Bits Bucket For September 19, 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
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When oh when is bloody Mountain View and Los Altos CA ever going to show visible signs of distress - everyone is spouting it’s different here - and I’m tired of waiting and smiling at them all politely.
Patrick K. used to call this area part of “the Fortress” and there was speculation about when and if it would ever crack.
I have friends in Saratoga who’ve been trying to sell their house FSBO for over 400 days now. They are asking $1.2 million: Zillow says $900K. Wonder how that will turn out.
FSBO doesnt work. Realtors wont show it as one of there own is not making a commission. They all swore to this. I know, I tired and had no showing. Then got a realturd and it sold….hmmmm
Well they still have JOBS…..when that goes so does the house
ever going to show visible signs of distress ??
If you are a fisherman you will understand this analogy…Have you ever watched “bait fish” act when a predator is in their area ?? They ball up, fighting each other to try and get to the center of the ball where safety lies…Its kind of that way in your more exclusive areas of the bay area a couple of which you offer…But its not just a flight to safety, its schools, job markets, rapid transit, services and for some, just being along side high income, highly educated people…
first ! i’m tired of waiting for an affordable house in venice. people there still think a million for a 1 bed shack with a pocket sized yard is ‘affordable’…’
Just for giggles, I checked some of the larger bank REO sales for Venice - nada!
Best,
Leigh
I am now in Eau Claire, Wisconsin rather than Fresno. People here are very friendly. I am told that home values decreased 15% here vs Fresno which is more than 50%. We did purchase a house, a 1800 square foot home in very good condition in a nice part of town for $189,000. There was a complication because the bank balked at giving us a loan until there was a letter stating exactly how much money I would get for retirement because they had read the newspapers and saw how bad off the State was. The problem is a lot of State employees were retiring, there were three furlough days per month and no letter would be issued until close to the actual date of the first check. This caused a problem for the real estate agent because the original owner was buying another place and the real estate agent was going to loose the commission on two properties. He arranged a load for a month so he would not loose his commissions.
“He arranged a load for a month so he would not loose his commissions.”
I would have given you a load. (Just kidding, I realize it’s early yet and I’m not trying to be a spelling nazi.)
Seriously, though, it is interesting to hear how California state employees are under a microscope when it comes to finances.
Wow dude, you moved from a desert to an ice box….
That takes….i dunno uh and you bought a house…..
AND you have to change your name to ‘Eau Claire Dude’.
Or possibly “Eau Claire Dude Loon” (mon ami Pierrot)
Wow dude, you moved from a desert to an ice box….
Ah, yes, but that ice box has good beer, walleye, and fried cheese curds. W00t!
My best friend grew up in Fresno part time. I used to visit him there. It was a real dump, for sure. Wisconsin seems like a major upgrade, but then I’m partial to the northern climes.
If you have enough money to live on, Wisconsin is a lovely, lovely place to be.
Hey Dude!
Welcome to WI. I’m in Sullivan - about 40 minutes east of Madison.
We love Eau Claire. WI folks are darn nice in general!
Leigh
Fresno….Bolted out the state before you even got your first state pension check eh ?? Can’t blame you one bit…Good luck…
Fresno Dude, intending absolutely no disrespect to you but I have to tell a funny story, to me anyway.
Many years, over at a friend’s house, came into a conversation part way through and this guest says “And I just got out”, so I’m being really considerate and I say ‘ oh man, you just got out of jail?’ and he says ‘no dude, i just got out of Fresno’.
I laughed so hard, I had tears streaming down my cheeks.
not down your legs?
Bolted out the state before you even got your first state pension check
Didn’t even give any sour-grapeser time to say “Don’t let the door slam on your @ss on the way out.”
I’ve never been to Fresno, but I LOVE Wisconsin and the Eau Claire area, and I think that anyone who moves there as fast as possible after retiring is brilliant!
Fresno has smog worse that L.A. for particulates, and not far behind for the rest of it like ozone and poor visibility. It may sound odd, but it took some time getting used to all the green trees here in Eau Claire, and then there are the fall colors. I like it. Fresno was so brown and dry much of the year. Also, the Fresno temperature in the summer is over 100 degrees much of the time. I grew up in a climate much like that in Wisconsin as did my wife so I know something about dealing with the cold. The personal reason to move to Eau Claire is because relatives already live here, but News Week once did have an article the listed Eau Claire as one of the ten best places to retire.
Yipee! I’m the first poster. just had a late night espresso. my husband bought a slightly used Rancilio machine on Ebay (half price) and we’re watching videos on barrista technique. yikes, it’s coffee porn. just learned that the dealio in which you get rid of the grinds is called a “knock box”
rats!
LOL!
Did you get the Silvia? If so, great machine, but even 10 times better if you get the PID temperature control. Makes a huge difference. Just google it. Jim Gallt makes a great unit you can install yourself. Worth every penny IMO.
This is coffee porn…
A review on the machine:
http://coffeegeek.com/proreviews/firstlook/ranciliosilvia
I’m waiting for the wife to wake up before turning on the grinder. Or… maybe I’ll wake her up. Naaa… I’ll be nice. The daughter on the Xylophone will take care of the wake up call. I’m making due reheating what was left over (not too bad, thermos carafe).
Got… coffee.
Neil
Yes, we’ve been reading about the temperature control, and proper tamping, everything we’d been doing wrong with what apparently was a Suzie Homemaker machine before we got the Silvia. My husband remarked that buying this Silvia is like getting a BMW, given all the expensive accessories. We have a burr grinder, but the really good burr grinder is almost 1000 bucks. Yikes! Thanks so much for the Jim Gallt referral, I know my husband will be obsessing. In San Diego, we’ve found the best beans are from Bird Rock Roasters.
I’ve got a Rancilio Rocky grinder, which weighs in at around $300, and I think you’ll find it’s all the grinder you’ll ever need. I was on my iPod this morning so I couldn’t really wax poetic about the PID, but not only does it take the PIA factor of guessing the temperature variable (because the factory thermostat will give you temps that can vary +/- 10 degrees, which makes a HUGE difference), but Jim’s kit also is handsome, like it’s part of the unit.
Most abandoned cities
http://www.comcast.net/slideshow/finance-emptiestcities/
Thanks, H2BH. Here’s the quick version:
1. Vegas
2. Detroit
3. Atlanta (not what I’d have expected!)
4. Greensboro NC (ditto)
5. Dayton
6. Phoenix
7. Orlando
8. Kansas City, both states
9-10. Tie between Indianapolis and Jacksonville
11. Miami/Ft.Laud
12. Chicago
13. Tampa/St.Pete
14. Bakersfield
15. Cincy tied with Charlotte
I’m surprised that Cleveland is not in the list when Cincinatti is. I’ve heard so much about thousand dollar houses in Cleveland and one of the posters from Cincinatti has been saying it is holding up well.
And where is Fresno?
I think we need to remember that you can have tons of vacant, crappy houses in an area, and still have a decently vibrant economy in other areas. Places like Cincinatti and Cleveland have horrible areas with tons of old, vacant housing, relics of a bygone area. But they still have other areas that are as nice as anywhere in the nation.
To some extent, older industrial cities have much more empty decaying properties than other cities (at least until recently). I think this might skew the results of some of these studies. A lot of those houses are uninhabitable. (But not unloanable against in easy money times.)
You have to realize “Atlanta” doesn’t really mean Atlanta. The city itself is about 80% unlivable with the 20% that is livable insanely expensive.
Most middle/upper middle class people who live in Metro Atlanta, don’t live in the city itself. They live in Alpharetta, Marietta, Kennesaw, Roswell, etc. So I wouldn’t read too much into any “Atlanta” statistic, it doesn’t mean much.
Today’s question for the HBB………..
However we got here, and no matter whose fault it is, I think we can all agree that:
-The civilian economy is basically trashed, but the government and Wall Street are trying to put lipstick on the pig. Basically, the bubble inflated the economy by 1/3, and camofladged the fact that a huge part of the civilian economy either disappeared, or was shipped overseas. Now that the housing bubble tide/tsunami has gone out………
-State and Local governments will be next, due to disappearing tax bases.
-The Feds are trying to print their way out of the problem……but all this money isn’t showing up on Main Street. In fact, the “inflation in things you need, deflation in everything else” (including jobs, and the paychecks of those still employed) is actually the current status.
-What little capital and industrial know-how we have left (at least in the non-military industries) is being packed up and shipped overseas, because “…..the business climate is better…..”
-Even though the subprime paper put them on life support, and the government took a lot of the crap paper off their books, nobody is talking about the new (and bigger) round of defaults coming in ALT-A/Jumbo/NINJA loans, commercial loans, and credit card debt. So all this deficit spending and money printing may have only kicked the can down the road for 18-24 months.
The questions:
-Assuming all this is true, or close to it. is there anything (other than the mattress and/or gold) that you would park your slowly eroding cash reserves in, for the next year or two?
-Outlook for next 3-5 years……inflation or deflation? (I say “B”…….all the “stimulus” seems to be doing is stimulate stock prices).
-Typical J6P wages……..stagnant? 20% lower than now?
-Any way to get ahead of the curve in the 10-15 year time frame? (I’d say buy oil companies with proven reserves at the next bottom, but that’s assuming that I find a job in the next year)
X=GSfixer…….I ask myself your questions over a million times . Sometimes there isn’t much you can do other than try to keep from losing .Short term it will be stagflation I think ,except for stocks that will go up and down (I think money is going to stocks now ,and it might be the new bubble ,not stable enough for me .) Given the outsourcing of jobs , wages could go lower than now . I was thinking buying oil at the next big dip also ,but not even comfortable with that . Buying greatly reduced in price real estate with a government give -a -way attacked to it, at a low rate ,if you plan to live in it and you have a stable job ,might be a hedge against inflation that will come ,not sure given the historic
supply build up however .
To sum it up ….it sucks .
The fed is printing new money to buy Treasuries to keep interest rates low so people can buy houses and pay fees to banks so that the banks can make up for the losses they have on their books for all the bad loans they made during the mania. Some of that money is also being used to fund the government’s deficit which includes cash for clunker and first-time buyer credits and other gimmicks which also provide a fee income stream for the banks. The fed is also printing money to buy these newly minted loans b/c no one else is willing to absorb additional losses as home prices are expected to fall further.
This keeps a whole bunch of people employed — life support. Have you thought about a RE license or getting into banking?
Be careful about banking. This is the problem. There is NO will in DC for another major bank bailout. They can do the stuff that requires only the action of the Fed (trading garbage securities for those backed by full faith and credit, etc.), but TARP II (or is it up to three by now?)? I don’t think it is in the cards.
Really. If you want to prevent it, write to your rep and senators and start to make noises about no more bank bailouts and support for the Fed audit. If the banks haven’t managed to collect enough reserves to keep themselves solvent through the next round of losses, we may find out what really happens. And they are shooting themselves in the foot right now. They are so desparate to get out from under the executive pay controls, they are paying off the TARP money before they know if they are going to need it a year or two down the road.
Remember what I’ve said about there being plenty of expertise in the executive branch (whether you agree with their policies or not), but I couldn’t make the same claim about Congress? They got convinced that the world would end if they didn’t pass TARP the first time. Then they had to face the backlash. I don’t think they will do it again, knowing how much anger there is.
“They can do the stuff that requires only the action of the Fed (trading garbage securities for those backed by full faith and credit, etc.), but TARP II (or is it up to three by now?)?”
How is the effect of a Fed-engineered bailout any different from what the impact of TARP II would be?
It happens more slowly which is not good for placating Wall Street.
There are enough people out there protesting future debt that they can’t vastly increase the rate at which new debt is issued without being called on it. And a lot of voters do not believe that things would have been a lot worse without the bailout. They just don’t.
There is a limit to the overall debt that has to be increased by Congress and they will eventually dig in their heels or put restrictions on it.
And, eventually, it won’t just be China whining about the devaluation of the dollar. There is some limit there too…eventually.
Good questions. I am definately expecting a double dip recession. I work for a professional services firm. We serve all industries. At meeting yesterday August figures were not good. This was surprising since the year has been ok. A friend works at one of the major (live) theaters. It does trade shows as well as entertainment. He said there is no work until 3 Oct. and that September is typically when things pick-up. He luckily can get work at the convention center. He’s a union stage hand / electrician. With a nice big mortgate.
He and wife were lucky enough to sell their condo last fall and to sell for a good price. Their building has less than 50% owner occupancy. BUT they had to rush out and buy a big house. It’s needs a ton of work and is a gentrifying neighood. They way overpaid. Would not listen to squat about maybe they shoud wait. Now, Now, Now. We want, want, want. Don’t think it will end nice.
