From the WSJ:
Some Cry Foul Over Relief Plan For Borrowers
By SUDEEP REDDY, DOUGLAS BELKIN and JONATHAN KARP
December 4, 2007; Page D1
The Bush administration’s plan to give subprime borrowers a break on their mortgages is already catching flak from an unexpected source: other homeowners.
Treasury Secretary Henry Paulson, at a housing conference yesterday, said he is “aggressively pursuing” an agreement with lenders and investor groups to freeze rates on subprime adjustable-rate mortgages at their original levels. The proposal, aimed at helping homeowners who would fall behind in their payments at higher rates, is designed to prevent a surge in foreclosures next year. About 1.5 million subprime adjustable-rate mortgages are scheduled to reset to higher rates in 2008.
But as outlines of the plan become known, some homeowners are complaining that the effort isn’t fair to borrowers who didn’t overextend themselves. Others argue that the government shouldn’t be involved in perpetuating a housing bubble that needs to deflate. A key question: How far should you go to help borrowers who can’t pay their bills?
“People have to be responsible for their own actions,” says Harry Lancz, a small-business owner in Traverse City, Mich. He holds a pair of fixed-rate mortgages, one for his primary residence, which has been for sale for six months, and one for a second home in Louisiana. “What are you going to do when their credit cards get due and they can’t pay? Are you going to bail them out on that, too?”
Like many homeowners, Mr. Lancz, 57, is skeptical that the plan will actually lessen the impact of the housing crisis. “Unless you give them the money, this is just postponing the inevitable,” he says. “The more the government steps in, the more things get into a deeper quagmire.”
Even some subprime borrowers object to the plan. Justin Miller, a 27-year-old mortgage broker in Coral Springs, Fla., says he made a bad investment decision when he bought a $600,000 oceanfront home last December with two subprime loans. But he’s committed to making the $6,000 in monthly payments — and the higher payments once the rates go up.
“A lot of people are trying to point fingers and get themselves out of something they put themselves into,” he says. “I put myself in this position. I need to find a way to make it work.”
Mr. Miller says that the rate-freeze proposal reminds him of a television commercial: The announcer asks, “Do you owe back taxes?” A client responds, “I settled for half of what I owe.” Says Mr. Miller: “How’s that fair? Everything seems to be backward.”
The Paulson plan wouldn’t help subprime mortgage holders who can afford the higher payments. In addition, it won’t help those who can’t manage to make their payments even at current rates. Because of that, some consumer advocates say the plan doesn’t go far enough in helping troubled borrowers.
“This only deals with one of the easiest of the categories” of borrowers, says Mike Shea, executive director of Acorn Housing Corp., a national housing-counseling organization. “It will do nothing to help those people who are currently delinquent and facing foreclosure.” Mr. Shea praises Mr. Paulson for trying, but points out, for example, that some mortgage-loan servicers already are freezing rates for five to seven years, so a grace period shorter than that in the government’s proposal could be a step backward.
…
For many people, the crucial question is whether taxpayers will pick up the tab; Mr. Paulson said they won’t. Melissa Huelsman, a Seattle lawyer who represents homeowners facing foreclosure, says she is in favor of a relief plan as long as it doesn’t entail public funds. “I would support it if the lenders and Wall Street take the hit,” she says.
From the WSJ:
No Bailouts for Borrowers
By ANDY LAPERRIERE
December 4, 2007; Page A21
As the housing market continues to deteriorate, the pressure to respond is growing in Washington. A Treasury Department plan — to work with mortgage servicers to streamline the process for modifying loans for subprime borrowers who can’t afford higher monthly payments — has been in the news the past few days. Yesterday Hillary Clinton announced a plan for a 90-day moratorium on foreclosures and a five-year freeze on mortgage payments for subprime borrowers. It won’t be long before demands are made — including from Wall Street — for a taxpayer bailout of homeowners facing foreclosure.
A taxpayer bailout of distressed homeowners would be expensive, unfair to the vast majority of homeowners and renters who have made prudent financial decisions, and set a troubling precedent that would invite reckless behavior in the future. What’s more, a bailout will not stop the inevitable correction in home prices, and is unlikely to prevent the associated economic repercussions.
The primary argument for a taxpayer bailout is based on a myth — that subprime borrowers are falling behind on their mortgages because interest rates on their adjustable rate mortgages have spiked, making their monthly payments unaffordable. In fact, the vast majority of delinquent subprime borrowers are still paying introductory teaser rates (about 8% on average, a below-market rate for borrowers with checkered credit histories). In other words, for most of these borrowers, their monthly payments have not yet gone up.
It is true that many subprime borrowers were sold a toxic mortgage by unscrupulous mortgage brokers. However, the primary reason for the spike in subprime delinquencies so far is that many subprime borrowers have taken on more debt than they can pay back using any reasonable interest rate.
According to Credit Suisse, the typical subprime mortgage starts at 45% of pre-tax income — before the rate resets. After the first reset, the mortgage payment generally increases to about 55% of gross income (and can go up from there). Many of these loans can’t be restructured or modified; the only way the most distressed subprime borrowers will be able to stay in their homes is if the lender or the taxpayers forgive a significant amount of their mortgage debt.
Since so many borrowers — and not just subprime borrowers — would need to receive substantial debt forgiveness to make their mortgages affordable, a bailout fund would be expensive, likely costing taxpayers hundreds of billions of dollars. At a time when Congress should be trying to confront the trillions of dollars in unfunded Social Security and Medicare obligations, a mortgage bailout would be fiscally irresponsible.
…
A majority of subprime loans during the past few years have been cash-out refinance loans. Many subprime borrowers have extracted, through cash-out refinancing, much more than they ever put into the house in the form of a down payment. Would they be eligible for a bailout? How about people who chose a “stated income” option, so they didn’t have to document their income and lied on their loan applications?
Would a bailout fund be limited to those with certain incomes or home values? Would there be an asset test, or would people with two brand new cars in the driveway or six-figure stock portfolios qualify? What kind of asset test?
Slacking this morning. At EWR for an early (windy) flight out.
From the NY Post:
2ND REALTY ‘ROBBER’ IS CUT LOO$E
The second woman in a pair of wig-wearing, accused open-house thieves was freed on bail yesterday.
Jennifer Jones, 33, was released from Bergen County Jail in New Jersey after posting $65,000 bail on grand larceny charges from four heists in Manhattan and two in Upper Saddle River, NJ.
Alleged accomplice Jessica Joyner, 39, has been free since posting her own bail Saturday. The two buddies are charged with swiping expensive furs, designer handbags, jewelry and cash while attending open houses of apartments for sale on the Upper East and Upper West sides.
One would distract the real-estate agent while the second would allegedly pilfer the baubles.
Cops say the two have confessed to the thefts.
From Bloomberg:
Florida’s Pension Fund Holds Same `Suspect’ Debt as Frozen Pool
Florida’s pension fund owns more than $1 billion of the same downgraded and defaulted debt that sparked a run on a state investment pool for local governments and forced officials to freeze withdrawals.
The State Board of Administration, manager of $37 billion in short-term assets, including the pool, also oversees the $138 billion Florida Retirement System. The board purchased $3.3 billion of debt whose top ratings were reduced following the collapse of the subprime mortgage market, according to documents obtained by Bloomberg News through an open records request.
…
“These were highly inappropriate investments for taxpayers’ money,” said Joseph Mason, a finance professor at Drexel University in Philadelphia. “This is the tip of the iceberg for pension funds. We know the paper is sitting there. There are substantial subprime-related losses that haven’t shown up yet.”
From Fortune:
Fannie Mae could face more losses
Could Fannie Mae be the next large financial company to announce billions of dollars of market losses on bonds backed by distressed mortgages?
The vast majority of Fannie Mae’s mortgages are loans to borrowers with good credit, but over the past five years the government sponsored enterprise became exposed to mortgages that were made to people with poor credit — subprime mortgages — and to mortgages that were made with incomplete documentation of borrowers’ income, called Alt-A mortgages in industry parlance.
One way that Fannie increased its exposure to subprime and Alt-A mortgages was to buy bonds backed with these types of loans. While these subprime and Alt-A mortgage-backed bonds are only a small proportion of Fannie’s overall mortgage holdings, their combined value of $76 billion is almost double Fannie’s $40 billion of capital, which is the net worth of a company and the last cushion against losses.
Losses are climbing on these loans as borrowers default, which has caused the market value of bonds backed with such loans to fall sharply. Investors are bidding down the value of mortgage bonds in anticipation that defaults will prevent many of the bondholders from being paid back in full.
Grim- posting things at 4am…go back to bed man
What is so bad about taking a house back from someone (who shouldn’t have bought it in the first place) and then they can go rent or buy a cheaper house. Isn’t it that simple, you can’t afford something, give it back.
Illegals moving out of NJ in droves. Got to love it.
http://www.nytimes.com/2007/12/04/nyregion/04brazilians.html?_r=1&oref=slogin
OptionOne is shutting down. Nice.
http://www.marketwatch.com/News/Story/Story.aspx?guid=%7b18C75866-34FE-4E54-82BD-75E763F072F1%7d&siteid=yhoo&dist=yhoo
This is the most jidiotic thing I have ever heard. Paulson is a putz.
People need to learn. I say let them lose there houses. These people are part of the reason that people like me were priced out of the market. I feel that everyone else is being punished for using common sense. I know what I can comfortable afford for a rent payment. So that is about what I would want to pay for a mortage. Hence I am still renting. We can sit here point fingers blame everyone else and say but they didnt explain it how it works. So it the lenders fault that you went into it blind and didnt do research. Its the lenders fault that they told you, that you can afford 2000/month when you comfortable afford 1200.00/month on rent. People need to take responsibility and admit the made a bad investment. Take the loss and move on.
Apparantly people do not know how to live within there means. The only help these people should get is a class on how to manage there money and live within there means. Wow what a weird concept.
If this ridiculous plan goes into effect I say we sew for discrimination.
They are discriminating against people who can afford to make payment and against people who have lost there homes.
I say we start a class action lawsuit and sew this guy for millions
oh and they are discriminating against people with common sense who knew they could not afford these prices like myself
This is just a dog and pony show, people already behind on their mortgage payments and people who could afford the payments even after the rate on your adjustable mortgage moves higher are not included.
So basically only people who are making their payments and through income verification can prove they can’t afford reset. These people should never have been in these types of subprime loans to begin with. Plus these people will default anyhow, cheaper to keep them in the house by converting them to fixed.
“The Paulson plan wouldn’t help subprime mortgage holders who can afford the higher payments. In addition, it won’t help those who can’t manage to make their payments even at current rates.”
But it will help Countrywide, Merrill. Citi, etc… What a better gift than a govt led bailout for X-Mas. It does not matter anymore if you are an irresponsible lender, borrower, structurer, rater or investor. The window is open to all.
There was a time when a mortgage was an agreement between a borrower and a lender, not the American taxpayer. Funny thing, there was also a time when Paulson believed that markets should correct on their own.
Grim Safe journey,enjoy.
Let us not take the Paulson plan to hard.
As it most likely only help a lesser % of people than a plan by congress.They are already threatening to take on problem. This would most likely be a broader plan with our tax money on the line.Naturally Clinton is already trying to hand candy out to sheeple.It may be the lesser of the evils out there.
Now lets not be fooled this plan is to help out banks bad paper not sheeple.But it is great window dressing to try to save this paper, for a while anyway.They don’t even have a handle on this stuff.The hope is in time it can be absorbed slowly in as the market can’t even price this stuff right now.
The credit problem from rate freeze how-
ever will make getting a mortgage harder for all.The houseing market will suffer even more declines as more people get taken out of the game.Moral hazard has been pushed
under the rug for the greater good.
As I have stated before I’m not for this
only trying to explore the reasons & out comes.When ever I come to the conclusion that the greater good card is being played
it is not good for me.
