Wed 24 Sep 2008
From Bloomberg:
U.S. Housing Prices Tumble on Home Mortgage Scarcity
U.S. home prices tumbled in July as the credit crisis that led to this month’s toppling of Lehman Brothers Holdings Inc. tightened mortgage standards and slashed real estate lending.
Home purchase prices dropped 5.3 percent, seasonally adjusted, from a year earlier, the Office of Federal Housing Enterprise Oversight said today in a report. The one-month decline from June was 0.6 percent, said Washington-based Ofheo.
Eight out of nine U.S. regions showed declines for the year as lenders tightened requirements after banks posted $523 billion in mortgage-related losses and writedowns worldwide. U.S. Treasury Secretary Henry Paulson this week asked Congress to approve $700 billion to buy the type of investments that forced Lehman Brothers to file for bankruptcy and American International Group Inc. to accept a federal takeover.
“You’re still looking at the residual effects of a marketplace that is starved for mortgage money,” Michael Aronstein, president of New York-based Marketfield Asset Management, said in an interview.
The decline in July from June was greater than the 0.2 percent average estimate of 15 economists surveyed by Bloomberg News. Ofheo now is part of the Federal Housing Finance Agency created by Congress in July to oversee Fannie Mae and Freddie Mac, which own or guarantee $5.4 trillion of mortgage debt. The mortgage buyers were seized by the government two weeks ago to prevent their collapse.
…
Prices fell the most from a year ago in the study’s western region that includes California and Washington, down 18 percent. Florida, Georgia, the Carolinas and states in the South Atlantic region fell 5.2 percent, Ofheo said. In New York, New Jersey and Pennsylvania the drop was 3.5 percent.
first baby!
SAS
Primo!
Night of the Living Debt
http://tinyurl.com/3nvq5h
Based upon the sheer volume of fat americans here in Rome paying 4 euro for a cafe americano the global recession has yet to take hold.
From Reuters:
Home prices fell in July vs June: OFHEO
Home prices fell 0.6 percent in July versus June, the Office of Federal Housing Enterprise Oversight said in Tuesday.
OFHEO’s monthly House Price Index, or HPI, is put out by the Federal Housing Finance Agency, the new regulator of mortgage finance companies Fannie Mae and Freddie Mac.
For the 12 months ending in July, U.S. home prices fell 5.3 percent, and the cumulative decline since the April 2007 peak is 5.8 percent, the report said.
From Bloomberg:
Home Resales in U.S. Probably Fell, Matching Year’s Average
Home resales in the U.S. probably fell in August, signaling the market remained in a slump heading into the latest financial meltdown, economists said before a report today.
Sales of existing homes dropped 1.2 percent last month to a 4.94 million annual pace, matching the year’s average, according to the median estimate of economists surveyed by Bloomberg News.
The collapse in lending that brought down American International Group. Inc. and Lehman Brothers Holdings Inc. this month may also make mortgages more difficult to get. A lack of credit raises the odds sales will again slump after hovering around a 10-year low this year, even as borrowing costs drop.
“The risk to housing markets remains on the downside until we see an easing in credit standards,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. “We’re looking at continued softness in sales, but there are signs of stabilization at low levels.”
The National Association of Realtors’ report on home resales is due at 10 a.m. in Washington. Estimates of the 73 economists surveyed ranged from 4.7 million to 5.15 million.
Resales dropped to a 4.85 million rate in June, the lowest in a decade and down 33 percent from the record reached in September 2005.
Judging by the sheer volume of fat americans here in Rome sipping 4 euro cafe americanos the party is not over yet.
Ciao!
Let’s get the Bank Rescue Right
R. Glenn Hubbard, Hal Scott, Luigi Zingales
“How can we design a transparent asset purchase process that avoids arbitrariness and potential favoritism?”
http://www.wsj.com/article/SB122221456930869333.html
“Any such process will have to be designed from scratch, because there is no U.S. precedent for such a targeted purchase of bad assets.”
That is where Roubini enters the picture…Anyone but Paulson etal.
Grim, did you watch any of the congress dog and pony show yesterday?
Any thoughts? For a few fleeting moments, I got the feeling this bailout wouldn’t happen.
Also, curious how your new car is working out and if you’re still house hunting or if that’s been curtailed.
I am finally seeing houses reduced to under $400k in prestigious wall street blue ribbon minutes from nyc towns in bergen county. Still have a long way to go, but at least there are some which broke the 400k bar
Trying to convince the wife to move to the country, This house in warwick was built 06, with a price tag of 995K, just ruduced again. $689K. Hope the link is acesible. I have to be greatful though she willing to keep renting for two or three years so we can live in nice,BC town.
http://org.mlxchange.com/Pub/EmailView.asp?r=1886876901&s=ORG&t=ORG
“You worry about taxpayers being on the hook? Guess what —they’re already on the hook.”
Treasury Secretary Henry Paulson
Quote above the fold in Star-Ledger
Berbake schooled Congress on holding the mortgages to maturity, and they bought it without any discussion on default. The banker’s lobbyists have been working over time to spin this bailout, they even had Bill Clinton on the View selling it to the masses.
China Shuns Paulson’s Free Market Push as Meltdown Burns U.S
Sept. 24 (Bloomberg) — Eighteen months ago, U.S. Treasury Secretary Henry Paulson told an audience at the Shanghai Futures Exchange that China risked trillions of dollars in lost economic potential unless it freed up its capital markets.
“An open, competitive, and liberalized financial market can effectively allocate scarce resources in a manner that promotes stability and prosperity far better than governmental intervention,” Paulson said.
That advice rings hollow in China as Paulson plans a $700 billion rescue for U.S. financial institutions and the Securities and Exchange Commission bans short sales of insurers, banks and securities firms.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aCl7bFUJzWRk
14 con’t
“The U.S. financial system was regarded as a model, and we tried our best to copy whatever we could,” said Yu Yongding, a former adviser to China’s central bank. “Suddenly we find our teacher is not that excellent, so the next time when we’re designing our financial system we will use our own mind more.”
“You’re still looking at the residual effects of a marketplace that is starved for mortgage money,” Michael Aronstein, president of New York-based Marketfield Asset Management, said in an interview.
Which is another way of saying a market that is starved of qualified buyers at current prices.
cindy (8)-
I strongly suspect Roubini would decline to take on such a job.
Only those who have been completely co-opted by the criminals in Washington need apply.
Drew (11)-
I think it’s a legitimate question to ask how nice those BC towns will be in 2-3 years. Between Commissar Jon, the failure of the financial industry and the de-population of NJ, it’s easy to construct a scenario in which you have close-in suburban ghost towns.
Take the nicest Main St in BC, then remove 60% of the retailers (I might be on the conservative side there). Won’t take long until it looks like Detroit or Cleveland.
BTW…I fully believe this will happen.
We will soon be at the brink of the nightmare scenario: RE prices will plummet further. However, everything else will be so bad that nobody will want to buy a house…at ANY price.
NJ will become so expensive and dangerous that only the ultra-rich and destitute will stay.
There will be a major Protest this Thursday at 4 pm in wall Street. Lots of different groups are the organizers.
HC
Camper (20)-
Tell me when they’re having a rally that involves grenades and M-16s.
coops (14)-
“An open, competitive, and liberalized financial market can effectively allocate scarce resources in a manner that promotes stability and prosperity far better than governmental intervention,” Paulson said.
In about 10-12 years, somebody will be in front of Congress, saying the above.
“Suddenly we find our teacher is not that excellent”
Um… how ’bout too many corrupt, crooked thieves and criminals were looting the system and the oversight committee was on permanent lunch break (or actually in a COMA.)
coops (15)-
Meet the new boss…not so much like the old boss:
“The U.S. financial system was regarded as a model, and we tried our best to copy whatever we could,” said Yu Yongding, a former adviser to China’s central bank. “Suddenly we find our teacher is not that excellent, so the next time when we’re designing our financial system we will use our own mind more.”
“However, everything else will be so bad that nobody will want to buy a house…at ANY price.”
Clot… we are already there…
me-
Yeah, we are. Personally, I can report that the expatriation idea is gaining a foothold in my home.
Excellent analysis on the Berkshire-Goldman deal by Ritholz. Doesnt look so sweet anymore. Of course, the market will rally 400 points on this.
“Verily, let’s look at the details to figure out just how much GS is paying for this capital:
• Goldman Sachs pays a fat dividend to Berkshire Hathaway of 10% on $5 Billion dollars — that’s $500 million per year. And, since this is a preferred, it gets paid out of net income in after tax dollars dollars. Ouch.
• Goldman gets the right to call the preferred at any time at a 10 percent premium. Ouch again.
• Buffett gets $5 billion worth of warrants with a strike price of $115, or about 43.47 million shares. The warrants are good for only 5 years.
If Buffett were to go to the Street earlier today to buy 44 million calls with a $115 strike price (circa 2010), they would have cost him about $1.5 billion dollars. With GS now trading at $135, Buffett’s $5 billion investment is more like $3.5B, in terms of net cost to him. Hence, the 10% interest is more like 14%.
Doug Kass thinks its an even better deal for Berkshire — goes further than I do, putting an intrinsic value on the warrants of about $2 billion. That makes Buffet’s net cost $3B — so the effective yield is closer to 17%. (Ouch)
A friend points out that Goldie bought back 1.5 million shares in the quarter ending 8/31, at an average price of $180 a share. (Nice trade). I’m thinking the buyback program may be on hold for a while here.”
http://bigpicture.typepad.com/
Wifey watched the whole Klink/Bergabe dog & pony yesterday. For the first time, I saw her get really disgusted over what’s happening.
Mark Mobius, executive chairman of Templeton Asset Management Ltd. said, “I just don’t see a long, protracted recession,” Mobius, who manages about $40 billion in emerging market stocks, told the Super Return Asia conference in Hong Kong today. “There is an opportunity to buy low right now and sell high in the next cycle.”
hahahah. that light at the end of the tunnel is a train.
Clot - Help me with this - I’m trying to catch on…
An inability to set a price has frozen the markets right? But Merrill set a mark-to-market at 22cents on the dollar (level 3 assets?) And some people say 5 cents if they are lucky.
So Bernanke and Paulson want to pay more than the established price because the banks would have to take too big a write-down if they honestly valued their holdings. W/O an artificial price - too many banks would fail?
So the pricing of these assets is the big deal..
“Tell me when they’re having a rally that involves grenades and M-16s.”
I’m sure those will be there, just possessed by the police/swat.
Why they’ll layoff US Workers before they layoff Indian Workers:
CEO murdered by mob of sacked Indian workers
http://www.timesonline.co.uk/tol/news/world/asia/article4810644.ece
NJ will become so expensive and dangerous that only the ultra-rich and destitute will stay.
Looks like I’ll be here.
