Bits Bucket For April 2, 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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FDIC sells $491M in distressed mortgages; Roundpoint Mortgage pays $34M for 50 percent stake
WASHINGTON (AP) — The Federal Deposit Insurance Corp. has sold $490.7 million in troubled mortgage loans from 19 banks that failed between August 2008 and March 2009 as it works through an inventory of assets from the institutions it has taken over.
The FDIC said Thursday that the winning bidder in its auction, Charlotte, N.C.-based Roundpoint Mortgage Servicing Corp., paid $34.4 million for a 50 percent stake in a new company set up to hold the home mortgage loans. The FDIC has the other 50 percent.
About half the loans are 30 or more days delinquent, the FDIC said. The agency said about 80 percent of the homes involved are located in Arizona, Florida and Georgia, which are among the states with the highest numbers of failed banks.
So they are paying 28 cents on the dollar for these distressed mortgages/houses? Seems like a safe bet for the buyers, since they can sell the houses.
Problem is that they’ve only written down half a billion of 4-5 trillion in RE losses with this maneuver. Long way to go.
I’ve had some experience with the Bottom Feeder world, and you can bet that they have a 25% or better ROI built into thier financial models. Typically they are smart guys that make their fortune dealing with not so smart guys. No criticism implied, like vultures in the natural world they play a valuable role in cleaning up the messes left by the rest of the world.
Smart and lucky can often appear to be the same thing. These purchasers might think they’re pulling off one heck of a deal based on recent (<30 years of history), but the correction happening now is far greater than anything we’ve seen in the past. 28 cents on the dollar seems high to me, as the collateral will not be easily flipped. At best, these guys might make some money but the more likely scenario is that they just became the next knife catchers, and the reason is the perspective from which they are making their decisions. Buying distressed mortgages would have been a no-brainer in past corrections, but for a host of reasons even beyond the housing bubble, this correction is different.
I’m with you, phxis2hot. Especially agree with your final sentence.
This correction may be “different” but flippers are paying what I consider to be way too much on fixers and still making beaucoup bucks. I would say that, once again, it depends on where you are. People still can’t get enough of Portland apparently, despite the lack of jobs…hope their parents have deep pockets.
People still can’t get enough of Portland apparently, despite the lack of jobs…hope their parents have deep pockets.
Seems to be happening in Tucson as well. And, uh-oh, it’s another story busting out of the Arizona Slim file:
House across the street from me is an example of what looks to be a flip for which the flipper overpaid.
It had been owned by a delightful old gent who was quite the neighborhood and community activist. The gym over at our neighborhood center is now named after him.
Alas, the gent got quite ill, then died. That was back in the summer of ‘05. Too bad you didn’t get a chance to go to his memorial — it was truly a five-star event.
Anyway, his children sold the place to an investor in early ‘06. Investor told me and other neighbors that he was fixing it up for his college-aged daughter to live in.
Well, darling daughter decided to leave college and run off to Hawaii. I don’t know what she did there, but she had been working at a Tucson hotel, so I think she could have easily found work.
Sans daughter, the investor continued on with the fixup plan. He hired a guy to do the work, and let me tell you, his industriousness was something to behold. Guy treated it like the best job of his life, and oh, did he do a good job.
Investor put the place on the market in the summer of ‘07. It was sold in November ‘07 for something like $200k. Investor had originally purchased for $100k, and I thought that was a bit much. Dear old gent hadn’t done much to the place in years, and it showed.
Any-hoo, the new owner was a lady approaching middle age. An editor for a local environmental group. And I know for a fact that this group doesn’t pay that well, so I suspect that a trust fund may be involved.
I went over to greet my new neighbor on moving-in day, and she seemed a bit cool toward me. I couldn’t figure out what was so offensive about giving the person moving into the nicest house on the block a cheerful welcome to the area, but, hey, some people don’t appreciate such things.
Her boyfriend, who moved in with her, was a wee bit friendlier. I didn’t try too hard to make his acquaintance because that sort of thing tends to make other women jealous, if you get my drift. (No, sweetie, I don’t want to steal your boyfriend. Because then he’d have to put up with me, and, among other tendencies, I’m even more of a neat freak than Felix Unger from “The Odd Couple.”)
Well, for some reason, the boyfriend moved out in late ‘08. Ms. enviro editor is living there alone now.
Oh, she does have a barking dog that goes off at anything walking or bicycling by. I can’t help thinking that the dog is her only friend because she sure hasn’t made much of an effort to reach out to us neighbors. (Come on, honey. Your across the street neighbor, Slim, may have a bit of a porcupine streak, but around here, you need that. Something about a lot of social dysfunction in our midst. Goes with the territory — it’s a transitional neighborhood, doncha know.)
So, wait a second.
We ridiculed people touting technology stock supremacy in 1999 when they said “it’s different this time.”
We ridiculed people in 2005-2006 touting that economic expansions can go on indefinitely when they said “it’s different this time.”
No we’re saying “it’s different this time”?!?!?
John Paulson (the one who made billions betting on the housing crash) is now buying residential land and disressed debt.
Raw land will not be developed into new housing unless home prices go up from where they are today. Population continues to grow. Home affordability levels are at high levels historically. We are just in the early stages of job growth again–the LAGGING indicator in a recovery.
Can’t we admit to the very real possibility that it’s NOT different this time? And that real estate values tend to recover with time? Perhaps not to where they once were, but certainly off of the below replacement cost price points of today?
LOL, Slim. You do have the stories. Is there more than one “daddy bought the house for his kid student to live in” or is this the one you’ve discussed before? Maybe the above was the Cliff’s Notes version, but I seem to remember the daughter’s BF living there and then some renters after they left? And didn’t she have some flamboyant car to match? Or was that a different place?
Answering the above questions from sleepless_near_seattle, Slim says:
1. The “daddy bought the house for student to live in” residence is directly to the west of the “I think it’s a trust fund puppy” house that I just told the lengthy story about. (If my neighbors ever found out what I’m saying about them here, I’d be one dead Slim. Needless to say, I don’t use the words “housing” and “bubble” during my infrequent conversations with them.)
2. The “daddy house” is now occupied by the brother (and tenants) of the girl for whom daddy originally bought the house. The girl graduated from the University of Arizona and left town, presumably for employment, last May.
3. The flamboyant car used to be driven by the girl over at the “daddy house.” Well, it was until she totaled it back in March ‘05. It was replaced by an underpowered SUV that could barely climb the (very modest) hill that starts in the next block. Then, after that vehicle died, she started riding a bicycle. And that was something I heartily approved of.
Y’know, this family appears to have really bad car karma during the month of March. The brother recently totaled his SUV. ‘Twas on the weekend before St. Patrick’s Day and it’s been sitting idle in the carport ever since.
Front end’s all smashed in, I saw a claims adjuster over there with Daddy last week, and the unlucky brother is now driving Daddy’s SUV. I fear for the future of that SUV.
And, yes, I’m dreaming, but I’d like to see Daddy cut the proverbial apron strings with his kids. It’s time they learned how to stand and deliver.
Thanks for the clarification. It sounded strange that daddy fixed and resold the house you had previously discussed. Makes sense now. Amazing you’ve had 2 houses on one street bought/maintained by parents. And we haven’t even touched on the one with all of the sewer issues.
Hey, sleepless, it’s me again!
The “I think it’s a trust fund puppy” house doesn’t seem to have a lot of parental involvement. At least the sort that I can see from across the street. I seldom see anyone visiting over there.
This is not to say that the puppy isn’t dealing with the parental units on the phone or via the Internet. Or by way of electronic transfers into her bank account. I just don’t know.
But she strikes me as someone who, shall we say, has personal issues. (I think they may have been the reason behind the live-in boyfriend’s departure.)
In short, when it comes to the “I think she’s a trust fund puppy” lady, I keep a respectful distance.
Oh, sorry. I was referring to the investor who ended up selling to “the trust fund puppy” in ‘07. You suggested he had bought it for his daughter.
Me again. Back again.
The investor who bought the house that the “I think she’s a trust fund puppy” lady has occupied since November ‘07 had originally made the purchase with the intention of fixing it up for his college student daughter. But that daughter decided she’d had enough of college — and of Tucson — and she lit out for Hawaii.
So, the investor continued to have the place fixed up by his excellent worker, who treated the work like it was his masterpiece. The worker finished up in the summer of ‘07, and the investor put the house on the market. The puppy-lady was the buyer, and she moved in right around Thanksgiving ‘07.
LOL, Slim. I got it. I guess my point was that two houses have been bought on your street with the intent to house the buyers’ precious “youngsters.”
…one of which no longer houses said youngsters, one of which still does.
Don’t forget that some of these are probably second mortgages.
If the house is underwater, the second mortgages are essentially worthless.
Also, are the whole loans, or bonds? Lots of bonds in the worst tranches are also likely to be wiped out. OTOH it probably IS true that many bonds will probably pay out better than the prices on them might indicate. But people are going to have to look at the actual collateral, ability to pay, and exactly how senior the bond is to get any kind of reasonable estimate of value.
I want to know if the FDIC’s ownership stake is subordinated to the private one, meaning the FDIC has to take the first hit on losses.
I can’t see any other reason for them to sell a 50% stake in $X million of loans rather than just selling a 100% stake in $X/2 million of loans.
i have no doubt the FDIC gets stuck holding the bag if things go sour… but at this point why should they care about that?
What’s the worst that can happen? They are back where they started?
What additional losses might they suffer by selling off what are essentially a just bunch of losses?
I would think that if they were 2nds they’d be going for less than 28%. I’ve heard of banks selling their notes on the 2nd at 2 cents on the dollar. ($1K for a $50k note in several cases.)
..half a billion of 4-5 trillion..
I don’t think the FDIC is interested in all the losses in the RE world. It cares only about the ones on it’s books.. failed-bank odds and ends it gets stuck with if nobody wants to buy that stuff.
I don’t know how much the FDIC was so far forced to absorb, but it can’t be trillions. It is usual for the FDIC to pass a failed-bank’s assets in their entirety to some healthy bank immediately after a failure.
Last Feb Lennar (the builder) did a similar deal.
It paid $243 million for a 40% stake in about $3 billion worth of loans.
—–
Lennar (LEN 17.13, 0.00, 0.00%) has purchased a 40% interest in the loan portfolios, while the FDIC is keeping the remaining 60% equity interest. The FDIC provided $627 million of financing at no interest for seven years.
With FDIC kicking in about $365 million in equity, Wall Street analysts pegged the portfolios’ overall purchase price at $1.22 billion, or 40 cents on the dollar.
The portfolios include about 5,500 distressed residential and commercial real estate loans from 22 failed bank receiverships.
“Acquiring and working out distressed real estate loans was a large and extremely profitable part of our business during the last major real estate down cycle in the early 1990s,” said Lennar Chief Executive Stuart Miller in a prepared statement.
http://www.marketwatch.com/story/lennar-scoops-up-distressed-loans-from-fdic-2010-02-11
——–
Shortly afterwards, there was another report saying Lennar had already sold a lot of the stuff it bought.. mostly prime land, IIRC.
“FDIC sells $491M in distressed mortgages; Roundpoint Mortgage pays $34M for 50 percent stake”
50 percent of $491M = $245.5M
100*($245.5M - $34M)/$245.5M = 86 percent loss
Is it really that simple, or is there more here than meets the eye in the headline?
paid $34.4 million for a 50 percent stake in a new company set up to hold the home mortgage loans. The FDIC has the other 50 percent.
So, FDIC sets up a company, transfers the loans to that company and sell half interest in the company for $34.5 million?
I wonder what the valuation of that company is?
Hmmmm, $490 million?
Hmmm, looks likes FDIC didn’t take a loss as that company is a SBE for FDIC!
Just got the loans off the books!
Hello Enron?
M & I Bank, Wisconsin’s largest bank, recieved over 1.5 billion in TARP within the last 2 years.
Here’s an interesting little deal( I believe premeditated) with the states largest home builder and a “new M & I company”. Even the locals posted a few comments on sudden appearance of this deal.
Bielinski transfers 460 acres, condos to M&I Bank
By Tom Daykin of the Journal Sentinel
Posted: April 1, 2010 |(17) Comments
Journal Sentinel business reporter Tom Daykin blogs about commercial real estate and development
Pewaukee-based Bielinski Homes Inc., Wisconsin’s largest home builder, has transferred ownership of 460 acres of undeveloped land and 46 condominiums to M&I Marshall & Ilsley Bank after running into financial trouble when the housing bubble burst.
Bielinski Homes and two related companies, Bielinski Investments LLC and Bielinski Development Inc., made the property transfers in late December, according to documents filed in January with the register of deeds in Waukesha, Washington and Ozaukee counties.
The properties were given to Water Street Land LLC, a new company formed by M&I Bank, after the Bielinski companies were unable to make continued loan payments.
…Neither Bielinski’s owners nor bank executives would agree to an interview…cont
http://tinyurl.com/y8zlruu
Number of California distressed hotels rises in Q1
San Francisco Business Times
Over 400 California hotels are now in distress.
According to the latest figures from Atlas Hospitality Group, 406 hotels across the state have either defaulted on their loans or been foreclosed. During the past three months, 79 hotels were foreclosed, a 27.4 percent increase from the 62 hotels foreclosed at the end of 2009.
More ominous, over the past year, there has been an almost 500 percent increase in the number of distressed properties.
The number of hotels in default climbed from 307 to 327, and include four hotels in San Francisco and two hotels in Alameda County.
A mere 2.5 percent of the foreclosed hotels had CMBS loans, suggesting that special servicers of CMBS loans are working to modify loans rather than foreclose, said Alan Reay, president of Atlas Hospitalty.
The picture is particularly bleak for unbranded properties: 90 percent of the foreclosed hotels, including Sausalito’s Casa Madrona Hotel & Spa, which was sold at auction in February, were independent.
Under 10 percent of the foreclosed properties have been resold by the lenders.
Remember when tourism was the business that would buoy the California economy during the housing bust?
Not so much anymore, neh?
And remember turd-ism is a component of the total supply of new buyers? Remember “everybody wants to live here” and “all the millionares want to live here”.
Nevermind there are no jobs and even if there were, they don’t pay enough to support the grossly inflated housing prices.
California, like much of the U.S. blue states, is overcrowded, overpolluted, has too much violent crime, and is and overtaxxed.
More and more, one is better off going to all-inclusive resorts for vacations to have some oasis from this muck. That’s how I can like California.
California, like much of the U.S. blue states, is overcrowded, overpolluted…
Geez Bill, California is a big state, maybe you ought to watch Huell Howser and go visit some place besides…LA
It seems strange that anyone would assert that since there is recent experience of tourism plummeting during the dot com implosion. Conventions and trade shows that are scheduled well in advance and are harder to call off fare a bit better, but other locations with bigger, newer, and cheaper facilities have been competing very aggressively with coastal cities to host events.
No draw is powerful enough to “bouy” anyone. Everyone will sink.
However, I’d bet that California will bob back up to the surface sooner than most other areas since the things that have always made it an attractive place to visit and work and live are not wiped away with a housing crash.
More ominous, over the past year, there has been an almost 500 percent increase in the number of distressed properties.
well.. if one was distressed last year and 5 this year, there’s your 500% increase..
i searched for “how many hotels are there in california” The only hit (ask.com) claimed “Approximately 23,000 according to the CA Dept of Finance.”
no link to follow up.. but i guess it might be close.
