Bits Bucket For April 1, 2010
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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I was reading some of the opinion of Pres Obama’s drilling plan yesterday, and among the libs there appears to be a bimodal curve: there are the knee-jerk environmentalists, and there is a smaller but growing body of supporters who see this as a headfake by a political master. I’m currently in the latter group. Obama just blunted Palin by usurping her signature issue. Obama knows that the Republican block is wavering, and means to weaken it further by daring Republicans to vote against him. The conservative oil lobby is so pleasantly surprised they they slapped their wallets shut for a time. The whole leasing-and-royalty game is far more complex than its face value. Exploring doesn’t necessarily mean drilling. If oil companies knew there was significant oil out there economical to drill, they would have “twisted” Bush’s arm for leases years ago.
Even if Obama is playing it straight, and even if there is oil/natural gas, we will still need oil for a long time, and it’s oil that won’t need to come from the Middle East, and I’m still sure he wants to tax the heck out of it to pay for the renewables ramp-up.
The is time for the environmentalists to come around. There is very little downside for Obama.
A pity that this is what “governing” has come down to. A pissing match between two equally undersirable “parties”. I suppose it’s always been that way, though, in a “democracy”. If this were a true republic, perhaps it would be different.
No Kidding Palm.
headfake by a political master = bait and switch.
Some might call it a bribe to conservative democrats so that they can vote on cap-and-trade.
Delusion runs deep amongst the true believers…..
basura, nice catch! It IS a bait and switch. Except that the baiters have become the bait.
Argh, don’t know if i posted this yet. But to be more accurate, it’s still a bait and switch. But the original baiters and switchers are now being baited and switched.
A pissing match between two equally undersirable “parties”
….. the evil of two lessers.
Or maybe it’s pragmatic.
Maybe Obama has looked at the declining US and Mexican production and increasing dependence on Saudi Arabia and has decided that in addition to reducing consumption we should increase drilling.
And maybe a candy-crapping unicorn will move into my living room.
Man I miss Oly, she wouldn’t have been able to resist that one.
She could always put a smile on my face.
I think has to do with the oil companies in China and Russia announcing that they will be drilling out there. If we don’t exercise drilling rights in the Gulf, they will. Sorta like getting “squatter’s rights”
Oxide:
It’s to the point I don’t care anymore. If all I can get is an “intern” job in my field at less then minimum wage so my resume will look good in a few months, it beats last year begging for any kind of work.
I’m tired of the $5 subway sandwich , and i”m bringing lunch now….still sending resumes and still getting few if any good responses.
I tried Workforce 1 job service and OhbaHmas stimulus plan gave NYC 2500 more paid training slots but of course its for minorities you know truck drivers for fresh direct, security guards ramp agent at airports, parks dept picking up garbage…. but they seem to have no money for us to learn dream-weaver, advanced photoshop web design, Final cut for video editing, or heck upgrade my paralegal skills…nope
I sounded exactly like you a year ago. I was lucky that I had some background and former connections. I don’t know how to help you, or even what to say except that you may have to decide on a drastic life change.
We are hearing stories like this all over the country… In-Colorado spoke of this yesterday. Gaffer Biden spoke of this months ago in an interview (paraphrase): “all these initiatives are great but if you don’t have a steady job, it means nothing.” Whether by greed or simply the tragedy of the commons, we are seeing the beginning of the logical conclusion of unfettered capitalism: stifling of true innvation in favor of the quick buck, either by M&A/layoffs, or by financial trickery. We see economies of scale trumping better mousetraps, which favors the formation of too-big-to-fail monopolies. A destroyed middle class, children uneducated and unhealthy, and of course the constant outsourcing and insourcing which IMO is the root of much of this. Obama’s “spread the wealth” comment drew ire from the right, but what did the constant corporate outsourcing and insourcing do but to spread the wealth? We are on our way back to the Gilded Age.
“unfettered capitalism” = where was this as I missed it. I would say that it was socialism that created all these problems as it was mostly created with socialized (fake) money. You cannot call a structure capitalism when it is built upon a fundamentally socialistic base (FED bailouts and millions of other social programs of our lovely USA)
I beleive Oxide was referring to the last 2 decades, not the last 18 months.
I would say that it was socialism that created all these problems as it was mostly created with socialized (fake) money
Do you even know what socialism is?
“”You cannot call a structure capitalism when it is built upon a fundamentally socialistic base (FED bailouts and millions of other social programs of our lovely USA)”"
The problems occurred before the bailouts. Bailouts are corporatism not socialism. The benefits of the bailouts go to corporate CEO’s and not to the people. The bailouts were coordinated by those same CEO’s via their henchmen in gov.
Socialism is the gov controlling things like the highways, medical care, utility lines, cable lines, public transportation so that corporations can’t exert monopoly/oligopolyy power to shut down competition and rape customers.
Do you even know what socialism is?
Almost no one who uses “socialism” as a four-letter word knows what it is or how to define it.
Just as “capitalism” is wrongly confused with “corporatism,” “socialism” is confused with “bureaucratic bloat” and/or “a policy some nimrod on the radio told me is scary.” Don’t try to take away my Medicare, you ding-dang socialist!
Bailouts are corporatism not socialism.
I mostly disagree. They are not exclusive. Most people generally define socialism as taking privately created resources and distributing them for public use/good. Bailouts IMO fall under that, in that the private resources (tax money) was used for the “public good” (bailout money - to avoid “financial meltdown”).
I agree that it’s corporatism, but I don’t agree that it’s not socialism. They are not exclusive.
“we are seeing the beginning of the logical conclusion of unfettered
capitalismcorporatism”You keep saying this, and I’m going to keep correcting you.
You’re probably right.
“we are seeing the beginning of the logical conclusion of unfettered
capitalismcorporatism”You keep saying this, and I’m going to keep correcting you.
An important distinction.
Yet most people think capitalism == corporatism
Yet most people think capitalism == corporatism
That’s the only example we’ve seen in our lifetimes, after all, and corporations spend a whole lot of time, money, and energy trying to keep their preferred model in place …
Unregulated capitalism leads to corporatism.
Unregulated capitalism leads to corporatism.
Au contraire, a large body of law and regulation is needed before corporations can even come into existence.
Correct
Unregulated capitalism leads to anarchy and war.
Poorly regulated capitalism and unregulated campaign contributions and lobbying lead to corporatism.
Unregulated capitalism leads to anarchy and war.
Fascinating theory, I’d love to hear you expand on this. I’ve talked to plenty of people who oppose the wars in Iraq and Afghanistan, but I’ve never heard anyone blame them on lack of regulation. Were the 9/11 attackers motivated by rage over the [partial] repeal of Glass-Steagall?
LOL. Interesting that this thread pops up the morning after I finally rented “Capitalism: a Love Story.” While I thought, in general, it was a decent flick the major flaw in the movie is that Moore never makes the distinction that y’all have made above. He also seems to promote the idea that what we’ve had since Reagan was a free market instead of the reality of manipulated corporate socialism.
He also seems to promote the idea that what we’ve had since Reagan was a free market instead of the reality of manipulated corporate socialism.
+1
And I like that terminology - seems to spot-on describe the system we’ve had for decades now.
but what did the constant corporate outsourcing and insourcing do but to spread the wealth?
Uh I think the outsourcing actually concentrated the wealth here in the USA.
I guess the outsourcing spread the Exisiting wealth into the hands of a few, but what about Future wealth, that is created by future labor of the workers — i.e. jobs? The wealth of jobs was spread.
Oxide’s point is well taken. Certainly much of the investment in production facilities has been done in places where the cost of labor is cheaper. An economic system where the factories and workers are in one country and the investors and consumers are in another isn’t sustainable over the long term. The word for tomorrow is nationalization.
You can get pirated copies of all the applications and pirated copies of tutorials and manuals. There are also tutorials on youtube and other sites a plenty. Then put together a portfolio.
Another way to do this is sign up for classes where Dreamweaver, etc are taught. Usually you can get the software for cheeeeaaaap. Then, drop the class….(usually you can’t return unopened software, so that’s your “out”)
(not investment advice)
Or, better yet, don’t rely on crutches like Dreamweaver. Learn to hand-code your work — and validate it. This site will become your best friend:
http://validator.w3.org/
Hi Slim,
I’ve not taken a Dreamweaver class although I’ve been considering it for my own (non-professional) use. What about it is a crutch? Would a proper analogy be using Visual Studio instead of writing code in C?
IOW:
Dreamweaver is to X/HTML as Visual Studio is to C?
Dreamweaver makes it too easy to get into the habit of writing sloppy code. Last I checked, it still allowed one to do layout with tables. Tables are for tabular data, not layout.
Instead, I recommend using a Web Standards-based editor like TopStyle. You can also use it to create your CSS.
Thanks, I’ll look into TopStyle.
Er, Dreamweaver 8 (2005. It’s now at CS4 or basically 10) allowed you to use advanced CSS.
Tables are and always will the only way to ensure best cross browser compatibility because only FF comes close the W3C standards and even it isn’t perfect.
Better yet, Flash can be made to look exactly the same across all browsers and resolutions.
But unless you are one meticulous and obsessed coder who can take into account every possible screen resolution, monitor configuration, browser type, connection speed and OS, it’s always going to be an iffy deal.
I’ve also found Dreamweaver creates the cleanest code of anyone or anything.