Interesting Anon…I would think that DC would be doing quite well due to government work…
In DC (the disctrict itself) unemployment hit 11.1%. Much lower in NoVa and some of the MD counties, but the stimulous jobs will mostly be elsewhere. They are, after all, intended to stimulate the whole country. Increased employment in DC in the government comes from hiring at agencies that were hopelessly understaffed under Bush. EPA is definitely hiring. FDIC is hiring and bringing back the retired to train the newbies. This is real hiring, but the volume wouldn’t be enough to make up for a total collapse of the economy. What really saves DC is the general stability of the area and the fact that our real estate collapse is still in early stages. The far out stuff is really down, but the close in stuff is still in wishing price ranges. For example, the Montgomery County teachers union agreed to forgo annual pay raises (not experience or education related increases) in exchange for no lay offs. That isn’t enough of a cut to work most places in the country, but it was enough here.
Easy enough to go to the usajobs site and start searching by department for hiring in the DC area. You will find plenty.
“He said there is no work until 3 Oct. and that September is typically when things pick-up. He luckily can get work at the convention center…He and wife were lucky enough to sell their condo last fall and to sell for a good price. Their building has less than 50% owner occupancy. BUT they had to rush out and buy a big house.”
I just spent last evening with an old friend. He’s doing just fine as he’s a teacher, and his wife is a head nursing supervisor. He told me a story of some friends of theirs. A couple, in their early 30’s, just bought a new, bigger house a few months ago. Husband is a union worker (pipe fitter I think), and wife quit her job to be a stay home mom. Husband just got laid off for the second time in 6 months, and can find no work. Wife is trying to get a job to help pay mortgage because the unemployment check is not cutting it. Looks like they’re already in trouble.
State and Local governments will be next, due to disappearing tax bases ??
I will disagree with this part of your post…They may contract on the fringes (slow hiring, eliminate positions through attrition) but they will not get smaller in any significant way…As far as “disappearing tax base” IMO, they will just tax in a way that you cannot avoid it…They are already doing it..Sales tax…Water, electricity and gas rates…Fee’s…etc..And, the VAT is cummun like a freight train right at us…
good point scdave .
not working and worried about inflation costing you money? Does your current income cover your costs of living?
The “costs” of inflation would have to be less than your unemployed living expenses to be worth worrying about… elsewise you are trying to plug a little hole and ignoring a big hole.
i messed that up..
The costs of inflation would have to be more than your living expenses for inflation to be worth worrying about.
it’s possible.. you might have several million in the bank and it generates more than you’re spending.
—
I don’t see any good way to protect money from inflation at this time without taking unacceptable risks.. but risk tolerance is a personal thing..
if it were me, i’d find some kinda employment.. maybe self employment if I had some cash to spend and some talent to exploit. Anything to get some amount of money coming in..
There is only one way to protect your money from inflation: don’t hold “dollars”. That is the unacceptable risk to anyone who is paying attention.
So they won’t need a taxpayer bailout, do they get it from the money fairy?
US mortgage insurer sounds cash alert
Washington September 18 2009
The Federal Housing Administration, the US government mortgage-insurer, warned on Friday that its cash cushion would dip below the limit set by Congress as the savaged housing market puts increasing strain on the fund.
The FHA, which was created in the Great Depression of the 1930s and insures some 4.8m single-family mortgages, stressed that it would not need a taxpayer bailout and was taking steps to address the problem.
Yeah, the money fairy whose names both start with B.
I hear “audit the Fed” now has 2/3 of the House as sponsors?
‘I hear “audit the Fed” now has 2/3 of the House as sponsors?’
This will be a watershed moment in the history of US Constitutional checks and balances if they go through with this plan. I expect a certain constitutional scholar’s economics team to do everything within their power to block this effort to increase Fed transparency.
We are probably at the point now that the only glue holding the whole mess together is Fed opacity.
More good news in this jobless recovery…
42 states lose jobs in August, up from 29 in July
WASHINGTON (AP) — Forty-two states lost jobs last month, up from 29 in July, with the biggest net payroll cuts coming in Texas, Michigan, Georgia and Ohio.
The Labor Department also reported Friday that 27 states saw their unemployment rates increase in August, and 14 states and Washington D.C., reported unemployment rates of 10 percent or above.
The report shows jobs remain scarce even as most analysts believe the economy is pulling out of the worst recession since the 1930s. Federal Reserve Chairman Ben Bernanke said earlier this week that the recovery isn’t likely to be rapid enough to reduce unemployment for some time.
The jobless rate nationwide is expected to peak above 10 percent next year, from its current 9.7 percent.
So Texas is finally coming to the party eh…That largess they received with oil @ $140. a barrel has finally worn off..
Sad, pathetic, but true…
“In reward for its gross culpability in creating the financial crisis, the Federal Reserve has been rewarded with extensive new powers. Given the damage it was able to inflict in the past, I can only imagine the havoc that will be wrought by the new “Super Fed.”
- Peter Schiff
And that’s how you can tell that the current financial scene isn’t going to improve any time in the near future. The fancy term for all of this is “moral hazard”. I’d like to know what propagandist came up with that canard.
What’s going on is simple: You get what you reward. As long as fraud, manipulation, bad behaviour, funny money, etc. is rewarded, expect more. It’s really a basic law of life, when you think about it.
‘As long as fraud, manipulation, bad behaviour, funny money, etc. is rewarded, expect more.”
Exactly. So my question is, how do I get on the gravy train?
Personal responsibility, honesty, working hard and living within one’s means will clearly continue to be punished. Repeating the same actions expecting a different result is madness. I’m not a martyr.
Any advice on how to become a crook? I’m afraid I’m completely unfamiliar with that way of life, but I’m a quick study and eager to learn.
Sleep with a Congressman.
You mean crookedness is passed on like an STD?
An interesting hypothesis. A medical examination of Barney Frank’s boyfriends should settle the matter.
crookedness is passed on like an STD?
Look at Phil and Wendy Gramm
…or the Fiensteins.
the Fiensteins
What does “the mister” do? I’m not familiar with him.
From Wiki:
Feinstein has received scrutiny for her husband, Richard Blum’s, extensive business dealings with China and her past votes on trade issues with the country. Critics have argued that Feinstein’s support, as a member of the Senate’s Military Construction Appropriations subcommittee, of policies that may benefit her husband may raise the appearance of a conflict of interest.[46] Suburban newspaper Metro Silicon Valley reported in 2007 that Blum holds large investments in companies that have won large government contracts without competitive bidding. In April 2007, Feinstein’s office denied there was a conflict of interest and stated that her departure from the subcommittee had nothing to do with the reports in the Metro weeklies.
As of December 2006, according to U.S. Securities and Exchange Commission (SEC) filings and FedSpending.org,[47] three corporations in which Blum’s financial entities own a total of $1 billion in stock won considerable favor from the budgets of the Department of Defense and the Department of Veterans Affairs.
The Washington Times reported in April 2009 that in October 2008, Feinstein had requested $25 billion in extra federal funding for the Federal Deposit Insurance Corporation (FDIC), which days later granted real estate company Richard Ellis, on which Feinstein’s husband serves on the board of directors, a contract to sell foreclosed homes on the FDIC’s books.[48]
Tune in… Drop out?
In reward for its gross culpability in creating the financial crisis, the Federal Reserve has been rewarded with extensive new powers.
I thought that the Fed’s gross culpability was due to the passage of Gramm-leach-Bliley (ie, less regulation). According to Schiff’s logic, the Fed would be “rewarded” with even less regulation, not more. Instead, the Fed gets more regulation. That’s not creating moral hazard, that’s closing a loophole.
The real problem is that the creation of vertical monopolies looks good for short term business, so nobody wants to stop it (especially Congre$$)…until it becomes Too Big To Fail.
Can someone explain to me how Peter Schiff squares his run for the Senate with his investment firm’s strategies. He has bet against the US in every way possible, economically. If he wins, will he work to help the US get out of our hole, thus damaging his investments, or will he help us go off the cliff. It’s quite a conflict of interest, no?
Peter Schiff is doing what any smart, prudent person would do: identifying unsustainable trends and voting against them. He has not bet against the “US.” He has bet against the flim-flam men who control our fiscal policies. At the same time, he’s enough of a patriot to want to challenge the present corrupt, rigged system. I believe that if he becomes a Senator, he will divest himself of any holdings where a conflict of interest might be percieved.
Bear in mind, a Senator Schiff and Representative Ron Paul would be two lone principled politicians facing off against several hundred bought-and-paid-for Republicrat hacks doing the bidding of their Wall Street puppet-masters. The corporate-owned MSM will also do everything possible to smear and destroy Schiff and Dr. Paul. So if Peter Schiff continued to bet against a rigged and corrupt system, I for one wouldn’t blame him.
So why don’t you run, if you have no conflicts of interest?
If you’ve followed the performance of his fund over the last 18 months you’ll find he’s done a pretty good job of damaging his investments without being a member of the senate.
If you had a clue you’d know that although he did poorly in 2008 (like anybody else who was long equities) his fund has outperformed the overall market in 2009 due to his overweighting in foreign markets.
You talk like Peter’s firm is the only one that has *gasp* ever had a losing year. Besides, his general economic theories have been largely correct. He just missed the currency trade unwinding which led to US dollar strength, preventing commodities from breaking out. Even there he may have only been wrong on the timing.
Also, to alpha-sloth, there will be no conflict of interest. First, I fully expect that Schiff will disassociate himself from his firm if he makes Senate (he will come back after he finishes his stint).
Second, those who run his firm (or anyone else for that matter) are free to change investment strategy if they see that he is able to effect real change in Washington which causes the US economy (and hence the currency) to strengthen.
Third, Peter has stated that he will continue to insist that foreign countries stop lending money to the US govt. He is saying it now and he will say it if he gets into the Senate. The point I’m making is that he has been, and will probably continue to be, consistent in his viewpoint and policies. If one is consistent then there is less of a case for conflict of interest.
You seem to be very adept at ascribing to me things I didn’t say and opinions I don’t hold—obviously many funds were down at the start of this year. Schiff was right about a number of things, including the collapse of GM’s stock, but his implication that foreign stock markets were the place to be and that they would be immune to any downturn proved incorrect. Anyone moving to all cash in early 2008 and piling it all back in to an S&P index fund last March would have done nearly as well.
Is Peter part of the ‘Failure Caucus’? Are we?
(gnothi seauton-the first rule of investment)
http://www.newsweek.com/id/214765
All the politicians have conflict of interest these days in one way or another . Maybe the requirement should be made that if you hold public office you have to get rid of all your holdings . Never more than today are the lobbyist the true power brokers .
Yeah, but Peter’s got the mother of all conflicts of interest. He’s bet, massively, against the US dollar and markets. Even if he no longer ran his firm, he’d still know how they’re invested. And the firm could hardly just switch to a different investment strategy. It’s their raison d’etre! And he’s a gold dealer too. Don’t get me wrong, I’d vote for the guy. But I’m not bringing up anything that his opponents won’t.
I’m not very comfortable with Peter Shift being in the business,
but look at Hank Paulson ,he was one of the big power brokers
for the over-leveraged system before he abruptly retired and became the Treasury Sec. But ,people should be on the look-out for people wanting to enhance their own position by gaining a
political seat . Peter Shift seems to be pretty honest ,and he claims that he wants to go to the Senate to educate all those other morons (he didn’t say that in those words).
Correction, alpha: Peter has NOT bet against the markets. That would be shorting or buying puts. Peter has bet FOR foreign markets, and minimized his exposure to US markets.
I really don’t see why Europac couldn’t shift their strategy if they had do. Haven’t many businesses started out doing X and ended up doing Y?
Finally, even if the US recovers, there might not be any reason to not continue to be overweighted in foreign markets, which could still do better (and probably will). Ie, a US recovery will not necessarily hurt Europac.
One thing you can be sure of: Peter won’t try to tapdance around these issues. If asked a direct question he will give a direct answer. Check out his Sept 17 CNBC video on youtube. He is smart enough to figure out if there is a legitimate conflict of interest, and get rid of it if he has to.
Maybe the requirement should be made that if you hold public office you have to get rid of all your holdings.
Well, your investments do have to go into a blind trust. But Mr. Schiff presents a more complex case altogether.
So this guy can’t manage his personal finance, so he must be the perfect pick to run a loser like Chrysler…
Unpaid bills mount for top Chrysler executive.
DETROIT (Reuters) - One of the best-known auto industry executives in the world has fallen on hard times.
