Does Anyone feel like Bailing

[classicman]

How would that differ from paying off the mortgages for people thus freeing up capital? Would people then have additional money to spend & respend without the worry of defaults?

[ZenGum]

I mean help the guy in China, since almost all the steel posts, wire, and PVC comes from there

And China buys lots of iron ore from ... Australia! STIMULATED!

Thanks guys, love you! (Hope you figure out a way to pay it all off!)

[classicman]

TOKYO -- Just over four years since it clawed its way out of a consumption-sapping cycle of price slides that sucked the vitality out of Asia's biggest economy, Japan is back in deflation, officially at least.

The feeling of deflation deja vu was compound by the nation's central bank response, which amounted to more of the same. The Bank of Japan is keeping the nation awash in corpuscles of cash in the hope that like an over-oxygenated athlete, the Japanese economy might burst into a sprint.

Many are happy to keep it that way -- after all, how many shoppers are going to complain when goods get cheaper? When wages are shrinking and taxation and social welfare costs are ballooning, people will insist on value for money, especially when they have been overpaying for goods and services for years.

The upside is that it will force Japan into the kind of structural change needed to boost productivity that its political leaders dare not suggest.

Their response to the latest bout of deflation from the top has been predictable and disappointing. The spend-our-way-out-of-trouble mantra is again being chanted in the cloisters of power and another government stimulus package to kick-start the domestic economy is on its inevitable way.

The new Democratic Party of Japan seems intent on shifting away from pouring concrete into roads, dams, ports and bridges to shore up the economy in favor of giving the money to consumers through subsidies and benefits, although bickering among ministers about how many billions of dollars it should splurge has delayed the package.

Link

Wow - is this the future for our bailout? We'll just bail our way out again. How many times has this already been done in Japan now?

[ZenGum]

Japan has its own problems, but I know some people who specialise in studying the Japanese economy and at least one insists that Japan is doing fine.

Their GDP is the same as it was 20 years ago. But since their population is also steady, their per-capita GDP is unchanged, and still very high. Unemployment is low, inflation is near zero, the vast majority of people are living comfortable lives ... what's the problem?

Adam Smith style economists demand permanent growth. In Smith's day (late 1700s) this made sense, because poverty was a great cause of human misery; poor food and water, bad housing, disease, infant mortality, etc. But once these problems have been addressed ... how much richer do we need to be? Why do we need permanent growth? Is, eg Japan, rich enough?

Another part of the problem (if there is one) in Japan is that they are pursuing extremely low interest rates - less than 1% - and have been for years. The idea is to make it easier to borrow and invest in new enterprises in Japan.

Millions of Japanese people have realised that they can borrow a big bucket of Yen at 1%, convert it into some foreign currency, and deposit it overseas and earn maybe 5%, thus skimming 4% of someone else's money. Australia and New Zealand are favourites for this "carry trade". Which is fine but it means a huge outflow of capital from Japan, which completely defeats the purpose of low interest rates, which was to make it easier to invest in Japan by making capital cheaper.

[classicman]

Scott Talbott, who represents some of the country's largest financial firms at Financial Services Roundtable, said banks are still lending, but they've gotten more wary of potential risk.
"You've seen an increase or a tightening of the credit standards," Talbott said. "So banks are cautious now about lending in terms of who our borrower is.
We're looking to make good, solid loans that can be repaid."

Link
What a concept!

[TheMercenary]

"Fat Cats", Obama last night on 60 minutes. That should help foster relations.

[glatt]

He was trying to mend fences with his supporters after disillusioning them by ramping up the war. Bash some bankers and the public will love you again.

[TheMercenary]

NPR said the very same thing this am. I tend to agree with them.

[xoxoxoBruce]

It's obvious that Wall Street is back to business as usual, max profit at the expense of anything and anyone. They need a good whuppin.

[classicman]

How the Subprime Scam Works

By Chip Parker, Jacksonville Bankruptcy Attorney

I have written a few articles about the crash and burn of the subprime lending market, but why am I so gleeful about the suffering of lenders, such as the recently-bankrupt New Century Financial Group? After all, the subprime lenders were heralded by our presidential administrations, both Republican and Democratic, as the broker of the middle-class American Dream. In reality, these lenders are breaking the American Dream for the middle class.

