The Rules Of The Game Have Changed
I posed a topic on housing policy, jobs, and the support of the people. “I’ve suggested in the past that the US govt was making a mistake by focusing on propping up housing prices (and Wall Street) instead of addressing the real problem; what to do for a living instead of selling each other houses. My topic suggestion; did Obama lose the people, in part, by supporting these policies? “A very large proportion of recent university graduates have soured on President Barack Obama, and many will vote GOP or stay at home in the 2012 election, according to two new surveys of younger voters.”
“‘These rock-solid Obama constituents are free-agents,’ said Kellyanne Conway, president of The Polling Company. She recently completed a large survey of college grads, and ‘they’re shopping around, considering their options, [and] a fair number will say at home and sit it out,’ she said.”
A reply, “That poll is an ‘informal survey of 500 post-graduates’ by some unknown guy with a month-old blog, who posted his results on Tucker Carlson’s GOP cheerleader website. Show me something that’s statistically relevant, please. And did all these unemployed kids forget that because of President Obama, they at least have health insurance until they are 26?”
“Please distinguish between what ‘Obama’ did, and what ‘Congress’ didn’t do. Remember that there was a block of 40 Republican Senators who blocked everything. EVERYTHING. Obama could have taken HBB policies and they would never have passed into law.”
Another said, “He seemed like a pretty good guy until he handed the TBTF mafia a blank check to permanently keep my family out of one of the many vacant homes we are surrounded by. I can’t beat BofA. I can’t. I’d love to, but I actually have limits and consequences in my daily life. This part of the whole scene is actually Obama’s fault.”
One posted, “It would have made no difference had McCain won. To say that I’m disappointed is an understatement. I wasn’t expecting him to wave his magic wand and fix everything, but so far everything has been a dud: health care reform, off-shoring, unemployment, the wars, housing, banks, etc. There was no ‘change.’”
One said this, “I would agree that those persons between 20-40 years of age who were smart enough to avoid ruining themselves financially in the bubble run-up are also smart enough to avoid getting whacked with propped up valuations on the downhill run. Those people must certainly be disaffected with both the pubs and the dems, but certainly won’t be voting for ‘opey changey on the second go round.”
“And all told the group mentioned above must be what, around 100-200 souls?”
Another, “I would imagine those living in overpriced homes which they plan to sell some day for a capital gain are downright appreciative of the effort to prop up home prices. And they are still a political majority, right?”
On TARP, “Wasn’t Bush in office when TARP happened? Wasn’t it Bush who went on TV and explained to America why we all needed TARP? Wasn’t it Hank Paulsen (Bush’s guy) who came up with TARP to begin with? Couldn’t the Republicans have used their 8 years with full control of the government to decrease offshoring and financial fraud, once it had become obvious to everyone what was going on?”
And another, “Let’s say Obama supported housing to keep the banks from all failing together. That’s got to be a greater good (gag, choke) than the welfare of an individual homeowner wannabe. So, on the current trajectory, how many years of this soft descent will be required to ensure the banking system survives?”
Finally, “Lower housing prices is one possible way that the economy could have created labor market mobility at a time of shrinking pay checks and high unemployment. But instead, we have high home prices coupled with meager job prospects — an excellent recipe for labor market permafrost instead of mobility.”
The Albuquerque Business Journal. “New Mexico’s economy has undergone a fundamental change, and until businesses and workers adjust to the new world, jobs for less skilled workers, especially men, will be harder to come by than in the years before 2009, when the recession really took hold in the state, said Lee Reynis, BBER director.”
“‘We are not able to produce enough jobs,’ Reynis said. BBER expects the construction sector to remain in a recession for some time to come and for government hiring to remain slow. Those two sectors have been significant drivers of New Mexico’s economy historically. Absent growth there, New Mexico needs different drivers, and it is not clear what those will be, Reynis said.”
“Credit is harder to obtain and foreclosure rates are increasing in New Mexico. The supply of housing exceeds demand. Housing stocks grew during the boom years because of easy financing, not because of economic reasons, Reynis said.”
“The construction sector has lost 15,000 jobs. ‘I don’t think those jobs are going to come back, and I certainly don’t think they’re going to come back soon,’ Reynis said. ‘The rules of the game have changed. It’s a really different market today.’”
From CNN Money. “The brutal job market brought on by the recession has been hard on everyone, but especially devastating on the youngest members of the labor force. About 60% of recent graduates have not been able to find a full-time job in their chosen profession, according to job placement firm Adecco. Meghan O’Halloran was one of those who had her career derailed by the timing of her graduation.”
“She left Cornell University with a degree in architecture and six summers of internships at top firms in New York, Milan and London. But after graduating in December 2008, just as job losses in the economy were reaching a high point, she was confronted with a very cold reception into the labor force. ‘I’ve applied for temporary work,’ she said. ‘The answer is always the same, ‘We wish we could hire you.’”
“O’Halloran’s experience is not unique. Last year, the unemployment rate for college graduates age 24 and younger rose to 9.4%, the highest since the Labor Department began keeping records in 1985.”
“According to one study performed by Till von Wachter, an economics professor at Columbia University, the drag on income lasts for 10 years, on average. The outlook could be even worse for the class of ‘09 or ‘10, von Wachter said, since the worse the recession, the longer it takes to get earnings and a career back on track. ‘In the bad recessions in the past, the graduates recovered in 10 to 15 years. But we’ve never had such a strong recession,’ he said.”
The MetroWest Daily News. “Attorney General Martha Coakley said she wants changes in the health care system and more aggressive prosecution of white-collar criminals during a wide-ranging talk yesterday. Foreclosures are also a huge problem, she said. While local legislators have tried to address the problem, she said there ‘hasn’t been much (help) at the federal level.’”
“Coakley said the U.S. Securities and Exchange Commission and other federal regulators joined everyone else on Wall Street and ‘looked the other way’ during the mortgage crisis. ‘Nobody in the industry was willing to stop the tailspin,’ she said.”
Here’s a suggestion for Washington DC. Unleash the shadow inventory and let’s put those construction workers back on a job:
‘The Campbell/Inside Mortgage Finance HousingPulse Tracking Survey’s Distressed Property Index, a key measure of the health of the U.S. housing market, fell slightly to 47.7% in April, although sales of distressed properties continued to account for nearly half of the market.’
‘Survey respondents in April reported that potential first-time homebuyers are having trouble finding foreclosed homes in move-in ready condition. For the month of April, 45% of foreclosed properties were damaged and not inhabitable without renovation.’
http://campbellsurveys.com/housingreport/press_051911.htm
Unleash the shadow inventory
Sorry…. can’t do that. To do so would repudiate the last 30 years of corporatism disguised as a “free market”. To do so would unleash a free market by definition. To do so would be democratic. To do so would obliterate the protection racket for the corporate elite and their benefactors, insurance/banking/realtor Crime Syndicate.
Let’s look at the benefits. Put thousands of people back to work in the private sector, using skills they already have. Reduce the liability to taxpayers via the FDIC and the GSEs, and shore up the financial sector. Put millions of houses in the hands of families, and go a long way toward restoring affordability to the housing market. What’s not to like?
We are coming into the election season. How about it, Obama supporters; will you send this thread to the White House?
Sure.
Ben
You’ll know this. Are the foreclosed homes exempt from property taxes in most states?
I agree with you, from both a buyer’s and taxpayer’s perspective. Enough with Rule 157 and corporate welfare already.
I got an email from a national builder this morning, offering to build a custom home for us. I had emailed them months ago, looking to pay cash for a one-story in So Ca. They must be very, very hungry.
Are the foreclosed homes exempt from property taxes in most states ??
