From the WSJ:
U.S. Seizes Mortgage Giants
Government Ousts CEOs of Fannie, Freddie;
Promises Up to $200 Billion in Capital
By JAMES R. HAGERTY, RUTH SIMON and DAMIAN PALETTA
September 8, 2008; Page A1
In its most dramatic market intervention in years, the U.S. government seized two of the nation’s largest financial companies, taking direct responsibility for firms that provide funding for around three-quarters of new home mortgages.
Treasury Secretary Henry Paulson announced plans Sunday to take control of troubled mortgage giants Fannie Mae and Freddie Mac and replace the companies’ chief executives. The Treasury will acquire $1 billion of preferred shares in each company without providing immediate cash, and has pledged to provide as much as $200 billion to the companies as they cope with heavy losses on mortgage defaults. The Treasury’s plan puts the two companies under a conservatorship, giving management control to their regulator, the Federal Housing Finance Agency, or FHFA.
With that, the U.S. mortgage crisis entered a new and uncharted phase, potentially saddling American taxpayers with billions of dollars in losses from home loans made by the private sector. Bush administration officials argued that the cost of doing nothing would be far greater because of the toll on the economy of falling home prices and defaults in the $11 trillion U.S. mortgage market.
Mr. Paulson noted that more than $5 trillion of debt and mortgage-backed securities issued by Fannie and Freddie is owned by central banks and other investors world-wide. “Failure of either of them would cause great turmoil in our financial markets here at home and around the globe,” Mr. Paulson said.
From CNBC:
Government Takes Control of Fannie, Freddie
The Government on Sunday seized control of mortgage finance companies Fannie Mae and Freddie Mac, launching what could be its biggest federal bailout ever, in a bid to support the U.S. housing market and ward off more global financial market turbulence.
Officials were concerned mounting losses at the two companies, which own or guarantee almost half of the country’s $12 trillion in outstanding home mortgage debt, was sapping their vitality and threatening to undermine them at a time other sources of housing finance have largely run dry.
“Our economy and our markets will not recover until the bulk of this housing correction is behind us,” U.S. Treasury Secretary Henry Paulson said at a news conference. “Fannie Mae and Freddie Mac are critical to turning the corner on housing.”
…
Paulson said Fannie Mae and Freddie Mac were so large that “a failure of either of them would cause great turmoil in our financial markets here at home and around the globe.”Several analysts said the move should help instill some confidence in shaky credit markets and lower mortgage costs.
“The government had to do something to eliminate uncertainty,” said Peter Goldman, a principal with Front Barnett Associates in Chicago. “Anything that eliminates uncertainty in the credit markets is a good thing.”
God help us, going down this road. If we do not take the opportunity to break-up these huge companies into a dozen or score of companies, thus preventing any of them from being too big to fail, we will have earned whatever pain we later feel.
So, the Asian markets went up? I suppose they had to, inasmuch as we have prevented Asian investors from taking a loss on knuckleheaded investments.
Ahh, music to my ears and to my eyes:
Fannie, Freddie Should Be Split Up: Steve Forbes
[snip]
“What should be done is instead of having these (Fannie and Freddie) become permanent wards of the government, is to split the companies up into ten different pieces, recapitalize them, allow old shareholders to exchange their shares for new shares, have the government take warrants so that the taxpayers can get some of their money back, and to sever the ties and ship them out into the private markets,” Forbes told CNBC’s Asia Squawk Box Monday. The sooner the better Forbes added.
[snip]
Grim 3 in mod, not sure why, just Jim Rogers comments
HEHE – re Cincinnati previous thread –
That and Graeter’s ice cream. I even like Skyline and I’m a vegetarian. Lil Gator loves the Skyline with the choo choo.
But as for the rest of the town, let’s just say it’s a little too close to Kentucky for my tastes. Although Lil Gator would leave us in a heartbeat to go live in the KY Totters Otterville if we let him.
Nom – Did I just insult a swing state on the record? You might want to spirit me off to an undisclosed location to keep me away from the press.
7 gator,
you might need unexpected medical treatment at an undisclosed location for an indeterminate period of time, a treatment that is of course not life threatening and really just a minor inconvenience. Gator should be back on stage in a few weeks, just after the oppositions latest scandal breaks.
7 gator,
you might need unexpected medical treatment at an undisclosed location for an indeterminate period of time, a treatment that is of course not life threatening and really just a minor inconvenience. Gator should be back on stage in a few weeks, just after the oppositions latest scandal breaks.
The most ironic part of this bailout is every taxpayer that either could not afford to buy or was waiting for prices to drop has by proxy become a lender to the speculators ,flippers ,and sub-prime buyers .The very same people who drove up prices we are now lending our tax dollars to ,at the same time propping up prices ,just when we all know they must fall !….sickining
So the Treasury will acquire FNM’s & FRE’s MBS portfolio, possibly holding them until maturity?
Are THEY F**KING SERIOUS?
Any presidential candidate that does not strongly advocate the breaking-up of Fannie and Freddie doesn’t deserve 27 electoral votes, let alone 270.
I suspect this will be on of those Darwin-Awards-type moments where history will look back and ask, “What were they thinking?”
And I thought that Rs believed that the free market was sacred.
# 11 Tosh
“holding them until maturity?”
Many of the more recent loans have suffered crib death. The securities packaging them are likely to rot before they mature. Hold them, indeed.
Gator,
As a TR, RR, Repub. I am sickened by this nonsense.
I worked with folks at Risk Mgmt dept at FNM about a year ago. I think there is cultural issue. Being located in Washington area, makes it more of Government organization, then private sector.
For all we talk about right thing to do, Government will always take easy road. Especially Bush at this point in time. He is willing to sacrifice all principles for sake of keeping his legacy alive.
#10 tom: this bailout is not going to stop house prices from falling. It is going to be even tougher to get a mortgage going forward.
http://www.nytimes.com/2008/09/08/business/media/08msnbc.html?_r=1&hp&oref=slogin
MSNBC Takes Incendiary Hosts From Anchor Seat
MSNBC tried a bold experiment this year by putting two politically incendiary hosts, Keith Olbermann and Chris Matthews, in the anchor chair to lead the cable news channel’s coverage of the election.
MSNBC tried a bold experiment this year by putting two politically incendiary hosts, Keith Olbermann and Chris Matthews, in the anchor chair to lead the cable news channel’s coverage of the election.
[Snip]
over/under for the dow today is set at +300,
place your bets…
#16 SG: What legacy!!
If the Dow advances today, it will only point to a lack of long-term thinking and bodes ill for the future.
In the new poll, taken Friday through Sunday, Mc leads Ob by 54%-44% among those seen as most likely to vote. The survey of 1,022 adults, including 959 registered voters, has a margin of error of +/— 3 points for both samples.
http://www.usatoday.com/news/politics/election2008/2008-09-07-poll_N.htm
Looks like IKE could be in line for another Louisiana strike. Houston is more likely, but both are still in the line of fire. anyone placing bets?
http://www.wunderground.com/tropical/tracking/at200809_model.html#a_topad
# 22
Bi,
Are there any numbers tha tyou have seen for the various “swing” states?
phew, at least i now know what to do with my $200 billion. i was just about to build a bonfire and light it up. good think i can put it to more practical use and help out my homeowner friends. maybe in return they’ll buy me a stove for my shi!!y rental.
# 23
Houston is worse for the overall economy.
over/under for the dow today is set at +300,
place your bets…
I’ll take the under.
I wouldn’t be surprised if it pops over 300 intraday, but it will back off before the day is over as investors both take profits and the exuberance of the bailout begins to wane and the gravity of the U.S. govt. having to bail out Fannie/Freddie to prevent a systemic collapse takes over.
Dow will rise 500 points today. SKF futures are down 17. SRS futures down to 79. All the financials will go up between 10 and 20%, some even more. Unfortunately, the euphoria will be short-lived. DJIA will still be close to 10K by the end of the year.
All complete guesses of course.
slip? flip? or ultimate truth under subconscoious?
“You’re absolutely right that John McCan has not talked about my Muslim faith,” Obsama said, before being corrected by Stephanopoulos.
Voter Registration by Students Raises Cloud of Consequences
By TAMAR LEWIN
Published: September 7, 2008
The widespread practice of students’ registering to vote at their college address has set off a fracas in Virginia, a battleground state in the presidential election.
Late last month, as a voter-registration drive by supporters of Senator BO was signing up thousands of students at Virginia Tech, the local registrar of elections issued two releases incorrectly suggesting a range of dire possibilities for students who registered to vote at their college.
The releases warned that such students could no longer be claimed as dependents on their parents’ tax returns, a statement the Internal Revenue Service says is incorrect, and could lose scholarships or coverage under their parents’ car and health insurance.
After some inquiries from students and parents, and more pointed questions from civil rights lawyers, the state board of elections said Friday that it was “modifying and clarifying” the state guidelines on which the county registrar had based his releases.
Student-registration controversies have been a recurring problem since 1971, when the 26st Amendment lowered the voting age to 18 from 21, and despite a 1979 ruling by the United States Supreme Court that students have the right to register at their college address.
Virginia is not the only state with murky guidelines. South Carolina’s voter-registration site, for example, says students who want to register to vote at their college address must demonstrate “a present intention to remain in the community.”
“There’s no issue for snowbirds who live in Iowa but fly to Florida for the winter,” said Sujatha Jahagirdar, program director of the Student Public Interest Research Group’s New Voters Project. “One demographic group, like students, shouldn’t have to overcome a special hurdle to vote. We impose all the responsibilities of citizenship on students, and we have to provide them with the privileges of citizenship, too.”
Ms. Jahagirdar said Virginia’s warnings were profoundly misleading. “We have been registering young voters for 25 years,” she said. “We registered 500,000 young voters in 2004, the majority on college campuses, and we’ve never heard of a single one who lost health insurance, scholarship or tax status because of where they registered to vote.”
In Virginia, the county registrar first issued an alarming release on Aug. 25, and two days later a slightly toned-down version using language taken directly from the state Board of Elections’ Web site.
That site says students can determine their legal residence, but advises them to consider certain questions. “Are you claimed as a dependent on your parents’ income tax return?” the site asks. “If you are, then their address is probably your legal residence.”
The site also tells students to check whether their coverage under their parents’ health or automobile insurance, or their scholarship, will be affected by changing their residence.
Civil rights lawyers say these guidelines are problematic and could infringe on students’ rights.
“What the state Board of Elections has on its Web site, to me, sounds like it is discouraging students from registering at their school address,” said Jon Greenbaum, director of the Voting Rights Project at the Lawyers’ Committee for Civil Rights Under Law.
Indeed, the Montgomery County registrar, E. Randall Wertz, said several students had canceled their local registration over their worry about the possible consequences. Mr. Wertz said he had issued the release to try to dispel confusion and explain what he believed to be the consequences of choosing a college address as a primary residence.
“My understanding of state law has been that by declaring you’re voting here, you’re saying this is your primary residence, your domicile, and that while you can have many abodes or residences, you can only have one domicile,” Mr. Wertz said. “And if this is your primary residence, you have to register your vehicle here, charge your driver’s license to here and so on. That’s been the interpretation at state training sessions.”
Kevin Griffis, the Obama campaign’s Virginia spokesman, said the release appeared to be a good-faith effort to convey state guidelines, not a politically motivated effort to stop voting by students.
Mr. Wertz said the initial release had been written by an intern whom he asked to summarize the guidelines. Although the second release used the state’s precise language, he said, it still left room for confusion. In other counties, registrars have refused to accept dormitory addresses as residences. But so far, the state has not set clear standards.
“Different registrars around the state interpret it differently,” he said. “We’ve asked for more guidance from the state legislature, but they haven’t wanted to deal with it.”
Mr. Greenbaum’s Voting Rights Project has been involved in other student-registration cases. Last fall, in Statesboro, Ga., in a hotly contested city council race, there were challenges to the registration of about 1,000 Georgia Southern University students who had used dormitory addresses. “We threatened suit, but the issue went away when they figured out that the challenges weren’t going to affect the results of the election,” Mr. Greenbaum said.
In 2003, in Waller County, Tex., the district attorney wrote a column in a local newspaper threatening to prosecute students at Prairie View A&M, a historically black university, for illegal voting. The project sued, and the district attorney backed down.
In the 1970s, that same county required Prairie View students who wanted to register to fill out a questionnaire asking, among other things, whether they owned property in the county, had an automobile registered there or belonged to any church, club or organization unrelated to the college. A challenge to that practice led the Supreme Court to uphold students’ rights to vote at their college address
http://www.nytimes.com/2008/09/08/education/08students.html
America’s mortgage giants – Suffering a seizure
But the eventual cost to the public purse is unknown and potentially huge. The Treasury says it could buy as much as $100 billion of preferred stock in each of the two firms, though it deems that highly unlikely. Ultimately, the size of the bill will depend on their ability to recover, and that is far from clear. Under American accounting standards they have adequate capital, despite the rapid deterioration of their portfolios. But on a fair-value basis, marking their assets to the current market price, Freddie is insolvent and Fannie not far off. Moreover, with house prices still sliding and foreclosures rising sharply, worse may be ahead.
The taxpayer is on the hook elsewhere, too. Bank failures, almost unheard of in recent years, are ticking up. The Federal Deposit Insurance Corporation, which steps in and covers deposits up to $100,000 when lenders go belly-up, is nervously watching its fund shrink. It, too, may soon need to tap the Treasury for funds, especially if a big bank fails. On Sunday it emerged that one of the most vulnerable large lenders, Washington Mutual, is to force out its boss in a bid to shore up confidence. More and more pundits are predicting the return in new guise of the Resolution Trust Corporation, which was tasked with taking over and offloading duff assets in the savings and loan crisis of the early 1990s. The tab this time is likely to far exceed that institution’s total losses, $124 billion by the end of 1999.
24#, shore, the numbers from swing states are not updated yet. you can check the summary from the right corner of
http://www.realclearpolitics.com/
http://www.nytimes.com/2008/09/08/education/08students.html
Voter Registration by Students Raises Cloud of Consequences
By TAMAR LEWIN
Published: September 7, 2008
The widespread practice of students’ registering to vote at their college address has set off a fracas in Virginia, a battleground state in the presidential election.
Late last month, as a voter-registration drive by supporters of Senator BO was signing up thousands of students at Virginia Tech, the local registrar of elections issued two releases incorrectly suggesting a range of dire possibilities for students who registered to vote at their college.
The releases warned that such students could no longer be claimed as dependents on their parents’ tax returns, a statement the Internal Revenue Service says is incorrect, and could lose scholarships or coverage under their parents’ car and health insurance.
After some inquiries from students and parents, and more pointed questions from civil rights lawyers, the state board of elections said Friday that it was “modifying and clarifying” the state guidelines on which the county registrar had based his releases.
Student-registration controversies have been a recurring problem since 1971, when the 26st Amendment lowered the voting age to 18 from 21, and despite a 1979 ruling by the United States Supreme Court that students have the right to register at their college address.
