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The mother of all meltdowns.
WaMu BooHoo!
Good morning early risers!
bank failure friday, here we go!
RIP WaMu.
sl
WHAM MU!!
Grim –
Is there one “root cause” of this financial crisis?
Attached is the most bracing – and profound – article I’ve read on this whole situation.
Your readers should find it kosher –
The Diversity Recession: What Was The Financial (And Political) Establishment Thinking?
By Steve Sailer
The weird thing about the tumbling of the latest financial house of cards is that the cornerstone, such as it was, was confidence in the increasing ability of the bottom half of society to pay back unprecedentedly large debts.
Underlying these vast pyramids of debt was, all too often, a promise by a single mother who works at the DMV or a drywaller from Chiapas to (following a brief teaser period) make mortgage payments of, say, $3750 per month for the next several decades.
In recent times, investors have typically gotten rich in our society by betting on the rich to get richer. And most of the time, that’s what happens: the rich get richer. Every so often, however, we have a meltdown because, during the bubble, investors temporarily overestimated the rate at which the rich will get richer—e.g., Silicon Valley in 2000, the Texas oil patch in 1982, commercial real estate developers around 1990, and so forth.
But, most of the time, you can get richer betting on the rich to get richer.
For example, Southern California is full of people who used to be movie, TV, or pop music stars but aren’t anymore. Yet, with the exception of addicts who blew all their money on drugs, you almost never hear of ex-stars having to undergo the humiliation of having to get real, boring, non-glamorous jobs to pay the rent. Among ex-stars who stay off drugs, you find a lot of them during the longer and longer periods “between projects” coaching their kids’ soccer teams, taking yoga classes, noodling on screenplays they never finish, walking their dogs, and just generally enjoying pleasant lives without bosses or jobs.
A big reason for them not running out of rent money: back when they were making lots of money, they didn’t rent, they bought—and in very expensive neighborhoods.
One of the things everybody does when he becomes a star is to buy a house in Beverly Hills. And then when you aren’t a star anymore and finally run out of money, rather than get a job, you sell your Beverly Hills house, which has appreciated dramatically, to somebody who is currently a star, and you buy a cheaper house in Santa Monica and live off the difference while you pretend you still have a career in the industry.
Then, after a decade or two of going out to lunch at nice restaurants you are running out of money again. So you sell your Santa Monica house to a newly rich person for a lot more than you paid for it and buy a cheaper house in Encino. Lather, rinse, and repeat.
This strategy works because the rich have been getting richer.
What’s totally strange about the mortgage meltdown, however, is that the bet, at its base, was on the more marginal members of society to be able to pay off their inflated debts—a bet on the pretty-close-to-poor to get pretty-close-to-rich.
And that made no sense at all.
The homeownership rate had been stuck at about 64% since the late 1960s. The Clinton and Bush administrations pushed hard to get it up to 68-69%.
What in the world made anybody think that the second quartile up from the bottom was developing more earning capacity?
They’d sent their wives out to work a couple of decades before. What could they do now to pay bigger mortgage payments in the future?
The second quartile folks weren’t getting better educated, weren’t getting more unionized, weren’t facing less competition from China, weren’t facing less competition from immigrants, weren’t getting married at higher rates so they could better pool their earning capacity.
So what trend suggested they were now developing more capacity to pay back huge debts than before?…
So, let’s say that big stars’ homes in the Hollywood Hills go for a median of $11 or 12 million. In the spring of 2006, the median sales price of all homes (houses and condos) in the Los Angeles region, an urban area of about 5 million people that includes vast tracts of Nowheresville in South Central and the San Fernando Valley, was $580,000. (It’s now just under $400,000). So the ratio of home prices for stars to nobodies was about 20 to 1.
Now, 20 to 1 sounds like a big difference. But most measures of ability to pay would favor stars over nobodies by much more than 20 to 1.
Consider net worth outside of home equity. I would guess that most people who take out a $10 million mortgage might have, say, $10 million in stocks, bonds, CDs, art, vintage cars, and other assets, for a 1 to 1 ratio. What was the net worth of the median buyer of a $580,000 home with almost zero down payment in LA in 2006? $58,000? Maybe not that much when you subtract the car loans and outstanding credit card debt.
If the median net worth was $58,000, that’s a ten to 1 ratio between mortgage and net worth (heck, there were buyers in 2006 and 2007 who had a net worth consisting of a monthly bus pass and some lottery tickets, so their ratio was close to infinite) vs. 1 to 1 for the rich folks.
Obviously, I just made most of these numbers up. But I know that I at least got the sign right. So how did people not notice that financial institutions were making huge bets on something that just wasn’t happening—the lower middle of society getting much better off economically?
(And don’t tell me about how much cheaper DVD players have gotten. I’m not talking about standard of living, I’m talking about ability to pay debt obligations.)
That level of stupidity requires a bipartisan consensus on what you aren’t allowed to talk about in public.
Are you some kind of Communist who is saying that America”s free enterprise system can’t generate enough high-paying jobs to pay for all this debt?
Are you some kind of racist who is saying that America’s increasingly diverse population won’t pay back their debts?
Oh, wait—it just didn’t.
And they just haven’t.
Hmmm.
[Steve Sailer (email him) is founder of the Human Biodiversity Institute and movie critic for The American Conservative. His website http://www.iSteve.blogspot.com features his daily blog.]
From the FDIC:
JPMorgan Chase Acquires Banking Operations of Washington Mutual
JPMorgan Chase acquired the banking operations of Washington Mutual Bank in a transaction facilitated by the Federal Deposit Insurance Corporation. All depositors are fully protected and there will be no cost to the Deposit Insurance Fund.
“For all depositors and other customers of Washington Mutual Bank, this is simply a combination of two banks,” said FDIC Chairman Sheila C. Bair. “For bank customers, it will be a seamless transition. There will be no interruption in services and bank customers should expect business as usual come Friday morning.”
JPMorgan Chase acquired the assets, assumed the qualified financial contracts and made a payment of $1.9 billion. Claims by equity, subordinated and senior debt holders were not acquired.
“WaMu’s balance sheet and the payment paid by JPMorgan Chase allowed a transaction in which neither the uninsured depositors nor the insurance fund absorbed any losses,” Bair said.
Washington Mutual Bank also has a subsidiary, Washington Mutual FSB, Park City, Utah. They have combined assets of $307 billion and total deposits of $188 billion.
Thursday evening, Washington Mutual was closed by the Office of Thrift Supervision and the FDIC named receiver. WaMu customers with questions should call their normal banking representative, service center, 1-800-788-7000 or visit http://www.WaMU.com. The FDIC’s consumer hotline is 1-877-ASK-FDIC (1-877-275-3342) or visit http://www.fdic.gov.
Q-is the debate on for tonight?
From Bloomberg:
JPMorgan Buys WaMu Deposits; Regulators Seize Thrift
JPMorgan Chase & Co. became the biggest U.S. bank by deposits, acquiring Washington Mutual Inc.’s branch network for $1.9 billion after the thrift was seized in the largest U.S. bank failure in history.
Customers of WaMu withdrew $16.7 billion from accounts since Sept. 16, leaving the Seattle-based bank “unsound,” the Office of Thrift Supervision said late yesterday. WaMu’s branches will open today and depositors will have full access to all their accounts, Sheila Bair, chairman of the Federal Deposit Insurance Corp., said on a conference call.
WaMu is the latest casualty of a financial crisis that drove Lehman Brothers Holdings Inc. and IndyMac Bancorp out of business and led to the hastily arranged rescues of Merrill Lynch & Co. and Bear Stearns Cos., which was itself absorbed by JPMorgan. WaMu in March rejected a takeover offer from JPMorgan Chief Executive Officer Jamie Dimon that the savings and loan valued at $4 a share.
…
WaMu collapsed as its credit rating was slashed to junk and its stock price tumbled. Facing $19 billion of losses on soured mortgage loans, the lender put itself up for sale last week. WaMu fired CEO Kerry Killinger on Sept. 8 and replaced him with Alan Fishman, who was awarded a $7.5 million signing bonus and $1 million salary.
From MarketWatch:
KB Home Q3 loss widens to $1.87 a share vs 46 cents year ago
KB Home Q3 revenue $681 million vs $1.54 billion a year ago
KB Home Q3 loss widens to $144.7 million from $35.6 million
Crap you go and finaly start a thread after I post in the last one…
To avoid the spam filter.
Candidate A claims Candidate B is useless in the bailout negotiations. Candidate A’s party said Candidate B is bringing election politics in to the mix to get publicity at the expense of what’s important to the economy and to the american public.
Replace A and B with either name. It doesn’t matter.
Cindy,
“So the House conservative Reps, who are listening to their constiuents, want insurance coverage for MBS instead of a bailout …What does that mean exactly..?”
It means my house is on fire, sell me fire insurance.
Wachovia’s next.
All those Golden West option ARMs just keep rotting.
They won’t be able to get out from under. Those mortgages are worse than what took out WM.
“It means my house is on fire, sell me fire insurance.”
– ROFL! And we have a candidate for the vote of the day already!
California housing prices down 41%, YOY.
Virtually all of Wachovia’s ARM portfolio is “secured” by California RE.
From the WSJ:
WaMu Is Seized, Sold Off to J.P. Morgan,
In Largest Failure in U.S. Banking History
By ROBIN SIDEL, DAVID ENRICH and DAN FITZPATRICK
In what is by far the largest bank failure in U.S. history, federal regulators seized Washington Mutual Inc. and struck a deal to sell the bulk of its operations to J.P. Morgan Chase & Co.
The collapse of the Seattle thrift, which was triggered by a wave of deposit withdrawals, marks a new low point in the country’s financial crisis. But the deal, as constructed by the Federal Deposit Insurance Corp., could hold some glimmers of hope for the beleaguered banking system because it averts any hit to the bank-insurance fund.
Instead, J.P. Morgan agreed to pay $1.9 billion to the government for WaMu’s banking operations and will assume the loan portfolio of the thrift, which has $307 billion in assets. The full cost to J.P. Morgan will be much higher, because it plans to write down about $31 billion of the bad loans and raise $8 billion in new capital. All WaMu depositors will have access to their cash, but holders of more than $30 billion in debt and preferred stock will likely see little if any recovery.
…
The failure of WaMu eclipsed what had long been America’s largest bank bust on record, the 1984 collapse of Continental Illinois, which had $40 billion in assets.
The fact that no bank was willing to buy WaMu until it failed shows how badly confidence has eroded in a banking system awash with record profits just a few years ago. Faced with deepening losses on mortgages, credit cards and other loans, big and small banks across the country are struggling with what many bank executives say is a crisis far deeper than the savings-and-loan debacle.
The seizure of Washington Mutual is likely to send tremors through the thrift industry. Many of WaMu’s smaller brethren are also struggling with a wave of bad loans and some have already been ordered by regulators to raise capital and stop growing. Many community and regional financial institutions are also slashing dividends, selling branches and reining in lending in order to preserve capital.
Every body that wants to get a good understanding of the bail out, I’m posting this again.
Peter Orszag, Director of the Congressional Budget Office Testified before the House Budget Committe. I have links to the transcripts and webcast on the bottom of that page.
You can skip through my ramblings if you want but I urge you to watch the video. It’s 2 hours long and gives a very good explanation of the plan, why it was requested and if and how it will work.
There are issues with the plan and he can’t say how much it will cost or if it will be effective. If it doesn’t work, we’ll be in worse shape if we have another problem. The Bernanke/Paulson testimony doesn’t give anywhere near this much info.
Right now would not be a bad time to drop an e-mail to Shelby, Bunning, etc to thank them and encourage them not to give in.
BTW, I am in no way a conservative Republican. I am an anarchist, but these guys are saving our a**…at no small risk to their own.
After Wachovia, any other big names? I mean, besides GS and MS.
Really there’s not much left to worry about.
Really there’s not much left to worry about.
Yeah, but is that because there really isn’t anyone else left to worry about?
Clot [17],
Jim Bunning.
Hopefully, he can pitch another perfect game.
http://www.baseball-almanac.com/boxscore/06211964.shtml
(17) Yeah Clotpoll!
I’m with you on this…They have listened!
And didn’t the WAMU deal prove, in a way, that the market FDIC can take care of some of this mess?
Meant market and FDIC
MJ,
Just JPM’s derivative book. But then again, a blank check will be greatly appreciated.
sas (468, yesterday): see, if you read the most recent “chapter” in the story, it’s about one of the revered elders who did serve in wartime (iraq, basically)… got fed up with the gov’t trying to manipulate elections by assassination… he trains folks in survival and scouting skills. (short version: it was a compliment, and the comic does have the occasional educational bit on scouting, tracking, and survival stuff.)
i like it. :*)
(ps: i’m a girl, not a bloke. ;)
Richard Shelby said this AM that there never really was a deal as reported yesterday. The House Reps were left out..no one asked them.
Sure, some will say it is a political ploy to bring in M at this juncture, but Shelby was pretty adament that the conservatives are just listening to their constituents.
What’s the guess? There’s a new ‘bailout’ proposal, or they can agree on nothing and just let things play out?
What are the republicans proposing?
MJ,
I forgot, Deutsche Bank. One would think that would be Germany’s problem. One would be wrong.
What are the republicans proposing?
How many Republican parties are there now? The Pres already went prime time with his plan.
Is the GOP that fractured?
“After Wachovia, any other big names? I mean, besides GS and MS.”
I’m surprised people aren’t talking more about GE. Investors are definately reacting.
Their subprime and consumer credit operations looks like it might have leveraged their other businesses units, not entirely but to a degree. I mean wasn’t that the point of merging risky banking units with other lines of business in other big companies?
In addition to subprime, Home Depot was, maybe still is one of their big credit card accounts, add in their appliances and they took multiple hits from housing normalization. Airlines slowing down doesn’t help either.
From what I’ve seen they still haven’t found a buyer for GE Money but I haven’t really been following.
Not sure if they are going to fail but they definately took a big hit to their share price. If they fail though, it would overshadow any other failure in my opinion.
Not sure I would bet against them, they’re big enough to witstand a big hit. I just find it interesting to see what a small thing like subprime mortgages could do to such a big company.
I’m cynical because I believe that the WaMu seizure was orchestrated to force a bailout deal out of Congress.
Off topic- I think that everyone going to vote should be forced to watch the P-alin -Couric interview before entering the polls. People that think that she is clueless are giving her way too much credit.
(26) Laughing –
“What are the Republicans proposing?”
That is what I am asking. They want Wall Street to take the hit – not Main Street.
I’m sorry but I only caught some of it. I think a plan was circulated that called for a mortgage-backed securities insurance fund, rather than a tax payer-funded purchase of the securities.
Well, at least I’m not the only one with dark conspiratorial thoughts about the timing of the WaMu failure.
Latest from Roubini (9/26):
The Treasury plan (even in its current version agreed with Congress) is very poorly conceived and does not contain many of the key elements of a sound and efficient and fair rescue plan. Like in my 10 step HOME plan many other economists and commentators (Charles Calomiris, Raghu Rajan, Kotlikoff and Mehrling, Luigi Zingales, Martin Wolf, Barry Ritholtz, Chris Whalen and twenty others whose views have been featured this week in the RGE Monitor group blogs) have presented ideas that would have minimized the cost to the US taxpayer of a resolution of this financial crisis. It is a disgrace that no professional economist was consulted by Congress or invited to present his/her views at the Congressional hearings on the Treasury rescue plan.
Specifically, the Treasury plan does not formally provide senior preferred shares for the government in exchange for the government purchase of the toxic/illiquid assets of the financial institutions; so this rescue plan is a huge and massive bailout of the shareholders and the unsecured creditors of the firms; with $700 billion of taxpayer money the pockets of reckless bankers and investors have been made fatter under the fake argument that bailing out Wall Street was necessary to rescue Main Street from a severe recession. Instead, the restoration of the financial health of distressed financial firms could have been achieved with a cheaper and better use of public money.
Moreover, the plan does not address the need to recapitalize badly undercapitalized financial institutions: this could have been achieved via public injections of preferred shares into these firms; needed matching injections of Tier 1 capital by current shareholders to make sure that such shareholders take first tier loss in the presence of public recapitalization; suspension of dividends payments; conversion of some of the unsecured debt into equity (a debt for equity swap).
The plan also does not explicitly include an HOLC-style program to reduce across the board the debt burden of the distressed household sector; without such a component the debt overhang of the household sector will continue to depress consumption spending and will exacerbate the current economic recession.
Thus, the Treasury plan is a disgrace: a bailout of reckless bankers, lenders and investors that provides little direct debt relief to borrowers and financially stressed households and that will come at a very high cost to the US taxpayer. And the plan does nothing to resolve the severe stress in money markets and interbank markets that are now close to a systemic meltdown.
(33) Yeah Clotpoll!
Should we be scared that the one canadate that ‘doesn’t know much about economics’ is a key member in putting together a bailout? Think he’s being advised by Keating?
#28 – Is the GOP that fractured?
Yes, it has been since 2000 and those fractures have been getting bigger.
There is still a portion of the party with its roots in Goldwater-esque political conservatism with heavy libertarian leanings.
BC Bob,
Maybe not ‘not our problem’
When asked about foreign banks Paulson said any bank that does business in the US will be able to participate since it would be a benefit to be good for america.
I’m assuming foreign banks also participate in our federal reserve system if they do business here? Is that correct? Or do they deal with their own central banks?
Well, at least I’m not the only one with dark conspiratorial thoughts about the timing of the WaMu failure.
tosh,
A coworker and I speculated about this earlier in the week..
any body know how is Larry Kudlow doing these days? Hope he’s not using drugs again.
HC
Cindy (21)-
The JPM handoff kept the FDIC out of WM.
The FDIC’s tapped out. IMO, they will be the next explosion.
Right after the first big bank run.
“Should we be scared that the one canadate that ‘doesn’t know much about economics’ is a key member in putting together a bailout? Think he’s being advised by Keating?
Worse, he’s being adviced by the guy that called us a nation of whiners that also pushed for a lot of deregulation that helped lead us here.
I’m sorry I have no details but from what I can gather the conservative Republican base of the House of Representatives is saying “no” to the “sky is falling” unless we do this immediately idea. They want cooler heads to prevail and a reduction of tax-payer liability in this.
Apparently they DID consult some economists. It sounds like they are listening to their constiuents and holding up the deal until certain assurances are met.
They also are basically DARING the house to go ahead and pass it. Let O show up at the debate and say Yes, I was for bailing out Wall Street.”
Clot! You win the office Deathpool!
sl
Tom (29)-
Hey, GE will be okay.
They can always increase their sales of sensitive technologies to Iran.
Cindy (31)-
That insurance fund had better have more than .03/USD in loss reserves. :)
um… should I be clearing out my bank of america account?? [I wish I was joking]
sl
(40) Clot
But couldn’t more deals be struck without the FDIC is the price was realistic?
And here’s a video from Olberman (yeah I know) http://www.youtube.com/watch?v=lQ4kH3sNNTo
McCaln says “Our financial market approach should include encouraging increased capital in financial institutions by removing regalatory, accounting and tax impediments.”
Ha!
Did I ever get double donged last night!!!!!
First I had a 5K WAMU bond that I bought pre 2008 that I lost all my money but since chase basically stole Wamu and got it for free Chase stock went way up and my Chase stock is up 15K.
Felt like being in a three way with pamela sue anderson and tommy lee and me in the middle loving Pam while tommy is on top of me splitting me open like John Holmes tearing into a tiny asian chick.
(45) Clot – so if the money were to go somewhere – couldn’t go to have these outfits BORROW the money instead of just give it to them?
tosh (36)-
“There is still a portion of the party with its roots in Goldwater-esque political conservatism with heavy libertarian leanings.”
Then, there is the American Taliban wing: full of messianic, nihilistic f@scists, posing as conservatives.
Reason Wamu deal was done on Thursday night as they had a run on the bank the last few days plus a lot of west coast company use Wamu for payroll, they put the cash in their Thursday night and checks are handed out Friday to workers. All payroll accounts are over 100K so all those paychecks would be worthless when handed out this morning. And many a small business would go under in a chain reaction.
NCC and KEY are shaky today. Detroit and Clevland were very hard hit. Don’t see how both can survive.
Cindy (47)-
You can get the deposits of a bank for a nominal “premium”. However, when one bank takes over another, the failed bank’s liabilities must be marked-to-market by the acquirer and written down.
That could be a teensy problem.
John (49)-
Don’t look now: JPM down in the pre-market.
When will the press spotlight JPM’s derivatives exposure? The number is in the googleplex range…so staggeringly large, that any deterioration will have the whole planet living in caves and eating bugs.
(54) Last night Newt was calling for a 3-year rolling average to mark to market – would that help?
We really need to know what this Rep plan involves.
#51 – Then, there is the American Taliban wing: full of messianic, nihilistic f@scists, posing as conservatives.
Yeah, well yeah.
It used to be a party filled with Ron Pauls. Good times, good good times.
Is it ironic that their Faustian bargain was made with conservative Christians?
/cry
John (49)-
Besides, you deserve to lose your shirt for putting that image into my head for the rest of the day.
Cindy (50)-
Would YOU make a loan to any of these nincompoops?
#30 db2: I missed it. How bad was she?
John (53)-
NCC has been dead man walking for over a year. They have been insolvent the whole time.
But I love doing short sales through them. Once you toss them a contract, tax return and hardship letter, they wave it through.
Anyone check the Bankrate Safe and Sound ratings lately? I just checked and RBC has dropped a notch and BB&T isn’t rated.
Emergency rate cut?
Clot,
They might be a long shot but I’d definately consider it if the odds were right. Thought about shorting them a year ago but I’ve looked into lots of short positions but am too chicken. I kick myself a lot over that.
any body know how is Larry Kudlow doing these days?
Didn’t you hear? He LOVES the bailout.
Maybe that’s why he dropped his creed at the beginning of his show…
I found this – pretty vague..
http://www.comcast.net/articles/news-politics/20080925/POLITICS-US-FINANCIAL-BAILOUT-REPUBLICANS-GROUP-polit/
Clotpoll,
What’s the buzz around sellers these last few weeks since all this financial sh*t has hit the mainstream? Are they smelling panic? Are you starting to see real capitulation by Joe and Jane Sixpack?
“But I love doing short sales through them. Once you toss them a contract, tax return and hardship letter, they wave it through.”
Try sending them a 2.50 in cash, a cupcake and a tic tac and see if they approve that. You never know.
I can’t even have Kudlow on in the background anymore with the sound turned all the way down. The things that come out of his mouth are an affront to the intelligence of any creature that walk upright.
Tom (67)-
You pretty much described what they’ll take when they’re holding a second.
“When will the press spotlight JPM’s derivatives exposure?”
Ouch.
Some of the second lienholders I deal with ask for no more than $1,000 for short sale approval…and you can hardball them out of even that, if you’re willing to play a little bluff-and-feint.
“What’s the buzz around sellers these last few weeks since all this financial sh*t has hit the mainstream? Are they smelling panic? Are you starting to see real capitulation by Joe and Jane Sixpack?”
Gary,
It’s NNJ, we’re insulated. They raised their asking prices 10-15%, across the board. They heard a bailout is coming.
gary (66)-
No. But don’t worry. Their nonchalance is the final guarantee that they will end up being the biggest losers…and the best marks.
Patience, my friend. Remember, you’re a homeowner too.
nowallstreetbailout.com
So, to sum up today’s thread so far:
Pamela Anderson told John the bailout was a done deal and to go ahead and load up on WM bonds.
Ok. Proceed.
Props to Clot (and I believe Skep and SG, and perhaps tosh) who had WAMU in the death pool. If I left anyone out, my bad.
In a way, this morass has made a liar out of me. After the FSLIC/S&L debacle nearly 20 years ago, I told folks that the next big acronym in crisis would be the PBGC. People hear rumblings and remind me that I predicted it. Now I don’t have any conspiratorial thoughts about Wamu—the feds did this sort of thing a lot during the last banking crisis. One reason they aren’t now is because FIRREA changed the rules.
Now, with apologies to Tosh and his peeps, for my conspiracy theory: The bailout will happen because the financial shock will have a huge impact on government. Consider that if individual and corporate taxpayers are taking huge losses, that hurts tax collection in a major way for years, perhaps decades, to come. I will be taking losses next year that I will have to take in increments over a few years, offsetting unearned income. Think of the NOLs that hard-hit businesses will take. Even healthy businesses will buy up sick ones in order to get and use the NOLs. Thus, the segment of the populace that pays the most in taxes, the “wealthy” and corporations, will be paying substantially less, even with O’s tax hikes.
Consider also the PBGC–it is the payor of last resort when a defined benefit plan sponsor goes under. The assets held in reserve for pensions have taken a huge hit, so a lot of pensions are now underfunded. As the companies go under, PBGC makes up the difference, but not dollar for dollar, so in that sense PBGC isn’t like FDIC and once it is tapped, the pensioners are SOL. Politically, that is going to prove unpopular, and PBGC will likely be forced to make good on pensions, meaning massive infusions of taxpayer dollars.
These are just two legs that would get kicked out in a collapse, but they are pretty big legs. I can only surmise (not being an economist or financial expert) that the feds shudder to think what would happen if tax revenues dive precipitously and the failing businesses start taking underfunded plans down with them.
Not a cheery thought, but this is my take on why the Feds will pass a bailout.
“You pretty much described what they’ll take when they’re holding a second.”
If this bailout doesn’t go through I’d prefer to keep the 2.50 and the cupcake myself.
What do you mean that second lien holders ask for $1,000 for approval?
Is that the fee or do ou mean if your doing a short sale all they want is $1,000 to settle the debt?
#72 BC Bob: Don’t laugh. I was following one hosue in my town, started at 650k, repeated priced drops, change of realtors, it finally was priced down to 425K.
It drops of the mls,and I figured it either went UC, or the listing expired.
It came back on the market a few days later for 459K!!. Yes that is the answer solve the housing mess by increasing prices.
JPMorgan Chase said it was not acquiring any senior unsecured debt, subordinated debt, and preferred stock of WaMu’s banks, or any assets or liabilities of the holding company, Washington Mutual Inc. JPMorgan also said it will not take on the lawsuits facing the holding company.
So what happens to the above listed liabilities? Who picks up the tab for it all?
http://www.youtube.com/watch?v=Vbg6hF0nShQ&feature=related
Link to the interview. She reminded me of that beauty pageant contestant in SC.
So what happens to the above listed liabilities? Who picks up the tab for it all?
See #15 above:
but holders of more than $30 billion in debt and preferred stock will likely see little if any recovery.
Thanks grim.
How will this affect WaMu employees? It sounds like JPM will be keeping most of the WaMu branches open, but I’m assuming WaMu corporate employees are screwed….,
Gator is wishing everyone a great weekend from the C-1 President’s Club.
Ref 33. Senior preferred shares. If it’s good enough for Buffet it ought to be good enough for Paulson. BTW, if GE goes belly up, does that mean they take CNBC off the air?
“After Wachovia, any other big names? I mean, besides GS and MS.
Really there’s not much left to worry about.”
– All the companies who begged to be added to the no-short list.
From what I remember there weren’t any bailouts after the tech bubble burst.
Lots of people lost a lot of money. Not just people getting into trading for the first time but people who’s retirement accounts declined because even “sound” companies had some elevation and were seen as good bets for mutual fund managers and other institutional investors.
Lots of companies failed and there were a lot of good companies that could have been profitable. Problem is you can’t take a $1mil idea and throw $50mil at it hoping to make the same return.
IB’s were flush with money and blew it away bettng they could manipulate the housing market forever.
Tom (77)-
That $1,000 is the sum of what they want to resolve the whole shooting match and approve the short sale moving to completion.
Last week, I got the servicer of a second lien- with an outstanding balance of $87,000- to accept $1,000 in return for their approval.
Most second liens have been sold, sliced and diced to the point at which the servicers may not know who really owns them (anytime you see a foreclosure plaintiff with the name of say, “Homex, as servicer for Deutsche Bank MBS #2456879-00-5697”, you know it’s been put through the sausage machine). Most servicers now have blanket orders from identifiable owners to simply accept whatever can be recovered in short sales.
JPM will close all the redundant Wamu branches and just add the deposits to their branches. Not sure what the overlap is w/ their branch network.
So, Dow down 1,000 by noon?
Fed conducting more reverse repos this morning.
Why pull liquidity out? Does the Fed itself need it?
At what point toady, given current opening level of Dow, is the first circut breaker?
Happy Friday everyone!
#88 – In Manhattan the overlap is pretty big, IIRC WaMu has 300 branches in NYC. The Manhattan ones are all in pretty expensive territories.
I really wish the WaMu guy in the commercials wasn’t african american and instead someone like Carrot Top because I have a great commercial for JP Morgan’s new commercial. They have that pack of old bankers tieing up and kicking the young guy.
But a commercial of a group of old white guys ganging up on a black guy isn’t very PC.
GAtor, Say hello to Gate 74 for me.
Today, not toady lol
http://www.cnbc.com/id/24494689
Bush speaking now
oops, now over.
“From what I remember there weren’t any bailouts after the tech bubble burst.”
Tom,
Dot Com vs Wall Street.
Shore-
The toadies are on Capitol Hill.
#98 – Ha!
I know it’s a complete lark, but today’s market action will probably be tame until the last hour. Sort of like a market basketball game. I have a funny feeling that a lot of people are not going to be comfortable holding shares long going into this weekend.
Although I’m quite happy that congress appears to be behaving well, the lack of credit availability is going to kill our economy. I guess now we wait and see how our Asian masters view the failure of the passage of what Cramer calls ‘the Invest in America’ plan. If they fail to continue buying our debt, then SAS’s proposal for personal survival from last night might become good advice to follow.
NCC and KEY are shaky today. Detroit and Clevland were very hard hit. Don’t see how both can survive.
Wait. You don’t see how those CITIES can survive? Poor Lions. Just when they fire Matt Millen …
Clot,
Perhaps it was Freudian.
Clot,
So I’m assuming this is when there is a larger primary lien that is in or at risk of default.
I haven’t looked closely at other counties but for the Bergen County foreclosures I track on my site, it seems very rare that the wining bid, when there is one, even covers the judgment on the primary lien holder. No surplus funds means junior lien holders get nothing in a foreclosure.
Understandable why you’d be able to get them to knock that down. They probably figure you’ll pay the $1k just to save time.
Ever run into a case where the secondary lien was greater than the primary and it was the secondary that was defaulting?
I wonder if people in a position like that would choose to keep up payments on the secondary and let the primary go into default. Either the primary or secondary might buy the other’s interest out. If there’s enough equity the bank won’t mind going to auction but in toss up situations I wonder if it would be a good opportunity for the homeowner to get a good work out.
“This sucker could go down.”
Chaos,” “disarray,” “unprecedented political wrangling,” Treasury Secretary Henry Paulson on bended knee pleading for a lifeline, and President George W. Bush warning, “if money isn’t loosened up, this sucker could go down.” These were the dramatic scenes in Washington yesterday where the historic $700 billion bailout plan now looks very much in doubt, The New York Times, Wall Street Journal and Financial Times all report this morning. Congressional negotiators called off talks at 10:30 p.m. EST, the NYT reports, failing to reach an agreement and all but piercing the bubble of hope generated by the markets’ comeback earlier in the day. The high drama culminated in a plea from Paulson to Democratic leaders, barging into their White House meeting on Thursday, urging them not to say anything that could destroy the fraught negotiations, WSJ reports. The newspaper adds, “In doing so, the Treasury secretary got down on one knee, a gesture that one of these people described as a moment of levity in a rough day.”
http://tbm.thebigmoney.com/features/todays-business-press/2008/09/26/sucker-could-go-down
Good to know we have a leader with such a vocabulary…
In the Bee today
“We’ve reached fundamental agreement on a set of principals” said Sen. Christopher Dodd, D-Conn., chairman of the Senate Banking Committee, adding that a bill could pass within days.
Less than 30 minutes later, however, Bachus denied that an agreement had been reached. While progress was made on peripheral issues, Bachus said House Republicans remained adamantly opposed to the central point of the plan: purchasing bad assets from struggling firms.
“There’s not a deal. There’s not a deal made. There was progress on the issues,” Bachus told reporters. He said House Republicans “would prefer a loan where we fix an interest rate or we would prefer insurance” rather than having the government buy bad assets.”
Baltimore Business Journal:
BB&T chief exec slams bailout plan
http://baltimore.bizjournals.com/baltimore/stories/2008/09/22/daily42.html?ana=yfcpc
“A significant and immediate tax credit for financial institutions to purchase homes would be a more effective solution for the financial crisis than the proposed $700 billion federal bailout, said BB&T CEO John Allison.
The federal government should also buy homes, and not securities backed by mortgages, he wrote in a Sept. 23 letter to the U.S. Congress.”
One of the British monarchs, I believe it may have been Victoria, once observed that too much public exposure adversley affected the aura of a leader and reduced his or her effectiveness. This had to have been bu-sh’s 4th or 5th public announcement on this issue in the past week. True enough, most of them were drive-bys, but I don’t remember any president doing such a thing during my lifetime. I don’t even think that FDR made so many comments about the economic crisis during any given week.
“He said House Republicans “would prefer a loan where we fix an interest rate or we would prefer insurance” rather than having the government buy bad assets.””
Not wanting to buy bad assets? Obviously, he has never worked at the Fed.
“This sucker could go down.”
Reports from Chappaqua indicate that, when former president Bill Clinton heard this, he immediately booked a seat on the Acela.
Will do Shore. It will be easy to do since I am at Gate 71.
Hello S Fla sun. I am going to try and pick up a beach condo foreclosure with my meager ATM withdrawal just for kicks. SoBe GTG, anyone?
Tom (105)-
Yes. Second holders almost always cave in because of: a) the presence of a first lienholder and b) no money left for them once everybody ahead of them is paid off. Better to get $1,000 than nothing.
A first lienholder letting a property go at the sheriff sale for less than the upset price indicates that they don’t even think it’s worth it to seize the collateral. Chances are, those “winning” bidders will end up wishing they’d let those properties go back to the bank for $100.
“Ever run into a case where the secondary lien was greater than the primary and it was the secondary that was defaulting?”
Yes. In fact, I recently had one myself. Those are great. In my case, the first was for 180K and there was a second (actually a HELOC) of 240K, held by BAC. It was a loan taken and approved over the phone, drive-by appraised and funded. The borrower immediately drained the LOC and used the funds as a DP on a house in Charlotte (I promise you, I’m not imaginative enough to make this stuff up).
Anyway, BAC couldn’t wait to get this one done, as they were in a position to luckily recoup about 160K. That one took about a week.
Business or pleasure?
#73 clot: That is truly amazing. Even with all that has transpired, there are still people who are nonchalance about this whole nightmare,and believe that their house values are not or will not go down??
Funny (pathetic), but I do not remember people being that stupid during the last housing down turn.
Clot,
In a situation like that, which smacks of fraud by the homeowner(as well as what should be criminaly-punishable stupidity by the second lender), the homeowner should face some criminal charges. An action like that does not strike this turnip as anything other than an attempt to steal money for a downpayment.
Here’s some friends of Bi
http://www.liveleak.com/view?i=3be_1222409488
Pure fun! Girls weekend. Lots of beaches, mojitos and latin music.
So, consumer sentiment is SLIGHTLY lower. WTF. Slightly?
Finally got to look at some of the KB figures from this morning;
3Q Net orders at -66% (1,329 vs 3,907)
3Q Cancellation rate %51 (!) vs %27 (2nd Q)
Staff cut by %40 since beginning of year. They mostly sub-contract, but still….
%51 drop in homes delivered %10 drop in price.
So it’s getting worse for some of the builders.
So now that dubya’s reign is winding down, any thoughts on what he’s going to do next?
I don’t see him making big bucks on the lecture circuit like Cllnton or starting a foundation.
Bill C was on Letterman earlier this week and Paris Hllton yesterday. Am I the only one bothered that about the same amount that people pay to hear him speak is paid to her show up at a club or event? :(
Gator,
Watch out for the storm brewing. May need to stay in and party.
SoBe GTG, anyone?
I’d have done Vegas, seems fitting.
“I don’t see him making big bucks on the lecture circuit ”
Not unless it is a comedy routine.
Sad to say,though, there are likely a few groups that will step up to the plact, offer him several million to speak to their small private gatherings, and then a few friends will put him onto some boards.
Gator,
Enjoy Collins ave, etc. Even raining, it is not the usual routine.
Clot’s question from last night:
“So, an acquiring party can buy branches and deposits and prevent FDIC receivership?”
it is called a purchase and assumption transaction and it is the preferred method of the FDIC for resolving bank failures. it is pretty flexible, but basic idea is to let another sound bank assume deposits without being exposed to failed bank’s other obligations. generally, FDIC will only assume control in a receivership fashion if no P&A transaction can be brokered.
Has anyone here heard about the Fed shipping dollars to other central banks in order to keep the dollar from rising?
also, when P&A is done successfully, there is minimal cost to the FDIC fund.
Tosh
in honor of Nj patient…..
Yes, and this concludes another episode of simple answers to simple questions.
# toshiro_mifune Says:
September 26th, 2008 at 9:35 am
Fed conducting more reverse repos this morning.
Why pull liquidity out? Does the Fed itself need it?
Gotta run but…IMHO – This Paulson plan is going down. Bush came on to calm the markets but the House Reps want Wall Street to pay for this money – suspend dividends etc. We shall see.
Where is NJ patient anyway?
#89 tosh
Manipulation. Pull liquidity out to tank the market some more and extort $700 Billion from US taxpayers.
Clot,
Thanks, good story.
Not sure if you’ve been looking at what’s happening at auctions in your area but here in BC, of the last 23 properties that didn’t go back to the bank, average judgment was about 437k average winning bid was 308k.
Some look like really good deals on the surface. Probably not the market for a quick turnaround and too uncertain for the uninitiated but for some people looking to buy and live or rent them might want to take a look.
SHore,
Bush is just looking desperate at this point. I think he sees his legacy going down the drain is scrambling to look like a hero in this current mess.
#17
“BTW, I am in no way a conservative Republican. I am an anarchist, but these guys are saving our a**…at no small risk to their own.”
Clot– not surprisingly, I disagree. The Repubs who are against this are taking far less risk politically than the people who are supporting it. It is easy to demonize wall st; it is much harder to explain to ordinary americans how wall st is connected to them
“Has anyone here heard about the Fed shipping dollars to other central banks in order to keep the dollar from rising?”
Shore,
There was some economist on cspan yesterday morning. I don’t remember where he was from but a lot on the panel were economists from banks and other financial institutions.
One of the things he said was going into debt for the bailout would be good because it will devalue the dollar. That would give foreign investors even more incentive to capitalize Wall St.
So if what you said is true, I wouldn’t be surprised.
Paln’s new film
http://tinyurl.com/4tf23k
#21
“And didn’t the WAMU deal prove, in a way, that the market FDIC can take care of some of this mess?”
question is who steps up to take over the next big bank. can anyone do it? FDIC cannot absorb a WB failure. doubtful that JPM would step up again. That leaves BAC, but after ML, do they have the ammo? very precarious situation right now
#131 Shore Guy
I think he is tied up with some personal issues.
#133 Tom.
How many went to the same person. I though there was some rich person going round buying them up?
#52
“Reason Wamu deal was done on Thursday night as they had a run on the bank the last few days plus a lot of west coast company use Wamu for payroll, they put the cash in their Thursday night and checks are handed out Friday to workers. All payroll accounts are over 100K so all those paychecks would be worthless when handed out this morning. And many a small business would go under in a chain reaction.”
one of many connections to “Main St.” in this mess. I assume everyone likes getting paid
Shore,
regarding plastics from last night.
