Inept banks blamed for poor HAMP performance

From the Huffington Post:

Banks’ Disorganization Pushed 800,000 Homeowners Into Unnecessary Foreclosure: ProPublica

Over the past several years, we’ve reported extensively on the big banks’ foreclosure failings. As a result of banks’ disorganization and understaffing — particularly at the peak of the crisis in 2009 and 2010 — homeowners were often forced to run a gauntlet of confusion, delays, and errors when seeking a mortgage modification.

But while evidence of these problems was pervasive, it was always hard to quantify the damage. Just how many more people could have qualified under the administration’s mortgage modification program if the banks had done a better job? In other words, how many people have been pushed toward foreclosure unnecessarily?

A thorough study released last week provides one number, and it’s a big one: about 800,000 homeowners.

The study’s authors — from the Federal Reserve Bank of Chicago, the government’s Office of the Comptroller of the Currency (OCC), Ohio State University, Columbia Business School, and the University of Chicago — arrived at this conclusion by analyzing a vast data set available to the OCC. They wanted to measure the impact of HAMP, the government’s main foreclosure prevention program.

What they found was that certain banks were far better at modifying loans than others. The reasons for the difference, they established, were pretty predictable: The banks that were better at helping homeowners avoid foreclosure had staff who were both more numerous and better trained.

Unfortunately for homeowners, most mortgages are handled by banks that haven’t been properly staffed and thus have modified far fewer loans. If these worse-performing banks had simply modified loans at the same pace as their better performing peers, then HAMP would have produced about 800,000 more modifications. Instead of about 1.2 million modifications by the end of this year, HAMP would have resulted in about 2 million.

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111 Responses to Inept banks blamed for poor HAMP performance

  1. grim says:

    From the FT:

    QE3 Hit by Mortgage Processing Delays

    The Federal Reserve’s attempt to push aid into the heart of the US economy is being blunted by banks struggling to process mortgage applications fast enough, keeping rates on home loans elevated, according to the largest lenders.

    The Fed announced last week that it would buy mortgage-backed securities in another round of quantitative easing – nicknamed QE3.

    This was partly designed to ease further the cost of mortgages, but bankers say the impact will be limited by a dearth of loan officers with banks reluctant to cut mortgage rates without the staff to process any increase in business.

    “In the very near term [QE3] has virtually no transfer mechanism whatsoever to the customer,” said one executive at a leading lender, who requested anonymity. “Originators are massively backlogged in terms of origination volumes.”

    Steven Abrahams, MBS analyst at Deutsche Bank, noted that the yield on mortgage-backed securities fell more than 30 basis points after the Fed announcement.

    “Very little of that is likely to make it through immediately to consumers,” he said. “There’s nothing that will force mortgage originators themselves to lower the rates that they’re offering to consumers. Right now they have their hands pretty full in terms of the pipeline and managing paperwork and making loans. These folks are busy. There’s not a bunch of people on long cigarette breaks.”

  2. Mike says:

    Good Morning New Jersey

  3. Essex says:

    The difference between the Democrats and the Republicans is that when the Dems hear about this there will be some handwringing and angst, but they move on. When the Repubs hear about it, they’ll snear alittle bit and figure the losers had it coming. Either way, nothing will change. Thanks.

  4. Comrade Nom Deplume says:

    Grim [prior thread]

    I have it on craigslist for $100 but I haven’t hit donate in awhile, so $50 for you

  5. Bagholder Brian says:

    HAMP Sucks.

  6. Grim says:

    Sounds good nom

  7. Comrade Nom Deplume says:

    You have my email.

  8. grim says:

    Happy New Year!

  9. Essex says:

    Happy “election” Year.

  10. chicagofinance says:

    The End Is Nigh (It Is High, It Is Far, It Is Gone Edition):
    These two fans scored in a Yankee Stadium bathroom.

    A randy duo was filmed having sex in a bathroom while the Yankees played the Tampa Bay Rays on Saturday, according to

    The woman sat on the toilet as her enthusiastic male partner — who wore a CC Sabathia t-shirt and no pants — climbed on top of her amid a crowd of onlookers.

    “Seems impossible to me, but the couple appeared to be oblivious to the surrounding crowd,” wrote the tipster who filmed the hookup.

    The tawdry twosome kept going for several minutes even after they noticed onlookers peering over and under the stall — and received a round of applause when they strolled out of the bathroom.

    The bathroom boinking may have been good luck: The Yankees won 5-3.

  11. chicagofinance says:

    I showed this article to my wife, and her response was “They were in the stall. Whatever happens in the stall is private.” I married the right woman…..

  12. Grim says:

    Did you incinerate the carcass?

  13. chicagofinance says:

    Yes. Effective. Thank you.

  14. Essex says:

    11. So you say.

  15. Comrade Nom Deplume says:

    [8] grim

    Very funny

  16. Brian says:

    Some wonderful reading here to get some of the njrerport bloggers punching their keyboards.

    Paul Krugman somehow ties the iPhone 5 release with stimulus and Keynesian theory in a NY Times article. WTF?

  17. Grim says:

    AT&T already announced 2 million preorders.

    The 8 million cited in the research note doesn’t seem too far off.

