The government’s new mantra is all about “availing us the credit that we need”.
This is how to government looks at us; like we are junkies who will go into convulsions if we cannot pay for things on credit.
The question that I keep asking is “Why do I need all of this credit? I have owed money to anybody in a long time and I seem to be getting by OK by saving money and budgeting and living below my means. If credit goes away - it does not affect me personally at all.”
Could you imagine the horror that would fall upon the country if all of a sudden we asked people to save up 60,000 for their Cadillac Escalades? Such a horrific scenario could lead to people thinking a lot harder about what they spend their money on and possibly manipulate them into purchasing cheaper and more practical vehicles of transportation. It would doom the well-to-do-poser-car market.
We cannot let this perverted way of thinking infect us. Our bankers are dependent on our need to finance everything from a stick of gum at the Quicky Mart to our educations, to our cars, to our houses.
Save the bankers to save our wealth (also called debt/salavery).
UK nationalizes it’s largest mortgage lender, Bradford & Bingley. “The move is intended to preserve the country’s financial stability”, Treasury Chief Alistair Darling said on BBC Radio.
Please bring back the edit feature so we can fix mistakes in our posts. It was available when you first switched over the software and then it disappeared a day or two later.
Nice job IR. It’s a little long, but it hits it square.
Posted by Shadax on 09/29/08 at 07:55 AM
Thanks IR for telling it like it is. I am so sick of shills like Steve Thomas from REMAX talking about “demand levels” when he is CLEARLY using the terms incorrectly. Well, you certainly don’t need a degree in economics to be a RE agent. I think he might just afraid that if his office(s) go under he’ll have to go back to being a used car salesman.
In the last downturn in the early 90’s, as I recall it was the high end that declined first because job losses took out potential buyers then as the high end came down, the low end, especially condo’s got hammered. In this downturn it seems to be the other way around, the low end is leading.
IR,
is CA that much worse than other states? I don’t have that much experience getting projects through municipalities but my builder friends do complain a lot. (I thought complaining was their natural state) “many local municipalities restrict the ability of developers to bring new supply to the market or outright forbid it. It is not uncommon in California for price points to favor the construction of new dwelling units and for municipalities to forbid its construction.”
Yes, California is more difficult than most other states to obtain entitlements, although it is difficult in the Northeast as well. The CEQA process is costly, cumbersome and takes much time, and at the end of the day, the governing council may still not approve the development. Californians greatly limit the supply of new dwelling units by just saying no.
Posted by Anonymous on 09/29/08 at 09:16 AM
O.C. foreclosure starts plummet amid new law
http://mortgage.freedomblogging.com/2008/09/29/oc-foreclosure-starts-plummet/1834
Posted by Blueberry Pie on 09/29/08 at 09:27 AM
IR, a year ago you were posting some predictions on your blog about what you expected from the housing market. I think much of it has been coming true.
One thing you did not predict was massive financial institution distress like we are now seeing. Do you think this is just a part of the bubble popping, or is this an additional factor that you didn’t previously factor in, and will it cause a greater decline in the housing market than you originally estimated?
Posted by Anonymous on 09/29/08 at 09:39 AM
Love the blog IR, helps me keep track of the panic in California from NYC. Most of what I see, and prices still have not corrected to levels consistent with affordability, much less what cash flow investors would buy.
The credit side of the housing mess is much neglected yet just as integral to affordability as prices. People fixate on prices, but where will the marginal buyer for the surfeit of home inventory if one cannot obtain a mortgage? Affordability is a function of many things, but primarily prices and the interest rate used to get the loan. If the latter is prohibitively expensive, then prices have to fall further to reach an equilibrium for new homebuyers like young couples or cash flow investors in REIT’s or private equity funds.
Extending your point further, the people who can obtain a mortgage and afford the 20% down now required are likely to be financially prudent/savvy people who will haggle aggressively for a deal. Just as the blowoff top was driven by creative/aggressive/fradulent lending, a capitulation bottom could be driven by the dearth of marginal buyers (patsies as Buffett would say) because of prudent/standard/intelligent lending.
Moreover tightening credit is nowhere near the worst it will get for mortgages. I work on a trading desk for a large bank here in NY and can tell you that credit and money markets are a mess. European banks are paying 5% for 3m USD funds, so you will need a steeper curve/higher long rate to justify the higher short-end funding costs. Everything I’ve seen in the financial markets over the last year hits the economy with a 3-6m lag. This Winter will not be pretty for housing. I just hope it doesn’t pull us into the abyss because we are very close right now.
Posted by Orcian on 09/29/08 at 09:55 AM
Thanks, IrvineRenter. I got sick of my realtor friend telling during the boom that homes were selling because there was a “demand” for them, though I didn’t realize at the time that much of it was false demand. I couldn’t put it into words. There is always a desire to buy a home, and if we give every moron out there access to toxic loans, they will certainly take it, and by golly that’s demand—not.
For a long time, I did not realize just how much of this garbage lenders kept on their books. I assumed that most of this toxic waste was purchased by hedge funds and other institutional investors. I knew there was going to be a lot of pain, but I really thought our lenders were more insulated than they were. I do see this as leading to the last nail in the coffin of real estate: higher interest rates. We now have a much less competitive lending environment, and those that remain face higher short-term borrowing costs. I don’t see how this cannot lead to higher interest rates.
Posted by Some Guy on 09/29/08 at 10:13 AM
There are dozens of steps in the process to getting permitted for building housing in CA. At all those steps, there is an opportunity for influence by “community activists” and local politicians with their hands out. Generally, the process is operated in the suburbs with the goal of keeping lot size up, and minorities out.
Little known fact, environmental/community activism in CA is basically a tool for keeping higher density housing out of your neighborhood…and the accompanying blacks and Mexicans.
Yes, I speak from experience.
In the old days, “community activists” wore white hoods and rode only at night. Now, with CEQA and planning boards, they do it in broad daylight, and feel smugly superior about doing it.
Orcian, I like the concept of “false demand”, because that’s actually a concept that applies in this case as well. In my situation, false demand applies to the “I think you should aughta…” whines coming from people who give the suggestion that they’d buy if the seller included particular features/perks/benefits, but who’ll never bother to buy once it’s offered to their specifications. Everyone who’s ever worked in retail knows these dolts: they’ll whine and whine about how they’d buy from you in a heartbeat if you just included one dealbreaker to the mix, but the moment you ask them to pay for it, they suddenly run like hell and leave you with the item.
I think that false desire helped with a lot of the real estate bubble, especially with convincing buyers to get as much house as they could possibly afford. Does everyone need or even want zero-lotline McMansions that cost the rough equivalent of the gross national product of Singapore to heat and cool every year? No, but somebody got it into his/her microscopic head that this sort of house would be cool, especially if fitted with a giftwrapping room and a shoebox-sized swimming pool in what tiny strip is left of the back yard. Same deal with pergraniteel and big staircases visible from the front yard and kitchen islands: they thought these things were in demand, and subsequently built or influenced the market so these things became standard. After a while, it became nearly impossible to put a house on the market without stainless steel appliances, even though nobody could explain, with a straight face, why stainless steel was an improvement.
The clincher, of course, comes when the houses stop being bought as investments and commodities. Many of the buyers in the boom, and I say this from firsthand knowledge, were the sort that caused the implosion of the toy market in the late Nineties thanks to an obsession with collecting action figures and playsets as an investment. When they were in their twenties, they filled their rooms with mint-on-card Star Wars action figures, certain that they’d only go up in value as they got older. Now that it’s impossible to give away Jar-Jar Binks figures with free beer, they can’t find buyers because enough of their contemporaries woke up, asked “And what did I just blow two paychecks on?”, and got out of the market. We’re watching right now as those twentysomethings turned thirtysomething and fortysomething try to get out of the housing market, trying to turn their cool investments into much-needed cash at a time when nobody even comes close to wanting what they’re trying to sell. False desire all over again: I keep looking at horribly designed houses with no storage space, bad placement of walls and windows, and no thought toward longterm occupation, and wonder who in their right mind would be crazy enough to buy them in another ten years.
