This is the way out of our unemployment dilemma. Behold this and weep.
What Bill said
Second (or third) what Bill said.
“They offer a simple solution for the housing crisis: give foreigners who will come to the US and buy a home resident status (green cards).”
That would have worked in 2005, when the future was so bright we were all wearing shades.
Did this before in 1990 or so. Bush had a program to let in anyone who would invest 200,000$. Worked out OK. Picked up a lot of good people from India and Pakistan at the time.
It is one way of balancing things out. The banking systems gets capital. We will probably get pretty talented people out if this. Generally the people that can afford to do this have good life skills and provide a substantial benift to those of us here.
Course we will have a bunch of people with poor English skills. Painful but not the end of the world either.
Other solutions that would work. Let the forclosures happen and the bondholder take their lashes. They’ve been getting great returns for a long time. Sorry, its not a risk free market. Bail out depositiors only as banks fail.
Anyhow, we are all foriegners here. Some been here longer than others though.
Help me out here, somebody. Let me get this straight.
Low food prices = good (must have more illegal alien fruit pickers to control costs)
Low oil prices = good (let’s send our brave young men to die for this one)
Low housing prices = catastrophe (must bankrupt the nation and feed the monsters to keep them up)
Every loser congressperson should look at it in these simple terms and then explain their bull$hit to all of us. I am sure we would hear a lot of “uhhhs”, “d’uhhhhs” and “you knows”. We would see a lot of pitchforks and blowtorches.
While i am in total agreement and believe that the cheaper the prices go the better it is for everyone, the idiots in business and CONgress take this view:
NO one in America has saved for retirement. SS is bankrupt and will collapse or the dollar is toast. the only “investment” most stupid Americans have is their “home”. If it goes down, they have no way to pull up any money for future expenditures.
We need to Ponzi scheme back to continue the spending………..”Mortimer, we’re ruined.
Turn those machines back on…………..”
Which is just another way of saying housing is an investment and food/oil are necessities. If you assume that’s the case maybe we need margin limits, more regulation, better licensing, more competition, lower transaction fees, etc, etc.
Oh, and the ability for the investment to lose money.
More like housing is leveraged and food/oil aren’t. (as much)
Bingo… the notion that high housing prices is a good thing is ass backwards in an economy that consumes stuff (too much stuff)… high housing prices only work with fraud and false inflators to keep them that way.. otherwise, it’s back to economics 101 and the pie theory for distributing wages over all the various items in a persons life, with shelter being just one of them..
James we HAVE Millions of Americans mostly from the hip hop generation who can’t speak English, and can’t hold a conversation without swearing or using the N word.
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Course we will have a bunch of people with poor English skills.
Mmmm. HipHop generation. Young people that have been sold a particular outlook on life, how to behave and what to think. More puppets.
Was walking about my ‘hood and questioning why the hell I’d want to live closer to the beach. My hood, we’ve got a nice yards, fruit trees, decent traffic levels and were 5 miles from the beach. Weather is about perfect. Polution isn’t bad. Close to the 110, 91 and 405. Quick trip to downtown or the mountains. Plenty of shopping. Schools are well funded and test pretty well. At the HS level things turn bad.
Don’t understand why this is a “bad” area vs a “good” area like Rossmoor down in OC. Rossmoor is part of Long Beach or perhaps Huntington beach, ca. For some reason its very expensive there. The residents say its because the schools are great and easy access to the freeways. Its 2 miles from the beach vs five. It is in the flight path of an Army Air station.
Anyhow, the residents there seem to believe they walk on water and how amazing of a place it is.
So, there is just this strange psychological cultural thing that happens where people accept something as their role in life. Largely thankless task to convince people otherwise.
I’m happy to have people come to the US. Think its great culturally and otherwise. Like I said the communication problem just makes me a bit frustrated at times.
Just wait till all the job ads on CL want you to be bi-lingual in Spanish…..even law firms wont hire entry level paralegals unless they speak another language.
Be glad you still don’t have to deal with that everyday.
