From Reuters:
Housing grim as financial rescue debate rages
Prices of U.S. existing homes suffered a record drop in August and the rate of sales tumbled, offering little sign of improvement in the source of the financial crisis in the United States.
The pace of existing home sales decreased 2.2 percent to an annual pace of 4.91 million units while the median national home price declined a record 9.5 percent to $203,100, the National Association of Realtors said on Wednesday.
In what would normally be a potentially bright spot, the overstock of homes for sale shrank. However, the trade group said as many as 2 in 5 home sales were by borrowers who have seen their property lose value or are facing foreclosure.
“The NAR estimates that 35-to-40 percent of all sales are of distressed property, so underlying private activity is weaker than the headlines (imply) and there is little sign of imminent improvement,” Ian Shepherdson, chief U.S. economist at High Frequency Economics.
Economists polled by Reuters were expecting home resales to fall to a 4.93 million-unit pace from the 5.00 million unit rate initially reported for July, which was revised to a 5.02 million unit pace.
The inventory of existing homes for sale fell 7.0 percent to 4.26 million from the record-high overstock reported in July.
From the AP:
US home sales, prices fall in August
A record decline in U.S. home prices in August attracted more buyers in some areas and led to a sizable decline in the number of unsold homes on the market, the National Association of Realtors said Wednesday.
The median price fell 9.5 percent to $203,100, the largest price decline on records dating to 1999. As prices fall, buyers are taking advantage of steep discounts, especially in hard-hit markets like California, Nevada and Florida.
“Time and price are the real cures for the housing market slump,” said Mike Larson, an analyst at Weiss Research.
The inventory of unsold homes fell 7 percent to 4.3 million, down from the all-time record of 4.6 million in July. That’s a 10.4-month supply at the current sales pace.
The decline, however, merits only “a small round of applause” because around 5 months of inventory is a more typical level, wrote Global Insight economist Patrick Newport. Also, many homeowners who don’t have to sell are likely keeping their properties off the market. At the same time, thousands of foreclosed properties are tied up in court and are not for sale yet.
Lawrence Yun, the trade group’s chief economist, said he hopes the downward trend in inventories continues because, “home prices will not stabilize as long as inventories remain high.”
Inventories have been driven higher by a massive wave of mortgage foreclosures, especially on risky loans.
first ?
would you like a Clotpoll Lager with that?
Yay me! I’ve never done that before.
Also; Reuters is reporting that NYSE regulators are expecting the short sale rule to be extended beyond Oct.2 to the 30 day max.
So, Great Leader is going to accept limitations on executive pay and will speak to the nation tonight. At least it will be after the markets close, which should dampen the damage.
#2 – Wouldn’t mind one at all! It hits the spot when I’m reading my copy of The Anarchists Cookbook or Improvised Munitions.
#4 – Shore – Right now CNBC and Reuters are reporting the White House is denying any agreement on pay curbs.
“The median price fell 9.5 percent to $203,100, the largest price decline on records dating to 1999. ”
Grim,
Do you have any charts showing inflation-adjusted median home prices from the beginning of the bubble to now? It would be interesting to see where things currently stand, in constant dollars, right now compared to recent years.
tosh,
they must have gotten lots of calls on the bat phone.
As someone once said, Clot, “Nametags? At an arnichist’s convention?”
As someone once said, Clot, “Nametags? At an anarchists’ convention?”
I just can’t use this thumb keyboard.
#7 Shore:
http://mysite.verizon.net/vodkajim/housingbubble/
“…in the 25-year period from 1975 through 1999, real house prices stayed roughly within the range of $132,000 to $171,000. Only since the year 2000 have real house prices risen above the top of this range.”
I have to assume that housing must once again fall to this level, and if I am right, then we should see a further drop of 25% in home prices, and that is if the market does not overcorrect.
from
http://globaleconomicanalysis.blogspot.com/
The world’s most famous investor is betting that it’s time to buy into one of the battered financials.
Berkshire Hathaway’s (BRK.A) Oracle of Omaha Warren Buffett said late Tuesday that he is buying a $5 billion interest in Goldman Sachs (GS), one of the two investment banks left standing amid the fallout of the mortgage crisis. Berkshire Hathaway gets a perpetual preferred stock that pays a 10% annual dividend, which takes precedence over other payments to common shareholders in Goldman.
Berkshire will also have warrants to buy an additional $5 billion in Goldman common stock any time over the next five years at $115 a share, about $10 below Tuesday’s closing price.
—————————
It’s being called an “endorsement” and a “show of confidence” designed to “bolster the market.” No, I’m not talking about Warren Buffett’s deal struck yesterday to shore up the capital base of Goldman Sachs (GS) to “restore confidence”.
I’m talking about Morgan Bank, Chase National Bank and National City Bank’s agreement to pitch in and buy shares of US Steel (X) at below market prices to thwart the share price panic on Wall Street on October 25, 1929. Here’s how that worked out:
see chart at link
aint history grand???
————————————
“A group of New York bankers complained to the White House and warned that they would not comply with the standstill. They demanded that Hoover loan money to Germany so it could pay its debts which the bankers held. As Hoover wrote: “My nerves were perhaps overstrained when I replied that, if they (bankers) did not accept within twenty-four hours (his standstill proposal), I would expose their banking conduct to the American people.” Needless to say, the bankers realized Hoover’s determination and his opinion that the taxpayer should not pay for the banker’s problems, which had been created by their eager solicitation of private citizens for foreign securities, and the bankers reluctantly backed off. Indeed, the actions of the banks and the Federal Reserve had bordered on the verge of treason as they acted as willing participants in what proved to be a game of musical chairs with the unsound foreign governmental debt instruments.”
— 1931, “The Greatest Bull Market In History”, Martin Armstrong
http://www.nowandfutures.com/great_depression.html
From Previous Thread –
273 Skep –
“I just do not think Paulson is a crook.”
Then,
why doesn’t he accept the demands for taxpayer equity stake?
Why no reductions in exec compensation?
Why Section 8 in the plan?
Why pay above market price for the assets?
PCG:
As far as I know, there are no child-friendly establishments in Napa. Best bet is to leave them with grandma.
Hobocondo(previous thread)
Off the water is getting beaten up and Some waterfront buildings may be holding, but it appears there are a ton of cracks….constitution being the biggest example. I will post some when I get some time. Fact is there are few sales of late, so can’t compare real numbers…
Victorian Says:
September 24th, 2008 at 12:59 pm
Chifi – This is for you. From your Alma mater.
That is a lot of brainpower……
Stan – right, Constitution value is dropping. Still over $700K for a 2BR 2BA, 1100-ish square feet, though. (Too much!)
Although Hudson Tea – a studio just sold for over $500K…
partial transcript from
Marcy Kaptru D-ohio
Video: http://tw.youtube.com/watch?v=mbD62gNi9WE
—————————-
Taxpayers did not get their fair share of the upside, but they are getting all of the downside and a huge IOU. While Wall Street is made whole, the folks on Main Street are getting the bill. What has mama given us here? Are Mr. Bernanke and Mr. Paulson giving them any bet on the upside? They’re not even helping them on the downside.
I feel sorry for our country, I feel sorry for this Congress, that we can’t do a better job of standing up for the people today. Where’s the Federal Reserve, Where’s the Treasury?
Why do they only help the rich people? What about the rest of the people who have to work for a living?
Wake Up America. Wake Up America. Contact your member of Congress.
#13
and how did Hoover’s decision pay off?
it could be a great time to buy into a firm like Goldman. After all, the US is in the process of handing their former head, a few years removed, a blank check good for maybe upwards of a trillion dollars? That’s like 10000 Mega Millions jackpots.
“why doesn’t he accept the demands for taxpayer equity stake?
Why no reductions in exec compensation?
Why Section 8 in the plan?
Why pay above market price for the assets?”
the exec comp limit has been agreed to. I think there were legit reasons to resist as I have articulated, but it is worth it to give up this point.
I am also in favor of the equity stake approach, but the counterargument is that if the gov’t essentially wipes out SHs it makes it nearly impossible for firms to raise equity in private market going forward.
Section 8 is projects, right? I don’t know the details of any proposal w/r/t this so I can’t say why anyone might object.
re: market price: (1) there is not really a functioning market right now so the assets might actually have a higher value if held to maturity (not sure I actually believe this). (2) failing to pay above market sort of defeats the point of the bailout, which is to boost capital at these firms. if they wanted/were able to sell at current market price, they would.
Reuters
Jack Welch says U.S. faces “deep downturn”
http://biz.yahoo.com/rb/080924/business_us_financial_welchbiz.html
“I now believe we are in for one hell of a deep downturn,” Welch told the World Business Forum in New York on Wednesday, adding that the first quarter of 2009 will likely be “brutal.”
“the exec comp limit has been agreed to.”
No.
It hasn’t.
well, I guess the headline in the WSJ was wrong.
Skeptic,
a lot of the conversation for the last few days has indeed been beating a dead horse. The two opposing arguments are as follows:
1. The system is essentially fine as is and needs to be repaired, i.e a trillion $ bailout to keep markets moving.
2. The system is fundamentally unsound and should not be maintained. Its replacement should be allowed to occur.
note, i am talking about the relatively unregulated banking industry when i mention “the system”
“(1) there is not really a functioning market right now so the assets might actually have a higher value if held to maturity (not sure I actually believe this).”
