The chickens have come home to roost

[delldude]

Barry...no doubt about any of that...but MOST Americans have a NEGATIVE savings rate. That means they have been "powering the economy" on plastic, and turning to the home based ATM (equity lines). Economic Darwininsim is what threatens the US economy. I don't have debt (outside my home mortgage - with it's equity fully intact). but you and I are the exception rather than the rule. And this house of cards economy that we have is going to hurt even those like us.

You are quite correct....but what our parents yearned and saved for is all to easily obtained with the

"right now" credit availability and for that fact...many go down extending their salary way beyond

what one should,and suffer the consequences which for some bizarre reason usually ends up with

some type of congressional bailout.(ie:Airlines-Joe Taxpayer,etc,etc,etc...)

 

[777 fixer]

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Your correct fixer....the 80/90's................and 2000/2001 were bad, BUT a big difference that shows how much worse it's become is;

There was'nt not the Mortgage scams then, as there are now,
AND,

as far as those fuuking CCards go...............back in the 80's, everyone could get a $300 Min. card.......then it was the $300 card, but you had to open a security account for a $100,.................NOW, it's a $250 Min. card,............but you have to pay UP FRONT a "one time" activation FEE, a "handling FEE", a "processing FEE" and a "Your sisters BUSH" FEE, then your left with an available balance of $24, with an Interest rate of "29%" !!!!!!!!!!!!!,

AND...we STILL have ANOTHER 14 months of..................EL-CHIMPO :down: :down:

Actually I was taling about the late 70's early 80's, not the 80/90. The recession in the early nineties was bump in the road compared to the late seventies early eighties. The point I have been trying to make is that we have heard this sort of talk before. People were saying this sort stuff back in the late 70's early 80's as well.

 

[brown]

All of you, who have posted here, on this topic, are MUCH more knowledgeable than I(about economic matters), but one thing I do know(and everyone else for that matter), is that we've STILL got another.."14" more months of EL-CHIMPO at the helm !!!!!!!

Now because I don't know, could someone explain to me, that under the Reagan/GHW Bush era, the economy was'nt good. Under BILL, it was real good. UNDER EL-Chimpo, well "it" speaks for itself, and I'm assuming that the economy will rebound during the next POTUS, who's favored to be a Democrat.

What gives??

Just BAD GOP luck ??(I'm inclined to think NOT, though I'm not Qualified to prove it)

Nice! I am surprised all the right-wing wack jobs aren't blaming this on Clinton....Dam I miss paying 1.25 a gallon for gas, having a surplus instead of being so far in debt up china's a--. dam i miss bill!!!!

 

[jerseyfinn]

Barry...no doubt about any of that...but MOST Americans have a NEGATIVE savings rate. That means they have been "powering the economy" on plastic, and turning to the home based ATM (equity lines). Economic Darwininsim is what threatens the US economy. I don't have debt (outside my home mortgage - with it's equity fully intact). but you and I are the exception rather than the rule. And this house of cards economy that we have is going to hurt even those like us.

KC, I hear what you're saying as it does indeed appear that "bad behavior is rewarded" at present.

But I simply don't believe that those negative savers are the moving force behind America's economy. Neither is economic Darwinism a threat to the nation's economics. Always keep in mind that the first axiom in any Economics 101 class is that economics is about insatiable wants/desires/wishes and finite resource/supplies. The market functions to sort those things out ( and government should function only to ensure that the markets remain fluid ).

How rational or irrational individuals behave does indeed influence the character of the market. But the market remains the market and just like a parent, it will on occassion spank you when you misbehave too much. In this instance, the banks are taking a hit and the thing is rippling across the economy where it touches all of us. But the business of banks remains to manage money and I'm confident that they will get back on track ( at an unfortunate cost to some ). The alternative to Adam Smith's invisible hand ( which sometimes doubles as Darwin's leather belt ) is statist government which meddles too much in private affairs.

