Bits Bucket For January 16, 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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Name:Ben Jones
Location:Northern Arizona, United States
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“A nationwide survey last year found that investors expect the U.S. stock market to return an annual average of 13.7% over the next ten years.”
Lol, good luck with that. Read all about it by googling-up “Why many investors keep fooling themselves”.
It is a trick leading up to the fact that a fool and his money soon part.
Give em false hope and then cleanup. Works every time.
That’s right. Notice how the whopping big gains on Wall Street always seem to occur right at the point when individual investors are either unable to participate (e.g. Megabank, Inc got the ZIRP loans from the Fed and the TARP money, while Main Street Americans got pink slips)? Once Wall Street insiders have made a killing on a big runup in share prices at the point when individual investors are either too broke or scared to participate, it is time to rake in another herd of greater fools to take to the cleaners…
+1,000,000
“…either unable or too scared to participate…”
That’s a good article in the WSJ.
http://online.wsj.com/article/SB10001424052748704381604575005291706758502.html?mod=WSJ_PersonalFinance_PF2
And what does it say about plans all over the country to allow local governments to borrow against the pension funds by not making required contributions, at a rate of 8 to 10 percent?
The usual — younger generations will be hit with a far more massive bill, and see their social institutions collapse.
Unfortunately, local and state governments have seen retirements as a way to get labor a bit cheaper today, while paying many times more later. It is nothing but a ruse to borrow at VERY high interest rates. Of course these deals should have been funded from the start, but if they had to do that they would never have made the deals to begin with.
The sad thing is that there is no longer enough money in the universe to meet these obligations and many will be left holding the basket at retirement.
Nationwide survey conducted by stockbrokers of other stockbrokers and Hedgefund types??
in other news
A survey of criminals found that our city is so safe that one can leave their house unlocked when they go on vacation.
Just as absurd is the opinion that the S&P 500 ARR the next ten years will repeat the negative ARR of the previous ten years.
I wouldn’t go that far, but the excesses are not yet out, so I would expect another decade of below average returns when adjusted for inflation.
And remember, we are in an era where excess executive pay has taken the place of dividends.
And remember, we are in an era where excess executive pay has taken the place of dividends.
So very, very, true.
How would Wall Street keep its perpetual money pump going without greater fools willing to prime it?
How does ANY institution - public or private - keep its perpetual money pump going (i.e., make enough profit to at least survive) without greater fools willing to prime it?
It’s a fact of life.
How do government agencies make it without greater fools to prime it?
How do IT organizations and their excessively paid captive and consultant staff make massive incomes without the greater fools who think they actually need what is often 10th-grade level expertise?
“How does ANY institution - public or private - keep its perpetual money pump going (i.e., make enough profit to at least survive) without greater fools willing to prime it?
It’s a fact of life.”
Nope. But it is quite easy to see why the present financial climate on Wall Street would give you that perception. In a world where thieves are given free rein to prosper unchecked by a rule of law, those who fervently play by the rules can easily reach conclusion you stated.
You mean how could they do it without Eddie? The system runs on Eddies. Goldman sez to the gas pump attendant: “fill -er up with eddies”.
“A nationwide survey last year found that investors expect the U.S. stock market to return an annual average of 13.7% over the next ten years.”
BUWHAHAHAHAHAHA! Even Bernie Madoff never promised returns that high.
Depends when “last year” this was done. If it was in Feb, then they may well be right. Stocks are already up about 70% since the lows of ‘09.
Read the article, Eddie. And tell me what proportion of stockbuyers bought last March and sold in December.
Why sold in December? All major indexes are up in 2010. Dow has averaged about 10% a year since 1980. There is no reason to believe the next 30 years won’t return the same. And given that the past 10 years have been more or less 0%, 13.7% is quite within the realm for the next 10 years. That would average out to 6 or 7% a year over 20 years, below the 30 years moving average.
Though I cannot confirm this, it kinda sorta looks like some of that TARP money that was supposedly for getting the toxic assets off the banks backs and the ZIRP loans from the Fed that was supposed to restore lending got diverted into buying stocks at fire sale prices at a point when American households were largely sidelined by fear or a dearth of income. Just a conjecture here…
Countrywide just called, they want to land a helicopter in my back yard and make a tv commercial. I told them that I dont’ mind them killing themselves but they would hit my house after hitting a tree.
I did offer to fly them around to look for a more suitable landing zone in exhcange for a 2% mortgage. They haven’t got back to me yet but I think they want to give me a $100 and call it good.
Does anybody have access to the Joshua Tree extension? Anybody?
http://home.avvanta.com/~drumminj/joshuatree.html
I love being able to “ignore” some posters. It really cuts down on the background noise on this board.
Looks like that entire site is having issues at the moment.
Twue. What’s with the disappearing posts? Hack alert, Ben.
I had post yesterday in the Friday thread that disappeared for hours, then re-appeared this morning.
Does anybody have access to the Joshua Tree extension? Anybody?
The link appears to be gone, looks like Drummin lost his hosting.
I have the extension, but I need to figure out how to package it up. When I do, and assuming that Drummin doesn’t mind, I’ll post it as a link on the HBB Comment Search.
I’ll post in the Bits Bucket when I get it done. I’m battling the flu right now, so I don’t know if it’s going to get done this weekend.
Feel better, lavi. Drink clear fluids. Sleep. Joshua Tree extensions can wait two days.
Drink clear fluids. Sleep.
Gin is a clear fluid, right?
Thanks
(Alan) Gin is an economist who enjoys drinking koolaide…
I heard they did some things to Nyquil that made it less effective, so I gave a newly purchased = bottle a try the other night. Still works good and doesn’t have that horrible drying effect you get with some cold/flu remedies. Gold star to the people who invented NyQuil.
You could always make an appointment with Dr. Zinfandel.
Next time you have a cold, try Jagermeister. Seriously. Has all the curative properties I need.
So sorry to hear you’re sick, lavi d. Try vitamin D. They say it might help with resistance to the flu. Not sure if it works when you have the flu already, but it might be worth a try.
Feel better soon!
I am wondering if there will be a bite to the SEC bark?
SEC subpoenas big banks over CDOs
Several leading international banks have received subpoenas from US regulators investigating one of the complex securities markets at the heart of the financial crisis, people familiar with the probe say.
The Securities and Exchange Commission sent subpoenas last month to banks including Goldman Sachs, Credit Suisse, Citigroup, Bank of America/Merrill Lynch, Deutsche Bank, UBS, Morgan Stanley and Barclays Capital, these people said. Requests for information were also made by the Financial Industry Regulatory Authority, which oversees broker-dealers.
The regulators are seeking information about the sale and marketing of so-called synthetic collateralised debt obligations during the financial crisis.
The SEC and Finra declined to comment on the investigation, which is at an early stage. The banks declined to comment. None has been accused of wrongdoing. CDOs are pools of bonds or mortgages and other loans that are sold to investors. Synthetic CDOs are backed by derivatives known as credit default swaps – a form of credit insurance – rather than actual loans or bonds themselves.
Securities regulators, who are under pressure to investigate possible wrongdoing related to the crisis, have been focused on whether investors in the market were provided accurate and relevant information or misled in some manner.
People familiar with the investigation said regulators are particularly interested in whether banks that created such instruments also bet against the clients who purchased them – thereby profiting while investors lost money.
Synthetic CDOs have been blamed by many analysts for exacerbating the financial crisis. Because synthetic CDOs are not backed by actual loans or bonds, but by derivatives, the market grew rapidly during the credit boom that ended with the collapse of the US subprime mortgage market.
However, because so many synthetic CDOs were ultimately linked to subprime mortgages, defaults by home buyers with poor credit histories reverberated around the global financial system. Investors came to discover than tranches of synthetic CDOs that had been rated triple A were, in fact, worthless.
Mary Schapiro, SEC chairman, told a commission investigating the financial crisis on Thursday that the SEC was probing complex debt securities that were sold by big banks in late 2006 and 2007.
http://www.ft.com/home/us
They don’t even know about these complex casino bets that weren’t backed by anything ? Since the AIG bailout involved Credit Default Swap
pay outs, no question that bail out money went to bets that were
“Synthetic CDO’s “( this is a new word . I think they should be called \Fraudulent Securities myself. ) I think that its more accurate to say that the Investment Firms sold these Casino bets ,rather than the regulated banks who might of been more the purchasers of them . When you mix the regulated with the unregulated you get this sort of crazy world of
what ends up being no regulations .
So much of these actions - especially the laughable congressional hearings of late, are window dressing. I have to believe though that somebody, somewhere will do some meaningful investigation and conclusions that will eventually, to some degree curtail the higher risk, high leveraged investing. Somebody on Charlie Rose the other night pointed out that banks are not failing at the high rate in other countries compared to US. India was used as an example. And of course, bloomberg has a story on some even tigher CDO regs recently instituted ther. US has really taken the free market concept to crazy heights when you compare to rest of world gov and regulations.
Living with Less
The human side of global recession.
NYTimes.com readers around the world are picturing the recession. How is the downturn playing out in your community?
http://www.nytimes.com/interactive/2009/04/02/business/economy/economy-user-photos.html
Check out these rides? I would buy one of these cars. Detriot can be the kingdom of cars again ?
The Coolest Cars Detroit Never Built
DETROIT — Auto shows are the perfect venue for carmakers to show off not just their newest models, but also their extreme ideas for the cars of the future.
In the 1950s and ’60s, concept cars were all about alternative propulsion–vehicles powered by jet engines or even nuclear reactors. But none of those ideas ever made it to production.
In 2010 the focus is again on powertrains of the future–most of them involving electricity.
http://www.forbes.com/2010/01/15/detroit-auto-show-business-autos-concept-cars.html?partner=popstories
Loved the Caddy 16. That tomahawk is silly. The nucleon looks like it should be given a speeding ticket just sitting there with the engine off. 1954 GMC XP-21 Firebird I? Aaaawww. That is so weird I’d drive it. LOL.
Some are really nice. Some are just yoogly. Some are ok. Got any more to post.
Roidy
I like the Turbine- it looks cool and runs on tequila. (I’d hate to rear-end the Nucleus.)
Nucleon
Surprise, surprise. Turns out the big banksters haven’t paid back all the money they had ‘forced’ on the by the gov. The Temporary Liquidity Guarantee (guess by who) Program continues to offer a fine feeding trough. So who should they get those big bonuses again?