KL
I can’t believe folks are sitting idly by while:
Fed chairman /threatens/ us with a recession if we don’t give him taxpayer money. This same man admitted privately this year that the US “has lost control” and “cannot stabilize the dollar”
Treas Secretary says we might as well give up our tax money since the taxpayer is “already on the hook.”
Pitchfork and lantern time, people!
FBI begins investigations into FRE, FNM, AIG & LEH & 26 other companies.
Hey FBI, there was one firm in particular that securitized and sold huge portions of the most toxic stuff. Yeah, of course I mean Goldman. Now I know the boys at Goldman are probably all busy right now, what with them straightening up and becoming plain-old “banky bank” rather than and IB. It might be kind of hard to get hold of someone to talk to. If only you could find someone who was with the company for a long long time, and was there up until, say, 2 years ago. I bet they would have been elbow deep in this whole mess and have a clear understanding of just how fraudulent and bad some of these deals were.
Where o where could you find a person like that? If I were them I’d be desperately trying to cover my tracks and hide everything.
Hmmmm…. who could they talk to? Hmmm….
Wow Paulson and Bergabe fess up about how bad we’re screwed and now this:
Clay is gay: Aiken comes out of the closet
http://apnews.myway.com/article/20080924/D93CP4G80.html
tosh,
Couldn’t be Paulson he’s as angry as the American people are about this mess
Clot[28]- I love it, the Mrs. has wanted to buy a home for a while and of course I’ve discouraged her… finally she’s took notice of what been happening the last few weeks and I think it’s bought me some time… we rent and it’s a beautiful thing.
what happens when/if China pushes the sell button?
cindy (30)-
The way I see it, it’s simple. These assets have been offered all over the planet, to every possible potential investor. In every case, the market has rejected them. In technical terms, the bid/ask spread is too great to allow markets to clear. In whisper- and in actual trade- the value of those assets runs between .00 and .05.
Now, let’s assume that there are high-quality, performing CDO assets out there (there are). Isn’t it logical to assume that their holders will either:
1. Keep them?
2. Sell them to willing investors at a profitable price?
The slop that will go to Bust Trust Corp is toxic sewage you wouldn’t touch with a 10-ft pole. They are completely illiquid, as any institution who would dare to fairly value them will have admitted its insolvency.
By selling garbage at Tiffany prices, these firms will re-capitalize themselves- at our expense- and once again fire up the mechanisms that allow for the creation of debt, with the debt and its adverse consequences separated from the debtor.
link?
If things are so bad, how come I still can’t buy an apartment in Hoboken for 2005 prices?
clotpoll wrote: “By selling garbage at Tiffany prices, these firms will re-capitalize themselves- at our expense- and once again fire up the mechanisms that allow for the creation of debt, with the debt and its adverse consequences separated from the debtor.”
Of course, you are entirely correct.
In fact, this is the plan.
If they did not immediately begin creating more funny debt, the “economy” would stop again — this is the tragedy the fed/treas claims we are “suffering” from now.
After all, like I heard on TV yesterday, a farmer cannot grow corn without taking a loan to buy the seed and fertilizer and then paying it back at harvest time. You know, except in the real world where RESPONSIBLE people save their own money and use savings, risking their own capital, to make investments in things like seed and fertilizer…
And, again, like the TV said, “if the banks aren’t lending, people won’t be able to buy cars”. Funny, when I bought my //all// of my new cars, all the bank did is produce a certified check off my checking account. I don’t recall any lending…
grim 42 moderation
(39) Clot - Thank you
“By selling garbage at Tiffany prices, these firms will re-capitalize -at our expense- and once again…….
Well we need to stop right there. If they are in need of a bailout future transactions should be seriously curtailed and those who did not require a bailout should be allowed to become the new key players.
You should not be able to have your cake and eat it too. If you need the “cake” to survive as a reduced entity until you get your act together - then we will help. But to allow those same - proven incompetents to continue as if nothing ever happened would be a crime.
@40. Have no link because got the message by email. I will ask for more info and will post it later.
HC
Buffett schmuppet. WTF is he doing investing in the poster child of fiscal irresponsibility? Clearly, just betting on the cronyism. HYPOCRITE!
“So the pricing of these assets is the big deal..”
Cindy,
A price artifically set above the market will create a huge surplus. Institutions will be sprinting to DC to offload their riskiest assets. If someone paid you to het rid of all your worst liabilities, wouldn’t you do the same? I’d sell pet.com for gold 24 hours a day. It’s simply fraud, price controls.
Bottom line, taxpayer’s, who were not involved in the trade, are now buried further in debt. On the flip side, management, shareholders and creditors thank you from the bottom of their hearts.
From your posting history, clearly, you are not that bright. Look harder.
Bush administration is against pay freezes on salary and bonuses in conjunction to the bailout. Why doesn’t ANYONE in congress ask them WHY?
Seriously, what logical reason in the face of all of this would you be against something that doesn’t even really punish those responsible?? (I’d prefer they all be fired).
Blatant friendly payoffs.
(46) BC - So…If a more measured response were inacted - say “so much” at a time…instead of the whole $700B at once - would that help curtail the practice?
cindy (43)-
“…those who did not require a bailout should be allowed to become the new key players.”
Bergabe/Klink keep pushing the “unthinkable, unspeakable consequences if we don’t act now” button.
Me? I envision a greatly-contracted, yet healing economy, with credit markets dominated by formerly mid-level players like Hudson City, BB&T, Valley National, etc.
We’d have real underwriting standards, an ultra-low default rate, transparency, management by people with a history of performance.
We wouldn’t have: mega M&A deals, securitization, PE feeding frenzies and balance sheets full of mispriced crap.
And, whether we want it or not, the Canadians are coming. Look at the moves TD and Brookfield are making. These people are no joke, and they aren’t burdened in the way our big institutions are.
Wouldn’t it be a killer to see Toronto become the new Wall St?
Laughing [47],
Maybe he could start here?
http://realestate.yahoo.com/New_Jersey/Hoboken/Homes_for_sale/result.html;_ylt=Ao.E2pA0axDRhCjPU7x.oeDnMrQs?cc=realestate&p=Hoboken,%20NJ&priceHigh=&priceLow=&nodeId=750007014&sortBy=price%202&radius=&bedrooms=&bathrooms=&type=foreclosure&b=1
NO BAILOUT
clotpoll, i was intrigued with TD taking over Commerce. I don’t bank with Commerce, but I keep an eye on them. Hard not to where I live.
Re: 35 tosh - FBI -s just smoke and mirrors for the masses in an attewmpt to placate and press congress, damage is done now the villans are making their getaway, and they will getaway…
Frank,
You can. From what I have seen in Hoboken, and I follow the market here closely, anyone who has purchased from 2006 on, and actually sold their place, has lost money. I have posted before, look for them… No time today to post…we are creeping into 2005 at a fast clip….preconstruction that was purchased in 2005, after putting a deposit down in 2003, at 2003 prices, is a different story, but of course that would ruin any last argument you have left…we are heading there anyway
#41 Frank
Because the are looking to snag an idiot stupid enough to pay 2005 prices.
When are you moving?
i gotta go. gotta line up outside t-mobile to get the new google phone. got my beach chair ready.
Frank,
You can. From what I have seen in Hoboken, and I follow the market here closely, anyone who has purchased from 2006 on, and actually sold their place, has lost money. I have posted before, look for them… No time today to post…we are creeping into 2005 at a fast clip….preconstruction that was built in 2005, after putting a deposit down in 2003, at 2003 prices, is a different story, but of course that would ruin any last argument you have left…we are heading there anyway
Frank,
2005 prices?
http://tax1.co.monmouth.nj.us/cgi-bin/m4.cgi?&district=0905&block=82&lot=11&qual=C0408
How about less than 2005 Francis:
http://tax1.co.monmouth.nj.us/cgi-bin/m4.cgi?&district=0905&block=16&lot=11&qual=C003D
http://tax1.co.monmouth.nj.us/cgi-bin/m4.cgi?&district=0905&block=16&lot=11&qual=C003D
http://tax1.co.monmouth.nj.us/cgi-bin/m4.cgi?&district=0905&block=20&lot=2.1&qual=C004C
Quick Poll…
Have you ever been more disappointed with your country?
60,
I feel almost completely divorced from my country
Here, too. It’s as if I have no country. I’m treading in a sea of wal*mart sheep, but I don’t have anywhere to swim to.
Clotpoll Says:
September 24th, 2008 at 7:49 am
Drew (11)- I think it’s a legitimate question to ask how nice those BC towns will be in 2-3 years. Between Commissar Jon, the failure of the financial industry and the de-population of NJ, it’s easy to construct a scenario in which you have close-in suburban ghost towns.
Take the nicest Main St in BC, then remove 60% of the retailers (I might be on the conservative side there). Won’t take long until it looks like Detroit or Cleveland.
BTW…I fully believe this will happen.
clot: I think you a double enema for your head and also posterior to clean them out. Once completed, lobotomize yourself to keep an even keel. You are the Depeche Mode of Real Estate.
Doubts grow about bailout
Rob Hotakainen -McClatchy News
Fresno Bee - page 1
“While the Bush administration is pushing for quick approval of a historic $700 billion bailout to calm Wall Street, skeptical Republicans and Democrats from California are pushing back, saying
Congress must take its time in scrutinizing such a mammoth proposal.”
http://www.mcclatchydc.com/244/story/52962.html
ENOUGH RAGE!
If your house is in order, it is the biggest revenge that you can have on these guys.
If it is not apparent, your RELATIVE wealth has increased substantially for the period you have posting on this blog.
If your personal situation is not in an upheaval, then you are crushing the competition.
Having the wisdom and foresight to live a life consistent with your means for the last few years is bear serious fruit now. To demand punishment of others at this junction is grandstanding and amounts to having your cake and eating it too…to use a cliche.
junction = juncture
bear = bearing
chi - are you joking?
My banked savings are losing buying power as we speak. And if my share of the national debt (shared debt load of the nation) increases a massive amount as a result of this bailout, and yet the actual economic results that would benefit me would be negligible at best - exactly how am I doing well? And why should I be happy?
I did not hear Secretary “I never said I would put that in Writing” Pauline give one straight answer yesterday. He can’t even utter one coherent sentence without restarting it five times.
ChiFi - My house is in order (all in cash) but my concern is we will be paying taxes at all levels (School, County, State, Fed) from an ever dwindling supply of taxpayers in an attempt to replinsh government coffers that have been looted by the Friends of Pauline.
Chi,
Not looking for others to be punished, unless, of course, they are on the other side of the trade. That said, just looking for capitalism to prevail, bring back the short rule. The market needs liquidity.
Speaking of punishment, why should taxpayers get pillaged?
Bring bac kthe short rule, let the assets be sold for what they’re worth. We’ll all be getting mortages from the Bank of Buffet plc.
