If MEW is currently running about 5% of GDP, how could that number be only 5.2% of disposable income if 70-80% of the average family's income goes to taxes interest and insurance?
Yep J6P is a fool and refuses to live at or beneath means. Gotta keep up the spending so that people think I'm rich.
Local syndicated morning Ha-Ha show in LA had a truly funny bit this morning essentially making fun of such people. They did a fake ad for Lexus Christmas Trees.
Actually, 2006 nominal GDP was approximately $13.27 Trillion. Thus, 2007 annualized MEW is actually closer to 4% of GDP. Does total disposable income approximate GDP? It is just that it seems that current MEW is a much higher percentage of disposable income in the common usage of the term.
Thanks for any input.
Wow, just wow. Look how that MEW increased in the last five years. How did borrowing money against the house for consumer purchases get to be the norm?
The thing to think about here, is that up until the current insanity MEW was generally only provided to people with low LTV's who wanted to do something at least semi productive. Like fix a roof, or foundation, or remodel a kitchen.
Other reasons might be to roll in CC debt to ensure more timely payments on the mortgage. But these generally required the CC accounts be closed.
This idea of MEW being handed out like free money to spend on consumption with no questions asked just kind of exploded out of no where. Truly silly.
I know people here who between cash out refi's (and other schemes) combined with MEW are in debt now for over $500k. Combined income of $120K. Insane.
What's Magoo's name doing on that paper? I guess is wasn't enough to be knighted, called Maestro and given an $8 million advance for partially ghost-written memoirs. Looks like he also has to take credit for work done by his subordinates.
About 23 years ago I saw an add in a newspaper about loans being offered to buy a stereo. At that point I knew we had gone to far into consumerism and indebtedness and if it continued we would end up borrowing for many things that were not needed. It took a while to see things get to the point where many are overextended and will need to reconsider their extravagant lifestyles.
Of course the fact that the banks keep making these stupid loans is also ridiculous.
Actually the executives probably walked away with huge bonuses that they wouldn't have gotten otherwise from the "profits" they generated (nevermind if they all roll back and then some).
It's the same thing for hedge fund managers -- their compensation is like a ratchet wrench that only goes up even when that fateful day comes where everything goes bust. Since there's no way they can lose money themselves they have a huge motivation to screw up as much as possible so long as it appears profitable.
I've got no problems with people who get rich creating real wealth. I feel differently about people who get rich by destroying wealth in the process of creating wealth illusions.
Yep, typical partisan. The dumborats had nothing to do with it. And actually in was Magoo, but yes Shrubboy's mal-administration was promoting the debtorship...err...ownership society. But to not include Clinton is just partisan political BS, so...
"I've got no problems with people who get rich creating real wealth. I feel differently about people who get rich by destroying wealth in the process of creating wealth illusions."
I've got no problems with people who get rich creating real wealth. I feel differently about people who get rich by destroying wealth in the process of creating wealth illusions.
I have often wondered about the "market failure" represented by the obscene money people make in finance for doing approximately nothing.
But the optimist in me hopes this entire crisis is just the market finally correcting that inefficiency. Have you noticed that almost all of the carnage is confined to financial assets held by financial institutions, and the data coming out of the real economy simply are not that bad (yet)?
Maybe the primary outcome of this turmoil will be for the financial sector to contract by 80%, and all those talented folks on Wall Street will have to get real jobs creating real wealth.
The entire country is stark raving mad, I tells ya.
Pretty much. You would think that falling housing prices would scare more people into cutting back. But since consumer over-spending is America's Prozac/Viagra, no can do.
Sorry, but love this example of what this bogus economy is based on, i.e, love the part here about stability:
Newcastle Investment Corp
Investment Corp. (Newcastle) is a real estate investment and finance company. We invest with the objective of producing long term, stable returns under varying interest rate and credit cycles, with a moderate amount of credit risk. Newcastle invests in real estate securities, loans and other real estate related assets.
We are dependent on our manager and may not find a suitable replacement if our manager terminates the management agreement.
We have no paid employees. Our officers are employees of our manager. We have no separate facilities and are completely reliant on our manager, which has significant discretion as to the implementation of our operating policies and strategies. We are subject to the risk that our manager will terminate the management agreement and that no suitable replacement will be found to manage us. Furthermore, we are dependent on the services of certain key employees of our manager whose continued service is not guaranteed, and the loss of such services could temporarily adversely affect our operations.
"I do not doubt that a low U.S. federal-funds rate in response to the dot-com crash, and especially the 1% rate set in mid-2003 to counter potential deflation, lowered interest rates on adjustable-rate mortgages (ARMs) and may have contributed to the rise in U.S. home prices."
Right so people can do things like MEW withdrawals to keep consumer spending going strong and the US economy afloat.
then Alan Greenspan says...
"In my judgment, however, the impact on demand for homes financed with ARMs was not major"
Right Alan you had nothing to do with priming the pump for the subprime, Alt A and rest of the real estate mess.
I'm old enough (older than bacon dreamz) to recall that the line was, if Clinton doesn't reappoint Greenspan, the world will end- from the GOP and Wall Street.
The Mises remark was a gag.
But the GOP is an absolute sewer, and I lay the blame at their door.
Anyone else here amazed at how high MEW still is vs. historical baseline of the 1990s? Despite all the foreclosures/NODs, failed lenders, flopped floppers, new lending "guidance", bailout talk, and generally negative press, we're STILL in 2002-2003 bubble territory.
The Amerikan consumer will stop spending when you pry the HELOC from his cold, dead hands (and maybe not even then).
Both parties are sewers. Thanks for the retraction on Mises. I try not to discuss politics here so I'll stop. Agreed? Accept as politics impinges on the post of course. Shake? (as in hand shake)
Maybe the primary outcome of this turmoil will be for the financial sector to contract by 80%, and all those talented folks on Wall Street will have to get real jobs creating real wealth.
Yeah. I really think the financial sector could be looking at a blowout worse than what hit the tech sector in 2001.
When it comes down to it, I bet there's a lot of really scared people on Wall Street right now.
This idea of MEW being handed out like free money to spend on consumption with no questions asked just kind of exploded out of no where. Truly silly.
I keep harkening back to the summer of 2000. The last time we had an asset bubble in this country, it cost us 85% on the Nasdaq, 50% on the S&P ... and this with an asset class that could only be margined up to 50% of its value!
Imagine the absolute carnage that would have ensued if Joe Daytrader, with a $50K income, had been allowed to buy $500K worth of stocks with no money down. And, rather than being the victim of forced margin selling, he could call up E*Trade and have them advance him another 20% of the late-1999 value of his account because, really, we all know stocks only go up in price!
The thought experiment itself just boggles the mind. The realization that we're so stupid as a society as to relive it on a grander scale less than a decade later ... well, words flat-out fail me.
The entire problem will be solved by a massive earthquake in California and a massive hurricane in Florida that will each destroy 500,000 homes. All of the displaced people will move to the remainder of the country and buy homes there. Result-all the unsold inventory will be gone in 2 months.
The Amerikan consumer will stop spending when you pry the HELOC from his cold, dead hands (and maybe not even then).
HARM | Homepage | 12.12.07 - 9:37 pm | #
There are still parts of the country where housing hasn't rolled over completely yet. PNW and Utah for example. I have a coworker who just got and appraisal for a refinance and cash out and the house is double what it was bought for 3 years ago.
Banks have only "redlined" places with serious declines for lending cutbacks. They seem to actually think that they are avoiding further risk by concentrating on markets that have not shown year over year declines but are clearly at peaks for anyone with a brain.
I think the new HELOCs may be going to a slightly different demographic. Namely the relatively conservative folks who actually still have some home equity. I've considered it to increase my cash cushion because credit may not be available on those terms six months from now.
That would really be bad news. It means that the conservative folk who have low LTV's are throwing in the towel to join the party.
Ever show up at a rager late and see all the over drunk doofuses falling over themselves and say...Gee bartender give me a bottle of Kettle One so I can look like that?
I mean I have, but that's me...but it is...unsiwe.
CR - thanks. Useful as always. We couldn't enter a plea for the "old" MEW impact on GDP (with & w/o) could we ? Understand your problems but there were so cute and so informative.
In the meantime where does the data come from ? Kennedy or something you construct from the Fed data yourself using his methodology ?
It'd be interesting to see those charts as MA's to smooth them and as YOY% as well. That would make the trends easier to see and extrapolate rather than having to smooth by eye .
Missed out on the great fed deal debate. I posted, second to last one. Interested in your reaction to waht I had to say. I yes, I read the whole darn thing, but it was dead by the time I got there. If you have a second.
Misean,
We were clearly reversing trends and in better shape after Clinton. I think many people in that administration were trying to do the right thing economically. Was there corruption? Sure. Remember when Greenspan actually worried that we might pay down the debt too quickly and actually have real surplus? He, in his fundamentalist Ayn Randian rotted brain, actually thought it would give the government too much power to have reserves like that. This will become infamous in history I think. I guess it is better for our adversaries/trading partners to have that power!
"We were clearly reversing trends and in better shape after Clinton. I think many people in that administration were trying to do the right thing economically."
Well, only because the Rubin Strong Dollar policy and the Tech bubble were still ballooning. And I disagree any politician does anything other than increase their power, so if it was trying to reduce debt it was to steal an issue from the GLOP, nothing altruistic.
"He, in his fundamentalist Ayn Randian rotted brain, actually thought it would give the government too much power to have reserves like that."
I'm no Randian to be sure, but Magoo sold out to the PTB long ago. With Multi Trillions in debt the private FRB was in no danger.
Whats worse at this point, rapid prepayments on a CDO or default? How do hedgies deal with that issue? Do they shut them down and take losses or hang in there and go for broke?
Um, do people not realize that a HELOC is plastic?
You close on your HELOC, and they give a checkbook and two nice shiny metallic-colored credit cards, which you can use anywhere, anytime, for anything.
We may invest in net interest margin securities, or NIMs, which are notes that are payable from and secured by excess cash flow that is generated by MBS or home equity loan-backed securities, or HELOCs, after paying the debt service, expenses and fees on such securities. The excess cash flow represents all or a portion of a residual that is generally retained by the originator of the MBS or HELOCs. The residual is illiquid, thus the originator will monetize the position by securitizing the residual and issuing a NIM, usually in the form of a note that is backed by the excess cash flow generated in the underlying securitization.
We may invest in mortgage pass-through certificates issued or guaranteed by Ginnie Mae, Fannie Mae or Freddie Mac. We refer to these U.S. government agencies as Agencies, and to the mortgage pass-through certificates they issue or guarantee as Agency Mortgage Pass-through Certificates. We may invest in collateralized mortgage obligations issued by the Agencies. We refer to these types of securities as Agency CMOs, and we refer to Agency Mortgage Pass-through Certificates and Agency CMOs as Agency RMBS.
Mike in AZ,
Congress learned a few things from corporate America. Many items are "Off Budget" and not included in the annual deficit. Much of the funding in Iraq occurs this way. These expenditures are supposed to be surprises, and therefore, "Off Budget". This is the equivalent of the "One Time Charge" popular in the 90's corporate world where years of losses could be blasted through at once in the guise of some special event.
In the last year ended 6/30/07, I believe the deficit was $200 billion, but the national debt rose $500 billion. Neat trick, huh?
The issuer, servicer, or residual holder may hold the call rights. Financial Accounting
Standards (FAS) 140 has limited the ability of the issuer to hold the call rights. In some
cases, the servicer may own the call rights, but the economic benefits are directed to the
residual holder.
Um, do people not realize that a HELOC is plastic?
No they don't. All the people I have talked to with HELOCS view it as earned money (the less enlightened) or debt backed by real wealth that can be paid back easily with the next move. In my neck of the woods real estate still only goes up.
I point out that debt stays the same while the home market price can fluctuate.
Really, really blank stares. Home prices only fluctuate up!
I agree that we and our leadership cannot be trusted with our exorbitant privilege. Hand it back to the creditors I guess.
