Bits Bucket For November 12, 2009
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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U.S. Foreclosure Filings Surpass 300,000 for 8th Straight Month.
Nov. 12 (Bloomberg) — U.S. foreclosure filings surpassed 300,000 for an eighth straight month as unemployment made it tougher for homeowners to pay their bills, RealtyTrac Inc. said.
A total of 332,292 properties received a default or auction notice or were seized by banks in October, up 19 percent from a year earlier, Irvine, California-based RealtyTrac said today. One in every 385 households received a filing. The tally fell 3 percent from September, the third consecutive monthly decline.
“The foreclosure problem is still with us and will keep prices down,” Stephen Miller, chairman of the economics department at the University of Nevada at Las Vegas, said in an interview. “The real issue is we don’t know what inventory banks are holding that they have yet to put on the market.”
Distressed real estate transactions accounted for 30 percent of all home sales in the third quarter as the median price fell 11 percent from a year earlier to $177,900, according to the National Association of Realtors. U.S. unemployment surged to a 26-year high of 10.2 percent in October as payrolls fell by 190,000 workers, the Labor Department said last week.
Housing will reach a bottom by March 2010, with lower- priced properties recovering value more quickly than expensive homes, First American CoreLogic said last month.
“The fundamental forces driving foreclosure activity in this housing downturn — high-risk mortgages, negative equity, and unemployment — continue to loom over any nascent recovery,” James Saccacio, chief executive officer of RealtyTrac, said in the statement. “We continue to see foreclosure activity levels that are substantially higher than a year ago in most states.”
RealtyTrac sells default data collected from more than 2,200 counties representing 90 percent of the U.S. population.
“Housing will reach a bottom by March 2010, with lower- priced properties recovering value more quickly than expensive homes, First American CoreLogic said last month”.
Keep reading over and over that first quarter 2010 is the bottom. Must be nice to have a working crystal ball.
I seem to recall when the “experts” were predicting that March 2009 was going to be the bottom.
The experts have been calling a bottom between 6-12 months into the future for several years running now. Eventually their stopped-clock prediction will prove correct, but probably not for several more years of trying.
I believe American Core Logic is firmly in the “noone could have seen it coming” camp regarding their failure to predict the housing collapse, but they nonetheless seem highly confident in their ability to accurately call the recovery.
They’re clearly taking advantage of the fact the there is absolutely zero public accountability for their past failures. Only when the MSM et al get some balls and start calling these people on their BS will these hot air machines cool down.
Rule number one: never talk about Fight Club.
Seriously GB, you never rat out your fellow frat/country club member. That’s just so declasse. Beside, you might need a… favor one day.
“Must be nice to have a working crystal ball.”
Truely,
Mine was on the fritz a while back so I sent it to the shop and the idiots dropped it. Now I have ‘crystal shards’. I can only see bits and pieces of the future.
Probably better that way anyhow.
Suffice it to say, the only thing we can be sure of is that this roller coaster ride is far from over and anyone who says otherwise probably has the deed to a bridge he would like to sell you stuffed into his back pocket.
The one thing I know with any degree of certainty is that CRE has yet to really hit the fan. If things are still more or less stable (i.e. aren’t any worse) by next March I might start to feel diferently but right now I’m still nervous as hell.
Sort of like when you were a kid and took your marbles and cooked them in the oven to get that cracked glaze look.
That is it..
We are seeing that ‘cracked glaze look’ in so many eyes!
What I have noticed, sort of OT, is that when I view CL, that I think there is a new bubble.
Nothing wrong here. I am not inferring anything, but I have noticed many more Rental agencies are more numerous and lots are gay owned. Like this is the NEW business.
#3. Lots of the properties shown are where the owner is in another state. So far, 9 of 10 ( and that does include those who live more than 2hrs away too).
The crystal ball may have a crack in it causing to fog up the real future of the housing market.
“The real issue is we don’t know what inventory banks are holding that they have yet to put on the market.”
“Housing will reach a bottom by March 2010.”
Kinda contradictory, don’t ya think?
Housing will reach a bottom about six months after some major change takes place in the financing structure. By this I mean a) government forces banks to value those assets and release the inventory b) Government stops feeding Fannie and Freddie c) somebody starts requiring actual down payments in cash up front (no piggyback/rollover stuff).
B and C are likely to happen together. And btw, if C happens, all the tax “credits” in the world aren’t gonna help.
Actual downpayments (even 10% down) would crush the housing market; it would be like a depth charge going off under a submarine, breaking is straight into 2 pieces. Even with the median home price at 150K, a 20% downpayment on that is 30K. And that’s a house for the median family; making about 50-60K a year. How many people do you know making 50-60K a year who have 30K in cash?
And then, even worse are the bigger homes and more expensive properties. Without the “carry over” effect (from selling your starter house for WAY more than it’s actually worth), who’s going to have the down payment for a 500K McMansion? 100K in cash? I can count on one hand the number of people I know who have access to that kind of cash.
20% down as the RULE (no exceptions) would be the best thing, long term, that could EVER happen to this housing market. And it would be the best thing personally, that’s every happened to me (because I’m one of the handful of people who have the downpayment saved). But, unfortunately, it’s not going to happen; the government simply will not allow that occur; it would be a “catastrophe” of epic proportions for the housing market at large.
“…the government simply will not allow that occur…”
While I entirely understand this sentiment, and lord knows that all the meddling is also perplexing and frustrating me too, it’s more important now than ever to shatter this illusion of governmental omnipotence. It’s tough, I know - but they are reacting to events, not dictating them.
but the gobmint will “fix” healthcare…….
“…they are reacting to events, not dictating them.”
A very good point, john, this mess is beyond mere governance, it’s a multi-generational meltdown exacerbated by a demographic anomaly.
The chickens have indeed come home to roast, er roost, and the very best we can hope for at this point is a kitchen staff with enough imagination and experience to to turn their stringy lice-ridden carcasses into a nice bullion with which to start a whole new batch of soup.
Yep, and it seems the only way out is …?
Let the Elizabeth Warrens have at it for awhile?
Let the Elizabeth Warrens have at it for awhile?
And Brooksley Borns?
Why not?
“… it would be a ‘catastrophe’ of epic proportions for the housing market at large.”
And thus a catastrophe for the banks and any other financial institution that owns the mortgages for these houses.
It’s all about saving the banks; if enough banks fail our economy screeches to a halt.
The banks do have America by the b@lls. All the while, the Obama aministration is trying to castrate this country. It is just one giant pain in the nuts.
“The banks do have America by the b@lls.”
Yep, and it seems the only way out is …?
And thus a catastrophe for the banks and any other financial institution that owns the mortgages for these houses.
Increasingly that would be Fannie, Freddie, and Ginnie - and by extension us, unfortunately.
Yep, and it seems the only way out is …?
Finger to the eye.
“Yep, and it seems the only way out is …?”
Catastroation?
“Yep, and it seems the only way out is …?”
Spay the Fed.
There is No Way Out. That is why the government is able to get away with any ridiculous bailout nonsense right now. Pain is the only solution, but even Billy Mays can’t sell pain. Reality is kryptonite for humans. Reality is a politician’s worst nightmare.
“It’s all about saving the banks; if enough banks fail our economy screeches to a halt.”
Wrong. Saving these banks is precisely what is killing our economy. We had way too many banks as it was. Allowing these “too big to fail” institutions to fail would have been the cure. It would have allowed the smaller, more responsible banks to rise up and replace these irresponsible drags on the economy. There was just no political will to do so, as Megabank, Inc. is in the pocket of the politicians, and vice versa.
We had way too many banks as it was.
The problem is most definitely not too many banks, at least in terms of the number of banking companies. Since 1985 at least - there have been an ever-decreasing number of them - over 50% less, in fact.
The problem is the growth of the large banks getting out of control, and their rapid ramp-up in their use of leverage to make profits.
(Though I most definitely agree with the rest of your statement - that allowing the bad ones to fail would have been the cure, etc.)
(my previous post -with a link - will show up at some point, and then this one will make more sense)
“Wrong. Saving these banks is precisely what is killing our economy.”
We wouldn’t have an economy if we didn’t have the banks. The banks are where non-cash financial transactions are cleared. If there is any question about whether the financial part of a transaction will be cleared then it’s unlikely the transaction will ever take place.
Transactions have two parts: The delivery of goods and services and the payments for these goods and services. When a cash transaction is made both parts of the transaction - the physical and the financial - occurs at the same time.
Other types of transactions require a clearing house, such as a bank. If the financial integrity of the bank is questionable and the deliverer of goods or services will question whether or not he will get paid then the transaction won’t happen.
If the financial integrity of enough banks are questionable then very few non-cash transactions will take place and the economy will freezes up.
I don’t need a tutorial on banking- I worked for a megabank for two years. There is zero evidence that allowing those financial institutions to fail would have frozen up the whole economy. There were plenty of solvent, healthy banks to pick up the slack.
Even with the bailout, there was a problem with confidence among banks. There is no way to tell if that would have been appreciably worse had the failures been allowed to fail, but we’ll never know because the politicians bought into Hank Paulson’s fear mongering, and the rest is history.
“I don’t need a tutorial on banking …”
No? You might want to revist what happened in sept 2008 when Lehman was allowed to fail.
“No? You might want to revist what happened in sept 2008 when Lehman was allowed to fail.”
I remember well what happened- the stock market was tanking due to panic in the streets, and megabankers were crapping their little panties, running to daddy Paulson for bailouts. How exactly does this prove your beloved “too big to fail” ideology is not a failure?
How about the world’s economy freezing up?
“How exactly does this prove your beloved ‘too big to fail’ ideaology is not a failure?”
By your own words: “I remember well what happened - the stock market was tanking due to panic in the streets, and megabankers were crapping their little panties, running to daddy Paulson for bailouts.”
And the world economy was beginning to freeze up.
The world economy never froze up. Life went on as usual for me, how about you? It sounds like you fell hook, line, and sinker for Paulson’s scare tactics. I didn’t. I wish the politicians would have called his bluff. I suppose you’re also on board with Bernanke’s “we saved the world” mantra. I’m not. You and I- we don’t think alike.
With all due respect to combo, I have to agree with you, Grizzly.
Yes, the financial system would have experienced a few glitches, and transactions would have taken longer to clear; but I think this would have been a temporary situation until the other institutions took over. The govt absolutely should have helped backstop these transactions, but they did not need to save any particular institution, IMHO. Just nationalize and liquidate those institutions that could not be saved under any circumstances, and sell off what was fairly viable.
“It sounds like you fell hook, line, and sinker for Paulson’s scare tactics.”
Paulson had and has nothing to do with my viewpoint. My viewpoint is based upon global events that transpired in September of last year when global trade began to screech to a halt due to the banking crisis. It was only after EXPLICIT - as opposed to implicit - government guarantees that the banks would be made whole that saved the system.
It is what it is. You can either buy into it or not.
“You and I - we don’t think alike.” This is one point where we are in agreement.
CA renter -
You might find an interesting read by googling-up “Three Lessons of the Lehman Brothers Collapse” and read about what was happening to the world’s economy.
Well I put more than 20% down when I bought my first and only house for 120k in 1999. But I was probably excessively paranoid because I remember my college roomates foreclosure.
Find me a house in my area for $120K and I’ll put more than 20% down, too. Hell, find me a house for $150K and I’ll do the same. The problem - still - is prices are just too damn high.
That’s the point, they wouldn’t seem too high if you didn’t have to put any money down and expected to pay off the mortgage with HELOCs.
I’ve said it before and I’ll say it again — if you can make the monthly payments, why do you need 20% down?
Having more skin in the game doesn’t cut it, because psychologically, and human nature being what it is, when a home is considered YOURS, you will do virtually anything to keep it. The exception being negative equity and if you have lived in your house long enough, I doubt even that would matter to most people because they would assume prices will increase eventually.
You need 20% down to prevent the negative equity scenario (where you can make a ton of money by walking away from your house). Also, without some amount of down payment, the whole housing market becomes a “heads I win, tails you lose” environment. If I can buy with nothing down, what’s the downside to me to buy, hold it, and try to sell at a huge profit? If I lose, the bank eats the loss. If I win, I make a huge amount of money.
The action in the housing market from 2002-2007 should show you exactly why 20% down is so important. The housing bubble never would have gotten off the ground without no/low down loans.
The banks are counting on human nature (do anything to keep your house) from starting off the real avalanche of foreclosures; but, that’s not a good basis to start from. Basically, you’re (and they) are assuming that people will put their financial well being behind their want to keep “their” home. This IMHO, is a flawed argument; people are stupid, but they aren’t stupid forever. As people start to “buy and bail” more and more, the psyche of the country will change. If you start to know a bunch of people who’ve 1/2ed the MTG, 1/2ed their tax bill, and lowered their insurance to move across the street and take a credit hit, it’s going to start to look much, much more attractive.
How much is that 750 credit score worth to you? 10K? 50K? 100K? At some point, people are going to look at it and figure out that a 200 point credit hit isn’t worth paying an extra 200K plus on a bad investment decision for. The sooner that happens, the sooner we can heal.
There are FAR too many people out there who paid FAR too much for their homes, and, until they walk, are going to suffer EVERYDAY of their lives for it. They will have less disposable income, less happiness, more stress, etc; none of which is good for this country or the people involved. The only people helped are the banks; everyone else is better off walking away.
Having more skin in the game doesn’t cut it, because psychologically, and human nature being what it is, when a home is considered YOURS, you will do virtually anything to keep it.
Millions of strategic walkaways in the last 2+ years say you’re wrong.
This is wrong on so many levels that I don’t have time to even outline a response.
Well classicly there are two good reasons for downpayments:
1.) They serve to reduce losses to the lender in a foreclosure. By the time you add up forclosure costs and the 7% you hand to realtors, the lender should be close to breakeven, if the house hasn’t declined in value.
2.) They serve as proof of a borrowers ability and inclincation to live within their means. IMHO one of the many reasons we’re in the hole that we are is that lenders relied instead on FICO scores as a substitute measure of borrowers inclination to repay their debts. But in a world of expanding credit, it was deceptively easy for many to make payments while adding to their indebtedness every month.
We’ll agree to disagree.
In a ‘normal’ housing environment I don’t believe 20% down is necessary. I fully beleive the ability to make your monthly payments is all that matters.
I don’t consider the last 2-3 years normal.
Normal has its ups and downs.
Even in a normal housing market, think about the following scenario:
- Person buys a house
- Shortly thereafter the person loses their job and can’t get another one immediately
What do you think will happen in a no-down-payment scenario vs. a high-down-payment scenario? Now think about how that will affect the bank, and there’s your answer.
Even in a normal housing market, mortgage interest rates vary a bit causing the probable selling price of the house to wobble.
In a ‘normal’ housing environment I don’t believe 20% down is necessary. The question is “necessary for whom?” You’re right there doesn’t seem to be a good reason for the borrower to want it. But I would submit that it is reasonable for the lender to require it.
I think that one of the pieces of evidence that we were in a credit bubble was the fact that people used a second mortgage rather than mortgage insurance. The aggregation of risk via pooling into bonds or insurance should lead to similar pricing. But bond issuers were consistantly able to underprice the insurance issuers. The underwriters at insurance companies were closer to the loans and had years of experience. The bond raters and buyers were several layers removed and either newcommers to the RE business or completly inexperienced with it.
Even in a normal housing market, think about the following scenario:
- Person buys a house
- Shortly thereafter the person loses their job and can’t get another one immediately
Normal being the operative word, the person would find a job relatively quickly, but since most jobs are being offshored or deleted, Normal being housing prices are through the roof, banks won’t lend, and jobs are tough at best to re-establish.
Normal, hmmm.
This is normal now, but not historically.
I would say, 20% down vs less down would tell me to walk in this “normal” economy.
‘ but I would submit that it is reasonable for the lender to require it.’
Why should the lender require it when the Fed gov’t is bailing them out? Ultimately, the taxpayers are left holding the bag. This has become more than a moral hazard. It’s a never ending cycle of abusing/robbing other peoples’ money.
Oh it’s refreshing to hear from our old friend Howie Muchamonth every once in a while.
Well, that 20% down sure helped keep things from carnage most of the time.
Sigh. Boomlet in the face of double digit unemployment, massive forclosures, massive backlog of forclosures and unprecidented moves by the Fed and government. Brings out all the bestest sorts of folks.
“Well, that 20% down sure helped keep things from carnage most of the time.”
Why would anyone with a 20% down payment saved up be dumb enough to compete against FHA-subprime-loaned fools ARMed with $8K in stimulus money as incentive to buy a house that they cannot afford and which will likely turn them into a future FB?
>…none of which is good for this country or the people involved
Well, it would be if with pain came understanding and wisdom.
Michael Finks comments: so well stated that I kept his last two paragraphs on a notepad file.
I second that. You are right-on, Mike!
I read somewhere recently (here?) that if you’re going to buy a place outside the U.S., among other things look for a country that either has no mortgages to speak of, or where the down payment percentage is huge, as it was in the U.S. a century ago.
I’ll sell you a house in the Philippines for 100% down for 40k (spent 25k in remodeling adding a second story recently.)
Of course if you are like our last whacko American renter (from Alaska??) who complained about the local dogs and the (gasp) chicken sounds to delay paying his 15$/day rent… don’t waste my wife’s time :0 She is not going to offer to fly over and kill the dogs and chicken for you!
“who’s going to have the down payment for a 500K McMansion? 100K in cash? I can count on one hand the number of people I know who have access to that kind of cash. I can count on one hand the number of people I know who have access to that kind of cash. ”
You should meet some new people then. This is the big fallacy on blogs such as this. You don’t know anyone who has $100K, therefore that means nobody has $100K. Believe it or not, lots of people have $100K in cash, even $200K, $500K or more.
“The real issue is we don’t know what inventory banks are holding that they have yet to put on the market.”
Ohh no, there’s that pesky, rotting elephant carcass again. Quick, get some carpet cleaner and air freshener.
