Bits Bucket for February 14, 2011
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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What? Foreclosures are affecting the home-resale market? I am shocked I tell you. Shocked:
http://www.orlandosentinel.com/business/os-foreclosure-bulge-20110211,0,2260497.story
“The number of foreclosed homes on, or about to hit, Metro Orlando’s resale market has more than doubled in the past year, forcing down the prices of other houses that have already lost more than half their value since before the recession, new figures show.”
All The King’s Programs, And All The King’s Men Couldn’t Put Housing Together Again.
I do have to give new governor Rick Scott some major props for refusing to shut down some of the state parks, on the grounds that they are tourist (and resident) attractions and generate revenue. I have to admit, having been to some of those parks, they’re pretty decent places, very well run with lots of flavor from bygone days and showcase the good things about the Florida ecosystem.
A couple of years ago, I contacted Charlie Crist’s office and gave the staffer an earful about what sort of businesses should be developed in and attracted to Florida. At that time, “tech” was a buzzword and all the politicians were bloviating about the 1-4 corridor and how Florida was going to attract a lot of tech business. And I do note that bill-in-wherever-the-job-is has migrated to our area. Plus when that lady went nuts in New Tampa and executed her children, many of the neighbors contacted by the press for comment had names of Indian or Pakistani origin, so I guess there is a certain amount of tech here, although I’m sure it is relatively low paying.
However, my opinion was that Florida should stop trying to copycat other states and knock off trying to attract industries already entrenched elsewhere. Instead, Florida shoud concentrate on its strengths and build from there: bio-tech (especially marine), solar energy, aquaculture, gerontology, anything related to water, etc. Kind of a no-brainer, but Florida always wanna-be California. And it seems Rick Scott is following along those lines, at least with bio-tech, so I’m actually hopeful.
Orlando has some of the modeling and simulation biz.
I met a guy from New Orleans last year that was trying to get me to move my video game studio there. They’ve got an old shopping mall that they’ve converted to office space, and are offering free rent and to cover some of your payroll costs.
I ran it by my crew. Reactions ranged from “New Orleans… ew!” to “Are you out of your #*#*$@ mind!?!?”
Humidity. Bugs. Heat. Bible thumping whackaloons. This is what the south has to offer tech workers.
Humidity. Bugs. Heat. Bible thumping whackaloons. This is what the south has to offer tech workers.
Not to mention anti-Semitism. One of my friends disliked the South intensely for this very reason.
And she and her non-Jewish husband were techies to the nth degree.
..and those are its good points!
You left out the one thing “gaarunteed” to make it miserable for all… the corruption.
I’ve heard NO described a lot of ways, but “Bible-thumping” isn’t the first one that springs to mind. I think “tranny hookers” and then thank God I’m in Texas. (In the tech industry, no less.)
“I do have to give new governor Rick Scott some major props for refusing to shut down some of the state parks, on the grounds that they are tourist (and resident) attractions and generate revenue.”
I take the impression CA’s govt has yet to reach a similar stage of enlightenment, as the talk is to shut down state parks until the budget problems are fixed. Wouldn’t it make a lot more sense to raise use fees to a level which funded their continued operation?
In my daily Redfin listing updates for San Diego, there’s been about a 3 or 4 to 1 ratio for new listings to number of houses sold for houses in the 500-650,000 price range. I think the market’s really getting ripe for the double dip now.
But shouldn’t that be expected at this time of year. I’d be SHOCKED to see that in September though.
Housing Crash Hitting Cities Thought To Be Stable:
It used to be different here.
http://www.msnbc.msn.com/id/41569256/ns/business-the_new_york_times
“Prices of Orlando-area foreclosures have fallen from $84,000 in December 2009 to $78,101 a year later. ”
Which seems like a low price, until you consider how little major local employers like the Mouse pay their employees (about $10/hr on average).
When I went to college in SoCal (many years ago) Disneyland had a reputation of paying generous wages, even to run of the mill “cast members”, paying them 2-3 times minimum wage. And it showed in the quality of staff they had. Now their “cast members” don’t perform all that differently from the people that work at the fast food places across the street on Harbor Blvd. Its the same in Orlando. Disney lowered the bar (in the name of quartrly profits of course)
People are paid in sunshine and humidititty. A lot of Florida small businesses are bush league, too. I’ve had a lot of experience with this and have learned to roll with the punches. It’s always a treat to have someone come here from Cali or the Northeast or even Chi-town, all smarty-pants and full of themselves about how they’re gonna be a real success in Florida and show everyone how it’s done. A couple of years down the road, people like this either leave, licking their wounds, or they toughen up and learn to live with the various quirks of Florida and its “diverse” population.
Send those pukes (and their money) back to California where they belong!
At one time I was one of those “pukes” from the Northeast. I was really gonna tear it up. I learned some pretty tough lessons, but I grew to love this state, with all its quirks and humid weather. Even now I just don’t understand people who move here and get all freaked out when a little lizard gets into their home.
Ya gotta know how to live with Florida and once you do, it’s a great ride.
On second thought, Palmy, you can keep the pukes; Just send us the money.
Florida lizard = alligator?
Or some exotic Burmese Python?
cameleon
Right, Blue. Chameleon. I love those little lizards, always have, they’re cute as a button and slurp the miskeeters. It always bums me out to find one of their stiff, dried out bodies in a corner somewhere, when they get in and can’t find their way out.
People gotta learn to live with the gators here. Caution: if you have a “waterfront” property, on a lake or pond or river, gators are a fact of life. Don’t like ‘em, don’t live there. Snakes, too. Heck, it’s Florida.
Burmese pythons have become a real problem here, since idiots started releasing their unwanted “pets” into the wild. However, there’s some signs that the recent colder winters are culling the herd big time.
anole
I remember waking up in the Philipines to find a gecko sitting on my arm. After a moment’s reflection, I let him be and went back to sleep.
Palmy,
You perfectly described the imbeciles from NJ/NYC/CT that bought in the upper reaches of upstate NY, VT and NH.
For the residents of upstate NY, VT and NH such thinking should be encouraged in that it brings in fresh money.
I am orginally from upstate Vermont and the cost of the money is very high when you get people with no common sense who then drive of tax rate to a point that only a trust fund baby can live there.
You’re not paying attention Combo. I’ve written extensively on this for years. For the natives, metro-tards with borrowed cash was their only economic opportunity during housing cycles. The metro-tards get ripped off big time by natives. As Palmy mentions, the natives eventually sink, declare bankruptcy and lose it all. Why? They pay far far too much.
It seems to me that the mass influx of lemming money from outside puffs up values during the boom periods but a steady influx of knifecatcher money from outside would dampen the declines during the busts.
The boom days are gone (along with the inflow of money) so I think one would welcome knifecatcher money in order to keep cash flowing.
Hey Palmetto, what ever happened to your old man’s place on the canal? I think I remember you relating his position to the housing bubble a long long time ago.
I don’t think that was me, Liz. My old man passed away back in 2000, although he may have a place on a canal somewhere in the afterlife. Lol, he moved to Florida briefly for a year back in the mid 1980s and went screaming back to the Northeast to escape some widder lady who wouldn’t let him be.
That was a great story, he was living in a condo complex in Lauderdale. Being somewhat of a cheapskate, he didn’t ask any of the widder ladies out, but went to all the freebie happy hours, etc. Finally some lady asked him out and picked him up in her Cadillac. It was an ambush. She pulled up to the pump at a gas station and sat there, waiting for him to get out, fill ‘er up and pay for it. They both sat there for a while, staring at each other, finally she lays into him. She had been married to a doctor and was used to fine things and being catered to. So he gets out of the car, calls a cab and goes home.
ROTFLMAO!!!!!!!!!!
“It was an ambush. She pulled up to the pump at a gas station and sat there, waiting for him to get out, fill ‘er up and pay for it.”
LOL! If I outlive my wife I’ll be on the look out for this.
Old people are harsh to each other. lol
My Dad, long gone, was living in a retirement
community and he hated it. He told me he
had to fight the old biddies away 24 hours a day. Wanted to find a place that catered
to old, curmudgeon bachelors.
“Wanted to find a place that catered to old, curmudgeon bachelors.”
Was he perchance a Norwegian bachelor farmer, in the Lake Wobegon tradition?
There are more widows than widowers here and I personally know just one widower. He has some stories about the attention he gets from the ladies, and says he’d never have to cook dinner or go to a restaurant with all the invitations he gets. Yes, he has money. He manages to avoid deep entanglements with any of them and continues to play the field.
I hear tell the incidence of STDs is on the rise in senior and assisted living facilities. Evidently there are quite a few sexy senior citizens and I’m not so sure the ladies are looking for any deep entanglements either! Just someone who can still ….
“Just someone who can still …”
You’d think that would select favorably for a low STD rate in old age (but also for people who are careful about putting out).
“or they toughen up and learn to live with the various quirks of Florida and its “diverse” population”
One thing I noticed in Orlando (especially at the airport) was that its “hispanic” population had a very “caribbean” vibe to it.
“The bubble markets, where builders, buyers and banks ran wild, began falling first, economists say, so they are close to the end of the cycle…”
I keep reading this story over and over again that the areas which fell first will be the first to recover, but it doesn’t withstand the test of economic logic. A simple stylized example will suffice to show why.
Suppose homes in an area of San Diego County called RB fell before Seattle, say from a median price of $800,000 to $640,000, or 80 percent of their former value, then flattened out. Subsequently prices in an equally desirable area of Seattle fall from, say, $640,000 to $400,000. Assuming a number of RByans might be interested and willing to relocate to the newly affordable area of Seattle, you have a potential arbitrage opportunity which will eventually be eliminated by many peoples’ relocation choices, through the joint action of downward pressure on RB prices coupled with upward pressure on home prices in the comparable area of Seattle.
The prices and locations in my example are not meant to accurately depict present market reality, but rather are set forth to illustrate why David Lareah’s thesis that All Real Estate is Local is pure bunk in a nation where citizens can freely locate across state boundaries.
PB
I think Rancho Bernardo is starkitecture fugly. Lots of overside HOA PUD’s in Stucco Canyons. I use to live in similar mock.
It bored me to tears, when the firm sent me in the area to check on shopping centers.
My brief stay in Poway which is next to Pancho bernardo reminds me of a characteristic most of these slightly inland cities of CA have
about 30% or more of the home owners are over 80 bought for 30k and love prop 13 many of them also bought dozens of rentals.
the young crowd live on the coast
“…about 30% or more of the home owners are over 80 bought for 30k and love prop 13 many of them also bought dozens of rentals…”
These people will be continuously trying to cash out of their residential investment properties (one of which we rent) over the next twenty or so years, resulting in a continuous application of the force of economic gravity to area home prices for the foreseeable future.
I should add that since the greediest generation has left so little behind for the younger generation following in their wake, these eighty-something real estate investors may have a very difficult time finding new home buyers qualified and interested to take their investment properties off their hands at anywhere near their wishing prices.
I never understood the appeal of Poway. Country living? I don’t think so.
I never understood the appeal of Poway. Country living? I don’t think so.”
it has good public schools
These people will be continuously trying to cash out of their residential investment properties (one of which we rent) over the next twenty or so years, resulting in a continuous application of the force of economic gravity to area home prices for the foreseeable future.”
yes I think so , their kids will inherit much of it but who knows what they will choose to do ?
If they don’t maintain them they could be teardowns after all these things were built in the 1960’s. And eastern Ventura County has a very similair demographic
The contrast living in Phoenix was striking way more Middle class families with young kids in Phoenix, Chandler, Ahwatukee areas. In both Poway and Moorpark its half low income kids on school lunch programs and english as a second laungage. Then gated communities who knows whats back behind the gate?
In the more afluent areas like Newbury Park I don’t think there is much in the way of school lunch programs, and the test scoures are sky high. I was out-bid on a rental in Newbury Park , crazy huh?
Its a good thing I’m from this area or I would have run right back to Phoenix, and now I know why Engineers from Phoenix won’t touch this area unless they are Foriegn Born and come from this kind of 2 class society.
yes I think so , their kids will inherit much of it but who knows what they will choose to do ?
In my case, sell the house for what I can get for it, and move on.
“now I know why Engineers from Phoenix won’t touch this area unless they are Foriegn Born and come from this kind of 2 class society.”
They’d best get used to it (2 class society).
” In both Poway and Moorpark its half low income kids on school lunch programs and english as a second laungage.”
Poway has changed since I fled San Diego 15 years ago. Even in podunky Loveland its not that bad (its about 25% on the free lunch programs)
“it has good public schools”
Bingo! I never understood the appeal of the area to people w/o kids or who home school, at least relative to the decent-public-schools premium which is priced into our housing.
*Resale Value
*Less Crime
*Educated Demographics
*Social Status
cactus
On one had you have the Dos Vientos (Newbury Park) crowd, and the “inner city” Newbury Park Hispanic and White Trash low-income with a zillion kids crowd. (behaviors not socioeconomics)
I lived in NP, and I saw boat loads of non-speaking folks around town= free meals at school.
Lots of Sec 8 houses, apts, and townhomes, around E Ventura County.
It is my opinion that location is relatively ’sticky’ in that people tend to live close to family, friends, and what they have declared as their roots, and it takes a dramatic amount of money to make up for that change. Between SD and Seattle, I’d say it’s more than $300k in terms of housing prices. Between SD or Seattle and Detroit, I’d say more than $400k. To a BFE part of Nebraska, there is no amount of money associated with home prices that would cause a majority to move. Ok, maybe 100% free.