In recent history was there ever a time that congress (or any administration) really held in abeyance the grand innovation-- that Reagan proved that deficits dont matter? 90s I recall reading about cold hearted bond vigilantes. Also about an opposition congress, something about a contract with the people, that was running DD on budgets. In hindsight, seems to have been a blip, and a politically motivated charade of a blip at that. How frightful to think that even a momentary lapse of deficit spending could have coincided with responsible leadership to continue to pare it down. Seems early in this regimes tenure when AG endorsed the tax cuts with no mention of spending, we were off to the races...
thanks lama and we have the latest incarnation of this "off budget" thingie forming right before our eyes with the Fed accepting collateral that the borrowers as a group only want to sell, but until recently could not find someone less informed than themselves about its real worth. Enter the Fed who will fill this spot...at some price possibly cheap in the short term, possibly catastrophic if it only fosters more of the same, yes?
The entire problem will be solved by a massive earthquake in California and a massive hurricane in Florida that will each destroy 500,000 homes. All of the displaced people will move to the remainder of the country and buy homes there.
Damn - I am going to have to arm myself better aren't I?
Kou Jie,
Ahhhh, the exorbitant privilege. The correct international perspective. The problem is that so few US citizens (and few politicians as well)understand or appreciated the exorbitant privilege. I guess it is inevitable given that situation that we would utterly @#$% it up. People will cry, "what has happened?" when it is gone.
We'll probably blame China or Mexicans or atheists or something.
"Seems early in this regimes tenure when AG endorsed the tax cuts with no mention of spending, we were off to the races..."
Yes! and I received my $100 ($300?) sheeple check in the mail and I knew our fate was sealed.
That's why the national debt increased every year under Clinton...I mean actual borrowings not the smoke and mirrors shite in the press clippings
While the "debt to the penny" number at the end of each FY never went down, if you don't count the FICA overpayments (engineered by our pal Greenspan) the debt was on a very good track 1998-2001.
This gives an idea of how subprime or Alt-A loans are structured in terms of higher loan costs for less collateral, which is why so many people in debt, used this method to smooth out payments, but of course, resets, ARMS and all those hidden details are like timebombs for both buyer and seller, as we are seeing! http://www.ams.jhu.edu/~daudley/444/reference_docs/CSFB%20Non%20Agency%20MBS.pdf
Thus, in regard to MEW & HELOCS, only 37% of the Alt-A loan had documentation to back up the collateral for these vintage/seasoned investments, with Prepay Penalty Term of 43 (months).
Re: Prepayment Penalty A charge levied on a borrower for either a prepayment in full or a
curtailment greater than a specified amount. The penalty is typically
expressed as a function of the interest-rate on the mortgage and
balance of the loan.
Unscheduled principal cash flows, i.e., principal prepayments, are initially
directed entirely to the AAA classes. Subordinate classes are subject to a
prepay lockout, whereby they do not receive their pro-rata share of
prepayment cash flows during the first five years. Over the following five years, a declining percentage of their pro-rata share of prepayment cash flows is directed to the senior classes, leading to a shifting interest schedule.
An example of the impact of the credit crunch on the drying up of MEW.
My parents recently moved, selling one home and moving to a new one that they purchased last year. New home purchase price was $225K. They had a mortgage on the home for $180K for a year (home was rented out, they were waiting to move). Paid off the mortgage 3 months ago and also put $150K in cash in savings with the bank that had held the mortgage. They they applied for a HELOC of $100K with this same bank. They were initially denied the HELOC on the home that was paid off and then after much protest the bank agreed to give them $33K for the HELOC. They have excellent credit, etc and their only other debt is on an income property where the LTV is less than 50% and they own another income property free and clear. Both properties are solid money makers.
They weren't planning to use the HELOC but from what we know most people do. If this is any indication of how banks are thinking these days, say goodbye to MEW.
Also, I read somewhere recently that 25% of MEW was used to pay off credit cards. I imagine those credit cards will get filled up again and then...consumer tapped out.
As Martin Barnes says in the latest from BCA, the Fed gets an "F" for clarity in its recent communications. Despite have declared that it will be more straightforward and less opaque, here is what we have seen in recent weeks:
An unnecessary and ill-advised shift to a neutral position after the October rate cut was quickly abandoned as it became apparent that the economy and markets needed more monetary relief. Then we had this weeks fiasco: hanging the markets out to dry on Tuesday with a timid move on the discount rate, followed by todays announcement of plans to ease credit market strains. It is a mystery why yesterdays policy statement did not warn that a new plan to boost market liquidity was on the way.
From my simplistic calculations, the numbers imply that reduction in MEW is going to cause a 2% haircut in GDP since 2005. And if MEW drops back down to 1990 levels, that will be a 5% haircut to GDP.
Sooner or later we are going to be talking about real money.
Yep J6P is a fool and refuses to live at or beneath means. Gotta keep up the spending so that people think I'm rich.
Before you make a judgement about J6P I suggest you do a little research about why he can't live beneath his means.
Elizabeth Warren has done a lot of research on how todays spending patterns compare with families of a generation ago. The net is that J6P is spending less on the ancillaries of middle class life today than he was a generation ago. He's going bankrupt because he has to spend so much more on the core of the middle class life (home, health-care, cars, and child care).
the former is of course a beautiful example of the middle class driving prices to the edge of unaffordability, and beyond. IMO we first saw this happen with the "two income trap" enabling prices to double over a decade.
health care in this country is of course a dismal picture of people collecting economic rents from patients from the womb to death's doorstep.
health care in this country is of course a dismal picture of people collecting economic rents from patients from the womb to death's doorstep.
Troy | 12.12.07 - 11:02 pm | #
My wife is a physician still in training (think Scrubs). I have been amazed at how our health care system extremely efficiently kills idealism in our doctors. Troy's description is accurate I am depressed to say. It is all so obviously about profit. Healthy society? Ppfft.
It is near collapse. We will have some baseline minimal socialized system with a higher level privileged system on top I imagine. Your ideology regarding the matter is irrelevant. This seems inevitable to me.
I about kicked in the TV when bush the lessor said: sure we all have health care, just go to the emergency room. Very very very inexpensive and inefficient. Many emergency rooms are near the breaking point.
health care in this country is of course a dismal picture of people collecting economic rents from patients from the womb to death's doorstep.
health care in this country is a dismal picture of the affluent subsidizing the elderly, poor and uninsured without having the bargaining power and efficiencies of single-payer or regional-payer systems.
Yes, how long can it be pretended that the current crisis will shave only a couple points off of GDP?
With dropping MEW alone taking away 2 to 5%, PLUS the lack of new house construction, PLUS the drop in the magical mystery financial dealings,etc., etc, -- you are looking at a pretty steep drop.
Can anyone see why the Fed may be running around with their hair on fire?
health care in this country is a dismal picture of the affluent subsidizing the elderly, poor and uninsured without having the bargaining power and efficiencies of single-payer or regional-payer systems.
rich | 12.12.07 - 11:16 pm | #
Also a reasonable interpretation. How much is the last two months of life worth? The hard truth is that sometimes it is time to die. The health care industry is almost 20% of GDP so I do not think it is too off topic from an economic perspective. 20% of GDP and look what we have. . .
? will all this MEW be used to make house payments. Curious what anyone thinks.
01/20/2009 end of an error | 12.12.07 - 11:20 pm | #
I have a real estate appraiser relative . He specializes in more heavy industry type stuff but he told me it was quite common for people to extract equity to make housing payments.
He thinks there will be an unprecedented housing crash.
Deborah: How could that mounting level of debt be considered good times?
Just close your eyes and believe!
Obviously things are not on a sustainable path. You have two choices. Rebel against it and be considered somewhat "crazy". Or join it and win the game du jour. I guess there is the third option for some... "Have you seen what the Joneses just bought?"
Also a reasonable interpretation. How much is the last two months of life worth? The hard truth is that sometimes it is time to die. The health care industry is almost 20% of GDP so I do not think it is too off topic from an economic perspective. 20% of GDP and look what we have. . .
Red Pill | 12.12.07 - 11:24 pm | #
20% of GDP? I think you might want to hunt for some stats to back that up. I mean we hear another wild guess that consumer spending is 70% of GDP... add that to your guess that health care is 20% and that doesn't leave a lot for OTHER non-trivial categories like defense & gov't.
When Reagan took office right at 1 trillion of debt. When he left as I remember it was around 3.8 trillion.
When dufus senior left it was around 5.6 trillion.
When Slick Willie left it was roughly 5.9 best recollection.
Dufus the second god knows probably 10 trillion.
As to Clinton using smoke and mirrors to make it look better, probably but know more than these three other a$$wipes.
When you look at it roughly 85% of all the nations debt occured under the watch of three presidents. Hard to dispute regardless of your political preference.
I've been lurking for several months now. I am a physician. Here's my take on healthcare.
Healthcare costs are high due many reasons but here are three which are not regularly mentioned.
Poor lifestyle habits which lead to preventable diseases (diabetes, hypertension, heart disease) which are expensive to treat.
I can't remember the numbers but we spend an exorbitant amount of money on the first year of life (sick neonates) and last year of life (sick elderly). This is an ethical dilemma.
Drugs - we make expensive drugs to treat every problem most of which I'm not convinced improve overall health.
Extremely profitable middlemen ie health insurance companies who add a layer of bureaucracy and inefficiency to the system.
Technology advances which of course are expensive.
If people would have some discipline and improve lifestyle we could drastically reduce costs. Unfortunately there is not monetary incentive for physicians, hospitals, insurance companies to emphasize preventive medicine.
Medical is a tough one for me as I am on both sides. Do we spend way to much for what we get hell yes. I went to Mexico City 3 years ago and saw an MRI and ultrasound system that we still don't have in this country "FDA". Price for an ultrasound 100 dollars. Same exam I perform here for almost 1000. Price for an MRI 300 here with inferior equipment 4-5000.
Answer most countries don't pay their physicians like we do. In Mexico I know a Neuro Pediatrician who earns 5.00 an hour. Answer get rid of frivolous lawsuits and medical malpractice which is up to 250000 a year for an OB. Send them to medical school for free and have them be govt employees at a reasonable wage of 150-200k a year with no malpractice or incentive to cheat the system.
Half of medical expense is CYA for fear of being sued.
What you should do is line up what we spend on health care with what the other G7 developed nations spend. That would tell you exactly where we are spending too much.
Compare how many doctors they have per capita and how much those doctors make and cost to our data.
We spent about twice as much of our GDP on health care as Canada.
Misean,
Do you believe that 9/11 and the wars which followed are irrelevant to the current economic situation which we are discussing? I don't believe that this needs to be a partisan issue. 9/11 was an opportunity to harness patriotism. In past wars, this harnessed patriotism manifested as a call to sacrifice and rationing. Bush explicitly called for spend, spend, spend and linked consumption with patriotism. I'm not trying to troll, but am truly interested in a thoughtful explanation for why these factors are being excluded from the conversation.
Other countries pay much less for healthcare than the US, with measurably better health outcomes.
So, out of your list, which one applies only to the US? Number 4.
Oh, and while I'm sure the dutiful bleatings of "frivolous lawsuits" warm the cockles of the insurance industry PR flacks who invented the phrase, malpractice lawsuits account actually account for less than 1% of healthcare costs. Med mal insurance is driven not by payouts, but by insurers' needs for profits--premiums rise fastest in years when insurers' investments perform the worst.
dryfly,
You are right we should provide links. It keeps us honest. Health care is considered a consumable so is included in the 70% consumption number. 20% I believe was a projection for the near future. The latest stat I could find was this, 16%,for a couple of years ago. I second AZ'z comments above as well.
tp://www.washingtonpost.com/wp-dyn/content/article/2006/01/09/AR2006010901932.html
Record Share Of Economy Spent on Health Care
By Marc Kaufman and Rob Stein
Washington Post Staff Writers
Tuesday, January 10, 2006; Page A01
Rising health care costs, already threatening many basic industries, now consume 16 percent of the nation's economic output -- the highest proportion ever, the government said yesterday in its latest calculation.
