Bits Bucket For November 27, 2010
Post off-topic ideas, links, and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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Thousands expected to protest Irish austerity plan
By SHAWN POGATCHNIK The Associated Press
Updated 5:03 a.m.
DUBLIN — Tens of thousands of demonstrators were massing on a wintry Dublin on Saturday to oppose the government’s harsh austerity plan, aimed at slashing the country’s budget deficit to meet the terms of a bailout for its humbled economy.
The labor union-organized rally follows Irish Prime Minister Brian Cowen’s announcement Wednesday of a four-year package to cut spending, raise taxes and ax thousands of state jobs, the toughest budget measures in the nation’s history.
Cowen acknowledged that living standards will fall, but insisted action is needed to tackle a 2010 deficit running at 32 percent of GDP, the highest in Europe since World War II.
His government will unveil an emergency annual budget on Dec. 7, which must be passed to allow an €85 billion ($113 billion) loan from the European Union and the International Monetary Fund.
Ireland can always go back to its historical export- its people.
Or just institute a penny tax per pint, and they’ll pay it all back in a year.
Being of Irish ancestry, I resent that statement, and demand you buy us a round as a form of apology.
“Ireland can always go back to its historical export- its people.”
Only problem with that is that my Irish ancestors had a place to go 250 years ago. Nowadays, the global banksters have greatly limited the possibilities.
December 7th, 2010 - a day that will live in infamy?
BTW, Irish minimum wage is approximately $12.00 per hour.
Not for long - they are cutting that too.
I guess their Socialist party time is quickly coming to an end (as it always does, when this stuff is tried)…and with one heck of a hangover.
It’s a shame that us HBBers cannot be running these governments - but instead we have the ’speculator class’ of people that always get in charge. I guess the kool-aid of splurge now, pay later is just too tempting for most voters.
The bankers that destroyed their economy were Socialists?
Who knew?
nice
Irish taxpayers getting hosed:
http://www.independent.ie/national-news/penal-interest-rate-the-price-of-euro85bn-bailout-2438350.html
Shocking when the same work can be done in Asia for a dollar a day! What are Westerners thinking?
The next evolution will be when the same work can be done by robots for 1 penny per day.
“Voyage From Yesteryear” by James P. Hogan offered a what- if scenario where robots or machines provided everything you want or need. But the only flaw in the theory was that the machines could not get you the real estate you want. This is why capitalism will be around for centuries, whether or not it is driven underground to the black market - in case the U.S. Goes the soviet way.
Perhaps we can move all the people out into the ocean or somewhere they will not cause trouble and put the robots in homes?
I can see a future where a handful of people live in magnificent castles and the rest of us fight over scraps of food and cardboard for shelter.
In the last week I am starting to see Bank Owned Properties coming on the market at more than a fair price. Not where I am looking to live but not the hood either. Could this be the beginning of the end?
12543 N 73 Ct West Palm Beach, FL 33412
$89,900 Foreclosure Bank Owned
3 Bed 2 Bath 2,455 Sq Ft 1.36 Acres
Price/sqft $37
Property Type Single Family
Year Built 1992
From Property Appraiser site
Apr-2010 23812/0201 $89,600
CERT OF TITLE BANK OF AMERICA NA
And as a part of that price reduction process, Homepath continues to play the shell game of removing houses from their reo list by saying they’ve been sold only to re-appear as a new listing. This occurs over a 90 day period. *SOME* of the price reductions are substantial, i.e, in excess of 50%.
And no… I’m not saying these places are worth 50% of asking. With wholesale price slashing like this, I’d say they’ll be cut even further.
It’s a come-on…just to spur your interest…it will not sell for that price.
Similar properties in that area have sold in that price range. In Port St.Lucie about an hour north 2000-06 built houses 3000 sq. ft. that sold for $400k+ have sold for $80k It is very real.
jeff,
house is only 1610sf. neighbor’s property zillows out at around 250K. Bank will only take cash offers…redrum redrum! Maybe I was wrong…man it needs some work…nice pool on 1/3 acre.
http://www.zillow.com/homedetails/12543-73rd-Ct-N-West-Palm-Beach-FL-33412/46491374_zpid/
Spec houses don’t wear well in warm moist climates.
A cheap development with no drainage, no curbs or sidewalks, no street lights, etc., makes this neighborhood a loser. How far to the Piggly Wiggly?
For 1 thing I understand 1610 living, but does that mean a 2 car garage and a covered back porch ( where we spend a lot of time from Nov.-April ) and an ingroud pool from 2000 isn`t worth anything or doesn`t cost anything to build? Now I aint buying it, nor am I telling anyone else to but in 2005 this house would have sold for $400k in a week. Across the street 09/28/2006 $332,000
BAS BASE AREA 1610
2. FOP FINISHED OPEN PORCH 340
3. FGR FINISHED GARAGE 460
4. FOP FINISHED OPEN PORCH 45
Total Square Footage : 2455
Total Area Under Air : 1610
“How far to the Piggly Wiggly?”
About 1 1/2 miles to a major shopping center anchored by Publix, 3 miles to PGA Natioal and Fl. Turnpike, 5 miles to I 95 and about 1/2 hour to the beach.
13254 79TH West Palm Beach, FL 33412
$85,000Price Reduced
4 Bed2 Bath1,974 Sq Ft
Days on site 157 days
13252 N 71st Pl West Palm Beach, FL 33412
$94,900
3 Bed2 Bath1,950 Sq Ft
Days on site 44 days
I jumped a bunch of them to get to this. This aint bad at all.
12442 N 89th Pl West Palm Beach, FL 33412
$149,900
3 Bed2 Bath 2,850 Sq Ft
Days on site 66 days
Subarea and Sq. Footage for Building 1
No. Code Description Sq. Footage
1. BAS BASE AREA 2013
2. FGR FINISHED GARAGE 400
3. FOP FINISHED OPEN PORCH 84
4. FOP FINISHED OPEN PORCH 374
Total Square Footage : 2871
Total Area Under Air : 2013
SCREEN ENCLOSURE 2002 1686
POOL - IN-GROUND 2002 90
“CERT OF TITLE BANK OF AMERICA NA”
I think that’s supposed to say “SORT OF LIKE A TITLE BANK OF AMERICA NA”
Still waiting for the transcript to this post-Thanksgiving-Day Schadenfreude feast:
Why Are Local Home Sales, Prices Declining?
An audio recording of this interview will be posted here within a few hours of the live broadcast. A transcript will also be added within 24 hours. Thank you for your patience.
By Hank Crook, Tom Fudge
Editors Roundtable transcript | Friday, November 26, 2010
Will San Diego experience a double-dip housing slump in the new year? What impact will the banks’ backlog of distressed properties, and the expiration of a federal tax credit have on the market over time? We discuss the latest trends in the local housing market.
Guests
Kent Davy, editor of North County Times
Scott Lewis, chief executive officer of voiceofsandiego.org
Alisa Joyce Barba, independent editor with NPR member stations
Hank Crook and Tom Fudge?
Surprising they are in radio and not banking, eh?
“Why Are Local Home Sales, Prices Declining?”
WTF is it with the media these days????? This is along the lines of some of the beaut headlines on http://www.msn.com like “Are you eating too much?” or FoxNoise running a banner saying “Is the president of the US controlled by secret foreign agents by remote control?”
WTF.
Looks like Fannie and Freddie may be finally coming around to ending to the post-$8K-tax-credit for-sale inventory shrinkage. This, in turn, could precipitate an accidental realization of their long-sought, though ever-elusive, goal of providing affordable housing.
* HOMES
* NOVEMBER 26, 2010, 11:48 P.M. ET
Fannie, Freddie Recommend Foreclosed-Property Sales Resume
By NICK TIMIRAOS
Fannie Mae and Freddie Mac have begun telling real-estate agents nationwide to resume sales of foreclosed properties that had been suspended after document-handling problems surfaced over the past two months.
Fannie said Friday it had lifted a moratorium on foreclosed-property sales following a review of the affected properties it has acquired and after consulting with its government regulator, the Federal Housing Finance Agency. It was unclear how quickly sales would resume because loan servicers are still completing their reviews of paperwork.
“Our decision was motivated by several factors including the protection of buyers with title insurance, the negative impact lingering foreclosed properties has on neighborhoods and the cost burden that is placed on taxpayers when [bank-owned] sales are suspended,” said a Fannie Mae spokeswoman.
Fannie and Freddie owned nearly 240,000 properties at the end of September, valued at nearly $24 billion. Difficulty selling those homes could lead to higher carrying costs for the mortgage titans. Delays also could prompt buyers that had been under contract to lower their asking prices or to walk away from deals.
In September, Fannie and Freddie were forced to suspend sales of certain properties amid reports that documents used to process foreclosures weren’t being properly submitted by companies that handle loan servicing and their attorneys.
A memo Fannie sent to real-estate agents on Wednesday directed agents to “proceed with scheduling and holding the closings” of sales of Fannie Mae-owned homes and to work with appropriate personnel “if a title issue arises with respect to the potential defect of an affidavit used in the underlying foreclosure.”
Freddie’s memo told agents to “resume all normal sales activity.”
…
But how to they define “normal”?
I hope none of you own the old gm stock.Evidently some gullable investors thought the old stock would soar when GM issued it’s new IPO.Finra even changed the ticker symbol from gmgmq to mtlqq to help investors avoid confusion.Sorry you are still holding the bag as GM execs party on thier new found wealth from prince alaweed.
http://www.streetinsider.com/stock_lookup.php?q=MTLQQ
Of course, not many houses sell at ths time if the year, so the fall in prices will continue to be slow. I just wonder when the bottom will actually occur. Could it take another ten years?
At some point (2012 IIRC) the tax forgiveness on deficiency balances will sunset. That will make for an interesting point in the housing bubble saga. It will be “do or die” time for all the FBs out there as they say to themselves, “If I am going to default, it is going to have to be now.”
Of course, Congress might push back that sunset to keep the extend & pretend game going.
I can’t wait for the lenders to send out 1099s to the FBs who refied and or used erroneous stated income to get a loan. Serves them right!!!
* BUSINESS
* NOVEMBER 26, 2010, 8:16 P.M. ET
Short Sales Still Hit Owners’ Credit
By NICK TIMIRAOS
Q: Is a short sale as damaging to a borrower’s credit as a foreclosure?
A: Generally speaking, yes. In both cases, a borrower’s credit score can fall 100 points or more. A borrower with an initial credit score of 780 could fall to around 620 as a result of a foreclosure or short sale, according to Fair Isaac Corp. A borrower with a 680 credit score could see a drop to 575.
Still, lenders are trying to give borrowers an incentive to complete a short sale and avoid foreclosure. Mortgage giants Fannie Mae and Freddie Mac allow borrowers who complete a short sale to become eligible for a new loan after two years. Borrowers who complete a foreclosure must wait as long as seven years.
Q: Why would a lender decide to allow a short sale?
A: Lenders generally lose less money on a short sale than on a foreclosure. Foreclosures are more costly because banks must take back the homes and pay someone to maintain them and to resell them. On average, a short sale reduces the lender’s loss by at least 20% and can happen in half the time as the average foreclosure, according to a study by research firm TowerGroup Inc. Short sales may also fetch a better price than a foreclosure because occupied properties are generally better maintained. In Orlando, Fla., the average price per square foot on a short sale last month was $147, compared to $122 for a bank-owned property and $188 for a traditional sale, according to Collateral Analytics, a real-estate research firm.
…
100 point loss to credit scrore seems awfully low.I think it is closer to 300 points.A realtor told me you can buy two years after a short sale.
So if you get the gains on the way up and the bank takes loss on the way down what do you have to lose?
“A realtor told me you can buy two years after a short sale.”
Fannie and Freddie agree with your realtor friend (see bold passage in the above).
I am wondering how much it costs you in extra interest to get back into a loan after a 100 (or 300) point hit to your credit rating?
Even if its 2% higher you would still be at 6.5 at todays rates.
Unbelievable to me that they give loans out to people after two years.This housing market really is a casino these days.
I agree. What the hell is so hard about living in rental housing for a few more years? I mean, people do it all their lives in most cities in the world, including some in the US.
…and some of these people are happy and not embarrassed about it.
Some of those people actually live in apartments, too. Can you imagine the shame of it? Sometimes they can even sounds from their neighbors’ apartments through the walls. Who could live like that? On top of that, everyone knows that renting is just throwing money away.
Some of those people actually live in apartments, too. Can you imagine the shame of it? Sometimes they can even sounds from their neighbors’ apartments through the walls. Who could live like that? On top of that, everyone knows that renting is just throwing money away.
Of course, if it’s a condo, then it magically transforms into a savvy investment!
I would guess a lot more too. With a 120 day late alone would knock down a couple hundred points? From what I have seen, almost any blemish greater than a single 60 day late will pretty much render a credit rating dust!
With so many credit ratings turned to dust, I’d imagine they will be less important moving forward. Lenders cannot afford not to lend, so they’ll figure a way to get everyone into their claws.
Yup, they will change the way credit ratings are calculated.
Credit ratings will have to continue to be more stick than carrot, or there will be little incentive for us all to struggle to keep our A ratings alive.