Will be in Rome next week. 4 euros for an espresso? I can get two shots of Fernet Branca for that.
chifi:
What I’ve earned and saved in cash is now worth substantially less than it was, all because of government action.
In addition, an incredible new debt burden has been put upon my shoulders and upon my daughter’s shoulders, all because of government action.
My country is lost. My government is a sham. My family’s future is significantly darker due to government action.
The problem out there is NOT ENOUGH RAGE.
I just want Paulson to stop screaming “the sky is falling.”
We need this legislation in one week…
Let’s have a chance to review what will be in the best interest of our country and have some experts on board that do not have such a skewed interest in the outcome.
I know something needs to be done - but what? Do we really have to figure that out in one week?
Chi,
One other thought. Why should Hunter, not management and shareholders, be burdened by this colossal travesty?
# 6 grim:The risk to housing markets remains on the downside until we see an easing in credit standards
Yes that is just what we need,an easing in credit standards.
http://flickr.com/photos/dcapfoto/2883471120/
A system that can fall down in one week is not worth propping up.
Laughing all the Way,
If you are so smart, how about you show me Hoboken properties at 2005 prices instead of just calling people stupid? Good luck.
http://www.flickr.com/photos/fintag/2871546835/
#10 tbw: Quite a few of those in River Edge. I think the next leg down will be much quicker, as in 399K to 359K
Think about this for a moment.
Paulson & Co. are demanding that the taxpaying citizens of the USA give $700B+ to fix Wail St.
But they have NO PLAN if that doesn’t work.
What is to stop the same system from falling down again, leaving us $700B+ poorer and the same problem?
He wants US to GAMBLE like his company did. And this time he wants to gamble with $700B+ of tax money.
I SAY NO. EMPHATICALLY NO.
Hello,
Can anyone get me listing history and address for mls listing 2553344. Any help would be appreciated. Thanks
i love it, the USA can’t survive without credit and living in debt. and we’ve run out of credit and everyone’s up to their eyeballs in debt.
so now this administration/Paulson/Bergabe want to hit the “RESET” button and start all over again. get the credit/debt engine fired back up.
don’t these guys realize the credibility of this country and our currency is shot????
what’s the point of having a healthy banking sector if there’s very few citizens worth lending anything to????????????
#19 clot: 150K houses with an average 20k tax bill.
FURTHER…
We are being asked to FIX things with $700B+ of our money.
But they are really looking to fix what is not broken. This $700B+ request itself IS THE PROBLEM.
The only way to FIX this system is to BE RESPONSIBLE and REAP WHAT YOU SOW.
Paulson & Co. are what need to be fixed. Plain and simple.
(65) Chicago - I actually don’t feel any rage. I just feel misled, naive and bewildered. My own fault. I’m sure many Americans feel that way about now. I am only asking that an expert be called on - without a vested interest in the outcome - to steer us in the right direction.
Clot says Roubini wouldn’t touch it with a ten foot pole. But surely, we have knowledgeable people we can call on in a crisis like this besides Bernanke and Paulson.
How can I trust these guys anymore after they have lied for so long - saying everything was fine. And so why should we rush to a solution on their “say so?”
I just want to take some time - knowing full well that something will need to be done.
Wasn’t it a Megan McCardle video that you posted that had an example of poor decisions being made because “something needs to be done so I did something?”
I just feel like that is what is going on…
The Public Policy
It’s Paulson’s Own Mess
By John Berlau
Published 9/24/2008 12:08:44 AM
http://www.spectator.org/dsp_article.asp?art_id=13936
#29 MJ I just don’t see a long, protracted recession.
What can you say, the guy is an idiot.
MJ,
What they hey, the leverage didn’t work at Goldman, let the US taxpayer increase the leverage and let them solve the problem. However, we at Goldman, will be happy to manage this fcuk up and charge the US taxpayer titanic, oops, fees for the service.
#34 MJ: I guess he has not heard but we already have a recession.
It is astounding to me that these people are still going around talking as if we can somehow avoid a recession, that we already have.
“Clot says Roubini wouldn’t touch it with a ten foot pole. But surely, we have knowledgeable people we can call on in a crisis like this besides Bernanke and Paulson.”
Cindy,
This comment reminds me of the “philosopher king” concept of the ancient greeks. That is the most knowledgeable, thoughtful and forward thinking individuals should be the one’s put in power. Yet the conundrum is such people never gain power due to their very nature of being knowledgeable, thoughtful and forward thinking individuals.
Why do you think Hank Paulson and Bergabe are where they are?
What the hey,
#41 frank: I guess you have not tried,
(90) HEHEHE
I am the eternal optimist. I still believe we can get ourselves out of this mess. Go figure…
Have a great day…
Everyone is lying. They want to include credit card and auto loan debt in the bailout? Why should anyone pay back anything now? And the notion that there are millions of people out there who are lining up for mortages and consumer loans but the credit markets are gummed up is a farce. Too much debt was the porblem but if only the banks could lend again, house proves would be propped up and everyhting would be fine. Puleease.
81. RaulV
37 Jackson St, Nutley
Expired - List 1/23/08 - OLP $759,000 - LP $695,000 - DOM 159
Sold - List 2/8/05 - OLP $339,000 - LP $339,000 - SP $315,000 - DOM 65
Active - List 7/23/08 - OLP $579,000 - LP $579,000 - DOM 63
thanks!!! YoungBuck!!!
From MarketWatch:
U.S. Aug. existing home sales down 2.2% to 4.91 mln pace
U.S. Aug. existing home sales below 4.93 mln expected
U.S. existing home sales down 10.7% in past year
grim un mod @ 60. thanks
3b said “It is astounding to me that these people are still going around talking as if we can somehow avoid a recession, that we already have.”
What’s more astounding to me is that anyone is concerned about a recession or trying to stop one.
A recession now and then is part of a functioning system. It is not a problem.
Attempting to manipulate the system to avoid a recession causes real problems.
But for the Fed chairman to /threaten/ a recession if we don’t cough up $700B+ is surreal. And that is what he did yesterday. Firing him immediately would really be far too merciful. A firing squad might not be inappropriate.
@grim: remember, the powers that be want housing stats right now to look as grim as possible so they get the bailout money they’re begging for.
Heard any Hedge that did not get out now has their paper frozen.
Let’s see if Hank plans on bailing them out too, although he said he wasn’t going to bail the hedgies I have my doubts.
what happens when/if China pushes the sell button?
You gonna wish you owed as many dollars as possible. Translation: You goona wish you had the biggest mortgage.
Re: 102 any Hedge at Lehman that is
Let’s see if Hank plans on bailing them out too, although he said he wasn’t going to bail the hedgies I have my doubts.
Sean,
Hedge funds can now accept deposits as they have been turned into banks and can now dump toxic stuff.
“Everyone is lying. They want to include credit card and auto loan debt in the bailout?”
DL,
Exactly. Why would any prudent individual pay their obligations. Hand it over, to the next generation, with the other crap. They are dangling on a rope with this one.
nothing personal frank, just an example…
# Frank Says:
September 24th, 2008 at 8:37 am
If things are so bad, how come I still can’t buy an apartment in Hoboken for 2005 prices?
Statements like this are no different then people who dont evacuated before a hurricane. they say, oh the rain isnt so bad i’ll just go back in the house. before you know it, you get hit with 150 mph winds and your house disintegrates.
Speaking of punishment, why should taxpayers get pillaged?
BC,
Why not? They allow it hence they deserve it.
I love it. Henry and Ben say we’ll buy troubled assets at great prices and then later sell them for a profit.
Kind of like flipping a house. I hear there’s good money in that.
#40 protest-at-wall-st-this-thursday-at-4-pm
http://www.indypendent.org/2008/09/23/get-out-the-pitchforks-and-lighted-torches-protest-at-wall-st-this-thursday-at-4-pm/
“Translation: You goona wish you had the biggest mortgage.”
make,
No.
You are going to wish you were on the sidelines, with cash and/or gold, as the dollar gets pounded, rates skyrocket [your scenario] and RE gets crushed.
any reasonable person will think some kind of government action is necessary at this moment. the poeple who think doing nothing is better alternative are those SKF/gold holders and anti-america terrorists.
ChiFi, 66
i also disagree. The rampant greed that has gotten us to this point has and will continue to severely impact all of us for a long time. As has already been pointed out everyone’s assets are being devalued and dragged through the mud.
The rage is due to the government not allowing those who made poor business choices to suffer the consequences. Why should there not be rage when IB execs are getting 100K+ bonuses this tear when the companies have gone bankrupt and are being bailed out by the federal government?
you won’t see mr. o until debating time. he is hiding in a secret golf club to prepare his first debate this coming friday. if he was elected, it would be a nightmare for the country. he needs 3 days to prepare first state of union, 3 days for each visit by foreign leaders, 3 days for each press conference, 3 days for presenting each budget proposal……
#29 MJ I just don’t see a long, protracted recession.
What can you say, the guy is an idiot.
——–
There is a chance he is wrong (and he has been wrong), but Mark Mobius is not an idiot. He has been investing in emerging markets for several decades and has delivered good returns. He gets things wrong sometimes, but on balance, he has proven to be one of the most astute investors out there in EM.
RE: 66 ENOUGH RAGE!
CF,
first time poster, long long time reader.
Good post. Probably one of your best. 100% agree. Surprised the “rage” that this post itself has engendered. The egg is cracked, milk has spilt. Deal with it folks.
RELATIVE is the key word.
Please continue to provide your sometimes infrequsnt, but always on point counterpoints.
One CF post is worth 25 posts of some other commentators.
Long Live CF, and LGM, 5 to go!
@make money:
I pay my every red cent of my taxes because I don’t want to go to jail and I don’t want my family ruined. I believe most of how the tax allocated is unfair and unconstitutional and contrary to the ultimate interest of the citizenry.
I presume the above holds true for many.
No one I’ve voted for has ever gotten into office — all libertarian.
I think, at some point, those in government figured, “Wow, our citizens have created for themselves such a good life that we can make it worse every day for decades without threat of revolt.” And they figured correctly.
And that pretty much explains things.
“the poeple who think doing nothing is better alternative are those SKF/gold holders and anti-america terrorists.”
bi,
One day you’ll get it right. Doing nothing would be bearish to gold, deflation. The bigger the package; more bullish gold. If this goes through, we are “trying” to inflate our way out of the muck. How is this bearish gold?
Paulson: Dude, you know that problem that George, Ben and I said wasn’t, like, a problem with the economy?
Congress: Yeah?
P: Well, it kind of is.
C: So what do you want us to do?
P: Give me $1 trillion. Dude, I know I can like totally fix this thing.
C: We’ll have to think about it.
P: No, man. There’s no time for that. I need the money now.
C: We really should check with our constituents.
P: Dude, I gave you two days to think about it. Fine, go ahead and tank the economy. Don’t say you weren’t warned.
CF_follower:
ChiFi’s comments just make you feel more comfortable about your unfortunate position. Like going to church.
