Bits Bucket For November 13, 2009
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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David Calderwood
Why Do We Submit? (to tyranny and extortion - because we don’t have a choice)
www dot lewrockwell dot com /calderwood/calderwood39.1.html
Yes, you have a choice. It might not be the choice you want, but you always have a choice.
Lets all refinance, woohoo!!!!!
http://www.makinghomeaffordable.gov/
Lew Rockwell..seriously? Was Alex Jones’ site unavailable?
Haven’t you heard? Alex has been abducted by aliens.
We can complain or we can enact “unintended consequences,” consequences that they did not consider. I opt to follow through on making consequences for those who enact tyranny toward me. I try to make it as painful as possible for them and as painless a possible for me.
Each one of us is a sovereign individual. To the extent that they initiate force, it’s only because we allow them to…for now.
My pitch fork is sharpened and ready.
Have any particular target and/or arrival time in mind? Cause, you know, the cops will probably ony let you use it once.
Speaking of metal in high security buildings (shamelss transition, I know), I joined the National Aquarium recently. Naw, not the really big one in Baltimore right on the Inner Harbor. The one in the basement of the Commerce Building. Small, but kind of cool. At $7 for an adult entrance it is a bad value, but unlimited entrances for members ($25 a year) is a great deal. I use it as a destination for a walk during lunch about once a week. Walk over from office, stare at fish for a few minutes, walk back. The zipper from the zip out lining of my trench coat set off the metal detector. Sigh. At least the security people did not treat me like dirt when it went off - probably because they had already checked my ID.
The various tropical reef environments are the most spectacular, but I also like the poison tree frogs and the fresh water skates. And the piranhas are just spooky. Plus they have an interactive station for hearing whale sounds and an interesting (and not really overpriced) gift shop.
They were putting the lights up on the National Christmas tree as I waled back to my office one day last week. The season is about to hit Washington.
“Cause, you know, the cops will probably ony let you use it once.”
Thanks for the warning, ooh, I’m scared. Washington must be pitting its shants these days. I wouldn’t count on the cops entirely. Sometimes they feel a little put-upon and switch sides. I’ll bet many have more sympathy with the people than the effetes.
No idea where you are getting this, but there is no change of atmosphere in DC at all. I admit, I haven’t been to the Hill recently, but security is always adequate in the congressional office buildings. I’ve never seen it vary. You put your bag on the xray thing and walk through a metal detector. Less annoying than going through airport security any day of the week.
And I wouldn’t bet a wooden nickel on the unifomed secret service or the Capitol Hill police changing sides during a protest, with or without pitchforks.
You do know that in Congress, especially in the Senate, elected officials whose ideas are so violently opposed to the others that it is hard to imagine they come from the same species, will be extremely good friends the second the debate is over? It is only outside the beltway that folks who disagree can’t be polite to the other side once the cameras are off and the reporters go home. Politicians use that anger, but they don’t internalize it.
It is only outside the beltway that folks who disagree can’t be polite to the other side once the cameras are off and the reporters go home.
I hadn’t realized the Beltway was such a magical oasis of civilization. Aren’t most of us HBB’ers from outside of it?
It isn’t more civilized. It is show business. The actors who play rivals on TV don’t actually hate each other. Same with DC, except the stuff behind the performance isn’t actually fiction. Doesn’t mean that the people that work together for a decade or two don’t become friends.
polly,
You mean Boss Hog didn’t really have it in for Bo’ & Luke?
Right, we’ve likened it to “professional” wrestling but I get your point.
So your view of DC is Maxine Waters, Ron Paul, Harry Reid and MIchelle Bachman all going for beer after hours?
DinOR, Nobody doubts that they’re getting paid, so shouldn’t that be professional “wrestling”?
No. Michelle Bachman is on work release from the psycho hospital during the day. She has to check back in at 4pm sharp.
“You do know that in Congress, especially in the Senate, elected officials whose ideas are so violently opposed to the others that it is hard to imagine they come from the same species, will be extremely good friends the second the debate is over?”
I just KNEW it- Barney Frank and Orrin Hatch get all warm and cuddly with each other!
Eddie,
Probably not. But Baucus and Grassley are very collegial. Ted Kennedy was good frinds with tons of republicans. After 8-12 years they really have a lot more in common with each other than they do with most other people.
And the phenomenon is most noticeable in the Senate, not the House. Even in the House, no one is throwing elbows or hip checks in the elevators. I couldn’t vouch the same way for the protestors.
No. Michelle Bachman is on work release from the psycho hospital during the day. She has to check back in at 4pm sharp.
For a guy who professes to know so much about Christianity, you sure do take a lot of political shots on the backs of the mentally ill. How uncharitable of you. Next time you feel the urge to malign a disabled person, ask yourself:
WWJD?
(”psycho hospital” - Is that the term that is currently used in professional circles?)
Anyone who doesn’t believe in all things Obama is either
a) racist
b) crazy
c) all of the above
I’m glad to see you acknowledge that Michelle Bachman is mentally ill. Thank you.
I read that the same way. Oops….
“Walk over from office, stare at fish for a few minutes, walk back.”
Polly, when the fish stare back, while holding tiny signs that read “Get a Life”, you will know that you are overdue for a vaction !
Oh, I’m overdue for a vacation. I know that. No need for the fish to get literate to convince me of that.
the cops will probably ony let you use it once
More to the point, you need to figure out the end goal and desired outcome of your actions. Just saying you’re mad as hell and going postal isn’t going to win you allies among the police or anyone else. You need serious (even if radical) reform proposals that will convince a lot of people. The pen is mightier than the sword, that type of thing.
Non-violent revolution is the way to do it.
I can stab the hell out of a lot of pen wielders with my pitchfork.
I love to hear about your DC jaunts, Polly. I haven’t been there since the 7th grade, and would love to go back. It seems there are so many different things to do. I’d like to go in spring or fall, as summer is too hot and muggy for my pelt.
Hmm…I could probably share every once in a while. I sometimes walk past the FDIC building. They have a history display up that I have never checked out. Might be worth a few iines…
A few years ago, I remember walking past the offices of OFHEO. I remember thinking, “If only they’d done a better job….”
Thanks to whoever posted the link to the Atlantic article on the connection of the rise of prosperity gospel theology and the bubble. It was thin on stats and therefore not up to proving causation in any way, but it was a fascinating exploration of a belief system I have never understood. Actually, I think I may have been largely unaware of it until a year or two ago.
Anyway, again, thank you. And for the link to the article about the Silver Spring banker who can’t bring himself to take a job without a huge guaranteed severance package because he doesn’t understand that the way you save your family from financial ruin is to live below your means and *save* money, not just get handed a huge check on the way out once you are fired. Well, as I pointed out yesterday, assuming all those offers aren’t being withdrawn once the potential employer checks his financial situation.
That was me who posted the link to the theological distortionistas.
Thanks directly, then, exeter. It was a great find.
I’ve got to suck up some and apologize for getting fairly defensive in that thread.
I have been somewhat dismayed in the behavior I’ve seen in some Christian friends - being irresponsible financially. I don’t think this springs from Christianity itself, or even from greed necessarily) but I think sometimes there is a correlation in mindset; people who are Christians (or not) obtain what they see as success, and can sometimes attribute that success to their belief system. It doesn’t help that there are references in the bible to God providing for his believers. What many don’t understand though, or just forget, is that he’s generally not referring to financial welfare, but more to spiritual and emotional welfare; something that’s true regardless of financial well-being (and often counter to it in fact).
Christmas itself actually started (some believe anyhow - evidence is unclear) as a celebration of success; an annual thanksgiving for success in battle started by the Romans. However it wasn’t thanksgiving to the Christian god - it was thanksgiving to Sol Invictus - the god of the sun, started by the emperor Aurelian after significant victories in the eastern empire, on December 25th, which at the time was seen as the winter solstice. This happened before the Roman empire was Christian of course, in the third century. Later when the Roman empire adopted Christianity as its main religion the festival was adopted/changed as a celebration of the birth of Jesus.
The prosperity gospel is a cultural phenomenon endemic to the north american church just like the legalism/authoritarian and war theologies(distortions). The Dobsons and Robertsons are wholly responsible for this.
You may be right about Robertson and Falwell, but what about the pop culture?
I was having the same discussion with a co-worker yesterday and we pretty much agreed it’s not the greed, nor politics, but the overall culture that’s leading us to where we are today. Some of things we talked about:
1. No fear of anything (not necessarily god)
2. No shame
3. Get rich quick mentality without the hard-work
4. No right or wrong, it’s all perspective
Well many people simply use religion to justify whatever it is that they WANT to do anyway, whether that’s beating their wife, destroying the environment, giving to the poor, or invading neighboring countries. ‘Course they do the same thing with Communism, free markets, objectivism and just about any ideology you can find.
Yes.
It wasn’t the mainline churches pushing the prosperity gospel. It was the mega-churches and smaller community churches, many of which are full up 12-steppers and ex-cons, and where just about anyone can be a pastor.
Of course my uncle complained when he was in town for a visit that it was hard for him to FIND a mainline church to attend for sunday service. They’re there, but they don’t have much of a web-prescence…
What will be the social, psychological, and political effects of mass lifestyle downsizing?
What share of people will get to “gee, we didn’t really need it anyway” and how soon?
And what share will be attracted to those who would seek to channel their post-entitlement rage against some minority group?
“And what share will be attracted to those who would seek to channel their post-entitlement rage aginst some monority group?”
A minority group such as the They people?
They are the cause of all our woes, not us. They need to be severly dealt with.
Will the majority agree on who “they” are, or will we have plural hatred?
I recall The Collapse Gap presentation.
“Don’t expect any miracles of social cohension.”
“Don’t expect any miracles of social cohension.”
Nope. Keep the people fighting amongst themselves, it creates a nice diversion for pickpockets and parasites.
I don’t know if They (the politicians) have to scheme our dissension, or if Their ascendancy and increasing privilege is the inevitable state of an aging democracy. I’m going with the latter.
Excellent points all. And a large part of the reason so much of the bile shown here at the Fed, BB, TG, AG Mozillo etc. is so misdirected.
A friend sent me an email of Foreclosures here in the Portland area and wanted to know if ‘one’ of them “looked like mortgage fraud”? Granted it was a pretty glaring example but after perusing the lengthy list I had to reply, “which one”?
They ALL smacked of equity-skimming. From the amounts involved, the fluffed appraisals to the “lone applicants” to the -very- recent chronology, it pretty much -all- looked fraudulent to ‘me’? And with SO many eager and willing participants and accomplices all our “fist pumping” at the PTB won’t amount to a hill of beans!
How are EVER going to have any credibility when so many people benefitted from this?
But you just can’t explain that to some people around here.
Excellent questions WT and worth a thread all of its own somewhere down the road…Maybe on a Saturday or Sunday when more people could be on board…This along with the “new frugality” could be major game changers going forward…
“…assuming all those offers aren’t being withdrawn once the potential employer checks his financial situation.”
I didn’t like that guy, and I think he needs to get knocked down a few notches, but I’m not a fan of all of this digging into peoples personal lives by potential employers.
Hypothetically speaking, a man loses his job. His household is dependent upon two incomes, and his unemployment check is not sufficient for his half. He has a little savings, and uses this to fill in the gap. As the months drag on and he cannot find work in a piss poor economy, he is getting nervous, and wants to preserve cash so he uses the credit card for everything he can, thinking of it as a short term loan as surely he will find work and get back on his feet- a difficult decision in difficult times. There are a few unforeseen expenses along the way- the car breaks, and the kid needs medical attention- so his credit card balance is swelling. He pays the minimum, but meanwhile his job search is fruitless. Everywhere he looks he hears “I’m sorry, we’re not hiring right now, if anything we’re laying off”.