————————————————–
Like I said the communication problem just makes me a bit frustrated at times.
good place to jump in here…they have had the floodgates open for years. Immigrants pouring in by the millions. They have almost completely turned S. Florida into the New Immigrant Capital. Miami is becoming more and more third worldish. American standards are out the window.
I know for a fact that the gov. is not just letting people in with high savings. Boy is that a lie. In the Dominican Republic I would go to the embassy for one thing or the other and always see long lines of people lining up to get entry into the USA. And they got it. They were the poorest of the poor. This is happening in countries all over the world….lining up to come in.
The gov. is doing this…from what I can see because it increases the population, increases the need for basic products and services here in the USA. So markets expand. the wealthy make even more money. Always follow the money. That and cheaper and cheaper labor.
I pity these younger generations. What are they going to do. It is so competitive. It starts in high school and college. They get out of college and find the competition brutal. And if they dont have an education…oh my. Because everything not requiring an education is dime a dozen.
So NO, immigration is not OK. It is way overdone. We need to stop all immigration for a time and determine how all the immigration will impact the country.
One huge problem is DRUGS. Another is GANGS. Another is the UNDERGROUND. For example in New York my dominican friend tells me there is an entire underground mall of products. If you are allowed into this mall society you can buy almost anything very cheap. Where do these products come from. They come off the back of trucks. The workers simply scam a few boxes with each truckload. Then my dominican friend tells me about the process of getting food stamps and other gov. assistance. If you are in the society, the immigrant workers in the food stamp department work up your paperwork so that you pass…even though you may not qualify. That is just an example.
It is all out of control. It is all just like a third world country.
Immigration is out of control. It will stay this way. There are reasons for this which they are not telling us. I think it has to do with making the wealthy even wealthier.
Good reporting Paul, you kinda nailed the the way this third world economy works on the street level. It has been like that for many years and most people, unless they were trying to be part of it wouldn’t care because it has always been the fringe and in the scheme of things “small potatoes”. I mean who wants to hustle in the shadow society with the risks and all:) when you could have a shot at the “American dream” so even in the illegal/legal immigrant society it has been only certain individuals that look for shadow opportunities even while having full knowledge of them. Today we live in an America that most of us,including the immigrants, thought impossible; America without a dream, what’s that? Well this is where the shadow economy becomes the power economy for people who don’t have access to the higher levels corruption and fleecing opportunities such as banking, medicine, and insurance. As far as rich getting richer, if you did not make it to the 1% during the last 10 years you are cooked; the change will come from bottom up, maybe from the back of the van:)
Multimillionaire immigration is a good idea. Foreign Individuals who don’t have to work for a living.
Millions of current, and subsequent college graduates, are a lost generation. The WSJ has alluded to this fact.
Only college graduates with highly specialized degrees from the best universities really have a future. For most folks, a college degree is no longer what it used to be: a ticket to the good life. The average starting salary for a college graduate was about $48,000 before the severe recession. Now, a multitude of college graduates aren’t even making $20,000 a year. Many are now living with mom and dad again.
The WSJ presented stats pointing to the fact that these college graduates have a very bleak future. For example, they may have degrees in, psychology, mass communications, anthropology, or even elementary education.
The computer, engineering, chemistry, and quantam physics’ graduates are learning job skills every day. They’re honing their skills while other college graduates, with dead-end jobs, are going nowhere fast. Not only that, they’re losing big money. And apparently it takes decades for them to recover–if at all.
And then when the boomers start retiring in a few years, a resume of jobs that only paid $15,000 isn’t going land these college graduates well-paying jobs. Plus, you tend to forget things you learned in college if you’re not honing your skills.
Today, I wouldn’t even attend college unless you’re very, very bright and you love chemistry, quantam physics, and engineering. Many PH.d’s cannot land a teaching job in the states.
Who really wants to buy a house these days? And who’s going to have the money? Multimillionaires from India, France, Sweden can afford the homes. Most college graduates will have dead-end jobs for decades.