As an aside, the WSJ points out this week that 80% of individuals holding subprime mortgages continue to pay those monthly payments. This subprime thing remains a huge problem, but it can and will be addressed. Another ditty is that over half of those folks receiving subprime loans in the past 18 months or so had credit scores which might have qualified them for bettter deals had they taken more conventional approaches. So this subprime thing is partly a deal gone awry when folks look for the fast and easy way out without fully pondering consequences ( this applies both to the borrowers and the lenders ).

The present situation is kind of like a SBD fart in church. A lot of people end up smelling the damned thing, but only one guy has crapped his pants, and he's the one that's gotta walk home like that. If the government gets too involved in these things, it'll make us wash his pants or even buy the idiot a new pair.

Just my way of suggesting that the sun will indeed rise another day and things will move forward to some sort of conclusion. But most of us do indeed have an economic tomorrow to look forward to.

Barry

 

[North by Northwest]

The California market was fueled by speculators...flippers, and builders.

The whole market was "fake". Now they expect the responsible taxpayers to bail them out. We are now responsible for the village idiot's get rich scheme, but then again, he's never had a real job on his own.

Housing needs to flood the market so that prices realistically adjust to earnings. People need to learn a hard, valuable lesson about "shopping" with money that is NOT yours. This is a disaster that lays directly at the feet of George Bush, the man who bragged and based his whole ponzi scheme "More Americans own their homes than ever before" (he left out the part that his policies don't allow them to make enough money to pay for them)

 

[777 fixer]

The California market was fueled by speculators...flippers, and builders.

The whole market was "fake". Now they expect the responsible taxpayers to bail them out. We are now responsible for the village idiot's get rich scheme, but then again, he's never had a real job on his own.

Housing needs to flood the market so that prices realistically adjust to earnings. People need to learn a hard, valuable lesson about "shopping" with money that is NOT yours. This is a disaster that lays directly at the feet of George Bush, the man who bragged and based his whole ponzi scheme "More Americans own their homes than ever before" (he left out the part that his policies don't allow them to make enough money to pay for them)

You know who's fault it is? The people who sold those mortgages and the people who signed their names to it, that's who. If your going to try and blame Bush for this I guess your going to have blame Clinton for the high tech bubble bursting in 2000-2001. Afterall, he was saying similiar things about the high tech/internet industry. As we all know now it was a house of cards. Companies who's only assets were some computers and office furniture that never made a profit had a two hundered dollar stock price.

 

[North by Northwest]

The whole economic plan of the Bush Presidency has been based on the housing industry "smoke and mirrors". Keep the economy going with a ponzi scheme type credit plan, and TAX Breaks for the Rich (trickle down to the peasants effect). Housing costs run up 50%-100% while real wages and earning power decrease. Issue loans with explosive teaser rates to people who barely qualify for renting an apt. on a credit check, INCLUDING illegal aliens (with NO credit history EVER in this country).

If Bush's treasury Sect. couldn't see the problem with this then one must question the man who put him there...the buck stops at the one in charge.

As for Clinton, I hardly think you can compare him to this disaster when he left the federal budget surplus for fiscal year 2000 amounted to at least $230 billion, making it the largest in U.S. history.

"Eight years ago, our future was at risk," (from a Republican Bush Sr.) Clinton said Wednesday morning. "Economic growth was low, unemployment was high, interest rates were high, the federal debt had quadrupled in the previous 12 years. When Vice President Gore and I took office, the budget deficit was $290 billion, and it was projected this year the budget deficit would be $455 billion."

Instead, the president explained, the $5.7 trillion national debt (NOW approaching $10 TRILLION in 2007) has been reduced by $360 billion in the last three years -- $223 billion this year alone.

This represents, Clinton said, "the largest one-year debt reduction in the history of the United States." In June, the administration predicted the surplus could be $211 billion, and would increase by as much as $1 trillion over the next 10 years. (little did we know how fast it would be spent like a drunken sailor by the biggest disaster in American History).

The Tech. bubble clearly had an impact on the economy (a drop in the ocean compared to the massive financial losses now being counted in the housing fiasco, with the big bite still to come). It also created some of the most powerful companies in history...Google.