You may have missed my point. I was just offering some info and i agree that heating or freezing material in them is not the best idea.
That said, its about risk mitigation. I avoid it when i dont get to worked up about it. I could list 100 chemicals that you encounter day to day that are worse. As with anything substance, the harm is in the relative size of the dose/exposure
“I think he sees his legacy going down the drain”
Ket,
The sad thing is that he actually seems to believe he will be admired in history. Absent his reaction to 9-11, after he got back to DC (the rest of the day was pathetic), his invasion of Afghanistan, and the initial gains in Afghanistan, he has been abysmal. The inattention to the economy just puts an underline, italics, and bold emphasis on the utter failure of his presidency. If there is a decline even just on a par with the 70s or early 80s, he will in my opinion be rated as the worst (or maybe amongst the worst 5) president ever.
Skeptic, Shore
i believe that Guy Fawkes mentioned that we should look out for action based on all of the corporate debts that roll over at the end of the month. Sounds like he nailed it.
Ket,
I agree with you. My feeling is that if one can mitigate exposure to chemicals throughout one’s life, one should.
Shore,
sorry for the horrible grammar @ 142. That was barely English. Too much multitasking.
PGC,
I don’t remember exactly but I do remember there were like 2 or 3 names I saw that picked up more than 1.
Any reputable on-line gold dealers you guys recommend?
Supersized intellect emphatically called WaMu’s demise about one year ago. Man, Clot, you were right on!
There is a letter in the Op-Ed section of today’s WSJ from the BOFA CEO Ken Lewis.
He wants us all to support the Bail Out package so we don’t have an economic recession.
The F%$#er is looking to dump the Country Wide garbage on the tax payer !!
“sorry for the horrible grammar @ 142”
No worries. When I use my thumb keyboard I am very often horrified at what posts.
Common worthless, pref 1000 = 1 and bonds they have not decided yet but they are as valuable as WHOOPS and Crazy Eddie bonds from back in the last junk bond melt down when old Milken still had his toupee. The will pay I bet like a nickle on a dollar just to get the bondholders to sign off they won’t keep suing. Basically even senior bonds are toast.
I knew I would get hit, I had a bunch of 5k high yield bonds and I made it this far without a hit. I have been buying munis and cds only last six months.
watergapnomad Says:
September 26th, 2008 at 9:20 am
JPMorgan Chase said it was not acquiring any senior unsecured debt, subordinated debt, and preferred stock of WaMu’s banks, or any assets or liabilities of the holding company, Washington Mutual Inc. JPMorgan also said it will not take on the lawsuits facing the holding company.
So what happens to the above listed liabilities? Who picks up the tab for it all?
Anti [150],
Of course. Why else do the deal?
#144
” believe that Guy Fawkes mentioned that we should look out for action based on all of the corporate debts that roll over at the end of the month. Sounds like he nailed it.”
kettle– I don’t want to see the result of an experiment that prevents this debt from being rolled over
repost from last night
PAULSON gets called out!!! Rep. Peter Defazio – “We should not be rolled by a Wall Street exec who is masquerading as the Secretary of the Treasury”
video
http://tinyurl.com/4tf23k
repost from last night
PAULSON gets called out!!! Rep. Peter Defazio – “We should not be rolled by a Wall Street exec who is masquerading as the Secretary of the Treasury”
video
http://video.google.com/videosearch?q=Rep.+Peter+Defazio&hl=en&emb=0&aq=f#
all of the personal insults are really unproductive. If Defazio doesn’t agree with the plan, he can just say so without getting personal. it is pathetic to see how washington is completely incapable of addressing a crisis without grandstanding and name calling.
Ket,
I know Pete pretty well. He is as honest as the day is long. I need to call him and thank him for that comment.
157 skeptic
Its not personal Sonny. Its strictly business.
it is the business of CYA while the country goes down in flames.
from OTS re: WaMu:
“Deposit Outflows — Since July 2008, the pressure on WMB increased market conditions continued to worsen. Significant deposit outflows began on September 15, 2008. During the next eight business days, WMB deposit outflows totaled $16.7 billion, shortening the time available to augment capital, improve liquidity, or find an equity partner. Given the Bank’s limited sources of funds and significant deposit outflows, it was highly likely to be unable to pay its obligations and meet its operating liquidity needs.”
It is funny. Every business that bu-sh was responsible for running came to a bad end. True enough, he was the titular head of the Texas Rangers, but in that role he was the hale fellow well met, and others ran the business.
Mr. Gentlemen’s C came onto the scene in 2000 promising to run the country like a business. Well, looking at his own past failures, and the failures in the auto industry, Wall Street, etc, it seems that he kept that promise.
I agree that Bu-sh has zero credibility at this point. Paulson’s credibility is significantly diminished as well. But you do not need to take their word for it. You can simply look at the events of the past few weeks to see that this is a major crisis with the potential to sping completely out of control very fast.
“it is the business of CYA while the country goes down in flames.”
skep,
Been covering for awhile.
Unfortunately, 700B is not a pimple on a cows #ss. The problem is worldwide. European banks are in worse shape than ours, more leverage. US taxpayers can’t not solve this problem. It’s too damn huge.
Cover me.
e.g., FDIC has never failed to make good on 100% of deposits up to 100k. what if, next week, that promise was broken? how do you think the public would react?
“You can simply look at the events of the past few weeks to see that this is a major crisis with the potential to sping completely out of control very fast.”
Inmdeed. Which makes it more important that any plan come with the complete buy-in of a majority of Rs and Ds in both houses.
“what if, next week, that promise was broken?”
Pitchforks and torches. They will never allow the deposits to go un protected. It is easier to print $ and let the value of each new $ fall than to suffer civil disruptions.
you know – I love seeing all these mooks in congress/senate bashing wall street for this mess, forgetting that they pushed hard for affordable mortgage products and an end to discriminatory lending practices (and I don’t mean race, but socio-economic). Anyone remember that rhetoric during the “everyone should own a home” craze, or was I in some altered state?
and please, I think the banking industry is to blame for a majority of this mess, but not completely alone.
[164]
is a pimple
Right now folks can get FDIC insurance for millions, placing $ in various banks etc. I wonder if they will rewrite the regs to cap the amount any oner social security number or EIN can have protected across the entire banking system.
Print,print,print. Who cares if a pizza costs an ounce of gold?
Shore,
Next time you see DeFazio please give him a one man standing ovation from me. I’ve been watching his videos on youtube a lot lately.
skep-tic,
I’d go a step further than saying Paulson’s credibility is diminished. I’d say it’s toast. Same with Bernanke. The two of them have been working on this problem for months now, all along telling us everything is going to be ok. Then all of a sudden they need congress to push through this emergency bail out.
That’s just poor performance for some high ranking officials in the administration.
I can understand the need for them to not cause panic but that is no excuse for not coming up with a back up plan and working on it with congress just in case.
#166
Shore– I believe that a faction of R’s are making a political calculation that sabotaging this plan is the best way to turn the tables on the dems and make them appear to be the more corrupt, out of touch party just before the election. The R’s up till now had no means of changing the subject from their incompetance. I believe some of them think this is it. I do think some are driven by a genuine philsophical agenda, but I also believe others are far more cynical. It is disgusting.
Print,print,print. Who cares if a pizza costs an ounce of gold?
Why would a pizza cost an ounce of gold? You can print pizzas but you can’t print gold.
Tom,
I just called his office. He was out abut I offered many thanks. Consider one of those to have been yours. Next time I speak to him, I will give the ovation.
“That’s just poor performance for some high ranking officials in the administration”
If they had any honor, they would apologize for messing up and resign.
“You can print pizzas but you can’t print gold.”
Wasn’t that an album by REO Speedwagon? Or maybe it was Iggy Pop.
yeesh. This sounds like a bit of sound banking:
[snip]
“Wachovia had $122 billion of option adjustable-rate mortgages as of June 30, plus $45 billion in more traditional mortgages. That total of $167 billion ranks second among U.S. lenders behind Bank of America Corp.’s $239 billion, followed by Citigroup Inc.’s $145 billion, according to an Oppenheimer & Co. report on Sept. 23. ”
[snip]
http://www.bloomberg.com/apps/news?pid=20601087&sid=a06k7mrKNJUU&refer=home
Isn’t all of this a testimony to our instant gradification culture? do we really need this bail out by today at 4pm, or can we continue to look at what is needed in the fire drill sense of the word, and strategize the rest…another words, can’t we do both?
The theory behind the global credit crunch
It began inflating in the United States of America in the latter years of the 20th century, after the US Government was persuaded to deregulate the finance industry.
Unlike previous bubbles, this one has not been confined to real estate or shares although those markets certainly hyperinflated.
This bubble is pumped full of a strange class of asset called a “derivative”, a kind of financial steroid that has bulked up balance sheets, markets and economies with artificial wealth.
Derivatives, of which the now widely acknowledged mortgage-backed securities are just one small subset, have grown astoundingly since they were first introduced on Wall Street not many years ago.
Real Estate is not the main issue here. But all MSM can talk about is Housing.
“You can print pizzas but you can’t print gold.”
I tried printing a pizza. Now I need a new fuser.
House Hunter,
It’s not our instant gratification culture it’s Wall Streets.
Remember, most of the time when they originated a loan, they turned around to securitize it and sold it offvery quickly up until investors no longer wanted those.
Subprime mortgage issuance went from like 20% to 80% (don’t have exact numbers in front of me) in just a short number of years.
If abolishing the fed is part of the bailout, I may change my mind.
If the derivatives were suddenly declared void — poof, gone. Who loses? The underlying assets still exist. If they derivatives are froth on the top of the economy, like too much head on top of beer, can we just blow it off somehow? Cerainly the upper 1/1000 of 1% of the population will get hammered, but…….
Tom Says:
September 26th, 2008 at 10:19 am
Clot,
Thanks, good story.
Not sure if you’ve been looking at what’s happening at auctions in your area but here in BC, of the last 23 properties that didn’t go back to the bank, average judgment was about 437k average winning bid was 308k.
Some look like really good deals on the surface. Probably not the market for a quick turnaround and too uncertain for the uninitiated but for some people looking to buy and live or rent them might want to take a look.
I need an advice for next year – not now…
Where exactly thouse auctions are going on – is it in municipal building of each town?? or is it different?
And how can you get the list of houses being auctioned off and is it possible to look at them and possible have a home inspection before hand?
Stu,
Your problem is you used a laser printer. Pizza’s can only be printed using ink jets, or diesub printers.
http://edition.cnn.com/2008/WORLD/europe/09/26/rocket.man.english.channel.ap/index.html?iref=mpstoryview
Can we give Paulson and Big Ben a pair of these?
this will sound nerdy as hell, but i’d like to say that at a landmark moment in US history, I feel more plugged in reading this board than watching the news.
and it’s not close, really.
we officially buy guns this weekend. the wife, who was long against guns, is now down. mostly, i think, due to some of the dire situations you guys have predicted.
Rep Defazio at Best
http://www.youtube.com/watch?v=j6B5rtwRmf0
Al,
Others here have more experianced than I but, the business of buying homes on the courthouse steps at auction brings considerable risk. It looks like the best bet for most folks is to let the auction fail then buy from the bank.
SG
Is there any $ value of these derivatives and other fancy products worldwide? I read somewhere between 500-600 trillion!!
Thanks
The debate is on, I hear.
interesting opinion piece in WSJ from John Paulson arguing that gov’t should buy preferred shares in banks as did buffet, rather than taking MBS
List of economists against the plan:
http://faculty.chicagogsb.edu/john.cochrane/research/Papers/mortgage_protest.htm
3b (115)-
“Funny (pathetic), but I do not remember people being that stupid during the last housing down turn.”
That’s because before the last housing downturn, millions of mortgages were not granted to stupid people.
Am I not understanding soething correctly?
These banks and financial institutions seem to have leveraged items that tie back directly to residential mortgages.
Isn’t that like getting two mortgages for the same house?
US Senate leader Harry Reid says Congress will stay in session until a Wall Street bailout is agreed, after talks broke down on Thursday.
For more details: http://www.bbc.co.uk/news
Shore (116)-
That’s exactly what it was.
Your problem is you used a laser printer. Pizza’s can only be printed using ink jets, or diesub printers.
Hands down, best pizza is made with an Epson FX-86 dot matrix near letter quality printer.
Shore (124)-
So, in other words, he goes back to his pre-political life?:
“Sad to say,though, there are likely a few groups that will step up to the plact, offer him several million to speak to their small private gatherings, and then a few friends will put him onto some boards.”
“That’s because before the last housing downturn, millions of mortgages were not granted to stupid people.”
YES! This is the crux of it.
New securities made MBS, SIV, CDO, etc
Funded with sham assets — $$$ from mortgages that were fraudulent.
Sold to millions of investors…
aka PONZI scheme.
sl
#184
“If the derivatives were suddenly declared void — poof, gone. Who loses? The underlying assets still exist.”
Shore– probably people on this board who are far more qualified than me to suggest answers, but it seems to me this would leave many people unhedged, which would change the economics of many credit arrangements currently outstanding. in other words, I think there would be significant spillover effects beyond the derivatives themselves
Clot,
He should be hunted down with dogs and people with clubs.
Tom (133)-
Show me that some of those properties can cash flow positive, and I’ll be impressed.
My guess is, these properties are being taken down by the first wave of “investors”, who will soon be impaled in short order by the ever-falling knife.
http://www.youtube.com/watch?v=gY2vxl20jeg
More of Peter before bu-sh’s bailout speech.
WaMu may file for bankruptcy shortly: Merrill Lynch
11:40 a.m. 09/26/2008 Provided by
(Reuters) – Washington Mutual may file for bankruptcy shortly, said Merrill Lynch analyst Kenneth Bruce terminating coverage of the stock.
The top U.S. savings and loan bank, whose market value has been virtually wiped out because of soaring mortgage losses, was closed by regulators on Thursday, and its banking assets were sold to JPMorgan Chase & Co for $1.9 billion.
The company witnessed $16.7 billion in deposit outflows from September 15 to September 24, according to an Office of Thrift Supervision statement.
“We suspect the series of ratings downgrades and concerns over the position of U.S. financial institutions, in particular Washington Mutual, led to the deposits outflow,” Bruce said.
Shares of Washington Mutual sank 90 percent to 16 cents in morning trade
skep (135)-
Wow! What a concept! Legislators who listen to their constituents.
Is that what you define “taking less political risk” to be?
“The Repubs who are against this are taking far less risk politically than the people who are supporting it.”
So apparently there were a grand total of 4 condos that went under contract in Hoboken last week. By my calculations there is about 3 years of inventory for 1br’s, and 1 3/4 years of 2br’s.
Shore (143)-
I think Bush broke under the Warren G Harding “floor” about five days ago.
He’s solidly in Millard Fillmore territory now.
And that could be an insult to Fillmore.
Al,
Like Shore said buying foreclosures involves a lot of risk but I disagree that people are better off buying from the banks once they take posession. It looks like some of the better deals are getting sold before they make it to the auction. The longer the auction goes on the more it costs the bank. Once the bank takes posessions they usually sell through a local agent which means they have to pay a commission too. If you do a short sale before an auction with a realtor you’ll have to deal with that as well. But the sooner the banks unload it seems the better.
Things change all the time though and next year might be completely different.
I can’t answer all your questions but I have a post on my site regarding how foreclosure auctions work in Bergen County. Doesn’t tell you everything you need to know but I recommend a book in there to get you started. Pick up some more, not the ones on informercials. You have a year to learn about the process. That should be enough time to educate yourself.
I also have listings on my site as well that you can get to from the link to my blog I posted.
http://www.youtube.com/watch?v=vWKURQn0CRM
BO picked the wrong guy, Pete should have been the one. he can talk ank keep people’s attention.
“List of economists against the plan:”
Orion [194],
Along with a voting member of the FOMC, Fisher.
Clot– one aspect of leadership is to take a hit to do the right thing when it is unpopular. we legitimately disagree on what the right thing to do is here. but I am not convinced that these repubs are so principaled, and I think some of them are playing more to their constituents misplaced priority of revenge/schadenfreude.
Orion (149)-
I can’t take all the credit for that call. I used to deal daily with Long Beach Financial, WaMu’s subprime swamp.
They were so bad, I figured any company that owned such a POS could never survive. Long Beach couldn’t even make money when the market was rising. Even in 2004, I used to see lists of borrowers that didn’t even make one single payment after closing!
Shore (151)-
“No worries. When I use my thumb keyboard I am very often horrified at what posts.”
Don’t apologize. I think there are a couple of posters here who don’t even possess opposable thumbs.
I can’t answer all your questions but I have a post on my site regarding how foreclosure auctions work in Bergen County. Doesn’t tell you everything you need to know but I recommend a book in there to get you started. Pick up some more, not the ones on informercials. You have a year to learn about the process. That should be enough time to educate yourself.
I also have listings on my site as well that you can get to from the link to my blog I posted.
I am not necessary going to buy the house off auction. I looked at details and aware of difficulty and issues.
I would like to go to a few auctions just for kicks/experience, without intention to buy. However in Central NJ there is either no acutions or their location is a somewhat of a mystery – is it usually in a a courthouse – for example where would auctions be for house in Metuchen? Cranford? Westfield?. Clark??
aS i SAID BEFORE AT THIS POINT
so now Mr. M is going to debate despite absence of a plan. this guy is embarrassing himself.
Clot,
At least Fillmore got the California Compromise through congress and kept the Civil War from breaking out at a time that the Union lacked the resources to win the war.
Bush has my vote for worse than Fillmore.
Skep (157)-
A lot of more of us think Defazio merely stated the obvious.
I am warily optimistic today. Perhaps this country has finally decided enough financial crime is enough.
As I said before At this point I believe by next year I will be moving out of NJ.
but you never know – economy might make it impossible to get a job.
So just for kicks I want to go to see few of thouse auctions with my own eyes. – do a pretend run – find information aboutt he house, see how it is all done. It would not hurt.
skep (160)-
“it is the business of CYA while the country goes down in flames.”
The sun came up this morning. The Dow is not down 500 points.
The only world that’s crumbling is that of the robber barons.
If it were not for the fact that big Di-ck would take over, and his ticker is not likely up to the stress, I would hope that bus-hit would have the honor to resign.
clot– some pretty big dominoes are falling. biggest bank failure in history last night and you think this only affects the robber barons?
Clot,
Here’s the 2nd to last one sold.
http://www.bergenjerseyforeclosures.com/bjf/PropertyDetail?id=103
I didn’t pic the first one because from the aerial photo it looks like it might need a lot of work. Roof looks bad at least.
Anyway, the one I linked to went for below 2001 prices. 20% down and mortgage payment turns out to be around $1,500 with current rates including tax and insurance.
You have MLS access and more experience. You tell me if you think it would be cash flow possitive. I have a feeling it might be but if you could look up comperable rentals I would appreciate it.
The administration has lied about or misjudged things so often that they lack the credibility to achieve action in a crisis. The current team should clear the decks and allow some folks who lack a demonstrated history of wrong calls or duplicity to take over and work with congress to get something done.
“so now Mr. M is going to debate despite absence of a plan. this guy is embarrassing himself.”
Maverick = Desperate?
From previous article. This derivative bubble is many times bigger then even economy.
Now the derivative bubble is so huge that its deflation represents an extraordinarily daunting challenge.
It will take years for all the worthless IOUs to be extracted from the world financial system.
This will be an unavoidably painful operation. The dollar has been the world reserve currency for decades. It seems inevitable that the currency must undergo a major devaluation and it will not please foreign creditors to be repaid in less valuable dollars than the ones they originally loaned.
Confidence in America’s ability to pay its debts will be sorely shaken and it is likely that Americans will have to adjust their standards of living to suit their actual, heavily indebted circumstances. Prices of imports including energy will rise, foreigners may stop financing US deficits, thereby endangering social programs and credit will be in painfully short supply.
The consequences for the rest of the world are unclear, but they are unlikely to be favourable.
Al (185)-
Those questions tell me that you should never, ever get within a mile of a sheriff sale.
99% of the stuff around here goes back to the bank. The other 1% is looking for a sucker. Wanna audition for that role?
I’m a longtime investor, and I don’t get near sheriff sales these days. Like jumping into an alligator pit in a suit of meat.
i don’t see why it would be bad if w’s vp had a very very brief presidency? about 3 minutes long?
Shore (190)-
Like banks price these dumps right? By the time most of this swill hits the market, it’s being repped by some soccer mom, overpriced by 30% and well on the way to growing mold problems that can never be mitigated.
“It looks like the best bet for most folks is to let the auction fail then buy from the bank.”
alia,
President Pelosi, is one reason.
I am not sure how we can bail out a bubble of this size!
http://www.marketwatch.com/news/story/derivatives-new-ticking-time-bomb/story.aspx?guid=%7BB9E54A5D%2D4796%2D4D0D%2DAC9E%2DD9124B59D436%7D&dist=TNMostRead
“growing mold problems that can never be mitigated”
I bet there are some federal agriculture programs for which one could be subsidized for urban farming, or something dealing with CO2 mitigation from DOE.
Those questions tell me that you should never, ever get within a mile of a sheriff sale.
What is the damage from going and looking/listening??
Why NOBODY would tell me how do you find out location/time and listings before the auction??
I am not buying… Not this year. Just want to look and learn.
“Like jumping into an alligator pit in a suit of meat.”
Clot, mind if I borrow that? I get a lot of emails asking how to buy a particular foreclosure and I do my best to let them know they shouldn’t even think about putting any money down before educating themselves thoroughly on the process. Your first line is what comes to mind a lot but I try and be polite and tell them to learn first then decide. The alligators should help drive home the point.
The scary thing is that a number of the clueless emails have been from agents. I would think that they would have some idea.
Al, in NJ from my understanding they are usually run by the sheriff.
Call up your county sheriff office or look at their website for information.
Take the time to learn before you go. The problem with auctions is they can be exciting and people get tempted. Not that you can buy anything if you don’t show up iwth cash or a casheirs check though.
Isn’t everyone already in a suit of meat?
I do not work with derivatives and do not pretend to even play a derivative expert in summer stock but, when one has created an “asset” class that is bigger than all of the worlds real assets, it sounds like one big Ponzi scheme. These things appear to be bets on bets on bets, on bets and people believe each one is worth the value of all of the others leading up to them. This is absurd.
In the case of a revolution, such nonsense would be outlawed and the plutocrats would take the hit. Why not do the same thing without the social disruption of an overthrow? The world will live witha a few less billionairs. Under the current state of things we are hammering everyone, and the crash seems to be coming anyway. The folks who invented the derivative products, and the folks who feasted on them have brought the worls’s economy to the edge of collapse. Better we should push them over the edge than the other way around, no?
“The sun came up this morning.”
Clot,
Not in my neighborhood.
here is my bold prediction again: dow is going to close positive.
bi,
The market is trading on anything but fundamentals so, I suspect you may be correct.
Why NOBODY would tell me how do you find out location/time and listings before the auction??
By the wqy – I went to clerk in a municipal building – real estate tax records section and she told me that she have no information or have no Idea how do you find it.
to your surprise. today’s weakest sector is not financial, not rimm related tech. but energy and materials, both down almost 5%.
from the WSJ
Short-term money markets remained in turmoil, heightening the likelihood the credit pullback may harm the broader economy.
Inside markets that are hidden to most Americans — the overnight Treasury repo market, the short-term commercial-paper markets and the floating-rate municipal bond markets — action was unfolding that will soon affect how companies meet payroll, pay vendors and make investments.
These markets allow companies with ample reserves to squeeze out a few extra dollars by investing the cash in securities with life spans of just days or weeks. All that cash helps keep the economy lubricated by distributing money to other firms that need short-term loans to buy inventory or meet payroll.
Some distressing signs emerged Thursday from one of the most important of these marketplaces, the commercial-paper market, where companies borrow money for periods of just a day to up to a year. The market contracted by $61 billion in the week ended Sept. 24, its largest decline since August 2007, when investors fled over some of the first warning signs of the subprime-mortgage crisis. In the latest week, banks and other financial companies accounted for most of the decline, as they took $50.3 billion of paper off the market.
The decline follows a $52.1 billion shrinkage in the week ended Sept. 17, which reduces the overall market to $1.702 trillion, according to Federal Reserve data.
“The world is clearly saying this is a huge problem,” said Harjeet Heer, who runs the Global Aggregate business at Baring Asset Management, which manages $17.8 billion in fixed-income assets.
These changes already are having effects on a host of companies that are constantly managing their cash positions.
Payroll processor Paychex Inc. transmits billions of payroll payments each day for 500,000 U.S. businesses.
Last week, Paychex’s chief financial officer, John Morphy, moved some of his working cash out of short-term municipal bonds and some money-market funds and into discount notes issued by government-backed Fannie Mae and Freddie Mac, called agency discount notes.
******************
please note above: CFO of company that processes billions of payroll payments each day does not have confidence in private credit markets. this is the wall st / main st link in action
Wow! What a concept! Legislators who listen to their constituents.
Is that what you define “taking less political risk” to be?
“The Repubs who are against this are taking far less risk politically than the people who are supporting it.”
This isn’t about principle, it’s about popularity. The R’s are the minority. They don’t have the votes to stop this thing. They have the luxury of getting to oppose this, but still have it pass despite their objections. You don’t get blamed for a Wall Street crash & you get to go home and tell your constituents that you opposed handing out their tax dollars to Wall Street fat cats. This is the best career position to be in.
more from above article:
“There is so much mistrust in the markets that banks and funds aren’t extending credit to customers even for a few hours during the day, as they usually do. Instead, lenders are waiting until the last possible moment to release funds, creating a logjam at day’s end when they wire money to branches, subsidiaries or other accounts. The backup of cash transfers has led the Federal Reserve to keep its money-transmission system open late, said a Fed spokesman.”
I thought this was funny.
Warning, might be offensive.
Tom Says:
September 26th, 2008 at 12:24 pm
Al, in NJ from my understanding they are usually run by the sheriff.
Call up your county sheriff office or look at their website for information.
Take the time to learn before you go. The problem with auctions is they can be exciting and people get tempted. Not that you can buy anything if you don’t show up iwth cash or a casheirs check though.
Thanks for the advice on sheriffs office.
I think you are talking about lists like this one?
http://www.co.middlesex.nj.us/sherifffc/ForeclosedHomes.aspx
It is very easy to resist temptation – I am not going to have any cash for a while. I did read about legal implications and various risks of buying on the auction quite a bit.
But what I found that theoretical knoweledge does not even prepare you for something as simple as doing a title search in the tax records office.
“I do not work with derivatives”
shore,
I stated this a long time ago. Consider your electrical box, totally hard wired. Hundreds of wires, multiple colors, intertwined, some taped together, some dangling, some serrated.
When you turn the lights on and they work, all is fine. However, when boom, boom, out go the lights, good luck. You better have an electrician, not named Bergabe or Paulson, handy.
At this point, the lights are flickering. Please call your electrician.
231: but just think, wouldn’t it put hillary’s knickers in a twist if someone *else* got to be the First Woman President? (if you like the idea of hc’s knickers twisted up. i’m fairly neutral on her, myself.)
NJMLS Bergen County Comp Killers!
Wyckoff, 200 HILLCREST AVE
SOLD: $660,000 6/27/2005
(Added central A/C, new kit and appliances)
SOLD: $650,000 9/23/2008
Westwood, 2 BENSON AVE
SOLD: $585,000 4/6/2006
SOLD: $517,700 9/17/2008
Tenafly, 1 CHURCHILL RD
SOLD: $999,000 3/1/2005
SOLD: $875,000 9/19/2008
Teaneck, 188 CRANFORD PL
SOLD: $399,000 1/27/2005
(New kitchen)
SOLD: $385,000 9/19/2008
Paramus, 63 SUMMIT ST
SOLD: $735,000 4/11/2006
SOLD: $680,000 9/22/2008
Hackensack, 577 SUMMIT AVE
SOLD: $799,900 7/18/2003
SOLD: $770,000 9/19/2008
Hackensack, 159 HERMAN ST
SOLD: $490,000 6/7/2004
SOLD: $420,000 9/23/2008
Fair Lawn, 15-03 LUCENA DR
SOLD: $610,000 7/19/2004
SOLD: $501,000 9/25/2008
Fair Lawn, 1-19 BERDAN AVE
SOLD: $350,000 2/27/2006
SOLD: $300,000 9/23/2008
Al,
The clelrk doesn’t do the work for you but they usually have a reasearch station you can use.
Get that book in the link, it will tell you pretty much everything you need to know and then some. The hardest thing is understanding the market and setting a good price for you. The research is tedious but easy once you know what to do.
You have nobody to guide you in the process but yourself so you have to learn as much as you can on a lot of different sources.
I tried to guide you to the information you’re looking for. There’s no way I can answer a book’s worth of information.
“here is my bold prediction again: dow is going to close positive.”
Bi,
Who cares about the DOW? Completely trivial. The harebrained, you, follow that. Watch the credit markets. Learn about Libor at 6% and Ted spread at +300.
253. for today, ted spread is down compared other days this week even equity market is down. i see this as positive
#163 skeptic:You can simply look at the events of the past few weeks to see that this is a major crisis with the potential to sping completely out of control very fast.
Again skep you fail to address the credibility problem, and that is all along Bush and Paulson were saying all is well, the crisis is contained, even up until 2 weeks ago Paulson was preaching this.
Now it is armageddon. Paulson, Bernanke, Bush and anybody else had plenty of time to craft a plan after Bear failed in March.
That is why I do not trust any of them.
Al: Here is link to Somerset County Sheriff’s website.
http://www.somcosheriff.org/sales.htm
Al: Here is link to Morris county website
http://www.mcsheriff.org/main/civil_sheriffsales/
Al: Middlesex County Sheriff
http://www.co.middlesex.nj.us/sherifffc/foreclosedhomes.aspx
# toshiro_mifune Says:
September 26th, 2008 at 12:31 pm
I thought this was funny.
Warning, might be offensive.
toshiro – lately, if its not a little offensive it CAN’T be funny.
#254 – It’s still at 293 when it’s usually 50. In what world is that positive?
Have you looked at the 5y chart to get some sort of idea of what it usually is? Or are you just looking at intraday movement?
Al,
Middlesex’s clerk has a lot of info online https://mcrecords.co.middlesex.nj.us/records/index.jsp
Took 2 seconds to do a google search to find it. Don’t take this the wrong way, but if you can’t do that much you really need to learn more.
“253. for today, ted spread is down”
bi,
Good. Put that in your blackbox and follow that. Then, you will be able to tell us how the stock market will be performing in the future.
TD Bank is clean as far as i know. Canadians went through a similar but smaller credit crisis about 8 years ago. I worked for them for 5 years and they were always extremely conservative in lending, frustrating to many bank officers but now we see they had good reason. They have also correctly predicted mass consolidation in US market for the last 3 years. Cant speak for Commerce, they were always very aggressive but I dont think they have any toxic mortgages or derivative products.
#255
3b– I believe I did address the credibility problem above when I said Bush has no credibility and Paulson’s is slim. Actually, congressional leaders have little credibility as well since they have basically broken all of their promises. I see a political reality in which the gov’t has no credibility to address a real crisis, having spent all its capital on name calling and crying wolf. regardless of whether or not a solution is found I think all incumbents should be thrown out
BI:
See #3
http://biz.yahoo.com/bizwk/080926/sep2008pi20080925049629.html
Ending the Credit Crunch: Four Benchmarks to Watch
3b– I am saying don’t take gov’t’s word for it– look at events. Look at what people outside of gov’t are saying. Even people who are not down with the current plan, most of them agree that some kind of gov’t intervention is necessary
Nigerian E-mail scam? Nope. It’s the Paulson bailout. Seriously.
Dear American:
I need to ask you to support an urgent secret business relationship with a transfer of funds of great magnitude.
I am Ministry of the Treasury of the Republic of America. My country has had crisis that has caused the need for large transfer of funds of 800 billion dollars US. If you would assist me in this transfer, it would be most profitable to you.
I am working with Mr. Phil Gram, lobbyist for UBS, who will be my replacement as Ministry of the Treasury in January. As a Senator, you may know him as the leader of the American banking deregulation movement in the 1990s. This transaction is 100% safe.
This is a matter of great urgency. We need a blank check. We need the funds as quickly as possible. We cannot directly transfer these funds in the names of our close friends because we are constantly under surveillance. My family lawyer advised me that I should look for a reliable and trustworthy person who will act as a next of kin so the funds can be transferred.
Please reply with all of your bank account, IRA and college fund account numbers and those of your children and grandchildren to wallstreetbailout@treasury.gov so that we may transfer your commission for this transaction. After I receive that information, I will respond with detailed information about safeguards that will be used to protect the funds.
Yours Faithfully Minister of Treasury
Henry Paulson
“It’s still at 293 when it’s usually 50. In what world is that positive?”
Tosh,
Yeah, what an incerdible drop today.
incredible
WB fading ,,, are they next
max,
WB is safe and sound. It’s those terrorist short sellers that are driving this perfectly sound and well managed company to the brink of insolvency. (sarcasm off).
WB has been insolvent for months!
I like to look at old stories once in a while for a laugh. This one is from 2002. It talks about record foreclosures and there being no bubble.
“That said, home-price increases are likely to decelerate — year-over-year increases have already dropped from near 8 percent last year to 6.5 percent in the latest National Association of Realtors survey — and some local markets may see falling prices, Seiders predicted.”
Link here
Towns That Could Be Hit Hardest by the Financial Crisis
Already the financial sector alone has lost 10,000 jobs through July, or about 2% of finance jobs. Moody’s Economy.com projects that New York City and its suburbs will lose 65,000 finance jobs by the middle of 2010, or 11% of the total.
n other words, smaller financial centers and their suburbs could also see trouble ahead. BusinessWeek.com worked with PolicyMap.com, a Philadelphia-based online data and demographics site, to rank the communities with the largest percentage of residents working in finance, real estate, insurance, and leasing. Topping the list is Darien, Conn., an affluent New York suburb where the median salary is $168,000 and 27% of residents work in those industries. Bloomington, Ill., home of State Farm Insurance, came in second, followed by Hoboken, N.J., which is across the Hudson River from Wall Street.
[188] Laughing,
Be sure to buy ammo. Lots of it. It will only get more expensive.
When you buy a gun, be sure it is a common caliber — don’t go for unusual, like Makarov. Great gun, but hard to get ammo.
Consider used guns as they cost less but just as good. Since they are simple devices, it is easy to assess maintenance. All mine are used, and I am happy with them.
Finally, consider state laws. NJ is very tough and a lot of guns that are legal in PA are not legal here. I ran into that issue. Amazingly, this applies more to long guns.
From CR, new home sales and recessions;
http://2.bp.blogspot.com/_nSTO-vZpSgc/SNva2sOm-HI/AAAAAAAADXc/yfR-ipdAWoQ/s1600-h/new+home+sales+and+recessions.png
BC 275
Are you suprised that more builders have not imploded?
NJ Towns from list above
3. Hoboken, N.J.
Share population in finance and real estate: 23.33%
Nearest large city: New York
Population: 40,002
Median salary: $81,356
6. Summit, N.J.
Share population in finance and real estate: 19.74%
Nearest large city: New York
Population: 20,618
Median salary: $111,497
Emphasis added.
NCC according to 10-K:
Core deposits, excluding escrow funds, grew to $84.1 billion at December 31, 2007
#266 skeptic:Even people who are not down with the current plan, most of them agree that some kind of gov’t intervention is necessary.
I am not saying that it is not necessary at this point, (even though it never should have gotten to this point).
I do not trust the people involved (Bush Bernanke, and Paulson), bring in independent,neutral outside experts to come up with a solution, instead of the clowns who bear no small part of thr responsibility for getting us into this mess in the first place.
“The Paulson solution fails because it does not help consumers or businesses service debt, it does not create any jobs, it increases the national debt, and it encourages more reckless lending by banks. Attempting to bail out banks on the back of cash strapped consumers is simply doomed to fail.”
“If printing money was the solution to all problems, Zimbabwe would be the most prosperous country in the world.”
“Paulson wants to recapitalize banks so they can keep lending. Ironically, one of the problems is lending. The US has been on a credit binge to such an extent that I have to ask what more do we need? More Pizza Huts? More Home Depots? More Houses? More Nail Salons? More Car Dealers? What?”
“What is the urgent need to lend still more?”
“We are in this mess because of too much reckless lending. We do not need more lending, we need more saving!”
http://globaleconomicanalysis.blogspot.com/2008/09/open-letter-to-congress-on-700-billion.html
[131] Shore
Shh. Ask Grim. Offline. Or get my email from grim or kettle.
Nom
Also, as I just found out you can no longer get pistol ammo, black powder, and some slugs like lightfields without your Firams ID card on your person. I’m, long on buck shot for close encounters, 7mm rem mag to reach out and touch someone, slugs and blackpowder. MY mz has an effective range out to two hundred yards with conical bullets. Back to lurking.
“Are you suprised that more builders have not imploded?”
make,
Can’t believe Beazer is still standing, or crawling.
Does anyone know if Peapack Gladstone bank is safe?
what about hov,,, who are they kidding,
dead, just don’t know it yet
I am new homehowner. I have one question: is there a cap(3% or 4%) for the property increase every year?
Your help is appreciate.
Thanks
“Gas Shortage In the South Creates Panic, Long Lines”
“If Drivers Can Fill Up, They Get Sticker Shock”
http://www.washingtonpost.com/wp-dyn/content/article/2008/09/25/AR2008092504159.html
typo in privious message. Here is the correct one.
I am new homeowner. I have one question: is there a cap(3% or 4%) for the property tax increase every year?
Your help is appreciate.
Thanks
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Hey All!
I’ve been visting this site for a long time but never posted before. Because my brother just moved back from CA to Ridgewood, I have decided to move to around that area with my family (two kids 5 and 2). However, it appears this area really isn’t getting hit hard, if at all, in terms of home prices coming down. For example, even though home prices haven’t come down all that much on Long Island – you can see that sales have plunged. But around Ridgewood area – it appears prices are holding and sales are keeping steady to next year. What gives?
Recapitalizing Banks
Banks are undercapitalized. They need funding badly. Here is what I propose.
1)Reduce the capital gains tax by 50% for any investor willing to cash out stocks and invest in 5 year bank CDs.
2) Eliminate the difference between long term and short term capital gains.
3)Eliminate taxable interest on savings accounts, CDs, and US treasuries.
The above would promote saving rather than speculation and provide a big boost in government revenues as well. Stock prices will not be affected over the long haul by these measures.
I love this idea from Minn
BC Bob 287
see this chart
http://img221.imageshack.us/img221/6721/gtstusmok5.gif
you are seeing the results of the recent hurricanes in Texas and Louisiana. They caused the shut down of refineries. refineries have been running at very high utilization levels, 90+ % last i looked pre-hurricane and just keeping up with supply.
The shortage has not hit the northeast because a large portion of the finished gasoline that is imported comes into NY ports. (RBOB)
This shortage should begin to resolve itself over the next few weeks assuming no further interruptions.
also see the following charts
gasoline stocks
http://www.theoildrum.com/files/EIA%20Gasoline%20Stocks.png
Refinery shortfalls (Louisiana)
http://www.theoildrum.com/files/LA%20Refinery%20Shortfalls%209_23.png
refinery shortfalls (Texas)
http://www.theoildrum.com/files/TX%20Refinery%20Shortfalls%209_23.png
Nom,
As Brigadoonian, I don’t know if you read the Westfield Goleader, but there is an angry letter in there about the huge traffic snafu they have created at the north end of E Broad. I found out from my mechanic that every few years, to get the traffic lights certified by NJ, they alter the traffic pattern at this light (one left hand turn lane, not 2) to be acceptable, and then eventually, when they are certified, they change it back to the way that works. All this is in response to Kenilworth losing a big judgement a few years ago in a DWI accident because their traffic lights weren’t State certified.
