The Housing Bubble

As far back as I can remember, my father told me a person should only put their house in hock for an extreme emergency, and only after all other avenues had been exhausted.In today’s world it does not factor in to peoples judgment that living in perpetual debt is not a good thing. Of course the gubmint as a role model has set a very poor example.

Homeowners outraged over cancellation of their home equity lines
Sunday, September 20, 2009
San Jose Mercury News

Jeff, left, and Jenifer Schulken, of Cupertino, California, stand in their newly remodeled kitchen, September 3, 2009. The Schulkens’ home equity credit loan was frozen earlier this year, even though they continued to make their payments and their income had not changed. They are part of a class action suit against their lender, Chase, formerly Washington Mutual.

SAN JOSE, Calif. — A growing number of homeowners around the country are finding themselves unable to borrow against the equity in their home, as beleaguered banks take away a financial safety net many homeowners had counted on. And now some of those homeowners are fighting back.

Cupertino, Calif., homeowners Jeff and Jenifer Schulken filed suit this summer against JPMorgan Chase, charging that the bank unfairly terminated their home equity line of credit even though the couple provided documents showing that they could repay the money.

“They weren’t even interested in verifying whether I could pay it back. They just want these things off the books,” Jeff Schulken said, adding he had $160,000 available on his credit line in March when he got a letter from Chase asking for tax documents. He sent them immediately, and was told when he called the bank that the inquiry was only a formality and his equity line was not in jeopardy.

“The next morning, I got online and we had zero available credit,” he said.

The Schulkens got a $250,000 line of credit against their three-bedroom Cupertino house in 2005, used about $123,000 to remodel their home and had paid down the balance to about $90,000 by the time they got the letter from Chase, Jeff Schulken said. Schulken said every month he pays extra on his mortgage and more than the minimum due on the equity line of credit, carries no credit card or other debt, and his income from the family business — a day care run from his home of 21 years — has not faltered during the recession. Having the remaining $160,000 on his line of credit yanked away irked him.

Sup with this old fool, didn’t he know about the gubmints save the homeowners campaign/program.

Elderly Bank Bandit: I Robbed to Pay Off My Mortgage
Man being held on $50,000 bail
Sep 19, 2009

“I had to get us out of this,” the elderly man said Friday from the other side of the glass at San Diego central jail. “I’ve never done a bad thing in my life. But when you get desperate, I guess you throw all that sh– out the window.”

Listening to how Michael Casey Wilson of Santee tells it, a 17 percent mortgage, the threat of homelessness and a terminal health condition will turn a man to crime.

Wilson, 69, is accused of walking into the Bank of America branch in the 4100 block of El Cajon Boulevard in City Heights and handing a bank manager a demand note, saying he had a bomb. Prosecutors said he made off with $107,000 before he was caught lying on a front porch near the bank.

“I wrote them an apology. I am so sorry,” he said referring to the employees who rushed out of the bank. “It’s not my purpose in life to scare people.”

“If it would’ve worked the way I wanted it to, it would’ve just been he and I. But he told everybody. He shouldn’t have done that,” Wilson said.

On Thursday he pleaded not guilty to three counts of robbery and one count of falsely reporting a bomb to a business. In an interview Friday, Wilson was very open about the plan he had hatched to save his home.

“I was hoping to get $50,000 to pay off my mortgage,” he said. “Just to get the money and get the hell out of there.”

Peter Schiff is aiming at a run for the U.S. Senate from Connecticut. He has already raised more than a million dollars for his campaign, according to his web site. The Washington establishment will fight his candidacy tooth and nail because of his persistent complaints about federal government interference with the free market system and the economic correction.

” The pain of allowing Lehman Brothers to fail will be dwarfed by the agony of bailing out the rest of Wall Street, which is now a foregone conclusion,” writes Schiff. “Just because the Lehman bankruptcy created unpleasant consequences does not mean it was a mistake. On the contrary, sometimes doing the right thing hurts – especially if it is done to avoid even greater pain down the road. It just seems that our representatives are incapable of asking for short-term sacrifice. There is no price they are not willing to force the rest of us to pay to assure their own reelection.”

Schiff believes if current policies continue, the America we know – for which our forebears risked so much – will cease to exist. Lehman Bros. Revisited

(I have never contributed a dime to a Connecticut political race in the past, but we’ll make a considerable exception in Schiff’s race. He is glib, smart, and devoted to the idea that the Constitution means something and the federal government ought to abide by it. The country desperately needs more Solons with this point of view.)

Ben, I apologize for the length of this article, but I don’t have the computer skill to know how to transfer a hyperlink. However, I think my friends here will find this article important. The Automatic Earth archives.