Frank–check out #60
CF_follower: No reason to think any differently than you did in the past. Just keep your 60/40 stocks/bonds allocation in your 401k. Don’t fret that it’s down 30% this year. It’ll bounce back! Really! All it takes is patience, tolerance, and moderation.
ChiFi:
To some extent, I agree with you. Too much rage, not enough solutions offered.
Your advice though is key. Those properly diversified with their houses in order will profit handsomely from this debacle. Those living check to check on the edge of homelessness will not be able to take advantage of this once in a lifetime opportunity. Not only will we profit from future market gains, but in the brave new world of tight credit, we will pay significantly lower interest rates on loans then those whose houses are in shambles.
As much as I hate the concept of paying for those who screwed up on main street, I know it is very necessary for the greater good. I also hate the concept of bailing out Wall Street, but am impressed by the congress (both parties) who so far appear to be ensuring that the underlying issues that contributed to the crisis are fixed as well.
And that Buffet deal was a complete joke. GS is probably in worse shape than they are projecting. I couldn’t help but notice that the street has noticed as well. It’s always reassuring when the market behaves rationally.
“The egg is cracked, milk has spilt. Deal with it folks.”
[116],
When the USD withers away to nothing, how do you clean up the milk?
What America really cares about…
Top 5 most popular stories on Reuters this morning.
1. Clay Aiken to reveal he is gay
2. Buffett’s “time bomb” goes off on Wall Street
3. Palin meets Afghan, Colombian leaders in New York | Video
4. Buffett bets on Wall St. revival | Video
5. 15 train robbers killed by poison gas
“When the USD withers away to nothing, how do you clean up the milk?”
With mop heads made from valueless dollars?
And Bi: At least O talks to the press. SP is not allowed to speak apparently and M only adds to the crisis. Fire Cox? That will solve everything. We don’t need a complainer in chief.
It’s easy for those of you with your economic houses in order who have had years to get it in order to belittle those who were irresponsible. Some of us are young professionals, who, although we are making a good income (mid-100s), are still paying off school loans, trying to buy a house and support a family–and are otherwise financially resposible. If I had 20 more of the “golden years” like we just had to look forward to then I would be much more optimistic. The debt/increase taxes/almost certain prolonged period of low asset appreciation just adds to my burden, and diminishes the value of my hard saved cash for a down payment, etc.
Personal economic financial models say “start saving in your 20s.” Well, I’m in my thirties now, and the market hasn’t been too kind to my 401k and my money market is pulling in a little over 2%, while inflation is rising fast. I’m furious over what’s happening, as I’m going to be stuck with the bill.
Wanna puke?
Follow this link, and click on “NAR’s Letter to Senator Dodd”, composed by Dick Gaylord (not to be confused with Gaylord Focker).
Thanks, Dick:
http://www.realtor.org/gapublic.nsf/pages/gses_conservatorship?OpenDocument
FT: Eurozone is in recession
http://www.ft.com/cms/s/222e75ec-894e-11dd-8371-0000779fd18c,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F222e75ec-894e-11dd-8371-0000779fd18c.html%3Fnclick_check%3D1&_i_referer=http%3A%2F%2Fwww.crossingwallstreet.com%2Findex.html&nclick_check=1
“I’m furious over what’s happening, as I’m going to be stuck with the bill.”
Dawg: You won’t have the bill, your children will. I doubt I have been terribly reassuring. ;P
#115 Agreed. but in this instance he is wrong, perhaps idiot was too strong a word.
Simple common sense should tell one that no matter what the outcome, this will lead to a deep protracted recession.
At the end of the day if a little more common snese had been utilized form top to bottom, we may have avoided this whol mess.
BC Bob Says:
September 24th, 2008 at 9:42 am
Chi, One other thought. Why should Hunter, not management and shareholders, be burdened by this colossal travesty?
Bost: Hunter was inspired this morning. He dances like Snoopy. I joined him and we did the Snoopy-dance to Blue Da Ba Dee this morning…..I’ll take the USA warts and all…
http://www.youtube.com/watch?v=WDq5v5gcRjc&feature=related
MJ (61)-
I’m Japanese and feeling fine.
Stu and CF: I appreciate the comments. At some point you have to learn to tolerate what you cannot control. Set aside emotion and attack your opportunities mercilessly. It is apparent that the same is being done to us over time so vent your anger in a manner that motivates your own brand of personal justice.
Hoboken is a fools market, they have way overbuilt the Wall Street Residential Market and when all the new buildings hit the market in 2009 and 2010 sponsors will be making deals, converting to rentals priced to rent or going broke and getting their units auctioned off. When given the opportunity to live in NYC at near the same price as Hoboken only an idiot will choose Hoboken. By 2011 Hoboken will have to start doing some serious price cutting of its own.
My degree is in astrophysics. I work in computer science.
And I am AMAZED that simple common sense trumps a lifetime of education in economics and finance.
Chi (64)-
“You are the Depeche Mode of Real Estate.”
Come spend a week with me. You’ll see why.
I’m not the broker with an office full of soccer moms, trying to offload “cream puffs” to the last handful of suckers left. As I’ve stated here before, we do actual RE business, in the only manner available in which actual deals can be brought to actual closings in this environment.
Needless to say, it ain’t pretty, and it’s not getting any better. If anything, the losses- and the stories behind the losses- become more shocking on a daily basis.
@John: The may have even overbuilt the NYC market! Hobroken is absolute toast.
Chi (66)-
“To demand punishment of others at this junction is grandstanding and amounts to having your cake and eating it too…”
If a guy walked into your branch bank with a gun and a stocking mask, wouldn’t you want him to be caught and sent to jail?
“When given the opportunity to live in NYC at near the same price as Hoboken only an idiot will choose Hoboken.”
John,
You are describing Frank. No?
I guess I’m confused at why the administration would take an equity stake in AIG, but not in the wall street firms that will be getting the bailout.
MJ Says:
September 24th, 2008 at 10:36 am
CF_follower: No reason to think any differently than you did in the past. Just keep your 60/40 stocks/bonds allocation in your 401k. Don’t fret that it’s down 30% this year. It’ll bounce back! Really! All it takes is patience, tolerance, and moderation.
MJ: Do you think I say such things without consideration? I am a charter member of the LOD. I am one of the Hudson Tea renters that told Toll to stick their insider prices up their granite countertops. I had Barbara Corcoran refer to my choice to bubble sit as something “…you don’t want to do…” I live in a SFH in a neighborhood of all homeowners. I feel vindicated, savvy, and lucky as hell. My life is uncomplicated. I can focus on my family and my job, which at this juncture is mostly patting people on the back for listening to me for the last several years, with some notable exceptions.
Clotpoll Says:
September 24th, 2008 at 11:09 am
Chi (66)- “To demand punishment of others at this junction is grandstanding and amounts to having your cake and eating it too…”
If a guy walked into your branch bank with a gun and a stocking mask, wouldn’t you want him to be caught and sent to jail?
clot: In general yes, but more importantly, I would be happy that I wasn’t shot, and leave it at that…..the cops can go catch the guy.
You know the phrase “…if you love somebody, set them free…”….”how about, if you hate somebody, set them free?”
Off topic-
Speaking with a guy who works at a Toyota dealership who said that there are plenty of buyers, but no credit through Toyota Finance. Too many people with poor credit right now. If it’s bad for Toyota it must be a nightmare for Ford.
We’ve been kicking around replacing a 3 series. I wonder if they are desperate.
just got this email….
From: Henry Paulson
Date: 9/23/2008
Subject: Supper secret transaction Need you’re help
Bright Greetings Dear American:
I need to ask you to support an urgent secret business relationship with a transfer of funds of great magnitude.
I am Ministry of Treasury of the Republic of America. My country has had a crisis that has caused the need for a large transfer of funds of 700 billion dollars US. If you would assist me in this transfer, it would be most profitable to you.
I am working with renowned Mr. Phil Gram, lobbyist for UBS, who will be my replacement as Ministry of Treasury in January. As a Senator, you may know him as the leader of the American banking deregulation movement in the 1990s. This transactin is 100% safe.
This is a matter of great urgency. We need a blank check. We need the funds as quickly as possible. We cannot directly transfer these funds in the names of our close friends because we are constantly under surveillance. My family lawyer advised me that I should look for reliable and trustworthy person who will act as a next of kin so the funds can be transferred.
Please reply with all of your bank account, IRA and college fund account numbers and those of your children and grandchildren to wallstreetbailout@treasury.gov so that we transfer your commission for this transaction. After I receive you’re information, I will respond with detailed information about safeguards that will be used to protect the funds.
Wonderful salutations to you cherish friend from Republic of America.
Yours Faithfully Minister of Treasury Paulson
3b (84)-
“150K houses with an average 20k tax bill.”
By 2012, we’ll have thousands of homes in NJ where the tax bill is more than the mortgage.
Wonder if Commissar Jon and his special panel geeked that one over on Monday?
BC Bob Says:
September 24th, 2008 at 11:09 am
“When given the opportunity to live in NYC at near the same price as Hoboken only an idiot will choose Hoboken.”
John,
You are describing Frank. No?
Bost: unless you work in NJ and are looking to either cut down your commute a bit, save money or avoid NYC taxes.
“there are plenty of buyers, but no credit”
d2b,
Sounds like the pant up demand in RE. In addition to this, there are a slew of buyers chomping on the bit. Only one problem, they can’t sell at their price.
ghandifinance?
@d2b:
1) how dare you question the widsom of Paulson
2) //no one// likes Hank Greenberg
@d2b:
1) how dare you question the widsom of Paulson
2) no one likes Hank Greenberg
bi (112)-
“the poeple who think doing nothing is better alternative are those SKF/gold holders and anti-america terrorists.”
Yep, sounds about right. Instead of locking me into SKF and manipulating currency markets to pull the rug out from under precious metals, the gubmint should just come arrest me and send me to Gitmo.
And, if they seize my brokerage account, they will at least have one performing asset on their books.
Stu Says:
September 24th, 2008 at 11:17 am
ghandifinance?
Stu: I’ve had to talk too many people off the ledge the last few weeks, and they are the ones who deserve to sit in the sun and drink martinis. You very quickly go beyond the rage and hit on what is actually bothering them. Make sure they set aside the guilt, the personal affront, and instead send them forth.
@d2b
oh, and
3) because the feds would own every single large bank and investment bank in america and half of europe.
“I guess I’m confused at why the administration would take an equity stake in AIG, but not in the wall street firms that will be getting the bailout.”
d2b,
When FedCo took an equity stake in AIG, it dilluted existing shareholders’ value. Bear in mind that Paulson has $600 million in Goldman Stock, and who knows how much more in other firms’ stock. Connect the dots. Any equity stake will reduce his own wealth by hunderss of millions of dollars.
No confllict of interest here, though.
