Bits Bucket For May 11, 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.
May 11, 2010
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Bank Swaps, Libor Show Doubts on Europe Bailout: Credit Markets
May 11 (Bloomberg) — Money markets and the cost of protecting bank bonds from losses show investors are concerned the almost $1 trillion rescue plan announced by European leaders may not be enough to contain the region’s sovereign debt crisis.
The loan package for debt-laden nations including Greece is part of an attempt to stem a decline in the euro, which fell to a 14-month low last week, and stave off a sovereign default that would threaten recovery from the worst global recession since the 1930s. Banks’ potential losses stemming from the crisis are under scrutiny by investors concerned financial institutions are owed too much by Europe’s most-indebted countries.
“Sovereign risk hasn’t gone away in the slightest,” said Jim Reid, head of fundamental strategy in London for Deutsche Bank AG, Germany’s biggest bank. “What this package has done is massively reduced the tail risk in European markets without necessarily changing the medium- to long-term dynamics of financial markets.”
“that would threaten recovery from the worst global recession since the 1930s.”
The MSM just can’t get that word “DEPRESSION” into print. I didn’t know we had a quote “recession” in the 30’s.
A depression is impossible because of new electronic printing-press technology. In the 30s all they had was that old steam-powered printing press. And they didn’t have Bernanke and TTT so really there is nothing to worry about this time. This time its different.
Anything to give us the confidence necessary to let them keep playing with the fruits of our labor.
By the way, is the very concept of “confidence” - taken in the context of contemporary investing behaviors - really akin to superstition?
A lot of people are trumpeting the need for everyone to have confidence nowadays. But confidence in exactly what? They cite the need to be confident without really discussing what that confidence should be based upon. Support is usually in the form of vague platitudes about past performance and/or plays on emotion (patriotism, mom, apple pie, etc.)
Just remember that the “con” in Con Man, Con Game, etc. is in fact “confidence”. I.e. - very often confidence is not only unwarranted but it can be used against you.
Confidence in the printing press is what’s needed now. Believe in “the paper money”. Wonder why the new $100 bill has a picture of a yellow gold pot on it? Just wondering?
A lot of people are trumpeting the need for everyone to have confidence nowadays. But confidence in exactly what? They cite the need to be confident without really discussing what that confidence should be based upon. Support is usually in the form of vague platitudes about past performance and/or plays on emotion (patriotism, mom, apple pie, etc.)
Thwack! (A nail just got hit on the head.)
We need to bring back CONfidence so people will get back into debt by buying junk they don’t need and can’t afford. That, and if people believe the lies, the elite can loot freely since the “little people” will still think they can get a share of the loot. When the reality is that we get the bill for the looting, that discourages people from giving more money to the looters, and they don’t like that.
Confidence that some other jackass will pay even more than you did for your stock shares/house/gold/whatever.
We’re almost having a depression now. I’m trying to remember the old newsreels from the 30’s.
Old people suffering in their homes —> Medicare and social security.
Poor people dying in the streets —> Medicaid, food banks
Lines for jobs because people are starving —> online resumes, UI payments, credit.
High unemployment —> different criteria of unemployment.
Public bread lines in the city streets —> food banks.
Starving farmers in Dust Bowl/Grapes of Wrath scenarios —> automated/irrigated/fertilized/subsidzed agriculture —> cheap Cheetos.
Middle class going frugal —> credit and extend+pretend national debt.
Press reports with overall stats and facts, including pix of long bread lines —> anecdotal tabloid TV of the ubiqutous Single Mother with American idol comfort.
Stock market in the tank —> PPT
Jimmy Stewart-style bank runs —> FDIC
Small banks failing left and right —> Happening now.
Big banks failing left and right —>
Businesses failing left and right —> Happening now.
I don’t see us having another Great Depression, at least not one where the MSM would show the honest truth.
A couple of weeks ago Forbes claimed the City of Milwaukee was the worst city in the US to try to sell a house which proves one thing to angelical little mikey.
Armed with tax credits, Fools Rush in where Angels Dare Not Tread.
Business
Tax credit boosts metro Milwaukee home sales 36% in April
By Paul Gores of the Journal Sentinel
Posted: May 10, 2010
Click to enlargeFueled by home shoppers rushing to beat the deadline to qualify for special tax credits, sales of existing homes jumped more than 36% in April in the four-county metro Milwaukee area.
Metro MLS Inc., which tracks sales by Realtors, reported Monday that 1,555 homes sold in April. That’s up from 1,140 in April 2009, and a 31% rise from March sales of this year.
http://tinyurl.com/24e93qm
It looks like all that has been learned from history is new ways to hide the truth!
I disagree. I think oxide’s list shows that the advent of the social safety net has ameliorated the worst of the human suffering seen during the Depression.
I disagree. I think oxide’s list shows that the advent of the social safety net has ameliorated the worst of the human suffering seen during the Depression.
Or it could be the normal case of progression of technology and health care, that would have happened whether the social safety nets existed or not.
E.g. like how U.S. life expectancy from the 1700’s to 1930 went from 35 to 60, before social safety nets existed, including health care.
Correlation does not equal causation.
the social safety net has ameliorated the worst of the human suffering seen during the Depression.
Oh, but we need to do more, more, more!
If my Grandma was still alive she would say we are in a Depression.
Rogoff and Reinhart deal with this delicate linguistic issue by calling the 1930s the “First Great Contraction” and the late 2000s the “Second Great Contraction.”
This is getting weird. A hedge fund advised by the Black Swan author may have been the black swan in the sudden market drop. Or is the black swan the fact that high frequency trading seems to be faster than any circuit breaker can handle. I wonder if that could ever cause problems?
Did a Big Bet Help Trigger ‘Black Swan’ Stock Swoon?
By SCOTT PATTERSON And TOM LAURICELLA
Shortly after 2:15 p.m. Eastern time last Thursday, hedge fund Universa Investments LP placed a big bet in the Chicago options trading pits that stocks would continue their sharp declines.
On any other day, this $7.5 million trade for 50,000 options contracts might have briefly hurt stock prices, though not caused much of a ripple. But coming on a day when all varieties of financial markets were deeply unsettled, the trade may have played a key role in the stock-market collapse just 20 minutes later.
WSJ Professional
The trade by Universa, a hedge fund advised by Nassim Taleb, author of “Black Swan: The Impact of the Highly Improbable,” led traders on the other side of the transaction—including Barclays Capital, the brokerage arm of British bank Barclays PLC—to do their own selling to offset some of the risk, according to traders in Chicago.
Then, as the market fell, those declines are likely to have forced even more “hedging” sales, creating a tsunami of pressure that spread to nearly all parts of the market.
(don’t know why this posted here, wasn’t meant as a reply)
alpha-sloth,
I mentioned here late yesterday that on that particular morning, I was unable to log on! I called my local affiliate and he said that not only was ‘he’ unable to log on to the trading platform but that -everyone- at the entire… Broker/Dealer was unable to access the system!
All during the day it was very unstable and added steps to the “Verify Trade” of the confirmation. Considering we’re part of Fidelity, I thought it was significant.
The trade by Universa, a hedge fund advised by Nassim Taleb, author of “Black Swan: The Impact of the Highly Improbable,” led traders on the other side of the transaction—including Barclays Capital, the brokerage arm of British bank Barclays PLC—to do their own selling to offset some of the risk, according to traders in Chicago.
It appears that black swans not only exist - but are going forth and multiplying.
Let’s hope that black swan locust cross-breeding isn’t possible. Alfred Hitchcock would have nothing on that resulting plague.
High-speed trading can do more trades in a second than humans are capable of in a lifetime. This implies that any errors or systemic faults will be brought to “full blossom” before they can be caught and dealt with. Trading stops won’t work.
Humans are little enough capable of discerning and avoiding a disaster before it happens (Deep Horizon as an example). These trading algorithms have no discretion at all, and so will happily collapse the entire global economy without emotion or reflection.
That being said, the primary difference between a Wall Street Trader (the biological kind) and a High-speed Trader (the silicon kind) is how fast they can accomplish this feat of derring-do. Silicon wins this one.
Will either of them reflect for one instant or exercise a gnat’s worth of good judgment before proceeding directly into disaster as quickly as possible? To the HBBer:
So, we call High-speed Traders “Algorithms” and Wall Street Traders “sociopaths.” Both have about the same amount of morality or conscience.
Me? I’m not going near stocks. Not after last Thursday.
Roidy
Let’s hope that black swan locust cross-breeding isn’t possible. Alfred Hitchcock would have nothing on that resulting plague.
Ah yes, but he could make it look fantastic.
Sounds like a trial run to me. Or someone trying to make a point.
$7.5 mill for 50,000 options contracts? Imagine the SHTF if it had been $75 million
$7.5 mill for 50,000 options contracts? Imagine the SHTF if it had been $75 million
It may not have made a difference actually - e.g. like a bigger fuse doesn’t make the dynamite explode any more violently.
These trading algorithms have no discretion at all, and so will happily collapse the entire global economy without emotion or reflection.
If a few bits in a computer can result in a disaster in the real world, perhaps the real world is too fragile to allow the computer so much control? My complaint isn’t the computer, it’s the fragility of the situation. The avalanche isn’t the fault of the tiny sound that sets it off.
“Me? I’m not going near stocks. Not after last Thursday.”
IMHO, the only kind of stocks Wall Street Boyz should be in are those old fashioned wooden ones, with their big feet and greedy little hands dangling out of them.
IMHO, the only kind of stocks Wall Street Boyz should be in are those old fashioned wooden ones, with their big feet and greedy little hands dangling out of them.
Awww, Mikey, that’s way too lenient!
Of course “depression” was the euphamism that replaced the earlier term, “panic.”
A country gets a depression … nothing a little fauxloft can’t fix.
Or just fire the fraud-cannon loaded with a trillion dollars at the problem. Seems to do the trick lately.
fauxloft…that’s pretty good.
I think the people that actually lived through the depression would be insulted to call this a depression.Most of the people I see are not hurting that much.The malls are packed and people have food on the table.Seems to be another opportunity for the rich to get richer.
arizonadude,
Please note *oxide’s post above. Even though the technologies have advanced enough to ‘mask’ ( or at least shuffle from plain sight ) a lot of the pain, it doesn’t mean it isn’t there.
Well, if we’ve seen the worst of it, sure. While pumping huge amounts of deficit-fueled money into the economy HAS made the contraction less abrupt than the GD, it has done little to eliminate all the bad debt. It has merely transferred the bad debt to other entities. It remains to be seen what the effect of this will be. Many of us believe that rather than creating a “bottom”, we have merely created a bump on the downward path. In a few years we may well see that the contraction is as severe as the GD.
“The malls are packed”
Not where I live.
They are where I live.
P.S. - I live near DC.
“They are where I live.
P.S. - I live near DC.”
Yeah…that’s because they have those24/7 printing presses and everyone is knee deep in taxpayer funny money.
Yeah - every now and then I have to break out the push broom and sweep away the bills that keep blowing over from the Eccles building. Gets to be pretty annoying after a while.
Same here in Maryland. Everyone is rich here because of DC. Unemployment is -5%, everyone gets a 10% raise each year, and houses should go up 20% per year in price… or so I’ve been told.
Time to sweep up more of that DC money that rains from the sky!
I think one of the big differences between then and now is the fact that the two income family has become the norm in todays society. In the 20’s it was rare for the wife to work out of the home. For better or worse, two incomes (assuming that both parties don’t lose thier jobs) provide a significant degree of earning power redundancy. Mrs. Spokaneman was a stay at home mom, and I was always cognizant of the fact that we had no backup if I were to lose my job. Couple that with the safety nets in place today, and the ability to squat in a house without making a payment for many months before eviction, and its easy to see why the impact of the downturn is much less evident today.
Of course most two income families have simply expanded their lifestyle until they are reliant on two incomes. So instead of more security they have approximately doubled the chance that they’ll experience a devastating job loss.
Yes. Concur with Jim A.
The two-income household is worse off than a single-income household because the SAHP represented extra earning capacity that wasn’t tapped.
If two are earning incomes and spend all of that income (making prices rise so nobody is then able to live on one income, BTW), they are in a much worse position, IMHO.
The MSM just can’t get that word “DEPRESSION” into print. I didn’t know we had a quote “recession” in the 30’s.
Actually, we did have a major recession in the 1930’s because that was what they called major declines. The terms reversed in meaning, following the great recession, as a result of this same word-smithing that happens when politicians want to paint a rosier picture of the state of affairs.
You know you’ve really screwed up when $1 TRILLION of new money won’t solve your debt problems.
Well, if $1 trillion won’t handle the problem then I’m sure they will pledge $1 gazillion bazillon zillion and that ought to do the trick. At what point do these ficticious money amouts become laughable?
Trend of US Mortgages ‘Underwater’ Grows: Report ~ CNBC
A growing percentage of U.S. homeowners were saddled with “underwater mortgages” in the first quarter, accounting for almost one in four homes in a trend that poses a serious threat to the housing market’s recovery, real estate website Zillow.com said on Monday.
U.S. home values also declined again in the first quarter, Zillow reported.
Homeowners with “underwater” mortgages—where the amount owed on the mortgage exceeds the value of the home—are more prone to defaults and foreclosures.
The percentage of American single-family homes with mortgages in negative equity rose to 23.3 percent in the first quarter from 21.4 percent in the fourth quarter, according to the Zillow Real Estate Market Reports.
Arguably, the real problem is those who are “significantly” underwater. The transaction costs for RE are so high that if you can make the payments, there’s little incentive to default if you’re ~5% underwater. But if you’re 20-30% underwater, defaulting can be a real windfall, one that might well be worth the hit to your credit rating. Of course in mega bubble areas, there are plenty of people who simply never had any reasonable chance of making the payments that they agreed to. They’re likely to default if they’re even close to not having equity because they can’t afford to sell, and they can’t afford to stay.
The 20% down payment keeps hope alive, longer, IMHO. I had friends that were underwater in Lancaster, CA for twelve years following the end of the cold war. They eventually got out with their skin intact, but it was a long haul as the area slid into social decline.
20-30% underwater, defaulting can be a real windfall ??
Yeah…All the way up to the point when the IRS comes knocking…
But if you’re 20-30% underwater, defaulting can be a real windfall, one that might well be worth the hit to your credit rating.
Precisely the point of University of Arizona Law Professor Brent White’s recent paper.
But what if you have been faithfully paying off your mortgage for, say, ten years, and assuming you would be able to help fund your retirement by liberating your home equity, only to learn that you are now underwater? Would it make sense to walk away from your home equity-based supplemental retirement income security plan?
Not really feasible. Being that prices are still well-above 2000 levels (C/S shiller index 100->136), If someone bought a home 10 years ago and had been paying it off (i.e. no HEL, no cash-bask refi) the only way they’d be underwater is if they did something really stupid, or really unlucky, like buy in downtown Detroit, or some other recently-condemned area.
CIB,
Good question and I realize you were perhaps being a little flippant.., but I think we’ve all wondered that. If one lived in the boomiest of boom mkts. and extracted hundreds of thousands, how would you manage to shoe horn that into an IRA etc?
At the rate of 5 to 6k per filing year, even for couples, how long would that take? And other than using a coffee can, would those $’s have even been better deployed in eq. mkts?
If you’re “taking your Home ATM ‘with’ you!” ?
packman,
Even ‘more’ wrinkles! I will say though, paying faithfully for ten years really doesn’t make much of a dent in your prin. owed ( I can speak from experience )
Assuming you’ve gone down the route I’ve outlined.., then you have ethical issues, especially if you strat. def. once you’ve completed your little extraction operation. I assure you it will be the LAST time in life you have “good fortune”.
And if you Heloced yourself underwater, walking away is gererally not an option.
Spokaneman!
How you doin? Alright.
Yeah, you ’shouldn’t’ but they can and they are. We discussed at some length yesterday the $100k Lifetime Limit and we’re willing to bet that got trampled in the MEW Extraction Stampede!
In my mind, assuming you walk away, 100% of that should become taxable. Such a deal, free money and zero tax bill!
What I ment to say is that typically banks can come after you for deficiency judgements on Heloc’s and refi’s. But I wasn’t aware that the tax amnesty now covers those kinds of loans as well.
Trend of US Mortgages ‘Underwater’ Grows: Report ~ CNBC
Years ago I remember reading predictions that someday people would live in houses under the ocean.
Funny how that turned out.
United States of Atlantis
Descent pay for 3 weeks…
Citi to Pay Board Member Joss $350,000 for Consulting (Update1)
(Bloomberg) — Citigroup Inc. will pay director Robert Joss $350,000 for as little as three weeks of work amid criticism by shareholder-advisory firm Glass, Lewis & Co. that he lacks the independence needed to serve on the board.
Joss, a former Wells Fargo & Co. executive and Stanford University business-school dean who joined the board in July, will advise on projects “from time to time,” Vice Chairman Lewis Kaden wrote in an agreement dated April 5, according to a filing on May 7. The annual consulting fee is for “a minimum of approximately three weeks,” the filing said.
“This is kind of an interesting situation, where you’re not management, and you’re not independent, but you’re a director,” Joss said in an interview today. “I’m comfortable that I can handle that, but if it’s not working right, then we’ll undo it.”
As long as the Pay-Czar approves it, its fine with me. I have full faith in the frugality of Obamas team.
Has Citi paid back its TARP yet? If so, it’s none of Barry’s business.
The government owns 36% of Citi. That should provide a few votes on compensation.
Moreover, the govt is backstopping C both explicitly throught the FDIC and implicitly through “TBTF” (which is likely to get tested again in the not to distant future).
Well, we do need to retain “talent” and obviously it makes complete sense for some stuffed suit to make more money in 3 weeks of part-time work than most Americans make in 5+ years of full-time work.
What’s this class-war talk, you ungrateful peasant!
I thought that this was an anarcho-syndicalist commune!
No, he’s over there…..
“Splitter!”
Then we should be taking it in turns to vote for a sort-of “executive officer” for the week.
How could 24 “economists” be wrong…When China blows it’s going to be a dozy.
China’s April Inflation Accelerates, Lending Surges (Update3)
May 11 (Bloomberg) — China’s inflation accelerated, bank lending exceeded estimates and property prices jumped by a record, increasing pressure on the government to raise interest rates and let the currency appreciate.
Consumer prices rose 2.8 percent in April from a year earlier, the fastest pace in 18 months, and property prices jumped 12.8 percent, the statistics bureau said in statements today. New lending of 774 billion yuan ($113 billion), announced by the central bank, was more than any of 24 economists forecast.
And what will rising interest rates in China do to their appetite for US dollars ??
What then do we do to attract capital ??
What happens to real estate in a rising interest rate and higher Tax/Fee environment ??
I asked a Realtor about this, and I was told the answer is: “IT GOES UP!!!”
Brawndo?
Its what plants crave. It has electrolytes.
“Real Estate: It has green shoots.”
Can’t Fannie and Freddie open offices in China? What about FHA loan kiosks in every mall in China? Maybe our congress could somehow give the Chinese a tax-credit for houses purchased in their own country. Casey Serin could go open a workshop in Bejing and teach them the art of specuvesting.
