Bits Bucket for September 29, 2011
Post off-topic ideas, links, and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
About Me
Name:Ben Jones
Location:Northern Arizona, United States
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Box wine is king.
I’ll drink to that.
I find box wine hazardous- I can never tell how much I’ve drunk, like I can when I look at a bottle. Also, I like drinking a variety of wines from around the world (which are still often quite cheap), rather than the more mainstream commercially-produced box wines.
I’m stuck on tequila.
Drowns out the housing mess faster on those particularly depressing days.
The idea of boxing wine was a real game-changer.
Try Carmenere, a varietal that to date is available only from Chile.
Should have added, it’s not available in boxes.
JANIS JOPLIN LYRICS
“Mercedes Benz”
Oh Lord, won’t you buy me a Mercedes Benz ?
My Landlords a Deadbeat, I must make amends.
Worked hard all my lifetime, no lobbyist friends,
So Lord, won’t you buy me a Mercedes Benz ?
Oh Lord, won’t you buy me a Flat Screen TV ?
Refinancing houses did not work for me.
I`m just not a victim, no help from DC.
So Lord, won’t you buy me a Flat Screen TV ?
Oh Lord, won’t you buy me a night on the town ?
I did not buy a big house, with no money down.
So prove that you love me and buy the next round,
Oh Lord, won’t you buy me a night on the town ?
Everybody!
Oh Lord, won’t you buy me a Mercedes Benz ?
My neighbors are Deadbeats, I must make amends,
Worked hard all my lifetime, no lobbyist friends,
So Lord, won’t you buy me a Mercedes Benz ?
Tough crowd.
Janis Joplin Mercedes Benz WITH LYRICS - YouTube
Feb 9, 2011 … Janis Joplin Mercedes Benz WITH LYRICS … Standard YouTube License … Janis Joplin - Piece Of My Heartby anasammet1745405 views …
http://www.youtube.com/watch?v=dbmPTsyB2H8 - 91k - Cached - Similar pages
Bernanke says Fed would act if inflation falls
CLEVELAND (Reuters) - Federal Reserve Chairman Ben Bernanke said on Wednesday the central bank might need to ease monetary policy further if inflation or inflation expectations fall significantly.
In his first public remarks since the Fed launched a fresh measure aimed at keeping down long-term borrowing costs, Bernanke indicated a willingness to push deeper into the realm of unconventional policy if economic growth remains anemic.
“It is something that we’re going to be watching very carefully,” Bernanke said in response to questions from the audience at a forum sponsored by the Cleveland Fed.
“If inflation falls too low or inflation expectations fall too low, that would be something we have to respond to because we do not want deflation,” Bernanke said.
The comment was made in response to a question about a recent decline in market-based inflation expectations, which policymakers see as a good gauge of future inflation trends.
I wish someone would ask why he is at war with savers…..
Moman - I agree.
This is from yesterday:
Comment by Robin
2011-09-28 18:06:11
Paid off mortgage 6 years ago - banked cash and would spend, but I can’t generate safe income. $500 interest income became $90.
Stimulus, my ass! (Age 59)
Our house money is earning approx. $1,200/yr. We’re talking some serious dough sitting there for a cash purchase in So Ca. I feel betrayed.
I think this is why investors are buying homes and renting them out , better returns. If a big company pools money and does this, say a REIT type fund, I bet they can make some money long term. like a giant pottersville. In our area its still too expensive but I sense a change ? In the future buying will be cheaper than renting IF you can qualify.
Once the giant rental funds have a hold of cheap rental RE they will curb the give aways to buyers ( making it really hard to buy ) to keep their cash flow captive.
Of course these slum lords will live here in our area and reap cash from Palmdale, Phoenix, riverside, etc.
have you thought about utility stocks ? I like AEP
cactus
I’ll be quick. What is your feeling about Newbury Park?
Not the Casa Conejo dumps off Wendy, but the stuff off Renio Rd by the new Albertson’s?
My husband thinks Simi is a local Palmdale/Lancaster in too many ways.
Your opinion?
I hope you’re right about change. http://www.redfin.com/CA/Moorpark/4212-Canario-Ct-93021/home/4562244
That is an insane price for that home,imo.
Cactus,
The investors are buying homes and renting them because they are among the best values in the market on a risk-adjusted basis when compared to other income producing real estate.
7-9% unleveraged yield on cost, with demand that rents the homes within a couple of weeks is pretty darn good.
It is very difficult to scale though, so you’ll see a lot of smaller players enter the market, not as many large players.
The investors are buying homes and renting them because they are among the best values in the market on a risk-adjusted basis when compared to other income producing real estate.
I just hope that they find good tenants.
Reason: One set of house wreckers will make their investment *a lot* less profitable. I’ve seen this happen twice on my block since the beginning of last year.
In both cases, the landlords had to spend many months (and a lot of money) bringing their properties back up to snuff before they could be rented out again.
Slim, what I am hearing is that some folks are:
1. Renting out to former owners (either of a different home, or the actual rented home) with a rent-to-own structure (giving the tenant an option to purchase at a value determined today, with some of each month’s rent going toward a down payment–an increased security deposit otherwise); and
2. Some markets are so tough to find rentals that the tenants are treating the properties well (they don’t want to be back out looking for a home again if they are kicked out);
3. On a portfolio basis, if you are putting aside several hundred dollars per year per home owned, as a vacancy reserve, you can fix a lot of stuff.
I expected to hear more of the stories you are describing, but so far, I haven’t heard very many.
Depends where you are, Rental Watch. Here in Tucson, the rental vacancy is something like 16%. It’s hitting the university area pretty hard.
We’re coming up on the end of the sixth week of the semester, and there are a lot of places still for rent. And they’re not all tumbledown dumps — there are some very nice properties without tenants.
I’ve also noticed a lot of vacancies in areas further away from campus.
These properties are in very dense, infill areas with low vacancies in Southern California.
There is no national weather forecast, I can definitely see how Tucson is different than Los Angeles.
look at INZ for the interest, not a dividend.
“…war with savers…”
When most folks are broke, you have to confiscate money where you can find it.
Savers aren’t ‘producers’.
Coffee is for closers, not loser savers.
When you save, you cut into the Fed’s market share.
Because people iw debt can’t get money to pay it back until after people with money spend it.
Because the Bernank is a central banker. His interest is in the banks. Banks don’t make money on savers. They make money on debt. Hence the importance of inflation. It makes debt more palatable.
It’s also a way to incite consumption now, as dollars become less valuable the longer you hold them. And in a zero-interest rate environment, it is supposed to enhance that effect.
To those of us who are savers, it’s pretty damaging. It also discourages savings from those who aren’t savers.
But, the Bernank has a bank-centric view of the world, and so does Geithner, and that’s what the bottom line is I think.
Savers = collateral damage when the majority is levered up.
Fed market manipulation can be a real game changer.
Federal Reserve Chairman Ben Bernanke said on Wednesday the central bank might need to ease monetary policy further if inflation or inflation expectations fall significantly.
Whoa, whoa … WHOA! Does this mean that the PTB are finally admitting that there is inflation?
Say it ain’t so, Joe!
Realtors Are Liars®
Realtors are game changers.
Are Liars Realtors?
Debt collection is the new growth industry
September 26, 2011 | 5:19 pm
Chief Executive Bill Bartmann is putting up $6.6 million to fund CFS II’s growth, the company said. The risk for Bartmann is that if the economy rebounds vigorously, employment and personal income will rise and the number of people having trouble making ends meet will plummet. From the look of things, though, his $6.6 million seems safe.
http://opinion.latimes.com/opinionla/2011/09/economy-debt-collection-is-the-new-growth-industry.html - 87k -
Big news from Tucson is that yet another call center opened. Fishwrap just had a big article about the hundreds of jobs they need to fill.
You guessed it — the place is a collection agency. Sounds like a real fun job!
Its a start, now if dell HP apple all bring their call centers home….
there are millions who are unemployed and not very bright and a call center to them is a VERY GOOD job.
Sotto voce: I know people who’ve taken jobs at call centers so that they can learn how to handle computer software problems. (There’s a big Intuit call center out near the Tucson airport.)
Then, after they’ve done their time at Intuit, they hang out their shingles as consultants.
I distinctly recall one fellow noting the thousands of customer problems he resolved while he was a call center employee. And, when it came to slaying software problem-dragons, this guy was good.
Not likely, US $11 + an hr, vs $11 a day in India.
‘Buy and Bail’ Homeowners Get Past Fannie, Freddie Loan Hurdles
By Kathleen M. Howley -
Aug 10, 2010 12:00 AM ET
Harvey Collier, a mortgage broker in Fort Lauderdale, Florida, says he gets as many as 10 calls a month from people planning to default on their loans. The twist: They first want financing to buy another home.
Real estate professionals call it “buy and bail,” acquiring a new house before the buyer’s credit rating is ruined by walking away from the old one because it’s “underwater,” or worth less than the mortgage. It’s an attempt to escape payments on a home whose value may never recover while securing a new property, often at a lower price with a more affordable loan.
The practice, which constitutes fraud if borrowers lie on loan applications, is continuing even after Fannie Mae and Freddie Mac, the biggest U.S. mortgage-finance companies, beefed up standards to prevent it, according to brokers such as Collier and Meg Burns, senior associate director for congressional affairs and communications at the Federal Housing Finance Agency. Whether driven by greed or desperation, the persistency of buy and bail underscores the lingering impact of the worst housing crash since the Great Depression.
“People were holding on, hoping the market would turn around,” Collier, who won’t work with applicants who intend to go into foreclosure, said in a telephone interview. “But now they’re giving up because there’s no light at the end of the tunnel in places like Florida.”
http://www.bloomberg.com/news/2010-08-10/-buy-and-bail-homeowners-get-past-mortgage-hurdles-from-fannie-freddie.html - 149k -
“The practice, which constitutes fraud if borrowers lie on loan applications,”
lol
Back in the bad old days:
The local bank would look at your total debt ratios (with the two mortgages) and laugh you right out of their office.
You mean the days when they would actually investigate and verify the applicant’s information?
You mean the days when banks and CEO’s were actually held responsible for making bad loans, the days before they could sell the risk for top dollar via Wall Street and the corrupt rating agencies.
Before securitization
Before 100% securitization. Those bankers were no better than warehouse middlemen, and they whined to high heaven when the Feds proposed a rule that they hold just 5%. FIVE PERCENT.
Time to cut out the middleman.
But why are the investors still buying this crap? The cat was let out of the bag years ago regarding quality of this stuff?
Before 100% securitization.
“But why are the investors still buying this crap? The cat was let out of the bag years ago regarding quality of this stuff?”
I think the “investors” are the taxpayers via Fannie/Freddie/FHA.
+1
Many of the public comments on the QRM rule contained that talking point that “The QRM requirements are too strict for even Fannie and Freddie… why, if they had to follow these requirements, they wouldn’t have been able to purchase 80% of what they have purchased in the past five years.”
In other words, they know full well that F&F have been propping up the crap.
You just draft some be loan docs showing the old house is rented out. The rent is added to your income, and poof, no income debt problems.
“People were holding on, hoping the market would turn around,” Collier, who won’t work with applicants who intend to go into foreclosure, said in a telephone interview. “But now they’re giving up because there’s no light at the end of the tunnel in places like Florida.”
What happens when more people start to realize this, instead of being a 2-3 year correction cycle, is a structural shift in the housing market?
Switching houses can be a real game changer.
My GF’s sister is in the process of attempting to “upgrade” to a much bigger, fancier house for the same amount she owes on her current modest, bubble-purchased home. She hired an attorney who is steering her through the process (scam) of buying the new house first, then strategically defaulting on the old one. Bunch of bullshit if you ask me.
Game changer for real…
Those are the people who are out bidding you and I on these homes.
There should really be a bit more outrage on this practice. Otherwise these people just assume we’re in agreement that they should go for it.
liz pendens
I hope your GF has better morals. That just pisses me off. You’d think they would have a cross reference data bank and throw their a**es in jail for fraud, and all the pos attorneys, too. I thought buy and bail was illegal. Did I miss something?
CarrieAnn and I need to go take our BP now. LOL
LOL
America supports ‘class warfare’.
Poll Shows Strong Bipartisan Backing for “Buffett Rule”
Slate
In somewhat of a surprise, a majority of Republicans and Tea Party supporters say they favor Obama’s proposal.
Nearly three in four Americans back President Obama’s proposed tax increase on households making more than $1 million a year, according to a new poll from a leading Democratic firm.
The Public Policy Polling survey, commissioned by the Daily Kos and labor union SEIU, found that the support for the so-called “Buffett Rule” wasn’t limited to only liberals as one might expect: Two in three Republicans, or 66 percent, said they’re in favor of the proposal.
Daily Kos with more numbers: “Indeed, every demographic sub-group favors the idea. Republicans back it 66-17. Hell, even self-identified tea partiers, the weakest supporters, are at 52-29. Oh, and those making over $100,000? 73-16.”