MJ @ 9:11AM is channeling Mrs Messiah.
“Have you ever been more disappointed with your country?”
#35
“FBI begins investigations into FRE, FNM, AIG & LEH & 26 other companies.”
for those who think the gov’t will let criminals off the hook, you are way too pessimistic.
@ghandifinance
Indeed, my wife is angry at me for being so sour lately.
At some point, to triumph, I must become happy in spite of it all.
chi (134)-
“…so vent your anger in a manner that motivates your own brand of personal justice.”
In my case, that wouldn’t go so well.
The paulson plan will not save the US economy, and it won’t solve the problems that require a salvation plan in the first place today. Instead, it seeks to re-insert virtual fantasy credit into the economy, taken straight out of the public trough, so that same public can continue to buy homes. But is that in the interest of the people? Home prices are far too high, when set against historical levels. The reason why they are so high is because of cheap easy lying virtual fantasy credit. And that needs to be restored, even though it is the very core of the problem. How is it in the interest of the taxpayer to pay far too much for a home?
The US government needs to get out of the mortgage market, once and for all. All this talk about the American dream of owning one’s own home, with Fannie and Freddie providing cheap money for everyone, does and can only lead to one outcome. Home prices rise when there’s more credit available, and therefore more demand. This is not an unintended consequence, and it never has been, except for the clueless. The banking industry has understood this inevitable perverse consequence of “well-intented” policies all along, all the way back to Roosevelt’s New Deal and the founding of Fannie Mae.
By trying to prolong the Roosevelt crime, the American government, at best, plays double or nothing, with all the money you have, and that of multiple generations of your offspring, in a bet on the crap table that they very well know they can’t win. You know who will win the bet? The bank.
The only money left in the US is the $8-9 trillion in customer deposits at commercial banks, plus whatever is left in pension funds, money funds etc. And they’re coming for it. Just watch them.
@skep-tic: when they raid GS and Paulson’s office, i’ll come around to your state of mind.
#42
“After all, like I heard on TV yesterday, a farmer cannot grow corn without taking a loan to buy the seed and fertilizer and then paying it back at harvest time. You know, except in the real world where RESPONSIBLE people save their own money and use savings, risking their own capital, to make investments in things like seed and fertilizer… ”
What you just described was the main business of European IBs around the turn of the 19th/20th century (funding American agriculture). If you actually believe all responsible people / businesses fund the majority of economic activity through equity you are dreaming. It has not been this way for hundreds of years, if ever.
Who wants to go in on producing a new TV reality show?
I plan on calling it: Liv’n in Leavenworth.
The show will follow the travails and new and interesting social and love lives of Wall Street insiders who trad in the Hamptons for a 6×9 cell in Northeast Kansas.
Guy Fawkes said: “The only money left in the US is the $8-9 trillion in customer deposits at commercial banks, plus whatever is left in pension funds, money funds etc. And they’re coming for it. Just watch them.”
This is why GS filed to become a commercial bank.
lisoosh Says:
September 24th, 2008 at 9:33 am
chi - are you joking? My banked savings are losing buying power as we speak. And if my share of the national debt (shared debt load of the nation) increases a massive amount as a result of this bailout, and yet the actual economic results that would benefit me would be negligible at best - exactly how am I doing well? And why should I be happy?
l: I forget your personal situation. If your savings is for buying a house, then you just hit the jackpot. I know you have personal interests out side of the US. If you are complaining about the relative buying power of the USD versus other currencies, then why aren’t you hedging yourself? Don’t blame the government because you didn’t receive the outcome your expected.
Don’t confuse ostensibly prudent or conservative actions with being optimal. In fact, it may be some empirical proof that investing in an overly conservative manner is actually far riskier than logic would dictate.
“Who wants to go in on producing a new TV reality show?
I plan on calling it: Liv’n in Leavenworth.
The show will follow the travails and new and interesting social and love lives of Wall Street insiders who trad in the Hamptons for a 6×9 cell in Northeast Kansas.”
I was thinking more along the lines of “Extreme Foreclosure”
WASHINGTON (Reuters) - Prices of existing homes in the United States suffered a record drop in August while the sales pace slowed and the overstock of homes shrank, the National Association of Realtors said on Wednesday.
The pace of existing home sales decreased 2.2 percent to a 4.91 million unit annual pace while the median national home price declined 9.5 percent to $203,100.
Economists polled by Reuters were expecting home resales to fall to a 4.93 million-unit pace from the July rate of 5.02 million units. The dollar extended losses against the euro after the data.
The realty trade group said in a report that as many as 2 in 5 home sales are by borrowers who have seen their property lose value or are facing foreclosure.
“The big question now is whether lending is so tight that sales are being hurt,” said Gary Thayer, senior economist at Wachovia Securities in St. Louis, Missouri. “If we can work through the current lending difficulty, sales are likely to improve later this year.”
The inventory of existing homes for sale fell 7.0 percent to 4.26 million from the record-high overstock reported in July.
#Bush administration is against pay freezes on salary and bonuses in conjunction to the bailout. Why doesn’t ANYONE in congress ask them WHY?
Seriously, what logical reason in the face of all of this would you be against something that doesn’t even really punish those responsible??”
#49
the concern is not for those presently in office, but attracting their replacements who will be tasked with cleaning up this mess. also, there is the issue of freedom of contract
Skep,
Justice may not get the people who most deserve to go to prison — those folks are too big to jail — but they will hoist a few bodies upon some pikes in order to placate the masses.
@skep-tic: ” If you actually believe all responsible people / businesses fund the majority of economic activity through equity you are dreaming. It has not been this way for hundreds of years, if ever.”
I don’t believe that or even recommend it. But folks act like that isn’t an option for anyone, or any business. That everything must be financed through a bank. And a highly leveraged bank, at that.
You can buy a car without a loan or a lease.
You can even buy a house without a mortgage.
You can build and run a successful business without a loan of any kind.
To Americans, these things seem impossible.
“In fact, it may be some empirical proof that investing in an overly conservative manner is actually far riskier than logic would dictate.”
Chi,
I totally agree. I’m swinging for the fences.
#51
“I envision a greatly-contracted, yet healing economy”
After how many years of serious pain in the free-for-all transition?
Problem, what problem? Move along please.
http://tinyurl.com/3zedur
ChiFi:
I too have more at stake then I probably should at this juncture, but I still sleep at night knowing this country isn’t headed for doomsday and my investments are sound. Call me a terrorist, but I look forward to market crisis. It makes stock selection much less important.
Everyone needs to keep in mind that there is more to our society than Wall Street and housing. Take these two out of the equation and we are probably not even in a recession. Our unemployment rate (as poorly as it is calculated) is only 6.1%. There is a reason that foreign governments continue to buy and/or hold our debt. There are still tons to be happy about in the USA!
It’s OK to protest Paulson’s/Bergabe’s decisions. It is what separates us from most of the rest of the world. Imagine what Chinese investors are feeling right now as their indexes are down almsot 50% on the year. They can’t blog nor speak negatively about their leaders decisions. They are forced to accept whatever decisions are made for them.
I guess the bottom line is that things are indeed bad, but not that bad. Keep on protesting and saving and squirreling away as much as you can. Ten years from now, you won’t even remember the Summer of 2008 and the credit crisis.
LIBERTY N Y DEV CORP REV REV BDS GOLDMAN 05.25000% 10/01/2035 SACHS HEADQUARTERS LLC SER. 2005
Price (Ask) 84.745
Yield to Worst (Ask) 6.450%
Do the math the tax free yield of a 6.5% muni is insane.
“When given the opportunity to live in NYC at near the same price as Hoboken only an idiot will choose Hoboken.”
Only an idiot would choose NYC give the taxes and quality of living.
chifi writes: ” investing in an overly conservative manner is actually far riskier than logic would dictate”
This is what keeps me awake at night.
Yet, how can I invest when the rules change overnight?
Guaranteed money markets? Bailed out mortgage debters? Bailed out banks? No shorting of specific blessed entities?
“, there is the issue of freedom of contract”
Look, if people do not want to do the jobs for the money, don’t do the jobs. There are no doubt a number of bright and capable folks who are champing at the bit to have the opportunity to rise up and do the jobs and become a well-known hero.
Bottom line, if you want the bail out, you take whatever strings the money supplier requires. If you do not want the money with strings today, the terms will only be more severe tomorow. In the final analysis, any institution that is strong enough to walk away from government money does not need it in the first place.
Clotpoll Says:
September 24th, 2008 at 11:26 am
chi (134)- “…so vent your anger in a manner that motivates your own brand of personal justice.” In my case, that wouldn’t go so well.
clot: I want to see you on Iron Chef taking out Bobby boy…..
#66
“Having the wisdom and foresight to live a life consistent with your means for the last few years is bear serious fruit now. To demand punishment of others at this junction is grandstanding”
totally agree. I find the barely disguised glee expressed at the prospect of the massive pain to be felt by the USA really disturbing. If you really hate it here and see no reason to invest in this country further maybe you should put your money where your mouth is.
@Frank: “Only an idiot would choose NYC give the taxes and quality of living.”
NJ has the highest effective tax rate in the nation, 3 years running.
Quality of living? Hoboken vs. NYC? On the world stage? Ha!
Frank, I love living on the gold coast but if Manhattan was the same money I’d probably be there, Manhattan has a greater number of conveniences close by, Hoboken doesn’t even have a movie theater. But it doesn’t matter because the gold coast will always be cheaper(My rent is 40% of what it would be in manhattan) and as such I will continue to live here.
#91
“This comment reminds me of the “philosopher king” concept of the ancient greeks. That is the most knowledgeable, thoughtful and forward thinking individuals should be the one’s put in power.”
this is from Plato’s Republic and it was understood at the time as an argument for returning the aristocracy to power to replace the democracy. Plato was a heriditary member of this aristocracy, so he obviously had a vested interest in this outcome. if you have an interest in returning to such a static society, by all means let us promote gov’t by philosopher kings. by the way, Lenin was found of such an idea as well.
#173
I like the new “Sunny Stu”.
@skep-tic:
I really don’t think anyone here wants pain for the USA. The most concerned folks here are perhaps the most fundamentally American in spirit.
We all want the same thing — health, safety, prosperity and happiness for our families, and to live in a country we can have some pride in.
We all get angry when we see motion counter to that.
“To demand punishment of others at this junction is grandstanding”
There is a profound difference between looking to punish people who did no wrong and punishing people who did. There is also nothing wrong with looking to see people who acted imprudently pay a price above and beyond what the prudent are being asked to pay.
When it comes to the bailout, and mortgage modifications, it is vital to the longterm health of the nation that the principal outstanding not be reduced. If the term is extended, that is one thing, although it still puts people in homes they could never have afforded otherwise. The amount the borrowers save by having the mortgage interest lowered (if any) should be counted as income and taxed, even if they receive a number of years to pay it off.
