Bits Bucket For November 3, 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.
November 2, 2009
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Finance and Economics
CIT files for bankruptcy
A prepackaged pratfall
Nov 2nd 2009 | NEW YORK
From Economist.com
CIT, a lender to thousands of small businesses, files for bankruptcy
Reuters
THE most gut-wrenching failures may be over, but the financial crisis continues to claim the occasional big victim. CIT, a lender to small and medium-sized businesses, from clothing retailers to Dunkin’ Donuts franchisees, filed for bankruptcy on Sunday November 1st after failing to garner enough support for a debt-restructuring plan. With $71 billion in assets, the century-old firm is only one-ninth the size of Lehman Brothers, which collapsed in September 2008. Nevertheless, its Chapter 11 filing augurs ill for America’s corporate minnows, whose financing options have narrowed dramatically over the past year.
Financial-services firms have a harder time than most bouncing back from bankruptcy, because their business relies so heavily on trust, which has a tendency to evaporate in such situations. CIT has improved its chances by securing the support of the vast majority of its bondholders for a “prepackaged” filing that will reduce its debt by $10 billion while allowing its subsidiaries to go on operating. Among those persuaded to come on board is Carl Icahn, a veteran corporate gadfly who had been trying to derail CIT’s restructuring in the hope of profiting by picking through its entrails; he has even offered a $1 billion back-up loan. The firm’s advisers say it could emerge from bankruptcy by the end of the year.
The pain will be widely felt. Bondholders will be handed new CIT debt worth about 70% of the face value of their old paper. They include a group of distressed-debt funds that gave it rescue financing over the summer, then committed $4.5 billion more as the firm continued to totter. Even Goldman Sachs, Wall Street’s savviest and best-connected firm, is taking a hit of sorts. Perhaps mindful that it could do without more bad publicity of the “vampire squid” sort, it renegotiated the terms of a loan facility that would have triggered a $1 billion payment if CIT went bust. Goldman will now get only $535m, half of that in collateral.
The biggest losers, of course, are shareholders, who will be wiped out as creditors take the equity in the new company. Also likely to lose their shirts are preferred shareholders, including the hapless taxpayer, who handed over $2.3 billion of funds from the Troubled Asset Relief Programme last December. After that bail-out, the Obama administration refused to inject more capital into CIT, or to guarantee its new debt issues, after concluding that the firm’s failure would not further destabilise the financial system. This raised the hackles of some in Congress who accused the White House of being more concerned with aiding big banks and their multinational clients than businesses on Main Street.
…
I guess they will get more stimulous now.Wipe out tour debts and back to business as usual.
I know that the idea of more stimulous has been all over the media recently. Krugman has been writing about it especially. But please note that there are too many fiscally conservative democrats in the House and the Senate to pass a new stimulous package that is similar to the original one.
Yes, we can get little piecemeal programs like cash for clunkers, and the stupid $8000 credit, but as we all know here that is little more than pinching sales from the future (and unneccessary subsidies to a few people who were ready to buy anyway). They mostly just tie up consumers with more debt they can’t really afford. They can pass because they give individuals a feeling of having gotten “theirs” just like the big banks and congress critters do have to pay attention to voters as well as donors.
You also might be able to get another rescue or two. I doubt it, but there is the possibility.
But a huge general spending package with aid to states to keep their budgets from collapsing under lower revenues and balanced budget requirements of their constitutions and lots of building programs? Uh uh. Not in the cards. Not during the next three years, anyway.
Has anyone in the Congress proposed following the UK in breaking up Megabank, Inc? I frankly see no alternative for fixing the broken banking system. But that is just my own opinion, of course…
Glass Stegall should never have been overturned. it was the beginning of the end of financial stability. Couple that with allowing the major investment houses to become publicly held and it was a receipe for disaster.
The guys in Washington need to understand that the guys on Wall Street are way smarter than they are, and are more highly motivated as well. That is why strong regulation, well enforced will always be needed.
I just its not too late, the horse appears to be well clear of the barn.
guys in Washington need to understand that the guys on Wall Street are way smarter than they are
I’m sure Phil and Wendy consider themselves the smartest couple in the room
Repeal of the Glass Stegall Act was actually the crowning moment of 20 years worth of “deregulation.”
Oh, and the “guys in Washington” ARE the “guys on Wall St.”
Professor Bear,
Thanks for sharing that. Again, I find myself wondering how they can permit this to happen ( and yes, “picking through the entrails sounds about right ) without turning the SBA into Phonie/Fraudie all over again?
At it’s core, has anyone seen a Dunkin’ Donuts go out of business?
I’ve seen a Bennigan’s go out of business. Not quie the same thing….
At it’s core, has anyone seen a Dunkin’ Donuts go out of business?
—————————————
Yeah, many of the Dunkin’ Doughnuts in TX went bankrupt and left for a few years in the ’90s - early ’00s. They are back now though.
Apparently, a subsidiary of CIT holds my student loans.
Overdog,
Well.., the minute you hit ’submit’? I was only attempting to establish the scale of CIT. Notice, these were franchisees so..?
Laid off tech workers, hell laid off people period, with their rollovers and stock options etc. ‘could’ find financing and make an honest go of it.
I guess it’s why I fail to understand the callous “let ‘em ALL fail” mentality around here sometimes? Can’t we all just get along?
I understood your point. That’s why i said my student loans were held by a subsidiary of CIT. Which I had never known (never cared to check I suppose would be more accurate) until I got a paper saying yes, they were still safe/ still had to be paid back, blah blah blah.
Shows CIT does more than just small business - they were a (relatively) secret lumbar supporting the spine of American business.
Has anyone seen a Hooters go out of business???
anyone seen a Hooters go out of business???
Eventually, over time, the business model will become old and tired, sagging bottom line and such. Not to dissimilar to Hard Rock Cafe and the one the models had.
“They mostly just tie up consumers with more debt they can’t really afford.”
But that is great for lenders, provided the full principle balance is guaranteed (e.g. w/ FHA and other federally guaranteed lending programs), as they can collect interest until the borrower goes into default, then collect the full principle balance from Main Street tax payers. Where is the downside with this policy?
Not a downside for the banks, but the retailers and service providers that would like to get a chance to compete for that money are rather pissed. They lost before they got a chance at bat.
Exactly polly.
fiscally conservative democrats
I prefer the more accurate ‘Corporate democrat’. Or Corporcrats.
Republicorps.
Corporipoffartists?
know that the idea of more stimulous has been all over the media recently. Krugman has been writing about it especially. But please note that there are too many fiscally conservative democrats in the House and the Senate to pass a new stimulous package that is similar to the original one.
Nothing a quick collapse in the stock market won’t fix.
Maybe the next stimuluous will pull in the more conservative by slashing income or payroll taxes.
Well, that would be very different than the last one. The only thing I am saying, and it is very limited, is that there is no political will to pass another stimulous similar to the last one.
I don’t think a stock market collapse would actually do it. Might get close, but not quite there.
And I’m not sure the liberals would go for just tax cuts. With savings rates going up, tax cuts don’t guarantee more spending.
The closest thing I could possibly see is specific federal funding to save teacher jobs which is a part of the last stimulous bill, but in no way all of it. More unemployment extensions and additional money for food stamps and to subsidize COBRA payments could happen, but you would be surprised what the blue dogs are willing to oppose, but not a huge general bill stuffed with projects. Not going to happen.
Sorry to be a spelling Nazi, but when three of the sub-commenters insist on misspelling “stimulus” in exactly the same way, I can’t let it go uncorrected.
az_lender,
Not at all! Actually my wife and I like to refer to it as “stibulous”! ( You have to say it like a small pouty child nursing a cold and sucking up boogers )
Ref: “I was hibbo-tized”
( What else can you do when you’re going through your third consecutive Gov. funded road construction project? )
“Not at all! Actually my wife and I like to refer to it as “stibulous”! ( You have to say it like a small pouty child nursing a cold and sucking up boogers )”
DinOR is as graphic as ever in his online descriptions…
That’ll learn ya durn ya !
Breaking up the banks is hard to do
Remember US banks that were ‘too big to fail’? If Congress gets its way, they will be bigger and less accountable than ever
o Dean Baker
o guardian.co.uk, Monday 2 November 2009 18.36 GMT
Those who like banks that are too big to fail will love the latest financial reform proposals circulating in the US Congress. The bill put forward by Barney Frank, the chairman of the House finance committee, does little to change the current structure of the financial system.
The “too-big-to-fail” banks will be left in place, even bigger and less accountable than before. There will be nothing done to separate commercial and investment banking, so giants like Goldman Sachs will be free to speculate with money guaranteed by the Federal Deposit Insurance Corporation. The main difference is that the Federal Reserve Board will be granted even more power than it has now. And, we will tell the Fed to be smarter in the future, so that it doesn’t make the same stupid mistakes that gave us the current crisis.
While we all want a smarter Fed, it is not clear that the bill before Congress will get us one, even though it will definitely give us a more powerful Fed. The new Fed will be able to decide which financial firms need to be put through a bankruptcy-like resolution process, paid for with a virtually unlimited amount of taxpayer dollars.
…
How much smarter can the Fed possibly get than to have the former chair of the Princeton University Department of Economics at its helm? They are already too smart for their own and everyone else’s good.
How much smarter can the Fed possibly get than to have the former chair of the Princeton University Department of Economics at its helm? They are already too smart for their own and everyone else’s good.
I am not sure if we need a smarter Fed. Perhaps a Fed who has integrity, honesty and the ability to do the right thing for the taxpayers as well as the country might be a nice change.
It’s not their intelligence but their fecklessness that is the problem.
So the socialists are breaking up their financial behemoths while the capitalists (heh, heh, ya I know) won’t let failures fail.
Truth is stranger than fiction.
Truth is stranger than fiction.
Until you learn that both socialists and capitalists are merely corporatists in sheep’s clothing.
Actually I should correct - I had the relationship of capitalism and corporatism backward. Corporatism is more the corrupt version of capitalism. Unfortunately capitalism is what gets the bad rap.
But the Europeans are actually doing something about the risk. We’re doubling down by propping up the beasts and then having our behemoths gobble up the small weaker banks we let fail.
The audacity of same!
I think it would be pretty simple, just create a new tax rate for officers of banks with assets greater than $x.
I recommend a 100% marginal tax rate for bank officers earning over $X00,000. Not sure about X, though.
It seems to me one can make a pretty strong arguement for a windfall profits tax on banks and hedge funds who received FED cocaine.
This name may stick. The “Credit Crunch” was so lame — right up there with “Cash 4 Clunkers” and “Dough 4 Dumps” in my opinion.
The Great Contraction of 2008-2009
Monday, 02 November 2009 12:57 Kenneth Rogoff
CAMBRIDGE - A popular view among economic forecasters and market bulls is that “the deeper the recession, the quicker the recovery.” They are right - up to a point: immediately after a normal recession, economies do, indeed, often grow much faster than usual over the ensuing twelve months. Unfortunately, the Great Recession of 2008-2009 is far from being a normal global recession.
The Great Recession was turbo-charged by a financial crisis, making it a far more insidious affair that typically has far more long-lasting effects. As Carmen Reinhart and I argue in our new book This Time is Different: Eight Centuries of Financial Folly , the Great Recession is better described as “The Great Contraction,” given the massive and simultaneous contraction of global credit, trade, and growth that the world has experienced.
Fortunately, despite a hobbled recovery in the developed world, emerging markets in Asia, Latin America, and the Middle East have enormous latent growth potential. Most should be able to grow strongly, despite the challenging global environment.
…
Apparently nobody cared to report on the Great Credit Expansion of 2002-2007?
1980-2007?
1960-2007?
1982-2009
Peak oil redux.
Alternative Energy bubble redux.
Gold bubble redux.
Housing bubble bursting redux.
Bank Failure redux.
Sneak Previews.
I teach in the MBA program at one of the local universities. At least once a class, I point out that we are just setting the stage for the next bubble/burst. Hopefully, I can spare my charges some of the pain that the rest of us have had to endure.
I’m old enough now that it doesn’t matter much to me, buy they have 30 or 40 years of insanity ahead of them.
They nod their heads like they understand, time will tell.
Spokaneman,
Thanks for sharing that and thanks for doing everything you CAN to help break our bubble-dependent cycle! There’s so many things on a micro level we should be imparting.
Perhaps by the time we’re ready for an old folks home we’ll have made a dent in it? Again, and I know it’s not popular here but I see so much of this as a basic failing of salesmanship? Likely as it’s Used House Salesman that -brought- us here. But that’s a common misconception on this board too? When you had multiple ‘bidders’ throwing money at you ( borrowed… money ) w/ both fists, how much of a ’salesman’ did realtwhores you need to BE!?
So like everything else, we tend to lump it together w/ all the things we hate about NAR. But how is teaching our children that just putting your products into the flow of the internet ( at a deep, DEEP freaking discount ) going to assure success in the future? But nobody wants to talk about ‘that’.
1913-2007?
Yup
“Fortunately, despite a hobbled recovery in the developed world, emerging markets in Asia, Latin America, and the Middle East have enormous latent growth potential. Most should be able to grow strongly, despite the challenging global environment.”
I’m calling BS on this. “Decoupling” is pure fantasy.
I agree. Wages are flat there as well, not to mention very low. The middle class in the third world has very little purchasing power. I have two cousins in Mexico, with 4 year degrees, who still live at home with their mom and ride the bus to work. Neither makes more that $1000 US per month.
How long will it take for Uncle Sam to see the light on too-big-to-fail?
Game Changer: U.K. Decides Too Big to Fail Is Too Big to Exist
by: Edward Harrison November 02, 2009
In a clear break with US economic policy, the UK government has decided that too big to fail is too big to exist. As a result, three large financial institutions now owned at least in part by government are to be dismantled. Moreover, talk of Tesco’s or Virgin getting the assets is yet another momentous shift in the British banking landscape.
The BBC reports:
Chancellor Alistair Darling has confirmed that Lloyds, RBS and Northern Rock will be broken up and parts sold to new entrants to the banking sector.
He said there could be three new High Street banks in the UK over the next three to four years as a result.
But the chancellor said he would only sell parts of the banks when “the time is right”, to ensure taxpayers get their money back.
There is speculation that buyers might include Tesco and Virgin.
One should not understate the importance of this decision. This is a game-changing move by the UK government. One year ago, it was the U.K.’s decision to recapitalise its banks which change the economic policy landscape. U.S. policy makers were forced to switch TARP policy from buying up dodgy assets at inflated prices to injecting capital (see my post “Recapitalising Britain” from 7 Oct 2008).
…
I was hoping and thinking the US might follow the UK and start breaking down the too big to fail banks. Banking should be honest as well as boring. Keeping banks big will repeat the thievery.
“Banking should be honest as well as boring.”
Likewise for economists turned central bankers:
“If economists could manage to get themselves thought of as humble, competent people, on a level with dentists, that would be splendid!”
–John Maynard Keynes, “The Future,” in Essays in Persuasion, 1931
LOL - I’m curious as to how Keynes reconciled that quote with his core view that economists should control the economy itself. Last I checked dentists didn’t nearly have that power*. I guess he thought that ultimate power and humility (or lack thereof) could somehow be decoupled?
Keynes had a remarkable knack for claiming to understand economics without actually understanding human nature.
Or maybe, like Greenspan, he simply changed views as his life went on.
(*Though I guess dentists do have the power of… the chair. Shudder. So maybe I speak too soon.)
“When the facts change, I change my mind. What do you do, sir?”
Reply to a criticism of Keynes during the Great Depression of having changed his position on monetary policy, as quoted in Lost Prophets: An Insider’s History of the Modern Economists (1994) by Alfred L. Malabre, p. 220
There will be lots of mind-changing ahead for the economics profession over the next few years.
“When the facts change, I change my mind. What do you do, sir?”
Sounded a lot like Alan Greenspawn in his last visit before congress to me.
“Banking should be honest as well as boring”
Volker was trying to express that yesterday in his interview w/Maria B. He expressed the opinion that investment class institutions should be kept separate from S&Ls.
SUGuy,
Nice. Additionally it squares w/ the sea change in mentality that banks should simply be financing progress ( not directing it! ) Honest and boring works for us.
“…has decided that too big to fail is too big to exist.”
Geez, Market “Innovation”, Market “Efficiency” & over-sized “Profits” … out the window in one fell swoop. Back to the 10 pm to 4 pm “banker hours.”
Dearth of borrowing, lending hobbles recovery
11:03 AM CST on Monday, November 2, 2009
The stock market is up nicely this year, the recession probably ended over the summer, and it seems we avoided Great Depression II.
And yet I and many others still have this nagging feeling that not all is well in the hinterlands. For starters, unemployment continues to surge, and corporate earnings remain lethargic.
I’m aware that the jobless rate and earnings are so-called lagging economic indicators, but geez, at some point profits and jobs have to come around. Don’t they?
Yes, says professor Carmen Reinhart of the University of Maryland, an expert on financial crises. But there is one very troubling issue that is weighing on the economy and is causing Reinhart to be less bullish than most about the stock market.
And that is simply that the credit channel is still not working properly, and credit is the lifeblood of any economy.
Reinhart, who has studied 800 years of financial crises and written a book on the topic, calls the current period in the U.S. a “post-financial crisis recession.”
In other words, this was not your typical, business-cycle recession. It was made much worse because of the near collapse of the global financial system. Just think how much worse the collapse of the technology bubble in 2001 would have been if the nation’s financial sector had collapsed too.
“Recessions that come after financial crises are more protracted because you don’t have the credit to fuel household spending or the credit to fuel business investment,” said Reinhart, co-author of the book This Time Is Different: Eight Centuries of Financial Folly.
…
PB - just curious - you’re just posting a lot of this just for information/discussion right? You don’t honestly believe a lot of this tripe, do you?
The notion that last year’s “near collapse of the global financial system” was what caused this recession to be as bad as it has been is ludicrous. That notion is for people who believe that The Stock Market equals The Economy.
Well, who was it who said “neither a borrower nor a lender be”? Or some such thing.
The only reason for so much borrowing is that prices are too high relative to income.
Re-set the board.
$500.00 homes.
Shakespeare said it — you know, the same playwrite who created the Shylock character.
Polonius. Long winded politician giving advice to his hot headed son who was headed back to Paris to whoop it up with his friends.
Oh, and a fictional character.
A fictional character with a lesson for the ages.
who was it who said “neither a borrower nor a lender be”?
I think it was Gilligan’s Island, or were they just performing Shakespear?
Ah, that was the musical of hamlet. Perhaps my favorite GI episode.
They were putting on a local production of Hamlet.
CarrieAnn, PB, that has got to be one of my all time favorite HBB exchanges!
+1 for digging up Gilligan’s Island memories. That show was awesome - and in many ways a mirror of society.
I’m still trying to figure out what kind of batteries they had in that radio. Can’t beat ones that last for years!
packman,
One Friday after work, check out Youtube for GI episodes. They have the original ( un-aired ) pilot actually filmed on an island.
Shortly thereafter the studio decided if they were going to do it, it would be filmed in a studio. I happen to think it was their best episode.
I was trying to find the video on youtube to include w/that post. It appears many have tried to reproduce it but the original is elusive.
