Bits Bucket For July 28, 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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Name:Ben Jones
Location:Northern Arizona, United States
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Foreclosures Are Often In Lenders’ Best Interest.
Numbers Work Against Government Efforts To Help Homeowners.
Washington Post
Tuesday, July 28, 2009
Government initiatives to stem the country’s mounting foreclosures are hampered because banks and other lenders in many cases have more financial incentive to let borrowers lose their homes than to work out settlements, some economists have concluded.
Policymakers often say it’s a good deal for lenders to cut borrowers a break on mortgage payments to keep them in their homes. But, according to researchers and industry experts, foreclosing can be more profitable.
The problem is that modifying mortgages is profitable to banks for only one set of distressed borrowers, while lenders are actually dealing with three very different types. Modification makes economic sense for a bank or other lender only if the borrower can’t sustain payments without it yet will be able to keep up with new, more modest terms.
A second set are those who are likely to fall behind on their payments again even after receiving a modified loan and are likely to lose their homes one way or another. Lenders don’t want to help these borrowers because waiting to foreclose can be costly.
Finally, there are those delinquent borrowers who can somehow, even at great sacrifice, catch up without a modification. Lenders have little financial incentive to help them.
The article suffers a bit from the “when you put a percent sign after your wild-ass-guestimate, it sounds precise.” syndrome. They estimate that 30% of borrowers who fall two months behind can catch up without help, but I suspect that this is the sort of rear view mirror driving that got us into this mess. What is the percentage of people who “self-cure” when they are significantly underwater? People who are underwater by their gross income aren’t that motivated to get another job and borrow from family to make their lender whole.
That’s a really good point, but OTOH the group that will default again is probably way more than half, based on my fuzzy memory of some statistic about previous workouts.
Well there’s probably SOME amount of principal writeoff that will lower the redefault rate to a reasonable number. But it may be much lower than what the bank will get at acution. And that’s a central point: borrowers INCLINATION (rather than their ABILITY) to pay is heavily influenced by how underwater they are. After all absent a deficiency judgement, this is what they stand to GAIN* by getting foreclosed upon. And since the percentage and degree of underwaterness is unprecidented, at least at a national level, it is very important to remember that borrower behavior is likely to be different than historical norms. There’s a BIG difference between being 5% underwater on 150k and being 25% underwater on 750k. And we can expect borrowers to behave differently.
*Yes, this isn’t a check in their pocket, but it improves their balance sheet just the same because it constitutes the removal of debt.
High default rates and re-default rates are especially true
when you just look at how they sold real estate during the
boom. Real estate was sold as a leverage investment and a ATM machine rather than a place to live and maybe a hedge against inflation .
Why would normally rational people buy property that either caused them to lie on their loan application. or stressed out their finances in the future?.People in the industry were seeking out people and they either got the fear sale or the greed sale .At some point the sales people knew they could get any loan through at
a very low down payment . Normally a person who couldn’t prove their income, or had bad credit , or was a investor, would have to put a lot more down .The teaser rate was a way of giving leverage while the industry made promises that everybody could refinance or sell and make a bundle ,so the loan didn’t matter . The idea was to just get in and sell to a greater fool later . Toward the end of the boom ,the industry was trying to find people under rocks to keep the Ponzi-scheme going . With hit the mark appraisals ,it was just a matter of putting bodies in homes and fraud became rampant .
My point is the Government is not being honest about
what the real problem is .The loans were used as investment leverage and sold as such ,so loan modification doesn’t work a lot of times because the objective was profit from appreciation on inflated appraisals ,not long term
ownership .They don’t seem to be applying discrimination in who they give loan modifications to anyway . Why should the
taxpayers pay for people who took out vast amounts of money from a equity loan and bought cars and boats and luxury items and often times didn’t even improve the property with those funds ?
Nice summary Jim A. Are you new to the Blog..??
“and often times didn’t even improve the property with those funds”
I would say “didn’t even BOTHER to improve” but hey, whatever. Yet another fork in the road where we picked the wrong direction.
The int. paid on a 2nd ( or subsequent re-fi ) ’should’ have been deductible and the proceeds Tax Free, as long as you had recpt’s for your improvements! But letting people “rob their own home” and buy Harley’s and elective surgery Tax Free was absolute lunacy. And clearly not what was originally intended!
scdave since early 2006 or so….
Moral hazard will most likely come into play and increase that number as more loan modifications are made. After all if the bank modifies your loan once, the bank will probably modify it again, right?
Not to mention the millions who would be incented to stop making their payments if their neighbors modifications are too good. Miss a few payments, get a 3% rate, or $100K off your principal. Make your payments, get nothing.
“stop making their payments if their neighbors modifications are too good…”
BINGO! If it’s too easy, everyone will want to do it. It has to be a nightmarish, unpredictable, pain-in-the-arse.
It should be, by preference, non-existent. Subsidizing fools only begets more fools. And it’s like the government is setting up Fool University and letting anyone attend for free.
“Not to mention the millions who would be incented [sic] to stop making their payments if their neighbors modifications are too good.”
Who talks to their neighbors about their mortgage, or anything to do with finances for that matter? My good friends and I rarely even talk about that stuff, let alone the particulars, and we’ve known each other since elementary school.
I believe that it would happen the same way millions found out that they could buy a house for no money down, keep the gains if it went up, or stick it to the banks (and the taxpayers) if it went down. I know a guy that missed 3 payments and the bank lowered his rate from 8% to 4%. I’ve told many people, and they tell other people, etc.
“Subsidizing fools only begets more fools.”
Thanks to a long history of subsidizing fools, the fools brigade is now too big to rescue.
What about the “jingle-mail” type who tell the bank to take their modification and stick-it. Would that not be a fourth type?
It’s probably a lot more contingent on ‘where’ you are than ‘who’ you are. We have good friends down in Henderson, NV and… ( against ALL our better advice! ) went ahead and bought in 2005.
They’ve filed for BK ( they seemed to say so in so many words ) and are now working to get a mod. I think they’ll get it, but that’s just me. The last thing their lender needs is yet ‘another’ busted 400k loan in Vegas?
NY ASSociation of Revisionists continue their pump and dump schemes for June09 sales and price.
The truth?
Price
June08-June09 down 10.8% statewide
June07-June09 down 21.9% statewide
Sales Volume
June08-June09 down 6.5% statewide
June07-June09 down 24.0% statewide
http://www.nysar.com/media.asp
Now exeter,
There are certain people that can’t handle the truth.
So true SFBAgirl.
Some price points in this area are heavy with inventory. Others are wiped out if you don’t snub your nose at dropping $100k in long deferred updates/maintenence into your new $1/4 million purchase w/$9500 tax per year burden. I believe the numbers on our county are correct as I gleefully watch other target areas continue to drop.
I’m wondering how long the out of staters will keep coming as the housing cost differences between the flyover and bubble areas level out. That 31.9% deficit in the NY 2010 budget isn’t going to help support the continued buying spree either.
Yeah Carrie…. that 32% NY state deficit got my attention when you posted it.
My wife is a state employee. There is a hiring freeze and she got the word yesterday that soon they will be offering incentives to those with >10 years service.
NY property owners are in for a world of hurt.
“…will be offering incentives to those with >10 years service.”
I take that’s incentives to resign?
Exactly Al.
I hope she makes any cuts exeter.
“of Revisionists” LOL.
How do I *not join?
Surprisingly, the Essex and Warren County numbers 07-09 were not that bad at all. Must be chip fab plant they broke ground on last week.
“Not that bad” at all considering sales in Warren county fell 30% jun07-jun09.
With a trend like that….. you made a brilliant “investment”.
Look at the prices, up a few %, not bad brain surgeon.
Actually Essex prices are up 14% over 2 years and Warren up 1.4% over 2 years, I’d say that’s “not that bad” Of course you always know better even if the numbers don’t support it. I did not say it was awesome but + 14 and 1.4% is pretty good.
http://www.nysar.com/pdfs/annualmedian.pdf
Essex County DOWN 20%.
NICE TRY.
New York State is really 2 totally different states;
Substate 1) NYC / Hudson valley
Substate 2) Everything West of Hudson Valley
Substate 1 follows the coastal economic trends. Substate 2 follows the industrial Great Lakes economic trend.
Now for those of you not familiar with the differences between the 2 economic trends, they are to a certain degree counter-cyclical. While the coasts are booming, the inland areas are sagging. While the coast is busting, the inland areas are growing slowly.
Not completely sure why the difference. Could be that the inland areas are echos of the coastal economic areas, and trail by some 5 years.
The industrial Great Lakes economic area is by no means uniform either, as places like Cleveland and Detroit are declining, while places like Cincy, Columbus, Indy, and even Syracuse,NY are holding up. Expect these later cities to turn negative, just not at the same rate as the other cities in the region or on the coast.
That’s a significant differencial to point out Cincy, for those not familiar with the area. Even w/in this greater Syracuse area there are some real differences in how each town is faring. See NYFed heat maps. (13201 is on of Syr zip codes) Really the lower income towns are the ones behind on their mortgages.
http://data.newyorkfed.org/creditconditionsmap/
This heat map is good for entire US for anyone that was out having fun last Sunday instead of reading HBB.
For the record, despite Hank Paulson’s best efforts to cover up the facts, this recession began before the last year of W’s term in office. It is W’s recession, and Obama inherited the problem of how best to mitigate the economic damage.