Jim Press, who briefly ran Toyota Motor Corp.’s U.S. operations and spent 37 years with the Japanese automaker before joining Chrysler as one of its three top executives in 2007, is facing claims of more than $1.35 million for unpaid federal taxes and a personal loan.
The 62-year-old auto executive, who told the New York Times last year he wore a single string on one wrist as a reminder that material wealth is not the most important thing, may be one of the highest profile victims of Detroit’s collapse.
Press blamed the elimination of bonuses at Chrysler for his failure to pay back the personal loan.
Chrysler went into a U.S. government-financed bankruptcy earlier this year in a deal that gave management control to Italy’s Fiat SpA.
The distressed state of the Detroit area housing market, which has been hit hard by the U.S. housing bust and the auto industry’s troubles, may be adding to his problems.
Press, known to be an avid swimmer, and his wife, Suwichada Busamrong Press, purchased a multimillion-dollar, 6,900-square-foot luxury home in the Detroit suburb of Birmingham in June 2008, taking out a $2.2 million mortgage with ING Bank, records show.
The couple, who have put the six-bedroom mansion up for sale at $3.15 million, now face a tax lien against the property for just over $947,000 related to unpaid income taxes for 2007, according to a filing in late August.
Press has also been sued by a California credit union for failing to repay $406,000 on a loan dating back to his time at Toyota, court records show.
“No comment,” Press said in an email to Reuters. “Thank you for your interest.”
Is he still at Chrysler ? The great part is he have his house listed for as for 50% more than he paid. Funny when looking at interent listings here in Washington DC last week everytime something just looked ridiculously high I would check the tax record. Typcially it show seller had bought in 2005, 2006, 2007. Guess that flip is not panning out.
That “poor exec” is probably upside down. He is not going to “just give it away.” He feels if he gets the 3 mil plus, he can get out from his debt.
These are the kind of people that call me for hard money real estate loans. I try to be nice knowing in the first 30 seconds of the conversation that I cannot help them.
Then I hear the story of how and what happened and how wronged they were because X institution backed on the 2nd they were going to get or the “darn appraiser didn’t know his ‘arse’ from a hole in the ground.”
After I say I’m sorry I cannot help you, they sometimes keep talking. I almost have to rude and sometimes am but do not like doing that.
Yesterday-I got a call from a scammer. He said he WANTED TO BUY an REO in Lancaster CA from a bank and the price is 135K. I told him I could give him 70% of the purchase price.
I did a title search and found our that HE already just bought it from a bank for 78k. I confronted him on this and he said that it’s complicated and that it wasn’t really his.(almost like when you catch your kid with pot..”I’m holding it for a friend”)
He then admitted to buying it(and LIVING IN IT)and that he wants to “sell it to a friend.” I asked him why he didn’t tell me that in the first place and he said it’s too complicated for me to understand.
He then had the gonads to ask if he could still get the loan for 94K (70% of the 135k). I replied, “you want me to give you a loan for $94,000 when you paid only 78,000?’ He then said he really didn’t pay $78,000 and that it was “complicated.”
I told him that this deal was too complicated for me to understand because I’m not bright enough and he should get a smarter lender.
I told him that this deal was too complicated for me to understand because I’m not bright enough and he should get a smarter lender
good for you!
Oh, and I’ll probably start to get interested in those houses somewhere around 40K.
He did buy it for 78K. Those houses are ubiquitous these days.
Press blamed the elimination of bonuses at Chrysler for his failure to pay back the personal loan.
This sounds like a reason so many of the high-ups are fighting tooth and nail to keep their bonuses.
They have already spent them.
They are bankrupt if the bonuses don’t come through.
(Hope this doesn’t post twice. The 1st got eaten.)
That “poor exec” is probably upside down. He is not going to “just give it away.” He feels if he gets the 3 mil plus, he can get out from his debt.
These are the kind of people that call me for hard money real estate loans. I try to be nice knowing in the first 30 seconds of the conversation that I cannot help them.
Then I hear the story of how and what happened and how wronged they were because X institution backed on the 2nd they were going to get or the “darn appraiser didn’t know his ‘arse’ from a hole in the ground.”
After I say I’m sorry I cannot help you, they sometimes keep talking. I almost have to rude and sometimes am but do not like doing that.
Yesterday, I didn’t mind if I was rude. I got a call from a scammer. He said he WANTED TO BUY an REO in Lancaster CA from a bank and the price is 135K. I told him I could give him 70% of the purchase price.
I did a title search and found our that HE already just bought it from a bank for 78k. I confronted him on this and he said that it’s complicated and that it wasn’t really his.(almost like when you catch your kid with pot..”I’m holding it for a friend”)
He then admitted to buying it(and LIVING IN IT)and that he wants to “sell it to a friend.” I asked him why he didn’t tell me that in the first place and he said it’s too complicated for me to understand.
He then had the gonads to ask if he could still get the loan for 94K (70% of the 135k). I replied, “you want me to give you a loan for $94,000 when you paid only 78,000?’ He then said he really didn’t pay $78,000 and that it was “complicated.”
I told him that this deal was too complicated for me to understand because I’m not bright enough and he should get a smarter lender.
This dude should probably tie a string around the other wrist to remind himself that debt is not wealth and must be repaid.
http://www.sun-sentinel.com/business/realestate/sfl-home-values-sink-092009,0,4465878.story
South Florida Sun-Sentinel.com
Home values lower in some South Florida areas than a decade ago
By Paul Owers
South Florida Sun-Sentinel
11:38 AM EDT, September 18, 2009
Home buyers cling to the notion that property values increase over time, making the long-term investment a lucrative one. But prices have fallen so far during the past three years that homes in some unlucky neighborhoods are selling for less now than they did a decade ago, before the start of the historic housing boom.
Nine zip codes in Broward and Palm Beach counties had lower single-family median sales prices in July than they did in July 1999, according to an analysis by MDA DataQuick, a San Diego-based research firm.
————>>
I wonder, given that Florida is supposed to be a refuge for retirees, are good schools less important than elsewhere? Or is the “good school” district still a major factor in desirablity of a zipcode?
It is if the retiree wants medical care… Or the estate wants to sell after the fact.
I used to own in Palm Beach county. I sold at a small loss. So if prices are back to July 1999… they’re back to almost what I sold at. Oh, for the record, that was after the start of a run-up.\
They had ten years worth of inventory three years ago. There is no way this is bottom.
Got Popcorn?
Neil
I’d really like to finish on helping my wife through the final days of her pregnancy, and finishing my masters degree, but does anyone have any advice on taking down a state representative whistleblower-style?
The most important thing is that I don’t end up as one of the shallow grave / torched-car-in-orange-grove stories.
anonymous letters to a good, local reporter? (deep throat)
or to the FBI
If it is a felony just send the evidence to a hungry young DA. They’ll take it from there. My little brother would be all over something like that.
Local DA may not be as ‘unattached’ to the local power structure as the FBI. (one hopes)
Oh, and I wish you both the best with the new little one.
The State Attorney General may be of some help if the FBI doesn’t want to get involved. Just be VERY careful about blowback, as your County government can make your life extremely difficult in an effort to drive you out. Make sure your nose is clean before starting anything, then be prepared to duck.
You basically have it right — school not such a big thing where many buyers are 65ish. The only county in Florida with GOOD schools is Brevard (Cape Canaveral).
“The only county in Florida with GOOD schools is Brevard (Cape Canaveral).”
I presume you’re speaking generally. Good info.
GOOD schools is Brevard (Cape Canaveral) ??
Government again…
The government provides the good jobs in Canaveral. The quality of students make the schools better.
……. while govt. provides the schools.
good point Dudley.
Give me government guarantee jobs and I will give you good schools…Its really that simple…
Asian countries at G-20 push for greater decision-making role, face demands on climate, trade
September 19, 2009,
WASHINGTON (AP) — Asian leaders gathering at next week’s economic summit in Pittsburgh will be demanding a greater voice in the way global financial institutions make crucial decisions. Likewise, the world’s established powers will have some demands of their own for the rising Asian nations.
The Western countries who traditionally have wielded power at the World Bank, the International Monetary Fund and the United Nations will want Asia to cut greenhouse gases blamed for dangerous climate change and to slash barriers that prevent free trade.
China, with its powerful economy and diplomatic and military strength, will be a leading player at the summit. The other Asian-Pacific G-20 nations — Japan, India, South Korea, Australia and Indonesia — believe their growing importance deserves a bigger say in the world’s financial decision-making. The G-20, which represents 80 percent of the world’s economic output, is where they will make their case.
“Broadly, they’re looking for more input on how the world runs,” said Brad Glosserman, executive director of the Pacific Forum CSIS think tank.
You go UK, just follow our lead, we know what we are doing!
UK public debt out of control, hits £800 billion, most on record.
Public debt hits £800 billion - the highest on record.
Britain is clocking up debt at a rate of £6,017 per second as the Government struggles to balance the books. With tax receipts plummeting because of the recession, state borrowing grew by £16.1 billion last month — almost twice the entire budget for the 2012 Olympics.
Net borrowing for the first five months of the financial year stood at £65.3 billion, compared with £26.1 billion at the same stage last year. Total borrowing soared past the £800 billion mark for the first time and total state debt as a proportion of national output reached 57.5 per cent.
Just to pay the interest on its ballooning debts the Government must find more than £30 billion a year — about £500 for every man, woman and child in the country.
The figures from the Office for National Statistics (ONS) show that tax receipts in August dived by 9 per cent compared with August 2008, while public spending rose by almost 3 per cent. The widening gulf was bridged by borrowing. Spending on benefits grew by £900 million to £13.5 billion as unemployment soared.
Related Links
Taking fright at the figures, foreign exchange dealers sent sterling diving to a four-month low against the euro. The value of the pound fell by more than 1 per cent against the dollar.
Analysts said that the Budget forecast by Alistair Darling, the Chancellor, that additional borrowings would be £175 billion this year was not pessimistic enough and predicted that borrowing would be between £15 billion and £50 billion above that forecast.
You know, it wouldn’t surprise me if, as a result of globalization, gold becomes the worldwide standard on which exchange is based.
You know what… You may well be correct! It works, and as more people start to understand that all fiat currencies fail,(always have) they hopefully will want to understand why.
Note that the Chicmos have been patiently accumulating gold. There is a change coming, however it may well not be what the majority expect.
I have already stated that I believe the Chinese are going to go on the gold standard at some point. Then everyone will want to sell them anything they want, as the sellers will get paid in real money.
Palmy How are ya ? Looks like you guys might make it through September. Although there is one out there that could become a depression. Good luck.
Ya Bud,
ATE
I hate hurricanes. I hate ‘em, hate ‘em, hate ‘em….
Here in Charlotte the local paper has been running a series looking back on Hurricane Hugo. Hugo hit South Carolina twenty years ago. Charleston took a hard hit, and the storm kept a great deal of strength on its way to Charlotte, even though Charlotte is well over 100 miles from the Atlantic.
http://www.youtube.com/watch?v=ZqzMziGop-w&feature=related
The UK still has a couple of principled politicians, as evidenced by Daniel Hannon ripping Prime Minister Gordon Brown a new one in this speech to the European Parliment. I imagine we could get similar scenes if Peter Schiff is elected to the Senate.
BTW, Gordon Brown is the idiot who when he was Minister of the Exchequer (sp) in the late 1990s, sold off the UK’s gold reserves for a song ($256 a oz) to “diversify” into “a basket of currencies.” Gold is now over $1000 an oz while most fiat currencies have tanked - heckova job, Brownie!
Those numbers tell me the Brits are pikers when it comes to national debt. We Yankees do it right!
Dems push expanded Community Reinvestment Act; deny Act’s role in mortgage meltdown; GOP cites ACORN connection
Absolutely amazing. The same democrat clowns whose actions significantly contributed to the housing crisis are at it again.
The bill’s purpose is “to close the wealth gap in the United States” by increasing “home ownership and small business ownership for low- and moderate-income borrowers and persons of color.” It would extend CRA’s strict lending requirements to non-bank institutions like credit unions, insurance companies, and mortgage lenders. It would also make CRA more explicitly race-based by requiring CRA standards to be applied to minorities, regardless of income, going beyond earlier requirements that applied solely to low- and moderate-income areas.
Nothing but income redistribution - why do the dems love these socialist programs so much even though that have proven to be nothing but gigantic failures?
I always get beat up whenever I note how socialistic our country is going on this blog, so I have no comment….
whispers in PB’s ear, YEA, do dems REALLY think socialism works?