“A Proposal For Goldman Sachs: Pay Down $21.2 Billion In TLGP Borrowings Using Your $20 Billion+ Bonus Accrual
Submitted by Tyler Durden on 11/24/2009 16:54 -0500
The list below highlights the firms that are on the hook to the FDIC in the form of implicit TLGP guarantees. The top five financial companies consist of CNBC’s parent company (not for long) General Electric at $88 billion, Citi at $64.6 billion, Bank of America at $44.5 billion, JPM at $40 billion, and Morgan Stanley at $25 billion. Goldman is just out of the top five at the 6th position, with current outstanding TLGP borrowings at $21.3 billion - nearly a dollar for dollar match with what is expected to be the firm’s end of year bonus accrual.
It is only fair to propose to Mr. Blankfein that instead of paying $20 billion in bonuses, the firm uses the bonus accrual to immediately repay every single last cent of its TLGP borrowings. If the firm wishes to approach the private (non-taxpayer subsidized) market subsequently, and reissue the full amount refunded, it may of course do so. Since the firm has repeatedly stated that it is not indebted to the US taxpayer any more, it would be very hypocritical if the firm proceeds to pay $20 billion in bonuses while it is still receiving the implicit interest rate benefits courtesy of having over $20 billion in debt on its balance sheet funded at virtually risk-free rates.
Mr. Blankfein: do not apologize, just do the right thing for once.
The same logic applies to Mr. Dimon who has borrowed almost $40 billion courtesy of TLGP, as well as Mr. Pandit and of course Lewis, who combine for nearly $110 billion in TLGP borrowings.”
linkster: http://www.zerohedge.com/article/proposal-goldman-sachs-pay-down-212-billion-tlgp-borrowings-using-your-20-billion-bonus-accr
Are those bonuses going to cause Goldman to go broke? or go blind?
Roidy
How can a banking industry which is based on systemic lies and deception hope to ever restore trust?
Oh yes ,the discount loans that are outstanding . Thats how they started this bail out mess, by making a bunch of loans backed by junk paper .
Remember how the Fed was making loans to anybody and everybody
for months prior to TARP ,at what close to 0 percent interest ?
This week, I was told by my realtor on a triplex I was bidding on in Barstow Cal that I was awarded the bid at a whopping price of $27,000. Wells Fargo owns it. An appraisor who was trying to get a Hard Money loan from me wanted to buy it himself told me about it. He didn’t have any down payment.
The 3 units should rent out for $1500/mo (minus 10% management fees. It only needs about $7000 in upgrades so it seemed like a good financial deal. I get the call yesterday from the realtor that Wells Fargo pulled my acceptance and now the going rate was $30,000 and I was welcome to bid higher. (they have a wiesel clause in fine print that I was aware of)
The small claims court is only 1 mile from my office. I filed against Wells Fargo for the max of $7500 one hour after hearing of the collapsed deal. I emailed copies of the court papers before they get served so she can email to WF company who handles the REO’s on their behalf. I guess WF is too busy to take care of silly things like bad loans so they sub it out.
The WF branch who is on title is about 3 hours away. I made sure I set the court hearing for 8:15 AM. I wanted it earlier but that was the earliest they had. When it goes to court, I will probably lose but for $85 it’s worth a shot. If they don’t show, the Plaintiff(me) is awarded the money.
I hope they spend more than $3000 to fight this thing. Hopefully they will just say, “Ok, we’ll let you have it for 27K” but I’m not standing on one foot waiting for that to happen.
I will take any suggestions on what else to do.
It seems like a good business deal. Meet them half way and get the property. A small 10 percent hike should not kill this deal for either party.
If it’s a good deal for CA renter, then why is Wells Fargo agreeing to it?
Because Wells Fargo is not in the landlording business.
That doesn’t seem to be stopping plenty of other banks from withholding inventory from the housing market…
Comment by Professor Bear
2010-01-16 11:42:13
If it’s a good deal for CA renter, then why is Wells Fargo agreeing to it?
———————–
That’s SD renter’s post. Close, but not the same poster.
Sounds to me like it’s gone back to auction, SU, which means that the entire process could repeat, rinse, repeat, rinse, repeat. I like SD’s approach. Very imaginitive and anticipatory.
The facts are that most business deals fall thru and if you are a regular business owner you have to keep a lot of irons in the fire. Some deals materialize and others do not. In this housing market all you have to do is wait as nicer deals will likely come along.
Good luck. I hope you win.
‘The 3 units should rent out for $1500/mo’
I’m curious to know if you’ve looked into the vacancy rates for Barstow?
According to: http://profiles.nationalrelocation.com/California/Barstow/ the rental vacancy rate for Barstow is 20.4%.
But the date of this info is questionable.
Ben,
Yes, I called 3 property management co’s in Barstow. There are a total of 4. I told them I would rather price the rent a little lower than market average so I would have people fighting over it…if that is even possible out in BF Egypt.
The nice thing is that 2 of the 3 apts have garages which is quite unusual. I would be very happy with $1400/mo too
Rental Vacancy Rate
Barstow 20.4%
San Bernadino county 7.3%
California 3.7%
http://www.nationalrelocation.com/real-estate/California/Barstow.aspx
There’s no date on the page but there are some current (Jan 14, 2010) foreclosure listings, and I assume the charts are updated once in a while..
i hope this aint a double post.. some weirdness happened on this end.
“Barstow 20.4%”
That is a useful piece of information for anyone thinking about buying rental property in Barstow. It sounds like rents have not dropped enough to attract tenants…
Good point Pro Bear. Maybe I wouldn’t mind winning the $7500 lawsuit instead:-)
Unless you’re in the Witness Protection Program, why on earth would you want to live in Barstow?
“Unless you’re in the Witness Protection Program, why on earth would you want to live in Barstow?”
Looking for people in the Witness Protection Program?
Roidy
Rental Vacancy Rate
Barstow 20.4%
San Bernadino county 7.3%
California 3.7%
http://www.nationalrelocation.com/real-estate/California/Barstow.aspx
There’s no date on the page but there are some current (Jan 14, 2010) foreclosure listings, and I assume the charts are updated once in a while..
“I will take any suggestions on what else to do.”
Do avoid any rides into the desert with Wells Fargo…to talk!
“Do avoid any rides into the desert with Wells Fargo…to talk!”
As Joe Pesci was told before he killed someone, “ALWAYS dig the hole first!” Was that in Casino or Goodfellas?
I think it was in Casino.
DON’T DO IT, SD!!!!!
It’s Barstow!
-Check the earthquake maps.
-Imagine what fun you’ll have redoing a section of roofing that’s blown off in a sandstorm in the middle of August.
-What kind of tenants do you think you’ll find in the capitol of armed Methville?
-Where will you find reliable labor to do the (never-ending,) renovations?
-The place makes Bakersplat look like Valhalla.
-Those Joshua Trees are growing there for a reason….
You dodged a bullet here.
Good call Ahansen,
According to google maps its equidistant to Vegas, the pacific ocean and death valley.
the satellite view looks pretty scary, especially if water is important to you.
I remember hearing about google’s “streetview” a while back. It seems to cover a lot of territory now. I looked all around Barstow. Lots of beat up little pick ups, a few carrying matresses.
I feel like an elitist, but that place doesn’t look fit for human habitation.
“I feel like an elitist, but that place doesn’t look fit for human habitation.”
It is a good place to stop if you are driving home to SoCal from Las Vegas and you either have to pee very badly or you are out of gas. Otherwise, just keep driving.
Good points Ahansen and JD. It is definately near a major fault line.
You remind me — where does the San Andreas fault lie relative to Barstow? Unlike Wall Street’s banking industry, the San Andreas fault is not too big to fail.
yeah.. WF subs REOs sales out. Premier Asset Services.
http://www.pasreo.com
Suggestions?
What’s done is done. It’s up to a judge now. You no longer have any say in the matter.
(they have a wiesel clause in fine print that I was aware of)
It must have taken me several minutes to conclude that “wiesel” is not some sort of esoteric legal term and that you meant to say “weasel clause I wasN’T aware of”
Got my brain workout for the day.
He must be German.
And to some of us “Wiesel” makes us think of:
http://en.wikipedia.org/wiki/Wiesel_AWC
Looks like a good commute car. Why tailgate slowpokes when you can just aim your main gun at his rear window?
Funny one, Blue.
Lots of great stuff to look at already this morning here!
..well i finally have an almost first hand experience with the bubble.
My sister l has lived with her husband and 2 little kids in New Hampshire. He (thought he) was going to inherit a significant sum of money, which apparently has fallen through- a will has turned up and he isn’t mentioned on it. In the meantime they have bought a 4 bedroom , 4 bath(?) 3000 sq. ft house in CITRUS SPRINGS , FL- 34434. The lot is 10,000 sq. ft. I guess there’s room to play catch outside.
It was built in 2005 - when did all that Chinese drywall get installed?. They paid $152,000 for it. Under normal circumstances I advise my friends to rent not buy, and if they are trying to sell a house to price it aggressively. My input was not solicited as I am somewhat estranged from my sister. Her husband does hop at the chance to “stick it to me”" about how clever he is when the opportunity presents itself. I know most about what’s going on from a mutual friend.
Anyway, luv to hear the thoughts from the Blog regulars - isn’t Diogenes in that area? Citrus springs is like a 120 miles north west of Disney World. I believe it was in a discussion about that part of the state where I first heard the expression “pipe in sunlight”. I guess with all the recent “growth” everywhere, it has become a metropolis.
I saw that they have a big, brand spanking new middle school, her taxes are about $3,000 a year. I contacted a guy - a retiree from Michigan who has been there for 5 years and says it’s a great place. To tell you the truth I think I would rather take my chances in Honduras. My sister is a real Limbaugh -lover so she may fit right in, but I don’t think she has been to church in her life so I wonder how the social scene will work out. I wish I could be a fly on the wall listening to her family’s thick New Hampshire accent interacting with what I presume to be a bunch of redneck bubbas. (strike that last part if you find it offensive.)
Actually, i live in Tampa, but was born here and lived in Florida all of life. The area you are describing is mostly wooded with developments that have sprung up here and there around small country town, which is what Citrus Springs is……..a small town. This is in Citrus County, which from the last time i was there was one of the most sparely populated areas of central Florida.
If your relatives are moving there to RETIRE and depend on a stipend of some sort, then, i guess it’s okay if you like to fish or golf or play bridge with the neighbors, or watch your satellite TV.
The nearest town is OCALA, which has become a bit of a sprawling metropolis, but not much of a town per se. It is probably 40-50 miles away. Further south is Brooksville, or perhaps Spring Hill which has some major shopping areas, but no real town, just stores and shoppes for the retirees.