As the Huffington Post points out, the results echo a Gallup poll taken earlier this month that found two-thirds of American are in favor of raising taxes on households earning more than $200,000 per year.
“tax increase on households making more than $1 million a year”
they never define making.
if it doesn’t include a changed in the corp, cap gains, and dividends rate…nothing will be solved.
Bingo we have a winnner
We’ll tax atheletes and entertainers and neurosurgeons more but not WS titans
I’ve been hearing the unfair disparity between income and capital gains tax rates being discussed- for the first time- on the MSM. This thing is gaining traction.
Keep hope alive!
I personally do not enjoy many “capital gains”, but I think taxing them is largely confiscation through inflation. The dodge for most middle earthers over the past decades was to invest in houses, since the so-called capital gains were not taxed. So, bring it on, and deal another kick to the groin of the middle class and their overpriced housing.
The Public Policy Polling survey, commissioned by the Daily Kos and labor union SEIU
You are kidding me.
The most left wing of all left wing organizations does a poll that says people want higher taxes…
Odd that it mirrors the results of the Gallup poll- or are they pinkos too?
2nd banana
All those Republicans that are being pinched right now because they’re republican due to social rather than fiscal ideas…yeah, they’re thinking of their own behinds w/this vote.
So weird how the party partisans are surprised reality would rear it’s ugly head at some point.
“In somewhat of a surprise, a majority of Republicans and Tea Party supporters say they favor Obama’s proposal.”
Alright, Obama, you’ve got all of America on your side! Time to come up with a completely disappointing compromise with the Repub congressmen!
Meanwhile, in other news, Obama doubles down on the Solyndra fiasco with last minute Billion dollar giveaways to green boondoggles.
Come to think of it, Spend It Now is an excellent way to reduce future expenditures, from what they might have been. That must be what “spendthrift” means.
And per the Senate Committee on Appropriations on September 6th, Dept of Energy slated to get another $25.5B in FY 2012
Redistributing wealth is tricky and can be a real game changer.
Occupy Wall Street: inquiries launched as new pepper-spray video emerges
A still frame from video posted online shows Anthony Bologna, a New York police officer, firing pepper spray at retreating protesters on Saturday.
The senior New York police officer at the centre of the Occupy Wall Street pepper spray controversy fired the gas at protesters a second time just moments later.
After new video emerged on Wednesday showing the second incident, New York police commissioner Ray Kelly told reporters that the Civilian Complaint Review Board would investigate the officer, deputy inspector Anthony Bologna.
The New York Police Department’s own internal affairs bureau also plans to open an investigation, the New York Times reports.
The investigations were announced after bloggers and activists drew attention to video posted online which showed that Bologna fired pepper spray on two occasions last Saturday as officers broke up a protest march through Greenwich Village.
The first footage shows him targeting a group of female protesters who were being penned in by officers on East 12th Street. The latest video shows another incident on the same street, shortly after the first, when he fired more pepper spray towards at least one of the same women, after they were recovering from the first incident.
On both occasions, the officer appears to have violated New York Police Department guidance on how the gas should be used.
In response to the Guardian’s appeal to readers to help us reconstruct Saturday’s events on East 12th Street, one protester wrote to say that she was sprayed with gas by the officer both times.
The protester, Ashley Drzymala, also sent us a link to this raw footage, which shows - at about the 3:56 mark - the officer spraying protesters as they retreated from the area of West 12th Street where he had used the gas on another group about a minute earlier.
…
The Wall Street pigmen need a dose of this. Bring the WAR to Them
See also the great pic of Prince Charles and Camilla driving through London earlier this year surrounded by goons and thugs beating on the car and them looking sh*t-their-pants scared.
And Marie Antoinette didn’t get it either…
Question:
Will the Tea Party lend support to this grass roots movement against Big Money and its corrupt practices? Or will they lead a counter-protest in its defense?
Which side are you on, Tea Partiers?
Which side are you on?
One of the best comments here in recent weeks regarding the TeaTrash was their absolute hatred of all things government despite their absolute faith and certitude in the government carrying out the death penalty.
The ‘Tea Party’ phrase originates with a Ron Paul ‘money bomb’ fundraising event on 12/16/2007 (the anniversary of the Boston Tea Party) and since Rick Santelli’s famous rant has been sanitized and corporatized into a fake astroturf ‘movement’ to steer angry racist white people into voting against their own economic self-interests.
One of the best comments here in recent weeks regarding the TeaTrash was their absolute hatred of all things government despite their absolute faith and certitude in the government carrying out the death penalty.
1. I am not in the tea party
2. They don’t hate “all things government” - stop with the strawman arguments
3. They do want a smaller government to live within it means
4. The death penalty is carried out by states (99.9%).
This is one reason why the political system is so broken in the US. ‘TeaTrash’…’absolute hatred’. I bet you wonder why everyone doesn’t just go along with what you want…
Ben,
Audiences cheering for a record number of executions? Booing a gay soldier? Cheering letting the uninsured die? If that is not hate then what is?
Hate comes from both sides of the spectrum.
What about the people protesting at soldiers funerals? I can’t get my mind around the amount of disrespect they show the families.
goonie, they aren’t all like that. Just like the left isn’t all retired hippies who love illegals (Few of the are, actually)
Meanwhile, I’ve seen many a time on PBS where some GOP politician says they want to cut spending. The PBS journalist asks, without fail, what will you cut. The politician answers, without fail, that “we need to have a conversation.”
After years of it, they can’t seem to have this blasted conversation. of course not. Because they know that if they do, they will lose either the military money or the senior vote.
‘cheering for a record number of executions’
Or paying zero attention to drones killing brown people all over the globe (some say around 1,900; innocent or guilty, who will ever know). Is one worse than the other?
Door Gunner: Git some! Git some! Git some, yeah, yeah, yeah! Anyone who runs, is a VC. Anyone who stands still, is a well-disciplined VC! You guys oughta do a story about me sometime!
Private Joker: Why should we do a story about you?
Door Gunner: ‘Cuz I’m so f@ckin’ good! I done got me 157 dead gooks killed. Plus 50 water buffalo, too! Them’s all confirmed!
Private Joker: Any women or children?
Door Gunner: Sometimes!
Private Joker: How can you shoot women or children?
Door Gunner: Easy! Ya just don’t lead ‘em so much! Ain’t war hell?
“angry racist white people”
It seems unfair that these white ones get so much market share.
“What about the people protesting at soldiers funeral?”
The Fipps family has a lot more in common with the Tea Partiers than they do with anyone of the democratic/Liberal persuasion.
-Hate gays?…….check
-Hate government?…..check
-Hate paying taxes?……check
-Live off the government teat, while protesting all of the above?……..check
‘How can you shoot women or children?’
‘Disturbing footage of Apache attack helicopters killing people in Afghanistan is being shown to frontline British soldiers in “Kill TV nights” designed to boost morale, a television documentary will reveal.’
‘The footage, seen by The Independent on Sunday, shows ground troops at the British headquarters in Helmand province, Camp Bastion, gathered for a get-together said to be called “Kill TV night”.’
‘Much of the footage is along the lines of the now infamous video of a US Apache helicopter strike on civilians in Baghdad in 2007, first released on WikiLeaks last year. In one clip an Afghan woman is targeted after a radio dialogue between pilots refers to her as a “snake with tits”.’
http://www.independent.co.uk/news/uk/home-news/british-soldiers-in-afghanistan-shown-war-snuff-movies-2360511.html
Without seeing the video, or knowing the details, a woman “civilian” who is packing stuff for the Tailban will get whacked just as fast as a man will, if I was in charge.
Because I don’t want to be considered a sexist pig.
Ben -
“Or paying zero attention to drones killing brown people all over the globe ”
Don’t worry, as soon as we have a Republican president in office, war will be a Bad Thing in the media again.
‘as soon as we have a Republican president’
People don’t see what we are getting ourselves into. Consider that Obama used the legal argument that he didn’t have to have congressional authorization to go into Libya because, as no one was shooting back at our warplanes and no ‘boots on the ground’, there were no ‘hostilities’.
So with a drone, there is no need for a President to even consult congress when killing anyone, anywhere. How would the Dems like it if a Pres. Perry, for example, is handed the keys to this situation?
I saw a bumper sticker that said something like this; Obama has launched more Tomahawk missiles than all other Nobel Peace prize winners COMBINED!
“Smaller government that lives within it’s means”
Meaning:
-Poor/unemployed/disadvantaged people get thrown to the wolves. Because all those losers who can’t pull themselves up by their bootstraps deserve to die.
-Posession is 9/10ths……you get to keep you stuff, even if you stole it.
-Business gets an even freer hand to screw people.
-Wall Street continues their money games.
-The police state/Neuvo Gestapo will be given carte blance to crush the opposition.
- Christian Fundamentalists will occupy all policy making decisions, “Faith-based” government programs will flourish (as long as you are a member of one of the “approved” faiths)
That may not be the Teabaggers intended plan, but that will be the result.
In case you haven’t noticed X, all that you mention is already taking place with the blessings of the largest federal government this country has ever seen.
You actually think the police state will go away with large government? Do you know how many federal agencies now have armed enforcement agents? How many new laws are being passed every year that bring all of us closer to becoming felons?
Have you not noticed that the wall street types you fear are global progressives who support big bloated government and have Obama and other big name democrats in their pockets.
Has the war on poverty become more successful with the every increasing size of the federal government? Free cheese and high rise prisons (housing projects) are not doing the trick.
We also have a huge religious influence on government including Progressivism, liberation theology, social justice (still don’t know what that means), and Islam to name a few. Okay when it’s your guys?
Is borrowing 40 cents on every dollar the government spends sustainable? Only when your people are in charge?
These guys are morons…didn’t anyone run down to the ski shop for goggles?
And don’t forget the Vaseline….
Pepper spray in the eyes and a club to the head can be a serious game changer.
Bernanke: There’s No Housing Bubble to Go Bust
By Nell Henderson
Washington Post Staff Writer
Thursday, October 27, 2005
Ben S. Bernanke does not think the national housing boom is a bubble that is about to burst, he indicated to Congress last week, just a few days before President Bush nominated him to become the next chairman of the Federal Reserve.
U.S. house prices have risen by nearly 25 percent over the past two years, noted Bernanke, currently chairman of the president’s Council of Economic Advisers, in testimony to Congress’s Joint Economic Committee. But these increases, he said, “largely reflect strong economic fundamentals,” such as strong growth in jobs, incomes and the number of new households.
…
Something nobody could have seen coming can be a real game changer. Ben just had no idea. Its not like he was lying or just plain wrong. Give the guy a brake - after all he saved every one of us.
What was he supposed to say?
“Yeah, they’re picking me, the world’s leading expert on the Great Depression, because everyone that is anyone knows we’ve hit the iceburgh and this beath is going down and fast.”
Seriously? Is that what people would have expected him to say?
“What was he supposed to say?”
You provide a fond reminder of one of my high school tennis coach’s all-time favorite cliches:
Really? It reflected a 25% growth in incomes? Really?
Or was The Bernank just talking out of his -ss?
With the debt bubble explosion of the time, did it not occur to them to check net worths? OR something like that?
The increase in jobs was due to the boom in construction jobs building houses nobody would ever live in. That and easy “flipper” profits and heloc money driving a boom. If he couldn’t see that, he is blind as well as completely stupid.
Bernanke is clearly lying.
Enron, Taliban & Warburg: The Untold Story
In 1985 Drexel Lambert S&L crook Michael Milken helped Houston Natural Gas merged with Internorth to create Enron. Kenneth Lay headed Houston Natural Gas and became chairman and CEO of the new company. Enron was the biggest corporate contributor to George W. Bush’s campaign to become Texas Governor.
http://deanhenderson.wordpress.com/2011/09/28/enron-taliban-warburg-the-untold-story/#more-1450
“In 1985 Drexel Lambert S&L crook Michael Milken helped Houston Natural Gas merged with Internorth to create Enron.”
That story is so depressing that I hope later learn it is a crackpot conspiracy theory.
Don’t hold your breath. It’s not. If anything, it barely scratches the surface.
Michael Milken went on to open a bunch of private schools and community centers in the Jewish community in my area. He healed his dark past to those who like Distinguished Speaker Series and social events. Personable and bright, many now respect his philanthropy. He certainly has worked his charisma. I am personally not impressed. Is it for show or real?
(My opinion.)
Pablo Escobar similarly offered great community service in his home country of Columbia.
The Two Escobars (2010)
Pablo Escobar was the richest, most powerful drug kingpin in the world, ruling the Medellín Cartel with an iron fist. Andres Escobar was the biggest soccer star in Colombia. The two were not related, but their fates were inextricably-and fatally-intertwined. Pablo’s drug money had turned Andres’ national team into South American champions, favored to win the 1994 World Cup in Los Angeles. It was there, in a game against the U.S., that Andres committed one of the most shocking mistakes in soccer history, scoring an “own goal” that eliminated his team from the competition and ultimately cost him his life. The Two Escobars is a riveting examination of the intersection of sports, crime, and politics. For Colombians, soccer was far more than a game: their entire national identity rode on the success or failure of their team. Jeff and Michael Zimbalist’s fast and furious documentary plays out on an ever-expanding canvas, painting a fascinating portrait of Pablo, Andres, and a country in the grips of a violent, escalating civil war.
