Bits Bucket for April 30, 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.
About Me
Name:Ben Jones
Location:Northern Arizona, United States
To donate by mail, or to otherwise contact this blogger, please send emails to: thehousingbubble@gmail.com
PayPal is a secure online payment method which accepts ALL major credit cards.
Links
-
April 2025 M T W T F S S « Sep 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
Photo Submission: hbbphotos@gmail.com
View the HBB Photo Gallery *updated 4/13/2008
Geithner gives some companies pass on new rules
WASHINGTON (AP) — Treasury Secretary Timothy Geithner has decided to let companies continue to trade certain contracts used to guard against swings in currency values outside regulators’ view.
New rules require that many such trades happen more transparently, on exchanges where regulators can see them. But Geithner is exempting certain contracts used by companies to hedge currency rates.
The new financial overhaul law authorized Geithner to carve out such an exemption to stricter regulation.
Business groups argue that tighter oversight of such contracts would be costly and unnecessary. But critics, including some regulators, counter that the whole market for financial contracts called over-the-counter derivatives should face stricter supervision.
The value of derivatives hinges on an underlying investment, such as currencies, stocks or mortgages. Speculators who used over-the-counter derivatives helped fuel the 2008 financial crisis.
Sen. Carl Levin, who pushed for tighter regulation after the crisis, said Geithner’s decision might open the door for lax oversight in the future.
Treasury’s top markets official said the contracts already include many of the safeguards the new rules impose. Investors can find information on the price for each contract, for example. Some of the contracts are traded on electronic platforms, which are less likely to freeze up after an unexpected financial shock.
Imposing new rules would mean “introducing an additional process into what is a very well-functioning market today, and you would be putting more steps into the settlement process,” said Mary Miller, assistant Treasury secretary for financial markets.
Miller argued that even with the exemption, the market will become more transparent. Companies will have to report the contracts in real time, after they make a trade. The information will go to central databanks that regulators can see.
Still, the contracts, called foreign-exchange swaps, wouldn’t be subject to other requirements that experts say would make them more transparent.
The contracts that Geithner carved out account for about $30 trillion of the $600 trillion global market for over-the-counter derivatives, Treasury said. The new, tougher rules will apply to currency swaps, options and other contracts used for similar purposes.
Multinational corporations such as Cargill and 3M argued for the exemption. They said the new rules would have raised their costs, thereby limiting their ability to grow and create jobs.
Advocates of tighter regulation say closer oversight is needed at each stage of the process — before, during and after a trade. They say the exemptions will make some types of trades harder to oversee.
Michael Greenberger, a former official with the Commodity Futures Trading Commission, which is responsible for policing much of the derivatives market, disputed Treasury’s main defense of the exemption — that the contracts expire so fast that they don’t pose serious risks to the financial system.
“Within the next 60 months, there will be a systemic break in this market, said Greenberger, now a law professor at the University of Maryland.
The decision technically is a proposal. Treasury will accept public comments for 30 days before finalizing the exemption.
As long as Geithner says its ok, then its probably for the best of all of us. He would never sell out our interest to the big banks.
With all the talk, in the mainstream media, of the huge profits the oil companies are making, it’s amazing that you don’t here discussion of the major root cause. Namely the Federal reserve and their inflationary policies.
The Federal reserve intended to cause inflation, and that’s what we’re getting, in food and fuel prices. The average person just hears about the evil oil companies and their windfall profits. The oil companies simply mark up their products a given percent relative to the cost of production. If their cost goes up 50%, they increase their price 50%, and their nominal dollar profits increase accordingly.
The cheap money the Fed has been pumping out has steadily devalued the dollar and flowed into commodity speculation. Driving up the cost of food a fuel. Inflation is particularly hard on lower income people, but the Democrats seem more interested in a windfall profits tax, instead of talking about the real cause of the problem.
I wish there was more talk in the media about the relationship between the Fed’s policies and inflation. Pointing at the oil companies is just a diversion from the real cause. If more people understood how the Fed’s role in this worked, perhaps there would be more pressure put on the Fed to reign in inflation. Instead the American people get robbed and the big banks and oil companies make huge profits, thank you Ben Bernanke.
‘more talk in the media about the relationship between the Fed’s policies and…
-being a major reason we’ve had a stock and housing bubble.
-secretly loaning trillions to everyone from Japanese fishing cooperatives to Libyan banks (imagine what they’ve done that we don’t know about).
