October 23, 2011

How To Get The Pyramid Economy Cranking Again

Readers suggested a topic on the latest government housing proposals. “What about the proposal to save the U.S. housing market by offering foreign investors a sweet deal on obtaining a Visa?”

A reply, “If we are serious about scamming these marks, give them automatic dual citizenship, so we can tax all their overseas earnings. Doesn’t Congress have any serious work to do?”

Another wrote, “Need more people to get the pyramid economy cranking again. Bring in new blood since the natives have been bled dry.”

One said, “The thing is that in so many foreign countries things aren’t so rosy: kidnappings, riots, drug lords, etc. A lot of people want to emigrate someplace where it’s still ’safe’. My brother got his engineering degree at ITESM in Mexico (Mexico’s top engineering school). He told me the other day that the majority of his classmates managed to get themselves trasferred to the USA by their multinational employer (I have a cousin who is trying to do that right now).”

“Being middle to upper middle class in Mexico means have a big fat bullseye on your back. You aren’t wealthy enough to afford bodyguards but rich enough to pay a ransom. Memo to American cubicle dwellers: coming soon to your neighborhood.”

And this, “Has anyone come up with any vibrant new solutions to fixing the U.S. housing market, or are we collectively stuck with the same tired old neo-Keynesian proposals over the foreseeable time horizon?”

Finally, “It’s about the jobs, plain and simple. And there’s no fix for that, without stopping the outsourcing, and ending illegal immigration. And since illegal immigration and outsourcing are favored by the 1%ers, it means that there is no fix.”

The Wall Street Journal. “About four years ago, as the housing bust worsened, our country faced an entirely predictable problem: A huge wave of foreclosures was headed our way. The issue of the day was how to stop it before it engulfed the entire economy. My suggestion then was to revive the Depression-era Home Owners’ Loan Corporation, which refinanced about a tenth of all the mortgages in America and closed its books with a small profit. Never mind the details; the suggestion was ignored. Maybe there were better ideas, anyway.”

“Sadly, however, we did almost nothing to stop the predicted foreclosure wave, which is now drowning us. The issue at this late date is how we can mitigate the damage. One oft-repeated answer comes from the intellectual descendants of Andrew Mellon and Herbert Spencer: liquidate, liquidate, liquidate. Let the housing market find its natural bottom, and the chips fall where they may.”

“I beg to differ. Some of the reasons are humanitarian. Millions of foreclosures are ruining millions of lives and devastating many communities. We can do better than Social Darwinism.”




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102 Comments »

Comment by Ben Jones
2011-10-22 07:24:25

‘Some of the reasons are humanitarian. Millions of foreclosures are ruining millions of lives and devastating many communities’

So then how do the strategic defaults figure into this? Are these people who could make their payments purposefully ‘ruining ‘their lives? Or are they making a decision based on logic that will make their lives better in the long run?

And as most govt programs have involved inducing current buyers at current prices, where will the moral outcry be when they are underwater and face this same decision?

The title question is a good one; what could anyone do that would bring back the housing bubble? Or any other mania?

Comment by AmazingRuss
2011-10-22 08:49:47

This whole decade long fiasco ha prevented me from owning a home… Where’s MY handout. Is innumeracy required to get the goodies?

Comment by Neuromance
2011-10-22 20:25:18

Hear, hear.

My first interaction with a realtor earlier this decade was one telling me to prepare for bidding wars. I thought about the whole realtor business and realized that “my” agent’s interest were identical to the seller’s agents interest - namely getting the highest price possible.

Then, I saw prices going up 10-30K every few weeks. I had to understand why before just diving in. Now, here I am subsidizing the few million people and the banks who conspired, unwitting and wittingly, to keep house prices up for their personal profit.

Where’s my assistance? Can’t afford something? Don’t buy it. Welcome to my world. The real world.

 
Comment by rms
2011-10-23 02:28:08

“This whole decade long fiasco ha prevented me from owning a home… Where’s MY handout. Is innumeracy required to get the goodies?”

You could always move.

 
 
 
Comment by Bill in Phoenix and Tampa
2011-10-22 07:32:07

And this, “Has anyone come up with any vibrant new solutions to fixing the U.S. housing market, or are we collectively stuck with the same tired old neo-Keynesian proposals over the foreseeable time horizon?”

Either remove all artificial props from the market in real estate or have some degree of Keynesianism. There is no other “new” approach. It’s either government props or no government props. How can you find a “new” solution if there are only two choices?

Yes a number of HBBers have suggested that government should get totally out of the housing business. No MID (Cantankerous), no section 8 (me), no HUD, no Fannie Mae or Freddie Mac, no bank bailouts (pretty much every HBBer), etc.

I want government to be totally out of business. The size and scope of the US government should be at the pre-1916 level where most of its revenue comes from tariffs and there is no income tax and we do not persecute wealthy people for achieving the American dream.

Comment by Muggy
2011-10-22 08:04:32

At least limit MID to the primary residence. Lordy.

Comment by Ben Jones
2011-10-22 08:12:27

Let’s turn this around. Suppose the govt allows unlimited MID, any number of houses at any price. Let any person on the planet have citizenship if they buy a house. Hand out tax credits of $100k for any house buyer. Have the central bank print all the money needed for housing loans.

What would any of that really accomplish? I can just see it; ‘well, I’m underwater by $50k, it’s cheaper to rent, and I can default with little consequence, but I’m not going to give my mortgage interest deduction away.’

Comment by Bill in Phoenix and Tampa
2011-10-22 08:31:03

That’s an interesting concept. It would still not be worth it to a buyer. PITI and maintenance would still be huge expenses. It would be a fool’s game for the buyer. But the government would win because of the “smoke and mirrors” thing that makes MID seem like being a home moaner stuckee is the right way.

It certainly would bring fresh fools into real estate (foreigners) who have no experience in doing the math of U.S real estate. Yeah it would prop up the RE and perhaps buy time for those currently screwed by being underwater.

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Comment by Kirisdad
2011-10-23 05:17:50

How would the gov’t win? The MID is the biggest revenue negative for the gov’t.

 
 
Comment by SV guy
2011-10-22 10:07:00

If we are selling the dream of ‘Freedom’ to the highest bidder we had best start the auction soon.

Because ‘Freedom’ seems to be dying almost everywhere I look.

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Comment by Muggy
2011-10-22 16:02:02

“Let any person on the planet have citizenship if they buy a house. ”

That’s the other thing… WTF kinda people are going to park cash into USA RE? Oh yeah, criminals. Maybe even really mean ones.

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Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-23 07:57:05

A Taxing Debate: The Mortgage-Interest Deduction
By Ben Steverman - Oct 18, 2011 8:13 AM PT

The mortgage-interest deduction may be your favorite tax break, but be aware that it has some impressive enemies. The fiscal commissions of two different Presidents proposed eliminating it, first in 2005 and then in 2010. There’s also a steady stream of research from such places as the London School of Economics and the Brookings Institution arguing that the deduction doesn’t boost homeownership, but instead provides incentives for wealthier Americans to buy big houses and take on more debt.

 
 
Comment by trdrdon
2011-10-22 08:48:24

In order to fix the housing problem you have to look at the cause, and stop that activity. The bubble did not inflate in a day, it’s going to take more than a day for the market to get back to normal.

The cause was intervention by the government and the FED. Fanny Mae, Freddie Mac and the FHA were willing to accept loans that should never have been written and the FED provided funds at below market interest rates. This enabled speculators, banks, mortgage companies, bond rating agents and others to do their thing. They pulled future sales back to the present, much like “Cash For Clunkers” and created too much inventory.

The effect was the bubble. Now the same players along with Congress are trying to re-inflate it, with more cheap credit and shady accounting practices. The risk taken on by some of these players is being dumped on the tax paying public.

The solution is to let interest rates be set by market forces. Set meaningful standards and reasonable down payment requirements for mortgages so that everyone involved has some skin in the game. Return Fanny and Freddie to private ownership and get the government out of the lending industry. This will allow prices, production and inventory to go back to normal within a few years.