Wall Street Journal
JULY 28, 2009
The Great Recession: A Downturn Sized Up
Unemployment Lines Have Been Long Before, but No Prior Slump Since World War II Has Hurt So Much on So Many Fronts
By JUSTIN LAHART
What makes the current recession so bad? Other downturns have been more painful by some measures, but none since World War II has delivered so many severe blows to the economy at the same time.
Already it is the longest. The nonprofit National Bureau of Economic Research, which determines when the U.S. economy slips into recession, says the downturn began in December 2007, 19 months ago. That makes it longer than the wrenching, 16-month recessions of 1973-75 and 1981-82.
…
“A normal postwar recession ends when the Fed thinks it’s done enough to fight inflation,” says Brad DeLong, an economic historian at the University of California, Berkeley.
But this downturn was set off by a housing and credit collapse, making Fed rate cuts less effective in spurring growth. Economists believe Friday’s GDP report will show the economy contracted again in the second quarter and that, in combination with downward government data revisions, could make this recession’s GDP drop even larger than 1958’s.
…
…this recession has eaten away at Americans’ wealth like never before. Falling home prices have decreased the equity the U.S. households have in their homes — that is, the value of their homes minus what they owe on them — by $5.1 trillion, a 41% drop. They also have lost trillions of dollars in the stock market. No other episode of wealth destruction since the 1930s comes close.
As households work to rebuild the stores of wealth they lost, they spend less. Although spending has recovered a bit, it is still an inflation-adjusted 1.9% below its peak 2008 levels.
…
A 1.9% drop in aggregate spending does not seem like enough to offset a 41% drop in home equity wealth. What gives?
But (don’t you agree PB) much of what Ob proposes to “mitigate the economic damage” is more likely to prolong it. (??) …as I’ve mentioned before, the programs re housing/refi seem designed to keep FB’s paying as long as possible, as per my personal hope that amortization will keep up w/ depreciation.
I don’t like any of the bailout measures we had, but it is probably true that something had to be done to keep it all from falling apart at once and causing massive dislocations and a general banking collapse leading to another Great Depression.
Of course, I think the solutions picked by Bush and Obama are the WRONG solutions, but I at least understand why they felt they had to act. And keeping people paying on their ruinous mortgages for as long as possible lets the banks ride it out over years instead of months and lets them slowly paper over the losses with earnings.
Of course, the losses are too high for that to truly work, so they stuff the banks full of taxpayer money.
“It is W’s recession, and Obama inherited the problem of how best to mitigate the economic damage”
What?!! That’s crazy talk! Everything was going great until ‘that one’ became prez. Obama has wrecked the world economy, gotten us involved in wars in Iraq AND Afghanistan, and he’s still yet to cure restless leg syndrome. After six long months, it’s time to call his presidency a failure.
I hadn’t realized that it was possible for a new Prez to inflict retroactive damage on the economy.
“… for a new Prez to inflict retroactive damage on the economy.”
Well, it’s well known that Lil’ Opie practices Kenyan voodoo, you know that is where he was born, right?
BWAHAHAHAHHAHAHHAHAHHAHAHAHHAHAHAHHAHAHHHHHHHHHH!!! (fpss)
‘That one’ can.
:he’s an eeeegipshun an uh turrrrrist.
maybe it was the *prospect* of his election to office!
I too can’t fathom how aggregate spending is only off 1.9%. That just seems wrong.
Do you know what’s the difference between voodoo and government economic figures?
No, seriously, do you? That’s not a joke. I can’t figure it out, either. I wish somebody would tell me, if they know. I apologize if you were expecting a punchline.
voodoo economics has a better rhythm section
The whole rhythm section was the Purple Gang.
The whole rhythm section was the Purple Gang.
Le’ts balk
I believe alpha-sloth provided an excellent punchline.
Pffft and pshaw, this is such old news.
You need to move on PB. According to Newsweek and other economists the recession is over. Do you hear me the RECESSION IS OVER. HAPPY DAYS ARE HERE AGAIN. (sarcasm is now off)
The “recession is over” drumbeat is at full volume in the MSM and happy days are here again from what I’m hearing from the deluded masses on main street. Tune into WBBR to hear the truth. The lying, criminal banking elite is pushing on a string while their minions in the MSM are performing their typical diversionary pseudo-journalism.
Given the raft of bull$hit flying around, I fully expect a cameo appearance from David Pinocchio Lereah.
Hi SFBAGirl,
Well ya know the recession IS over for 500 or so members of House and Senate and their friends! Not to mention Friends of Barack. (But I guess I’ll mention them anyway.)
Payoffs, bribes, under the table and around the law graft and corruption, along with gubmint jobs and conflicts of interest, compounded, make for good livin’ in the summertime!
It’s just too bad and too sad, that meanwhile, back at the ranch, the apartment, or the McCrapshack, the “little people” get to pay taxes, eat sh!t, and die.
What would life be, were it not for the struggle of the uninformed and unconnected against the PTB?
I have a feeling we’ll never know.
I can just picture that Newsweek arriving in the mailbox where more than one major income earner in an extended famiily are out of work. The thing will probably end up in cinders in the middle of the street.
It seems to me that the PTB are relying heavily upon psychology to move the economy, but no amount of happy talk can change the reality that is mass unemployment, or put dollars in empty pockets.
psychological warfare…
tell em long enough, hopefully they will believe.
Newsweek/fauxnoise.
We are currently seeing the first application of the “think method” to cure an economic malaise.
Seventy six trombones led the big parade,
With a hundred & ten cornets close at hand.
They were followed by rows and rows,
Of the finest virtuosos,
The cream of every famous band.
Seventy six trombones caught the morning sun,
With a hundred & ten cornets right behind.
There were over a thousand reeds,
Srpinging up like weeds,
There were horns of every shape & size.
cobaltblue,
I recall back in the 90’s I had a client and we often laughed about “not wasting our 40’s seeking public office!”
I mean, c’mon, it was the 90’s. Everyone was getting rich doing IPO’s and private equity deals. I know it seems almost far-fetched ‘now’ but to us, pols were laughable.
Well ‘who’s’ laughing NOW!? Never before in our history has being politically connected been more of an imperative! Without it, you’ve got nothing. So I’m not laughing any more either. We’re going to have a family sit down and decide who’s running for what! I’m not going to make that mistake with my kids.
Oh I know. Makes me regret that I didn’t bat my eyelashes at some son of some Halliburton exec in college. I would have been set for life.
oxide,
Make light if wish but you have to understand, we are in the epicenter of politics run amok. We have the nation’s “only transgender mayor” and he’s ( she’s? ) already making their s*xuality the priority.
We -just- got rid of an under achieving alcoholic influence peddler that penciled himself in for a 6-figure job at our hospital and in a whiplash-effect wound up w/ someone worse. We’re getting world-wide attention and even a realty TV show for our new mayor!
Meanwhile back at Starvation Acres, unemployment is hitting the younger adults HARD. So rather than focus on JOB creation the latest debacle is his showing up at a youth event in a mini-skirt, high heels and a swim top. Who needs this?
Dinor, if only s(he)’d marry a porn star, the media frenzy would be complete!
How about a governor that was once an action hero movie star, or a ex president that was once a movie star.
sfbb,
+1
Yeah, I’m not ( or rather I wasn’t ) despondent over this persons s*xuality. He was born and raised here and actually HAS done a lot of great things for the community. He owns the local theater and was a voice of reason all during the boom, calling for the brakes w/ regularity.
‘That’ isn’t the issue. He has been so full of himself since reclaiming city hall ( he was mayor previously ) but has since led the charge to reject every business that’s tried to get into our industrial park! One was Quick-crete and it would’ve meant 20 decent paying jobs. We’re really struggling here, our’s was one of the few banks in OR to go under, there’s NO trust in the bus. community and our unemployment is thru the roof! We really don’t have the luxury to feed his vanity right now?
DinOr,
If there was a recall against your mayor, would there be enough votes to throw the mayor out of office?
SFBayAreaGal,
I doubt it, and that’s really *not what most here would be after anyway? To be truthful, it was the people at MTV that wanted to do the show, not ‘him’. And the former mayor was a complete mess. He basically created a job for himself “making the local bus. community aware of the services avail. at the hospital”. ( WTF? )
Again, my issue is ( and HAS been ) j-o-b-s. Making clever quips at city council meetings about “the smell” of the concrete plant isn’t what’s needed at this time.
It’s his NIMBY’ism that bothers me. Boomer ( it’s all about ME! ) to the core. I’ve got mine so ‘now’ everything is about “quality of life”. Well I got clue for pal, without a job, there IS no quality of life for these young people.
wow, now I know where you live. LOL quite a mayor you have there. Ours is merely fat.
That’s a shame, DinOR. I can’t imagine telling businesses to buzz off in this environment. That’s like hiking out of the dustbowl and turning down a job in Nevada because you heard that California was just two mountain chains over.
” Never before in our history has being politically connected been more of an imperative! Without it, you’ve got nothing. ”
That’s not quite true. I read a book on the Depression about 10 years ago, long before the subject was popular.
One of the many factoids that i recall was the payscale spread for people in the 30’s.
After the crash, regular incomes began declining to 60% of their prior levels, for those who could find work, which was 75% of the people.
HOWEVER, Government wages were at 102% of their former levels. Government employees always get addtional pay and benefits for their “public service”.
So realistically, Goverment employees were making 102/60 = 1.7, or 70% higher wages than average folks. Sounds like a Union job, doesn’t it?