I think they’re way ahead of you on that.
The Chinese have a way of punishing people like Casey Serin. I don’t think he’d want to go there.
“BANG!”
“Next!”
Well this is BS. (I edited this article)
Real estate’s new problem: Not enough homes
NEW YORK (CNNMoney.com) — Can it be possible? Despite the housing bust and high foreclosure rates, in some areas real estate agents are complaining that they don’t have enough homes to sell.
There is currently an eight-month supply of homes on the market… That’s still a lot compared to the six-month supply that is expected in a normal market, but it is much better than it was. In March, there were nearly 2% fewer homes on the market than there were a year ago, and 21.7% fewer than the record of 4.6 million in July 2008.
Denver: supply has fallen to 5.7 months from 6.2.
Phoenix: 4.5 from 5.2;
San Francisco: 3.2 months from 6.5 last March.
California: less than $300,000 is at 3.2 from 3.3 12 months ago.
California: $300,000 - 500,000, fell to 4.2 down from 4.5
California: $1M+, 21.6 months to 10.9 months.
Pacific Northwest, the supply of moderate and lower priced homes is also tight.
In the higher price ranges, sales are slower than they would be because of continued problems in obtaining financing. Right now, most jumbo-mortgage lenders require down payments of 30% to 35%, but as that eases, sales of higher end homes should rise and supplies fall.
Prices go up, supply goes up
Ordinarily, rising prices are an indication of shrinking inventory. But these are far from ordinary times. Never have there been so many properties that could be for sale — but aren’t.
This so-called “shadow inventory” comes from two main sources: properties lenders have not yet repossessed or have not yet put back on the market; and homeowners who want to sell but who have refrained because of low prices…Lenders are also holding back on foreclosing at all, either because they’re having trouble handling the volume of repossessions or because they want to sell off some of the inventory they already have.
“Notices of default are filed, but they’re not taking the properties back,” said Appleton-Young.
Zillow surveys indicate there’s a big pool of homeowners who have wanted to sell their homes during the past three years but market conditions either prevented sales or kept them from trying. The company estimates that 8% of homeowners are very likely to try to sell their homes in the next twelve months if they see signs of improvement in their local markets.
“These sidelined sellers closely watch the market for signs of a possible turnaround and rush in if there’s a hint of good news,” said Stan Humphries, chief economist at Zillow.com.
And so, as prices increase, inventory could also increase. While that’s not good news for sellers,
it is good news for buyers. They can take their time when shopping for a home without having to worry about getting priced out. 
It’s a great time for Toll brothers to crank out some new home supply then!
Indeed!
We need new $750,000 McBoxes to feed Amerikuh’s never ending desire for the overpriced, oversized, and tasteless!
I think that would be the obvious thing. Toll Brothers starts cranking out new homes and then we have another rush for the exits when the supply is too high again.
Not to mention the second round of flippers gets burned on their REO turn arounds.
There are two things that will jar that shadow inventory loose.
Sure, rising prices will do it…but also the passage of time.
Shadow Inventory 85383
As I’ve reported, in this area the total number of short sale homes on the MLS is about 90%, but these really aren’t ready to sell because it can take 6 months or more to close a deal on a short sale.
The remaining 10% are mostly lender owned with maybe 1% being straightforward homes where the owners are not underwater.
The Result? Those properties that are in good shape (maybe 5% of the total) are getting multiple offers because some people “have” to buy.
The fetching Mrs Lip and I made another offer on the last house we’re ever going to buy and the bank came back with the reply, “We have three good offers. Do you want to change your offer?” Our answer was no thanks.
So, for a few nice homes (1 story about 2500 sf) the prices are being supported by limited supply. For large McMansions and 2 story homes, the prices are sliding and IMO heading for a cliff.
Lip
Lip
Thank you for the post. We’re looking for a one-story home/established area ourselves, coming out of a McMansion years ago (this waiting game is getting old).
We are competing with empty pockets, and we’re paying cash. These are years were not getting back. Insane times.
Boy, the banks are arrogant. Thanks for the insight.
AW,
Yes that’s the thing, we’re seeing and hearing about a lot of bidders coming in higher than the asking price while they rely on the government’s low down mortgage money. The problem is many times they can’t get the financing. You on the other hand can dictate your offers by saying “it’s a cash deal”.
So it’s a difficult dance. To look at homes without freaking out about loosing in the bidding war. I’d like to say I’m going to wait until the market crashes, but if the right home comes along (one that I could live the rest of my life in) for me it’ll be worth it to buy.
Best of luck in your search.
Lip
“These are years were not getting back”
So true, short of pulling some radical moves to short ciruit the system, they’re gone. Still, you have to wonder, suppose for an instant there -hadn’t- been a Housing Bubble at all?
Would all this Gov. debt have collapsed the system sooner or later anyway?
The time factor is frustrating…
It costs these empty-pocket dolts nothing. They have no money, they lose the house, they go back to having no money. HBB’ers on the other hand have money and are tired of watching the years slip by and the bill for all this insanity grow. The amount of money and effort being spent to keep housing unaffordable while encouraging people to buy into it is astounding.
Pondering the Mess,
Worse yet is that every dollar we’ve kept in ‘cash’ ( likely out of well warranted apprehension ) is another dollar not working for us.
Most here have considerable cash positions earning paltry interest. Of course many here will argue better ‘that’ than winding up being eaten alive by some dark pool/fat finger fiasco!! But the truth is, it’s a -total- disruption of our normal plans.
I think most/many of us have abandoned the idea of bottom feeding RE ( as was our intent when we first stumbled upon BB’s ) and are now not only “playing defense” with our ‘money’ ( we’re now being forced to play defense w/ our time! )
And there’s no bailout plan that’s going to give you that back.
“It costs these empty-pocket dolts nothing.”
I don’t think Mr. M.T. Pockets is part of the buyer pool anymore.
And this doesn’t get discussed enough here. Maybe BJ can rally the blog so we can determine the current buyer profile. What does the current buyer look like? I don’t know anyone that is buying at the moment.
My anecdotes:
4 w/very deep pockets plus one move up in pretty solid shape. Three purchased homes they describe as their dream homes. One keeps talking about how over the top hers is. One was an inheritance recipient, the other 3 are in upper echelons of vital industries and are self made.
The 5th buyer I know: A youngish couple, retiring w/a very decent gov pension, planned to have their new home paid off in 10 years. They’re not even close to 50. Bravo!
Worse yet is that every dollar we’ve kept in ‘cash’ ( likely out of well warranted apprehension ) is another dollar not working for us.
You do realize that if you substitute “equity” for “cash”, you sound like a UHC right?
It’s the same principle actually. All cash eventually gets used. Not using it now doesn’t hurt the economy in the long run, as long as it’s used at some point.
Cash, like home equity, is not a “use it or lose it” thing.
packman,
No, all I was trying to point out was that ( and contrary to all the good natured fun ) none of us are getting any younger?
Maybe the yardstick shouldn’t be Renter/Loanowner but… Employed/UNemployed? Now… would that be a waste of everyone’s time? Little tough to add to your 401k when uh…
Like I say, I’m over being bitter about all of this, but I don’t think there’s anything intellectually dishonest in taking a moment to ponder where you’d be had none of this happened.
Response to some unkind comments below:
Hey guys, my husband was diagnosed with Glaucoma, and we aren’t sure what the future will bring. With $16K going out annually for health insurance costs, we need to get settled in a home. Our rent & storage situation is more expensive then the monthly carrying costs on a paid off home. For us, it makes sense to buy, so we can cut our loses. Life has given us a Black Swan. His surgery may not last a lifetime. We’d like to wait for better times to buy, but we got caught in a health situation that might change the future. Luckily, we can cut the financial bleeding, and pay cash. I hope that clarifies our need to buy.
Ben-
I hope you read why we are needing to buy a place. The possibility of losing your sight, or partial sight loss, can change plans dramatically. An EE needs his sight to work. Living on one salary (mine)with a paid off home is doable. Don’t be so quick to judge everyone’s reasoning. We aren’t idiots or emotionally drive. Sh*t happens
awaiting wipeout,
Now there’s something I never stopped to think about? For me, just personally, if I had to pay for storage ( I’d probably just rid of it! )
But I DO get where you’re coming from. I’ve seen many people “lose their storage” in the past and certainly more of late. In fact you could almost say that when one goes to be The Happiest Renter In The World ( yeah, uh.. add about $140 bucks a month to the free as a bird tab?
When the wife and I Sold Pre-Bubble, it honestly took almost a year of weekends to clean up all the stuff we stored for free. Sorry to hear about your husband and hope things work out for you!
drive=driven
Dino,
One thing in storage is my $15K Conservatory Grand Piano (also a player), and my quality furniture to fill a house. (control climate storage isn’t cheap.)We aren’t storing cr*p.
We sold our home and then got caught in the storm of insane housing inflation in So Ca. I mean, our former residence eventually doubled in price. No way was it worth $1.2M at the peak. It was just a McStarter Castle, not a Landmark home. People that bought it after our buyers were idiots. It’s back down to $700K+.
Thanks for the well wishes. I got beat up here without mercy. The eye drops alone are $500/mo and we’re insured. I wish we were illegals, sometimes.
awaiting,
You do what you need to do for you and your husband. I hope everything works out for you and your family.
‘I got beat up here’
Yeah, well, I’m sure when you sign on the dotted line you’ll find mercy all around and people will give you your money back if you made a mistake. Everyone has to make their own decisions, but I’ve got too many friends that are F’d to let this ‘years we’re not getting back’ crap fly here. It’s a mean old world out there, and some comments on a blog are the least of a house buyers worries.
“These are years were not getting back. Insane times.”
After bubble watching for 7 years, we purchased a house in January. We probably would have done better to wait another year but our landlord decided to try and sell his place and so wouldn’t renew our lease… didn’t want to move again for just one year. Our purchase made sense for us, room for an in-law unit, the neighborhood we wanted, paid with cash, and just barely pencils out from a rent-vs-own basis. The house was vacant for two years, but we still had a very difficult negotiation with a seller who repeatedly tried to bully us (we walked away twice).
But in hindsight, I don’t know what we “lost” by renting for 7 years. Right now I’m “losing” every weekend and many weeknights in home repairs and updates: painting, caulking, insulating, landscaping, etc… In retrospect, we had a very carefree life as renters… moving every couple of years was nothing compared to the time involved in home maintenance and was a great way to keep from accumulating too much junk.
‘I don’t know what we “lost” by renting for 7 years’
Forget about all those repairs and taxes and the fact that so many are paying half of the FB neighbors are paying; renting is slavery, serfdom and now we hear:
BAILOUTS MAKE TIME DISAPPEAR FOR RENTERS!
That’s right, you bitter renters may not even know it, but YEARS of your lives have vanished. It must work something like this; you sign a lease and a few minutes here, or hours there just don’t happen for renters! Maybe even your time is STOLEN and GIVEN to wall street CEOs or house debtors! So while you miss an hour or two of sleep each night, the FB next door gets to sleep in, ON YOUR TIME.
And you can’t even paint the walls.
Hell, this news is enough to make me want to buy a four-plex. Then I can rent three out and enjoy my extra 6 hours (or so, possibly more on holidays) of time each day from those poor bastards that are paying me rent. Diabolical.
LOL.
So by extension - if one buys enough houses one can live forever right?
‘one can live forever’
Damn, you know, that’s right. Renters must age quicker than house owners! While bitter renters toil away to pay for a roof over their heads, the landlords are actually looking younger! That’s why they have no wrinkles and all that free time/money and get all the hot chicks.
I thought it was the botox.
That would explain the size of the bubble in Florida (”God’s waiting room”). People trying to postpone the inevitable.
Funny my landlord looks like a burnt out hippie. Me I’m looking and feeling pretty darn good.
I hope you read why we are needing to buy a place. The possibility of losing your sight, or partial sight loss, can change plans dramatically. An EE needs his sight to work. Living on one salary (mine)with a paid off home is doable.
I’m sorry about that and good luck to you and yours. No one knows what will happen and sometimes trying to figure out what will happen in an irrational world is too much.
That they manipulated such a basic need as housing should not be forgiven nor ignored for the implications. But it is the reality.
Your situation is not typical for the health reasons nor the paying cash reasons. Paying cash for a house has much different variables than taking on debt for one. Paying the piper is different than borrowing to pay the piper.
You might lose money on the deal but I understand that sometimes it is well worth paying the price for other things besides financial gain.
‘this waiting game is getting old…These are years were not getting back’
Oh, boy here it is again.
Just buy a house already. If reading about thousands of ruined lives and bankrupt companies isn’t enough to make you appreciate what you’ve got and wary of buying a house in your market, then
buy
a
freaking
house
(or two).
Then dont pay and live free for a year or two!
I agree. Just buy a house and you’ll never have to pay another cent for the forseeable future. Talk about free money. Even your groceries will be given to you. I bet you won’t even have to go through the checkstand. “Step aside renters, let the FB through”
Ben - wow. Let us know how you really feel. Something going on the last day or two?
This story is far from over. Karma is a bi#ch. Freeloaders will eventually pay for their “year or two of free rent” one way or another.
No, every so often I feel compelled to chime in on the woe-is-me threads. It blows my mind that even as MILLIONS of people are agonizing over walking away from their houses, people here are saying, ‘hold me back’. I say, go ahead and jump. The blog needs more FBs.
Hey there Ben,
I’m changing jobs in a couple months…. Have to move to a new city.
Been in the same very cheap rental for a decade. Place is falling apart in lots of little spots. Fence has termites. Cracks in ceiling. Bathroom needs work. Carpets are worn exc.
Cost to me is something like zero.
I’m getting an extra prize of a large raise and signing bonus. Company practically had a happy moment because I didn’t use a recruiter and cost to relocate is under 10K.
Anyhow, what ever I robbed myself of renting, I got paid back this month many times over.
And I’m probably going to rent in the new area. Only fear is getting into a place that goes into foreclosure.
Might be cheaper to buy in new area but will hold off till next year after I get a better feel for the area.
No, every so often I feel compelled to chime in on the woe-is-me threads. It blows my mind that even as MILLIONS of people are agonizing over walking away from their houses, people here are saying, ‘hold me back’. I say, go ahead and jump. The blog needs more FBs.
Well, in defense of potential FB’s - the constant pumping by the does appear to be working, for the time being at least.
I think part of the frustration is that a lot of people are waiting for prices to get back down to or below historical norms - but now have seen a year’s delay. They’re wondering if they might have missed an opportunity to “buy at the bottom”.
However that being said - the expiration of the tax credit and of the Fed MBS purchases will almost certainly push that line back in the downward direction again, and soon if not already (the data’s a couple months old).
However that being said - seems like if someone’s got enough money saved and is ready to buy, then by all means do it. If prices fall another 20% or even 30% then so be it - for some people it’s worth it. FWIW - I sold and then bought again in 2006. I could have rented for a while and saved a chunk of $$ - knowing what I know now (that prices would fall another 30% in my area) I probably would have; however I don’t really have any strong regrets about buying. There are lots of other factors involved besides money (assuming the ability to afford your mortgage isn’t an issue). E.g. I like doing DYI projects, and I really hate moving. The latter doesn’t apply as a factor though to someone who’s currently renting (unless they have to move out of the current rental).
‘part of the frustration is that a lot of people are waiting for prices to get back down to or below historical norms - but now have seen a year’s delay’
A year? Did you see the chart the other day of the 15 year slide in Texas? And those prices weren’t even that far off from ‘historical norms’, not like the 800-900k houses you see talked about here.
I’ve never been very interested in what any one person decides to do about housing. History won’t remember and neither will any one here. What I am focused on is this enormous financial event, that IMO will be discussed for hundreds of years. I think many posters forget just how big this mania is, and don’t consider what fallout might lay ahead.
One more thing about buying and I’ve got to go back to work on a (used to be) $800k foreclosure. Why do people walk away from houses? Not because the place is worth less than they paid for it, but because it’s worth less than they owe…
“One more thing about buying and I’ve got to go back to work on a (used to be) $800k foreclosure. Why do people walk away from houses? Not because the place is worth less than they paid for it, but because it’s worth less than they owe…”
Right. And they also walk away because they cannot even begin to afford the mortgage they signed up for given all the other costs of home “ownerships”, and life itself.
I think “frustration” is the key word here. And no I’m not whining. Frustration with a housing finance system 100% co-opted by the banks, 100% endorsed by the federal govt and ready to collapse, yet the piece of $hit is still standing in spite of the fact that sales volume is a fraction of what it was at the peak, in spite of the hundreds of thousands(or maybe millions) of destroyed personal balance sheets. When doubts creep in about the collapse, the answer isn’t signing up for 30 years of wage slavery.
awaiting,
I am so sorry to hear about your husband’s glaucoma. Hopefully, you will find a house that will make you happy for the rest of your lives.
There is no doubt we all have our particular circumstances that affect what we should and shouldn’t do. I totally understand your frustration about the years we aren’t getting back.
Best of luck to you and your husband!
Lip
Was that a Short Sale or REO, and how long did the bank take to get back to you?
Secondly, what state are you in?
Lip and CarrieAnn
Granted, there is an big emotional component to a home purchase, but buyers have lost their minds. Nothing was learned in this bubble. Not to mention, all the flippers wanting insane prices for post WWII shacks.
So Ca has a great climate (that’s all that’s left), but you can’t eat sunshine.
AW,
Our latest was a “lender owned” home and they replied on the first business day.
Here seems to be the way they go. A house sits as a short sale for an unknown period of time. Then when they finally foreclose, they seem take their time putting them on the market as a foreclosure. When they do, they put them on the MLS on a Saturday where the property has a couple of days to be seen.
If the property is any good, ie one story and ready to be moved into, they get multiple offers. Other properties seem to languish for a while and are subject to being lowballed.
Lip
Lip….2500 sq.ft. single story…Roughly how much $ per foot ?
2500 single-story…that brings back childhood memories of driving through the “rich people” neighborhoods with the sprawly single story well-maintained homes on larger lots with beautiful windows and green lawns and well-kept landscaping and trees in back and a garage that was somewhat hidden.
Nowadays, the equivalent money won’t even buy you a maple tree because the roots would hit the sewer pipes in the front lawn or upheave the glaring-white driveway which leads to the ginat garage door which is the main feature of the elevation.
Nice ones are going for about $100 per sq ft. By nice I mean the paint and the flooring are in good condition, the location is in a quiet neighborhood, plus the pool is ready for the munchkins to jump in.
I know its more than I want to pay, but to avoid the hassle of renting, moving twice etc I’m willing to do it.
I know, in SoCal you can’t get a shack for that, but here its a different story.
Thanks Lip…That sounds like decent value given what it may cost to replace…Good Luck..
…which leads to the ginat garage door…
Personally, I like my gin at the bar.
Sometimes I think I need a gin and tonic just to endure the sight of those garage doors.
It was about 10 years ago that I realized that A LOT of houses do look like garages first and homes second.