Fat chance any of this will happen, as long as Congress (the worlds largest brothel) is involved.

Just my humble opinion.

Comment by Blue Skye
2011-10-22 11:13:04

The housing bubble was a mania, so identifying a cause other than human emotion is problematic. Manias always have triggers and enablers, but to say they are the “cause” means we are going to remain in delusion. Sure the Fed is a bad actor, but the mania was global, so it’s a stretch to say the Fed is all to blame. Besides, the Fed’s easy money policy is still in effect and the bubble is imploding anyway.

2011-10-22 12:16:17

It took 35 years of policy (1982-2006) so no, it’s not a stretch to say that the Fed is to blame.

The Fed provided the heroin and the wastrels drank it up. Yes, they are totally wastrels (your parents included!)

They never had any skills (in a globalized world) and they never will. They just were lucky to be born in the right place.

Sucks that all that is all over.

Got skills?

Comment by Bill in Phoenix and Tampa
2011-10-22 13:17:14

My parents were from the “greatest generation.” They paid off their house by 1982.

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Comment by alpha-sloth
2011-10-22 14:03:21

Of course, your dad was a WW2 veteran, so he got all those great advantages offered him by FDR. The ones you now call ’socialism’, and want to end- for everyone else.

Must be nice to be the last one on the gravy train;-)

 
Comment by GH
2011-10-22 14:13:47

All part of the Ponzi scheme. Early investors are made whole while latecomers are left holding the bag. Nice gravy train while it lasts.

Today’s young are basically told you will be paying extra for granny while doing without ANY health insurance and your wages will be depressed even if you can get a job through illegal immigration and off-shoring and later in life you will get nothing too.

Bottom line is that all of this was great until the job base was gutted. Now the system only works for those who were granted a lot more back then and then only through continued government borrowing.

 
Comment by alpha-sloth
2011-10-23 03:30:45

“All part of the Ponzi scheme. Early investors are made whole while latecomers are left holding the bag. ”

If the system can continue indefinitely with a few tweaks (like the rich paying the same taxes as the wee people), then it’s not a Ponzi scheme.

Don’t fall for the propaganda of the 1%ers.

 
Comment by GH
2011-10-23 08:27:32

Most high income earners pay a whole lot more taxes already than the rest of us. Increasing income taxes simply ensures those who already earned their money (the wealthy) continue to pay little or no tax while enterprising individuals who strike it big will be social engineered into poverty regardless of how hard they work.

I just do not buy the argument that increasing taxes on the rich will suddenly bring back middle class prosperity and jobs. Protectionist policy perhaps but what exactly has low taxes to do with off-shoring or cheap immigrant labor?

The United States as it currently stands IS a Socialist country. Note our economic demise?

 
Comment by Bill in Phoenix and Tampa
2011-10-23 09:48:01

Alpha slop - there was very little other choice in the FDR fascist society. It was extremely big government. You either participate in socialism or you starve.

My father was no libertarian. But he had no other choice. This was the height of Wilson’s fascist “Make the world safe for democracy” interventionism. Wilson’s policies got us in WW I and the reparations from that war encouraged the rise of Hitler. Had we not had the sixteenth amendment a lot of people’s lives and limbs would have been saved. Instead of destruction of wealth there would have been more creation of wealth. The world would have probably technological advances 25 years earlier than what we enjoy now if it was not for such horrific loss of lives and wealth destruction.

I caught you months ago on this same fallacy of reasoning of yours. You remove choice and freedom from the lives of the individual and you blame the individual because he participates in the socialist state. Dumb! I won’t catch that idiotic bait of yours. I’m too smart for that.

 
Comment by Ben Jones
2011-10-23 09:58:31

‘like the rich paying the same taxes as the wee people’

I hear this a lot. Whatever happened to the alternative minimum tax? Don’t tell me the govt screwed that up too!

 
Comment by alpha-sloth
2011-10-23 13:01:21

“Most high income earners pay a whole lot more taxes already than the rest of us. ”

Yawn. 1%er propaganda. Ya think they might pay more because they earn way, way, way more?

And have you checked the highest tax rates for capital gains- which is how the rich earn most of their money, and the highest rates for income- which is how most wee people earn their money? Do that, and get back to me.

 
Comment by alpha-sloth
2011-10-23 13:08:31

“Alpha slop”

It’s Mr. Sloth, if you’re nasty.

“You either participate in socialism or you starve.”

Or you just don’t take part in the GI Bill’s, or other FDR programs’ benefits. They weren’t forced on anybody. But I bet daddy went and got his, just like you live off the gov’s teat now, mr. security clearance.

“I won’t catch that idiotic bait of yours. I’m too smart for that.”

Curses! I’ll get you next time!

 
Comment by Overtaxed
2011-10-23 15:05:03

““Most high income earners pay a whole lot more taxes already than the rest of us. ”

Yawn. 1%er propaganda. Ya think they might pay more because they earn way, way, way more?

And have you checked the highest tax rates for capital gains- which is how the rich earn most of their money, and the highest rates for income- which is how most wee people earn their money? Do that, and get back to me.”

There’s a difference between the “rich” and those of us who pay the majority of the taxes. I’m paying (my household) about 100-125K a year in taxes. I don’t have a yacht, nor a helicopter. Not even a stinking little Gulfstream. And, no, I don’t make most of my income by capital gains.

It helps to define the “rich” when we have these conversations. But Obama’s definition, I’m it, and need to pay higher taxes. By my definition, I’m not even close; and I already am paying a combined 40%+ of my income to taxes (that includes RE taxes and the other “hidden” taxes that take a huge bite of out high earners salaries).

My life is as different from the “rich” and the guy living it a gutter is from me. Things that target the “rich” should have no impact at all on me, but, invariably, I find myself paying AMT (a tax on the rich), and being lumped in with hedge funders and the Buffets when we talk about taxation. I understand the reason (there’s no real way to tax those top .5% or so where the “real” money is), but it’s really a disingenuous conversation to lump me in with people making 10M+ a year in passive income; that’s a whole different league.

 
Comment by Dale
2011-10-23 17:19:15

How about that “millionaires and billionaires” category Obama is always referring to? How many decimal places are there between a million and a billion? Isn’t that like saying those “thousandaires and millionaires”? Sort of loses something when you put it that way. Nothing but class warfare stirred up by a desperate man trying to shift the focus of the coming election.

 
Comment by alpha-sloth
2011-10-24 04:25:57

Whatever happened to the alternative minimum tax? Don’t tell me the govt screwed that up too!

No, no. They fixed it- so the rich would still pay less:

wikipedia
“from 2004 onward, individuals have been subject to a reduced rate of Federal tax on long term capital gains. This reduced rate (limited to 15%) applies for regular tax and the Alternative Minimum Tax.”

 
 
Comment by Doug in Boone, NC
2011-10-23 17:07:19

“My parents were from the “greatest generation.” They paid off their house by 1982.”
My parents were from the greatest generation, too. And they paid off their house a little before 1982, but they only paid $12,000 for it, and their mortgage payments were only $125/month.

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Comment by alpha-sloth
2011-10-22 13:57:33

“The solution is to let interest rates be set by market forces. Set meaningful standards and reasonable down payment requirements for mortgages so that everyone involved has some skin in the game… and get the government out of the lending industry.

Make up our mind. Government gets “out of the lending industry” and the free market decides? Or we (I assume meaning the gov) “set meaningful standards and reasonable down payment requirements for mortgages”?

 
Comment by josemanolo
2011-10-22 19:18:05

“the solution is to let interest rates be set by market forces”

wait till an hft for interest rate gets invented and see if that free market is working out for you.