Not in California……
I don’t think any thing in the US is exempt from taxes like that except the govts. I do know that when the GSEs sell a foreclosure, they provide clear title, including taxes, so they must be paying it.
Thank you Ben and scdave. I heard rumors, so I thought I’d asked this brain trust.
Churches pay no property taxes.
Sports arenas pay no property tax.
Not only that, but unleashing the shadow inventory would be a fair way to ask those best positioned to shoulder their share of the recovery effort, i.e., top-1% super-rich folks with so much money they don’t know what to do with that they can think of nothing better to do with their money than to plop down all-cash offers on $500K+ homes, to contribute to the recovery without any need to explicitly raise taxes on the wealthy. The free market could easily accomplish what weak-kneed politicians cannot or will not.
Given myriad reports about all-cash foreign investors snapping up U.S. residential real estate, I am thinking a sizable share of the losses on falling-value shadow inventory would be shouldered by non-U.S. citizens, making the “affordable housing through shadow inventory release” policy all the more politically attractive.
Where is the downside?
Wow, 45% of foreclosed properties in April were probably deliberately trashed. It is probably too late to save the neighborhoods from blight. Meth-heads heaven!
Although the percentage that were damaged intentionally isn’t known, it was nowhere near 45%. The major lenders are FHA, VA and Fannie/Freddie. These groups have tightened their lending standards for property condition. A lack of move-in condition could be as simple as grading of the yard, cracks in the foundation, missing handrails on porches/steps. Or it could be missing appliances, like a furnace, stove, AC unit, or mold/frozen pipes.
What is significant is the 45% probably represents a million or more units. That is a lot of work for people like those I personally know who need something to do.
I think the 45% is also interesting as it relates to walk-aways. I’d be very interested in how many “walk-aways” are from poorly maintained homes as compared to generally well-maintained homes.
It adds a layer onto the discussion:
If you live in a house that is in great shape and you like, but underwater, you are far more likely to stick it out than if you are living in a steaming pile of dung and underwater.
It seems our friends in high circles within the Beltway care lots more for bankers than for Joe 6P, Joe the Plumber, Joe the Realtor or Joe the Construction Worker.
It does not matter who occupies the oval office. We will not get a fiscal conservative government until the majority of voters demand across the board spending cuts and downsizing of government. Last time I checked the rag known as the constitution, it did not say government must get into the weather forecasting business or do anything else but defense, justice, and promote (not provide) the general welfare. Alas, the majority of Americans want something for nothing.
the majority of Americans want something for nothing ??
Like 47 million on food stamps ?? I have no problem with the assistance if needed…The problem I have is they are not required to contribute “anything” to get it…
The Mormons have figured this out. Unemployed members can work at the canneries in exchange for food. This is a far more dignified way to feed your family in hard times than reliance on Subprime Sam’s free stuff.
Mormon Canneries and Self-Reliance
by Country Survival on January 13, 2009
in Food Storage, Self-Sufficiency
At the Houston Texas Cannery operated by the Church of Jesus Christ of Latter-day Saints, members work on a peanut butter assembly line.
Members of the Church of Jesus Christ of Latter-day Saints are taught to prepare for emergencies by having a one-year food storage as well as an immediate two-week supply of food, water, and money. Stocking up on food storage is just one of the many ways that we can prepare for the troubled times we now live in.
If you don’t have any food storage yet, you can get it done at the cannery. You volunteer your time and labor (along with others), and only pay for the cost of the food itself. This is for stuff that you would need in bulk, such as grains, beans, et cetera. The other part of your food storage should come from the grocery store for items that you use on a regular basis, such as canned goods, and should be rotated every six months or so. A good way to start is tithing your food budget.
By using 10 percent of your food budget for food storage, you will be able to grow your supply easily and without much struggle. For example, when you go grocery shopping with a budget of $100, spend the first $10 on food storage items (specifically things that you need and that are on sale), then the remaining $90 on your regular groceries on your list. You will be amazed at quickly you are able to build up your food storage this way.
Now that Obama is the president, it is clearly evident that “change” will happen, and it will be only worse than it is now. Time to get started on the preparations.
…
I worked a morning at the LDS cannery in Denver while I was unemployed a few months ago. It was real work, but at a slower pace designed for people who don’t normally do that kind of work. If it were commercial production it would probably go twice as fast (or more). The equipment worked pretty well, but was old fashioned. I assume that a newer commercial facility in the US would have more safety protection…it would have been pretty easy to get injured there. Overall my impression was positive…looked like a great way to put people to work making stuff they could actually use. My day was tomato soup day. Didn’t taste it but it smelled and looked just like Campbell’s.
Weather forecasting doesn’t promote the general welfare?
You don’t have to believe me. Just look at the stats for deaths caused by tornados before and after the NWS started doing tornado watches/warnings. Especially after the WSR-88Ds started coming on line.
I guess public libraries should be privatized as well? Swell. The PTB/top 1%ers already have a monopoly on information. Turning information into “pay-per-view” will only make things worse.
I’ve seen “privatized” info. I’m required to have current manuals when I work on airplanes. Subscription service for a loew end bizjet? A couple of thousand bucks a year.
So a lot of guys don’t bother using current manuals. Which won’t be a problem, until it is a problem. Yeah, those guys may lose their certificates. Won’t do those people on the airplane much good.
GS, ignore the TEA talking points. The pendulum is swinging faster than they’d planned:
http://www.miamiherald.com/2011/05/20/2227021/in-jacksonville-mayoral-loss-lessons.html
Looks like the TeaKoch party was a tempest in a Teapot. And this is in super-conservative Jacksonville.
from the article
“What’s more, Brown’s win showed the potential risks of fully embracing arch-conservative tea partyers — as Hogan did — and suggested Republicans may face some fallout over the perceptions of Gov. Rick Scott and the Republican-controlled Legislature.
Scott, who frequently visits Jacksonville, is less popular there than President Barack Obama, and he campaigned for Hogan at a high-profile tea party rally.
“We were very happy when Rick Scott came to town. We were all for that,’’ said Brown’s pollster, David Beattie, laughing.”
It’s strange the TeaKoch party isn’t more of a force, with leaders like this:
from the article
“First Coast Tea Party leader Billie Tucker, an early Rick Scott supporter, raised eyebrows when she railed against Brown-supporting “zombies” spreading through Jacksonville. Among the tidbits of advice she offered conservatives on her blog: “Pray. Zombies hate people who pray. They don’t believe in it and that is a good thing! We know the power of prayer can release a Zombie from the stronghold they are under. Pray for all the Zombies and keep praying that they will see the light.”
Ya don’t know whether to laugh or cry.
“Weather forecasting doesn’t promote the general welfare?”
Anyone who lives in hurricane country should look at documentaries of the Galveston hurricane of 1915. Reports from Cuba were ignored and many people died when the whole island went under water.
I am thinking this IS the conundrum.
House price appreciation is the basis of most middle class peoples plan to “retire” comfortably. Housing based stocks or at least the underlying loans are owned by pension funds, 401k funds, the Chinese and most importantly now by the Federal Reserve and US Govt, who have invested trillions to keep the prices floating by making sure the foreclosures NEVER reach the market.
I doubt this strategy will be sustainable over the long term, since it requires homes be kept empty and locked up, resulting in decay, mold problems etc, and the banks continue to have to pay taxes and maintain them to some degree. It seems to be this plan works IF the “recovery” comes along pretty soon, but it is this same strategy which is holding back any possibility of recovery by artificially keeping prices so high very few can afford or qualify for them.
I am going to go out on a limb and postulate that at some point in the next two to three years events will occur which will require these properties be dumped, and everyone will see for themselves the king has no clothes.