After more than a year unemployed, he can no longer pay the bills, so the credit card is the last in line to get paid. He is in debt, and his credit is getting hammered as he’s 60 days late on certain bills. He needs a job more than anyone, but now he’s not a good candidate because he’s “irresponsible and a risk” in employers eyes when all he was trying to do was keep his family fed. This is the kind of bullsh!t I’m tired of in this country. Credit checks for potential employees, etc. I’m ok with criminal background checks, but this stuff is getting ridiculous. Sure, in my fictitious story the guy made a mistake using the credit card, but who hasn’t made mistakes in their lives? His was for all the right reasons.
Well at some level, you want to make sure that the dogs that you have guarding the sheep aren’t voraciously hungry. So you don’t want bankers and others who watch over large amounts of money to have a history of bad personal finances. That adds to the risk that they will be tempted to embezzle. But I think that the damning post from yesterday was where somebody pointed out that he committed occupancy fraud on his mortgages.
Oops, that was me that posted the original article excerpt, and then me who followed through on the suggestion about primary residences. I didn’t really have it in for the guy at first, though; I just wanted to highlight that there is often a lot that goes unreported in these news articles. I fully expected to find underwater rental property mortgages.
And then I saw the dual primary residence thing, and I have to say, that made me annoyed specifically because he was a banker who SHOULD KNOW about the gravity of that.
Should he have jobs withheld from him because of his financial screw-ups? Surely not. But given the wee bit of fraud there to squeeze out a better mortgage deal, maybe he’s really not a good fit for financial oversight jobs like running a bank/branch. Unfortunately, that seems to be all that he’s applying for right now.
I do wish he’d go for a real career change and get his feet back on the ground, and not just for his family but for his own sake as well. And if the authorities never pursue his little indiscretions (and who of us doesn’t have those?), I don’t care — I’d rather see him learn his lesson and get on to earning a living and paying taxes. Fingers crossed that he DOES learn and earn.
If its any consolation, the majority of background checks are criminal and for confirming SSNs. Top executives may have a complete check done on them which would include a credit check, but its actually rare for a credit check to be done.
Not that that helps the one person it was done on.
Standards are a little different for government, but I had to grant permission for a credit check, give a list of all the times I had been out of the country for the past 7 years, give the contact info for all the non-US citizens with whom I have regular contact, contacts for all my past jobs since the age of 18, and a bunch of other stuff. Plus a fingerprint check.
It wasn’t a full security clearance by a long shot, but it was background check lite.
I’m under the impression that bank executives are also subject to considerable scrutiny. I think even tellers get pretty well vetted before hiring.
Well bad finances will make a security check very hard. The woman who sits next to me was going through a messy divorce where her unemployed husbund emptied out the bank account before moving out. Unfortunatly this was when her periodic reinvestigation was due. They questioned her VERY THOROUGHLY, and the rest of us as well.
Really, potential buyers? Because very single application I’ve filled out over the last 20 years has a waiver for a credit check.
You still wont drug test executives every 60 days in America
even though a coked up VP can steal 100-1000 times more then i can on the loading dock
I guess none of your heard the original prosperity pastor:
http://www.revike.com
And how can anyone forget this guy:
http://www.drgenescott.org
This is the song that never ends, yes it goes on and on my friend. Some people started singing it, not knowing what it was, and they’ll continue singing it forever just because…This is the song that never ends, yes it goes on and on my friend.
Homebuyer credits: Who qualifies now?
Thanks to the newly extended and expanded tax breaks for buying a home, you might qualify for a credit that you hadn’t been able to get before.
By Kiplinger’s Personal Finance Magazine
President Barack Obama has signed legislation extending the $8,000 first-time-homebuyer tax credit beyond its scheduled Nov. 30 expiration and creating a $6,500 credit for longtime homeowners who buy new homes. With thousands of dollars at stake, it’s not surprising that potential homebuyers have lots of questions. We have the answers.
How does the extension work?
It’s simple: The old credit was scheduled to expire Nov. 30, so folks who hadn’t already signed a contract faced a daunting task to get a deal closed by the deadline. Some real-estate agents were writing provisions into contracts making the purchase contingent on the deals closing in time for buyers to get the credit.
Under the new law, the credits are available to qualifying buyers who sign a binding contract by April 30, 2010, and who close by June 30, 2010. The two-month period should offer plenty of time for last-minute buyers to get to the closing table.
Are the rules the same?
No. There are a few differences that apply to deals closed after Nov. 6, the day Obama signed the bill. First, the similarities:
You’re considered a first-time buyer if you have not owned a home for at least three years before the date you settle on your new home.
A credit is available only for the home you live in. It’s not available for rental properties or vacation homes.
For first-time buyers, the credit is 10% of the purchase price of the home, up to $8,000. Therefore, if your house costs $80,000 or more, you can qualify for the maximum tax credit.
The credit does not have to be repaid, as long as you live in your house for at least three years. If you sell or move out before three years, you have to repay the money as extra tax on your tax return for the year you sell or move. (The payback can’t exceed the amount of profit you make on the sale, though.)
Now for the key differences:
Longtime homeowners can get a credit now, too, but it tops out at $6,500.
You don’t get a credit if the house you buy costs more than $800,000. (There was no price cap for deals closed before Nov. 7.)
\The new law increases how much buyers can earn and still claim a credit. For deals closed before Nov. 7, the right to the credit gradually disappeared as adjusted gross income rose between $75,000 and $95,000 on single returns and between $150,000 and $170,000 for married couples filing joint tax returns. (Adjusted gross income is basically your income after you subtract your personal and dependent exemptions and your standard or itemized deductions.)
Now the phaseout zones are $125,000 to $145,000 for singles and $225,000 to $245,000 for married couples.
People are out getting in bidding wars so they can get 8000 tax credit.They will overpay 50k to get 8k.This credit is a total waste of money.
But the 50K (plus fairly low mortage interest rate) is spread out over 30 years and the $8K is RIGHT NOW. This might be less of a distortion than people who keep charging on a high interest credit card (with a balance) deal with all the time. It makes no sense to me, but I can almost see how folks get there. \
In reality, I think the decision is more based on a “the banks got their piece of cake so now I get mine and I don’t care what it takes to get it” emotional response, but money is an emotional issue even for those of us who deal with it conservatively - savings being equal to safety and all that.
The NPV of 50K amortized over 30 years may well end up less than $8K today if double digits inflation kicks in for even 2 or 3 years.
Good point to consider for anyone currently buying l-t T-bonds…
Assuming that wages rise to keep pace with inflation. Sure, NPV will devalue your debt, but unless there are cost of living raises it will still look like 50K to the masses.
Wages are irrelevant. If I make $10K or $10M a year, the NPV doesn’t change. Plus there has never been a situation where prices inflated without wages following. It can’t work. If a Honda costs $200K and the average salary stays at $50K, nobody will ever buy a Honda.
This is another fallacy that I often read about here. A situation where there is price inflation without wage inflation. Can’t happen in the long run. You can have wild gyrations like gas going from $2 to $4 over a summer. But that $4 quickly goes back to $2 without a corresponding wage increase.
It’s the supply and demand curves in a nutshell. You cannot have price or wage inflation without the other one following closely behind.
Wow, that’s some assumption.
Just a thought on the connection between wages and prices. How precise has that ever been? In the time of the robber barons and going back to the days of the serfs, I’d think none of the assumptions we make now would hold. Thirty-something percent of income for a roof over your head? Why not 50%, 60% or 70%? When the rich are worshipped and the regular working folks are despised, then it’s whatever the overlords can get away with without sparking a revolt.
Don’t think we’re all that close yet.
“You cannot have price or wage inflation without the other one following closely behind.”
True in a closed economy, not so much in an open one.
Well wage inflation can lag SIGNIFICANTLY. We’ve certainly seen economies where where real wages have fallen significantly. Now I’m not one of those who is predicting that we’ll experience Weimar style inflation, but it is EASY to imagine real declines in consumption of 20% or more.
Fair enough. And true for a country like oh I dunno Costa Rica.
For the US, not so much since the world’s economy is more or less tied to it. Honda goes to $200K, nobody in the US buys Hondas, Honda goes out of business regardless of what Germans or Chinese do.
“You cannot have price or wage inflation without the other one following closely behind.”
True in a closed economy, not so much in an open one.
Or one that’s heavily manipulated - by things like stimuli.
That’s not true. Stimulus money is inflationary to prices and wages just like any other cause of inflation. Inflation is caused by shocks tio the economy. Doesn’t matter if it’s a stimulus, oil shock, war, whatever. The results are the same.
I suppose that if inflation does get sufficiently out of hand we will see SOME wage inflatiion, but global wage arbitration will keep in check. The globalist goal is to eventually achieve wage equilibrium across borders. Even the MSM is on board with this now, as witnessed by the recent article in money.cnn.com “Americans are overpaid”.
“Why not 50%, 60% or 70%? When the rich are worshipped and the regular working folks are despised, then it’s what/ever the overlords can get away with without sparking a revolt.”
You’re assuming that there is wizard of oz out there who sets the ratios. From this day forth the pecrcentage will increase ot 41%, so say I!!
People are choosing to spend X% for housing. Some spend more some spend less. Some buy a 5000 sq ft house, some buy a 1000 sq ft condo. They freely choose their housing expenditures. Now if someone who can only afford 1000 sq ft, buys 5000 sq ft and then gets in trouble, are you suggesting that it is not his fault and it’s the fault of “THE RICH” and they were somehow forced into being stupid?
That’s not true. Stimulus money is inflationary to prices and wages just like any other cause of inflation.
No.
The housing stimulus for instance has caused inflation in the housing sector for everyone. However any wage inflation that may have resulted would be only in the construction sector - if that even.
Same for C4C etc. They cause price inflation in an asset that’s used by everyone, however the wage inflation is experienced only by those who work in that particular industry.
Conversely generalized inflation - as caused by general loosening of lending standards and/or money creation - results in inflation across all asset classes. Still affects generally the same people on the price side, but on the wage side affects everyone, rather than just a small group.
That’s not true. Stimulus money is inflationary to prices and wages just like any other cause of inflation.
With true unemployment at close to 20% I don’t see any reason for wages in general to rise.
Also where I work (we do high end contract outsource work) we have been told by management that we will need to work smarter and faster as the competition from Chindia is getting better and better. Failure to do so means that our hourly billing rate will have go down, and with it our wages.
Inflation + global wage arbitration (outsourcing) = dollar devaluation.
“With true unemployment at close to 20% I don’t see any reason for wages in general to rise.”
If wages fall in the US, or raise elsewhere in the world, then US wage earners are at a relative disadvantage in buying power. Since we in the Western world are flying so high, we have a long way to fall.
“Now if someone who can only afford 1000 sq ft, buys 5000 sq ft and then gets in trouble, are you suggesting that it is not his fault and it’s the fault of “THE RICH” and they were somehow forced into being stupid?”
Even one with a child’s understanding of logic would question WHY THOSE IN CHARGE OF THE MONEY, LOANED IT TO THOSE WHO, HISTORICALLY–SHOULD NOT HAVE QUALIFIED TO BORROW LARGE SUMS OF IT–IF AT ALL.
The (RICH) Executives, CEO’s of finance who facilitated loaning LARGE sums of money so greedy and/or stupid people could shoehorn themselves into a 5000 sq. foot house (when they KNEW these folks SHOULD NOT qualify) in my book is WORSE than FORCING them to buy. At least FORCE is overt, and can be instantly recognized and quashed. What the affluent Executives, CEO’s and other supervisory ilk did in orchestrating/facilitating the bubble is MORE INSIDIOUS THAN FORCE. Remember, NOT every bank and lending institution participated in this fiasco, and were incensed that bailout money was offered to those that flushed basic rules of finance down the toilet.
Even the most deluded, irrationally exhuberant minions of finance have known for centuries why income-to-price ratios, large mandatory down-payments and maintenance costs are critical considerations in home purchase qualification.
More importantly, they KNOW what will happen in their ABSENCE.