The subprime scam goes like this: Subprime lenders offer “teaser” interest rates that jump significantly after two years or so, known as a “reset.” Additionally, many loans allow for the payment of interest only and terms of up to 50 years. The idea is to suck the borrower in with a low monthly payment. These loans usually have high closing costs and a large pre-payment penalty. So, when the loan “resets” after a couple of years, the monthly payment will skyrocket, as much as 50%, forcing the borrower to refinance. However, the borrower rarely has the cash to pay the prepayment penalties or the closing costs. No worries, however. The mortgage company happily rolls these fees and penalties into the new adjustable rate mortgage with the “teaser” interest rate that resets in two years. Ultimately, these loans are designed to require the borrower to refinance every couple of years, handing over home equity to the bank.

At first, the new loan programs boosted home ownership to an all-time high, but the entire industry relied on ever-increasing home values. Much like a Ponzi scheme, as soon as the bottom fell out of the housing market, home equity disappeared altogether. This means that these subprime lenders are no longer willing to roll the penalties and fees into a new mortgage. Without the ability to pay thousands of dollars out of pocket, most homeowners are realizing that they have bitten off more than they can chew. These homeowners cannot sell their homes in this housing market, and they cannot make the payments on their bloated mortgages. This “payment shock” is the reason that 60% of all foreclosures are subprime loans, even though they only account for 12.5% of all mortgages, and at least $300 billion in subprime adjustable-rate mortgages will reset this year to higher interest rates.

I recently had a bankruptcy consultation with a 14-year underwriter for the subprime mortgage industry who is sure that she will be out of a job by the end of summer. Like so many others, she was not even interested in keeping her house because her mortgage payments were unmanageable. She told me that, right around the new millennium, lenders “lost their minds.” “They completely forgot about the risk side of the equation. They were only interested big commissions,” she recalled.

Link

I just thought I'd share this persons opinion. You may take out of it what you will.

[ZenGum]

I was about to post a snarky "what, you only just figured this out?" type comment, but first I checked the link ... article seems to date from 2007/04/09. It is a good clear explanation though.

It must have sucked being able to see this coming and not being able to convince anyone about it.

The Wall Street Reform and Consumer Protection Act that the House passed last week addresses:

sub-prime lending - The bill outlaws many of the egregious and predatory industry practices that fueled the subprime lending boom and establishes a simple standard for all home loans: institutions must ensure that borrowers can repay the loans they are sold

ponzi schemes - the bill strengthens the SEC’s powers so that it can better protect investors from Madoff type frauds

derivatives - the bill regulates the over-the-counter derivatives marketplace, requiring all standardized swap transactions to be cleared and traded on an exchange

bail-outs - the bill requires big banks and other financial institutions (with $50 billion in assets) to foot the bill for any bailouts in the future. These institutions would pay assessments based on a company’s potential risk to the whole financial system if they were to fail.

consumer protections - the bill creates a new Consumer Financial Protection Agency to protect consumers and small businesses by ensuring that bank loans, mortgages, credit cards are fair, affordable, understandable, and transparent.

The House bill had ZERO republican votes. (link)

[xoxoxoBruce]

Color me skeptical.
No matter what kind of laws they pass, the crooks will find end-runs and loopholes. Or they'll dream up some new scam that's not covered by the laws, and off they go again. What needs to happen is a change of attitude, a change of culture, and I don't see that happening.

The only thing we can do is stop dealing with these piggies. But that's as likely to happen as us voting out piggies. We're truly fucked.

[TheMercenary]

All we do is trade one pen of piggies for another pen of piggies. Nothing ever changes. It is funny to see the piggies get defended as not really being piggies. Maybe they are sheep in piggie clothing.

[ZenGum]

This little piggy crashed the market
This little piggy lost his home
This little piggy had a bailout
This little piggy got a bonus
And this little piggy went wee wee wee all over the concept of individuals accepting the consequences of their own actions.