Systemic failure, by design…

Debt Rattle, November 26 2008: From the Top of the Great Pyramid:

“Everyone has heard of pyramid, or Ponzi, schemes. In their simplest form they are short-lived deliberate frauds where a small number of existing members are paid from the buy-in of a larger number of newer members until the supply of newer members is exhausted, whereupon they collapse. Typically, the founders, and perhaps a few others who got in early and out before it was too late, end up making a lot of money at the expense of later entrants, who end up holding the empty bag. There are always many more losers than winners. What most do not realize, however, is that Ponzi dynamics are far more pervasive than people think. There are many human systems that ultimately rest on the buy-in of new entrants, and every one of them will ultimately meet the same fate, although it can take far longer for complex constructions than for simple pyramid frauds.

What allows a more complex pyramid to last for longer than a simple one is a supplementary source of funds to pay members, besides merely the buy-in of newer members. The more such sources there are, legitimate and otherwise, the more complex the pyramid can become and the longer it will last, as the apparent on-going success of early entrants will attract many more new ones. There’s nothing like seeing one’s friends and neighbours seemingly making a lot of easy money for a long time to eventually overcome the mental defenses of even the most skeptical.

Following the collapse of communism in Eastern Europe, there was a spate of such schemes - notably MMM in Russia, Caritas in Romania, Jugoskandic and Dafiment Bank in Serbia, TAT in Macedonia, and VEFA Holdings, Xhafferi, Populli, Gjallica and several others in Albania. They were the topic of my academic research at the time. All of these lasted for quite a long time, and some paid out spectacular returns for much of that time. For instance, the Albanian funds , or quasi-banks, began by paying out 3-5% per month over a 6 month term and were eventually paying out 10% per month (and briefly much more as an interest rate war ensued very late in the game).

They were able to do this temporarily because the income from the buy-in of new entrants was supplemented by revenue from drug smuggling, oil sanctions busting, money laundering, gun running, human trafficking and a thriving trade in car theft from across Europe. There was some revenue from legitimate business interests, but not much in a country that survived mainly on a combination of remittances and politically supported criminal activity. Ironically, Albania was the darling of the IMF at the time.

Over time, approximately 80% of the Albanian population was drawn into the pyramids, often selling their only real property in order to invest and then depending on the pyramids for all their income. When the inevitable happened, the vast majority of the population was completely dispossessed. Although many had realized that there was something too-good-to-be-true about their ‘investments’ they had succumbed to greed “in the belief that they were in the hands of properly structured criminality”, as The Guardian newspaper put it in February 1997. The population believed, erroneously, that there was an implicit guarantee from the government, which was conspicuously and intimately entwined with the activities of the various funds.

In the developed world, there are many examples of pyramid dynamics where there is no intent to defraud at all - where even the founders really don’t understand the underlying logic of their business model taken to its logical conclusion. Direct marketing, for instance, is essentially pyramid-based - depending on an ever-increasing network of sales people, each of whom receives a percentage of their income from those they can attract into the business. If these businesses can no longer grow by attracting new salespeople, then they are ultimately finished, but as they cannot grow perpetually (or eventually everyone in the country would end up making a living selling these products to each other), they are inherently self-limiting. They can last for many years thanks to legitimate business revenues, but not forever. Early entrants will always do very well, at the expense of later ones, and the last tiers will certainly lose their stake.

Large economic bubbles, typically formed in dominant economies during periods of manic optimism (see McKay’s Extraordinary Public Delusions and the Madness of Crowds), have the same underlying dynamic. Without continual buy-in from new money - new investors or more money from existing investors - they cannot grow, and when they can no longer grow, they will collapse. Although grounded initially in legitimate business activity, they morph into structures where one has to question the motives and understanding of key individuals. In some cases there may be intent to defraud, but what is far more common is a characteristic recklessness as to the risks those in control are prepared to take with other people’s money.

In their latter stages, such structures hollow out, feeding on their own internal substance as they lose the ability to attract new investment. In the terminal phase, there is the appearance of great wealth, but it is virtual, and therefore extremely ephemeral. The next step is implosion, as the virtual wealth disappears - where the claims to wealth generated through leverage that exceed the amount of underlying real wealth are extinguished en masse. Enron was a prime example, and on a much larger scale, so is the derivatives market. Bubbles, like all Ponzi structures, are inherently self-limiting and will always collapse in the end.

At the largest scale, empires are also grounded in pyramid dynamics, which is why they too have a limited lifespan. They grow by assuming control, either politically or economically, of new territories, positioning themselves to cream off surpluses from an ever-expanding geographical area in a form of involuntary buy-in. In the past political control through invasion or physical colonization was more common, but latterly globalization has enabled the development of a sophisticated system of economic control based on international debt slavery, supplemented with economic colonization for the purpose of resource extraction. Both resources and financial surpluses, in the form of perpetual interest payments, could be efficiently extracted from the periphery and accumulated at the centre, where they led to the development of an unprecedented level of socioeconomic complexity.