Polly will disagree with me. But most government workers still way overpaid. The major benefit should be the job security. It used to be the same in banking as well.
It’s ironic, isn’t it? Ten years ago government workers used to say that they were willing to live with lower paychecks in exchange for stable benefits and job security. With ten years of wage stagnation, even reductions, the tables have turned. Regular raises for government workers now have them higher paid and more secure! As my husband says, “I’d rather be good looking and rich then ugly and poor.”
But you’re right, Anon, the paycuts that many government workers, including myself, are receiving are appropriate in a time of recession.
depends on the govt worker … here for state MD jobs, the pay is lower that in a private company, but you get more days off and cheaper insurance. pension is not a given though for younger workers …
My point more broadly fella’s was “How do I know ‘my’ investment will pan out?”
( Well because, if you’re connected it’s only a matter of time before you get your preferential treatment to ENSURE it is so! )
Now I realize I’ll get the argument that “Where have YOU been, it’s always… been that way!” and I’m not really arguing that. What I ‘am’ saying is that;
It’s become the O-N-L-Y way to generate wealth! Oh sure you can start a business and it may or may not do well. You’re playing it straight. But think how different your life would be if you KNEW it was going to be a success!? Hell, you could leverage that a thousand fold!
THAT is really more what I was getting at?!?
I was thinking the same thing this past few years. WTH was I thinking all these yrs when I could have been cultivating pols and making myself indispensible and running for office.
Now, I am p.o’d that idiots got elected and wealthy…shoulda kept that boring gov job in the appraisal office. ugh.
Now for sure I know I have 2many skeletons and not enough $ to run for office.
I don’t necessarily disagree, I just don’t know. My own education qualifies me for a much higher salary, but I don’t handle being out of work all that well, and I LIKE what I am doing now. When I got this job the best jobs in my field were with hedge funds. Ugh. No thanks.
Overpaid people are the ones who started out with very very little “there” there but have been working for so long that regular step and grade increases (you have to have something to motivate people and promotions are all we have here since the bonuses are miniscule to imaginary) get them up to a level which is way above their value on the open market.
I think you would be hard pressed to find a federal government employee who is overpaid if they have been around less than 10 years, but you can sure find them among the old timers. Not all old-timers as some of them are fantastic and know everything and are more than willing to share even when it forces them to stay late to make up for helping you, but I won’t dispute that over-inflated job descriptions (leading to over inflated pay grades) and pure longevity can get you to an overpaid place.
And you can’t beat the stability.
By the way, one of my colleagues recently found an instance of fraud, which, if handled properly, will pay for his salaray for the rest of his days in the government and then some. Easily.
By the way, one of my colleagues recently found an instance of fraud, which, if handled properly, will pay for his salaray for the rest of his days in the government and then some. Easily.
That’s good to hear, of course, but doesn’t mean that someone willing to work for less wouldn’t have found that same fraud case. So I’m not sure it justifies the salary your coworker is being paid.
“this is such old news”
But it hardly stops us from dredging it up time and again for a daily flogging?
What else are we going to do?
Now that the recession is over, can I have my 5% interest on my MM accout again?
You missed the decimal. Yessss, you can have your 0.5% interest. Glad to help.
BB
Oh, you say you are a bank? In that case, shift the interest rate decimal one place to the right…
the value of their homes minus what they owe on them — by $5.1 trillion, a 41% drop. They also have lost trillions of dollars in the stock market. No other episode of wealth destruction since the 1930s comes close.
LOL - I venture that this “destruction of wealth” surpasses that of the 1930’s even; not only in absolute terms but in terms of percentage of GDP. I’m not sure if good numbers exist from the 1930’s to do a valid comparison.
I put “destruction of wealth” in parens since in reality the majority of both stock market equity and home equity is false wealth, when taken as an aggregate.
“this recession has eaten away at Americans’ wealth like never before. Falling home prices have decreased the equity the U.S. households have in their homes ”
So what was the true equity that the US households had?
Most people had ‘blue sky’ equity; only those that cashed out using the greater fool actually retained that phantom equity talked about here.
salinasron,
Couldn’t agree more. Kind of like the guys that worked at Intel etc. in the dot.bomb heyday having a hardy belly-laugh about how they’d be retired by the time they were 40!
Having worked through the dot.bomb heydey in Sillycone Valley, I can tell you TONS of people were convinced they’d make bank. I even know some who DID get a payday on their stock, but borrowed against it because stock ‘only goes up’ to buy houses and wound up losing it all on margin calls and unemployment in the pop.
This is the same thing writ large. The populace in general is discovering what happens when you lose fake money, and what happens to you if you borrowed real money against said fake money. (Fake money being unrealized stock and home equity.)
I have a college friend who became an Internet millionaire. (In 1999, he and his three business partners sold their router technology company to Cisco Systems for $25 million.)
And, here’s some truly startling news: He’s the same guy he always was. Still lives in the same house, continued to send his kids to the local public schools, and stay married to the same woman. (Unfortunately, she died in 2003.)
He’s out of the router biz. Been there, done that. Nowadays, he’s an iPhone applications developer.
The people who took the dot-com money in cash did very well.
Should I ever contemplate buying again, I should find it a very useful deterent to frame such a purchase* as helping to pay for someone else’s retirement.
*if the price is still above enduring historical norms
edgewaterjohn,
And every ‘other’ property listed on Craigslist says as much!
“Look, you and I both know this thing is a terrible BUST! But.., if you buy my overpriced POS, you can ride out the meltdown in ’style’ and you’d be doing ‘me’ a tremendous favor! Whadda’ ya’ say?”
Well the same is true of the stock market, or any other market really: ALL current owners can not sell at current market price. And most of those clever guys at the trading desks realize this. But they suffer from the “Lake Woebegon effect.” They all think that THEY are smarter than their peers and will be the ones to pull out at peak, not be stuck standing in line, trying to sell while prices plummet.
Jim A,
Agreed, myself included. What I was driving at though is there’s almost this admition that the asking price really ‘isn’t’ in keeping w/ the current market, but they’re pleading for (1) last exception. You know, for old times sake..?
Preach it, salinsron!
They won’t have Bunning (Sen, R, KY) to kick around anymore! As predicted, he’s been squeezed out. But before you bemoan the loss of his acerbic questioning of the banksters, guess who a potential replacement is? Rand Paul, Ron Paul’s son! Apparently, he’s an ophthalmologist in Bowling Green, KY! Who knew? Not me. (He’s a political newcomer, so he may need some fundraising help, people. Dig deep, ’cause he aint the PTB’s choice.)
http://www.kentucky.com/latest_news/story/876301/html.
link stinks, and I know not why- Just go to kentucky.com and scroll down (beneath major headline story- Do snakes like blackberry bushes?)
if you type in the link it works (don’t add last period that’s in black)
Rand is a much better speaker than his father, a characteristic that is worth a lot in the world of politics.
Yeah, I just watched a few speeches online. Pretty much his father’s message but he does deliver it well and he seems likeable. I would think his father’s supporters would be thrilled at the thought of him in the Senate. They better send him some jack, his opponents are backed by the big boys.
Rand is a much better speaker than his father, a characteristic that is worth a lot in the world of politics.
I actually like the way Paul speaks. It’s far more sincere than your average politician. He may not be as smooth/well-groomed as Obama, but to me that makes him more credible. It’s not just sound bytes - he’s speaking to what he believes.
Top Executive at Countrywide saying that Senator Dodds got sweetheart loan from Countrywide ,and knew he was getting it . I love the part when the creeps start turning on each other .
And in other recent news…
(Sorry HW just yankin’ your chain)
Makes you wonder what else Chris Dodd has gotten without his knowledge. I bet half the things in his house he has never seen before.
No more “friends of Mozillo” loans. It’s like that joke about the ugly kid: They had to tie a mortgage around his neck to get the congressman to play with him.
When it came to practicing their love on clients, Countrywide hardly limited themselves to Senators.
Again though, the incidents date back to 2003, you know, before “things got crazy”?
It just set a precedent we really didn’t need.
Yes, but Dodd has been setting a precedent for being a complete stooge of the banking industry for his entire career. Anything we can use to kick him to the curb ASAP would be useful.
Hey, to be fair to Sen Dodd, not all of the banks have failed.
Yet. The year is still young!
Peter schiff
True, but Senators certainly knew how to love back.
Executive Testifies on Senators’ Mortgages
By Zachary A. Goldfarb
Washington Post Staff Writer
Tuesday, July 28, 2009
The Senate ethics committee has interviewed a former Countrywide Financial executive who testified under oath that Sens. Christopher J. Dodd (D-Conn.) and Kent Conrad (D-N.D.) were aware that they were accessing a special program to give below-market-rate mortgages to the powerful and famous when he arranged their loans, according to the executive’s attorneys.
The statements from Robert Feinberg, who worked as a loan officer at the mortgage lender, stand in direct contradiction to statements made by Dodd and Conrad, who maintain that they did not know they were part of the Countrywide program created by its chief executive at the time, Angelo Mozilo.
“He always made a big deal about them being in the VIP program. Does he remember the exact words he spoke with Conrad and Dodd? No, but he always made it clear,” said Elana Goldstein, one of Feinberg’s attorneys.
…
They will probably ask for more money too. That should also help the unemployment numbers.