I’m sure I’ll get flamed when I point out that a standing army is quite ’socialist’. (And seems to work!)
You won’t get flamed by me, nor by the author of Anti-Federalist Paper #15 (excerpt):
A standing army is to be kept on foot, by which the vicious, the sycophantick, and the time- serving will be exalted, and the brave, the patriotic, and the virtuous will be depressed.
“I’m sure I’ll get flamed when I point out that a standing army is quite ’socialist’.”
Not to flame you or anything, but could you please cite a bit of evidence to support this claim? Because otherwise we will think you just made it up.
Even Adam Smith (father of capitalism) acknowledged that provision of a national defense is an essential role of government (unlike, say, provision of subsidized housing). National defense is a public good (non-excludable, non-rival). By contrast, housing is primarily a private good (only one family per house, and if you stop paying your mortgage, you are usually excluded from further consumption of your private housing services).
Why can’t the gov outsource it to the private sector? (Not that they aren’t already.)
“Why can’t the gov outsource it to the private sector?”
If you are in favor of peace and America’s young men ending their tours of duty to return home to their families, then I am not sure the private sector is the way to go here. You see, demand for private defense contractor services goes up when war intensifies and the duration of conflict increases. Demand for private defense contractors would be highest if we had endless war and a never-ending need for private contractors to prosecute it. One of the best ways to prolong or intensify war is to attack countries with false justification (remember the yellow cake uranium story that proved false?).
Another problem with using private mercenary services to prosecute wars: Accountability. Remember those private contractors whose photos showed up on the internet torturing prisoners in Abu Ghraib prison?
I suppose some members of W’s cabinet may have viewed it as an advantage to be able to (implicitly) blame private contractors for prisoner abuses, but I see this as a moral hazard problem for an unscrupulous executive branch leader to weasel out of the US commitment to following the Geneva Convention.
So you’re saying the gov does it better than the free market could? Or that even if the free market could do it better, we can’t trust them? (We got us a socialist boys! Get ‘im.)
Didn’t we hire German mercenaries in the Revolutionary War? It’s as American as apple strudel!
Ooops! I wrote that wrong. The brits hired ‘em, but it’s still a tradition!
Some people confuse the meaning of the verbs provide and promote as used in the preamble to the constitution. If it weren’t for that error most social engineering would just not be allowed.
The US Constitution does call for the Federal government to provide defense and does not call for it “close the wealth gap.” We could argue about the details of defense, but probably all agree it’s a legitimate Federal function.
Militias could ‘provide for the common defense’, no?
Mind you, I’m not saying I support disbanding the military. Just that it’s not hard to see it as a ’socialist’ entity. Most of it’s actions could be done by the private sector, if we so chose. The fact that we don’t really trust the private sector to hold so much power, and would prefer the gov to hold it, just goes to show that we’re all a little socialist. Once you accept that the gov does something better, or more reliably than the private sector, you’re on the slippery slope…
You are the one who seems to be on the slippery slope… of a Domino Theory of socialized governance.
Why can’t we agree the central govt is better suited to some tasks while the private sector is better suited to others?
Why don’t we agree that a standing public army is socialist? (I mean, it sure ain’t capitalist. And they get free gov health care, grants, benefits…)
socialism has to do with state ownership, control and administration of the means of production.
a standing army isn’t socialist because an army doesn’t produce anything.. it only destroys stuff.
Why are some against a standing army? First because it costs a hell of a lot to maintain one in times of peace.
Second because it is kinda scary for an army to be roaming around if it’s not under civilian control.
Ours (USA) is under civilian control since the CIC and others in power are civilians, and those same people hold the power of the purse..
I don’t think anyone opposes a standing army because of any socilaist-type implications.
a standing army isn’t socialist because an army doesn’t produce anything..
Then the health care industry can’t ever be socialistic because it doesn’t produce anything except maybe good health, that is unless we consider “health” a product.
But if we consider health a product could not the military be socialistic since it produces peace and security?
a standing army isn’t socialist because an army doesn’t produce anything.. it only destroys stuff.
On the contrary, our army produces liberty and freedom.
The health care industry produces lots of things.. MRI and X-ray machines.. bandages.. drugs.. hospitals, etc. If the means of producing those things were state owned and operated, and those things (or their utility) were distributed by means of social programs, the economy of health care certainly would be socialist.
The socialist economy is basically defined by two things. State owned means of production, and huge social programs which distribute whatever is produced.
The closer to 100% an economy gets to that, the closer it is to pure socialist.
“Means of production” has a definition. It is those things we can apply our labor to and output products. It’s the way by which things are produced.
A factory makes steel widgets.
If the state owns the factory and the iron mines and steel mills, transportation system and everything else required to produce a widget, it owns the means of production.
Widgets are just the product, not the means.
An army doesn’t produce peace or anything else. An army breaks things and kills people. Peace is “produced” when armies STOP doing what they are designed to do.
You might as well say a babies produce silence because they eventually stop crying.
The Defense industry produces lots of things too.. Tanks and guns.. planes.. forts.. hospitals, etc. If the means of producing those things are only financed by governments and not private interests and those things (or their utility) are distributed only by states or governments doesn’t mean that there is a great socialistic aspect to the military industrial complex?
Does the military (or the government/state) build aircraft? No. Boeing et al.
Tanks? not sure who builds for the military.. Ford? GM?
Rifles? nope.. Colt.. Ruger.. Ammo? nope..
Hospitals? No.. Halliburton and it’s subs and other infrastructure contractors do that sort of thing.
Vehicles.. hummer?
The defense industry is privately owned. Most of it produces lots of things that are non-military. I doubt the military is more than a relatively minor, occasional customer.
And the military products we speak of are rarely, if ever, allowed to fall into the hands of the public. So there’s no state ownership of the means of production and no distribution.
—-
when we tire of debate about what an army produces, we can argue whether or not our government produces anything at all..
I would say you are partially correct and those companies you listed are only partially supported by taxpayer money. But many defense companies have only one customer, the US Government. And when the government provides all the funding, (with taxpayer money) specifies exactly what is to be produced with no variance, I would say they are “controlling the means of production” even if profit is being made by someone.
I agree with a lot of what this guy wrote too:
The Republicans need to stop denigrating the troops. They keep saying that the government can’t get anything right. How about the biggest government project of all — the United States Armed Forces? Are the Republicans talking smack about the military — and hence, the troops? Support the troops! Support government!
Does anyone disagree that the military is almost entirely government run? And if you agree to that obvious fact, when you attack all government run programs, aren’t you by definition attacking the United States military?
And if there was any question about how socialist the army is, they removed all doubt when they adopted their last slogan: Army of One. That sounds positively communist. Why don’t they just call it the collective? And in the US military everyone pledges to support one another no matter what. No one gets left behind. Everyone gets government provided housing, health care, and even government clothing. The military is the most socialist institution we have.
http://www.huffingtonpost.com/cenk-uygur/is-the-us-military-a-soci_b_252526.html
i get it..
First concede that the military is socialist.
Once the military is confirmed socialist, everything else government has the slightest influence on must also be considered socialist.
“Everything” else includes the health care system.
Why would any patriot oppose socialized medicine when the system is already socialized?
Bingo!
—–
oh yeah.. and Republicans supposedly denigrate the troops? Saying government “can’t get anything right” is tantamount to spitting in the eye of our troops!
I recall a US President that “abhorred the military”, but he wasn’t republican.
The army can’t be a biz because it only destroys things? Nationalize all demolition crews!
Have we forgotten about the ’service’ industry?
Not to worry
Dick Cheney did his best to privatize the military. The US gov would pay for training and then the private contractors could over bill the US gov for jobs that can’t be measured and are hard to price. Halliburton KBR Blackrock Xe and other mercinares.
VA medical system is socialized. Much more cost effective than private insurance.
i get it..
From that post I wouldn’t say you “get it” but I think you’re getting a little closer to getting it.
Thank you for taking up the standard, Rio, so I don’t have to. It’s getting pretty tedious pointing out the obvious to those imprisoned by their assumptions.
This stuff is what keeps me focused on taking direct action to reduce my taxable income as much as possible. I’m proud to say I’m an extremist against the previous and current group of thugs occupying the offices in Washington D.C. Actually also against all the thugs since I was old enough to vote in 1978.
Instead of carrying a sign in protest I find more effective and profitable ways to revolt.
I also won’t sanction this forced social engineering. When I make a RE purchase, I will fully screen the neighborhood by crime rate, school performance, and income. Plus I will buy when the cost of renting is higher than PITI for the same amenities.
“Affordable housing”… Isn’t that propagandese for “unaffordable housing”?
* THE WALL STREET JOURNAL
* SEPTEMBER 16, 2009, 10:07 A.M. ET
US Advocates Push To Expand Community Reinvestment Act
By Jessica Holzer
Of DOW JONES NEWSWIRES
…
Benson F. Roberts, senior vice president of Local Initiatives Support Corporation, will address CRA’s role in spurring the development of affordable housing and retail establishments in poor communities.
Though the law has prompted banks to pour billions of dollars into these projects, Roberts will say in prepared testimony, such financing has dropped off recently due to changes in the financial system.
Roberts will recommend that community development be added as a formal objective of the CRA, and that the law be applied to a broader group of institutions, not just depository institutions. The law should extend to all activities of bank holding companies and financial services holding companies, as well as lenders that participate in government mortgage and credit enhancement programs, Roberts will argue.
This senator apparently is prejudiced against sex workers.
WASHINGTON, DC – Continuing his efforts to block federal funding for ACORN, Senator Roberts (R-KS) today endorsed legislation to permanently deny ACORN of all federal funds including stimulus money, building on legislation that Roberts helped pass earlier this week in the Senate to block ACORN from receiving federal grant money.
“The Protect Taxpayers from ACORN Act” was introduced by U.S. Senator Mike Johanns (R-NE) and co-sponsored by Senator Roberts. This legislation is needed to prohibit funding from any federal government source to the Association of Community Organizations for Reform Now (ACORN). Currently ACORN, an organization under criminal indictment, is still eligible for some taxpayer dollars through the American Recovery and Reinvestment Act that was passed earlier this year. This legislation would permanently deny ACORN any federal dollars from any federal government program.
“I will continue to be vigilant and exhaust all avenues to block any taxpayer dollars from going to ACORN,” Senator Roberts said. “Americans are outraged at their tax dollars funding this organization and are demanding Congress spend their money wisely. ACORN has for years, been entangled in tax evasion, voter fraud and other controversial and politically skewed behaviors. I fully support cutting off all funding, from any government source, to this group and I hope this bill and our recent amendments on the floor will accomplish that.”
…
And name one Government funded entity that isn’t corrupt and riddled with fraud these days because of the great policing of these programs .
Fraud and corruption has reached the tilt point . I suppose that Congress thinks its a stimulus because the crooks spend money to .
Finally, a lawmaker who is working for us. I cant stress to all of you what a good day this is for the United States. ACORN needs to be disbanded..
Dont know if I told this story already, so please forgive. Me and the wife went to vote and there were several ACORN volunteers handing out leaflets. One tried to hand us one. I said, “We dont need one, no thank you”. She looked like we had just smacked her in the face. It seemed hard for her to believe someone who is black wasnt voting for the messiah. I’ll take my kool-aide in power form thank you….
“What’s The Matter with Kansas”
“ACORN needs to be disbanded..”
As does the military-industrial complex, Fed price supports for every paper security on the planet, etc etc etc.
But I suppose “disbanding” ACORN would make all those other issues sized larger in orders of magnitude go away.
Perspective….. find some in a hurry.
Why is it whenever someone points out problems with ACORN, those who support it throw up everything they can think of they don’t like about the Republitard party in defense? Perhaps there is no defense based on ACORN’s stand-alone merits?
And there is no defense what the banks, wall street and other corrupt entites have wrecked on our country. Yet I don’t see Congress rushing to cut off funds. Oh wait they rushed to give them more funds without any demand of accountability.
Can we spell HYPOCRISY of ALL our congress critters.
“Can we spell HYPOCRISY of ALL our congress critters.”
How does this relate to ACORN’s government-sponsored prostitution consulting business? Again, you are going way off subject in order to avoid addressing the issue at hand.
Now look who is using hyperbole in their argument. No I’m not going way off subject. What is wrong is we tend to lose perspective and get side track by the white noise. Look what’s happened to you and me.
Divide and conquer works so well doesn’t it?
Brava, SFG.
I’m sure there are some jerks in Meals On Wheels, too. Heaven forfend someone should organize poor people…. That $3.2M per year average funding for ACORN is going to bankrupt the country for sure.
