Sub-prime Bail Out
I have to agree, it is not quite fair. Someone should reduce my rate as well.
Subprime bailouts: Chump check
Responsible loan payers are crying foul about the breaks that delinquent borrowers are getting.
By Les Christie, CNNMoney.com staff writer
November 5 2007: 1:22 PM EST
NEW YORK (CNNMoney.com) -- Not everyone is happy about mortgage lenders' latest efforts to help troubled borrowers.
Take Teresa Nelson. Instead of going for an adjustable rate mortgage with its lure of low initial rates, she opted for the security of a 30-year fixed at 7.10 percent for a house she bought in Pinellas Park, Fla. in December, 2005.
"I was well aware of what an ARM meant, and was staying far away from those snake-oil pipe-dream promises," Nelson said. "I also wasn't shopping for a short-term, big payoff investment - I was looking for my home, until I retire."
But many delinquent subprime borrowers who went for low teaser rates that shot up to unaffordable levels are now paying lower rates than Nelson as part of a new round of foreclosure prevention packages. And she doesn't like it.
For example, one subprime borrower had a riskier hybrid adjustable rate mortgage (ARM) with a rate of just under 7 percent that was going to reset in December to 10.5 percent. But last month, as part of a new bailout plan from Countrywide Financial, the lender gave him a rate reduction to 5 percent on his loan, saving him hundreds of dollars a month.
Nelson feels cheated and has little sympathy for people who she believes weren't as careful as she was. "Everybody was seeing dollar signs," she said, "and let their greed get the better of them. So, no. No bail-out, no assistance with my tax dollars. Not one red cent."
The rest:
http://money.cnn.com/2007/11/01/real_estate/Countrywide_bail_out_bashers/index.htm?postversion=2007110513I tend to agree. Screw them. They chose this path.
But what happens to the economy on the whole and to my job specifically if all these people go broke?
If you signed a contract for a fixed rate mortgage and the mortgage company lowered your rate, wouldn't that be breach of contract? (Not that anyone would sue them for it.)
If you signed a contract for a fixed rate mortgage and the mortgage company lowered your rate, wouldn't that be breach of contract? (Not that anyone would sue them for it.)
Unless, perhaps, you could get out of your mortgage and keep your house in that case . . .
Those who don't pay their bills have always gotten the sweet deal. Lenders when faced with receiving $0 or 50-80% of what the contract entitles them to will always choose the option that gives them at least something. It isn't just your mortgage either.
If you owe $5000 at 9% and you make your payments every month right on time, try calling the company and ask them if you can get a break on the rate. The answer will be no. Miss a payment and your rate will jump to somewhere around 24%. If you call and ask them to return you to your old rate and you'll get laughed at.
Now skip your payments for 7 months. You will have compounded 24% interest on that $5000 + late payments every month. BUT if you call that company and explain you can't afford to pay that, most of them will offer to wave all late charges, drop your rate down to 5-6%, and bring your account current if you can make some sort of a payment today and agree to make your payments from that point on.
If that doesn't seem like a good enough deal don't pay them for 13 months. By that time they will have sold the paper to an agency at a discount. Talk to the agency and offer to pay the account in full - for a discount. They will offer you somewhere in the area of 30-40% discount just to get something out of you. The longer you wait, the lower it goes.
So if we go back to the start, you used $5000 of someone else's money. You can make all the payments and maintain a positive credit score, probably paying well over $7000 to pay it off, by the time it is all paid off. Or you can sacrifice a few points on your credit score and pay them $2-3000 in a year or so. That's the way the cookie crumbles.
The point is the lenders aren't "helping" the borrowers, they are trying to salvage their own finances by preventing the mortgages from going into default, which effects the lender's own credit rating and ability to conduct business. Poor, poor business decisions over the last 6 years forced this issue.
Nonetheless, Fed watchers should resist the tendency to put all events into a simple or a morally plausible narrative. Monetary policy is a largely technical subject, and its ups and downs don’t usually fit into the kinds of emotion-laden stories that human beings apply to daily life. The “us versus them” tag registers in human memory, but monetary policy is not always or even usually about moral issues. As Freud famously noted, sometimes a cigar is just a cigar.
Financial market news, which is by nature unpredictable, suffers from distortion when it is crammed into the form of a simple story. Unlike most well-structured narratives, the zigs and zags of daily profit and loss defy simple categorization in terms of moral precepts.
In the case of subprime mortgages, many investors did not foresee the risk of collateralized debt securities. In response to this crisis, the Fed has been trying to keep a steady hand and prevent a credit crunch. We don’t yet know how well the Fed has succeeded, or how well it could have done in the first place. And the storm has not yet fully passed.
Of course, such an account of recent financial history sounds mundane and offers less human conflict. It’s less like the stories that people have gossiped about for thousands of years and thus will have less traction, even if it is a better guide to monetary policy issues.
That's from this
MR post by Tyler Cowen.
Basically your moral outrage doesn't matter to policy-makers. At least that's what I get from "smart people."
So if we go back to the start, you used $5000 of someone else's money. You can make all the payments and maintain a positive credit score, probably paying well over $7000 to pay it off, by the time it is all paid off. Or you can sacrifice a few points on your credit score and pay them $2-3000 in a year or so. That's the way the cookie crumbles.
Sure, but
next time, they won't be able to get a loan at all, whereas I still will, right? That's what I tell myself to keep from weeping, anyway.
you'd be surprised how often someone can do that and still get a loan. and the people who start the process with intent get quite a few credit lines set up before they quit paying.
i worked with a guy who had replayed the whole process on a very very grand scale every 7-9 years since about 1970. lived in a big big beautiful house, drove fine german automobiles, had tons of cash, and every toy you could think of and the only things he actually paid for were the house and cars.
do well with small credit lines. get bigger credit lines. keep balances low, get more and bigger credit lines, start taking cash out of a couple of the credit lines in small increments, make minimum monthly payments. keep pulling cash out start using credit for living expenses, stockpile cash. low low balances in checking accounts. big home safe. get new car. keep making payments on everything. get new house. next year start making payments for each credit line using another credit line. now you've gone a year without spending actual money, only credit. miss a payment. send in enough to catch up. miss another payment, catch up again. get offers for consolidation loans. accept biggest one, who cares about interest rate? no intent to pay. DON"T close paid off credit cards, pull out more cash make minimum payments on everything. do this until debt to income ration is too far out of whack to qualify for anymore loans, then start missing payments. wait 6 months, file BK.
get $300 credit card the next day. start process all over again. takes 6-9 years start to finish. New BK laws mean that the same people will keep doing this, but instead of BK they will contact creditors for reduced settlement. Average schmoes who got in over their heads before life smacked them a nasty one are the only ones hurt by new BK laws.
BTW - this guy made in excess of $200,000/year and was a complete douche.
But what happens to the economy on the whole and to my job specifically if all these people go broke?
Let them go broke. We absolutely need a total reset in this market and have for years, now. The longer we keep this crap afloat, the farther we'll have to fall in the end.
what exactly do you see as a "total reset" and what are the benefits/consequences?
what exactly do you see as a "total reset" and what are the benefits/consequences?
Sane loans and prices that aren't artificially inflated to astronomically high prices by easy/free money. A normal growth in real estate and calm reactions on behalf of all parties -- lenders, buyers, and sellers. No more "free money" mania if enough investors learn their lesson.
If the government bails loans out, we'll see this problem extended and the inevitable could possibly be more damaging. We have years of ARM resets remaining before this is all over and done with, so any bailout that happens now is a drop in the bucket of a much larger problem, anyways. Besides, banks aren't going to take the fall and lawmakers will see to that.
Consequences include
lots of burned out vehicles. Strange.
sorry to burst your bubble but the banks have taken a major hit when you look at since the first of the year you have had over 150 banks implode.
educate your self on implode.com
its hell of alot bigger problem than what the average person thinks.
what is there? i'm not getting anything? but you mean 150 mortgage companies, not banks right?
I just don't buy the idea that we need a taxpayer bail out for many of these people or lenders. The lenders need to fold and get out of the business, the people who bit off more than they could chew should pay up. Anyone with any sense would avoid ARM's like the plague. Sure there are some people who need a bit of help or let them reapply, but don't just drop their rates to 5% out of the blue, that is not fair to people who have a fixed rate percent.
The societal effects of largescale repossessions on defaulted mortgates also need to be considered.
I recall during the recession in the UK in the 1990s, the housing market ran into serious trouble and so did the employment situation. Large numbers of people defaulted on mortgages and had their homes repossessed and put back onto the market at the slumped price that had become the norm, or were under so much strain to pay what they could not afford that they put the keys through the door and walked away. The result of that was a sharp increase in the number of people (often families) who became technically homeless. A whole culture of 'bed and breakfast' families began.
Now, on the one hand those people could possibly be seen as less culpable than the sub-prime borrowers as theirs was the result of a market slump rather than poor finance decisions. On the other hand, the societal effects of sharp, sudden rises in homeless and temporarily housed familes (often involving the temporary or permanent break up of those families) is not lessened by the culpability of the borrowers.
1) i'm not in favor of bailouts. for anyone - companies or individuals.
2) ARMs are not to blame, they are a valid and useful loan when used correctly.
3) Dana this is similar to the UK situation as this IS a market slump, caused by the inevitable increase of mortgage rates from historic lows, which in turn causes home values to stall and pull back, preventing people from making the "quick buck" they thought they'd get in an ever increasing real estate market. most of these people bought these homes they can't hold onto using the "bigger fool" logic. they would hold onto the home until a bigger fool came along and paid them a huge gain and THEN they'd buy a house they could really afford. dummies. greedy dummies.
*nods* okay. I agree.
I've just watched an interesting report on Newsnight (finished about five minutes ago). We are having our own 'credit crunch' at the moment. Northern Rock was the first of our major mortgage lenders to go into serious and newsworthy crisis. Lloyd's Bank was in talks to offer them a hand, the Treasury and Bank of England both intervened to prevent this. Many companies are currently paying out more in interest than they can afford, so with a credit crunch we'll see joblosses and closures, and house prices are going to fall.
Traditional economic sense says you don't intervene to help individual banks or people. But, there are also economists arguing that this only makes sense if dealing with a local problem. The credit crunch being international can, if allowed to continue without those confidence raising measures at a local level, throw the whole economy into serious recession. The argument seems to be that the dangers to the economy of not intervening are significantly more dangerous than the dangers of not.
well, the gray beards in my business always say, "trees don't grow to the sky, do they?" yeah, i know, dumb saying, but the point is that the economy is a cycle, it has peaks and troughs and no one knows exactly what will be the catalyst for each or the day they'll start. but my money, says you'd be a fool not to have some pretty serious defensive measures in place if you are planning to draw income from your investments in the next 10 years.
http://ml-implode.com/
that includes mortgage co. and banks such as bank of america whole sale
Don't foreclose, or drop the rate, lengthen the loan.
This topic has two different aspects. First are the many homeowners who carry a sub-prime loan and were 'surprised' by their new interest rates; be that a teaser rate loan or other Adjustable Rate Mortgages.
Second are the various financial organizations who invested in these mortgages using various instruments such as SIVs, conduits, bonds, etc.
Many in the first aspect may have been foolish. Of them, some must indeed be punished by bankruptcy. But also may have been many banks that took those mortgages and are now stuck with homes worth even less. Or are they?