“in the next two to three years”
GH, with all respect, this is how I felt in 2007. He we are in 2011… in the long run, we’re all
dead,renters.“Markets can remain irrational a lot longer than you and I can remain solvent.”
-John Maynard Keynes.
Every year that housing remains overpriced relative to renting is a year when we win by renting. If it remains overpriced forever, then we win forever.
It is cheaper to own than rent in most markets.
I know people who are buying foreclosed homes in Southern California and renting them out to get an 8% yield after expenses. This is a real “cheaper to own” example.
An individual could buy that home, pay for the costs of ownership (mainly taxes and insurance), and be better off to the tune of 3% per year (if their mortgage rate was 5%).
‘House price appreciation is the basis of most middle class peoples plan to “retire” comfortably.’
That was a bad choice, wasn’t it? Anyone who pursued this strategy should have to take responsibility for how it turned out. I disagree with the notion that others should have to bail out greater fools whose assumption they would get rich by investing in real estate proved false.
It worked out great for my parents, who made money on every house they ever owned since the 50’s starting with a small bungalow in Guildford, Surrey purchased for Some Ten Thousand Pounds in cash…
I never heard of real estate as a viable plan for retirement until sometime a few years ago reading about it on this HBB. It was supposed to be through regular investing in stock index funds. I thought becoming a landlord was nutty.
Pshaw! I recall people in SoCal counting their appreciation chickens before they hatched as far back as the 80’s.
“I never heard of real estate as a viable plan for retirement until sometime a few years ago reading about it on this HBB.”
I was just getting ready to write this until I saw Bill already did. Yet according to one of our own(the thread starter), this false idea is considered conventional thought. How does this work? I don’t know a single person or couple that have counted on price appreciation of their SFR. I have elderly parents, aunts uncles and my oldest brother and his wife and none have “cashed in”. Where do they go? Move into an apartment? Rent a house?
Someone explain this.
I think the whole idea was you have a paid off house by the time you retire ,so you don’t have the housing nut when you need to retire . It was a forced savings plan and a tax write off
because you needed housing anyway . It wasn’t the best investment plan ,just a hedge against inflation ,but it was a plan the people favored .
When the whole thing turned into a fake market and a get rich quick Ponzi scheme in a short time span ,than it was destined to crash .
There was always real estate speculators ,or flippers ,but the market from 2002-2008 was simply a mass Ponzi-scheme of
fake prices due to faulty lending and a crime wave .
So now all of a sudden real estate was going to give people the buying power they didn’t have by employment ,real estate was going to fund retirement in style ,and cure all the ills of a Society that had been on a stupid course for a long time with numerous policy decisions .
It was a major corruption cycle that masked the real culprits
take-over and betrayal of the American worker . The corruption seeped into the Health care Industry also and all long term structures in America that use to be functional ,
became undermined . Now the structures can’t hold up the
corruption and stupidity . The worker bee is suffering as well
as all social nets in favor of the FAT CATS .
“…this false idea is considered conventional thought. How does this work? I don’t know a single person or couple that have counted on price appreciation of their SFR.”
REIC propaganda / MSM snow job…
“I have elderly parents, aunts uncles and my oldest brother and his wife and none have “cashed in”. Where do they go? Move into an apartment? Rent a house? ”
I don’t know how my dad did it, but he pulled it off. He sold the Rochester, NY home I grew up in (bought in 1982) in 2004, rented a townhouse for four years, then bought a very nice, but modest townhouse in 2008 and pocketed the $100k difference.
I don’t know a single person or couple that have counted on price appreciation of their SFR.
It’s an extremely common mindset in coastal California.
Ah, no wonder! I grew up in Fresno (farmland part of Cali). There was never any house appreciation in Fresno until the 2003 bubble, at least from the early 1970s.
It only works as part of retirement if you don’t get all crazy with the financing.
The problem is this:
The same person who needs the forced savings of a 30-year mortgage, is that same person who couldn’t save as a renter, and is exactly the same person who loves the 3/1 interest only ARM because it puts more money in their pocket for a big screen TV.
It worked well for my folks…they had the discipline to pay off their mortgage, and downsized after. They turned some of their saved equity into cash, and when combined with other savings are doing just fine.
Despite paying off the home, the home wouldn’t have been enough for retirement…it took all of the above (Soc Sec, 401k, corporate pension, other savings) to get them to the point where they could retire.
“He seemed like a pretty good guy until he handed the TBTF mafia a blank check to permanently keep my family out of one of the many vacant homes we are surrounded by. I can’t beat BofA. I can’t. I’d love to, but I actually have limits and consequences in my daily life. This part of the whole scene is actually Obama’s fault.”
I agree, but doubt a different POTUS would have done otherwise.
I agree, and to placate V, I am not rewriting history. QE2 happened on Obama’s watch, yes?
Here is all I remember of the president’s during my life: When George was president I don’t remember much, when Clinton was president everything seemed o.k., then Dubs came, and that was a scary time. We were attacked and he starts threatening the world, and then somehow turns it into Pipelinistan / Banksta’s paradise… and now Obama seems to be the other side of that same coin.
If he can’t put a cap on this $hit, why do we have a president? I got into an argument about evacuations with my buddy after we got talking about this video:
http://www.youtube.com/watch?v=JHiqGqoIGII
WTF are the feds for? And I’m not asking this in a TEA way. We need federal crap, but it needs to be reigned in. Or, if they do exist to clean up national disasters and protect US citizens, why don’t they do that? It seems like every part of government exists for a good reason, but somehow how we are years down the road and all of these parts are further from their purpose?
I remember NYS Troopers went to help out with Katrina. THEY DROVE down. Are you kidding me? Where was the national guard? Where was the LA State Police?
GAH.
Let me summarize this incoherent ramble: we need gov, but gov has mutated into something that is not helpful.
I agree with you, Muggy, especially when I look at the whole illegal immigration phenomenon. It really boggles my mind, starting with that mind-bending day back in 2006 when illegals took to the streets, nationwide, to demand their “rights”. I was stunned as police just stood by and watched, rather than act.
since then, the border has become an area of violence, when it should have been closed, not with a fence, which is laughable, but a wall on the order of the Great Wall of China with military posted all along it.
The fedgov should have gotten serious about illegal immigration a long time ago, instead of posting warning signs on national lands regarding human and drug trafficking. Or instead of fingering little children at the airport.
I agree that McCain would have also given over a blank check with no strings. I expected more from Obama. He “could” have refused to give the money over until a deal regarding banking behavior towards consumers was reached, or better yet allowed the big banks to tank while supporting the smaller community banks which have been allowed to fail by the hundreds.
Kind of makes one wonder if a president really has the power we think they do?
I’m convinced that we’re not experiencing a TEMPORARY downturn,but a PERMANENT downturn.
Agree.
I agree, too, and if you look at what led up to this, it’s freaky to think about how much unwinding we have yet to do. A couple of years ago ET-Chicago and I were talking about all of the silly stuff we were working on and getting paid for in the early 00’s… and that was 10 years ago…
No recovery is likely to ensue until a majority agree with you…
Disagree. This downturn is no more permanent than the “permanently high plateau” of home prices. It just feels like a permanent downturn right now.
I enthusiastically voted for Obama in 2008. Yet Obama started to betray his constituency on January 20, 2009 - the very day he took office.
Appointing people like Tim Geithner and Larry Summers to high positions of authority in finance and economics immediately proved to me that Obama did not grasp the severity of America’s economic programs. Geithner could not compute his taxes correctly using a popular software program, while Summers had managed to erase half the endowment of Harvard University during his tenure as Harvard’s President.
The stimulus package was designed primarily to prop up state and local governments. It did nothing for the broader middle class unemployment problem. Now that the stimulus funds are spent, state and local governments are laying off tens of thousands whose ‘jobs’ were temporarily saved.