“garage mahal” was a term coined here (hbb) years ago, and it sure does fit most homes. Notice all the new garage door styles, trying to make a statement. What a waste of money.
Garage Mahal is one of my favorite bands. Try Indian curry-flavored jazz, and you’ll get the picture.
It’s happened here. Inventory is up over the norm. But it’s all in the high priced niches, ultra low or scratch and dent or lot issue homes. Looking for median income level target homes in nice shape: Good luck. The tax credit cleared them out. Even homes that needed lots of work if in a desired part of town have a SOLD sign sitting out front. Never saw the sheeple so herded in my entire life.
I’m wondering if this credit sucked all the summer inventory forward or if anything else will come on. It might be worth signing a lease till next year as anything that comes on w/such low inventory will be overpriced and probably be another multi offer situation if in any type of good shape at all. This is not how I expected this to go.
“Never saw the sheeple so herded in my entire life.”
CarrieAnn, neither have I. I cannot believe the govt and banks crazy scheme worked so well. It blows me away. Depressing.
It is unreal.
I figured the government would try to Bail Out this situation, but I really didn’t think the general population would be dumb enough to fall for it. I figured that after taking a few good financial hits, people would wise up; nope, they just assume that the Bubble bursting was like a June frost and now we can back to the “new economy” of flipping houses at ever increasing prices. The delusion runs strong and Denial is everywhere, even today.
The tax credit cleared out almost everything around here, too. Lots of people buying houses for no other reason… it would be like buying a car you don’t need just because somebody will knock a few hundred off the price “today only.” I even seen people who were once sane buying (or at least making bids) since they’ve given up and figure things will eventually start going back up… It’s infuriating; prices are still badly out of line with incomes and the market is clogged with overpriced teardowns and grossly oversized and overpriced McShacks. What a waste!
Pondering the Mess,
Great post, it really hits home for a lot of us. Yet.., I’m just not sure it’s Denial or Delusional or whatever? I don’t think these late round specuvestors have any delusions the underlying economy is “strong”?
I don’t. They don’t have any designs on actually ‘holding’ them ( like it was a stock fer’ chrissakes ) holding them long enough to find OUT if there’s going to BE an Implosion 2.0?
If anything, it only creates that much more of a sense of urgency to their scurrying activity.
We share your frustrations.
Our inventory is low (but a bit more than most of 2009, thankfully!). Everything is still overpriced, and some homes are selling for over “peak” pricing.
————————-
Like Lip and Awaiting mentioned above, some of us have been very patient for many, many years. We knew it would take a long time to unwind, but the stubborn insistence of our govt to keep housing prices at unaffordable levels…and to see the deadbeats living for free and rubbing our faces in it (while we earn sub-2% on our savings)…well, it gets tiresome.
We have kids, and we’d like to have them grow up in our “owned” house where we can decorate and design thing specifically for our own family. These are the years we can never get back, Ben. It’s hard to understand without walking in our shoes.
This stalling by our govt/PTB is criminal.
We have kids, and we’d like to have them grow up in our “owned” house where we can decorate and design thing specifically for our own family. These are the years we can never get back, Ben. It’s hard to understand without walking in our shoes.
But why is a year without a customizable home a “lost” year? IMO what’s lost is made up for by what’s gained in security and financial ability to do more things with the kids. When we were in our house we didn’t have money to do stuff…now we can do almost anything we want, and my son is enjoying it a lot. The situation is annoying, but in no way are the years “lost”.
But it’s all in the high priced niches, ultra low or scratch and dent or lot issue homes.
Which brings up another point. Has there been any time when there was so much low-quality housing? I remember when bad houses were the exception, not the rule. But now, people don’t want to live in bad neighborhoods, attached product, slap-up Chinese Drywall, bad floor plans, frekin’ floating boxes of air (condo), postage lots, far-flung commutes… housing is either really good ($$) or just bad.
It’s like we’ve lost the “middle class” of housing, the same way we lost the middle class of labor, and the middle class of food, when you think about it. I guess we have become a banana republic in many ways.
Good points. In Portland, OR during the boom years, virtually anything that could muster a Certificate of Habitation was $300k. Be it a 600 s/f condo or a NoPo ( N. Portland ) bars on the windows special!
At least we’re now seeing a differentiation in price! As long as it’s priced appropriately.., I don’t have any issues w/ low-quality housing. Used to be if you were willing to have a longer commute, yeah, you could save on your housing costs?
When you’ve reached a saturation point where there ‘are’ no good options in your area, well, you wind up on this blog.
When you’ve reached a saturation point where there ‘are’ no good options in your area, well, you wind up on this blog.
Yep. I’m still waiting to see a basic 3-bedroom, 2-bath house in Silicon Valley, 1500+ square feet, not in horrible condition or a crap neighborhood, for less than $550k (roughly the level supportable by rents). It hasn’t happened yet.
it’s like we’ve lost the “middle class” of housing
I guess when you lose your middle class, you lose middle class neighborhoods. They become either upper class enclaves or lower class ‘hoods.
This is exactly what’s happening in the U.S.
The middle class is gone, and the housing/neighborhoods that once represented that middle class lifestyle are now gone as well.
I think this is one of the reasons the illegal immigrant debate is so heated. It represents to many of us how we are sinking to Third World status — where you only have the few very wealthy families living in gated communities, and the many poor who live “on the outside.”
I totally agree: Maryland, for one of the wealthiest states in the Union, has to be the posterchild for depressing housing. Here are some of the things to look forward to around here:
1) Entire neighborhoods of Post WW2 shacks and shoeboxes. Many in bad shape, most lacking central air, some still on well waster, septic systems, oil heat, etc. No place to put your car except on the narrow street, everything crumbling, etc. Oh, and even these houses are overpriced.
2) Condos in the middle of the suburbs. No logic at all to this nonsense: why would you buy a glorified apartment outside of a city. Many homebuilds put these up all over since the profit margins are huge even though they make no sense.
3) McMansions: We know what they are. Huge, often poorly built, grossly overpriced, and crammed together on lots so small that there’s barely enough room for a Bradford Pear tree to reach 10 years of age and fall apart.
4) Older HOA ruled communities: may have decent houses, but are ruled by insane HOA’s that operate outside the law.
5) Super-sized townhouses: Because everyone wants a 4 story monster townhouse that costs as much as a large single-family home but lacks a yard. And, enjoy climbing up and down all those stairs in your old age!
For such a wealthy state, we have a lot of junk and white elephants for housing.
i live in MD and agree for the most part. But I find that older neighborhoods often don’t have crazy hoa’s. Mine doesn’t require a fee - you can choose to pay the $25 a year if you want. Sensible rules. About 1500 sf, very nice neighborhood. Baltimore County. Nicely maintained, most converted to central air, no more oil heat, etc.
But yes, the kool aid drinking here is insane
Amen. I went to look with some friends at a foreclosure in a newer (2003) area of Sacramento that they were interested in. I was discouraging them, harping on quality, small yards, HOA, flood insurance, etc, and as we left the property we were confronted with a defect in the stucco on the backside of a pillar at the entry. Inside was styrofoam! The couple looked at each other, said “styrofoam!” and we never went back to that area. The house went pending for a high asking price the next day.
But I’m seeing some pretty neglected situations in some pretty high demand neighborhoods. That’s what I’ve found shocking.
It could be that taxes skyrocketed since they purchased many years ago. It could be that they would do anything to get into this district and left themselves w/nothing else. It could be they’re divorcees hanging on by a thread like the person I bought my last house from. It could be that vacations were more important.
It’s just that median income is supposedly pretty high here.
I’ve seen some pretty high powered degrees hanging on some of the walls. Yet they weren’t going for the granite and the ultra sized laundry room. Heck, the windows and roof aren’t even maintained. And do ya think they’d know drains will help that nasty water in the basement issue? Apparently they’d grown used to the smell. And people keep buying at ever increasing prices so maybe the sellers that let them go ARE the smart ones. Spend nothing. Dump on the next generation. Help your own kids w/the profit. Hmmmmm.
Not out here. Tons (about 400) of under 200K houses for sale in Loveland. Sales are barely up, even with the now defunct tax credit
In Colorado,
More than any other two states in the Union ( OR & CO seem to have the most in common? ) That is more or less what we’re seeing here as well.
But that’s not in any way to discount alpha-sloth’s polarizing observation. In fact, that’s a lot of what the HB was all about. Be they outlying Exurbs or former warehouse districts gone upscale condo.., the REIC message was:
If you don’t want to be left behind in a dumpy area ( it’s going to COST you! ) They made no bones about it.
“Looking for median income level target homes in nice shape: Good luck. The tax credit cleared them out. Even homes that needed lots of work if in a desired part of town have a SOLD sign sitting out front. Never saw the sheeple so herded in my entire life.”
In my opinion, based upon what I see out west, it’s not so much due to average people buying but rather an absolutely eye popping number of speculators in the marketplace. It seems there are as many or more of them out right now than there were during the heyday of the bubble. Any houses on the lower end that are even remotely affordable have multiple offers immediately.
My mother had wanted to purchase a small house to retire to in Nevada, but as soon as prices even came close to historical norms, the inventory disappeared. In an area which has an official unemployment rate of 17.5%, the worst ever on record, houses are selling at a rate never seen before. Speculators ARE the market.
Grizzly Bear,
Sorry to hear that. Yeah, you can’t even have modest aspirations in this mess any more? Played out against 17.5% Unemployment ( are you kidding… me! ) and still nothing is a given.
I have a realtor sending me listings from Vegas and no sooner had things cratered, bada bing! Let the retracement begin! Totally insane.
Grizzly,
Yes, that’s exactly the problem.
I have a feeling that the insane investor activity is fueled by the freakishly low interest rates.
You can now buy a house for cash and earn more renting it out (or flipping it) than you can in any kind of (equally risky/safe) savings vehicle.
If interest rates would rise, I think the investors would disappear…but Bernanke seems intent on keeping the pedal to the metal for “an extended period of time,” no matter what.
N.Y. Lawmakers Pass Job Furloughs for 100,000 in Emergency Bill
(Bloomberg) — New York legislators agreed to force 100,000 state workers to take an unpaid day off each week under an emergency spending plan that will keep the government running while lawmakers try to close a $9.2 billion budget gap.
The furloughs, set to save about $30 million weekly, may “ratchet up the pressure” on lawmakers, Governor David Paterson said today in a radio interview on WBEN in Buffalo. Legislators haven’t agreed on a budget for the third-largest state by population. The fiscal year began April 1.
“Neither legislative branch has a plan that balances the $9.2 billion deficit without borrowing money,” Paterson, a Democrat, said on WBEN. He proposed a $135.2 billion budget in February. The two chambers, led by Democrats, have agreed on about $7 billion of deficit-closing actions, he said.
Union leaders called Paterson’s furlough plan illegal last week.
What? Austerity measures!… Here?… Union protests?
pressboardbox,
That was a little strange to wake up to on the west coast? A protestor w/ a child strapped to their back w/ a sign that said “You are STEALING from my Mommy!”
New York legislators agreed to force 100,000 state workers to take an unpaid day off each week ??
At least they had the gonads to do it unlike the weak stomachs that we have in Sacramento…
My CA state worker friends have been taking 3 furlough Fridays since July 2009, I believe it’s about a 14% reduction in pay.
been taking 3 furlough Fridays since July 2009 ??
Yes but its “selective” correct ?? Almost random. Point to the New York article is that it was for 100,000…Everyone shares some pain not just the weaker groups that don’t have political clout…
First 3 of the month for every one. Equal 15% pay cut. Even the guys paving the cruddy roads.
Three furlough Fridays a ‘month’? Or just 3 since ‘09? I’m sure you meant a month, right?
Yes, 3 per month. The furloughs were stopped for 67 Departments in March 2010, but CA Administration is appealing again. Most of my friends altered their W4 withholding, but still live on the edge. The fault is theirs not the states.
Our local teachers are getting a big pay cut next school year. Starting pay for a new fresh out of school teacher is 29K, 33K if you have a Masters degree and almost 40K if you have a PhD.
To think teachers used to teach competently by just going to the state Normal School or teacher’s college..
Teaching used to pay enough to be a lower-middle class career. There were a lot more male teachers back in my day, especially at high-school level, and especially math/sci. (The math/sci teachers were usually those who weren’t good or lucky enough to make it in industry.) It wasn’t impossible to support a stay-at-home mom with few kids on a teacher’s salary. Now it’s just a wife job. She gets a lib arts degree while courting hubby in college, then she takes a couple courses and voila, it’s something to bring in income while hubby plays Master of the Universe at the bank or the corp. Wifie can afford a lower salary, and the state pays what the market will bear.
I disagree, oxide. Entry level teachers in California only make about $36,000, but they get predictable raises every year and make $50,000 within 7 years or so. That’s a solidly middle-class job with good benefits and a pension. Plus they get summers off and could work summers if they felt like it.
Pink collar jobs are the toughies - $20,000 to start with meager benefits and little advancement. And there are women who are raising families on them.
You are correct REhobbyist…My daughter is a teacher…
Meh… 50K divided by 25 kids per class… 2k per kid per year.
About 1.25$ per hour for your average teacher.
Probably another 2.50 per hour in overhead. Paying for the buildings, admin and such.
Sounds pretty reasonable.
Can’t get that kind of rate from many private care places.
Really - so that’s how my daughter became a teacher. Funny, the story she told me is that she gave up law school because she didn’t want to raise her kid in LA for another 3 years. So she, grandson & SIL moved to desert where she started at a small private school being a computer lab asst & SIL went back to school to get teaching certificate while subbing. They never expected to get rich, but they felt compelled to help out the next generation. When did teachers go from being appreciated to being seen as money grubbing leeches? Because they want they want decent pay for a job most of us could not do? Do we not realize they are our relatives, neighbors & friends? They are not the enemy. Rant done.
When did teachers go from being appreciated to being seen as money grubbing leeches?
Because the other unions are more powerful when it comes to cutting back…When the state cuts back, they always cut in the places of the least political resistance…
Teaching may not be the route to riches, but it can provide a secure middle class lifestyle. Generally, after a few years a teacher is for the most part absolutely secure in his job, has received significant raises or is on the admin track. Most teachers has gold plated health and retirement benefits. For many teaching families, this is X2 because both husband and wife are teachers.
Contrast that with other non-professional college grads who may make a higher starting salary (not always), but typically have mediocre health benefits, 401-K’s for retirement, and in todays world is always at risk for lengthy un-employment.
Having had two kids go through the public education system, I can say from experience, there are a few very good teachers out there, a bunch of mediocre ones, and a few very poor ones. A few are dedicated, but for most, its a job.
All you have to do is ask yourself who would pick on working people.
Spokaneman,
After having two daughters ourselves go through the public system, I think your assessment is fair and accurate. K-8 we had a great “one room schoolhouse” type of setting. Everyone was just fabulous.
But by the time they were in the HS system, it was altogether too obvious it was in many cases just a job! I think the teachers were more enthused to see the end of the “year” ( there’s a laugh ) than the kids.
I guess that’s why I tend to find the “furloughs” so laughable? As if there were any connection.
On long island, depending on the district, teachers usually start at 30-40 thousand/yr and top off at 90-110/yr, some go as high as $125,000. District supervisors’s can go as high as $400,000/yr.
Generally, after a few years a teacher is for the most part absolutely secure in his job, has received significant raises or is on the admin track.
It depends. My sister has been a teacher for 10+ years and she makes 40K (in NC) and here in my neck of the woods that is also the princely sum they are paid after 10 years.
As far as job security they getting laid off around here. When there is no money, there is no money.
Yep. Plenty of teachers get laid off regularly in California, too.
It’s a myth that teachers have solid jobs.
FYI
This practice is nothing new for NY. They still owe current employees for a week they took back in 1991 or 92. Basically they delay your paycheck a week and you’re made whole upon retirement or resignation.
I’m speaking from my wife’s personal experience.
Right Ex, it’s called a lag payroll. They owe me four weeks pay until retirement.
Where in NY are you?
Legg Mason to cut 250 jobs in Baltimore area
Layoffs will affect 30 percent of the local work force as money manager moves work to affiliates across the globe ~ The Baltimore Sun
Money manager Legg Mason Inc. said Monday that it will cut 250 jobs in the Baltimore area — 30 percent of its local work force — in an effort to boost profits by shipping the work to affiliates around the world.
Most of the layoffs will be achieved by shutting down the company’s Owings Mills offices, with the rest of the job cuts at its brand-new building on the city’s waterfront in Harbor East. The move will bring the company’s Baltimore-area employment to about 550 — a drastic drop from just two years ago, when nearly 1,000 people worked here.
“Affiliates?” Is that what they call it these days?
Nice post wmbz….Al I seem to see is 250 job cuts here and 400 there…Where is the news of 400 job hires other than the Census ??
What a surprise… wheres all the new “transparency”?
Watchdog: Treasury lax with records in bank talks
Bailout watchdog says Treasury’s lax about record-keeping in dealings with bailed-out banks
WASHINGTON (AP) — The Treasury Department is lax about keeping records of its negotiations with bailed-out banks, including undocumented conversations in which billions of taxpayer dollars are at stake, a new watchdog report says.
Treasury fails to keep meeting minutes or notes from phone calls with banks that received money from its $700 billion financial bailout, says the report from Neil Barofsky, the Special Inspector General for the bailout fund.
Barofsky’s audit concerns Treasury’s negotiations to sell bank warrants — securities that allow the holder to buy stock in the future at a fixed price. Treasury received the warrants from hundreds of banks as a deal-sweetener as it injected billions of dollars to stabilize the reeling banking sector.
The report blasts Treasury for failing to keep complete notes about the process by which it sells those warrants after banks have returned their bailout money.
“When a brief telephone call can mean the difference of tens of billions of dollars, it is a basic and essential element of transparency and accountability that the substance of that call be documented,” Barofsky writes.
BWAHAHAHAHA!!! That’s a good one.
Do they seriously expect all the important conversations to be recorded?
Meetings with minutes are for working out the logistics and doing the rubber stamping. By then the important decisions have already been made, in other meetings that are not recorded.
If you don’t run with the herd, you’re on your own.
Britain must fend for itself in event of crisis, French official warns
Britain should not rely on EU help in the event of a renewed financial crisis after refusing to sign up to the bulk of a €500bn (£429bn) rescue package for the eurozone, the head of the French financial markets watchdog said.
By Angela Monaghan, Economics Reporter
Telegraph
Jean-Pierre Jouyet said the UK would have to fend for itself if ongoing political uncertainty led to a meltdown in the financial markets.
“The English are very certainly going to be targeted given the political difficulties they have. Help yourself and heaven will help you. If you don’t want to show solidarity to the eurozone, then let’s see what happens to the United Kingdom,” he told Europe 1 radio.
Mr Jouyet, European affairs minister from 2007-2008, was clearly angered by the Chancellor Alistair Darling’s refusal to pledge funds in an attempt to protect the euro, by failing to agree to provide troubled eurozone countries with €440bn in loans or guarantees.
He said it was a clear sign of the divisions within the European Union. “There is not a two speed Europe but a three speed Europe. You have Europe of the euro, Europe of the countries that understand the euro…and you have the English,” he said.