Posted by Matt on 09/29/08 at 10:27 AM
The counter-pressure I see, though, is that the remaining lenders will still need to drum up business. Yes, competitive pressures reduce prices, but reduced demand for a product forces even a monopolist to recognize that supply and demand are stronger forces than competition. Monopolists squeeze what ‘rents’ they can out of their supply advantage, but with low demand, there really aren’t any rents.
But, this counter-pressure can’t push back against both less competition AND the changes in the SUPPLY function (such as the phenomenal pressure real inflation puts on rates). Rates will rise. The fact that people won’t buy a house if the price is too high OR the rates are too high will push for lower rates, but inflation, bad loans on the books, and monopoly conditions all push those rates higher.
Posted by alan on 09/29/08 at 11:20 AM
Bailout fails in HOUSE! Dow down 500!
Roubini now calling total systemic meltdown predicting that if Merrill and GS don’t find a larger bank to merge with now they will be BK in a few weeks and “the mother of all bank runs, i.e. a run on the trillion dollar plus of the cross border short-term interbank liabilities of the US banking and financial system as foreign banks as starting to worry about the safety of their liquid exposures to US financial institutions”
If a $700B bailout would be able to prevent a massive meltdown, wouldn’t that same bailout be able to solve the problem a month from now if the meltdown actually begins to happen?
Posted by NanoWest on 09/29/08 at 11:44 AM
What is sort of sad about all this is that nobody want to come out and say what the real numbers are….....it is very simple to calculate what the underlying values of the mortgage assets are….(what would be retrieved if all the homes with bad mortgages went to auction)
Take all home loans sold in 2004- 2007, they are worth 40 % of their value.
home loans from 2001 - 2004 are worth 50 % of the value
home loans from 1998 - 2001 are worth 60% of their value.
So thats it,,,,,,,,,,,,,,,,,,we now know what the damage is. Problem is, nobody want to tell the general public because they will be very, very upset.
It was crap from the beginning. Trying to rush it all through and give the voters a chance to forget before November.
This will be painful, but it’s not the end of the world.
Posted by phil on 09/29/08 at 12:49 PM
Barney Frank gets on after the bailout vote failed and says “the problem with the housing market is foreclosures…”
This guy bugs me. The problem isn’t foreclosures; that’s the symptom of the problem! The root problem is housing valuations are out of whack and need to return to affordable values. Why don’t reporters and economists lambast this guy and others like him?
Posted by alan on 09/29/08 at 12:52 PM
That would work if all homes were located in CA or Fl. In TX, housing prices are actually increasing.
There are estimates of the total losses. CR posted a number of $1.5 trillion of which only $430 billion has been written down to date.
If Roubini is right in calling the “mother of all bank runs” then it is Armegedon for the dollar.
Posted by alan on 09/29/08 at 12:54 PM
Barney Frank was chair of the committee that blocked increased supervision of Fanny/Freddie requested by Bush back in 2004 and look what happened.
I still haven’t seen him or his party admit their role in this mess.
Barney Frank was not the chairman of anything in 2004. The Republicans controlled the House and the Senate. Barney Frank would have been the senior member of the minority party on any committees, but he would not have been a chairman.
Posted by nanowest on 09/29/08 at 01:09 PM
Alan,
Well if you like go state by state….......but it is possible to figure out what the value of the assets is in relationship to the value of the mortgages….and that is the maximum damage. No politician, banker or citizen wants to tell the American homeowner that their homes are worth far less than they thought.
Posted by Major Schadenfreude on 09/29/08 at 01:14 PM
I’m digging this rejection of the bill.
Anybody know how to see how people voted on it this afternoon?
Posted by lam3 on 09/29/08 at 01:16 PM
Amazing. You actually responded to your own post twice. Get the feeling nobody but you cares about what you write…I do.
FINAL VOTE RESULTS FOR ROLL CALL 674
(Democrats in roman; Republicans in italic; Independents underlined)
H R 3997 RECORDED VOTE 29-Sep-2008 2:07 PM
QUESTION: On Concurring in Senate Amendment With An Amendment
BILL TITLE: To amend the Internal Revenue Code of 1986 to provide earnings assistance and tax relief to members of the uniformed services, volunteer firefighters, and Peace Corps volunteers, and for other purposes
Based on your observation that the price is strongly connected to credit availability (I agree with that) what would be your prediction regarding house prices if credit availability is severely restricted (e.g., close to non existent)? Would this in turn result is severe price drops that we are yet to see (let’s say 70% off the peak)?
The libruls that caused this housing mess through their communist agenda and affordable housing initiatives have derailed our great President’s noble attempt to save the economy and the common man. Let us pray that the conservative voices of the righteous can save us once again…
Well, if we go back to a cash basis, anything is possible. Realistically, prices will drop to financing levels where people’s real salaries with a 28% DTI supports payments.
Posted by granite on 09/29/08 at 03:09 PM
From MarketWatch article on bailout failure.
“...Or perhaps the plan’s many critics were right in saying that credit markets and home prices can adjust on their own, once the promise of free money is withdrawn.”
Burn baby burn.
Posted by Matt on 09/29/08 at 03:26 PM
My concern is that home prices can adjust on their own (people can’t trade up as much, and many people have lost their retirements, but that just puts more of a drain on governmental balance sheets), but I’m not sure the credit markets CAN bounce back without help.
Yes, stupid, greedy people did this. But, I’ve been wondering if the analogy of a fire is correct here: sure, some punk kid started a brush fire while burning ants, but do you not put out the fire just to teach the kid a lesson?
I can’t claim to know the answer, but I have to admit to being concerned that not passing a bailout is simply paving that road to hell.
Posted by tonyE on 09/29/08 at 03:42 PM
The problem is that 28% of nothing is nothing.
If the economy tanks amd layoffs come around your boss don’t care if you are a renter, homeowner with a good mortgage or a would be flipper living in a TRidge mansion.
Then, of course, your 401K will go to pot.
And eventually we may run into inflation too, so good luck with your cash.
Those 700B were peanuts, and in any event they were supposed to be used to buy stuff at deeply discounted values.
Instead, we got all of these knuckleheads that don’t realize that no matter how well off and insulated you may be today, tomorrow we’ll be be shooting at each other to stake out the best underpass.
And then you got Pelosi… what a frickin’ idiot.
Posted by Capocorso on 09/29/08 at 04:04 PM
Anyone have a guess as to what this bailout failing is going to do to interest rates?
I heard one of the many “experts” say he thought interest rates would spike to over 10% if no help is given by the fed gov.
Posted by Chris on 09/29/08 at 04:42 PM
Sure, unless you’re unemployed/retired with mega million stashed such that you can live off dividend and interest even with premium healthcare paid for by the div/interest, you’ll be affected one way or another buddy.
Can you say jobless?
Yeah, burn baby burn. Jobs will be burned too even without this bailout.
IR, hope you’ll command 6 figures or more with that book. You might need it if layoff occurs.
Posted by Chris on 09/29/08 at 04:45 PM
For all you permabears on housing, I like to see your bear side when unemployment hits 50% nationally (and you’re being hit with a pink slip as well).
Let’s see…hmm…I rent, good, I don’t play the stock market, good, I just lost my job, SUPER!
Posted by Schadendude on 09/29/08 at 05:08 PM
Hard to call a number, but double digits is all but assured once the spread between the three-month LIBOR and the Fed funds rate reaches 3%. Not to mention our national credit rating will be adversely affected by any bailout and the market for Tbills will disappear once faith in the dollar reaches capitulation.
“Right now people, don’t think return ON capital, but return OF capital.”
-Peter Schiff
Posted by mmg on 09/29/08 at 05:21 PM
TonyE—>Those 700B were peanuts, and in any event they were supposed to be used to buy stuff at deeply discounted values.
That is part of the bubble mentality, peanuts, you know how many peanuts 700 B will buy you
we need to deal with reality not fantasy land, these people in charge got us into this mess and thus I personally dont give a $hit what they think will get us out, enough with the madness.
Maybe they should have a panel of IR, CR, Mish, N Roubini and Schiff to take a look at this mess, not these retards in Congress.
Posted by tonyE on 09/29/08 at 05:59 PM
Look, the issue here is that we’re all in the same boat now.
If we have a credit crisis and we ALL tank, then you better have a bunker somewhere full of gold, propane, dried food stuffs, a water well, a generator, plenty of ammo, guns and liquor and be ready to shoot any trespassers.