If there are 23,000 and only 406 are in trouble/defaulted, and my math is correct, the failure rate is a bit over one one-hundredth of a percent. (0.017%)
1.7%, but still relatively low.
yeah you’re right.. almost 2%.
I screwed up even after mentally double checking it.. hmm..
Relatively low, but the hotel business isn’t at all happy about it.
They really don’t like the reduced room rates. It seems they capitalize those rates to place a value on hotel properties.
When room rates fall the property is “worth” less… they can borrow less, it sells for less, etc.
I’m not sure I get the “branded” thing. ISTM that MOST hotels are franchises, not owned by the brand. And hotels change brands fairly easily. So “unbranded” are either pretty low end or fancy enough that they think that they can be filled WITHOUT access to a chain’s reservation system? Or am I confused?
The Great College Hoax
REPORTS LIKE THIS ARE NOT UNCOMMON: “Mindy Babbitt entered Davenport University in her mid-20s to study accounting. Unable to cover the costs with her previous earnings as a cosmetologist, she took out a $35,000 student loan at 9% interest, figuring her postgraduate income would cover the cost.
“Instead, the entry-level job her bachelor’s degree got her barely covered living expenses. Babbitt deferred loan repayments and was then laid off for a time. Now 41 and living in Plainwell, Mich., she is earning $41,000 a year, or about $10,000 more than the average high school graduate makes. But since she graduated, Babbitt’s student loan balance has more than doubled, to $87,000, and she despairs she’ll never pay it off.” One of the several sad tales in Forbes Magazine’s feature a year ago on going into heavy debt in order to get a college degree.
~ Costly Education
Now that President Obama is setting up a system whereby the federal government lends money directly to college students to pay for their college training, thereby cutting out the “middle man,” the question of going into hock for college instruction takes the spotlight once more.
Wmbz:
This time its over for “college” It will only be for the rich, the others will go to a full time intensive training course or “apprentice” with a small stipend type deal.. to cut out the “middle man” of 4 years down to 1 or 2 max
That implies that there will be jobs for these apprentices. I believe that part of the goal to get everyone under control is to get rid of as many jobs as possible, ASAP. People without hope and who need government support tend to vote as they are told.
How much do you want to bet college education will increase faster than the rate of inflation? Obama’s plan does absolutely nothing about the cost of college.
College education has been rising faster than general inflation for years. Wouldn’t it be more logical to conclude that, without further government intervention, college costs will increase more slowly than other prices over the foreseeable future?
Or does your analysis factor in the effects of intervention (e.g., is Uncle Sam working behind the scenes to make college more “affordable,” the same way they make housing “affordable”?).
(from my very cursory observation) It seems to be happening already, to a great extent. The exact same principle is at work as housing - the effort to make college “affordable” has served to do exactly the opposite - it’s made prices go through the roof. It’s no accident though, since this principle serves to greatly line the pockets of those doing the lending.
It’s quite the converse as “austerity measures” actually, now that I think about it. They’re things that actually are good for us, but appear bad on the surface, and thus people protest them.
So basically from a financial standpoint most people, and in fact most societies as a whole, are just like children. They want to eat nothing but dessert, not realizing that what’s “good” on the surface is not really what’s good for them in the long run.
Unfortunately our government isn’t being the good parent and making us eat our vegetables - instead they’re in cahoots with the ice cream man. Even when the children get smart and try to tell their “parent” that maybe they really should eat more vegetables, the parent instead says “No - have some more ice cream dammit!”.
Unfortunately our government isn’t being the good parent and making us eat our vegetables - instead they’re in cahoots with the ice cream man.
Extraordinarily succinct.
“…instead they’re in cahoots with the ice cream man”
Commie !!
LOL - well OK, perhaps I shouldn’t pick on the well-loved ice cream man. Hopefully the point is made though!
Think of “Uncle Creamy” from The Tick (+1000 for anyone who gets this reference).
Spoooooon!
+1000 for sleepless (though I shouldn’t have mentioned The Tick, just to make it tougher)
Same with healthcare;
Same with housing;
Same with eduction.
If you don’t bear the full economic cost of something you consume, you tend to overconsume it. Overconsumption drives up prices.
Subsidized healthcare (insurance and otherwise), prices will go up (the only potential offset is the introduction of not-for-profit players in the private sector).
Subsidized college eduction, prices will go up;
Subsidized housing, prices will go up.
College education has been rising faster than general inflation for years. Wouldn’t it be more logical to conclude that, without further government intervention, college costs will increase more slowly than other prices over the foreseeable future?
Actually, it would be more logical to conclude that colleges will crash and burn along with RE and stocks, once students realize they can get a better education for about 1% of the cost on the Internet.
Actually, it would be more logical to conclude that colleges will crash and burn along with RE and stocks, once students realize they can get a better education for about 1% of the cost on the Internet.
….true, but can they get the credentials from the internet. Most students now don’t care if they get an education, only the credentials to get into a professional college, grad school, high paying job. They are willing to “buy” these credentials by attending some high priced college. Sad but true.
You don’t think that the reputable grad schools which are, in general, part of universities that also give undergraduate degrees will accept credentials from a diploma mill, do you? Undergraduates are cheap to educate except for serious science/engineering students. Most undergrads spend their time in a big lecture hall. Grad/professional school is much more expensive to provide (except for law schools which, like undergrad, mostly need only a few lecture halls, some smaller rooms and a library).
Seriously, you aren’t going to get into a good grad program with a degree from Phoenix Lite.
The accredidation folks are going to find themselves with more power than they can handle.
Good point Dale, and true I think.
Hopefully over time people/companies will start to find/realize that credentials (college diploma) aren’t worth as much as they used to be; that there more people that are self-taught, now that self-teaching is so much easier. I think this is starting to happen, but is in the early stages still, since the ability to “self-teach” on the internet is fairly new.
As an engineer - I can’t tell you how much I’ve learned on the internet, just from google searches, Wikipedia, etc. It really is quite easy to get pretty much a full education online, if you’re willing to spend the time. And for free, without having to sign up for online courses.
All that being said - part of the problem though is that it’s a lot harder for a company to discern how much someone has been “self-taught”. With a diploma you know that a person has spent N hours in class; it’s a bit easier to “fake” an internet education than a college one. So this makes word-of-mouth / references more important.
Most students now don’t care if they get an education, only the credentials to get into a professional college, grad school, high paying job. They are willing to “buy” these credentials by attending some high priced college. Sad but true.
And that’s what needs to change in many parts of our society. We need to focus more on substance, less on formalities.
In case anyone’s interested, the education bubble idea is already starting to gain traction. For example, another HBB-er turned me on to this website:
EduBubble - A site about the book: Beating the College Bubble
BTW, the aforementioned book is a free download.
“They are willing to “buy” these credentials by attending some high priced college. Sad but true.”
During the early 60’s, most US working class families claimed that they couldn’t afford to send their kid(s) to a 4 years college. Little old Jr. and sister Tess were expected to get by life with that trusty old HS diploma.
Once the Vietnam war and the Draft kicked in big time, it was amazing to see how many parents came up with the cash to buy that College Sheepskin and a 4 year deferment for Jr.
“They’re really shooting people over there Mom!”
“College ?….Yes we can !”
In the early ’60s a year in college did not cost more than the average blue-collar annual wage of the time. I still remember the tuition and fees for my freshman year- $192 for the fall semester and $130 for the spring semester. And this was at a big mid-Atlantic state university. Books were extra and they were ridiculously expensive even then.
Exactly Bill. Like everything, the cost has risen not only as a function of inflation, but as percentage of income.
Another example would be housing. It used to be you could not rent an apt if it cost more than 1/4 of your monthly income. The mgt wouldn’t let you. Now it’s half or more.
And when the last time you could buy a new car (BUY not lease) and pay it off in 3 YEARS with a monthly payment equal to approx. one week’s pay of an avg person?
I have a good friend, teaches at the UC system, has students demonstrate proficiency in using Google as a TA.
College education has been rising faster than general inflation for years.
According to Elizabeth Warren, colleges aren’t increasing their tuition and fees because they have to, they’re doing it because they can.
The greed at colleges is astounding. And it’s not just tuition. The prices of books is bordering criminal. A friends GF who is back in school was lamenting this, and showed me a thin workbook about half the thickness of Cosmopolitan magazine, and made just as cheaply, which cost $80. Eighty bucks for a thin magazine!
According to Elizabeth Warren, colleges aren’t increasing their tuition and fees because they have to, they’re doing it because they can.
Sounds a little like home sellers in the 1997-2007 period, as enabled by easy lending, doesn’t it?
The greed at colleges is astounding. And it’s not just tuition. The prices of books is bordering criminal. A friends GF who is back in school was lamenting this, and showed me a thin workbook about half the thickness of Cosmopolitan magazine, and made just as cheaply, which cost $80. Eighty bucks for a thin magazine!
I hear ya!
Back when I was taking those Pima Community College construction courses, I wasn’t too appalled at the tuition. Matter of fact, I was happy to pay it. Reason: The instructors were outstanding, even when they were hollering at me for not following proper safety procedures. (They took safety very seriously at Pima.)
But the books? Yeesh. Those were pricey. But they’re good references, so, even though I’m in stuff-purging mode, I’m keeping ‘em.
“College education has been rising faster than general inflation for years.”
Wait, that sounds like…health care.
Quick recent anecdote. I’m trying to take a Nutrition class. The book for the class is $153. While I was in the bookstore, I overheard a customer complaining about the prices of books. An assistant then told him that many book prices are up 100% since last fall. Time for another student protest, methinks.
PS - I didn’t end up taking the class due to not having the pre-req of Anatomy & Physiology. I actually got into it over email with the professor, telling her I think that’s somewhat of a strange pre-req. And before I can take A&P, I would have to take BIO101 (which I can actually understand). Point is, by adding this pre-req, they’ve just added two more classes ($$) and two more sets of books ($$$$) to the equation.
Find a PDF file (scan) of the book online from a torrent site.
The cost of college education is already increasing faster than the rate of inflation. And it’s jumping even more due to the loss of state tax revenue.
I have to agree that Obama’s plan does nothing for the cost of college. But to get out of a hole, you have to stop digging first. There is far too much real money disappearing into the black hole of interest payments to banks.
The next problem to address is that college is fast becoming too-big-to-fail, hence the price hikes. It used to be that colleges had to compete for students because students could always choose the no-college route. But oops, those jobs have been outsourced and insourced. Now you have to buy college as surely as you have to buy gas.
Foreign language departments ought to be doing well these days, as American students seek the skills that enable them to follow the jobs that left our country.
Except that those foreign countries don’t have the welcome mats out for Americans. If a local can fill the job, it will be given to a local. In most countries the only way for an American to get a work visa is for the employer the prove that there are no locals who can do the job. The only young’uns who will be able to get out of the US will be those who hold dual citizenships.
And besides, you can get all of the foreign language skills needed through Rosetta Stone or Berlitz without spend 2 1/2 years taking advanced basket weaving.
Except that those foreign countries don’t have the welcome mats out for Americans.
Very true. And, folks, those foreign countries are a lot closer than we think. Take, for example, that driving excursion that my aunt and I made through southern Quebec last August.
On an earlier visit to that province, Jean stopped in a store and tried to buy a turtleneck. The people were very unfriendly to her — Jean’s not that proficient in French — and she quickly figured out that the frosty welcome was due to her being an American.
During our drive, Jean kept on going. Didn’t stop anywhere except in a parking lot so that we could discuss our next move amongst ourselves.
Her son, my cousin Tom, also had lots of stories to tell about his struggles to get paid for his construction work. The most notorious non-payers were rich people who came down from Montreal to have vacation homes built in Vermont. My cousin’s very slow to anger, but let me warn you, don’t get him started on the topic of people from north of the border. Just don’t.
+1 Spokaneman on Rosetta Stone.
I’m taking Polish right now and it works pretty well, especially when you add up the cost of doing the same in a class.
What I do miss from the class, however, is the interpersonal activity. The other thing Rosetta doesn’t do well is to provide adequate context (for example - the distinction between “He swims” and “He is swimming (right now”) in many cases. RS is also difficult in a language like Polish since nouns can take on many different forms depending on use. In English and most romance langs, a horse is a horse is a horse. It’s not obvious from context in RS why the noun change is taking place.
Link? I need to forward that to some high-school seniors and parents.
The university experience is quickly pricing itself out of the market. The Washington State University system as had tuition increases of 14% each of the last two years with more to come.
When money was easy, spending $100K to warehouse the kids while they grew up was doable, now, not so much.
Friend of mine’s daughter just threw in the towel after less than two years at the University of Washington. Don’t know all the details of what’s going on — Dad’s not being very forthcoming — but I think she’s going to find something else that’s even more wonderful to do than college.
My vote is on her going to work in Dad’s newest startup company. He’s done the entrepreneurial thing before, been quite successful at it, and he’s one of the nicest people you’d ever want to work for.
Can’t they just fund those price increases with HELOC’s from the endless housing ATM?
Oh, wait… that’s right… nope!
Link? I need to forward that to some high-school seniors and parents.
college hoax mindy babbitt
Tankxs!
LMAO, lavi. Well played.
Are they EVER going to figure out that when you subside (or make them easier to obtain) loans on something that the price reacts quickly to “capture” all the new found buying power? It’s amazing to me that the way to make things afforable is by making them easier to finance.. That has EXACTLY the opposite effect, it makes things much less affordable and makes everyone dependent on their ability to obtain (and service) financing.
If all student loans were eliminated tomorrow; what you they think would happen? Price of college would go up?? Same thing with houses; if the max loan was 50% LTV, the price of homes would drop drastically, and homes would get far more AFFORDABLE.
Affordability is not a function of financing; it’s a function of price. Debt service load is a function of financing terms; and, frankly, I’m sure that it’s not good public policy to try to increase the debt load on this country.. And, for the life of me, I can’t figure out why the government seems bound and determined to make sure that we have to finance everything, and dramatically more for it. If you subsidized financing on toilet paper the price would rise in response.. Don’t they understand this?
Isn’t that what inflation is? Too much money chasing too few goods?
If too much money is provided to chase up the price of education they you end up with a pricey education.
:choke:
Who are you, and what have you done with combotechie?
Why are you choking?
+1 pack.
Why are you choking?
Mostly just jerking your chain.
Hasn’t your mantra always been that we’re suffering from a shortage of cash? But aren’t you now saying that college tuition is going through the roof due to too much cash (chasing too few goods)?
“But aren’t you now saying that college tuition is going through the roof due to too mcuh cash (chasing too few goods)?”
No, I am saying too much cash USED TO chase up college tuition. Now colleges are in trouble because NOT ENOUGH cash is available to continue to chase up the price of tuition or to support the already chased-up price of tuition, hence the Federal government is stepping in to fill the cash-gap.
I think he says we suffer a cash shortage relative to debt. It appears consistent.
Wouldn’t this mean the college tuition prices would now be coming down? I haven’t heard this - I’ve only heard the opposite - they’re still going up. Though admittedly I haven’t looked deeply into it - just stating what I generally hear.
I would agree that the subsidies have driven up college education costs, however, I think one could reason that there’s more demand today for a college education primarily due to outsourcing. Higher demand usually equates to higher costs.
From my own personal experience, as one who taught in the New York State University system, college tuition goes up as the path of least resistance to the bloated staff and costs of carrying an administrative load that grows like cancer.
