Bits Bucket For January 8, 2010
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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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I’m sure we’ll see a better than “expected” jobs loss report this morning.
How many people now work two part time jobs trying to replace income earned from a full time job that’s been lost?
How many “discouraged” workers will be removed from the raw data by the Ministry of Truth?
The more, the better…that means unemployment is declining!
Once everyone is out of work and off of unemployment benefits, we’ll have “full employment!”
Great, isn’t it? Why fix the problems when the Ministry of Truth can just lie about it?
I was wrongo…The word is “unexpectedly” this go round!
(Reuters) U.S. employers unexpectedly cut 85,000 jobs in December, cooling optimism on the labor market’s recovery and keeping pressure on Obama. The Labor Department said November payrolls were revised to show the economy actually added 4,000 jobs in that month rather than losing 11,000 as initially reported. With revisions to October, however, the economy lost 1,000 more jobs than previously estimated over the two months.
The Labor Department has offset the loss of jobs in December with a big revision to the November numbers, hence the unemployment rate in the U.S. is still 10 percent.
Who moved my jobs recovery?
Despite the “worse-than-expected” jobs news, I expect the stock market to go up today, on the rationale that a weaker labor market recovery reduces impetus for near-term Fed tightening. Like a drunkard with an endless variety of new reasons to party, the stock market these days seems to always be able to find an excuse to rally.
I was just listening to secretary romer on cnbc about the jobs number.Is this the best we have to offer for this position?OMG she is not qualified for this job.
They were talking about the fed ponzi scheme.Evidently they said the fed bought 80% of the debt to finance the trillion dollar deficits.So we have our own govt buying their own debt, WTF.Something does not seem right here folks.We are in very dangerous territory.No wonder ron paul wants to audit the ponzi scheme.
“So we have our own govt buying their own debt, WTF.Something does not seem right here folks.We are in very dangerous territory.No wonder ron paul wants to audit the ponzi scheme.”
Dumb questions of the day:
1) Is this practice of buying our own debt with freshly-created liquidity (which brings to mind the plight of shipwrecked sailors forced to choose between drinking their own ….. or dying of thirst) something new this time around, or is it merely the openness regarding the practice that is new?
2) If this has been done previously, when was it done, how was it ended, and who ultimately bore the cost?
3) Is QE considered under the umbrella of “independent monetary policy” and hence off limits to the Congressional audit team inquisitors?
I think Japan has been doing QE for some time now
Professor Bear:
IMHO, no aspect of monetary policy should be off-limits to Congress. The idea of a bunch of unelected, corrupt, elite Masters of the Universe doing whatever they want with our money just to make a buck is sickening. Congress is just as corrupt as the Fed, but at least we can (in theory) vote them out; there’s no way for We The People to get rid of Bernanke, Geither, etc.
They were talking about the fed ponzi scheme.Evidently they said the fed bought 80% of the debt to finance the trillion dollar deficits.So we have our own govt buying their own debt, WTF.Something does not seem right here folks.We are in very dangerous territory.No wonder ron paul wants to audit the ponzi scheme.
Hmm…
That sounds odd. What does “bought 80% of the debt” mean? According to published numbers, in the first 9 months of 2009:
- There was an additional $1182B of treasuries outstanding. Of that:
- Foreign entities bought $373B (32%)
- Fed bought $294B (25%)
- Commercial banks bought $86B (7%)
- Insurance, pension, etc. funds bought $65B (5%)
- Mutual funds etc. were big net sellers of $203B (-17%)
- Business and local governments bought $32B (3%)
That’s about 55% accounted for; 25% being the Fed through their $300B program.
The other 45% (about $530B) is under the “household sector”, which is a catchall for “unknown purchasers”.
So - if the Fed is actually admitting to being the buyer behind these, that accounts for 70% (25% they did announce, plus 45% they didn’t announce) - close to the 80% number though not quite. I wonder if the Fed might also be admitting to being behind some of the other purchases - e.g. through the banks, or even some of the foreign entities, e.g. through the Bank of England?
Either way - something’s very rotten in the state of Denmark.
Follow up point -
If the Fed is indeed making these purchases, then they are clearly falsifying their money supply numbers. M1 should reflect this, but doesn’t. It only reflects the officially-announced $300 Billion.
Bad, bad Fed. Go to your room.
Did anyone here ever doubt that this was happening?
Weren’t we suggesting this over and over, since the “credit crisis” began?
That’s certainly what I was alluding to when claiming that interest rates were **artificially** suppressed. No buyer in his/her right mind would be buying debt, especially long-term debt, at these interest rate levels.
Did anyone here ever doubt that this was happening?
Maybe Eddie.
Jan. 8, 2010, 3:19 p.m. EST
Jobs report favors inflation-sensitive sectors of stock market
By Kate Gibson, MarketWatch
NEW YORK (MarketWatch) — As the stock market registered mild dismay over December’s jobs report, equities analysts said the data could have a silver lining in offsetting notions that the Federal Reserve might hike U.S. interest rates anytime soon.
“People were worried about the Fed switching from being a tailwind to a headwind for the economy. This takes some pressure out of the market in knowing the Fed is on our side,” said Burt White, chief investment officer for LPL Financial, of the unexpected loss of 85,000 jobs last month.
…
How can they say “unexpectedly” with a straight face? Someone on HBB the other day posted a national layoff website that provides a daily list, with numbers. Add ‘em up you national economists, it’s really easy. Geesh, pay me to be a “consultant.”
I predict (and predicted) yet more “unexpectedly.”
10000 jobs created, then give to illegal aliens. This is my guess.
Nah — the illegals have left town, at least so far as I can see (and I used to see lots and lots of them looking for work every morning, during the normal course of my daily commute…).
Same here. Also they are nowhere nearly as prevalent at the local SuperWalmart. The place used to be choking with them
For years we had a group of suspected illegals living ins duplex near us. I haven’t seen any of them in months. And not quite as many Hispanics in Walmart or walking anywhere.
It’s not just in CA. I’m not seeing illegals in AZ the way I once did.
without jobs, there’s no reason for them to stay here, as the cost of living is much higher than back home.
The cost of living is especially much lower back home for those abandoning U.S. homes that were purchased a few years back with liar loans for illegals.
I saw a Craig’s List post trying to get rid of furniture cite “going back to Brazil” as the reason for selling. Please note, that does NOT mean the person was here illegally.
Filed under: “Lies, damned lies, and statistics” … or… “ Honey, they’ve shrunk our finanacial future”
That’s the first time I’ve seen those two together in the same article:
Rocket Scientist + x2 incomes
Job Growth Erodes as Housing Bust Pushes Mobility to Record Low:
By Steve Matthews, Mike Dorning and Daniel Taub
Jan. 7 (Bloomberg)
“You don’t have to be a rocket scientist” to know that unemployment will be higher and “the noninflationary speed limit, or what economists call the potential growth rate of the economy, is going to be lower as a result of the housing-related decline in labor mobility,” David Rosenberg, chief economist at Gluskin Sheff & Associates in Toronto, said in a Jan. 4 telephone interview.
‘Negative Equity’
Almost 10.7 million homes, or 23 percent of all mortgaged properties, were worth less than the debt owed on them at the end of the third quarter, according to a Nov. 24 report from First American CoreLogic. An additional 2.3 million mortgages are approaching “negative equity” as loan defaults mount nationwide, the Santa Ana, California-based real-estate research company said.
Sixty-five percent of Nevada homeowners owed more than their houses were worth, the highest rate in the nation, according to the report. Arizona ranked second, at 48 percent, followed by Florida, Michigan and California.
Housing woes have exacerbated a decline in worker mobility that began in 1951, when 21 percent of Americans moved, according to the Census Bureau. More families now depend on two incomes, which makes moving more complicated, said Peter Francese, a demographic-trends analyst in Exter, New Hampshire, for New York-based advertising agency Ogilvy & Mather Worldwide.
Aging Population
The aging U.S. population also reduces mobility, he said. The largest age group is 45- to 55-year-olds and the fastest- growing segment is 55- to 65-year-olds, both of which have established family and social networks that complicate relocation, Francese said
Sounds from those articles like the entire U.S. economy may have gotten stucco…
I’ve been reading this blog long enough to get that one! When did you trade in GS for PB?
Back around the time when some troll hijacked the Get Stucco handle, I invented Professor Bear.
On one hand the gov’t and REIC want to put everyone in “homes”, but on the other hand the cold cruel realities of globalization might mean hoping freight trains to ride from job site to job site - a la a Guthrie song. Can’t have it both ways, PTB. (unless we all go RV)
My mother’s father was a railroad detective. Part of his job was removing the boxcar hitchhikers from railroad property. From what Mom says, he was quite busy with that task. Especially during the Great Depression.
That was the mode of transportation for my grandmother and grandfather during the Great Depression. My grandmother was thin enough to disguise herself as a man.
If your forebears traveled through upstate New York, it’s possible that my grandfather threw ‘em off the train.
Nope traveled to California. They came from Oklahoma.
Sixty-five percent of Nevada homeowners owed more than their houses were worth, the highest rate in the nation…
Nevada! We’re Number One!
Hey, I’ll one thing for those 65% doggie-paddlers, you’re in a state with some great taverns!
Isn’t it wonderful?
We’ll have a “Lost Generation” vs. Japan’s “Lost Decade (or Two)” before this is done!
Lost Century?
Lost Millennium?
(We’re getting into Biblical territory here)
“We’ll have a “Lost Generation” vs. Japan’s “Lost Decade (or Two)” before this is done!”
Half or more of my working life was lost on the way up. Half or more of the rest will be lost on the way down. That’s a generation or longer. What a great country we’ve become.
How did you lose “half or more of your working life on the way up”??? Please explain…
Overpaying for housing for more than a decade so far. Blocked from job opportunities by underperforming boomers.
The impacts from the bubble aren’t just on the way down. The distortions, both on the way up and the way down, affect many things. Depending upon your situation, those impacts might be good or bad.
I remember when I first hit the job market in the 70s. There was recession, but it was nothing compared to later ones.
Back then if you quit your job you could have another one the same day for more or less the same wage. A high school graduate straight out school could afford a cheap apartment and a used car.
In other words, money had far more purchasing power.
Minimum wage was 3.10. To match today’s equivalent, you would have to make $11hr.
And thing don’t look very good for the next 20 years either. At which point, I’ll be 70. So far, everything about this country has been a lie.
“America actually started out as a tax protest, the Boston Tea Party being the best specific example. Today, protest taxes and you are considered unpatriotic!
~Anon.
“…America actually started out as a tax protest…”
Actually, I thought it was more like this:
“Whoa, lookie what we found here…a mighty BIG chunk of land with lots & lots of “resources”… fu#k the King!”
Yeah that’s it. It just took them 170 years to get around to it (or 280, depending on where you start).
FWIW - I think there’s definitely a grain of truth to your statement. However you can’t deny that King George was overstepping his bounds of control. There’s quite an extensive list of grievances in the Declaration of Independence, most of them very valid grievances.
There’s quite an extensive list of grievances in the Declaration of Independence, most of them very valid grievances.
“What happens in Manhattan, …stays in Manhattan…still”
“…It just took them 170 years to get around to it.”
Really?
George Washington was born on February 22, 1732
“The growth of tobacco as a commodity in Virginia could be measured by the number of slaves imported to cultivate it. When Washington was born, the population of the colony was 50 percent black, mostly enslaved Africans and African Americans.”
“His eldest brother’s marriage into the powerful Fairfax family gained young George the patronage of Thomas Fairfax, 6th Lord Fairfax of Cameron, the Proprietor of the Northern Neck, which encompassed some five million acres.”
You know there were other people in the colonies before George Washington, right? I would presume these people were aware of the resources as well.
Not to mention - multitudes of people risked life and limb to get away from various forms of oppression in Europe. The early settlers generally had about a 30-50% survival rate. Most of them - e.g. the Mayflower pilgrims, were seeking freedom rather than resources. Yes many were seeking resources - e.g. the Jamestown, the Mississippi Company, etc. but these generally weren’t rebellious; they just sought to make a profit and bring it back to the Old World. Others were just seeking freedom - mainly religious freedom but also freedom from other oppressions. It wasn’t until after these freedoms started being taken away significantly by their European masters that they revolted.
The Pilgrims were a pretty small group. The Massachusetts Bay Colony Puritans loved religious oppression - as long as they were the ones doing the oppressing instead of the ones being oppressed. Roger Williams believed in religious freedom, but he had a LOT of problems with the Massachusetts authorities before going on to found his own colony to get away from them.
“…multitudes of people risked life and limb to get away from various forms of oppression in Europe. The early settlers generally had about a 30-50% survival rate. Most of them - e.g. the Mayflower pilgrims, were seeking freedom rather than resources…”
The Europeans found freedom, and the indigenous people who managed to survive here for 10,000 years got second class citizenship, smallpox, racial genocide, and loss of their religion, language and self respect.
But we can’t talk about that. There is only one official version of history.
Freedom is a zero-sum game.
Well Calvert also founded a colony to escape religious oppression, but the catholics were STILL a minority in their own colony, so they had to enact a law ensuring religious freedom. ISTR that lasted about 50 years until the protestents took over and moved the state capitol.
“But we can’t talk about that. There is only one official version of history.”
history is written by the victor.
just saying.
NoSingleOne,
Interesting aspect as always. In retrospect, I think the only group that found ‘freedom’ within the confines of Europe ( were the Cossacks? )
And they had to be mercenaries at that. Kind of gets my goat that pirates get all the movie deals though?
The land of the Indians always belonged to the guy that killed the guy who used to live there.
And if our current government has its way, we’re all about to follow the Native Americans onto the reservation. This is what cradle-to-grave support ultimately looks like.
Look at the Navajo Nation, and see your own future…
Thanks DinOr,
I just wanted to point out that throughout recorded history, when someone gets their freedom it is almost always guaranteed they need to take away someone else’s…especially in a world with unrestricted and increasing population vs. highly restricted but declining resources.
“…especially in a world with unrestricted and increasing population vs. highly restricted but declining resources.”
So long US Dollar, …Hello Yuan Juan
Filed under: “mouths to feed”
America = 303 million
China = 1.1 Billion
India = 1.2 Billion
Blues Brothers — Rubber Biscuit lyrics
“….Have you ever heard of a wish sandwich? A wish sandwich is the kind of a
Sandwich where you have two slices of bread and you, hee hee hee, wish you
Had some meat…
Bow bow bow…
“Ummm… the other day I had a ricochet biscuit. A ricochet biscuit is the
Kind of a biscuit that’s supposed to bounce back off the wall into your
Mouth. If it don’t bounce back, hee hee hee,… you go hungry!”
“America actually started out as a tax protest, the Boston Tea Party being the best specific example.”
The great epochs of our lives come when we gain the courage to rebaptize our evil as our best.
– Friedrich Nietzsche –
Contemporary revisionist:
Rene Zellweger to Tom “The Cruise”: “You had me at…5 million acres!”
The War for Independence was not a sure thing at all . Almost half the population still loved and backed King George of England.
George Washington at Valley Forge was in a seemingly hopeless struggle to keep things going . If they had lost , the English would almost certainly have Strung up all the leaders and Captains to the nearest trees . They considered the upstarts like Pirates or bandits . I must say that would seem to motivate the leaders somewhat , where losing is really not an attractive option .
“…the English would almost certainly have Strung up all the leaders and Captains to the nearest tree”
Captain Yellow Beard: (Points cannon to the deck of his own ship…Kaboom!) “Now men, fight or die!”
“naillllll that man’s foot to the deck!”
jess,
I’m reading David McCallum’s 1776, and you’re right. It was anything but assured. Unlike today, most of the colonists were fiercely independent. Just getting them to wear ‘uniforms’ and stand in ranks was a daily challenge.
Also getting ‘the men’ to observe basic standards of sanitation was uphill as well. Spies were every where. In fact, it would make for a humorous read had a nation’s future not been at stake?
Blood in the streets following
Oppressive taxes following
Economic depression following
One of the biggest freakin Bubbles in history.
Sound familiar?
“Blood in the streets…
Sound familiar?”
Let me try:
Is that the sound of a sign that there has never been a better time to buy a home?
I seem to recall that one of Baron von Steuben’s big Continental Army training challenges was to get the guys to shave and bath every day.
Very true. Sanitation was not a regular habit of the Continental Army. Still, bathing in the middle of a 1770’s winter is not my idea of fun even in a heated room.
Roidy
Heating water for bathing couldn’t have been that big of a problem.
The area around Valley Forge was (and still is) quite woodsy. The guys had plenty of trees to cut down and use for firewood.
And, since the winter was quite snowy, there was plenty of “raw material” for bath water.
Besides, von Steuben (and Washington) wanted the Continental Army to look and act like a professional fighting force. The increased attention to hygiene was part of this.
Local lore says that the region was quite denuded of trees by that time. The encampment was around Valley Stream, a pristine spring fed creek.
Thanks for pointing that out. History is too easily revised from the comfort on an armchair. Our Founding Fathers were outlaws in many, many eyes.
Revisionism has made the revolution seem like a done deal all along, and perhaps that’s why so many today think that rebellious acts are the decisions they make in a big box’s aisles, or a shopping mall’s stores, or a car showroom floor.