Cantankerous
Thank you for the post regarding Pablo Escobar. Interesting.
The review doesn’t really make my point, which was explained to me by a fellow soccer dad who watched the movie and recommended it. Pablo Escobar was beloved by the Colombian people for his many acts of philanthropy, which included supporting efforts to raise the caliber of the national soccer team to world-class.
And then they went to jail.
Compare/contrast to hope and change:
ABC: Obama Fundraisers Tied to Green Firms That Got Federal Cash
ABC News | September 29, 2011
Several of Barack Obama’s top campaign supporters went from soliciting political contributions to working from within the Energy Department as it showered billions in taxpayer-backed stimulus money on alternative energy firms, ABC News and iWatch News have learned.
One of them was Steven J. Spinner, a high-tech consultant and energy investor who raised at least $500,000 for the candidate. He became one of Energy Secretary Steven Chu’s key loan program advisors while his wife’s law firm represented a number of companies that had applied for loans.
Recovery Act records show Allison Spinner’s law firm, Wilson Sonsini Goodrich & Rosati, received $2.4 million in federal funds for legal fees related to the $535 million Energy Department loan guarantee to Solyndra, a solar company whose financial meltdown has prompted multiple investigations. She pledged to take no portion of the money and did not work on the loan applications.
Showered? Money?
So would that make it a… wait, never mind, this is a respectable board.
Now that Oh’s health care is on the chopping block of the supremes, his prez has be shown to be a complete and total failure. But hey, he:
employed lots of tax cheats
made the TBTF banks bigger
expanded the reach of the goldman squids
hooked up sweet deals for Buffett, UAW, Solyndra, light squared, etc.
played the race card on a weekly basis
had press conferences daily - but never was able to show up on time
golfed A LOT
All George W’s fault, of course!
The country re-elected a ‘complete and total failure’ in 2004, and they will again in 2012
FOUR MORE YEARS!
Knowing what you are getting is worth something!
The devil you know is better than the devil you don’t. Worked in 2004…
Now that Oh’s health care is on the chopping block of the supremes
Not surprising, given that this court is so biased towards big biz that it has granted free speech rights and “personhood” to corprorations.
Funny how they can get Corporate America’s agenda accomplished but they don’t seem so concerned about the things that matter to the religious right who faithfully votes for the guys with the Rs after their names. Hmmm … I wonder why?
You forgot that he made tele-prompters a fashion statement.
If you’re a public speaker, a teleprompter can be a real godsend.
However, like any other device, you do need a bit of training in how to use it properly. You don’t just get up there and start reading what’s scrolling on the screen.
The teleprompter also has to work right. Recall that during one of President Clinton’s State of the Union speeches, something went wrong with the prompter.
Clinton realized that there was trouble in Teleprompter Land, so he started extemporizing. He did this for oh, 10 minutes, and no one in the audience noticed that he was like a jazz player off on an extended riff.
Clinton could do such things and pull it off. George W. Bush certainly couldn’t and neither can Obama.
Obama can read a teleprompter just as well as Reagan did.
“And then they went to jail.
Compare/contrast to hope and change:”
Did you even read the article?
“Enron called Federal Energy Regulatory Commissioner Kenneth Hebert to pressure him to make a ruling favorable to the company. When Hebert refused President Bush relieved him of his job. Enron CEO Ken Lay was told by Bush to interview four candidates for the FERC post during the Bush transition to the White House. During the 2000 Presidential elections Enron was the biggest corporate funder of the Bush Campaign, giving $113,000 to the campaign, $100,000 for the inaugural ball and $5,000 to the Florida Recount Fund, which was presided over by James Baker. During 1999-2000 Enron doled out $2,439,000 in political contributions.
This was chump change compared to the $20 million Enron had given as bribes to Indian officials in 1993 when it moved into the power generation business in that country’s Maharashta State. Enron snookered the Indians into a deal where they would pay $30 billion to Enron to provide electricity at rates 700% the national average. The Enron Dabhol plant produced the highest priced electricity in India. Maharashta state officials wanted out. The US Ambassador to India chastised officials for even considering backing out of the deal. [6]
In 1999 the Indians finally sent Enron packing after both Human Rights Watch and Amnesty International cited Enron for human rights violations in handling opposition to Dabhol. Amnesty said women were dragged from their homes and beaten by thugs on Enron payroll.
There is a bigger story behind Enron’s failed Dabhol project in India. By the mid-1990’s the Unocal-led Centgas consortium, which proposed the Turkmenistan-Afghanistan-Pakistan natural gas pipeline to supply the Far East, began proposing an alternate route that would terminate at Multan, Pakistan on the Indian border in the heart of disputed Kashmir. A proposed 400-mile extension of the pipeline would bring cheap gas to India to supply the Dabhol plant, allowing Enron to be competitive in the Indian market. [7]
Were the last-ditch negotiations by the Bush Administration in summer 2001 with the Taliban an attempt to head off an Enron bankruptcy by pushing through the trans-Afghan pipeline necessary to bring Dabhol the cheap gas it needed to survive? The company sorely needed to recoup the over $3 billion it invested in the ultra-high-tech Dabhol facility just north of Bombay.”
This kind of behavior is so far beyond a failed solar panel startup as to be ludicrous. It’s no wonder America has become hated around the world.
It’s sobering to realize that WE are the jack booted goons and thugs. All the footage of GI’s handing out toys or playing soccer with Iraqi kids is nothing but propagangda.
My daughter arrived this morning in Madrid to begin her semester abroad in Spain. As she went through immigation she produced her German passport, keeping her US passport out of sight.
She said that the Spanish immigration agent was very cordial and greeted her with a “Guten tag”. (Her German Passport does say that it was issued in Los Angeles, CA)
Yeah, but those Spaniards are looking to the Germans for a bailout.
Let’s check again how the Spaniards act, if the Germans tell them to go pound sand.
LOL! You have a good point. Last time I was in Europe the immigration types, even in the UK, were a little cold and unfriendly when I produced my US Passport.
michael milken…the junk bond king.
a black man steals a car and they call him a thief.
a white mean steals millions of dollars and they call him a king.
Milken went to jail for 2 years.
So, if I go to jail for two years at Club Fed, I get to keep the multi-million dollars that I steal?
Sign me up for that deal.
friend of mine has a brother that has been in a federal prison for sometime now.
he said the first six months to a year isn’t bad at all…it’s actually kind of fun. he played on the baseball team.
he said after a year or so it gets a little boring.
just need to watch out for the DC boys.
make these “white collar” crimes state offenses and send them to a real “pound them in ….” prison would be one step in the right direction.
Thanks Michael & Steve.
Two years, wow, that’s a great ROI. How much did he squirrel away under a title category that could not be confiscated?
(I would not be surprised. The guy is smart. I’m just say’n.)
“michael milken…the junk bond king.
a black man steals a car and they call him a thief.
a white mean steals millions of dollars and they call him a king.”
What to do with a black man who stole a whole country?
Last election was the mother of all game changers.
How did Obama “steal” the country? I don’t recall there being any electoral irregularities, unlike in (cough) 2000.
He lied to the Dems and every other fool who was hoping for change. A liar is a form of thief.
Using that definition ALL politicians steal their election.
Touche;
Why do we keep putting up with this standard?
To be fair, I think there are always a small number of electoral irregularities. In most elections, the results are lopsided enough that the irregularities don’t matter. Aside from its narrow margin of victory, the 2000 election stands out because the aggregate popular vote swung to the loser.
Sept. 28, 2011, 2:57 p.m. EDT
Obama jobless mortgage program to end half-used
Roughly $500 million expected to be returned to Treasury
By Ronald D. Orol, MarketWatch
WASHINGTON (MarketWatch) — Only 15% of the estimated 100,000 borrowers who sought to obtain financial assistance from a $1 billion Obama administration program for unemployed homeowners will end up receiving it, a top Housing and Urban Development Department official said Wednesday.
The Emergency Homeowners’ Loan Program, or EHLP, is due to wind down this week, but just half of the funding will be used up, according to Neill Coleman, general deputy assistant secretary at HUD. The program was aimed at those who were either unemployed or who were jobless for a significant period of time.
“The program had really strict eligibility requirements. I don’t think anyone realized was just how many people that was going to knock out,” Coleman said.
…
If central bankers wanted to shift the burden of financial losses onto a particular investor class, gold bugs would be a good choice, as they are decentralized and internationally dispersed with no significant concentration of political power of which I am aware.
Tough Going for Gold, and It’s Looking Tougher
Sept. 27, 2011
October is the worst calendar month on average for gold, according to MarketWatch columnist Mark Hulbert, who says there are some seasonal winds blowing against the yellow metal. But watch for those weddings and festivals in India. Laura Mandaro reports.
Alert!!!!
Anti precious metals troll
Yeah! Another bailout! Good times are coming…
———————————
Stocks: Investors cheer German vote passing
CNN | September 29, 2011
NEW YORK (CNNMoney) — U.S. stocks are gearing up for a higher open Thursday, as global investors welcome a key vote from Germany’s parliament, approving new powers for the eurozone’s bailout fund….
…Germany became the latest of the 17 countries in the eurozone to approve an overhaul of the European Financial Stability Facility, a bailout fund set up in the wake of the 2008 financial crisis. Including Germany, nine countries have approved it so far, but all 17 need to give it their stamp of approval.
Financial Crisis
Greeks protest as EU and IMF begin bailout loan audit
Greek civil servants opposing a new barrage of austerity cuts on Thursday blocked a host of ministries as senior auditors from the EU and the IMF were to begin a vital fiscal audit to see in the debt laden country can avoid default.
Greeks protest as audit on bailout loan begins. Protesters chant slogans against the new austerity measures during a rally in front of the finance ministry in Athens. Photo: Getty
Telegraph Staff and agencies
7:55AM BST 29 Sep 2011
State TV NET reported that nearly all major ministries were occupied by protesting staff, including the ministries of finance, development, justice, labour, health, interior affairs and agriculture.
The occupations began early this morning before official opening hours and were to continue until Friday, NET said.
Greek civil servants oppose a new round of pay cuts and layoffs imposed by the government as it struggles to slash a runaway deficit.
A high-level mission from the EU, the IMF and the European Central Bank, which saved Greece from bankruptcy last year, have returned for a report that will determine if the debt-hit nation can again escape default.
Four weeks ago the auditors quit the country abruptly, unhappy with the government’s efforts to tackle its debt mountain.
…
Soon the banksters will have tranferred all the money from taxpayers to themselves.
As far as the Greeks are concerned, if they would be as dedicated getting their house in order as they are protesting and taking bribes they would have higher growth rates than China. Percentage wise they have the most bureaucrats but are no even able to collect taxes, how pathetic is that? You can’t build an economy on corruption, handouts, bureaucrats, debt, strikes and early retirement. Not going to work in Greece, not going to work in California or anywhere else.
Of course as long as you find a sucker that finances everything, why change?
What’s up with the Greeks? Don’t they know that all they have to do is start a program where they dig ditches and fill them back in?
It appears they have already started a program where they break windows and replace them.
And the can gets kicked one more time.
No. This time its a game changer.
Is the paradigm shifting and repurposing to a new synergy?
If I ran for president under the following platform would anyone vote for me?
1. Personal responsibility - No bailouts for persons or companies
2. Fed mandate changed to simply price stability. This should reduce some of the meddling in the economy and end the war on savers
3. Smaller federal government with more powers delegated to the states?
I was with you until number 3.
You do know that private federal contractors outnumber regular federal employees and that states are notorious for ignoring safety and civil rights laws, right?
You will be called:
A Nazi
A person who wants blacks hanging from trees
A person who wants to starve children and throw grandma into the streets
A person who wants dirty water, dirty air and the earth to bake
Personal repsonsbility is a great idea… but it doesn’t work when there are 5 applicants for every job.
An acquaintence just graduated from college with, admittedly, a degree in a very soft science, with no student loan debt. Like many we see on the news, he lives at home and works a McJob. He can’t afford a car, much less a house. Was he not personally responsible? Did he not “get off his butt and get a job?” What is your platform for this generation?
—–
Giving powers to the states will only turn the US into its own mini-globalistic minfield. States will compete with each other to have the fewest environmental standards, the unsafest working conditions, the lowest pay, the lowest taxes and the worst education just to be the most “business-friendly.”
Also, taking powers from the Fed to give to the states will just take employment from the federal union goons and give it to the state union goons. Notice how it’s never a federal worker who stacks his overtime for a lavish retirement? It’s always a state worker.
The premise that the collective is by nature better than the component parts needs examination.
Neanderthal hunting teams coverd that ground a long, long time ago.
States will compete with each other to have the fewest environmental standards, the unsafest working conditions, the lowest pay, the lowest taxes and the worst education just to be the most “business-friendly.”
