Bits Bucket for September 1, 2011
Post off-topic ideas, links, and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Name:Ben Jones
Location:Northern Arizona, United States
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How to rescue the housing market: Foreclosures!
By Tami Luhby August 31, 2011
NEW YORK (CNNMoney) — If the Obama administration really wants to save the housing market, it should speed up the foreclosure process — not prolong the inevitable, experts say.
Four years into the housing crisis, the real estate market is still teetering on the edge. The Obama administration has tried one program after another to stem the tide of foreclosures with limited success. And it is continuing to look for ways “to ease the burden on struggling homeowners,” though no new initiative is imminent, the White House said this week.
“Loans enter into foreclosure, but never come out,” said Thomas Lawler, founder of Lawler Economic & Housing Consulting. “If this keeps going on, you have a continual overhang that never goes away.”
http://money.cnn.com/2011/08/31/real_estate/housing_market_foreclosures/index.htm - 67k -
One dimensional thinking.
Process the foreclosures, force prices to find a bottom, recovery…
WRONG.
Process foreclsoures, book losses, insolvancy, debt and money poof into non-exiastance, people lose faith in money, long, ugly deflationary spiral into depression and no bottom fro a decade or more.
Wow, Darrell, I’m glad you came along to set the world straight. (BTW, Mr Lawler used to work for one of the GSEs and posted here trying to warn everybody about this back in 2005.)
Not to fear, Obama and company have been using your (Japanese) playbook for a while now, and the economy and housing market are doing great!
You should go out on the street and tell everybody you meet your views are responsible for the wonderful economic situation we are in. I’m sure they will all congratulate you for your three dimensional thinking…
I think throwing money at assets by Govt. that are not worth the price doesn’t make any sense (especially by printing them out of thin air). Govt. should not intervene and let the market adjust by itself. They already created the mess by very low rates during Greenspan time and then continuing the same under Obama.
The problem I think is not why RE is going down or how to keep it high, the issue is why it actally went up that much and how to fix the banks and lending that it doesn’t happen again. If they try to keep it propped up falsely, it will be Japan.
“Govt. should not intervene and let the market adjust by itself.”
The very idea of this would have been anathema to free-market advocate Alan Greenspan — right up to the point when he began to follow the practice of Fed-funded liquidity injections in the wake of the 1987 Black Monday Wall Street meltdown.
If your principles go out the window in a crisis, they must not have been very good principles.
“If your principles go out the window in a crisis, they must not have been very good principles.”
It’s different this time.
If your principles go out the window in a crisis, and powerful investment banks come to expect this and figure out how to profit from it, you can bet there will be a lot more crises to come at ever increasing frequency.
BUSINESS
SEPTEMBER 1, 2011
Goldman Takes a Dark View
A Private Note to Hedge-Fund Clients Gives a Strategist’s View; Ways to Gain From Global Pain
BY SUSAN PULLIAM AND LIZ RAPPAPORT
A top Goldman Sachs Group Inc. strategist has provided the firm’s hedge-fund clients with a particularly gloomy economic outlook and suggestions for how these traders can take advantage of the financial crisis in Europe.
In a 54-page report sent to hundreds of Goldman’s institutional clients dated Aug. 16, Alan Brazil—a Goldman strategist who sits on the firm’s trading desk—argued that as much as $1 trillion in capital may be needed to shore up European banks; that small businesses in the U.S., a past driver of job production, are still languishing; and that China’s growth may not be sustainable.
…
Goldman advises how to short the very governments that it also advises how to restructure debt
probably all at 0% cost of borowing money from FED banks
this is great if I owned a tire shop I could sell tires to people and then advise special freinds which roads I salted with nails.
Why do I have to settle for merely three dimensions? I deserve more!
Howmuchamonth for a fourth dimension?
That didn’t work out so great for Buckeroo Bonsai.
Great flick!
“Buckeroo Bonsai”
Be a great name for a gardening store.
Why do you assume my playbook is just to delay booking losses without any other actions?
What we need are jobs and wages.
My playbook:
Step 1)
Large tariff on money leaving the country. Increase the cost of globalization to bring jobs back to America. Plug the hole in our economy known as the international balance of payment deficit.
Eliminate payroll tax and corporate income tax. Double current income tax rates, but also double the size of current brackets. Eliminate all credits and deductions except the standard and personal. Treat capital gains and carried interest as regular income. Add a 10% penalty tax to any capital gain earned from investments held less than 3 years. Use the income tax to plug the internal trade imbalances rather than increasing them.
Double the minimum wage.
Non-profit healthcare funds with the power to negotiate drug prices and establish cost/benefit minimums for care. Bring our cost of care down from “twice any other country in the world” to “just a little more than any other country in the world”.
Bring home most troops, cut spending on military atleast 50%.
Use money saved from Medicare/Medicaid and Defense cuts to double Social Security.
My goal in all this step 1 stuff is to 1) plug trade imbalances, 2) create some sustainable wage inflation and 3) create better paying jobs in America by increasing the cost of cheap foreign labor.
Once we have step 1 complete, then we can begin..
Step 2)
Drastic re-regulation of banking, increasing reserve requirements, reserves on securitized debts, reserves on CDS and virtually every other debt transaction.
Eliminating or drastically reducing much of welfare that was created to deal with wage inflation and underemployment including eliminate housing subsidies, food stamps, school lunches, etc. Keep unemployment and something like WIC as short-term, emergency situations only.
We can’t treat a bullet would by changing the bloody shirt. Neither delaying foreclsoures nor cramming them through and dumping inventory into a market with no demand is going to fix the root cause problems with our economy.
We must address the real underlying root casue of problems, and that is trade imbalances both international and domestic that have made us dependant on ever growing debt. The housing bubble was a symptom of attempts to push excessive debt into the economy, and not the root casue of our troubles.
Again Darrell…you have to force people to speak English for their checks, nothing else will even begin to solve the dependency problem
—————-
Eliminating or drastically reducing much of welfare
“Again Darrell…you have to force people to speak English for their checks, nothing else will even begin to solve the dependency problem”
I disagree. Someone has to clean the toilets and take out the trash. Do not need really good English skills for that. If they want to be lock themselves into the low end jobs, that’s fine.
I disagree. Someone has to clean the toilets and take out the trash. Do not need really good English skills for that. If they want to be lock themselves into the low end jobs, that’s fine.
Looks like darrell_in_phoenix is describing my next-door neighbors to a tee. Both adults’ native language is Spanish. And they both work as janitors. The man also does landscape work.
From what I have seen, they don’t seem to be interested in rising above the jobs that they have. And the fact that the teenager (I believe she is the woman’s daughter) doesn’t go to school and just sits around like a blob doesn’t seem to bother them either. But I do notice that her weight is starting to climb above the level that would interest a young man in her.
But I do notice that her weight is starting to climb above the level that would interest a young man in her.
But that could be a culturally biased assumption on your part :-).
Darrell,
When you process foreclosures most of the money that goes poof was based on perceived value that never existed in the first place. The mortgage owners will recover the actual value less the cost of foreclosure. Its very much like a mark to market event.
You advocate printing money and kicking the can down the road. When money is printed what goes poof is the value of the dollars in my pocket. The entire population has already funded the bad behavior of the FBs and the lenders.
Rip the band-aid off quickly, feel the pain now, let things recover based on actual value.
Don’t you see that post recovery there will be lending again, hopefully with adequate reserves and based on qualified borrowers and the poofed money will be replaced by new debt created money but at a more sustainable level.
You cannot create fiat currency forever without consequences. The concept that our economy requires growth to be healthy is a misnomer as well. How can perpetual growth be justified?
“When money is printed what goes poof is the value of the dollars in my pocket.”
Dilution of other peoples’ money is the dirty little secret of running the printing press technology to make losing gamblers whole on their losses.
“When money is printed what goes poof is the value of the dollars in my pocket.”
Dilution of other peoples’ money is the dirty little secret of running the printing press technology to make losing gamblers whole on their losses.”
I don’t think this is working for them this time. 5.00 dollar gas and no jobs is worse than 4.00 dollar gas and no jobs. They could lose their elected puppets pretty fast in a inflationary no jobs economy. Or it could just be like Mexico? Mexico devaluated the peso and crushed the middle class, I think Argentina did this also.
“Mexico devaluated the peso and crushed the middle class, I think Argentina did this also.”
Hablo Español?
Perpetual growth is justifed by population growth. As soon as the population stops growing, then business growth will have a cap.
Nobody realizes this more than the food industry. How can grow your food sales by 9% if your population only grows 3%?
Easy… they get the exisiting people to eat more food per person.
Now it’s the people that are growing.
The most beneficial slice of the population from a national economic growth standpoint is the productive labor force.
Bloomberg
Shrinking Labor Force May Curb U.S. Expansion for Two Decades
August 30, 2011, 7:38 PM EDT
By Steve Matthews and Joshua Zumbrun
This is not your mother’s recovery.
Women and baby boomers entering the American workforce after 1950 helped to supercharge expansions in 1975 and 1983 by filling an increasing number of jobs and purchasing more goods and services. Now as the share of women with jobs falls and older Americans age into retirement, the shrinking — or, at best, slowly growing — workforce will weaken economic activity for the next two decades.
The demographic changes may be the biggest and least- appreciated reason why the two-year recovery has slowed, because the rate of growth for labor and capital is “the most important determinant” of economic expansion, said James Paulsen, chief investment strategist for Wells Capital Management in Minneapolis.
More retirees mean slower household formation, reduced consumer spending and downward pressure on equity prices as retirement cuts people’s purchasing power, according to John Lonski, chief economist at Moody’s Capital Markets Group in New York, and Gus Faucher, director of macroeconomics at Moody’s Analytics Inc. in West Chester, Pennsylvania.
Household purchases rose at an average annual pace of 3.2 percent in the quarter century that began in 1972, when the oldest of the boomers turned 26, and averaged 2.8 percent since 1996, when they turned 50, according to Lonski. He forecasts the decline will continue, to between 2 percent and 2.5 percent a year, as growth slows for Americans aged 15 to 49.
“A weaker labor force does dampen the pace of the rebound,” along with “our expectation for what an expansionary trend is,” said Dean Maki, chief U.S. economist at Barclays Capital Inc. in New York. “We should be lowering our sights on potential GDP compared to when our population was younger.”
Growth ‘Speed Limit’
Anemic gains in the number of new workers has effectively cut the long-term “speed limit for growth” to 2.25 percent, estimates Maki, a former senior economist at the Federal Reserve. That compares with the Fed’s estimated 2.5 percent to 2.8 percent rate for gross domestic product and average growth of 3.2 percent from 1980 to 2000.
Automakers General Motors Co., Ford Motor Co. and Toyota Motor Corp., motorcycle maker Harley-Davidson Inc. and natural- foods grocer Whole Foods Market Inc. may be hurt by the shift because most retirees will cut spending on big-ticket items and nonessentials, said C. Britt Beemer, chairman of America’s Research Group in Charleston, S.C., a consulting company that studies consumer behavior.
“Older people tend to have lower incomes, their consumption tends to be lower and in that sense, consumer- spending growth would be weaker as well,” said Moody’s Faucher. “There will be fewer people in prime car-buying years,” and “recreational goods and services are a young-adult thing.”
Sell Shares
The aging population also may hold down stock values for the next two decades as boomers sell shares to finance retirement, according to a Federal Reserve Bank of San Francisco research paper released Aug. 22.
“The mentality has shifted to preserving wealth rather than growing wealth, with less-risky portfolio allocations,” said Emily Sanders, president of Sanders Financial Management Inc. in Norcross, Georgia, whose largest group of clients is aged 55-65. A typical 65-year-old may have 50 percent of his portfolio in stocks, which would drop to 30 percent at age 80, she said.
Faucher forecasts changing demographics will lead to a period when nominal GDP growth — which includes the impact of inflation — slows to 3.3 percent compared with 5.5 percent before the 18-month recession. That means the rise in corporate profits and equity prices would slow to about 3.3 percent from 5.5 percent as well, he said.
…
“You advocate printing money and kicking the can down the road.”
No, I do not! I advocate plugging trade imbalances, bringing jobs back to America, increasing wages.
I advocate that instead of tirggering a global financial collapse, we defuse the debt bomb the only way it can be defeused… reversing trade imbalances so that people in debt can get the money they need to repay the debts.
Didn’t jingoistic American leaders use tariff policy to “reverse trade imbalances” in the 1930s?
How’d that work out for them?
“When you process foreclosures most of the money that goes poof was based on perceived value that never existed in the first place. ”
Maybe it was only perceived value that never really existed in the first place, if they owed $100K on a house they thought was worth $200K, like my next door neighbors.
However, if the loan is for $200K, and now the house is only worth $100K, the $100K that goes poof is REAL money somewhere in the system.
Someone really, really lent then the $200K. Someone really is going to have to book a $100K loss on money. If the loan is pooled into a non-GSE MBS, then that is money someone worked hard for and invested in something they thought was AAA safe.