1. Exploration is good. We need to know how much resources are accessible at what effort/price.
2. No amount of drilling will solve our energy predicament in the long term. I know the “long term” is not very popular with politicians and the American populus.
3. That Obama move will most likely deprive the Republicans of some much needed donations from big oil.
4. It might help short term to drive the cost of crude down.
5. Unless we get serious about alternatives we’re doomed. No amount of political manuvering will fill our transportation needs, no matter how much hot air comes out of DC.
None of these so called “alternatives” have the energy density as fossil fuels. We will never have enough alternative energy ie solar, wind, etc to replace our need for oil let alone all of the other uses for oil. Think of all the plastics and other materials that are petroleum based.
All of these “green” nazis are just in some sort of utopia thinking that we can get away from an oil based economy and not have our lifestyle completely changed. Maybe thats for the better but its not socially accepted at this point.
Obama is finally learning the real facts instead of the all the emotional knee jerk reactions of most liberals and is actually doing something practical. Its the first thing he has done as President that makes any sense.
“Think of all the plastics and other materials that are petroleum based.”
And that’s where it gets really silly. We don’t need all this plastic crap. When I wuz a pup, we had this big, ridged glass bottle with a red metal cap, sitting in the refrigerator, filled with water. When we wanted a cold drink, that’s where the water came from, instead of disposable plastic bottles. Remember returnable milk bottles? Soda bottles? When you think about it, folks were a lot more environmentally sensitive back in the day.
Folks were nowhere near environmentally sensitive. They just didn’t know any other way. When the technology arrived, oh they latched on quickly enough. Remember how wildly popular Tupperware was? Now the cheap equivalent of Tupperware is available in the paper towel aisle of every grocery store.
“We will never have enough alternative energy ie solar, wind, etc to replace our need for oil let alone all of the other uses for oil.”
Perhaps, but there must be something to solar or the energy companies wouldn’t try so hard to quash it. When I first moved to Fla back in 1979/1980, energy costs were skyrocketing and the bills for cooling the apartment were outrageous. Even worse than today, as I recall. Anyhoo, solar began to make inroads, people were getting solar pumps for the pool, solar water heaters, etc. Nothing major, just powering the odd appliance here and there. But it began to grow and what happened? Energy costs went down, to undercut solar, and so a budding industry died.
I think we have to sort of ignore the ups and downs of fuel costs currently while developing alternatives. It has to happen. I envision a day when I can use a battery to power my house.
Anything like that can be accomplished along those lines. It just takes the will and the resources. Who’d ever have thought we’d be sitting in our homes, typing on PCs? In the not too distant past, computers used to take up entire buildings, or a good part of them.
i don’t think environmental sensibility was the reason for all those swell things.
“Folks were nowhere near environmentally sensitive. They just didn’t know any other way.”
LOL, ignorance is bliss. Yes, I realize people were environmentally sensitive by default. But it wasn’t such a bad system, when you think about it. Plastics! Tupperware? Heck, my pre-packaged deli ham comes in such a container, and I save them and re-use them. Why buy the same crap at Wal-Mart when you can have it for free?
There were true Conservationists in those days. I knew one.
palmetto
I knew you’re a swell guy. I re-purpose almost everything. Peanut Butter jars are great for storing cookies, tea bags, misc house hardware, etc…, and I reuse plasticware too. But as it breaks down, the chemicals get in your system. Breast and Prostate Cancer risk, so be careful. The numbers on plastic aren’t just for green reasons, some #’s are more dangerous to your health than others.
I’ve been accused of having a Great Depression mentality.
The moment the environmental movement became commodified it lost a lot of legitimacy in my eyes. That movement is now just another means to increase consumption and push debt.
To people living comfortable lives this might not seem the case at all, but for the working stiffs it is a big deal. Ex: Why should they buy a new hybrid when a used car might be in their best financial interest? Now the gov’t is in on the act - handing out tax credits and legislating new building codes that will increase the cost of living to working people.
True conservation means getting by with what you have. Perhaps the most environmentally friendly thing that could happen is for the debt driven consumer economy to go kaput. Look how this recession has already saved more acres of land and reduced oil consumption more than any gov’t program ever could.
“Ex: Why should they buy a new hybrid when a used car might be in their best financial interest? ”
Tried, but failed, to explain to someone that buying a used car that gets decent mileage could not only be more economical than buying a new hybrid, but had a lower ecological impact when you count all the manufacturing inputs.
“ignorance is bliss”
not ignorance…a stronger currency was bliss.
I remember my neighbors pouring used motor oil down the drain in the driveway in the 70s. Nobody knew where it went, so nobody cared. And then the Cuyahoga went up in flames…
I have a better one…..
One of my former places of employment was based out of an old USAF base, our hangar was built in the early 50s, and we leased it from the Airport Authority.
Floor drains in the hangar quit working, so out comes the Roto Rooter guy to clean them…….runs 20-30 feet of cable down the floor drain. Discovered piping wasn’t metal, was concrete or something else, and the whole thing had disintegrated.
What was interesting was what we saw when the “rooter” was removed. Thing was coated with old engine oil. Seems the USAF boys were dumping their used oil down the floor drains.
As a KC-97 has approx 32 Gallons of oil, times 4, and the oild gets changed every 200 hours or thereabouts, you can see where they might have a problem on their hands.
If it was a civilian entity (preferably with deep pockets) that caused it, it would have been hissy-fits and law suits all around. But this was a USAF generated issue, so the
policy was “If we don’t do a report on it, it doesn’t exist”
Which is why you pay someone to do an environmental survey any time you purchase government land.
All of these “green” nazis are just in some sort of utopia thinking that we can get away from an oil based economy
And all of these “non green” nazis keep their head in the sand and think oil will last for ever and that we can drill our way out of the long term rapid decline of oil production in the US and Mexico.
The oil based economy is going to end one way or another, those that prepare early will do the best.
I agree that we should pursue both production and conservation at this point.
Our neighbors had a wind turbine. On a windy day, which is damn near every day in Kansas, it sounded like a turboprop at full throttle. One day a guy wire snapped and it fell over. The neighbors scrapped it.
And you had to wind up and tinker with the first cars just to get them to start. Not to mention the oil and unmuffled noise.
One thing’s for certain, and it’s that this $85 per barrel oil is the biggest scam going. It’s nothing but rampant speculation, and greedy Wall St. pigs chasing returns. It has absolutely NOTHING to do with fundamentals. I fueled up yesterday for more than $3 per gallon, and the insiders are barking $4 per gallon. There is no way in HELL that the economy can absorb this. It’s curtains.
Your assessment of the man is chilling; so completely a self serving genius.
IMO the renewable mania is on the downslide. “Renewable” at least in terms of Solar, was as much a hoax as Global Warming. It was a total public money grab as is Cap and Trade. The housing boom is over, and with it the manufacturing boom. The oil bubble will follow, at least for your generation. The last battlefront is the Federal spendathon. When that gravy train derails, the commodities speculation will too and some harsh reality might set in.
Exactly! Many things are on the downside and as the middle class shrinks, it moves up the food chain, taking down the more well to do, in time.
Life is changing. I have been trying to manage those changes. I never lived high on the hog…but now it is just much more simple and very free from the debt shackles and hassles of modern life.
The changes have allowed me more time, freedom, money and peace. I win.
My Dad and sister have joined my way of life and I don’t think they will ever go back. They have both paid off debt and have savings.
One brother who did not adjust to a new way is now on the verge of losing it all..big house, pool, new cars, vacations, etc. Just a matter of time.
After the Depression is over (few years) those who have some savings will be rewarded.
“After the Depression is over (few years) those who have some savings will be rewarded.”
I wish I could believe that, but I suspect that those in charge will make sure that no cent remains untaken in the quest to Bailout the crooks.
Life is changing. I have been trying to manage those changes. I never lived high on the hog…but now it is just much more simple and very free from the debt shackles and hassles of modern life.
I’ve been in the process of shedding stuff. Been donating some of it to places like Goodwill and the Salvation Army. Been freecycling the rest. Am about to sell a bit of it too.
I’m finding the whole process rather liberating. It’s also having a very interesting side effect, and that is my increasing reluctance to allow new stuff into my life.
+1, Slim. Books, CDs…gone. I’m investing my energy in having a home base with low overhead. A simple, comfortable place to rest my head in between my trips to the woods, and the ocean where the real entertainment lies…
This is one environmentalist who agrees with drilling for our own oil and advancing more nuclear power. I want us out of the Middle East. I want our boys and girls home.
… but can that work.
If we stop buying ME oil, they need only cut price enough to make it cheaper for us to import it. Oil sales are their livelihood and if that declines they don’t have many options to choose from.
I was glad to see the President finally taking Sarah Palin’s advice to “Drill Baby Drill!”
The tea party is not about “drill baby drill”. Obama converts nobody by this move, the public will not fall for head fakes this time…Been there done that. The majority of tea party activists want the out of control spending stopped, they also support reducing the size, scope and power of government. Obama will never support meaningful spending reductions and will never decrease the size, scope and especially the power of the Federal Government.
The teapartiers get a lot of news, but from a voter standpoint, there just aren’t that many of them.
Not sure how many there may be in the whole broad movement. They will need some pretty large numbers to compete with public employee unions, acorn, and the other statist grass root organizations. I guess we will find out in November.
ACORN disbanded, sorry. Rush will have to find another whipping boy. When’s he leaving, btw?