Tina Louise singing “I want to be loved by you” a la Marilyn Monroe was, however, available for perusal. Ha ha.
Of course I remembered that was Hamlet, Professor B!
I mean, who could forget “Hamlet, Hamlet don’t be lamblet….”
Packman,
You were obviously not a true Gilligan Island fan. Even the most casual fan knows that the Professor rigged up the the radio with batteries made from coconuts, salt water and some other crap so Thurston Howell could monitor his stock positions.
I knew when I watched the episode as a child in the 60s that was Hamlet. I hope my omission of the ; ) didn’t give anyone the idea I wasn’t being tongue in cheek. I hit the send button on my comment before PBs comment id-ing it as Shakespeare came up.
“I was trying to find the video on youtube to include w/that post.” the Hamlet performance that is.
Man the way my comments appeared after others I hadn’t even read made me look like a complete idiot the entire thread.
“You don’t honestly believe a lot of this tripe, do you?”
I subscribe to no doctrine. When the facts change, I change my mind.
Oh, the facts don’t change. Perhaps our perception of the situation changes and our understanding of the facts changes.
Generally, I just take most of my reversals as generic stupidity and lack of understanding.
This bubble has taught me a lot though.
When you get right down to it, outside the realm of mathematics, there just aren’t that many facts. There are many solid hypothesis, however.
“Recessions that come after financial crises are more protracted because you don’t have the credit to fuel household spending or the credit to fuel business investment,” said Reinhart, co-author of the book This Time Is Different: Eight Centuries of Financial Folly.
Or this one
The FED is injecting easy money at a tremendous clip but, causing inflation by injecting cash fixes things when
1. People can make more at work
2. People can send the wife off to work when she wasn’t working previously
3. People can spend savings
4. people can borrow
All they will do this time is shift spending patterns from manufactured wants to needs.
Except, measton, people did that already and they’re still in over their heads. They have no cards left to play.
Jan 01.2010 there will be another announcement that airlines will further reduce national flying and furlough 1000s more.
Current routes that are major carriers(s80s/737s/757s) are being shuffled off to the puddle jumpers/”commuter” airlines(rjs) and the Anti Trust will allow BA and Iberia to take over routes that would have stayed with US workers.
Wait for it, wait for it.
As well as many other industries.
I know a guy who used to be a pilot with United. He was furloughed sometime after 9/11 and went back to the Air Force. Since then United went BK and lowered salaries. They asked him to come back a couple of years ago. He told me that his pay as a Major in the Air Force was far better than what United offered him.
DD all of the airlines getting together to put out an announcement the morning after New Years Eve is ludicrous.
I was a Delta Platinum Medallion for lots of years until about 2004 when I finally said I just can’t do this anymore, traveling that is.
I remember distinctly sitting in First in the summer of 2001 next to a deadheading DL 737 captain going from Atlanta to SLC. He was crowing about the new contract they had just signed making the Delta guys the highest paid in the industry. I asked him (because I have always thought that mainline pilots were greatly overpaid) if he thought Delta could pay that level of compensation once business was no longer booming as it had in the late 90’s bubble. He looked at me like I was from Mars. Of course they can, he says, look at all the money the airlines are making.
For now, I said, for now. The rest, they say, is history.
Before it is all said and done, there will be a couple (maybe one) legacy carriers struggling hand to mouth forever, well run upstarts with a business model that works, and subsidized service to the Murtha airports, losing money at a prodigious rate, but subsidized by the taxpayer.
Not a business I would want to be in.
looked at me like I was from Mars.
spokaneman, the pilots I have met, and I have known quite a few (af brat-from col lineage)and airline ones too-neighbors, those guys- think they are the cats meow. Even the poor ones that work for commuter carriers won’t let on they work 2 and 3 extra jobs, painting houses/delivering pizzas to subsidize their meager pay- commuter airlines that is. Now the majors- up to 01 those guys were making serious scratch. They all think they are Management, not union guys. Serious disconnect. How else you think they got their pay raises? Corp wants to be “nice guys”
Nope.
Anyway, Skip, I know 2 announcements that are forth coming. But just like the banking/fed announcements, everything won’t come out on the “1st”, but spaced out. Heck maybe those announcements have been made already but we dont’ read them vis a vis MSM the same way as the announcements that are within company propagandas.
Seems like the only thing that has bailed us out of recessions since about 1991 is a bubble of some kind or another, Tech, Housing, so what’s next? Probably Green Tech. It will kick in in a couple of years or so, drive unemployment down, certain sectors of the economy up, the equity markets up, and then around 2016 or so……………………….POP, it was all economically unfeasable. A few will have once again skimmed a lot from many. After that? Who knows, but you can bet there is something else in the wings for the 2020’s.
I, for one, will be watching that one from the old folks home.
I think Green Tech is a little more *ahem* sustainable than that. The tech bubble popped when people found that they preferred one-stop-shopping at a familiar name instead of comparing hundreds of upstarts. Housing popped when we simply ran out of people to occupy the homes that had been built. I don’t see any such limit on green tech, except maybe to run out of raw materials, or have to contend with OPEC dropping the price of oil.
Or maybe, just maybe the old technology is just plain old cheaper?
I don’t know on this one. I’ve been an advocate of research in solar power, water power and wind power for a long time.
Wind is cheap as hell with limited use areas. Still a good alternative.
Water power is also cheap as heck now too. Still waiting for ocean current applications or wave power capture. Feel this will be a good alternative within a decade.
Solar has been a mess for a long time but like other semiconductor technology, the cost is making big big strides tword cost competativeness with other technology.
Electric vehicles and hybrids are making big strides too. Hopefully we will have some progress and breakthroughs in storage technology. Supercapacitors or something like that.
A big peice in the hybrids going forward is the reliability of the hybrid systems has been excellent. From what I’m hearing, sounds like the Prius might outlast a lot of other cars on the road, at least from a drive train standpoint.
I guess now we will get to find out if Megabank, Inc (and its rich Uncle, Sam) can “go it alone”?
Britain Moves on Too Big to Fail
The Baseline Scenario November 02, 2009
By Simon Johnson
The WSJ reports (on-line):
“The U.K.’s top treasury official Sunday said the government is starting a process to rebuild the country’s banking system, likely pressing major divestments from institutions and trying to attract new retail banks to the market.”
The British style is typically understated and policymakers always like to play down radical departures, but this is huge news.
Pressure from the EU has apparently had major impact – worries about unfair competition through subsidizing “too big to fail” banks are very real within the European market place. Also, strong voices from within the Bank of England have helped to move the consensus.
The US position on protecting everything about our largest banks is starting to look increasingly isolated and out of step with best practice in other industrialized countries. Time to start planning for the break-up of Citigroup (C).
…
It seems increasingly likely to me that Megabank, Inc is toast, especially now that the Brits are repudiating “too-big-to-fail” with actions, not only words. How long will it take for denial of this reality to morph into acceptance?
Daniel Gross
Rules of the Jungle
Wall Street bonuses won’t go quietly.
Published Oct 24, 2009
From the magazine issue dated Nov 2, 2009
…
This year compensation will again eat up something close to a majority of Wall Street’s revenues. And while Goldman and Morgan Stanley have paid back their bailout funds, other large bonus dispensers still owe large sums of money to the public. Every dollar they pay out in compensation is one fewer they have to pay back the taxpayer. Wall Street’s structure may have changed a great deal in the past year, but its culture has proved remarkably resistant to change. The devastating earthquake of September 2008 didn’t alter this custom. And neither will the public opprobrium, the disapproval of President Obama, or the threat of Federal Reserve oversight. Come December and January, we will continue to be shocked by the level of bonuses—and Wall Street will continue to be shocked that we’re shocked.
Daniel Gross is also the author of Dumb Money: How Our Greatest Financial Minds Bankrupted the Nation and Pop!: Why Bubbles Are Great For The Economy.
“bonus dispensers” LOL!
Well, in the end, that IS the reason for starting/running/scamming/gaming a financial institution?
PEz dispensers.
Not that this is news or anything, but heard rumors that some Chinese companies are looking at U.S. mines (various metals).
Just to add…
This is just one example of what I’m hearing/seeing about the Chinese looking at hard assets — including real estate. Lots of stories about Chinese companies/entities buying up rather large swaths of land and also buying lots of the bulk REO purchases. Looks like a lot of dollar-dumping going on; not that I blame them.
How long before the chinese start buying farms and importing their own grain to China?
Yes, good question. This is something about which I’m quite concerned. Not sure why we think it’s okay to sell off the few things that enable us to be self-sufficient (especially ag land).
The USD is an IOU against American labor and resources.
Debt is slavery.
It is a fools game though for the Chinese to buy land and buildings in the US. They only buy the privelage of renting from the US government, for a while, until it gets tiring.
Rockefeller Center!
I doubt they would import the grain. More likely set up giant pig farms and import the pork.
They are already buying farms and importing their own grain (soybeans) in Brazil. I hear they are buying and tearing down thousands of acres of rainforest to create soybean farms.
Questions of US sovereignty may increasingly come to the fore as Chinese companies eye cashing in their dollars for hard US assets.
FWIW - these exact same questions/issues were being raised in the early 1990’s with regards to Japan. They were buying everything in the U.S. they could get their hands on, until their own economy crashed and the had to pull back. I read a book on it at the time - unfortunately I forget the name. The author was convinced that the U.S. was going to basically turn into a Japanese territory, starting with California.
Hopefully (for our sake) the result will be the same - the Chinese “problem” - them buying all our stuff - will end up being a bubble, that will eventually mostly go away, like it did with Japan.
I hope.
It’s worth noting that there are two key differences, on opposite ends of the scale spectrum:
- On the macro side we have population - the world’s largest in fact, and the need to acquire resources for this population.
- On the micro side we have atoms - as in the ability to use them in a forceful manner to acquire said resources.
- On the macro side we have population - the world’s largest in fact, and the need to acquire resources for this population.
You know this is wrong, right? You just typo-ed or something?
You know this is wrong, right? You just typo-ed or something?
You mean about them having the world’s largest population, or the population needing resources?
Care to enlighten? I believe I’m correct on both counts.
I understand the “We” in your post to mean China, which is somewhat confusing unless you know that China is the world’s largest country by population.
Sorry yes - I meant “we have” to mean “it is the case”, as in China has the world’s largest population. I didn’t “we have” as in “the U.S. has”.
Sorry yes - I meant “we have” to mean “it is the case”
Got it.
In the 70s the Russians were going to take over. In the 80s the Japanese were going to take over. In the 90s those darned illegals were stealing all the jobs and worse NAFTA was sending what jobs were left over to Mehico. Now the Chinese are taking over.
I wonder who the evil foreign villain will be in the 2010s….India? Brazil? Or the old standby….The Jews?
I wonder who the evil foreign villain will be in the 2010s….India? Brazil?
Bingo.
Brazil. The country of the future. And always will be.
You forgot the Arabs in the late 70s. They were also buying up a lot of property and people were worried of a possible take over by them.
I wonder who the evil foreign villain will be in the 2010s
Funny how you trust foreigners not to be “evil”…
Funny how you trust foreigners not to be “evil”…
Isn’t the majority of our country foreigners? ‘Cept for the native American indians and Mexicans.
You are forgetting radical islam.
Russia was a BIG problem at the time.
I would guess that Iran will be the next big problem.
Probably the Iran-Pack alliance will launch a sneak attack on SA/Iraq after they achieve some amount of nuclear weapons. Threaten Israel to keep the US from reacting.
After that, they move against Jordan, possibly Turkey and into Egypt, then Syria. Morroco might be the last hold out. Libya will be ripe for the taking after the death of Quadaffi.
That is the most probably scenario for the bad guy. Eventually that pact will threaten Greece, Cyprus, Serbia and India. Possibly it will threaten Europe as well, though I suspect it would be an irritant to the Russia, they will avoid major conflict stearing clear of Georgia.
Possibly suspect sympathisers in France and Germany to try to undercut their military resistance.
I would guess Iran is hopeful that the US is in enough of an economic collapse to be unable to resist.
China for all the bluster lacks the necessary ability to project force in these reasons.
For political reasons and demographic reasons would expect that Europe lets this get quite out of hand.
Possible that a well placed nuke strike against the US takes out one or two carrier groups. That might cause us to shift fleets and North Korea and China may open up another front against Japan, Taiwan and South Korea.
That is where things are headed.
So, we are quietly preparing.
Radical islam is growing in Egypt these days. And in the US. Meanwhile, most of us are headed into the twilight.
“The struggle of man against power is the battle of memory against forgetting.”
You guys are forgetting the situations that led up to WW1 and WW2.
Funny how you trust foreigners not to be “evil”…
Anyone with money to spend is “good”, right? Or hasn’t that been our credo for some time now?
james,
Your post sounds like a sci-fi book I read in the late 70’s or early 80’s based on the scenario you listed above.
Thanks James. People seem to think that geopolitics is some bogey man.
The Chinese have not met the power of eminent domain. Cities can always just take the land back.
The Chinese are very well acquainted with the power of eminent domain. That’s how things work in China.
Beat me to their entire SOP is eminent domain or some variant thereof just in a different context.
That’s how things work in China.
Touché.
PB,
And increasingly easier. ahansen made mention not long back that they’re already favoring ( largely busted ) REIT’s over guvvies. And why not? Some are trading at 20 cents on the dollar.
Can someone check the back door? I think it’s WIDE open.
Whoever holds a dollar holds a claim to a dollar’s worth of goods and services. When we shipped a trillion-or-so dollars to China the past few years we in effect shipped claims to goods and services. Now the Chinese are cashing in.
My, what a surprise.
I don’t believe the Chinese can buy actual things using American debt as currency, can they? Treasury bonds are a promise of future dollars, not quite the same as dollar bills. I imagine the Chinese are just buying the US with their checking account. They’ve been making deals in Africa for years.
This raises the question of the question of ownership. Does a person with no mortgage “own” his land outright, or is he really renting it from the government for taxes? Can the US stop individual sales to foreign entities? Also, the Chinese can only buy what’s for sale, unless they want to sieze physical assets by force. (good luck)
If it gets too threatening, the US can easily do a Dubai Ports on the Chinese.
“Treasury bonds are a promise of future dollars, not quite the same as dollar bils.”
But they are close enough.
Close enough for what? I will ask you the question again the next time US interest rates are over 10 percent.
“Close enough for what?”
Close enough to traded for cash with a few keystrokes on a keyboard.
to traded = to be traded
Billions of dollars of treasury bonds are traded every day. Converting them to cash is no big deal.
Treasury bonds are very liquid in today’s interest rate environment. But try a thought experiment: Suppose (perhaps due to central banking experiments gone awry) that next week, T-bond yields spiked to 15 percent. Would they still be perfectly liquid?
If your answer is yes, then kindly define liquidity, as it would be useful for those sitting in houses they “cannot sell” to understand the definition.
Well if they spiked to 15 percent next week - I know I’d be buying some.
So yeah - I’d say they’d be pretty liquid in that case, since I personally would define liquid as:
- Having a pool of buyers, willing to buy at a given price
- Having a mechanism to buy and sell
They would be liquid as long as a buyer and a seller could find each other and could agree on a price.
This is true of anything that is for sale. Price levels make little difference when it comes to liquidity, something the stock market demonstrates on a daily basis.
Even Enron had buyers of its stock even after it was apparant the company was hosed.
“They would be liquid as long as a buyer and a seller could find each other and could agree on a price.”
I thing you guys nailed it. From Investopedia:
Liquidity
1. The degree to which an asset or security can be bought or sold in the market without affecting the asset’s price. Liquidity is characterized by a high level of trading activity. Assets that can by easily bought or sold, are known as liquid assets.
2. The ability to convert an asset to cash quickly. Also known as “marketability”.
The reason that I bring this up is that some people (especially Wall Street bankers) have claimed that housing and derivative assets based on housing as the underlying (e.g. MBS) are illiquid. I personally don’t understand what they are talking about. So long as the owner of housing, MBS, or whatever is willing to lower the price to a level the market will bear, what would stop them from easily selling these? I personally would even buy MBS based on subprime loans if the price were close enough to $0.
PB,
I imagine these housing and derivative assets based on housing are considered illiquid when they must be sold at considerable loss - at levels that would bankrupt the holders of these properties or so-called assets. In this case, they are truly illiquid.
But what, exactly is the TERM on those bonds? As they become due, the owner has a choice, buy another bond, or SOMETHING ELSE. It appears that the Chinese are starting to look at the something else answer.
It’s mixed, but has been increasingly short-term lately. This is true for all countries.
Foreign holdings:
August 2008 short-term $245B, long-term $1699B
August 2009 short-term $607B, long-term $1752B
Not a pretty picture. It’s better for us if they had long-term.
I don’t believe the Chinese can buy actual things using American debt as currency, can they?
We’re not talking about treasuries though. The U.S. has built just over a $2 Trillion trade deficit with China over the past 25 years, however China only holds $800 Billion of our treasuries. That leaves them $1.2 Trillion to buy other things.
i was thinking the same thing…the chinese have over a trillion dollars of cash reserves.
cash…plus they hold a bunch of our debt.
and it’s the repatriation of all of those cash reserves that will send inflation to the moon…supposedly.
repatriation
“I don’t think that word means what you think it means”.
Repatriation is when Americans who have US$ overseas bring them back into the US. Here though we’re talking about Chinese-owned US$.
Nevertheless the principle is there - yes Chinese purchases of US goods/land/etc puts upwards pressure on prices. We see it already in gold, oil, and treasuries in fact.
“I don’t think that word means what you think it means”.
I think we all knew what he meant.
China is a manufacturing powerhouse thus the goods and services they are mostly interested in buying are those that support their manufacturing entities.
Why should it be a surprise to learn that the Chinese are mostly interested in buying raw materials? What are manufacturers interested in acquiring most if it isn’t raw materials?
For the past few years there have beed “discussions” as to the true value of the dollar. The gold bugs deemed the dollar as fiat pieces of paper, unbacked by anything, hence totally worthless.
Some of us maintained the dollar is indeed backed; it is backed by exactly one dollar’s worth of goods and services.
So who’s correct? For the answer you might want to ask the Chinese.
“The gold bugs deemed the dollar as fiat pieces of paper, unbacked by anything, hence totally worthless.”
I have occasionally made an offer to gold bugs posting here to have Ben forward my home address to them so they can forward all their worthless fiat paper to my home address. So far, no takers…
Most gold bugs are glad to trade dollars that they deem worthless for gold that others deem worthless.
As normal, the truth is really in the middle. “Worthless” is rhetoric - when pressed any but the truly insane (pun partially intended) gold bugs wouldn’t actually hold that dollars are truly worthless.
“…gold bugs wouldn’t actually hold that dollars are truly worthless.”
I guess they wouldn’t be trading The Precious™ for those worthless pieces of paper if they truly believed you could not trade said paper for food, shelter, entertainment, transportation, educational services, etc…
“… but the truly insane (pun partially intended) gold bugs wouldn’t actually hold that dollars are truly worthless.”
Lol. Go back on the HBB archives and look over some of the posts of Aladinsane, Watcher, and some others.
Well - that’s why I said “any but the truly insane”. There are some who may believe so (e.g. perhaps alad to a certain extent), but they are not many.