Given that Paulson/Bernanke have specifically testified that the purchase price will be the projected maturity value (as determined by them), the market forces and your beliefs are completely irrelevant. The only question is what the delta is between 0 and the amount taxpayers will lose.
And remember, we’ll be doing this for banks that are perfectly healthy, economically. Why? Because of the moral hazard associated with only bailing out troubled banks. Doesn’t that just make you want to vomit?
Rep. Kaptur called the subprime lending mess a “ponzi-like scheme” back in June.
“I believe it incumbent that Congress authorize a full independent investigation of the roots of this crisis that traces back to the unstable period following the savings-and-loan crisis in the late 1980s,” she said.
So this isn’t the first time she’s spoke out against this matter.
By the way. How the hell did Ron Paul not do way better with conservatives? Looking at things now, Gingrich was a moderate. I had to watch Paul’s comments when Bernanke was before him in Congress again on the youtubes. One of the few politicians that says what he feels and knows what he’s talking about even though I don’t agree with him on everything.
If the Biden rumors are true, I vote for Paul for O’s VP slot :)
What the hell is going on with the world? Up is down, down is up, black is white and white is black. I bolted everything to the floor just in case the laws of gravity change.
Jessica Hagy on the Paulson Plan
http://www.crossingwallstreet.com/card1814.JPG
25 skep
Yes
They often are
25 skep
CNBC is often wrong as well.
#26
kettle– i would add a third possibility to that list (which is what I believe): the system is fundamentally unsound and needs to be unwound deliberately. the bailout buys time to do this.
Right now Reuters is reporting there are “conflicting stories” on pay curbs.
I like this one where he calls The Federal Reserve predatory lenders.
So, M is calling for the debate scheduled for friday to be put off until the bailout issue is settled.
“kettle– i would add a third possibility to that list (which is what I believe): the system is fundamentally unsound and needs to be unwound deliberately. the bailout buys time to do this.”
Then include provisions to facilitate the unwinding into the plan because we can’t depend on Wall St to unwind themselves.
from Reuters:
NEW YORK, Sept 24 (Reuters) – Conflicting reports emerged on Wednesday afternoon about whether U.S. lawmakers and the Bush administration had reached agreement on including curbs on executive pay in the proposed $700 billion credit market rescue package.
First, a one-line Associated Press bulletin read on air by CNBC said the White House had accepted curbs on executive pay as part of the proposal. The issue has been a sticking point between Congress, which wants limits on CEO pay, and the White House, which has opposed them.
Moments later, CNBC, citing its own unnamed source at the Treasury Department, said no deal has been reached.
Reuters also quoted a Treasury source as saying that discussions on that and other issues were continuing and there was as yet no agreement.
U.S. stock markets rose following the initial report of a deal. Benchmark indexes remain up on the session but moved off their highs after CNBC and Reuters reports saying no deal had been reached.
From the world’s only reliable news source investment bankers are fleeing to Mexico & Canada.
Batboy unavailable for comment.
“Section 8 is projects, right? I don’t know the details of any proposal w/r/t this so I can’t say why anyone might object.”
– Section 8 is Paulson demanding unfettered authority and no oversight.
“I am also in favor of the equity stake approach, but the counterargument is that if the gov’t essentially wipes out SHs it makes it nearly impossible for firms to raise equity in private market going forward.”
– Well, as I understand it – it is to protect the taxpayer in case the securities turn out not to be worth as much as they are purported to be. So, if the companies are not prepared to accept that, then well, they dont need help as badly as we think they do.
If Wall St. needs a bailout, it needs to accept it on our terms.
#27
“your beliefs are completely irrelevant. The only question is what the delta is between 0 and the amount taxpayers will lose.”
perhaps you can answer your own question then.
“Constitution value is dropping”
Hobo,
At first, I thought that was a comment on the administration’s lack of respect for the U.S. Constitution.
anyone have a link to the actual document representing the bailout bill (if one exists)?
#39
“Well, as I understand it – it is to protect the taxpayer in case the securities turn out not to be worth as much as they are purported to be. So, if the companies are not prepared to accept that, then well, they dont need help as badly as we think they do.”
I think it is to give taxpayers the possibility of an upside should one turn out to exist. But as I said above there is a tradeoff to gov’t ownership of majority stake in these firms. Perhaps this tradeoff is worth it, but it is real
#42 – ricky – Here’s the draft version of the Paulson plan.
Ricky,
As I understand it, there are a bunch of bullet points on a bunch of notepads on the Hill right now. There were some postings of the original plan but that is now out the window.
#36
“Then include provisions to facilitate the unwinding into the plan because we can’t depend on Wall St to unwind themselves.”
I believe Bernanke and Paulson are talking about two steps here. Step one is to stop the panic. Step two is to address longer term issues. Remember that the U.S. can shut these firms down any time they decide simply by changing the rules. But this is such a tangle that time needs to be taken to understand how best to restructure
#42 – Also here’s the draft version of Dodd’s counter plan
Skeptic,
Then why not strip the funds from the IB’s involved in order to pay for the mess? They caused it, they pay? For a mark to market and then Seize the assets and auction them of along the lines of a bankruptcy dissolution given that they are all bankrupt anyway?
What i do not understand, is how are we unwidnding the root cause if we are allowing any of these banking entities to survive this mess when by all rights they are beyond bankrupt. By allowing them to survive without strict regulations and penalties put in place we are only delaying the inevitable return to such nefarious making practices at the first opportunity.
If any bank is helped they should be forced to mark-to market all assets immediately and with 100% transparency. Once these terms are met i agree that we could talk about helping them.
kettle– i would add a third possibility to that list (which is what I believe): the system is fundamentally unsound and needs to be unwound deliberately. the bailout buys time to do this
Skeptic 46.
I see your point. But i believe that no real sensible regulation will occur if you build it after handing them the money. The money should come with the regulation
Skep –
My point was that if Paulson was not a crook, why didn’t he include all these provisions in the original draft of the bill?
Why did Congress basically have to pound him into submission?
CNBC just reported that O and M are to suspend campaigning. This will allow everyone to focus on the bailout.
Finally, if world renowned economists in this country have to say the following, I would agree with them.
“As economists, we want to express to Congress our great concern for the plan proposed by Treasury Secretary Paulson to deal with the financial crisis. We are well aware of the difficulty of the current financial situation and we agree with the need for bold action to ensure that the financial system continues to function. We see three fatal pitfalls in the currently proposed plan:
1) Its fairness. The plan is a subsidy to investors at taxpayers’ expense. Investors who took risks to earn profits must also bear the losses. Not every business failure carries systemic risk. The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise.
2) Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards.
3) Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, Americas dynamic and innovative private capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted. “
@Kettle1:
Clearly option 1) is wrong because if the system were worth bailing out, it wouldn’t have been able to crumble so swiftly. By swiftly I mean the week or two between “Our system is sound” and “Oh sh!t, bail us out fast, no time to deliberate!”.
It can’t possibly be prudent to spend more than every single dollar in circulation when a) it might not even fix the problem and b) even if “fixed”, who’s to say it couldn’t crumble again two weeks later?
#51 – Now if both would also step aside so we could pick new candidates we might be going in the right direction.
thanks for the links!
I think Dodd’s plan is better. It seems to me that if you don’t also find a way to keep people paying their mortgages (rather than walking away) the situation will deteriorate further. Allowing people to declare bankruptcy, have the principal written down, term stretched to 40 yrs and allow for fixed rate mortgage plus a do-able risk premium to offset some of the principal write down over time.
Suspend campaigning? Please, no. It is in times of crisis when real leaders emerge.
The whole thing smells bad.
Wall St apparently needs this and it is being sold as necessary for our economy. While we are giving the money to Wall St it is for our own benefit. Trying to paint this as a necessity that we can not ignore.
But if Wall St needs money, it’s not too bad that they would decide to reduce compensation and stop insider sales to lessen their burden. They want to pass the burden along to us. Even though the average wall st salary is many times the national and even NYC level.
Imagine you lived in a small community with one local supermarket. The owner has been making a ton of money as prices have been rising and blaming it on external factors. He’s been saving all his income and mortgaged out his business and his home to be make some improvements to the store and expand his initial well sized home into an estate.
The rest of the community is a mix of mostly middle income families. Not poor but not able to live the lifestyle of Mr. FoodMan.
All of a sudden it turns out Mr. FoodMan’s business is in trouble. With rising costs, families have been looking for ways to keep costs down and that includes their spending on some items at the market which had Mr. FoodMan’s greatest profit margin.
When times were good he had more than enough money in his business to pay off his growing debt as well as to give himself and his family that worked at the market very large salaries and bonuses. But now he cannot keep up his payments nor refinance his existing debt to better terms or get a loan to help him out.
So he goes to the mayor and tells him to tell the people this is an emergency and if something isn’t done the community will not have access to food and people will suffer. Part of the plan is to buy 5 tons of products that are near their expiration dates because people are no longer buying them.