The government policies that affect the situation all tend to make for a bigger system with more expensive tuition and more fixed costs. Entrenched eggheads universally applaud this as “progress”.
Academia and politics are both a refuge for those who think they know better than you do how to run your own life. Funny thing is, without direct State sponsorship and ever increasing tuition and taxes, they couldn’t survive in this world themselves.
From my own personal experience, as one who taught in the New York State University system, college tuition goes up as the path of least resistance to the bloated staff and costs of carrying an administrative load that grows like cancer.
I have worked at the Universities of Arizona and Pittsburgh. I heartily concur with the above.
Exactly. And like everything else in our society, nothing short of near death of the system will change it.
And there’s the whole voodoo, er, “supply side” economics model still running things (into the ground).
Remember?
Raise price during good times and claim scarcity of goods and services.
Raise prices during bad times and claim scarcity of income.
“Are they EVER going to figure out that when you subside (or make them easier to obtain) loans on something that the price reacts quickly to “capture” all the new found buying power?”
“They” are doing their masters bidding. The American people have been sold out to the financial institutions. Everything that has been done, over the last twenty years, has just served to put more people into greater amounts of debt. Keeping the masses on a treadmill of debt payments has made those same financial institutions so big that they now own us. Considering that the taxpayer was used to bail out the banks, the banks are in a can’t lose position.
Since Washington won’t do anything about it, the only hope is for a cultural shift away from large amounts of debt.
We got sold out in 1972 when the top 200 CEOs and Directors, etc formed the Business Roundtable, which became a “sort of Senate for large corporations and businesses”* and who’s influence is the very heart of K Street.
* - “Gangs of America” by Ted Nace
Sure they understand this.
Financing makes bankers rich, which is of great importance. And, if you are deeply in debt or have to finance everything, you never really own it, which makes you easier to control. That’s what they want.
You have problem with Corporate Communist Capitalism©®™, comrade?
My comment lies to this effect. College went up because the government started thinking everyone should go to college and get a degree.
Ergo, school population, college level jumped dramatically. I went to Cal Berkeley with 7,000 students, now 35,000! And most college found populations increasing same degree, more or less
Result, increased space requirement, professors, etc., driving salaries , and benefits, requiring higher tuition not covered by state. Now students had to borrow money to go to college.
I can not remember any of my fellow students going into debt to go to Cal.
Son is professor at college, now says students not of quality that there used to be as IQs down, education down, preparation down, but still required to accept to colleges
I highly recommend college to bright hard workers. You just have to do it wisely. Get a scholarship by maintaining the necessary grades and extacurricular activites in high school and go to you own State’s university to study a field that is realistically projected to be in demand in the future, maintaining at the very least a 3.0 average. If you excel, you can still go on to a great graduate school. It’s like buying a house. It doesn’t work in the long run as a get rich scheme with little effort. Price and quality matter, and you have to be willing to put in the work. Just getting in someplace at any cost and doing little will cost you dearly. If you don’t want to go, have trouble learning, and can’t even get into your State’s University but just saw a commerical saying you can make more money, consider other options.
One of the things that bothers me is that a college education has just become job training. (Not that job training is a bad thing…)
BUT the desire to be truly educated in a discipline seems to have been side tracked for the perception/prospect of a lucrative career path.
“Lucrative career path?” What quaint luxury. Try “a job where you’re not in constant fear of being laid off.”
But whose fault is that? Not the schools. Their curricula haven’t changed all that much. I’ll blame it on the disappearing entry-level positions.
Remember pmseatac’s thread from yesterday? They are looking for SCADA techs, 5-7 years exp only please. Few companies, if any, are willing to offer that 5-7 years, not even at entry level pay. Pre-baked expertise only. So, where do you get 5-7 years, besides Iraq/Afghanistan?
I do not disagree but hasn’t it always been the case that if the supply of employees far exceeds the demand that companies don’t need to invest in training, but can hire employees that are immediately profitable and can work independently.
This is Blatant age discrimination, it happened to my brother. he applied for a job 1/2 mi from home ..walking distance…and was willing to accept the pay…but no his 15 years made him overqualified.
So they hired a 5-7 yr guy and he had to drive an hour and was late 3 times in the first week. he got canned. But would they offer my brother the job??? heck no…
———————-
5-7 years exp only please.
if the supply of employees far exceeds the demand
Natalie, what do you mean by “supply?” In the SCADA case, they had openings unfilled for years because they could find nobody. It’s not as if there was a huge supply of SCADAs with 5-7 years and the fresh graduates were out of luck. No, the company would rather leave the position open for years, waiting for the perfect employee. [which makes me wonder how much they really needed the guy, but that's another debate.]
“Immediately profitable” is a sales/banking/marketing term, and I will have nothing to do with it.
DJ, I’m not sure where the age discrimination factors into this. (?)
If they didn’t have people defining some jobs as 5-7 years experience and others as 15+ years of experience, what would the HR people do to earn their keep?
Polly:
It would be my first job as King would be to make HR a respectable job again by hiring adults, who are paid to think about hmmm very experienced guy 1/2 mile away, or one that fits the pigeon hole and is an hour away..
The FIRST person you talk to in any company should be Bright…receptionist, sales, tech and HR.
Oxide:
Usually that means someone 10 -12 years younger then my bro.
eg: someone 25-28 vs 40
DJ, I’m not sure where the age discrimination factors into this.
I don’t have much experience in your field oxide, but in mine, trainees are not productive until about the 5th year, so if there are lots of applicants, the trainees are not considered.
Natalie, what if ALL you get are trainee applicants? That’s what I was referring to.
As for training, we’re not talking hiring a guy, and then you have to eat his salary for 5 years while he does nothing. We’re talking hiring him for easier tasks and then he works up. He would break even financially. Of course, “breaking even” is a cardinal sin.
You don’t need a job in SCADA to get experience with SCADA. You can hack your municipalities wireless control links, and monitor their infrastructure.
One of the things that bothers me is that a college education has just become job training. (Not that job training is a bad thing…)
I sincerely wish that my college education had been job training. Other than working on the college paper, I had no employment-related training at all. What I had was a lot of academic classroom time which didn’t carry over to the job market.
After I graduated, I was all but clueless as to how to conduct myself on the job. Not to mention the fact that I was highly unskilled.
As a result, I really struggled during my twenties. It wasn’t until I’d gained enough of those “skills that lead to jobs” that my work life got easier.
Nah. Not even a job training.
It’s like joining a fraternity of other college graduates who actually do the hiring.
I did not say that we were looking for people with 5-7 years of experience ( although the more experienced people obviously are more desireable ). The point I was trying to make is that we don’t have any younger, entry level applicants at all any more, only older people usually in their mid to late 50s or older ( and not that many of them now -they’re retiring or dying off ). If there were younger people applying who at least had shown the initiative to complete a tech school program they would be seriously considered. Several people responded to the thread implying that it is unreasonable for an employer to expect that potential employees provide themselves with minimum training and knowledge before being hired- this seems to be the prevailing attitude. That attitude is not reasonable for technical jobs, even the blue-collar ones. But it does give me insight as to why we can’t find younger workers anymore. By the way, we handle the lack of workers by working a lot of OT.
That thread did go off the rails. I work in IT and I expect the same thing. (but that isn’t often what happens, there is a lot of cheating on certs)
But I think it went off the rails when someone pointed out that there is so much uncertainty in any industry these days that young people are forced to choose between a sure thing and then the next best. Anything beyond that is considered a bad risk.
And many schools in this country have the worst job assistance programs in the world, bar none.
I should add that I saw nothing in the article to indicate that she was actually a highly talented accountant and great employee. Thus, the article offered very little to me. It’s one of those fields where you are either good, or dangerous.
at least she is not as bad off as the poor doofus who is 30k+ in debt getting his degree in photography.
i think the video was posted over at itulip several months ago.
also…with the federal goverment now being direct student loan lenders…there’s gonna be plenty of money chasing that american dream…and cost will continue to rise.
Now that is odd. Photography is one of the few fields where I think no training would actually be much better. The only real skill one could have is uniqueness and natural talent. Training is detrimental and/or non-effective in such cases.
The majority of photographers aren’t taking pictures to call themselves “artists”. They are taking pictures for advertising, schools, weddings, and other official type functions, and need to learn about proper lighting techniques and other tricks of the trade, which you can learn from as an apprentice or in college. Not that many people want to teach a novice photog, so college is the primary method.
I guess you are right. I was just focused on my own experience which is mainly art, commentary and documentary. I still do a lot of it, but not as my primary source of income. None of the people I respect most in those areas have a degree in photography but have chosen their own path.
Only formal photographic training I’ve ever had was back in high school. Other than that, it’s been pick up the camera, shoot like crazy, and carefully evaluate the results. Studying the work of a a lot of other photographers has also been helpful.
As for the technical stuff, there’s this great teaching/learning tool called the Internet. I highly recommend it.
The other side of the photography field is actually getting paid for it. I’m learning (via the University of Hard Knocks College of Business) that pro photography is a very difficult field to break into — and succeed at. It’s on the same level as professional musicianship and the theatrical arts.
That’s why I’m not throwing web development away to concentrate on photography. There’s a lot more money — and many more opportunities — in web development.
Yup I’ve met some great aerial photographers and they were doing weddings for the cash flow.
——–
that pro photography is a very difficult field to break into
I would much rather have someone like Arizona Slim take my wedding pics and family pics (i.e., someone that does it out of love of the work and can surprise me, rather than someone that can give me textbook standard prints). The textbook quality of the lighting is not as important to me as the experience and memory captured by someone that really cares and can see things differently than myself. I love to be challenged and surprised by others. I want to be moved by the picture.
I was at a wedding reception once which was professionally filmed. The reception was in a dark restaurant, so the lady kept swinging this FLIPPIN’ SPOTLIGHT all over the place just to get a good image. That was over 20 years ago and I’m still scarred from it. Lesson learned? Avoid the wedding thing entirely.
One of the areas of photography that I specialize in is concert photography. Using any sort of light, other than a flash in daytime to smooth out the harsh sunlight/shadow combo that falls on faces during outdoor concerts, is a huge no-no.
If you’re shooting after dark, you have to rely on what the lighting techs put up. No flashin’ the musicians. That makes them and the lighting techs very angry.
Lesson learned? Avoid the wedding thing entirely.
I could’ve used your advice around 12 years ago.
“What? Oh, nothing honey!!! Just… checking the weather!”
(packman quickly turns off computer)
“Davenport University is a private, non-profit, multi-location university” from DU’s website.
Now, I have nothing against DU. I assume that the school is a good one and adheres to the highest academic standards. Still, Mindy Babbitt should have a clear plan for her efforts in achieving a degree. What she wants, what are the future employment prospects in the subject, what can she afford. More on this later.
Generally, the education that a student works for does not educate and does not provide for a better future. This lack of value comes at a high price in money and time expended. Hmm, there is a lot of that going around lately.
I went to a local but well regarded state supported school in New Orleans after the oil bust in 1986. I was a field engineer at the time. I wanted to be a scientist. After completion of my BS, I went to grad school for my terminal degree.
The price tag for all of my education was excellent! I owed $2000 in student loans when I was done. I think I spent less than $6k for my undergrad. Grad school paid me to go, although I WAS slave labor for 5 years. Grad school, it’s not just a job, it’s an indenture. Frankly, if grad school did not pay me, I wouldn’t have done that. Waaaayyy too much work to pay FOR.
Anyway, I have a lot of students that are taking trash courses for a basically trash degree. Tough courses and degrees are to be avoided at all costs!
THIS IS COMPOUNDED BY A TRASH ECONOMY! Even if a student gets a good degree with courses that are relevant, it may make no difference if there aren’t any jobs or careers.
Accounting does not sound like a “buggy whip” (obsolete) trash degree to me. $35k in student debt does not sound outrageous either. 9% is too much. That is $3300 in interest before you touch the principle in the first year.
So, how much accounting did she actually learn? I hate to write that since I really sympathize with her situation.
Roidy
There seems to a pretty sharp dichotomy the story’s comments when it comes to the purpose of education: (1) you should major in a challenging field that will get you a good job; (2) you should get a liberal education to be a well rounded citizen (i.e., college is not a trade school).
No wonder we’re so effed up.
No, college is not trade school. Well said.
I have been to both college and trade school. Well, a 2 year electronics school, actually. It, too, was state supported. It was a great deal! A really good payoff.
It just seems that the Nation wants a University Degree to be … Well, I’m not sure what the heck the Nation wants a University Degree to be.
I mean I really don’t know.
Roidy
“No, college is not trade school. Well said.”
I didn’t say that. But it seems to me, if one is attending college with the expectation that it will assure a good income and a good life, then the major better be rigorous and practical. Or, take liberal arts but be crystal clear on what it will not do for you.
I’m afraid some of the policy makers are still stuck in 1960, when just about any bachelor’s degree assured you of a good job.
Yay, ACH! I’ve been to college (four-year university and community college) and trade school (for bicycle mechanics, of all things).
While I learned useful things in all three places, I think it’s important not to put too much stock in schooling. There are plenty of other places where much education happens. Like, for example, on the Internet.
(1) you should major in a challenging field that will get you a good job; (2) you should get a liberal education to be a well rounded citizen
That is exactly correct. That is what college is. It is a means by which a better, more productive life is to be had.
Roidy
I got my accounting degree back in ‘71 and passed the CPA exam a couple of years later. Accounting was a four year program back then. Now in order to sit for the CPA exam you need a five year “professional” degree.
Five years for an accounting degree is crazy. I guess the extra year is dedicated to learning how to look the other way, and/or how to justify concurring opinions on shady transactions.
Needless to say I am a little bit jaded toward my profession.
she is earning $41,000 a year, or about $10,000 more than the average high school graduate makes
High school graduates make an average of $31,000/year????
Is this recent graduates or lifetime average earnings?
California’s last auto plant shuts its doors
FREMONT, Calif. (AP) - The last car has rolled off the production lines at California’s sole auto plant.
Workers are trickling out of the New United Motor Manufacturing plant in Fremont as they complete their tasks and the plant readies to shut down.
Nearby, job centers have been set up to help the newly unemployed figure out benefits, retraining and other options.
The plant made Toyota Tacoma trucks and Corolla sedans. The last Tacoma rolled off the assembly lines last week, and Corolla production ended Thursday.
The plant began 25 years ago as a joint venture between Toyota Motor Corp. and General Motors Co. GM pulled out last year, and Toyota later announced it would halt production, eliminating about 4,700 jobs.
State officials are pursuing federal grants to help those impacted by the closure.
Would this be considered “Green Shoots?”
State officials are pursuing federal grants to help those impacted by the closure.
‘Tis a mere flesh wound.
Where is that Eddie guy when you need to smack someone upside the head w/ some text?
“eliminating about 4,700 jobs.”
Must be part of the March jobs recovery that we are in! First we eliminate the jobs in the public sector and then add them to the government unemployment payroll.
A recent newspaper article stated the total job loss was closer to 34,000. This included suppliers, vendors, etc. Another stake in the heart of the American economy.
The gub’mint is saying this morning that 160,000 jobs were added and that only 48,000 were census jobs.
http://www.usatoday.com/money/economy/2010-04-02-jobs-march_N.htm
“Still, more Americans said they were working part time even though they preferred full-time work. When they and discouraged workers who have given up searching for jobs are included, the “underemployment” rate ticked up to 16.9% from 16.8%.”