 

[777 fixer]

The whole economic plan of the Bush Presidency has been based on the housing industry "smoke and mirrors". Keep the economy going with a ponzi scheme type credit plan, and TAX Breaks for the Rich (trickle down to the peasants effect). Housing costs run up 50%-100% while real wages and earning power decrease. Issue loans with explosive teaser rates to people who barely qualify for renting an apt. on a credit check, INCLUDING illegal aliens (with NO credit history EVER in this country).

If Bush's treasury Sect. couldn't see the problem with this then one must question the man who put him there...the buck stops at the one in charge.

As for Clinton, I hardly think you can compare him to this disaster when he left the federal budget surplus for fiscal year 2000 amounted to at least $230 billion, making it the largest in U.S. history.

"Eight years ago, our future was at risk," (from a Republican Bush Sr.) Clinton said Wednesday morning. "Economic growth was low, unemployment was high, interest rates were high, the federal debt had quadrupled in the previous 12 years. When Vice President Gore and I took office, the budget deficit was $290 billion, and it was projected this year the budget deficit would be $455 billion."

Instead, the president explained, the $5.7 trillion national debt (NOW approaching $10 TRILLION in 2007) has been reduced by $360 billion in the last three years -- $223 billion this year alone.

This represents, Clinton said, "the largest one-year debt reduction in the history of the United States." In June, the administration predicted the surplus could be $211 billion, and would increase by as much as $1 trillion over the next 10 years. (little did we know how fast it would be spent like a drunken sailor by the biggest disaster in American History).

The Tech. bubble clearly had an impact on the economy (a drop in the ocean compared to the massive financial losses now being counted in the housing fiasco, with the big bite still to come). It also created some of the most powerful companies in history...Google.

Please spare me the speech and explain to me how the housing market situation is Bush's fault? And becasue you say so is not a good reason. If you want to blame Bush for the budget deficit that's fine. But please give something to support your argument that the housing situation is his fault.

 

[North by Northwest]

http://www.nytimes.com/2007/09/17/business/17greenspan.html (greenspans take on Bush's policy)

When many of us criticize Bush's tax cuts, what we generally mean is that Bush's tax cuts were backloaded and contributed very little to the recovery after the Tech bubble. For example, Bush opposed the Democratic proposal to give tax rebates as a way to stimulate demand. One can argue whether or not those rebates had much stimulative effect, but it's hard to argue that Bush's tax cuts had much effect because we were pretty well past the NBER dating of the recession before those tax cuts kicked in.

The fact that most of the investment boom came in the form of a housing boom effectively means that most of our investment is also in the nontradeable goods sector, which is the problem that has COME HOME TO ROOST. More aggressive investment tax credits in manufacturing and education/training was something that Bush didn't really push. In fact, Republicans were actually wanting to make investment tax credits permanent, which would have completely defeated the purpose of investment tax credits because it would not have accelerated the timing of the investments.

Finally, whenever Bush opponents pointed out that a $1 increase in spending had more fiscal punch than a $1 reduction in taxes, Bush frequently replied that he was not tailoring his tax cuts as short term fiscal pump priming. So in this sense Bush was no more than an accidental Keyensian and I think it's a bit odd of the Administration to want to claim credit for being wise Keynesians when at the time they went to great efforts to pooh-pooh pump priming.


777, here's a good read on the situation and what caused it.

http://hnn.us/articles/41985.html

"Our questions should then be, why did this huge investment in subprime mortgages take place, and why should dismal forecasts on the housing/mortgage market affect all others? The short answer to the first question is George W. Bush’s tax cuts—and this answer should give the Democratic candidates another reason to repeal them.

The rationale for these cuts came from the supply-side arguments of the 1980s (personified by Dick Cheney). It goes like this. Investment, productivity, and employment will increase if you augment the incomes of those who do the saving and investing. These already wealthy folks will acquire a new monetary incentive to invest in goods production if you raise their disposable incomes by cutting their taxes. That investment will in turn produce larger payrolls and more taxable incomes, thus canceling the revenue-reducing effect of the original tax cuts."