The nation's health care bill continued to grow substantially faster than inflation and wages, increasing by almost 8 percent in 2004, the most recent year with near-final numbers.
\t
Health and Human Services Secretary Mike Leavitt urged reducing the disparity for health care among ethnic groups.
Health and Human Services Secretary Mike Leavitt urged reducing the disparity for health care among ethnic groups. (By Susan Walsh -- Associated Press)
Rising Costs, Unequal Care
Health care spending has skyrocketed and now accounts for 16 percent of the nation's economic output.
\t\t\t\t
Superintendent Nancy S. Grasmick praised the board's decision, saying the selection of a superintendent 'should not be subjected to partisan politics.' (Christopher T. Assaf - AP)
Spending for physicians and hospitals shot up considerably faster than in recent years, while drug costs grew at a slower rate than over the past decade.
Even as health care costs continue to escalate, however, many Americans -- especially minorities and the poor -- still do not receive high-quality care, according to two other federal reports yesterday. The quality of health care is improving slowly and some racial disparities are narrowing, the reports found, but gaps persist and Hispanics appear to be falling even further behind.
"We can do better," Health and Human Services Secretary Mike Leavitt said at a Washington conference on racial and ethnic disparities in health care. "Disparities and inequities still exist. Outcomes vary. Treatments are not received equally."
Political, medical and economic leaders and experts have long warned that health care cost trends will gradually overwhelm the economy, and many companies now complain that employee and retiree health costs are making them less competitive. Yesterday's report added new reasons to worry.
The overall cost of health care -- everything from hospital and doctor bills to the cost of pharmaceuticals, medical equipment, insurance and nursing home and home-health care -- doubled from 1993 to 2004, said the report from the Centers for Medicare and Medicaid Services. In 2004, the nation spent almost $140 billion more for health care than the year
re:AZ
4. Extremely profitable middlemen ie health insurance companies who add a layer of bureaucracy and inefficiency to the system.
For my sins I did a 5 year stint at a health care insurer. That overhead number was 30cents in the dollar- I'm not kidding. I used to tell my wife that the main reason I was working those insane hours on the HIPAA IT project was that the claims standardization aspect would reduce this to 24 cents in the dollar and let the money go to actual care not to admin. Noble I know.
Of course the wankers stuck with EDI when the rest of the world was moving on to XML so it was obsolete by the time it was implemented. The f*cking HIPAA act actually mandated the use of EDI standards. IDIOTS !
Sigh.. Anyway by way of contrast, Medicare admin costs at 4cents in the dollar.
But anyway, before any of you buy into this electronic medical records malarkey, be very careful(The British NHS IT effort is a colossal failure too ). Its a push effort by the IT industry ( think Y2K, HIPAA, Sorbannes-Oxley systems and for Californians that stupid effort called SB1386 compliance (SSN privacy))
Once simple commercial relationship (doctor-patient, lender-borrower) made complex in the pursuit of efficiency
System increasingly looks to be broken, yet degree of specialization and integration makes it difficult to launch reform/improvement programs
Incumbents argue that change will stifle innovation
Many middlemen add costs that critics argue are out of proportion to the value added
Many middlemen also behave badly
Buyers (investors and patients) often lack ability to judge the quality (or need) for products/services being sold and are often dependent on not-always-reliable and sometimes self-interested guides (for investors, rating agencies and salesmen; for health consumers, drug advertising, doctor referrals, insurance company participating doctor list). As a result, buyers lack usual power to influence product/service quality
High premiums paid for good looking salesmen
Attorneys general go where regulators fear to tread
The beginning of the end occurred in the 1970s (invention of the HMO in 1972; Ginnie Mae did first MBS in 1970)
Incumbents spend a great deal on lobbying and political contributions, assuring that even if there were an obvious solution, it will never be implemented
Tell Conjure there is better than a 90% chance that the next Pres of U.S. will be one of two people.
One is male the other female.
One is white the other not.
Both are big fans of universal health care. One of the two will be swept in with big majorities on both sides of Congress and a mandate to squeeze the fat out of every level of U.S. health care delivery, starting no later than immediately.
rich, the winner of the next election, black or white, male or female will be financed by either the oil sector or the financial sector. My vote is with the financial sector. If either Clinton or Obama wins, so does Goldman Sachs.
The next president will be a Republican, even if a Democrat is elected.
"Do you believe that 9/11 and the wars which followed are irrelevant to the current economic situation which we are discussing? I don't believe that this needs to be a partisan issue. 9/11 was an opportunity to harness patriotism. In past wars, this harnessed patriotism manifested as a call to sacrifice and rationing. Bush explicitly called for spend, spend, spend and linked consumption with patriotism. I'm not trying to troll, but am truly interested in a thoughtful explanation for why these factors are being excluded from the conversation."
Dude, you're asking that of a Super Colander Tin Foil Hat wearer. What plane hit building 7. Why was the frigging basements of 1 and 2 at over 2000 degreees weeks after the buildings fell into their finger print like typical demolitions.
Sheesh... I advertise where I am on these issues. The war was WANTED. Why should I have to pay the idiot neo-clowns playing a game of global RISK any friggin' money. Patriotism, my ass. I just finished dinner with an ex-marine who served two tours in Iraq who couldn't agree more with me.
Thlllpppttt!
Patriotic my ass. You want to support the troops, at least get a bumper sticker that says:
I gotta love it. People consume too much and we get a link on consumption that dispels some of the stereotypes. Then it is health care, and we get a doctor's take. Then it's malpractice suits, but someone posts that judgments amount to 1% of health care costs, and it is the greedy insurers.
I am not going to defend the greedy insurers, but St Paul, traditionally the largest med mal insurer dropped the line 3 or 4 years ago. It's a competitive, cyclical business and insurers lost a lot of money in the late 90's. At the more favorable points in a cycle, excess profits get competed away pretty quickly as additional capital is attracted. One person's obscene profit is another's return on capital. Also, like other businesses that are being discussed lot, it's easy to get into but hard to get out of. People have referred to the costs of getting out of long tailed casualty businesses like buying an exit visa from hell. In other words, not cheap.
Oh yeah and for my son's friend who died there...why the F*CK don't you drag your friggin lazy carcass off to the recruitment office and SIGN UP! Mr Patriot. And if you're TOO OLD...ship one of your brats over there.
Sorry, but this ain't supposed to be a political or war pig blog...but that PATRIOT shite just lights a fire under my butt.
Enthusiasm Wanes for Fund to Bail Out SIVs
By ROBIN SIDEL
December 13, 2007; Page C2
After months of intense planning to create a fund designed to save banks and structured investment vehicles from big losses, the proposal appears to be losing momentum.
The nation's three biggest banks have started to formally ask other financial institutions to join the fund, but some firms that were expected to sign up are now not as interested. As a result, the fund's ability to provide a solution for the credit crunch is more uncertain than ever, according to people involved in the situation.
.
.
.
I remember when home equity loans were pitched as a tax advantaged way to borrow.
A year ago, my bank pushed me to lower my rate and double my credit line. I only use it as a tax advantaged, low cost, payday loan. So I draw it and pay it back pretty quickly.
It's a great way to borrow since the rates are competitive and also tax deductible. At least some of this must be for people that are simply taking advantage of the cheapest money available.
Interesting NYT piece on the effects of MEW on a homeowner in Paramount, California, the zip code with the largest drop in sales in 3Q07, according to the author:
" Extremely profitable middlemen ie health insurance companies who add a layer of bureaucracy and inefficiency to the system."
Someone has to be the bad guy. Any decent size corporation is essentially self insured. The insurance company is there to process claims/ration care, and to squeeze money out of the providers. I haven't seen this lately but I used to get bills with some outrageous "reasonable and customary fee" (sticker price) for a test or procedure and the PPO negotiated price with was usually 1/3.
I know specialist who do procedures who make less now then a decade ago. Not that they aren't well compensated.
And then you have companies like GE Med Systems that extract a lot of money from the system.
Hmm... when I go to the grocery store or Best Buy, I don't deal with that kinda stuff. In the 50's Doctors still made house calls (like computer fixers do today).
Maybe, the whole edifice of insurance paid doctoring through 3'rd parties is the problem? Naw...we need a titanic feral beuRATcy to deal with it...That'll solve the problem.
Just to try to clarify where I'm coming from . . .
I see the mania of the late 90's as bearing a relationship to calendar mania, fin de cycle ennui. I viewed this underlying anxiety as contributing to bold irrationality. 9/11 came at a time when people where recovering from this mania. I think that people have been channeling their anxiety into consumption and that this has been encouraged and until recently was largely socially acceptable. My primary interest is in how the coming economic upheaval will affect the identity constructs of people who have externalized their egos via consumption. There is a great deal more than just economic fallout that awaits us. Yeah, this makes no sense in short form and probably not in long form either.
Well that's an interesting post, and I apologize for yelling at you.
"There is a great deal more than just economic fallout that awaits us."
Yeah, social upheaval come to mind.
Of course the pseudo-psychological crud is a bit too aloof for me to swallow. To each his own. I posted this at the top of this post...It's post number 3:
"Yep J6P is a fool and refuses to live at or beneath means. Gotta keep up the spending so that people think I'm rich.
Local syndicated morning Ha-Ha show in LA had a truly funny bit this morning essentially making fun of such people. They did a fake ad for Lexus Christmas Trees.
jcsc- "My primary interest is in how the coming economic upheaval will affect the identity constructs of people who have externalized their egos via consumption."
Conjure Bag is always interested in learning about the lizards that live within us.
Misean, political commentary will in the end damage, if not destroy, this blog. Let's just say you and I disagree on most every political issue and leave it at that.
Meanwhile, you complimented Mook on his post and said it was worth remembering. I think what he said is worth repeating:
This idea of MEW being handed out like free money to spend on consumption with no questions asked just kind of exploded out of no where. Truly silly.
I keep harkening back to the summer of 2000. The last time we had an asset bubble in this country, it cost us 85% on the Nasdaq, 50% on the S&P ... and this with an asset class that could only be margined up to 50% of its value!
Imagine the absolute carnage that would have ensued if Joe Daytrader, with a $50K income, had been allowed to buy $500K worth of stocks with no money down. And, rather than being the victim of forced margin selling, he could call up E*Trade and have them advance him another 20% of the late-1999 value of his account because, really, we all know stocks only go up in price!
The thought experiment itself just boggles the mind. The realization that we're so stupid as a society as to relive it on a grander scale less than a decade later ... well, words flat-out fail me.
Mook | 12.12.07 - 9:41 pm | #
Lots of good comments on this blog, but I thought Mook really nailed it.
My primary interest is in how the coming economic upheaval will affect the identity constructs of people who have externalized their egos via consumption.
Shootin' from the hip, I'll put my money on war. Patriotism is the ultimate feel-good identity.
"This idea of MEW being handed out like free money to spend on consumption with no questions asked just kind of exploded out of no where. Truly silly."
I wrote that line.
And later agreed with Mook. Don't know what the rest of your point was but I guess I'll leave it at that.
A little-known network of government-sponsored bank co-operatives founded during the Great Depression is playing a critical role keeping the private sector US mortgage industry open for business and some mortgage lenders out of financial trouble in spite of the brutal slump in the housing sector.
The Federal Home Loan Banks are pumping hundreds of billions of dollars into the mortgage industry in the form of loans against mortgage collateral at a time when purely private sources of finance are offered only at punitive terms for many lenders.
......
The latest Fed flow of funds data shows that FHLBs issued new loans at an unprecedented annualised rate of $746bn (508bn, £366bn) in the third quarter, up from practically nothing in the second quarter.
Misean, yes, I see that Mook was responding to your quote (the first paragraph of what appeared in italics in my post). I think his reply to you was a classic.
IMO part of the strength of this board is that commenters with different politics, different biases, differences of all kinds, can discuss important issues, perhaps reach a consensus, and certainly learn from each other in the process.
Politics, on the other hand, is by nature and design the most divisive subject around and one to be avoided as much as possible. Just my take.
Dr Strangemoney- "Patriotism is the ultimate feel-good identity."