Anybody know where to find the actual number of foreclosures that have occurred? Most of these reports list total documents, I curious as to how many place have been forcefully taken by banks and the like.
There has to be some way, but its really tough. Short sales and loan modifications blur the picture somewhat.
Worth peeking at the historical data.
I stated the other day - I’m a bit surprised actually that the rate of foreclosures hasn’t seen a sharp decline this year, given that prices have leveled off and even rose some for a while. It seem much is driven now by unemployment.
I think that’s one factor (unemployment), but I think that we’ve also go a few things going on that are causing the data for most housing to be incorrect. Prices have leveled off, primarily (IMHO), because of the demand pulled forward by the housing credits. That’s exactly what they are designed to do (keep housing unaffordable), and, to my experience, it’s worked to some extent.
We also have the banks holding back foreclosure inventory, which is keeping the prices for dropping as far as they should. This is well within their rights, but, like ripping off a band-aid, they are delaying the inevitable. The problem is that there are FAR too many houses for the number of households; and, many of those houses aren’t suitable to the population of the area (6000 sq/ft monsters, even if they are FREE, aren’t suited to mid-income areas).
Foreclosures are still out there, and are going to see a significant uptick in the future. But, for now, it’s kind of quiet. We’re in the eye of the hurricane, soon the back half is going to hit us and drop the prices further.. But, until then, get a beach chair and get comfy!
Almost 50% of FL has loans greater than the value of their homes. How long do you think that can persist before more and more of those people start to walk away? Eventually people are going to come to the realization that neighbors can swap houses (you buy mine, I buy yours) and, with the exception of your credit score, will come out exactly as they went in with 1/2 the MTG balance, 1/2 the tax bill (for the rest of their lives, if they live in FL), and lower insurance (less value). That seems like a pretty strong motivator to ding the credit score.. And more and more people are going to realize this and start to short sell/foreclose on one house to buy another in the same area.
Thanks. A quick glance, if I read the chart correctly suggests about 6.5 million foreclosures in the last two years. That is astounding.
Yep. There was an article a few weeks ago that we’re on pace to hit 3.5 million just this year. Last year we had 2.3 million.
Compare that to the average new-build rate of about 1.5 million; now down to 0.5 million. Thus this year there is an excess of 2.5 million homes available (well - either available or held in shadow inventory by the banks). Gonna hurt from a price perspective for a long, long time.
And that doesn’t even count the 2nd homes. Heaven forbid the owners have a health event, job(less) event, then those 2nd homes will come foreclose too.
I’m a bit surprised actually that the rate of foreclosures hasn’t seen a sharp decline this year, given that prices have leveled off and even rose some for a while. It seem much is driven now by unemployment.
I suspect it takes a number of months for FB’s to accept reality and realize that the best thing to do is walk away. Either that or it takes a number of months to deplete savings before reality forces the issue.
As many others predicted on this blog, we are now seeing “prime” borrowers default, because of high unemployment.
Saw an article yesterday on money dot cnn dot com titled “Americans are overpaid”. The gist of the article was that high wages in the US were an impediment to global economic recovery.
I’m betting the authors are feeling very unpopular right now.
http://moneyDOTcnnDOTcom/2009/11/11/news/international/global_american_wages.breakingviews/index.htm
Are these authors wealthy, or as in many authors, they are working stiffs/middle class just like so many. Why in the heck would they write such an article. I put forth that someone high in mgmnt ie:wealthy, wrote said article.
Must have been a typo. I’m sure they meant that American CXOs and BODs are overpaid.
As for “global recovery”, the only people who give a flying damn if other countries are having recovery problems are those who are heavily invested in them.
Sorry, you didn’t invest in America? Kiss off.
Although I’m well aware we need higher income to pay our much higher bills, I also wonder how we’re going to get those manufacturing and other jobs to return to these shores w/o moving to a more competitive situation w/other world labor markets.
Well Carrie Ann, first you have the cart before the horse. But so does everyone else.
America is the largest consumer country on the planet. Next up is Japan and then Europe.
Without wages that support that consumption, there is no “world labor markets”. NONE. What will they produce and for who?
Second, why do we even have to compete with the “world labor markets”? Did you know that corporations were given TAX BREAKS to offshore jobs? Yep, you can google it. What kind of competition is that? And how can we compete with other countries having much tougher guest worker regulations yet we constantly undermine our own labor market with very loose guest worker regulations?
You see, there is no “competing with world labor markets.” It’s a scam to break labor (that’s you and me unless you are rich) and maximize profit margins while diluting quality.
And it’s been going on for 30 years.
My reply post is lost somewhere.
Those lost manufacturing jobs are definitely not returning to Northern Ohio. My employer’s business takes the pulse of metals related activity in a 4 to 6 state area. Our just ending fiscal year showed a 10 percent year to year drop in activity; the last 6 months, however, show a 28 percent plunge. Change you can count on.
“My employer’s business takes the pulse of metals related activity in a 4 to 6 state area. Our just ending fiscal year showed a 10 percent year to year drop in activity; the last 6 months, however, show a 28 percent plunge.”
These are numbers which the CNBC shills, and all the permabulls, should take a look at.
The pace of foreclosure filings over the past eight months has exceeded an annual rate of 12*300,000 = 3.6 million.
I am wondering if these will eventually show up as having a material impact on the number of vacant homes in the US, recently reported in the neighborhood of 19 million?
Remember some of the properties cure and forclosures are still selling. Forclosure sales often occur in the off months with a little bit of a bump tword the end of the year as banks unload.
Now, you would have to wonder how much budget woes are caused by banks not paying the property taxes. I could see it making a sizable dent into California’s budget.
My guess is there is about an 8 billion dollar hole in the budget since 2008 because banks are not paying property taxes. Also the property taxes are part mortgage payments so the people stop paying the mortgage or are behind. And boom the state government is short.
Figure 2 million forclosures @ 4000$ a pop. And there you go. That is forclosures since the start of this little ole party.
“My guess is there is about an 8 billion dollar hole in the budget since 2008 because banks are not paying property taxes.”
That appears to be easily solved. The state should require banks to either pay the property taxes on the assessed value of these homes, or sell them. Where is the problem?
Where is the problem?
Banks are owned by the money behind the curtain, and they do not have a master (any longer) who they are forced to answer to- except GS. GS doesn’t give a hoot what happens tax wise to a state like CA imho,and will probably GS will come out much richer if CA has to default properties/land etc.
Giant Monopoly. A fire breathing dragon.
IMHO. or just a wild ass guess.
What is really funny bear is looking at some of the stuff from China these days.
Believe it or not, they are feeding/starting their own housing bubble.
They interviewed someone who said “I’m afraid I’m going to miss the boat”.
So, we are all more alike than different. I guess they didn’t notice that things hadn’t worked out so well for us over in the ole USA. Two totally different cultures acting the exact same way.
Maybe they have laws prohibiting HELOCs?
Ahhhhh. Good times.
Well, a few regulations just gives lots of room for financial “innovation,” kind of like the “adulterate your product” revolution.
The Foreclosure Rate Abates
Posted: November 12, 2009 at 5:33 am
Twitter 24/7 Wall St Real Time 500
…
Some currents are pushing mortgage defaults and delinquencies higher and they are not likely to change in the next few quarters. The first is that unemployment is still rising and some pessimistic analysts believe the jobless rate will hit 11% next year–the highest level since The Great Depression.
There is likely to be another wave of defaults as “interest only” loans reset so the mortgage holders have to begin to pay down the principal on their home loans. Nearly $71 billion of these instruments will change in the next year so that owners will be making much larger payments. Some portion of these homeowners will be unable to take on the larger burden.
Foreclosures may have leveled off for the time being, but the odds are that the trend will be short-lived.
Douglas A. McIntyre
Wall Street Faces ‘Live Ammo’ as Congress Aims to Unravel Banks.
Nov. 12 (Bloomberg) — Seven Wall Street lobbyists trooped to Capitol Hill on Nov. 9, hoping to convince Representative Paul Kanjorski’s staff that his plan to dismantle large financial firms was a bad idea.
They walked out with a sobering conclusion, according to the accounts of two attendees who requested anonymity because the meeting was private. Not only was Kanjorski serious, he planned to offer the legislation as early as next week — and it just might pass.
Today marks a decade to the day that President Bill Clinton signed the repeal of the Depression-era Glass-Steagall Act that split investment-banking from lending and deposit-taking. The repeal allowed the creation of Citigroup Inc., the financial colossus now propped up by $45 billion in taxpayer rescue funds. Financial firms are scrambling to prevent Congress from re- imposing the act.
“We’re playing with live ammo,” said Sam Geduldig, a lobbyist at Clark Lytle & Geduldig who represents financial- services firms and wasn’t at the Nov. 9 meeting. “The banking community is rightfully concerned.”
“Financial firms are scrambling to prevent Congress from re- imposing the act.”
Awesome. I guess that answers my question, legislation can be re-instated. And eff Clinton for signing the repeal in the first place. A lot of people focus on Bush, and rightly so in many cases, however, Clinton had a huge hand in setting things up.
Clinton’s responsiblity in a lot of what’s going on today has not been examined and publicized enough. NAFTA, anyone?
Recall Nixon weaving ties with China.
yeah, so they’d buy our products.
LOL.
We went 70 years without Politicians being stupid enough to get rid of one of the best pieces of law that came out of the Stock Market crash of 1929 ,being the Glass-Steagall Act . Back in the 30’s they figured out that the conflict of interest between a investment house and a lender playing both roles was the cause and
the set up for the crash . The party that is the lender has to have a different objective than the party that is pushing the risk
investment ,otherwise just in order for the investment house to get someone to invest ,they will make a unsound loan to get that party funds to invest. Of course the investment houses and banks wanted greater leeway to play both roles and make more money because of
it ,but how could the Politicians give the lobbyist their way on this
one in 1999. That Act went a long way in keeping the stability in the markets for so many years . Look at what Wall Street did when they were able to play lender again . Wall Street flooded the market with
easy BS loans that were not underwritten properly and than they mis-rated that junk paper . Banks started to play with investments
and Casino bets that they had no business taking those risks .
The purpose of a lender is to make a sound loan . The purpose of a
investment house is to make a sound investment ,or at least rate the risk if its a risky investment . The two objective are different
and should always be kept separate . In 1929 Wall Street started loaning anybody money on margin to buy stock ,in spite of them not being credit worthy .When the stocks dropped in price Wall Street called the loans and guess what …it created a run on the banks .
Look at how the situation duplicated itself ,except this time the loans were made on real estate . So ,there are some things that never change .but I’m sure the Banks and Investment Houses will fight like crazy not to get Glass-Steagall reinstated .
“We went 70 years without Politicians being stupid enough to get rid of one of the best pieces of law that came out of the Stock Market crash of 1929 ,being the Glass-Steagall Act .”
I’m guessing the stupidity of pols was not the constraining factor, but rather the lingering memory of the Great Depression in the hearts and minds of the American people. Once the Depression was 70 years behind us, enough dumb Americans who never studied history had no clue about what purpose Glass-Steagall served so that it became politically tenable to eliminate it, thereby arming Megabank, Inc with the license to gamble with taxpayer money, along with the guarantee that they would be made whole as soon as the inevitable crash played out.
“The bill that ultimately repealed the Act was introduced in the Senate by Phil Gramm (Republican of Texas) and in the House of Representatives by Jim Leach (R-Iowa) in 1999. The bills were passed by a Republican majority, basically following party lines by a 54-44 vote in the Senate[12] and by a bi-partisan 343-86 vote in the House of Representatives.[13] After passing both the Senate and House the bill was moved to a conference committee to work out the differences between the Senate and House versions. The final bill resolving the differences was passed in the Senate 90-8 (one not voting) and in the House: 362-57 (15 not voting). The legislation was signed into law by President Bill Clinton on November 12, 1999.[14]“
Clinton had no choice. He could have vetoed but Congress would have easily overrode the veto. Remember, this was a Republican controlled Congress passing a Republican created bill.
Clinton most certainly had a choice.
He was in his second term; nothing to lose- he could have vetoed the legislation and stated his objections. His veto overridden by congress, the members would still get pay-offs from the banksters and Clinton might be remembered for something other than a stain on a dress.
Clinton was extorted. Plain and simple.
No one forced Clinton to sign this bill. He had a choice. Not sure how he was black mailed.
Clinton’s treasury secretary, Robert Rubin, pushed for it.
“Not sure how he was black mailed.”
Did you ever hear of Monica Lewinsky?
Like I said no one forced him to sign the bill or help himself to Monica. Bubba did that all on his own.
Uhm. Just pointing out that there were probably more than 8 democrats in the senate back then.
There aren’t any clean hands in this disaster.
I can only post so many facts and explanations before this blog eats them. So while I would like to engage in civilized debate and presenting the overwhelming preponderance of evidence and facts, I’m afraid there is a very real limitation. It’s up to the rest of you to refute my FACTS.
This may very well be one of those posts.
Clinton had no choice on Glass Stegall nor NAFTA. In fact NAFTA was practically ratified and signed before he came into office.
“In the U.S., Bush, who had worked to “fast track” the signing prior to the end of his term, ran out of time and had to pass the required ratification and signing into law to incoming president Bill Clinton. Prior to sending it to the House of Representatives, Clinton introduced clauses intended to protect American workers and allay the concerns of many House members.”
Another piece of Republican legislation from a Republican controlled Congress.
I love it! Clinton had no choice!
BWAHAHAHAHAHAHAHAHAHHH!
Well, yes. Buck Fush, and F Clinton too!
That’s a gem of an article.
The U.S. needs big financial firms to compete globally, said Rob Nichols, the group’s president.
“Boeing and IBM can’t bank at the Silver Spring Community Bank,” Nichols said. He said he’ll be “vocal and persistent in the halls of Congress.”
I call BS. These behometh companies seemed to do their banking just fine in 1997. Shouldn’t be a problem now. And if the Boeing can’t find a bank big enough to lend them billions, then maybe they can go to more than one bank? Or just maybe, the company doesn’t need all those billions.
Phil Gramm, the former Republican Senator from Texas who co-wrote the act that undid Glass-Steagall, said, “I’ve never seen any evidence to substantiate any claim that this current financial crisis had anything to do with Gramm-Leach-Bliley,” Gramm said in a Nov. 10 telephone interview.
“In fact, you couldn’t have had the assisted takeovers you had,” said Gramm
More BS. If they hadn’t undone Glass-Steagall, then you wouldn’t have NEEDED the assisted takeovers.
I don’t think the lobbyists are going to kill this bill. It’s too bipartisan.
“I don’t think the lobbyists are going to kill this bill. It’s too bipartisan.”
From your lips to God’s ears. This should have been done long ago, instead of dicking with that Frankenstein’s monster of a healthcare bill.
From your lips to God’s ears. This should have been done long ago
Hallejuah…(sp?)
I call BS. These behometh companies seemed to do their banking just fine in 1997. Shouldn’t be a problem now. And if the Boeing can’t find a bank big enough to lend them billions, then maybe they can go to more than one bank? Or just maybe, the company doesn’t need all those billions.
+1
Not only that - but Glass-Steagall wasn’t about the size of banks, unless I missed something. It didn’t actually restrict the size of banks, but rather just restricted them from having a brokerage wing.
Being that businesses don’t care about brokerage wing - a re-instatement of Glass-Steagall shouldn’t harm business lending at all.
FWIW - I’m actually still kind of on the fence about Glass-Steagall. On the surface it seems like a no-brainer - it needs to be there, but it goes against my Libertarian instincts.
I think the problem is that financial management has gotten so complex, that people just can’t afford to take the time to “look under the hood” of the banks they give their money to. Thus we trust the government, ratings agencies, etc. to do it for us. Ideally - if we actually had good ratings agencies - there would have been all kinds of warning signs going up right about in the 2002-2003 timeframe that the banks were getting overextended in risky MBS, and the then-small bubble would have deflated and we would have averted catastrophe - without needing to reinstate Glass-Steagall.
However as it is - finances have become so complex that even the ratings agencies didn’t see the problems coming. I say complex, but part of it too though was corruption - the agencies not wanting to bite the hand that fed them.
On my own Libertarian leanings…
What was it Einstien said… make things as simple as possible; but not simpler.
Same thing with regulations: minimal amount possible but not less.
We’ve gone a long way down a bad path. I’d like to turn away but it’s a mess if you act to rash.
A lot of things have changed since the days of the founders. World is a lot smaller. Technology has made things very different.
Packman . There is a inherent conflict of interest between the party that makes the loan and the party that makes the investment . The party making the loan has to make a sound loan
and the party that makes the investment has a different objective .If you mix the two ,the investment house will make a faulty loan just because it want the party to make the investment . The two worlds must be separated . They discovered that this was the sole cause of the run up and crash of the 1929 Stock Market crash .
I think you’re mixing things up a bit. When you say “making the investment” - to what are you referring? If you’re referring to buying MBS, then that’s irrelevant. Why would a bank buy MBS that it itself is selling?
Yes a bank may buy MBS from other banks and/or invest in CDS that are counter to the other banks’ success - but it seems like if this behavior ends up being risky, then the ratings agencies should flag them as such, causing the bank to lose customers, and thus the bank has a vested interest in not buying such risky securities.
I see the problems that happened mainly as two-fold:
1. The ratings agencies screwed up by grossly mis-calculating the risk.
2. The risk to the bank as a whole - in particular the PTB banks (JPM, GS, etc.) - was greatly lessened by the backstop of MBS purchases by Fannie and Freddie, and by the implied backstops the government had repeatedly shown they would do. So the risk of the MBS’s going bad was there, however that risk did not apply to the bank as a whole.
I see #2 as by far the bigger factor actually. If there was no backstop guarantee by the government - primarily through sponsorship of Fannie and Freddie, then the banks would have known the MBS and CDS investments were hugely risky, and wouldn’t have done them - at least to nowhere near the scale they did. Throw in the other artificial stimulus of the low interest rates, and the other housing-related stimuli, and there’s the problem.