The mayor pitches the plan to the people and the people ask, why doesn’t he sell some of his 10 luxury cars or move into a smaller house? Why doesn’t he go into his savings or does he really need to be making that much money when his company is in such bad shape? Why doesn’t he reduce the size of his operation? When we stopped buying these products, why did he keep ordering them? For weeks his dumpsters have been full of unsold products and why should we now buy his garbage?
For the amount of money he’s asking for, and not willing to reduce his business or his life, we could open up our own smaller supermarket that could serve us just fine.
Aren’t all the losses by IB’s really a paper loss? From what I understand, aren’t all these CDS (Credit Default Swaps) just an insurance, where nothing was really produced by any human being. In that case, what is wrong with them going bust? Its not like individuals have been mugged from their hard earned dollars.
Skeptic 56,
But why would any home owner who has any financial sense not walk away? Their homes may not be worth what they paid for DECADES, this is the biggest RE bubble in US history.
people entered in to contracts:
X$ for a house @ Y$/month: if i dont pay you then you get the house back as collateral.
what you are suggesting is that we push people to continue in a financial arrangement which is not significantly different from economic serfdom, when studies have shown that such individuals are better off walking away from the house as is allowed in the stated contract in exchange of forfeiture of the home.
(study was linked on this blog a few months back, cant find it at the moment)
Serious question: do you think banks will hand out loans once they know that the loans can be modified at a later date?
Brad Sherman is kicking a$$ right now! Watch CSPAN –
http://www.c-span.org/Watch/C-SPAN3_wm.aspx
No way in hell is this bill going to pass.
vodka (12)-
Precisely. Giving Buffett close to a guaranteed 17% rate of return on a special deal- not available to other investors- isn’t my idea of a ringing endorsement from Buffett.
I agree with Morgan. This whole “kiss” to Buffett was engineered by Klink, to be trotted out as a distraction whenever the heat got too hot under Klink’s seat.
#48
“What i do not understand, is how are we unwidnding the root cause if we are allowing any of these banking entities to survive this mess when by all rights they are beyond bankrupt. By allowing them to survive without strict regulations and penalties put in place we are only delaying the inevitable return to such nefarious making practices at the first opportunity.”
Kettle– I look at this like Ch. 11. A company like Delphi goes into Ch. 11 and continues to operate even though it is by definition insolvent. While in Ch. 11, it gets additional financing to restructure.
A similar process is being proposed w/r/t to these insolvent financial entities, except that de jure bankruptcy is not being declared because it would trigger other defaults that would have a cascading effect.
I think if the gov’t is smart, it will try to function like what is called a DIP (debtor in possession) lender in bankruptcy, taking a senior position to all other debt, coupled with equity options to participate in the upside when/if the company emerges from restructuring.
I do not think the environment that these companies will enter if they survive will allow a repeat of what just happened. The game has been exposed and does not work. I think it is also clear that the regulatory environment will be substantially different within months, regardless of who wins the election.
This will pass. I was peronally briefed by a member of the senate this week and if a deal is not done by Friday they will work through the weekend and if necessary into next week. Everyone in DC wants to go home as next week they were supposed to be off campaigning. Basically this is a Paulson Bernakee fhilabuster where they will wear eveyone down. The DC folks will get some belts and susppenders on this thing such as some limits on Exec Comp and oversight etc. But the lipstick is on this pig and it is getting close to closing time so someone is going to fold.
#60
“Serious question: do you think banks will hand out loans once they know that the loans can be modified at a later date?”
Kettle– I do think they will still make loans since almost all debt carries with it some bankruptcy risk. interest rates may go up if mortgages can be written down in bankruptcy, but I don’t think it would be prohibitive.
On the serfdom issue, I don’t think it is quite that bad. People already had 30 yr mortgages. 40 yrs isn’t draconian. In a way, it would be an attempt to convince people to pay more than their houses are worth, but these people will also avoid getting their credit ruined and if by some miracle housing goes the other way, they will get the upside. I guess it sounds far-fetched, but if millions default on their loans, we might be sunk. besides, I think a lot of these people want to keep their houses
Imagine being a time share salesmen right now?
It would be cheaper for the US to created their Own competing USBank to give out credit.
#65 skeptic: What amkes you say it would not be prohibitive, absed on what?
Sure there has always been bankruptcy risk. Modifying mtgs is something completely different.
From the bank’s perspective there could be situations where the bank could profit on the house going into foreclosure, as opposed to a Judge knocking 50 to 100K off the mtg.
As far as prohibitive, it would be much safer to say you don’t know.
#68 Sorry for the typos.
John,
What I don’t understand is the urgency for congress to do something now.
When Barney Frank asked Bernanke if he had $85 bln for the AIG loan, Bernanke said “I have $800bln”.
So if Bernanke thinks this plan is necessary, if this plan will work and this plan will be executed over the course of 2 years. Why not put up some of the money he has at his disposal to start things off while congress has time to thoroughly go over everything. We can even put in the plan to refund the money the fed put out in the meantime, ie make his spending retroactively part of the plan.
The problem is, Benranke has already been putting tons of money into the system through the reduced fed funds and discount rates and other mechanisms at his disposal.
While he’s been saying everything will be fine, even with all that intervention, it hasn’t and now he’s saying we’re in big trouble.
The federal reserve was responsible for overseeing a lot of activity that could have prevented this. Same with the Treasury’s Office of the Controller of Currency.
Dear Secretary Paulson and Chairman Bernanke,
We would like to help you but it would not be wise to jump to action with so much money without thoroughly considering the risks.
But this is a dire situation and we kindly suggest you put your money where your mouth is and ask these troubled bank execs to do the same while we consider your proposal.
Kindest Regards,
The American People
By the way, who says liar loans and no doc are buried. Hank has Congress ready to sign the most, potentially, explosive teaser rate structured during this crisis.
This is the quintessential exploding arm.
Tom,
Funny, or sad, they spent more time discussing steroids in baseball. Probably, spent more time taking pictures with Clemens.
It would appear that nearly the entire stock market has become a casino. 20%, 30%, 50% swings for various issues over the course of a day these last few weeks.
What individual, small scale investor in their right mind would want to participate in it?
Certainly not me.
I feel bad for anyone stuck inside it due to their criminally restricted 401k plan.
3b– obviously I don’t have all the answers (I just pretend to). but look at all of the other forms of consumer debt (secured and unsecured) that can be written down in bankruptcy. people still get car loans, for instance, at fairly low rates, despite the fact that cars depreciate in value and in some instances the debt can be written down in bankrupcty. so I do not think it is impossible that the same could be true for house loans
Our First Special President Bush will address the country on Wednesday night in hopes of bolstering public, and hence political, support for the economic recovery plan, one on which the administration is now willing to make a major concession on executive pay.
Yeah. I’ve heard lots of compelling arguments from him. On a whole range of topics, in fact.
McCain Seeks to Delay First Debate Amid Financial Crisis
Hopefully he has the decency to delay any Presidency of his as well.
McCa!n Seeks to Delay First Debate Amid Financial Crisis
Hopefully he has the decency to perpetually delay any Presidency of his as well.
“It is time for both parties to come together to solve this problem.” said McCa!n, referencing the problem no one from government has been willing or able to solve or even truthfully address for decades.
“Our First Special President Bush will address the country”
MJ [75],
Will Comrade Chavez be joining him?
John: Are these your shadow writers?
Wall Street Journal
SEPTEMBER 24, 2008
Got Milk? Chinese Crisis Creates A Market for Human Alternatives In China, Parents Pay a Premium to Hire Wet Nurses; Ms. Zhang’s Chubby
In China’s spiraling milk-contamination crisis, some mothers are making money selling their breast milk.
As news spread of the deadly taint of the industrial chemical melamine in China’s milk supply last week, new father Jimandy Wu approached his wife with a business proposition: She could become a nai ma, or wet nurse. He had read on the Internet about the practice, in which a woman feeds her own breast milk to someone else’s child.
Security staff kept order as families with children undergoing checks for possible kidney stones waited their turn at a hospital in Chongqing municipality.
“Why not,” says his 24-year-old wife, Tina Huang, a mother in the southern Chinese boomtown of Shenzhen who says she produces more milk than her own 2-month-old baby can use. “It’s a pity that I waste my breast milk when I see on TV so many kids with no milk to drink because of the contaminated powder.”
Ms. Huang’s old job as a secretary paid just 1,000 yuan ($146) a month. The 12,000 yuan she will earn each month as a wet nurse will “buy some good clothes for our daughter, and send her to a better kindergarten,” says Mr. Wu.
As Chinese parents panic about the tainted milk — which authorities now admit began in late 2007 — that has killed four and sickened more than 53,000 children, the fallout is breathing new life into an ancient profession. Wages for Chinese wet nurses, who post online ads and sign up at housework agencies around the country, have doubled since the milk crisis began on Sept. 12. They now run as high as 18,000 yuan a month.
[edit]
Hey, Hank’s not a liar.
“Sept. 24 (Bloomberg) — Treasury Secretary Hank Paulson’s $700 billion proposal to bail out the U.S. financial system may send the dollar to record lows by swelling the budget deficit.”
http://www.bloomberg.com/apps/news?pid=20601103&sid=a61md3ksf9Po&refer=us
“From the bank’s perspective there could be situations where the bank could profit on the house going into foreclosure, as opposed to a Judge knocking 50 to 100K off the mtg.”