It won’t make diddly squat of a difference whether you rented, bought or stole your home if you ain’t got a job, dig?
This is why what Pelosi did today was so particularly odious. She put her own political interests ahead of the entire country.
And yes, compared to the economy, and your job (assuming you are not a trust fund baby and your trust fund is in gold right now) those 700B are just peanuts.
Time to realize that the time for political posturing and bullshit is over. Pelosi better shut her mouth and remember that is was her and the Democrats in Congress that really got us in this mess.
We’ll have time to clean things up later, but right now those 700B are the peanuts that are needed to keep the beer flowing. Otherwise we’ll all be caught with peanut butter in our mouths and no milk in sight.
Posted by tonyE on 09/29/08 at 06:05 PM
There’s no hope with some people. Jefferson was right, Jackson was wrong. You can not have a republic when the voters are dumber than a rutagaba a foot in the ground.
Poor IR may also come out a loser. No one will want to buy ( or be able to afford ) his book when we’re all unemployed and trying to get a job tending dishes in Mexico.
At least I speak spanish so I can get the maitre’d job while you anglo-onlys will be forced to wash dishes…
“Andale Camsavem, you buey, get those damn dishes washed pronto or we’ll call la Immigracion Mexicana on you and back to LA you go….”
Posted by tonyE on 09/29/08 at 06:17 PM
Be serious for a sec… It was the Democrats in Congress that got us into this mess.
If you goggle you will find lots of info in 2003 and 2005 about how Bush and McCain tried to control the lending on Fannie Mae and Freddie Mac but it was the democrats who blocked them.
So, please, don’t make politics out of this because the Dems really are to blame too. In some ways much more than Bush.
Normally I don’t get too wound up with the political crap out of DC, but today’s complete bullshit speech by Pelosi meant to cover her us in her reelection in SF screwed the whole country.
It may get her reelected but she should lose her post of Majority Leader.
Dude, just because the truth might become unpleasant for us too doesn’t mean we should deny it.
Posted by Dave on 09/29/08 at 06:48 PM
I’m going surfing.
Seriously.
I have been breaking my balls last 5 years saving on what was left of the divorce settlement taking my small dot com savings because I knew in my bones this shit storm was brewing. I now have a tidy little pile. Not much, but more than enough.
Being out of work a year will be like a vacation. It *will* be a vacation.
Then I’ll get back to work like my father did during the Great Depression. He was never out of work. He was willing to work.
Everything is paid for. No debt. Savings for car repairs, food, rent, everything. Bring it on.
Why people cannot understand that economic calamities are normal is beyond me. Supply/demand, predator/prey, a billion year old cycle that we can only remediate, but never completely mitigate.
So, yeah, I’ll be partying like it’s 1999. And after I get tired of surfing, I’ll expand my current company or start a new one. There will be lots of talent available ready to work, and the price will be competitive with all our current outsourced venues.
BTW, one my contractors in Eastern Europe is now par with San Francisco pricing on entry level web development. We’re keeping him because he knows the current system. We’ll be replacing him as we grow. Replacing him with North American talent.
Posted by Dave on 09/29/08 at 06:54 PM
As a followup, the subcontinent is doomed. Bangalore is going to have to find a domestic market for their talents. Good luck given the massive social inequity embedded in the Indian system.
That’s what I’ve been trying to tell people for years. Indians are elitist bigots. That’s why we took their land. To bring social justice to these lands.
Posted by smarterthanyou on 09/29/08 at 07:19 PM
You and the authors of this blog are idiots. You fail to realize that everyone with retirement etc loses. By not giving 700B today we have lost 1.2 Trillion in value across the board. Moron.
Posted by freedomCM on 09/29/08 at 07:31 PM
who is this alan guy, and does he have anything remotely factual to add to the discussion?
Posted by Schadendude on 09/29/08 at 07:33 PM
huh ?
Posted by MalibuRenter on 09/29/08 at 07:36 PM
In case you haven’t noticed, Merrill already found a partner, BofA.
Perhaps you mean Morgan Stanley?
Posted by Schadendude on 09/29/08 at 07:37 PM
Ummm Indians from India and Indians from the Americas do not share the same culture.
thanks for the laugh though…
Posted by MalibuRenter on 09/29/08 at 07:38 PM
Interest rates will spread. Shorter term interest rates will go lower. Longer term interest rates will go higher.
Interest rates for people and institutions with very good credit will drop. Interest rates for people with OK credit will rise. People with crap credit won’t be able to get any new loans.
Posted by MalibuRenter on 09/29/08 at 07:41 PM
As I have said previously, the banks with MBS portfolios are very much like homeowners under water. They remember 2006 pricing and just can’t believe they can’t get anywhere near it. They think/hope that it is all temporary, if they hold on long enough, they will make money.
The same kinds of thing bring banks to reality as homeowners. 1. No one will refi them. 2. Any borrowing cost not already fixed either gets more costly or dries up on them. 3. Bankruptcy happens slowly at first, then all at once.
I made the same observation with similar reaction over on the forum.
It doesn’t matter now. I hope the ‘Pubs enjoy the shit sandwich they fixed for the rest of us, because IMO we’re getting ready to see what unleverageing really looks like.
Let’s see… Eliot Spitzer.. A Democrat right? The guy with the prostitute habit who at the same time took the holier than thou attitude.
Sorry Kirk… hope the bell in your computer don’t wake you up… but you got to choose your sources better.
In 2003 and 2005 Bush and McCain tried to control Congress and Fannie Mae and Freddie Mac.
Spitzer’s friends in Congress stopped them.
Posted by tonyE on 09/29/08 at 09:37 PM
Pelosi got her buddies to vote no on what she knew was a very unpopular dose of medicine… and then she could blame the GOP for passing it.
Now, who’s being partisan here?
Pelosi is the Majority Leader and both Obama and McCain pushed for a show of bipartisanship. Pelosi wwould have none of that and hence torpedoed the bill.
If I were being partisan, I’d say that this was planned by Obama and Pelosi.
Posted by LooksSimilar on 09/29/08 at 09:50 PM
thumb up….....you spoke out what I wanted to say but didn’t know how
If I want to sell something that is worthwell and can make money by holding, I don’t want to give it away to you, the taxpayer, it makes no sense why Bus told us we can make money on those assets the private companies planned to dump…..Do you think gov is smarter than wall street MBA-s, I doubt it.
Posted by Food on 09/29/08 at 09:59 PM
TonyE,
I don’t think we are on the same boat. I save my pennies. Some would call me cheap, and yet some would even suggest by looking up on the word “cheap” in the dictionary, it will show a picture of my face as an example, but in reality I am frugal by today’s standard but nowhere near the 30’s. The society ought to reward the frugal just like the field I am in.
If this organized/legalized bank/treasury robbery engineered by Paulson and Bernanke is passed, my hard-earned savings would be worth less. If there is a depression with surely long-term higher interest, I will benefit even if I lose my job. Hey, being an electronics engineer, the days are numbered for me anyway, but with a depression, at least some industrial jobs would come back to the United States.
Thank God that any coup is not necessary at this moment. This is the first time that the people united does make a difference in politics. Fuck Paulson and his Jewish sidekicks Greenspan and Bernanke. All of them should go to hell. Among them, I hate Greenspan the most. He was the clueless asshole who raised the interest rate just to kill the high-tech expansion that was when I lost my job in the high-tech industry. Moving to a new location, he priced me out of the real estate market by artificially lowering the interest. He was so clueless that he could not even make up his fucking mind. God, I hate Greenspan. I hate them all. The exact opposite of what they want must be the best for the country given the dire circumstances we are in right now.
What is the fuss all about? Fed Pumped $630 Billion Into Financial System today and at the time when Congress rejected $700 billion
bailout. If FED has the money and they can pump our USD (currency) as much as they want without approval , then where does the liquidity
crisis question come from? Can someone explain this??? My understanding of Federal Reserve is that its a private bank cartel that is holding USA hostage in debt big time, and now that their
trillions of $$ are being lost in bad mortgages, they want to pass the buck over to USA Govt. and bury us deeper in debt and keep collecting
taxes and interset until we all disappear from the face of the earth.