In keeping up with the Joneses, England should do a $1 trillion bailout. Everyone’s doing it.
Sounds like typical French sniping at the Brits. Been going on for centuries.
Stick a fork in the EU, it’s done.
Uncle Sam will bail out the Brits and they know it. Fed and Bank of England have being buying each others junks with the same fervour with which virtual eyeballs were traded in 1999.
Here we go again. Europe gets into trouble, then calls 1-800-USA-HELP.
No blood this time, just treasure?
Is it better to be a fat herd animal running headlong with your fellows over the edge of the nearest cliff, or the thin one watching in dismay from above as the stampede plummets towards the wicked and expedient ground below?
But is the herd running off a cliff or being circled by hyenas? Each calls for a different survival strategy.
It looks to me as though the herd is being chased by hyenas towards the edge of the cliff.
Even worse. When the fat herd goes over, the hyenas will realize they can’t get down to the carcasses, and so will then turn on US. Time to stock up on canned peas and AK-47s.
Perhaps the herd can jump off the cliff into a sea of liquidity provided by the bailouts?
Are they farting in their general direction???
the Iceland strategy
+1
“If you don’t run with the herd, you’re on your own.”
Oh yeah, and if you do run with the herd, they end up trying to stuff you into a long black rubber sauage casing.
173d Airborne Seperate, aka…the 3rd Herd.
Here’s a good political cartoon from Spain…..
http://strangemaps.wordpress.com/2010/05/08/463-spanish-whispers/
Hey, boyz and girlz, they’re gonna have CONGRESSIONAL HEARINGS on the BP oil spill!!!! OMG, I bet those bad boyz are literally SHAKING IN THEIR BOOTS!
Bah. They’re warming up the filet mignon at McCormick and Schmick’s to greet the triumphant BP execs as they endure a few hours of free humiliation in return for years of profit from cutting the safety and R&D budgets.
I for one want to watch when the Coast Guard and DHS hand-deliver them the bill for the cleanup. Ya think Katie will have it on the News?
Coast Guard, maybe. DHS, not so much. Not with that sadistic freak at the helm. The more destruction, the better.
Meh. Sex is always involved, somehow. Can we put mandatory saltpeter rations in place for government officials?
http://www.businessweek.com/news/2010-05-11/oil-spill-agency-fetches-13-billion-amid-cozy-ties-update1-.html
A little nookie, and voila! Oil spill.
But the coast guard caused it?
I think BP will be A-OK.
Obama was top recipient of BP-related dollars in 2008
CNN | May 5, 2010
Washington (CNN) — As petroleum giant BP comes under congressional scrutiny as its ruptured oil rig pumps thousands of barrels of oil into the Gulf of Mexico, its political contributions are being scrutinized, too.
The top recipient of BP-related donations during the 2008 presidential election was Barack Obama, who collected $71,000, according to the nonpartisan Center for Responsive Politics.
Sounds like a typical Rush talking point. In mid-2008, Obama collected upwards of $35-45 million from individual donors every month, and those donations spiked up whenever Sister Sarah opened her maw and exposed the empty space behind. Do you honestly think Obama cares about — or even remembers — a paltry $71K? What’s BP gonna do? Call up Obama and say “if you don’t cover for us now, we’ll not donate $71K in 2012?”
Hmmm -
Well, at least it seems we have narrowed down the range.
BP - $71,000 to obama for not much support during this oil spill
GS - $1,000,000 to obama for a massive bailout and protection from criminal probes
I wonder where the line exactly is…
Nice try with the logical fallacy. You are assuming that the Obama is doing everything on the basis of campaign contributions alone, and therefore we can predict Obama’s behavior based on a few numbers from opensecrets dot org. There are far more variables than that and you know it. Like, say, Congress, who I don’t trust.
But even if your assumption were true, you’re still off base. Compared to those tens of millions, a paltry 1 million won’t buy you much more than $71K. Therefore I highly doubt Obama bothers about the $1M from Golden Sacks either. Your average Palin rally brought in more money to the Democrats than GS ever did. The bailout was because they were Too-Big-To-Fail (and they got that way HOW?), not because they handed O money. And we don’t know about criminal probes yet. It’s plausible that GS wrote those laws (under the Reagan/Bush admins) and therefore know full well how to exploit the loopholes.
What did you expect from an EddieTard type?
…and those donations spiked up whenever Sister Sarah opened her maw and exposed the empty space behind.
Delightful prose. You’re really on today, oxie.
71k? Big money folks big money… NOT!
Even a money grubbing GOP’er wouldn’t whore for that pittance.
Yeah, you MIGHT be able to rent a House member for that amount, it certainly won’t buy a president.
I think that members of Congress should list prices for their services on their website; that way, we know how much it takes to buy a bill, rent a congresscritter, etc. Isn’t this part of truth in advertising, or something like that?
Also, they should wear patches with the logos of the companies who own them; also, don’t say which state they represent, but which industry or company. Now that would be transparency!
Also, they should wear patches with the logos of the companies who own them; also, don’t say which state they represent, but which industry or company. Now that would be transparency!
NASCONGRESS
And what exactly does this say about the public? If they are ALL so obviously corrupt, why did anyone vote for them in the first place. It doesn’t matter how much money they raise, if the public doesn’t vote for them, they’re out. No one forced anyone to vote for any candidate. And does this mean that it’s been going on for 200 years? Have all elected officials been totally corrupt? If not, when did it start? Who was the 1st corrupt official? How come no one has done anything about it for all this time?
are they crazy,
Good point, that could be one way to break them. Usually whoever is ahead in early polls attracts the money ( they’re not stupid you know )
This is the very brand of reasoning we should be applying to the REIC. Who was the first corrupt apparaisal firm? Which Relitter first steered unqualified buyers toward Neg/Am loans? Who ’started’ the N/A Loan program?
Instead we’ve all spent -way- too much time chasing barn doors. And… ( I fear ) unless we’re able to re-focus the debate, all we’ll keep getting is more Bailout Packages. There was solid discussion yesterday on how the Tea Party ( originally just anti-bailout ) derailed.
Have you ever seen the trend on voters? Less people have voted each year for decades now.
And no, if people didn’t vote, there would still be enough party fanatics to get someone elected. There are no min number of votes required in the US.
“I think that members of Congress should list prices for their services on their website; that way, we know how much it takes to buy a bill, rent a congresscritter, etc.”
Once upon a time in this blog someone suggested that all elected officials be required to sew logos of their “sponsors” on their jackets, much like Nascar drivers sport the names of their sponsors on their equipment of trade. I thought that was a rather intelligent idea. Kind of puts everything right out on the table.
I’ve spread that one around too, and everyone I talk to loves the idea.
Again, another gimmie for congress! They live for such things - it’s a one off event, there’s a “bad guy”, plenty of photo ops, etc.
Nothing at all like dealing with Freddie and Fannie for instance.
Why is it again that American tax payers are still being forced to pour their wealth down a real estate rat hole? I’m missing it.
WSJ Op-ed
* REVIEW & OUTLOOK
* MAY 11, 2010
$145 Billion and Counting
Fannie and Freddie lose it all for you.
Fannie Mae yesterday announced its 11th consecutive quarterly loss—$11.5 billion—and asked for another $8.4 billion in taxpayer assistance. When it comes to losing money, nobody does it better than this government-created mortgage investor.
…
Ramping up modifications makes perfect sense in the upside-down world of Fannie Mae. The company also announced that most of the loans it modified in the first three quarters of 2009 had gone delinquent again within six months. Talk about an exciting business opportunity! In case anyone still hasn’t gotten the joke, the company also clarified yesterday that its directors “are not obligated to consider the interests of the company” unless the government tells them to do so.
The real joke is that the Obama Administration and Senator Chris Dodd have collaborated on a financial regulatory-reform bill that includes no reform of Fan or Fred. Senators should rectify this embarrassment as early as today by voting for John McCain’s amendment to end this most costly of all bailouts.
Have any congressional hearings ever lead to ANYTHING??
You watch the “dog & pony show” hearings.. & then… after many days of MSM coverage… NOTHING HAPPENS!!
Well, they did stop Mccarthyism, but that was another era. (pre-Fox)
These days they have no shame.
-or decency
“At long last, sir, have you no sense of decency?”
“Why, no, I don’t, ya commie. Now if you’ll excuse me, I’m due on Glenn Beck in an hour.”
Yeah, that’s it. The source of all our problems is Fox News. Gee, who’s running this country these days anyway? Oh, bummer.
How do you think Fox would have covered the McCarthy Senate hearings, Chris? I find it hard not to imagine that the Beck/Oreillys of the time would have spun McCarthy’s line, made him look like an ‘honest voice’ being picked on by ‘liberal leftist elites’, and turned him into a folk hero. Maybe even a presidential candidate. You betcha!
Luckily there was no spinning at all, thanks to the unwavering honesty of the non-partisan media at the time. I don’t trust FOX much either these days, but I’m not going to pretend our president is not an empty suit, when he so obviously is.
I’m not going to pretend our president is not an empty suit…
An empty suit like your straw men?
Empty suit
Watch out for the telltale Rush talking point! Anytime you hear about Teleprompters or Empty Suits or Community Reinvestment Act, or Obama’s “gonna” do this and “They’re socialist in Argentina, and hey I’m not saying Obama’s gonna be like them but…” then you know you have a full-blown dittohead on your hands.
Can’t you guys make up your own talking points?
Wall St. Helped to Mask Debt Fueling Europe’s Crisis
By LOUISE STORY, LANDON THOMAS Jr. and NELSON D. SCHWARTZ
Published: February 13, 2010
Wall Street tactics akin to the ones that fostered subprime mortgages in America have worsened the financial crisis shaking Greece and undermining the euro by enabling European governments to hide their mounting debts.
As worries over Greece rattle world markets, records and interviews show that with Wall Street’s help, the nation engaged in a decade-long effort to skirt European debt limits. One deal created by Goldman Sachs helped obscure billions in debt from the budget overseers in Brussels.
Even as the crisis was nearing the flashpoint, banks were searching for ways to help Greece forestall the day of reckoning. In early November — three months before Athens became the epicenter of global financial anxiety — a team from Goldman Sachs arrived in the ancient city with a very modern proposition for a government struggling to pay its bills, according to two people who were briefed on the meeting.
The bankers, led by Goldman’s president, Gary D. Cohn, held out a financing instrument that would have pushed debt from Greece’s health care system far into the future, much as when strapped homeowners take out second mortgages to pay off their credit cards.
…
Paul B. Farrell
May 11, 2010, 3:33 a.m. EDT
Buffett defends Goldman, joins greed Conspiracy
Uncle Warren strums ukulele, in denial of Wall Street’s toxic business model
By Paul B. Farrell, MarketWatch
ARROYO GRANDE, Calif. (MarketWatch) — Warning: Bears taking over. Time to short Buffett’s new “Baby Berkshires,” short Goldman, short Moody’s and other favorites of Uncle Warren.
Why? Behind the façade, the lovable, good ol’ Uncle Warren strumming his cute little ukulele, ostensibly supporting reform, there’s a dark force that’s part of the toxic Goldman Conspiracy fighting to keep alive everything that’s wrong with Wall Street, everything that got us into this mess, everything that will trigger another meltdown that even Uncle Warren says: “I can guarantee it.”
Buffett belongs to the past while the news screams of a new world order … Riots in Greece, more coming when the other PIIGS demand EU bailouts … conservatives regain Britain … unregulated BP’s greed is spilling millions of gallons of oil destroying Gulf states, confirming Foreign Policy magazine warning of the “End of the Age of Oil” … the Dow’s techno-fear-driven irrational 1,000-point plunge as technicians turn bearish, ending the year-long bull rally … even Hank Paulson’s changing his tune, warning the Financial Crisis Commission that we need stronger reforms than Dodd’s Senate bill.
Meanwhile, out there, seemingly oblivious of the gathering storm is an aging Woodstock hippy, good Ol’ Uncle Warren strumming away on his ukulele, an over-the-hill rock star basking in the adulation of 40,000 adoring shareholders at their annual meeting in Omaha’s Qwest Center … a scene reminding us of Nero fiddling as Rome burns … of the string quartet playing on the deck of the sinking Titanic … of a Shakespearean tragedy with a raging, blind King Lear trapped, in denial of his role in America’s collapsing empire.
Yes, folks, Uncle Warren has a bad case of denial. Remember, not too long ago Buffett was calling derivatives “weapons of financial mass destruction.” And yet, there he was on stage at his love fest last week defending Wall Street’s most toxic companies, trapped in denial, defending the greedy culture that got America into its current mess:
* Praising Moody’s “business model,” and by inference all rating agencies that blindly rubberstamped Wall Street’s toxic debt, setting up the last meltdown
* Defending Goldman Sachs bad behavior despite the fraud suit and a possible criminal indictment (while hiding his own conflicts of interest as a big investor in both Moody’s and Goldman)
* Praising Goldman’s CEO Lloyd Blankfein … by far Wall Street’s greediest fat-cat banker who paid himself $68 million of his stockholders profits last year
* Defending Goldman with a bizarre argument that Goldman is no more guilty than the other Wall Street banks, a tacit approval of the bad behavior of all Wall Street banks in the Goldman Conspiracy
* Worse, ol’ Uncle Warren also tried deflecting attention from Wall Street’s corrupt business model by blaming government regulators for the meltdown, another example of Uncle Warren’s blind denial, ignoring the fact that in the past year Wall Street spent over $400 million on lobbyists and campaign cash to make absolutely certain regulators, Congress and the Obama team all played along with Buffett’s songs that guarantee Wall Street controls Washington regulators
* Ironically, all this comes from a man who once lectured Congress on “Moral Integrity: I want employees to ask themselves whether they are willing to have any contemplated act appear on the front page of their local paper the next day, read by their spouses, children, and friends … Lose money for my firm and I will be understanding; lose a shred of reputation for the firm, and I will be ruthless”
Yes, Buffett’s in denial … just like his banker buddies … so short Buffett, short Baby Berkshire, short Goldman, short Moody’s. Why? They are all “shorting America,” piling on debt that’s pushed our debt-to-GDP ratio to 92%, past the IMF’s 90% danger zone.
…
Sophisticated stuff
The Bakersfield Californian | Monday, May 10 2010 09:47 PM
Last Updated Monday, May 10 2010 09:47 PM
So let’s see: This Meg Whitman, “Republican” candidate for governor, was the head honcho of eBay a few years back, which landed her a seat on the Goldman Sachs board?
That seat earned her $475,000 over 15 months, and she also got a “special” bonus in the form of preferential stocks at prices which allowed her to make gazillions by flipping them?
She got this “bonus” in exchange for directing her publicly held company’s banking business to Goldman Sachs? She personally benefitted from directing the company’s business to GS rather than the company or stockholders?
Oh! I get it! Back in New Mexico, we call that a bribe rather than a “normal course of business.” We fire folks who do stuff like that and do our best to jail them. ‘Course we ain’t as sophisticated as you prune pickers.
…
“…….and do our best to jail them.”
Oh yeah? Then why don’t you start with that guy in the Govenor’s mansion. Two billion dollars of investor and taxpayer money goes poof….
Take a look at all the shenanigans going on between New Mexico, the city of Albuquerque. and Eclipse Aviation.
-”The Eclipse program was designed from the outset to be revolutionary and unique. In Teal Group’s estimation, the people behind Eclipse have achieved this objective. This program is the single worst aviation program Teal Group has ever covered”……
-”….a business plan that makes no sense, except to attract investors who don’t know much about the aviation business.”
-”…..have had a toxic impact on a broad range of political and government entities.”….. “During recent congressional hearings, New Mexico Gov. Bill Richardson implied that jobs were more important than honesty, safety,and good government. For possibly the first time, a US government entity provided equity cash for a private business.”
Google: “Richard Aboulafia Eclipse Aviation report”
I am still waiting for the investigation of my theory that the Great Big Fat Greek bailout was leaked before last weekend and that last Thursday’s 1000 pt “Fat Finger Glitch” drop on the DJIA was due to traders with inside information making hay on the news.
Thoughts?
“Thoughts?”
I don’t think there was a leak because I don’t think TPTB had a clue as to what to do. TPTBs are running things by the seat of their pants.
A leak would suggest some sort of long-range thinking was involved, that some sort of logical plan was well thought out beforehand.
To these guys long-term thinking means reacting to the next crisis as it erupts.
The Journal says Taleb’s Universa started a cascading selloff when it bet the S&P would be at 800 by June.
Don’t you mean “My Big Fat Greek Bailout?”
Check out the Global Dow — dropping like a rock on the day after the latest Bailout to End All Bailouts. Don’t investors recognize a great opportunity for dip buyers when they see one?
“Bailout to End All Bailouts”
Ha. ha! I like that. Basically one can take any jingoisms from the past and simply replace the word “war” with “bailout”!
Ex: We need to bail them out over there so we don’t have to bail them out over here.
Try it, it’s fun! After all, the marketplace is the 21st Century battlefield!
Bailouts are hell.
Make love, not bailouts.
Bailout!
What is it good for?
Absolutely nothin’
Say it again…
“(Bailouts are) the remedy our enemy has chosen, and I say let us give them all they want.”
“I would make this (bailout) as severe as possible, and show no symptoms of tiring, till the (banksters) beg for mercy.”
William T. Sherman
All’s fair in love and bailouts.
Bailouts do not determine who is right, only who is left.
I dream of giving birth to a child who will ask, “Mother, what was a bailout?”
Bailouts are not healthy for children and other living things.
What if they gave a bailout, and nobody came? (sounds like Rand and Greenspan’s pillow talk)
Is the Plunge Protection Team now acting to prop up even the Global Dow? 1900 on the Global Dow, or bust…
Where does the madness end?
Great news! Amidst stock trading glitches, Greek riots and Eurozone bailouts, the cost of refinancing America’s debt persistently remains at affordably low levels.
Bond Report
May 11, 2010, 9:07 a.m. EDT
Treasurys gain as investors mull Europe’s latest plan
Treasurys slump, yields soar after EU rescue plan
By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices rose on Tuesday, pushing yields down and retracing some of the big moves on Monday, as investors reconsidered the ramifications of the European Union’s and International Monetary Fund’s massive rescue package on the euro and economic growth in the region, weighing on global equity markets.
“Growing concerns over the IMF plans to bail out Europe is pressuring the euro and global stocks lower,” said Tom di Galoma, head of U.S. rates trading at Guggenheim Partners. “The backdrop of slower growth should keep the bid in Treasurys as well.”
…
I sense a great opportunity to buy the dip coming up any day now.
========================================================
May 11, 2010, 5:57 a.m. EDT
Asia stocks retreat on China data, Europe concerns
Related stories
* Shanghai resumes fall, as Hong Kong, Sydney slide (May 4)
* Banks, resource stocks front Asian stocks’ rebound (May 10)
* Asian markets rebound, but Europe worries remain (May 10)
* Nikkei slumps 2.6% as Europe debt woes hit Asia (April 28)
By V. Phani Kumar, Shri Navaratnam & Leslie Shaffer
HONG KONG (MarketWatch) — Most Asian markets declined Tuesday, with Hong Kong and mainland Chinese shares sliding as the fear of monetary tightening by Beijing resurfaced after economic data revealed consumer and property prices continued to rise on the mainland.