3b,
That is usually not the case in this market. Because of the way foreclosure work. Where there is a good deal, investors will come into the picture and try and work something out before it even gets to auction. Even at auction some investors will pick up properties that didn’t get picked up.
Foreclosures wipe out many other secondary liens so a good chunk of the burden may be eliminated. But banks are still letting properties go at short-sales and for below judgment at foreclosure sales. That’s because they already have possession of a lot of properties they can’t unload.
Going into the rental market with foreclosures may not be a good idea for banks at this time. That link describes an investment firm that did just that and his having trouble managing geographically diverse properties. But it seems like smaller investors that can manage their own properties and have the cash and credit to do so.
The profit may be slim, but if it’s just you, and not you, your bank, investors and a employees, it might be worth it for some people.
The banks are not in good position when it comes to foreclosures. The banks holding secondary mortgages and helocs are generally in worse shape. The current plan tries to address the short falls these secondary lien holders are seeing. They took on the most risk and if the primary mortgages risk assessments were bad I’m guessing the risk management for secondary liens was even worse.
#74 skeptic: We are talking hosues here, not cars, not credit cards.
You don’t pay your car loan, the repo man comes. Credit Card rates for many people are incredily high, there is the premium the lenders get for the bankruptcuy risk, and we are talking about credit cards, with limits of say 1k to 20k for most people.
Now we are talking houses, wehre a judge can decide to chop off a chunk of the mtg owed? I think that is huge difference than CC’s and cars,a nd I believe the lender will want a much larger risk premium (higher interest rate) for that kind of risk.
What about mtg. bonds, will there buyers for those securities with that kind of risk? What kind of premium will they demand, and on and on it goes.
Plus the potential home buyer, I know for certain if this modification item is approved it will certainly influence the price I am willing to pay, away from the price declines we are seeing now.
I believe this to have many more significant ramifacations then you do.
I guess we agree to disagree.
Ron Paul on Fox Business News 9/24/08
#81 Tom: I was speaking in generalities, away for the current situation.
I believe that in general modifying mtgs will be a disaster for the housing market. It will have the exact opposite affect of trying to stabalize/help it.
I’m afraid we are sunk and there is nothing we can do about it. I’m 80% cash and have been for awhile. I’m going to keep gas in the car, stock the pantry to the max and keep some cash in small bills around the house. What else is there?
3b,
Stabilization of the housing market is not a realistically achievable goal. The market needs to correct so that qualified buyers can come back in and keep it at a reasonable pace.
Mortgage modification is necessary and good for both banks and borrowers. If mortgages are not modified they will likely go into delinquency and foreclosure. Foreclosure are not good for banks in this market. They’ll either hold them on their books for a while until they sell them at a loss or they will let them go for a loss at the auction if they didn’t already do a short-sale.
Mortgage modification is basically a like short sale transaction except you don’t have to pay realtor commission, you don’t have to look for a buyer you don’t have to worry about inspections and the buyer doesn’t have to worry about moving to a new area.
Either the banks will take a hit on properties in distress or the borrowers will magically start making a ton more income. The latter doesn’t seem likely.
“I’m going to keep gas in the car, stock the pantry to the max and keep some cash in small bills around the house. What else is there?”
Weapons and ammo along with proper training.
3b– within or without bankruptcy, would you agree that a secured lender is really only protected to the extent of the value of the collateral? If so, then writing down the value of a mortgage in bankruptcy to the real value of the collateral should have no net effect on the lender’s position.
I agree with you on that, but not on the other issues we discussed, which I believe are more crtitical.
Skep (65)-
“I guess it sounds far-fetched, but if millions default on their loans, we might be sunk. besides, I think a lot of these people want to keep their houses.”
THESE HOUSES- IN VIRTUALLY EVERY CASE- AREN’T THEIRS! I deal with people all the time who are offered loan recasts and modifications. In every case I’ve seen, the borrower TURNS IT DOWN. They have no skin in the game, so they either walk away (worst case scenario) or short sale (best case scenario).
Skep, I know you’re dancing hard, but you need to take a long look at human nature and how it influences real-life decisions that all the players in this game are making.
Your theoretical arguments don’t line up with the actions people choose to take.
And sometimes, a lying sack of shit is just that.
Even when he’s the POTUS or Secretary of the Treasury.
#86 Tom:Stabilization of the housing market is not a realistically achievable goal. The market needs to correct so that qualified buyers can come back in and keep it at a reasonable pace.
I agree, however if you get this modification item passed, teh houysing market will IMO over correct.
There is IMO a new large risk involved for any potential home buyer,and that will be reflected in the bids, not to mention comps.
We could theoretically have many more bankruptcy’s than the typical foreclosure rate.
skep (74)-
That post is the first sign that you’re grasping at straws.
Much like Mr. Bergabe, currently on a hot seat of his own.
John (66)-
Coffee is for closers.
MJ (75)-
Will Bush deliver the speech himself…or send Colin Powell to do it, armed with photos of bank queues and bread lines?
3b– not to drag this out, but maybe you have heard of single asset real estate bankruptcies for corporate debtors? the basic idea is that there are no reorgs where the only asset of a corp is real property (goes straight to liquidation for benefit of creditors). a similar set up could be used for individuals whose only asset is their house (i.e., they would be forced to liquidate). a more general provision in the bankruptcy code allows the secured creditor to foreclose when the asset in question is not essential to the reorg (e.g., some kind of investment property). Basic idea I am trying to flesh out is that writedown of mortgages on an individual level could be limited to cases where debtor has reasonable chance of being able to pay off substantial amount of his debt over time, and the house in question is primary residence (not investment property, second home, etc).
Hearings stopped. They’ve sent out for a rattle and blanket for Paulson.
skep (96)-
A house is not an asset when the occupant is in negative equity.
“THESE HOUSES- IN VIRTUALLY EVERY CASE- AREN’T THEIRS! I deal with people all the time who are offered loan recasts and modifications. In every case I’ve seen, the borrower TURNS IT DOWN. They have no skin in the game, so they either walk away (worst case scenario) or short sale (best case scenario).”
Clot– this is a good point and I guess you are right that there is no point in trying to help people like this. But aren’t there also people out there who, even though they may have been irresponsible, still have some equity left in their house but just cannot make payments? this is the type who I think may find some kind of workout
It’s no time to buy a house.
http://www.marketwatch.com/news/story/you-dont-buy-house-uncertain/story.aspx?guid=%7B85E6AF56%2DAF5F%2D4897%2DA6AC%2DD05B849466D9%7D
Even now as we speak the Gov’t is propping up mortgages. Without gov aid banks would want 30-40% down payments and 10-12% interest given the current default rates.
The government should not be dictating how a bank should resolve non-performing debt. Perhaps requiring a meeting to try to avoid foreclosure would help as it is quite common for banks to reduce the principal or the payments to try to avoid foreclosure as it is costly and the banks are terrible at liquidating the asset for a good price. Home prices on average have fallen or will fall by 25% if they rearrange the financing to keep the people in their homes, paying off the principal and interest it will benefit all parties involved. The bank only writes down a small part of the debt the asset is likely to perform, etc and the people get to keep their home.
Any suggestion of banks operating rental properties or succeeding in real estate is insane. Banks are incompetent when it comes to real estate from the large commercial banks to the ibanks like Lehman and GS, they DO NOT KNOW THE BUSINESS. We already have way to many inexperienced players on the field, let not have clueless banks going at it as well.
skep-tic,
It seems like you are familiar with bankruptcy law. I ran across the chapter 11 filing of a NJ couple yesterday and wasn’t sure if what I saw was normal. It was definitely scary and I think a lot of people are in situations like that.
Regular family with some kids. Wife was the one listed in the bankruptcy and the home is in her name according to the tax records. I believe even the mortgage was in her name alone.
Her husband was listed in the details but it didn’t look like it was filed jointly.
Her income was a little over 30k/yr his was somewhere over 150k/yr. When they bought the home it was probably 4-5 times their income, but the time it was brought to court it was refinanced and had another lien attached coming to about 10x their income.
A couple repossessed expensive cars and another repo’ed expensive 6 figure item, a lot of credit card debt and a 1/4mil business loan but apparently no assets associated with a business. Practically no money in savings or checking and no investments.
According to their lawyers budget estimate they can likely restructure the debt and make payments but it would be like living as paupers in a castle compared to what their debt allowed.
Anyway, my question is… I understand with all the spending they seemed to be doing that it is likely the did not have any savings, but is it normal for the husband to not file jointly considering it was likely his salary, probably along with her good credit, that was used to secure all this debt?
The FBI is investigating Fannie Mae, Freddie Mac, Lehman and AIG, expanding its inquiry into corporate mortgage fraud, law enforcement officials said Wednesday.
Can I have some cream of sum young guy to go with my milk from sum young girl?
chicagofinance Says:
September 24th, 2008 at 4:21 pm
John: Are these your shadow writers?
Wall Street Journal
SEPTEMBER 24, 2008
Got Milk? Chinese Crisis Creates A Market for Human Alternatives In China, Parents Pay a Premium to Hire Wet Nurses; Ms. Zhang’s Chubby
A rug, a tug and a gulp of milk
skep (88)-
“…within or without bankruptcy, would you agree that a secured lender is really only protected to the extent of the value of the collateral?”