I’m a big gold proponent, but I would never say dollars are “worthless” except in a rhetorical fashion. In truth all things are worthless in certain contexts, including gold. Just as all things have some worth in certain contexts - e.g. if you’re looking to fertilize a field even sh!t is more valuable than either dollars or gold.
Guess we’ve gone through the whole “definition of worth” a lot before, so not worth going through it again.
(no pun intended)
Most of what I own is in terms of numbers on computers. 11% of what I own is real. Umm…$89,000 in paper series I and EE bonds is probably real so make that 20%. The 11% is precious metals. I have only $30 in paper currency PB. And it’s sitting in my wallet.
Spot price of gold (about 5 min. ago) is up to $1078.
Two words, guns and food. Why does gold have intrinsic value. Well it does until it doesn’t and you still can’t eat or heat with it. At least you can bun dollar bills for a while.
realestateskeptic,
According to one of the survivors of Kosovo, after six months without running water ( after the constant shelling! ) “you’d have traded a gold brick for a roll of toilet paper!”
I was in Russia in the fall of 1998, and in Argentina in the spring of 2002. I have seen the value of modern fiat currency plummet in a matter of hours. I think I will keep a bit of the shiny stuff in a safe place as insurance, thank you.
dinOR - Yeah and if you had dollars at least you could have wiped
As the archives would show, I do have some physical and advocate having some on hand, as I think it is a good hedge, especially in the early and middle stages of any meltdown.
However, I’d still rather have guns (have plenty) and food (I am not a survivalist stockpiler [yet]) over the precious.
I think it is the paperbugs who need to explain exactly why a piece of paper with a portrait of a “dead President” (although not all of them were Presidents, of course) has any value in the long run. Historically, it’s pretty obvious that has not been a big problem with gold.
No, you can’t eat gold. But you also can’t eat paper “money”. And the amount of food (or anything else) you can buy with gold doesn’t decrease over long periods of time, whereas historically the same is not true of paper money.
What are manufacturers interested in acquiring most if it isn’t raw materials?
Customers?
“Customers?”
Lol. You’re right; without customers there’s no reason to manufacture anything.
Not that has anything to do with the point I was trying to make.
Not that has anything to do with the point I was trying to make.
Oh yeah. Just usual smart-assery on my part. Lucky I made it through high-school, actually.
Lol. You’re right; without customers there’s no reason to manufacture anything.
Americans though tend to have the quite arrogant view that we’re the only people in the world who consume things.
..and the Customers for houses and cars are thinning out.
There is no lack of new houses and cars despite the media spin.
There IS a lack of jobs, money and credit for FB and GF’s.
State new vehicle registrations tumbled in September
By Joe Taschler of the Journal Sentinel
Posted: Nov. 2, 2009
Total new vehicle registrations in Wisconsin dropped by almost 10,000 in September from the previous month, according to an automotive market analysis firm
Tolkan said those numbers are expected to show improvement in the market.
Area dealers said the September numbers also were down because inventories had been depleted by the clunkers program and further reduced by production slowdowns by automakers.
“Nobody had any inventory,” said Jim Griffin, who operates auto dealerships in Waukesha as well as on Brown Deer Road and at a new location on S. 27th St. in Milwaukee.
Palmen Automotive Group in Racine and Kenosha also had very little inventory, President Andy Palmen said.
“Our inventory was gone” in September, he said. There were so few cars on the Kenosha lot, he decided to have it repaved, he said.
OMG…the last NEW car in Wisconsin, maybe even in America may have been sold…and I didn’t get mine.
http://tinyurl.com/yeho9jw
Ooops ! I forgot…
…the sense of urgency…the sense of urgency.
packman,
The notion that “we’re the only people that consume things” is bucking some serious headwind right about now?
I suppose the only true guilty pleasure “I” have taken in all of this is knowing there are so many people out there right now ( with their sources of credit fueled consumption utterly drying up! ) that for the first time in their lives.., being forced to do without necessities like Starbucks and weekends at the coast.
Welcome to “MY” world! ( @$$clowns! )
“Our inventory was gone” in September, he said. There were so few cars on the Kenosha lot, he decided to have it repaved, he said.
The dealers out here had cars and trucks up to the rafters in September. There was even a megedealer that went out of business in August, and his lots were chock full of vehicles.
There are and have been many days when I wonder where that much vaunted “efficiency of modern capitalism” is.
the Chinese are mostly interested in buying raw materials?
They are buying up everything in S. America that can be dug up. Everything.
Africa too. Also building infrastructure there, with Chinese labor - roads, dams, electric grids, etc.
Saw a newsday.com article earlier about a Chinese company awarded a $3 bn copper mining contract in Afghanistan. The US bid was not attractive because it included a lag period until the country is stabilized, but China is ready to start up soon regardless.
Speaking of dollars, have we found that several billion dollars sent to Iraq 7 yrs ago? Is anyone looking for it?
Halliburton.
Yep Haliburton. Where do you think they got the money to move their world HQ to Dubai while getting those really nice no-bid contracts?
Those officials just don’t bribe themselves, you know!
Mark my words
1 day they will blockade or invade taiwan
and we will be powerless to do anything about it
“Mark my words”
Consider yourself a marked man,dj. I think I may be one also - been noticing some patterns developing near the edges. But hey, you’d be paranoid too, if everybody else was out to get ya! (Credit to Woody Allen)
My observation is this: What would we actually have the power to do if they blockaded or invaded Tokyo, Manila, or Jakarta?
San Fran harbor- I know; we would just turn loose Pelosi and watch them scatter.
On Taiwan:
Well. First of all we’d notice them building up a landing fleet.
Then we probably send out the 7th fleet to intercept them. Since our intel capabilities are better than their’s we probably make contact with them somewhere in the middle of there assault on Taiwan’s not inconsiderable airforce. Taiwan has a nice bunch of US hardware with a lot of F16s. That is probably a decent match against the Su27s and other interceptors that PLAA would send up.
Basically our Navy could field 700+ fighter plans in the area with in a couple of hours.
Not sure how much of our airforce in Japan and Korea could make it over. Probably expect another contingent of 80 odd F22s to show up in short order. I’d also expect them to engage in Korea.
After about 24 hrs, we’d have 2000 planes in the area and three or more aircraft carier groups with many missle ships.
So, I’d gather an all out fast assault might succeed if China caught Taiwan napping. I’d expect that it wouldn’t work and China would lose the vast majoity of it’s airforce over the Taiwan strait.
Air control would mean the Naval assault would possibly be repelled with massive losses.
This is also assuming nobody goes nuclear and we don’t unlease our submarine fleet on them.
We have a 4:1 advantage in number of fighters against China. That and I think our missles, radar and planes are just better than anything they’ve got.
Similar with lots of the ground game stuff. Plus an agressive move like that would trigger Japan/Korea and others to redirrect a massive amount of resources to defense.
On Japan:
I don’t think China would send all of their sailors to die fighting out in the big blue. They’d have no chance at all.
On Iran scenario from earlier:
Well, even if those jokers got hold of a couple nukes, wouldn’t matter much. Basically they only have enough juice to maybe, MAYBE, handle Iraq. They have only a couple hundred fighter planes. Possibly the Caifornia Air Guard could take them on.
Gee, I’d have thought they could muster up a little bit more impresive of an airforce than that.
HAHAHA
They sell their bonds and crash the market interest rates to go sky high and we enter the Great Depression….HA!
I’ve got a solution for Taiwan. Become Israel.
The we would have to send our troops and ships to protect them ….hey more guvmint spending
I had a long post that got fed into the filter somewhere.
My take on the situation with Taiwan is this:
If push comes to shove we will probably defend Taiwan. That is in the case of a shooting war.
At this time, ff China decided to launch a sneak attack it would be unlikely to succeed, yield only limited benifits and only cause the US/Japan to strength positions. It seems like a loser.
China has a very limited naval capacity. They don’t have a lot of carrier groups and such. Their air superiority fighters are 3.5 generation Su27 planes. All together they have a pretty big number of planes but we have a 4:1 advantage in fighters combined with better training and superior equipment. We destroyed this Russian junk back in the first gulf war.
An all out attack with several hundred aircraft would likely involve the United States deploying both of its Pacific fleets in the theater. That would bring to bear 700 fighter craft, many missle ships. Additionaly you’d probably have 80+ F22 Raptors deployed in a few hours after the engagement started.
So, if Taiwan manages to hold out for a mere 8 hrs, then China gets engaged by several coordinated US attacks. Probably would lose their entire fighter strength doing this. They’d still have some ground attack support planes but would be unable to provide cover for them. They’d have to extend them out over the straight of Taiwan, near 100 miles across.
After about 24 hrs, the airforce and Navy will have responded with submarines and moved additional aircraft carriers closer.
That is our potential response here. Remember, we are not even counting on the fact that Taiwan has 400 fighter planes of their own.
Finally it is unlikely there will be much of an element of surprise. We are bound to notice China concentrating it’s troops and aircraft nearby. They’d have to do this to conserve fuel for the attacks.
Now, if they got all sorts of suicidal and decided to go out in the blue water. Well, they’d just get their poor sailors killed in large numbers. They have zero, yes zero, carriers.
In a few years they might have a carrier fleet. In general they don’t produce the best quality goods for the military and struggle with catching up the technology. I know they seem like this amazing clossus to some of you. However, if you are in tech fields, you realize you have to deal with special challenges when handing electronics to china. They don’t understand stuff and break stuff all the time. So, you have ot make sure designs are extra robust.
Similar with a lot of the high end military stuff. You want to be careful around explosives and missles and stuff. Don’t get extra chances to say “oops, that glitched”.
Anyhow, China is gearing up so they can have this conflict over Taiwan. All this will do is convince the people in Taiwan to buy up a lot of expensive F35 fighters, along with our friends in Japan and Australia. Additionaly we will probably end up adding a couple more carrier groups.
Again not a big problem economically. I suppose we will also upgrade the Los Angeles class submarines and the ballistic missle subs as well.
Anyhow, I think Taiwan is some kind of insult to China’s pride but otherwise doesn’t effect them one bit. If they make agressive moves it would not be in their interest. It also seems unlikely that they will develop any kind superior millitary strength without a similar reaction from the US and our allies (Australia, England, Japan, Korea, Taiwan).
Now if Iran got to the point that they were a serious threat to anyone…. maybe they’d try something. I can’t imagine they are as dumb as some of us here on the board though.
This gets to the inflation scenario — even without wage growth.
Not only do we have to pay more for imports as the dollar falls, but we also have to pay more for anything that can be exported, including food and raw materials.
And once those raw materials are all going out of the country to those whose currencies are worth more, we won’t even have the choice of recreating manufacturing so we won’t have to import.
More walk away from homes, mortgages.
USA TODAY
When Sharon Sakson was laid off recently from her job as a television writer and producer, she burned through her savings to pay the $2,400 monthly mortgage on her home. But she soon decided it didn’t make sense: Her home was worth thousands less than the mortgage she carried on it.
The home had been appraised at $390,000 when she refinanced in 2006, but she estimates it’s not worth the $320,000 it initially cost in 2004. So Sakson did what a growing number of homeowners are doing today: She stopped paying and decided to let the bank take her home.
“I’m walking away from my house,” says Sakson, 57, who stopped making payments about six months ago on her home in Pennington, N.J. “The bank can have it.”
What Sakson did is called a strategic default, or a voluntary foreclosure, and it’s fast becoming a major challenge to the government’s $75 billion effort to keep distressed borrowers in their homes. Walking away from a mortgage is serious business — it can knock 100 points off your credit score and make you ineligible for a new mortgage for seven years. Yet, about 588,000 borrowers walked away from homes last year, double the number in 2007, according to a recent study by credit-scoring firm Experian and management consultants Oliver Wyman. While home prices are rising, the increases pale compared with overall drops in home prices since 2005 that threaten to push millions more homeowners into Sakson’s predicament, owing more than their homes are worth and seeing little chance of rebuilding equity soon.
More will walk away, which will hamper the housing recovery, reinforce lenders’ tight credit policies and drag on the economy’s recovery, economists say.
“It’s increasingly a more important factor driving the foreclosure crisis,” says Mark Zandi, of Moody’s Economy.com. “As we move forward, the job market will stabilize, and the big thing will be strategic defaults. People are going to determine it doesn’t make financial sense to hold on to their homes. That’s going to be a significant problem. Strategic defaults mean foreclosures could be high for a long time.”
You can bet there will be more cries for additional gubmint programs, to ’stabilize’ the housing market. One mirage after the other.
“The mortgage unit of Citigroup says one in five borrowers who defaults does so willingly, even though they’re able to pay the mortgage. “It’s a very large number, and it’s a very, very significant risk to the housing recovery,” says Sanjiv Das, CEO of CitiMortgage, adding that new government programs to curb strategic defaults may be needed”.
Waiting & hoping for prices to stabilize.
“How bad the strategic defaults issue gets may depend on how much more home prices fall and whether the government does more to help homeowners with mortgages larger than their homes’ value. Both Zandi and Das suggest further actions to reduce mortgage principal for underwater borrowers”.
The woman in the USA Today story lost her job and her income. I wonder if she would have continued to pay her mortgage despite being underwater if that were not the case.
I wonder if she would have continued
Some are. I know of one family. They are still working and foreclosure across from them sold for 80k, so their 240k originally is worthless, but just something over their head/roof.
I am trying delicately to encourage them to stop paying.
I think a foreclosure takes about 300 off your credit score and you can actually get a loan backed by fannie mae after 3 years from foreclosure.
fannie mae after 3 years ??
Exactly…
“It’s a very large number, and it’s a very, very significant risk to the housing recovery,”
It’s frighteningly funny that “housing recovery” means a completely different thing to him than it does to me.
Speaking for myself, “Housing Recovery” means prices down to where the average wage-earner in an area can afford the average house.
“Housing Recovery” for a lot of other people means massive building, y-o-y appreciation at some level above inflation and tons of REIC jobs.
“Speaking for myself, “Housing Recovery” means prices down to where the average wage-earner in an area can afford the average house.”
Bleeding heart socialist who doesn’t believe in the American Dream of making a fast and easy buck!
Exactly how I feel, Lavi.
(Hi SD!)
There is a certain wonderful inevitable aspect to deflation.
I’m guessing that Citi will try to sneak in some additional punative legislation that will also be deflationary as it increases the risk for home buyers.
So from this we may conclude that Hank Paulson’s name calling (called the walkers - “speculators”) last fall didn’t have its intended effect, huh?
If walkers are “speculators”, what is the proper name for the subprime mortgage lending kingpins of Megabank who loaned them the money?
Dream Makers?
I was thinking more along the lines of ‘Bookies’
Love your handle, MrsWheezer.
How about Heart Breaker and Dream Maker? Sing it Pat Benatar.
Your love is like a tidal wave, spinning over my head
Drownin’ me in your promises, better left unsaid
You’re the right kind of sinner, to release my inner fantasy
The invincible winner, and you know that you were born to be
You’re a Heartbreaker
Dream Maker, Love Taker
Don’t you mess around with me!
You’re a Heartbreaker
Dream Maker, Love Taker
Don’t you mess around - NO NO NO!
Your love has set my soul on fire, burnin’ out of control
You taught me the ways of desire, now its takin’ its toll
You’re the right kind of sinner, to release my inner fantasy
The invincible winner, and you know that you were born to be
You’re a Heartbreaker
Dream Maker, Love Taker
Don’t you mess around with me!
You’re a Heartbreaker
Dream Maker, Love Taker
Don’t you mess around - NO NO NO!
You’re the right kind of sinner, to release my inner fantasy
The invincible winner, and you know that you were born to be
You’re a Heartbreaker
Dream Maker, Love Taker
Don’t you mess around with me
You’re a Heartbreaker
Dream Maker, Love Taker
Don’t you mess around with me!
You’re a Heartbreaker
Dream Maker, Love Taker
Don’t you mess around with me!
You’re a Heartbreaker
Dream Maker, Love Taker
Heartbreaker!
edge,
Right, and who is HE to be talking about speculators? The answer here is to create an entirely NEW category in FICO.
Yes, we understand you lost/are losing your home due to unforeseen financial difficulties -beyond- your control. We get it. Unfortunately we will have to ding your credit score accordingly.
WHEN… dealing w/ strategic defaulters we will make special notation ( in language approved by the legal dept. ) that you could well afford your home, you simply chose NOT to continue making payments as agreed! There, fixed! No gub’mint ‘program’ necessary. Oh and good luck getting a car loan or credit card w/ your new found wealth!
At some point after the poop quits hitting the fan, there are going to be so many foreclosed houses sitting that the banks and the loan underwritters (Fannie, Freddie and FHA) will have no choice but to grant new loans to previously defaulted mortgagors. That will be the only way to clear the overwhelming inventory. I’ll bet you will see some kind of program like that in a couple of years or so. Remember, they are gambling with the taxpayers money, putting it at risk is not a huge issue with them.
How is it a strategic walk-away? She ain’t got a job!? No money, no pay for house.
BUT if you pay off all your credit cards and other debt you probably ADD 100 points…so its a wash
Walking away from a mortgage is serious business — it can knock 100 points off your credit score and make you ineligible for a new mortgage for seven years.
From the link:
More will walk away, which will hamper the housing recovery, reinforce lenders’ tight credit policies and drag on the economy’s recovery, economists say.
————————-
Funny how opinions can differ. I’d say these walk-aways (along with tighter lending, etc.) will make the recovery happen much sooner. With cheap houses, we can afford to spend all our remaining money (after saving, of course) on more important things that will actually benefit the economy far more than high housing prices.
Bernanke Housing Gamble May Bring Pressure to Extend Fed Aid.
Nov. 3 (Bloomberg) — Federal Reserve Chairman Ben S. Bernanke is gambling that come March, he can stop the purchases of mortgage-backed securities that have propped up the U.S. housing market. Congress may have other ideas.
The central bank says it must eventually withdraw its unprecedented economic stimulus to avoid a surge of inflation as a recovery takes hold. Plans to buy $1.25 trillion of housing debt are the centerpiece of its program to pull the nation out of the worst recession since the 1930s.
Bernanke, who convenes a meeting of the Federal Open Market Committee today, is counting on private investors to fill the void left by the Fed when its purchases end. If he’s wrong, he may come under pressure from politicians to maintain support for housing or even extend credit programs for small businesses and consumers. That would threaten the Fed’s ability to conduct an independent monetary policy.
“The nightmare scenario for the Fed would be to see them try to sell their mortgage portfolio, and Congress steps in and tries to stop it on the grounds that the housing market hasn’t fully recovered,” said Ethan Harris, head of North American Economics at Bank of America-Merrill Lynch in New York. “The attempts to influence the Fed in the exit strategy will be pretty strong.”
Bernanke, who convenes a meeting of the Federal Open Market Committee today, is counting on private investors to fill the void left by the Fed when its purchases end. If he’s wrong, he may come under pressure from politicians to maintain support for housing or even extend credit programs for small businesses and consumers. That would threaten the Fed’s ability to conduct an independent monetary policy.
How many things are wrong with that paragraph? I count about 23. In a nutshell this illustrates almost everything wrong with this country.