 

[delldude]

Credit companies take advantage of people wanting it 'right now' and those same people fail to

read the fine print and not worry about the

consequences until later even if they did read the fine print.They fill their houses which they

couldn't really afford,but due to the lucrative terms, they bought a house above their income

due to the low monthly payments at first.. credit purchases fill the house with furniture

....Joe and Sally pop a couple of peeps and have to finance all the clothes and doctor

bills because they are already to the last dime of the paycheck...its Bush's fault

...you can't BS me.

 

[Gilding the Lily]

Credit companies take advantage of people wanting it 'right now' and those same people fail to

read the fine print and not worry about the

consequences until later even if they did read the fine print.They fill their houses which they

couldn't really afford,but due to the lucrative terms, they bought a house above their income

due to the low monthly payments at first.. credit purchases fill the house with furniture

....Joe and Sally pop a couple of peeps and have to finance all the clothes and doctor

bills because they are already to the last dime of the paycheck...its Bush's fault

...you can't BS me.

The one thing I like about Bush's bailout plan: It will not bail out the people who couldn't afford the payments even before the rate jumps.

The thing I do not like about the plan: It may deny us investors some, but not all, opportunities to buy property at bargain prices.

 

[local 12 proud]

Its not just foreclosures thats responsible for wreaking havoc on the housing Industry.

"This is the most severe housing recession since the post-World War II period," Zandi told Reuters.

These markets have been hard hit due to several reasons, namely the exiting of investors from the areas, a fair amount of subprime mortgage loans causing an increase in foreclosures and overbuilding by home builders, Zandi told Reuters.

"The housing market's most fundamental problem is it is awash in unsold inventory," the report said.

While some point to rising default rates in the subprime mortgage market, which caters to borrowers with poor credit histories, as the root cause of the problems plaguing the housing market, Moody's Economy.com said an unwieldy supply of unsold homes is the prime factor.

The U.S. Census Bureau said that, as of the third quarter of 2007, there were close to 2.1 million vacant unsold homes for sale, equal to 2.6 percent of the stock of owner-occupied homes.

http://www.reuters.com/article/businessNew...lBrandChannel=0

 

[777 fixer]

http://www.nytimes.com/2007/09/17/business/17greenspan.html (greenspans take on Bush's policy)

When many of us criticize Bush's tax cuts, what we generally mean is that Bush's tax cuts were backloaded and contributed very little to the recovery after the Tech bubble. For example, Bush opposed the Democratic proposal to give tax rebates as a way to stimulate demand. One can argue whether or not those rebates had much stimulative effect, but it's hard to argue that Bush's tax cuts had much effect because we were pretty well past the NBER dating of the recession before those tax cuts kicked in.

The fact that most of the investment boom came in the form of a housing boom effectively means that most of our investment is also in the nontradeable goods sector, which is the problem that has COME HOME TO ROOST. More aggressive investment tax credits in manufacturing and education/training was something that Bush didn't really push. In fact, Republicans were actually wanting to make investment tax credits permanent, which would have completely defeated the purpose of investment tax credits because it would not have accelerated the timing of the investments.

Finally, whenever Bush opponents pointed out that a $1 increase in spending had more fiscal punch than a $1 reduction in taxes, Bush frequently replied that he was not tailoring his tax cuts as short term fiscal pump priming. So in this sense Bush was no more than an accidental Keyensian and I think it's a bit odd of the Administration to want to claim credit for being wise Keynesians when at the time they went to great efforts to pooh-pooh pump priming.


777, here's a good read on the situation and what caused it.

http://hnn.us/articles/41985.html

"Our questions should then be, why did this huge investment in subprime mortgages take place, and why should dismal forecasts on the housing/mortgage market affect all others? The short answer to the first question is George W. Bush’s tax cuts—and this answer should give the Democratic candidates another reason to repeal them.