My and my fiance are 2006 and 2007 college grads. Together, we pull in about 105k. We are both in our first jobs out of college. There are opportunities out there if you want them, and if you are a good worker.
SURE….wink wink….what kind of jobs and where..Kansas?
foreigners have their own financial problems. I recall that Arabs were bailing out peoples when the bubble first broke. We thought that was going to be the pattern.
Seems like that is not the case
Bring the money home instead, tax amnesty for the billions hidden offshore. US money to bolster economy.
“Humpty Dumpty credit markets”
Greenspan and Paulson went up the hill, each will a buck and a quarter. Alan came down with $2.50! OH!
(Channeling the Diceman)
Damn. There is no way my response would ever get past the Jones filter. Well, I will sit here and chuckle all by myself. The cats thought it was funny.
“The cats thought it was funny.”
The cats were probably just humoring you as it was near their lunch-time NYCityBoy.
Hickory dickory dock
Your president missed our balk
The market split in two
He dropped a trillion for “you”
And we kicked 300 million suckers in the stalk
Little Timmy blew,
All the Money.
“From “How America Can Escape the New Great Depression” by Michael A.Kamperman:”
Great to see the word DEPRESSION slipping back into the MSM !! When they start denying it that means it’s hanging in the wings like a big sledge hammer waiting to strike.
Re Weiss recommendations.
“Closer monitoring and prompter action by the Federal Reserve to help avert runaway asset-price inflation”
Ha ha ha ha. The comparatives indicate that the Fed was taking SOME action to help avert runaway asset-price inflation, when in fact the opposite is true.
“Federal training, education, licensing, and training standards for mortgage lenders”
The old misnomer…they mean LOAN ORIGINATORS, not lenders. I’m a lender. I keep the notes. What the hell do I need to be licensed for. I’m entitled to lend my own money on whatever terms the borrower finds acceptable.
“Assignee liability for secondary-market buyers of home loans.”
I’m not sure just what is meant here (and Weiss doesn’t say, if I click on that), but if the buyer of a home loan becomes liable for ANYTHING, there will be no buyers, period.
i have a much, much simpler solution.
To avoid forclosure, make your mortgage payment. period. If you cannot, or will not, then get the hell out of the house and find something you ARE willing to pay for.
Lenders get burned? Too bad. They risked poor credit and bad collateral for their money. Once they get burned, they will either never lend again, or will learn about things like creditworthiness and down payments.
The same should have applied to Goldman-Sux, AIG, JP Morgan, and all the crooks on Wallstreet. They should have been allowed to fail. This would solve ALL of our problems, including the political ones, when the crooks didn’t have any bribe money left.
I like your thoughts
If this was happening in America this is exactly what would have happened. Unfortunately, this is not America.
A little piece of you
The little peace in me
Will die
For this is not america
Blossom falls to bloom
This season
Promise not to stare
Too long
For this is not a miracle
There was a time
A storm that blew so pure
For this could be the biggest sky
And I could have
The faintest idea
Snowman melting
From the inside
Falcon spirals
To the ground
So bloody red
Tomorrows clouds
A little piece of you
The little piece in me
Will die
For this is not america
There was a time
A wind that blew so young
For this could be the biggest sky
And I could have the faintest idea
This could be the biggest sky
This could be a miracle
This could be etc
“This could be etc”
My favorite line.
“Assignee liability for secondary-market buyers of home loans.”
I take that to mean that the person selling the note to the secondary-market buyers are to be on the hook should things go south, say passing on a fraudulent mortgage.
“Closer monitoring and prompter action by the Federal Reserve to help avert runaway asset-price inflation”
I thought this was comedy as well, az_lender.
You mean the same Fed that argued over and over during the boom that it was impossible to even identify asset-price bubbles? That Fed?
BWAAHAAHAHAHAAHAHAHAAHAHAHAHAHAHAA.