 
 
Comment by X-GSfixr
2011-10-22 08:53:02

This month’s “Trains” magazine has a story about the BNSF railroad’s Abo Canyon project, building 5 miles of brand new double track in the one remaining bottleneck in the railroad’s LA-Chicago main line. This basically completes the double-track project, that the railroad has been working for several years in Kansas, Oklahoma, Texas and New Mexico. One of the biggest (if not the biggest) railroad construction projects in the past 20-30 years.

Photos and text (if it works):

http://tinyurl.com/3rymhds

Rock cuts 1500 feet long x 150-200 feet deep……new bridges and signals. Lots of rock moved.

What’s interesting is the number of employees required for this project…..200 on site at any one time.

If you’ve noticed, practically every kind of project in the US doesn’t take nearly as many people to complete as it used to. Meaning of course that we may have a lot more people than jobs to fill for an extended period of time.

So, without further ado, the -fixr has put aside political correctness and wishful thinking to develop a policy list for the US Government going forward, to improve the balance of people-to-jobs in our economy.

-Eliminate research into the spread of infectious diseases, cancer and heart disease. As the 99%ers won’t be able to afford it, public spending on improved health care is just a government subsidy to the rich.

-Promote smoking and the use of corn sweeteners. Fat people don’t have sex much, so they produce fewer kids. (Don’t ask me how I know this…)

-Roll back auto safety standards to 1985-1990 . Marginal increases in “safety”, while adding significantly to the weight and cost of cars and trucks.

-As stated before, forget the effing “border fence”. Implement extremely punitive financial penalties for the hiring of illegals. Open a 1-800 “snitch line”, and pay snitches 10% of the penalties paid. Get medieval on people hiring illegals.

Call it the “Tough Love for Mexico” program……by taking all of their “wretched refuse” we are just enabling them to continue with the status quo, instead of addressing their internal problems.

-Pay a $25,000 “Celibacy Bonus” to childless men/women on their 25th birthday, if they don’t have kids before age 21. Anyone having (or fathering) a child below 21 loses the bonus. Take DNA samples from the kids in the hospital, or before admission to schools, or when receiving public assistance, and check for database matches.

As long as government can’t control themselves, and wants to use tax policy to modify behavior, might as well make it good policy.

- Start a war with somebody, in some out of the way place. Make sure that both sides have long, undefendable, supply lines, in order to maximize casualties, mandate inexpensive weapons……no smart bombs. Napalm and weapons made from organic corn/renewable resources are encouraged. Draft the kids of the top 10%ers, and every high level government official to fight this war; they should be happy to, since they are the only people with assets worth fighting for.

Comment by Ben Jones
2011-10-22 09:03:32

Yeah, as long as we are resisting the cave-man urge for ’social darwinism’, let’s get out the heavy equipment and really show some humanitarianism:

‘As protesters “occupy” Wall Street and other seats of power around the country, give the city of Jackson credit for addressing a problem that is at the root of many economic woes.’

‘City Manager Larry Shaffer and the City Council are moving ahead with an idea to demolish 462 empty homes. The idea — a good one — is to rid Jackson of property that serves no purpose, creates nuisances and is a dead weight on the area’s real estate market. This aggressive plan is a chance for Jackson to hit the reset button on a major problem.’

‘Give the new city manager and the council ample credit for ambition. Now comes a mountain of a challenge: accomplishing it. The cost of demolishing these homes stands around $3 million. That represents nearly $1 of every $6 that City Hall spends each year, though Shaffer no doubt will look for outside funding.’

‘The scope of the challenges reveals just how severe Jackson’s real estate problem is today. As Shaffer has noted, home values in Jackson have fallen by a staggering 32 percent in the last four years. He — and probably any impartial observer — sees prices falling again through 2012.’

‘Jackson is feeling the pain of the popped real estate bubble here to begin with. A chief culprit is foreclosed homes that have clogged the market, making it far more difficult for homeowners to sell their properties. If you drove around the city this summer, during the height of the home-buying season, you saw vacant homes with overgrown yards — and “For Sale” signs in the yards of neighbors who could not get a bite.’

‘While the wrecking ball sounds extreme, Jackson could take an approach that is hardly unorthodox. Larger cities such as Flint and Youngstown, Ohio, have tried “rightsizing” — getting rid of unwanted housing stock that does not serve a smaller population. Similarly, banks increasingly have looked to demolish homes they have obtained through foreclosure.’

‘The city does not have better options. Jackson’s government has spent a lot of money to buy and rehabilitate homes, with little success. The cost of renovations is five to 10 times that of demolition, while few buyers are interested in the finished product. The city, and taxpayers, do not get a sensible return on this investment.’

‘City Hall could do nothing, which has been its approach so far to this real estate meltdown. Shaffer’s view on that: “This is a chronic condition, and it will continue unless there is intervention.”

Comment by X-GSfixr
2011-10-22 13:55:18

Also known as paying someone to dig a hole, then paying someone else to fill it in.

You’d think they would do the same with commercial property. Plenty of that around there that’s been vacant for years. But somehow, taxes and upkeep are low enough for people to hold out 10-15 years for their “wishing price”.

So square miles of downtown take decades to crumble into dust, while the farms, orchards and Dairies on the outskirts of town get bulldozed over, to be replaced by crapshacks and Starbucks.

 
Comment by X-GSfixr
2011-10-22 14:40:37

I admit some of my recommendations may be a little draconian.

They have the virtue of recognizing reality.

I frankly would rather not spend my retirement/golden years living in a cardboard box, fighting the cats over a box of Friskies. The reality is, of the two extremes, the cardboard box plan is the more likely outcome. Hence, my “major heart attack/stroke before 65″ plan.

Our Banana Republic/oligarchy, as currently administered, likes the status quo. Why not? It’s working for them. One of their plans is to continue to drive labor costs down. Even on jobs that can’t be outsourced.

Using my example again: the Euros require that mechanics have a “Type Rating”, if they are working on complex aircraft. If I lived in Europe, this would be great, because I’m trained and experienced on 6-7 different models of “complex aircraft” (Cessna Citations thru the C-750, Falcon 20 and 900, Gulfstream 200)

In the US, when you get an “A&P” certificate, from Day 1 you are legally allowed to start spinning wrenches on everything from a Cessna 150 to a Boeing 787. Training is only “recommended”. Everybody in the industry likes it this way, because it takes labor pricing power away from the experienced guys.

Recommendations to change to something like the Euros and most of the rest of the First World are doing is met with howls of “over-regulation” and “it will cost too much”.

(Just pay me what the typical 20-30 year Porsche or BMW mechanic makes, and i’ll be happy)

You would think that people would be more worried about their own safety, but you would be wrong.

One time, I found TWO drops of hydraulic fluid leaking onto the floor from the airplane, in a place where they shouldn’t have been. Tracked it down, and found a problem that would have caused the failure of the “A” hydraulic system, and a emergency diversion in flight…..at best. 90 guys out of 100 wouldn’t have even recognized the drips as being a problem.

Also found a cheaper source to purchase the fancy drinking water we stock on the airplane……I’ll give you three guesses which of these two i got the most “attaboys” for.

As related by many of the other posters on the blog, these issues can be found in just about every specialized technical industry in the US of A. Upkeep/maintenance is considered as a loss. Costs are to be cut ruthlessly. While assuming that all this crap fixes itself.

Forgive the rant, but I’m just a salaried exempt working on Saturday (again)

 
Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-22 22:54:05

‘The cost of demolishing these homes stands around $3 million. That represents nearly $1 of every $6 that City Hall spends each year, though Shaffer no doubt will look for outside funding.’

A costly proposal to destroy a valuable economic asset — broken window economic stimulus at its best!

Comment by alpha-sloth
2011-10-23 03:56:41

Is the Detroit housing market full of valuable economic assets? If so, go snap some up, as I’m sure you can also do in Jackson.

BTW- Has the broken window fallacy ever explained how it gets around the paradox of thrift?

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Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-23 07:50:28

“Is the Detroit housing market full of valuable economic assets?”

It depends. If you cleaned up the riff-raff and made Detroit a safe place to raise a family and to run a business, housing there would skyrocket in value. But you would need to restore law and order before this would be the case.