Of course there is a set that has less family obligations, or that wandering spirit, etc, willing to go where the money is, but generally, I’d say it’s not a large enough percentage of any city’s population to move the needle. I’d toss out a guess and say 10% of the US population can make that kind of move in a given 5 year period.
Horrible structural problems are needed for mass migrations, like dried up industry, extreme crime, or extreme poverty.
Describing Detroit?
“It is my opinion that location is relatively ’sticky’ in that people tend to live close to family, friends, and what they have declared as their roots”
Oh my yes. We have some friends in the metro San Diego area. When thing sgot really bubbly there we suggested that they should sell their house (a horrible dump) and move out here. At the time Realtors were telling them they had buyers lined up who would pay 600K for their crap shack.
I told them that this was a once in a lifetime opportunity and that those crazy prices wouldn’t last. They could sell, move out here and buy a much nicer place for 200K. Both had menial jobs so careers wouldn’t be an issue.
But family was an issue. They simply could not move away from their immediate family. Now their dump is worth only 275K (Per ZEstimate, which I’m sure doesn’t take into account the poor shape their house is in) and the price is still falling.
A real generational problem exists in super-high-price markets like the SF bay area. Older people with grown children live in paid-off houses bought in the 1960’s. But their children simply cannot afford the cost-of-living there.
Why don’t more families have a “family meeting” where they all decide as a group where they could all simultaneously move in order to have a sustainable family life?
From the article:
“Arne Klubberud and Melissa Lee-Klubberud paid $358,000 for a new, 960-square-foot townhouse on trendy Capitol Hill a few weeks after that Seattle Times article was published”
Wow, only $373 per square foot! Seattle wasn’t bubbly at all. Hard to imagine prices getting lower than that.
http://www.youtube.com/watch?v=3lQtBzq7CdI
“…so big it want even be able to fit in the canal.”
My favorite all-time snippet which embodies most perfectly the greed and hype representative of the peak of the housing bubble. You just had to be there
Wonder if someone could succeed with a new show that follows up on the now underwater flippers who were featured on these shows at the peak of the bubble. Could be called, “My House is Now Worth What?”
I was disappointed that San Francisco was not on that list of cities. RE still ridiculously overpriced here, except in ghetto neighborhoods.
“Seattle is down about 31 percent from its mid-2007 peak and, according to Zillow’s calculations, still has as much as 10 percent to fall.”
Sorry you aren’t here to read it, Olympiagal.
I thought Commercial RE was doing really well?
“Eastland Mall was valued at nearly $71 million for a 1998 packaged loan. Last December, a new appraisal set the value at just $4.2 million, a loss of 94 percent.”
“Other properties have seen more deterioration. Some are months behind on payments. A small but growing number are tottering near foreclosure, have been foreclosed on or face other action for nonpayment.”
Read more: http://www.charlotteobserver.com/2010/08/08/1608932/stresses-exposed-in-commercial.html#ixzz1DviHkels
Luxury home sales jump 21% in California ~ NYT
In California, sales of luxury homes rise for the first time in five years even as overall home sales decline.
Even the rich love a deal.
California homes priced at $1 million or more experienced a sales boom in 2010, the first increase in five years, even as overall home sales in the state declined, a real estate information service reported. The reason: High-end home shoppers went bargain hunting as certain parts of the economy improved but luxury home prices remained depressed.
Last year, 22,529 homes sold statewide for $1 million-plus, a 21% increase from 2009, according to DataQuick Information Systems in San Diego. In contrast, the total number of California homes sold last year dropped 9%.
Get the monthly that has L.A. talking. Subscribe to Los Angeles Times Magazine at a special introductory rate.
“Prestige home buyers respond to a different set of motivations than the rest of us. Their decisions are less dependent on jobs, prices and interest rates, and more on how their portfolio is doing,” DataQuick President John Walsh said.
“When the financial world was full of uncertainty a couple of years back, and the jumbo-loan market dried up, luxury sales plummeted. As the economy started its top-down recovery, some wealthy buyers went looking for a bargain,” he said.
Savvy shoppers trying to time the market swooped in before discounted prices could turn the corner.
Last year…22,529 homes sold statewide for $1 million-plus
Jobs! Jobs! Jobs!
The income for the more expensive homes isn’t salary dependent like us average folks, and those type of people can enjoy the ride up the inflation balloon with money invested and some profits taken. That’s my two cents.
And just how did they come up with those stats?
“Savvy shoppers trying to time the market swooped in before discounted prices could turn the corner.”
Imagine their surprise upon discovering their discounted mansions have yet to turn the corner a decade from now.
“Savvy shoppers trying to time the market swooped in before discounted prices could turn the corner.”
Unless you’re Capt. Jack Sparrow, you shouldn’t be allowed to say the word “savvy”.
A risk index from PMI Mortgage Insurance gave the odds of Seattle prices dropping at a negligible 11 percent.
I’m surprised I’ve never heard of this index. Should be good for a laugh.
Marko van Akkeren, a little-heralded hero* of the housing bubble, used to produce it. I don’t know the full story, but conjecture that he took some heat for announcing back in Fall 2005 that home prices were overvalued and likely to decline in almost every U.S. city, as falling home prices are a mortgage insurer’s worst nightmare.
*I consider anyone working in the REIC in 2005 who went up against the pundits by announcing that housing prices were poised to fall to be a hero.
Found it! (PMI risk index)
http://www.pmi-us.com/elqNow/elqRedir.htm?ref=http://www.pmi-us.com/media/pdf/products_programs/eret/ERET_Appendix_Q2_10.pdf
but i couldn’t open it
It opened up for me with no problem!
My quick impression is that the Risk Index calculations they published for Q2.2010 are erroneous, at least as regards San Diego (77.1) and Seattle (15.7).
Here are the comparable Q2.2010 PMI risk index stats* for San Diego and Seattle:
MSA State Risk_Rank Risk_Index(Q2.2010, Q1.2010) Price_Appreciation(Volatility, Q2.2010, Q2.2009, Difference) Affordability_Index(Q2.2010, Q1.2010, Difference) Unemployment_Rate(Q2.2010) Demeaned_UE_Rate(Q2.2010, Q1.2010)
San Diego-Carlsbad-San Marcos CA High 77.1 98.8 25.8 1.7 -13.5 15.1 117.9 117.8 0.1 10.7 6.1 6.2
Seattle-Bellevue-Everett WA Low 15.7 51.9 22.1 2.0 0.6 1.5 121.9 120.0 1.8 8.4 3.6 3.8
*Since I don’t know how to post in tabular format, I alternated bold and non-bold format to make it easier to align numbers with column headings.
Opened fine for me too.
What does “demeaned UE rate” mean?
Why is the document stamped “PMI Insurance Confidential”?
“demeaned UE rate”
I believe they calculated a time-average unemployment rate (which must have included a period before the recession), then subtracted that from the current level (i.e. “demeaned” it).
“PMI Insurance Confidential”
Oops!
Nice gig if you can get it!
“In the fall of 2008, when the father of her children was incarcerated, Leanne Nunley of Wytheville, Virginia found herself in a bad situation. As a single mother and now the sole bread-winner, Nunley worked hard to make ends meet, but she and her children couldn’t find permanent housing. They bounced from one temporary living situation to another.
Nunley believed this wasn’t a suitable life for her children, Ariana, Alijeh, and Acelon (then 3, 4, and 6)… She approached a local nonprofit organization called HOPE (Helping Overcome Poverty’s Existence) to …help her pay her rent. The counselors at HOPE …looked at her bills and told her they thought she could buy a house for the same or even less money than she
had been paying on rent.
“I didn’t think it was possible,” says Nunley, who first had to work
with HOPE on improving her credit. “My credit took the longest time to get cleaned up — about a year — because I had to pay a little here and a little there, and then had to wait for my taxes to come in and pay the rest of it off.” With the FAHE loan, Nunley was able to buy a home built by HOPE in the new Deerfield subdivision in Wytheville.”
http://www.greenamerica.org/socialinvesting/communityinvesting/2011Nunley.cfm
———
In Whytheville, in the sticks past Blacksburg, buying could very well be less than renting. The house is plain ranch with a yard — paradise compared to the attached product that was built in the past 10 years. The article lists no numbers of import. Nothing about the house, the house price, or the interest rate.
And where is all the help for the middle class, the people who live in high-expense cities? Instead of building new environmentally friendly homes, non-profits should be snapping up the Fannie/Freddie inventory for pennies on the dollar.
Heh…. HOPE huh? I recall my brother dating a girl named Hope. My father renamed them Hope and Hopeless.
exeter-LOL
I recall the day I thought my father had an epiphany (90 year old conservative) …. He said , “you know…. that Bill Clinton has a kind face”….. as my eyes open wider he says, “the kind of face I’d like to throw $hit at”.
grrrrrrrrrimmace!
I am curious what would your father say about “Hope and Chains”?
BTW, Sh!t my father says is a really funny book.
I guess you had to be there to see the look on my face. I didn’t know whether to $hit or wind my watch (to use one of his expressions).
Of course my father hates O. He’s a fox noise adherent and is one of those functional retards FPSS speaks of.
Almost weekly, realtors declare housing prices have hit bottom.
Realtors Are Liars.
The sweet sweet nectar of the “Single Deposit/Transaction” is spread via the blossoms pollen of the liars Great Expectations!
Spring soil tilling has Sprung! …Feb 14th
Speaking of Spring, Open Houses in my area of So Ca blossomed yesterday. Must have seen 50 signs on my drive to target a few of interest to us for data points.
I politely, but firmly, told a UHS to chill on the new appliance bragging while the HVAC needed replacement. I explained to him his puff was a petty cash item, compared to the expensive stuff. He pouted and changed the subject. “What a Maroon” to quote Bugs Bunny.
At another, I asked the 23 yo UHS how many homes he’s owned… Nada.
That’s the ticket. All the gingerbread (new architectural features, BS appliances, etc) is the only thing the end users can see. Why? Allow me to quote from FPSS……. “the general public is functionally retarded”.
The fact the shanty was built on dilating sand completely eludes the looky lou morons.
Or is the 1960’s deferred maintenance pos rancher, sitting on a fish bowl 6,500 sq ft lot, with two-stories looking into the backyard worth $400K? Not to mention the green/blug shag carpet, was suppose to anchor me to nostalgia.
Is their target audience that stupid?
I know about overcoming objections, emotional anchoring, and other such nonsense. This isn’t a $10 I f’d up purchase, it’s the biggest one of your life, for petesakes. Oy Vey.
Awaiting w. I think you’re in Westlake area ? watch out for Aluminum Wiring on some of thoses old homes
fire hazard
Hi cactus
Thanks for caring. Oh, I have a list, and we’re watching our backs. Yeah, the other thing is that without copper plumbing, or if any part of the dwelling (garage too) has a flat roof, you can’t get homeowners insurance (called for cautions).UHS hate us buyers that know wtf we’re doing. We will not need a lender, so they drool and hope that we won’t catch it. A-holes.
Aluminum wiring was very prevalent in the 1970s and wasn’t really phased out until sometime in the 1980s. (depending on region).
mikey’s roadside adventures…or I’m done paying my neighbor to mow my lawn and snowblow me out.
It was a balmy 43 degrees, sunny and the pretty blue ice was melting off the rodeside cuts n’ bluffs not far from where Chief Blackhawk and his unfortunate tribe crossed the waters of the Wisconsin River prior to their awful demise at the Mississippi River crossing.
It was absolutely beautiful, peaceful and and hauntingly loney. Today, mikey was on his way to do battle at the Sears Valintines Day Sale. I did my homework and did a recon earlier n’ told them to work up their best figures cause I was looking at an imaginary used 2 yr old Toro with all the gadgets driven by a mysterious old lady that was heading to the Nursing Home. (I’m an ex-paratrooper and I have been known to lie worse than a snow driven pure 16 yr old virgin when it comes to trading cars, horses and miscellaneous cherished guy-thing odds n’ ends.)
They were waiting to ambush me. They had all their facts, figures, brownies, cupcakes and coffee. I pushed for everything I could and finally I bought a shinny little red lawn tractor armed to the teeth. I didn’t steal it but then I wasn’t totally mugged either. 5 yrs Sears Warranty, bagger, chains, wheel weights, plow, trailer. Hell, all I need now is a freakin’ combine, a straw hat, a few seeds and I’m in the farm business.
I may not know how to snowplow yet but I guarrantee you that if I point it correctly, rev it to 5,600 rpm n’ with a little running start, I’ll make it to the street next winter. Heck, what I really need now is a young chick with a nice boat that digs crazy old guys but that’s another story.
I stole some extra brownies n’ cupcakes which the owner had baked, fueled up and headed across the wonderful Wisconsin River once again. This time I stopped at a tiny town by the river for a 7 UP and paused to enjoy the river and soak in this fantastic day. Life is good.
Was doing my taxes upon my return when my friendly little opposum wandered out of my woods looking for munchies. I cut up and tossed her an apple that I had been saving for her, she located it it and ambled happily back through the melting snow into the oaks and walnuts.
It was a good day to be alive and Sears, me and my little possum friend all really enjoyed it.
“He had decided to live forever or die in the attempt”
Joseph Heller, Catch-22
What an awesome post, mikey!
Like I always say, it ISN’T the case that every salesman is a lying sack of Sh!t. But that’s a very useful working assumption.
Naaa… Not liars per se. Many I have bumped into recently have given up and are jumping on the hope and change band wagon. As in I hope something changes soon…
Something will change soon. That something is lower housing prices. And it’s coming to your neighborhood.
I woke up this morning from a nightmare where Obama’s economics team proposed a great solution to wind down Fannie Mae and Freddie Mac, but NARscum lobbyists subsequently used promises of Congressional campaign contributions to whittle down its provisions to the point where they had no significant impact.