For those in high levels of finance and RE to throw the above critical components to proper finance out with the trash (along with their standard of ethics) then claim they “didn’t see this coming” is ludicrous. The “twinkie defense” has more merit.
I for one was hammered with dumbfounded awe when trillions were handed over to bail out these very same crooks–instead of handing out sentences. Is that Madoff we hear giggling in his cell?
DOC
Packman,
House prices went up and…….they came crashing back down because nobody could afford the houses at those prices. Which is exactly my point. You can have temporary price spikes but unless wages follow, those price spikes are temporary. Works in reverse too. If everyone were to suddenly get a 20% raise tomorrow, the day after tomorrow the price of everything would be 20% higher.
****IN THE LONG RUN**** it is impossible to have price inflation without wage inflation.
But people COULD survive on say, 20% less income. The problem is global wage arbitrage. Places like China have become vastly more efficient while we have merely become somewhat more efficient. Their slice of global production has become larger more quickly than the whole pie has grown. And I would submit that it is the resulting mismatch between production and consumptoin that must balance ***over the long term*** .We’re perfectly capable of getting by consuming less, after all, in aggregate our parents did. But it isn’t a pleasent prospect and people will complain loudly about it.
Eddie you are full of it and so easily shot down. Come down from from the ivory. (better yet, don’t)
Wages have been stagnate and or falling for J6P over the last 30 years. Prices CAN continue to rise WITHOUT wages keeping pace. It’s how we got in to this mess.
But I guess the facts being available from venerable and reliable source (the Fed, the gov, many top financial news agencies, universities, etc) and easily checked with Google aren’t good enough, eh?
Good god Eddie, it is now obvious YOU are part of the problem. Your name wouldn’t happen to be Cramer, would it?
EcoFeco,
Take an econ 101 class. You really need a refresher course in the basics.
Somewhere in the 3rd or 4th week of the class you will learn to differentiate between real wages, purchasing power, price inflation and wage inflation.
Hint: they’re not the same thing.
“…Plus there has never been a situation where prices inflated without wages following.”
Edward, my dear. I appreciate what you are trying to say here, except you seem to have your head up your patootie. This is the housing BUBBLE blog? Where the PRICE of houses has inflated far about the Wage earners’ ability to afford them? It’s causing a bit of a stirr?
Sort of like price of advanced medical care and drug technologies? That must now be subsidized because WAGES can’t afford them anymore?
And the cost of private higher education? Which require huge loans because wages haven’t risen with the costs?
And ….
How long is “long-term?” Is the past 35 years long enough?
Why do you write this stuff?
That’s the whole psychology behind sales at department stores!
By late next year, we’ll be reading stories of FB’s in foreclosure who bought the house “because of the tax credit.”
I’m really looking forward to that, Grizzly.
It will be truly deee-lightful if a few of those FBs give choice quotes about how they shouldn’t have done it, and their government should not have given them incentives to catch a falling knife.
When it happens, I think I’ll write a poignant “we told you so” letter to a few senators and congresscritters, directing them to this blog for evidence of such.
Yeah, but the sheeple can write-off the interest on that extra 50K bid…
ROTFLMAO
1/4 of a million dollars in income, and needing a subsidy to buy a home? What a crock; I cannot believe there’s not more outrage over those numbers! How much of “middle America” is making that kind of money? And yet, these same people get to pay for the McMansions that these folks are buying? What a farce on the American public; we’re subsidizing the top 3% of the income brackets to buy homes? Only 1.5% of the ENTIRE country limits out of this credit. What possible reason can there be for subsidies flowing to those making that kind of money? And no, I’m not jealous or envious; I limited out of the last credit (as well I should have), and think it was nuts that we could have shifted our income to qualify for that one. I’m not rich, but, at the same time, the thought of the government giving people in my income bracket a handout just makes me sick.
The credit should not be viewed as a form of welfare, but a response to the financial meltdown. In fact, sellers and banks take a bigger hit on higher priced homes that lose the same percentage of value so one could make a strong case that the bigger credit should be given for the purchase of higher priced homes. I am against the credit altogether, but I really dont understand your insistence that it be a form of welfare redistribution rather than targeted at the financial problems initiated by falling home prices (i.e., sellers and banks taking hits). I’m a liberal Democrat, but I don’t believe in that kind of unfocused discrimination. I would be more offended by the bias exhibited in favor of married couples. Whether I am married or not is not the government’s freaking business.
Tim,
When “Yahoo Finance” runs articles on “How wealthy couples can use the $8k credit to DOWNsize” I think you can safely say this thing has gotten misdirected?
Hey Michael Fink!
LOL Dino, saw that too! Doesn’t bode well for the high end of the market, does it? Lots of people were counting on those boomers to upgrade, not downgrade.
edgewaterjohn,
Yeah, did I forget to emphasize the ***DOWNSIZE*** part? Again we’ll find early boomers have all the latitude in the world to exploit late-stage boomers that actually bought into the multiple McMansion strategy.
“why?”
Because only the people making good money really CAN buy a house, and very few of us are inclined to do so. The tax credit is an incentive. (If I were crazy, and if I did a little shifting, as you call it.)
Why is it whenever the govt hands out money, it is assumed only the poor should get any of it? If the goal is to stimulate the economy $1 spent by a poor person is as effective as $1 spent by a rich person. And even more so actually. If someone making $250K a year is given $10K by the govt, he will probably go and spend it on something. If $10K is given to someone who makes $50K a year and has $10K in debt, he’ll pay down dome debt.
Ugh.. Are you kidding? Yes, I supposed that 1 dollar spent is 1 dollar spent. But, beyond that, why on earth should subsidies flow to the top 5% of the population? An 8K gift to someone making 50K a year is a real incentive. To someone making 250K a year, it’s about 2 weeks work. And, the social implications of this are awful; that 8K would be much better spent providing services and/or subsidies to low/no income people, not given to people who have 150K worth of cars in the front yard.
The rich shouldn’t get government handouts because, primarily, they don’t NEED it, and there are plenty of other people who do. I’m all for lower tax rates on the wealthy, and for lower government spending, but this just doesn’t sit right with me at all. There’s no way in h((( that a rich family should qualify for government handouts like this.
Would you also support welfare stamps to people making 250K a year? If not, you need to examine your argument, this is the same exact thing; a simple giveaway from the government.
“Would you also support welfare stamps to people making 250K a year? ”
I think you are missing the point. An intelligent question would be whether governmental incentives to buy housing is an appropriate governmental action in an environment when home prices are falling in an effort to prevent further systemic losses. When viewed in the appropriate light, the income of the buyer should be irrelevant as the purpose is not to help those with low incomes buy crap they can’t afford but to prevent further losses and bankruptcies for existing sellers and banks. By targeting lower income buyers, you really do turn it into a program to encourage lower income people to buy crap they can’t afford which in no way can be viewed as an appropriate governmental purpose.
It’s easy to be hard on Eddie, because he IS kind of a jerk…but to be fair, he’s not supporting welfare to the rich, he’s doesn’t support welfare at all.
Here’s a gentle joke for you, Michael Fink: people who DO qualify for the homebuyers’ credit are much more likely to have “150K worth of cars in the front yard” than are people above the income limits.
I should add that I do not qualify for the credit, but that I want a home and can afford to buy one for cash. There are many distressed sellers and banks that would be in better shape if I did, but the tax credit is actually one of the factors keeping me out of the market. Luxury homes are taking a hit right now. This kind of distorted and unfocused discrimination is part of the problem, not the solution.
“Here’s a gentle joke for you, Michael Fink: people who DO qualify for the homebuyers’ credit are much more likely to have “150K worth of cars in the front yard” than are people above the income limits.”
ROFL.
Michael Fink:
How about we give everyone making under $250K the difference between $250K and their income? Then we’re all equal and we’re all rich. Anything else would be unfair right?
Here we go. Didn’t take long for the strawman to emerge. Well done Eddie.
LOL. I don’t think you’re understanding me. I don’t want the credit, I don’t want anyone to get the credit; and I don’t support subsidies of any type to buy/sell/flip houses. The MTG interest deduction is the biggest gimmie of all to the rich, it should also be eliminated.
And no, I’m not a socialist, quite the opposite. However, I think (as nuts as all the subsidies already are) that it’s just wrong to hand money out to those who are making so much money that they are in the top 5% of all earners in the country. And, regardless of my personal financial situation, it’s just not right to have “Joe Sixpack” stoke a check to people like me. This is coming on the backs of people who make 40K a year; do those making 250K really need their charity?
It’s not charity. It’s not welfare. It’s an incentive to buy houses.
“Why is it whenever the govt hands out money, it is assumed only the poor should get any of it?”
How poor were those Megabanksters who funded their multi-million dollar bonus payments on the back of massive losses with TARP dough?
What would you call 700 billion in tarp and printing money to buy mbs if not welfare for the elite.
They hand out money to the poor to keep them from rioting while the elite continue to fleece the shrinking middle class. They hand out money to the elite because they work for them. The top 1% pay a lower total effective tax rate (income state etc) than the 19% below them and similar to a person making 60k a year.
The top 1% pay a lower total effective tax rate (income state etc) than the 19% below them and similar to a person making 60k a year.
——-
That Warren Buffet myth has been dispelled numerous times. The use of a calculator and 5 minutes should confirm that for you.
That Warren Buffet myth has been dispelled numerous times. The use of a calculator and 5 minutes should confirm that for you.
If your income is mostly capital gains then its true, if perhaps exagerated somewhat. But it certainly isn’t progressive to pay 15% on capital gains when an upper middle class wage earner pays far more (unless they have a mongo mortgage, but then that creates another problem).
If you spend 40 years creating a compnay with a high priority on keeping your taxes low (even forgoing some opportunities to profit for the sake of keeping your taxes low) then you should have lower taxes than the average person, unless you’re a fool.
Also, if you sell one of the only tax sheltered investments available (annuities) it might behoove you to make noise about this discrepancy.
Comment by Eddie yesterday:
In response to my assertion that the return to 20% down payments would collapse the housing market overnight because almost nobody I know has 5-6 figure savings/liquid assets:
“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.”
Yes, there are a lot of people with 100K, but not nearly enough to absorb the supply of 500K houses out there. I do know 2 people, both of who are making over 250K a year, who I’m sure have 100K+ in liquid assets. But, you have to remember, liquid means exactly that, LIQUID; no retirement accounts. No phantom home equity. Just cash/stocks/bonds/gold/etc in the bank.
This is, admittedly, a tough thing to figure out. The median net worth (subtracting out home equity) for 39-42 demographic in 2004 was $43,560. That doesn’t look too bad, until you realize that this calculation includes 401K accounts! So, of that 43K, a dramatic (probably nearly all) portion is likely socked away for retirement.
In 2004, the median value of all financial assets (across age groups) was: $23,000. Again, I can’t figure out if this includes 401K, but again, a tiny number, and not anywhere near what’s necessary to put a 20% down payment on a median priced home.
Yes, there are certainly people out there with a 100K to put down on a home. How many of those people don’t already own a home? And how many of them (who do own homes) are counting on the sale of that home at some bubble number to give them the 100K they need for the next home?
There’s a TINY fraction of this country that has 100K in some liquid form and is looking to buy a 500K home. So tiny as to be almost laughable. That’s why, IMHO, the return to 20% would be like a nuke going off, just utter housing wasteland for 5-10 years until people (of all income strata) had the time and the discipline to save up a 20% down payment.
AARP stats:
http://assets.aarp.org/rgcenter/econ/dd143_wealth.pdf
Fed wealth survey:
http://money.cnn.com/2006/02/23/pf/consumer_fedsurvey/index.htm
“I do know 2 people, both of who are making over 250K a year, who I’m sure have 100K+ in liquid assets. But, you have to remember, liquid means exactly that, LIQUID; no retirement accounts. No phantom home equity. Just cash/stocks/bonds/gold/etc in the bank.”