-manipulating interest rates that retired people depend on.
I’m sure we could come up with a few more. Yet some here will say, ‘if you want to get rid of the Fed, what would you replace it with?’
I think we could replace them with a hole in the ground and be better off.
You could replace it with the free market that sets interest rates on the short end.
That would suffice.
I like the hole in the ground idea better.
What`s that?
That is The Federal Hole in the Ground.
In that Hole we trust.
That’s one alternative. Just to illustrate how a debate on this issue brings up critical actions that are given a pass by the media and govt:
Would the free market create money out of thin air and loan it to giant banks? Whoa, says a bunch of people! We can’t give the power to print our money to private Wall Street banks!!! They would run wild and steal left and right.
But here’s the thing: the Federal Reserve is private, and is owned by Wall Street, literally. But do they steal? Why, we don’t know! They aren’t audited. We know they manipulate, cuz they tell us so. But how much, and does this distort the global economy in ways that cause harm?
The Fed recently was forced to release data on a batch of loans. They put $12 trillion out there, all over the world. Think about that - while our govt trembles over cutting $100 billion here or there, average people are making do with less, this private corporation secretly loans out enough to buy half the houses in this country. Where did they get $12 trillion? Where is that sort of action in their mandate? If it isn’t in their mandate, why aren’t they held to account?
Here’s a curious thing; have you ever heard of a Fed governor being fired? And with the giant screw-ups the Fed has been involved in, wouldn’t a few pink slips be in order?
06:48:19
That’s one alternative. Just to illustrate how a debate on this issue brings up critical actions that are given a pass by the media and govt:
Good points, Ben. I wish this type of thing got discussed more.
Perhaps a good weekend topic is how we can fill in the role we keep decrying the MSM should take. How can we educate people and make these conversations happen.
Well “price stability” IS part of their mandate. Unfortunatly they only seem to remember that fact when either wages (the price of labor) go up or asset prices (ZOMG Deflation) go down. Until then we seem to hear “Asset price inflation isn’t our concern,” and “Inflation expectation seem well anchored.”
The Federal Reserve topic has been brought out into the daylight here as well as other enlightened sites.
Some people, regardless of the evidence, can’t get their minds around what has been presented as fact during their entire lifetimes. Examples are the Fed is a government entity, etc. Now throw in fractional reserve lending and you lose a majority of your target audience.
Ben, your blog has been a beacon of truth in an otherwise insane world.
Ben, keep up the good work. You might not get the feedback that allows you to see it but I have conversations all the time about how our dollar is toilet paper. They’re obviously getting this info online because the MSM is just not offering it.
I just came back from Walmart where a stranger and I had that conversation in an aisle. That situation was not a first. Increasingly over the last year this is a discussion that gets repeated in very public places.
Jim A wrote:
Very true. If food, housing, energy, medical, education skyrocket relentlessly, they seem to have little issue with these things.
Why? I’m guessing they think that as long as big business is making money, it’s all good.
Reminds me of that Keynesian vs Hayek rap posted the other day.
The way I see it, inflation is a tax on stupidity. Let me explain.
In 2008, 90% of the electorate sanctioned, with their votes for Obama and McCain, limitless taxpayer bailouts and subsidies for the Wall Street grifters. These same sheep also gave their de facto blessing to the Fed inflating away government debts and liabilities by simply cranking up the printing presses, and handing over trillions in free gambling money to Wall Street banks and trading desks to speculate in global markets, with Bernanke explaining to the sheeple that the subsequent “wealth effect” would stimulate the wider economy. So how’s that working out for you, Middle America?
Naturally the Fed’s deranged money printing and POMO gifts to the banksters is resulting in soaring commodity inflation as more money is chasing fewer goods. In addition, the Wall Street grifters know the Bernanke Put (via QE) and the Republicrat socialization of bankster losses means their orgy of speculation and looting will continue unchecked. Of course the rubes in the flyover states are seeing their savings and purchasing power eaten away by quickening inflation - but, as I’m fond of pointing out, this is what they voted for. Stupidity has a price, and the universe has a way of setting itself right. Now that the costs of the Republicrat’s Wall Street-enriching, Main Street asset stripping fiscal policies are being felt, J6P is starting to get uneasy - but he lacks either the intelligence or accountability to start putting the primary blame where it really belongs: on himself and his mindless perpetuation of the status quo.
sadly, this tax doesn’t just hit the “stupid”. It’s different from the lottery in that regard - all of us holding FRNs get hosed.