Correct. But in the near future, the lender’s interest could also be threatened by a cranky judge who feels like flexing some muscle.
So, how does this not lead to financing pools drying up and further price collapses?
Just note if the banks knew real estate we would not be here today. The experts in real estate investing and development will ride out this storm, the newer inexperienced players who did not understand what was going on will get crushed. The real investors amassed huge quantities of cash and were in diversified real estate investments, including commercial deals with long term leases to credit tenants and build to suit to sell where millions in cash were banked on these deals and the bank was holding the note. Banks were so stupid to hold paper that could not possibly be repaid because of the cash flow characteristics of the property or the borrower.
Tom– I have only a passing knowledge of consumer bankruptcy so unfortunately I can’t tell you why she might have filed in that way. could be that all of the debt involved was in her name.
skep (99)-
I agree. But, these people are few and far between, and they tend- as a group- to approach the lender early on and fashion workouts that are not as draconian as what’s being proposed.
I’d also submit (and this is from personal experience and gut feeling) that the pool of those who cannot pay the mortgage- yet still have equity- is approaching 0.
One of the comments today in the hearing was to not collect capital gains taxes. I wonder what the stats are for the % of people that own individual stocks/bonds.
3b,
Maybe I’m confused and you’re mainly talking about the modification of mortgages through bankruptcy?
I don’t think it makes much difference. As skep-tic said, the collateral used to secure the mortgage is what the banks use to hedge their bets. If the borrower is now under financial problems they get the collateral back. If the banker wants to keep the person in the home, which is generally in their best interest in these times, the judge can do the modification. It’s not the judge’s fault the banks didn’t properly assess their risk and the value of the collateral.
skep-tic, it’s when you make some sense to me that leads me to believe you’re not a shill and just like the kool-aide :)
Just because a judge has that authority doesn’t mean that’s the only option. In times like these, if it’s better for the creditors to let the property go into foreclosure then that’s what he should do. In other cases where there is substantial debt and a lot of equity in the home can’t the judge also order the home be sold to cover the debt?
I have a feeling a lot of people are in the situation I described above. And from what I’ve seen the NJ foreclosure rate is already rising.
By the way, I hard something on a yahoo video that when a bank takes possession of a property that it then needs to increase it’s reserves by 4x the value of the property. Sounded odd and I never heard that before. Anyone know if that’s true?
#106
““…within or without bankruptcy, would you agree that a secured lender is really only protected to the extent of the value of the collateral?”
Correct. But in the near future, the lender’s interest could also be threatened by a cranky judge who feels like flexing some muscle.
So, how does this not lead to financing pools drying up and further price collapses?”
you could set up the law so that there are very strict guidelines for the ability of the judge to write down the debt. I agree that it would certainly affect the availability of credit, but I think if you crafted it narrowly enough, it would not kill the market.
jcer (101)-
Banks are always my dumbest clients.
Always.
I have had clients who are in prison when I sell their homes. They are easier to deal with than banks.
Judges should not be writing down collateralized debt, it is a slippery slope and this debt exists this way for a reason and that is since in the case of default physical assets are repossessed the rate can be lower.
Clot [114],
Any in the slammer buying?
jcer (107)-
Just read some of Morgan’s pieces about all the commercial stuff still being built down South, using non-recourse bank loans.
The builders figure it’s all non-recourse, so just build it, finish and walk away.
#111 Tom:Maybe I’m confused and you’re mainly talking about the modification of mortgages through bankruptcy?
Yes.
BC (116)-
Nope. It’s a one-way street.
not trying to get too far removed, but bankruptcy has always been a controversial thing. one of the big problems with the 2005 bankruptcy reforms was that it drastically reduced the kinds of debt that could be written down by consumers in bankruptcy. big consumer lenders argued that this would reduce the cost of credit for consumers overall, but I doubt you noticed a change in your credit card rate, etc following the passage of that bill. similarly, I think lenders tend to overstate the risk that credit will dry up if debt can be written down in bankruptcy. there is risk associated with all loans and bankruptcy just creates an orderly process for unwinding a pile of debt before everyone swarms the debtor. it is actually quite often to creditors’ benefit in addition to the debtor. as clot mentioned, sometimes lenders do not really understand what is in their best interest. again, not claiming to have all of the answers here, just wanted to point out that these are some pretty traditional objections to bankruptcy in general
Hurray for bank runs!
http://www.ft.com/cms/s/0/92281bda-8a3b-11dd-a76a-0000779fd18c.html
Rumours trigger bank run in Hong Kong
By Justine Lau and Tom Mitchell in Hong Kong
Published: September 24 2008 15:36 | Last updated: September 24 2008 19:16
Thousands of panicked depositors queued outside Bank of East Asia’s branches across Hong Kong on Wednesday to withdraw their life-savings on rumours that the lender was in financial trouble.
vodka (121)-
The cracks are getting bigger. The pressure, greater.
Re 80,
Yeah BC. Hank’s preserving his reputation with this bailout of his love for the strong dollar:))
Rather then a subprime issue, you are seeing the unraveling of the Fiat Debt System.
Buffett is getting paid 10% to hold what is essentially an option to buy $5 billion worth of Goldman with essentially little to no equity risk given the terms of the deal. That’s not an “investment.” That’s just an endorsement deal.
http://www.minyanville.com/articles/GS-buffett-BRK-X-congress-goldman/index/a/19154
Confused,
Also, the unraveling of our shadow banking system.
he [125],
He observed who was swimming naked and sent the sharks out.
Wow, the Lions fired Matt Millen.
http://sports.yahoo.com/nfl/news?slug=ap-lions-millenout&prov=ap&type=lgns
With that type of a long lived streak of incompetence don’t be surprised to see him added to the Bush administration.
Big Fish here from other side of the pond.
You yanks might want to remember that there is a great big world out there and this bog of a financial affair is bigger then yourselves even if it may have started in the US of A. I love you guys to death, my wife is even a bloody yank, but look at the big picture.
Barclays (BCS) holds liabilities larger then the total GDP of the UK! Yet Barclays is talking about buying yankee banks? The world has begun to whisper of the failure of the American democracy as the robber barons such as your Treasury Secretery and FED chairman take the helm and fleece the American public.
Best of luck to all of us, we will all need it.
Cheers!
“Clot [114],
Any in the slammer buying?”,
What about during the bubble. I remember reading a story of a woman buying a house with her husband or boyfriend that was in jail. Every come across that?
The market is down, everything is doom and gloom as this article states, but I guarantee than in a decades time we will all be talking about how wonderful the housing market is. Trust me, it will turn around, maybe even sooner than later.
Paulson’s plan was not a true solution to the crisis
http://www.ft.com/cms/s/0/a09b317e-898d-11dd-8371-0000779fd18c.html?nclick_check=1
The fundamental problem with the Paulson scheme, as proposed, is then that it is neither a necessary nor an efficient solution. It is not necessary, because the Federal Reserve is able to manage illiquidity through its many lender-of-last resort operations. It is not efficient, because it can only deal with insolvency by buying bad assets at far above their true value, thereby guaranteeing big losses for taxpayers and providing an open-ended bail-out to the most irresponsible investors.
Furthermore, these assets are illiquid precisely because they are so hard to value. The government risks finding its coffers stuffed with huge amounts of overpriced junk even if it tries not to do so. Also objectionable, though more in design than in the fundamentals, were the unchecked powers for the Treasury. Such a fund should be operated professionally, under independent oversight. Finally, if the US government is to bail out incompetent investors it should surely also provide more help to the poor and often ill-informed borrowers.
Yet, above all, a scheme for dealing with the crisis must be able to remedy the looming decapitalisation of the financial system in as targeted a manner as possible. A fascinating debate on how to do this is under way in the economists’ forum on FT.com. To the contributions, including Tuesday’s Comment page article by Dominique Strauss-Kahn, managing director of the International Monetary Fund, I would add one by Luigi Zingales of Chicago University’s graduate school of business.*
The simplest way to recapitalise institutions is by forcing them to raise equity and halt dividends. If that did not work, there could be forced conversions of debt into equity. The attraction of debt-equity swaps is that they would create losses for creditors, which are essential for the long-run health of any financial system.
The advantage of these schemes is that they would require not a penny of public money. Their drawback is that they would be disruptive and highly unpopular: banking institutions would have to be valued, whereupon undercapitalised entities would have to adopt one of the ways to improve their capital positions.
Re 131
Can I get some of that stuff you are smoking???
You are completely delusional.
JIm
I do know of a local transaction in which a woman bought a home & put her jailed boyfriend on the note and deed.
Evidently, his FICOs were just fine. Getting smashed out of your gourd and beating people up is not an adverse credit event.
131 NJ RE
Is that you RE101????
http://www.atimes.com/atimes/Global_Economy/JI23Dj06.html
Americans are so deep in the hole that they might as well keep putting borrowed quarters into the one-armed bandit. They have hardly saved anything for the past 10 years. Instead, they counted on capital gains to replace the retirement savings they never put aside, first in tech stocks, then in houses. That hasn’t worked out. The S&P 500 Index of American equities today is worth what it was in 1997, after adjusting for inflation (and a pensioner who sells stock purchased in 1997 will pay a 20% capital gains tax on an illusory inflationary gain of 40%). Home prices doubled between 1997 and 2007 before falling by more than 20%, with no floor in sight.