If you like out of the way, country living, then this is probably the place for you. My Sister and BIL bought a big house like you describe for $200k a couple of years ago when they figured it was the bottom in 2007 with the builder close-outs. It is in Hernando County and one of many “gated” communities. They are beginning to regret the decision as the community is not developing but foreclosures have entered the market there, too. They commute to Tampa regularly, which is about a 50 mile trip. We have a place in the “country” in nearby Sumter County where we go to “get away” from the city.
We don’t go to live there because the nearest town is Brooksville and everything in the smaller “town” there, which is a couple of restaurants, closes at about 7pm, except the local Circle-K that closes around 10 or 11. No place to go all night. NO conveniences. None. There are some of the developments you are probably describing along US41 South of Brooksville. Development in most of them stopped and the unfortunates living there realize that shopping is a 20 mile journey. The nearest hospital is 50 miles, and kids get shipped to school. Country living at its finest. How much would you pay to live there?
I get the hebbee-jebbees just thinking about it.
I was looking at Barstow from the air and on the street.
At least in Florida, things grow.
Personally I’d rather deal with the cold than the heat (and humidity).
I almost never eat out. My family likes to go the movies. Here in Connecticut I do have a circle of friends that I play tennis with and can talk to about the issues and events of the day.
I go to NYC for day trips, maybe three times a year. Suburban CT is “insulated” to a large extent from the real world, but I work in an Urban center. Some places in America seem so sterile and vapant.
I have heard that is why some of the most eclectic places are Kansas city and Austin, TX. People that need something different gravitate there.
To answer your question I think I would rephrase it:
How much would YOU pay ME to live there?
thanks for the insight
Please don’t tell people about Kansas City, they”ll ruin it if word gets out.
That’s a real testimonial- your secret is safe with me.
I believe the secret is all ready out. We have a lot of lurkers
Don’t worry, we have emperical evidence that the masses don’t listen to anything that is said here.
Remember the house that was up for auction a few weeks back? The one that I was interested in, but felt too inexperienced to try to do the auction route? Thursday morning there’s a For Sale sign on the front lawn. I look at it Thursday afternoon. I put in a offer (90% of asking) Thursday evening (no shock to Blue Skye I’m sure…aren’t we in “the season”?). It is the highest offer I’ve made yet. I’m on pins and needles waiting to hear. I have a friend who lives across the street from there, another around the corner, and one of my son’s best friends is nearby. Perfect, right?
Wrong.
My realtor calls today to say this is an estate sale, there are multiple offers and a decision by the estate won’t be made until Monday or Tuesday. I already feel defeated - if anyone offered full asking I’m done. This one really was perfect for us. Effing housing bubble - the collateral damage shoots out in all locations…not just to people losing their homes and banks’ balance sheets.
I do know that the family selling this (for their deceased mother) is a very close-knit family who were torn up over having to clean out the house and part with it (the mother died over a year ago, took this long for the kids to make a move). With my offer, I included a letter giving them an idea of who I am and letting them know that I would take as good care of that home as their family did and that I want it to raise my son in - not to flip or as a starter (they were the original owners since 1950). My friend across the street seemed to think that would mean a lot to them, but at the end of the day I’m sure it’s just about the highest offer…that extra 10% that I just cannot quite stretch to (ok, well, I CAN…but I want to make sure I can continue to save money after buying a house…silly me).
Down & out.
Hey East - warmest thoughts for you.
My fingers are crossed that your letter will make the difference.
Best,
Leigh
Thank you Leigh. I’m hoping the letter at least makes it to the family. You never really can be sure that’s the case, I guess. Perhaps, just perhaps, this could be one of those rare cases where human kindness and empathy triumphs over one of the 7 deadly sins.
East, you’ve been a trooper through all of this. I’m glad that you didn’t let your emotions get the better of you in making an offer you can afford. Just remember that if you don’t get the house, we haven’t reached the bottom of this bust and you will get a house you can afford in the next two years. And you’ve said many times that your son is happy as long as he’s with you. He will grow up strong and will brag about how you and he toughed it out for many years.
What was the high bid at auction?
I think you may be bidding against phantom competitors.
Once the family has decided to sell all they see is $$$$.
I think your offer will be accepted.
regards,
Trapper
No idea what the high bid at the auction was, but clearly it didn’t sell then because they’re now going the realtor route.
Here’s hoping you’re right! Thanks.
eastcoaster,
Buy the house! This is one you really want. Pay a little more. You’ll be happy you did in the future. If I were you, I’d pay for it. I’m not in that position, because there is no house like you describe in my present circumstances, but if there were, I would go for it. Lots of love and kindest regards. Call those REIC liars on their BS, though. Go around them and talk to the owners. Oh, yeah, there’s ALWAYS a “Bidding war”. Call their BS. But Get this house!
Some other additional thoughts Eastcoaster….
If your offer is not accepted, you will have the opportunity to counter.
Relax, (and I know this is difficult).
Remember, he who brings the $$ to the table controls…
They have a house, you have the $$$.
If your offer is “accepted”, counter with a slightly lower offer for the stress that the sellers put you through.
Next time you offer, put a time limit on it…(ie… “seller has two days to accept or reject this offer”"”)
PS- I still think your offer will be accepted…
We did have a limit on it - they had 2 days to accept (have until end of today). But their realtor called mine to say that the multiple offers are going before the estate either Monday or Tuesday for a final decision. Technically, if I want out I’m out based on that. But I don’t want out yet.
I won’t counter if rejected, though. Nothing’s that worth it.
Hi. Sounds like phantom offers to me. Good luck.
dude,
I put several offers a month on different properties…it’s pathetic. If you get a response, consider youself lucky. I have waited up to 6 months for a response. Asking prices are a come-on. They wait for a higher bid, but there may be none and you’re the only bidder… they still won’t sell it. And it sits there for another 6 months.
Although yours is a probate sale, they will still have a bidding war.
I have given up, but
“Our day will come”.
elvis
HAHA, thanks for thinking of my yearly jab. When risk is high, you must only go in for exactly what you want. It sounds like you have done that.
Personally, I doubt that your letter of sincere intent should have impact, and the realator is not bound to pass that along. You would not bid higher if the seller wrote a letter to you about what good things they were going to do with your money, would you?
As to your comment about what you can afford, I was struck this week by the comment of a friend/customer: “None of us know what we can afford in the future.”
As much as I think this is a horrible time to borrow long in a falling market, I think your reluctance to negotiate based on pride is perhaps a stumbling block (but might yet save your bacon). Assuming that your offer is contingent on inspection and lawyer approval and tea leaves, you will have a future opportunity to renegotiate with them when they think the hook is set and have already planned their lives around your purchase, and the other bidders have moved on.
Eastcoaster, I have seen two instances where buyer letters swayed sellers. However, in both instances, the sellers said that they would like to sell to the letter writer, if they could match their highest offer. Sorry about that.
Skye it’s not pride that’ll keep me from bidding higher, it’s financial constraint. Plus, Trapper’s suggestion was that I rebid after being rejected. Why? In my world a no is a no. A counter is a maybe.
You should told the agent and have countered with withdraw my offer of 10%under asking and I’ll bid 15% under…don’t want to over pay with all those other “professional” bidders involved……….ya know!
———————–
My realtor calls today to say this is an estate sale, there are multiple offers and a decision by the estate won’t be made until Monday or Tuesday.
* JANUARY 13, 2010
House Panel Subpoenas N.Y. Fed’s AIG Documents
By MICHAEL R. CRITTENDEN
WASHINGTON—A U.S. House panel issued a subpoena for Federal Reserve Bank of New York documents related to American International Group Inc., as the political pressure surrounding one of the more controversial events of the financial crisis continued to grow.
Rep. Edolphus Towns (D., N.Y.), who chairs the House Committee on Oversight and Government Reform, said he was issuing a subpoena for documents that would “shed light on how and why taxpayer dollars were used for a backdoor bailout.” At issue is the government-orchestrated decision to make whole AIG’s counterparties on some $62 billion in bets on soured mortgage securities.
“We will work with the committee to provide relevant information as appropriate,” said a spokeswoman for the New York Fed.
The payments to the insurer’s counterparties has been a source of simmering controversy that reached a boil over the last week. Rep. Darrell Issa of California, the ranking Republican on the Oversight panel, recently released documents showing that officials at the New York Fed told AIG not to disclose key details of their agreements with counterparties in late 2008.
The names of the counterparties and the details of the transactions were eventually released, but the new debate over disclosure has thrust the discussion over the government’s actions with AIG back into the political arena. Mr. Issa on Tuesday accused Fed officials of blocking attempts to gain access to documents, circulating a letter he received from Neil Barofsky, the special inspector general for the Troubled Asset Relief Program.
The Fed, Mr. Barofsky said in the letter, “has directed us not to provide you with the documents that it has provided to us, and that it will instead respond to your request directly.”
…
In buying an out of state foreclosure to live in, how should one research its condition? A lot of them say no SPEDS, NO CLUE reports, no inspections of any kind.
Thanks,
Go East
By breaking and entering maybe?
B+E..That’s so 20th Century.
These days everything is done online.
Don’t you dare buy a house sight unseen to live in. But if you want to check one out, get a real estate relocation expert to help you. Go to a brokerage that cares about its reputation, and ask them to find a referral for you. They love that kind of stuff and get a referral fee from the seller if you close. I bought an out of state house (Michigan - not a foreclosure) for my sister to live in last year. The agent went and checked it out and arranged for the home inspection that I paid for. Well worth it, because we were able to demand repairs before closing. She probably got $500 for her trouble, and worked hard for it. My sister and her son are happily living in the house now.
Every single house that my wife and I have discussed making an offer on, is under contract by the time we have called our realtor and asked him to make an offer. I think we’re up to 6 or 7 now.
Also, one had a contract fall through, so we decided to take a look at it — before we could visit it was under contract again. Maybe the silver lining is that we keep renting for a while.
Remember, I’m not nuts to buy — so I am just giving you the play-by-play. I know that gold will be $4,500/oz. in 3 weeks, there will be nuclear holocaust, and we’ll all be stabbing each other for rice by next Thursday, but in the mean time we’ll still be out there looking, which takes a lot of energy with two kids, btw…
Here are some that we liked, but are under contract:
MLS #7366288
MLS #7435990
Muggy,
Hi. Does NY state have dual agency for RE agents ? If so what do other posters think about dealing only with the listing agent ? I have alway had good luck that way. Double the commission is a good motivator to get the deal done.
Muggy,
I’m sorry to hear about your experiences. Just know that we are dealing with the same situation here on the west coast.
IMHO, the fact that this manic activity is happening all across the nation (and even around the world) at the same time…tells me this is NOT a “normal” market. This fairly consistent activity across a large swath of the country tells me this is more about financing than it is about the housing market. Be very careful.