#8
I hope Gisele does not decide to leave as well. Now that would be a tragedy.
Homer Says:
December 4th, 2007 at 8:14 am
oh and they are discriminating against people with common sense who knew they could not afford these prices like myself
homer: my wife used to work in HR….she would say that people with common sense are not a protected class so you are free to discriminate against them
I also say let them lose their houses. This rate freeze will only delay the inevitable. I think that is really the only objective – to push this disaster into the future when Bush is out of office. They wouldn’t want to tarnish his “legacy” any further.
You know what is even funnyier govt. pension funds loaded up on subprime crap so if they don’t do something they are screwed either way.
Whats next? Do we help with the Hummer payment and the PSE&G .
What a disgrace.
Paulson who I used think was a stud at Goldman showed me nothing yesterday. I thought he was a capitalist but clearly he is not. This is not the right message to send to the prudent people who took mortgages they could pay and bought houses they could afford.
#14 Mr. Paulson former head of Goldman Sachs,and this is the crap he is peddeling?
Well he is no Bob Rubin, or Bob Friedman, that is for sure.
I think he should be embarraesd.
3b [21],
That’s Comrade Paulson.
#17 Bush and legacy? What legacy? As a registered Independent (have been for a long time), I am no particualr fan of the 2 party system, and I am convinced that we really do need a viable 3rd party alternative (but it won’t happen)
But that being said, Bush and co. have absolutely destroyed the Republican party, it weil take years to repair the damage.
To Quote Mark Twain: “History may not repeat itself, but it rhymes a lot”
I see shadows of 1980s all over again. To me it seems the writing is already on the wall in the form of legislation introduced and placed on the calendar in the House and Senate for another bailout. Take a look at some of the bills introduced in Congress on Thomas dot gov and search for mortgage. The Senate bill S.1100 (Federal Housing Finance Reform Act of 2007) peaked my interest since it reorganizes the entire mortgage industry with a new government oversight agency.
The last banking bailout introduced by newly elected President Herbert Walker Bush one month after he was sworn into office in 1989 eventually cost taxpayers $157 billion which was financed by floating 30-year bonds. The actual cost to taxpayers will depend since we are still paying for it on the interest rates between 1990 and 2020. Estimates range from $500 billion to $1.4 trillion. I will split the difference between these two estimates and predict that the ultimate cost for the 1980s S&L bailout will be $950 billion. That comes to about $32 billion a year-and we’re locked into it for thirty years, no matter what we do or who we elect.
I wonder what the number will be (without interest) this time? Dare I say over a trillion dollars, and who the heck is going to buy the debt this time?
3b,
I was reading an article recently where they did a game theory analysis of the US election system. I do not remember the details but apparently our current setup will almost always dictate a 2 party system. It was very interesting and well supported. I will see if i can dig it up
When people owe money and ultimately can’t pay back, SOMEONE takes a loss. You can spin and massage it all you want. So the plan is to shift this loss from irresponsible parties onto the backs of the prudent. The loss has to be shifted somewhere.
Some system, you buy a house that you can’t afford. WS sells the debt to pension plans. The borrower loses his house, his pension plan gets rocked and the American taxpayer bails out WS. Capitalism at its best.
Hedge-fund investors suffered their worst month of investment performance since the bursting of the dot-com bubble, with intense volatility in global markets tipping every strategy into a loss, London newspaper the Times reported, citing preliminary figures from Hedge Fund Research (HFR).
http://www.cnbc.com/id/22093903
Excuse me for being cynical but, I wonder if this has any connection to decision of some closed funds to start accepting $ from the little guy?
Interesting note this morning on commercial RE.
60 day delinquencies were up by 50% on Nov. The overall rates were still very low, but it might be worth tracking.
http://www.efinancialnews.com/homepage/content/2349318542/restricted
BC Bob [26],
The bookies never lose. WS is a bunch of bookies. As Bobby D. said in the movie Casino, “The glitz, glitter, comps… all designed for one thing, to get your money.”
Gary [29],
That is how the game is played. Ooopps, there goes the dollar.
#30 BC: But hey we are number 1, to think any thing less, would be unpatriotic.
Too bad the crowd running around saying dissension is unpatriotic, if they only knew how the founding fathers argued vehemently over almost every aspect of our Republic.
#12 Agree with John.
This whole thing is an eye wash. Paulson plan will help a small percentage of owners. But it takes some heat of the administration.
#27 Shore Guy
I think most funds when they close still allow institutional investors who are already in the fund to buy and sell. This way SB, ML or your run of the mill CFP who is already in the fund can move their clients in or out.
Also if you have a family member in a closed fund, they can get you in.
The whole bailout idea isn’t designed to help individual homeowners, and it’s only designed tangentially to help investors. It’s designed to make voters and political contributors support a Republican administration.
AntiTrump Says:
Paulson plan will help a small percentage of owners. But it takes some heat of the administration.
Agree. I think any kind of bail out loan will involve full documentation of income and qualifying for a fixed rate loan. 99% of the people who are in trouble are those that overstated or misrepresented their income in the first place. Gubmint will be able to say they’re offering some help, but the number of people who will actually qualify for a new loan will be small.
#33 “PGC Says:
December 4th, 2007 at 9:50 am
#27 Shore Guy
I think most funds when they close still allow institutional investors who are already in the fund to buy and sell. This way SB, ML or your run of the mill CFP who is already in the fund can move their clients in or out.”
Thanks. I have always stayed with non-exotic investments, so I appreciate the insight. The first thing that came to mind was walking up to a door on a side street, using a secret knock and telling the guy through a slit in the door that “Tony sent me.”
Also if you have a family member in a closed fund, they can get you in.
#31 3b
The lack of critical debate on every level is one of the key reasons that capitalism fails to provide for the various checks and balances that it would in a hypothetical world. In order for capitalism to function effectively, the various parties must be fairly well informed and actively assimilate new information constantly. while large companies tend to constantly absord new information, the average Joe sixpack does not. If the consumer is not going to make an educated decision then the flow of information that is required for capitalism to work effectively and efficiently begins to break down. There are also other issues such as cable companies having state sanctioned monopolies and artificial barriers to entry for new players, for example.
We certainly do not have a “free” market, we have something closer to a hybrid managed capitalistic economy. Unfortunately all of the great “self-correcting” mechanisms that exist in a free market capitalistic economy are not functional in our managed version regardless of how the FED or the government may hype them.
My main point here is that a capitalistic market/society fails when people do not make independent decisions, but instead simply act as consumerist zombies
#37 kettle: Agree, and that is how the powers that be want it. The best way to keep Joe six pack in line, is to keep him/her uninformed and docile.
it is ironic that we are runninga round the world preaching Democracy, and all the rest.
Seems to me Democracy does not work, if people are uninformed,and uninvolved, and most Americans are both.
Off TOpic *
Does anyone besides me get physically ill when listening to our President?
KL
#39 Yes I do, I am at the point where I have nothing but contempt for the man, not because he is a Republican or a Democrat, simply because he is an ignorant, arrogant, baffoon. A very dangerous combination.
And then I look at the choices for 08,and I think I may simply have to sit this election out.
From the President’s ongoing press conference, an answer to a question about the sub-prime mortgage issue:
We have been working on it since August… should not be subsidizing lenders who made bad loans… mortgage industry more complex than the past…taking awhile to fix… people around the world own bundles of US mortgages… the treasury secretary is making progress.
I assume the entire transcript will be on the WH website later.
No I do not get sick.I become informed on his positions.Like or not he is the President.
“it is ironic that we are running around the world preaching Democracy,”
3b,
And we borrow from Communist China to pay for granite countertops, that we can not afford, and hummers that cost too much to drive.
a lot of folks here have cfa, mba, s7 or whatever. what is the benefit fo reit investment over other partnership? one obvious one is limited liability: if the things do not go well, walk away and let lender to deal with the mess. maybe this is the law (regularation) you don’t like. but a law is a law. you got to follow and use it at your best interest. that is why real estate investment is best for long run.
all: can anyone direct me to a resource on the retail boat industry in NJ for 2008? I know the answer (it’s %ucked), but I need something better than that…..merci to anyone who can help?
#42 mike: Very difficult to understand what his positions are.I am not sure he understands his positions.
#43 BC Bob: Truly ironic.
Based on speed at which our govt moves, Johh Q will be hanging on his clothes line, with his dirty wears, before we can agree to disagree.
Joe and Jane sixpack were simply the setup to propagate the sting. The swindlers con the sheep into signing papers to move the dead asset along while collecting the fees and short the h*ll out the investment (GS) knowing full well it’s going to blow up thus making even more money on top. It’s hot potato, just pass it along quickly and hope you don’t get caught. They knew all along what they were doing. And now, they’re devising ways to switch the con and make the prudent ones pay for the mess. It’s deviously brilliant.
Chi [45],
Take a look at BC, not Boston College, on the charts. They are witnessing a slowdown not seen since 1965.
According to an analysis for The Wall Street Journal of more than $2.5 trillion in subprime loans made since 2000, as the number of subprime loans ballooned an increasing proportion of them went to people with credit scores high enough to qualify for conventional loans with far better terms.
In 2005, the peak year of the subprime boom, borrowers with good credit scores were recipients of 55% of subprime loans.
The study by First American LoanPerformance says the proportion rose even higher by the end of 2006, to 61%.
Wait, wait, don’t give up yet… there’s a silver lining, according to the Journal.
“Credit-worthy borrowers holding subprime loans may turn out to serve as a sort of shock absorber for the current mortgage crisis. They may be more likely than traditional subprime borrowers to withstand the double whammy of declining home prices and adjustable-rate mortgages soon due to reset at higher interest rates.”
It’s a weird silver lining, but it’s a silver lining nonetheless… we guess… although, the fact that selling people expensive mortgages they don’t need can be considered a silver lining probably is indicative of still deeper problems.
By the way RTC did not cost the govt that much money. You are giving intitial numbers, it took them many many years to get rid of all properties and the last properties the RTC was selling was at a good profit. But knowing the US Govt they did not take the profit to pay off costs of RTC they used it elsewhere.
BC Bob Says:
December 4th, 2007 at 9:24 am
Some system, you buy a house that you can’t afford. WS sells the debt to pension plans. The borrower loses his house, his pension plan gets rocked and the American taxpayer bails out WS. Capitalism at its best.
Bost: Bankers get paid in cash and have the corporate veil to shield them from liability.
That said, the LOD wants blood…you have Spector, Oneal, Prince, Cruz and if MS has to split the bit again (rumblings about it)…they are talking about knifing the Mack….
spit not split….
From the WSJ:
Paulson Urges Congress
To Act on Loan Woes
WASHINGTON — The Bush administration is putting the burden on Congress to fend off an approaching wave of home foreclosures.
[snip]
Mr. Paulson’s comments came as the president of the Federal Reserve Bank of Boston suggested in a speech that more than half of homeowners with subprime ARMs may be qualified to refinance into a less-costly loan by taking advantage of programs already available.
In an interview, Mr. Rosengren said some borrowers with relatively good credit may have been steered into a subprime loan because it was more profitable for the lender. Other borrowers “who might have been considered prime based on their credit score” wound up in subprime loans because they didn’t have adequate funds for a down payment, didn’t wish to document their income or assets or wanted to buy a home that was more expensive than they could have qualified for, a Boston Fed study found.
http://online.wsj.com/article/SB119669624800711876.html?mod=dist_smartbrief
3b I agree, but I take from it what I can as he is the guy in charge it is smart to listen.
Everybody blew this off….maybe I can be more pointed….please respond grim, clot, KL or Pat if you have a moment….
chicagofinance Says:
November 27th, 2007 at 9:57 am
Questions:
#1 I have a client that is very possibly going to dispose of a large real estate parcel…..has anyone ever conducted a “dog & pony” show for realtors? Is this considered bad form? Is there a good RFP out there for such a purpose? I’ve done the equivalent for banks and tech consultants, but I don’t know whether such an approach would come across as heavy-handed in this scenario.