“decisions they make in a big box’s aisles”
LOL. You mean the ones they’ve been programmed to make?
Even though I’m enjoying it, 1776 isn’t for everyone. It’s a laboriously slow read and you kind of have to enjoy military history to get a yuck out of it. Oh, and they gave a whole new definition to “drunk on duty”!
What no one will admit is that ol’ King Georgie really didn’t try all that hard to win. He had many irons in the fire, our colonies were just the one with the hottest handle.
Much of the same ground is covered in McCallum’s biography of John Adams, also a dense and slow read. That book opened my eyes to the fact that war profiteering (not by Adams but by many of his contemporaries) has a long history.
“What no one will admit is that ol’ King Georgie really didn’t try all that hard to win. He had many irons in the fire, our colonies were just the one with the hottest handle.”
The Revolution actually had two or three things going for it: 1) George Washington, 2) Von Steuben, 3) tough solders. These three things made the Continentals a force to be reckoned with. The British really didn’t want to fight the Continentals after 1778 or so. It seems that Von Steuben’s effect on the Continental Army made them a world class fighting force. Also, the American Revolution ultimately caused a world war. We won and the Bourbon’s were overthrown because of France’s support to our success and that subsequent world war.
Enter Napoleon.
Roidy
As opposed to today, where the Bankers fear nothing.
It was more of 1/3 was for the revolution, 1/3 was for King George and 1/3 didn’t care (they knew whoever won, wasn’t going to make their live any easier).
The 1/3 that didn’t care had a point. The very young United States was not a nice place to be. To the point where many people questioned why the Revolution had been fought.
The Boston Tea Party was actually an anti-corporate protest, directed at the Dutch East India company and supported by small local businesses.
The tone of the protest was pro-business, anti-corporate: a distinction unfortunately long forgotten and overdue for a revival.
Already happening.
Does your state or city have a “buy local” movement? We sure have one here — it’s called Local First Arizona.
And have you heard about Move Your Money? It’s a campaign to get people to move their money out of the TBTF banks and into community banks.
After my experiences recently at the local Chase branch, I’m looking into joining their ranks. This branch started out as a First Illinois Bank, which was bought by Bank One, which became JP Morgan Chase. Whenever I have to go there to deposit a check (because I still don’t trust ATMs to put money into, only to take it out of!)there is now a small army of eager young bankers ready to swoop down upon the customer and offer their services. It’s creepy.
America actually started out as a peaceful nation.Today, protest war and you are considered unpatriotic!
I wonder:
Many say that to slow down the crash is essential because it keeps the taxpayer off the hook from bearing the brunt of the crash. That it’s better, for example that knife-catchers slow the house price correction.
But how is that? Isn’t the taxpayer already on the hook because of the bailouts?
Is not slowing down the crash just dragging out a problem that we’ve already been given the bill for?
“Is not slowing down the crash just dragging out a problem that we’ve already been given the bill for?”
Yep. But slowing down the crash keeps the financial system alive so payments on this bill can be made.
slowing down the crash keeps the financial system alive so payments on this bill can be made.
That is a valid point. And I’m not certain of the best way out of this mess.
But if we crashed hard we would:
1. Pick up the pieces faster
2. Have impetus to reign in (and change) the financial system
3. Move on with our lives
4. Put money into productive areas of the economy
5. Have cheaper housing
6. Reap the long-term social and economic benefits of getting our hubristic heads handed to us on a plate.
But if we crashed hard we would:
1. Pick up the pieces faster
Correct, but to many people think that slowly burning down the system is better. It is not, long term it creates more layers and more problems. It”fixes” nothing.
Agree with this, wmbz.
“But if we crashed hard we would:”
All be out of a job because the financial system would freeze up because all the banks would fail.
We can’t allow all the banks to fail because banks serve as clearing housing houses for financial transactions. If it is suspected transactions won’t clear then transactions won’t happen and commerce grinds to a halt.
I get it. If we give the banks enough fake money, then everyone will have confidence in the system. WTF????
Combo, I’m not sure that’s the case. Why can’t the banks can go bankrupt (their shareholders get wiped out) and still function as clearing houses for financial transactions? GM was still building cars while in bankruptcy.
I believe there were many ways to handle the BK of the investment firms and banks that created this mess ,rather than
a bail-out in the manner it was done .
On this blog years ago we use to talk about a quick brutal crash versus a slow kick the can down the road approach to the meltdown . I was in favor of a quick brutal resolve based on standing law so we could get this over with and move on in the least costly way . I was in favor of shoring up FDIC ,so we could maintain a banking system and not get runs on the banks (if they paid in a timely manner )and possible other insured accounts being protected by bail outs . The Government has never explained why they bailed out uninsured accounts and various high risk gambling investments . Sure ,the financial world would of been exposed for what it was and reform would of been necessary
but this slow burn has been a waste of money going into corrupt hands of fat cats. It has not prevented the pain to main street
who has paid dearly for the crash in more ways than one .
The moral hazard of the way the meltdown has been handled
has furthered the corruption of America to the point that black is white and white is black .
If you remember ,the selling point that Wall Street had for mortgage backed securities was that the risk was spread out with these securities .So ,the loss would of been spread out and would of been better overall . It makes sense that investment income take a hit ,rather than Main streets bread and butter income . Investment income is extra money ,or should be . The employees of BK banks were not spared and most lost their position in stock sharing .
In large part ,IMHO ,I believe that bail-outs were conducted in the way they were to Obstruct Justice and prevent the Lawsuits that would of taken place that would of gotten the culprits real good ,even regarding their personal wealth .
Combo, I’m not sure that’s the case. Why can’t the banks can go bankrupt (their shareholders get wiped out) and still function as clearing houses for financial transactions? GM was still building cars while in bankruptcy.
Bingo. (Don’t forget Chrysler, BTW)
See IndyMac, Washington Mutual, etc. - still functioning banks after going bankrupt.
It’s all about the shareholders - and not the J6P ones either. The big boys (on the inside and the outside) just aren’t willing to lose their money, moral hazard be damned.
The big boys (on the inside and the outside) just aren’t willing to lose their money
It’s too bad we’ve given them a choice.
“Washington Mutual”
WAMU did not go bankrupt; they were taken over by the FDIC while still meeting their obligations. I think that their couple of near-runs made the FDIC nervous about the risk to the system, though the bank itself was not yet involvent. Their CFO said that they had sufficient liquidity when taken over—above the levels required by their regulators.
I’m still not absolutely convinced that the takeover was necessary or appropriate—look at the price they fetched when they were sold to J.P. Morgan. It sounded as though they were engaged in talks to sell for a higher price, but those talks came to nothing precisely because the buyers were tipped off that they were about to be seized, and could be bought for less shortly.
It smelled like a dirty deal to me at the time, and it still does.
There was a really good article in the Seattle PI on that subject. The jist of the article was that the FDIC essentially pushed WAMU into the merger when it truly was not necessary. The bad press was causing repeted runs on the bank and the FDIC did not want to take the liquidity risk. WAMU made a lot of bad decisions, but it may have been able to survive.
Years ago Washington Mutual Savings Bank was the gold standard for residential lending and personal banking in the northwest. I knew that was changing when I saw WAMU branches in Pt. St. Lucie Fl in the late 90’s.
WaMu did go bankrupt, but just didn’t emerge since they were taken over wholly by JPM.
From Wikipedia:
On September 25, 2008, the United States Office of Thrift Supervision (OTS) seized Washington Mutual Bank from Washington Mutual, Inc. and placed it into the receivership of the Federal Deposit Insurance Corporation (FDIC). The OTS took the action due to the withdrawal of $16.4 billion in deposits, during a 10-day bank run (amounting to 9% of the deposits it had held on June 30, 2008).[7] The FDIC sold the banking subsidiaries (minus unsecured debt or equity claims) to JPMorgan Chase for $1.9 billion, which reopened the bank’s offices the next day as JPMorgan Chase branches. The holding company, Washington Mutual, Inc. was left with $33 billion assets, and $8 billion debt, after being stripped of its banking subsidiary by the FDIC.[3][4][8][9] The next day, September 26, Washington Mutual, Inc. filed for Chapter 11 voluntary bankruptcy in Delaware, where it is incorporated.[4][8]
Washington Mutual Bank’s closure and receivership is the largest bank failure in American financial history.[3][4] Before the receivership action, it was the sixth-largest bank in the United States.[10] According to Washington Mutual Inc.’s 2007 SEC filing, the holding company held assets valued at $327.9 billion.[11]
Ok, so maybe they did declare BK after their banking subsidiary was ripped from them and sold for peanuts—while still having significant deposits and liquidity over the regulatory limits.
What was left for them to do if they weren’t allowed to be a bank anymore? I heard that the BK was just a move to prevent the regulators from seizing more of their assets.
It is too bad that this defensive move confused people about the bank having “failed”, though. I think it was murdered.
I knew that was changing when I saw WAMU branches in Pt. St. Lucie Fl in the late 90’s.
That was because they bought Great Western Bank, which had a big Florida presence (for whatever reason - probably some other previous buyout). I used to bank with GW - they were awesome. One of the first banks in the country to offer free checking with no strings attached I believe. I was really bummed when WaMu bought GW - they went downhill fast IMO.
My concern at the time was what the heck does WAMU know about lending in FL. Not much, it turned out.
“Combo, I’m not sure that’s the case. Why can’t the banks go bankrupt (their shareholders get wiped out) and still function as clearinghouses for financial transactions?”
Would you accept a check written from an account from a bank that is bankrupt?
Would a shipowner accept a LOC from a bankrupt bank? If the answer is no then the ship’s cargo won’t get unloaded.
How about a trucker who delivers groceries to a market? If he refuses to have the truck unloaded then the store shelves will soon empty out.
Think about what I am saying. The perception among everyone MUST BE that banks will make good on any transaction that comes their way else the transaction will not take place. That means that if it is suspected that the bank will not make good on their end then someone else - in this case the U.S. government - must stand up and give the bank its backing.
Which is where we are today.
Combo,
I’m still not sure why you think the banks had to be backed the way they did. All they had to do was publicly declare that all deposits were insured (even go up to the “emergency” $250K limit, if necessary), and that the FDIC would make good on any pending transactions.
The govt could have nationalized the banks, if need be. They could have created new banks to take over the old ones (with totally new people at the helm).
What they did was totally immoral, unethical, and criminal (IMHO), not to mention entirely unnecessary.
I’m not defending what they did, I’m defending why they did it.
The issue at hand is whether government intervention was necessary to slow the crash and I gather from your posts this is the position you are taking, which is the same position as mine.
Yes, I’ve definitely said from the start that we needed some kind of govt intervention, but I was advocating for FDIC, SIPC, and PBGC backstops, in addition to work programs (primarily infrastructure and energy grid related), and public grants to companies who are trying to do something useful like cure cancer, or create new kinds of energy alternatives (either creation or conservation).
Bailing out the existing banks (and the borrowers) was the very worst thing they could have done, IMHO.
I don’t fully agree since it assumes more bills are not being racked up while waiting for this thing to finish crashing.
It’s not a question of: “do you want the ship to sink fast or slow?” since the longer the ship takes to sink, the more loot and lifeboats are being stolen by the elite as they shoot holes in the sinking ship while fleeing.
In the end, the taxpayer will be on the hook for some unrepayable amount anyway, so why drag it all out?
Would you prefer to have a job and suffer higher taxes or be unemployed for the foreseeable future?
In one case you and your family eats and things are fairly stable.
Business goes bust without banks lending. Business is jobs. Jobs is food and shelter. It’s so basic but people don’t connect the dots..
Business goes bust without banks lending. Business is jobs. Jobs is food and shelter. It’s so basic but people don’t connect the dots..
But the connected dots show me that math is basic too. The amount of money spent on the Banksters, Bailouts and Boondoggled Buffonery could EASILY have:
1. Supported the remaining good bank’s continued lending
2. Let the bad banks fail by nationalizing and break-ups
3. Given free vocational, science and math educations to millions
4. Kept people fed and housed during our economic revival
6. Supported higher import duties and rebuilt factories and basic industries. (no short-term pain no gain)
7. Given illegal immigrants $10,000 each to go home.
8. Instituted a federal program of micro-loans to encourage very small businesses.
OR, we could have done MANY other productive things with the bailout money. Bailing out our corrupt, predatory, financial system was a bad choice.
We could have easily made lending still available for PRODUCTIVE endeavours.
Amen, Rio!
combo/joey,
Thank you. I believe between ADP and Paychex they cover about 70% of the country’s payroll. Much of those “2 week’s pay” are tied up in LOC’s, Repo Agreements, short term notes etc.
We’ll just tell all the employees to keep on working and we’ll get their paychecks straightened out as things “get better”.
Business goes bust without banks lending.
Depends on what you mean by “lend.” Big difference between lending to credit-worthy business for a capital expense growth (i.e. build a new factory), and routine lending to make payroll, or to play roulette on Wall Street.
Business is jobs.
Need to specify “where” the jobs are — or went.
And this sounds a little too supply-side. Didn’t that already fail?
oxide,
Won’t argue for a second. But again ( and I lost a post there somewhere? ) unfortunately most of our payroll ‘is’ tied up in short term notes and repo agreements etc.
We can’t expect workers to continue to show up in the hopes they’ll get paid ’someday’.
Don’t know about you, but I have always been paid AFTER I provide the services that I get paid for. I don’t get paid in advance the way a supplier might ask to get paid before relinquishing his goods. My understanding is that suppliers don’t generally get paid in advance either, at least not these days.
I think the original remark was reminicent of situations in other failed countries where workers go months without being paid.
Either way, polly’s point is valid and worthy of remembering.
It will be interesting to see whether growing numbers of employees will demand to be paid up front, before services rendered - or partially up front, with the rest to be paid later.
i guess you’d have to run a business to have the slightest inkling of how it all works..
play roulette on wall street.... holy.. smoke..
Yeah.,. you got the picture, oxide. Business is nothing but fat cats with fat seegars raping the economy and screwing the little guy at every turn..
we da peeple need help.. bad.. somebody start praying
It might be nice to be a homeowner with ever-rising equity to the tune of $100,000+/year gains with a home equity ATM spigot to tap into it, despite no job. Don’t think that deal will be available any time soon, though…
Importance of the $100,000+ vector control:
“$100,000+ Vector control in today’s world is extremely important. As the impacts of disease and virus are devastating, the need to control the vectors in which they are carried is prioritized. Because of the high movement of the population, disease spread is also a greater issue in these areas.”
The thing is the higher taxes and staggering unemployment are going to happen anyway since that is what the bankers want. It doesn’t matter how money we funnel into their maws - they are like black holes and will continue to devour the entire enconomy.
My assertion is that the slow crash is largely for the benefit of the state and local governments that can’t handle a hard crash because they are required to have “balanced” budgets, have much less ability to borrow on the open market than the federal government does, and don’t have their own version of the Fed to buy up debt and keep their borrowing costs artificially low. In addition, well entrenched members of the House of Representatives rely on local government officials to endorse them and keep potential rivals from running for their offices.
As long as the banks are allowed to use pretend accouting rules to value their collapsed assets on their books, they would not collapse immediately. It is an extremely powerful tool for them. But the local governments and the states have to at least try to deal with their actual cash receipts and tons of existing contracts and obligations already in place and not easily repudiated without going bankrupt. The feds cannot bail out the states and cities - there just isn’t enough money. I don’t know exactly why they don’t just give in and go bankrupt. Perhaps it is fear of never being able to sell bonds again? In any event, that is my best guess. It really comes down to everyone counting on a new bubble/a V shaped recovery, because I don’t see the states and locals actually doing what needs to be done to live within the new fiscal reality, though there is some talk around here about places going back to half day kindergarden. Expensive for parents, but cheaper for school systems.
“It really comes down to everyone counting on a new bubble/a V shaped recovery, because I don’t see the states and locals actually doing what needs to be done to live within the new fiscal reality…”
Exactly, Kick the Can is being played at statehouses and city halls across our land. Fingers, toes, and eyes are crossed.
Little known fact: your local town, city, county, state and up to the federal government are all heavily invested in the markets.
Oh, you didn’t know they played the markets?
I’ll bet you also didn’t know that our taxes are only 1/3 or their annual income.
Or that government investments make up the majority shareholders of many Fortune 500 corps.
Google CAFR or Comprehensive Annual Financial Report. Each little section of government has one. Only the states have a real breakdown of their investments. You can google your own state.
Be sure you are sitting down when you realize what this means.
Hang on…
$1 trillion over 10 years? Riiight, more than likely 3or4 trillion.
House May Tax Payrolls, Drop Wealth Levy to Finance Health Plan.
Jan. 8 (Bloomberg) — U.S. House lawmakers may agree to pay for the nation’s health-care overhaul by adopting versions of Senate proposals to raise Medicare payroll taxes and tax health benefits for the first time, Democratic aides said.
House leaders may also discard a plan to impose a surtax on the wealthiest Americans, which has come under fire from some Senate Democrats, aides said.
Financing the expansion of insurance coverage to more than 90 percent of Americans looms as the largest issue facing Congress. House Speaker Nancy Pelosi, seeking to merge her bill with Senate legislation, yesterday briefed the Democratic caucus on party leaders’ discussions during a conference call.