Such wealth conveyors in favour of the economic centre, at the expense of the hinterland, are the very heart of empire, but without continual expansion to feed rapidly developing central complexity, they eventually fail, leaving the centre unable to sustain its existing complexity level. As with economic bubbles, empires hollow out in the latter stages, consuming their own substance in a catabolic manner in order to compensate for the inability to strengthen wealth conveyors sufficiently quickly to keep pace with the expanding requirements of the centre.

As the hinterland is increasingly stripped of wealth and resources, and burdened with the increasing environmental impact of its own exploitation, an increasing fraction of it is left too impoverished to sustain a minimum level of internal order. In modern times we speak of failed states without realizing why many of these states are failing, or the impact that an increasing number of failed states will ultimately have on our own standard of living.

Wealth conveyors are breaking down, and no amount of financially squeezing the population in the central economies can compensate for the loss of that ability to accumulate wealth from virtually the whole world. The vast majority of the central population will be brutally squeezed as the elites try to hang on to their own privileged position, but this can only sustain a very small, and rapidly shrinking, fraction of the population, and at great cost.

We are living through the collapse of the final - and all-consuming - economic bubble at the end of the American empire”.

——————————————————————————–

I love the smell of capitulation in the morning
-In my upper-middle class community 20 miles east of downtown Smella, an interesting letter was posted on the window of the most respected real estate office in town. In a nutshell, it asked us to remember the good old days of 2005 when we could pull 100’s of K out of our houses. Also, they remember when almost all sales took place out of their office. Now, outsiders are getting a hold of listings through foreclosures and selling without understanding the “specialness” of the area and thus vastly underpricing the listings. They conclude by telling us to hang strong as a community to keep those outsiders at bay and prices up. No worries, soon the normality of high valuations will be restored because open houses are seeing much more activity now.
-That letter my friends is the smell of palpable realtor fear.

We are heading out to enjoy a debt-free day in the Big Apple. The weather is beautiful. The wind is calm. The sun is shining. I will have no thoughts of the destruction that Bernanke, Geithner, Fannie, Freddie, FHA and the rest of the devils have in store for us. We will celebrate the end of the recession with a whoop and a holler. I hope you can do the same.

What the stenographer fails to note in this story is, that the houses are in a crappy neighborhood are extremely over priced, even with a wino cellar. They are one of many examples of pure speculation that will end up as ghettos.

News - Local / Metro
Sunday, Sep. 20, 2009
Buyers, builders still can’t get loans

Shandon Square was supposed to be a showpiece of new home construction in downtown Columbia. Its half-million-dollar homes featured wine cellars, media rooms and elaborate master baths.

But more than two years after construction started, the Woodrow Street neighborhood has been hit by a one-two punch. Neither buyers nor builders can get a loan.

“The banks are not lending money. I don’t care if you’re Donald Trump,” said David Bryant, president of Metropolitan Development in Columbia, which developed Shandon Square.

An agonizing recession has crippled many Midlands builders.

Builders have trouble finding buyers for homes that sprouted up in the Midlands in recent years, including once-fast-growing Northeast Richland and Lexington counties. Even if builders sell the new homes they have built, banks won’t lend them money to build new ones.

As a result, some home builders are looking for other work, and an annual Midlands tradition - the Parade of Homes, showcasing builders’ work - has been canceled.

The event, usually held for several weeks in October, typically features an enclave of lavish homes in an upscale neighborhood. But builders couldn’t get financing to construct homes that didn’t already have a buyer in place, and buyers have been especially tough to land in the hard-hit market for high-end homes.

Instead, the group is offering a coupon and discount program for new home buyers, targeting homes that builders have not been able to sell.

“It’s no secret they need to sell some houses,” said Earl McLeod, chief executive of the Home Builders Association of Greater Columbia. “It’s been a bad year.”

McLeod said he hopes to be able to offer the parade again - when banks ease up on lending.

“We’re all in this thing together,” he said. “We’ve got to fight our way out of it.”

Here’s a real bombshell for those who claim the “mortgage crisis” is over. Got REO?

Nation’s Housing
High credit scorers more likely to cut losses and halt payments
Kenneth R. Harney

2:00 a.m. September 20, 2009

WASHINGTON — Who is more likely to walk away from a house and a mortgage — a person with super-prime credit scores or someone with lower scores?

It’s probably not who you think.
…
With foreclosures, delinquencies and loan losses at record levels, strategic defaults and walkaways are among the hottest subjects in residential real estate finance. Unlike earlier academic studies, Experian and Wyman had the ability to tap into credit files over extended periods of years to identify patterns associated with strategic defaults.