Virginia is not the only state with murky guidelines. South Carolina’s voter-registration site, for example, says students who want to register to vote at their college address must demonstrate “a present intention to remain in the community.”
“There’s no issue for snowbirds who live in Iowa but fly to Florida for the winter,” said Sujatha Jahagirdar, program director of the Student Public Interest Research Group’s New Voters Project. “One demographic group, like students, shouldn’t have to overcome a special hurdle to vote. We impose all the responsibilities of citizenship on students, and we have to provide them with the privileges of citizenship, too.”
Ms. Jahagirdar said Virginia’s warnings were profoundly misleading. “We have been registering young voters for 25 years,” she said. “We registered 500,000 young voters in 2004, the majority on college campuses, and we’ve never heard of a single one who lost health insurance, scholarship or tax status because of where they registered to vote.”
In Virginia, the county registrar first issued an alarming release on Aug. 25, and two days later a slightly toned-down version using language taken directly from the state Board of Elections’ Web site.
That site says students can determine their legal residence, but advises them to consider certain questions. “Are you claimed as a dependent on your parents’ income tax return?” the site asks. “If you are, then their address is probably your legal residence.”
The site also tells students to check whether their coverage under their parents’ health or automobile insurance, or their scholarship, will be affected by changing their residence.
Civil rights lawyers say these guidelines are problematic and could infringe on students’ rights.
“What the state Board of Elections has on its Web site, to me, sounds like it is discouraging students from registering at their school address,” said Jon Greenbaum, director of the Voting Rights Project at the Lawyers’ Committee for Civil Rights Under Law.
Indeed, the Montgomery County registrar, E. Randall Wertz, said several students had canceled their local registration over their worry about the possible consequences. Mr. Wertz said he had issued the release to try to dispel confusion and explain what he believed to be the consequences of choosing a college address as a primary residence.
“My understanding of state law has been that by declaring you’re voting here, you’re saying this is your primary residence, your domicile, and that while you can have many abodes or residences, you can only have one domicile,” Mr. Wertz said. “And if this is your primary residence, you have to register your vehicle here, charge your driver’s license to here and so on. That’s been the interpretation at state training sessions.”
Kevin Griffis, the O’s campaign’s Virginia spokesman, said the release appeared to be a good-faith effort to convey state guidelines, not a politically motivated effort to stop voting by students.
Mr. Wertz said the initial release had been written by an intern whom he asked to summarize the guidelines. Although the second release used the state’s precise language, he said, it still left room for confusion. In other counties, registrars have refused to accept dormitory addresses as residences. But so far, the state has not set clear standards.
“Different registrars around the state interpret it differently,” he said. “We’ve asked for more guidance from the state legislature, but they haven’t wanted to deal with it.”
Mr. Greenbaum’s Voting Rights Project has been involved in other student-registration cases. Last fall, in Statesboro, Ga., in a hotly contested city council race, there were challenges to the registration of about 1,000 Georgia Southern University students who had used dormitory addresses. “We threatened suit, but the issue went away when they figured out that the challenges weren’t going to affect the results of the election,” Mr. Greenbaum said.
In 2003, in Waller County, Tex., the district attorney wrote a column in a local newspaper threatening to prosecute students at Prairie View A&M, a historically black university, for illegal voting. The project sued, and the district attorney backed down.
In the 1970s, that same county required Prairie View students who wanted to register to fill out a questionnaire asking, among other things, whether they owned property in the county, had an automobile registered there or belonged to any church, club or organization unrelated to the college. A challenge to that practice led the Supreme Court to uphold students’ rights to vote at their college address
Thanks, Bi.
28#, i am going to take a few shares of SKF on its way down
So here’s the plan;
1) Allow FNM & FRE to continue buying MBS from various banks until the end of next year.
2) Allow the Treasury to buy the MBS from FRE & FNM.
3) Don’t worry about that though, as the Treasury is part of the US Govt! Which can issue bonds and print cash to cover the losses incurred from acquiring all those MBSs.
I mean, seriously, we can’t allow Krupp Steel… errr, that is Fannie Mae to go under. That would be bad.
Dead serious, it may be time to split. I have no idea of where to go. I am at a loss for words as to how f’d we all are.
Shore,
Can we take the names of everyone who pushes the market up today and then fire them based on incompetency when it its the fan?
3b SG,
Bush’s legacy is solidly in place. And it the exact opposite of what he wants.
Remember when in the TV show they sang, “Mister, we could use a man like Herbert Hoover again”? Well, we seem to have a slew of them. Maybe in a few years the song Happy Days are Here Again will be popular once again.
Those of you who have been here awhile know my political end economic background and that I am not a far-letf or far-right flametrower. That said, I am aghast at the stupidity of “our leaders.”
I would like to think that the American public is too smart than to allow policy makers to continue down this reckless path to 1930 but yeesh, I am feeling less certain about that as each day goes by.
If any of the bozos who ran Freddie and Fannie into the ground get serious cash as they depart……….. Ugghg!!!!!!!!!!!
# 37
Works for me.
18 Shore – Looks like the D’s are giving up already. You can always count on them to fold…even if they ahve a winning hand. Sigh…
I just heard Paulson say “We need to figure out if we want government support for private profit.” Is this a serious position? Does he actually believe “we need to figure this out?” Have we really gone this far off the rails?
Gator
Israeli politician Abba Eban once said that the “Palestinians never miss an opportunity to miss an opportunity.” I have observed the same can be said of the Dems.
Obviously Paulson leaked the news early on Friday. Everything started to go mysteriously positive in the middle of the day.
But the SEC wont do anything about these shenanigans, lets go get the damn bloggers!!
32 – Re the Voter Registration. All that’s missing from the release is an incorrect date for election day and a statement that you can’t vote if you have outstanding parking tickets.
If the Dems cant win this one, we should switch to one party rule.
#41 – Shore – Have we really gone this far off the rails?
Yes.
Merrill says too early to be overweight in financial stocks
The broker said traders might want to look for shorter-term “knee-jerk” reactions to the announcements, but rallies in the sector should still be used as opportunities to sell into strength.
The One now says W tax cuts may not be so bad after all:
“Democrat BHO says he would delay rescinding President Bush’s tax cuts on wealthy Americans if he becomes the next president and the economy is in a recession, suggesting such an increase would further hurt the economy…”
What about increasing taxes on the wealthy?
“I think we’ve got to take a look and see where the economy is. I mean, the economy is weak right now,” O said on “This Week” on ABC. “The news with Freddie Mac and Fannie Mae, I think, along with the unemployment numbers, indicates that we’re fragile.”
Some principled candidate we have here. This might explain the 17 point swing in the polls to M/P.
SHore,
I regret to inform you that said “smart american public” has not been seen or heard from in several decades and therefore death in absentia has been invoked. For supporting evidence please see the following list:
Faux news
American idol
George W Bush
No Child Left behind
…….
Please see appendices I through MM for the complete listing
make no mistake. john mc has very steep unhill battle ahead of him since current president from his party has been blamed for anything and everything in current economic situation. nevertheless, the race is so close. it means the dem candiate is a really weak one in front of ordianry americans. he is strong in his party run by extemists such as dean, kennedy, and kerry where the leftier is better.
I just saw a statment that O made over the weekend that points to a crack that may provide enough room for M to win: “”If they like what they’ve had over the last eight years, then they’ll go with McCain. And if they don’t like it, hopefully they’ll go with me,” he said.”
If people want a fresh break from the disaster of the Bush Administration, but are not confident about the ability of O to bring change and keep the nation strong, M can take advantage of the situation. Over the weekend, M seemed to do everything short of burning Bu-sh (Bu-sh-it??) in effigy and calling him to stand trial as a war criminal.
As September goes on and M keeps up his insults of Bu-sh-it, it wil be harder for O to persuasively argue that M is another Bu-sh-it.
We shall see.
#49 – For supporting evidence please see the following list:
Faux news
American idol
George W Bush
No Child Left behind
Oooh, this could be fun. I’ll add:
Creed
Kelly Clarkson
The fact the Iggy & the Stooges still aren’t in the rock n’ roll hall of fame but Madonna is.
I just saw a statment that O made over the weekend that points to a crack that may provide enough room for M to win: “”If they like what they’ve had over the last eight years, then they’ll go with M. And if they don’t like it, hopefully they’ll go with me,” he said.”
If people want a fresh break from the disaster of the Bush Administration, but are not confident about the ability of O to bring change and keep the nation strong, M can take advantage of the situation. Over the weekend, M seemed to do everything short of burning Bu-sh (Bu-sh-it??) in effigy and calling him to stand trial as a war criminal.
As September goes on and M keeps up his insults of Bu-sh-it, it wil be harder for O to persuasively argue that M is another Bu-sh-it.
We shall see.
#36 kettle; And we are the same nation running around telling everybody else in the world they should be just like us.
FNM and FRE down to $1 and change, equity investors has been wiped out.
Ket,
I fear you are correct. When I was a kid, I figured that the adults knew what they were doing. When I became one, i realized that not all of them did. Now, I am amazed at the number of them that do not seem to have a clue.
I always saw myself as a “common man” kind of guy. I grew up poor, did allright, reasonably bright, yadda yadda. Anymore, though……
$ 1?? Who the heck would pay $.02 for them right now?
6….not enough elderly folks for your comfort level ‘Gator’???
55…the common man of generations ago had less TV…more common sense….and the will to survive….
Time to crank up Crazy Train. It seems to reflect the current situation better than anything else that comes to mind at the moment.
While this is highly pessimistic, how much does the winner of the election matter give the magnitude of the financial storm we are entering? Any policies that either candidate would want to push will be severely limited or outright prevented due to the financial impacts of our bankruptcy.
Either candidate will spend the next 4 years just trying to keep their head above water
Market is up 297 right now.
The Power of De
By PAUL KRUGMAN
Published: September 7, 2008
Save the home lenders, save the world? If only it were that simple.
So Fannie and Freddie had to be rescued — otherwise debt deflation would have gotten much worse. Indeed, their financial troubles have already caused problems for would-be home buyers: mortgage rates are up sharply since earlier this year. With the federal takeover, which removes the pressure on the lenders’ balance sheets, we should see mortgage rates drop again — which is definitely good news.
But is it enough? I doubt it.
The current U.S. financial crisis bears a strong resemblance to the crisis that hit Japan at the end of the 1980s, and led to a decade-long slump that worried many American economists, including both Mr. Bernanke and yours truly. We wondered whether the same thing could take place here — and economists at the Fed devised strategies that were supposed to prevent that from happening. Above all, the response to a Japan-type financial crisis was supposed to involve a very aggressive combination of interest-rate cuts and fiscal stimulus, designed to prevent the crisis from spilling over into a major slump in the real economy.
Shore,
a friend of mine is a CFO for a commercial RE firm in Manhattan. I have tried to discuss some of the financial issues we debate here in order to get his opinion. His opinion is that he doesn’t care and doesnt want to know as long as he continues to make money on his RE deals. he knows things are bad but doesnt want to know the details because ” its just very depressing and there isnt anything we can do to fix it. SO we should just make money as long as we can. besides they will figure out some way to fix this.”
This is the opinion of a very intelligent , well educated and high ranking individual. if someone at this level, who readily understands the issues involved actively buries their head in the sand, then what can we expect of the general public? These are complex issues that actually take some amount of reading and study to understand. Joe Sixpack has a hard time with the reading level required for the WSJ or FT. How do you explain the current situation besides saying the US is bankrupt. And of course no one would believe you because “it just cant happen, we are the US”. There has been copious amounts of coolaide being handed our for over a generation.
was flipping around the news channels this morning to get a sense of the various slants on the bailout. big shock was that CNBC was the only channel that even suggested there might be a negative consequence to this move (although they greatl downplayed this while effusively praising Paulson). CNN’s take was that this was really a great thing because it would lower mortgage rates by 30 bps! Overall, I saw zero comprehension of the magnitude of this move. The American public is completely blind to the degree to which they are being robbed and it does not appear that the media understands the issue sufficiently to bring it to their attention
My understanding is that FRE and FNM will need to dump 50% of thier portfolio by the end of next year, and then 10% a year after that. Is the Treasury on the hook to buy all of it? I don’t expect there is much of a market for it anywhere else.
Also, who is supposed to write loans going forward if FRE and FNM are downsizing? How is the goal of “saving the housing market” supposed to be accomplished with no one writing loans, or is the Treasury essentially now the bank who is supposed to keep house prices propped up?
#22.. here is the best site for state by state election polling.
http://www.realclearpolitics.com/epolls/maps/obama_vs_mccain/
regarding bold text: can i have a hit of whatever you’re smoking?
From: Paulson Statement on U.S. Action on Fannie, Freddie: Text
….The second step Treasury is taking today is the establishment of a new secured lending credit facility which will be available to Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. Given the combination of actions we are taking, including the Preferred Share Purchase Agreements, we expect the GSEs to be in a stronger position to fund their regular business activities in the capital markets. This facility is intended to serve as an ultimate liquidity backstop, in essence, implementing the temporary liquidity backstop authority granted by Congress in July, and will be available until those authorities expire in December 2009.
While the GSEs are expected to moderately increase the size of their portfolios over the next 15 months through prudent mortgage purchases, complementary government efforts can aid mortgage affordability. Treasury will begin this new program later this month, investing in new GSE MBS. Additional purchases will be made as deemed appropriate. Given that Treasury can hold these securities to maturity, the spreads between Treasury issuances and GSE MBS indicate that there is no reason to expect taxpayer losses from this program, and, in fact, it could produce gains. This program will also expire with the Treasury’s temporary authorities in December 2009.
(emphasis mine)
http://www.bloomberg.com/apps/news?pid=20601087&sid=aDipiKDdhfSI&refer=home
So, when do I get my government sponsored housing unit?
#65
I have read conflicting things on this point. First, they are saying that FNM/FRE will be rapidly downsizing. Other reports are saying these entities have been given the go ahead to inject more liquidity into the mortgage market. I do not understand how both can be accomplished simultaneously. My only hope is that they are simply trying to jawbone spreads down by acting as though they are going to increase liquidity, but that they are really focused on shrinking the GSEs balance sheets. If they are actually going to expand, the problem is only going to get worse.
George W Bush could well be the worst President in the history of the country. Never before has an administration so steadfastly put short term political/financial gain ahead of the future well being of the country. I am saying this as somebody who has quite frequently voted Republican in the past. They spent 7 years looking the other way while all this crap in the mortgage market was going on and didn’t lift a finger and now it’s bailout city for all the wealthy and well connected.
Graeters Ice Cream is the bomb. They don’t mess around.
agree that this a massive failure of policy toward a problem that has been obvious for a long time. I sincerely hope Mr. M will have the sense to denounce this move and propose that the U.S. get out of the mortgage business altogether (like Forbes is proposing). getting rid of these entities is going to be like pulling teeth though in D.C. Look at Barney Frank’s reaction today in the WSJ:
**********
“Wrangling over the future shape of Freddie and Fannie will likely be kicked to the next Congress. Already the majority Democrats are pushing back on elements of Treasury’s plan. “Good luck on that,” said Massachusetts Rep. Barney Frank, chairman of the House Financial Services Committee, when asked about the Treasury’s plan to start reducing the firms’ portfolios beginning in 2010. Mr. Frank called it “more of a sop to the right” than a real policy prescription and said it wasn’t going to happen.”