Paul Tillich's "The Dynamics of Faith" comes to mind. People need to believe in something. If they don't it leads to existential doubt. God forbid they should believe in themselves.
If, according to Tillich, and if memory serves, people lose faith in their government, the next step on the hierarchy is belief in a higher power. If they lose faith in a higher power, then it's existential doubt.
I was specifically goaded into a political thing on this page...and i Jumped in...apologized and bowed out. The second was my fault entirely...and apologized for that as well.
Jump down my throat, if you will, but earlier Gary and I truced amicably and I'm done with the other. Do you need some specific "Mea Culpa"?
"people lose faith in their government, the next step on the hierarchy is belief in a higher power."
and, ironically, some show on discovery was discussing the higher power thing. I gave up on such things years ago, never looked back...and I feel fine.
I don't want to tussle, I agree with your wide ranging opinions statement. That's why I like to be here. Just watch out for conjure bag...I hear he bites...
If they lose faith in a higher power, then it's existential doubt.
Nothing can hold me back! It's will-to-power time baby!
Besides, that existential doubt thing is tiring. Always looking for answers... too much critical thinking involved. Look at my car! Dang! I'm better than you! Bling! Bling!
"Andrew Mellon's flirtation with Mussolini was based largely on Il Duce's ability to make the trains run on time. As a believer in the righteousness of capital efficiency, Mellon and Mussolini must have had a lot to talk about when Mellon visited Rome in 1926."
Mellon is my heero as far as exemplifying how cutthroat laissez-faire capitalism can get. Alcoa protected their aluminum monopoly by buying up hydroelectric capacity, just to keep any competitors' ideas about putting in bauxite processing plants on ice. Later, add one European war and the Truman Committee:
"The result was that a Truman Committee hearing in May 1941 unearthed a 600,000,000 pound annual deficit in aluminum. The OPM tried to cover up its culpability with a great campaign to collect aluminum pots and pans, which produced scrap equivalent to about four days of the amount of the annual deficit. Expansion of production was arranged for finallyat government expenseon August 19, 1941. The plant expansion will be available for actual production about August 1942."
If consensus estimates for the CPI are correct (the figures come out Friday), the November year over year inflation will be 4.4%. This may well alarm the FED and guarantee that there are no more rate reductions. I suspect fear of inflation is what kept the last one to only a quarter instead of a half.
As everyone contemplates the feds next move, consider that what we may see is the targeting of margin requirements with the aim of curbing commodities speculation and those that are short credit.
The hedge space has decidedly avoided its intended purpose and has become an enemy of the fed. BB knows this and will likely lead the targeting of the miscreants.
"the Fed will accept a wide range of collateral at the regular discount window and under the TAF program. A question arises as to whether the Fed will be taking a large enough "haircut" on some of the collateral being presented to it by successful TAF bidders. If the markets cannot price some of these securities, how does the Fed know what they are worth? If a TAF borrower were to become insolvent, the Fed might not be able to recover the full amount it had loaned the bank. In effect, the TAF program, as well as the regular discount window facility, transfers credit risk to the Fed, which means ultimately, to the taxpayer. Depending on how the Fed prices the collateral presented to it, the TAF program could be construed as a taxpayer subsidy to banks presenting "questionable" collateral. Remember, there is no such thing as a free bailout"
Too cute for words, this claptrap about "judgments"" accounting for less than 1% of the cost of medical services. What happened to settlements and legal expense? In any sort of complex litigation, legal expense typically exceeds the costs of judgments and settlements combined by a factor of 2 to 1. And why would you suppose St. Paul bailed out of medmal? Too many politicos have been bought and paid for by the trial lawyers to permit any sort of rational inquiry into the costs of medical care.
OT
Chinese Premier Wen Jiabao made it clear to US Treasury Secretary Henry Paulson that China's exchange rate reform will be gradual, a senior finance ministry official said.
Zhu Guangyao, assistant finance minister, told reporters that exchange rate reform would continue at China's own initiative, though it would be "controllable and gradual."
Our currency, your problem wonder where they ever came up with that idea.
Alright, I'm fairly new to this board and I see alot of interesting discussion and many smart, well- informed people here. No question we are at a dicey moment. But, what I'd be interested in hearing is as Chernyshevsky asked, "What is to be done?" I have now appointed each of you Supreme Grand Poobah with complete authority over the Fed, Congress, the White House and the Courts. You can include any foreign institutions you would like. What do you do?
By the way, if your recommended course of action is let everything crash and burn, please justify the inevitable collateral damage to those of us who have worked and saved and not incurred debt, but whose lives will certainly be impacted negatively by the fallout (IRAs, 401 Ks, jobs, businesses, etc.)
Biotech,
During times of financial crisis there exists extraordinary opportunity. Your life will be negatively affected if you let it. However, if you are proactive and smart, it will be a significant window to make fantastic long-term investments.
Hoowah, how about those wholesale prices? Came in a tad hot, about 100% above expectations (3.2% total vs 1.5% total expected, core at 0.4% instead of 0.2% core expected).
Looks like retail sales ex-gas are .6%, which in real terms is probably .2-.3%. Not too bad, but then the early Thanksgiving makes it hard to draw conclusions from it.
Select Comfort, the mattress maker, warned last night that sales weakened after Black Friday promotions. Wonder how much of that we'll be hearing.
Hello,
My wife an I bought our house in 2002, and we're doing fine. We have a HELOC which we used when we remodeled our kitchen, and we're going to use again while we replace our windows and siding.
We have plenty of equity in the house (If we observed no price appreciation from 2002 purchase, we'd still have 25% equity).
How does our HELOC fit into the MEW equation?
We used the HELOC while we remodeled our kitchen, but paid it back within a year.
We're using the HELOC again while we replace windows, and again will repay it back within a year.
How would our "re-insertion" of equity in our home be accounted for? What about when we have an un-used HELOC?
I'll take a stab, completely off the cuff. This idea isn't well-thought out, but here goes:
Clearly the housing bubble and stupidity of giving credit to folks who have inappropriate income levels has led to tremendous 'malinvestments'. These need to be worked off and/or sold off at firesale prices.
One thought is that the Federal government could purchase abandoned housing developments from near BK builders or perhaps simply seize them using eminent domain. These could then be bulldozed and turned into public parks, greenpaces or other land uses. Agriculture also comes to mind.
Obviously the redevelopment would have to be appropriate for the area ... far flung exurban big boxes would be the most likely candidates for redevelopment, with close in or inner city housing more likely to be saved or perhaps re-purpased.
This would have two beneficial effects - supply of houses would be reduced, and also jobs created to do the work of tearing down McMansions and converting the land back to greenspace.
Big drawback is that it would require more Federal spending, and the taxpayers would be implicitly footing the bill. However, at least we'd get something useful for our money.
We used the HELOC while we remodeled our kitchen, but paid it back within a year.
Then you had an offsetting "Mortgage Equity Deposit". So your net MEW was zero. Technically, would have been $40,000 (or whatever, I don't know if you went all Jenn-Air or what) the quarter in which you drew on your line.
In the quarter in which you paid it back, your MEW was $-40,000
@Sportsfan / Misean - Aw shucks, thanks, you guys. Really, I'm blushing over here.
My wife an I bought our house in 2002, and we're doing fine. We have a HELOC which we used when we remodeled our kitchen, and we're going to use again while we replace our windows and siding.
This is an example of why HELOCs were created in the first place - it's what they are intended for.
Before the real-estate bubble hit, if you'd taken $40K in equity out of your house, dropped it all on new cars / vacations / golf memberships without spending a dime on the house itself, and justified it with, "Who cares? My house will be worth $40K more by this time next year anyway," you'd have been laughed at. Or possibly committed.
Our company's 401(k) plan offers two classes of loans - a "house purchase" loan, which requires documented proof of use but carries fewer restrictions, longer payback times, and a lower interest rate; and a "general purpose" loan that can be used for, well, whatever, but carries more restrictions and a higher rate.
Why the hell would it be so difficult for banks offering HELOCs and other post-purchase MEW to require this distinction be drawn? If you want to add a bedroom, upgrade the kitchen, something that will add value to my collateral, then sure, I'll give you a flexible prime-rate loan to do it. If you're just gonna use it as a credit card ... well, then, I'm gonna charge you credit-card type rates for it, because I'm increasing my risk without increasing the associated collateral value.
This is where I'd start with the reforms, and this is why I have approximately zero sympathy for the MEW lenders in this whole mess.
centra_scrutinizer Yes! That is exactly right. What is saddest about what happened in the last several years is not so much that there was too much building, but rather that what was built was so WRONG! Household size shrinking, while average house size doubles? Insane! There was and still is a need for smaller, supre-energy efficient residences in real communities with services in walking distance and adaptable to residents diminished mobility as aging occurs. I will go out on a limb and say that even in this horrible market a smart builder could still make money on those type of projects. There are a few small local developers who are rehabbing abandoned inner city houses and industrial buildings, but I don't see Lennar and Toll doing anything like that. Unfortunately, the stuff they built is so far removed from what's needed that I see little alternative to bulldozing it.
As far as taxpayer money, it should be invested in things that will add to the national wealth and productive capacity. The most compelling needs are to fix the public infrastructure. We need high speed rail, wind power and a whole host of green technologies. And let's bill the Iraqis for the cost of the war; after all Wolfowitz and Rumsfeld said they'd pay for it!
Some of my US contacts have told me that when people see their equity evaporating and figure they may lose their house, they 'withdraw' the remaining equity now before it disappears.
Pay off the cards.
Start again when house prices have dropped enough.
If MEW is currently running about 5% of GDP, how could that number be only 5.2% of disposable income if 70-80% of the average family's income goes to taxes interest and insurance?
5.2% of Disposable Personal Income means that these people gave themselves 5.2% raise for that quarter.
Am I understanding it right ?
Yep J6P is a fool and refuses to live at or beneath means. Gotta keep up the spending so that people think I'm rich.
Local syndicated morning Ha-Ha show in LA had a truly funny bit this morning essentially making fun of such people. They did a fake ad for Lexus Christmas Trees.
Upper left side of page under podcasts:
KLOS
Enjoy.
Cheers,
Actually, 2006 nominal GDP was approximately $13.27 Trillion. Thus, 2007 annualized MEW is actually closer to 4% of GDP. Does total disposable income approximate GDP? It is just that it seems that current MEW is a much higher percentage of disposable income in the common usage of the term.
Thanks for any input.
Of course the fact that the banks keep making these stupid loans is also ridiculous.
The entire country is stark raving mad, I tells ya.
Cheers,
Wow, just wow. Look how that MEW increased in the last five years. How did borrowing money against the house for consumer purchases get to be the norm?
Justthefacts,
The thing to think about here, is that up until the current insanity MEW was generally only provided to people with low LTV's who wanted to do something at least semi productive. Like fix a roof, or foundation, or remodel a kitchen.
Other reasons might be to roll in CC debt to ensure more timely payments on the mortgage. But these generally required the CC accounts be closed.
This idea of MEW being handed out like free money to spend on consumption with no questions asked just kind of exploded out of no where. Truly silly.
I know people here who between cash out refi's (and other schemes) combined with MEW are in debt now for over $500k. Combined income of $120K. Insane.
Cheers,
Bwahahaha,
Holoscan put an advert link to free money, to some online casino.
Bwahahaha...Oh, the irony.
Cheers,
"The entire country is stark raving mad, I tells ya."
Uh Huh, ship of fools.
What's Magoo's name doing on that paper? I guess is wasn't enough to be knighted, called Maestro and given an $8 million advance for partially ghost-written memoirs. Looks like he also has to take credit for work done by his subordinates.
Misean -
that practice was actively encouraged by the Bush admin after 9/11.
The rot in this country comes from the top. Sown under Reagan, flowered under Bush. Alas, a corpse flower.
About 23 years ago I saw an add in a newspaper about loans being offered to buy a stereo. At that point I knew we had gone to far into consumerism and indebtedness and if it continued we would end up borrowing for many things that were not needed. It took a while to see things get to the point where many are overextended and will need to reconsider their extravagant lifestyles.