What a freaking FED Hypocrisy here folks. I lost money today in the market and as much as I hate losing money and as much as everyone hates bailouts, think about the core monopoly game being played by the FED here and lets discuss what you folks think about this whole fiasco! Its just a bunch of BS on FED’s part and they got the Govt. by the balls!
If you think about this, USD has been recently gaining strength with falling other currencies, at the same time FED is pumping billions and
billions of newly printed funny money into the markets, thereby diluting USD as it accumulates somewhere. When markets return to sanity, USD will flood the markets causing massive dilution. But, by then FED would have gotten its pray via asset or gold accumulation from those who needed to be rescued.
Economists call the market cycles as “Business Cycles” while most economists represent these big banks. If you think about it, FED is the one that causes easy money policy = creates bubbles = squeezes every penny out of citizens into real estate or stock markets = money transfers, changes hands from people to banks = credit is squeezed by FED again = massive loses for citizens, life savings wiped out, put deeper into debt = keep working your butt and keep paying interest.
The only way out of this FED’s stangle hold is I think that people spend money they own and not they borrow. Once that happens, lending will be less lucrative and economies will prosper without these big blood suckers!
Posted by Kirk on 09/29/08 at 10:28 PM
What can I say? If nailing some hooker to clear the mind is what is needed to do the job then I’m all for it. I really could care less what politicians do with their genitals. They can nail some guy in an airport bathroom for all I care. Spitzer, and several other state attorneys, tried to act and Bush blocked them. End of story.
Posted by WaitingToBuyByAndBy on 09/29/08 at 10:32 PM
I care.
Posted by Major Schadenfreude on 09/29/08 at 10:41 PM
Me too. AZ always cracks me up.
(By the way, that was a nice post yesterday Waiting.”
Posted by Mikee on 09/30/08 at 06:32 AM
So, the Dems didn’t control the House or Senate until 2006 right? So, a Repub controlled Congress (with help from some Dems) defeated any try to rein in the lending/credit card/bankruptcy business.
As well, federal courts stopped certain states (i.e. GA, NY) from implementing their own safeguards. And this was done while the President, House and Senate were all Repub-controlled right?
I’m just trying to get the story right.
Posted by muzie on 09/30/08 at 04:06 PM
Oh, look, geez, about 600B$ of that “loss” came back today. And, wouldn’t you know, the market is right back at the point it was BEFORE the bailout vote. Guess that kills your panicky theory.
Maybe a trillion will disappear again tomorrow? Who will you blame then?
Posted by muzie on 09/30/08 at 04:20 PM
The money was not printed, it is from expanded currency swaps from with central banks.
What does this mean? Well, I don’t know, but it woudl be premature to assume it is “printed” without knowing the details.
Posted by Irvine Cyclist on 09/30/08 at 10:34 PM
Be serious for a sec… It was the Democrats in Congress that got us into this mess.
You should read through the whole thread you posted. It’s obvious the person who wrote it is biased, and they’re refuted with facts throughout the whole thread.
Posted by AZDavidPhx on 09/29/08 at 06:32 AM
The government’s new mantra is all about “availing us the credit that we need”.
This is how to government looks at us; like we are junkies who will go into convulsions if we cannot pay for things on credit.
The question that I keep asking is “Why do I need all of this credit? I have owed money to anybody in a long time and I seem to be getting by OK by saving money and budgeting and living below my means. If credit goes away - it does not affect me personally at all.”
Could you imagine the horror that would fall upon the country if all of a sudden we asked people to save up 60,000 for their Cadillac Escalades? Such a horrific scenario could lead to people thinking a lot harder about what they spend their money on and possibly manipulate them into purchasing cheaper and more practical vehicles of transportation. It would doom the well-to-do-poser-car market.
We cannot let this perverted way of thinking infect us. Our bankers are dependent on our need to finance everything from a stick of gum at the Quicky Mart to our educations, to our cars, to our houses.
Save the bankers to save our wealth (also called debt/salavery).
Posted by awgee on 09/29/08 at 04:51 AM
Desire does not equal demand. Perfect.
Posted by Trooper on 09/29/08 at 06:12 AM
http://money.cnn.com/2008/09/29/news/international/bradford.ap/index.htm
UK nationalizes it’s largest mortgage lender, Bradford & Bingley. “The move is intended to preserve the country’s financial stability”, Treasury Chief Alistair Darling said on BBC Radio.
Posted by AZDavidPhx on 09/29/08 at 06:34 AM
Correction “I have not owed money”.
Please bring back the edit feature so we can fix mistakes in our posts. It was available when you first switched over the software and then it disappeared a day or two later.
Posted by no_vaseline on 09/29/08 at 07:14 AM
Nice job IR. It’s a little long, but it hits it square.
Posted by Shadax on 09/29/08 at 07:55 AM
Thanks IR for telling it like it is. I am so sick of shills like Steve Thomas from REMAX talking about “demand levels” when he is CLEARLY using the terms incorrectly. Well, you certainly don’t need a degree in economics to be a RE agent. I think he might just afraid that if his office(s) go under he’ll have to go back to being a used car salesman.
Posted by AZDavidPhx on 09/29/08 at 07:59 AM
Posted by alan on 09/29/08 at 08:36 AM
In the last downturn in the early 90’s, as I recall it was the high end that declined first because job losses took out potential buyers then as the high end came down, the low end, especially condo’s got hammered. In this downturn it seems to be the other way around, the low end is leading.
IR,
is CA that much worse than other states? I don’t have that much experience getting projects through municipalities but my builder friends do complain a lot. (I thought complaining was their natural state) “many local municipalities restrict the ability of developers to bring new supply to the market or outright forbid it. It is not uncommon in California for price points to favor the construction of new dwelling units and for municipalities to forbid its construction.”
Posted by IrvineRenter on 09/29/08 at 08:54 AM
Yes, California is more difficult than most other states to obtain entitlements, although it is difficult in the Northeast as well. The CEQA process is costly, cumbersome and takes much time, and at the end of the day, the governing council may still not approve the development. Californians greatly limit the supply of new dwelling units by just saying no.
Posted by Anonymous on 09/29/08 at 09:16 AM
O.C. foreclosure starts plummet amid new law
http://mortgage.freedomblogging.com/2008/09/29/oc-foreclosure-starts-plummet/1834
Posted by Blueberry Pie on 09/29/08 at 09:27 AM
IR, a year ago you were posting some predictions on your blog about what you expected from the housing market. I think much of it has been coming true.
One thing you did not predict was massive financial institution distress like we are now seeing. Do you think this is just a part of the bubble popping, or is this an additional factor that you didn’t previously factor in, and will it cause a greater decline in the housing market than you originally estimated?
Posted by Anonymous on 09/29/08 at 09:39 AM
Love the blog IR, helps me keep track of the panic in California from NYC. Most of what I see, and prices still have not corrected to levels consistent with affordability, much less what cash flow investors would buy.
The credit side of the housing mess is much neglected yet just as integral to affordability as prices. People fixate on prices, but where will the marginal buyer for the surfeit of home inventory if one cannot obtain a mortgage? Affordability is a function of many things, but primarily prices and the interest rate used to get the loan. If the latter is prohibitively expensive, then prices have to fall further to reach an equilibrium for new homebuyers like young couples or cash flow investors in REIT’s or private equity funds.
Extending your point further, the people who can obtain a mortgage and afford the 20% down now required are likely to be financially prudent/savvy people who will haggle aggressively for a deal. Just as the blowoff top was driven by creative/aggressive/fradulent lending, a capitulation bottom could be driven by the dearth of marginal buyers (patsies as Buffett would say) because of prudent/standard/intelligent lending.
Moreover tightening credit is nowhere near the worst it will get for mortgages. I work on a trading desk for a large bank here in NY and can tell you that credit and money markets are a mess. European banks are paying 5% for 3m USD funds, so you will need a steeper curve/higher long rate to justify the higher short-end funding costs. Everything I’ve seen in the financial markets over the last year hits the economy with a 3-6m lag. This Winter will not be pretty for housing. I just hope it doesn’t pull us into the abyss because we are very close right now.