Silly giveaway programs like “cash for clunkers” and “housing tax credits” did nothing to ease the widespread middle class unemployment problem either.
The final straw for me was the reappointment of Ben ‘Bernokio’ Bernanke. Bernanke is a pathological liar who has failed miserably to foresee any of America’s economic problems, and his policies have been designed to prop up insolvent banks at the expense of everyday working people. If you have a CD at a bank, buy food at a grocery store or gas at a gas station, you know exactly what I mean.
We got a health care bill written for the benefit of private insurance companies and Big Pharma. That bill will not ‘reform’ health care. It will simply transfer trillion$ more from the pockets of the formerly middle class to the coffers of corrupt mega-corporations.
In other areas of public policy, Obama has failed to close Gitmo, failed to get the US out of Iraq, expanded the conflict in Afghanistan, and expanded the police state powers of the TSA, instead of simply repealing the Patriot Act. While Obama managed to eliminate Osama bin Laden and send him to sleep with the fishes, this act is mostly symbolic, as is the repeal of ‘don’t ask, don’t tell.’
All in all, President Obama is nothing more than a clone of his predecessor, and is basically serving George Bush’s third term.
Having said all that, I think the Republicans are far worse. Just look at the piecemeal attacks on women’s rights taking place in states all over the country, and the wholesale erasure of constitutional protections supposedly enshrined in the Bill of Rights, aided and abetted by conservative judges all over the country.
Every day, the electronic police state grows ever bigger and more powerful and it now has the support of both major political parties.
I will not vote to re-elect Obama under any foreseeable circumstances. If a Republican wins in 2012, I’ll stay in the US for a while to see what changes. Hopefully I won’t wait too long before I make my final exit from the US - a lot of people in Germany waited too long in 1938 and 1939, and by the time they tried to leave, it was too late for them. I hope it won’t be too late for me.
Hold on! I was under the impression Bernanke was appointed by GWB.
Correct.
He was reappointed by Obama, one of the early signs of business as usual.
Correct. First appointed by Bush II, then reappointed by Obama. There’s no greater evidence that Obama is a Bush clone.
Vegas Bob, if you know of a nation that ensures individual liberties more than in the U.S. Please let us know! I would leave for it at once! The right to life, liberty, property and pursuit of happiness transcends the civil liberties which Bible thumpers hate, as well as economic liberties the socialists hate.
Bill, it’s not the Bible that hates liberties, it is the intentional sheep herders that hate freedom.
“Geithner could not compute his taxes correctly using a popular software program, while Summers had managed to erase half the endowment of Harvard University during his tenure as Harvard’s President.”
They seem quite well qualified to me. Whom would you have appointed in their stead?
Paul Volcker.
I voted for Obama precisely because, in his campaign.. he promised to have Paul Volker (Fed Chairman during Carter admin) on his Fiance Committee.. which led me to believe that he was going to reappoint him as Fed Chair again.
Volker was an inflation Hawk… he hiked interest rates HUGE in the late 1970s. Sure, it was painful.. but necessary to head off inflation.
Now that Obama reappointed “Helicopter” Ben… we will all be screwed w/ inflation.
VOTE “ANYONE BUT OBAMA” in 2012!!!!!!!
VegasBob
I also was thinking about an exit from the US.
I was thinking about moving to California.
Vegas bob …I like you post above ,I feel the same way, but I’m not looking at leaving ever .
Interesting commentary this VegasBob guy…..
If I knew where there was a better place to be, I would already be there. I don’t want to leave the US, but as basic Bill of Rights protections are systematically erased, I don’t think I want to be here when they decide it’s time to lock the exit door. We Americans are like frogs in a pot of water - by the time we understand that the burner is on high heat and that we’re being boiled to death, it will be too late for us.
My brother has dual US-Portuguese citizenship, so I could probably get into Portugal and by extension the Eurozone (at least until the Portuguese economy implodes and Portugal is forced to exit the Euro).
My point is that A nation has an excuse to erase the freedoms you enjoy if those freedoms are not “guaranteed” in its constitution and has no objective court system as part of the checks and balances. If you don’t talk the talk you don’t need to walk the walk. I do agree that the constitution is being ignored in the U.S. Better to have the rights written than not. They are there to point to when we do the second American Revolution. The first paragraph of the Declaration of Independence predicts and endorses revolutions.
Bill…you are so right that a Revolution might be in the making ,
but the form it will come in is of concern .
I’d like to add that I’ll be very, very surprised if Obama is re-elected. I have talked to countless people like VegasBob and myself who voted for him in 2008, but who would never consider voting for him again. He’s a liar and a failure in my opinion. And, the Summers, Geithner, and Bernanke appointments did not sit well with me at all.
I think he’ll be re-elected, but with a smaller majority. I won’t vote for him this time. I won’t vote for whoever the Republican candidate turns out to be, either. To vote for either major party is to endorse another 4 years of the same.
“I’d like to add that I’ll be very, very surprised if Obama is re-elected.”
So will every political analyst.
Obama has to run against a backdrop of historic long term unemployment, an increasing number of middle-class families slipping into poverty, and three hugely expensive foreign wars with little benefit for the U.S. He’ll never make it, IMHO.
“He’ll never make it, IMHO.”
Right, and we’ll end up with some Retardican hack who sends us further into the abyss in order to enrich those who brought us to where we are today. Still, I’m done with the “lesser of two evils” vote. This will likely be the first time in my life in which I do not vote in the Presidential election.
If you’re sure Obama won’t be re-elected, you’re on the other side of the oddsmakers. Here’s your chance to cash in:
Intradedotcom-The World’s Leading Prediction Market
Barack Obama to be re-elected President in 2012
61% chance
Last prediction was: $6.10 / share
Todays Change: +$0.05 (+0.8%)
It’s too early for a real hero. Let’s discuss in 2015.
I personally will not vote again for Obama, but I reckon his success or failure at the next election will hinge on how successful the Republicans are at putting forward a strong presidential candidate.
If I had my way, I would like to see the president remain as much as I dislike him and his policies but strengthen the Republican hold on Congress and have the Republicans take the Senate, but not with sufficient numbers to override a presidential veto. This way neither party can do any further harm for the next 4 years.
Nice rant, VegasBob, and I feel the same way for the most part with the exception of leaving the country. I’ll die here one way or another. I’m not opposed to taking up arms to help the cause.
Wow, VB. I wasn’t the choir, but now I think I’m starting to sing!
Good luck in Nirvana.
At what point will the “foreclosure rapture” occur?
Who Will Buy the Foreclosures?
Published: Friday, 20 May 2011 | 1:42 PM ET
By: Diana Olick
CNBC Real Estate Reporter
Not to sound like a broken record, but only when we work through the vast inventory and shadow inventory of foreclosed properties, can home prices bottom and housing recover overall. Obviously certain markets are more burdened by the distress than others, but it’s a universal truth.
In April, however, the percentage of investors and all-cash buyers in the market dropped a bit. Investors have been buying the lion’s share of foreclosures, as first-time home buyers continue to play a very small role in housing’s recovery. First-time buyers should be about 40 percent of the market, but realtors say they are now about 36 percent. They made up nearly half of the market last Spring, but that was all thanks to the home buyer tax credit.
In addition to a tough job and mortgage market, first-time buyers are also looking at a lot of work when buying a foreclosed property.
I found this survey from Campbell/Inside Mortgage Finance particularly interesting this month:
That also tells me that barely 18 percent were bought by move-up buyers.
Investors want to rehab these places and flip them as soon as possible, but today they are being forced to put them up for rent as first-time buyer demand is still weak.