All of this nonsense is making me think that Stu’s idea of decamping off to Costa Rica or Belize is not such a bad idea after all.
# 65
Ket,
Thanks for sharing the good news. If a person like your friend fails to understand, or even see a need to understand, the nation’s financial condition….
I know people in our circle, high earners, well educated, yadda yadda, who believe that we are still: the richest country in the world, the country with the greatest life expectancy, and the biggest market. None of this is any longer true, unless, if by rich, one means in the greatest debt.
This nation achieved greatness due to a conbination of great natural resources, the belssings of geography, and doing the right things over an extended period. Like the prospectus for the USA might say, past results are no guarantee of future performance.
Past generations saved. We spend.
hehe 69
did you see IOUSA – the movie?
you are preaching to the choir, my friend.
sl
I may be crazy, but I just loaded up on SKF. Couldn’t resist.
Also from paulsons statement:
First, Treasury and FHFA have established Preferred Stock Purchase Agreements, contractual agreements between the Treasury and the conserved entities. Under these agreements, Treasury will ensure that each company maintains a positive net worth.
# 69
Maybe one of the small third-floor bedrooms of the White House will come available.
What is a cheap, English speaking, relatively close country?
78-
Alaska. Completely subsidized by the lower 49.
Re 79,
That’s for certain. Too bad with Sen Teddy getting indicted that’s not likely to last.
78 – Belize
Belieze
Grenada, and Barbados are also great, and they lack the hurricane dangers of BZE
What does this all mean for financial markets? An answer is available from anyone who can also walk on water. My guess is that for the here and now, i.e. between now and when the GSE induced relief rush wears off, equities will give Boo a head-spinning bear-market-short squeeze enema (S&P500 (ESU8) futures are up 37 points as I write on Sunday evening), together with a strong rally in gold and commodities, a shake-down of the freshly baptized dollar bulls, and a rush away from the safety of Treasuries. Beyond that… one step at a time.
http://www.minyanville.com/articles/Paulson-fre-fnm-mortgage-treasury-government/index/a/18837
#48
“I think we’ve got to take a look and see where the economy is. I mean, the economy is weak right now,” O said on “This Week” on ABC. “The news with Freddie Mac and Fannie Mae, I think, along with the unemployment numbers, indicates that we’re fragile.”
******
I saw that interview on Sunday and was impressed by how hard Stephenopolous pressed Mr. O. Not a surprise to me that yet again he shifted his message on taxation. This is why his repeated claims that his plan will be better for “95%” of Americans (which Stephenopolous also suggested was wrong) is so implausible. He changes his plan every couple of weeks.
Why is everyone shocked that we took over Fannie and Freddy?
We all knew this was coming. We all planned our portfolios for this to happen.
I actually think it was a cheapeast way for the taxpayer to bailout these monkeys. Much better then the way we Bailed out Bear Stearns.
Now does anyone think that the deflation is still the threat with these short cited people running this country.
Our Gov’t now owns 50% of the mortgages in this country. Which means they own 50% of the land.
This is not capitalism. It’s exactly why Jim Rogers left the county in 2007 and moved his whole family to singapore.
I thought Fannie and Freddy were well capitalized. LOL.
Jim Rogers called Hanks bluf on CNBC shorted those monkeys and made millions.
I thought Graeter’s ice cream was totally overrated.
Shore gator,
Carribean island may not be the best longer term choices as they face serious challenges if energy and climate changes occur. A mainland location such as belize, costa rica, or paraguay might be a better long term choice. have heard many good things about paraguay from people who are from their and from few expats. dont knew much about it though
#86
“I actually think it was a cheapeast way for the taxpayer to bailout these monkeys.”
It may be the cheapest IF they actually scale these entities down. If they are going to keep running them full tilt, we are going to lose massive amounts of money as we keep lending into the storm
Make $
Now does anyone think that the deflation is still the threat with these short cited people running this country.
YES!
I dont care who holds the debt. Assume for arguments sake that housing values drop another 15% per the shiller composite 20 index. That would be approx an additional 3 trillion US$$$$ that ceases to exist and a total 305% drop in home prices. 3 trillion in just home values have already disappeared. Add to that the Write downs that will happen when the level 3 assets finally get marked to market, the FDIC bailout etc. we could see 10 trillion+ disappearing. The US$ Bond markets will collapse if the GOV tries to print 10 trillion.
Due to our current level of leveraged debt there are multiple claims to each real assets floating around in the real world. When all these claims come a calling you have deflation as only 1 claim can be recognized to each asset (oversimplified)
correction
total 305% drop in home prices
total 30% drop in home prices
also, really amazing, Paulson saying on CNBC this morning how BAD he felt for all of the Fannie/Freddie directors. What a shame that this had to happen to them, they couldn’t have done anything about it, etc. My question is, since citizens are now the residual owners of these corporations, can we bring a derivative suit against the directors?
[7] Gator,
No, I also think that Skyline is about the only redeeming feature of Cincinnati.
Full disclosure, never been, never had Skyline Chili, but T.J., my former Judicial Intern Extraordinaire, swears by it and I trust his judgment.
Did you see PGC’s comment about Toppam Hat? I only learned yesterday about the Fat Controller when I finally had to learn why the name Sodor. He (she?) has way too much time on his (her) hands.
[88] Ket,
Consider the logistics of getting to, and acquiring sufficient land and materials in said foreign nation, then worry whether the gov will expropriate all property owned by foreign nationals. Even without expropriation, you ilve in a 3rd world nation where you are vastly outgunned. The only reason to go abroad is to avoid US taxation, but that presupposes that you have something to tax. If you have no income, then you have no (federal and state) taxes, leaving only munis, so you pick your haven county carefully.
U.K., Iceland, NZ, Australia, Canada, maybe Norway, Ireland.
Dow down to being up 229. What are the odds peole wake up and things finish flat?
Now down to up 173. MAybe the street is not completely populated by dunderkopfs
Q’s are already negative. it is not a strong market.
Three other Cincinnati delicacies that once tried can’t be denied
1) Goetta
2) Mettwurst – these are not the crappy Big Red Smokies
3)Bockwurst – the small one’s that are only available in the spring time made with fresh veal
Mmm…Graeter’s. Just brought back some fond memories for me. There was one in the neighborhood where I grew up. Adolescent boy troubles always required us girls to walk to Graeter’s to fix our sorrows.
SHore,
UK and ireland are a bad idea. Those 2 countries will be hard pressed to support ehir current population without extensive imports. also climate issues.
Nom,
All good points. The counter is that if you integrate with a small local community in said south/central american country you can negate some of the negatives you mentioned. may yourself indispensable.
As you state din the e-mail you sent recently, the key is community.
Kettle is right, it’s all about the leverage.
“Hobocondo Says:
September 8th, 2008 at 10:39 am
I thought Graeter’s ice cream was totally overrated.”
Go back to Cleveland.
If you want great ice cream, try the dairy bar at Cornell in Ithaca.
anyone going to the “investing-21” meeting this week?
Zillow, newspaper consortium launch ad network
Zillow.com, which in November 2007 teamed up with a consortium of newspapers to carry their listings on its real-estate site, has now expanded that deal to include the sale of ads on each other’s sites.
Under the Zillow Advertising Network agreement, the consortium’s advertisers can tap into Zillow’s user base of more than 5 million unique monthly visitors, while Zillow’s advertisers will have access to readers of the newspapers’ online real-estate content.
93 Nom – Well if you ever get to skyline, you’ll have to choose between a 3 way, 4 way or 5 way.
Lay off Sir Topham Hatt. He always makes sure the trains run ontime. He’d make a fantastic Sec of Transportation or Superintendent of Amtrak. I’d wager he could even make Amtrak profitable.
23 mil combined for CEOs of Fannie & Freddie. I feel like an idiot as a shareholder of FNM.
Jay Leno: “Well, here’s a little known fact from the Republican convention. This is kind of interesting. You know the confetti they dropped at the end?” That “was made from the actual Constitution of the United States.”
http://www.usnews.com/usnews/politics/bulletin/bulletin_080908.htm
“you’ll have to choose between a 3 way, 4 way or 5 way.”
Is this a place run by John?
93 Nom – There goes Ohio.
Just found this little gem on MSN.
Maybe he’s just trying to preserve equity in his own lil patch of grass…
[snip]
Fed chairman sees housing slump firsthand
Ben Bernanke isn’t selling or in foreclosure, but his Washington, D.C., home has lost value in the housing and loan crisis he so closely follows as the Federal Reserve chairman. He bought the 2,600-square-foot, four-bedroom place for $839,000 in 2004. The value went up each year until this year. The proposed 2009 assessment is $885,290 — down from last year’s $948,110. [snip]
see msn for the rest of the article.
sl
We’re Gonna Frickin’ Lose this Thing
http://www.huffingtonpost.com/adam-mckay/were-gonna-frickin-lose-t_b_124772.html
Something strange happened at last weeks foreclosure auction in BC and maybe you guys can help prevent someone from getting scammed.
A property sold in 2002 actually had a winning bid higher than the judgment. So the previous owner is looking at somewhere between $25-50k from the auction sale.
It doesn’t appear to be someone that went nutz and cashed out all the equity in their home and the foreclosure is possibly due to some sort of hardship. Surplus fund scams are pretty popular in nj so if anyone knows the individual that used to live in River Vale, let them know they’re entitled to a decent chunk of change.
The old phone number doesn’t seem to work. Figured I’d give it a shot here since there are many more participants than on my site.
More info at http://www.bergenjerseyforeclosures.com/blog/info/entry/september_5_2008_sheriff_auction
http://www.ajc.com/opinion/content/shared-blogs/ajc/thinkingright/entries/2008/09/08/the_campaign_of_barack_obama.html
Obama, McCain, Fannie and Freddie
By Jim Wooten | Monday, September 8, 2008, 08:30 AM
The Atlanta Journal-Constitution
The campaign of Barack Obama has reason to be concerned in the first week of the post-convention campaign season.
For one, his rival’s bump from the convention and from the selection of Alaska Gov. Sarah Palin as his running mate was solid. John McCain now leads 50 to 46 percent among registered voters, according to a Gallup poll taken Friday through Sunday.
Of greater concern to the Obama campaign, though, is his lead among those who are most likely to vote. That’s 10 points, 54-44. Obama’s strong lead on dealing with the economy has essentially vanished, too. It was 19 points before the convention and is down to 3 now, which is within the poll’s margin of error.
During a post-convention trip to South Georgia, I had a chance to get some reaction to the GOP convention and to Palin. Far and away, she was the hit of the convention.
Obama continues to be bedeviled by questions about his religion, something I picked up repeatedly from people who aren’t political junkies. It’s not surprising that Obama lashed out on that issue Sunday. He can’t shake the believe that he is a Muslim, the religion of his father and religion of at least part of his childhood.
Obama badly needs to do something to shake that perception. A major speech, addressing it head-on, is warranted.
On another front, the feds moved decisively over the weekend to deal with the Fannie Mae and Freddie Mac problem. Partisan commentators and others are quick to react, calling such efforts a bail-out. When you lose your investment, your job and the franchise, as will now happen, it’s hardly a bail-out for managers and investors. The two entities should be stabilized, broken up, and sold back into the private sector completely free of government guarantees on debt.
O, M, Fannie and Freddie
By Jim Wooten | Monday, September 8, 2008, 08:30 AM
The Atlanta Journal-Constitution
The campaign of BO has reason to be concerned in the first week of the post-convention campaign season.
Atlanta Journal Constitution (link is in post stuck in moderation, withthe evil O name in it)
For one, his rival’s bump from the convention and from the selection of Alaska Gov. Sarah Palin as his running mate was solid. John M now leads 50 to 46 percent among registered voters, according to a Gallup poll taken Friday through Sunday.
Of greater concern to the O campaign, though, is his lead among those who are most likely to vote. That’s 10 points, 54-44. O’s strong lead on dealing with the economy has essentially vanished, too. It was 19 points before the convention and is down to 3 now, which is within the poll’s margin of error.
During a post-convention trip to South Georgia, I had a chance to get some reaction to the GOP convention and to Palin. Far and away, she was the hit of the convention.
O continues to be bedeviled by questions about his religion, something I picked up repeatedly from people who aren’t political junkies. It’s not surprising that O lashed out on that issue Sunday. He can’t shake the believe that he is a Muslim, the religion of his father and religion of at least part of his childhood.
O badly needs to do something to shake that perception. A major speech, addressing it head-on, is warranted.
On another front, the feds moved decisively over the weekend to deal with the Fannie Mae and Freddie Mac problem. Partisan commentators and others are quick to react, calling such efforts a bail-out. When you lose your investment, your job and the franchise, as will now happen, it’s hardly a bail-out for managers and investors. The two entities should be stabilized, broken up, and sold back into the private sector completely free of government guarantees on debt.
# 114
Even so, when Big Ben sells, he should have enough to buy a 1 BR condo in West Windsor.
WaMu too big to fail? (from the WSJ)
“Washington Mutual also said it entered a memorandum of understanding with the Office of Thrift Supervision, meaning it is now effectively on probation. The bank said the regulatory warning concerns aspects of its operations related to risk management and compliance.”
#37 Shore – Or “Brother Can You Spare A Dime?”
#107 NJGator
Are you kidding, the only reason that railway keeps going is the huge government subsidies. There are empty trains running all over the place. Half the trains are in the shed for being bold or else they are out causing confusion and delay. The fireman are always stopping for tea and cocoa. And don’t get me started on their Health and Safety record.
I say privatize now.
Skeptic,
Uh-oh, WAMU had $140 billion in insured deposits as of june 08. I hope hank has reloaded his bazooka for the forth coming FDIC bailout
tom, 114
maybe you can reach their former neighbors to find them. Sometimes they know who employs them, etc.
sl
119 PGC – I was kidding, of course. However the Thomas the Tank Engine folks have figured out how to make an absolute mint off of silly looking wooden trains, so maybe they could give it a go with Amtrak. Couldn’t do any worse, in my opinion.
Kettle 101 —
I recall reading an article lamenting Ireland’s car dependency and sprawlification. I’ll try to dig it up. The gist of it: Ireland is the most car dependent nation on the planet. They have minimal passenger rail and lousy bus service everywhere except Dublin. The Celtic Tiger allowed everyone to get a car and a house in a new housing estate (aka subdivision) which was farmland 15 years ago. After centuries of British oppression the Irish have an anti-authority bias (kind of like us) so when they had money for the first time they went nuts on a suburban building binge without regard to any central planning. Also their population is growing at a rapid clip … large Irish families are no longer standard … rather, their young people are staying and their diaspora is coming back. And for the first time they’re taking in immigrants. All this adds up to rapidly dwindling farmland, more roadbuilding, and more car dependency.