——
I can’t say for sure since I don’t ask my friends for bank statements. But I think I can say with 95% confidence that I know 15 people who have $100K in LIQUID assets minimum, excluding retirement accounts or equity in their homes.
Like I said, don’t assume everyone is like you.
How many of these 15 people don’t already own a home?
My point exactly.
I guess you don’t read a lot of my posts; I’d welcome the return to 20% down, because… Well, because, I’m a saver and have a significant amount of liquid assets. And yes, I do know a few other people who would be able to take advantage of that situation as well, but it’s a very, very small number.
Those who I know and are “wealthy” bought homes, and (because I live in FL) are so deeply underwater that it would wipe them out financially to sell them (they’d have to use 100K+ in cash to sell the house). Those who I know who are really wealthy (1 person) isn’t interested in 500K homes.
It’s my assertion that there are a tremendously low number of people in this country with 100K in liquid assets who don’t also need to sell a home (thereby resulting in no change in inventory) to be able to buy another 500K home. Almost everyone with that level of liquid assets has bought; those that are out there are such a tiny portion of the population as to have a totally irrelevant impact on the total sales.
The statistics show that it’s exceeding rare to have 100K in liquid assets. It’s interesting that you know a bunch of them; but I can tell you, from my experience, it’s not the norm (at all) to have that kind of money burning a hole in the bank account.
Re: PB your post yesterday evening on new homes being smaller.
It would be interesting to do a study (maybe one’s already been done) regarding home sizes built before and after the GD. My casual observation is that there was a really big change then - lots of big Victorians and craftsmans built at the end of the 1800’s and early 1900’s, and lots of small bungalows built in the 1930’s+.
Many of the big Victorians of course ended up being subdivided into apartments and/or offices at some point. Seems like that could be the fate of many McMansions - though I haven’t heard of this being done much (yet)
New homes being smaller?
You mean I only get one sink in my bathroom instead of two?
I have to admit I love the idea of his ‘n hers bathrooms.
PB’s post was interesting. What did he call it - “McMansions go to the fat farm”, lol.
Let’s go all the way. 1 sink in the bathroom. Only 1 bathroom in the house. No garage. 7 ft celings. An ice box, no phone, no laundry room as you can do the wash in the kitchen sink. All the kids share a room, the parents sleep on a couch in the living room.
Come to think of it, why have a bathroom at all, an outhouse works just fine. Just like the good old days.
LUXURY!! We grew up in the bottom of a lake. Every morning we drowned then went to work for 26 hours.
Don’t the the PTB ideas Eddie.
And why exactly would this PTB care what house you live in? Or does this PTB control all our lives down to deciding how many bathrooms my house will have. Is the PTB related to the “The Man” in any way?
I think the PTB would like us to “scale back” our lifestyles, hence their support for things like cap and trade.
Agree with you there. Cap N Tax is about as bad an idea as they come.
But who is the PTB? I thought PTB = evil industrialists who want us to buy stuff from them. Why would they go for a scheme that makes us buy less? So confusing keeping up with the players in this world.
Post in the wrong place, so not sure the context, but I would say you have to generalize more:
PTB = people who want to extract as much money from us as possible, primarily by the use of government power. (note that this does include people who don’t actually work for the government).
“buying stuff from them” is but one tool - there are many.
Wow - PPG (Post Position Gremlin) strikes again. He’s been active the past couple fo days.
Eddie,
Recently I spoke w/ a realtor gal that has been fairly objective throughout this whole thing on her website and in her market analysis.
She said, “Just think how much less damage there would have been had it not been for builders fluffing up their p/p/s/f with every gadget and amenity imaginable?”
I think that’s a pretty powerful statement. Had they left out the PERgo floors, GRANIte counter tops and stainless sTEEL ( Pergraniteel (TM) ) along with pre-wired intercom and sound surround systems, the loans wouldn’t have been -nearly- as big and the defaults all that much less painful for ALL of us to bear! Big price tag for all that BC.
I agree that all that fluff could have been left out and the world would be a marginally better place today. But I don’t for a second put the blame on the builders.
If the first time a house with a wine cellar, media room and surround sound had gone unsold for a year, the second such house would not have been built. But the 1st one and the 2nd and 1000th with the fluff was enthusiastically bought by consumers.
I’m going to agree with Eddie here. It was borrowers willingness to pay and lenders willingness to lend to them that was the real problem.
We shouldn’t let the builders off the hook entirely. If you’re going to produce something, you should do some market analysis. Looking at demographics, inventories, the level of speculation in both buying and building and other factors, they should have had a clue what was coming.
But agreed, the builders were reacting to a market that was heavily distorted by easy money and borrower mania.
Gulp!! Someone agreed with me on HBB. I’m scared. And it’s Friday the 13th too. Very scared.
She said, “Just think how much less damage there would have been had it not been for builders fluffing up their p/p/s/f with every gadget and amenity imaginable?”
Are you sure she wasn’t spieling those gadgets and amenities during the boom times? I worked in the REIC and the sales agents pumped all the amenities as though it were a sacred cause.
The need/want for the gadgets etc. built upon itself, much of it driven by SIL envy.
“Gulp!! Someone agreed with me on HBB. I’m scared. And it’s Friday the 13th too. Very scared.”
It’s a very scary day indeed, Eddie… You have been making a lot of sense today! I’ve agreed with most of what you’ve said.
“We shouldn’t let the builders off the hook entirely. If you’re going to produce something, you should do some market analysis.”
Al, there is no better pricing signal than transactions occuring. The builders built and the houses sold instantly. I don’t blame them for responding to the market—that is the fundamental cornerstone of capitalism.
I _do_ blame the banksters for ignoring every rule in the book on how to lend responsibly. The credit-bubble dramatically distorted many markets.
Al, the logical thing for the building companies to do would be to build all they can before the music stops, and sock away as much as possible to survive the bad times. Of course the logical thing for the MANAGERS of the companies to do would be to milk the companies for every penny while the getting is good, by selling stock simultaneously having the company do stock buybacks to keep the price up. When the stock goes tango unform, THEY’RE still sitting on a pile of cash. ISTR this is EXACTLY what some of them did.
No, going all the way is to have you grab your club and head back into your cave.
Even a blind squirrel finds an acorn sometimes.
Acorn Sues Over Funding Vote in House
Published: November 12, 2009
The antipoverty group Acorn filed a lawsuit against the federal government on Thursday, saying that the House violated the Constitution by passing a resolution barring the group from receiving federal aid.
In the lawsuit, filed in United States District Court in Brooklyn, Acorn asks that its federal financing be restored.
The suit says that the House resolution constitutes a “bill of attainder,” or a legislative determination of guilt without a trial. Acorn, which came under fire after a series of embarrassing scandals, says it was penalized by Congress “without an investigation” and has been forced to cut programs that counsel struggling homeowners and to lay off workers.
For example, it said, because of budget cutbacks, a class for first-time homebuyers in New York that enrolled 100 people in September enrolled only 7 in October, after the Congressional action.
“It’s a classic trial by the legislature,” said Jules Lobel, a lawyer with the Center for Constitutional Rights, which brought the suit. “They have essentially determined the guilt of the organization and any organization affiliated or allied with it.”
The suit represents the first legal response by Acorn to the Congressional action in September, when the House added the financing prohibition to a bill on college lending.
Before the vote, the organization had come under heavy criticism by conservative groups amid allegations of voter registration fraud. Critics intensified their attacks after Acorn counselors were videotaped giving mortgage advice to activists posing as a pimp and a prostitute interested in setting up a brothel. The counselors were fired.
The Obama administration has also distanced itself from Acorn, which is short for Association of Community Organizations for Reform Now.
At the time of the House vote, Acorn said the action would have little impact, since the group receives most of its income from members and other supporters. But in the suit, the group said that many of those supporters had cut off their relationships with Acorn, for fear of being tainted.
In an affidavit attached to the lawsuit, Bertha Lewis, the chief executive of Acorn, said she “underestimated” the effect of the resolution. “It gave the green light for others to terminate our funds as well,” she said. “All of our state and local grants were frozen, as were most of our private foundation funds.”
Got Blackwater?
I believe I predicted this when the video first came out. Acorn is dead. Their contracts will not be renewed. Their grants will be suspended and canceled and/or not renewed. They can’t function without that money and they will cease to exist as an entity. A tiny fraction of what they were might survive using the same name but no more than that.
I think they are probably right about the Bill of Attainder thing, but even if they win, it doesn’t mean they will ever get the funding restored - it just won’t be forbidden by legislation. The executive branches of the various levels of government are more than up to the task of cancelling their grants and contracts.
By the way, ACORN is an eligible recipient of donations through the Combined Federal Campaign according to the printed materials. Haven’t checked the website version yet.
Polly:
going back to something you were talking about earlier, there is a televangelist out there by the name of Creflo Dollar!!
I kid you not.
’tis true. Don’t forget Oral Roberts.
“I believe I predicted this when the video first came out. Acorn is dead. Their contracts will not be renewed.”
Next stop, LaRaza. Then the $PLC.
Don’t hold your breath waiting.
Any and all of this could end in a twinkling of an eye, for one reason or another.
Things have gone so far out of whack, a military coup would not surprise me in the least.
A former Fannie Mae officer has a WSJ Op-ed today which nicely explains how ACORN (with the help of CRA) lit the fuse on the housing bubble rocket. As Toy Story’s Woody and Buzz Lightyear learned, “rockets explode.”
I really love this bit of liberal wacko propaganda:
‘…1992 Federal Housing Enterprises Financial Safety and Soundness Act, also known as the GSE Act. To comply with that law’s “affordable housing” requirements,…’
Guess what?
1) This act apparently served to destroy the financial safety and soundness of the GSEs, and the entire US housing finance system in the process.
2) It also drove housing prices to unaffordable levels.
D’OH!!!!!!!!!!
Now that the housing finance system in the US is FUBAR, I guess it is essential from the standpoint of home price stabilization to forever more use federal government subprime lending programs to maintain the FUBAR status, and charge the US taxpayer for the ongoing, entirely predictable requisite bailouts?
IS THERE ANY CONCEIVABLE WAY TO STOP CONGRESS FROM CONTINUING TO DEBAUCH THE US HOUSING FINANCE SYSTEM TO ITS REDISTRIBUTIVE SOCIAL ENGINEERING ENDS? The good news is that the D-ratically controlled Congress is self-destructing at a faster-than-expected rate. The bad news is that there may not be anything better on the horizon to replace them.
* 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.)
…
Now this history may repeat itself as many of the same community groups are pushing Congress to expand CRA to cover all mortgage lenders, credit unions, insurance companies and others financial industry segments. Are we about to set the stage for another catastrophe?
Mr. Pinto was the chief credit officer at Fannie Mae from 1987 to 1989. He is currently a consultant to the mortgage-finance industry.
“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.”
Wow.
I’m starting to realize that the mid-90’s securitization, and the early 2000’s financial deregulation, were merely the tails being wagged by the dog that had already grown up from a puppy by then. A bubble was pretty much already in the works by the mid 1990’s. The financial shenanigans were created to take advantage of the bubble that was already a foregone conclusion, and ended up making it worse - but they very much weren’t the main cause of the existence of a bubble.
(I know I’ll probably get slammed as a partisan for this, but oh well…)
An interesting side note is Obama’s various ties to ACORN right around the same time - e.g. joining the board of the Woods Foundation, from which ACORN has received numerous grants, in 1993. Of course there’s the (well-publicized) 1995 lawsuit of the state of Illinois he participated in on ACORN’s behalf.
I’m sure there are no material ties or issues there - in the end the one of the key points of the Democratic platform - government assistance for the lower class - matches one of the purposes of ACORN, so no big deal. Just though the timing was interesting, in the context of this article.
Are the liberal attack dogs sleeping in today or something?
No, just cleaning the house.
And I’m not going to defend everything the libs do, especially the fringe. ACORN was fringe. Let Glenn and Rush kill a few fringe groups.