As it is, many of the baby boomers now on the verge of retirement will spend their declining years working at Wal-Mart or McDonalds rather than cruising the Caribbean. Some of them still have time to tighten their belts and save 10% of their income (by consuming 10% less), plus a good deal more to compensate for the missing savings of the 1990s.
Altogether, they’d rather gamble, and if that requires a bailout of the house, they gladly will chip in to pay for it. After all, today’s baby boomers won’t pay for the bailout. The next generation of taxpayers will pay for Paulson’s $700-$800 billion. If that enables the present generation to keep borrowing rather than saving, it is no skin off their back. If home prices continue to collapse, the baby boomers will die in debt anyway, working at low-paying jobs until the day before their funerals.
The homeowners of America hope against hope that somehow, sometime, the price of their one only asset will bounce back. The character of Mortimer Duke in the 1983 film Trading Places comes to mind. After losing his fortune in the frozen orange juice futures market, Duke screams, “I want trading reopened right now. Get those brokers back in here! Turn those machines back on! Turn those machines back on!” If a reverse takeover of the US government by Goldman Sachs is what it takes to turn the machines back on, the American public will support it. Sadly, there is no reason to expect the bailout of bank shareholders to have any effect at all on American home prices, which will continue to sink into the sand.
Contrary to what the Bush administration says, it is not the case that banks’ troubled mortgage assets cannot be sold in the private market. Those are the so-called “Level III” assets that banks say they cannot value. But that is only a dodge that the banks use to postpone taking losses. There is a ready bid for these assets from hedge funds, in multi-hundred-billion-dollar size.
The trouble is that the market bid is 25% to 30% below the prices that banks carry these assets on their books. Traders at Wall Street boutiques who specialize in distressed securities say that US regional banks regularly make discreet offers to sell private mortgage-backed securities (not guaranteed by a federal agency) at prices, for example, of 75 to 80 cents on the dollar. Hedge funds bid, for example, 55 to 60 cents in return.
On rare occasions, the bank seller and the hedge fund buyer will meet in the middle, although very few transactions occur. Although many banks are desperate to sell, they cannot accept the offered price without taking losses over the threshold of mortality, for write-downs of this magnitude would destroy their shareholders’ capital. Investment banks typically hold about $30 of securities for every $1 of capital, so a 3% write-down would leave them insolvent.
Lehman Brothers classified 14% of its assets as Level III at the end of the first quarter; Goldman Sachs was at 13%. Why is Lehman bankrupt, and Goldman Sachs still in business? If Secretary Paulson, the former head of Goldman Sachs, had not proposed a general bailout last week, we might already have had the answer to that question.
For the Paulson bailout to be helpful to the banks, it must buy their securities at much higher prices than the private market is willing to pay. Otherwise it makes no sense at all, for the banks could sell at any moment to the hedge funds. But that is a subsidy to private banks, administered at the whim of the Treasury Secretary, without oversight and without the possibility of legal recourse.
.
lol @ 131,
when are the used SUV salesmen going to start coming in saying now is a great time to buy a used SUV?
McCain has suspended his campaign to return to Washington to work on the Economic Crisis. Ball in O’s court.
Odfice pool time: How many minutes into his address tonight will bush say things are “hard?” How many times will he say “hard” or a variation on the word? How many times will he say “I have direcetd,” “this is no time for politics (or pplitics as usual,” or urge congress to jump through his hoops upon his command?
How come nobody is talking about the legislation the house just passed regarding credit cards
I believe most people are optimistic about their home prices in this area. I know friends who are fixing their house to sell next year when the market rebounds. People talk about buyers “taking advantage” of sellers. One guy said “the house must be a disaster, they only paid half a million dollars.”
I’m just reporting what I hear in the lobbies of the dance schools.
renter,
I think it’s an example of the endowment effect.
Just like with people buying into tech stocks after the bubble burst but before it hit bottom. The concluded it was a great time to buy and stocks would rebound.
Slightly less stupid than beanie babies as stocks had some value.
Real estate is even better you know. It’s not just a number on your statement, it’s something you can actually touch and walk in. It has to have value right? And if I was willing to pay so much blah blah blah blah.
“but I guarantee than in a decades time we will all be talking about how wonderful the housing market is.”
Yeah, can’t wait until boomers start to unload.
Mantra: *5 bedroom, 3 bath 3 story victorian on nice street with great schools for under 500k* repeat several times hourly
across the pond [129],
Based on the net flows of our treasury securities, I think the world is doing more than whispering. Funny, nobody at all seems to be concerned with the value of the dollar, as this charade moves forward. Well, the liars have presented all of us a golden opportunity. Sit back, watch the show and drink some bitters.
Cheers.
BC 142 let us re post the time line for the uninformed About the time this mess clears up the biggest portion of the population will be bailing out of their homes to retire (lets hope they have a prayer). Taxes in NJ will be even worse, so off they go. We are well aware of the time line of past Re cycles so this should hit right on time & keep going for years.
BC Dammed if they do dammed if they don’t. Has to be a better way. Pimm’s for me.Cheerio.
This is scary.
http://krugman.blogs.nytimes.com/2008/09/24/a-sneaking-suspicion/
A sneaking suspicion
So now the whole rationale for the plan is “price discovery”: we’re going to throw lots of taxpayer funds into the pot because that will let us find the true values of troubled assets, which are higher than the fire sale prices out there, and so balance sheet will improve, confidence will return, etc, etc..
So I just did a Nexis search trying to find out when Paulson and Bernanke started talking about price discovery, which we’re now told are at the core of the plan’s logic. And the answer is …
Yesterday.
I can’t find any use of the term, or even a hint of the argument, until yesterday’s Senate hearings.
One possible explanation. It wasn’t until yesterday that they realized that it would actually be necessary to explain themselves.
But there’s another possible explanation, which I find terrifyingly plausible: the plan came first, and all this stuff about price discovery is an after-the-fact rationalization, invented when people started asking questions.
It has seemed very strange to me that such a supposedly crucial economic program would be based on such an exotic argument. My sneaking suspicion is that they started with a determination to throw money at the financial industry, and everything else is just an excuse.
Vic I don’t doubt it they are out of answers so in true American fashion they are throwing tax payer money at the problem.
In selling us the Iraq war, they at least made an effort to invent some fictitious WMDs.
These guys really believe that all of us have turned into such sheeple that we will accept anything which comes out their pieholes. They have zero credibility at this point.
This bailout should be supervised by an outside board with no connection to D.C.
You will be able to tell your great-grand-children how you survived the “Greatest Depression”. Although he doesn’t have a clue what to do, Bernanke’s fears about one are on target. His biggest fear probably is he realizes the entire system is flawed starting with LBJ removing all support for the Fiat dollar. The correction of these issues, require a reversal going back to the LBJ administration and working foward thru fifty years of Economic Treason, except for maybe the Carter years. Can’t execute Kennedy, LBJ, Nixon, Ford or Reagan anymore, but we can still nail two Bush’s and a Clinton. They, and their administrations, and congresses, are at the root of the problem, as paid fraud facilitators.
“These guys really believe that all of us have turned into such sheeple that we will accept anything which comes out their pieholes. They have zero credibility at this point.”
Unfortunately not everyone realizes this :(
I wonder if the FBI is bugging Paulson and Bernanke to see what they’re saying behind the scenes? Do you think when nobody is watching they tell the truth? Or are they just innocent pawns? Or do they say “I can’t believe I gave that whole speech without even cracking a smoke”?
This whole thing is depressing. Back to politics :)
The one big thing about McCaln’s VP that bothers me the most is he picked someone he doesn’t know and hasn’t worked with. In all his years in Congress he must have made some relations with people that he works well with and would make a good team and not be some sort of tactical pick.
With so many problems facing our country, I think he would have had a better message if he picked someone that he already had a good working relationship with and could say “Me and Senator X have worked hard to do A, B, and C in the past and can do even more in the white house”.
I’m surprised more people haven’t said something like this. To me that’s the most disconcerting thing about his pick.
Besides some name calling, I never got my Hoboken listing for 2005 prices.
If things are so bad all the Lehman employees should be selling like crazy.
Come on Clotpoll, it should be easy to find them.
Re 149,
Vic,
They finally found the WMD’s; turns out they were on every US financial institutions balance sheets.
Hehehe THAT is the post of the week.
Here is the money quote. After reading this, I am stunned!! Absolutely stunned!
“It’s not based on any particular data point,” a Treasury spokeswoman told Forbes.com Tuesday. “We just wanted to choose a really large number.”
http://www.forbes.com/home/2008/09/23/bailout-paulson-congress-biz-beltway-cx_jz_bw_0923bailout.html
152 – Frank
We admit that we are wrong. Why dont you go buy some RE and flip it 6 months later?
With the attempt to shove the Paulson Putsch down the throats of congress, we have come a long way from this approach to enacting laws:
http://www.youtube.com/watch?v=mEJL2Uuv-oQ
Frank I posted three I found in in five minutes. Post sixty on the previous thread.