Acorn is just changing their organization, they are not going away. A rose by any other name is still a rose. In acorn’s case it would be more like a black rose.
there is a point where enviros will be seen as pulling for the middle east.
If that becomes the majority opinion,right or wrong they have lost the fight.
US central bank reveals cash backed by trash. Poof!
April 1 (Bloomberg) — After months of litigation and political scrutiny, the Federal Reserve yesterday ended a policy of secrecy over its Bear Stearns Cos. bailout.
In a 4:30 p.m. announcement in a week of congressional recess and religious holidays, the central bank released details of securities bought to aid Bear Stearns’s takeover by JPMorgan Chase & Co. Bloomberg News sued the Fed for that information.
That’s actually huge, mrkt. Probably the biggest housing news of the day, the week, maybe even the decade. Took Bloomberg to do it, but hey, they have the resources to stand up to the FED.
Does this end Fed secrecy over all the other details of the bailout? For instance, what is the composition of the $1t+ in MBS they supposedly purchased since Fall 2008; do they all meet the Fed’s high quality standards for assets they hold in their portfolio? And who sold them the MBS and how much did they profit on the deals?
Here’s a tidbit or two about those MBS. Remember that Richard Fisher talk I attended a couple of nights ago? It’s gotten some CNBC coverage.
fiscal incontinence = ?
“We cannot turn a blind eye to the effect that growing government indebtedness has on investors’ confidence and Treasury yields,” he said.
He added that the Fed would not come to the government’s rescue by making additional purchases of Treasury debt if bond yields continue their upward march.
“Should we do so, we would only become an accomplice to the fiscal incontinence of Congress,” he said.
IMHO (High quality) = (bottle caps and pocket lint) in this case. At a deep level, I think that many of the powers that be haven’t realized that they DON’T have enough life boats to “save” everybody. Ant the rest are just making sure that THEY have spots.
* BUSINESS
* APRIL 2, 2010
Mortgage Problems? Fed Can Relate
By CARRICK MOLLENKAMP, LINGLING WEI And SERENA NG
The Federal Reserve Bank of New York doesn’t have to look far to understand the woes of banks and investors that hold loans and securities underpinned by real estate.
It can look at its own books.
A review of the portfolios the regional Fed bank assumed as part of two financial bailouts in 2008 shows a complex hodgepodge of souring commercial-property loans, securities backed by U.S. subprime loans, credit insurance written on troubled bond and mortgage insurers and loans tied to struggling hotels in Georgia and California. The New York Fed published the detailed portfolios on Wednesday.
The New York Fed’s portfolio includes a $110 million loan that went to purchase San Francisco’s Rincon Towers.
In an unexpected twist, the takeover of the Bear assets effectively leaves the New York Fed as holder of credit-default swaps on bonds issued by the states of Nevada, California, and Florida. That protection rises in value when the bonds decrease in value.
The total fair value of the three portfolios as of Dec. 31 was $65 billion, which puts the Fed’s holdings on par with the fair value of assets at PNC Financial Services Group, the sixth-largest U.S. bank in terms of market value, according to research firm SNL Financial. Fair values are based on observable market prices, data points that can underpin an asset, and cash flow.
“To say this portfolio is a pile of junk is being unkind to junk,” David Zervos, Jefferies & Co. global fixed-income strategist, wrote in a note Thursday.
…
Looking at all the floods in the Northeast, one wonders if it’s nature’s flush-system . Here in upstate SC one notices all the old homesteads are built on a knoll or a rise in the land . Houses built the last 50 years are built almost anywhere , even in creek-beds. Nature has a way of reverting to the mean , at some point.
In some countries people in flood zones build their houses on stilts.
I’m not suggesting we think in terms of stilts but thinking in terms of mounds might not be such a bad idea.
“thinking in terms of mounds might not be such a bad idea.”
Washington has been thinking in terms of mounds for decades. Big, steaming mounds.
I can visualize a bill collection agency built on the same business model as Executive Outcomes.
Anyone remember Executive Outcomes?
Oops, this post should have been posted to the one below.
Lots of houses in and around Galveston Bay are built on stilts, or at least they were back in the 60’s. One of my Uncles had one. Of course it didn’t keep Hurricane Carla from blowing it away (in fact the wind getting under the house probably made the problem worse), but at least it didn’t flood.
Not nature … it is actully Gore quality proof of Global Warming
I don’t know how many of you saw the article a week or two ago about Bill Clinton making jokes and tongue-in-cheek comments about many of his friends as well as his enemies. He said something like, “To Al Gore, the first day of spring is proof of global warming.”
Back in the day taxpayer subsidized flood insurance wasn’t available, so if your house washed away, its your problem. No, we all get to share in the idiocy of building in a flood plain, or on an Atlantic beach.
Too true. Forbes had a list of the biggest weather related disasters of the past 15-20 years and the % of the tab that was picked up by the fed govt and its gone from <5% under Bush I to almost 100% today. Its a way to give people jobs rebuilding as well as further debase our currency.
You see it in coastal areas where owners of beachfront property build walls to protect erosion - erosion which naturally replenishes beaches. Add in reduced water flow from streams and rivers and after a few good storms beaches will have little sand in places at times. Then the local govt takes your tax dollars to obtain sand from elsewhere to dump on those beaches. In some cases the property owners even get the local government to help pay for the beach walls protecting their mcmansions. Its truly insane.
I found a book at the public library last night, Green with Envy by Shira Boss, published in 2006 so probably written in 2005. She’d made the shocking discovery that most the people she thought were doing better than her were actually living on debt! I’m to the part where she talks about use of home equity lines of credit…It’s like reading Only Yesterday, seems so long ago now.
” … were acutally living on debt!”
Nice time to become a bill collector. Lot’s of future job opportunities.
Yes, I remember when the meltdown started and I had that realization myself, that all these folks driving around in SUVs and going on vacations and living in fancy houses were a fraud. But hey, at least they had the experience, right? And remember, it’s better to look good than to feel good.
It has been going on four years now since I first started reading this blog. If we have reached the half-way point from the peak of house prices, here is to another four fun years reading this blog and stopping the insanity. Cheers.
you look marvelous!
“Mah-val-us, dahling!”
“people she thought were doing better than her were actually living on debt!”
The Greatful Debt
“What in the world ever became of sweet Jane?
She lost her sparkle, you know she isn’t the same
Living on reds, vitamin C and cocaine
all a friend can say is “ain’t it a shame”
Re-financing, up in Buffalo
Been sinkin’ somewhat with cashflow
“I have a nice house…there’s even have a pool. Like my car? It’s new. I’m even a member of the local golf club. How do i do it? I’m in debt up to my eyeballs. Somebody please help meeeeeee….”
Anyone remember when going to a pool was a big deal? Some friends of ours had a pool when I wuz a pup and being invited over for a dip was quite the event. Of course, there was the Y, but during the summer, an outdoor pool was a great thing. Later on, I bugged my parents to join a club that had a pool, so I could cool off during the summer. My siblings seconded me.
I recall that one like it was yesterday Oxide. Stanley Johnson was his name. And it seemed that commercial was the very first public/cultural acknowledgement of the truth as it relates to the mania of housing/cashout/refi/Mcmillionare phenomenon at the time.
I dunno about you guys but those years 2003-2006 seemed like a parallel universe as I lived through them. It was a sense that something was just plain wrong but nobody said anything and very few acknowledged it. The HBB was a relief; an oasis away from the maddening stupid talk out in public.
Yup, I remember laboriously saving up those college loans (the months went by and the paychecks came S-O-O-O slowly), while the pretty young things were clubbing it up in their HGTV condos…I felt like such a slacker. That was the “sense” that something was wrong.
Does anyone else look at those McMansions and “know” that something is wrong just by looking at them? Something is definitely bad about the proportions, the flatness of the windows, the roof pitch, something…
Big, ugly, poorly built, tasteless things jammed together on tiny lots so close to each other that there’s no room for gardens or trees… not that the nasty HOA’s would let you have gardens or trees anyway…
They were built to sell, not to be lived in.
What I find funny is the fact that evenyif the have an attractive front, the sides are often the cheapest possible vinyl, and one of the sides has NO windows, so that your neighbor isn’t looking out from their kitchen into your bedroom.
My Sis bought a McM in Puyallup during the boom years, paid I think about $650K for it. As I look around, I am astounded by all of the cheapness in the place. Things like fiber glass tub surround, linoleum on the bathroom floors, formica bathroom counter tops, granite tile for the kitchen counters, unvented non circulating gas FP, NO A/C!!!! (ya don’t need it in Western WA, yeah right) and the list goes on. The downstairs looks pretty good (except for the granite tiles) but the upstairs is cheap, cheap, cheap. Nothing wrong with any of that stuff, but it should be better quality in place selling for that kind of money. I bet the builders were walking away with a 35% profit.
$650k in Puyallup. OMFG. I’d file that under “What the f@ck was she thinking?”
But I’d argue that you only need A/C in the Western NW for maybe 3 weeks outta the year…just saying.
Yeah I got to admit, I was wondering how all these people could be doing so great, and the blog cleared that up. It was envy and all that, but yet I couldn’t get myself to do the things I sensed they were doing, like buy too much house and use HELOC for cars and new kitchens. I thought I didn’t make enough money.