Oh, OK, I’ll jump in. Loosening of downpayment requirements did NOT cause the bubble. Did it lower credit quality? Yes. Bum me out? Yes. Allow for some increase in house prices? For those with good income and credit but little savings, yes it did.
BUT, you can’t get the kind of bubble we had with 10 times income loans, no verification of income loans, 2/28 teaser rates ARMs, negative amortization loans just by lowering or even eliminating downpayment requirements, you have to do all the other stupid lending tricks as well.
Now, you could have stopped the whole thing, or at least most of it, by keeping downpayment requirements where they used to be (especially the part where you have to prove you saved the money yourself rather than getting it as a gift or inheritance), but saying that one restriction could have prevented a bubble is not the same as saying that losing the restriction caused the bubble. I can think of nothing in the CRA that says banks must lend to people who cannot provide any proof of income. Just that they must lend in minority neighborhoods using the same criteria they use in non-minority neighborhoods. I’m not as familiar with the details of the GSE lending, but low down payment requirements still don’t get you to NINJA loans. Trying to maintain market share in a world where the non-bank loan originators are making NINJA loans does. Find me a place in the GSE charters where it says one of their goals is to maintain market share and I’ll take it back, but I think they did it so their executives could earn big bonuses, not to fulfill their charter.
Responses:
Oh, OK, I’ll jump in. Loosening of downpayment requirements did NOT cause the bubble.
IMO yes they were very much a significant factor. Given the overwhelming amount of evidence, I’m not sure how you could say otherwise.
Of course they weren’t THE cause of the bubble. No one thing was THE cause of the bubble - anyone who claims otherwise is a fool. FWIW - I have previously posted my list of no less than 25 things that IMO caused the bubble (can post again if you want, though it’s long).
BUT, you can’t get the kind of bubble we had with 10 times income loans, no verification of income loans, 2/28 teaser rates ARMs, negative amortization loans just by lowering or even eliminating downpayment requirements, you have to do all the other stupid lending tricks as well.
Yes - you can get the kind of bubble we did (housing prices), though just not the scale that we did. As a very brief summary:
- The government mandates (CRA, GSE lending pushes, Taxpayer Relief Act, etc.) caused the bubble itself.
- The financial shenanigans (securitization, Glass-Steagall repeal, margin requirements loosening etc.) caused the scale of the bubble.
I can think of nothing in the CRA that says banks must lend to people who cannot provide any proof of income. Just that they must lend in minority neighborhoods using the same criteria they use in non-minority neighborhoods. I’m not as familiar with the details of the GSE lending, but low down payment requirements still don’t get you to NINJA loans. Trying to maintain market share in a world where the non-bank loan originators are making NINJA loans does. Find me a place in the GSE charters where it says one of their goals is to maintain market share and I’ll take it back, but I think they did it so their executives could earn big bonuses, not to fulfill their charter.
They were pushed very heavily by the government - either directly or indirectly (and yes shareholders as well). E.g. in 1999:
…
Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
…
“In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae’s and Freddie Mac’s portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.”
…
And from a http://www.federalreserve.gov/newsevents/speech/Bernanke20070330a.htm:
“Securitization of affordable housing loans expanded, as did the secondary market for those loans, in part reflecting a 1992 law that required the government-sponsored enterprises, Fannie Mae and Freddie Mac, to devote a percentage of their activities to meeting affordable housing goals (HUD, 2006). ”
(not sure the details of the law though)
etc. Lots more I’m sure could be found.
Affordable housing is a noble goal. Unfortunately the effort to achieve it ended up causing the exact opposite effect.
Another tidbit - funding for the CRA was boosted via the Reigle Community Development Financial Institutions (CDFI) Act of 1994 - direct from the U.S. Treasury. Guess who some of the biggest early recipients were?
Band of America
Chase Manhattan (now part of JPM/Chase)
Citibank
NationsBank (now part of BofA)
Wells Fargo
link (warning pdf)
Nah,
We already beat each other up about this already. Just not worth the time to rehash.
Hey! It’s lucky Friday the Thirteenth! Awesome!
Rats! Of all the available days the thirteenth has to land on, this month it chose to land on a Friday.
Last day of my 18-day trans-USA auto trip. I shoulda made it end on the 12th (honor superstitions Just In Case). Oh well.
Highlights: Bridge games w/ all the foreign embassy wives in Ottawa. Hallowe’en party w/ HBB’s NYCityBoy. Old French drawings show at DC Natl Gallery. Thai restaurant w/friends in Columbia MO (yup, there IS one). Admission by my Fremont County Wyo cousin that YES, the real estate bust has finally come there (this is a biggie, last June she was so “it’s different here”).
Golf in NY, WV, IN, IL, NE, WY, UT, CA. And the best: no rain on actual driving days and still no mtg clients in default.
Old French drawings show at DC Natl Gallery.
Love the National Gallery - what a treasure.
Your trip sounds like fun, az, did you pick up any souvenirs?
My brother still sings the praises of Fremont County WY….oy vey.
Too bad Zillow et al. don’t cover Riverton or I’d have some stats to throw at him. I type his address into Zillow and it spits back “no such place”.
I guess Zillow never saw Brokeback Mountain?
I love Friday the 13th. My thirteenth birthday was on Friday the 13th in fact. Thus 13 is my lucky number.
My older sister’s was too, are you 44 by any chance?
Lavi…Are things getting worse in Vegas or not ??
To ecofeco and CA renter, you’re welcome for the video. Glad you liked.
Just waiting for anycdj to show up, I’ll post it again.
blast you palm, I haven’t been able to get that rhythm line out of my head. Still humming it this morning!
LOL, glad I was able to help, Philly!
That was pretty cool. Thank YOU.
Nov. 11 (Bloomberg) — Toll Brothers Inc., the largest U.S. luxury homebuilder, gained the most since 1992 after orders surged 42 percent in the fiscal fourth quarter, cancellations slowed and revenue beat analysts’ estimates.
The builder’s net contracts climbed to 765 in the three months through October from 539 a year earlier and the cancellation rate dropped to 6.9 percent from 30.2 percent, Horsham, Pennsylvania-based Toll said in a statement yesterday.
The shares climbed $3.02, or 16 percent, to $21.41 at 4:15 p.m. in New York Stock Exchange composite trading, the highest gain since 1992. The Standard & Poor’s Supercomposite Homebuilding Index rose 6.9 percent, the most since May.
———-
But nobody’s buying homes anymore. Odd.
and a h/t to anyone who goes into debt for the privilege of living in one of those poorly built houses in soulless developments that dictate what kind of mailbox you can have. With no yard to speak of.
I’ve met plenty of people who like it that way, especially the tiny yards, which translate into minimal yardwork.
Having grown up on a 1.5 acre lawn and now having a .4 acre lawn - I can vouch for that. There’s a lot to be said for a small yard w/regards to maintenance.
There are tradeoffs. it’s really nice to have a big yard to play in. No so much to care for.
Of course - ultimately as the population grows there is no choice but to migrate to smaller and smaller yards - the best example being cities of course where most people have no yard at all.
Wall Street Journal the voice of GOD and the right wingers. So they must be speaking the truth.
“The vast bulk of sub prime lending came from institutions not subject to the CRA.” Here’s a link for you to read
http://tinyurl.com/ydddwbp
Here’s another article warning PDF file: http://tinyurl.com/yk5whho
Let’s not forget this other little gem commercial real estate lending, which was mainly lending to rich white developers, not you-know-who, is in much worse shape than subprime home lending.
The circus continues, blame the poor, blame the middle class, but GOD forbid we blame who really is at fault.
Divide and conquer
I love the feel of grass underneath my feet. Just give me a patch big enough to lay down on.
My posting about the Wall Street Journal article belongs under PB posting. Whoa not sure what happened. Maybe a litte of Friday the 13th
Yes I learned this when we sold our place. Here was I thinking 2 acres would be a selling point - you know: elbow room, you can landscape and plant to your hearts’ content…
silly me!
- in 21c suburbia, no one even uses their Chemlawns for recreation or gardening. It’s all cookie cutter boilerplate prefab dreck.
I also thought the solid construction of the house would be of interest to any potential buyers. Nay, nay. The only lookie-loos who even noticed the fortress-like qualities of the house were those in the trades. And they ultimately were not interested because they were looking to flip, the price was too high for that purpose.
Mr. and Mrs. Boom-buyer wanted pergraniteel, everything else just went right over their heads.
The absence of a princess suite was a big minus as well.
Ok, what the heck is a princess suite? A kid’s room with its own bath all painted pink is all I can think of, but I’ve never heard of it…
Yes, it’s the girl’s room with its own bath. Some of the Mickey Mansions even have two - can’t have one for Kylie and leave Madison out, doncha know.
Beats having someone move in next door who paints the house purple, never cuts the lawn and has a collection of semi-working cars in the driveway.
There’s a rather spacious middle ground between Notsy HOA and ‘65 Chebby on blocks.
Yes, sure. But sans HOA you can’t prevent the purple house and 7 cars in the driveway. Some people like the insurance policy of having the HOA preventing such a scenario
I have this argument all the time with the women I work with. Why would I care what color my neighbor’s house is painted? Or the condition of the car in his driveway? I just don’t spend that much time scoping out my neighbors. Now loud music, cars with no mufflers, etc. can bother me, but color? Tasteless neighbors give you something to laugh at.
Any suburban twp. I’ve lived in has code enforcement re: grass height, number of cars allowed in driveways, etc. As for the paint colors someone chooses, the community’s aesthetic can be determined by one drive-by. The stability of the neighborhood can be researched as well. Personally, I could give a rat’s patoot what color my neighbor uses. But I’m an artist, so it all comes down to à chacun son goût.
Actually I’ve seen lots of crazy house colors in the People’s Republic of Takoma Park, MD. The house colors aren’t so bad. But he seven cars in the driveway are a telltale sign of illegal immigrants. And I’m sorry, they tend to trash their places.
Isn’t the large house much more upkeep than a large yard? And as the population grows, we’re more likely to just make more cities. And even in the more crowded areas of a city you can get a townhome with a skinny back yard. There’s a whole field of urban gardening.
“Why would I care what color my neighbor’s house is painted? Or the condition of the car in his driveway? ”
You’d care if you tried to sell your house.
You’d care if you tried to sell your house. I have no intention of selling, except perhaps when I move into a nursing home. (I said I’d had this argument many times before.)
“But nobody’s buying homes anymore. Odd.”
Sure they are, and Enron looked like a great buy at $45.00 a share.
2000
Aug. 23 - Enron stock hits a record high of $90 a share.
Dec. 13 - Enron announces that president and chief operating officer Jeff Skilling, the driving force behind Enron’s transformation from pipeline company to trading powerhouse, will take over as chief executive in February.
Ken Lay will remain as chairman.
2001
Aug. 14 - Skilling resigns after running the company for just six months, citing the need to spend more time with his family but acknowledging sagging stock prices. To the relief of most employees, Lay named CEO again.
Aug. 22 - Enron Vice President Sherron Watkins meets with Lay to discuss memo she wrote about looming accounting problems.
Oct. 16 - Enron reports a $638 million third-quarter loss and discloses a $1.2 billion reduction in shareholder equity, partly related to partnerships run by chief financial officer Andrew Fastow.
Oct. 22 - Enron acknowledges Securities and Exchange Commission inquiry into a possible conflict of interest related to the company’s dealings with the partnerships.
Oct. 23 - Lay professes support for Fastow during conference call with analysts. Laid-off employees wait for rides home.
Oct. 24 - Enron ousts Fastow.
Oct. 31 - Enron announces the SEC inquiry has been upgraded to a formal investigation.
Nov. 8 - Enron files documents with SEC revising its financial statements for past five years to account for $586 million in losses.
Nov. 19 - Enron restates its third-quarter earnings and discloses it is trying to restructure a $690 million obligation that could come due Nov. 27.