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 percent of all serious delinquencies that extended for more than 60 days during the fourth quarter of last year.
…
Strategic defaults are heavily concentrated in negative-equity markets where home values zoomed during the boom and have cratered since 2006. In California last year, the total number of strategic defaults was 68 times higher than it was in 2005. In Florida it was 46 times higher. In most other parts of the country, defaults were about nine times higher in 2008 than in 2005. Loans originated across the country in the pivotal market-turn year of 2006 have produced seven times more walkaways than loans originated during 2004, when property values were still rising.
…
While high scorers have lower overall default rates on all their credit activities than people with lower scores, it’s much more likely that when they stop payments on mortgages, the default is intentional and calculated.

Strategic defaulters may know that their credit scores will be severely depressed by their mortgage abandonment, Tantia said in an interview, but they appear to look at it as a business decision: “Well, I’m $200,000 in the hole on my house, and yes, I’ll damage my credit,” he said of defaulters. But they see it as the most practical solution under the circumstances, and they won’t have to deal with their negative equity albatross any further.
…

Whad’ya know — affordable housing quotas are much easier to meet when home prices are lower. I wonder if the geniuses running Fannie and Freddie ever considered the relationship between home prices and affordability?

The price is right
San Diego Housing Commission plans to borrow against its housing stock to produce 1,035 additional affordable units throughout the city

By Lori Weisberg

UNION-TRIBUNE STAFF WRITER

When San Diego got the go-ahead two years ago to withdraw from the federal government’s long-standing public housing program, it came with the proviso that the city create a relatively modest 350 new housing units for low-income households. The feds would be happy to learn that the city’s housing agency intends to nearly triple that, thanks to a battered economy that has greatly depressed housing values.

Good thing for US investors that sugar highs last forever…

Economy may be calmer, but investors still facing waves
By Gail MarksJarvis
2:00 a.m. September 20, 2009

At long last, investors have received the soothing news they have been wanting to hear: Federal Reserve Chairman Ben Bernanke said last week that the recession has probably ended.

“From a technical perspective, the recession is very likely over at this point,” Bernanke told an audience at the Brookings Institution, although he quickly warned, “It’s still going to feel like a very weak economy for some time because many people will still find that their job security and their employment status is not what they wish it was.”

Declaring the recession over may seem like the green light to finally buy stocks with peace of mind. But for investors who have been sitting back waiting for that comfort, they’ll find that many fund managers have beaten them to the bargain rack. Picking stocks now is not an easy task.

The stock market, after a 55 percent rally in the Standard & Poor’s 500 index, has been described by some analysts as being on a sugar high.
…

DC HBBers, -Not really on topic but I’m having a cookout today and y’all are invited. There will be coolaide drinkers present so best behavior please. I live in College Park about 1/2 mile from the College Park Station. If you’re interested and need directions feel free to call three zero one, nine eight two seven seven three six for directions.

“Do Buy” Into My Magic Recovery Meme, Dubai Honco Pleads:

Dubai World Chairman Sees Return to Growth After Reorganizing

By Anthony DiPaola Sept. 20 (Bloomberg) — Dubai World, the United Arab Emirates sheikhdom’s government-owned holding company, will resume growth after naming new executives and reorganizing holdings, Chairman Sultan Ahmed Bin Sulayem said.

“The worst for us and for that matter, Dubai, is over,” Bin Sulayem said in an interview with daily Gulf News that was confirmed by a spokesman today. “The situation at Dubai World is much better and we are going to move ahead with most of our programs.”

Dubai World, one of the three-largest government-owned groups in the sheikdom, had $59.3 billion in liabilities at the end of 2008 and is restructuring amid a slump in Dubai and a decline of nearly 50 percent in property prices. The company last week named two top executives and shifted assets to streamline the business.

The emirate’s state-run investment and real-estate companies are cutting expenses by putting projects on hold and reducing staff as the global recession cuts access to credit.

Dubai will soon return “to a strong growth path” as government steps to support the economy during the financial crisis will help expansion restore investors’ confidence, Bin Sulayem said.

The government plans to raise the second half of its $20 billion bond program to aid state-owned firms struggling to refinance debt. The first $10 billion was raised by selling bonds to the U.A.E.’s central bank in February.

Those measures have helped restore confidence in Dubai’s economy, meaning bankers are “ready to fund projects,” Bin Sulayem said.

In other words, since “the government is stepping in” (and presumably over a cliff), the laws of mathematics and gravity have been repealed, at least in Doobie - buy.

If the “worst” is over, maybe the “really really unbelievably bad worst” is just beginning?

So I had an interesting weekend.