The talks are at a preliminary stage until the Senate returns later this month, and House Ways and Means Committee Chairman Charles Rangel predicted “tough” negotiations. Some House members are vowing to put up a fight over the legislation, which is estimated to cost about $1 trillion over 10 years.
House May Tax Payrolls, Drop Wealth Levy to Finance Health Plan.
In an alternate universe, Democrat and Republic representatives ignored lobbyists from health insurance, pharma, hospitals and doctors, and worked together to craft a health coverage bill which would benefit the majority of their constituents.
Good morning, all.
Wow…we did get 10-12 inches of snow last night !!
Not sure but I believe that I heard my LL plowing and shoveling at 4:30 am. but I rolled over and went back to sleep.
I did a visual inspection from my windows before breakfast this morning and will call him as he missed a spot.
Sheesh…good help is hard to find !
You sure he wasn’t digging a grave?
Morning Hwy
lol…when he lived below me, I used to tell him he missed a spot when he’d power-wash my car.
You’re right, maybe pushing it on a cold winter day could be hazardous to my health.
Mornin’ mikey!
(Hwy glances over at video rack,…eyes trained on “Fargo”)
eer…humm. He does have one of THOSE wood-chipper things come to think of it !
Maybe I’ll forget the missed snow spot and just ask for a rent reduction.
ha ha ha
This global warming seems to be freezing over the entire planet. Has the Day after Tomorrow arrived already without warning?
Good old George!
George Carlin: The Hippy Dippy Weatherman
“tonight’s forecast…
http://www.youtube.com/watch?v=D1uaw3WIOlc
Carlin never gets old.
Well, he”s no longer with us, so something must have been going on with his bodily systems
( Just a joke, George, RIP ).
Landlords shovel your driveway for you? I ask because they sure as hell don’t do that out here/
I thought da dems were going to hammer the ‘rich’ to pay for this. Well what do you know, it ain’t so.
They are; they’re hammering the rich health plans. They want the funding for the health system to come from the fat within the health system.
(and personally, I suspect they’re sparing the “rich” now so they can hammer the rich for something else later on — my guess is education, possibly cash-for-caulkers.)
I suspect they’re sparing the “rich” now so they can hammer the rich for something else later on
If they want to do that, they’d better hurry…
How do you hammer a plan?
Oh, gov’t is going to cut the fat from the private sector. I can’t WAIT to see that. And who’s going to cut the fat from gov’t? Will there be a citizen audit process? Will I be able to walk into the gov’t HMO, see who’s goofing off and who’s working and fire the goof-offs and/or revert us to a private system if there are too many of them?
Inquiring minds…
More taxes on the middle and upper middle class despite the fact that the upper middle class already pays a higher effective tax rate than the elite.
So why aren’t we fleeing to greener pastures? Is it because we aren’t welcome in other countries, who are wise enough to protect their citizens from job stealing foreigners?
Being a pragmatic bean counter, I’m certain that the cost of health care reform will not reach $3 or $4 trillion. Why? Beacause it cannot. There isn’t enough money in the system to beg, borrow, print or steal to incur those kinds of costs.
At some point, despite the rhetoric to the contrary, like it or not, health care will be rationed, and it will be done in part much as it is done today: reimbursement rates under medicare and medicaid will be lowered to the point that Doctors and hospitals (more the latter as they operate in a more business like manner) will refuse to accept Medicare/aid patients. Note that today the Mayo clinic said it was beginning a trial program of not accepting Medicare Patents in a clinic in AZ to see if that would reduce its losses associated with Medicare services. Ya think?
Viola, lower health care costs, and with 80 million of us boomers moving from private employer based insurance to the Public non Option Medicare, it will have an enormous impact on the total costs of medical care in the country.
Step two will be the gradual implementaton of denial of procedures under Medicare/aid based on age and other health factors. It will be done slowly to avoid wholesale panic among the geezers who think they have a right to a half million $ of medical care to keep ‘em alive for another six months. A hip replacement for an 80 year old, ain’t gonna happen, a heart stint for a 75 year old diabetic, aint gonna happen and the list will grow.
Keeping costs under control is fairly simple if you are willing to do less.
There isn’t enough money in the system to beg, borrow, print or steal to incur those kinds of costs.
Oh they can print it all right, but not without consequences.
I was chatting with the carpool folk today on how the gov’t will deal with the long term unemployed. Will they keep extending unemployment benefits into perpetuity, or will they “let them eat cake”?
The carpool was of the pastry persuasion.
“Let them eat cake” is already in progress.
Perhaps I should explain:
Texas first declined federal assistance for its UE fund. Then it changed its mind, but with a caveat: if UE was over 8%, then those who qualified for EUEB, would receive it. If it fell below 8%, then only the regularly qualified would receive it.
You tell me how those numbers could be verified by J6P and then take a wild guess what the state decided to do.
Sixteen years ago my mother who was diabetic with three forms of cancer had a heart attack. Her doctor said that a pacemaker might extend her life for two to three months. My father told me that they had decided against it and asked how I felt. I told him that I agreed but that it was their decision. Some procedures should not be done.
Good for you for helping to make a hard decision for them just a little bit easier.
My mother was ranting at me a while ago about how the pain medication my great aunt was given for her cancer while in a home-based hospice program probably reduced her ability to breathe and caused her to die a week or two earlier than she would have otherwise. She wanted me to agree it was a big scandal and the sort of thing that everyone should be upset about. Rather than take the bait, I said I was glad of it. I preferred that she live the time she had with as little pain as possible and if that meant dying a few weeks early, that was OK by me, and since she had chosen hospice, presumably OK by her too. She was in the program for nearly 9 months. Lovely lady. I miss her.
My dad went quietly and I think comfortably under hospice care five years ago.
The hardest thing was telling him where he was being moved to from his hospital room. I let him know it was that time.
He understood. He was in his 80s, had lived his life, and had requested no heroic measures, spelled out in a folder entitled “Dad’s Final Papers.”
So props to all hospice workers/volunteers everywhere.
The hardest thing was telling him where he was being moved to from his hospital room. I let him know it was that time.
———————–
My dad had fought three different types of cancer for almost 25 years. We were so used to him fighting it, that when it was really time to go, having to ask his permission to be taken off life-support measures was the most difficult thing I’ve ever done. He looked so sad and dejected when he realized his time was finally up.
Your post just brought back that memory. Sorry you had to deal with your father’s death like that. It’s never easy, no matter how “right” it might be.
God bless all the good fathers out there. They are so precious.
Tax wage income, not retirement income, investment earnings or spending. Nothing new here.
When Generation Greed was earning wages, wages were taxed less.
Generation Greed (a.k.a. “the deficit hawks”!) underfunded Medicare, SSI and other entitlements when they were wage earners, and gave the world the “Reagan Revolution”.
Now that they are moving from wages to retirement, they are screwing their children over by creating a huge set of entitlements masquerading as “reform” of almost everything except institutions providing their investment and dividend income.
(Un)luckily, depending on whether you are one of them or their children, the Baby Boomers are benefiting from the longest demographic increase in lifespan that humankind has ever seen…and they will be with us shaping government policy for a long, long time.
They have nothing on the “Greatest Generaton” types.
Have this argument with my mom all the time, about “her” Medicare.
Math doesn’t seem to be one of the “Greatest Generation”’s skill set, at least when it comes to calculating how much they put into the system, vs. how much they are taking out.
FWIW - I venture that 99.5% of people don’t know that - it’s not just the GG.
I don’t know it myself really (though I know how to find out).
OTOH, the Medical Industrial complex needs to look at some of these invoices they have been generating, and explain them while keeping a straight face. It’s like the medical establishment and the insurance companies are in some alternate universe, where real money is treated like Monopoly money.
Like $120 bills for office visits, when you see the doctor for 5 minutes (if your lucky).
Or $5000 dollars for an emergency room visit where they couldn’t find anything wrong (I guess Ringer’s is pretty expensive)
Or $2000 for a trip to the emergency room, to remove a steel splinter from my eye (total time under care- 10 minutes)
These are my experiences……yours may vary. And good luck finding any semi-decent insurance if you are over 50 and self-employed.
Pain/Death or Bankruptcy………what a choice.
And good luck finding any semi-decent insurance if you are over 50 and self-employed.
That’s me. Don’t get me started on health insurance. Just don’t.
Actually, the time of us boomers shaping policy is coming to a close. I tell my kids and the students in the college class I teach that their generation is going to have some tough decisions to make regarding mine.
As I stated earlier, we will not, because we cannot, continue to provide every possible medical procedure to every aging boomer for as long as he or his family may desire it. There just is not enough money to do so when all 80 million of us hit the door. Limits are going to have to be set, and yeah, its going to mean pulling granny (or gramps in my case) off the ventalator (or not putting her on in the first place) and not performing expensive potentially life extending procedures to gain a few more months of life, at least not on the Govt. nickle. If granny’s family wants her around a few more months, write the check.
I’m personally fine with this concept and have told my kids as much, don’t hook me up.
Sometimes things just are, like it or not.
“When Generation Greed was earning wages, wages were taxed less.”
Wrong. Tax rates were much, much higher. Especially for the wealthy.
http://www.ntu.org/main/page.php?PageID=19
But then, the dollar was also worth much much more.
Actually, we need consensus on the dates for Generation Greed. They peaked as wage earners in the 80’s, and that’s when tax cutting fever began in earnest, continuing until the present day.
In relative dollars, their parents, the Greatest Generation, paid their way as they went, taxwise. Baby boomers never will.
Yes and no, NoSingleOne. It was also the beginning of hidden double digit inflation and the acceleration of offshoring. Millions of people lost their blue collar jobs that barely paid a living for jobs that barely paid minimum wage.
I’m sure higher taxes will fuel the recovery in our CONsumer dependent eCONomy!
They will keep screwing with mortgages and wonder why the RE market isn’t doing what they think it should.
Principal Cuts on Lender Menus as Foreclosures Rise (Update2)
(Bloomberg) — Efforts by U.S. banks to help distressed homeowners have focused mainly on temporary fixes such as interest-rate reductions that may only put off the day of reckoning, despite policy makers wanting them to do more.
Banks may be forced to resort to a remedy they’ve been trying to avoid — principal reductions — as another wave of foreclosures looms and payments on risky loans rise, Bloomberg BusinessWeek magazine reports in the Jan. 18 issue.
While interest-rate reductions or extending loan terms reduce homeowners’ monthly payments, they don’t give much comfort to borrowers who owe more on their homes than their properties are worth. Borrowers who don’t have equity in their homes are more likely to hand over the keys when they run into trouble. “The evidence is irrefutable,” Laurie Goodman, senior managing director of Amherst Securities Group in New York, testified before the U.S. House Financial Services Committee on Dec. 8. “Negative equity is the most important predictor of default.”
The 25 percent plunge in residential real estate prices from their 2006 peak has left homeowners underwater by $745 billion, according to research firm First American CoreLogic –a number that tops the government’s $700 billion bailout for banks. That’s why Federal Deposit Insurance Corp. Chairman Sheila Bair is considering incentives for lenders to cut the principal on as much as $45 billion of mortgages acquired from seized banks. “We’re looking now at whether we should provide some further loss-sharing for principal writedowns,” says Bair. “Now you’re in a situation where even the good mortgages are going bad because people are losing their jobs.”
“They will keep screwing with mortgages and wonder why the RE market isn’t doing what they think it should.”
More generally, they will keep screwing with markets and then claim the Chicago School was wrong for saying free markets work best.
If they start doing principal reductions they are going to have a tsunami of people defualting so they can get the mortgage reduced.
Ding,ding,ding!
The above comments are the very reason why they shouldn’t of tampered with contracts to begin with . There is such a low rate of success with trying ot make bad loans good and the
money spent has ended up in corrupt pockets anyway . The Lenders are waiting for the government to pay for any concessions anyway .
What is frightening is that such a small percentage of borrowers
even had the potential to qualify for a re-written loan ,that’s how fraudulent the real estate loan market was and that’s how crazy the defective loan products and underwriting was.
How many of these Borrowers were on the 2 year plan to make money on real estate appreciation ,than cash out ? A high percentage because that is the way real estate was sold the last three years of the bubble ,as a highly leveraged investment .
If the borrowers had bought for solid reasons ,like wanting a home to live in long term that they could afford ,than they might have success with programs ,but that wasn’t many borrowers motive ,and it certainly wasn’t the flippers motive
or the equity extractors motive .
Everything is a bunch of BS anyway because it’s just all about how to pay for the loss and who is the bag-holder going
to be .Standing law would of sorted out the bag-holder the best at the time and a lot of heads and corruption would of been purged and punished in the process.
I’m all for principal reductions as long as it is combined with a switch up to a market based (not FHA, etc.) mortgage rate for someone who has just defaulted on 20% or more of their mortgage. Oh, and lets make it full recourse as well. What do you think the new rate would be? I’m guessing 12% or more, but that is just a guess.
You put your finger on it. So long as the feds continue to cram down the default risk premium, the mortgage market will remain FUBAR and delinquencies and foreclosures will continue at “higher than expected” levels for the indefinite future.
Funny how the gamblers and the crazy mania borrowers are so demanding . Unless you give them the opportunity to make quick money they aren’t interested because that was their reason for purchasing real estate to begin with .
I am a firm believer in motive . What was your true motive for purchasing this property …..”I wanted to get rich quick “….
….”I wanted to make money and pay for my children
education “……”I wanted to cash out and in 4 years have a cushy retirement “…….” I wanted to quit my boring job and become a flipper”…..”I wanted to buy because I had a fear of being left out”……”My realtor told me real estate only goes up
so I bought without thinking of my real needs” …”I took that loan because I really didn’t qualify and I wanted leverage “…..”I didn’t put any money down and I got cash back ,so what the hell “…..I got 200 thousand that I blew on stupid stuff ,but boy was it fun feeling rich for a while …”My neighbor made a lot of money ,so I wanted to make money also ” …..The loan agent told me I could refinance after my
house went up in value in 6 months and get money to buy another house “…”The salesman told me that a rich baby
boomer would buy this property in a year and I would make 100 thousand “…….
How many people said ,I want a house I can afford to live in for years and my objective is to pay down my equity and be debt free ?
“How many people said ,I want a house I can afford to live in for years and my objective is to pay down my equity and be debt free ?”
Well that’s what I said, and the banker lady looked at me like I was crazy.
A fantastic way to strip wealth from homebuyers to lenders, the NAR and builders.
“If we don’t keep shoveling money to the financial companies, the economy will collapse.” This is starting to sound fishy to me.
It’s sounding like, “If we don’t fight them in Vietnam, we’ll have to fight them in Santa Monica.”
Right — it’s fine and dandy to have TBTF Megabanks, but a TBTF household sector would be a policy disaster!
More generally, they will keep screwing with markets and then claim the Chicago School was wrong for saying free markets work best.
Is the Chicago School now the Light, the Truth, the Salvation?
Huh?
I guess since Eddietard is MIA, somebody has to pick up the Straw Man caricature business for him…
Is the Chicago School right for saying free markets work best? Or are you agnostic on this issue?
“Is the Chicago School right for saying free markets work best?”
Define what you mean by “best”. Do you mean the best allocation of capital? Or the best average outcome for participants? I’m not sure those two are the same thing.
From what I’ve seen over the last few years, I will say that my impression is that manipulated markets don’t seem to work all that well in either regard…
More generally, they will keep screwing with markets and then claim the Chicago School was wrong for saying free markets work best.
The Chicago School of Economic Dogma would prove mostly correct in a vacuum, however its unquestioned embrace has proven a failure as applied to our Republic.
In a Republic with a campaign financing system that allows excessive corporate influence, and corporations manipulating both academics and politics, a to-big-to-fail environment is a natural result of placing blind faith in the theories of, and changing laws to conform to the Chicago School and similar economic dogma.
The wholehearted embrace of efficient market hypothesis, and competitive market behavior by both political parties, ironically enabled too big to fail institutions and crony capitalism to emerge as it eliminated firewalls, regulations and protections that had prevented their formation before.
Incessant corporate promotion of the “Free-market” dogma fostered an environment that gutted such protections as Glass-Steagall thus spawning too-big-to-fail institutions which by definition are not required to follow capitalism’s basic premise of being subject to failure due to poor decisions like making bad mortgages.
When something becomes too big to fail, it fails capitalism. Then when a crisis hit we moved from crony capitalism into a disaster capitalism situation requiring bailouts that violate the Chicago-school dogma that helped spawn the crisis to begin with.
The big problem with the “free-market” theories is that they don’t take into proper account man’s capacity for injustice when wealth is involved. Greed is a basic component of human behavior because some greed is required for survival, however unchecked greed can lead to crime and even societal collapse.
Free markets, although very desirable, do not enforce economic justice. Proper laws, regulations and enforcement do.
“Free market” would fail under any regime. It is a dangerous and devastating fantasy.
Just like “enlightened self interest.” Something so rare as to be meaningless.
‘“Free market” would fail under any regime. It is a dangerous and devastating fantasy.’
On what basis do you say this?
“some further loss-sharing for principal writedowns,”
well I don’t really want to share in the loss via my taxes
I just rent so I guess I don’t count
Right. Renters are lowly creatures who are gumming up the works, and causing prices to fall. Didn’t you get the memo?
Hey Ben, ’bout your interview with Jonathan Miller @ HousingHelix yesterday…
“…We are the “contradiction”!