If it is a bank or GSE loan, then it is likely the US taxpayer that will have to eat the loss when in the next bailout, it is just added to the national debt.
“If it is a bank or GSE loan, then it is likely the US taxpayer that will have to eat the loss when in the next bailout, it is just added to the national debt.”
Think ‘Resolution Trust Corporation’; but we’re not there yet.
Through the rear-view mirror, it will become clear that the Great Housing Bubble was just another variant on the Wall Street-K Street coalition business plan: Private profits, socialize losses.
Darrell is right that deflation would ensue and that allowing house prices to collapse without any intervention would likely cause a depression.
That doesn’t mean the gov’s efforts to prevent severe deflation should target real estate.
They should target job creation and trade imbalances.
That would work, except it won’t help the voters who HELOC’d, or bought too much house with a 3-year grace period I/O ARM. Even if we brought all the jobs back, the jobs wouldn’t pay enough to make the adjusted payments.
“Darrell is right that deflation would ensue and that allowing house prices to collapse without any intervention would likely cause a depression.”
You can’t very well prevent what has already happened from occurring, can you? All the experts assured us back in 2005 or so that U.S. home prices would never fall, yet they went down by 30% or so on a national basis, and by much greater amounts in pockets like Detroit, and have not come back.
How do you know that intervention to artificially prop up housing prices at their current levels won’t lead us into a depression, by ushering in an Ice Age in the home sales and construction industries due to the insurmountable gap between unaffordable home prices and weak purchase demand due to a chronically anemic labor market?
More home sales would occur if prices were not so high, and this could help kick start the home sales and construction industries, not to mention related industries such as home furnishings, from their present moribund state of being. But then wealthy people who bought the MBS, not to mention American taxpayers who are on the hook for federal mortgage guarantees, would have to bear losses on asset devaluation.
I think that the only thing would occur for sure is the big banks would lose a lot of money if housing prices were allowed to fall to their nature floor. Would that cause a recession? In my opinion, it may might not necessarily cause one if credit was still available. If the federal reserve made money available to smaller banks to loan to the consumers and businesses then I don’t think we would have a recession, we might even have a stronger economy since people would be spending less on housing and would have it available for other purchases. It would certainly prevent this Japanese style slow growth that we are having, better to have a swift recession than dragging it out.
No, I think that the reason we don’t allow housing to fall is because the people that would be hurt are the people on Wall street that control the government. So we pursue policies such as creating inflation that hurts the real economy so the big banks and Wall Street do not have to admit that they bet big and lost and are bankrupt.
P.S gasoline prices near record high for labor day: http://finance.yahoo.com/news/Gasoline-close-to-record-high-apf-3414950031.html?x=0
This is an example of the policies designed to keep the present ultra rich from losing their money hurting the real economy. We might not have gasoline prices around 1.70 a gallon like when Obama took office but a 2.70 price would have been a real possibility but for QE which was designed to save the bankers by having general inflation to put a floor under housing prices.
If we let true price discovery occur in RE then ‘mark to fantasy’ would be unnecessary.
Which means the current charade is over.
I say pull the ripcord! We are all going to take a hit but let’s stop delaying the inevitable.
“If the federal reserve made money available to smaller banks to loan to the consumers and businesses then I don’t think we would have a recession, we might even have a stronger economy since people would be spending less on housing and would have it available for other purchases.”
Ding ding ding!
It’s painfully obvious that if the Fed wanted to successfully restart the moribund post-Fall 2008 economy, they should have made their near-or-at zero-interest-rate loans to small community banks and households, and let Megabank, Inc choke on its own subprime loan securitization vomit. But that would not have very well served the Fed’s lock on political power.
“They should target job creation and trade imbalances.”
Exactly.
We can view this problem in two ways.
1) There is too much debt for peoples’ wages. If we take the view that nothing can be done to create jobs and drive up wages, then we’re doomed to debt collapse into depression.
2) Peoples’ wages are too low for their debt. IF we start undoing all the “innovation” of the last 60 years and go back to a 1950s sytle economy… Tariffs on trade (though I’d prefer a tariff on money leaving rather than goods entering), no or low payroll taxes, much steeper income tax, consumer demand based on wages instead of access to ever increasing debt, shrinking federal government.
My exception to the 1950s economy would be nationalized healthcare via non-profit funds, and a significantly more generous Social Security paid for via the steep income tax.
“tariff on money leaving rather than goods entering”
One could argue that these are one and the same.
“One could argue that these are one and the same.”
Except that money leaving the country would cover offshoring services like call centers in India or having Chinease doctors read x-rays of Americans.
Also, taxing the money as it leaves would exclude balanced trades. If GE wants to manufacture MRI machines in China and import them into America, that is fine, as long as they are buying sufficient American made goods and selling them somewhere else in the world so that it doesn’t have to move cash out of the USA to pay those Chinese workers.
Taxing the money leaving also negates having to track domestic vs foreign content, value added, etc etc etc.
Ford wants to import parts from China to Mexico, then assemble cars, then ship the cars into the USA, fine, as long as they are then buying enough goods in the USA and exporting them to balance their flow of payments.
North America wants a free trade zone? No problem. Just ensure a balance of trade exists so that money doesn’t have to move.. poof… free trade.
How do you implement a tax on money leaving the country?
“debt and money poof into non-exiastance, people lose faith in money, long, ugly deflationary spiral into depression”
If people lose faith in money the first thing they’ll do is go out and spend it to get rid of it > huge spending boom > economic boom.
Not if it is in the hands of too few people or locked up in illequid assets.
In another 2008 style collapse, the government would be forced to make a decision to let it fail, which is the poofage and loss in faith scenario. In this case, any money locked up in illequid assets such as MBS, ABS, money marekts, amount in banks that exceeds FDIC limits, etc, can’t be used to buy stuff as you can’t liquidate the asset to use it to buy stuff.
If the government tries to bail again, then in our already weakened financial state and bloated debt, you get to the point where people begin to question the government’s ability to pay. The Fed would have to extend its already bloated balance sheet, and we’d see a wave of hyperinflation as everyone is made liquid, but there would be nothng to buy. The people with the majority of the money wouldn’t want half-a-million cars or other depreciating assets for their billions of dollars. They would want gold, silver, oil, land. But, no one would want to seel those things in exchange fot the quickly becoming worthless dollars being pumped into the economy.
“They would want gold, silver, oil, land. But, no one would want to sell those things in exchange for the quickly becoming worthless dollars being pumped into the economy.”
Was that meant as a hypothetical or a description of the status quo?
Given that foreclosure laws are state-based, and that the lenders don’t seem to have the proper paperwork to legally foreclose anyway, it’s hard to see what exactly the Obama administration could do to speed things along.
Aren’t we still in the Era of Mark to Fantasy accounting? Isn’t that Federal Reserve Policy? FDIC policy? I do believe the Administration could influence us “moving along” just by talking up honest accounting. The problem with moving along, well one of the problems, might be that it would end the gravy train for a lot of financial managers. While I could stand fewer financial managers, that might leave a lot of the inner circle driving a boat called “Empty Pockets”. I seem to remember that our top politicians get most of their money from Financial Interests, not wannabe home owners.
The 57 year pig in the python in NY makes the game look fragile. I wonder what the spring tonic will be.
“Isn’t that Federal Reserve Policy? ”
Who’s in charge of the Federal Reserve?
What’s the 57 year pig in python in NY?
The pig is 700 supposed months of inventory in the foreclosure pipeline. NY is #1.
It is hard for a boat bum like me to see who controls what in this zaney puppet show. The dead fish smell is kind of strong though.
“The pig is 700 supposed months of inventory in the foreclosure pipeline. NY is #1.”
Whoa. Link?
Comment by Blue Skye
2011-08-31 07:20:44
NY is number one!
http://www.lpsvcs.com/LPSCorporateInformation/ResourceCenter/PressResources/MortgageMonitor/201107MortgageMonitor/LPSMortgage%20Monitor072011.pdf
57 years of house foreclosure inventory in the pipeline. No wonder prices haven’t crashed here yet. I am wondering how a situation like this can get resolved. Naturally, I would like to see this inventory spill out like the Johnstown flood. What is the cause for NY/NJ having such a gargantuan backlog?
alpha-sloth,
I don’t read the pig being 57 years. I see on page three the total foreclosure + 90 day DQ being 4.1 million homes. The annual national originations is around 500k, meaning a current 8-year inventory overhang (which is still huge).
Can you explain where I’m wrong?
Great slides, BTW. Thx!
CCC
Yeah, I can’t suss out the 57 years either, Cap’n, but that’s Blue’s number, not mine.
Page 19 breaks current houses in process divided by current foreclosure sales rate out by state. NY = 693 months. NJ is no slacker either.
“Total noncurrent” for July 2011 in the LPS powerpoint = 6.5 million.
I am highly titillated that the official number exactly matches (to one decimal place) the back-of-the-envelope calculation I tossed out a week or so…
The puzzling aspect is
…that MSM articles are constantly referring to foreclosure homes for sale in the low hundreds-of-thousands range — a small fraction of 6.5 million, to be sure (e.g. 6.5 million / 500,000 = 13X…).
When are all those millions of homes whose owners have stopped making mortgage payments going to finally enter the supply chain? Future homeowners should be curious (and I am not necessarily counting myself among that group).
“Foreclosures have been initiated at the fastest pace for GSE loans”
That is a slightly surprising statistic in the LPS power point slides. I guess the GSEs are making sure to get out the exit door before the rest of the occupants of the burning theater…
Wait until us geezers they’re planning on boning decide to quit paying the mortgage; telling us to forget about Medicare coverage will do it for me. I figure that very soon my life expectancy wont exceed the foreclosure sale. Just one more nail in the coffin!
Blue Sky
That is a fantastic link. Thank you.
“Page 19 breaks current houses in process divided by current foreclosure sales rate out by state. NY = 693 months. NJ is no slacker either.”
Doesn’t that just mean that they haven’t started the foreclosure sales back up after the robosigning debacle?
‘lenders don’t seem to have the proper paperwork to legally foreclose’
There are a few million people in the US, now renting, who could probably dispute that claim.
‘it’s hard to see what exactly the Obama administration could do’
The Federal govt is behind 90% or more of the loans being made today. Many of those loans are given with 3% down or less. The Federal Reserve just announced easy money will continue for years. I remember that artificially low rates were one of the things that got us into this mess.
What people who claim we can maneuver our way out of the housing bubble never address this; what if they are wrong, and we end up in a situation like Japan? They did have a twin stock and real estate bubble.
As for the ‘one dimensional thinking’, there’s this saying; if your stupid plan works, it isn’t stupid.
My understanding is that Fannie and Freddie are processing their foreclosures faster than anybody else.
As for ‘going Japan’, I think a decade-long recovery is probably the least we can expect from such a credit bubble as we’ve just had. You yourself have pointed out that it took Texas ten years to recover from their RE bubble, and that was with minimal gov intervention, and it was only a regional depression.
There’s no magic bullet to cure a credit bust quickly and easily. We should hope to survive our credit bust as well as Japan has (who really only have a demographic problem now, China having resuscitated their export economy).
The rate of foreclosure is one thing, but to not only continue making loans, but to become the primary source of loans is another.
Govt intervention in Texas depends on what actions you consider intervention. The S&Ls did a lot of bad things, and the govt didn’t respond by keeping them going. The Feds shut almost every bank and S&L down and then liquidated their real estate.
What took 10 (or more) years in Texas, wasn’t for real estate to rise in price again. It took that long for the economy to adjust toward more productive purposes. The question with the current govt approach, IMO, is will their policies result in a 10 year adjustment like Texas, or thirty years and counting, like Japan?
Or was it ten years for oil prices to recover? You can take oil out of Texas, but you can’t take Texas out of oil. In that sense, the end of the Iran-Iraq war and the renewed ability of OPEC to control supply may have more to do with the recovery of Texas than any domestic policy.
“It took that long for the economy to adjust toward more productive purposes”
And that’s how long I think it will take us, at least, to readjust. you can’t just do it overnight by ‘clearing the market’ or whatever.
And Japan isn’t thirty years and counting, unless you mean they haven’t returned to their bubble prices in RE and stocks- but that’s not what’s important, and would be disastrous if it did happen. What matters is they kept their industrial base intact, and they’ve grown out of their economic problems by exporting to the new Asian economy. They still have the third largest economy in the world, far larger per capita than number 2 China. There’s plenty they did wrong, and plenty we can learn from their actions during their bust, but overall they haven’t done so bad, if you take away their demographic problems.
Japan has spent their fortune hanging on these past decades. Exporting to Asia during this “miracle” era was really exporting to the US and Europe. If the US and Europe are in for a no-growth era, Japan looks pretty much like toast. No-growth will mean a huge drop in imports from Asia, which will mean they can stop buying Diddley from Japan. Contraction and protectionism will nail the lid on it.