Defending underaged prostitution rings. A new low even for liberals.
That’s right up your wide alley Edie.
Morning Step!
In general, how do the troops feel serving under the current CIC?
I served under Carter through GW Bush (Bush 2?)
Best,
Leigh
wasnt voting for the messiah ??
But you voted for the decider right ??
ET-Chicago encouraged me to undertake some research into the connection between the CRA and the housing bubble, and I decided he is right — I need to educate myself. I will gladly share what I learn.
Obama financial regulations make things even worse, promote risky loans, destroy banking options
September 15, 11:33 AM
…
Banks will now be pressured to make even more risky, low-income loans. Obama has sent to Congress his proposal to create a politically-correct entity called the Consumer Financial Protection Agency. “The agency would be in charge of enforcing the Community Reinvestment Act, a law that prods banks to make loans in low-income communities.”
Government pressure on banks to make low-income loans was a key reason for the mortgage meltdown and the financial crisis. Yet Obama’s disturbing proposal would empower the new agency to enforce the Community Reinvestment Act without regard for banks’ financial safety and soundness. The Community Reinvestment Act was a key contributor to the financial crisis.
…
Yet Obama’s disturbing proposal would empower the new agency to enforce the Community Reinvestment Act without regard for banks’ financial safety and soundness.
That, admittedly, doesn’t sound like good policy.
The Community Reinvestment Act was a key contributor to the financial crisis.
Again, broad pronouncements like that are dramatic, but where’s the data?
I’d also encourage you to do some research on the author of the linked article (Hans Bader), and the Competitive Enterprise Institute, the advocacy group that employs him. I think it’s safe to say they have an agenda …
“Again, broad pronouncements like that are dramatic, but where’s the data?”
If existed, you know PB would the first to post it. Yep… ACORN is responsible for WW2, Vietnam, WTC bombing, LTCM collapse, earthquakes, global warming and Aunt Mildreds bunion.
Idiots.
Thus far, everything I have posted about ACORN has elicited a vigorous off-topic litany from ACORN apologists about myriad off-topic subjects. Couldn’t we please, please, please discuss their government-sponsored prostitution consulting services just a wee bit more?
Defending the indefensible once again with straw man arguments.
Bravo.
Speaking of Aunt Mildreds hemorrhoid….
“I’d also encourage you to do some research on the author of the linked article (Hans Bader), and the Competitive Enterprise Institute, the advocacy group that employs him. I think it’s safe to say they have an agenda …”
I care not about anyone’s agenda, just the objective merits of their arguments. Agenda-driven thinking is one of the biggest problems our country faces.
Agenda-driven thinking is one of the biggest problems our country faces.
Then you should check out the Competitive Enterprise Institute and their “thinking,” post-haste.
I really care not for anyone’s agenda. I have even seen posts by LaRouchies which I generally agree with, even though I consider the source highly whacked. It does bother me somewhat to see credible information spewing from disreputable sources, as this potentially serves to legitimize the illegitimate.
I’m confused — is agenda-driven thinking “one of the biggest problems our country faces” … or not?
If so, you should be bothered by anything spewing forth from the Competitive Enterprise Institute. (And a number of other institutions.)
Would you prefer hoards of unemployed/homeless roaming the streets of North San Diego county?
Maybe it makes more financial sense to get people involved in owning and maintaining their communities than just abandoning them to fend for themselves? (Not that I have any great faith in the wise distribution of these funds, but from a practical standpoint, I’d rather pay taxes to stabilize people than to mop up after they go ballistic.)
From Salon.com
“…According to University of Michigan law professor Michael Barr in testimony before the House Financial Services Committee, just 20 percent of the subprime mortgages since the late 1990s were issued by CRA-covered lenders. Thus, 80 percent subprime loans were made by lenders not regulated by the CRA. ”
Banks did not engage in an orgy of reckless subprime lending to meet CRA obligations; they did so for they same reason they always do: to make money. Only this time, deregulation allowed them to get paid not just for making the loans, but for turning them into securities and trading them.”
Because of CRA and Fannie and Freddie’s (the GSEs”) affordable housing goals, “American Nightmare of Foreclosure” has spread to virtually every congressional district of these United States.
Here are the facts that I believe Gale (Cincotta) would want me to report to you:
• Understanding CRA lending performance is of vital importance because it is now clear that CRA-related single family mortgages totaled trillions of dollars over the period of 1993-2007;
• Over time CRA origination volume became a growing and ultimately significant portion of conventional conforming origination volume, growing from an estimated 7% of originations in 1993 to 19% in 2007;
• As H.R. 1479 points out, announced CRA commitment volume totaled over $6 trillion since CRA’s inception in 1977. Starting in 1992, volume exploded. Over the 17 year period 1992-2008, there were a total of $6 trillion in announced CRA commitments. This is an astounding 680 times the cumulative volume of $9 billion for such commitments over the entire first 15 years of CRA’s existence;
• Ninety-four percent of this $6 trillion in commitments were made by banks and thrifts that were or ended up being owned by just four banks: Wells Fargo, JP Morgan Chase, Citibank, and Bank of America;
Over time CRA origination volume became a growing and ultimately significant portion of conventional conforming origination volume, growing from an estimated 7% of originations in 1993 to 19% in 2007;
Several issues here — the high water mark, according to this, is less than one-fifth of all conforming loans. What about the other 81%? What is the ratio of non-conforming to conforming loans in those years? And how much of that increase is due simply to the re-raising of the conforming loan limits in the past decade?
The linked article does raise some excellent questions of its own, however, including “Why is it after requiring banks to demonstrate that they make extensive use of ‘innovative and/or flexible lending practices’ in order to receive a rating of outstanding, not one regulator had the common sense to track the performance of these admittedly innovative and flexible loans?”
“What about the other 81%?”
Apparently they went to the group of Americans who did not qualify for implicit CRA subsidies.
What does the relatively low CRA origination percentage tell us about where bad loans were proffered?
How much of the change in CRA origination derives from the increase in conforming loan limits from $227,150 (1997) to $417,000 (2007), an increase that has nothing to do with CRA itself?
How does the default rate for the vast majority of conforming loans compare to CRA-originated loans?
“…innovative and flexible…”
My understanding of propagandese is fairly limited. Does this mean ‘likely to blow up’?
Perhaps.
All the more reason to track their performance tightly, both on the lender’s side and the regulator’s side. No?
PB
See if you can find anything in the bill that forces the banks to lower lending standards. My take on CRA is that it tries to prevent red lining. ie if you live in this neighborhood it doesn’t matter if you have a job you won’t get a loan or they will loan you half as much at twice the rate of someone in a better neighborhood with the same job. Show me something that forces banks to lower financial lending standards. The same holds for race. I’m sure Stpn2 would agree that he should be able to borrow as much and at the same rate as white soldiers.
“CRA-related single family mortgages totaled trillions of dollars over the period of 1993-2007. ” Over time CRA origination volume became a growing and ultimately significant portion of conventional conforming origination volume, growing from an estimated 7% of originations in 1993 to 19% in 2007;
What percentage of people live in poor neighborhoods covered by CRA??
The numbers I want to see
What percentage of CRA loans made in the 90’s and in 2000 to present were subprime loans compared to what percentage in the non CRA market. What percentage went bust for reasons other than unemployment.
I mean can’t one look at the huge tracts of 3-4-500,000 dollar houses across the country and know that this was not due to lending to poor neighborhoods.
Do those bashing CRA think there should be any rule that compels banks to lend in poorer neighborhoods or to minorities or should banks be able to loan only to whites and the rich.
“Do those bashing CRA think there should be any rule that compels banks to lend in poorer neighborhoods or to minorities or should banks be able to loan only to whites and the rich.”
With the banking system we have, a CRA may be necessary to get money flowing into low income communities, as Megabank, Inc may have no profit motive to do so. If we had a competitive banking system (devoid of too-big-to-fail behemoths making for an unlevel mortgage lending playing field), if a community were redlined by one lender, it would be in a competitor’s interest to make loans to the redlined group, based on the arbitrage opportunity created by redliners.
“…if a community were redlined by one lender, it would be in a competitor’s interest to make loans to the redlined group,…”
But they didn’t. That’s why they came up with CRA in the first place.
Centrally Planned
28 Aug, 2009 07:08:41
By Asantha Sirimanne
Sri Lankans ask whether the US is a socialist state
Aug 28, 2009 (LBO) - Sweeping ‘nationalization’ of collapsing banks, state mandated mortgage lending and centrally planned interest rates has made the USA a socialist state, Sri Lankan viewers of a film on the US economic collapse said.
“I think it is an exaggeration to describe the United States as a socialist economy now,” says Edward Heartney, economic counselor at the US embassy in Colombo.
“This is an incredibly dangerous time and there are extraordinary measures that no one expected (being taken).”
“Although the United States injected capital, they did not nationalize the banks, which a number of people have said.”
The comments came after a screening of ‘Inside the Meltdown’, a US public broadcasting service documentary on the most recent US ‘banking panic’, at the United States Information Office in Colombo.
…
The current collapse is a textbook Austrian-style deflationary collapse found in the writings of economists such as Friedrich August von Hayek and Ludwig von Mises.
“The expansion in risky mortgages to underqualified borrowers was encouraged by the federal government,” Larry White, F. A. Hayek Professor of Economic History at the University of Missouri–St. Louis said in a detailed report issued in November 2008.
“The growth of “creative” nonprime lending followed Congress’s strengthening of the Community Reinvestment Act, the Federal Housing Administration’s loosening of down-payment standards, and the Department of Housing and Urban Development’s pressuring lenders to extend mortgages to borrowers who previously would not have qualified.”
Fannie Mae and Freddie Mac, two agencies which were supposed to give below-free-market-rate mortgages to Americans, were further pressurized to promote credit as politicians pushed the agenda of ‘affordable’ housing to win votes.
…
How can those monkey Politicians take a concept like ” red-lining was a wrong thing to do” ,and morph it into giving people who don’t qualify a loan ?
Lenders didn’t want to make loans in areas that were more prone to foreclosures . Than it became illegal to deny qualified borrowers
just because they lived in a certain neighborhood . Lenders than tried to get around red=lining laws based on health and safety violation loopholes .
Who came up with the idea that just giving people loans they could never re-pay was the solution ? I am becoming more and more convinced that
the Politicians just spend money because it’s available and it gets them votes. Say NO to stupid lawmakers . Maybe a law should be made that if
a program fails ,the politician gets ousted or pays a penalty .
Who came up with the idea that just giving people loans they could never repay was the solution?
The real solution was securitizing those loans, packaged as AAA, and selling them to someone else.
Hah!
‘How can those monkey Politicians take a concept like ” red-lining was a wrong thing to do” ,and morph it into giving people who don’t qualify a loan ?’
My guess is that some Smartest-Guys-in-the-Room types in the lending business saw an opportunity to kill birds with one stone, by satisfying CRA mandates while making themselves a bundle of money on subslime loan commissions. Because they were sending large campaign contributions to the politicians in charge of lending industry oversight, it was not hard to get political buy-in.
Just a guess
A very good guess.
How can those monkey Politicians take a concept like ” red-lining was a wrong thing to do” ,and morph it into giving people who don’t qualify a loan ?
Define qualify?
If you can show me that the quality of loans based strictly on financial information, ie how much they made, how much they put down, what interest rate and terms they were given was inferior in CRA loans AND that CRA mandated a relaxed lending standards I’ll change my tune.
August 30, 2009
Alyssa Katz’ Our Lot: A Liberal Perspective On How Political Pressure To Boost Minority Homeownership Helped Blow Up The Economy.
By Steve Sailer
>Our Lot: How Real Estate Came to Own Us by Alyssa Katz, a liberal journalist and NYU journalism professor who writes for Mother Jones, is the best book yet on how the sacred cause of “diversity” merged with pedal-to-the-metal capitalism to bring us the Great Mortgage Meltdown.
…
In Chicago, Gale Cincotta started a national coalition of “community activists”, who helped pass the Home Mortgage Disclosure Act of 1975 and the Community Reinvestment Act of 1977. Cincotta remains a heroine to the author, although she can’t quite make clear Cincotta’s logic. If the feds encouraging lending to minorities had destroyed Austin, how was more hair of the dog that bit you supposed to fix Austin?
Sadly, Austin remains unfixed. On a visit to Chicago earlier this month, my wife drove by her old house. Her former home had no doorknob, just an empty hole in the front door. But at least it was still standing, unlike two large apartment buildings on her old block, which are now just crabgrass-covered vacant lots.