I don’t see any of these proposals having real legs in DC, but if they do get implemented here is how they play out long term:
1) Green card plan: I just don’t see that many wealthy foreigners wanting to live in an over priced low quality home 40 mile outside Ogden Utah. Or in 50 mile from the ocean in Florida. Just can’t see it. It would work for a few higher quality places in desirable locations, but not the whole darn country. Sorry. Besides, you have to be really wealthy to want to come to the United States without health insurance and there aren’t any jobs right now to get you that.
2) Allow the owners to rent their house once the banks foreclose: We are still dealing with a world where most mortgages have been securitized, right? That is why the banks are collapsing slowly (as the commercial loans go down and the origination fees disappear), not all at once. So, presumably, the new market rate rents will be assigned to the holders of the securitized bonds. But that stream of income will be much smaller than the one they based the bond ratings on, so either a huge percentage of the bonds will collapse or someone will have to decide to divvy up the proceeds in some manner other than the one in original documents. Either way, you completely dry up the future of mortgage loan securitization on anything other than the strictest lending standards. Or you have to go back to banks making loans out of their own capital. Only exception to this is if Fannie and Freddie make everyone whole on 100% of their bonds. Honestly, I don’t think there is a chance of their being the political will to do that for 10 or 20 years, so they would probably have partial defaults/redistribution as well.
Housing still crashes because new loans are scarce.
3) Force cram down on all the mortgages: Same result as above except possibly even faster.
Housing still crashes because new loans are scarce.
4) Dotzour plan: As proposed it looks like a 100% bail out by taxpayers. Situation is an investor pays $100K to get 5 yearly deductions of $20K (worth less than $10K each, but lets assume they are worth $10K) in order to be able to sell in 5 years without paying capital gains. So if the price goes to $50K, you have tied up $100K to get $50K of deductions and $50K tax free return of capital. If you borrow the money to do it, the deductions are bigger (investors get to deduct cost of capital) and if you can collect rent there is some additional money to bring in. But again, this is just a bailout by taxpayers. And once the stuff comes on the market in 5 years (probably at higher interest rates) the collapse still happens. Actually, this one is the most likely one of the bunch, but only because it is very complicated so most folks won’t understand it and it could make a lot of money for investment banks and rich people by sheltering all their income. Sad, but true.
5) Buy Treasury bonds - Congress will stop this eventually. Most Congress Critters are old enough to remember the 70’s. Heck, a bunch of them were in office in the 70’s. They are scared of inflation eventually. They really are.
So, exactly which one was the “solution” to falling house prices?
Green card plan: I just don’t see that many wealthy foreigners wanting to live in an over priced low quality home 40 mile outside Ogden Utah. Or in 50 mile from the ocean in Florida. Just can’t see it. It would work for a few higher quality places in desirable locations, but not the whole darn country. Sorry.
Nicely put. I can’t see it, either.
I forget the latest statistic about how many empty houses we presently have sprinkled around America, here and there like ugly McConfetti. A lot, though. Let’s see, so we’ll need how many rich furriners clamoring to live in one?
One…two…ummmmm, no. Not gonna work.
Speaking of green cards, I am wondering quite a bit about what will happen with all the distinctly NON-wealthy foreigners presently living in CA, once they start losing welfare, food-stamps, free health clinics, etc. Where will they go? And by this I mean: ‘please, please not to western WA’…
A good production from the Mysterious Flying Miser. Say, is the miser like the Flying Nun? Only without a wimple, or course. Maybe he or she flaps their arms majestically, or else flies with their ears and keeps the arms sedately crossed. Or clenching a briefcase. In either case I image a trail of golden, sparkling doubloons sprinkling down in the sonic wake, like pennies from heaven.
Maybe the candy crapping unicorn is actually Pegasus? Maybe the flying miser rides that?
“Speaking of green cards, I am wondering quite a bit about what will happen with all the distinctly NON-wealthy foreigners presently living in CA, once they start losing welfare, food-stamps, free health clinics, etc. Where will they go? And by this I mean: ‘please, please not to western WA’…”
Unfortunately, they’re already swarming the area. Their presence is more evident than ever, and the gang violence and drug trade has really got a foothold in the state. MS13 has a huge presence as well. WA state has really changed over the years, and for the worse. It’s quite sad.