I had to LOL later…
Indeed: I’ve been surrounded by Bubble-heads for years here in Maryland. Many of them still refuse to admit to the Bubble - they feel that “something went wrong” but by that, they mean that “something” stopped the Bubble, not that the Bubble itself was the problem.
This Blog is a place of sanity in a stupid, greedy world.
My grand father (in Germany) was a bill collector for the court system back in the 50s & 60s. He would go to people’s/deadbeat’s homes and put his seal on everything but the bed, fridge, stove and radio. Then the movers would come by and haul all the stuff off. If anything was missing you would go to jail. Your paycheck would go directly to the court system which would dispense whatever they saw fit. They would keep the rest to pay off your debt.
If you couldn’t pay your debt there was hell to pay. Generally people avoided debt like the plague ‘cos they knew of the consequences.
There were no bailouts either. If big companies got into trouble they would go under. There’re several examples of that, like Borgward motor company, the 4th largest auto maker at the time head of BMW and Mercedes. Still, (West) Germany had its most prosperous economic period during the late 50s and 60s.
How is buy now, pay later working out for this country? Its all fun ‘n games as long as you’re buying. Once its later and the bills arrive, not so much.
Borgward limped along until 1970 in Mexico.
It wasn’t really Borgward anymore. The factories were sold to some Mexican investors which never really managed to get things going again. They build a couple of thousand cars there. Real shame, Borgward was building nice cars at the time.
I remember seeing some old Borgwards in Mexico when I lived there in the 70s. You’re right, they just bought the existing tooling and equipment and limped along until it died. The Mexican market was closed to auto imports at the time, so I could see the idea behind buying the company’s assets and taking them to Mexico.
My grand father (in Germany) was a bill collector for the court system back in the 50s & 60s. He would go to people’s/deadbeat’s homes and put his seal on everything but the bed, fridge, stove and radio. Then the movers would come by and haul all the stuff off. If anything was missing you would go to jail. Your paycheck would go directly to the court system which would dispense whatever they saw fit. They would keep the rest to pay off your debt.
If you couldn’t pay your debt there was hell to pay. Generally people avoided debt like the plague ‘cos they knew of the consequences.
There were no bailouts either. If big companies got into trouble they would go under. There’re several examples of that, like Borgward motor company, the 4th largest auto maker at the time head of BMW and Mercedes. Still, (West) Germany had its most prosperous economic period during the late 50s and 60s.
How is buy now, pay later working out for this country? Its all fun ‘n games as long as you’re buying. Once its later and the bills arrive, not so much.
Interesting - thanks for the info.
Interestingly Germany managed to use this “Draconian” system to emerge from the ashes of WWII and become the world’s 3rd largest economy - despite having the 14th largest population (at least current-standings-wise).
It amazes me that a large percentage of people think that a strong economy can’t run without a very high level of debt.
I occasionally work with an accountant who was born in, then spent her early years, in Nazi Germany. She was nine years old when the war ended.
You would have loved to have been a fly on the wall one fine morning when she came to the Arizona Slim Ranch for an on-site consultation. She no sooner came through my front door when she launched into a rant about the unkempt condition of some of my neighbors’ houses and yards. “Just because you’re poor that’s no excuse!” she said.
Then she launched into a discourse about how, in post-war Germany, they had nothing. But they cleaned the place up, got back on their feet (with help from the Allies), and became a strong country.
I am always amazed when you see the bomb out cities of Germany in mid-late 1945 with the allies in them.
The cleanest rubble you have ever seen. The roads are clear, the piles orderly and bricks already being sorted. The common people in them dressed well.
Compare to the Bronx or Detroit or Newark today…
What a terrible system!
Why, if things were like that, prudent people would be rewarded! Houses would be owned by sensible people who didn’t lie on their loans and who would quietly pay off their normal 30-year mortgages and then live in the house they paid for… bankers can’t get stupid-rich in a world like that! Hence, we end up with the nonsense of today, where failure is rewarded and most people support corruption so long as they may get something out of it.
Back in the 60’s when I was in H/S, I worked for a White’s Auto Store. Anyone who lived in the South in those days are familiar with White’s and Western Auto. They sold almost everything except groceries. The stores were interesting in that they had thier own consumer credit facility, given by and administered at the store level. It was not unusual even in those days for furniture and appliances to have to be repossessed. A few times I was pressed into service to go with the delivery guy to repossess some of that stuff. People aren’t happy when you take back the fridge, TV or living room set. Typically the stuff was such junk, we would just pile it behind the store for the junky to haul off. It was an eye-opener for a 17 year old kid from a financially responsible family.
Freddie Mac easing lending rules on Fla. condos
By ADRIAN SAINZ
The Associated Press
Posted: 5:41 p.m. Wednesday, March 31, 2010
MIAMI — Freddie Mac is moving to buoy the battered Florida condo market, waiving lending rules that made it harder to buy and sell units in many condo buildings.
Freddie Mac said Wednesday it will back mortgages on units in financially troubled condo developments as long as the seller’s loan is already owned or securitized by the mortgage finance company.
The announcement is a reversal by Freddie Mac, which had been rejecting mortgages for units in condo developments with low occupancy and high delinquency rates for condo association fees.
The change, intended to increase financing availability for Florida condos, is effective Thursday. To qualify, the closing date for the new mortgage must be on or before March 31, 2011.
Florida’s once-burgeoning condo market has been hit hard by foreclosures, falling prices and high inventory caused by overbuilding. Condo prices have fallen by half since 2006 in many parts of the state.
Condo associations with a glut of empty units have struggled to collect fees, causing buildings to fall into disrepair and forcing associations to delay improvements.
Freddie to the rescue. But just who is it that Freddie is rescuing?
Ultimately it’s the banks.
Great. When are they announcing return to no-doc, stated-income loans? That would be sure to stimulate sales.
The corruption continues unabated.
The beat goes on….
Senate to drivers – Speak English
3:15 pm March 30, 2010
by Ernie Suggs
According to state Sen. Jack Murphy, there are 13 languages in which someone can sit and test for their Georgia driver’s license.
For him, that is about a dozen too many. So on Tuesday, the Cumming republican revised and got approved a bill that would make English the official and only language someone can use to get their license.
Murphy, who chairs the public safety committee, said it was naturally a safety issue. Drivers who can’t read road signs pose a danger to everyone, he said.
But critics of the bill, point to the fact that illiterate Georgians are still allowed to drive and are helped with the test. But their overriding concern is that the bill is anti-immigration and stunts economic development in the state.
The illiterate Georgians can’t read the signs either.
If you can’t read, how do you know the different between “D” and “R” on your automatic transmission?
This is a good idea, IMO, and it also saves money. Lots of it. It’s good to be multi-lingual personally, it adds to skills, etc., but as national policy, it is suicide. You bust up a country or any unified group by trashing the language and the culture and splitting everyone into disparate, warring groups that can’t communicate with each other. And that’s what we have today.
+1 Palm….
Plus, if someone is allowed to continue to speak in another language, it doesnt help for assimilation. Speak what you want in the privacy of your home, but please speak english when talking to other americans.
True story from the Australian branch of the Slim family: Seems that a Cornish born-and-raised ancestor moved to Australia. And, much to the amusement of her Aussie descendants, she didn’t speak English, just Cornish. She refused to learn Aussie, which, to this day, they continue to think is hilarious.
bad idea. it just means that all those people will continue to drive without being licensed at all.
Heard an interview with some of the local political types in Georgia. One of the selling points for the bill was that a non English speaking driver could get in an accident, not be at fault, and end up inadvertently taking the blame due to the inability to speak English at the scene of the accident.
Then again, seems to me the state government could be sued for providing the tests in 13 different languages, however, a newly licensed non English speaking driver ended up in an accident because the road signs weren’t in 13 different languages.
Reminds of some of the option ARM / negative amortization type mortgage contracts that were signed by non English speaking folks. Seems these folks were also victims.
Driving is a privilege. It’s not a right like Health Care
“Disparate, warring groups” is right. My prediction is the US will eventually split up as a result of the “diversity is strength” mantra. Generally, humans tend to be tribal and prefer to live amongst those like themselves. When the split occurs, I don’t know…but eventually it will happen.
Read Robert Heinlein’s Friday. It’s a science fiction novel, set in a future where North America has broken up into several different countries and corporations are state-like entities who hire mercenary armies.
Last August, my aunt and I took a drive from her home in northern Vermont to southern Quebec. Where the road signs are of the international variety. You don’t have to read words, just understand the pictures. Some of them were quite entertaining. My personal favorite was the “Slow down at the crest of this hill so you don’t crash into the monster-like thing that’s coming up the other side.”
Only verbal signs we saw were those indicating the distances between towns. And the signs in the towns themselves.
So, to Georgia I say, chill out. If Aunt Jean and I could navigate rural Quebec with just a rudimentary knowledge of French that was only needed when we were in towns, similar things can happen here. We need to go to an international signage system in this country.
My personal favorite was the “Slow down at the crest of this hill so you don’t crash into the monster-like thing that’s coming up the other side.”
So, basic Greek mythology on a street sign? I like it.
When I was in Russia 15 years ago, I could understand the stop signs because they said “STOP” in English.
“What happened in our country should never happen again,” he said. “People were paid for taking enormous risks. It was a crazy way to run a financial system.” Geithner said, “It’s the government’s job … to do a better job of restraining that kind of risk-taking.”