“…he may come under pressure from politicians to maintain support for housing…”
Are they suggesting that so far, Big Ben has warded off pressure to prop up the housing market? How does that square with the evidence?
“How does that square with the evidence?”
Descent control?
Many a country has become a banana republic when the Legislators start interfering with the independent operation of the Central Bank.
Seems there are about three oxymorons on that statement.
(no offense intended)
Looks like the IMF is waving its arms about Japan’s potential for default:
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/6480289/It-is-Japan-we-should-be-worrying-about-not-America.html
Japan is drifting helplessly towards a dramatic fiscal crisis. For 20 years the world’s second-largest economy has been able to borrow cheaply from a captive bond market, feeding its addiction to Keynesian deficit spending – and allowing it to push public debt beyond the point of no return.
The rocketing cost of insuring against the bankruptcy of the Japanese state is telling us that the model has smashed into the buffers. Credit default swaps (CDS) on five-year Japanese debt have risen from 35 to 63 basis points since early September. Japan has suddenly decoupled from Germany (21), France (22), the US (22), and even Britain (47).
Our black swan?
Thanks for the link. Wow.
Remember the scene in Spaceballs when they find a VCR copy of the movie Spaceballs, and then fast-forward it to see what happens next? That’d be us, looking at Japan.
We won’t be able to claim we didn’t seen it coming.
Oh we Americans see it coming; we just think they can get through it better than Japan because we have the bigger schwartz.
Hopefully we’re the evil ones in this story, since evil always wins because good is dumb.
Now I have to watch that movie tonight.
“I’m surrounded by a@@holes!”
Since the US relies so heavily on Japan’s Treasury purchases (even if they do take place at a slower pace) I’m thinking when Japan goes down, we go with them. Forget our following in the footsteps because we made the same poor choices….more like we’re Siamese twins attached at the hip.
Am I wrong?
Out of the $1.4 Trillion or so in treasuries sold in the 2009 budget year, Japan bought about $100 Billion (7%).
Significant - second only China in fact, but not something that would take us down by any means if they stopped buying.
Oh. Was Japan purchasing more in 2007, 2008? I’d gotten the idea there was a more significant amount at some point.
From here it looks like 2003 was a big year for them -
www dot treas.gov/tic/shlhistdat.html
Ever since then Japan’s US treasury purchases have been very small. In fact in 2008 they held less than they held in 2005 - they were a net seller for those 3 years. Though of course we didn’t have much new debt then either.
Remember the scene in Spaceballs when they find a VCR copy of the movie Spaceballs, and then fast-forward it to see what happens next? That was funny. Thanks.
From the article:
They will not be able to fund their deficit. There will be a fiscal shutdown, a pension haircut, and bank failures that will rock the world. It is criminally negligent that rating agencies are not blowing the whistle on this.
So how do we translate this to a trading strategy? Is there a way to sell short Japanese gov’t bonds? Or do we bet against the yen?
Our black swan ?
If we can see it coming its likely not it…
Larry David took care of the Black Swan on this week’s episode of CYU.
“The majority of people are short sighted and believe the economy has improved because governments have printed trillions of Dollars, Pounds, Euros etc that they call money. But let us be very clear, you can’t abolish poverty by printing paper and you can’t solve the world’s enormous debt problem by exacerbating it. These debts will never be repaid with normal money, not today and not tomorrow – NEVER”!
~ Matterhorn Asset Management
You can’t produce real wealth by creating derivatives of derivatives on a Cray either. But all those brilliant managers collected fees and bonuses for it anyway.
And do NOT get me started on the difference between bad debt and good debt, again.
be repaid with normal money ??
Best part of the quote….
Rep. Ron Paul
Texas Straight Talk
Nov 3, 2009
There has been a lot of talk in Washington recently about senior citizens, mostly about how various healthcare reform models would help or hurt them. But there is another critical issue that has quietly devastated seniors financially over the last few decades. It concerns how the cost of living is calculated. How does the administration justify not giving a cost of living increase to Social Security recipients this year?
According to the official Consumer Price Index calculation, life has gotten cheaper for the first time in decades. If the government can show statistically that the cost of living has gone down, not up, then they can make the case for not giving a cost of living increase to social security recipients. But does this match reality? Using older calculations of CPI, the cost of living has actually increased - by roughly 5 percent!
The CPI (Consumer Price Index) is a calculation based on the average price of a fixed basket of goods that was initially designed to help businesses adjust for inflation. The government eventually started using it to determine cost of living adjustments for entitlement programs. Couple that with politicians’ discovery that they could raid the social security trust fund to pay for new spending programs, and you have a perfect storm to deny seniors what they were promised, while hiding the true size of the deficit. For politicians, it is a win-win.
For seniors, it is a different story. Economist John Williams of Shadow Government Statistics has estimated that if the original methodology of CPI had not changed, Social Security checks would be nearly double what they are today. This represents a lot of money that politicians have been able to literally steal from seniors, to spend on their own wasteful programs.
One example of how they do this is to substitute hamburger for steak, which lowers the average price of that basket of goods. But living on hamburger, or maybe dog food, instead of steak does not represent a constant standard of living. This renders the measurement virtually meaningless, even though politically it comes in very handy.
http://www.321gold.com/editorials/paul/paul110309.html
I call BS. The top three most-well-off groups in this country are:
1. Wall Street banksters
2. Federal Government employees
3. Retirees (I’m a member of this group)
One and two will co-operate as needed to maintain their respective standings.
“Economist John Williams of Shadow Government Statistics has estimated that if the original methodology of CPI had not changed, Social Security checks would be nearly double what they are today.”
And the Social Security Ponzi scheme would have already collapsed.
Bill - it’s not clear to me what you’re disagreeing with.
I think the point of Paul’s piece is that one of the ways that #1 and #2 have risen to their top two spots is exactly because of this mechanism.
Retirees should be in the #1 spot actually, since they should have saved money their whole life and thus should be the most well off.
It’s a sentence in the article I disagree with.
“But there is another critical issue that has quietly devastated seniors financially over the last few decades.”
Devastated?
Yes that’s pretty suspect. Retirees are the happiest people I know. Even the ones just getting SS seem to enjoy not having to work, or working for extra income, plus getting Section 8 housing (around here not too bad) and other breaks. You got to learn to live small, though.
Then there are the govt/military retirees…whoohoo, party time.
How does the administration justify not giving a cost of living increase to Social Security recipients this year?
The same way my former employer justified not giving anyone except a select few raises for years.
Qwest to save $100M by stopping contributions to management pensions; freezing manager pay ~ Monday November 2, 2009
DENVER (AP) — Fiber-optic network provider Qwest Communications International Inc. said Monday it will save about $100 million by stopping contributions to the pension plans of active managers and freezing their pay.
The move to stop adding to pension benefits on Jan. 1 will save $60 million in 2010, while declining merit pay increases will save $35 million next year, it said.
Combined with changes to benefits of employee health plans and life insurance, total savings will amount to about $100 million in 2010, the company said.
The moves impact active management employees, and not retirees, former employees or employees covered by contracts negotiated by the Communications Workers of America and International Brotherhood of Electrical Workers.
The telcos are hosed. There is too much competing infrastructure online or coming online that prevents any one company getting the edge on any of the others.
Ultimately the telcos and the cables will be mere bitstream providers just as the power companies are mere voltage providers.
Good for customers, bad for stockholders, bad for employees.
LOL - wait until net neutrality is a wash and you will find out the power of the telecoms/cable.
Question - being that the internet is now 40 years old, and the web has been popular for 12-15 years or so, and the proposed “net neutrality” regulations haven’t existed during any of this time - how come those big bad telecoms haven’t exercised said power, even though the technology to do so - firewalls, traffic shapers, etc. - has existed for some time?
Could it be that maybe said telecoms don’t want to piss of their customers? Or does that not reconcile with the view of telecom omnipotence?
The internet is 40 years old? I didn’t realize how young Al was when he invented it. Just 21.
They already do packman.
For example, Comcast slows peer-to-peer traffice and AT&T does not allow Skype on the iPhone due to “network congestion” (You of course, also cannot use Google Voice on an iPhone due to…hmmm…according to both AT&T and Apple there are no restrictions yet it doesn’t work.)
Of course, Comcast has already said it would like Google/Amazon/Facebook to pay for traffic to their sites. Once the internet turns to pay for play, it will be a much much different environment in the US than the rest of the world.
First two nodes of the ARPANET - the first version of the internet - were connected on Oct 29, 1969. That’s widely considered to be the genesis of the Internet.
The Internet Protocol suite was formalized by Vint Cerf and company in early 1970’s - first official version in 1974.
Once again BIC you really need to do some research. Al Gore did not say he invented the internet. Here’s one link of many that may help you out.
http://www.snopes.com/quotes/internet.asp
Well, FWIW - I wouldn’t label that “false” as snopes does, but rather perhaps “subjective”. To me “created” and “invented” are pretty much synonymous.
“During my service in the United States Congress, I took the initiative in creating the Internet” is more than just “a bit clumsy” as Mikkelson claims, IMO. Yes he worked on initiatives to expand it - but it was created long before he took office. As such he was claiming more credit than where credit was due, and deserves to be slammed for it.
AT&T does not allow Skype on the iPhone
No longer true - fixed by FCC - without legislation.
Of course, Comcast has already said it would like Google/Amazon/Facebook to pay for traffic to their sites. Once the internet turns to pay for play, it will be a much much different environment in the US than the rest of the world.
Likewise heavy users of roads - 18-wheelers and such - pay extra to use highways, in the form of various taxes, and have for years.
Has that prevented average Joe’s from riding on the highways? Actually no - the reverse is true. It’s cheaper for the average Joe than would otherwise be, because the heaviest highway users pay a larger portion - their fair share - of maintenance costs.
A perfect analogy actually. It’s very appropriate for heavy users of the internet to pay more, since they’re the ones forcing the higher maintenance costs.
Question - being that the internet is now 40 years old, and the web has been popular for 12-15 years or so, and the proposed “net neutrality” regulations haven’t existed during any of this time - how come those big bad telecoms haven’t exercised said power, even though the technology to do so - firewalls, traffic shapers, etc. - has existed for some time?
1) Until the shift to broadband all ISPs had to compete. It wasn’t until everyone moved to DSL/Cable that the customer base and price stabilized to the point where the remaining monopolies could start to think about leveraging their power into controlling the flow of data. It’s also no coincidence that this happens around the same time that the same monopolies were buying up television networks. Before everyone moved to broadband anyone could switch dial-up providers to escape blocks, filters, and quotas.
2) Firewalls and traffic shapers certainly existed for many years, but not ones that were really capable of managing huge pipes.
3) Fear of regulation. The monopolies are just now feeling out regulators to see what they can get away with. It was last year (?) that the Comcast started making statements about charging Google extra because it was a “free loader” on Comcast’s network. They’ve just started getting their toes wet. You wait and see what comes next.
I would love it to apply to auto insurance…why should people that drive 50,000 miles a year pay the same rate as me at 5,000 miles? once a year have our agent/mechanic verify the odometer and charge us accordingly.
——————————-
A perfect analogy actually. It’s very appropriate for heavy users of the internet to pay more, since they’re the ones forcing the higher maintenance costs.
Google, et all are not “heavy users.” Their clients are. That would be you and I. And that’s who is going to pay for it if the wire owners start charging Google and company.
Again, let me remind you of the VERY brief history of personall access to the Internet.
In my city in 1994 there were 30+ ISPs. Today, there are 2: cable and AT&T.
Without net neutrality, they WILL determine what you can access and they WILL determine who can access the Internet.
“In my city in 1994 there were 30+ ISPs. Today, there are 2: cable and AT&T.”
How many do you need?
If there are two then that’s one too many. If AT&T jacks you then you can switch to cable. If cable jacks you then you can switch back to AT&T. If you don’t like either one then you can go wireless.
Consumers have choices, the service providers don’t; What services providers have instead is expensive infrastructure. This expensive infrastructure needs customers riding on it so it can pay for itself.
When you have two service providers competing for the same customers then the customers end up winning as the service providers struggle against each trying to win market share.
The net neutrality is so damn important to every single citizens access to full and complete information. With newspapers and msm feeding us fake news, what happens when/if the net is allowed to charge for selective services and the folks who do not want to pay, or can’t will have their rights completely infringed upon.
Combotechie, I can’t just “jump to wireless.” I cannot afford cell phone net connection. I can barely afford basic DSL. Dial up is out of the question these days.
And wait, isn’t wireless, the PHONE companies?
And what if all three jack me? If you think that is unlikely, let me tell you, it is MOST likely.
Surely, you are not saying that LESS competition is a good thing, are you?
I repeat, without net neutrality, they WILL decide who has access and what you can have access to.
You sure seem to use tons of bandwidth on the HBB.
Wait a minute - I’m starting to make a connection here…
j/k
“Surely, you are not saying LESS competition is a good thing, are you?”
In this case two providers is plenty. You said you used to have 30+ ISPs, now you’re down to 2. The reason for that decline is the market cannot support 30 ISPs. It can barely support 2.
How many power companies supply voltage to your house? Most people only have one. That’s because one is all that they need. If there were more than one then a price war would ensue between the two power companies and each would become marginally profitable at best.
Telco infrastructure is expensive, hence it needs to garner as many customers as it can to justify its continuing existence. If another infrastructure is in place, serving the same customers, then the two will engage in a continuous battle for market share.
“And wait, isn’t wireless, the PHONE companies?”
If you are asking if wireless is restricted to being either AT&T or Verizon then the answer is “No”.
Even the wireline side of the business is not necessairly AT&T or Verizon. In every central office cages have been built to houses telco competitors’ equipment, and these competitors are granted access to the telco infrastructure and are allowed to offer customers telco services in direct competition with the host telco. At least that’s how it is in So Cal.
Well, lookie here: I come home from work and I find stuffed in may mailbox the November 16 issue of Forbes magazine with a screaming headline announcing: “THE $10 PHONE BILL: AT&T and Verizon’s Worst Nightmare Is Starting To Happen”.
Inside, starting at page 92, is the title of the article: “BIG TALK: The $116 Billion Business Of Selling Cell Phone Calls In The U.S. Faces A Long, Ugly Decline. That Petrifies Just About Everyone In The Industry Except Roger Linquest.”
Some selected excerpts from the article:
“(Linquest, head of MetroPCS) means to help turn cell phones into just another cheap commodity, the same fate that has already befallen the rest of the phone business and doesn’t much care what happens to his giant rivals in the process.”
“Linquest charges 2.1 cents a minute, just under half of the industry’s average revenue.”
“A decade ago there were three phone businesses: local, long distance and cellular. The first two have already collapsed, done in by advancing Internet and cellular technology and the cutthroat competition they unleashed. Americans paid $110 billion annually for long-distance phone calls nine years ago. Now it’s down to $55 billion and still shrinking. Local phone companies took in $126 billion at its peak eight years ago; that sum has fallen to $86 billion and is dropping fast.”
“In October AT&T caved in to consumer and political pressure and lifted it blockade of Internet calling software. The market chopped 2% off AT&T shares the next day…”
“Linqueast believes liberated phones will hop off the cellular network whenever there is another wireless network around that’s able to do the same job at a lower cost. Already many of today’s wireless gadgets can communicate via either a 3G cellular network or a Wi-Fi network. Tomorrow’s phones will hopscotch to electronic formats with names like Long Term Evolution, femtocellular and Wi-Max.”
“The price war rages on. Last month AT&T introduced its first unlimited, no-contract plan. Five days later Wal-Mart announced it would start selling the Tractfone brand (which uses the Verizon network) nationwide. It includes an unlimited plan for $45 and a new 1,000-minute, 1,000-text plan for $30. The industry is nervously awaiting an announcement from T-Moble, which has traditionally been a price leader but has yet to enter the unlimited, no-contract fray.”
“In the mid-1980s (cellular) calls cost a dollar a minute. Today the revenue is much bigger at a price of a nickel.
“That magic formula relies on demand growth, which isn’t there anymore. Last year was the first in the history of the industry in which theaverage cell phone subscriber talked less than he had the previous year. The influx on new subscribers is declining, too. New customers are tough to find in a market where nine of ten Americans already own a cell phone.”
AT&T and Verizon have just finished a remarkable transformation. In the course of a decade they went from relying mainly on local phone lines to relying mainly on cell phone service. Yet while they survived the metamorphosis. it has been wrenching. In the past decade shares in AT&T and Verizon are down 43% and 55%, respectively, compared with a 12% drop in the broader market.”
I am surprised no one has responded to this?
I was suspicious something was happening. Had a friend want to sell me on selling $49.99 prepaid, unlimited time/text. As I looked around, I saw things very similar and thought, maybe it was going to get better.
“But I’m an American.”
“…Mike Fugitt’s job includes making sure the laborers don’t come into the nursery’s parking lot, because their presence draws complaints from
some customers. In the past three months or so, he said, more of those
laborers have been telling him, “But I’m an American.” ”
http://m.lasvegassun.com/news/2009/nov/02/new-faces-day-labor/
Some suggested that people hiring day laborers prefer Hispanics anyway, because of their reputation as hard workers.
But later on we find the real reason:
Instead, Buchanan has found himself defending the rights of his fellow laborers on more than one occasion. One day, a man tried to hire a bunch of them for $5 an hour. Again, Buchanan pulled out the “citizen card.” But this time, he was telling the other person that he, a U.S. citizen, knew about minimum wage laws, and was going to make sure those laws were followed. “I said, ‘You want me to write down your license plate number?’ ” Buchanan recalled. The guy drove away.
You need a new roof. You get two estimates- $6,500 and $8,500. Both companies have been around for a while and you know people who have used one or the other. All were satisfied.
Since you can’t refinance or get a HELOC, this is going to put a big dent in your savings. Do you actually ask about the pay scale and legal status of each company’s workers?
Well firstly, we’re talking about a man that’s made a lot of bad career choices. Likely a gambler ( and then some ) this is where a 30 yr. long party in Vegas ends.
No savings, no home and… standing out in front of the Home Depot. Still, I feel for this guy. Whatever issues he had, he was very definitely a loyal employee for a long, long time. I’d suggest before any of us get ‘too’ excited about throwing this guy under a bus, remembering it could well be ‘us’ next. This is what this country has come to.
remembering it could well be ‘us’ next. This is what this country has come to.
There but for the grace of God, there go I.
I guess actually that is the crux of what irks me. So many of ‘us’ refer to situations ie: wealthy retirees vs many poor ones, ‘day laborers’ vs white collar emps, engineers vs non engineers etc, and yet, one health catastrophe or one company that folds not due to your efforts and suddenly we could all be there, even billinLA with his well thought out plans. I don’t begrudge him or others who are in better positions now, I just don’t see how slamming all others works either. What is the phrase, be nice on the way up, you are going to see the same faces on the way down?
The uncertainties of life don’t mean we should try to make the connections between performance and reward MORE random than they already are.
All the FB’s I know are largely responsible for their own problems.
IMF sells India 200 tonnes of Gold for $6,7bn.
Reuters ~ 2009/11/03
The International Monetary Fund has sold 200 tonnes of gold to the Reserve Bank of India for $6,7 billion, quietly executing half of a long-planned bullion sale that has threatened to slow gold’s ascent.