Best of luck to you and your wife!
BTW, it sure is tough dragging kids around to look at houses. Our kids used to enjoy it, but they are getting very tired of it these days (they’ve been doing it for many years).
In all likelihood, you are looking first-hand at the consequences of the combined effects of banks withholding inventory from the market and the first-time home buyer credit enabling dubiously qualified buyers to mop up anything that was reasonably priced last year. Both factors have served to starve local housing markets of affordable housing inventory. Hence you will have to pay “more than expected” to purchase a home during the course of the worst economic downturn since the 1930s.
But don’t let my comments stand in your way!
So, whatever happened to NHZ, who warned us all about this for years? Did you have him banned?
Good point about NHZ’s posts. Didn’t he say they were going on something like 10 years in the echo bubble?
This is getting seriously frightening.
Mission accomplished!
Bubble prices in the Great Recession! Pay more and earn less - the new Amerika!
Here’s the really bad news. If you read my commentary from yesterday, i am in favor of having the government get out of the housing business and trying to manipulate prices upward.
If it wasn’t for FANNIE and FREDDIE and the government covering bad loans to people with no money and no ability to pay, then the “bubble” would never have gotten the big push it did with shortage of funding.
So…………what’s the government response??
A policy change to help provide FHA financing:
“The policy change will permit buyers to use FHA-insured financing to purchase HUD-owned properties, bank-owned properties, or properties resold through private sales. This will allow homes to resell as quickly as possible, helping to stabilize real estate prices and to revitalize neighborhoods and communities.”
Here’s a link to the full article which made me hurl. Just what we don’t need to Stabilize PRICES at high levels. They need to stabilize at levels the are afforable without ridiculous lending terms:
http://portal.hud.gov/portal/page/portal/HUD/press/press_releases_media_advisories/2010/HUDNo.10-011
Read it and croak.
Great, Diogenes, now there’s no reason for “investor-flippers” to think twice about whether there could be a buyer for their ill-gotten goods.
Sounds like you are swimming upstream during spawing season. Especially crazed since you missed the spring run.
It appears that Darrell Issa is trying to snare some very big Wall Street fish in the same dragnet. With a bit of luck, perhaps he can haul in Paulson, Bernanke and Geithner in the same tow. I have no higher hope than to see the Wall Street insiders who financially engineered the most massive theft of Main Street American wealth in history be brought to justice. It would also be sweet poetic justice if California leaders like Issa and Angiledes led the charge against the Wall Street banksters and their Washington enablers, as California has enjoyed the view from under the bus while Wall Street banksters have wallowed in the federally-funded bonus slop.
I am going to hunt for a link to a web site where you can send funds to support Issa, which I will post if I find it. This is one politician whose efforts seem well worth your financial support; the American people deserve leaders who are willing to defend them against Wall Street’s well-oiled theft machine.
House probe of AIG bailout widens to include Paulson, Friedman; GOP wants Bernanke affidavit
By DANIEL WAGNER AP Business Writer
WASHINGTON January 15, 2010 (AP)
The Associated Press
A House committee is broadening its probe of secretive bank bailouts to include former Treasury Secretary Henry Paulson and former Federal Reserve Bank of New York Chairman Stephen Friedman.
The Committee on Oversight and Government Reform has invited Paulson and Friedman to testify about their roles in the bailout of American International Group Inc., according to Chairman Edolphus Towns, D-N.Y.
Lawmakers want to know more about deals that funneled billions from AIG to banks including Goldman Sachs Group Inc. Friedman is a Goldman director who resigned from the New York Fed after concerns he had conflicts of interest.
California Rep. Darrell Issa, the committee’s top Republican, also said he wants Federal Reserve Chairman Ben Bernanke to answer questions about the bailout, which he helped lead.
A Towns spokeswoman said he is “making decisions daily about witnesses and testimony.” A Fed spokesman would not comment.
An earlier watchdog report said the bailouts might have cost taxpayers billions more than necessary because officials did not demand concessions from the banks. The money went to satisfy massive financial obligations that AIG was unable to meet without a government rescue.
The bailouts were managed by the Federal Reserve Bank of New York under the leadership of Treasury Secretary Timothy Geithner. Geithner has defended the deals and will testify on Jan. 27.
California Rep. Darrell Issa, the committee’s top Republican, called earlier Friday for Paulson to testify. He asked for the hearing last week after uncovering e-mails in which New York Fed lawyers told AIG to keep some details secret.
Issa also wanted the committee to demand documents from the Treasury Department and Federal Reserve by issuing subpoenas. He said lawmakers should question Bernanke.
Towns heeded Issa’s earlier call to subpoena the New York Fed for documents including Geithner’s e-mails and phone records. A Towns spokeswoman said he is “making decisions daily about witnesses and testimony.”
…
I looked around his web site a bit and could not find his PayPal link. (Hint to Issa: Establish a PayPal link on your web site for reception of grass roots financial support…)
Issa doesn’t need our donations. He’s the Car Alarm King who inadvertently financed Ahnode’s election to the Governorship. (He thought the CARC was going to run HIM.)
Let’s hope they don’t stooge him on this one, too, because I think he’s been doing a good job this last year or so.
Good to see you posting! Hope life is treating you OK…
If Issa could take down some Masters of the Universe that would be a fine retribution for how Calif. was treated during the Enron debacle. Rolling blackouts rigged by their lackies as Wall Street cheered ill-gotten gains. We were scolded by the likes of Cheney for being at fault for having “too many hot tubs” while Enron traders laughed. Enron was just a taste of what was to come….
Tapes Show Enron Arranged Plant Shutdown
By Timothy Egan, The New York Time
Friday 04 February 2005
EVERETT, Wash - In the midst of the California energy troubles in early 2001, when power plants were under a federal order to deliver a full output of electricity, the Enron Corporation arranged to take a plant off-line on the same day that California was hit by rolling blackouts, according to audiotapes of company traders released here on Thursday.
…Enron, as early as 1998, was creating artificial energy shortages and running up prices in Canada in advance of California’s larger experiment with deregulation.
The tapes provide new details of market manipulation during the California energy crisis that produced blackouts and billions of dollars of surcharges to homes and businesses on the West Coast in 2000 and 2001.
More to the point, SD, Enron was behind the recall election– Kenny Lay having met with Ahnode and Mikey Milken before launching the campaign to oust Grey Davis. Seems Cruz Bustamante and Gov. Davis had this federal lawsuit filed against Enron et al for market fixing during the “energy crisis,” and when Arnie took office it…wow! Just magically got withdrawn somehow.
House Panel on Bank Bailout Broadens Its Inquiry
By THE ASSOCIATED PRESS
Published: January 16, 2010
WASHINGTON (AP) — A House committee is broadening its investigation of secretive bank bailouts to include the former Treasury Secretary Henry M. Paulson Jr. and the former Federal Reserve Bank of New York chairman Stephen Friedman.
The Committee on Oversight and Government Reform has invited Mr. Paulson and Mr. Friedman to testify about their roles in the bailout of the American International Group, according to the chairman, Edolphus Towns, Democrat of New York.
Lawmakers want to know more about deals that funneled billions from A.I.G. to banks including Goldman Sachs. Mr. Friedman is a Goldman director who resigned from the New York Fed after concerns he had conflicts of interest.
Representative Darrell Issa of California, the committee’s top Republican, also said he wanted the Federal Reserve chairman, Ben S. Bernanke to answer questions about the bailout.
The bailouts were managed by the Federal Reserve Bank of New York under the Treasury secretary, Timothy F. Geithner. Mr. Geithner has defended the deals and will testify on Jan. 27.
Mr. Issa also wanted the committee to demand documents from the Treasury Department and the Federal Reserve by issuing subpoenas. Representatives for Mr. Paulson and Mr. Friedman would not comment. A Treasury spokesman did not respond to requests for comment.
…
PB,
Maybe those of us who live locally can lend our knowledge, time, and money to Issa in the hopes that he is successful in his investigations?
I agree with you; we all need to support the very few leaders who appear to be doing the right thing. This includes Bernie Sanders, Ron Paul, Dennis Kucinich, etc. A motley group, no doubt, but it seems the all share the one characteristic that has any meaning: they appear to be honestly concerned about the well-being of the country and U.S. citizens.
“Comment by joeyinCalif
2010-01-16 02:16:01
It’s not about a moral obligation. And who cares what banks say?
It’s about us paying for the FB’s mistakes. We will suffer. We pay that bill.
It’s about how business losses are certainly, eventually transferred to the rest of us, through higher product or service prices, job losses, a slower economy or in any number of ways.”
Those who work for or invest in the lending industry will pay a disproportionately high price for walkaways, and that is as it should be, as they are the ones who abdicated sensible lending standards in favor of making loans that were unlikely to ever be repaid.
I haven’t heard any top economic policy makers or politicians suggest this yet, but the best way to protect American citizens from systemic theft by banksters would be to make sure that any bank who made foolish loans that are unlikely to be repaid went bankrupt. Save the Fed’s printing press loans for starting up new banks that are better at the business of banking than these fools who threw away hundreds of billions of dollars.
Is drumming moral hazard out of the system really any harder than this?
All you now wish for actually came about in the Great Depression. Some 5,000 banks failed and 10 million bank accounts simply evaporated, 25% of the workforce was idle. Soup lines. Rioting. Hundreds of thousands homeless.
Not something I’d be in favor of repeating, but to each his own.
Here we go again with Wall Street’s tired Mutually Assured Destruction argument. If the big concern was making sure American households are able to ride out the Great Recession, wouldn’t it have been much better for the Fed and Treasury to simply bypass handing over hundreds of billions of dollars to the Wall Street banksters and instead make zero percent interest loans available directly to American households?
kind of a bottom-up approach..
Zero interest loans. Hmm….
I may be mistaken, but I seem to recall that people getting low interest loans had something to do with causing this mess..
Fed and Treasury in 2008 were suckered by banksters into creating TARP. In 2010 I believe that bankers are tapdancing for the purpose of saving their compensation, while the federal government is trying to save the economy. Obama seems to think that you can’t have one without the other. Of course, if he ends up a one-term president he’ll likely enjoy some highly-compensated financial cooperation with the banksters.
“I may be mistaken, but I seem to recall that people getting low interest loans had something to do with causing this mess…”
Did you mean to say that people now getting low interest loans had something to do with causing this mess?
If so, I totally agree with you…
“Fed and Treasury in 2008 were suckered by banksters into creating TARP.”
‘Suckered into’ or ‘complicit with’? This is yet another good question for the Congressional audit team to take up with the Fed.