…
That’s the new joke these days, the millions of empty houses? Why of course! All evidence the rapture came for the former residents! It was a multi year rapture and still occurring!
LOL Apparently you can take your appliances with you in the rapture.
Market Insights: Warning: Do you know what is hiding in the shadows?
By Daniel Webster Johnson
Many owners have no reason to sell so are waiting for prices to climb. The owner of this home is waiting for prices to increase.
You and I care about Summit County real estate. That is why I provide these market insights each week and why you read them. I have seen what is hiding in the shadows and I want you to know what it is.
This article is about “Shadow Inventory,” a term used frequently in the real estate industry, but not always understood. First, let’s define what the industry means by “inventory.”
The National Association of Realtors® (NAR) defines it as the number of properties currently for sale in a specific market. On a national basis, this is expressed in months. However, here, in some segments of the market, we have so much inventory we express it in years! For example, in The Highlands of Breckenridge, at the current time, the inventory of vacant land is over four years. Based on my involvement in the Resort & Second Home Specialists Division of NAR, I have learned the ideal supply of inventory is closer to six months. This means that if no additional properties come on the market for sale, the existing supply would run out in six months.
“Shadow Inventory” is the inventory that is likely to be coming on the market in the foreseeable future. For example, in most major metropolitan markets, bank-owned homes that have not yet been placed up for sale constitute the majority of the shadow inventory. In our resort community, it is much, much different. Here, those who hold the shadow inventory are sellers waiting for prices to increase. In particular, these are property owners who want to obtain the same peak price they could have obtained if they sold in 2007/08.
Have a look at the photos of this Summit County home. At the peak of the market, it might have sold for $3+ million, but not today. This summer, it might sell for $2 million or less. Here is what I hear from owners of properties like this one: “It is very hard to swallow losing one million dollars or more.” I agree.
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Sounds like a great time to buy a home in St. Louis, if you are into living there. It’s quite amazing to see St. Louis crashing so much harder than California, despite the fact that the latter was viewed as a housing bubble ground zero area while the former was not generally regarded as residing in bubble territory during the runup to the real estate crash.
P.S. I highlighted the stats posted below for St. Charles County, where my sister owns two homes (one of them now an accidental rental).
Cold reality for housing market here
BY TIM BRYANT
Friday, May 20, 2011 12:10 am
It’s a buyers market for home sales
It’s a buyers market for home sales
It’s a buyers market for home sales
It’s a buyers market for home sales
Related Stories
Sales, prices on a slide
Census shows slump in St. Louis home ownership
No spring in St. Louis home construction
A one-word statement describes the St. Louis housing market in a recent report: Cold!
That summary — exclamation point included — highlights the depths to which the region’s market has plummeted. Even as the overall economy crawls forward, the area’s housing market remains mired in the rugged days of 2008.
New home construction remains stalled. Sales of existing homes are on pace this year to fall short of the paltry number sold in 11 St. Louis-area counties in 2008, according to the report released by St. Louis real estate brokerage firm More, Realtors this month.
The lingering slump shows up in April’s 2,219 sales of previously owned homes — down 17 percent from the same month three years ago, according to data compiled by the Post-Dispatch. The bump provided by last year’s first-time homebuyers’ tax credit has vanished.
And the glut continues to grow: The number of houses put on the market in the 90 days preceding May 13 — 1,182 — exceeded those put under contract or taken off the market, 953, More reported.
More’s “market action index,” which measures housing supply and demand on a zero to 60 scale, rates values above 30 as a seller’s market. In its most recent rating, the St. Louis area rated a 13.
“I would say the St. Louis housing market has probably found the bottom, albeit a rocky bottom,” said Dennis Norman, a More broker. “I expect prices to continue to drop some; but, basically, the strong downward trend has stopped.”
That doesn’t mean recovery lies just ahead.
…
Sales, prices on a slide
Posted: Friday, May 20, 2011 12:00 am | No Comments Posted
Sales of existing homes and median prices fell across much of the St. Louis region in April, as they have been doing all year.
Sales Median Price
Apr. ’10 Apr. ’11 Change Apr. ’10 Apr. ’11 Change
St. Louis County 1,162 835 -28.1% $145,700 $139,500 -4.3%
St. Charles 450 334 -25.8% $167,000 $148,000 -11.4%
St. Louis (city) 340 226 -33.5% $110,000 $98,000 -10.9%
Madison 267 213 -20.2% $121,875 $108,000 -11.4%
Jefferson 230 210 -8.7% $138,000 $120,400 -12.8%
St. Clair 275 190 -30.9% $120,000 $123,000 2.5%
Franklin 91 90 -1.1% $128,500 $99,500 -22.6%
Lincoln 53 43 -18.9% $123,500 $103,000 -16.6%
Warren 32 35 9.4% $116,500 $108,800 -6.6%
Clinton 35 22 -37.1% $105,000 $105,000 0.0%
Monroe 34 21 -38.2% $173,500 $187,500 8.1%
Total 2,969 2,219 -25.3%
Source: MARIS, Illinois Association of Realtors, Greater Gateway Association of Realtors, Keller Williams
Serial bottom callers at The Economist magazine seem convinced that a U.S. housing recovery is at hand. The fact that they continue cheerleading for higher home prices as a sign of recovery suggests they are stuck in the denial phase of the housing bust. Before a U.S. housing recovery ensues, we need to undergo a paradigm shift to collective recognition that affordable housing prices are healthy, while unaffordable housing prices are financially destructive, having the tendency of miring households under a yolk of unrepayable debt. Unbeknownst to the banksters, the slave era ended on January 1, 1863 in the U.S. with Abraham Lincoln’s issuance of the Emancipation Proclamation.
Recovery hasn’t happened yet. If the ratio of home prices to rents has returned to pre-bubble levels in most of the U.S., it certainly hasn’t in California. And I disagree with The Economist writers that the bubble began in 2001; dating the inception to 1983 or so would better reflect the duration of the Volcker-Greenspan-Bernanke easy money regime at the Fed.
The twisted confusion of bubble era beliefs must be left in the past before genuine and sustainable recovery can take hold.
The housing market
The darkest hour
Signs of hope among the gloom
May 19th 2011 | WASHINGTON, DC | from the print edition
…the ratio of house prices to rents has returned to its pre-bubble level (see chart).
Other numbers are looking a lot better. Vacancies for apartments tumbled in the first quarter of the year and are now at a three-year low. Rents have been rising, and analysts expect them to increase by over 4% this year and next. Rent rises typically support house prices by making home-ownership more attractive.
The credit markets are healing. Mortgage borrowing actually rose in the first quarter, according to the Federal Reserve Bank of New York. New foreclosures were 17.7% lower in the first quarter than they had been at the end of 2010, and household delinquency improved for a fifth consecutive quarter. Mortgage rates have fallen back to historic lows, tracking declines in yields on American government bonds.
Explore and compare global housing data over time with our interactive house-price tool
Perhaps the best news for housing has come from the labour market. The economy added over 200,000 jobs in each of the past three months and over 1.3m jobs in the past year. A better job market enables struggling households to make mortgage payments, reducing foreclosures. For most of the bust, borrowers that fell behind on their loans were likely to end up in serious difficulties. In the first quarter of this year, for the first time since 2007, more mortgage borrowers caught up with their payments than fell further behind.