Why then, Timmy, is nobody going to jail?
http://finance.yahoo.com/news/Geithner-Disparity-in-apf-3488282125.html?x=0&sec=topStories&pos=main&asset=feceea097e297074ddc0ba8f18987434&ccode=rd
Blah, blah, blah, I’m set for life, blah, blah, blah, my bosses and handlers are set for life, blah, blah, blah, trust us and don’t stop taking on debt you little people, blah, blah, blah
So… did Turbo Tax-cheat Timmy pay his taxes this year? Or, is that part of the risk-taking he’s now suddenly against, yet oddly had no problems supporting when he worked at the Fed… Deep questions…
I still don’t think anyone would go through the trouble of cheating for a measely $27K. geez, if you’re gonna cheat, go all in like Willie Nelson and Wesley Snipes.
Can someone explain the health bill verbage regarding amending the IRS code of 1986 by striking “modified gross” each place it appears and inserting “modified adjusted gross”. Then it states “The term modified adjusted gross income means adjusted gross income increased by–
“(i) any amount excluded from gross
income under section 911, and
“(ii) any amount of interest received
or accrued by the taxpayer during the tax-
able year which is exempt from tax.”.
??
It means: Just bend over.
+1
Its not really a health bill, its a tax bill mascerading as a health bill. That’s why they’re going to hire 16,500+ new IRS employees. The following is a pdf that was prepared for some Republicans, but we can’t expect the Dems to put out something like this, can we?
http://brown-waite.house.gov/UploadedFiles/IRS_Power_Report.pdf
Ho hum. For Republicans, every bill is a tax bill.
Except this one. It’s not a bill. It’s a law.
Gross income should be all your income just by parsing the meaning of gross and income.
Adjusted gross income is that number you get at the bottom of the first page of your 1040. Section 911 has something to do with foreign income that you earn while living overseas. Tax exempt interest is interest that isn’t taxed like from muni bonds.
The “modified” is probably the same modification for both.
Sounds like they are subbing in an income number that could be lower than the original one because it might have a few extra things taken out of it. You sure that they are modifying the whole income tax code? That sounds like something that would have been on the news, and I haven’t heard it. Maybe the income level for getting certain benefits under the bill is measured by this “modified adjusted gross income”?
Gotta squeeze more taxes out of the dying middle class!! Daddy needs a second weekend yacht!
Eleven thou “in the bag”. Go banksters!
Upset about the bailout of TBTF? This article is sure to cheer you up:
http://finance.yahoo.com/news/Pay-of-Hedge-Fund-Managers-nytimes-3746406267.html?x=0&sec=topStories&pos=4&asset=706659a69c66cbcf0805bdd3c5b2b0ab&ccode=rd
No way David Tepper did not have inside info on the extent of the gov supported recovery efforts.
He is a Goldman alum, no way he knew anything. What also sucks is these guys don’t pay ordinary income tax on this bonanza either. The incentive pay in a hedge fund is called “carried interest” and is treated differently for tax purposes. Tepper probably paid 15% tax on that $4 billion payout
Geithner: Disparity in recovery ‘deeply unfair’
Thursday April 1, 2010, 8:51 am EDT
WASHINGTON (AP) — Treasury Secretary Timothy Geithner said Thursday it’s “deeply unfair” that some financial institutions that got taxpayer-paid bailouts are emerging in better shape from the recession than millions of ordinary Americans.
He acknowledged public outrage over that and said people watched with disdain as Washington protected high-risk banks and investment houses, even as the national unemployment rate was soaring to double-digit levels for the first time in a generation.
But in a nationally broadcast interview, Geithner also argued that President Barack Obama had no choice when confronted with a financial crisis.
“As the president has said, we had to do some very unpopular things,” Geithner said. “People looked at what had happened.”
“It’s not fair. It’s deeply unfair,” he said. “He (Obama) had to decide whether he was going to act to fix it or stand back … and that would have been calamitous for the American economy.”
The government eventually embarked on a program of assisting the threatened financial institutions, and the sweeping, multibillion-dollar Troubled Asset Relief Program (TARP) created as a bailout engine.
Geithner also said that administration officials are “very worried” about recovering the more than 8 million jobs lost in the recession. But he noted that business growth has been improving and expects the economy “is going to start creating jobs again.”
The secretary agreed that the national jobless rate — now at 9.7 percent — is “still terribly high and is going to stay unacceptably high for a very long time” because of the damage caused by the recession.
“Just because this was the worst economic crisis since the Great Depression,” Geithner said, “a huge amount of damage was done to businesses and families across the country … and it’s going to take us a long time to heal that damage. “
Treasury Secretary Timothy Geithner said Thursday it’s “deeply unfair” that some financial institutions that got taxpayer-paid bailouts are emerging in better shape from the recession than millions of ordinary Americans.
I think that Timmy’s trying to save his job.
After all, there are rumors that Larry Summers will soon be leaving the Obama administration. Methinks that, once that happens, Timmy won’t be feeling so comfy in DC, and that it will be time for his exit. And, despite the “set for life” chatter ’round this blog, I don’t think he’ll find the private sector so easy to navigate.
Linky? Summers is pretty well hated by both left and right.
“It’s not fair. It’s deeply unfair,” he said. “He (Obama) had to decide whether he was going to act to fix it or stand back … and that would have been calamitous for the American economy.”
*************************************
Twist it all you want it IS still calamitous for the American middle class.
They act like they have saved us. I did things to try and save myself. I see the middle class getting rolled over family by family.
They saved themselves just for a bit of time. We are going to see chit roll uphill.
Machiavellian BS.
AP - “Stock futures are rising Thursday on new signs of economic growth worldwide. A government report showing initial claims for unemployment benefits fell last week added to the market’s enthusiasm following upbeat manufacturing reports overseas.”
If jobs are being created, how come state and local governments are firing, as reported by Challenger:
Employers announced plans to cut 67,611 jobs in March, according to outplacement firm Challenger, Gray & Christmas Inc. That’s up 61% from February, when 42,090 jobs were lost, the lowest level in nearly four years.
Anecdotally I’ve been hearing of major reductions in state and local employment for the last couple of months, as “stimulus” transfer payments run out and budgets must be balanced on a state level. A recent surge in Facebook groups coalescing around the government leeches howling about pay, benefit and job reductions are quite impressive, with literal thousands squealing about New Jersey’s moves to bring teacher, firefighter and cop leech, er, “employee” pay and benefit levels in line with private sector costs.
Government, of course, has long been populated with leeches. Indeed, by definition every government employee is a leech, since the money to operate a government program can come only by taxing it away from those who produce in the economy to be redistributed to these “essential” programs.
Some of these services are indeed important - or even essential. But over the last 20 years or so we have changed a government job from something you do because you want to be of service to something you do to extract as much money as possible from your neighbor across the street - or next door.
Witness the pension abuse loopholes that are being closed - and are generating the loudest screams. The usual practice for years has been to use take the last handful (frequently three or five) years of service as the salary base, then pay that. But “salary base” has nearly always included overtime, “hazard pay” and any other “add-ins”, including in some cases pay taken in lieu of accrued vacation time off! The result is that many people “retire” from these positions with six-figure pensions that frequently exceed the base pay that they would have earned while on the job. Further, many of these systems allow people to retire at 50 or 55, instead of the private-sector standard of 65 or even 67 (as is now the case for full Social Security benefits.) Many of these pensions also provide full medical coverage - all paid in full. And then you have the abusive changes made to state law and constitutions which effectively protect these payments as “super-senior” obligations that cannot be renegotiated or defaulted upon.
Contrast this with a private pension plan which can and sometimes does default. When private sector employees push too hard and abuse their pension systems, forcing them underwater, the PBGC comes in and takes over the plan. This results in the plan forcibly resetting back to whatever it can actually fund, which frequently results in a 50% or more reduction in benefits for pensioners.
Those who think that the “pain is over” need to look at state finances. There’s nothing good going on in this regard and layoff notices are increasing rapidly at the state and local government level. There isn’t a thing that can be done to fix this, as the distortions that drove the so-called “economy” over the last three decades are so outrageous as to expect them to be able to be maintained is laughable.
Yet that’s a huge part of the “juice” behind the calls of “economic recovery” - the premise that we can pay retired firefighters and cops $150,000 pensions plus full medical insurance for 30 or more years as we can let them retire at 50 with full benefits. At the same time we can have public employees that are dramatically overpaid relative to the private sector in their current jobs…
(From K. Denninger)
Public employees pay and benefits are under attack. It will be a long fight but they will be defeated.
Also
Word is: The military base around here is set to shake off 300 contracting companies. Many over the top paying jobs will cease to exist. The contractors have been enjoying above local wages for years.
I am reposting this from yesterday to offer up the HBB a chance to add to a list of possible questions for a radio interview with Michael Lewis (author of The Big Short / Liar’s Poker). Yesterday there were a couple good ones, including exploring Lewis’ insistence that there should be no prosecutions, but I suspect the bulk of the readership had left by the time I posted.
Any other thoughts?
Would someone please explain to me how so many people on this blog can believe that the banksters control/own Congress (and the various authorities that enforce the laws made by Congress) and at the same time did not manage to make sure their actions did not violate those laws (as enforced)? I just don’t get it.
You can’t be jailed for setting up perfectly legal lending structures that were certain to destroy the economy eventually. You can’t be jailed for making your company so large and intertwined with the economy that the government decides to bail you out when you are in trouble. There just isn’t a law against it. Not in the US, there isn’t.