Who’s to say that tens of millions of down-and-out Joe and Jill six packs will do any better handling a government handout than the banks?
No, I’m NOT supportive of banks. But I’m not supportive of derelict Americans, either. Many Americans who are now on the street (or nearly so) are there due to their own stupidity and avarice.
Don’t blame banks for the stupidity of those who are not bankers.
“No, I’m NOT supportive of banks.”
So far as I am concerned, the managers of Megabank, Inc can go screw themselves.
But I am supportive of some other banks:
1) the kind that are too small to pose a systemic risk threat to the global economy;
2) the kind that are run by responsible bankers who feel an obligation to serve communities rather than to screw people;
3) the kind that make prudent loans that have a high probability of future repayment.
Here’s a timely article for you, Joey. I doubt you will find many fat cat Wall Street banksters standing in these food lines.
“Let them eat soup.”
United States
Food and poverty
The Big Apple is hungry
Jan 14th 2010 | NEW YORK
From The Economist print edition
Increasing numbers of New Yorkers need help getting enough to eat
…
New Yorkers with children are among the most vulnerable to food poverty. Almost half of all New York City households with children have difficulty affording enough food. A staggering one in five of the city’s children, 397,000 small people, rely on soup kitchens—up 48% since 2004.
…
I guess if it weren’t for the TARP and other bailouts that favored bankers over other Americans, we wouldn’t see so many NYC residents standing in soup lines?
How is saving and expanding responsible banks or starting responsible banks and letting the gamblers go out of business going to cause a repeat depression any more than what we are doing now. ?
I would think it would make it much harder for Megabank, Inc to sow the seeds of a future banking crisis if they were broken up into competitive, systemically-risk-free pieces, rather than allowed to continue existence as 800 lb financial gorillas with the ability to create their own good or bad financial weather and to profit immensely from the capability.
Perhaps Joey or Eddie could explain why this is not the case, since their posts suggest they have insider familiarity with the banking industry?
But, looking at the history of this robbery, you will recall that Goldman Suchs is a BROKERAGE house that was allowed to become a Bank by acquiring a small bank and becoming a BANK HOLDING COMPANY, thereby allowing them to have access to FED funds in the various bailout programs.
Recall that WalMart Corp. had petitioned the FED to become a bank holding company to allow them to provide financial services at many of their locations. They never did get approval.
GOLDMAN got approved in ONE DAY.
And unfortunately for us, this shell game of finances is viewed by those gaming the system as NORMAL and their “entitlement”.
That is why NOTHING will be done to these crooks. The politicians know how to play the game to see the FED can print money to give to the Banks for the banks to provide political payouts for the politicians that help them get the money. The FED dependents NEVER lose. OF course, they say its to save US, the poor taxpayers.
It’s a closed system of political corruption that started in 1913 and continues to this day. We MUST END THE FED. Break up Goldman, Citi, JP MORGAN, et al, and remove ALL banking interests from brokerage houses. Sue each of the managers that are before Congress for FRAUD and demand TRIPLE DAMAGES to the people who have been hurt, stripping them of ALL their personal assets before carting them off to prison, never to be allowed to work in financial industry, again. EVER. Think Bernie Maddoff. Prison is a nice place for crooks, which is what they are.
“Recall that WalMart Corp. had petitioned the FED to become a bank holding company to allow them to provide financial services at many of their locations. They never did get approval.
GOLDMAN got approved in ONE DAY.”
Though I hate WalMart and intend to never, ever shop there unless someone puts a gun to my head, this nonetheless seems extremely unfair.
My sentiments, exactly, Diogenes!
Fantastic post, diogenes!
Amen to everything you’ve said!!!!
the best way to protect American citizens from systemic theft by banksters would be to make sure that any bank who made foolish loans that are unlikely to be repaid went bankrupt.
Modify that to “make sure that any bank executive who made foolish loans that are unlikely to be repaid went bankrupt”
… and I’d agree.
Even better, send the foolish executives who broke the law straight to jail.
Who’d have thunk Obama would actually join the American people in their struggle to stop Wall Street’s theft machine from robbing them blind? I am proud to say that I voted for him.
Bloomberg
Obama Promises All-Out Battle to Impose New Tax on Major Banks
January 16, 2010, 12:37 PM EST
By Roger Runningen
Jan. 16 (Bloomberg) — President Barack Obama defended his plan to “collect every dime” of taxpayer bailout money from as many as 50 major financial institutions and promised enactment of legislation to crack down on practices that led to the financial crisis.
“We’re not going to let Wall Street take the money and run,” the president said in his weekly radio and Internet address. “We’re going to pass this fee into law.”
…
YES!
Change we can believe in!
(hope for?)
(snicker at cynically?)
I wonder if $3 a gallon gas will help push the ball forward. I know it’s unrelated but those rising gas prices do raise the populist ire. This country needs more ire.
Not that I like higher gas prices, but a couple of years ago - when prices were so high - a textile supplier I know re-started some manufacturing in the American South. (Global shipping costs made closer manufacturing and higher labor costs balance out.)
I found that interesting.
Who’d have thunk Obama would actually join the American people in their struggle to stop Wall Street’s theft machine from robbing them blind? I am proud to say that I voted for him.
Are you being sarcastic? How is “punishing” inanimate objects going to accomplish anything?
Combo, what I meant was, where exactly does one research a property’s ownership or rental history, and what does a buyer inspection cost? Where might I contact an inspector in Phoenix, if I am able to get a job there in July (after passing, I hope, my licensing exam?)
Go East
Are you saying you want to buy a foreclosure, sight unseen, in Phoenix because you might move there in July? Really?
No kidding that sounds like four bad jokes in a row! The July part sounds the worst.
You might think of visiting Phoenix in July as a start (be prepared for a reality check regarding desert heat). Then maybe knock on doors in the neighborhood where you want to buy, look through windows and such. Maybe make a deal with whomever is looking after the place for a peek inside, etc.
Oh please. It’s not that bad in July. Millions of people live in Phoenix, millions more in Las Vegas and manage to survive summers just fine. Give me 110 in the desert heat over 90 in the South or that really awesome NYC 90 (especially in the subway) any day.
By your standards nobody should live anywhere but San Diego because it’s too hot/cold/dry/wet pretty much everywhere else.
Anyone who overpays for housing in order to enjoy the opportunity to enjoy Phoenix’s triple-digit summer temperatures is a fool.
Give me 110 in the desert heat over 90 in the South or that really awesome NYC 90
Ssh! There’s too many friggin’ snowbirds already.
By your standards nobody should live anywhere but San Diego because it’s too hot/cold/dry/wet pretty much everywhere else.”
Thank you for clarifying my standards; I always was in doubt as to what they were.
BTW, I don’t live in San Diego.
Eddie is capably holding down his claim to the title of STRAW MAN KING OF THE HBB.
Mlultiple offers…..? full price….?
Is Ben going to have to change the name of the blog?
These first hand experiences are really interesting. Keep us up datedeastcoaster, muggy. Remind us where you are.
I’m watching my friend’s house
Suburban connecticut 06488 (”it’s different here”) 4brm, 2.5 bath, potential inlaw apt, dead end rd, 2700 sq. ft. , $6,000 / yr taxes , built 1972
asking $450 k.
He’s hoping tastes will move away from the Mcmansions and he will get lucky.
“Mlultiple offers…..? full price….?
Is Ben going to have to change the name of the blog?”
How’s about HousingBubbleReflationBlog dot com?
Seems like.
I hang my head in shame as I type this, but we have recently made a couple of full-price and over-list offers in the past month or so. Cash, short contingency periods for inspection, etc. Guess what? Multiple bids on every one, and we were outbid each time.
Personally, I want to wait; but Mr. CAR is getting impatient again (it happens in waves), so we tried our hand at it again.
The bubble is back. The bubble is back. The bubble is back. No question about it.
This is in the San Diego area.
Indeed - the Bubble will never die without taking everything with it, and then having a house will be the least of our worries.
The crooks won.
Comparing banksters with used car salesmen is a cruel insult to the salesmen.
Editorial: Angelides ideal choice to lead banking inquiry
Mercury News Editorial
Posted: 01/14/2010 08:00:00 PM PST
President Barack Obama is on the right track with his proposal Thursday to tax the nation’s largest banks. The president should ensure that U.S. taxpayers don’t lose a penny from the federal bailout of the dunces who created the nation’s biggest financial crisis in 70 years.
But if he really wants to make sure this kind of disaster doesn’t happen again, he’ll need to do more than just talk tough about a tax. Fortunately, he has Phil Angelides to help.
The qualities that made Angelides a lousy candidate for California governor in 2006 make the former state treasurer a perfect choice to be the government’s lead attack dog on banks. He’s feisty. Fixated. A financial wonk’s financial wonk. And best of all, he has a history of staying one step ahead of corporate fat cats used to having their way with politicians.
Angelides is the chairman of the Financial Crisis Inquiry Commission, which opened hearings Wednesday in Washington. The task: Find out what brought the financial system to its knees and recommend ways to prevent it from happening again. Angelides hasn’t lost anything off his fastball since we last saw him in action.
On Wednesday, he asked Goldman Sachs CEO Lloyd Blankfein to explain how his firm could have sold bundles of troubled mortgages at the same time it was betting that their value would fall. Not satisfied with Blankfein’s answer — essentially, that Goldman’s investors knew the risks replied: “It sounds to me a little bit like selling a car with faulty brakes and then buying an insurance policy on the buyer of those cars.”
…
A tax on banks is a good start but I’d really like to see a windfall profits tax on ceo’s who took tarp. or were bailed out by AIG. The bottom line is they shouldn’t get any bonus.
I’d like to see the Sherman Antitrust Act used to bust the Wall Street trusts into non-systemically risky bits and pieces.
* January 12, 2010, 2:26 PM ET
A Midget, Banker Hearings and Populism Circa 1933
By Michael Corkery
Wall Street bankers haven’t faced a grilling like this since financier J.P. Morgan Jr. ended up with a circus midget in his lap and his sterling reputation in tatters.
The year was 1933 and Morgan was testifying before a presidentially appointed committee led by former New York prosecutor Ferdinand Pecora, who was investigating the causes of the 1929 stock market crash. Over two days of testimony, Morgan exposed his bank’s shady business practices, such as excessive compensation and failure to pay income taxes. Pecora’s investigation–captured in thousands of pages of transcripts – is credited with leading to the last major overhaul of the financial regulatory system, which gave us Glass Steagall Act and the Securities & Exchange Commission.