  18. Grim says:

    Bloomberg said people were already camping out in anticipation.

  19. Ben says:

    Food stamp usage is at an all time high. Meanwhile, its ok, half of those recipients have preordered their new i-phone.

  20. Ben says:

    The problem with Paul Krugman is that according to his doctrines, we could all buy and sell each other iphones and life would be dandy. Just as long as unemployment is under 5%. In every Keynesian’s mind, it’s always, how many people are employed, rather than, what are those people employed in.

  21. joyce says:


    what does an iphone taste like?


  22. funnelcloud says:

    Joyce #21
    I,m not on food stamps so I can’t afford one but I’m guessing when I say:
    Sweat and earwax flavor

  23. 1993 House Buyer says:

    There are pilot programs where Medicaid payers provide free i phones and monthly contracts to members to ensure that they make their neo natal dr appointments. Each appointment met gets the contract renewed another month. One preemie avoided pays for more than the whole program.

  24. yo says:

    I dont think it is the Iphone he is talking directly.It is the willingness of consumer buying something that will trigger consumption that will trigger businesses to invest.With more demands they will be forced to hire more.
    We have over 3 trillions of cash that was paid by the Feds to bondholders by QE.And that money is not circulating.Over a Trillion, businesses are holding that is not being reinvested.Eventually this money will have to come out.Maybe,It is the Iphone that will trigger this DEMAND TO REINVESTMENT TO HIRING

    Krugman says;
    ” And to believe that more spending will provide an economic boost, you have to believe — as you should — that demand, not supply, is what’s holding the economy back. We don’t have high unemployment because Americans don’t want to work, and we don’t have high unemployment because workers lack the right skills. Instead, willing and able workers can’t find jobs because employers can’t sell enough to justify hiring them. And the solution is to find some way to increase overall spending so that the nation can get back to work.

    So where can more spending come from? Businesses are sitting on lots of cash but, for the most part, have seen little reason to do a lot of investment. Why expand your capacity when you don’t have enough sales to make full use of the capacity you already have? And because businesses aren’t spending a lot, incomes are low, so consumer demand is low, which perpetuates those low sales.”

  25. chicagofinance says:

    re Krugman:

    Two different economists at different points of the conference I attended last week took cracks at Krugman…..the one that resonated the most was “Paul Krugman is a great example of how an academic and Nobel Laureate can lose 100 points of IQ merely by being given the opportunity to write editorials for the New York Times….

  26. yo says:


    If Im not mistaken,you trade commodities.Can you please explain,how drill baby drill will bring down oil prices in the US.I am buffled by what I read and what I understand.Thanks

  27. yo says:

    Sorry not shore >> Chi

  28. yo says:

    White House details $100 billion in automatic budget cuts

    ‘Not the responsible way for nation to achieve deficit reduction,’ report concludes

    WASHINGTON — Army operations and maintenance would lose nearly $7 billion next year, and the Navy more than $4 billion under a looming series of automatic cuts in federal spending. Educational achievement and special education programs would be shaved by $2.3 billion. Hospital insurance would fall $5.6 billion.

    And, particularly relevant at a moment that world attention is focused on the continuing attacks on United States embassies and consulates abroad, diplomatic programs and embassy security would lose $1.2 billion.

    These are part of the findings by the White House in a new 394-page report that was delivered Friday to Congress, detailing line by line what will happen next year if Washington fails to act to head off about $100 billion automatic defense and domestic spending cuts scheduled to begin Jan. 2. The Obama administration had been reluctant to show its hand on the true impact of so-called sequestration, but once forced to do so by Congress, the White House budget office did not scrimp on the details.

    “As the administration has made clear, no amount of planning can mitigate the effect of these cuts. Sequestration is a blunt and indiscriminate instrument. It is not the responsible way for our nation to achieve deficit reduction,” the report concludes.

    The Budget Control Act of July 2011 established automatic cuts as the bludgeon that was supposed to force a special, bipartisan committee to come to an agreement on deficit reduction of at least $1 trillion over the next decade. The committee failed, with Republicans refusing to meet Democrats’ demands to raise taxes in exchange for cuts to domestic programs and entitlements like Social Security and Medicare.

    Lawmakers are still hopeful that Congress and the White House can come up with a way to avoid the cuts, but no action will come before the November elections, with the outcome of the voting having some effect on what any agreement would look like.

    For now, the two parties remain at odds, with each trying to blame the other for the automatic cuts about to come.

    Under the terms of those cuts, most defense programs face a 9.4 percent cut, while most domestic programs would be sliced by 8.2 percent. Medicare would be trimmed by 2 percent, while other entitlements — not counting Social Security — would be sliced as much as 10 percent.

    Congressional Republicans initially sought a detailed accounting of the cost of the planned defense cuts, which the White House had resisted. Then Democrats joined in, pushing to see the impact on domestic programs as well, and Congress ultimately passed legislation almost unanimously demanding a written report.

    As late as Friday, Congressional aides were skeptical that the White House would produce the details that lawmakers had wanted. But the White House did, down to the $4 million the Library of Congress stands to lose for its books for the blind and handicapped.