Thata boy Mr. Ben, pokes’em right straights in the eye!
(Reminds Hwy of young Indian Bob (Blackfoot), “back in the day” …drinkin’ beer, shootin’ pool… things could get ugly ’round midnight, drunk fella’s not wanting to pay up their lost bets…
Drunk loser (walking up to Bob): “…not only am I’s not goin’ pay ya…I’m gonna kick your…(suddenly Yelling): “I can’t see…I can’t see…”
Bob, he struck like a rattler!
I know this was posted last night, but there is no way the plan can only be for Fla. Every broke assed condo complex in the U.S. will be pounding on the door. I love the use of the term “prop up”, then what? Crutch breaks and down it crashes.
WASHINGTON (AP) — Fannie Mae is seeking to prop up Florida’s ravaged real estate market by reviewing hundreds of condo projects in the state that currently don’t qualify for its loans.
The mortgage finance company said Thursday that buildings deemed stable after the review will be given a special approval lasting up to 18 months.
If they are approved, lenders will be allowed to offer mortgages to homebuyers and sell those loans to Fannie Mae, which pools them into bonds and sells them to investors.
The reviews will look at the buildings’ occupancy, homeownership association dues, financial stability and physical condition.
“… which pools them into bonds and sells them to investors.”
I’m all for this. Get the load off of public money by putting it into private hands.
“… which pools them into bonds and sells them to investors.”
…which are guaranteed by the taxpayers of the USA.
Your solution would also quickly restore housing affordability. No loans, lower home prices, more loans — in that order.
If it makes housing affordable - and thus reduces the debt load on wage-serfs - it won’t happen.
Again
If you are trying to sell your home or condo in Florida you will now have to compete with builders and speculators who will be given Federal help.
Who gives a crap, as long as the stock market keeps going up.
More job cuts coming to help bottom line…
UPS raises fourth-quarter view, sets job cuts
United Parcel Service Inc
BOSTON (MarketWatch) — UPS Inc. (UPS 59.60, +2.19, +3.82%) on Friday raised its fourth-quarter earnings forecast to a range of 73 cents to 75 cents a share from its prior estimate of 58 cents to 65 cents a share, citing “better-than-expected results in both domestic and international operations and savings through cost management.” On average, analysts polled by FactSet Research were expecting a profit of 64 cents a share. The package-delivery firm also announced plans to cut about 1,800 management and administrative positions across the country. Kurt Kuehn, UPS’s chief financial officer, said the company sees “a gradual economic recovery with improvement more evident as 2010 progresses.”
“Kurt Kuehn, UPS’s chief financial officer, said the company sees “a gradual economic recovery with improvement more evident as 2010 progresses.””
Just how is he able to “see” the future like this?
“sees” = “wishes for”
That’s why you’re a cardboard box and he’s a CFO. Vision!
BEIJING (AP) — China overtook the United States as the biggest auto market in 2009 and automakers should see more strong growth this year, an industry group reported Friday.
Boosted by Beijing’s stimulus, 2009 passenger car sales soared to 10.3 million and total vehicle sales are estimated at 13.6 million, the China Passenger Car Association said. That represents growth of about 45 percent from 2008.
“This is even better than anyone expected,” the group’s general secretary, Rao Da, said at a news conference in Shanghai.
I wonder though what the average car price was in China? $5000?
Still, that’s a lot of cars, and they’ll filling up at a gas station.
Plus it’s one step forward, five steps back for the Greenies.
For each of our kiddies recycling their juice boxes, the Chinese just put a couple new cars on the road. What’s that? Those Chinese cars are smaller, more fuel efficient? Doesn’t matter, the pressure on resources will be immense regardless.
Further adding some dark humor to the situation is that while our pols and corps bang the Green drum to us, they are concurrently doing everything possible to sell the Chinese on our hyper-conusming economic model.
Many Chinese families buying cars use them only on the weekend - to do usual middle class stuff like visiting family across town, going to the supermarket & amusement park, and traveling to nearby picnic spots. Most Chinese, even many with cars, continue to use public transport to go to work.
30 years ago when I worked in London, UK we would rent a car once month for a weekend.
I wonder what kind of smog control systems those 10.3 million cars have. My guess is that each Chinese care is equivalent to a bunch of western cars in terms of CO, CO2, NO, etc.
Anybody know the technicals on that?
I think air pollution is pretty fungible.
It boggles the mind, but maybe China’s urban air will eventually surpass U.S. improvements in smog/particulates.
http://blogs.ngm.com/.a/6a00e0098226918833012876674340970c-800wi
Very interesting graph. I wonder how the price of healthcare will lower if we add those without insurance…
And who is going to pay for this?
“I wonder how the price of healthcare will lower”
It won’t.
I disagree on the semantics here: The price will lower, the costs won’t.
Supply and demand will get out of whack, while wage and price controls will perforce ensue. Because reality won’t match what the expert’s theories predict, the market will become so distorted from government interference that it will make the problem even worse.
Sound familiar, HBBers? This is the inevitable result of political (i.e. non-economic) solutions to cost-containment issues.
Unintended consequences? Fuggedaboutit! The architects of the Worker’s Paradise will later claim “Nobody could have possibly foreseen this coming!”
But…what do I know? I’m just a cog in the healthcare machinery.
While traveling to Albuquerque this week I had the chance to talk to a few Democrats. One lawyer in particular “DID NOT” like the Obama Healthcare debacle and they are worried about what it’s going to do to them. I asked him why he was a Democrat and he couldn’t find an answer why. I think many others will be feeling the same way when the taxes start 4 years before the benefits.
My Dem congressman blames the bill’s weak support on party leadership’s lack of transparency .
“They said it would be transparent. Why isn’t it?” said Sestak, a Delaware County Democr*t, in a meeting with Tribune-Review editors and reporters. “At times, I find the caucus is a real disappointment. We aren’t transparent, not just to the public but at times to the members.”
Joe Sestak rocks the house.
And I don’t just mean the House of Representatives. I mean the Slim household. His DC office has been helping a family member with contacts for a research project. I’ve been very impressed with the constituent service.
He’s helped our family as well.
His staffers each have an area of expertise and are able to effectively address our concerns. Has this been your experience?
His staffers each have an area of expertise and are able to effectively address our concerns. Has this been your experience?
The family member mentioned above has a very extensive background in scientific research and development. At Sestak’s District Office, we were very fortunate to find an aide with a bachelor’s and master’s degree in environmental science. And a law degree. He’s now in the DC office, and we’re still working with him.
I wonder how long people will continue to believe the Prophet of Change (Obama)? Hmmm…
If you read the left-wing blogosphere, e.g., Daily Kos, Firedoglake, TPM, etc., you’ll know that the disbelief is well underway. Matter of fact, some of those folks sound just as skeptical as Fox News.
You need to go read some interesting blogs. One is firedoglake dot com. They have been calling the health insurance reform bill a piece of cra*p. They are one of the few places that have written great fact based articles about this bill that will screw the middle class.
As long as the GOP opposes a women’s right to chose they’ll never get my support. It’s a deal breaker, no matter how fiscally conservative I may be.
Yes..
..and if you think Health Care is expensive now.
Just wait till it’s fee, and see how much more it costs..!!
You already pay for people without health insurance when they show up to the ER. Drug companies Hospitals etc often give them medical care, but of course they have to raise the rates on the meds and medical care you buy to accomplish this. States also offer coverage for the indigent paid for with your taxes.
Quite so. The improvement I supect will be that all of these dollars will now be funneled through something called an “insurance company”. Let’s just call it the “insurance company care plan”.
There’s a job growth field.
I agree the current plan is BS, I would get rid of private insurance companies except for those who wich to have every bell and whistle. Therapies that have a good cost to benefit ratio would be covered by a public health plan. Everything else you would pay for with cash or via private insurance plan. Doctors Drug companies Hospitals would then fight to get treatments under the cost benefit line. Thus medical costs would drop and only the most effective treatments would be covered.
The health care funding mechanism has been screwed up since 1942 when the burden of the cost of health coverage began to shift to the employer. It makes absolutely no sense that the majority of health care funding comes from the workplace. It is just an abberation of the economics of WWII.
True health care funding reform (health care reform is a terrible misnomer) has to start with throwing out the employer based coverage model. That is going to happen anyway as chronic joblessness persists, unions continue to weaken, temporary/contract employment grows and health care coverage costs continue to rise. Private employers will not be able to afford to maintain their coverage and will no longer be extorted into doing so by a strong job market or union threat. So, the day will come when a substantial portion of non-public employees will no longer have access to employer based coverage and they will look at their public employee peers and say WTF.
In my opinon, health care insurance should be funded much like Medicare (only on an actuarially sound basis), paid for by the first dollar of employment income and continually paid for throughout a persons working life by payroll witholding and employer contributions. The 20 somethings will scream “I don’t need insurance, I am young and healthy”. True, until they crash their motorcycle or fall while rock climbing. Everyone needs health insurance regardless of their age. Those that don’t have it will eventually sponge off of the rest of us.
Yeah, there are some that won’t work and will get a free ride, and the higher earners will pay more into the system than they are likely to use, but there have always been inequities in every system.
Now you can just see what’s coming next if you watch the Cheerleaders on the business channel .
Finally after Wall Street/Lenders got the biggest bail out in American history ,cheerleaders are now realizing that Main Streets unemployment is a serious problem . Keep in mind that its been 4 or 5 years since the meltdown of bad lending and this group of marker cheerleaders are just getting around to being concerned about jobs .
What you should see coming now is Cheerleading for incentives for Corporations to hire , just one more potential government program that will pad the pockets of the Corrupt that will abuse the hand outs .
How about adding a penalty tax to any Corporation that outsources jobs
to give them incentives to hire Americans . Start thinking in terms of penalty to stimulate in the right direction ,rather than hand outs that will be abused ( I’m talking to that bought off Congress/Senate when I make this suggestion ). Penalty doesn’t cost the government money . You don’t want people to walk ,bring back the law that charges them penalty on forgiven debt . Penalty tax doesn’t cost you any money that will be wasted anyway .
How about adding a penalty tax to any Corporation that outsources jobs
to give them incentives to hire Americans . Start thinking in terms of penalty to stimulate in the right direction ,rather than hand outs that will be abused
Right on.
I think we will see “stimulus” checks for J6P this election year. I only wonder how big they will be. Maybe $5000 per household?
Yeah, after cheering after every huge outsourcing of jobs to foreign countries and rewarding these companies with huge stock bumps (Jack Welsh, the axman, our hero!) these idiots are having an epiphany. Gulp, maybe americans need an income to buy $hit.
It’s BS. Just a song and dance to appease J6P, but will amount to nothing.
Hey, I’d settle for rescinding the tax break big business got for sending jobs offshore. Oh, you didn’t know that?
Another great post, Wiz. Thank you.
Job creation… Pennsylvania style…
Rendell to sign table-games bill.
HARRISBURG - It’s a done deal at last. Table games are coming to Pennsylvania by the end of the year.
By a vote of 103-89, legislation to legalize poker, blackjack, roulette, and other table games received long-awaited final approval last night in the state House. Gov. Rendell plans to sign the bill today.
The gambling expansion, coming as the commonwealth struggles to pull itself out of the recession, is projected to create thousands of jobs and pump $250 million into the state’s revenue-starved coffers.
By patching that budget hole, the bill averts the threatened layoff of 1,000 state workers and concludes the excruciating 2009-10 budget process - just weeks before Rendell is due to unveil next year’s state spending plan.
A spokesman for the state Gaming Control Board said it would take from six to nine months to get table games up and running in the nine operating casinos - some of which have already marked off whole expanses of floor space to make way for the new games.
Desperation. This probably won’t help Atlantic City’s situation much, huh?
When IL legalized and allowed casino boats, the first locations were far flung on the Mississippi and Illinois Rivers. They thrived only until a cadre of boats opened on the Fox River and in NW Indiana. Now these are threatened by boats coming to the Des Plaines River.
Nowadays no one even talks about those old river towns along the Mississippi and Illinois Rivers that gaming was supposed to save from extinction. The talk is always of getting games closer to the largest concentration of low income residents, although no one will ever admit that’s the goal.
“The talk is always of getting games closer to the largest concentration of low income residents, although no one will ever admit that’s the goal”.
That is very true!
The #1 purchasers of lotto tickets are those that can least afford it. Another little fact that states make sure not to address.
Two casinos have attempted to do just that in Philadelphia, the residents put up such a stink that one of the plans has been effectively tabled. And yes the proposed locales were squarely in the depths of blue collar neighborhoods.
This probably won’t help Atlantic City’s situation much, huh?
That ship already done sailed.
A.C. casinos are not the profit centers of a quarter century ago. Resorts closed, the Trop went belly up, I don’t know probably a few others. Gambling was supposed to resurrect that town - all it did was create a glitzy mob front operation by the sea. What a travesty. From “The Queen of Resorts” to a low rent mecca for blackjack and craps players.
The #1 purchasers of lotto tickets are those that can least afford it. Another little fact that states make sure not to address.
They can’t address that can they?
Here in Illinois, they like to talk about how lottery funds go toward the education budget. But the lottery proceeds are a small fraction on the total public education budget — the lottery is projected to send about $660 million toward Illinois education this year, but that pencils out to something like 8 or 9% of the total budget (source: Illinois State Board of Education Fiscal Year 2009 Budget).
As you know gambling, is a bad and evil, it separates people from their hard earns funds, unless the State gets their cut. Then it’s for all the good things like education and job creation.
Look at it as the “Alternative Minimum Tax Recapture” Fee.
Betcha feel better now……
Gambling is society’s punishment for those who are unable to learn mathematics.
Better known as the “bad at math tax”
Think of it as a voluntary tax on stupidity.
I don’t even know what to say to that?
Pennsylvania has long experience on government monopoly on sin.
How long til they open brothels to keep those state employees working?
The Feds need to catch up on these schemes. Why not open a casino in the UN?
And a brothel; then global summits wouldn’t have to be held in Copenhagen.
“Why not open a casino in the UN”?
May as well, and then charge property tax. We may get just a little back from that money sucking waste of real estate.
China would love to give the UN a square mile in Beijing or Shanghai. Are you sure you want the UN to relocate?
Technology Spending to Rise This Year, Luczo Says (Update1)
Jan. 8 (Bloomberg) — Technology spending will rise this year because of pent-up demand from businesses for new equipment and consumer appetite for notebook computers, Seagate Technology Chief Executive Officer Steve Luczo said.
“2010 is going to be a growing year for tech globally,” Luczo, head of the world’s largest maker of hard-disk drives, said in an interview yesterday at the Consumer Electronics Show in Las Vegas. “We think 2010 is going to be a good year all the way through.”
Luczo, 52, who retook the CEO job at Seagate a year ago amid a global recession, said that while customers’ confidence level is not yet at the level of “everything OK,” it’s higher than it was at the start of 2009. Beginning in November, customers found they had a clear enough picture of the market to predict demand several months ahead, something they weren’t able to do in the first half of the year.
“People had no visibility — I mean no visibility,” Luczo said. “The big change has been that we’re almost back to the type of visibility that we would normally have, which in our business is somewhere between three and six months.”
Pent up my @$$. People and businesses will make do with what they already have. It will be another mediocre year for IT HW sales.
People and businesses will make do with what they already have. It will be another mediocre year for IT HW sales.
Yup. And not just in hardware — software purchasing has been very anemic as well.
Geez Luczo, get a dictionary and look up the word “visibility”. Then you’ll know what to say when you can’t see no peoples.
Microsoft has a way to increase sending on technology—they stop supporting an old operating system. But it takes a while for some companies to notice. The company my husband is with went to a new timekeeping program that was compatible with XP, Vista, and 7. the were shocked to find some office were still using ME which the program did not work with.
Yep
and when you want your printer or camera to work it gets harder and harder.
Linux….why the vast majority of businesses haven’t gone to it yet is beyond me. It’s free, fast, and stable. The only downside is that it doesn’t always have the drivers for the latest and greatest video cards, wifi cards. My three year old laptop at home running linux is as fast if not faster than my new windows running desktop at work.
Lots of Enterprise Resource type software won’t run on Linux, or at least its not supported on Linux
Maybe for some of the same reasons individuals don’t switch. My wife got a really nasty latest-generation virus on her laptop a few weeks ago. She decided it was time to make the leap to Linux since “all I do with it is surf and email”. Been working great for a couple of weeks. Just realized she needed to load iTunes so she could sync up her iPhone and see if there were any updates available. Oops.
I love the idea of Linux but if there’s something critical you need and nobody is interested in making a Linux version you’re screwed.
I got itunes working with wine on ubuntu.
When I worked at a big name computer company, they were shipping Linux based servers out the doors by the thousands.
But here’s the problem: small businesses need out of the box systems that look like their home system. Thus, MS.
news.yahoo.com/s/bw/20100108/bs_bw/jan2010db2010018994080
Bloomberg) — Representative Barney Frank said the Federal Reserve Bank of New York’s 2008 order to American International Group Inc. (NYSE:AIG - News) to suppress disclosures of bank payments is “troubling” and he supports hearings on the issue
“Did they have the authority to tell AIG to pay less than 100 percent or not?” Frank said. “That’s an interesting debate.