Whereas banks were once storage houses for mortgages; today, banks have become mortgage moving companies. Banks had less incentive to review an applicant's financial stability because the bank would bundle those mortgages into a bond. Sell the whole package off. Existing are many NINJA loans - "No Income, No Job Apparent".
Who would buy such risky investments? Welcome to a world where what you do today looks profitable today on spread sheets while risk can be ignored to only appear four and more years later on some future spread sheet. Many of these mortgages were sold to large investment houses such as hedge funds. According to bond rating firms such as Moody's and S&P500, these financial instruments had an AAA rating. After all, they were mortgages - and mortgages were always predictably stable investments. Few bothered to look inside; learn the details of these mortgages. Instead these mortgages were bundled in complex financial structures defined by 150 page complex legal and monetary agreements. Sure some would default. But few understood the time bomb implanted in these mortgages. Rather than study the product, too many 'geniuses' were too busy grasping the complex legal overhead. Few bothered to learn why so many banks (and mortgage companies) were ignoring the risk (i.e. Ninjas). Few bothered to instead look inside to learn details of those mortgages.
Many who bought these financial instruments expected even higher profits when interest rates increased. So many were even rewarded with bonuses. Four some years later, the losses fell upon the financial institutions. The guy who did not do his homework had profited already and may have been long gone. (Many of the corporate presidents responsible for the mess were fired with $200 million type severance payments.)
This second aspect is a story of major financial institutions now caught in a major liquidity crisis. Not a shortage of capital - a severe liquidity crisis. Well some, such as CountryWide Financial, took precautions. CountryWide hedged their risk by purchasing $hundreds of million in credit lines from major banks. IOW the liquidity crisis created by so many homeowner defaults moved through companies such as CountryWide Financial and ended up on the banks were underwriting these organizations and never expected the sudden demand for cash.
Other banks (such as Citigroup) attempted to become a full service institution. So they bought and held riskier mortgage packages since those (should) pay better in the long term while requiring no additional 'cash on hand'. This liquidity problem was supposed to be addressed by Basel 2. Riskier investments would have required banks to keep more 'cash on hand' for riskier investments. But Basel 2 never got instituted. Banks could reap higher profits for the same 'cash on hand' by purchasing riskier mortgages. According to their financial experts (and S&P 500, Moody's, etc), there was no higher risk. These were mortgages.
Not all banks did this. But more irresponsible organizations include Citigroup, Bank of America, and JP Morgan Chase did. These three banks just announced a 'slush fund' (it has many different names including MLEC) so that a bank can borrow. Remember, the sub-prime loan mess does not create a shortage of capital. All banks (including Britain’s Northern Rock) had sufficient capital. But with so many defaults, the banks needed some liquidity while liquefying other assets. Unfortunately for Northern Rock, the British version of a Fed may have accidentally created a run on that bank. A liquidity crisis - not a capital shortage - undermined that institution.
These three American banks want others to join. But why? European and other American banks were not so promiscuous. Why would they want to join a fund that underwrites other bean counters that do not do their job? It is their job to identify risk four and more years before that risk can appear on any spread sheet. Instead these promiscuous types created off-balance corporations to mask their risks even from stockholders.
Because Citigroup's was so negligent - only investing in these sub-prime loans based only on financial returns rather than on risk - then Citigroup may be broken up. Citigroup may be worth more in pieces than as the unit once created by Sandy Weil. Critics note that no financial institution has ever succeeded in creating a 'one stop for everything' store. That is what Citigroup tried to be. The sub-prime mess may be the "camel's straw".
Merrill Lynch was once one of Wall Street's most conservative and stable organizations. It was never a most profitable company; but always a benchmark of good safe investing. Their new executive started pushing for higher profits; take more risks. The strategy looked good. Merrill Lynch profits were better. So executives were well paid with bonuses based upon yesteryear's spread sheets. Never forget how economics works. The spread sheets report things that happened 4 and more years ago. Today's spread sheets are now reporting those ignored risks created by financial managers investing in these SIVs or conduits. Another reason why those investments looked good? They were carried in off-balance entities - similar to how Enron masked massive losses.
In theory, these off-balance entities were only profit centers that also required no 'on hand cash' to be maintained. In reality, these off-balance entities would only suck liquidity out of the company without warning - because off-balance entities need not appear on the company reports to stockholders. Money games that are legal? Just another example of mistakes made so many years ago never appeared on spread sheets until today. How many of those executives prospered with $millions in bonuses long before the spread sheets could actually report reality four and more years later?
Merrill Lynch suddenly *discovered* an $8billion loss. If the SEC is not investigating, then the ghost of Harvey Pitts remains in the George Jr administration. Speculators believe Merrill may have another $10billion loss coming. Yes the loss was created many years ago when genius financial experts did not bother to study the risks - did not even know the details inside those investment packages. But they so clearly understood the 150 page complex agreements attached to those financial instruments. Only today - many years later - are those bean counter oversights actually appearing on spread sheets.
Again, this is not a financial crisis - a massive shortage of capital such as in the 1920s. This is only a liquidity crisis. The Fed has made loans more available for these institutions. But ... welcome to what happens years later when these actions eventually appear in the economy.
Remember, the stock market crash of the late 1920 did not appear in the economy until 1933/4. Economics has a bad habit of taking revenge when people solve problems using money games. Providing too much easy money can create other problems. Sharp increase in inflation (if you did not notice prices have risen far higher than 'core inflation' numbers). Other problems could be higher precious metal (gold, copper, etc) prices. Dropping dollar. Higher oil prices. And if too much currency in other nations is in dollars, then a worldwide dumping of dollars which only makes those problems even worse again. Eventually Americans (and government Treasury) must sell off assets to pay for these problems. Which American companies must become foreign owned? How many more treasury bonds must the government sell (mortgage your future) to pay its bills?
[continues in next post]
[continued from previous post]
Does this all sound drastic? That is jumping to conclusions. All these things are happening or will happen. Just will not happen catastrophically. For example, whereas the dollar once bought one Euro, it may soon require $1.50 to buy a Euro. $100 per barrel oil? That is all but inevitable. $3+ gallon gasoline is no longer the worry. When gas was under $2, most never imagines $3 gasoline. Currently realistic is $4 gasoline due to many reasons including the quickly falling dollar. The government has been playing money games with debts. China has all but been financing "Mission Accomplished". Reducing taxes while spending wildly will come back years later when debts come due. And when those debts do not result in profits, also expect higher inflation.
So what can we expect? Clearly many organizations starting with major financial institutions must fire employees or sell off parts of America to foreign investors. Bear Stearns has already accepted massive Chinese investment. That is followed in the next decade by lower living standards. After all, when those profits start going to new overseas owners, well, who has less income?
Whereas government numbers mysteriously claim near zero inflation, well, the average lunch that once cost $5 when George Jr took office is now closing in on $10. Inflation, that must result from spending today without yet paying the bills, is coming. Taylor says interest rates should have been rising in 2003 to keep inflation in check. Instead we dropped interest rates - made easy money - keep the economy out of recession. We did the equivalent of ''ripping up the front lawn and reseeding it'. That created economic activity; makes higher GDP numbers. But when the profits do not appear years later and the debts come due - starting about now - four years later. If Taylor is correct, then expect the economy to punish for living too easy.
Has the sub-prime loan mess started the downfall? Was it just another example of money games to make the economy appear temporarily better? Something like 70% of the CA home loans were sub-prime. Using the housing market to make the economy appear healthier, does economics start taking revenge four years later?
This is not even a primer. More like snap shots of the many valleys and mountains in a country called ‘Sub-prime Crisis’. Appreciate how widespread a problem well beyond homeowners. Will it create a recession? No. Is it a precursor to recession? We will only know how much damage to the economy has occurred during George Jr’s tenure too many years from now. Has a major economic catastrophe been averted? I believe so. Apparently the majority of bad loans have conjugated in some badly managed institutions where bean counters only saw profits and completely ignored all risks.
One final note. Equifax claim they are not as risk. Equifax says they have something unique - risk analysis programs that do more than just measure default. It also measures liquidity risks. S&P, Moody’s, et al are said to have started creating similar products. These bond rating firms claim their ratings ignore time factors (sounds almost like admitting crime without being guilty). IOW a few defaults every year in an instrument is expected – still gets a high rating. But many defaults simultaneously is possible with higher rated bonds. That is a completely different risk problem.
tw, bottom line is, don't make me pay for your piss poor decision making, we have enough of that already in the rest of our lives.
However, merc, some borrowers were ripped off, accepting loans that turned out to be ARMs when they had the credit to acquire fixed loans instead. I know of at least a couple of them from my neighborhood.
But those people also shouldn't have a hard time refinancing for a fixed-rate loan. They'll probably lose several hundred or even over a thousand in refinancing costs for their mistake, but if they could really afford their house in the first place, it shouldn't be the end of the world.
However, merc, some borrowers were ripped off, accepting loans that turned out to be ARMs when they had the credit to acquire fixed loans instead. I know of at least a couple of them from my neighborhood.
In that case I would support having the companies who made the loans take it in the shorts, but DO Not pass that on to everyone else.
something Rate Mortgage I'm guessing.
yes, that'd probably be right. Here we call them variable rate mortgages...which is what we have although we don't exactly have a mortgage as such. We have a line of credit...but it amounts to the same thing in the end.
What is an ARM?
ARM's:
A loan in which the interest rate is periodically adjusted, moving higher or lower in the same ratio as a preselected index, such as Treasury bill rates. ARM loans may include caps on interest rate increases in a given time period, and over the life of the loan, and may include limits on the frequency of interest rate adjustments. ARM loans generally have initial below market interest rates in return for the borrower sharing the risk that interest rates may rise during the life of the loan.
We call that initial low rate a honeymoon rate and it normally last for 1 to 2 years and then you're at normal variable rates.
I don't see why arm loans should be more subject to stupid borrowers. In fact, variable rate loans are far more popular in Oz than fixed. I suspect that will change shortly though with market trends the way they are. That is to say, I think if you could get a good fixed rate at the moment you'd be wise because interest rates here are steadily climbing and they're about to go through the roof (in my opinion).
That being said though, if you can't afford an extra $100 per month to cover higher interest rates, you shouldn't be taking out the loan. In fact it is my personal opinion tht if you're not paying off at least $500 more than the minimum of your loan per month, you should rethink what you're doing. It's stupid to take out a loan that you can only just afford.
I don't think the government or anyone else should be offering people bail out deals although I do see the consequences of not trying to prop up the market. The problem is, it is just a prop up, and sooner rather than later, the stilts are going to cave in, and the more bad risks you have sitting on them, the worse the crash is going to be.
I believe banks should immediately address their lending criteria and slowly tighten the belt on existing mortgages that're in default. In this way, the damage would be less than it will be in the future if banks continue to employ these delaying tactics.
We have 1 year, 2 year, 5 year and 7 year ARMs (I believe) where rates will stay steady for that initial "year" period and then the sky is the limit.
Wiki has a whole thing about them:
http://en.wikipedia.org/wiki/Adjustable_rate_mortgageThis economy is now full of adjustable rate whatevers.