As for the midget, she was plopped in Morgan’s lap at the end of the hearing by a press agent for the Ringling Brothers Circus as a stunt that came as a surprise to the stodgy Wall Street titan.
…
RATIONAL IRRATIONALITY
The U.S. has closed down banks, such as Wachovia or Washington Mutual, or at least dissolved them, which are really big banks. But when you come to Citigroup or Bank of America it is a completely different kettle of fish. We have to figure out how to do it—without any question. And we could have been much tougher on the banks than we have been. Even now, we could be much tougher than we are. But to argue that it’s a very simple thing to do—it’s just a matter of nationalizing them or shutting them down—there are a whole lot of issues that are raised there.
All I am saying is that there are no easy answers in this thing … and one doesn’t have to be corrupt or in the pay of the financial sector to say, hey, wait a minute: it’s not as simple as letting them all go under or taking them all over. That’s my rant about the banking sector. By and large, I think we’ve done all the things that needed to be done. I think the downside of what we haven’t done is that we haven’t made the banks face up to more pain. That would have made it politically easier to do what needed to be done.
When you say, “make the banks face up to more pain,” what do you mean? Tougher regulation? Big equity stakes for the government—along the British lines?
Equity stakes and other things. For example, even now [the government] can require all compensation above a certain amount to be paid in equity, and equity that is real equity. The way banks do it now is they pay people in shares, but they also buy back equal amounts of shares [in the market]. So there is no increase in capital.
What we have right now is a situation where every saver in the country is, essentially, paying a huge tax to bail out the banking system. We are all getting screwed on our money market accounts—getting 0.25 per cent—and the banks are making a huge spread on nearly every asset they hold, because they are financing them at pretty close to zero rates. Another way of doing this—a way that would be nice to try—is to force the banks to load up on capital.
What is the point of all this? The point of all this is to get banks to lend. Well, they have been doing everything else except lending. Now, it may be that there aren’t that many profitable lending opportunities at this point. But if there aren’t, why are all the savers paying for this? Because you are not getting them to lend any more, and you are not getting more investment, which was the whole point of having interest rates so low. In fact, what you are doing is setting up a whole lot of other asset bubbles at this point.
http://www.newyorker.com/online/blogs/johncassidy/2010/01/interview-with-raghuram-rajan.html#entry-more#ixzz0cnvIVZDP
Raghuram Rajan appears to be complaining that they had it all mostly right. It was those pesky details that messed us up. It wasn’t that housing was a casino, that the Wall Street Criminals had not set up their own casino in S. Manhattan Island. It wasn’t that the FED, Feds, and big institutional investors were too morally decrepit to do their jobs with responsibility and sobriety. BTW, all of these so-called Institutions were and are playing with OUR MONEY.
Roidy
It’s high time to end the game of extend and pretend and revive a much older game known as BUST THE TRUSTS. This will require an international effort, as banksters across the pond appear to be just as greedy as their Wall Street brethren.
Having seen Avatar twice in the same week, I now have a great deal of confidence in the power of grass roots efforts to stand up to powerful entrenched interests. Keep the faith and stay the course, and it can happen!!!
If a bank’s too big to fail, break it up
The lesson of the financial crisis is that if banks are too big to fail, they should be broken up, writes Jeremy Warner. Unfortunately, it may need further upheaval for the policy makers to see sense.
By Jeremy Warner
Published: 10:51PM GMT 11 Jan 2010
In the West End the other day, I was witness to the following bizarre invective from a man as he tore a parking ticket from the windscreen of his vehicle. “Bloody bankers”, he cursed, as if bankers can these days be blamed for almost any misfortune, however trivial.
The economic crisis may be abating, but public fury with the banks shows few signs of doing the same. Small wonder. Summing up the prevailing perception, the chairman of “The Financial Crisis Inquiry Commission” in the US, Phil Angelides, likens events to an earthquake where the only buildings left standing when the quake has passed are those that were at its very epicentre.
Without trillions of dollars of public support, they too would have collapsed as surely as the rest of the economy, yet the bankers are behaving as if nothing of significance happened at all, with asset markets once more skipping along with apparent abandon, and, despite the efforts of the British government and others to deter them, near record bonuses about to be declared.
…
Hi all. Here in Sacramento it’s a good news followed by really bad news day. My husband and I went to a good neighborhood to check out three newly foreclosed houses. Last year at this time there were no foreclosures in this part of town - that’s the good news. The bad news is that they are very high priced. I can’t wait to see if knifecatchers go for the bait.
Here is one of them: http://www.indexpost.com/property-for-sale/california-sacramento-95818-2132-bidwell-way/
Last year this was listed as a short sale and the price came down to $299,000. Now it’s a foreclosure for $333,000! A little 2 bed, one bath. Sheesh. We’ll keep our powder dry for another year, and eat a little of Neil’s popcorn.
According to Zillow:
2132 Bidwell Way
Last sale and tax info:
Sold 12/08/2006: $425,000
2009 Property Tax: $4,875
Built in 1938.. Nice neighborhood, nice lot.. end of the culdesac .. has a pool. Neighbors are all zestimated at around $300K or so.
i dunno what those all the RR tracks next to that street are for.. hopefully it’s not heavy freight.
Joey: a 2 bedroom, 1 bath sold for $425,000 in 2006, and now they want $333,000 in 2010. That’s not much of a haircut in a city that has had a 48% cut in median price over the past five years. Despite the comparables in the neighborhood, it’s just ridiculous to have $300/sq/ft prices in Sacramento in 2010.
Average numbers imply some are above and some are below.. Find one that’s below. It’s gotta be there somewhere.
That’s a cute house, REhobbyist. Love all the trees (you guys must get a lot more water than we do down here in San Diego).
Agree with your sense that the prices are still too high. They are too high in almost all of the desirable neighborhoods because they govt/PTB stepped in just before the crash hit these markets.
More popcorn…
There was this interesting article in yesterday’s WSJ on the aftermath of catastrophes which got me to thinking: Wouldn’t it have been better for the future health of America’s financial system to allow Wall Street’s Megabank, Inc to (figuratively) collapse into rubble in the wake of the unnatural financial disaster that occurred in Fall 2008, rather than to bail them out? Instead of the opportunity to build a better financial system, the American people get to look forward to the future continuation of systemic theft through too-big-to-fail bailouts.
* JANUARY 16, 2010
Rising From the Ruins
Natural disasters have been engines of development and economic growth throughout history. Kevin Rozario on the lessons of past catastrophes, and why Haiti might be different.
By KEVIN ROZARIO
…
By the mid-20th century, the history of disasters had taught many Americans to equate progress with economic development and to view destruction as an essential mechanism for achieving that progress. Hence the broad resonance of economist Joseph Schumpeter’s famous description of capitalism as a “gale of creative destruction.” As Federal Reserve Chairman Alan Greenspan explained in the 1990s, this metaphor aptly captured the dependence of a capitalist economy on the continual obliteration of outmoded goods and structures to clear space and make way for innovation, new efficiencies and greater productivity.
…
In the U.S. such confidence has taken a hard hit in recent years, and perhaps nothing speaks to the possibility that we may be entering an age of diminishing expectations than the difficulty we have in seeing disasters as opportunities.
…
In James Burke’s “Connections” he discusses the aftermath of the Black Death. About 1/3 of the people in Europe died. So much loose capital was left in the hands of the survivors that business exploded in the aftermath, sparking the Renaisance.
Chicago and San Francisco expanded and redeveloped in the aftermath of the great fire and earthquake/fire, respectively.
Europe was bombed flat in WWII, which meant all factories would be rebuilt from scratch - with the latest technology. European tire companies pioneered radial tires, whereas US companies kept building bias-ply tires in their antiquated factories.
I am starting to warm up to the decoupling theory. In particular, I will conjecture here and now that America is likely to be enjoying a financial recovery (maybe five years from now) at the same time China’s bubble is popping. Does anyone else see this possible eventuality?
Leaders
China’s battered image
Bears in a China shop
Jan 14th 2010
From The Economist print edition
The “peaceful rise” hits some turbulence; but China’s economy is not about to crash
Illustration by Derek Bacon
THE thunderous applause that China has become used to has suddenly been drowned by catcalls. Celebration that it had seen the light on climate change turned to condemnation of its spoiling role at Copenhagen. Foreign complaints about the jailing of a human-rights activist and the execution of a mentally disturbed British drug-smuggler recalled the bad old days of hectoring from Western governments. Barack Obama is (at last) due to meet the Dalai Lama, and his government has gone through with the sale of arms to Taiwan. And Google, an internet giant that had been notoriously willing to tailor its services in China to repressive local regulations, has said it may quit the market (see article). Even China’s strongest suit, its booming economy, has been damned. Rather than cheering China’s success in shrugging off the “Great Recession” of 2009, some analysts say China’s prosperity comes at the expense of the rest of the world and claim that, anyway, it is heading for a crash. One describes it as “Dubai times 1,000, or worse”.
…
Interesting
http://newobservations.net/2010/01/12/default-is-a-patriotic-duty/
From the link:
Default is an intelligent act. Take the right steps so we can beat the Chinese and the rest of the world. We need the jobs now. We need to get back to work now. We have to compete based on the price of our labor. We can’t charge less for our work while paying more for phony mortgage debt issued to buy a home at a phony bubble-jacked price.
The government has screwed up management of the financial crisis by granting debt assets special status. It’s time for the owners of debt assets to take losses. It’s time for the people to fix the financial crisis. Give the debt investors the losses they bargained for.
Mortgage default is a patriotic duty.
——————————
An excellent article, and one I wholeheartedly agree with. Thanks for posting that.
Tried to post this before, but the blog is acting strangely right now…
From the link:
Default is an intelligent act. Take the right steps so we can beat the Chinese and the rest of the world. We need the jobs now. We need to get back to work now. We have to compete based on the price of our labor. We can’t charge less for our work while paying more for phony mortgage debt issued to buy a home at a phony bubble-jacked price.
The government has screwed up management of the financial crisis by granting debt assets special status. It’s time for the owners of debt assets to take losses. It’s time for the people to fix the financial crisis. Give the debt investors the losses they bargained for.
Mortgage default is a patriotic duty.
——————————
An excellent article, and one I wholeheartedly agree with. Thanks for posting that.
Things must be heating up in my zip code. All of a sudden I’ve got three different groups calling my number looking for unheard of individuals. The calls are relentless and Time Warner says they don’t block phone calls. It’s got to be about collections.
Makes me really really glad we have no debt.
Is there any chance the AIG scandal and the Fed audit will put Ben Bernanke’s reconfirmation on hold? (Nothing wrong with holding out hope, is there?)