    Pointedly, the first items on the ledger are cuts to the legislative branch. Inquiries and investigations — a mainstay of the Republican House — would lose $11 million. Salaries and expenses in the House of Representatives would drop by $101 million.

    Big cuts would hit the military. Defense Department operations and maintenance would lose $3.9 billion next year alone. Pentagon health care would be cut by $3.3 billion. Air Force and Navy aircraft procurement would be sliced by more than $4.2 billion. And funding to strengthen Afghanistan’s security force the year before the United States plans to withdraw its own forces would fall by $1.3 billion.

    Politically, the pain would be spread to all parts of the spectrum. The National Institutes of Health would lose $2.5 billion. Rental assistance for the poor would fall by $2.3 billion; food stamps would lose $543 million.

    Republican domestic priorities would also take a hit. The Federal Bureau of Investigations would lose $735 million for salaries and expenses. The Customs and Border Patrol budget would fall by $823 million, and the budget for the border fence — virtual and physical — would drop $33 million.

    This story, “White House Report Details Effects of Automatic Budget Cuts,” first appeared in The New York Times.

  29. Essex says:

    IOU $16T. And counting. I’m good for it. Really!!

  30. yo says:

    Of that $16T debt, $5T is owed to Foreign countries,the rest is domestic.$5T is over 30% of a $15T GDP owed to foreigners.Im not saying this deficits is good.I am just saying if what the deficit comission is saying screw the SS medicare holders and plus the Tea partiers ending social services,you just wiped out 70% of what is owed.NO?

  31. Brian says:

    I thought I would share this with you guys. It really doesn’t have anything to do with real estate but the term “game changer” is continually thrown around in reference to it. Ever heard of the process called “additive manufacturing”? They are also refered to as 3d printers. Now imagine what would happen if these things could be purchased by the average consumer. How would it impact jobs and manufacturing and God knows what else. I am totally fascinated by these things and can’t help but wonder what the world will be like once they are more prevelant.

  32. Brian says:

    Grim can you unmod my post 32 please?

  33. Juice Box says:

    No worries Uncle Benny will gift us all the dollars we need.

  34. yo says:

    From friday

    Why even bother with gold and nompound,that has no value in heaven.If there is a heaven or maybe I will meet 7 virgins. How many nuclear heads each all this power countries have?

    Juice Box says:
    September 14, 2012 at 2:55 pm
    Yo – you do know some nuclear armed countries hold Fannie, Freddie MBS and UST right? There can be no default without pain.

  35. grim says:

    32 – Yeah right, I’m still waiting for my Jetson’s-style Food Replicator.

    What happens when a 3D printer can reproduce a 3D printer? Would they take over the world in a kind of recursive armageddon? Clearly they’d become sentient by the 3rd or 4th generation.

    Trick question – no company would be dumb enough to make one so good that it would reproduce itself, they’d be out of business after the first sale.

  36. Juice Box says:

    China seems a little poed, Armada of boats headed to disputed islands.

  37. Brian says:

    36 –

    Those things are sick right? I saw the article on Reuters this morning. I’m obsessed with them. The idea that they exist still blows my mind. I thought maybe it was fake or something.

  38. grim says:

    In all seriousness…

    When Epson and HP start selling home models, will the “ink” cartridges sell for less than a thousand bucks a piece?

    Where do you get the “programs” from? Will Hasbro start selling them? Will you need to pay $25 for it? Will they build DRM in?

    What happens when you get halfway through the wrench and you run out? Do you send your wife to staples?

  39. reinvestor101 says:

    >>Juice Box says:
    September 17, 2012 at 12:59 pm

    China seems a little poed, Armada of boats headed to disputed islands.<<&lt;

    Stinking commies. That's what the hell they get for sticking their damn noses in Syria and voting against us in the damn security council. They had no damn business doing that. I'd love to see Japan take them the hell over. Hell, if Japan takes them down, we probably don't have to pay them their stinking money back. As far as I concerned, we shouldn't pay them back under any circumstances just to teach those stinking commies a lesson. They can't do nothing about it, so vuck them.

  40. The Original NJ ExPat says:

    I was just discussing applications of 3D printers at lunch with a colleague today. One application may be temporary dental crowns. According to my colleague 3D printers can be had for about $1700 right now.

  41. Ben says:

    Paul Krugman, Oct 7, 2001

    In time this overhang will be worked off. Meanwhile, economic policy should encourage other spending to offset the temporary slump in business investment. Low interest rates, which promote spending on housing and other durable goods, are the main answer.

    Oh but he “called” the housing bubble.

  42. Anon E. Moose says:

    Re: Chimney Caps

    A) I don’t mind heights, its just that on a rooftop I have insufficient airspeed to feel confident of my position;

    B) I’m gonna pay a guy to clean the chimney anyway; why not have him do the cap while he’s in there?

  43. Ben says:

    They just need to stick a 3-d printer in target next to the photo printer. No one should be buying one of these things on their own.

  44. chicagofinance says:

    First off….I really know very little about the technical aspects of this topic. To the point that anyone with real background and knowledge would consider me an utter hack….in that vein, I will provide the following information, which is subject to being corrected by anyone else posting.