You may have noticed I’m more than a little pissed off about paying the price for the mindlessness of the herd. And knowing my children are the victims of the greatest inter-generational swindle in human history, thanks largely to the Boomers.
+1, Sammy
Many of those boomers encouraged their adult kids to become mortgage slaves. I personally know some instances of that. Out of revenge, those very same slaves should walk away from their McMansions and move in with mom and dad.
Still, I am puzzled as to what grounds that I am charged a thief. What did I steal from a young person? Maybe it was because of my one brain fart when I voted in 2004 for GWB? But in 2008 I voted for Ron Paul. All other years before 2010 I voted libertarian. So what did I steal from the young uns?
For the boomers, buying a house was a no-brainer. They paid relatively reasonable prices for the ability to eventually no longer rent.
But, house prices were bubbled through fully government-sanctioned predatory lending. And those high levels are being desperately supported by that same government.
So what we have today is many people’s net worth being decimated by trying to buy at those prices. I personally know of two people who had to bail out on their houses as a result of being unable/unwilling to pay their loans.
The boomers had decades of experience which indicated that buying was a good idea for net worth. That experience is not applicable with current bubble-level pricing (in many metro areas).
“perpetuation of the status quo”
Some of the folks you complain about remember the Great Depression and World War 2. They may feel that our current status quo is better than those times.
If there is no libertarian in their congressional district, they cannot vote for one - except as a write-in, which is even more like throwing their vote away than voting for a 3rd party candidate. (The recent Senate race in Alaska is an exception to the write-in rule and was possible because she was an incumbent. Most write-in candidates have neither name recognition nor the money to fund a campaign)
Or are you only concerned with the presidential election? If you really want to change this mindset, then you should probably get more involved in your local politics.
A neighbor of mine went to Norway last year. She said that their town elections are completely different from ours. Each party votes on their own representative who then sits on the town council. So they may have 10 parties represented.
Wells Fargo published an economic report on Florida on Thursday. Here’s the link: https://www.wellsfargo.com/downloads/pdf/com/research/presentations/FloridaConferenceCall_28April2011.pdf
Slides 19-24 discuss housing in Florida. The negative equity by county (slide 23) was a real eye-opener for me. It kinda brings a new meaning to the word swampy.
Look on the bright side. We’re having one heckuva lovebug season here! They are out in force, flying and mating with a vengeance. Jeebus, walk outside and it feels like you’ve just entered a science fiction movie. They’re everywhere! At least around here. And they get all over everything. Nothing like taking a drive and having them splat all over the vehicle.
Lovebugs are one of the joys of spring in Florida, at least around these parts.
I forgot about spring love bug season. I recall a lot of folks put screens on the front grills of their cars to make cleanup easier.
And your namesake - the palmetto bug. I had never seen a giant flying cockroach before, and the first time I saw one it was flying right towards me.
Florida sure has a lot of bugs.
Disney must spend a ton on pesticides
Hmmmm … I see a market for lots of bug catchers.
Are these bugs attracted to light?
Florida sure has a lot of bugs ??
Lot of “big” bugs…
Palmy, have you noticed more flies than ever before? Must be from all of the rotting foreclosures providing breeding havens. We wanted rich boomers and ended up getting flies and maggots.
Oh, so that’s what they are! I drive north on McKinley in Tampa toward USF and everyday I see those things always doing the wild thing in front of my windshield with another of their species and they seem to be able to fly at the same time.
“Investors are scooping up bargain-priced houses, which is sending home prices lower once again.”
–Cause and effect, ur doing it rong. Seriously, Investors purchasing houses cause prices to be higher than they would be if investors WEREN’T buying houses. How can anybody make the argument that more buyers cause lower prices?
I surmise it’s part of the market’s process of price discovery. Actual transactions set the mark for comparable sales rather than comparing inflated asking prices for properties offered for sale.
It’s the difference between wishing prices and selling prices.
Yep. New lower comps with each and every price drop. Thanks Investors!
But if those investors weren’t buying, the final, capitulation price would be set at an even lower level by owner/occupiers or professional landlords.
Good discussion.
Jim, my understanding is buyers are needed to get to the final, capitulation price. So long as the supply is greater than demand, the price will fall with each transaction, i.e. domino effect.