Luckily, Dean Baker is running actual numbers, and we should spread the conclusions around:
‘Arithmetic is a skill that is in short supply among economists in policymaking positions. The Obama administration is about to come out with its plans for replacing Fannie and Freddie…The third option, that apparently many Washington policy wonks are smiling upon, is a hybrid system with private institutions buying mortgages with a government guarantee standing behind them. (Depending on the construction, the government may either guarantee the institution or the mortgage backed security — more likely it will be the latter.)’
‘ According to a new paper by Moody’s, this sort of hybrid system will reduce the cost of a 30-year mortgage by 90 basis points (9/10ths of a percentage point) compared to a purely privatized system. The Moody’s analysis also calculates that it will raise house prices by 8 percent compared to a privatized system.’
‘There are some reasons for skepticism about the Moody’s estimates of the cost advantages of the hybrid system…But let’s just take the Moody’s estimates at face value and have some fun with numbers.’
‘taking the estimates from the Moody’s analysis exactly as written, we find that the hybrid system will save the buyer of the median home about $8 a month on their mortgage. The basic story is that the benefit of the lower interest rate is largely offset by the fact that buyers will have to pay more money for their house. So, is it important to set up a whole new system of finance, with all the regulatory problems with which we are now quite familiar, in order to save homebuyers $8 a month on their mortgage?’
‘But wait, there’s more. One big obstacle to homeownership is the downpayment. In both cases we have assumed a 20 percent downpayment, the standard for a conformable mortgage. In the case of the private system this requirement means that homebuyers would need $31,280 in cash. In the case of the hybrid model, following Moody’s estimates, they would need to come up with $34,000 in cash. That might not be easy for many first-time buyers.’
‘But wait, there is still more. In most parts of the country people pay property taxes on their homes. Let’s assume that the tax rate is 1.0 percent, which is somewhere near the average. Let’s see what happens to those monthly payments now…Hmmm, now it looks like our homeowner comes out somewhat worse under the hybrid system. It seems that their savings on mortgage payments is more than offset by higher property taxes. This one is not looking really good.’
‘But, in the spirit of old-fashioned late night TV commercials, there is still more…’
‘So, what have we learned about the relative merits of the private system and the hybrid model? Well the hybrid model will mean slightly lower monthly mortgage payments, but this benefit is likely to be offset by higher property taxes. The higher house prices in the hybrid model will mean that it will be more difficult for first-time buyers to come up with a downpayment. And, the wealth effect associated with the higher house prices in the hybrid model will mean lower savings and less growth.’
‘We could also point out that financial intermediaries (e.g. Goldman Sachs and J.P. Morgan) would stand to make more money on housing in a hybrid model, but there is no reason to get into such details.’
http://www.cepr.net/index.php/blogs/cepr-blog/arithmetic-and-the-fanniefreddie-fix
“The third option, that apparently many Washington policy wonks are smiling upon, is a hybrid system with private institutions buying mortgages with a government guarantee standing behind them.”
Must be the best option for reinstating the Congress’s real-estate based campaign finance cookie jar.
Thank you Dean Baker, for exposing “hybrid” and “partnership” as loose code for “fee-grubbing middleman.”
There is another aspect of this hypothetical comparison that Moodys doesn’t get into; Let’s say prices are 8% higher with the hybrid plan. But that’s with all other things being static. There is this little thing called the housing bubble.
So if prices are much higher than people can afford in a particular area, because of the mania, we can expect them to continue to adjust downward. If prices are 8% higher (than they otherwise would be) with the govts involvement, but are down 20-30-50% overall, much of the supposed benefits of higher prices go out the window.
And there’s another related issue that doesn’t get enough attention in these models. Suppose that along with this new arrangement, we also continue other govt supports like the tax deduction. Taken together, this is a significant package of incentives to buy a house, and no doubt many will do so. Then, as the bubble continues to deflate, they will find themselves underwater and many will walk away! Where are the additional foreclosures in all of these calculations? If the govt is guaranteeing these loans, what will the additional defaults cost?
If potential buyers and lenders want to take that risk, that’s one thing. But at these bubble prices, for the govt to encourage anyone to buy a house, or be involved in the financing, is morally wrong.
Well Ben, I mostly agree. But I think there’s a role for government in homebuying. People should have the opportunity to buy a home, if for no other reason than to control rents.*
My belief is that the gov help should first-time primary buyers only. A nice one-time loan for the first down payment. Anything else is just a loophope waiting to happen.
———–
* There are a lot of renters who have enough money left over to live well, but not enough to buy. If enough renters are like that — as is now the case Where the Jobs Are — apartment managers will jack the rent and take that leftover money. And renters can’t really “choose some other place to live” unless they want to move every year, and commute all over creation.
“A nice one-time loan for the first down payment.”
Nope. That would undermine a primary purpose of downpayment requirements, which is to demonstrate the ability to manage one’s finances.
Why would you want to add housing subsidies to control rents? That’s seems….bubblicious. There is no magical place ‘where the jobs are’. Don’t like the ratio of rent/income you are experiencing, then move. That’s the advantage of being a renter.
“Then, as the bubble continues to deflate, they will find themselves underwater and many will walk away!”
That’s the beauty of federally guaranteed debt: Taxpayers get to cover the lenders’ losses on all of these future walkaways. Banksters make out like bandits, and Main Street gets left holding the bag (again!).
Main Street gets left holding the bag (again!).
Let’s be honest about this.
It’s not the general “Main Street” that gets left holding the bag.
First off, there are those who walked away. They’re benefiting, not “holding the bag”.
Then there are those who don’t pay taxes (or pay very little) who aren’t going to be affected.
It’s the upper middle class folks that are left holding the bag.
Nope. That would undermine a primary purpose of downpayment requirements, which is to demonstrate the ability to manage one’s finances.
Agree 100%. All this would do is allow people with shakier finances to bid up prices for everyone else. i.e. the same thing we’ve all been complaining about for years during the bubble.
“It’s the upper middle class folks that are left holding the bag.”
Those are the folks who live on Main Street in my world. But your point is taken: I have a biased view, as does every other human on the planet.
Overdog, I disagree with your entire post.
‘Let’s see what happens to those monthly payments now…Hmmm, now it looks like our homeowner comes out somewhat worse under the hybrid system. It seems that their savings on mortgage payments is more than offset by higher property taxes. This one is not looking really good.’
But isn’t that totally besides the point, which centers on whether politicians will be able to rake in campaign contributions from whatever Frankenstein institutional arrangement follows the burial of the zombie GSEs?
I’ve read over and over, from business leaders in moments of candor, that business is only concerned with profit, the bottom line. That it is essentially amoral, and will use the rules of the society it is in to maximize its profit. That it is the role of the government to come up with rules to force the business to act in socially beneficial ways.
The problem, I realized is that government - aka politicians - is also essentially amoral, concerned with its own profit and security.
Voters can vote in people who might represent the people, rather than representing the highest bidder. But… I think things will have to get a lot worse before that happens.
“Well the hybrid model will mean slightly lower monthly mortgage payments, but this benefit is likely to be offset by higher property taxes.”
Sounds like a great way to stealth-engineer higher tax payments to local governments on the brink of financial collapse!
‘We could also point out that financial intermediaries (e.g. Goldman Sachs and J.P. Morgan) would stand to make more money on housing in a hybrid model, but there is no reason to get into such details.’
We could also point out that the hybrid model is most likely to pass for this very reason, but there is no need to get into such details.
Ben, PB, Oxide & everyone,
The one thing not mentioned is the FHA 3.5% down, no teeth in the game loan. I assume those would still be around?
The talk is to keep them around in limited amounts to help interested low-income buyers purchase homes. So long as it is A LOT LESS than 92% of the market, this would certainly be an improvement on the status quo.
Thank you, PB.
Here’s the WSJ article that discusses the 3 options for winding down Fannie/Freddy:
http://online.wsj.com/article/SB10001424052748704657104576141891006477826.html
Door No. 1 is the best of the lot by our lights. Under this option, federal guarantees would be limited to Federal Housing Administration (FHA) loans for lower-income buyers and VA assistance for veterans and farm programs—each a narrowly targeted market segment. A Treasury official says this would reduce the taxpayer backstop over time to about 10% to 15% of the mortgage market.
The Administration puts the case for federal withdrawal from the broader housing market in compelling terms: “The strength of this option is that it would minimize distortions in capital allocation across sectors, reduce moral hazard in mortgage lending and drastically reduce direct taxpayer exposure to private lenders’ losses.” Bravo.
Treasury points to other benefits: “With less incentive to invest in housing, more capital will flow into other areas of the economy, potentially leading to more long-run economic growth and reducing the inflationary pressure on housing assets. Risk throughout the system may also be reduced, as private actors will not be as inclined to take on excessive risk without the assurance of a government guarantee behind them. And finally, direct taxpayer risk exposure to private losses in the mortgage market would be limited to the loans guaranteed by FHA and other narrowly targeted government loan programs: no longer would taxpayers be at direct risk for guarantees covering most of the nation’s mortgages.”
Those two paragraphs more or less sum up 20 years of Journal editorials on housing.
Any government guarantee is simply a continuation of Too Big To Fail.
If corporations can gamble that their greed will be bailed out, to their officers’ profit, one can rest assured they will exercise that option to its maximum potential.
Sounds like Dodd-Frank.
Inflation, deflation and default.
Trying to make sense of it all. In our fractional reserve lending system money gets loaned into existence. Actually something like 95% of the current money supply was loaned into existence. That also implies that it is impossible to pay back all loans plus interest. There always need to be new, larger loans made to pay back previous ones.
I want to explore how a default by a borrower (private, corporate or municipal) impacts inflation. The inflationary event takes place when the borrower gets the funds, which are largely created out of thin air, and buys a product or service such as a house in case of a private borrower or pays employee’s salaries in case of a corporation or municipality.
Opposing this inflationary event is a long term deflationary event, the repayment of the loan over time. For things to remain in some kind of balance we need roughly an equal amount of inflationary and deflatioanry events. Now suppose the borrower defaults on its obligation to repay the loan. The deflationary event has now been shifted from the original borrower to some bond/note holder. That means some entity that paid money for some MBS, municipal bond, etc. is holding a worthless piece of paper. That implies the needed defaltionary event does take place. This dynamic changes in case the bagholder is made whole via the federal government as in case of FANNIE & Co. Therefore bailing out failed investors with freshly printed money via QE and similar shenanigans are inflationary events. They negate the deflationary event that is supposed to oppose the inflationry event of loaning the money out of thin air in the first place. Looking at the scope of this activity world wide I conclude that we will have more inflation coming our way. Especially when people try to protect themselves from inflation by purchasing goods/comodities as the velocity of money will increase. Keep in mind, there’s always the same amount of money “at the sidelines” since money does not get created or destroyed by cash transactions such as the cash purchase of stocks, houses or commodities. For each buyer there is a seller. If the seller, who now holds the cash, tries to get rid of the “hot potato” and buys goods we have another transaction and a self reinforcing cycle. So inflation not only needs an increase in the amount of money but also a loss of confidence in the value of money. Once that occurs it will be extremely dificult to restore confidence.
Once that occurs, the rising tide will lift all boats, including real estate.
Good analysis. I remember the FED kind of snickered when a suggestion was made that deflation was not a threat. They know how to “do” inflation.
That makes absolutely no sense. I meant the Fed never considered deflation to be a threat (with their patented “we have everything under control, its contained dammit” cockiness).
I think they are pushing a string when it comes to the vital component of wage inflation. With cheap international labor and very high unemployment and pending mass layoffs by defunct states and municipalities, there is little incentive for companies to raise salaries and wages. OK there is investment banking…
Without wage inflation, all the FED can hope to do is mop up defaults as they occur, which is exactly what is happening.
As much as I do not particularly like the current administration, I suspect Federal govt spending may be the ONLY way to keep things going. A manned Mars mission? Solar panels on the roof of every structure and outhouse in the US?
I wonder what would happen if all the debt were forgiven and all the credit taken away?
Therefore bailing out failed investors with freshly printed money via QE and similar shenanigans are inflationary events. They negate the deflationary event that is supposed to oppose the inflationry event of loaning the money out of thin air in the first place. ‘
keeps money supply even, not really more inflation, more inflation would be more loans
trying to keep the past inflation at a plateau past inflation = housing
Housing still might go down though the lenders might buy commodities with the government money given to make up for the bad loans.
Maybe we should get rid of New Jersey or Utah and ask for the international community to write-off the national debt?
===================
Sudan calls for huge foreign debt write-off
Sudanese authorities want creditors to write off much of the country’s $38bn (R276bn) foreign debt before Southern Sudan becomes independent in July, a minister in the southern government said.
Without debt relief, the northern and southern regions were likely to split the debt load, Gabriel Changson Chang, a member of the committee negotiating financial arrangements with the north, said yesterday in the southern capital of Juba. At most, 75% of the debt will be written off, he said.
Sudan hasn’t been able to borrow from the World Bank since 1993 because of its failure to make payments on its debt. That may leave the south, one of Africa’s poorest regions, ineligible to borrow from the bank.
Sudan has debt arrears of about $30bn, according to the Washington-based Centre for Global Development.
“We want both the north and south to be economically viable,” said Chang, who also is Southern Sudan’s minister of culture.
About 99% of Southern Sudanese voters chose independence in a referendum last month.
The plebiscite was the centrepiece of a 2005 peace deal that ended decades of civil war between north and south.
The region has just 45km of paved roads. Southern Sudan has no steady power supply, large-scale farms or factories. Half of its eight million people need food aid, according to the UN. The regional government depends on oil earnings for 98% of its budget.