Save this Larry Yun/Dick Gaylord podcast to your hard drive. It’ll help you save money…you’ll never need to buy Ipecac again:
http://tinyurl.com/3ogzmm
some fun math, from another blog:
—————————————
$700,000,000,000
divided by
United States Population: 301,139,947 (July 2007 est.)
EQUALS $2324.50 collected for every man woman and child.
How much is it for the average family?
Average family (mother, father, 2.5 kids) = $10,460 stolen from the average
family, and then handed to banks.
But what is the “bailout’s” percentage of total cash in circulation?
According to Wikipedia, 700 billion is 100% of ALL THE CASH IN CIRCULATION used
throughout the United States. (in 2007)
Bernanke Sees `Grave Threats’ to Financial Stability (Update1)
By Craig Torres
Sept. 24 (Bloomberg) — Federal Reserve Chairman Ben S. Bernanke said the U.S. is facing “grave threats” to financial stability and warned that the credit crisis has started to damage household and business spending.
[snip]
Well Benny, households have been spending too much and they should pull back. If a prime goal of this bailout is to keep people spending, it is doomed to failure.
http://www.bloomberg.com/apps/news?pid=20601068&sid=aU2HhIudsuxE&refer=home
Folks,
Congress has gotten part of the message and is pushing back on the administration. If you want to make sure the plan does not do serious damage with mortgage modifications, etc., this is a great time to contact your representatives.
One way to reduce the inventory of houses:
http://abcnews.go.com/GMA/Travel/story?id=5874747&page=1
Skep you are, as you usally do, taking a statement and changing it into something else. My point being that Bergabe and Paulson are only interested in the short term and not the long term of this country. I was not advocating some type of dictatorship.
If you flip through these photos, it is a clear demonstration of why only small old-style beach houses should be granted building permits near the coast.
http://abcnews.go.com/US/popup?id=5794800
It also demonstrates a need to do what we did with flood-prone areas near the mississippi and missouri rivers some years back and tell people that if they have been wiped out once, they become ineligible for federal flood insurance for future claims at that location.
“Bernanke Sees `Grave Threats’ to Financial Stability”
Wow nothing’s changed the past 10-15 years and now all of a sudden he see’s it? Amazing?
“I was not advocating some type of dictatorship.”
No. That is the current veep’s job.
“maybe you should put your money where your mouth is.”
skep,
I agree. Been on that track for awhile. Only problem, once the UK banned shorting, I immediately covered. The land of the free became locked.
Think of the car as the Wall Street bailout, as curently envisioned, and the taxpayers are the guy:
http://abcnews.go.com/US/popup?id=5794800&contentIndex=1&page=20&start=false
#169
“You can buy a car without a loan or a lease.
You can even buy a house without a mortgage.
You can build and run a successful business without a loan of any kind.”
like I said, you are dreaming.
Skep,
I have done two of the three and we paid off our mortgage in 1/3 its term.
I like the new “Sunny Stu”.
This probably has something to do with the fact that my investments are doing relatively well and we are going on a Mexican cruise next week. Trust me, watching my largest stock holding lose 25% in a matter of minutes was not enjoyable, the underlying fundamentals hadn’t changed one bit, so I really wasn’t worried. You should have seen the email I wrote the Gator. I was actually expecting non-realized losses of 35% and it to have taken closer to a month to get them back. A little over a week later, we are back to where we were prior to the Paulson BS, and sitting pretty.
Skep,
A number of my and Mrs. Shore’s business associates rely on lines of credit to even out their cash flow throughout the year. In essence, to make up for 1) a lack of working capital and 2) to finance lifestyles beyond their business cash flow.
We do not do these things. We have adequate capitalization and we live off of the monies that come in each month. It does not allow us the lavish lifestyle of some others, who “use debt as a tool,” but it suits us.
i love it, we’ve run out of creditworthy borrowers and solvent lenders. so we’ll recapitalize the lenders on taxpayer dime in order to maintain the godawful lending standards for longer, to help keep asset prices inflated. and clueless real-estate commentators see nothing wrong with this, they simply see it from the business side of things. but how long can this juggling act continue?
alas, Alan Greenspan looks like a bigger d*ck every passing day.
I love Paulson’s justification for not agreeing to compensation limits: that it would dissuade corporations from participating in the bailout.
I can just picture directors of one of these companies, who, by the way, have a fiduciary duty to their shareholders, talking:
D1: This federal program will save our company! We can unload our poorest performing assets for way more than they are actually worth and get back to making money.
D2: Except one thing…
D1: What’s that?
D2: Doing so will hurt our retirement/severance packages.
D1: *silently stares at floor* …You know, this program needs some vetting first. Let’s hold off on jumping into this.
Fleeing the country huh. Some American. While we are fighting a global war on Tarra (I never did understand what the pres has against Gone With The Wind) people should be vacationing in places that will benefit America — like Wall Street.
a lot of you fail to take a dynamic view. maybe you as an individual can buy a house, car, fund your business, etc without debt. but without debt, do you think that house or car would be built in the first place? or would the roads continue to function and the police? you are failing to recognize that we are in a real situation in which debt is pervasive at all levels of society and it needs to continue to be available at least until we find an alternative. pretending otherwise is akin to saying we can simply stop using oil altogether right now because you personally ride a bike to work. It is not realistic in broad terms.
yes, and I am not a parody like reinvestor, but I think this unwillingness to accept that this calamity is your problem too amounts to taking the benefits you enjoy as a member of this society for granted. I guarantee that every single person on this board greatly benefits from functioning capital markets and has a vested interest in seeing that they continue to function. if you prioritize punishing the worst actors in this calamity above preventing macro collapse it is in the truest sense cutting off your nose to spite your face.
Frank I lived in the city for several years, most of the city stock is rent stablized. The average rent in my building in gramercy park back in 1998 was only $550 a month, even then market pice was around $1,600. Most of my building were either lower income people who had no car or commuter train to pay for and only $550 rent and no heat or gas to pay for loved it. On there 60K income they could live large. The rest of building were well off people who locked in years earlier. NYC for some crazy reason does no comparision of income tax returns to rent stablized apartments and you are allowed to own a home and have a rent stablized place. Plenty folks had a Hampton house or shore house which they listed as their primary residence to avoid NYC taxes and to insure their cars at and stayed in their $550K a month apartment during the week. I paid 4700 a month for my one bedroom and on my friends advise bought a classic car and kept it at my Moms house with $29 dollar a year insurance. My friends renting outside NYC had a car with $1,200 a year insurance and a train ticket that was $2,000 a year and they paid higher monthly rent than I did. At first I thought I could not afford NYC but quickly realized I could not afford JC or Queens. I did have to slip the guy $800 to get the place but I made that back in my first month. My cousin had the best deal he got a $2K a month place for $800 and was kind enough to charge his roomate he got from the voice only $800 a month and he lived in NYC for free for five years all for his $1,000 bribe up front and he passed the lease to his roomate for $1,000. I was amazed when I first answered roomate ads how many people controled rent stablized leases on one to three bedrooms with roomates. I even ran into some 40ish business men who had three bedrooms in their names who would get two single guys to rent the other rooms at more than the lease and he would just use it as a pied a tier when he worked late or his wife went to a play while making a few hundred a month. I always thought it was criminal except for the few years I had my sweet deal.
Frank Says:
September 24th, 2008 at 11:34 am
“When given the opportunity to live in NYC at near the same price as Hoboken only an idiot will choose Hoboken.”
Only an idiot would choose NYC give the taxes and quality of living.
Skep,
TO an extent you are right. I am not “dynamic.” I am conservative, pruent, and debt free. Excessive dynamism led us to to this precipice.
We need a change. We need to have American’s saving so we can, when the government needs it, borrow domestically, rather than relying on China. We need to be honest with Americans. We need to not reward the imprudent. We need to exact pain from those who fu*ked up so badly.
I know someone at the Pentagon who has the following at the botom of each of his e-mails:, “If you cant be a good example to others, at least serve as a warning to them.” We need to ensure that folks who messed thing up feel sufficient pain that they act prudently in the future and also serve as a warning to others that there will be reprecussions for imprudence.
John (166)-
“If we can work through the current lending difficulty, sales are likely to improve later this year.”
Translation:
“Once the bailout is jammed through, we can start making loans to deadbeats again.”
I guess we can agree on one thing. One hell of a RE bubble.
209, Cont’d,
and credit/debt.
” I guarantee that every single person on this board greatly benefits from functioning capital markets ”
Yes, BUT, inasmuch as we are now being asked to bail out the folks who have destroyed the funnctioning of the capital markets we now get the right to impose restrictions on the people operating them. Just because I need their “product” does not mean I am willing to put on Gary’s cheerleader outfit and bend over a straightbacked chair for “the market.”
Stu (173)-
“Ten years from now, you won’t even remember the Summer of 2008 and the credit crisis.”
Not me. I still have memories of RTC that are chilling, and the current mess is about 100x worse than RTC ever was.
And, during RTC, I was on the vulture side of the smorgasbord. This time around, I’m one of the little guys, baling water and just trying to help clean up our little corner of the mess.
And it feels like using a thimble to bail water from the Titanic.
Listening to the comments at the hearing, it sounds like Paulson et al. believe that consumers will go about spending if only Wall Street will get its act together. Where will the tapped-out consumer get the money to repay new loans?
Frank (175)-
That post just confirmed that you are an absoulute paramecium.
“We need to ensure that folks who messed thing up feel sufficient pain that they act prudently in the future and also serve as a warning to others that there will be reprecussions for imprudence.”
I am confident that there will be repurcussions for many of the bad actors, but some people will get away with it like what happens with all crime. It is great to set long term goals and I believe the ones you list are the right ones, but there is also a present situation that must be addressed.
when are we going to see people just stoping
to make mortgage payments? why pay for something that is going down quickly in price.
Clot,
Not to worry, as Capt. Smith said on the Titanic, “Don’t worry folks, the damage is just to the starbord side of the ship. The rest of it is healthy.”
Chi (178)-
I’d coat his face in Demerrara sugar and hit it with a blowtorch.
Flay Brulee.
Clot [214],
That has already been established.
“Not to worry, as Capt. Smith said on the Titanic”
Who was it, pesche? “At least the Titanic had a band”
skep (179)-
“If you really hate it here and see no reason to invest in this country further maybe you should put your money where your mouth is.”
My money IS where my mouth is. Has been for some time.
Problem is, the gubmint’s now taped my mouth shut.
Now we know why BAC was offering to buy MER for $29/share.
We were supposed to buy all the cr@p off of Merrill’s books at 60c on the dollar. The same cr@p which it sold to LoneStar for 5c on the dollar.
look, there is so much political opportunity for the up and coming people in gov’t to take down some rich wall st guys following this fiasco. the next spitzer is planning his rise right now and I bet there are dozens more like him behind the scenes. the public wants heads on sticks and politicians will always rise up by giving the public what it wants. incidentally, the public wanted houses and they got that too.