EVERYBODY DANCE NOW!
http://equityprivate.typepad.com/
Part 6 is available if you want to see it, funny, very funny, but a bit more sobering then the others.
still_looking,
Thanks for the tip, I’ll try that.
My two cents is that the new CEO of WAMU is the real deal. One of my first jobs was at Independence where he was the CEO, he ran a tight ship. Heck my first loan was through Independence and it required 25% down and they kept it on the books. He did a great job in bringing Independence public and got Soveign to overpay in a cash only deal in June 2006. He was the COO of SOV for awhile. A real life time Brooklyn straight shooter. Was a really big shot at Chemical Bank too for awhile so he knows the folks over at Chase. He can prop that baby up as he is very tight on expenses and consertive on loans, the better news is he had no problem selling 110 year old Independence to Sov so he has no problem selling Wamu to Chase or whoever. I think he might apply some good old time religion there get the books a little better and sell the damm thing at $20 in 2009/2010 to Chase. I worked for him, I owned Independence stock and cashed out in the SOV deal. I have a good feeling. Plus guy is 62 and will only make a million a year as CEO, he has a lot of stock he can purschase at a set price so he has to be a rainmaker to make it happen and at 62 he has three years to do it.
I frequent a few other blogs and some RE agent from one that I visit posted some information that I handn’t seen before.
Please look over this and comment…Thanks to Las Vegas Real Estate for his contributions
Quote:
If you have some time for some interesting reading –>
http://www.ofheo.gov/media/pdf/FNMSPECIALEXAM.PDF
Here are some cliff notes done way back in 2006 –>
—-Quote:
“Fannie Mae management believed that, to double EPS by 2003, the Enterprise would have to achieve three business objectives. Page 45.
We need to go through these slowly, because each one is very important.
1. First, in the credit guarantee business Fannie Mae would have to securitize a greater share of the single-family mortgage market, in part by:
(a) penetrating the subprime market, and
(b) buying conventional loans that might otherwise be insured by the Federal Housing Administration. Page 45.”
End Quote ——-
Plenty of more in there to read…. Pretty much sums up the system that led to higher prices in areas where money was being given away to boost up those earnings.
So basically, risky decisions for personal gain (bonuses) were made since it’s been assumed that ultimately, the Government (Taxpayer) would be there to bail them out if needed.
Something tells me that these same people don’t care about the mess these decisions created and the effect it is having on hundreds of thousands (If not millions eventually) of American Families who just wanted to get into the “American Dream” no matter what it took.
I certainly don’t expect the average consumer to understand what happens to real estate prices when anybody can buy…
where did all the rally monkeys go?
post 129 was from Las Vegas Real Estate too, sorry for missing the attribution.
PGC “Are you kidding, the only reason that railway keeps going is the huge government subsidies. ”
Agreed. Likewise, the only reason the highways work is the huge government subsidies.
Down to up 126. Maybe the market will see snse and finish flat to down. Of course, the folks activly trading are making a mint, but, after all, this is America, where the investment community is entitled to gains and all losses are now socialized.
Correction, “all losses amongst the connected are now socialized, the folks in the upper midle class and below are on their own, and need to bail out the truely deserving.”
“loading up on SKF”
hope i’m not asking too much, but what do you guys consider loading up?
$1,000?
$5,000?
$15,000?
Because if you buy at 110, and sell at 150 (hypothetical), and you’ve only invested $1000, you’re making a whopping $800 or so, and that’s not really even taking taxes into account.
just got off the phone with the financial adviser about this, and we’re pondering how much to invest.
yes, all disclaimers, etc
Top 5 % Decliners on NYSE
FNA: -89.58%
FRE-PO: -84.99%
FRE-PK: -85.64%
FRE-PT: -84.56%
FNM: -84.09%
132 Shore –
Apparently the only reason the housing market will work is government subsidies.
“Agreed. Likewise, the only reason the highways work is the huge government subsidies.”
Bought 20K worth at $104
I caught something Sen O said on the news last night in regards to the bailouts.
I forget the full quote but when he said “greedy borrowers” it reaffirmed the belief that neither candidate will be able to solve the problems with housing and lenders.
Yes there were speculators but the far majority of people buying homes during the bubble weren’t doing so out of greed but out of the image of homeownership that was being sold and they were buying houses at the prices that they were going for.
Do you blame “greedy parents” when they buy high priced milk for their kids?
Pres McC: More of the same
Pres O: A little less of the same
doubled down on SKF with $8500 at $99 (9:40AM) after the 36 shares bought at $136 hit a stop at $100 first thing this morning.
Halfway there
Laughing all the way –
We also have about 20K of SKF that we bought last week at 115. So we are in for 20K at 115 and 20K at 104.
Profits already on the 104 batch.
There is some UGLY stuff going on with LEH right now. Ugly. My bets are that there is some kind of announcement after the bell.
i hope you guys who long or plan to long SKF will not get burnt. please keep in mind:
first it is 2X of financials;
second, a lot of short covering will easily make it $10K swing.
third, before thinking of taking profit at $150, think what you would do if it goes to $80 to $60.
sorry $10 not $10K per share
Kettle,
I have seen hyperinflation in Montenegro in the 90’s. The gov’t was monetizing debt to fight a war. Placed short term political interest and economic gains(ala stimulus) as priority. Controlled most media and shaped people’s views.
Housing crashed to pennies on the dollar. I was getting $110 dollars per month for a 5 bedroom masion with Ocean views in ULCINJ.
Prices of Commodities and food went through the roof. Almost all banks imploded. Gov’t (FDIC equivalent) is still paying me $1000 Euro’s a month on my savings that I had back then. 15Yrs later and I still don’t have didn’t get my savings back.
People trashed the currency and started using USD and Francs, Marks and most desirable paymnet for goods and services were GOLD AND SILVER.
Standard of living will crash here as goods that foreigners make will get consumed there cause Americans will not be able to pay for them with our devaluated Dollars and you can forget about credit.
In addition our exportable goods and services will be sold to the highest bidder and we and our economy with a country in a Ten Trillion dollar debt will not be capable of having a top 50 currency.
Local goods and services that can’t be exported will be dirt cheap. Haircuts, Plumming, Electric, House Mades, Tuition, housing( except vacation spots), will all do dirt cheap when priced in other currencies and/or Gold. Malls will be turned into Factories.
Inflation wipes out the middle class and turns nations into third world.
Do you really think that the Russians, Chinese, and Japanese are extatic about their Fannie And Freddie common positions being wiped out and will return again to funs our need for capital surplasses. All the Dollars from around the world will come home to roost and that’s just way too many dollars not to cause inflation.
Nurburgringer – good move getting in at 99. Planned to get it a 9:31 this morning, but was on a damn call. Missed the best entry point.
I think a lot of shorts covered this morning, but most of the people I talked to knew it was a sucker’s rally.
Always a chance to get burnt.
I missed many an opportunity to sell. BTDT.
BTW, great video from Karl:
http://www.tickerforum.org/cgi-ticker/akcs-www?post=59124
We also have about 20K of SKF that we bought last week at 115. So we are in for 20K at 115 and 20K at 104.
Forgive me for being floored, but 40k? on one ETF? I don’t recognize your handle, so i dont know if you’re the ballsy type … but geez. clearly, you’re clearing a ton of dough each year … enough to risk 40k on one ETF.
i’m a cautious bastard – that’s too rich for my blood. but we’ll go in for a few grand.
and at 62 he has three years to do it.
John,
Do you really think that WaMu has three years of lifeline left?
form seekingapha
According to standard ISDA definitions,
A Credit Event occurs if the Reference Entity “seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all of its assets”.
Does this mean that Fannie and Freddie’s credit default swaps have been triggered, and that the protection seller must pay out on them? Yes.
Thirteen “major” dealers of credit-default swaps agreed “unanimously” that the rescue constitutes a credit event triggering payment or delivery of the companies’ bonds, the International Swaps and Derivatives Association said in a memo obtained by Bloomberg News today.
In itself, that doesn’t worry me overmuch. The way that credit default swaps work, the protection seller receives an insurance premium every six months from the protection buyer. If a credit event occurs, then the seller has to pay out the face value of the bonds in cash, while the buyer has to deliver an actual bond.
In this case, the bargain is no great hardship for the seller, since the bond being delivered is essentially going to be an obligation of the US government. Indeed, if Frannie’s spreads tighten in today, the protection seller might actually make money on this trade.
But of course it’s more complicated than that. Even if the netting on bilateral CDS works out fine, there’s also the index CDS to worry about:
A settlement of credit-default swaps would probably be the biggest attempted in the market’s decade-long history because Fannie and Freddie are members of the benchmark index of U.S. credit risk, Percy-Dove said. The index comprises the most frequently traded contracts in the U.S.
Lots of index swaps get triggered the first time any credit in the basket suffers a credit event. Which means that there could be some big unwinds coming up very soon.
#139 Perhaps greedy, or perhaps not, but certainly stupid borrowers pushed up prices, due to fear, and or ignorance. They than justified their decesion by stating well it does not matter, becasue next year it will be worth 100k more.
I had this conversation a couple of years back, with one of those so called educated people, who on the surface at least appeared to be knowledgeable and successful.
To make a long story short, I said to him so it is your belief that prices will continue to increase at the levels they have, his answer, yes.
To which I than said well that will mean that the proverbial 50+ year old not updated POS starter Cape, Ranch, Colonial, will cost $1,000,000.0, in another few years to which he replied, yes!!!
And this from someone who lived through the last housing bust.
So in short, you cannot fix stupid
laughing … it’s a crazy bet (yes ballsy!), but we’ve successfully traded skf for about a year. It’s one of our only trades, and we follow it very closely.
We never had more than 20K in, BUT, couldn’t resist the 104 entry point. That’s why we pulled the trigger this morning.
Feels a bit crazy, but we’ve been sitting on tons of cash waiting out this housing mess, and felt like rolling the dice.
#149 make: I think more like 3 months.
LEH is taking an ass-kicking today on this glorious day for financials. Anybody know why?
3b,
these people didn’t come to these stupid conclusions on their own. They had large groups working to instill those beliefs through commercials, the media and even direct one on one conversations. These home buyers were up against NAR, lenders, tv home improvement shows, and all the other crap.
It’s not like buyers got together and formed a big group so that they could drive up the price of houses.
Make $ 144
Please forgive my presumption , as i realize i am not an expert. However in my opinion the difference between Montenegro and the US is that the financial mess the US is tied up in is a global mess, not a local mess. Montenegro’s financial woes were highly localized and not tied to global finance.
The US if tied directly into the global finance markets at all levels. Any collapse of the american finance machine will be a global event. The implications of such a global event change the picture from inflation to deflation.
I agree that if the US were not a keystone in the global finance market, then we might be looking at hyper inflation. But given how interconnected we are and how interdependent both the US and the global economy are this will be a deflation event.
The reason being that the US cannot attempt to hyperinflate its way out while the bond market functions. We dont want to crash the bond market hence we are limited to what we can print. Once the bond market for US$ dies you will likely see an attempt at hyperinflation but it will not work, as the dollar will already be considered worthless.
The primary action available to the US that doesnt collapse the bond market is to shift the debt to the taxpayer (well underway) and to attempt a slow controlled de-leveraging of the market. Those 2 actions are opposing though. As the market de-leverages the public debt mounts and the social services available to the people begin to rapidly dry up. This causes a general contraction of credit (already happening) that is self re-enforcing. No one gives credit because they to busy trying to lay claim to the few real assets available.
Once again i acknowledge that my finance skills are on par with bozo the clown. but from what i have learned from this blog as well as other sources, i believe that this is most likely outcome. you may be 100% correct Make $ , only time will tell.
today’s gallup poll is just out: M leads O by 5 pts:
http://www.gallup.com/home.aspx
#155 Tom: So they lost the ability to think for themselves? I understand what you are saying, but at the end of the day, these Bozo’s made the decesion, nobody forced them to.
Now they are crying that nobody told them, it was not their fault.
Hey, I lived through the last down turn, and yes I was influenced by what my peers were doing, and the alarmist announcemnts from the so called experts that a whole generation would be closed out of buying a house.
But at the end of the day, i should have listened to my gut, and I did’t, and that was my fault. I did not look to blame anybody;and besides I am not a crybaby.
VIc,
Could it be the CDS triggers that are kicking LEH’s behind?
#157 bi: Do you really think that either candidate who wins will make a difference one way or the other?
Why do you appear so obsessed with McCain?
SG (30)-
RTC will be chump change compared to this.
#152 electricsheep
An old classic, I think it was written with people like you in mind ….. :*)
Your average Wall Streeter, faced with nothing profitable to do, does nothing for only a brief time. Then, suddenly and hysterically, he does something which turns out to be extremely unprofitable. He is not a lazy man.
For one thing, customers have an unfortunate habit of asking about the financial future. Now if you do someone the signal honor of asking him a difficult question, you may be assured that you will get a detailed answer. Rarely will it be the most difficult of all answers — “I don’t know.”
There was always a scattering of bears, “aginners” by temperament, who spent their business days having their ears knocked off. Many of them, bowing to a force which finally seemed cosmic, switched to being bulls at a sadly late period in the era. The remainder who were still short at the time of the crash covered too soon (as who wouldn’t?). Then, after prices had gone inconceivably lower, they took their profits and bought stocks (as who wouldn’t?). In due course of time, if they bought on margin, they went to “the Cleaners,” that mythical establishment to which their brother speculators had repaired some time earlier. “The Cleaners” was not one of those exclusive clubs; by 1932, everybody who had ever tried speculation had been admitted to membership.
toshiro (35)-
What we have here is a pre-ordained bankruptcy/bailout vehicle (Phony/Fraudy), whose actual failure has begotten another pre-ordained bankruptcy/bailout vehicle…the US Treasury.
hypothesis from another blog:
“Also, I am still seeing discussion that the F&F bailout was really for the benefit of foreign central bank debt holders. I referenced an iTulip piece a few weeks back that spoke about how foreign central banks were switched over to agency bonds with the assurance that they were as good as treasuries. Is this move really designed to keep the foreign banks holding the same levels of agency debt? This seems a reasonable explanation to me in that I think the government really wants to prevent a massive downgrade on US Treasury bonds and a huge high in our interest rates. Wouldn’t this be worse than a F&F takeover? Or are we so far gone that there is really no way to prevent this? Are we on the verge of defaulting on our treasury debt?“
I’m really not political, but for the life of me, I cannot think of one thing that O really, truly stands for.
clotpoll, he stands for CHANGE.
Seriously, who cares? Obama == McCain == Bush == Clinton. Same difference.
skep (64)-
“The American public is completely blind to the degree to which they are being robbed and it does not appear that the media understands the issue sufficiently to bring it to their attention”
That is why we are both ignorant of the occurrence of this event and wholly deserving of whatever we get.