That’s a long story, but the short version is the Texas economy had to diversify away from real estate and oil to recover.
OPEC was instrumental in driving oil prices down. Some would say this was to destroy the oil industry in non-OPEC producing countries. Years later, Alan Greenspan admitted that Fed policy was to drive down oil prices as well. How they went about this, or why wasn’t made clear.
It should be noted that it wasn’t oil loans that broke the S&Ls and banks; it was real estate loans. In the early 80’s, Dallas/Fort Worth alone had the top real estate market in the world for 5 straight years. (That’s right, the top market in the world!) And that’s not counting Houston, San Antonio, Austin or the oil patch proper. By the late 80’s, Austin had the highest office vacancy of near 50%.
Japan has spent their fortune hanging on these past decades. ”
debt at 200% of GDP yes you’re right Japan did spend a fortune.
But the large amount of oil money flowing into Texas cities was a big part of the reason for rising RE prices. When the money went away, the RE market went South fast. Just as with the current, national bust, there was an illusion that RE lending (in that case mostly commercial) was much safer because it was secured by property.
There were a lot of people fleeing the Rustbelt states in the 80’s.
“And that’s how long I think it will take us, at least, to readjust. you can’t just do it overnight by ‘clearing the market’ or whatever.”
One shouldn’t make statements like this as though policy had no effect on the recovery time. Better to state the likely future as conditional on policy; e.g., ‘Given the current policy regime, that’s how long I think it will take us, at least, to readjust.’
As to whether the market would clear overnight without government intervention to prop up housing prices, who can say? Economic theory predicts that competitive markets will find an equilibrium, but it is impossible to know how long that would take if government intervention throws a wrench into the market’s normal operation.
Well it can reasonably be argued that Chain-of-title issues are popping up more frequently as the word of them gets out. And make no mistake, they are a BIG issue. Even if the banks successfully foreclose*, they sometimes crop up if a prospective purchaser tries to get title insurance if they’re not a cash buyer. And if an inability to get title insurance limits one to cash buyers, the price netted upon sale is MUCH lower.
Don’t get me wrong, we need to lower the average period between default and foreclosure. ISTR reading that it stands at 599 days now. Really, a year and a half living rent free is fairly nice bene for FBs.
*and many defaulting borrowers don’t fight foreclosure because, after all THEY know that they haven’t been paying their mortgage.
There are a few million people in the US, now renting, who could probably dispute that claim.
I agree. I am virtually certain that if I stopped paying my mortgage I would be on the street in 6-12 months.
I am virtually certain that if I stopped paying my rent I would be on the street in 6-12 days.
“I agree. I am virtually certain that if I stopped paying my mortgage I would be on the street in 6-12 months.”
Don’t be so sure; I know someone who stopped paying in Nov 2009, and they only just got FC papers recently.
Subprime Mortgage Bonds Getting AAA Rating S&P Denies to U.S. Treasuries
By Zeke Faux and Jody Shenn -
Aug 31, 2011 2:25 PM ET
Standard & Poor’s is giving a higher rating to securities backed by subprime home loans, the same type of investments that led to the worst financial crisis since the Great Depression, than it assigns the U.S. government.
http://www.bloomberg.com/news/2011-08-31/subprime-mortgage-bonds-getting-aaa-rating-s-p-denies-to-u-s-treasuries.html - -
As stated yesterday when this was posted. If the sub-prime loans are backed by collateral that is near its fundamental value as determined by price/rent, then they are safer than governemtn bonds backed by a promise.
What got us into trouble was giving loans, prime, sub-prime, other, against houses that had detached from rent/price fundamental value.
As I said back in the boom, appraisals should be used to determine probablity of getting repaid, and therefore should not be based on current market prices, but rather they should be based on fundamentals of price/rent, price/wage, supply/fundamental demographic current and future demand.
…appraisals should be used to determine probability of getting repaid, and therefore should not be based on current market prices…
There is nothing wrong with market prices if they are set competitively. The problems creep in when too much financial fire power is concentrated in too few hands — the situation at hand in the global economy today. It doesn’t help when central banks can summarily create trillions of dollars and dole them out in the form of low-interest loans to investment banks of all stripes. This rather tends to exacerbate the problem of concentrating too much financial fire power into too few hands, and the related problem of asset prices that don’t reflect underlying economic fundamentals.
“As stated yesterday when this was posted.”
I am sorry Darrell, I was out yesterday trying to keep my family off of SNAP food benefits (used to be called food stamps). I just stopped back home after an early morning job meeting and I am going back out to put my tools on now. My deadbeat LL is expecting his $1,700 this week. So if I offended you with you with this I am so sorry.
Instead of paying your landlord the rent, ask him if you can not make the mortgage payment for him instead.
This, by the way is where I disagree with Darrell’s “money is debt” theory. IMO, sometimes money* is labor, and sometimes money is created debt. If money were all labor, we would go back to our grandparents time where people saved up to buy everything except big-ticket items. If money were all debt, then we’d all be as rich as they are in Zimbabwe.
The problem arises when the poor have to work for hours to create their money, while the rich can can create the same money on computers in a microsecond: at the Wall-Street casino with day trades limited only by the speed of light, or by playing interest rate games at the discount window, or default swaps, or lending with low cash reserve ratios, or banking in the Cayman islands, or creating $400K loans now and filling in with print money from a later bailout.
Didn’t regulations used to limit these poof-money games… so that the little guy working off the labor model had a chance to keep up with the keystrokers? That’s part of why the poor are so bad off.
———–
*not to be confused with backing currency. If a boss asks me to labor for $20 an hour, and I do one hour labor, and the boss hands me a piece of cotton with Andrew Jackson on it, that’s not debt. The “debt” lasted only an hour. The larger debt question — whether the grocery store accepts the $20 for chicken wings — is not so relevant here.
No offence taken, and sorry if I offended in return.
We talked about this yesterday, and my opinion has not changed.
It isn’t the “primeness” of the loan that caused the problmes, it is when the loans continued to be made on inflated values that was the problem, in my opinion.
And that happened because we decoupled risk from lending via securitization and because CEO compensation was not tied in anyway to longterm risk.
Of course if the US defaults on it’s loans that property you claim as collateral will be worth MUCH less.
The US bonds are backed by the productivity of America just as those subprime loans are backed by the productivity of those purchasing homes using subprime loans.
My guess is that America as a whole will do better than the working slobs who purchased homes using subprime loans, that’s been the case so far.
Where Have You Gone Jack Welch? CEO Pay Rises While Stature Fades
The release of the report has helped contribute to a highly toxic environment for CEOs — worse than I’ve seen in twenty years of covering business. And astonishingly, the report found that the gap between CEO and average U.S. worker pay rose from a ratio of 263-to-1 in 2009 to 325-to-1 last year.
Because they are problem solvers, CEOs are frequently welcome in public life. Not now.
Over the past decade, the main problems they seem to have been working on are increasing their own compensation and reducing the amount of taxes their companies pay. CEOs get paid a lot because they work so hard to deliver for shareholders. But America’s shareholders have received a big helping of nothing from public companies in the past decade.
The S&P 500, as this very long-term chart shows, is basically where it was in the fall of 1998. We’re frequently told we must be sensitive to CEOs’ prerogatives because they’re the ones who create jobs. But in July 2001, there were 109.156 million private sector payroll jobs, down from 110.737 million in July 2001. And every time CEOs ask for a specific policy that tells us will enhance growth — like the big foreign earnings tax amnesty in 2004, or financial deregulation — it doesn’t quite turn out.
And Marie Antoinette didn’t get it either
She didn’t have the education or experience these guys have. IIRC she was a teenager when she became Queen. She and Louis were playing at ruling France.
check your dates.
From the Denver Post
Mike Rosen: Corporations are people too
“The left’s obsession with corporations as a spawn of evil is pathological paranoia. A corporation is just one form of organizing a private business enterprise for purposes of limiting personal liability, issuing stock, filing financial reports and paying taxes. Other forms include partnerships and sole proprietorships. Are they less evil? You buy your groceries from corporations, your cars, newspapers, cellphones, clothing and exercise equipment. Your parents and children work for corporations. Are they evil?
Liberals’ hatred of corporations is selective. They like the New York Times Corporation and the Corporation for Public Broadcasting, the spawn of PBS and NPR. They like Ben & Jerry’s. And they like corporate executives with deep pockets, like the Hollywood crowd, who support left-wing causes.”
and then there is the reporter’s obsession with liberals….
Rosen has always been a shill for the super rich.
I suppose the Mafia isn’t evil either. After all they run businesses that supply goods and services.
Indeed, the reporter shows his bias. But what parts of his rant are incorrect?
“what parts of his rant are incorrect?”
The premise that everyone of a political leaning is a slave to groupthink.
The argument by personal atack.
Using an ice pick as a proxy for logic.
Rosen is correct that corporations aren’t evil. It’s the senior executives that are evil. I’m betting Rosen’s goals are two-fold:
1) Get the right leaning folks to jump to the defense of corporations.
2) Keep the left leaning people looking at the tool (corp) and not at who’s beating on the middle class with it.
BINGO.
The premise that everyone of a political leaning is a slave to groupthink.
The argument by personal atack.
That seems to be standard fare around here. You mean that’s not a valid basis for an argument???
It’s certainly your method for interjecting an ideological position. Then you accuse everyone of getting ideological. You’re really not as slick as you think.
It’s certainly your method for interjecting an ideological position.
Please point out a single place where I’ve attacked someone personally to undermine their point, or associated them with a group or an ideology to attack or undermine their point. Or accused anyone of groupthink.
Go on, I’ll wait…
Or you can just slander me as always.
Where do we begin… poor thing.
“Or accused anyone of groupthink.”
That seems to be standard fare around here.
“Or accused anyone of groupthink.”
That seems to be standard fare around here.
are you suggesting that quote is me accusing people of groupthink? If so I think perhaps you should re-read Blue Skye’s post and pull out a dictionary…
I was thinking “that seems to be the standard fare” suggested you were accusing the supposed-standard bearers of groupthink.
The release of the report has helped contribute to a highly toxic environment for CEOs — worse than I’ve seen in twenty years of covering business. And astonishingly, the report found that the gap between CEO and average U.S. worker pay rose from a ratio of 263-to-1 in 2009 to 325-to-1 last year.
1. My guess is these are actually doctored numbers others have reported these kind of discrepancies all the way back to the 90’s and I suspect it’s worse now.
The United States long has had the industrialized world’s largest gap in pay between chief executives and blue-collar workers. CEO compensation swelled from 85 times what workers earned in 1990, to 209 times in 1996, and 326 times the following year. In 1999, CEO pay surged to a record 419 times the average worker’s wage, according to the U.S. Bureau of Labor Statistics.
The gap then declined, to 282-to-1 in 2002, before surpassing 300-to-1 the following year, according to the research and advocacy group
AS with most averages this hides the HUGE gap between worker and CEO at the top. Some have pay ratios of over 5-600 to 1.
I think England is about 90 to 1, Japan <50
thinkprogress.org/politics/2010/07/08/106536/japanese-ceo-american-sixth/
Then throw in that they are taxed at a much lower rate on options, insurance, perks, stock and you see the real problem.
Because they are problem solvers
I call BS. CEO’s solve problems for their shareholders for the next six months out, but it will hollow out the employees in the next six years.
Now that we’re at the end of six years after all the CEO’s did like Jack, and the employees are hollowed out, is it any wonder that CEO’s are no longer welcome?
Oops link:
http://finance.yahoo.com/blogs/daily-ticker/where-gone-jack-welch-ceo-pay-rise-while-193022445.html;_ylt=AkdTEsZQn7HZ7YJl.LzNhsi7YWsA;_ylu=X3oDMTE2aDFpa24xBHBvcwMxMgRzZWMDdG9wU3RvcmllcwRzbGsDd2hlcmVpc2phY2t3?sec=topStories&pos=9&asset=&ccode=
Foreclosure limbo getting longer and longer, LPS says
Submitted by Kevin Turner on August 31, 2011 - 2:09pm
The amount of time a home is in foreclosure limbo before the process is final has reached record lengths, Jacksonville-based Lender Processing Service says.
Foreclosure timelines continue to stretch on and on, and the average loan in foreclosure hit a record 599 days, LPS reported in its July Mortgage Monitor.
That means as of July, it takes the average American home more than a year and a half to slog through a foreclosure once it begins. And it’s getting worse.
And there’s records being set for homeowners that are way behind in mortgage payments for whom foreclosures have not yet begun, LPS noted.
Of the 1.9 million homes that are 90 days or more behind on mortgage payments, a whopping 42 percent haven’t made a payment in an average 397 days — about a year and a month. That’s also a record.
At the same time, first-time foreclosure starts in June were near three-year lows. So either there are fewer formerly prompt payers falling into foreclosure, or their banks simply aren’t starting as many new foreclosure actions.