#2 How does compensation work for referrals among realtors within the same company? As an example, if I know Grim Bednarski who works for the national brokerage Dewey, Cheatum & Howe (DCH) in the Clifton office. I have a property in Oshkosh and I know that DCH has an office in Oshkosh. However, if I call Bednarski and he sends the referral to DCH in Oshkosh, what happens in terms of attribution/compensation?
Thanks for any and all responses.
Nothing to see here. Fort Lee back under $4 The recession is over.
http://www.ams.usda.gov/dyfmos/mib/rtl_mon_whl_07.pdf
Chi,
There are some trade magazines on the boating industry:
http://www.ibinews.com/ibinews/index.html
Bost: BC…..thx…you got a Big Bottom in my book… ;-)
I think its timed to post the link to the anti-bailout petition again.
Grim…is it possible to have a semi-perminant link on your homepage insteasd of digging through these posts?
another question…is the petition for a state or federal bailout?
I’m pissed…here I am living in a cramped 2BR apt…making a very decent salary….wearing 15 dollar jeans and without a plasma tv….waiting 4 years for more reasonable home prices.
Call me stupid for being finacially responsble!
scribe Says:
December 4th, 2007 at 10:54 am
Chi, There are some trade magazines on the boating industry:
http://www.ibinews.com/ibinews/index.html
grazie…
From the WSJ:
SIV Exposure Seen at Some Money Funds
Complex Securities, Held
Even in Small Amounts,
Can Pose Theoretical Risk
By SHEFALI ANAND
December 4, 2007; Page C15
At least a dozen money-market mutual funds are likely still holding securities recently put on review for possible downgrade by Moody’s Investors Service, according to regulatory filings.
The complex securities, known as “structured investment vehicles” or SIVs, have been at the heart of turmoil in the markets due to a difficulty in selling some of them.
MONEY WATCH
• Some money funds that may hold securities that were recently put on review for a possible downgrade by Moody’s:
• Barclays Global Investors’ Institutional Money Market fund
• BNY Hamilton Money Fund
• Charles Schwab Advisor Cash Reserves
• DWS Money Market Trust
• Morgan Stanley Active Assets Institutional Money Trust
• Munder Institutional Money Market Fund
• Phoenix Insight Money Market Fund
• Profunds: Money Market ProFund
• RiverSource Variable Portfolio Cash Mgmt.
• UBS RMA Money Market Portfolio
• Western Asset Money Market Fund
Source: WSJ research
The recent batch of regulatory filings show just how widely these SIVs have filtered into money-market funds, which are considered among the safest investments around. SIVs typically raise money by selling short-term debt and using it to buy higher-yielding long-term securities.
[snip]
The funds range in asset size from $2 billion to $36 billion, and hold about 1% to 2% of their investments in some of the SIVs. While these are very small percentages, they can theoretically still pose a risk. That’s because, if even a relatively small sliver of a money-market fund’s assets were to lose all of its value, a fund could technically be termed to have “broken the buck,” or violated the requirement to maintain a $1-a-share value.
To be sure, no money-market fund has broken the buck in the recent market turmoil. In addition, nobody is expecting SIVs to lose all their value and they have underlying collateral that will pay investors. Nevertheless analysts are paying attention.
“No matter what the exposure, if it’s a penny or millions dollars, we’re keeping our eye on it,” says Peter Rizzo, an analyst at Standard & Poor’s whose team reviews money funds rated by them weekly.
Among funds holding SIVs is the $29 billion Western Asset Money Market Fund, run by a unit of Legg Mason Inc. The fund holds a SIV called Orion Finance, which was on Friday downgraded by Moody’s. Orion represents about 0.5% of the fund.
A Legg Mason spokeswoman said in an email that the company is confident in the stability of the fund’s net asset value. “By and large, SIVs are paying on time, and Legg Mason’s money funds’ exposure to SIVs continues to come down as paper matures and pays.”
On Friday, Moody’s placed 12 SIVs on review for a possible downgrade.
A downgrade could require the managers to take remedial measures to prevent the funds from losing value. The funds’ managers should ideally already be evaluating the securities “to ensure that they still represent minimal credit risk to the portfolio,” said Henry Shilling, an analyst of money funds at Moody’s. If the fund’s managers and board are confident that the security in fact will pay up, the fund can continue to hold the securities.
Fund companies holding the SIVs that are on review say they are confident that these securities will pay up on maturity. Besides, these are only a small percentage of the funds, and many funds have now stopped buying securities issued by SIVs.
In a report issued last month, Standard & Poor’s Ratings Services estimated that among the 500-plus U.S. money funds it tracks, SIV exposure had come down 40% in two months through early last month.
Investments in SIVs maturing this month or next year are likely still on the funds’ books, since it would be hard for funds to have sold this paper in the current market. A look at portfolio holdings through Sept. 30 show a number of funds hold 1% to 2% of their investments in SIVs whose rating was recently put on review for a potential downgrade by Moody’s.
For instance, Barclays Global Investors’ Institutional Money Market fund, which manages $29 billion in assets, has investments in SIVs like Tango Finance., Sedna Finance and Dorada Finance., which were on the Moody’s list. “The funds invest in a well diversified portfolio of high-quality, short-term money market instruments, and we are confident in our portfolio management process,” said a BGI spokesman via email.
Some money funds from Charles Schwab, including Schwab Advisor Cash Reserves, hold SIVs like Five Finance and Whistlejacket Capital. A Schwab spokeswoman said in an email that their money funds have little exposure to SIVs and “are not currently adding to our SIV fund holdings.”
The $12 billion-BNY Hamilton Money Fund holds investments from Hudson-Thames and Links Finance, on the Moody’s list. “We consider it to be minimal credit risk,” said Mike Dunn, a fund spokesman.
The Morgan Stanley Variable Investment Series-Money Market, and Active Assets Institutional Money Trust hold investments in Victoria Finance and Links Finance. These holdings are “very small, and we do not expect these positions to have any adverse impact on the NAV of either fund,” said a fund’s spokeswoman in an email.
Funds at Deutsche Bank and UBS also hold SIVs. A Deutsche spokesman said: “As of October 31st our exposure to the SIVs at issue was less than 1.5% of the portfolio. We take all rating actions seriously and we will continue to monitor the situation closely.” A spokesperson for UBS didn’t comment.
39 kl
Yes
for your info: crude oil down almost 3%, back to mid 80’s. it has been a must-have by some experts in this blog.
Ok, so we are getting ready to get rejected on another offer that we are going to make tomorrow.
The sellers bought it themselves in 2003, for not-cheap. Their OLP was their 2003 price plus 30% (not adjusted). Their current LP is 20% above the price they bought it for in 2003. It’s been on the market since May.
What would you give them for it today? The price they paid, their price plus some, 10% more?
66#, start with 10% offf LP, which would be roughly 2004 price. good luck!
39 KL
Yes. makes me want to vomit just passing a room with him on the TV. Soon. Soon. No more of the f*ing shrub.
I wish everyone could write in Bloomberg as a candidate.
sl
chicagofinance Says:
December 4th, 2007 at 10:50 am
Everybody blew this off….maybe I can be more pointed….please respond grim, clot, KL or Pat if you have a moment….
Just put an open house sign out front and lay down some cheese and the rats will come.
Register as Independent Voter
Dobbs: Middle class needs to fight back now
POSTED: 9:12 p.m. EDT, October 18, 2006
By Lou Dobbs
CNN
Adjust font size:
Editor’s note: Lou Dobbs’ commentary appears every Wednesday on CNN.com
NEW YORK (CNN) — I don’t know about you, but I can’t take seriously anyone who takes either the Republican Party or Democratic Party seriously — in part because neither party takes you and me seriously; in part because both are bought and paid for by corporate America and special interests. And neither party gives a damn about the middle class.
Our country’s middle class is not just collateral damage in what has become all-out class warfare. Political, business and academic elites are waging an outright war on working men and women and their families, and there is no chance the American middle class will survive this assault if the dominant forces unleashed over the past five years continue unchecked.
They’ve accomplished this through large campaign contributions, armies of lobbyists that have swamped Washington, and control of political and economic think tanks and media. Lobbyists, in fact, are the arms dealers in the war on the middle class, brokering money, influence and information between their clients our elected officials.
Yet in my entire career, I’ve literally never heard anyone in Congress argue that lobbyists are bad for America. In 1968 there were only 63 lobbyists in Washington. Today, there are more than 34,000, and lobbyists now outnumber our elected representatives and their staffs by a 2-to-1 margin.
According to the nonpartisan Center for Public Integrity, from 1998 through 2004, lobbyists spent nearly $12 billion to not only influence legislation, but in many cases to write the language of the laws and regulations.
Individual firms, corporations and national organizations spent a record $2.14 billion on lobbying members of Congress and 220 other federal agencies in 2004, according to PoliticalMoneyLine. That’s nearly $6 million a day spent to influence our leaders. We really do have the best government money can buy.
But as I discuss in my new book, “War on the Middle Class,” what if we all resolved that we would not permit either the Republicans or Democrats to waste their time and ours with wedge issues? Both parties love to excite their bases by focusing on wedge issues like gay marriage, the pledge of allegiance, school prayer, judicial appointments, gun control, stem cell research and welfare reform.
Each of these wedge issues is important in varying degrees to large numbers of us, but none of them rises to the level of urgency or the requirement of immediate change in public policy.
These issues are raised by both political parties to distract and divert public attention from the profound issues — like educating our youth, economic inequality and the war against radical Islamic terrorists — that affect our daily lives and the American way of life. Imagine the consternation in Washington if both parties had to contend with a national electorate whose political affiliation had dramatically changed within a matter of weeks or months.
In both Republican and Democratic administrations, Congress has passed and sustained billions of dollars in royalty payments and subsidies to big oil companies; pushed through a corporate-written, consumer-crippling bankruptcy law; embraced the death of the estate tax; approved every free trade deal brought to a vote; and supported illegal immigration for the sake of cheap labor.
The party strategists and savants are telling us that fewer Americans will turn out to the polls than ever before, disgusted by a disgraced former congressman. But we don’t have to wait for the midterm elections to begin to engage in our new political life.
There’s something all of us could do that would have an immediate impact and send a powerful message to both corporation-dominated political parties and to our elected officials in Washington. Our so-called representatives in both parties have been working against the interests of the middle class for so long that they take our votes for granted, or they take advantage of the fact that a sizable number of us don’t vote at all.
So what if a majority of us decided once and for all to walk into our town and city halls all over the country and change our party affiliation from Republican or Democrat to independent? What if that sizable number of us who don’t vote at all decided to register as independents? For the first time in decades, working middle-class Americans might just get the attention of our elected officials in Washington.
Our middle class has suffered in silence for far too long, and it cannot afford to suffer or be silent much longer. Hardworking Americans have not spoken out about their increasingly marginalized role in this society, and as a consequence they’ve all but lost their voice.
Without that strong, clear and vibrant voice, all the major decisions about America and our future will be made by the elites of government, big business and the dominant special interests. Those elites treasure your silence, as it enables them to claim America’s future for their own.
I sincerely hope that we will find the resolve to face these challenges to our way of life, and we do so soon. George Bernard Shaw said, “It is dangerous to be sincere unless you are also stupid.”
I’m stupid enough to be absolutely sincere in the hope that middle-class America will awake soon and take action.
“it has been a must-have by some experts in this blog.”
bi,
The only must have, for those on this site, is liquidity. Unfortunatley, if you have a decaying, weakening asset that is on the threshold of a titanic decline, you are not liquid.