I post this as a COMPLETE departure from talking about actual important world events. But seriously, its f^%$^%$d up my commute. Where is my bailout?
alia (229)-
Many of my friends would like to do things with VPILF. Most of those actions would be about 3 minutes long, too.
“i don’t see why it would be bad if w’s vp had a very very brief presidency? about 3 minutes long?”
Tom (235)-
The agents always have the least idea. Sure, use my line.
BC
As i am sure you are aware, most modern supply chains are JIT (Just In Time) i.e no reserve stock to speak of. The greatest weakness in such a system is that nay disruption greater then a little blip and you will have rapid shortages develop that can cascade.
This will be an unexpected effect of the financial turmoil. Similar to how grain elevators couldn’t buy corn due to loans not being available, we are about to see what may appear to be random shortages of various good and services. It however, is not random. you just have to know what part of the supply chain is the weak link. easier said then done.
#288 Yup, there has been a shortage for the last week. About 1/3 of the stations have gas. All the BP stations around me have been out for six days. There were about 25 cars lined up at the Kroger gas station this morning. Add to that the fact that Wachovia has a large presence in Atlanta and it’s just good times everywhere you look.
Oh, and whats up with the russian PRON spam????
September 26th, 2008 at 1:32 pm
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Clot,
Any opinion on if that property would be cash flow positive? Looked up some listings on CL and it either is or is very close just factoring in the mortgage.
I can’t say for sure but I think the intent is to sell.
It’s 2pm. Time for Bi to be proven wrong once again.
anyone see this yet???
Exploiting FDIC Loopholes Enriches Former U.S. Bank Regulators
By David Evans
Enlarge Image/Details
Sept. 25 (Bloomberg) — As chief of staff of the Federal Deposit Insurance Corp. from 1999 to 2002, Mark Jacobsen was responsible for a safety net that protects U.S. savers. He now runs a company that critics say is designed to stretch that net to its breaking point.
Jacobsen, 42, is president and co-founder of Arlington, Virginia-based Promontory Interfinancial Network, a company that makes it easy for a wealthy depositor to keep FDIC-insured cash in separate accounts at multiple banks. It offers customers up to $50 million of FDIC insurance, 500 times the single-account limit approved by Congress.
http://www.bloomberg.com/apps/news?pid=20601170&refer=home&sid=aBaYKQD_UPcE
alia,
Personally, I try not to think about Hillary’s knickers.
BC,
“At this point, the lights are flickering. Please call your electrician”
BC,
Given an electrical box like that, I would be inclined to call that electrician and have him divert the main line to a new electrical box and toss the old one.
WaMu deal suggests home prices may fall further
NEW YORK (MarketWatch) — When buying Washington Mutual’s banking business, J.P. Morgan Chase & Co. weighed the risks of the deal using some worrying assumptions about house prices and future losses on mortgages.
Wachovia has more than $100 billion of option ARMs. These types of mortgages allowed borrowers to choose between several different monthly payments. The lower payment options increased the total amount owed, which is known as negative amortization. Wachovia stopped offering these home loans this summer. See full story.
“We expect this deal to have a negative impact on the value of credit-impaired banking institutions,” Cannon wrote in a note to investors on Friday.
World is waking upto Option-ARM !!!
Barry Benson [290],
You shouldn’t have said that. See, you’re going to get skewered now because a lot of people here are convinced (deluded) that you’re going to get a house in a town like Ridgewood for at least 20% or better off of peak prices. However, if one would actually go out and look at these homes as I do on a regular basis, one would see that yes, indeed, the prices in the sought-after towns in North Jersey are holding up.
But again… shhhh… we don’t want to poke a stick too many times. Then again, what do I know? I’ve been told to be patient and wait and I’ll see a BIG price reduction sooner rather than later. I’ve been told that a week ago, a month ago, 6 months ago, a year ago, 18 months ago and two years ago.
It would be insane to make bank cds tax free. Munis are tax free and the cheap funds raised pay schools, hospitals, police, firemen, roads etc. Once state govt had to pay full interest rates you prop taxes and state taxes would go through roof.
#290 Barry:But around Ridgewood area – it appears prices are holding and sales are keeping steady to next year. What gives?
That is all yesterday’s news. As far Ridgewood, look at all the list prices that are now in the 400k’s something unheardard of a couple of years ago.
Alos look at the large amont of inventory for sale there. Last time I looked it was over 100 SFH’s. Very little is selling there either.
you can get way more than $100k FDIC insured in the same bank. You just need a wife you trust, and ira accounts…
http://www.fdic.gov/edie/
We hate to interupt your current programming of gloom, doom and the end of life as we know it, but. . . . .
Gary/Clot/Grim:
Any information on MLS #2499772. Seems to be off the GSMLS. It has been listed/relisted at least twice. Want to know if someone stupid actually bought the house. Seller said “present all offers” but didn’t like our offer.
Thanks in advance
remember: Free your mind!
kettle,
Most of the big grain exporters grant loans to the farmers before they even grow the crop so as to guartantee product, sometimes in the form of direct crop financing, and sometimes by fowarding them Ferilizers, so it’s a little different than oil refineries.
Oops. Looks like things were a bit worse at WM than they let on:
NEW YORK (MarketWatch) — When buying Washington Mutual’s banking business, J.P. Morgan Chase & Co. weighed the risks of the deal using some worrying assumptions about house prices and future losses on mortgages.
That’s sparked concern that mortgage-related assets held by rival banks including Wachovia Corp.
WB may be worth less than previously thought.
Late Thursday, J.P. Morgan announced an agreement to buy WaMu’s banking subsidiary after the nation’s largest thrift was seized by the Federal Deposit Insurance Corp. See full story. In a presentation on its WaMu acquisition, J.P. Morgan forecast a 58% peak-to-trough slump in California home prices if the U.S. enters a severe recession. In Florida, house prices could fall 64% in such a scenario, while nationwide prices could drop 37%, the bank said.
J.P. Morgan also immediately wrote down the value of WaMu’s assets by more than $30 billion, mainly because the giant bank expects losses on the thrift’s mortgage holdings to be higher than previous expectations.
The write-downs assume that cumulative losses on WaMu’s $51 billion option adjustable-rate mortgage portfolio will reach 20%.
That’s a lot higher than the 12% cumulative losses that Fred Cannon, an analyst at Keefe, Bruyette & Woods, was expecting.
Wachovia has more than $100 billion of option ARMs. These types of mortgages allowed borrowers to choose between several different monthly payments. The lower payment options increased the total amount owed, which is known as negative amortization. Wachovia stopped offering these home loans this summer. See full story.
“We expect this deal to have a negative impact on the value of credit-impaired banking institutions,” Cannon wrote in a note to investors on Friday.
Wachovia shares slumped 28% to $9.78 during afternoon trading. Credit default swap spreads on the bank’s debt surged by more than 800 basis points and now trade at distressed levels, according to Credit Derivatives Research.
J.P. Morgan assumes cumulative losses of at least 20% on WaMu’s home equity lines of credit and home equity loans. KBW’s Cannon was expecting cumulative losses of 10%.
J.P. Morgan’s projection of losses on WaMu’s prime and subprime mortgage exposures were also higher than Cannon’s estimates, the analyst said.”
Wanda Sykes on Jay Leno: Bailout & Paln
Tom (301)-
What property?
Morph (310)-
Expired 9/19.
#306 gary: You can start the process, with your own house.
Look you can believe whatever you want, but the fact remains that prices are falling,and the speed is picking up, maybe not fast enough for you, but it is.
The fact also remains that I lived through the last houisng bust,and prices decliend dramatically from the peak when we bought. My wife and I used to kick ourselves for not waiting,when we would go out and look.
If they fell back than, when you had to qualify for a mtg, then they are going to fall now. Simple as that.
We are close to a financial meltdown,and you still believe prices will reamin unaffected!!!
You have got to calm down Dude.
#308
112 SFH’s in Ridgewood -17 of which are under 500-13 in the 500’s- over 30 in the 600-800 range
disclaimer-info reliable not guaranteed
“World is waking upto Option-ARM !!!”
SG,
Exactly what snake oil Hank is selling.
Gary:
I hope the drop in local housing prices does not happen so quickly that you miss it entirely and we all end up selling apples.
3b[316],
Please excuse Gary. He’s trying to sponsor Usain Bolt, to run in the Boston Marathon.
Clotpoll Says:
September 26th, 2008 at 9:42 am
Shore- The toadies are on Capitol Hill?
Where?
http://www.youtube.com/watch?v=F5Cf5OusjrQ
clot:
Thanks, you are the best. stupid question: by “expired”, I assume that it means it was not sold and is not being marketed thru the MLS. . . . .please no “Bad news bears” jokes about “assume”
Gary,
Bear, Lehman, Merrill, Wamu, Countryslide, Indymac, Fannie, Freddie, hundreds of mortgage firms, etc., all bite the dust. The only group immune, NNJ sellers. Almost as funny as Paterson Plank Joe to Larry Csonka.
From an e-mail newsletter from Diane Turton Relators. At least they are telling their sellers not to expect people to come in the door, drop to their knees and shine the seller’s shoes whilst in a bidding war.
enewsletter@dianeturton.com
The Principles of Pricing
Pricing your home correctly is critical to a successful sale as it will help your
home sell faster and for top dollar. Determining a home’s asking price involves
comparing similar homes that have recently sold while also investigating local
market trends. In the end, the market will determine your selling price so it’s
critical you do your research upfront.
Start by evaluating the recent sales in your area that are similar in square footage
and age. You’ll also want to examine the number of bedrooms & bathrooms, the
home’s condition and other issues like surrounding houses (ie. is it the biggest
house on the street). Don’t forget to consider homes which have recently expired
as well as those that are currently for sale.
Some people believe it’s okay to list a home at a higher price because they can
always reduce it later on; however, this often backfires as the home will develop
a stigma if it sits on the market too long. A huge buzz is created when a new property
hits the market but if it sits there, it will quickly lose its appeal and become
stale. “How long has it been on the market?” is one of the first questions buyers
ask. If it’s been a while, they won’t feel the need to make an offer right away.
If on the other hand it’s just been listed, there’s a sense of urgency!
It’s a common belief that sellers don’t have anything to lose by overpricing their
home as they won’t lose out on any offers as they feel buyers will just offer what
they feel is fair. This however isn’t always the case since many buyers are hesitant
to attach their name to a low offer as they don’t want to insult the seller. Many
buyers are intimidated by the negotiating process and feel they’ll be wasting everyone’s
time with an offer that’s so far off the asking price.
Timing is also a key issue. The Spring and Fall are traditionally the best times
of year to sell so overpricing your home and having it sit on the market may mean
you miss out on the peak time of year. Furthermore, carrying costs such as insurance,
taxes and utilities will quickly build up if you get stuck carrying two homes at
once.
Having your property sit on the market is also inconvenient as you’ll need to keep
it ultra clean for potential buyers who will want to come and see it on a moment’s
notice. Overpricing your property may also mean you unintentionally help your competition
as buyers will see other homes in your area as better deals since they’re less expensive.
If you price your home at market value, those same buyers will consider your home
more seriously.
Setting an asking price isn’t an exact science and market factors (buyer or seller
markets) make a huge difference so make sure you do your research ahead of time
so you’re able to best estimate a competitive asking price. The best case scenario
when listing your home is that it sells quickly and for top dollar. To achieve
this ideal scenario, make sure you don’t overprice your home.
From the Palin – Katie Couric recent interview….
Katie Couric – Thank you for being here, Governor Palin.
Sarah Palin – I’m all about being here.
Katie Couric – Are you and John McCain in favor of this $700 billion bailout?
Sarah Palin – I’m totally in favor of supporting the troops. My son is a troop.
Katie Couric – Right. But I’m asking about the bailout proposal for Wall Street.
Sarah Palin – You sure are. You betcha.
Katie Couric – So are you in favor of it?
Sarah Palin – Reform needs to be in the Wall Street. Not just sittin’ on the curb of Wall Street. We need it in the middle of the street. Like a dead squirrel.
Katie Couric – Can we afford to give tax breaks to the wealthiest Americans right now?
Sarah Palin – Well, what do you mean by tax breaks? Like on a car? Those kinds of breaks?
Katie Couric – Less taxes.
Sarah Palin – You know, I’m really into the Bush doctrine. I’m like, supporting it.
Katie Couric – In the event that something were to happen to John McCain, are you ready to step in and be president?
Sarah Palin – I have the steadiness to be steady. I’m getting in there and really doing it. Not just not doing it. I’m not going to be like ‘hey, presidency, talk to the hand.’
Katie Couric – But are you ready to become the leader of the free world?
Sarah Palin – Totally. I will totally lead the world. Any world. I will lead Mars or whatever too if those guys need a world president. Or just a Mars president. I took on the ole’ boys club in Alaska and I can take it on in Mars.
Katie Couric – But I’m not asking about being president of Mars.
Sarah Palin – But I am answering about being president of Mars because a president person needs to be prepared for anything. I like to reform.
Katie Couric – I understand you only just got a passport last year.
Sarah Palin – You know, I was in Idaho for my friend Amber’s wedding a ways back. Lemme tell you, Katie. We American taxpayers have a lot more in common with other countries than we think. There were Budweiser beers cans at that Idaho wedding. And Hot Pockets too. Those pizza flavored ones. Yummy.
Katie Couric – Wait, are you saying that Idaho is another country?
Sarah Palin – I’m saying they have Hot Pockets just like us. Pizza ones even. It’s called ‘the globalization.’
Katie Couric – But let me get this straight because I think it’s important. Is Idaho another country?
Sarah Palin – You know, I’m not going to get into that right now. I think American men and women and men are focused on solutions. Not what’s a country or what’s not a country. Some places aren’t countries. They’re just things. And that’s ok. Do you know the difference between a country and a thing?
Katie Couric – I’m not sure I do.
Sarah Palin – Hot Pockets.
Katie Couric – And finally, where will you and John McCain take this country?
Sarah Palin – We are going to take it somewhere really nice. A nice place where all American taxpayer people will totally be like ‘hey, hello, this is really nice.'” And then we’ll take it from that really nice place and over to a nicer place, a super duper nice one. More super duper nice than my cousin Marge even. And the American taxpayer people will be like ‘hey, this is a super duper nice place. More than Marge even.'” Reform.
Katie Couric – Thank you, Governor.
Chifi,
I always liked that song.
morph (322)-
Yes.
The njrereport primer:
1) Thou shalt not calm down Gary
2) Thou shalt not silence Bi nor his black box of infinite inverse reliability
3) Thou shalt not disagree with Skep-tic
4) Thou shalt not discuss energy when Kettle1 is not present
5) Thou shalt not make investment recommendations in the presence of ChicagoFinance
6) Thou shalt not listen to Frank
7) Thou shall not compare any story to one of John’s
8) Thou shall not call Reinvestor101 by his blog name or number
9) Thou must never refer to Brigadoon as anything but Brigadoon
10) All bad loan writedowns announced in the news must immediately be followed by a post stating, “There will be no more write-downs!”
11) All homes of the cape cod variety must either be immediately preceded by, followed by or actually be called POS
12) All posts between 5am and 7:30am must immediately be preceded by another entry containing only the word ‘frist’
13) Thou must appreciate Grim and eventually send some sheckles his way through the link on the home page.
Nj Lifer, 311
yes they are somewhat different, but here is an example of what i was talking about
Jul 20, 2008 (Star Tribune – McClatchy-Tribune Information Services via COMTEX) — Scott Dubbelde has told himself, time and again, that there is no use fretting about things over which he has no control.
Even so, the general manager of a grain elevator cooperative in Hanley Falls, Minn., lies awake at night, worrying about the ballooning debt his elevator has incurred to finance its inventory.
“I’d be lying to you if I said I wasn’t worried,” Dubbelde said. “This is about our survival.”
“The big question many agricultural analysts are asking is how much debt elevators can incur before a liquidity crisis occurs and banks start tightening. Swanson estimates that U.S. financial institutions already have provided at least $10 billion to grain elevators, just to fund margin calls for futures contracts. Some elevators have been forced to turn to three or more lenders just to meet their debt obligations.”
ML just layed-off 15% of it staff?
13) Thou must appreciate Grim and eventually send some sheckles his way through the link on the home page.
!!!
Well, this sounds like the GOP in the House is not inclined to follow the lead of Great Leader:
House GOP: We’ll Oppose Any Bailout of Wall Street
http://www.cnbc.com/id/26895236
Boehner’s letter to Pelosi:
http://msnbcmedia.msn.com/i/CNBC/Sections/News_And_Analysis/_News/__EDIT%20Englewood%20Cliffs/080926_Pelosi.pdf
3b, BC Bob, Stu,
LOL! You guys wanna f*cking kill me! :) I guess my wife is a Saint, wouldn’t you think? I don’t know whether I should buy you guys a drink at the next GTG or run for my life!! LOL!
Re #327:
14. No member shall beat up another member, at least while someone is watching;
15. No poofters;
16. There are no rules, refer to # 14;
17. No poofters.
No offense, I hope
Tom,
Thanks for the info, I tried to post your site but was unable.
KL
Bush has lost the house Rs. He has lost the faith of the American people. He states that if we do not act immediately, we face collapse, yet he cannot bring along his own party. He has no moral authority. He has no intellectual authority. He is leaving the nation rudderless.
As such, he should resign.
Federal Reserve leads central bank injection of billions
http://www.telegraph.co.uk/finance/3086611/Federal-Reserve-leads-central-bank-injection-of-billions.html
“Apocalyptic” and “money market meltdown” were phrases used to describe the distress at the heart of the financial system – the interbank market where banks lend to each other. After a US debt-rescue deal stalled overnight, the US Federal Reserve moved rapidly this morning with the European and Swiss central banks to deliver a further $13bn (£7bn) into crippled money markets.
Commercial banks usually seek extra funds at the end of each quarter, but credit has all but dried up as banks demand higher interest for the loans they make to each other as fear that another lender may collapse stalks the market. “The problem is neither a lack of liquidity nor a question of the level of interest rates,” said Stephane Deo, an economist at UBS. “It is essentially a problem of trust between banks.”
morpheus, regarding your rule 14.
The other day, one or two of the regular posters requested that they be beaten. So, you may need to amend that one.
Rule 18 – I don’t want to catch anyone not drinking.
kettle,
You are right about the smaller grain elevators. Unlike the big boys that have their hand in the entire chain (ie. ADM, Bunge, Cargill, Louis Dreyfuss) capital will be even harder to come by for these guys.
UK banks could qualify for $175 billion of US bailout plan
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4828413.ece
Britain’s five leading high street banks have as much as £95.3 billion ($175 billion) of distressed assets on their books that may qualify for the American bailout scheme.
If the British banks tap the rescue fund being set up by the US Treasury and the Federal Reserve to the maximum, they could secure one quarter of the $700 billion being made available. Under the terms of an outline agreement that appeared to have been reached by US policymakers last night, Britain’s lenders will be able to use the facility.
House Republicans Give Boehner A Standing Ovation Over Bailout Stance
Sep 26, 2008
——————————————————————————–
(The Politico) House Republicans gave Minority Leader John Boehner (R-Ohio) a standing ovation today as he briefed them on the last developments in the battle over President Bush’s $700 billion Wall Street bailout plan, according to Patrick O’Connor, who is covering a GOP members-only meeting.
Boehner and the House Republican leadership has been roundly criticized by the Democrats over their unwillingness to support the Bush bailout package, but his rank-and-file is backing the Ohio Republican strongly. House Republicans have offered a series of principles as an alternative to the White House’s bailout plan, but have yet to unveil an actual bill.
[snip]
http://www.cbsnews.com/stories/2008/09/26/politics/politico/thecrypt/printable4480809.shtml
“UK banks could qualify for $175 billion of US bailout plan”
My ancestors threw the UK out of most of North America, then others went and pulled their chestnuts out of the fire in 1917, and 1941. $crew their banks. Let them take their own writedowns.
http://news.cnet.com/8301-13578_3-10051790-38.html
Do you oppose the $700 billion Wall Street bailout? Click here
Posted by Declan McCullagh 78 commentsShare
Digg Del.icio.us Reddit Facebook Google Newsvine Yahoo! Bookmarks Twitter Stumbleupon E-mail Print Bailout type Cost to taxpayers (Source: Reuters)
Proposed Treasury Department legislation $700 billion+
Bear Stearns financing $29 billion
Fannie Mae and Freddie Mac nationalization $200 billion
AIG loan and nationalization $85 billion
Federal Housing Administration housing rescue bill $300 billion
Mortgage community grants $4 billion
JPMorgan Chase repayments $87 billion
Loans to banks via Fed’s Term Auction Facility $200 billion+
Loans from Depression-era Exchange Stabilization Fund $50 billion
Purchases of mortgage securities by Fannie Mae and Freddie Mac $144 billion
TOTAL $1.8 trillion+
COST PER HOUSEHOLD $17,064+
A flurry of Web activism is channelling misgivings about the proposed $700 billion Wall Street bailout into political action.
There is NoWallStreetBailout.com, which asks visitors to sign a petition to Congress. It features a quote from Allan Meltzer, a professor at Carnegie Mellon University’s business school, saying: “This is scare tactics to try to do something that’s in the private but not the public interest. It’s terrible.”
The cross-town competition comes from VoteNoBailout.org, which says: “We are witnessing a bankers’ coup d’etat. In the name of saving the economy from a crisis created by their own greed and immense profits, the biggest bankers have taken a country and a people hostage.”
There’s also FinancialPetition.org, plus a humorous, off-color Web site that encourages people to “list” items they want the government to buy.
Public pressure in opposition to the bailout, from these sites and from unexpected sources like the AFL-CIO and Republican Newt Gingrich, may have helped to slam the brakes on what had been an unusually fast-moving process in Washington.
By midday Thursday, news articles began appearing saying a “tentative bailout agreement” had been struck between congressional leaders and the White House. But the day ended with the talks in tatters, an intra-party rebellion by House Republicans, and a promise to continue the meetings on Friday.
Republicans including House Minority Leader John Boehner objected to the proposal as putting taxpayers on the hook for what could be potentially huge losses, according to the summary by The Washington Post. Boehner and his colleagues are backing an alternative that would involve a rescue plan financed by the banks themselves, not taxpayers. (Because their party controls the Congress, Democratic leaders don’t actually need Republican support. They want it anyway for political cover.)
Ask an economist whether the $700 billion bailout will harm or help the economy, and the answer will depend on his or her political (or at least philosophical) predilections.
New York Times columnist Paul Krugman said “doing nothing isn’t a serious option.” Treasury Secretary Henry Paulson told a House committee on Wednesday that doing nothing would “threaten American families’ financial well-being, the viability of businesses both small and large, and the very health of our economy.” An editorial in the Salt Lake Tribune took a similar approach.
Other economists draw unnerving parallels to the Great Depression, warning that it was caused precisely by this kind of government intervention in the economy. The Competitive Enterprise Institute’s OpenMarket.org says the proposed $700 billion intervention will prove to be either “excessively costly or unnecessary.” Peter Schiff, a well-known stock market bear and president of Euro Pacific Capital, warned: “We’re going to have a tremendous recession if the government does nothing but we’re going to have a worse one” if it does. Also see the Huffington Post’s reasons to oppose the bailout, and Republican Rep. Ron Paul’s warning that “it’s the same destructive strategy that government tried during the Great Depression: prop up prices at all costs.”
The 1920s boom that led to the Great Depression was aided, and may have been largely caused, by the Federal Reserve’s expansion of the money supply by 8 percent a year, or 62 percent over an eight-year period. Such a boom was due for a bust, which started in September 1929.
Instead of taking a hands-off approach, the Federal Reserve intervened on a dramatic scale, in part to allow loans to be taken over; one union leader called it a “barrier against financial demoralization.” President Herbert Hoover overruled his Treasury secretary, who counseled a laissez-faire approach, and embarked on programs to artificially keep wages constant (or higher), expand public works, and boost farm subsidies. By 1931, as the Depression was well under way, Hoover was busy calling for an investigation of short sellers. He later summarized his policies as: “We met the situation with proposals… of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic.”
It’s true that the proposal the Bush administration is advancing today does not come close to the extreme measures that Hoover adopted. But what critics–especially those online–seem to fear is that another step down that path could prove to be an unusually risky one.
Maybe i missed something, but where did all of WAMU’s money go? They have about 500 billion in combined asset and deposit value. JPM only paid 1.9 billion for 188 billion in deposits!!! I must be missing something here as it seems a lot of assets just disappeared……
Washington Mutual Inc was closed by the U.S. government in by far the largest failure of a U.S. bank, and its banking assets were sold to JPMorgan Chase & Co for $1.9 billion.
Washington Mutual has about $307 billion of assets and $188 billion of deposits, regulators said. The largest previous U.S. banking failure was Continental Illinois National Bank & Trust, which had $40 billion of assets when it collapsed in 1984.
http://www.reuters.com/article/newsOne/idUSTRE48P05I20080926?sp=true
snip
It Is About Bush. House conservatives may have liked President Bush back when he was cutting taxes and sporting high approval numbers, but many of them have little reason to support or trust him now. He’s a lame duck with approval ratings that are hovering around 30 percent, so he has little to offer members in the way of political protection. And some conservatives think Bush is ideologically adrift, whether on his more conciliatory second-term foreign policy or immigation or, more recently, his refusal to veto the housing rescue package in July that nearly all House conservatives opposed.
Now, conservatives privately suspect that Bush is being too heavily influenced by Henry Paulson and other Wall Street alumni in the administration. So yesterday’s plea from the president for their support simply didn’t do the trick.
snip
http://voices.washingtonpost.com/capitol-briefing/2008/09/why_house_republicans_balked.html?hpid=topnews
“I don’t know whether I should buy you guys a drink at the next GTG or run for my life!! LOL!”
Gary,
Bring your wallet and your track shoes. However, first buy the drinks.
Regarding grain elevators, those things are the lifeblood and the center of so many small communities throughout the midwest. Talk about hitting main street.
bi,
Are you anxiously awaiting the close. We’ll see you at 4:01.
http://www.lewrockwell.com/snyder/snyder15.html
Section 19(a)(2) of Senator Dodd’s original bill provides that if the Federal Reserve Board exercises this authority, it must notify the Senate Committee on Housing, Banking and Urban Affairs and the House Committee on Financial Services of “the specific terms of the actions of the Board, including the size and duration of the lending, the value of any collateral held with respect to such a loan, the recipient of warrants or any other potential equity in exchange for the loan, and any expected cost to the taxpayer for the cost of such exercise.”
The first thing to notice about the Dodd language is that it contemplates the possibility that both stock or other equity and warrants may be acquired and transferred by the Board to private parties, and not to the government. Under 12 U.S.C. 343, the Fed already has this power to structure loans as it sees fit in unusual and exigent circumstances. The Dodd bill simply requires that the Senate and House be informed what the Fed has done, and provides no authority to Congress to control it.
So the vaunted Congressional “oversight” consists simply of being informed of what has been done after the fact. But note this well: The bailout bill provides no mechanism for assuring that the federal government acquires any ownership stake in the companies it bails out for the funds it provides. It is not nationalization. What will happen is that the Fed will have the power to preserve and make new kings of finance on the backs of taxpayers.
“What will happen is that the Fed will have the power to preserve and make new kings of finance on the backs of taxpayers.”
It worked for the oligarchs in Russia. Perhaps we will need to change the name of The Department of Homeland Security to the Department of Rodina Security.
from the WSJ Deal Journal (with this thou shall not disagree):
“Perhaps the greater failure by Bernanke, Paulson and President Bush was a reluctance to scare the hell out of people. A leader shows gravitas and concern, not panic. But, perhaps, a little panic wouldn’t hurt. Because you get the sense that Main Street is so busy being angry, that it isn’t sufficiently frightened. The public still doesn’t connect their lives to the crisis. But it should.
Because no bailout bill means that:
By the close of the stock market on Monday, the value of Main Street’s IRAs, 401Ks and pension plans will be worth a lot less than on Friday. How much? Hard to say, but a loss of 20% isn’t crazy.
By week’s end, there is a good chance that a raft of large banks will be taken over by federal regulators.
Within two weeks, as the banks hoard cash, the credit lines on most of Main Street’s credit cards will be reduced, foreclosure proceedings accelerated and car-leasing programs suspended.
Within a month, Main Street won’t be able to buy a home, a car or a tractor unless paid for in cash. As the credit markets shutdown, the mortgage, auto and small-business loan markets will nearly disappear. And the economy will grind to a near halt.
Far fetched? Not at all. It is the absence of credit–not too much of it–that causes great economic depressions.
The credit markets even today are essentially frozen, waiting for a resolution of the bill.
I am not holding my breath waiting for Main Street to come around and support the bill. And I certainly don’t expect Congress and the two presidential candidates to quickly put away their swords.
No, that would be the right thing to do. They will take the nation to the brink this weekend. And then–and only then–will they do the right thing.
This shouldn’t just make you cynical. This should make you question everything about the kind of government we have.”
http://www.nyse.com/attachment/liveflashbell.htm
For those interested in watching a bell ring.
here is an interesting question: will NYC become a sh*thole again?
WaMu/FDIC: did someone post this?
http://www.bloomberg.com/apps/news?pid=20601103&sid=ahGfuxAYf7hA&refer=us
This is all very much like the ‘Sea of Monsters’in the 1968 Beatles film ‘Yellow Submarine’. Psychedelic dinosaurs wander a white landscape peppered with black holes. Big monsters eat little ones. Then comes the vacuum-cleaner monster steadily hoovering up all others until there are none left. It then hoovers up the entire backdrop. Perplexed it looks around for something else to swallow and sees the end of its own tail. Whoosh – it’s all gone. Nothing left.
skep-tic Says:
September 26th, 2008 at 3:53 pm
here is an interesting question: will NYC become a sh*thole again?
skep: I think the answer there is a qualified “no”. Bloomberg alluded to mistakes made in the 1970’s/1980’s that wouldn’t be repeated.
I think one mistake was along the lines of petty crime and general lawlessness. Strained budgets have a way of blowing up these plans though. I think another issue is also about understanding that at some point the tax base needs to be appeased, and if pushed too hard, they will vote with their feet.
Skeptic,
here is an interesting question: will NYC become a sh*thole again?
Not mach of a question. The answer is yes. NYC tax revenue is rapidly evaporating while obligations increase. a more apt question may be how far does it fall?
Ket,
The other question is whether it falls far enough to persuade folks that they should move across the river.
I had 30 minutes to kill yesterday, so I walked from Carnegie Hill to the 125th Street Metro-North station. As a passed, Duke Ellington Square or Tito Puente Circle (whatever it’s called), I saw a well dressed blue-blood looking guy walking out of a project. I’m guessing he scored some smack. Not that it is Buckingham Palaca up there now, but when I was in High School, there is no way I would walk anywhere north of 96th Street except around Mt. Sinai or in the park.
[351]
“By the close of the stock market on Monday, the value of Main Street’s IRAs, 401Ks and pension plans will be worth a lot less than on Friday. How much? Hard to say, but a loss of 20% isn’t crazy.”
Too bad. Markets go up, markets go down. All investments are attached to the hip with inherent risk. How about be duplicate the markets in the mid 60’s. Wake up, if you are you are not risk tolerant, move to t bills. We survived a 90% loss, peak to trough, in the Nasdaq, just a few years back. We’ll survive another hit.
“Within a month, Main Street won’t be able to buy a home, a car or a tractor unless paid for in cash.”
Nothing will change, on Main Street, with a $700B smoke screen. Like a bucket of water in the ocean. However, Main’s Street purchasing power will decline, interest rates will rise and real incomes will be hit harder.
“The credit markets even today are essentially frozen”
Let the banks go to the market, raise cash, dilute shareholder value and cut/eliminate dividends.
“By week’s end, there is a good chance that a raft of large banks will be taken over by federal regulators.”
Why wait until the end of the week? Do it yesterday.
shotgun wachovia marriage with Citi this weekend.
#356
CF– I saw bloomberg on meet the press last week where he said NYC won’t cut back on basic services (read: policing) the way it did in the 70s. As you say, this is a great idea, but the question is how to pay for it if revenues drop massively as they look like they will.
Is it too late to propose a government guarantee of all mortgage debt?
I want to make a comment about a stock in which I have no position, do not intend to have a position, nor do I have any view.
I have rarely witnessed an established stock for a decent sized company with a real business that is not under duress (e.g., financials) get such a one day demolition.
RIMM…..blam!
NYC future?
In NYC the marginal/gentrifying areas will inevitably become sh!tholes again. The nice areas will probably slip a little, but with all the new families that have moved in I don’t think many will uproot themselves unless they have suffered a fairly devastating loss. That being said, there are many suffering devastating losses. Let’s see how things fall out over the next few years.
Oh, wait, I think we’re already halfway there.
year to date, NYC murders are up 9.5% over last year (see PDF below). long way back to early 90s, but still interesting
http://www.nyc.gov/html/nypd/downloads/pdf/crime_statistics/cscity.pdf
I have to state this is for Intel based systems only (mainly laptops) and you would be well advised to IMAGE your disk BEFORE YOU TRY THIS just in case something happens and you cannot load your Vista (IMAGE, IMAGE, IMAGE!!!)
Once you have your disk images precede with the following:
Backup your registry or make a restore point just in case.
Under search: regedit
Navigate to: HKEY_LOCAL_MACHINE\System\CurrentControlSet\Servic es\
Locate: folder “iaStor”
Under “iaStor” you will find a folder named “Parameter” > delete this folder
Locate: folder “iaStorv”
Under “iaStorv” you will find a folder named “Parameter” > delete this folder
Reload Vista
Cheers,
Carl
In the early 90’s the best parts of NYC, prime uptown areas, took a 20-40% price hit, peak to trough.
Citi in talks to take over Wachovia – Bloomberg
so what are the current marginal areas in NYC? will this be the end of the recent upsurge of families with young children in the city?
I just recieved a credit card offer from Wamu, I wrote no thanks and put it in the prepaid envelope they sent me, so now they have to pay the postage, Hah! that’ll teach em.
KL
#332 gary: We still love you, we just wanna hit you;than you can buy us drinks.
Hey, who is going to buy me my beer?
I called the fall of WaMu for at least a year now.
Don’t you be trying to steal my thunder Clot!
:)
SAS
and Citibank is still going down too.
give it some time son…give it some time..
SAS
[374]
SAS, that was it. I forgot your props. Yes, you were putting WAMU in the dead pool for some time.
Props to you sir.
but, you also have to take SAS with the bad.
I just checked on an Etrade account that I forgot I had, and haven’t looked at it for sometime.
yikes, nothing like a few grand being sucked out of you due to forgetfullness.
Sheeeet
SAS
[370]
“Citi in talks to take over Wachovia”
Great, at least all my worthless stock will be consolidated in one place.
OK sas, now I gotta go move my downpayment out of Citi after your Wamu call…
GTG at the offical SAS bunker?????
The cuts are to be made across the board, affecting agencies including the Police Department, which must cut costs by $95 million this year
http://www.nytimes.com/2008/09/24/nyregion/24bloomberg.html?em
[338] tosh
I thought that was “no pooftahs”?
sas (374)-
As I recall, I was way out in front on that call. At least 12 months…probably more like 18.
Lost my pants with my position in Wamu. Put 3K in the stock last week. It was really a coin toss, no guts no glory kind of situation. I got rammed in the back today. I could have used that 3K and go to vegas. What a freakin’ waste,. Feeling miserable. I am never pitting my my money in the stock market, never again.
putting
“GTG at the offical SAS bunker?”
which one?
I got 9 lives and can be at 2 spots at the same time.
SAS
chi (364)-
They have been beaten by AAPL.
Clot,
ok bloke… we will have to share the crown.
SAS
Zack,
I hope you mean that a little more than all the “I am never drinking again”s I have heard.
C going down. Toast.
Money center banks will fail. Not all, but 1-2.
Zack,
I highly recommend investing in hookers and blow. Your still gambling but you get to give the screwing as opposed to receiving it, unless thats your think of course…..
“Citi in talks to take over Wachovia”
Washitty.
Courtesy of Dealbreaker.
Any Friday night failures? Or was the FDIC too busy with WaMu to bother?
About Citi…
I know some people who sit high at Citi.
Last word I got was last spring, this person, told me “they have no idea how much money they are losing” & “they are worried” & “it going to get bad”
when people who sit at those nice long tables. in nice conference rooms, say these types of things, it ain’t good.
you be the judge, just passing along what I know, and when I got it.
and no, I won’t tell you who “they” are..
SAS
Why are the stupid builders rallying on speculation about the bailout? This bailout just helps the banks with their L3 assets.
How does this bailout make Joe SixPack want to buy more houses?
Clot – any light to be shed on this?
121,000 job cuts. this is looking to be worse than late 80’s/early 90’s Wall St retrenchment. I wouldn’t be surprised if the number hits 200k, once you factor in hedge funds, Wamu, Wachovia.
http://www.bloomberg.com/apps/news?pid=20601110&sid=apSGgutpX6f4
there are alot of nice apts for sale all over the place on Wall St.
When the time is ripe, just for yucks, I may pick one up just so I can wake up and goto my window and piss on the head of some bloke in a suit thinking he is Kenneth Cole.
he he… ye
SAS
Is Chase (Manhattan) still a bank? How could they be, I haven’t heard a good OR bad thing about them.
(I just went to their website, it says “Welcome, WAMU customers”)
“US Mint suspends sale of 24-karat gold coins”
http://tinyurl.com/3tnvvk
“When the time is ripe, just for yucks, I may pick one up just so I can wake up and goto my window and piss on the head of some bloke in a suit thinking he is Kenneth Cole.”
SAS,
When the time is ripe, you’ll only be able to piss on tourists.
“When the time is ripe, you’ll only be able to piss on tourists.”
the german ones will like it
From the BP;
Boomer time;
http://bigpicture.typepad.com/photos/uncategorized/2008/09/26/baby_boomer_panic.png
“the german ones will like it”
skep,
Actually, it’s mainly tourists now. Been there lately?
297, Clot: i think i’m disappointed in your friends. either what they want to do should take much longer, or much less long. cough. cough. cough.
“STIGLITZ CALLS BUSH BAILOUT PLAN”
http://tinyurl.com/4ox76x
think I might goto a comedy club tonight..alot of bad news lately.
SAS
SAN FRANCISCO (MarketWatch) — American International Group Inc. (AIG:American) said late Friday the New York Stock Exchange granted it an exemption to issue preferred shares to the U.S. Treasury without shareholder approval. “The Audit Committee of the Board of Directors of AIG has determined that delay necessary in securing shareholder approval prior to the issuance of the Preferred Stock would seriously jeopardize the financial viability of AIG,” the company said in a statement.
#396 Where is pret!!
#403
“Been there lately?”
BC–Not for several months. But the Euros are swarming midtown as well
Chris Dodd & company have inserted an item into the bailout plan to require 20% of the money paid back be put into ACORN. ACORN, the Association of Community Organizations for Reform Now, is the nation’s largest community organization of low and moderate income families. Obama was their lawyer for 7 years. They sponsored the creation of 0 down mortgages. Is Chris Dodd on Drugs?
Chris Dodd is a closet Armeggedonist.