The deal, which surprised traders who expected China to be the most likely buyer, will relieve the gold market of some uncertainty over how and when the IMF would sell 403,3 tonnes of gold, about one-eighth of its total stock. The deal will increase India’s gold holdings to the tenth largest among central banks.
It also fuelled speculation that other governments — including Beijing — may be ready to diversify their reserves even at near-record gold prices, helping soak up IMF supply that the fund may otherwise be forced to sell on the open market.
“Central banks in India and China will be happy to accumulate gold at these levels. I will not be surprised to see even some Southeast Asian banks buying gold,” Aaron Smith, Asia head of the $1,65 billion technical trading fund Superfund, told Reuters.
For graphics on the world’s top gold reserve holders:
Spot gold prices earlier rose by nearly one%, but later reversed those gains to trade little changed at around
$1058 an ounce on Tuesday, within striking distance of last month’s $1070,40 record despite a rallying dollar. Traders said the IMF news could add to the market’s upward momentum.
“Its potentially bullish from several points of view,” said Commerzbank analyst Eugen Weinberg. “Gold was kept off the market and sold directly to cental banks so potential sales on market are limited by this.”
“Secondly, it showed large buyers are ready to accept the current price levels. Thirdly, the central banks are increasing their gold reserves. Last but not least the central bank gold agreement sales of 400 tonnes … is half empty already.”
Where did the International Monetary Fund get 200 tonnes of gold in the first place???
Each country deposits a portion of their reserves there. All IMF member countries are required to store 25% of their reserves there.
(nice, huh?)
Background info
As a result - gold and the dollar both up a fair amount today - about 0.8%. Not often seen.
I don’t know whether this was a smart move on the part of the Reserve Bank. While I am tempted to say that this is fishy given the very recent runup in gold prices and the greater than $1000/ounce average cost, the RBI has generally been above board. I think there is more to it than meets the eye - this deal might have been a precondition for India to acquire larger voting rights at the IMF/WB.
My post below assumes metric tonnes.
Looks like a good deal for India as well. $951/oz. by my calculation.
I’m confused. Doesn’t whether the start is ugly or beautiful depend on whether the PPT decides to prop up the market with green squirts of liquidity? We have seen again and again when the MarketWatchers and other market prognosticators translated an ugly futures picture into a gloomy market prediction, only to have tornadic pre-market clouds give way to blue skies of “better than expected” upside moves after the opening bell.
Besides that, the dangerous month of October is behind us now, the purchasing managers’ index came in higher than expected yesterday, the
first-timehome buyers’ tax credit is up for renewal, GDP is increasing again, Wall Street bankers continue receiving massive bonuses, and green shoots of recovery are intact, despite the incipient onset of winter. What could possibly go wrong from here?MARKETS
Preparing for a sour start
Stock futures brace for an ugly Tuesday open. European and Asia bourses also trade weak.
…
Is it just me or is seeing or hearing warren buffet every week is getting old.I wish he would take his billions and go away personally.They opened an RC willey up near rocklin ca and the place is a ghost town.Prices are really high but they say they have service.
hearingwarren buffetevery weekis getting oldThank you pb.lol
I can just see old Warren laying track and blowing whistles in his engineer hat in his living room…
“The 8:15 east-bound freight GOT through…complete details on the NBC 5:30 Evening News”
I hope he losses his ass on this flagrant attempt to manipulate the markets.
Anyone following DOW Theory understands the implications of his actions. Transports are on the verge of a major collapse and suddenly, out of the blue, he offers to overpay for a rail.
This latest maneuver stinks of PPT intervention. Why pay so much more than it is trading? Why now? Why not wait until Transports crash some more and buy it for pennies on the dollar?
I think you are very correct.I have believed the PPT has been holding up this market for months.I have tried to go short a couple times and that didnt quite work out for me.
What makes you think they cannot prop up the stock (and housing) market from now until whenever the economy recovers? Look at GDP, for instance — the evidence is already strong that the recession is over. Buy stocks now, or get priced out forever!
Trans up 179 points, as a result. The price, the timing, even the script all scream INTERVENTION. Warren is betting on America! You should too. After all, he is a billionaire.
Warning: If this latest intervention fails, it’s all over.
Even Paul Farrell is saying now is the time to buy (LOLOLOL!!!):
Paul B. Farrell
Nov. 3, 2009, 12:01 a.m. EST
Warning: Your brain is killing America’s capitalism
Deadly 800-year-old pandemic keeps repeating: ‘This time is different’
Goldman’s ‘Chainsaw Massacre’ Halloween
By Paul B. Farrell, MarketWatch
ARROYO GRANDE, Calif. (MarketWatch) — Recovery? New bull market? Yes, yes, get your money out of the mattress, out of CDs and money markets. Buy stocks — emerging markets. Buy ETF hedge funds. Buy junk bonds, bailed-out banks. Buy. Get back in the market. Buy, buy, buy.
…
“If this latest intervention fails, it’s all over.”
I’m also very bullish on America. Let’s get the collapse over with, so we can start rebuilding our country based on a business model that works. The longer we continue down the current path, the harder the eventual rebuilding effort will be.
Would it be a stretch to extrapolate MM’s comments a few steps further and suggest that the PPT is particularly worried about this Friday’s BLS? Is that the reason behind these moves?
After all, as has been pointed out, the man just bought a bunch of empty boxcars - who’s gonna fill ‘em? That’s whole other question.
Comment by Professor Bear
2009-11-03 09:23:12
“If this latest intervention fails, it’s all over.”
I’m also very bullish on America. Let’s get the collapse over with, so we can start rebuilding our country based on a business model that works. The longer we continue down the current path, the harder the eventual rebuilding effort will be.
——————
Amen.
Buffet plays the market by different rules than you and I. He doesn’t dabble in buying tiny fractional shares of companies - he buys entire companies. That gives him considerable say in the businesses, and in that sense he offers an honest alternative to the various pump and dump schemes of Wall Street. He rehabs the businesses ground up. He keeps what he likes and sells what doesn’t fit well.
In summary, Buffet adds value. The others don’t. Yes I’m tired of hearing his name too but don’t confuse him with the rest.
As for the question why he overpaid…
Well he wants to buy a controlling stake in BNSF. He can’t be buying 1% at a time without the market getting wind of it, more likely because he has to disclose if he crosses X percent of ownership. At that point the price is going to shoot up anyway. So instead of playing this game, he makes a high open offer to the large investors who are only too happy to sell and move their money to the next scheme.
“He doesn’t dabble in buying tiny fractional shares of companies - he buys entire companies.”
He also enjoys the coattail effect of the MSM trumpeting his purchases, which generates instant investment gains.
Of course he plays by different rules — inner party rules. He cleaned up big with previous interventions, GS and WFC.
Don’t kid yourself. Transports doubled topped while the Industrials made new highs. It was a failure to confirm. Hence, the intervention. Thereafter, Transports started dropping like a stone to the neckline of a what might be a multiple head and shoulder pattern — the intervention may form the right shoulder. If it doesn’t work, and the neckline is broken, the sell-off could be dramatic.
When transports are bought/sold, sold off, it doesn’t usually effect 1000’s and 1000s of American employees at some point losing their jobs, but airlines- Anti Trust agreements do affect 100s of 1,000s of employees nationwide when agreements with other nations take over, or someone a la Icahn, Lorenzo take over.
Probably not exactly the same thing as Warren’s deal, but along those same changes. If this all continues, we surely will see more houses walked away from and health ins bks.
Buffett’s Berkshire buying Burlington Northern RR
http://finance.yahoo.com/news/Buffetts-Berkshire-buying-apf-3016566039.html?x=0
Buffet will be dead soon, I think? He’s up there in age.
Don’t count on it. I see 90+yr olds all over the place.
I see more at the local cemetary.
more at the local cemetary.
Yes.
haha
It’s nice to be able to make “all-in” wagers where your very public announcement thereof pretty much ensures a winning payoff.
“It’s an all-in wager on the economic future of the United States,” said Buffett in a statement. “I love these bets.”
The enthusiasm of the legendary investor hasn’t been widely shared of late in increasingly volatile markets.
Lars Christensen, Copenhagen-based chief analyst at Dankse Bank, said as the year winds down, he’s seeing less willingness to take on risk.
“Even though we are seeing very strong U.S. data, the market does not seem to care about that because already everything is pretty pricey, and whether it’s U.S. stocks or emerging markets…everyone thinks this run might be coming to an end,” said Christensen. “We are now fully priced for recovery in the global economy in most asset classes.”
…
Does anyone remember how GM stock rocketed up a couple of years ago when Kirk Kerkorian (sp?) announced he was making a massive purchase of their shares? My recollection was that the stock price rallied to about $30/share or so; how is that bet looking today?
Yes I remember that.I think GM is going to issue new stock next year.The previous shareholders got wiped out by incompetent managers and you want people to invest again?I would not invest 1 dime in any us automaker or airline for that matter.
Does anyone out there drive a hyundai?How are these cars?
My neighbor has a Santa Fe. He loves it. (He did just buy a Traverse for his wife, though.) My brother-in-law rented a very small Hyundai and said it was the worst car he has ever driven.
We have a 2008 Azera (bought new) and a 2007 Santa Fe (bought used). Love ‘em both. We’ve had no problems to date. The Azera has a remarkably frisky powertrain.
Pluses: Roomy, quiet, relatively reliable (per Consumer Reports), relative bargains.
Negatives: So-so gas mileage, low trade-in value.
Since we intend to keep them at least ten years, that latter negative isn’t much of an issue. And if you’re willing to buy used, it’s a positive.
Met a BIG man yesterday who has a Yari. Big meaning he had already lost 85 lbs since March and was still at least 275. He loved his Yari and said it was the roomiest car, loved the zippy-ness.
Here’s the story:
http://tinyurl.com/ykbyuh4
Funny to read this nowadays…. makes you realize that just because you’re a BILLIONAIRE… doesn’t mean that you can’t LOSE YOUR ASS on HUGE BETS!!
Personally, I think Buffet is buying something tangible because he believes his massive holdings of USD are about to be worthless.
Nice. He probably gets land and other hard assets as well.
But what about looking at this purchase from the energy standpoint? Even if Buffett’s bet is wrong, we go downhill and shipping decreases, things will still get shipped. Now, if energy prices increase, rail is twice as efficient (in terms of MJ/tonne km) as trucking. So couldn’t it also be a bet that energy prices will increase? There are a lot of “ifs” with this line of argument and I probably shouldn’t be thinking out loud. Ooh, what’s that smell?!
MrBubble
The amusing part of Berkshire buying BNI (Burlington Northern) isn’t that he’s doing it at what looks to be a ridiculous premium to the current stock price (although below the historic high) - it is that he’s splitting Berkshire’s “B” shares in doing it.
Remember, this is the guy who has maintained forever that stock splits are inherently wrong, in that they’re nothing other than a game.
Well, yes. But under the cover of the claim that he wants BNI shareholders to “enjoy” a tax-free exchange, suddenly Berkshire “gets religion” and splits the “B” shares 50:1?
Uh, Warren. This is a stock and cash deal, right? What prevented you from issuing a “C” share? Nothing, other than dilution, which you could handle with an immediate buyback of the outstanding amount necessary to balance it.
Here’s my view, for what it’s worth - BNI at yesterday’s closing price was reasonably valued at a P/E of 14. At the deal price it’s about 20. That’s too high, unless you believe that manufacturing is coming home in massive numbers, and that “indefinite growth” is coming back…
If you’re a BNI shareholder, I’d be taking the money - this morning. You’re no longer the owner of a big industrial mover; you’re now the owner of stock in what amounts to a financial conglomerate trading with a P/E of 52 (as of this morning), where you had a P/E of 14 last night. Worse, Berkshire’s market cap is being “invaded” tremendously by this acquisition, turning Berkshire from a financial company (in the main; banking and insurance) into a multi-line conglomerate with a HUGE transportation component.
Mean reversion is going to suck WHEN it occurs, and this much is certain - you didn’t own BNI expecting it to have a P/E of 52, but suddenly it does, and anyone who believes that a conglomerate with 25% of it’s total market cap comprised of “railroad” should trade at anywhere near a P/E of 52 has rocks in their head.
(Credit K. Denninger)
Cobalt:
He owns mid america energy which has 11 coal fired plants, and wants to build more. and the RR hauls the low sulphur coal
First dibs on the coal????
It’s nice to be able to make “all-in” wagers where your very public announcement thereof pretty much ensures a winning payoff
I closed out my short positions on the QQQQ and C today for a modest return. Looks like C may be at the bottom of a channel with a “piercing pattern” bullish reversal forming… just looking for bullish confirmation tomorrow and I’ll go long C.
With Buffet’s news today, Ford’s surprise earnings to the upside, the market shrugging off the CIT bankruptcy and the last few days of the QQQQ forming a new uptrend from March, I’m looking for some movement to the upside… again, waiting for bullish confirmation, in this case a “three white soldiers” possibly forming.
As far as Buffet is concerned, I’m suspicious of the timing and the valuation of the acquisition, but not enough of a tin-foil hatist to blame the PPT or PTB directly. It could just be a play on inflation or energy or the economic recovery, or any combination thereof… and if this is the catalyst to send stocks higher from here, well who are we not to profit from it, at least until the market signals otherwise…
OK this is too good -
I’ve been passing time on sports blogs lately for obvious reasons. On the one board is a persistent Yankees troll named hahahaha to the nth power. This one is generally obnoxious, rude, offensive and has no grammar or spelling skills of which to speak.
Last nite a Phils fan called him out, wanting to know what kind of work he does, because everyone assumed he was unemployed or blogging from the state pen.
Here is his stellar, tailor-made for the HBB response:
holy 5hit u asz holes and the spellings they are called typos retard and that is seriously all u fukks have to say about me and if u looked at the previous posts I LIVE AN HOUR AWAY FROM THE BRONX illiterate fukk and i am in real estate broker wtf are u a mexican bean picker
“I am in real estate broker”.
Ladies and gentlemen, you have just met The Pride of Union City.
(I edited his real post, the words he did manage to spell correctly were the vulgarities).
thnx 4 sharing!
Anyone with a moderate command of the English language knows the difference between a true keyboard typo, a typo because the person is thinking faster than he types, and a genuine lack of education/low IQ. Ask yourself: would you make that mistake if you were handwriting? If not, it’s a legit typo.
My guess is that this guy has the education, but his attitude needs serious work.
he says he’s a realtor like it’s a good thing
No no, he says he’s IN a realtor. Ie, he is posting while in the act of copulation. Nothing to indicate whether said realtor is male or female.
Actually, a brief perusal of realty listings will confirm that spelling, punctuation and grammer definitely aren’t their strong suits. Someone really ought to outlaw “!” from UHS keyboards.
G-R-A-M-M-A-R
(sorry, couldn’t resist)
Since I can’t get my comment correcting three HBBer’s misspelling of “stimulus” to appear up top where it belongs, I’ll try it here.
“spelling, punctuation and grammer definitely aren’t their strong suits”
If I see “…Montana living at it’s [sic] finest!” one more time I’m going to hurl.
Never can understand why grown men get so so worked up about watching other grown men throw a ball around.
Ed - that’s just…unAmerican!
I’m so upset by your comment I’ll have to go gaze upon an 8 x 10 glossy of Chase Utley to ease the pain.
It’s over.
Never could understand how grown men could get REALLY worked up watching other grown men kick a ball around.
“Never can understand why grown men get so so worked up about watching other grown men throw a ball around”
I just watched to see the all the cheeseheads get their panties tied in knots with Brett Farve in Minnestota Vikings Purple at Greenbay Sunday — Priceless
link
It’s a NE corridor thing -
You wouldn’t understand.
HOGAN!
Real Estate Price Plunge Makes U.S. Homeownership Perilous Path.
Nov. 3 (Bloomberg) — Kajal and Vishal Dharod paid $559,000 in 2006 for a new four-bedroom house built in Rancho Cucamonga, California. Today, it’s worth about $360,000.
“We don’t know how we can come back from a loss like that,” said Kajal Dharod, 29, a first-time homeowner with a $4,200-a-month mortgage. “Buying the house was a mistake.”
American homeownership, once considered a path to wealth, is now leading to disillusionment. Home prices in the last four years have been the most volatile on record, swinging from a gain of 12 percent in 2005 to an estimated 13 percent loss this year, according to the National Association of Realtors. Those gyrations have embittered many property owners and potential buyers, said Nicolas Retsinas, director of Harvard University’s Joint Center for Housing Studies in Cambridge, Massachusetts.
“We always talk about homeownership as being the American dream, but during the last decade people forgot it’s shelter and started thinking of it as a fast way to make or lose money,” said Retsinas. “The quicker we move back to seeing real estate as a place to live, a place to put down roots, the quicker the housing recovery will strengthen.”
Home-price growth in the next decade probably will average about 3.5 percent a year, based on Retsinas’s estimate of increases of about 1.5 percent above inflation and the Federal Reserve’s long-term inflation forecast of about 1.7 percent to 2 percent. On that basis, it could take a decade or more for the Dharods to recover from the 36 percent loss on their home.
When I was 29 I was still renting an apartment and saving for a house. 29 years old with a $4,200 nut every month (not to mention taxes, upkeep and utilities)!!!
Dude - you are 29. You should be having fun. Your biggest decision should be where to eat and party on the weekends. Now you are a debt slave.
I bought my first (and only) house at 27. Almost new, 3 bedroom house with a pool and good sided yard, $1250 mortgage vs. $1050 rent I was paying for the 2 bedroom apartment I moved from. It was a fantastic apartment, but still an apartment. And while the house was a little further away from work, it took less time since the traffic pattern was more favorable.
My priorities before moving: Women, drinking. My priorities after moving: Women, drinking, remember to water the grass twice a week and pay the kid next door who cut the grass on Sundays.
Not exactly a life changing experience.
I bought my first house at 22, and I have always wondered how the people who partied away their 20s plan on retiring.
They aren’t planning their retirement because most 20 yos can’t afford a house. Most can’t afford an apt without a roomate.
A bit less partying goes a long way toward solving that problem. Most folks spend a lot of money on booze, cars, road trips in their 20s, and then complain about being poor.
“Real Estate Price Plunge Makes U.S. Homeownership Perilous Path.”
Wait — I thought real estate price declines were over, and real estate was always going up again?
“Real Estate Price Plunge Makes U.S. Homeownership
Perilous Pathmore affordable.”I doubt that anybody who ever owned a home for more than ten years (or until it needed a new roof) ever considered it a “path to wealth”. Most of us think of houses as nice places to live.
I’m thinking those who view their homes as a path to wealth were confused by the effect of a massive wall of ever-increasing federal housing subsidies on prices. Home ownership was the gateway to qualifying for stealth Ownership Society welfare payments from Uncle Sam to Main Street.
Nice words, but it’s too late. Housing has been commodified in this society.
My maternal grandfather built the house that my mother still lives in today. She’s been there 60 years. So the other week I asked her: “how many real estate agents have you hired?” - “none”. “how many transfer fees and transfer taxes have you paid?” - “a couple bucks in the 50s”. “how many times have you refinanced a mortgage and paid the associated fees?” - “none”.