“What would you give them for it today? The price they paid, their price plus some, 10% more?”
Ann [66],
The price they paid is of zero consequence to me. What works for you?
“borrowers with good credit scores were recipients of 55% of subprime loans.”
Isn’t that a loose definition of “subprime”?
Ann To echo BC don’t worry about what they payed.
They will be lucky to get that much in the forseable future.So lowball away!
#73
Good credit becomes irrelevant when you take a loan for 10X your annual income and your house notes is 60+% of your budget
“3b I agree, but I take from it what I can as he is the guy in charge it is smart to listen.”
I didn’t realize we were talking about Cheney.
Ann, i am not a RE agent, but i would look at what similar properties would go for in 03 then factor in inflation +3% as a first run guess
NJpatient OK mouth piece but its still the same.
Dow Chemical to shutter plants, layoff 1,000 people
>>
Does this affect Plainsboro office?
patient, #73
I don’t get that one, either.
“I don’t know about you, but I can’t take seriously anyone who takes either the Republican Party or Democratic Party seriously”
Dobbs is so cute – he’ll say all that and then go pull the Republican lever like he always does.
Although maybe I misjudge – maybe the last 4 presidential elections he’s voted for Perot twice and Nader twice – that’d make him a freakin’ genius.
The insanity started as early as 1999 – 2000. We were standing in line then at open houses with a realtor at the front door telling us to enter in a single file and stay to the right. You think I’m kidding? For anyone thinking about what to bid on a house, take the price of that same house in 1999 and figure an appreciation of approximately 4% to 5% per year. That’s what you should bid. If the stupid b*stard seller doesn’t accept, say buh bye and move on to the next. They don’t dictate the terms, you do.
From the NY Post:
ADJUSTABLE FATE
PAULSON’S MORTGAGE LIFE-LINE MAY TURN INTO A NOOSE
By PAUL THARP
December 4, 2007 — Treasury Secretary Hank Paulson’s new safety net to prevent a flood of home foreclosures could actually drown many hard-working homeowners who never missed a mortgage payment, experts say.
[snip]
For hundreds of thousands of homeowners already in foreclosure or who have lost their homes, there appeared to be no solution offered in Paulson’s remarks.
Some local lawmakers in recent months have set up their own foreclosure rescues with lenders.
In September, state Sen. Jeff Klein, (D-Bronx/Westchester) got Countrywide Mortgage to pick 1,000 subprime mortgages in default or about to default, and take over the paper and replace it with what has been typically a 6-percent fixed-rate loan.
California Gov. Arnold Schwarzenegger followed weeks later with a similar plan with Countrywide.
“This is a model that’s working,” Klein said. “I’ve been waiting breathlessly for Secretary Paulson’s plan, but there aren’t any details.”
http://www.nypost.com/seven/12042007/business/adjustable_fate_99215.htm
#34PeaceNow Says:
December 4th, 2007 at 9:55 am
“The whole bailout idea isn’t designed to help individual homeowners, and it’s only designed tangentially to help investors. It’s designed to make voters and political contributors support a Republican administration.”
i don’t see how this could help a republican administration.
first of all, there seems to be a backlash against this from the ordinary person who stayed within their means. hopefully, there are more of them out there than those who stupidly bought what they couldn’t afford (again hopefully) if that were the case, then, wouldn’t a bailout plan hurt the administration as more people become resentful of the punishment they recieve for being honest and responsible?
secondly, the democrats want a bailout also. so, even if there is a benefit for the administration, wouldn’t the democrats be able to say they supported a bailout also? they may even claim they wanted a more comprehensive bailout.
i think the problem is that both parties are in a agreement on the bailout. i know that there are many many other issues that come into play when choosing who to vote for, and i don’t advocate sitting an election out, but on this issue alone, i think not voting is really a vote for some leadership.
“They don’t dictate the terms, you do.”
Gary,
Now you’re talking.
Jack Nicholson, “A Few Good Men”.
“You can’t handle the truth”
http://www.longislandbubble.com/bubblemap.php
at bottom of page there is a home appreciation tool. First look up price and year home sold for on the domania link plug it in and they it shows what you should pay at either 3%& or 5% appreciation. Gives you a clue about how bubble priced house is.
“mikeinwaiting Says:
December 4th, 2007 at 11:38 am
NJpatient OK mouth piece but its still the same.”
Fair enough
82 gary
sometimes I want to crawl through the intertubes and splash you with cold water (or perhaps scotch). For that post, I toast you.
Cheers!
TCM
The bailout isnt about one party getting more votes. No one except for the banks know how band the situation really is at the moment. The banks have most likely gone to the politicians and explained that they are in very deep ****. Interestingly enough we are in a sort of chinese finger trap. The more we try to bailout banks or anyone else the greater the negative impact on the economy due to the inherent weaknesses that stay in the system instead of being purged by a recession. But if nothing is done the situation is going to get ugly before it gets better. the choice comes down the lesser of 2 evils. For the politicians the lesser evil to bailout the banks, for if they do nothing then it looks like they are ignoring the situation to the general public. This has been alluded to by Chifi and others. the politicians can either pay the piper today or pay the piper tomorrow, the politicians in office would rather pay tomorrow even if that means a higher price down the road.
njpatient,
Johnny Black on the rocks will do. :)
From the WSJ:
How Florida Might Unfreeze a Fund
Adviser Poses Asset Split
And a Redemption Fee,
But Some Parties Balk
By CRAIG KARMIN and TOM LAURICELLA
December 4, 2007; Page C1
Officials in Florida are scrambling to reopen a state-run fund that has been crippled by withdrawals from local governments and school districts amid worries about its exposure to subprime-mortgage loans.
[snip]
Mr. Wilson, from Florida’s Jefferson County schools, says that he had to overdraw the school’s bank account by $500,000 to pay his staff Friday. The school district has $4.1 million in the state-run fund and hasn’t been able to get access to the cash because the state cut off withdrawals. Mr. Wilson also had to stop payment on checks to the local electric company so that teachers could be paid.
http://online.wsj.com/article/SB119673985690712810.html?mod=hps_us_whats_news
And while you are ranting just ask the hot wife or daughter to stay on as part of the deal as your personal maid/nanny/geisha!! We are dictating terms aren’t we?
gary Says:
December 4th, 2007 at 11:42 am
The insanity started as early as 1999 – 2000. We were standing in line then at open houses with a realtor at the front door telling us to enter in a single file and stay to the right. You think I’m kidding? For anyone thinking about what to bid on a house, take the price of that same house in 1999 and figure an appreciation of approximately 4% to 5% per year. That’s what you should bid. If the stupid b*stard seller doesn’t accept, say buh bye and move on to the next. They don’t dictate the terms, you do.
Grim,
11 Bruce Circle, Short Hills
So what’s the story behind this one? That’s well under assessed value and comps.
Thanks everyone re pricing a house on a 2003 comp
If we do 10% off their current list or take their 2003 price that they bought it for and appreciate it at 3% a year, both numbers end up roughly the same.
If we do 5% appreciation from 1999, we end up at their 2003 price. Which is probably more like the real price.
But, for now, we’ll go with the 10% off LP, or roughly a 2004 comp and I’m sure we will get rejected anyway, so no worries!
Thanks all!
Subprime woes spread north of the border
Analysis: Canada cuts rates in response to U.S. woes
By MarketWatch
Last update: 11:03 a.m. EST Dec. 4, 2007
WASHINGTON (MarketWatch) — With the Bank of Canada cutting interest rates on Tuesday, the U.S. subprime mess has thus claimed another victim, contrary to the happy talk from U.S. officials earlier in the year that it would remain “contained” to a small sector of the U.S. economy.
The bank explicitly cited the contagion from subprime in its statement announcing the quarter-point cut in the overnight rate to 4.25%.
http://www.marketwatch.com/news/story/subprime-woes-spread-north-border/story.aspx?guid=%7B7DEE04F2%2D668F%2D4882%2DB85D%2D59CD0D389D8B%7D
BTW the bail out screws the bond investors big time. Remember subprime bonds that had prepayment penalites and 2/28 and 3/27’s with terms that jack up rates in the reset were sold at a prem to the buyers. Only the people who actually pay the loans would be paying the big bucks and that would offset the losses from the deadbeats. The rate hikes made them more secure.
Now Paulson wants to take away all the resets from the people paying on time and lower the profitability of those mortgages but wait they were pooled with the deadbeats who aren’t getting help. Those bond investors are going to get a second spanking. When you have performing and nonperforming loans pooled together the only profit is from the peforming loans. Significantlly cutting the profit on the performing loans in a time when there are far more than expected nonperforming loans will kill the investors in those 2006/2006 alt a funds. Plus the pool was making an assumption that people would refinance elsewhere at a fixed rate and pay a big prepayment penalty, now that is gone too.
This is like making an SUV loan where if the price of gas goes above $4 you get to give the truck back.
“Although domestic demand is still healthy, Ottawa is also worried that the Canadian dollar has gotten too strong, thus threatening the exports that account for more than a third of Canada’s gross domestic product”
scribe [95],
It will be a race, of the currencies, to the bottom. Join the downhill speed slalom.
Why is it when I read these articles about Paulson meeting with mortgage execs, I think back to the Stonecutters episode of The Simpsons?(perhaps my the best episode ever).
It did start in 1999.
I bought my place in 1999 which was an open unadvertised house Christmas week, realtor just plucked sign in front. She told me day before as she showed me an other house. Well anyhow the owner deadbolted every door in house so ex-wife would not steal any more things and she had her boyfriend come in night before with an ax and smashed in every door in house and ransacked it.
I bought house five minutes into open house and stopped the open house. There were three couples there already and one was headed back with a check. Owner could not move out till March 30th and by time we closed I was up 20K. Houses were doing up over 5K a month.
In fact a y2k consultant I was working with in 1999 who made 120K a year bought a house in Great Neck on a 40 by 100 lot in original condition from a widow who never worked whose blue collar GED educated husband had bought the house 50 years earlier in brand new condition. He commented in 1999 how crazy it is that he works 60+ hours a week with an MBA to afford a house that a ditch digger could afford a generation earlier. AND THAT WAS 1999!
“This is like making an SUV loan where if the price of gas goes above $4 you get to give the truck back.’
John [96],
And if you are GM, you don’t care, the note is shifted to the US taxpayer.
“the Stonecutters episode of The Simpsons?(perhaps my the best episode ever)”
It gets my vote
vodka (25)-
Seeing a layman’s analysis of that conclusion led me several years ago to the belief that the current system is so entrenched, only extraordinary measures can overturn it. The possibility of a third party’s upsetting the apple cart is almost mathematically impossible. Nothing, short of armed insurrection, will change the mess we’re in.
So, wake me up when the stockpiling of arms begins.
vodka (37)-
“…we have something closer to a hybrid managed capitalistic economy…”
I think the term for that is “fascism”.
“The recent spike in home foreclosures in Massachusetts is caused primarily by falling housing prices, and not by rising mortgage payments, according to research released yesterday by the Federal Reserve Bank of Boston.”
“The contrarian report suggests the common understanding of the foreclosure crisis is somewhat mistaken. Unaffordable loans don’t cause foreclosures directly. Even as subprime lending became more common, even when people fell behind on mortgage payments – during the economic downturn in 2001, for example – foreclosures were rare because house prices continued to rise.”
http://www.boston.com/business/globe/articles/2007/12/04/falling_prices_driving_crisis/
#102,
Why do I think the first attack would be called “The March on Brigadoon”?
3b (38)-
“The best way to keep Joe six pack in line, is to keep him/her uninformed and docile.”