These loans were important so that people who could never own a home could, instead, buy one. Or so that people could buy homes larger than they could afford. These groups cannot refinance because they could not afford the home in the first place. And now they cannot sell them because housing prices were significantly inflated by these ARMs and by Fed interest rates that were too low.
Meanwhile getting people into homes no matter what may be widespread. Fannie Mae and Sally Mae may be under investigation by the NY Attorney General.
Another looming problem resided in credit cards. In America, everyone is familiar with the Capital One credit card. Get everyone to transfer their credit card debts to Capital One with its low interest rates. Then when they miss anything completely unrelated to that Credit Card (ie the electric company bill is late), then that Credit Card interest rate increases massively. Now these debtors have seriously increasing debts.
GM is also guilty of playing such games. To maintain sales of poor products, GM simply tapped on of their remaining profit centers - GMAC - their financing company. By offering loans at zero percent, GMAC was simply giving free rebates on grossly overpriced GM cars. When do those losses appear? Four and more years later. Today GM admitted that GMAC is no longer a profit center. Duh-h-h-h.
GM was mortgaging GMAC on a hope that GM profits from cars would return. Maybe if car guys were designing their cars. Now GMAC is no longer a profit center.
GM was holding back on massive losses in a hope that GM would be able to write those losses off on those future profits. Well those not lying to themselves should have seen products not be profitable. GM had to finally concede to those losses - could no longer play spread sheet games to mask those losses. What surprised analysts are how much larger those losses are. Another money game exposed - along with these Adjustable Rate Mortgages and the looming credit card crisis.
So I try to look at news like this and think about how it applies to me.
I've been mulling over the idea of buying a new digital tv set. Most consumer electronics come down in price over time, so I expected that if I am patient, and hold off as long as possible, I'll be able to get a medium sized high-def digital TV for a fair price.
BUT, if the dollar is falling, and will continue to fall, should I grab a new TV now? Maybe the future exchange rate will be so unfavorable in a year or two that I won't be able to afford a new TV.
Thoughts?
buy it with today's dollars but pay it back with the value of future dollars. 0% financing.
I've been mulling over the idea of buying a new digital tv set. Most consumer electronics come down in price over time, so I expected that if I am patient, and hold off as long as possible, I'll be able to get a medium sized high-def digital TV for a fair price.
Prices on digital TVs too a sharp dive this past year. Many were selling TVs at slim profits - some were being sold at losses last Christmas. Prices are not likely to go much lower for the next few years. You will need a new tech TV by Feb 2009.
However, with the threat of recession looming, will that $600 TV be a cost burden? This is no time to have credit card debts.
recessionary periods help those with fixed income sources (teachers, salaried people) play catch up with those that have variable or cyclical income. (sales, services)
credit cards are excellent tools in the hands of disciplined individual. the fact that he hasn't already purchased it on a credit card and has given future value consideration would indicate a disciplined individual.
You will need a new tech TV by Feb 2009.
~snip
There will be converter boxes for non-digital TVs.
There will be converter boxes for non-digital TVs.
So they say. I haven't seen any on the market yet, and I've looked (a little.)
However, with the threat of recession looming, will that $600 TV be a cost burden? This is no time to have credit card debts.
True. I wouldn't go into debt to get a stupid tv, but I would be dipping into savings. I can afford it, but part of me recoils at the idea of spending that much (more like $800) on a tv.
they'll make them available. they aren't stupid enough to think we'll all just pony up for the new tech, when some kid will sit in his mom's basement and figure out how to make a box and start selling them on the street. they'll want the income from the converters that will be made either legally or illegally.
There will be converter boxes for non-digital TVs.
Converters were also defined almost 10 years ago when all this was required and when conventional (VHF) TV was slated to be turned off in 2006. Converter boxes were supposed to be made available for $100 with government subsidies. However all this (and Zenith for which much of this was created to protect) are gone, missing, or not discussed.
Meanwhile, most of those HD TVs are a complete insult to me. Instead of receiving a true HD signal, they just widen the screen (make faces fatter) and promote "LOOK! IT’s a BIGger Screen!". No. A true HD picture means that when the Eagles are being taken apart in the Super Bowl, then you can see why on every play as Eagles receivers downfield are being embarrassed. Currently, the low resolution screens still on HD TVs only tunnel in the line of scrimmage. (Those not in N America will have to guess what was just written.)
See also the controversy between HD and Blu-Ray DVDs to appreciate how few facts actually get out to the public due to political correctness and the number of people who know only from what retailers tell them. "You cannot be trusted to know the truth." They get away with it because so many of us don't ask, "Why?" Why are those converter boxes not everywhere? What happened to the government subsidies?
Another question: why are TV receiver circuits so insensitive as to all but require Cable service? And why is this relavent to mortgages?
I have a solution for the TV...throw it away.
Returning to the topic: Bernanke (Federal Reserve Chairman), in testimony to a joint (Senate and House) committee, said that stagflation is back.
Stagflation was created when government was spending massively, government debts increases, oil prices rose to prices well in excess of $5 per gallon (in today's money), the dollar dropped massively, massive debts from Vietnam were coming due, jobs eventually were lost, GM, Ford, and Chrysler made cars so crappy that one always would not start every cold winter morning in the parking lot, mortgages were hard to obtain, the US 6th fleet at one point could not even put to sea due to fuel shortages, housing market crashed, gold rose to record dollars per oz., heavy machine operators would make best money driving construction equipment onto ships as so many American business were selling off capital equipment just to survive, copper prices increased by a factor of ten, accountants (bean counters) were in great demand while engineers (innovators) had trouble finding jobs, violent crimes increased (as anyone in Philadelphia what the lead news story has been most every night for the past two weeks), the third largest industrial base in the world (US overseas owned businesses) were being sold off completely to pay for America's debts, government was lying about environmental laws and enforcement, that light at the end of the tunnel was finally considered fiction (ie "Mission Accomplished"), and - how curious - the president was a crook AND a liar. Deja vue?
Bernanke has a problem. Core inflation numbers imply near zero inflation. However those numbers exclude things like energy (oil) and food. Two years ago, what $20 once bought in the grocery store now costs almost $30. But there is little inflation? Only according to the official government numbers. We know how honest this government (dominated by wacko extremists) is.
The Fed must raise interest rates to combat inflation? It cannot. According to Bernanke, a recession is a real possibility. So the Fed must lower interest rates? They already did that with prime rates as low as 1% when the threat of recession was less. Having lowered rates too low to make a 2003 economy look good, well, economic forces are now conspiring to take revenge for the easy money.
Nothing suggests stagflation will approach 1970s pain. But then how many here were 16 or older in the 70s? I suspect half in The Cellar have little grasp of anything but a Roaring 20s economy.
Bernanke’s dilemma: This economy has been in a slow destruct mode as America even entered a war that would only cost $2billion and it now created more anti-America uprisings even in S America. How many appreciate why this author has been so appalled for so long? How many know that tw was never even partially aggressive critical of politicians until George Jr came forward to lie routinely? Welcome to the George Jr economy which we will have to pay for in the next ten years.
In 2000, Bill Clinton left America with a $260billion surplus. George Jr quickly turned that surplus into a deficient that had increased to as much as $400 billion. As Cheney said, "Reagan proved that deficits don't matter." Welcome to what those who voted for George Jr were really voting for. This debt created when the economy was at its best - when surpluses are supposed to be created. No decent American has a kind thing to say about this scumbag president. Tw has never (UT, et al should confirm this) in what - 20 years - ever been anywhere near this critical of any leader.
Welcome to what may be the start of stagflation according to Fed Chairman Bernanke.
The role of the U.S. Government isn't to defend people who bought more house than they could afford. The markets take care of themselves. The government should not intervene. The more people who lose their houses, the more affordable houses become and others who act more responsibly and don't have as much money will be able to buy them at the lower price.
I don't see why responsible people should be taxed to pay for the irresponsibility of others and also don't see how the government should be involved at all.
When the government meddles in the markets, we have disaster. That is what caused the great depression in America. When markets are allowed to adjust naturally without intervention, we have normal cycles.
The markets take care of themselves.
Except that they don't. Government has always meddled in the market, it's just that it usually meddles on behalf of big business and lobby interests.
Unhampered Free-Markets ALWAYS take care of themselves and have never failed. Only when government involves itself do things fail. Anyone with even the slightest knowledge of economics knows this.
The invisible hand absolutely exists and absolutely works 100% of the time. The hard part is keeping government out of the markets. The more government involvement (especially in regulations) the worse off the economy, and the less freedom people have.
Socialism is always wrong.
The invisible hand absolutely exists and absolutely works 100% of the time.
I do not believe it has been truly tested, anymore than I believe communism has been truly tested. Even the most hands off gvernments aren't actually hands off. Rules and laws relating to trade are skewed in favour of a particular class and even in a predominately laissez faire government such as America's there are such things as trade protectionism, subsidies and corporate welfare.
I do not believe it has been truly tested, anymore than I believe communism has been truly tested. Even the most hands off gvernments aren't actually hands off. Rules and laws relating to trade are skewed in favour of a particular class and even in a predominately laissez faire government such as America's there are such things as trade protectionism, subsidies and corporate welfare.
I tend to agree with you on capitalism not being fully tested, but not communism. Communism was setup the way it is described by Marx, but it never lasts because it violates human nature. What is the motivation for one person to produce more than another when there is no more reward? People who do more naturally want more than the guy who does less.
History has proven many times over that the more a country embraces socialism or communism, the more likely that country is to collapse financially under its own weight and beg capitalists to bail them out. Communism always ends up being totalitarianism because an iron fist is required to force people to violate their own nature.
Socialism and communism require force to exist, while capitalism does not. In capitalism every person is a winner in every transaction because every transaction is voluntary and each person will do what is in their own best interest.
I have a dollar and I want an apple. You have an apple and you want a dollar. I buy your apple for a dollar. We both win. Some will claim I was ripped off for paying a whole dollar for an apple, but to me it was worth the price. Nobody forced me to give up my dollar for an apple.
If I had been walking in the desert for days and was starving and the guy sold me the apple for $100, I am still not a victim. The value of the apple rises the more I want it.
Communism was setup the way it is described by Marx, but it never lasts because it violates human nature.
I disagree. In fact the people attempting to 'set up' communism also disagreed...with each other. There are many ways of intepreting Marx, and the mensheviks and Bolsheviks each had their own analysis of how to go about creating a communist state. From the very start the project was riven with internal dissent and civil war. In such a climate, Strongmen flourish. Systems envisaged to promote democratic participation were in fact skewed to the needs of said Strongmen. Communism, as envisaged by Marx was never implemented.
Technically it can never be implemented 100% as envisioned by Marx because humans can't do it; only robots can because it violates our very nature. Capitalism on the other hand, could be and does not violate human nature.
Unhampered Free-Markets ALWAYS take care of themselves and have never failed. Only when government involves itself do things fail. Anyone with even the slightest knowledge of economics knows this.
I am not sure I would agree completely. The system where government is involved in the markets is actually an important aspect. Regulations which control how companies can and cannot act are in important factor in controlling fraud and abuse. It is not perfect but I think it is better. Take for example Enron. A number of new rules and regulations were developed to hold CEO's more responsible for the bottom lines reported to the shareholders and those that trade on the stock in the various exchanges. There are other examples I am sure. It is important that we go after crooked companies and hold them responsible, it is the responsiblity of Government to do that.