Report: Bank of America planning to cut 10 percent of branches
By Jeva M. Augstums
Associated Press
Posted: 07/28/2009 05:23:20 AM PDT
Updated: 07/28/2009 05:23:21 AM PDT
CHARLOTTE, N.C. — Bank of America Corp.’s CEO Ken Lewis said he is planning to shrink the bank’s 6,100-branch network by about 10 percent, The Wall Street Journal reported Tuesday.
The newspaper said Lewis told investors of the plans at a meeting last week in Charlotte, N.C., where the bank’s headquarters are located. The Journal cited unidentified people familiar with the discussion.
The move would be a pullback from the bank’s two-decade expansion, most recently under Lewis’ command, which expanded the bank from coast to coast.
A Bank of America spokesman could not be reached for immediate comment.
Shares of Bank of America fell 1.5 percent in premarket trading Tuesday.
The report said it was told Liam McGee, president of Bank of America’s consumer and small-business bank, cited changing customer preferences for the move, saying more people are using online and mobile banking.
McGee, however, reportedly said it would be premature to specify how many locations could be closed.
The report comes as Bank of America continues to be under the careful watch of the U.S. government, while it works to integrate two recent deals.
Bank of America acquired troubled mortgage lender Countrywide Financial Corp. last summer and investment bank Merrill Lynch & Co. in January.
Those two acquisitions have proven challenging for Lewis, who was stripped of his chairman title by a shareholder vote at his
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company’s annual meeting in April.
The bank and Lewis have been under intense scrutiny because Bank of America is one of the biggest recipients of government bailout money — $45 billion — and because the losses at Merrill Lynch turned out to be much higher than expected. It is not known when it will repay the government.
Over the years, Bank of America has become a financial powerhouse befitting of its name.
First under chief executive Hugh McColl Jr., and since 2001 under Lewis, the bank has grown through acquisition from a little North Carolina National Bank into a behemoth consumer bank.
In 2004, the bank acquired FleetBoston Financial, a move that gave Bank of America $133 billion in deposits in eight Northeastern states. Three years ago it added millions of names to its customer ledger through the purchase of credit card issuer MBNA Corp.
In 2007, the bank completed its purchase of wealth management company U.S. Trust and acquired LaSalle Bank Corp., immediately turning Lewis’ bank into the market leader in Chicago.
The acquisition of Countrywide last year brought Bank of America to the forefront of the mortgage business, and the Merrill Lynch deal bought bank a large presence back on Wall Street.
Smart moves all, when you consider that they have made themselves too big to fail.
“The acquisition of Countrywide last year brought Bank of America to the forefront of the mortgage business…”
I guess Countrywide must have been a pretty reputable operation, if their acquisition served to bring BoA to the ‘forefront of the mortgage business’?
Sounds like BofA is going to give CRE a helping hand into the grave by closing ten percent of their branches.
And yet I still see bank branches opening all around the City. It is ridiculous. HSBC is opening a new one on Hudson Street where a sushi joint closed down. I would much rather have the sushi joint back and I don’t eat much sushi.
Being the competitive b*st*rds that they are, one might expect all the big banks to follow suit and significantly reduce their branches as well.
That’s going to leave a big smoking hole in a lot of strip malls and on a lot of street corners.
In my neck of the woods Bank America/Wamu & Citi seemed to have bought out at least one gas station on every corner.
There were several Wamu buildings that never actually opened and are now for lease.
Same here, Wamu and Capital one built brand new buildings within two miles from my house. This was in the last year and a half… unbelievable.
I’ve been looking into online banking. For a frugal business-type like I am, online banking has a certain appeal — no branches, no tellers, and very low marketing expenditures.
Right now, the online banks appear to be gaining customers largely through word of mouth. And, from what I’ve read, they do a good job of keeping those customers happy.
Edgewaterjohn-
Do you have a source that you can link? Thanks.
I’ll post it but it might take a while.
Here you are:
http://finance.yahoo.com/news/BofA-could-eventually-cut-10-apf-330938738.html?x=0
Could it be illegals leaving the country. After all they were courting illegals.
CS Numbers: http://www.cnbc.com/id/32184433
And just in time - CNBC is doing a special on Housing tonight - “prices from coast to coast” “has housing pricing finally hit bottom”
Seems to be the summer effect re: prices, but we shall see in the fall.
The bubble mentality is still very much alive and well, sitting right below the surface. This sort of this is just the encouragement that many people need to become the next wave of GFs.
http://tinyurl.com/mpxmu2
Home prices up, first in 34 months, Case Shiller
What MW fails to tell you is prices fell 17.1% YoY.
And that prices are only up in nominal terms - they are still down MoM when adjusted for seasonality.
Florida CRE bust photo slide show:
http://tinyurl.com/mspxj7
Oil at $147.60 ….was simply the result of “efficient” markets based on the economics of Supply & Demand!
BWAHAHAHAHHAHAHHAHAHHAHAHAHHAHAHAHHAHAHHHHHHHHHH!!! (fpss)
Oil futures accelerate losses:
NEW YORK (MarketWatch) — Crude futures accelerated their decline Tuesday, as stocks on Wall Street opened lower and the Commodity Futures Trading Commission started hearings on the energy markets. Light sweet crude for September delivery dropped $1.17 to $67.20 a barrel in electronic trading on Globex. CFTC Chairman Gary Gensler said Tuesday the futures market regulator “must seriously consider setting strict position limits in the energy market.”
market pulse Jul 28, 2009, 9:33 a.m. EST
“must seriously consider setting strict position limits in the energy market.”
I believe there all already position limits in place. The consumer is limited to the bent over position.
Now that it is pretty much common knowledge that the oil price spike was due to speculators, shouldn’t we expect a crash back to levels that reflect market fundamentals? Or will the Fed intervene to prevent it?
One question I hope a future GAO audit of the Fed asks them:
Do you employ freshly printed Bernankes to manipulate asset prices, and if so, which ones and how?
Did anyone see the article about home price edges up?
Same old…
Comparing Month to Month…. If you compare Year to year, it is still dropping. The Ministry of Truth is really on the ball on that one.
Not only that, but prices are still down when seasonally adjusted - i.e. even though they’re “up”, the up is less than the normal spring bounce.
That being said:
- This is the first time they’ve been up since July 2006, which is noteworthy.
- The seasonally adjusted numbers, while still down MoM, had a much slower decline in May - the past couple of years the index has dropped usually from 1.5 - 3.0 points each month; this May it dropped only 0.2.
I think we are actually seeing a real bounce - or pause perhaps, due to many factors that I’ve mentioned previously. Most of those factors are temporary though. The inventory of vacant homes hasn’t gone down hardly at all; this will continue to drag prices down for 2-3 years still, despite the Fed/Guv/Megabanks’ best efforts otherwise. What we are experiencing now is the first dead-cat bounce, and it’s roping in lots of fools.
Home vacancy rate says that any price bounce/pause won’t last.
… and the Home equity rate agrees.
packman,
You have been throwing out some excellent graphs recently which provide a beautifully succinct visual refutation of the nonsense the MSM financial journalists are spewing. Thanks for all the effort!
What I think that we are seeing are the results of the “stimulus” package for housing. I would not care to venture what will happen after all the “freebies” are taken away. My best guess is that it will keep on dropping. Yesterday I took a look at the infamous reset chart, and we are right now in a lull. We are in between the Sub primers, and the Alt-A resets. The Alt-A’s just happened to either buy earlier, and in better ‘hoods than the subprimers, but their recasts are still coming.
Most of the REALLY toxic stuff is stored there. It is the home of the Neg-Am, No doc, No income, OK credit subcontractor that had no way to “prove” his income. It will make the resets for sub primers look like nothing. One overlooked part of the chart is the dollar amount of the resets, and that is still going up.
Just as with physics, there might be a terminal velocity in the housing collapse. We are just seeing the rate of acceleration steady, but not the speed, so to speak.
Pinch-a-penny,
Interesting. This ‘may’ be the worst of the worst? People that were late to the party, or perhaps some of Casey Serin’s ‘last’ purchases bubbling to the surface ( like a corpse that just won’t stay underwater? )
Is it possible ( given the sell job’s going on in ‘05 and ‘06 ) that these people actually -believed- they were the same person on their loan application!? That their income -would- increase as they fibbed on paper?
I think that a lot of late entries into the RE arena were people that never before had the income to do so, and were unaware of the bubble. I think that a lot of that group would be made up of construction workers that went from $8 per hour in 2000 to 25-30 per hour in 2005, and felt that they would keep on going.
I have a friend that is trying to remodel an old house in a vacation spot, and he is constantly getting quotes for basic labor at about 25.. I tell him that basic labor should be no more than 8-9, and trades (plumber, electician, etc)maybe 20-25…
Can somebody post the reset graph? I need a fix.
Exactly pinch-a-penny! The no-docs are all Alt-As. I think they’ll fare as bad or worse than subprime. The subprimes were those too stupid or too honest to lie their way through a no-doc loan application.
“I have a friend that is trying to remodel an old house in a vacation spot, and he is constantly getting quotes for basic labor at about 25.. I tell him that basic labor should be no more than 8-9, and trades (plumber, electician, etc)maybe 20-25…”
What market are you in? Regardless, no contractor could bill out labor at $8-$9 per hour and make a profit, much less pay taxes. I think you’re off your rocker!
Testing the waters. Throw in the bait and see who bites.
Catch a falling knife an’ put it in your wallet,
Now you let cash bleed away!
Catch a falling knife an’ put it in your wallet,
Waitin’ for foreclosure day!
Your bank may come an’ tap you on the shoulder,
Some cash-less night!