Agreed. Here’s my Top Ten list of gubmint-sponsored mind control:
1. Britney Spears
2. Entertainment Tonight
3. American Idol
4. public education
5. NASCAR
6. True Religion jeans
7. plasma TV
8. malt liquor
9. KFC
10.Walt Disney corporation
scribe [95],
More from the Canucks;
“The Ontario government will join a growing parade of banks and private sector companies taking multimillion-dollar writedowns on commercial paper investments ravaged by a global liquidity crisis.”
“Ontario Finance Minister Dwight Duncan acknowledged in an interview yesterday that the government will be forced to write down the value of its investment in a class of short-term debt known as asset-backed commercial paper (ABCP).”
He said his office has not yet determined the size of the writedown.
“It’s liable to be a lot of dollars,” Mr. Duncan said.
http://www.globeinvestor.com/servlet/story/GAM.20071204.RONTARIO04/GIStory/
Clot –
Ring ring I have been stockpiling ammo in dry boxes at the in-laws in way upstate NY for a year now. Not that I expect an armed insurrection, just like having my bases covered while it is still at a relatively low price. Mixed assortment of 12 gauge, 20 gauge, high powered rifle hunting calibers and 22 rounds to stay sharp. Noting that my cushy science degree/job may not be able to put food on the table if times get tough but hunting and butchering skills can. Tin foil hat on and back to my regularly scheduled lurking
Clot [106],
Not to worry. The fed is alert and flexible. Comforting, no?
so if by some miracle, there is no bailout, what are the consequences? will there be widespread bank failures? if the damage is already done, isn’t this a case of pick your poision?
Clot, #103
We are very close to meeting the definition of a fascist economy ( remember the wiki link i put a week or so ago). But i was trying to avoid starting that argument again :)
Chifi,
Please accept my apologies as I did not see your oringinal post. If I refer a client that came to me but I cannot service for whatever reason, I refer to another office or to my office I get a refferal fee of 20-25% of the top of the listing commission.
Does that help?
KL
Clot # 106,
Disney is definitely #1 on that list. that is where all of the indoctrination starts, and dont worry they have heroin for the masses as well just look as disney land/world
Skeptic 110
it has been a “pick your poison” from the get go. either way the US economy is essentially insolvent. there is no painless fix for that
#106 clot: True Religion jeans? I must have missed that one.
ChiFi (57)-
1. I’ve never heard of a “dog & pony” being held for a piece of RE like the one you reference. A more to-the-point approach would be to have three separate companies conduct their own assessments of the property, make presentations to the seller and choose the company whose analysis and marketing plan sounds the most do-able.
2. Most “traditional” RE companies allow their agents to refer business to other company offices and collect a referral fee, less a percentage of that referral going to the broker. Companies like Re/Max and some other agent-centric companies will allow the referring agent to receive almost the entire amount of the referral fee. Under this system, the referring agent often will do more research on the proper agent/office to which to make the referral, as well as keep tabs on the transaction once it’s underway. The referring agent stands to make significant money, and his extra skin in the game motivates him to make a higher-quality referral.
#113 kettle: I have done the pilgramge to Disney World Twice.
I know it is un-American to say this, but with the exception of Space Mountain, I think it is one of the most over rated places, period.
“The fed is alert and flexible. Comforting, no?”
Like a wet blanket on a cold night.
#113 kettle, #116 3b:
I was not happy about my traveling companions wanting to go to Disney World back in 2001. I thought that Epcot was just a giant golf ball. I warmed up to the whole thing when I realized I could drink my way around the world without having to go through EWR 15 times.
Seeing a layman’s analysis of that conclusion led me several years ago to the belief that the current system is so entrenched, only extraordinary measures can overturn it. The possibility of a third party’s upsetting the apple cart is almost mathematically impossible. Nothing, short of armed insurrection, will change the mess we’re in.
You see clot, this is why I love your posts. I would have just said ” Ya can’t fight city Hall”
This blog would’nt be the same without our resident smart a5s.
KL
“I warmed up to the whole thing when I realized I could drink my way around the world without having to go through EWR 15 times.”
[118],
And your drinks were priced in US dollars. Imagine what you would have spent in other currencies around the world.
bystander (105)-
Naw. I’ve got nothing against Brigadoon, or any other nice town. Nice towns are nice, and if you live in one, that’s great. Of course, the latecomers to places like Brigadoon are way more likely to be cast back into the muck when their homes plummet into negative equity, and their owners find it difficult to refinance at 150% of value.
3b #116
The wife and i had to go to disney land (the florida one)last summer for a wedding. We both found it down right scary. Its like a giant party for the lowest common denominator of american society. The only point of disney is consumption.
BC (109)-
“The fed is alert and flexible.”
My dachshund is alert and flexible, too. Moreover, she is much more useful to me than Bernanke et al.
http://www.akc.org/breeds/dachshund/index.cfm
Clotpoll Says:
December 4th, 2007 at 1:10 pm
3b (38)- “The best way to keep Joe six pack in line, is to keep him/her uninformed and docile.”
Agreed. Here’s my Top Ten list of gubmint-sponsored mind control:
9. KFC
clot: consider me docile……
Clotpoll Says:
December 4th, 2007 at 1:52 pm
BC (109)-“The fed is alert and flexible.”
My dachshund is alert and flexible, too.
mmmmmmm….hot dog…….
KL & clot: thx
vodka (122)-
Very telling that in Olde English, the term for pneumonia is “consumption”.
#122 kettle: And I remember that every exit you actually had to walk through one of the Disney Stores before you could leave the park.
Funny the stuff in the Disney store in paramus, was cheaper than wht they were selling at Disney world.
gary Says:
December 4th, 2007 at 12:19 pm
njpatient,Johnny Black on the rocks will do. :)
gary: GGGRRRRRRRRRRRR… don’t wreck good scotch by diluting it :(
“My dachshund is alert and flexible, too.”
Clot,
Wirehaired Dachshunds- The distinctive facial furnishings include a beard and eyebrows.
BB?
3b Says: December 4th, 2007 at 1:56 pm
#122 kettle: And I remember that every exit you actually had to walk through one of the Disney Stores before you could leave the park.
Funny the stuff in the Disney store in paramus, was cheaper than wht they were selling at Disney world.
bergen: the Wine Library in Millburn is less expensive than virtually all the wineries in Napa. The only difference is selection.
#129 chgo: I prefer Bushmills.
Ten more gubmint mind-control plots…these for people of slightly higher than 100 IQ:
1. Food Network
2. MySpace/Facebook
3. Applebee’s
4. Juicy Couture
5. 48 of 50 state universities (UNC & UVA being the exceptions)
6. CNBC
7. Vogue
8. Malls called “Galleria” or “Collection”
9. Toll Brothers
10.GPS
BTW – the %ucking sulfites in the Australian red crap are giving me a chronic migrane…I’ve had about 16 Advil today :( :(
#131 Disney World/Paramus, it was the same crap.
#94 Ann:
Here is a link from a realtor advising clients on handling low-ball offers. I thought you might find it interesting or even helpful.
http://realtytimes.com/nl/nlpages109/3lowballoffer.htm?open&ID=tonycannata#NLContinued
BC (130)-
Please refrain from disparaging a noble breed with your crude comparisons. :)
2nd best Simpsons episode
“DuffWorld”
“Of course, the latecomers to places like Brigadoon are way more likely to be cast back into the muck when their homes plummet into negative equity….”
…and they wind up having to sell at a loss to the guy up the block who’s been renting for the last four years…
patient (139)-
Oh man, are we miserable wretches or what?
Tonight is the first night of Hannukah, and Christmas is nigh.
What do we do?
Engage in Reech-baiting.
ChiFi (134)-
Did the label say “BHP Billiton”?
“Very telling that in Olde English, the term for pneumonia is “consumption”.”
Of course. And that’s why Olde English comes in 40 oz bottles.
On remainder at Amazon. Did his bubble burst?
http://tinyurl.com/3a6lhs
Dent gives us all something to look forward to, including:
The Dow hitting 40,000 by the end of the decade
The Nasdaq advancing at least ten times from its October 2001 lows to around 13,500, and potentially as high as 20,000 by 2009
Another strong advance in stocks in 2005, with a significant correction into around September/October 2006
The Great Boom resurging into its final and strongest stage in 2007, and even more fully in 2008, lasting until late 2009 to early 2010
“bergen: the Wine Library in Millburn is less expensive than virtually all the wineries in Napa. The only difference is selection.”
That’s a great place, chi. Have you ever been to the “Total Wines” on 22? It’s more like a Wine Walmart – none of the charm (or cheese) of the Library, but quite a good selection and very good prices.
chicagofinance [129],
I’m a victim of my blue collar up-bringing. :)
clot 140
“Engage in Reech-baiting.”
Easy, and fun for the whole family!
3b Says:
December 4th, 2007 at 2:02 pm
#129 chgo: I prefer Bushmills.
open faced club sand wedge
http://www.laphroaig.com/whiskies/10yo/tasting.asp?expanded=10_year_old.tasting_notes
136 CB
Great article, thanks!
“If the buyer is stretching and this won’t work, this is when the honesty comes out. The agent may tell you, If we can’t do $309,000, it’s just not going to work. It goes too far beyond their qualification.” Then you can decide whether to keep it on the market (hoping you don’t have to drop the price again), or you cut the loss and move forward with settlement.”
This quote was interesting. “If the buyer is stretching…” In our case, we can usually afford more, we just don’t think the houses are worth more. We actually had the listing agent on a house that rejected our good offer (a 2004 comp on practically a fixer-upper) insult us by saying to our agent, “If they can’t afford X price, why are you even showing them this house.” My agent was good at that point, I have to admit, she replied, “It’s not about what they can afford, it’s what they think THIS HOUSE is worth.”
One point that hurts us is that we’re not dealing with a 50K difference like in the article, but more like a 100K difference off of their original list prices because we’re in good ole inflated Bergen County.
Anyway, thanks for that article. More listing agents and buyers should be reading that one.
CB 136,
That actually wasnt to terribly outlandish…. although
“The lone buyer does appear, like a bandit in the night and offers you even less than what you just agreed to. Quite a bit less — about 10 percent less”
i think they might need to reassess the market if 10% is “quite abit”
Tha’ Ca- Tha’ Ca-
GENERAL TASTING
The harsh climate of Islay, the abundance of soft water, rain soaked peat, quality barley and the skilled craftsmen all contribute to the unique taste of Laphroaig…
Below are the 4 easy steps to unleashing and enjoying Laphroaig’s full potential.
Step 1
Pour yourself a full measure of Scotland’s most richly flavoured malts. Admire the full golden amber colour with its slightly greenish tone.
Step 2
Nose the glass (adding just a drop of water to release the full potential) and savour the pungent earthy aroma. Admire the heavy peaty smokiness and detect the delicate heathery perfume.
Step 3
Really taste the whisky – roll it around on your tongue and allow it to impress your palate. Take time to experience its full rich character and peaty flavour.
Step 4
Contemplate it, savour it, but never rush it – appreciate the lingering and unique mellow finish of the true single malt Scotch whisky for the connoisseur.
““Very telling that in Olde English, the term for pneumonia is “consumption”.”
Clot, per Mrs. Patient, it was tuberculosis that was known as consumption (she’s got some learning in the area)
147 kettle
Great point. Is 10% really that much? Sure it sounds like a ton of money when you’re dealing with these kind of prices, but it’s still 90% of what you asked for, not 50%.
129, 132
If we have the get-together, I may have to introduce you to Messrs. MacAllan and Laphroaig.
chi – ya beat me to the laphroaig
that won’t happen twice
#145 gary Yeah, you probably like Dunkin Donuts too!!
#153 I have had MacAllan, excellent, but I do really enjoy my Bushmills. I will of course try Laphroaig.
so the question of the day. Do we have
any bad paper on the books in Trenton.
(SIV related)
Not the time to buy RE:
http://thehousingbubbleblog.com/?p=3822
Re: #158 – Not necessarity my opinion.
Re: #158 – Not necessarily my opinion.