I did some digging around on a situation and found that the base of an entire, huge real etsate scam rumor was based upon a misinterpretation of public records. Of all things, the supposed fraudster’s name.

I told this co-worker to chill out and conduct due dilligence before going “all in.” This would have been an easy case of slander/libel, IMHO. I’m glad he ran it by me first.

I’m reckless, but not that reckless.

To this skeptic, the Dudd plan and the Fed plan share a crucial element: Both create a sole super-regulator of the financial system. It would seem far easier for Megabank, Inc to only have to focus on buying off or otherwise thwarting the efforts of a sole regulator than to have numerous prying eyes trying to pierce through the opacity of their operations. Look no further than the failure of the Office of Federal Housing Enterprise Oversight to contain looming problems at the GSEs as evidence on how well a sole financial super-regulator might work.

Leading senator to suggest new plan to oversee banks
In The Union-Tribune on Page A1

By Stephen Labaton
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 Barack Obama envisions.
…
Dodd — who faces a difficult re-election campaign in Connecticut, partly because of the perception that he is cozy with the financial-services industry — decided two weeks ago to remain chairman of the Banking Committee rather than succeed his close friend the late Sen. Edward M. Kennedy as head of the health committee.

Senior Democrats in Congress say Dodd might have to thread a needle as he publicly takes on the financial-services industry — whose members have a heavy presence in Connecticut and are some of his biggest campaign contributors — while trying to project an image of independence from it to get re-elected. But as chairman, he may also have to make compromises with industry lobbyists to move the legislation through a chamber in which bankers hold political sway.
…
It sounds like it might prove necessary to find a Senator who is not in bed with top dogs in the FIRE sector to enact meaningful financial reforms. Good luck with that plan!

http://customsites.yahoo.com/financiallyfit/finance/article-107752-2691-0-how-one-family-shed-106000-in-debt?ywaad=ad0035

Looks like this is what America is heading too. Living within their means….

I just wanted to put a comment here to followup on yesterday’s conversation! Specifically, I am responding to Eddie, who was arguing that 130,000$ is excessively cheap (his quote,

“To me $130K for a house that is not in the heart the ghetto seems cheap. Dirt cheap actually. And I guess I am not the only one given the anecdotes told by Temporal.

$130K even with $0 down is a $700 mortgage. Call it $1000 with tax/insurance/maintenance. Can you even rent a house for less than that in Phoenix? How much is a 3 bedroom apartment? Can’t be much less than $1000.”

You may never read this Eddie, being that I’m posting it next-day, but I had to comment on this.

Do you remember a time, in the earlier parts of -this decade- where an investor could buy a home with a modestly small down payment and have a property CASH FLOW when rented?

Seriously, people in that far away time of the early 2000’s actually invested in homes to make profits every single month. We’re talking real investment, buying something and getting an immediate return (as opposed to buying a negative-cash flow property and speculating it’ll go up in value in a year or two to make up for the giant hole you’re putting in your wallet).

Somewhere along the line everyone lost their collective minds and forgot that 130,000$ is BIG MONEY in a town like Phoenix, where the average (recorded - non-illegal) family of 4 brings home 46,000$ a year. In normal times, with normal lending, a good middle-class home should cost roughly 3X this, and phoenix was EXTREMELY CHEAP historically (this whole city is sitting in the middle of a huge stupid-hot desert with suburbs 30 miles in each direction).

In normal times renting isn’t as cheap and buying in almost every market historically. The reason was many people couldnt qualify to buy or didn’t want the trouble of owning a home, and thus a landlord could make a premium over the cost (and 10-20% down payment) they put into buying that home.

The sad thing is, the last 5-6 years has warped everyones perspective SO MUCH. I was having a conversation with a manager at work yesterday, he’s in the process of having his home foreclosed on. I explained I had given up on homebuying and he reflected your sentiments exactly “oh, chicken little here is waiting until everything can be bought for chicken scratch”. He followed it up with “you’re the reason we’re having this problem, people like you not spending your money”, several people in the office laughed.

So I asked him how much he paid for -his- house, back in the early 2000’s, BEFORE taking out the HELOC, just north of south mountain (it’s a nice house, in a not-so-nice neighborhood). 139,000$. He asked me (no, he SPAT at me) if I seriously thought his house he bought in the early 2000’s was “only” worth 139,000$. I replied “well you said yourself the short-sale bid you submitted to the bank was for 150k, minus the 8k housing “credit” in the middle of a buying frenzy to take advantage of it… No, I think your house is worth less.”