Vic,
regarding Leh and WAMU,
from: http://globaleconomicanalysis.blogspot.com/
LEH and WAMU are collapsing because people now believe that financial institution equity shareholders will also be wiped out in a bailout
156 Kettle,
I see yoru point and I respect it. Yes US Dollar collapse is gonna bring a lot of pain to the world. But in a long run it’s heck of a lot cheaper then to fund our way of life.
and if you think the tax payer can afford this national debt you’re sadly mistaken.
They will try to balance the two between raisisng taxes and printing. It’s much eaiser politically to print though ad that’s what this administration has done.
There is no savings in place for the Gov’t to start selling 30 year bonds to the citizens(ala reagan and tall Paul) and a citizens belief that gov’t won’t spend it on Medicaid. Even if US citizens had the money in savings they do not trust the gov’t. If we don’t trust our own elected officials then why should a pension manager in Sweden trust us with their money.
All it will take is one central bank to dump dollars and everyone will follow as they don’t want to be a bagholder.
Bond market will collapse for a while. USA will definitively loose it’s AAA credit.
165- clot
I think it will really hit home when their 401K statements start getting thinner and thinner. (if they have a job left)
well if this is the end of the financial world perhaps i should grab the kettle family and go pull up here
The White Bay campground
and here:
Poll Reaction from the Left Wing Internets:
Primal Scream
The TPM email bag this morning is chock of emails saying, in so many words, is it time to panic? I’m actually not taking much summary license here. Most of the emails I’m talking about actually ends with some form of that sentence. Since a lot of you are asking this I thought I should provide some sort of answer.
First, I think the USAToday/Gallup poll is an outlier. I wouldn’t put much stock in it. It’s clear that McC is getting a sizable bump out of his convention. But remember, O did too. It quickly subsided, as was expected. And we should expect McC’s to as well. We’ll know more by the end of the week.
Polls aside though, I continue to see a campaign in which the McC camp has a consistent and aggressive message. They’re constantly on the attack and largely defining the debate. The O campaign is largely reactive, parrying the attacks — sometimes rapid response, sometimes slower response, but defined largely by response. It seemed that way to me in July, in August and it seems that way to me now.
At several points over the last year, I’ve underestimated O’s campaign. And I take it that their position now is that they’re not going to get knocked off their game. Instead they’re staying focused on the ground game in the dozen and a half states where they believe the race will be won or lost. That’s difficult for someone in my position to evaluate. The messaging and air war is something that is inherently visible. The ground game is very difficult to evaluate because it’s much more difficult to see. So we’re left to take it on faith that they know what they’re doing, without having much way of seeing for ourselves.
I certainly hope they do. But what I see is a campaign that is for some reason either unwilling or unable to take the initiative in the national messaging war. It’s all reactive. And, yeah, that worries me.
–Josh Marshall
http://talkingpointsmemo.com/archives/214608.php
http://www.soggydollar.com//soggydollarbar/
the painkiller is everything it is puported to be.
http://www.soggydollar.com//soggydollarbar/
Yes and No. I think the new CEO can make it work, but if the stuff is even uglier than it appears or the markets get worse he will have no problem with selling it for $2 dollar a share or putting it into receivership. It may survive, but I would say it is at least 50% that common and pref get wiped out get pennies on the dollars. It is like betting on roultette.
make $ Says:
September 8th, 2008 at 12:53 pm
and at 62 he has three years to do it.
John,
Do you really think that WaMu has three years of lifeline left?
I had a respected doctor (surgeon) tell me the other day that the most recent Cholesterol findings indicate that your LDL Cholesterol should be below 70, and Total Cholesterol & HDL Cholesterol are no longer meaninful. Rather then argue the stupidity of his new belief, I simply stated that my household was “Statin Free”, and I did not allow Statin users in anymore, because of the “Dangers of Second Hand Statin Exposure”. That ended the conversation quickly. The key thing I have found in recent years is that most people in power are wrong. Bush, who I voted for, also ignored my Email sent to him before the IRAQ invasion that their were no WMD in Iraq. Greenspan held the record on ignoring correct advice, followed very closely by Corzine. I have found that Stupidity & Criminal Activity are equally divided among all political parties and government agencies.
#164 clot: Agreed, and the same for McCain. I really think I am going to stay home from the polls this year. For the first time in my voting life, I really do not believe voting will make a difference one way or another.
For me personally, it is quite sad, I always took my civic duty to vote seriously. Now, I just don’t give a krap.
Left Wing Internets Panic Part Deux:
State of the race: 9/8 (panic edition)
by kos
Mon Sep 08, 2008 at 09:30:49 AM PDT
I haven’t done of these since August 1, since the Olympics and conventions sort of froze everything in place. We should be seeing the numbers shift around quite a bit over the next couple of weeks as the convention bounces fade and whatever is left over begins to assert itself. So while many of you panic over the national polling numbers, let’s take a look at the numbers that actually matter — the state-by-state polling.
Five weeks ago, it was O 336, McC 202. I give the states to whoever leads in the Pollster.com polling aggregates. For this edition, it’s O 309, McC 229. The difference from five weeks ago is Florida, which flipped from the narrowest O lead to the narrowest McC lead (McC 46.2, O 44.1).
Now let’s look at the battleground state map. In previous editions, I used to define “battleground” as states within single digits. As we near Election Day, I’m tightening that definition, to those states that are within six points. Why six? Because if we tightened the screen to five, that would leave out Michigan, and I think we can all agree that Michigan is certainly tight. Going to six doesn’t leave out any obvious hot battleground states. And going to seven would pull in states like Texas, which while tighter than history would suggest, aren’t being overtly contested (at least not for now). And yes, seven also keeps out New Mexico and Pennsylvania, which McC is heavily contesting, but so far, McC’s numbers in those states suck (which can obviously change in the coming weeks). So with that new screen, we get this:
That is O 243, McC 132. Looks pretty good, huh? Unfortunately for O, other than New Hampshire and Michigan, those are all Red states, with their past history of voting R. So we’re not out of the woods just yet. This is a real battle. But make no mistake about it, I’d rather be in O’s shoes than McC’s. Compare to 2004, with yellow representing the states either candidate won by 6 or less points:
Without those tight states, the tally was B 213, K 165. K had a much tougher map getting to 270 than O does this time around.
http://www.dailykos.com/storyonly/2008/9/8/02758/97279/261/590618
world may end wednesday
http://www.time.com/time/health/article/0,8599,1838947,00.html
Make $
i think we agree on most points. I believe that the main point of contention is that the amount of debt that people are going to start calling in will cause write-downs that make the write-downs to date look like lunch money.
Ultimately we agree on 90% of the forthcoming events. i respect you opinion as well. Lets find a comfy spot and watch the forth coming horror flick. or is it a dark comedy?
the other “here from my post at 169
http://tinyurl.com/6z3sqg
the painkiller is all its cracked up to be!
A thought on the term “bailout.”
Isn’t thst what one does just before an aircraft CRASHES?
Alexander Hamilton would be proud of us today, huh? Our fearless (and witless) leaders should take him off of the $10 bill so we do not have to look him in the eyes each day they continue with running this nation’s currency into the ground.
Bye the way, has anyone else been to his boyhood home on Nevis?
I will go on record to say that WaMu is toast and will not last another week.
laughin 176,
watch out for the proton beams!!!
PPT file!
http://irfu.cea.fr/Phocea/file.php?class=std&file=Seminaires/1595/Dapnia-Nov07-partB.ppt
Shore Guy Says:
September 8th, 2008 at 11:14 am
If you want great ice cream, try the dairy bar at Cornell in Ithaca.
Shore…..who are you?
Kettle,
MAybe GWB will come out dressed like Dr. Franknfrutter when he announces the next steps he plans to take to protect our currency. That way we can combine horroe with comedy.
horror, even
Can one build a home with proton beams?
I will go on record to say Wamu will not go under in 2008, that said, it may just opperate in zombie 1 to 4 dollar a share status for the remainder of 2008 but will not go under. Also, WAMU is not allowed to go bankrupt. Banks do not have the option of bankrupty. They get taken over by the govt and shareholders lose their shirts.
make $ Says:
September 8th, 2008 at 1:51 pm
I will go on record to say that WaMu is toast and will not last another week.
Regarding FNM FRE….chill out. Look, I’m not particularly jazzed about the bailout. However, if you guys don’t quit the sky is falling nonsense, I will be whipping out my own bazooka. Anyone messing with the SKF at this juncture is whacky, and the same is said for going long. Those with scruples will just steer clear or wait it out. This situation is purely amorphous, and if you think that your insights provide you with a clear risk/reward advantage (i.e. arb opportunity) YOU ARE WRONG.
If you are fearful of what is happening in general, THEN STOP READING THE INTERNET, TURN OFF THE TV, STOP LONGING INTO YOUR ACCOUNT….go out to the beach or the park and grab a drink…enough…..everything will be fine, so stop soiling your diapers.
Maybe Paulson will come out on TV, sitting in a darkened room, dripping water from a sponge onto his head, explaining the current economic situation to the American people using this simple but timetested phrase: “The horror. The horror.”
Ok..Here is our VPILF in action.
“Speaking before voters in Colorado Springs, the Republican vice presidential nominee claimed that lending giants Fannie Mae and Freddie Mac had “gotten too big and too expensive to the taxpayers. “”
http://www.huffingtonpost.com/2008/09/08/palin-makes-her-first-gaf_n_124792.html
LONGING = logging
I’m with you on WM and LEH is also looking mighty grim. Tanking.
Chifi,
Even better, I think I will go to a park overlooking the beach and have a drink (from a bottle wrapped in FNM stock certificates).
# 192 ““Speaking before voters in Colorado Springs, the Republican vice presidential nominee claimed that lending giants Fannie Mae and Freddie Mac had “gotten too big and too expensive to the taxpayers. “””
Well, on second thought, maybe she is ok.
Hot dog. Down to being up 106. Here is to closing flat.
#189 cf: everything will be fine.
Or it will not be. We are in unchartered territory here, and nobody can calim either way how it will all turn out.
I personally would not claim to be so bold or knowledgeable that it will all work out.
chi-fi … why not a fan of skf?
John,
Jamie Dimon is licking his chops right now as he’s screaming on the phone “their balance sheet is worthless. There is nothing here of value. I’ll pay $2 per share if you backstop the first $100B” and Ben Bernanke and Hank, Bush, and the rest of the working group is on the other end of the phone.
end result WaMu is toast and tax payers backstop the deal.
Just have to say that no one picked up on Cindy McCain’s gaffe in her speech at the convention – she starts off telling how they met. Cute story about how John lied about his age (no mention that he also lied by omission since he was married) and so did she. Then she concludes by saying he’ll always tell you the truth, even when you won’t like it. Excuse me – the truth was that he was married and had 2 kids already – but she of course would not have liked that so he didn’t tell her!
3b,
The issue I have was referring to them as greedy. I’m not saying the buyers made smart decisions. I’m just pointing out that if any one should be labeled as greedy, it should be the ones that made all the money, not the people that indebted themselves for 30 years for a place to live.
Yes, the housing bubble wouldn’t have happened without ignorant buyers, but they didn’t cause the bubble through their “greed”
SP – What a complete joke. No wonder she won’t appear in public.
She’s selfish, inexperienced and a liar as well.
Creationism – ha ha!
If I was O, as frequently as possible, I would point out that M voted in line with GWB 90% of the time. The countries disapproval of GWB is so low that this is all he needs to do to win the GE.
Here is an example:
Interviewer: The surge appears to be working in Iraq. Weren’t you against it?
O: Are you aware that M’s voted in 90% agreement with GWB over the past 4 years?
Interviewer: You were married by a racist anti-american pastor. Although you denounced his position, how can you explain attending that church for 20 years and having been wed by him?
O: Are you aware that M’s voted in 90% agreement with GWB over the past 4 years?
Instead, these Democratic imbeciles are going to try to reason with people who live to watch Dancing w. the Stars.
Oy vey!
Chi
as my wife pointed out the other day, this and my other favorite blogs are all just economic/financial PRON!
Personal experience is SKF is great if you time it right, the problem is timing it right.
Chi,
you might be happy to know that she also suggested that i might need to reduce my econo-financial Pron habit and shift more towards the traditional brand as she finds that more interesting
As ChiFi’s personal translator, I will explain his position. ChiFi is a financial adviser who really isn’t for or against most positions advocated on this blog. He is actually trying to protect you from potentially hurting other readers on this board who may stupidly act on your advice without further researching the investment opportunity.
It is not necessary to share your trading ideas. If you’re going to buy SKF, go for it! Just stop telling the rest of us about it.
clotpoll [163],
THANK YOU!! Holy smokes, I’ve been saying this for weeks!!
#200 Tom: Point taken.
As ChiFi’s personal translator, I will explain his position. ChiFi is a financial adviser who really isn’t for or against most positions advocated on this blog. He is actually trying to protect you from potentially hurting other readers on this board who may stupidly act on your advice without further researching the investment opportunity.
It is not necessary to share your trading ideas. If you’re going to buy SKF, go for it! Just stop telling the rest of us about it.
Good stuff. This board (outside of bi) has a solid history with calls that I have passed on repeatedly (with the exception of gold), and I’ll take a chance on this one.
I’m with you on WM and LEH is also looking mighty grim.
I resent that remark.
The one big difference is WAMU is a bank, not a BD like Bear. What will happen to Wamu is they will wipe out all their stock and bond obligations and everyone with over 100K in their bank accounts. The FDIC will run it for awhile and then sell it to try and cover what they paid out in their FDIC claims. Chase can buy it or take it over on Monday morning after WAMU gets taken over by govt on Friday. Wamu has a ton of cash in savings accounts that gets counted as capital. If the govt realistically mkts to mkts the junk on the books, wipes out a ton of obligations a bank like chase will gladly pick up a few thousand branches and a couple of billion in deposits. The problem is the shareholders are distroyed in most cases in Wamus survival.
make $ Says:
September 8th, 2008 at 2:05 pm
John,
Jamie Dimon is licking his chops right now as he’s screaming on the phone “their balance sheet is worthless. There is nothing here of value. I’ll pay $2 per share if you backstop the first $100B” and Ben Bernanke and Hank, Bush, and the rest of the working group is on the other end of the phone.
end result WaMu is toast and tax payers backstop the deal.
Stu: spasiba
3b,
Sorry forgot to add something, i was trying to find the video with what O said and was having a hard time. Although if I was looking for upskirts from fox news there seem to be plenty.
American consumers want to believe that there are great deals and easy ways to wealth. That’s why it’s so easy to scam them. Every once in a while I wind up on a site that rates infomercial products and the consumer complaints and reviews are just astonishing.
First, you’ll get a ton of people saying something like “I wish I found this site before I ordered”. So obviously, people aren’t doing the research before they give out their CC.
Next you’ll see people trying to justify what they got. Stuff like “Well this was the best hammer I ever purchased. I think the other reviewers might not be using it correctly. It does a great job holding down my paperwork when I open my window.”
Then there are the “Mine broke after I first got it so I called up customer service and they shipped out a new one right away after I overpaid for shipping and handling. The second one last a little longer. I hope I have better luck with the third one.”