Technically it can never be implemented 100% as envisioned by Marx because humans can't do it; only robots can because it violates our very nature. Capitalism on the other hand, could be and does not violate human nature.
Again, I disagree. Communism doesn't sit well with our concept of what an advanced society is. There have been numerous cultures which have developed along broadly collectivist principles. Many of those cultures are cultures we deem to be anachronistic and undeveloped. But the people living within them are (or were) still humans and those cultures do not clash with their nature. Many such cultures have since been eroded through contact with our culture and our concepts of ownership, trade and the market. The reason communism appears to run contrary to human nature is that the kind of culture and sensibilities which 'won the race', so to speak, have not developed along broadly collectivist lines. But there were fits and starts of collectivism within the history and development of even these cultures.
There is nothing inherently natural about market forces, or inherently unnatural about collectivism or communism. We view such concepts from the perspective of people raised within one of those systems and as such we are viewing the one through the filter of the other.
There are only 2 choices.
1) Free-Market capitalism which does not require force to exist.
2) Everything else.
1) Free-Market capitalism which does not require force to exist.
However, since you can't prevent "force" from
existing, you can't implement capitalism in a "force-free" environment.
The only valid use of force is for defense. We either trade dollars or bullets. I prefer trading freely and peacefully. Will there be some who don't subscribe to this? Yes, but then using force against them is ok.
So it would take some force to exist.
Capitalism doesn't take force to exist. It only takes force to defend. Capitalism can exist without force. No other system can.
If it can't exist without being defended by force, then it requires force to exist.
There are only 2 choices.
1) Free-Market capitalism which does not require force to exist.
2) Everything else.
:) I am imagining Radar's childhood colouring books ... no colours, just black and white. And not one scribble over the lines. :)
Seriously:
Force is inherent in a capitalist system. Robbery is the most extreme form of capitalism. Either a system allows robbery (with force) or forbids it (by threat of punitive force). Some force is inescapable.
No market can exist without some kind of government intervention in the form of the regulatory environment that creates the conditions for the market to exist, such as banning fraud, stipulating accounting standards, and so on.
I acknowledge that you were denying the appropriateness of bailing out sub-prime borrowers, presumably with buckets of cash, which is a very different kind of intervention from this regulatory framework intervention. But there is a wide spectrum of possible interventions that fall in between (eg. cutting interest rates, injecting cash for liquidity, etc) and your (EDIT) zero intervention approach doesn't cope with this reality.
You say that markets always take care of themselves. Markets can be manipulated; they can swing wildly and irrationally, and real people get badly hurt by these swings.
Here, I think, is the root of our difference. Maybe markets do always take care of themselves.
I don't care about the welfare of the market per se. Markets don't have feelings, interests, needs, in anything but a metaphorical sense. They have no value in the giant moral or utilitarian calculation. They are only of interest insofar as they serve to advance human interests.
It doesn't matter if the market can take care of itself. I care about taking care of the people. And I mean all people, not just brokers or investors or foolish mortgagees.
BUT! I agree that most interventions, like price limits, quotas, subsidies, tariffs, and such, usually provide temporary relief at the cost of making the problem worse in the long term. Bite the bullet, get it over with.
I am also opposed to middle-class welfare. I am opposed to rewarding greed and foolishness (it will just encourage more). And I don't have a solution to the sub-prime crisis that won't involve a lot of people loosing homes they can't afford. This is very rough on them, but ... in this case ... I don't support a buckets-of-cash bailout.
That is pure bullshit.
Robbery has absolutely NOTHING to do with capitalism. Capitalism is the free and voluntary exchange of goods and/or money on a value-for-value basis.
Any form of crime (robbery, fraud, etc) is not capitalism.
Markets can EASILY exist without any kind of government regulations or intervention. In fact they thrive without such intervention.
If it can't exist without being defended by force, then it requires force to exist.
It can exist without being defended by force as long as force isn't used to intervene on the markets.
Capitalism = Freedom. Freedom is to be defended by force, but if there were no force, freedom and capitalism would still exist, while no form of socialism or communism could.
Markets can EASILY exist without any kind of government regulations or intervention. In fact they thrive without such intervention.
The stock markets could not exist without that regulation. To make it work - to establish rules so that trades are fair and equitable - only people trained in those laws and regulations can perform that trading. A free market as described would only subvert free market stock trading into a corrupt and avoided market. What makes stock markets so useful? They are safe and regulated places to conduct free market trading.
There is no way around some government regulations in all free markets.
I was watching 'world news' (a bit like the world series because it's all about one country) on the weekend and they had a segment about the effects of forclosures in Cleveland. There are 1000 repo homes in 1 zip code. The area is basically becoming a slum now because the empty houses are now home to crack houses and squatters or they're simply being defaced and pulled apart little bit by little bit.
This of course has meant that the people who have paid their mortgages now live in an area where the value of houses has slumped which in turn means their major asset is on the verge of becoming a liability.
While I was watching, the first thought that came to my mind was; where are all those people living now? What kind of stress is this causing in other neighbourhoods?
I got to thinking about this situation and thought of a way the government could step in but benefit all parties concerned, including themselves.
Rather than subsidise the mortgages, they should simply buy the house from the bank, then 'rent to buy' the house to the foreclosee on a long term deal (say 25 years). This benefits the community by not having empty houses prone to vandalism thus maintaining property values in the area. It gives the people somewhere to live with minimal disruption to children etc (which was a big concern from my perspective). It means the government has an asset which is also 'making money' for them. It means long term, the foreclosee either ends up owning the house anyway, or alternatively, the government can sell the house in the future when the market is in a more stable position.
Everyone wins.
Rather than subsidise the mortgages, they should simply buy the house from the bank, then 'rent to buy' the house to the foreclosee on a long term deal (say 25 years).
That is what banks (et al) do. They resell these homes to companies specializing in refurbishing and refinancing homes to new qualified buyers. The problem is that American incomes in those price categories have been falling for the past seven years (relative to inflation). Interest rates are rising. Economic downturn is a real possibility.
All that means there are not enough companies to move these homes off the banks hands fast enough. Furthermore, many of these defaults are to large financial institutions who are not setup to handle so much defaulted real estate.
The system is swamped with too many homes, and liquidity shortages. A problem made worse because the market was inventing liquidity where it did not exist with money games.
Those homes lie on a fault line; an earthquake only in that part of the economy. It will take years to resolve. That neighborhood is the risk everyone takes when buying a home.
Meanwhile, this same problem has long been ongoing in some areas such as Detroit. Your report only cited a different area. But the same problem has long existed.
Americans are spending 10% more per year than they are earning. As Cheney said, "Reagan proved deficits don't matter." Welcome to the reality of what has not mattered for many years now. It could be ignored for many years by playing money games such as sub-prime mortgages. Sooner or later, the economy takes revenge - takes back what it is due. The problem existed many years previous. So we played money games to ignore it. Sooner or later, we have to stop playing money games and acknowledge the economic problem created by too much money migrating up to the top 1% - and too many lower incoming falling for the past seven years.
In fact they thrive without such intervention.
...and unchecked they do it to the point of completely and dangerously exhausting resources in a mad frenzy and permit wild, uncontrolled fluctuations that lead to disastrous boom/bust cycles.
The more people who lose their houses, the more affordable houses become and others who act more responsibly and don't have as much money will be able to buy them at the lower price.
I absolutely do not want a government bailout, but some regulation in the loan industry would have prevented this mess from happening in the first place.
TW said: That is what banks (et al) do. They resell these homes to companies specializing in refurbishing and refinancing homes to new qualified buyers. The problem is that American incomes in those price categories have been falling for the past seven years (relative to inflation). Interest rates are rising. Economic downturn is a real possibility.
I said government. Not private industry. There's a huge difference there. Also, I didn't say refinance, I said 'rent to buy' which means the person has no ownership claim over the house until such time as they've paid the value of the mortgage off, say 25yrs. If they move out prior to that, then that's their own tough titty. They're viewed as tennants rather than owners.
There's a big difference between what I suggested and what is currently happening tw. That's why there's a problem.
As to the rest of your post, I'm aware of all that. I'm not sure why you felt the need to explain it all over again.
The stock markets could not exist without that regulation. To make it work - to establish rules so that trades are fair and equitable - only people trained in those laws and regulations can perform that trading. A free market as described would only subvert free market stock trading into a corrupt and avoided market. What makes stock markets so useful? They are safe and regulated places to conduct free market trading.
There is no way around some government regulations in all free markets.
The stock market...and ALL markets could easily exist and would thrive without any government intervention or regulation and would make sure that all trades were fair and equitable because they would be voluntary.
Without government involvement in markets, we'd still have laws against fraud, theft, endangering others, etc.
Free-markets do not lead to corruption or to criminal activity. Government regulations do lead to corruption and criminal activity especially when it comes to the markets.
...and unchecked they do it to the point of completely and dangerously exhausting resources in a mad frenzy and permit wild, uncontrolled fluctuations that lead to disastrous boom/bust cycles.
I absolutely do not want a government bailout, but some regulation in the loan industry would have prevented this mess from happening in the first place.
There is a ton of regulation in the loan industry and it didn't prevent this from happening because no amount of government regulation can prevent people from doing stupid things like buying more house than they can afford. The loan companies didn't do anything wrong. Let me repeat that...
THE LOAN COMPANIES DIDN'T DO ANYTHING WRONG!
They lent money to people who promised they would pay back loans and who said they understood that when the fed raises interest rates, their payments would rise. But greedy people bought houses they couldn't afford and flipped them or bought more of them without thinking that the bubble would eventually burst.
Government meddling in the markets is what created this problem. If we got rid of the unconstitutional federal reserve, they wouldn't control the money supply and we might have something to back up our money rather than the promises of government.
I said government. Not private industry. There's a huge difference there. Also, I didn't say refinance, I said 'rent to buy' which means the person has no ownership claim over the house until such time as they've paid the value of the mortgage off, say 25yrs. If they move out prior to that, then that's their own tough titty. They're viewed as tennants rather than owners.
There's a big difference between what I suggested and what is currently happening tw. That's why there's a problem.
As to the rest of your post, I'm aware of all that. I'm not sure why you felt the need to explain it all over again.
People like you are exactly what is wrong in America. They think we should look to government to solve every problem or social ill. They think government should be all things to all people. They think government should provide, food, shelter, clothing, charity, retirement, education, etc... when the federal government should not be doing anything other than protecting America from invasion, settling disputes among the states, and staying out of our daily lives.
Charity, education, retirement, food, shelter, clothing, etc. don't fit within the valid role of government at any level.
Well lucky I'm not an American isn't it? For both of us when there's people like you about.
The long term effects of leaving vast numbers of houses untenanted is obviously too much for you to consider with your close minded view of the world.
If you don't like the idea fine. Either suggest something alternative, or at the least point out the flaw, but for fucks sake, find some other way to express your point of view other than spewing your capitalist bullshit all over the place and making a mess for everyone else to clean up!
The houses won't be empty long. When the prices drop low enough, they will be bought. The time period in question is a period of months.
My view of the world is most certainly not closed-minded. It's wide, expansive, and accurate.
I have never spewed capitalist bullshit. I have espoused the virtues and the truth of capitalism. No part of anything I've said is bullshit.