Just in case you feel you wanna’ keep her,
You’ll need a pocketful of cash, right?
Catch a falling knife an’ put it in your wallet,
Now you let cash bleed away!
Catch a falling knife an’ put it in your wallet,
Waitin’ for foreclosure day!
Very nice
Every time I see that phrase the same tune has always popped in my head, though I couldn’t make out some decent lyrics.
Ben’s filter stole my bait! Hate fishing with a bare hook.
Ben’s filter stole my bait!
He just wants you to get good at it.
Then you can be a “Master Baiter”
(ta-dump!)
Case Shiller is out:
http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_Release_072820.pdf
10 city composite rose 0.4% in May. Down 16.8% for the year.
20 city composite rose 0.5% in May. Down 17.1% for the year.
It took an awfully long time for the US housing market to eek out a minuscule debt cat bounce. But if this housing correction is like any other financial correction in history, another big leg down awaits. Don’t make the mistake Sir Isaac Newton made during the South Sea Bubble and catch yourself a financially fatal falling knife.
I just love the media……green shoots with new housing sales up 11%
Horse pucky….. new home sales are down year on year are down 32.1%
National new home sales, on a monthly basis, don’t even add up to half of the total foreclosure activity in California alone in a single month.
“…new home sales are down year on year are down 32.1%”
Today’s WSJ has a wonderful graph which shows only June sales for the past ten or so years. This year’s June sales are the lowest. It seems the rate of new home sales always increases in June (a fact conveniently omitted from yesterday’s housing market recovery stories).
Good with coffee:
“The world is a pool table,” our naked-headed CEO likes to tell us. “And all the people in it are either stripes or solids. You alone are the cue balls.”
Bashing Goldman Sachs Is Simply a Game for Fools:
Commentary by Michael Lewis July 28 (Bloomberg)
I was talking with some others here yesterday about CNBC’s Fast Money show and Macke in particular. Someone chimed in late (for me) that he’d had an on-air meltdown and to google it. I did, and WOW, did he melt. I mean, it’s either a psychotic breakdown or serious cocaine freak out. He says the word tweek numerous times in his ravings and the segment ends with him wondering aloud, ‘Have I gone crazy?’ Everyone watching is thinking ‘YES’. My links stink today so just google it, you won’t be sorry.
Thanks alpha.
Mackie referred to something on Minyanville after the fact. Now I gotta google it. Gee Charlie G survived his druggy, dreamy ramble session on one of the Closing Bell reports w/Dylan and Maria during the October fun. I guess now Fast Money’s producers were feeling twitchy.
edgewaterjohn, Do you live in edgewater Fl.? If so, have the prices come down in your area? I fish out of oak hill and the prices dont seem to have come down.
Nope, not the one in FLA.
Edgewater, FL is a wipeout. RE and commercial foreclosures galore - prices down 50% plus. No jobs for miles. Almost every manufacturing business there has either shut down or is shutting down soon. Great time to buy! …kidding.
Question guys…
As I should be finishing my master’s in March, I was looking at some PHD programs. So I wandered over to PHDjobs.org. Why are there so many jobs for quantitative mathmatics at trading firms? I thought the financial markets were crashing. Is it mostly for predictive trading or trying to guess where the certain price or P/E ratio is going at any given time? The job postings talk alot about modeling and mathmatics.
A sample:
SYSTEMATIC QUANTITATIVE TRADING | HIGH-FREQUENCY ALGORITHMIC TRADING
We seek a highly quantitative individual to research and trade sophisticated quant-driven and systematic arbitrage strategies. You will be working collaboratively with a dedicated team of high frequency algorithmic trading and systems professionals. Several years experience within high frequency statistical arbitrage platform
What? All this about predictive math and they couldn’t see the housing bubble coming? I just wanted to know what Doctor of Business degree holders do outside of academia…anyone know?
My highly qualified and extremely smart friend told this to me.
You can’t predict the market. But if you can predict the other guy’s prediction before he makes that prediction, you can make a ton of money. That’s why these firms are always looking out for the smartest.
Ick….Italics off
I have a question that’s been puzzling me for a long time.
Back around 2005 I got the feeling that the real estate market was headed for a tumble. Prices were going up at an unsustainable rate, and I thought it was going to go over a cliff. I began hanging around Patrick’s blog, which is more a regional SF Bay Area blog than a national blog, and found there were many skeptics who shared my views.
There are two kinds of people who should have paid attention to the fact that there was going to be a real estate crash. One group was people who didn’t already own property. The advice for them was simply DON’T BUY NOW. The second group was people (like me) who did already own property, and especially those who had paid it off. The advice for them was SELL SELL SELL!
Blogs like Patrick’s and Ben’s are full of folks from the first group. I haven’t really seen anyone else other than myself from the second group.
Why is this?
There was also a group of people who happened to turn on the TV to HGTV and see a bunch of uncoordinated goofballs buy a house, make some 1/2 assed repairs, slap some paint on the walls and sell the house for $150k more than they had bought it for 6 months earlier.
This group was then stumped as to how/why this was possible and went looking for answers.
I think many folks here are just like me. I was looking to buy what would become a second house that would become my retirement residence when this “bubble” started and the BID WARS got going here in Florida.
I do own a house that is 100% owned. I did not sell when prices reach their zenith because I did not know how long it would take them to re-settle. I simply did not want to overpay for the 2nd house. I wanted to take 6 months to move to the new house and re-work the old one before selling, assuming it would be empty 6 months or more. I did not want to SELL before i bought, as I own a lot of things.
IF I did, then i would need to rent for maybe 2 or 3 years, store may possessions for as long, or sell them, rent storage space for boats, etc. ALL THIS would COST maybe $12,000 to $15,000 per year at a minimum. So for 3 years of waiting, the COST would be around $45,000. May current cost is TAXES and maintenance.
The only savings would be if i didn’t need a place to live, or if Iived in my van.
i will end up selling my house at a lower price, but i was not interested in “maximizing profits”. i wanted an easy transition, with Minimal or NO payments. That way I am more FREE to live my life, not dependent on mortgage men and government schills to dictate and make plans for Mortage re-adjustments and various schemes. No thank=you. A house is a place to live, not an investment. FLIPPERs are a curse to this and most other societies and they should be stopped from using houses as poker chips.
I think the reason there aren’t many people who sold at or near the top, then rented waiting for the bottom is that the people who would do that are pretty responsible. They probably never had their home appraised for heloc purposes, etc. And they probably liked their houses. So they never cared what it was ‘worth’ on the market. And Prop 13 protected them from the tax effects of the bubble in California, so they had very little incentive to sell unless they sat down and did the serious math involved.
I was within a few years of retirement, and figured it was best to sell out in 2006 even if I missed a few years salary.
I knew I had to retire outside California anyway, since the COL there is crazy.
Our neighbors across the street were planning on selling in two years when they had planned on officially retiring. He got laid off about 8 months ago and they tried to sell the house. No luck. They finally agreed to sell it to one of their kids for a steep discount and since he doesn’t have a job, she’s going to retire a year early and they’ll head out to their retirement house in one of the cheaper areas of California.
There are some people in the second group here I know. Not sure specific names but some people, recently especially, have thanked the blog for driving them to sell at or near the peak.
I think part of the reason there are less in group 2 is simply that it’s a lot easier to “not buy” than it is to “sell”. There’s a lot more to it than just bottom-line buy-price vs. sell-price profit and loss. Selling a house has huge overhead, both in actual costs and in opportunity costs (financial and otherwise). And - like sf mentions - a lot of people just don’t care how much their houses are worth; they don’t view them as an investment but rather as simply a place to live. Being an owner I’d say I fall mostly into that category. I rode the bubble up and I’m riding it down; in the end it’ll probably be somewhat of a wash; though I’m fortunate in that I did actually sell at the very peak in a very bubbly area (CA) and bought somewhat post-peak in an also-bubbly-but-no-quite-so area (VA), so I’ll probably come out ahead some. By the same token I wasn’t involved on this blog until after buying in VA - if I had done so earlier I *might* have held off buying for a while; though maybe not since I would have taken the tax hit on the CA house cap gains. One factor is that I really really hate moving, and factored that into the decision to buy and move once vs. rent then buy and thus move twice.
Hi Dennis. I thought about selling for a $200,000 profit but I didn’t want to disrupt our lives by waiting years for the bubble to bottom out. Our house is exactly what we need and want. In addition, I am an AMT sufferer and my combined property tax and interest deduction put me into a 3% lower tax bracket, which would cut further into that profit.
We’re from this second group. We sold a paid off house in June 2004 because I was convinced the market had to crash and, when it did, we’d lose all of hard earned money we’d put into our Santa Rosa, CA house. In retrospect, this seems like an obvious thing to do, but back then, no one else was selling and pocketing the cash. Everyone I know who sold a house back then either bought another house or frittered their money away on “toys.” We moved to the northeast for 3 years to try to find a cheap house to buy and keep the remaining money in the bank. We were told by many people that we’d never be able to buy a house in California again if we left. It sounds silly now, but people were very earnest. When we came to the northeast, I realized the home prices were just as outrageous for the incomes as California prices were. Fortunately, I found this blog and finally found the information I needed to understand what was going on. We are now back in California with every penny of our homesale plus a large amount of savings. I have both friends and family members whom I’ve warned about this housing mania. I’ve only offered advice when asked but no one has actually had the courage to act on my advice even though they usually agree that I’m probably right. People can be smart, but basically we are very emotional creatures. It seems to me that a mania is almost a biological phenomenon. Collectively, our emotions take over our intellect en masse. I think my family succombed to this a bit as well. We sold at a good time but we were trying to buy another house for several years. It took awhile for us to really understand that house prices were too high almost everywhere and that they must and will come down.