At June’s end, some 4.1 million U.S. mortgage loans were either 90 days delinquent or more or in foreclosure, LPS announced. The total U.S. loan delinquency rate was 8.34 percent, up 2.4 percent from June.
Florida, Mississippi, Nevada, New Jersey and Illinois had the highest loan delinquency rates in July, while Montana, Wyoming, Arkansas, South Dakota and North Dakota had the lowest rates, LPS noted.
http://jacksonville.com/opinion/blog/404387/kevin-turner/2011-08-31/foreclosure-limbo-getting-longer-and-longer-lps-says - 75k -
2013 may be the year to start looking for a home to purchase, if any prospective U.S. end-user buyers are left standing by then…
ARG!!!! Are they ignorant or dishonest???? I’m guessing lots of each.
http://www.cnbc.com/id/44352671
“I know it’s easy for a politician to scapegoat globalization, the fundamental reality is that globalization is (responsible) for nothing in this crisis. Trade globalization is (responsible) for nothing in this crisis. Where there was a problem was in poor, insufficient regulation in some global activities such as the financial industry, but global trade is not the reason why we had this crisis,” he said.
ARG!!!!
For one entity to sell more than they buy, getting money, someone else has to be buying more than they sell, getting debt.
The insufficinet regulation in the financial industry was a prerequisite to money creation needed to fund trade imbalances casued by globalization!
He’s saying A didn’t cause C, B did. BUT, A caused B.
If A caused B and B casued C, then A caused C… butt for brains!
“With this global value chain if you start hitting your imports, in reality you will hit your exports because a large part of what you export is bits and pieces which you have imported and to which you have added value.”
So, we stop importing as much, and stop exporting as much, and produce and consume IN THE SAME COUNTRY!
Would it be difficult to unwind the globalization? Sure. But is it any less difficult to keep debt increasing at an unsustainable rate forever, without ever having to pay on or for any of that debt?
The future belongs to Foxconn City
Sometimes I wonder what the world will be like 50-100 years from (after I am long gone). I can see a world full of Foxconn cities.
It’s been 200 years since William Blake wrote about life “Among these dark Satanic Mills”
Not much has changed since, nor would I expect it to in the next 200.
This is my kind of religion:
I think William Gibson pretty much nailed it in his fiction back in the mid 1980’s.
“Would it be difficult to unwind the globalization?”
It used to be there were two barriers to globalization;
1. Political barriers (i.e. iron curtain, tarrifs)
2. Infrastructure barriers (lack of modern port infrastructure in developing countries, lack of roads, power generation, etc.).
Both barriers came down, the first one rather quickly, the second one not so quickly. But only one barrier can be put back up, and that’s the political barrier.
The infrastructure for cheap transportation to ship things made Over There to Over Here is well in place and is not about to be torn down any time soon. So that means the only hope to reverse globalization is to somehow reconstruct the political barriers.
Which means - what?
Whatever it means, my bet is it won’t be a lot of fun.
“Both barriers came down, the first one rather quickly, the second one not so quickly. But only one barrier can be put back up, and that’s the political barrier.”
In a few years liquid fuels will be expensive enough that the infrastructure barrier will come back up. Really difficult to run ships on batteries or extension cords. Of course that only goes for large, relatively cheap manufactured goods (appliances, cars, building materials, etc.). Small stuff like computer chips or anything that can go over the net (call centers, software, etc.) will be exempt from that development.
The engine is debt. The contraction of credit will reverse the globalization process. I welcome that. We only hurt ourselves with the giant credit spending spree. Most of it was crap anyway.
“The engine is debt.”
Agree. And it was debt - direct investment debt or indirect consumption debt - that financed the infrastracture that helped allow globalization to gain a foothold.
But even as the debt is poofed away the infrastructure will still remain.
Funny thing about that infrastructure; it can be a drag to maintain. We have a lot of underutilized capacity and it all has to be paid for as if it were bristling with activity, or left to rot or be demolished. How is that a benefit? Practically none of the “infrastructure” was directed at anything sustainable.
South of me in Elmira there is a strip called the “Miracle Mile”. It’s looking rather post miracle now. Plenty of infrastructure though.
South of me in Elmira there is a strip called the “Miracle Mile”. It’s looking rather post miracle now. Plenty of infrastructure though.
Here in Tucson, we also have a Miracle Mile. Used to be full of those little motor court-type motels. Then it became a hotbed of prostitution — “Because honey, what those girls can do for you is a miracle.”
Lately, it’s been discovered. It’s becoming quite the area for renovations. The Ghost Ranch Lodge was redone as affordable housing (room rentals) for the elderly and there’s another one that’s a collection of artists’ studios.
What is wrong with a tariff on all money leaving the country?
It is niether a political nor physical barrier. It is an ecnomic tool that could be used to erase trade imbalances.
What’s wrong with it is that it will bring profits down to 6% at best. You think the powers that be will allow that?
It’s like I have said before: for these people Globalization is a matter of faith. Facts don’t matter to them, no more than science matters to a Protestant Fundamentalist who insists that the Earth (and the entire universe) is just a few thousand years old.
Call it “secular fundamentalism” if you will, but that is what blind faith in globalization is.
Are you sure that little shoebox is big enough for everyone to fit in?
It’s like I have said before: for these people Globalization is a matter of faith.
For those at the top it’s a matter of money and power not faith. For those blinded by the MSM and propaganda it’s a matter of faith.
Oh yes, the 1%ers benefit immensely from globalization. I’m talking about middle class folk who defend it tooth and nail, even though its harmful to their economic well being. They believe in it for the same reason they believe in the rapture: faith.
Colorado / Measton
I have been preached at by the Global Experts who cannot convince me that Globalization is of benefit to North America. Their faith messages do not register any sound reason.
Globalization doesn’t make sense. The fact that someone can make it cheaper doesn’t account for the intellectual property advancement, tactics of materials gathering, relative position of finished goods to market, service availabilities, differing environmental standards, transportation, demurrage, damages, different packaging for different weather and transport type required - etc.
I can see the reasons for continentalization - ie North America - where differing transportation facilities can be integrated, market penetration ruled by human rights plus standardized environmental laws - with enforceable enforcement, and swift justice to those who copy our patents freely - etc. The varying raw materials storehouse is more than adequate for all NA needs in the future.
Trump was on TV last night saying that America is letting the rest of the world get a free ride at it’s expense.
I totally agree.
Corporate profits reported on a world basis and (paying taxes by respective countries) is a joke. They want global free protection and will not pay their own country doing it for that freedom ! Then insist on a super cheap rate to repatriate their foreign profits promising more jobs in return (but they didn’t deliver the last time).
Our leaders need to be able to show leadership we can believe in.
Realtors Are Liars®
I never get tired of hearing this one. Did you know that google search for “realtors are liars” returns 31,000 results?
Make that 31,001 results.
~Realtors Are Liars®
“The budget should be balanced,the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance.”
~ Cicero circa 50 B.C.
Dang that quote is spot on. Too bad our leaders do not follow it, they are too busy learning the fiddle.
“People must again learn to work, instead of living on public assistance.”
I have heard people talk about the resemblance of America to Rome since I was a little kid. But this quote has current relevance, as U.S. labor force participation currently is dismal and dwindling.
CIBT:
You cant hire these people because almost all Cannot read, write or speak English and fail doing simple math
What the big OH can do is stop forcing people to work at menial “jobs”….and force them into English classes 20-30 hours a week for their benefits….
Its called tough love……
Odd that those people that can’t be hired now were perfectly capable of being hired just 5 years ago….
If they could build houses or originate loans or be Realtors or do appraisals or work as sales clerks or flip burgers… just 5 years ago, I have a feeling they could do the manufacturing, call center, and other jobs that are currently being done in Mexico, Chindia, or elsewhere.
Standards were Lower then..today so many college educated are out of work….who would you hire first for these customer service jobs…..gangsta baby mama?
———–
Odd that those people that can’t be hired now were perfectly capable of being hired just 5 years ago….
The quote is ‘dead on’ because it’s bogus.
“And yea, the Brothers Koch shall arise, and working with the fox and the Evil One, shall lead many astray.”
Apocrypha 4:20
Gotta motivate the sheeple to vote against their own economic self-interests on the ‘issues’ of gays, guns, God, and the newest boogeyman, the union goons.
Mommy! Mommy! There’s a goon under my bed
See also Thomas Frank’s book ‘What’s The Matter With Kansas’
My economic self-interest would be to let others buy my food, shelter, medical services and other necessities of life. Why did I work a 40+ year career when I could have sat back and let others support me?
Mr. Frank and his ilk would like everyone to be in the cart, while conveniently ignoring the fact that as a result there would be no one to pull it.
“See also Thomas Frank’s book ‘What’s The Matter With Kansas’”
Best book ever.
“People must again learn to work, instead of living on public assistance.”
It would help if there weren’t 5-6 job seekers for every job opening. It would help if we didn’t have structural unemployment and incessant offshoring. A lot of people receiving public assistance used to have decent jobs.
What is a system that works (at least for the majority ) . Many jobs ,decent wages ,money flow ,taxes collected ,affordable housing and
health care ,proper reserves and limited leverage ,proper allocation of
investment funds ,Government for the people . Production economy . Regulated capitalism ,law and order . Debt limitation .
What is a system that doesn’t work ? Monopolies ,price fixing ,high unemployment ,outsourcing and out-manufacturing ,Bubble creation ,
faulty lending , Wall Street high leverage casino games , faulty trade balances and tariffs . Government for the billionaires and Multi-National Corporations . Globalism . Get rich quick schemes ,economy based on investment rather than production .Obstruction of Justice ,to big to fall . To much debt .
Why do they just keep trying to fine the solutions with faulty premises ?
My company had 40,000 legitimate (as in resumes submitted, not just popped their name into an online form) applications for 36 postions across the southern half of Florida.
Job seekers want jobs.
The company i work for, I don’t own it nor am I anywhere near the CEO.
At one time I would have reacted along the lines of “whoa! that’s a lot of applicants.” now I just shrug my shoulders and mumble something about the new normal.
“Treasury should be refilled, public debt should be reduced, ”
Wow, sounds like 2000. Then the hanging chad went into the ballot box, the tax cuts went into the pockets of the rich, the jobs went into the Orient, and the planes went into the buildings.
The problem in Rome was that slaves were doing most of the labor. Easy to tell people they need to work, but when there are no jobs that pay more than slave wages (room and board), it isn’t so easy to do.
In modern day, it is cheap foreign labor. Easy to tell people to work, but when all the factories are leaving and moving to Mexico or Chindia, it isn’t so easy to do.
Unless, of course, you are in the Ann Coulter camp that we need to eliminate the minimum wage and unemployment and just force people to take any $1 an hour job they can find.
Hey Ann, Marie Antoinette didn’t get it either.
Or putting it in terms Cicero would understand, the plebs will turn to what the rich would call a tyrant but the poor would call a hero. Long Live Ceasar!
Apparently, your quote is not completely accurate.
http://www.truthorfiction.com/rumors/c/cicero-plan.htm
“The actual quote is: “The arrogance of officialdom should be tempered and controlled, and assistance to foreign hands should be curtailed, lest Rome fall.”
And here is another site debunking it.
http://message.snopes.com/showpost.php?p=570302&postcount=6
“In a letter to The Chicago Tribune (20 April 1971), John H. Collins, Professor of History at Northern Illinois University, reported that the following attribution to Cicero,
Quote:
The budget should be balanced, the treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, assistance to foreign lands should be curtailed lest Rome become bankrupt. The mobs should be forced to work and not depend on government for subsistence.
actually originated in A Pillar of Iron (1965), Taylor Caldwell’s fictionalized account of the life of the senator. (In fact, Collins noted that it was on page 483 of the edition he had in hand.)
Collins held that the alleged quotation “is totally without documentation,” and that “the great bulk of [Caldwell's] quotations are false.” He further observed that “[a] historical novelist has a perfect right to put invented conversations and anecdotes into a novel, but should not represent these inventions as authentic history.”
And another interesting discussion of it here:
http://www.roger-pearse.com/weblog/?p=5543
“More details here, where, in the comment, DIVVS adds:
I found it in chapter 15 of Caldwell’s book, but it’s indirect speech. Rough translation: “[Gaius] Antonius [Hybrida] was in complete agreement with Cicero that the budget had to be balanced, public debt reduced, aid to foreign lands curtailed, and that the people should not depend on government for subsistence.”
It was turned into direct speech by a politician in the US House of Representatives in 1968. See here (right page, lower right hand side): http://www.archive.org/stream/congressionalrec114dunit#page/n631/mode/1up
So Congressman Passman added a thing or two himself and must be regarded as the co-creator of the fake Cicero quote.”
The mere existence of two supersized, zombiefied, taxpayer-subsidized mortgage swamps is among the best available evidence they be drained and shrunken to non-too-big-to-fail proportions.