Everyone laughed, because I obviously don’t know what I’m talking about. Homes just simply go up in value every year arbitrarily, right? There’s no such thing as fundamentals, it doesn’t matter that the average wage today is less then it was in the early 2000’s, it doesn’t matter that the local economy is in the shitter, who cares that the manager I’m talking to is making 1/4th the income he was making back then (we’re talking 10k to 2500$/month) and hasn’t personally made a payment on said house in over 7 months. No shadow inventory here, no sir-EEE.

Your right Eddie, not everyone is out of a job, I’m running into those 10-20 people outbidding me on homes. So-far most of those people outbidding me are owner-occupants financing through FHA with the smallest down-payment necessary, or at least so-says my realtor. There’s no skin in the game and it’s going to end badly. I’ll buy my home and spend less then 1000$/month doing it (and remember, that’s PLUS utilities, and Electric in phoenix is over 200-300$/month thanks to high AC usage to survive). Until then, I’ll live in my all-utilities-included 2 bedroom apartment for 800$/month 5 miles from work, and be happy about it.

If ACORN is closely tied to CRA and CRA is directly tied to the subprime lending crisis, how can this not be a national issue?
(Please see posts on yesterday’s bits buckets for some evidence on this point.)

Obama favors investigation into ACORN’s activities
(AP) – 35 minutes ago

WASHINGTON — President Barack Obama says there deserves to be an investigation into that hidden-camera video involving two employees at the activist group ACORN and a couple posing as a prostitute and her pimp.

The ACORN workers are seen apparently advising the couple to lie about her profession and launder her earnings.

The House has voted to deny all federal funds for the group, while the Senate agreed to shut off housing and community grant money. The Census Bureau has cut ties with ACORN for the 2010 national census amid Republican accusations of voter-registration fraud.

Obama tells ABC’s “This Week” that what he saw on the video “was certainly inappropriate and deserves to be investigated.” He did not say who should investigate. But he also says it’s not a major national issue and it’s not something he’s paying a lot of attention to.
…

Filed under: “Hurry, hurry, hurry…Buy Gold! Buy Gold! Buy Gold!”

“The IMF is the world’s third-largest holder of gold reserves….”

“These sales will be conducted in a responsible and transparent manner that avoids disruption of the gold market,”

“The IMF said it would “stand ready to sell gold directly to central banks.” The sales could also be conducted in the open market in a “phased manner” over time,…”

IMF Board Approves Sale of 403.3 Metric Tons of Gold:
By Sandrine Rastello, Sept. 18 (Bloomberg)

Daffy Duck: “Consequences, Schmonsequences, as long as I’m rich.”

Hey Mr. Bear morning math problem, what percentage is 500 of 1 .1 Billion people?

What’s Chinese slang for: “Me first!”

The Chinese Communist Party “needs to play an active role to facilitate harmony in political, ethnic, religious and class relations among our compatriots at home and abroad,” Hu said.

“The party must crack down on “separatist forces” that are plotting to create schisms between the nation’s 56 major ethnic groups,…”

“The “rise in incidents involving more than 500 people is worthy of heightened vigilance,”

China Faces ‘Arduous Task’ for Stable Growth, Society:
By Bloomberg News, Sept. 20

The debate on the role of CRA in the housing crisis is a tremendous one, which I am thoroughly enjoying. It ties in nicely with much of the discussion on this blog over the years about the folly of trying to turn every American household into a homeowner household. I have especially enjoyed the off-topic and poorly focused rebuttals of many of the far-left of left wing posters here. Let’s hear some more of them today

The article linked in below shows the direct role Bill Clinton played in destroying the financial integrity of the GSEs.

Subprime Commission
Posted 09/11/2009 06:48 PM ET
Peter Wallison, minority member.

Financial Crisis: Congress has impaneled a “bipartisan” commission to get to the bottom of the subprime scandal. Will it? Only if it listens to a panelist who predicted the disaster.
…
This crisis wasn’t a failure of capitalism, Wallison argues. It was a failure of government.

“The crisis would not have become so extensive and intractable,” he recently said, “had the U.S. government not created the necessary conditions for a housing boom by “directing investments into the housing sector , requiring banks to make mortgage loans they otherwise would never have made , requiring Fannie Mae and Freddie Mac to purchase the secondary mortgage market loans they would never otherwise have bought and encouraging underwriting standards for housing that were lower than for any other area of the economy.”

An early critic of the Community Reinvestment Act, a banking rule that socializes mortgages, Wallison argues too much regulation caused the mortgage meltdown.

As we’ve detailed on these pages, President Clinton strengthened the CRA (by requiring, for the first time, numerical quotas for affirmative lending) and used it to pressure banks into making risky loans and to adopt “flexible” lending standards.

The same pressure was brought to bear on Fannie and Freddie. Those agencies adapted their underwriting standards so they could accept the loans made under the CRA and other loans that did not conform to what had been considered sound lending practices.

