Things Can’t Just Keep Going Up Forever
The Desert Sun reports from California. “Riverside County officials have announced that more than 400,000 property owners will receive notifications in the mail in July that their property’s assessed value will be reduced. About 100,000 of the reduced assessments affected nonresidential properties such as commercial space, timeshares and vacant land. Housing declines and deflation caused the value of the housing roll to drop by $9.2 billion, said Riverside County Assessor-Clerk-Recorder Larry Ward. ‘While significant, the decrease is less severe than in 2009,’ Ward said, an indication the housing market in a county with 945,000 total properties is stabilizing.”
“The California Consumer Price Index, which sets rates used in assessing property values, identified ‘negative inflation’ in the state for the first time in 32 years.”
Inland News Today. “Hundreds of thousands of local homeowners are being notified this month that their property taxes are going down. That comes on the heels of new assessment rolls that fell 4.5% in San Bernardino County, according to Assessor Dennis Draeger. ‘We were predicting a larger decline than what actually happened. Property tax payers will see relief when the bills go out in September.’”
“Property values took double-digit drops in the desert cities of Coachella, Desert Hot Springs, Adelanto and Hesperia.”
The Morgan Hill Times. “Santa Clara County’s assessment roll shows a dramatic decline in property values that reduces public revenue and hits Morgan Hill and Gilroy hardest, but many local homeowners will see a drop in their tax bills next year. The county has not seen such deeply negative growth in property values since the Great Depression, except in 1978 when Proposition 13 capped assessed values’ annual growth statewide - “a political, not economic circumstance,’ said county Tax Assessor Larry Stone. That year, property values decreased by about 21 percent.”
“During the Great Depression, while the county saw three consecutive years of negative growth in assessed values, only one of those years saw a steeper decline than this year. These numbers are ‘only the tip of the iceberg,’ Stone said. The assessor’s office has not yet conducted widespread appraisals of the county’s commercial properties, as it has for 220,000 residential properties in the last two years.”
SIlicon Valley Community Newspapers. “Stone told the Filipino American Real Estate Professional Association this year’s assessment roll is ‘not pretty’ and that for the first time in 15 years the county’s roll is going to be negative. This year he has already reduced the value of 118,000 properties, 99 percent of which are residential, taking off $21.4 billion from the assessment roll.”
“Stone said it is more difficult to quickly assess the value of commercial properties, but he anticipates when all is said and done there will also be big assessment reductions in this sector. He said he is already seeing high vacancy rates and buildings with fewer employees. ‘The bottom line is the roll will be 2.5 percent negative. This is a disaster,’ he said.”
The Mercury News. “Four years ago, Mercy Martinez plunked $100,000 down on her dream condo in San Jose. Today, the single mother is on the brink of losing it all. ‘I don’t want to default but I could see the day coming soon when I won’t be able to make the payments,’ a tearful Martinez testified at a San Jose hearing, attended by Laurie Maggiano, policy director for the Homeownership Preservation Office at the U.S. Treasury Department.”
“The hearing is one of 10 being held across the country focusing on the Home Affordable Modification Program, or HAMP. With home foreclosures continuing at an alarming pace, Santa Clara County community leaders are urging the Treasury official to hold banks accountable, claiming President Barack Obama’s promise to help homeowners is failing.”
“‘I can’t pay these payments. I’m so much under water but I can’t walk away because I put so much money down,’ Martinez said. ‘I just wish the banks would do what they were bailed out to do.’”
The Monterey County Herald. “Recovery from the recession has started and will be slow and steady, an economist told Monterey County real estate agents. Because it is gradual, recovery ‘doesn’t feel as good as a recovery should feel,’ Leslie Appleton-Young, chief economist for the California Association of Realtors, told agents at its annual meeting in Seaside.”
“In May, the average sale price of a Monterey County home was $527,000, up from $283,00 for May 2009. The average jumped because there were more multi-million dollar homes selling and fewer foreclosure sales of low-priced homes in Salinas. Appleton-Young said she has been hearing people say that on a given day, banks will take all their inventory and flood the market. That is not likely to happen, she said. Lenders have a strategy and aren’t going to take on all the foreclosures at once.”
“As home prices have come down in the past few years, Appleton-Young said, ’sellers at the high end are not motivated to reduce prices.’”