    Drill Baby Drill is Sarah Palin who is antithetical to an intellectual discussion, so you should refrain from using that language. Further, that refers to drilling for oil off the shores of the continental U.S., which is fraught with the potential to putrefy everything in its path. It is also part of the 2008 Presidential campaign. The rise of the “new paradigm” has only occurred in the last 2-3 years. As a result, anything you know in this context about the debate pro/com over drilling needs to be cast aside.

    The new paradigm is two-fold. Hydraulic fracturing for natural gas (fracking), and also the methods used to extract crude oil from shale rock (similar in concept to fracking, but what is does is take oil deposits found and substantially increases their yield – see Bakken oil fields).

    What is the problem? Normally the process to drill for oil is expensive, and due to the U.S. dearth of traditional styled reserves, completely uneconomic and environmentally destructive. Even though the oil companies have for decades lobbied to do stuff, it is easy to push off their fantasies as a joke.

    The liberals, Obamunists et al. are closed minded people and not willing to be “progressive” (pun intended) and consider new information. However, the new information is material, and even though their misgivings are NOT any less important, the overall economic, strategic and security (liberated from foreign oil) impact to the United States is so overwhelming, that it is actually irresponsible to continue with (CLEARLY) money losing initiatives in alternative energies.

    The problem is that the Obamunists know that the Greens have intractable views built on decades of facts and discussion. As a result, I view the Obamunists as simultaneously being obstructionist, stonewallers, and worst, two-faced, in that they want to take credit for any gains from technology (which they had zero participation), yet gritting through their teeth and the evil energy companies.

    Off the top of my head, a good to understand what has happened is on these terms: Oil and Gas fracturing technolgy is the Apple iPhone 5, and alternatives energy is the Blackberry and Nokia……is that clearer?

    yo says:
    September 17, 2012 at 12:04 pm
    Shore, If Im not mistaken,you trade commodities.Can you please explain,how drill baby drill will bring down oil prices in the US.I am buffled by what I read and what I understand.Thanks

  45. Statler Waldorf says:

    Jay Leno’s 3D Printer Replaces Rusty Old Parts

    Jay Leno has a lot of old cars with a lot of obsolete parts. When he needs to replace these parts, he skips the error-prone machinist and goes to his rapid prototyping 3D printer. Simply scan, print and repeat.

  46. grim says:

    Yeah but how does one get their hands on the “CNC” program needed to print the part?

    Ok, so Leno scans them. But how much is this laser scanner? Probably pretty costly. It also means you need to have the physical part in your possession, in order to make the scan. Also, it means the part can’t be damaged, as you’d replicate a damaged part.

    So now you need to hire a CAD engineer to sit down in your livingroom, on Solidworks or AutoCad or whatever and make your part, or correct the scan, before you can print it.

    If you’ve got the CAD guy in your livingroom already, why not just buy a CNC mill and cut the thing out of steel, aluminum, plastic, or whatever. Dare I say it, but you can get a multi axis CNC mill relatively cheaply on eBay these days. You can make a real thing, out of metal.

    By the way, Leno is probably having his replacement parts milled out in a machine shop, the guy isn’t going to dick around with a printer to make a little plastic part.

  47. Comrade Nom Deplume says:


    There is interest in the ladder. Let me know.

  48. prtraders says:

    So we won our Friday bidding war with a bid just over original ask in response to sellers request for highest and final bid. Saturday signed off on the revised contract and contacted our attorney. Sunday we found out that our competition requested a second chance at a highest bid. Guess they were holding a little back. And now the seller wants another higher bid from us and a clause in the contract how much we will guarantee to pay over appraisal if appraisal comes in low. I’m not going up any more and won’t guarantee more than 10k on the appraisal. Back to square one. Cue angry sobbing wife.

  49. Westjester says:

    Re #24
    How can anyone expect any significant bump in consumer demand when we have already entered the boomer downsizing era? Won’t this trend continue and increase for the foreseeable future? What am I missing?

  50. The Original NJ ExPat says:

    [48] grim – “Ok, so Leno scans them. But how much is this laser scanner? Probably pretty costly.”

    from the Leno article(the scanner is cheaper than the printer):

    “The NextEngine scanner costs $2995. The Dimension uPrint Personal 3D printer is now under $15,000. That’s not cheap. But this technology used to cost 10 times that amount.”

  51. Brian says:

    sorry to hyjack your blog about it Grim but this one you have to see. There’ a company that is experimenting with printing live organs for transplant

  52. grim says:

    49 – take their cash!!!

  53. The Original NJ ExPat says:

    [48 contd.] I think the benefit is that once you have a scanned model you can continually make incremental changes to your model and QA it before producing the real McCoy in a much costlier process. Remember, a lot of precision parts are milled or otherwise produced from much costlier stock materials (titanium and zirconia ceramic at my company, for example) so being able to prototype something out of plastic repeatedly may work out to be a real cost saver.

  54. yo says:

    THANKS! I brought the subject up is because,just like gold,oil is priced at world market price.Canada an oil producing country still pays the same amount as any other country unless they nationalized their oil or government subsidize the difference in the price.Studies have found US at full capacity,oil estimated underground will only produce less than 10% of world demand,not enough to dictate oil prices.If there was an oil embargo in Saudi Arabia and oil prices jump to $300/barrel,The US will not be paying $100/barrel at full oil producing capacity.We will still be paying the world market price.So the game with strategic oil reserve being open does not lower price,it calms the uncertainty.