As another note - the repeal of Glass-Steagall actually only served to make legal things that were already happening. For instance Credit Default Swaps were invented by JP Morgan and already in wide use by them in the late 1990’s - long before the repeal of Glass Steagall took effect in 2001. I see no reason to believe that a reinstatement would prevent such risky behavior by the banks, when its existence before didn’t. They always find new ways to get “innovative”.
Aren’t credit default swaps a insurance bet actually . Anyway ,the regulated banks were selling off their loans to the secondary market . The repeal of Glass -Steagall put Wall
Street Investment houses in the position of being able to come up with the loan products themselves and be the direct lender at
leverage levels that exceeded any regulated banks ability to leverage . Eventually the regulated banks were in competition
with direct lender Wall Street Investment houses . Who do you think came up with the toxic loans programs and the low down loan payments ?
Prior to the repeal of Glass-Steagall ,any loan under a 20% down payment generally had to be insured by private mortgage insurance . With Wall Street coming into the game ,their model was that CDO’s would spread out the risk and they came up with these toxic low down loans ,while they breached their duty to underwrite the loans and of course they were not rated proper on the risk by the rating agencies .What is the real kicker is the degree of leverage that was taking place in the unregulated world of Wall Street lending .
In addition the Casino bets of the Credit Default Swaps ,while
reserves for those bets were a joke ,were a additional area where money was being made on non existence reserves . What a racket .
I call BS. These behometh companies seemed to do their banking just fine in 1997.
It’s called the bond market. You don’t need a Citibank to have a bond offering.
When I was at an NYC law firm, we could do a take down of a tranche of an already established bond offering in about 24 hours. 48 if there were some extra fancy twists involved. And this was back in the days where you had to actually go to the financial printer to get the documents printed up, review them a bunch of times for printing errors and fly them down to the SEC to file them. Assuming it is all electronic now, you could shave off a big chunk of that.
Damn straight! Megabank, Inc serves no essential purpose, save perhaps their campaign finance activities. (Please speak up if I am being unfair here…)
Because the building burned down, Grahm sees no evidence that fire prevention works.
I’d be calling it Senate Bill “some number that has nothing to do with my name”, if my name was Gramm.
And one more from the article: One obstacle for proponents is knowing when a financial firm’s size poses a threat.
I have an idea: If the bank is so big that its failure would require taxpayer money, it’s too big.
I get the impression that it is not “to big” to fail that is the problem, rather “too interconnected”.
Like Christmas lights strung in series, one bulb goes out and the whole tree goes dark.
I get the impression that it is not “to big” to fail that is the problem, rather “too interconnected”.
Is that you Mr. Fuld from Lehman
Yep.
Seems like this might be evidence of that fact.
Re-posting a better graph.
It’s interesting that there does not appear to be an inflection point in 2001, when the repeal of Glass-Steagall took effect. This to me indicates that change had less effect on the housing bubble than most people think.
Pack, maybe then the problem wasn’t really Glass-Steagall. Maybe we should look for historical data on AIG, or some data where bank reserves were relaxed, or maybe something to do with Fannie-Freddie. Hmmm…
There’s a major inflection point in 1983. It’s tempting to blame it on Reagan, but I suspect that the rise in financial debt was due to the rise of computers in general. There’s a small inflection point in 1997. The Internet?
Repeal of Glass-Steagall + Paulson getting leverage limit of x12 removed = Off to the Races
I think the problem goes back to Rubin/Clinton primarily.
Basically they changed the reserve requirements and all the new money caused the economy to take off. Then you got a series of bubbles.
Automotive, dotcom, LTCM exc.
Then the big bubble got stoked by a bunch of things…
Low Fed rates
Fan/Fre competing for securitization… side note on government agencies acting as life forms by taking on new charters when they become irrelavent.
China and most favored trade status (Clinton/Bush) going hog wild on securitization
Then you had the community reinvestment act and Glass-Stegal… as has been pointed out by our host… governments always ignore bubbles on the way up as they are cashing in too.
Again, after the bubble becames self feeding I don’t think Volker could have stopped it with 20% rates. Banks were routinely pulling in 45% thanks to the magic of leverage.
Pack, maybe then the problem wasn’t really Glass-Steagall. Maybe we should look for historical data on AIG, or some data where bank reserves were relaxed, or maybe something to do with Fannie-Freddie. Hmmm…
There’s a major inflection point in 1983. It’s tempting to blame it on Reagan, but I suspect that the rise in financial debt was due to the rise of computers in general. There’s a small inflection point in 1997. The Internet?
Good questions.
Here’s one possibility relating to the 1997 timeframe.
There are two ways to lessen your loan loss reserve ratio - A. build capital, or B. loan more. Nice to see that the SEC was pushing this. In this case SunTrust reduced their reserves - but how many banks instead just increased lending to make the SEC happy?
I don’t see an inflection point in 1983 actually - I think you mean 1987? Not sure what might have caused that. I’m not aware of anything significant then other than the stock market crash late that year - however the inflection point really started in the 1986 timeframe. I think the 1987 crash may have been a symptom of the same thing though - a rapid increase in margin investing. Computers may have indeed had something to do with it.
Repeal of Glass-Steagall + Paulson getting leverage limit of x12 removed = Off to the Races
Referring to the 2004 meeting with the SEC?
If so - yes I think that was a primary factor in the post-2005 ramp up. However the inflection point doesn’t quite match - the rule change happened in early 2004, but the ramping didn’t really start until late 2005 / early 2006. Perhaps there was some lag, but it seems like the big boys don’t generally take so long to take advantage of such things.
No question lowering of reserve requirements and the allowance of leverage being off the charts into absurd zone had a huge bearing on the problem . But , Wall Street would not of been able to play lender if Glass -Steagall had not been repealed .
But , Wall Street would not of been able to play lender if Glass -Steagall had not been repealed .
MBS were in full swing in the mid and late 1990’s
- long before the Glass-Steagall repeal took effect in 2001.
(warning - pdf)
Housing prices were already rising abnormally by then as well.
I don’t know packman …I still think the lending had to be done under a lenders name . Wall Street could buy already made loans
but I don’t think Wall Street itself could be a direct lender in which they came up with the funds for the direct lending before the repeal of Glass-Steagall.
Wall Street and Insurance Companies have been buying loans for years and years ,but that is different than being the direct lender that is actually making the loan . Add to that, when Wall Street was able to leverage x30 or x40 ,their ability to create
profit by unsound lending and leverage went into the Ponzi-scheme zone.
The point is that the unregulated world of banking was able to gamble with money they didn’t have by leverage by being the direct lender . Prior to the repeal ,the bulk of lending was done by regulated Banks or regulated Mortgage Companies . There has always been private money lending ,but that sort of lending was called Hard Money lending and was usually done with low loan to value ratios .
Well it’s really the combination. If an institution ISN’T “too big,” than its creditors can survive it’s bankruptcy.
Like Christmas lights strung in series, one bulb goes out and the whole tree goes dark.
Did everyone in the Chirstmas Light industry whine and moan when customers started demanding lights strung in parallel, which are so prevelant now I have no idea if you can even buy lights wired in series now…
… I have no idea if you can even buy lights wired in series now…
Thank God. There was no more annoying Yuletide task than finding the bad bulbs on a particular strand.
“Like Christmas lights strung in series, one bulb goes out and the whole tree goes dark.”
Simple solution: Ban Christmas.
“Seven Wall Street lobbyists trooped to Capitol Hill on Nov 9 …”
What’s is needed are seven lobbyists trooping to Capitol Hill to represent us taxpayers.
What’s is needed are seven lobbyists trooping to Capitol Hill to represent us taxpayers.
A basic problem with democracy: a policy that is fervently desired by a minority will win over one that is moderately desired by a majority.
the majority isn’t organized and is easily distracted
Ding ding! It would take a modern Huey Newton or Peron to get that rabble together.
I really do think we need a taxpayers’ and consumers’ lobby.
If they bring back Glass-Stegal, Bank of America would be just as big as it is now, and banks could still lend enough to investment banks that the failure of one of them could bring them down. Lehman as not part of an integrated financial company. Neither was AIG.
Now if they are talking about limiting the size, rather than the scope, of these businesses, then they might actually do some good.
I wonder if limiting size might be a good thing for investors as well.
They would have to entice investors with dividends if their growth was capped.
Dividends? What are those?
snark …The reason for investing? /snark.
“Dividends? What are those?”
What gets cut before bonuses.
Wait wait wait… Didn’t someone tell me dividends were for suckers.
Growth stocks are where it’s at.
Growth = speculation. Nothing intrinsicly wrong with that, but don’t act like your casino is a bank.
“Seven Wall Street lobbyists trooped to Capitol Hill on Nov. 9, hoping to convince Representative Paul Kanjorski’s staff that his plan to dismantle large financial firms was a bad idea.”
That’s a good hint that this is a very good idea. Hopefully there is at least one Representative in Congress who will look out for the good of his Country above the narrow, greedy interests of Wall Street.
Agree PB. If the lobbyists are against it, it must be a good thing for the little guy.
[btw, I'm reading the same thing from the left on Health Care. i.e. AHIP really hates the health care bill, therefore it must be good.]
This is a symptom of the amount of leverage allowed.
If they fix that problem, then it isn’t really an issue.
“The banking community is rightfully concerned.”
Gather round.
Let us all pray.
If Kanjorski lives long enough to present it, and then follow through.
Reading another corporate crime mystery novel now, Chapter 2…
History is full of stories like this.
While they are at it maybe they can work on breaking the monopolies
that the Insurance Companies enjoy .
For anycdj, a little something to cheer you up and take you back to some music with a fun, sophisticated sound. Cory Daye has such a cool voice. I had no clue the one brother went on to form Kid Creole and the Coconuts.
http://www.youtube.com/watch?v=4CK-f-Hhij4
“He’s all alone, he’s got no woman and no home…”
they knew about the coming wave of FBs!
LOL, Philly, although why they chose Tommy Mottola, who certainly has no problem with women or homes, is beyond me.
I think they were yanking his chain a little.
Hall & Oates did the same thing in one of their songs, I think.
Say, wasn’t Mottola from Philly originally?
either Brooklyn or da Bronx
Bronx. Went to Iona Prep in one of my old stomping grounds, New Rochelle.
A regular cugine.
Whoa. Had to blow the dust off that one! Good find!
I’d forgotten all about this song. GAH! No wonder I hate most of today’s pop tunes. They are about as sophisticated as a hammer.
It’s like trying to explain Jethro Tull or Genesis or Hawkwind to someone under 35. “Who?”
Ian Anderson’s flute as a lead instrument…maybe today its the accordion??
http://www.youtube.com/watch?v=MR_FV18Dkos
Random post day…
That was too cool, Palmy!
Excellent palmy…i was busy all day yesterday
Where is Aldinsan?
http://www.telegraph.co.uk/finance/newsbysector/industry/mining/6546579/Barrick-shuts-hedge-book-as-world-gold-supply-runs-out.html
I’m thinking he’s Juvenal Delinquent at CR
I’ve only been on sporadically the last 2 days. My apologies if this has been discussed already:
http://www.cbsnews.com/blogs/2009/11/09/taking_liberties/entry5595506.shtml?tag=mncol;txt
In a case that raises questions about online journalism and privacy rights, the U.S. Department of Justice sent a formal request to an independent news site ordering it to provide details of all reader visits on a certain day.
The grand jury subpoena also required the Philadelphia-based Indymedia.us Web site “not to disclose the existence of this request” unless authorized by the Justice Department, a gag order that presents an unusual quandary for any news organization.
************
On another site there were examples and clarification of the lines of acceptable commentary. Part of the reasoning was the people running the website didn’t want to dilute the power they felt they’d weilded due some more extreme sounding comments. I always felt those comments were tongue in cheek but a few more graphic versions did make me glad I didn’t live in that person’s vicinity just in case. In any case, there appears to be some careful reexamining of what makes thoughtful free speech vs some more attention getting versions.
Free speech does not and never did protect violent threats, slander or libel although plenty of morons think it does.
Easily recognized satire is the condoned vehicle for that kind of speech.
The Great Downtown Development Mania finally unwinds, but Crain’s fails to answer the lurking question: Who will they con into buying all that existing inventory?
Downtown condos: Sales dismal, but development winds down
By: Alby Gallun Nov. 09, 2009
(Crain’s) — Downtown condominium developers limped through yet another quarter, but they have at least one reason to be thankful: The great condo building boom is coming to an end.
For the past three years, downtown developers have built more condos than they’ve sold, the result of overexuberance and an easy-money ethos that swept through the real estate market in the middle of the decade. Though demand for condos sank in 2006, many high-rise developers had already passed the point of no return, leaving them with no choice but to finish projects they began when times were good.
Demand and supply remained out of whack in the third quarter, when downtown developers sold just 56 condos and townhomes, vs. 313 in the second quarter and 160 in third-quarter 2008, according to a new report by Appraisal Research Counselors, a Chicago-based consulting firm.
But the construction wave that peaked in 2005 is winding down, allowing demand to catch up with supply. After completing 4,155 units in 2008 and 4,061 units this year, downtown condo and townhome developers will finish just 900 in 2010, a 78% drop, according to Appraisal Research. Just 86 units are due to be completed in 2011.
At 56 x 4 = 224 sales per year, it’ll only take 40.7 years for demand to catch up with supply. Even at 1000 units per year it’ll take 9 or so years.
Such a wicked decline! Now the question that follows: Is this the result of A. a lightning stroke of foresight on the part of developers or B. a draconian cut of construction financing for anything condo on the part of shaky regional banks?
I’d guess the lack of financing is driving any Eureka-like insights the average developer may have.
At a fundamental level, bubbles are possible in ANY commodity (housing, stocks, even gold) where demand can shift much more quickly than supply. It is the nature of a free market.
Downtown condos will resurge when gas hits $6 a gallon, and declining policing in the suburbs makes the burbs no longer as safe as before.
Because the budgets for police in the ghettos will suddenly increase?
And besides, not everyone works downtown and it’s damn near impossible to raise kids in an apartment. The market for condos downtown or otherwise is severely limited, pretty much to 20 somethings, $6 gas or $1 gas.
And explain to me how $6 gas is happening in an era of delfation again…
… and it’s damn near impossible to raise kids in an apartment.
Really? I should tell my wife that “Eddie researched this”, also I should preach your words of wisdom to the 18 million inhabitants of the city where I live, where most kids are raised in apartments.
Seriously, these are kids we’re talking about, not poultry. They will do just fine in apartments.
Meanwhile, yes the City will continue to have more jobs than the burbs and better public transportation. Ok maybe not the nine blocks in the downtown shopping core, but certainly in the 4 square miles around there (for most American cities).
It’s not at all true that suburbanites have to commute more than their city-dwelling counterparts.
I’ve always lived in the suburbs, and most of my jobs were 5-10 minutes away. The longest commute I’ve ever had was about 25 minutes each way, and I had turned down the job offer three times before accepting. Only had to do that for a few years, though.
People make choices. They choose to commute, in most cases. Personally, I’d rather make a bit less money, but gain it all in time.
There is no one “right” way for people to live. Thankfully, we are all different.
18 million inhabitants in apartments…I take it you’re outside of the US. Let’s stick to the subject at hand. IF not, where is this city of 18 million located? I must have an old map.
OK how about you do some research for me. Ask 100 women in their 20s and 30s where they want to raise their kids. If more than 5 say in an apartment vs. a house I’d be surprised.
After all downtown areas are known for their excellent schools, wide open spaces in safe areas where children can play. And nothing screams happiness for kids than having no yard. I know growing up I hated that yard and begged my parents to move us into an apartment instead. It is
every kid’s dream after all.
Also, the jobs in the city, commuters in from suburbs is about 20 years out of date. Ever see all those shiny 2-5 story buildings which line interstates in the suburbs in every major city? Those are office buildings with office worker bees inside. And that’s there the growth in jobs has been. When a new company is started, office space isn’t leased ina 60 story tower downtown. It’s leased in a non-descript office park in the suburbs.
People like to talk about the bad traffic in Atlanta. The reason it’s bad is simple. The city’s infrastructure was designed in the 60s and 70s with the notion of everyone going downtown to work. Only problem is that few people actually work downtown these days. In the 90s there was an unimaginable boom in office park construction out of the city in Alpharetta, Smyrna, Marietta, Dunwoody. So the commuting patterns today are more suburb to suburb than suburb to downtown. And because of that there is no direct way to get anywhere. The highways all go N-S, and good luck to you if you have to go E-W at 8am.
I wrote a bit yesterday about Mr. Joegriner who was featured in an article in the WSJ about people living on their severance pay. A bit of digging shows that this guy isn’t at all your usual bloke who loses his job, gets severance, and can’t stop spending. Despite being a higher-up at a bank (or because of it?) this guy was fiscally reckless from the beginning. He has way more problems than just his missing job income:
Primary residence on Arcola Avenue in Silver Spring, bought for $163k in 2000. Now he’s got a mortgage for $270k on it. Nice way to tap that otherwise-idle cash, dude.
Investment property on Higby Street in Silver Spring, bought in about March 2007 for $410k with a $328k mortgage and $82k second. Can you say “no money down speculation”?
Another investment property on Galt Avenue in Silver Spring, bought in about July 2007 for $475k with a $380k ARM and $95k second. Funny how these two mortgages add up to…. you got it: Exactly the purchase price.
He was darned late to the RE party, and now current Zillow Zestimates indicate he’d take a major hosing if he tried to sell the “investments”, something on the order of $100k loss. So he’s pretty stuck there. And that’s if you believe sometimes-optimistic Zillow; coudl be worse in real life. He *might* be able to offset those losses by selling his primary residence, but again, you have to believe Zillow. And even then, he’d need to come up with $50k in real estate commissions.
Had he bailed out as soon as he lost his job, spending their savings to get rid of the houses, and started afresh in a rental and taken the first decent job offer, he’d be living like a regular guy now. Unfortunately, he’s dug himself a deep hole now that will take him years to get out of — if he ever can get out without filing bankruptcy.
Karma in action.