Of course the fact that the banks keep making these stupid loans is also ridiculous.
Actually the executives probably walked away with huge bonuses that they wouldn't have gotten otherwise from the "profits" they generated (nevermind if they all roll back and then some).
It's the same thing for hedge fund managers -- their compensation is like a ratchet wrench that only goes up even when that fateful day comes where everything goes bust. Since there's no way they can lose money themselves they have a huge motivation to screw up as much as possible so long as it appears profitable.
I've got no problems with people who get rich creating real wealth. I feel differently about people who get rich by destroying wealth in the process of creating wealth illusions.
Gary,
Yep, typical partisan. The dumborats had nothing to do with it. And actually in was Magoo, but yes Shrubboy's mal-administration was promoting the debtorship...err...ownership society. But to not include Clinton is just partisan political BS, so...
Cheers,
ac,
"I've got no problems with people who get rich creating real wealth. I feel differently about people who get rich by destroying wealth in the process of creating wealth illusions."
Preaching to the choir, brother.
Cheers,
ac --
I've got no problems with people who get rich creating real wealth. I feel differently about people who get rich by destroying wealth in the process of creating wealth illusions.
I have often wondered about the "market failure" represented by the obscene money people make in finance for doing approximately nothing.
But the optimist in me hopes this entire crisis is just the market finally correcting that inefficiency. Have you noticed that almost all of the carnage is confined to financial assets held by financial institutions, and the data coming out of the real economy simply are not that bad (yet)?
Maybe the primary outcome of this turmoil will be for the financial sector to contract by 80%, and all those talented folks on Wall Street will have to get real jobs creating real wealth.
Hey, I can dream.
match funded financing structures anyone
The entire country is stark raving mad, I tells ya.
Pretty much. You would think that falling housing prices would scare more people into cutting back. But since consumer over-spending is America's Prozac/Viagra, no can do.
ac-
the most recent pinnacle of greed was the sallie mae deal, those bastards should all be shown the door.
Unbelievable from the beginning.
Mis[cr]ean[t] -
Magoo was a Republican appointee.
Clinton is a corporate Democrat, not my cup of tea, but better than GOP.
And just for bait:
von Mises was a douche!
OT...
Sorry, but love this example of what this bogus economy is based on, i.e, love the part here about stability:
Newcastle Investment Corp
Investment Corp. (Newcastle) is a real estate investment and finance company. We invest with the objective of producing long term, stable returns under varying interest rate and credit cycles, with a moderate amount of credit risk. Newcastle invests in real estate securities, loans and other real estate related assets.
We are dependent on our manager and may not find a suitable replacement if our manager terminates the management agreement.
We have no paid employees. Our officers are employees of our manager. We have no separate facilities and are completely reliant on our manager, which has significant discretion as to the implementation of our operating policies and strategies. We are subject to the risk that our manager will terminate the management agreement and that no suitable replacement will be found to manage us. Furthermore, we are dependent on the services of certain key employees of our manager whose continued service is not guaranteed, and the loss of such services could temporarily adversely affect our operations.
the all-out-gall, beyond comprehension, throw-the-morals-out-the-window award has to go to BS for the attempt at Everquest.
Gary,
Magoo was reappointed by Clinton twice.
As for the other, find someone else to troll bait.
Cheers,
These do not necessarily represent new HELOCs, and such, correct? I think people still have plenty of credit left on old plastic.
The kitchen ATM will soon run out of cash.
Conjure reiterates his long-standing Q1-08 recession forecast and the end of the bull market in equities last month.
Meanwhile, Conjure's Global Financial Meltdown Clock is ticking.
Markel,
This ain't plastic it's MEW. They may have room on the plastic for more debt...
Cheers,
Alan Greenspan says...
"I do not doubt that a low U.S. federal-funds rate in response to the dot-com crash, and especially the 1% rate set in mid-2003 to counter potential deflation, lowered interest rates on adjustable-rate mortgages (ARMs) and may have contributed to the rise in U.S. home prices."
Right so people can do things like MEW withdrawals to keep consumer spending going strong and the US economy afloat.
then Alan Greenspan says...
"In my judgment, however, the impact on demand for homes financed with ARMs was not major"
Right Alan you had nothing to do with priming the pump for the subprime, Alt A and rest of the real estate mess.
I'm old enough (older than bacon dreamz) to recall that the line was, if Clinton doesn't reappoint Greenspan, the world will end- from the GOP and Wall Street.
The Mises remark was a gag.
But the GOP is an absolute sewer, and I lay the blame at their door.
mp,
As I was catching up on posts today, conjure kept saying 11:57, shouldn't he be adding some seconds there? Just askin'.
Not, of course, that I disagree. The Super Colander Tin Foil Hat has been eating up lantern batteries today at a ferocious pace.
Cheers,
Conjure's Global Financial Meltdown Clock is event driven.
Anyone else here amazed at how high MEW still is vs. historical baseline of the 1990s? Despite all the foreclosures/NODs, failed lenders, flopped floppers, new lending "guidance", bailout talk, and generally negative press, we're STILL in 2002-2003 bubble territory.
The Amerikan consumer will stop spending when you pry the HELOC from his cold, dead hands (and maybe not even then).
Q3 MEWs at $133 Billion?
Oh well, here comes another $45 Billion in Bank Writeoffs in the coming months.....
(Vicious Cycle of Banks Leading Lemmings Leading Banks OVER THE CLIFF continues onward...)
IMO
Gary,
Both parties are sewers. Thanks for the retraction on Mises. I try not to discuss politics here so I'll stop. Agreed? Accept as politics impinges on the post of course. Shake? (as in hand shake)
Cheers,
Maybe the primary outcome of this turmoil will be for the financial sector to contract by 80%, and all those talented folks on Wall Street will have to get real jobs creating real wealth.
Yeah. I really think the financial sector could be looking at a blowout worse than what hit the tech sector in 2001.
When it comes down to it, I bet there's a lot of really scared people on Wall Street right now.
HARM,
Yeah dude, up toward the beginning of the post a lot of us were.
Cheers,
So what is the "critical" home equity percentage where "economists" start to be worried? 50% 40% 10% 0?
Aren't we approaching some really unprecedented weird @#$% with this equity extraction and price declines?
At some point we become majority renters from banks and investors, yes?
Do we eventually say: "uum, do over!"
Seriously.
This idea of MEW being handed out like free money to spend on consumption with no questions asked just kind of exploded out of no where. Truly silly.
I keep harkening back to the summer of 2000. The last time we had an asset bubble in this country, it cost us 85% on the Nasdaq, 50% on the S&P ... and this with an asset class that could only be margined up to 50% of its value!
Imagine the absolute carnage that would have ensued if Joe Daytrader, with a $50K income, had been allowed to buy $500K worth of stocks with no money down. And, rather than being the victim of forced margin selling, he could call up E*Trade and have them advance him another 20% of the late-1999 value of his account because, really, we all know stocks only go up in price!
The thought experiment itself just boggles the mind. The realization that we're so stupid as a society as to relive it on a grander scale less than a decade later ... well, words flat-out fail me.
ac,
"When it comes down to it, I bet there's a lot of really scared people on Wall Street right now."
As in:
How the hell do I open this G#D@MN window!
Cheers,
Truce. i'm out for the night in any case. Adios!
Mook,
Nice...really nice. I gotta remeber that.
Cheers,
The entire problem will be solved by a massive earthquake in California and a massive hurricane in Florida that will each destroy 500,000 homes. All of the displaced people will move to the remainder of the country and buy homes there. Result-all the unsold inventory will be gone in 2 months.
Last time I checked, Clinton left us with a surplus...
The Amerikan consumer will stop spending when you pry the HELOC from his cold, dead hands (and maybe not even then).
HARM | Homepage | 12.12.07 - 9:37 pm | #
There are still parts of the country where housing hasn't rolled over completely yet. PNW and Utah for example. I have a coworker who just got and appraisal for a refinance and cash out and the house is double what it was bought for 3 years ago.
Banks have only "redlined" places with serious declines for lending cutbacks. They seem to actually think that they are avoiding further risk by concentrating on markets that have not shown year over year declines but are clearly at peaks for anyone with a brain.
It's like they are trying to maximize losses.
Mike in AZ,
That's why the national debt increased every year under Clinton...I mean actual borrowings not the smoke and mirrors shite in the press clippings.
Whatever, I gave up pointing this out years ago.
Cheers,
I think the new HELOCs may be going to a slightly different demographic. Namely the relatively conservative folks who actually still have some home equity. I've considered it to increase my cash cushion because credit may not be available on those terms six months from now.
albrt,
That would really be bad news. It means that the conservative folk who have low LTV's are throwing in the towel to join the party.
Ever show up at a rager late and see all the over drunk doofuses falling over themselves and say...Gee bartender give me a bottle of Kettle One so I can look like that?
I mean I have, but that's me...but it is...unsiwe.
Cheers,
CR - thanks. Useful as always. We couldn't enter a plea for the "old" MEW impact on GDP (with & w/o) could we ?
Understand your problems but there were so cute and so informative.
In the meantime where does the data come from ? Kennedy or something you construct from the Fed data yourself using his methodology ?
It'd be interesting to see those charts as MA's to smooth them and as YOY% as well. That would make the trends easier to see and extrapolate rather than having to smooth by eye
.
Just a thought or three FWIW.
ac,
OT
Missed out on the great fed deal debate. I posted, second to last one. Interested in your reaction to waht I had to say. I yes, I read the whole darn thing, but it was dead by the time I got there. If you have a second.
Cheers,
Misean,
We were clearly reversing trends and in better shape after Clinton. I think many people in that administration were trying to do the right thing economically. Was there corruption? Sure. Remember when Greenspan actually worried that we might pay down the debt too quickly and actually have real surplus? He, in his fundamentalist Ayn Randian rotted brain, actually thought it would give the government too much power to have reserves like that. This will become infamous in history I think. I guess it is better for our adversaries/trading partners to have that power!
BTW I don't think von Mises was a douche.
Red Pill,
"We were clearly reversing trends and in better shape after Clinton. I think many people in that administration were trying to do the right thing economically."
Well, only because the Rubin Strong Dollar policy and the Tech bubble were still ballooning. And I disagree any politician does anything other than increase their power, so if it was trying to reduce debt it was to steal an issue from the GLOP, nothing altruistic.
"He, in his fundamentalist Ayn Randian rotted brain, actually thought it would give the government too much power to have reserves like that."
I'm no Randian to be sure, but Magoo sold out to the PTB long ago. With Multi Trillions in debt the private FRB was in no danger.
Thanks for the Mises thing.
Gotta go eat...
Cheers,
Q??
Whats worse at this point, rapid prepayments on a CDO or default? How do hedgies deal with that issue? Do they shut them down and take losses or hang in there and go for broke?
Um, do people not realize that a HELOC is plastic?
You close on your HELOC, and they give a checkbook and two nice shiny metallic-colored credit cards, which you can use anywhere, anytime, for anything.
We may invest in net interest margin securities, or NIMs, which are notes that are payable from and secured by excess cash flow that is generated by MBS or home equity loan-backed securities, or HELOCs, after paying the debt service, expenses and fees on such securities. The excess cash flow represents all or a portion of a residual that is generally retained by the originator of the MBS or HELOCs. The residual is illiquid, thus the originator will monetize the position by securitizing the residual and issuing a NIM, usually in the form of a note that is backed by the excess cash flow generated in the underlying securitization.
We may invest in mortgage pass-through certificates issued or guaranteed by Ginnie Mae, Fannie Mae or Freddie Mac. We refer to these U.S. government agencies as Agencies, and to the mortgage pass-through certificates they issue or guarantee as Agency Mortgage Pass-through Certificates. We may invest in collateralized mortgage obligations issued by the Agencies. We refer to these types of securities as Agency CMOs, and we refer to Agency Mortgage Pass-through Certificates and Agency CMOs as Agency RMBS.