Analysis: Little-known bureaucrat is most powerful man in housing policy
By Brad Plumer and Ezra Klein,
Published: August 30
The most powerful man in housing policy today isn’t President Obama. It’s not Treasury Secretary Timothy F. Geithner or House Financial Services Chairman Spencer Bachus (R-Ala.). It’s a little-known bureaucrat named Edward DeMarco.
DeMarco is the acting director of the Federal Housing Finance Agency. Which means that, under the terms of the 2008 Housing and Economic Recovery Act, DeMarco is in charge of supervising mortgage giants Fannie Mae and Freddie Mac. As such, any attempts the Obama administration might make to use Fannie and Freddie to stabilize the housing market run directly through DeMarco’s office. And in many of the attempts it has made, the Obama administration has not exactly found DeMarco to be a willing partner.
At the heart of the tension between DeMarco and the Obama administration is a conflict tucked deep into DeMarco’s job description: The head of the FHFA is stuck between the narrow needs of Fannie and Freddie and the broader needs of the housing market.
The agency’s official mission, on the one hand, is to “support housing finance and affordable housing, and support a stable and liquid mortgage market.” That could entail broader interventions in the housing market — say, reducing the principal on mortgage loans or helping underwater homeowners refinance, on the theory a stronger housing market and economy will be good for Fannie and Freddie.
That’s how James Lockhart, DeMarco’s predecessor, saw it. “Fannie and Freddie are sitting on 30 million mortgages and own or guarantee 55 percent of mortgages in the country,” Lockhart says. “So any actions that they could take to help the mortgage market would help them long term.”
But such policies might also expose Fannie and Freddie to more risk and increase their cost to taxpayers. And the FHFA’s other task is to get the mortgage giants back on a stable financial footing and spin them off from the government as quickly as possible. Since placing Fannie and Freddie in conservatorship in 2008, the Treasury Department has already spent $170 billion subsidizing the enterprises, of which $27.9 billion has been paid back.
DeMarco, who declined an interview request, has tended to define his job quite narrowly. “As conservator, FHFA has a statutory responsibility to preserve and conserve the enterprises’ assets,” he told Congress this year. The insistence on shoring up Fannie’s and Freddie’s books may reflect his work experience. Before 2003, DeMarco was at Treasury’s Office of Financial Institutions Policy. As such, he had firsthand experience with Fannie and Freddie at a period in which they were running roughshod over regulators and expanding aggressively into the housing market.
…
Chillin’ at home by myself - taking a sick day because I have bronchitis. I usually work through stuff like this, but what the heck, I could use a nap and some HBB.
I have been so busy I haven’t been able to keep up with the news. Anything new? I am getting a lot of emails from a mortgage guy gushing about rates. My wife and I came dangerously close to writing an offer on a stilted home in Seminole, but…. they’re asking too much.
I’d rather rent than be owned by a home. It seems like we go through this near-miss-buy every fall and spring. The market here is ridiculous. It’s one of two things: someone paying way toooo much what I think is reasonable, or someone paying wayyyy below what I think is reasonable. Bizarre.
Muggy
Feel better. What made the Seminole home an almost “trigger” home?
“What made the Seminole home an almost “trigger” home?”
Awesome house. Needs no work. Perfectly maintained. New roof. New A/C. Nature-y ‘hood. Really cool lot (secluded/quiet) It’s just… that… they’re asking too much.
I’d rather be flexible for the next few years. My wife goes in and out of wanting to buy, but she’s starting to see the long-term benefit of waiting. She’s not a short-term thinker, but she never really thinks about “20 years from now.”
For example, many areas we like require flood insurance. There are two areas I like that do not require flood insurance. I explain to her that not buying in a flood zone means having an extra $50k when our kids go off to college.
She says, “Oh! Good point.”
Thanks for the insight, Muggy. I learn from other buyers, and it always give me another data point.
*Location (can’t fix)
*Ideal noise level (can’t fix)
*The expensive stuff-HVAC, roof, plumbing, flooring… granite & SS cheaper
**FEMA Flood Insurance - added expense
We look at the same factors, and that’s why we can reconcile these obscene prices in So Ca for a chitbox.
c=s (being a lady)
**In our area, flood ins. covers areas that gets taken off the flood zone map every few years. An on and off again thing.What’s up with that? Did the data change in the last 100 years? LOL What a cash grab!
“Thanks for the insight, Muggy. I learn from other buyers, and it always give me another data point.”
Me too! It drives me crazy when I see a house that’s priced at the top of dollars/sq.ft. and yet needs work. Out the door we go.
Our current rental needs some work, and the owners want to sell to us, so we’ll see who blinks first. They are still priced too high, but they’re also not in denial.
There are so many variables to buying in Florida I can’t list them all, but I typically only look at homes that have recent roofs and AC, because finding an honest person to do these jobs right, at a fair price, is hard to get around here.
http://market-ticker.org/akcs-www?post=193323
Obama’s central-planning big housing fix, explained.
This sounds like a promising start; now could the Justice Department kindly shift its attention towards Wall Street?
August 31, 2011, 9:02 pm
Mergers & Acquisitions | Telecommunications
The Antitrust Battle Ahead
By BEN PROTESS and MICHAEL J. DE LA MERCED
Wall Street, Comcast, Exxon and H&R BlockClockwise from top left, Justin Lane/European Pressphoto Agency, Justin Sullivan/Getty Images, Scott Olson/Getty Images and Gene J. Puskar/Associated Press
The Justice Department has used different tactics when faced with deals its sees as anticompetitive.
9:02 p.m. | Updated
When President Obama took office, he vowed a new era of antitrust enforcement, promising to crack down on deals that undermined competition.
…
Considering the bribe-ocracy we live in - “government of the highest bidder, by the highest bidder, for the highest bidder” - this was surprising.
Massive (anti-competitive) consolidation has been the rule. Comcast buying NBC seemed to me that anything goes. I supposed there are some political angles to this action.
And the presidentrial motorcade pays a visit to the said company’s CEO. You know who is more powerful in this relationship?
Are Rick Perry and Michelle Bachmann for real? Or do they merely fit into a grand Republican Party scheme to take the focus off of Romney’s Mormonism, by serving up Christian fundamentalists of a more extreme flavor during the primary season?
Tea party — Perry gets it, Romney doesn’t
By James C. Moore, Special to CNN
updated 10:44 AM EST, Wed August 31, 2011
Editor’s note: Editor’s note: James C. Moore is a Texas-based Emmy award-winning former national TV news correspondent and co-author of the best-seller “Bush’s Brain.”
Austin, Texas (CNN) — Mitt Romney thinks he can run on the issue of jobs and the economy. And he can. But not in the primary. Romney has an unnatural belief that logic and considered judgments will give him the Republican presidential nomination. No, seriously, he thinks that’s the way it works. He is constantly explaining how his experience as a businessman gives him the skills needed to rebuild the economy.
Why is he talking such nonsense? Doesn’t Romney realize he is running in the GOP primary? The voters he needs to move in his direction don’t want to hear about jobs. Jesus is on their minds. And unborn babies. And those scary gay and lesbian people who have “chosen” to live an alternative lifestyle right here in America. (Every time homosexuals hold hands, another crack forms in the foundation of heterosexual marriage.) As handsome as Mitt Romney is, however, these voters have already met their dreamboat.
Rick Perry is their perfect date.
…
OH, horse feathers…let’s not forget romney was a denizen of wall street. I thought wall street and evangs were the evil twins?
From the Washington Post:
Rick Perry’s donors fare well, Texas-style
“He also will have to deal with mounting criticism that his administration has rewarded large donors with favors that have enhanced their personal and business interests. Public interest groups contend that the linkage is too strong to be explained by the business-friendly climate that Perry has worked hard to create.
“Perry has taken it to a whole new level,” said Public Citizen’s director in Texas, Tom Smith said. “Time after time, there’s often a direct link between Perry’s decisions and payments to his campaign coffers.”
The Post looked at Perry’s top 50 donors, who collectively gave more than $21 million to Perry, and found that 34 received some benefit from Perry’s administration or the state, including grants, contracts and appointments. The donor list was compiled by the nonprofit Texans For Public Justice.
Twenty-three donors won Perry’s appointment to state boards, often the boards of regents at the University of Texas or Texas A&M.
Roughly one in three of the top Perry donors had business interests that secured grants, tax subsidies or project approvals under his administration, the Post review found. Five donors gained both an appointment and a state boost to their specific company or interests.”
Has WaPo done the same checking on The One’s 50 top donors?
Goldman Sachs is the #2 donor to obama!
Hope and change boys!
www dot opensecrets.org/pres08/contrib.php?cycle=2008&cid=n00009638
Goldman Sachs has enough money to buy them both off.
Let’s not forget that the TARP and Bernanke came at the ands of GW.
Let’s see how the GS court case goes.
Champion Rick Parry’s cause.
I seem to remember Senator obama voting for TARP also…
Yes we can!
Prez Barry is a corporatist warmonger… so let’s replace him with an even bigger corporatist warmonger, right?
He’s the right guy to lose so get behind him.
Bribes are legal in Texas as long as they don’t come from corporations.
Amazing that a few hundred lenders and a few million borrowers could pull the walls down on the rest of the economy. A tiny fraction of the population.
Debt should not be the biggest industry in this country. Arbitrage should not be the biggest industry in this country. Debt is like gambling in that it extracts money from the public and gives it to the house. It adds another middleman into the price of goods and services.
And… I wouldn’t care what adults do with each other - IF it doesn’t impact me. But with debt, the government and the Fed seem hell-bent on making me pay for the greed, irresponsibility and stupidity of bad lenders and borrowers.
I save. I live frugally. I don’t have the toys that many of my friends have. And now the government wants to inflate away what I do have to keep Wall Street flush with cash, and contributing to the politicians.
I’m looking forward to this election cycle.
Hang in there! Lots of people are getting drowned by all those toys.
Neuromance …..Its very upsetting that a group of Mad-hatters that
had no other goal but ill-gotten quick gain that was actually criminal could screw with this many people and the World for that matter .
Rigged systems designed for these criminals to take the money and run
leaving the Government and taxpayers to deal with the aftermath of their destruction .
I agree with you on your analysis of debt . What is worse is the faulty
lending increased the value of what was backing that debt . Its like creating a false reserve for debt that crashed .
All you have to ask yourself is who were the benefactors of this
scam and who is eating it now .
It is fundamentally impossible for everyone to be spending less than they earn.
If others had not been borrowing money into exsitance, then there would not have been money in the economy for you to earn.
“It is fundamentally impossible for everyone to be spending less than they earn.”
I don’t see how that can be true, darrell; it can be true for a WHILE—maybe not forever. But If they are spending less than they earn and the difference is going to pay off old debts, then I don’t see how that is impossible at all.
“Our whole country is so fascinated by this Jack-lantern wealth [it] will not stop short of its total and fatal explosion.”
~ ~Thos. Jefferson (Letter to Thos. Cooper)
“Bad” Parenting Could Get You Sued
Forbes
An Illinois judge dismissed a case brought against mother Kimberly Garrity by her two children, Steven Miner and Kathryn, for emotional distress due to bad parenting.
Now adults, and old enough to sue, Steven and Kathryn’s litany of filed complaints against their mother include her buying a birthday card for Steven that didn’t include money, telling her then-7-year-old son to buckle his seat belt or she would call the police, insisting that her daughter come home early (midnight!) from her homecoming, and not sending Steven care packages while he was at college.
The appellate court (yes, believe it or not, this case had been dismissed once before) ruled that none of the mother’s behavior could be considered “extreme or outrageous.”
To top it off, the kids got their case handled for free by their father, who happens to be a lawyer, while the mother had to shell out for her own legal fees. (The parents are divorced. Shocker.)
Poster children for Parental Alienation Syndrome.
The headline makes you think it’s another entry in the “Lawsuits run amok” file, a Forbes talking point/theme.
The following headline would have been more accurate: “P.O.’d ex-husband still looking for payback”
But then, it wouldn’t have made the (faulty) message that Forbes wanted to repeat.
The system worked, because it was dismissed at the local level. The problem is with the ex-husband, not the system.
Guess if she’d been a better wife, he wouldn’t have divorced her.
(……Note to self: put on asbestos fire suit….. :)…….)
“The problem is with the ex-husband, not the system.”
The “kids” are adults and, if they didn’t come up with the idea, they went along with it. Ergo the problem is with the ex-husband AND the kids. No wonder Mom left.
20 years worth of Daddy whispering in the kid’s ears about what a monster their mother is does leave an impression.
I tried pretty hard to avoid injuring my kids this way while single parenting, but I’ve seen others fall into it eagerly.
Guess if she’d been a better wife, he wouldn’t have divorced her.
Once in a while the history of this group lends itself to some pretty funny inside jokes.
This was a real lost opportunity. Lawyers are subject to rules about bringing frivolous lawsuits. The judge could have sanctioned the father. The suit has to very, very extreme for sanctions to be appropriate, but, seriously, not including money in a birthday card? To sue a child’s mother for emotional distress for not including money in a child’s birthday card? That has to be sanctionable.