  55. yo says:

    O will be right on this path.Drill baby drill is not the answer.All of the above is the answer to lower our price in energy.

  56. homeboken says:

    “The NextEngine scanner costs $2995. The Dimension uPrint Personal 3D printer is now under $15,000. That’s not cheap. But this technology used to cost 10 times that amount.”

    Who cares how much it costs. I will buy one, set the target at a $20 bill and let it run forever.

  57. yo says:


    The babyboomers as long as they are alive will still be spending.They might downsize in the size of their home.There are 76 million babyboomers born between that time and the population of the US is 312 million.

  58. yo says:

    #51 West

    The real question is the housing bubble is a $6T economy.What will replace this void in capacity.Create another bubble?

  59. grim says:

    from the Leno article(the scanner is cheaper than the printer)

    I guess the point I was trying to get at is that this technology hasn’t necessarily been out of the grasp of the technical public. It’s been available, and it’s been used by people who have a need for it. Desktop CNC mills exist, likewise older industrial technology (multi-axis CNC) have come down dramatically in price. Heck, folks have milled by hand too. I suppose you can argue that it is smaller too, but that also applies to the size of the part you can make. If you can deal with the size, you can also make “real” parts out of metal and the like, and not just plastic.

    So, if similar technology exists, but isn’t being leveraged widespread, why exactly would this be revolutionary? Size? Like I said before, you can get a very nice Roland desktop mill today, and companies use it all over the place (Leno could have done it years ago). Or, you can roll your own with a Shop Bot.

    Ok, I admit, it’s cool. But is it really a game changer?

  60. Fantastic items from you, man. I have consider your stuff prior to and you’re just extremely fantastic. I really like what you have bought here, certainly like what you are saying and the way in which during which you assert it. You’re making it enjoyable and you still care for to keep it sensible. I can not wait to read much more from you. This is actually a terrific web site.

  61. Comrade Nom Deplume says:


    Ladder sold, sorry.

  62. Richard says:

    #50 prtraders that sucks, I dont know what is best. Maybe once the other side submits a bid you can ask if you can bid a 3rd time. Then pull out and tell them to **** off.

  63. prtraders says:


    Thought about something like that. But that’s where it ends. You never know how it might turn out and I’d rather sit quietly and hope they return to me. Grim was right with his Friday comment about most of the posters on here (myself included) being highly selective ( I think he used the word critical) and that he was not surprised that a bidding war emerged on a targeted property. I now fully appreciate my realtor’s sense of urgency when we first saw the property on day 2 of its listing.

  64. joyce says:

    Shore Guy,

    Have you done any more looking in the OBX? I’m thinking (just thinking) of buying a lot in the 4-wheel drive area. If you’re not oceanfront or on the sound, the lots are dirt cheap and you’re only a 5 min walk to the beach.

  65. chicagofinance says:

    yo: You’re welcome, although based on your response, I am getting a nagging feeling that you are just cherry picking some of the information I provided, because it does not jibe with your already held opinions. I am going to post the WSJ interview from today that Scribe posted so you can appreciate that the U.S. (if properly structured) could function independent of the Middle East, using resources soley from the Western (i.e. friendly and willing partners) Hemisphere. That would leave the Middle East and Russia in the hands of China and Inida. The fracking technology will hopefully allow Eastern Europe and China to effectively bankrupt all those evil bastards……

    yo says:
    September 17, 2012 at 3:35 pm
    Chi. THANKS! I brought the subject up is because,just like gold,oil is priced at world market price.Canada an oil producing country still pays the same amount as any other country unless they nationalized their oil or government subsidize the difference in the price.Studies have found US at full capacity,oil estimated underground will only produce less than 10% of world demand,not enough to dictate oil prices.If there was an oil embargo in Saudi Arabia and oil prices jump to $300/barrel,The US will not be paying $100/barrel at full oil producing capacity.We will still be paying the world market price.So the game with strategic oil reserve being open does not lower price,it calms the uncertainty.
    yo says:
    September 17, 2012 at 3:37 pm
    will be right on this path.Drill baby drill is not the answer.All of the above is the answer to lower our price in energy.

  66. chicagofinance says:

    September 13, 2012, 2:53 p.m. ET
    The Journal Report: Investing in Energy
    Making Sense of the U.S. Oil Boom

    Daniel Yergin talks about where it’s coming from and what it will mean for the U.S.—and the world.


    The U.S. has long been seen as an energy hog. Thanks to hydraulic fracturing and deep water technology, it is now pumping more oil than it has in more than a decade, and its growing status as a crude producer is taking the world by storm.

    In a conversation with The Wall Street Journal, Daniel Yergin, the energy industry’s most prominent chronicler, talks about the American oil renaissance and its profound implications for the U.S. in a changing world. Mr. Yergin, currently vice chairman of IHS, a consulting firm in Englewood, Colo., is the author of “The Quest: Energy, Security, and the Remaking of the Modern World.” His history of the oil industry, “The Prize,” earned a Pulitzer Prize.