Uh Barney, this is not the debate, the debate is did they have the authority and was it right to tell AIG NOT to offer anything less than 100 cents on the dollar to GS and other favored insured entities. The debate is should the FED be in the business of telling companies to hide information about such charity to fat cat Wall Streeters.
PS should the FED officials be allowed to buy say 50,000 shares of GS with insider knowledge that the FED was going to force American tax payers via AIG to had billions over to GS.
Isn’t it amazing that this guy didn’t go to court and then to jail, this is by definition insider trading.
Friedman’s role remains controversial. In December 2008, weeks after the payments to the banks were authorized in November, Friedman bought 37,300 shares of Goldman stock at $80.78 a share, according to SEC filings. On Jan. 22, he bought 15,300 more at $66.61. Both purchases took place before the payments to Goldman Sachs were publicly disclosed under pressure from Senator Dodd in March. On Oct. 26, Goldman Sachs stock closed at $179.37 a share, meaning Friedman had paper profits of $5.4 million.
Jerry Jordan, former president of the Federal Reserve Bank of Cleveland, says Friedman should have resigned from the New York Fed as soon as it became clear that Goldman stood to benefit from its actions. “It’s an outrage,” Jordan says. “He needed to either resign from the Fed board or from Goldman and proceed to sell his stock.”
98,600 Goldman Shares
Friedman remains a member of Goldman’s board and held a total of 98,600 shares of the firm’s stock as of Jan. 22.
OMG, I hadn’t even heard about that. Un-freakin-believable.
Where is the freakin SEC when you need them???? This is classic insider-trading, way worse than what Martha went to the pokey for doing.
It’s way past time for perp walks!
Can you imagine the SEC actually going after a FED chairman and a member of the GS cabal? I mean short of murdering someone at rush hour in front of a video camera and then bathing in the blood of the victim until the police arrive, I can’t see these people going to jail.
Um, it is quite hard to imagine.
Does that mean it is time for pitchforks and torches? They are looking more and more like financial vampires, so maybe we also need garlic, silver, and wooden stakes.
Please see my post above about CAFRs… if it ever shows.
People don’t get it.
The idea was to save the banks, not AIG. If having AIG go under wouldn’t have brought down the banks, it would have been allowed to go under.
In fact, if allowing AIG to sink Goldman wouldn’t have affected the banks, they would have allowed Goldman to go under. Which is what they would have wanted.
But after Lehman, they decided they couldn’t. That was the moment of decision. Did you want Great Depression II, with a wipeout of the value of most paper assets (stocks, bonds, pensions and annuties backed by them) or 20 years of stagnation? They went with 20 years of stagnation, a decision that favored the old over the young.
Don’t know which ‘people’ you are saying don’t get it, but don’t include me in your count. I cannot fathom the Fed should be in the business of bailing out banks that destroyed hundreds of billions of wealth. These banks should be allowed to fail, and banks which are better at banking should be enabled to replace them. If the system has to go through wrenching adjustments in the course of the transition, so be it.
Anyone who ignores the connection between this abdication of any semblance of a rule of law governing the banking system and the failure of the Chicago School credo to explain how a free market economy works is missing the picture.
The other banks could have been propped up directly, no need to save GS and their bonus money.
The very fact that the CEO of GS was reportedly standing right next to Hank Paulson a former GS employee when they were determining how to handle AIG tells you everything.
The gov could have come out and said we will nationalize important banks and keep them running and lending. We will let bond holders and stock holders and management take a huge hit. I think we’d be in much better shape now. Just think of all the money that has been taken by managment and stock holders that could have been used to lend to businesses that actually make something.
“The gov could have come out and said we will nationalize important banks and keep them running and lending.”
A principled approach rather than the exercise of pure discretion could have gone a long way towards dispelling the perception of crony capitalism at its worst.
Sorry, we would not have all been dumpster diving in the dark, by allowing what needed to happen, happen. Go back as far as you wish prior to the cash of ‘29 and the ensuing decade plus depression. You will find that previous corrections and crashes were of short duration. Not a decade or decades, why on earth is a society willing subject themselves to a looong slow decline ending in a lower, not higher standard of living?
Flush the system and rebuild, it works and you end up stronger, just a fact, period. Like it or not. So what do we do, the exact opposite, which is logical according to government and many so called experts.
“But after Lehman, they decided they couldn’t. That was the moment of decision. Did you want Great Depression II, with a wipeout of the value of most paper assets (stocks, bonds, pensions and annuties backed by them) or 20 years of stagnation? They went with 20 years of stagnation, a decision that favored the old over the young.”
I think thats right nobody knew what to do but Hanky so they let him roll and of course he only did what he knows best
“Great Depression II”
Out here in Flyover land, the Wall Street types got baled out, and we have Great Depression II anyway.
Glad to see Wall Street and their lapdogs in Washington have their priorities straight.
“The debate is should the FED be in the business of telling companies to hide information about such charity to fat cat Wall Streeters.”
That bit doesn’t jibe well with Bernanke’s move towards glasnost at the Fed.
One thing the Englisters know something about, is reserve currency collapse. When? Who the hell knows…
Willem Buiter warns of massive dollar collapse.
Americans must prepare themselves for a massive collapse in the dollar as investors around the world dump their US assets, a former Bank of England policymaker has warned.
UK ~ Telegraph
The long-held assumption that US assets - particularly government bonds - are a safe haven will soon be overturned as investors lose their patience with the world’s biggest economy, according to Willem Buiter.
Professor Buiter, a former Monetary Policy Committee member who is now at the London School of Economics, said this increasing disenchantment would result in an exodus of foreign cash from the US.
The warning comes despite the dollar having strengthened significantly against other major currencies, including sterling and the euro, after hitting historic lows last year. It will reignite fears about the currency’s prospects, as well as sparking fears about the sustainability of President-Elect Barack Obama’s mooted plans for a Keynesian-style increase in public spending to pull the US out of recession.
Writing on his blog , Prof Buiter said: “There will, before long (my best guess is between two and five years from now) be a global dumping of US dollar assets, including US government assets. Old habits die hard. The US dollar and US Treasury bills and bonds are still viewed as a safe haven by many. But learning takes place.”
He said that the dollar had been kept elevated in recent years by what some called “dark matter” or “American alpha” - an assumption that the US could earn more on its overseas investments than foreign investors could make on their American assets. However, this notion had been gradually dismantled in recent years, before being dealt a fatal blow by the current financial crisis, he said.
The American dollar has been propped up by
China and Our military.
Bingo!
Funny, isn’t it, how every ‘worse-than-expected’ news release which one would expect to knock down U.S. stocks seems to instead knock the dollar down a few more notches.
From Bloomberg:
CURRENCY VALUE CHANGE % CHANGE TIME
EUR-USD 1.4339 0.0031 0.2162% 11:24
GBP-USD 1.5978 0.0044 0.2793% 11:24
USD-CHF 1.0310 -0.0031 -0.2988% 11:23
USD-SEK 7.1316 0.0016 0.0224% 11:23
USD-DKK 5.1885 -0.0118 -0.2272% 11:23
USD-NOK 5.6918 -0.0213 -0.3733% 11:23
USD-CZK 18.3150 -0.0692 -0.3767% 11:23
USD-SKK 21.0100 -0.0349 -0.1657% 11:24
USD-PLN 2.8384 -0.0342 -1.1895% 11:23
USD-HUF 186.6450 -1.9623 -1.0404% 11:24
USD-RUB 29.7750 0.0000 0.0000% 01/07
USD-TRY 1.4608 -0.0100 -0.6799% 11:24
USD-ILS 3.7135 0.0032 0.0876% 11:16
USD-KES 75.4500 -0.1250 -0.1654% 09:11
USD-ZAR 7.3666 -0.0652 -0.8773% 11:23
USD-MAD 7.8958 -0.0146 -0.1846% 11:23
That is the goal: once a loaf of old bread is selling for $12 (assuming you can get it) everyone will still be happy since the DOW will be 20,000.
I see no more nor less here than financially engineered wealth redistribution. The upper-most layer of the U.S. wealth distribution has an asset allocation heavily skewed towards corporate ownership; conversely, Main Street and foreign creditors’ wealth is heavily weighted towards dollar-denominated obligations (fixed income pensions, union labor contracts, Treasurys, MBS, etc). Propping up the stock market through shifting the negative adjustment onto Uncle Buck’s tired back serves quite nicely as an under-the-radar-screen protection of corporate owners’ wealth through dilution of the people’s money.
Wall Street sheds losses
Stocks stage late-session turnaround, set to finish the first week of 2010 with gains of more than 1%.
This has been going on since the 1970s. Reaganomics in the 1980s was the final tipping point.
Currencies
Jan. 8, 2010, 3:30 p.m. EST
Dollar slumps as U.S. economy sheds more jobs
U.S. currency slides 1% against the yen as Japan’s Kan clarifies comments
By William L. Watts & Lisa Twaronite, MarketWatch
NEW YORK (MarketWatch) — The dollar slumped on Friday after the Labor Department said the U.S. economy shed more jobs in December instead of recording the slight increase in payrolls economists expected.
The dollar index, which measures the greenback against a trade-weighted basket of six major currencies, traded at 77.470, compared with 77.945 ahead of the report and 77.974 in late North American trade Thursday.
For the week, the dollar index fell 0.5%.
Against the Japanese currency, the dollar fell 1% to 92.49 yen.
…
The US wants the dollar to go down but in an orderly way
most other countries who hold dollars probably don’t want a crash either
This dollar recent strenght a good time to sell ? Like treasuries ?
Florida Gaming Corp. disclosed in a Securities and Exchange Commission filing Thursday that is in default on two loans after missing payments on Dec. 31.
The Miami-based company (OTCBB: FGMG) owns Miami Jai-Alai and Fort Pierce Jai-Alai, which also have card rooms.
In the SEC filing, Florida Gaming said that a $3 million promissory note it owes to St. Louis-based Isle of Capri Casinos (NASDAQ: ISLE) came due on Dec. 31, but the company failed to pay it. This event of default triggers a spike in the interest rate to 18 percent.
“The registrant [Florida Gaming] and Isle currently are engaging in discussions to restructure the repayment to Isle of amounts due Isle under the Isle documents,” Florida Gaming stated in the SEC filing.
Isle of Capri owns casinos across the country, including Isle Casino & Racing at Pompano Park in Pompano Beach.
Florida Gaming also disclosed that a $1 million loan from James W. Stuckert and Solomon O. Howel came due on Dec. 31, yet went unpaid. This triggers a default interest rate of 24 percent. Florida Gaming said it is negotiating with these lenders to restructure this note.
I’m sensing a Tony and Guido moment.
Looks like they tackle the tough issues in S.F.
San Francisco Official Vows to Curse at Every City Meeting
January 08, 2010 ~ Foxnews
A San Francisco supervisor known for outrageous behavior reportedly cursed at a City Hall meeting and promised to use profanities during every board meeting for the remainder of 2010.
Chris Daly said he was upset about a Bay Guardian newspaper article taking the supervisor to task about his previous usage of “f— you” during a Rules Committee meeting on Thursday, CBS5.com reported.
“I do want to warn the easily offended,” Daly said. “I just updated my Facebook page vowing that in 2010 I’ll use the word f— in every Board of Supervisors meeting.”
Asked if he was serious, Daly told CB5.com: “It was serious as far as spur of the moment Facebook status updates go. Happy New Year!”
David Chiu, president of San Francisco’s Board of Supervisors, said he was checking to see if Daly’s pledge violated any city rules or regulations. Chiu also asked Daly not to use that kind of language and left a bar of soap at Daly’s office.
“I told him that I thought he could do better,” Chiu told CBS5.com.
A spokesman for San Francisco Mayor Gavin Newsom suggested that Daly’s colleagues start a “swear jar” to make Daly pay for every time he uses profanities during official meetings.
How much of a deficit does SF have? Could Daly’s “swear jar” fines help bring it down?
Well at least they’re not punching each other out à la Philly city council. (But who knows, maybe foul language is a step in the progression to fisticuffs and pugilistic activity.)
And they could always resort to caning. Such a thing happened on the floor of the U.S. Senate in 1856. Sen. Sumner (the recipient of the caning) was so badly injured that he didn’t return to the Senate floor for three years.
Slim, Where was that senator from, that did the caning?
I know you know, and I’m sure you also know that when he returned home he was sent hundreds of new canes!
The cane-er was from South Carolina. The cane-ee was from Massachusetts.
IIRC Sumner was an abolitionist and was caned by a pro-slavery Senator.
But sometimes when you make fun of another persons handicap you get your ass beat! Sumner did and got his ass beat.
I’d like to see more of that on the senate floor today. We could place bets.
On May 22, 1856, Preston Brooks beat Senator Charles Sumner with his Gutta-percha wood walking cane in the Senate chamber because of a speech Sumner had made three days earlier, for singling out Brooks’ uncle, Andrew Butler. Senator Andrew Butler was not in attendance when the speech was read, but Sumner compared Butler with Don Quixote for embracing slavery, and mocking Butler for a physical handicap. Senator Stephen Douglas of Illinois, who was also a subject of criticism during the speech, suggested to a colleague while Sumner was orating that “this damn fool [Sumner] is going to get himself shot by some other damn fool.”
Well at least they’re not punching each other out à la Philly city council.
At least the rough-and-tumble keeps it interesting.
You gotta pity the places where a mere F-bomb means controversy!
Looks like they tackle the tough issues in S.F.
Looks like they cover all the important news at Fox.
My bad, it came from SFGate The Chronicle, but I’m sure the cable channels looking for waste of time filler news will grad it.
It’s still filler, no matter the source …
Test
Jan. 8 (Bloomberg) — The Obama administration is weighing how the government can encourage workers to turn their savings into guaranteed income streams following a collapse in retiree accounts when the stock market plunged.
The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are spearheading the effort.
Annuities generally guarantee income until the retiree’s death, and often that of a surviving spouse as well. They are designed to protect against the risk that retirees outlive their savings, a danger made clear by market losses suffered by older Americans over the last year, David Certner, legislative counsel for AARP, said in an interview.
“There’s a real desire on a lot of people’s parts to try to encourage something other than just rolling over a lump sum, to make sure this money will actually last a lifetime,” said Certner, legislative counsel for Washington-based AARP, the biggest U.S. advocacy group for retirees.
Promoting annuities may benefit companies that provide them through employers, including ING Groep NV and Prudential Financial Inc., or sell them directly to individuals, such as American International Group Inc., the insurer that has received $182.3 billion in government aid.
**** Seems like another set up to separate conservative investors from their money, and to force them to keep their money in the market. How will they strip wealth??
Annuity sales to individuals have come under regulatory scrutiny in recent years over the size of sales commissions and whether some varieties are suitable for older investors. Policy makers could “”pretent to “” avoid those pitfalls by encouraging the use of group annuities, which are bought by employers rather than individuals and often carry lower fees, AARP’s Certner said.
**** Also seems like the plan may be to force 401k retirement plans to keep their money in a low fixed rate investment (say treasuries) at a time when the gov expects rapid inflation. I think Argentina did this in a more blunt manner.
Here’s a blurb on the Argentina
Argentina has a parallel system of state-owned and privately-owned pension accounts. Its state system pension payments were cut by 14% in 2001, and then cut an addition 66% when the peso was devalued the following year. Now, the Kirschner government is nationalizing the private accounts. Set up in 1993, these funds must invest 60% of their money in Argentine bonds. Naturally, bonds backed by the Argentine government are not necessarily the strongest credits in the world. Argentine peso bonds – like pensions – are adjusted for inflation. But the government lies, with a measure of inflation that is less than half the real 30% rate. As to the dollar bonds, it steals. In 2001, it defaulted on $95 billion worth of loans made by overseas lenders. It didn’t settle up until 4 years later – stiffing the foreigners for 70%. And now the government is in trouble again
****Sounds a lot like our current situation.
It’s only a matter of time until they take away the 401K and replace it with a promise.
I am sure the brightest minds on Wall Street are working on ways to “liberate” all that cash trapped in 401K accounts. With a little help from their friends in congress I am confident they’ll find a solution to their mutual benefit.
The Argentina example is similar to what I think is coming to a retirement account near you!
Uhm, maybe you didn’t notice, but they did that last year.
And you see the DOW rising without any real fundamentals? They’re going to do it again.
I knew it:
“The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are spearheading the effort.”
The Prophet of Change and his minions will take every cent we have. No one will be spared; no one will be allowed to save.
Savings = Freedom, and that is bad.
“Savings = Freedom, and that is bad”.
Correct!
Freedom= Bad for gubmint control.
More generally, savings are bad for corporate control of the sheeple. By contrast, employees who are drowning in debt, but nonetheless are engaged in a valiant effort to repay it, feel compelled by their financial circumstances to work like slaves.
I have a bit of a mouth on me. In fact, my mouth has a name: The Troublemaker.
I first became aware of my mouth’s ability to cause trouble when I was a very young Slim. Yours Truly got in a lot of mouthing off-caused trouble.
When I went out into the work world, I realized that I’d better have a good cash-stash saved up in case my mouth went off at the wrong time. That’s a policy I still have.
First shot over the bow of a potential future merge of 401k and Social Security?