“…while the mother had to shell out for her own legal fees.”
Shouldn’t the judge have ordered the plaintiffs to pay this back?
Only if that is one of the options legally available in that jurisdiction. Judges have to work within rules too. They don’t just make it up.
Judges make things up all the time; they are activist judges whether conservative or liberal. Wait, they are not made up things, they are called living document interpretations.
My wife is an attorney. Her dad is a retired judge who grew up in, let’s just say, FAR less opulent conditions than these two kids.
We read the article a couple of days ago and were trying to guess what her dad would have done faced with this case…we’re assuming he would have put the massive b*tch slap on the attorney/father (at least to the extent he could).
By the way, the other offensive thing is that this wasn’t just the father handling the case, but the father PLUS two other attorneys.
The father wasn’t just spending his time, but also his money on the case, assuming of course that the kids weren’t paying…
Evidence that this was far more than “going along with his kids”.
Could the whole thing be a scam. Both parents and the children are in it together. The scam is to transfer a large sum of money to the children without paying the new inheritance tax.
Really? The case was fought for two years.
The kids were trying to get $50,000.
Each parent could have gifted each kid $13k per year tax free…$52k over two years PER CHILD, tax free.
Take your gun to work day?
Techrepublic
Those wacky Texans are at it again. On September 1, a Texas law known as the “guns-at-work” or “parking lot” bill will go into effect. The law gives gun owners a new right to store a weapon (any lawfully owned firearm, not just those owned under a Concealed Handgun License) in their vehicle while at work.
Of course, I have to admit that I didn’t know it was previously illegal to have a gun in your vehicle. How would one enforce that policy? Do a glove compartment inspection each morning?
There are a few exceptions to the new law: school districts, private schools, certain oil and gas facilities, and employees driving company-owned vehicles.
Workforce Management, a site that covers HR matters related to the workplace recommends that Texas employers (and any other states that pass a law like this) take the following practical steps:
Identify company-owned facilities that fall under an exception in the statute.
Create a protocol if an employee travels between facilities and is unsure whether he or she can bring a lawfully stored weapon into a particular parking lot.
Work with property management to assess applicable rules for employee parking lots owned by third parties.
Conduct an audit of all workplace violence programs to ensure a comprehensive approach is in place for responding to jokes, threats, or a disgruntled worker.
Require that employees identify themselves to the human resources department if they will be keeping a gun in a vehicle parked on a company lot.
Above all, and this is just my suggestion, please make your parking lots big enough so there is no scuffling over spaces.
You find out about guns in cars/concealed, when one employee threatens another one with them………and you get the call from HR and Security, to go over and tell the guy he’s being suspended/terminated. While the gun is still in his car.
Or one of your employees is carrying a pocket pistol, and it falls out of his coat pocket and discharges, shooting a hole in a customer’s airplane.
And now, Texas won’t let you terminate these people.
Note to self: Add line item to the (long) list of reasons to stay the hell out of Texas.
Many companies won’t allow firearms on company property. The concealed carry crowd, doesn’t like this, because they run the risk of losing their jobs if they “exercise their rights”
As noted above, the guns turn up one way or another. Like the Para-Ordinance .45 (with a loaded 15 round clip in the gun, and 5 15 round clips in the gun bag) in one of the cases noted above.
Sheriffs Department came out and checked the gun. Wasn’t stolen, so they just handed it back to the guy, saying “Not our problem…..it was in the case (in the floorboard of the front seat)……..call us back if/when shots are fired.”
So Texas passes a law, and business has to hire all kinds of consultants/HR help to develop a policy and jump through hoops for compliance with the new law.
Gee, sounds like “excessive regulation” to me.
So, basically, laws/regulations aren’t bad, as long as they favor Republican/Teabagger voters.
You find out about guns in cars when people move them from one car to another because a couple buddies are going shooting after work.
The NRA was all up in arms over this one….
“At an America Online call center in Ogden, Utah, a security camera recorded three employees transferring guns from their cars. They were parked in a strip mall parking lot that included parking for AOL employees, lawyers say. The employees were off work and planned to go target shooting.
All three were fired by AOL for violating a workplace-violence-prevention policy that banned guns. The three fired workers sued, saying the policy violated their right to bear arms. Utah allows residents with a permit to carry a concealed firearm in a public place; you don’t need a permit if it’s not concealed.
But the Utah Supreme Court in July sided with AOL and said employers have the right to set policies banning guns in the workplace.”
http://thehousingbubbleblog.com/?p=6708#comment-1961524
Previously, you could only do this if traveling through 4 or more counties or carrying more than $10k.
Surveys Show Manufacturing Slowing Worldwide
By REUTERS September 1, 2011
LONDON — Factory activity worldwide stalled last month as new orders tumbled, a series of surveys showed on Thursday, heightening fears that the global economy may be heading for another recession.
In the euro area, the Purchasing Managers’ Indexes showed manufacturing activity contracted for the first time in almost two years in August. That echoed earlier data from South Korea and Taiwan, where new export orders fell sharply.
Britain’s manufacturing sector shrank at its fastest pace in over two years, hurt by a sharp drop in demand for exports, and figures due later Thursday in the United States are expected to show factory activity there declined for the first time since the recession.
Although China’s official P.M.I. increased slightly, its first rise since March, it also showed the effects of slowing demand in Europe and the United States.
The P.M.I. figure issued by HSBC bank for China, which relies more heavily on private companies than the large state-owned enterprises that dominate the government’s P.M.I. report, showed factory activity contracted for a second consecutive month.
“The key thing they show is that we are not out of the woods. The economies are very vulnerable to any shock which at this moment in time there are a few of,” said Jeavon Lolay at Lloyds Banking Group.
“What is happening in the euro zone is very important and in the U.S. growth has weakened markedly in the last two quarters. There is a risk of a return to recession.”
I guess those low wage Asian economies are going to learn that their “customers” in the west need good paying jobs to buy the junk they make.
Steuben glass factory to close
Sep. 1, 2011 | Jason Whong Elmira Star-Gazette
After making fine glass crystal for nearly 11 decades, the company whose art has long been part of the Corning area’s cultural identity will close by the end of the year.
Steuben LLC, which makes Steuben glass pieces sought after by collectors and museums, will close its factory effective Nov. 29, according to a statement from the company.
The Steuben store, which is inside the Corning Museum of Glass, but is not part of the museum, also will close Nov. 29. The New York City store will remain open until its inventory sells.
The closing of the plant and museum store will result in 60 people losing their jobs.
While Steuben LLC has owned the Steuben brand since 2008, the Steuben name has long been associated with fine American art glass.
U.S. presidents, beginning with Harry Truman, have commissioned Steuben to make gifts for other heads of state.
Founded in 1903 as Steuben Glass, the company was bought in 1918 by Corning Glass Works, which later became Corning Inc.
In 2008, Corning Inc. sold 80 percent of Steuben Glass to Schottenstein Stores Corp. of Columbus, Ohio, and was a minority partner in Steuben LLC.
“The difficult economy, declining sales and high expenses continue to have a negative impact on the company’s profitability,” Mark Samitt, president of Steuben LLC, said in a prepared statement.
Darn!
Guess I won’t be making blown glass Christmas ornaments in their pay to play kiln as gifts this season .
The glass museum in Corning is wonderful. I used to stop off in the Stueben show room in NYC just to look around.
Haha, we used to say, “… that’s Steubendous!
Cool!
——————————-
All this can be yours for just $99! Company makes tiny, 65 sq ft build-it-yourself homes
http://www.dailymail.co.uk| 1st September 2011 | Rachel Quigley
For those who are too broke to get on the housing ladder, an American firm is here to help.
Jay Shafer’s Tumbleweed Tiny House Company makes cute little homes that start from the bargain price of $99.
The cheapest home is a flat-pack to be built by the owner but, if you’re not very handy, there are ready-made versions for $38,997.
The teeny homes, which start at just 65 square feet are kitted out with fully functioning kitchens, bathrooms complete with composting toilets and sleeping areas.
Some models even come on wheels.
As well as being environmentally friendly the homes are affordable for people on meagre incomes.
As the debt problem in the U.S. reaches tipping point Mr Shafer, who lives in one of his houses in Sebastapol, California, says that less can be more.
‘People are starting to get a clue I think,’ he said.
‘People are starting to understand that excess is not necessarily a luxury. It can be a burden, a liability. People are living in 4,000 and 6,000 square foot debtors prisons.’
Home Depot sells a bi-level shed for about $3000 bucks. Domensions were around 15ft x 15, as I recall.
I was looking at one a while back, and thought to myself “Run some electrical, water and sewer into this thing, an you could actually live in this thing…..”
Solar panels and/or wind turbine would take care of the electrical problem……and put a water tank on a trailer, if you can’t put in a well.
Then, I can do my best Unabomber imitation.
An old RV already has all that stuff in it, and if they close in on you, you can roll away quietly in the dark.
Bad editing. The house isn’t $99, the plans for the house are $99. Which by the way, is pretty expensive for plans for a house that size.
I’ve been following Tumbleweed for quite some time, and IMO Schaeffer has gone a little nutzoid, trying to go as small as possible. The bedroom is a mattress in a loft, with about 2 foot clearance. That is not legal sq footage, which is how he gets away with such small sq ft. His littlest houses don’t have sewer or water. They are pretty much well-built wooden camper trailers which are legally trailers. He does that on purpose because so many towns have minimum sq ft requirements to be considered a dwelling.
In Schaeffers defense, he has designed a few homes in the 400-500 sq ft range which really aren’t that bad. I see the appeal of small housing, but if you really want to energy efficient and hug a tree, you may as well live in a studio condo, or fix up an existing cottage.
Goldman to stop controversial mortgage practices
Yahoo
NEW YORK (AP) — Goldman Sachs’s mortgage subsidiary has agreed to stop many of its controversial mortgage-related practices in a settlement with a New York state banking regulator.
The New York’s Department of Financial Services and Banking Department said Thursday the settlement was a condition to Goldman Sachs Group Inc.’s ability to sell its Litton Loan Servicing subsidiary to a mortgage company Ocwen Financial Corp.
As part of the deal, the Goldman subsidiary said it will stop the practice of robo-signing mortgage paperwork. The practice, which involved signing mortgage affidavits without reviewing the loan documents and notarizing them in a way that violates state law, led to a temporary halt to most mortgage foreclosures in the fall of 2010.
Sept. 1, 2011, 1:30 p.m. EDT
Fed sanctions Goldman over foreclosure practices
WASHINGTON (MarketWatch) — The Federal Reserve on Thursday sanctioned Goldman Sachs (GS -2.93%) over deficient practices involving residential mortgage loan servicing and foreclosure processing at its former subsidiary, Litton Loan Servicing LP, in what’s commonly referred to as the “robo-signing” scandal.
…
Norfolk’s First Colony Coffee closes after 109 years
The Virginian-Pilot - September 1, 2011
NORFOLK,VA.
First Colony Coffee & Tea Co., a 109-year-old manufacturer based in the Ghent neighborhood, has roasted its last batch of beans and shut down, its president confirmed Wednesday.
Bruce Grembowitz, First Colony’s president, cited the continued high price of beans, which has more than doubled in the past two years, as well as the weak economy for the decision to close.
“Over the past two years, a lot of the business that we’ve been doing has kind of dried up and disappeared,” he said during his first interview since the plant stopped operating Aug. 19.
First Colony’s 55 workers learned of its fate about 10 days before the end, Grembowitz said. He and five other employees remain at the factory at 204 W. 22nd St. to work out the final details, including the potential sale of the building, which the company owns and has occupied since the 1920s.
Drink!!!
————–
July construction spending drop biggest since Jan
MarketWatch | Sept. 1, 2011 | Greg Robb
Outlays for U.S. construction projects fell 1.3% in July, the largest decline since January, the Commerce Department reported Thursday. The decline came as a surprise to economists surveyed by MarketWatch who were expecting a 0.3% increase … Public construction is at its lowest level since December 2006….
This is what Republicans want, right? Smaller government. YEAH, fewer people have jobs!
Let’s see.
People leaving hard core democrat public union goon high tax states.
People moving into conservative right to work low tax states (like Texas).
I wonder why?
—————————
Illinois Loses Most Jobs in Nation Following Tax Hikes
September 1, 2011 | Mike Shedlock
Thanks to Illinois governor Pat Quinn and the Illinois legislature Illinois Loses Most Jobs in the Nation
In a trend that continues to worsen, more Illinoisans found themselves unemployed in the month of July.
Illinois lost more jobs during the month of July than any other state in the nation, according to the most recent Bureau of Labor Statistics report. After losing 7,200 jobs in June, Illinois lost an additional 24,900 non-farm payroll jobs in July. The report also said Illinois’s unemployment rate climbed to 9.5 percent. This marks the third consecutive month of increases in the unemployment rate.