The poor woman is a leach. She has not contributed to the F.I.R.E. eCONomy. Such behavior will not stand, there is no money to be made off of stable communities - there must be churn when so many make money by simply moving money.
Sure, individuals may want to break this stranglehold, but it will not be broken until the banks and their F.I.R.E. eCONomy are stuffed back in their box. So far, the vast majority seems quite happy with continuing the illusion and so it will go on.
Nice post, John.
“Buying the house was a mistake.”
And had property values climbed, you would be claiming yourself to be a financial genius.
By Timothy Pratt (contact)
Monday, Nov. 2, 2009 | 2 a.m.
It sounds like a George Lopez joke.
“Times are so bad that I saw an Anglo day laborer standing outside Home Depot the other day.”
Except it’s true.
http://www.lasvegassun.com/news/2009/nov/02/new-faces-day-labor/
“It’s the equivalent of selling apples in the Great Depression”
Yep.
Megabank, Inc is the modern incarnation of Shylock! Try not to let a pound of your own flesh get turned into a portion some Wall Street banker’s year-end bonus payment.
The new paradigm is the old paradigm. To understand this, I recommend a read of “The Wizard of Oz.” Dorothy is Main Street America, the twister blowing away the farm house is the Fall 2008 collapse of Aunt Fannie and Uncle Freddie, the Wizard of Oz (the man behind the curtain pulling the levers) is the central-banker-led Federal Reserve and Treasury Department, the wicked witch is Megabank, Inc and her band of flying monkeys is the army of stock traders on Wall Street. Any questions?
* The Wall Street Journal
* NOVEMBER 3, 2009
Crisis Compels Economists To Reach for New Paradigm
By MARK WHITEHOUSE
The pain of the financial crisis has economists striving to understand precisely why it happened and how to prevent a repeat. For that task, John Geanakoplos of Yale University takes inspiration from Shakespeare’s “Merchant of Venice.”
The play’s focus is collateral, with the money lender Shylock demanding a particularly onerous form of recompense if his loan wasn’t repaid: a pound of flesh. Mr. Geanakoplos, too, finds danger lurking in the assets that back loans. For him, the risk is that investors who can borrow too freely against those assets drive their prices far too high, setting up a bust that reverberates through the economy.
Yale economist John Geanakoplos has seen his previously obscure theory about collateral’s role in the credit bubble gain currency after it burst.
For years, his effort to understand this process didn’t draw much interest. Now it does — yet another aftereffect of the brutal deflating of the credit bubble. The crisis exposed the inadequacy of economists’ traditional tool kit, forcing them to revisit questions many had long thought answered, such as how to tame disruptive boom-and-bust cycles.
Mr. Geanakoplos is among a small band of academics offering new thinking about those cycles. A varied group ranging from finance specialists to abstract theorists, they are moving to economic center stage after years on the margins. The goal: Fix the models that encapsulate economists’ understanding of the world and serve as policy-making tools at the world’s biggest central banks. It is a task that could require a thorough overhaul of the way those models work.
“We could be looking at a paradigm shift,” says Frederic Mishkin, a former Federal Reserve governor now at Columbia University.
…
We could be looking at a need to rein in a carnivorous, rapacious Megabanking parasite before it feasts on the flesh of all Americans.
Belated Happy Halloween to all!!!
Oh, fer cryin’ out loud Jeebus Crikey. New paradigm? WTF? The Austrian school has been around for eons.
Ya know, these turd-heads are always looking for a “new paradigm”, when the old paradigms that worked in the past is right in front of them.
Same with CONgress. So they repealed the bankruptcy laws that worked (on behalf of the banksters). Now, instead of going back to what worked, NEW LEGISLATION! Or like Glass-Steagall. Re-instate.
What’s old is now new?
They didn’t call “supply side” economic “voodoo” for nothin’!
“The pain of the financial crisis has economists striving to understand precisely why it happened and how to prevent a repeat.”
And people wonder why “economists” have a bad rep.
Pssst, driving down wages decade after decade in a 75% consumer driven economy with REAL double digit inflation is NOT a good idea.
Did that help?
Bravo, eco.
David Weidner’s Writing on the Wall
Nov. 3, 2009, 12:01 a.m. EST
The evil empire strikes again
Commentary: Do we want Goldman Sachs to make money?
By David Weidner, MarketWatch
NEW YORK (MarketWatch) — Just asking: Is there any other corporate gang we despise or mistrust more on Wall Street than the bankers over at Goldman Sachs Group Inc.?
We suspect they cheat — that they’re too cozy with the government. We worry they rig the system, manipulate our leaders, have too much influence. They seem to own the stock exchange through wheeling and dealing and Capitol Hill through connections and campaign contributions.
We’re mad as hell but we don’t know what to do about it.
…
——————————————————————————–
Here’s a modest proposal:
Europe November 2, 2009, 9:20AM EST
Britain Set to Unveil Bank Breakup
To introduce more competition into the banking sector, the Labour government this week will propose selling pieces of Lloyds and RBS to new entrants
By Nick Clark
Chancellor Alistair Darling will this week unveil his proposed overhaul of the UK banking system which includes breaking up Lloyds Banking Group (LYG) and Royal Bank of Scotland (RBS) and bringing “at least” three new banks to the high street.
Mr Darling is preparing to announce the Government’s plan for the future of UK banking – as first revealed in The Independent last week – to the House of Commons in the next few days.
The Government is not yet ready to announce as it is still in negotiations with the two banks over their participation in its Asset Protection Scheme (APS), designed to insure billions of pounds worth of bad loans.
…
“At Goldman-Sachs, we make money the old fashioned way: We control the Government.”
“What’s good for Goldman is good for America.”
Why does Weidner think keeping 800 lb gorilla monopolists on Wall Street in the business of raping and pilagging Main Street is good for America? I guess he knows who butters his bread?
I’ll bet he gets “it” “buttered” real good.
Not sure if this has been posted. Yet more mark-to-fantasy insanity. Or as the case may be - just don’t mark at all.
Banks Get New Rules on Property
WSJ 10/31/09
Federal bank regulators issued guidelines allowing banks to keep loans on their books as “performing” even if the value of the underlying properties have fallen below the loan amount.
The volume of troubled commercial real-estate loans is skyrocketing. Regulators said that the rules were designed to encourage banks to restructure problem commercial mortgages with borrowers rather than foreclose on them. But the move has prompted criticism that regulators are simply prolonging the financial crisis by not forcing borrowers and lenders to confront, rather than delay, inevitable problems.
…
link to follow
link
Is it me - or is it looking more and more like the first housing bubble is being used as a tool to build an even bigger one, that’ll pop about 15 years from now?
I suppose state-sanctioned accounting fraud can help keep elephants hidden under rugs indefinitely. But how will foreign funds be lured into the American banking system if other nations reform their banking sectors and we do not? Trust is gone from banking, and my hunch is that any nation which does not take significant steps to restore trust to their banking system will relegate itself to third-world status.
Regarding your 15-year reflation hypothesis: Is there a historical example of bubble reflation so close to the time of the initial collapse phase? For instance, though the Japanese post-bubble asset price collapse has already lasted for two decades, the initial phase only lasted a few years, and did most of the damage to prices. After that, it has been mostly slow burn, with no evidence of a return of their bubble.
Well - one could postulate that the 1997-2007 housing bubble was merely a larger echo of the 1985-1990 one; that the post-1990-recession S&L bailouts in part fueled the later larger housing bubble.
E.g. from the Wikipedia S&L crisis page:
Consequences
…
Some commentators believe that a taxpayer-funded government bailout related to mortgages during the savings and loan crisis may have created a moral hazard and acted as encouragement to lenders to make similar higher risk loans during the 2007 subprime mortgage financial crisis.[19]
I was just an unfrozen caveman engineer back then - fresh out of school, and knew not much about such things. I haven’t looked into the details of the S&L-related bailouts / stimulus, so can’t really comment intelligently. But I do know there is some view as such.
Yes, but the paradigm shift that occurred during this current bubble’s collapse utterly dwarfs anything that played out in the early 1990s. In fact, I would go so far as to say that, from the standpoint of most real estate market participants, real estate largely appeared to keep going up steadily through the early 1990s bust, at least through the foggy lens of memory.
This time is different. Too many people lost too much of their life savings.
I have to agree with packman.
Also, the S&L disaster previously dwarfed anything before it happened as well. A half a trillion dollars was considered insane.
Even by today’s standards, that’ still a lot of money.
Many (hell most) S&Ls (and banks) weren’t bailed out. They failed and closed. The RTC (Resolution Trust Corporation, a GSE) had to be formed to liquidate all the RE. They sold for literally pennies on the dollar.
The situation was so bad that many small towns became ghost towns.
The major difference this time, however, is all the back end reselling of the risk.
I think that PB’s post and the subsequent ones by packman and ecofeco are interesting and thought-provoking. I’m leaning with pack and eco here so far, but there’s so much more to discuss. I’ve been thinking for a while of posting a query to Ben on this topic, as the 80s TX boom and S&L crisis were key to his analysis and point of view on the recent / current bubble.
Ben, could we have a weekend discussion sometime on the 80’s S&L crisis and the Resolution Trust Corporation and implications for “moral hazard” and the early 90’s banking consolidation and how that might relate to the 2000’s bubble?
“After that, it has been mostly slow burn, with no evidence of a return of their bubble.”
Yes, but Japan didn’t take as vigorous measures to reflate their bubble either. I mean we’re throwing everything and the kitchen sink at reflating the housing bubble. State sanctioned acounting fraud, $8K bribes for unsuspecting buyers, artificially low mortgage rates (OK Japan did that as well) and last but not least the 3.5% down FHA backed loan to get people with “weak credit” and low downpayment into a house.
This might work at reflating the housing bubble to some degree, not really sure. The long term consequences will be absolutely devestating, much worse than what we’ve seen last fall. Reflating the last bubble is the absolute worst economic policy one could pursue.
“The Americans will do the right thing, after they exhausted all other possibilities” …I just hope it won’t be too late by then.
So the question to be partially answered in the next several years is whether massive reflation efforts can work. The South Sea Bubble experience suggests the answer is a qualified yes: They can work, temporarily.
I doubt it. Bubbles are ultimately a herd psychology thing. Along that line, we won’t make *exactly* the same mistake twice. We’ll make *fundamentally* the same mistake, but it needs to appear just different enough so that we convince ourselves that “This time, it’s different.”
Exactly, annata. Exactly.
“…just don’t mark at all.”
That is a sure-fire way to restore trust to the credit-starved banking system…
I would keep a loan on my own books as “performing” if in fact the monthly payments of interest and principal were still being made. Why does the decline in the value of the collateral suggest that the loan is not “performing” ?? …I agree the debtor may STOP “performing” some time in the near future…
I’m not intimate with the details of commercial lending - but I believe it’s fairly different than residential, in that there are lump payments (like balloon payments?) due sometimes, e.g. when the developer believes they’ll get their first big lease(s). Up to that point it’s “performing” in the sense that maintenance payments are made, but those are small (interest-only?) relative to the larger lump payments.
My take based on this text in the article:
“The new guidelines are targeted primarily at the hundreds of billions of dollars worth of loans that are coming due that can’t be refinanced largely because the value of the properties have fallen below the loan amount. In many of these situations, the properties are still generating enough income to pay debt service.
Banks have generally been keeping a lid on commercial real-estate losses by extending these mortgages upon maturity. However, that practice, billed by many industry observers as “extending and pretending,” has come under criticism by some analysts and investors as it promises to put off the pains into the future.”
… is that these lump payments are being postponed beyond their original contract date, due to lack of ability of the developer to get the big leases.
Not sure if that’s exactly how it works, but that’s what I get from the “loans that are coming due”, and “upon maturity” wording, and from tidbits I’ve picked up in other discussions.
Federal bank regulators issued guidelines allowing banks to keep loans on their books as “performing” even if the value of the underlying properties have fallen below the loan amount.
This CANNOT be happening!
Holy moly, we’re in deep doodoo.
Where are we?
- We are at the point in the crisis when politicians are talking about financial sector reforms.
What is likely to happen?
- Talk will get translated into token rather than substantive reforms, intended to serve as political palliatives without material impact on business as usual.
- The reform process will be undermined by banking industry lobbyists striking deals with politicians whose job it will be to gut any efforts to overhaul the failed banking system.
What can be done to make sure the system gets fixed, so that our children do not have to (repeatedly) play out the recent episode in their own lives?
????????????????????????????????????????????????????????????????????????????
At the corner of Wall Street and Washington is where the inner party converges. Members on Wall Street go to Washington to protect the party and recruit new members. Aspiring members in Washington go to Washington to earn their membership.
Telling our kids, grandchildren, mothers, fathers, siblings, friends, neighbors, and strangers about its existence and teaching them how to protect themselves from its ways is a good start.
Walking away is the only power the man on the street has at the moment. The housing bubble was a trap — a debt-trap.
“Telling our kids, grandchildren, mothers, fathers, siblings, friends, neighbors, and strangers about its existence and teaching them how to protect themselves from its ways is a good start.
Walking away is the only power the man on the street has at the moment. The housing bubble was a trap — a debt-trap.”
It’s too late for many of the 45+ burn outs, loaded with debt and no options but to keep slaving or find a good tall jumping bridge. But you can bet some of their kids are watching this and some (not all ) will revolt - as kids often do.
Our government, WS and economy depend on the human mindset to have more, to achieve, to keep moving forward. What happends if the definiton of having more, moving forward and achieving morphs into healthy lifestyle, no debt, and a job that stays “a job” rather than the center of life as a means to get all that you think you need and want? People start taking 7 weeks of vacation, having long lunches with wine!
Anybody watch the recent Frontline “close to home”? Who watching that would want to live and look like those people?
“But you can bet some of their kids are watching this and some (not all ) will revolt - as kids often do.”
Agreed, I’ll take that bet. And you’re right, if cultural attitudes are indeed nearing a watershed moment it’s going to debase a lot of economic assumptions - most of which are still based on the aberration of the past few decades.
Anybody watch the recent Frontline “close to home”?
Yes. And it could be anyone of us, except we saw it coming.
And what about that poor woman in the stylist’s chair who looked 55+ who said she was “almost 40″.
Unlike fernado lamas, I would rather feel good than look good, but that’s gotta be a downer every morning in the mirror.
I just checked the Frontline website, I missed that episode. It looks good. When I get back to Austin in a day or so, I’ll watch it. My wireless connection here in Rockport isn’t stable enough for streaming. (But I can’t complain. Neighbor across the street was kind enough to put up a little antenna so that his wireless service reaches my place.)
Fantasy island - Now is your chance to live among the Really Rich People (RRP):
MIAMI (MarketWatch) — Fisher Island is legally part of the United States. But you have to emigrate to get there.
Security guards, wearing colonial pith helmets, inspect the photo IDs of everyone in the car before letting it onto the private ferry. You need a visa — or at least your name has to be on a list — to be admitted.
No wonder. Fisher is famously home to RRPs — Really Rich People. Oprah Winfrey and Mel Brooks are among those who lived here, along with legions of hedge fund managers, Russian millionaires, and the like.
Buyer’s market
Prices have collapsed on Fisher Island, just as they have across southern Florida. Some have halved, or worse. A few weeks ago a three-bedroom condo changed hands for $1.75 million. Back in 2006 the same place sold for $4 million. In 1990 it sold for $1.2 million. Annualized return on investment: 2%. And that’s before counting the very high fees associated with living there.
Forget the snooty rigmarole for outsiders at the ferry. This is a buyer’s market. About 140 condos, or one-fifth of the total on the island, are up for sale. Based on recent trends, that’s a four year’s supply. And 25 of these are short sales: The home is on the island but the owner is underwater. The bank will take what it can get.
I remember Michael Moore’s brief tv show where he went to a gated community outside of Chicago where that did the same as Fisher Island. Moore setup a checkpoint just outside and started asking the gated community residents for id and why they were visiting Chicago. For some reason, they all got mad and drove right through.
there was another episode where he took a bullhorn to all the executive buildings for the big auto makers challenging them to come out and change their on oil in their cars.
the only one came out and changed the oil in his own car was the CEO of Ford…ironic.
Maybe Barney Frank should fly down there on a private
(public) jet and see if he can come up with a bill to help those poor homeowners. A tax-credit, maybe.
Oprah Winfrey and Mel Brooks…
Amazing how the liberal Hollywood elite who are all for illegals, no choice in schools, massive government regulations, gun control, diversity, all cultures are equal, etc. live on their own little island where none of these rules apply because no serfs are allowed to go there.
The hypocrisy of the elites is perhaps the most caustic solution eating at the fabric of this society. That, and the fact that so many people even care to listen to a word they say.
I have witnessed, first hand, the contempt for the poor which some of the extraordinarily wealthy have. It’s caustic, indeed.
+1 to both of you.
LET THEM EAT CAKE!
Of course serfs are allowed to go there. Someone has to clean, cook, landscape, do maintenance and tend to the children….
The wealthy and well-known are isolated for a reason; their presence presents a danger to any community not prepared to deal with the crackpots and curiosity-seekers who tend to hound and harass them for being rich and famous— and for having the temerity to express their political opinions just as we do.
Hence, we imprison them on islands and inside gated enclaves so they don’t inconvenience us in our resentments.
Maybe we could export the top 3 percent of the US wealth distribution to another country, and start over with the rest of us? They could keep and exercise their current claims on US assets, but would not be able to continue with current “shooting the fish in a barrel” Wall Street banking practices. I am guessing the bottom 97 percent could quickly restore US economic productivity if not encumbered by Megabank, Inc.
Maybe we could export the top 3 percent of the US wealth distribution to another country, and start over with the rest of us?
Kill two birds with one stone, move them to Dubai and take care of its overbuilding of fabulous luxury housing and office towers. Plenty of luxury for the über-rich there and we can get on with things here.
Aw, sheesh, who even cares? Most “stars” these days are anything but, performing in movies and TV shows that, on the comedic side are reduced to fart and titty jokes, on the dramatic side a lot of social hand-wringing angst about invented issues and on the action/adventure side, enough special effects to give an average person a stroke. Who even needs actors? Just 2 solid hours of stuff zooming, exploding, imploding. So what if contemporary celebs want to live in isolation? I think it’s a good idea. Most art is pretty lowbrow idiot stuff anymore, and as to the masters of the universe, well, not much accomplishment there.
They need a place where they can take their meds and feel special, if only for a little while.
on the comedic side are reduced to fart and titty jokes
“Ow My Balls” was the top rated show in the movie Idiocracy. Are we there yet?
Dead on about the crackpots and curiosity seekers, ahansen.
I’ve seen the effects first hand.
Buyer’s market
Prices have collapsed on Fisher Island, just as they have across southern Florida. Some have halved, or worse. A few weeks ago a three-bedroom condo changed hands for $1.75 million. Back in 2006 the same place sold for $4 million. In 1990 it sold for $1.2 million. Annualized return on investment: 2%. And that’s before counting the very high fees associated with living there.
Forget the snooty rigmarole for outsiders at the ferry. This is a buyer’s market. About 140 condos, or one-fifth of the total on the island, are up for sale. Based on recent trends, that’s a four year’s supply. And 25 of these are short sales: The home is on the island but the owner is underwater. The bank will take what it can get.