Right?
Which means if there are no buyers then the fantasy prices can be maintained which means the banks can hold the fantasy prices on their books which helps make the banks solvent.
But if actual buyers emerge and “scoop up” houses at “bargain prices” then the comps also take a hit - and the banks hold a lot of mortgages on the comps.
Sooooo … the game of Extend-and-Pretend by the banks can still be played IF the low prices being paid by people can be explained away due to investors scooping up these houses at BELOW MARKET prices.
Numbers can mean a lot but often the harsh and hard reality of numbers can be softened up by the skillful use of words.
In the World Of Make Believe (where we now reside, or at least USED to reside) nasty numbers are dealt with with clever words and phrases:
“Deficits don’t matter”
“In the long run you can’t go wrong in buying real estate”
“A man’s a fool to pay off his house and leave all that equity to stagnate.”
“Anyone who isn’t leveraged to the max is not handling his money competently.”
In this world it makes perfectly good sense to sell to the guy who works the grill at McDonalds a six-hundred-thousand dollar McMansion.
Anyone who reveals embarassing numbers to the public in this world is demonized. Those who can explain these numbers away in this world are made into heros.
California, for years, “balanced” its budget by explaining away numbers. The numbers are now such that they can no longer be explained away and so now they must be (gasp) dealt with.
Oh, the pain!
Oh, (I almost forgot) in this new world of reality cash indeed rules and debt truly sucks.
“But if those investors weren’t buying, the final, capitulation price would be set at an even lower level by owner/occupiers or professional landlords.”
In my part of metro Phoenix, I see the price drops coming in waves, with each wave the new comps have assisted in moving the prices down. I assume this will continue as long as the supply exceeds the demand and we still have that fear in the qualified buyer pool.
Re-post from late yesterday:
http://www.tampabay.com/news/business/realestate/chase-offers-mortgage-holders-a-way-out/1166880
“JP Morgan Chase has a deal for some homeowners behind on their payments: If they’ll accept a quick sale of their home, the bank will give them $10,000 to $20,000 and forgive what it loses on the mortgage.”
Why do I smell a rat?
Sounds to me like another way of somehow keeping the “F” fully entrenched in the term FB.
Does anybody here really think that in this cash-strapped economy a bank would need to give an FB ten to twenty thousand dollars AND solve the FB’s underwater problems?
Well…I can get my head around the idea that they are spending far more in the legal process of foreclosure and are looking for ways to eliminate that.
Does anybody here really think that in this cash-strapped economy a bank would need to give an FB ten to twenty thousand dollars AND solve the FB’s underwater problems?
Free rent for years and a cash bonus. Can rewards get any more sweet for irresponsible people who live beyond their means? The answer is yes obviously if the FBs bide their time.
Safety in numbers.
Note to self: If you’re going to screw up make sure you do it with a very very large crowd.
I wonder if that is only for the mortgages they actually hold. JPMC became the servicer on my last mortgage after that situation turned over a couple times on the banks end, and I know the numbers they serviced but didn’t own were pretty heavy.
Also I wonder if they are limiting this particular offer to people in Florida or other ground zero locations where the shadow inventory is heaviest.
I love the info the newspaper supplied about the realtors being all excited about it. We never get reporting like that from the Post Standard.
I wonder if this is primarily a way of getting around the robo-signing mess.
“I wonder if this is primarily a way of getting around the robo-signing mess.”
Sheila Bair, the chairman FDIC just said this on 60 minutes last month. Why is anyone suprised.
“I am very worried about if this starts getting out of hand the kind of impact it will have,” Bair said.
“These are lawsuits by homeowners who are being foreclosed upon,” Pelley remarked.
“Or have, are in the process, or have already been foreclosed on,” she said.
“Saying, prove it?” Pelley asked. “Prove that you own this.”
“Exactly,” Bair said.
“How big an issue is that gonna be? There are 30,000 today,” Pelley asked.
“I think this litigation could easily get out of control. And we would like to get ahead of it. We’re already feeling like we’re falling behind it,” Bair said.
Chairman Bair thinks rotten mortgage documents are so threatening to the economy that the government should force banks to pay into a massive fund.
“You think there needs to be a cleanup fund like for a natural disaster?” Pelley asked.
“I do. Yes, somewhat like that. Yes, this is yes this is one of human-making, but yes,” Bair said.