Testing?
Hold r nute (sp?)
…the furriners in CA are not the only ones in the US. I know of many in the land of Utarr who are out of work and from asian countries. I also have seen hundreds of hmong people being brought to the US by religious groups in Wisconsin and those regions. And that is just the folks I saw while traveling into Chicago.
We also have or did have a big problem of S. Americans coming through central America illegally.
I think we won’t be seeing lots and lots of India folk, or maybe we will. Although I have seen lots of folks coming through immigrations, maybe citizens, maybe residence without visa and maybe visitors/family who will outstay their stays, and just live on the dole or not.
Jus saying.
“Speaking of green cards, I am wondering quite a bit about what will happen with all the distinctly NON-wealthy foreigners presently living in CA, once they start losing welfare, food-stamps, free health clinics, etc. “
Hold r nute (sp?)
…the furriners in CA are not the only ones in the US. I know of many in the land of Utarr who are out of work and from asian countries. I also have seen hundreds of hmong people being brought to the US by religious groups in Wisconsin and those regions. And that is just the folks I saw while traveling into Chicago.
We also have or did have a big problem of S. Americans coming through central America illegally.
I think we won’t be seeing lots and lots of India folk, or maybe we will. Although I have seen lots of folks coming through immigrations, maybe citizens, maybe residence without visa and maybe visitors/family who will outstay their stays, and just live on the dole or not.
Jus saying.
“Speaking of green cards, I am wondering quite a bit about what will happen with all the distinctly NON-wealthy foreigners presently living in CA, once they start losing welfare, food-stamps, free health clinics, etc. “
Me thinks the Mysterious Flying Miser is Shorty the Hairy Midget Jerk…
I favor the cram downs. Those will cement the comps according to incomes. Banks take the losses and people stay in their houses.
While plenty of us would like to see prices absolutly crushed by more forced inventory, the amount of suffering and foolishness attached would be too much.
Restricted credit would also help us saver types in the future.
Think the downward adjustment in prices and deflationary effects will make us more competative as a labor marketplace as well. Not to mention crimping the ability to have so much excess consumption.
What is all that excess consumption getting us anyway? SUVs, stupid toys like offroad bikes and jet skis. Blah. More crap we don’t need that makes life worse.
+1 all around, James.
“What is all that excess consumption getting us anyway? SUVs, stupid toys like offroad bikes and jet skis. Blah. More crap we don’t need that makes life worse”
If you only knew what I have learned, and how, I, (and a lot of us here), are minimalists. Some naturally, some the hard knocks way.
Personally, I would prefer the natural way 100 times over the hard knocks way to get there. Too much residual damage.
Good point James.
P.S. Oly, how do you spell minimiimalist?
My neighbor has a big power runabout and two jet skis. I’ll bet I enjoy life more with my simple canoe than he does.
Over my pea brain a little polly but nice analysis.
1) Green card plan: I just don’t see that many wealthy foreigners wanting to live in an over priced low quality home 40 mile outside Ogden Utah. Or in 50 mile from the ocean in Florida
Remember, the wealthy foreigner doesn’t have to actually live in the house (at least, such a requirement would be difficult to enforce).
So, pick up a U.S. Green card for the price of the cheapest shack in the middle of nowhere that qualifies for the program?
I don’t see this passing either.
The problem with every one of those plans except the bribing foreigners with citizenship.
They won’t affect the surplus in housing because builders will continue to build. What will affect the surplus is a crash in housing prices and collapse of builders and those who fund such activities.
IF they use teh foreigner plan I sure hope they make them pay cash rather than allowing them to take out loans.
Why can’t we just get government out of the way and let the market collapse as it needs to?
Once people have come to reality about how much their homes are really worth, then the economy will start moving again.
We are living in an age where nobody wants to take responsibility for their actions and everyone is a victim.