The Bakersfield Californian. “Christopher Lance Stovall, formerly a loan officer with the mortgage lending arm of Crisp, Cole & Associates, entered a guilty plea in federal court Thursday as part of a plea deal in a mortgage fraud investigation. Stovall is the fifth person to take a deal in the case. Stovall’s attorney, Carl Faller, said outside the courtroom that his client’s guilty plea ‘obviously indicates a knowledge of the scheme that was being run by Crisp and Cole. One thing that’s important to remember about Chris, though, is that he is one of the few who left the company voluntarily before everything came crashing down. When he got a sense of what was going on, he reached a conclusion on his own that this was not a place he wanted to be.’”
“At least 88 foreclosed properties are linked to former Crisp & Cole agency employees, family members and associates. Authorities said Stovall, who worked for Tower Lending, was part of a mortgage loan operation that knowingly submitted applications for loans that contained false information about borrower income, assets, employment history and the intended use for the property.”
“Loans on two homes Stovall worked on later defaulted, costing lenders nearly $2.5 million.”
The Pasadena Star News. “Pasadena experienced an uptick in the leasing of commercial property during the second quarter, fueled heavily by discounted pricing, subleases and tenants moving up to higher-quality office space, the John Alle Co. reported. ‘The key thing to take from this quarter compared to the last quarter is that landlords are finally becoming more flexible,’ said John Alle, owner and president of the Pasadena-based company.”
“They have to be. Because monthly office rents that once averaged $3.15 to $3.45 per square foot during 2007 and 2008 are now priced at $2.15 to $2.35 per square foot. As a result, landlords are offering a variety of concessions to lure tenants in.”
“The loss of occupied office space, Alle said, has been dramatic. The vacancy rate for office space remained at 18 percent, almost unchanged from the previous quarter. Alle figures low lease rates are going to be around for a while. ‘I think this is the new reality for the next 18 to 24 months,’ he said. ‘The previous rates had gotten too high and weren’t realistic. Things can’t just keep going up forever.’”
The Orange County Register. “The condo that Jesse James, ex-husband of actress Sandra Bullock, is selling in Sunset Beach got its asking price sliced the other day, 3 weeks in to landing on the market. It’s now listed at $1,195,000, down from $1,290,000. The housing market in Sunset Beach has several less expensive condos near the one that James owns. A couple can be spotted as distress sales right off the bat.”
“A 3-bedroom condo not far from his is listed as a short sale at $565,000, though it’s 1,324 square feet compared to James’ 2,634-square foot condo. The nearby condo, in the process of foreclosure, lists 2 living rooms. James’ condo, on the other hand, includes an elevator. Another 3-bedroom condo, a bank-owned property right near James’ place, went from $1,149,800 in May to $924,800 4 days after the James condo was listed. That one is 3,200 square feet and now is in backup offers.”
“And a 3,000-square foot, 3-bedroom condo near those that’s a traditional sale is now in backup offers. It’s listed at $1,098,000. That price dropped nearly $100,000 last month.”
The County Sun. “At 21, Shane Smith has already felt the sting of a bad economy and the reality of little work in the construction industry. Basic knowledge about how to financially survive in this economy - after it turned upside down - would have been nice, he said. ‘It would be cool if they taught more about responsible consuming,’ he said.”
“Squeezed into the Wall Street Reform and Consumer Protection Act is a provision to create an Office of Financial Literacy. The idea is to spur the federal government into helping consumers understand investing and where their money is going. Marty Rodriguez, a Glendora Realtor, has seen financial illiteracy in the home-buying process. ‘I feel (many buyers) are not educated,’ she said. ‘They don’t have a full understanding of a loan product. Sometimes, they just say `yes, yes,’ and they really don’t know.’”
The Acorn. “Despite hopes for a turnaround this year, California’s economy will continue to sputter until the business climate improves and unemployment drops, experts said during a state and federal economic forecast on the campus of CLU in Thousand Oaks. ‘We’re looking at a long stagnant period,’ said Bill Watkins, executive director of the California Lutheran University Center for Economic Research and Forecasting.”
“Many attribute California’s ongoing economic troubles to the mid- 2000s housing bubble, but Watkins said other factors are in play. California has had no sustained job growth since 1990, a problem masked by the bubbles in technology and real estate.”