“You don’t want to give an exact dollar amount for this cleanup fund, but what are we talking about. Is it billions?” Pelley asked.
“Yes. I would assume it would be billions. Yes,” she replied.
Read more: http://www.cbsnews.com/stories/2011/04/01/60minutes/main20049646.shtml#ixzz1L2bP9ub1
When a bank is willing to forgive debt AND pay the debtor, something is up. You can count on it. Banks DO NOT DO THIS.
My guess is that they have a large number of lawsuits contesting their actual right to foreclose because they no longer actually hold the mortgage and they project the lawsuits as costing them more.
“My guess is that they have a large number of lawsuits contesting their actual right to foreclose because they no longer actually hold the mortgage and they project the lawsuits as costing them more.”
Isn`t that what Bair said.
“I am very worried about if this starts getting out of hand the kind of impact it will have,” Bair said.
“These are lawsuits by homeowners who are being foreclosed upon,” Pelley remarked.
“Or have, are in the process, or have already been foreclosed on,” she said.
“Saying, prove it?” Pelley asked. “Prove that you own this.”
“Exactly,” Bair said.
“How big an issue is that gonna be? There are 30,000 today,”
Thanks to all of you who helped me with your advice on my below post the other day. A few more comments. Yes, I can live with the damage ( a burn from an iron. There is no security deposit. I’ll try to get landlord tenant rules as Polly suggested. Maybe waiting is best. Supposed I stay here another thwoyears? Then I would owe them for the value of 4 year carpet rather than having to bear the cost of new carpet?????
Enjoy the blog. Need your advice. I rent month to month (having been here a year with no plans to move but don’t think I’ll be here at most another year but not sure) in a nicely run apartment. It was part a small portfolio owned by a family and recently taken over by a large regional landlord. They seem to run a nice operation as well. I damaged the carpet. It will have to be replaced. It was not new when I moved in but good condition. The damage in prominant place on a light color berber style carpet. A patch would not work. I am afraid to tell the landlord. What if they say it’s a gazzillon dollars? Home Depot (who people tell me are high gave me a price that I can easily live with. The price is for replacing the whole apartment (including bedroom) if the carpet cannot be matched. The front hall and living room sort of flow into one another.) But landlord probably has their own people. Should I wait until I already have a new lease when I eventually move? Then landlord will have less leverage? I am just afraid they could give an inflated price, say they need to paint as well since installing carpet can mark up the woodwork. (Home Depot says I would not need to paint. Don’t carpet installers have boards or something to protect woodwork while they install?)Maybe current landlord does not have paint left over from last landlord, etc… I just see this possibly escalating into a costly thing. I am a dream tenant, pay on time, no smoking, no pets, travel for work, etc..
This in a fairly tenant friend state - Mass. Any adive on how to proceed?
Massachusetts is the most renter friendly state in the country. Add in a large regional landlord that cares more about cash flow than anything else. As such, I suggest the following course of action.
1) Call the building/super. Tell him you dropped the iron on the carpet.
2) Listen to what he says.
Seriously. Do not suggest anything that costs you money in the short term. When you move out, odds are there will be nothing deducted from your security deposit (which, as you know, has been earning interest), as other posters have pointed out carpet replacement is typically normal wear and tear.
PS: I hope you slip the building super $40-$60 at the end of the year every year with a fancy little holiday card. That goes a long way toward getting your secuirty deposit back, things repaired without complaint and fast, packages looked after, etc.
It was not new when I moved in but good condition ??
Carpet in a apartment has a useful life…IMO, its difficult for a landlord to charge you for new carpeting when the carpet may already be five years old…
Watched thirty seconds of the royal wedding yesterday.
I was channel serfing.
Ba-dump-ba!
Was watching a movie on hulu.com (you can see some things esp. older TV show for free. But there are commercials) One commercial was was for JP Morgan. More a PR piece than ad for something. They’re loaning money, helping build neighboorhoods, communities, etc…
At&T is also doing the “Warm and fuzzy” blitz.
Goldman Sachs has a “supporting main street” commercial. Sickening!
It was a very well done warm and fuzzy. Does JP Morgan have many retail banks?
Yachts a matter with tax breaks?
http://www.chron.com/disp/story.mpl/metropolitan/7544130.html
Proposed tax breaks for yacht sales in a state with a deficit as large as California’s.