Mike in AZ,
Congress learned a few things from corporate America. Many items are "Off Budget" and not included in the annual deficit. Much of the funding in Iraq occurs this way. These expenditures are supposed to be surprises, and therefore, "Off Budget". This is the equivalent of the "One Time Charge" popular in the 90's corporate world where years of losses could be blasted through at once in the guise of some special event.
In the last year ended 6/30/07, I believe the deficit was $200 billion, but the national debt rose $500 billion. Neat trick, huh?
Mew, Mew;
The issuer, servicer, or residual holder may hold the call rights. Financial Accounting
Standards (FAS) 140 has limited the ability of the issuer to hold the call rights. In some
cases, the servicer may own the call rights, but the economic benefits are directed to the
residual holder.
Um, do people not realize that a HELOC is plastic?
No they don't. All the people I have talked to with HELOCS view it as earned money (the less enlightened) or debt backed by real wealth that can be paid back easily with the next move. In my neck of the woods real estate still only goes up.
I point out that debt stays the same while the home market price can fluctuate.
Really, really blank stares. Home prices only fluctuate up!
Red,
I agree that we and our leadership cannot be trusted with our exorbitant privilege. Hand it back to the creditors I guess.
In recent history was there ever a time that congress (or any administration) really held in abeyance the grand innovation-- that Reagan proved that deficits dont matter? 90s I recall reading about cold hearted bond vigilantes. Also about an opposition congress, something about a contract with the people, that was running DD on budgets. In hindsight, seems to have been a blip, and a politically motivated charade of a blip at that. How frightful to think that even a momentary lapse of deficit spending could have coincided with responsible leadership to continue to pare it down. Seems early in this regimes tenure when AG endorsed the tax cuts with no mention of spending, we were off to the races...
No, as in, how the hell do I get my extractions safely domiciled in the Bermudas and keep my ass out of jail?
We're not Japanese who take the step of responsibility by going off the subway platform in the path of an on-coming train.
Look to Greenspan's example in his Fox Wall Street Journal op-ed "How I Didn't Do It" this week.
thanks lama and we have the latest incarnation of this "off budget" thingie forming right before our eyes with the Fed accepting collateral that the borrowers as a group only want to sell, but until recently could not find someone less informed than themselves about its real worth. Enter the Fed who will fill this spot...at some price possibly cheap in the short term, possibly catastrophic if it only fosters more of the same, yes?
The entire problem will be solved by a massive earthquake in California and a massive hurricane in Florida that will each destroy 500,000 homes. All of the displaced people will move to the remainder of the country and buy homes there.
Damn - I am going to have to arm myself better aren't I?
Kou Jie,
Ahhhh, the exorbitant privilege. The correct international perspective. The problem is that so few US citizens (and few politicians as well)understand or appreciated the exorbitant privilege. I guess it is inevitable given that situation that we would utterly @#$% it up. People will cry, "what has happened?" when it is gone.
We'll probably blame China or Mexicans or atheists or something.
"Seems early in this regimes tenure when AG endorsed the tax cuts with no mention of spending, we were off to the races..."
Yes! and I received my $100 ($300?) sheeple check in the mail and I knew our fate was sealed.
Whatever, I gave up pointing this out years ago.
Debt is as bipartisan as sex.
Both parties are sewers
one is grey-water and one is black-water.
That's why the national debt increased every year under Clinton...I mean actual borrowings not the smoke and mirrors shite in the press clippings
While the "debt to the penny" number at the end of each FY never went down, if you don't count the FICA overpayments (engineered by our pal Greenspan) the debt was on a very good track 1998-2001.
Last time I checked, Clinton left us with a surplus...
If you believe that your a fool.
In the last year ended 6/30/07, I believe the deficit was $200 billion, but the national debt rose $500 billion. Neat trick, huh?
10/02/2006
4,850,288,721,360.86 (external debt)
3,698,095,389,253.42 (gov't trust fund debt)
8,548,384,110,614.28 (total)
09/28/2007
5,049,305,502,926.48 (external debt)
3,958,347,869,336.00 (gov't trust fund debt)
9,007,653,372,262.48 (total)
Note that about half the additional trust fund debt was imputed interest, the government billing interest to itself.
Wow, 1993 the last year that people actually paid back more debt then they made...
A$$ backwards, when the economy is strong they should be paying back more then they are borrowing...
How could that mounting level of debt be considered good times?
Anon, on day 1 of FY01 (the last Clinton budget), the external debt was $3,405,303,490,221.20.
On the last day of FY01, the external debt was $3,339,310,176,094.74.
Do the math. Even with the FICA surplus, having external debt declining was like that was a bona fide good.
This gives an idea of how subprime or Alt-A loans are structured in terms of higher loan costs for less collateral, which is why so many people in debt, used this method to smooth out payments, but of course, resets, ARMS and all those hidden details are like timebombs for both buyer and seller, as we are seeing!
http://www.ams.jhu.edu/~daudley/444/reference_docs/CSFB%20Non%20Agency%20MBS.pdf
Table 4 2004 vintage 30-year fixed-rate collateral characteristics
Owner-Occupied (%) 91 (FNMA Fixed 30yr) 67 (Alt-A Fixed 30yr)
Thus, in regard to MEW & HELOCS, only 37% of the Alt-A loan had documentation to back up the collateral for these vintage/seasoned investments, with Prepay Penalty Term of 43 (months).
Re: Prepayment Penalty A charge levied on a borrower for either a prepayment in full or a
curtailment greater than a specified amount. The penalty is typically
expressed as a function of the interest-rate on the mortgage and
balance of the loan.
Unscheduled principal cash flows, i.e., principal prepayments, are initially
directed entirely to the AAA classes. Subordinate classes are subject to a
prepay lockout, whereby they do not receive their pro-rata share of
prepayment cash flows during the first five years. Over the following five years, a declining percentage of their pro-rata share of prepayment cash flows is directed to the senior classes, leading to a shifting interest schedule.
Once again, Im sorry to offer info and comment!
An example of the impact of the credit crunch on the drying up of MEW.
My parents recently moved, selling one home and moving to a new one that they purchased last year. New home purchase price was $225K. They had a mortgage on the home for $180K for a year (home was rented out, they were waiting to move). Paid off the mortgage 3 months ago and also put $150K in cash in savings with the bank that had held the mortgage. They they applied for a HELOC of $100K with this same bank. They were initially denied the HELOC on the home that was paid off and then after much protest the bank agreed to give them $33K for the HELOC. They have excellent credit, etc and their only other debt is on an income property where the LTV is less than 50% and they own another income property free and clear. Both properties are solid money makers.
They weren't planning to use the HELOC but from what we know most people do. If this is any indication of how banks are thinking these days, say goodbye to MEW.
Also, I read somewhere recently that 25% of MEW was used to pay off credit cards. I imagine those credit cards will get filled up again and then...consumer tapped out.
Grading the Fed "F" On Communications
As Martin Barnes says in the latest from BCA, the Fed gets an "F" for clarity in its recent communications. Despite have declared that it will be more straightforward and less opaque, here is what we have seen in recent weeks:
An unnecessary and ill-advised shift to a neutral position after the October rate cut was quickly abandoned as it became apparent that the economy and markets needed more monetary relief. Then we had this weeks fiasco: hanging the markets out to dry on Tuesday with a timid move on the discount rate, followed by todays announcement of plans to ease credit market strains. It is a mystery why yesterdays policy statement did not warn that a new plan to boost market liquidity was on the way.
From my simplistic calculations, the numbers imply that reduction in MEW is going to cause a 2% haircut in GDP since 2005. And if MEW drops back down to 1990 levels, that will be a 5% haircut to GDP.
Sooner or later we are going to be talking about real money.
Yep J6P is a fool and refuses to live at or beneath means. Gotta keep up the spending so that people think I'm rich.
Before you make a judgement about J6P I suggest you do a little research about why he can't live beneath his means.
Elizabeth Warren has done a lot of research on how todays spending patterns compare with families of a generation ago. The net is that J6P is spending less on the ancillaries of middle class life today than he was a generation ago. He's going bankrupt because he has to spend so much more on the core of the middle class life (home, health-care, cars, and child care).
http://www.yale.edu/law/leo/052005/papers/Warren.pdf
home, health-care
the former is of course a beautiful example of the middle class driving prices to the edge of unaffordability, and beyond. IMO we first saw this happen with the "two income trap" enabling prices to double over a decade.
health care in this country is of course a dismal picture of people collecting economic rents from patients from the womb to death's doorstep.
More info on FED's TAF (Term Acution Facility).
Safe Haven | TAF - The Fed Is Not Tone-Challenged After All
health care in this country is of course a dismal picture of people collecting economic rents from patients from the womb to death's doorstep.
Troy | 12.12.07 - 11:02 pm | #
My wife is a physician still in training (think Scrubs). I have been amazed at how our health care system extremely efficiently kills idealism in our doctors. Troy's description is accurate I am depressed to say. It is all so obviously about profit. Healthy society? Ppfft.
It is near collapse. We will have some baseline minimal socialized system with a higher level privileged system on top I imagine. Your ideology regarding the matter is irrelevant. This seems inevitable to me.
I about kicked in the TV when bush the lessor said: sure we all have health care, just go to the emergency room. Very very very inexpensive and inefficient. Many emergency rooms are near the breaking point.
health care in this country is a dismal picture of the affluent subsidizing the elderly, poor and uninsured without having the bargaining power and efficiencies of single-payer or regional-payer systems.
Yes, how long can it be pretended that the current crisis will shave only a couple points off of GDP?
With dropping MEW alone taking away 2 to 5%, PLUS the lack of new house construction, PLUS the drop in the magical mystery financial dealings,etc., etc, -- you are looking at a pretty steep drop.
Can anyone see why the Fed may be running around with their hair on fire?
How can it result in a MILD recession?
Expensive I meant. Did you guys know that you are drinking pals of mine?
? will all this MEW be used to make house payments. Curious what anyone thinks.
health care in this country is a dismal picture of the affluent subsidizing the elderly, poor and uninsured without having the bargaining power and efficiencies of single-payer or regional-payer systems.
rich | 12.12.07 - 11:16 pm | #
Also a reasonable interpretation. How much is the last two months of life worth? The hard truth is that sometimes it is time to die. The health care industry is almost 20% of GDP so I do not think it is too off topic from an economic perspective. 20% of GDP and look what we have. . .
? will all this MEW be used to make house payments. Curious what anyone thinks.
01/20/2009 end of an error | 12.12.07 - 11:20 pm | #
I have a real estate appraiser relative . He specializes in more heavy industry type stuff but he told me it was quite common for people to extract equity to make housing payments.
He thinks there will be an unprecedented housing crash.
Deborah: How could that mounting level of debt be considered good times?
Just close your eyes and believe!
Obviously things are not on a sustainable path. You have two choices. Rebel against it and be considered somewhat "crazy". Or join it and win the game du jour. I guess there is the third option for some... "Have you seen what the Joneses just bought?"
Also a reasonable interpretation. How much is the last two months of life worth? The hard truth is that sometimes it is time to die. The health care industry is almost 20% of GDP so I do not think it is too off topic from an economic perspective. 20% of GDP and look what we have. . .
Red Pill | 12.12.07 - 11:24 pm | #
20% of GDP? I think you might want to hunt for some stats to back that up. I mean we hear another wild guess that consumer spending is 70% of GDP... add that to your guess that health care is 20% and that doesn't leave a lot for OTHER non-trivial categories like defense & gov't.
Just saying.
But do agree medical system is a bit FUBAR.
Red Pill | 12.12.07 - 11:18 pm | # Expensive I meant. Did you guys know that you are drinking pals of mine?
thats a statement I can relate to. me too.
I have been trying to avoid commenting as the beers deplete (I keep on trying to be a wine afficiando)
When Reagan took office right at 1 trillion of debt. When he left as I remember it was around 3.8 trillion.
When dufus senior left it was around 5.6 trillion.
When Slick Willie left it was roughly 5.9 best recollection.
Dufus the second god knows probably 10 trillion.
As to Clinton using smoke and mirrors to make it look better, probably but know more than these three other a$$wipes.