Cincotta died in 2001—across the municipal border from Austin in Oak Park. In telling contrast to Austin, that prosperous suburb that had succeeded in saving its famous district of Frank Lloyd Wright homes (where my father was born in 1917) by limiting the number of blacks allowed to move in through its notoriously illegal but effective “black-a-block” quota.
Katz notes that Cincotta’s organization of the left, combined with the invention of mortgage securitizing by investment banker Lewis Ranieri in 1983, made possible the disasters of this decade.
Cincotta began siccing her “pushy capitalist radicals” on Fannie Mae, which remained reluctant to buy the dubious mortgages of likely deadbeats. Still, Katz writes, “The reality was that to meet its growth objectives, Fannie Mae needed these poor people as much as the poor people needed them.”
Looking back from 2009, Katz asks:
“How did Fannie Mae and Freddie Mac … turn into the world’s biggest funders of Wall Street-backed subprime mortgages? … It all started with the best of intentions, with … the activists who demanded bank loans for the poor and urban.”
Democrat Jim Johnson took over as CEO of Fannie Mae in 1991. He soon came up with a nice round number as a goal: one trillion dollars to lend by 2000 to ten million incremental homeowners. Katz writes:
“Jim Johnson only needed to point to the Atlanta Journal-Constitution’s [Pulitzer Prize-winning investigative series] The Color of Money to show that he was embarking on nothing less than a civil rights crusade. …”
Fannie Mae wanted to raise the homeownership rate to 75 percent, which meant, Katz notes, that “Consumers would have to borrow more and pay less up front.”
Johnson, whom Barack Obama had put in charge of vetting his Vice-Presidential candidates until it was revealed that he had snagged a cheap mortgage as a “Friend of Angelo” [Mozilo], quickly found a private partner:
“By 1993, he’d made a deal with [Mozilo’s] Countrywide to buy $2.5 billion in loans for lower-income and minority borrowers. Financially, these homebuyers would be a motley lot, with no money in the bank, other debt to deal with, and less than stable employment. … Fannie Mae targeted much of its advertising budget to Black Entertainment Television and made a sponsorship deal with Univision, the dominant Spanish-language TV network. … The advertising campaign explicitly targeted young families, new immigrants, and single parents.”
Katz points out the culture-changing role that Fannie Mae played:
“More than anything, Fannie Mae made working people comfortable with the idea of taking on vast debt as the price for participating in the American Dream. From 1989 to 2004, mortgage debt for low-income people increased by 46 percent, compared with just 15 percent for upper-middle-income and 5 percent for high-income.”
…
Nice post P’Bear - thanks.
Leigh
So community activists somehow forced Wall Street and its regulators to go along with their plans? What power they hold!
Where are you reading that? Please provide a link or we will think you are making stuff up again with no support for your point.
I was responding to your days-long jihad against ACORN, which seems to me (and apparently many others) to be placing the group and its political allies as the origin and/or driver of this whole economic mess. I guess the Wall Street plutocrats were incapable of withstanding their pressure? They just had to give in, and make billions in the process? Give me a break.
Blindness is what I call it alpha. Some of the posters got so hung up on the bogey man ACORN, they lost sight of the real monsters in the corner.
You just answered how CRA “forced” them to lower standards.
“…days-long jihad against ACORN…”
Hyperbole will get you nowhere. Why don’t you support anything you write here with evidence, or else we will think you are making it all up.
For instance, why don’t you demonstrate a single post I have made before yesterday in my ‘days long’ jihad against ACORN?
Two days= days, no? I didn’t say weeks-long.
Seriously PB, anyone reading the last two days here has seen you post every article you could that painted ACORN and/or CRE’s as the bogeymen of this debacle. You can’t post a ton of articles that all say the same thing and then feign innocence when someone ascribes those beliefs to you. Impartiality doesn’t work that way. (Though many here hide behind the ‘impartiality’ of the endless articles they post. If they all say roughly the same thing, we must presume you somewhat believe it. If you’re proving some other, larger point, or being ironic, you should let us in on it.)
Somewhere lost in this perpetual argument over “socialism” is the fact that some very right wing bankers and financiers and lobbyists and politicians and CEOs made a TON of money by this loosening of lending standards so that poor people could get roped into the housing bubble. The poor FBs were always just a number, which justified bundlings of hundreds of thousands of loans into securities. Billions of dollars of bonuses were made on the basis of bad loans made to people who didn’t have a pot to piss in. Follow the money. The culprits are using ACORN, which from all accounts is completely mismanaged and clueless & corrupt, to cover their tracks.
More than anything, Fannie Mae made working people comfortable with the idea of taking on vast debt as the price for participating in the American Dream. From 1989 to 2004, mortgage debt for low-income people increased by 46 percent, compared with just 15 percent for upper-middle-income and 5 percent for high-income.”
Wasn’t this the idea to loan more in low income neighborhoods. Again what we need to find out is
1. What percentage in $ terms were CRA to non CRA?
2. How did the terms compare between the two?
3. Did the CRA rules mandate any lowering of financial lending standards?
3. What percentage of loan failures in $ terms for CRA vs non CRA, I might exclude those with failures do to job losses.
“3. Did the CRA rules mandate any lowering of financial lending standards?”
Doesn’t forcing banks to make loans they would not choose to make of their own volition by definition involve lowering of lending standards ?
Doesn’t forcing banks to make loans they would not choose to make of their own volition by definition involve lowering of lending standards ?
Huh?
Does your definition of “lowering of lending standards” only include the use of reliable, quantitative data, or does it also imply that lending to poor people and most particularly poor minorities is by definition lowering an institution’s lending standards?
The historical record shows that quantitative data alone was not the only yardstick used to determine lending standards (among other things). Do you dispute that?
Exactly
By your reasoning since blacks default at a higher rate than whites it would be fine for banks to avoid lending to a given black man or charge that person a much higher interest rate then a white man with the same job and down payment.
“lowering of lending standards” = forcing lenders to lower their lending standards sufficiently to make loans they would not voluntarily choose to make. I don’t really think this is very complicated, but perhaps I am missing some subtlety you could clear up for us?
“…or does it also imply that lending to poor people and most particularly poor minorities is by definition lowering an institution’s lending standards?”
I said nothing about lending to poor people or poor minorities, did I? You like to put words into other people’s mouths, don’t you.
For the record, I have nothing against prudent lending to poor people, rich people, brown people, purple people or green people, so long as everyone’s loans are underwritten by the same, nondiscriminatory, prudent lending rules.
Come to think of it, I believe a competitive lending market (one with lots and lots of small lending operations, not dominated by 800 lb too-big-to-fail gorillas) could withstand some highly racist individual lenders. You see, in a free market system, if one lender practiced racism and others did not, then the qualified borrowers in the discriminated group who were not served by the racist lender could be profitably served by one of the non-racist lenders in the market. This is one of the beauties of a competitive market system whose constituents include a large number of individual firms and households: There tends to be at least one firm for every customer.
I don’t really think this is very complicated, but perhaps I am missing some subtlety you could clear up for us?
No, it’s not really complicated.
You asked this:
Doesn’t forcing banks to make loans they would not choose to make of their own volition by definition involve lowering of lending standards?
And the answer is no.
Some lending institutions might voluntarily discriminate against people for any number of non-legitimate reasons, including neighborhood location, religion (or lack thereof), sexual orientation, ethnicity, and so on. They might even deem that decision prudent and financially sound, though the law says differently. And the lending institutions in question might claim that being forced to do otherwise is by definition “lowering their lending standards.”
See: once again: REDLINING.
I hereby assign the Prof to research and answer the above questions. I’d love to hear what he has to say in response to his own accusations. (Sincerely.)
This is an eye-opener. A new study shows the people who intentionally walk on mortgages are more likely to have higher FICO scores than those who really try to keep their mortgage alive.
http://www.latimes.com/classified/realestate/news/la-fi-harney20-2009sep20,0,2560658.story
Research using a massive sample of 24 million individual credit files has found that homeowners with high scores when they apply for a loan are 50% more likely to “strategically default” — abruptly and intentionally pull the plug and abandon the mortgage — compared with lower-scoring borrowers….
Among researchers’ findings are these eye-openers:
* The number of strategic defaults is far beyond most industry estimates — 588,000 nationwide during 2008, more than double the total in 2007. They represented 18% of all serious delinquencies that extended for more than 60 days in last year’s fourth quarter.
Maybe higher FICO people are smarter? They know that if they walk now, they can repair the FICO in less time than they would spend struggling in the house.
That’s the way that I’m reading it. They are smarter, or at the very least, more financially literate than those with lower credit scores. People argue with me all the time about the “strategic default”, but, frankly, I’m watching too many friends and co-workers destroy their lives trying to keep up with feeding a monster they are under by 50%+ and 100’s of K.
I know one couple, HH income of about 100K, who’s under their home by (at his estimate) 300K (they bought for mid-6’s a few years ago). I keep telling him, you’ve GOT to walk in that situation. 300K is life changing (especially when it’s BORROWED, and you actually have to pay back closer to 600K) to a couple making 100K. Their lives will never be the same as long as they keep feeding that gator. They will never break even, and it will take another 15 years before they have any hope of being able to sell. In that 15 year period, they will have paid 2X what they should have for their housing. Come on… Who wouldn’t walk when you’re presented with those kinds of numbers (and can actually do math).
Sadly, this couple is still seriously delusional, and figure that everything will “stabilize” in the next few years. I agree with them, but I think that our definitions of “stabilize” are somewhat different.
This isn’t a morality issue, this is business. Business has no morals/ethics, it has numbers, figures, and consequences. I tell people (to try to make them understand), that the bank laughs at them every time a MTG payment comes in on the home underwater 50% on the MTG note, just to try to make the idea hit home.
Do you think, for ONE second, if the banks had the ability to “let the loan go” they wouldn’t take it (and let someone else eat the loss)? Come on now!
“This isn’t a morality issue, this is business. Business has no morals/ethics, it has numbers, figures, and consequences.”
Isn’t the lack of morals/ethics the source of a lot of our society’s problems?
Right oxide ,and I bet a high % of those walkers could actually pay the mortgage, given they still have a job . I’m all for loan modification to compensate for the down market ,but when Congress decided to take away the penalty of walking ,that was going to far . There was a loophole in the tax codes that hardship cases could avoid the tax
penalty anyway ,so there was no reason for Congress to pass a law
that again put the penalty on the taxpayers backs instead and encouraged non-hardship cases to walk .
I bet a high % of those walkers could actually pay the mortgage, given they still have a job . I’m all for loan modification to compensate for the down market ,but when Congress decided to take away the penalty of walking ,that was going to far
Yep. But hey, that’s the current law. “Ruthless default” makes sense when you put little to nothing down. The whole point of a down payment is to make it too costly to walk (in most situations). It also forces a saving discipline prior to home purchase. A known *future* down payment also makes defaulting a little more scary (and thus less likely).
But our fearless leaders seem to be against making down payments a norm.
Got Popcorn?
Neil
I suspect its more like the people with typically bad credit know that its very likely that they will never qualify again for a home, so they are determined to attempt to work through this. Plus not everyone reads - they may not know to walk!
I suspect that they’re likely just more sophisticated about manipulating the financial system than those with lower scores.
Could also be that higher FICO folk are more likely to own multiple investment properties. So one of them might be more likely to be walking away from multiple properties.
Nice dig Dennis.
Commentary
Acorn: A Democratic Party Albatross
Sol Stern, 09.17.09, 03:30 PM EDT
Association of Community Organizations for Rapacity Now.
…
Our lawmakers’ sudden outrage is all a bit rich–and risible. Even in the halls of Congress it’s widely known that the sleaze now surfacing in Acorn offices all across the country was first brewed in the Community Reinvestment Act (CRA) of 1977. The legislation aimed to expand minority home ownership in the inner cities. Under CRA’s new rules, banks were forced to go through a costly process of reporting where and to whom they lend money and to show that they don’t discriminate or “red line” in minority communities. When banks need approval for mergers or acquisitions, the legislation gives “community groups” the opportunity to lodge complaints against them, alleging suspect lending practices. If there’s even the appearance of discrimination, federal bank regulators may put the proposed deals on hold.
The CRA legislation became Acorn’s wedge, allowing it to expand its presence in inner city neighborhoods as a community-based housing group. The organization developed a lucrative niche “advising” banks seeking regulatory approvals on how they could comply with CRA and thus avoid complaints by groups like … Acorn. Major financial institutions like J. P. Morgan & Company and Chase Manhattan, symbols of the capitalist system that Acorn said was the root of all evil, suddenly donated hundreds of thousands of dollars to the self-styled radical organization. If the banks didn’t cooperate, there was always the implied threat that Acorn would lodge a complaint. It was a shakedown operation that made Jesse Jackson and Al Sharpton look like amateurs. “The banks knew they are being held up, but they weren’t going to fight over this. They just wrote it off as part of the cost of doing business,” a banking industry insider once told me.