Nov. 28 - Enron shares plunge below $1.
Dec. 2 - Enron files for Chapter 11 bankruptcy protection. Over 4,000 workers will be laid off.
2002
Jan. 9 - Justice Department confirms it has begun a criminal investigation of Enron.
Jan. 23 - Lay resigns from Enron. Rescue specialist Stephen Cooper replaces him as CEO.
“Patience young grasshopper…”
Relevance: 0
2000 was still the height of the boom. I would agree with you if you quoted things said about Toll from 2006. The fact this is post-bubble and Toll is kicking ass once again, is what’s relevant. But as I said before, your money, invest as if it’s 2006 still if you want.
” The fact this is post-bubble and Toll is kicking ass once again, is what’s relevant.”
I live in SE Fl. and the only thing I know about Toll is a metal framing and drywall contractor that did Toll Bros. work for three years bid a high end 12000 sq. ft. custom home for a local builder in Admirals Cove in Jupiter Fl. about five months ago. There were four bids on the job, three from long time reputable subs at $270,000, $265,000 and $262,000. Toll`s sub bid $150,000. He didn`t get the job but if he did, he would not be kicking ass but in for an ass kicking.
I wonder what they put in those Toll Bros. houses anyway?
Eddie — Do you work for Toll, or are you perhaps gunning for a PR job with them?
Ask not for whom the bell Tolls — it Tolls for thee.
Am I the only one who thinks Ken Lay is alive and well and living in South America somewhere?
Well, I’ve heard rumors Elvis could be down there also
Elanor,
Nope.
And I’m betting Osama’s somewhere in Indo on a beach drinking pineapple juice garnished with little plastic monkeys hanging from little plastic umbrellas.
This one is obvious. Tool Bros builds mansions. Wall St. is handing out record bonuses.
Yer welcome.
How do Megabanksters defend themselves against regulators who point out the plainly obvious fact that their recent banking practices were “crazy”? Did it kinda make sense to do crazy sh!t, knowing that too-big-to-fail bailouts were soon going to make you all whole again?
* 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.
…
Is this the magnitude 8.0 financial earthquake that shook the headline stock market indexes this morning, before automatic stabilizers smoothed out the volatility?
market pulse
Nov. 13, 2009, 9:58 a.m. EST
Consumer sentiment pulls back in early Nov, UMich
By Greg Robb
WASHINGTON (MarketWatch) — Consumer sentiment pulled back in early November, according to media reports on Friday of the Reuters/University of Michigan index. The consumer sentiment index fell to 66.0 from 70.6 in October. The decrease was unexpected. The consensus forecast of Wall Street economists was for sentiment to rise to 71.8. After hitting 73.5 in September, the index has now fallen in two straight months.
Why don’t they ever adjust their expectations for the consumer sentiment numbers when the unemployment numbers come out? i just don’t get it. Do they think that Joe on the street feel better about spending when his cousin and 4 of his co-workers get laid off but Goldman reports huge earnings? Makes no sense….
Of it doesn’t make sense, its propaganda. As someone said here the other day, the MSM has become our equivalent of the old Soviet era Pravda.
В Правде нет известы, в Известях нет правди
Soviet proverb:
“In The Truth there is no news, and in The News there is no truth.”
(Pravda = “The Truth”, Izvestiya = “The News”)
Just part of the whole social disconnect, I think. To the PTB, like Timmay, unemployment is a statistic, but Lehman going under affected REAL PEOPLE. These people really believe that the stock market is a good measure of how the economy is doing, and they believe that they earn their million plus salaries.
I’m sure that when Lehman went under a lot of the big boys shuddered, realizing that could have been them!
Jim A., lets not forget our resident troll, Eddie.
765 contracts over a three-month period is enough to keep Toll afloat? Who is buying homes priced above $500,000 these days (or has Toll downsized its sticker prices)?
Toll’s selling condos down the street for me for the mid-200’s.
Still on sale - four years after being built, BTW, and after reductions from at least the mid-300’s or maybe even the 400’s - I can’t remember for sure.
down the street
forfrom me.Would Wall St. record bonuses provide any clues?
Is Toll building McMansions in Manhattan these days?
Given the renewal of Dough-4-Dumps, why are home purchase applications currently plummeting? Are prospective buyers holding out for the $25,000 tax credit offer in a couple of years? (I certainly am
).
Nov. 12, 2009, 7:00 a.m. EST
Filings for home-purchase mortgages sink to nine-year low
Homeowners showing continued interest in refinancing, MBA’s data show
By Amy Hoak, MarketWatch
CHICAGO (MarketWatch) — The volume of mortgage applications filed to purchase homes last week hit the lowest level in nearly nine years, the Mortgage Bankers Association reported Thursday.
Applications for loans to buy homes fell a seasonally adjusted 11.7% in the week ended Nov. 6 from with the previous week — bringing volumes to their lowest since December 2000. The Washington-based MBA’s weekly survey covers more than half of all applications filed for U.S. retail residential mortgages.
…
The peeps are confused. Are they supposed to be holiday shopping or going to open houses?
Still seems like it’s too many goods chasing too few dollars.
“Given the renewal of Dough-4-Dumps, why are home purchase applications currently plummeting? Are prospective buyers holding out for the $25,000 tax credit offer in a couple of years?”
I’m holding out for lower prices and $6,000 isn’t going to get the deal done.
I expect to see some $800K - $900K houses lowering their price to get in under the tax credit maximum purchase price, but so far it doesn’t appear to be happening.
It was a one week blip while the $8k credit was being debated. Now that it passed for another 6 months, you’ll see that index go way up this week. The article even said so, but you left that part out.
Here’s what you also omitted:
“The Market Composite Index, a measure of mortgage loan application volume, increased 3.2 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 2.8 percent compared with the previous week”
But why lets the facts get in the way of a good story?
“It was a one week blip while the $8k credit was being debated. Now that it passed for another 6 months, you’ll see that index go way up this week.”
I’ll be surprised if that is the case. The $8K credit did a great job of pulling demand in under the presumed expiration-date. But it will now be harder to pull demand in from 6 months further out.
To put it another way, the pool of potential FBs is smaller now that many were incented to jump in; and those remaining that now-smaller pool will not feel the same pressure for at least a few more months, when expiration looms large again.
No matter HOW hard you try to steal sales from the future, eventually the future arrives.
It will take a while to build up a new pool of potential FBs to replace the ones who raced like a pack of lemmings to beat the (non)expiration date on the $8K credit.
Uh Eddie, WHOSE Market Composite Index? And how’s the comparison to last year?
We don’t fall for “seasonally adjusted” and “compared to last month (week, quarter)”
I’m afraid the only chart I could find was from Mortgage News Daily dated August 12, 2009. But it looks to me like mortgage apps are still down by about 2/3rds.
http://www.mortgagenewsdaily.com/08122009_mortgage_applications.asp
And from an article dated Oct 21, 2009, “Refinance Loan Applications Fall 16.8%. Purchase Apps Decline 7.6%”
Oh dear.
Are you sure your name isn’t Cramer?
“Now that it passed for another 6 months, you’ll see that index go way up this week.”
CLICK!
Speaking of facts, if my post ever shows up…
US import prices inflating at an annualized rate of (1.007^12-1)*100 = 8.7 percent. Got strong dollars?
Economic Report
Nov. 13, 2009, 9:15 a.m. EST · Recommend · Post:
October import prices rise 0.7% on energy, U.S. data show
Weaker dollar may be building inflationary pressures
Related stories
* U.S. trade gap widens sharply in September (9:52a)
* Poor man’s gold may be an investor’s treasure (7:00a)
By Rex Nutting, MarketWatch
WASHINGTON (MarketWatch) — Led by higher energy prices, the prices of goods imported into the United States rose by 0.7% in October, the third increase in a row, the Labor Department estimated Friday.
…
Don’t worry, it’s contained.
And yet interest rates remain low?
Stocks going up bonds going up gold going up?
It feels like a game of musical chairs, the fun starts when the music stops.
Yeah but that rock is meeting this hard place.
A quick glance at that graph reveals that never since the Great Depression until the present episode has unemployment ever gone up as rapidly — over five percentage points (from under 5 percent to over 10 percent) in one year’s time. My guess is that many folks don’t even know yet what hit them at this point…
Yeah and traditionally, like house prices unemployment is “sticky.”
Builders Downsize the Dream Home
WSJ
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.
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.
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.
All,
I got one of THE “We are making changes to your Citi account terms” to a very high interest rate. Not quite 29.99% but close enough. I have a high FICO score and charge and pay off in full every month (never carry a balance).
I called. I was transferred around and around and finally to an account specialist. I must have said “I want to close my account” at least 20 times. Each time I was countered with a “new program”, roll back, special deal, etc.
The rep even pointed out that since I do not carry a balance it really does not matter what the APR is. Well, asshat - FU. How dumb do you think I am?
Finally, after repeating myself a dozen more times (and the rep saying he was trying to have a “professional” conversation with me) he finally closed the account.
My take-away. Citi is trying to jack up rates on everyone. If you push back they will back down but you must be very firm. They assume XX% of the people won’t push back and then they get more fees and interest from them. They are out to squeeze anyone they can.
I would hate to be in debt to them.
Honestly, the only question I really have is why didn’t they try this before (raise rates on eveyone and pull back only for people who protest it)? If they really believe that the overwhelming majoruty of people won’t push back (especially those who carry balances), it is a great profit maximizing technique. Why wait until a law is about to pull back the cookie jar to help yourself to all the cookies?
My guess is that if they had tried this before, it was too easy for someone with a balance to open a new account with another bank and zip the whole balance over there with a sweet balance transfer deal, leaving Citibank holding nothing.
But these days, it’s not as easy to open a new credit account and do that, especially if you want a “good deal” on the balance transfer like they used to offer. Hence, Citibank (and others) are actually able to do this and (much of the time) make it stick.
I, likewise, would hate to be in debt to them. But if I were, I’d be sorely tempted to head down to my small, local bank and beg for a personal loan to pay off Citi, just to get out from Citi’s clutches.
Barring that, I’d call Citi to void that card and pay down the balance at the current terms instead of the news ones. (Every time I’v gotten a rate increase notice, that was one of the options in the fine print. Sure, you can’t use the card anymore while you pay down the balance over years, but who wants to charge more on those scoundrels’ card anyway?)
It’s amazing how businesses will, in effect, say ’screw you’ and then try to back peddle when you say it right back. Good work sticking to your guns 2banana.
Me too. But I figure that since I never carry a balance, I don’t really care that the interest rate has gon up to ~24%. A credit card IS a convenient method of payment, and I only have the one.
Same here, though I have two. Amex gives the best cash returns, but have Visa for places that don’t take Amex.
I have no clue what the rates are on my cards, nor do I care. They can raise them to 500% for all I care.
(However the day they introduce an annual fee is the day I go shopping for a new card)
I’m with you there… Probably worth getting a second card now, just in case….
Ah, the UK mortgage lenders are, as expected, looking to keep up their old habits and go on creating mortgages that people can’t pay, even when they should know better. This tidbit is from Matthew Wyles, chairman of the Council of Mortgage Lenders, who is not happy that the FSA (Financial Services Authority) actually might want to require proper underwriting:
He warned that the regulator’s plans to get lenders to verify all borrowers’ income could asphyxiate the market and add extra costs and time delays to mortgage applications.
He said: “It seems we’re not even going to be allowed to rely on the borrower’s assessment of what they spend on food, booze and fags - but the ‘feasibility’ tests we’re going to have to apply sound pretty clunky, and costly, for consumers.”
Oh yeah, can’t be verifying income, can we?! That would “asphyxiate the market”!!!
If the market can’t manage with that, it’s time to put ‘er down.
This is insanity. They are nucking futs. And if they try it, so will we.
I think I’ll go check my pantry and make sure I have plenty of non perishables.