A descent house in Silver Spring would absolutely sell for more than $270K even now. Probably a lot more. It would have to be a contaminated meth lab to go for less.
Sounds like the real estate investments are really his biggest problem (after the brain fart that causes him to turn down any job without a huge severance package). Any one know what the MD rules are about recourse vs. nonrecourse loans on investment properties? Or did he file the paperwork on both the other places saying they would be his primary residence? Oops. Maybe doing the newspaper article wasn’t such a good idea.
Not all publicity is good publicity, dude.
So if Zillow is right, then $100k he would get from his primary residence would just about cover the $40k+$60k that he’s underwater on his rentals. Excluding commissions.
Mea culpa: In my earlier “title search”, I missed a mortgage on his primary residence: Add another $75k owed to Wachovia. Oops, that wipes out most of the equity in the primary residence. So his financial predicament is worse than I thought. No escape.
Recourse: I’m pretty sure you’re typically on the hook for recourse for investment properties in Maryland. And I saw nothing in the mortgage documents that stated otherwise. I think he’s on the hook for that, though I’m not sure about primary residences there.
But… uh oh… big uh oh…
Higby Street, section 6 of the document from February 27, 2007:
“Borrower shall occupy, establish, and use the Property and Borrower’s principal residence within 60 days and shall continue [...] for at least one year [...]“
Galt Avenue, section 6 of the document from July 6, 2007:
“Borrower shall occupy, establish, and use the Property and Borrower’s principal residence within 60 days and shall continue [...] for at least one year [...]“
Nice catch to point me there, Polly! Looks like Mr Joegriner didn’t act to the spirit nor to the letter of those contracts. Oh my.
He really should have kept his mouth shut.
Somebody really needs to email that WSJ reporter.
And you would have thought that as a high-ranking bank official, he (of all people!) would have certainly known about the importance and relevance of those particular clauses!
At least the lies on the documents should keep him from ever qualifying to be a high ranking officer of a banking institution again.
Is he really turning down those jobs or are the offers being withdrawn after the potential employers look over his financial situation….
Aha! Again, you might be onto something. That’s an interesting insight, and that could certainly explain his long unemployment.
Ya think a DC area bank offering him a six figure salary might check him out about as well as nobodies like us on HBB do? Well, I would hope so. It didn’t take much looking, did it?
Man you people have a lot of free time on your hands.
Sometimes we do. Usually, lately, I have not had a lot of time on my hands (as old members will attest, having not seen me here in a while), but I made an exception for this case that just piqued my interest, so I figured I’d share what I found.
You’re welcome.
Hmmm… my long reply hung up or disappeared. Hopefully it will show soon: Much good info, Polly. You are right about his “primary residence” — plural! Oh, and I missed a little $75k second mortgage on his “primary primary residence”, so he owes in the range of $340k. Perhaps no equity there at all after commissions.
My limited (and probably wrong) understanding is that there is no difference between investement/primary residence when it comes to recourse. All loans are recourse loans. Of course in normal times, people who are being foreclosed on don’t have enough money to justify a judicial foreclosure, so banks don’t generally pursue deficiency judgements that would merely serve to force people into bankruptcy. But as many people(the banks included) are discovering, past performance is no guarantee…
Jim, it depends on the state, and it depends sometimes on whether it was a purchase mortgage or a refinance.
I just located an excellent document explaining more than most anyone wants to know about Recourse versus Non-Recourse mortgages. It even covers details on individual states:
Federal Reserve Bank of Richmond, July 7th, 2009
Recourse and Residential Mortgage Default
Thanks for the link. Of course Polly’s question was on the state of the law in Maryland, and I think that my answer was correct for that. I should have been clearer that I was ONLY talking about MD though…
Your answer is indeed correct for Maryland, no difference ‘tween residential and investment for recourse. (i.e. you mean to say Mr. Joegriner is pretty much hosed!) I just wanted to confirm that, and in the process I found that excellent paper.
For those not willing to pore through the document itself:
Maryland: Lenders may foreclose through either a judicial or non-judicial procedure. State law permits deficiency judgements on residential properties without significant restrictions. We classify Maryland as a RECOURSE stats. The relevant statutes are in the Maryland Rules, Title 14, Ch. 200.
And as you imply, different states equal different rules. Even when the paper states recourse or not, the process is not cut-and-dried; sometimes lenders can go after only some of your other assets, since in quite a few states, there are complicating details. Maryland is a straightforward case. (So is Virginia.)
From Maryland Rules, cited in the paper cited by NoVa Sideliner
Rule 14-201. Applicability; Other Remedies.
(a) Applicability.- The Rules in this Chapter apply to foreclosures under lien instruments and statutory liens.
(b) Not exclusive remedy; exception.- The foreclosure procedure set forth in the Rules in this Chapter does not preclude other remedies available by law, except that the procedure is the sole remedy for the repossession of property sold under a land installment contract executed pursuant to Code, Real Property Article, Title 10, Subtitle 1 or its statutory predecessor.
In my lay person/non lawyer/free legal advice is overpriced opinion, non-exclusive means that they can sue for the rest of the money owed. n.b. A “land installment contract,” seems to be some sort of rent-to-own contract where title is held by the SELLER, not given to the buyer subject to a lein or deed of trust.
So, MD is full recourse? Just another reason for me not to buy anything any time soon. No chance of a strategic walk away…
I did wonder how this moron had the gall to say “we look normal but nobody knows we’re in trouble” while giving his full name and picture to the New York Times. Now everyone knows.
Don’t expect us to take up a collection for you.
I can’t figure out why he has trouble finding a job. Somebody with his talent for investing in real estate and general economic insight.
/sarcasm off
Well he didn’t have trouble finding a job. He had three jobs offers and turned them all down. I can’t figure out how he got those job offers.
I can’t figure out how he’ll get many more offers at all, now that his name is up on Google with such details on how he’s managed his finances. DOH! From one of the various articles (not blog comments):
“He’d turned down some job offers that seemed pretty great on the surface, but as he explained it to me, they left him vulnerable to financial ruin among other things.”
Uh, vulnerable to financial ruin? As opposed to certain financial ruin?
Well it’s possible that lying on mortgage applications is NO LONGER a critical job skill in the banking industry.
True fiscal recklessness:
http://blogs.houstonpress.com/hairballs/2009/11/bugatti_pelican_crash.php
Dropping cell phone because he were startled by a pelican “causing” driver to drive their $2M Bugatti Veyron into a dirt lot and then into a lagoon.
This is the kind of driving conditions we have to put up with here around Galveston, TX.
I have a contrary opinion for the board. While a house may not be a good buy, perhaps having a mortgage just might be a smart move. I base that on the decline of the dollar and the possibility of an inflationary spiral due to our governments spending. My logic is this: Borrow $150,000.00 to buy a house at a fixed rate. Inflation moves the house up to $300,000.00. The real money i.e. Gold moves from $1,100.00 to $2,200.00 house in real terms has not moved at all but the mortgage money can now buy only half the same amount in gold but house can buy the same. Wages would not keep up with this inflation but probably would have to be kept close for political reasons. Would not go wild on this approach since whether we have deflation or inflation will be decided in D.C. but I think it is easier to see us running trillion dollar deficits than it is seeing us having fiscal discipline which would allow houses to drop in price. Just saying.
BTW, check out palladium today. SWC has a floor price at $360.00 an ounce on palladium anything above that will add serious money to the bottom line. Getting close.
You are a little behind the curve. That was the play of the last 25 years.
The play of the last 25 years had houses moving up in real terms based on artificial increased demand. The chart that I believe and still believe of houses needing to revert to the mean is still valid. However, you can revert to the mean two ways. One is to drop in both nominal and real price which we have seen for the last two years or two to drop in real terms due to a failure to keep up with inflation. I still see houses dropping in real terms but moving up in nominal price. My play is the just based on the final collapse of the dollar and what that does to debt. Think Germany after World War One, and numerous African countries lately. Under those circumstances your debt melts away due to raging inflation but you are still holding a hard asset. Perhaps not the best asset but if you buy an inexpensive home pocket the $8,000.00 and get a loan that will inflate away, it is a compelling play.
One can have endless fun with the the inflation/deflation debate. But at the end of the day, what you need to do is prepare for either (and possibly both) eventualities.
A decent shop downtown could be had in Germany for ONE gold coin. There’s a safer play for you. Of course, those people with gold coins were murdered by the millions.
The FED wants you to believe that we are on the verge of inflation.
Don’t gamble with borrowed money, you could find yourself in debt slavery.
The FED wants you to believe that we are on the verge of inflation.
——————–
Agree that this is a very real possibility. Too many people talking up inflation/falling dollar right now. It makes me think we’re in for a correction in the near/mid-term.
Wages would not keep up with this inflation but probably would have to be kept close for political reasons.
Don’t bet on it.
http://money.cnn.com/2009/11/11/news/international/global_american_wages.breakingviews/index.htm
Wages are a price set by the market, just like any other (mostly). When wages are ‘kept’ at any particular level for political reasons, Mr. Market gets angry and throws a tantrum.
We’re witnessing one of those tantrums right now.
So, lemme get this straight - the stated plan here is for the government to support prices and wages too!?
Breathtaking.
Lets take a look at management pay in the US vs the world, then we will see an even bigger gap.
+1
Aladinsane — is that you?
How about buy $100,000 worth of gold in the year back in 2000 and another batch in 2001? Then wait until 2009 to buy a house?
Then you can get an ocean view house on the California coast for $200,000 worth, inflated to $800,000 due to spot price of gold.
However, you are stuck with $8,000 annual property tax.
$8K is nothing. A friend of mine is renting a house with a $36K tax bill. A hell of a house, and the rent is $5200. But still $36K a year just for tax, unreal.
If you are planning to live in or otherwise use the house, its value to you will remain constant, (minus what you spend to maintain it. ) If you’re planning to use it as a store for your money, you’re assuming that someone will want to buy it from you at some point—not necessarily a good assumption given the generational glut of available housing.
Gold doesn’t deteriorate over time, and it’s pretty to look at, but you can’t live in the stuff. Houses are useful, but they’re not all that fungible.
Buy water rights and retirement villages.
“Buy water rights…”
What about the risk desalinization technology becomes a game changer for SoCal?
Won’t scale up for decades, and the environmental impact issues with what to do about all that salt will hold them up for a couple more.
Better chance of direct sub-atomic conversion from H than large-scale desalinization, IMO. But what do I know…. if we can convert H into H2O by fiddling around with outer valence electrons, we can figure out how to convert H into Au.
they are building a desalination plant right here in Carlsbad, CA. All the enviormental impact hurdles have been cleared and construction is a year away….
ahansen: What to do with all that salt?
Pretzels. They can make extra salty pretzels.
How about Trader Joes? Where do you think that cheap sea salt comes from?
We could always work on salinating the great lakes.
“Inflation moves the house up to $300,000.00.”
But if wages do not also double, who is there to be able to buy the house? Until inventory overhang evaporates - a long way off - people can’t buy a $300K home with a $150K-home income. They can’t get the mortgage, for one, and even if they did, they wouldn’t be able to keep up with the payments.
To me, that’s why rents are the real indicator of value - rent reflects what’s in your wallet, not what’s in your aspirations.
Right. We can’t have ever-higher housing prices if they want us to have ever-lower wages. One or the other, something’s got to give.
Nov. 12 (Bloomberg) — Mortgage applications to purchase homes in the U.S. plunged last week to the lowest level in almost nine years as Americans waited for the outcome of deliberations to extend a government tax credit.
The Mortgage Bankers Association’s index of applications to buy a house dropped 12 percent in the week ended Nov. 6 to 220.9, the lowest level since Dec. 2000. The group’s refinancing gauge rose 11 percent as interest rates decreased, pushing the overall index up 3.2 percent.
The drop in buying plans points to the risk that the recent stabilization in housing will unravel without government help. In a bid to sustain the recovery, Congress passed and the administration signed a bill last week to extend jobless benefits and incentives for first-time homebuyers, adding a provision that also made funds available to current owners.
“Uncertainty over the housing tax credit sent some tremors through the market in recent weeks,” Michael Larson, a housing analyst at Weiss Research in Jupiter, Florida, said before the report. “But now that Congress has extended and expanded the credit, we should see demand pick back up.”
“But now that Congress has extended and expanded the credit, we should see demand pick back up.”
Call me pessimistic, but I am expecting price declines to pick back up, as all the fence sitters who could have been lured into the market to capture $8K in free money already have been. Who wants to move up when real estate price gains over the next thirty years are quite likely to be far smaller than returns on other investments, thanks to current government price support measures artificially inflating the purchase price?
So maybe $8k was a let down? I mean, I can’t imagine that no real estate professional anywhere would have ever whispered these words into a fencesitter’s ears: “don’t worry, they’re going to make it $15k”.
Nah, that never happened - never even once this fall.
Exactly. The disappointment that the credit was not bumped up to $15K might spark another leg down in the crash, as those holding out for $15K will now be content to keep sitting on the fence until further price declines.
FWIW - at least this time they’re tapping a larger pool of buyers, so I think there will be some upward push from that. In the end though there’s only so much water in that well. I think there’s some left, but I think we’ve probably reached “Peak FB”.
(if I may coin a term)
“FWIW - at least this time they’re tapping a larger pool of buyers, so I think there will be some upward push from that.”
The problem with that larger pool of buyers is that (in most cases) those guys, unlike first time homebuyers, will have to sell also.
I wonder how many of those “move up” buyers will buy a cheaper house taking advantage of the tax credit, and once the ink dries, will walk on their HELOCed-to-the-hilt former residence?
This is going to become the housing equivalent of car rebates. Buyers learned to sit on the fence until acceptable rebates or financing deals materialized.
The problem with that larger pool of buyers is that (in most cases) those guys, unlike first time homebuyers, will have to sell also.
Good point.
What I’m seeing is houses in the 600k+ range are not moving at all. 8k is 1+% of the cost ie not going to change many minds. My guess is this segment could soon see some huge drops. I’ve seen a few places drop 33% and still sit for a year.
‘I wonder how many of those “move up” buyers will buy a cheaper house taking advantage of the tax credit, and once the ink dries, will walk on their HELOCed-to-the-hilt former residence?’
That’s a great idea, Kim. Do you work in the financial engineering field?
They expanded the eligibility rules for the credit. Now, I don’t think the one for people who have owned recently will do as much as the one for new purchasers, as they have to be able to sell the old house first, but upping the income eligibility will have some effect. Not as much as they hope for, because, honestly the folks with AGIs between $75K and $125K (that is the change, isn’t it) were able to get loans for pretty much any amount they could dream of during the bubble so a lot of them are just hanging out underwater already, but there will be a few who qualify.
If you are more than $8K underwater on the old mortgage, then I guess the $8K credit isn’t going to quite get you into the move-up-buyer pool, is it?
How about a $200K credit for those who would like to move up but cannot because of their underwater problem?
A couple more reasons I doubt extending the tax credit to move-up buyers will have little impact:
1) Who wants to move up when the main effect is likely to be higher property taxes not offset by the prospect of high home equity gains?
2) How many people are in a position and sufficiently brave to move up when (unofficial) unemployment is at 17.5% and possibly headed to 20%?
littlemuch17% real unemployment and potentially going up to 20%. Only more smoke and mirror stimuli will keep the prices from caving in, (taxpayer-provided 50″ HDTV and cable for a year if you buy a house within the next three months).
Eventually the piper will be paid.
$1t in Fed MBS purchases might have helped keep prices a bit higher than they would otherwise have been by this point in the cycle, no?
I reiterate my questions (to which I have never yet received satisfactory answers):
1) Did the Fed backstop prices in previous real estate busts?
2) What in their charter grants them the authority to do this (aside from a de facto right due to their control of the printing press technology)?
Well ISTR that they DO have the statutory authority to determine exactly what collateral that they’ll accept as collateral. IMHO by accepting the very MBS securities that the market won’t price they’re down to “bottlecaps and pocket lint,” but that’s just me.
I am wondering what measures have been taken to root out the fraud which plagued the last version of the tax credit (e.g., four-year-olds and foreign buyers claiming the credit). Or is fraud deliberately sanctioned as part of the credit?
* TAX REPORT
* NOVEMBER 12, 2009
The Lowdown on Home-Buyer Tax Credits
By LAURA SAUNDERS
Last week, President Barack Obama signed a law that extends through next spring a temporary tax credit of up to $8,000 for some first-time home buyers, which was due to expire Nov. 30. The law also adds a new tax credit of up to $6,500 for certain repeat home buyers. The package, which the government estimates will cost a total of $11 billion, is intended to help spur housing sales, a critical part of the economy.
…
I think Winston’s government induced subprime mini-mania is coming to an end. A lot of buyers got suckered forward. Yesterday’s FHA announcement to expand lending back to condos indicates Winston is scraping the bottom of the barrel in search of new buyers. There are a lot of foreclosures on the foreclosure docket.
The barrel being scraped is how we got in to this mess. That and there were no other prospects on the horizon for employment and income after the dot com bomb.
Sound familiar?
30 years of decimating jobs and wages will do that for ya. That and not reinvesting in your workforce and modernization. It’s what killed the steel companies (and a lot of other heavy industry) back in the 70s.
Nice edit job.
You left out this part from the article:
“Toll Brothers Inc., the largest U.S. luxury homebuilder, yesterday said orders surged 42 percent in the fiscal fourth quarter, cancellations slowed and revenue beat analysts’ estimates. ”
and this part
“The MBA’s overall index climbed to 627.5 last week from 608.3, the banking group reported today in Washington. Its refinancing gauge increased to 2998.2 from 2693.7. ”
The big drop was during the week where congress was still debating to extend the $8K. As soon as it was extended, mortgage apps shot right back up.
This paymaster, pay czar, is one huge pathetic joke. Another made up POS gubmint waste of money!
Feinberg ‘Concerned’ Pay Cuts Could Drive Out Talent.
Nov. 12 (Bloomberg) — Kenneth Feinberg, the Obama administration’s special master for executive compensation, said he is “very concerned” about the possibility his pay cuts may drive talent away from companies bailed out by U.S. taxpayers.