3b,
Better yet, I go for the corner diner coffee and a buttered roll.
#161 gary: I like the guys on the street, and every once in a while I go for one of those big disgusting glazed donuts.
Citigroup SIV’s Junior Sedna Debt Cut to CCC by Fitch (Update3)
By Neil Unmack
Dec. 4 (Bloomberg) — Citigroup Inc.’s Sedna Finance Corp. had $867 million of junior-ranking debt downgraded 12 levels to CCC by Fitch Ratings after declines in the structured investment vehicle’s assets.
The cut from Fitch comes as Moody’s Investors Service considers its biggest wave of downgrades since subprime mortgages contaminated the bond market. Moody’s said last week that it may lower its ratings on $105 billion of SIVs, including Sedna’s $10.7 billion of senior debt and five more Citigroup funds.
Sedna’s net asset value has fallen to 54 percent, eroding nearly all the protection the downgraded “second priority senior” notes gets from ranking above the lowest layer of debt, Fitch said in a statement today. The securities will start losing money if the Cayman Islands-based SIV sells $500 million of assets to repay senior-ranking debt, according to Fitch.
“The probability that the SPS notes will incur a loss has significantly increased over the recent weeks,” Fitch said. Next year “there will be significant refinancing requirements that may need to be covered by the sale of assets.”
Citigroup is working with Bank of America Corp. and JPMorgan Chase & Co. to form an $80 billion “SuperSIV” fund to help avoid forced sales by buying SIV assets. Treasury Secretary Henry Paulson aims to have the master liquidity enhancement conduit, or M-LEC, running by yearend.
Assets Fall
The average price of the assets held by Sedna has fallen below 97 percent of face value, Fitch said.
Citigroup said the assets in its seven SIVs declined to $66 billion as of Nov. 30, from $83 billion in September.
SIVs use short-term debt to invest in higher-yielding securities, including mortgage-backed notes. The net asset value measures the amount that would be left after selling assets and repaying senior-ranking debt.
Sedna’s second priority senior notes and the lowest-ranking capital notes are designed to absorb losses before holders of the highest-rated commercial paper and medium-term bonds.
Standard & Poor’s rates the SPS notes A, the sixth-highest investment-grade ranking. Moody’s didn’t rate them when the company was set up in September.
To contact the reporter on this story: Neil Unmack in London at nunmack@bloomberg.net
Last Updated: December 4, 2007 11:47 EST
Roadblock to a subprime solution
The most significant obstacle to mortgage modification plan may be the ultimate owners of the debt.
http://money.cnn.com/2007/12/03/real_estate/investors_obstacle_to_mortgage_plan/index.htm?postversion=2007120412
“investors in mortgage-backed securities, who buy the loans wholesale from lenders, aren’t exactly jumping on board.
“You have contracts in place guaranteeing investors a fixed rate of returns,” said Jim Carr, Chief Operating Officer of the non-profit advocacy group, National Community Reinvestment Coalition. “They have no immediate incentive to give up those returns.””
I guess Laphroaig is okay if you insist on purchasing mass-produced…
Jamey (165)-
Jeez, do you make your own?
Jamey Says:
December 4th, 2007 at 3:06 pm
I guess Laphroaig is okay if you insist on purchasing mass-produced…
doh!
FYI – I was at a JW tasting and I found out that one of the whiskeys in the JWB blend is Laphroaig…..
patient (164)-
“A sweeping solution to the subprime lending crisis is looking at a big sticking point at the end of the mortgage chain.
On Monday, Treasury Secretary Henry Paulson said in a speech that its Hope Now coalition of government, industry and community groups is developing a streamlined way to move able homeowners into sustainable mortgages.
A large part of that plan, it’s been widely reported, is to broadly rework adjustable rate mortgages (ARMs) for all borrowers who qualify and freeze their interest rates before they jump to unaffordable levels.
But investors in mortgage-backed securities, who buy the loans wholesale from lenders, aren’t exactly jumping on board.
“You have contracts in place guaranteeing investors a fixed rate of returns,” said Jim Carr, Chief Operating Officer of the non-profit advocacy group, National Community Reinvestment Coalition. “They have no immediate incentive to give up those returns.”
No shit, Sherlock. One woulda thunk Paulson and his lackeys would’ve attacked this part of the problem first.
I guess Treasury doesn’t consider unilateral breach of contracts to be an important matter.
They don’t give too much detail here…only one the Green…..
Black Label — a blend of as many as 40 whiskies, each aged at least 12 years. According to William Manchester, this was the favourite Scotch of Winston Churchill.
Green Label — a vatted malt whisky that consists of a blend of about 15 individual single malts, the signature malts being Talisker, Cragganmore, Linkwood, and Caol Ila – Aged 15 years.
Any chance I can still get a Freedom Loan?
http://www.youtube.com/watch?v=6Vgu8jYTQQo&feature=related
Ahh yes……Disney World…..whats better than middle America and turkey legs!!
No Lagavulin fans here? King of the Islay. Closely followed by Talisker.
I don’t post many links to read, but you all should read this great article on our current macroeconomic situation:
http://www.cornerstoneri.com/comments/icebergs.htm
“It will be a ‘Very Big Challenge’ to segregate these borrowers,” Paul Miller, an analyst at Friedman Billings Ramsey in Arlington, Virginia, said in a research note on Tuesday. Working through loans on a case-by-case basis will take time and be expensive, he said.
The plan, dubbed “Teaser Freezer,” is thus more hype than substance, Miller and colleagues wrote.
“Legal issues have stalled modifications to date and may also limit the plan’s effectiveness, economists at Goldman Sachs Group Inc. said in a note dated Monday. Most of the subprime loans created in recent years are locked up in bonds that are governed by contracts between investors and loan servicing companies, they said.”
http://www.reuters.com/article/ousiv/idUSN0449132320071204?pageNumber=1&virtualBrandChannel=0
Some history:
how much time does it take for a Bank or for that matter Insurance Company to go bankrupt? .you guessed wrong. 40 seconds is all it takes. Thats what it took during the Northridge Earthquake of 1994 in United States and the story repeated the following year when an Earthquake struck Kobe, Japan. The estimated loss was so many Billion Dollars that the Blue Chips had no option but to declare themselves bankrupt and eventually the Government had to step in to partially bail them out.
I’ll have teh Dalwhinnie thanks..
Debt vulture 174 best line of story:mother inlaw coming over -hide the good scotch & lower rates goes well with todays posts.
Mikeinwaiting: By far the funniest line!
Scariest line: Comment on how Japan stocks are still 60% their peak levels of 18 years ago!
40 seconds is a long time!! I was in the room when we killed Drexels DTC clearing number intraday for not meeting net capital requirements. The traders over at 60 and 55 Broad got cut off midtrade and in a matter of minutes there were zombies out front on Broad Street getting interviewed by reporters.
Oh the good old days!
Dalmore good bang for the buck,then Shatner
started drinking it on Bosten legal now its always sold out.
Who’s next John? My bet is on Bear Stearns.
Not sure if somebody posted:
Deflationary Credit Downturn Is Underway
http://www.minyanville.com/articles/index/a/15091
John the good old days may be back soon.
Fannie Mae to cut dividend by 30% Here we go!
Lagavulin, Talisker and Highland Park for me…
I used to drink Oban, but they had some issue about 4 years ago where a batch of distillate needed to be destroyed. It was out of stock for 6 months. When it reappeared, the new price point was something ranging from $70-$90 a bottle. That is just too steep for something that I drink so casually and often.
My colleague often travels out of the country and finds JWB for $90-$100 in duty free shops. She has standing orders to snag it at that price. Sometimes she has no room in her luggage though.
mikeinwaiting Says:
December 4th, 2007 at 4:39 pm
Fannie Mae to cut dividend by 30% Here we go!
miw: who picked that up?
Chic: FNM stock is trading at $33.85 after hours, fyi, down from a closing price of $35.18.
Talking heads CNBC breaking news
82 gary Says:
December 4th, 2007 at 11:42 am
The insanity started as early as 1999 – 2000. We were standing in line then at open houses with a realtor at the front door telling us to enter in a single file and stay to the right.
and #90
Right on about current pricing. As for the drink, Johnny Blue is better for a successful low-ball celebration.
This is becoming a comedy.
“U.S. Senator Dodd Asks Paulson to Address Goldman Subprime Role”
http://www.bloomberg.com/apps/news?pid=20601087&sid=aX1RdOcyY5LM&refer=home
Enough of all these stupid half-baked attempts to fix the biggest g-d economic situation we’ll likely ever see! Hey, all you big money center banks, all you investment banking houses and assorted ilk: Open up your g-d books and let us all have a look at all the toxic cr#p we know is in there! Everybody hold hands and take your hit all at once – mark the stuff to what you could sell it for in the next five minutes, let the Dow collapse a couple of thousand points and let’s get it over with already!!!! This death by inches is torture and is just prolonging the inevitable. OK. I feel better now. You guys can go back to real estate and scotch now. Thank you.
110 skep-tic Says:
December 4th, 2007 at 1:16 pm
so if by some miracle, there is no bailout, what are the consequences? will there be widespread bank failures? if the damage is already done, isn’t this a case of pick your poision?
I prefer one where I am not bent over a chair taking it in order to bail out people who went chasing ever-increasing prices like lemmings heading to the cliff. Those who were prudent did not buy into the madness. Those who did deserve what they get. It is harsh but it makes the economy stronger in the long run.
I don’t get Islay fans. Oban has a good, strong peat flavor. Lagavulin tastes like liquid burnt tire.
Balvenie is my favorite though.
Shore Guy (195)– but what if major banks fail (e.g., Citi)? Do you think the average responsible person would be better off than if tax dollars are used to bail out the morons?
151 njpatient Says:
December 4th, 2007 at 2:20 pm
““Very telling that in Olde English, the term for pneumonia is “consumption”.”
Clot, per Mrs. Patient, it was tuberculosis that was known as consumption (she’s got some learning in the area)
Either way, it killed many.
Marc Faber auther Boom Gloom & Doom 300mil fund Mgr out of Bangkok: US already in recession fed playing around with CPI #’s.
I think we went over this weeks ago.
Fast Money just had him on to tell them
something they should already know.Now if they air a promo with this for Fast Money during American Idol joe 6 pack may catch on & stop spending.
skep-tic Says:
December 4th, 2007 at 5:32 pm
Shore Guy (195)– but what if major banks fail (e.g., Citi)? Do you think the average responsible person would be better off than if tax dollars are used to bail out the morons?
We have been through this before as a nation. Remember the S&L issues of the 80s? If banks did their jobs so monumentially bad, then their shareholders should feel the pinch, the executives who allowed the lending standards to sink to almost comic levels should be shown the door, bonuses should shrink, etc. Economics is not called the dismal science without reason. Pain causes people to rethink doing stupid things, and it works for instu\itutions as well. We would be better served by a recession that puts things right than by any number of illconcieved bailout plans designed to spare the nation pain. Strong banks will grow stronger. If weak ones must fail, so be it. Lots of “innocent” workers get fired and have hellish times thrust upon them when the executives of the companies they work for guess incorrectly in the marketplace.
Right now, Ford Motors is mortgaged to the hilt. They made a series of missteps in recent years and acquired some other companies that did not add value to the company. If they fail, it will be a sad thing for the clerks, secretaries, janitors, truck drivers, accountants, etc. THat said, if they fail it is because of their own actions and that is what the marked requires. What, we should bail out the Ford family just to prevent “innocent” worker, “innocent” communities where the plants are located, “innocent” franchise holders, etc? I submit that unless we allow the worst actors to fail, or undergo painful times, that they have earned we will only encourtage even grander follies in the future.