Hmm - I just noticed the Fed’s FRED data now shows the recession as ending after 2009 Q2. While there has been much MSM postulating about it - there hasn’t been any official announcement - i.e. by the NBER - has there? Or did I somehow miss it?
Just checked, and Per the NBER - nope - they haven’t announced the recession being over.
Seems the Fed has gotten ahead of itself.
The NBER apparently likes to wait until the entire world already knows a recession has either started or ended before they make any announcements. I suppose they want to avoid creating the perception that whatever they said was happening created a self-fulfilling prophecy effect?
Nov. 13 (Bloomberg) — A group of university students I spoke to recently asked if it was possible to make a living on Wall Street without compromising your values. I had to tell them no.
Wall Street has many decent, honorable people, but they work in a system that fundamentally compromises people’s ethics. The high pay is like an anesthetic that numbs you from feeling how you are being corrupted. Not only that, many honest people who work there would agree with an even more extreme statement: It’s hard to make a living legally on Wall Street.
The goal of investing is to get an edge, whereas the securities laws presume all investors should have the same information at once. If ever there was a recipe for a system rife with abuse, this is it. The harder that money managers, traders and analysts must work to get information that gives them that edge, the more likely some are to cross a legal line.
http://www.bloomberg.com/apps/news?pid=20601039&sid=aSBXFKI5Gvlg
I would say it’s more a case of:
It’s hard to make a living
legallyethically on Wall Street.Even interest is unethical in a lot of major religions.
A group of university students I spoke to recently asked if it was possible to make a living on Wall Street without compromising your values. I had to tell them no.
I call BS. The guy who wrote that line would have to personally know everyone who ever worked on Wall Street and everyone who is working on Wall Street and prove NONE of them “made a living” without compromisising their values (and he’d have to know what each person’s hierarchy of values is).
What a moron. Now that it’s out of the way, I want to know what is his motivation. Is he a wealth redistributor?
“Is he a wealth redistributor?”
A banker? Hmm, good question.
The goal of investing is to get an edge, whereas the securities laws presume all investors should have the same information at once. If ever there was a recipe for a system rife with abuse, this is it.
Wow, measton. It almost seems like you’re admitting that the whole securities regulation system is ineffective and pointless. Is this a turning point?
So you believe it wouldn’t be worse without regulation?????
Your arguement is that speedlimits are worthless because almost everyone speeds at one point or another. You argue that if limits and enforcement were removed we wouldn’t see a dramatic rise in highway fatalities.
You live in a wonderfull fantasy land.
Actually, I’m pretty sure that removing speed limits would have no or a very small effect on fatalities, and it might be in the downward direction, owing to the distraction of having to watch your speedometer independently of how fast the other traffic is flowing.
Of course, reckless driving is dangerous, but speed limits don’t prevent reckless driving, if only because reckless drivers are, well, reckless. They don’t obey the laws against reckless driving either, which is an offense independent of speeding.
Wow! Wild storm in Norfolk/Hampton Roads the past few days. Collected about 15 o 20 gallons of water in my apartment (6th floor of 8). Seemed to have seeped through the concrete at the floors, perhaps due to driving rain.
Lots of people are pretty mad. Normally rain hits the other side of the building. Power is out, transformer is sitting in the middle of a temporary lake. Got ham radio running on a battery listening to the power company.
Fun times. It’s like camping.
Remnant of Ida?
Doesn’t sound like fun to me! Of course, much as I love the rain I do prefer it stays outside! Hope you are staying warm and safe and dry and aren’t losing your stuff to a leaky roof (or wall.)
with that much water will they condemn the building? Think about packing your valuables fast.
I didn’t expect the “buy now or get priced out forever” angle to be used again this early, but you got to give it to the for trying.
http://news.yahoo.com/s/ap/20091113/ap_on_bi_ge/us_realtors_outlook
SAN DIEGO – Home prices are expected to grow modestly next year and sales will keep rising as the housing market continues to recover from the worst downturn since the Great Depression, the National Association of Realtors said Friday.
Home resales are projected to total 5.7 million next year, up from an estimated 5 million this year. Prices will climb 4 percent after a projected decline of 13 percent this year, according to Lawrence Yun, chief economist for the trade association.
‘I didn’t expect the “buy now or get priced out forever” angle to be used again this early, but you got to give it to the for trying.’
So far as I can tell, this Used Home Seller’s credo never goes out of style in San Diego.
Hee Hee! NAR is always right! I think I will put 1% down on a megabuck house in Hermosa Beach (waterfront/bikinis view).
Strange thought for the day:
We’ve talked a lot about how stimulus in a particular asset-class (CFC, housing tax credit, etc) largely just pulls demand into the present from the future.
I was thinking that credit in general is just a massive demand-shift function: it moves consumption that could be afforded in the future into the present.
Thoughts?
On consumer credit your obsevation is certainly true. Used wisely credit can be very beneficial. If you use it on something that will generate a long term benefit like a power plant, rail line, factory etc..
On consumer credit I have the sneaky suspicion that it actually lowers consumption that would otherwise take place. If one person always saves and then buys stuff for cash they can buy more stuff over the long run than someone who always buys stuff on credit and then pays finance charges. By not paying finance charges I will be able to buy more crap over a lifetime than someone who does always pay a substantial amount on interest.
And until the current blow up, housing was the classic example of something that it made sense to buy on credit. After all, a house is a lasting asset and you have to live somewhere. There’s truth in the axiom that “you can pay your mortgage or someone else’s.” Of course one of the PRIME bits of bubble evidence was the fact that rental rates were incapable of paying the landlords mortgage. So if you’re not paying your landlord’s mortgage, there is little reason to pay your own.
Exactly.
It’s no coincidence that economic growth has supposedly been strong since the early 1980’s. Well, guess what? They’ve managed to keep debt growth going pretty strongly now since 1982. 27 years of pulling forward more and more future demand is not a bad run.
“I was thinking that credit is general is just a massive demand-shift function: it moves consumption that could be afforded in the future into the present.”
Correcto.
And this shift, if done on a massive scale, produces a puffed-up economy that grows dependent on this shift in consumption from the future to the present - hence we end up with four-dollar lattes and pirate stores.
When the consumption-shift reverts back to the present (some may say “when it shifts back to reality”) the puffiness of the economy vanishes and so do those jobs the puffiness produced.
And that’s where we are now.
Plus: Borrowing from tomorrow to spend today puts a lot of excess money into the economy hence rising prices (witness how RE prices exploded).
This excess money disappears when the consumption-shift shifts back to the present, hence the many bankruptcies and such we are now seeing.
This disappearance of money also makes the remaining money scarce, thus more valuable. It makes cash the king.
This is incredibly bad……..(besides the fact that the WSJ is only now reporting on a problem that came up in June).
tinyurl.com/yhs7k5u
Composite components aren’t supposed to “wrinkle”. If they are “wrinkled”, they are sustaining damage………which, due to the nature of the material, may not be confined to the area of the visible damage. The only way to be sure it isn’t damaged, is to bring in a bunch of high-dollar Non-Destructive Testing specialists, and check the whole affected structure.
Their “repair” only adds weight to an airplane that is already overweight.
Given enough money, I’m sure they can “fix” all these problems…….hopefully in time to start addressing the problems that are bound to come up when $10/hr baggage handlers and aircraft fuellers start banging stuff into the airplanes.
For these reasons, all of the General Aviation/Bizjet manufacturers have avoided using Carbon fiber/composite components in primary structure (except for Hawker Beechcraft in the Starship, Premier, and Hawker 4000……ask them how that worked out). The track record (so far) with passenger-carrying composite airframes is that the weight savings is minimal, and the hassles in manufacture, inspection, repair, and maintenance are maximized. As a guy named Stan Blankenship said, using composites is “90% of the risk, for a 3% gain in efficiency”.
I hope Boeing has a “Skunk Works” somewhere, working on a Plan “B”. They may need one.
Well there IS a really steep learning curve. Just about EVERYTHING is different than aluminum. Design, assembly, maintenance, lifecycle. It isn’t at all unlikely that we’ll end up with another “Comet” learning experience. But on the other side, if they’re the first to solve the difficulties, they’re likely to have a leg up on the competetion. OTOH, sometimes it’s better to be second and right, than first and fail, cf the “Comet” mentioned above.
” they’re the first to solve the difficulties, they’re likely to have a leg up on the competition…..”
That was Raytheon’s (later Hawker Beechcraft) story when they started designing the Starship.
Rumor in Wichita at the time was that they had to scrap their first prototype Premier Bizjet, because the tail wouldn’t fit on the pressure vessel. Evidently they missed on their allowed .002″ tolerance (that’s one of the problems with this stuff……..the part has to be PERFECT).
Guess they didn’t learn anything from the Starship………where the tooling from the fuselage SHRANK 1/50” every heat cycle……..so the 100th airplane was two inches SHORTER than the first.
The Hawker 4000 didn’t improve on matters (10 YEARS from announcement to (semi-) certification.
And they were building all the parts under the same roof, with all the parties getting their paychecks from Raytheon………I can imagine the pi$$ing contests/finger pointing/who’s gonna pay for the rework? going on when you have 10 different companies, working thousands of miles apart, who may or may not have the same list of priorities.
Nov. 13 (Bloomberg) — Two Obama administration officials stood up for the Federal Reserve after a key senator earlier this week proposed eliminating the central bank as the watchdog of the biggest, most complex financial firms.
Austan Goolsbee, a White House economic adviser, and Neal Wolin, the deputy Treasury secretary, warned of consequences if the Fed’s supervisory role were crimped, as Senator Christopher Dodd, the chairman of the Senate Banking Committee, has proposed.
“Systemically important institutions ought to be governed by the Fed,” Goolsbee said today at the Bloomberg Washington Summit. A central bank that is “not integrally involved with actual regulation and oversight of institutions” could lack the information it needs to address a financial meltdown
Yes we should hand regulation over to an agency that is secrative and can’t be audited. One that isn’t subject to freedom of information act. One that is to some extent owned by the very institutions it seeks to regulate.
Brilliant!
Well we know who runs the white house.
Bits Bucket, Bits Bicket!!
Talking to a homie, gansta, etc. Said… (Young man was only 20 or so…), said… “There is no best song, so pick your best song, out of the top ten you ever heard.
He said, “Marvin Gaye, “What’s goin’ on”. I agreed, (top ten, mind you).
I added:
People Get Ready; Curtis Mayfield and the Impressions,
My Girl; Temps,
Hey Jude; Beatles,
2000 Miles; Pretenders,
Shooting Star; Dylan,
I’m So Lonesome, I Could Cry; BOTH Hank Williams, and B.J. Thomas, (for the excellent cover),
Holiday in the Sun; Sex Pistols.
The Three Bells; The Browns;, as follows…
“There’s a village, hidden deep in the valley,
Among the pine trees, half forlorn.
And there, on a sunny morning,
Little Jimmy Brown was born.
All the chapel bells were ringing, in the little village town,
And the song that they were singing was for baby Jimmy Brown.
And the little congregation prayed for guidance from above:
“Lead us not into temptation, bless this hour of meditation.
Guide him with eternal love.”
There’s a village, hidden deep in the valley,
Beneath the mountains high above.
And there, twenty years thereafter,
Jimmy was to meet his love.
All the chapel bells were ringing, ‘Twas a great day in his life,
Cause the song that they were singing was for Jimmy and his wife.
And the little congregation prayed for guidance from above:
“Lead us not into temptation, bless, O Lord, this celebration.
May their lives be filled with love.”
From the village, hidden deep in the valley,
One rainy morning dark and gray,
A soul winged its way to heaven.
Jimmy Brown had passed away.
Just one lonely bell was ringing, in the little village town,
‘Twas farewell that it was singing to our buddy Jimmy Brown.
And the little congregation prayed for guidance from above:
“Lead us not into temptation, may his soul find the salvation
Of thy great eternal love.”
Where the heck of you been? Hope life has been good to you. Mom is doing good. She finished her last round of chemo for the time being.