Job growth may also set loose what economists call “shadow demand”. Some households, especially young workers, shared homes during the recovery to economise but can now afford to move out. Above all, the construction business has been so depressed that even a minor spurt in demand from new households could give prices a lift. If that, in turn, boosts construction employment, a vicious housing cycle could turn virtuous.
from the print edition | United States
I agree that there must be a paradigm shift to value affordable, but unsubsidized, housing. I do think the boomers had a lot to do with the end of the bubbles. The real paradigm shift will be to value renting and owning fewer things, to become less materialistic and become in better personal finance shape. We can expect more multi-year lapses in employment. We would hope that employers will get used to this 9% official unemployment and not stigmatize those out of work longer than a year as unemployable. Because there will be more multi-year unemployment for more people down the road as the nations around the globe adjust to the market forces. At some point equilibrium will be reached and Chindian labor will be too expensive relative to American labor. But that could be a generation or two away. It spells death to the concept of owning a home and staying in a small town, expecting your job to last as long as your mortgage.
One would hope that many people who are still working will at least try to profit from the dynamics of the world going free market. VEIEX, OPPAX, DODFX, REREX, PRASX. If your job gets outsourced, you may as well be their bosses.
Funny, I used to own shares in HP, but I never felt that I was either Fiorina’s or Hurd’s boss. I guess I just didn’t own enough shares.
Then again the Hewletts and Packards own or control billion of dollars worth of shares and they have no real voice either. Carly told Walter Hewlett and the rest of the Hewletts and Packards to eff off when they opposed the merger with Compaq.
Inflation in labor rates in China and India and the devaluing of the dollar will, I predict, reach equilibrium in less than 10 years.
…the ratio of house prices to rents has returned to its pre-bubble level
Every time I read one of these articles in The Economist, I mentally insert “except where it hasn’t” and move on.
On average nationwide, perhaps it’s true, although one might expect this ratio to overshoot on the way down.
In coastal California and the other still-bubbly locales, it’s not even close to true.
“Volcker-Greenspan-Bernanke easy money regime at the Fed.”
I defy you to show me the easy money period of Volker’s reign at the Fed.
You may have a point. Let’s say Greenspan-Bernanke, then…
Word.
Volcker- Hired by Jimmy C., fired by St. Ronnie- for not being a supporter of financial deregulation.
I find it amusing that they would cheerlead for higher house prices.
Would they cheerlead for higher stock prices?
Higher gas prices?
“There is no where in the country where real estate will go up for a very long time”- Suzie Orman, May 21 2011
From the same show:
“2012 will not be a good year.”
Suze Orman, May 21, 2011
Will “Welfare for the Wealthy” (aka the mortgage-interest deduction) get rescinded as part of deficit reduction, or will it not?
* May 18, 2011, 2:46 PM ET
What’s the Future of the Mortgage-Interest Deduction?
By Matthew Strozier
Despite its popularity among real estate agents, builders and homeowners, talk is building on Capitol Hill and in policy circles of scaling back or eliminating the mortgage-interest tax deduction.
Commentators give plenty of reasons to dislike it (see below). They say it unfairly benefits wealthy homeowners (even mortgage interest on second homes can be deducted) and is far too expensive at a time of great concern about the national debt. But supporters say that it’s crucial to the housing market, and cutting it would amount to a tax increase on homeowners as the housing market struggles to emerge from its historic bust.
Complaints about the mortgage-interest deduction are not new, but they have renewed vigor these days in the heated federal budget debate. The deduction ranks high among so-called tax expenditures, reducing federal revenues to the tune of $100 billion annually. “So it’s big and it’s prominent,” said Donald Marron, director of the Urban-Brookings Tax Policy Center.
Current law allows interest deduction on mortgage debt totaling $1 million, and up to $100,000 in home-equity loans or lines of credit, for a principal and second home. There are several options to change the deduction, including: limiting the rate for upper-income households; replacing it with 15% refundable credits; and phasing it out over time.
So Developments posed this question to a group of experts: Should Congress cut back or eliminate the mortgage-interest tax deduction to help reduce the deficit?
…
“Should Congress cut back or eliminate the mortgage-interest tax deduction to help reduce the deficit?”
Not only that, but a few in the MSM have suggested (the horror!) that the interest deduction encourages leverage. I think even the WSJ came out & said why not have a tax deduction on principal instead of interest, to encourage borrowers to pay off their homes as quickly as possible.
Wouldn’t that be something.
Meantime, I can’t understand why anyone would be buying now given the rules around homeownership could be very different moving forward.
News
Report shows housing and renters markets have flip-flopped (with video)
Published: Sunday, May 22, 2011
By Cassandra Shofar
Not long ago, it was a housing market’s world, leaving the renters market scrambling to keep pace.
But the tables have turned.
A recent report by the National Low Income Housing Coalition found that high unemployment, falling wages and low rental vacancy rates driven by a post-recession return to renting have combined to put housing stability beyond the grasp of low-income households across the country.
The Out of Reach 2011 report also shows the “mismatch between the rents available across the county and what low-income renters can really afford.”
“We went through a period of high vacancies during the time when interest rates were so low, people you thought couldn’t buy homes were buying homes,” said Carole Burning, apartment manager for Normandy Manor Apartments in Mentor-on-the-Lake. “We were shocked at what people were buying. Now you’ve had all these foreclosures and people are back to renting.”
In the past year, Burning, who has been with Normandy Manor for 21 years, saw the highest upswing.
“Right now, I’m 99 percent occupied,” she said. “Everything that’s opening up is already rented. I haven’t see that for a long time.”
…
Everyone is getting the shaft on housing, except for the most irresponsible who signed up for loans they could not afford, and live rent free each month as they wait for a foreclosure which never happens due to a bank playing extend and pretend.
Question? At what point does an accelerated strategic default rate trigger a change in banking to bring forth the shadow inventory to market more quickly? High wage earners dumping multimillion dollar property back to the bank is the elephant that cannot be swept under the carpet.
Never. Extend and pretend accounting rules promote massive amounts of shadow inventory. The banks will probably be allowed, at some junction in the future, to unload these unlivable shacks to the FED for full value in exchange for cash, and the FED will unload them upon the taxpayer where they will be torn down, with the taxpayer bearing 100% of the financial burden.
Let’s name the Congressional protectors of Wall Street criminals, kick them out of office, and tar and feather them for good measure. What’s stopping us?
Salon
Editor: Andrew Leonard
Updated: Today
Topic: Wall Street
Friday, May 20, 2011 06:21 ET
Eric Schneiderman vs. Wall Street and its political servants
By Glenn Greenwald
It’s rare to be able to write in praise of a high elected official, but Eric Schneiderman — New York’s recently elected state Attorney General — thus far deserves it. As a State Senator, he was one of the leaders in reforming that state’s decades-old, oppressive Rockefeller drug laws, waging war on what he called “the failed drug policies of the past” — harsh, mandatory prison terms for users — and replacing them with non-punitive provisions “to expand drug treatment as an alternative to prison [and] give judges more discretion to divert drug-addicted individuals convicted of non-violent drug crimes to treatment” (politics is never pure; the price for those reforms were longer sentences for so-called “drug kingpins”). He is also an outspoken advocate for full-scale marriage equality, joining former Reagan Solicitor General Ted Olsen in decrying “civil unions” as “a badge of inferiority that forever stigmatizes the relationships of committed same-sex couples as different, separate, unequal and less worthy.”
But most noteworthy and impressive is his seemingly solitary fight to hold Wall Street accountable for the vast corruption and criminality that spawned the 2008 financial crisis, which continues to impose serious financial hardship and anxiety on hundreds of millions of people around the world. As the U.S. DOJ steadfastly looks the other way and other state Attorneys General prepare to settle all potential charges in exchange for payment of woefully inadequate “cost-of-doing-business” fines, Schneiderman is doing the opposite, aggressively expanding his investigation in a way that could single-handedly sabotage the efforts to permanently protect this industry from accountability:
…
Schneiderman, Schneiderman!
He’s our man!
If he can’t do it,
No one can!
Thank god for NY state attorneys general.