BC (193)-
Mr. Fox, please guard Mr. Chicken.
skep (196)-
Gimme the Balvenie every time. It’s the sherry oak that does it…
However, if given my pick of hard spirits, I’d take Bushmills and Knob Creek over any Scotch on the planet.
Shore GUY 200 Damm straight,but as you know its an election year & Ben has no balls.So let the bailouts commence.Where Volcker when you need him.
mike (199)-
“Now if they air a promo with this for Fast Money during American Idol joe 6 pack may catch on & stop spending.”
Nope; Joe 6 will get pissed and change the channel.
I think America’s Wildest Police Chases is on during American Idol’s time slot.
If this keeps up I may have to go get a bottle
of Basil Hayden best bourbon around!If you haven’t tried give it a shot or 2 or 3!……
Clot Shows how much I know about when this crap is on.
mike (206)-
It’s all crap.
Except for EPL games on Fox Soccer Channel.
Gubmint’s Top Ten mind control projects for those with IQs over 115:
1. Single-malt Scotch
2. Sharper Image
3. Discovery Channel/stores
4. CNBC
5. Sulfite-loaded Australian red wine (sorry, ChiFi)
6. Platinum-level credit cards
7. Stated income loans
8. Cadillacs
9. College admissions counseling
10. Blogging
mike (205)-
Basil Hayden is pretty damn good.
Clot I love it, but once opened it seems to evaporate rather quickly!
A common sense question about responsibility and prudence…
When Katarina struck, many were left homeless overnight and FEMA was under pressure to explain its unpreparedness. I don’t understand why Paulson is out on the TV and not discussing with FEMA about increassing shelter for the homeless for the upcoming economic storm and not talking about giving funds to local governments to beef up support for shelter for the homeless. Even if 1 person becomes homeless, the Treasury Secretary and his entire economic team should be held accountable given all this lead time and the way it is wasted.
#211 – Better clean out your basements guys because your Uncle Louie is going to be living there. Show of hands everyone – who honestly believes that C is not functionally insolvent? Jeez, I hope it was all the wine I had at dinner.
I don’t thimk that homelessness will come in such #s as to overwhelm the system.To hold them
accountable for 1 is alittle much.Gov is not responsible for everything this is not a welfare state.Its called personal responsiblity.
Something this country lacks.Katarina was a natural disaster, you buy a house 5x your income by choice.
212 C is under water why else give 11%.And the market liked it, fools.They can’t see the forest thru the trees.
Jeebus-
I’m 8 out of 10 on Clot’s High IQ control projects!!
Thank goodness I stayed clear of Stated Income Loans and Australian red wine! HA!
#202 Clot: As I said earlier, Bushmills simply the best.
OT-
Tigers get Cabrera and Willis for not much in return.
Was this one posted yet?
From Bloomberg:
Subprime Rate Five-Year Fix Eyed by U.S. Regulators, Lenders
By Alison Vekshin
Dec. 4 (Bloomberg) — Federal regulators and U.S. lenders are focusing on five years as the duration of an interest-rate freeze on subprime mortgages, said a person familiar with negotiations aimed at stemming a surge in foreclosures.
Such an agreement would satisfy the shortest fix sought by the Federal Deposit Insurance Corp. That period is longer than the minimum, two- to three-year modifications suggested by Fannie Mae, the largest source of finance for American home loans. The Treasury Department’s Office of Thrift Supervision advocated between three and five years.
“Five years sounds about right,” said Douglas Elmendorf, a former Treasury and Federal Reserve Board official, and now a senior fellow at the Brookings Institution in Washington. “This is a useful and important step, but it isn’t a panacea.”
http://www.bloomberg.com/apps/news?pid=20601087&refer=home&sid=alDRnzsykDOc
scribe (218)-
Wow…longer than an entire Presidential term.
Wouldn’t it be ironic if two years into the freeze, most of the “owners” getting “helped” by the legislation let their houses go FK anyway?
“Wouldn’t it be ironic if two years into the freeze, most of the “owners” getting “helped” by the legislation let their houses go FK anyway?”
Clot,
That is exactly how it will play out. The problem is not making the payments. The main issue is their purchase price is getting smoked. They got into their dwelling with a free call option. There is no way they will keep making payments when they realize that their 600k abode is now a 450k pos. Why struggle with this. It didn’t cost anything to get in, it will only cost a credit score to get out. This whole issue is strictly about prices declining. They can freeze like Phil Ford, hell go to the 4 corners, it will only prolong the agony, extend the inevitable.
This whole bailout is becoming almost baby-ish like. What is this place coming to where adults need Paulson’s nipple to feed on as a source of sustenance?
The more I think about it, the less remorse I have for people losing their homes which they had no business getting into in the first place. Sorry, life’s a bitch….learn to take it on the chin and move on.
http://www.cnbc.com/id/22099828
Home Prices Suffer Biggest Drop In 25 Years
U.S. home prices dropped the most in a quarter century in the three months to the end of September on an annualized basis as inventories, restrictive lending and a credit crunch yanked support from the market, a Freddie Mac index showed.
The Freddie Mac Conventional Mortgage Home Price Index Classic Series fell an annualized 1.3 percent last quarter, compared with appreciation of 0.5 percent in the second quarter, the No. 2 home funding company said in a statement.
Year-over-year, prices rose 1.9 percent, a sharp retreat from the 7.8 percent growth seen a year earlier, it said.
[snip]
Many government and policy-makers feel this is a subprime problem, which is completely wrong,” said Paul Miller, an analyst at Friedman Billings Ramsey, in a research note. “This is a high loan-to-value and overvalued housing problem!”
The Freddie Mac Freddie Mac house price index showed home prices in the Pacific region posted the fastest rate of depreciation, at 3.5 percent, annualized.
From Bloomberg:
“Containment” hits Japan:
http://www.bloomberg.com/apps/news?pid=20601087&sid=acejFBPAuM7U&refer=home
BC (220)-
In the ’77 championship game vs. Marquette, Dean had Phil go to the freeze way too early in the 2nd half. That freeze didn’t work out so well, either.
Clotpoll Says:
December 4th, 2007 at 7:59 pm
OT- Tigers get Cabrera and Willis for not much in return.
clot: Marlins got the mother load of prospects…..they are the favorites…..in 2010 that is…
Orion (222)-
“Mizuho Financial Group Inc., Japan’s second-biggest publicly traded bank, may inject about 100 billion yen ($910 million) into its securities unit to boost capital after losses from soured U.S. home loans, people familiar with the situation said.
Mizuho Financial will raise the cash by selling new shares in the brokerage to Mizuho Corporate Bank, the biggest shareholder in Mizuho Securities Co., said two people who declined to be identified before a public announcement.”
I guess investors in Japanese banks are used to having their stakes diluted by “stock sales” that are nothing more than thinly-disguised schemes to raise cash to cover losses.
BC,
This ones for you
163 Forest
Sold 2-2003 $265,000
Sold 3/2006 $464,200
Sold 12/2007 $441,350
KL
ChiFi (224)-
I’ll take a young third baseman who can hit .330 in his sleep- and a tough lefty starter- over any gang of prospects you can name…anywhere, anytime.
Keep in mind, these guys will also now be playing for a very nasty manager who doesn’t tolerate head cases. No way Cabrera shows up looking like the Sta-Puf man this Spring.
And, honestly…in the postseason, which 3b would you take for your team: A-Rod or Cabrera?
can someone shoot all these pathetic babies in the head, and make it messy so there can’t be an open casket……..
WSJ
Talking B-School Welcoming the New Millennials M.B.A. Programs Adjust to the Next Generation, and Their Parents
By RON ALSOP
December 4, 2007; Page B9
The millennial generation’s leading edge — 24- to 26-year-olds — has finally arrived in many M.B.A. programs, especially those that have started admitting younger applicants. M.B.A. Track columnist Ron Alsop recently interviewed Daphne Atkinson, vice president for industry relations at the Graduate Management Admission Council, about the millennial generation’s career interests, its likely impact in the workplace, and how business schools and the council are adjusting to the millennials — and their parents.
WSJ: Are millennials as interested in an M.B.A. degree as previous generations?
Ms. Atkinson: A segment of this generation will definitely gravitate to b-school, in part because of their interest in lucrative careers and the connection between earning power and the lifestyle they want. But this is a generation inundated with information that has developed very sophisticated screening mechanisms. So getting to them is a challenge. At GMAC, we are working on upgrading our Web site, http://www.mba.com, to make it millennial friendly by incorporating new media [editor’s note: WTF?]
WSJ: As hovering “helicopter parents” become more active in the admission process, how should schools deal with them?
Ms. Atkinson: The schools have been quite surprised because they weren’t accustomed to seeing parents at admission events at the graduate level. [WHAT? WHAT? WHAT? WHAT!!!??!??!?!?!?!] We were all wondering why the parents couldn’t simply advise from the sidelines. But we have come to understand that parents are there because they are investors who hold their children’s schools accountable for a proper return on time and money. Clearly, parents are trusted advisers to the millennial generation, and their presence and influence can’t be wished away. We can either reach out in a calculated way to provide them with good information or let them find the information on their own, which may or may not be accurate.
WSJ: Are schools encountering new challenges in teaching these multitasking technology whizzes?
Ms. Atkinson: Some schools are looking at new approaches in the classroom, such as the use of a talk-show format that allows for different points of view and more interaction than a straight lecture. There also are classroom role-playing simulations that are more personal and interactive than a printed case study. And some schools are even introducing games to engage millennials. At the same time, millennials’ multitasking is driving some instructors wild. At a faculty workshop I conducted, a professor asked if laptops are open, how does she know whether her students are checking email and surfing the Web instead of taking notes. I asked her if she was glued to the podium, and she said she was. So I said, “I guarantee if you circulate around the room and stand at students’ elbows, they’ll get the message.”
WSJ: Are millennial M.B.A.s also proving demanding for career-service offices and corporate recruiters?
Ms. Atkinson: One new challenge is the use of social-networking sites by students and the ability for hiring companies to view those online profiles. Millennials do not necessarily have the same filters for censoring or sharing personal information that older generations have. Another challenge is the sense that it is either irrelevant or meaningless to “pay dues.” It can be disappointing to find out that you won’t be president of the company in two years. Millennials want their dream job as early as possible. But entry-level jobs are seldom dream jobs, although they may be at dream companies or in dream industries. A final challenge is that millennials don’t see it as particularly damning to have had four jobs in a year. They fully expect to job hop as they search for the dream job. I’m not sure how you package that as a benefit to a corporation.
WSJ: What do you believe will be the millennials’ biggest contributions to companies?
Ms. Atkinson: I would say probably their skill in integrating technology seamlessly and their optimism. They also are quite serious about reforming the work environment for more flexibility and reasonable hours to accommodate their personal goals and interests. Unlike baby boomers who talked about work-life balance but weren’t wholehearted about achieving it, these young people will insist on it.
[editor’s note: WHAT! WHAT! WHAT! Are any of these clowns actually interested in doing work?]
WSJ: What deficiencies do employers see in millennials? [editor’s note: how about asking “what strengths, if any, do you see?”]
Ms. Atkinson: While millennials bring skills in multitasking, technology and working in teams, they tend to demonstrate less ability in oral and written communications and interpersonal interaction. They also have been socialized since childhood to get constant feedback and are going to look for it in the workplace too. As a result, some employers consider them high maintenance. But if everyone can agree on the terms of the feedback, it could be a superb tool for managing performance.
WSJ: What are some careers that millennials are especially drawn to?
Ms. Atkinson: We see interest in entrepreneurship and management consulting. Starting their own business gives millennials the chance to do something that is personally meaningful. With the safety net provided by parents and the ease of creating technology-based businesses, why not take the chance while you are young with relatively few responsibilities? As for consulting, it allows millennials to work in teams and provides constant stimulation and learning through a stream of project work.