You can set up laws and regulations going forward that will keep it from happening again in this particular manner (regulating underwriting requirements of loans that can be securitized plus requiring the securitizers to keep the worst 10% on their own books valued at mark-to-market rates would be a start). That plus a fully independent new agency tasked with protecting consumers, and the ability to break up any financial institution that gets too big is about as much as you can do.
I’ve said it here before. Being evil isn’t a crime.
I’ve said it here before. Being evil isn’t a crime.
An HBB classic!
I love it!
I would argue that Bail Outs prevented ‘”Discovery” of the
crimes ,Civil as well as Criminal . You would have to trace what would of been the course of law based on the standing law at the time had the Bail Outs not occurred . What would of been the natural course of civil or criminal lawsuits had the bail outs not occurred . Likewise what would of been the outcome had borrowers who committed
loan fraud had they decided to prosecute these cases .
Would AIG of been able to make a claim that they didn’t have to pay on a lot of the insurance bets they made because of inherent fraud and misrepresentation in the MBS’s marketed
that they insured ?
If a borrowers is bailed out from his perjury on his loan application than that borrower never faces possible penalty .
If a Company goes BK than the creditors could make a case or the harmed investors could make a case .
When the Congressional hearings were taking place at the beginning of the meltdown the classic protective defense against fraud was the pleads from CEO’s in step with each other that “We didn’t see it coming .” Well that would be up to Discovery to see if that Defense had merit or not ,but that’s you classic defense against fraud ,that it wasn’t
intended .
But also regarding product liability ,there could of been a lot of violations regarding those laws .
Madoff went years without Discovery of his crimes and it took a melt down of the market for it to stop his ability to continue the Ponzi scheme . Had Madhoff been somehow bailed out by a entity ,than those crimes could of been hidden forever .
The more unlikely the conspiracy, the more attractive and compelling it is..
The more unlikely-sounding the conspiracy, the less likely it is to ever be uncovered.
“The temptation to form premature theories upon insufficient data is the bane of our profession.” –Sherlock Holmes
I never conclude any theories (conspiracy or otherwise) are true without data. But I believe I am pretty good at coming up with theories that explain anomalies (e.g., home prices rising against the backdrop of the worst recession since the 1930s might reflect collusion by banks holding them off the market).
Would someone please explain to me how so many people on this blog can believe that the banksters control/own Congress (and the various authorities that enforce the laws made by Congress) and at the same time did not manage to make sure their actions did not violate those laws (as enforced)? I just don’t get it.
This gets back to Ben’s question from yesterday - how many of the people responsible for this mess have been jailed? Virtually none. So they did manage to make sure that their actions didn’t violate the laws, in part by having the laws changed (e.g. Rubin’s push for the Financial Services Modernization Act on the behalf of Citigroup), in part by just campaign contributions (e.g. to Barney Frank who pushed F/F looser lending), and in part by taking advantage of laws that are gray and not really enforceable (e.g. like the conflict of interest with the ratings agencies).
Always pertinent to remember that the laws written by lawyers and pressed into law by the lawyers in Congress are usually enforced by lawyers in government who have been sufficiently plied and bribed by powerful interest groups represented by lawyers who are primarily interested in circumventing any laws that apply to them.
Q. Does this make the lawyers evil?
A. Maybe yes, maybe no; but it does tend to make them rich.
Would someone please tell me where the lawyers in government are supposed to pick up their bribes and plies? Because I think my entire department got left off the list.
Oh, wait. Do you mean the extra pens we pick up at that conference because the pens in the photocopy room don’t work? How silly of me. I could sell those on e-bay for a million bucks each, couldn’t I?
“…and at the same time did not manage to make sure their actions did not violate those laws (as enforced)?”
Why is that important if you operate above the rule of law?
(as enforced by pols receiving lots of campaign contributions from Wall Street)
Government lawyers are not the same as pols receiving money from Wall Street.
When I have ever had to go to a meeting at an interest groups offices, we hesitate to even accept a glass of water because the executive branch ethics rules are so strict. That is why we make them come to our nasty little conference rooms (often windowless or looking out over a dingy air shaft) to talk to us.
I resent the implication that government lawyers are on the take. Not happening. Not where I work and there is plenty of reason for people to try it.
“I resent the implication that government lawyers are on the take.”
If something I said suggested government lawyers are on the take, I did not mean it that way. I am not playing some kind of a blame game, but I am highly concerned that enough scrutiny is paid to what illegal actions may have occurred during the Fall 2008 financial system meltdown.
come on polly.. you can be square with us.. we’re your friends.
Polly,
I think what they mean by “being on the take” is that the job of many lawyers exists simply because of the large amount of law that needs to be navigated to do anything. In turn, the lawyers being lawyers help craft even more regulation. It’s simple to them after all, it’s their job. They just don’t realize that crafting legaleze all day to run a country is counterproductive for us as a nation. They think that regulation and law can improve a country. They think that by being more detailed in the writing of laws they can cover more scenarios and stop more bad.
That’s just a bunch of masturbation as far as many people are concerned. Adding more laws and regulations just gives people who would be bad otherwise more lines of laws to use to argue, delay, hide, and misuse the spirit of the law. the lawyers in these jobs would never think that they are part of the problem. Instead, they would ask questions like ,”how are hardworking lawyers who don’t even accept bribes, and just review and craft legislation to protect babies part of the problem?” They will never see and understand that their very salary is the cruft that our gov’t can do without.
And Polly,
Hopefully you know this post is not aimed at you, and isn’t a personal attack. I have no idea what job you do, and so couldn’t (and wouldn’t) say that I believe your job is extraneous cruft of our out of control gov’t. But I do believe many jobs as I described exist.. not all, but many many many…
Mathguy (by the way, like the handle),
Garbage. No one who talks about lawyers on the take is talking about people who put in 40+ hours a week for between $60K and $130K, even if the vacation time is OK and the health insurance is pretty good.
And I will tell you why the laws and regulations are so detailed and it has nothing to do with the government lawyers wanting to keep their jobs. Lets make up a hypothetical law. It says you aren’t allowed to do jumping jacks in your apartment if anyone is living in the unit beneath you because it makes too much noise. If you did that, then the typical large American corportation would go right to their lawyers and get an opinion that jumping up and down with your legs alternately apart and together does not constitute a real “jumping jack” unless the palms of both hands clap together at the precice moment of the landing of the feet apart portion of the jump. And if the courts then interpreted the rule as being generally about the jumping up and down on the ceiling of your downstairs neighbor, they would howl about how a jumping jack is defined by the simultinaity of the clapping and feet landing far apart, so they didn’t do anything wrong. And then you would have to create regulations defining the jumping jack sufficiently broadly to include the type of jumping that the legislature meant to forbid. Then you would have to create more regulations so the corporations wouldn’t decide that they can assume that the unit below them is empty unless they have received a registered letter in triplicate specifying the exact dates it is to be considered occupied at least 18 months in advance so they have time to obtain other premises in which to perform jumping jacks.
And all this, because so many corporations will be as evil as they can be without actually breaking the rules. So they love detailed minutia in their laws and regulations because that is what allows them to game the system and still be evil without actually getting into trouble. It is the folks who are want to get around the rules that motivate the detail, not the ones who write them.
“…Being evil isn’t a crime”
Polly, I’m stumped, …how do arrive at “evil” without committing a crime?
how do arrive at “evil” without committing a crime
Hasn’t that been the topic here since the blog was created? With occasional breaks to discuss the times when a crime actually was committed?
I was trying to remember that Latin saying, something along these lines:
“No one is made evil over-night”
There is not always a law that prevents people from doing something that will hurt other people. Doing things that you know will hurt someone (you may have no idea who those someones are) is bad. If you know that many people will be hurt a lot, I would move that up to the ranks of evil. But there is no guarantee that there is a criminal law against what you are doing. And it can even be tremendously difficult to prove a civil tort based on it.
I’m not saying that the mortgage brokers that falsified papers didn’t commit a crime - they did. But the people who figured out how to change the securitization system just enought that was bound to be corrupted by ever looser and looser credit standards creating a bubble in any asset paid for on credit? Not criminals. Just evil.
If you want to punish evil, look to God or karma or whatever else comforts you. The courts can only punish people who violate the law.
Actually, if you want to punish evil, just take away the free money that we let the Fed control. Banks fail due to no bailout money == punishment. Plus, we will be rewarding our good hardworking selves by keeping more of what we work for.
Plus, we will be rewarding our good hardworking selves by keeping more of what we work for.
I like the concept and if we spent $3,800 per capita on healthcare as Canada does for better stats as opposed to our $6,800 per capita we’d be keeping more of what we work for too.
Why is this concept so hard to apply by some when it’s corrupt, private company monopolies “stealing” our hard earned money?
Maybe it’s because private company monopolies have more money to brainwash the gullible by using scare tactics and buzz words.
TBTF,
We will not get financial regulation that means anything. We will get another horrific financial collapse as a result.
So, what happens then? Has the Fed learned enough to provide a backdoor, under the table bailout so that the general public doesn’t know or understand how it is done?
Could we have a final collapse and then finally arrive in a Mad Max World?
Roidy
I wish the collapse would hurry up, I already have leather undies and body paint and even a cross-bow. Its going to be so much fun!
Kewl,
I have the motorcycles.