BLUNT BLASTS FED´S “COVER-UP OF A COVER-UP”
Congressional Desk
January 16, 2010
WASHINGTON, DC— Missouri Congressman Roy Blunt reacted strongly to news that the Special Inspector General for the Troubled Asset Relief Program (TARP) will not release documents related to AIG´s payments to banks during the taxpayer-funded bailout process in 2008 because the Federal Reserve has asked them not to make them available to the public.
“Just when you think that these outrageous abuses of taxpayers´ trust can´t get any worse, they do,” Blunt said. “Secretary Geithner´s New York Fed deliberately counseled AIG to muddy the waters and sit on information the taxpayers deserved to know relating to the disbursement of billions of dollars in bailout funds. Now we find out that the Federal Reserve is refusing to allow the special inspector general to release documents and details related to AIG´s payments of tax dollars to banks.”
“The cover-up was bad,” Blunt continued. “This cover-up of a cover-up is beyond the pale. The taxpayers deserve answers, not more stonewalling.”
Last week, news broke that the Federal Reserve Bank of New York, then led by now-Treasury Secretary Timothy Geithner, advised AIG to withhold information from the public regarding their payments to banks during the taxpayer-funded bailout process in 2008. Bloomberg News reported that: “email exchanges between AIG and the New York Fed over the insurer´s disclosure of transactions show that the regulator pressed the company to keep details out of the public eye.”
…
I think its pretty hard to explain why bail outs of Investment firms like
Goldman’s by AIG Insurance pay outs of 100% on Credit Default Swaps from the TARP funds was necessary for saving the system as was stressed by Hank Paulson when he was screaming “fire “and talking about having a big gun .
I didn’t like the fact that they combined these Banks with Major
Investment Firms ,just to try to suggest that they were Banks now so they would qualify for certain bailouts . I guess that is why Paulson wanted a blank check with no requirements with immunity . I found it very odd when it was taking place and I find that my worst thoughts
about what they might be doing was true . You could see for months that the Feds were lending to any financial firms short term loans for billions of dollars based on their junk paper ,so it followed that they were sitting up for massive bail-outs .
I remember at the time the grounds for the bail-outs were to keep the credit markets going . After the bail outs we see that banks raised interest on stuck credit card borrowers and the Government became the main lender bag-holder ,not these entities that were bailed out . In fact Wall Street and the Banks just took advantage of the fallen stock market and they continued to play their Casino games
that resulted in record bonuses and profits . Has anybody seen a set of events that could of been more rigged and more of a Obstruction of Justice than what took place ?
‘I think its pretty hard to explain why bail outs of Investment firms like Goldman’s by AIG Insurance pay outs of 100% on Credit Default Swaps from the TARP funds was necessary for saving the system as was stressed by Hank Paulson when he was screaming “fire “and talking about having a big gun .’
Think of the TARP rescue as a political smoke screen to justify transferring hundreds of billions of dollars directly from the Treasury to Wall Street Megabanks and it all makes perfectly good sense.
Congressman Ron Paul to Present “The Case Against the Fed” Jan. 27 at Loyola
BALTIMORE, MD — United States Congressman Ron Paul will present “The Case Against the Fed” at Loyola University Maryland on Wednesday, Jan. 27, at 7 p.m. The event, which takes place in McGuire Hall on the University’s North Charles Street campus, will be followed by a book-signing and reception.
Dr. Paul, a Republican and an obstetrician by training who has served Texas’s 14th district for 20 years, will discuss many of the key themes outlined in his book End the Fed, a New York Times bestseller. Dr. Paul is also the co-author of a current bill requiring an audit of the Federal Reserve.
“Dr. Paul presents a very convincing case that the Federal Reserve is not only the cause of much of our current economic condition, but is continuing with policies that will lead to greater difficulties in the future,” said Thomas DiLorenzo, Ph.D., a professor of economics at Loyola who arranged Dr. Paul’s appearance. “In addition to calling for the first audit of the Fed, he also proposes several alternatives for managing the U.S. money supply.”
Dr. Paul, a graduate of Gettysburg College and the Duke University School of Medicine, serves on the House Foreign Affairs and Financial Services Committees as well as the Joint Economic Committee. He was a candidate for the Republican nomination during the 2008 United States presidential campaign.
The event, part of the Moral Foundations of Capitalism lecture series led by DiLorenzo, is supported by a grant from the BB&T Foundation.
While this event is open to the public, free tickets are required. To reserve tickets, call 410-617-5932.
…
Updated January 16, 2010
After Rocky First Year, Geithner Faces Another Test in AIG Bailout Hearing
FOXNews dot com
The Treasury secretary is back in the hot seat, for bailout decisions he made about AIG while he was head of the New York Federal Reserve — and it has created a firestorm that some critics hope will mark the end of his tenure
(Treasury Secretary Timothy Geithner testifies on Capitol Hill in Washington, Thursday, Nov. 19, 2009, before the Joint Economic Committee hearing on financial regulatory reform.) (AP)
Timothy Geithner’s tenure as Treasury secretary got off to a rocky start, to say the least.
There was the revelation during his Senate confirmation last year that he once failed to pay taxes. There were the questions surrounding his role at Freddie Mac during an accounting scandal. And later, there were the calls from some lawmakers for his resignation for what they deemed as a poor response to the U.S. economic crisis.
Now Geithner is back in the hot seat, for bailout decisions he made about AIG while he was head of the New York Federal Reserve — and it has created a firestorm that some critics hope will mark the end of his tenure.
“Everybody on the [trading] floor thinks these revelations about the Fed and AIG are outrageous,” Barry T. Larkin, the head of sales and trading at Kabrik Trading, told the New York Post. Geithner “should be held to account for what has come out.”
…
BTW, my sister is a died-in-the-wool liberal and was an Obama campaign worker. Now she is talking about feelings of betrayal. I can’t imagine his support for Wall Street insiders like Geithner is going to rally Obama’s liberal base, but perhaps he is better at hoodwinking the public than I can imagine?
You give too much credit. Obama is a victim. He is a likeable guy, corrupt by my standards, but not by the system’s. He was encouraged to take the path, and everything would be grand. He was held up on people’s shoulders. But it’s not grand. His name will be on it, not the name(s) of the real movers and shakers. Like Hoover, only x10.
He’s a lot like Kennedy. We loved Kennedy. I was in short pants still when he fell. My dad said LBJ was the villian. Once, I read someone who said Kennedy found his “voice”. And then, you know.
I don’t think the “voice” has been heard yet, but it will come, from him or another. We are due for it.
“BTW, my sister is a died-in-the-wool liberal and was an Obama campaign worker. Now she is talking about feelings of betrayal.”
I am savoring every story like that. I tried to warn these people. They wouldn’t listen. They were consumed with hopeNchange, making history and other nonsense. Reason and logic were tossed aside in favor of feelings.
The only silver lining for me is that, in my experience anyway, there seems to be a direct correlation between the amount of kool-aid consumed and negative economic impact from his policies.
Smart, hard working people will do fine even with his reckless policies that have put the final nail in this once great nation’s coffin. It’s the people who voted for him and thought all their problems would disappear on 1/20/09 that are lost and hopeless. You know, the people who thought their mortgage and gas would be paid for by THE WON. And to them I wish nothing but the worst. They deserve everything that’s coming.
I didn’t mean to suggest Obama’s presidency isn’t a huge improvement on W’s or on what McSame’s would have been, but rather that he naturally turned out to be less of a Messiah than his liberal backers had hoped.
I’m with your sister Prof. Bear.
Especially the way he has really rolled over and continued Bush era policies endless wars, enabling the banksters, no meaningful attempt at healthcare reform.
Of course we will probably come running back to the Dem. party after seeing Palin on Fox, or a comparable nut job/idiot on the ballot for the Repubs.
it won’t really even be a question of hoodwinking us, just not being a Limbaugh drone.
Congrats. In one post you hit all 4 left-wing talking points: Palin, Fox, Bush, Limbaugh. In 2012 a light pole could run against Obama and it would still win. Face it, you screwed the pooch big time with him. I’m betting 2024 will be the next time a Dem even comes close to winning the presidency.
Palin has occupied my mind on occasion.
Uh — that part of your anatomy is not known as your ‘mind.’
I’m as nonpartisan as they come. McCain could’ve had my vote. Until she came along. She needs to get out of politics and the spotlight once and for all.
Speaking of which, anyone seen Biden recently? Obama seems to have sent him in a deep, deep undisclosed secret location. Every time he opens his mouth THE WON’s numbers drop 3%.
“In 2012 a light pole could run against Obama and it would still win.”
Are you subtly suggesting that Sarah Palin is dumber than a light pole?
McCain lost it when he cozied up to the Pat Robertsons and Dr.Dobson and with his choice of Palin. He also provided cover for GWand hired a lot of GW’sguys. I think he remembered how they had roasted him in the previous primaries and decided if you can’t beat them join them. Big mistake. To think that the guy at the center of the Keating 5 scandle would have handled things any differently is crazy. If Ralph could win I’d have voted for him, maybe he and Ron Paul could team up. A lot conflict but at least they’d fight for what’s best for the country rather than for Wall Street or the military industrial complex or big oil.
Plato’s short version: crippled body, crippled mind.
If Ralph could win I’d have voted for him, maybe he and Ron Paul could team up. A lot conflict but at least they’d fight for what’s best for the country rather than for Wall Street or the military industrial complex or big oil.
————————-
This is what I was hoping for as well. Odd characters, but at least they appear to have integrity. That’s more than what one can say about most politicians out there,
Not so Eddy. There’s still no appetite for GOP talking points. nobody thinks we can drill our way out of anything.
The Democrats may be in bed with the corporate junta, but the Republicans ARE the corporate junta.
Seems to me that the absence of an electoral spanking (especially if the economy convulses again) of the Democrats by the Republicans will be yet another sign of the GOP’s dim future.
The populist momentum (if any) of authentic tea baggers will focus on Ron Paul (or Peter Schiff, here in my state of Connecticut)types.
Palin, Fox, and Limbaugh are pure entertainment with zero influence. Very much like Michael Jackson at the end.
p.s If voting for Obama was unAmerican, then voting for Palin was treason.
Perhaps.
And authentic Democrats will cast their votes towards the Lieberman sect, all the while ignoring the MSM.
See? The re-directive blather can work both ways. And who says it won’t? I can’t imagine any authentic Democrat voting for any of the current socialist Liberal Congressional bozos now holding office.
UPDATE: MY WIFE IS RECONSIDERING.
Pray to the bubblesit Gods for us, please!! Let’s hope every house we see tomorrow has mold damage.