Jan. 8 (Bloomberg) — Argentine bonds fell after a judge blocked the government’s plan to tap $6.6 billion of central bank reserves to pay debt, fueling a sense of “chaos” in the country, Brown Brothers Harriman & Co analyst Win Thin said.
Just back from a vacation in Argentina. The lady president can’t keep her hands off the people’s money. She just fired the governor of the Central Bank. Big trouble brewing again. Oh, well, so what’s new. Had lots of fun, though. What really worries me is that I keep reading these comments about how the US is headed in the same direction. Can’t be true, can’t be true, can’t be true. It would just be too awful.
First, people have to have money TO save. But let’s just ignore that pesky detail.
Dubai, a popular vacation destination…
British woman ‘arrested in Dubai after being raped’
A 23-year-old British woman on holiday in Dubai told police she had been raped, only to be arrested herself for having illegal sexual intercourse.
GMT 08 Jan 2010
Dubai is popular with British holidaymakers but it has strict rules about sexual intercourse and alcohol.
The woman, a Muslim of Pakistani descent, was celebrating her engagement to her 44-year-old boyfriend, and was allegedly attacked when she passed out in a hotel lavatory.
Despite approaching police about the attack, she was arrested after admitting to “illegal drinking” outside licensed premises as well as having sexual intercourse outside marriage. Her fiancé was also charged with the same offences.
The couple from London are now reportedly on bail and understood to be awaiting trial after having their passports confiscated. Should they be found guilty, they could face up to six years in jail.
My crystal ball predicts a decline in Dubai’s popularity as a holiday destination for Brits.
…leading to even MORE vacant holiday-rental inventory there!
Seems they were unclear on the concept of “vacation.”
“Hey honey, let’s go somewhere that doesn’t allow partying, oppresses women and have us some fun!”
They were arrested for being stupid.
“Goldman Sachs’ Next Slaughter of the Stock Market Lambs”
Ben’s ads just keep getting more interesting. I had never before noticed the striking resemblance of Lloyd Blankfein to Hannibal Lecter…
How do predictinators cook up bullsh!t forecasts? Do they pretty much just pull numbers out of their arses?
For example, how does one reconcile a FUBAR construction sector, due to no available financing, and a stagnant labor market, with sharply rising home sales and prices?
The housing market is a key to San Diego’s economic recovery. Sharon Hanley of the Hanley Group says median house prices have fallen in San Diego 13 to 25 percent since 2004. She sees the trend reversing this year, but says real estate and construction will have their hands tied unless banks start lending.
“Without availability of construction financing, I don’t see much hope of a recovery across the board,” Haley said. “I stay with my estimate: price increase of approximately 5 percent, sales increase this year of probably 10 to 15 percent.”
Marney Cox is cautious about talk of recovery. He showed a graph of federal borrowing, where the trend line shoots up off the top of the chart. He says only about 10 percent of federal stimulus money is being spent in areas that create new jobs.
“I think in the end, this deficit spending is not going to pay off,” Cox said. “I think the economy is going to grow too slowly. We are going to see some retrenchments at the federal and state level, especially in the State of California.”
Whereas one panelist compared the recovery to a V shape, Cox had another analogy.
“It is going to be more like the Nike swoosh.” He said, “It’s going to be very long, tailed out.”
However most of the panelists agreed San Diego is positioned to have a recovery that could outperform the rest of the state and the nation.
“Marney Cox, chief economist for the San Diego Association of Governments, said the total number of jobs lost in San Diego since the recession began is close to 70,000. That’s two to three times more, he says, than in any downturn in the past 50 years. Gin estimated it could take four or five years for San Diego to get back to levels of employment seen before the economic downturn began.”
Lynn Reaser, chief economist at Point Loma Nazarene University, “It’s not going to be easy to get a job,” she said. “You’re going to have to generally lower your expected wage, maybe take a 30 percent cut from what you were taking before, but I think this job market will be turning over the next 12 months.”
What kind of “recovery” do you get when people are making 30 percent less than they made previously, if they are working at all?
“But Marney Cox predicted sales tax revenues would drop by 10 percent, the third consecutive year of declines. He suggested malls might have to close. Cox suggested sales tax revenue may never recover, as consumers move to buy more on the internet.”
“This, combined with falling property values, has severe implications for local governments. They rely on property and sales taxes to keep public services going. Steuer said because Proposition 13 only allows property taxes to rise 2 percent a year, it could take 25 years to make up the loss in property values in San Diego County.”
“What all this boils down to is we truly are looking at a long-term issue here. This is not something we can hunker down and it’ll blow over in a year or two. We’re living in a new economic reality. Steuer said 80 percent of the county’s discretionary funding comes from real estate activities.”
Some interesting numbers and scenarios from some of the panelists, very different from the views of those often interviewed and quoted.
How do you get jobs like this? They are even less qualified than our politicians. Wait, maybe not, both are really, really not able to get their minds around anything other than their perks. Oh well, nice country while it lasted.
How do you get jobs like this? Perhaps you aren’t familiar with the concept of the inbred aristocracy. Which is just a fancy way of saying “cronyism.”
“Gin estimated it could take four or five years for San Diego to get back to levels of employment seen before the economic downturn began.”
Nonetheless, the housing market will make a strong come back in 2010.
Why, you ask?
Because Sharon Hanley said so.
“However most of the panelists agreed San Diego is positioned to have a recovery that could outperform the rest of the state and the nation.”
yes we have plenty of water here
Till just recently, we had plenty of financial liquidity, too, which helps explain why so many homeowners find themselves underwater, saddled with unrepayable debt burdens.
“However most of the panelists agreed San Diego is positioned to have a recovery that could outperform the rest of the state and the nation.”
So we’ll just be in a severe recession versus a depression? One can do relatively better and still not do well.
Maine man, 101, loses battle to save 240-year-old elm tree.
USA Today
A 240-year-old American elm tree that has graced Yarmouth, Maine, since before the American Revolution will be cut down on Jan. 18, ending one man’s half-century effort to stave off the ravages of Dutch elm disease.
The tree, known as “Herbie” would have succumbed in the 1950s if not for the care of Frank Knight, now, 101, who calls the 110-foot tall tree “old friend.”
Over the years, Knight, a former town warden, has nursed Herbie with insecticides and fungicide injections to battle the dreaded disease, writes David Sharp, of the Associated Press.
But the battle is now lost and the tree will be cut down in two weeks.
“His time has come,” Knight tells the AP. “And mine is about due, too.”
(Hwy inserts the ending…as the beginning):
“The days of people paying $500, $600 — $900 a night are gone,” Reay says.
“The HELCOC you say!” (In Montana™)
Calif. hotel foreclosures quadruple:
January 8th, 2010, by Jon Lansner
“California hotels are getting hammered by the recession and the changing buying habits of the newly thrifty guests who do come to visit.
A new report from Atlas Hospitality in Costa Mesa shows that since the start of 2009, the number of California hotels taken back by lenders through foreclosure rose 313% to 62. The number of hotels in financial default on their loans grew 479% to 307″
Hotel investor Sunstone of San Clemente on Thursday said that its letting 11 of its hotels — including 5 in SoCal — go back to its lenders. (The 11? In California it’s Residence Inn by Marriott Manhattan Beach; Courtyard by Marriott Los Angeles; Courtyard by Marriott San Diego/Old Town; Holiday Inn Downtown/San Diego; plus Holiday Inn Express San Diego/Old Town and elsewhere — Renaissance Atlanta Concourse; Hilton Huntington, N.Y.; Marriott Provo; Kahler Inn & Suites Rochester; Marriott Rochester; and Marriott Salt Lake City.
“Unfortunately, it’s going to get worse before it gets better,”
So joey,
You want to tell us again why it’s okay for business to let their property go back to the bank but it’s not okay for the average person to let their property go back to the back.
Funny how they are always absent, when a simple question is asked. Of course it would just be more circular logic. AKA ~ B.S.
The business world is very simple. It’s guided by one concept. It has one goal: Make money. Everyone in the business world accepts, understands and is utterly bound by that one goal.
In total contrast, the private world’s various needs and goals are distinctly unprofitable. All of them burn money on the bonfire of consumption.
——-
As different as they are, the two worlds get along just fine. Business makes ALL the money, transfers most of it to the private world through wages, loans, taxes, etc, and people spend all the money.
This continuous money cycle constitutes what we call the “economy”.
Society as a whole flourishes. Everyone’s happy.
———
Now lets change things. Lets say that the private world decides that, if it buys a house or a car or whatever, making a profit is it’s goal. And, if the house or car is unprofitable it will be abandoned.
Where would or could that extra, “profit-money” possibly come from?
It can’t come from the business world. That business world ONLY profits. It doesn’t consume anything. It doesn’t spend. It doesn’t provide a profit to anyone. It only MAKES money.
——
The only place profit on a home comes from is the private world itself. The private world would need to consume a part of itself in order to make money on a house.
We just went through a period where the private world attempted to consume itself.. It was the housing bubble. People trying to make a profit on homes practically destroyed the economy.
Encouraging people to either profit or walk away is Bubble-Think.. You’d think we already had enough of that.. but evidently not.
It just blows my mind that people would spend that kind of dough. Sheesh, does the room come with an attractive woman? (A la soylent green)
Don’t you mean Westworld with Yul Brynner as a gun slinger?
“While denying the obvious, Bernanke is now pursuing an even more reckless monetary policy than the one that created the housing bubble. The consequences this time will be even more devastating, and you can take that to the bank”.
~ Peter Schiff
A new report reveals New York and states across the nation have suffered the worst decline in tax revenue in more than four decades.
State tax collections dropped 11 percent from July to September 2009, the latest data available, according to the Rockefeller Institute of Government. The Albany-based research group is the public policy wing of the State University of New York system.
The first three quarters of 2009 marked the largest drop in state tax collections since at least 1963, the institute’s Jan. 7 report found. Early data for the fourth quarter of 2009 shows continued declines, though seemingly more moderate than what was experienced earlier in the recession.
New York is one of 28 state economies that, as of November, was continuing to decline, the report said. The findings were based on an index measuring unemployment, sales tax collections, private-sector employment and average weekly hours worked by manufacturing employees.
“The depth of the decline over the past two years will almost certainly leave state revenues significantly lower than those of any of the past several years,” even if tax collections increase in 2010, said Lucy Dadayan, a researcher at the Rockefeller Institute.
Lots of companies in the private sector would give their founders first born to have only a 11% decline in revenues. Lots of businesses are dealing with 30 to 40% drops in revenues. The business that survive are the ones that figure out how to reduce costs comensurately, mainly through dramatic cost reductions. Businesses do not have the luxury or raising prices on the remaining sales or borrowing tons of money to see them through the tough times. They just make do with less.
“A new report reveals New York and states across the nation have suffered the worst decline in tax revenue in more than four decades.”
How does that square with the supposed recovery? Shouldn’t tax collections begin to increase during a recovery?
States that rely heavilly on Income tax will probably see a slow recovery as individuals are either unemployed or making significantly less than they were before. Its going to take a long time for that to recover. Of course, that also impact the the second leg of the state tax structure, sales tax revenue. If people are unemployed or underemployed, they are not spending for much more than the essentials driving down sales tax revenues.
Businesses are losing money hand over fist, so they are not paying income tax, and businesses are allowed to carry back and forward net operating losses. So not only are they not paying income tax they may be getting refunds of taxes paid in prior years, and/or may offset the losses against future income to avoid paying income tax for a while after conditions begin to improve.
I would hate like heck to be the Treasurer at the state or local level these days.
I look for gubmint motors to come out with a new never before tried sales plan. Such as 0 down 0% financing for 72 months. To move their “critical” sedans, and perhaps GMAC can do the financing! They love losing money, it’s one thing they do well, I’ll give them credit for that.
GM Meeting Whitacre Profit Goal Means Fixing ‘Critical’ Sedans
Jan. 8 (Bloomberg) — General Motors Co. is cutting prices and reworking ads to revive sales of two sedans that executives consider vital to meeting Chairman Ed Whitacre’s goal for a 2010 profit.
The moves are aimed at shrinking dealer stockpiles of the Chevrolet Malibu and Cadillac CTS that ballooned to more than twice the industry average, North American President Mark Reuss said in an interview ahead of next week’s Detroit auto show.
“The CTS is going to be fixed, now,” said Reuss, 46. “We’re going to be right on the back of that working on Malibu. We’ve got to have Malibu selling a lot more than we do right now. We’re looking at what we should be doing with the car versus where we’re at.”
Yesterday evening, I took a gander at a documentary called “Who Killed the Electric Car?” Good stuff. Made me wonder why we’re propping up such a stupid company.
I enjoyed that documentary… recomended it to many friends and family. I had the same reaction as you did - it was extremely painful to watch the government bail out the auto manufacturers after seeing it.
Yeah, I always feel better when bailing out those that have made the worst business decisions.
NEW YORK (AP) — Investment bankers at Bank of America Corp. will likely get bonuses close to what they got in 2007 as the bank tries to retain key employees following its takeover of Merrill Lynch, The Wall Street Journal reported Thursday.
Citing people familiar with the situation, the Journal reported that Bank of America bankers are expected to get 2009 bonuses equal to 2007 levels, with about 25 percent in cash and the rest as deferred payments of stock or cash tied to the company’s performance.
Merrill paid out $5.8 billion in year-end bonuses in 2007, the Journal said. It said the size of Bank of America’s bonus outlay could not be determined.
I imagine pirate captains paid their crew well to keep them from taking over other ships and becoming competition or enemies.
Do managers of Megabank, Inc get bigger bonuses when the firms are doing well (due to more profits to share) or when they are losing money by the hundreds of billions (thanks to bailouts)?
Depends on their accountant? and how many friends they have at the FED.
Contrarian Investor Sees Economic Crash in China
Friday, January 8, 2010 ~~ The New York Times
James S. Chanos built one of the largest fortunes on Wall Street by foreseeing the collapse of Enron and other highflying companies whose stories were too good to be true.
Now Mr. Chanos, a wealthy hedge fund investor, is working to bust the myth of the biggest conglomerate of all: China Inc.
As most of the world bets on China to help lift the global economy out of recession, Mr. Chanos is warning that China’s hyperstimulated economy is headed for a crash, rather than the sustained boom that most economists predict. Its surging real estate sector, buoyed by a flood of speculative capital, looks like “Dubai times 1,000 — or worse,” he frets. He even suspects that Beijing is cooking its books, faking, among other things, its eye-popping growth rates of more than 8 percent.
“Bubbles are best identified by credit excesses, not valuation excesses,” he said in a recent appearance on CNBC. “And there’s no bigger credit excess than in China.” He is planning a speech later this month at the University of Oxford to drive home his point.
As America’s pre-eminent short-seller — he bets big money that companies’ strategies will fail — Mr. Chanos’s narrative runs counter to the prevailing wisdom on China. Most economists and governments expect Chinese growth momentum to continue this year, buoyed by what remains of a $586 billion government stimulus program that began last year, meant to lift exports and consumption among Chinese consumers.
It’d be pretty cool to put him and Jim Rogers in a box together and let them go at it.
“Now Mr. Chanos, a wealthy hedge fund investor, is working to bust the myth of the biggest conglomerate of all: China Inc.”
(Yawn…) Wake me up when the China crash is over.
“Dubai times 1,000 — or worse,”
Heh heh…
Mr. Bear do you Tango? Hugo & Christina might make a cute couple on “Dancing with the Stars”
I guess being a Central Banker in South America, is’nt quite a “prestigious” as in North America…
LA TImes…By Chris Kraul and Andres D’Alessandro January 8, 2010
Argentina’s president fires central bank chief over foreign reserves:
President Cristina Fernandez de Kirchner’s dismissal order stems from the bank chief’s refusal to release $6.6 billion to service foreign debt. He had refused to resign.
“The roots of this week’s fight — and Fernandez’s attempts to get control of the bank’s cash — stem in large part from Argentina’s battered economy, ravaged by devaluation and debt default during the decade that just ended.”
“…That in turn has raised borrowing costs, forcing the country to look to unusual and costly sources for cash and credit.
One of those sources was Venezuelan President Hugo Chavez, who bought billions in Argentine bonds to cement political ties with the left-leaning Fernandez and her husband, Nestor Kirchner, her predecessor in office. But the relationship ended in 2008 when Chavez’s conditions, including interest rates of 17%, became more than Fernandez could afford, Viglione said.
The Chavez connection has tainted Fernandez in other ways.
In 2007, Venezuelan Guido Alejandro Antonini Wilson was arrested at Buenos Aires airport carrying $800,000 in undeclared cash that investigators said was sent by Chavez for Fernandez’s presidential campaign. Chavez denied any knowledge of the cash. Wilson cooperated with prosecutors, but his associate, Franklin Duran, was convicted in 2008 by a Miami court of being an “unregistered foreign agent.”
Also to obtain cash, Argentina nationalized the nation’s $30-billion private pension system in 2008, raising a storm of controversy.”
Cristina Fernandez de Kirchner
Now, say what you will about her politics, but ya gotta admit that she’s a babe. I wouldn’t be surprised if that helped her win her last election. OTOH, looks like her re-election is up in the air.
Now, say what you will about her politics, but ya gotta admit that she’s a babe. I wouldn’t be surprised if that helped her win her last election.
Of course those looks helped! But more importantly, she’s part of Latin America’s hyperconnected political elite.