CRA would have created temptations for abuse of power by even the most scrupulous of community groups. But Acorn has never been anything but unscrupulous in trying to expand its power and reach. In Acorn’s worldview, the ends have always justified the means because the ends are nothing less than a utopian transformation of the world. “We are the majority, forged from all the minorities,” says the group’s official platform. “We will continue our fight … until we have shared the wealth, until we have won our freedom.”
…
Sharing the wealth means giving people loans they can’t afford or pay back and setting them up for failure ? Somehow I think these wealth distributors don’t think with head .
*link*
Cut and paste a paragraph into google if you think he’s making it up. Eschewing the link means the info posts faster. You can find the link on your own, or do you need the government to do that for you too?
Steve Forbes, Editor-in-Chief
Facts and Comment
“With all thy getting get understanding.”
Largely Useless, Even Harmful
The blunt truth is that even if we had had President Obama’s financial regulatory “reforms” in place four years ago–reforms designed to prevent another financial meltdown–we would still have experienced a horrific economic disaster. In other words, the Administration’s prescriptions deal with the symptoms–and those badly–not the underlying causes.
The astonishing housing bubble could not have happened without the Federal Reserve’s easy-money policy, which got under way in late 2003. If not for the excess liquidity created, there would not have been sufficient fuel to distort the housing market and ultimately the financial system. Yet President Obama has remained mum regarding the need for a strong and stable dollar. Without such a policy it’s guaranteed we’ll continue to experience financial turmoil.
The Fed’s punishment for its wretched doings is that Congress will likely give it more regulatory powers. That’s the thing about government: The more it fails, the more power it accrues.
…
The new consumer protection agency will also be tempted to square circles. Congress is not touching the Community Reinvestment Act and subsequent government decrees mandating that banks grant mortgages to unsound borrowers. Such an agency will thereby be tempted to mandate that credit be extended in accordance with that act, which will lead to future losses.
…
“…The astonishing housing bubble could not have happened without the Federal Reserve’s easy-money policy, which got under way in late 2003. If not for the excess liquidity created, there would not have been sufficient fuel to distort the housing market and ultimately the financial system.”
That’s Sir…as in… Sir Greenisspent!
There’s that word again: 14+% morgaget rates!
Yet President Obama has remained mum regarding the need for a strong and stable dollar. Without such a policy it’s guaranteed we’ll continue to experience financial turmoil.
This is laughable we are screwed with a strong dollar (massive unemployment and deflation) or a weak dollar (further collapse of the housing market and banks).
The best possible outcome is stagflation and that will suck too.
Do people consider the FED our government now??
My understanding is that it is that it is predominantly owned by the banks. Thats the biggest joke about giving them more regulatory powers, it’s the fox guarding the hen house and their will be no abillity to audit the number of chickens in the hen house by the public.
“best possible outcome is stagflation”
Very true and very scary. The worst case? Deflatuation, where deflation of the economy and currency devaluation skip merrily hand in hand into the abyss.
Again I’ll point out that if the problem was interest rates held low for too long then the problem should be fixed by the current very low interest rates.
The problem is
1. Securitization and rating agencies
2. Financial incentives at banks and the abillity to offload risk
3. Fraud
These are the things that changed. There is no securitization because everyone knows what’s in those Moody’s gold covered nuggets.
I can’t help but wonder how well BB’s 2007 research findings are holding up in this Great Recession?
I note the two firms who got the ball rolling on CRA loan securitization are now defunct, as of twenty-two years later.
Community Reinvestment Act of 1977
Nov 26, 2008 8:12 PM
…
Responding to concerns that the CRA would lower bank profitability, a 1997 research paper by economists at the Federal Reserve found that “[CRA] lenders active in lower-income neighborhoods and with lower-income borrowers appear to be as profitable as other mortgage-oriented commercial banks”.[26] Speaking in 2007, Federal Reserve Chair Ben Bernanke noted that, “managers of financial institutions found that these loan portfolios, if properly underwritten and managed, could be profitable” and that the loans “usually did not involve disproportionately higher levels of default”.[10]
According to a 2000 United States Department of the Treasury study of lending trends in 305 U.S. cities between 1993 and 1998, $467 billion in mortgage credit flowed from CRA-covered lenders to low- and medium-income borrowers and areas. In that period, the total number of loans to poorer Americans by CRA-eligible institutions rose by 39% while loans to wealthier individuals by CRA-covered institutions rose by 17%. The share of total US lending to low and meduim income borrowers rose from 25% in 1993 to 28% in 1998 as a consequence. [27]
In October 1997, First Union Capital Markets and Bear, Stearns & Co launched the first publicly available securitization of Community Reinvestment Act loans, issuing $384.6 million of such securities. The securities were guaranteed by Freddie Mac and had an implied “AAA” rating.[28][21] The public offering was several times oversubscribed, predominantly by money managers and insurance companies who were not buying them for CRA credit.[29]
…
Mr. Filter has potty problems again…
Here, Mr. Filter. Drink this glass of 220 Volts. you will feel better in the morning.
Okay…
Let’s call for the vegetable garden thread again….
It’s time to put some roughage down the pie hole.
Actually, peanuts and sunflower seeds. And flax seeds, plain, 2-3 teaspoons per day.
How about crushing or grinding those peanuts, sunflower seeds, and flax seeds and sprinkling them on a plateful of steamed broccoli and brussels sprouts drizzled with a little olive oil?
Brown rice with a little miso sauce. A glass of tomato / beet / carrot / sauerkraut juice.
A little exercise and fresh air and Mr. Filter will be good to go!
I see no mention of bacon, or deep-frying, or cheese sauce.
Sounds like communiss’ food to me!
Well, if Mr. Filter unblocks and lets the comments flow, I wouldn’t begrudge him a Saturday night meal of fried oysters, field greens cooked with bacon, a plate of home fries with cheese sauce and salsa, and a few beers.
Or if that’s too Texan, say he’s a Wisconsin boy, a simpler menu might suffice: a brat, a pickle, fried cheese curds, and LOTS of beers.
This is my vegetarian weekend. I am one of the few people who actually like Morningstar Farms Garden burgers. Spicey bean or Garden Veggie in a couple of slices of 100% whole wheat (smeared with Vegonnaise) is my selection for lunch along with steamed brussels sprouts, peas, and a handful of almonds.
I’m pretty hungry from swimming nearly two miles this morning.
One word, cabbage.
Raw or boiled?
Raw as in slaw, boiled in soup. It’s all good.
I like it raw in a salad like cole slaw. The smell of boiled cabbage makes me nauseous and the texture of boiled cabbage makes me gag.
I Love cabbage…
Try cabbage in its most compact form:
http://tinyurl.com/lsdqhm
Be creative, add whole grains (make a 100% whole wheat brussel sprouts sandwich) and you have a complete protein with powerful cancer-fighting chemicals and the whole grains are good for your heart.
Interesting piece on CRA by an interesting Fed governor:
Remarks by Governor Edward M. Gramlich
At Widener University, Chester, Pennsylvania
November 6, 1998
Examining Community Reinvestment
The Federal Reserve does many things, some well known and some not so well known. Our well known function is to set monetary policy, or the overall level of interest rates. That is not what I plan to talk about today. What I would like to talk about is one of the lesser known things we do, which is to administer the Community Reinvestment Act (CRA).
This act was passed back in 1977 with relatively little fanfare. Based on the charters of banks and savings associations, which say that these financial institutions should meet the convenience and needs of the communities they serve, the CRA encourages these financial institutions to help meet the credit needs of their entire communities, including low and moderate income borrowers.
While for many years the CRA was little known to those outside the banking business, recently it has become the source of much more attention and controversy. Some see CRA as one way to aid low and moderate income groups living or working in poor areas. Others see the same act as an overly-bureaucratic and distortionary credit allocation scheme. Provisions involving CRA became a major source of contention in this year’s political debates on credit union membership, financial modernization, and regulatory relief. What I would like to do today is provide a summary of evidence to date regarding CRA issues and propose several avenues of further study.
…
There are at least four important evaluation questions that could be raised about CRA.
* Since the law is designed to remedy discriminatory patterns in lending, a first question is how serious and pervasive these discriminatory patterns are, by income (the specific focus of CRA) and by race. There is a longstanding debate in the economic literature on this issue.
* A second question involves the operation of the law. If there is lending discrimination, would it not make more sense to find and prosecute this discrimination directly, rather than to impose CRA requirements on a great many financial institutions? Indeed, does it make sense to impose CRA requirements only on those financial institutions contemplating mergers, as the law effectively does at present, as opposed to on all institutions, or on noncompliant institutions?
* A third question involves properties of the loans. Are these loans incremental or not, caused by CRA or not? Are the loans repaid at normal rates, are the interest rates on the loans subsidized, and to what degree? Exactly who gains and loses how much from these loans?
* A last question looks at even broader implications of the program - did the small business lending and the community development lending stimulate neighborhood economic development in low income areas? Did the mortgage loans improve neighborhood housing integration?
…
There are at least four important evaluation questions that could be raised about CRA …
All good questions.
Why don’t the Fed and Treasury just formally merge, so reporters won’t have to keep making awkward references to “Fed, Treasury” or “The Federal Reserve and the Treasury”?
The Fed is doing a great job of increasing
transparencyopacity in the banking system:Fed, Treasury prep new bank pay rules
Guidelines may head off even stricter regulations
By Edmund L. Andrews and Louise Story
NEW YORK TIMES NEWS SERVICE
2:00 a.m. September 19, 2009
WASHINGTON — The Federal Reserve and the Treasury are preparing broad new rules that would force banks to rein in practices that made multimillionaires out of many financial executives during the housing bubble, officials said.
While the rules depart from the hands-off approach that dominated bank regulation for the past three decades, they could head off even stricter limits on financial industry bonuses.
Fed officials would give banks wide leeway in how they structure their rewards. They would not prohibit million-dollar pay packages or address issues of fairness. Rather, the rules are intended to restrict pay plans that encourage reckless behavior by rewarding only short-term gains.
And because the rules would be applied through the confidential bank examination process, it would be hard for consumers and investors to judge how strictly the rules were being applied.
…
Nothing a little GAO audit of the Fed couldn’t uncover here, I suppose…
I think they need to look at lower level front line fraud also . How is it that the front line loan agents were able to get away with all this fraud ?
What happened to a check and balance system on employees on the front lines . The pay scale of the lower level creeps was a issue with this
loan fraud market also . The whole darn system from top to bottom was
corrupt .
“The whole darn system from top to bottom was corrupt .”
The SuperCop-Fed has already shown its aptitude for turning a blind eye to the situation on the ground. Limiting the number of regulators to one would help to perpetuate the blindness. That’s why I am rooting for Sheila Barr and others outside the Fed to retain their stakes in maintaining the checks-and-balances of US Constitutional governance.
“Why don’t the Fed and Treasury just formally merge”
You and I both know that they wouldn’t be able to run the monetization machine if that were to happen. At this point if monetization of debt stops the economy crashes. If monetization continues it also crashes but at a much later date.
“You and I both know that they wouldn’t be able to run the monetization machine if that were to happen.”
Are you talking about from a technological standpoint? Please explain this, as I am flummoxed. Does the Fed literally print money and drop it into the Treasury’s piggy bank out of helicopters or something?
The Fed is currently functioning as the customer of last resort for Treasury debt. If they were one and the same would they buy bonds from themselves in order to suppress rates?
Cleaning up corruption should not be about partisan politics. If you are a Democrat, take out your own trash first. If you are a Republican, ditto:
http://market-ticker.denninger.net/
Best way for us to force themselves to cleanup their own corruption is to starve them of tax money. Sure, they will get money from lobbyists. But no money to force their socialist engineering laws.
I know there are ways to legally drive down your income taxes to 10%. My taxes next year are going to go way up, as I will be losing a loophole for a few months. So I will find another legal way to cut my taxes. It may happen anyway when unemployment in my field creeps up.
Government is way too big. Its power can be cut 90% without us lacking a defense and court system. Anything beyond that is tyranny, in my book.
Agree 100%.
The 100% agreement is to you blue.
I agree 100% too, blue.