Victorian,
When I saw the statement you quoted about pulling the “really big” number out of thin air, I was convinced I must have read it incorrectly. After reading the whole article, I am appalled.
159 – Shore.
This is what bothers me most – They are now so incompetent that they are not even competent enough to hide their incompetency.
Shore 159″ We just wanted a really big number.”
We are screwed. They have no clue.
ok, just wrote my congressman. at least he has the sense (per an article in the paper today) to be for limiting the executives’ salaries.
i know it won’t do shit, but the guy’s barely older than me, so i decided why the hell not.
http://www.stopthehousingbailout.com/
Vic At least have the sense to throw out some bull line Like “after researching the problem we feel this would be an amount to assure stabilizing the system”
And we are going to give them 700bil.
everyone, put your words into action.
contact your local Senators & Reps, and tell them that you are 100% against the bailouts.
No more inactions!!
SAS
stan,
That doesn’t count, those were sale prices. Frank’s talking about listing prices. Everyone knows that’s more important than the price it was actually sold for.
Taking off my sarcasm hat now.
Chimp in Chief is on
Frank:
this one is just about at 2004 prices:
Sale Date: 11/18/04 Book: 7422 Page: 37 Price: 366000
http://hudson.fnismls.com/publink/default.aspx?GUID=208c8957-cd54-403a-82cb-79a8dd16edd6&Report=Yes
#140 renter:I’m just reporting what I hear in the lobbies of the dance schools.
Well there you go. Totally clueless.
this is the frank special:
listed and under contract for 545K
http://hudson.fnismls.com/publink/default.aspx?GUID=ba00dda6-b757-40f9-a4fa-d5b866284a94&Report=Yes
purchased 39 months ago for 550k
http://tax1.co.monmouth.nj.us/cgi-bin/m4.cgi?&district=0905&block=70&lot=11&qual=C0504
vic (160)-
Conscious incompetence: step 2 of Dunning-Kruger effect:
http://en.wikipedia.org/wiki/Four_stages_of_competence
I think there is going to be a bank run tommorow if Joe SixPack watched the speech by our retard-in-chief.
Hmm..Futures are up.
More of today’s Mike Morgan:
Warren Buffet – Liar, Liar, Pants on Fire
You can hear it in Warren Buffet’s voice this morning on the interview. He’s lying. I thought he was lying on Maria’s interview a couple of weeks ago. He’s lying again.
Look at it this way.
1 – He says he invested in Goldman because they are the best, and he has done business with them for a long time. Oops . . . that was when they were an investment bank. Now what? Now they are changing their business model, so the past does not apply. Liar, liar Warren.
2 – He says he invested now because the government is going to take action. How would he know that? How would he know what they are going to do? How does he know they will do enough? Warren would not have thrown $5B at this, unless he knew something? Liar, liar Warren.
3 – He ONLY invested in Goldman. So does that mean Goldman is the only company “worth” investing in or was he forced into this deal, or does he now something we don’t? Liar, liar Warren.
4 – He says the bail out will make a profit, but when Sweety Pie Becky asked him if he was buying some of this stuff, he said NO. Double-Talk Warren. Double-Talk.
He’s totally lost all of my respect as a man, a human being and an investor. He cut a deal with the Devil. But now he’s still just hoping this all works. I believe, as Larry Kudlow, used to say . . . FREE MARKET ECONOMY. It’s funny how Kudlow is not using that on his show anymore.
We are in a War. It is clearly Main Street against Wall Street. Everyone is taking sides. You must continue to email and fax and call your Senators and Congressman. We go into a Depression either way. But if Wall Street wins, we come out of this naked, crawling on our hands and knees. If Main Street wins, at least we come out with our dignity, standing tall to fight another day like Americans . . . not slaves to Wall Street pigs.
(150) Confused –
Thought this was interesting..
LBJ also took Fannie Mae off of the governemnt books in 1968 – helped to balance war costs.
http://www.cfr.org/publication/17146/
I vote for Franklin Delano Romanowski
http://www.nypost.com/seven/09242008/photos/news005b.jpg
Hunterdoom is finally number 2 in taxes!
Maybe Bernanke, Bush and Paulson ought to take it down a notch because the unintended consequence of your leaders screaming “we are in dire staights here”…”the sky is falling” could be runs on our own banks.
And it wouldn’t even be because people understood the fundamentals of what was happening but rather that all they keep hearing from the Secretary of the Treasury is how aweful everything is.
So if they are not careful… they better save that bailout money – they may need it to backstop the FDIC.
awful – even
John (175)-
And all this time, I thought it was hemorrhoids.
But hey! My kid’s HS has SprintTurf and a g@y/lesbi@n club.
Cindy (176)-
I was at a fundraiser dinner tonight, and two wealthy friends of mine volunteered that they had pulled 6-figure amounts out of money center banks last week and put it in local, state-chartered community banks.
So, what will this election’s October Surprise be?
(180) Clot
Ron Paul write-ins
From the text of the speech tonite:
“The government is the one institution with the patience and resources to buy these assets at their current low prices and hold them until markets return to normal.”
But I thought that most agree that the plan won’t work if the govt buys them “at their current low prices” – Aren’t P and B talking about buying them at hold to maturity prices – in other words, prices higher than they’d be able to get now. Isn’t that the whole point of this bailout – paying more than the current price they’d get on the market today?
(179) Clot – I’m serious. You should have heard folks at work today.
The public is now paying attention and someone is messing with their money.
cindy (183)-
Sometimes I like to drive and listen to Michael Savage. It’s sort of cathartic…in a cheap, vicious kind of way.
He’s all over this story. Seems like his audience (who may be more heavily-armed than me) is into it as well.
“I was at a fundraiser dinner tonight, and two wealthy friends of mine volunteered that they had pulled 6-figure amounts out of money center banks last week and put it in local, state-chartered community banks.”
Clot, I’m going to email that to the Hudson City and see if I get a free toaster since I’ve been such a loud fan of local community banks and credit unions :)
By the way.. how the hell does Jim Cramer stay on the air? I can’t search youtube without finding something crazy he’s said.
Here he is in July 2007 saying “subprime is completely meaningless” If every subprime loan in 2006 $500 billion, you will still not notice. Ha!
http://www.youtube.com/watch?v=BVl9SQ-KVmE
Now it’s bailout bailout bailout Yippeee!
I’ve always preferred to get my advice from guys that were crazy hats and say smart things than people that say crazy things and have no hats.
# Clotpoll Says:
September 24th, 2008 at 10:18 pm
I was at a fundraiser dinner tonight, and two wealthy friends of mine volunteered that they had pulled 6-figure amounts out of money center banks last week and put it in local, state-chartered community banks.
_________________
Hmmm. This is a tough one, I see the logic to an extent – but if your money is with JPMC or another too big to fail, I wonder if you’re better off there as the Feds would simply not let them go down. Whereas a small bank could under and it might take a bit longer to get your money back, if things are really off the rails and FDIC is tapped…
With my wife this evening, I watched the Bush lie through his teeth and struggle to pronounce the big words. I said to my wife,
This moment is like the Cuban Missile Crisis. This is a defining moment for America. If this criminal act is rejected, flat out, we and this country could have a bright future. If this bill is passed, in any shape or form, the United States is absolutely, irreversibly doomed, and all of our lives will be a struggle to survive the inevitable collapse of the United States.
As someone else wrote:
“Give me all your money or you’ll lose all your money.”
I have not been impressed with much that this administration has done, apart from the initial invasion of Afghanistan. That said, I was pleased with the speech tonight.
No, I do not agree with all of the proposals but, for the first time, a member of this administration looked the public in the eye and spelled out just how profoundly screwed up things are currently. I was also glad to see him embrace a number of the changes the congress has been insisting upon.
Tomorrow is the day to press congress and the WH to prevent overpaying for the assets and to preveny workouts that drop principal balances or reduce the return to lenders, as we all know this will create massive problems for correcting the bubble and for generating future loans.
“Whereas a small bank could under and it might take a bit longer to get your money back,”
To the contrary, the FDIC can take a smaller bank and more easily transfer all its assets to a larger one. If a giant bank goes down, who knows.
We also moved large sums from money-center banks to some smaller ones. We even sent some to Puerto Rico. That waywecan get some sun whenwe visit our money, at least some of the crumbs Uncle Sam let’s us keep.
Shore Guy:
Are you serious?
The President Just Threatened the Citizens.
I repeat…
The President Just Threatened the Citizens.
“Maybe Bernanke, Bush and Paulson ought to take it down a notch because the unintended consequence of your leaders screaming we are in dire staights here the sky is falling could be runs on our own banks. ”
Cindy,
I have been relieved at the recent candor about how bad things are. For a number of days folks have been speaking “economist speak” or “politician speak.” Those who understand it hear the clear message embeded within the fog; however, most of the country does not get it. Consequently, they have been unprepared for a big crash, which could still occur. There is now no excuse for anyone to be taken by surprise, regardless of what happens.
MJ,
Yes, I heard the threat. Congress will need to put the breaks on the worst aspects of this “plan,” perhaps slashing its cost, getting equity stakes, etc.