    Here are edited excerpts from the conversation.

    Energy Boom

    WSJ: The U.S. is experiencing an unprecedented boom in oil production. How did this happen? Where is it taking us?

    MR. YERGIN: The last time we had a presidential election, the U.S. was going to run out of oil. Since then, U.S. oil production has grown about 25%. As has happened in the past, technology has opened doors people didn’t know were there or didn’t think could be opened.

    We expect to see tight-oil production [oil extracted from dense rock formations] grow dramatically over the rest of this decade. If you take what’s happening in the U.S. and what’s happening in Brazil and Canada, we’re going to see a rebalancing of global oil flows. By the end of this decade, the Western Hemisphere may be importing very little oil from the Eastern Hemisphere.

    WSJ: What difference does that make to U.S. oil consumers?

    MR. YERGIN: Until a couple of years ago, people didn’t focus on the economic impact of domestic energy production. Over one million jobs have been created by the development of unconventional gas. It makes the U.S. more competitive. You can see how the growing recognition of the economic impact is changing the political discourse about energy in the U.S., including, very clearly, in the presidential campaign. You would not have had this kind of discussion about energy in 2008.

    [The new flow] changes the geopolitical perspective about energy. The U.S. is going to be relatively more self-sufficient and less dependent on foreign energy. We’re already independent in terms of coal and natural gas; greater reliance on regional and domestic supplies increases our sense of security.

    WSJ: Will this weaken the U.S.-Saudi relationship?

    MR. YERGIN:We don’t get a lot of our oil from the Middle East as it is today, but the strategic interests are very strong; obviously they’re highlighted by continuing tension over Iran’s nuclear program.

    WSJ: What is China’s role after the rebalancing of global oil?

    MR. YERGIN: There was much heightened concern about energy security in China in the middle of the last decade; now there’s much more self-confidence in their ability to buy what they need, a bigger appreciation of a flexible global market. But China clearly intends to have a bigger presence on the world stage; it is participating in antipiracy efforts off the coast of Somalia.

    In some ways, China will become a partner—it will come to have a role in the security of the flow of energy. This can go on a very constructive, cooperative fashion, or it can go on in a fashion which creates greater risk. This is going to be one of the major focuses of the U.S.-China relationship.

    WSJ: Critics have said the potential of unconventional fields—shale and tight oil—is exaggerated. Is this boom real?

    MR. YERGIN: The proof is in the numbers. Shale gas (2% of U.S. gas production at the start of the century) is now almost 40% of U.S. gas production. And using this technology in new areas and established oil fields has really revitalized U.S. oil production.

    WSJ: Can you put this boom in historical perspective?

    MR. YERGIN: During the oil industry’s first century, the U.S. was the world’s dominant oil producer. During World War II, six out of seven barrels of oil used by the Allies came from the U.S. After World War II, the U.S. became a net importer of oil, and it was during the 1970s that it came to be a huge importer.

    The last time we had a presidential campaign, the U.S. seemed set to continue along this path. The only question seemed to be: At what pace would imports grow? Since then, we’ve seen a big turnaround—from importing 60% of our crude in 2005 to 42% today. This is a big change, and that number will continue to go down as production increases and we continue to be more efficient in terms of the automobiles that we drive.

    The U.S. is not going to go back to its position as the unquestioned major source of world oil. But our production will continue to grow. It is a great turnaround.

    WSJ: What sparked it?

    MR. YERGIN: The main thing here is the new ability to use in oil fields technologies that were developed for shale gas. It’s technology and entrepreneurship, initiative, people having different ideas and acting on them.

    WSJ: Can the U.S. boom be replicated elsewhere?

    MR. YERGIN:It’s what happens above ground in terms of policy, fiscal regime, infrastructure, logistics, pipelines. All those things are critical.

    Our analysis suggests that China has a bigger unconventional gas potential than the U.S. But the timing will be different. In Argentina, it’s not only the resource. There are very problematic government policies combined with great uncertainty about the fiscal regime and prices. The timing will be controlled not by the physical resource, but by the whole system above ground.

    The Russians are very interested in tight oil in western Siberia, which could be a whole new renaissance for that area. But it’s still early days.

    Next Challenges

    WSJ: What are the big challenges to U.S. development of unconventional energy?

    MR. YERGIN: In the mid-Atlantic states there’s still a lot of controversy about shale-gas development. Public acceptability is important. The environmental question needs to be addressed—it will be addressed. There’s a much more intense focus on the water aspect than a few years ago. Also, transportation, pipelines and terminals in North America are struggling to catch up with the new production.

  67. chicagofinance says:

    The End Is Nigh (High School Marching Band Edition):
    give it about 45 seconds to kick in….

  68. Anon E. Moose says:

    Title Post:

    In no particular order —

    “Unnecessry Foreclosure” — I do not think that word means what they think it means. The only “unnecessary” foreclosure I know of is where the borrower actualy paid as agreed. All others – talk until you’re blue in the face about what’s in the enlightened best interest of the lender, and maximising revenue over FK — all smoke and mirrors. If the deadbeat doesn’t pay, and gets to stay anyway, its through the grace of the lender for whatever reason they see fit. And its privilege, not a right.