We must have our hip urban über-shiny tin foil hats tipped at the same angle today
Some people are bidding up prices above and beyond the tax credit b/c they couldn’t buy otherwise. Plus, they’d lose the opportunity to snap up a ‘cheap foreclosure’ and show yesteryear’s GF how smart they were for waiting.
I agree the housing bubble story would make a great comedy — a dark comedy. Every time I think about the silly assumptions and assertions my family members made throughout this mania, I can’t help but roll on the floor and laugh my ass off.
At one point, after prices started heading down, Big Sis thought about paying a dude 10K to be her RE guru (I kid you not). All she had to do was open the MLS and see prices were falling. Instead she kept paying for seminar after seminar to get expert advice from the ‘movers and shakers.’ Meanwhile, her hubby was draining the equity line, month after month, and walking around like a RE mogul.
All they had to do was sell and rent for a couple years. Now, they are quintessential Joshua Tree riding FBs — Bitter-Debtors.
http://www.msnbc.msn.com/id/32923526/ns/us_news-crime_and_courts/
The corruption in our political system is mirrored by the corruption in our so-called justice system, which exists not to dispense justice but to provide opportunities and advancement for judges, lawyers, judicial employees, and cops. Not surprisingly, it seems like we’re seeing an increase in dirty cops and rogue operations.
and since we da people are pure as the driven snow, we deserve better..
Yeah, you got that right! ANyone read about the couple in San Marcos who were just arrested for their shoplifting sprees over the past 10 years? They went on Dr Phil last NOvember to brag about their deeds, what idiots! Why did it take so long for the FEDs to swoop in? I read that a Target employee had caught one of them stealing toys at the Vista store last Summer, they pled guilty and got a slap on the wrist, and this same employee saw them on Dr. PHil a few months later and connected the dots. Their house was raided in March and the delay in criminal charges was because it took awhile to get the records from eBay and PayPal to substantiate the extent of their fencing operation. This couple has 3 young children, what on earth were they thinking? San Marcos years ago was inland dairy country & ranches, now it’s birthed insta-neighborhoods of tract house sprawl. San Marcos is also home to the Real Doll. http://www.realdoll.com (that’s a whole other story…..)
Ben, that is most certainly NOT a family blog link.
oops, sorry, i wasn’t thinking…. ALl You HBBers, do NOT check out that link. I repeat, DO NOT click on the link.
um…eeeeeeeew.
Note to self: don’t open Salad’s blue linky things.
Leigh
Yes. But that is nowhere near as bad as what ACORN has done.
Personally, I’m surprised by the poor quality of political advice being given to the sitting President versus the candidate.
IMO, to encourage or advise the current President to take credit for an “economic turnaround” will only backfire. From a purely politcal perspective, it seems to me, the current Administration would have been better served to keep saying that the depth of the economic problems they inherited made them virtually unsolvable. (In my view, they were only remotely solvable, but everything the current Admin has done has made the situation much worse.)
By now presenting the notion that a turnaround is at hand and that disaster was averted, they set themselves up to “own” the much worse results to follow. This a very poor game of political chess and IMHO reflects a critical misunderstanding of economic reality on the part of the President’s economic advisors:
Obama Cautiously Takes Credit for Economic Turnaround
By Michael D. Shear
President Obama on Saturday continued his administration’s careful efforts to take credit for the slowly improving economy, using his radio address to tout the economic turnaround since world leaders met in London in April.
At the time of the G-20 summit, the world’s economic situation was dire, Obama said in the radio address. The meeting in London marked “a crisis that required unprecedented international cooperation to jumpstart the world’s economies and help break the downward spiral that enveloped all our nations,” he said.
Next week, Obama and the same world leaders will gather in Pittsburgh for what Obama called “a five-month checkup” on the financial actions taken by their countries.
“Because of the steps taken by our nation and all nations, we can now say that we have stopped our economic freefall,” the president said in the address, which is broadcast on the radio and the internet.
But the president was quick to note that he is not satisfied with the extent of the recovery in the United States or globally, saying that “stopping the bleeding isn’t nearly enough.”
“Our work is far from over,” he said. “We know we still have a lot to do, in conjunction with nations around the world, to strengthen the rules governing financial markets and ensure that we never again find ourselves in the precarious situation we found ourselves in just one year ago.”
‘By now presenting the notion that a turnaround is at hand and that disaster was averted, they set themselves up to “own” the much worse results to follow.’
I guess we will have to see how results play out going forward, but I tend to agree with you — it seems foolish to believe that we have gone from all-out Wall Street collapse to recovery in the span of twelve short months, especially against the backdrop of historically similar situation in Japan (over the past two decades) and the US (1930s).
I kinda agree too!
Obama should put out a banner: “Mission maybe accomplished? Sorta?”
(however, I shudder to think what would have happened under McCain…)
An update on our purchase experience:
We had some SNAFUs that we’ve needed to work through. I think the bank’s listing agent at one point started intentionally trying to get the deal to fall from escrow. She probably had another buyer of her own where she’d get both sides of the commission.
We are close to done now, we were forced to threaten slapping a lean on the property since she was not operating in good faith. Once the broker got wind of that things got moving again.
The loan has been a breeze, 50% down will do that. We will be in a 15 year fiXed at 4.875%.
It could very well close this week, we’ll see…
Good luck Dude!! Killer interest rate and nice short term. If you pay extra on the 15 yr, you can own it in 7 or 8.
My plan is to pay it off when my gold equals the balance, or 15 years whichever comes first. Sounds like the makings of a HBB pool?
interesting.. what did that agent do to get the deal to fail?
a bird in the hand is worth two in the bush. I wouldn’t assume she tried to sabotage the deal for the reason you suspect. She have any reason to believe you were weak or that the offer would fall through for some reason ?
We were doing annoying things like making sure the provisions of the contract were followed. I had marked up the contract before signing, even had to do it twice before acceptance by the seller.
You could be right about her not having another buyer but there has still been quite a lot of activity on the high end in these neighborhoods on properties that are priced right. We only got 10% off asking.
Sorry, forgot to answer the original question. She tried to make the deal fall out when the first 45 days expired. We were prepared to close but the well inspection etc. hadn’t been done yet, her responsibility per contract. She tried to say we hadn’t fulfilled and drew an agreement to stop the deal.
She may have been stunned by the appraisal that actually exceeded the purchase price and realized she could put one of her 3% downers into the prop.
Just got back from a short trip to Portland. My dear
wife likes to shop Nordstroms about twice a year so this was time for her fix.
I was amazed at the empty store fronts in downtown
Portland and the many empty expansives of large
commercial land down by the river. One after another for miles on Hwy 30 headed down the Columbia river front, huge commercial buildings all vacant.
Every where you looked you saw signs saying
“For lease, XXX,XXX sq ft”
Boy, glad something like that could never happen in Austin since it’s different here.
Did Portland do a lot of high-rise luxury condo towers? How did that work out?
It is everywhere, I was just in Monterey, CA, same story.
The head of the FCC plans to propose new rules that would prohibit Internet service providers from interfering with the free flow of information and certain applications over their networks, an official at the agency said Saturday.
The Federal Communications Commission chairman, Julius Genachowski, will announce the proposed rules in a speech Monday at the Brookings Institution, a Washington think tank, the official said on condition of anonymity because news of the announcement had not been formally released.
The proposals would uphold a pledge Barack Obama made during the presidential campaign to support Internet neutrality — the equal treatment of Internet traffic. That would bar Internet service providers such as Verizon Communications Inc., Comcast Corp. or AT&T Inc., from slowing or blocking certain services or content flowing through their vast networks.
Without strict rules ensuring Net neutrality, consumer watchdogs fear the communications companies could interfere with the transmission of content, such as TV shows delivered over the Internet, that compete with services the ISPs offer, like cable television.
i dunno if i like this..
Here the govt is playing good guy. It’s gonna insure information is free flowing. Strict rules. Regulations. Prohibitions.
No thank you. I’d rather they just butt out. Leave the internet alone. It doesn’t need any more governance.
These rules and regulation are NOT regulating the Internet itself. The rules are meant to block other entities from applying their little favoritisms to the Internet. Because if there isn’t a law against it, private enterprise will do it, regardless of how bad or dishonorable it is. Just look at MegaBank and MegaHealthInsurance.
Say the government does butt out. And then you find out that some ISP is blocking your favorite websites because they aren’t profitable enough, or generating enough hits for the greedy ISP. What will you say then?
i’d say goodbye to that ISP. I’d say that people object to poor service and will look for something more to their liking, and are willing to pay for it. There’s no law against setting up your own ISP (not yet, at least).
Mega-whatever spells opportunity for things like netscape and linux. Microsoft was a garage band and eventually surpassed IBM.
government knows nothing about competition.. knows nothing about business..
It’s just a bunch of politicians who are elated when some “consumer watchdogs fear” something and give govt an excuse to try and butt into private enterprise and regulate our lives in some way they don’t already regulate us..
“The lack of money is the root of all evil.” ~Mark Twain
Well here’s a local Boise story about a developer hitting the stops in the suburb of Eagle.
http://www.idahostatesman.com/235/story/905096.html
It was promoted as offering world-class sports academies. In 2005, Eagle officials said it would inject $50 million annually into the local economy from consumer spending, sales of about 1,300 homes, and hundreds of new jobs.
Legacy marketed itself as the nation’s first life-sport community. Developers said they wanted to create a community where people could own quality, affordable homes and live healthy, balanced lives. The development is south of Floating Feather Road and west of Linder Road
But fewer than 30 building permits have been issued for the 623-acre Legacy development, said Trey Langford, who tracks local building trends at http://www.buildidaho.com. The last permit appears to have been issued more than a year ago.
Now much of Legacy’s property is scheduled to be auctioned.
DinOr is here in Boise - we’ll have to drive past this dump tomorrow.
Just came across this interesting article:
Leading Senator Pushes New Plan to Oversee Banks
WASHINGTON — The senior Senate Democrat shepherding legislation to overhaul the nation’s financial system is planning to propose the merger of four bank agencies into one super-regulator, an idea that is significantly different from what President Obama envisions.
Senator Christopher Dodd, chairman of the Senate Banking Committee, wants changes in President Obama’s financial plan.
The legislation being prepared by Senator Christopher J. Dodd of Connecticut, who heads the Senate Banking Committee, would also differ from the Obama plan by diminishing the role of the Federal Reserve as a systemwide overseer.
Mr. Dodd’s plan is intended to be the starting point for the Senate as it redraws the financial landscape in response to the market crisis.
Here’s the rest of the story: http://tinyurl.com/mgv2ny
One thing worse than the Fed as system wide overseer would be Congress as overseer.
Politicians and many others are fighting for some portion of the Fed’s powers. We should be very careful who, if anyone, we allow to gain and use any of that power, imho.
That statement has so much wrong with it, I hardly know where to start. So an unelected bunch of secretive, unaudited billionaires, that largely caused the biggest financial disaster in history, is the preferred overseer of the system?
We should be careful? What have we got to lose? Do you know how much the “federal reserve note” has depreciated since these people were put in power? I believe it’s 95%. And that was before the housing bubble.
These straw man debates ain’t gonna cut it. How about this; we take the power away from the politicians AND the Fed. And that’s my sick-of-this-BS-opinion.
Some people have hated the Fed since the day it was born, back when a dollar was a dollar and backed by gold.. and hated central banks long before that.
ok.. give the people the Feds power and abolish the Fed.
The people will do a much better job of controlling the money supply and the cost of money than the Fed ever did, because people are not greedy and wouldn’t take advantage of the power. We’d never have a recession, never suffer inflation, nor have a repeat of the housing bubble.
I don’t hate anything, and the Fed was “born” a long time before I was. As I recall, even the first federal reserve note was backed by gold. (How else would people have bought into it?)
And here we have more straw men; “the people” can’t be trusted with the money supply. Taking power of the MS away from congress and the fed hardly means we conduct town halls on the matter each week.
A sound currency can’t be subject to the the greed and opportunism of which you speak. That’s the point; take away the whims of those in “power” and the result is stability.
Stability (sound currency and money supply) sounds pretty good right now, as so many around me wonder about their jobs and the future of the economy. And isn’t this what we are really taking about; the oversight of how this currency thing is going to work? Base money on soybeans for all I care, it would be better than the disaster we have on our plate now.
joeyinCalif,
Master of the straw man argument
So an unelected bunch of secretive, unaudited billionaires, that largely caused the biggest financial disaster in history, is the preferred overseer of the system?
Not only that but the FED is owned by the banks, thus as I stated above, you are putting the fox in charge of the hen house and then taking away the peoples abillity to count the chickens.