Several markets opened higher following a hefty increase overnight on Wall Street, but their advance was tempered by concerns over the implementation of the European Union’s bailout package. In the Philippines, the market surged after a relatively peaceful election outcome.
“It is becoming blatantly obvious that global economic growth is not going to be smooth sailing,” said Southern Cross Equities director Charlie Aitken. “Sovereign debt issues are the ultimate ’slow fix’ problem, with the quicker fix of higher taxation and slower government spending being the arch enemy of equity market investors.”
…
http://finance.yahoo.com/tech-ticker/hope-you-enjoyed-the-housing-recovery-…-because-it%27s-history-says-suttmeier-482467.html
I hope this Analyst is right.
I’ll believe when I see it. Despite all the evidence, there are many who will still vote against this measure. Senators Seek Proprietary trading Ban for Big Banks, according to WSJ:
Sens. Jeff Merkley (D., Ore.) and Carl Levin (D., Mich.) have proposed an amendment to the bill that would ban “proprietary” trading at large banks. Proprietary trading refers to an institution using its own capital, instead of a client’s money, for speculative trading.
The amendment nearly mirrors a White House proposal from earlier this year, known as the “Volcker Rule” because it addresses concerns raised by former Federal Reserve Chairman Paul Volcker. The pending Senate legislation also would restrict proprietary trading, but it would give regulators the flexibility to waive restrictions under certain circumstances. The new amendment would essentially remove that regulatory flexibility.
Time for another precipitous stock market drop.
It seems the answer to yesterday’s statement that it was odd that gold didn’t go up due to the new EU money, is… apparently it just took a day for everyone to realize the implications. It’s up $30 today.
The critical mistake was telling the world they were printing more euros to save the euro. How does Weimarizing the euro save it? The EU will implode as a result. It was a desperate unpopular move.
The ECB has lost all credibility. It didn’t take it that long to start breaking the rules or the spirit of the treaty by purchasing sovereign debt — monetizing government deficits. ALL central bankers are liars and thieves. They steal from the poor, weak, and gullible.
What’s more, it didn’t take Washington that long either to launch into another bailout scheme via the IMF and paper swaps. The people should be tired of these fools by now.
Even with that I still think Euro is in better position than Dollar in the long run. At least the europeans are taking measurable steps with their austerity(??) plans. I don’t believe that the bailout will save Greece. They are in the paths to default further down the road and they are just trying make it a softer landing when that day arrives. Instead of taking a hit of 12-15% in their GDP, the Greeks will probably take a less than 5% of hit on GDP when they default. That’s what it’s all about.
And now look in US. What are dumb and dumber (O&B) doing? They are pretty much in denial and it will not end well for US.
Yeah I guess it’s sinking in. Notice the stocks in the early part of the day seemed to recover 80% of the loss on Friday. But then that dropped. And now today they are down this morning. Looks as though the big drop last week is going to take hold, a 10% hit.
Slow growth for the world economy could really turn into an inflationary spiral. Inflationistas will probably take over India and China as well. That would mean lots of wage inflation.
I think cash might not really be king in a few years.
I hate to sound like a doom and gloomer survivalist. But the prudent thing to do is to buy five acres per person in your household on irrigated land and hold at least 10% of your net worth in precious metals. You don’t have to leave your high paying city job until SHTF. I remember in the late 70s the survivalists went to the country, shunned good jobs, and never caught up economically with their contemporaries. There is no good work, no good pay, and no good medical care out in the boonies.
I say Stagflation like the mid 70’s…Cash is still the ruler…
I agree - cash is always king, particularly when so few have it. Having cash means you can take advantage of opportunities when they arise. In the long run, I believe you get better return on your money this way then the risk of investing.
Yep, stagflation. Much like the last 30 years.
Yes, but worse, unfortunately.
In the late 70s savings account interest rates were around 5.25%, so it made things bearable. I can see cash being nice to a certain point, but even in the stagflation days precious metals were zooming in the U.S. $1,235 per ounce for gold spot price a few minutes ago. Sweet!
And 5% was nothing to get excited about.
Bill in Los Angeles,
Wow, I had forgotten about that altogether! I even had a b-i-l that went that route. He was into the whole Mother Earth Whole News thing and it took him decades to make up that ground!
Nice catch. I think it’s a little different now w/ the ability to tele-commute etc. and you’d best have your gig in a row before taking the plunge. I think just having a place that’s completely paid off or where there’s little or no debt would do wonders for most of our mental states?
Can’t see how it would hurt. Of course you could say that for those that remained and adapted, they were 30 years ahead of the learning curve?
Yes I recall my parents subscribed to Mother Earth News. Interesting articles and lots of practical sense. Yes, completely paid off addresses certainly would give peace of mind.
Here’s what I don’t get about the end of the world stuff caused by a lot of numbers with a lot of zeros being written off or inflated away.
1. How can we compare starving Great Depression era stories with today when today, unlike then, the government has shown that they will not allow this? We’re all socialist now remember?
2. If our government bails out banks, do you really think they would not feed starving, armed citizens? Come on, I don’t think we are that far gone and we never will be as long as productivity is possible.
3. What do we really lack that we need for survival? Air? Water? Food? Housing? Demand? These will all disappear because balance sheets will be destroyed?
4. If debt implodes the farms will shut down? The houses already built will disappear? Most jobs will end? I don’t see it. The means of production are already built. Maybe they are not PAID for but they already exist.
Bad times sure. It will happen but not be the end of the world and if we think 20 acres in Missouri is going to save the family who has it as opposed to 20 families who don’t, well forget it.
Brazil’s currency collapsed 3 times in the past 25 years and they muddled through it and the USA is a lot richer and advanced than Brazil, Greece, Argentina or China no matter what we are led to believe.
I always find it amusing when ‘city-slickers’ talk about heading for the hills should the SHTF. I like to remind them that people already live in the hills, and they’re not going to be very welcoming to a bunch of guys fleeing their self-created urban apocalypse to wait it out in the sticks with the people they’ve been making fun of for the last twenty years. They might get a welcome they didn’t expect…
/////I think cash might not really be king in a few years.
I hate to sound like a doom and gloomer survivalist. But the prudent thing to do is to buy five acres per person in your household …/////
Yeah, Bill, not seeing much talk from the deflationistas right now. A trillion to get the ball rolling in Europe. Then maybe another dose or two for Portugal, Spain and Ireland … then it will be China’s turn, and ours again. Good god, when Americans start getting raises again, that’ll be when TSHTF!
Maybe it is time to pull the money out of the bank and buy some land … without the house that could get you taxed to oblivion.
Every now and then, I think of selling my remote, hillside shack/compound, but it’s paid for and has plenty of timber on it … think I will hold on.
“hillside shack/compound” LOL!
That’s pretty much what I had in mind anyway. You know it ‘is’ possible to contemplate the purchase of raw land without respect to that all-important “view to die for!” circular driveway and plans to add a tennis court?
After all the futile years of pouring money into the black hole of no return ( that we call a mortgage ) “I” think it’s every HBB’s right to own a dump of their choosing outright!
Every time I consider picking up one of those I imagine if the S really did HTF, I’d be here w/the job and the elders and the people in the cities that were feeling much more desperate than I would be squatting on my land. If you’re not around to protect it, I wonder how much would be there when things really got tough. One thing about remote is its also remote from help and the sheriff.
A few years ago, my in laws gave away land to their cousins (who owned neighboring plots) because they never went there. It had access issues and really couldn’t be sold on its own. That would have been nice to have as a backstop. The cousins wouldn’t have missed the additional acreage.
Carrie Ann,
Always a concern. One of the things my wife and I considered was.., doing all of the landscaping -first-! Once you’ve “staked off” your approx. homesite, then we’d simply get shade trees, arbovitaes in place, build out your pavillion, driveway, shop, shed, pumphouse etc. and let the house end of it take care of itself?
One could always look at a repo’d mfr. home to plunk down once the rest of that has been attended to. There’s a lot ways to work around it.
But I’m just “thinking” out loud. Nobody should follow my example, especially me! A few months back, I was thinking it just might be a good idea to get out of the fading dollar into the, um, more solid, er, ack, cough, euro. Fortunately, I did nothing in that case.
Hey, packman. I have been meaning to ping you to chat with you about the data you collect and charts you construct. My new company makes software for that kind of thing (more the charting/data analysis) and I’m curious if it might be interesting to play with your data sets.
Can you shoot me an email? drumminj/yahoo
Thanks.
sent
Gold jumps up to $1233 after hours - a new record. Wow.
More reason to hoard. The shelves will be empty when the riots breakout.
May 11 (Bloomberg) — Inventories at U.S. wholesalers rose for a third month in March, and sales climbed even more, a signal companies will need to step up orders to try to meet demand.
The 0.4 percent gain in the value of stockpiles followed a 0.6 percent increase the prior month, the Commerce Department said today in Washington. Sales gained 2.4 percent, the most since November.
The amount of goods on hand compared to sales dropped to the lowest level on record, indicating factories will need to keep increasing production. A report later this week is projected to show purchases at retailers climbed again in April, pointing to a rebound in consumer spending.
Local Wall Streeter relative home for Mother’s Day told the table don’t invest anything in this market….unless it’s Smith & Wesson or survivalist stuff.
Wonder if he reads here.
WSJ Op-eds
* REVIEW & OUTLOOK
* MAY 10, 2010
The Real Euro Crisis
The EU’s bailout postpones the day of fiscal reckoning.
A trillion dollars is a lot of money, even these days, and the European Union has demonstrated that a check for €750 billion ($972 billion) can produce a rally in European debt markets and global equities. Too bad the larger price for Sunday night’s “shock and awe” intervention is likely to be paid in the further erosion of Europe’s fiscal and monetary credibility.
…
Don’t these guys know how to increase productivity or make hedonic adjustments to tamper down froth and keep interest rates low forever.
May 11 (Bloomberg) — China’s inflation accelerated, bank lending exceeded estimates and property prices jumped by a record, increasing pressure on the government to raise interest rates and let the currency appreciate.
Consumer prices rose 2.8 percent in April from a year earlier, the fastest pace in 18 months, and property prices jumped 12.8 percent, the statistics bureau said in statements today. New lending of 774 billion yuan ($113 billion), announced by the central bank, was more than any of 24 economists forecast.
I was just looking at the original bubble era mortgage reset chart, which shows a second Option-Arm and Alt-A peak coming over the rest of the year and through 2011, after which everything will have reset.
Do you think that when the Fed says it will leave rates low for “an extended period,” it means until the resets have passed and everyone has refinanced?
WT Economist,
I still pull that chart out of the dust bin once in awhile just for old times sake? You’re absolutely right. Once we’ve gotten those that are current and willing to re-fi, they’ll have done their job.
Then it’s time to clear the decks. Over the years we’ve built most of our bailout analogies around aviation ref’s, what else can you do when you’re at 40,000 feet?
In truth, maritime comparisons would have been more accurate. Even if a vessle is “extremis” there’s still actions the crew can take. Securing cargo, manning fire hoses and “bracing for shock”.
They’ll keep them low until the banks have offloaded all of their mbs crap onto tax payers and pension funds.
Bingo.
“Once we’ve gotten those that are current and willing to re-fi, they’ll have done their job.”
That assumes most are refi-ing due to mortgage situations. But job losses or profit reductions/losses are part of the picture too.
Yes.
Rates will remain low until the problem is swept under the rug… or, they’ll remain low forever. Free money for bankers is good!?
Right, and I fail to see necessarily any connection between artificially suppressed Int. rates and the Great Dump Out? Hell, they were going to fluff that off on us -regardless-.
The only difference is the more they’re able to Re-Fi and are/keep/begin to perfom as loans it’s just that much less of a burden to the taxpayer. They really are doing us a ‘favor’ here!
But I think the original context WT intended was owner occupied homes that are current and performing. Those they’ll probably keep.
Japan has had ultra-low interest rates for 15 years running now, and zero even in the 1999-2006 period. They started to poke their head back out of the shell again - raising rates slightly, upon which time they were firmly thwacked back down by the U.S. housing bubble crash.
IOW - It may be a long, long time before rates are ever back up at a decent level again.
Anecdotally, in the super bubble areas, many people couldn’t even make it to the reset or recast before getting in trouble. So the comming “second drop” might not be as bad because much of it has already happened. Although with TARP, HAMP etc. TPTB have managed to drag out the first drop so….your mileage might vary.
Jim A,
Thanks for bringing that up. WT brought the topic up I suppose as much for entertainment purposes as anything and the whole Credit Suisse Reset Chart wasn’t designed to be a static chart.
and everyone has refinanced?
And after that ??
market pulse
May 11, 2010, 12:05 p.m. EDT
Senate OK’s one-time audit-the-Fed measure
By Ronald D. Orol
WASHINGTON (MarketWatch) — A controversial measure requiring the government to conduct an unprecedented one-time audit of the Federal Reserve’s economic crisis response programs was approved with overwhelming bipartisan support Tuesday by the Senate as part of sweeping bank reform legislation. The amendment also calls for releasing the names of institutions that received in total more than $2 trillion in loans from the central bank during the peak of the financial crisis. The provision received a vote of 96-0, with many lawmakers agreeing to back it following a compromise reached late Thursday. “This makes it clear that the Fed can no longer operate under the kind of secrecy it has been operating under,” said Sen. Bernie Sanders, I-Vt., the measure’s author.
Correction:
WASHINGTON (MarketWatch) — A
controversialcompromise measure requiring the government to conduct an unprecedented one-time audit of the Federal Reserve’s economic crisis response programs was approved with overwhelming bipartisan…I wouldn’t exactly call 96-0 “controversial”. The reason it wasn’t controversial is because the much-more-benign amendment was a huge compromise from the originally-proposed audit, which was controversial (i.e. not liked/approved by the PTB).
Isn’t that a win for Bloomberg’s FOIA lawsuit? The Fed is finally going to be forced to name names. Dec 1st is a long time to wait, however.
Apparently it isn’t a win for Bloomberg’s FOIA lawsuit. It bars discount window lending from the audit. Damn, it so difficult to decipher these double talkers. From the article above:
It also prohibits the GAO from auditing the Fed’s so-called normal discount window lending. However, it does permit an audit of the discount window emergency lending programs, such as Term Asset-Backed Securities Loan Facility, in response to the financial crisis. The discount window is a government lending facility through which commercial banks and, in response to the crisis, investment banks borrowed reserves.
Some background from Bloomberg’s, Senate Approves Audit of Fed’s Emergency Lending:
Bloomberg LP has sued the central bank to release records of discount-window loans following a request under the Freedom of Information Act. The U.S. Court of Appeals in New York ruled March 19 that the Fed must release the records.
The Federal Reserve Board asked the appeals court this month to reconsider its ruling. If the court refuses, the Fed can appeal to the U.S. Supreme Court.
Bloomberg also sued the Fed to reveal securities purchased from Bear Stearns Cos. to facilitate the investment bank’s merger with JPMorgan Chase & Co. The Fed made that information public March 31.
…The Senate measure would — for the first time in the central bank’s 95-year-history — require a Government Accountability Office audit of the financial institutions that borrowed from the Fed during the financial crisis.
In addition, the legislation would require the Fed on Dec., 1, 2010, to put on its Web site all of the recipients of the central bank’s emergency assistance between December 2007 and the date of the statute’s enactment.
——
I read that first paragraph to say the GAO will audit, not the Fed, but the institutions that borrowed from the Fed.
———
As for the requirement to expose all the recipients of Fed assistance, what does anyone hope to learn or gain from that? I mean, who do we expect to find on the list that we don’t already know of or strongly suspect?
There are no doubt lots of small recipients who are probably running for cover as we speak, and will likely suffer for being exposed. I see little good coming of that.
If someone got the list ahead of time, i suppose there would be great opportunity to short those institutions..
“I read that first paragraph to say the GAO will audit, not the Fed, but the institutions that borrowed from the Fed.”
Even better!
What’s the point?
Are you hoping an audit will reveal there was some funny business going on? Don’t get your hopes too high. They borrowed because they needed money.
The Fed Audit’s Been Defanged, But Big Banks Face a Tsunami of Emergency-Loan Disclosure
By Barbara Correa
May 11th, 2010 @ 7:47 am
Tags: Ron Paul, Bank of America, Wells Fargo, JPMorgan Chase, Citibank, Goldman Sachs, Federal Reserve Board, Financial Services, Finance, Barbara Correa
Yes, the Federal Reserve won a victory last week when last-minute political wrangling killed a plan (first championed by celeb Libertarian Ron Paul, R-Texas) that would have let Congress audit the central bank’s decision making on interest rates.
But as part of the compromise to keep those monetary policy dealings private, the Fed will have to agree to spill details about loans it made during the financial crisis. It will have to disclose who took how much, and when. It will name names, like Bank of America (BAC), Wells Fargo (WFC), JPMorgan Chase (JPM), Citibank (C) and other banks that presumably accepted the Fed’s $2 trillion in low/no interest loans when the crisis broke out in 2008.
Such revelations could administer an ugly black eye to banks in a few ways. One, if the record shows that the Fed propped up banks that would have failed, it won’t exactly register as a vote of confidence in those institutions’ share prices. Two, it will reopen an examination of potential favoritism surrounding why some banks received (Goldman Sachs) while others went without (Lehman Brothers). Most powerfully, though, it will set the tone for how this all plays out in future bailouts.
…
On Ron Paul’s FB feed today:
Ron Paul: I am outraged. The Senate just voted down the Vitter Amendment and against a real audit of the Federal Reserve. My entire team and I are going to work very hard to make sure the American people know who voted right, and who voted with the banking special interests.
Next up:
Megabank, Inc’s lobbyists fight tooth-and-nail to defang the Congressional audit from asking any probing questions that would reveal possible actions taken by the Fed to reallocate America’s collective wealth into Megabank, Inc’s coffers.
Hmmm - didn’t he just yesterday though finally capitulate and condone the watered-down Sanders amendment - the one that just passed?
The first floor unit of the original Playboy Mansion is available for purchase.
…Hugh Hefner, founder of Playboy Magazine, purchased the estate in 1959. While he lived there, Mr. Hefner hosted legendary parties where celebrities enjoyed the exquisite gardens and famous indoor pool. It remained Mr. Hefner’s primary residence until 1974 when he donated the property to the Art Institute of Chicago. In 1993, the building was converted into seven exclusive single family residences.
This well appointed residence overlooks The Mansion’s gardens and has a private patio. Unit 1S is available on the market for $2.9 million. Susan Wagner of Prudential Rubloff is the listing agent.
Does the seller demand the new buyer feed the bunnies?
Bloomberg
Home Prices Gain in 91 U.S. Cities in First Quarter (Update2)
May 11, 2010, 12:00 PM EDT
(Adds New York, Connecticut, New Jersey prices beginning in ninth paragraph.)