People work hard and they don’t have the time to realize the 10% of what they’re hearing is right when the other 90% tells them to buy buy buy.
People make mistakes, like you did in the last bubble. One person’s mistake does not cause a bubble. Large entities trying to influence millions of individuals to make a mistake does.
What I want to know is who the shareholders are/were of Wamu or FRE/FNM even?
Talk about gambling!
3b Says:
September 8th, 2008 at 2:02 pm
#189 cf: everything will be fine.
Or it will not be. We are in unchartered territory here, and nobody can calim either way how it will all turn out.
I personally would not claim to be so bold or knowledgeable that it will all work out.
3b: unchartered? I disagree.
Allow me to edit for me: I personally would not claim to be so bold or knowledgeable [how it will rather than if] it will all work out.
We are moving toward something called capitulation…..if you are pissed and disillusioned, you should be….
CF: puzhalsta!
chicagofinance:
I think you are right, that to make any bold moves right now is a total random gamble. & Jim Rogers agrees with you, too.
both SRS and SKF touched YTD low… did i miss the boat?
All: Remember, ostensibly people pay me to talk them out of what you are doing, so I am biased. I also happen to be rather well researched….but so is Bernanke….
MC is pulling ahead in every major national polls. cannot wait to see the results from battleground states.
CNN 09/05 – 09/07 942 RV 48 48 Tie
USA Today/Gallup 09/05 – 09/07 823 LV 54 44 Mc +10
Rasmussen Tracking 09/05 – 09/07 3000 LV 48 47 Mc +1
Hotline/FD Tracking 09/05 – 09/07 924 RV 44 44 Tie
Gallup Tracking 09/05 – 09/07 2733 RV 49 44 Mc +5
Grim –
Oh, my bad. You look MUCH better than LEH and WM right now.
210- Stu.
“What I want to know is who the shareholders are/were of Wamu or FRE/FNM even?”
Here you go –
http://finance.yahoo.com/q/mh?s=FRE
Looks like Bill Miller of Legg Mason will sport a buzz cut from today.
Shore…..here is a quick way to gain 15 pounds….knock off a case of this on a hot summer weekend…..
http://www.drfrankwines.com/drf_detail.taf?pr_id=384
Most of them were mutual fund holders whose managers made bad bets. Most of them won’t know till they get their 4Q statements, maybe fidelity will be kind enough to include a little KY with the 4Q statements.
Stu Says:
September 8th, 2008 at 2:28 pm
What I want to know is who the shareholders are/were of Wamu or FRE/FNM even?
Talk about gambling!
Chifi –
I was reading your blog and I think your prose is very lucid. Why did you stop?
I’m with chifi on chilling out.
It wont be the end of the world, nor will this somehow be the symbolic death of America. I’m not packing my bags or looking for other places to live.
Focus on enjoying your life, and being productive and there wont be an issue of wholesale collapse of the economy.
I am upset that corrupt, greedy people were allowed to bring this shame on the financials market while everyone was watching. I want to put into office regulators that will bring an oft-unseen brand of justice. But I don’t use that as an excuse to run from the situation that I am in.
Shake up a few drinks and start thinking of solutions, thats the American way.
Loss of lucidity?
Do you mean the blogspot one?
Looks like the RE market in Bergen County got close to the 2003 level last year. This year should be worse. Foreclosures seem to be going for around 2002 prices. At what point do you think we’ll be seeing listing prices in line with the market?
Can everyone STFU about SKF.
I want to focus on comp killers, how this housing bust is going to impact the economy, job losses, even read re bulls like pret, stories about you or friends/coworkers thinking about leaving NJ due to the cost of living, anecdotes of people trying to sell their houses, etc.
I especially want to read more Gary rants.
#224 Why think up of soultions, if the right ones will never be implemented.
Just more of the same as we as a country continue to stumble and decline forward into the 21st century. Nothing to do, but take care of your own.
On to more important things. My friend has two cars going off at auction tommorrow and needs to know which one he should buy for me. The choice is a 2007 STS V series or a 2006 530XI. The STS V is super sick fast but do I really need 464HP to get to the train and soccer practice. The 5 has all wheel drive, but I really don’t go driving around in the snow and if I did my wife has an SUV. However, both are cool options.
Told him I wanted a five passenger luxery car with some style. I originally wanted a 2008 CTS but it seems no one is giving them up. Plenty of old body style CTS but I don’t want them. Guess the people who bought the 08 like them.
[164] MJ
So did Lenin
First of all I came to work late today, at my kids school, the dentist, the coffee shop no one cares about this. Heck the dental people don’t even have 401Ks or stock and bought their little capes back in the 1960s-1990s, this is of no matter to them. Fact of the matter, other than the fact I want to buy a trade up house and I have to wait for housing to bottom this does not matter to me. I only care about stock price when I am 70, the more I buy cheap the better. And I only care about home prices if I was selling and not buying another home. The rest of the world is concerned about the price of gas, heating fuel, bread, rice and milk and this stuff is nonsense to them.
bairen [225],
Just for you:
Awright, everybody just shut the f*ck up.. now. The realtors are still a bunch of lying parasites and the sellers still got their heads up their f*cking @sses. Case closed. Lowball the p*ss out of them and give them a best and final 48 hour window before you pull the f*cking switch and juice them!!
I went around looking at housing this weekend. Rentals and SFHs.
I think that there will be a tipping point very soon where housing prices will start to cave in Maryland. The starvation-diet that housing has been under is about to pay dividends.
I went looking at a 2bed 2 bath Townhome w 2 car garage for sale at 375,000$. About a mile away there was a 5bed, 3bath, 2car garage home for sale at 350,000$ (immaculate condition). I get the feeling that listing prices are just going to plummet this winter or sales will just evaporate.
Also found a scam on craig’s list. Someone listing rental for 50% off current prices. Doesn’t live in state and needs you to send your deposit to ensure that your serious about renting…will mail you keys after they receive deposit. Be careful out there the claws are comming out.
#213 CFWe are moving toward something called capitulation…..if you are pissed and disillusioned, you should be….
Perhaps I did not understand your original post, as I simply thought you were saying it will all work out fine, and my point was and is we have no idea how it will all work out.
Capitulation? I guess I again fail to undestand what you are saying. Is it capitulation of our financial system?
As far as disillusioned, yes I am in so much as if you are refering to the state of the U.S. at this time. Am I pissed? No. I am in a good place and can watch as this all unfolds.
http://www.investopedia.com/terms/c/capitulation.asp
A military term. Capitulation refers to surrendering or giving up.
In the stock market, capitulation is associated with “giving up” any previous gains in stock price as investors sell equities in an effort to get out of the market and into less risky investments. True capitulation involves extremely high volume and sharp declines. It usually is indicated by panic selling.
After capitulation selling, it is thought that there are great bargains to be had. The belief is that everyone who wants to get out of a stock, for any reason (including forced selling due to margin calls), has sold. The price should then, theoretically, reverse or bounce off the lows. In other words, some investors believe that true capitulation is the sign of a bottom.
I have only used the term capitulation when wargamming.
The opponent realizes that the result of his actions is a loss even though the game may take a long time to complete. As a result he surrenders his pieces very quickly ending the game so that he can begin playing another.
Chess may provide a good example. A player may call checkmate in 13 moves because he sees where your pieces are and has played the game enough to know that it results in a loss everytime. The losing player capitulates by acknowledging the losing position and the game is conceeded to the winner.
#230 gary,
Thanks for the fix. That’s more like it!
Chifi may be saying that the people playing in the financials game are capitulating, selling their shares for discounts, so that they can take what they have left and start earning money in different sectors.
I see people like John (posting 20% returns on WaMu bonds) as those who don’t see the game as over. It may just be the time to pick up the ball and start in on some serious plays or to try and strenghten current positions.
Consumer Credit
“Consumer credit increased at an annual rate of 2 percent in July. Revolving credit rose at an annual rate of 4-3/4 percent,
and nonrevolving credit rose at an annual rate of 1/2 percent.”
http://www.federalreserve.gov/releases/g19/Current/
# chicagofinance Says:
September 8th, 2008 at 2:39 pm
Loss of lucidity?
Do you mean the blogspot one?
——————————————
Yes, the blogspot one. I liked the arbitrage trading post.
Aw Gary
That just made me feel all warm and fuzzy inside.
HEHEHE,
Where is the credit crunch then if consumer credit is still increasing?
Alright Bairen (225):
I was in the Chase office (in Grove City Ohio) depositing my cash winnings from my lucrative Belterra casino victory on Sunday. I overheard one of their mortgage experts telling a prospective borrower to wait at least a month before they try to lock. He clearly said that the government buyout of FNM/FRE will probably lower interest rates by .5% in the next couple of weeks.
I just laughed and continued to make my deposit with the overly nice teller.
Three observations about the Midwest.
Everythings cheaper out here. Cigarettes are $3, hotel room was $39, Hertz intermediate rental car was $18/day, etc.
Everyone is significantly nicer out here and much more considerate. It is really refreshing to hear thank you and how is your day going from complete strangers. Even the kids that joined me at the counter at Skyline Chili in Kentucky were polite and well behaved.
People do not speed on the highways out here. If the speed limit is 70, at best they will drive 75. It is not unusual to see 2 cars in parallel on a two lane highway driving 60mph in a 65mph zone. It kind of drives you crazy, but fortunately, I was not in a rush to go anywhere. I also noticed that all of the truckers seem to drive more slowly these days. I’m guessing that is to save fuel as they also all seem to draft each other.
Way to much religion on the radio out here for my taste, but did hear a great blues show last night on my drive. First time I have ever hear Little Ed and Blues Imperials on the radio. New York radio really blows. For as intellectually superior as we all think us Yankees are, our AM and FM radio tastes in the NY metro are downright inferior. Especially the FM band.
I don’t know about the rest of you, but when I hear politicians talk about stabilizing the housing market I think of an idiot and a wobbly chair.
They see that one leg is a little short, so they put something under it and sit back down but it’s not quite fixed.
They see now that there’s a different leg without a firm footing so they place a shim under that one.
Now it’s a different leg that isn’t quite right and that one gets shimmed too.
Still not good, before considering shimming the forth leg he considers starting over but realizes he likes being up a couple extra inches.
Eventually the chair is up a couple feet off the floor and very unstable. But he can’t go back now. I mean, he worked hard to get his desk at the right height too and bought an expensive ceiling mount for his monitor. If he lowers his chair, all that’s going to have to come down too. And think of all the poor things that were used to prop things up that will now have no use and will be thrown in the trash.
Most western states have laws about driving on the right and passing on the left. They use the left lane as a passing lane exclusively and not as a travel lane. I got pulled over in Washington State for passing a cop on the right.
If I remember correctly, Ohio has a “dine-in” tax that is levied for people who eat in restaurants. They use that tax to hire extra people to keep the place clean and to provide better service. Employee’s are not over-worked, the trash bins are clean, and everyone seems generally happy to work. Every McDonald’s has plush seating, gas fireplaces, wi-fi access.
I wondered how there could be such a difference between the eastcoast and the midwest in restaurants and found the answer, dine-in taxes. You are not charged the tax for using the drive through or taking the food out of the restaurant.
The midwest is really a different place.
In moderation…I’m not sure what got caught in the moderator though.
lostinny,
Ya know, as a guitar player, I could put music to my last post and make it a punk song. :)
Stu,
“It is not unusual to see 2 cars in parallel on a two lane highway driving 60mph in a 65mph zone.”
From the road trips I’ve taken I think I can explain this phenomenon. It has to do with DNA
This usually happens when a car full of individuals with XX chromosomes passes a car full of individuals with XY chromosomes. After one of the XX indivuduals shows the XY’s what is under their shirt, they slow down and drive side by side attempting to communicate using sharpies and roy rogers bags.
Anyone check out the Mortgage rates today?
Phony/Fraudy 30 yrs repriced 50 bps lower today. The mortgage guys in my office are locking the pipeline ASAP. Nobody here thinks it will last.
ARMs haven’t budged today.
bairen (237)-
Yeah, but reading all that stuff is what leads people to load up on SKF.
Full disclosure: I eat SKF for breakfast every day.
John (239)-
Aren’t they auctioning off any Gremlins?
Whether the interest rate is 7% or 5%, you still need a 10% DP in most cases. I hardly see this GSE bailout helping anyone what but the debt holders (especially the banks).
Hi, everyone,
I need help from you. Does anybody have experience how to appeal for the property tax? I recently moved to Short Hills. My tax is much higher than my neighbors which are similar houses.
Thanks
Wendy
Wendy (265)-
Just go shopping.
#143
“Do you blame “greedy parents” when they buy high priced milk for their kids?”
Tom– this is a false analogy. You can easily rent a suitable place to live. No one forced these people to buy beyond their means. They gambled and lost. Had their investment turned out positive, they certainly would not have shared the profits with the public. This is what capitalism is supposed to be all about.
267 – Skep
Agree 100%
Moved to Short Hills? You can afford it :P
Try this link:
http://www.google.com/search?hl=en&lr=&client=firefox-a&rls=org.mozilla%3Aen-US%3Aofficial&hs=E7R&as_qdr=all&q=appeal+property+taxes+njgator+site%3Anjrereport.com&btnG=Search
#255 Nicholas
NJ has a “keep right – pass left” law as well. The only time it is enforced is when someone either passes a cop on the right or fails to move right when a cop zooms up on his/her back bumper.
I know that most on the board don’t like the bailout, but here is my question.
If you have 2 options, either give money/help to home that is going in foreclosure or help new home buyers what would you choose? I think Fed and Treasury went with 2nd choice. It’s kind of less of two evil.
Ideally, doing nothing is right capitalist approach, but would be disaster for republicans at this stage. I think Bush chose center bailout option. Dems solution would have been the first choice.
Basically, I feel Bush made decision to help out M’s campaign. Now M can go around saying, we Republicans understand economy better and prepared to take pre-emptive steps. Am I missing anything in this argument?
#199
you think that’s a gaffe? I’d say that’s an understatement given that the GSEs put the taxpayers on the hook for $1.5 trillion in debt
#221
“American consumers want to believe that there are great deals and easy ways to wealth. That’s why it’s so easy to scam them.”
This is another way of saying people are greedy
Whether the interest rate is 7% or 5%, you still need a 10% DP in most cases. I hardly see this GSE bailout helping anyone what but the debt holders (especially the banks).
You’re crazy if you think there’s no difference between 7% and 5%.
272 –
Well, she thought that they were govt owned and are being privatized.
Make $
My point was, considering American’s median income and our current negative individual savings rate, I think a 2% lower interest rate will not cause a housing rebound. Certainly, it will help some of us, who save and live life wisely, but the bigger problem is that most of us don’t have the nut necessary to purchase a home at any interest rate.
Nicholas,
It’s what is increasing that is the problem. Revolving credit=credit card debt and in this instance I think people are using them as the lender of last resort.