“Maybe I’ve struck the right balance,” Feinberg said, referring to criticism that he has been too harsh and too easy on executives. “Hopefully some of this will percolate into the private sector, we’ll have to see,” he said today at a Washington conference held by Bloomberg Ventures, a unit of Bloomberg LP, parent of Bloomberg News.
Feinberg has ordered pay cuts averaging 50 percent for the top 25 executives at Citigroup Inc., Bank of America Corp., American International Group Inc. and four other companies that took U.S. bailout money. He will rule on pay structures covering the next 75 highest-paid employees at those firms by year-end.
Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co.’s investment bank, all exempt from Feinberg’s oversight, will hand out a combined $29.7 billion in bonuses, according to analysts’ estimates. That’s up 60 percent from last year and more than the record $26.8 billion in 2007. The companies are the biggest banks to exit the Troubled Asset Relief Program.
“I’ll measure my success, really, if these seven companies repay the taxpayer, that’s really the litmus test,” he said.
Anyone out there fluent in Bullsh!t? I took some back in school, but am rusty. I can’t understand a word of this.
Not fluent, but Feinberg had a good interview on the News Hour. Essentially, Feinberg cut the pay of execs at 7 banks who still have TARP money. (Golden Sacks, MS and JP took TARP but paid it back.)
What was beginning to happen was that the 7 banks were still using TARP even if they didn’t need it. They were using taxpayer TARP as a revolving mastercard to speculate. Feinberg put a stop to that, saying: Look, you have taxpayer money, so we have the right to cut your pay. You’ll lose your talent to Golden Sacks et al. If you don’t like your pay cut, then pay back your TARP money. Then you can pay your talent whatever you want.
It’s a great idea. If the bank keeps TARP, the gov makes money because they cut bonuses. If the bank pays back TARP, the gov makes money on the interest on the TARP loan.
At least that’s my understanding.
Heck if they’re working for the government, let’s pay them one of those bloated governemnt salaries that people occasionaly complain about. Let’s see, as an SES they’d make what, 166k?
There was a short thread late yesterday about how Barney Frank got elected to Congress. I happen to know that story. Here is it again slightly expanded:
MA lost a congressman after the 1980 census. The republicans were in charge of the redistricting and saw that Margaret Heckler had been re-elected for 16 years in a district that covered a bit of Southeast MA fairly close to Barney’s district (he was a freshman rep who did unpopular things like point out that Social Security and Medicare needed reform or they would go broke eventually). They got rid of Barney’s district and managed to connect his residence to a large chunk of Ms. Heckler’s district and assumed that she would win handily against a newcomer in a district that had been electing her for so long.
However, they forgot to check how that district voted for president - democrats all the way. As it turned out, Margaret Heckler had been running nearly unopposed for years as no one cared to bother to run against her. The district was pretty liberal, but she had been an old fashioned liberal to moderate republican up until Reagan was elected president and the republicans started up an emphasis on party discipline. The district was not pleased with a “toe the party line” republican rep as the republicans got more and more conservative and she lost handily to Barney. He has been the rep for that district (which includes my hometown) ever since.
I remember the exact moment my dad decided to vote for him. I had just come home from volunteering for a campaign fundraiser (my history teacher gave us extra credit, any party or none for stuff like state referenda questions) where I mostly wandered around picking up used cups. Mom asked if I had met the Congressman and I told her he wasn’t there but I turned on the speaker phone when he called in. Why wasn’t he there, I was asked. Oh, there was a vote scheduled for that evening and he wanted to be there for the vote not the fundraiser. And that is the exact moment my dad decided to vote for him. I think mom had already decided.
And that is how Barney kept his seat after the first two years. He used to go to the very occasional school committee meeting and other basic constituent contact stuff that local elected officials love, though I couldn’t say whether he still does it. I have no idea what situation lead to his first term - whether it was an open seat or if he won against an incumbent. Probably an open seat.
Well that clears it up. I always thought Barney won “best-in-show” as a St Bernard and was awarded a seat as a prize. Surely slobbering must have played some role?
Polly,
I hope you are archiving all these stories. You have a wonderful “tell-all” book in you. If nothing else, you can finance your retirement with all the discretion you could um, offer the principals.
Eh, I wouldn’t be surprised if some version of that story (minus the bit about my Dad) is in his recent autobiography. And it was probably a case study in republican circles for years. Loosing Peggy Heckler was a big deal at the time. Remember that Reagan actually won MA in 1980 so loosing that seat in 1982 must have been a real annoyance as the first fantasies of a “permanent republican majority” wafted into being. I don’t think anyone in the republican party ever did a redistricting to try to target a particular democrat without doing better backup research on the district again. Ever.
Heckler eventually got an ambassadorship out of the deal too. Kind of an apology for getting her kicked out of Congress. I assume they thought it was so safe (an 8 term incumbant vs a sophmore from a different district), she didn’t get a huge amount of campaign support. Or maybe they just had to get her out of the country so the parents of all the hemophiliacs that got Aids from blood products (she promised that the blood supply was totally safe as HHS secretary) wouldn’t kill her.
This is from his wikipedia page (there is more there) referring to that campaign:
Frank focused on Heckler’s initial support for President Ronald Reagan’s tax cuts, and won by 20 percentage points. He has not faced credible opposition since, and has been reelected thirteen times
Yeah, a 20 point loss had to hurt, especially when they expected it to be a cake walk. I’d forgotten how huge the win was. Well, I wasn’t a voter yet - I was more interested in high school stuff.
BigBoxMart posts “better than expected” results…
* The Wall Street Journal
* NOVEMBER 12, 2009, 10:29 A.M. ET
Wal-Mart Posts Higher Net but Is Cautious About Holidays
BY KAREN TALLEY AND JOAN E. SOLSMAN
Wal-Mart Stores Inc. reported a 3.2% gain in earnings for its fiscal third quarter, exceeding the retailer’s forecast, but remained guarded about the holiday season’s outlook.
…
Zombie GSEs continue sucking the blood of American taxpayers in the afterlife:
* The Wall Street Journal
* REAL ESTATE
* NOVEMBER 12, 2009
Fannie, Freddie Warn on More Losses
By NICK TIMIRAOS
Fannie Mae and Freddie Mac, already reeling in red ink, are warning they could face additional losses from the weakening condition of mortgage-insurance companies.
Fannie and Freddie together have required capital injections from the Treasury of $112 billion since the government took them over through conservatorship last year. Their need for government support would have been greater without collecting on claims from mortgage-insurance companies. Fannie and Freddie have received payouts of $2.3 billion and $658 million, respectively, from mortgage insurers through September this year.
But as conditions for mortgage insurers deteriorate, Fannie and Freddie have warned that their claims against the insurers may not be paid in full. Fannie set aside $1 billion in loss reserves to cover the possibility that mortgage-insurance companies won’t be able to pay full claims, the company said in a Securities and Exchange Commission filing.
Freddie hasn’t set aside reserves but warned in an SEC filing that “several” of its insurers are “at risk of falling out of compliance with regulatory capital requirements, which may result in regulatory actions that could threaten our ability to receive future claims payments, and negatively impact our access to mortgage insurance for high [loan-to-value] loans.”
..
Darn that counterparty risk.
Happens even in a regulated industry like insurance. Is it any wonder it is an issue in a totally unregulated area like derivatives?
Don’t take away the states’ rights to protect their citizenry against Wall Street-style reverse bank robbery.
State Regulators: Dodd’s Bank Bill Creates Another ‘Too Big To Fail’ Problem
State bank regulators are warning that Senate Banking Committee Chairman Christopher Dodd’s proposal to create one monolithic federal bank regulator would increase risks to the system and would favor precisely the gigantic banks whose conduct most needs to be reined in.
…
The international banking cartel keeps on whistling past the graveyard as regards the obvious fix for too-big-to-fail.
UPDATE 1-Draghi:FSB not looking into breaking up banks
Thu Nov 12, 2009 10:47am EST
ROME, Nov 12 (Reuters) - The Financial Stability Board is not drawing up plans to break up big banks, its head said on Thursday.
When asked whether breaking up banks was an sensible answer to the ‘too big to fail’ issue, Mario Draghi, who also sits on the European Central Bank’s Governing Council said: “We are not discussing this problem yet.”
“I am highly uncertain about this. All kinds of banks failed, pure commercial banks, mortgage houses, etc.”
Asked about the merits of separating the books of banks into, for example, their banking and trading sides, Draghi said: “I don’t exclude it.”
He added that some of FSB’s members favoured the idea, but stressed that he saw numerous complications involved.
…
B. Bernanke: “Welcome to fantasy island!”
-”Zee plane! Zee Plane” -B Frank
Tried to post this as a response but it does not seem to posting. So will explain why I am not arguing for a play that has worked for 25 years but a new play that none or most of us who are reading this site do not like. All of us believe that houses have appreciated in real terms beyond their historical means and need to revert in real terms back the trend line. However, there are two ways to get there. An actual price drop which we have seem for the last two years or just a failure to keep up with inflation which I believe due to massive governmental interference is the way that is now playing out. Zimbabwe a few years ago had the best stock market in the world in nominal terms caused by the government printing money. You can inflate the price of everything by just printing money, think Germany after World War 1, Zimbabwe etc. Under those circumstances you don’t want cash but having debt is fine since it will soon disappear in real terms. Our government seems to have drawn a line in the sand on letting houses drop in nominal terms and they can prevent it but at a great cost of soaring inflation in the future. I don’t approve of the policy but that is the policy right now.
I think the implication remains that wages will have to track inflation or people will not be able to buy the real estate, no matter how much the currency depreciates, since the RE is priced in the same currency. That holds until a different currency becomes preferable.
For example, what happened in Zimbabwe, Burma and most any other place where hyperinflation destroyed the currency is that a different country’s currency (US$, usually) replaced the local one as the real means of exchange,either openly or surreptitiously.
In Zimbabwe, savvy locals used gimmicks to get as much wealth as possible out of the country via “exports.” They also urged their children to study abroad and not return - to establish a home elsewhere. That doesn’t create demand for housing in Zimbabwe. In far-poorer Burma, the US$ became the defacto currency for big transactions and the Kyat is used just for small-time transactions. I suppose it is easy enough to keep people ruined, but not so easy to keep them fooled.
Stumbled upon this site and wondered if the data wonks here might have fun looking around:
http://academiccommons.columbia.edu/
I think the Japanese Economy and Business link is the most current w/the latest item published in June 09.
Why stop at Citigroup and BOA? How about if all financial firms whose too-big-to-fail status threatens the global economy (and guarantees them a stealth government subsidy through a lower cost of raising capital that reflects their implicit free insurance contract) are broken up to a size that eliminates their monopoly advantage and restores competition to the global banking system?
This should be done through international agreement, to make sure that banksters in one country which tackles the too-big-to-fail problem are not tempted to seek better opportunities in other countries which have not tackled it.
Citigroup, Bank of America: Break up law closer
Economy
Written by Gary Howes
Thursday, 12 November 2009
Citigroup and Bank of America Corp are however taking the fight to congress.
Citigroup (NYSE:C) and Bank of America Corp (NYSE:BAC) could soon be faced with regulation designed to unravel them.
Bloomberg reports that Representative Paul Kanjorski and his staff could table legislation as early as next week that will see the investment and retailing units of Citigroup and Bank of America split.
Citigroup is amongst those said to be ’scrambling’ to prevent congress from re-imposing the Glass Steagall act which in 1933 prevented the single entities from carrying out investment banking and taking in retail deposits.
…
I hear a big…
BWAHAHAHAHAHAHAHAHAHAHAHAHAHAHA!!!!!
coming from JP Morgan’s gravesite.
Have been recently considering knife catching, and found this disclosure at one of the banks that I was comparing rates at:
Prepayment: You are not entitled to a refund of part of your finance charges if you pay off early. You will be charged interest for the period of time in which you used the money loaned to you. Your prepaid finance charges are generally not refundable, nor is any interest which has already been paid, unless it was paid in advance. Of course, you will not be charged any finance charges that would be incurred after the loan is paid in full.
Does this mean that even if I pay extra towards the principle, they’ll keep charging interest as though I hadn’t until the balance is paid off? Does anyone have any idea? I don’t trust the answer I’d get from the bank.
I don’t see that in the text you have. Seems to be referring to points and/or closing costs.
Ge the bank to explain exactly how they handle partial prepayments of principal in writing and demand that they incorporate that letter into the agreement as controlling for the treatment of prepayments even if other language in the note contradicts it (my favorite bit of legalese is “not withstanding the forgoing to the contrary” - easily translates to “but”). And make sure they make the terms binding on future owners of the note.
Of course, they’ll never do that, but it might be fun to try.
That language or very similar has been in the Truth in Lending form in every one of the 100’s of closings I have done. It means that if you refi, you don’t get your interest, prepaid or otherwise (or closing costs) back, but your prepaid principle is safe and credited.
It is one of those DOH statements that the Fed’s use to try to help that smart people struggle with and the less educated don’t care about.
Sort of like the HUD-1 form. Line 3 is everything form page 2 causing you to have to get 3 lines into a form before your start flipping pages…..
What is says is you’re not entitled to a refund of finance charges that you prepaid if you never needed them. You will not be charged interest going forward on principle paid off early due to the early payment of principle.
Now comes the kicker from the blog: You’re wise not to trust the bank. ALWAYS, ALWAYS get a competent real estate attorney to review ALL documents. Sometimes a couple attorneys is worth it. NEVER trust (1) the internet; (2) friends; (3) sellers; (4) mortgage brokers; or (5) real estate agents. Espically if they’re telling you something about mortgages.
(For the record, you’re confusing prepayment of interest with prepayment of principle - when you sign the mortgage documents they’ll probably tell you that the default for excess payment is to put it toward principle, but if you request in writing with the excess payment it will be applied toward future interest).
Why would one prepay interest? For the tax deduction?
By mistake, is one reason. I believe that if you send any prepayment check to the bank, that by default they apply it as a general prepayment, including both principle and future interest.
I think a lot of people do this, intending just to pay down their principle, but if they forget to write “apply to principle only” or the like on their payment, it ends up being applied partly to future interest.
Otherwise - seems like tax reasons might also apply. E.g. I’ll bet if you pay January 2010’s mortgage payment in December 2009, then you get to claim January’s interest as a 2009 tax deduction. Then just don’t make a payment in January. You’re now back to the same square budget-wise, except you’ve pulled a month’s worth of tax deduction forward a whole year.
(hmmm…. I might have to give this a shot!)
If you buy points you are essentially pre-paying interest. It could be for the tax deduction if in the year you take out the mortgage you have an unusually high income which puts you in a higher bracket than you expect to be in future years.
NEVER trust (1) the internet; (2) friends; (3) sellers; (4) mortgage brokers; or (5) real estate agents.
No need to worry :). My attorney will be looking over everything to make sure it says what I think it does when and if I put ink on paper. I just like to understand things right away, and this blog is often the quickest path to that. After the past month of reading, for instance, I can now convincingly argue any position on health care imaginable.
-joe
jfp, I think I have a similar clause in my note and remember being confused and asking about it as well. I am satisfied that this means that if you prepay, you are never again charged interest on the amount prepaid, only on the unpaid balance going forward. Amounts such as points paid up front or annual fees, however, would not be refunded. Of course, all standard disclaimers apply: IANAL, YMMV, consult an attorney, etc., etc.
Thanks everyone! I understand now. I was a little worried because I felt like I understood the rest of the things in the contracts and disclosures, but the wording of that mystified me. Now that I’ve heard some explanations, it makes sense.
‘Call of Duty: Modern Warfare 2′ game sets record with sales of $310 million in 24 hours.
SANTA MONICA, Calif. (AP) — First-day sales of Activision Blizzard Inc.’s “Call of Duty: Modern Warfare 2″ broke records, raking in an estimated $310 million in North America and the United Kingdom alone.
The video game went on sale all over the world on Tuesday, but Activision provided figures Thursday only for North America and Britain. The company estimates that it sold about 4.7 million copies of the game in the first 24 hours in those markets, making it the biggest-selling launch in the history of entertainment.
The latest installment in the “Call of Duty” action franchise was expected to at least match last year’s “Grand Theft Auto IV,” which was the most successful video game release in history and at the time may have been the top entertainment launch ever.
Players can fight one another, whether they’re at the same game console or in separate locations and connected online. Or a player can dive in alone and get swept into the game, which includes jarring depictions of war and an intricate story of good versus evil.
The game sells for $60 and plays on Windows-based computers, Microsoft’s Xbox 360 and Sony’s PlayStation 3.
great game i here…not gonna get it though. im a PC gamer and the PC version is rubbish.
A guy’s gotta have something to do while living in his parents’ basement.
lol…big time gamer here…40 year CPA married with one kid. i play alot with a few family members and friends.
- FBI agent - married with 2 kids.
- History PHD - married with 5 kids.
- Purcasing Consultant with black belt in Sigma - married with 3 kids.
- various married computer guys with kids (ok…maybe your typical gamers)
- Presbytirian minister - married with 3 kids.
gamers aren’t what they used to be. it’s very big business these days.
Yeah, but how does the history Phd feed 5 kids?
3 from a previous marriage. 2 of those 3 are in their mid 20s.
he married a gal with 2 younger ones of her own.
so since it’s 5 kids amongst 4 parents he has 2.5 kids…i reckon.
Don’t take it personally, society doesn’t view us train buffs very highly either. All the same there’s just something perverted about a society in which grown men are playing virtual war when their elected leaders can’t get a handle on the real thing.
Reminds me of Noam Chomsky’s observations of a Vietnam War exhibit at our Museum of Science and Industry in the 1960s. Upon learning that kids could assualt a replica of a Vietnamese village as part of the exhibit, ol’ Noam pretty much concluded that the facists really did win WWII.
Upon learning that kids could assualt a replica of a Vietnamese village as part of the exhibit, ol’ Noam pretty much concluded that the facists really did win WWII.
Mr. Chomsky is often both enlightening and unintentionally funny.