“Some economic historians say a “contagion” effect, where depositors in one bank reacted to neighboring banks’ failures by pulling money, started the great run of the 1930s. To be sure, the Federal Deposit Insurance Corp. makes today’s situation completely different, but that didn’t stop WaMu depositors whipping out $16.7 billion in 10 days.”
WSJ Marketbeat Blog
#375 – so what are the current marginal areas in NYC? will this be the end of the recent upsurge of families with young children in the city?
Marginal in terms of price support? FiDi! LES/Bowery, parts of Chelsea, and Chinatown.
I saw bloomberg on meet the press last week where he said NYC won’t cut back on basic services (read: policing) the way it did in the 70s.
I saw parts of that as well. I think they’ll try not to cut back too far but won’t have a choice. The tax base will take a huge hit and won’t be replaced any time soon. Remember the IBs are now gone, if the securities everyone has been selling are worthless then the revenues everyone had for the past few years were illusory. Not a pretty picture. This was a golden age in Manhattan for some.
I don’t know if I’m the only one but I’ve been seeing a lot more homeless people around the city since the beginning of summer. It’s been very noticable.
This could come in handy at either Armageddon or at your next tailgate.
http://www.carguygarage.com/elporico.html
Cramer says that if bailout doesn’t occur Dow goes to 8368. It’s a very precise forecast I see.
Anyone think the silent bank run is being caused by the short selling ban in the financials?
scenes from a bank:
Me: Need to make a withdrawal.
Her: (that look – ‘another one?’)
Me: Have a lot of people been coming in?
Her: Yes. Tons.
Me: Panic set in yet?
Her: Oh yeah.
She said there were too many people who took out $5k and above today to count.
Where’s Booya Bob?
World’s Largest Chevy Dealer Closes; May Be First of Many
Posted: Sep. 26, 2008 10:09 a.m.
“Mr. Big Volume” has gone silent. The Detroit News reports that the world’s largest Chevrolet dealership is closing its doors, “unable to survive in a weak economy with high gas prices and an inventory heavy on trucks and SUVs.” Bill Heard Chevrolet will close its last 13 branches, which stretch across the South from Alabama to Texas, laying off 2,700 employees in the process. The closure is expected to be one of many we’ll see in coming years.
http://usnews.rankingsandreviews.com/cars-trucks/daily-news/080926-World-s-Largest-Chevy-Dealer-Closes-May-Be-First-of-Many-/
holy crow!
these guys on Phil Donahue were right all along, and watch the stupid sheep like reaction from idiot Donahue and morons in the crowd. wow!
Phil Donahue Show regarding the Militia 1994 Part 1
http://tinyurl.com/48y2dd
Phil Donahue Show regarding the Militia 1994 Part 2
http://tinyurl.com/48y2dd
Phil Donahue Show regarding the Militia 1994 Part 3
http://tinyurl.com/48y2dd
“Phil Donahue Show regarding the Militia 1994 Part 4”
http://tinyurl.com/48y2dd
wow, looks like the militia guys were right all along.
someone should interview these guys today, and shame Phil Donahue.
SAS
“Silver Supports Reinstating NYC Commuter Tax”
http://tinyurl.com/4pm2os
So I’m in Philly and I work in North Wales-Lansdale which is north of the city. I can not believe the amount of businesses that have been around for years that are going out of business. Car dealerships, furniture stores, gas stations, and restaurants all seem to be taking a massive hit.
There are a ton of empty stores everywhere.
September 30, 1999
Fannie Mae Eases Credit To Aid Mortgage Lending
By STEVEN A. HOLMES
In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
The action, which will begin as a pilot program involving 24 banks in 15 markets — including the New York metropolitan region — will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.
Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates — anywhere from three to four percentage points higher than conventional loans.
”Fannie Mae has expanded home ownership for millions of families in the 1990’s by reducing down payment requirements,” said Franklin D. Raines, Fannie Mae’s chairman and chief executive officer. ”Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.”
Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980’s.
”From the perspective of many people, including me, this is another thrift industry growing up around us,” said Peter Wallison a resident fellow at the American Enterprise Institute. ”If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.”
Under Fannie Mae’s pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 — a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.
Fannie Mae, the nation’s biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.
Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.
Home ownership has, in fact, exploded among minorities during the economic boom of the 1990’s. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University’s Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.
In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.
Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.
In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae’s and Freddie Mac’s portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.
The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.
To Wendy (289):
There is no cap on property tax increases in New Jersey.
Vic (399)-
Believe me, 3/4 of the HBs have been insolvent for over a year. They are all in a conspiracy of silence with their bank lenders about the values of their current projects and the underlying loan quality of the financing. It’s a though the bankers have a gun pointed at the builders’ heads and vice versa. If anybody admits to deteriorating conditions, they’ve literally jumped off the cliff together.
The insurance companies are another story. They play much rougher, and a couple of mid-sized builders have been forced into BK by insurers who have lent money for land and projects.
Pension funds are also big funders of HBs, both through stock purchase and direct investment. I’d guess a good deal of the pension money that’s gone the HBs’ way is now gone forever, except the pension funds don’t know it yet…since the banks and HBs are keeping their little pact of silence.
Give it time. As Mike Morgan often says, it will all degenerate to nothing. The whole ball of string will eventually unravel.
alia (408)-
I’ve been waiting all day for your riposte. :)
sas (410)-
Just don’t go all Vietnam once you’re there.
Large discounts hit home sellers
A moribund market has meant falling sales and lower prices
Home sellers are being forced to accept offers on average 9% below their asking price, said the Royal Institution of Chartered Surveyors (Rics).
The gap between asking and selling price is widening as the property market downturn worsens, Rics added.
Property prices have fallen by 11% in the past year, according to major lenders, while sales have fallen by more than half.
The available evidence suggests that prices and sales will fall further.
“With housing transactions currently at a 30-year low, many vendors are being forced to lower their asking prices to achieve a sale in an ever shrinking market or they are being forced to rent their property until the market picks up,” said Simon Rubinsohn, RICS chief economist.
“The gap between asking prices and selling prices could widen in the coming months as the downturn in the economy becomes more visible, he added.
Big gaps
The smallest gap between asking and selling price was in Scotland where house prices are still rising.
But in the North of England, the discount between asking and selling price was the largest, at 12.5%.
Those vendors in Wales, the West Midlands and East Midlands, and the North West were accepting offers, on average, 10% below their asking price.
And the gap was smaller in London, at just 8.5%.
Rics said this was because London’s economy was more diverse, with a large jobs market, giving sellers “more room for optimism” about the price they could hope to achieve when selling a house or flat.
However Mr Rubinsohn warned this could change.
“The London market could be adversely affected as employment in the financial sector drops off,” he said.
BC (411)-
What’d I say? The 85 bn would be gone this week?
They’re tapped out.
430 – Clot.
Here are Bob Toll’s transactions.
11-Sep-08 TOLL ROBERT I
Officer 216,800 Direct Automatic Sale at $25.18 per share. $5,459,024
9-Sep-08 TOLL ROBERT I
Officer 500,000 Direct Automatic Sale at $25.67 – $26.19 per share. $12,965,0002
8-Sep-08 TOLL ROBERT I
Officer 500,000 Direct Automatic Sale at $26.02 – $26.72 per share. $13,185,000
Certainly, a huge vote of confidence. Why cant the institutional dopes see this?
is the fed going to shoot another hostage this weekend to get the bailout passed?
Vic (435)-
Because those institutions are holding billions of HB stock and have even more tied up in direct investments.
And, don’t get me started on the billions they have tied up in MBS, that are now already close to worthless and levered against a rapidly-depreciating asset class. Once you put a sell call on the HBs, you’ve pulled the rug out from under your own marked-to-blackbox trash.
Where you sit is where you stand..
wachovia and standandar
Morgan, positioning his clients for Monday. Looks like Fidelity has slapped on a 30% trading cap during aftermarket hours:
Fidelity v. Ameritrade
I am advising all clients to transfer their accounts out of Fidelity to Ameritrade, immediately.
If you trade with Fidelity, you need to know that you are restricted to a 30% cap when entering a trade when the markets are closed. What this means is, if a position closed at 100, and we think the market is going to move big and lock us out of electronic trading like it did in 1987, we can only enter a trade electronically for up to 130 or 70, depending upon whether we are long or short. With most positions, that would not matter, but with double short ETFs or extreme positions, that will be a big problem if we are locked out of trading during the trading day.
Therefore, we are recommending that all clients transfer their accounts to Ameritrade immediately. If you have more than $500,000 in an account, you may want to consider two accounts or using two brokers.
I did speak with the Fidelity people, and they advised me there was no way around that policy.
We have a direct contact for our clients at Ameritrade who will assist you with the transfer. He is first class, and you can talk to him like he is family.
kettle1 Says:
September 26th, 2008 at 3:35 pm
Maybe i missed something, but where did all of WAMU’s money go? They have about 500 billion in combined asset and deposit value. JPM only paid 1.9 billion for 188 billion in deposits!!! I must be missing something here as it seems a lot of assets just disappeared……
Deposits are liabilities for a bank, so presumably 312 billion of sr. debt, sub, pref, and shareholder equity went poof.
SAN FRANCISCO (MarketWatch) — Banco Santander SA , Wells Fargo & Co. and a handful of other suitors are in early talks with Wachovia Corp. to buy the bank, The Wall Street Journal reported late Friday on its Web page, citing a person familiar with the situation. Earlier, The New York Times reported that Citigroup Inc. was in early talks to buy the troubled bank.
Stu…Reagarding post #330, A very good list altho I must take exception with #11…while capes will always be the gold standard for a true POS, let us not forget the split and the grandaddy of all bad houses, the bilevel. POS’s all.
as usual, you will feel the sky is falling when you read this blog. but SKF/SRS really sucks.
Clot,
“Tom (301)-
What property?”
See 225
bi: Just wait. REITs are a flight to safety for their dividends. Once the dividends get cut when the rent checks stop coming in…lookout! If you do not understand how CRE works I advise you to stay far away!
rhymingrealtor,
What info? I posted a lot of crap on here today.
Can you email me and tell me what problem you had posting to the site please?
email is info at my domain
“you will feel the sky is falling when you read this blog”
thats because…it is,
and the mainstream media & those 2 puppets (Omama & McStain) are blowing smoke up your skirt telling you its ok, now watch football, goto WalMart, and feel good that your govt loves.
SAS
I’m watching the comedy club right now:
the presidental debates. Two fkn losers.
You will hear them not address the devaluation of the dollar, and the hijacking of your finances by the private federal reserve.
SAS
“There is no cap on property tax increases in New Jersey.”
Didn’t they just sign in a new 4% cap on property taxes? There were alos a lot of cuts in the budget for property tax relief.
Victorian,
If the SEC can put a ban on short sales to keep stocks up, they should also ban insider sales on the same companies in my opinion.
431, clot
oh dear. you gotta warn me in advance when i’m supposed to have a rapier wit.
Obama said “orgy”
Tom (444)-
I don’t have access to NJMLS, but based on the info in that link in #225, it looks like you might be able to cash flow it positive, with the assumptions you provided and a rent of $2,500 or better. I certainly like its potential cash-on-cash return.
Negatives? I hear Lodi is not exactly posh…and an $8,500 tax bill on a property that could be taken down for a little over $200,000 is troubling.
alia (451)-
No pressure. I liked your answer, actually.
In my sick world, rapier wit is required every second, every day, even while sleeping.
VPILF is having to be coached- hourly- so that she can step out again in a week or two and deliver less that 45 minutes of rapier wit…only to be sequestered again until election day.
And VPILF only has to deliver her rapier wit against a debate opponent who has the IQ of a doorknob.
stu (445)-
Let bi burn. In the environment we’re entering on Monday, he won’t make it through a week before he’s margined out.
REITs are just like every other stinking part of the RE/finance complex. If an investor wants to take on a proven performer like Mort Zuckerman (BXP), that investor does so at his own risk. Zuckerman will make it through whatever crisis comes along…and come out the other end smarter, stronger and bigger. On the other hand, the average REIT has a heavily-cooked book that hides vacancy, mismanagement, insane projections and unsustainable dividends.
Stu (445)-
And, CRE is a stinking POS.
“as usual, you will feel the sky is falling when you read this blog.”
bi,
Is falling? Thankfully, Noah’s meteorologist didn’t forecast a slight drizzle.
I am proud to watch the two clowns on TV tonight, knowing that I wouldn’t support either damn one of them…even at gunpoint.
Schmucks, both of them.
Ohdrama NOBAMA
s/l
Drag’ em Off The Interstate, Sock It To ‘Em J.P. Blues
Santander? Wachovia?
Maybe Santander wants to learn new ways of losing money even faster on mortgage lending to deadbeats, against properties with no intrinsic value.
They’ve jumped in and picked up two dying UK mortgage outfits this year. Wachovia may prove to be the rat they can’t swallow.
“Negatives? I hear Lodi is not exactly posh”
Clot,
Certainly not Posh Spice. The only reason to step foot in the town is NJDMV and Satin Dolls. Come to think of it, town officials would be wise to try to have the short sale ban extended to include this pos town.
Do the Satin Dolls girls work at DMV?
“Hugh Hefner to sack Playboy bunnies amid financial crisis”
http://www.telegraph.co.uk/news/newstopics/howaboutthat/3077911/Hugh-Hefner-to-sack-Playboy-bunnies-amid-financial-crisis.html
Re: REITS
Don’t disagree with anyone’s assessment of the outlook on CRE but if – if – one wants to play the REITs in this environment look at the healthcare ones.
Facilities are usually nursing homes, ambulatory surgery centers, etc. Most of their underlying rents come from insured procedures or Medicare. Plus they’re specialized facilities, meaning the ‘tenants’ can’t really just up and leave to hop across the street for a lower rent (costs alot to move those 2 ton MRI units).
Just a thought. All disclaimers apply.
“Do the Satin Dolls girls work at DMV?”
Clot,
The first bomb is reserved for Trenton, the 2nd for DMV, Lodi. Another thought, the foreclosure bus tour, of NNJ, can arrange for a stop at Satin Dolls.
“Lodi”
I opened my mouth one night too much in the ballroom, got jumped, beaten, & dragged off to Lodi and almost left for dead back in the late 70s.
SAS
sas (467)-
Talk about stuck in Lodi again…
BC (466)-
I will MC that bus tour…even though I know nothing about Bergen RE and still get lost even looking for the Meadowlands.
Is anybody in Upper Saddle River or Alpine getting foreclosed yet?
Flexible spending at Wamu;
http://www.youtube.com/watch?v=laot_Eomr3s&eurl=http://www.wallstreetfighter.com/2008/09/8-WaMu-commercials-that-seem-funny-now.html
back then,
Lodi was the NNJ mafia’s local dumping ground. I learned that well when 3 blokes in suits and Grease hair approaced me and I drunk as a skunk.
SAS
“I opened my mouth one night too much in the ballroom, got jumped, beaten, & dragged off to Lodi and almost left for dead back in the late 70s.”
SAS,
The dead,not yet accounted for, outnumber the living by 1.5-1, in Lodi.
http://www.youtube.com/watch?v=laot_Eomr3s&eurl=http://www.wallstreetfighter.com/2008/09/8-WaMu-commercials-that-seem-funny-now.html
JB,
470 in mod. Can you move it up.
Did anybody notice that we had no $700b bailout passed and we’re all still breathing?
Yeah, some company’s payroll might be delayed. Some bounced checks.
I’m not feeling the crisis vibe here. I’m just not feeling it. How do I get the sense of urgency back?
what were we doing in Lodi or that area?…I have no idea.
I think a call girl was putting us on a goose chase…oh hell, I forget.
SAS
“I’m not feeling the crisis vibe here. I’m just not feeling it. How do I get the sense of urgency back?”
don’t worry, when bread cost $7/load and gas $10/gallon, that feeling will come back real quick.
:)
SAS
Should I blog more about politix?
SAS, that’s not gonna bother me. I’m another one that’s been in hell before. I’ve waded in floating bodies. Lost almost everything in dot.com.
OMG. Met’s lose, we flick to Cramer. Cramer’s talking about the hidden bank runs going on right now. The dow is headed to 8,373 absent the bailout.
Pat (477)-
You lose all the poignant drama of the bank queue when everybody can move money out of banks via the intertubes.
I’d guess a lot of loot is moving out of Wachovia right about now.
Didn’t Cramer say the bottom was in three weeks ago? Why does anybody listen to that loudmouth jack@ss?
Yeah, I wanted to see the queues, too. Do miss brick and mortar.
Clot,
I just picked the first one, I didn’t go through the list to pick out one I thought would be the best deal. Did it that way so that I’m not giving anyone advice but to analyze one picked just based on convenience.
There might be opportunities but you’re right on there being risk. A lot depends on where the market is going. It may be cash flow possitive now but who knows what happens later.
The only point I’m trying to make is that I think they’re worth a look. What concerns me is the discounts banks are willing to give. Makes me wonder if they know something we don’t.
I posted on a story concerning an investment firm trying to get into the rental market through foreclosures and it’s not going great for them. But they did say they’re competing with mom and pop investors who have it easier and cheaper.
Not saying people should run out to do it.
$64 million of that $300 billion dollars allocated under Congresses homeowner assistance legislation has been allocated to help NJ deal with foreclosures and abandoned property.
“How to Identify a Bank Likely to Fail”
http://tinyurl.com/3hp97c
O.K. Cutest thing I’ve heard today.
David Letterman reports some positive news that one of the Lehman Brothers has been adopted by Angelia Jolie.
If a bank goes under, what happens to the saftey deposit boxes?
Regarding property tax caps, here’s a link
http://www.politickernj.com/governors-press-office/23478/homeowner-property-tax-relief-its-way
http://sunfell.wordpress.com/2008/09/11/time-to-choose-citizen-or-serf/
Tom (481)-
“What concerns me is the discounts banks are willing to give. Makes me wonder if they know something we don’t.”
It is the rare bank that has a clue. The smart bank is the one that takes today’s market price and undercuts it by at least 10%, if not 25-30%. Most banks take forever to rehab their REO and prep it for sale; then they turn it over to agents who don’t even bother to photograph the dumps with their cell phones.
Any cubicle jockey- given a 10th grade education and a copy of the bank’s balance sheet- can parlor game the outcome of this whole mess.
d2b (485)-
What’s in it?
Theoretically, that is.
Clot,
What I meant by that was that the banks have done a big 180 at auction.
They have lost confidence but now want the taxpayers to take on enourmous debt to increase consumer and investor confidence.
So I wonder if they want to increase consumer confidence in the short therm to get some cash and bad debt off their books, sell off their reo’s and brace for impact.
I think there was a clear winner of the debate and it was….
Jim Lehrer.
I liked that he let discussions continue I wish they could extend the time limit.
I am against time tables for withdrawl from debates.
Mc-C’s lack of debate prep really showed in that first half an hour. How anyone who is not a ploicy wonk or who follows politics closely could make heads or tails out of much he was saying is beyond me.
I trust that he knows the answers but, he better learn to convey clearly that he does.
http://online.wsj.com/article/SB122243266787878709.html
“The face-off reflected years of tension between the Bush White House and House Republicans, and exposed the ideological differences within the Republican party and the role of government in free markets.”
These fiscal conservatives are just trying to be heard after years of having no leadership. All of the ills of the economy have been laid at the Republican’s feet as though no Democrat contributed to the demise of Freddie and Fannie. I imagine it also sticks in their craw that one the lead negotiators in the bailout plan is none other than Barney Frank.
At least the process slowed and John Q is finally hearing a few details reguarding the country’s financial problems on the nightly news.
Shore,
What I don’t understand is why he was so unprepared? The financial crisis shouldn’t have taken any more time away from him than it did O. Neither one of them serves on relevant committees.
I’m not sure he knows the answers. I think he knows what he knows and relies on others to fill him in on the rest, but it’s not so much that he learns from others but memorizes. At least that’s the perception I have been getting from watching his campaign. It seems like a lot of times he had to say he’d get back to reporters. That’s fine but it just seemed like a lot and by now he should know.
When it comes to the military or foreign affairs he knows a lot and has done a lot for a long time. When it comes to other issues he was off the mark. He’s been talking about earmarks for so long, you would think he would not make such a big gaff as to clame they have trippled in the past 5 years when they are actually down like 24% vs 3 years ago.
M was talking as if he was talking to his base, not to a mixed crowd. Maybe I’m reading into it but it seemed like he was confused when he said some of his buzz phrases and didn’t receive roaring applause.
I don’t think he did as well on the current economic issues. For that he should have been prepared since he suspended his campaign for 72 hours to address that. Maybe O is just a quicker study and that might be important with the fast pace at which things move these days.
Like I said I liked the format, might have been better seated at a table facing each other. Then the post debate show can be a game of heads-up NL Hold’em.
McCon looked like a tired old doofus.
anyone notice who B.O. (not body odor) kept calling McCon the wrong first name?
#494 Tom,
And they could thumb wrestle for a tie breaker.
(493)..one OF THE lead negotiators..
http://www.businessandmedia.org/printer/2008/20080924145932.aspx
bairen, I missed that what did he call him?
#498 Tom
I heard him say Tom at least once. He also called him Jim a few times. At first I thought O was talking to Lehrer, but when I heard it again I realized he was talking about McCon.
New game…
With all the turmoil in the market today and for any of you who have money left, be aware of the next expected mergers and get in on the ground floor so you too can make the big bucks.
1. Hale Business Systems, Mary Kay Cosmetics, Fuller Brush, and W.R. Grace Co. will merge and become: Hale, Mary, Fuller, Grace
2. Polygram Records, Warner Bros., and Zesta Crackers join forces and become: Poly, Warner Crackers
3. 3M merges with Goodyear and becomes MMMGood
4. Zippo Manufacturing, Audi Motors, Dofasco, and Dakota Mining will merge and become: ZipAudiDoDa
5. FedEx is expected to join forces with its competitor UPS and become FedUP
500 Cindy
That was cute. Unfortunately, Polygram ceased to exist years ago. I think it sold out to Seagrams.
OK guys, what do you think? Wachovia is offering a 12 month CD for 4.25% Do I roll the dice and count on the FDIC?
Cindy (497)-
Barney Frank is another one of the crooks who would be a waste of a bullet.
I’d say turn a pack of dogs on him, too…but the dogs might not want to get near him.
stater (502)-
Take the money to AC. At least if you lose it, you’ll have some fun.
If Wachovia spits the bit and no other bank is there to scoop them up, they will tap out the FDIC.
I wonder how well Sheila Bair is sleeping these nights.
Santander…BWAHAHAHAHAHAHA!!!
Maybe Santander wants in, so they can jump on the too big to fail/bailout gravy train.
For all those eager to beat up the current Administration at every turn: h++p://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B63&sec=&spon=&pagewanted=print
I am not exactly a supporter, but fair is fair.
# sas Says:
September 26th, 2008 at 11:01 pm
“I’m not feeling the crisis vibe here. I’m just not feeling it. How do I get the sense of urgency back?”
don’t worry, when bread cost $7/load and gas $10/gallon, that feeling will come back real quick.
:)
SAS
From what I am hearing on this board, that is going to happen bail out or not.
Sheila’s not sleeping too well these days, but I think Congress would step in with whatever it took to save the FDIC. If it didn’t, there really would be um, “civil unrest.” We’ll see – you’ve been right every other time.
Outofstater,
the new WaMu/JPM bank is offering 5%.
SAS
Still trying to understand the system…
Read at another blog…That what we are seeing now is the effective leverage of fractional reserve banking in reverse.
530B in write downs but 19T in equity losses… 35-to-1
This person argues that we have to allow these outfits to fail because we do not have the capital to support a 35-to-1 unwinding
“From what I am hearing on this board, that is going to happen bail out or not”
inflation is going through the roof, if this bail out passes, its into the stratasphere.
Either way, I hope your prepared.
SAS
(501) Lost
“Unfortunately, Polygram ceased to exist years ago. I think it sold out to Seagrams.”
Lost, there must be a joke in there somewhere…
(510) OOPPSS 1.9T in equity loss – not 19T
Anyone hear of Fred Harrison and his bubble predictions before? Hasn’t been getting the same attention as Roubini.
Apparently he predicted this bubble in 1997 and the previous one as well.
Talkas about Citigroup a lot in the video at the end of the post.
Beach Haven just made Yahoo’s list of “America’s Surprising Foreclosure Hotspots”.
stater (508)-
Not suggesting that FDIC wouldn’t be recapitalized, and pronto. I think you’d see immediate action on that one.
However, that action would probably have to be in the hundreds of billions. I think we also have to realize that it’s a “when” proposition, not an “if”.
Quite a lot to be putting on top of what’s become a very hefty tab.
bairen,
Didn’t notice that, but then again didn’t notice McCalln not making eye contact either.
Although I did keep thinking to myself “Boy I sure bet he’d like to sit down.”
C will be toast. Sooner than any of us think.
JPM has a googleplex in derivatives. Think they even know what their net position is? I don’t.
Chinese regulator calls US lending ‘ridiculous’
Chinese calls bailout as fast food and US should learn from chinese slow cooking and slow food !!! I don’t think they will buy our MBS again !!! Treasuries hmmm maybe.
http://biz.yahoo.com/ap/080927/as_china_wef_credit_crisis.html
The debate last night guaranteed the Bush view that we are “falling off a cliff”. Obama still wants to pour money into ACORN so poor people can own McMansions, and McCain is imbedded in fighting Global Terrorism. Neither has addressed the issue of the US being Bankrupt. Simple solution for McCain is bring back the draft for a cheaper Army, and Obama tell poor people they can’t afford McMansions until they work their way up from Poverty.
#517 Tom,
I just figured it was past McCon’s bedtime.
OK… Wachovia will be taken out this week.
“Wachovia Suitors May Delay Bidding After Dimon’s Deal for WaMu ”
“WaMu’s takeover has proven that there’s an easy way, if the FDIC is involved,” said Sean Egan, president of Egan-Jones in Haverford, Pennsylvania. “You kick the hell out of the equity holders and bondholders. That may be the new model for bank takeovers.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=as9sF0RrMSTg&refer=home
The Debates last night reinforced the Bush view that we are about to fall off a cliff. McCain wants to continue the Global War against Terrorism. Obama wants to shift the resources to Acorn to buy the poor & illegals McMansions. Neither acknowledges that the US is Bankrupt or offers a solution to that overarching problem. One solution would be to draft the poor & illegals. They would provide cheap labor in the War against Terrorism and no longer need a McMansion.
Grim,
This week’s report from the hinterlands…
Hunterdon County Comp Killers:
GSMLS recorded just 11 sales in Hunterdon County this week. Two made this list.
MLS#: 2542282
38 LOCKTOWN SCHOOL ROAD
Delaware Twp
SLD: 03/14/05 $423,750
OLP: 06/27/08 $389,900
SLD: 09/22/08 $362,500
DOM: 57
MLS#: 2538859
20 NEWCASTLE WAY
Raritan Twp
SLD: 12/01/05 $799,900
OLP: 06/21/08 $752,000
SLD: 09/25/08 $715,500
DOM: 67
Scaling Back in Suburbia .
http://www.nytimes.com/2008/09/28/realestate/28njzo.html?_r=1&oref=slogin&ref=realestate&pagewanted=print
FINALLY, the McMansion may have reached the limits of its popularity in New Jersey, where it has seemed to rule the residential market with unshakable authority for many years. Whether that setback is temporary or permanent remains to be seen.
The total inventory of houses now on the market would take 10.9 months to sell at the current level of demand, if no other houses were put on the market in that time, Mr. Otteau said. For houses priced at $1 million to $2.5 million, the inventory would take 16.9 months to sell; for homes over $2.5 million, the wait would be 29.2 months.
“But actually,” Mr. Otteau said, “many conditions have converged to affect the market for so-called luxury homes, particularly in those areas not along major mass-transit corridors.” He mentioned the rapid escalation in the cost of energy and gasoline, as well as increasingly restrictive zoning — for instance, some local “anti-McMansion” ordinances, which limit the footprint and height of new homes.
Perhaps the most important factor, Mr. Otteau said, is the shrinking pool of likely buyers.
Since 2000, the state has lost 130,000 jobs in the highest-paying categories and added roughly the same number in the lowest-paying categories — service positions. In addition, widespread layoffs on Wall Street have greatly affected the residential market in many upscale commuter communities in New Jersey.
“Last, but not least,” he said, “we have a growing fiscal conservatism amongst baby boomers as they get closer to retirement. Historically, this generation of consumers created the greatest demand for luxury-priced homes.
“When you are 45 and you feel certain your income will continue to rise, you are more willing to take the plunge than when you’re 55 and expect your income to decline in the near future.”
A number of architects in the state said they, too, were seeing a significant decline in demand for the McMansion, which most defined as a house with 4,000 or more square feet of living space, occupying a disproportionate share of a lot and featuring formulaic elements like two-story foyers, Palladian windows, granite counters, and “great rooms” with fireplaces.
Once Again they key point:
Since 2000, the state has lost 130,000 jobs in the highest-paying categories and added roughly the same number in the lowest-paying categories — service positions. In addition, widespread layoffs on Wall Street have greatly affected the residential market in many upscale commuter communities in New Jersey.
#337 & 342
Your names are Toshiro and Morpheus…?
That will be a problem. We’re all named Bruce here…
My blood is boiling, boiling.
I’ve just heard on wabc radio (770 am) an audio clip of a 2005 where:
a) Barney Franks says he is opposed of Fannie/Freddie regulation
b) Chuck Schumer saying both GSE’s have no financial concerns
The radio host this morning is Mark Simone.
Can someone please find this audio clip and post it here, pass it along to Congress.
This is a sham. The fleecing of America.
“M was talking as if he was talking to his base, not to a mixed crowd.”
Both the base and a senate hearing, where one need only use buzzwords and acronyms to get people to understand what you are saying. Mrs. shore and I cringed, frankly, at both of their performances during the first half hour; however, in the first half of the debate M was bad. I was so unimpressed by both of them, I fell asleep.
M should have prepared and O should have had more to say with 3-days prep under his belt. If this is the best our nation can produce for the chief of the exec branch….
Iwish I had stayed awake long enough to have seen the exchange on Iran:
http://www.chicagotribune.com/news/columnists/chi-kassdebatemccainobamasep28,0,6575954.column
chicagotribune.com
Smooth sailing for Obama until debate arrived in Iran
John Kass
September 28, 2008
For most of the debate Friday night, Sen. Barack Obama was the one who presented himself as presidential and strong. And Sen. John McCain appeared to be the guy who was wavering.
Then came Iran.
That’s when Obama’s mouth dried up, and he appeared to be standing alone at that terrible border between presenting yourself as presidential and dealing with that knock on the door in the middle of the night, with the aide outside saying, “Mr. President, the planes are in the air.”
I’m not saying Obama failed, or that McCain won. If you’re an Obama supporter, your guy won. If you’re a McCain supporter, your guy won. We’re stubborn Americans now.
It’ll all be decided anyway on the Sunday morning talk shows, as the Beltway punditry tap-dances its way into a consensus, that point at which they drink from the cup of common wisdom and some line is pulled out from Friday’s debate, a line to be prattled on by some politically active late-night TV host, just before the host introduces Dr. McSteamy to talk about his stupid show about the hospital and the love affairs and the hot nurses.
But as I write this, the debate has just ended, and I have turned off the spinners on television, and I’ll most likely be embarrassed by my words, for not waiting for that cup of common wisdom to pass my desk and offer safety.
Still, I thought that Obama looked so good, and so presidential, up until that terrible moment for him, the Iranian moment, when he could have used a pitcher of water to wash his tongue down from the roof of his mouth.
Up until then, Obama had that baritone voice working, so clear and forceful. He looked directly into the camera, not at moderator Jim Lehrer, because he probably already has Lehrer’s vote. The voters Obama seeks live in that mythic place, that small sliver of allegedly undecided Americans who insist they haven’t made up their minds as yet.
Who are these undecideds? Perhaps they were those 10 pleasant people sitting with those crazy dials in their hands on CNN, turning it one way when they heard a comment they liked, turning it another when they disapproved, making green lines crawl across the bottom of the screen so that all the undecideds would know how to feel about what they were watching.
The CNN folks with the crazy dials in the hands looked as if they had just returned from a public radio pledge drive, so sensible and earnest, and I’m sure there are more of them out there. By the way their dials were twisting, Obama was reaching right into their hearts, proving that he could appear presidential, while McCain’s green line was rather flat.
McCain rambled at times, talking about how the Republicans and Democrats in Washington saw the economy infected with the credit crisis, how “a lot of us saw this train wreck coming.” To reinforce his age, he stubbornly cemented himself firmly in the last century, launching into a discussion of Eisenhower on the eve of the invasion of Normandy, the general writing two letters, one of congratulations and the other of resignation if the invasion failed.
Through it all, Obama was cool and smiling at the oldster, and there was no sweat on the man, even as McCain mentioned the word “corruption” about seven times. McCain didn’t know about the Sunday Tribune’s report that Obama’s convicted real estate fairy Tony Rezko is thinking about cooperating with the feds.
Obama was so full of grace and fine debate tactics and elegant body language, measured tones telling those so-called undecided voters out there that he was the one they’ve been waiting for.
Unfortunately, events have a way of overtaking drama, no matter how artfully produced, and McCain got on Iran and rode Obama down.
McCain hammered at Obama’s insistence that he would sit down with the crazed Iranian President Mahmoud Ahmadinejad without preconditions. McCain said this proves Obama has demonstrated a dangerous naivete and a willingness to legitimize Ahmadinejad’s standing, even as the Iranian boss develops nukes and threatens to wipe Israel off the map.
“What Sen. Obama doesn’t seem to understand, when you sit down across the table from a person who has said Israel is a stinking corpse, it is not only naive, it is dangerous,” McCain said.
Obama protested, but not too much.
“So let me get this straight,” McCain said, still on the attack, “you sit down with Ahmadinejad and he says, ‘We’re going to wipe Israel off the face of the Earth,’ and you say, ‘No, you’re not.’ Oh, please.”
Through it all, Obama appealed to Lehrer that he had something to say, and McCain kept pounding him to the body, and Lehrer said he had a question to ask, and Obama deferred. He let Lehrer change the subject.
It was a fine debating tactic, certainly a careful retreat from danger, but it is at such moments in debates where we learn the most about those who would lead.
good little video
“Burning Down The House: What Caused Our Economic Crisis?”
http://tinyurl.com/3fdyva
Courtesy of CR:
http://www.nysun.com/real-estate/wall-st-woes-give-rise-to-talk-of-black-september/86555/
As layoffs begin on Wall Street as well in the professional service industries, the real estate industry is bracing for a wave of office space to hit the market, followed by a precipitous fall in rental rates and a surge in vacancy. Even the most optimistic real estate executives are finally beginning to worry, with many dubbing this month “Black September.”
Shore – agreed. Even more depressing, both appear better than the last loser the nation voted for TWICE to hold the position.
People who would be actually qualified to do the job are too smart to want it.
http://www.chicagotribune.com/news/columnists/chi-kassdebatemc*caino*amasep28,0,6575954.column
remove * to activate link
chicagotribune.com
Smooth sailing for Ob-ama until debate arrived in Iran
John Kass
September 28, 2008
For most of the debate Friday night, Sen. Bar-ack Ob-ama was the one who presented himself as presidential and strong. And Sen. John Mc-Ca-in appeared to be the guy who was wavering.
Then came Iran.
That’s when O’s mouth dried up, and he appeared to be standing alone at that terrible border between presenting yourself as presidential and dealing with that knock on the door in the middle of the night, with the aide outside saying, “Mr. President, the planes are in the air.”
I’m not saying O failed, or that M won. If you’re an O supporter, your guy won. If you’re a M supporter, your guy won. We’re stubborn Americans now.
It’ll all be decided anyway on the Sunday morning talk shows, as the Beltway punditry tap-dances its way into a consensus, that point at which they drink from the cup of common wisdom and some line is pulled out from Friday’s debate, a line to be prattled on by some politically active late-night TV host, just before the host introduces Dr. McSteamy to talk about his stupid show about the hospital and the love affairs and the hot nurses.
But as I write this, the debate has just ended, and I have turned off the spinners on television, and I’ll most likely be embarrassed by my words, for not waiting for that cup of common wisdom to pass my desk and offer safety.
Still, I thought that O looked so good, and so presidential, up until that terrible moment for him, the Iranian moment, when he could have used a pitcher of water to wash his tongue down from the roof of his mouth.
Up until then, O had that baritone voice working, so clear and forceful. He looked directly into the camera, not at moderator Jim Lehrer, because he probably already has Lehrer’s vote. The voters O seeks live in that mythic place, that small sliver of allegedly undecided Americans who insist they haven’t made up their minds as yet.
Who are these undecideds? Perhaps they were those 10 pleasant people sitting with those crazy dials in their hands on CNN, turning it one way when they heard a comment they liked, turning it another when they disapproved, making green lines crawl across the bottom of the screen so that all the undecideds would know how to feel about what they were watching.
The CNN folks with the crazy dials in the hands looked as if they had just returned from a public radio pledge drive, so sensible and earnest, and I’m sure there are more of them out there. By the way their dials were twisting, O was reaching right into their hearts, proving that he could appear presidential, while M’s green line was rather flat.
M rambled at times, talking about how the Republicans and Democrats in Washington saw the economy infected with the credit crisis, how “a lot of us saw this train wreck coming.” To reinforce his age, he stubbornly cemented himself firmly in the last century, launching into a discussion of Eisenhower on the eve of the invasion of Normandy, the general writing two letters, one of congratulations and the other of resignation if the invasion failed.
Through it all, O was cool and smiling at the oldster, and there was no sweat on the man, even as M mentioned the word “corruption” about seven times. M didn’t know about the Sunday Tribune’s report that O’s convicted real estate fairy Tony Rezko is thinking about cooperating with the feds.
O was so full of grace and fine debate tactics and elegant body language, measured tones telling those so-called undecided voters out there that he was the one they’ve been waiting for.
Unfortunately, events have a way of overtaking drama, no matter how artfully produced, and M got on Iran and rode O down.
M hammered at O’s insistence that he would sit down with the crazed Iranian President Mahmoud Ahmadinejad without preconditions. M said this proves O has demonstrated a dangerous naivete and a willingness to legitimize Ahmadinejad’s standing, even as the Iranian boss develops nukes and threatens to wipe Israel off the map.
“What Sen. O doesn’t seem to understand, when you sit down across the table from a person who has said Israel is a stinking corpse, it is not only naive, it is dangerous,” M said.
O protested, but not too much.
“So let me get this straight,” M said, still on the attack, “you sit down with Ahmadinejad and he says, ‘We’re going to wipe Israel off the face of the Earth,’ and you say, ‘No, you’re not.’ Oh, please.”
Through it all, O appealed to Lehrer that he had something to say, and M kept pounding him to the body, and Lehrer said he had a question to ask, and O deferred. He let Lehrer change the subject.
It was a fine debating tactic, certainly a careful retreat from danger, but it is at such moments in debates where we learn the most about those who would lead.
Where’s Pret? I’m sure there’s an explanation for this “declining rents” story.
minus the McStain part
but, the stuff about Omama is spot on
SAS
I’m going to give the black mark to Mac though. Not for his debate performance but for his VP, who appears to be hand picked with the sole purpose of setting women in politics back 30 years.
Perhaps Clots guru Mike Morgan is right. The R’s are desparately trying to throw the election.
Hey, at least the VP debate will be a riot!