 
Comment by aNYCdj
2011-10-23 08:05:32

Or to be blunt… detroit needs to be white again.

 
Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-23 08:17:45

“…detroit needs to be white again…”

You can say what you want, but I definitely don’t agree with this.

I see no reason Detroit could not reinstate and enforce a rule of law, regardless of the racial composition. What I saw in the Midwest town where I grew up was economically people of all races abandon the crime-ridden inner city. Clean up the crime problem and you will restore a functioning inner city economy.

 
Comment by aNYCdj
2011-10-23 08:24:00

But then black people spoke English back then too….

Look our prez doesnt care about black people…so the question is why should we?

Lets let all the non violent pot smokers out of jail to put all the other violent criminals in.

 
Comment by alpha-sloth
2011-10-23 13:11:22

I still wanna know how the broken window fallacy gets around the paradox of thrift.

 
 
 
 
Comment by SV guy
2011-10-22 10:12:15

X,

I hereby nominate this post for the HBB HOF! I especially liked,

“..and weapons made from organic corn/renewable resources are encouraged.”

Comment by AmazingRuss
2011-10-22 10:34:54

Issue each soldier a pointed stick and send him into battle.

 
 
 
Comment by iftheshoefits
2011-10-22 09:04:46

“We can do better than Social Darwinism.”

We’ve had five plus years so far, and we certainly haven’t done any better trying the trillion-dollar alternatives. Maybe time to give it a try?

Comment by Ben Jones
2011-10-22 09:20:20

This is semantics. It’s meant to frame the discussion in animalistic versus humanitarian terms. Like I said, are strategic defaulters looking to “ruin” their lives?

 
Comment by snake charmer
2011-10-22 12:37:59

The WSJ opinion page fantasizes about social Darwinism, except when bank balance sheets require federal intervention to maintain the pretense of solvency. Then it’s not so good. Who do they think they are fooling with this?

Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-22 22:57:11

“…WSJ opinion page fantasizes about social Darwinism…”

For the record, that was Ben Bernanke’s fellow Princeton economics department faculty member and former Federal Reserve Governor Alan Blinder’s viewpoint, not the WSJ editors’…

Comment by snake charmer
2011-10-23 08:21:10

Thanks. I clicked on the link, but it said “opinion” and only allowed me to see a couple of paragraphs, so I assumed it was from the newspaper’s editorial board, rather than a guest piece.

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Comment by Natalie
2011-10-22 09:17:59

I think most people miss the point, and are focusing on whether it will increase the cost of housing. The real point is that a select few in our government who own homes in the US have decided that they want the foreigners making money off the jobs they outsourced to drive up the cost of the American homes they own, knowing that if their plan suceeds they are ensuring that homes in the US will remain unaffordable for Americans. This is this not a legitimate government purpose and is actually more appropriately viewed as an act of treason and/or terrorism. Any in US government supporting such proposals should immediately be forced to resign and publicly hung.

Comment by Natalie
2011-10-22 09:26:47

I really wish it was easier to type and proof on an iphone.

Comment by WLange
2011-10-22 12:08:16

Excellent point anyway ^

 
 
Comment by Bill in Phoenix and Tampa
2011-10-22 13:29:00

Interesting perspective. I question if there is a deliberate effort to keep houses unaffordable or at absurdly high prices. I do think there is a desire to keep the houses at high prices though. The feds tried in the 90s to put low income people into the mortgage paying camp by the CRA (I would add a “p” to those three letters) deal. And they did put a lot of them into those houses. Lots of them have fallen out though. I saw evidence of that in my once upscale Phoenix neighborhood where low income people started moving into my once quiet luxury apartment complex within the last 13 months.

The bigger crime by multi generations of government officials was to replace tariffs with the income tax on Joe 6 pack over the last 98 years. This allowed the federal government to justify its world cop crimes and arm both sides of many wars, foment anger in the middle east to cause them to attack us on 9/11, establish the big criminal Federal Reserve bank system that gave the private banks free money essentially, use the income tax to social engineer the U.S. away from a culture based on the enlightenment and reason to a culture based on envy and where everyone wants the unearned. The biggest crime started with Woodrow Wilson because it enabled all these little crimes, one of which is the housing bubble.

Comment by Neuromance
2011-10-22 20:30:46

Both Obama and Geithner have stated their desire to put a floor under house prices. I’ve posted the links in the past, and it’s been very explicit. It’s not a secret.

 
Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-22 23:01:41

‘I would add a “p” to those three letters’

That’s funny, and also ironic, as a staff member at work who used to be a secretary in the banking industry told me just last week that they used to spell CRA that way!

 
 
Comment by Montana
2011-10-22 14:22:56

I agree. There are plenty of FB’s in govt making decisions and the media influencing opinions too. Maybe they’re not underwater, but they’re still worried about their values and counting on appreciation to handle future financial plans.

If nothing else, it wreaks havoc with their objectivity. Everyone knows here how quiet the rooms gets when you bring up this stuff. The discomfort is palpable.

 
Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-22 22:59:52

“The real point is that a select few in our government who own homes in the US have decided that they want the foreigners making money off the jobs they outsourced to drive up the cost of the American homes they own, knowing that if their plan suceeds they are ensuring that homes in the US will remain unaffordable for Americans.”

Natalie — Many thanks for an excellent post which captures very well the reason I brought up this issue.

I was wondering if you could pinpoint which of our government officials are in the group you reference (other than the Senators who set forth this measure)? It would be nice to know whom to vote out of office in the next election.

 
 
Comment by GH
2011-10-22 14:17:40

What IF the treasury minted a $15 trillion coin and sent every American a $50,000 Check to do with as they wish… Basically providing currency to cover our debt.

Inflationary yes, but given our run away deflation train right now is this REALLY a worse alternative than economic collapse under a titan mountain of unpayable debt?

Comment by I am the 53%
2011-10-22 20:01:47

What IF?

Weimar style inflation. The destruction of savings of the entire country. 100000% increases in costs of goods. Severe recession/depression. And complete economic collapse.

Comment by GH
2011-10-22 20:31:21

How is what we have today not destruction of savings for the whole country. I had just over $100,000 in cash three years ago and $250,000 in lines of credit. Today I have $10,000 in savings left and my credit lines have been cancelled due I am told to non usage. By your formula I SHOULD have $100,000 in cash, but due to lack of business I have had to live on the rest. I do not see where I am worse off under my idea than your idea of letting the whole ship sink in the mid Atlantic? What IF the US could no longer borrow and your Social Security check never showed and your Medi-care defaulted? Could not happen? The way things are headed it is a dead cert.

The REAL fact is that there is some 100 trillion dollars in unfunded obligations just in the US forget Europe. Say we let this 100 trillion default where are we then?

 
Comment by GH
2011-10-22 20:33:20

Continuing my previous post a bit. We are in total agreement if you were to tell me you think all this debt should NEVER have been created. BUT!!!! It has, so now what???

 
 
Comment by Neuromance
2011-10-22 20:45:10

Silly - only the heads of financial companies can de facto print their own money.

 
 
Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-23 07:36:54

Buy stocks now, or get priced out forever!

INVESTING
OCTOBER 23, 2011

Investing in a Manic-Depressive Stock Market
By TOM LAURICELLA

With the stock market staging a sharp rebound from its summer-time selloff, there’s hope that the worst is over. But there are plenty of land mines ahead.

Stocks have staged a swift comeback in October following the 12% drop in the Dow Jones Industrial Average during the third quarter. Since hitting its 2011 low on Oct. 3, the Dow has bounced back 11%. For the week, the Dow was up 1.4%. The Standard & Poor’s 500-stock index finished 1.1% higher, while the Nasdaq was off 1.1%.

To some degree, investors are caught in a tug of war. On the positive side, the U.S. economy seems to be avoiding recession and instead is muddling along in a slow-growth mode that could be supportive for stocks. Corporate earnings have remained robust.