* BUSINESS
* NOVEMBER 27, 2010
Foreclosure Restarts Limp Out of the Gate
By DAN FITZPATRICK and RUTH SIMON
Bank of America Corp. and J.P. Morgan Chase & Co. have hit snags in efforts to restart nearly 230,000 foreclosures across the U.S., meaning some cases are likely to remain in limbo until early next year.
Several complications are slowing the process, ranging from the hiring of new law firms to handle foreclosure paperwork to making sure that correct procedures are being followed as new or revised files are submitted in the 23 states where court approval is required for foreclosures.
The delays aren’t a sign that documentation problems are worse than previously acknowledged by the nation’s two largest banks by assets, according to the companies. And Bank of America, based in Charlotte, N.C., and J.P. Morgan, of New York, haven’t backed down from their insistence that no one was wrongly foreclosed on as a result of errors in affidavits or other loan documents.
Still, Bank of America said it has refiled documentation on just a “handful” of foreclosures that must be approved by a judge. The bank previously said it would resubmit 102,000 affidavits on pending foreclosures starting Oct. 25, with foreclosure sales resuming in November.
James Mahoney, Bank of America’s head of public policy, said “the process is now picking up,” adding that “we expect there will be thousands of affidavits in the courts by the end of December.” He wouldn’t provide an estimate of how long it could take to go through all 102,000 cases being reviewed by employees.
The delay partly reflects a decision by Bank of America officials to make several visits to new law firms working on foreclosure cases for the bank to check that proper procedures are followed as new files are submitted to courts.
“We’ll be opening the valve soon,” another Bank of America executive said. “We’re going to move slowly to ensure high quality.”
J.P. Morgan said in November that it expected to start refiling foreclosure affidavits “within a couple of weeks.” The bank temporarily suspended foreclosures in October.
However, “we still haven’t quite started,” a J.P. Morgan spokesman said. “We’re making sure everything is right.” Bank officials have said it will take three or four months to submit revised documentation on roughly 127,000 loans affected by the temporary halt.
Ally Financial Inc.’s GMAC Mortgage unit has reviewed about half of its 25,000 foreclosures idled by the freeze it announced in September and resubmitted a majority of those cases.
“We still expect the vast majority of the remaining to be completed in the next few months,” said a company spokeswoman.
The delays could lead to higher costs for banks and investors.
…
It’s quite the paradox that the paperwork on the way up isn’t really an issue, but now that the bodies are piling up, peeps are reading the fine print.
ok it sounds like these are new Lost Note affidavits, thisw tine not robosigned - ? we’ll get some clarity here one of these days.
oy, such typos..
WARNING! This ain’t glamour shots.
http://www.palmbeachpost.com/blotter - 40k -
And this is the future of our country?????
WE’RE DOOOMMMED DOOMED I’LL TELL YA!
…at least we have music to cheer us up:
http://www.youtube.com/watch?v=U60Na2ZjWY8
“WARNING! This ain’t glamour shots.”
As Tom Wolfe would say, “The Chow.”
Love the resisting arrest ones. They all have that surprised look that every bully gets when they realize there IS someone bigger and badder than they are who WILL make them follow the rules.
We just drove by the house that the deal fell apart on. How long do you think a house will stay in probate in Florida? It looks like the widow has moved back in. I don’t blame her, she’ll probably get 2-3 years of free housing!
Ah, go ahead and blame the widow.
I was asked the other day what the heck Ayn Rand and Objectivism (her philosophy) had to do with our current efforts to rebuild our economy- if it all wasn’t just a distraction.
Greenspan, of course, was an objectivist, whose ‘let the Titans roll’ philosophy was indisputably a major cause of our bubble economy. But rather than Rand’s philosophy being discredited by this association, with the appropriate lessons learned (eg never trust the Titans), it has rather become the ‘philosophy du jour’ of the Tea Party and its many supporters and hangers-on. Philosophies that had nothing to do with the bubble and crash (particularly Keynesian), have instead been substituted in the public mind as the real cause.
I find it ‘objectionable’ when people’s minds are so easily manipulated by the PTB. It brings to mind even more unsavory episodes in history.
Frum Forum
Noah Kristula Green
“…since the financial crisis, all has changed. The Ayn Rand Institute, which owns the Rand copyrights, claims that sales of Atlas Shrugged tripled between 2009 and 2008. The Economist observed the sharpest spikes in Rand sales occurred when bailouts or stimulus bills were in the news. And very suddenly, prominent national conservatives have overcome their repugnance for Rand’s militant atheism to endorse her vision – and her politics.
The Wall Street Journal declared in an Op-Ed by Stephen Moore—its senior economics writer—in January 2009 that Rand’s work had moved “From Fiction to Fact.” Rush Limbaugh gave monologues that quoted Rand and called her “Brilliant.” Among politicians, Ron Paul has described Atlas Shrugged as “telling the truth.” Amity Shlaes tried to map the characters of Atlas Shrugged onto the real world in a piece for Bloomberg.
Who is Ayn Rand? For conservatives she is no longer the author who defended The Fountainhead’s rape scene as “rape by engraved invitation” but the prophetic writer on the Obama Presidency: “We are living in an Ayn Rand novel” argues conservative rising star Wisconsin Rep. Paul Ryan.”
Wow, more books sold and Rush Limbaugh mentioned Rand. That’s a landslide of political force for sure. But, let’s look at what else is happening to the people of this country:
‘That golden age – we didn’t know it was golden at the time, of course – was an America in which the idea of being searched before getting on a plane was incomprehensible, impossible, the product of someone’s dystopian imagination: today it is a reality. It was an America in which the idea that the government could read our communications, spy on our lawful activities, and declare anyone – even an American citizen – an “enemy combatant,” and hold them indefinitely or even kill them, was utterly inconceivable, a paranoid’s fever dream: today it is all too real.’
http://original.antiwar.com/justin/2010/11/25/libertarians-against-the-regime/
Rand’s philosophy is also being used to attract Libertarians to the Koch Brothers Tea Party. The TSA ‘revolt’ (and the much-hyped patdown protest that didn’t occur) is another part.
TSAstroturf: The Washington Lobbyists and Koch-Funded Libertarians Behind the TSA Scandal
Mark Ames and Yasha Levine
“Does anyone else sense something strange is going on with the apparently spontaneous revolt against the TSA? This past week, the media turned an “ordinary guy,” 31-year-old Californian John Tyner, who blogs under the pseudonym “Johnny Edge,” into a national hero after he posted a cell phone video of himself defending his liberty against the evil government oppressors in charge of airport security.
While this issue is certainly important—and offensive—to Americans, we are nonetheless skeptical about how and why this story turned into a national movement. In fact, this whole campaign feels a bit like déjà-vu: As the first reporters to expose the Tea Party as an Astroturf PR campaign funded by FreedomWorks and Koch-related front groups back in February, 2009, we see many of the same elements driving the current “rebellion” against the TSA: Koch-related libertarians, Washington lobbyists and PR operatives posing as “ordinary citizens,” and suspicious fake-grassroots outrage relentlessly promoted in the same old right-wing echo chamber.”
Astroturf? As defined by Pelosi, that charmer?
Koch Brothers? Bad? Like George Soros?
Weird how both sides have the same thing, yet still the kids choose up teams.
Funny you bring up that article. I guess you didn’t read mine:
‘Screw you, Mark Ames!…Speaking of implausible fiction, The Nation recently ran a piece by Mark “I spit on libertarians” Ames and Yasha Levine, which determined that the anti-TSA movement — that seems to have sprung up like a last gasp of life from the old America – is really a front for the Koch brothers, two formerly libertarian billionaires who have become the deus ex machina of clueless “progressive” commentators who cannot otherwise explain the explosion of anti-government anti-authoritarian populism currently upending politics. Glenn Greenwald seems to have taken care of the Ames-Levine fantasists, putting them in their proper place as apologists for the Obama regime and all its works, but one more thing needs to be said:’
‘If Ames and Levine are going to become the “go to” team for the dirt on libertarians, such as it is, they ought to learn their subject. Because the very idea of Charles and David Koch leading a national resistance movement involving civil disobedience on a massive scale is laughable: to anyone who knows them, or knows of them in more than a glancing way, this can only provoke gales of unrestrained laughter.’
‘The Ames-Levine “article” – really just a hash of half-baked assertions and warmed over atmospherics – underscores the enormous betrayal of the pro-Obama fake-”left.” Defend civil liberties? Forget it, if it means criticizing the Messiah! March against war? No way, not if it’s Obama’s war! Protest crony-capitalism and corporate welfare? Not if it means coming out against Obama-care — a “healthcare” program that guarantees profits for the big corporations by forcing everyone to “buy” insurance. ‘
Oh, yeah, about those wars:
‘President Obama once said withdrawal from Afghanistan would begin in July 2011 — maybe, conditions permitting. But then he backed off that date. Now NATO, echoing American officials, says security won’t be fully turned over to the Afghan government any earlier than the end of 2014 — again, maybe…’
‘Even before Obama backed off the 2011 timetable and before the NATO summit, Gen. David Petraeus had told Bob Woodward, “You have to recognize that I don’t think you win this war. I think you keep fighting. You have to stay after it. This is the kind of fight we’re in for the rest of our lives and probably our kids’ lives.” ‘
‘And Defense Secretary Robert Gates went even further, telling Woodward: “We’re not leaving Afghanistan prematurely. In fact, we’re not ever leaving at all’
http://www.fff.org/comment/com1011o.asp
Pardon me if I don’t think we’re on the verge of a Randian take-over of Washington DC. It looks to me like the real problem is the same old two parties, serving the military industrial complex, dragging this country down with lies, and deception.
I’m not getting in the middle of this, but I just wanted to add: they’re going to have to do wayyyy better than a 19 year old lured to America and given a fake bomb if they want to scare this holiday season.
Sell Fear…. Easily the best product ever manufactured…
Ben- I read your article- that’s where I found the link to the story I posted.
I don’t buy the idea that the Koch Brothers’ influence is a phantasm of the liberal mind. Are they not major, and early funders of the many Tea Party ‘movements’? Look around, their fingerprints are on all sorts of psuedo-populist and Libertarian movements and organizations- board members of “Reason’ magazine, for instance.
There was and is a legitimate ‘populist’ uprising in America. In many ways, we are a part of it. But it would be naive to think that there are not forces- on the left and right- that will seek to get out in front of these movements and direct them in their preferred direction. The Koch Brothers are proving themselves to be the jedi masters of this, thus far.
Well, you are straying off your own topic:
‘Greenspan, of course, was an objectivist, whose ‘let the Titans roll’ philosophy was indisputably a major cause of our bubble economy.’
Greenspan wasn’t an Objectivist. He hung around Rand back in the 60’s, but he spent what, 18 years running a central bank that no Objectivist would approve of.
‘MIKE WALLACE, 60 Minutes: Can I ask you to capsulize your philosophy? AYN RAND: I am opposed to all forms of control. I am for an absolute laissez-faire, free, unregulated economy. Let me put it briefly. I am for the separation of state and economics.’
‘JOSEPH STIGLITZ, Sr. Clinton economic Adviser, 1993-’97: Greenspan was a believer in Ayn Rand, a believer in free market. A little bit curious for a central banker, because what is central banking? It’s a massive intervention in the market, setting interest rates.’
http://www.pbs.org/wgbh/pages/frontline/warning/etc/script.html
Back to your comment: ”But rather than Rand’s philosophy being discredited by this association, with the appropriate lessons learned (eg never trust the Titans), it has rather become the ‘philosophy du jour’ of the Tea Party and its many supporters and hangers-on. Philosophies that had nothing to do with the bubble and crash (particularly Keynesian), have instead been substituted in the public mind as the real cause.’
The PBS report:
‘TIMOTHY O’BRIEN: Bob Rubin was Bill Clinton’s emissary to Wall Street. Clinton placed great trust in Bob Rubin and Bob Rubin’s view of financial markets and financial regulation. DAVID WESSEL: He had an enormous amount of credibility because he was a business success, and Democratic administrations always seem to worship people who can excel at business.’
‘NARRATOR: At the White House, and as Treasury secretary, Rubin found an unlikely ally. Clinton had asked Alan Greenspan to stay on. ‘TIMOTHY O’BRIEN: Bob Rubin and Alan Greenspan were very much in lockstep. They had very similar views on Wall Street. It boiled down to the less regulation, the better. NARRATOR: And Rubin populated the Clinton administration with a network of free market true believers.’
‘JOE NOCERA: It wasn’t just Rubin and Greenspan who were these free market acolytes. That thinking pervaded the Treasury and the White House.’
‘NARRATOR: Among Rubin’s acolytes, 35-year-old Timothy Geithner and Rubin’s top deputy, the outspoken Harvard economist Larry Summers.’
‘NARRATOR: Together, Greenspan, Rubin and Summers formed their own pro-business, anti-regulation support group. RON SUSKIND: They’re the committee to save the world, according to the Time magazine cover. These are the people that we turned to at that moment who together, all three in a way, who say “Trust us.”
‘JOE NOCERA: They seemed to have things under control. You know, the world trusted Rubin and Greenspan, so why wouldn’t Clinton, you know? And the market was doing great and the country seemed to be doing great.’
All these Clinton people are Objectivist? Objectivism is ‘Indisputably a major cause of our bubble economy’?