Never fear!
Once they all fall off unemployment, the job losses will “vanish” and everything will be great again!
Thankfully, we won’t be building things in this bold, new eCONomy!
Happy Easter to all!
We’ll be sailing in our annual Easter regatta this weekend, in J-24’s. Great weather, unfortunately very light breeze. But plenty of cold beer and good company!
Enjoy your weekend!
Have a Good Friday!
Is “happy Good Friday” an appropriate greeting? It seems a little off to me given what is remembered on the day.
This is a serious question.
I always wondered why it was called “Good Friday”
DICTIONARY
Good Friday
Definition
1. Friday before Easter: a Christian holy day marking the death of Jesus Christ.Friday before Easter Day.
Since you are going deep on me, how can it be properly called a ‘Good’ Friday if the commemorated death involves barbaric execution?
hypothetically,….good for us, bad for him.
Here’s some info (link to follow):
Why is it Called Good Friday?
Updated: Friday, 02 Apr 2010, 9:01 AM EDT
Published : Friday, 02 Apr 2010, 8:58 AM EDT
(CANVAS STAFF REPORTS) - The most solemn time of Holy Week is Good Friday – the celebration of Jesus Christ’s crucifixion and death. How the day got its name is unclear, though.
Good Friday may be a variation of the phrase “God’s Friday,” according to Gbod.org . God’s name was deemed too sacred for peasants and commoners to utter.
A second possibility is the Christian church in Gaul, where reference was made to ” gute freitag ,” a “good” or “holy” Friday.
The Roman Catholic and Protestant churches hold somber observances where altars are stripped of decorations and priests wear black or red to mourn the death of God’s only begotten son. It is a time for reflection and penance before celebrating Easter Sunday and the Resurrection. Some Catholics fast or forego meat.
Not every denomination uses the name Good Friday . Greek Orthodox call the day Holy and Great Friday; it is Sorrowful Friday in Germany; Long Friday in Norway; and Holy Friday in some Hispanic countries. Another name is Good Friday of the Lord’s Passion.
link
The Roman Catholic and Protestant churches hold somber observances where altars are stripped of decorations and priests wear black or red to mourn the death of God’s only begotten son. It is a time for reflection and penance before celebrating Easter Sunday and the Resurrection. Some Catholics fast or forego meat.
I was raised in the Episcopal church. Recall that Good Friday was a somber day. The joy came on Easter.
My cynical nature tells me that advertisers changed the name to “Good Friday”, as it might be tough to get people excited to go out and buy stuff on “Sorrowful” or “Long” Friday
I’m not to into Good Friday, Easter or any of that religious stuff but as a Maich Waters Strathclyde Celtic Heathen, I can and do praise and worship a Cadbury’s creme filled chocloate egg and a few jelly beans now and then.
Depending on your religion, it may not be that good of a Friday after all:
Abuse furore continues as Catholics observe Easter
By Philip Williams and staff
Updated 45 minutes ago
Pope Benedict has presided over Easter ceremonies, as Catholic leaders defend the 82-year-old over criticism of his handling of the Church’s widening sex abuse scandal.
The Pontiff led a service at St Peter’s Basilica at the Vatican, before attending a traditional procession at Rome’s Colosseum that re-enacted Jesus’s final hours and crucifixion.
Pope Benedict has been beset by allegations he covered up child abuse before he became the Pope - claims vehemently denied by the Vatican.
Several senior Catholics have rallied around the Pontiff in his defence.
…
Have a great time!
Happy Easter wmbz
My invite must have been lost in the mail.
So what’s the going price of a used J-24 these days? Last I checked - a few years ago - they were in the $6K range.
More hard times from CA. A postal worker found his paycheck had been dunned. Unable to figure out why, he contacted the payroll department and found out that he had an unpaid parking ticket and the thirty some dollar ticket now cost him fines plus a fifty dollar assessment for the dunning process. The state, county and cities are going after monies right now; before they would have collected when you renewed your car license or car tags.
This is a very common practice in VA. My sister-in-law works for a treasury office and she tell stories of people who call up and complain that they have no paycheck (her team will work with the delinquent tax payer, but if the tax payer snubs them then all bets are off). She even went after a guys paycheck in Australia. In VA the DMV and all treasurers office talk to each other. If you don’t pay your taxes you can renew your car tags.
I lived ( and worked ) in Virginia very briefly in the early 1970s, after I got out of the armed forces. It was only for about 8-9 months. I think I left in 1971. Anyway, every few years since then the Virginia dept. of revenue has sent me a very threatening letter demanding back taxes for all of the years going back to the time I actually lived there. I call them up and explain to the very suspicious person on the other end that I haven’t been near their state in 5, 10, 15, 20, and now almost 40 years and don’t owe them anything for those years. They have never been happy about it and always leave me with a stern warning that they will be looking into the matter further, I may be subject to legal action at any time, blah blah blah.
I read your post, pmseatac, and thought, “Oh crap!” The county where we lived in Virginia (going on three years ago) keeps sending us personal property tax bills for our cars. We paid it when we lived there, but they can’t seem to read and comprehend the words “we’ve moved out of state”.
he contacted the payroll department and found out that he had an unpaid parking ticket and the thirty some dollar ticket now cost him fines plus a fifty dollar assessment for the dunning process.
There’s a big argument for self-employment.
Bastards.
“Bastards.”
Nah, they’re on our side.
More money taken from tax avoiders means less money needs to be taken from the rest of us.
Speaking “Bastards”, I just received “Inglourious Basterds” via Netflix. Hope it’s as good as most people say.
It is indeed very entertaining - just make sure you have your “suspension of disbelief” hat on.
i had that hat on when i watched 2012 last night…2012 broke my hat.
i had that hat on when i watched 2012 last night…2012 broke my hat.
(Laugh.)
Nah, they’re on our side.
More money taken from tax avoiders means less money needs to be taken from the rest of us.
This was a parking ticket.
I have a real problem with a government that can just reach out and siphon cash out of your account.
What happened to warrants?
Quote: “More money taken from tax avoiders means less money needs to be taken from the rest of us.”
Unfortunately, that’s not true. You are assuming that the amount of money the government wants to take is a fixed total. In reality, there is no upper limit to the amount of wealth the government wants to steal. It’s called an insatiable demand.
Ironically, the more money the government collects, the more money there is to feed special interests, which in turn means a greater demand for money. Feeding the monster more money only increases it’s appetite.
Tax avoiders, as selfish and unlikable as they are, do not increase your tax burden and may in fact decrease it. Of course, if we were all to avoid takes simultaneously, it could kill the monster.
Imagine if everyone saved up a supply of food, water, etc. and then quit their job. All at the same time. Suddenly there is no income tax revenues. I’d bet the gvt would quickly sh1t its pants. All those frivolous special interests would quickly die as the gvt was forced to figure out what was actually necessary and what wasn’t.
Within months the gvt would bow down to whatever demands the people had just to get the money flowing again. Too bad this is just a dream.
My daughter lived in Seattle for a while. Apparently parking is quite difficult over there, as she got (and ignored) five parking tickets. The tickets were originally $25, but by the time they got turned over to collections they were close to $200 (each). I hope she learned her lesson.
Taxation without Representation.
Nobody can tell me that the “crime” of illegal parking is worth a $200 penalty.
Another “unintended consequence” moment for the government.
They used to set fines just below the “it’s not worth my time to fight it” threshold. Now they are getting greedy/desperate.
Expect more people to fight traffic tickets. Especially since all these unemployed and “part-time” workers have a lot more time on their hands.
Well, I did ’splain to her that if she had just put the check in the little envelope and dropped it in the nearest mail box, it would have saved a lot of time, grief and money. Or easier yet, don’t park in a no parking zone. I don’t remember getting a parking ticket in the past 20 years, much less 5 in six months. That is the result of lazyness.
(Chicken Little): Bawk…buck buck buck bawk…
Analysis: Economic Outlook
Holding up the sky
Published: April 1, 2010 at 8:36 AM
By ANTHONY HALL, United Press International
The cessation of a $1.25 trillion U.S. Federal Reserve mortgage-purchasing program has elicited a surprisingly calm reaction from economists.
The sky may not fall, after all, with the Fed concluding a program that is credited with propping up the housing market that had stalled to the point of choking in 2008, The New York Times reported Thursday.
“The potential maelstrom of destruction was out there,” said Professor Susan Wachter at the Wharton School at the University of Pennsylvania.
The potential, pointedly, was a collapse of the housing market as banks backed away from lending with their books clogged with toxic assets they were in the habit of selling quickly as bundled securities.
To measure the freeze, the Times said, the spread between rates for 30-year fixed-rate mortgages and 10-year Treasury notes were twice their normal amount in November of 2008, a month after the government seized mortgage giants Fannie Mae and Freddie Mac.
With the Federal National Mortgage Association and the Federal Home Loan Mortgage Corp. essentially dead in the water, “We were in a deflationary spiral, causing mortgages to go underwater, more foreclosures and a further decline in housing prices,” said Wachter, whose specialties include real estate and finance.
Backed by historically low fund rates, set at zero to 0.25 percent, the purchasing program is credited with keeping mortgage interest rates
at near historic lows. Interest rates frequently fell under 5 percent in the past year.
It also wasn’t long before there were a few Chicken Little types very concerned about what would happen should the program ever cease — a steady patter of left-handed recognition that the program was doing its job. And that has largely abated as the program quietly ended Wednesday.
“Financial markets have improved considerably over the last year, and I am hopeful that mortgages will remain highly affordable even after our purchases cease,” said Janet Yellen, president of the Federal Reserve Bank of San Francisco.
“Any significant run-up in mortgage rates would create risks for a housing recovery,” she said.
That risk is covered, the Fed said, by its willingness to jump back in if a significant glitch shows up — a sharp rise in interest rates, for example. But Lawrence Yun, chief economist at the National Association of Realtors, told the Times 14 words that any Fed policymaker would be happy to hear.
“Just as the Fed is stepping out, private investors appear to be stepping in,” Yun said.
“As long as there are buyers on Wall Street for mortgages, it should have no impact on consumers,” he said.
“Having said that, it’s possible that the mortgage rate could be higher later in the year, but that would be due to macroeconomic forces unrelated to the Fed purchase program,” Yun said.
…
“‘Just as the Fed is stepping out, private investors appear to be stepping in’, Yun said.”
Lawrence Yun is our friend. If he and his NAR can talk up the RE market and bring in private money instead of having the RE market rely on taxpayer money then he is one of the good guys.
Except for one thing (or so): Private money will only be lured in with higher mortgage interest rates, and higher rates would stifle the nascent housing recovery, and a stifling of the housing recovery would mute the jobs recovery.
We can’t allow all that, can we?
“Private money will only be lured in with higher interest rates…”
Don’t forget the lure of buy-now-or-be-priced-out-forever.
They’re not making any more land. The bottom is in. Lock in those low interest rates while you can. This is a once-in-a-lifetime opportunity. Buy low, sell high.
Real estate always goes up, in the long run.
Lock in those low interest rates while you can. ”
Thats funny but I’m thinking of the person buying the Mortgage and if rates go up from here hahaha
Prof, if the private money is waiting for higher interest rates, then why are they stepping in now, when rates are still low? Are they anticipating and/or thinking to demand a rate increase?
If so, then put these guys on CNBC, and get the popcorn! I wanna see Kudlow’s head explode.
“I wanna see Kudlow’s head explode.”
Considering his head is devoid of any matter, it should be a pretty clean scene.
“…then why are they stepping in now, when rates are still low?”
They might anticipate further, as yet unannounced, bailouts, when the shocking news comes to light that higher mortgage interest rates cause lower housing demand and home prices.
Aren’t these loans still guaranteed by the US Government through their propping up of the GSEs?
if so, people are going to be comparing them to treasuries. Will rates rise? Probably. It’s hard to argue that removing a major buyer from any market wouldn’t cause prices to fall (and thus rates rise).
Will rates rise a lot? There is still something like $3+ TRILLION dollars in money markets earning 0%. Perhaps rates won’t rise as much as people expect as some of this money starts getting tired of no return and the stock market doesn’t look like much of a bargain anymore.
Robert Reich’s Blog
Fed in hot water over secret bailouts
The Fed bailed out Bear Stearns without authorization from Congress or informing the public.
The Federal Reserve Building is seen in Washington in this Jan. 14 photo. The Fed is currently in hot water over secret bailouts it made to Bear Stearns and AIG.
By Robert Reich, Guest blogger / April 1, 2010
The Fed has finally came clean. It now admits it bailed out Bear Stearns – taking on tens of billions of dollars of the bank’s bad loans – in order to smooth Bear Stearns’ takeover by JPMorgan Chase. The secret Fed bailout came months before Congress authorized the government to spend up to $700 billion of taxpayer dollars bailing out the banks, even months before Lehman Brothers collapsed. The Fed also took on billions of dollars worth of AIG securities, also before the official government-sanctioned bailout.
The losses from those deals still total tens of billions, and taxpayers are ultimately on the hook. But the public never knew. There was no congressional oversight. It was all done behind closed doors. And the New York Fed – then run by Tim Geithner – was very much in the center of the action.
This raises three issues.
First, only Congress is supposed to risk taxpayer dollars. The Fed is not part of the legislative branch. Its secret deals, announced almost two years after they were done, violate the democratic process, if not the Constitution itself. Thomas Jefferson put a stop to Alexander Hamilton’s idea of a powerful central bank out of fear it would be unaccountable to the public. The Fed has just proven Jefferson’s point.
Second, if the Fed can secretly bail out big banks, the problem of “moral hazard” – bankers taking irresponsible risks because they know they’ll be rescued – is far greater than anyone assumed after Congress and the Bush and Obama administrations bailed out the banks. Big banks will always be too big to fail because they know the Fed will secretly back them up if they get into trouble, even if Congress won’t do it openly.
Third, the announcement throws a monkey wrench into the financial reform bill now on Capitol Hill, which gives the Fed additional authority by, for example, creating a consumer protection bureau inside it. Only yesterday, Sen. Jim DeMint (R-S.C.) blasted the Dodd bill for expanding the Fed’s authority “even as it remains shrouded in secrecy.”
…
Ding ding ding! Didn’t Ben and HBB anticipate this years ago? Treasury and Fed were going to do an end-run bailout right around Congress, knowing that Congress would never act in time (probably not at all) to save the banks during that crisis?
And honestly, if this gets sufficient press, it will be the end of Larry and Timmy.
“And honestly, if this gets sufficient press, it will be the end of Larry and Timmy.”
I don’t see that happening. Hasn’t this story pretty much been an open secret all along? Besides, these guys operate above the rule of law, as evidenced by the lack of outrage over this breaking story. It has been greeted in the MSM by one giant, collective shrug of the shoulders.
Agree with PB
The average American will only get mad at 3 things.
1. Unemployment
2. Rapid inflation
Unlikely that any of our bought and paid for gov officials will be angered by this.
3. People who are bad at counting?
4. American Idol being canceled?
Laws are for the little people.
Nothing will be done about anything until some outside event forces change.
This being the same Robert Reich who let the ‘cat-out-of-the-bag’ when he let slip during congressional testimony that the stimulus monies weren’t meant for “white male construction workers”?
If you think this is a figment of my imagination look it up on YouTube.