Really?
So this would explain why companies are FLOCKING to Haiti and Germany is being abandoned…
There is alot more to making a profit than just wages…
Yeah…….all that public infrastructure like roads, a reliable court system, police who make enough money so they can’t be bribed.
You know, all that stuff you are constantly calling “bloated government”
You know, all that stuff you are constantly calling “bloated government”
And AMAZINGLY that we had all those things before government was 25% of GDP, before government took 50% of a middle class person’s paycheck (for all taxes), before government had TRILLIONS in debts and (my gawd) EVEN BEFORE WE HAD AN INCOME TAX.
Just amazing - isn’t it?
No cabana boy, we didn’t.
Now fetch me an umbrella drink, quickly.
They are flocking to China and India, however. there’s just enough government to protect the factories from the mobs and to get the goods to market. But they look the other way on labor conditions and environmental standards. Coinkydink? I think not…
Wrong question
If you ran with that platform would the financial titans and MSM support you, or would they dig through your garbage and rip you to shreads with their coverage?
Impossible question.
If you ran with that platform you wouldn’t want to be President.
No bailouts, as in “end the FDIC”? FDIC is a bailout for depositors when the institution goes belly up.
No bailouts as in no more FEMA? Pay what the insurance costs, or just eat a loss when the storm rolls in?
Changing the Fed mandate would not end the war on savers. We’ve inflated prices far above peoples’ wages ability to maintain those prices. We need to keep interest rates near 0% to prevent prices from crashing down to affirdability (price stability).
Smaller federal government is just a way of telling the poor states to go pack sand. Alabama, sorry, but you don’t get federal money for school, so you’ll be stuck with 100 kids per class.
How does adoption square with personal responsibility?
Liquidation is a way to pay taxes.
Greek Official: Ability to Pay New Taxes Exhausted
By DEREK GATOPOULOS Associated Press
ATHENS, Greece September 28, 2011 (AP)
Greece has “exhausted” its ability to pay more taxes to cover budget gaps, the deputy prime minister declared Wednesday, saying he himself can’t pay a new emergency tax without selling property.
Theodoros Pangalos spoke as the debt-shackled nation faced fresh strikes and braced for another inspection by international creditors, starting Thursday, to decide whether to continue the vital bailout loan payouts.
Parliament approved a new emergency property tax Tuesday to be added to electricity bills later this year, as Greece remains under strong international pressure to abide by its painful deficit-cutting targets. Greece will go bankrupt by mid-October if it does not get an expected euro8 billion ($11 billion) loan.
“I believe that the tax limits of Greek society have been exhausted. I would say they have been exhausted for some time,” Pangalos told private Mega television.
Pangalos, a 73-year-old Sorbonne-trained economist, is listed as owner or part-owner of eight properties and farmland in greater Athens and several other parts of Greece.
“The property I own was purely obtained through inheritance. Personally, I have never bought anything … I will be obliged to sell some of these properties. There is nothing else I can do,” Pangalos said.
…
Thus popped the Greek property bubble.
“The property I own was purely obtained through inheritance. Personally, I have never bought anything … I will be obliged to sell some of these properties. There is nothing else I can do,” Pangalos said.
We’re gonna see lots of this too.
I have a friend paying her in law’s property taxes. It’s on an island in the Adirondacks they want to keep in the family but really can’t afford it anymore. My friend insists none of the kids want it but because the elders are stressed and in such poor health they don’t want losing the island to be behind losing their loved one. So they continue to pay.
You gotta wonder how many homes this is going on in.
My friends doing the paying help so many different people I sometimes wonder if they’ll have enough for themselves when this thing corrects. Well, they should have good will. We’ll see.
If that isn’t proof that a Greek default is inevitable, I don’t know what is.
I need a reality check here. I’m looking to purchase a slip (I’m currently renting it and the owner just sold his house, so now has the slip up for sale) in my community. Here are the particulars..
My current rent is 300/mo.
Owner’s sale price is 49K.
No RE taxes or insurance (it’s a lifetime lease, whatever that means).
6.5% transfer tax (which will be on 39K, or about 2500 bucks)
Community fees are about 100/mo (and are going to be about 50/mo soon, we just paid off the final developer loan on the waterfront)
Anyway, my math is showing a price/rent ratio of about 14 for this slip. The 300/mo is a solid rental figure, that’s what they are all going for (and what I’m currently paying).
The supply is strikingly limited on these slips, but so is demand (there are about 30 slips and 100 possible owners). The developer has 1 or 2 slips left for sale that he’s been holding for 5+ years, he want’s 60K for the cheaper one, and that’s without a boat life (10K or so).
Let me know what everyone thinks. And you can hold the “hole in the ocean to throw money into”, I already know, I’ve owned a boat for many years.
49K for 30 years at 5% is $260/month
Add in $50/month for fees and you are up to $310
Almost a wash.
Plus the transfer tax of $2500.
Do you love the place? Can your monthly rent go up? Can you be kicked out of this slip if the current landlord has a bad day? Is that worth $2500?
And how long do you intend to stay?
If the answer is all “yes” and more than 5 years.
Then I would lean on the “go for it” side of the house.
My monthly rent has gone up several times already, it used to be 250/mo. These slips command a higher than market value rent because of the limited nature (there are typically none, or only 1 available for rent at any one time).
I agree with your numbers, but, from the start, the “real” costs are going to be higher. The HOA is actually 285/qtr right now (call it 100/mo with utilities). All of that is covered in my 300/mo payment, so.. By giving up 50K, I’m actually saving 200/mo compared to renting. I’m looking at that as a 4.8% yearly return.. Not great, but tax free and protects me from any future rent increases. Lift will probably have to be updated at some point (2.5-5K), but that’s typically about it.
I’m honestly worried about both options. Rent is risky because the supply is so limited, if there’s only one person renting they can command a big premium simply because they “corner” the market in slips for our community. Buying is risky because prices can continue to fall and the supply could vastly outstrip demand at some point in the future (new mix of people without boats, less overall demand for boats because of s**tty economy or high gas prices, etc).
I’m very conflicted. It’s in that “middle range” where both buying and rent “could” make sense. I doubt I’ll be selling this house anytime soon, but you never know. My wife and I tried to do the “one and done” house, saved up for a long time and bought our dream house as our first home. You never know what life will bring, but, we have no intention of ever leaving this home.
I’m showing a price/rent of 140, higher than what houses should be. I didn’t realize slips were that expensive…
OT, I feel for you.
My economics were easier to swallow. I “own” a slip, in that I have exclusive rights to it as long as the club has a lease on the property. Cost to “own” was $2500. The most pricey slip here changed hands for $5K. Yearly HOA, including electric, is approx $1200. Naturally, three months of the year it’s frozen. I must live in the cheapest place to own a boat in the US.
Your posts sounds like the “They aren’t making any more slips” vs the shtty economic forecast fear tug of war. Personally, I’d sit on the money. The boating crowd is a little behind the curve in adjusting to the new realities, but everything points to there being less money around for this sort of thing in the future. You can do a lot of driving down the road to the marina for $50K.
Sept. 29, 2011, 10:02 a.m. EDT
Pending home sales index drops 1.2% in August
By Jeffry Bartash
WASHINGTON (MarketWatch)– The pending sales index of existing U.S. homes fell 1.2% to 88.6 in August, the National Association of Realtors said Thursday. The pending sales index totaled 89.7 in July. The index’s current level is 7.7% above the August 2010 level, but it’s well below the pace of pending sales in a healthy economy. The biggest decline took place in the Northeast, while the Midwest and West also fell. The South was the only region to post an increase.
Sept. 29, 2011, 10:47 a.m. EDT
30-year mortgage rates just barely above 4%
Fixed-rates drop to lows following Fed announcement: Freddie Mac
By Amy Hoak, MarketWatch
CHICAGO (MarketWatch) — Average rates on fixed-rate mortgages hit record lows this week, with the 30-year fixed-rate mortgage averaging 4.01%, according to Freddie Mac’s weekly survey of conforming mortgage rates.
“Fixed mortgage rates fell to all-time record lows this week following the Federal Reserve’s announcement of its Maturity Extension Program and additional purchases of mortgage-backed securities,” said Frank Nothaft, vice president and chief economist of Freddie Mac, in a statement.
DJ Newswires News Editor John Shipman reports on two key pieces of economic data driving markets: jobless claims and final Q2 GDP figures. AP Photo.
The 30-year fixed-rate mortgage averaged 4.09% last week and 4.32% a year ago. This week, rates were lowest in the western part of the country, where the average fell to 3.95%. Freddie Mac surveys five regions in its report.
Fifteen-year fixed-rate mortgages also hit a record low, averaging 3.28% for the week ending Sept. 29, down from 3.29% last week and 3.75% a year ago.
…
Sept. 9, 2011, 2:50 p.m. EDT
Jacksonville is worst housing market
By MarketWatch
Jacksonville, Fla., is the lowest performing major housing market, beating out Detroit, which has held the undesirable honor for the past seven months, according to a report released this week by Clear Capital, a provider of real estate asset valuation information.
Prices fell 2.7% in Jacksonville over the past four months, compared with the previous three months. In Detroit, prices fell 1.1%. For its analysis, Clear Capital uses rolling quarter intervals, comparing the most recent four months of pricing information to the previous three months, according to a news release from the firm.
On a national basis, home prices rose 4%, according to the report. Home price gains were largest in the Midwest.
“Although the summer gains appear to signal strong growth in home prices, it’s important to keep in mind that these gains are off of the record lows of winter,” said Alex Villacorta, director of research and analytics at Clear Capital, in the release. “With summer coming to a close and the price gains clearly starting to level off, the market is at a critical juncture as to whether it can avoid another significant downturn into the slower buying seasons of fall and winter.”
Read more real estate news in this week’s pages, including why some people are considering buying vacation homes, how office building security has changed since the Sept. 11 attacks and a Realty Q&A on how to get started investing in trust deeds.
While prices have shown recent signs of improvement, they might not last — the latest consumer confidence readings suggest that many consumers are still not ready to jump into the housing market, Villacorta said.
…
So, dropping house prices mean that the industry is “low-performing.” That’s like saying that a health insurance company is low-performing when it pays for the most health care, or a private corrections facility is high-performing when it houses the most prisoners, or the electric company loses investors when people conserve energy, or Waste Management is high-performance when people throw out more trash.
I wanted to add my $0.02 to the fed contractor discussion yesterday but was too busy. I’ve worked both sides (different areas, so no cushy job waiting for me after govt work, in fact I took a pay cut initially and had to work my way up the ladder). No way is any fed contractor taking home 160/hr. Cut that in half and that’s still far fetched - if it existed based on some unique service/product, competition would rise up to reduce the profit - I know because I try and do that vs. other contractors.
Also, you have an intermediate govt agency or another contractor performing oversight for 8-11%, govt gets money to perform management on their side, plus the company you work for has to maintain a small army of lawyers and accountants to make sure the contracts are air tight and you have all the back office stuff so before you know it you’re looking at 50% going to that type of overhead and you start to get an idea of how costs bloat up. Plus companies bid low, find they can’t get out of the red and go for contract mods to keep their heads above water. Frankly sometimes government doesn’t have the expertise to select the best proposal and they go with someone they’re familiar with too. You win some and you lose some that way.
I would say the one area where things seem to be uniformly shady (in my observations) is the govt set asides for minority businesses on contracts. Usually you see a couple of well educated (typically lawyers) types that form a shell corporation, play the gender/ethnicity/disability card and land big contracts where they take 10-20% off the top, do nothing, and sub contract out the the work to the name brand companies in that field. Those contractors tend to donate big to politicians come election time and get rewarded big time - an ROI factor of 10 or more. Writing 100K checks is nothing to them.
I’m an engineer and I find that I prefer to be a contractor because even though its not as reliable the work is more interesting and varied, allowing me to enjoy it more and keep my skills up to date. Government gigs seem to have a tragedy of the commons thing going, I can’t quite describe it but professional standards are much higher as a contractor and that makes the work environment much better, IMO.
I would say the one area where things seem to be uniformly shady (in my observations) is the govt set asides for minority businesses on contracts. Usually you see a couple of well educated (typically lawyers) types that form a shell corporation, play the gender/ethnicity/disability card and land big contracts where they take 10-20% off the top, do nothing, and sub contract out the the work to the name brand companies in that field. Those contractors tend to donate big to politicians come election time and get rewarded big time - an ROI factor of 10 or more. Writing 100K checks is nothing to them.
Speaking as someone who could qualify for such set asides and is in a HUBZone, I agree with the above. Thanks for confirming what I have long suspected. The game is rigged in favor of others.
My company has dealt with some of these types of businesses,
ex: “Woman-owned enterprise”. A man gives his wife 51% of his business, so it’s woman owned and he runs it. Plays the “woman” card to get coveted contracts
ex: “Minority owned”. White-male born in Panama to missionaries gets to claim “Latino” owned and wins contracts for it
I could go on and on. We had to pass on a contract with a large beer company because they gave preference to minority firms. It’s tough being a white American owned business.
ex: “Woman-owned enterprise”. A man gives his wife 51% of his business, so it’s woman owned and he runs it.