The Federal Reserve was a major cause of this disaster, so why don’t we get back to this organization, instead of flogging Ayn Rands ghost one more time?
I have been a radical libertarian since the late 1970s, was the campaign manager for a California state assembly candidate when I was 23, and even was elected to a minor office back then. I read most of the libertarian literature, including from the 19th century classics, such as Lysander Spooner.
Lately to my chagrin I’ve noticed many social conservatives calling themselves libertarians. Well they certainly are not libertarians. By definition, social conservatives want to use force to make other people fit their morality. Social conservatives are NOT libertarians. Rush is no libertarian. And he is a hypocrite for admiring an atheist while pushing religion on everybody.
I am skeptical about government using the muslim’s anti-western ideology to keep government defense hawks employed too.
I am a firm proponent of shoving freedom in the faces of Muslims. The best reaction America should have is to become more hedonistic and cut government size to that before the 16th amendment.
Women should be allowed to run around topless adjacent to the property line of any mosque in the U.S.
All these Clinton people are Objectivist? Objectivism is ‘Indisputably a major cause of our bubble economy’?
The Federal Reserve was a major cause of this disaster, so why don’t we get back to this organization, instead of flogging Ayn Rands ghost one more time?
All these Clinton people are Objectivist? Objectivism is ‘Indisputably a major cause of our bubble economy’?
The Federal Reserve was a major cause of this disaster, so why don’t we get back to this organization, instead of flogging Ayn Rands ghost one more time?
Well, Greenspan was an Objectivist, and he was the Fed Chairman who said the job of the Fed was to clean up after bubbles blew, not stop them from inflating- ie don’t stop the titans, just clean up after them. I don’t know Rubin’s or Summer’s personal philosophies, but they were apparently compatible with Greenspan’s. They all worked together to undue the regulations that once bound the Wall Street titans, just as Ayn would have advised.
I’m not saying let’s ignore the Fed’s role in all this. Quite the contrary, I support auditing the Fed, because I think we have the right to know what they do. I am dubious about giving Congress more control over them, however. I just want some sunlight shined on their doings. I think that will provide its own regulation. If we discover crimes, then we prosecute.
“…with a network of free market true believers”
http://memegenerator.net/Foghorn-Leghorn/ImageMacro/887752/Foghorn-Leghorn-boy-i-say-boy-I-think-yer-on-to-something.jpg
“…He had an enormous amount of credibility because he was a business success, and Democratic administrations always seem to worship people who can excel at business.”
http://memegenerator.net/Foghorn-Leghorn/ImageMacro/887799/Foghorn-Leghorn-boy-i-say-boy-thisll-be-more-fun-than-a-barrel-of-half-witted-monkeys.jpg
Rand didn’t seem to pay enough attention to the natural tendencies toward monopolies when you have pure capitalism ,therefore you would get price fixing rather than the competition
of capitalism keeping the prices down .I’m sure she didn’t think that Industries would get in bed with the government to the degree they have and she certainly would not approve of bailing out TBTF Banks and other Industries .
Banks making loans without qualifying people would not be a concept that Rand would find sane if I have any understanding
of Rands thoughts ,after all she believed in rational thought .
Maybe that was the flaw in Rands thinking that she thought entities would act in a rational manner if allowed the freedom of pure capitalism .
Rand knew that industry would get into bed with government. Her villains include a number of such “industrialists”, e.g., James Taggart and Orren Boyle (both in Atlas Shrugged).
One of her main points was that the honest ones were subsidizing the government-connected crooks, as only the honest ones actually produced anything to be looted.
“I don’t buy the idea that the Koch Brothers’ influence is a phantasm of the liberal mind. Are they not major, and early funders of the many Tea Party ‘movements’? Look around, their fingerprints are on all sorts of psuedo-populist and Libertarian movements and organizations- board members of “Reason’ magazine, for instance.”
Who? I had to google the name just to see who you were talking about. I would have to bet if you asked 1000 tea party activists, you would be lucky to find one that has any idea who the Koch Brothers are. You’re looking for the bizarro George Soros, that person doesn’t exist. Only serfs worship kings.
Maybe that was the flaw in Rands thinking that she thought entities would act in a rational manner if allowed the freedom of pure capitalism .
That was precisely the flaw that Greenspan admitted to: that he never thought the Titans would do anything seriously damaging to the economy, or to their businesses, since they were benefiting so much from the way it was all working.
Ayn’s problem was that she was a victim of Soviet collectivism as a child, and from that came to see a Communist takeover behind even the slightest of government regulation. This led her to create a philosophy that saw any and all regulation as bad- a typical over-reaction to childhood crisis.
Greenspan’s problem was that, like most followers of idealist philosophers, he adopted the easy parts of her philosophy (Let it roll, big boyz!) without adopting the hard parts (Sorry, my friends, but you’re all broke now.) That’s how it always goes- idealist philosophies are impossible to follow in the real world, as we have just seen.
What I don’t get is this:
If the Rand folks really believe in Rand’s dogma why do they never go after the government connected, big-business, crony-capitalist crooks?
Why do the Rand people only target the programs that might take money out of the pockets of the government connected, crony-capitalist, big-business crooks?
In “Capitalism, The Unknown Ideal” didn’t Greenspan write against centralized banking and favor the gold standard? I urge Alpha to borrow that book.I agree with Ben. Greenspan was by no means an objectivist when he worked in government. Objectivism includes Austrian economics and certainly not Milton Friedman’s monetarist economics. I do think Dr. fried man’s monetarist economics is far better than Keynesianism.
“If the Rand folks really believe in Rand’s dogma why do they never go after the government connected, big-business, crony-capitalist crooks?”
Because they are the government connected, big-business, crony-capitalist crooks?
Just guessing.
I would have to bet if you asked 1000 tea party activists, you would be lucky to find one that has any idea who the Koch Brothers are.
Exactly. Few know who their puppetmasters are.
I defy anyone to show me a quote of Greenspan ‘refudiating’ Objectivism or Rand. He was her supporter, and a believer, to the end.
His term at the Fed was marked by more tolerance of financial shenanigans by the big boyz than any Fed president in half a century. He said it wasn’t his job to pop bubbles, just to clean up afterward, so he basically let them do as they pleased- they were the financial elite, they’d never endanger the system they thrived in. This was the ‘flaw’ in both his philosophy and Rand’s.
Was he a perfect exemplar of Objectivism? No. Can anyone show me a perfect exemplar of any philosophy? No.
“Women should be allowed to run around topless adjacent to the property line of any mosque in the U.S.”
Add wrestling in 100% pure warm lard and I think you have a winner BILA.
Alpha, by joining the Fed, Alan Greenspan repudiated (repudiated?) objectivism because 1) objectivism rejects all economics except Austrian economics and 2) Austrian economics rejects central banking and fiat money - only wants hard currency.
I do not have a quote. Alan Greenspan showed his rejection by action, not words, as far as I know. So your need of a quote is moot.
Just as few of Bammy’s religious followers were aware the multiple- billionaire Pritzker family were responsible for Bammy becoming President. Puppetmasters on the socialist side.
You guys keep saying “Koch”
Y’all mean “Soros” right?
Puppets n’ all…
-d
I would have to bet if you asked 1000 tea party activists, you would be lucky to find one that has any idea who the Koch Brothers are.
That’s the deal of which no one should be proud.
‘he adopted the easy parts of her philosophy without adopting the hard parts’
Sort of like Keynes. Anyway, in an Objectivist world there would be no Fed guy to adopt anything.
I’, not an Objectivist, and I don’t even know one. I do know these people in DC are selling us down the river right now, today. And that includes Obama, with his continuation of the Bush wars. Have you been to a Democratic war protest lately?
Oh, yeah, there aren’t any!
‘The Ames-Levine “article”…underscores the enormous betrayal of the pro-Obama fake-”left.” Defend civil liberties? Forget it, if it means criticizing the Messiah! March against war? No way, not if it’s Obama’s war!’
‘Protest crony-capitalism and corporate welfare? Not if it means coming out against Obama-care — a “healthcare” program that guarantees profits for the big corporations by forcing everyone to “buy” insurance.’
by joining the Fed, Alan Greenspan repudiated (repudiated?) objectivism because 1)
Rand will go down as a destructive joke as a philosopher.
Rand did not understand human behavior in the context of her simplistic models of what she thought should be.
She should have taken Anthropology 101 at a conservative college. Twice.
I bet you are patting yourself on the back for your own self-nomination as an elitist by using the standard label of “simplistic” for anything in favor of capitalism. But we see through you.
“Women should be allowed to run around topless adjacent to the property line of any mosque in the U.S.”
Now that would be change I could believe in. I would go so far as to support paying women to run around topless adjacent to the property line of any U.S. mosque.
I bet you are patting yourself on the back for your own self-nomination as an elitist by using the standard label of “simplistic” for anything in favor of capitalism. But we see through you.
You personally attack me because I take down your failed hero, weirdo Rand? Darn. Sorry it was such a good one. But “patting myself on the back”?
If anyone knows about back-patting it’s you, bragging “bill in LA” or wherever your solitary, calculating existence might command you. Tampa right? In your GT, for the young chicks who will cherish your 50 year old swimmer’s wisdom? (lol…that was funny)
We don’t need to “see through you”. Why would we?
A capitalist entrepreneur such as myself getting a pathetic slap on capitalism from an at-will employee such as yourself is an indication of the absurdity of your current debate.
“incomprehensible, impossible, the product of someone’s dystopian imagination” heheh:
http://www.theonion.com/articles/i-dont-even-want-to-be-alive-anymore,11521/
Someone who has done more damage to this country than illegal drugs.
“…could not possibly be any worse than the bottomless pool of excrement I already paddle around in like some demented, shit-covered walrus.”
Now that’s descriptive language wmbz would highly admire!
Only in some people’s sociopathic fantasies are we living in an Ann Rand novel.
More like a William Gibson or Greg Bear novel where the corporations are the true rulers and use technology the masses have no access to, nor any idea exists, to keep their control.
In the early 1950s, Greenspan began an association with famed novelist and philosopher Ayn Rand that would last until her death in 1982. Rand stood beside him at his 1974 swearing-in as Chair of the Council of Economic Advisers.
Although Greenspan was once recognized as a proponent of laissez-faire capitalism, some Objectivists find his support for a gold standard somewhat incongruous or dubious,[citation needed] given the Federal Reserve’s role in America’s fiat money system and endogenous inflation. He has come under criticism from Harry Binswanger,[36] who believes his actions while at work for the Federal Reserve and his publicly expressed opinions on other issues show abandonment of Objectivist and free market principles. However, when questioned in relation to this, Greenspan has said that in a democratic society individuals have to make compromises with each other over conflicting ideas of how money should be handled. He said he himself had to make such compromises, because he believes that “we did extremely well” without a central bank and with a gold standard.[37] Greenspan and Rand maintained a close relationship until her death in 1982.
You see, Greenspan was an Objectivist until the end, and was supported by Rand as he became involved in economic oversight- his taking an economic oversight position didn’t in any way automatically disqualify him as an Objectivist- just ask Rand who was literally sitting at his side.
If you oppose a system, there’s no better way to destroy or undermine it than to become its leader. As we have just witnessed.
European Stocks Have Biggest Weekly Decline in Eight Weeks on Debt Concern
By Giles Broom - Nov 26, 2010 4:00 PM PT
European stocks had their biggest weekly decline in eight weeks as concern mounted that peripheral euro area countries can’t repay their debt and North Korea fired shells on South Korea for the first time since the 1950-53 war.
Banks and insurers led the decline as investors waited to find out how much Ireland will borrow from the European bailout fund and as the cost of insuring Portuguese government debt rose to a record. Bank of Ireland Plc tumbled 45 percent, the largest weekly drop in the benchmark Stoxx Europe 600 Index. Banco Santander SA plunged 12 percent and BNP Paribas SA lost 8.5 percent.
The benchmark Stoxx 600 fell 1.1 percent this past week, the biggest weekly drop since September. The gauge has still rallied 15 percent since its low this year in May as investors speculated that the world economy will grow after companies reported better-than-estimated results and central banks from the U.S. to Japan announced more stimulus measures to prop up the economic recovery.
“After Ireland, Portugal is a likely candidate for aid with Spain close behind,” John Plassard, head of European equities at Louis Capital Markets LP, said. “Amid these problems, the geopolitical problem between the two Koreas is the cherry on the cake in a bad week.”
…
Let me see, you start with a worthless tulip (plot of land this time). You hype it up and next thing folks are borrowing thousands to get their hands on a single tulip, knowing that the next guy will borrow even more to buy your tulip from you yielding a nice profit.
One day, someone wakes up and realizes tulips are still pretty much the same tulips they were 10 years ago and the whole thing implodes leaving behind only masses of debt that cannot be repaid.
This is the damaging nature of bubbles. I find it interesting this time around the amounts were so massive that even governments could not secure them and of course the underlying tulips put up as collateral have all wilted…
Now they are peddleing golden tulips.
Actually what they are peddling is electronically created fed balance sheet expansion in the hopes of sweeping the debt debacle under the rug through currency devaluation.