Here is a sampler of what is to come…
““That Alaska has a very narrow maritime border between a foreign country, Russia, and on our other side, the land — boundary that we have with — Canada,” she replied. She mentioned the jokes made at her expense and seemed for a moment at a loss for the word “caricature.” “It — it’s funny that a comment like that was — kind of made to — cari — I don’t know, you know? Reporters —”
Ms. Couric stepped in. “Mocked?” Ms. Palin looked relieved and even grateful for the help. “Yeah, mocked, I guess that’s the word, yeah.”
Ms. Couric pressed her again to explain the geographic point. “Well, it certainly does,” Ms. Palin said, “because our, our next-door neighbors are foreign countries, they’re in the state that I am the executive of.”
Ms. Couric asked the governor if she had ever been involved in negotiations, for example, with her Russian neighbors.
“We have trade missions back and forth,” Ms. Palin said. “We — we do — it’s very important when you consider even national security issues with Russia as Putin rears his head and comes into the airspace of the United States of America, where — where do they go? It’s Alaska. It’s just right over the border.” “
By the way, anyone action on citi in the death pool?
I think I remember seeing some data and their numbers for subprime mortgages was very big.
While BofA and JPMorgan is picking up the roadkill, Citi seems to be very quit.
The WaMu failure reminded me that in 2003 Citigroup bougt Washington Mutual Finance, which was WaMu’s subprime lending
Victorian – It’s a credit to Couric that she didn’t jump up and smack that woman on the head. Or even that she managed to keep her face blank while listening to the incomprehensible babbling.
531,
That can’t be. That contradicts everything pret spewed for the last year. I guess the same turnip truck that brought him to NY is now traveling west.
sorry about the bad typing on that last one. Was using my thumbs. Not cause I’m on a blackberry. bairen’s thumb wrestling comment made me want to start training again.
“I’d say turn a pack of dogs on him, too…but the dogs might not want to get near him.”
Clot,
Coin toss, depends on the gender of the dog.
“both appear better than the last loser the nation voted for TWICE to hold the position”
He, the current loser, can’t leave fast enough for me. I am a lifetime R and worked on his dad’s campaign. But the current guy is pathetic. Before 9-11 he was lost, clueless, and unpopular. 9-11 gave him a bit of a boost and he did some good after he got rid of the deer-in-the-headlights look and got back to DC. But, he has been a one trick pony, and has utterly failed the nation in myriad respects. If he had any honor, he would recognize that he is again lost, clueless, unpopular, unable to even lead his own party, that all of this has left him unable to lead at a time that the nation needs REAL leadership and he would do the best good for the nation by resigning. Cheney is a pr*ck, and has been a disaster as well with respect to the constitution — no small matter — and it would not break my heart to see him in an orange prison jumpsuit — but if bu-sh would ride off into the sunset it might clear the air enough that Di-ck could get something meaningful done to address the crisis.
I have full faith, though, that bu-sh lacks the character and honor to think of anything other than himself at this moment.
FISCAL CONSERVATIVE:
http://blogs.venturacountystar.com/greenberg/qqxsgFiscalConservative.jpg
HC
“Perhaps Clots guru Mike Morgan is right. The R’s are desparately trying to throw the election.”
lisosh,
I have been saying for well over a year that whomever wins the presidency this year will live to regret having done so.
WickedOrange…the real problem is not the subprime loans…if it was just the loans, the gov. could easily solve this.
It’s the credit default swaps, CDO’s, SIV’s , and other ridicuous derivatives. Notional value? , who knows? , 11 Trillion? 500 Trillion? Both have been stated…..
541 – Has Cheney even been seen in the past couple of years?
Glad to hear a Rep actually admitting to the current holders’ deficiencies. Sick of hearing the usual line of “sour grapes”. Would love to have a moment in the sun of “Nyah, Nyah, told you so” to a hardline B supporter.
Shore – “I have been saying for well over a year that whomever wins the presidency this year will live to regret having done so.”
Ditto.
In fact, I would guess that is why there appears to be a certain lack of enthusiasm seen in both of the campaigns. Neither really wants to “seal the deal” is my guess.
It’s a race to the bottom.
sas (528)
Good video, thanks for posting.
David Brooks after the debate mention that Congress has been swamped with calls/faxes/emails and letters against the bailout.
They are even having competitions to see if anybody can find any supporters of the bailout at all.
Lisoosh
Last I heard big Di-ck was fishing in Wyoming.
This could be interesting:
September 26, 2008
BY MICHAEL SNEED Sun-Times Columnist
Tipsville: Sneed hears rumbles that convicted influence peddler Tony Rezko, whose dealings have been linked to Barack Obama and Gov. Blagojevich, is singing to the feds.
• • To wit: “I’m told by a close friend of Rezko that he’s cooperating with the feds,” said a Sneed source. “I don’t know whether he’s talking about Gov. Blagojevich or Barack Obama or anyone else,” the source said.
» Click to enlarge image Michael Sneed
• • The shocker: Rezko, a Wilmette businessman who was a top adviser and fund-raiser for Blago, has been locked up at the Metropolitan Correctional Center awaiting an Oct. 28 sentencing — one week before the presidential election.
• • Background: Convicted in June of wide-ranging fraud tied to kickbacks on state deals, Rezko’s involvement in real estate deals with Gov. Blago’s wife, Patti, are also under federal scrutiny.
• • The backshot: Rezko’s name has continually surfaced as a friend of Obama, who benefitted from a real estate deal involving Rezko — which involved Obama’s Kenwood home. Thus far, no serious paint has been splashed on Obama by the Rezko brush. But rumors abound that the feds have their eyes fixed on Blago and his wife, who firmly maintain their innocence.
• • The buckshot: Being locked up at the MCC has been known to be a sure way to break a felon’s silence. Tweet. Tweet.
http://www.suntimes.com/news/sneed/1186553,CST-NWS-SNEED26.article#
Grim,
Hinterlands report part two…
Hunterdon County FUTURE Comp Killers:
GSMLS recorded 48 new listings for Hunterdon County this week. Four made this list. (Still way too heavy on the KoolAid…)
MLS#: 2581204
280 TURKEY HILL ROAD
Bethlehem Twp
SLD: 12/08/05 $540,000
OLP: 09/22/08 $474,900
DOM: 5
MLS#: 2581558
85 CLINTON ST
Lambertville City
sLD: 08/20/04 $610,000
OLP: 09/21/08 $499,000
DOM: 6
MLS#: 2580482
2 WASHINGTON
Raritan Twp
SLD: 04/13/06 $347,000
OLP: 09/20/08 $339,500
DOM: 7
MLS#: 2583265
1502 FARLEY RD
Tewksbury Twp
SLD: 11/08/06 $865,000
OLP: 09/26/08 $799,000
DOM: 1
ACORN subsidies included in bailout, Why?
http://hotair.com/archives/2008/09/26/the-democratic-acorn-bailout/
Shore Guy #544, so have I, I may vote for Mcpain just based on that.
KL
I had a new thought regarding the bailout.
Wanda Sykes talking about rich people asking poor people to bail them out got me thinking.
Why not have the rich people bail out the rich?
Ran across something that stated oil industry made almost $600bln profit in recent years. Looked over a few of the balance sheets of the big US companies and there should be almost $700bln.
rhyming,
don’t know if you missed my response.
What info were you talking about?
Also what problems were you having posting on my site? You can email me at info at my domain or use the contact form on my site.
If you know someone in mortgage trouble, they may qualify for this federal program starting October 1, 2008:
http://portal.hud.gov/portal/page?_pageid=73,3947211&_dad=portal&_schema=PORTAL
“Tied to Wall Street, State Feels the Shock ”
http://www.nytimes.com/2008/09/28/nyregion/new-jersey/28econnj.html?sq=%22Tied%20to%20wall%20street%22&st=cse&scp=2&pagewanted=print
“We estimate that financial services are about 25 percent of the state’s real gross domestic product,” said Sean Maher, New Jersey analyst for Moody’s Economy.com.
David J. Socolow, the state’s commissioner of labor and workforce development, said one job loss in the financial sector translates to the loss of 2.7 jobs in other segments of the economy.
The state is already beset by a rising unemployment rate — it hit a five-year high of 5.9 percent in August — and slow job expansion. State officials expect 2009 tax collections to plummet, and are bracing for added pressure on the state’s Unemployment Trust Fund.
New Jersey’s pension funds have also been affected. During Wall Street’s free fall, the state treasurer, R. David Rousseau, issued a statement saying the state’s Division of Investment lost more than half of $200 million it invested in June with Lehman Brothers, which filed for bankruptcy two weeks ago.
“New Jersey is in for some difficult times,” said Joseph J. Seneca, a professor at the Edward J. Bloustein School of Planning and Public Policy at Rutgers.
New Jersey derives 40 percent of its income tax collections from 1 percent of its filers, according to Tom Vincz, a spokesman for the New Jersey Treasury Department. Last year the state collected $12.6 billion in income tax revenues, $8.4 billion in sales tax and $2.9 billion in corporate tax revenues, he said.
In the best case, New Jersey could lose 45,000 private-sector jobs over the next year, said James W. Hughes, the dean of the Bloustein school. In the worst case, he said, twice as many jobs could disappear. “It’s going to be an era of lower returns, thinner profits and fewer jobs,” Dr. Hughes said. He predicted the most vulnerable sectors would be financial services; warehousing, distribution and retailing; and pharmaceuticals.
IN Summit, a quiet, prosperous town favored by Wall Street titans, difficult times have already arrived.
“I see numerous families overwhelmed by the current crisis,” said Sharon Shrensel, a Summit psychotherapist. “Anxiety and panic disorder is at a high. Wives are disheartened, angry and nervous, exposed to house husbands for the first time, and husbands are vulnerable to humiliation and nervous disorders, as well as depression.”
Lois Schneider, who owns a real estate agency in Summit, said two house purchases her firm had been brokering dissolved after Lehman Brothers filed for bankruptcy and Merrill Lynch agreed to be sold. Ten other potential homebuyers called to say that they had decided not to buy.
“The Wall Street people are gun-shy right now,” she said.
Paul Newman died yesterday.
I’m sad.
Grew up on Butch Cassidy, The Sting and other movies.
OK, ONLY an actor, but he was a good guy.
“but he was a good guy.”
Once you overlook his abandoning his wife to take up with the current one.
“ACORN subsidies included in bailout, Why?”
Because big trees that later blow over in a stiff wind and destroy your house from little acorns spring?
557 – True. But then again he was married to his second for what? 40-50 years so I wouldn’t put him in the role of philanderer, just a guy who made a mistake and found the right person.
His charity has raised hundreds of millions and he hasn’t taken a dime.
He was on Nixons hate list.
Didn’t you have contact with Nixon in his later years?
“New Jersey derives 40 percent of its income tax collections from 1 percent of its filers”
Sounds like just about any state.
lisoosh
I wasn’t looking to hammer the guy, and I don’t know whether he was a good guy or not. I just would hate for some guy to treat my daughter the way he apparently treatd his first wife.
When it comes to most celebrities, whether actors or whatever, I tend not to py attention to their lives. I use them to entertain me now and then. What they do in their private lives is really of no concern to me. I just kind of had absorbed osmotically tht he had this past that was not in line with his reputation. Thats all.
Cindy 510,
numbers aside for the moment, the answer is yes. Leverage works both ways. It magnifies your gains and magnifies your losses.
US banks as a group currently hols approx 1/25 of the deposits that are on their books. i.e a bank has $25 in deposits but only has 1 dollar in the vault to give to people. the other 24 have been lent out for home mortgages and other credit products.
there is roughly $6.84 Trillion in bank deposits. $2.60 Trillion of that is uninsured, leaving only $53 Billion in FDIC insurance to cover $4.2 Trillion in bank deposits. Of the $6.84 Trillion in bank deposits, the total cash on hand at banks is a mere $273.7 Billion
Where is the rest of the loot? The answer is in off balance sheet SIVs, imploding commercial real estate deals, Alt-A liar loans, Fannie Mae and Freddie Mac bonds, toggle bonds where debt is amazingly paid back with more debt, and all sorts of other silly (and arguably fraudulent) financial wizardry schemes that have bank and brokerage firms leveraged at 30-1 or more. Those loans cannot be paid back. Even with a 50% recovery rate for the loans, which would be wildly optimistic they way things are progressing, the banks have lost roughly 3 trillion of customer deposits that must be replaced!
But the leverage story gets even better! The global shadow banking system, the source of perhaps $800 trillion in outstanding derivatives, has $62 trillion in credit default swaps alone. This all has to be unwound now. It should be an interesting ride down….
# Cindy Says:
September 27th, 2008 at 9:00 am
Still trying to understand the system…
Read at another blog…That what we are seeing now is the effective leverage of fractional reserve banking in reverse.
530B in write downs but 19T in equity losses… 35-to-1
This person argues that we have to allow these outfits to fail because we do not have the capital to support a 35-to-1 unwinding
lisoosh,
If I married a 18 year younger hot billionaire chick I’d never get divorced either. I’d even let her make little jokes at my expense without calling her a c**t.
When McC was a POW and his first wife had the accident, Ross Perot helped her out.
Earlier this year he gave an interview and had some harsh things to say.
http://www.newsweek.com/id/94827/page/1
Don’t know that I agree with everything but when it comes to him and his wife, Perot was there.
Cindy,
this video may clear up some aspects of the fractional reserve system as it is currently setup
http://video.google.com/videoplay?docid=-9050474362583451279
Cindy,
If you look at those numbers in my post above you can see why people are so concerned about banks. to put the numbers in an easier format. if your bank has 1,000,000 in deposts then they only have about 4,000 in cash at the actual bank.
If there was any sort of a national or even just a large scale bank run where people demanded hard currency, actual cash was carried out of the bank, then the entire US banking system could be insolvent over night. The system depends upon a steady rate of withdrawals and deposits without withdrawal spikes.
http://video.google.com/videoplay?docid=3499945582265471553&ei=ulfeSMOOG5H4qAKQl4msCw&q=its+a+wonderful+life+bank&vt=lf
Tom,
I just sent you an email but have to say I did’nt like my spam confirmation word.
Overweight
I prefer pleasingly plump.
KL
WAY OT Question for the blog.
Does anyone have any recommendations for welding classes in NJ? Looking to learn for hobby purposes.
I heard that the list of troubled banks – as determined so by FDIC, is kept a secret. However there are independent agencies that try to figure out whats on such a list.
Here’s a list from Research Associates of America:
Bank
City
State
Texas Ratio
Colorado Federal Savings Bank
Greenwood Village
CO
244.8
Eastern Savings Bank, FSB
Hunt Valley
MD
222.7
Integrity Bank
Alpharetta
GA
191.6
Ameribank, Inc.
Welch
WV
153.7
First Priority Bank
Bradenton
FL
122.6
First Security National Bank
Norcross
GA
112.1
Magnet Bank
Salt Lake City
UT
110.4
Security Pacific Bank
Los Angeles
CA
102.8
First National Bank of Brookfield
Brookfield
IL
102.1
The State Bank of Lebo
Lebo
KS
100.6
Can anyone point to other lists?
ok, screwed up the formatting.. here’s just the list:
Colorado Federal Savings Bank
Eastern Savings Bank, FSB
Integrity Bank
Ameribank, Inc.
First Priority Bank
First Security National Bank
Magnet Bank
Security Pacific Bank
First National Bank of Brookfield
The State Bank of Lebo
Listening to the head of FDIC on Bloomberg, it appears that their list is over a 100 banks.
I am starting to think FDIC may not be able to keep its promise to insure the 100k.
Thoughts?
kettle[564],
Yup.
The incompetent, negligent and fraudsters can jerk each other around and try to piss on a raging inferno, continue to deflect attention away from a crumbling economy, deteriorating job market, declining real wages and a currency on the verge of spinning out of control. I’m glad that I’m not a suspicious individual. Otherwise, I may just conclude that there is an election around the corner.
Every action has corresponding reaction. This reaction was just delayed 6 years, thru the creation of a debt/credit bubble, a fabricated economy. Present day, the long awaited reaction will now be one for the record books. Buckle up, it will be a long, long,long walk home.
#571:
If Hanke Panke can come up with an idotic scheme to move the the Toxic assets to the tax payer, do you think they will ever let FDIC run out of money. My sense is that if anything at all, they will eventually increase the insured amounts to a higher limit.
Clot – They’re in Florida, but are you at all familiar with Avatar Homes? Relative is in one of their gated communities in Central Florida … and since it is a new construction joint, there have been massive foreclosures all over the place. (i looked at the stock; it is down like the rest of the HBs.)
my concern is the gated aspect. if they have too many foreclosures, and/or people stop paying their HO dues … can you see a community closing the gated aspect? Right now, both entrances are manned. But 6 months from now?
“Does anyone have any recommendations for welding classes in NJ?”
kettle,
I would target a class taught by either the fed, treasury, the house or cb’s around the world. They are/were master welders.
Nice article great title…
Apparently NJ lawmakers find that their constituents are bitterly divided on the bailout and it’s pretty close between “no” and “hell no”
http://www.dailyrecord.com/apps/pbcs.dll/article?AID=/20080926/NEWS02/809260331/1123
Rent lord, Antitrump,
I posted a link the other day that had a troubled bank list generated by a private group. The list had about 1,800 banks on it.
No the Gov will not allow the FDIC to go broke. They will be forced to bail out the FDIC as a collapse of FDIC will cause real civil unrest.
The bailout of the FDIC will be massive and the taxpayers will be footing the bill.
Tom, The third response was likely, “No friggen way.”
Kettle – do you mind posting the link or to your earlier post.
Thanks!
lets recap:
US banks have insufficient cash on hand to cover deposits
the FDIC has $53 Billion in insurance funds to cover $4.2 Trillion in insured deposits. The FDIC has approx 1% of the cash it needs to cover insured deposits
Banks have lost trillions of dollars (3+) in bad loans. that money came from deposit accounts. where do they get the cash to replace it?????
the GOV is asking for a revolving line of credit with a 700 billion limit. do they get airline points with that?
TED spread is through the roof. Anyone here ever study control system or complex systems? look at the 5 year TED chart. It looks almost exactly like a system transitioning from steadystate to chaotic behavior. expect the unexpected.
Auto manufacturers and Credit card companies are begging for a bailout as their head is on the chopping block next.
States tax revenue is rapidly evaporating as pension and health liabilities are skyrocketing.
A large part of this ponzi pyramid was built on housing as an asset. Housing will probably drop another 30+ percent before we hit bottom. Yet the government is scrambling to find a way to “stabilize” the market. They should be trying to figure our what can be saved and what must be cut away before the gangrene spreads.
there’s more, but you get the idea…..
and as a finally
http://www.youtube.com/watch?v=yjnvSQuv-H4
Cindy,
WHAT is going on out at Tioga Middle school??
Parents held a protest outside a Fresno middle school on Thursday.
They’re upset about a school lesson in profanity. Some teachers posted vulgar curse words on the board and then told students not to say them.
Some of the protesting parents handed out packets containing the list of the 21 words their children were exposed to. They want other parents to be aware of what is being taught to their children.
Students in several classes were shown the list of words during a school lesson on profanity on august 20th.
Teachers did not discuss the words but just posted them on the chalkboard and told students they are “zero tolerance” words and unacceptable at school.
Many parents are angry that the words were presented to their children without being notified first.
The Fresno Teachers Association says the lessons intent was not to upset parents. Greg Gadams with the Teachers Association said, “If you go outside one of the schools in our district, you will hear parents using these words in front of students. The intent of the lesson was to stop this behavior.”
Tioga school principal said in hindsight, he should have contacted parents about the lesson plan first, because it would have given parents the opportunity to opt out of the lesson.
Angry parents plan to return to the school to pass out more fliers to parents
http://www.cbs47.tv/news/local/story.aspx?content_id=14d6b126-4dc9-48b3-891a-144e304b623b
WSJ
At the epicenter of the financial crisis, the effect on restaurants is already evident. Marc Forgione, a 29-year-old chef who opened Forge in Tribeca three months ago, says he had bookings for a party of 15 last Friday and a party of eight this past Monday. The Friday party canceled because six of the guests got laid off; the Monday party canceled that day because four of the guests got laid off. All worked on Wall Street, Mr. Forgione says. David Waltuck, whose restaurant Chanterelle has been a Tribeca neighbor of Bouley for 19 years, says his revenue this summer was down 15% compared to summers in the past.
Rentlord,
here is the link
http://www.moneyandmarkets.com/Issues.aspx?Weiss-Research-Press-Release-on-Federal-Bailout-2328
Shore at 527:
If this is the best our nation can produce for the chief of the exec branch…
Not the best the nation can produce, but the best the parties can produce…
ChiFi
In case i missed this before, thanks for the Audi mechanic suggestion a few months back. Just had to drop my car off with them again :( But they have been a good resource. Cheaper then Audi and seem pretty good!!!
I think I’m finally going to have to move over to the dark side.
Considering most thoughts are that the bailout won’t solve anything, just delay the inevitable, perhaps the whole thing was cooked up to be so ridiculous “the people” would be against it. Then, if/when it didn’t pass, the government could pass the buck saying “well, if you had given us what we asked for we could have fixed it but…..”.
Goes right along with the idea of the Repubs throwing the election. At least that would give a rational reason for Palin.
Too late to buy physical gold. Just have to go shopping for mucho food.
rsavila@fresno.k12.ca.us
I wonder if the Tioga principal will share the list with anyone?
lioosh,
IF i am correct about deflation then the best time to buy gold (and or silver) will be well after the deflation hits, not now in the beginning phase of deflation.
but i am just a school janitor so thats a big IF.
ket – if major deflation hits, my first port of call would be property. Then I would let hyperinflation take care of my debt, if any existed at all.
(564) Kettle1
You actually posted that video for me months ago. It is very worthwhile.
So now that the loaned out amounts have gone bad, it would be a great service to the general public if a trusted official (not Bush or Paulson) would enlighten them as to their direct connection to the bank’s problems.
Much like in (your other video) “It’s a Wonderful Life” when George explained to the townspeople that their money wasn’t in the bank – it had been loaned out to so and so for their house, etc.
Right now there is such anger and mistrust because many people do not see how directly involved they are. The right communicator might even be able to break down the poorly thought through derivatives situation and its consequences.
I have a minimal understanding of the complexities of these issues yet I have been a source of information to people who actually have money. That’s sad.
(581) Shore
Different district. I have no idea what they were thinking.
Thanks Kettle.
One of the questions that the bloomberg interviewer asked Shiela Bair of FDIC was, if FDIC is going to do something about expediting the return of funds since it currently takes a long time.
Sheila flatly denied that it takes a long time to get the money back within the 100k limit. Beyond that they have to perform some checks so it delays getting back the funds.
So, question is: What does it really take to get back the money from a failed bank – a) if its under 100k and b) its over the limit.
Lissosh,
the property play only works if you have enough cash to buy the property upfront. Do you think banks will be handing out loans in that environment??????? If you have the cash then great, but most people wont.
Cindy,
Careful, remember that i am the paranoid doomer on the blog ;)
lisoosh,
I think the administration really painted themselves into a corner with this one. They came out really strong that this needed to happen. They built up too much expectation that if they don’t do something there will be panic.
They probably didn’t expect to come up against so much opposition from republicans and for the democrats to finally develop a spine.
The analogy I made previously is imagine your towns grocer experience a big boom. He leverages his house and his business to live a very expensive lifestyle. It’s all good while his market is doing well but whith so much debt, it doesn’t take much of a downturn to cause him to be underwater and this downturn was greater than expected.
Now he gets together with the banker and tells your community they have to bail him out or the town won’t have food. He wants the town to pay off his second mortgage to relieve his debt so he can continue to run his business. Secondary liens are a big part of the bailout according to Paulson and Bernanke. It’s also why they can’t sell them to fannie and freddie I believe.
They try and scare everyone with starvation if they don’t help. But when the townsfolk agree to help in exchange for him selling some of his luxury cars and dip into his ample retirement he objects.
Rent lord 592,
not my area of expertise. But the delay seems to be related to how well funded the FDIC is and how many banks are going under at any one time.
One bank at a time isnt a problem, but one bank with insured deposits greater then the FDIC cash fund or multiple banks and you will see delays.
love this video..
“Drag ‘Em Off the Interstate, Officer Jackboot Blues”
http://tinyurl.com/4729c7
reminds me back when I got home from the war and marched in DC with the veterans against vietnam.
they welcomed us home allright…I got a baton over my head, and when I came through I was in paddy wagon off to jail.
SAS
Wall Street Executives Made $3 Billion Before Crisis
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. paid its chief executives the most, with Stanley O’Neal taking in $172 million from 2003 to 2007 and John Thain getting $86 million, including a signing bonus, after beginning work in December. 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.
kettle1,
Didn’t the WaMu failure go pretty smoothly? At least compared to IndyMac?
I haven’t read all the details but I thought they were able to get wipe out many debt holders, then sell the depositors and assets, probably making up any difference between debt and equity to the buyer, and then some.
Quick and easy and doesn’t require the FDIC to put up a lot of money and then recover it down the line after liquidating assets and finally finding a buyer.
sas (528) – Hey, Thanks
I had to use the “pause” button on that one – So much information.
The first securitization of CRA loans – Bear Stearns – I had no idea. Oh yeah, I googled CRA.
“US taxpayers are being enrolled in an economic chain gang”
http://tinyurl.com/4omo5q
I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.
-Thomas Jefferson, Letter to the Secretary of the Treasury Albert Gallatin (1802)
From:
http://www.usnews.com/blogs/the-inside-job/2008/09/26/hank-paulson-kneeling-before-pelosi.html
Reminds me of a dominatrix friend of mine explaining how a lot of her clients were big execs that after a long day bossing people around would unwind by humiliating themselves to a powerful woman.
If the bailout includes caps on executive compensation, don’t be surprised if Purple Passion goes out of business.
“US taxpayers are being enrolled in an economic chain gang”
SAS,
Courtesy of The Eagles;
“Well I know it wasn’t you who held me down
Heaven knows it wasn’t you who set me free
So often times it happens that we live our lives in chains and we never even know we have the key”
“Reminds me of a dominatrix friend of mine ”
Tom,
Compared to you, John, Clot, Kettle, I have the most mundane life and most mundane friends.
laughy (574)-
Pretty soon, the only thing in those guard houses will be rats.
The first things to go in failing community living are the amenities.
another great video.
I bet all of America is kicking themselves now, wishing they would of supported Ron Paul during the campaign.
Now, we are stuck with Omama and “songbird” McStain (aka. frick & frack)
“Congressman Ron Paul Schools Bernanke on the Bailout Plan”
http://tinyurl.com/4hm2l7
This is one of the most bullish investment guys out there. Look what I just pulled out of my e-mail:
“Louis Navellier here, and if you believe the final version of the Fed’s $700 billion plan to rescue the banking system is going to prevent another bank failure, I have a few shares of Lehman Brothers I’d like to sell you.
You needn’t take my word that the Paulson plan is a loser—the market’s recent 372-point decline and congressional bickering are all the proof that you need to know that the Wall Street’s excitement has waned…
Truth is, in my 23 years as a financial advisor, I’ve never seen such a frightening global scenario:
Where bankers have given up on the banking system
The world has finally said “thanks but no thanks” to the almighty dollar
Inflation is out of control
Money market funds are failing, and
Investors are fleeing to the “safety” of gold and commodities en masse…
Just as I said they would when I kept my readers out of Bear Stearns, Lehman Brothers and AIG more than six months ago.
Truth is, my friend, Paulson’s $700 billion bailout plan is simply hiding the fact that our financial system is broken.
If you believe the bailout plan congress ultimately decides on will save U.S. investors, you’re going to get cut from the falling knife.
And while I can’t tell you which big financial institution will fall next, I can tell you this:
We’re at the beginning of more banking failures and not at the end
The government doesn’t have any more money to rescue any more banks, and
The fallout will send the dollar crashing, raise inflation, panic investors and crush stocks again—worse than the 504-point, 450-point, and 372-point declines we’ve seen over the past 2 weeks.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=awNB18n8u4Xo&refer=home Where’s Ben..been…
“In his conversations with lawmakers, he is avoiding discussions of specific provisions of the Paulson plan and sticking to three principles: the plan has to be enticing enough to attract a large number of banks, it must protect taxpayers, and it can’t deliver windfalls to executives and institutions.
the way I see this if $700 bn stabilizes the credit markets great, everybody wins. we keep deleveraging but slower.
if this bill does not pass taxpayers will have to prop up FDIC, a few other banks. the govt funding costs will go through the roof and taxpayers will pay for that too. one way or another taxpayers will pay for this.. and they should because joe sixpack benefited way more via all those vacations, plasma tvs, granit countertops and leased cars paid for by cc debt and helocs than all of wall street combined.
“and taxpayers will pay for that too. one way or another taxpayers will pay for this.. and they should because joe sixpack benefited way more via all those vacations, plasma tvs, granit countertops and leased cars paid for by cc debt and helocs than all of wall street combined.”
And what about those of us who buy our vacations, cars, homes with cash from the bank? We, who also tend to be amongst the ones paying the greatest share of taxes, should pay to bail out both Wall Street and the fools on Main Street who lived beyond their means? I dont think so.
No Shore you should not. But show me a way to do it where only those guilty pay
guys,
where can I get solid info on the health of local banks? Or does this even exist?
Not feeling great about my Citi accounts
611
Here is one idea. In the face of the bailout, eliminate cap gains tax. Chances are only the fiscally responsible will benefit since no one else saved or invested wisely, therefore have no profits let alone assets.
ha-ha. good one, but political non-starter. people will see this as another giveaway to the rich
Clot [609],
Al least somebody has his head out of his @ss.
who won the debate? foxnews said M and msnbc said O. but when i tried to recall any lines from yesterday’s debate, only two lines popped up.
M said: “Senator Obsama just doesn’t understand it.” (repeated at least 8 times)
O replied: “John is absolutely right” (repeated at least 8 times).
if you are not as partisan as stu, it is hard to say O won the debate.
Here is what O said in the debate:
“I think Senator McCane’s absolutely right that we need more responsibility…”
“Senator McCane is absolutely right that the earmarks process has been abused…”
“He’s also right that oftentimes lobbyists and special interests are the ones that are introducing these…requests…”
“John mentioned the fact that business taxes on paper are high in this country, and he’s absolutely right…”
“John is right we have to make cuts…”
“Senator McCane is absolutely right that the violence has been reduced as a consequence of the extraordinary sacrifice of our troops and our military families…”
“John — you’re absolutely right that presidents have to be prudent in what they say…”
“Senator McCane is absolutely right, we cannot tolerate a nuclear Iran…”
614 tie it in to a temporary stay on penalties for early withdraw on roth, ira, 401 etc
“the way I see this if $700 bn stabilizes the credit markets great”
guest,
The Bear bailout was to stabilize the world markets, the fannie/freddie bailout was to ward off a systemic collapse, the AIG bailout was to avoid armageddon. Who will ultimately step up to the plate to bailout the bailout?
Rent, #592
I’ve been told that if you’re under $100,000, it doesn’t take long.
If you’re over $100,000, you get in line as an unsecured creditor for any amount over that.
During the S&L crisis, my grandmother had a CD that had rolled up to $106,000. I don’t know how long it took to get the $100,000, but she did.
With the other $6,000, sometime between 2002 and 2004, my mother got a check out of the blue made out to my grandmother for about $30. Part of the settlement.
My grandmother died in 1991 at the age of 94. The check arrived more than 20 years after she died. It might have been as long as 25 years since the failure of the bank.
bi[618],
Who cares. When we vote for a fed chairman and a treasury sec, have your blackbox give me a call.
Derivative monster: JPM.
when will JPM fall? hard to say at this point, but I am leaning that JPM will fall too.
credit default swaps anyone.
leveraged derivatives…
u dumb schmuck with an ARM are being used as a scapegoat
(yes, thre is an ARM problem yes, but not nearly as the derivative bubble).
SAS
“where can I get solid info on the health of local banks? Or does this even exist?
Not feeling great about my Citi accounts”
get a rating of your bank and review this video.
“How to Identify a Bank Likely to Fail”
http://tinyurl.com/3hp97c
SAS
that reminds me too…
so when does the health care system collapse?
Will the the financial collapse lead to the health care collapse?
SAS
623 – as soon as insurance companies are insolvent, which is as soon as we see mass defaults on corp bonds, which is as soon as their revenues slow because consumer retreats and they can’t roll financing because credit markets are frozen.
guest13,
good answer. good answer.
I will be keeping my eye on you.
SAS
623,
I think that collapse started spiraling over 1 yr ago. I won’t bore with personal details but lets just say I pay nearly 800 a month for a family of three perfectly healthy people and I don’t see any benefit until we work up over 5000K of sick.
Yeah I feel like a fool paying it but what if the big what if happens? I have assets and I look at my “health insurance” as asset protection and not much more. BTW I’m 4 months pregnant and just found out that I will have to pay for my days in the hospital, nice.
SAS,
I forgot, the point being: self employed in NJ have been jumping ship in NJ re:health insurance. I’ve been getting phone calls from BCBS conducting extensive interviews about customer satisfaction. They sound scared.
I really wish I could dig up Abe Lincoln and put him back in the White House.
SAS
Anyone want to recommend online banks that they have had good experiences with? I already have an ING account (never have had any problems with them, excellent customer service) but am looking for some other alternatives. Anyone deal with EmigrantDirect or are they on the “next to fail” watch list?
Seneca,
I may have to look into 1st National Mattress if Citi teeters.
“BTW I’m 4 months pregnant and just found out that I will have to pay for my days in the hospital, nice”
scratch traditional health care and the money squeezing OB/GYN.
Look into midwives. They are great, more cost effective, and won’t want to rush and do a C-section because its 4 o’clock and they want to be home by 5.
SAS
Barbara,
the saying goes in pricing of health care:
“throw everything against the wall and see what sticks”
All medical bills are up for nego.
Key point when you nego, you don’t ask for a lower price, you tell them.. this is what I will pay.
Thats how I nego anyways, been doing it for 25years all over.
in any case…
:)
SAS
SAS,
I would consider it except that I have a history of tachycardia (SVT). I am going to have a talk with mu OB/GYN group and tell them I expect an early release as long as the baby checks out and I better not get a bunch of resistance.
632,
been there done that, now I’m in collections.
top of yahoo right now
http://realestate.yahoo.com/promo/renting-makes-more-financial-sense-than-homeownership.html;_ylc=X3oDMTFta3Jqcjk3BF9TAzI3MTYxNDkEX3MDOTc2MjA0NjUEc2VjA2ZwLXRvZGF5BHNsawNyZW50aW5nLWJldHRlcg–
Renting Makes More Financial Sense Than Homeownership
By Jack Hough Sep 26th, 2008
I have something un-American to confess: I rent an apartment, despite having enough money to buy a house. I plan to keep renting for as long as I can. I’m not just holding out for better prices. Renting will make me richer.
http://realestate.yahoo.com/promo/renting-makes-more-financial-sense-than-homeownership.html;_ylc=X3oDMTFta3Jqcjk3BF9TAzI3MTYxNDkEX3MDOTc2MjA0NjUEc2VjA2ZwLXRvZGF5BHNsawNyZW50aW5nLWJldHRlcg–
635 Stan
Jinx!
sas (628)-
That qualifies as the required once-daily “Weekend at Bernie’s” reference.
Re:renting
I never found the *great landlord great tenant* combo. I appreciate the points in the article, but ime, renting has been an almost weekly headache.
Kettle1, regarding post 568. I too had the need and sufficed it(learning welding) with youtube how-to videos.
By the way does anyone here think that the fed should charge hefty fees for brokering the on-going mergers.
Tom, the Fourth response would be “No and eat sh*t”.
friend of mine who owns & runs a crepe joint on the uws of manhattan tell me his buisness is doing really well right now.
Its full every day with Euro tourists, but does admits, once they are gone, he might not be able to really on the locals to keep things afloat.
SAS
Deleveraging – A fate worse than debt
The Bush administration’s bail-out plan, even if it gets through Congress, may not be the end of the finance industry’s problems. The travails of investment banks will inevitably cause problems for hedge funds, which depend for their finances on institutions such as Goldman Sachs and Morgan Stanley.
Many hedge funds have already cut positions since the credit crunch started in the summer of 2007, and banks have tightened the terms on which they will do business with them. This has been particularly true for those that sought funding through the prime-brokerage arms of Bear Stearns and Lehman Brothers before they were wiped out.
Barbara (612),
Go to moneyandmarkets.com and view the X-List video. They’ve put together a very informative video about banks. It’s one hour long and well worth it.
here’s the link:
http://www.moneyandmarkets.com/
Shore (558)
I’m thinking they had halloween and the bailout as being one/the same :)
” really wish I could dig up Abe Lincoln and put him back in the White House.”
Why not, he dug up his son enough times. And, even as a corpse he would be at least as effective as bu-sh.
lostinny-wow
Haha, what am I thinking right now?
649 Stan
I’m not sure I can post that here. :)
654
Thanks Orion,
I am going to bookmark it
wow!right again!
sys (640)-
More like the Fed is paying out fees to guys like Steel, who are willing to take the helm of a stinkboat like Wachovia, deal with 2-3 weeks of heat, then jump ship with millions in tow.
Waddya think Klink had to toss him to buy all that WB stock? Had to have been a lot.
http://www.fasb.org/st/summary/stsum157.shtml
So I’m reading this summary of statement #157 – fair value measures – and it does seem like the situation would benefit from the 3 to 5 year rolling averages.
Because the bad debt in question is R/E, something that actually does have a chance to recover some value, maybe the mark to market could be adjusted.
I’m just looking for viable ideas here – something long-term needs to be done. Any ideas?
Cindy 653
RE will not increase in value when adjusted for inflation for 8-10 years. If this bubble follows the same pattern as the last then it could take 4 years to really bottom out ( with 06 as peak)
Cindy,
ideas? buy food, gold, guns.
The problem that no one will talk about is that the US dollar is about to crash.
SAS
any thoughts on ghana? I may have a business opportunity there. And no its not a prince with a bank account.
http://online.wsj.com/article/SB122247046217180743.html?mod=googlenews_wsj
Differing opinions on the subject..
“The alchemy of securitization turned illiquid mortgages into liquid securities, available for sale. These were now financed by short term debt, vulnerable to any fluctuations of the market.”
Well they have got to do away with these fancy vehicles…when you cannot even track back to what you are holding – that’s messed up – they have messed up everything.
I’m not a “leave the country” type of a gal, Kettle.
We need a new Financial Modernization Act that outlaws these exotic vehicles – and we need it yesterday.
586, lisoosh:
while my local costco sells rice in bulk, they don’t sell wheat. (hubby suggests this is because of its tendency to burst into flames)… somebody (here?) posted a link to http://beprepared.com/ i haven’t bought anything from them yet, but they seem professional (and even have tips on storage in a small apartment).
Barbara,
There’s a link to a report in this essay, which lists banks they rate as D’s and E’s:
http://www.moneyandmarkets.com/Issues.aspx?Weiss-Research-Press-Release-on-Federal-Bailout-2328
635/636… ok, so i *know* i read that article over a year ago. (the author has a memorable turn of phrase)… must search the intertubes… here we go!
http://articles.moneycentral.msn.com/Banking/HomebuyingGuide/WhyRentToGetRicher.aspx?page=all
…so at least the byline is right. but i’d like to give the guy props, he wrote this at the height of “renters are dumb” propaganda…
This housing bubble talk is a bunch of bullsh*t.
Uttered by a realtor b*tch at an open house in Montvale, March, 2006.
#662 gary,
Did you save her card? Maybe you can call her and ask how is she liking her new job as a barista? Oh wait, that’s not doing too well either.