“The lack of progress also can be attributed to soaring taxes, still-high housing costs, lack of investment in infrastructure and a decline in the quality of public education. But the bigger problem hails from the state’s budget shortage and excessive regulations, Watkins said. ‘Business abhors uncertainty and California has a bunch of uncertainty,’ he said.”
“Watkins said contrary to popular opinion, most economists believe immigration is good for the economy. ‘I know it’s politically incorrect, but there is no problem that we have right now that couldn’t be solved by a few million immigrants,’ he said.”
“An influx of skilled workers and people with capital would create a surge in housing demand and improve overall commerce.”
The Modesto Bee. “Ceres City Manager Brad Kilger watched California economies boom and bust in his 30-year career in local government, giving him the impression the Gold Rush still shapes the Golden State’s approach to budgeting. He was on hand as the aerospace industry fled Southern California in the 1980s and ’90s, as the military shuttered bases critical to community economies in the early ’90s and the dot-com bust showed that even tech could collapse as the millennium turned.”
“This time Kilger still doesn’t see the bottom. Construction pulled the state up after the dot-com bust, and that industry remains stressed by a lack of financing, an overabundance of housing and a job shortage that keeps people from buying homes. ‘No one anticipated there’d by three years of (property tax) reassessments’ cutting revenue to local government. ‘In past recessions I’ve been in, there were no reassessments. It just really hits to the core of what you do,’ he said.”
“This recession exposed another trend that followed Kilger’s career — complicated budget Band-Aids that mask the state’s financial troubles until the next boom takes off. ‘What the state does is push their problems down so they don’t have to deal with them,’ Kilger vented.”
The Appeal Democrat. “Out of misplaced compassion, California’s Housing Finance Agency will spend $420 million to pay down private mortgages for delinquent homeowners. This is a horrific idea, couched as kindhearted and benevolent. This misuse of taxpayers’ funds will reward some people who have mismanaged their own money, and probably only delay many inevitable foreclosures.”
“To qualify for the giveaway that begins in November, borrowers must be in imminent danger of default or delinquent. By announcing the giveaway months in advance, housing authorities perversely tip off homeowners there’s still time for them to fall behind in their payments to qualify for the government to pay off $50,000 of what they owe.”
“If this weren’t bad enough, the giveaway also ‘asks’ private lenders to match what the government spends by forgiving an equal amount on each loan…That kind of government encouragement was one of the reasons for the rash of foreclosures beginning in 2007 when buyers defaulted on mortgages they couldn’t afford, but that the government had encouraged lenders to give them, anyway.”
“The mortgage pay-down will be first-come, first-served. ‘Unfortunately, there will likely be more demand than funding,’ lamented a CalHFA official. No doubt.”
“For those who don’t get in the giveaway line soon enough, the state has a consolation prize. Homeowners can get up to $5,000 in moving expenses if they can’t afford their mortgages. In all, the state will dole out $700 million in tax money from Washington, D.C. There’s another noteworthy point. The government’s administrative costs will be $52 million, 7.5 percent of the total.”
“This scheme isn’t compassionate. It is coercive and destructive. It takes money from taxpayers, most of whom aren’t facing default but probably could use the money to pay their own debts. It rewards people who, for good reasons or bad, haven’t met their personal obligations. And it coerces lenders to forgive what is rightly owed them, which the lenders obviously so far haven’t determined is something they voluntarily choose to do.”
“Worst of all, these schemes send a loud message that government will bail out people who fail to meet their personal responsibilities, which is certain to encourage more bad behavior, while digging an ever-deeper fiscal hole for the government, which will look to taxpayers for its bailout.”
From the original post:
“Squeezed into the Wall Street Reform and Consumer Protection Act is a provision to create an Office of Financial Literacy. The idea is to spur the federal government into helping consumers understand investing and where their money is going. Marty Rodriguez, a Glendora Realtor, has seen financial illiteracy in the home-buying process. ‘I feel (many buyers) are not educated,’ she said. ‘They don’t have a full understanding of a loan product. Sometimes, they just say `yes, yes,’ and they really don’t know.’”
To which I say:
On the surface, this seems like a good idea. Of course, I’m looking forward to seeing how it works out in the real world.