“European stocks had their biggest weekly decline in eight weeks as concern mounted that peripheral euro area countries can’t repay their debt…”
Why did this “concern” disappear in the first place? Am I the only one who finds it ludicrous that one day the stock market is tanking due to fears of the debt crisis, only to go parabolic the following day as if it never even existed?
If by “ludicrous” you mean game and pump-n-dump, than I don’t find it hard to believe at all.
Rich Americans Ditch Home Ownership For Renting
Patrick Lee went from homeowner to home renter this year.
It may sound like a downgrade, but the New Yorker didn’t make the switch because he couldn’t keep up with payments or because he lost his job. Instead, Lee was nervous about the state of the housing market. http://www.cnbc.com/id/40260336
For some reason I dont believe this article.Rich people like to own thier assets.
There are different types of wealth which comprise permanent income.
1) Accumulated wealth is money you already saved, earned, inherited, etc. People with this kind of wealth tend to own assets outright.
2) Human capital is the knowledge, skill, luck and determination which enables you to earn future income. People with this kind of wealth are quite likely to choose renting over owning if the decision to do so will result in hundreds of thousands of dollars increase to their future net worth positions.
I work with and personally know wealthy folks(>$10 million in cash) and not one of them own assets other than cash and paper securities. They lease everything.
I suppose the folks I referred to are more of the $100m+ net worth camp; for them, buying a multi-million dollar home and watching its value drop by 20% is no big deal…
Bear, I disagree most heartily. I know several people with incomes of over $100k
a MONTH, and they all, with no exceptions,
watch where every penny goes. How do you
think they got their wealth? By not paying
attention? I am somewhat surprised at your
lack of understanding. Maybe you really
are a professor, which would explain it.
At $100k per month, it would take more than 80 years (a lifetime) just to get to $100M if you never spent a dime. People earning $100k per month are no more in the $100M+ camp than those who make $10k per month are in the $10M+ camp. Those with $100M+ net worth buy a second home in Tahoe for $5M which sits empty for months, sometimes years at a time, all the while paying tens of thousands in property taxes which are of no consequence to them. It appears as if you don’t understand, Rancher.
“Maybe you really are a professor, which would explain it.”
If you think calling myself ‘Professor Bear’ qualifies me as a professor, then maybe you really are a professor, and not a rancher.
But seriously, I was not trying to make a blanket statement; I was referring anecdotally to people in my social circle with millions and millions of dollars of accumulated wealth. I saw them buy homes when they moved to San Diego with no apparent hesitation, and I am pretty sure they don’t really care about short-term fluctuations in the value of their homes which would matter a great deal to my considerably less advantaged household.
I am not really complaining about my lot in life; just saying the rich are different, at least in the sense that in the big scheme of things, they don’t really have to worry much about losing a million bucks or so, as there is more where that came from.
“At $100k per month, it would take more than 80 years (a lifetime) just to get to $100M if you never spent a dime.”
Thank you. Now we know why rancher is not a professor.
Exeter, I believe you on that one.
“So in March he sold the Manhattan apartment he bought in 2008…”
What was Patrick Lee thinking–buying in 2008? It also cost him some fees too, twice!
The things the rich own are things they can resell for profit, like art, rare items, etc. Some are also purely sentimental or desire.
They usually lease most of their everyday needs like houses and cars, planes and boats, or have a shell corporation lease or buy those things dependent upon which provides the better tax advantage and/or resell value.
Their “daily” operating capital usually comes from investments of various natures.
Yes, this is all very general and merely a sketch of their world. But you get the idea.
O.k., here’s another one for the HBB brain trust: my parents and some of my wife’s relatives always respond with “there are no jobs” and “the economy is dying up here!” whenever we say we’re thinking about moving back to upstate NY. I get it, it’s cold an grey up there, but we still talk about leaving Florida at least once a week. But my thing is, where is this not true (tough economy, no jobs, and so on)?
If I imagine a world (like Kunstler envisions) in which everything needs to return to some form of localization, I’d think older areas would fare better since they are less car dependent.
Some things to think about. If there is equality among jobless areas then:
Go to a place that is warm year round.
Go to a place that has generous unemployment benifits.
Go to a place where one can live “close to the earth” - where one can barter his services for food, a place to stay, etc.
Do you have a job that is portable? (software, RN, etc.). That may work. Or one in which you travel (consulting, etc.)
Upper NY state is dying. And it is not from the cold or the grey.
It is from insane taxes and insane regulations. They have drove off every major business they had (IBM, GE, Kodak, steel, etc.) and those are not coming back.
Since NY State is as about far left as you can get - this is probably not going to change.
As shame - upper NY State is beautiful. And plenty of water. Plenty of electricity (from hyrdo). Plenty of land. Plenty of minerals. Plenty of GREAT farm land. Plenty of woods.
It SHOULD be booming.
“Upper NY state is dying. And it is not from the cold or the grey.
It is from insane taxes and insane regulations. They have drove off every major business they had (IBM, GE, Kodak, steel, etc.) and those are not coming back.
Since NY State is as about far left as you can get - this is probably not going to change.”
Extrapolate the taxes and regulations part,
and you understand that what has happened over the last 40-50 years in the USA is not just “Bush’s fault”.
As “regulations” and “taxes” drove businesses out of upstate New York, so did they drive businesses and employment out of the country as a whole.
Of course the “left”, as you put it, has never successfully run any kind of business, except those which are “bigger government” related. Like the extortion biz, corruption biz, and bribery biz, to name a few favorites.
I’m not sure that you can really blame the taxes and regulations. Did IBM, GE, etc. move those jobs to low-tax states like New Hamshire and South Carolina? My guess is that most of the jobs were moved out of the country.
An interesting point to keep in mind is that, in 1945, IBM made machines that processed punch cards and they also made typewriters. It was only massive government investment in, and spending on, computers that allowed IBM to become the biggest computer company in the world by the 1960s. I read somewhere that 75% of their employees are now outside of the US. That’s the thanks the American people get for helping that corporation grow to become the giant that it is.
We have a winner.
“As shame - upper NY State is beautiful. ”
Understatement, IMO. More like breathtaking, with gorgeous mountains and rolling hills. It’s a shame that NY decided to make that huge area into a poor tourist trap, rather than keeping well-paying for the people that want to live there.
GotRocks…. I’ll wager it’s been a while since you’ve been there. Not entirely but the backdrop has changed for the worse. Architectural blight, decrepit and poorly performing grossly priced public utilities, etc.
The area has descended into manorialism, i.e, feudalism. The parallels with 10th century feudalism is striking.
You might really consider looking at parts of the mid west beyond the “rust belt”.
For example, places like the “doughnut” around Kansas City have a lot of reasonably priced housing, a fairly diverse economy, lowish taxes and a quality of life that surprises a lot of first time visitors.
There is the ‘Bible Belt” influence that some will be concerned about but there are oases.
I love the west, but things like water rights make me wonder about the long term future.
As to the northeast, I can’t imagine paying the kind of property taxes they have. Just doesn’t seem sustainable.
You might consider reading “The Nine Nations of North America”, it’s an older book but has some worthwhile insights about the character differences between regions.
Does that mean I have to cheer for the Chiefs ?
Muggy:
As bizarre as this sounds I think there will be a resurgence in AM local radio stations…local community people local advertisers local talent….once most of them either go bankrupt or go dark…in fact Clear Channel gave some stations away for $1…
If I imagine a world (like Kunstler envisions) in which everything needs to return to some form of localization
“a resurgence in AM local radio stations”
I hope so. I hope there’s a resurgence in local everything. I mentioned a few weeks ago that my gramps-in-law passed away. He always said he conducted business in a way so that he “wouldn’t have to cross the street” when he walked around Ithaca.
It would be nice to do business with something other than a cadre of shadowy figures and groups from somewhere else.
Muggy,
I feel for you. I would also like to return to upstate NY. The problem from where I sit is that even if I accept the higher taxes, the insane regulation (30K for a “approved” septic system), and NYC political dominance is that the “trend is not your friend”. I left in 1999 for KY.
Things have not improved in upstate since then (ten years). I don’t see anything that would change this trend. Very sad that the state seems to embrace all on the dole, and does everything to drive out those that pay their way and taxes too.
Actually, they may have gotten worse. From what I hear, the Finger Lakes Region has been fracked like crazy. I hope it doesn’t turn into a frack fluid wasteland. That plus factory farming could really put the nail in the coffin…
Trapper, it sounds like you’re from the Delaware basin, i.e Otsego, chenango, western schoharie counties. The far reaching hand of NYC DEP has placed ever greater restrictions around the big reservoirs west of the Catskills. I left my NY/VT border town in late 1999 because I finally acknowledged the handwriting on the wall that was evident in 1980 but I refused to accept. And those who stay still refuse to accept reality. Every so often, some big money operators float a promise to the natives with strings attached. They promise shangri-la… utopia…… so long as they can operate in a zero tax environment and be granted tax inducements which the local taxpayer must finance. And of course the natives are suckered it into every time and they take great offense when you tell then they’re suckers. They just want to forget about getting suckered. It’s too embarrassing for them to admit it. Much like the profligate gambling stock trader, they attempt to make up for the losses by wagering on the next trade and get suckered all over again.
If I’ve said it once, I’ve said it a 1000 times here. The post industrial decline of the Northeast has resumed in a very big way. The promise of riches via the great housing fraud has evaporated. No my native NY and VT friends and family…. nope…. the rich people aren’t coming here(and never were)….. pension loaded retiring baby boomers already retired elsewhere… It’s time to rise out of the housing fantasy ash heap and your long term chronic underemployment future and do something. Anything.
And BananaBoy…. you obviously know nothing about NY history. NOTHING. The regulatory climate for businesses in NY state have never been more favorable. At the expense of residents.
Muggy,
You need at least 25k people in a town to have
adequate medical care. You need to be near major
shipping routes, either truck or train. You also
need local produce and protein and a good growing
season, which in the west means gravity irrigation.
If you want to live out of town, make sure that
you’re no further than half a days ride by horse
or by shanks mare.
Our favorite is Cedarville, in Surprise Valley,
Moduc county, CA
Remember to ration your ammo. No more than one bullet per zombie.
Hi Press.
We’ve changed our minds. Now we want to
form a commune, grow flowers, trade our guns
for gold, and love all our brothers. Oh, and
grab hands and dance around the evening fire.
Sounds like you want to move to Santa Fe NM. Don’t forget to bring your crystal spheres!
The Wyoming/Montana region is in the middle of natural gas boom.
So is the upper midwest part of Texas through Colorado.
IIUC it’s called the Rocky Mountains “overthrust belt”.
FDIC chief: ‘Urgent action’ needed on debt
NEW YORK (CNNMoney.com) — FDIC Chairman Sheila Bair believes “urgent action” is needed to lower government debt and forestall the next financial crisis, according to an op-ed piece published Friday.
“Even as work continues to repair our financial infrastructure and get the economy moving again, we need urgent action to forestall the next financial crisis,” Bair wrote in the Washington Post. “I fear that one will start in Washington.”
Citing a sharp increase in federal debt, which is now approaching $14 trillion, Bair argued that “relentless federal borrowing” will eventually “directly threaten our financial stability.”
“This explosive growth in federal borrowing is a result of not just the financial crisis but also government unwillingness over many years to make the hard choices necessary to rein in our long-term structural deficit,” she writes.
As a result, Bair warned that the U.S. Treasuries could be in danger of losing their status as a safe-haven investment in troubled times, with dire implications for the financial system as a whole.
“If investors were to similarly lose confidence in U.S. public debt, we could expect high and volatile interest rates to impose losses on financial institutions that hold Treasury instruments,” she wrote. “All of us would pay more for consumer and business credit, and our economy would suffer.”
Fixing the problem requires a bipartisan plan to cut spending and increase taxes over many years, Bair said, and she offered an endorsement of recent proposals by the co-chairs of President Obama’s fiscal commission and by the Bipartisan Policy Center as “credible first steps.”
Those plans have been met with a lukewarm reception in Washington, but Bair argued that they are needed.
“Most of the needed changes will be unpopular, and they are likely to affect every interest group in some way. We will want to phase in these changes as the economy continues to recover from the effects of the financial crisis,” she wrote.
The “first steps” will be along the lines of Ireland today:
Slashing entitlement spending
Massive public worker layoffs
Cutting the minimum wage
Huge pay cuts for the remaining government workers
etc.
I disagree, 2banana. It doesn’t require massive cutting, just plain old trimming. That’s the beauty of the commission’s recommendations. They don’t suggest slash entitlement spending, just cutting it. They don’t recommend massive public worker layoffs, just small pay cuts. They don’t recommend cutting the federal minimum wage of $7.25/hour (what’s wrong with you?) Try it yourself.
We are not Ireland.
http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html
The measures are draconian. The government plans to shed nearly 25,000 public-sector jobs, slash welfare spending and reduce the minimum wage. A new property tax will be introduced, water charges imposed, and the tax base expanded to bring in lower-income earners. It all adds up to €10 billion in cuts and €5 billion in taxes over the next four years.
We will be seeing this and much more…
I repeat, the commission’s recommendations do not include any of the measures proposed for Ireland, and yet will reduce the deficit to zero. Zero. We don’t need draconian measures - just judicious, reasonable cutting. Don’t be a drama queen.
I did the linked exercise and you are right, easy-peasy with the right cuts.