#661 alia
A few weeks ago I heard some nitwit actually say renting is throwing money away. i pointed out that you can rent the same house for 60% to 65% of what the PITI would be, not counting insurance, maintenance, and time value of money. I might as well have been talking to a cat.
my wife no longer thinks I’m crazy for wanting to buy a few hundred pounds of rice, noodles, canned, and freeze dried foods.
She still thinks I’m crazy, but for other reasons.
My lucky number!
bairen,
Don’t forget to buy a few hundred pounds of reefer, also. Oh wait… better not… you’ll get the munchies and eat all the food! LOL!
ShoreGuy–re:557
So, I guess you won’t be voting for M based on the history with his first wife?
Cindy (658)-
You can count on the fact that the banks are waiting for the chance to fire up the sausage machine again.
They actually believe the RE bubble can be reinflated. That’s why they’re dying for the bailout to get through.
665: i go back and forth on the crazy. unfortunately, the first and biggest voice in my life that thought we should be self-sufficient and Prepared for Anything also thought the pyramids on mars were encoded messages on how to build hyperdrive engines and that i was the second coming. cough. my “go-bag” is ready, but only ’cause i can justify it as Not Crazy because even the local gov’t thinks it’s a good idea… talk of stockpiling anything more than water or a week’s supply of food makes my hubby worry i’m going to the dark side. sigh. at least, this weekend, he’s agreed we can have enough cash on hand to buy plane tickets upstate where i have useful relatives. (nice organic garden, a doctor, and close to the canadian border.)
fight or flight? i honestly don’t know.
funny thing i found on this board is female posters are more cruel when talking about palin. why? all because you are jealous and feel left out in your own life
bi- that sound? it’s me laughing really really hard. at you.
Cindy,
I wasnt suggesting you leave the country. guns gold and foos jst means be prepared. Look at katrina, and take lessons from that. as many have said, also look at argentina 2001
Bi Your either very brave or a fool, the gals are going to rip you a new one.
alia, the first thing you need to do is determine what you are fighting for.
Here is a blog by a guy from argentina who lived through the 2001 crisi and has been commenting on the coming US crisis.
http://ferfal.blogspot.com
vodka (675)-
Dude had a couple of Mossberg 500s?
Maybe he got through ’01 by pulling a few bodega robberies of his own.
Nothing beats a high-powered shotgun with a pistol grip.
Flexible, useful and deadly.
clott,
what do you have against the 500???? its a respectable weapon from the 2 times i have fired one.
#654 Kettle:If this bubble follows the same pattern as the last then it could take 4 years to really bottom out ( with 06 as peak)
It will be much quicker this time as the excesss in this now collapsed housing bubble was far worse than what happend in the past. Plus back than, you actually had to qualify for a mortgage.
vodka (678)-
Have against it? Nothing! Hell, I’ve wanted one for years, but the wifey thinks it would send a bad message to my kids.
Of course, she had no problem when I whipped out my Tec-9 and spiked my bull terrier in the front yard during the LA riots…
#669 clot:They actually believe the RE bubble can be reinflated.
That will never happen. These clowans are insane!!!
Kudlow on Paulson Rescue Plan: Actually, for taxpayers, it’s a win-win-win-win.
The single-biggest mistake in the Paulson bank-rescue-plan marketing effort has been the failure to explain clearly how taxpayers are going to recoup $700 billion used to buy toxic assets at auction in order to unfreeze the banking system. In other words, folks don’t understand how taxpayers will be paid back, and may actually make profits, which will enable the new government debt to be erased after the Treasury bank-rescue is completed.
http://www.cnbc.com/id/26915048
Bi: I understand your love of Palin. She appears to be on your level. The VP debate should be one for the ages.
In other news, I scored 4 Mets playoff tickets through their lottery for game one of the divisional series. Think we can have Santana pitch again tomorrow?
BI:
http://www.youtube.com/watch?v=npUMUASwaec
One can not take her seriously. I said it since day one…M seriously screwed up and there is no turning back. Perhaps the reason that women here don’t like her is because she is a serious embarrassment to their gender. Most of the women who post here are probably three times more qualified than her. At the minimum, they can speak in complete sentences.
Senate Fax List
Please fax everyone on this list.
Sen. Richard Shelby (R) 202-224-3416 or 202-224-5137 (try both not sure which is correct)
Sen. Harry Reid (D) 202-224-7327
Sen. Jim DeMint (R) 202-228-5143
Sen. John Ensign (R) 202-228-2193
Sen. Jim Bunning (R) 202-228-1373
Sen. Chuck Grassley (R) 202-224-6020
Sen John McCain (R) 202-228-2862
Sen. Barack Obama 202-228-4260
Sen. John D. Rockefeller 202-224-7665
Sen. Dianne Feinstein 202-228-3954
Sen. Ron Wyden 202-228-2717
Sen. Evan Bayh 202-228-1377
Sen. Barbara Mikulski 202-224-8858
Sen. Bill Nelson 202-228-2183
Sen. John Kerry 202-224-8525
Sen. Daniel Inouye 202-224-6747
Sen. Hillary Clinton 202-228-0282
684#, i didn’t see any gaffing in this video. yes. bailout is about everything related to economy, which includes healthcare. if most of female posters here were 3 times more qualified than her, how come no one was elected as even a small town mayor? even the president of your own appartment association?
685: let’s turn that question around. most of the *men* on this board are three times more qualified than sarah palin to be vp. how come *they* have not held office? how come you’re not asking *that* question?
i do not hate ms. palin. i hate that her gender is important to you and people like you, and it’s being used by other people to create, as sir toppam hatt would say, “Confusion and Delay” in the political process.
# sas Says:
I really wish I could dig up Abe Lincoln and put him back in the White House.
He’d stink a lot less than our current prez and our current choices.
sl
As I drove past the Federal Reserve today, I looked to see if BB had the oil burning.
All was quiet.
Nobody, in a crowd of 100k, talked bank. Nobody in a popular museum talked bank. Well, there was one German guy who was annoyingly loud while discussing the crisis and housing. He reminded me of what CF would sound like speaking German after four shots and a hormonal mood swing.
I’m also sure that the P plan is a diversion. Give them a horrifically bad doc to play with for a week. It’s a snow job.
Something else is going down. Is the play a buy, or a sale?
Barbara,
Are you in NJ?
sl
Pat,
I would guess the play is a sell. but i also think the P plan was meant t o try and hold things together past the election. after november all bets are off, but they are pulling out all the stops until then. you would want athe american presidency in contention in the middle of a national crisis.
I am not suggesting this will happen, but the patriot act gives the president the power to suspend elections during a “state of emergency”. makes for a good B movie script anyway.
“i didn’t see any gaffing in this video”
– Of course, you didn’t.
peanut gallery:
is there any ‘bailout’ or ‘rescue plan’ that the top 200 economists in the world – the ones who railed against the paulson plan – can come up with to minimize the damage? I fully understand that there will be major issues …
but seriously, there’s GOT to be something that can cushion the blow and make this a 1-2 year problem as opposed to a 7-10 year malaise, right?
laughing,
ask this question. how quickly can you get a heroin junky clean when he has been hopped up for 10 years strait?
#692 It’s tough to restore faith. You’d have better luck trying to understand the emotions of the human heart. Our entire financial system, like Blanche DuBois, has depended upon the kindness of strangers to buy our debt and to pretend that MBS really did have the value that everyone said they did. It just wasn’t true, none of it.
Sorry for being maudlin, guys. I’m going to bed. Somebody turn out the light, will ya?
O.K., I’ll take care of that as soon as the dryer buzzes. Night.
kettle1,
“RE will not increase in value when adjusted for inflation for 8-10 years. If this bubble follows the same pattern as the last then it could take 4 years to really bottom out ( with 06 as peak)”
No, you don’t seem to understand it’s different this time. New technology and new ideas have found ways to make sure we don’t follow the same patterns. That’s why this bubble didn’t burst….
Oh wait a minute…
laughing
the problem is that this crisis is the culmination of multiple issues at the same time. there is no one fix that solves all issues.
the consumer based economy has hit the wall.
the US economy as a service economy has hit the wall
having a negative national savings rate gas hit the wall
out of control government spending has hit the wall
American educational competitiveness has hit the wall
We are facing an energy crisis
I may have missed a few but you get the idea. Its not the end of the world, but it is going to an “uncomfortable” transition
here is who i am writing for pres 08
http://www.zod2008.com/
Cindy,
““The alchemy of securitization turned illiquid mortgages into liquid securities, available for sale. These were now financed by short term debt, vulnerable to any fluctuations of the market.”
Well they have got to do away with these fancy vehicles…when you cannot even track back to what you are holding – that’s messed up – they have messed up everything.
Yep, what it looks like to me is that you take out a mortgage on your house, then Wall St takes out a mortgage too.
What could go wrong?
Mortgage fraudsters are going to jail for taking out more than one mortgage out against a house without letting the other bank know.
Here’s something to store some rice in.
http://washingtondc.craigslist.org/nva/zip/857720069.html
How do we get that guy to start posting on this blog?
i get that, fellas. but there are some bright minds here … what’s the key to the turnaround? what can/should the US do right now that would significantly aid a recovery?
i know the easy answer is to let the markets just work themselves out, because manipulating is one of the 15 reasons we’re where we are.
but other than telling Congress, ‘we’re F’d’ … what’s your best guess as to a solution plan that’s being kicked round in DC this weekend?
Via calculated risk;The fun spreads overseas!
Welcome to the shindig euro-friends. I hope you all brought your party hats. Hold on, things might get a bit bumpy.
Pat,
what’s your best guess as to a solution plan that’s being kicked round in DC this weekend?
that is you primary mistake. No such plan would come out of DC.
. The UK government is about to nationalize another Northern Rock, in Bradford and Bingley, Belgian giant Fortis Bank is on life-support (its liabilities are three times the GDP of Belgium)
now to important news…..
Revealed: Radical cleric Bakri’s pole-dancer daughter
By Michael Seamark and Emily Andrews
Last updated at 1:18 AM on 27th September 2008
* commentsComments (50)
* Add to My Stories Add to My Stories
As the daughter of firebrand cleric Omar Bakri Mohammed, Yasmin Fostok might be expected to share his fanatical beliefs.
But the radical Muslim’s daughter has ditched his extreme interpretation of Islam – as well as most of her clothing.
The busty blonde has been revealed as a topless, tattooed pole dancer.
http://www.dailymail.co.uk/news/article-1062375/Revealed-Radical-cleric-Bakris-pole-dancer-daughter.html
“what’s the key to the turnaround?”
reduce fractional banking and require banks to hold larger amounts of actual reserves.
thats a good start.
SAS
man,
karma’s a b!tch
Pat,
the number 1 reason why There is nothing that paulson and friends can do:
this is a global event. NOT a US event. there are 700-800 trillion in derivatives that have been generated over the last 8 years. you cannot unwind that in a year or two without pain
Kettle, yes, I agree. The plan’s already done and in the works. Just not sure who gets wildcard. I think we’re in for a surprise.
But, doanchyaknow, ya gotta keep the kids busy while the big folk play.
you meant Laughing.
“Ghana”
if its in natural resources & infrastructe, I’d consider it.
Africa is very unpredictable and corrupt, but still a great place. especially, Zimbabwe, and Cape Town is always fun.
I know China has alot of investments there too.
SAS
why wamu failed. sad, but also comical.
http://latimesblogs.latimes.com/laland/2008/09/why-wamu-failed.html#comments
kettle, i dont doubt anything you say at all. i have been reading this blog for two years and we’re fully prepared.
but you mean to tell me there’s not one single solitary thing that can be done to help at this point? the regulation is stating the obvious. i realize there’s no silver bullet tomorrow that fixes things … but come on man … nothing?
nada? zip?
some folks here were able to correctly guess the failures … who can guess a decent solution?
Laughing,
I’ve made some different charts showing pricing, the one on the link bellow shows total sales volume. What has been obvious in all the charts I’ve made was that the price housing bubble grew far too long too fast. We have not yet corrected. Correction means we get back to where things should be.
http://www.bergenjerseyforeclosures.com/blog/info/entry/another_look_at_bergen_county
If the market doesn’t correct, but instead is held up above it’s value, it leaves room for another fall. It also leaves the market not only trying to make normal gains but trying to outpace normal gains to make up for the shortfall.
The problem comes when people forget they’re still riding on some air and don’t work on putting gains back into replace the air. Then when there’s a bit more problems, the last bit of bubble air finally comes out which makes the current problem seem even worse.
AT least that’s my opinion.
“The single-biggest mistake in the Paulson bank-rescue-plan marketing effort has been the failure to explain clearly how taxpayers are going to recoup $700 billion used to buy toxic assets at auction in order to unfreeze the banking system.”
bi,
I get it now. The private sector is buried with worthless paper but DC will devise a strategy to extract a profit? Over the past 156 years, Lehman thrives, thru a depression, the collapse of 1907, world wars, the crash of 87′, the russian currency crisis, the demise of LTCM and nasquack.com. Unfortunately, they could not survive charade.com. However, thru hope, a prayer and a stroke, the taxpayers will stem the tide and profit?? Exactly who is this taxpayer? Are they accepting capital? Maybe you can explain their blackbox strategy? What do they know that Bear, Lehman, Merrill, Wamu, Indymac, etc.., missed.
Wachovia and Citi?
WaShitty.
just so the discussion is not so one sided here’s a view from a respected publication
http://online.barrons.com/article/SB122246748703380411.html?mod=djemWR
who can guess a decent solution?
larger reserves, reduce or eliminate fractional banking, abolish the Federal Reserve, have the Treasury produce sound money, raise interest rates, encourage savings, no more stupid ass wars, realize to stop terrorism..is to stop engaging in it, turn off your TV, get on a treadmill, read a book, vote, be aware of local politics, bring back manufacturing base, invest in alternative energy & infrastructure, don’t buy junk at slave mart, curb credit cards from allowing to targt kids.
oh man, I can go on forever.
SAS
I don’t know how comforting it is but everybody is going down with us.
BRIC down the tubes
Europe well just watch.
and are friends in the middle east who sell oil think demand destruction.
There is no quick cure, the world has been living it up on credit & easy money for years. In my experience if we make hay for 4 or 5 years it will take twice as long in payback pain.
Now let me see over population , limited resources, global economic crisis. Get really scared because its time for a war. Not a little one like Iraq, everyone is coming to the party. To many nukes in to many hands not good. If we didn’t have the bomb I’d say it was a given, but cooler heads may prevail in light of it. Stock up folks. Maybe the answer no one wants to think about. Not a solution a result.
“nada? zip?”
laughing,
That’s the ultimate upside.
The idiots will dig us into a hole that we, actually they, can never get out of. This charade will make the roaring 20’s seem like a dress rehearsal.
“So, I guess you wont be voting for M based on the history with his first wife?”
What he did was not at all admirable. I do not approve in the least. Nevertheless, while I might not approve of his past behavior, given the choice between him and O, I will put my vote where I have already put my cash.
From the Barrons article:
“Treasury’s purchases should not only help free up credit markets but boost the prices of securities that are backed by home loans. That, in turn, is likely to arrest the relentless loop of falling home prices spawning further mortgage defaults and foreclosures that, in turn, result in further declines in residential real-estate prices.”
How is inflating the prices on MBS going to stop falling home prices? It’s the other way around. If home prices were to go up, the value of the MBS would rise.
manufacturing jobs lost in the states.
Click on various states.
Credit replaced what was decent middle class salaries. The middle class continued there lifestyle via credit (or credit just to survive).
Middle Class is being wiped out, before your eyes.
http://www.americanmanufacturing.org/inyourstate/
SAS
sas 716,
exactly!
Paulson has said that the bailout is intended to create a bottom.
Problem is that the housing market has a while to go to reach bottom. I think the only things that have reached bottom are the safety nets in the system. Some have already failed and others may do so soon if housing contunies to fall.
Tom if it keeps falling, have a ways to go.
To get back to normal historic values, homes would have to shave about 50% off their peak.
“larger reserves, reduce or eliminate fractional banking, abolish the Federal Reserve, have the Treasury produce sound money, raise interest rates, encourage savings”
SAS,
After I tripped over you in some dark alley, in Lodi, during that damn cold winter in 79′, I came to my senses. If you want to make $, bet against the fed. They are simply an illegal cartel. Don’t believe me, do your homework, [not you]. Who owns stock in the fed? One other tibit, why are they prohibited from selling their stock?
Our only chance is to increase our savings, strive for a positive current account balance and, once again, become the world’s largest creditor, not debtor. There is one major hurdle; consumption will now be fueled by savings, not credit. Can Pavlov’s dog be trained to switch hit?
WS can sell the lumpens anything. You want structured paper, fine, bid up. You want to blow up a community, fine, we’ll provide the dynamite. The only chance in hell, that this bailout/fleecing of America has a glimmer of hope; the package must implode/bulldoze 2M homes. Oh by the way, WS will be happy to package the explosives to accomplish this. You’ll just have to negotiate 2%/20%.
716, barron’s article.
ok. I might agree with the that analysis except that it relies assumptions that fly in the face of fact.
Unfortunately, we have: 1) a recession with continuing job loss and contraction of the economy, here and spreading abroad.
—snip–Of the $1 trillion presumed hole, $800 billion involve subprime and Alt-A mortgage securities, which are of slightly higher quality than subprime. The remainder of losses is accounted for by under-water prime mortgage securities and unsecuritized mortgage loans. —snip–
Many of these mortgages are still going to tank because a lot of these folks got these mortgages based on wages they don’t currently have.
Again refer to the disconnect between house prices and income.
Refer yet again to the Case Shiller graph that still shows the inflation adjusted housing price index to be too high.
Until this correction is complete, there is no fixing this.
The “fake money” – inflated home equity — has to disappear.
Funny, this article doesn’t address the amount of money that was HELOC’s from these artificially inflated homes either. Or do they just consider them mortgages, too?
I respect Barron’s. I don’t agree with the article. I freely admit I’m a neophyte and may be ENTIRELY wrong.
It just doesn’t make logical sense to me.
…and it doesn’t take into account that inflation is on its way and a lot of those purportedly “good” alt A and primes may be in danger too.
Or I’m just a pessimist.
sl
726 REpo
YES!
sl
“Paulson has said that the bailout is intended to create a bottom.”
Tom,
A bottom? Six months ago they stated that we haven’t yet reached the peak. Either they are lying or clueless. Hank is lying, Bergabe/Bush, clueless.
A bottom? Not in my book. Come to think of it, not in Hank’s book either. He’s much smarter than that.
If this goes thru, the top will be firmly entrenched. In our lifetime, this will be major resistance, a line in the sand. A top will be established. The bottom? Maybe Japan, probably worse.
Sadly, from this point, we will slide down the slope of hope. There are no more lifelines available. A positive? Those that comprehend and have the brass to take the other side; well, they drink out of the cup.
“Our only chance is to increase our savings, strive for a positive current account balance and, once again, become the world’s largest creditor, not debtor.”
thats the part that nobody wants to do.
I also think people need to evaluate whats really important to them. The chase of money and materialism has ruined people.
It did me some terribly for years.
FOr 20 years I chased women & money all over the globe. got me nowhere cause My kids never really knew me & they all have different mothers. Luckily, grandkids heal all wounds.
SAS
on that note, I’m done w/ my warm milk & Cognac and off to bed.
night Tomboy!
:)
SAS
“From the Barrons article:”
Hobokenite,
Are you referring to Jonathan Laing? If yes, this is the same pundit that promoted GM at 30 something and proclaimed that housing had bottomed 6-8 months ago.
http://www.cjr.org/the_audit/barrons_housing_story.php?page=all
BC Bob,
This is what Paulson said to the House Financial Service Committee.
“But as we looked at it and thought about this and consulted together about this for a long time and we said ultimately, and we hope we don’t get there and we hope that this decline can be arrested, but we both have said but until the biggest part of the correction in housing prices is over, there’s no way to really have a stable financial system.”
So the bailout is meant to stabilize the financial system and to stabilize the financial system housing declines need to be arrested therefor the bailout is meant to stop the decline in housing prices.
I have some more parts of the testimony at http://www.bergenjerseyforeclosures.com/blog/info/entry/paulson_angry_by_the_things
I don’t think the plan will do that and I don’t know what Paulson thinks, I only know what he says.
BC Bob
YES! No one wants to accept the fact.
A bunch of fake money was created from inflating the prices of houses.
Until the the correction occurs, it’s all just rearranging of deck chairs.
sl
Guess what?
WASHINGTON – Automakers gained $25 billion in taxpayer-subsidized loans and oil companies won elimination of a long-standing ban on drilling off the Atlantic and Pacific coasts as the Senate passed a sprawling spending bill Saturday.
Got Ford?
ugh.
sl
For the record, cause there seems to be some confusion.
I think houses are still over priced. I have doubts whether the bailout will cause house prices to stop falling.
I’m just saying what Paulson said in. For some reason, there seems to be confusion. Either people are reading into it what they want to hear or are hearing things second hand from people that have distorted facts.
For that post on my blog, I watched the testimony live, rewound to transcribe it after what I heard concerned me, then wound up reading it a few times while writing the entry. I also posted complete answers and didn’t just cut out snippets for people to come to their own conclussions.
My conculsion, a lot of money has already been pumped into the system and a lot of money through bail outs and other action by the fed such as repurchase agreements and cutting the discount and fed funds rate and knocking on bank’s doors asking them if they needed anything.
All their “normal” measures for dealing with extraordinary circumstances are reaching their limits and we still need $700 billion to keep Wall St from tanking.
Paulson/Bernanke are either crooks or incapable of handling their jobs. As someone previously measured they might have been promoted to their level of incompetency.
That may sound harsh but they’ve been at their posts long enough to know that there was a crisis brewing and they should have taken the initiative to meet with congress, even in closed door sessions to come up with a backup plan in case their fire fighting efforts didn’t work. They didn’t and now they’re asking congress to rush to pass this bill.
It’s ridiculous.
here it comes….
[hurry up…Asia’s gonna open soon…]
http://www.msnbc.msn.com/id/26884523
MSNBC News Services
updated 10 minutes ago
WASHINGTON – Key lawmakers in both parties and Treasury Secretary Henry Paulson made a “breakthrough” on a tentative deal for the multibillion-dollar government bailout of distressed financial companies, they said early Sunday.
In a dramatic press conference at the Capitol after midnight, Senate Majority leader Harry Reid, D-Nev., said there had been a “breakthrough” in the negotiations, and Paulson said that “I think we’re there,” although details remained to be worked out overnight. Reid said there would be an announcement later Sunday.
“We’ve made great progress,” House Speaker Nancy Pelosi told reporters after a night of marathon talks. “We have to get it committed to paper so we can formally agree.”
etc. [insert vomit sound bite here]
sl
What will the impact of the Wall St collapses be on NNJ real estate? I haven’t seen any good articles or threads about this, which surprises me a bit.
“What will the impact of the Wall St collapses be on NNJ real estate? I haven’t seen any good articles or threads about this, which surprises me a bit.”
Either your not looking hard enough or your only looking for good news articles.
“So the bailout is meant to stabilize the financial system and to stabilize the financial system housing declines need to be arrested therefor the bailout is meant to stop the decline in housing prices.”
Tom,
Nothing more than a snake oil salesman. Bailout? Picture Hank, Bergabe, Bush, Cheney, Frank, Dodd and Pelosi standing on the beach and blowing as hard as possible. [don’t picture Hank on his knees, begging to Pelosi] What chance in hell do they have of stopping/reversing a cat 5 hurricane?
Yes, they can stroke us, blow smoke up our #ss, even try to make us believe that taxpayers will ultimately profit, buying worthless securities and marking them to maturity. The same worthless paper that put Bear, Lehman, Indy, Wamu, etc.., under. Hey, maybe DC employs master quants?
The dolts can try to massage it any way that strikes their fancy. That’s OK. They realize that there is absolutely nothing else that they can fabricate to pull us out of this mess. We have already borrowed to the max and leveraged to the sky. End result? Bankrupt. Their answer, print, lend and leverage more. Hello? Been there, done that, now bankrupt. The world is deleveraging, yet our solution is to print and leverage again? Better yet, send us all to a gunfight with water pistols. At least we would have a fighting chance. How much more s#it can you force down a backed up septic system?
Unfortunately, better yet fortunately, the only solution is to cut back, increase savings, build a positive current account balance and get back to bricks and mortar.
There is no government, in the history of mankind, that has been able to alter a business cycle. In addition to this, no government, in the history of mankind, has been able to print their way to prosperity. I like odds. Anybody willing to place odds that this collection of liars and fraudsters will be the 1st to print to prosperity? Come to think of it, fire Bergabe and bring in Mugabe.
Tom, links? Thanks.
“However, thru hope, a prayer and a stroke, the taxpayers will stem the tide and profit?? Exactly who is this taxpayer? Are they accepting capital? Maybe you can explain their blackbox strategy? What do they know that Bear, Lehman, Merrill, Wamu, Indymac, etc.., missed.”
Like anything, it’s about price. I’m not supporting this (or any) horror show of a ‘solution’ but if the purchase price by the feds is set too high the financial institutions are recapitalized and the taxpayer is holding the bag. If the fed bid is low, some financials get helped, more than in the above scenario would fail, and the taxpayer has a lower basis and maybe some light at the end of a very long tunnel.
“The UK government is about to nationalize another Northern Rock, in Bradford and Bingley, Belgian giant Fortis Bank is on life-support (its liabilities are three times the GDP of Belgium)”
Use care when comparing the size of international financial institutions based in Europe to their home countries’ GDP. Since most of the world (except US and a couple of African dictatorships) do not tax their citizens on global income most international Euro based financial institutions have their assets and funding outside of their home country. They need not even be Swiss or Luxembourg based. It’s not about hiding income, just getting it outside one’s contry of domicile. The financial condition of the locals is not that relevant except for truly domestic foreign institutions such as B&B, the German Landesbanken, etc.
manhattan/738-
Here’s a good one.
http://www.businessweek.com/lifestyle/content/sep2008/bw20080925_757510.htm?chan=top+news_top+news+index+-+temp_lifestyle
laughy (692)-
“…but seriously, there’s GOT to be something that can cushion the blow and make this a 1-2 year problem as opposed to a 7-10 year malaise, right?”
No. There is no known way to polish a turd. As its core, this is about worthless assets, whose values will never recover. The only way to break the negative feedback loop is to let it all crash.
We could, however, be starting work on WPA-like initiatives to begin to divert whatever capital is left toward the enterprises that will lead to eventual recovery.
But that’d be too much like honestly admitting a problem and planning ahead.
still looking 737 Well we have been sold out.Not to say I had much hope of another outcome. The details should prove interesting but will change very little on the overall screwing to the tax payer & the
future of are country. How to structure a mistake right congress is uniquely qualified.
laughy (701)-
I’d guess that if they can even get a bill together this weekend, it’ll be so flawed- and watered down- that the net effect will end up being worse than P’s original “crown me” idea.
Amazing that the Dems have the votes but won’t jump off the cliff without the R’s joined to them at the hip.
Towns That Could Be Hit Hardest by the Financial Crisis
by Prashant Gopal
Saturday, September 27, 2008
The upheaval shaking Wall Street will hurt privileged enclaves as well as working-class neighborhoods from coast to coast. Find out which will fare the worst.
http://finance.yahoo.com/real-estate/article/105861/Towns-That-Could-Be-Hit-Hardest-by-the-Financial-Crisis
boken (720)-
Bass-ackwards, ain’t it? And these are our best and brightest coming up with this idiocy.
BC (729)-
Not to be impatient and greedy…but I feel like the cup is placed just out of my reach, and the Fed/Treasury have duct taped me to a chair.
Tom (733)-
The only purpose of P’s plan is to turn the US taxpayer into the biggest bagholder in history.
There are now two decent ranches in Summit for 399k and a handful of pre WW2 colonials below 450k. Wish I could remember the name of the agent who claimed I would only be able to buy a tear down for less then 450k in Summit last year.
There’s also a cape in good shape in Berkeley Heights at 399k, but I think that’s on a busy street.
Sorry if this has already been discussed. I can’t keep up lately.
Silver supports reinstating New York City commuter tax
by Associated Press
Friday September 26, 2008, 1:34 PM
State Assembly Speaker Sheldon Silver supports bringing back a tax on suburban commuters who work in New York City that he helped eliminate in 1999.
http://www.silive.com/news/index.ssf/2008/09/silver_supports_reinstating_ne.html
Bank run in Hong Kong
http://news.bbc.co.uk/2/hi/asia-pacific/7634895.stm
http://www.washingtonpost.com/wp-dyn/content/article/2008/09/26/AR2008092603269_pf.html
A World of Risk Beyond Wall Street
By Jim Hoagland
Sunday, September 28, 2008; B07
NEW YORK — George W. Bu-sh governs by crisis interspersed with long periods of not governing at all. Only when disaster threatens or arrives does this president summon himself, Congress and the nation to act — in haste and extremis rather than in reasoned unison.
The latest example — following the attacks of Sept. 11, the Iraq war’s unraveling and Hurricane Katrina — is the international financial meltdown that Bush and Congress are trying to stave off with a go-it-alone U.S. rescue. Unfortunately, Barack Ob-ama and John Mc-Ca-in also neglected the global dimension of this financial crisis when they crossed rhetorical swords in Oxford, Miss., on Friday night.
Ob-ama did explicitly promise to provide leadership “not just when there is a crisis.” I think he won the debate, on points rather than by knockout, by showing a much surer grasp of the costs of Bu-sh’s gun-to-the-head leadership style and the administration’s flawed economic policies.
But Obama was little better than Mc-Ca-in in conveying how he would lead us out of this storm. And neither indicated clearly if or how he would rally the input and help that are needed from other nations to remake international financial institutions and markets now at risk of being swamped by problems largely Made in the USA.
Both men appeared overwhelmed by the scope of this crisis. They have every reason to be. The credibility of American power, brought low by the draining conflicts in Iraq and Afghanistan, would be trashed by a botched financial rescue. In poker terms, Bush has gone all in on this hand. He bets that the United States is too big to fail.
The rest of the world is reduced to waiting to exhale. With Bu-sh, Hank Paulson and Ben Bernanke warning that “financial panic” is just around the corner if Congress does not act now, it is remarkable that sovereign wealth funds and central banks have not been dumping the mountains of Treasury bonds and other U.S. assets they hold — or even attacking the dollar systematically, as happened in past crises.
Part of the reason lies in the U.S. security blanket that is spread over nations such as Saudi Arabia and Japan or in China’s determination not to damage its market access and dollar holdings. However dim U.S. prospects are, most other markets look even riskier. The United States does not weaken alone. A broken America means a broken international system that others will not be strong enough to repair without the U.S. centerpiece.
Bu-sh and his successor need to communicate now that U.S. financial unilateralism is also a relic. In this era of instant telecommunications and unfettered capital flows across borders, U.S. rescue plans will work in the long run only if they are accompanied by significant international regulatory reform and innovation.
Like newspapers and other industries, stock markets, banks and insurance companies have few defenses against a telecommunications revolution that changes the nature of time and knowledge. Computers, fiber-optic networks and other instruments of globalization are rendering many of their practices obsolete and self-wounding.
The International Monetary Fund has cautioned for months that the global economy was much weaker than governments admitted. Bu-sh missed a chance to use those and other warnings to bring international organizations and cash-rich nations together to talk about creating a global insurance fund and other steps to keep U.S. credit problems from metastasizing.
It is still worth trying. French President Nicolas Sarkozy suggests that a summit of major financial powers should take place after the U.S. elections. Such a gathering should begin to update the six-decade-old Bretton Woods institutions. Mc-Ca-in and Obama should take up the Sarkozy proposal.
Here for the U.N. General Assembly opening last week and to receive a humanitarian award at a black-tie dinner, Sarkozy, an unabashed admirer of the United States, had other advice worth considering. He spoke in a hotel ballroom filled with Wall Street financiers who underwrote the gala — but his words seemed aimed not only at them but also at Bu-sh, Congress and ultimately the American nation:
“You cannot demand to lead and then say that you are not responsible when things do not work out. You cannot accept only the rewards and duck the bad consequences of your actions.”
Americans cannot take for granted a world leadership role that comes with relatively little cost or sacrifice, as they have tended to do in the Clinton-Bu-sh era. Leadership must be earned anew, and the costs cannot be simply passed down to future generations. Otherwise, as John Maynard Keynes might have said, in the long run we are all poor.
jimhoagland@washpost.com
A good read:
http://www.washingtonpost.com/wp-dyn/content/article/2008/09/26/AR2008092603269_pf.html
A World of Risk Beyond Wall Street
By Jim Hoagland
Sunday, September 28, 2008; B07
NEW YORK — George W. Bu-sh governs by crisis interspersed with long periods of not governing at all. Only when disaster threatens or arrives does this president summon himself, Congress and the nation to act — in haste and extremis rather than in reasoned unison.
The latest example — following the attacks of Sept. 11, the Iraq war’s unraveling and Hurricane Katrina — is the international financial meltdown that Bu-sh and Congress are trying to stave off with a go-it-alone U.S. rescue. Unfortunately, Barack Ob-ama and John Mc-Ca-in also neglected the global dimension of this financial crisis when they crossed rhetorical swords in Oxford, Miss., on Friday night.
Ob-ama did explicitly promise to provide leadership “not just when there is a crisis.” I think he won the debate, on points rather than by knockout, by showing a much surer grasp of the costs of Bu-sh’s gun-to-the-head leadership style and the administration’s flawed economic policies.
But Ob-ama was little better than Mc-Ca-in in conveying how he would lead us out of this storm. And neither indicated clearly if or how he would rally the input and help that are needed from other nations to remake international financial institutions and markets now at risk of being swamped by problems largely Made in the USA.
Both men appeared overwhelmed by the scope of this crisis. They have every reason to be. The credibility of American power, brought low by the draining conflicts in Iraq and Afghanistan, would be trashed by a botched financial rescue. In poker terms, Bush has gone all in on this hand. He bets that the United States is too big to fail.
The rest of the world is reduced to waiting to exhale. With Bu-sh, Hank Paulson and Ben Bernanke warning that “financial panic” is just around the corner if Congress does not act now, it is remarkable that sovereign wealth funds and central banks have not been dumping the mountains of Treasury bonds and other U.S. assets they hold — or even attacking the dollar systematically, as happened in past crises.
Part of the reason lies in the U.S. security blanket that is spread over nations such as Saudi Arabia and Japan or in China’s determination not to damage its market access and dollar holdings. However dim U.S. prospects are, most other markets look even riskier. The United States does not weaken alone. A broken America means a broken international system that others will not be strong enough to repair without the U.S. centerpiece.
Bu-sh and his successor need to communicate now that U.S. financial unilateralism is also a relic. In this era of instant telecommunications and unfettered capital flows across borders, U.S. rescue plans will work in the long run only if they are accompanied by significant international regulatory reform and innovation.
Like newspapers and other industries, stock markets, banks and insurance companies have few defenses against a telecommunications revolution that changes the nature of time and knowledge. Computers, fiber-optic networks and other instruments of globalization are rendering many of their practices obsolete and self-wounding.
The International Monetary Fund has cautioned for months that the global economy was much weaker than governments admitted. Bu-sh missed a chance to use those and other warnings to bring international organizations and cash-rich nations together to talk about creating a global insurance fund and other steps to keep U.S. credit problems from metastasizing.
It is still worth trying. French President Nicolas Sarkozy suggests that a summit of major financial powers should take place after the U.S. elections. Such a gathering should begin to update the six-decade-old Bretton Woods institutions. Mc-Ca-in and Obama should take up the Sarkozy proposal.
Here for the U.N. General Assembly opening last week and to receive a humanitarian award at a black-tie dinner, Sarkozy, an unabashed admirer of the United States, had other advice worth considering. He spoke in a hotel ballroom filled with Wall Street financiers who underwrote the gala — but his words seemed aimed not only at them but also at Bu-sh, Congress and ultimately the American nation:
“You cannot demand to lead and then say that you are not responsible when things do not work out. You cannot accept only the rewards and duck the bad consequences of your actions.”
Americans cannot take for granted a world leadership role that comes with relatively little cost or sacrifice, as they have tended to do in the Clinton-Bu-sh era. Leadership must be earned anew, and the costs cannot be simply passed down to future generations. Otherwise, as John Maynard Keynes might have said, in the long run we are all poor.
jimhoagland@washpost.com
UK bank to get nationalized
http://news.bbc.co.uk/2/hi/business/7640143.stm
http://www.washingtonpost.com/wp-dyn/content/article/2008/09/26/AR2008092603269_pf.html
A World of Risk Beyond Wall Street
By Jim Hoagland
Sunday, September 28, 2008; B07
NEW YORK — George W. Bu-sh governs by crisis interspersed with long periods of not governing at all. Only when disaster threatens or arrives does this president summon himself, Congress and the nation to act — in haste and extremis rather than in reasoned unison.
The latest example — following the attacks of Sept. 11, the Iraq war’s unraveling and Hurricane Katrina — is the international financial meltdown that Bu-sh and Congress are trying to stave off with a go-it-alone U.S. rescue. Unfortunately, Barack Ob-ama and John Mc-Ca-in also neglected the global dimension of this financial crisis when they crossed rhetorical swords in Oxford, Miss., on Friday night.
Ob-ama did explicitly promise to provide leadership “not just when there is a crisis.” I think he won the debate, on points rather than by knockout, by showing a much surer grasp of the costs of Bu-sh’s gun-to-the-head leadership style and the administration’s flawed economic policies.
But Ob-ama was little better than Mc-Ca-in in conveying how he would lead us out of this storm. And neither indicated clearly if or how he would rally the input and help that are needed from other nations to remake international financial institutions and markets now at risk of being swamped by problems largely Made in the USA.
Both men appeared overwhelmed by the scope of this crisis. They have every reason to be. The credibility of American power, brought low by the draining conflicts in Iraq and Afghanistan, would be trashed by a botched financial rescue. In poker terms, Bu-sh has gone all in on this hand. He bets that the United States is too big to fail.
The rest of the world is reduced to waiting to exhale. With Bu-sh, Hank Paulson and Ben Bernanke warning that “financial panic” is just around the corner if Congress does not act now, it is remarkable that sovereign wealth funds and central banks have not been dumping the mountains of Treasury bonds and other U.S. assets they hold — or even attacking the dollar systematically, as happened in past crises.
Part of the reason lies in the U.S. security blanket that is spread over nations such as Saudi Arabia and Japan or in China’s determination not to damage its market access and dollar holdings. However dim U.S. prospects are, most other markets look even riskier. The United States does not weaken alone. A broken America means a broken international system that others will not be strong enough to repair without the U.S. centerpiece.
Bu-sh and his successor need to communicate now that U.S. financial unilateralism is also a relic. In this era of instant telecommunications and unfettered capital flows across borders, U.S. rescue plans will work in the long run only if they are accompanied by significant international regulatory reform and innovation.
Like newspapers and other industries, stock markets, banks and insurance companies have few defenses against a telecommunications revolution that changes the nature of time and knowledge. Computers, fiber-optic networks and other instruments of globalization are rendering many of their practices obsolete and self-wounding.
The International Monetary Fund has cautioned for months that the global economy was much weaker than governments admitted. Bu-sh missed a chance to use those and other warnings to bring international organizations and cash-rich nations together to talk about creating a global insurance fund and other steps to keep U.S. credit problems from metastasizing.
It is still worth trying. French President Nicolas Sarkozy suggests that a summit of major financial powers should take place after the U.S. elections. Such a gathering should begin to update the six-decade-old Bretton Woods institutions. Mc-Ca-in and Ob-ama should take up the Sarkozy proposal.