From calculated risk, chart, existing home sales;
http://2.bp.blogspot.com/_pMscxxELHEg/SNpTY_rOBLI/AAAAAAAADeo/ursGvqNy78s/s1600-h/EHSAug09NSA.jpg
“If you really hate it here and see no reason to invest in this country further maybe you should put your money where your mouth is.”
Skep,
One thing that happened these past several years is that dissent was equated with contempt for the established order. In fact, dissent within a democratic framework, is the mechanism by which sound policy is developed.
Stu (199)-
Come clean. You’re medicated.
“My money IS where my mouth is. Has been for some time.”
is it? I respect you, but outside of your investment portfolio you are still sleeping under the blanket the USA provides, to use the cliche.
So if the bottom 40% pay no taxes exactly how are they bailing out the rich guys?
I read this blog daily but don’t comment much. The amount of juvenile name-calling that comes from people who are smug about renting/saving money/predicting the crash is both incongruous and ridiculous.
jcer - #181 - a movie theater is being built in the NW part of Hoboken.
Frank and others - property values have decreased in some parts of Hoboken but have remained stable on the waterfront. So as of right now, you’re both wrong and both right.
there is a difference between dissent and calls for revolution or threats to leave the country. I think reasonable people disagree on a lot of things, but reasonable people do not, in my view, wish for violent revolution.
skep (205)-
Not punishing the bad actors and effecting a giant, macro rescue will only ensure that the same bad thing that happened will immediately happen again.
We NEED public punishment and a financial collapse. Unfortunately, we’re just too dumb to learn the lesson any other way.
#173 Stu: All valid points, except IMO for your view on a recession.
Perhaps officially we are not in one, but regardless of how this all turns out, I cannot see how we will avoid a deep and protracted recession
John Says:
September 24th, 2008 at 12:29 pm
So if the bottom 40% pay no taxes exactly how are they bailing out the rich guys?
By being in the bottom 40% and working for 6.50$/hour wages with no benefits???
“So if the bottom 40% pay no taxes exactly how are they bailing out the rich guys?”
John,
I have no idea about the botton 40% but as someone who sends six-figures in taxes to the feds each year (and on top of that taxes to about 16 states, and a dozen or more other nations) and who is just trying to get through life with a reasonable standard of living from now until death for Mrs. Shore and me, and send the kids to school, and what not, I sure don’t want to be asked to pay for folks who make in a week or month what I make in a year.
The jobs that various folks on the street do are vital, various individuals are replacable. The ones who screwed up should be cashiered and stripped of their ill-gotten gains. Let some of their competent colleagues step up and do the jobs and reap the rewards of doing it well.
How about a public keelhauling?
#229 Well, what goes areound comes around. The same so called smug renters/savers were being ridiculed for the last few years, not very mature, now was it?
Now the tides have changed,and yes there is some gloating on the part of the renters/savers not very mature now is it?
No, but undestandable. I am just happy I stuck to my guns.
I wish no one ill will, but I am not over paying for your house.
“I respect you, but outside of your investment portfolio you are still sleeping under the blanket the USA provides, to use the cliche.”
skep,
Unfortunately, I have had to buy a myriad of blankets. Our full faith and credit does not seem to buy the same amount of heating oil as it did previously.
Frank Says:
September 24th, 2008 at 8:37 am
If things are so bad, how come I still can’t buy an apartment in Hoboken for 2005 prices?
Make someone an offer. maybe you’ll be surprised
“We NEED public punishment and a financial collapse.”
Clot– You and I might agree (I think) that it is guaranteed that we get both, regardless of what is done with this bailout. But I see the possibility of two scenarios. One, total collapse very quickly, with great social unrest as a result. Two, managed unwind with social order being maintained. Maybe #2 will ultimately fail but I think we have to try.
“Frank Says:
September 24th, 2008 at 8:37 am
If things are so bad, how come I still can’t buy an apartment in Hoboken for 2005 prices?”
I dare you to try to get financing for buying a Hoboken apartment at 2005 prices.
#236 - calling people a “retard” or a “paramecium” or any of the dozens of insults I have heard on this board is what bugs me, not the gloating part. All I’m saying is that the same people who claim they are so brilliant act like such 10-year-olds. And that doesn’t matter whether you are a buyer or a renter or whatever.
#191
HEHE– I misread your intent and apologize. I have gotten myself a little vaclempt.
“If the prices are too low, nothing will happen; if the prices are too high, you’re going to end up with horrible losses for the taxpayer,” said L. William Seidman, a former chairman of the Resolution Trust Corp., the agency that liquidated failed thrifts after the savings-and-loan crisis of the 1980s. “I’m equally concerned in both directions.”
“All of the crooks on Wall Street are still alive; they haven’t all been shot,” he said. “They’ll probably go into new businesses and try to pick up assets and you’ll have to worry about that.”
http://www.bloomberg.com/apps/news?pid=20601109&sid=ajKCFjCBzU80&refer=home
Hobocondo Says:
I read this blog daily but don’t comment much. The amount of juvenile name-calling that comes from people who are smug about renting/saving money/predicting the crash is both incongruous and ridiculous.
—————–
Right on!
Over the weekend everyone was all het up about doing a Wall Street protest. A plan for such a protest was posted this morning, and yet not one comment about anyone going. Would take away from the “enlightened” discussion going on here, I guess. Just sayin’.
About the Wall Street protest. I am up for it but will be locked away with clients tomorrow making money to pay the taxes to bail out Wall Street and to pay for stimulus checks for those of you who get them.
Chifi -
This is for you. From your Alma mater.
“As economists, we want to express to Congress our great concern for the plan proposed by Treasury Secretary Paulson to deal with the financial crisis. We are well aware of the difficulty of the current financial situation and we agree with the need for bold action to ensure that the financial system continues to function. We see three fatal pitfalls in the currently proposed plan:
1) Its fairness. The plan is a subsidy to investors at taxpayers’ expense. Investors who took risks to earn profits must also bear the losses. Not every business failure carries systemic risk. The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise.
2) Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards.
3) Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, Americas dynamic and innovative private capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted.
For these reasons we ask Congress not to rush, to hold appropriate hearings, and to carefully consider the right course of action, and to wisely determine the future of the financial industry and the U.S. economy for years to come.”
http://faculty.chicagogsb.edu/john.cochrane/research/Papers/mortgage_protest.htm
“Bush may give speech to nation on economic woes”
Lord help us!
skep (227)-
“…outside of your investment portfolio you are still sleeping under the blanket the USA provides, to use the cliche.”
Sorry, skep. That blanket was full of holes and lice, so I went and got myself a good one.
hobo (229)-
Check your browser. This isn’t Kannekt.
skep (230)-
Hey, call me unreasonable:
“…reasonable people do not, in my view, wish for violent revolution.”
Barbara,
“Bush administration is against pay freezes on salary and bonuses in conjunction to the bailout. Why doesn’t ANYONE in congress ask them WHY?
Seriously, what logical reason in the face of all of this would you be against something that doesn’t even really punish those responsible?? (I’d prefer they all be fired).
Blatant friendly payoffs.”
They said that they don’t need to, that is only the remedy you take when a company is failing. These copanies aren’t failing. They just need $700 billion so that fire and brimstone won’t rain down on all of us.
I just received the following notice from someone on the Hill. Note that the cost of the Wall Street bailout is about 50% greater than the total national security spending in the ‘09 budget. As important as Wall Street bankers are to the national wellbeing, the armed services play a pretty big role as well:
House Armed Services Committee Chairman Ike Skelton (D-MO) announced that the House and Senate Armed Services Committees have reached agreement on the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009.
The agreement, which is expected to be considered this week in the House and the Senate, authorizes $531.4 billion in budget authority for the Department of Defense (DoD) and the national security programs of the Department of Energy (DoE). The bill also authorizes $68.6 billion to support ongoing military operations in Iraq and Afghanistan during fiscal year 2009
Hey, call me unreasonable:
“…reasonable people do not, in my view, wish for violent revolution.”
*******
Hey, I guess if all goes well you could get a beer named after you. 21st century sam adams
Clotpoll Lager?
our economic and military dominance are interconnected. China undestands this.
Stu / Gator,
Did you find any child friendly places in Napa?
“Clotpoll Lager?”
hoppy, with a gunpowder aftertaste.
Ten ancesteral Shore’s held officer rank during the American Revolution. Our founders recognized the occasional necessity of overturning a disfunctional order. I for one do NOT believe we are at the point where such actions are justified or prudent. That said, any government must represent the best interests of the vast majority of its people (while protecting from the tyrany of the majority) in order to retain the coinsent of the governed. Without such consent, any government will collapse. It took awhile with the USSR but even there it happened.
# skep-tic Says:
September 24th, 2008 at 1:11 pm
“Clotpoll Lager?”
hoppy, with a gunpowder aftertaste.
I love it. I’ll have 2 to start.
consent, even
MJ 136:
And I am AMAZED that simple common sense trumps a lifetime of education in economics and finance.
My vote for quote of the day…
But what I think you mean is the LACK of said common sense.
sl
I said it before and I’ll say it again.
1) It’s been an enormous Ponzi scheme.
2) The Case-Shiller graph from 1890 to present depicts it entirely.
sl
I contacted my senators on this bailout buisness. I don’t like it and it smells of some nasty funk.
After watching him in action in front of the committee yesterday, I’m all for removing Paulson from his position.
I can’t wait for an administration change. I’m even thinking of throwing out the senators if they don’t do something about this debauchery.
Bush is going to accept executive pay restritions.
For our gov’t it is not common sense, it is protecting one’s own interests instead of the nations well being. A bailout is a necessity but the pricing of the assets has to take into account non-performing assets. Listen the market might, just might be irrational about pricing these assets but given a high percentage is not performing we need to account for losses. It is fine for the gov’t to buy assets where most of the principal will be returned and a return will be made until that time. It is totally different if the tax payer needs to eat billions of dollars and the firms who caused this mess come out smelling like roses.
Will speak tonight.
Why don’t we send this bill to the rating agencies, S&P [McGraw Hill] and Moody’s. The only taxpayer’s that slapped AAA on this crap were employed by them. Hey, at least start there.
if the bailout goes through more or less as is, look out for where Paulson is employed in a few months. That will say it all, but then, as usual, it will be too late for America.
http://www.nytimes.com/2008/09/24/business/businessspecial2/24farmers.html?_r=1&em&oref=slogin
If this works with cows, imagine what we can power with what Wall Street has dumped on us.
#213 clot: Just like I was ont he trading floor during the 87 crash, and participated in the houisng bubble crash.
One does not forget those things, or should I say one should not forget those things.
I believe you need to have lived through some bad times to have some perspective.