The rationale for these cuts came from the supply-side arguments of the 1980s (personified by Dick Cheney). It goes like this. Investment, productivity, and employment will increase if you augment the incomes of those who do the saving and investing. These already wealthy folks will acquire a new monetary incentive to invest in goods production if you raise their disposable incomes by cutting their taxes. That investment will in turn produce larger payrolls and more taxable incomes, thus canceling the revenue-reducing effect of the original tax cuts."

So two articles make it true? In order for anyone to believe that the whole housing situation is on Bush's doorstep as you put it one also would have to belive that people are not responsible for their own actions. Nobody put a gun to anyones head making them sign a subprime loan. That brings up another subject. Those ARM loans that everyone has been talking about, they have been around for awhile now. They are nothing new.

Did you read both articles all the way through? There was something that caught my eye in the NY Times article.

“The housing boom is not an American phenomenon — it’s a worldwide phenomenon,†Mr. Greenspan said. “The evidence is quite overwhelming that what we are going through is a consequence of the fall of the Soviet Union and the shift of a billion workers from central planning in to the labor market.â€

The United States was only one of 40 countries that experience a housing boom after 2000, he said, and all of the booms were driven in part by low interest rates.“

If you line up all the major developed countries and all the developing countries, leaving out the Zimbabwes, inflation rates were all in single digits. This is utterly unprecedented, there is no history like this. And the consequence was a fairly dramatic decline in real interest rates, which created dramatic housing price increases around the world.â€

Is this GWB's fault? The president does not have control over interest rates in this country, let alone anyother. As we all know that's a function of the federal reserve, in this country that is. If you want to put eh budget deficit and the mess in Iraq on his doorstep you will not get much argument from me. However to try and put the housing market on him is stretching it to say the least.

 

[jerseyfinn]

777, you make several good points in your posts. As you suggest this problem is not attributable to B43 per se, though he's the guy in that big white house when things finally go awry.

It's my own opinion that government, markets, and individuals all play a role in this subprime mess. Ultimately it's a matter of "too good to be true". How can a lender shell out big mortgages without thoroughly checking credit and the ability to pay the money back? How do these middle man clowns and hedge funds get their hands into the engine room and drive full speed ahead without first checking to see that the wheel nuts are tightened? How does a babysitter in California get a $495K mortgage they can't pay back? Well it happened didn't it?

From what I read in the WSJ & the Economist this week, it sounds as if B43 is going for the middle ground of assisting those folks who continue to pay their mortgages ( in other words those folks who are in that 80% of subprime loans where payments are still being made) . He's talking 5 years of locking in rates. Methinks this is a bit too long and 3 years sounds more like it. The dems of course want 7 or more years -- what a surprise to tax payers. that's right! The dems are only gonna sock it to the rich.

So the lines of argument are pretty much laid out. Of course in America, life is never about solutions. It's about blame. So I expect things to drag out as Congress dicks around doing its anti-Bush thing and the hedge fund hedgehogs will be lobbying away to save their own skins ( I think they're better off moving on ). Those individuals who were over their head the day they sit down to sign on the dotted line should sell and get out of the way. Likewsie to those TV infatuated folks who try to turn houses left and right -- take your loss and walk away -- the business of America is business and you gambled and lost -- get on with it.

The biggest worry I'm reading about is concern that too heavy of a government hand will prolong the effect of the subprime fiasco upon housing prices ( which will indeed continue to drop ). In other words, aid should be brief and help shore up folks who can indeed carry a loan but need some time before new rates ratchet up ( for them it would be a good thing if housing prices take their hit and define the bottom sooner instead of later as they can better sort out their lives while retaining their home ).

Time will tell how it all works out.

Barry

 

[Gilding the Lily]

How can a lender shell out big mortgages without thoroughly checking credit and the ability to pay the money back?

Because many of these lenders couldn't care less. Many of them would make the loan, bundle them, and sell them to another servicer. Then, in many cases after that, those 2nd servicers would repackage them as securities and sell them to investors with shoddy rights upon foreclosure (e.g. A judge in OK recently ruled that the securitization pool did not actually attach to the foreclosed properties).

So, in short, many of those original lenders were not left holding the bag!