Here for the U.N. General Assembly opening last week and to receive a humanitarian award at a black-tie dinner, Sarkozy, an unabashed admirer of the United States, had other advice worth considering. He spoke in a hotel ballroom filled with Wall Street financiers who underwrote the gala — but his words seemed aimed not only at them but also at Bu-sh, Congress and ultimately the American nation:
“You cannot demand to lead and then say that you are not responsible when things do not work out. You cannot accept only the rewards and duck the bad consequences of your actions.”
Americans cannot take for granted a world leadership role that comes with relatively little cost or sacrifice, as they have tended to do in the Clinton-Bu-sh era. Leadership must be earned anew, and the costs cannot be simply passed down to future generations. Otherwise, as John Maynard Keynes might have said, in the long run we are all poor.
jimhoagland@washpost.com
“I’d guess that if they can even get a bill together this weekend, it’ll be so flawed- and watered down- that the net effect will end up being worse than P’s original “crown me” idea.”
Would it really kill the republic to take 4 days, not unlike when the senate considers a Supreme Court nominee, to allow panels of economic experts and other citizens to testify about various aspects of the legislation and point out places where unseen (to congress) flaws might exist before voting onthis?
http://www.bloomberg.com/apps/news?pid=20601087&sid=afLj7ofnabdc&refer=home
Hearing they have reached a tentative agreement…
I tried to read on this tentative agreement by going to various websites. I feel with all the clauses in the tentative agreement to satisfy all parties, I doubt whether the bailout will really work !!! And of course dollar will collapse, oil at $200, inflation through the roof…Maybe we will need $10 trillion bailout then.
Posted yesterday and just now rescued from moderation land
Lisoosh
Last I heard big Di-ck was fishing in Wyoming.
This could be interesting:
September 26, 2008
BY MICHAEL SNEED Sun-Times Columnist
Tipsville: Sneed hears rumbles that convicted influence peddler Tony Rezko, whose dealings have been linked to Barack Ob-ama and Gov. Blagojevich, is singing to the feds.
• • To wit: “I’m told by a close friend of Rezko that he’s cooperating with the feds,” said a Sneed source. “I don’t know whether he’s talking about Gov. Blagojevich or Bar-ack Ob-ama or anyone else,” the source said.
» Click to enlarge image Michael Sneed
• • The shocker: Rezko, a Wilmette businessman who was a top adviser and fund-raiser for Blago, has been locked up at the Metropolitan Correctional Center awaiting an Oct. 28 sentencing — one week before the presidential election.
• • Background: Convicted in June of wide-ranging fraud tied to kickbacks on state deals, Rezko’s involvement in real estate deals with Gov. Blago’s wife, Patti, are also under federal scrutiny.
• • The backshot: Rezko’s name has continually surfaced as a friend of Ob-ama, who benefitted from a real estate deal involving Rezko — which involved Ob-ama’s Kenwood home. Thus far, no serious paint has been splashed on Ob-ama by the Rezko brush. But rumors abound that the feds have their eyes fixed on Blago and his wife, who firmly maintain their innocence.
• • The buckshot: Being locked up at the MCC has been known to be a sure way to break a felon’s silence. Tweet. Tweet.
http://www.suntimes.com/news/sneed/1186553,CST-NWS-SNEED26.article#
“Maybe we will need $10 trillion bailout then.”
AHHHHHHHHHHHHHHHHHHHHHHHH!!!!!!!!!!!!!!!!!!!!
We hold the greatest gold reserves in the world. If the dollar collapses, relative to gold, it may only take a few tonnes to pay for our debts and to finance the bailout.
Eureka! I have the answer to the problem. Sort of.
Put Pualson, Bernanke and Orszag in a room alone for a few days and offer them $2 billion each to come up with a cheaper, better solution that will really solve the problems. That should counteract Paulson’s and Bernanke’s incentives from Wall St.
By the way, I’ve been compiling some thoughts all week that I just posted on my site.
Losers Keepers: Is Paulson a big fat liar?
Clot, BC,
“The only purpose of P’s plan is to turn the US taxpayer into the biggest bagholder in history.”
I completely agree. All I’m saying is what Paulson said.
Other people on here are trying to read into what Paulson is saying to make it better or worse.
I think what he says is bad enough on it’s own and less tinfoil hat sounding to talk about that.
Clot,
Did you get my email the other day?
Does anyone have access to WSJ? –
There is a posted article:
“Summary of the Draft Proposal to Rescue U.S. Financial Markets
http://www.nbc.com/Saturday_Night_Live/video/clips/couric-palin-open/704042/
Laugh or cringe.
Bill summary from LA Times
snip
According to a summary of the draft proposal, the compromise plan would make available $250 billion to the Treasury department immediately, followed by another $100 billion later, but the remaining $350 billion would be subject to additional congressional action. The limits on executive compensation include no golden parachutes. And it would establish a bipartisan oversight commission, split evenly between appointees of the minority and majority parties. If after five years the government has a net loss of taxpayer funds, the president will be required to submit a legislative proposal to recoup the funds.
snip
https://njrereport.com/index.php/2008/09/26/weekend-open-discussion-132/#comment-223537
Draft on Fox News.
http://www.foxnews.com/story/0,2933,429343,00.html
oops, cut the wrong link for la times
Now that the bailout is done, it time to go out and buy a home before prices shot up 20%. So buy now!!!
Buy early, buy often.
With apologies to the old song and to rhyming:
POS capes
POS capes
One a million
two a million
POS capes
Buy them for your daughters
Buy them for your sons
Buy them before you lose your money
In a bank run
Bailout will help the markets for about 2 weeks at best. Expect to return to even worse position by end of October.
Printing that many dollars will create inflation which will in turn create job loss. Remember the band aid analogy from a few days ago? Well it does appear that the government plans on ripping the bandage off extremely slowly. The problem is that once the bandage is completely removed, the festering wound will be clearly revealed.
Here comes the deep recession/depression.
2009 is gonna be a very bad year!
Stu,
The revamped bailout is but a figleaf meant to convey that something is being done. One has to wonder if anything beyond the first $250B will ever get spent.
Stu,
What do you mean? Bush, Paulson and Pelosi said this will help our economy. Don’t you believe them?
How is the Gator doing down in gator country?
She is doing well even after the painful loss. She comes home tonight.
Frank…In all seriousness, the problem is in the 100s of trillions when you calculate the derivative issue. The adjusting arms about to hit will equal if not surpass the subprime pain in dollars. Why do I predict this? Less employment and more inflation when these arms start adjusting then when the subprime exploded. Realistically, one in 3 subprime borrowers couldn’t afford their loan even before it adjusted.
So tell me, the only way to stop the bleeding is for housing to bottom. This plan does absolutely nothing to stop the falling home prices. The uptick in inflation from printing money will actually increase the likelihood of foreclosures actually adding to the drop in home values. Very very few people have the nut necessary to buy a new home and buy creating inflation, we are pricing more people out. This bailout will soon prove to be nothing more than one last chance to sell your long positions with a little less pain then you are currently suffering.
Good luck to everyone, we will need it.
Did I mention that X-mas was canceled?
http://online.wsj.com/article/SB122257682963083173.html
It looks like judicial review has been agreed upon..
They dropped the ACORN money…
“Did I mention that X-mas was canceled?”
This year and for the next 2 years!
Can somebody explain in 10 lines or less what the trillions derivatives issue is? I know a few things about derivatives and don’t get how it gets into trillions.
http://online.wsj.com/article/SB122256539004883001.html?mod=special_page_campaign2008_mostpop
The Real Costs of the Bailouts
Last week, as federal regulators seized Washington Mutual in the largest U.S. banking failure, Congress was grappling with whether to spend $700 billion of public money to fix the financial industry’s troubles.
Lawmakers’ initial reaction to the Treasury Department’s staggering request: shock. That sum amounts to about a quarter of the U.S. government’s annual spending. It’s more than the Pentagon’s annual budget, more than the nation pays out each year in Social Security benefits and more than the federal government’s cost for Medicare and Medicaid.
Members of Congress then asked the questions that continue to be on many Americans’ minds:
How will the U.S. pay for this program and the previously announced aid to Bear Stearns, Fannie Mae, Freddie Mac and American International Group? (The Washington Mutual seizure doesn’t add to the U.S. tab because the bulk of WaMu’s operations are being taken over by J.P. Morgan Chase without cost to the Federal Deposit Insurance Corp.)
And what will these efforts end up costing us all in taxes?
Part of the answer is known today but other aspects — including the ultimate tab for these rescue programs — may not be clear for years or even decades.
$1 Trillion Commitment
The total government commitment so far in its current and proposed bailouts: $1 trillion. But most of that money would give the government a claim on assets — such as home mortgages and insurance operations — that have actual value.
In each case, government officials took action because they believed the nation’s financial system — including banks where you deposit your money and Wall Street firms that run many markets — risked a breakdown. Such a meltdown would make it harder for regular consumers and businesses to borrow money and make major purchases, putting a major dent in the $14 trillion U.S. economy.
The plumbing of the financial markets and economy “is all esoteric Wall Street stuff,” Federal Reserve Chairman Ben Bernanke, a former college economics professor, explained to lawmakers last week. “It doesn’t have any meaning to people on Main Street, but it connects very directly to their lives. If the credit system isn’t working, then firms cannot finance themselves. People cannot borrow to buy a car, to send a student to college, to buy a house.”
Most of the government’s bailouts are tied to the housing-market slump and all the toxic mortgage loans and mortgage-backed securities held by banks and other financial institutions.
Biggest U.S. Bailout
In the rescue plan Congress was negotiating last week — at $700 billion the biggest bailout in U.S. history — a key goal is to remove much of those soured mortgage securities from banks’ books, possibly through an auction system.
The government — taxpayers, essentially — would then hold those assets until they can be sold off in a more normal market once the economy and housing market recover.
A key point: The $700 billion would come from selling debt to the public, raising the total federal debt, which is approaching $10 trillion now.
But it’s not direct government spending, which shows up as part of the U.S. budget. If the mortgage debt loses value over time, however, the U.S. would have to record those losses as spending. That could increase the budget deficit, which eventually must be offset by higher taxes or lower spending.
So taxpayers face the risk of losing some part of the $700 billion — but could also turn a profit if the U.S. ends up selling those holdings for more than the purchase price.
First Up: Bear Stearns
The earlier rescue efforts also involve uncertainty about the ultimate cost to taxpayers. Back in March, the government worried that the failure of investment bank Bear Stearns would lead markets to fall apart globally. So it agreed to take on $30 billion worth of the firm’s assets, including some of those bad mortgages, to help its new buyer, J.P. Morgan Chase.
The Federal Reserve plans to hold onto those assets for perhaps a decade before selling. J.P. Morgan will cover the first $1 billion in losses, if any. Taxpayers are highly unlikely to lose all $29 billion they have on the line, but could lose some of it.
Earlier this month, the action moved to mortgage giants Fannie Mae and Freddie Mac. Because many investors assumed they were like public entities, the U.S. stepped in and took them over when the companies became too unstable to support the housing market by providing enough new mortgages.
The Treasury Department plans to inject up to $200 billion in capital into the firms. Some of that money may be lost because the firms’ mortgage securities continue to lose value as home prices decline. But it’s still unclear how much money taxpayers will kick in.
Less than 10 days later, the government stepped in again, to aid giant insurer AIG. The U.S. provided a loan of up to $85 billion. Half of that had been tapped by the middle of last week. But the terms were onerous: An interest rate above 11% and rights to an 80% government stake in the company.
AIG still has profitable insurance lines, and some of its businesses could be sold to pay the government back. So that bailout may not cost taxpayers anything directly.
With all these rescue efforts, even if the U.S. government profits after its expenses, there’s still a broader unquantifiable cost: whether bailing out financial institutions and markets will create expectations for more taxpayer support down the road when Wall Street or big businesses get into trouble.
Government officials acknowledge that risk. But they say taxpayers are being helped in the long run because stronger financial markets will translate into more economic growth and higher tax revenue.
Guest,
I wouldn’t mind the same. What it seems to copme down to is you have a house for which you have agreed to pay a bank back $400,000. The bank sells off the mortgage to folks who chop it and add it to say 9 other (for the sake of keeeping numbers small) mortgages. That $4M reprents the value of the houses underlying the loans (even if overstated given the then current marketplace) and each of the banks shows the $400,000 on their balllance sheets. The $4Million gets divided into 10 tranches of $400,000 each and those get sold to 10 investors. Now, the Banks each show $400,000 on their ballance sheet, as do the 10 new investors. The investors, then take their 1/10th of each underlying mortgage and divide it further and sell to each other, dividing the risk of any given default hurting any one of them . Those new tranches become assets on the new investor’s ballance sheets. Other folks now see this as an opportunity to trade and some trade actual pieces of the original loans and others use their ability to scoop up the pieces as a later date as an asset to sell to other folks looking for insurance , in essence, to protect their non-RE investments. Suddenly, that $4,000,000 in real assets has ballooned as each setp in essence creats money.
As long as the value of the RE underpinning all of this holds or increrases in value, ther are no issues. Even a default here or therte, does little harm. But, when everything decreases and lots of people start defaulting, like water over a water fall, it picks up momentum packing a wallop to those at the end of the chain.
I envision it like a gambler at a Soprano’s-type high stakes poker game. One may have run out of money, but, as long as one has resources to draw upon, the house will give you more chips. The chips have no value other than that you provide by promising to pay. If at the end of the game you find out that your assets are not worth enough to cover the debt, those chips, which everyone assumed had some value, are suddenly transformed from gold to the plastic they were before you promised to turn them into gold. ALthough noone is really out anything they feel themselves having been cheated, since they could have lost real money to your worthless plastic chips, so they find ways of, umm, encouraging, persuading, or menacing you to find a way of exchanging real money for the worthless plastic.
Banks tend not to kneecap folks, so their ability to force payment is more limited, at least pre-bailout. We will need to see what made it in the bill.
Thanks to those of you who threw me a few links. I suppose it won’t be long before the personal finance crisis stories start coming out of Manhattan and the surrounding suburbs. No wait, these people are in the top 5% of earners in the Nation – I’m sure they have big savings accounts to fall back on for a few years.
“No wait, these people are in the top 5% of earners in the Nation – I’m sure they have big savings accounts to fall back on for a few years.”
Manhattan,
The thing is, how many of those folks will say toi themselves, “My job is gone, it is not coming back, I have a few million in cash, and a few million in my property here in Manhattan. Why not go and essentially retire to a warm place and golf abd boat, and maybe use some of the cash to open a small business to keep my mind occupied?”
I knew a woman who retired at about 40. She and her husband opened a shop in a posh town and they work when they want and let staff cover the store when they don’t want to.
They could have worked until grayhaired but saw no reason to continue to living in Manhattan and running in the rat race.
to SAS, shore et al
A lot of people on this blog keep talking up inflation.
If we are talking strictly about the total money supply we will and cannot see inflation before deflation has run its course.
Housing alone is in the process of losing approx 3 trillion in value assuming a reversion to mean and any significant over shoot could put it at 4 trillion. Now add in all the wall street financial instruments that are worth pennies on the dollar and you are talking about another 5 – 8 trillion.
Right there we are talking about losing 10- 12 trillion in money. poof, gone!
If you take this to the next level and look at global derivatives, a fraction of which are tied to US currency, you are looking at additional trillion dollar loses.
I believe we will see hyperinflation, but not until a substantial amount of deleagvering has occurred. If the government tried to print money fast enough to keep up with the crumbling derivatives and home values then they would collapse the bond market overnight. no one would touch us treasuries and the US dollar would collapse.
Can someone explain the mechanism that you see allowing inflation to occur while the current massive level of leverage, deleverages?
SAS,
I may have an interesting business opportunity in Ghana natural resources…..
Shore Guy,
That’s a big shift from living in Manhattan. I imagine people working on the Street for 10-20 years have plenty of cash to make a change like you describe. The younger ones that thought the game would never end may not be so fortunate, however.
“Right there we are talking about losing 10- 12 trillion in money. poof, gone!”
At least trillions in percieved money. I would be tempted to declare void the “overlevereged,” how one defines that would need to be debated legislatively, derivatives. The economy ran without the esoteric derivatives for years and would adapt to not having them moving forward. In the interest of reducing their own risk, the uber fat cats have imperiled toe global economic system. Inasmuch as their actions threaten all of us, let them suffer complete and utter loss.
Why not direct our scarce resources to address the underlying asset issue, whether lengthening loan periods, bulldozing, sending $500,000 cheques to those of us who acted properly so that we can then use our good sense to remove properties from the hands of the misguided or reckless?
“That’s a big shift from living in Manhattan.”
Indeed it is. The thing is, there is actually life out of the metro NY area. When one is immersed in any given environment, it is hard to imagine being anyplace else. Once one removes one’s self from the environment, however, one adapts and one is often surprised how much they like the change.
I for one could never live in Laramie, Wyoming, or Bismark, ND, or Birmingham, AL. But, put me within a few blocks of nearly any beach…. Especially one that is within an hour or so (heck even 3 hours)of a decent-sized city and I am golden.
Many of the young’ins in the financial industry that you mentioned, were living in a dream world. They believed that they were entitled to continued employment at outsized salaries and with large bonuses just because they could fog a mirror. Welcome to the value-added real world folks.
Many people have had to change careers and readjust expectations at various times in their lives. Suck it up and deal with it. Some of the young’ins may get reemployed in the industry, some may not. Tough.
“Right there we are talking about losing 10- 12 trillion in money. poof, gone”
Ket,
Since this money was largley conjured up by the banks and investment houses and only existed because folks received assurances that the money would be paid someday, even though there was never any physical money available to do so, why could the derrivative contracts not be legislated out of existance and the conjured dollars transferred to the central banks?
Would the losers not be the same people who conjured up the money, and thus the crisis, in the first place? It is certainly better than the old days when firing squads were used to eliminate problems.
For those interested, from another site:
Here are the numbers for the leaders pushing the bailout. John Boehner – (800) 582-1001, Roy Blunt – (202) 225-6536, Mitch McConnell – (202) 224-2541, Judd Gregg – (202) 224-3324, John Thune – (202) 224-2321, Max Baucus – (202) 224-2651, Chris Dodd – (202) 224-2823, Nancy Pelosi – (202) 225-4965, Harry Reed – (202) 224-3542, Barney Frank – (202) 225-5931
Re-Seeding the Housing Mess Article
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Taxpayers are naturally suspicious that political insiders and contributors on Wall Street are going to make out like bandits once Washington starts spending the $700 billion in the financial market rescue. But Democrats have already decided to spin off potentially billions of taxpayer dollars from the bailout fund to their own political buddies — not on Wall Street but on nearby K Street.
The House and Senate Democratic drafts contain an indefensible and well-hidden provision. It would mandate that at least 20% of any profit realized from the sale of each troubled asset purchased under the Paulson plan be deposited in either the Housing Trust Fund or the Capital Magnet Fund. Only after these funds get their cut of the profits are “all amounts remaining . . . paid into the Treasury for reduction of the public debt.”
Here’s the exact, amazing language from the Democratic proposal, breaking out how the money would be divided and dispensed:
“Deposits. Not less than 20% of any profit realized on the sale of each troubled asset purchased under this Act shall be deposited as provided in paragraph (2).
“Use of Deposits. 65% shall be deposited into the Housing Trust Fund established under section 1338 of the Federal Housing Enterprises Regulatory Reform Act . . . ; and 35% shall be deposited into the Capital Magnet Fund . . .
“Remainder Deposited in the Treasury. All amounts remaining after payments under paragraph (1) shall be paid into the General Fund of the Treasury for reduction of the public debt.”
What we have here essentially are a pair of government slush funds created in July as part of the Economic Recovery Act that pump tax dollars into the coffers of low-income housing advocacy groups, such as Acorn.
Acorn, one of America’s most militant left-wing “community activist groups,” is spending $16 million this year to register Democrats to vote in November. In the past several years, Acorn’s voter registration programs have come under investigation in Ohio, Colorado, Michigan, Missouri and Washington, while several of their employees have been convicted of voter fraud.
Along with other potential recipients of these funds, including the National Council of La Raza and the Urban League, Acorn has promoted laws like the Community Reinvestment Act, which laid the foundation for the house of cards built out of subprime loans. Thus, we’d be funneling more cash to the groups that helped create the lending mess in the first place.
This isn’t the first time this year that Democrats have tried to route money for fixing the housing crisis into the bank accounts of these community activist groups. The housing bill passed by Congress in July also included a tax on Fannie Mae and Freddie Mac to raise an estimated $600 million annually in grants for these lobbying groups. When Fannie and Freddie went under, the Democrats had to find a new way to fill the pipeline flowing tax dollars into the groups’ coffers.
This is a crude power grab in a time of economic crisis. Congress should insist that every penny recaptured from the sale of distressed assets be dedicated to retiring the hundreds of billions of dollars in public debt that will be incurred, or passed back to taxpayers who will ultimately underwrite the cost of the bailout.
The idea that special-interest groups on the left or right should get a royalty payment for monies that are repaid to the Treasury is a violation of the public trust. We’re told the White House and House Republicans are insisting that the Acorn fund be purged from the bailout bill. The Paulson plan is supposed to get us out of this problem, not start it over again.
http://online.wsj.com/article/SB122247015469280723.html?mod=googlenews_wsj#printMode
http://blogs.abcnews.com/politicalradar/2008/09/un-american-pla.html
‘Un-American’ Bailout, Paulson Should Have Quit, Gingrich Says
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Share September 28, 2008 12:46 PM
ABC News’ Tahman Bradley and Arnab Datta Report: Former House Speaker Newt Gingrich, R-Ga., on Sunday described Treasury Secretary Henry Paulson’s request for billion of dollars to buy debt from struggling Wall Street financial firms as “un-American” and said the secretary should have stepped down.
Gingrich even expressed concern with Paulson’s connections to Wall Street. The treasury secretary served as the chairman of a major global investment banking and securities firm before joining the Bush administration.
“You have the former Chairman of Goldman Sachs asking for 700 billion dollars, and in his initial request, asking for it in such an un-American way that I think he should have resigned,” said Gingrich. “I think Paulson has terminally misunderstood the nature of the American system. Not just no review, no judicial review, no congressional accountability. Give me 700 billion dollars, 700 BILLION dollars! ‘I’ll be glad to spend it for you.’ That’s a centralization of power that is totally un-American.”
Early Sunday, congressional leaders and the Bush administration reached a tentative agreement on the $700 billion Wall Street bailout proposal. The bill is expected to come up for a vote in the House on Monday.
Gingrich, who made his remarks on the “This Week with George Stephanopoulos” roundtable conceded that he would probably end up reluctantly voting for the plan because Congress was given no choice.
Last week, Gingrich described the bailout plan as a “dead loser on Election Day” and urged Republican presidential candidate Sen. John Mc-Ca-in of Arizona to speak out against the plan. Mc-Ca-in, who appeared as the headliner on “This Week”, signaled he’s likely to vote for the bill in its present form.
shoreguy,
i agree invalidate those derivatives. But the effective loss of money in our economy is not changed. business was be transacted based on the value of those instruments. and the value is still on the books, regardless of how legitimate or not it may be
FYI
I finally got a hold of the documentary
Memorias del Saqueo
that documents the 2001 argentina crisis. It as english subtitles and i would be happy to share it with who ever might be interested.
And, he will increase the payroll tax, which for the self-employed brings a double wallop. After paying well over $100,000.00 in taxes this year, I am not all that enthused about paying any more. Lets try spending cuts before socking it to the socalled rich:
Fact Check: Obama Misleads on $250,000 Tax Claim
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Share September 26, 2008 10:14 PM
ABC News’ Teddy Davis and Nitya Venkataraman Report: During Friday’s presidential debate, Sen. Barack Obama provided a loose interpretation of his tax plan, saying that those making less than $250,000 a year “will not see one dime’s worth of tax increase.”
It’s not entirely true.
Obama has called for higher taxes on income, capital gains and dividends for individuals making $200,000 per year; his tax plan imposes higher taxes on couples starting at $250,000 a year.
http://blogs.abcnews.com/politicalradar/2008/09/fact-check-obam.html
alia –
Not really into freeze dried anything. Thinking more about boring basics, rice (duh), beans, lentils (more efficient storage than animal proteins) and of course canned fruit and veg (bleuch). Cooking oil and salt high on the list too.
Apart from Costco, I have an advantage in living in an area with a heavy Indian population. They appear to be experts at cheap healthy vegetarian meals so I will hit Patels across the road and stock up. Might take a trip to the bodegas too and stock up on corn meal and the like.
My townhouse complex has large greens in the center. If worst comes to worst they could be turned into communal vegetable gardens.
Luckily, apart from that, my husband and I have always been addicted to camping gear (not camping, just the gear) so we have lots of useful stuff.
And luckily, his being a simple mechanic can really pay off now. A useful practical skill that can generate income no matter where you are and what the economy is like. Not like an investment banker for instance.
And, he will increase the payroll tax, which for the self-employed brings a double wallop. After paying well over $100,000.00 in taxes this year, I am not all that enthused about paying any more. Lets try spending cuts before socking it to the socalled rich:
Fact Check: Ob-ama Misleads on $250,000 Tax Claim
Email
Share September 26, 2008 10:14 PM
ABC News’ Teddy Davis and Nitya Venkataraman Report: During Friday’s presidential debate, Sen. Barack Ob-ama provided a loose interpretation of his tax plan, saying that those making less than $250,000 a year “will not see one dime’s worth of tax increase.”
It’s not entirely true.
Ob-ama has called for higher taxes on income, capital gains and dividends for individuals making $200,000 per year; his tax plan imposes higher taxes on couples starting at $250,000 a year.
http://blogs.abcnews.com/politicalradar/2008/09/fact-check-obam.html
McC and P
http://img205.imageshack.us/img205/4176/putinrearshisheadnz7.jpg
Ket,
One gets the feeling that removing this conjured money, which only existed within the stratosphere of the economy, would cause a huge hit to the plutocrats, but not so much to Joa and Jane main street, epecially if we adjust the tax code to encourage savings.
http://abcnews.go.com/Video/playerIndex?id=5903025
Good discussion.
shore,
i see your point, but i suspect it would have “trickle down” effects that impact everyone. I agree with you that invalidating those sums could be an interesting idea. All i am saying is that i do not see it allowing us to avoid pain in the near term. any benefits would likely be long term.
October 2005, Ben Bernanke tells congress: There’s No Housing Bubble to Go Bust, rising prices “”largely reflect strong economic fundamentals”. WTF?! why are we still listening to this idiot?
http://www.washingtonpost.com/wp-dyn/content/article/2005/10/26/AR2005102602255.html
Ket,
I agree there will be pain. My concern is that without outlawing some of the current practices anything we do will not cure the problem, just treat a short-term problem. There will be pain no matter what, thus I would like to to cut out the cancer as long as there will be pain.
Us Financial crisis theme?
http://www.youtube.com/watch?v=TS9_ipu9GKw
shore 802.
we agree 100%!!!!!!!!!!
794, lisoosh:
oh, i’m not into the freeze dried stuff either. but they sell wheat and lentils and such in food grade air tight containers.
my husband is handy around the house, but he’s a computer guy. not sure rebooting someone’s server will be a tradeable skill in an economic crisis… but he’s got a cute foreign accent and a matching passport. ;)
(kettle, that argentinian’s blog spooked me good and hubby’s about to ban me from it. luckily i’m a fast reader.)
lyrics to linked song CCR:
Someone told me long ago theres a calm before the storm,
I know; its been comin for some time.
When its over, so they say, itll rain a sunny day,
I know; shinin down like water.
Chorus:
I want to know, have you ever seen the rain?
I want to know, have you ever seen the rain
Comin down on a sunny day?
Yesterday, and days before, sun is cold and rain is hard,
I know; been that way for all my time.
til forever, on it goes through the circle, fast and slow,
I know; it cant stop, I wonder.
Chorus
Yeah!
Chorus
[804] alia,
One thing to take from ferFal’s blog is that you shouldn’t be spooked, just prepared and aware. I am doing my own thing, not because I am afraid but because I have a responsibility to protect, within reason, my family’s future from all foreseeable and preventable calamities.
Note also that FerFal doesn’t advocate a bunker mentality. His blog is important because it demonstrates issues in urban preparedness, not just preparedness in general.
Bucks County bagholder:
bought dec 2007 (per zillow)
470k
just went on the market this week (per realtor.com) for
514k
Delusional? For some reason, the value of the house shot up 44k in 10 months.
http://www.realtor.com/search/listingdetail.aspx?ctid=84330&mnp=29&mxp=30&bd=4&typ=1&sid=1ffb84236f284552b6eabd5645b3ff28&pg=3&lid=1103552751&lsn=24&srcnt=32#Detail
Stu and Gator – If you are around…
Ribs last night at the wine friend’s house who travels to Napa quite a bit…
Cakebread – white -Sauvignon Blanc
loved that -Red and Green -small winery in Chiles Valley Napa -Zin – wasn’t impressed
Willamette Valley -Pinot – Witness Tree –
He must have bought a slew of the Relentless – Shafer because he always serves that.
Some Cu ve or whatever it’s called..
No merlot though…
Great food – They had others along with their cigars but I was not in on that…
The GIRLS were busy talking about the economy and drinking water by then…
You’ll have to tell me what you liked on your travels. I’d love to surprize them with something from Napa…you would recommend???
surprize = surprise – must have been thinking of a “prize.”
Kettle – is there a way to activate spellcheck for the blog?
Thoughts anyone..
I thought that the Fed backing of MoneyMarketMutualFunds was supposed to be part of the bail out package. I did not see anything to that effect/affect. Is my MMMF backed by Fed yet? Or should I be taking steps to protect myself.
809 – Cindy
Use Firefox instead of IE. I think spell check is built-in.
http://www.mozilla.com
Stan,
Thanks for the link about the insurance companies. I felt the joy of being poor, my insurance coverage amount as well as the cash value was covered. But I need to check on the solvency of the state board which insures my insurer. I will try to do it this week.
By the way does anyone know if HSA is protected in any manner?
810- Sysadmin
I believe that MMF investments before Sept 19th are guaranteed, not true for new investments.
More details –
http://www.bloomberg.com/apps/news?pid=20601213&sid=a117zkbdHNUQ&refer=home
OT-
Which are the coolest Firefox add-ons you have used?
I use – Adblock and Foxmarks. (I think Stu recommended those – thanks!). Any others out there?
Thanks Victorian for Post # 813
http://www.youtube.com/watch?v=_MGT_cSi7Rs
A friend from last night’s discussion just sent this over….
(811) Victorian
Thanks – My nephew is coming over today, I’ll see if he can help with that… – my printer doesn’t work..New computers are a bi!ch.
I am a total computer illiterate – and I’ll admit it..
with the bailout in place, can we expect interest rate hikes for the next year?
My thought is to buy in about 6-7 months. we’re going to lock up a place and the idea is to be there for many, many years.
we figure since inflation will skyrocket in the coming years, we might as well make a 40% downpayment. we’ll still have plenty of cash, but more importantly, we’ll have the silver and gold.
I think I’ve watched more cspan this past week than I have in my whole life before now.
And I now completely understand why my grammer school teachers had such a thing about chewing gum in class.
Shore,
Don’t they have someone to tell those aids/interns the spit it out before they walk into a hearing?
Yes, I said congressional aide/intern and spit it out. We’ve all made our own jokes now, no need to post them :)
From BP;
http://bigpicture.typepad.com/comments/files/marsh-1260×1681.jpg
http://seekingalpha.com/article/97702-3-things-america-needs-to-do-to-get-the-economy-back-on-track#comment-267702
How about these ideas…
[810] sysadmin
There is a provision in the house fin committee version of the bill that establishes an insurance program for MMKTs. It would operate exactly as the Deposit Insurance Fund (FDIC) does now.
I read the Frank version of the bailout and it will create a cottage industry of lawyers looking to help homeowners cram down their mortgages. The bill obligates Treasury to strong arm servicers and further obligates Treasury to accept any “reasonable” workout.
There are also bankruptcy provisions that permit judges to rewrite virtually any meaningful provision of a mortgage and “cram down” the secured claim to the current value.
Thus, I see a wave of attorney ads on TV coming that promise to help you renegotiate your mortgage or HEL or HELOC, for a nominal fee.
Think a combination of Roni Deutsch or JK Harris and the ambulance chasing crowd.
Stu/Gator,
This is for you (and it does not involve Ol’ Miss):
Palin Is Ready? Please.
Mc-Ca-in says that he always puts country first. In this important case, that is simply not true.
Fareed Zakaria
NEWSWEEK
From the magazine issue dated Oct 6, 2008
Will someone please put Sarah Palin out of her agony? Is it too much to ask that she come to realize that she wants, in that wonderful phrase in American politics, “to spend more time with her family”? Having stayed in purdah for weeks, she finally agreed to a third interview. CBS’s Katie Couric questioned her in her trademark sympathetic style. It didn’t help. When asked how living in the state closest to Russia gave her foreign-policy experience, Palin responded thus:
“It’s very important when you consider even national-security issues with Russia as Putin rears his head and comes into the airspace of the United States of America. Where—where do they go? It’s Alaska. It’s just right over the border. It is from Alaska that we send those out to make sure that an eye is being kept on this very powerful nation, Russia, because they are right there. They are right next to—to our state.”
There is, of course, the sheer absurdity of the premise. Two weeks ago I flew to Tokyo, crossing over the North Pole. Does that make me an expert on Santa Claus? (Thanks, Jon Stewart.) But even beyond that, read the rest of her response. “It is from Alaska that we send out those …” What does this mean? This is not an isolated example. Palin has been given a set of talking points by campaign advisers, simple ideological mantras that she repeats and repeats as long as she can. (“We mustn’t blink.”) But if forced off those rehearsed lines, what she has to say is often, quite frankly, gibberish.
Couric asked her a smart question about the proposed $700 billion bailout of the American financial sector. It was designed to see if Palin understood that the problem in this crisis is that credit and liquidity in the financial system has dried up, and that that’s why, in the estimation of Treasury Secretary Hank Paulson and Fed chairman Ben Bernanke, the government needs to step in to buy up Wall Street’s most toxic liabilities. Here’s the entire exchange:
COURIC: Why isn’t it better, Governor Palin, to spend $700 billion helping middle-class families who are struggling with health care, housing, gas and groceries; allow them to spend more and put more money into the economy instead of helping these big financial institutions that played a role in creating this mess?
PALIN: That’s why I say I, like every American I’m speaking with, were ill about this position that we have been put in where it is the taxpayers looking to bail out. But ultimately, what the bailout does is help those who are concerned about the health-care reform that is needed to help shore up our economy, helping the—it’s got to be all about job creation, too, shoring up our economy and putting it back on the right track. So health-care reform and reducing taxes and reining in spending has got to accompany tax reductions and tax relief for Americans. And trade, we’ve got to see trade as opportunity, not as a competitive, scary thing. But one in five jobs being created in the trade sector today, we’ve got to look at that as more opportunity. All those things under the umbrella of job creation. This bailout is a part of that.
This is nonsense—a vapid emptying out of every catchphrase about economics that came into her head. Some commentators, like CNN’s Campbell Brown, have argued that it’s sexist to keep Sarah Palin under wraps, as if she were a delicate flower who might wilt under the bright lights of the modern media. But the more Palin talks, the more we see that it may not be sexism but common sense that’s causing the Mc-Ca-in campaign to treat her like a time bomb.
Can we now admit the obvious? Sarah Palin is utterly unqualified to be vice president. She is a feisty, charismatic politician who has done some good things in Alaska. But she has never spent a day thinking about any important national or international issue, and this is a hell of a time to start. The next administration is going to face a set of challenges unlike any in recent memory. There is an ongoing military operation in Iraq that still costs $10 billion a month, a war against the Taliban in Afghanistan and Pakistan that is not going well and is not easily fixed. Iran, Russia and Venezuela present tough strategic challenges.
Domestically, the bailout and reform of the financial industry will take years and hundreds of billions of dollars. Health-care costs, unless curtailed, will bankrupt the federal government. Social Security, immigration, collapsing infrastructure and education are all going to get much worse if they are not handled soon.
And the American government is stretched to the limit. Between the Bush tax cuts, homeland-security needs, Iraq, Afghanistan and the bailout, the budget is looking bleak. Plus, within a few years, the retirement of the baby boomers begins with its massive and rising costs (in the trillions).
Obviously these are very serious challenges and constraints. In these times, for John Mc-Ca-in to have chosen this person to be his running mate is fundamentally irresponsible. Mc-Ca-in says that he always puts country first. In this important case, it is simply not true.
URL: http://www.newsweek.com/id/161204
Cindy,
That video and others like it regarding fannie mae and freddie mac is very distorted and so have most of the posts I’ve seen on other sites.
2005 and 2006 was the last time reform of the GSE’s was proposed. They wanted to put them under the authority of the treasury.
If the republicans couldn’t get the legislation passed the two times it was introduced, when they had control of both houses and the white house they probably didn’t fight all that hard.
Other sites I’ve seen that linked to those videos went so far as to claim that the 2005 or 2006 acts were blocked in committee chairman chris dodd (d). There was a republican chair up until Jan 2007 when the dems claimed a majority.
“it will create a cottage industry of lawyers looking to help homeowners cram down their mortgages. ”
Nom,
In nearly any piece of legislation, there are myriad provisions that can result in all kinds of unintended consequences. FOr that reason, it is important for congress to hold hearings on bills before voting on them. It is far easier to fix problems before enactment than it is to go back and fix things later.
Any one else think there should be a provision that no bailout money goes to any security that has passed through goldman sachs recently?
Details are now public.
http://online.wsj.com/article/SB122212948811465427.html?mod=googlenews_wsj
Freddie/Fannie
Apparently not YET public:
NEW YORK (CNNMoney.com) — The federal government would provide as much as $700 billion in a far-reaching plan to rescue the nation’s troubled financial system, according to a draft of the proposed bill obtained by CNN.
The legislation is still being negotiated and elements of the bill could still change.
The core of the bill is based on Treasury Secretary Henry Paulson’s request for authority to purchase troubled assets from financial institutions so banks can resume lending and so the credit markets, now virtually frozen, can begin to operate more normally.
But Democrats and Republicans – concerned about the potential taxpayer cost – have added several conditions and restrictions. Key negotiators for the financial rescue plan will be busy trying to line up votes on Capitol Hill on Sunday to support the accord they reached soon after midnight.
Among the provisions of the draft bill:
The $700 billion would be disbursed in stages, with $250 billion made available immediately for the Treasury’s use.
Curbs will be placed on the compensation of executives at companies that sell mortgage assets to Treasury. Among them, the bill would limit golden parachutes to executives at companies that participate; they will not be able to deduct the salary they pay to executives above $500,000.
An oversight board will be created. The board will include the Federal Reserve chairman, the Securities and Exchange Commission chairman, the Federal Home Finance Agency director and the Housing and Urban Development secretary.
Allow for the Treasury to receive the option to take ownership stakes in participating companies under certain circumstances.
Treasury may establish an insurance program – with risk-based premiums paid by the industry – to guarantee companies’ troubled assets, including mortgage-backed securities, purchased before March 18, 2008.
Lawmakers’ goal is to shore up a deal before financial markets around the world open on Sunday evening.
Treasury Secretary Henry Paulson first announced the administration would seek an economic bailout plan on Sept. 18, after meeting with key lawmakers in the House and Senate – a meeting that left lawmakers looking ashen when they spoke to the press afterwards.
If enacted, the rescue plan would be the most dramatic and extensive government intervention in the economy since the Great Depression. President Bush on Sept. 24 gave a prime-time address to the nation in which he urged lawmakers to pass his plan and warned that the “entire economy is in danger.”