I wonder if they fudged any assumptions? Did they assume that we’ll cycle back to tax revenues of the previous hay days at some point? If that assumption was made they will be sadly disappointed.
(using inflation adjusted real dollars of course)
Thanks for looking at that dude. If everyone looked at it and thought about it, maybe we could reach the compromises we need to actually balance our f-ing budget.
All to bail out the rich.
“Privatize the profits, socialize the losses” has never been more glaringly obvious.
Thank god most people don’t remember anything past their middle school general education that doesn’t have to do with their jobs or there would be some serious trouble.
Whats the problem?When the fed is able to manipulate the treasury market what could go wrong.Whenever they want low rates the ny fed simply buys treasuries from one of the 18 primary dealers with virtual money created out of thin air.The 18 primary dealers can buy them from the treasury or public and then sell them to the fed at a profit.I read the other day that the fed is the largest holder of treasuries, more than china.Isnt the fed a private entity?As long as the fed has access to cheap money than they will keep borrowing.Who in their right mind would be loaning the us govt money at these low rates?
This may be the only thing stopping our economy from full blown collapse. Other countries like Ireland are not in a position to create their own money and hence must suffer right away, where we can put off suffering to another day.
as long as the fed has a printing press america will survive.
The Man Who Shattered Our Economy
Rejoice, the housing market is back. Sandy Weill just picked up a humdinger of a wine vineyard estate in Sonoma, Calif., for a record $31 million, so the foreclosure crisis—which the former CEO of Citigroup did so much to create when he successfully lobbied then-President Bill Clinton to sign off on radical deregulation of the banking industry—must be over
After all, Weill wasn’t desperate for shelter, already being in possession of a fourteen-acre estate in über-exclusive Greenwich, Connecticut, and a 120-acre spread in New York state’s Adirondacks. Let’s also not forget the penthouse that he bought for $42.4 million in New York City in 2007 as the banking collapse he helped engineer was fast developing. Not too shabby for a guy who ran Citigroup into the ground by trafficking in what proved to be toxic mortgage-based securities.
http://www.thenation.com/article/156497/man-who-shattered-our-economy
Sandy Weill puts on his Marvin the Martian costume:
http://www.motifake.com/image/demotivational-poster/small/0910/incompetence-marvin-the-martian-nasa-blow-up-the-moon-demotivational-poster-1256076124.jpg
I thought it was “Planet X” that Marvin and Duck Dodgers blew up.
And Sandy is going to care…. why?
Fail and Grow Rich on Wall Street
Welcome to the brave new world of post-bailout capitalism. The Commerce Department announced Tuesday that corporate profits are at their highest level in US history, and the Fed released minutes of an early November meeting in which officials predicted a stagnant economy and continued high unemployment.
The lead on the New York Times story read like a line from a Dickens novel: “The nation’s workers may be struggling, but American companies just had their best quarter ever.” What the Times story neglected to mention is that the bulk of the increase in corporate profits was nabbed by the financial industry rather than manufacturing and other productive sectors. A whopping $33.3 billion out of the total corporate profits increase of $44.4 billion went to the banks and investment houses that those same workers had bailed out with their tax dollars.
http://www.thenation.com/article/156666/fail-and-grow-rich-wall-street
Time to buy stock, go all in baby.Insider selling is at an all time high right?
“Insider selling is at an all time high right?”
Is that considered to be a buy signal?
“America cannot have a thriving Wall Street while Main Street suffers.”
-Barrack Obama innauguration speech Jan 2009.
There is a French-made tool available for solving just such a problem. Its called a guillotine.
And it’s a green technology. It’s powered by gravity.
Welcome to the brave new world of
post-bailoutcapitalism.The “Truth” has been right in front of ya all,…for 10’s & 10’s of years!
Circa 1962: (Hey, just 10 cents!)
http://4.bp.blogspot.com/_MNK0lQqf-vc/SPYYVdnqNgI/AAAAAAAADPM/IKpmFuiu1tU/s400/MARS_ATTACKS_5A_Cover.jpg
Circa 1951: (Hey, just 50 cents!)
http://upload.wikimedia.org/wikipedia/en/1/1b/The_True_Believer_%28book%29.jpg
“The nation’s workers may be struggling, but American companies just had their best quarter ever.”
Sure, companies are doing fine. They why is the dividend yield at less than 2.0%?
I think companies are being looted.
“Fail and Grow Rich on Wall Street”
And there you have it. The wealthy have shown to even dullest, that playing by the rules is for chumps.
Probably the most damaging aspect of this whole mess.
Need a dose of Schadenfreude today? Check out how this guy went from $10 Million net from the sale of his company to broke in just a decade. Most of the losses came from, wait for it… Real Estate!
http://www.heraldtribune.com/article/20101126/ZNYT01/11263004
A fool and his money are soon parted. Nothing new here.
But what’s the rest of the saying?
“But how the fool got all that money is still a mystery.”
He hasn’t caught his wife riding different pony yet.
That article is stunning…… and here’s the money quote;
“She also speculates that the Adirondacks estate was alluring partly as a way of keeping up.”
This clown and his wife is exhibit A in what happens to dummies who paid massively inflated prices in upstate NY and VT. Not only did he flush $5 million(read it!!!! $5 million in no-where land!!!) down a toilet on a shack in Tupper after paying 5-6 times it’s actual value, he doubled down on a dump in VT. I’ve watched this occur over and over and over and over. They never learn. Even if the natives(as stupid as they are) had the $$$ they wouldn’t do what this dummy and idiots like him do.
These people need to go back to NYC/SanFran/Miami/DC/Philly and never come back.
“…and here’s the money
quotebyline”:WAMEGO, Kansas
x3…
“Sunflowers
Sunsets
Son’sabitches”
(Clint Eastwood)
“…Still, Mr. Martin, a strapping man with a disarming bluntness, seemed dazed by it all. “We are basically broke,” he said.”
http://2.bp.blogspot.com/_RGX2lgFSrdM/S7KRpHT5vkI/AAAAAAAADOA/UONuyuuXjTw/s1600/monopoly-broke.jpg
Broke and brain dead.
Ha, just got to the very end…:
We are Irish Catholics…
“…and Bob is a real estate novelist…” (name that tune)
The guy was banking on a novel? Said it all right there.
Piano Man
ding ding ding!
My god! Simple math shows that they could have set up a simple trust that doled out 200K every year and lived on it for… 50 years!
(That can’t be right! 10,000,000/200,000)
200K! Tax free! Holy moly!
http://news.yahoo.com/s/ap/20101126/ap_on_bi_ge/us_mortgage_fraud;_ylt=AhmH2JpcHclm4FMm6GxwUYJn.3QA;_ylu=X3oDMTNnZ3U3cmRsBGFzc2V0Ay9zL2FwLzIwMTAxMTI2L2FwX29uX2JpX2dlL3VzX21vcnRnYWdlX2ZyYXVkBGNjb2RlA2NlYm5iZQRjcG9zAzMEcG9zAzMEc2VjA3luX3RvcF9zdG9yaWVzBHNsawNib3N0b25tYW5zZW4-
As expected, slap on the wrist justice for mortgage brokers who engaged in fraud.
business as usual in american high finance.
Previously:
We are supposed to give a pro/con side of the issue also.
Opening statement: “Fraud! Fraud! Fraud!”
Wall St. : “You Lie!”
Main St. : “You Lie!”
Gov’t Housing : “You Lie!”
Foreign Investors : “You Lie!”
Rating Agencies : “You Lie!”
realtors : “You Lie!”
brokers : “You Lie!”
appraisers : “You Lie!”
Strawberry-pickers : “You Lie!”
Doctors : “You Lie!”
Bugs: “eh, could be you’re on to somethin’ Doc, What do you think FogHorn?”
FogHorn: “Well listen up here boy, let me tell ya somethin’, that thar hen-house has to be worth, …oh, I’d say a least, um,…well now see here boy, did eyes ever tell ‘bought the time I was wrestlin’ with a bunch a gators’ down in Florida, found myself stuck in mud swamp,… now pay attention son,…I was SURROUNDED by ‘em eyes tell ya! then all of sudden like eyes got this heres idea on how to get myself out of quite the fix eyes was in…here’s what I did…”
http://media.photobucket.com/image/foghorn%20leghorn/JohnnyGunn/Foghorn_Leghorn.jpg
The sociopaths on Wall Street steal hundreds of millions, then get off with fines of tens of millions and no jail time. Yeah, that’ll teach ‘em.
When will Long Island become sane in the higher end especially (but not only there?). Part of my usual rant, but to me the numbers speak for themselves.
Here’s a nice house in an Rockville Centre, an OKish area — not as tony as the North Shore but Rockville Centre has some nicer prewar houses, albeit on smallish properties and 2 minutes from Baldwin and 5 minutes from Freeport. (Freeport has gang-infested schools)… Like most of Nassau County, Rockville Centre is crowded, and being on the south shore it still gets airplane noise from JFK, if not as loudly as Valley Stream or Cedarhurst.
http://www.trulia.com/property/3007810329-36-Berkshire-Rd-Rockville-Centre-NY-11570
1/4 acre is actually relatively large for the area, alas. The house linked here is reduced from 1.3 million asking to 1.1 million asking.
But notice it went for 377,000 in 1995!! What’s that after inflation, maybe 550k according to inflations calculators? (not that my salary has gone up that equivalent %). I like this house (not that my wife wants to stay on the south shore, but alas her family is from Long Island and she wants to remain on the island), but I simply refuse to look at this even with 4%-ish interest rates. Is it a dream to think this should price at 600k? well what about 800k? Wonder where it will end up, or if they’ll just pull it from market or try to rent it out. I know prices are where buyers and sellers meet, but I refuse to be a participant in this. My money and savings are just too hard to earn to blow catching a falling knife. But when will it fall? Pretty and charming house though if you don’t all the negatives of Long Island in general.
The real kicker, as per mlsli.com, is that the taxes on this house are 24k per year. I don’t get it. Even if I decided to pay 1.1 million for a house and didn’t think it would lose value, why would I pay 24k in property taxes? This is a NICE area but not an ULTRA-HIGH-END area. Even in Port Washington or Great Neck, 1 million dollar homes don’t all have taxes this high. (Although Roslyn area does). The whole NY / Long Island equation does not make sense, and it hasn’t even accounted for the enormous NY state deficit. Cuomo is a waffler who talks about closing down children’s prisons that are empty to avoid paying for 30 unneeded jobs extra for 1 year, but he is talking like a weasel. I don’t believe he will truly hack away at pensions and other state costs. He wants to “improve goverment”. Remember Obama and his “scalpel” vs. McCain and his “hatchet”? We can see how much Obama’s scalpel has reduced government. I hope Cuomo will wake up / stop pretending, but I have my serious doubts… NY needs Chris Christie alas, but we get union stooges instead. God, the teachers union hates Christie in NJ — he is actually standing up to them and other public employees and their ludicrous pensions.
But back to the main point, the house price is somewhat silly and the taxes are simply ridiculous. Even if someone had the income to afford the combination, why would they want to when you can live so much better at that price? Must be a life-long-Long-Islander who can’t imagine living elsewhere who would want to buy into this, but even so the area is not nice enough to command this kind of money. At least give me an acre on the North Shore instead. Curious to see where/if this will sell.
http://www.trulia.com/property/3007810329-36-Berkshire-Rd-Rockville-Centre-NY-11570
The real answer is NEVER. Stop beating your head against the wall you will feel better. Just move that is the better option
I must admit that is a nice shack. It may be vintage 1930’s but someone dumped alot of money in it. It’s classic.
PS….. that house is akin to a 1968 Chevelle or 1970 Camaro. Beautiful lines, costly to restore, you’ll never get your money out it. I’d much prefer a modern design that meets my needs. That house doesn’t. Nor does a 68 camaro no matter how beautiful and nostalgic.
I’d much prefer a modern design that meets my needs.
Me too!
http://www.hotcarz.net/wp-content/uploads/2010/05/DODGE-CHALLENGER-2011-Pictures.jpg
I once restored and drove classic British sportscars, such as an Austin-Healey Bugeyed Sprite and a Lotus 7.
I now am quite satisfied with my 2004 Miata. It’s just less hassle. All the fun of an old Brit sportscar with the boring reliability of a Honda Civic.
AFTER high school (55 Studebaker truck),…summer BEFORE 1st year of college:
http://www.lotus-europa.com/vinpics/4523r/7.jpg
The whole NY / Long Island equation does not make sense
but to me the numbers speak for themselves.
Does the 1/4 acre have coal?
Built 1931
Rooms: x11
Fireplace: x1
Old growth hardwood trees to be cut down & used for heat: x6
http://www.davemackey.com/animation/wb/titlecards/leghrnsw.jpg
I figure I’ll ask a longislander…
I know nothing about Long Island. Friends of mine are in escrow for a short-sale “fixer upper” in the town of Wading River. Her parents retired from NYC to Tennessee years ago “to a ranch to raise horses”. Now both parents are in failing health and they want to “move back to the NYC area”. This house in Wading River is intended for them. I looked it up on a map and it’s about 2/3 out Long Island from the city.
Is this a decent township? My friends live in California and her folks live in TN - is it going to be a royal pain fixing this place up from such distances?