Let’s let the market fall and let each of us pick ourselves back up and start taking responsibility for the decisions that we make.
This isn’t a bungy jump.. it’s a skydive. Do you want this parachute or not?
Good point Joey:
Why can’t we be heading in the direction of personal responsibility? When proposals are put on the table, why can’t they be measured in terms of what would give the individuals responsible for the mess the biggest consequences?
Why do we always want to walk away from our problems?
I believe taking personal responsibility is something learned from your parents while you’re growing up, or else you (very likely) never learn it.
Since kids are pretty much lacking in pride or prejudice, parents can teach them how taking responsibility is something that ultimately feeds and strengthens them and makes them grow as a person…. a sort of “spinach for the soul”.. slightly bitter but good for you… and that it’s not something to be feared or avoided.
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btw.. i didn’t intend to be flippant with my answer about the skydive..
While I agree that letting markets fail and recover without artificial influence is a good ideology, i really believe the risk of inflicting unnecessary damage, much of it affecting innocent bystanders, that might be caused by an uncontrolled free-fall, is just not worth it in this case..
So, just protect the innocent bystanders (like FDIC coverage for insured accounts), and let the guilty parties (borrowers and lenders alike) fail.
FDIC is just a small insurance fund. It doesn’t come close to covering all deposits, which if i recall correctly, is somewhere in the tens of trillions.
No insurance company can cover all it’s policies. If all homes burnt to the ground, or all cars smashed into each other, about 1% of policy holders might get paid off.
Aside from that, a systemic bank failure would crush businesses and jobs. Business needs a steady flow of working capital. No banks, no business activity, no jobs, no paychecks.. no food, no roof over your head.. We’d be thrust into the stone age, bartering and gathering berries in short order.
You don’t have to travel far down this path before the innocent people who suffer far outnumber the guilty.
How about Chapter 11? It’s already on the books.
Don’t you understand? You can’t use laws that are already on the books. That doesn’t give the pols any chance to grandstand about how they’re Doing Something!! about the Crisis!! — and to hear the grateful response from the populace: Yes!! Thank you, wise and merciful Washington! You have saved the day yet again!!
Then again, this is the general viewpoint of who has the money, who gets the money and so forth. Not for the rest of us. We are skrooed, and generally even though we think we are going to be a player of sorts, we can never be the ‘big guns’ in any fashion.
Mauldin - “Basically, this service is for accredited investors (net worth of $1.5 million or more) ”
Unless Tim is one of those, I would venture to say, we don’t stand a chance.
“Amazingly, (the housing mess can be solved) with just one policy: a decree that whenever a bank forecloses on a home, the current occupant has the right to remain in the property indefinitely, simply by paying the fair-market rent.”
Yes, that is amazing. Make a law that someone has the right to rent a property for whatever the market rent is. And how much did they pay this guy to come up with this idea?
LOL. Well, when you put it like thaaaaat!
“This option takes the form of what we call a prepackaged Chapter 13 bankruptcy, in which the mortgage is automatically readjusted in line with the decline of housing prices in the homeowner’s ZIP code. The homeowner ends up with positive equity in his house, so that he will either maintain the house or sell it outside foreclosure, and the creditor ends up with a claim of greater value than the foreclosure price of the house. Because both parties are made better off, the cost of credit should not increase in the long run, and taxpayers do not have to subsidize the scheme.”
The best part of Roubini’s proposal:
Those who wanted to have nothing to do with the bubble don’t need to get screwed in order to pay off bad gambling debt which should rightfully be shared between the f-d buyers and the foolish lenders who loaned them unrepayable sums of money.
First we give them our well paid jobs. Now we offer them cheap housing. BTW, what if they want a job after they are given green cards. What will happen to US standard of living?
They will all apply once we also provice healthcare.
No you miss the point. They will provide healthcare.
Anyway, thanks all of you for making us feel so welcome
You’re welcome!