He was a guest lecturer in a seminar class I tool in the ’90s. Our discussion of corporate conglomeration went off the rails for a little while because he got in an argument with some classmates about how much “brainpower” they were wasting on the enjoyment of baseball.
LOL, My uncle is a train buff. The family tries not to talk about it
My thing is rebuilding and hot rodding old Hondas, laugh all you like, it keeps me out of trouble on the weekends.
Whatever makes you happy
I’m the last to judge.
I love trains. Even watched a few PBS series about trains around the world.
I’ll do you one even more obscure. I’m a graffiti ON the train buff. Some amazing stuff comes through here…just ask Hwy50
Why give us all gubmint jobs.
Obama to Hold Jobs Summit in December
FOXNews
November 12, 2009
In the face of a 10.2 percent unemployment rate — the highest since 1983 — President Obama on Thursday announced plans for a jobs summit in December.
President Obama took time Thursday — before jetting off to Asia for a 10-day tour — to announce a December jobs summit aimed at synching job growth with the massive government spending meant to “break the back” of the recession.
The announcement came as the Labor Department reported another 502,000 new jobless claims, two high-tech mainstays announced big layoffs and the unemployment rate reached 10.2 percent.
Obama said the White House forum will gather CEOs, small business owners, economists, financial experts and representatives from labor unions and nonprofit groups “to talk about how we can work together to create jobs and get this economy moving again.”
“We all know that there are limits to what government can and should do, even during such difficult times. But we have an obligation to consider every additional, responsible step that we can take to encourage and accelerate job creation in this country,” he said.
“Jobs Summit” = New Deal II?
We all know that there are limits to what government can and should do, even during such difficult times.
What are those limits, anyway, Mr. Pres?
somewhere between giving everyone $ 2,000 and $ 2,000,000.
http://finance.yahoo.com/tech-ticker/article/370734/Chinese-Homebuyer-Maxes-Out-Borrowing-So-as-Not-to-‘Miss-the-Boat’?tickers=FXI,XHB,CHINA,GMF,EEM,EMF,MSF
China Daily: Thirty-year-old Luo Yan and her husband raced to complete the purchase of a three-bedroom apartment in Shanghai with the help of an 800,000 yuan ($117,000) mortgage. The amount they borrowed was the maximum they qualified for.
“I am afraid that if we don’t do something now, we will certainly miss the boat,” Luo said.
Boy, their internet filters must really be good in China!
LOL. Good line, edge. You’re on a roll today!
FWIW, when I was there in summer 07, the housing bubble was all over the TV news and commentary shows. “This is not sustainable.” “No one can afford these prices but rich foreigners.” “It’s better to rent.”
This was in Guangzhou, where the median downtown single apartment was USD 430K+.
“No one can afford these prices but rich foreigners.”
Don’t they know they’re the ones supposed to be snapping up our sweet deals? Uh-oh!
We need mo-money. Brother can you spare a few more billion.
Cash cushion shrivels - U.S. housing agency
Federal Housing Administration’s reserve fund drops below 2% ratio required by Congress. Calls increase for revamping lending guidelines.
NEW YORK (CNNMoney.com) — The mortgage meltdown has ravaged the finances of a crucial government agency tasked with propping up the housing industry.
The Federal Housing Administration’s reserve fund has dropped to .53%, well below the 2% ratio mandated by Congress and the 3% ratio it had last fall, according to its annual independent audit, released Thursday. The fund covers losses on the mortgages the agency insures.
Housing officials said the agency will not have to turn to Congress for a bailout, but the agency’s weakening financial condition has prompted renewed calls to change its lending guidelines.
The FHA has skyrocketed in popularity during the mortgage crisis since it backstops banks if borrowers stop paying. Housing experts are growing increasingly concerned about the agency’s ability to handle rising numbers of defaults.
“They have a horrendous foreclosure problem and it’s getting worse,” said real estate finance consultant Edward Pinto, former chief credit officer for Fannie Mae (FNM, Fortune 500) in the late 1980s.
The audit showed FHA has sustained significant losses from loans made before 2009, but concluded that under most economic conditions considered, FHA’s reserves would remain above zero.
REPORT: More than 25% of US bridges are “structurally deficient or functionally obsolete”
Here’s some bad news for all of us: Over 150,000 bridges in the U.S. have been judged to be “structurally deficient or functionally obsolete.” And get this, there are less than 598,000 bridges in America. That means 25.7% aren’t in very good shape. It turns out that the state with the most structurally deficient or functionally obsolete (SD/FO) bridges is Texas, with 9,564 such bridges. However, Texas is ginormous – almost half the size of Alaska – and therefore has a lot of bridges, but the percentage of Texan SD/FO bridges is 19%. And that’s significantly lower than the national average.
What state has the most SD/FO bridges? Betcha never would have guessed the District of Columbia. For one thing, it’s not even a state! For another, you’d think being in such close proximity to all that Washingtonian largesse would be good for something. Turns out, not. Anyhow, 55% of the bridges in our nation’s capital are going to fall down/fail sooner than later says The Better Roads Bridge Inventory survey.
The actual State with the highest percentage of bad bridges is Rhode Island with 53%. Pennsylvania takes second place honors with 39%. The really bad news, according to the frighteningly detailed article, is that all these numbers might be low.
What’s the breakdown between SD and FO? That’s a pretty significant difference, IMO.
Pennsylvania has a pretty rough freeze thaw pattern for roads and bridges. You hike some trails there and get to see the sea of broken rocks.
“He was darned late to the RE party,”
Heh, a banker the last one to know.
Oh poop, I don’t know what my Joegriner comment is doing here.
I’ve noticed stuff posting in odd places today as well.
Ben?
The PPT is scrambling posts in an attempt to prop up the housing market. It isn’t working.
http://money.cnn.com/2009/11/12/news/economy/us_gold/index.htm
GOLD!!! Go baby GO!
Heard on the radio that there is a raffle for a condo at Santana Row in San Jose. To those not familiar, this is a high end shopping centre - Gucci, etc. where luxurious condos were built over the overpriced stores. Selling price around $800k - $1m or so.
I can’t imagine what the property taxes or HOA would be like for the winner!
If they offer cash, take the CASH.
Returning Workers Face Steep Pay Cuts
Many Bouncing Back From Layoffs Struggle to Recoup Earning Power as Wage Erosion Threatens to Slow Economic Recovery. WSJ
Nearly a year after losing his job at a Vermont plywood maker, 40-year-old Robert Hudson is back at work. Here is the catch: His paycheck is half that of his old job — and the same as when he was 18 years old.
In the past year, more than five million people exhausted their unemployment benefits, according to the government. Now, some are returning to work at jobs that pay considerably less than what they were earning before, a trend that threatens to slow an economic recovery.
And they are only just reporting this? This is old news, has been going for some time now, especially if you’re in a field that’s been battered by offshoring.
Don’t you know it. My brother-in-law was deciding whether or not to take a 50% off job. I hope he did.
Of course the PTB expect folks lie Mr. Hudson to run out and but a $300K house
Now, some are returning to work at jobs that pay considerably less than what they were earning before, a trend that threatens to slow an economic recovery.
Threatens to slow? More like torpedoes it.
Obama Needs More Time to Find Fannie, Freddie Agency Inspector.
Nov. 12 (Bloomberg) — Filling a 15-month vacancy for inspector general of the agency overseeing Fannie Mae, Freddie Mac and the Federal Home Loan Banks will take more time and be done “as soon as possible,” the Obama administration said.
“The process of announcing nominees does take some time given the rigor of the process to ensure that important positions like this one are filled by the highest quality people,” Jennifer Psaki, a White House spokeswoman, said in an e-mail yesterday.
Taxpayer support for the government-chartered companies may need to be reconsidered until an inspector general is place, Representative Darrell Issa of California, the ranking Republican on the House Oversight and Government Reform Committee, said in a statement.
“It is absolutely unconscionable that Fannie Mae and Freddie Mac, which were at the heart of the subprime housing collapse last fall that sent our economy into a tailspin, should be without independent oversight at a time when the federal government now owns over half of all the mortgages,” Issa said.
The companies own or guarantee more than $5 trillion in U.S. residential debt, while the 12 Federal Home Loan Banks have $1.1 trillion in obligations.
Issa is a killer rep. I hope he one day runs for president.
I think he’s in with the Governator’s camp somewhat unfortunately (e.g. he was a primary factor in the Gray Davis takedown), but he’s really been slamming the various financial entities most responsible for the bubble. He’s right w/regards to Fannie and Freddie - it’s unconscionable to have such a big hole in oversight of these agencies for so long.
Do you think that the GOP would ever run an Arab American for president ???
They’ll run a three toed sloth or any other gimmick. You can wager anyone they run will undoubtedly have an empty skull. It’s their trademark.
Issa was the money stooge in the first Guvernatorial primary election, trying for greatness after a long career as an OC weasel. He got majorly screwed by the OC GOP kingmakers and lost a ton of spondoolicks in the process.
But something changed after that election, Ahnode went on to defeat Arrianna, and Issa’s been progressively more rational, seemingly ethical, and populist in the intervening years. I’ve watched him fielding hardballs on a few talk shows around LA, and NY and the man makes sense. A couple of times, I’ve even found myself cheering him on. So it will be fun to see if this is his breakout cycle. If it is, I might just support him…..
I called up citibank yesterday and cancelled my Choice credit card that I had had for 15 years. It was a good deal until early this year, when certain little problems began to crop up.
In February, the statement arrived two days after the payment due date. I called up and asked about it, they said there must have been a “mail glitch”, but tough luck for me: I was on the hook for a hefty late payment surcharge, a penalty fee, and some interest. I was POd but I paid.
In March, the same thing happened, so now it was a pattern. I complained but paid it down to zero and waited. I didn’t use it for a few months.
In summer, I did use it in June and watched carefully for the statement. It didn’t come on time, but I called up well before the due date and told the rep to send it immediately or I would cancel the account. It arrived two days later, I sent payment in full immediately, and noticed that they cashed the check three days later, still well before the due date. But they did not post it to my account - they waited about ten days, and charged me the various late fees, surcharges, etc. So I complained, paid in full, and stopped using it. Two weeks ago they sent a letter raising the interest rate to 30 %, threatening to put a $300.00 “non-use surcharge” on the account, and giving themselves the right to cancel at any moment without warning, and also the right to place unspecified “fees” and “surcharges” on the account at any time with no warning. I had already obtained a replacement Visa from my credit union with an 8.9% interest rate, so I said sayonara to citibank. The phone rep did make a point of mentioning that it would damage my credit rating due to the fact I was closing a 15 year old account.
My father canceled his citibank card after 30+ years, they kept putting and additional charge on his card that had been long paid for.
30% holy smokes! That says a lot about the state of the c.card business.
I’ll stick with Amx. gold and USAA Visa. Never had a problem that wasn’t easily resolved.
I have a USAA visa and mastercard linked to the same credit line and switched the AmEx from gold to blue (no fee) two years ago. I’d like to switch the Blue to a USAA AmEx, but figured it was better not to have all my cards at one company.
I think the work one is a Citi card, but I don’t have any choice about that.
I am SO glad I don’t have cards with any of the banks that are trying to bail themselves out on the backs of people who can’t get their balances down to zero as of yesterday. Am Ex doesn’t quite have the guts yet, at least not that I’ve seen. Bills come closer to the due date than they used to, but not so close I can’t take care of it easily.
When the “customer service” person told you your credit would take a hit for cancelling a 15 year old card, you should have told her your credit would take a hit as the company fraudulently charged you late fees when they refused to cash checks and credit your account in a timely manner, too.
By the way, a story like that, with all the bells and whistles about them not crediting your account in a timely manner should get written down in a letter (on paper sent by snail mail) to your rep and senators (cc the chairs and ranking members of the appropriate committees too). Send it to their DC office, not the constituent office in the district. Oh, and cc the president of the bank.
My daughter is a military spouse with USAA credit card. She told me today they jacked her rate to 32%. No lates on her record. They’ve bought a few things on it just to establish a credit history. Her comment to me was: “I don’t want to establish a credit history that bad.”
This is crazy. They may make a few dollars more before most of their credit junkie customers default. Responsible customers will just stop using credit cards.
I’ve had the USAA cards for years. They raised rates, but only when the formula they usually use got my rate below 6%. I also use them for my regular banking. If any financial institution can figure out my habits from the history they can access, it is USAA.
I guess age (and being a long time customer) has its benefits. Trying to “establish” your credit history at this moment must be nasty.
There should be a low that prohibits the use of credit ratings for anithing other than getting loans. Employers should not be allowed to use it as a job pre-requisite. It just gives banks too much power.
I don’t know about that… would you want your accountant or bookkeeper in charge of your books if they couldn’t manage their own? There are a host of “financial advisors” out there whose mantra is “do as I say, not as I do”.
Accountants just do the books, they don’t choose how to spend the money. That’s management’s job.
I called up citibank yesterday and cancelled my Choice credit card that I had had for 15 years. It was a good deal until early this year, when certain little problems began to crop up.
Those seem like more than little problems you’re describing — sounds like illegal machinations on Citibank’s part.
At any rate, congratulations on untethering yourself from them. I canceled an 11 year-old Citibank card this summer, and enjoyed their repeated and futile efforts to woo me back to their teat. Hope you experienced some similar satisfaction in cutting them loose.
I thought Marxist Maxine Waters was going to take over big oil to stop this foolishness, and take all their profits.
Pumped-up prices: $4 per gallon gasoline may be coming in 2010.
Has this been a trying decade for the average American, or what? It’s bad enough that we’ve have had to cope with stagnant wages and tax increases at just about every level. But in the months ahead, we may have to deal with yet another nightmare: surging gasoline prices.
Factors are lining up that could end up pushing gas prices back over $4 per gallon sometime next year. If you’re already exasperated about prices at the pump, you’re not the only one. Gasoline demand in 2009 has been comparatively low — take 7.6 million Americans out of the workforce through layoffs — yet gasoline’s price has gone up, not down.
It’s risen about 20 cents per gallon in the past month to a U.S. average price of $2.65 per gallon for unleaded regular, according to data compiled by gasbuddy.com. This, when we’re heading into December and the winter season — a time when gasoline demand historically has been at its lowest.
Gasoline demand down, but the price is up. What’s going on here? Well, part of the reason is the price of oil, currently around $80 per barrel. Oil — boosted by the weak dollar and by likely increasing global oil demand during the economic recovery — has essentially doubled since hitting a post-leverage boom low of about $35 per barrel a year ago.
IIRC refinery production has been scaled back as well.
Emerson’s Farr: Regulation, taxes hurting manufacturers
St. Louis Business Journal
The U.S. government’s regulation and taxes are hurting manufacturers, Emerson Chief Executive David Farr said Wednesday.
“Washington is doing everything in their manpower, capability, to destroy U.S. manufacturing,” Farr said at a Baird Industrial Outlook conference in Chicago, Bloomberg News reported. “Cap and trade, medical reform, labor rules … I’m not going to hire anybody in the United States. I’m moving. They are doing everything possible to destroy jobs.”
Farr said the company would keep expanding in emerging markets, such as India and China, which represented 32 percent of revenue in 2009. About 36 percent of manufacturing is now in “best-cost countries” up from 21 percent in 2003, according to slides accompanying his speech, Bloomberg reported.
This isn’t the first time Farr has criticized the Obama administration.
In July, Farr sent a letter to employees saying Congress and the Obama administration’s stimulus spending was “out of control” and that health-care and energy reform efforts were costly to business.
The St. Louis-based electrical equipment and garbage disposal maker (NYSE: EMR) reported $20.9 billion in sales for the year ended September. It employs about 125,000 people worldwide but has had to cut more than 20,000 jobs since the end of 2008.
‘Farr said the company would keep expanding in emerging markets, such as India and China, which represented 32 percent of revenue in 2009. About 36 percent of manufacturing is now in “best-cost countries” up from 21 percent in 2003, according to slides accompanying his speech, Bloomberg reported.’
Emerson has long been about outsourcing American jobs to the labor market with the cheapest bid. I once attended a talk by Chuck Knight (an Emerson CEO of yesteryear) at AG Edwards. He first asked whether any media reps were present in the room (there were none) before launching into a discussion of his evil plans to bust unions and outsource American jobs. Hopefully Farr is less of a CEO scumbag than Knight was.
Hawaii foreclosures up 134% in October
Pacific Business News (Honolulu)
Hawaii foreclosures were up 134 percent from last October, according to the latest foreclosure data.
Hawaii had 925 filings for the month, compared to 395 a year ago, according to RealtyTrac.
Hawaii ranked 17th in the nation for foreclosures in October, down from 15th in September.
Nationally, there were 332,292 foreclosure filings for the month, down 3.3 percent from September and up 18.8 percent from October 2008.
Hawaii home foreclosures were down 4.5 percent from September, according to the survey by the California-based real estate research firm.
Hawaii had a rate of one filing for every 548 households.
Nevada again had the highest foreclosure rate in the country for the month, with one filing for every 80 households.
California had the second highest rate for October with one filing in every 156 housing units, followed by Florida, also with one in 168.
California had the highest number of foreclosures at 85,420.
Vermont ranked 50th, with 15 foreclosures.
Americans are overpaid
For the global economy to rebalance, the pay gap between Americans and the rest of the world must shrink.
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U.S. workers are overpaid, relative to equally productive foreigners doing the same work. If the global economy is ever to get back into balance, that gap needs to be closed. CNNMoney
Of course, U.S. workers should earn more than their peers in China, Moldova, or Vietnam. The Americans take advantage of the higher productivity that makes their country rich: better education and infrastructure, abundant capital and a more developed work ethic. But how much higher should U.S. wages be?
The answer depends in large part on two measures: the difference in productivity in making goods that can be traded across borders, and the quantity of such tradable goods. Both measures point to a narrowing wage gap.
There are so many factors working to push up productivity in poor countries. Fast development, cheap capital, and more efficient shipping all help make foreign factories more competitive. Cheap global communication through the Internet reduces all sorts of costs and makes it easy to trade many more goods and especially services.