Posted by Orcian on 09/29/08 at 09:55 AM
Thanks, IrvineRenter. I got sick of my realtor friend telling during the boom that homes were selling because there was a “demand” for them, though I didn’t realize at the time that much of it was false demand. I couldn’t put it into words. There is always a desire to buy a home, and if we give every moron out there access to toxic loans, they will certainly take it, and by golly that’s demand—not.
Posted by IrvineRenter on 09/29/08 at 10:11 AM
For a long time, I did not realize just how much of this garbage lenders kept on their books. I assumed that most of this toxic waste was purchased by hedge funds and other institutional investors. I knew there was going to be a lot of pain, but I really thought our lenders were more insulated than they were. I do see this as leading to the last nail in the coffin of real estate: higher interest rates. We now have a much less competitive lending environment, and those that remain face higher short-term borrowing costs. I don’t see how this cannot lead to higher interest rates.
Posted by Some Guy on 09/29/08 at 10:13 AM
There are dozens of steps in the process to getting permitted for building housing in CA. At all those steps, there is an opportunity for influence by “community activists” and local politicians with their hands out. Generally, the process is operated in the suburbs with the goal of keeping lot size up, and minorities out.
Little known fact, environmental/community activism in CA is basically a tool for keeping higher density housing out of your neighborhood…and the accompanying blacks and Mexicans.
Yes, I speak from experience.
In the old days, “community activists” wore white hoods and rode only at night. Now, with CEQA and planning boards, they do it in broad daylight, and feel smugly superior about doing it.
Posted by Texas Triffid Ranch on 09/29/08 at 10:16 AM
Orcian, I like the concept of “false demand”, because that’s actually a concept that applies in this case as well. In my situation, false demand applies to the “I think you should aughta…” whines coming from people who give the suggestion that they’d buy if the seller included particular features/perks/benefits, but who’ll never bother to buy once it’s offered to their specifications. Everyone who’s ever worked in retail knows these dolts: they’ll whine and whine about how they’d buy from you in a heartbeat if you just included one dealbreaker to the mix, but the moment you ask them to pay for it, they suddenly run like hell and leave you with the item.
I think that false desire helped with a lot of the real estate bubble, especially with convincing buyers to get as much house as they could possibly afford. Does everyone need or even want zero-lotline McMansions that cost the rough equivalent of the gross national product of Singapore to heat and cool every year? No, but somebody got it into his/her microscopic head that this sort of house would be cool, especially if fitted with a giftwrapping room and a shoebox-sized swimming pool in what tiny strip is left of the back yard. Same deal with pergraniteel and big staircases visible from the front yard and kitchen islands: they thought these things were in demand, and subsequently built or influenced the market so these things became standard. After a while, it became nearly impossible to put a house on the market without stainless steel appliances, even though nobody could explain, with a straight face, why stainless steel was an improvement.
The clincher, of course, comes when the houses stop being bought as investments and commodities. Many of the buyers in the boom, and I say this from firsthand knowledge, were the sort that caused the implosion of the toy market in the late Nineties thanks to an obsession with collecting action figures and playsets as an investment. When they were in their twenties, they filled their rooms with mint-on-card Star Wars action figures, certain that they’d only go up in value as they got older. Now that it’s impossible to give away Jar-Jar Binks figures with free beer, they can’t find buyers because enough of their contemporaries woke up, asked “And what did I just blow two paychecks on?”, and got out of the market. We’re watching right now as those twentysomethings turned thirtysomething and fortysomething try to get out of the housing market, trying to turn their cool investments into much-needed cash at a time when nobody even comes close to wanting what they’re trying to sell. False desire all over again: I keep looking at horribly designed houses with no storage space, bad placement of walls and windows, and no thought toward longterm occupation, and wonder who in their right mind would be crazy enough to buy them in another ten years.
Posted by Matt on 09/29/08 at 10:27 AM
The counter-pressure I see, though, is that the remaining lenders will still need to drum up business. Yes, competitive pressures reduce prices, but reduced demand for a product forces even a monopolist to recognize that supply and demand are stronger forces than competition. Monopolists squeeze what ‘rents’ they can out of their supply advantage, but with low demand, there really aren’t any rents.
But, this counter-pressure can’t push back against both less competition AND the changes in the SUPPLY function (such as the phenomenal pressure real inflation puts on rates). Rates will rise. The fact that people won’t buy a house if the price is too high OR the rates are too high will push for lower rates, but inflation, bad loans on the books, and monopoly conditions all push those rates higher.
Posted by alan on 09/29/08 at 11:20 AM
Bailout fails in HOUSE! Dow down 500!
Roubini now calling total systemic meltdown predicting that if Merrill and GS don’t find a larger bank to merge with now they will be BK in a few weeks and “the mother of all bank runs, i.e. a run on the trillion dollar plus of the cross border short-term interbank liabilities of the US banking and financial system as foreign banks as starting to worry about the safety of their liquid exposures to US financial institutions”
http://www.rgemonitor.com/roubini-monitor/253801/the_us_and_global_financial_crisis_is_becoming_much_more_severe_in_spite_of_the_treasury_rescue_plan_the_risk_of_a_total_systemic_meltdown_is_now_as_high_as_ever
Blood in the streets. The end of days is here.
Forget housing, there are bigger things to worry about now.
Posted by AZDavidPhx on 09/29/08 at 11:31 AM
There is hope for the country after all.
Posted by Blueberry Pie on 09/29/08 at 11:39 AM
If a $700B bailout would be able to prevent a massive meltdown, wouldn’t that same bailout be able to solve the problem a month from now if the meltdown actually begins to happen?
Posted by NanoWest on 09/29/08 at 11:44 AM
What is sort of sad about all this is that nobody want to come out and say what the real numbers are….....it is very simple to calculate what the underlying values of the mortgage assets are….(what would be retrieved if all the homes with bad mortgages went to auction)
Take all home loans sold in 2004- 2007, they are worth 40 % of their value.
home loans from 2001 - 2004 are worth 50 % of the value
home loans from 1998 - 2001 are worth 60% of their value.
So thats it,,,,,,,,,,,,,,,,,,we now know what the damage is. Problem is, nobody want to tell the general public because they will be very, very upset.
Posted by AZDavidPhx on 09/29/08 at 12:08 PM
It was crap from the beginning. Trying to rush it all through and give the voters a chance to forget before November.
This will be painful, but it’s not the end of the world.
Posted by phil on 09/29/08 at 12:49 PM
Barney Frank gets on after the bailout vote failed and says “the problem with the housing market is foreclosures…”
This guy bugs me. The problem isn’t foreclosures; that’s the symptom of the problem! The root problem is housing valuations are out of whack and need to return to affordable values. Why don’t reporters and economists lambast this guy and others like him?
Posted by alan on 09/29/08 at 12:52 PM
That would work if all homes were located in CA or Fl. In TX, housing prices are actually increasing.
There are estimates of the total losses. CR posted a number of $1.5 trillion of which only $430 billion has been written down to date.
If Roubini is right in calling the “mother of all bank runs” then it is Armegedon for the dollar.
Posted by alan on 09/29/08 at 12:54 PM
Barney Frank was chair of the committee that blocked increased supervision of Fanny/Freddie requested by Bush back in 2004 and look what happened.
I still haven’t seen him or his party admit their role in this mess.
Posted by IrvineRenter on 09/29/08 at 01:06 PM
Barney Frank was not the chairman of anything in 2004. The Republicans controlled the House and the Senate. Barney Frank would have been the senior member of the minority party on any committees, but he would not have been a chairman.
Posted by nanowest on 09/29/08 at 01:09 PM
Alan,
Well if you like go state by state….......but it is possible to figure out what the value of the assets is in relationship to the value of the mortgages….and that is the maximum damage. No politician, banker or citizen wants to tell the American homeowner that their homes are worth far less than they thought.
Posted by Major Schadenfreude on 09/29/08 at 01:14 PM
I’m digging this rejection of the bill.
Anybody know how to see how people voted on it this afternoon?
Posted by lam3 on 09/29/08 at 01:16 PM
Amazing. You actually responded to your own post twice. Get the feeling nobody but you cares about what you write…I do.