A couple of now-deceased friends did something like this. The business was based on his expertise and she was the owner.
“The game is rigged in favor of others.”
If money is involved…you bet it’s rigged.
Reports of boom-era mortgage fraud on rise
http://latimesblogs.latimes.com/money_co/2011/09/reports-of-boom-era-mortgage-fraud-on-rise.html
(Cantankerous - If you posted already, sorry.)
Crony Socialism: Obama Gives $737 Million to Solar Firm Linked to the Pelosi Clan
It’s as if Solyndra never happened. The Obama Administration is giving $737 million to a Tonopah Solar, a subsidiary of California-based SolarReserve. PCG is an investment partner with SolarReserve. Nancy Pelosi’s brother-in-law happens to be the number two man at PCG.
And $337M to Mesquite Solar in Arizona
See also story on thehill DOT com about Energy Secretary Chu becoming a political target.
They didn’t give it to them they loaned it to them. They haven’t yet declared bk.
Now for those against these types of loans, should the US allow China to take over solar power technology. Seriously their gov is spending like a drunken sailor on this technology, do our companies have to compete with VC alone. If so who is going to win economically.
The fact that the gov has made loans of a similar size to multiple companies does not suggest something criminal. They are trying to promote US solar technology.
Now compare these paltry LOANS to say the tax breaks we give to big oil.
Its because renewable energy is for sissies (don’t be economic girly man). Real Men drive Big Azz Truckz that go Vroom Vroom and get 15mpg
Better than giving money to Pakistan.
‘Retirement Heist’: How Firms Trimmed Pensions
(8 minute audio or text)
http://www.npr.org/2011/09/29/140344871/retirement-heist-how-firms-trimmed-pensions
After political wrangling, it’s bailouts all the way down in the Eurozone.
German parliament votes to expand eurozone bailout fund
Marketplace Morning Report, Thursday, September 29, 2011
Things in Europe are looking up, as German leaders have agreed to extend the proposed eurozone bailout fund. But the victory might have damaged Angela Merkel politically, hurting future progress.
Chancellor Angela Merkel at the Lower House of German parliament Bundestag in Berlin as lawmakers vote on legislation to expand the E.U.’s rescue fund. (JOHN MACDOUGALL/AFP/Getty Images)
Steve Chiotakis: It’s a major step in the struggle to fix Europe’s sprawling sovereign debt crisis. The German parliament voted 523 to 85 to expand the size and power of the eurozone bailout fund.
Marketplace’s Stephen Beard is with us live from our European Desk in London with the latest on the vote. Hi Stephen.
…
Professor Bear is back?
British government may shoot down Robin Hood tax
By Stephen Beard
Marketplace Morning Report, Thursday, September 29, 2011
A new plan to solve the eurozone debt problems involves a tax that takes from the rich and gives to the poor. But British people worry such a tax will damage their financial system.
A tour guide holds a Union Flag umbrella as she speaks to tourists outside Westminster Abbey in central London. (LEON NEAL/AFP/Getty Images)
Steve Chiotakis: The British government’s crying foul over a proposed European-wide tax on financial transactions. The tax is aimed at helping the eurozone deal with its debt crisis. But the Brits fear it may damage their financial center.
More from London and Marketplace’s Stephen Beard.
…
Another, OMG, anecdote. Person relating to me their 45ish friends’ situation. Each person making $80k+, so $160k+ is a pretty sweet household income in this area. I know where they live and they did not overspend on their home. It’s actually the lower end of the price spectrum. So I think gee, they’ve been married for a while. They must own it outright.
Nope, they only have $10k into it and they’re going to let it go into foreclosure, and that $10k equity is based on the sticky price appraisals going on right now.
Much of it may have gone into their educations but gheesh, how do people let things get so bad?
Oh yeah, and I figured out why the gals are all driving Mercedes all of a sudden. Had a Mercedes ad pop up on Ben’s site of all places and I saw the lease price wasn’t much more than what I was paying for my minivan when I paid it off in 4 years w/a very hefty downpayment. I wouldn’t make that choice because I enjoy the years of virtually no car costs but that’s me. So I’m confused how can the dealership afford to lease them out that cheaply.
High resale values of used Mercedes.
Ahhhh. I see said the blindman.
Maybe I should go out and grab mine before all that changes.
LOL
High resale values of used Mercedes.
I don’t think it could be that unless my wife’s is appreciating in the driveway as I type.
He’s saying the leased vehicles will retain much of their value so at the end of the lease contract the dealership will turn around and make a profit on the resale.
The aggressive pricing structure of the leases is most likely a reaction to the fact that fewer Mercedes buyers can pay full price so dealers have to continue to feed the creation of the hungrier used market.
Not only that, but MB plays into the upgrade mentality everyone has. Get into the 300, the next lease 500, then AMG, etc. It’s tough from a social standpoint to go from MB to driving a Ford and they know it.
In 1999 or thereabouts, the WSJ ran an aritcle about the luxury car manufacturers going after the middle class market, who could not afford their cars. That’s were the 200C Class and 300 series BMW’s came from.
I must look like white trash in my 1995 Volvo 940. 13 years of no payments. Thank goodness I dress well, or I’d be treated poorly. (sad to say)
were s/b where (fast fingers)
That makes sense to me but I think BMW has moved past it better than Mercedes. I like the 3 series much better than the C class and I’ve driven both.
Carl
BMW vs. MBZ
But how about dependability and repair costs? Have any feedback or experience on the lower end models?
Nope. I’ve only driven the C class as a loaner, and the 3 series was pretty new and I only got to drive it a couple times and he turned it back in at the end of the lease. It was a nice car, though.
Thanks for the reply. After owning a Volvo, I know European cars are expensive to repair, although my car has over 300K on it. I’m starting to think about replacing “Vixen” in a year or two.
How old is her Mercedes?
15 year old, 150K mile examples aren’t considered “premium”.
Remember, when you lease, you are basically paying for the difference between what the car sells for “new”, vs. it’s estimated “used” price 2-3 years from now.
Looks like the M-B people think that used Mercedes prices are going to be high, three years from now.
It’s an 06. She bought it at about 4 years old with 40k miles for about 33% of sticker. I realize her model depreciates more than most, but I thought they all depreciated pretty hard.
MBs. The Chevrolet of Germany.
Overhyped and overpriced.
I wonder when we’ll see the first advertisements for leasing using cars. Hundred bucks a month. Lease them all the way down the food chain…
Sept. 29, 2011, 12:01 p.m. EDT
Home sales actually better than the NAR says
Commentary: Pending home sales up 13.1% compared with last
By Lee Adler
WEST PALM BEACH, Fla. (MarketWatch) — The mainstream financial media is widely misreporting the National Association of Realtors’ pending home sales data Thursday morning, simply parroting the NAR’s seasonally manipulated data.
As it turns out, the NAR is screwing its own pooch because the actual, not manipulated data is actually much better than the seasonally smoothed numbers imply. That’s not to say sales are great. They remain 25% below the peak levels reached during the bubble, but the fact is that sales were up in August, and not just by a little. They were up by 9.4% month to month, and were 13.1% above the level of last August.
…
They’re ripping Meredith Whitney a new one over on the Bloomberg chatboards because it’s been 9 mos and few muni defaults. Although we don’t need unnecessary gloom and doom when there is not imminent danger it never ceases to amaze me how the fiscal gymnastics being done at all levels of government are never given any recognition.
They seem to believe because nothing has happened yet that the possibilities are off the board. When I see all the black and white thinking I just think we’re going to need a full on collapse before the masses believe we’ve got a problem.
http://www.bloomberg.com/news/2011-09-29/whitney-gets-one-out-of-billions-right-with-wrong-market-call-muni-credit.html
Unlimited stimulus and decades of ZIRP can be a real game changer.
Poor Meredith. Smart people can be wrong when reality is manipulated by the criminals in charge.
Markets can remain irrational longer than your reputation can stay intact.
Think housing bubble deniers cira 2004.
In the media, there is no such thing as better too early than too late.
They ripped John Talbott when he wrote about the coming crash in the housing bubble… in 2003.
Meredith Whitney is right. She just isn’t right YET.
“The Coming Crash in the Housing Market” by John Talbott/ 2003. I read that book, oxide.
I liked what you said about Meredith Whitney and agree. Boy, speaking as a woman, that lady has it all. Brains, beauty, money, and a hunk for a hubby. I should be jealous, but I like her “id”. (She graduated with honors from Brown U, btw.)
Looking at data of NYS area realtors.
Onondaga County: Numbers up, prices slightly down for August YOY.
http://nysar.com/content/press/statistics.htm
Realtors will tell you there’s a lot out there and nominally there is. But I met another Mom recently and we had to laugh when she said they’ve been looking and there’s nothing out there. What we mean is nothing at the price/value range we’re looking for. Those were the ones that were snapped up in weeks in the summer because some sellers were relenting. All the rest are way overpriced or delusional about how much money the buyers will have to sink in to fix the messes they’d like us as buyers to assume. There weren’t enough homes priced at those values to satisfy the number of us sitting on the sidelines so next spring when the next crops arrive they’ll be the same frenzy. Meanwhile the ugly & overpriced sit and sit.
Statewide prices down 8% YoY.
Couple of interesting news items:
More Americans Are Doubling-Up
Key point: Fewer households means fewer consumers for businesses desperate for demand. (You don’t need to buy a new TV if you can just use mom and dad’s.) At the same time, it continues to drag on a housing market that needs to burn off excess supply.
Sly Stone homeless: Soul music star living in camper in L.A.
Key point: Soul music legend Sly Stone, best known as the frontman of Sly and the Family Stone, has squandered his fortune and is living homeless on the streets of Los Angeles.
He is not the first musician to get screwed out of his music.
Stone filed suit against Jerry Goldstein, the former manager of Sly and the Family Stone for $50 million in January 2010. The suit claims that Goldstein used fraudulent practices to convince him to deliver the rights to his songs to Goldstein. In the suit, he makes the same claim about the Sly and the Family Stone trademark.
Jason Wilber has a song called “Pay Bo Diddley.” It’s about how Bo was still owed money from his Chess Records days.
Slim,
The doubling up I’ve heard referred to as “shadow demand”. Not everyone who is doubling up will stay doubled-up forever. As we move through the cycle, people “un-doubling-up” will be another source of demand for housing (rental or otherwise) that isn’t there in typical times.
Tell me about it!
I was one of those double-uppers for many years. Then, one fine evening, I was out having a drink with a former roommate. (I sublet a room in the house that she had rented.)
I was kvetching about the landlady in the house I’d moved to after leaving former roommate’s place. Former roomie looked me in the eye and said, “You need to get your own place.”
That was in September 1987. I’ve had my own place ever since.
lol
Also, kids only want to live with their parents for so long…and parents only want their grown kids to live with them for so long. Like seafood, houseguests start to stink after a while.
“kvetching”
Slim -
I’ve always liked that word, but never knew how to spell it, and didn’t think it was important enough to look up. Thank you.
I think I have a new nic-name for my “incubator” (mother) “kvetchy”. LOL
More backlash…
Over the next 2 weeks, the Make Banks Pay California group plans to have a variety of actions in the San Francisco Bay Area and Los Angeles to “make Wall Street banks pay for destroying jobs and neighborhoods with their greedy, irresponsible and predatory business practices.” Several of the protesters I spoke with on Monday indicated their belief that because banks “don’t pay” it impoverishes local governments and causes school, library and government service cutbacks.
There were already a few auctioneers standing there with clipboards in hand, ready to start their auctions. The protestors started to chant, with at least one person blowing a whistle. Some of the chants were “they got bailed out, we get tossed out” and “vultures.” I spoke with a well dressed gentleman who said he was there with his client to place a bid. When asked for his thoughts, he said he thought it was a “joke” and that people should “go home” and “pay their bills.”
The bidders and auctioneers at first seemed somewhat confused or even amused by the situation. However once the protest started to get going, the protesters would circle up around an auctioneer and start chanting so loudly that it was difficult for the auctioneer to be heard. In response, the auctioneers distributed themselves around the steps so that the protesters couldn’t stop all of them. The protesters broke up into a couple of groups, with each group attempting (and succeeding in some cases) in surrounding an auctioneer with chanting people. Electronic media devices were everywhere– people were pulling out phones and digital cameras and taking pictures. I even saw one of the bidders do a self-video with what looked like an Android phone– he showed the crowd then turned the phone on himself and gave a quick narration of the scene. The protesters were able to disrupt the sales enough that one person I took to be an auctioneer (due to his clip board and demeanor– I have been to more than a few courthouse step auctions) got on the phone and said that it was “getting rough” and he “need[ed] everyone here.” Thankfully he didn’t pull a Gary Oldman and demand EVERYONE.