Gee, now I can’t remember exactly but I think we had like $50k to go to pay off our house and i was planning on going back to work before I had a series of surgeries and a few other curve balls my ole higher power threw my way. So we had guessed 2 years before pay off.
Found Ben’s blog, decided we wanted to go through the downturn in a different location and sold as soon as we could get the house market ready. We didn’t make a killing though because we bought in flyover land and may have overpaid when we bought it. Actually we made a killing on our previous home on the coast and managed not to lose anything on this one.
I’m part of the second group. Granted I had bought recently (2005), but sold for a variety of factors, one of which was all I had learned here and what I expected to happen in the housing market as well as the economy as a result. Glad I did.
Maybe you haven’t been around long enough. There were many of us in the earlier years, and we commented and congratulated each other for getting out before the crash.
We discussed “Fast Money” on these boards yesterday. I’ve been one of many tuning out lately, but Rick Santelli is hosting tonight. That one could get interesting.
Hey Kim, I posted about that today but it’s lost in the Filter. Google ‘Macke meltdown’ to get an idea about his absence.
It’s very sad. He is having a public psychotic breakdown. Not his fault. Mental illness is an illness. That said, it was riveting!
I’m not convinced it was a “psychotic breakdown”. Macke has always been a little out there in his delivery, and I think this particular piece was just way over people’s heads. Basically, he was talking crazy as if that’s the new normal because every person talking in a “normal”, socially acceptable manner was engaging in psychotic behavior (auto bailouts, totalitarianism, etc.).
Maybe….But if you’re talking like you’re crazy to make a point, and everyone reacts like you’re seriously crazy, you need to break character and say ‘I’m joking, in case you can’t tell’.
Nonetheless, good spin. Right or wrong, you should be in politics.
Oh yeah, check around, there’s a montage of recent crazy moments of his on Gawker, I think. Makes it look like this freak-out is a little more than a one-off. (I’m not reveling in it- I hope its an easily cured med thing, or a joke that backfired- I like the guy.)
I’d certainly never rule out the possibility of extreme substance abuse coupled with a lack of sleep.
His repeated use of the word ‘tweek’ does seem like a Freudian confession of some sort.
Just watched the vid….If that was alcohol he’d be slurring his words and have 1/2 mast eyes. That was something else.
Didn’t Gasparino’s crazy talk Closing Bell segment also have him asking Ratigan if he got the joke?
Maybe Wall Street is a bunch of pill heads. Sure would explain a lot.
Maybe he should team up with Jim Cramer on Mad Money.
“This isn’t CNBC crazy—it’s actually crazy.”
Wall Street is full of bulls***.
MarketWatch: Stock Market Quotes — Business News — Financial News
Street bulls lack confidence
Goldman Sachs will fight to keep exemptions as hearings into commodities trading begin.
Stocks take a second turn to the downside. A full plate — the latest earnings wave, another big Treasury auction, house-price and confidence data, and hearings on energy trading — keeps investors on their toes.
This whole market move has been outrageous. When one looks at commodities prices, soaring emerging markets, and the amount of money pouring into all sectors, it appears a reflated bubble is alive and well. All this leads me to believe we have yet to take our medicine. What form of delivery it comes in is beyond me. Bizzaroworld.
“This whole market move has been outrageous.”
While other explanations may fit, the recent stock market moon shot surely smacks of a desperation effort by the Megabank, Inc / Fed cartel to use a financially engineered stock market rally as a decoy for the persistent preponderance of bad economic news.
All companies are created equal, but too-big-to-fail companies are more equal than others.
Jul 27, 2009, 4:33 p.m. EST
Frank: House won’t create list of ‘too-big-to-fail’ institutions
Ronald D. Orol, MarketWatch
WASHINGTON (MarketWatch) - A key lawmaker on Monday said legislators won’t write legislation that would create a list of a specific number of so-called too-big-to-fail institutions, even though a White House proposal seeks to create such a list.
“The administration proposes that there will be a list of systemically important companies, but the general consensus in Congress is that it would have the opposite effect,” said House Financial Services Committee Chairman Barney Frank, D-Mass., at a luncheon at the National Press Club. “Yes there will be restrictions on excessive leverage but not with a predetermined list.”
…
While they are at not creating this list, perhaps they can create a list of above the law persons… Paulson, Bush, Dodd, O, Frank, exc..
Editorial suggestion:
While they are at not creating this list, perhaps they can create a list of not-above-the-law persons
Consumer confidence falls further in July
Job worries cause confidence to fall further in July, private research group says
AP On Tuesday July 28, 2009, 11:37 am EDT
NEW YORK (AP) — Americans’ confidence in the economy soured further in July as worries about job security offset any enthusiasm about the resumed stock market rally.
The New York-based Conference Board said Tuesday that its Consumer Confidence Index, which retreated last month, fell to 46.6, down from 49.3 in June. Economists surveyed by Thomson Reuters were expecting a reading of 49. It would take a reading above 90 to signal that the economy is on solid footing.
The second straight month of decline follows an upswing in confidence this past spring fueled by a stock market rally and some signs that the economy was improving.
The disappointing report on confidence followed an upbeat report on the housing market, also released Tuesday, that offered more evidence that the real estate market was showing signs of life. According to a widely watched housing price index, home prices in May posted their first monthly increase since the summer of 2006, indicating prices may finally be stabilizing.
“The New York-based Conference Board said Tuesday that its Consumer Confidence Index, which retreated last month, fell to 46.6, down from 49.3 in June. Economists surveyed by Thomson Reuters were expecting a reading of 49. It would take a reading above 90 to signal that the economy is on solid footing.”
O green shoots, green shoots, wherefore art thou green shoots?
“The second straight month of decline follows an upswing in confidence this past spring fueled by a stock market rally and some signs that the economy was improving.”
Fed recovery recipe:
1) Pump liquidity into the stock market in order to drive up the share price.
2) Point out how the rising stock market represents green shoots of recovery.
Does anybody know what happened to GMAC? Where did it go when GM filed BK? Do I now own it?
I think they now run those cute little commercials where the banker guy offers the little girl a plastic pony and then brings out a real pony for the other girl.
It’s still out there. Ownership percentages changed a few months back and Cerberus is no longer the majority owner IIRC.
As Skip says, their “bank” is now called Ally rather than GMAC and have the kid commercials out.
The look of disgust on the one little girl who didn’t get the real horse is pretty funny.
OK. But wasn’t GMAC famous for the pony bait and switch during the whole boom themselves? DiTech, I think did most of the swindling. Good thing we bailed them out.
Yep, they sure were part of it. DiTech is their subsidiary.
There was a write up on Consumerist not too long ago saying they had returned their old ways.
Do I now own it?
thanks for the laugh!
Valero Posts First Second-Quarter Loss in a Decade.
July 28 (Bloomberg) — Valero Energy Corp., the largest U.S. refiner, posted its first second-quarter loss in a decade after the recession eroded fuel demand and plant shutdowns cut production.
The net loss was $254 million or 48 cents a share, compared with profit of $734 million, or $1.37, a year earlier, San Antonio-based Valero said today in a statement. The company said June 2 that it expected to report a loss of 50 cents a share. Revenue plunged 51 percent to $17.9 billion.
The recession slowed use of 18 wheelers and other diesel- powered vehicles, causing prices for the fuel to drop below gasoline. Valero, the largest U.S. processor of sour and heavy grades of oil, was hurt further as discounts for such crudes declined, narrowing profit margins.
“These results really highlight the impact of the heavy- crude price differentials for these types of companies,” said Chi Chow, an analyst at Tristone Capital in Denver. “They’re basically unprofitable.”
Demand for diesel, which boosted Valero’s 2008 profit, fell 9.3 percent in June, according to the U.S. Energy Department. Relative to West Texas Intermediate, the average second-quarter discount for Mexican Maya crude, a benchmark heavy oil, tumbled 78 percent from a year earlier to $4.57 a barrel.
Valero fell 67 cents, or 3.6 percent, to $18.10 at 9:34 a.m. in New York Stock Exchange composite trading. The stock has dropped 16 percent this year.
First Loss Since 1999
Demand for diesel falls over nine percent in June and the PTB expects people to get worked up over a piddley M-O-M spring bounce increase in house prices?
Diesel, until recently, has been priced above gasoline for years. Last summer, when fuel prices were at their highest, diesel was over $5 per gallon in my area. There were tons of 4 x 4 diesel pickups for sale, many asking much less than blue book, with no buyers. Now, it’s slim pickings, and the prices are as delusional as ever.
Hey guys & gals;
Hope that you can provide some input / feedback to me. We looked at a foreclosure “up north” (remember this is Minnie-sooo-tah, and lake places are considered “up north” if they are located over an hour north of Minneapolis-St. Paul metroplex).
I know some of you will probably tell us “don’t do it”, but this is for a vacation property. Here is the story on this place:
Last family bought it and invested some $$ adding on. They added on a two-story addition to the circa 1940s cabin. Replaced cabin roof (it was leaking), gas boiler, added a dual-fuel electric boiler system, new well, and a two-car garage.