If you are going to “let the cat out of the bag” you have to be one of the people who saw the cat go into the bag. Reich is not part of this administration. If he was testifying then it was to provide analysis as a former Labor Secretary. What he said is what he saw based on what the package was funding. I agree that it wasn’t mostly set up to help white male construction workers. It was mostly set up to help white male cops and firefighters plus teachers and a whole slew of other state workers of either gender and many enthnicities.
What do the Obamanites have against white male construction workers?
I posted the YT link. It should post soon.
P-Bear,
I didn’t say Obamanites’ have anything against WMCW’s. But, if one of his trolls will say this publicly, one can only imagine what is said behind closed doors.
If you aren’t racist, then RR’s words would never cross your lips.
Reverse the colors in this example. There would have been a political firestorm.
Pardon my diversion from RE discussion. This happens to be a hot button issue for me.
If you aren’t racist, then RR’s words would never cross your lips.
Reverse the colors in this example. There would have been a political firestorm.
Pardon my diversion from RE discussion. This happens to be a hot button issue for me.
White men oppressed again!
Yawn.
http://www.youtube.com/watch?v=duQDVTczGbA
Please watch this video. You’ll hit the money shot very quickly.
“Third, the announcement throws a monkey wrench into the financial reform bill now on Capitol Hill, which gives the Fed additional authority by, for example, creating a consumer protection bureau inside it.”
I see the relationship between the The Federal Reserve Bank and the banks as one of parent and children. How can we ever trust that the Fed isn’t going to put the interest of the banks ahead of consumers? Giving the Fed more power only serves to transfer more power and influence to the financial institutions.
“Giving the Fed more power only serves to transfer more power and influence to the financial institutions.”
That’s how it looks to me.
Yes. Isn’t this fairly explicit in fact - that the Fed represents the banks, and therefore couldn’t act as a valid check on the banks?
Yes. Ergo if we want to maintain the U.S. Constitutional system of checks and balances in government, the Fed needs an independent agency to keep their rogue actions in check and to hold them subject to a rule of law.
Isn’t this fairly obvious?
The Fed has finally came clean. It now admits it bailed out Bear Stearns – taking on tens of billions of dollars of the bank’s bad loans – in order to smooth Bear Stearns’ takeover by JPMorgan Chase. The secret Fed bailout came months before Congress authorized the government to spend up to $700 billion of taxpayer dollars bailing out the banks, even months before Lehman Brothers collapsed.
Isn’t he forgetting about $30 Billion specifically authorized (as such) for the JPM/BS deal in March 2008 - to allow JPM to offload the bad debt? Not that there wasn’t additional backdoor money from the Fed, but it’s odd that he doesn’t mention this front door money that was independent and long before the TARP, and wasn’t a secret.
The Fed has finally come partly clean about this particular thing inconveniently in the news. What about the other 100,000 crimes they have and continue to perpetrate against the American public? Secrecy, misinformation, graft and corruption hide so many profitable schemes and scams.
Start putting some of their chief conspirators on trial under threat of prison, and you would be amazed how many dirty little secrets will come to light.
I think there is a difference with FDIC money verses taxpayer bail out
money . The thing is they were trying to make these investment firms qualify for bail out money by having major banks merge with
investment houses . All those big mergers were a joke .but it allowed for more funds to be injected .
Legal
N.Y. Fed Clarifies Toxic Bear and A.I.G. Assets
April 1, 2010, 4:56 am
The New York Federal Reserve made new disclosures late Wednesday about the assets of Bear Stearns and American International Group that it acquired in the course of the subprime mortgage and financial crises.
The assets went into a three-part portfolio called Maiden Lane, the first taking on toxic assets from Bear Stearns as part of Bear’s takeover by JPMorgan, and the second two parts holding assets acquired in the government’s rescue of A.I.G. as part of the restructuring of the vast insurer.
The revelations come after a long campaign on the part of certain members of Congress and the press to make further details of the government crisis measures known, and are part of a gradual opening on the part of the Fed over what happened during the meltdown, some details of which it fought to keep secret as the bailouts unfolded.
“The Federal Reserve recognizes the importance of transparency to its financial stability efforts and will continue to review disclosure practices with the goal of making additional information publicly available when possible,” the Fed said.
…
Casual observation: This ain’t over yet.
Fed Reveals Bear Stearns Assets It Swallowed in Firm’s Rescue
By Craig Torres, Bob Ivry and Scott Lanman
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.
The Fed’s vehicle known as Maiden Lane LLC has securities backed by mortgages from lenders including Washington Mutual Inc. and Countrywide Financial Corp., loans that were made with limited borrower documentation. More than $1 billion of them are backed by “jumbo” mortgages written by Thornburg Mortgage Inc., which now carry the lowest investment-grade rating. Jumbo loans were larger than government-sponsored mortgage buyers such as Fannie Mae could finance — $417,000 at the time.
“The Fed absorbed that risk on its balance sheet and is now seen to be holding problematic, legacy assets,” said Vincent Reinhart, a resident scholar at the American Enterprise Institute in Washington who was the central bank’s monetary- affairs director from 2001 to 2007. “There is both an impairment to its balance sheet and its reputation.”
The Bear Stearns deal marked a turning point in the financial crisis for the Fed. By putting taxpayers at risk in financing the rescue, the central bank was engaging in fiscal policy, normally the domain of Congress and the U.S. Treasury, said Marvin Goodfriend, a former Richmond Fed policy adviser who is now an economist at Carnegie Mellon University in Pittsburgh.
…
the central bank was engaging in fiscal policy
And this is new… how?
Well, this revelation doesn’t surprise me about the Feds acts leading up to Tarp . The other question is the Feds breach of policy in taking bad paper for those billions in loans leading up to the Tarp .I was saying all along that it was unconstitutional what they were doing and
I was trying to figure out how they were getting away with it . Some people could say that this is a treason breach by the Feds and the Treasury .
IMO ,these big Investment firms/Insurance Co. were in a pickle at the time and in comes Hank Paulson with the Feds to save the day ,never mind getting permission from Congress . This explains why Paulson immediately put the money of Tarp toward capital injections rather than buying toxic assets as proposed .For God Sakes they had already made billions in short term loans and bail outs on that junk paper leading up to Tarp .
Can’t imagine that this order of events won’t get more media
play .
Weekend Edition
April 2 - 4, 2010
The Guys Who Got It Wrong
Obama’s Economic Brain Trust
By PAM MARTENS
America is held out to the world as a meritocracy. You work hard, you play by the rules, you make sound judgment calls, you succeed. That’s the American dream. Right? That’s what the President of the United States should exemplify in his actions. Right?
Then how does one explain the individuals who represent the abject failures of financial and regulatory theory chosen by the President to dominate the dialogue on financial reform. How does one reconcile President Obama appointing Lawrence Summers as head of the National Economic Council after Mr. Summers played a central role in rolling back the safeguards that led to the current financial crisis.
This is what Mr. Summers had to say at the November 12, 1999 signing ceremony for the Gramm-Leach-Bliley Act, the draconian legislation that repealed the Glass-Steagall Act and allowed commercial banks holding insured deposits to merge with investment banks, brokerage firms and insurance companies: the very same combinations that led to the 1929 stock market crash and ensuing Great Depression:
“Let me welcome you all here today for the signing of this historic legislation. With this bill, the American financial system takes a major step forward towards the 21st century, one that will benefit American consumers, business, and the national economy for many years to come…I believe we have all found the right framework for America’s future financial system.”
Mr. Summers was wrong. This was not the “framework for America’s future” but the framework for epic financial collapse. Why isn’t Mr. Summers in an unemployment line along with the millions of Americans his bad judgment call put out of work.
…
Pam’s piece never mentions gawd’s chosen children.
Obama’s praise and reliance on Larry Summers AKA MR. Derivatives, is more than a little concerning.
With the Derivatives Market staying in the Quadrillion Dollar Range (1,000 Trillion), I still feel we should all be a little concerned.
My question is; What if the Banksters, Traders, Wall Street Boys, etc.. have priced risk loss’s at 3% and it turns out to be 5%. Can we the Tax Payer be on the hook for another 30 Trillion Dollars?
And if so, are we even capable of covering it?
Just Happy Thoughts for Good Friday.
Gramm-Leach-Bliley Act, the draconian legislation that repealed the Glass-Steagall Act
Once again I must correct the record, for Gramm-Leach-Bliley only repealed the part of Glass-Steagall that related to risk control, not the part that created the NEED for risk control and the taxpayer liability, i.e. the FDIC! Had the ENTIRE Glass-Steagall act been repealed, we would not have had all these problems with TBTF and the consequent worldwide crisis.
I also note the incredible distortion in referring to the repeal of a law as “draconian”– normally it’s the law itself that is called draconian.
I also note the incredible distortion in referring to the repeal of a law as “draconian”– normally it’s the law itself that is called draconian.
Yeah it seems kind of stupid to call it that. People are starting to mistakenly use “Draconian” when they mean just a more general “bad”. In this case the author uses it completely the wrong way, since her reasoning of the “bad” is that it wasn’t harsh enough, whereas Draconian means too harsh.
Still, the ability for Investment Banks to cross over into the Commercial Bank arena allowed the Leverage which enabled the Greed.
The “Gramm-Leach-Bliley Act” is one of the main factors of the worldwide Liquidity Bubble that helped create the Housing Bubble.
This legislation was signed into law by Democratic President Bill Clinton on November 12, 1999.
This legislation was created out of nothing by GOP lawmaker Phil Gramm.
It was pretty much an equal play by Dems and Pubs. Rubin and Summers both pushed it hard, with Rubin and his guys actually composing the bill.
The fact that Clinton signed it was somewhat irrelevant since it passed by a veto-proof margin. However he didn’t really seem to protest either. It was pretty widely regarded at the time as a good thing, at least in political circles. Not much was made about it publicly, that I’m aware of anyhow. Some fanfare, but not much.
Why isn’t Mr. Summers in an unemployment line along with the millions of Americans his bad judgment call put out of work.
Because his current employer - Barack Obama - is nothing more than “more of the same”, perhaps?
Is it time for more bubbling crude again already? How many oil bubbles can you have in the short span of one financial crisis?
MarketWatch First Take
April 1, 2010, 3:58 p.m. EDT
Rites of spring
Commentary: Rising oil prices signal return of speculators
Rebound is real — but on fragile footing
Speculators hear the call of crude
By MarketWatch
SAN FRANCISCO (MarketWatch) — It’s spring. And, like the swallows’ trek to San Juan Capistrano, speculators appear to be flocking back into the energy market.
Crude-oil prices touched $85 a barrel Thursday, kicking off the beginning of the second quarter right where they left off the first. The May light-crude futures contract traded on the New York Mercantile Exchange is up 8% in a month, with most of the gains made in the past week. Read about rising oil prices.
…
Ironically, the swallows don’t come back to San Juan Capistrano anymore, thanks to all the housing developments that “swallowed” up their old nesting and feeding sites.
Are you implying that with no more swallows, it sucks?
Be sure to tip your waiter!
Oil that is economically suitable for extraction and refining is finite. The rise is oil over the past ten years reflects the increasing cost of production, and that’s exactly what we’re seeing today with crude consistently at Katrina levels and beyond.
Oil = Cash
market pulse
April 2, 2010, 8:00 a.m. EDT
Treasurys slump in thin trading before payrolls
NEW YORK (MarketWatch) — Treasury prices came under slightly pressure in the European and Asian trading hours, with a sense of caution before the U.S. payrolls report at 8:30 a.m. Eastern, expected to show a big improvement in the labor market. Analysts also noted very little volume as most markets were closed for Good Friday. Total overnight volume was 22% of the 10-day moving average, according to RBS Securities. Most of European markets are closed for Good Friday holiday, as are U.S. equity and commodity markets. The bond market is expected to close at noon Eastern. Yields on 10-year notes (UST10Y 3.87, +0.05, +1.25%) , which move inversely to prices, rose 1 basis point to 3.87%.
Ran across this article from the local press, we are now offering asylum to foreign Banksters. Apparently the Irish citizenry are less forgiving than their American counterparts and are bringing the heat. Perhaps a tact we might want to consider?
Former Anglo Irish Bank CEO David Drumm, pursued by media in his home country, is living quietly in Chatham, the Cape Cod Times reports.
The paper says local police have not been asked about Drumm by police in Ireland, where Drumm has come under considerable fire.
A TOP executive in scandal-hit Anglo Irish Bank last night accused its former senior managers of thinking they “could walk on water”, as the disgraced lender announced the biggest corporate loss - €12.7bn - in Irish history.
The state-owned lender’s new chief financial officer, Maarten van Eden, said: “If you get lucky for a long period of time, you start to think the rules don’t apply to you. These guys thought they could walk on water. They weren’t smart, they were lucky.”
It also emerged that Anglo paid top management €19m in the 15 months to the end of last year, including €7m in salaries and €1m in directors’ fees.
“Controversy over the billions spent on bailing out Anglo Irish broke out in the Irish parliament today with the opposition accusing Brian Cowen, the taoiseach, of “economic treason” for bailing out the banks to protect government cronies”
http://www.independent.ie/business/irish/exanglo-bosses-thought-they-could-walk-on-water-2120411.html
“…we are now offering asylum to foreign Banksters.”
I guess they weren’t getting compensated well enough back home, so they came over here where banker pay is unlimited and backed by Uncle Sam’s bailout pledge?
I almost wish some country would just allow their economy to crash “naturally”, so we could all see the result.
The Financial Times
Watch out for sovereign debt black holes
By David Roche and Bob McKee
Published: March 31 2010 17:51 | Last updated: March 31 2010 17:51
Will the next step in the credit crisis centre on sovereign debt? And what would that mean?
My co-author and I argue that high levels of sovereign debt will, at best, mean significantly below-trend economic growth over the rest of this decade. At worst, there will be a series of sovereign debt defaults that will ricochet through some leading economies and plunge the global economy back into recession.
…
It has been possible in the past for countries to run unsustainable fiscal arithmetic for lengthy periods. Italy did for eons. Japan has been at it for a decade. But to achieve that, a country must have high domestic savings that citizens want to keep at home in “safe” investments. The majority of government debt must be owned by domestic investors, not by foreigners. And it needs a fat excess of gross domestic savings over investment needs, which yields a current account surplus. This keeps the currency strong and makes low domestic returns look good relative to those of foreign assets.
None of the big credit crisis-stricken states has any of these strengths today. Even Japan now has a household savings rate below the inadequate level of the US. None can fund their debts and deficits domestically on a durable basis. They will all have to sate their appetite for funding at the same trough of international savings, which will reprice them to reflect their true nature as risky assets. This will happen as soon as central banks stop monetising government debt by buying their bonds and when domestic savers take fright. Creating new sovereign borrowing to finance another thriftless consumer binge and more asset bubbles is no way to achieve sustainable growth. Unless immediately addressed, the excess of sovereign debt will be the next chapter in the credit crisis.
Apr 2, 2008
Page 1 of 5
THE SHAPE OF US POPULISM, Part 4
A panic-stricken Federal Reserve
By Henry C K Liu
(Part 1: A rich free-market legacy - for some)
(Part 2: Long-term effects of the Civil War)
(Part 3: The progressive era)
The recent moves by the US Federal Reserve in the months following the credit market seizure of August 2007 to inject liquidity into a failed credit market and to bail out distressed banks and brokerage houses that had been caught holding securities of dubious market value are looking more like fixes for drug addicts in advanced stages of abuse.