Watch out for honey-traps, Eric. Don’t stand near the edge of the subway platform in a crowd.
Is it possible, at least in principle, to simply shut down banks whose operations demonstrate a pattern of persistent intent to defraud others?
This is the information age. Let’s out criminal operations and those in high office who protect them, and send the ring leaders to jail. America deserves better than a corrupt banking system.
Sunday, May 22, 2011 2:35:56 PM
Goldman Still at the Heart of Crisis Investigations
The banking giant expects Federal subpoenas on its mortgage business.
(May 22, 2011) — Goldman Sachs may receive subpoenas from US prosecutors looking for more information about the firm’s mortgage-related business.
According to the Wall Street Journal, Goldman officials expect the Justice Department to demand additional background information within days. The subpoenas would follow a 639-page report on the financial crisis released last month by the Senate Permanent Subcommittee on Investigations, which alleged that Goldman executives misled clients in order to reap profits, and then proceeded to lie to Congress when questioned about its actions. The lengthy report was completed after a two-year probe of the mortgage business that led to financial collapse. It concluded that Goldman mismanaged conflicts of interest, putting its interests above all others.
Already, the banking giant has released hundreds of millions of pages of information to the Senate Permanent Subcommittee on Investigations and to the Federal Crisis Inquiry Commission, the WSJ reported. “Goldman is a high-octane, high-profile target,” Dick Beckler, a partner in Bracewell & Giuliani’s white-collar defence practice, told Reuters.
Earlier this month in a 10Q filing, Goldman Sachs disclosed that it is facing fraud charges over whether it improperly used investment accounts to conduct trades. According to the filing, the Commodity Futures Trading Commission (CFTC) will recommend that the federal regulatory agency bring fraud charges against the banking giant over the firm’s role as clearing broker for an unnamed SEC-registered broker dealer. The CFTC has alleged that Goldman either “knew or should have known” that the broker-dealer’s sub-accounts at Goldman belonged to the dealer’s customers and weren’t the broker-dealer’s own accounts.
…
Things are looking up!
Attorney General Eric Schneiderman Goes After Bank Fraud
May. 20 2011 - 1:47 pm
Posted by Jason Raznick
Breaking ranks with the other 49 states, New York just might investigate the unprecedented fraud perpetrated by the biggest banks. While the other attorneys general are willing to settle for a tiny slap on the wrists of banksters, NY State Attorney General Eric Schneiderman appears to want to actually prosecute the crimes. As I wrote last week, the banks have offered up a mere $5 billion to settle with all states on the condition that they abandon investigation into fraud. Clearly, the banksters need all 50 states on board—if one state bolts from the deal, it can continue to pursue the banks. And boy oh boy do they need NY as it is the home to many of the biggest fraudsters. Moreover, virtually all securitizations took place in NY because its stricter laws provided a patina of security for the securities.
If AG Schneiderman’s office actually looks for fraud, it will find it by the truckload. It is likely that all the securitizations performed by the banks were fraudulent in multiple ways. First, the mortgages in the pools did not meet the “reps and warranties”—they were trashier than advertised. Second, we know that the investment banks like Goldman withheld material facts from investors. For example, it appears that Goldman’s normal practice was to sell toxic waste to its own customers while placing bets against them through the use of credit default swaps. The most notorious case involved hedge fund manager John Paulson, who was allowed by Goldman to hand-pick toxic waste for CDOs Goldman sold to unsuspecting clients. If you were buying securities from Goldman, it would be nice to know that Paulson had created them and placed bets on failure. And third, every securitization was certified by a Trustee who claimed to have all relevant documents, including the wet ink notes, related to the mortgages that backed up the securities. We know that this was a lie—the notes and the deeds (also called securities or mortgages) were separated by the banks, following the recommendations of MERS (the industry’s mortgage electronic registry system—itself a monstrous fraud). In other words, the Trustees do not have the necessary docs, which means the “mortgage backed securities” are not backed by securities. All of that violates NY state law. Any investigation by the NY AG will be a disaster for the banks. We are not talking about billions of dollars worth of fraud—it is trillions.
It really won’t be a difficult investigation. The recently released WALL STREET AND THE FINANCIAL CRISIS: Anatomy of a Financial Collapse by Senator Carl Levin’s Permanent Subcommittee On Investigations United States Senate provides all the smoking guns any white collar criminologist would need. It is remarkable that no one in the Obama administration is interested in locking up Wall Street scum. We might, however, have the audacity to hope that Senator Levin will go after them for perjury. As Matt Taibi’s article in Rolling Stone (The People vs. Goldman Sachs) documents, a parade of Wall Street’s finest probably perjured themselves before Levin’s committee, including Goldman Sachs’ CEO Lloyd Blankfein. Maybe he can buddy-up with Dominique Strauss-Kahn in a Federal penitentiary.
The Levin report makes for highly entertaining reading—a real pot-boiler. I’ll be writing more about it in coming weeks. Meanwhile, let us hope that NY’s AG finds the steel that will be needed to go after the fraudsters. As we know he has just painted the equivalent of a bulls-eye on his chest so he must keep his nose clean or he will suffer the fate of the last great AG from NY—Eliot Spitzer.
…
“MERS (the industry’s mortgage electronic registry system—itself a monstrous fraud)
“…the Trustees do not have the necessary docs, which means the “mortgage backed securities” are not backed by securities.
“…he has just painted the equivalent of a bulls-eye on his chest so he must keep his nose clean or he will suffer the fate of the last great AG from NY—Eliot Spitzer.”
Guy’s been reading my mail…
except I think he meant the Mortgage Backed Securities aren’t backed by mortgages
Why not just reset the entire U.S. banking system, starting with a breakup of the systemically risky monopoly trusts? Wouldn’t we be collectively better off without Wall Street’s too-big-to-fail monopolists holding the Sword of Damocles over Main Street American heads?
POSTED: May 18, 11:16 AM ET | By Matt Taibbi
A New Wall Street Investigation: Is the Hammer Finally Coming Down?
Eric Schneiderman speaks to supporters on election night at the Sheraton New York November 2, 2010 in New York City.
Got a chance to meet Josh Rosner (co-author, with Times reporter Gretchen Morgenson, of the new book Reckless Endangerment) last night during an appearance on Eliot Spitzer’s In the Arena. We were brought in to talk about the new investigation of the banks that apparently is being launched by New York State Attorney General Eric Schneiderman, which looks like it might be the first for-real attempt at a prosecution of the systemic corruption that led to the financial crisis.
Schneiderman’s probe, news of which came out yesterday in this piece by Morgenson, reportedly targets the banks’ mortgage securitization process during the bubble years. Morgenson reported that Schneiderman is focused on at least three companies: Morgan Stanley, Bank of America, and old friend Goldman Sachs.
This investigation has the potential to be a Mother of All Nightmares situation for the banks for a couple of reasons. For one thing, the decision to go after the securitization process is a total prosecutorial bullseye. This is the ugly heart of the wide-scale fraud scheme of the bubble era. Again, the business model during this time was a giant bait-and-switch scam. Sleazy lenders like Countrywide and New Century first created huge masses of bad loans, committing every conceivable kind of fraud to get people into loans (from doctoring income statements with white-out to phonying FICO scores to engineering fake appraisals). They then moved the bad loans quickly to the big banks, which pooled them and chopped them up (this is the “securitization” process), sprinkled hocus-pocus math on them, and them sold them to suckers around the world as AAA-rated securities.