Outrageously, Clinton’s HUD required Fannie and Freddie to underwrite fully half of their mortgages for lower-income, higher-risk borrowers — a quota that remained in effect several years into the Bush administration.

By 1997, Fannie was offering a 97% loan-to-value mortgage — well above the standard 80% LTV. And by 2001, it was offering mortgages with no down payment at all, along with other deficiencies. Those relaxed standards spread to the wider market, including prime mortgage markets and speculative borrowers, Wallison says.

By 2008, when the crash hit, Fannie and Freddie held well over a trillion dollars in subprime, Alt-A and other junk loans — junk that infected Wall Street in the form of mortgage-backed securities that were sliced and diced into tranches and sold and resold the world over.

“The crisis has its roots in the U.S. government’s efforts to increase homeownership, especially among minority and other underserved or low-income groups,” Wallison concludes.

Americans deserve an honest airing of government’s role in the mess. But don’t expect the commission, which will hold hearings and release a report next year, to give Wallison (who’s already being demonized by liberal bloggers as the “backer of the CRA myth“) much running room.
…

I posted this earlier last evening, thought it was interesting:

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/nxm6xc

pressboardbox,

Saw your postings yesterday. First posting too funny. Second posting about being stupid, pressboardbox you are not stupid. Aggravating, a PITA, but not stupid.

This guy raises the same point I have often made about lending to low-income communities: Why would banks leave money on the table by foregoing profitable lending opportunities?

House Committee Examines CRA
in News > Residential Mortgage
By MortgageOrb dot com on Friday 18 September 2009

A House committee hearing this week yielded varying opinions on the role of the Community Reinvestment Act (CRA), which Congress passed in 1977 in an effort to boost lending to low-income neighborhoods.
…
Lawrence J. White, professor of economics at the New York University Stern School of Business, took a different track. “The CRA is not a good public policy tool for achieving the goals of it advocates,” he concluded.

“[T]he CRA is based on the notion that banks systematically overlook profitable opportunities in [low- and moderate-income] communities,” he said, adding that the notion “seems unlikely in today’s environment.”
…

In America, you must behave like “others”… especially in regards to the colors you are “allowed” to choose from your crayon box…
(Down the street from Mr. Cole’s Grandma’s house)

News from behind: “The O.C.”

Colorful house among historic ones. Too much? Or cool?:
September 18th, 2009, by Jim Radcliffe OC Register

“…Her color choice has stirred up enough responses to cause some neighbors to start a petition against her house. The petition did not amount to anything, Carder said, but that does not stop some neighbors from personally disagreeing with her color choices…”

“It demonstrates a general lack of regard or consideration for her neighbors, and shows wanton disrespect in the context of a historic neighborhood,” said neighbor and interior designer Diane Von Gerichten.

BWAHAHHAHAHAHHAHAHHAHHAHAHAHHHHHHHHHHHHH!!! (fpss™)

Be like me, act like me, think like me…welcome to, the “The O.C.”

I just published a new post.

Sorry to post so much on CRA and ACORN, but there is just so much out there to post on — it’s like a blogger’s cornucopia!

Calif. Gov. Schwarzenegger seeks state probe of ACORN
September 16, 2009 | 1:48 pm

(UPDATE: 4:48 p.m. California Republican Gov. Arnold Schwarzenegger joined a growing chorus of officials today and called on the state’s attorney general to launch an investigation into ACORN due to the latest charges of illegal activity by the group, this time in San Bernardino, Calif.

His letter:

Over the past few days, I have seen a series of news stories regarding the ACORN organization that have concerned me greatly. As you may be aware, the most recent report has come out of San Bernardino.

Given this, I believe it is appropriate that your office launch a full investigation into ACORN’s activities in California. My administration stands ready to assist in any way necessary.

I apologize to everyone here who thinks I am some kind of a racist because of my sincere fascination over the ACORN scandal that recently broke. But I suggest those of you in this group should take a look at yourselves in the mirror, and ask, “Isn’t there something just a teensy bit fascinating about a story that suggests federal monies funded a consulting service to help hookers and pimps hide illegal income and activities”? Isn’t that just a wee bit intriguing?

Well, this is the big weekend for the Bozeman, Montana Parade of Homes, when builders show off their biggest boondoggles.

For the past 9 years, an older funky and modest neighborhood on the northeast side of town has been having the Parade of Shacks. It begins with a crazy hippy type parade, then everyone can go around and visit each other’s shacks or garages and have wine tastings, pancake cookouts, etc.