The state of NJ could become the “bad bank” before it gets let go into exile. Brilliant.
We would also get rid of their real housewives!!1
The problem is that just writing off the federal debt is not enough. While it is true that our national federal debt was higher just after WWII, we are far worse off as a country. Besides the issues that I wrote about earlier, the war being over so the cause of the debt being over, and the United States being in a far better economic position, the final problem is the debt held in the civil sector and state and local governments. 350% debt to gdp as opposed to 150% debt in 1946. Actually, has grown worse since these numbers but these are the latest I could find:
http://en.wikipedia.org/wiki/File:Components-of-total-US-debt.jpg
With our “leaders” talking about minor budget cuts, we are toast. Default is virtual certain, just the form is up for debate. I still believe it will be in the form of debasing the currency but a straight default cannot be ruled out.
But the graph shows that the major areas of debt growth are in the household, financial, and non-financial business areas. Government spending has actually remained pretty flat. Looks like it’s the private sector that went hog-wild.
I also note that the graph, self-made by ‘Equilibrium 007′, is designed in a way that implies that government spending towers over all other debt, when in fact the opposite is true.
I think it is a purposely deceptive graph. The Kochtopus at work?
I meant to say government debt,not government spending, in both my posts.
“With our “leaders” talking about minor budget cuts, we are toast. Default is virtual certain, just the form is up for debate. I still believe it will be in the form of debasing the currency but a straight default cannot be ruled out.”
That’s pretty much the way I see it. Neither side is willing to make real spending cuts nor raise taxes to close the budget deficit.
I sometimes think that we will have our own “Berlin Wall coming down” moment. Just as it was with Soviets, everything will appear to be “business as usual” until the SHTF. Then either we default and/or we print like crazy. Either way the middle and lower classes will be impacted.
We’re like crabs in a steaming pot. Each holding onto the other, preventing any of their escape.
An orderly winding down of the debt would mean the myriad recipients of government largesse accepting pay cuts or job loss with equanimity. Since the government is so involved with distributing largesse, I don’t know how an orderly unwinding could be executed.
And remove the possibility of an orderly unwinding, and you get the possibility of a disorderly unwinding. I suspect a lot of the same people who would profit from an orderly unwinding, will also wind up profiting from a disorderly unwinding. I think the average citizenry would suffer more in the latter scenario. Don’t know for sure though.
“When they’ve got you by the balls, there’s not much you can do.”
Clothing prices to rise 10 pct starting in spring
Soaring cotton prices, labor costs back retailers into a corner, prices seen rising 10 percent
NEW YORK (AP) — The era of falling clothing prices is ending.
Clothing prices have dropped for a decade as tame inflation and cheap overseas labor helped hold down costs. Retailers and clothing makers cut frills and experimented with fabric blends to cut prices during the recession.
But as the world economy recovers and demand for goods rises, a surge in labor and raw materials costs is squeezing retailers and manufacturers who have run out of ways to pare costs.
Cotton has more than doubled in price over the past year, hitting all-time highs. The price of other synthetic fabrics has jumped roughly 50 percent as demand for alternatives and blends has risen.
Clothing prices are expected to rise about 10 percent in coming months, with the biggest increases coming in the second half of the year, said Burt Flickinger III president of Strategic Resource Group.
Brooks Brothers’ wrinkle-free men’s dress shirts now cost $88, up from $79.50. Levi Strauss & Co., Wrangler jeans maker VF Corp., J.C. Penney Co., Nike and designer shoe seller Steve Madden also plan increases.
Thrift-store prices will be unaffected. I plan to do all my clothes shopping there.
i am originally from greenwood, mississippi. i’ve been in the DC metro area for about 10 years now. when i left mississippi most of what was grown was cotton and soybeans.
now…it’s all corn.
Lot’s of corn is grown in Larimer and Weld counties too. Also, wheat (aka “winter wheat”) and sugar beets.
Alternate fuel is the reason for that.
Hmmm… I’d better go buy some new jeans.
Retailers say prices are going up blah blah blah blah blah blah blah.
Welcome to the world where supply and demand is suspended.
Manufacturer Suggested Retail Prices are deceptive. They are calculated so that they are still making the desired margin with the first markdown or two.
For example, at places like Kohl’s you don’t have to wait very many weeks to see them cycle through sales on nearly every apparel item they carry. Anyone who pays the MSRP is just gravy. While increased commodity prices will nudge prices up, a lot of what you are paying for is overhead and shipping, not cotton.
But they’ll use the cotton prices as a mask to jack up the overall price anyway.
NOW I know why I wash the dishes so often!
Not Having Enough Sex? Economic Theory May Help
Feb. 12, 2011
Couples have long squabbled over things from who does the dishes to how often to have sex. Kelsey Hubbard speaks to WSJ Editor Paula Szuchman who has co-authored a new book called Spousonomics which uses economic theories to solve everyday marital conflict.
I’m the first and second wife of the same guy. (Divorced, then remarried) In my opinion, this nice young gal wrote a book with a catchy title and babble inside. That said, I hope she makes a pile of dough.
Kill the mortgage deduction and give it to entrepreneurs
Feb 11, 2011 11:06 EST
Prospective home buyer Jessica Doctoroff (C) visits a condominium for sale with her real estate agent Brenda Bremis in Medford, Massachusetts April 2, 2009. REUTERS/Brian Snyder
Somehow I don’t think President Obama had the home-mortgage interest deduction in mind when he mentioned the U.S. tax code before the U.S. Chamber of Commerce this week.
Yet winding down and eliminating this write-off for homes would be good for business. It’s unfair, doing nothing to revive the housing market and can be put to better use shifting it to entrepreneurs to create jobs.
Most of the job creation in the U.S. economy comes from small businesses, which typically have no public shareholders to sate and are not primarily interested in fattening pay packages of overpaid executives.
The home mortgage deduction needs to go because it doesn’t make housing less expensive, either. If anything, it makes homes more expensive because the subsidy inflates prices. Most homebuyers don’t even itemize to take advantage of it. Nixing it would make homes more affordable.
As Alan Mallach, senior fellow at the Center for Community Progress, wrote in this space: “It is one of the most regressive parts of the tax code, since it affects all house prices, including the price of houses bought by lower-income home buyers, who rarely itemize and get little benefit from the deduction.”
Mallach cites one study found that “barely 10 percent of homeowners earning less than $30,000 take the deduction, but they pay higher prices for their homes to benefit more well-off homeowners. On top if this, it is projected to add $120 billion to the federal deficit next year.”
Will getting rid of the write-off deep-six the already flagging U.S. home market? Mallach noted that Italy pared its residential housing deduction in 1992 and maintains a higher home ownership rate than the U.S.
…
Yet winding down and eliminating this write-off for homes would be good for business. It’s unfair, doing nothing to revive the housing market and can be put to better use shifting it to entrepreneurs to create jobs.
Best idea I’ve heard in a long time!
Woo-hoo! The voices of common sense are finally getting a forum in the MSM!
American Chronicle
By Bill McClellan, St. Louis Post-Dispatch
Feb. 14–Chief Executive David Farr of Emerson is our area’s latest Citizen of the Year. I read that news yesterday with mixed feelings. After all, I have not always been in agreement with Farr, especially regarding “best-cost countries.” I like health care, and clean air and water, and child labor laws.
However, this is not a day to talk about our differences, but a day to celebrate the beliefs we share.
Chief among them is this: We both want to simplify the tax code.
Earlier this month, Farr said, “We have become the least competitive country out there. And it’s real simple. But you’ve got to stop all those special deals that are sitting there in Washington, D.C.”
He talked about tax breaks for certain industries and loopholes for others. He suggested we emulate Germany, which cut its tax rate by eliminating special discounts and credits.
“We’ve got to take out these special deals that certain industries have gotten out there and force companies to pay what I call their fair share of taxes … ”
Right on, sir!
…
Now we get to the middle class. Under a progressive flat tax, they will pay a higher percentage than the poor. And, of course, the elimination of deductions will have an impact on the middle class. So let’s talk about the most sacred of the middle class tax breaks — the deduction for the interest on a home loan. Don’t we want to encourage home ownership?
We don’t have to. People want to own homes. For most people, home ownership is a big part of the American dream and has little to do with tax breaks.
Frankly, I’ve always thought the mortgage interest deduction was unfair. Most of my friends who live in apartments do so because they can’t afford to buy a house. So they should pay higher taxes? That’s not fair.
And fairness is really the issue here. That’s why we want to eliminate all deductions. The tax code is thousands of pages long. Why is it that long? Because the people in Congress are always adding things. And why do they add things? Because people ask them to.
Every single thing in the tax code is there because somebody wanted it. That’s somebody who can afford the ear of a congressman. I don’t mean to be too cynical, but congressmen desperately need money, and people who desperately need money are not to be trusted. That’s why we need to eliminate deductions.
…
“Under a progressive flat tax”
Isn’t that am oxymoron? I mean, if a tax is flat (like the state income tax is in Colorado) then it isn’t “progressive”.
Now granted, most flat tax schemes exempt a certain amount of income from being taxed, which might benefit lower income earners, but I still don’t see that as being “progressive”
“Isn’t that am oxymoron?”
McClellan is an extreme liberal; what do you expect — common sense?
A flat tax will just make our income disparity worse. I agree with greatly simplifying the tax codes, and eliminating many of the deductions, but we should keep the progressive tax system. It will work even better without all the loopholes, most of which are for the rich anyway. And tax capital gains like income, which they are.
I suspect that even the most extreme Republican flat tax plan would still come out looking quite progressive, in that there would be a large swath of exempt income before the (flat) marginal tax rate kicked in to provide a buffer for living expenses of low income working households.
If anyone can prove my conjecture wrong with counter evidence, I am highly interested.
An flat income tax without an exemption for the first X dollars is a no starter. Exempt the first 60k and then you might have something to discuss.
Also, it’s an no starter without the willingness to raise capital gains FIRST.
FWIW, here in the Centennial state the amount of income subject to the flat tax is your after deductions income. Since the standard deduction has risen a lot lately that helps the very poor, who might pay no state income tax at all.
It depends on how they implement it. But, since the poor are broke to begin with we should expect the laws to be written to shake down the middle class.
“I suspect that even the most extreme Republican flat tax plan would still come out looking quite progressive”
Most of the Republican flat tax proposals I’ve seen, (there are countless, of course), have an exemption in the neighborhood of 10 to 20 thousand dollars per person, and most also exempt all capital gains from taxation. Clearly the middle class would see an increase in their taxes, while the wealthy could continue to shield their income from taxes. Not exactly progressive.
exempli gratia:
from CTJdot org:
The Armey plan
* Among the key elements of the Armey plan are: Individuals would report only wages and pensions on their individual tax forms. Small business owners would pay themselves a salary so they could file an individual tax form (along with a business tax form) to take advantage of the proposed exemptions from the wage tax.
* Income from interest, dividends and capital gains would not be reported on any form.
* All individual itemized deductions and credits would be eliminated. Thus, there would be no deductions for mortgage interest, state and local taxes, charitable contributions or extraordinary medical expenses; no credit for child-care expenses; and no earned-income tax credit for low- and moderate-income working families.
* Most adult taxpayers would be allowed a personal exemption of $11,000 each (two exemptions for couples), except that unmarried parents would get a $14,400 exemption each. There would be an additional deduction of $5,000 per child.
* The flat tax would also apply (without exemptions) to employer-paid fringe benefits, defined to include employer-paid health insurance, certain other fringe benefits and the social security taxes (7.65% of wages up to $63,700) that employers pay on their employees’ behalf. The new fringe benefits tax would be collected from all employers, including state and local governments and non-profit organizations. There is general agreement that its burden would fall on workers in the form of reduced benefits and/or cash wages.
* Businesses would file tax forms similar to the current forms, except that (a) all capital investments and inventory purchases would be deductible immediately, rather than depreciated or deducted when goods are sold; (b) business income from dividends and capital gains would not be reported; (c) interest income would not be included in income and interest expenses would not be deductible; and (d) outlays for tickets to sporting events, country club memberships, skyboxes, business meals, etc. would be 100% deductible, rather than only 50% deductible (or completely non-deductible) as under current law.
* The federal estate tax would be repealed.
* There would be no transition rules from the old system to the new one. Thus, for example, businesses would lose unused depreciation deductions on previous purchases of machinery and buildings.
* Rep. Armey proposes a 20% tax rate in 1997 and 1998, dropping to 17% starting in 1999.
* According to both Armey and the Treasury Department, at the proposed 20% rate and assuming no transition rules and no changes in taxpayer behavior to avoid the new tax, Armey’s plan would lose at least $30 billion a year in tax revenues. At Armey’s promised 17% rate, Treasury says the plan would add $138 billion to the annual budget deficit (in 1996 dollars).
According to the Treasury Department, at what Treasury says is a break even rate of 20.82% (or for that matter, at Armey’s proposed 20% rate), the Armey plan would increase taxes sharply on all income groups except those earning more than $200,000 a year. (Others believe that the break-even rate would have to be considerably higher than Treasury finds.)
link http://www.ctj.org/html/flatsum.htm
“the Armey plan would increase taxes sharply on all income groups except those earning more than $200,000 a year”
God save the rich!
exempt all capital gains from taxation
Why? Is capital gaines somehow NOT income????
“Is capital gains somehow NOT income????”
Nah — it’s that guys who earn capital gains(and who have big mortgage interest deductions) pay lots of campaign contributions.