Illinois started to create jobs as the national economy began to recover. But just when Illinois’s economy seemed to be turning around, lawmakers passed record tax increases in January of this year. Since then, Illinois’s employment numbers have done nothing but decline.
Git yer guns Marthuh….. deez dam yoonyun goons have ruined the werld.
Correction: conservative right to work at lower wages low tax states (like Texas).
Don’t forget more food stamp recipients live in Texas than in California, and the ‘Texas Miracle’ has the highest percentage of children without health insurance. #1 baby! USA! USA! USA!
California has 10x’s as many people on welfare.
More Texans receive food stamps than Californians. I wouldn’t be surpised if the same was true for section 8.
California on the Brink
Aug 28, 2011 10:00 AM EDT
The Golden State has become a wasteland of unemployment and budget deficits. Now legislators are cutting holes in what’s left of the safety net.
From California on the Brink: “We’re facing the unintended consequences of decisions based on a legacy of many, many bad decisions coupled with a lack of revenues, and that’s of grave concern to me,” says Starbucks CEO Howard Schultz, who recently lambasted the U.S. Congress for shuffling through the same partisan budget dance Californians know so well. “The social safety net is being cut not with a knife but an ax.”
Starbucks drinks should be added to the Food Stamp program.
Their wages must really blow in IL to move to a place with lower wages, right? Or is that just something you post everyday, like RAL posts ‘Realtors are liars”?
And the race to the bottom is on.
We can’t all be rich, until we’re all dirt poor first.
And when did GW cut capital gains tax cut for the elite and how has that turned out for the country?????
Illinois tax rate is still less than Wi and many neighbors.
Were these jobs relocated to another state, you’ll have to show that before your case is made.
Also hard to make much of 1 mo worth of data.
Nope as usuall it sounds like a pile of propaganda advocating a race to the bottom for wages benefits and our environment and quality of life while cutting taxes for the elite.
Except Florida, that is.
Unless your old and sick of cold weather.
Another taxpayer give-away to a greedy billionaire….
If the AEG stadium in Los Angeles is such a great financial winner, the Anshutz should be willing to pay the city to build. The contrary is the situation. The city will be giving Anshutz hundreds of millions or even a billion under, over, through and around the table.
Due to the reign of the unholy CRA/LA for decades, free enterprise development of significant projects is dead in Los Angeles. The only things that are built are where they tax payers are ripped off. The Hollywood-Highland Complex for the Oscars should be able to pay for itself and if the CRA/LA had not existed, perhaps it would have. Due to the involvement of the CRA, it cost $625 M to construct and then the City sold it to CIM Group for $201 plus giving CIM Group an extra $30 M to rehab the new Kodak Theater.This is the busiest corner in LA,and the city council gave it away ???
Maybe they should try this plan.
-City/county/state, or a combination of the three, builds the stadium.
-Put up a “For Rent” sign. If football is such a lucrative, free enterprise business, there shouldn’t be a lack of NFL teams willing to move their franchise to the 1st/2nd biggest market in the country.
This assumes, of course, that the NFL is for “free enterprise”, and not a colluding, price fixing, labor exploiting, shifting training costs/employee development onto the states (via the publicly funded college football system).
SOLD IN 04
We like The Hollywood-Highland Complex, and we love the subway station right underneath it. Now we know the rest of the story. Thank you.
Following from a question I had about home rentals yesterday, what I’m curious about is how long it takes to rent a home, not necessarily rent levels. Back to a focus of mine, I’m keenly interested in homes simply sitting vacant.
What I’ve heard now in 4 different markets (Southern CA, Northern CA, southern VA, and Northern NV) is that rental homes (especially in good school districts) are filling up relatively quickly. Meaning within a few weeks a “for rent” home is rented. In these markets during the bubble, it could have taken a month or longer to rent a home.
These are anecdotes from people who are trying to find a rental home, and having a hard time.
Are people seeing any markets where “for rent” signs are staying up for a long time (a month or two, if not longer)?
If you are seeing a market languish with rentals, which markets are you in?
My guess is that it is 100% dependant on the asking rent.
Price the rent right, and sure, I bet it will fill in days. Price it based on what you need to cash flow positive because you bought in the bubble or too soon into the crash, and you probably can’t rent it no matter how long you look.
If the price is right and it’s in a good area, it will be gone within hours here in SW Fla. I called on a place on Monday and they said they hadn’t gotten the keys yet from the owner. Called back the next day at 11 a.m. and it was gone. Of course this was in one of the most desirable spots in the area, but the home wasn’t perfect by a long shot and still it was gone in a flash.
Now if you head out to the outlying areas like North Cape Coral, there a a ton of homes for rent out there that sit and sit and sit even though they are priced cheap.
Sitting here at work eves dropping on the guys in the next cube having a conversation.
One just got marreid. He has a house and his new wife has a house. The new wife’s house has been rented out for the last 2 years a a slight loss. The renter moved out and the property management agency said they wouldn’t even re-list without atleast a 20% drop in the rent since there are many properties available.
Oh, and the previous tenants had dogs that dirtied the carpets, chewed up baseboards. They need to paint, relandscape, replace carpets or just put in tile, and repair other damage, to the tune of about $15K. And that $15k would just bring the house up to the condition needed to rent it at a 20-25% a month negative cash flow.
So, of course, they are walking.
And, since his house is also about 50% upside down… Well…
Do I need to fill in the blanks?
Yep, he’s going to do strawman-renters for both properties to let him buy a 3rd house at half what he owes on either of the current houses.. then walk from house 1 and house 2.
The guy he is talking with has 2 rentals, both occupied by family. Both are in default and the family members have been living there for the last year paying rent in cash that he has stashed. Once he gets hit with that tax on the forgiven debt, he intends to go bankrupt, wipe out all his debts, and then have the stashed cash to live on while he rebuilds his credit.
What do you call the last moral guy in an immoral world?
SUCKER!
One just got marreid. He has a house and his new wife has a house. The new wife’s house has been rented out for the last 2 years a a slight loss.
LOL! We have one of those here too.
What do you call the last moral guy in an immoral world?
Ron Paul?
I’m getting to the point where I’m just opening my big mouth (aka The Troublemaker) and telling these people what I think.
Case in point: Last night, I was talking to a guy who’s probably in his seventies, but he recently bought a house. Well, actually, it’s a trashed-out double-wide on Tucson’s South Side.
Now, if you’re familiar with Tucson, you know that it’s not a good idea to live south of 22nd Street. That’s the South Side. It’s not the safest area, if you get my drift.
Anyway, back to last night. Guy was telling me that the house had already been broken into, his outdoor hose bibb had been stolen, and I just had enough. I told him that the South Side’s a lousy area, and what the heck was he doing buying there?
His answer was classic: “The price was right.”
Well, I was en fuego and came back with, “Yeah, the price may have been right, but what about the neighborhood?”
He stammered a bit about his nice neighbors, and, TYTT, I have those too. But I wouldn’t have touched the South Side with a barge pole.
—Once he gets hit with that tax on the forgiven debt, he intends to go bankrupt, wipe out all his debts, and then have the stashed cash to live on while he rebuilds his credit.—
Does bankruptcy release one from IRS obligation?
I don’t think it does. And, from what I’ve heard about the IRS, if you owe them back taxes, they’re going to be a part of your life until you pay it all.
Student Loans too.
“Does bankruptcy release one from IRS obligation?”
My understanding is Ch7, no—but a Ch13 payment plan can make partial payment, with the remainder potentially being discharged.
YMMV. I am not a lawyer. Etc.
Of course, since it was his primary residence, I thought Bush already changed the law so there there would be no tax on the forgiven debt for the house, at least…
FEMA’S use of term ‘federal family’ for government expands under Obama
By George Bennett - Palm Beach Post Staff Writer
Don’t think of it as the federal government but as your “federal family.”
In a Category 4 torrent of official communications during the approach and aftermath of Hurricane Irene, the Federal Emergency Management Agency has repeatedly used the phrase “federal family” when describing the Obama administration’s response to the storm.
The Obama administration didn’t invent the phrase but has taken it to new heights.
“Under the direction of President Obama and Secretary Janet Napolitano, the entire federal family is leaning forward to support our state, tribal and territorial partners along the East Coast,” a FEMA news release declared Friday as Irene churned toward landfall.
The G-word — “government” — has been nearly banished, with FEMA instead referring to federal, state and local “partners” as well as “offices” and “personnel.”
“’Government’ is such a dirty word right now,” says Florida State University communication professor Davis Houck. “Part of what the federal government does and any elected official does is change the terms of the language game into terms that are favorable to them.”
“Family” can evoke favorable thoughts of motherhood and security. But it can also conjure images of Big Brother and organized crime.
The phrase “federal family” has been used in connection with FEMA at least as far back as 1999.
Under President George W. Bush, FEMA officials sprinkled the alliterative euphemism into congressional testimony and statements. When former FEMA Director Michael Brown promised help to hurricane-battered Floridians in 2004, he vowed that “the federal family is dedicated to staying for as long as it takes.”
During the Clinton administration, Vice President Al Gore responded to 1999 flooding in Iowa by pledging that “the federal family is committed to providing the necessary resources to comfort every person and family devastated by this disaster and to help them return to their normal way of living as fast as possible.”
A Google search shows the phrase appearing 10 times on FEMA’s website during the Bush years. Since Obama took office, “federal family” has turned up 118 times on fema.gov, including 50 Irene-related references.
Among them: statements that the Obama administration “is committed to bringing all of the resources of the federal family to bear” for storm assistance and that “the entire federal family continues to lean forward to support the states in their ongoing response efforts.”
Houck doubts all the “family” references will give the public a warm and fuzzy view of FEMA and the federal government.
“That one is so blatantly obvious that I think people’s rhetorical radar is going to go off,” Houck says.
“tribal partners”?
In Plague-Filled August, American Consumers Shopped Like Champs
By Daniel Gross | Contrary Indicator
August was a plague month for the American economy. It started with the U.S. debt-ceiling crisis, continued with nausea-inducing market volatility, and closed with a small earthquake and a massive hurricane — all with a steady drumbeat of European instability in the background.
The misery certainly had the effect of dampening the mood of American consumers, who account for 70 percent of economic activity. Just check out the Conference Board’s dismal August consumer confidence figure. It’s as if the combination of man-made and natural disasters had smothered Americans’ enthusiasm level, which already stood at a pathetic Citi-Field-in-September level.
But when the going got tough, the tough went shopping. Or at least that’s what the data that has poured in on Thursday indicates.
First, news from the nation’s single largest retail sector: automobile. Sales were generally up sharply from a year ago, and up from July. GM sold 218,479 cars in August, up 18 percent from August 2010 (and up 1.7 percent from July 2011). (Interesting note: the Cruze alone accounts for about 10 percent of GM’s sales). Ford’s sales in August, at 175,220, were up 11 percent from August 2010 (though down a bit from July 2011). Rounding out what used to be known as the Big Three, Chrysler reported August sales of 130,119 vehicles, up 31 percent from the year-before, but also up 16 percent, from July sales. Want more? Nissan North America, up 19.2 percent from August 2010. Volkswagen, up 10 percent from last August. Toyota and Honda, which report later in the day on Thursday, are likely to report sharp declines, due to lingering inventory problems related to the earthquake/tsunami in those companies’ home country.
Next, look at the news on non-automotive retailing. As Reuters reported: “Many top U.S. retailers reported better-than-expected August sales, withstanding Hurricane Irene and sagging consumer confidence.” Among the trains tracked by Retail Metrics, same-store sales rose 5.5 percent in August from last year, as the Financial Times reported. The International Council of Shopping Centers said same-store sales in the chains it tracks rose 4.6 percent in August 2011 from August 2010. Check out some of the individual chains: Macy’s, same-store sales up 5 percent from August 2010; Target, same-store sales up 5.4 percent from the year before; Limited Brands, same-store sales up 11 percent; Saks, up 6.1 percent. At Costco, U.S. comparable sales were up 9 percent from the year before; excluding the higher price of gasoline from a year ago, same-store sales were up 6 percent.
August was not kind to everybody. J.C. Penney reported same-stores sales were off 1.9 percent in August from August 2010, and Gap said same-store sales in North America were off 8 percent. Wal-Mart, the largest retailer, has stopped reporting monthly same-store sales. And its sales have been suffering for several quarters.
People went shopping for new cars because the used car market is insane.
I got a 6 year old car with 195K miles and some body damage for $4000, and “only” had to put $3800 into it the first week. And compared to what else was on the market, I don’t feel mistreated at all.
Before going shopping, I expected to pay $3000-4000 for a decent 6-8 year old car with maybe 100-150K mile. HAH!!!!
Of course, you’d have to pay $20K for a new Chevy Cruze or a Ford Focus.
It makes that 2800 to put a new tranny in the minivan seem like a bargain?
Isn’t friction substantially reduced under water?