But Europe remains on the precipice of financial turmoil and recession. Until the debt crisis is decisively dealt with, it could be tough for stocks anywhere around the world to enjoy any kind of sustained gains. Furthermore, markets are likely to remain exceptionally volatile—taking investors through the kind of wild ride seen over the past few months.

The Dow has moved up or down more than 1% on 43 days since June 30—the kind of frequent big swings not seen since the worst of the 2008-2009 financial crisis.

 
Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-23 07:38:51

With so many investors yanking so much money out of the stock market, what drives it up?

The Associated Press
For investors, playing it ’safe’ can be risky
By Dave Carpenter
AP Personal Finance Writer / October 21, 2011

CHICAGO—Investors remain anxious to find safety even as the stock market moves back toward positive territory for the year.

They’re on pace to yank more than $20 billion out of stock funds this month, the fourth time in the last five months, scarred by the volatility over everything from the sluggish economy to Europe’s debt crisis to the threat of another global recession.

Despite the recent market uptick, there’s still plenty to worry about.

Fears remain that the Greek government may fail to pay its massive debts, which would wreak widespread financial havoc. Federal Reserve Chairman Ben Bernanke hasn’t backed off from his statement early this month that the economic recovery “is close to faltering.” And investors aren’t fully convinced that the selloff that pushed the Standard & Poor’s 500 index down 14 percent in the third quarter has run its course.

All the added uncertainty fuels any temptation to abandon stocks, as many already have done.

But “playing it safe” comes at a cost. Over the long run, fleeing to cash or buying Treasurys may be even more dangerous in this era of low interest rates as well as low returns. It can do permanent damage to your money’s buying power and your retirement prospects.

That’s the message financial advisers have been hammering home to clients who want to abandon the stock market, fearing a repeat of the 2008 meltdown or who are simply fed up with all the plunges.

Comment by Ben Jones
2011-10-23 07:55:10

‘what drives it up?’

‘Only a few months ago, Groupon was the Internet’s next great thing. Business media christened it the fastest growing company ever. Copycats proliferated. And investors salivated over the prospect of Groupon going public. Today, the startup that pioneered online daily deals for coupons is an example of how fast an Internet darling can fall.’

‘In Friday’s filing, the company laid out third-quarter financial figures that showed it is getting closer to profitability. For the three months ended Sept. 30, Groupon narrowed its net loss of $10.6 million on revenue of $430.2 million in part by lowering marketing spending. That compares with a loss of $49 million on revenue of $81.8 million in the same period last year.’

‘Groupon rejected a $6 billion takeover offer from Google Inc. last year.

Groupon has been funded by such venture capital heavyweights as Andreessen Horowitz, firm of Netscape founder Marc Andreessen. Andreessen declined to comment, but in an August essay in the Wall Street Journal, he wrote that companies like Groupon would “eat the retail marketing industry.”

“We are in the middle of a dramatic and broad technological and economic shift in which software companies are poised to take over large swaths of the economy,” he wrote.’

http://finance.yahoo.com/news/Groupons-fall-to-earth-apf-1850258734.html?x=0&sec=topStories&pos=7&asset=&ccode=

Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-23 07:59:28

Groupon Fail: St. Louis business owners are souring on the once-mighty coupon startup
By Ettie Berneking
Thursday, Oct 13 2011

After accepting Groupon coupons for nearly six months, Clara Moore, the general manager and chef at Local Harvest Café & Catering, had almost forgotten about the 3,500 customers who’d jumped on the deal.

Until the last few weeks, that is, when hundreds of those people came rushing in.

After running the staff ragged, pissing off the regulars, cleaning the restaurant out of all but four items on the menu and posting several negative Yelp reviews about their experiences, the Groupon masses left Local Harvest stunned and exhausted. Moore could only say, or rather Tweet, one thing: “Sorry, we won’t be doing Groupon again, guaranteed!”

For its first few years of rapid growth, Groupon seemed like a win-win-win: Customers got a great deal, such as a coupon for $40 worth of hamburgers for just $20. Businesses got new customers. And Groupon got roughly half the money exchanged in the transaction — enough to notch the Chicago-based company $713 million in revenue last year.

But the bloom is off the rose. Despite all that revenue, it turns out, Groupon isn’t actually making a profit. The company actually had a net loss of $420 million in 2010 and $117 million within the first three months of this year, according to a prospectus it filed with the Securities and Exchange Commission. On September 6, the company postponed its once-ballyhooed initial public offering, making its decision to turn down a $6 billion offer from Google last December look pretty foolhardy.

Comment by Ben Jones
2011-10-23 08:10:23

‘Groupon has been funded by such venture capital heavyweights as Andreessen Horowitz, firm of Netscape founder Marc Andreessen’

The very first day, the moment, when I realized a mania was forming in the US was when Netscape tried to raise something like $45 million and instead got $2 billion.

‘its decision to turn down a $6 billion offer from Google’

Irrational behavior, anyone?

Things like this make me think there is still too much funny money out there. Where did Google get $6 billion to toss around like that?

This is what you get when the economy has been gutted of productive businesses, and relies instead on bubbles and debt. I’m still amazed that the big industry titans in this country make CELL PHONES! Nothing against these companies, but it’s telling that our biggest industries are in fancy walkie-talkies, while the Chinese re-build the golden gate bridge.

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Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-23 08:19:31

“…still too much funny money out there.”

Spot on! We have a Fed-funded funny-money economy which encourages malinvestment in hairbrained schemes.

 
Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-23 08:25:17

Or is it “hare-brained“?

 
Comment by SV guy
2011-10-23 08:45:12

“while the Chinese re-build the golden gate bridge.”

It’s the Bay Bridge but your point is well taken.

 
Comment by Ben Jones
2011-10-23 08:57:20

Yeah, I only heard a bit on the radio, so no surprise I got it wrong. While I was listening, they mentioned the project was approved in 2005 when unemployment in CA was low.

2005, when we were all gonna get rich selling each other houses. We couldn’t be bothered with real work like that! Yet another example of bubbles tearing an economy apart.

 
 
 
 
Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-23 10:51:16

I guess the investment strategy of picking up nickels in front of steam rollers hasn’t gone out of fashion just yet?

U.S. investors chase rallies despite wariness
By David Gaffen
NEW YORK | Fri Oct 21, 2011 3:17pm EDT

Share trader Tom Holler reacts in front of his trading terminal during early morning trading at the German stock exchange in Frankfurt, November 20, 2008. REUTERS/Kai Pfaffenbach

(Reuters) - The EU summit is on. No, wait, it’s off. No, hold on, the summit is on, and what’s more, now there are two of them.

The daily headlines out of Europe are enough to make a long-term investor’s head spin and more importantly, to keep them out of the market altogether.

Markets have see-sawed all week on frequent and sometimes contradictory reports on the success or lack thereof of European leaders to deal with their region’s debt crisis.

Stocks have risen on the mere suggestion of a hint of progress, with investors afraid of missing the rally that will follow if politicians finally come up with a solution.

Volume has been muted, generally spiking on sudden rallies and sell-offs. It’s a sign investors are avoiding real investment decisions and chasing rallies in what has been a tough year so far.

“People have been burned by reacting to individual news stories only to have them refuted, withdrawn or contradicted,” said Stephen Massocca, managing director at Wedbush Morgan in San Francisco. “It’s really kind of wait and watch, which is why the volume is so low.”

Comment by Carl Morris
2011-10-23 11:20:51

If the volumes are low enough not only can the PTB set prices, they don’t even have to spend much to do it.

 
 
 
Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-23 07:41:56

I’m guessing those Americans who are stuck in U6 unemployment purgatory won’t soon be purchasing a home.

Long-term jobless find benefits endangered
Written by Elizabeth Aguilera
7:20 p.m., Oct. 22, 2011

More than half a million Californians — including nearly 40,000 San Diegans — have run out of unemployment benefits, and many more will join those ranks after the new year if Congress does not approve an extension to maintain the current 99-week maximum.