The mere suggestion of exempting capital gains is outlandish.
outlays for tickets to sporting events, country club memberships, skyboxes, business meals, etc. would be 100% deductible, rather than only 50% deductible (or completely non-deductible) as under current law.”
what ??
“outlays for tickets to sporting events, country club memberships, skyboxes, business meals, etc. would be 100% deductible”
I have no problem with this, as long as the recipients of these perks also pay the “fringe benefits” tax on the full face value of the received benefit.
It blows my mind that they would propose fully taxing the benefits that are necessary (e.g. health care), while applying no taxation to the benefits that are “perks”.
Yeesh.
Does anyone have the dirt on why they strangled the proprosal to eliminate the mortgage interest deduction (aka WELFARE FOR THE WEALTHY) in the cradle?
Cynthia Tucker
Obama and Boehner: bi-partisan cowardice on the budget
7:48 am February 14, 2011, by ctucker
Now, the fun begins.
President Obama’s budget sets up a fierce clash over spending, since his budget — while embracing steep cuts — won’t go nearly as far to cut discretionary non-defense spending as ultra-conservatives in the House demand. But here’s what you ought to be paying attention to: neither President Obama nor John Boehner’s shock troops are proposing to touch the spending that is eating through the budget and drowning us all in red ink.
…
Some who worked on Obama’s fiscal panel were also disappointed by his decision not to endorse any of the major elements of their deficit-reduction plan, which calls for raising the Social Security retirement age, charging wealthy seniors more for Medicare and limiting popular tax breaks such as the mortgage interest deduction. The plan has attracted support from key members of both parties and is the focus of an effort in the Senate to develop a bipartisan spending plan.
“I would have preferred to see the administration get out front on addressing the entitlements and the tax reform that we need to reduce long-run deficits,” said Alice Rivlin, a commission member who served as budget director in the Clinton White House. “But they clearly made a tactical decision that this is not the best way to get to a positive result.”
…
I’d like to repost something that ecofeco posted yesterday:
—
“What can you do with a Congress determined to sabotage everything?
Back in Sept, the Repubs defeated a bill that would have ended tax breaks for offshoring jobs. Tax breaks that were then to be given to local businesses to hire!!
How can you go up against that kind of wanton treason?
Especially when we the people, just gave the Repub more power?”
—
I don’t know what Obama’s strategy is. I do NOT think he’s empty and clueless — he’s made enough sideways comments to the likes of the Chamber of Commerce to convince me he knows the score. More like, scared to raise the Republicans ire into shutting down the House.
I don’t know what Obama’s strategy is. I do NOT think he’s empty and clueless — he’s made enough sideways comments to the likes of the Chamber of Commerce to convince me he knows the score. More like, scared to raise the Republicans ire into shutting down the House.
I think he’s letting the Republicans hang themselves the way they did back in ‘95 when they shut down the government. Ever so slow, Barack is giving them rope…
It’s a nice idea, but I don’t think it will work. Republicans have been hanging themselves for the past two years, but the conservative populace isn’t seeing it and the liberal populace lost patience.
It’s a nice idea, but I don’t think it will work. Republicans have been hanging themselves for the past two years, but the conservative populace isn’t seeing it and the liberal populace lost patience.
A very interesting thing is happening here in Arizona.
You’ve probably heard (more than enough) about the January 8 shootings. And we Tucsonans are with you on the “more than enough” part. The local sentiment now is: “With all due respect to the victims, it’s time to move on.”
In the interest of moving on, I’ll get to the point of my post: Our state’s (largely Republican) business community is starting to push back against some of the ideas emerging from our state legislature.
Seems that getting rid of the 14th Amendment isn’t such a hot idea after all. Especially when it comes to things like recruiting potential employees from out of state. Or getting companies to start or relocated here.
“Or getting companies to start or relocated here.”
I’m sure that not being able to hire low paid, taxpayer subsidized (food stamps , etc). illegals is a disincentive to employers.
I was explaining the illegal situation here to a guy from Singapore. He told me that over there illegals are caned and then deported. Not surprising as Singapore is a fairly strict society.
Every nation in the world has a tougher immigration policy than ours.
No, they do not. Where did you hear or read that? Argentina for example.
“Ever so slow, Barack is giving them rope…”
Smart — he must realize that Republican pols cannot resist the temptation of hanging themselves, if given enough rope! LOLOLOL!!!
Wasn’t it Lenin who said capitalists would sell them the rope they’d use to hang them?
This is why DC is so dumb. The conventional wisdom is the gobmint shutdown would hurt the republicans like it did in 95. This line of thinking premises that nothing has changed in last 15 years and we are not in a recession/depression currently. I am willing to bet that a govment shutdown would help the repubs this time around, but I know that since the repubs have no guts, it will never happen.
And I posit that the government shutdown would hurt FAR MORE in a recession/depression.
The effect of discontinuing government cheese will kick in FAR faster than the vague idea of stronger country through less debt.
Remember who does most of the voting in the country.
Think again
Take away gov spending and see what happens to consumption in this country. See what happens to the market. I can guarantee you that if McCAin was elected he’d be spending like a drunken sailor with GOP support for this very reason.
The working class, lower to upper middle class will not be affected a bit by the Government shutdown. The 2 classes I can see hurting are the people in welfare and the richest of riches. Welfare people for the obvious reason and there will be no government protecting the richest. It’s worth it, no?
Revolution here we come……
Would this government shutdown also involve shutting down social security payments and medicare? Or will it be a hypocritical farce?
Shut down everything. They are no use at all. The only game in DC is the Fed. Have the Fed print the money and send cash to who they see fit.
butters, you must be young and healthy, and probably lucky.
I think he’s letting the Republicans hang themselves the way they did back in ‘95 when they shut down the government. Ever so slow, Barack is giving them rope…
And where in this does the good of the country come into play?
If that’s really what’s happening, it’s all about political positioning. Don’t we have elected offices to provide for the good of the nation?
Have we given up on that? Is it now just a spectator sport where all that matters is who wins?
To answer your questions:
It doesn’t.
Not anymore.
Yes.
Yes.
It does not matter wheter red or blue wins, it’s all about the drama.
Obviously this administration (government) has absolutely zero interest in reducing deficits. The talk of reductions is double speak. Hey, we could have increased the deficit even more, but we didn’t, so that proves we are all for reductions!
HAha! It’s like all the jobs they’ve created. True Lies.
Obama was interested enough to commission a Commission to look at reducing deficits. They came out with some pretty good recommendations.
And then Goldman Sachs and the Koch Brothers, and heck, probably the UAW called up their buddies in Congress, and suddenly Obama is growing entire olive groves just to keep up with the demand for branches.
It’s not difficult to see what’s going on, folks.
Are you still saying that Obama is that virtuous genius leader with a secret unfathomable master plan to outwit the GOP and lead this country into the heroic anals of history, with peace and prosperity for the common man?
No “seekrit” plan at all. In fact he has made it plain and simple and public many times. You can easily find it on the White House website. Along with detailed reports of all the other programs and changes he made or has tried to make.
It’s all right there in broad daylight. Go see for yourself.
But he is obviously not smart enough to outwith the Repubs nor an electorate that keeps screwing themselves over.
The Repub were voted back in mostly on the premise of lack of job. The very party that created and forced keeping the system that created those lack of job.
People is be smart.
The government currently borrows about 11% of GDP. On top of that it guarantees $13 trillion in private financial assets (TARP, AIG, FANNIE, etc.). But wait, there’s more! The FED throws in another $1 trillion in freshly printed (or electronic equivalent) money to buy junk paper from banks.
The $100 billion Democrats and Republicans bicker about is mere peanuts. It has no impact on the grand scheme. It does have some impact on the stupid masses that will vote for clown A or clown B in the next election.
But one day the entire system will blow up taking the clown’s heads right along with it. Reminds me of those cartoon characters that keep on throwing each other a bomb with a lit fuse.
Spy vs Spy
TaxWatch
Feb. 11, 2011, 12:01 a.m. EST
Claiming home-buyer tax credit? Watch your step
Tips to make sure the IRS won’t reject your home-buyer tax credit claim
By Eva Rosenberg, MarketWatch
LOS ANGELES (MarketWatch) — Lulu Rodriguez was excited when she bought her first home in October 2008 in Chatsworth, Calif. Being able to get the $7,500 first-time home-buyer’s credit made it possible to buy a charming condo, and fix it up so it was beautiful and cozy. Rodriguez knew she had to pay back that $7,500 over 15 years. But why turn down an interest-free loan?
Rodriguez faced a rude awakening just a couple of months later. As an enrolled agent, licensed to practice before the IRS, Rodriguez was one of the first home buyers to learn the terms of the new home-buyer credit for 2009 purchases. The new credit was worth up to $8,000, and does not require repayment. Oh well. When she got her refund for 2009, Rodriguez set aside the money to pay the first installment.
…
One more reason why housing bubbles are a bad idea:
“Abandoned groves and foreclosed properties across Central Florida that were purchased by land speculators during the housing boom have become breeding grounds for a disease wreaking havoc on Florida’s $9 billion-a-year citrus industry.”
http://www.orlandosentinel.com/business/os-citrus-greening-abandoned-groves-20110214,0,4439356.story
Greed kills innocent bystanders:
“Abandoned groves and foreclosed properties across Central Florida that were purchased by land speculators during the housing boom have become breeding grounds for a disease wreaking havoc on Florida’s $9 billion-a-year citrus industry.”
http://www.orlandosentinel.com/business/os-citrus-greening-abandoned-groves-20110214,0,4439356.story
Here’s a comment from the article:
——-
“dlc1550 at 7:21 AM February 14, 2011
Can we expect the Agrigcultural Department to come tromping through our backyards again like they did for citrus canker? They didn’t have any problem telling us what we could and could not grow in our backyards.”
——-
I’m trying to articulate a proper answer for this.
btw, I had a hard time buying a lemon tree last year for this reason.
Most seem to think they have no responsibility to the common good.
Have any of the myriad MSM-favored housing market ‘experts’ yet noted the ironic possibility that a return of affordable housing to America may result from eliminating the very agencies whose intended purpose was to make housing affordable?
This naturally causes one to wonder if ending the Fed, which is tasked with controlling inflation, might serendipitously result in lower inflation.
* REVIEW & OUTLOOK
* FEBRUARY 14, 2011
The End of Fannie Mae
Treasury wants the company phased out but punts on how to do it.
It’s enough to make you believe in miracles: The Obama Administration is now on record as saying that Fannie Mae and Freddie Mac should go out of business. It took a global financial panic and $140 billion in taxpayer losses, but on Friday there it was in black-and-white in the U.S. Treasury’s report to Congress on reforming the mortgage market: The Administration will “ultimately . . . wind down both institutions.”
This marks a break with decades of bipartisan support and protection for the two government-sponsored giants of mortgage finance. Fannie Mae has its roots in the Roosevelt Administration, and a phalanx of bankers, mortgage lenders, homebuilders and Realtors worked together to keep the companies growing and federal mortgage subsidies flowing. Now even some Democrats—though not yet those on Capitol Hill—admit their business model was a catastrophe waiting to happen.
***
Under the Administration’s proposals, Fan and Fred wind down over five to seven years. The two mortgage giants would, in effect, gradually price themselves out of the mortgage finance market by raising guarantee prices and down payment requirements, while lowering the size of the mortgages they could securitize and guarantee. This sounds like a plausible set of first steps to lure private capital back into the mortgage market, where some 92% of all new mortgages are currently underwritten or guaranteed by the government.
The $5 trillion question, however, is what would replace Fan and Fred. And here the Obama Administration has punted, offering the “pros and cons” of three broad proposals without endorsing any one of them.
Door No. 1 is the best of the lot by our lights. Under this option, federal guarantees would be limited to Federal Housing Administration (FHA) loans for lower-income buyers and VA assistance for veterans and farm programs—each a narrowly targeted market segment. A Treasury official says this would reduce the taxpayer backstop over time to about 10% to 15% of the mortgage market.
The Administration puts the case for federal withdrawal from the broader housing market in compelling terms: “The strength of this option is that it would minimize distortions in capital allocation across sectors, reduce moral hazard in mortgage lending and drastically reduce direct taxpayer exposure to private lenders’ losses.” Bravo.
Treasury points to other benefits: “With less incentive to invest in housing, more capital will flow into other areas of the economy, potentially leading to more long-run economic growth and reducing the inflationary pressure on housing assets. Risk throughout the system may also be reduced, as private actors will not be as inclined to take on excessive risk without the assurance of a government guarantee behind them. And finally, direct taxpayer risk exposure to private losses in the mortgage market would be limited to the loans guaranteed by FHA and other narrowly targeted government loan programs: no longer would taxpayers be at direct risk for guarantees covering most of the nation’s mortgages.”
Those two paragraphs more or less sum up 20 years of Journal editorials on housing.
…
Ah, good ol’ WSJ.
Now even some Democrats—though not yet those on Capitol Hill—admit their business model was a catastrophe waiting to happen.
The weakness in the Democrat’s business model was in assuming that everybody was as honest as they were (and they were right, until about a 8 years ago). The catastrophe happened when the fraud and cheating outpaced the honesty. The Dems are “admitting” that it’s time to take the treats from the cheats.
I have a hard time believing that those “two paragraphs sum up 20 years of Journal editorials on housing.” Did the WSJ warn the Megabanks to stop securitizing? Did the WSJ call out the crooked housing appraisers? Did the the WSJ advocate letting all the banks fail, including Wach, BoA, GS, Morgan Stanley, JPM, AIG? What was their position on TARP? Because if Fannie/Freddie were eliminated and there were no TARP, as WSJ seems to favor, those banks would have been toast 30 months years ago.