Wading River is nice enough from what I know. On the very Northern part of the island so a bit hillier if I recollect correctly, and its pretty enough, not hyper-built-up like Nassau County, and far enough out in Suffolk County that while it also experienced the bubble it is not as as insane as closer in. Contrasted with Manorville to the south, which saw an increase in prices as it was one of the last areas on the island to be built up in the early 2000’s, Wading River is a little less development-y from what I remember, and similar with fairly large houses and properties. I have no idea how to fix up a house in NY from California,unfortunately, so can’t help you on that. By the way, Wading River is a good 1.5 hours from NYC and Long Island is notoriously awful for traffic, especially since there is only 1 way out (going west) except for some ferries . While this is in the umbra or penumbra of NYC I’m not sure what they are trying to do by living there… not trivial to go to New York City (though certainly possible). So unless there is a particular reason for that town (such as a true bargain on the house or relatives on Long Island), I’d ask why not consider other areas? Ocean County NJ and perhaps Monmouth County to the north are well known to have huge retirement communities. Some are rather cookie-cutter such as Holiday City, but my grandparents lived in Leisure Village East in Lakewood. Very charming attached homes with 2 bedrooms, landscaped nicely with a porch. Sold for 60k-ish if I remember in early 2000’s when my grandmother moved to a more care-intensive place. I always loved visiting her there. Central Jersey is full of retirement communities and some are very nice.
—->Her parents retired from NYC to Tennessee years ago “to a ranch to raise horses”.<——–
BWAHAHAHAHAHAHA!
There’s nothing more enjoyable for me than watching slickers throw good money after bad on debacles like this. Kinda like “I’m going to buy a vineyard” or “I’m going to farm”. These morons wouldn’t know a barrel racer from a thoroughbred and they’re going to farm huh? lmao.
I thought retirement relieved you from this kind of BS? Idiots.
Never, ever try to remodel a house from long distance.
You WILL get ripped off.
Look kid,
We’ve had this chat. We are in midst of, shall we say, a “Great Unwinding”.
We’ve had the “bubble chat”. We know that Tulips, Tea Companies, Widgets and what have you cannot forever sustain price that disconnects them from either their utilitarian value (eg, making pretty yards, supplying tea, keeping widget-dependent machines running, or… for houses… providing shelter). The disconnect always implodes with usually a shoot beyond the mean.
The problem is that the Unwinding can take time, especially with a multi-trillion dollar government trying desperately to prop up the disconnect.
As you well know, for those with cash reserves, which you happen to have, low interest rates are a DISincentive to buy, not an incentive, as you can afford most houses and as you know low interest rates pump UP prices (part of the effort to block the inevitable Unwinding), and then when interest rates rise, the value of what you bought (that there house) will plunge. At least if you were typical player putting nothing down and taking a suicide loan, when the loan bloated you could always walk. But as one who can buy in cash, why rush to buy when prices will plunge? Ahhh…
You know all that. I KNOW you know all that. But, again, the Unwinding can take time, and time perhaps is as or more precious to us than money. Is it worth it for a 40 something guy with a few munchkins to wait 20 years ( I hope far less) for prices to plummet as they must in order to get a “good and fair” deal on a crapshack? Is it worth it when he arguably can afford the place and the inevitable few hundred grand loss on it, while- well- living and enjoying life while there? Is it more worth it, when his place in NYC gave him a couple hundred grand windfall just by owning a teeny apartment for a few years by coincidence not by brains in the early bubble, and when that money maybe should be looked at as an easy come easy go lubricant to life?
California has plunged and is not done. Most parts of country have dropped significantly and have far more to go. New York City penumbra will crash even though “it’s different there”.
My overriding suggestion to you is to rent “rich” for a couple years. Get that nice house on North Shore even if Rent is more than Mortgage (unlike most of the country now). Indulge and enjoy but keep your real powder dry. I don’t care if you spend $4k/month instead of buying at $900k or more. You won’t lose much doing the first relative to the second, you can get over the “living cramped” you feel now, and you can then wait out the $400k drop in prices while NOT feeling as if spacious living is passing you buy simply because you (correctly) don’t want to buy a horribly expensive and overpricedhouse but also feel you want to live well (which you can afford).
Don’t we have posts yesterday or today showing the “rich” in Manhattan cheerfully renting at 12k/month rather than being “homeowners”? They don’t feel they are missing out.
My suggestion old bud… go live well on North Shore. But, you DON’T need to buy to do that. And, you must stop lamenting that North Shore Long Island is the one area anywhere where rent might exceed mortgage, etc. If you pay $40k in rent vs $40k mortgage your first year, you won’t have tied up $200k downpayment and you will have great “insurance” about the housing crash finally hitting LI.
cheers.
your evildoc
Yes you have a very good point, in the Combotechie deflationist camp. I will not consider buying a house until interest rates exceed 8%. I have most of my government securities yielding over three percent and that suits me. TIPS, municipal bond funds, and series I bonds. I can convert it to cash now and buy a territorial in the Troon area north of Scottsdale. But why? When rates go up those prices will fall. Three percent yield another three years while more unwinding occurs is fine and dandy. Renting is king.
Great post, evildoc. But it wasn’t evil. It was very nice.
Even if I decided to pay 1.1 million for a house and didn’t think it would lose value, why would I pay 24k in property taxes?
Is this the place in LI that has the average pay for a cop at $120k/year + gold plated benefits + insane pensions?
At least ya know where your money is going…
Seriously, that is probably all of Long Island, or at least I’ve heard those numbers for Suffolk County (the eastern of the two) and probably it applies to Nassau as well.
They are completely insane. I lived near there (in Baldwin), and paid $117k in 1984 (albeit for a somewhat smaller house). And that was too much, if you ask me.
It’s a nice house, but not a million nice, I agree. If I were you I’d wait another two years. What goes up must come down.
Rockville centre is OKish? What is bellmore, wantagh, Seaford-the slums? I stopped reading after that comment.
I occasional check on the listing prices of condos in the 91303 zip. An engineer who worked for me bought a 1+1 there in 2005 for 320K. It isn’t a market I look at frequently but I do think about possibly buying a condo there to rent if and when the market bottom out.
Current prices for 1+1 condos start at 99K. 70% haircut from ‘05 anyone? Anyone? Bueller?
Carnage, pure carnage.
For Canoga Park, that sounds pretty good. If there’s a big supply of cheap condos now, and if you are paying cash, I’d make multiple lowball offers (25% below asking.) Find four or five condos you like, make the first offer with a 48 hour turnover, and make a new offer every 48 hours. Always counter with your original offer. A lender told me that his bank (Wells Fargo) makes almost no loans on condos (too risky) so you won’t have much competition.
You are probably right about the cash only thing. I think we are heading still lower, even within LA city limits. I’ll agree that for 75K it’s a no-brainer. One could pay cash and have 20% return minus upkeep association fees and taxes. Maybe I’ll take a look and see which side of Vanowen these are on.
All I want for Christmas is a solar/wind powered money printer.
Geez you want to be “green” in both senses of the word.
You do know that in most states, the power company is obligated to buy any excess power from your home solar/wind?
So it’s like printing money.
In most states only if you have 10 mega watt capacity, smaller generation only offsets your meter down to zero, with over-generation going free to the utility.
It does vary from state to state.
http://online.wsj.com/article/SB10001424052748704008704575638841899271092.html?mod=WSJ_World_LEFTSecondNews
Irish FBs showing up in food pantries. These middle class “new poor” are overstretched financially due to buying nice homes and cars at the peak of the bubble. The same entitlement mentality that says it’s okay to live beyond your means and have it all now, on credit, would naturally not be too proud to show up for free food alongside the truly destitute.
For these “new poor,” I cannot muster the slightest bit of sympathy. Most are cash-strapped due to their own financial mismanagement. The sooner they walk and let the banks take back those mortgages that never should have been written, the better for all concerned (except the greedy banksters).
I could be wrong but these are “recourse mortgages” (to use the US nomenclature.)
That article has an example of someone who’s “still stuck”.
Why these money-drunken fools went insane is something we’ll never figured out. At least, with their traditional drinking, the damage was limited.
Back to eating cabbage soup for them!
I thought most were cash strapped because of layoffs?
There were serious job reductions, weren’t there? I seem to have read that someplace.
Downsizing and “headcount rightsizing” have been facts of life since the ’90s, when “shareholder value” and cutting costs while maximizing CEO and upper management pay became all-important. Nobody in that environment should have assumed they’d have a job for life when they signed those bubble mortgages.
Nobody in that environment should have assumed they’d have a job for life when they signed those bubble mortgages.
FB’s did not need to assume that when all of our lenders, leaders, banks, friends and even our government were conditioning us to believe home prices only go up.
We should not disdain our fellow countrymen because they were not as “smart” as us.
http://blogs.wsj.com/chinarealtime/2010/11/26/china%e2%80%99s-inflationary-food-fight/?mod=rss_WSJBlog&mod=chinablog
Bernanke’s “QE II” driving up inflation in China, which in turn threatens to cause social unrest among the poor and students.
Many including myself have said this before. When this is all over, China is gonna get demolished.
Many are confusing the secular growth story for China and India (quite accurate) with the advent of easy money.
China has a floating population of 200 million rural poor living on the margins of society, barely able to eke out an existence even before inflation kicked in. Add in millions of dudes who can’t get laid, much less find find a suitable wife, because of decades of abortions/adoptions of female offspring due to China’s “one child” policy, and the ever-widening gulf between China’s corrupt ruling and new-money elites and the rest of the population - what could possibly go wrong?
Korea.
+1 China has a demographic problem. The bets are on Brazil and India looking ahead.
“When this is all over, China is gonna get demolished.”
Please elaborate. Ex post Schadenfreude is great, but ex ante Schadenfreude followed by the ex post variety is all the better.
“When this is all over, China is gonna get demolished.”
Many countries such as China, India, Brazil have been developing their own internal demand as well as internal supply. The USA is not the only game in town anymore.
The world is changing.
Obviously, they haven’t learned the American trick of reducing the size, while keeping the price the same.
They are rioting over a seven cent increase????? We’re doomed. All our students are a bunch of candy-a$$es.
Maybe we should be thinking about issuing a buttload of Student Visas to these guys.
7 cents is a lot of you’re making 60 cents and hour.
No food stamp program in China?
“The company, which has since lost its contract with the school, could not be reached for comment.”
The whole company could not be reached for comment? I wonder if the new company will ever raise prices?
A 1-month decline of 0.7 percent occurs at an annualized rate of
((1-0.007)^12-1)*100 = -8.1 percent.
The implied one-year loss of value on a $500,000 McMansion is 8.1*500,000/100 = $40,500.
This translates into an average daily loss of $40,500/365 = $110.96.
How many readers would voluntarily lose $110.96 a day? I can guarantee my wife would literally kill me if I threw money away this fast, but millions of Americans apparently have no problem throwing away money this way, so long as it is done in the name of home ownership.
It’s a free country — to each his own!
Sept home prices down 0.7 percent: FHFA
WASHINGTON | Wed Nov 24, 2010 10:40am EST
WASHINGTON (Reuters) - U.S. home prices fell by a seasonally adjusted 0.7 percent in September, bringing the 12-month decline to 3.4 percent, the Federal Housing Finance Agency said on Wednesday.
The U.S. index is down 14.7 percent from its April 2007 peak.
…
U.S. home prices down in 3rd quarter
Saturday, November 27, 2010
U.S. home prices fell 3.2 percent in the third quarter from a year earlier as demand weakened without federal tax credits, the Federal Housing Finance Agency said this week.
The Atlanta area led in declines among the 25 largest metropolitan regions, with a 10 percent slump, the agency said in a statement. Prices rose 4.6 percent in the San Diego area for the biggest gain, according to the agency, which measures sales of homes with mortgages backed by Fannie Mae or Freddie Mac.
Prices fell in 40 states in the third quarter from a year earlier, led by Idaho, Georgia, Arizona, Oregon and South Carolina, the agency said. Ten states and the District of Columbia had gains.
…
What happen to the bidding wars in san diego?
Take it from the India Express: There ARE bidding wars in San Diego.
Housing gains investors’ trust
New York Times Tags : David Neithercut, REIT, San Diego, Manhattan Posted: Sat Nov 27 2010, 01:22 hrs
At the start of the year, David Neithercut, the chief executive of Equity Residential, a real estate investment trust, set a target of $1 billion to spend on apartment buildings across the country. By the middle of November, after buying 15 properties that included a troubled condominium tower in San Diego and three apartment buildings in Manhattan, Neithercut had invested $1.4 billion. “We stepped up, swallowed hard and plunged in,” said Neithercut, whose Equity Residential is the country’s biggest publicly traded REIT. “We never expected there to be a lot of opportunities out there in the marketplace.” Equity Residential, the top apartment buyer this year, according to the research firm Real Capital Analytics, joins a list of institutional, public and private investors that are plowing money into apartments at a time when the market for most commercial real estate is flat. In the third quarter, sales of apartment buildings jumped 63 per cent over the previous quarter, to $8.5 billion, according to Real Capital Analytics. Sales this year through the third quarter now stand at $18.5 billion, nearly double the same period last year. By comparison, sales through the third quarter in 2006 were $659.6 billion. A number of factors are behind the rise in multifamily-unit sales this year. Low interest rates, a lack of new construction and falling vacancy rates have swelled the ranks of buyers and, in some cases, incited bidding wars. And real estate investors are eager to spend cash reserves hoarded in the bust.