Posted by AZDavidPhx on 09/29/08 at 01:55 PM
Someone posted the list on the HousingPanic comments:
https://www.blogger.com/comment.g?blogID=18675105&postID=7563429855884735429&page=1
Here’s the Hall of Shame for Today:
Vote accordingly…
FINAL VOTE RESULTS FOR ROLL CALL 674
(Democrats in roman; Republicans in italic; Independents underlined)
H R 3997 RECORDED VOTE 29-Sep-2008 2:07 PM
QUESTION: On Concurring in Senate Amendment With An Amendment
BILL TITLE: To amend the Internal Revenue Code of 1986 to provide earnings assistance and tax relief to members of the uniformed services, volunteer firefighters, and Peace Corps volunteers, and for other purposes
Ayes Noes PRES NV
Democratic 140 95
Republican 65 133 1
Independent
TOTALS 205 228 1
——AYES 205—-
Ackerman
Allen
Andrews
Arcuri
Bachus
Baird
Baldwin
Bean
Berman
Berry
Bishop (GA)
Bishop (NY)
Blunt
Boehner
Bonner
Bono Mack
Boozman
Boren
Boswell
Boucher
Boyd (FL)
Brady (PA)
Brady (TX)
Brown (SC)
Brown, Corrine
Calvert
Camp (MI)
Campbell (CA)
Cannon
Cantor
Capps
Capuano
Cardoza
Carnahan
Castle
Clarke
Clyburn
Cohen
Cole (OK)
Cooper
Costa
Cramer
Crenshaw
Crowley
Cubin
Davis (AL)
Davis (CA)
Davis (IL)
Davis, Tom
DeGette
DeLauro
Dicks
Dingell
Donnelly
Doyle
Dreier
Edwards (TX)
Ehlers
Ellison
Ellsworth
Emanuel
Emerson
Engel
Eshoo
Etheridge
Everett
Farr
Fattah
Ferguson
Fossella
Foster
Frank (MA)
Gilchrest
Gonzalez
Gordon
Granger
Gutierrez
Hall (NY)
Hare
Harman
Hastings (FL)
Herger
Higgins
Hinojosa
Hobson
Holt
Honda
Hooley
Hoyer
Inglis (SC)
Israel
Johnson, E. B.
Kanjorski
Kennedy
Kildee
Kind
King (NY)
Kirk
Klein (FL)
Kline (MN)
LaHood
Langevin
Larsen (WA)
Larson (CT)
Levin
Lewis (CA)
Lewis (KY)
Loebsack
Lofgren, Zoe
Lowey
Lungren, Daniel E.
Mahoney (FL)
Maloney (NY)
Markey
Marshall
Matsui
McCarthy (NY)
McCollum (MN)
McCrery
McDermott
McGovern
McHugh
McKeon
McNerney
McNulty
Meek (FL)
Meeks (NY)
Melancon
Miller (NC)
Miller, Gary
Miller, George
Mollohan
Moore (KS)
Moore (WI)
Moran (VA)
Murphy (CT)
Murphy, Patrick
Murtha
Nadler
Neal (MA)
Oberstar
Obey
Olver
Pallone
Pelosi
Perlmutter
Peterson (PA)
Pickering
Pomeroy
Porter
Price (NC)
Pryce (OH)
Putnam
Radanovich
Rahall
Rangel
Regula
Reyes
Reynolds
Richardson
Rogers (AL)
Rogers (KY)
Ross
Ruppersberger
Ryan (OH)
Ryan (WI)
Sarbanes
Saxton
Schakowsky
Schwartz
Sessions
Sestak
Shays
Simpson
Sires
Skelton
Slaughter
Smith (TX)
Smith (WA)
Snyder
Souder
Space
Speier
Spratt
Tancredo
Tanner
Tauscher
Towns
Tsongas
Upton
Van Hollen
Velázquez
Walden (OR)
Walsh (NY)
Wasserman Schultz
Waters
Watt
Waxman
Weiner
Weldon (FL)
Wexler
Wilson (NM)
Wilson (OH)
Wilson (SC)
Wolf
——NOES 228—-
Abercrombie
Aderholt
Akin
Alexander
Altmire
Baca
Bachmann
Barrett (SC)
Barrow
Bartlett (MD)
Barton (TX)
Becerra
Berkley
Biggert
Bilbray
Bilirakis
Bishop (UT)
Blackburn
Blumenauer
Boustany
Boyda (KS)
Braley (IA)
Broun (GA)
Brown-Waite, Ginny
Buchanan
Burgess
Burton (IN)
Butterfield
Buyer
Capito
Carney
Carson
Carter
Castor
Cazayoux
Chabot
Chandler
Childers
Clay
Cleaver
Coble
Conaway
Conyers
Costello
Courtney
Cuellar
Culberson
Cummings
Davis (KY)
Davis, David
Davis, Lincoln
Deal (GA)
DeFazio
Delahunt
Dent
Diaz-Balart, L.
Diaz-Balart, M.
Doggett
Doolittle
Drake
Duncan
Edwards (MD)
English (PA)
Fallin
Feeney
Filner
Flake
Forbes
Fortenberry
Foxx
Franks (AZ)
Frelinghuysen
Gallegly
Garrett (NJ)
Gerlach
Giffords
Gillibrand
Gingrey
Gohmert
Goode
Goodlatte
Graves
Green, Al
Green, Gene
Grijalva
Hall (TX)
Hastings (WA)
Hayes
Heller
Hensarling
Herseth Sandlin
Hill
Hinchey
Hirono
Hodes
Hoekstra
Holden
Hulshof
Hunter
Inslee
Issa
Jackson (IL)
Jackson-Lee (TX)
Jefferson
Johnson (GA)
Johnson (IL)
Johnson, Sam
Jones (NC)
Jordan
Kagen
Kaptur
Keller
Kilpatrick
King (IA)
Kingston
Knollenberg
Kucinich
Kuhl (NY)
Lamborn
Lampson
Latham
LaTourette
Latta
Lee
Lewis (GA)
Linder
Lipinski
LoBiondo
Lucas
Lynch
Mack
Manzullo
Marchant
Matheson
McCarthy (CA)
McCaul (TX)
McCotter
McHenry
McIntyre
McMorris Rodgers
Mica
Michaud
Miller (FL)
Miller (MI)
Mitchell
Moran (KS)
Murphy, Tim
Musgrave
Myrick
Napolitano
Neugebauer
Nunes
Ortiz
Pascrell
Pastor
Paul
Payne
Pearce
Pence
Peterson (MN)
Petri
Pitts
Platts
Poe
Price (GA)
Ramstad
Rehberg
Reichert
Renzi
Rodriguez
Rogers (MI)
Rohrabacher
Ros-Lehtinen
Roskam
Rothman
Roybal-Allard
Royce
Rush
Salazar
Sali
Sánchez, Linda T.
Sanchez, Loretta
Scalise
Schiff
Schmidt
Scott (GA)
Scott (VA)
Sensenbrenner
Serrano
Shadegg
Shea-Porter
Sherman
Shimkus
Shuler
Shuster
Smith (NE)
Smith (NJ)
Solis
Stark
Stearns
Stupak
Sullivan
Sutton
Taylor
Terry
Thompson (CA)
Thompson (MS)
Thornberry
Tiahrt
Tiberi
Tierney
Turner
Udall (CO)
Udall (NM)
Visclosky
Walberg
Walz (MN)
Wamp
Watson
Welch (VT)
Westmoreland
Whitfield (KY)
Wittman (VA)
Woolsey
Wu
Yarmuth
Young (AK)
Young (FL)
——NOT VOTING 1—-
Weller
Posted by camsavem on 09/29/08 at 02:14 PM
Im glad it failed and here is why.
We are supposed to believe that they know what they are talking about now, and risking 700B on their opinion yet…..
None of them saw this comming?
I knew it was comming since 2005.
Either they are morons (not likely) or liars (likely) and think we are morons.
Let them eat cake.
Posted by Kirk on 09/29/08 at 02:24 PM
I’ve been gone for a week. Did I miss anything?
Posted by SevenHundredBillion.com on 09/29/08 at 03:04 PM
Based on your observation that the price is strongly connected to credit availability (I agree with that) what would be your prediction regarding house prices if credit availability is severely restricted (e.g., close to non existent)? Would this in turn result is severe price drops that we are yet to see (let’s say 70% off the peak)?