Catherine Austin Fitts has some really scary stories about corruption at HUD back in the 1980s.
Comment: I see evidence that the real estate market is really gonna thaw this year. Higher transaction volumes (aka liquidity) and much lower sale prices will eventually result.
Where are the lower prices? We’ve already established the fact that NARscum is raising prices on houses that aren’t selling.
“Where are the lower prices?”
Detroit, St. Louis, Minneapolis, Atlanta and Seattle, to name a few places recently reporting sizable price declines…
Housing Crash Is Hitting Cities Once Thought to Be Stable
Stuart Isett for The New York Times
Homes in Seattle, where houses are lingering on the market.
By DAVID STREITFELD
Published: February 13, 2011
SEATTLE — Few believed the housing market here would ever collapse. Now they wonder if it will ever stop slumping.
The rolling real estate crash that ravaged Florida and the Southwest is delivering a new wave of distress to communities once thought to be immune — economically diversified cities where the boom was relatively restrained.
In the last year, home prices in Seattle had a bigger decline than in Las Vegas. Minneapolis dropped more than Miami, and Atlanta fared worse than Phoenix.
The bubble markets, where builders, buyers and banks ran wild, began falling first, economists say, so they are close to the end of the cycle and in some cases on their way back up. Nearly everyone else still has another season of pain.
“When I go out and talk to people around town, they say, ‘Wow, I thought we were going to have a 12 percent correction and call it a day,’ ” said Stan Humphries, chief economist for the housing site Zillow, which is based in Seattle. “But this thing just keeps on going.”
Seattle is down about 31 percent from its mid-2007 peak and, according to Zillow’s calculations, still has as much as 10 percent to fall. Mr. Humphries estimates the rest of the country will drop a further 5 and 7 percent as last year’s tax credits for home buyers continue to wear off.
“We went into 2010 feeling gangbusters, thanks to Uncle Sam,” Mr. Humphries said. “We ended it feeling penniless, with home values tanking.”
…
Interactive Graphic
Home Prices in Selected Cities, Through November 2010
I can see that happening. Stocks will crash and housing will pick up a bit.
Higher transaction volumes (aka liquidity) and much lower sale prices will eventually result.
Darn that law of supply and demand!
What is this evidence? I’m still not seeing the vacant inventory showing up in the MLS in Seattle…
I think Stucco just installed a new trolling motor in his bassboat.
Whiiiiiiiiiiiiiizzzzzzzzzzz………….
(tug, tug)
(YANK!)
Anyone got a pair of pliars I can use to get this fish-hook out of my jaw?
“…vacant inventory showing up in the MLS in Seattle…”
Remember that inventory represents the stock of homes that are not sold. Often times there is a very good reason why high priced homes (at least by list price) appear on the MLS, which is that they are priced above market value.
By contrast, areas where prices have tanked may actually show a relative dearth of MLS inventory, if buyers have responded by snapping up the low-priced homes. You probably should focus on recent sales prices to get the comps picture, rather than the MLS (= prices of unsold homes).
Per the comments from the other day:
Wholesale prices on “bundles on shadow inventory” will drop.
Retail prices for the public will not budge.
Somehow much of the shadow inventory in my sub here in Boise has gotten sold and occupied in the past few months. Places are suddenly selling. But Idaho has an oddball law where sales prices are NOT public record, so Zillow only shows a sale took place, not the sales price. Not very helpful in making a housing market analysis.
has an oddball law where sales prices are NOT public record ??
Aren’t the county tax assessments based on transfer value ?? Do you have a transfer tax thats applicable in your county ?? Both would give the amount of the sales price…
Nope.
The seller/buyer is under NO obligation to reveal the actual sales price to the county recorder’s office.
The tax assessor does have your square footage, and he multiplies this by a “neighborhood price per square foot” to derive your annual property tax appraisal.
Beats me how Zillow et al. operate in Idaho.
Mayor Bloomberg, where’s your ban on assault knives?
Maksim Gelman, accused of killing 4 in stabbing, carjacking spree caught after daylong manhunt
Read more: http://www.nydailynews.com/news/ny_crime/2011/02/12/2011-02-12_cops_continue_hunt_for_brooklyn_sicko_who_left_4_dead_2_injured_in_stabbing_carj.html#ixzz1DxI1vFra
Especially full-auto assault knives, where you never have to stop to reload.
Study Predicts 3,300 Teacher Layoffs On L.I.
NEW YORK (WCBS 880) – Teacher jobs on Long Island may be in jeopardy after a new study estimated more than 3,300 layoffs over the next two years.
The study, done by the New York State School Board Association, estimates that Nassau County will have to lose more than 1,500 teacher positions while Suffolk County will need to cut more than 1,800.
The study credits the governor’s proposed cap on property taxes and a reduction in school aid for the probable cause of the layoffs.
One union leader told Newsday that the estimated job losses would be the most ever.
School officials, meanwhile, have warned teacher union leaders of the likely layoffs, unless the teachers agree to contract concessions.
What’s with the Ru Paul advertisement on top of page? Does anyone really believe Retards For Ru pose any threat to the CIC?
He did win that straw poll last week, besting Palin.
I am a big Paul fan but let’s be honest he’s been winning all kinds of straw polls everywhere.
Hasn’t he always won all kinds of early straw polls everywhere? The true believers vote early and often, but later on when the majority of the party wake up for the next election they never have much interest in him.
He is also 74, so he is probably not going to make a serious
Eun in 2012.
Regarding the debt-contraction, two tidbits from the NY Fed Q4 Household Credit report:
http://www.newyorkfed.org/research/national_economy/householdcredit/DistrictReport_Q42010.pdf
“As of December 31, 2010, total consumer indebtedness was $11.4 trillion, a reduction of $1.08 trillion (8.6%) from its peak level at the close of 2008Q3, and $155 billion (1.3%) below its September 30, 2010 level.”
and
“Currently about $1.2 trillion of consumer debt is delinquent and $902 billion is seriously delinquent (at least 90 days late or “severely derogatory”).”
I know this is a simplistic analysis, but if you assume that delinquency is now declining rather than growing, and that most of the distressed debt does not cure, then you could make a back-of-the-envelope guess that we are roughly half-way through this period of debt-destruction.
Thoughts on whether this back-of-the-envelope is close or not?
Ignores that the FedGov is picking up the slack for Mr. Consumer in the debt department. Just playing musical chairs with who owes the money to whom. The who is wage earners for the next couple of generations and the whom is the Federal Reserve.
We’re not doing so great yet at what FPSS calls “negotiating”.
This just appeared on Drudge: http://www.washingtontimes.com/news/2011/feb/14/debt-now-equals-total-us-economy/
I understand that the gov’t is expanding its debt to take up the slack.
But I think the length of the downturn will largely be driven by how long the consumer fail to “expand their balance sheets” (joke)—e.g. either because they cannot afford to (no job), or because they are unwilling to (emotional scars from the downturn), or because lenders are unwilling to take on bad credit risk.
I see no sign in the current interest-rate climate that the world is unwilling to loan to our gov’t debt binge. At least not yet.
Problem is what has happened to government debt during the same period? Expanded by much more than one trillion. Until we have a contraction in both types of debt, we face a default. Unlike in 1946, where we could grow are way out of the government debt because of the low private debt. The debt bubble made faster growth with more tax revenues possible. Any real payment of debt means pain and neither party is willing to engage in it. Obama could have set a different path but chose to exchange government debt for private debt as the engine of growth.
France wants new global finance system
Updated: 11:37, Monday, 14 February 2011
France will help the transition to a global financial system based on ’several international currencies’, the French Economy Minister said today.
France, as current head of the Group of 20 countries, will help the transition to a global financial system based on ’several international currencies’, French Economy Minister Christine Lagarde said today.
Lagarde, speaking ahead of a G20 finance ministers meeting in Paris on Friday and Saturday, said the world had to move on from the ‘non-monetary system’ it now has to one ‘based on several international currencies’.
Accordingly, France wants to see less need for countries, especially the emerging economies, to accumulate huge foreign reserves, she said.
At the same time, international capital flows should be better regulated and the role of the Special Drawing Rights issued by the International Monetary Fund should be reinforced by the inclusion of China’s yuan in the system.
The ultimate fiat wet dream.
Did anyone see Lady Gaga arriving at Grammy’s in an egg womb?
That girl is sick. I think I am in love.
Correction, she is a woman. Almost 25 yrs old.
She’s no “woman”. She never grew up.
Saw something a lot more interesting and uplifting- a documentary about the Greensboro Four. It originally came out last February, the 50th anniversary of the first successful desegregation sit-ins.
This sounds sweeet!
Feb. 14 (Bloomberg) — Barack Obama may lose the advantage of low borrowing costs as the U.S. Treasury Department says what it pays to service the national debt is poised to triple amid record budget deficits. Interest expense will rise to 3.1 percent of gross domestic product by 2016, from 1.3 percent in 2010 with the government forecast to run cumulative deficits of more than $4 trillion through the end of 2015, according to page 23 of a 24-page presentation made to a 13-member committee of bond dealers and investors that meet quarterly with Treasury officials.
Does this mean grandma will soon once again be able to eat better than her dog eats?
If interest rates rise this much where will that leave housing.
Much more affordable than expected…
If interest rates rise this much where will that leave housing ??
Housing would be the least of our worries…Try a unemployment-underemployment rate of 40% and a world wide depression…Our economy can barely function right now on 3.5% T-Bills much less double digit rates…
AP Source: GM to spend millions on bonuses; hourly workers to get more than $4,000 each.
DETROIT (AP) — General Motors Co. will pay more than $189 million in profit-sharing to 48,000 U.S. hourly workers and millions more in performance bonuses to salaried employees, according to company documents obtained by The Associated Press.
GM will pay most hourly workers more than $4,000 each as compensation for its strong financial performance last year, said a person briefed on the bonuses. The payments come less than two years after the automaker emerged from bankruptcy protection with the help of a huge government bailout. They’re more than double the previous record payment of $1,775 in 1999, at the height of the boom in sales of sport utility vehicles and pickup trucks.
“On the whole, we made tremendous progress last year,” CEO and Chairman Dan Akerson said in an e-mail message to employees announcing the payments on Monday. “With our collective teamwork, this can be just the beginning.”
Damn unions!
Say, wasn’t the bonus just $3000 last week?
Damn commies, taking government cheese like that!
They’re not at all like these fine people.
—
General Motors Co. will pay more than $189 million in profit-sharing to 48,000 U.S. hourly workers and millions more in performance bonuses to salaried employees ..
None of these guys would even have this job if not for the taxpayer. Pay the taxpayer back first, before all the high-fiving.
THE OBAMABUDGET By Neal Boortz
$1,600,000,000,000.00
There you go. And no … that’s not Obama’s new budget. That’s Obama’s projection for the budget DEFICIT this year! That’s money we don’t have. That’s money we’re going to have to borrow. That’s money our children and grandchildren are going to have to pay back. Or … .that’s debt our country will eventually try to discharge in bankruptcy.
Let me try to put that $1.6 trillion in perspective. We’re going on a spending spree. Let’s see ….. how much do we want to spend an hour? Does $100,000 an hour work for you? $100,000 an hour 24 hours a day 365 days a year … and we’re going to keep on spending at $100K an hour until we’ve spent the entire $1.6 trillion.
The first day goes by. How much have we spent? That one’s easy. We’ve spent $2,400,000. We now have the house of our dreams, a few tremendous cars and some nice bling.
The first year goes by. How much have we spent? Try $876,000,000. That’s $876 million dollars. Is there anything else you could possibly want? I’m thinking you’re starting to give money away to complete strangers by now.
You’re well on your way to spending $1,600,000,000. But wait! Look at that figure above! There’s some extra zeros there. That $1,600,000,000 you’re edging up on is in billions, not trillions. You will reach that spending level in 564 days. That’s 564 days of spending $100,000 an hour 24/7.
So … let’s move in on that $1.6 trillion dollar figure. It took you 564 days to knock off your first $1.6 billion … so how much to spend this year’s deficit? How about 666,490? Yup … that’s the figure. That’s how long it takes you to spend this year’s deficit at $100,000 an hour. If you want that figure to sound a bit more reasonable … try 1,826 years.
That’s not the worse of it. This is just one year’s deficit. The Obama budget projects $8 trillion in deficits over the next ten years. How long would it take for our $100,000/hr spending spree to take care of that? Try 9,132 years.
The cold, hard truth here is that neither the Republicans nor the Democrats have the courage to really address this hideous budget problem right now. On the one hand we have Obama suggesting even MORE spending increases, and on the other hand we have Republicans playing games with the people by floating phony spending-cut numbers out there. Don’t tell us how much you’re going to cut from the Obama budget proposals for last year! Don’t tell us how much you’re going to cut from projected future spending increases. Tell us how much you’re going to cut from current spending levels! That’s the ONLY figure out there that means anything.
And something else … and this is for both sides. Grow some stones and start to address entitlement spending. Both sides are gutless here. Their inattention to reigning in entitlements is all the proof you need that their main concern is not budget cutting or attaining some sense of economic sanity in this country … their main concern is getting reelected. They love their positions of power and prestige … they love these positions of power so much that they will consciously ignore - even jeopardize - the future of this country rather than put those positions in jeopardy.
Let’s say something about the Gimme Generation before we move on here. I’m talking about seniors … the wealthiest segment of our population. These people are consistent voters … and the politicians realize this. The politicians also realize that, by and large, these seniors are going to vote their pockets and purses. If you dare to take any entitlements away from them - no matter whether they need the money or not - they’re going to mobilize against you. If you think that politicians are ignoring future generations, they have nothing on our senior citizens. The loudest “screw you, you’re on your own” shout-out to future generations is actually coming from the Social Security and Medicare crowd.