Why bother listening to these illogical jackasses that are only interested in saving their own asses. The solution already exists in the form of bankruptcy laws, foreclosure laws, and simple business and accounting laws (prior to the recent FASB changes that only hide losses). The government has no business intervening in natural laws of economics. It is simply not fair to penalize the prudent and honest taxpayers who resisted the urge to spend money they would never have nor the ability to repay. If you overbought or spent money you never had the ability to repay, you need to face the music. It’s real simple: you gambled and lost !! The idea of the government coming up with plans to “save” these idiots is as offensive as the current crop of various bailout packages that have been enacted (at taxpayer cost) to save Wall Street. We would all have been better off if all these investment banks, insurance companies and hedge funds that gambled on these various derivatives had been left alone by the government and gone bankrupt.
The first two (non-PDF) links are broken, btw.
The solution was written into the law a long time ago. Let the houses go into foreclosure and the banks resell them. Why do we keep propping up dead trees (owners)???
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The solution was written into the law a long time ago. Let the houses go into foreclosure and the banks resell them. Why do we keep propping up dead trees (owners)???
_______________________________________________________________________
The solution was written into the law a long time ago. Let the houses go into foreclosure and the banks resell them. Why do we keep propping up dead trees (owners)???
_______________________________________________________________________
The solution was written into the law a long time ago. Let the houses go into foreclosure and the banks resell them. Why do we keep propping up dead trees (owners)???
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There are some interesting ideas here. As the Chinese say - may you live in interesting times.
I’ve been for putting capital gains tax on a much more nuanced schedule for a long time now. Right now you only have two crude choices: short and long term. Anything over a year is “long term”. Rubbish. There should be differing treatment at 1 year, 5 years, 10 years, 15 years, etc. Selling a house after 15 years shouldn’t be considered making a “profit” - it’s just keeping up with inflation. Preferrential capital gains tax structure shouldn’t be for short term flippers, only honest long term investors.
Additionally the captial gains should be compared with the rate of inflation during the time period. Only “excess” above the rate of inflation should be considered an amount subject to taxation.
Another idea. Shorten the time for the statute of limitations on mortgage holders. Right now banks are stalling on carrying out forclosures leaving much of the housing market in limbo. Make the statute of limitations 6 months for carrying out a foreclosure. If you don’t hurry up and foreclose, you will have WAIVED your rights to any and all payments, and the FB takes the house with clear title.
Excellent ideas, Dennis.
i’m not expert at any of this - but why not just
1) let people take a capital loss on their RE asset against ordinary income and / or
2) just split the loss on the asset 50% - 50% - by converting half the debt to equity and having the bank retain the equity - and then allowing the debt to be re-financed at a subsidized rate.
*
either that (keep the current system in play) or just go ahead and repudiate the debt and slash income taxes to the bone and hope for the best.
* The Wall Street Journal
* JULY 20, 2009, 1:01 P.M. ET
Government Tab for Crisis Could Hit $23.7 Trillion, Official Says
By MEENA THIRUVENGADAM
WASHINGTON–Government support aimed at cushioning the effects of the financial crisis in the U.S. could reach $23.7 trillion, a special inspector general overseeing U.S. bailout efforts planned to tell Congress on Tuesday.
In prepared testimony for a hearing of the House Committee on Oversight and Government Reform, Special Inspector General Neil Barofsky said the figure included spending and commitments for several agencies that have implemented programs aimed at supporting the economy and the U.S. financial system.
“TARP does not function in a vacuum,” he said, referring to the government’s $700 billion Troubled Asset Relief Program–its most visible effort to counter the financial meltdown.
The top Republican on the oversight committee, Rep. Darrell Issa of California, blasted the figure provided by Barofsky, saying “If you spent a million dollars a day going back to the birth of Christ, that wouldn’t even come close to just $1 trillion–$23.7 trillion is a staggering figure.”
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I apologize for the messy HTML. This is what happens when more than one computer/browser/operating system work on the same post. I tried to just cut it up into straight links, so good luck and we’ll learn from this in the future.