Pretty Woman; Roy Orbison
Just My Imagination; Temptations
“At This Moment” - Billy Vera
“Nothing Compares To You” - Sinead O’Connor
Born to Run - Springsteen
“Layla” Eric Clapton
Hey dude — was just wondering about you and Olygal yesterday. Good to hear from you.
Now where is that sprightly wood nymph?
Greetings and Hi 8Up.
Wow…you suddenly storm in here all perky with Golden Oldies on your mind.
There must be a new woman involved in this somewhere.
P.S
“Queen of the Slipstream; Van Morrison;
“Gallows Pole” Led Zeppelin.
Stairway to Heaven is my fav by Led Zepplin.
OK Ate just for you…………………
http://www.youtube.com/watch?v=FeZlXJtLhMQ
Too-big-to-fail is ending, and it is time for high level US government officials in Congress, the Fed and the Treasury to end their denial of economic reality staring them square in the face. Get with the program and figure out how best to end it!
JPMorgan’s Dimon says end “too big to fail”
Fri Nov 13, 2009 10:34am EST
NEW YORK (Reuters) - JPMorgan Chase & Co Chief Executive Jamie Dimon called the idea that any bank is too big to fail “ethically bankrupt” and said regulators should have the power to wind down even the largest lenders.
“If some unforeseen circumstance should put this firm at risk of collapse, I believe we should be allowed to fail,” Dimon wrote on Friday in The Washington Post. “Global economic growth requires the services of big financial firms. It also requires that big financial firms be allowed to fail.”
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I would concur with Mr Dimon, *IF* it were possible for the gubmint to sit on its hands when it was tempted to offer bailouts to Megabank, Inc, due to a financial crisis in progress. However, the Fall of 2008 set a terrible precedent. I believe we would need to have a cap on the size of too-big-to-fail firms for several decades going forward to convince the markets that no more bailouts are in the works for the foreseeable future.
But then, who asked me
No more ‘too big to fail’
(Mary Altaffer/associated Press)
By Jamie Dimon
Friday, November 13, 2009
Our company, J.P. Morgan Chase, employs more than 220,000 people, serves well over 100 million customers, lends hundreds of millions of dollars each day and has operations in nearly 100 countries. And if some unforeseen circumstance should put this firm at risk of collapse, I believe we should be allowed to fail. As Treasury Secretary Timothy Geithner recently put it, “No financial system can operate efficiently if financial institutions and investors assume that government will protect them from the consequences of failure.” The term “too big to fail” must be excised from our vocabulary.
But ending the era of “too big to fail” does not mean that we must somehow cap the size of financial-services firms. Scale can create value for shareholders; for consumers, who are beneficiaries of better products, delivered more quickly and at less cost; for the businesses that are our customers; and for the economy as a whole. Artificially limiting the size of an institution, regardless of the business implications, does not make sense. The goal should be a regulatory system that allows financial institutions to meet the needs of individual and institutional customers while ensuring that even the biggest bank can be allowed to fail in a way that does not put taxpayers or the broader economy at risk.
…
It sounds to me like too-big-to-fail is history, and it has unraveled much faster than I could have possibly imagined. Where will the Dodds and Franks of the political world get their campaign contributions without the too-big-to-fail kickback scheme that has funded unscrupulous pols’ runs for office for the past few decades?
It’s Time to End ‘Too Big to Fail’
By Ilan Moscovitz and Morgan Housel
November 13, 2009
Of the 8,195 banks in this nation, just four, JPMorgan Chase (NYSE: JPM), Citigroup (NYSE: C), Wells Fargo (NYSE: WFC), and Bank of America (NYSE: BAC) control nearly 40% of the deposits. Those four, plus Goldman Sachs (NYSE: GS), hold 97% of the industry’s notional derivative exposure.
These statistics would be hilarious if they weren’t true, and if the banks behind them didn’t have the power to manipulate vast portions of the economy. We spent the latter half of 2008 feeling the wrath of “too big to fail.” Today, banks are bigger than ever. We need to end that. Now.
Here’s why
We all know the downside of “too big to fail.” They screw up; we pay the price. Yet many people (mostly bankers) still defend the practice. So rather than firing off reasons why “too big to fail” is such a menace — you already know those — we’ll refute the arguments defending it.
Start with the first argument — that post-Lehman, the problem has evaporated. JPMorgan Chase CEO Jamie Dimon, for example, recently argued that his bank wasn’t too big to fail. Wrong. JPMorgan Chase is not very likely to fail at the moment, but let’s not pretend that the eruption of its balance sheet, with more than $79 trillion in notional derivative exposure (we’re not making that number up) wouldn’t annihilate everything in sight.
Plus, we’ll remind you that AIG, Bear Stearns, Lehman Brothers, Citigroup, Washington Mutual, Fannie Mae, and Freddie Mac all once gave off the impression of being “not very likely to fail,” too. Overcoming the notion that last fall’s financial crisis was a random, one-off event is perhaps the most crucial aspect of stabilizing the financial industry. Last fall was no fluke. It will happen again.
Moving on to the grittier arguments, Dimon has also been quoted as saying: “Large businesses are large for a reason. You can’t do an $8 billion loan if you are a small bank.”
No, but can’t eight smaller banks lend $1 billion each? And that way, wouldn’t competition flourish, since those smaller banks would all bid against each other on loan terms? Increasing the number of competitive banks doesn’t reduce the total amount of capital in the financial system.
There were huge, prosperous, industrial companies far before there were banks with multitrillion-dollar balance sheets. We think it’s plainly clear that the overall economy fared far better when three or four banks didn’t hold the economy in a headlock. In fact, this seems utterly obvious to everyone except the big banks.
…
Sheila Bair is a rising star in the struggle to end the too-big-to-fail Megabank, Inc bailout policy. She seems far more in touch with the inexorable reality of the changing global banking system landscape than “certain other parties.” I am thinking perhaps she will become the first female US Treasury Secretary, perhaps even before Obama’s term is over.
What do you all think about this idea?
Posted: November 13, 2009, 2:10 PM ET
FDIC’s Bair on ‘Too Big to Fail,’ Lessons Learned
Tonight on the NewsHour, FDIC Director Sheila Bair weighs in on the state of the U.S. banking system. In a Web-exclusive excerpt, Bair speaks bluntly about the need to break up banks that are deemed “too big to fail.”
There was a time not that long ago when few paid close attention to the Federal Deposit Insurance Corporation or those who run it, other than knowing that the agency insures deposits in commercial banks. But the financial crisis has changed all that.
Bair has become known as an outspoken figure who has battled behind-the-scenes in two administrations. She is known to have clashed with the Bush administration (and particularly then-Treasury Secretary Hank Paulson) over her worries that the government and big banks were not doing enough to mitigate the foreclosure problems. More recently, she has reportedly clashed with Paulson’s successor, Tim Geithner, over her concerns about how bailout money is being used.
Economics correspondent Paul Solman sat down with Bair on Friday to discuss her views — and to find out just how much trouble the commercial banking system is in. As the chief regulator of commercial banks, Bair has overseen the closing of more than 100 banks in 2009.
She spoke about the need to break up so-called “too big to fail” banks should these firms get into trouble in the future. And she says she does not agree with the way Paulson and Geithner decided to use the federal bailout money to directly prop up some financial institutions with capital infusions. “In retrospect, I think it was not a good idea,” she said. Solman’s interview airs on Friday night’s NewsHour. In the meantime, here are several exceprts from the interview:
…
How many banks failed four years ago? Something like 0 all year long?
Bank failure toll reaches 123
Regulators close two Florida banks and on in California, costing the FDIC $986.4 million.
By Hibah Yousuf, CNNMoney.com staff reporter
Last Updated: November 13, 2009: 8:25 PM ET
NEW YORK (CNNMoney.com) — Two Florida banks and one in California failed Friday night, bring the 2009 national tally to 123. Regulators closed Century Bank, Federal Savings Bank in Sarasota, Fla., Orion Bank in Naples, Fla., and Pacific Coast National Bank in San Clemente, Calif.
…
Maybe Dodd should put his friend Mozillo in charge of banking regulation?
* The Wall Street Journal
* NOVEMBER 14, 2009
White House Backs Fed Oversight Role
By MICHAEL R. CRITTENDEN and COREY BOLES
Senior Obama administration officials criticized a key provision of a Senate plan to overhaul the regulation of financial services, warning Friday that removing bank-oversight powers from the Federal Reserve would be a mistake.
The Fed “is the agency best equipped for the task of supervising the largest, most complex firms,” said Deputy Treasury Secretary Neal Wolin. Stripping away those powers could prevent the central bank from gathering “timely and complete information in a crisis,” he said.
Senate Banking Committee Chairman Christopher Dodd announcing a proposal to overhaul financial regulations earlier this week in Washington.
Austan Goolsbee, a member of the White House Council of Economic Advisers, said the Fed should retain a central role in supervising the banking sector and that moves to merge oversight into a single agency could cause industry “nervousness.”
The comments, made in separate appearances Friday, were the latest salvo in an increasingly high-stakes debate about the central bank’s future role.
Senate Banking Committee Chairman Christopher Dodd (D., Conn.) seeks to create a new agency to supervise all federally chartered financial institutions, taking powers away from the Fed and the Federal Deposit Insurance Corp., among other agencies. Mr. Dodd’s proposal aims to narrow the central bank’s purview so it focuses more closely on monetary policy.
“The Federal Reserve flat out failed at supervising the largest, most complex firms,” a spokeswoman for Mr. Dodd said in response to Mr. Wolin’s remarks.
…
* The Wall Street Journal
* OPINION: THE TILTING YARD
* NOVEMBER 11, 2009, 8:12 P.M. ET
The Real Danger of ‘One Big Regulator’
What if those in control don’t believe in oversight?
* By THOMAS FRANK
Financial regulation is the next item on the political horizon, and it doesn’t have to be the deathly dull wonk-battle that it sounds like. In fact, if the Democrats do their job, it can just as easily become a platform for addressing the greatest issues of them all.
Our current way of regulating the financial system is dysfunctional. Oversight is dispersed among numerous confusing bodies that at times have seemed to be racing each other to the bottom. Setting up One Big Regulator would end that problem.
The Obama administration’s plan is to have the Federal Reserve regulate banks that might pose a “systemic risk” if they were to fail. Critics suggest the Fed is too close to the banks that it would be charged with cracking down on. What’s more, the Fed’s main task is monetary policy, so regulating banks would never receive the attention it deserves.
Let me add another objection: What if some future administration were to install as the chairman of the Federal Reserve—or as chief of whatever agency is made into the One Big Regulator—a man who really doesn’t believe in the regulatory mission? What if control of the systemic regulator is handed over to a person who considers 19th-century economic arrangements to be a sort of aspirational ideal? A man who turns out to be a dedicated fan of Ayn Rand, that Nietzsche of the boardroom? A man who blows off warning signs because, in his perfect theoretical universe of rational markets, the only really systemic problem is government itself?
I raise this potential problem because, from 1987 to 2006, that’s pretty much the sort of man who headed the Federal Reserve. Had Alan Greenspan somehow been handed the One Big Regulator job back in those days, we might have had no real financial regulation in this country at all.
Consider the astonishing ideas about fraud that Mr. Greenspan once reportedly expressed. According to a Washington Post interview earlier this year with Brooksley Born, the former head of the Commodity Futures Trading Commission, in 1996 Mr. Greenspan “explained [to her] there wasn’t a need for a law against fraud because if a floor broker was committing fraud, the customer would figure it out and stop doing business with him.” Later on, Ms. Born proposed that the U.S. regulate certain financial derivatives; Mr. Greenspan was influential in stopping her.
Could a Fed chairman do otherwise? As economist James K. Galbraith has pointed out, they are usually chosen “from among people who are close to the banking industry and to the financial sector.” They can hardly be expected to be enthusiastic regulators of the same.
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