Roidy
P.S. No leather teddy, though. Bummer.
The Lord Humongous
Exactly.
The “reform” will somehow increase costs on the middle and lower class while allowing the crooks to still do whatever they please. As for the Fed, they will prop up everything, forever, until the dollar is worthless, which is the longer-term goal.
It is with the utmost respect of its importance that I am gratified to announce the definitive percentage figures on regulation vs. deregulation’s responsibility for causing the Housing Bubble.
All of the arguments on this bog were taken in to account in the conclusions of the final numbers. Also considered was the oft-complicated nature of the final result of said “regulation” or “deregulation”. For example, many times regulations implemented had the final effect of partially “deregulating” a market as the community re-investment regulations had the end result of deregulating mortgage markets by removing historical hindrances to market participation by certain ethnicities.
In addition, lowering interest rates, itself a regulatory act, had the actual affect of deregulating the mortgage markets by removing the regulating power of a higher cost of money from the transactions. Consequently, regulation’s RESULT sometimes raised the percentage figure of deregulation’s responsibility in causing the Housing Bubble.
It is with consideration of all of the above objective and subjective criteria, and more, that the definitive result below was calculated:
1. Regulation was responsible for 37% of the Housing Bubble.
2. Deregulation was responsible for 63% of the Housing Bubble.
The results are final however subject to a margin of error of 5.74%. Thank you for your time and input. As decider, I am gratified to put this matter to rest. Now we are freed to resolve the equally important issues such as War vs. Healthcare’s drain on treasure or the Democratic vs. Republican responsibility for America’s decline
“1. Regulation was responsible for 37% of the Housing Bubble.
2. Deregulation was responsible for 63% of the Housing Bubble.”
Are you suggesting that mass stupidity, fraud, corruption and irrational exuberance were collectively 0% responsible?
Are you suggesting that mass stupidity, fraud, corruption and irrational exuberance were collectively 0% responsible?
Good question. No.
My exhaustive and comprehensive work studied regulation’s and deregulation’s responsibility for the Housing Bubble relative only to each other’s percent of responsibility in their cumulative share of the total blame.
A much more detailed and equally as definitive study of every factor’s percentage role of responsibility in the Housing Bubble will be posted in one year.
Thank you.
Mass stupidity = 94.8% De-regulated…5.2% Regulated
Fraud = 88% De-regulated…12% Regulated
Corruption = 70% De-regulated…30% Regulated
Irrational Exuberance = 94% De-regulated… 6% Regulated
Conclusion: One of the choices above was more “Instrumental” in creating this result:
“In a single transaction, about $110,000 / $220,000 / $330,000 / $440,00 …went into their personal bank accounts as the ESCROW closed on their houses between 2001-2005″
Wow Rio, many tankxs for your efforts & perspective!
These Days (Mon.-Thurs. 9-11 a.m. on 89.5 FM)
What Are Pros And Cons Of A Short Sale?
An audio recording of this interview will be posted here within a few hours of the live broadcast. A transcript will also be added within 24 hours. Thank you for your patience.
By Hank Crook, Tom Fudge
April 1, 2010
Tom Fudge: Nobody wants to be sold short. But if you own a house, selling it short may be the best option you have. The boom and bust of the San Diego housing market has put thousands of people in the predicament of owing more on their homes than they’re actually worth. In fact, about one-third of local homeowners are, so to speak, underwater. This has made “short sales” very common. Home owners who are financially suffering under the weight of their mortgages are trying to sell their homes for less than what they owe. There are some upsides to short sales, but they are not easy to do. That’s understandable since short sales mean the lender must agree to take a loss.
Guests
Kelly Bennett, staff writer, and author of the Survival in San Diego blog on voiceofsandiego.org.
Mark Goldman, mortgage broker for Cobalt Financial Corporation and a lecturer at the College of Business Administration at SDSU.
“That’s understandable since short sales mean the lender must agree to take a loss.”
The lender is taking a hit either way. The decision is between booking the loss NOW (current quarter), or kicking the can down the road, playing pretend and extend a little longer, and hoping for more government a$$i$tance.
Good April Fool’s day on Google. I’ve been Topeaked.
Was it enjoyable?
http://en.wikipedia.org/wiki/Wife_selling
What does wife selling have to do with Googling or Topekaing?
oops.. I pasted that in the wrong place. Sorry.
LOL - so I’m looking at that article the whole time, thinking “Man, they really went all out on this one! It looks legit!”
Thanks a bunch.
Geithner Writes Own Resignation Speech
Well, it should have been anyway.
WASHINGTON - Treasury Secretary Timothy Geithner said Thursday it’s “deeply unfair” that some financial institutions that got taxpayer-paid bailouts are emerging in better shape from the recession than millions of ordinary Americans.
But in a “TODAY” show interview, Geithner also argued that President Barack Obama had no choice when confronted with a financial crisis.
Let’s say that I accept that. I don’t, by the way, but let’s assume that I do.
The real problem with his speechifying is here:
“What happened in our country should never happen again,” he said. “People were paid for taking enormous risks. It was a crazy way to run a financial system.” Geithner said, “It’s the government’s job … to do a better job of restraining that kind of risk-taking.”
Who was the one that was responsible for watching over that enormous risk-taking and crazy operation of the financial system?
Oh that would be Timmy Geithner, who was running the NY Federal Reserve Bank, the organization that both executes monetary policy and monitors every one of those “too big to fail” institutions that we had to bail out.
So for Timmy’s malfeasance, misfeasance or both - which he just admitted to on national television - he is promoted to Treasury Secretary?
If you’re an Obama supporter, how do you defend not only the choice of Timmy for the job in the first place, but President Obama’s continued “confidence and support” in the very man who has admitted that the financial system that he oversaw and was charged with monitoring was being run “in a crazy way”?
(From the Market Ticker)
I know I’ve already regaled you with the story of Dallas Fed president Richard Fisher’s lecture in Tucson. But, while he was speaking, I couldn’t help but ask myself what Tim Geithner had over him. I mean, come on. I didn’t agree with everything Fisher said, but he seemed head and shoulders above Geithner.
The ongoing rally in headline U.S. stock market indexes and oil has been attributed to economic recovery. But doesn’t a uniform dollar decline on the FOREX market explain across-the-board dollar increases in dollar-denominated asset prices even better?
From Bloomberg:
World Currencies
CURRENCY VALUE CHANGE % CHANGE TIME
EUR-USD 1.3582 0.0072 0.5341% 15:38
GBP-USD 1.5284 0.0100 0.6609% 15:38
USD-CHF 1.0545 0.0006 0.0576% 15:38
USD-SEK 7.1547 -0.0638 -0.8845% 15:38
USD-DKK 5.4824 -0.0283 -0.5136% 15:38
USD-NOK 5.9211 -0.0210 -0.3527% 15:38
USD-CZK 18.6920 -0.1098 -0.5843% 15:38
USD-SKK 22.1820 -0.1180 -0.5294% 15:39
USD-PLN 2.8356 -0.0220 -0.7695% 15:38
USD-HUF 195.2040 -1.1910 -0.6064% 15:38
USD-RUB 29.2700 -0.1505 -0.5115% 12:59
USD-TRY 1.5171 -0.0005 -0.0346% 15:38
USD-ILS 3.6921 -0.0037 -0.0994% 15:31
USD-KES 77.2150 -0.0950 -0.1229% 10:18
USD-ZAR 7.2345 -0.0505 -0.6932% 15:38
USD-MAD 8.2483 -0.0456 -0.5498% 15:39
Inflation observations from the University Of Pennsylvania’s Wharton School newsletter
In the short run — say over the next three years — inflation is likely to continue to be quite low. One reason is that explosive growth in the Federal Reserve’s balance sheet has been mostly matched by enormous increases in excess reserves held by commercial banks despite a very steep yield curve. In other words, the banks are “hoarding the cash,” preventing it from becoming part of everyday transactions. Why? One reason that is the Federal Reserve now pays banks interest to encourage them to hold additional reserves. Some banks also fear that rising short-term interest rates will increase their costs over the life of the loan. (Their fears are indeed reflected in prices of one-year futures contracts for Fed Funds.) More importantly, the banking sector is just in “Phase One” of the residential real estate mortgage crisis, the so-called “subprime” mess. Phase Two — defaults of “Alt A” types of residential loans that were often issued to sole proprietors with less formal income documentation — will begin later this year. Phase Three — defaults of “Option ARM” loans in which interest rates sharply increase a few years after the loans start — will begin to increase next year. Banks need to reserve against all of these potential losses.
Of course, if banks happen to be over-reserving for these losses, then inflation might come sooner if the Fed can’t quickly yank money out of the banking system. But that scenario is unlikely. Indeed, “Phase Four” of the mortgage crisis — this one stemming from the commercial lending side — has received very little attention this far. If anything, banks are probably still not reserving enough for these defaults. Combined with the recent economic slowdown in Europe, it is likely that inflation will be held in check for a while.
But longer-run inflation (beyond five years) should be on everyone’s radar screen. In fact, it is unlikely that the current yields on 30-year Treasury securities will be enough to cover inflation over time, much less provide a real return. Present value shortfalls in Social Security and Medicare are in excess of $70 trillion and will likely lead to an “inflation tax.” Yields on 10-year Treasury securities — which policymakers try to keep low because of their indirect relationship to mortgages — may not be high enough to cover inflation.