The collapse of real estate on Fisher Island isn’t just interesting for rubberneckers. It also proves the simple impossibility of calling a bottom to the real estate market. There is no such thing as “the” real estate market.
What does this island have in common with Las Vegas suburbs, or tracts of empty single family homes in the Californian “inland empire”?
They will probably hit bottom at different times and bounce in different ways. It’s a point that is apt to get overlooked. Last week the Case-Shiller real estate numbers raised some hopes about real estate generally. Seasonally-adjusted prices across the main 20 markets rose 1% from July to August. More remarkably, perhaps, they were level on a six-month view.
But the news covers a multitude of sins. Las Vegas, for example, has fallen another 14% in the past six months. San Francisco has risen 6%.
…
Gold is breaking out. Lies are being exposed.
Good. The first step in restoring a functioning banking system is restoring trust. That can only happen if lying liars in the top echelon of the US banking system are systematically outed.
“Gold is breaking out. Lies are being exposed.”
Great!…you can never have enough Gold, except when you are swimming or underwater and drowning.
Oh gee, I wonder whether the Fed is going to change interest rates at this meeting — the suspense is just killing me…
Federal reserve
Winks and nods
The FOMC, its two-day meeting underway, will play the cards close to the chest when it comes to U.S. interest rates. Macro-wise, the conditions don’t suggest it’s time for a short-term tightening.
Are we exporting our stimulus programs to China? This “hurry up and take advantage of this government subsidy before it ends” idea sounds vaguely familiar. Are Chinese households generally as stoopid as American households?
Asia Markets
Nov. 3, 2009, 12:08 a.m. EST
China property sales may get boost before year end
Fears Beijing may partially withdraw stimulus could spur demand
By V. Phani Kumar, MarketWatch
HONG KONG (MarketWatch) — A year after China unveiled a powerful stimulus to encourage home buyers to take out mortgages in a troubled property market, real-estate sales may be getting a boost from concerns that the government will withdraw some of those measures by the end of the year.
…
A “Measure G” update.
They’re trying to raise our taxes with a “Parcel Tax”
I got a confirmation from the Secretary of State’s “Election Fraud Division” that the school’s promotion of this ballot measure on the taxpayer-funded website is illegal. The SoS sent a nice letter detailing the laws they broke and the (felony!) charges they could face.
However, the SoS tells me that they have no jurisdiction over the school district and I have to start with my District Attorney. Armed with the letter from the Secretary of State, I thought I’d get their attention. Nope. They refuse to look into it.
The local newspaper, the “San Jose Mercury Snooze” doesn’t care either.
Our local government, Sunnyvale, has a law against election signs in the landscaping strip between sidewalk and street.
Here’s a photo of a school administrator with an illegal sign:
http://www.flickr.com/photos/tppllc/4072634732/
…and the City of Sunnyvale “code enforcement” refuses to do anything about it. (I have a link to the law on that photo page.)
Local elections are as crooked as any Iranian election.
Local elections are as crooked as any
IranianAfghanistan election.This is a follow-up to Lesser Fool’s comments yesterday - with credit to Karl D -
Why Bernanke and Geithner are FAILING:
Capital will always go where the holder believes they can make the best return given the environment they have. The big trading and investment houses have inside information that they use daily in making their bets, with most of it being shady but legal, coming from their conveyor-belt style access to Washington. As they demand fealty (and an obscene act of 8 letters beginning with the letter “f”) from their bought-and-paid-for Congressfolk, they of course get to both dictate actions and are fed “inside baseball”, allowing them to place bets in the capital markets with a far better chance of success than you, the ordinary American. Even better, in the instant case they were gambling not with their money but yours!
The outcome was both predictable and obvious - the banksters bet on “asset reflation” in the equity markets and got it - to the tune of a P/E in the S&P 500 of 140 (as of the end of September.) This “ramp job” is, in fact, nearly identical to what happened in the Nikkei following their collapse, and it occurred for the same reason!
But neither Bernanke or Geithner can fix an over-levered consumer. Doing that would require either massive debt defaults (bankrupting both lenders and borrowers) or the erection of trade barriers worse than anything ever seen in the history of America, forcing manufacturing (and thus high-wage jobs) home. That in turn would fuel price inflation as wages and prices both rose.
There is no way out of the box that Geithner and Bernanke face. Bernanke concluded in his famous speech on deflation that:
“We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.”
Notice that Bernanke confuses higher prices (the result of a devalued currency) with higher spending.
Under a paper-money system a determined government can always generate higher prices by deprecating the currency but generating higher spending net of that currency devaluation requires that the aggregate purchasing power increase or that sufficient slack between income and mandatory spending (e.g. that on food, fuel, etc) exists to increase expenditures.
A determined government can only do that by either driving productivity higher or incentivising companies to locate their high-paying jobs here rather than abroad - that is, inhibiting global wage arbitrage. Absent that all higher prices do is impoverish a greater portion of the population and that in turn destroys debt carrying capacity among the very same people.
Since all modern monetary systems are debt-based the consequence of such a program is in fact the exact opposite of that which Bernanke (and Treasury) expected.
Leave it to the ivory tower folk to forget that in the real world (the one where you have to go to both the grocery store and gas station and buy your own stuff as opposed to having it all handed to you on a silver platter) consumption is driven by the spread between wages and mandatory spending (that on food, fuel, medical care, etc.)
Ramping prices through currency deprecation in an environment where global wage arbitrage has capped the feedback mechanism into earnings capacity destroys credit capacity instead of adding to it.
OOPS - BERNANKE GEITHNER FAIL
“OOPS - BERNANKE GEITHNER FAIL”
Naw, ya don’t say? I’m shocked, I tell you, SHOCKED!
A very fancy way of saying “If you don’t pay your workers a decent wage, they can’t be consumers.”
Good for the author! Thanks CB!
Is it me, or is the architecture of the Federal Reserve HQ reminiscent of that of the Kumsusan Memorial Palace? I wonder which came first.
Maddoff Auditor pleads guilty.
http://finance.yahoo.com/news/Madoffs-longtime-auditor-apf-793298119.html?x=0
It’s amazing that a multi-billion investment fund company uses a small time auditr for years. The should’ve been the most visible RED FLAG for all investers.
I’ve hired noone outside the major accounting firms for my business becuase if I hired some hole in the wall auditor, I get audited. The first thing I look at if I invested my money into something is who performed the audit. Plain and simple.
“It’s amazing that a multi-billion investment fund company uses a small time auditr for years. The should’ve been the most visible RED FLAG for all investers”
Nothing surprises or alerts people anymore.
We even had convicted felons writing mortgages out of some mom’s basements between high 5’s and bong hits…it WAS the New America Industry, while it lasted.
“Here at Fruad Inc, We make our money the Old Fashioned Way, We Steal It ”
..Fraud Inc, see, I even cheated the spelling cops again !
Madoffs new number
1-800-CON-VICT
I’ve hired noone outside the major accounting firms for my business becuase if I hired some hole in the wall auditor, I get audited. –Ken Lay
I smell a Chrysler inventory pileup…
market pulse
Nov. 3, 2009, 1:30 p.m. EST
Chrysler U.S. October sales fall 30%
By Wallace Witkowski
SAN FRANCISCO (MarketWatch) — Chrysler Group LLC, now managed by Italian auto maker Fiat SPA (FIAT.Y 15.23, -0.12, -0.78%) , said Tuesday that U.S. October sales dropped 30% to 65,803 vehicles from 94,530 in the year ago period. By brand, U.S. October sales of Chrysler models fell 36% to 12,815 units a year ago, while sales of the Jeep brand dropped 37% to 13,500, and Dodge brand sales declined 22% to 26,265. Total truck sales for the month fell 31% to 48,247 vehicles, and car sales fell 30% to 17,556 units.
——————————————————————————–
Posted: 12:21 p.m. Nov. 2, 2009
Feds dictated Chrysler, GM production
By Justin Hyde
Free Press Washington Staff
WASHINGTON — As part of its bankruptcy loans to Chrysler LLC and General Motors Co., the Obama administration required the companies to meet certain levels of vehicle production in the United States, according to a report released today by the Government Accounting Office.
The GAO report also said the U.S. Treasury “is unlikely to recover the entirety of its investment in Chrysler or GM,” and that the two companies had vowed to release detailed financial information.
Under the terms of the loans to keep the companies operating through bankruptcy, the GAO said GM agreed to “use its commercially reasonable best efforts” to keep its U.S. manufacturing within 90% of the level in its business plans.
The targets for Chrysler were more specific: It must either make 40% of U.S. sales in the United States or keep its U.S. production above 90% of its 2008 total.
…
Well Fiat came out and said they’ll basically being selling their own rebadged designs going forward. Who would want to buy the older Mopar models that will soon be discontinued?
But its got a Hemi!
Sweet.
So “Directive 10-289″ has turned out to be another of Rand’s accurate predictions! I think she should get the Nobel for economics.
Does anyone know if there is a comprehensive list of all of the entities that the Federal Government has taken an equity position in over the past year or so?
I have searched everywhere I can think of, written the Treasury, my Senators, Representative and have gotten no where.
I wonder if anyone in the government knows or cares. Maybe its just enough to throw money.
By how much did the fiat to produce goose GDP?
Anyone want to wager on whether a sizable percentage of the 8000 jobs cut worldwide wind up translating into jobs lost in the USA? Since the press release didn’t specify it, it would seem likely the US is where most of the higher cost jobs are:
NEW YORK (AP) — Johnson & Johnson said Tuesday it will trim layers of management, cut thousands of jobs, and set other restructuring moves in order to save up to $900 million next year. The New Brunswick, N.J., company said the cuts will affect 6 to 7 percent of its global work force of roughly 118,700 workers, or potentially more than 8,000 jobs.
The layoffs will prompt a restructuring charge of up to $1.3 billion pretax in the fourth quarter. Still, the company confirmed adjusted profit guidance between $4.54 and $4.59 per share for 2009.
Johnson & Johnson plans to simplify its business structure and projects that it will save between $1.4 billion and $1.7 billion annually after the restructuring is complete in 2011.
The company, the world’s most diversified health-products maker, saw its revenue fall 5 percent in the third quarter as intensifying generic competition slashed sales of about a half-dozen of its prescription drugs, including the schizophrenia drug Risperdal and the epilepsy treatment Topamax.
Chairman and CEO William C. Weldon said the moves are meant to position the company for long-term growth in an evolving, and sometimes turbulent, market.
“These types of changes are difficult under any circumstances, and will have a very personal impact on people who have been dedicated to the mission of Johnson & Johnson,” he said. “We recognize their contributions to the achievements of our business, and are committed to treating them fairly and with respect throughout this process.”
The new restructuring program comes on the heels of management’s decision to reorganize its comprehensive care business in August. That unit was created under a 2008 restructuring program with the goal of boosting sales, though sales were down during the first half of 2009. The unit makes medical devices and tests.
“When you look at the total economic environment, I don’t think anybody knows what’s going to happen,” Weldon said. “But nobody expects it to come back tomorrow.”
Anyone want to wager on whether a sizable percentage of the 8000 jobs cut worldwide wind up translating into jobs lost in the USA?
Of that there is little doubt.
A note from my 83 year old father, his MC had been getting hit for several months for a charge they did not make. He tried over and over to no avail, ended up canceling. I wonder how many thousands of people get screwed on a regular basis, and never get it resolved.
“I finally closed my CitiBank Mastercard account last week. We got into a brouhaha over a $29.99 charge they were putting on my account each month from the catolog company called Anthony-Richards. CitiBank kept insisting the charge was legit and I could never get a response out of Anthony-Richards. Barbara had ordered some small item from Richards in 2008 and her name must have somehow found its way back into their computer”.
“We had the MasterCard some 35 years. Now we’re down to one. American Express. Been with them since 1970″.
California moves closer to pay-by-the-mile auto insurance.
The Sacramento Bee
Car insurance by the tankful?
Not quite, but California moved a step closer last month to pay-as-you-drive policies that could allow motorists to buy insurance like they do gasoline — a little at a time.
Insurance Commissioner Steve Poizner released regulations permitting and authorizing mileage verification for pay-as-you-drive, without dictating what form such plans must take.
The goal is to use per-mile pricing to entice Californians not to drive so much, thus easing air pollution, relieving traffic congestion and lowering the number of traffic collisions.
A first-of-its-kind plan is MileMeter, available only in Texas, which last year began offering six-month policies with chunks of insured miles ranging from 1,000 to 6,000 miles. When the “tank” runs dry, motorists buy more.
Not a bad idea if the administrative headaches could be resolved. I know my wife would drive less; not sure I would…
Not a bad idea if the administrative headaches could be resolved.
Yeah - I’m curious exactly how the insurance company will go about tracking my driving mileage.
Overall seems like a decent idea, except for that part. History is filled with good intentions gone bad. I’m not crazy about all the little “tweaks” that are supposed to help us, but in the process require an ever-increasing level of tracking of our behavior.
“Yeah - I’m curious exactly how the insurance company will go about tracking my driving mileage.”
In principle, they already could — through your odometer reading.
Similarly, one is supposed to report the true mileage (reflected in an untampered odometer reading) on the title upon selling a used car. Of course, this will not prevent odometer tampering, but I would guess many people (including myself) would rather stay honest than tamper with the odometer to face both a guilty conscience and potential legal consequences.
Well that’s not what I meant. What I meant was - do I then need to send an email each month or year telling them my odometer reading? Is an agent going to drop by my house? Are they going to set up a reporting mechanism from the mechanics, or the state inspector? Are we talking GPS devices? etc. etc. Not really crazy about any of those alternatives - not necessarily from a privacy standpoint but also from a logistics cost standpoint.
Generally once an insurance policy is written on a vehicle, it goes into auto-pilot from then on until either an accident or the car is sold, thus the operational costs are extremely low. This would change that, requiring constant adjustment.
I know it’s not a huge deal, just something more.
And FWIW - it’s nothing new. Years ago when I bought insurance my rates were actually determined by how far I drove, but only when I bought the policy, and it was based on the honor system for the most part. I think that if you told them you drove 5,000 miles a year and then had an accident and had a 120,000 odometer reading in your 4-year-old car, they would call you on it and raise your rates. Not sure though since I never had that happen. Somehow they always believed me when I told them I drove 12 miles a year.
Have you ever used FastPass? I had a transponder when we lived in the Bay Area, and I routinely crossed lots of toll bridges. The transponder recorded every time I crossed a bridge, and I was magically sent a bill at the end of each month for an amount proportional to the number of bridge crossings. I am not an electrical engineer, but it does not seem like much of a technical challenge to design an electronic device (a tiny computer, if you will) that is linked to the odometer which could compute the mileage between billing periods for insurance purposes. The technology seems easy enough; thwarting cheaters might be more of a challenge.
Easy with a GPS logger attached to your vehicle, which would collect various driving habits such as speeds, zip code area of operation, time of day or night, etc., but it would have to be priced right for such an invasion of privacy. Many trucking firms already use this technology to track their equipment.
How hard can it be to go to your insurance office, write down the odometer one month and then compare it to next month? Or even easier: just twice a year? If you want a discount, you’ll put in the extra effort.
In my state, the odometer reading is part of your annual inspection record.
Business bankruptcy filings jumped in October, reversing two consecutive months of declining commercial filings and indicating that bankruptcies could continue to rise as the economy struggles to stabilize.
Last month, 7,771 businesses filed for bankruptcy protection, compared to 7,271 that sought shelter from creditors in September, according to data from Automated Access to Court Electronic Records, a private firm that tracks bankruptcy filings.
After two months of decline, the 7% rise in commercial filings shows that businesses are still struggling to access financing and are facing weak demand for their products.
“The margin for success is so thin that any financial hiccup” could cause a business to file for bankruptcy, said Jack Williams, a bankruptcy professor at the Georgia State University College of Law.
The tight credit markets since 2008 “will only be exacerbated” with small-business lender CIT Group Inc.’s Chapter 11 filing Sunday, he said.
The hardest-hit industries continue to be real estate and retail, but weakness in those sectors trickles down to a number of other areas, including home building and manufacturing, Mr. Williams said.
On a year-to-year basis, business bankruptcies shot up 24% in October compared with the same month in 2008. Mr. Williams called that increase “substantial” and said it is a bad omen for the final months of 2009 and the first quarter of 2010.
‘“The margin for success is so thin that any financial hiccup” could cause a business to file for bankruptcy, said Jack Williams, a bankruptcy professor at the Georgia State University College of Law.’
Hiccup…
* The Wall Street Journal
* BUSINESS
* NOVEMBER 3, 2009
CIT Files Its Bankruptcy Plan
Customers Gird for Snags; Usually No Chapter 12 for Banks
BY MIKE SPECTOR, VANESSA O’CONNELL AND KATE HAYWOOD
CIT Group Inc. filed for bankruptcy protection Sunday, in a final attempt to restructure and keep the doors open at the century-old commercial lender.
Now, the lender to nearly a million small and midsize businesses must maintain its customer base as it tries to rehabilitate under Chapter 11 protection. Most financial firms sell off assets or liquidate in bankruptcy amid fears that customers will draw down credit lines and spark a run on the bank.
…
Ouch! Another higher income postion replaced w/technology:
“(Johnson & Johnson) is….looking at streamlining its sales organization—a process that may involve replacing salespeople with technology. Some products, such as drugs that are sold to primary-care physicians, might not need to be marketed by high-priced sales reps. Instead the company can direct the doctors to interactive Web sites and other informational resources. J&J might be better served, McCoy says, by using sales reps to call on specialists, who prescribe complicated products that really require one-on-one explanations. “In the past, we would be going and detailing products to primary-care physicians,” McCoy said in September. “Now we’re taking sales forces out, and the way we interact with those physicians is directly through the Web site”
http://www.businessweek.com/bwdaily/dnflash/content/nov2009/db2009113_481501.htm
OT sort of. Oncologists are the only physicians who are licensed to sell chemo/radiation, thereby having a locked in position of prescribing these treatments at any and all times- conflict of interest and major money maker.
A Tale of Two Economies -
INDIA BUYS GOLD – UK BUYS BANKS
November 3rd, 2009 by Egon von Greyerz, GoldSwitzerland
India, like China, understands the virtues of gold. This is why they have snapped up 200 tons of gold from the IMF at around $1,045 per ounce or $6.7 billion. The UK does not understand gold, that is why Gordon Brown sold most of the nation’s gold in 1999 at virtually the low of $250.
Instead the UK has today spent $51 billion on propping up bankrupt banks. Royal Bank of Scotland received another $41 billion today making it the costliest bailout worldwide with a total of $75 billion. Lloyds Bank received another $10 billion. The US is of course also spending printed money on rescuing bank creditors with 115 bank failures so far in 2009.
So who is likely to make the best return on their investment, India with their gold or the UK or US with their bankrupt banks. We certainly know who we will put our money on.
On 22 October we forecast in our report “Final Warning” that starting in November we are likely to see major changes in markets and in the economy. We have barely entered November and gold is already making a new all time high at $1,081. It is interesting that it is happening right after IMF has disposed of half of the planned gold sales. The same event in the 1970’s was the catalyst for the acceleration of the gold price.
What the hell is a Fannie Mae HomePath property?