Among the “99ers,” as many have dubbed themselves, it is unclear how many are working, attending school or continuing to look for jobs. Experts estimate that the majority are still unemployed.

“I just want a job,” said Diane Gilbert of San Diego, 57, a bank processor who was laid off in September 2008 and whose unemployment benefits expired a year ago. “One interviewer asked me, ‘Why do you want back in the workforce?’ I said, ‘I never wanted to leave it.’ It’s so discouraging.”

As of Monday, 544,181 people in California have exhausted their unemployment benefits since February 2010, according to the state Employment Development Department. In San Diego County, data for August — the most recent available — show that 39,128 have reached the benefits limit since February 2010.

The latest state unemployment analysis, based on a household survey by the Employment Development Department, indicates that about half of all unemployed Californians have been out of work for at least six months.

“It’s truly a sign of how long and difficult this (strained economy) has been,” said Loree Levy, spokeswoman for the agency.

The federal government does not keep tabs on how many jobless Americans no longer qualify for unemployment checks. But the National Employment Law Project estimates that such benefits expired for 3.9 million people across the country last year.

Economists do not foresee a pattern reversal in the near future as unemployment rates remain high; most of them predict a weak economy through next year or into 2013.

The national “U6” total unemployment rate — which includes all unemployed people looking for a job, those discouraged but still wanting to work and those who work part time but wish to reach full-time status — was a seasonally adjusted 16.5 percent in September.

Comment by aNYCdj
2011-10-23 08:18:33

And yet the moron in the white house puts the Dream act as top priority.

———was a seasonally adjusted 16.5 percent in September.

 
 
Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-23 07:44:23

Published: Oct. 10, 2011 Updated: Oct. 15, 2011 7:53 p.m.

Nearly 1 million in state long-term jobless

And most of those have been out of work a year or more.
By MARY ANN MILBOURN / THE ORANGE COUNTY REGISTER

California has 988,000 people who have been unemployed more than six months, with the majority of those out of work a year or longer, according to the state Employment Development Department.

That is more than the entire population in the states of Alaska, Delaware, North Dakota, South Dakota, Vermont and Wyoming.

Typically, workers who have just lost their jobs make up the bulk of the unemployed. But as the economic downturn has dragged on, those who don’t find work in the first six months of unemployment find it increasingly difficult to get a job.

That six-month mark is critical because the unemployed typically receive benefits for only 26 weeks. However, because of the depth of this downturn Congress has extended benefits for up to 99 weeks.

Even with those extensions, more than 533,000 people in California have become so-called 99ers, people who have exhausted their benefits and no longer are receiving unemployment. It is not known how many of them subsequently found work.

In August, the most recent data available, 45.5 percent of California’s 2.2 million unemployed had been out of work over six months and 33.2 percent of those had been out over a year.

 
Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-23 07:48:44

Not relevant: “While the debt ceiling is $1 million, Mendenhall said 65 percent of people who claim the deduction earn less than $100,000 per year.”

RELEVANT: What is the average amount of MID claimed by 1%ers versus the average MID claimed by 99%ers?


Realtors Bus In Information

by Alex Ferreras on October 17, 2011 in Real Estate

Oct. 16–NORMAN (Source: By James S. Tyree, The Norman Transcript, Okla.) - The National Realtors Association’s “Home Ownership Matters” bus that’s traveling the country rolled into Norman on Thursday to spread the message of preserving the federal tax dedcution for mortgage interest.Homeowners currently are allowed to deduct the interest they pay on mortgages for first and second homes from their taxable income. Interest can be deducted on up to $1 million of mortgage debt and $100,000 on home equity loan debt.

A bipartisan legislative committee working to reduce the federal deficit is considering cutbacks on the mortgage interest deduction, perhaps by eliminating the deduction for second homes or reducing the mortgage debt cap to $500,000.

But Richard Mendenhall, past president of the National Association of Realtors, said preserving the current tax deduction is crucial to homeowners and the communities in which they spend their tax savings.

More than 320,000 taxpayers in Oklahoma claimed the deduction last year, Mendenhall said, and they saved an average of about $8,000.

While the debt ceiling is $1 million, Mendenhall said 65 percent of people who claim the deduction earn less than $100,000 per year.

“The last thing our economy needs is another blow,” he said outside the bus parked at the Embassy Suites and Conference Center. “We need to keep the fact that ‘home ownership matters’ in front of our country’s public policy agenda, and in our communities.”

Comment by X-GSfixr
2011-10-23 10:20:31

Basically a “Whats the Matter with Oklahoma?” story.

If there were more than a couple of dozen houses in Oklahoma worth a million bucks, I’d be surprised. Basically, getting Flyover people to lobby for rich Californian’s/New Yorker’s tax deduction.

The family farm was purchased by my older cousin from the family when Grandpa dies. 160 acres, 1930s built 3 br house, barns, outbuildings, and intact mineral rights.

Appraised at $112K in 2002-03. Last I checked, you could buy decent 3 br houses about anywhere in the state for $60-75K.

Of course, the catch is, the houses are in Oklahoma, where “OU Red” seems to be the most popular interior decorating color..

Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-23 14:39:57

“Oklahoma is OK.”

 
 
 
Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-23 08:09:49

There is no proper federal government role to support investment in condos or any other form of residential real estate.

Kenneth R. Harney
FHA rules for condo purchases are causing major headaches for buyers and sellers
(Linda Davidson/THE WASHINGTON POST) - In the DC area, $500,000 can buy a one bedroom, one bath condo downtown.
By Kenneth R. Harney, Published: October 21

Is a little-publicized switch in federal mortgage policy causing huge problems for condominium sellers, buyers and homeowner association boards across the country — even depressing prices and blocking refinancings?

Condo industry leaders, from the 30,000-member Community Associations Institute to individual unit owners and realty agents, are emphatic that the answer is yes. They say a series of rule revisions by the Federal Housing Administration has caused thousands of condo projects to become ineligible for FHA mortgages. This, in turn, has abruptly shut off loan money for would-be buyers and refinancers, forcing them to pursue conventional bank loans requiring much higher down payments — sometimes 20 percent and higher compared with the FHA’s 3.5 percent minimum — which they often cannot afford.

Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-23 09:00:01

Please explain to me why O’Quinn’s inability to sell his condo at his wishing price is a national policy concern. Doesn’t Uncle Sam have more momentous issues on his plate than the plight of hapless condo owners who got stucco?

‘“This has been a nightmare,” said Ryan O’Quinn, a unit owner in a townhouse community in Calabasas, Calif. O’Quinn, who is a member of the board of directors of the homeowners association, has been trying to sell his condo since May. He has had multiple offers and been under contract four times — twice with the same purchaser — but because the community’s eligibility has lapsed, buyers who need FHA financing have been rejected by lenders.

In the meantime, O’Quinn has cut his asking price several times for a total of $81,000, an 18 percent decline that his agent, Anna Nevares of the Redfin realty brokerage, attributes directly to FHA’s policy revisions. Not only did FHA fail to inform the condo board about the changes, according to O’Quinn, but every time the board submitted applications for recertification, they were rejected on technical grounds. In one instance, he said, the agency turned down the application solely because the reserve-fund bank account for the condo project did not carry the words “reserve fund.”’

Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-23 09:01:21

P.S. In case you don’t recall this sweet bit of Schadenfreudic irony, Calabassas was where Countrywide was headquartered.

 
Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-23 09:04:10

“…$81,000, an 18 percent decline that his agent, Anna Nevares of the Redfin realty brokerage, attributes directly to FHA’s policy revisions.”

If the FHA changed its lending policy, then that must be the reason O’Quinn can’t get his wishing price. It couldn’t possibly be that condo demand has collapsed in the wake of California’s especially severe version of the Great Recession, making it impossible for O’Quinn to find a sucker willing to pay his wishing price.