Oh Muggy,
That was too funny. My heart goes out to you.
My Realtor just called… 3/6 we lined up to see tomorrow have contracts.
I’m thinking this is the dead cat bounce that many thought was going to occur in 2007ish…
Best of luck to you, Muggy! Keeping my fingers crossed for you guys.
MS-NBC host Ed Shultz today on the MA Senate race:
“I tell you what, if I lived in Massachusetts I’d try to vote 10 times. I don’t know if they’d let me or not, but I’d try to. Yeah, that’s right. I’d cheat to keep these bastards out. I would. ‘Cause that’s exactly what they are. ”
It is the Kennedy party after all.
Ya gotta love a straight shooter from Kansas!
The Buzz
Fed up with the Fed?Paul R. La Monica, editor at large
January 15, 2010: 3:23 PM ET
NEW YORK (CNNMoney dot com) — Ben Bernanke and the rest of the Federal Reserve may think that low interest rates can continue to be just what the economy needs to get back on track.
But many disagree, including one of Washington’s other big financial power brokers.
Sheila Bair, the influential chairman of the FDIC, testified earlier this week in front of the Financial Crisis Inquiry Commission that “low interest rates encouraged consumer borrowing and excessive leverage in the shadow banking sector.”
Bair also made a point to cite “stimulative monetary policies” first in a list of what she described as “numerous problems in our financial markets and regulatory system” that have come to light since the crisis began. Take that Ben!
…
I’m really stunned she would make such a frontal assault on the Fed/Treasury’s new “raison d’etre”.
I want to see:
1) if i read that anywhere but here
and
2) if she repeats it.
Gotta believe that any stronger jobs, sales,or manufacturing numbers will make her voice a little stronger, even get a chorus going.
I’m so used to all involved just lipsinking the mantra about “saving the system” and “jump starting the economy” that any other perspective will be drowned out.
My wife asked WTF is going on? I explained to her that the bubble will ring out from the bottom up, but what is a better way of saying this?
Tell her if you rent 2 more years she can have a horse. I’m only 1/2 joking.
“…bubble will ring out from the bottom up, but what is a better way of saying this?”
The bubble will collapse from the top down, like a Haitian structure during a 7.0 magnitude quake?
Listened to an interview on NPR yesterday, one of the rescue team from Iceland in Haiti: When a building pancakes like that, everybody gets crushed. It’s no use looking for survivors.
If this AIG story doesn’t convince you that the top dogs in the global banking industry and their government enablers comprise one of the seamiest coalitions of liars and scoundrels to ever walk the planet, what would it take to convince you?
Redacted AIG filing might have spotted worst deals
Matthew Goldstein - Analysis
NEW YORK
Tue Jan 12, 2010 2:10pm EST
* Calls grow for inquiry into Fed role in AIG issue
Tue, Jan 12 2010
* SEC order helps maintain AIG bailout mystery
Mon, Jan 11 2010
* Greenberg wants U.S. stake in AIG below 20 percent
Mon, Jan 11 2010
* Lawmaker presses NY Fed on AIG payment details
Sun, Jan 10 2010
* RPT-UPDATE 2-U.S. lawmakers press for Geithner AIG testimony
Fri, Jan 8 2010
The American International Group (AIG) building is seen in New York’s financial district March 16, 2009. REUTERS/Brendan McDermid
NEW YORK (Reuters) - Information about the American International Group bailout that regulators agreed to keep secret may reveal which banks held some of the worst performing mortgage-related securities at the time of the rescue.
Reuters reported Monday that the Securities and Exchange Commission approved a request last May by AIG to keep confidential some portions of a year-old regulatory filing that provided details about the funneling of tens of billions of federal bailout dollars to banks like Societe Generale, Goldman Sachs, Deutsche Bank and Merrill Lynch.
The SEC’s order granting confidential treatment to the redacted portion of the filing, known as Schedule A - List of Derivative Transactions, lasts until November 25, 2018.
A close review of the non-redacted portions of the Schedule A exhibit, which the giant insurer filed with the SEC on March 16, reveals the regulatory agency permitted the giant insurer to keep secret any identifying information about the securities a group of 16 big US and European banks sold to Maiden Lane III, an entity set-up by the Federal Reserve of New York in November 2008 as part of the AIG bailout.
The NY Fed established Maiden Lane III to retire the credit default swaps-and insurance-like derivative product-AIG had sold to the banks to guard against a decline in value on those mortgage-related securities.
The redacted information includes things such as the CUSIP, or trading ID number, for each security; the name of each security and its face value. Also redacted was the distressed market price, or “negative mark to market” value, for each security sold to Maiden Lane III.
SOURED DEALS
Derivatives consultant Janet Tavakoli said the information kept secret made it difficult to determine which banks held the worst performing securities as well as the identity of the banks that arranged and marketed those securities.
“They didn’t want you to know which deals had soured the fastest,‘ said Tavakoli, president of Tavakoli Structured Finance and a vocal critic of the AIG bailout. “The reason they didn’t want to release these details is because it would have shown that some securities suffered only moderate discounts while others were worth much, much less. And that could have prompted an investigation into the deals that performed the worst.”
An AIG spokesman was not immediately available for comment.
The bailout of AIG has been assailed on Capitol Hill and elsewhere for funneling tens of billions of dollars to Wall Street banks without forcing and to incur losses on them.
…
America is by and large a Christian country, with Christian values and expectations. Unlike Eddie or Joey, most Americans have a certain naive expectation that others share their sense of integrity and goodness of heart. This gullible trust in the good nature of others makes them easy targets for the operation of Wall Street’s institutionalized theft operations.
Editorial
January 04, 2010
Ben S. Bernanke’s four years as chairman of the Federal Reserve Board of Governors have been as challenging as any chairman’s since the Depression. He moved with uncommon alacrity and creativity, forcing down interest rates and injecting hundreds of billions of dollars into the financial system after a series of high-profile collapses on Wall Street threatened to wreck the U.S. economy. No one can say for sure, but we (and many leading economists) are convinced that the recession would have been far worse had the Fed acted more timidly.
All the same, numerous members of Congress don’t want Bernanke to be confirmed for a second term. Some even want to strip the Fed of some of its powers or subject it to more congressional audits. We think the Senate should grant Bernanke another four years without demanding additional authority to scrutinize monetary policy. But Congress should explore ways to bring more accountability to the Fed’s use of its other powers to influence the economy.
Bernanke’s critics note that he was a member of the board of governors from 2002 to 2005, when it kept interest rates extremely low for an extended period — too extended, as economists would eventually conclude. They also complain that the Fed failed to stop banks from engaging in predatory lending or making risky bets on securities backed by exotic mortgages. And after the bubble burst, they say, the Fed shielded banks too much from losses and disclosed too little about the winners and losers.
…
The Financial Times
Is Ben Bernanke descended from the Bourbons?
By John Cassidy
Published: January 7 2010 20:13 | Last updated: January 7 2010 20:13
Behind his white beard, Federal Reserve chairman Ben Bernanke has a wry sense of humour. On reading his recent speech to the American Economic Association, in which he defended the Fed’s actions during the housing bubble, I initially suspected it was a practical joke. Rather than conceding that he and his predecessor, Alan Greenspan, made a hash of things between 2002 and 2006, keeping interest rates too low for too long, he said the Fed’s policies were reasonable and the main cause of the rise in house prices was not cheap money but lax supervision.
Searching in vain for a punch line, I was reminded of Talleyrand’s quip about the restored Bourbon monarchs: “They have learned nothing and forgotten nothing.” Mr Bernanke is far smarter than Louis XVIII and Charles X, two notorious boneheads, and has done a good job of firefighting. But his unwillingness to admit the Fed’s role in inflating the housing and broader credit bubble raises serious questions about his judgment.
…
“In seeking to separate decisions about interest rates from issues of financial stability, Mr Bernanke is returning to the wishful thinking of the Greenspan era. In a financially driven economy, it takes vigorous oversight and a responsible monetary policy to prevent bubbles. Before the next boom gets under way, the Fed needs a credible commitment to limiting leverage and raising interest rates and doing what is necessary to shock people out of cloud-cuckoo land. The last thing we need is a return to the misguided policies that got us into this mess. Until Mr Bernanke pledges a decisive break with Mr Greenspan’s legacy, his confirmation for another four years should be put on hold.“
Foreclosure Expert: The Worst is Yet to Come - Foreclosure filings reach nearly 3 million in 2009, record high
Saturday, Jan 16 2010, 12:35 pm
Emily Killian
The freshly painted burgundy shutters on a blue house on Shelby’s Arnold Drive fit in with the rest of the surrounding neighborhood.
But there’s one difference between this house and others around it — this home is owned by a bank instead of a family.
It’s a foreclosure.
And according to industry experts, it’s far from being alone.
Industry group RealtyTrac’s year-end report shows a record 2.8 million U.S. properties with foreclosure filings in 2009.
It shows 3,957,643 foreclosure filings — default notices, scheduled foreclosure auctions and bank repossessions — a 21 percent increase in total properties from 2008 and a 120 percent increase in total properties from 2007.
The report also shows that 2.21 percent of all U.S. housing units (one in 45) received at least one foreclosure filing during the year, up from 1.84 percent in 2008, 1.03 percent in 2007 and 0.58 percent in 2006.
Foreclosure expert and consumer bankruptcy attorney O. Max Gardner III said the number of homeowners who have been able to modify their loans and save their houses is “dismal.”
“The sad thing is nothing is really working,” said Gardner. “None of the modification programs are really working.”
…
The math seems altogether too easy, yet somehow implausible:
- American population growth from Dec 1999 through Dec 2009 = 30,000,000
- American employment growth over the same period = 400,000
- Growth in number of Americans without jobs over the period = 29,600,000
I know some of the 29.6 million are not in the labor force, but still…
United States
The economy
The trap
Jan 14th 2010 | WASHINGTON, DC
From The Economist print edition
The curse of long-term unemployment will bedevil the economy
THE 2000s—the Noughts, some call them—turned out to be jobless. Only about 400,000 more Americans were employed in December 2009 than in December 1999, while the population grew by nearly 30m. This dismal rate of job creation raises the distinct possibility that America’s recovery from the latest recession may also be jobless. The economy almost certainly expanded during the second half of 2009, but 800,000 additional jobs were lost all the same.
…
Here’s something to make your blood boil:
Seems Barack Obama’s goons want to squeeze more money out of small business:
http://www.forbes.com/2010/01/15/irs-gao-medicare-social-security-tax-personal-finance-s-corp.html
It’s interesting how they think of scrupulous following of the tax law as “tax evading”. If it’s legal, it’s not evading.