215 Coral Cay Ter Palm Beach Gardens, FL 33418 $290,000 3 Bed, 2 Bath | 2,606 Sq Ft | MLS #R3061269 Bank Owned Foreclosure Opportunity Prestigious BallenIsles! Golf Tennis Gym Social
4Property Information for 215 Coral Cay Ter Save Listing
Message from Frank Verna
Purchase this property for as little as 3% down! This property is approved for HomePath Renovation Mortgage Financing. Contact Brian Manning 954-260-0601 for Homepath Mortgage Pre-Qualification and information. NOT A SHORT SALE! This is a Fannie Mae HomePath property. Purchase this property for as little as 3% down! This property is approved for HomePath Renovation Mortgage Financing. Special purchase addendums apply. For Homepath mort PQ contact list agent Located in exclusive Ballenisles! HOA requires purchase of a membership when buying this home. Memberships are available from $40k for Social level to $115k for Golf. Other memberships also available. Home exterior has been recently painted. Huge ceilings, well equipped kitchen with SS appliances and wood cabinets. Courtyard entry with nice backyard. All offers require PQ letter if mortgage or Proof of Funds for cash offers. Minimum $1000 deposit w/ mortgage offer or 10% of purchase price for cash offers. If you have completed buyer signed contracts, our preferred method to submit an offer is online at our website. Purchase addenda, instructions and disclosures for this home can be obtained from the lsiting agent. All data and dimensions estimated and not guaranteed. Buyer should complete their own inspections to verify information provided.
Bubba is driving down a back road in Alabama .
A sign in front of a restaurant reads:
HAPPY HOUR SPECIAL
Lobster Tail and Beer
“Lord a’mighty,” he says to himself, “my three
favrite thangs!”
Yes indeed!
Does your HBB handle have any connection to 941buzz in TN?
Just askin’
Nope, we are down here in S.Carolina. pass through Tenn. on I-40 about twice a year.
This crowd wastes no time dealing with cases like this…
Paedophile to be beheaded and crucified in Saudi Arabia for string of sex attacks where he left toddler to die in desert
Daily Mail 03rd November 2009
Riyadh, SAUDI ARABIA
Tough justice: The man lost his appeal at a court in Riyadh, Saudi Arabia
A man in Saudi Arabia is to be beheaded and crucified after he raped five children and left one of them, a three-year-old boy, to die in the desert.
An appeal court in the capital Riyadh approved the death sentence handed down in June by judges in the northwestern oasis city of Hail where the convicted 22-year-old man carried out his crimes.
The rapist - who was not named - was arrested several weeks ago as he tried to seize another boy after offering him a ride home from school.
The seven-year-old - who escaped unharmed - helped identify the culprit.
The man’s victims were aged between three and seven. He was said to have lured them into his car as they left school at midday and then drove them to remote desert locations to rape them.
An investigation was launched after a 25-year-old father reported that his three-year-old son was missing and that he suspected the kidnapper to be a male driver of a white four-wheel drive vehicle.
The infant was later found under a scorching sun in the desert where he had died of thirst.
A panel of three judges in Hail sentenced the rapist to death for “abhorrent” crimes which they said had terrorised the community.
Crucifixion in the conservative desert Kingdom means tying the convict’s body to wooden beams to be displayed to the public after he is decapitated by a professional swordsman.
Saudi Arabia has executed 56 people this year under laws that allow the death penalty for rape, murder, apostasy, armed robbery and drug trafficking.
In extreme cases, the convict is executed and his body crucified in public.
well i mean his crimes were not like selling a few joints to an undercover cop.
That peremptorily takes care of the issue of where to house convicted sex offenders.
Not a small issue, considering pedophiles are almost never “rehabilitated”. Release them from prison and within 48 hours they are fantasizing of, plotting, or carrying out the same crimes, 99% of the time.
The Saudis at least grasp the notion that pedophile rapist/killer = mad dog at picnic:
put it down and end the problem. Rehab not an option.
Castration would be an alternative which would seemingly be more humane than the death penalty (though perhaps not for pedophiles — I personally cannot comment on that…).
Some cases like this are clear-cut, but keep in mind it’s a slippery slope. For instance a 17-year old having sex with their boyfriend/girlfriend who’s just shy of 16 can be convicted as a sex offender, including being put in a public internet database (map views and notifications and all) for the rest of their life, and not being able to live in many areas near schools, etc.
An enlightening article.
They face retribution so much more awful than anything our courts would dole out and yet they commit the crime anyway. They obviously have a compulsion beyond their ability to control. Even more reason that as a mother/woman I’d be glad to see them permanently taken out of circulation.
If that’s evil to say, may I burn in hell.
If he’s guilty, and I say if because I would not want my guilt or innocence decided by a 7-year-old who may be very eager to please the authorities asking questions, than I have no problem with this. I know I’m inhumane and sick and twisted but I cannot understand how any parent can allow their child’s rapist, or even worse rapist and murderer, to live once they know who did it. Like a lot of people I had a crappy childhood in a lot of ways, but this was one thing I never had to worry about. My father would have killed (literally – he liked guns) anyone who laid a hand on me. And EVERY child should grow up knowing they will be protected even if they don’t understand from what.
The only problem with my world of perfect revenge is I have been falsely accused of a crime (stealing eggs from a neighbor as a kid), I have thought someone guilty of a event they did not do and only found out years later the true culprit, and know DNA evidence has exonerated many rapists “ID’d” by their victims. The human ability to remember details and identify those that have harmed us is faulty at best, broken at worst. So there’s no easy solution and for this reason I tend towards thinking the state ought not to be in the business of executing its citizens.
OTOH, they got this guy on video or some other impeachable proof? I will gladly do the beheading! Also, I would recommend the crucifixion first and then the beheading! But that’s just me.
This is why we all need to support he Innocence project. I think a death row convict has a right to all dna testing…..no more pussyfooting by the courts….no more nonsense. new evidence then a new hearing. No more 10-12-15 years before we put them to death. No dna matchup then life without parole.
http://www.innocenceproject.org/
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I have thought someone guilty of a event they did not do and only found out years later the true culprit, and know DNA evidence has exonerated many rapists “ID’d” by their victims.
apostasy = if you leave islam, you leave your head.
If the conjecture that asset prices prove accurate, the whole notion of “be greedy when others are fearful” might be seriously undermined, as current prices would reflect overvaluation due to artificial price supports rather than fundamental value reflecting actual investor sentiment.
Good luck with that high-stakes gamble, Warren!
Short View: Uncertainty reigns
By Aline van Duyn, US markets editor
Published: November 3 2009 19:39 | Last updated: November 3 2009 21:11
Warren Buffett is the world’s best-known investor, not least because he has strong views and a long-term perspective which have made him immense profits.
…
When the Vix was heading for record highs last October, in the wake of the bankruptcy of Lehman Brothers, Mr Buffett said he was buying US stocks. “Be fearful when others are greedy, and be greedy when others are fearful,” he said. Investors who bought the S&P 500 index back then have made more than 10 per cent.
Whether greedy or fearful, many investors are confused. The Vix, often called Wall Street’s “fear gauge”, could well be rebranded as the “uncertainty gauge”. And uncertainty over stocks signals uncertainty about oil and the dollar, too, in light of the strong, and growing, correlations between these assets.
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Whether greedy or fearful, many investors are confused. The Vix, often called Wall Street’s “fear gauge”, could well be rebranded as the “uncertainty gauge”
This is the sweet spot as far as the FED is concerned. What they don’t want is a majority of the population feeling certain that massive inflation or deflation is on the horizon. With confusion they can steer the masses with subtle news releases.
Agreed. The Fed likes bid distribution with high variance, which is a natural consequence of befuddling the sheep into a quivering mass of confusion, with talk of green shoots offset by rumors of currency devaluation and collapsing real estate prices.
I just did my first SD County foreclosure home search in a while (on foreclosure dot com) and here is what I see:
Home >> California Foreclosures >> San Diego County
Don’t ask me again
San Diego County Search Results
Real Estate Listing Results 1 - 25 of 33,530
I am really too disinterested to investigate, but is the 33,530 number whatsoever related to the actual number of San Diego homes currently in some stage of the foreclosure process? I am thinking that number may exceed the annual number of homes sold by a large margin, but here again I have lost interest in this sort of question, as I am out of the purchase market now for at least another year (and maybe on a permanent basis). I wouldn’t want to stand in the way of anyone who can really use the $8K tax credit to significant personal advantage.
http://news.yahoo.com/s/ap/20091103/ap_on_bi_ge/us_johnson___johnson_restructuring
Johnson & Johnson to cut 8,000 jobs.
Why don’t taxpayers have a say in measures to prop up assets held at Megabank, Inc. I, for one, would prefer to see Citibank go belly up than to be forced to help prop them up (including the mob boss’s gazillion dollar pay check). The Fed and Treasury could have chosen to let Megabank, Inc fail, and provide welfare payments to American households to help them through the crisis, but instead, Megabank, Inc, haven to the wealthiest employees and investors on the face of the Earth, is the welfare recipient. What is wrong with this picture?
Households across America are facing the menace of Megabank, Inc foreclosing on them; meanwhile, their lackeys in Congress and the Treasury are forcing Main Street to collectively prop up their scam so-called “banking operations,” which are really none other than financially-engineered, government-approved thievery. THIS IS A FREAKIN’ OUTRAGE!!!
Nov. 3, 2009, 12:40 p.m. EST
A look at banks with government backing of assets
By Steve Goldstein, MarketWatch
LONDON (MarketWatch) — As Lloyds Banking Group exited a program from the British government providing a guarantee in case assets went sour, and the Royal Bank of Scotland modified its protection, here’s a list of some of the institutions that are receiving state backing for specific portfolios.
Citigroup (C 4.04, +0.05, +1.25%) : About $152 billion of North American loans, $4.8 billion of mortgage-backed securities, $9 billion of Alt-A mortgages, close to $10 billion of commercial real estate and $5.8 billion of structured investment vehicle assets enjoy the protection of the U.S. government, according to a presentation during Citi’s third-quarter results.
ING (ING 12.98, -0.13, -1.02%) : The Dutch state backs 80% of a portfolio of Alt-A residential mortgage-backed securities that in January was valued at $35.1 billion and now stands at 14 billion euros, or about $21 billion.
Royal Bank of Scotland (RBS 11.90, -0.06, -0.50%) : The U.K. government backs 282 billion pounds ($462 billion) of assets, compared to corporate and leveraged loans, commercial and residential property loans, structured credit assets, and derivatives with monoline insurers.
UBS (UBS 16.35, +0.11, +0.68%) : A fund of sub-prime, Alt-A, prime, commercial real estate, student loans and reference-linked notes is backed by the Swiss government that was initially valued at $60 billion.
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Credit Markets
Nov. 3, 2009, 10:47 p.m. EST
Investors see mortgage rates rising as Fed wraps up buys
* Treasurys fall as companies sell debt ahead of Fed (3:45p)
* Pimco’s Gross unwinds mortgage positions (Oct. 20)
* Treasurys fall after ISM, higher debt issuance (Nov. 2)
* Investors hold least cash in two years, AAII says (Nov. 2)
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Some bond investors are expecting mortgage rates to rise as the Federal Reserve finishes its planned purchases of nearly $1.5 trillion in mortgage-related bonds, yet another risk to the fragile U.S. recovery.
The central bank may address its plans to unwind this program, one of its biggest of forays into the private credit markets over the past year, in Wednesday’s policy statement. Read more on the Fed.
“Once we don’t have the largest incremental buyer of mortgages, who will step up to take that role?” asked Todd White, a bond portfolio manager at RiverSource Investments.
“It probably won’t be a smooth transition, assuming rates are near where we are currently.”
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Perfect storm ahead once the “eye” of the housing market hurricane passes over:
Rising rates on the back of the ends of Fed MBS purchases and Dough-4-Dumps, just in time for the 2010 red hot prime and Alt-A ARM reset tsunami to drown what little housing demand remains after another half-year’s worth of double-digit unemployment. Happy knife catching to all brave home buyers
So I never did get a single satisfactory answer about whether
1) the Fed is propping up housing prices;
2) whether it is legal for them to do so.
My thought is that they are propping up housing prices and that it is not legal, but perhaps I just don’t understand the laws governing price fixing very well.
I do know a little about the economics of govt-engineered price controls. They were used in WWII (implemented by “price tzar” J K Galbraith) and during Nixon’s term (early 1970s) to cap gasoline prices when OPEC was getting started. Price caps have the effect of generating shortages, like during WWII and the early-1970s — remember those gas lines? — and in the old Soviet Union when the price of bread was suppressed to $0 — remember those poor people wasting their lives away waiting to receive their “free” bread?
Price floors — like the ones I believe the Fed has placed under housing — have the effect of generating surpluses, or gluts — got shadow inventory and vacancies??? The disequilibrium condition would like to resolve itself through lower (read: more affordable) housing prices and increased sales.
An audit of the Fed would sure help clear up the mysteries about whether or not they are supporting housing prices… and whether it is legal or not.
Sounds like the Fed will have to print lots more money if they want to prop up the stock market, as investors have little left to invest:
Nov. 2, 2009, 1:30 p.m. EST
Investors holding the least cash in two years, AAII says
* Mortgage rates to rise as investors eye Fed’s exit (10:47p)
* Investors hold least cash in two years, AAII says (Nov. 2)
* Treasurys fall as companies sell debt ahead of Fed (3:45p)
* Americans save more but will it help bonds? (Oct. 21)
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Individual investors’ cash holdings in October fell to the lowest since July 2007, and Americans became more willing to invest in higher-returning assets as the economy improved, according to a new survey by the American Association of Individual Investors.
The proportion of holdings in cash fell to 19% of assets last month. Investors increased both equity and fixed-income holdings, with individual stocks holdings rising about 1 percentage point to 29% of assets, and stock mutual-fund holdings also up about 1 point to 28%.
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If the MSM is talking about it, then it has already occurred. Who’d ‘ave thunk that the Fed expanding its balance sheet to gargantuan proportions, coupled with reciprocal responses from partners in the international banking cabal, might have the undesirable consequence of reflating a ginormous asset bubble?
* The Wall Street Journal
* REAL ESTATE
* NOVEMBER 4, 2009
Fears of a New Bubble as Cash Pours In
Real-Estate, Stock and Currency Markets, Especially in Asia and Pacific, Are Seen at Risk
By ALEX FRANGOS and BOB DAVIS
Concerns are mounting that efforts by governments and central banks to stoke a recovery will create a nasty side effect: asset bubbles in real-estate, stock and currency markets, especially in Asia.
The World Bank warned Tuesday that the sudden reappearance of billions of dollars in investment capital in East Asia is “raising concerns about asset price bubbles” in equity markets across Asia and in real estate in China, Hong Kong, Singapore and Vietnam. Also Tuesday, the International Monetary Fund cited “a risk” that surging Hong Kong asset prices are being driven by a flood of capital “divorced from fundamental forces of supply and demand.”
Behind the trend are measures such as cutting interest rates and pumping money into the financial system, which have left parts of the world awash in cash and at risk of bubbles, or run-ups in asset prices beyond what economic fundamentals suggest are reasonable.
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It’s really too bad that we don’t have an ignore button on this site. People talking to themselves. They must have got stuck somewhere.
BTW, does anyone remember humor?
The permabears will miss the bottom. Even Ben seems to be out there buying properties. Am I wrong? Geez, I’ve been here since may 2005. I’m not a fricken troll, for God’s sake. But If I were in AZ, I’d be buying a house, too. Unfortunately, I’m in a bubble zone, just like Get Stucco. The prices came down somewhat, but not enough as we expected. So, am I a troll? No, I’m not. I’m renting , just like the professor, who is probably not really a professor anyway. Show us your credentials. You’ll probably cry like a baby to Ben and have me banned again, but you do not own this site. On the other hand, I do appreciate some of your posts, but your non acceptance of any ideas contrary to your own is what I find most objectionable.
Even Ben’s been looking out there for the bargains, He’s even said so. So why am I treated like a troll, when I’m not? I’ve been following this debacle since day one. I rent. I’ve rented since I sold my house in Jan 2005.
I’m still looking for a bargain in this bubbly area, and while prices have gone down somewhat, they are still not at bargain basement levels, despite the economic meltdown of 07, 08 and 09. Go figure! Had I lived in Florida, Las Vegas or Arizona, I’d be snapping up at least one property by now, but this just isn’t the case here. I could have bought in 08, but I was afraid to. Just as well, since I’ve since lost 1/2 of my employment, and I would have been suffering anyway. Can’t win! Anyway, that’s my situation. Best of luck to all HBB’s. Lots of kind regards and goodnight.
So is the Fed going to discuss draining the liquidity out of the swamp at their current meeting? I am wondering how cheap talk might square with future action; i.e., will they keep supporting the value of housing assets forever through MBS purchases, or will they scale those back and let them reach what one might call a more “fundamental valuation”?
What’s all this talk of panic? All I see are green shoots of recovery sprouting up all over the place. Is the Fed taking up the topic of financial panic this week? Or is the denial still running as thick as molasses at the FOMC meeting?
And is there any chance their busy agenda will allow them to take up the question of breaking up the too-big-has-failed Megabanks, in order to restore competition to the American banking sector and a level playing field between Wall Street and Main Street?
I didn’t think so…
* The Wall Street Journal
* OPINION EUROPE
* NOVEMBER 3, 2009, 5:30 P.M. ET
When Regulators Fail
‘Systemic risk’ is not only for banks.
Financial Services Authority chief Adair Turner has finally stopped attacking bankers for their paychecks and started talking about the real issue—what to do about the banks deemed too-big-to-fail. Unfortunately, he’s still worrying too much about how to prevent failure and not enough about how to facilitate it.
In his speech Monday to an international group of central and private bankers, Lord Turner identified three possible approaches to the problem:
• Make failure less likely by increasing capital requirements;
• Make banks smaller or less “systemic” by either narrowing what they can do or making them less interconnected;
• Or, finally, make failure easier by developing bankruptcy procedures or other “resolution” mechanisms for large financial institutions.
Of these, the last is the most important for reducing the moral hazard that did so much to contribute to the financial panic, as Bank of England Governor Mervyn King has persuasively argued. Even before the panic, systemically important banks enjoyed considerable advantages over their less “important” rivals, and many of these advantages were created by or made more acute by government regulation and rules.
As Lord Turner noted Monday, the Basel II standards on bank capital actually allowed large financial firms to hold less capital than their smaller brethren, on the theory that large meant diversified and sophisticated and so less risky. Looking back, this was clearly a crazy policy—but it’s worth recalling that it was propagated by the same luminaries who are now proposing to prevent the next crisis by tinkering with the regime that contributed to the last one. At a minimum, this should be an occasion of some humility from the wise men of bank regulation.
We now know that this presumption of safety in size was false. We also know that the costs of being wrong about such things—both for the public fisc and the real economy as a whole—are much greater than was commonly assumed before the panic.
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Bigger is not better. How bout if we see if smaller is better? I would like to see Megabank, Inc broken up into little bitty pieces, none of which is systemically risky. Wouldn’t that pretty much solve the problems we are currently facing? Why don’t people in high places in the US government want to discuss the real issues?