The above being said, there have been government-driven education programs that have been quite effective in changing behavior. Anti-smoking and seat belt promotion campaigns come to mind.
Hmmm, certainly a case of apples and oranges between the anti-smoking/seat belt campaigns and the “office of financial literacy”. But if…could it be that those anti-smoking and selt belt campaigns were intended to allow for more debtors to live longer and service their debts?
“Office of financial literacy” Training handbook - excerpt from page 1: suggested response to all consumer questions: “it’s never been a better time buy!”
Instead of expanding government, why don’t they include a “financial literacy” block in high school curriculum, one that is not co-sponsored by corporate America (like the current economics curriculum). It’s no wonder they learn to spend, spend, spend. Look who’s supplying the learning materials!
http://www.dollarsandsense.org/archives/2002/0502maier.html
While I appreciate teaching our youth about the free market, it does little to prepare them for the real world consequences of overspending!
Heheh, my stepson took a class like that senior year, right before going into the service and racking up a bunch of debt.
It’s REAL hard to reduce financial literacy to the sort of slogan that works for public education programs. “Smoking kills, “Click-it or Ticket” are much simpler to explain that ammoritzation tables.
How about “Don’t Borrow Trouble,” which is the name of a program of (yes, I know — them) Fannie and Freddie.
Or how about Ben Franklin’s saying, “Neither a borrower nor lender be.”
Wasn’t that Shakesphere?
Polonius??
“Neither a borrower nor lender be, for loan oft loses both itself and friend, and borrowing dulls the edge of husbandry. This above all: To thine own self be true, and it follows as the night the day thou canst not be false to any man.”
I REALLY wish that compounding interest, budgeting, and retirement saving would be included in our school Math curriculum. How hard would it be to include it in math/home ec/etc classes?
It would be nice to have society’s teenagers graduating and not seeing credit cards as instant wealth.
“I REALLY wish that compounding interest, budgeting, and retirement saving would be included in our school Math curriculum.”
Truth is that most kids are simply to dumb to understand somthing as simple as compounded interest or exponential growth. Most of our Congress critters don’t understand those concepts either. I guess we as a nation will have to suffer the consequences of our ignorance. We’re ruled by the ignorant majority and the corrupt representatives they keep on electing into office.
…but let’s focus on really important topics such as gay rights, abortion and prayer in school.
I know we like to rag on Phony and Frauddie, but here’s a case where they may be doing something right:
Don’t Borrow Trouble
Many decades ago I remember taking a “get ready for life after high school” course. The teacher, who apparently didn’t have a lesson plan, asked us what we would like to learn. I suggested, many, many times..checkbook balancing…Since I my idea was ignored thoughout the semester I can only assume she didn’t know how it was done.
Many adults know NOTHING about financial literacy.
After my mother died, my sister and I had to teach our father some simple things, like how to WRITE a check and pay bills. He was SEVENTY YEARS OLD at the time.
When I was in high school, I borrowed a book from my mom on investing in stocks and bonds, and quickly learned the basics.
Nope ,this is a big cop-out . Historically Lenders were in charge of qualifying borrowers and preventing fraud . Now they would like you to believe that its the responsibility of the borrower to figure out how much they can afford , Some borrowers are able to figure it out ,some aren’t ,so it falls back to the lender not to allow a bad loan or a fraudulent loan . Just because it became a fraud market were Wall Street and Lenders breached their duty to protect funds in underwriting loans (while they mis-rated the risk and fraud ) doesn’t mean they can BS and act like the borrowers were the culprits that were’t able to determine how much they could afford .
Also appraisals can’t be determined on just what a buyer is willing to pay on a purchase because the buyer could be
nuts . So appraisals are based on a defined appraisal science
that would be able to determine if a buyer was overpaying for a property and they would be required to put more down to offset the risk that they were overpaying . The problem during the boom was that you had so many fraud transactions going on and loans made to unqualified buyers that it set the appraisal values on fraud by lenders making loans to unqualified buyers and fraudulent buyers .
Market value is what a willing and “able” buyer will pay at a defined point in time . You are not a able buyer if your fraudulent or the lender didn’t properly qualify you ,or get the proper down payment based on the risk you posed as a borrower .