    You mean throwing money at deadbeat home l’oaners wasn’t shovel-ready either? Quelle suprise! You mean the Obama administration didn’t have a realistic understanding of how the mortgage loan market works, and what the likely effect of his proposals would be? mon Dieu!

    Considering how much trouble Obama seems to have had spending my money, he sure did spend a lot of it. Though it appears that his trouble wasn’t exactly spending the money per se, as that got done just fine — it was getting the promised results where there was a glaring disconnect.

    Oh, and in case anyone missed the point of the article – the miserable failure of Obama’s plan is absolutely, definitely, not Obama’s fault.

  69. Westjester says:

    Re# 60
    So you are asserting that they will spend at the same rate? This seems problematic when less than 50% have any significant retirement funds saved.

  70. grim says:

    I didn’t say “critical” because I was trying to sound pejorative or negative in any way. It’s simply a constructive observation from having worked with folks that highly focused on the real estate market. Be aware of it and make sure it’s focused in the right areas. It can work in your favor, but it can also work against you.

    There is a lifecycle associated with buying after blogging. From my experience, it manifests itself in the following progression.

    1) Inability to see anything as being a good deal. See lots of houses, everything “sucks” and is “too expensive”. Good opportunities? Not interested. Problem is typically expectations that don’t match reality.

    2) Inevitably, after seeing a number of properties go off market, perception starts to shift, buyer gets a better understanding of pricing in the market, maybe expectations tick back towards reality. Finally sees properties that look “decent”. Analysis paralysis takes hold, inaction results.

    3) After seeing more properties tick off market, buyer finally has a good grasp on market pricing, correct expectation. They find a property, and inevitably fail to move fast enough to secure it. They want the property, and intend to bid, but simply can’t execute on it fast enough. They will almost always attempt to bid on a property as soon as it hits ARIP, as if the other bid provides sufficient confirmation in the value of the property (Someone else wants it, so it must be a good deal).

    4) This is an optional stage – Bid and bail – Buyers that finally bid, but self-sabotage the deal in negotiation, or prior to closing. I suppose they want to buy, but immediately get buyers remorse as soon as the property gets into negotiation. Typically it blows up in negotiation, but if it does make it through, it’ll blow up during inspections. This might also manifest itself as a stream of Bid-Under-Market, where Grim provides his estimate of fair value/closing price, and the buyer bids $20k under that, repeatedly, losing out every time.

    5) Bid and buy – When buyers finally get to this stage they are in tune. When an opportunity pops up, they move very quickly, and lock it up.

  71. grim says:

    #3 – this one is precisely why listing agents shop offers and make callbacks when they have a deal in hand. They do it because it works. I dont believe this one is all about a sense of urgency, but it does play into it. I think the confirmation provided by the other bid is of higher importance.

  72. Ernest Money says:

    grim (75)-

    Not that different from Kubler-Ross’ stages of grief.

    If I ever had another buying client, by the time they were to Step 3, I’d be dumping them in a shallow grave.

  73. grim says:

    or you can look at it as a continuum where the buyer starts with a focus on price and ends with a focus on value.

  74. Ernest Money says:

    grim (78)-

    More like a continuum to oblivion.

  75. Ernest Money says:

    gluteus (80)-

    Electricity and water. Perfect together.

  76. cobbler says:

    Energy independence and energy costs are two different things. Unless we institute substantial export duties for the crude (like most oil-exporting countries do for fiscal reasons), or set up export quotas, our internal prices will closely track the global markets. The only difference will be that the profits will go to the oil companies (a few of them are foreign-owned, actually – like BP and Shell) rather than to OPEC. As an example: right now, we have very limited LNG export capacity, so our nat gas prices are 1/3 of the ones in Europe and Japan thanks to fracking, and it is a powerful stimulus for the industry here; once LNG terminals are built, the price will go up to world minus compression costs. So, the best thing we can do for the American jobs to stay here is to not allow the construction of LNG ports…

  77. grim says:

    So, the best thing we can do for the American jobs to stay here is to not allow the construction of LNG ports…

    It’s a compeling argument…

  78. Mikewaited says:

    Juice and this is untrue how? We can get into corporate greed ,CEO’s making 300 times pay of workers, but on the face it’s true.
    “There are 47 percent of the people who will vote for the president no matter what. All right, there are 47 percent who are with him, who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it. That that’s an entitlement. And the government should give it to them. And they will vote for this president no matter what…These are people who pay no income tax. ”
    I believe the no income tax line at the end was pushing it considering Nom could go full time helping these well heeled folks trying to evade but all in all still true.

  79. Ben says:

    wonderful, so they bailout the banks, setup a program to have these people leech off the tax payer, the bank is still so incompetent that they don’t even take advantage of free money? Why was it so important we keep these guys in business?

  80. cobbler says:

    mike [85]
    The statement is pretty incredible, especially having in mind that a third or so of the people not paying income tax are retirees that from all age groups are the biggest R supporters.