Perino: Mortgage Bailout Could Have Been Avoided If Congress Listened To Bush
Perino said the White House asked Congress “for years” to create an independent regulator to oversee the mortgage giants but Congress ignored his requests until it was too late.
“It is exactly the kind of event we warned about and tried to prevent over the years,” Perino said during a morning press briefing at the White House.
“Remember that we have highlighted the systemic risk posed by Fannie Mae and Freddie Mac because of the very large role they play in housing markets and because of their business practices,” she said.
Perino also said the government bailout will allow time for the next administration and Congress to determine the appropriate future role for the companies.
Predictably, congressional Democrats didn’t quite see it that way.
“The White House Press Office is entitled to its own opinion, but not to its own set of facts,” said Sarah Feinberg, a spokeswoman for House Democratic Caucus Chairman Rahm Emanuel.
“While the Democratic Congress was acting in response to the struggling economy and skyrocketing foreclosure rates, President Bush and Senator McCain were still saying the American economy was strong and sound. And while the Democratic Congress took action on the housing crisis, Congressional Republicans still hadn’t taken the problem seriously, saying efforts to stem the housing crisis amounted to using ‘a sledgehammer on a gnat.’”
Actually, other than a few stray high yield corp bond purchases I have been posting those 20% corp bonds out of morbid desire to rubber neck at the scene of an accident. The bond mkt is a better predictor of the future than the stock market for distressed companies.
I have actually been buying callable munis that are trading under 103% with a coupon of 5% or better with an yield above 3%. Lots of munis are having trouble raising funds to call bonds. Munis are priced yield to worst and when they are not called you get a kick in the yield, the non callable ones may get 110 versus the noncallable ones even if they have the same rate. But if you hold to maturity and the callable ones don’t get called you get a much greater yield as you paid less for the bond. Basically, I am hiding in munis trying to capture a little extra tax free yield for the rest of 2008. My other theory is mro will tax us to death in 2010 which will make munis more valuable. Plus I don’t trust inflation and if it shoots up paying a pem for a non call fixed rate bond may be bad news.
Gary,
I think we should collaborate.
From WSJ
“Revolving debt, which mainly reflects credit-card financing, rose in July at a seasonally adjusted annual rate of 4.8% — or $3.9 billion to $969.9 billion. Credit in June rose 3.5%, or $2.8 billion, revised from an originally reported increase of $5.5 billion. Americans have tried maintaining their living standards by using credit cards with rising gasoline prices, mounting grocery bills, falling home values, and tightening credit conditions.”
http://online.wsj.com/article/SB122090057431411207.html?mod=googlenews_wsj
My point was, considering American’s median income and our current negative individual savings rate, I think a 2% lower interest rate will not cause a housing rebound. Certainly, it will help some of us, who save and live life wisely, but the bigger problem is that most of us don’t have the nut necessary to purchase a home at any interest rate
I was saying that it’s a huge difference and if were looking to buy anyway take advantage of this and lock in as it will not last.
Grim – 278 in mod.
NPR Article,
Understanding The Fannie, Freddie Rescue
# 271
Yes, I believe you are missing something. I for one do not believe for a minute that what is driving the bailout has anything to do with housing. It is all about preventing foreign banks from losing faith in the federal govern.ent and thus refusing to continue financing our continuing budget shortfalls. This is all about keeping the federal government afloat.
Democrats back bailout of mortgage giants
Sen. Christopher J. Dodd, Senate Banking Committee chairman, announced plans to hold a hearing in the near future on details of the bailout plan from Treasury Secretary Henry M. Paulson Jr. and Federal Reserve Chairman Ben S. Bernanke, which includes the removal of top management at both companies and the injection of up to $200 billion in taxpayer money over time to keep Freddie and Fannie from failing.
“There are still many unanswered questions about the administration’s plan, and Americans deserve to know if this unprecedented proposal will help keep mortgages affordable, stabilize the markets and protect taxpayer interests,” Mr. Dodd said.
#284
agree completely. Paulson was on TV this morning talking about getting calls from central banks around the world. they wanted the U.S. to back GSE debt as if it were treasuries, otherwise I think the implicit threat was they would stop buying both.
Capitulation, Fannie, Freddie, housing, the Hadron collider . . . all chickensh1t news.
No, the important story has been revealed. I know now, today, that it is TEOTWAWKI. Or at least TEOTWAIKI. Armageddon is upon us.
Tom Brady is out for the season. Now I’m gonna have to kill myself.
#285
“Mr. Dodd warned against an “ideologically driven” agenda to eliminate the two enterprises.”
yes, let’s maintain these massive failures going forward. not everyone can get a Friends of Angelo loan
##271SG: For the most part the bailout is not going help those facing foreclosure.
HEHEHE,
I can only speak for myself and the people that I know but I tend to use my credit card as a debit card because of the fraud prevention measures that credit card companies afford to good customers.
Debit cards also have the same cost as using credit cards but don’t offer incentives (miles, cash-back, other rewards).
To say that credit card revolving debt rose during back-to-school sales at the corner store don’t mean much even after seasonal adjustments. They are just reporting that real inflation is at 4.8% when they quote seasonally adjusted annual rates of increase.
I think that it would be premature to call the increase a way for Americans to maintain standards of living on credit cards unless wage increases were flat also.
I got a 4% raise so a 4% increase in my credit card activity wouldn’t be all that amazing.
LITTLE ORPHAN FANNIE.
Over the past several days, before the U.S. Treasury Department acted to seize Fannie Mae and Freddie Mac, several people asked me if I thought it was a good idea for the government to “nationalize” the two mortgage giants. In virtually none of the coverage of the Bush administration’s latest emergency action did anyone bother to tell the back story. Fannie Mae, nee the Federal National Mortgage Association, began life as a government invention. It was born “nationalized” — and it worked beautifully until it was privatized.
==
Here is the cycle: government invents something virtuous. The private market takes it over, loses hundreds of billions. Government then bails it out. This is best understood as socialized risk, privatized gain. Yes, the shareholders of Fannie Mae will deservedly lose a bundle — it’s always the shareholders who take a hit — but the insiders who thought up subprime and the executives of Fannie Mae during the roaring ‘90s already made their pile.
skep-tic,
“Tom– this is a false analogy. You can easily rent a suitable place to live. No one forced these people to buy beyond their means.”
Sure nobody forced them, but they sure as hell encouraged them. The government was setting up programs to encourage home ownership, the real estate agents were telling people they should buy because it’s like putting money in the bank, the mortgage industry was bending over backwards to give out loans to whoever asked even going so far as giving people over 100% financing to encourage them to buy.
While not quite a gun to their heads there was a concerted effort to get people to buy.
This whole blame the buyer thing is one of the most ridiculous things I’ve ever heard. While people think of their homes as investments most people buy them as a place to live. I’ve said it before… Buyers didn’t have control of the market, they didn’t have control over how much money was being lent out. It’s completely assinine to blame the person with the lest control in the situation with the problems.
Slight mistake,
I don’t let people I know use my credit card.
People I know use credit cards as debit cards.
#281 make; Or wait as prices continue to go lower. I would rather lower prices than a lower interest rate.
Tom,
Don’t forget all those late night infomercials that showed that the real deal wealth was in flipping houses.
Forget all the rest of the chump change go for the motherload.
Tom– You are conflating the macro and the micro views. Yes, there were macro forces at work which were beyond any individual’s control, but every deal was an individual deal involving individuals who had freedom of choice. Do you deny this?
Nicholas,
If you’re using your credit card as a debit card, you don’t have any revolving debt and your activity would not show up in those figures.
292 – Tom.
How is this different from the dot-com era stock buying pump from the media and everyone else?
People are attracted to wherever there is easy money to be made. But if they stepped back, and did their due diligence, they would not be in this state.
Tom,
Its a 22-30 day carry thus it is considered credit card debt?
I meant that I was using it figuratively as if it was a bank debit card.
I went back and looked at the reported statistics and wasn’t able to discern what they meant by short term revolving credit. It just isn’t clear from that page.
Nouriel Roubini | Sep 7, 2008
Fannie and Freddie’s Bust and Deeply Flawed Government Bailout
One cannot even exclude systemic risk consequences if the housing bust combined with a recession leads to a bust of the mortgage backed securities (MBS) market and triggers severe losses for the two huge GSEs, Fannie Mae and Freddie Mac. Then, the ugly scenario that Greenspan worried about may come true: the implicit moral hazard coming from the activities of GSEs – that are formally private but that act as if they were large too-big-to-fail public institutions given the market perception that the US Treasury would bail them out in case of a systemic housing and financial distress – becomes explicit. Then, the implicit liabilities from implicit GSEs bailout-expectations lead to a financial and fiscal crisis. If this systemic risk scenario were to occur, the $200 billion fiscal cost to the US tax-payer of bailing-out and cleaning-up the S&Ls may look like spare change compared to the trillions of dollars of implicit liabilities that a more severe home lending industry financial crisis and a GSEs crisis would lead to.
#297 Tom: Maybe he means they use it like a debit card, until they realize they have to pay it back, and than of course it would show up in those figures.
skep-tic,
You can’t talk about buyers in the macro view. They have no representation, only the effects of their actions can be seen. There is no large national association which most home buyers belong to where they get together and have quarterly meetings and decide how they are going to act in the market.
They don’t have a say in what happens on a global scale, they’re not even there. But other entities, that profited the most from the bubble are.
For a bubble buyer, you go find a house you like, because everyone tells you renting is for losers, you think it’s a little high but you don’t have a choice, if you want the house you pay what is being asked for it or some other idiot will snap it up.
Sure you could choose not to buy but everyone calms your fears by telling you what a great decision you’re making.
It’s like getting into the passenger seat with someone you think might be drunk. You may be stupid for doing that, but it’s not your fault there was an accident.
tom,
i see the issue more along the line of a quote attributed to Ben Franklin:
“When the people find they can vote themselves money, that will herald the end of the republic.”
tom
It’s like getting into the passenger seat with someone you think might be drunk. You may be stupid for doing that, but it’s not your fault there was an accident.
per your analogy, dont then sue the driver because you got hurt in the wreck. you knew he was drunk when you got in the car.
short term revolving credit = credit cards
Consumer Credit data is not used by almost any economists. The numbers are seriously flawed and subject to huge revisions anyway.
Consumer Credit from Yahoo:
* Importance (A-F): This release merits a D-.
* Source: Federal Reserve.
* Release Time: 15:00 ET on the fifth business day of the month (data for two months prior).
* Raw Data Available At: http://www.bog.frb.fed.us/releases/G19/Current/.
This monthly measure of consumer debt is volatile and subject to massive revisions. It is also released well after every other consumer spending indicator, including weekly chain store sales, auto sales, consumer confidence, retail sales, and personal consumption. For these reasons, the market almost never reacts to the consumer credit report.
Consumer credit is broken down into three categories: auto, revolving (ie, credit card), and other. Since we already have indications on total consumer spending well before this release, there is little to be gained from learning what portion of spending was financed through acquisition of debt. Periods of strong spending can be accompanied by relatively weak credit growth and vice versa, so this measure fails even as a coincident or lagging indicator.
Despite the problems with revisions, when you see an anemic economy and an increase in credit card expenditures what would you think is the underlying story? I’d think the logical conclusion is people are using credit cards to stay afloat.
kettle1,
“per your analogy, dont then sue the driver because you got hurt in the wreck. you knew he was drunk when you got in the car.”
Completely agree.
But it’s not homeowners that are getting money out of this bailout. The best it seems their getting is some fees wiped off and interest rates reduced and allowed to stay in their homes with the new modified mortgages. Some may get some principle forgiven but that seems to be rare. Meanwhile the banks are getting billions of dollars.
To continue with the analogy, it’s like EMS gets to the accident and only treats the driver. Because drivers are important to the economy. They drive to work, they drive to the mall, the drive to the supermarket, etc. THe passenger is just an idiot and should have to deal with the choice he made getting in the car.
There’s also the possible increase with use of the stimulus checks too but at the end of the day I am sure there’s plenty of last gaspers using the plastic to tied them by
Hmmm,
I wouldn’t get into the passenger seat of someone who has been drinking, or I was suspicious of drinking.
I would hold you responsible for getting in a car with someone who has been drinking.
We are all measured by the company we keep.
3b,
My wording may have been a bit off (shouldn’t have used debit card terminology) but I intended to ask how a 22-30 day credit-card carry is treated in those statistics, it is not evident from what I saw.
Credit card companies call people who pay off their debt monthly “deadbeats”. It would be interesting if they broke the revolving debt into two categories, that generated by deadbeats and that generated by earners.
All I see in those statistics is that inflation is still real and that Americans are still spending. What I don’t see is conclusive proof that Americans are supporting themselves with debt instead of earning.
I mention that because someone else (Kettle?) showed an article that recreated the M3 money supply and conjectured that for the last year or so people were withdrawing from 401k’s and other long-term investment accounts to support their standard of living. M3 had remained flat for the last year or two thus being dissolved by inflation.
Looking at the chart for M3 you see pretty smooth transition for a long time and then when they stopped reporting M3 the data starts going in very sharp jagged directions. That leads me to believe that there is some uncertainty with the underlying data for M3 such as since it wasn’t a collected statistic the data reported was less then accurate.
I would like to see more concrete evidence of overspending behavior. I’m not saying it isn’t happening, I’m just saying I don’t see conclusive proof, and in any case proof may not exist.
One wonders: how may bailouts will taxpayers have to fund?
There was $29 billion for Bear Stearns,
$150 billion for low-income Americans (the “stimulus plan”),
$300 billion for homeowners and lenders in the latest housing bill,
Eight hundred billion for Fannie Mae and Freddie Mac (small estimation)
potentially $50 billion in loans for Detroit carmakers
and possibly hundreds of billions more for the nation’s bank depositors. (FDIC WILL BE TOAST IN 6 MONTHS)
The bill may ultimately top $2 trillion.
A trillion here, a trillion there and pretty soon you’re talking real money.
http://obadiah1317.files.wordpress.com/2007/06/bailing-animated.gif
Tom– if all of these people are as incapable of resisting the evil snake oil salesmen as you say, then we should probably identify them and put them on a searchable database so that us free thinking people never have to do business with them again.
Big rally today on the GSE nationalization and the London Stock Exchange is shut down for 7 hours for a computer “glitch” including the ICE markets?
http://www.dailymail.co.uk/news/worldnews/article-1053241/City-traders-miss-billions-pounds-shares-meltdown-cripples-stock-exchange.htm
Tom Comment #292
There is societal pressure put on people to purchase a home. We are constantly asked “When are you buying..?” Isn’t the market so low now?
I reply that we cannot afford a home and that renting allows us to have things other than housing…one of those things is sleeping at night. People look at us like we are ‘untouchables.’
Mr Mortgage – ‘The Quickening’
Poll:
How worried are you about FDIC?
If very, how are you managing your cash?
Krammer says 296 days till bottom on the housing market, also says Mortgage rates are down 1/2 a percent as of today.
You liberals love to drag President Bushes name through the dirt. You’d all prefer that no good moron obama.
skep-tic,
Or we should get rid of the evil snake oil salesmen when they become as large as the have and when they start to fail let them fail instead of giving them handouts.