So far, many of the Fed’s actions taken to deal with the credit crisis have been self neutralizing, such as pushing down short-term interest rates to try to save wayward institutions addicted to fantastic returns from highly leveraged speculation, only to cause the dollar to free fall, thus causing dollar interest rates and commodity prices, including food and energy, to rise.
…
So far, many of the Fed’s actions taken to deal with the credit crisis have been self neutralizing, such as pushing down short-term interest rates to try to save wayward institutions addicted to fantastic returns from highly leveraged speculation, only to cause the dollar to free fall, thus causing dollar interest rates and commodity prices, including food and energy, to rise.
Nope they are having the intended effect of handing money to the elite while stripping wealth from the bottom 95%.
Is the UAW Booster Club is gonna need a better plan of attack?
Unintended acceleration?
Discounts drive auto sales rise, Toyota surge April 1, 2010 9:49 PM ET
All Thomson Reuters news DETROIT (Reuters) - U.S. auto sales jumped to a seven-month high in March led by a 41 percent surge at Toyota Motor Corp after the Japanese automaker offered the steepest discounts in its history to win back sales lost during its recent safety crisis.
Jess remebuh, a closely watched pot never boils.
* The Wall Street Journal
* CREDIT MARKETS
* APRIL 2, 2010
Mortgage Risk Premiums Widen
Quick Move After Fed’s Exit Could Draw Buyers Next Week
By PRABHA NATARAJAN
Mortgage-backed securities stumbled on Thursday as the market struggled to adjust to the absence of Federal Reserve buying.
Risk premiums on securities sold by Fannie Mae, Freddie Mac and Ginnie Mae widened 0.4 percentage points compared with Treasurys to 1.34 percentage points. They have widened 0.13 percentage points this week, and are heading toward their widest levels in five months. Investors had expected premiums to widen by 0.15 to 0.20 percentage points once the Fed exited the market, but at a more gradual pace. The speedy move raises the possibility that buyers could return to the market as early as next week.
“A lot of people are observing what’s going to happen now that the Fed is actually out,” said Chad Stephens, portfolio manager of a $1 billion government and agency fund at StableRiver Capital Management in Atlanta, Ga. He’s among those on the sidelines: “I would rather wait it out,” he said.
The central bank Wednesday completed its $1.25 trillion purchase program of mortgage securities guaranteed by Fannie, Freddie and Ginnie Mae. The Federal Reserve Bank of New York said it had bought $6.074 billion of the bonds in its final week of purchases.
“The mortgage bond market is in search of equilibrium,” said Chris Aherns, strategist with UBS.
In the past few months, risk premiums have traded within a range of 1.21 to 1.40 points.
“Expectations are that (risk premiums) will widen towards the higher end of that range and then start to attract interest,” Mr. Aherns said.
…
Oops — I misspelled ‘remembuh’…
The Wall Street Journal
U.S. Payrolls Rise; Jobless Rate at 9.7%
U.S. employers added 162,000 jobs in March, the largest gain since 2007. But nearly one-third came from temporary hiring for the Census. The unemployment rate was steady at 9.7%.
*
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* The Wall Street Journal
* APRIL 2, 2010, 8:59 A.M. ET
Employers Added Most Jobs in Three Years in March
* Article
* Comments (11)
more in Economy »
BY LUCA DI LEO AND JEFF BATER
WASHINGTON—U.S. employers created jobs at the fastest pace in three years in March, but nearly one-third came from temporary hiring for the Census, indicating the labor market has still some way to go to recover.
The Labor Department said in a report Friday that nonfarm payrolls rose by 162,000 in March, the largest gain since March 2007. That compared to a revised 14,000 drop in February, when the number was likely depressed by the blizzards that hit the East Coast.
Economists polled by Dow Jones Newswires were expecting payrolls to rise by an even higher 200,000.
…
200,000 - 162,000 = 38,000 less jobs than expected…
200,000 - 162,000 + 54,000 temp census jobs = 92,000 less jobs than expected (unless they factored the temp census jobs into their prediction)
They did factor 100K temp census workers into the 200 count.
Therefore we are 162K - 48K = 14K ahead of expectations.
Even considering the temporary census jobs, that’s not a bad number considering just how bad the jobs numbers have been for the past couple of years. This also seems consistent with the traffic increases I’ve noted during commute periods. Those increases are very modest, but still noticeable. Still nothing near as bad as during the middle portion of the past decade.
This seems to be a steady, if not stable, recovery for a year or two. My expectation is that global peak oil and associated price spikes and possible supply disruptions will end any modest recovery in the next 2 to 3 years. Whatever economic “good” happens in the near term won’t last. There are still too many unaddressed structural issues that will be exposed with the next economic shock.
Tic-tock tic-tock, clock is ticking much too fast!
Tic tock tic-tock, say how can you make it last?
First-time home buyer tax credit clock ticking
by Kim Miller
Home buyers hoping to cash in on the up to $8,000 first-time home buyer tax credit are running out of time.
To qualify for the money, a sales contract must be signed by April 30 and closed by June 30. The credit, originally scheduled to sunset Dec. 1, was extended in the fall and expanded to include some current homeowners who can earn up to $6,500 when buying a new residence.
About 128,500 people in Florida have already collected about $936 million in first-time home buyer tax credits, according to Treasury Department statistics released today.
Nationwide, more than 1.8 million taxpayers have collected $12.6 billion in tax credits to buy their new home.
Personally, I believe the BIGGEST impact of the $8000 credit was allowing people to buy with NO MONEY DOWN. I believe prices will fall far more than $8000 once this ridiculous credit expires (assuming it does).
As always, time will tell.
When are stated income loans coming back?
Soon, but they’ll put some other spin on them, such as the “recent income verification act” or something, where you can count any income in the past few years as your income going forward.
Whatever it takes to reinflate the Bubble and get unqualified buyers into houses that they can later lose. More fees for the bankers and realtors!
I discussed the $8000 housing tax fraud with my real-turd yesterday. Her assertion is that they’ve run out of marginal buyers the credit brought to the market place and it’s expiration won’t mean anything because “the market is stablizing”. I asked her to define “stabilizing”.
Dead silence.
As of three weeks ago, there were two offers on a shack I’m interested in (at the correct price). I was informed yesterday the two offers were rejected (both roughly 75% of asking). Elusively, my realtor suggested the offers were rejected due to contingencies and neither were cash buyers. In other words, tire kickers and empty pockets brought to the marketplace by the $8000 housing tax credit fraud.
We need more fraud to move the economy forward, or so I’m told. More fake bidders, fake money, fake deals to fuel our fake economy.
“Stabilizing” normally (around here) means “returning to the good old days of double digit price increase per year while salaries go nowhere.” Yep, we need to get back to that!?
Yeah… “stabilizing” means about as much as “plateau” and “soft landing”.
Offer 70% payable in cash on 1 MAY.
Oddly enough, I didn’t figure percent wise but you were close. It comes out to 62.5% of ask.
I’m with you, but don’t fear, they’ll come up with another carrot, and the sheeples with bite.
I met a 24 yr old yesterday, who bought a condo to take advantage of the $8K & $10K (Ca scam), and after she did her bragging, I informed her it only erases her state liability for 3 years, and the difference isn’t rebated in a check, it evaporates. I sent her to the Franchise Tax Board website to read it for herself. She had purchased furniture with $ that isn’t coming her way.She trusted her “Business Manager” and her UHS. I think she was an actress. I met her close to CBS Studios in Studio City.”Business Manager” is code for the entertainment biz around So Ca.
Liquidity traps…
Stock market traps…
RE traps…
Credit traps…
Student loan traps…
Cable TV traps…
Cell phone traps…
Traps of all kinds on and on…
It’s like an uncharted minefield out there for a poor hard working American mouse weighed down with a couple of dollars in his wallet.
SNAP !!
You forgot the inflation trap for needs.
It’s all good in Klownifornia though.
When the Fed Tax Credit ends the State $10,000 Tax Credit Kicks in. We are sooooooooo Lucky. Not like were broke or anything.
/Sarcasm off
Are they going to pay the $10K tax credit by IOUs?
eastcoaster
Since it really isn’t a $10K home purchase tax credit for most, whatever tax revenue reduction there is, will just go on our credit card of red ink. It was truly an idiotic idea. What else is new.
(see my above post on the misrepresented $10K credit.) Since I email the tax board, and told them about transparency, the renewal is much more defined on their website.
I think this is fair: the money doesn’t exist, the house will fall apart, and the economy is blowing away in the dust anyway. Just make up numbers and call it a recovery.
PB, the glass is 81% full from my perspective in this case, not 19% empty!
Meanwhile I’m seeing more firings at work. Eventually we will have too many empty offices that they will give up lease in one of the corporate offices here out west.
Am I the only one here feeling like this fake recovery is totally rigged?
No, you are not.
no
cool chart.I am just trying to figure out the long term ramifications from all the govt intervention.Basically all that has happeened is the govt did a huge money bomb and bought all the bogus mortgage assets from banks.you have the fed buying treasuries from the govt, wtf?
If it were as simple as printing money the whole world would be rich right?
does anyone have some good knowledge of the ramifications of the money bomb?I keep hearing about inflation but I’m not seeing that.
I am just trying to figure out the long term ramifications from all the govt intervention.
Join the crowd. Everyone’s got a different view.
My view is that the intervention is plugging holes in the dike, and the expense of forgoing the effort to actually fix the dike itself and/or the drainage system that the dike uses. The government has lots of tape* to plug the holes, but is spending all its effort to plug the holes from the back, when really the dike just needs to be rebuilt. As it is - the water still builds up within the dike, and will eventually burst through, since the power of tape has its limits.
*At first I was going to say “duct tape” here, but my view is that duct tape really can cure all ills, so that would’ve been a bad analogy. Masking tape is probably appropriate here.
I kind of see it as them plugging the holes with taxpayers while herding more taxpayers below the dike. Then, when it fails, the taxpayers will be washed out to see. The ultra wealthy will survive thanks to our brave sacrifice.
Then, when it fails, the taxpayers will be washed out to see. The ultra wealthy will survive thanks to our brave sacrifice.
Sounds a lot like the Titanic.
(Though probably the richest man on the Titanic - John Jacob Astor IV - did die on the Titanic - apparently killed by the first falling smokestack, after dropping his wife off in one of the lifeboats - women and children first.)
OK - question. I had thought that John Jacob Astor (one of them) was the founder of the Astor meat company - you know, all that gross prepackaged stuff that I *thought* you could still get. I thought I remember from way back in like middle school that Astor made his fortune (or at least part of it) by inventing, or at least using, refrigerated railroad car technology for transporting his meats across the country.
However in doing google and Wikipedia searches - I can’t find *any* information on Astor meats! WTF - am I missing something? Please tell me I’m not imagining this!
The Mythbusters tried to fix a hole in a boat with duct tape. When they did it on a boat that was already in the water and sinking, it worked for a while, until it didn’t. Worked for a lot longer when the did the repair on land before putting the boat in the water.
When they did it on a boat that was already in the water and sinking, it worked for a while, until it didn’t.
They just didn’t use enough, that’s all.
http://www.thenation.com/doc/20100322/galbraith
James Galbraith, son of John K. Galbraith wrote the above piece in the Nation a couple of weeks ago. The gist is that Soverign deficits don’t matter so long as the soverign entity can continue to print money that is accepted in international trade, which he believes the US can do for the forseeable future. I have to believe that this is true only within some relevant range, but who knows. At any rate the article is worth reading, if for no other reason than it give a good insight into world monetary movement.
“The gist is that sovereign deficits don’t matter so long as the sovereign entity can continue to print money that is accepted in international trade, which he believes the US can do for the foreseeable future.”
Tautologically speaking, that sounds right. But this is not really a qualitative (either/or), but rather a quantitative issue: The dollar is sure to continue as a medium of international trade for the foreseeable future, but the purchasing power could be severely impacted by excessive use of the virtual printing press.
I wonder if the Brits thought the same thing about the Sterling, pre-1900’s? I think so.
It’s worth noting that the dollar’s standing is very much not a static thing.
Does the fact that the fed debt projection line falls below zero (YoY change) imply that the CBO is expecting a surplus in 2013? If so, they are sipping some spiked Kool-Aid.
No, not expecting a surplus. Keep in mind this is relative to GDP growth, which is projected at 4+% every year. In 2013 in fact their projection is for 6% GDP growth, with debt growing at 5%.
Amazing chart. How will Uncle Sam unwind his outsized 2009 mortgage equity withdrawal? Or will he forever more carry a much higher debt burden going forward?
Given our huge $333B of new debt in March, here’s an updated chart. Looks like we’re already exceeding expectations.
Has the rate of change in outstanding mortgage debt ever before gone negative, as in 2008-2009 — especially the second half of 2009, after Uncle Sam’s debt binge topped off and began receding (at least in first derivative terms)? I am thinking that portends lower home prices to come, but I have to remind myself that I am a housing bear, so I may be overly pessimistic here…
Has the rate of change in outstanding mortgage debt ever before gone negative, as in 2008-2009 — especially the second half of 2009, after Uncle Sam’s debt binge topped off and began receding (at least in first derivative terms)? I am thinking that portends lower home prices to come, but I have to remind myself that I am a housing bear, so I may be overly pessimistic here…
In nominal terms - since the early 1900’s the only times it’s gone negative have been:
- 1931-1938
- 1942-1946
- 2008-???
In GDP-adjusted terms it also had three flat/slight decline periods from 1965-1997.
Other than that - it’s been to-the-moon-Alice!
Looking at the chart we should have a pull back like the 30’s. Having said that it did have a minor head fake in the down perido fo the 30’s. Weren’t the early 30’s the previous bubble period?
The 30’s period is odd mainly because GDP swung so wildly then. E.g. from 1929-1932 the amount of debt was flat, it’s just that the GDP plummeted. The 1932-1937 period was somewhat of a pullback in nominal debt, with GDP rising some, but then the level of debt after that was fairly flat - the big 1940-1945 drop was mostly due to GDP skyrocketing due to WWII (over 40% of GDP was military).
In the end though between 1930 and 1945 mortgage debt did drop from $27B to $19B. While it’d be nice if we had a similar drop this time - don’t count on it. That $8B drop basically consisted of two components:
1. First half was result of the crash; a big drop of about 20% in the first 7 years, with the bulk of that being right after the peak. Well - this time almost 3 years after the peak (2008-2010) the drop is only 3.5%. Total drop remains to be seen, but I’m guessing based on the current “rebound” that we’re hitting a bottom in mortgage debt.
2. Second half was the result of WWII - people dying and stuff. Not sure we really want that.
NO.
lol
The fake recovery since 1980, right?
Three decades of the credit crisis, which was preceded by massive government entitlement programs and the Vietnam War from the 1960s to mid-70s.
Am I the only one who feels like they’re reading a Reagan era Pravda when looking at almost any daily rag anymore?
I suppose you can make any economy look better as long as you’re able to throw unlimited amounts of money at it. I mean you can throw a hell of a party with a trillion dollars. The problem is the that trillions are borrowed and that this type of borrowing is not sustainable for very long. Unless our gubermint comes to its financial senses very soon we will face financial chaos similar to Greece. And this time its going to be too big to bail.