There was no law enforcement presence on the steps, although I know for a fact that a sheriff’s security station was within 150 yards of the steps inside the courthouse. I did see one law enforcement officer ride by on a bicycle. A picketer waved to him and he waved back.
http://www.nakedcapitalism.com/2011/09/protestors-disrupting-foreclosure-auctions-in-california.html
However once the protest started to get going, the protesters would circle up around an auctioneer and start chanting so loudly that it was difficult for the auctioneer to be heard.
Same sort of thing happened during the Great Depression. Quite a few farm auctions were disrupted by neighboring farmers coming to protest. ISTR reading that some auctions were just abandoned.
ISTR some sheriffs didn’t fare some well in some of those GD cases.
“I did see one law enforcement officer ride by on a bicycle.”
I love seeing this sight. Fitter cops, less inclined to put a burden on the health care “system”, using less gas, able to chase criminals more safely while being physically closer to the community that they serve. Multi-tiered wins.
I’ve known quite a number of bike cops. One of the things that they say works in their favor is the “stealth” approach. Meaning that they can roll up on a crime in progress without the crook knowing it.
Oh, here’s another fun factoid: A few years ago, when I was visiting Washington, DC with my dad, we were standing in line to visit the Capitol. Along came a Capitol Police officer on wheels. There was someone to talk to.
So, we got to talking. And talking. And talking. Dang, it was fun.
Especially the part about the steps. They have to ride those steps on a regular basis. After all, they may have to chase some unauthorized person up or down them.
I thought that was pretty cool.
I love seeing this sight. Fitter cops, less inclined to put a burden on the health care “system”, using less gas, able to chase criminals more safely while being physically closer to the community that they serve. Multi-tiered wins
And less likely to be speeding, ignoring traffic laws, not signaling turns, running red lights at high rates of speed, etc…
More from a post moving thru the filters…..
(T)here seems to be a certain institutional and personal blindness among our elite, as exemplified by the Gucci-sunglasses-wearing man I saw yelling at the demonstrators. Even though he was surrounded by chanting protesters he thought it might be a good idea to taunt them. Thankfully the crowd was non-violent and nothing happened other than some shouting.
I am positive that the financial and political elite fail to understand the level of anger out there in today’s America. Probably the most disturbing thing I heard at the protest came from a conversation between a couple of bystanders. An older man was commenting that he’d tried to seek justice against his bank through the legal system but that it was “bullshit” [his exact word] and that the system was stacked against normal people. It’s a sentiment that, as an attorney, I have been hearing altogether too often lately from all kinds of people. I am disturbed by it because our government, indeed all governments, depend on public faith in institutions. When public trust in government institutions fails, the result is chaos and violence. As seen when the Soviet Union collapsed, organized crime steps in to fill in the void.
Our elite leadership is a lot like the man with the Gucci sunglasses– flaunting their wealth and positions while taunting a crowd of angry people. I can only hope that the recent upsurge of protests across America can succeed in convincing our elites to effectively respond to the concerns of ordinary Americans before we step over the precipice.
(Naked Capitalism)
You can also keep up with the “occupy” movement via their website. Methinks this whole thing’s going viral in a big way.
$14600 in taxes to live in the boonies of Marcellus. School taxes $9000 WTF?
Psssst owners….you’re supposed to move to the boonies to get away from all that.
http://cnyhomes.com/Listing/Search/info.cgi?mlnum=S257278
This area’s gone completely mad. Year built 2006. Ha ha.
Seller is deluded. Realtor is a Liar. Taxes are Ludicrous.
Dems control the state.
Public unions are the dems biggest supporters.
Public union pensions and benefits will be paid and will not be cut.
Pay your property taxes or another union goon with a gun will come and take it from you.
It is the circle of life in public union goon states.
…. and banana is a coward because (s)he’s too afraid to answer a simple question.
Why?
It’s got four different ovens right next to each other. How much do they plan to cook????
They’re not merely going to cook, they’re going to entertain.
#$% that. I’m not an entertainer. I want to be entertained. That doesn’t mean dump 30 grand in a “home theater” room. It means Mrs. RAL and I go out on a Saturday night for $150.
Me? I organize bicycling events that start with very interesting environmentally-oriented tours and end at one of our many fine brew pubs. Matter of fact, here comes one now!
Crony Capitalism: $737 Million Green Jobs Loan Given to Nancy Pelosi’s Brother-In-Law.
Sep 29, 2011 • By MARK HEMINGWAY - The Weekly Standard
Despite the growing Solyndra scandal, yesterday the Department of Energy approved $1 billion in new loans to green energy companies — including a $737 million loan guarantee to a company known as SolarReserve:
SolarReserve LLC, a closely held renewable energy developer, received a $737 million U.S. Energy Department loan guarantee to build a solar-thermal project in Nevada.
The 110-megawatt Crescent Dunes project, near Tonopah, Nevada, will use the sun’s heat to create steam that drives a turbine, the agency said today in a e-mailed statement. SolarReserve is based in Santa Monica, California.
On SolarReserve’s website is a list of “investment partners,” including the “PCG Clean Energy & Technology Fund (East) LLC.” As blogger American Glob quickly discovered, PCG’s number two is none other than “Ronald Pelosi, a San Francisco political insider and financial industry polymath who happens to be the brother-in-law of Nancy Pelosi, the Minority Leader of the United States House of Representatives.”
But wait… there’s more! One of SolarReserve’s other investment partners is Argonaut Private Equity:
Steve Mitchell and Argonaut Private Equity might have a chance to recoup some of their losses in the Solyndra debacle now that the Department of Energy has given a $737 million dollar loan guarantee to a company backed by Argonaut that also lists Mitchell among its board of directors.
Mitchell served on the Solyndra LLC Board of Directors. He also serves as Managing Director for Argonaut Private Equity, a company that invested in Solyndra through the LLCs parent company. After Solyndra declared bankruptcy, two Democratic members of the U.S. House asked that Mitchell testify about Solyndra. Though he has not appeared before Congress, he has “been asked to provide documents to Congress” pertaining to Solyndra.
And for good measure, it’s also noteworthy that Obama is about to hold a big money fundraiser at the home of Tom Carnahan in St. Louis:
Carnahan, a member of the prominent Missouri Democratic family, has been tapped by the Obama campaign as its chief Missouri fundraiser. He is chairman of the board of Wind Capital Group, a wind energy company that makes it corporate headquarters in St. Louis. He formerly was president and CEO of the company.
Last year, Wind Capital’s Lost Creek Farm facility in northwest Missouri received a $107 million tax credit from the Treasury Department, among many such wind operations receiving support from from stimulus funds.
Tom Carnahan is the son of former Missouri governor Mel Carnahan and former U.S. senator Jean Carnahan. He’s also the brother of current Missouri secretary of state, Robin Carnahan.
It’s increasingly hard to tell the government’s green jobs subsidies apart from the Democrats’ friends and family rewards program.
It’s increasingly hard to tell the government’s green jobs subsidies apart from the Democrats’ friends and family rewards program.
Just like those no-bid contracts that Dick Cheney’s company, Halliburton got. Funny how The Weekly Standard says nothing about them, isn’t it?
Just like those no-bid contracts that Dick Cheney’s company, Halliburton got. Funny how The Weekly Standard says nothing about them, isn’t it?
My 4 year old uses those same arguments too.
So I guess we will just give all government corruption a pass because everyone can point to something corrupt in the past.
It is sad what “hope and change” has become…
or was it “Yes we can”
???
…and that missing $4 TRILLION among the war contractors?
“billion” I meant “billion.
My bad.
is there even a difference? Both are literally incomprehensible amounts of money. A number at a certain point becomes just another word used by the babbling media.
They say that the average person can’t really comprehend and visualize the impact of more than 100 of anything.
It’s more funny that there is never any consequence for conflict of interest in Congress or the White House. We know by definition that all of them start by taking money from special interests just to get elected. We keep playing though, hoping for a different result.
Is it *really* a conflcit when you make the laws? At whim?
Seriously
It’s not even a loan it’s a loan guarantee for a solar power plant, ie unlike Solyndria which was trying to develope new technology this company is building a power plant.
Is there no road that you guys won’t go down with your foaming mouths when the right wing media kings pretend to throw you a ball.
Wow.
This was great
On SolarReserve’s website is a list of “investment partners,” including the “PCG Clean Energy & Technology Fund (East) LLC.” As blogger American Glob quickly discovered, PCG’s number two is none other than “Ronald Pelosi, a San Francisco political insider and financial industry polymath who happens to be the brother-in-law of Nancy Pelosi,
So the brother in law of Pelosi is part of an investment group that invested in this power plant with other investment groups. I mean how far down the chain do we have to go.
Dick Cheney’s cousins wifes mailman was a stock holder of Exxon.
Of course in this case he was the former CEO and still getting compensation from the company.
Wake me up when some real scandle breaks.
Want to hear a Black Man with a brain? Herman Cain’s got one and has a sense of what America is all about! He’ll get my vote on any ballot I have in front of me. American Jews are like the Vulcans on Star Trek: THE INTELLECTUAL PUPPETS OF THE LEFT! Is it a coincidence a Jew played Spock? Then we see the dummies over in Palastine playing games with radically controlled terrorist states such as Iran and Syria. It’s a world where the White Male is in danger of extinction. He has priced himself out of having a family and kids! He has regulated himself into financial oblivion. He has created a political system of Liberalism where he is persecuted IF he asserts his rights to financial and social sovereignty. And yes, it took a BLACK MAN to give a small summary of how to fix some of the problems facing the White Man without ever saying “White Man!” But, let’s watch the poverty, corruption, and backstabbing of the Left rip apart California’s economy. Maybe a few hundred Herman Cains exist out there to lead the effort back from ruin.
Enough with the race and religion baiting, okay? Let’s go back to talking about housing bubbles and their consequences.
Race division is just a tool used by the PTB to keep all of us from seeing how they’re screwing all of us.
Another electable black man could be a real game changer in 2012.
yeah….. a real game changer. lmao.
I’m starting to be impressed with Cain. But… I’m waiting for see the worm in the apple. I’m waiting to hear some crazy statement or position, or some wacky thing that’ll make him seem like a loon.
Trouble is….there isn’t an easy solution to the mess we are in. There will be no candidate with the solution. We really don’t want to know what the solution is.
Exactly why Ron Paul is unelectable. Most people don’t want to hear the truth. They’d rather be lied to as long as the lies sound better than the truth.
Americans spending less — but not on health care or gas
YAHOO NEWS
Consumers reduced their spending on most goods and services last year, as incomes dipped. But spending in two areas bucked the trend, according to a new report.
“Consumer groups” — essentially, families or single people–spent $48,109 on average last year–a drop of 2 percent from 2009, a Labor Department study found (pdf). Behind the decrease was a 0.6 percent drop in average income, to $62,481. (Remember, we’re often talking about two people who combine their income–the average individual income is far lower.)
At the same time, consumer prices increased by 1.6 percent, creating a squeeze for many working families.
The only two types of spending that saw an increase? Health care and transportation.
Health care costs have been rising rapidly over the last decade–a problem that President Obama’s health-care overhaul, which won’t fully go into effect until 2014, was designed in part to address. A new study by the Kaiser Family Foundation released Tuesday found that the average annual premium for a family covered through an employer increased by a whopping 9 percent last year, to $15,073.
But transportation costs spiked even more than health care: Gasoline prices increased by 18 percent over 2009 prices.
What else did we spend money on? Housing accounted for over a third of our total spending, at $16,557, even as it fell by 2 percent from 2009. Transportation was next, at $7,677 and personal insurance and pensions third, at $5,373.
Food spending dropped by 3.8 percent. Interestingly, around 40 percent of our total food budget goes to food prepared outside the home, though we cut back last year both on that score and on home-made food. We also spent less on clothes and services, and a whopping 7 percent less on entertainment. (No word on whether boredom increased at a corresponding rate.)
It’s worth remembering that these mundane personal choices collectively have a profound effect on the economy. Growth and job creation are lagging right now because consumers, hit by a loss of wealth thanks to the housing bust, and a general lack of confidence, are spending less. Until that changes, the economy likely won’t recover.
Some of that spending on health care is due to some crackerjack salesmanship. Article:
Your Doctor Is Upselling You (And She Knows It)
Key point: But probably the most telling statistic from this particular study is the percentage of doctors who admit that their patients are receiving too much health care. It’s 42%. 42% of doctors admit to administering additional, unnecessary, financially-burdensome care, because they want to look like they’re doing their job, or because they don’t want to get sued.
From my own experience: Since I’m one of the growing number of pay-out-of-pocket people, I’ve found that a lot of necessary things can become optional in a New York minute. Take, for example, dental X-rays. As soon as I said “I can’t afford those!” they’d suddenly become very unimportant at Dr. Pricey’s office.
This is not to say that all things are unnecessary, but just be aware that there’s a whole lotta health care salesmanship going on.