By Kathleen M. Howley
May 11 (Bloomberg) — Home prices rose in 91 U.S. cities in the first quarter as states hard hit by foreclosures began to recover and a tax credit cut the number of properties for sale.
The median price of a single-family home sold in Saginaw, Michigan, doubled to $60,800, the Chicago-based National Association of Realtors said in a report today. Prices in Akron, Ohio, climbed 90 percent to $95,300 and Grand Rapids, Michigan, recorded a 26 percent increase to $90,700. Nationally, the median declined 0.7 percent.
Cities that led the nation in foreclosures a year earlier had the biggest price increases as a tax credit of as much as $8,000 boosted demand and drove the supply of unsold homes to a four-year low in January, according to Lawrence Yun, chief economist for the Realtors’ group. Brian Bethune, chief U.S. financial economist for IHS Global Insight, said an improving job market should sustain the fledgling rebound in real estate.
“In the second half of the year, employment growth and an improving economic situation should keep the housing recovery on track,” Bethune said in a telephone interview from his Lexington, Massachusetts, office.
Today’s report showed the recovery accelerating from the fourth quarter when 67 metropolitan areas reported price gains.
Peak to Trough
The U.S. median home price tumbled 29 percent over three and a half years as defaults among subprime borrowers flooded the housing market with cheaply priced foreclosures and Wall Street piled up $1.78 trillion in losses and asset writedowns.
The median prices of an existing U.S. home peaked at $230,300 in July of 2006 and hit a low of $164,600 in February, according to NAR data. The drop was 13 percent in 2009, outpacing 2008’s 9.5 percent decline.
This year, prices may increase 2.5 percent as the economy improves, according to the Realtors’ forecast.
The median price of a single-family home in the New York metropolitan area rose 1.8 percent to $380,400 in the three months ended March 31. The areas surrounding New Haven and Milford, Connecticut, gained 5.3 percent to $227,900.
The Edison, New Jersey, region had a 1.5 percent gain in the median price; and Hartford, Connecticut, posted a 1.6 percent increase to $225,900. Prices in the Boston metropolitan area increased 11 percent to $321,800.
…
Gold prices always go up! Buy gold now, or get priced out forever!!!
To get a clear indication of where inflation is headed, look at the gold price change from early 2000s ($300 an oz or so) to today ($1,220 an oz and rising).
The prospect of a Fed audit seems to be great for gold prices!
=======================================================
Victory for Audit the Fed
One year ago, I remember talking to Sen. Jeff Sessions (R-Ala.) at the Conservative Political Action Conference when a polite volunteer for Rep. Ron Paul’s (R-Tex.) Campaign for Liberty edged in, bearing a clipboard, and asked the senator to back legislation to “audit the Federal Reserve.” Sessions gave the inoffensive, talk-to-me-later answer that usually greets all young people bearing clipboards. Why would the Senate grab onto a Ron Paul idea and “audit” the Federal Reserve?
Today, the Senate did just that in a 96-0 vote. Ben Smith has more on the coalition that formed to support this (a similar coalition was built, but failed, to stop the re-confirmation of Fed Chairman Ben Bernanke). It’s not all that Paul wanted, but his Campaign for Liberty was asking for support as recently as this morning, and it’s a substantial win just a week before Paul’s son faces a U.S. Senate primary.
“I’m in favor of accountability,” Sen. Bob Casey (D-Penn.) told me, as the amendment’s Senate sponsor, Sen. Bernie Sanders (D-Vt.), was congratulated by colleagues. “The way that Sanders amendment ultimately was crafted, it was targeted, instead of being so broad-based that it could complicate things.”
By David Weigel | May 11, 2010; 12:56 PM ET
..To get a clear indication of where inflation is headed, look at the gold price change from early 2000s ($300 an oz or so) to today ($1,220 an oz and rising)…
Inflation? You mean like inflating a bubble?
I lack your mathematical skills, but there appears to be a close correlation between the inflation of property prices and that of gold.
From $300 to $1,200 in ten years. Is that about 15% a year?
Even the Fed must realize that a quadrupling of the gold price is a screaming indicator of inflation — especially given that inflation is everywhere and always a monetary phenomenon.
If the Fed were to view that rise to $1,200 as a indicator, wouldn’t they adjust it for inflation?
If they did, both the speed it rose at, as well as the peak of $1,200 is far less than gold’s rise and peak price in the early 1980’s.
I think the adjusted peak was $2,200 and it got there fast.
Gold price seems to be more of an indicator of the anticipation of inflation, or sentiment, according to investors and commodity traders.
Part of the Fed’s job is to anticipate inflation. What investors think may or may not be considered of much importance. I suspect not..
Part ofthe Fed’s job is toanticipatecreate inflation.FTFY
“As far as summer jobs go, this is going to be the worst year to try to land a job since the Depression.”
~Heidi Shierholz
They’ve said that every year for the last 2 decades… and they were right.
there’s an easy fix for that.. Lower the retirement age to 50. Lots of jobs will open up.
With SS, forgiven taxes on 401(k)s, pensions and discounts for all? Hey, sign me up! Gotta do what we can for the next generation that otherwise seems in a hurry to pull the plug on us.
If Greece Is Bear Stearns, Will the UK Be Lehman?
11 May 2010 |CNBC
Monday’s market euphoria across the world at the terms of the European Union/International Monetary Fund rescue package for the European bond market faded Tuesday as investors sold stocks and took profits on the euro. The worry for investors is whether governments in Greece and Portugal can live up to their end of the bargain and manage to significantly cut government spending in the face of bitter opposition from voters.
Despite averting what could have very well turned into a fully-fledged liquidity crisis with Sunday’s news of a 750 billion euros ($951 billion) stabilization fund and European Central Bank assistance for the European bond market some investors remain sceptical that the worst is now behind us.
“The big question I am asking myself is whether Greece is Bear Stearns” Anthony Fry, senior managing director at Evercore Partners, said. “What I really fear is that if Greece is Bear Stearns then the UK is Lehman Brothers.” Fry worked for Lehman before its collapse.
Other analysts have told CNBC the UK is not in major trouble.
Michael Gallagher, director of research at IDEAglobal, said he believes the UK will be alright due to its ability to sell government bonds internally.
Wouldn’t that be sweet…… I’d love to see those limp-wristed, tea drinking, squeeze blood out of a turnip bastards sink.
In three years we can send them Scary Barry to be their president (he will find a new birth-certificate) and show them a real “recovery”.
Your blind loyalty to your masters is showing again.
96-0 vote? Must have been a tough decision on the Audit-the-Fed measure.
D-ratic economic fallacy: Without a government agency to buy up mortgages and resell them to investors, there would be no mortgage lending.
Why is Dodd so excited about force feeding bad GSE debt down the throats of American taxpayers, anyway? Does he own some underwater real estate investments he is hoping to unload at a taxpayer-subsidized premium?
* The Wall Street Journal
* POLITICS
* MAY 11, 2010, 1:10 P.M. ET
Senate Passes Amendment for One-Time Audit of Fed
By VICTORIA MCGRANE And MICHAEL R. CRITTENDEN
WASHINGTON—The Senate adopted Tuesday an amendment to the financial-overhaul bill that would boost transparency of the Federal Reserve’s emergency lending actions during the financial crisis.
Lawmakers voted 96-0 to mandate a one-time government audit of all of the Fed’s emergency lending programs from December 2007 on, including facilities used to help deal with the collapse of Bear Stearns & Co. and the program to stabilize asset-backed securities markets. Under the amendment, the Government Accountability Office would also have to review the Fed’s corporate governance, including whether there are conflicts of interest inherent in the current design of the Federal Reserve system.
Additionally, the Fed would have to make public by Dec. 1 the name of every company or foreign central bank that received aid through its emergency programs over the last three years, the amount of assistance they received and specific details on the terms of the aid.
The audit provision now becomes part of the sweeping revamp of the nation’s financial regulations that the Senate is debating.
The language lawmakers approved Tuesday is narrower than the original amendment offered by Sen. Bernie Sanders (I., Vt.). Mr. Sanders agreed to modify his measure late last week to overcome objections from the White House and get the 60 votes needed to avoid a filibuster on the amendment.
The Senate could also vote Tuesday on a politically charged amendment by Sen. John McCain (R., Ariz.) that would set a hard end-date for the government’s control of mortgage finance giants Fannie Mae and Freddie Mac, which have been under federal conservatorship since September 2008. It would also eventually end their government-sponsored charter as well as roll back the firms’ conforming loan limits, require them to pay state and local taxes, and require them to pay back the government for any benefit the firms received from receiving an implicit guarantee from the government.
The measure has strong support on the Republican side of the aisle. Dealing with Fannie and Freddie is the only way financial legislation can “really end ‘too big to fail,’” said Sen. Jon Kyl of Arizona, the No. 2 Senate GOP leader.
Sen. Christopher Dodd (D., Conn.), chairman of the Senate Banking Committee, called Mr. McCain’s measure “reckless” because it fails to offer any alternative structure to replace the firms, which currently purchase 97% of all U.S. home mortgages. “There’s no reform here,” he said.
…
The headline should read: Senate passes watered down measure that makes no difference. Gottcha again, Mr 6Pack.
Is The Federal Reserve Behind The European Bailout? Audit The Fed!!
By Larry Doyle on May 10, 2010
Author’s Website
Is the American taxpayer ultimately bailing out the European Union? Far fetched? Don’t be so sure.
While the focus of the European bailout is on the European Central Bank, the European Union, and the IMF, little attention is being given to swap lines which were reopened between the Federal Reserve and the European Central Bank.
The ECB has steadfastly fought the idea of breeching the principles which formed the European common currency, the Euro, in order to fashion a bailout for the EU. Did the ECB crater to political pressure by the EU? Or did the risks of the bailout shift from the ECB to another large central bank? Such as? The Federal Reserve!!
Adding fuel to this fire is the fact that the Fed reopened swap lines with the ECB and other central banks just yesterday. The Wall Street Journal reports, Fed’s Swap Decision Could Ratchet Up Political Pressure,
The U.S. Federal Reserve’s decision to reopen swap lines with the European Central Bank and central banks in Japan, Switzerland, England and Canada puts it in a delicate political position.
The U.S. Congress is in the midst of rewriting a financial regulatory overhaul that could rein in the Fed amid sharp criticism of its actions before and during the financial crisis. The overseas lending program it reopened Sunday in response to pleas from Europe has been among the programs lawmakers have criticized, with some suggesting it is bailing out foreign banks and other saying the Fed is too secretive about details.
Is the American taxpayer ultimately bailing out the EU? While the German populace is livid at the idea of providing bailout funds for the wastefulness and fiscal follies in other EU countries, has the wool just been pulled over the American public’s eyes?
Will the America public ever learn what is going on here?
Audit the Fed!!!
Sen. Christopher Dodd (D., Conn.), chairman of the Senate Banking Committee, called Mr. McCain’s measure “reckless” because it fails to offer any alternative structure to replace the firms, which currently purchase 97% of all U.S. home mortgages. “There’s no reform here,” he said.
So being that the mandate of the G
SE’s is to be the lenders of last resort - does that mean he’s admitting that we are so far entrenched in “last resort” territory that we’ll never actually get back to a normal economy again?At 97% - I’d have to say I agree with him.
And it’s not reckless to force feed chronic losses due to purchasing mortgage loans that never should have been made down American taxpayers’ throats? Come on, Dodd!
Why does ‘Senator Dodd’ still have a job?
I understand that they won’t be auditing monetary policy. That’s almost certainly a good thing.
What if it was just a legitimate lack of buying interest, god forbid? Its like saying all yard-sale items must sell at full asking price, price-drops to match demand are ‘unacceptable’. ~ can you say ‘Control Freaks’.
Schapiro calls market plunge ‘unacceptable’
http://finance.yahoo.com/news/Schapiro-calls-market-plunge-apf-4221454173.html?x=0&sec=topStories&pos=main&asset=0508cf8da13aabbbde5646ad4b64666e&ccode=1
I mean, just what is ‘unacceptable” about a stock market crash during a fake recovery in the middle of a depression?
Sounds downright reasonable to me.
+1
“Not Everybody in Germany Is Cool” … You mean Germans aren’t falling all over one another with excitement about the opportunity to shore up Megabank, Inc’s gambling losses?
Not Everybody In Germany Is Cool With The Bailout
2:04 pm
May 11, 2010
By Jacob Goldstein
Bild, a popular German tabloid, ran the banner image up there on its English-language home page today.
The “lion’s share of that cash — up to 123 billion — is coming from Germany,” the paper said. “If it is not paid back, the taxpayer will be left out of pocket. Just like with the Greek bailout!”
Just to be clear, the bailout announced this week is a basically a line of credit, and nobody has borrowed against it yet. Still, now that yesterday’s honeymoon is over, markets don’t seem so psyched about the bailout either.
Banks in Europe are still very nervous about lending money to each other. Insurance that pays off if European banks default on their debts is still relatively expensive. And the euro is still cheap.
Inevitably, the news of the bailout has been followed by talk of moral hazard — the notion that people and institutions who are protected against bad outcomes from risky behavior may be more likely to take big risks.
All the big corporate bailouts during the financial crisis made this a big worry in the U.S. Now that the EU seems to be saying that euro-zone countries are also too big to fail, countries may be more likely to throw fiscal caution to the wind and spend their way into bailouts.
EU officials are aware of the risk, and they’re trying to figure out how to manage it. One possibility: Force euro-zone countries to give up some control over national budgets.
Under a proposal described by the WSJ, euro-zone members would review nations’ budgets before they go to national parliaments. If a super-majority of euro-zone members votes against the proposed budget, it would be rejected, and the national parliament wouldn’t get to vote on it.
“Under a proposal described by the WSJ, euro-zone members would review nations’ budgets before they go to national parliaments. If a super-majority of euro-zone members votes against the proposed budget, it would be rejected, and the national parliament wouldn’t get to vote on it.”
I wouldn’t hold my breath on THAT happening.
Me either. The EU continues to suffer under the delusion that it can become a monetary powerhouse without a strictly enforced set of rules.
As things stand they are deathly afraid of alienating some country like Greece which, being the historical “cradle of democracy”, is a valuable addition to the so called Union, despite Greece’s being an economic ball and chain.
Galen Carey, director of government affairs for the National Evangelical Association, tells Yahoo! News the organization is seeking to rally support for comprehensive immigration reform. The campaign begins with a full-page ad Thursday in Roll Call, a Washington newspaper that covers Congress.
“What we say is: There does need to be some workable system that’s put in place to address the situation of people that are already here,” Carey said.
The association, which includes members from 40 evangelical denominations, reached consensus on the issue of immigration reform in 2009 — almost two years after President George W. Bush’s failed attempts to reform immigration — by focusing on the biblical material that supports immigration.
I wonder if these evangelicals are the rights Jessie Jackson. Taking kickbacks to get the masses to swallow unpopular programs.
JOE LEGAL vs. JOSE ILLEGAL
You have two families: “Joe Legal” and “Jose Illegal”.
Both families have two parents, two children, and live in California .
Joe Legal works in construction, has a Social Security Number and makes
$25.00 per hour with taxes deducted…. See More
Jose Illegal also works in construction, has NO Social Security Number,
And gets paid $15.00 cash “under the table”.
Ready? Now pay attention….
Joe Legal: $25.00 per hour x 40 hours = $1000.00 per week, or $52,000.00
Per year. Now take 30% away for state and federal tax; Joe Legal now has
$31,231.00.
Jose Illegal: $15.00 per hour x 40 hours = $600.00 per week, or
$31,200.00 per year. Jose Illegal pays no taxes. Jose Illegal now has
$31,200.00.
Joe Legal pays medical and dental insurance with limited coverage for
His family at $600.00 per month, or $7,200.00 per year. Joe Legal now
Has $24,031.00.
Jose Illegal has full medical and dental coverage through the state and
Local clinics at a cost of $0.00 per year. Jose Illegal still has
$31,200.00.
Joe Legal makes too much money and is not eligible for food stamps or
Welfare. Joe Legal pays $500.00 per month for food, or $6,000.00 per
Year. Joe Legal now has $18,031.00.
Jose Illegal has no documented income and is eligible for food stamps
And welfare. Jose Illegal still has $31,200.00.
Joe Legal pays rent of $1,200.00 per month, or $14,400.00 per year. Joe
Legal now has $9,631.00.
Jose Illegal receives a $500.00 per month federal rent subsidy. Jose
Illegal pays out that $500.00 per month, or $6,000.00 per year. Jose
Illegal
Still has $ 31,200.00.
Joe Legal pays $200.00 per month, or $2,400.00 for insurance. Joe Legal
Now has $7,231.00.
Jose Illegal says, “We don’t need no stinkin’ insurance!” and still has
$31,200..00.
Joe Legal has to make his $7,231.00 stretch to pay utilities, gasoline,
Etc.
Jose Illegal has to make his $31,200.00 stretch to pay utilities,
Gasoline, and what he sends out of the country every month.
Joe Legal now works overtime on Saturdays or gets a part time job after
Work.
Jose Illegal has nights and weekends off to enjoy with his family.
Joe Legal’s and Jose Illegal’s children both attend the same school. Joe
Legal pays for his children’s lunches while Jose Illegal’s children get
A government sponsored lunch. Jose Illegal’s children have an after
School ESL program. Joe Legal’s children go home.
Joe Legal and Jose Illegal both enjoy the same police and fire services,
But Joe paid for them and Jose did not pay.
Jose with his free tax payer entitlements makes $65,000.00 a year!
Do you get it, now?
If you vote for or support any politician that supports illegal Aliens…
You are part of the problem!
It’s way PAST time to take a stand for America and Americans!
What are you waiting for?
So… shut down all the businesses that use illegals. No jobs, no illegals. And dont let illegals use our schools. And no driver’s licenses. And beef up the border where crossings are taking place. Ya see, they really want illegals or they could easily do something about it. Smoke and mirrors. All they want is your vote.
Seems that we should be bring in all the illegals we can. After all, they seem to be the only people that have disposable income.
We’d really be screwed if we had to rely on Joe Legal to do the “consumer spending”.
Wow. They’re doing the spending we don’t want to do, either.
Jose Illegal doesn’t make $15hr. More like $5hr.
And yes, businesses want the illegals because they drive down wages and can’t complain about being abused.
ecofeco,
Probably true, and certainly here in Oregon. At the same time I don’t think they avg. guy that works unskilled labor at a const. site is making $25 an hour either?
By and large, the hypo stands.
Down here guys are willing to work for pennies just to have some work. Very sad.
I live in the land of illegals and if anyone thinks they are making fat bank, I invite you to live their life.
What they ARE doing is clogging up the system and driving down wages and encouraging employers to perpetuate very bad labor practices.
More Financial Crises Coming Thanks to Global “Wall of Liquidity,” Roubini Says
Posted May 11, 2010 07:30am EDT by Heesun Wee in Investing, Commodities, Recession, Banking, Housing, Emerging Markets
In the new book, “Crisis Economics: A Crash Course in the Future of Finance,” co-author Nouriel Roubini makes the case for why “black swans may become white swans.” In other words, “crises once thought to occur only once or twice a century may hammer the global economy far more often.”