  81. yo says:

    Is this the kind of president that will run this country? No compassion to the millions of people that lost their jobs that is no fault of their own. Calls them dependent to the govt. This statement just lost his chance with the undecided and the millions of jobless. Good job to win a vote

  82. yo says:

    I guess he does not believe every vote counts

  83. cobbler says:

    grim [84]
    You will be surprised, but GDP multiplier on energy in general is large, and specifically on natural gas it is yet bigger. By exporting it you cut off the whole value-added chain (don’t invest into production of polymers, fertilizers, etc. that can be exported for much more money than you get by exporting LNG, or you don’t pay for their imports if they are for the domestic use).

  84. yo says:

    He called the retired seniors receiving ss,medicare a leech to the govt. He should pack his bags,its over

  85. certainly like your website however you need to check the spelling on several of your posts. Many of them are rife with spelling issues and I to find it very bothersome to inform the truth then again I’ll surely come again again.

  86. Ernest Money says:

    From where I sit, the biggest leeches are Blankfraud, Dimon, etc.

  87. schabadoo says:

    The odd thing about Romney’s statement is that the 47% of the people that pay no income taxes live disproportionally in red states. It’s an odd way to play up to the base.

  88. Mikewaited says:

    YO 91-I said how is this untrue & you make my case ” He called the retired seniors receiving ss,medicare a leech to the govt. He should pack his bags,its over.”
    Cobbler 87 – it would seem Yo disagrees, asserting they will not vote for him.

    My take “on face true” – they will go where their bread is buttered is simpatico with yo. How long this compassion is sustainable is another issue.

  89. chicagofinance says:

    I read some articles awhile back on LNG exporting….don’t worry, it’s uneconomic and it won’t happen….further, if other countries utilize the technology used in the US, the cost discrepancy will disappear anyway……..compressing, transporting and reconstituting nat gas is cumbersome and expensive….

  90. chicagofinance says:

    Why is there a referendum on Romney…..all that matters is that the Obamunists get kicked out, everything else is a smokescreen…..

  91. Mikewaited says:

    chi 96 Perfect, costly& cumbersome to transport & we have plenty.

  92. Mikewaited says:

    chi 97 just having fun, you know where I stand on “O”. Let me not leave that hanging, we have a lot of problems in this country “O” had his shot & failed. I have no other choice than Mitt as unpalatable as it is.

  93. cobbler says:

    chi [96]
    Overall, you spend about 1 volume of natural gas to compress, liquefy, transport and reconstitute another volume, so the cost approximately doubles at the delivery point v. the origin. Since our current commodity price is below $3, and in Japan it is about $12, the operation is immediately profitable if the export facility is available – which it is not. However, Cheniere is building the plant that at full capacity will be able to pack away about 7% of the U.S. output of gas – which will significantly increase the price here:

    Cheniere Proceeding With LNG Export Facility in Louisiana

  94. chicagofinance says:

    Are you stupid? I would argue that this was an intentional plant allowed by the Romney campaign….it lays out everything right out of Romney’s mouth, but he doesn’t actually have to say it to Obama. It is the same as the Clinton/Michelle speeches in support of the Obamunist. I think it is shrewd. There is nothing controversial or off-color here. He is saying things that are completely rational and true…….he gets to denigrate Obama without being accused on denigrating Obama.

    Juice Box says:
    September 17, 2012 at 8:29 pm
    Romney fundraiser all he needed was a white hood.

  95. chicagofinance says:

    on = of

  96. chicagofinance says:

    I think the difference is actually more than double. I think your source may be tainted to justify a lofty valuation for Cheniere…….if it were that obvious, then there would be more players…..I think Cheniere has a monopoly or close to it….or someone would buy them out……

    cobbler says:
    September 17, 2012 at 11:23 pm
    chi [96]
    Overall, you spend about 1 volume of natural gas to compress, liquefy, transport and reconstitute another volume, so the cost approximately doubles at the delivery point v. the origin. Since our current commodity price is below $3, and in Japan it is about $12, the operation is immediately profitable if the export facility is available – which it is not. However, Cheniere is building the plant that at full capacity will be able to pack away about 7% of the U.S. output of gas – which will significantly increase the price here:

  97. Comrade Nom Deplume says:

    [88] yo,

    Both sides have drawn the lines clearly, identified the enemy, and thrown down the gauntlet. My side pays better.

  98. cobbler says:

    chi [103]
    Source is actually Dow Jones as tainted as it goes… And the article states that the exports will bring the commodity NG price here to about $6… so they count on $12 + world prices.
    Blackstone’s traitors underwriting the facility have chutzpah to state:
    Cheniere expects the project to cost about $5.6 billion, funded by $2 billion of equity and $3.6 billion of debt. The effort is backed by private equity firm Blackstone Group (>> The Blackstone Group L.P.).

    “We are pleased to provide the growth capital to fund the construction of the first LNG export facility in the continental United States, creating thousands of jobs for American workers and providing significant benefits to the U.S. economy,” David Foley, senior managing director of Blackstone, said.

  99. The Original NJ ExPat says:

    Downsizing boomers, property taxes, and rising interest rates will precipitate the next leg down in the housing market. Continued high unemployment and stagnant wages will be accelerating factors. Anybody want to take the position that boomers won’t downsize, property taxes are a non-issue, and inflation has been eradicated from the globe?

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