I didn’t go, a friend who lives in the neighborhood told me about it, but I did see one of the parade entires, an old car with a huge papermache chicken on top celebrating the new law allowing chickens. Proves there are still a few sane Americans left…

On Friday, I was walking with my toddler when a car pulled up to a house down the street and the driver asked if I knew the folk who lived there. “They moved out two months ago,” I said, and he looked relieved and said, “So it *is* vacant.”

He was from the bank, there to change a lock and do a quick check of the property. It was in pre-foreclosure. No big surprise to anyone on the street. This guy was driving around securing houses– like Ben?– and starting the process. I think he mentioned that he had fifteen or twenty properties to do that day.

The foreclosure moratorium in California ended on September 15th. Last week, then, marked the beginning of the next wave of foreclosures, which were kicked down the road to a time of year when there’s traditionally fewer sales! Brilliant strategy.

Some people saw the writing on the wall, like the former neighbors. They may well have gotten a new loan for a new place while there was a guarantee of no black mark on their record.

Incidentally, they paid $390,000 for the 3/2, more than twice what we paid for our larger house on a larger lot. Craziness.

Foreclosures in Simi nearly double since November

By Anna Bakalis (Contact)
Thursday, September 17, 2009

The number of Simi Valley homes now in foreclosure has almost doubled since November — from 595 to 1,041.

City Manager Mike Sedell said it’s a cautionary figure, but not enough to panic.

“Anytime there is an increase, there is some concern,” Sedell said.
…

.. who says there’s no great deals in San Francisco..

$165K .. and it’s on Nob Hill.

http://sfbay.craigslist.org/sfc/rvs/1384227868.html

$30 billion home loan time bomb set for 2010

Thousands of Bay Area homes have a ticking time bomb embedded in their mortgage. The homes were purchased with loans known as option ARMs, short for adjustable rate mortgages.

Next year, many option ARM payments will begin to readjust, slamming borrowers with dramatically higher monthly mortgage bills. Analysts say that could unleash the next big wave of foreclosures - and home-loan data show that the risky loans were heavily used in the Bay Area.

From 2004 to 2008, “one in five people who took out a mortgage loan (for both purchases and refinancing) in the San Francisco metropolitan region (San Francisco, Alameda, Contra Costa, Marin and San Mateo counties) got an option ARM,” said Bob Visini, senior director of marketing in San Francisco at First American CoreLogic, a mortgage research firm. “That’s more than twice the national average.

For the rest of the story click on the link: http://tinyurl.com/n2l8mj

Ah insurance companies

ST. LOUIS – St. Louis is perking up with jokes about the $200,000 cup of coffee. But officials at a college and its insurance company aren’t laughing.

St. Louis Community College at Forest Park must foot the bill after a coffee maker rigged to a faucet and left on in a photo lab led to a ruptured water line in July. About 10,000 gallons of water spilled down four floors, damaging ceilings, walls, computers and files.

So the bottom line is if any employee does anything stupid, and I’d rank leaving the coffee pot on minor in that department the insurance company won’t pay.

F them.

Meltdown jolts consumers from financial fairyland

The stock market bounced back, just as it has for nearly three decades. It just doesn’t feel that way.

Last year’s financial meltdown knocked the swagger out of Americans’ views toward investing. The baby boomers who forged the Reagan bull market; survived the 1987 crash; bought Amazon.com at $2 a share and sold at $100; brushed off the collapse of the dot-com bubble and kept plowing money into their 401(k)s are reassessing what they once believed.

It’s hard, after all, to keep the faith in buy-and-hold after the market crashed harder than at any time since the Great Depression. It’s hard to trust your financial adviser after Bernard Madoff stole billions from his clients. Most of all, it’s hard for a generation that equated personal finance with investing in stocks to accept that the rules have changed.

People are still investing. The Standard & Poor’s 500 index is up 58 percent since hitting a 12-year low on March 9. 401(k) participation rates have held steady.

But financial planners around the country say there is a sense that people are returning to basic principles that were shunted aside: Maximize your savings; limit your use of credit cards; keep a substantial emergency fund; know how much risk you can tolerate; diversify your investments; don’t try to short-cut your way to wealth.

For the rest of the story click on the link: http://tinyurl.com/m9wpjk

Sept. 21 (Bloomberg) — International investors are increasing purchases of Treasuries on a bet U.S. inflation will remain subdued, even as the dollar falls to the lowest levels of the year and the budget deficit tops $1 trillion.

Investors outside the U.S. bought 43.1 percent of the $1.41 trillion of notes and bonds sold by the Treasury Department this year, compared with 27.1 percent of the $527 billion issued at this point in 2008, government figures show. The Merrill Lynch & Co. Treasury Master Index of U.S. securities returned 1.18 percent in the third quarter after the worst first half on record as demand from the investor group that includes central banks climbed to record levels at Treasury auctions

Yep yell sell when your buying and yell buy when you’re selling.