The global wage gap has been narrowing, but recent U.S. labor market statistics suggest the adjustment has not gone far enough.
One indicator is unemployment, which has risen unexpectedly rapidly in this downturn. The 7.3 million jobs lost are more than treble the 2 million of the next worst post-war recession, in 1980-82. Some of that huge increase reflects the turbulence of an unusually sharp decline in GDP, but there could be another factor: the recession has revealed many workers are paid more than they are worth.
I’ve been anticipating very significant pay cuts for myself the last fifteen years, so lived like a monk.
The handwriting was on the wall for quite a long time. Berlin wall tumbled, China’s GDP went up 9 or 10 percent per year. The Chinese can still call their economic system “communism” just like I can call my Toyota economy car a box of Wheaties. But the reality is world competition.
I embrace world competition. Most people here do not embrace economic freedom in other countries because they did not want to make the tremendous sacrifices like I made to prepare for their own major income cuts.
That’s their problem. Competition not only brings wages down, but it drives housing prices down too. It drives down the prices of goods.
It’s a buyer’s market if you have been buying gold and stacking up T-bills and series I bonds.
Looking forward to seeing the car Capn Credit Crunch snapped up. Probably had cash and got a good deal from a FB.
Well, I-Series bonds were great in the day. That is, the day(s) when they were paying 3+% above the tagged inflation rate. Now that new ones pay 0% above that rate, I don’t touch ‘em. (Then again, nobody’s touchin’ mine that are paying 3.40 above, either — I’m haning on to them for the short or medium term, anyway.)
Current 6-month Series I’s are good enough to continue buying. Better than 52-week T-bills yielding 0.38%.
Since you got 3.40% fixed rate, I would call those long term holdings.
If you bought well over $100k of Series I bonds back in 1998 through 2001, I could see why you wouldn’t care to buy any now. The $10,000 purchase limit per year they just implemented, combined with stingy fixed rate make it not seem like continued buying will do any significant improvement to a $60,000 gain.
Survey: Texans cutting back on spending.
Houston Business Journal
Though the Texas economy may rebound faster from the recession than other parts of the country, the state’s residents are still hurting.
A survey to measure Texans’ views on the economy and their personal finances released Thursday by Citigroup Inc. shows that residents are in belt-tightening mode.
More than half of Texans, about 57 percent, have postponed major purchases such as automobiles, and 38 percent have taken money out of savings to help pay for expenses. And about a third of Texas residents said they were working longer hours to make ends meet.
Like the rest of the country, worries about health care costs (28 percent) and the price of consumer goods such as food or gasoline (24 percent) are the top two items on Texans’ list of concerns.
Kathleen Gibson, Citibank central division president of commercial banking, said the survey accurately reflected what she hears on a daily basis.
“People we’ve talked with have new norms in financial behavior. They are spending differently and saving differently, for however long this lasts,” Gibson said. “But it’s tempered with optimism we see around the state.”
Indeed, Texans are more confident that the Lone Star State will recover faster than other parts of the country.
Australia’s wine glut.
Australia has an accumulated surplus of 100 million cases of wine that will double in the next two years if current trends continue, according to the report. The annual surplus is huge – equal to all UK export sales and there is no clear prospect of finding additional demand, either domestic or foreign, to fill this gap. …
In fact, wine exports have fallen by 8 million cases or more than 20 percent in the last two years, according to the statement, with the largest declines in the high value wines that Aussie winemakers hoped would be their future.
Inexpensive and bulk wine sales have grown, but at prices that are unsustainably low.
Time for Trader Joe’s to introduce a Two Buck Matilda?
I certainly am drinking a much higher quality of wine than before.
I certainly am drinking a much higher quantity of wine than before.
equal to all UK export sales
That’s “huge”? I didn’t know there was such a thing as UK wine.
Oh yes there is…think Maryland wine…English wine is better.
I think they mean Aussie exports to the UK - the Brits buy a lot of the stuff.
Yeah I figured. Just funnin’
Police property seizures ensnare even the innocent.
Money raised by Metro Detroit agencies increases 50% in five years.
The Detroit News
Local law enforcement agencies are raising millions of dollars by seizing private property suspected in crimes, but often without charges being filed — and sometimes even when authorities admit no offense was committed.
The money raised by confiscating goods in Metro Detroit soared more than 50 percent to at least $20.62 million from 2003 to 2007, according to a Detroit News analysis of records from 58 law enforcement agencies. In some communities, amounts raised went from tens of thousands to hundreds of thousands — and, in one case, into the millions.
“It’s like legalized stealing,” said Jacque Sutton, a 21-year-old college student from Mount Clemens whose 1989 Mustang was seized by Detroit police raiding a party. Charges against him and more than 100 others were dropped, but he still paid more than $1,000 to get the car back.
“According to the law, I did nothing wrong — but they’re allowed to take my property anyway. It doesn’t make sense.”
While courts have maintained the government’s right to take property involved in crimes, police seizures — also known as forfeitures — are a growing source of friction in Michigan, especially as law enforcement agencies struggle to balance budgets.
“Police departments right now are looking for ways to generate revenue, and forfeiture is a way to offset the costs of doing business,” said Sgt. Dave Schreiner, who runs Canton Township’s forfeiture unit, which raised $343,699 in 2008. “You’ll find that departments are doing more forfeitures than they used to because they’ve got to — they’re running out of money and they’ve got to find it somewhere.”
October deficit $176 billion
For 13th month in a row, outlays trump receipts, adding to the federal government’s red ink. Monthly interest: $22.8 billion.
NEW YORK (CNNMoney.com) — October was another costly month for Uncle Sam. The U.S. Treasury reported on Thursday that federal coffers racked up a deficit of $176.4 billion for the month.
It was the 13th straight month of a reported monthly deficit.
Interest paid on the debt was $22.8 billion - or 7% of federal outlays for October, which is the first month of the new fiscal year.
For the month, the Treasury took in $135.3 billion from various sources and spent $311.7 billion.
At this reading, the Treasury is estimating the annual deficit for fiscal year 2010 to hit $1.5 trillion. That would top the $1.42 trillion registered for 2009, which was the highest annual deficit since 1945.
If those numbers don’t scare you nothing will. I remeber times when running up a deficit of $176 billion in a year was considered bad, now we can do it in one month.
That comes to around $580 per person. I just wonder how this will end. I mean I know this has to end badly, I am just not sure how this will play out in detail.
Excerpt: TDR ~ Bill Bonner
“It’s amazing; the US is doing everything that Japan did wrong,” said a friend yesterday.
Let’s see, in the 1980s Japan’s corporate leaders thought they were going to take over the world. Investors thought so too. They expanded. They wheeled. They dealed. Prices shot up and they all thought they were geniuses.
In the ’80s, everyone wanted to be Japanese. Management consultants used Japanese words to describe commonplace insights. For example, instead of saying that businesses always need to try to do things better, they referred to “kaizen” as if it were the secret of success. And US economists urged the Reagan Administration to have an “industrial policy” - because that was what Japan had. Japanese businesses were the envy of the world. Japan was the world’s second largest economy. But in growth and stock prices it was Numero Uno.
It turned out, as it always does, that Japan did not have the secret to everlasting success. Instead, what it had was what comes before a fall. The stock market crashed in Tokyo in 1989. The Japanese economy entered a recession. At first, the experts believed it was temporary. They urged investors to take advantage of the opportunity to buy into Japan, Inc. at record low prices. They thought Japanese industry was unstoppable…unbeatable. It would recover in no time, they said.
But Japan, Inc. didn’t recover. Instead, it went into a long, drawn-out recession that lasted year after year…with on-again, off again deflation…and several stock market rallies. Each time stocks rallied, they fell again. Each time the economy began to grow…along came another setback. This continued for the next 20 years…until March of this year…when Tokyo stocks hit their lowest point for the whole bear market. A generation of investors had been nearly wiped out. Over two generations they had made nothing. Trillions worth of wealth had been erased.
What did the Japanese authorities do during these last two decades? They fought the correction every step of the way, with the boldest attempt at fiscal and monetary stimulus every undertaken up to that point. Interest rates came down to effectively zero. And government spending soared, creating the largest deficits in Japanese history. Now, Japan’s national debt approaches 200% of GDP - a peacetime record. If it continues to grow at this rate, it will hit 300% of GDP in just a few more years.
Sound familiar? It should. The key US interest rate is now effectively zero. The Fed says it will leave it there for “as long as it takes.” And deficits have reached staggering levels - 13% of GDP. At this rate, the US debt/GDP ratio will hit 100% in just a few years. And if it continues, US debt/GDP will reach 200% not long after - as recession- reduced tax revenues meet stimulus-increased outlays.
But wait…the feds say they won’t let it happen. They’ll turn this thing around. The economy will begin to grow. Tax revenues will rise. Prices will go up.
Hey…that’s just what the Japanese said!
So far, the US is doing almost exactly what the Japanese did…propping up zombie companies and stimulating the economy as best it can.
But if it does the same thing the Japanese did, won’t the US get the same results the Japanese got?
Here is where it gets interesting. Because the US economy is not exactly like the Japanese economy. Japan had high savings…and a positive trade balance. It could run up huge government debts and “owe it to itself.” It could finance its government debts with the savings of its own people, in other words. It never had to worry about foreigners refusing to buy its bonds…or selling them suddenly.
America’s government debt is different. The US doesn’t save enough to finance its own deficits. So it depends on the kindness of strangers. And if those strangers ever lose faith in America’s ability or willingness to repay its debts, they’ll drop the dollar like an annoying girlfriend. And when they do, the whole global monetary system will come crashing down.
But suppose savings rates go up in America - to, say, 10% of GDP, like they were before the bubble years. That would make $1.4 trillion of savings available to finance the feds’ deficits. And suppose the slump continues…as we think it will, with another big scare in the investment markets. People will seek safety in…yes, you guessed it…US bonds. This will take the pressure off the dollar and permit the US to finance its countercyclical spending without depending heavily on foreigners. The recession/depression will be annoying…but not insufferable. And Bernanke will figure het has more to lose by undermining the dollar than to gain from it. In that case, the Japan- like slump could go on for many years - just as it has in Japan!
I posted a link but it did not get to HBB yet. China is also experiencing growing debt. Surprising, as they are the ones who just about own the entire U.S.
Seattle hikes electricity rates by nearly 14 percent
Puget Sound Business Journal (Seattle)
The Seattle City Council voted to hike electricity rates by 13.8 percent on Thursday.
City officials attributed the hike in City Light rates to “the unpredictability and volatility of the current market (that) has resulted in City Light burning through cash reserves that will be depleted by mid-2010.”
City Council members said the current recession is a good time for Seattle residents to conserve energy and reduce the city’s “carbon footprint.”
“Increasing energy conservation saves money in addition to reducing our carbon footprint. The time of financial crisis is the exact time to conserve resources,” said Richard Conlin, council president, in a statement.
The two-year, 13.8 percent hike will go into effect next year.
Nice pricing power you have when you’re a monopoly!
I’ll betcha they got burned by energy futures. Probably bought a few years’ supply of oil last year when it was $130, figured it would hit $200 before long.
Or perhaps it’s just all those empty houses where they spent the $$ to run power lines, but have no revenue now to show for it. Seems like this should be happening all over, actually.
Chris Dodds top 20 contributors…
1 Citigroup Inc $265,694
2 SAC Capital Partners $262,800
3 United Technologies $255,800
4 Royal Bank of Scotland $223,700
5 ActBlue $209,000
6 Bear Stearns $190,500
7 American International Group $183,700
8 Merrill Lynch $129,950
9 Goldman Sachs $127,950
10 Credit Suisse Group $114,800
11 Morgan Stanley $110,600
12 Travelers Companies $104,700
13 JPMorgan Chase & Co $103,550
14 The Hartford $94,800
15 Hartford Financial Services $90,300
16 St Paul Travelers Companies $88,750
17 Ernst & Young $82,750
18 General Electric $81,700
19 Bank of America $80,350
20 FMR Corp
Source: Opensecrets.org
Fun to see who’s zooming who!
Citi just couldn’t come up with that last $6 to make it a nice round number, eh?
Relax, it was a just coffee can next to the water cooler.
NEW YORK – Federal prosecutors Thursday took steps to seize four U.S. mosques and a Fifth Avenue skyscraper owned by a nonprofit Muslim organization long suspected of being secretly controlled by the Iranian government.
In what could prove to be one of the biggest counterterrorism seizures in U.S. history, prosecutors filed a civil complaint in federal court seeking the forfeiture of more than $500 million in assets of the Alavi Foundation and an alleged front company.
The assets include Islamic centers in New York City, Maryland, California and Houston, more than 100 acres in Virginia, and a 36-story office tower in New York.
Seizing the properties would be a sharp blow against Iran, which has been accused by the U.S. government of bankrolling terrorism and seeking a nuclear bomb.
A telephone call and e-mail to Iran’s U.N. Mission seeking comment were not immediately answered.
It is extremely rare for U.S. law enforcement authorities to seize a house of worship, a step fraught with questions about the First Amendment right to freedom of religion.
The action against the Shiite Muslim mosques is sure to inflame relations between the U.S. government and American Muslims, many of whom are fearful of a backlash after last week’s Fort Hood shooting rampage, blamed on a Muslim American soldier.
Just when you thought things were going to get dull around here.
HEY now we are finally starting to fight a Religious Jihad…
Green shoots….whoo hoo
1) If the FHA guaranteeing fewer mortgages would be bad news for banks, isn’t there a really good chance they won’t end up guaranteeing fewer mortgages?
2) Doesn’t the FHA have a bottomless credit line at the Treasury? Hence why the concern that they are “running low on cash”?
Financial Stocks
Nov. 12, 2009, 5:45 p.m. EST
Financial stocks tumble on housing-market fears
Related stories
* Financial stocks slip, insurers lead decliners (9:46a)
* FHA reserves fall below 2% minimum, auditor says (2:34p)
* Sector drifts higher, exec comments lend support (Nov. 11)
* Gold notches first November loss as dollar rises (5:01p)
By Greg Morcroft, MarketWatch
NEW YORK (MarketWatch) — U.S. financial stocks fell Thursday as concern about the housing market was triggered by news that the Federal Housing Administration is low on cash.
As banks and other lenders have pulled back from lending money for house purchases in recent years, the FHA has stepped in with guarantees that have become one of the leading sources of financing to prop up the housing market in the U.S.
Another housing bailout?
The U.S. Federal Housing Administration’s cash reserves drops well below the congressionally mandated level. The News Hub discusses whether we should expect another housing bailout. Plus, military prosecutors intend to seek the death penalty for alleged Fort Hood shooter Nidal Hasan.
However, that’s come at a cost, according to an independent review of the federal agency’s books released Thursday. A large increase in foreclosures has pushed the FHA’s reserve fund to a record-low level, it concluded.
The FHA’s reserves dropped to 0.53% of its total insured mortgages, less than the 2% required by law, the review found. The reserves measure how much capital the FHA has beyond the funds it has put aside for expected losses over the next 30 years. See story on FHA’s troubles.
If the FHA guarantees fewer mortgages, that could dent demand for houses and derail a recent stabilization in house prices. That, in turn, may be bad news for banks.
…
Darn “worse than expected” economy! Nobody could have seen it coming!!!
The Financial Times
Defaults pose risks to US housing agency
By Saskia Scholtes in New York
Published: November 12 2009 21:12 | Last updated: November 12 2009 21:12
The Federal Housing Administration, the government agency that insured $360bn of US single-family mortgages last year, said on Thursday that its insurance reserves had fallen below its congressionally mandated threshold to their lowest level ever.
Amid depressed house prices and mounting losses on insured mortgages, the FHA’s capital reserve ratio, which measures reserves after accounting for projected losses, fell to 0.53 per cent in the 12 months to September 30 – well below the 2 per cent cushion it is required by Congress to maintain.
Last year its capital ratio stood at 3 per cent, and it was 6.4 per cent in 2007.
Rising defaults on FHA loans have prompted fears that the agency will need a taxpayer bailout. Defaults on FHA-backed loans reached 8.24 per cent in September – up from 8.1 per cent in August and 6.1 per cent a year ago.
Shaun Donovan, secretary for housing and urban development, whose office oversees the FHA, said the economy was worse than housing officials had expected. He projected that claims against the insurance fund would be higher than forecast and said action would be needed to shore up the agency’s reserves.
“If the FHA guarantees fewer mortgages, that could dent demand for houses and derail a recent stabilization in house prices. That, in turn, may be bad news for banks.”
And Lord knows we can’t have that.
Hong Kong Is New Target of U.S. Crackdown on Global Tax Evasion.
Nov. 13 (Bloomberg) — Hong Kong is a new target of U.S. prosecutors pursuing a global campaign against evaders of federal taxes, spurred by data acquired in their crackdown on Swiss banks.
Prosecutors are trying to determine what role financial professionals in Hong Kong play in tax evasion, according to people familiar with the matter. They are examining how much taxable money was moved to the former British colony that returned to China in 1997, whether accounts were based there in name only and what banks were involved, the people said.
The push follows the government’s success in penetrating Swiss bank secrecy and learning from insiders how UBS AG helped Americans evade taxes. UBS, the largest Swiss bank by assets, avoided prosecution by agreeing in February to pay $780 million and disclose account data on 250 clients. In August, it agreed to supply information on another 4,450.
“They must have reason to believe this is a target-rich environment and a very significant amount of tax evasion is going on there,” said Peter Zeidenberg, a former federal prosecutor now at DLA Piper LLP in Washington.
It’s about time…
Feds Prepare to Seize Four Mosques, Office Building Suspected of Iranian Ties. ~ November 12, 2009
NEW YORK — Federal prosecutors Thursday took steps to seize four U.S. mosques and a Fifth Avenue skyscraper owned by a nonprofit Muslim organization long suspected of being secretly controlled by the Iranian government.
In what could prove to be one of the biggest counterterrorism seizures in U.S. history, prosecutors filed a civil complaint in federal court seeking the forfeiture of more than $500 million in assets of the Alavi Foundation and an alleged front company.