Still, bush has finally leveled with the public about how badly f@cked up things are. And it happened on his watch. And his administration is to blame. And his plan su(ks. Yadda yadda. But, there was little sugar coating tonight, and the public debate will be better for it, and Congress will be strengthened in dealing with the administration because of it.
“How much pain they have cost us, the evils which have never happened.”
177.cindy Says:
September 24th, 2008 at 10:12 pm
Maybe Bernanke, Bush and Paulson ought to take it down a notch because the unintended consequence of your leaders screaming “we are in dire staights here”…”the sky is falling” could be runs on our own banks.
The amazing thing is in one months time “The Sky Is Falling”, apparently without any warning! This is like FDR and Pearl Harbor, except he had more time. No one said we have to build a navy & draft the country in one week, or the Country is gone. Now they are saying give away Trillions in a week or “Fall off a Cliff”. Either this is worse then WWII, or we need Cooler Heads to Prevail! It’s evidently worse then the “Great Depression, as they had more time, and did not “Fall Off A Cliff”.
Funny you should mention “depression.” I jist saw this on yahoo news:
EW YORK – Republican vice presidential candidate Sarah Palin said Wednesday that the United States could be headed for another Great Depression if Congress doesn’t act on the financial crisis [snip].
On handheld and can’t grab link and text.
Shore,
Let’s say for sake of argument many banks were to go down in very close succession, meltdown of large/small etc- I would think they’d focus on stabilizing the biggest, since they represent much more in terms of systemic risk; and get to the small ones when they get to them…
Not a direct analogy, but Leh is toast and they stepped up for AIG. Say Citi in 100 countries 400,000 employees and a massive balance sheet, vs. Hudson City? If it all hit the fan at once, I know who’d be at the top of my pile to fix.
@Confused:
The threat is great, but not understood.
The real threat is government action.
What hurt America more? Planes flying into buildings, or the government reaction?
This time around, government action will be many times worse, should it come to pass.
Shore,
I haven’t been on here too long so I’m curious what it is you do? I take it you work in DC in some capacity?
“No, I do not agree with all of the proposals but, for the first time, a member of this administration looked the public in the eye and spelled out just how profoundly screwed up things are currently. I was also glad to see him embrace a number of the changes the congress has been insisting upon.”
I didn’t even bother to see but I can tell you that you shouldn’t have been impressed. For the “first time” in 8 years, as this administration’s days are winding down, someone in the administration finally was open and honest.
The biggest problem is that people have been talking about these problems for a long time. Not just people on the internet but also in government. The message was the same the buzzword just changed. What people are now talking now as the subprime problems are the predatory lending issues that started buzzing around in 2001.
And there were concerns within the fed in 2000 about using their authority to send examiners out to lenders to keep an eye on them.
http://online.wsj.com/article/SB118134111823129555.html?mod=todays_us_money_and_investing
This isn’t honesty, this is nothing anyone should be impressed with. This is a bunch of people that had to admit the truth that they either were caught or were asleep. We see the crumbs on your face, we didn’t need to see your hand in the cookie jar.
“Tomorrow is the day to press congress and the WH to prevent overpaying for the assets and to preveny workouts that drop principal balances or reduce the return to lenders, as we all know this will create massive problems for correcting the bubble and for generating future loans.”
This is complete nonsense. Prevent workouts that drop principal balances? For some mortgages that means they go into foreclosure and if you visit my blog you can see how well that’s working out for the banks. Once we buy these mortgages the lenders have already gotten their money. These mortgages and securities being pitched to the american taxpayers are virtually worthless as is. If they had any value they would not be begging us to buy them.
The federal reserve is the lender of last resort. If the banks need money to keep the wheels of industry running, they can borrow from them. At the rates the fed is charging, they’re practically giving money away. But that is still not enough to keep these banks going. This is not a matter of greasing the wheels, the engine has blown due to reckless operation. It’s time for a rebuild and it’s the driver that should pay.
Steve,
Could be. One might do well to split things up between a hald dozen banks of different size. We use a credit union, a small-town bank, a couple regional banks, and a couple of money-center banks. Even though we are supposed to have multiple accounts insured to $100k in a single bank as long as the names are different (say one in the name of Shore, one in the name of Mrs. Shore, and a joint act), we don’t do that. Nothing is allowed to go above $90k total deposits in a given bank, that way any interest earned is protected as well.
I think that’s the smartest approach really – diversify across multiple institutions….’cause it’s impossible to know exactly how the “rules” could be changed in the event of a banking panic…
Tom,
I agree that thos administration has messed up badly in nearly every respect. That said, they have been masters of denying, resisting being honest, and pushing back when pushed. We are in a serious pickle at the moment and until tonight it was possible for Joe and Jane Main Street to believe we are not. bush could have done the usual tap dance and sugar coating. He did not. I was telling one of his aides the other day that he owed it to the nation to come clean and let us know thay things are bad and to explain how close we came to a meltdown last week. I think he at last did that.
I still think the plan sucks and I want serious changes, and punishment for many. I am just relieved that we are no longer pretending to the nation that things are pretty good.
From what I understand less than 10% of all mortgages are in default or foreclosure.
Now, banks don’t just make money on mortgages. I mean they shouldn’t. Investment banks do so much more than lend money to buy assets, right skep-tic? They make money on those transactions I would assume.
So what kind of business cannot take a 10% decline, without concerns of grinding to a halt, and still be considered sound?
Shore,
He’s saying things are no long good so that we can give money to Wall St. Everything was rosy, the economy was great when we were told to spend and buy houses to give money to Wall St. The message seems to change depending what will send money to Wall St.
I just saw the speech. I would not consider it honest. The only thing that impressed me was that he didn’t mention terrorists.
By the way, you didn’t answer my question of what you do in Washington.
http://housingpanic.blogspot.com/2008/09/representative-peter-defazio-on-paulson.html
*Sec. HANK PAULSON EXPOSED!!! by Rep. Peter Defazio
watch this and spread it out !!!
http://www.youtube.com/watch?v=ANGsBNMY1_c&eurl=http://www.itulip.com/forums/showthread.php?p=49468
HANK PAULSON EXPOSED!!! Rep. Peter Defazio – “We should not be rolled by a Wall Street exec who is masquerading as the Secretary of the Treasury”
(207) Shore
“I am just relieved that we are no longer pretending to the nation that things are pretty good.”
I too am glad it is all out in the open so the people are now better informed.
It is the rush to action I am opposed to. The threats being hurled that the mess must be fixed today. It is making the folks I see everyday even more uncomfortable with the financial system.
Luigi Zingales has this article at FT.com “Why Paulson is wrong”
http://blogs.ft.com/wolfforum/2008/09/why-paulson-is-wrong/#more-190
“Since we do not have time for a Chapter 11 and we do not want to bail out all of the creditors, the lesser evil is to do what judges do in contentious and overextended bankruptcy processes: to cram down a restructuring plan on creditors, where part of the debt is forgiven in exchange for some equity or some warrants.”
“Forcing a debt-for-equity swap or a debt forgiveness could be no greater a violation of private property rights than a massive bailout, but it forces much stronger political opposition.”
Is this a better idea? I don’t know – but let the folks who do know speak up.
I just want a chance for the best ideas to come forward. I don’t know what they are. But surely we can do better than a blank check handed over to Paulson before the weekend.
We tout ourselves as the nation of ideas. Well if creative destruction is about to destoy the shadow banking system, then what takes its place had better be well thought through.
Wall Street Executives Scored $3 Billion as Banks Rose and Fell
By Tom Randall and Jamie McGee
Sept. 26 (Bloomberg) — Wall Street’s five biggest firms paid more than $3 billion in the last five years to their top executives, while they presided over the packaging and sale of loans that helped bring down the investment-banking system.
Merrill Lynch & Co., once the largest U.S. brokerage, paid its chief executives the most, with Stanley O’Neal taking in $172 million from 2003 to 2007 and John Thain $86 million after a month’s work last year. The company agreed to be acquired by Bank of America Corp. for about $50 billion on Sept. 15. Bear Stearns Cos.’s James “Jimmy” Cayne made $161 million before the company collapsed and was sold to JPMorgan Chase & Co. in June.
Democrats and Republicans in Congress are demanding that limits be placed on executive pay as part of the $700 billion financial rescue plan proposed by U.S. Treasury Secretary Henry Paulson. The former Goldman Sachs Group Inc. CEO, who received about $111 million between 2003 and 2006, said in testimony to Congress on Sept. 24 that he would accept such limits as part of the plan, after initially opposing them.
“Shareholders and boards should have done something about this a long time ago,” said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware in Newark. “They justified these levels of pay on the idea that they’re all geniuses. I think that balloon has burst.”
Wall Street firms have shared profits liberally with employees. The five biggest — Goldman, Morgan Stanley, Merrill, Lehman Brothers Holdings Inc. and Bear Stearns — paid their 185,687 employees $66 billion in 2007, as problems with subprime mortgages mounted, including about $39 billion in bonuses. That amounts to average pay of $353,089 per employee, including an average bonus of $211,849. The five firms had combined net income of $93 billion during the five years through 2007.
read http://www.bloomberg.com/apps/news?pid=20601103&sid=a96vQtgKS3BM&refer=news#