Comment by X-GSfixr
2011-10-23 10:30:07

From what I read from the links, it’s not that FHA has quit financing condos….it’s that they don’t finance condos in buildings that aren’t FHA approved, and don’t finance more than 50% of the condos in any one building.

Why the tightened standards? Soaring defaults on condos. Gee, didn’t see that coming….

His solution is obvious. He just needs to get his building FHA approved, and all his problems will be over. This assumes, of course, that the FHA is really the problem.

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Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-23 08:15:11

The Congress seems determined to use hair-of-the-dog housing market stimulus to ensure the “foreclosure crisis” lasts forever!

EDITORIAL: Occupying your mortgage
Congress just can’t kick the government-subsidized lending habit
By THE WASHINGTON TIMES
Friday, October 21, 2011

Politicians and realtors want to maintain a permanent government occupation of the housing market. If the hippies clogging the streets of major cities had any integrity for their cause, they’d speak out against mortgage lending practices that stick taxpayers with the bills when banks make bad loans. On Thursday night, the Senate voted 60-38 to do more of the same.

At the beginning of the month, the maximum amount of a home loan that Uncle Sam would back dropped 17 percent. That spurred a mostly Democratic group of lawmakers to take steps to restore the higher conforming loan limits. They want to see the Federal Housing Administration (FHA), Department of Veterans Affairs, Freddie Mac and Fannie Mae backing loans at the boosted rate of $729,750 instead of just $625,500. Here we go again.

It wasn’t so long ago that congressional meddling diluted lending standards so thoroughly that the public bought more house than it could afford with low rates and zero down. The deals appeared too good to be true - because they were. When payments were not met and defaults mounted, the unsustainable housing market collapsed. The implicit government guarantee behind the Freddie and Fannie loans became explicit, and taxpayers absorbed at least $150 billion in losses. We have yet to recover from the resulting Great Recession.

Now 60 senators led by Robert Menendez, New Jersey Democrat, and Johnny Isakson, Georgia Republican, insist government-sponsored enterprises need to keep buying larger loans because the housing market is weak, credit is tight and housing prices continue to decline. Their cause is supported by the National Association of Realtors, the homebuilders and mortgage bankers - the groups with the most to gain from socializing the risk of pricier financing on more expensive estates.

Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-23 08:30:09

It seems as though the Democrats are the primary culprits behind never-ending efforts at housing bubble reflation.

REVIEW & OUTLOOK
OCTOBER 22, 2011

Senators for McMansion Subsidies
The housing lobby strikes again.

Should taxpayers continue to guarantee personal McMansions, even as Fannie Mae and Freddie Mac have lost $142 billion, and counting? Homeowners who lived through the recent government-backed housing boom and bust would say no, but for Senate Democrats and a clutch of Republicans in hock to the housing lobby, the answer is a resounding yes.

That’s a reference to Thursday night’s 60-38 vote in favor of a measure to raise “conforming loan limits” for Fannie, Freddie and the Federal Housing Administration to $729,750 in certain markets for two more years. The limits dictate the size of mortgage that each agency is allowed to guarantee, and they had been reduced earlier this month as planned under previous law to $625,500.

The housing lobby claims that reducing the loan limits would, as National Association of Home Builders Chairman Bob Nielsen said in a statement Friday, “reduce housing demand, and place downward pressure on home prices in major markets. This will exacerbate the current housing downturn, trigger more foreclosures, impede job growth and endanger the fragile economic recovery.” The home builders have never seen a subsidy they didn’t like, no matter how healthy the housing market.

Even the Obama Administration recognized this subsidy train can’t last forever if we want to reduce the role of government in housing markets. So it pledged in its February white paper on Fan and Fed to reduce the limits so “larger loans for more expensive homes will once again be funded only through the private market.” Funny, then, that the White House didn’t do more to stop Senate Democrats from repudiating this pledge. Must be an election coming.

Equally egregious are the eight Republicans who joined 52 Democrats in voting for the loan limits; see the list nearby. Massachusetts’s Scott Brown probably figured he had to appease the housing lobby before his re-election campaign next year. Georgia Senator and former realtor Johnny Isakson has been in cahoots with the housing lobby and against reform for years.

Comment by X-GSfixr
2011-10-23 10:39:47

More bandaids for mosquito bites, while ignoring the shotgun blast to the chest.

It’s not about helping people keep their homes. It’s about being able to say during next year’s campaigns that the Bankster’s pizzboyz “did something”.

Who says we don’t have public financing of elections? The problem is, the “public spending” is spent for the benefit of the incumbants.

One time, I’d like to hear something like:

“…….due to decisions and votes I made over the past 30 years, which has led to the US economy being as fooked up as a football bat, I am resigning from my seat in the Senate/House of Representatives….”

 
Comment by Realtors Are Liars®
2011-10-23 11:00:36

Johnny IsuckSon(r), Kay BeetleBaileyHutchinson(r) and Big Dick Shelby(r) have long been accepting bribes from the Housing Crime Syndicate. Along with half the elected dumbocrats.

End the Fed, prosecute NAR, NAHB, Wall St, Banking and Congress. then smash the power structures.

Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-23 11:13:32

“IsuckSon”

I thought it was ‘ISuckSome.’

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Comment by Realtors Are Liars®
2011-10-23 16:43:53

He’s a family values type so I’m sure he’s done some sucking.

 
 
 
 
 
Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-23 10:56:57

The Great Recession’s high volatility weak hands shakeout seems to be working out well for savvy investors with deep pockets.

Asia’s Market Turmoil an Opportunity for Savvy Investors
Published: Sunday, 23 Oct 2011 | 10:45 AM ET
By: Deepanshu Bagchee
Supervising Digital Editor, CNBC Asia

Asian financial markets have shown in recent months that they remain extremely vulnerable to economic shocks from Europe and the U.S. However, some investors have been riding this volatility. They have been using the selloff to shop for cheap stocks and bonds while at the same time investing in esoteric products to profit from the turmoil.

“In the first downdraft in the market we actually saw clients opportunistically coming in and buying significantly more than they were selling,” Adam Tejpaul, Head of Investments for J.P. Morgan Private Bank in Asia based in Hong Kong said. “In the second leg down in markets, the inclination was to take more of a wait-and-see approach.”

Since late July, most Asian markets have fallen between 15 and 20 percent and volatility has shot up. Launched earlier this year, the Hang Seng volatility index that tracks investors’ volatility expectations, had been bouncing between 15 and 20 points for much of the year. But in early September it shot up to 51, and has remained elevated ever since.

The jump in volatility has been a double-edged sword for many investors. For the well-heeled, though, it has created plenty of opportunities. “There are investors who tend to reduce their activity in such periods. However, for savvy investors it (the volatility) increases the chances of reaching desired entry or exit points,” Gary Tiernan, Global Head of Investment Advisory, Standard Chartered Private Bank, said.

Comment by Ben Jones
2011-10-23 18:02:02

‘France is among euro-region sovereigns likely to be downgraded in a stressed economic scenario, according to Standard & Poor’s. The sovereign ratings of Spain, Italy, Ireland and Portugal would also be reduced by another one or two levels in either of New York-based S&P’s two stress scenarios. These assume low economic growth and a double-dip recession in the first set of circumstances, and add an interest-rate shock to the recession in the second.’

http://finance.yahoo.com/news/France-Likely-to-Lose-Top-bloomberg-2718996877.html?x=0

 
 
Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-23 11:38:29

The GOP candidates are smart to avoid talking much about the housing market. Since it’s the Democrats who seem convinced the federal government is the solution, why not just step back and let the Democrats fall on their faces over and over again?

NEED TO KNOW: ECONOMY
Underwater, Out of Mind
GOP presidential candidates are ignoring the economy’s No. 1 problem: the housing market.
By Stacy Kaper and Jim Tankersley
Updated: October 20, 2011 | 6:38 p.m.
October 20, 2011 | 3:30 p.m.