They can BS as much as they want ,but its the responsibility of the lenders and agents of lenders to protect the funds of depositors in banks or
other funds and make proper risk loans and rate those risks in a proper fashion and to prevent fraud . They breached their duty as middlemen and lenders and they contributed to
the fraud with the motive of greed . They have no excuse for the boom demand they created that raised prices by this faulty lending .
+1 Great post Housing Wizard.
So all this time I thought the housing bubble was
a) Bush’s fault
b) the banks’ fault
c) Bernanke/Greenspan’s fault
Now all of a sudden you’re all talking about the fact that people don’t understand finance.
So can I then take it to mean that maybe, just maybe, the people themselves are to blame?
You all can’t have it both ways. You can’t blame big bad evil Bush and big bad evil banks and then turn around and claim that the borrowers were too stupid to understand basic compounding interest rate theory.
So which is it?
“It has electrolytes”
America’s future.
I just saw a web ad today for Amex cards for your kids. They are prepaid by the parents.
If people had to pay everything in cash, they’d want to pay less. There is just something about a fist full of cash.
There is also something to be said about having to save up that fist full in the first place!
Save your money first people.
I was reading some articles by Charlie Mumford who is the right hand man for Warren Buffett’s Berkshire Hathaway company and of course a billionaire in his own right.
He said that most people ask him the secret of successful finance.
He said that he had no secret, but if forced to say something he admitted that there was one no brainer.
“Spend less than you earn and save/invest that difference”
sounds pretty simple to me.
The California state bar has compiled a pamphlet on legal literacy for 18 year olds - i.e. for those becoming adults in the eyes of the law. It’s really well-done and I recommend it. It’s even roughly useful as a guide for people in other jurisdictions, although the cites to statues is of course for CA only.
http://www.calbar.ca.gov/Public/Pamphlets/WhenYouBecome18.aspx
Maybe such a program could educate our politicians and the president regarding basic financial concepts/relationships. They seem not to understand.
“Watkins said contrary to popular opinion, most economists believe immigration is good for the economy. ‘I know it’s politically incorrect, but there is no problem that we have right now that couldn’t be solved by a few million immigrants,’ he said.”
“An influx of skilled workers and people with capital would create a surge in housing demand and improve overall commerce.”
Riiiiiiiiiight.
Note the ‘Skilled’ part there. We get millions of poor, unskilled immigrants and thousands of skilled ones who might have a bit of cash. Not exactly a recipe for economic expansion.
That’s an odd hedge, and portrays a huge misunderstanding about what is currently happening to the CA economy, which after having read this site for a while, is par for the course for an economist.
And, of course, the economist doesn’t live in a neighborhood that’s bearing the brunt of illegal immigration.
I think all pro-immigration firebrands should spend a few months working on the border farms and in the border towns and see what it feels like to be inundated with illegal border crossers.
I think all pro-immigration firebrands should spend a few months working on the border farms and in the border towns and see what it feels like to be inundated with illegal border crossers.
For one thing, the natural environment really takes a beating.
Well, that wasn’t what he said, now was it? In fact other studies have corroborated his point of view — they point out the many established business today were founded by immigrants - pointing to Yahoo, for example. I’m sure you can come up with many more.
I live close to CLU- Cal Luthern University and think Mr Watkins is absolutely out to lunch, imo. There are many well educated and skilled workers here in Thousand Oaks, for example. That’s not the problem. It’s no freak’in jobs. Ivy League arrogance, I swear. In our circle of friends, most of the men are EE’s or Software, and they are either unemployed,underemployed, or self employed making peanuts.
exactly those that cross the border are the unskilled workers,we surely dont nd more of them,how can they improve the economy when they have nothing to offer us but their backs…………..and now plenty of americans will work for the wages that illegals are making….if Obama passes an amnesity i guarantee you he will nt be elected again…
if Obama passes an amnesity i guarantee you he will nt be elected again…
It’s up to Congress to pass this legislation.
And I predict that it will have the same fate as what went down in flames back in 2007. That was one of President Bush’s biggest legislative setbacks.
Az Slim
On the radio this morning, I heard a San Diego and AZ Congresscritter today, say this administration is thinking of doing something in line with an Executive Order. I don’t recall the details, but it sounded pretty “urgent”.
I’m afraid this is America’s final curtain call.