Big rally today on the GSE nationalization and the London Stock Exchange is shut down for 7 hours for a computer “glitch” including the ICE markets?
ICE was down this morning, but only for about an hour.
Corzine telling Cramer his Fannie bailout, rah-rah-financials speech might be just a tad too enthusiastic.
DUH
You just can’t make this stuff up.
By the way, looking at bergen county,
From 1990-2006, the population grew only 10% but the number of sf,coop,condo,townhomes sold grew ovre 40%. And 2006 was over 18% slower than 2005 but I couldn’t find population numbers for 2005. Between 1990-2005 number of sales increased by 70%
I just can’t buy that all of a sudden people decided to buy homes in such large numbers without some sort of external force acting upon them.
Looks like the commie Chris Dodd is more upset than Fannie/Freddie management about the takeover. What a sick old man. He tries to make some sort of a liberal/social argument about Fannie and Freddie to appease the left wing liberals. But the people who benefit the most from these institutions are the senior management and the crooked politicians like Dodd.
No surprise…Mike Morgan is revved up, but good:
http://realestateandhousing2.blogspot.com/
Shore (284)-
Precisely. Housing is the smokescreen for all this skulduggery.
What has really happened is, our masters have called us to task.
And our masters are China, Russia and PIMCO.
Clot,
I just wish that the Administration would be honest with the American Public; I know, why should they start now? We are in a whole heap of trouble — which I trust the American public would work to solve if the Administration would lay the cards on the table. If they don’t, when the waste hits the air dispersal unit, people are going to be extra shocked, unprepared, and very angry. I don’t know if it will be Watts/Newark-riot angry, or Storm-the-Winter-Palace angry but, it will be ugly if folks are not told, in an honest way, what confronts us.
Tom (292)-
To put it politely, bullshit. The consumer has the ultimate control, as the consumer is the only party in the position to decide whether to buy or not to buy.
I can recall many parties in my youth where some chucklehead would try to get us to smoke some PCP. Even my most stoner buddies would reject this offer, as pretty much all of us knew that PCP would turn us into a herd of rabid ocelots. After we all turned down the PCP, the idiot who offered it would go ahead and smoke some, and then we’d have to wrap him in blankets while he hallucinated and lashed out at the army of monkeys trying to eat his face.
No amount of pitch and spin can sway people who rely on common sense instead of emotion to make decisions. However, those who rely solely on emotion can be duped time and time again. The fault does not lie with those who make offers to the emotional, much as credit does not accrue to the offeror when the prudent buyer finally accepts reasonable offers of financial services.
# 311 “A trillion here, a trillion there and pretty soon youre talking real money”
No, then you are talking Zimbabwie (sp? The old Rhodesia, at any rate). A trillion is about the cost of a loaf of bread, no?
“would turn us into a herd of rabid ocelots”
Clot,
This may explain the whole Neocon outlook. Before now, it never made sense to me.
Tom (308)-
I like that analogy better.
Shore/Clot:
What the people hear is what they want to hear. Conservative talk radio and a lot of the media don’t want to preach doom & gloom. It does not sell papers or increase ratings like fear and blind/deaf patriotism does.
I unfortunately have been listening to a lot of conservative talk radio out here in OH. The only thing close to the left is NPR’s all things considered, although they are occasionally centrists. Listening to the misinformed callers and then the broadcaster’s affirmation of the falsehoods is pure comedy. Unfortunately, the populace is happily swallowing it all like it was a Big Gulp.
Tried Sonic tonight. Fun concept, but food was pretty weak.
Before going to the FM dial last night, the only thing I could find on AM between Cincy and Columbus was two different auto racing shows. Things sure are different 400 miles west of the metro area.
“To put it politely, bullshit. The consumer has the ultimate control, as the consumer is the only party in the position to decide whether to buy or not to buy.”
Clot, you know that’s not true. If some guy making 35k/yr decides to go buy a 600k house, he’s going to find someone to decide that that’s a good idea, since most poeople making that much money need to borrow to purchase a house.
But there were enough boneheads looking to buy houses way above what they could afford and enough boneheads willing to loan it to them.
It’s the lender that ultimately makes the decision whether they buy the house or not.
In the past lenders didn’t make the stupid decisions they have in the past few years.
# 302 “ts like getting into the passenger seat with someone you think might be drunk. You may be stupid for doing that, but its not your fault there was an accident”
Tom,
You are correct that in this situation you are not responsible for the crash BUT you are responsible for any harm that comes to you.
Shore (326)-
It’s precisely this kind of thinking that I did a while back. Its logical conclusion is manifested by the broken grenade launcher that ended up in my barn.
Tom (332)-
It’s still only the consumer that can close the loop of the transaction cycle. Still not buying it.
Every market and every game needs a loser. Just because the housing game features multiple losers- lenders AND borrowers- does not absolve the buyer of full responsibility for his fair share of dumb.
was just listening to Money Talk, CNBC on sirius. wow, just wow. One caller after another completely upsidedown on their houses and clearly thinnking that the simple truth couldn’t be true. “We want a better life and a lower mortgage, what do you suggest?” Ummm, short sale and rent for the next 10 years? They just couldn’t believe it, not THEIR house, their lives.
Unreal.
#327
When everyone is admiring the emperor’s new clothes, it isn’t easy to be the person to point out he is nude.
CNBC, oh this was a gem – a guy saying he bought FIVE houses with $65k income, all liar loans, drawing a HELOC down every month to survive, 2 kids, and at least 3 out of the 5 are vacant with huge negative cash flow.
He’s over $970k in debt and Barbara Corcoran says, giving her advice:
“You did GREAT! You’re such a smart guy, I love it – this exactly what people do who get rich. You don’t need to sell any of these, just go out, get an investor to take a bit of equity and keep all these houses until the market recovers. Try putting an ad on Craigslist to get an investor…”
I can’t believe I just heard this.
Tom,
I’ve been on a 5 year house hunt. We have great credit and had our pick of the littler when it came to lenders and rates. I didn’t look at houses in a “what can we afford” mindset, I loked at them with a “how much is this pile of bricks really worth” mindset. Having invested in realestate in the 90s, I knew that a 200% jump in price over 5 short years made no sense. The bricks were not dipped in gold. This falls on both consumer and lender, however, it goes to the heart of the character of our people, and right now I find it pretty weak. Greedy, immature and stupid seems to sum it up pretty well.
#318 sean: Krammer has been wrong time and time again. He is just a showman, nothing more.
sorry, but to keep repeating myself…
deflation.
Real US Housing Losses Are $6 Trillion
by Daniel R. Amerman, CFA
6 Trillion
Actual losses in the US real estate market are much higher than what you have been reading in the newspapers recently. Using a combination of official government statistics and the most widely used index of housing values, we will demonstrate that the US real estate market has lost a total of $6 trillion in value in the last two year
http://www.financialsense.com/fsu/editorials/amerman/2008/0905.html
in my defense, I’m typing on the floor, 4 months pregnant with a kid inn my lap (typos)
Clotpoll Says:
September 8th, 2008 at 3:30 pm
Phony/Fraudy 30 yrs repriced 50 bps lower today. The mortgage guys in my office are locking the pipeline ASAP. Nobody here thinks it will last.
clot: Why not? They are effectively Treasuries now with a slightly wider spread for subsidiary-credit exposure and add in prepayment risk.
If the spreads shift dramatically I would be shocked. For the underlying Treasury, I have no view, so really anything is possible on an absolute basis.
I don’t know if I would say it means people have a bad character. People just believe in the American dream.
Clot,
“It’s still only the consumer that can close the loop of the transaction cycle. Still not buying it.”
Buyer can’t close the loop without a lender either.
Buyers didn’t lobby congress for deregulation for more than 30 years.
Buyers didn’t come with a national campain to get people to loan more money.
Buyers didn’t try and get state predatory lending laws quashed.
Without buyers not knowing what they were doing this wouldn’t have happend. But this didn’t just happen, people made the bubble happen.
Yeah people like Barbara were able to keep grounded, but others had to contend againsta very large machine.
I’m assuming when you realized how nuts things were, you didn’t take down your shingle and go fishing. You didn’t just take clints on that were selling and tell anyone that came to you looking to buy that you’ll help them find a rental instead. But that doesn’t mean you caused the bubble. But above you is NAR and above Bob the Broker is the banking industry and lobby. Above the buyer is nobody. All the things that had to happen for the bubble to inflate happened at a higher level.
Tom (345)-
What is your real interest in assigning individuals a lesser share of the blame in this whole mess?
Should individual consumers be held harmless because of their ostensibly lower position in the food chain, or are you implying that in the future they need to be protected from themselves?
People who do dumb things- be they lenders, agents, bank employees or private individuals- deserve exactly the same measure of blame and the same consequences for their misadventures.
Apportioning uneven slices of the blame pie sounds a bit too much like threading the needle for my tastes.
Shore Guy……you’re my new hero. Your post #284 nailed it.
“Yes, I believe you are missing something. I for one do not believe for a minute that what is driving the bailout has anything to do with housing. It is all about preventing foreign banks from losing faith in the federal govern.ent and thus refusing to continue financing our continuing budget shortfalls. This is all about keeping the federal government afloat.”
OT…tonight’s GG is a classic.
I can actually feel my brain melting.
348- Clot
GG??
Reuters
China frets at U.S. risk after Fannie/Freddie bailout
http://biz.yahoo.com/rb/080908/fannie_freddie_china.html?.v=3
” There was a vigorous reaction among Chinese Internet users.
A blogger on http://www.163.com said “a capitalist country is now acting to save the market and protect investors,” whereas China’s government had sat idly by during a 64 percent plunge in the Shanghai stock market since last October.
“How can Chinese stock investors not be sad? How can they not lose confidence?” the post said.
The main Shanghai index (^SSEC – News) shed 2 percent on Monday, touching a fresh 20-month low, despite a rally elsewhere in Asia triggered by the takeover of the two firms.
“Hope that China’s stock market will get government help like Fannie Mae and Freddie Mac, not just lip service,” a blogger named “Bang Ni” on sina.com.cn said.”
It looks like the cruise lines are fast approaching the fabled island vacations on my father’s youth – Staten, Long & Coney. Circle Line Staycation, anybody?
Cruise lines change course to cut fuel
Altered itineraries will minimize distance, speed between ports
PORTLAND, Maine – When the 1,020-foot Explorer of the Seas cruises through North Atlantic waters next year, it’ll spend more time off the coast of New England and less time near Canadian shores, and it’s not because of better vistas.
Royal Caribbean International and other cruise lines have begun charting a new course in search of routes that eat up less fuel. Already one of the industry’s biggest costs, record fuel prices have cut heavily into the bottom line.
http://www.msnbc.msn.com/id/26608500/
GG=Gossip Girls
You should not have asked :(
news from Long Island….nothing to see here
http://www.newsday.com/news/local/ny-enhome0909,0,2282075.story
Clot (or anyone else)
Mortgage Question:
Before Fannie & Freddie were nationalized yesterday, I locked in a 30 yr fixed for a home I intend to close on in October. My rate lock agreement stipulates a $500 charge if I withdraw my application at this point. Interest rates have fallen enough to make paying the $500 a no-brainer; it’s well worth it.
While I can pay $500 and leave, I would prefer to work with my current lender. How much do lenders normally budge on this kind of thing? I’d even be willing to pay the $500 to lock to break the agreement and lock in the new rate.
Clot,
“What is your real interest in assigning individuals a lesser share of the blame in this whole mess?”
I don’t know how other people go about solving problems, but I look at the cause of the problem to determine how to correct it. This isn’t 1st grade where 2 kids get sent to the principle’s office for fighting and they both get the same punishment.
“People who do dumb things- be they lenders, agents, bank employees or private individuals- deserve exactly the same measure of blame and the same consequences for their misadventures.”
The problem is there aren’t the same measure of consequences. Are banks expecting their employees to give back their exhorbitant compensation since it depleted their reserves when the true risk of their decisions was revealed? No, they sold off their bad mortgages to the GSE’s who are now being bailed out by the tax payers. On top of that the FED’s been feeding them even cheaper money.
Are borrowers being given the same type of consideration? No. Mostly they’re either losing their homes to foreclosure or toughing out their bad decisions. In some cases they are going back to their teaser rates as the banks decide it’s better to keep them as customers at their teaser rates, sometimes for an extended term, rather than having to try and sell the home themselves.
In my opinion, nobody should be bailed out. Not the homeowners, especially not the banks who caused the problem. The banks fought hard for deregulation but still expect the protection. Doesn’t fly for me. Like my dad used to say, as long as you live in my house and eat my food you live by my rules. When you move out and pay your own way, you can do what you want.
stan 353,
bah! they just redid my story for Bergen County home sales but quoted people on what was hapening. I have a chart! :)
United blames bankruptcy rumor on old story
Article about 2002 bankruptcy filing resurfaces, clobbers company’s shares
\
updated 2 hours, 16 minutes ago
CHICAGO – The 2002 bankruptcy of United Airlines parent company was big news at the time, and big news again on Monday when an investment newsletter mistakenly passed along an old news story about the Chapter 11 filing, thinking it was new.
United shares tanked before trading was halted and then recovered only a portion of that before ending the day down by a larger percentage than other airline stocks.
The trouble started with a Google search.
A staffer at investment newsletter Income Securities Advisors Inc. in Miami Lakes, Fla., entered the words “bankruptcy” and “2008” in the Internet search engine, according to President Richard Lehmann. ISA does this all the time, searching for overlooked information about companies in trouble, he said.
Lehmann said the top item returned in the Google search was a story about United’s bankruptcy filing that appeared on the South Florida Sun Sentinel Web site. The story referred to United’s filing on Monday morning. United had filed for Chapter 11 protection on Monday, Dec. 9, 2002. Lehmann said that date was not on the story.
At 10:43 a.m. the staffer posted a summary of the story from the Sun Sentinel site on the financial information service Bloomberg, Lehmann said. Bloomberg has its own journalists but also distributes information from third-party providers such as ISA, for which some subscribers pay extra. Lehmann said all Bloomberg users would have been able to see the headline, though.
After trading around $12 a share Monday morning, the stock of United parent company, UAL Corp., dropped at least as low as $4.62 about five minutes after the ISA article was posted on the Bloomberg terminal. The shares fell as low as $3 before Nasdaq halted trading just before 11:07 a.m. EDT.
http://www.msnbc.msn.com/id/26608735/
rent (354)-
Your lender should work with you on this one.
this is business, blame is completely irrelevant.
a company cannot go bankrupt while it shows assets, they would have to go liquid first. When both of these companies went to file for bankruptcy their good standing accounts would have been bought up by more well-run companies.
This is a violation of human right, capitalism, and the constitution. I’ve heard this ‘too big to fail’ rhetoric before and it’s complete crap as always.
RP made me believe in the US again. This move by the federal government just put the last nail in the coffin…i’m getting the hell out of here as soon as i can.
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