All heat, no light: GOP candidates aren’t offering solutions.
AP Photo/Chris Carlson

It takes poker-champion nerves to ride into the country’s foreclosure capital, bask in the bright lights for a day, then skip town without tossing so much as a $5 chip toward the housing crisis that is keeping the economic recovery tied up in the desert. But that’s what seven Republican presidential candidates did in a televised debate from Nevada this week, dodging questions about falling home values and repeating long-discredited whoppers about how economic growth alone—or squashing government-backed mortgage lenders—can heal the housing market.

Rep. Michele Bachmann seemed to speak for the group when, asked about helping Nevada residents keep their homes, she wandered through motherhood, foreclosure, and job loss before wrapping up with a vague promise: “I will not fail you on this issue,” she said. “I will turn this country around. We will turn the economy around. We will create jobs. That’s how you hold on to your house.” Others chose to discuss the Troubled Asset Relief Program. No one on stage offered anything better—or more specific.

Reverting to platitudes might seem a gutsy gamble in a state that has led the nation in foreclosures for 56 months, but it’s nothing new for a GOP field that has essentially avoided the most pressing economic issue in America today.

More and more research suggests that the U.S. economy won’t grow at a good clip until home prices break their free fall and start creeping up again. “The enormous gap between current home prices and those that seemed plausible when mortgage contracts were written is at the root” of the economy’s woes, reported economists from Barclays Capital this week. “Until the pipeline of foreclosures and distressed sales is resolved, a protracted period of cyclical weakness is indeed in store.” A study published earlier this year by the Federal Reserve Bank of San Francisco found that after the Great Recession, employment growth has returned much more slowly in counties where homeowners piled up debt during the housing bubble, compared with counties where debt levels remained relatively low.

Falling home prices have robbed Americans of huge amounts of presumed wealth and, as a result, drained consumer spending power, investment activity, and borrowing ability for prospective small-business owners. The median home price slumped from its 2006 high of $227,100 to $158,700 in May, a 30 percent drop, according to data from the National Association of Realtors. Homeowners across the country lost $7.4 trillion in equity during the housing price plunge. New home construction, which typically helps lead the way in a recovery, is at its lowest level since World War II. At least 5 million people have lost their homes to foreclosure, and another 3.5 million are expected to do so in the next one to two years, according to Moody’s Analytics chief economist, Mark Zandi. Nearly 15 million borrowers owe more on their mortgages than their properties are worth. One in three homes sold today are short sales or foreclosed properties.

Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-23 11:45:53

“At least 5 million people have lost their homes to foreclosure, and another 3.5 million are expected to do so in the next one to two years…”

On the face of it, perhaps this suggests we are over half way there. But I am guessing that it will turn out otherwise, due to a ‘larger than expected’ number of additional foreclosures to come, coupled with a ‘longer than expected’ time to work through the shadow inventory backlog.

Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-23 11:48:04

Don’t lose sight of current Congressional efforts to help Main Street households continue to get themselves stucco with loans of $729,750 in a falling price housing market, as this is likely to be a contributing factor to my predicted ‘larger than expected’ number of foreclosures ahead.

 
 
Comment by Ben Jones
2011-10-23 11:47:23

‘Falling home prices have robbed Americans…’

Uh huh…

‘ignoring the economy’s No. 1 problem’

We are still ignoring the #1 problem; the housing bubble. It should have been front and center in the last presidential election and here we are still bogged down years later.

Memo to GOP candidates; give me 5 minutes and I can set you straight.

Comment by Blue Skye
2011-10-23 16:41:00

Explanations don’t help much when you’re paid to not understand.

 
 
 
Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-23 13:54:21


Review: The Wealth Cure: Putting Money In Its Place by Hill Harper

Updated 5m ago

In his new book, The Wealth Cure: Putting Money In Its Place, Hill Harper takes you on several journeys — a train ride from Los Angeles to Chicago, an introspective look at life as he deals with a cancer diagnosis, and a spiritual quest to explore the true meaning of wealth. Along the way, the CSI: NY star offers advice about money management — and life — seducing readers with raw, even painful, honesty about himself.

This combination of personal reflection and practical information is part of what has earned Harper a spot on The New York Times Best Sellers list with three previous books.

Early in The Wealth Cure, he hangs out with a friend who spends so much at a nightclub that the author thinks of “how many school uniforms, musical instruments, or computers that money could have provided. This type of conspicuous consumption bothers me especially when it’s obvious that a lot of this floss is more than likely covering up a deeper insecurity that spending money isn’t about to fix.”

That quote is our first cue that this is a different kind of financial book, one that not only urges us to look at how we use our money but also at how we define wealth. It’s as much about personal philosophy as about advice on building a solid financial future.

A pensive three-day train ride from Los Angeles to Chicago comes after an endocrinologist’s proclamation: “Hill, we believe you have thyroid cancer … the worst kind.” On the journey he works on this book, mixing his research and advice from financial experts with real life experiences of people he meets on the train.

“True happiness,” says Harper, “is having our life balanced and organized so we are free to pursue any dream.”

The Wealth Cure: Putting Money In Its Place,” By Hill Harper; Gotham Books, $26.

 
Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-23 14:14:18

“$26″

Got book price deflation?

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Comment by Big V
2011-10-23 17:50:20

The government should give a $3 billion bailout to me. I promise to spend it all. That should do the trick.

Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-23 20:43:58

I would gladly buy a home if given even a $1 billion bailout. In fact, I would even be willing to take the bailout in the form of a loan, provided I had to repay it at zero percent interest.

 
 
Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-23 20:41:37

The Staggers
The New Statesman rolling blog
How inequality has soared in the US
Posted by George Eaton - 22 October 2011 11:43

The top 1 per cent now take home 23.5 per cent of all income.

If you want to get some idea of why the 99 per cent movement has attracted so much support in the US, just take a look at this graph. Over the last thirty years, the share of income taken by the top 1 per cent of Americans has risen from 10 per cent to 23.5 per cent. Even more remarkably, the share taken by the top 0.1 per cent (the top 14,988 US families, making at least $11.5m in 2007) has risen from 1 per cent to 6 per cent. Income inequality in the US is now at its highest level since 1928 (see this excellent Berkeley report for more data), when the top 1 per cent took home 23.9 per cent.

As you’ll notice, from the 1950s onwards, income distribution in the US remained broadly stable until the Thatcher-Reagan revolution. The neoliberal policies pursued by the Reagan administration - tax cuts for the wealthy (the top rate of tax was reduced from 50 per cent to 28 per cent), deregulation and privatisation, led to a dramatic rise in inequality.

Consequently, it’s no surprise that even in the US, where the Tea Party has tilted the political spectrum rightwards, the majority of citizens support the aims of the 99 per cent movement. A recent Time/Abt SRBI poll found that 54 per cent had a “very favourable” (25 per cent) or “somewhat favourable” (29 per cent) view of the movement.

It was Alan Greenspan, a disciple of free-market guru Ayn Rand, who remarked in 2005: “This is not the type of thing which a democratic society - a capitalist democratic society - can really accept without addressing.” Obama now has a huge political opportunity to win support for a renewed drive against inequality. He was memorably attacked during the 2008 presidential election for wanting to “spread the wealth” but the polls suggest that’s exactly what the voters want him to do.

 
Comment by Cantankerous Intellectual Bomb Thrower©
2011-10-23 21:58:09

ECONOMY
OCTOBER 24, 2011

Home Lending Revamp Planned

New Rules Aim to Speed Refinancing
BY NICK TIMIRAOS

Federal regulators on Monday plan to unveil a major overhaul of an under-used mortgage-refinance program designed to help millions of Americans whose home values have tumbled.

The plan is the latest White House effort to deal with one of the most critical impediments to economic recovery—a stagnant housing market caused in part by a surfeit of homeowners who are unable to refinance.

The overhaul will, among other things, let borrowers refinance regardless of how far their homes have fallen in value, eliminating previous limits. That could open up refinancing to legions of borrowers in Nevada, Arizona, Florida, California and elsewhere …

 
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