The loudest “screw you, you’re on your own” shout-out to future generations is actually coming from the Social Security and Medicare crowd.
A point that Matt Taibi made in a recent Rolling Stone piece.
I find the point is misdirected by a mile. Grandma probably knows how to get by on little better than the rest of us, she grew up in the last depression. Grampa spent some five decades paying into the “system” for his retirement, but sure, call him generation greed.
Personally, I cannot see how their stipend brings down the greatest country in the world, really. Isn’t it dwarfed by the entitlements that we have shoveled to Wall Street, and continue to shovel to Wall Street? It seems dwarfed by the money that Mubarick has skimmed off of our “foriegn aid”. & etc.
“Grandma probably knows how to get by on little better than the rest of us, she grew up in the last depression…”
Look, most seniors today are 65 - 80 years old. That puts their year of birth in the 1930 - 1945 range. So the vast majority did not grow up in the depression.
Nothing against paying some reasonable pension to old folks, but $50+K pensions at taxpayer expense on top of social security, preferably at age 50 is pretty far from reasonable.
Somtime in the future some generation will break the promise past generations made to themselves.
Exactly Blue Sky, except for the foreign aid part. Foreign aid is minuscule compared to most of the spending.
You also left out corporate tax breaks from the local to federal level that amount to trillions.
http://market-ticker.org/akcs-www?post=179886
Time to put a fork in MERS?
From the findings of the Federal Bankruptcy Court:
“MERS and its partners made the decision to create and operate under a business model that was designed in large part to avoid the requirements of the traditional mortgage recording process. This Court does not accept the argument that because MERS may be involved with 50% of all residential mortgages in the country, that is reason enough for this Court to turn a blind eye to the fact that this process does not comply with the law.”
O-oh, MERSy, MERSy me…
The loudest “screw you, you’re on your own” shout-out to future generations is actually coming from the Social Security and Medicare crowd.”
In time the present old folks will be gone and the baby boomers will age and they will be the ones who take the hit
by that time there will be no choices left
They are going to be in worse shape.
The boomers where pretty much controlled by the veterans of WWII.
Guess who is controlling Gen Y? Why yes, that would be the Bankstas.
Latest Salaries For SJ City Employees Posted Online
The Bay Area’s biggest city has been handing out some big paychecks to some of its top public employees. San Jose…
SAN JOSE, Calif. — The latest information about the salaries and benefits of each San Jose city employee was posted online Friday in an effort to maintain transparency in the city’s government.
The compensation information, which can be accessed at http://www.sanjoseca.gov/salary, is from 2010, the latest year available, according to city officials.
Former police Chief Robert Davis had the highest total compensation - more than $534,000 in salary and benefits - for the year, according to the report.
City Manager Debra Figone - who made more than $276,000 in 2010 - said the release of the information is an example of San Jose’s commitment to an open and transparent government.
“Residents want to know where their tax dollars are going,” Figone said in a statement. “Posting this information online proactively is part of the city of San Jose’s commitment to making information available so the public can easily access it at their convenience.”
Mayor Chuck Reed said that sick leave payouts cost the city $14 million dollars last year and said retirement benefits were also too generous.
“We’re draining money from services, so we’re cutting services to pay these high benefits and wages,” Reed said. “I understand people are working hard, but we can’t afford to pay money at this rate.”
San Jose has about 5,900 full-time employees in 19 city departments.
“Former police Chief Robert Davis had the highest total compensation - more than $534,000 in salary and benefits - for the year,”
Every time I post salaries and benefits like these I am told I am cherry picking. But I gotta tell ya, from Fl. to N.Y. to Cali there are a lot of friggin cherries.
Jeff, I say “cherry picking” because this is not the case for most of the country.
What do they all have in common? Proximity to, or in, large metro areas or states with known and chronic corruption problems.
Also, the biggest offenders are at or near the top of the executive chain.
I wholeheartedly agree it’s a problem, but just remember WHERE it’s taking place and remember than most of your civil servants are just making and avg wage and will collect a very avg pension.
Point taken.
The realtor that represents the owners of our home as asked me via email if we’re still interested in buying the house we live in. Zillow has it at $187, the house behind us is on the market @ $67/sq. ft.
I am willing to buy ours @$100 sq.ft, but that is still $50k below what zillow is saying. The house next to me is still abandoned with no proceedings yet.
I would buy this joint for $135k, but I also don’t want to jeopardize our rental situation.
I would buy this joint for $135k, but I also don’t want to jeopardize our rental situation.
Keep your powder dry, Muggy. I think the landlord’s probably thrilled to have your very responsible family as tenants. My feeling is that in the coming months, they’ll offer the house to you at a very attractive price.
“Zillow has it at $187, the house behind us is on the market @ $67/sq. ft.”
Sounds like they might want to consider a name change to ZillHigh?
Har!
At $67/ft. our house would be $90,450
The problem is, and this is too funny seeing Combo’s post above, some jackass Clownifornians just bought a house around the corner @ $160/ft. I’m thinking this is why our property manager is asking now.
They’re fishing for stupid.
They’re fishing for stupid.
And the Muggy family is anything but stupid.
You guys risk getting priced out by Clownifornians with buckets of money and boxes of stupid.
“You guys risk getting priced out by Clownifornians with buckets of money and boxes of stupid.”
If the banks withhold inventory and the line of lemmings streams unabated, then yes, we will continue to be priced out. I’m getting the feeling we will be moving again in June, and honestly, I’m getting really, really tired of it.
Fishing for, and catching, stupid is how most people get rich.
Sad, but true.
Why do the names Rush and Glenn come to mind all of a sudden?
Who owns the vacant house next door? Is it a copy of yours? If the answers are bank owned and yes, send the bank a letter every week offering them the equivalent of $50/sf until they sell to you or tell you to stop. In the meantime, enjoy your kids and freedom.
“Who owns the vacant house next door?”
A couple that owns a few other homes that haven’t made payments for years… no foreclosure on any of them.
BofA
Navy kickbacks case firm lays off staff
ASFT currently under federal investigation
MIDDLETOWN, R.I. (WPRI) - Advanced Solutions for Tomorrow is laying off its entire staff in Middletown, Roswell, Ga., and Fairfax, Va., following last week’s federal corruption case against its founder, WPRI.com has confirmed.
Wayne King, Advanced Solutions’ acting CEO, confirmed the mass layoffs in a brief phone interview this morning. The layoffs take effect at noon Monday.
King informed workers that they are losing their jobs in an e-mail message sent this morning and obtained by WPRI.com.
Advanced Solutions’ assets have been frozen to the point that the company has been unable to secure financing or find a buyer to take it over, King said in the e-mail.
“Our efforts to obtain adequate financing have been undertaken on a nearly endless basis until we determined Sunday that we could not continue to operate without this needed financing,” he wrote.
Prosecutors last week charged Advanced Solutions founder Anjan Dutta-Gupta, 58, with using subcontractors to funnel roughly $10 million to Ralph Mariano, 52, and his relatives over more than 10 years as a bribe to help secure more than $120 million worth of Navy contracts. Dutta-Gupta and his wife, Indrani, resigned from the firm Thursday.
A spokesman for U.S. Attorney Peter Neronha’s office said his office did not freeze Advanced Solutions’ assets, but declined to comment further.
King told WPRI.com that officials at Advanced Solutions are still working to determine the total number of employees they are laying off and whether they will receive severance packages or other assistance. “We’re trying to figure that out,” he said.
Prosecutors last week charged Advanced Solutions founder Anjan Dutta-Gupta, 58, with using subcontractors to funnel roughly $10 million to Ralph Mariano, 52, and his relatives over more than 10 years as a bribe to help secure more than $120 million worth of Navy contracts. Dutta-Gupta and his wife, Indrani, resigned from the firm Thursday.
Oh, for cryin’ in a bucket. It really galls me to read this stuff. I’m in the process of applying for yet another certification so I can do biz with the feds. Not that I have, mind you. It seems that the Club Fed is a very hard doing-business-with club to get into.
All the while, things like this are going on.
It’s supposed to be hard. You can’t maintain the status quo any other way.
Ok, so this house is on my street. not sure why the ladies who live there never asked me if I was interested. renters get such a bad rap and my honda gives me a dowdy look. they could have omitted the commission.
http://www.zillow.com/homedetails/1346-Eldean-Ln-Oceanside-CA-92054/52505494_zpid/
The car port is a deal breaker for us. Why own a home if you don’t have a garage and a nice private yard?
I found a beaut this weekend, DOM 200+, 10,000 lot (w/pool), but they turned the garage into the new master and added a 1 car, car port. It even had a cirular driveway. They ruined the property.
“They ruined the property.”
I feel that way about a lot of the places that I look at. It’s one of the under-appreciated damages wreaked by the bubble. D*mn flippers!
Thanks for also seeing the stupidity of these flippers. They took a really cool 4 bdrm, turned it into a 5 w/ 2 masters (the original being small, granted) and ruined a really neato home. I can’t build a 1.5-2 car garage, ripping out the carport due to a 5 ft variance rule w/ the city. No wonder they can’t sell it. It’s priced to sit on top of it. Grrrrrr!
(All real wood flooring throughout.)
but they turned the garage into the new master and added a 1 car, car port.
I’m not sure if it was the current owner (that’s my guess) or a previous one, but one side of the garage is a work area + storage room. That conversion I’m actually a fan of. It’s nice having a dedicated work bench area, and a dedicated room that can be organized for storage.
Then again, I live alone and only one car needs to be garaged. There’s a car port big enough for an RV as well, so at least a 2nd car can be sheltered from the rain/sun/hail/frogs
NEW YORK (AP) — Stocks are closing mixed. Wal-Mart Stores Inc. dragged down the Dow Jones industrial average Monday after analysts at JPMorgan downgraded the company.
JPMorgan’s analysts say the world’s largest retailer risks losing customers as low-income customers head to discount stores and other shoppers return to more expensive stores.
Oh yes that’s it low income customers are heading to discount stores “Hellow JPM what do you call Wal Mart” What other store offers lower prices than Wal Mart. How about calling a spade a spade and just say that lower income customers don’t have any money left to spend after buying food housing and transportation.
They’re saying that the po’ folks are shopping at dollar stores (buying Egyptian made, no name brand cornflakes? I’m not kidding, I once saw that in a dollar store) and shopping at thrift stores. Don’t know if its true or not. That they are broke seems to be a very plausible explanation.
So they ship corn from the US to Egypt and then ship flakes back here. I don’t think it can be done for less.
Well, with your federal export assistance perks, then your contribution to an emerging nation perks, then your import from an emerging nation perks, you’re probably right.
(just kidding. I don’t know if any of those actually apply to generic cornflakes)
FEDX profits down on higher fuel and weather. All companies will face higher input costs that they can’t pass along.
Didn’t say anything about demand, but that’s next.
I used to use Fedex a lot. Then they just got too expensive. As in, more than 30 bucks to shoot something from here to Ohio.
OTOH, the USPS’s Express Mail to the same destination is about a third the price.
While we’re on this topic: Did anyone else notice that during the just-ended holiday season, the USPS was doing quite the business in package shipping? I sure noticed it in the lines at Tucson post offices.
FedEx and UPS are way too expensive for small fish. I’m sure they charge Amazon a lot less though.
FedEx’s profits are down only based on what analysts think it should be.
They are still showing record gains year after year.
The latest S&P 500 insider buys/sells report is out, and it is more of the same.
Where the fun was, however, is as usual on the selling side, where insiders dumped the biggest amount of shares so far in 2011, selling over $1.3 billion worth of stock (a 61.4x insider buying to selling ratio), which was nearly double last week’s $749 million. The biggest selling: MSFT ($417 million), Nasdaq ($268 million), and, surprise, Juniper at ($65 million) and AutoNation ($30.5 million). In other words, with each artificial uptick in the market, we see a new YTD record pick up in selling
zerohedge.com/article/13-billion-insider-sales-surge-highest-2011-double-last-weeks-total
Isn’t that kind of expected, as many insider shares are bonuses? Generally speaking, things should be weighted towards insider sales vs purchases I would think.
“Isn’t that kind of expected, as many insider shares are bonuses?”
Yes, you are correct, drummin. These bonuses/stock grants/incentive stock-options all represent essentially employees being “long” their own stock in a way that never shows up on the “buy” list of insider transaction.
Also note that if the stock market were not going up up up, many of these transactions would not be occurring, since the stock options would be underwater.
Mortgage interest deduction on the line again
2012 budget would trim itemized deductions for the wealthy
By Inman News, Monday, February 14, 2011.
The Obama administration’s proposed 2012 budget would trim the value of itemized deductions for high-income taxpayers by nearly one-third, reducing the tax benefit some homeowners with mortgages receive if they itemize the interest portion of their loan payments on their tax returns.
The administration proposed such a measure as part of last year’s budget negotiations, but Congress did not approve it.
…
The Financial Times
Please respect FT.com’s ts&cs and copyright policy which allow you to: share links; copy content for personal use; & redistribute limited extracts. Email ftsales.support@ft.com to buy additional rights or use this link to reference the article - http://www.ft.com/cms/s/0/293fcc80-3885-11e0-959c-00144feabdc0.html#ixzz1Dz4PeIWZ
SEC makes muni bond disclosure a ‘top priority’
By Kara Scannell and Nicole Bullock in New York
Published: February 14 2011 23:00 | Last updated: February 14 2011 23:00
The $3,000bn municipal bond market where states and local governments raise money has become a “top priority” for the Securities and Exchange Commission amid concerns of mounting risks for investors, said the head of the regulator’s enforcement unit for the area.