Mike the money is borrowed from ourselves.How the hell do you borrow money from yourself?The fed is buying US treasuries from the US treasury.This is the most bogus thing I have ever heard of.So can we create more govt agencies with unlimited access to electronic money so they can keep loaning money to the govt?
Does anyone have a breakdown of who is actually loaning us money via buying treasuries?
This sure seems like a ponzi scheme to me.The economy is in real trouble.We cannot have an economy based on stock market gains and housing equity.
Mike the money is borrowed from ourselves.How the hell do you borrow money from yourself?The fed is buying US treasuries from the US treasury.
….cool, a perpetual motion/money machine.
When you look at how much money was wasted on these bail outs ,it would of been better to lets these entities fail ,the losses would of been spread out and Congress could of just given restitution to harmed parties . At the very least bail outs should of only gone to regulated banks if the objective was to keep a banking system operative . They should of honored FDIC ,and AIG and others should of refused to pay on the CDS because they were misrepresented on the quality and fraud contained in the bundles .The bail outs must of been designed by Goldmans ,oh I forgot ,one of their guys was the Treasury Sec. at the time .
Does anyone have a breakdown of who is actually loaning us money via buying treasuries?
It’s published in the Fed’s flow of funds report, at least the “public debt” part. Roughly (as of December):
Household:
Savings bonds: $191B
Other*: $604B
Business: $100B
State and local gov: $530B
International: $3713B
Fed: $776B
Banks: $185B
Insurance, retirement funds: $740B
Money markets etc.: $900B
Total (public debt) = $7781B
The rest of the $12.3T is in SS, Medicare, pension trust funds.
* This is the big “miscellaneous” category that’s grown by leaps and bounds over the last year, spawning various conjecture.
P.S. the “Savings bonds” and “Other” entries are supposed but sub-entries under “Household”. Wordpress doesn’t do spacing well though.
If the FED is buying the treasuries via freshly printed money I wouldn’t call it borrowed. Being PC is called Quantitative Easing ie. printing money. The kind of stuff Argentina and Zimbabwe are good in.
Italy and Japan borrowed money internally from their own population’s savings. This type of borrowing has been known to be sustainable much longer than borrowing from foreigners.
It seems that a large part of our current “borrowed” money comes from foreigners and the printing press….not good.
You sir, have not been drinking enough Kool-Aid.
Count me as another Arizonan who agrees with the Dude.
Mon frere,
Alone you are not.
But plausible explanations may abound, if we stop and listen for them…
(…cue the crickets…)
Treasury yields up big today, prices down. The post-2008 treasury bubble appears to be popping.
Ruh-roh for the housing market.
No, no — you have it all wrong (according to certain naysayers):
1. The end of the Fed’s MBS purchase program will have no effect on interest rates.
2. Higher interest rates (especially mortgage rates) will have no effect on home prices.
3. Basically, everything that happens from this point forward will cease obeying what were previously misconstrued as fundamental laws of economics.
Where is the fed getting all the money to buy these mbs?
Can we create another fed agency to buy more bad debts with electronic money?
I heard a realtor say that prices can only go up from here.Buy now to get the 8k tax credit.They aint making anymore land.Havent we heard this before?
More dumb questions:
1) Did the Fed have a legal mandate to buy those toxic MBS?
2) Does it matter whether they did, given that they appear to operate above any rule of law?
3) Who holds the Fed accountable for their actions?
The Fed actually bought mortgage backed bonds which were guaranteed by fannie/freddie.
And of course the Fed is allowed to buy and sell bonds. That’s how it regulates the money supply in it’s attempts to smooth out ripples in the economy… it does it all the time.
It buys and sells bonds for a living.
PB …..What are they going to claim ,ignorances of the law in their breaches of usurping Congress ,or will they claim their acts fall under emergency measures . Wouldn’t there be something that constitutes treason on the part of the Feds or Treasury ?
Joey ,but they are under mandate to only buy high grade securities and the Feds are under mandate to ask permission from Congress for outright bail outs .
Wiz.. The Fed was created as a means to regulate the economy. It has certain goals. It is expected to take whatever action is needed to achieve those goals.
Far as I know, the Fed is not limited by any mandate which prevents them from taking any action they deem necessary to insure we have high employment.. stable prices.. reasonable interest rates.. measured, controlled economic growth.. and a generally stable economy.
—–
Suppose there was really high unemployment and the Fed decides the quickest and easiest way to fix it was if the Fed buys a lot of train locomotives. (I’m just making this up.)
By purchasing all those trains, the B&O Railroad company will profit immensely. Some people won’t like that. Also, dumping a lot of money into the economy is inflationary. Some people won’t like that either.
Should the Fed not be allowed to buy them? What is the most important thing here.. our jobs or the train company’s profit?
—-
Rather than limit the Fed’s ability to act, if we don’t like the methods it uses or the results, we’re better off getting rid of it and trying something else.
If we’re going to handcuff it so it can’t do what it was told to do, and what it was created for, it’s pointless to keep it around..
I don’t know about that Joey . They had to ask permission from Congress to give bail outs ,or loans ,to the Car Companies .I don’t think the Feds have the direction to just purchase just anything they want .
Joey ,some Experts are saying that the Acts of the Feds were
taxing the people without representation .
Wiz, of course it doesn’t act alone. I am sure the Fed gets permission before it does anything unusual. It consults with Congress all the time.
You have the legal right to go Vegas and drop all your money on a roulette table, but it might be best to get permission from the wife first.
Even after she agrees and goes with you, your starving kid’s attorneys might sue you both for child abuse.
“I am sure the Fed gets permission before it does anything unusual. It consults with Congress all the time.”
So are you suggesting the Fed had bailout permission from Congress, Joey?
Can you provide a little evidence to back this up?
bear.. Did they get permission? Do they need permission?
I have searched for any statute that puts any limits whatsoever on the choice of action the Fed might take.. so far came up empty. Maybe you can do better.
If by use of the Freedom of Information Act we get to see exactly what they did, when where how and with whom, and we find fraud or some such thing, then fine.. they did something illegal.
But as for limits on the range of tools they can use to correct whatever they think needs correcting, whether it be by purchasing trains or selling beanie babies or raising the fund rate to 100%, i doubt they exist.
“Did they get permission? Do they need permission?”
I guess that gets back to my question list; in particular:
2) Does it matter whether they did, given that they appear to operate above any rule of law?
3) Who holds the Fed accountable for their actions?
“Maybe you can do better.”
Maybe you are right. I found the following; trouble is, so far as I am aware, this legislative authority went into effect after the Fed started snapping up toxic mortgage securities. Also confused how one can “insure” against a black swan guano bomb that has already landed? And perhaps this reflects my ignorance of the law, but where in the below does it mention the Fed’s balance sheet will be the toxic MBS Superfund site?
15 (8) TARP.—The term ‘‘TARP’’ means the
16 Troubled Asset Relief Program established under
17 section 101.
18 (9) TROUBLED ASSETS.—The term ‘‘troubled
19 assets’’ means—
20 (A) residential or commercial mortgages
21 and any securities, obligations, or other instru
22 ments that are based on or related to such
23 mortgages, that in each case was originated or
24 issued on or before March 14, 2008, the pur
6 O:\AYO\AYO08C32.xml S.L.C.
1 chase of which the Secretary determines pro
2 motes financial market stability; and
3 (B) any other financial instrument that the
4 Secretary, after consultation with the Chairman
5 of the Board of Governors of the Federal Re
6 serve System, determines the purchase of which
7 is necessary to promote financial market sta
8 bility, but only upon transmittal of such deter
9 mination, in writing, to the appropriate commit
10 tees of Congress.
11 TITLE I—TROUBLED ASSETS
12 RELIEF PROGRAM
13 SEC. 101. PURCHASES OF TROUBLED ASSETS.
14 (a) OFFICES; AUTHORITY.—
15 (1) AUTHORITY.—The Secretary is authorized
16 to establish the Troubled Asset Relief Program (or
17 ‘‘TARP’’) to purchase, and to make and fund com
18 mitments to purchase, troubled assets from any fi
19 nancial institution, on such terms and conditions as
20 are determined by the Secretary, and in accordance
21 with this Act and the policies and procedures devel
22 oped and published by the Secretary.
23 (2) COMMENCEMENT OF PROGRAM.—Establish
24 ment of the policies and procedures and other simi
25 lar administrative requirements imposed on the Sec
7 O:\AYO\AYO08C32.xml S.L.C.
1 retary by this Act are not intended to delay the com
2 mencement of the TARP.
3 (3) ESTABLISHMENT OF TREASURY OFFICE.—
4 (A) IN GENERAL.—The Secretary shall im
5 plement any program under paragraph (1)
6 through an Office of Financial Stability, estab
7 lished for such purpose within the Office of Do
8 mestic Finance of the Department of the Treas
9 ury, which office shall be headed by an Assist
10 ant Secretary of the Treasury, appointed by the
11 President, by and with the advice and consent
12 of the Senate, except that an interim Assistant
13 Secretary may be appointed by the Secretary.
14 (B) CLERICAL AMENDMENTS.—
15 (i) TITLE 5.—Section 5315 of title 5,
16 United States Code, is amended in the
17 item relating to Assistant Secretaries of
18 the Treasury, by striking ‘‘(9)’’ and insert
19 ing ‘‘(10)’’.
20 (ii) TITLE 31.—Section 301(e) of title
21 31, United States Code, is amended by
22 striking ‘‘9’’ and inserting ‘‘10’’.
23 (b) CONSULTATION.—In exercising the authority
24 under this section, the Secretary shall consult with the
25 Board, the Corporation, the Comptroller of the Currency,
8 O:\AYO\AYO08C32.xml S.L.C.
1 the Director of the Office of Thrift Supervision, and the
2 Secretary of Housing and Urban Development.
3 (c) NECESSARY ACTIONS.—The Secretary is author
4 ized to take such actions as the Secretary deems necessary
5 to carry out the authorities in this Act, including, without
6 limitation, the following:
7 (1) The Secretary shall have direct hiring au
8 thority with respect to the appointment of employees
9 to administer this Act.
10 (2) Entering into contracts, including contracts
11 for services authorized by section 3109 of title 5,
12 United States Code.
13 (3) Designating financial institutions as finan
14 cial agents of the Federal Government, and such in
15 stitutions shall perform all such reasonable duties
16 related to this Act as financial agents of the Federal
17 Government as may be required.
18 (4) In order to provide the Secretary with the
19 flexibility to manage troubled assets in a manner de
20 signed to minimize cost to the taxpayers, estab
21 lishing vehicles that are authorized, subject to super
22 vision by the Secretary, to purchase, hold, and sell
23 troubled assets and issue obligations.
9 O:\AYO\AYO08C32.xml S.L.C.
1 (5) Issuing such regulations and other guidance
2 as may be necessary or appropriate to define terms
3 or carry out the authorities or purposes of this Act.
4 (d) PROGRAM GUIDELINES.—Before the earlier of
5 the end of the 2-business-day period beginning on the date
6 of the first purchase of troubled assets pursuant to the
7 authority under this section or the end of the 45-day pe
8 riod beginning on the date of enactment of this Act, the
9 Secretary shall publish program guidelines, including the
10 following:
11 (1) Mechanisms for purchasing troubled assets.
12 (2) Methods for pricing and valuing troubled
13 assets.
14 (3) Procedures for selecting asset managers.
15 (4) Criteria for identifying troubled assets for
16 purchase.
17 (e) PREVENTING UNJUST ENRICHMENT.—In making
18 purchases under the authority of this Act, the Secretary
19 shall take such steps as may be necessary to prevent un
20 just enrichment of financial institutions participating in
21 a program established under this section, including by pre
22 venting the sale of a troubled asset to the Secretary at
23 a higher price than what the seller paid to purchase the
24 asset. This subsection does not apply to troubled assets
25 acquired in a merger or acquisition, or a purchase of as
10 O:\AYO\AYO08C32.xml S.L.C.
1 sets from a financial institution in conservatorship or re
2 ceivership, or that has initiated bankruptcy proceedings
3 under title 11, United States Code.
4 SEC. 102. INSURANCE OF TROUBLED ASSETS.
5 (a) AUTHORITY.—
6 (1) IN GENERAL.—If the Secretary establishes
7 the program authorized under section 101, then the
8 Secretary shall establish a program to guarantee
9 troubled assets originated or issued prior to March
10 14, 2008, including mortgage-backed securities.
11 (2) GUARANTEES.—In establishing any pro
12 gram under this subsection, the Secretary may de
13 velop guarantees of troubled assets and the associ
14 ated premiums for such guarantees. Such guaran
15 tees and premiums may be determined by category
16 or class of the troubled assets to be guaranteed.
17 (3) EXTENT OF GUARANTEE.—Upon request of
18 a financial institution, the Secretary may guarantee
19 the timely payment of principal of, and interest on,
20 troubled assets in amounts not to exceed 100 per
21 cent of such payments. Such guarantee may be on
22 such terms and conditions as are determined by the
23 Secretary, provided that such terms and conditions
24 are consistent with the purposes of this Act.
11 O:\AYO\AYO08C32.xml S.L.C.
1 (b) REPORTS.—Not later than 90 days after the date
2 of enactment of this Act, the Secretary shall report to the
3 appropriate committees of Congress on the program estab
4 lished under subsection (a).
5 (c) PREMIUMS.—
6 (1) IN GENERAL.—The Secretary shall collect
7 premiums from any financial institution partici
8 pating in the program established under subsection
9 (a). Such premiums shall be in an amount that the
10 Secretary determines necessary to meet the purposes
11 of this Act and to provide sufficient reserves pursu
12 ant to paragraph (3).
13 (2) AUTHORITY TO BASE PREMIUMS ON PROD
14 UCT RISK.—In establishing any premium under
15 paragraph (1), the Secretary may provide for vari
16 ations in such rates according to the credit risk as
17 sociated with the particular troubled asset that is
18 being guaranteed. The Secretary shall publish the
19 methodology for setting the premium for a class of
20 troubled assets together with an explanation of the
21 appropriateness of the class of assets for participa
22 tion in the program established under this section.
23 The methodology shall ensure that the premium is
24 consistent with paragraph (3).
12 O:\AYO\AYO08C32.xml S.L.C.
1 (3) MINIMUM LEVEL.—The premiums referred
2 to in paragraph (1) shall be set by the Secretary at
3 a level necessary to create reserves sufficient to meet
4 anticipated claims, based on an actuarial analysis,
5 and to ensure that taxpayers are fully protected.
6 (4) ADJUSTMENT TO PURCHASE AUTHORITY.—
7 The purchase authority limit in section 115 shall be
8 reduced by an amount equal to the difference be
9 tween the total of the outstanding guaranteed obli
10 gations and the balance in the Troubled Assets In
11 surance Financing Fund.
12 (d) TROUBLED ASSETS INSURANCE FINANCING
13 FUND.—
14 (1) DEPOSITS.—The Secretary shall deposit
15 fees collected under this section into the Fund estab
16 lished under paragraph (2).
17 (2) ESTABLISHMENT.—There is established a
18 Troubled Assets Insurance Financing Fund that
19 shall consist of the amounts collected pursuant to
20 paragraph (1), and any balance in such fund shall
21 be invested by the Secretary in United States Treas
22 ury securities, or kept in cash on hand or on deposit,
23 as necessary.