The questions Schneiderman will seek to answer are these: did the banks securitize loans they knew were fraudulent, throwing the rotten mortgages into the stew before serving them to customers? Did they also commit insurance fraud by duping the bond insurers (known as “monoline” insurers) into thinking the mortgages were not as risky as they really were? And did they participate in the fraud scheme on a more basic level by lending huge amounts of money to the Countrywides of the world, knowing that they in turn would immediately use that money to create the bad loans? In other words, did the banks finance the fraud in addition to brokering it?
The reason this is such a potentially deadly investigation for the banks is that they seemed to be so close to getting away scot free. There is another investigation into the banks’ mortgage abuses by the states’ Attorneys General, led by Iowa AG Tom Miller, that was rumored to be headed toward a settlement, despite the fact that nothing like a complete investigation has been done. The expectation for some time has been that the banks would eventually have to pay a significant, but eminently survivable, settlement for abuses during the bubble era. Although the Miller probe was focused on practices like robo-signing and other such documentation abuses, it could theoretically have covered securitization as well.
But if the AGs were to sign off on a friendly global settlement for mortgage abuses prematurely, it would be like a DA offering a millionaire murderer a 2-year plea bargain before the cops even had a chance to interview all the eyewitnesses. It would be a blatantly political arrangement. Such a desire to get some kind of deal done and sweep the mortgage mess under the rug once and for all seems almost universal among high-ranking politicians, and particularly in the Obama administration, which has acted throughout like it wants more than anything to simply get all of this over with and put in the past.
Schneiderman’s investigation throws a monkey wrench into all of this. The banks cannot enter into a settlement with 49 states. They need all 50 at the table. But if Schneiderman breaks ranks and goes off on an end-run investigation that plunges right into the rotten core of the fraud era, then the whole pipe dream of an easy settlement vanishes in an instant. This is particularly true since Schneiderman is the most important AG, being from the state of New York, where most of the crime was probably committed.
The amount of money investors lost in this fraud scheme is probably gigantic. The ill-gotten money the banks made off that same fraud is probably similarly huge. And the damage to society, in the form of mass foreclosures and other losses, is incalculable. If the banks end up being found liable for all of these offenses, they could face truly crippling fines and penalties. This goes far beyond the question of whether one bank like Goldman defrauded a client or two or lied to investigators. This probe could be asking whether the banks’ entire revenue model during the crisis years was based on fraud.
…
Holy cow! Holy, holy cow!
This is bigger than Dallas, as we used to say in Take-sus.
“Schneiderman’s probe, news of which came out yesterday in this piece by Morgenson, reportedly targets the banks’ mortgage securitization process during the bubble years. Morgenson reported that Schneiderman is focused on at least three companies: Morgan Stanley, Bank of America, and old friend Goldman Sachs.”
Don’t worry… the big bank boyz are on it… they’ll set Schnieiderman up w/ a hooker, film it…. & take him out “Spitzer-style”
It’s Getting Harder To Defend Goldman Sachs
May. 18 2011 - 1:19 pm | 5,920 views | 0 recommendations | 6
After reading Money and Power: How Goldman Sachs Came To Rule the World by William D. Cohan, I can no longer defend Goldman Sachs and the status quo on Wall Street.
As Congress and the media were debating the controversial and populist-tinged Dodd-Frank Financial Regulation bill, my first inclination was to defend Wall Street and traders overall. I didn’t like Dodd-Frank’s Volcker Rule, which divests proprietary trading and alternative investments (hedge funds and private equity) from Wall Street (commercial) banks. I believed the bill was similar to reinstating the Glass-Steagall Act separating investment banking and trading from commercial banking.
I argued that banks need trading profits — where the main profits have been the last decade — to offset losses on lending, especially during a recession. But now I agree with Chairman Volcker. We can’t be certain Goldman Sachs CEO Blankfein and other sleuths won’t steal client inside information to front run, compete, and trade against their clients and the public’s interests. The Chinese Wall is the biggest myth and lie on Wall Street.
What’s clear to me now after learning more is that Wall Street embraced and abused conflicts of interest for its own private good, directly at the great expense of its clients and the public.
Goldman should be tarred and feathered over the 2008 meltdown. Like others on Wall Street, Goldman had an active mortgage department designing, packaging, securitizing, promoting, and selling mortgage-backed securities and related synthetic derivatives. Goldman’s trading desk conceived, promoted, and sold various protection strategies as market maker, agent, and principal.
As the housing bubble got close to bursting, Goldman became enlightened sooner than other banks, partially from witnessing the “big short” strategies of its infamous hedge-fund client John Paulson.
The entire firm came around to believing the great mortgage bubble was a house of cards ready to collapse, based on delinquencies, no-doc loans, fraud, and more. This is where Goldman made a serious error in judgment.
Goldman had two choices: discontinue the sale of junk-mortgage securities and alerting the government, media, public, their clients, and investors; or, keep it a secret, sell off junk-mortgage securities to investors, profit from the inevitable bursting of the bubble, and steal and even front-run part of Paulson’s trade.
Here’s the most basic analogy of guilt: Picture Goldman as a used car salesman. When it learned it had an inventory of lemons, rather than return those lemons to the manufacturers (lemon law in most states), it put those cars on promotion with very aggressive sales tactics.
Before the unsuspecting and trusting customer bought the lemon and drove off with it, Goldman purchased “protection” — life and auto insurance policies on the driver that were set to profit when the lemon crashed and burned. Clearly, Goldman’s short (protection) trade was connected to clearing out their long trades (selling the lemons), so ill-gotten profits on all these transactions must be returned with penalties too.
Once Goldman had its “big short” trades on, it couldn’t wait for the payday, risking the market might recover. It knew marking down its own long portfolio of lemons could trigger the crisis and the huge short-trade payouts. Marking down the lemons lowered them for sale to investors and forced all other banks to do almost the same. Based on fair-value accounting rules, Goldman forced lower fire-sale marks on the industry which put some financial institutions out of business almost overnight. Which turned into another win, as Goldman had pre-purchased credit-default swaps to pay off on their competitors’ demise.
The firm can’t extricate itself from fault by saying it realized mortgages were worth less or worthless and that it did the right thing at the time. The reality is it did the very wrong thing. It should have returned the lemons to the manufacturers, brought in the government, and cooperated with the industry to fix this mess years earlier.
Goldman can no longer retain public trust. The government should terminate high-level people who worked previously at Goldman, and never recruit from Goldman again. The revolving door between Goldman and government empowers abusive conflicts of interest even more.
Clients who hire Goldman should be taken to task by their shareholders for the equivalent of leaving your cash register unattended with a known crook, which is the opposite of ‘you can’t err by hiring IBM.’ Cohan has many quotes in his book about Goldman investment bankers tipping off Goldman traders and private equity funds to compete against their clients, with insider trading, front running and more.
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I can see this going year round. Trade your house for a heating grate. Yup, win-win ….
ORLEANS — When the slow economy hurt his music business, Bruce Maclean decided to try what other Cape Cod residents have been doing for years: move out of the house and let strangers take over.
He did it last year and will be doing it again this summer. The $3,000 a week he can make renting his three-bedroom house near Nauset Beach in Orleans helps make up for the decline in gigs and recording work.
“It’s a win-win situation, as long as they don’t burn the place down,’’ said Maclean, 57.
As the economy plods along, more and more Cape Cod residents are moving out for the summer to live with relatives, lease cheaper apartments, or stay in campers so they can rent their homes. The income — up to $6,000 a week for beachfront property — makes the inconvenience worthwhile.
Indeed, the number of Cape and Islands residents renting out their homes rose 39 percent during the past two years, according to Weneedavacation.com, a Wellesley-based rental site that specializes in Cape listings.
The company attributes the increase not just to people looking for extra income, but to the sagging housing market.
http://www.boston.com/business/articles/2011/05/23/more_cape_codders_leaping_at_lucrative_summer_rents/?p1=News_links