…
In View: The Bernanke Put
The US Federal Reserve has come up a lot of reasons for its controversial plan to buy US$600B + of Treasury securities in the coming months.
Among them is the desire to drive players into risky assets such as equities by making bonds yield so small that no one finds them attractive unless they truly believe The End is on us. The theory is this: when shares prices rise, everyone will feel better and go out and spend the paper profits.
The prior Fed Chairman did that with housing prices, remember?
There are a lot of problems with this IMO.
Rising home prices have a much bigger wealth effect, and we are nowhere close to the point where most people can take satisfaction from the worth of their homes again.
Many analysts, like me, believe that it would be better if interest rates rose, rewarding savers. Instead, “we have debt-induced consumption”, says a US Fed executive.
As New York Fed executive vice-president Terry Checki put it in a Press Barred appearance before the New York Economic Club in a week ago, “Our current circumstances are not just the result of the crisis. Our growth was too reliant on spending and borrowing, as opposed to saving and investing.”
Adding this: “Monetary policy has limits. It cannot, by itself, create growth or jobs. Nor can monetary policy provide the answers to all of the uncertainties that are weighing on consumption, investment and job creation, or eliminate the need for balance sheet adjustments.”
Perhaps that is one reason the markets have reacted quietly to the Fed’s wishes. Stocks have been broadly flat and bond yields have risen. The USD climbed against the Euro, but continues to fall vs the Yen and other Asian currencies.
Meanwhile, players are taking note of what appears to be displays of dissension between US Fed officials, at the same time, the Fed is publicly debating a change in its communication policy. “Further so-called open-mouthed monetary policy should be expected in the time ahead,” notes Tony Crescenzi, a strategist and portfolio manager at Pimco in Newport Beach, CA.
Some are of the opinion that the Fed is losing credibility. And of course, there are some supporters. Barclays’ economists are fans of the new Bernanke “Put”, which has replaced the famous Greenspan “Put”.
“The US Fed is offering an extremely rare opportunity to investors. It is unusual for the world’s most powerful central bank to provide such a clear signal that it wants the prices of risky assets aka “Stocks” to go up,” they conclude, as the risks for stock prices looks tilted to the Northside.
At the same time as the US Fed is driving share prices higher through rates so low that Pimco’s Mohamed El-Erian describes them as confiscatory, the message from other arms of the government is that the market is rigged against small investors.
…
“Further so-called open-mouthed monetary policy should be expected in the time ahead,” notes Tony Crescenzi, a strategist and portfolio manager at Pimco in Newport Beach, CA.
“Well, shuts my mouth, and slaps me with both of the hands that feeds me!” (anonymous Pimpco CEO)
The problem is the people losing thier homes dont have any money so there is no wealth effect.The only people he is helping already have money.
“…people losing thier homes dont have any money so there is no wealth effect.”
Technically, people losing their homes after years of paying overpriced* mortgages is a wealth effect, albeit a negative one.
* Above market rental rate on comparable housing
At least Oz has a housing shortage, instead of a massive glut like in the U.S.
The high price of punting on property
* Michael Stutchbury, Economics editor
* From: The Australian
* November 27, 2010 12:00AM
THERE’S no bubble to burst but falling house prices provide cause for concern.
The mix of rising mortgage interest rates, softening house prices, higher rents, worsening house shortages and a building slump could destabilise Canberra’s minority politics further
THE background noise at this weekend’s housing auctions will be Australia’s overpriced residential property market deflating. House and apartment prices across the nation have been easing since midyear and are tipped to fall further next year as they are squeezed by more rate hikes.
The Weekend Australian last week revealed emails between federal Treasury officials as recently as June suggesting Australia was in danger of inflating a housing price bubble.
The follow-up story is that, bubble or not, housing prices are now correcting.
Home buyers and investors should take note. Australia was spared a painful residential property price slump in the wake of the global financial crisis as Rudd Labor quickly boosted its first-home buyers subsidy, the Reserve Bank slashed interest rates and the big four banks kept on lending when capital markets seized up.
But Treasury and Reserve Bank documents obtained under Freedom of Information suggest the household borrowing spree of the past two decades has knocked Australia’s $4 trillion housing market “out of equilibrium”.
Since 1990, capital city dwelling prices have jumped from three times annual household incomes to five times annual incomes. And household debt has soared from 45 per cent of income to nearly 160 per cent.
Yet housing construction has not kept pace with our strong population growth, producing an estimated undersupply of nearly 180,000 houses by mid-2009.
…
The politics of the Fed
Bernanke in the crosshairs
The Fed’s latest foray into quantitative easing prompts a Republican backlash
Nov 25th 2010 | Washington, dc | from PRINT EDITION
REPUBLICANS have trumpeted their victory in the mid-term elections as a revolt against big government, from bail-outs to fiscal stimulus. Having made short work of the Democratic Congress, it was inevitable that they would next turn their sights on the Federal Reserve, a perennial target of the wilder-eyed.
On November 3rd the Fed said it would buy $600 billion-worth of Treasury bonds over the next eight months with newly printed money. This second round of quantitative easing (QE), the Fed hopes, will nudge down long-term interest rates, thus stimulating spending and fending off the threat of deflation.
Republicans and “tea-party” activists erupted in criticism. “Cease and desist,” cried Sarah Palin, a former vice-presidential candidate. “Currency debasement and inflation,” declared a gaggle of conservative economists and commentators in an open letter published as a full-page ad in leading newspapers. Republican leaders in Congress wrote to Ben Bernanke, the Fed chairman, to express “deep concerns”; and two of their colleagues proposed stripping the Fed of its statutory responsibility to promote growth and employment, leaving it to occupy itself only with controlling inflation.
At first blush their complaints are perplexing. Core inflation (excluding food and energy) was just 0.6% in the year to October, the lowest since records began in 1957. Even food prices are up only 1.4% from a year earlier, while petrol prices are well below their peak of 2008. In a Gallup poll, 33% of respondents called unemployment the most important problem facing the country; just 1% picked inflation. Even the dollar’s recent drop is small beer.
Yet the fight is not ultimately over numbers, but ideology. To be sure, the Fed’s reputation has suffered among Americans of all political stripes over its failure to prevent the crisis and its bail-outs of banks. But the tea-party movement holds it in particularly low regard, seeing it as the monetary bedfellow of the hated stimulus and bail-outs. Some 60% of tea-party activists want the Fed abolished or overhauled, according to a Bloomberg poll. One of the movement’s heroes is Ron Paul, a congressman from Texas who wants to scrap the Fed outright and bring back the gold standard. His son Rand, newly elected as a senator from Kentucky, has also been stridently critical. QE can be made to seem sinister: an animated video on YouTube that portrays it as a conspiracy between Goldman Sachs and the Fed to fleece the taxpayer has been viewed over 2m times.
…
Are they saying that even though QE DID INDEED benefit GS while being paid for by taxpayers, that it wasn’t a conspiracy?
Who wrote this? The Queen of Hearts or the Mad hatter?
As for the Repubs, bear in mind these are the same traitors that shot down a bill to end tax breaks for offshoring jobs and are aligning with foreign countries on OUR money matters.
“Who wrote this? The Queen of Hearts or the Mad hatter?”
If you are going with the conspiracy hypothesis, then you have to allow for the considerable likelihood that the owners of The Economist magazine are in on it, and that the magazine’s editorial bias reflects this.
“…The publication belongs to The Economist Group, half of which is owned by the Financial Times, a subsidiary of Pearson PLC. A group of independent shareholders, including many members of the staff and the Rothschild banking family of England,[8] owns the rest. A board of trustees formally appoints the editor, who cannot be removed without its permission. In addition, about two-thirds of the seventy-five staff journalists are based in London, despite the global emphasis.[9]…”
I read both, but not religiously. I sometimes agree with some of their stories and sometimes not.
I’ve written letters to the editor pointing out serious factual errors and they have been kind enough to print them.
In GENERAL, we can agree that Wall St. and the rest of the FIRE sector did conspire to fleece us and used every resource available to do so. It’s as obvious as rain.
Some 60% of tea-party activists want the Fed abolished or overhauled, according to a Bloomberg poll.
I tend to agree with Palin, Paul and the Tea Party on this issue.
I am almost knocking my head on the wall. Sometimes you surprise me. I still dislike Palin’s social conservatism.
I am almost knocking my head on the wall. Sometimes you surprise me.
Well then sorry my next post wont. But you intentionally insulted me for no reason.
“Mr Bernanke may plan to stay the course, but the chorus of criticism is already doing damage. It has nourished investors’ doubts that the Fed will finish, much less add to, the planned $600 billion in bond purchases. That has helped drive up long-term bond yields from 2.53% the day after the Fed’s announcement to 2.8% now, precisely the opposite of what QE was meant to achieve. If those perceptions stick, QE will be seen to have failed and the critics will have won. Unfortunately, the same will not be true of the economy.”
The writers for this Rothschilds-owned publication apparently fail to recognize the ultra-low interest rates on savings take a heavy toll on seniors and other savers who have traditionally relied on fixed income investment returns to fund their retirement expenditures. The Fed’s policies create winners out of Wall Street Megabanks, who can borrow at near zero percent from the Fed and loan the money out to the rest of America at ‘market rates,’ and losers out of the rest of America’s households and firms, which don’t qualify for ZIRP financing. I thought lending discrimation was illegal, but I guess it is not so long as you are a too-big-to-fail Megabank.
American monetary policy
Fed under fire
Political attacks on America’s central bank are misguided
Nov 25th 2010 | from PRINT EDITION
RARELY has a central bank been lambasted so loudly by so many. The Federal Reserve’s decision on November 3rd to start a second round of quantitative easing, or QE—printing money to buy government bonds—gave rise at first to loud protest abroad. A chorus of finance ministers accused America of wilfully pushing the dollar down. Now the Fed is under attack at home, as Republicans accuse it of fuelling asset bubbles and inflation (see article). Several want to narrow the Fed’s dual mandate to curb inflation and maintain full employment to a single goal of price stability.
Like any other policy, QE deserves scrutiny. Reasonable people can disagree about whether its benefits outweigh the risks. But too much of the cacophony of criticism is confused, hypocritical or ideologically motivated. Par for the course in policy matters, you may say. But by politicising or paralysing the technocratic Fed, it could have dangerous consequences.
Begin with the confusions. A common theme among the most vocal critics is that QE is some sort of voodoo monetary policy. That is nonsense. QE follows the same logic as standard monetary policy. In normal times central banks loosen monetary conditions by pushing down their policy interest rates. They do so by creating bank reserves (“printing money”) to purchase government bills temporarily. But today short-term rates are virtually zero. So the Fed wants to push down longer-term rates by buying longer-term government bonds. The approaches are not identical: rather than targeting a specific interest rate (the yield on ten-year Treasury bonds, say), the Fed has announced the total amount of bonds it intends to buy. But the principle is the same.
…
I’m going to buy some stock in NFLX so I can feel the wealth effect. No, maybe PCLN, it looks like a great investment at 400.
“Most developed countries have put their monetary policy in the hands of independent central banks for a good reason: technocrats are better at running it than elected officials are. The Fed is doing its job as best it can. QE may or may not help America’s economy. But putting political pressure on the Fed certainly won’t.”
The Fed brought this upon themselves, through discriminatory lending policies which favor Wall Street banks over the rest of America. If the Fed wants to stay out of politics, they should avoid discretionary policies which reallocate wealth from Main Street to Wall Street.
P.S. I include our Treasury Secretary with the collection of policy makers I refer to as “the Fed,” as his recent appointment as New York Federal Reserve Bank President patently qualifies him as a Fed insider. These guys are running our banking system like a giant hedge fund which favors Wall Street bank interests over those of the rest of the nation, rather than as an apolitical technocratic institution in charge of maintaining a stable currency. Small wonder the American populace has turned against them…
Well, it’s after Thanksgiving now. I’m going to put in an offer 25% below asking on a house for some investor friends. We’ve been looking since February, waiting for prices to fall. Made several lowball offers that were always topped by FBs with FHA loans.
“…always topped by FBs with FHA loans.”
Do you think the losses on these will ever reach a level where the folly of forcing the U.S. taxpayer to guarantee loans that no private banker would make will become common knowledge?
to guarantee loans that no private banker would make
Please define the “potential” relationship between “private banker” / “home-loan-4-you” / “we-have-non-30yearjobs-&-x3-kids-the-oldest-serving-in-Iraq”?
Anyone up for some old gm stock?Its cheap.
http://www.streetinsider.com/stock_lookup.php?q=MTLQQ
U.S. Housing Market `Still in Downfall’
Oct. 4 (Bloomberg) — Reggie Middleton, author of BoomBustBlog.com, discusses the U.S. housing market and what he feels are the shortcomings of the S&P/Case-Shiller index of property values. Middleton speaks with Carl Massar and Matt Miller on Bloomberg Television’s “Street Smart.”
Awesome, thanks for posting. This made my day.