But greedy people bought houses they couldn't afford and flipped them or bought more of them without thinking that the bubble would eventually burst.
...and pure, unrestricted capitalism would change this, how? I tend to think an unchecked market would be a lot worse and the fluctuations would be extremely violent, far reaching, and long lasting. The actions of the stupid and irresponsible will never change and aren't going to go away, regardless what market they're placed into.
If we got rid of the unconstitutional federal reserve, they wouldn't control the money supply and we might have something to back up our money rather than the promises of government.
...and go to what, gold? Tell me how we should go about that transition without the market being instantly, dangerously cornered.
...and pure, unrestricted capitalism would change this, how? I tend to think an unchecked market would be a lot worse and the fluctuations would be extremely violent, far reaching, and long lasting. The actions of the stupid and irresponsible will never change and aren't going to go away, regardless what market they're placed into.
The exact opposite is true. Without government meddling, corrections in the market wouldn't be huge like they are right now. The government tries to prevent corrections and eventually the dam bursts and the money floods out of the market. An unhampered, free-market capitalist market without government interference wouldn't let the pressure build that high. Changes, fluctuations, and corrections would be more slight and more frequent.
The actions of the stupid and irresponsible won't change. The actions of the government to stop people from making stupid decisions for themselves should. Those who make poor decisions should have to live with the consequences of those decisions. This is how we learn to make better choices and to choose our actions more wisely.
It also opens the door for others to benefit by being able to buy a house. Why should those who work hard, save their money, and think carefully about what they will do be forced to pay the bill of others who acted irresponsibly? When those people lose their houses...as they should...the others who saved and acted wisely can move in and buy a house at a more reasonable price.
It's nature. In order for the lion to eat, the gazelle who wanders from the group must die. It also teaches the others to stay close
...and go to what, gold? Tell me how we should go about that transition without the market being instantly, dangerously cornered.
It doesn't have to be gold. It can be any hard asset or commodity with a limited supply like Diamonds...Platinum...oil....etc.
Maybe the fact that the government needs to get involved proves there are more stupid people out there affecting the economy than you might think.
The stock market...and ALL markets could easily exist and would thrive without any government intervention or regulation and would make sure that all trades were fair and equitable because they would be voluntary.
Wow. Attitudes that underly Marxist socialism - from Radar. If Radar has posted accurately, then no stock market ever need exist. We are all honest and equal. We all treat one another with equality and impartiality every time. Stocks would be traded freely on any street without all that market regulation. That only possible if we all live according to principles that permit Marxist socialism.
Why do stock markets exist? Trading of stocks on the street, as in Radar's model, never works. Stocks need a controlled environment (NASDAQ, LSE, the Frankfort Exchange, etc) because stock exchanges only work in the safe and well defined environment of regulated exchanges. Radar says none of the world stock markets need exist. We don't need brokers. We don't need regulations and laws. We don't need all that bureacracy. The problem with this Radar world: stock markets exist because those standards, control and regulation are necessary. Without regulations of markets, then anarchy would reign.
There is a fine line between too much regulation and insufficient regulation. So we have numerous financial instruments with various types of regulation. But in every case, some regulation and laws are always required. No way around that imposed 'level playing field' to make free market economies work.
I said government. Not private industry. There's a huge difference there. Also, I didn't say refinance, I said 'rent to buy' which means the person has no ownership claim over the house until such time as they've paid the value of the mortgage off, say 25yrs.
That is exactly what tw said. It's a huge difference. Private industry does this; not government. If possible, then private industry is already doing it and doing it far better than any government can.
There are too many homes and not enough people to lease these homes. Appreciate the problem. Lower income people - where so many of these loans exist - have been living well beyond their means.
Is this problem that people are going homeless? For the most part - no. Too many homes are now in this mess; too much product and not enough consumers. A mess that remain ignored while more money games masked the problem. Too many people in debt for so long that it is even appearing on spread sheets many years later.
Don't fool yourself. Spread sheets only report what was happening many years ago. Should we now bring in government welfare to further mask this problem?
Ridiculous is an idea that government will solve a financial problem. Government was already doing that years ago with money games that only made these problems worse. When money games and excessively low interest rates were not enough, then private industry played more money games: sub-prime loans and complex financial instruments. Home equity loans - borrowing money on home prices that were inflated by those money games and sub-prime loans. Meanwhile, everyone ignored the factor that spread sheets cannot measure – risk. Too many homes, too many Americans (at this income level) with massive debts, and America that was spending recklessly at 10% more than incomes (which also means no savings). Aliantha wants government to magically solve all this?
Put homes up for massively reduced prices. Yes, private investors will buy then and rent them at lower leases. Few are willing to do this. Even at reduced prices, few are willing to risk more capital because, well, where is a market?
Aliantha suggests government to, again, fix this market? More damage? Take these homes away from finance companies under martial law? Fine. A government already deeply in debt, going $hundreds billions further into debt, rewarding the companies who only made this problem worse with welfare, and then become landlord of still vacant homes. At what point do we end up with more Bronx slums that take decades to solve? At what point do we turn neighborhoods into 'the projects'?
Problem is not homeless people. But if we do as Aliantha suggests, then economics takes revenge years later - making many more homeless people. The problem is too many houses built for people who never had incomes to support them. Problem agrevated by an economy where the rich are getting richers and everyone else have a lower income. Problem created by the same government policies that Aliantha would further expand? What financial problem will government solve with financial welfare?
What Aliantha recommends creates more inflation AND real estate dependent on government (rather than private industry) while still looking for tenants who just do not exist. Meantime, when does the actual problem get addressed?
Never forget why too many homes exist. To make a recessionary economy look good, government dumped money into the housing market using low interest rates, tax games, etc. Government made things worse. When that still was not enough, then finance companies mortgaged those people further with sub-prime loans. Mortgaged more homeowners with home equity loans as homes values were inflated by those money games. Eventually we ended up with too many homes, an economy fully in recession if not for money being dumped into housing, and now Americans who are even poorer.
It was the cover page of The Economist. A falling brick labeled housing prices.
Worse, add the threat of stagflation, in part, due to these money games. Make this worse by having government step in, dump more money into an economy already under threat of inflation, and create another 'housing market' money game?
This is what bankruptcy does. Solve problems at the source. Same thing saved Chrysler and Ford. Gerald Ford (according to the NY Post) told New York City to 'Drop Dead'. As a result, NYC eliminated and fixed their money games. Why? Threat of bankructcy was the only reason every problem was solved. Every one asked for government welfare and (thank goodness) did not get it. Threat of bankruptcy finally killed off money games.
Let economics take revenge on an economy that has been lying to itself for four and more years. Too many houses and not enough people with incomes to support those homes. The sooner economic pains are addressed, then the less that pain will be long term, AND the faster private industry can solve this liquidity crisis.
Maybe if America was not spending $2billion every month on "Mission Accomplished", then the economy might have funds to minimize this problem without creating more inflation and other money games. Even bridge maintenance is being reduced. Let's not forget the brunt of an inevitable $1+trillion outstanding debt to pay for "Mission Accomplished". We have yet to see the damage created by money games played even in 2002. "Reagan said deficits don't matter".
Deja vue Nam. Money games in the late 1960s and early 70s to coverup a financial disaster and a war that cost $1million per day (as Nixon lied about the war and its costs) meant stagflation in the late 70s, masssive reduction of American standards of living, and everything worse. How to avoid reliving history? People responsible for irresponsible money games - homeowners and financial firms - must suffer the consequences.
Aliantha wants government to magically solve all this?
It's not magic. It's simple economic sense.
Aliantha suggests government to, again, fix this market?
The government stands to profit in the long run.
At what point do we end up with more Bronx slums that take decades to solve? At what point do we turn neighborhoods into 'the projects'?
This is the situation already. Did you not read my earlier post? Do you not realize that this is the situation that is occuring already while people do nothing but blame the government and yet you don't want the government to fix it? So you just want someone to moan about but you don't want them to do anything proactive?
Never forget why too many homes exist.
If too many homes exist, there can not be inflated prices. Your statement in this paragraph is false.
Problem is not homeless people. But if we do as Aliantha suggests, then economics takes revenge years later - making many more homeless people. The problem is too many houses built for people who never had incomes to support them. Problem agrevated by an economy where the rich are getting richers and everyone else have a lower income. Problem created by the same government policies that Aliantha would further expand? What financial problem will government solve with financial welfare?
Again I ask, where are the thousands of people going who have had their houses repo'd? Are they moving into the already existing slums which in turn perpetuates the social problems already evident there?
I ask you, why would you not try to keep people in a better situation? If someone has to spend money one way or another, why not do so in a productive manner which will help all concerned.
If you leave a house untennanted for a year, you're losing $5k/annum straight up. Then there are the issues of vandalism. More dollars to spend. Neighbourhood values depreciating because there are too many houses vacant.
Yeah, I can see how people who borrow beyond their means are stupid and don't deserve a hand out, but they're your fellow citizens. They don't deserve to be kicked when they're down either.
If you wanted to send in a private company to do buy ups of these massive numbers of homes, fine. Go ahead, but remember if this happens, there is no chance of these people from poorer circumstances to close the gap.
If you want to preach about the gap between rich and poor widening tw, you should really think your argument over a bit more before you post it. You propose doing nothing? Letting the economy slump. Perhaps reach depression type lows just for the sake of saying 'fuck you Bush'?
Radar suggests doing nothing because those stupid people deserve what they got.
Neither of those suggestions seem to be logical to me. They seem highly emotional responses to an economic puzzle.
Wow. Attitudes that underly Marxist socialism - from Radar. If Radar has posted accurately, then no stock market ever need exist. We are all honest and equal. We all treat one another with equality and impartiality every time. Stocks would be traded freely on any street without all that market regulation. That only possible if we all live according to principles that permit Marxist socialism.
Why do stock markets exist? Trading of stocks on the street, as in Radar's model, never works. Stocks need a controlled environment (NASDAQ, LSE, the Frankfort Exchange, etc) because stock exchanges only work in the safe and well defined environment of regulated exchanges. Radar says none of the world stock markets need exist. We don't need brokers. We don't need regulations and laws. We don't need all that bureacracy. The problem with this Radar world: stock markets exist because those standards, control and regulation are necessary. Without regulations of markets, then anarchy would reign.
There is a fine line between too much regulation and insufficient regulation. So we have numerous financial instruments with various types of regulation. But in every case, some regulation and laws are always required. No way around that imposed 'level playing field' to make free market economies work.
You're taking a huge leap and claiming I've said things I didn't. I said markets could exist and thrive without any government regulation. Without regulations on these markets, anarchy would most certainly NOT ensue. To claim that without government regulations, the markets wouldn't be regulated privately is laughable. To claim the markets wouldn't be held to standards, including standards that require honesty in trading, is on the verge of retarded.
Markets would exist without any regulation at all. They would be organized, held to standards, and regulated privately. We would still have brokers, and traders, etc. because most people would feel more confident trading stocks with these people than with a guy trading stock certificates from the trunk of his car. What would the problem be with going to a store on the street to buy stocks? I don't see one.
Without government intervention the playing field is always level. It's government that makes things unfair and tilts the playing field. Government regulations allow politically influential businesses to gain an unfair advantage over new start-ups or prevents new businesses from starting up at all.