Try to put up with her kind of government for more than six months and you will no longer think she is a babe. She is mean, vindictive, petty minded, stupid and now, as she has shown today, almost suicidal. You can trust this kind of people to dig their own graves. I’ll be happy to see her go up flames, but not happy about the mess she will leave behind.
Is there something about Argentina water??? First there were the Perons, and then they took on G. Britain over the Falklands (a naval war..the second best navy at that time).
We are definitely quite weird, but we do have some virtues. We are just very bad at governing ourselves. It might be all that beef we eat.
…Chavez’s conditions, including interest rates of 17%…
Is there any doubt Chavez isn’t a Capitalist?
17% is likely lower than the inflation rate in Argentina.
I doubt Chavez would have loaned in Pesos. I would guess the loans were USD denominated, in which case the Argentine inflation rate is immaterial.
Is there any doubt Chavez isn’t a Capitalist?
Chavez Socialist: 17%
Citi-Bank Capitalist: 39%
PayDay loan ($$$$ Provided backdoor from Wells Fargo) Mafia: 386%
Hugo’s a 98 lb welterweight weakling
Hey now, don’t be picking on the Mafia. They are the only honest ones in the bunch!
I didn’t say “Italian” Mafia, I said PayDay Mafia, most likely…:-)
I’m sure this liar was/is the only one!
Economist Was Under Contract With HHS While Touting Health Reform Bill.
MIT economist Jonathan Gruber, one of the leading academic defenders of health care reform, is taking heat for failing to disclose consistently that he was under contract with the Department of Health and Human Services while he was touting the Democrats’ health proposals the media.
MIT economist Jonathan Gruber, one of the leading academic defenders of health care reform, is taking heat for failing to disclose consistently that he was under contract with the Department of Health and Human Services while he was touting the Democrats’ health proposals in the media.
Gruber, according to federal government documents, is under a $297,600 contract until next month to provide “technical assistance” in evaluating health care reform proposals. He was under a $95,000 HHS contract before that.
Grill him? Why not roast his azz on a spit! Just another dog & pony show, nothing more.
Geithner faces hot seat again as lawmakers react to ‘troubling’ e-mails on AIG bailout secrecy.
WASHINGTON (AP) — A House committee is planning to grill Treasury Secretary Timothy Geithner about his role in the massive bailout of failed insurer American International Group Inc.
The House Oversight Committee is responding to news that key details about AIG’s bailout were suppressed by the Federal Reserve Bank of New York while Geithner was its president.
A growing chorus of lawmakers says Geithner must explain his involvement in deals that diverted billions from AIG’s bailout to Goldman Sachs and other big banks.
New York Democrat and committee Chairman Edolphus Towns says the hearing will examine the rise and fall of AIG and its business partners.
The New York Fed and Treasury say Geithner was not made aware of the e-mails that pushed for more secrecy.
Geithner knows where all the bodies are and you can bet he will never be prosecuted.
Why Job Growth Will Be Weak and Painful This Time.
January 8, 2010 ~ Foxnews
The aftershocks of the credit crisis will be a significant drag on job creation during the economic recovery, and those counting on a classic bounce-back may want to get a reality check from the housing and retail sectors.
“We haven’t just gone through a business cycle, we’ve also gone through a major restructuring of the American economy,” says Ken Goldstein, a labor economist at the Conference Board. “The workout from all of this will be very long and very slow. This is an awful lot to adjust to.”
This was reinforced Friday when the government reported that US employers unexpectedly cut 85,000 jobs in December, cooling optimism on the labor market’s recovery.
In the case of the homebuilding industry, that adjustment could take until mid-2013, when the National Association of Home Builders expects production and employment to return to something resembling normal.
“In housing, we ‘re going through an abnormal cycle,” says David Crowe, chief economist at the trade group. “We started losing jobs almost two years before the rest of the economy, in late ‘05, early ‘06. We usually go in [top recession] first, but come out first. That’s not going to happen this time. We’re expecting weak job growth in general in 2010.”
The industry has already lost about a third of the 3.5 million jobs it had during the peak employment period of early 2006.
Any form of the word expect should be banned.
“We haven’t just gone through a business cycle, we’ve also gone through a major restructuring of the American economy,” says Ken Goldstein, a labor economist at the Conference Board. “The workout from all of this will be very long and very slow. This is an awful lot to adjust to.”
Of course it will be slow, especially since we still haven’t gone through the necessary restructuring. We’re still trying to resuscitate the old economy which is dead and in any case was never sustainable.
This time? THIS TIME?!
Must be some newly minted college grad, because that’s the way it been for the last 40 years and 5 recessions.
Now worse? That might have been a better adjective.
Amtrak “Train From Hell” Delayed Almost 24 Hours
“The snow drifts were more than two stories tall,” said an Amtrak spokesman Fri, Jan 8, 2010 ~ CNBC
It was “the train from hell,” said one passenger.
Arriving almost 24 hours behind schedule, Amtrak’s California Zephyr arrived in Chicago with a trainload of passengers who described themselves as “tired, hungry and stinky.”
The train, which left Sacramento five days ago, was delayed by severe weather and numerous mishaps on route and pulled into Union Station more than 19 hours late.
One delay was caused by the train striking a pickup truck in Iowa. But the biggest problem, the rail carrier says, was the weather. “There is a pass in Nebraska between two hills, ” spokesman Marc Magliari says, “where the snow drifts were more than two stories tall.”
“I’m Sweaty, I’m Tired, I Want My Money Back!”
Some passengers complained about a short supply of food and water on board, others criticized the crew for not keeping them informed.
Most say they will never take Amtrak again.
Amtrak says it will pay hotel rooms for passengers who need them. It will also offer refunds on a case by case basis. Because of the weather, the rail carrier is suspending service past Minneapolis today. Trains between Chicago and Denver have also been suspended until tracks can be cleared.
In a similar incident, an Amtrak train bound from Denver arrived 23 hours late. A third train which runs from San Antonio to Chicago derailed in St. Louis yesterday, temporarily stranding 176 passengers and a crew of nine.
Anyone who gets on Amtrak without x3 extra bottles of red red wine, is just asking for trouble!
Excellent advice, sir.
So somehow they (the passengers) forgot it was winter.
Yes Amtrak should have better prepared. Track recon for starters. Contingency on-board supplies. But one thing I learned when I lived in northern climes was that, well it’s fricken winter! With like, snow!
They could always try the Donner Party menu….
Did you know this?
That the words race car spelled backward spells race car.
That eat is the only word that if you take the 1st letter and move it to the last, it spells it’s past tense ate.
And have you noticed that if you rearrange the letters in “illegal immigrants” and add just a few more letters, it spells out:
“F**k off and go home you free-loading, benefit grabbing, kid producing, non-English speaking d-heads and take those hairy faced, sandal wearing, bomb making, goat humping, smelly rag head m’fers with you!”
Did you know the prefix “palin-” (as in palindrome) means backwards?
I suppose this explains a lot about the former Alaska governor’s name…
As someone pointed out the other day “Team” spelled backwards is “Meat”
wmbz, you should invite Clarence Thomas over for lunch, you’d all have a lot to “talk” about out on the “veranda”…tobacco, plantation farming, Pepsi cola or mint julep,…
Damn, I didn’t know Cali., was having $ trouble, thank God he declared an emergency…
Schwarzenegger declares budget emergency in California.
Foxnews~
During last summer’s fiscal crisis, Gov. Arnold Schwarzenegger borrowed the title of a film classic to describe California’s budget, saying it contained “the good, the bad and the ugly.”
He was referring to welfare reforms and the streamlining of state boards that he was able to broker, along with deep spending cuts for schools, health care programs for the poor and AIDS-prevention efforts.
All that’s left in 2010 is the ugly.
Gov. Arnold Schwarzenegger unveiled an $82.9 billion state spending plan today that calls for no tax hikes but envisions pay cuts for state workers, reductions in services to California’s neediest residents - and on the benevolence of the federal government.
The governor also declared yet another fiscal emergency, and called for yet another special session of the Legislature, designed to keep a projected $19.9 billion budget deficit from growing by another $2.4 billion.
“We must begin our work immediately,” Schwarzenegger said in his message to legislators. “If we fail to take action in the special session that I have called, our problem will only grow, and the decisions that will be required to make up for lost savings will grow even more difficult than those now before us.”
I thought it was already ‘official’ but now apparently it is.
OFFICIAL: GM Is Closing Saab ~ 08 January 2010 Saab
Although GM has received several last-minute offers to save Saab, the Americans decided to send the Swedish brand in liquidation.
The Swedish automaker maker Saab has been put into liquidation today, despite the last-minute offers that General Motors received for the Northern manufacturer. The information was made public by the Saab’s main workers union.
“Today, Saab Automobile’s board has decided on the liquidation of the company. GM is taking an additional step in the winding up of Saab,” said Stefan Loefven, head of the IF Metall union, which has a syndic in that the Swedish automaker’s board.
Swedes harshly criticize GM’s attitude, which had confirmed today that they received several offers to sale Saab. “It is irresponsible of GM as an owner to go in two directions, both pursuing the sale (of Saab) and the winding up,” Loefven said, quoted by AFP.
No, GM should continue to pour money down the sinkhole trying to keep up with the welfare state that it’s Saab employees are used to!
“It is irresponsible of GM as an owner to go in two directions, both pursuing the sale (of Saab) and the winding up,” Loefven said, quoted by AFP.
yeah Loefen, didn’t you hear, nobody wanted to buy the t*rd?
China Becoming Top Exporter ‘Good News’ for Germany, BGA Says
“Jan. 7 (Bloomberg) — German exporters said they’re not concerned at the prospect of China becoming the world’s No. 1 exporter, because rising Chinese wealth offers greater opportunities for German business.
“The fact that China has overtaken us is good news because they’re not taking away anything from us,” Anton Boerner, president of the BGA exporters’ lobby, said today in a phone interview in Berlin. “The richer the customer, the better our business.”
http://www.bloomberg.com/apps/news?pid=20601100&sid=a33DxV_LGpn8
If there is one country China imports from (stuff besides oil or commodities), it is Germany. But be sure they are disassembling everything they bring over and trying to make cut-rate imitations of German machinery & engineering equipment!
WASHINGTON (AP) — Americans borrowed less for a 10th consecutive month in November with total credit and borrowing on credit cards falling by the largest amounts on records going back nearly seven decades.
The dramatic declines raised new worries about whether consumers will cut back further on spending, making it harder for the economy to mount a sustained rebound.
The Federal Reserve said Friday that total borrowing dropped by $17.5 billion in November, a much bigger decline than the $5 billion decrease economists had expected.
Which begs the question, is that due to lack of available credit, or lack of borrowing desire/ability?
It must drive D.C. crazy, knowing that they can’t make people borrow. I look for ’stimulus’ 3 mid-year.
Higher unemployment
+ Lower borrowing
= Green shoots???
Not surprising as a lot of people I know have told me that their CC companies have lowered their credit lines to whatever their current balance is. Kinda hard to snap up a 50″ flatscreen under those conditions for most J6Ps.
CES 2010: Ford unveils Tweeting car
Ford, the US car giant, has unveiled the world’s first tweeting car.
Las Vegasm 08 Jan 2010
Mulally, Ford’s chief executive, said the company will produce a range of vehicles which can read motorist’s twitter messages to them as they drive down the street.
Drivers may even be able to Tweet replies as the cars will feature voice recognition technology. But composing Tweets will not be possible on the first models, due out in the US later this year, because of safety fears.
US Road safety group the AAA warned that the new technology could put lives at risk. “The more things that are going on in a vehicle, the more things can distract a driver,” a spokeswoman said. “You only have so much attention to give, and we really want everyone to keep their attention on the roadway for safety reasons.”
However, Doug VanDagens, Ford’s global director of connected services, said people currently read Twitter feeds while they are driving anyway, and the new system would increase road safety by enabling motorists to keep both hands on the wheel.
“We take what people do – they talk on the phone, they fumble with mp3 players, they look at maps. We take these activities and make them safer,” he said.
Methinks that the “successful” models in the not too distant future will be the ones the formerly middle class can afford with their shrunken paychecks.
The local Ford, Chevy and GMC dealers have 40K+ Pickups coming out of their ears. I don’t know who is supposed to buy these monsters. I seem to see more and more Korean (especially KIAs) and other cheap cars on the road these days. If the Chinese can produce a reasonably safe and reliable 5K car they will clean up big time in the US.
We all know that one can get a good, safe, reasonably clean and fuel-efficient used car for $5k, yet Americans tend to go in for new cars. The secret to pushing cars in the US is financing. Yes, the Chinese will be in a superior position to offer financing, and that is what will help them clean up the market. That,together with kitschy designs and the “new car smell” (formaldehyde?).
Uh, no. I went shopping for used cars 2 years ago. What you just described was around 9-12K that is 4-6yo.
5k around here gets you a beater on its way to junker. People DO NOT take care of their cars.
Treating a 10K+ purchase as disposable is everything you need to know about what is wrong with this country.
Oh just fricking great.
Idiocracy here we come!
Reduce that stress and chance of heart attack, the scientific way. Now we have to come up with a study for women that proves the same point!
~~UK Telegraph
Having sex twice a week ‘reduces chance of heart attack by half’
Men who have sex at least twice a week can almost halve their risk of heart disease, according to new research.
It shows men who indulge in regular lovemaking are up to 45 per cent less likely to develop life-threatening heart conditions than men who have sex once a month or less.
The study, of over 1,000 men, shows sex appears to have a protective effect on the male heart but did not examine whether women benefit too.
Now the American researchers who carried out the investigation are calling for doctors to screen men for sexual activity when assessing their risk of heart disease.
Every year, around 270,000 people in Britain suffer a heart attack, and coronary disease remains Britains biggest killer.
Although sex has long been regarded as good for physical and mental health, there has been little scientific evidence to show the full benefits that frequent intercourse can have on major illnesses such as heart disease.
It shows men who indulge in regular lovemaking are up to 45 per cent less likely to develop life-threatening heart conditions than men who have sex once a month or less.
No word on the effect it has on women. Isn’t that interesting.
Conversely, if your man just isn’t up to it, drop him like a heart attack.
“Men who have sex at least twice a week can almost halve their risk of heart disease, according to new research.”
This information should prove quite valuable to women who are tired of their husbands.
I’m not thinking this is true for Tiger.
Again they confuse cause and effect.
Maybe it’s those that aren’t obese that are getting some action, instead of frequency being an indicator of good health?
Beat me to it!
Happy 75th birthday, Elvis!
uh huh uh huh uh huh
Hey don’t step on my blue suede shoes
What the hell is up with the Brits? Every other month or so you read about a capture, in area’s where pirates roam…
Somali pirates holding Britons issue terrifying ultimatum: Pay £1.9m or yacht couple die.
By David Jones~ UK~ 08th January 2010
Pirates holding a British couple issued a terrifying ultimatum yesterday: ‘Pay up or we’ll shoot them.’
Speaking exclusively to the Daily Mail, the Somali gang which snatched Paul and Rachel Chandler from their yacht in the Indian Ocean said time was running out after negotiations to free them stalled.
In a chilling exchange, they also revealed that 55-year-old Mrs Chandler has been brutally beaten and needs medical treatment.
The captors are demanding $3million (£1.9million) and have set a two-month deadline for the ransom to be paid.
If their demands are not met, they will kill the couple in March, one of the kidnappers told the Mail.
‘We are giving an ultimatum of two months from January 1. If we are not paid $3million we are ready to shoot them,’ he said.
‘It is becoming too expensive to hold these people. By March, they have to decide or we will be done with them.’
The man, who gave his name only as Noor, gave horrific details of the Chandlers’ life in captivity.
Mr Chandler, 59, and his wife, from Tunbridge Wells, Kent, were kidnapped at gunpoint in October as they sailed from the Seychelles to Tanzania.
They have since been moved every 48 hours and have been separated from each other despite their desperate pleas to be kept together.
In one shocking episode, the helpless couple clung to each other and begged for clemency until their ruthless captors resorted to force to beat them apart.
Mrs Chandler, an economist, was injured in the attack. She will be treated by a doctor in Somalia, according to her captors, but the episode has escalated fears for her safety.
A second gang member, who claimed he was the pirates’ negotiator, said: ‘The woman was unfortunately beaten. She was injured but we have arranged for her to get medical treatment.’
Mr Chandler, a retired quantity surveyor, and his wife were on a round-the-world trip when they were kidnapped in the Indian Ocean, onboard their yacht the Lynn Rival.
Their captors have said they will ‘burn the bones’ of the couple if an attempt is made to free them.
The Chandlers are being held close to the town of Haradeere but have been moved between safe houses to prevent their rescue.
Their captors fear they will be located by Western intelligence, or snatched by Islamic extremists.
The gang initially demanded a $7million (£4.3million) ransom from the Chandlers’ relatives - a middle-class family with no apparent ability to meet such a vast demand.
But reports suggested that the couple’s release was almost secured for $100,000 (£61,600) last month until the British Government allegedly blocked the deal because it went against a policy on negotiating.
Mrs Chandler, an economist, …
’nuff said!
… ransom from the Chandlers’ relatives - a middle-class family …
Can’t be sure if the reporter was referring to Chandlers or their relatives, but calling the Chandlers middle-class pushes British understatement to the limit. Middle class families don’t often go sailing around the world in their yatch.