The Fed Archives
Sept. 1, 2011, 1:50 p.m. EDT
Fed governor calls for refi program changes
By Ronald D. Orol, MarketWatch
WASHINGTON (MarketWatch) — Changes should be made to the Obama administration’s existing housing refinance program to enable the participation of millions more underwater borrowers, Federal Reserve Governor Elizabeth Duke said in a speech on Thursday.
“Given the potential savings to households, the relatively low take-up on this program warrants another look at the frictions that may be impeding these refinancing transactions,” Duke said in remarks prepared for a Fed housing conference.
Duke’s comments come as observers speculate that the Obama administration is considering a major new initiative that would allow for the refinancing of millions of underwater mortgages backed by the U.S. government.
At issue in Duke’s speech is the Obama administration’s Home Affordable Refinance Program, or HARP, which seeks to provide refinancing to borrowers who have low or no equity in their homes as long as that mortgage is backed by government seized housing giants Fannie and Freddie. So far, roughly 800,000 borrowers have refinanced their mortgages through HARP, but Duke said the Fed estimates that 4 million borrowers appear to meet the basic eligibility standards to qualify.
To allow for more refinancing, Duke suggests changes to limit up-front fees that are added to the refinancing costs of underwater mortgages.
“The fees can increase the cost of refinancing by thousands of dollars and thus discourage borrowers from participating in the HARP program,” she said. “When the lender or guarantor already owns the credit risk, refinancing a low- or no-equity loan can actually reduce risk because it reduces payments and thus makes default less likely.”
…
Mortgage refinancing could jump-start economy
Glenn Hubbard, dean of the School of Business at Columbia University, tells MarketWatch’s Greg Robb that if mortgage owners could refinance their loans it would be the equivalent of a $70 billion tax break.
Of course they miss the fact that this $70B would come out of the pockets of whoever is holding the current higher-yielding bonds, which would receive prepayment in the refi. They would be left to reinvest those funds at a significantly lower rate elsewhere.
Gotta love the way they don’t think twice about meddling in the free markets, nor the long-term effects of such!
So, rather then meddeling in markets, they should have just let the 2008 collapse continue, so that those bond holders you are worried about could get $.50 on the dollar. That would be much better than only getting $1.03 on the $1 when they were expecting $1.05 on the dollar.
Meddeling is all or nothing.
Wait.. they are Freddie or Fannie bonds!!! They wouldn’t exist with out meddeling. you can’t buy a bond that exists because of meddeling, then complain about meddeling.
That is like moving in across the street from Disneyland than complaining about noise and crowds! Or moving in next to an airport and complaining about the planes flying over your house.
http://www.cnbc.com/id/44358981
“However, the ’single most productive thing’ for the economy would be for Congress to ‘eliminate all the so-called tax expenditures and tax earmarks in the tax code and use all of those funds to reduce tax rates and simplify the tax code,’ he said.”
I have to assume he means per child tax credit ($23B) and the earned income tax credit ($45B).
I think he has nailed it. The problem in this country is that the poor aren’t poor enough, and the rich aren’t rich enough.
If there is one thing that low inflation despite 0% interest rates proves is that there is too much hands of the rank-and-file and there just isn’t enough investment capital in the hands of the top 10% richest.
Business after business going bankrupt proves that the problem is that poor people just have too much money. We need to make sure they have less money so they can spend more.
We keep cutting the taxes on the rich, and they still aren’t creating jobs (in America) so clearly the answer is that we just haven’t cut taxes on them enough.
End sarcasm.
http://www.cnbc.com/id/44358398
“The biggest failure is that these people are still working on consumption rather than production programs,” he said. “Until they figure out that more production is what is required we will continue to take money out of one pocket and put it into another and assume that we have accomplished something.”
Another guy that has nailed it. Stores are packed with goods that won’t sell becuase buyers don’t have money. He’s dead on. What we need is to increase production (presumedly in China, Mexico, or Texas where wages are lower). Then, suddenly, Americans will magically be able to buy all the excess goods with thier non-existant pay checks.
Or does he just mean production of new loans that can’t be paid back… Come to think of it, that does seem to be his point. We’re crushing the country by forcing banks to make fewer loans to people that can’t pay them back.
Here is a hint. I needed to borrow money to buy and repair a used car for my son. I had no problems getting a loan. I just needed to prove I could/would pay it back.
So - a totally bankrupt state votes to pay out even more unjustified funds to those here ILLEGALLY -
A state now completely controlled by democrats
And they wonder why they are bankrupt????
Prediction - more people and companies who actually work for a living will leave the state.
Democrats will blame racism and the greedy evil wealthy for not paying their fair share (anyone who makes more than $40,000). And demand a federal obama bailout.
———————————————
California Senate approves college aid for illegal immigrants
BNO News | Sept. 1, 2011
LOS ANGELES (BNO NEWS) — The California state senate has approved a bill which will give college students who are illegal immigrants access to public financial aid, the Los Angeles Times reported on Thursday.
The measure, which passed 22-11 on a party-line vote with Democratic support and Republican opposition on Wednesday, still needs to pass the Assembly. If approved, it will be sent to Governor Jerry Brown for his signature.
Part of a two-bill package known as the California Dream Act, the measure would allow undocumented students to apply for state-funded scholarships and financial aid. To be eligible they must be California high school graduates who attended schools in the state at least three years, and demonstrate financial need and academic merit.
I hope that they have to continue demonstrating substantial academic merit to keep those scholarships. As in, 3.8 GPA or better, and I think that the GPA should be tailored to the major.
In other words, for engineering, I’ll spot you a point or two lower, but no lower than 3.6. As for “cake” majors like Underwater Basket Weaving, I want straight A’s with the right of transcript and course content review. Or keep the “cake” majors out of this program.
I went to college on a scholarship that required that I keep a GPA. Even a 3.0 is no picnic in the sci/eng.
FWIW they still won’t be eligible for Federal Grants or loans. Still, the idea of giving Cal Grants (on top of in state tuition rates) to students who won’t have the legal right to work in the US seems rather idiotic.
Agree on the idiocy part.
Another thing I’d like to see: The recipients of these scholarships being required to give periodic reports on what they’re learning in school — and how they plan to use this knowledge to benefit their country. And by that, I mean the United States of America.
I would expect this report to be given orally to an audience of business, academic, community, and government leaders. It should be given in grammatically correct American English and, if there are accompanying slides, they should be free of errors in spelling, grammar, and logic. I want all assertions supported by data, rather than rhetorical flourishes.
And the audience should be allowed to ask questions at the end of the presentations.
In short, if you want a scholarship to attend a school like Berkeley or UCLA, well kiddo-who-wasn’t-born-here-but-wants-in-state-tuition, earn the darn thing!
UCLA - a few years back….
I went to an area economic summit there and met up with a few “Chicano Studies” grads. Most obnoxious, self righteous, young a-holes I’ve ever met. They said they were taking back what was theirs, and it was too damn bad us white people didn’t like it. Talk about chutzpah. All anchors, btw.
the mexican mafia is in power in calif,most of calif elected official have latin names. is it any wonder that we are 2 californias. there are different rules,the illegals are treated like gold,while us legals pay for all the services…many more taxtakers than taxpayers
The Dream Act passage in just wrong.
“many more taxtakers than taxpayers”
Well said SOLD IN 04.
We are currently surrounded by illegals as neighbors, and they get lots of free money, food, medical care, and now education deals. This makes me steamed.
We live in Thousand Oaks, and the illegals have invaded this once middleclass area. You’re right, the spanish politicians do better for theirs, then ours do for us.
Los Angeles area- 4.3 earthquake this afternoon. No reports of damage or injury so far.
4.3 isn’t so much an earthquake as an earthsneeze.
darrell
“earthsneeze” LOL
I agree, but of course my mother, who is using a walker after hip surgery, calls me … is this a precursor to the BIG one?
I recall reading in a periodical that the 1994 earthquake was down graded so people weren’t exempt from making their mortgage payment.
A 4.3 feels as though a truck just rammed into the side of the building in which you sit. Unless the building is very weak, little or no harm is done.
I had a nice talk with wifey. I’m going to do some stuff around the house and do some landscaping to keep her happy renting.
Muggy
Thanks for the update. We all love following your saga.
Remember, a happy wife is a happy life!
“We all love following your saga. ”
I hope so. Everyone here has a different scenario — I like reading about all the variations: mobile homes, retirement homes, empty lots, condos, boats, in-laws, kids, etc.
We got it all…
Muggy
HBB connects us all to each other. We’re a family, not just a community. Every day I learn something new here. I care about all of you. (Even the pita’s.)
Currently, in the morning on the treadmill, I am watching Structured Finance lectures. The professor is fabulous. I pencil out the problems at night before bed.
Generously helping out around the rental home can certainly go far to mitigate connubial pressure to join the Ownership Society.
http://www.cnbc.com/id/44360807
“Greece to Miss 2011 Budget Deficit Target”
“Underlining the relentless decline of the Greek economy, the Markit Manufacturing Purchasing Managers’ Index (PMI) showed on Thursday that manufacturing sector activity shrank for the 24th month running in August, with weak domestic demand outweighing a sharp rise in export orders.
The PMI survey showed manufacturers continued to lay off staff steadily in August. The country’s official jobless rate jumped to a record 16.6 percent in May, fueling widespread popular discontent over austerity policies.”
Wait… If government slashes spending, then people have less money to buy stuff? How can that be?
“Greece struggled with a deeper-than-expected recession Greece struggled with a deeper-than-expected recession ”
Wait? All they did was cut spending? How could that lead to recession?
“The gap has three sources: 1) the economy is doing worse than expected; 2) some of the measures of the mid-term plan are not implemented as they should be, either they lag or they are not implemented at all; 3) previous measures which were in the baseline plan yield less than expected, in particular tax measures,”
Wait.. What? Governmetn cuts spending, economy tanks, and when the economy tanks your tax revenue falls?
Are you telling me that we can’t spending-cut our way out of national deficits?
Next you’ll be telling me we can’t run perminant trade deficits via every increasing debt.
Miss 2011 Budget Deficit Target
Sounds like a beauty contestant.
MARKETS
SEPTEMBER 3, 2011
Big Banks Face Suits on Mortgage Bond Losses
By NICK TIMIRAOS And AL YOON
The federal regulator for mortgage giants Fannie Mae and Freddie Mac is preparing to sue some of the nation’s largest banks over soured mortgage bonds in a bid to recoup billions of dollars in losses from the failed investments, according to people familiar with the matter.
The Federal Housing Finance Agency, which is charged with conserving the assets of the failed mortgage giants, could file the lawsuits in the coming days, these people said. The suits are likely to allege that mortgages that were securitized by Wall Street firms and other issuers misled investors about the quality of the loans.
The FHFA filed the first of what could be around one dozen lawsuits in July against UBS AG, seeking $900 million in damages. UBS, in a statement at the time, promised to “vigorously” defend against all charges in court. The lawsuit alleged that UBS made false statements about 16 mortgage-backed securities that it sold to Fannie and Freddie from fall 2005 to summer 2007, including overstatements of borrowers’ capacity to repay loans.
The agency’s acting director, Edward J. DeMarco, declined to discuss the lawsuits in an interview last week but said there were “more to come.” An FHFA spokeswoman declined to comment on Thursday.
The FHFA issued 64 subpoenas last year to issuers and servicers of mortgage-backed securities in what has become one of the largest investigations to date of potential securities fraud from the mortgage boom and bust. The FHFA didn’t disclose its targets at the time.
The inquiry has focused on the “private label” securities based on subprime and other risky loans that were originated by mortgage companies, packaged by Wall Street firms, and then sold to investors. Many of the mortgage securities were made up of subprime loans and mortgages requiring little or no documentation of a borrower’s income, which deteriorated dramatically during the housing meltdown.
Fannie and Freddie couldn’t purchase those loans directly, but they were allowed to invest in slices of those securities that carried triple-A ratings. Fannie and Freddie were among the largest investors in those securities. At the end of July, they held nearly $78 billion and $149 billion, respectively, in securities that weren’t backed by a government-related entity. Private-label securities have been among the poorest performing mortgages.
The suits come as the potential statute of limitations for the FHFA to take such actions draws near next week, according to people familiar with the matter. The FHFA placed Fannie and Freddie into conservatorship, a legal process similar to bankruptcy restructuring, three years ago on next Wednesday.
The subpoenas issued last year could have been used to access loan files and other documents that would show how the loans underlying the securities didn’t match the materials used to market the investments. That subpoena power gives the FHFA a big advantage over private investors, which have had a harder time gaining access to the loan files that are critical to filing such lawsuits.
…
They’re not making any more ocean, you know?
‘Houseboats’ for Rough Economic Waters
8/31/2011 6:35:11 PM
Amid high housing costs and a weak economy, some Bay Area residents are deciding to live full time on boats. So-called live-aboards are attracted by the relative affordability of a home on the water.