So what is an investor to do about inflation?
http://knowledge.wharton.upenn.edu/article.cfm?articleid=2461
Sounds like a pretty good view.
Except for one thing - the amount of cash that the banks have on reserve - according to the FDIC at least - is still very tiny compared with the amount of cash that’s been injected into the system. According to FDIC stats the sum total of loan loss reserves at all banks was $58.8 Billion at the end of Q4. Certainly up a lot in percentage terms over the past two years (was $9.6B at the end of 2007), but not much in nominal terms at all.
(paging combo…)
So - drum roll for the final tally on March’s new federal debt…..
$333 Billion. Exceeded only twice before - Sep and Oct 2008, which were due to TARP.
Nice.
I keep hearing about how it would have been financial Armageddon had the government not bailed out the financial industry. Jamie Dimon would beg to differ:
He also sought to deflect some of the public anger toward financial companies and to correct the perception that all banks would have failed if the federal government hadn’t intervened.
“We should acknowledge that the worst offenders among financial companies no longer are in existence,” Dimon said. “And while it is true that some of the surviving banks would not, or might not, have survived, not all banks would have failed.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=aGCSnkmqtuts&pos=3
Is it legal for the Fed to hold a portfolio of toxic assets?
* BUSINESS
* APRIL 2, 2010
Mortgage Problems? Fed Can Relate
By CARRICK MOLLENKAMP, LINGLING WEI And SERENA NG
The Federal Reserve Bank of New York doesn’t have to look far to understand the woes of banks and investors that hold loans and securities underpinned by real estate.
It can look at its own books.
A review of the portfolios the regional Fed bank assumed as part of two financial bailouts in 2008 shows a complex hodgepodge of souring commercial-property loans, securities backed by U.S. subprime loans, credit insurance written on troubled bond and mortgage insurers and loans tied to struggling hotels in Georgia and California. The New York Fed published the detailed portfolios on Wednesday.
The New York Fed’s portfolio includes a $110 million loan that went to purchase San Francisco’s Rincon Towers.
In an unexpected twist, the takeover of the Bear assets effectively leaves the New York Fed as holder of credit-default swaps on bonds issued by the states of Nevada, California, and Florida. That protection rises in value when the bonds decrease in value.
The total fair value of the three portfolios as of Dec. 31 was $65 billion, which puts the Fed’s holdings on par with the fair value of assets at PNC Financial Services Group, the sixth-largest U.S. bank in terms of market value, according to research firm SNL Financial. Fair values are based on observable market prices, data points that can underpin an asset, and cash flow.
“To say this portfolio is a pile of junk is being unkind to junk,” David Zervos, Jefferies & Co. global fixed-income strategist, wrote in a note Thursday.
…
Meet The Fed’s Toxic Assets
1:01 pm
April 1, 2010
By Jacob Goldstein
Planet Money is a penny-ante player in the toxic-asset game. The Federal Reserve Bank of New York is the big money.
The New York Fed spent roughly $80 billion to buy toxic assets from Bear Stearns and AIG during the financial crisis. It has been reporting on the status of its investments — how much income they’ve generated, what their current estimated market value is, that sort of thing. But the Fed hasn’t actually listed which assets it bought.
That just changed.
Late yesterday, the New York Fed told the world which assets it had purchased. The assets the Fed bought from Bear Stearns, which are held by a specially created company named Maiden Lane, are listed here. The assets it bought in the AIG bailout, which are held by special companies named Maiden Lane II and Maiden Lane III, are listed here and here. (Maiden Lane is a street adjacent to the New York Fed’s office.)
The NY Fed put out a statement that said it “recognizes the importance of transparency … .”
The statement didn’t mention that the Fed initially refused to disclose what the assets were, and only did so after Bloomberg News won a lawsuit that forced the Fed to pull back the curtain. (The NY Fed argued that disclosing which assets it owned would make it harder to sell them for competitive prices in the future, the WSJ says.)
So what’s in there? There are some bread-and-butter toxic assets: Securities backed by mortgages that were given to borrowers who provided little documentation to get the loans, Bloomberg notes. There are also loans for Hilton hotels in New Jersey, Hawaii and Malaysia, and for a Radisson in Florida. And there are bets against credit of bond insurers, such as MBIA.
There’s lots more. We’ll be digging around in there to see what else we find. And if you find anything interesting, let us know.
…
DEAL!
* The Wall Street Journal
* OPINION: FEDERATION FEATURE
* MARCH 30, 2010, 3:38 P.M. ET
New Obama Mortgage Plan: A Backdoor Bank Bailout
We are looking at tens of billions of taxpayer dollars again being funneled to the very banks behind the mortgage crisis.
By MARK A. CALABRIA
From the Cato Institute
Today President Obama announced an expansion and modification of his Home Affordable Modification Program (HAMP). While one can debate the merits of incentives to keep unemployed families in their homes while they search for jobs — I personally believe this will more often than not keep those families tied to weak labor markets — what should be beyond debate is the various bailouts to mortgage lenders contained in the program’s fine print.
Several of the largest mortgage lenders, including some that have already received huge bailouts, carry hundreds of billions worth of second mortgages on their books. As home prices have nationally declined by almost 30 percent, these second mortgages are worthless in the case of a foreclosure. Second mortgages are usually wiped out completely during a foreclosure if the price has decreased more than 20 percent. Yet the Obama solution is now to pay off 6 cents on the dollar for those junior liens. While 6 cents doesn’t sound like a lot, it is a whole lot more than zero, which is what the banks would receive otherwise. Given that the largest lenders are carrying over $500 billion in second mortgages that may need to be written down, we are looking at tens of billions of taxpayer dollars again being funneled to the very banks behind the mortgage crisis.
If that bailout isn’t enough, the new plan increases payments to lenders to not foreclose, all at the expense of the taxpayer. While TARP was passed under Bush’s watch, and he rightly deserves blame for it, Obama continues these bailouts in the name of avoiding a much needed correction in our housing market.
The Wall Street Journal
Opinion & Commentary
Washington Money Is a Sucker’s Play
The amount of debt our states and localities have accumulated is truly staggering, and we must remember they cannot utilize a printing press to pay their bills as Uncle Sam does. “Another Wall Street Bonus” (Review and Outlook, March 24) aptly points out that the last thing states and municipalities need is a permanent federal incentive to dive further into debt.
In the wake of the Great Recession, government entities across America are facing some of the most challenging fiscal times in recent memory. However, many state and local budgets were driven deep into the red because of their borrowing and spending spree over the past decade.
With billions of dollars in current state budget shortfalls and perhaps trillions in unfunded pension and health-care obligations, lawmakers need to put spending on a diet and reject the idea that more “free” money from Washington is the panacea for their fiscal problems.
Jonathan Williams
* The Wall Street Journal
* APRIL 1, 2010, 8:13 P.M. ET
Crunch Relic Gets Fresh Look
Market for ‘Private Label’ Mortgage Securities Stirs, but Don’t Call It a Revival
By RUTH SIMON
The first signs of life are appearing in the comatose market for securities made up of mortgages that don’t carry government backing. But even the industry’s biggest cheerleaders say it is too soon to declare a revival.
That means so-called jumbo and other nontraditional mortgages, which don’t qualify for government backing, are likely to remain hard to get even as other parts of the credit market rebound.
Redwood Trust Inc., a Mill Valley, Calif., mortgage-investment manager, is close to launching such a security backed by jumbo loans, which would be the first sale in more than two years of such “private label” securities backed by newly originated home mortgages. Others firms including Barclays PLC’s Barclays Capital are considering putting similar deals together.
“I think we will see a handful of transactions through the year, which, optimistically, could rise to a couple dozen by year-end,” said Tom Deutsch, executive director of the American Securitization Forum, an industry group. These are likely to be “one-off transactions” that signal that the market is beginning to reopen, not that it has reopened, he says.
“That’s a critical distinction,” Mr. Deutsch added.
The challenges are many. Low interest rates and tougher requirements by credit-ratings firms make the deals less profitable for the creators; the supply of new mortgages to package is vastly reduced; and potential regulation is adding to uncertainty. The pool of willing buyers has also shrunk dramatically in the aftermath of the credit crisis.
At the peak of the housing boom in 2006, private-label mortgage securities accounted for 56% of the $2 trillion in mortgage securities sold to investors, according to Inside Mortgage Finance, an industry newsletter.
But the market collapsed in 2007 amid rising mortgage defaults, helping spark the financial crisis. The continued problems in the mortgage market stand in contrast to other securitization markets, such as those for credit cards and auto loans, where deal volume has rebounded, though it remains below peak levels.
To entice investors back to the market, arrangers of the first new deals are likely to make them as attractive as possible—and potentially very profitable, some investors said. Unlike their subprime predecessors, the securities will be packed with loans made to borrowers with very good credit and significant equity who fully document their income and assets.
“From my perspective, these deals are going to be significantly better than what we saw anytime in the last five years,” said Daniel Castro Jr., a principal with Huxley Capital Management. As more deals come to market, “the guys who got in first will see lots of price appreciation.”
…
PTA dinner at our kids’ grade school tonight: $20 for a family of four to enjoy chicken, salad, bread and drinks.
We had the lowest-ever turnout since we moved her over five years ago; it wasn’t the weather, either, as the rain moved out early today, leaving behind cool San Diego sunshine. Naturally, I suspect the problem is that families are broke…