And seriously, how would you like a bunch of Somali families “sailing around the world in their yatch” swing by the British isles?
My daughter is considering a move from Seattle to Newport Beach. She asked me to get a quote for a one way truck rental. 16′ Penske truck, Seattle to Newport Beach = $394.00 including mileage.
Penske truck, Newport Beach to Seattle = $1145.00 including mileage.
They must be leaving CA in droves. And things aren’t that rosy in SEA.
Geez. At that differential, hop a plane to Cali, then drive the truck to Seattle.
You’d burn a lot more than the cost-differential in diesel expenses.
You might not. I moved from Chicago to Colorado in mid-2008 (peak oil/diesel price), so my reference point is valid.
An empty truck driven at a steady, consistent pace might get 20 mpg. I drove a full 24-foot truck more than 1,100 miles, much of it uphill (Chicago is 690 feet above sea level; Colorado Springs is 6,000-ft). I averaged 14 mpg.
Interesting… $1145+ tax is exactly what I paid for a one way U-Haul 17′ truck from Cleveland to Denver two weeks ago. I heard moving from Denver to Cleveland is free if you pay for the gas.
Same for me. I moved from Santa Fe, NM to Cali in the summer for $400, the opposite trip was $1150.
CA is in big trouble, they know how to fix it, but no one wants to be the bad (smart) guy.
I moved from San Jose to Boise in 2006, and even then the U-Haul rate was higher to Boise than the reverse.
Sheila’s back in the office, but a bit of a slow start…
http://www.fdic.gov/bank/individual/failed/horizon-wa.html
He rode the one in the late 1990s and lost $350,000 in the dot-com collapse. Shaken but optimistic, he bought into the bull market that followed — and lost another $350,000 from his portfolio’s peak when stocks fell to a 12-year low in early 2009.
Now the 65-year-old roofing contractor from Raleigh, N.C., says “he’s getting smart for a change.” Even though the Standard & Poor’s 500 has climbed 68 percent since March, Shook is largely leaving the stock market “to the crooks that run” it. He’s sold shares and bought bonds instead, with no regrets.
Millions of other Americans are steering the same course. After being key players in bull runs of the past, small-time investors have not only stopped buying, they’re selling. The question for the new year: If the man on the street doesn’t jump back in, will stocks continue to defy gravity?
Answer YES
THE FED will not let it fall. It’s too big to fail.
Screw billions and trillions, it`s time for “unlimited aid” thatshould cover it.
Fannie Mae relaxes Florida condo standards
By ALAN ZIBEL
The Associated Press
Updated: 7:30 p.m. Thursday, Jan. 7, 2010
WASHINGTON — Fannie Mae is seeking to prop up Florida’s ravaged real estate market by reviewing hundreds of condo projects in the state that currently don’t qualify for its loans.
The mortgage finance company said Thursday that buildings deemed stable after the review will be given a special approval lasting up to 18 months.
If they are approved, lenders will be allowed to offer mortgages to homebuyers and sell those loans to Fannie Mae, which pools them into bonds and sells them to investors.
The reviews will look at the buildings’ occupancy, homeownership association dues, financial stability and physical condition.
Under nationwide regulations enacted in March, Fannie Mae has been rejecting any mortgage for a condo buyer if more than 15 percent of a development’s other owners are delinquent on their association fees. Fannie Mae has been willing to make exceptions to that rule, but now it is actively seeking out applications for exceptions.
The initiative is “is geared toward providing maximum support for Florida’s distressed condo market,” Karen Pallotta, executive vice president of the company’s single family mortgage business.
The rules for new buildings still are tight. Fannie Mae will only guarantee mortgages in new or newly converted condo developments if 70 percent of the units are sold or under contract.
Fannie Mae and sibling company Freddie Mac provide vital cash to the mortgage industry by purchasing home loans from lenders and selling them to investors. Together, they own or guarantee almost 31 million home loans worth about $5.5 trillion, orabout half of all mortgages.
The two companies, facing mounting losses from mortgage defaults, were taken over by the government in September 2008 under the authority of a law Congress passed in summer of 2008.
So far the government has provided $60 billion to Fannie Mae and $51 billion to Freddie Mac, and the Treasury Department last month promised unlimited aid over the next three years.
Men strip Loxahatchee Groves home under foreclosure, but was that a crime?
By Eliot Kleinberg
Palm Beach Post Staff Writer
Posted: 1:52 p.m. Friday, Jan. 8, 2010
A judge today ruled prosecutors can’t prove eight men committed a crime when they stripped a million-dollar Loxahatchee Groves home under foreclosure.
The ruling could well lead prosecutors to drop charges against the eight, unless new evidence comes to light.
The decision focuses a spotlight on a growing problem: it’s taking a year on average for lenders to seize foreclosed homes through a formal sale, giving angry or desperate owners plenty of time to cart away goods and fixtures.
Or have someone do it for them.
“There is a problem with the system that’s going to plague our system for a long time,” Palm Beach County Circuit Judge Ted S. Booras said.
A Palm Beach County Sheriff’s report says a person had met a deputy Wednesday night at the home at 14094 43rd Road North. It’s valued at $1.1 million.
After the man showed the deputy a foreclosure document, the deputy found the eight men, seven of them from Broward County, removing major appliances, cabinets, and even toilets and tiles and copper wire.
Andrew H. Carr, 47, of Davie, told the deputy the men were in the house with the permission of a man named Gary Coulton, who was in Jamaica.
Coulton is the cousin of Michael Brandon, listed in property records as the home’s owner.
But the eight were charged with burglary of an unoccupied dwelling, criminal mischief of $1,000 or more, grand larceny of $100,000 or more, and possession of burglary tools.
On Thursday, Assistant Public Defender Marie Calla told the judge Coulton had sold the home to Brandon in 2007.
“It sounds like probably what happened (was), this guy (Brandon) owned the place, it’s in foreclosure, he said, ‘Guys: take everything out of it.’” Callas said Thursday.
“It may be immoral and unethical, but it’s not a crime if you own the property,” she said,
This morning, Calla told the judge a lawyer for the Bank of New York had confirmed the foreclosure sale had not yet occurred and so the home still technically belonged to Brandon.
“Banks have legal remedies that they’re not exercising, such as getting restraining orders,” Booras said. “There is some serious civil issues between everybody and the bank, (but) they’re civil, not criminal.”
Booras said he found no evidence to dispute that Brandon or his cousin gave the men permission to strip the house.
“This does not necessarily end the case,” Booras told the men. He said prosecutors still have six months to file charges if they find new evidence. The state attorney’s office said law enforcement is continuing its investigation.
The other defendants are Leecent V. Blake, 29, of Royal Palm Beach; Sean Coleman, 39, and Dwight Jackson, 38, of Sunrise; Patrick Leroy Johnson, 37, of Coral Springs; Marlon M. Remikie, 28, of Plantation; Anthony Johnson, 41, of Lauderhill, and David Ellis, 48, of Fort Lauderdale.
All were released on their own recognizance, except Carr, who is on probation on a 2006 Broward County conviction for grand theft.
With no charges now pending in Palm Beach County, it may be that Carr didn’t technically violate probation, Booras said. He set another hearing on Carr’s status for Saturday.
After the hearing, Calla said, “Perhaps the Florida Legislature needs to take a look at procedures as far as foreclosure. For now, a person can do what they want to do with their own home.”
Outside court, Michelle Jackson, wife of Dwight Jackson, said she didn’t know what deal was struck but the men were not paid for their work.
“These are law abiding men,” she said. “They’re the hardest working human beings I know.”
Attempts to locate Brandon for comment were unsuccessful. A lawyer for the bank did not return a call Thursday or today.
If stripping a house isn’t illegal then would stealing the whole house be illegal? Could a person legally move a house he doesn’t own to his own plot of land?
Removing the house would presumably be illegal, since the bank holds a lien against the house, not just the lot.
However, destroying the house on-site beyond possibility to repair (e.g. major structural damage, intentional destruction of all finish work, soaking all the drywall with water or something noxious, etc) probably would not be illegal.
To be very clear, I am not advocating this type of behavior. I am opposed to the waste involved.
FDIC sells $1B in loans
The Associated Press
Posted: 6:40 p.m. Friday, Jan. 8, 2010
WASHINGTON — The Federal Deposit Insurance Corp. has sold about $1 billion in troubled loans from 22 banks that failed during the past 18 months as it works through an inventory of assets from the institutions it has taken over.
The FDIC said Friday that the winning bidder in its auction, Los Angeles-based Colony Capital Acquisitions LLC, paid $90.5 million for a 40 percent stake in the new company set up to hold the commercial real estate loans. The FDIC has the remaining 60 percent.
About 840 of the 1,200 or so “seriously distressed” loans are delinquent, the FDIC said. The agency said 75 percent of the commercial properties involved are located in California, Florida, Georgia and Nevada, which are among the states with the highest numbers of failed banks.
Last year, 140 U.S. banks succumbed to the soured economy and a cascade of loan defaults — the most in a year since 1992 at the height of the savings-and-loan crisis. The failures compare with 25 in 2008 and three in 2007. They cost the federal deposit insurance fund, which fell into the red, more than $30 billion last year.
FDIC Chairman Sheila Bair has said the number of bank failures could rise further this year. The agency expects the cost of resolving failed banks to grow to about $100 billion over the next four years.
January 08, 2010 06:40 PM EST
Copyright 2010, The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Another View: TARP-ed and Feathered
February 11, 2009, 3:32 pm
Thomas J. Barrack Jr., the founder and chairman of real estate investment firm Colony Capital, offers his review of Treasury Secretary Timothy F. Geithner’s recently announced overhaul of the Troubled Asset Relief Program, or TARP, and suggests other ways the government could help banks shed troubled assets.
The mortal sin as a rookie in the World Series is overpromising and underdelivering. It is standing up to the plate with the bases loaded, in the bottom of the ninth, down by three runs, pointing at the center field fence, the crowd cheering you on, promising to deliver a grand slam — then whiffing your opportunity at bat.
The market had expectations of a clearly articulated plan to “ring fence” bad assets to reignite lending into a stalled economy. The Treasury secretary pleaded for patience, indicating we were still in the first inning. The crowd booed and jeered, saying it might be the first inning of the final game of a long and painful triple-header.
The market simply cannot ignite because it does not know what the government or its agencies are going to do on any given day. The market can figure it out as long as the rules are clearly articulated and maintained. We can play hockey on a baseball field with football pads as long as the rules are clear and consistently applied to all players. As we have stated before, we need and must demand clarity in architecture, structure and execution of public/private partnerships, and it cannot take place without the “flooring” and “financing” of some form of “bad bank.”
Public/Private Partnerships
There are at least two intersections of public/private participation that could be potentially helpful in rescuing the banking industry:
1. Acquisition of “toxic assets” from a bad bank.
2. Pre-receivership capital infusions to existing banking institutions.
Both can only function fully in harmony with a bad-bank collector.
Acquisition of Assets from a Bad Bank
A bad bank holds lazy assets to term with no mark-to-market consequence, harvesting pre- and post-receivership toxic assets and subsequently selling them at auction through equity partnerships with private capital, as previously done in Resolution Trust Corporation-era N-series and MIF partnerships.
The equity partnership strategy would be designed to yield recoveries with a higher present value than conventional sales methods by capturing the asset management efficiencies and expertise of the private sector, while the bad bank would recover part of the profit from improvement in inefficient markets or unpredictable events. This in essence provides insurance to the government by retaining a continuing interest in the upside pricing parameters of the remerchandised bad assets. Pricing of toxic assets could be similar to the sales process and procedures utilized by the RTC with a Derived Investment Value, or DIV, structure — an estimate of the liquidation value of the assets based on an arithmetic valuation formula created by the RTC.
Equity partnerships could be established by the bad bank to bid on the toxic assets that the bad banks wanted to liquidate. The bad bank would establish limited partnerships with selected private sector entities to be the general partner, or GP, with the government. The private sector partner would be the GP and own 51 percent of the partnership and the government (bad bank) would be the limited partner, or LP, of the GP and own 49 percent (similar to the N Series and the MIF RTC partnerships). The GP would be selected in a competitive auction based on price and qualifications. If a GP wanted to bid on the assets, the GP would bid a percentage of DIV. The highest bidder would become a partner with the government and be given staple financing for the acquisition by the government. (Financing is crucial to renewed liquidity.) The GP and LP would contribute equity capital according to their percentage interests, subject to the government-provided debt to facilitate the purchase.
The pricing and equity partnership program by a bad bank will put a definable and understandable pricing formula in place, such as DIV, bring a call to arms from private capital as a result of eliminating the unknowns through profit participation and a type of “loss sharing,” solve the seller-assisted financing problem, limit taxpayer losses and quickly start to create a new and realistic market in troubled assets which will then over time become untroubled.
The bad bank will be able to liquidate the true toxic assets and will hold to maturity the toxic market assets. Private capital will run to participate and the unknowns will be neutralized by the loss-sharing and profit-sharing agreements. Private capital will come in and bid on these assets at a percentage of some sort of DIV. Although the bids may be below what the bad bank paid for these assets, they will be protected through the equity partnerships and “schmuck insurance.” The toxic market assets could then be held to maturity and as the market comes back, these assets will recoup their value.
Pre-Receivership Capital Infusions
1. Congress should amend the current Bank Holding Company Act to change the percent limitation that a private equity fund can control in a depository institution without the necessity of becoming a Bank Holding Company.
* Currently, any transaction involving a nonbank entity acquiring 25 percent or greater control of a depository institution would require it to be classified as a Bank Holding Company and subject to all associated regulatory limitations, statutory reviews and capital requirements.
* A “silo” structure, which in effect would be a “look through” exemption to the actual limited partner investors in a private equity fund would work well. Rather than viewing the fund itself as a single investor, it would count each LP as a single investor but not require registration other than by the general partner.
* The percentage limitation is designed to prevent manipulative control of a federally insured institution for one individual or group’s purpose. That governance already exists within private equity firms as a result of the diversity of its investor base.
2. Require any bank that receives TARP money to receive private equity funding on a matched basis to TARP funding. The terms and conditions of the entire funded amount would be on terms at least as favorable as those dictated by the private equity firm. This would undoubtedly be preferred stock with a preferential return, conversion rights and/or warrants at attractive strike prices along with governance (i.e. Goldman Sachs and Warren Buffett).
* The government is taking all the downside and, as we have said before, the existing shareholders in these situations need to suffer dilution when required. These side-by-side private equity investments would provide a market test to support TARP pricing and the terms and conditions upon which it would be rendered.
3. Allow prereceivership loss sharing. Loss sharing gives private equity investors an incentive to make capital infusions in banking entities with troubled assets on a sane basis. Pricing the bad assets is the ultimate barrier to fresh capital infusion and no one has been capable of getting it right. Private equity would be willing to take a first-loss position of a designated amount and the government would absorb the residual losses (i.e. similar to the last Citi loss-sharing agreement with the government).
* Unfortunately, the government and the regulatory environment have not been willing to engage in loss-sharing agreements with new investors in a pre-receivership environment. In other words, a private equity investor interested in a failing bank can only receive government help once the government has taken over the institution, which by its own effect extinguishes existing common equity, preferred equity and bonds. If the regulations were changed to entertain loss-sharing relationships with new private equity investors pre-receivership, this would remove a gigantic impediment to investment structures and allow a renewed flow of equity which might salvage portions of common equity, preferred equity and debt in the failing institution.
Pricing of Toxic Assts
The purchase of true toxic assets should be done at market-clearing values, since time and patience will not heal them. These assets require active management, value-add and often a re-engineering and redistribution of complicated portfolios. Pricing at market value causes an immediate write-down and commensurate capital impairment, which banks find problematic at this stage of the cycle. The problem has been that the banks will not sell because of the capital impairment that they will suffer as a result of “true clearing prices.”
The claim that these “Franken-derivatives” are too complicated to be understood or underwritten is lazy thinking. The federal regulators already stress-test these assets in every review and audit. The market simply cannot predict what actions entertained by government and regulators will affect the future pricing and resolution strategies of those assets. As a consequence, the market sits in the dugout waiting for another curve ball to pass.
One method to ease the banks’ pain in selling toxic assets, which has been successfully used in the past and would also work today, is the utilization by the regulators (i.e. the new “bank czar”) of Net Worth Certificates, or NWCs. The bad bank would buy toxic assets for cash at true market value, resulting in a capital loss for the selling bank. To plug the hole in the balance sheet of the selling institution, the bad bank would issue an NWC. The use of NWCs, along with a capital forbearance program, would allow well-managed, economically sound institutions to temporarily exempt themselves from regulatory and capital requirements upon certain terms and conditions.
(For an example of how this structure could work, see “Bad Bank Alchemy.”)
Conclusion
Mr. Geithner is obviously not an amateur, although his handlers have scripted him to act like one. I have compassion for his six-Tylenol headache, but this is the moment for bold leadership, defined architecture, detailed structure, and painstaking harnessing of expectations. Strength and focus, not political rhetoric, are the mandate of the day. No matter how you look at today, the non-plan-plan was a disaster.
By the way, whoever hatched the idea of Senator Christopher Dodd throwing out the opening pitch should be TARPed and feathered.