So, family runs into financial problems; decides to sell. Listed for $285,000 approximately 18 months ago. No dice. Family loses home and Deutsche Bank Trust Company takes ownership end of 2008.
Listed with local agent this past Spring for $250k, then $230k, then $210k, then $200k, then $180k, then $170k, then $160k, now at $150k. So, we go and have a lookie-lu at this place last weekend.
Well, the good first: 0.7 acres, 102 feet of nice sandy lakeshore frontage (on a 400 acre recreational lake), beautiful mature trees around the house. Indeed, two-story addition complete.
The bad: old original cabin has non-conforming ceilings (less than 8′, and under 7′ in spots), floor is uneven in spots, there are a couple of soft spots in the flooring, missing floor coverings in some rooms (just bare plywood), carpeting old-need replacing, wall paneling coming off, ceiling needing repair (where it was originally water damaged), missing water softener (just the plumbing stubs showing), missing kitchen range, the two-story addition has some damaged carpeting (from dogs by the looks of it), some of the construction was of very poor quality (vinyl floor tiles instead of sheet vinyl in the bathroom for example).
In other words, this place obviously needs work. Now, I’d like to make an offer to DB and have contacted the county to determine the mortgage lien amount (don’t have that info yet, but I suspect the lien amount to be in the $80k-$100k range). I was able to determine that there are no other liens, assessments, back taxes, etc.
Where I would like your feedback; based on the fact that the listing agent told me repeatedly (DB wants to move this property, they are willing to entertain any and all offers), we would like to offer $80k for the place as-is. I have done general contracting on 2 of our houses and am quite handy (hey, I can even install irradiated granite countertops!!), so this would be pretty much a DIY project over time.
Is this reasonable, or will DB not even respond?
Do we document the areas that need work, provide photographs (the DB Trust co is in North Carolina, so I am sure that they have NO IDEA what this place even looks like), and cost estimates to repair?
What else should be include to help ensure that DB will respond to us favorably? Mortgage Pre-approval, Earnest Money, etc.
Other thoughts?
Many thanks,
Lots and lots of pictures….of ONLY the bad stuff. You’ve got to convince them the place is a disaster (which it kinda sounds like).
Give them two offers . . . #1 - a reasonable price assuming home is inspected and all problems (big and small) have been corrected, i.e. move-in ready. Pictures and estimates to make it move-in ready should accompany the offer (overestimate on the costs - they’ll never know). Would probably be tough to come up with real good comps, so I’d stay away from that.
#2 - the as-is number. At this point if it is bank owned, the old mortgage amount is irrelevant. That mortgage has been foreclosed on and the bank is the owner with no mortgage. It is only worth what a willing buyer will pay for it and it sounds like there are none to be found at their price.
There is no way they will agree to #1, but you’ve at least identified for them how big of a problem they have and how much more they need to invest in this place. To DB, $250k is peanuts, if they are smart - they’ll take #2 and move on.
Good luck!
I’m confused - how can there be a “mortgage lien” if the bank has foreclosed and the property is a REO?
Sorry, no mortgage lien. I wanted to find out what the last occupants outstanding mortgage amount was prior to foreclosure. My bad
$80K cash offer, contingent on good home inspection but you will not ask for repairs, you offer to split closing costs. That should do it.
Good advice given so far.
Also be prepared for the possibility that no matter what you do they may shoot you down.
And for the possibility that after you submit your offer they’ll come back and say “give us your best offer.” All this is is DB trying to get you to negotiate against yourself to get more out of you.
Personally, I’d tell them to pound sand, you got my best offer, but that’s for you to decide.
I’d say if they come back with a ‘give us your best offer’, reply back with a $79,000 offer, and tell them every time they make you rebid, you’re dropping 1k.
“The bad: old original cabin has non-conforming ceilings (less than 8′, and under 7′ in spots), floor is uneven in spots, there are a couple of soft spots in the flooring…”
I would pull the most recent comps for a vacant parcel of equal size, price in the cost of utilities, and make an offer based on that, giving ZERO value to the structure, considering it a teardown.
+1. That’s what I was insinuating above. The leverage to do so is in the house.
You want them to think that they would be crazy to hold onto it for a day longer. Fear sells.
Yar! Do that! Huh huh!
US govt. denies loan guarantee for Ohio uranium plant, says cleanup will create new jobs Tuesday July 28, 2009
CINCINNATI (AP) — Federal officials say they won’t guarantee a loan for an energy company that had been developing a uranium enrichment plant project in southern Ohio, but they are promising to create up to 1,000 jobs for cleanup at the site.
Energy Department officials said Tuesday that the department asked USEC Inc. Monday night to withdraw its loan application so it could be resubmitted later.
DOE officials say the American Centrifuge project in Piketon does not currently meet statutory and regulatory requirements.
USEC Inc. CEO John Welch says the Bethesda, Md.-based company was shocked and disappointed.
The government says it will invest $150 million to $200 million per year over the next four years to boost cleanup of cold-war era contamination at the site.
Hello from sunny Cyprus at the blog’s most eastern “european” outpost. Wife and I are here for a few years as I’m supporting a program for a well known US government department.
Many, many, many houses for sale here and many of them are empty. Seems that the “buy to let” crowd got here in a huge way after the island joined the EU in 2004. The Russian mob got here too but that’s a story for another blog. Hope to keep you all up to date with tales of recessionary woe euro-style. BTW, food and gas prices here are next to insane. Buying a car? The VAT will kill you! Only the very well off or connected drive a car here as the prices are prohibitive. Seems the the unemployment picture here is headed up and many of the tourist bars and restaurants are empty due to the Brits staying closer to home this year. Yassou y’all :>
Tell us some prices. Real estate, gas, food, etc. I remember Greece being the cheapest spot I’d ever vacationed, but that was for rooms, food, and booze. Never gassed up a car or bought a house.
I know Cypress isn’t Greece, but they’re close by, and I’ve always heard Turkey was cheap too.
Ross Says ‘Never Again’ on Banks Under FDIC Rules.
July 28 (Bloomberg) — Wilbur Ross, the billionaire private-equity investor, said the Federal Deposit Insurance Corp.’s proposed guidelines for bank takeovers are onerous and will deter buyout firms from making offers for lenders.
“I assure you that my firm will never again bid if the proposed policy statement is adopted in its present form,” he wrote in a letter to the FDIC as part of the regulator’s public- comment process for the rules issued July 2. Ross’s firm was among the buyers of failed BankUnited Financial Corp. in May.
The FDIC is seeking to clarify how private-equity firms can buy stakes in banks as the number of failed institutions in 2009 has climbed to 64, the most in 17 years. Lawmakers including Senator Jack Reed of Rhode Island have asked regulators for rules to ensure that private investors can’t take advantage of government assistance and pit agencies against each other.
Individual private-equity firms have largely abandoned taking over lenders, which would require them to be regulated as bank-holding companies. Instead, they are making group bids, with each firm owning a minority stake in the bank and getting representation on the board.
Terms proposed by the FDIC include requiring banks bought by private-equity firms to maintain a Tier 1 capital ratio of 15 percent, almost twice the level usually required for a startup bank. Tier 1 capital is a measure of a bank’s ability to absorb losses. The agency would also require the firms to hold onto their investments for at least three years.
Mexican growers having big pot year in state.
Chronicle (07-28)Shasta-Trinity National Forest
Mexican drug traffickers have expanded their marijuana-growing operations in California parks as state and local governments have tightened spending and slashed jobs and services.
Law enforcement officials say the traffickers, taking advantage of the fact that there are fewer sheriff’s deputies and rangers monitoring parks, are cultivating more pot than ever before. This year’s multibillion-dollar crop is on pace to be the largest in history, said state officials.
“It’s a huge problem,” said Gordon Taylor, the assistant special agent in charge of the U.S. Drug Enforcement Administration. “California is ground zero for domestic marijuana cultivation in the country.”
The illicit crops are believed to be hidden on ridges and in gullies in California’s 31 million acres of forest, with most being grown in state and national parks.
So far this year, more than a million plants have been seized by the state’s Campaign Against Marijuana Planting, or CAMP program, according to Michelle Gregory, the spokeswoman for the California Bureau of Narcotic Enforcement, and the pot-growing season is not even half over.
“Our whole state is overrun,” Gregory said. “It’s an epidemic.”
Much of the cannabis grown in California is being exported around the country, into Mexico and overseas. One batch recently harvested in Shasta County was tracked by drug enforcement agents to Chicago and South Carolina.
This year’s multibillion-dollar crop is on pace to be the largest in history, said state officials.
HAHAHAHA (gasp) BWAHAHAHA!
As the state drowns in red ink!
Snork! Oh, that’s too good.
I truly surprised they didn’t legalize and tax it, and then complain that the Feds are making them broke when they quash the deal and demand bailout money to replace the ‘lost revenue’
I truly surprised they didn’t legalize and tax it, and then complain that the Feds are making them broke when they quash the deal and demand bailout money to replace the ‘lost revenue’
Excellent!
Who’s to say they can’t do that going forward?
If we get nothing else out of a near-total economic collapse, at least a relaxation of the Constitutionally-adverse, violence-promoting, democracy destabilizing, short-sighted and idiotic drug laws would be some small consolation.
It’s not the pot they’re after, it’s the Mexican gang/cartels that are growing it on public lands in the state and national forests. Environmental issues like crazy –run-off of herbicides, pesticides, trash and garbage from the camps. Also murders, kidnapping, slave labor, etc.