PB ..yes, great post …..On the same page(at the right side ) are 5 tape interviews of
Dr. William Black called ” Economic Collapse 1-5″. These are must see
interviews . William Black explains the situation we are in better than
anyone I have ever heard and he also has solutions . Dr . Black
testified in front of Congress many times ,but these jerks have no intentions of doing what is right . Anyway the tapes go very fast so you
will get a great summary .
Too bad they didn’t touch unemployment’s downward pull on household income and true housing affordability. They need to make their argument easier for J6P to get it.
Steven Levitt Says U.S. Homebuyer Caution Is Justified - Video -
Oct. 6 (Bloomberg) — Steven Levitt, a professor of economics at the University of Chicago, discusses the impact of stimulus funds on the U.S. economy and outlook for the housing market. Levitt speaks with Betty Liu on Bloomberg Television’s “In the Loop,” from the World Business Forum in New York. He is co-author of the books “Freakonomics” and “SuperFreaknomics.” (Source: Bloomberg)
Probe leads investors to wonder: Is game rigged?
(AP) – 3 days ago
NEW YORK (AP) — The Wall Street insider trading investigation may lead everyday investors — already rattled by a stock market meltdown, a one-day “flash crash” and the Madoff scandal — to finally conclude that the game is rigged.
“A large part of trading has to do with trust, and I don’t have it,” says Mark Swenson, a 43-year-old plumber from New Hampshire who refuses to buy individual stocks.
“When a stock moves up 10 percent, you don’t know why,” he added. “We can pretend that everyone has access to the same information, but they don’t.”
…
If you think this stock market isnt rigged you need to have a mental evaluation.
I’m certain it’s rigged. The thing I can’t understand is, why would anyone who isn’t on the insider side of the game be willing to play in this market?
What are the other choices, again?
Savings? Nope.
Pensions? Nope.
Small business? An even bigger gamble.
Bonds? Not now.
Commodities? More rigged than the stock market.
Flipping? Not for the avg person or faint of heart.
Art collecting? Good money if you have an above avg IQ and 10 years to spend learning.
What am I leaving out?
It’s greed and desperation.It is no different than going to reno and hoping to hit the big one.As long as these people are in the game and have a chance, thats all that matters.
I have learned to look at it as just like gambleing.If you think your investing your nuts.
Biggest lesson is learned is to know what you are willing to lose going into your trade.Put stops at that level.Learn to take your losses like a man and move on.
“If you think your investing your nuts.”
The problem, as I see it, is that, with a global financial system dominated by central banks with fiat money presses and unlimited discretion, stuffing your money under the mattress and hoping for the best is gambling, too.
We are all gamblers now.
I guess I should be put into a straightjacket. 21 years of being in the stock market. Much more assets now than if I was just to park it in passbook savings or even dollar cost average into bonds.
Make that a diamond straightjacket.
“21 years of being in the stock market.”
Past performance is no guarantee of future results.
Well.. we all knew Netflix was great when it first came out, all we had to do is buy the stock. Overall it is rigged, but you can still ride the wake.
congrats.didnt say you cant make money but I really think it is more gambleing than anything else.You can be a good gambler and make some money.I’m not going to rely on the casino for my retirement though.
It’s a no win game ,it’s rigged .The big players are selling us down the tubes for short term gains and take the money and run . Any investment today is like a gamble with the way everything is conducted . Markets are run on the greater fool theory . It’s a joke .
The fact that you have insolvent Banks trading on the New York
Stock Exchange by accounting fraud to begin with is one of the biggest jokes .
They didn’t get rid of the Mad Men and they maintained the Corrupt systems and casinos . It’s the biggest joke in history .
He refuses to buy individual stocks. Does that imply that he buys mutual funds? In my opinion he’s better off with individual stocks. Buying mutual funds guarantees that he’ll lose the rigged game.
* Business
* Financial sector
FBI insider dealing probe tries to draw a line in the land of nods, winks and private dicks
When does legitimate fact-finding tip over into obtaining unlawful insider information? We may soon have an answer
o Andrew Clark
o The Observer, Sunday 28 November 2010
How do so many big-brained Wall Street hedge fund managers beat the market so handsomely? We look set to get some clues. FBI agents swarmed into the offices of three US funds this week, seizing scores of boxes of documents and confiscating traders’ BlackBerrys as part of a sudden crackdown on insider trading.
In images carefully orchestrated to alarm the financial community, burly men were photographed carrying carton after carton of printouts from the premises of Diamondback Capital Management, Level Global Investors and Loch Capital. A day later, hedge fund titans SAC Capital and Citadel, which manage $30bn (£19bn) in assets between them – were served with subpoenas demanding information about trades.
The criminal investigation, jointly conducted by the US Securities and Exchange Commission (SEC), New York prosecutors and the FBI, is the biggest assault on insider dealing for years and it has severely rattled Wall Street. Shares in Goldman Sachs sunk following reports its junior bankers are facing a probe for alleged leaks of upcoming deals. But the key target for the authorities are little-known intelligence firms far from Wall Street that provide so-called “expert network” information to fund managers.
On Wednesday, the Feds arrested Don Chu, an executive at a firm called Primary Global Research, which describes itself as a provider of “incremental information” giving institutional investors a “strategic advantage” in investment decisions. Firms such as Chu’s conduct deep due diligence on quoted companies: they talk to suppliers, clients and employees in an effort to find out what products are hot and which lines are going cold. They’ve been known to count the cars in car parks to see just how busy companies appear to be – all fodder to help fund managers decide whether to invest.
This poses a dilemma. In a perfect free-market model, all investors on the stock market are supposed to have access to the same information. Deciding whether to buy shares in Apple, Google, eBay or Microsoft, investors can look at official quarterly reports providing balance sheets, sales numbers and earnings breakdowns to see how iPods, Android phones or Xboxes have been faring. On top of that, there’s nothing wrong with doing a little extra industry research. But when does legitimate fact-finding tip over into obtaining unlawful insider information about commercially sensitive trading ahead of public disclosure?
…
“…they talk to suppliers, clients and employees in an effort to find out what products are hot and which lines are going cold. They’ve been known to count the cars in car parks to see just how busy companies appear to be – all fodder to help fund managers decide whether to invest.
…”
This sounds perfectly legal to this non-legal beagle. By contrast, Wall Street Megabanks taking TARP money and investing it in the stock market when most Americans were gripped by panic sounds like
it should be illegal, even if it officially was not.
they talk to suppliers, clients and employees in an effort to find out…
describes itself as a provider of “incremental information” giving institutional investors a “strategic advantage” in investment decisions
Mystery shadow person #1:”So, Hwy, where are those 1,386,000 ipads being shipped to?”
Hwy: “packing label says,…they’re going to SE Asia…”
(Mystery shadow person #1 suddenly disappears…)
“…then, they’re being re-routed to various points in Africa, then the Netherlands, then Russia, then back here to the good ol’ US ofA, but not until after this years bonus reporting filings, …then where they go to is the real mystery…”
Look ,until the corrupt structures are corrected and the rule of law is restored, contrary to the bogus reforms we just got,it’s just one big sit
up for failure again. They never got rid of the jerks that failed and they kept the very structures that failed and they just thought of new ways to allow cheating and accounting fraud . Not one pert walk for any of the major
players in the greatest criminal financial Ponzi -scheme in American History.
The insane Mad Men got promoted ,the corrupt systems were kept in tact and Main Street is in a state of ruin from the disconnected systems that are
designed to foster fraud and a re-distribution of the wealth upward to a small percentage of the population .
It doesn’t seem that different this time compared to past all-out financial meltdowns, except that the perpetrators nowadays seem to get off scot-free; by contrast, every past mass financial debacle since I began paying attention in the late 1980s at least resulted in some of the key instigators serving prison time. Only a few minor players (e.g. Madoff) are taking the fall this go round.
My Amazon dot com wish list is getting unmanageably long; nonetheless, I decided to add one more:
The Best Way to Rob a Bank Is to Own One: How Corporate Executives and Politicians Looted the S&L Industry [Hardcover]
William K. Black
(Author)
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14 Reviews
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Realty stocks fall for third day on fears of housing loan curbs
Real estate prices seen falling as developers may have to generate cash internally.
Our Bureau
Mumbai, Nov. 26
Realty stocks fell for the third straight day on Friday on increasing fears that real estate companies may find it difficult to raise funds in the wake of the bribes-for-loans cases being pursued by the Central Bureau of Investigation.
The BSE Realty Index nose-dived close to 15 per cent during intra-day trade on Friday but recovered sharply to close 4.68 per cent lower from the previous day. The Index has fallen 12.4 per cent since Wednesday when the scandal broke.
The market sentiment was weak, despite clarifications pouring in from many quarters that the cases of bribery were isolated and did not suggest a systemic problem.
The Sensex has fallen 3.5 per cent since Wednesday. After the CBI arrested senior officials of some public sector banks for allegedly taking bribes to sanction project loans for certain real estate companies, investors have been selling real estate scrips. They are worried that housing prices will move south or that the RBI will further tighten norms for housing loans, said analysts.
…
America’s banking sector certainly doesn’t have any exclusive monopoly on real estate scams.
27 Nov, 2010, 08.14PM IST,PTI
We have robust system to prevent wrongdoing: Bank of India
CHANDIGARH: Three days after CBI arrested Bank of India’s General Manager (Delhi) RN Tayal , for his alleged role in the housing-finance scam , the bank on Saturday asserted it has a robust system in place to prevent any wrongdoing in advancing corporate loans.
“….our bank has a robust system to take action wherever there is any wrong doing,” Bank of India’s Executive Director N Seshadri told reporters here today.
“Incidentally, nothing has gone wrong on process with the bank…if you really talk about it… it is an aberration and we will have a look at it when we have full details (with us),” Seshadri said here on triennial delegation session organized by Federation of Bank of India Officers’Association .
When asked if the bank was contemplating any action against the official who was arrested by CBI on graft charges, Seshadri said that action would definitely be taken against him.
“We just got (his) details yesterday and there is a specific guideline…(and)there is a process (for action)..but action will definitely be taken against the official,” he said.
However, he said, “no individual in the bank can influence such type of loans.”
Bank of India has said that the companies under CBI scanner are not from realty sector but rather from the manufacturing sector. “In one of the case, we do not even disbursed so far…it was just sanctioned. In another case, a group of banks are advancing loans ,” he said.
Bank of India maintains it has just 3.2 per cent exposure to the realty sector. “We have very small exposure towards real estate sector,” he said.
…
Banks may apply brakes soon on teaser rate home loans
Some banks withdraw scheme after RBI’s concerns.
State Bank of India was the first bank to introduce the scheme two years ago, when the credit offtake was poor and cost of funds was also low.
Shobha Roy
Kolkata, Nov. 26
Teaser rate home loans, which found favour with customers due to the lower rates of interest during the initial loan period, might soon become a thing of past with banks adopting a cautious approach towards such loans.
While some banks have already withdrawn the scheme and replaced it with other home loan schemes, some others have adopted a ‘wait and watch’ approach following Reserve Bank of India’s serious concerns over such schemes.
With a view to discouraging banks from offering such schemes, the RBI, during its recent monetary policy review, increased provisioning for teaser loans to two per cent from 0.4 per cent and also capped all home loans at 80 per cent of the value of a property.
Indian Bank, for instance, has withdrawn its teaser rate scheme of offering 8 per cent for the first year, 9 per cent during the second and third year and floating thereafter which was introduced in September this year as a part of its festival offer.
“We have withdrawn the earlier scheme and introduced a new festival scheme which will offer home loans at 8.5 per cent fixed for the first five years and floating thereafter in order to avoid any sort of confusion in the minds of consumers,” said Mr T. M. Bhasin, Chairman and Managing Director, Indian Bank. The bank hopes to disburse close to Rs 500 crore under this scheme over the next five months of this fiscal, he said.
…
The Economic Times
Real Estate
26 Nov, 2010, 06.16AM IST,ET Bureau
Property prices may crash as loan scam hits funding
MUMBAI/NEW DELHI: Finance minister Pranab Mukherjee’s direction to state-run lenders to prevent a recurrence of the loans-for-bribes scandal, and banks’ decision to go for a critical appraisal of all real estate loans above Rs 50 crore may stall projects and drive developers to private funds.
Liquidity for the sector may dry up as bankers turn cautious in sanctioning fresh loans, forcing builders to cut prices to improve cash position, helping prospective buyers who have been holding on due to high prices.
DB Realty tumbled 10%, Indiabulls Real Estate lost 5.2%, DLF fell 3.8%, and Unitech declined 6% as a fund shortage threatens to derail their project execution, which had just started to show signs of recovery after the 2008 credit crisis.
The arrest of eight finance executives by the Central Bureau of Investigation on Wednesday on charges of taking bribes to sanction loans does not lead to a systemic risk since the amount involved is tiny, bankers and bureaucrats said. It is getting more attention than it deserves, they said.
“ banks and financial institutions should strengthen the NPA (non-performing assets) monitoring and management in their institutions to ensure that advance action is taken to identify incipient sickness and take appropriate action on it,” said Mukherjee.
A Bank of India official said, “All big-tickets loans, particularly to builders, will come under the scanner now. Recall of loans can happen if there is a fear that the quality of loans may suffer. But as of now, there is no such worry and hence it would not prompt us to recall loans.”
…