“To the extent you may have states and municipalities experiencing financial difficulties and not disclosing that information in official statements or other continuing disclosure documents, then that’s real cause for concern,” said Elaine Greenberg, chief of the SEC enforcement division’s municipal securities unit. Ms Greenberg declined to comment on any specific investigation.
…
The Financial Times
SEC makes muni bond disclosure a ‘top priority’
By Kara Scannell and Nicole Bullock in New York
Published: February 14 2011 23:00 | Last updated: February 14 2011 23:00
The $3,000bn municipal bond market where states and local governments raise money has become a “top priority” for the Securities and Exchange Commission amid concerns of mounting risks for investors, said the head of the regulator’s enforcement unit for the area.
“To the extent you may have states and municipalities experiencing financial difficulties and not disclosing that information in official statements or other continuing disclosure documents, then that’s real cause for concern,” said Elaine Greenberg, chief of the SEC enforcement division’s municipal securities unit. Ms Greenberg declined to comment on any specific investigation.
…
Here is still more incentive for the U.S. govt bond buyer of last resort to buy more bonds.
The Financial Times
Largest bond fund cuts US government holdings
By Dan McCrum in New York
Published: February 14 2011 20:38 | Last updated: February 14 2011 20:38
The world’s largest bond fund sharply cut its exposure to US government-related debt in January, before US bond yields rose this month to their highest level in almost a year.
Pimco’s Total Return Fund, run by Bill Gross, a founder of Pimco, reported that its holdings of US government-related securities fell from 22 per cent in December to 12 per cent in January.
…
If there were a “toppy” market: Cramer: “Sky’s the Limit”
“Valuations just aren’t relevant” -omg.
http://www.thestreet.com/story/11007788/1/cramers-mad-money-recap-skys-the-limit-update-1.html
Here’s a doozy…
http://www.bloomberg.com/news/2011-02-14/merscorp-has-no-right-to-transfer-mortgages-u-s-judge-says.html
Cutting corners on the traditional mortgage-recording process is so 2005!
“MERS and its partners made the decision to create and operate under a business model that was designed in large part to avoid the requirements of the traditional mortgage-recording process,” Grossman wrote. “The court does not accept the argument that because MERS may be involved with 50 percent of all residential mortgages in the country, that is reason enough for this court to turn a blind eye to the fact that this process does not comply with the law.”
This is awesome.
“The system is fine all the way up until it suddenly isn’t fine.”
Over the course of a few years, the US went from the world’s largest creditor nation, to the largest debtor nation. Back in the late 70s IIRC. The stock market keeps climbing till it suddenly doesn’t anymore.
I recently posted a link from the CIA’s World Factbook ranking the world’s countries by debt as a percentage of GDP. The US was ranked around the upper 25% of the list coming in at number 36 with 58% of GDP.
Then I just saw this story, from the Washington Times, which states that now, the government debt is now 102% of GDP.
I guess what was missing from the World Factbook link was that ever-important “rate of growth” statistic. If the Washington Times figure is accurate, this does move us farther up the slaughter line than we anticipated we would be.
Chinese consumer price statisticians have taken a page out of the Fed’s play book, and decided to downweight food price increases in their official consumer price index calculation. Lucky thing that food is not a necessity — oh wait…
Inflation Hits Nearly 5% in China, With Food Costs Soaring
By SHARON LaFRANIERE
Published: February 14, 2011
BEIJING — Consumer prices in China rose 4.9 percent in January when compared with the same month a year earlier, the government reported Tuesday, as inflation remains a worry in the fast-growing major economy.
The rise in prices was less than expected, but economists said that could have been a result of a move by the statistics bureau to give diminished weight to food prices. Food previously accounted for a third of the basket of goods that made up the index. The shift made it impossible to directly compare the January data to earlier months.
Paul Cavey, head of China economics at Macquarie Securities, said the data showed that prices for goods other than food are rising sharply. Prices for nonfood items rose 2.6 percent in January over a year earlier, compared with a rise of 2.1 percent in December. “This shows a broadening of inflation away from just food,” Mr. Cavey said.
…
Shazam!
For those of you who were wondering, a one-month price decline of 8.7% occurs at an annualized rate of (exp(12*ln(1-8.7/100))-1)*100 = -66.5 percent, which according to DataCluck, is completely normal for the ice cold winter sales season.
Keep on whistling as you enjoy the view from your stroll past the graveyard, San Diego real estate ‘experts.’
Median home price in county drops 8.7% in January
By Lily Leung, UNION-TRIBUNE
Monday, February 14, 2011 at 2:13 p.m.
Median price and sales were both down in January, normal for the holiday season, San Diego real estate experts said.
John Gastaldo / Union-Tribune staff
Median price and sales were both down in January, normal for the holiday season, San Diego real estate experts said.
Housing prices in San Diego County took their usual fall from December to January, a time when consumers spend more time at shopping malls than at open houses.
The median price for all homes dropped to $304,000 from $333,000 in December, or 8.7 percent.
It was the biggest December-to-January drop recorded by DataQuick Information Systems whose figures date back to January 1988. But real estate experts say it likely reflected the usual sluggishness of the holiday season. A year earlier, the median price dropped 7.6 percent to $305,000.
The number of sales this year also slid month-over-month: A total of 2,248 units were sold in January, down 29.6 percent from the 3,191 sold in December. A year earlier, sales were off 36 percent to 2,322.
…
Matt Perry, U-T
San Diego County housing, Dec. 2010-Jan. 2011
Jan. 2011 Dec. 2010 Jan. 2010 % change YOY*
Median prices
Single-family resale $350,000 $360,000 $345,000 1.4%
Condo resale $200,000 $212,500 $201,500 -0.7%
New homes* $398,750 $500,000 $406,000 -1.8%
San Diego County $304,000 $333,000 $305,000 -0.3%
Sales
Single-family resale 1,364 1,927 1,403 -2.8%
Condo resale 746 935 735 1.5%
New homes* 138 329 184 -25.0%
San Diego County 2,248 3,191 2,322 -3.2%
Figures include new construction and condo conversions. YOY means year-over-year percentage change.
Source: DataQuick Information Systems
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“The current model also rests on the expectation that, in good times, servicers are using some of the residual income to build out systems and procedures to handle the pressures that come with worse times.”
Why would a Wall Street Megabank in the mortgage business, which knew it had free too-big-to-fail insurance against financial collapse in bad times, waste their residual income (aka executive bonus pay) to insure against bad times? Nobody does TBTF insurance better than the Fed!
Posted at 9:00 PM ET, 02/11/2011
Federal Reserve board member: U.S. investigation into mortgage servicing has found ‘widespread weakness’
By Ariana Eunjung Cha
The preliminary results of a multi-agency federal review of the mortgage industry has found “widespread weaknesses” that impair the function of the housing market and hurt consumers, according to Federal Reserve board of governors member Sarah Bloom Raskin.
“We have reached the point where this sign of failure is hindering our economy’s ability to rebound,” Bloom Raskin said in remarks prepared for delivery to mortgage finance executives at a conference in Utah Friday evening.
Bloom Raskin said that she has seen “little to no evidence of improvement” until now despite the government scrutiny and that things remain similar to when the crisis began in 2007.
Bloom Raskin offered what she called her “initial thoughts on how to rebuild an important but currently dysfunctional sector of the housing market.”
One of the major problems, she said, is that mortgage servicing operates on a “flawed business model that creates misaligned incentives.”
For instance, she said servicers are paid on an annual fee basis by loan originators but that means that they are being paid too much when the loans are current but perhaps not enough when the loans are delinquent because there are additional costs associated with managing troubled loans.
“The current model also rests on the expectation that, in good times, servicers are using some of the residual income to build out systems and procedures to handle the pressures that come with worse times,” she added. “Unfortunately, as we have seen, this has not happened.”
…
There seems to be a sudden flood of common sense on housing matters hitting the pages of the MSM press. Could this have something to do with saltwater economists Summers and Romer leaving the WH, and the Chicago guy taking charge?
* OPINION
* FEBRUARY 15, 2011
A Way Forward for the Mortgage Market
The housing system can function perfectly well without government backing. The key is making sure most mortgages are prime loans.
By PETER J. WALLISON
Last week the Obama administration offered a vision of a future U.S. housing system in which Fannie Mae and Freddie Mac will eventually be wound down and eliminated. That in itself is not remarkable; even Rep. Barney Frank (D., Mass.) said last year that he hoped the two government-sponsored enterprises (GSEs) would be abolished. What was remarkable was that the proposal outlined by Treasury Secretary Tim Geithner included, as one of its options, a future housing-finance system that would rely almost entirely on the private sector.
Starting with the savings and loans crisis in the late 1980s, and continuing through Fannie and Freddie and the Federal Housing Administration (FHA), taxpayers have been or will be called upon to pony up more than $500 billion to pay for losses that the government has suffered in an unsuccessful effort to help people buy homes. The reason is simple: The government never receives adequate compensation for the risks it assumes. As a result, government backing always appears to confer a benefit—and members of Congress want to push as many of their constituents as possible into that favored category.
Exactly this happened with Fan and Fred. In 1992, we got affordable housing requirements that required the GSEs to extend their subsidy to low- income borrowers who couldn’t meet the standards for prime loans. And in 2008, we got higher loan limits that enabled Fannie and Freddie to buy mortgages for million-dollar homes. In the end, both low-income and high- income borrowers got to benefit from the GSEs’ subsidy.
The costs were all heaped on the taxpayers. And for what? Destructive housing bubbles and a home ownership rate that is No. 17 among developed countries.
Much of the Obama administration’s proposal for a private housing-finance system follows a white paper issued in January by the American Enterprise Institute. That paper argued that the U.S. can build a sound mortgage system without public backing by ensuring that most mortgages are prime loans.
Prime loans are good investments and will be bought by insurance companies, pension funds and other institutional investors without government backing. Even in the worst downturns of the past, prime loans as a group have never suffered serious losses, and the losses that did occur were limited to local markets.
…
Feb. 15, 2011, 12:01 a.m. EST
Fed dictator Bernanke needs to be toppled
Commentary: Forget Mubarak, it’s Fed reign of terror that must end
By Paul B. Farrell, MarketWatch
ARROYO GRANDE, Calif. (MarketWatch) — Fed boss Ben Bernanke is the most dangerous human on earth, far more dangerous than Hosni Mubarak, Egypt’s 30-year dictator, ever was. Bernanke rules a monetary dictatorship that will trigger the coming third meltdown of the 21st century.
But this reign of economic terror will end.
Just as Mubarak was blind to the economic needs of the masses and democratic reforms, Bernanke is blind to the easy-money legacy that’s set the stage for revolution, turning the rich into super rich while the middle class stagnates and peanuts trickle down to the poor.
Warning, Egypt also had a huge wealth gap before its revolution. Bernanke is the final egomaniac in America’s bubbling 30-year wealth gap, where the top 1% went from owning 9% of America’s wealth to owning 23% during this dictatorship.
Bernanke’s ruling ideology is the culmination of a 30-year economic war that has forged together Reaganomics for the super rich, former Fed chairman Alan Greenspan’s toxic allegiance to Wall Street, the extreme Ayn Rand’s capitalist dogma, culminating in the toxic bailouts of Treasury Secretaries Hank Paulson and Tim Geithner, two Wall Street Trojan Horses corrupting government from within.
Since 1981 this monetary dictatorship has caused enormous collateral damage, systematically sabotaging democracy, capitalism and the American dream while fueling the rise of our most dangerous new enemy, China.
…
The Man Who Said No to Easy Money
Monday, February 07, 2011 7:25
David Von Drehle
Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, Mo.
Photograph by Marco Grob for TIME
Late in January, the high priests and priestesses of the U.S. economy gathered inside their Washington sanctum for the regularly scheduled ritual known as the Federal Open Market Committee (FOMC). This is the group that decides the value of money, measured by interest rates, which it controls by easing or tightening the money supply. Of course, there are other forces that influence the value of money–a great global whirlwind of forces–but most don’t hold orderly meetings in a grand conference room on Constitution Avenue.
The FOMC’s mission is to steer a course between the shoals of high unemployment and high inflation, putting enough dough into circulation to keep the economy well fed and growing–but not so much that money begins to plummet in value. The priesthood meets eight times per year, reporting its decisions in oracular statements of Olympian voice. This year, when the committee spoke, Fed watchers noted something striking: for the first time since 2009, the members were unanimous. All supported the chosen policy of adding $600 billion to the banking system by purchasing that amount of Treasury bills from big banks–a strategy known as quantitative easing.
And here’s the reason they were finally unanimous: Thomas Hoenig couldn’t vote. Throughout 2010, this tall Iowan with thin white hair and cuff links like gold coins was a voting member of the priesthood. He sized up the data, then cast his lonely ballot against the indefinite reign of easy money. Eight meetings, eight no votes–a rare unblemished record of recalcitrance that made him a hero to inflation hawks and a pariah to the many economists who believe that, with unemployment above 9%, the engine of the economy needs further priming.
Hoenig would still be issuing dissents if his one-year term as a voting member had not expired (non–New York regional Fed presidents share votes on a rotating basis). With his mandatory retirement at 65 as president of the Federal Reserve’s 10th District looming in October, he will never get another chance, though he plans to continue his critique of government policy as a think tanker, consultant or author. When I paid him a visit a couple of days after the FOMC’s unanimous vote, Hoenig (pronounced Hawn-ig) was happy to explain his unyielding point of view, one that has become ever more relevant now that rising commodity prices have put inflation worries back on the economic radar screen.
…