Many counties allow private growers, but they must pay for permits, do so on private property, etc. Huge billion dollar bust outside of Fresno last week. I say git ‘em.
“Much of the cannabis grown in California is being exported….into Mexico…”
What??! That’s the first I’ve ever heard of that. Maybe to be shipped worldwide from there? Still seems like carrying coals to Newcastle.
Yes, I was amazed, too. In fact, I don’t think I believe it. They must have got something wrong, surely? Maybe too much Mexkin dope smokin’ there in the newsroom.
This is the dumbest idea we have in America is to keep pot Illegal
Just let people grow their own….then make it Illegal to sell any pot.
Jail time confiscation of property and money…..
The mehikanz would be outta biz overnight.
How is California going to tax their way out of the budget mess if pot remains illegal to sell (and tax)?
Is that a rhetorical question?
This is for exeter and other non-fans globalization on this blog:
Trade Liberalization Linked To Obesity In Central America
http://www.sciencedaily.com/releases/2009/07/090727191730.htm
I have ambivalent thoughts on trade liberalization in general, but when it comes to food, I am more and more becoming what they call a “locavore.”
I have met a few high fliers of this type during my sport fishing years in Ft. Lauderdale “The Yachting Capitol Of The World” at Pier 66, Bahia Mar etc…
I imagine this prick in the article thinks he deserves the money and screw the investors. You see he’s smarter and much higher class than the smucks he guided/helped in their investments. I can smell those turds a mile off and unfortunately many,many times they pay no penalty.
You can only hope that they will run up on the wrong one, just once, that’s all it takes. On a yacht, off shore the term swimming with the fishes takes on more than one meaning.
Sorry, posted in the wrong place.
No, I don’t mind at all.
I like the anger, no matter where it gets posted.
Gallup Poll: Federal Reserve the Least Trusted
The Federal Reserve is the least trusted of all government-related agencies, a new Gallup poll finds.
Only 30 percent of those polled said the Fed was doing a “good” or “excellent” job, leaving it at the bottom of a list of nine agencies included in the poll, according to a Gallup.com video clip.
The new mark represents a plunge from the 53 percent who gave it high marks the last time the agencies were rated in 2003.
The Centers for Disease Control came in first place with 61 percent approval. NASA and the FBI with trailed at second, each with 58 percent approval.
The poll comes as Fed Chairman Ben Bernanke is increasingly going public with a defense of the Federal Reserve’s handling of the crisis in an effort to ward off a congressional proposal by Republican Representative Ron Paul that would undercut the Fed’s independence.
This week, Bernanke traveled to the U.S. heartland to tape a special airing on television network PBS over three days this week in which he answered questions from Americans.
“The Centers for Disease Control came in first place with 61 percent approval”
because they haven’t taken part in keeping secrets or candycoating unfortunate information like we’re children.
I’m glad to hear the public for the most part respects that out them.
Apparently the American public is more impressed with the CDC’s response to the swine flu outbreak than they are with the Fed’s response to the pigman flu pandemic.
The CIA has the Fed cleanly beat in the trust department. No wonder Bernanke is barnstorming to try to gain political support. Maybe they should just make the Fed Chairman position an elected position and be done with it.
The IRS got a better rating than the Fed! LOL!!!
How to piss off your investors: lose half their money to Bernie Madoff while collecting 1% in fees, and 20% of any returns, then sail off into the sunset on your new $30M yacht.
http://www.huffingtonpost.com/vicky-ward/madoffs-chief-feeder-fund_b_245527.html
I have met a few high fliers of this type during my sport fishing years in Ft. Lauderdale “The Yachting Capitol Of The World” at Pier 66, Bahia Mar etc…
I imagine this prick in the article thinks he deserves the money and screw the investors. You see he’s smarter and much higher class than the smucks he guided/helped in their investments. I can smell those turds a mile off and unfortunately many,many times they pay no penalty.
You can only hope that they will run up on the wrong one, just once, that’s all it takes. On a yacht, off shore the term swimming with the fishes takes on more than one meaning.
It is HOT here. Record breaking hot. But I’m still not grouchy, because this morning I drove to Olympia along Madrona beach road and it struck me forcibly that there are now a couple dozen ‘for sale’ signs along there, they just have sort of built up, and there are more and more all the time, too. Some of them getting kinda mossy and leaning.
I recall a mere few years ago and not seeing even one. At that time AYTHING along there got multiple bids, sometimes even before it was actually listen on the realtors sites, just from the pro*stit*utes notifying their clients ahead of time.
Ahhhh….could this possibly mean we’re NOT different here? I wonder?
HAHAHAHAH!
And now excuse me, as I’m going to go pour ice water on myself.
that’ll perk up your teacups
LOL, alpha, sometimes you jes cracks me up.
Why! You!
*appalled gasp! Followed by the modest clutching of soggy gingham shirt front! *
Yes, I did pour ice-water on me, starting top down. It’s freakin’ HOT! If this keeps up I’m going to go kill somebody just for fun. I might have anyway, but this heat is makin’ me extra distracted and impulsive and grouchy.
“If this keeps up I’m going to go kill somebody just for fun.”
Can we start a list for you to consider or is that just too lone wolf?
What are teacups?
little things you sip on
DennisN.
Patent quest is this, interested in a formulation of a product not made any more, nor sold anywhere. Where can I find said patent on formulation, or how to get through to corp that owns said defunct product?
Got any links? Thanks-appreciate any N/S/E/W directions!
You can search for US patents at http://www.uspto.gov . You can read the text-only of patents with ease there. The patents with full drawings there are in some really oddball modified-TIFF image format that we got talked into by international treaty. Get the patent number there and then download a regular PDF for it at http://www.pat2pdf.org .
A hint for your search. The company who owns the patent will be called the “assignee” as in the the company is assigned the patent by the actual inventor(s).
Did the formulation have a trademark name? You can also search for the owners of trademarks at the PTO.
Thanks a bunch Dennis, simi.
The jar has a trademark. No patent.
But I am beginning my search.
The brand name has a circled R next to the name.
Nothing else.
Pfizer sold the brand/product to J&J and they stopped production.
I can’t get anywhere on J&J site.
Google has a great patent search as well.
What happened to our resident torture fear monger, JoeyinCalifornia? Wherever you are, Joey, I have only two words for you:
F__k you.
Prof Bear, what the..? A bit out of line, no?
I’ve not really been reading the past few days - perhaps I missed something. But do we really need to be swearing at each other in these parts?
you missed something.
Sigh…I miss all the excitement.
Why are MSM financial journalists so eager to grasp at straws? Surely they are astute enough to realize that one month does not a trend make.
US home price rise hints at stability
By Alan Rappeport in New York
Published: July 28 2009 15:21 | Last updated: July 28 2009 18:36
US house prices showed their first monthly gain in three years in May offering another sign that the stricken residential real estate market is stabilising.
Home prices unexpectedly climbed by 0.5 per cent from April to May, but were off by 17.1 per cent year-on-year, according to the closely watched Case-Shiller index, released on Tuesday. The monthly rise was the first since prices peaked in July 2006, while the annual drop marked the fourth straight month that the rate of decline slowed after 16 consecutive months of record falls.
…
Financial Times
What is the point of economists?
July 28, 2009 7:59am
“Why did no one see the crisis coming?” Queen Elizabeth asked last year. “A failure of the collective imagination of many bright people” who were all “doing their job properly on its own merit”, was the answer many of those bright people gave in a letter to the Queen last week.
If the economics profession could not warn the public about the credit crunch and the recession, what is the profession’s raison d’etre? Did this reflect, as some claim, that economics has gone astray with models that no longer help understand economic reality but rather distort it? Did such models even contribute to the crisis? FT writers and outside experts will set out their views in the posts below. What is the point of economists? What do you think?
…
There’s a lot of doctors, and everyone gets sick and dies. A lot of psychologists, and a lot of wackos. A lot of sociologists, and a lot of poor people. A lot of philosophers, and a lot of morons. A lot of economists, and a lot of people going broke. ‘It’s a funny world’. If things didn’t go wrong, most of us wouldn’t have jobs. Let’s keep screwing up, people. For America!
We’re all in this together.
Wall Street Journal
* JULY 29, 2009
Market Slide Puts a Dent in Fed Leaders’ Wealth
Bernanke, Other Bank Governors Report That Asset Holdings at End of 2008 Were Down Compared With the Previous Year
By BRIAN BLACKSTONE and SUDEEP REDDY
Last year’s stock-market plunge walloped the portfolio of one more high-profile investor: Ben Bernanke.
The Federal Reserve chairman’s wealth took a hit last year, according to financial disclosure forms released Tuesday by the central bank. As of the end of 2008, Mr. Bernanke’s asset holdings were between $850,000 and $1.9 million. That compares with $1.2 million to $2.5 million the year before.
The disclosure forms, used by officials across the executive branch, report asset valuations and income in broad dollar ranges.
Much of Mr. Bernanke’s decline came from a large-cap stock variable annuity he holds, whose value dropped from between $500,000 and $1 million at the end of 2007 to between $250,000 and $500,000. Mr. Bernanke’s Vanguard International Growth Fund also lost value.
…
*tiniest violin concerto*
“Vanguard International Growth Fund”.. my investment advisor had me in that same fund… until I told him to move to all cash back in the middle of last year. He finally listened to me after the market had dropped to around 10,000 or so.
Now I’m desperately looking for someone who knows better and hoping it’s not me.