So tell me again, why did we fight the Civil War? It wasn’t about slavery… oh, yeah… state’s rights.
yeah with 10% unemployment and 25% underemployment i just don’t get the talk of Amnesty….like Americans won’t do any of the jobs the 11 million illegals are holding. and, of course we brought in 1.1 million people legally in 2009. what are the jobs there people are getting? i guess we need someone living in all those foreclosed houses
“‘I can’t pay these payments. I’m so much under water but I can’t walk away because I put so much money down,’ Martinez said. ‘I just wish the banks would do what they were bailed out to do.’”
Did she lose her job? Well, then she should dip into her savings to tide her over while she’s looking for a job. What’s that you say? She has no savings other than what she put in the condo? Then she’s a financial idiot, and losing the condo will teach her a very expensive lesson.
Lady you have ALREADY LOST your $100K down payment. You are now only quibbling about how much the BANK will lose.
And THAT is what the bureaucrats, banks, brokers, and bondholders desparatly DON’T want people to figure out. Because once they do, the level of “strategic defaults” will skyrocket.
‘I just wish the banks would do what they were bailed out to do.’”
Ummm… hate to break it to ya, sweetie, but the banks are doing EXACTLY “what they were bailed to do”. (Hint: it had nothing to do with helping powerless peons like you.)
I would like to know where Ms. Martinez acquired $100K for a down payment, especially in cash. It takes years to accumulate that amount of money. The article didn’t report Ms. Martinez’s age or profession either, although she must be under 45 or so if she’s a “single mom.”
‘The bottom line is the roll will be 2.5 percent negative. This is a disaster,’ he said.”
That’s no disaster! Since a responsible budget would be running a few percent surplus to save for big ticket items, just dip into your savings to cover the drop while carefully reducing your expenses so a multi-year decline won’t soak up all of your savings.
What’s that you say? You were running deficits during the boom years? Then the county is collectively a financial idiot and is about learn some expensive, painful lessons.
Just raise taxes like they do here in New Jersey, the proletarians have no choice. You either pay or get audited and heavily fined or your house gets seized or get your legs broken. It’s legalized extortion in the People’s Republic of New Jersey. Tenured teachers making 150K, public servants working a zillion hours of overtime in their last year of “service” to receive the majority of that salary in pension money for the rest of their lives. Property taxes exceeding $12,000 per year on a 3bd/1.5bth POS listed in the 500K to 600K range. If you don’t live here, you have no idea.
If you don’t live here, you have no idea.
I’m originally from Pennsylvania, and let me tell you, quite a few of us Keystoners were aghast about the things that happened over in Jersey.
Not to mention you have to cough a quarter out your arse any time you drive more than a couple of miles.
About 100,000 of the reduced assessments affected nonresidential properties such as commercial space, timeshares and vacant land.
I don’t get it. Who would purchase a “timeshare condo” in Riverside county? It’s not exactly a “destination vacation” spot.
The California Consumer Price Index, which sets rates used in assessing property values, identified ‘negative inflation’ in the state for the first time in 32 years.
Huh? I thought Prop. 13 and its rules set “rates used in assessing property values”. Why would a CPI have anything to do with real estate valuation?
Prop 13 still allows for “annual increases in assessed value of real property to an inflation factor, not to exceed 2% per year.” That 2% per year increase assumes inflation is above zero and not negative (deflation). So, the CCPI is used in assessing property tax increases, if any.
http://en.wikipedia.org/wiki/California_Proposition_13_(1978)
test
No HARM done.
‘The county has not seen such deeply negative growth in property values since the Great Depression, except in 1978 when Proposition 13 capped assessed values’ annual growth statewide - “a political, not economic circumstance,’ said county Tax Assessor Larry Stone. That year, property values decreased by about 21 percent.”’
The financial journalist confused assessed values with market values. The obvious first-order effect of Prop 13 would have been to increase, not decrease property values, as the cap on future tax payments would naturally get capitalized into purchase prices.
I have to wonder if the passage of Prop 13 was not the first point at which California home price to income ratios became unhinged from those in other states?
“Worst of all, these schemes send a loud message that government will bail out people who fail to meet their personal responsibilities, which is certain to encourage more bad behavior, while digging an ever-deeper fiscal hole for the government, which will look to taxpayers for its bailout.”