Again I ask, where are the thousands of people going who have had their houses repo'd? Are they moving into the already existing slums which in turn perpetuates the social problems already evident there?
They are moving into apartments. They aren't homeless and they haven't lost their jobs. They just can't afford their homes anymore.
I ask you, why would you not try to keep people in a better situation? If someone has to spend money one way or another, why not do so in a productive manner which will help all concerned.
I am trying to keep people in a better situation. A situation in which they have personal and economic freedom without the government meddling in our markets. A situation in which those who make poor economic decisions don't look to government to bail them out.
If you leave a house untennanted for a year, you're losing $5k/annum straight up. Then there are the issues of vandalism. More dollars to spend. Neighbourhood values depreciating because there are too many houses vacant.
The house isn't vacant for a year in most cases. In fact it's not vacant until the hose is already lost and repossessed by the bank. Then the bank sells the house and are willing to lose 5k to sell a house they may have already gotten 100k on. But this isn't an issue in America because houses do not stay vacant for a year. In fact they don't stay vacant for 6 months before they are sold.
Yeah, I can see how people who borrow beyond their means are stupid and don't deserve a hand out, but they're your fellow citizens. They don't deserve to be kicked when they're down either.
Expecting them to live with the consequences of their decisions without having their "fellow citizens" pay for it is not kicking them when they are down. When they lose their house, someone else will snap it up at a better price.
The house isn't vacant for a year in most cases. In fact it's not vacant until the hose is already lost and repossessed by the bank. Then the bank sells the house and are willing to lose 5k to sell a house they may have already gotten 100k on. But this isn't an issue in America because houses do not stay vacant for a year. In fact they don't stay vacant for 6 months before they are sold.
This is not what your news services (various) are reporting. It's also contrary to what some other posters have said in this thread. This is the main reason for the views I hold. A large proportion of untennanted houses is bad in anyone's books, regardless of whose fault it is.
The whole point is that if an economy is not growing - regardless of how slowly which of course is generally preferable to rapid growth - then it's slumping. If the economy slumps because of massive slumps in the housing industry, particularly the US economy, the whole world suffers.
This is the reason for my interest in this problem.
Ultimately, it's your country and you and your fellow citizens will do what you want without consideration for how those actions affect the rest of the world (seemingly), but people from other countries will definitely be affected by what is happening in your country right now.
If too many homes exist, there can not be inflated prices. Your statement in this paragraph is false.
Having run prices so high with low interest rates, sub-prime loans, and other money games; homes around here are selling for $30,000 less and are still too overpriced.
Welcome to the conundrum of why a liquidity crisis exists. Your logic assumes no liquidity crisis. Your post makes the same mistake that bond rating agencies made - measure risk only in terms of capital. Too many homes can exist AND prices remain inflated. Many cannot sell their home for what it is really worth. Why? Liquidity crisis. Please appreciate the difference between capital and liquidity. Appreciate why so many financial experts making $hundreds of thousands annually also did not grasp the concept. A problem that should have been obvious four years ago when this problem actually existed.
Numerous options exist for homeowners. Hold properties in hope prices might rise, or earn enough money by doing two jobs for five years to pay off their loans, or get enough money (liquidity) to eventually sell at a loss, or just suffer through bankruptcy, or ... numerous options. But the only acceptable options also must be painful for years. Emotion or empathy only makes reality worse.
No way around this reality: economics takes revenge when we solve money games with more money games, as you have advocated. That pain is good and necessary. Not in the short term. But the responsible person is only concerned about 10 years from now. How many obvious examples do you need - including NYC, Ford, and Chrysler? Or Baring, Northern Rock, AT&T, IBM, Apple Computer, Enron ... The music industry in denial for so many years needs some horrific threats of bankruptcy.
Almost nobody is going homeless. They are now living in two bedroom apartments or living in post WWII densities. They are suffering in 1000 or 1700 square foot homes. Good. Still living quite well but suffering a severe reduction in living standards because of their mismanagement.
What is the proactive action? Learn from history. As Gerald Ford is paraphrased to NYC - "Drop Dead". That is the proactive situation; the best solution. Anything else is classic bleeding heart liberalism that Urbane Guerrilla so criticizes AND actually rewards the wrong people. Who would prosper most from your solution? The rich financial houses that created this mess by playing money games so that their failures stayed off spread sheets for maybe four years. You want to reward them with government welfare?
Why were the seventies so bad? Rather than address the problem, we did bleeding heart solutions. Nixon used price controls. Gerald Ford even distributed campaign badges that said WIN. (Whip Inflation Now). Therefore stagflation only got worse. Everyone suffered even more. What did we do to finally fix the American economy? Interest rates went to 14% and 22%. Only then did the American factory worker stop getting poorer. How can this be? Raising interest rates on everyone that high make everyone's life miserable. Of course. We all suffered. Our economy had been playing money games to mask lies from top government and industry criminals. It took 20+% interest rates to create enough pain; finally fix the economy.
Welcome to what we knew was coming when some here instead mocked The Economist for what was obvious.
Best thing that can happen to those who were not fiscally responsible? Five tough financial years where household budgets are made daily. Anything less would have meant even destruction of Ford and Chrysler - everything sold to fiscally responsible foreigners. It takes something that vicious to educate even our so called financial geniuses who make big bucks by playing money games rather than doing things productive. They go by titles such as stock brokers, bond traders, and equity analysts.
It is only a liquidity crisis; not a capital crisis. Shame on anyone who treats it like an accident by recommending welfare. Like car crashes, this liquidity crisis is directly traceable to human brains that must witness or suffer pain before they decide to learn. That sometimes means five years working two or three jobs.
Bankruptcy threat must be that vicious to change mindsets. Would you rather wait for people to actually become homeless? This liquidity crisis is almost trivial; will be solved in only a few years IF we don't aggrevate it with corporate welfare. Aliantha, your solution would only be corporate welfare to those who created this problem by not doing their jobs. Your solution would mostly enrich those finance firms.
Well again, I wouldn't involve a finance company.
And with regard to market value of homes. The market sets the value. You may want $30000 more than someone is willing to pay for it, but if that's all people will pay, then that's what it's worth.
You're taking a huge leap and claiming I've said things I didn't. I said markets could exist and thrive without any government regulation. Without regulations on these markets, anarchy would most certainly NOT ensue. To claim that without government regulations, the markets wouldn't be regulated privately is laughable. To claim the markets wouldn't be held to standards, including standards that require honesty in trading, is on the verge of retarded.
What are toy industry benchmarks begging for? Government regulations. Standards so that their 'fly by night' peers must also protect kids from lead paint and date rape drugs. The most responsible American toy manufactures - those who voluntarily announced dangerous toys as soon as the problem was discovered (ie Mattel) want regulations to create a level and productive free market.
If stock markets could exist without regulations, then nobody needs a stock market. All trading would be on the street. Why do stock markets create so much trading and capital investment? To repeat what you avoid: because without those regulations, then stock trading will halt due to the anarchy. If what you are saying had any truth, then all stock markets would fail completely. Stock markets would have no purpose. Why do stock markets exist? Why do commodity exchanges exist? Because productive trading cannot exist without regulations - a standard, level, safe, and predictable trading floor (virtual or real). Anarchy (also called widespread criminal activity) would create near zero trading.
The only reason stock, bond, commodity, etc markets exist is because that is where the regulations exist and are enforced. Even the private markets demand certain government regulations so that their trading is secure, honest, and liquid.
Name one trading exchange that exists without government regulation? Smuggling? What happens when smuggling markets become legal - conform to laws? Trading increases. Everyone is wealthier. People stop getting shot down in the streets. Name that market that thrives better due to zero regulations? It does not exist. If you knew markets would be better with zero regulations, then why do you not list 100 of them? Because they do not exist. A certain amount of regulation always results in a more productive and profitable market.
Well again, I wouldn't involve a finance company.
But everything you have suggested can and must involve those finance companies. Who is the at the center of these problems? Who holds those defaulted properties? Who prosper most if these defaults are removed from their books? Everything you have posted is corporate welfare for the most irresponsible financial institutions.
And with regard to market value of homes. The market sets the value. You may want $30000 more than someone is willing to pay for it, but if that's all people will pay, then that's what it's worth.
I should not have to use the word again - liquidity.
My $200,000 home is now worth $100,000. But I cannot sell it for $100,000 since my mortgage is $150,000. I cannot pay my mortgage, cannot sell my house for market value, and my neighbors are in the same position. To sell my home would make me homeless. My home must sell for $150,000 because of a liquidity crisis. I have no choice. Either that or bankruptcy. The market value is only $100,000. But it cannot be sold at that price. Again. Liquidity crisis. Please stop using economic concepts (law of price and demand) that assume no liquidity crisis. Stop making the same assumptions that those big shot finance experts also made to create this problem.
Those simplistic economic rules of supply and demand are based in assumptions that do not exist here. Again, I keep using the word because your posts ignore its significance - liquidity.
But everything you have suggested can and must involve those finance companies. Who is the at the center of these problems? Who holds those defaulted properties? Who prosper most if these defaults are removed from their books? Everything you have posted is corporate welfare for the most irresponsible financial institutions. I should not have to use the word again - liquidity.
The gov buys the houses from the finance companies at their current market value (much lower than the going rate) and then sits on the asset while recieving 'rent' until such time as the 'tenant' leaves. Then the house is either sold at a profit, or re-rented.
It's very simple really, and creates a lot of jobs in the process.
My $200,000 home is now worth $100,000. But I cannot sell it for $100,000 since my mortgage is $150,000. I cannot pay my mortgage, cannot sell my house for market value, and my neighbors are in the same position. To sell my home would make me homeless. My home must sell for $150,000 because of a liquidity crisis. I have no choice. Either that or bankruptcy. The market value is only $100,000. But it cannot be sold at that price. Again. Liquidity crisis. Please stop using economic concepts (law of price and demand) that assume no liquidity crisis. Stop making the same assumptions that those big shot finance experts also made to create this problem.
Those simplistic economic rules of supply and demand are based in assumptions that do not exist here. Again, I keep using the word because your posts ignore its significance - liquidity.
You shouldn't have been stupid enough to buy a house that you couldn't afford. Shame on you.
Shame is all well and good but it doesn't stop people being made homeless.
I couldn't give a rats behind for who's at fault. What concerns me is the social cost of largescale repossessions.
Yesterday morning I visited a constituent. Her husband was laid off work. When you are in rented accomodation and unemployed the benefits system will assist you with rent. If you own your house, however, the benefits system will not assist you to maintain your asset. They put the house on the market but the recent slump in our area means they were not able to sell. They were also not able to keep up with the mortgage payments and on the 1st of this month their house was repossessed and they were evicted. Now this woman, her husband, their 13 year old son and 17 year old daughter are all living at a friend's house. It's a one bedroom terrace, in which lives their friend, her partner and a teenage son on the sofa. There are now seven people living in a one bedroom house.
They keep trying to bid for association (ex-council) housing on the open letting system...but when more than one person bids, the winner is decided by points...points which increase with length of time on the list. This family stand no chance of getting a house through that system for about 6 months. Though the benefits system will assist with rent, they do not cover moving expenses, downpayments and deposits. Since pretty much all their meagre savings went on trying to stave off the repossession of their home, they cannot pay those costs and are therefore unable to take on a private tenancy. They've been offered hostel places, which would break up the family and have them living in different towns. Their son would have a journey of several miles to get to school.