A few points to add:
1. California has implemented tort reform–a friend knows a doctor in FL who said his malpractice insurance would drop considerably if he moved to CA. That said, in CA my wife was subjected to a test that I am convinced would not have been done had insurance NOT covered it. Why am I convinced? Before ordering the test, the doctor checked to see if insurance covered it–our primary physician noted after that the test was overkill. Why was the test pushed? It wasn’t for fear of being sued…it was to pay for the fancy new machine (it was a fancy new machine).
2. If you don’t pay for the marginal consumption of a product (nearly any product), you will overconsume it…if the world were only made up of all-you-can eat buffets for $9, there would be more obesity. And importantly, everyone would be fatter still if the people serving at the all-you-can eat buffet were known to be highly trained chefs who could describe very well how good the food tastes, why you should eat more, and were paid more if you ate more! And over time, the $9 would need to rise for all to make up for the increase in consumption. This is the healthcare problem in the US.
Why was the test pushed? It wasn’t for fear of being sued…it was to pay for the fancy new machine (it was a fancy new machine).
Bingo! There you have it!
That’s why those four words — I Can’t Afford It — strike fear in the hearts of so many health care types. We who say those words bring their gravy trains to a screeching halt.
“Interestingly, around 40 percent of our total food budget goes to food prepared outside the home”
That IS interesting. I really hope that this statistic is simply skewed by rich folks eating out and splurging. A small family with a food budget of 1000/month shouldn’t be spending 400 of that on “food prepared outside the home”. In fact, the big story these days is how people are supposedly hunkering down and saving.
Yeah, those damn Feds are really going overboard with all this regulation. Might force manufacturers to move to Mexico, to avoid it……..
“Cessna faces $2.4 million dollar fine for Bad (Mexican) Composite Work”
http://tinyurl.com4yjgk74
(the FAA has ZERO sense of humor, when it comes to airplanes falling apart with their guys onboard)
Hawker Beechcraft and Bombardier are building complete (pressurized) fuselages in Mexico. Guess we’ll see how that works out.
Dammit…..
http://tinyurl.com/4yjgk74
Gee, what a surprise.
Thank god Boeing is going to pay $12hr to build Dreamliners instead of Mexican wages.
Oh wait….
Chinese drywallMexican flywall
Any off-the-record questions for John Huntsman, anyone?
Yikes. Sorry, posted to wrong board.
Nuh-uh! Not the wrong board at all.
Slim waves hand: I have a question, John:
I’m about to read Ron Suskind’s new book, Confidence Men. John, how does his account square with your experience in the Obama administration.
BTW, I highly recommend Suskind’s Bush administration book, The Price of Loyalty.
With regards from your HBB Librarian…
How did you vote on the TARP bailout Mr Huntsman?
Is he your progressive Trojan Horse candidate?
Rate on 30-year fixed mortgage falls to record low of 4.01 percent -KABC Channel 7 News
http://abclocal.go.com/kabc/story?section=news/business&id=8372746
“This year is shaping up to be among the worst for sales of previously occupied homes in 14 years. Few are buying, even though the average rate on the 30-year fixed mortgage has fallen to around 4 percent. ”
Rates, shmates, you need a job that actually pays enough to save up for and to buy a home. A comment about 20% down payments needed was in there too. Oh boy, I’m happy!
At Costco, a lady told me her daughter’s deal went from 14% down to 20% down on a Condo today. Another win for us real buyers.
Bank of America wants to charge $60/year to use their debit card. I think I’d rather fall back on old practices and stop by my bank once a week to carry cash. Luckily I don’t use their services but if I did I’d starve the beast.
Boy, that Dodd Frank consumer protection is working wonders for us consumers, isn’t it?
I’ll bet there are going to be millions of people who don’t even notice the extra $5 being siphoned out of their account every month.
Please sir, may I have another?
I heard a financial advisor just today blaming Dodd Frank for the BoFA fee.
If Dodd Frank succeeds in stopping banks from making bad loans and then making the US taxpayer pay for the defaulted loan at 100 cents on the dollar, I’ll be content.
Of course, that won’t stop the government from taking up the slack and making its own bad loans through Fannie and Freddie.
Dodd Frank will be worse that Sarbanes Oxley in terms of unintended consequences.
Case in point. Some of the regulations were supposed to exempt Venture Capital firms (impact only lenders, not equity investors). So, when the SEC wrote the rule, they tried to make the distinction between lenders and equity investors by the types of investments made (debt, vs. equity).
The problem is that many venture funds invest using convertible debt…oops. The “exempt” venture industry either now is subject to the regulation, or restricts their investment activity, or the SEC needs to find a better way to define what a venture capital fund is.
Second point:
Dodd Frank was supposed to be limited to large entities (stopping “too big to fail”). They are roping in any firm managing $100 million or more.
A firm managing $100 million has steady REVENUES of maybe $2 million per year (income of much less). Dodd Frank will require such firms to spend significant $ up front to register as an RIA (and yes, attorneys are involved if you want to still be able to attract capital from smaller institutions), AND potentially need to hire a “chief compliance officer”, AND need to hire a third party custodian to hold your legal documents (and potentially more). This could eat up 10% or more of the firm’s profit…letting the Bush tax cuts expire would be far better…
These firms were not too big to fail, but now may be too small to absorb the costs.
Dodd Frank isn’t requiring these firms to change what they invest in, or how they invest, or effectively who can invest, these firms just need to spend money to report and comply with the law. They were never too big to fail during the downturn, and in fact, many actually did fail (and there wasn’t a peep about it in the papers).
The main problem is that these smaller firms are those that invest with small entrepreneurs. If it is harder for these small firms to be formed (due to the additional regulatory burden), it will be harder for small business to get capital.
I’m fine with all the mortgage regulations and Volcker rule, etc. for big banks. It’s pieces of the other 90% of the law that will have unintended consequences (primarily slowing capital flows into the hands of entrepreneurs).
Why use a debit card and not a credit card, get some points, and pay off 30 days later?
I damn near knocked out my effin BIL. He had the stones to sit on my couch today and judge my housing choices. This is the guy that lives in a closet (I mean, a real closet, not a gay thing) with his dad who lives with his mom.
He said, “you still looking to buy?”
Me, “yeah, but the beach is a problem because flood insurance adds up”
Him, “naw, dude, you can’t leave the beach. That’s where it’s at. That’s lame. I would never live anywhere else.”
Me: (silence, although I was mentally choking him)
Welllllll, chit, I’d live anywhere for free, too, especially the beach.
Muggy
That story was funny in a sad sort of way. Is your BIL related to Cheech or Chong? (Reference might be too old for you.)
Evidently your wife has a sweet heart to let him come around. Poor thing, isn’t he the “dude” that got a hammy down car from you guys, and left the windows down in the rain?
His antics are kinda funny, but I feel for you. LOL
Apparently you married the white sheep in a family of black sheeps.
“(Reference might be too old for you.)”
Naw, who is this is?
“isn’t he the “dude” that got a hammy down car from you guys, and left the windows down in the rain?”
You bet.
“Apparently you married the white sheep in a family of black sheeps.”
I did. I love her brothers, but they’re all buffoons. One’s an ass about it, the other doesn’t totally get it, and the oldest is lazy, but at least he’s nice and compassionate and doesn’t leave beer cans on the lawn. The youngest (the one arrested a few weeks ago) has to appear in court on Monday and he has an attitude about it. He also doesn’t think he needs a lawyer. This should be good. I can’t wait until one of them asks me for money. Fit will hit the shan then. My son almost found your weed on the counter a few weeks ago… I’m sorry, were you about to ask to borrow money?
Hey, speaking of my littleman, he had the dental stuff yesterday under general anesthesia and he’s fine. I didn’t want post before because I didn’t want to be talked out of it. Here’s an interesting note: the office said submit the GA, but make 4-5 copies because the company will deny it 3-4 times before paying. Good to know…
Total out of pocket: $880
It’s a good thing I’m 1. renting 2. have a job 3. eat beans and oatmeal
Muggy
Glad to hear littleman is doing well. What an ordeal. My niece had eye surgery when she was 8, and that just about put a whole in our hearts. Glad littleman just had dental stuff. Kids aren’t cheap, but adorable.
I knew it. When you talk about your wife’s family, I like to follow the saga. Come here at night and fill us in. Your sense of humor lifts me.
I got “hammy down” (hand me down) from my 5 year old nephew, thanking me last year for his Christmas gift. He was happy it wasn’t a “hammy down”! LOL
Your wife must be a strong gal. She’s from a dysfunctional family and found a happy life.
Your visuals in your head with your BIL’s must be an episode of “The Three Stooges” . Gotta drive you batty.
“hole”, not “whole” Evidently, I have a “hole” in my brain.
I replied to littleman’s ordeal. I hope it shows up. You have a great sense of humor, Muggy.
Glad to hear it too…I just dealt with a broken arm on our 4-year old. That was not a fun night in the emergency room. There is nothing like causing your daughter excruciating pain while holding her broken arm outstretched over the X-ray table.
At least the nausea I dealt with after proves that I would be a terrible abusive parent…watching your kid scream in pain while being the cause of the pain is number 1 on my list of personal hells.
Good news is that she didn’t need surgery, and after three weeks is already out of the splint…amazing healing timeline…
Sounds rough; been there, done that.
I will never forget going to pick up one of my sons from their Taekwondo lesson, only to see one of them crumpled to the floor in a heap of pain. Sensei said his leg wasn’t broken, but Dad knew better. Two months on crutches later, my boy was as good as new.
E room charged $2200 for gluing a cut on the back of my sons head. Blue Cross cover $500 only.
Cut on forehead with 4 stitches 6 mos earlier at an Urgent Care Center. $30 deductible. Make sure your kids stop fighting before 7pm when Urgent Care closes.
Seriously Muggy, what are you thinking, dude? A nice place in Malibu on the water ought to be real cool, private beach access is where it’s at. That would be totally sweet. I mean what’s the problem? $20 million should do it…
…hey, can I borrow $20? This guy told me that he’d pay me back, but he was a little short on tips from his Batista job, and I wanted to take my girl out to a nice fancy dinner at Sizzler…cool?
Laying off Heros? No way!!
http://www.miamiherald.com/2011/09/29/2430671/hialeah-lays-off-40-of-fire-department.html
Next on the menu, Arson!
What is it that central bankers so dislike about contagion? And if they dislike it so, why don’t they espouse regulatory safeguards, such as the Glass-Steagall Act and long prison sentences for banksters who commit fraud, to help avert the conditions which give rise to it?
HEARD ON THE STREET
SEPTEMBER 30, 2011
Caught in the Labyrinth of Greece’s Debt Restructuring
By RICHARD BARLEY And SIMON NIXON
The euro zone now looks likely to get its expanded bailout fund, and Greece looks likely to get the next tranche of its first rescue package. But a new front in the euro crisis is opening up: what to do if Greece’s second bailout package, worth €109 billion ($147.8 billion) and agreed to in July, isn’t enough.
That risk is real. But with Greece reaching the limits of austerity, at least in the near-term, there are only two options for filling any shortfall. Either euro-zone governments and the International Monetary Fund must dig deeper into their pockets, or Greece has to unpick its deal with bondholders to secure more debt relief.
Some argue Greece should seize the opportunity to impose bigger losses on bondholders. Greece has about €360 billion of debt, equivalent to 165% of 2011 GDP. The July 21 deal aims to swap €135 billion to €150 billion for new bonds worth 79% of the face value of the old ones. But that will still leave Greece with a debt-to-GDP ratio of 150%, according to Barclays Capital estimates. That looks unsustainable.
To reduce debt to the euro-zone average of 80% of GDP, would mean writing down all Greek debt, excluding T-bills and IMF loans, by 57%, Citigroup says, or €184 billion.
Greek bonds already trade at 30 cents to 40 cents on the euro, suggesting deeper restructuring is in the price.
The longer restructuring is delayed, the more euro-zone taxpayers will be on the hook. IMF and euro-zone government loans already account for one-fifth of Greek debt. By 2014, this will rise to 57.3%, J.P. Morgan estimates. And once the bond swap is completed, existing bondholders will be shielded from further losses as their principal will be protected by collateral; all they can lose is their coupons.
On the other hand, neither the euro zone nor Greece will want to unpick a deal just two months after it was agreed upon. There is no way Greece could secure a voluntary deal with bondholders to accept bigger losses, so it will be forced into a disorderly default triggering credit default swaps and fueling contagion.
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MARKETS
SEPTEMBER 30, 2011
Fed’s Twist May Prompt Bigger Turn
By MATT PHILLIPS
“Operation Twist” might be more powerful than many investors expect.
As the Federal Reserve Bank of New York prepares to release on Friday new details about the central bank’s rate-lowering program, some bond-market strategists have done their own back-of-the-envelope assessment already.
Investors are in suspense over the impact of the Fed’s ‘Operation Twist’
Economic Ripples
The Fed’s latest effort to boost the economy is designed to ripple through markets. Here is one potential script:
A fund manager sells 30-year Treasurys to the Fed.
Now he has cash, but needs to use it to buy something with a better yield and/or similar risk characteristics.
He snaps up some 30- year mortgage bonds.