24 (3) PAYMENTS FROM FUND.—The Secretary
25 shall make payments from amounts deposited in the
13 O:\AYO\AYO08C32.xml S.L.C.
1 Fund to fulfill obligations of the guarantees provided
2 to financial institutions under subsection (a).
From what I gather, the Fed has a job to do and as long as it gets done, nobody much cares how they do it.
When the job doesn’t get done, like when a bubble or recession occurs, we have to question their methods.
—————-
Here’s a question:
Was the Fed unsuccessful because they operate beyond the rule of law? (assuming they do)
Well, no.. them operating within the law or beyond the rule of law didn’t cause the bubble… lawfulness had nothing to do with it.
The Fed may have caused the bubble, but not by doing anything illegal. It might have screwed up setting interest rates. Might have miscalculated something or made poor choices.
If the Fed can’t get the freaking job done even when allowed total freedom, then maybe it’s just not up to the task. Limiting it’s ability to function cannot make it more effective, only less.
“Limiting it’s ability to function cannot make it more effective, only less.”
It depends on the judgment of their leadership. We are talking about the folks who said housing would barely decline and subprime would be contained to $200 bn.
With bad judgment a possibility, behavioral constraints could lead to improved performance compared to full discretion.
“Limiting it’s ability to function cannot make it more effective, only less.”
It depends on the judgment of their leadership. We are talking about the folks who said housing would barely decline and subprime would be contained to $200 bn.
With bad judgment a possibility, behavioral constraints that constrained the Fed away from the worst possible decisions (e.g. making a futile attempt to reflate a housing bubble)
could lead to improved performance compared to full discretion.
Limiting it’s ability to function cannot make it more effective, only less.
Given what we’ve seen of the Fed’s “effects”, making it less effective would be an awesome thing.
The analogy of the Fed steering an enormous economic tanker is appropriate.
If you need to make a left turn a hundred miles out at noon tomorrow, you’ve gotta start turning now.
Why is that turn necessary? Well, there appears to be a storm brewing up ahead. At least, our best forecasters predict it, and the wind is up.. a sign of a storm.
—-
Is the storm guaranteed? Is the coming storm a fact we can depend on? Well, no. Nothing is guaranteed.
There may be no storm. We might change course and waste lots of time, money and energy. We might even head into a more dangerous situation than the one we’re trying to avoid.
—–
If the Fed makes too many errors in judgment, or is caught DUI or asleep on duty, just get rid of the Fed. Do not let them steer this boat.
Entrust the ship to someone else… to someone who is better qualified.
I suggest you hire that same person/people who you think qualified to constrain the behavior of the Fed.
You must believe they have foresight and knowledge the Fed lacks, or that they would never drive drunk.. or they are somehow superior.
Just our of curiosity, who are they?
3. Basically, everything that happens from this point forward will cease obeying what were previously misconstrued as fundamental laws of economics.
(which I might say, WERE proven quite sound, by 4 rich drunken nerds at the Harvard Business School using the Scientific Method and playing 8 board games of Monopoly)
“2. Higher interest rates (especially mortgage rates) will have no effect on home prices.”
No, no… higher interest rates increase housing prices, as do lower rates, the same rates, no rates, and everything else since housing only goes up!
*smirk*
House prices will stay the same , your housing cost will be constant. But oil & gold will cost you a lot more. Expect your paycheck to increase at offical rate of inflation. Inflation takers will assume you drive an electric car.
Wall Street more powerful now?
Simon Johnson, author of the new book “13 Bankers,” tells David Weidner that big banks need to be broken up into pieces “small enough to fail.”
The futurist vision of a world controlled by corporations is slowly becoming reality. The financial institutions seem to be the front runners. To big to fail has many uses. The latest crises serves to make the big institutions bigger, as they swallow the assets of the failed.
One of the lessons learned from the Challenger Shuttle disaster was to avoid extrapolating. The O-rings that caused the problem were safe at normal temperatures but proved disastrous at freezing temperatures.
This seems to be the danger for the Fed and the Big Banks. They bailout this, spend money on that and incur just incredible debts. They have confidence in themselves but none of this is tested.
The main thing they continue to have trouble dealing with is human behavior. The housing bubble collapsed when investors and buyers felt it was not real but a bubble. The same thing will occur with all this government debt. When investors and buyers of this debt feel it will not be paid back, it willl collapse.
The Fed and the banks are in untested areas dealing with theories that don’t match human behavior. This has to end badly for them. Protect yourself.
Richard Feynman dropping the O-rings into the beaker of ice water to demonstrate the shrinkage… Priceless!
Athletes who jumped headfirst into real estate keep gettin’ burned … from Chicago Breaking Business:
Former Bull loses $1M on Lake Forest home
Former Chicago Bulls forward-center Ben Wallace, now with the Detroit Pistons, has taken a significant loss on his 6,983-square-foot, traditional-style mansion on 1.74 gated acres in Lake Forest, selling it on Thursday for $2.0575 million.
With the Bulls from 2006 until a 2008 trade to the Cleveland Cavaliers, Wallace, 35, lost almost $1 million on the five-bedroom home, which he purchased in late 2006 for exactly $3 million.
Wallace first listed the mansion for $3.295 million in January 2009, later cutting his asking price to $2.994 million, then to $2.49 million and finally to $2.39 million before accepting a sale offer.
Built in 2005, the 14-room, stone and slate mansion has five full baths, three partial baths, a cherry library, a custom staircase, a gourmet kitchen with a butler’s pantry, a four-car heated garage and no fewer than eight fireplaces. The house also has a finished lower level with a rec room, wine cellar, billiard room and bar room.
The name of the buyer of the mansion has not yet appeared in public records.
When it comes to real estate purchases, be they for residences or investments, athletes don’t have a very good track record. They also aren’t very adept at hiring good advisers who could help them avoid costly mistakes.
At the risk of going out on a not-so-nice, politically incorrect limb, I’m going to say that a lot of this ineptitude has to do with the intelligence of athletes.
In short, many of them aren’t very bright. Which leads to the sort of decision-making that we see described in the above article.
Sorry for being so blunt, but I’m just calling this one as I see it.
everything’s relative..
I can’t think of any profession that proved it’s prowess in the RE market the last few years. (yeah yeah bankster bonuses spare me please.)
Nor can I think of any discrete group known to hire “good advisers” that kept them out of trouble..
Anyway, athletes didn’t do any worse than anyone else, afaik.
“Anyway, athletes didn’t do any worse than anyone else.” I don’t believe that is true. Outlandish custom homes built to shock and awe, and stroke the owner’s egos and questionable tastes, have some of the biggest haircuts on resale.
The wealthy who got sheared came from all walks of life..
“Anyway, athletes didn’t do any worse than anyone else.” I don’t believe that is true.
I don’t believe that, either. Most athletes have a relatively short time in which to earn their maximum income, should be saving, should be mobile in case of trades, free agency, etc., and prob’ly won’t live in the city they played in. In other words, a classic renter’s profile.
Agree, ET. I also agree with Natalie’s “shock and awe” comment.
I used to live in the same nabe as Rasheed Wallace who played for Portland for awhile. They bought an old vintage Portland mansion for about $1.6M and, according to a neighbor who owned the place in the 70s, completely re-did the interior - gameroom, Disney wing for the kids, etc effectively changing the whole character of the place. It’s been on the market for at least 3 years now at around $4M.
OTOH, these guys don’t think they need the money. Supposedly, there have been several rejected offers in the $3M range. The owner address is listed as Rochester Hills, MI where I presume he lived while with Detroit. He’s now with Boston. Wonder if he has a home there too?
Oh, and those offers were 2 years ago during the end of the boom. Save for a few puke inducing Californians who might think it’s a bargain, I’m guessing the offers aren’t coming these days.
“At the risk of going out on a not-so-nice, politically incorrect limb, I’m going to say that a lot of this ineptitude has to do with the intelligence of athletes.”
I don’t think it’s intelligence so much as coming from the streets with no experience in having plenty of, or managing any, money. This is similar to the experience most lower to middle income folks of all races and levels of income experience, if they win the lottery. Within 10 years the majority are broke. White or black, athlete or teacher, young or old.
Now, add to this the fact that most young athletes or entertainers will be swamped by countless “lovers”, “friends”, “relatives” and “advisors” who will hang around until the cash cow is dry. Winning an NBA contract or the lottery will produce the same result: Inexperienced and impressionable person with lots of pressure to share and squander, not save, the income and wealth.
Not to belabor this point, but a whole lot of wealthy or just successful people who got there the hard way started out on the streets. Being from the streets doesn’t mean you have no respect for money, or that you don’t know how to save or use it wisely..
Mom, who has no money to speak of, teaches you to have the very highest respect for money, and to save every penny, and to do research before spending it…or perhaps fails to teach those things. A lot of it is the luck of the draw.
There were smart and stupid, ignorant and educated people, with and without lots of money. The bubble favored nobody and spared no one.. It dolled out it’s punishments in a perfectly even manner, without prejudice or bias or favoritism.
Mom, who has no money to speak of, teaches you to have the very highest respect for money, and to save every penny, and to do research before spending it…or perhaps fails to teach those things. A lot of it is the luck of the draw.
Were your mother and my mother separated at birth?
“Former Bull loses $1M on Lake Forest home”
That would instantly turn me from a bull to a bear, were I not already in the latter category…
Good one, Bear!
NEW ORLEANS – New federal guidelines say thousands of U.S. homes tainted by Chinese drywall won’t be safe unless they are completely gutted.
The Consumer Product Safety Commission released the guidelines Friday. They say electrical wiring, outlets, circuit breakers, fire alarm systems, carbon monoxide alarms, fire sprinklers, gas pipes and drywall must be removed.
About 3,000 homeowners, mostly in Florida, Virginia, Mississippi, Alabama and Louisiana, have reported problems with the Chinese-made drywall.
A large quantity of the drywall was imported during the housing boom and after a string of Gulf Coast hurricanes. It has been linked to corrosion of wiring, air conditioning units, computers, doorknobs and jewelry, along with possible health problems.
Too bad they couldn’t extend this to a million homes, then we would just have to tear them down, decreasing supply. They could get China to pay for it all.
If prices kept going up nobody would give a rat’s rear..
Auction.. dateline 2015:
“OK folks.. this house has that Chinese drywall and associated problems. We’ll start the bidding at $1,500,000″
“$2,000,000 !!!”
“I’ll give you $3M!”
Do I hear 4?
“$4 million!”
Feds: Homes with Chinese drywall must be gutted
-No mention of who is going to have to pay for it… I am sure that somehow I am.
http://finance.yahoo.com/news/Feds-Homes-with-Chinese-apf-3307134453.html?x=0&sec=topStories&pos=7&asset=3ddf88ebb6dd526e87e97bd40c6ca16f&ccode=rd
Unemployment joke:
Guy goes to doctor, sez “Doc I have a problem you need to see”.
Doc says okay, let’s see it. Guy drops trou, and “Mr Winkie” is bright orange!!! Doc is perplexed; orders up a bunch of tests.
Couple of weeks later, guy comes back and Doc says “We’ve run every test we can think of, and we can’t find a reason that would cause something like that. We are wondering if you are exposed to Hazmat, or Radiation at work?”
Guy says “No, in fact I’ve been out of work for nine months”. Doc asks “What have you been doing to keep busy?”
Guys says “Not much…….just sitting around the house, surfing for Net Porn, and eating Cheetos”.
I heard a great FL real estate investing story this morning from a colleague who happens to be an Asian national. Seems her friend made a cash real estate investment in FL which was advertised as “close to Disney World.” Seems the UHS™ forgot to mention the property was underwater — not figuratively, but literally — at the bottom of a lake!
FL has dry lakes doesn’t it?
http://blogs.forbes.com/moneybuilder/2010/04/01/hud-boots-two-fha-mortgage-lenders/
HUD Boots Two FHA Mortgage Lenders
Looks like the U.S. Department of Housing and Urban Development is continuing its long-overdue effort to clean up its mortgage insurance program.
This afternoon the agency announced it would no longer guarantee mortgages lent by Houston’s 1st Alliance Mortgage and Atlanta’s RSA Financial. Only 3.7% of 1st Alliance’s 1,220 loans in the last two years have ended in default (well under the national average of 4.6%) but HUD officials said the firm has been charging customers excessive fees, among other infractions.
RSA has originated just 3 loans (none of them in default) since securing HUD’s backing in June 2009. However the feds claim that when RSA applied for HUD approval it failed to mention that owner Ramsey Suphi Agan was twice debarred by the agency in the 1980s following felony convictions.
More significant than those actions was HUD’s announcement that it secured a $400,000-plus civil penalty from Franklin First Financial of Long Island, NY. Several weeks ago we called out Franklin and nine other of “Uncle Sam’s Deadbeat Mortgage Lenders” for sporting default ratios higher than 10%. HUD’s mortgage insurance initiative, known as the Federal Housing Administration (FHA), has been blamed as a key cause of the growth of the housing bubble, but David Stevens, the man President Obama chose to run the FHA, has promised to clean house.
Who hasn’t noticed that in tough times more people are looking out for those who use the system to their advantage? The following forum post over at City Data Forum reminds me of this (and there are plenty more postings all over the internet in a similar vein - people are pissed-off):
“..Where I live there is a thing called a Quest card. This is the state system for providing handouts. It can be used just like a cash card. A person can get cash at any cash machine or they can use it at any store to buy things.
One day I was over at the local Safeway store. As I was checking out I saw a sign that said that the store would give out no more than $100 in cash when using the Quest card. While I was checking out I was teasing the cashier. I said what’s this Quest card thing. So explained it to me. I said do you mean that if I get one of those cards I can get tax payer money from here or a cash machine? That set her off. Trying to keep her voice down she said that people that are supposed to be poor sure don’t act poor. She said that the store had cake mixes for less than $2 but no more than and hour ago some people came in and bought the most expensive cake they have and paid for it with a Quest card. She said that she see it all the time. They are also the people that make the most noise when the store does not have something they want. She said she had been doing it so long that if she saw a cart full of prepared food there was a 95% chance that it was going to be paid for with public assistance.
Where I live I am a commissioner in the fire district. This is an elected position but like a lot of the fire service it’s non-paid. In fact 75% of the firefighters in the US are non-paid. There is no money to pay them but there is money to pay people to do nothing. In my area the number of firefighters that are on public assistance is zero. It’s because they don’t and won’t sign up. Those that owe the most to the system give the least back. They seem to have the mind set that it’s all owed to them.
The most outrageous behavior I have ever seen is by a couple of people in my district. This one women comes to mind. She lives 6 miles out of town. She has no car or even a license. She has more yard ornaments than 50 people should have and a lot of her money goes there. If she needs a ride to town and no one is available to take her she calls an ambulance. She demands to be taken to the hospital so they have to take her. At the hospital they can find nothing wrong so they release her. She then goes on her way shopping or what ever she really wanted to do in town. Not only did the tax payers pay for a ride in the ambulance we also paid a hospital bill for nothing. But if the ambulance was needed for a real call it won’t be available.
The hospital won’t help bust the woman because of HIPPA regulations (health privacy laws). I contend that these handout systems are out of control. Those that take out of the system should have to give back. But now-days community service is a form of punishment. Me donating my time to the fire district is community service. I don’t want to paint with a wide brush and state that all people act this way. But it must be my luck that by far most that I have encountered do. Most people on public assistance are the most demanding when it comes to services and they act like it’s all owned to them.”