Posted by IrvineRenter on 09/29/08 at 03:06 PM
The libruls that caused this housing mess through their communist agenda and affordable housing initiatives have derailed our great President’s noble attempt to save the economy and the common man. Let us pray that the conservative voices of the righteous can save us once again…
Er, something like that.
Posted by IrvineRenter on 09/29/08 at 03:08 PM
Well, if we go back to a cash basis, anything is possible. Realistically, prices will drop to financing levels where people’s real salaries with a 28% DTI supports payments.
Posted by granite on 09/29/08 at 03:09 PM
From MarketWatch article on bailout failure.
“...Or perhaps the plan’s many critics were right in saying that credit markets and home prices can adjust on their own, once the promise of free money is withdrawn.”
Burn baby burn.
Posted by Matt on 09/29/08 at 03:26 PM
My concern is that home prices can adjust on their own (people can’t trade up as much, and many people have lost their retirements, but that just puts more of a drain on governmental balance sheets), but I’m not sure the credit markets CAN bounce back without help.
Yes, stupid, greedy people did this. But, I’ve been wondering if the analogy of a fire is correct here: sure, some punk kid started a brush fire while burning ants, but do you not put out the fire just to teach the kid a lesson?
I can’t claim to know the answer, but I have to admit to being concerned that not passing a bailout is simply paving that road to hell.
Posted by tonyE on 09/29/08 at 03:42 PM
The problem is that 28% of nothing is nothing.
If the economy tanks amd layoffs come around your boss don’t care if you are a renter, homeowner with a good mortgage or a would be flipper living in a TRidge mansion.
Then, of course, your 401K will go to pot.
And eventually we may run into inflation too, so good luck with your cash.
Those 700B were peanuts, and in any event they were supposed to be used to buy stuff at deeply discounted values.
Instead, we got all of these knuckleheads that don’t realize that no matter how well off and insulated you may be today, tomorrow we’ll be be shooting at each other to stake out the best underpass.
And then you got Pelosi… what a frickin’ idiot.
Posted by Capocorso on 09/29/08 at 04:04 PM
Anyone have a guess as to what this bailout failing is going to do to interest rates?
I heard one of the many “experts” say he thought interest rates would spike to over 10% if no help is given by the fed gov.
Posted by Chris on 09/29/08 at 04:42 PM
Sure, unless you’re unemployed/retired with mega million stashed such that you can live off dividend and interest even with premium healthcare paid for by the div/interest, you’ll be affected one way or another buddy.
Can you say jobless?
Yeah, burn baby burn. Jobs will be burned too even without this bailout.
IR, hope you’ll command 6 figures or more with that book. You might need it if layoff occurs.
Posted by Chris on 09/29/08 at 04:45 PM
For all you permabears on housing, I like to see your bear side when unemployment hits 50% nationally (and you’re being hit with a pink slip as well).
Let’s see…hmm…I rent, good, I don’t play the stock market, good, I just lost my job, SUPER!
Posted by Schadendude on 09/29/08 at 05:08 PM
Hard to call a number, but double digits is all but assured once the spread between the three-month LIBOR and the Fed funds rate reaches 3%. Not to mention our national credit rating will be adversely affected by any bailout and the market for Tbills will disappear once faith in the dollar reaches capitulation.
“Right now people, don’t think return ON capital, but return OF capital.”
-Peter Schiff
Posted by mmg on 09/29/08 at 05:21 PM
TonyE—>Those 700B were peanuts, and in any event they were supposed to be used to buy stuff at deeply discounted values.
That is part of the bubble mentality, peanuts, you know how many peanuts 700 B will buy you
we need to deal with reality not fantasy land, these people in charge got us into this mess and thus I personally dont give a $hit what they think will get us out, enough with the madness.
Maybe they should have a panel of IR, CR, Mish, N Roubini and Schiff to take a look at this mess, not these retards in Congress.
Posted by tonyE on 09/29/08 at 05:59 PM
Look, the issue here is that we’re all in the same boat now.
If we have a credit crisis and we ALL tank, then you better have a bunker somewhere full of gold, propane, dried food stuffs, a water well, a generator, plenty of ammo, guns and liquor and be ready to shoot any trespassers.
It won’t make diddly squat of a difference whether you rented, bought or stole your home if you ain’t got a job, dig?
This is why what Pelosi did today was so particularly odious. She put her own political interests ahead of the entire country.
And yes, compared to the economy, and your job (assuming you are not a trust fund baby and your trust fund is in gold right now) those 700B are just peanuts.
Time to realize that the time for political posturing and bullshit is over. Pelosi better shut her mouth and remember that is was her and the Democrats in Congress that really got us in this mess.
We’ll have time to clean things up later, but right now those 700B are the peanuts that are needed to keep the beer flowing. Otherwise we’ll all be caught with peanut butter in our mouths and no milk in sight.
Posted by tonyE on 09/29/08 at 06:05 PM
There’s no hope with some people. Jefferson was right, Jackson was wrong. You can not have a republic when the voters are dumber than a rutagaba a foot in the ground.
Poor IR may also come out a loser. No one will want to buy ( or be able to afford ) his book when we’re all unemployed and trying to get a job tending dishes in Mexico.
At least I speak spanish so I can get the maitre’d job while you anglo-onlys will be forced to wash dishes…
“Andale Camsavem, you buey, get those damn dishes washed pronto or we’ll call la Immigracion Mexicana on you and back to LA you go….”
Posted by tonyE on 09/29/08 at 06:17 PM
Be serious for a sec… It was the Democrats in Congress that got us into this mess.
Check this from 2005.
http://www.headlinezone.com/lofiversion/index.php/t13286.html
Todd, Kerry, Obama….
If you goggle you will find lots of info in 2003 and 2005 about how Bush and McCain tried to control the lending on Fannie Mae and Freddie Mac but it was the democrats who blocked them.
So, please, don’t make politics out of this because the Dems really are to blame too. In some ways much more than Bush.
Normally I don’t get too wound up with the political crap out of DC, but today’s complete bullshit speech by Pelosi meant to cover her us in her reelection in SF screwed the whole country.
It may get her reelected but she should lose her post of Majority Leader.
Posted by nefron on 09/29/08 at 06:26 PM
hmmm tonyE, who’s being partisan now?
Posted by Kirk on 09/29/08 at 06:30 PM
Yes, let’s be serious for a sec.
http://www.washingtonpost.com/wp-dyn/content/article/2008/02/13/AR2008021302783.html
Posted by Kirk on 09/29/08 at 06:32 PM
Dude, just because the truth might become unpleasant for us too doesn’t mean we should deny it.
Posted by Dave on 09/29/08 at 06:48 PM
I’m going surfing.
Seriously.
I have been breaking my balls last 5 years saving on what was left of the divorce settlement taking my small dot com savings because I knew in my bones this shit storm was brewing. I now have a tidy little pile. Not much, but more than enough.
Being out of work a year will be like a vacation. It *will* be a vacation.
Then I’ll get back to work like my father did during the Great Depression. He was never out of work. He was willing to work.
Everything is paid for. No debt. Savings for car repairs, food, rent, everything. Bring it on.
Why people cannot understand that economic calamities are normal is beyond me. Supply/demand, predator/prey, a billion year old cycle that we can only remediate, but never completely mitigate.
So, yeah, I’ll be partying like it’s 1999. And after I get tired of surfing, I’ll expand my current company or start a new one. There will be lots of talent available ready to work, and the price will be competitive with all our current outsourced venues.
BTW, one my contractors in Eastern Europe is now par with San Francisco pricing on entry level web development. We’re keeping him because he knows the current system. We’ll be replacing him as we grow. Replacing him with North American talent.
Posted by Dave on 09/29/08 at 06:54 PM
As a followup, the subcontinent is doomed. Bangalore is going to have to find a domestic market for their talents. Good luck given the massive social inequity embedded in the Indian system.
Posted by Kirk on 09/29/08 at 07:17 PM
That’s what I’ve been trying to tell people for years. Indians are elitist bigots. That’s why we took their land. To bring social justice to these lands.
Posted by smarterthanyou on 09/29/08 at 07:19 PM
You and the authors of this blog are idiots. You fail to realize that everyone with retirement etc loses. By not giving 700B today we have lost 1.2 Trillion in value across the board. Moron.