The husband has worked his whole life, since the age of 16. She used to work but was forced into inactivity by ill-health.
It could be argued that they bought too much house, given the lack of fall-back should the worst occur. They had a three bedroom house in a cheap part of town. Not exactly greedy.
Again, I don't really care about the moral dimension of credit. All I care about is that there are seven people living in a one bedroom house, and a family in crisis because the raft they built wasn't strong enough to weather the storm.
My $200,000 home is now worth $100,000. But I cannot sell it for $100,000 since my mortgage is $150,000.
And yet I live a half-hour away and my $200K home mortgaged for $210K has risen in value to $300K in the last 3 years.
And the only way I could afford to stay here was through a crappy high-interest ARM.
I am very thankful they decided to loan me money. Of course before they did they sent out their guy to look at my place and my neighborhood and put a value on it.
You shouldn't have been stupid enough to buy a house that you couldn't afford. Shame on you.
This is correct IMO. The price paid every month didn't change. The value of the house did, but this is what happens, and a house is a long-term investment.
What are toy industry benchmarks begging for? Government regulations. Standards so that their 'fly by night' peers must also protect kids from lead paint and date rape drugs. The most responsible American toy manufactures - those who voluntarily announced dangerous toys as soon as the problem was discovered (ie Mattel) want regulations to create a level and productive free market.
The toy industry does a very good job at regulating itself. They VOLUNTARILY recall toys that do not meet their high standards. Mattel is a great company and is certainly not responsible when people in China don't stick to the standards they've laid out, but they immediately recalled toys and took a hit on their reputation. Government regulatiosn don't give "confidence". Also, claims of "date rape" drugs are false. GHB is not a date rape drug. It's a party drug used by ravers. From what I understand these toys didn't even have GHB on them, they had another chemical that metabolized into GHB when inside the human body.
If stock markets could exist without regulations, then nobody needs a stock market.
That is 100% False.
All trading would be on the street.
Again, entirely false. Most people don't want to buy or sell stock with a guy working from the trunk of his car. They want to work with reputable businesses.
Why do stock markets create so much trading and capital investment? To repeat what you avoid: because without those regulations, then stock trading will halt due to the anarchy.
That is an outright lie. Without government regulations stifling business, the stock markets would continue to exist, see triple their current trading volume, and would have much greater returns on investments.
If what you are saying had any truth, then all stock markets would fail completely. Stock markets would have no purpose. Why do stock markets exist? Why do commodity exchanges exist? Because productive trading cannot exist without regulations - a standard, level, safe, and predictable trading floor (virtual or real). Anarchy (also called widespread criminal activity) would create near zero trading.
Why do farmer's markets exist? To have a central place where people can buy vegetables from many farms. Stock markets exist so investors have a single place where they can buy or sell stocks from various companies. These would still exist. Trading would easily continue without any government regulations. The trading floor would be MORE predictable, safe, level, and held to better standards without government involvement. Government regulations don't prevent criminal activity, they promote it.
The only reason stock, bond, commodity, etc markets exist is because that is where the regulations exist and are enforced. Even the private markets demand certain government regulations so that their trading is secure, honest, and liquid.
You're batting a thousand. You are wrong again. You may want to read the writings of famous economists
(Several have won the Nobel prize in economists) like Robert J. Barro, Walter Block, James Buchanan, Donald J. Boudreaux, Richard M. Ebeling, David Friedman, Milton Friedman, Friedrich Hayek, Robert Higgs, Israel Kirzner, Ludwig von Mises, Murray N. Rothbard, Mark Skousen, Thomas Sowell, Vernon Smith, Mark Thornton, Richard Timberlake, and Walter Williams. Perhaps then you wouldn't be so clueless when it comes to economics.
Name one trading exchange that exists without government regulation?
Farmer's Markets, Computer Fairs, Swap Meets, etc.
Also, remember that not having government regulations is not the same as being unregulated. Self-regulation in the markets is what is called for. Government regulations CREATE uncertainty, unfairness, etc. in the markets.
My $200,000 home is now worth $100,000. But I cannot sell it for $100,000 since my mortgage is $150,000. I cannot pay my mortgage, cannot sell my house for market value, and my neighbors are in the same position. To sell my home would make me homeless.
This would not make you homeless. You would do a "short sale" and work out a deal with the bank. They may allow you to sell your home for 100k and take the 50k loss. They may want you to pay them 20k and then allow you to sell the house at 150k.
Shame is all well and good but it doesn't stop people being made homeless.
I couldn't give a rats behind for who's at fault. What concerns me is the social cost of largescale repossessions.
Yesterday morning I visited a constituent. Her husband was laid off work. When you are in rented accomodation and unemployed the benefits system will assist you with rent. If you own your house, however, the benefits system will not assist you to maintain your asset. They put the house on the market but the recent slump in our area means they were not able to sell. They were also not able to keep up with the mortgage payments and on the 1st of this month their house was repossessed and they were evicted. Now this woman, her husband, their 13 year old son and 17 year old daughter are all living at a friend's house. It's a one bedroom terrace, in which lives their friend, her partner and a teenage son on the sofa. There are now seven people living in a one bedroom house.
They keep trying to bid for association (ex-council) housing on the open letting system...but when more than one person bids, the winner is decided by points...points which increase with length of time on the list. This family stand no chance of getting a house through that system for about 6 months. Though the benefits system will assist with rent, they do not cover moving expenses, downpayments and deposits. Since pretty much all their meagre savings went on trying to stave off the repossession of their home, they cannot pay those costs and are therefore unable to take on a private tenancy. They've been offered hostel places, which would break up the family and have them living in different towns. Their son would have a journey of several miles to get to school.
The husband has worked his whole life, since the age of 16. She used to work but was forced into inactivity by ill-health.
It could be argued that they bought too much house, given the lack of fall-back should the worst occur. They had a three bedroom house in a cheap part of town. Not exactly greedy.
Again, I don't really care about the moral dimension of credit. All I care about is that there are seven people living in a one bedroom house, and a family in crisis because the raft they built wasn't strong enough to weather the storm.
Is there a housing crisis in the UK also Dana? Are you having similar issues with mortgage companies as the US?
BTW, I completely agree with you on all points you've made above. My shame on you comment was simply taking tw at his own words for the sake of continuity. I think I've argued my point fairly clearly in the last few pages.
I don't think it could yet be classed as a crisis. We are having some problems though. Slow down is at different rates in different parts of the country, but where I am people are taking much longer to sell their houses and if you have an apartment for saler you've a snowball's chance in hell of selling in some parts of town.
The people above were probably not part of the sub-prime problems. For them it was just the economic winds that took the main breadwinner out of work.
Interesting.
In the part of the country I live in, we're in the middle of a housing crisis for the simple fact that there really are not enough houses to go around, even though the construction industry has been booming over the last decade. It's really become somewhat of a self fullfilling prophesy in that when it started, people started moving here for work, and needed houses which had to be built, so more people came...more houses required...more labour etc etc. The problem is, now that the boom is at it's peak, the value of properties is incredibly high. In the last 18 months since we bought our home, the value has increased not 5% which would be good, and not 10% either. It has increased by nearly 50%! This of course is good for us in so far as being able to 'get extra credit' if we wanted it - along with now having a valuable asset, but it would be foolish to do so because it's going to end because of all the other people who 'get extra credit' because they can. The bubble is going to burst and there's going to be a lot of people living in houses they can't afford. On top of that, rents are over inflated simply because prospective tennants are offering to pay more for places than they're worth (in comparison to other states and historical prices) which of course leaves out the lower income earners who're then suckered into a 100% mortgage (they'll even be loaned more than 100% sometimes) which there's no way they'll pay off before the prices are deflated in say 10yrs time (maybe less).
The only benefit we have in Australia is the amount of natural resources we can pillage from our land. The mining industry (always a good source of cash for unskilled labour and tradesmen) is of course booming also which in turn gives people more cash than they'd otherwise have had. We as a separate economy here can probably support ourselves through a large market slump because of this boom in mining, but it wont sustain us forever and eventually things will topple here also.
Mmm. *nods* sounds insecure. In terms of having enough housing, we have a serious shortage of 'affordable housing' as it's usually termed. The soaring house prices over the last few years have made it very difficult for first timers to get onto the housing ladder. Developers are mainly building for the high end market, gentrifying areas that previously had fairly low house prices. Councils are responsible for ensuring that an appropriate mix of housing is developed within their borough, done through regulations on large scale developments (if you're building more than x number of houses you have to include within that 20% 'affordable housing', or some similar stricture). But, not all councils push that enough and there is plenty of room in interpretation of the term 'affordable'.
Currently in my borough, there are about 2-3000 people on waiting lists for housing association lets and the like. Bout half of them are of a socio-economic status that ten years ago would have had them on the housing ladder by now. So we have several thousand people who cannot find permanent homes, whilst at the same time we have over developed areas with houses and flats (especially flats) standing empty and unsold.
The gov buys the houses from the finance companies at their current market value (much lower than the going rate) and then sits on the asset while recieving 'rent' until such time as the 'tenant' leaves.
Aliantha would keep houses vacant longer. Your solution 1) gets the most irresponsible finance companies off the hook at the expense of responsible people, 2) leaves homes sitting vacant longer because government always takes much longer to do this stuff and has no structure to process this problem, 3) means homes sit unsupervised and decaying again because government has no organization to maintain vacant homes, 4) ends up making government into the landlord of public housing - 'the projects' - which we all know do not work, and 5) provide best welfare to those who are the least responsible. Only five reasons? More are below.
Aliantha - "gov buys the houses from the finance companies at their current market value ... and then sits on the asset while recieving 'rent'" is the perfect example of corporate welfare to the finance companies AND is what every American knows as "The Projects" - welfare housing. We spent decades eliminating that mistake. Aliantha would bring it all back while also rewarding finance companies.
The best solution already exists in current laws and organizations with this experience. Why would Aliantha use government welfare to subvert what already works best? Why would she advocate public housing - "the projects" - and so few call her on this massive 1960s proven mistake?
Aliantha, do not grasp a fact: nobody is going homeless. People who were so irresponsible have earned the right to years of economic rehabilitation - maybe even bankruptcy. This is called good economics. Either they must move into small apartments or townhouses, OR they must take on two or three jobs for the next five years, OR they must take in tenants, OR they must get rid of the two $30,000 SUVs that nobody needed anyway, OR they must cut expenses such as weekly dinners at the steak house, OR they must start taking public transportation or carpool, OR ... every useful solution means no government and personal financial responsibility. Yes, these are the people Aliantha calls homeless.
Every solution means both the irresponsible financial companies and the irresponsible homeowners must suffer through well proven legal and financial hoops designed to rehabilitate the irresponsible. Necessary so that these mistakes do not happen again AND so that the economy fixes itself. Welcome to what the most sympathetic endorse: economic rehabilitation that has proven for generations as the best and most generous solution.