When you look at it roughly 85% of all the nations debt occured under the watch of three presidents. Hard to dispute regardless of your political preference.
I've been lurking for several months now. I am a physician. Here's my take on healthcare.
Healthcare costs are high due many reasons but here are three which are not regularly mentioned.
If people would have some discipline and improve lifestyle we could drastically reduce costs. Unfortunately there is not monetary incentive for physicians, hospitals, insurance companies to emphasize preventive medicine.
Medical is a tough one for me as I am on both sides. Do we spend way to much for what we get hell yes. I went to Mexico City 3 years ago and saw an MRI and ultrasound system that we still don't have in this country "FDA". Price for an ultrasound 100 dollars. Same exam I perform here for almost 1000. Price for an MRI 300 here with inferior equipment 4-5000.
Answer most countries don't pay their physicians like we do. In Mexico I know a Neuro Pediatrician who earns 5.00 an hour. Answer get rid of frivolous lawsuits and medical malpractice which is up to 250000 a year for an OB. Send them to medical school for free and have them be govt employees at a reasonable wage of 150-200k a year with no malpractice or incentive to cheat the system.
Half of medical expense is CYA for fear of being sued.
AZ,
What you should do is line up what we spend on health care with what the other G7 developed nations spend. That would tell you exactly where we are spending too much.
Compare how many doctors they have per capita and how much those doctors make and cost to our data.
We spent about twice as much of our GDP on health care as Canada.
Misean,
Do you believe that 9/11 and the wars which followed are irrelevant to the current economic situation which we are discussing? I don't believe that this needs to be a partisan issue. 9/11 was an opportunity to harness patriotism. In past wars, this harnessed patriotism manifested as a call to sacrifice and rationing. Bush explicitly called for spend, spend, spend and linked consumption with patriotism. I'm not trying to troll, but am truly interested in a thoughtful explanation for why these factors are being excluded from the conversation.
Other countries pay much less for healthcare than the US, with measurably better health outcomes.
So, out of your list, which one applies only to the US? Number 4.
Oh, and while I'm sure the dutiful bleatings of "frivolous lawsuits" warm the cockles of the insurance industry PR flacks who invented the phrase, malpractice lawsuits account actually account for less than 1% of healthcare costs. Med mal insurance is driven not by payouts, but by insurers' needs for profits--premiums rise fastest in years when insurers' investments perform the worst.
dryfly,
You are right we should provide links. It keeps us honest. Health care is considered a consumable so is included in the 70% consumption number. 20% I believe was a projection for the near future. The latest stat I could find was this, 16%,for a couple of years ago. I second AZ'z comments above as well.
tp://www.washingtonpost.com/wp-dyn/content/article/2006/01/09/AR2006010901932.html
Record Share Of Economy Spent on Health Care
By Marc Kaufman and Rob Stein
Washington Post Staff Writers
Tuesday, January 10, 2006; Page A01
Rising health care costs, already threatening many basic industries, now consume 16 percent of the nation's economic output -- the highest proportion ever, the government said yesterday in its latest calculation.
The nation's health care bill continued to grow substantially faster than inflation and wages, increasing by almost 8 percent in 2004, the most recent year with near-final numbers.
\t
Health and Human Services Secretary Mike Leavitt urged reducing the disparity for health care among ethnic groups.
Health and Human Services Secretary Mike Leavitt urged reducing the disparity for health care among ethnic groups. (By Susan Walsh -- Associated Press)
Rising Costs, Unequal Care
Health care spending has skyrocketed and now accounts for 16 percent of the nation's economic output.
\t\t\t\t
Superintendent Nancy S. Grasmick praised the board's decision, saying the selection of a superintendent 'should not be subjected to partisan politics.' (Christopher T. Assaf - AP)
Spending for physicians and hospitals shot up considerably faster than in recent years, while drug costs grew at a slower rate than over the past decade.
Even as health care costs continue to escalate, however, many Americans -- especially minorities and the poor -- still do not receive high-quality care, according to two other federal reports yesterday. The quality of health care is improving slowly and some racial disparities are narrowing, the reports found, but gaps persist and Hispanics appear to be falling even further behind.
"We can do better," Health and Human Services Secretary Mike Leavitt said at a Washington conference on racial and ethnic disparities in health care. "Disparities and inequities still exist. Outcomes vary. Treatments are not received equally."
Political, medical and economic leaders and experts have long warned that health care cost trends will gradually overwhelm the economy, and many companies now complain that employee and retiree health costs are making them less competitive. Yesterday's report added new reasons to worry.
The overall cost of health care -- everything from hospital and doctor bills to the cost of pharmaceuticals, medical equipment, insurance and nursing home and home-health care -- doubled from 1993 to 2004, said the report from the Centers for Medicare and Medicaid Services. In 2004, the nation spent almost $140 billion more for health care than the year
re:AZ
4. Extremely profitable middlemen ie health insurance companies who add a layer of bureaucracy and inefficiency to the system.
For my sins I did a 5 year stint at a health care insurer. That overhead number was 30cents in the dollar- I'm not kidding. I used to tell my wife that the main reason I was working those insane hours on the HIPAA IT project was that the claims standardization aspect would reduce this to 24 cents in the dollar and let the money go to actual care not to admin. Noble I know.
Of course the wankers stuck with EDI when the rest of the world was moving on to XML so it was obsolete by the time it was implemented. The f*cking HIPAA act actually mandated the use of EDI standards. IDIOTS !
Sigh.. Anyway by way of contrast, Medicare admin costs at 4cents in the dollar.
But anyway, before any of you buy into this electronic medical records malarkey, be very careful(The British NHS IT effort is a colossal failure too ). Its a push effort by the IT industry ( think Y2K, HIPAA, Sorbannes-Oxley systems and for Californians that stupid effort called SB1386 compliance (SSN privacy))
End of OT.
-K
Very interesting article on Bloomberg about the Spain housing bubble starting to deflate. Don't know how to link sorry.
Parallels Between the Health Care and the Credit Market Messes
Parallels Between the Health Care and the Credit Market Messes « naked capitalism
Health care could be a nice defensive play in this market.
Government mandated, nice margin. Conjure likes the idea.
Parallels Between the Health Care and the Credit Market Messes
Page not found « naked capitalism and.html
quoted below
Once simple commercial relationship (doctor-patient, lender-borrower) made complex in the pursuit of efficiency
System increasingly looks to be broken, yet degree of specialization and integration makes it difficult to launch reform/improvement programs
Incumbents argue that change will stifle innovation
Many middlemen add costs that critics argue are out of proportion to the value added
Many middlemen also behave badly
Buyers (investors and patients) often lack ability to judge the quality (or need) for products/services being sold and are often dependent on not-always-reliable and sometimes self-interested guides (for investors, rating agencies and salesmen; for health consumers, drug advertising, doctor referrals, insurance company participating doctor list). As a result, buyers lack usual power to influence product/service quality
High premiums paid for good looking salesmen
Attorneys general go where regulators fear to tread
The beginning of the end occurred in the 1970s (invention of the HMO in 1972; Ginnie Mae did first MBS in 1970)
Incumbents spend a great deal on lobbying and political contributions, assuring that even if there were an obvious solution, it will never be implemented
Tell Conjure there is better than a 90% chance that the next Pres of U.S. will be one of two people.
One is male the other female.
One is white the other not.
Both are big fans of universal health care. One of the two will be swept in with big majorities on both sides of Congress and a mandate to squeeze the fat out of every level of U.S. health care delivery, starting no later than immediately.
Not smart of Conjure, this idea.
rich, the winner of the next election, black or white, male or female will be financed by either the oil sector or the financial sector. My vote is with the financial sector. If either Clinton or Obama wins, so does Goldman Sachs.
The next president will be a Republican, even if a Democrat is elected.
rich: "...without having the bargaining power and efficiencies of single-payer or regional-payer systems..."
Aw, you know better than that, rich.
Here's another fine recent example of government-run insurance running amok:
Untitled Page
Give me small, competing, profit-motivated entities, instead, any day of the week.
dryfly,
Not saying you don't have lots of good ones but:
"Debt is as bipartisan as sex."
Is a real good one.
Cheers,
AZ,
Good lord I want to hug you...
Cheers,
jcsc,
"Do you believe that 9/11 and the wars which followed are irrelevant to the current economic situation which we are discussing? I don't believe that this needs to be a partisan issue. 9/11 was an opportunity to harness patriotism. In past wars, this harnessed patriotism manifested as a call to sacrifice and rationing. Bush explicitly called for spend, spend, spend and linked consumption with patriotism. I'm not trying to troll, but am truly interested in a thoughtful explanation for why these factors are being excluded from the conversation."
Dude, you're asking that of a Super Colander Tin Foil Hat wearer. What plane hit building 7. Why was the frigging basements of 1 and 2 at over 2000 degreees weeks after the buildings fell into their finger print like typical demolitions.
Sheesh... I advertise where I am on these issues. The war was WANTED. Why should I have to pay the idiot neo-clowns playing a game of global RISK any friggin' money. Patriotism, my ass. I just finished dinner with an ex-marine who served two tours in Iraq who couldn't agree more with me.
Thlllpppttt!
Patriotic my ass. You want to support the troops, at least get a bumper sticker that says:
"Bring 'em Home"
Cheers,
I gotta love it. People consume too much and we get a link on consumption that dispels some of the stereotypes. Then it is health care, and we get a doctor's take. Then it's malpractice suits, but someone posts that judgments amount to 1% of health care costs, and it is the greedy insurers.
I am not going to defend the greedy insurers, but St Paul, traditionally the largest med mal insurer dropped the line 3 or 4 years ago. It's a competitive, cyclical business and insurers lost a lot of money in the late 90's. At the more favorable points in a cycle, excess profits get competed away pretty quickly as additional capital is attracted. One person's obscene profit is another's return on capital. Also, like other businesses that are being discussed lot, it's easy to get into but hard to get out of. People have referred to the costs of getting out of long tailed casualty businesses like buying an exit visa from hell. In other words, not cheap.
jcsc,
Oh yeah and for my son's friend who died there...why the F*CK don't you drag your friggin lazy carcass off to the recruitment office and SIGN UP! Mr Patriot. And if you're TOO OLD...ship one of your brats over there.
Sorry, but this ain't supposed to be a political or war pig blog...but that PATRIOT shite just lights a fire under my butt.
I'll shut up about it now and just ignore it.
Cheers,
Sorry if it's been posted...from the WSJ:
Enthusiasm Wanes for Fund to Bail Out SIVs
By ROBIN SIDEL
December 13, 2007; Page C2
After months of intense planning to create a fund designed to save banks and structured investment vehicles from big losses, the proposal appears to be losing momentum.
The nation's three biggest banks have started to formally ask other financial institutions to join the fund, but some firms that were expected to sign up are now not as interested. As a result, the fund's ability to provide a solution for the credit crunch is more uncertain than ever, according to people involved in the situation.
.
.
.
Might require subscription:
Enthusiasm Wanes for Fund to Bail Out SIVs - WSJ.com
I remember when home equity loans were pitched as a tax advantaged way to borrow.
A year ago, my bank pushed me to lower my rate and double my credit line. I only use it as a tax advantaged, low cost, payday loan. So I draw it and pay it back pretty quickly.
It's a great way to borrow since the rates are competitive and also tax deductible. At least some of this must be for people that are simply taking advantage of the cheapest money available.
Interesting NYT piece on the effects of MEW on a homeowner in Paramount, California, the zip code with the largest drop in sales in 3Q07, according to the author:
ECONOMIC SCENE; The Capital Of Slumping Home Sales - NY Times
Anecdotal of course, but I think this story will be replicated many times over next year.
ShortCourage,
Yeah the M-bLECh Super Sewer is dead. Long live the Super Sewer.
Who really believed it when it came out?
Cheers,
" Extremely profitable middlemen ie health insurance companies who add a layer of bureaucracy and inefficiency to the system."
Someone has to be the bad guy. Any decent size corporation is essentially self insured. The insurance company is there to process claims/ration care, and to squeeze money out of the providers. I haven't seen this lately but I used to get bills with some outrageous "reasonable and customary fee" (sticker price) for a test or procedure and the PPO negotiated price with was usually 1/3.