The aim of the rescue is to unfreeze the credit markets – short-term lending among banks and corporations. The core of the problem is bad real estate loans that have led to record foreclosures when the housing bubble burst and home prices declined.
In the past two weeks, the banking world and Wall Street have been reordered by a wave of collapses and corporate mergers. The most recent development was the seizure by federal regulators on Thursday night of Washington Mutual, once the nation’s largest thrift and a major mortgage lender.
Pain on Main Street, risk to taxpayers
The chill of the credit freeze has been felt far beyond Wall Street, as well. Businesses large and small have seen the cost of borrowing spike higher.
At the same time, the scale of the administration’s plan – and the quick pace of the debate over it – has given pause to many Americans and lawmakers worried about its potential cost to taxpayers.
“We begin with a very important task, a task to stabilize the markets, to protect all Americans – and do it in a way that protects the taxpayer to the maximum extent possible,” Paulson said early Sunday morning.
CNN’s Jessica Yellin contributed to this report.
An earlier version of this article incorrectly reported that Congress had publicly released the draft bill CNN obtained.
First Published: September 28, 2008: 10:12 AM ET
http://money.cnn.com/2008/09/28/news/economy/Sunday_talks_bailout/index.htm?cnn=yes
Mets done. Blame falls squarely on Heilman!
Stu,
The mets were done the moment they were born. There is only one baseball team in NY.
http://online.wsj.com/article/SB122246898556580567.html
snip
By contrast, the implosion of Wall Street, followed by Paulson’s escalating series of multibillion-dollar rescues, has fired up populist sentiments that were already building in American politics, promising to reshape legislative battles over everything from tax and trade policies to federal regulation. Union leaders like the AFL-CIO’s John Sweeney suddenly sound as if they’re in the mainstream of public opinion with statements like this: “One thing is certain. No one – no politician, no investment banker, no television commentator, no economist – should be able to say again with a straight face that here in the United States we just let markets do whatever markets do and everything works out for the best.”
Washington hath no fury like Middle America scorned – and there’s reason to think it will only get uglier. The government’s massive new financial commitments will severely tie the next President’s hands in addressing middle-class concerns.
“The next President will have to temper expectations a lot,” says Middlebury College economist David Colander, “far beyond what either of the candidates has been willing to talk about.”
snip
Oh, and they wear pinstrips.
Ha ha!
They are consistent though. They consistently break your heart. To make it worse, I scored tickets yesterday to game 1 of the division championship series. I suppose they will make a nice collectible. As they would have most likely represented the last playoff game ever played at Shea!
I expect the Jets to miss the playoffs on the last game of the season as well.
Sound familiar to anyone who regularly reads these pages?
Beltway medicine men
Don’t be surprised if the cure conjured up by Washington fails to solve the market’s woes.
By Allan Sloan, senior editor at large
NEW YORK (Fortune) — The proposed bailout of the world’s financial system isn’t really about money, folks. It’s about psychology. In fact, you can think of it as the most expensive piece of psychotherapy in the history of the world.
The idea is that having Uncle Sam buy tons of trashy, hard-to-value financial assets will change the psychology of lending institutions throughout the world. This financial Prozac, as it were, would cure the lenders of their fear and depression, encourage them to start lending again, and induce investors to pump new capital into these capital-short institutions.
But psychology – even when practiced by masters like Treasury Secretary Hank Paulson and Federal Reserve Board chairman Ben Bernanke – isn’t an exact science.
That’s why I wouldn’t bet the farm on this bailout working as planned. How can I say that when some of the smartest investors in the land, like Warren Buffett and Bill Gross, shilled for the bailout plan?
Answer: Because Paulson and Bernanke have tried one thing after another to stimulate lending and restore confidence since the markets blew up in the summer of 2007, but nothing has worked for more than a brief period.
The two amigos had to ask Congress to fund the bailout, which comes directly from taxpayer money. But for the past 14 months they’ve thrown hundreds of billions of dollars of fed assets into the market, and lenders still won’t lend. Recent figures show that the Fed has used recently created programs to put about $400 billion of cash and Treasury securities (which are the same as cash) into the credit markets, much of it as loans against hard-to-value securities. Despite that, debt markets are still glopped up (though things might be far worse, absent these programs).
What I find especially disturbing is that the Fed’s post-Bear-Stearns-collapse program to lend to investment banks didn’t forestall runs on investment banks, and Paulson’s guarantee of Fannie Mae and Freddie Mac debt didn’t settle those markets, forcing the Treasury to take the companies over. I thought both those programs would work.
It’s going to take quite a while to see whether the debt markets’ depression is lifted by the bailout – I wouldn’t place much faith in early reports.
And let’s not forget that there’s a long-term psychological cost to this fix: It has enraged ordinary taxpayers-and rightly so. Don’t be surprised if they lose faith in the supposed miracle of free markets, and in the financial system, and in the Fed and Treasury, which – unlike Washington pols – have been generally revered. That loss, in fact, may be the bailout’s biggest cost of all
http://money.cnn.com/2008/09/25/news/economy/sloan_crash.fortune/index.htm?postversion=2008092610
(831) Sorry Stu and Chicago – that’s a tough one to lose.
On a happier note, Fresno State beat UCLA in the Rose Bowl yesterday – 36 to 31.
Stu,
As long as the Yankees and Giants do well (so this year is already off to a poor start), life is good.
Cindy,
Yea but just wait til they play Rutgers. Then they wil be in for a, umm, uh oh, never mind.
Who says American’s no longer know how to find business opportunities.
http://money.cnn.com/galleries/2008/smallbusiness/0809/gallery.smashshack.smb/index.html
San Diego entrepreneur Sarah Lavely has found a perfect business for frustrating times: Selling customers breakables to fling against walls.
WSJ:
America Needs A New New Deal
http://online.wsj.com/article/SB122246953790280655.html
Stone Pony has a couple of shows on Oct 5. One at 3 and one at 6. Could be a decent mini GTG. The early show would have folks home before it
got too late.
Rutgers would do very well in Division 2 apparently.
Actually, I think the first one may run from 2-6.
Stu,
I don’t know about needing a New New Deal but, whenever Katrina Vanden Heuvel speaks, I love to watch.
Say Shore – Re: your post 836 –
“And let’s not forget that there’s a long-term psychological cost to this fix: It has enraged ordinary tax payers, and rightly so.”
Remember me pleading – give them a chance for the information to get to them?…it got to them..and they’re p!ssed. Somebody is messin’ with their money.
Cindy,
And messing with their kid’s futures.
Looks like Grim is going to have to deal with a weekend where the thread falls short of 1,000 posts.
Sun., Oct. 5: Local Matinee, 2-6 pm at the Pony.
I find the inflation/deflation question the toughest to answer right now. This is perhaps why gold is such a tricky investment in the current economic climate. My heart tells me to start going long, but my mind tells me that it’s probably not quite time yet.
I really think that the credit market is dead for a long time and I’m not sure if this is going to be a good or a bad thing. On the plus side, it will force people to save and limit their consumerism. On the negative side, some people are not going to be able to replace their broken down cars and homes. I expect unemployment to kick up as consumerism dies a slow death. Ultimately, Americans are going to have to save and interest rate increases, as painful as it sounds, are probably the solution to encourage savings. I compare it to how fuel was taxed in Europe to limit demand and increase their MPG standards. Here, we are bailing out the car companies to provide seed money to encourage the automakers to increase their fleet MPG averages. So we are all paying for it through taxes and future debt. I like the European model a whole lot more.
So now we wait like sitting ducks for the option Armageddon to kick in. These are interesting times we are living in and we will probably be discussing them one day with our grandchildren. I only hope we can get through it without too much permanent damage.
Stu,
What is the data on the option ARMs? I seem to recall the first wave is ready to reset in mid ’09. Is that correct? Do you have any data on the numbers of them? I saw recently that, I think it was Wachovia, some major bank had something on the order of 75% or more of its outstanding mortgages as option ARMS and that most of those were up against their limit.
The declaration of the passing of the bailout could generate a good amount of posts tonight. I anxiously look forward the Asian markets reaction to this announcement which I’m betting will come around 7pm. Don’t count your chickens just yet Shore Guy.
It looks like the original two or three page Paulson plan has been expanded to a good hundred pages. I have yet to see anything officially entered into the congressional record. No bill number yet assigned.
Shore Guy…Check this one out for a bit of your option arm answers:
http://www.gracecheng.com/economy/2008/09/03/wachovia-fitch-and-%E2%80%98the-pay-option-arm-implosion%E2%80%99/
(850) Stu
“On the plus side, it will force people to save and limit consumerism.”
Barney Frank just said “The average American didn’t do this.”
What an opportunity for these politicians to lay it all out there and explain that everyone needs to cut back and save. This isn’t all Wall Street’s fault either.
heck,
If they end up killing the dollar, not only will I have missed the opportunity for a big plasma screen, and all sorts of other toys but, chickens may become a necessity.
Mish on Option Arms:
Option ARM Time Bomb About To Explode
http://globaleconomicanalysis.blogspot.com/2008/09/option-arm-time-bomb-about-to-explode.html
Ah, Gotta go watch TV…
My Republican House heroes are going to be on next..
It is so weird thinking back…
I remember feeling so proud of them for not just blindly signing on…
I was just talking to some folks on the Hill. The “plan” does not yet have a bill number. I am trying to get a copybefore its official release.
This is one from earlier today:
http://www.latimes.com/media/acrobat/2008-09/42631254.pdf
Grim,
If you an pull down the draft bill and place it on your server it will prevent the bill access from being cut off by the LA Times.
856:
i like buff orpingtons (cold-hardy, good tempered, bred for dual purpose and small gardens), but ameraucanas lay blue and green eggs, which is just awesomely cool.
and nigerian dwarf goats can also supply you with milk and meat and make good pets. (er, i’ve been looking into urban sustainable living… just ’cause it seems like fun, not out of a fear of armageddon.)
From the proposed bill:
“TARP.—The term ‘‘TARP’’ means the
troubled asset relief program established under sec
tion 101.”
I guess they are going to cover the mess with a tarp.
Barney Frank just said “The average American didn’t do this.”
What an opportunity for these politicians to lay it all out there and explain that everyone needs to cut back and save. This isn’t all Wall Street’s fault either.
The blame for this goes clear across the board from average Americans, to Wall Street to politicians. This is one of those cases where everyone was making money and happy when home prices were going up. Average Americans felt richer, Wall Street collected big fees and politicians gladly took credit for creating prosperity.
I want to see a politician step forward and explain to the people that the days of “no credit no problem” instant gratification are over and that a debt of this size is going to exact a cost on growth and our standard of living going forward.
If one has a mortgage in excess of 3 times income, one caused this.
If one has $8,000.00 or more of credit card debt, one caused this.
If one is over 30years old and one has less than $30,000 in cash on hand, one did this.
If one had ti finance a car payment for more than 3 years, one caused this.
If one has less than a month’s income in the bank and one owns a large-screen TV, or a home theatre, or used a credit card to finance a vacation, yadda, yadda, one caused this.
(864) Renting…
I’m with you….
These guys behind closed doors…the fiscal conservatives – must feel torn – sick to their stomachs…
They say it is posted at Financialservices.house.gov
but I can’t pull it up…
I sympathize with the people who are trying to get through to their Congressmen and Senators with petitions and pleas and plans, screaming for them not to accept the $700 billion -at any one time- Paulson plan. I sympathize because they are dead right: it’s so bad as to be disgusting.
What they don’t seem to realize is that their representatives have no choice. Not if they want to keep their jobs, that is. Whichever party would let the plan fail, is assured of a gaint sized mud bucket full of blame for the financial mayhem that will cripple the US economy between now and the election. And there will be a lot of that: I would suggest you look upon the Paulson plan as a way to divvy up the spoils of war while the bombs have only just started dropping.
It doesn’t matter that the mayhem will come anyway, whether there’s a plan or not. If they vote for it, they can claim they’ve done all they could, and followed the advice of the finest experts the country has to offer. And the other party did the same.
Voting the Paulson plan down equals losing the election. Sure, there will be discussions, some heated and frantic, but believe me, nobody wants to rob their party of any and all chances at winning the presidency. That is why the plan will be there later today, even if there must certainly be a few elected heads being severely scratched.
The people who have contocted the plan are obviously aware of all this. There is no time to discuss alternatives, not 6 weeks before the election. Political Check Mate.
The entire system is based on appearances, not truth finding. In the same vein as a company CEO who can’t reveal the true problems his company may be in, because his first duty is to protect the value of the shareholders, politicians simply can’t speak the truth.
If anyone stood up and told the people the real story, that their country, their welfare, and the future of their children is rapidly being gift-wrapped in a hell-bent handbasket, they’d unleash a storm of biblical proportions. And even if they’d miraculously survive that ordeal, people would move away from them and vote for the nexy guy, who promises solutions and money and sunny days and whatever else the people like to hear.
Yes, both the CEO and the politician have the option of getting out of their positions. But that doesn’t change what’s wrong: the next liar will simply take over.
The truth doesn’t have a place in US politics. If I may paraphrase Jay Hanson: “Democracy only works until the people figure out they can vote themselves an ever larger piece of the pie”. We are today finding out that, alas and unfortunately, the pie itself does not get ever larger.
I’ve tried pulling it up from 2 locations, can’t get it either.
Mathematics FAIL Paulson / Bernanke Bailout Plan (PDF)
http://www.denninger.net/letters/mathematics.pdf
Known Facts United States non-financial private debt is $32.4 trillion dollars and household debt is $10.0 trillion as of 2Q 2008. This encompasses mortgages, auto loans, credit cards, HELOCs, commercial and industrial loans, LBO monies outstanding and all other forms of non-financial (e.g. not including margin loans and similar) debt.
Henry Paulson and Ben Bernanke have asked for a $700 billion “revolving credit line” with which to buy “troubled” assets. Congress is strongly considering giving it to Mr. Paulson with some set of conditions. The assertion has been made by both Mr. Paulson and Mr. Bernanke that absent this credit line and absorption of these “troubled” assets, the financial markets will imminently seize and fail.
The assertion has been made that the taxpayer will not recognize large losses and might make a profit. House prices are projected to fall by another 15-30% nationally (depending on who you ask); therefore, whatever level of stress exists in the system today far more will exist over the next few years.
Mathematics $700 billion dollars is 2.16% of all non-financial private debt and 7% of all household debt. Provision of this credit line therefore would allow removal of a maximum of just over 2% of the current nonfinancial private debt from the banking system, assuming only US domiciled debt is included.
If the imminent failure of the United States financial system is going to be averted by 2.16% (maximum) of the outstanding private non-financial debt being removed from the banks’ hands and transferred to the taxpayer as the “responsible party”, then the system is under leverage of 46.29:1.
If, as many have projected, the actual losses to be sustained are $2.5-3 trillion in residential housing and a like amount among commercial real estate, credit cards and LBO loans, then the aggregate requirement is not $700 billion it is in the neighborhood of five to nine times what has been requested. If this is the case the aggregate requirement is double the US Federal Budget. The government cannot raise that amount.
Conclusions Either (1) the system is not about to fail imminently OR (2) it will fail irrespective of whether this bill passes, as the actual amount required to “resolve” the problem exceeds the government’s ability to finance it.
If no failure is imminent then we are giving $700 billion to the people who caused the mess for no purpose other than enriching them. If the latter then we need the $700 billion for social programs and other spending that will become necessary as we work through a financial collapse and crisis worse than anything since the 1930s.
recent IMF study of 42 systemic banking crises across the world provides evidence on how different crises were resolved. First of all only in 32 of the 42 cases there was government financial intervention of any sort; in 10 cases systemic banking crises were resolved without any government financial intervention. Of the 32 cases where the government recapitalized the banking system only seven included a program of purchase of bad assets/loans (like the one proposed by the US Treasury).
In 25 other cases there was no government purchase of such toxic assets. In 6 cases the government purchased preferred shares; in 4 cases the government purchased common shares; in 11 cases the government purchased subordinated debt; in 12 cases the government injected cash in the banks; in 2 cases credit was extended to the banks; and in 3 cases the government assumed bank liabilities. Even in cases where bad assets were purchased – as in Chile – dividends were suspended and all profits and recoveries had to be used to repurchase the bad assets.
Of course in most cases multiple forms of government recapitalization of banks were used. But government purchase of bad assets was the exception rather than the rule. It was used only in Mexico, Japan, Bolivia, Czech Republic, Jamaica, Malaysia, and Paraguay. Even in six of these seven cases where the recapitalization of banks occurred via the government purchase of bad assets such recapitalization was a combination of purchase of bad assets together with other forms of recapitalization (such as government purchase of preferred shares or subordinated debt).
In the Scandinavian banking crises (Sweden, Norway, Finland) that are a model of how a banking crisis should be resolved there was not government purchase of bad assets; most of the recapitalization occurred through various injections of public capital in the banking system. Purchase of toxic assets instead – in most cases in which it was used – made the fiscal cost of the crisis much higher and expensive (as in Japan and Mexico).
Thus the claim by the Fed and Treasury that spending $700 billion of public money is the best way to recapitalize banks has absolutely no factual basis or justification. This way of recapitalizing financial institutions is a total rip-off that will mostly benefit – at a huge expense for the US taxpayer – the common and preferred shareholders and even unsecured creditors of the banks. Even the late addition of some warrants that the government will get in exchange of this massive injection of public money is only a cosmetic fig leaf of dubious value as the form and size of such warrants is totally vague and fuzzy.
A recent IMF study of 42 systemic banking crises across the world provides evidence on how different crises were resolved. First of all only in 32 of the 42 cases there was government financial intervention of any sort; in 10 cases systemic banking crises were resolved without any government financial intervention. Of the 32 cases where the government recapitalized the banking system only seven included a program of purchase of bad assets/loans (like the one proposed by the US Treasury).
In 25 other cases there was no government purchase of such toxic assets. In 6 cases the government purchased preferred shares; in 4 cases the government purchased common shares; in 11 cases the government purchased subordinated debt; in 12 cases the government injected cash in the banks; in 2 cases credit was extended to the banks; and in 3 cases the government assumed bank liabilities. Even in cases where bad assets were purchased – as in Chile – dividends were suspended and all profits and recoveries had to be used to repurchase the bad assets.
Of course in most cases multiple forms of government recapitalization of banks were used. But government purchase of bad assets was the exception rather than the rule. It was used only in Mexico, Japan, Bolivia, Czech Republic, Jamaica, Malaysia, and Paraguay. Even in six of these seven cases where the recapitalization of banks occurred via the government purchase of bad assets such recapitalization was a combination of purchase of bad assets together with other forms of recapitalization (such as government purchase of preferred shares or subordinated debt).
In the Scandinavian banking crises (Sweden, Norway, Finland) that are a model of how a banking crisis should be resolved there was not government purchase of bad assets; most of the recapitalization occurred through various injections of public capital in the banking system. Purchase of toxic assets instead – in most cases in which it was used – made the fiscal cost of the crisis much higher and expensive (as in Japan and Mexico).
Thus the claim by the Fed and Treasury that spending $700 billion of public money is the best way to recapitalize banks has absolutely no factual basis or justification. This way of recapitalizing financial institutions is a total rip-off that will mostly benefit – at a huge expense for the US taxpayer – the common and preferred shareholders and even unsecured creditors of the banks. Even the late addition of some warrants that the government will get in exchange of this massive injection of public money is only a cosmetic fig leaf of dubious value as the form and size of such warrants is totally vague and fuzzy.
Gator is stuck in the FLL President’s Club and can’t believe Continental wants to close it on schedule even though flights are delayed tonight.
All of Miami seems to be on sale. Half of the rental listings my friend looked at wanted 60 day notice termination clauses because the landlord was trying to short sale the place. Anyone here know what the law is in Florida regarding tenant’s rights in case of foreclosure?
Incidentally, my 2 companions for the weekend were female attorneys who both have left Tampa, but own real estate they can’t unload (even if they were willing to do it short – which they are not), and can only rent out at a hefty loss. They are now reduced to renting extremely modest places in their new cities even though they have good incomes. Both of them bought in 2005, and don’t realize how long they are going to be stuck.
My friend did tell me that I was the only person to warn her not to buy Tampa real estate.
Cindy,
As someone said before, switch to firefox. it has spell check built in.
alia – are you some kind of doppelganger of mine. I also looked into Nigerian Dwarf goats. (Mostly because they are so cute, but practical too).
lisoosh, alia
Nom’s comment before was 100% on mark. also remember that when push comes to shove, the government will not be there to help you, even if they want to be. its a simple matter of logistics.
chance favors the prepared
Cute goats?
Please keep your perverse fetishes to yourself.
Hank Paulson on 60 minutes right now.
If Joe SixPack watches this, the bill is dead.
Whats the latest on Wachovia? Anyone hear anything besides the Citi talks?
stu
come on look at those faces!
http://www.albc-usa.org/images/dwarfkids.JPG
lisoosh, alia
here is another helpful website for “stuff”
http://www.lehmans.com/
lisoosh, 875:
great minds think alike, maybe? (and as hubby likes to add, “fools seldom differ”)
i’m currently stalking this blog: http://meaningfulpursuit.com/novella/
where she details her urban homesteading experiment; before this i thought the most i could get away with was chickens and maybe some angora bunnies. now, i am inspired to dabble in more livestock…
the baby nigerian goats are adorable– but baby llamas are the cutest baby animals i’ve ever seen. (my god, the eyelashes!) not sure i could eat them…. which is another plus for the goats. i’d have no trouble eating a wether. mwa ha ha ha chomp.
oo, kettle. you found my weakness… useful kitchen equipment…i miss seattle, where you could pick up cast iron skillets for a dollar at the thrift store.
Let’s put the $700 Billion Bailout in Perspective… [PIC]
http://www.nytimes.com/imagepages/2008/09/28/weekinreview/20080928_MARSH_GRFK.html?scp=1&sq=federal%20rescues&st=cse
yeah, on CNN your money today “its become near impossible for most people to secure loans.”
What a bunch of bunk. Total American Amnesia. The lenders have go back to 10 yrs ago credit standards. Sounds like a GOOD thing but they were spinning it as a collapse of our “way of life.”
Also “small biz can’t make payroll without the credit.” OMG! sounds like they shouldn’t be in business if they don’t have a cash cushion just to make weekly payrolls. Pathetic.
When I think about all the paperwork we had to go through 10 yrs ago to buy our last house and the extra fee and 1/2 point because we were self employed (higher risk despite great credit), I think, yeah we paid a little more in fees and about 200,000 less in mortgage.
I’m so disgusted.
#880 kettle1,
where’s john when we need a good comment?
#881 kettle1
i only use lodge cast iron. as far as I know, it’s the only cast iron made entirely in the US. I think everything else comes from Europe (pricey) or China (some pricey, some cheap).
If you remember what happened with pet food in the US and the current disaster with their milk supply, I’m not using something made in China to cook with.
re 880 I love Ewe
barien 888
i agree
Looks like the gator may never get home tonight. She’s in the plane in Ft. Lauderdale, but is delayed so far by 90 minutes. They are keeping them on the tarmac for at least the next 20 minutes.
Dealbreaker: The Bailout/Rescue isn’t going to happen on account of not enough votes.
http://dealbreaker.com/2008/09/kucinich-not-enough-votes-for.php
Dennis Kucinich told reporters this afternoon, “I will tell you right now I don’t know if they have votes…If the votes were there, this would be on the floor. The votes aren’t there.” In a meeting of House Democrats not so pleased with the $700 billion dubbed the “Skeptics Caucus,” Kucinich claimed: “None of this has been subject to a critical analysis. We haven’t had access to the books to the people who are claiming they are going broke. They rushed this Congress into the Iraq resolution and look what happened. Catastrophe for this nation as well as for the people of Iraq.”
Shore – I think SP is actually Ms. South Carolina. I expect her to start spouting off on ‘The Iraq’ and ‘the children’.
This weekend, the Gators, the Mets and Continental have all broken my heart. You know your delay will be bad when they encourage you to use your phone on the runway.
Well at least Georgia lost and Lil Gator got himself a nice, new jersey for the rest of football season.
vodka (792)-
You can’t simply “invalidate” the derivatives. Many of them are “live” hedges against losing positions. If a counterparty to a derivative position has gone bust, well, too bad. That’s a case of real-life, brutal invalidation. Outside of that, a counterparty- once identified- should be expected to uphold its end of the contract.
And, many of the derivatives have been leveraged themselves.
I can see a case for invalidating the duplicate derivatives…if anybody can even identify the duplicates.
The Treasury will need to issue $1.86 trillion in 2009 to finance expenses including the $700 billion Troubled Asset Relief Program, or TARP, and a proposed $75 billion economic stimulus package,
TARP I guess means Taxpayers Are Really Paying
Nom (806)-
The best thing to be gleaned from FerFal’s blog is that he has impeccable taste in personal armaments.
US dollar by january????
http://dontclickthis.whatingods.name/350-million-dollars.jpg
On the positive side Gator, Ryan’s potty training results have improved dramatically. Since you left he had a total of 17 bodily functions and the accident count totaled only 2.
Nom (823)-
The last mortgage payment I’ll make in a very long time is last month’s.
I have a 750 FICO, and I have no doubt that I can default and have a 700+ FICO again within 24 months.
If you pay your mortgage, you are the walking definition of an idiot.
clott
invalidation of derivatives would be a political firestorm. it would indeed be complex. i was making general comments in response to shore, not trying to suugest a detailed course of action
#897 stu,
sounds like a good weekend for pres nominee mccon.
clott,
are you saying that you have paid off your mortgage or that you have stopped paying?
I want to read the rescue bill but none of the sites allow access to it. If someone gets it, please post.
stu (835)-
I just look at two giant boondoggle stadiums in NY and think about what else could’ve been done with the money and effort. Baseball and football, IMO, are just another couple of post-modern corporate welfare entertainments.
The confirmation of baseball and football as trash sports comes with seeing the distance that an actual fan of either game is kept from the live action.
Why, again, do I need tuna tartare at a Mets’ game? Why do I need to sit on the Deegan to risk my life at a new, improved, sanitized Yankee Stadium?
Say what you want, but soccer is a proper and measured sporting reflection of society at large. You don’t see them tearing down Anfield, Stamford Bridge, the San Siro or the Bombanera.
And, don’t look now…but NJ HS soccer games are drawing crowds as big as football games.
I never thought I’d cook for a living again. Tomorrow, I’m pulling out my knives and sharpening them.
I might also take a look into the wine wholesale environment around here…
vodka (901)-
Not paid off. But, if Barney’s new idea of “pick-a-pay” becomes law, my lender is gonna have one hell of an adversary in moi.
Cindy (858)-
Heroes? They couldn’t even hold out for four days before whoring themselves out.
A pox on all of us.
Anyone who votes is complicit in a criminal enterprise.
Uggh. Gator is still on the tarmac. Clot, I wouldn’t stop paying your mortgage just yet. I too agree that building stadiums with tax dollars is a crock. There is nothing wrong with any of the stadiums except perhaps a lack of toilets. In Los Angeles, when I had Kings tickets, the Lakers, Kings and Clippers all chipped in to build the Staples Center when the populace voted down funding it through taxes. Low and behold, all three teams are still around. Now an ice arena in Newark with no basketball team? Only in New Jersey!
Stu (908)-
I agree. But the minute a judge can alter my principal balance, all bets are off.
http://www.house.gov/apps/list/press/financialsvcs_dem/ayo08c04_xml.pdf
The bill!!!!!
SUMMARY OF THE “EMERGENCY ECONOMIC STABILIZATION ACT OF 2008”
I. Stabilizing the Economy
The Emergency Economic Stabilization Act of 2008 (EESA) provides up to $700 billion
to the Secretary of the Treasury to buy mortgages and other assets that are clogging the
balance sheets of financial institutions and making it difficult for working families, small
businesses, and other companies to access credit, which is vital to a strong and stable
economy. EESA also establishes a program that would allow companies to insure their
troubled assets.
II. Homeownership Preservation
EESA requires the Treasury to modify troubled loans – many the result of predatory
lending practices – wherever possible to help American families keep their homes. It
also directs other federal agencies to modify loans that they own or control. Finally, it
improves the HOPE for Homeowners program by expanding eligibility and increasing
the tools available to the Department of Housing and Urban Development to help more
families keep their homes.
III. Taxpayer Protection
Taxpayers should not be expected to pay for Wall Street’s mistakes. The legislation
requires companies that sell some of their bad assets to the government to provide
warrants so that taxpayers will benefit from any future growth these companies may
experience as a result of participation in this program. The legislation also requires the
President to submit legislation that would cover any losses to taxpayers resulting from
this program from financial institutions.
IV. No Windfalls for Executives
Executives who made bad decisions should not be allowed to dump their bad assets on
the government, and then walk away with millions of dollars in bonuses. In order to
participate in this program, companies will lose certain tax benefits and, in some cases,
must limit executive pay. In addition, the bill limits “golden parachutes” and requires
that unearned bonuses be returned.
V. Strong Oversight
Rather than giving the Treasury all the funds at once, the legislation gives the Treasury
$250 billion immediately, then requires the President to certify that additional funds are
needed ($100 billion, then $350 billion subject to Congressional disapproval). The
Treasury must report on the use of the funds and the progress in addressing the crisis.
EESA also establishes an Oversight Board so that the Treasury cannot act in an arbitrary
manner. It also
the FULL BILL
To provide authority for the Federal Government to purchase
and insure certain types of troubled assets for the purposes
of providing stability to and preventing disruption
in the economy and financial system and protecting taxpayers,
and for other purposes….
http://www.house.gov/apps/list/press/financialsvcs_dem/ayo08c04_xml.pdf
If you pay your mortgage, you are the walking definition of an idiot.
This isn’t a bad idea … so what do you say when they come after you? I’d like to pass this on to my parents, but they’re going to have obvious fears, ‘but i’ll get in trouble!’
‘i’ll lose my house!’
The Gator is at 11,700 ft. Whoopee! She’s gonna have a nice day at work tomorrow ;)
The Bill
One important thing I noted earlier is NOT in this bill, and that is the bankruptcy cram-down and re-write provisions. Apparently the banks got their way on this one, which in reality means the Treasury got its way since it is the bagholder.
One small victory for the taxpayer and a giant defeat for the ambulance chasers looking to branch out.
Unless my partners say otherwise, I have to have this summarized by tomorrow. Ouch.
[902] Orion
See kettle’s post. CNN also posted the bill in PDF.
Lots of tax language and banking language for me to chew on. Will be an early day at the office. Yow.
more Bill stuff
http://www.house.gov/apps/list/press/financialsvcs_dem/press092808.shtml
Wachivia update…
http://www.nytimes.com/2008/09/29/business/29bank.html?_r=1&oref=slogin
Citigroup (C) and Wells Fargo(WFC) were locked in a bidding war on Sunday over a possible emergency takeover of the Wachovia Corporation, people involved in the talks said.
The government, led by the Federal Reserve and Treasury Department, has been involved in the talks as well, these people said. But so far, the government is resisting pressure to help bidders by guaranteeing a part of Wachovia’s assets the way it did for Bear Stearns when it was sold to JPMorgan Chase in March.
A timetable for a potential deal is not clear, with the talks possibly extending beyond Sunday night.
Either way, Citigroup and Wells Fargo are unlikely to bid more than a few dollars a share for Wachovia, substantially less than the $10 at which its shares were trading Friday. It was unclear whether bondholders would also take a steep discount on their holdings, or be entirely wiped out.
Other aspects of the deal also remain in flux. One is whether all of Wachovia is up for sale, or whether the company might be carved up.
Citigroup and Wells Fargo, for example, might bid only on Wachovia’s retail banking business. Wachovia retail brokerage, the second largest behind Merrill Lynch, might remain independent. It was unclear what would happen to Wachovia’s small investment bank.
Both Citigroup and Wells Fargo are interested in acquiring Wachovia’s branches and roughly $400 billion in deposit financing. For Wells Fargo, a deal would extend their branch banking network eastward across the Mississippi, creating a nationwide franchise that would compete with Bank of America and JPMorgan Chase. Citigroup and Wachovia declined to comment. Wells Fargo did not immediately return calls seeking comment.
For Citigroup, the deal would vastly expand its retail branch network after struggling to build one for years. It would also give it access to more stable customer deposits, so it could rely less heavily on outside investors for funds. Bank executives there see this as game-changing opportunity.
might as well ask – everyone here seemed to call Wavhovia, WaMu, Bank of America, etc …
what about online outfits like ING and EMIGRANT direct?
Anyone keeping cash in house ? For real have you thought of taking money out of bank?
Drew,
Yes I have thought of taking my money out of the bank but I am afraid of that also.
I started reading but stopped at the very begining when it said they are going to protect home values. Can anyone tell me how they are going to get rid of all the homes for sale if they are going to protect the values, after this bill passes and we are all broke how do we buy them at these protected values?
KL
http://www.drawger.com/zinasaunders/images/Paulson-Pharaoh.jpg
KL,
At this rate, I don’t think there is any possible conceivable way to keep prices at their current levels, at least not in our area. The only way I can see it happening is if we experience severe inflation.
Asian markets are mostly flat tonight and US market futures are mostly down just a tad. Not the result I anticipated. Perhaps dealbreaker and Kucinich were in to something earlier tonight?
One would think if they truly had the votes this thing would have been voted on already. What would be the purpose for the delay? Maybe each Senator/Rep supporting it gets a couple of days to position their portfolios to get the maximum benefit.
#920 i haven’t figured that one out.
I have figured out that even with the median income and a 20% down payment, a family of four can not afford the cheapest non tear down in any ‘good’ town in the junction of somerset/morris/union county. and that’s with the 30 year mtg at 6%.
i know median income should not translate into median house price, but I think median income should at least let you buy a ranch/cape/ or small colonial that is liveable, just needing a new kitchen and baths.
Can’t look at what is already posted, so it might be out from a press site already. If not, this comes from the Speaker’s office:
Debatestarts at 8 a.m. in the House
No amendments allowed
Vote to be taken around noon
WH and treasury have given their approval.
Night all
Can’t look at what is already posted, so it might be out from a press site already. If not, this comes from the Speaker’s office:
Debatestarts at 8 a.m. in the House
No amendments allowed
Vote to be taken around noon
WH and treasury have given their approval.
No sponsor yet but will likely be Barney Frank.
Night all
barien KL
They cannot maintain prices. end of story. they will try and they will fail. take a look st the South Sea Bubble of 1720.
this all ends for a very simple reason. the entire pyramid was predicated on credit. The citizenry are maxed out on all forms of credit and cannot take on any more. end of story
kl (920)-
Cash in mattress + Mossberg 500 + eagle eye = safety
Clotpoll:
emergency must have list per Ferfal
1911
Moss 50
M1A
Shore (927)-
“No sponsor yet but will likely be Barney Frank.”
That’s good. At least he’s familiar with playing the role of “catcher”.
I only hope that we get to the point of approving public, televised executions during my lifetime. I’d pay good money to see that degenerate hung from the gallows.
vodka (930)-
Nice working list. However, why accept an M1A? M-14s are pretty easy to get your hands on.
Shore-
It sounds like you have ties to Congress.
Any idea what M and O are like personally? I hear that M is not really liked by his peers. Any idea on O?
“No sponsor yet but will likely be Barney Frank.”
Bend over, here it comes.
Is he gonna kiss us before he buggers us?
take a listen at this from 2004
http://www.youtube.com/watch?v=_MGT_cSi7Rs
Clott,
the M1a is a commercial version of the m14
i would also add a glock model 22 to my personal list…
the kettle 1 wish list:
2X Glock model 22
1X M1A
2X Glock model G27
1X Mossberg 500
2X Ruger 10/22
1X mini-14
clot, Barney shows up about minute 5
Clot, btw, fwiw, I also believe this bill is criminal.
Shore,
These discussions come up so much here and other places I just put most of my thoughts together regarding who is to blame, homeowners or lenders in one spot.
“If one has a mortgage in excess of 3 times income, one caused this.”
If one has to borrow more than 3 times their income to buy a decent house in a decent neighborhood and bank was willing to lend it to them, it’s not so simple.
If one has $8,000.00 or more of credit card debt, one caused this.
If one is over 30years old and one has less than $30,000 in cash on hand, one did this.
If someone is over 30 years old and has worked all his adult life, but can’t save because of rising costs in products, education, housing and health care that is a problem.
If one had ti finance a car payment for more than 3 years, one caused this.
If amercians didn’t over extend themselves to buy cars, the us car makers would never have survived.
If one has less than a month’s income in the bank and one owns a large-screen TV, or a home theatre, or used a credit card to finance a vacation, yadda, yadda, one caused this.
Yeah, I can go with that. But just add that americans were encouraged to spend more to help grow our economy. For most people wages were not increasing so that meant they were encouraged to borrow more.
With certain types of jobs leaving the country, people had to go into different areas. In my opinion didn’t go into creating streams of money, they found a money stream and jumped in it. Causing transactions that occur in that stream to increase in cost because they had to pay more people.
Shore, you’ve been in worse situations from what you’ve said here. You know what it’s like to make sacrifices so that you don’t dig yourself into a deeper whole.
There are a lot of people out there that are not in great financial shape. People want to have a decent standard of living and even those that don’t have a plasma in every room need to borrow to get by. Even many businesses can’t survive without credit flowing which is why the bailout is coming.
It may be a chicken/egg argument but you can’t get rid of all the chickens and still expect to have eggs.
Does anyone know if Henry Paulson is related to the late allen Paulson…T. Boone Pickens is married to The late Paulson’s widow….I found this to be an interesting coincidence
Also, remember that paltry $300 billion dollar foreclosure relief bill?
$64 million dollars of it is coming to NJ to help with the blight of foreclosed and abandoned properties.
Tom,
From your post above:
“If one has to borrow more than 3 times their income to buy a decent house in a decent neighborhood and bank was willing to lend it to them, it’s not so simple.”
People are responsible for their own finances. Just because someone is willing to lend money to anybody who can fog a mirror does not absolve the borrower from personal responsibility to look after hios or her own finances. We are adults, after all, and must use some sense when entering contracts and not expect others to come save us from ourselves.
“If someone is over 30 years old and has worked all his adult life, but can’t save because of rising costs in products, education, housing and health care that is a problem.”
Yes it is a problem but it does not absolve one from one’s responsibiloity to pare back spending to try and keep spending in line with income.
“If amercians didn’t over extend themselves to buy cars, the us car makers would never have survived.”
Are you proposing that it is consumers’ duty to buy too much product and go too far into debt to support mismanaged american industries? Regardless of how poorly run companies might be, no consumer should purchase their product to keep them afloat. Well run companies get rewarded, poorly run ones go out of business.
But just add that americans were encouraged to spend more to help grow our economy. For most people wages were not increasing so that meant they were encouraged to borrow more.
“With certain types of jobs leaving the country, people had to go into different areas. In my opinion didn’t go into creating streams of money, they found a money stream and jumped in it.”
Just because drugs are available on the street and people encourage one to buy and use them does not mean it is ok to do so. Be adults and do not give into encouragement to buy, even when it comes from political leaders.
Shore,
I think I came across as arguing your points rather than adding to them which was my intention.
I think we have too much debt. All of us including consumers, businesses, financial institutions and our government. The use of credit needs to come down in all areas for this cyclical debt spiral to stop. And I think we both agree on that?
You think consumers need to be more responsible, as do I, but I feel that the government and corporations are in a position where they can actually do something about it that would cover the whole spectrum. Instead of encouraging people and companies to spend and borrow, there should be incentives to save and pay higher wages so that real money is flowing within the economy.
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