WSJ: I’m surprised that consulting is of so much interest, given the travel and long hours it usually involves. What do you think of the apparent conflict with millennials’ desire for work-life balance?
Ms. Atkinson: As with all human behavior, some contradictions should be expected. Millennials are hungry for experiences — the more, the better. They find the variety in project work attractive because the boredom factor is minimized. I suspect that for stimulating work with lucrative pay, millennials are willing to hammer out intelligent compromises. I am also confident that millennials will challenge the notion of balance in consulting, and because consulting firms want their share of the best and brightest, they will find ways to accommodate their newest generation of employees.
Regarding: the Paulson thing…..when you think sub-prime you think SoCal, BUT ALSO FL & OH…..can anyone say swing states? More pandering for the 2008 election….
Pandit closing in…..
WSJ
Why Citi Should Split Jobs Separate CEO, Chairman Could Be a Step Toward Rectifying Bank’s Missteps
December 4, 2007; Page C16
Citigroup has a knack for superlatives. The bank’s most dysfunctional rivals would find it difficult to top the $11 billion of write-downs Citigroup is taking on its holdings of unloved securities. Citigroup’s board could counter its financial deficiencies by becoming the first on Wall Street to separate the roles of chairman and chief executive.
That is a swiftly emerging option as the company narrows down its search for a successor to Charles Prince, who held both titles until he left over the bank’s losses. The reason, however, may have as much to do with the painfully abbreviated shortlist of candidates Citigroup has compiled as a nod toward great governance.
Vikram Pandit (left) looks to be a top candidate to be Citigroup’s next chief; former HSBC Chairman John Bond could be a good nonexecutive chairman.
Indeed, Vikram Pandit looks to have popped into the lead to be the next Citigroup boss. This makes some sense. Citigroup’s significant trouble spot is within its investment bank. As the former head of Morgan Stanley’s institutional businesses, Mr. Pandit has experience to fill a need that other potential recruits — such as former consumer bankers Robert Willumstad, 62 years old, of Citigroup and Dick Kovacevich, 64, of Wells Fargo — can’t.
But Mr. Pandit, 50, has never run a publicly traded company. And Citigroup isn’t just any listed bank. It is a complex conglomerate whose successive years of inadequate management have left it capital-deficient — and its shareholders bruised.
This is no time for the board to experiment. That is why if Mr. Pandit is made CEO he needs adult supervision in the form of a well-respected and powerful nonexecutive chairman. Interim chairman Robert Rubin already has taken himself off the list, which is just as well. His support for Mr. Prince and his own $100 million of compensation over the years have made him a polarizing figure.
Someone such as former HSBC Holdings Chairman Sir John Bond would make sense. Not only is the British banker widely respected, but he also understands the breadth of businesses Citigroup is engaged in. As an outsider and former rival, he also would be better-placed to look at the bank’s pieces objectively — something that will come in handy when the conglomerate recognizes its need to break up.
CF 228
Put down the Black Swan long enough to think about this.
If I can find somebody to write code, can we use your fat head as a “serious, but likeable” teacher for a Wii MBA learning series?
It’s the future.
And I think I could sell it.
…use your fat head…
Careful, I think he’s sensative about that…
:P
Can you imagine? I’d put CF against Reech in a Wii Economics case study.
“Briga ba boom”
Clot/Mike/Bourbon lovers, Woodford Reserve is one of my favorites–right up there with Knob Creek, IMHO. Both are great neat and they make excellent Manhattans–my favorite winter cocktail (though I recognize that makers of such fine spirits might come after me with a shotgun if they saw me splash vermouth and bitters into their product. . . )
[NB: This is a lengthy rant but there are some questions embedded within . . .] I don’t post much on this blog. I mainly read and learn. I am feeling angry and worried about the state of our economy/country. The idea of a bailout for people who are in over their heads really burns me up. I was about to jump on board the real estate ship myself a few years ago. My realtor responded to my concerns about handling payments by saying things like, “don’t worry, you’ll have a higher salary in a few years”; and “If you have trouble making the payments you can just sell.” All of my friends own their apartments in NYC and were encouraging me to buy.
I’ve always been a diehard democrat/liberal and I shamefully admit that I’ve historically never attended much to money matters; in fact I disavowed my need for a lot of money. While I didn’t know much about finances or markets, I do understand something about logic. And my realtor’s sales pitches to ease my anxiety about making payments (see above) actually raised red flags. How do I know I’ll be making more money in a few years? I could be laid off in a few years. How do I know that I can sell my condo in a few years (I did knew that markets change)? I told the mortgage broker that I had student loans coming due in a year’s time and I didn’t want to get into a situation where I couldn’t make payments. My own rudimentary calculations indicated that I could afford a property worth X and the mortgage broker indicated, after seeing my financial information, that I could afford “X + 90K!
Putting all this together I concluded that my Realtor is a salesperson and makes his living by selling. He’s not looking out for my best interest—that’s my job. I decided to give up on buying a place for the time being. Then I discovered this blog.
Over the past 2 years, I’ve been reading and learning a great deal here. And even though I know much more than I used to, I realize that I don’t know nearly as much as many of you do and probably never will since my field of expertise his nothing to do with financial markets.
Now if I, with paltry knowledge of finances/markets/etc., understand that signing loan docs when I’m unsure about my future means to repay is a bad idea, why couldn’t everyone else? I took responsibility for not getting myself into an impossible financial situation, why couldn’t they? If there are really going to be bailouts then STOP, I promise I’ll be quick—let me buy a place now so I can get in line for a bailout!
With all the news and commentary that I’ve been reading on this blog and elsewhere, I’m rapidly becoming disenchanted with the democratic party and worried about the state of our nation. It seems that both parties are in a race to see which party can pander the best and the most to the uneducated masses. Politicians are appearing to me to be high-priced administrative prostitutes, sold to the highest bidder, and will push whatever paper is necessary to ensure that their campaign contributors are satisfied. There is little regard to what is best for the country, rather the priorities seem to be “what is best for my political career right now”, seemingly paralleling, in a disturbing fashion, many Americans’ fiscal priorities. I therefore believe that our democracy currently is illusory.
I grew up learning that “free markets” and Laissez-Faire economics were vastly superior to any other economic system. Yet as I read this blog and other sources about what free markets entail, it seems that we do not truly have “free” markets. Market participants seem perfectly happy to keep any and all profits made for themselves. After all, they “earned” them. Then why is it such free market exponents believe that government should bail them out when their losses mount? Now, losses in the CDO markets seem so high that our banking system could be in jeopardy (we’re already seeing state pension funds in trouble, e.g., Florida). Are we headed for “The Greater Depression”? Should I completely withdraw my 403b and rollover IRA and place the funds in a bank? Sure, I’ll pay a penalty but at least if it’s in a bank I’ll be covered by FDIC (for what that’s worth). And from what I’ve read, higher taxes in the future are highly likely so perhaps I should take advantage of the Bush tax cuts now before it’s too late???
Is this the paradox of laissez-faire economics/free markets: That participants in unregulated markets are allowed to behave in ways that put the country’s entire economic system in jeopardy? Then what do we do? We can perpetuate moral hazard by “bailing out” those in trouble; Or allow them to learn their free market lesson but risk the fall of the entire economy? The democrat/liberal in me says “government regulation is needed”. But what regulations? Law is odd; Once you specify what the law is, you also specify what the law is NOT.
It seems that the US is between a rock and a hard place now. And I’ve become quite cynical that politicians will do anything of substance about it. In 1992 I couldn’t wait for the presidential elections and I was elated when Bill Clinton was elected. But looking back on his presidency, I have mixed feelings. Was NAFTA really a good idea? I certainly don’t think allowing pharmaceutical companies to advertise direct to consumers was a good idea at all. I hope Clot’s method of reform is not our only option. But right now I’m not very optimistic. I’m considering a vote for Ron Paul. And if Bloomberg were to run I would vote for him in heartbeat.
Any comments or feedback on this [lengthy!] post are appreciated.
144: love! wine library in Springfield actually, not Millburn, — was just there last week and went berzerk for the spanish paprika, saffron, cheeses (found a cheese called Piave — it was awesome!!) Also got a good reggiano parmesan and a chunk of chocolate…. and a good viognier plus Jadot’s Puilly Fuisse for a better price than I have seen in a lot of places…..
234: been singing that tune…. would be nice if Bloomberg would run. I’m so sick of the insolent, vapid drivel known as Bushspeak. UGH
sl
Cumo to subpoena wall street firms in regard to handling of loan sec.CNBC
Road trip boy,
I hope all that worry was’nt what kept you up so late last night. Your worries however are valid, and I have a tendency not to think about it that often, although at my age and financial situation these problems created by others (I did not buy over my head, although almost)is going to affect people like me and my family the most. I do have a tendency to react like Scarlette O’Hara ” I shan’t think about that today. I’ll think about it tommorow”
KL
Road trip boy,
I hope all that worry was’nt what kept you up so late last night. Your worries however are valid, and I have a tendency not to think about it that often, although at my age and financial situation these problems created by others (I did not buy over my head, although almost)is going to affect people like me and my family the most. I do have a tendency to react like Scarlette O’Hara ” I shan’t think about that today. I’ll think about it tommorow”
KL
RoadTrip: Your post shows that you can think which puts you in the vast minority. No system is perfect but I have to go with the free market every time. When allowed to act freely, the market will shake out problems and the economy will move forward. The current situation, IMHO, is being fed by fear of the unknown. If there ever was a time when the market should be allowed to work, it’s now.
I’m not understanding the interest rate freeze plan. If it is in the interest of the banks to freeze the adjustable rates instead of forcing foreclosures, then why does the Government need to be involved? If the banks are unwilling to freeze rates on their own then what incentives are the Government giving them to do so now?
Does a five year rate freeze at unprofitably low rates imply a promise by the Fed to keep rates low so the banks can make a decent margin?
236, interesting post. I don’t work in finance either, but I do have a few simple opinions on this bailout.
When it comes to real estate, which is the biggest purchase regular people make in their lives, there do needs to be more regulation about what kind of loans lenders can make. Is this paternalistic, the gov’t protecting those that are so stupid they can’t figure these things out for themselves? Perhaps.
But many of these lenders were also predatory so the blame cannot only lie on the homeowners who borrowed.
With purchases this big, that affect the whole economy, the government did fail us on this one. Now how many of us are going to pay the price, whether through a bailout, or crashing home prices.
A free market doesn’t have to mean an entirely free market. Consumer protections can still be put into place to protect people from hurting themselves.
Will they bail me out? I have been trying to be fiscally responsible and try to save for my 20% down payment since 2000. But the greedy mortgage brokers, realtors, and fiscally irresponsible buyers have been bidding homes beyond my savings. I keep saving more but the home prices are always one step ahead of me.
Why reward the greedy irresponsible ones? They should all go to jail. The mortgage brokers, bankers, and realtors for misrepresenting the terms of the mortgages and the borrowers for lying on the mortgage applications. These borrowers should not be rewarded with home they really can not afford.
The govt should stop interfering with free markets. Home prices were push high not based on fundamental (incomes, etc.), but by this funky financing that is now coming home to roost. The market now needs to continue to adjust downward to match incomes. It’s all about affordability Mr. Pauson! No bailout!
the cost of a bailout is miniscule compared to the overall benefit and wealth generated by the property and housing boom…I would expect they will continue to subsidize here and there to keep the housing market floating at a certain level…if politicians, bankers, and the american public all benefit from the housing market being propped up…i’d bet that’s what will happen…yes its rigged…big surprise….awaiting a huge housing collapse?…well expect any or all of the following before you get the house you like at 2002 and prior price levels…(printing money, tax increases on the wealthy, heavy manipulation of the stock and bond markets, housing related tax changes, govt intervention and currency manipulation, aggressive action against other countries to see it our way.. and just about anything else they can think of would come first before they allow it.)