New thread…
I just do not think Paulson is a crook. Rangel is a crook. Paulson is putting his reputation on the line and doing something that is against his core beliefs because he thinks it is necessary. He has already demonstrated that he is willing to let institutions fail when they do not pose systemic risk.
Laughing all the Way,
If you are so smart, how about you show me Hoboken properties at 2005 prices instead of just calling people stupid? Good luck.
a) because i dont give a darn about hoboken and i’d never live there
b) because you never once have cited facts to back up your claims, and since someone posted 5 pages worth of foreclosures, clearly you have not done your HW
Isn’t this what most folks here have been saying?
http://www.nytimes.com/2008/09/23/business/23skeptics.html?em=&pagewanted=print
September 23, 2008
News Analysis
Experts See a Need for Punitive Action in Bailout
By PETER S. GOODMAN
As economists puzzle over the proposed details of what may be the biggest financial bailout in American history, the initial skepticism that greeted its unveiling has only deepened.
Some are horrified at the prospect of putting $700 billion in public money on the line. Others are outraged that Wall Street, home of the eight-figure salary, may get rescued from the consequences of its real estate bender, even as working families give up their houses to foreclosure.
Most economists accept that the nation’s financial crisis — the worst since the Great Depression — has reached such perilous proportions that an expensive intervention is required. But considerable disagreement centers on how to go about it. The Treasury’s proposal for a bailout, now being negotiated with Congress, is being challenged as fundamentally deficient.
“At first it was, ‘thank goodness the cavalry is coming,’ but what exactly is the cavalry going to do?” asked Douglas W. Elmendorf, a former Treasury and Federal Reserve Board economist, and now a fellow at the Brookings Institution in Washington. “What I worry about is that the Treasury has acted very quickly, without having the time to solicit enough opinions.”
The common denominator to many reactions is a visceral discomfort with giving Treasury Secretary Henry Paulson Jr. — himself a product of Wall Street — carte blanche to relieve major financial institutions of bad loans choking their balance sheets, all on the taxpayer’s bill.
There are substantive reasons for this discomfort, not least concerns that Mr. Paulson will pay too much, thus subsidizing giant financial institutions. Many economists argue that taxpayers ought to get more than avoidance of the apocalypse for their dollars: they ought to get an ownership stake in the companies on the receiving end.
But an underlying source of doubt about the bailout stems from who is asking for it. The rescue is being sold as a must-have emergency measure by an administration with a controversial record when it comes to asking Congress for special authority in time of duress.
“This administration is asking for a $700 billion blank check to be put in the hands of Henry Paulson, a guy who totally missed this, and has been wrong about almost everything,” said Dean Baker, co-director of the liberal Center for Economic and Policy Research in Washington. “It’s almost amazing they can do this with a straight face. There is clearly skepticism and anger at the idea that we’d give this money to these guys, no questions asked.”
Mr. Paulson has argued that the powers he seeks are necessary to chase away the wolf howling at the door: a potentially swift shredding of the American financial system. That would be catastrophic for everyone, he argues, not only banks, but also ordinary Americans who depend on their finances to buy homes and cars, and to pay for college.
Some are suspicious of Mr. Paulson’s characterizations, finding in his warnings and demands for extraordinary powers a parallel with the way the Bush administration gained authority for the war in Iraq. Then, the White House suggested that mushroom clouds could accompany Congress’s failure to act. This time, it is financial Armageddon supposedly on the doorstep.
“This is scare tactics to try to do something that’s in the private but not the public interest,” said Allan Meltzer, a former economic adviser to President Reagan, and an expert on monetary policy at the Carnegie Mellon Tepper School of Business. “It’s terrible.”
In part, Mr. Paulson’s credibility has been dented by his pronouncements in previous weeks that the crisis was already contained. Some suggest this was a well-intentioned effort to stem panic. But the aftermath complicates his quest for the bailout.
“If you view your public statements as an instrument of policy, people don’t believe you anymore,” said Vincent R. Reinhart, a former Federal Reserve economist and now a scholar at the conservative American Enterprise Institute.
The biggest point of contention is over whether and how taxpayers would benefit if the bailout succeeded in righting the financial system, sending banking stocks upward.
In Mr. Paulson’s plan, the Treasury would have the right to buy as much as $700 billion worth of troubled investments, with the taxpayer recouping the proceeds when those investments were sold over coming years. But many economists — Mr. Elmendorf among them — argue that taxpayers should get more out of the deal, securing stock in the banks that make use of the bailout. The government could then sell off that stock at a profit when conditions improve. A similar approach was used successfully in Sweden in the early 1990s when its financial system melted down.
Others argue that any bailout must pinch the people who have run the companies now needing rescue, along with their shareholders, addressing the unseemly reality that executives have amassed beach houses and fat bank accounts while taxpayers are now stuck with the bill for their reckless ways.
“It absolutely has to be punitive,” Mr. Baker said. “If they sell us the junk, then we own the company. This isn’t a way to make these companies and their executives rich. This should be about keeping them in business so the financial system doesn’t collapse.”
Other questions center on how to value what the Treasury aims to purchase — an issue that goes to the heart of the crisis itself.
The financial system got to its dangerous perch by betting extravagantly on real estate. When housing prices began plummeting and borrowers stopped making payments, financial institutions found themselves with huge inventories of bad loans. Not simple loans, but complex investments created by pooling millions of mortgages together and then slicing them into pieces. These were the investments that Wall Street bought, sold and borrowed against in cooking up the money it poured into housing.
The trouble is that these investments are so intertwined and complex that no one seems able to figure out what they are worth. So no one has been willing to buy them. This is why banks have been in lockdown mode: with mystery enshrouding both the value of their assets and their future losses, banks have held tight to their remaining dollars, depriving the economy of capital.
Now, the Treasury aims to clear the fog by buying up these investments. But their value is as mysterious as ever.
“There’s a tendency for people to think these are stocks and bonds and you know what the price is,” said Bruce Bartlett, a former White House economist under President Reagan. “The problem is people are operating in a world in which nobody knows what the hell is going on. There’s some naïve assumptions about how this would function.”
If Mr. Paulson pays the market rate — whatever that is — that presumably would not be enough to persuade banks to sell. Otherwise, they would have sold already. For the plan to work, Treasury has to pay a premium.
“It’s a straight subsidy to financial institutions,” said Martin Baily, a former chairman of the Council of Economic Advisers in the Clinton administration, and now a senior fellow at the Brookings Institution. “You’re essentially giving them money.”
Mr. Baily favors the basics of the Paulson plan, albeit with some mechanism that would give the government a slice of any resulting profits. And yet he remains troubled by the dearth of information combined with the abundance of zeroes in the bailout request.
“I’d like a clearer statement of what we were afraid was going to happen that requires $700 billion,” Mr. Baily said. “Maybe they don’t want to talk about it because it would scare everybody, but it’s a bit much to ask.”
273 -
“I just do not think Paulson is a crook.”
Then,
why doesnt he accept the demands for taxpayer equity stake?
Why no reductions in exec compensation?
Why Section 8 in the plan?
Why pay above market price for the assets?
“The boys are bailing out Wall Street and you are paying the bill for all those multi million dollar bonuses. You are also paying for the negligence or incompetence (it must be one or the other) of all those regulators who knew what was happening but acquiesced to keep the game going. When asked if he thought that executives of companies taking the handout should have some restrictions on their salaries and bonuses, Paulson replied that such action would be punitive. Clearly that is not on his agenda. No accountability and now no consequences.”
http://www.financialsense.com/fsu/editorials/danielcode/2008/0923.html
#273 skpetic; Perhaps Paulson is trying to do the right thing as you say.
The problem is he is not credible. You cannot say for months even up to a couple of weeks ago, that everything is fine, the crisis is contained, and now it’s “end of days”.
#277 BC Bob:Paulson replied that such action would be punitive.
As it should be.
I really don’t think anyone here wants pain for the USA. The most concerned folks here are perhaps the most fundamentally American in spirit.
We all want the same thing — health, safety, prosperity and happiness for our families, and to live in a country we can have some pride in.
We all get angry when we see motion counter to that.
i find myself liking this new guy more and more with each post.
“deep seated thrift craves vindication”
darn, messed up the italics.
Hobocondo Says:
calling people a “retard” or a “paramecium” ..
Don’t get upset, these are NJ RE agents for you. It’s normal.
Frank (282)-
Please explain again how you’ve arbed the MER/BAC merger.
Frank,
Is hobocondo your deskmate, or your margin clerk?
You + hobocondo = paramecia
“U.S. Treasury Secretary Henry Paulson said on Friday the housing market correction appears to be at or near its bottom and that troubles in the subprime mortgage market will not likely spread throughout the economy.”
Reuters, 4/20/07
“We’re very vigilant,” Paulson said.
“Our banking system is a safe and sound one,” he added at another point.
Marketwatch, 9/15/08
“I think there is a reasonable case to be made that when you look at the housing correction, the largest part of this we can work through in months.”
Business Week, 7/22/08
“Our banking system is a safe and a sound one,” Paulson insisted on CNN’s “Late Edition.” He had earlier told CBS, the list of troubled banks would grow.
But “this is a very manageable situation … our regulators are focused on it.”
Reuters, 7/21/08
Laughing: My wife thinks I’m spendy.
By the way, who says liar loans and no doc are buried. Hank has Congress ready to sign the most, potentially, explosive teaser rate ever structured during this crisis.
“Please explain again how you’ve arbed the MER/BAC merger.”
I bought MER calls on Friday before it.
Clot, don’t worry Hoboken is an enviable paradise where the rich and famous live and waterfront property always appreciates and some day soon they will get a movie theater. All of this makes it so much better than Manhattan. Seriously, Hoboken, Jersey City, NYC, and all of the NY suburbs are dead in the water. High costs and a shrinking job market do not amount to price appreciation.
It is unfortunate, and rather scary, how the market has tumbled. However, if you are looking to buy a home, now is the right time. My wife and I are first time home buyers and we were able to find an affordable home with good rates. I suggest all who can to do the same.
This is unreal, watching this right now.
Remedial robot teleprompter econ 50.5
290 njr
Did you say realtor?
I have just the house for you!
Today, I dealt with a realtor who bought a home just to flip it to unfortunate first time buyers like yourself.
F that bagholder! I say let him sweat!
Does anyone see the golden nugget in this report? Inventory is dropping for a second month in a row. It dropped 7%. This is a good sign the bottom is upon us.
The National Association of Realtors reported that sales of existing homes dropped by 3.8 percent in June to a seasonally adjusted annual rate of 5.75 million units. That is the slowest sales pace since November 2002 and the decline was about twice what had been expected.The median price of an existing home edged up to $230,100, 0.3 percent more than a year ago. The median is the point where half the homes sold for more and half for less.It was the first price gain in 11 months. Analysts, however, said they were looking for prices to fall further because of the large number of unsold homes.
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francis
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