The seller of those bonds now has cash and may buy corporate bonds.
The seller of the corporate bonds now has cash and may buy ‘junk’ bonds or even stocks.
Their conclusion: Operation Twist could in some ways do as much—or more—for the bond market than its predecessor, known as QE2. The program also could prove to be a boost for stocks.
When the plan was announced Sept. 21, it got a resounding raspberry from the stock market. The Dow Jones Industrial Average fell 2.5% that day and had its worst week since October 2008. Stocks have stabilized somewhat since then.
Operation Twist was initially maligned by some market participants because it mainly involves the Fed shuffling its bond holdings, rather than pouring new money into the system. By contrast, QE2, so-named because it was the second round of quantitative easing, saw the Fed pump in $600 billion.
Even though Operation Twist hasn’t begun being implemented, it already is having an impact on long-term interest rates. It also is affecting what bond investors are buying and selling, pushing many to buy somewhat more risky bonds like mortgage securities and corporate bonds. That’s the outcome the Fed has suggested it wants to achieve.
“Operation Twist has greater punch than the QE2 program, or should,” said Ray Stone, an economist at Stone & McCarthy Research, a firm that focuses on research for the bond market.
Prices on 30-year Treasury bonds have soared on the announcement of Operation Twist, at times driving yields below 3% for the first time since January 2009. The yield, which moves in the opposite direction to price, has fallen 0.21 percentage point since the day before the program was announced Sept. 21. Ten-year notes also have surged. Yields on both Treasury securities have moved off their recent lows.
Here is how the program works: The Fed will buy $400 billion of longer-term Treasurys—those maturing in six to 30 years—and in turn will sell $400 billion of Treasurys that mature in three months to three years.
Essentially, the Fed is sucking up bonds that have the most risk tied to interest-rate fluctuations. By doing that, the Fed shrinks the supply of those investments available to private investors, which raises the price.
But investors still need bonds with similar interest-rate risk, known as duration, in part because many of them have set duration targets within their investment portfolios.
Barclays Capital and other bond observers measure the impact of the Fed’s buying through a concept known as 10-year equivalents, or the amount of 10-year notes an investor would have to buy to get the same amount of interest-rate risk.
In those terms, Operation Twist looks similar to, or a little bigger than, QE2.
Barclays Capital analysts suggest that Operation Twist will remove roughly $375 billion in 10-year equivalents from the market.
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The Associated Press
September 28, 2011, 1:12PM ET
Mortgage fraud reports spike as lawsuits pile up
VIENNA, Va.
The wave of lawsuits and other demands from investors in mortgage-backed securities contributed to a big spike in reports of likely mortgage fraud during the second quarter, according to a Treasury Department report.
The department’s Financial Crimes Enforcement Network said Wednesday that it received 29,558 tips about possible mortgage fraud in the April-to-June period, an 88 percent leap from 15,727 in the 2010 second quarter.
A large majority of the tips examined during the second quarter involved mortgages closed during the height of the real estate bubble, the report said. In fact, 81 percent of the tips involved suspicious activities that occurred before 2008, while 63 percent involved mortgages inked four or more years ago.
The network receives the tips, called suspicious activity reports, because it enforces the law requiring banks to tell the government about questionable financial transactions. The agency helps track illegal money transfers, catch money launderers and shut down accounts linked to corrupt political leaders.
The spike in reports “is directly attributable to mortgage repurchase demands and special filings generated by several institutions,” the report said. Director James H. Freis said the age of the loans in question is “an indication that financial institutions are uncovering fraud as they sift through defaulted mortgages.”
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This is truly awesome news, but will take a while to sink in. Markets are now facing conditions which have not existed for over half a century.
Good luck figuring out how not to catch yourself a falling knife!
Mark Hulbert Archives
Sept. 30, 2011, 12:03 a.m. EDT
Market undergoing huge change
Commentary: Market’s dividend yield now higher than T-Note’s
CHAPEL HILL, N.C. (MarketWatch) — Shall we do the time warp again?
Believe it or not, the stock and bond markets are behaving in a way that, with only one exception at the depths of the 2008-2009 credit crisis, they have not since 1958—53 years ago: The stock market’s dividend yield is now above the interest rate on the 10-year Treasury note XX:TNX -2.25%
For example, the dividend yield on the Dow Jones Industrial Average DJIA +1.30% is 2.8%, and on the S&P 500 index SPX +0.81% it is 2.2%. The 10-year T-Note yield, in contrast, is just 2.0%.
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Illegal financial activity has become so commonplace and broadly accepted that it is hard to give a rat’s ass about this story.
Report: Taxpayer Owned Mortgage Company May Still Break the Law
by Christopher Maag on 09/26/2011
Fannie Mae, the taxpayer-owned company that owns or insures a large portion of U.S. mortgages, has known since May 2006 that its lawyers were falsifying court documents, which ultimately led to some people getting evicted from their homes illegally, according to a new government report.
Even now, a year after the related robo-signing scandal broke, Fannie Mae still lacks the internal controls to prevent its lawyers from breaking the law. The company’s attempts to fix the problem have been “ineffective,” according to the report, published by the inspector general for the Federal Housing Finance Agency, (FHFA) which oversees Fannie Mae.
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“…to prevent its lawyers from breaking the law…”
I am going to meditate on that as I try to fall asleep tonight.
It’s kind of hard to pin the blame for Solyndra on the Democrats, as like most companies that generate a blizzard of fraud allegations as they collapse, the corporate brass had the common sense to court high officials in both parties.
FBI Probing Solyndra for Possible Fraud
By Seth Stern and Jim Snyder - Sep 29, 2011 9:00 PM PT
Solyndra LLC, the solar-panel maker that filed for bankruptcy protection two months after executives extolled its prospects, is being investigated by the FBI for accounting fraud, an agency official said.
The FBI is examining possible misrepresentations in financial statements submitted to the Energy Department, according to the official, who requested anonymity because the investigation is continuing.
Disclosure of the fraud probe is likely to heighten Republican criticism of the Obama administration for its approval of a $535 million U.S. loan guarantee, which the company used to build a $733 million factory in Fremont, California, that opened in January.
When construction started, the company said it had a $2 billion backlog in orders for its cylindrical solar modules for commercial rooftops.
“The company is not aware of any wrongdoing by Solyndra officers, directors or employees” related to the Energy Department loan guarantees or other actions and “is cooperating fully” with the U.S. Attorney in San Francisco, according to a Sept. 20 statement from Solyndra. David Miller, a company spokesman, didn’t return a phone call and an e-mail seeking comment yesterday.
Solyndra filed for bankruptcy protection on Sept. 6 and fired about 1,100 workers with little notice, two years after it received the loan guarantee. The Federal Bureau of Investigation raided the company’s offices on Sept. 8. The Justice Department hasn’t said why Solyndra is being probed.
White House Pressure
Solyndra’s collapse has prompted congressional scrutiny of President Barack Obama, whose administration issued final approval of the loan that also won support from officials in the administration of George W. Bush.
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POLITICS
SEPTEMBER 30, 2011
Wall Street Is Bearish on Perry’s Electability
BY BRODY MULLINS AND STEVE EDER
The red meat Rick Perry is serving up to Republican primary voters is causing him problems with deep-pocketed Wall Street donors.
Some bankers say they would prefer a more moderate candidate, and worry the Texas governor’s style and stances on social issues could sink him in the general election. Their unease, along with rules against governors accepting money from certain financial executives, could crimp Mr. Perry’s ability to tap into his party’s single biggest source of cash.
“Wall Street would only really go for him if they thought he could win—and they don’t,” said Rick Hohlt, a Washington lobbyist…
I’d probably vote for this guy if he got that far, just to give a consummate outsider with practical management experience a chance. The thought of a black Republican in the White House is an intriguing one.
WONDER LAND
SEPTEMBER 29, 2011
Taking Cain Seriously
Why isn’t a successful business résumé presidential material?
By DANIEL HENNINGER
You hear the same thing said about Herman Cain all the time: Herman Cain has some really interesting ideas, but . . .
I love Herman Cain, but . . .
But what?
But he can’t win.
Why not?
At best, the answer has to do with that cloudy word “electability.” Or that Mr. Cain has never held elected political office.
In 2004, Mr. Cain ran for the GOP’s U.S. Senate nomination in Georgia. He lost to Johnny Isakson. Last weekend, Mr. Cain ran away with the Florida straw poll vote, winning with 37%. He torched both the “Southern” candidate, Rick Perry of Texas, who worked hard to win the vote, and Mitt Romney, who in 2008 campaigned everywhere in Florida.
The time is overdue to plumb the mystery of Herman Cain’s “interesting, but” candidacy. Let’s start at the top—in the top-tier candidacy of Mitt Romney.
Though he’s got the governorship credential, Mr. Romney’s emphasis in this campaign is on his private-sector experience. It’s good, despite the knock on Bain Capital’s business model. But measured by résumés, Herman Cain’s looks deeper in terms of working on the private sector’s front lines.
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God I love this op-ed. Will need to revisit it when I am in a more awake state of mind. (Got the dead tree version in recycling somewhere…)
OPINION
SEPTEMBER 29, 2011, 7:00 P.M. ET
Last Chance to Save the Euro
A Greek default won’t destroy Europe’s currency. Bailouts will.
By JOHN H. COCHRANE
The European debt discussions always paint the alternatives as either bail out countries (really, bail out their bondholders) or break up the euro. In fact, the euro and the European economic union would be stronger if countries can default. For that reason, I advocated letting Greece go a year and a half ago when the crisis first erupted.
That chance to save the euro is fading. The European Central Bank (ECB) has bought sovereign debt from Greece, Portugal, Ireland, Italy and Spain. It has lent even more money to banks whose main asset is the same sovereign debt. Deposits are fleeing those countries’ banks, and lending from the ECB is making up the difference.
Bank regulation is making the situation worse: Banks carry most of the ECB and sovereign debt at face value. And their own governments are pressuring banks to buy more sovereign debt.
When the defaults come, the ECB will take a big hit. Then Germany and the others will be faced with an awful choice: Pony up trillions to “recapitalize” the central bank or abandon the euro along with the union it represents.
“Eurobonds” that would be issued to buy sovereign debt, backed by EU-wide taxes, have been suggested but aren’t going anywhere in the face of taxpayer resistance. In reality, Eurobonds have already been issued—they are called euros. The countries of the European Union are already pledged to make up any capital loss of the European Central Bank, and this must eventually come from tax revenues. That’s the same as paying off Eurobonds.
The central bank doves and their defenders deny this is a problem. They say the ECB got collateral from banks. They say it “sterilized” the bond purchases, by selling high quality bonds to buy poor ones, so the total supply of euros did not increase. They think that euros will stay outstanding forever so central-bank capital does not matter.
But the ECB’s collateral is the same sovereign debt that upon default will bring down the banks. If collateral evaporates on the same day as the loan, it’s not collateral. “Sterilizing” is a mirage, and central-bank capital matters. When the ECB needs to raise rates or contract the money supply, it needs assets to sell to soak up euros. And if currency holders know the central bank is empty, they will run away from euros, so that need to buy euros may come quickly.
The ECB involvement has only just begun. Last weekend’s bright idea is to “leverage” the €440 billion bailout fund by borrowing from the ECB, and using the fund to insure debt rather than to buy it. In this way the fund could “support” trillions of euros of debt. But risk can only be transferred; it does not evaporate. And the risk ends up at the ECB and, ultimately, with taxpayers.
This sort of scheme should sound familiar from the financial crisis. Take a fund designed to buy bonds, and goose its credit exposure by leveraging and writing credit default swaps (bond insurance) instead. This move just explodes the ECB’s already large lending against rotten collateral.
German Finance Minister Wolfgang Schauble saw through the scheme quickly, calling it a “stupid idea” that would “endanger the AAA sovereign debt rating” of other member states. I think he misspoke a bit. The goal is stupid, but it takes clever financial engineering to turn a €440 billion fund into several trillions of credit exposure.
And we can forecast more. What happens, say, when an Italian bond auction fails? The German taxpayer is unlikely to stand for direct government purchase, so the politicians will surely decide that the only immediate choice is for the ECB to provide what they will call “bridge financing.”
Europe’s deepest problem is bad ideas. Unpleasant price movements represent “illiquidity,” “speculators,” “market manipulation,” “lack of confidence” and “contagion,” not the hard reality of looming default. The point of policy is to “calm markets” and “provide confidence”—not to solve financial problems.
When the price of bread rose in their revolution, the French took bakers to the guillotine. They got more inflation, and less bread. When their descendants saw bond prices falling, they passed restrictions on short sales. They got lower prices, and less liquidity.
This is not a temporary market dislocation. This debt will not be paid back. Greece and the others might well rather default. Cleared of past debt, like Argentina, they are likely to be able to borrow again soon. These countries surely don’t want austerity. And least of all do their political classes want to reform their great-scam states—there is pervasive rot in an economy where every occupational license is a political favor—though reform is the one thing that could actually return them to strong growth and let them pay back debt.
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