Why?
“In practice we’ve seen that things that should have happened once every 100 years are occurring much more frequently and they’re much more virulent,” Roubini tells Aaron and Henry in the accompanying segment. “The fiscal costs of these financial crises are becoming larger, larger and larger.”
So where’s the next bubble?
Roubini is concerned the “wall of liquidity” from central bankers around the globe is laying the foundation for the next crisis, citing evidence of potential bubbles in various asset classes. “When you can borrow everywhere in the world at zero rate, and you can take leverage, the risk of creating the next asset bubble — dollar-funded carry trades, for example — that significant risk is rising,” he says.
New York Times to Greece: End socialized medicine to save money
By: Mark Hemingway Washington Examiner 05/10/10
The Times, which couldn’t get enough of Obamacare, has an unusual prescription for Greece’s economic predicament:
“Another reform high on the list is removing the state from the marketplace in crucial sectors like health care, transportation and energy and allowing private investment. Economists say that the liberalization of trucking routes — where a trucking license can cost up to $90,000 — and the health care industry would help bring down prices in these areas, which are among the highest in Europe”.
Getting the government out of health care saves money? Why didn’t the Times tell us before! But seriously, the article also notes that a major reason why Greece is in this predicament:
“Among the most significant features of the plan, a Greek government official said, would be a measure making it easier for the government to lay off some of the many thousands of public sector workers, whose low levels of productivity and high wages are a big contributor to Greece’s debt problem. Until now, the government has not been able to lay off civil servants, whose employment rights are in effect constitutionally guaranteed”.
Yowza. I’d say that’s messed, up but as a resident of a country that has $3 trillion in outstanding public pension liabilities, I’m not really in a position to criticize.
Low productivity, highly paid civil servants is indicative of an early stage in socialist evolution.
Low productivity and low pay comes a little later. In compensation for less pay, they will be granted social privileges. Front seats at the movie theaters.. shoulder patches to indicate rank.. an extra ration of meat or bread.. free public transit..
They have all this already. Read PLUNDER by
Steven Greenhut who lays out with intensive
research the unholy marriage between the unions
and elected officials; unions supplying the dough and the votes, and the officials giving them anything they want.
Says the country with the highest costs and least effective medical on the entire planet.
“If something cannot go on forever, it will stop.”
– Herbert Stein –
European Banks Now Feverishly Betting Against Euro, As Bailout Fails, Gold Surges
Tyler Durden
Zero Hedge
Tuesday, May 11th, 2010
Thought experiment: You are the head FX trader at French megabank Croc Monsieur & Cie. (HFT: CMC) For the past 5 years, your bonus has been getting paid primarily in company stock. In the last two weeks you have seen the stock of your firm plunge as the markets have finally realized that those idiots in the Fixed Income desk have loaded up to the gills with PIIGS debt which is now worth 60 cents on the dollar at best. And to top things off, the euro has plunged to multi year lows killing any chance of buying that New York Pied A Terre which seemed so cheap when the EURUSD was 1.50 a few months ago. So what do you do?
Well, you short the living daylights out of the EUR, knowing full well that the EU, the IMF and the ECB will not let Europe crash. You sell, you sell on margin and then you sell some more, trying to get EURUSD all they way down to 1.20, to 1.10, even to parity if possible, to make it all that more believable that the end of Europe is coming. And, lo and behold, on May 9 your plan succeeds: Europe agrees to bail your bonus out, by flushing $1 trillion under the pretext the money will be used to stabilize the periphery and the euro. Immediately the stock of CMC, and thus the value of your accrued bonus (several million worth), surges by a record 20% in one day.
So you think: “How can I get an even greater bonus appreciation? Why – I will short the euro again. At this point I know that between myself and the other FX desks at all the other French and German banks we can easily take the euro down to 1.20 if not much lower. After all we are only trading against the very central banks that are keeping us alive. And when that happens Europe will have to print another trillion, then ten trillion, then one hundred trillion, all the while the stock portion of my accrued bonus surges. Brilliant.”
Brilliant indeed – Zero Hedge has received confirmation that several of the largest French banks are now actively shorting the euro to take advantage of globalized moral hazard, which with every ensuing bailout does nothing but make the bonuses of French FX traders surge. In other words, the very banks that Europe is bailing out are betting more and more aggressively with each passing day against Europe’s own survival! Even George Soros has shed a tear of pride in how beautifully his initial plan to take on the BOE has mutated for the Bailout Generation.
If I was arse-deep in PIIGS debt right now, shorting the euro would indeed be one way to hedge myself.
Fun times at the P-Ho
Stimulus and Oil Spill Resolution in One Move:
Kill two birds with one stone.
Do dollar bills soak up oil? I think Mr Bernanke might have stumbled on the solution to tackle the clean-up. He has an inexhaustible supply and the helicopters to distrubute. People would do the rest in their greed for oil-soaked dollars to spend. They would flock to the beaches and clean them for free.
Next problem?
We can’t have that it would be deflationary.
Those oil soaked dollar bills would wash up on shore
and they would be worth something
ie the oil they had soaked up could be squeezed out of them.
Call me when there is a gusher of sewage.
Don’t look now, Freddie’s Buying COMMERCIAL FB Stuff with your money!
Is this even legal?
North Miami’s Cottage Cove gets $17.4M refinancing
http://southflorida.bizjournals.com/southflorida/stories/2010/05/10/daily19.html?ana=yfcpc
Fannie and Freddie are the largest apartment lenders in the country right now. All part of their “multi-family” housing mandate. Were it not for F&F the apartment market would have crashed.
* POLITICS
* MAY 7, 2010, 6:16 P.M. ET
Kagan’s Goldman Ties Won’t Hurt Supreme Court Chances, White House Says
By LAURA MECKLER
WASHINGTON—The White House said Friday that Elena Kagan’s membership on an advisory panel for the securities firm Goldman Sachs Group Inc. wouldn’t disqualify her for a position on the Supreme Court.
Ms. Kagan, the solicitor general, is considered a top contender to replace retiring Justice John Paul Stevens. President Barack Obama is expected to announce his nomination next week. An announcement could come “at any moment,” White House Press Secretary Robert Gibbs said Friday.
From 2005 to 2008, Ms. Kagan was a paid member of the Research Advisory Council of Goldman Sachs Global Markets Institute, according to financial-disclosure reports she filed after being appointed to her current job. The form shows she was paid $10,000 in 2008, when she was dean of Harvard Law School.
The Securities and Exchange Commission has accused Goldman in a civil suit of failing to disclose to clients in a deal involving mortgage-related securities that a hedge fund betting on the mortgages to fail helped design the product. Goldman denies the charges.
Mr. Gibbs said the group Ms. Kagan advised had nothing to do with the activities in the SEC’s case. “This is a panel that had absolutely nothing to do with the decisions that Goldman has made that they’re now being investigated for,” he said. Asked if there was a concern that this issue could be used against Ms. Kagan, should she be nominated, Mr. Gibbs said, “No.”
Justice Department spokeswoman Tracy Schmaler said the Goldman advisory group met once a year for a day-long conference about public-policy issues. “The group wasn’t involved in making any investment decisions for the company,” she said.
Write to Laura Meckler at laura.meckler@wsj.com
Goldman ties haven’t stopped any other appointments - why should it hurt this one?
Press Releases
Apr 05, 2010
Berkshire Hathaway Ranks #1 on Corporate Reputation, According to 11th Annual Harris Interactive U.S. Reputation Quotient® (RQ®) Survey
Ford Jumps an Astounding 11 Spots, Despite Automotive Industry’s Soured Reputation
After hitting rock bottom during the height of greed, bailouts, and the economic crisis in 2008, the American public’s perceptions of the reputation of corporate America seem to be bouncing back. This, according to the findings of the 2009 Harris Interactive RQ Study, which measures the reputations of the 60 Most Visible Companies in the U.S.
The percentage of Americans who see the state of reputation as “not good” or “terrible” decreased from 88% in 2008 to 81% in 2009. Perhaps even more telling, there was a 50% increase in the number of Americans who said that the state of reputation is “good”, moving from 12% to 18%. This is the first positive improvement in four years.
…
9 of 10 Lowest Ranked Companies were Recipients of Government Bailout
At the other end of the spectrum, AIG moved up one spot, ceding the lowest rating to Freddie Mac, another first time company on the list of the 60 most visible. These two companies, along with Fannie Mae, received RQ scores below 50, which over the past eight years of this study, has been a very strong indicator of a lack of future viability for a company. Freddie Mac’s score of 38.94 is the lowest recorded score since Enron’s 30.05 in 2005.
Looking further at the bottom of the rankings, we find the nine lowest companies all have recently received government/bailout money or currently remain government supported, including another newcomer to the list, Goldman Sachs, who joins the most visible list with an RQ score of 51.36.
…
I could see it as a plus for possible right-wing opposition. Heck, from the look of her, she could easily be a stealth lefty radical, but if she’s been that close to the heart of Mordor, she’s pretty safe.
Republican Gubernatorial Race Tightens
Reported by: CBS47 News
Email: newsdesk@cbs47.tv
Last Update: 11:31 am
With just a month before the June Primary Elections, the race for the Republican nominee for Governor is closer than ever.
California Insurance Commissioner Steve Poizner has gained so much ground on former eBay CEP Meg Whitman, the race is almost a tie.
Whitman leads Poizner 39% to 37% according to a new SurveyUSA poll.
In March, Whitman’s lead was 63% to 14%.
The biggest reason for Poizner’s comeback is due to his stance on immigration and his criticism of Goldman Sachs.
The Primary Election is on June 8th.
I’m voting for Poizner to hedge my bets against winding up with yet another Gollum puppet in high office.
How do you run when your name is spelled almost like Ponzi?
It helps if your opponent was on Gollum’s board.
Last year after the precious first closed over 1000 I acurately called next significant resistance at 1230. Today we broke that. Wither from here?
My gut feeling is that this has more to do with light being shed on the naked shorting cockroaches, than the EU profligates.
No one knows what Gold will do, and summer is a bad time for PM’s but:
Gold has just formed another “cup” formation that began November 09. If it bounces around now for a couple months between 1160 and 1260 and then rises above that range it will have broken out of another “cup and handle” tech pattern.
Every time it has broken out of this type of pattern the past 20 years, Gold has risen. Some of these formations took years to play out.
Long term everyone knows what gold will do, as priced in fiat…
US Exposure to EU Bailout: $50 Billion and Counting
11 May 2010 | CNBC
US taxpayers could be on the hook for $50 billion or more as part of the European debt bailout, which is likely to be a close cousin to the strategy used to rescue the American financial system.
Determining the exact exposure at this point is nearly impossible until governments start stepping up to the window created by the European Union and the International Monetary Fund to stem the crisis in Greece and elsewhere on the continent.
But one rule-of-thumb formula puts potential US exposure at $54 billion should the entire IMF loan fund be tapped.
And that doesn’t count the added exposure created by the Federal Reserve’s decision over the weekend to participate in currency swaps to provide liquidity to jittery European banks. The swaps move resembles the Term Auction Facility the Fed instituted when the worst of the US financial crisis hit in 2007-08.
And the entire bailout package has been nicknamed “Le Tarp” by some for its similarity to the Troubled Asset Relief Program that bailed out US companies with taxpayer-backed loans.
“When more of the people’s sustenance is exacted through the form of taxation than is necessary to meet the just obligations of government and expenses of its economical administration, such exaction becomes ruthless extortion and a violation of the fundamental principles of a free government.”
-Grover Cleveland (Mar 18, 1837 - Jun 24, 1908) 22nd & 24th President of the United States.
Fed chief to grads: Money can’t buy happiness
By JEANNINE AVERSA (AP) – 2 days ago
WASHINGTON — Your parents were right. Money can’t buy you happiness. That was the message from the Federal Reserve chairman on Saturday to graduates of the University of South Carolina.
“We all know that getting a better-paying job is one of the main reasons to go to college. … But if you are ever tempted to go into a field or take a job only because the pay is high and for no other reason, be careful!” Ben Bernanke said in his commencement address.
“Having a larger income is exciting at first, but as you get used to your new standard of living and as you associate with other people in your new income bracket, the thrill quickly wears off,” he said.
…
This was posted the other day.
I’ve heard that same homily all my life and I’ve found that the only people who say that tend to be very sheltered.
“…tend to be very sheltered.”
And wealthy — how else could you empirically test the idea?
Every time! I used say that if money doesn’t bring you happiness, then you’re an idiot.
“Money can’t buy happiness”
So says everyone who has money……let me complete the quote:
“Money can’t buy happiness, but not having money sucks even worse”
And don’t forget the golden rule:
“He who owns the gold, gets to rule.”
.So says everyone who has money..
So says every sad person with money who searched for the store that sells happiness.
“you get used to your new standard of living and as you associate with other d-bags in your new income bracket, the thrill quickly wears off”
Fixed.
“Don’t try to be like us, we’re really miserable”
*clinking champagne glass*
Who needs money when you have the power to decide who fails and who succeeds? Who needs money when you control the flow of it?
Power trumps money, because it can take and make money.
Moral hazard re-emerging: Merkel rebuked in Germany, GOP Bennett tossed in Utah
May 10, 12:43 AM
Independent Conservative Examiner
Arthur Bruzzone
SAN FRANCISCO, CA — This has to do with moral hazard. Remember that vague term ‘moral hazard’ used often during the TARP debate — when $800 billion was needed to bailout sophisticated, risky, Wall Street behavior. A simple principle, moral hazard: You don’t bailout financial risk takers. Or, most recently, You don’t reward inefficient, deficit-spending governments.
Markets, not governments, should reward or punish risk takers. Simple.
The voters are doing what the politicians refuse to do: Demand a return to moral hazard, despite the painful consequences. Germany’s Chancellor was rebuked in the country’s most populous state; three-term GOP Senator Bob Bennett failed to gain the Utah GOP convention endorsement.
First the German Story…
Voters in Germany’s most populous state dealt Chancellor Angela Merkel a setback Sunday, erasing her government’s majority in the upper house of parliament over the Greek debt crisis.
Merkel’s center-right alliance was voted out of power in a state election in North Rhine-Westphalia, a region of some 18 million people. Late last week, parliament approved a bill allowing Germany to grant as much as $28.6 billion in credit over three years as part of a wider rescue plan, just as the elections were occurring.
And in the U.S…
U.S. Senator Bennett was under fire in part for voting to bail out Wall Street.
At the Utah GOP convention, Bennett survived a first round of voting Saturday among roughly 3,500 delegates but was eliminated when he finished a distant third in the second round.
Bailouts weren’t the only reason Merkel and Bennett suffered embarrassing setbacks.
But the EU/IMF bailout for Greece dominated the news last week leading up to the regional election in Germany. That only highlighted a host of problems simmering in Germany including a stagnating economy and reforms of that country’s health care system. In Bennett’s case, he also supported mandated health insurance and earmarks.
Still, voters are showing their anger over bailouts.
It’s unlikely that international monetary institutions will stop bailing out free spending governments like Greece, Spain and Portugal. Nor could Washington ignore the near 48-hour meltdown the U.S. banking system two years ago.
But, slowly countries, corporations, and financial institutions are getting the message: that their risky and incompetent behavior has consequences.
Whether in the U.S. and or in Germany – taxpayers are angry seeing their tax dollars used to reward incompetence. It serves as a warning that there might not be a bailout next time for failing states and institutions, from Greece to California.
Hopefully, moral hazard is being slowly restored.
If you don’t like what the press is saying.
Just buy them
McLEAN, Va. (AP) — JPMorgan Chase & Co. has increased its bet on slumping newspapers by acquiring a 10.2 percent stake in Gannett, the publisher of USA Today and other dailies.
The bank-holding company is now Gannett’s largest stockholder with 24.3 million shares as of April 30. That’s according to a regulatory filing Tuesday. Based on its last round of disclosures, JPMorgan and its various subsidiaries began the year with about 7.4 million Gannett shares.
Business partnerships make for more fruitful manage-a-trois with the politicians.
manage-a-trolls
Newsweek is for sale
My guess is GS will buy them.
Pretty soon, only blogs will provide independent commentary.
“Pretty soon”? ( I think we’re there )
We’ve been there since the Internet started.
MSM was consolidated into just 7 major corporations in the 1980s & 90s.
Remember the 1980s? “Greed is good?” Yeah, that worked out real pretty, didn’t.
We haven’t had independent nor unbiased and well researched news or commentary since the 1980s.
Newspeak is nothing more than a PR firm for GS and Wall Street, and fawning toadies for the Democratic Party. Their “journalists” are doctrinare politically correct hacks. Unemployment suits them.
“Don’t look now, Freddie’s Buying COMMERCIAL FB Stuff with your money!
Is this even legal?
North Miami’s Cottage Cove gets $17.4M refinancing”
A mere pittance, checkout these deals:
http://www.freddiemac.com/multifamily/multifamily_financing.html
Get over it. Real estate always goes up. Buy now, or get priced out forever.
Good God!
Astounding all right….
A player new to the conduit lending market is quietly offering loans with some great rates and terms.
The upstart provides five-, seven-, and 10-year loans with rates of just 6 percent, loan-to-value (LTV) ratios of up to 80 percent, and debt-service coverage ratios (DSCRs) that stretch down to 1.15x.
Even more astounding, this new kid on the block allows supplemental financing on its loans, dispelling the myth that all conduit loans are inflexible.
That new player is Freddie Mac, whose Capital Markets Execution (CME) pilot program is quoting deals left and right. The program gives Freddie Mac a hedge against the next time the market for commercial mortgage- backed securities (CMBS) comes back in full force, and at the same time broadens its customer base.
And here are a couple of data points from sunny Tucson:
1. Was out on a midday ride today. (Had a meeting with a prospective client, then had to run a couple of errands.) Oh, brother, are the “for sale” signs out in force. They seem to have sprouted like springtime weeds. And they’re not just ugly duckling houses that didn’t get picked during the recent tax credit frenzy. Many appear to be just-listed properties.
2. This morning’s Arizona Daily Fishwrap had a story about 40% of local homeowners being underwater. Get a load of these comments. Sound like they came from a buncha HBB-ers, if you ask me.
Here is one of many great comments:
I’m still talking to people who either are just scraping by
or are seriously thinking about defaulting
this is on top of the 10,000 who are in technical default, but have not been foreclosed on
why??? because banks could flood the market
they have some 4,000 ready to go at the courthouse today
but hold off until 1 is sold before proceeding with another
BTW the post office says there are 25,000 EMPTY houses in TUCSON
that’s not counting the 10% vacancies in condo’s and apartments
underwater in the desert
WASHINGTON (Reuters) – It is unclear how much U.S. taxpayers will eventually have to shell out to help mortgage finance giants Fannie Mae and Freddie Mac, the regulator of the two companies said on Tuesday.
“The actual cost I do not know,” Federal Housing Finance Agency Acting Director Edward DeMarco said in response to a question from Kentucky Republican Senator Jim Bunning at a Senate Finance Committee hearing.