But just think of all the newly-minted FBs the government will have available to bail out, in exchange for their future support on Election Day.
“Ceres City Manager Brad Kilger watched California economies boom and bust in his 30-year career in local government, giving him the impression the Gold Rush still shapes the Golden State’s approach to budgeting.”
A most intriguing thought has often occurred to me over the past half decade, since I started thinking about this housing bubble: Perhaps the Gold Rush set off a series of boom-bust cycles in California which have never ended to the present day, and if anything, have worsened.
“This recession exposed another trend that followed Kilger’s career — complicated budget Band-Aids that mask the state’s financial troubles until the next boom takes off. ‘What the state does is push their problems down so they don’t have to deal with them,’ Kilger vented.”
By all visible evidence, this calculation is doomed to fail in the ongoing Second Great Contraction, which will prove deeper and of longer duration than the central planners in Sacramento could have anticipated.
Given the Fed’s opacity, I have no way to verify or refute these tinfoil hat allegations. But their surfacing does seem like a natural consequence of the myriad ad hoc interventions which the Fed has played since Fall 2008. Hopefully the GAO audit later this year can dispell any false allegations that the Fed manipulates asset prices.
Fed Facing Lawsuits, Criminal Complaints Over Market Manipulation Written by Alex Newman
Tuesday, 27 April 2010 16:00
In addition to valiant congressional efforts for increased transparency, the Federal Reserve System and its cohorts are being targeted with criminal complaints and multiple lawsuits that attempt to shed to light on the central bank’s “bailouts” and its manipulation of the stock market, the precious-metals market, and more.
Some startling revelations have already surfaced, like the fact that under Timothy Geithner, the Federal Reserve Bank of New York set up front companies to purchase toxic assets from various firms. It has also become public knowledge that the Fed handed out hundreds of billions to foreign central banks and trillions to financial institutions. But there is still much more hidden in the shadows, and efforts to expose the secrets are growing.
Fox Business Network announced on April 20 that it was expanding its lawsuit against the Federal Reserve’s secret bailouts. And “The New American” has provided extensive coverage of Bloomberg’s lawsuit, which aims to force the banking cartel to disclose information about its so-called “emergency” lending program, which unconstitutionally and without appropriations from Congress provided trillions of dollars to various financial institutions.
Bloomberg won its original Freedom of Information suit, but the Fed obtained permission to delay disclosure while it appealed the ruling. The Fed lost again on appeal, arguing it was not subject to FOIA requests as a private entity and that disclosure would “harm” the institutions receiving bailouts. But despite the two court rulings, it has not yet given up and may even take the case all the way to the U.S. Supreme Court.
But while the Bloomberg lawsuit proceeds, investors who lost money because of the Fed’s market manipulations are exploring other options. A Florida investor who lost money after deciding to “short” financial institutions based on publicly available data has recently filed three felony criminal complaints with the Federal Bureau of Investigation and the Securities and Exchange Commission against the Fed, the Treasury, and various banks.
“Investors who had short positions or purchased ‘put options’ were defrauded of billions. I purchased short positions and was defrauded. I want to prosecute,” wrote investor, developer, and Republican Liberty Caucus of Florida chairman Will Pitts in his criminal complaint filed with the SEC. “Those guilty by their own admission should be arrested. Those who lost because of this fraud should be compensated for their loss.”
…
I think it was pretty clear that the Feds and the Treasury were giving bail-outs prior to permission from Congress and the Tarp bail-out . The bail-outs were done in the form of making short term loans based on toxic assets at full value . When the Fed made these liquidity injections
they made them to all kinds of entities ,including Insurance Companies and other financial entities that normally do not get to go to the discount window . The Feds breached their duty to limit the loan amounts based on the true value of the assets . Than when the Banks and entities that did borrow from the discount window were ready to default or BK the Feds and Treasury screamed emergency .
Congress should not of approved any bail-out fund because in essence they were just giving the banks and other entities the money to make good on the short term discount loans given leading up to tarp .
Can the Feds justify giving out loans based on full value of toxic assets that they knew they were not at the value they made the loans on ?
It would be like a borrower who says you gave me a loan I couldn’t pay
on false values so now you have to give me the money to pay the loan .