Posted by freedomCM on 09/29/08 at 07:31 PM
who is this alan guy, and does he have anything remotely factual to add to the discussion?
Posted by Schadendude on 09/29/08 at 07:33 PM
huh ?
Posted by MalibuRenter on 09/29/08 at 07:36 PM
In case you haven’t noticed, Merrill already found a partner, BofA.
Perhaps you mean Morgan Stanley?
Posted by Schadendude on 09/29/08 at 07:37 PM
Ummm Indians from India and Indians from the Americas do not share the same culture.
thanks for the laugh though…
Posted by MalibuRenter on 09/29/08 at 07:38 PM
Interest rates will spread. Shorter term interest rates will go lower. Longer term interest rates will go higher.
Interest rates for people and institutions with very good credit will drop. Interest rates for people with OK credit will rise. People with crap credit won’t be able to get any new loans.
Posted by MalibuRenter on 09/29/08 at 07:41 PM
As I have said previously, the banks with MBS portfolios are very much like homeowners under water. They remember 2006 pricing and just can’t believe they can’t get anywhere near it. They think/hope that it is all temporary, if they hold on long enough, they will make money.
The same kinds of thing bring banks to reality as homeowners. 1. No one will refi them. 2. Any borrowing cost not already fixed either gets more costly or dries up on them. 3. Bankruptcy happens slowly at first, then all at once.
Posted by Kirk on 09/29/08 at 08:28 PM
Of course not, they try to assimilate once they move to India.
Posted by Schadendude on 09/29/08 at 08:44 PM
please pass whatever you’re smokin kirk
Posted by no_vaseline on 09/29/08 at 08:55 PM
I made the same observation with similar reaction over on the forum.
It doesn’t matter now. I hope the ‘Pubs enjoy the shit sandwich they fixed for the rest of us, because IMO we’re getting ready to see what unleverageing really looks like.
Posted by no_vaseline on 09/29/08 at 09:10 PM
lulz
Posted by tonyE on 09/29/08 at 09:34 PM
Let’s see… Eliot Spitzer.. A Democrat right? The guy with the prostitute habit who at the same time took the holier than thou attitude.
Sorry Kirk… hope the bell in your computer don’t wake you up… but you got to choose your sources better.
In 2003 and 2005 Bush and McCain tried to control Congress and Fannie Mae and Freddie Mac.
Spitzer’s friends in Congress stopped them.
Posted by tonyE on 09/29/08 at 09:37 PM
Pelosi got her buddies to vote no on what she knew was a very unpopular dose of medicine… and then she could blame the GOP for passing it.
Now, who’s being partisan here?
Pelosi is the Majority Leader and both Obama and McCain pushed for a show of bipartisanship. Pelosi wwould have none of that and hence torpedoed the bill.
If I were being partisan, I’d say that this was planned by Obama and Pelosi.
Posted by LooksSimilar on 09/29/08 at 09:50 PM
thumb up….....you spoke out what I wanted to say but didn’t know how
If I want to sell something that is worthwell and can make money by holding, I don’t want to give it away to you, the taxpayer, it makes no sense why Bus told us we can make money on those assets the private companies planned to dump…..Do you think gov is smarter than wall street MBA-s, I doubt it.
Posted by Food on 09/29/08 at 09:59 PM
TonyE,
I don’t think we are on the same boat. I save my pennies. Some would call me cheap, and yet some would even suggest by looking up on the word “cheap” in the dictionary, it will show a picture of my face as an example, but in reality I am frugal by today’s standard but nowhere near the 30’s. The society ought to reward the frugal just like the field I am in.
If this organized/legalized bank/treasury robbery engineered by Paulson and Bernanke is passed, my hard-earned savings would be worth less. If there is a depression with surely long-term higher interest, I will benefit even if I lose my job. Hey, being an electronics engineer, the days are numbered for me anyway, but with a depression, at least some industrial jobs would come back to the United States.
Thank God that any coup is not necessary at this moment. This is the first time that the people united does make a difference in politics. Fuck Paulson and his Jewish sidekicks Greenspan and Bernanke. All of them should go to hell. Among them, I hate Greenspan the most. He was the clueless asshole who raised the interest rate just to kill the high-tech expansion that was when I lost my job in the high-tech industry. Moving to a new location, he priced me out of the real estate market by artificially lowering the interest. He was so clueless that he could not even make up his fucking mind. God, I hate Greenspan. I hate them all. The exact opposite of what they want must be the best for the country given the dire circumstances we are in right now.
Posted by ochomehunter on 09/29/08 at 10:12 PM
$630 Billion pumped despite $700 bailout refusal - FED Hypocrisy
What is the fuss all about? Fed Pumped $630 Billion Into Financial System today and at the time when Congress rejected $700 billion
bailout. If FED has the money and they can pump our USD (currency) as much as they want without approval , then where does the liquidity
crisis question come from? Can someone explain this??? My understanding of Federal Reserve is that its a private bank cartel that is holding USA hostage in debt big time, and now that their
trillions of $$ are being lost in bad mortgages, they want to pass the buck over to USA Govt. and bury us deeper in debt and keep collecting
taxes and interset until we all disappear from the face of the earth.
What a freaking FED Hypocrisy here folks. I lost money today in the market and as much as I hate losing money and as much as everyone hates bailouts, think about the core monopoly game being played by the FED here and lets discuss what you folks think about this whole fiasco! Its just a bunch of BS on FED’s part and they got the Govt. by the balls!
If you think about this, USD has been recently gaining strength with falling other currencies, at the same time FED is pumping billions and
billions of newly printed funny money into the markets, thereby diluting USD as it accumulates somewhere. When markets return to sanity, USD will flood the markets causing massive dilution. But, by then FED would have gotten its pray via asset or gold accumulation from those who needed to be rescued.
Economists call the market cycles as “Business Cycles” while most economists represent these big banks. If you think about it, FED is the one that causes easy money policy = creates bubbles = squeezes every penny out of citizens into real estate or stock markets = money transfers, changes hands from people to banks = credit is squeezed by FED again = massive loses for citizens, life savings wiped out, put deeper into debt = keep working your butt and keep paying interest.
The only way out of this FED’s stangle hold is I think that people spend money they own and not they borrow. Once that happens, lending will be less lucrative and economies will prosper without these big blood suckers!
Posted by Kirk on 09/29/08 at 10:28 PM
What can I say? If nailing some hooker to clear the mind is what is needed to do the job then I’m all for it. I really could care less what politicians do with their genitals. They can nail some guy in an airport bathroom for all I care. Spitzer, and several other state attorneys, tried to act and Bush blocked them. End of story.
Posted by WaitingToBuyByAndBy on 09/29/08 at 10:32 PM
I care.
Posted by Major Schadenfreude on 09/29/08 at 10:41 PM
Me too. AZ always cracks me up.
(By the way, that was a nice post yesterday Waiting.”
Posted by Mikee on 09/30/08 at 06:32 AM
So, the Dems didn’t control the House or Senate until 2006 right? So, a Repub controlled Congress (with help from some Dems) defeated any try to rein in the lending/credit card/bankruptcy business.
As well, federal courts stopped certain states (i.e. GA, NY) from implementing their own safeguards. And this was done while the President, House and Senate were all Repub-controlled right?
I’m just trying to get the story right.
Posted by muzie on 09/30/08 at 04:06 PM
Oh, look, geez, about 600B$ of that “loss” came back today. And, wouldn’t you know, the market is right back at the point it was BEFORE the bailout vote. Guess that kills your panicky theory.
Maybe a trillion will disappear again tomorrow? Who will you blame then?
Posted by muzie on 09/30/08 at 04:20 PM
The money was not printed, it is from expanded currency swaps from with central banks.
What does this mean? Well, I don’t know, but it woudl be premature to assume it is “printed” without knowing the details.
Posted by Irvine Cyclist on 09/30/08 at 10:34 PM
Be serious for a sec… It was the Democrats in Congress that got us into this mess.
Check this from 2005.
http://www.headlinezone.com/lofiversion/index.php/t13286.html
Todd, Kerry, Obama….
—————————————-
tonyE
You should read through the whole thread you posted. It’s obvious the person who wrote it is biased, and they’re refuted with facts throughout the whole thread.