Fannie Mae said on Monday it would need an additional $8.4 billion from the U.S. Treasury. The two firms have now tapped about $145 billion from the government and the Obama administration has said it will backstop losses, no matter how high they go, through 2012.
We’ll backstop Europe losses no matter how high they go
Of course we will because it’s all about keeping the commies (Russia/China) contained.
Seriously.
Did some research, thankfully Freddie doesn’t do hotel financing only multifamily. Current default rates according to Fitch:
With no significant movement in delinquencies specific to any one property type last month, current delinquency rates by property type are as follows:
* hotel: 18.42%;
* multifamily: 13.60%;
* retail: 5.83%;
* industrial: 4.60%; and
* office: 3.97%.
Though delinquencies will continue to increase, Fitch says it maintains stable or positive rating outlooks on 75% of it U.S. CMBS portfolio, as recent rating actions have taken into account a continued rise in delinquencies.
Senate OKs Fed audit as part of bank overhaulMay 11, 2010 5:42 PM ET
All Thomson Reuters news WASHINGTON (Reuters) - The U.S. Senate on Tuesday challenged the Federal Reserve’s tradition of secrecy but postponed an overhaul of mortgage finance giants Fannie Mae and Freddie Mac as it worked through a massive reform of banking regulations.
Tuesday’s votes on two amendments on the broad Senate reform bill highlighted the scope of the legislation, as well as widespread public frustration with the government’s unprecedented Wall Street bailouts during the worst financial crisis since the Great Depression.
http://www.makinghomeaffordable.com/pr_03292010.html
OPEN UP NOW.
DETROIT (AP) — General Motors Co. executives want their own auto-financing arm so they can offer more competitive lease and loan deals, according to a person briefed on their plans.
The executives want to buy back the auto financing business from the former GMAC Financial Services or start their own operations, said the person, who asked not to be identified because the plans have not been made public.
A top GM executive has told dealers about the plans, the person said.
GM sold a 51 percent stake in GMAC Financial Services in 2006 when it was starved for cash. The new owners, led by private equity firm Cerberus Capital Management LP, ran into trouble in 2008 with bad mortgage loans and had to be bailed out by the federal government, which now owns 56 percent of the company.
There must be 50 ways to leave your lover and your bad debt backed securities. Why did cerberus have to get bailed out????????????? Were they too big to fail too or just too politically connected to fail.
Pelosi Urges Catholic Clergy to Preach Amnesty
Mon, May, 10, 2010CNSNewsDateline:Washington, DC
“I want you to instruct your, whatever the communication is — the people, some of them, oppose immigration reform are sitting in those pews and you have to tell them that this is a ‘manifestation of our living the gospels.’ Our patron saint of San Francisco, St. Francis of Assisi, ‘Preach the gospel - sometimes use words.’ We need the words to be said because it isn’t being picked up automatically,” House Speaker Nancy Pelosi said at the Catholic Community Conference.
2006 (First Quarter) INS/FBI Statistical Report on Undocumented Immigrants
CRIME
* 95 % of Warrants in LOS ANGELES are for ILLEGAL ALIENS
* 83 % of Warrants for MURDER in Phoenix Arizona are FOR ILLEGAL ALIENS
* 86 % of Warrants for MURDER in Albuquerque New Mexico are for ILLEGAL ALIENS
* 75 % of those on the most wanted list in Los Angeles, Phoenix, Albuquerque are ILLEGAL ALIENS
* 24.9 % OF ALL INMATES in California detention centers are Mexican Nationals here ILLEGALLY
* 40.1 % of all inmates in Arizona detention centers are Mexican Nationals here ILLEGALLY
* 29 % (630,000) Convicted ILLEGAL ALIENS felons fill our state and federal prisons at the cost of $1.5 Billion Annually
* 53 % Plus of all investigated burglaries reported in California, New Mexico, Nevada, Arizona and Texas are perpetrated by ILLEGAL ALIENS
* 50 % Plus of all gang members in Los Angeles are ILLEGAL ALIENS
* 71 % Plus of all apprehended Cars stolen in Texas, New Mexico, Arizona, Nevada, and California were stolen by ILLEGAL ALIENS or “Transport Coyotes “
* 47 % of cited / stopped Drivers in California have NO License, NO Insurance, and NO Registration for the vehicle of that 47 %, over 92 % were ILLEGAL ALIENS
* 63 % of cited / stopped Drivers in Arizona have NO License, NO Insurance, and NO Registration for the vehicle of that 63 %, over 97 % are ILLEGAL ALIENS
* 66 % of cited / stopped Drivers in New Mexico have NO License, NO Insurance, and NO Registration for the vehicle Of that 66 %, over 98 % were ILLEGAL ALIENS
Then dont hire them and send them home. I could round up >400 of them in a day if paid to.
Tell Pilosi, not me.
You are so…intolerant! You need to start looking at them as lawbreakers and drains on the system, and start seeing them as future Democratic voters who will enrich the Republican Fat Cats.
Senate votes 96-0 to audit Federal Reserve
The congressional audit would examine the Fed’s emergency aid program and disclose previously secret recipients of bailout money.
By David Lightman, McClatchy Newspapers May 11, 2010 | 4:06 p.m.
“The White House and Fed Chairman Ben S. Bernanke had opposed the Fed audit but relented after two concessions were made: It will be done only once and the list of funding recipients won’t appear on the Internet until Dec. 1, rather than 30 days after enactment.”
Dec 1st 2010…a day that will live in infamy!
Check out the cool flow chart of CORPORATE crimminals!
The Architects of Destruction:
May 12th, 2010 Wealth Daily
Wall Street executives. Government ideologues and lawmakers.
Pay no attention to their double speak.
It’s just “theater” designed to distract you from the truth… which is that they’re all slimy, soulless liars…
From Goldman Sachs’ Lloyd Blankfein to former Fed Chairman Alan Greenspan, we now know the ‘fix’ was in… Wall Street’s worst culprits in collusion with the miscreants of a hapless, deregulated government. And now the taxpayer is funding their record-breaking bonuses.
But Thain and Greenspan aren’t the only robber barons behind this historic heist.
They’re all host bodies carrying the same malignant cancer that’s spread through Wall Street and the government’s Corporate Welfare Program for the last decade-plus: GREED.”
http://www.wealthdaily.com/aqx_p/18026?gclid=CMT_u6y8y6ECFRJcbQod2TUymw
“Nobody could have seen it coming” my arse. Perhaps the Fed audit later this year could explore who at the Fed actually did see it coming and who did not…
Opinions? I liberated the equity in my home to the tune of 130K, with which I carried the note on a property a friend of mine bought.
My interest rate is 2.99% and my friend faithfully pays me 7.5% (my interest only payment is around $400 and my friend pays me around $950/mo.)
So of course I’m underwater on my residence (owe 300K worth 200K).
The loan is due in 4 years.
Should I strategically default and ruin my pristine credit? (802 fico).
Thanks in advance.
Should I strategically default and ruin my pristine credit? (802 fico).
How would you feel if your friend strategically defaulted?
I’d have no qualms about taking possession and renting it out for $1200. So I’ll take that as a “no” to walking.
I’d have no qualms with taking possession and renting it out for $1200/mo. So I take it that’s a “no” to walking?
So I take it that’s a “no” to walking?
Why should my or anyone on here’s opinion matter? You’re the one who will deal with whatever moral implications there are. You’re the one who will deal with the credit hit, and the possible job implications (some run a credit check).
Personally, I wouldn’t walk just because the value went down. Sometimes we can get out of a bad decision, but we have to recognize that someone is taking the loss instead of us. My conscience isn’t okay with that, but many on here will make a good argument that it’s not a moral decision at all.
Of course you need to be concerned about whether you’re in a recourse state, and even in non-recourse states, often a re-fi is recourse where a purchase loan isn’t. Do your own DD.
What did your friend buy with 130K that will rent for $1,200 a month?
http://www.zillow.com/homedetails/215-W-Limited-St-Lake-Elsinore-CA-92530/17944780_zpid/
It is an interesting property with great view of the lake. REcords don’t show the purchase about 18 mos. ago. (crap i didn’t realize the value had dropped THAT much.)
I’m always heartened to see ideas for financial innovation which I have long promoted on the HBB show up in the MSM:
Bust Up the Banks
The president’s half-measures won’t fix our failed financial system. Here’s what will.
By Nouriel Roubini and Stephen Mihm | NEWSWEEK
Published May 7, 2010
From the magazine issue dated May 17, 2010
In early January, Ben Bernanke defended the Fed’s handling of the recent financial crisis. The lesson he drew was simple: better regulation could have prevented it.
This is correct. Regulation could be better and smarter. Regulators could eliminate banks’ intentional evasion of regulatory oversight. They could solve the too-many-cooks-in-the-kitchen problem, in which an overabundance of regulators and a lack of coordination frustrate effective supervision of the system.
But sometimes it’s not enough to impose new regulations on the status quo; sometimes a bit of regulatory “creative destruction” is in order. Many of President Obama’s reform proposals are good, but they don’t go far enough. There are more drastic changes that can and should be imposed in the coming years, including breaking up big banks and imposing new firewalls in the financial system. There is an even more radical idea: use monetary policy to prevent speculative bubbles.
What follows is a glimpse of the possible future of finance—if policymakers and politicians recognize that confronting crises requires radical reform.
…
I’d like a blond with that short sale, please.
WSJ Blogs
Developments
Real estate news and analysis from The Wall Street Journal
* May 11, 2010, 12:21 PM ET
Orange County Housewives: Short-Sale Edition
By Dawn Wotapka
Getty Images
The Barneys in 2008
Reality has hit home for one of the “Real Housewives of Orange County’s” blond-and-Botoxed stars: Tamra Barney unloaded her Tuscan-style house in a short sale, the Orange County Register reports.
The 4,300-square-foot Ladera Ranch showpiece went for $1.12 million, a 30% discount from the original $1.6 million asking price. In a short sale, the lender-in this case, JP Morgan Chase-agrees to a price less than what is owed. The process helps troubled owners avoid a foreclosure.
“No one wants to face foreclosure,” agent Marcos Prolo of Berrington Properties is quoted as saying. “This is a good lesson for everyone who’s struggling.”
Simon and Tamra Barney-parents of three who are reportedly in the process of a divorce-paid $1.32 million for the five-bedroom, five-and-a-half-bath house at the height of the market in 2005, according to the article. They then spent more than $200,000 installing a saltwater pool, spa, waterfall and landscaping. And, if that’s not enough, the backyard boasts a fireplace, fire pit and outdoor bar.
The Register says the family lost $600,000 on the home.
Like many Americans, the downturn forced Ms. Barney, 42, back into the workplace. Ironically enough, she’s now working for the real-estate firm, Bennington Properties, that sold her home. She’s also launching a make-up line with her plastic surgeon, according to her online bio.
The housewife is now said to be living in a two-bedroom apartment.
She’s not the only “real housewife” with housing issues: Earlier this year, a loan mod helped fellow OC housewife Jeana Keough avert foreclosure of her seven-bedroom, nine-bathroom home.
We’ll watch the Bravo network to see how this storyline plays into the reality show’s sixth season.
Follow Dawn on Twitter @dwotapka
She’s a blond faux, PB.
Ya gotta love it when the Wall Street Journal editors are piling on Gollum!
* OPINION: POTOMAC WATCH
* MAY 7, 2010
Financial Reform Goldman Can Love
Wall Street has given $5.3 million to Senate Democrats this election year.
BY KIMBERLEY A. STRASSEL
Democrats have been playing a very smooth game on Wall Street reform.
To listen to President Barack Obama and Senate Majority Leader Harry Reid, Democrats have crafted a sidewinder of a bill. It’s so tough, explains the president, that Republicans now must protect their wealthy Wall Street “movers and shakers” by trying to sabotage it. The industry is so worried, he claims, that their lobbyists are engaged in a “furious effort” to kill the legislation. If you buy this, the majority also has a synthetic collateralized debt obligation to sell you.
…
When will BoA, JP Morgan Chase and Shittigroup get their turns in the new age witch trials?
market pulse
May 12, 2010, 12:33 a.m. EDT
U.S. investigates Morgan Stanley: WSJ
Myra P. Saefong
TOKYO (MarketWatch) — U.S. Federal prosecutors are looking into whether Morgan Stanley misled investors about mortgage-derivatives deals it helped design and sometimes bet against, The Wall Street Journal reported Wednesday, citing people familiar with the matter. The brokerage arranged and marketed pools of bond-related investments referred to as “collateralized debt obligations,” or CDOs — and traders said Morgan Stanley’s trading desk sometimes placed bets that their value would fall, the report said. Investigators are examining whether Morgan Stanley made proper representations about its roles.
Remember when Big Hank asked us to please not refer to bailouts as “bailouts”? What a change a couple of years makes! I just Googled the term:
bailout
(Search)
About 11,100,000 results (0.34 seconds)
The Euro in 2010 Feels Like the Ruble in 1998
By ANDREW E. KRAMER
Published: May 11, 2010
MOSCOW — As the financial markets try to absorb news of a rescue package for Greece and other teetering euro-zone economies, some bankers and economists see parallels to Russia’s default in 1998.
A decade ago Russia was walking in the same shoes as Greece is today, striving to restore confidence in government bonds by seeking a huge loan from the International Monetary Fund and other lenders. Then, as now, the debt crisis was roiling global financial markets. And hopes were pinned on a bailout — one that in Russia’s case did not work.
“Greece creates a remarkable sense of déjà vu,” Roland Nash, the head of research for Renaissance Capital investment bank in Moscow, wrote in a recent note to investors. The 1998 bailout designed for Russia, in the form of a rescue package offered by the International Monetary Fund, had the effect of forestalling but not preventing Russia’s defaulting on its foreign debt.
During the month between the announced rescue and that default, Russian and Western banks frantically cashed out of short-term debt as it matured, changed the rubles into dollars and spirited the money out of Russia.
The bailout propped up the exchange rate through this process, enriching those bondholders who got out early and leaving the embittered Russian public holding the debt and having to pay back creditors, including the I.M.F. By Aug. 17, 1998, when the government announced a de facto default on Russia’s foreign debt and said it would allow the ruble to float more freely against the dollar, the World Bank and monetary fund had disbursed about $5.1 billion of the bailout money.
Some analysts say that if a similar pattern takes hold in the euro-zone rescue, it could be European taxpayers paying for the bailout while investors in Greek debt are largely made whole.
In Russia’s case, the monetary fund, spurred to action by the Clinton administration’s worries about the political consequences in Russia of a financial collapse, cobbled together an aid package that was enormous by the standards of the day.
The monetary fund and other lenders first proposed $5.6 billion, but then raised it to $22.5 billion, including previous commitments — the equivalent of $29.5 billion in today’s dollars.
In Greece, the fund and European Union initially proposed a bailout of 110 billion euros, or $139 billion, last week. After markets reacted skeptically, European finance ministers met over the weekend and proposed a nearly $1 trillion financial support package for Greece and other weak euro zone economies. They proposed forming an investment fund guaranteed by the governments of richer European Union countries like Germany and France that would also draw on monetary fund money.
With Russia, the successive bailout proposals were quickly judged by the markets as too little, too late — as happened with the Greek crisis before the latest announcement.
“You need speed to put out a forest fire,” Anatoly B. Chubais, who was the lead Russian negotiator with the International Monetary Fund in the 1998 crisis, said in written responses to questions about the Greek bailout.
Edmond S. Phelps, a Nobel laureate and Columbia University economist, in a telephone interview cited a lesson from the 1998 bailout: lenders should announce their highest number as quickly as possible, to keep interest rates down and lower the cost of a bailout. International lenders, he said, need to go in “with all their guns blazing.”
…
How many nails are needed to seal the lid on a coffin?
Wednesday May 12, 2010
Bloomberg
Bailout Is ‘Nail in the Coffin’ for Euro, Rogers Says (Update1)
May 11, 2010, 11:38 PM EDT
More From Businessweek
(Adds comment from Rogers in third paragraph.)
By Shiyin Chen and Haslinda Amin
May 12 (Bloomberg) — Investor Jim Rogers said Europe’s bailout of indebted nations to overcome the sovereign-debt crisis is just “another nail in the coffin” for the euro as higher spending increases the region’s debt.
The 16-nation currency weakened for a second day against the dollar after rallying as much as 2.7 percent on May 10, when the governments of the 16 euro nations agreed to make loans of as much as 750 billion euros ($962 billion) available to countries under attack from speculators and the European Central Bank pledged to intervene in government securities markets.
“I was stunned,” Rogers, chairman of Rogers Holdings, said in a Bloomberg Television interview in Singapore. “This means that they’ve given up on the euro, they don’t particularly care if they have a sound currency, you have all these countries spending money they don’t have and it’s now going to continue.”
…
May 11, 2010 | Opinions
EU unnecessarily institutes bailouts
by Robert Robb - May. 12, 2010 12:00 AM
The Arizona Republic
Surely it would have been better to let Greece go broke.
The Greek national government doesn’t have the cash to service its debt, and private parties aren’t willing to lend it any more. The natural solution would be for Greece to default and restructure its debt. Those who imprudently lent to Greece would incur a loss. The Greek government would have to curtail its spending to match what it could raise in taxes and from more demanding lenders.
Instead, eurozone countries cobbled together a $145 billion bailout package, designed to relieve Greece from the need to raise private capital for a couple of years.
Rather than calm anxiety about eurozone sovereign debt, rate spreads between fiscally shaky countries (such as Spain, Portugal and Ireland) and sounder ones (principally Germany) increased sharply.
So, eurozone countries cobbled together a $955 billion bailout fund over the weekend for all euro-denominated sovereign debt.
The rationale is supposedly to prevent contagion. There are two fears. One is that the default of any eurozone country on its public debt would have cascading effects on the economies of other countries. The second, more profound, fear is that the default on any euro-denominated sovereign debt would adversely affect all euro-denominated sovereign debt and the euro itself.
These fears would seem grossly overwrought. Banks and other private parties in other countries hold Greek debt, but not in the sort of concentrations to represent serious contagion risk.
The euro is a currency, a medium of exchange. The default of one borrower in a particular currency doesn’t reflect upon the creditworthiness of other borrowers using that currency or the soundness of the currency itself. Indeed, as Greece was finding it more expensive to borrow, Germany was finding it less expensive.
These bailouts will have serious adverse consequences for Greece and the eurozone’s future.
Greece has to undergo a severe austerity program. If the spending cutbacks were because Greece defaulted on its debt and couldn’t borrow any more money, the Greeks would have no one to blame but themselves.
Instead, the austerity program comes as a condition of the bailout funds from other eurozone countries and the International Monetary Fund. So, there are strikes and riots in Greece, claiming that the spending cuts are unnecessary and are being foisted on Greece by nefarious outsiders.
Some think that this is good, allowing local officials to take painful action while outsiders get the blame. But that does not make for a healthy democracy or more prudent future political choices.
Read more: http://www.azcentral.com/arizonarepublic/opinions/articles/2010/05/11/20100511robb12.html#ixzz0nh1MKd2s