Where does Aliantha reward Goldman Sachs? GS was a more responsible company who admitted up front to their few mistakes, addressed them early and openly, minimized their exposure, and therefore did not contribute to an American recession. Instead Aliantha would reward Merrill Lynch who operated to maximize profits rather than financial services. It’s called greed. Aliantha would now reward companies whose greed is most likely to create an American recession. Merrill Lynch finally admitted to $8billion in mistakes. Merrill Lynch is rumored to have another $10billion problem. Why does Aliantha reward the guiltiest? Who gets most rewarded by Aliantha's solution? Not Goldman Sachs. Aliantha would reward Merrill Lynch with massive corporate welfare for being irresponsible AND again for not be candid (honest). Aliantha - your solution is a 100% reward to the most guilty finance companies. And you also deny this?
I no longer expect Aliantha to understand this. She is more worried about minimizing pain to America's irresponsible homeowners. Just because one has an ARM does not mean one is irresponsible. We are discussing people who can hardly afford the ARM when its interest rate was low. We are taking about finance companies who loaned money on NINJAs. They had no business buying that house or offering that mortgage. Aliantha would reward both with government assistance.
There is no housing shortage. There are plenty of homes. But there are not enough homes so that the Smiths can keep up with the Jones'. Too many want to live in homes they have no business in rather that in townhouses or apartments. This arrogance (a tribute to others who accurately used that description here) is what irresponsible finance companies preyed on.
It scares me how Aliantha has no respect for others who were responsible. Where do you reward Goldman Sachs for minimizing their exposure AND for being both up front and responsible? Aliantha would even punish both Goldman Sachs and me for being responsible? Where are the others who question Aliantha's socialism of rewarding the guilty? Why would you punish me by helping those who most need to learn from their mistakes? Why would you have me pay for their greed? Why would you only encourage an American recession - maybe stagflation?
Your heart is in the right place. But your solutions are vile - a tax on other who were responsible and may suffer the economic downturn created by the greedy; made worse by welfare to the guilty. How to mimimize the economic consequences? The best solutions already exist – and without government welfare. Plenty of solutions exist including apartments, refinancing, second jobs, public transportation, small used cars, and protections afforded by bankruptcy laws.
This would not make you homeless. You would do a "short sale" and work out a deal with the bank. They may allow you to sell your home for 100k and take the 50k loss. They may want you to pay them 20k and then allow you to sell the house at 150k.
As Radar demonstrates, the best solutions already exist and would only be subverted by the corporate welfare advocated by Aliantha. Aliantha does not intend it as corporate welfare. But she advocated 100% assistance to those most irresponsible finance companies. As Radar notes and as I keep posting - Aliantha - get it out of your head. There are not all these homeless people. There are all these people who must now spend years rehabilitating themselves due to greed and using the so many existing solutions as Radar has exampled. Those with true sympathy would offer better solutions including the protection of bankruptcy.
Again, Aliantha. Your socialism that threatens productive economies is scary. The best solutions already exist if not subverted by what Aliantha proposes. In the previous post are maybe eight reasons why Aliantha heartful sympathy results in the worst possible solutions for everyone.
TW, if you already think how the system works over there (the USA) is perfect, why are you even responding to me?
Obviously the strategy I've suggested would be far more involved than what is written here. I'm not prepared to compile a whole financial report on the benefits of the scheme I would propose just for the sake of refuting your argument.
Just think about the social issues in your country and try and consider that some of those issues are directly related to poor social services and a basic lack of safety nets provided by your ever so brilliant government.
Yes people make bad financial decisions and no it's not good if people who toe the line have to pay for that, but there is a middle ground, and for a western country, your government provides precious little safety for your citizens in comparison to other western nations.
So in summary, whatever you think is the best thing for your countrymen is fine by me. I can't be bothered arguing with you anymore. Just take your fucking blinkers off every once in a while and you might find there's a whole wide world out there.
TW, if you already think how the system works over there (the USA) is perfect, why are you even responding to me?
I obviously don't think the system is working properly. But your plan only rewards those who are the problem.
Again, too few financial firms operated with the ethics and transparency of Goldman Sachs. Its smells too much like Enron, the manufacturers CA energy crisis, Adelphia Cable, AT&T, and...
Well GM was expected to announce another massive loss at $0.25 per share. What has GM been doing with losses so large? GM has been hiding so many losses as to suddenly announce a $68 per share loss. Where have $67.75 per share losses been hiding for the last decade? Did GM suddenly lose tens of billions only in one quarter? At what point do we call for life sentences on another Enron corruption?
Look back upon my justified criticisms of the financial people including stock brokers who routinely underperform the market. These are the same people who are supposed to provide oversight and therefore recommendations on companies such as GM? The GM accountants only suddenly discovered $67.75 more losses per share? Bull. Why have I routinely seen here their products are that bad - and Wall Street analysts don't?
Anything we do to reward people who take home $hundreds of thousands annually (plus bonuses sometimes in the $millions) - well that is just bogus. Your plan would only remove pain from these people who created the problem by not doing their jobs.
I believe the president of Merrill Lynch, having hidden all those losses for so long, received something like $200 million just to quit. He is the one who ordered Merrill employees to purchase massively in risky investments. Merrill was once the benchmark for Wall Street stability.
So we reward him? So we have the government reduce their losses buy buying those conduits or collateralized debt obligations?
The system has another problem. The rich keep collecting more of the wealth. Why does the average American's incoming keep dropping every year (when adjusted for inflation)? Oh. And why have my groceries gone from $20 to $30 over the past year - but there is no inflation according to government core numbers?
No, I believe there are serious problems in this finance industry. So how did we fix NYC when it was playing money games in 1975? "Drop Dead". The resulting turmoil finally caused castration of the problem. Is that word harsh. Well unfortunately we did not address the CA energy crisis as it deserved. We were not that harsh. We did not go after the ones who got rich by creating it. IOW anything less severe than castration of such problems only permits problems to fester.
You would tea-tattle people who need to suffer severe budgetary constraints for up to five years? It cannot be harsh enough. So how many others will we reward for perverting the American economy - because greed is good?
In 1981, Americans stopped buying Fords as Ford, Chrysler and GM begged for government assistance and protection. It took near bankruptcy in Ford to save all Ford employee jobs, to remove a man who did more to destroy American than Nikita Khrushchev (Henry Ford), and to finally let engineers design the first Ford car in 22 years. Because we attacked the problem with threat of bankruptcy, another problem at Ford was eliminated. 48 levels of management were reduced to five. Many who were the problem - managers - were made redundant or reassigned to the lower skill levels where they belonged. Castration.
Financial penalties were so severe as to save Ford Motor. So severe that engineers were finally permitted to design the Ford Taurus. Any government bailout or assistance would have killed the Taurus and probably cost massive American jobs in Ford. It is how economics works.
We cannot be severe enough with these finance people who believe Gordon Gekko's "Greed is Good". These were not accidents. These finance people did not do their job. Many are so corrupt as to believe the purpose of a company is profit. That is mafioso reasoning. And yet they are so corrupt as to believe those lies. We have a serious problem in our finance industry where they routinely get fat and drunk on everyone else's sweat.
I am appalled that you would recommend something that is finance company welfare - and be so naive as ignore the corporate welfare you are promoting. To not recognize you are preaching their propaganda - what they need you to say to save their sorry asses. Those homeowners have plenty of options. There are near zero homeless despite what others have posted. But there is this massive and corrupt finance industry were 'greed is good' rather than customer service: their job is to service the financial needs of America.
tw, individuals in the US don't have the bankruptcy option anymore; George Jr took that away, at the behest of, yes, financial companies.
And Radar, GHB is a date rape drug. I'm surprised that molesters don't have the wicked idea to slip Aqua Dots on children.
tw said: But your plan only rewards those who are the problem.
No it does not only reward those who caused the problem, but if you can't see that, then there's no point in me wasting my time here anymore.
Thanks for your input though. I see where you're coming from.
tw, individuals in the US don't have the bankruptcy option anymore; George Jr took that away, at the behest of, yes, financial companies.
And Radar, GHB is a date rape drug. I'm surprised that molesters don't have the wicked idea to slip Aqua Dots on children.
It's not a date rape drug among kids or ravers. I was a raver for a long long time, and people used GHB on themselves to relax and come down from ecstasy.
Yes, and date rapists use it to 'calm down' their victims, and their inhibitions.
That's like saying a pencil isn't a writing utensil among 'office darts' players.
tw, individuals in the US don't have the bankruptcy option anymore; George Jr took that away, at the behest of, yes, financial companies.
misconception alert. BK's are still available. filing BK on $30K in credit card debt while having $150K in home equity is no longer an option.
The house isn't vacant for a year in most cases. In fact it's not vacant until the hose is already lost and repossessed by the bank. Then the bank sells the house and are willing to lose 5k to sell a house they may have already gotten 100k on. But this isn't an issue in America because houses do not stay vacant for a year. In fact they don't stay vacant for 6 months before they are sold.
Maybe, maybe not.
Yes, and date rapists use it to 'calm down' their victims, and their inhibitions.
That's like saying a pencil isn't a writing utensil among 'office darts' players.
It's closer to calling a pair of scissors "eye stabbers". It wasn't made to be used for "date rape" so such use is out of the ordinary.
it's not out of the ordinary as far as drugs used to subdue women (and sometimes men) go.
Did a Republican President just nationalize the housing market? For the record, the answer is yes. :headshake I gotta get a piece of this socialize the losses game...
Did a Republican President just nationalize the housing market? For the record, the answer is yes.
If he didn't, then it would be obvious why throwing money at the rich makes the economy look good (short term) and results in massive economic revenge on that economy (long term). These are all symptoms of a George Jr who made the economy look good by throwing money at it. Nixon did same. So the economy took revenge many years later.
Eventually we will pay for government welfare to the rich. Fannie and Freddie are simply then next irresponsible entities to line up for free handouts. GM and other domestic automakers will demand equal welfare. Never forget the party line. Enrich those who are your campaign supporters (ADM, Halliburton, etc). Massive government deficit spending has been financed by China, et al who are now flush with dollars. So much for wiping out the balanced budget and then setting records for deficit spending. New record for government borrowing is something above $400 billion - probably higher. This was the budget that conservative (wacko) extremists said would be the first balanced budget. How could their political agenda be wrong? Reagan proved that deficits don't matter? Cheney said so.
Lehman Bros is going the same way a Bear Stearns. Even with Fed offering discounted money. Something like 39% of American mortgages are estimated to be non-performing (hopefully that number is erroneous). And yet the same administration also said there is no inflation - despite prices in grocery stores and gas stations.
Denial means welfare to the rich is alive and well. Best solution to these problems is bankruptcy. Bankruptcy - if applied early enough (if spread sheet fraud was not encouraged by George Jr's Harvey Pitts and his predecessors even in the Enron days) means jobs are saved and the problem (top management) is eliminated. Instead, George Jr's political agenda dictates protecting the problem who are also major campaign contributors. And yes, even Fannie and Freddie were major political fund donors.
Their conservative agenda is only good for America in rhetoric. George Jr's people will spend money everywhere to make themselves look good. Oh. The Federal Highway Trust fund surplus? That trust fund is something like one to two months away from no more cash. Where did the surplus go? Enron style accounting is justified by a political agenda that also says "deficits don't matter".
How curious that Clinton could be fiscally responsible. The party rhetoric says that only Republicans can be fiscally responsible. And yet both George Jr and Nixon spent money we did not have.