The assets include Islamic centers in New York City, Maryland, California and Houston, more than 100 acres (40 hectares) of land in Virginia, and a 36-story office tower in New York.
Seizing the properties would be a sharp blow against Iran, which has been accused by the U.S. government of bankrolling terrorism and seeking a nuclear bomb.
A telephone call and e-mail to Iran’s U.N. Mission seeking comment were not immediately answered.
It is extremely rare for U.S. law enforcement authorities to seize a house of worship, a step fraught with questions about the First Amendment right to freedom of religion.
The action against the Shiite Muslim mosques is sure to inflame relations between the U.S. government and American Muslims, many of whom are fearful of a backlash after last week’s Fort Hood shooting rampage, blamed on a Muslim American soldier.
RAAAAAAAAAACISTS!!
NO eddie Green shoots
Bomb destroy the mosques….we will show them that allah is a moron
Yep, random post day…
China’s record debt has economists worried.
http://tinyurl.com/ydvvmvj
Ah, another reason to buy precious metals!
Here’s another random post:
google this: “Martin Armstrong Gold $5000″
And another:
“DJIA 1000″
Sorry folks, it’s hard to engage in debate when my posts keep getting eaten. So if you don’t see my explanations or replies, it got ate.
Speaking of “ate”, whatever became of our Ate_Up, not to mention Olympia Gal? I miss their half-baked banter…
After reading all of the above, I couldn’t find any part of the “news” - as opposed to banter and opinion - that points to anything other than a continued decline in house prices. The price of gasoline is up. Credit card rates are up. Foreclosures are up. Employment is down. Re-employed people are making way less.
Some recovery.
- Is it just me, or do others perceive that the US banking system has been taken over by bankers who live by a fundamentally different value system than the vast majority of Americans live by, one based on lies, deception, and legitimation of activities (e.g. theft) that most individual Americans would regard as immoral, unethical and illegal?
- Is it different now, or has our banking system always been governed by liars and thieves?
It’s not different now.
The accidental forecast:
No jobs recovery until after September 2010
* ECONOMIC FORECASTING
* NOVEMBER 12, 2009
Economists See Fed Raising Rates Near Midterm Elections
By PHIL IZZO
Economists in the latest Wall Street Journal survey, on average, expect the Federal Reserve to raise interest rates around September 2010, a politically sensitive time considering midterm elections will be right around the corner and unemployment is forecast to still be over 9.5%.
Kelly Evans and Phil Izzo discuss the findings from the latest WSJ economic forecasting survey, in which most economists predict that the Federal Reserve will start raising interest rate next September.
The 52 surveyed economists—not all of whom answer every question—on average expect the unemployment rate to rise to 10.3% by the end of this year from its current 10.2%, and they expect it to stay above 9.5% through 2010. The respondents expect job growth to return over the next 12 months, but the forecast calls for an average of about 50,000 jobs to be added per month over that period. The economy needs to add about 100,000 jobs a month just to keep up with new entrants to the labor force.
…
What kind of sneaky, conniving Fed-engineered scam is at play here to transfer America’s collective wealth into the coffers of Megabank, Inc?
And since when is a German bank a “Wall Street firm”? Part of the global banking cabal, maybe…
* The Wall Street Journal
* BUSINESS
* NOVEMBER 13, 2009
Ex-Bankers Form ‘Blind Pools’ in Bid for Failed Lenders
BY ROBIN SIDEL
Former bank executives are returning to the battered industry to bid on failed financial institutions, putting them in competition with healthy banks and private-equity firms for the rising number of doomed banks.
Wall Street firms such as Goldman Sachs Group Inc. and Deutsche Bank AG are racing to form investment pools that plan to fund acquisitions by the bankers, who hope to leap into the auction process for failing banks led by the Federal Insurance Deposit Corp.
…
I know I am getting a bit repetitive with this message, but, FOR THE GOOD OF THE PLANET, SMASH THE TRUSTS!!!!!
Why isn’t “Friend-of-Angelo” Dodd in jail by now for taking sweetheart loans from Godzillo? Isn’t political bribery against the law?
Dodd embarks on an age-old quest
GOAL IS SINGLE BANK REGULATOR
Current patchwork has supporters, critics
By Brady Dennis and Binyamin Appelbaum
Washington Post Staff Writer
Thursday, November 12, 2009
Sen. Christopher J. Dodd (D-Conn.) this week joined the generations of dreamers who have advocated for eliminating the nation’s muddle of bank regulators, arguing that a single agency would be more efficient and would end the ability of banks to choose the most lenient supervisor.
“The financial crisis,” Dodd said Tuesday, “exposed a financial regulatory structure that was the product of historic accidents, one after another, over the past 80 years, created piece by piece over decades, with little thought given to how it would function as a whole and unable to prevent threats to our economic security.”
But Dodd confronts a broad range of critics including bankers, regulators and fellow legislators who warn that his plan overlooks the strengths of the current patchwork and ignores the potential downsides of consolidation.
They argue that community banks and international behemoths need different kinds of oversight. They also note that the various agencies possess meaningfully different perspectives. The Federal Deposit Insurance Corp., for example, tends to look out for the interests of smaller banks, while the Office of the Comptroller of the Currency traditionally has been mindful of the concerns of larger institutions.
…
Fed Up
The political movement to curtail the Federal Reserve goes from fringe to mainstream.
Brian Doherty from the November 2009 issue
…these days the Federal Reserve faces challenges to both its power and its mystery, thanks to both hot public opinion and cold academic analysis. Politicians are demanding a peek behind the curtain, and holdovers from Paul’s 2008 presidential campaign have kick-started an “End the Fed” movement. Even within the central bank’s natural fanbase of economists and financiers, many are complaining about its appetite for regulatory power and its massive expansion of the money supply. During the last year the Fed has nearly doubled the monetary measure over which it has the most direct control, the “monetary base” (defined as circulating currency plus the reserves that commercial banks keep with Federal Reserve banks).
Signs abound that public sentiment is turning against the bank. Meltdown, an anti-Fed tract by the historian Thomas Woods, sat on the New York Times bestseller list for more than a month. Woods, like Paul, embraces the “Austrian” school of economic thought, which sees central banking as a recipe for endless inflation and constantly growing government. Paul has invited him to Capitol Hill to brief a growing unofficial caucus of Republicans attracted to Paul’s hardcore anti-statism. Fed bashing has been a prominent component of Tea Party gatherings nationwide. The largely Paulite movement Campaign for Liberty has organized “contact your congressman” campaigns to get H.R. 1207 on representatives’ radar screens, and the results are pouring in.
“The bill has received as many cosponsors as it has in part because Dr. Paul’s presidential campaign really brought the Fed into the spotlight, opened people’s eyes,” Paul Martin-Foss, a legislative aide for Paul, writes in an email. “There was also a lot of grassroots support, with numerous offices telling me that they had received a lot of mail about the bill and wanted more information.” Colorado Democrat Betsy Markey specifically credits Tea Party pressure for getting her interested in the bill, which she decided to cosponsor. “There’s a lot of anger from both sides of the aisle towards the Fed, not necessarily coming from the same position or working towards the same goals,” Martin-Ross writes. “But everyone wants to be seen as being in favor of transparency.”
…
McMansions visit the fat farm…
* The Wall Street Journal
* NOVEMBER 13, 2009
Builders Downsize the Dream Home
By MICHAEL M. PHILLIPS
SMYRNA, Ga. — For the first time in four decades in the luxury-home business, executives at John Wieland builders are thinking the unthinkable: Maybe houses in the South don’t really need a fireplace.
They’re also wondering whether new homes require 4,700 square feet of living space. Or private theaters with 100-inch screens. Or super-size-me foyers.
At 2,450 square feet, this new Wieland home in North Carolina looks like a cottage compared with some of the 3,900-square-foot models down the road.
As they draw up blueprints for the house of the post-recession future, builders are struggling to distinguish among what home buyers need, what they want and what they can live without — Jacuzzi by Jacuzzi, butler’s pantry by butler’s pantry.
“You have to keep taking things out until you hit a critical point where people reject your product,” said Jeff Kingsfield, senior vice president of sales at Smyrna-based John Wieland Homes & Neighborhoods.
It’s an experiment brought on by necessity. Two years ago, closely held Wieland was building 1,800 houses a year in posh subdivisions in Georgia, Tennessee and the Carolinas, selling for an average of $650,000 apiece. Today, the company is closing on just 600 homes annually, according to Wieland. It has slashed staff to 330 employees from 1,100.
The American housing market continues to drag, with the Mortgage Bankers Association reporting Thursday that applications for home-purchase loans have hit a nine-year low, plunging a seasonally adjusted 11.7% in the week ending Nov. 6 from the previous week. U.S. sales of newly built homes have fallen sharply as well, from 1.3 million in 2005 to 485,000 last year. The latest Census Bureau data suggest that this year’s sales will be even lower. Just 294,000 new homes sold through the first nine months of this year.
Slimming Down
Compare the floor plans of a boom-era luxury home and a smaller, post-recession design.
More often than not, builders say, post-crash buyers of new homes want smaller and simpler. The average new single-family house peaked at 2,507 square feet in 2007 and has since slipped to 2,392 square feet, according to Census Bureau data.
Average prices are sliding, too, by 16% — to $269,200 — between the first quarter of 2007 and the third quarter of this year, the Census Bureau reports. Wieland has been hit worse than most. The company’s average sales price has already dropped $153,000, to $497,000, or about 24%. And company executives expect that a year from now, 85% of its homes will go for less than $430,000.
…
Everyone could have seen it coming:
* The Wall Street Journal
* REVIEW & OUTLOOK
* NOVEMBER 13, 2009
The FHA’s Bailout Warning
Whoops, there it is.
Critics of Fannie Mae and Freddie Mac were waved off as cranks and assured that the companies wouldn’t need a taxpayer bailout right up until the moment that they did. Some $112 billion later and counting, this political history may be repeating itself with the Federal Housing Administration, which yesterday announced that its capital reserve ratio has fallen to 0.53%.
That cushion is far below the 2% of its liabilities that Congress mandates, itself a 50 to 1 leverage ratio, and down from 3% last autumn. The FHA’s mortgage guarantees in 2009 are four times higher than they were in 2007. Nearly 18% of its loans are 30 days or more past due, while mortgages guaranteed in 2007 are “on par with FHA’s worst-ever books from the early 1980s,” according to the Department of Housing and Urban Development’s report to Congress. The financial deterioration is the result of the agency’s plunge into high-risk loans over the last two years, asking dangerously low down payments of 3.5% from unqualified borrowers.
The FHA strikes a note of optimism by claiming that its book of business is improving and that “the just-completed actuarial studies show that FHA’s capital reserve ratio will not dip below zero under most of the economic scenarios considered.” The Administration has also made some modest reforms. Still, if housing values don’t recover, or if by some chance the agency can’t outrun its problems, the report admits that the FHA could ask taxpayers for $1.6 billion in 2012. Judging from history, that’s probably a low-ball estimate.
Congress doesn’t mind because these liabilities are technically off budget, until they aren’t. This was all so predictable—and, ahem, predicted.
Thanks so much to Mr Pinto at the WSJ for backing me up on my suggestion of a few months back that ACORN had a “larger than acknowledged” role in blowing the housing bubble. Out of ACORNs grow might oak trees, which eventually crash to the ground if they are not firmly rooted.
* The Wall Street Journal
* OPINION
* NOVEMBER 12, 2009, 7:10 P.M. ET
Acorn and the Housing Bubble
The liberal pressure group helped Congress write the affordable housing rules that got us into trouble.
By EDWARD PINTO
All agree that the bursting of the housing bubble caused the financial collapse of 2008. Most agree that the housing bubble started in 1997. Less well understood is that this bubble was the result of government policies that lowered mortgage-lending standards to increase home ownership. One of the key players was the controversial liberal advocacy group, Acorn (Association of Community Organizations for Reform Now).
The watershed moment was the 1992 Federal Housing Enterprises Financial Safety and Soundness Act, also known as the GSE Act. To comply with that law’s “affordable housing” requirements, Fannie Mae and Freddie Mac would acquire more than $6 trillion of single-family loans over the next 16 years.
Congress’s goal was to force these two government-sponsored enterprises (GSEs) to purchase loans that had been originated by banks—loans that were made under the pressure of another federal law, the 1977 Community Reinvestment Act (CRA), to increase lending in low- and moderate-income communities.
From 1977 to 1991, $9 billion in local CRA lending commitments had been announced. CRA lending by large banks increased dramatically after the affordable housing mandate was in place in 1993, growing to $6 trillion today. As Ellen Seidman, director of the federal Office of Thrift Supervision, said in a speech before the Greenlining Institute on Oct. 2, 2001, “Our record home ownership rate [increasing from 64.2% in 1994 to 68% in 2001], I’m convinced, would not have been reached without CRA and its close relative, the Fannie/Freddie requirements.”
The 1992 GSE Act was the fuse, and the trillions of dollars in subsequent CRA and GSE affordable-housing loans would fuel the greatest housing bubble our nation has ever seen. But who lit the fuse?
The previous year, as Allen Fishbein, currently an adviser for consumer policy at the Federal Reserve, has noted, Acorn and other community groups were informally deputized by then House Banking Chairman Henry Gonzalez to draft statutory language setting the law’s affordable-housing mandates. Interim goals were set at 30% of the single-family mortgages purchased by Fannie and Freddie, and the Department of Housing and Urban Development has increased that percentage over time. The goal of the community groups was to force Fannie and Freddie to loosen their underwriting standards, in order to facilitate the purchase of loans made under the CRA.
Thus a provision was inserted into the law whereby Congress signaled to the GSEs that they should accept down payments of 5% or less, ignore impaired credit if the blot was over one year old, and otherwise loosen their lending guidelines.
The proposals of Acorn and other affordable-housing advocacy groups were acceptable to Fannie. Fannie had been planning to use the carrot of affordable-housing lending to maintain its hold over Congress and stave off its efforts to impose a strong safety and soundness regulator to oversee the company. (It was not until 2008 that a strong regulator was created for Fannie and Freddie. A little over a month later both GSEs were placed into conservatorship; they have requested a combined $112 billion in assistance from the federal government, and much more will be needed over the next few years.)
The result of loosened credit standards and a mandate to facilitate affordable-housing loans was a tsunami of high risk lending that sank the GSEs, overwhelmed the housing finance system, and caused an expected $1 trillion in mortgage loan losses by the GSEs, banks, and other investors and guarantors, and most tragically an expected 10 million or more home foreclosures.
As a result of congressional and regulatory actions, the percentage of conventional first mortgages (not guaranteed by the Federal Housing Administration or the Veteran’s Administration) used to purchase a home with the borrower putting 5% or less down tripled from 9% in 1991 to 27% in 1995, eventually reaching 29% in 2007.
Fannie and Freddie acquired $1.2 trillion of loans from banks and other lenders from 1993 to 2007. This amounted to 62% of all such conventional home purchase loans with a down payment of 5% or less that were originated nationwide over the same period.
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This woman’s actions may single-handedly save the global economy from an endless financially-engineered future of systemic theft through bailouts by members of the too-big-to-fail Megabank, Inc global banking cartel. STAY THE COURSE, NEELIE!!!
P.S. Reasonably assuming they were financially engineered to enable systemic theft, then I would personally choose other terms besides “Crazy” to describe the banking practises which brought about the crisis. How about illegal, immoral and unethical– terms that few economists seem to grasp?
* The Wall Street Journal
* NOVEMBER 12, 2009, 12:57 P.M. ET
EU Kroes: Banking Practises Leading To Crisis “Crazy”
BRUSSELS (Dow Jones)–Banking practises that led to the financial crisis were “crazy” and banks now have to recognize their responsibilities towards society and taxpayers, the European Commissioner for competition Neelie Kroes said Thursday.
The banking culture needs to change from one prioritizing short-term gain to one that looks after real investment, Kroes added in a speech to the General Pension Group in Amsterdam.
The European Commission’s drive to downsize Europe’s bailed out banks such as Lloyds banking Group PLC (LYG) and Commerzbank (CBK.XE) is for the good of the banking system, Kroes said.
“I am not some kind of bank destroyer,” Kroes said defending her strict approach to banking restructuring. “We are trying to build up solid banks by working with them to face certain realities,” Kroes added.
It shouldn’t have taken a genius to see that “problems might emerge in banks with a loan-to-deposit ration of 180% — as part of the Lloyds Banking Group had,” Kroes said.
Turning her attention to the Royal Bank of Scotland (RBS), Kroes said the bank had tripled its balance sheet in just two years from 2006, growing to be only slightly smaller than the German economy. “It was simply too big to operate and supervise. And it should have set off investors’ ‘alarm bells’,” Kroes said.
Banks should not be allowed to “cherry pick” the lightest regulation around, instead national banking regulators should come together and demonstrate that they can control their national banks, Kroes said. “There aren’t any second chances here,” she added.
Outside the Box
Nov. 13, 2009, 12:01 a.m. EST
Wall Street has to live with reactionary Fed
Commentary: Get used to volatility and bubbles
By Tomi Kilgore, Dow Jones Newswires
NEW YORK (MarketWatch) — There’s something about the current stock market environment that brings to mind words sung by the Who: “Meet the new boss, same as the old boss.”
For all the pomp and circumstance surrounding exit strategies and financial industry regulation, nothing has changed — the Federal Reserve will only react to financial market problems after they occur, rather than make a pre-emptive move that might be a risk to near-term stability.
The Dow Jones Industrial Average (INDU 10,197, -93.79, -0.91%) has rallied methodically to new yearly highs, propelled more by a sliding U.S. dollar than by rapidly improving fundamentals. The flood gates for buying stocks and selling the buck were opened when the Fed placed certain conditions on removing stimulus — resource utilization (employment) had to improve and inflation trends and expectations have to show signs of increasing. Basically, the Fed won’t do anything to rein in stimulus until after inflation manifests itself.
Wall Street cheered…