I know specialist who do procedures who make less now then a decade ago. Not that they aren't well compensated.
And then you have companies like GE Med Systems that extract a lot of money from the system.
PHX resale volume down 35% YoY, median price down 7%
OT... (not that I have been on topic for a while)
Annals of Medicine: The Checklist : The New Yorker
Nice article about using quality/process improvements in health care
Zigurrat,
Hmm... when I go to the grocery store or Best Buy, I don't deal with that kinda stuff. In the 50's Doctors still made house calls (like computer fixers do today).
Maybe, the whole edifice of insurance paid doctoring through 3'rd parties is the problem? Naw...we need a titanic feral beuRATcy to deal with it...That'll solve the problem.
Cheers,
Just to try to clarify where I'm coming from . . .
I see the mania of the late 90's as bearing a relationship to calendar mania, fin de cycle ennui. I viewed this underlying anxiety as contributing to bold irrationality. 9/11 came at a time when people where recovering from this mania. I think that people have been channeling their anxiety into consumption and that this has been encouraged and until recently was largely socially acceptable. My primary interest is in how the coming economic upheaval will affect the identity constructs of people who have externalized their egos via consumption. There is a great deal more than just economic fallout that awaits us. Yeah, this makes no sense in short form and probably not in long form either.
jcsc,
Well that's an interesting post, and I apologize for yelling at you.
"There is a great deal more than just economic fallout that awaits us."
Yeah, social upheaval come to mind.
Of course the pseudo-psychological crud is a bit too aloof for me to swallow. To each his own. I posted this at the top of this post...It's post number 3:
"Yep J6P is a fool and refuses to live at or beneath means. Gotta keep up the spending so that people think I'm rich.
Local syndicated morning Ha-Ha show in LA had a truly funny bit this morning essentially making fun of such people. They did a fake ad for Lexus Christmas Trees.
Upper left side of page under podcasts:
KLOS
Enjoy."
Give it a look...
Cheers,
jcsc- "My primary interest is in how the coming economic upheaval will affect the identity constructs of people who have externalized their egos via consumption."
Conjure Bag is always interested in learning about the lizards that live within us.
Finally,
It's evening in America.
jcsc- "I see the mania of the late 90's as bearing a relationship to calendar mania, fin de cycle ennui."
Conjure Bag says, "You have my rapt attention."
mp,
"Conjure Bag is always interested in learning about the lizards that live within us."
I eat them. After frying them up in some olive oil...Quite tasty really. taste like chicken.
Cheers,
Misean, political commentary will in the end damage, if not destroy, this blog. Let's just say you and I disagree on most every political issue and leave it at that.
Meanwhile, you complimented Mook on his post and said it was worth remembering. I think what he said is worth repeating:
This idea of MEW being handed out like free money to spend on consumption with no questions asked just kind of exploded out of no where. Truly silly.
I keep harkening back to the summer of 2000. The last time we had an asset bubble in this country, it cost us 85% on the Nasdaq, 50% on the S&P ... and this with an asset class that could only be margined up to 50% of its value!
Imagine the absolute carnage that would have ensued if Joe Daytrader, with a $50K income, had been allowed to buy $500K worth of stocks with no money down. And, rather than being the victim of forced margin selling, he could call up E*Trade and have them advance him another 20% of the late-1999 value of his account because, really, we all know stocks only go up in price!
The thought experiment itself just boggles the mind. The realization that we're so stupid as a society as to relive it on a grander scale less than a decade later ... well, words flat-out fail me.
Mook | 12.12.07 - 9:41 pm | #
Lots of good comments on this blog, but I thought Mook really nailed it.
My primary interest is in how the coming economic upheaval will affect the identity constructs of people who have externalized their egos via consumption.
Shootin' from the hip, I'll put my money on war. Patriotism is the ultimate feel-good identity.
sportsfan,
OK cool.
I wrote that line.
And later agreed with Mook. Don't know what the rest of your point was but I guess I'll leave it at that.
Cheers,
A little-known network of government-sponsored bank co-operatives founded during the Great Depression is playing a critical role keeping the private sector US mortgage industry open for business and some mortgage lenders out of financial trouble in spite of the brutal slump in the housing sector.
The Federal Home Loan Banks are pumping hundreds of billions of dollars into the mortgage industry in the form of loans against mortgage collateral at a time when purely private sources of finance are offered only at punitive terms for many lenders.
......
The latest Fed flow of funds data shows that FHLBs issued new loans at an unprecedented annualised rate of $746bn (508bn, £366bn) in the third quarter, up from practically nothing in the second quarter.
FT.com / In depth - Bank co-ops keep US afloat
Misean, yes, I see that Mook was responding to your quote (the first paragraph of what appeared in italics in my post). I think his reply to you was a classic.
IMO part of the strength of this board is that commenters with different politics, different biases, differences of all kinds, can discuss important issues, perhaps reach a consensus, and certainly learn from each other in the process.
Politics, on the other hand, is by nature and design the most divisive subject around and one to be avoided as much as possible. Just my take.
Cheers,
sportsfa
Dr Strangemoney- "Patriotism is the ultimate feel-good identity."
Paul Tillich's "The Dynamics of Faith" comes to mind. People need to believe in something. If they don't it leads to existential doubt. God forbid they should believe in themselves.
If, according to Tillich, and if memory serves, people lose faith in their government, the next step on the hierarchy is belief in a higher power. If they lose faith in a higher power, then it's existential doubt.
sportsfan,
I was specifically goaded into a political thing on this page...and i Jumped in...apologized and bowed out. The second was my fault entirely...and apologized for that as well.
Jump down my throat, if you will, but earlier Gary and I truced amicably and I'm done with the other. Do you need some specific "Mea Culpa"?
Cheers,
mp,
"people lose faith in their government, the next step on the hierarchy is belief in a higher power."
and, ironically, some show on discovery was discussing the higher power thing. I gave up on such things years ago, never looked back...and I feel fine.
A little REM..for fun...no?
YouTube - Hey There Delilah It's the End of the world as we know it..And I DO still Love YOU, Yes I DO
Cheers,
Misean, on second thought, I'm sure we agree on some political issues. I just don't want to explore what those issues are and are not.
Meanwhile, Paul Tillich is always worth reading. Never can tell what you'll see here.
No, of course not.
sportsfan,
I don't want to tussle, I agree with your wide ranging opinions statement. That's why I like to be here. Just watch out for conjure bag...I hear he bites...
JK
Anywho...off to bed.
Night all remaining CR's
Cheers,
If they lose faith in a higher power, then it's existential doubt.
Nothing can hold me back! It's will-to-power time baby!
Besides, that existential doubt thing is tiring. Always looking for answers... too much critical thinking involved. Look at my car! Dang! I'm better than you! Bling! Bling!
Of course, Paul Tillich was close to Reinhold Niebuhr, who married off Cord Meyer to one of the Pinchot daughters.
One of Conjure's little fun facts.
Ahhh, late night at CR's. Glad they don't shut this bar down at 2 AM.
"It's will-to-power time baby!"
Lest we forget America's flirtation with fascism during the 1920s.
Conjure relates the following:
"Andrew Mellon's flirtation with Mussolini was based largely on Il Duce's ability to make the trains run on time. As a believer in the righteousness of capital efficiency, Mellon and Mussolini must have had a lot to talk about when Mellon visited Rome in 1926."
Yes, and Charles Lindbergh and Henry Ford. But a rigid stratified society looks pretty attractive when you're on top.
"Of course, Paul Tillich was close to Reinhold Niebuhr, who married off Cord Meyer to one of the Pinchot daughters."
Conjure just reminded me that it was Mary Pinchot, who later became one of JFK's many mistresses.
Conjure says she was found shot in the head shortly after JFK's assassination on the B&O canal towpath in Georgetown.
"Yes, and Charles Lindbergh and Henry Ford. But a rigid stratified society looks pretty attractive when you're on top."
Conjure says, "Always saw off the rungs behind you as you climb the ladder."
A friend, trust fund from PPG, said ironically of the rich and making laws, "I got mine, now dynamite the passes!"
Mellon is my heero as far as exemplifying how cutthroat laissez-faire capitalism can get. Alcoa protected their aluminum monopoly by buying up hydroelectric capacity, just to keep any competitors' ideas about putting in bauxite processing plants on ice. Later, add one European war and the Truman Committee:
"The result was that a Truman Committee hearing in May 1941 unearthed a 600,000,000 pound annual deficit in aluminum. The OPM tried to cover up its culpability with a great campaign to collect aluminum pots and pans, which produced scrap equivalent to about four days of the amount of the annual deficit. Expansion of production was arranged for finallyat government expenseon August 19, 1941. The plant expansion will be available for actual production about August 1942."
Plus ça change
Dynamite the passes. I like that.
"Alcoa protected their aluminum monopoly by buying up hydroelectric capacity..."
Dynamiting the passes?
Guys, Gals, it has been swell. Conjure wants to go chase women.
If consensus estimates for the CPI are correct (the figures come out Friday), the November year over year inflation will be 4.4%. This may well alarm the FED and guarantee that there are no more rate reductions. I suspect fear of inflation is what kept the last one to only a quarter instead of a half.
As everyone contemplates the feds next move, consider that what we may see is the targeting of margin requirements with the aim of curbing commodities speculation and those that are short credit.
The hedge space has decidedly avoided its intended purpose and has become an enemy of the fed. BB knows this and will likely lead the targeting of the miscreants.
"the Fed will accept a wide range of collateral at the regular discount window and under the TAF program. A question arises as to whether the Fed will be taking a large enough "haircut" on some of the collateral being presented to it by successful TAF bidders. If the markets cannot price some of these securities, how does the Fed know what they are worth? If a TAF borrower were to become insolvent, the Fed might not be able to recover the full amount it had loaned the bank. In effect, the TAF program, as well as the regular discount window facility, transfers credit risk to the Fed, which means ultimately, to the taxpayer. Depending on how the Fed prices the collateral presented to it, the TAF program could be construed as a taxpayer subsidy to banks presenting "questionable" collateral. Remember, there is no such thing as a free bailout"
Paul Kasriel
Safe Haven | TAF - The Fed Is Not Tone-Challenged After All
http://www.frbdiscountwindow.org/discountmargins.pdf
Here's the headline on Professor Wolf's column in this morning's FT about the CB's concerted actions:
"The helicopters start to drop money"
Too cute for words, this claptrap about "judgments"" accounting for less than 1% of the cost of medical services. What happened to settlements and legal expense? In any sort of complex litigation, legal expense typically exceeds the costs of judgments and settlements combined by a factor of 2 to 1. And why would you suppose St. Paul bailed out of medmal? Too many politicos have been bought and paid for by the trial lawyers to permit any sort of rational inquiry into the costs of medical care.
OT
Chinese Premier Wen Jiabao made it clear to US Treasury Secretary Henry Paulson that China's exchange rate reform will be gradual, a senior finance ministry official said.
Zhu Guangyao, assistant finance minister, told reporters that exchange rate reform would continue at China's own initiative, though it would be "controllable and gradual."
Our currency, your problem wonder where they ever came up with that idea.
Alright, I'm fairly new to this board and I see alot of interesting discussion and many smart, well- informed people here. No question we are at a dicey moment. But, what I'd be interested in hearing is as Chernyshevsky asked, "What is to be done?" I have now appointed each of you Supreme Grand Poobah with complete authority over the Fed, Congress, the White House and the Courts. You can include any foreign institutions you would like. What do you do?
By the way, if your recommended course of action is let everything crash and burn, please justify the inevitable collateral damage to those of us who have worked and saved and not incurred debt, but whose lives will certainly be impacted negatively by the fallout (IRAs, 401 Ks, jobs, businesses, etc.)
I'll sit back and watch the fireworks...
Biotech,
During times of financial crisis there exists extraordinary opportunity. Your life will be negatively affected if you let it. However, if you are proactive and smart, it will be a significant window to make fantastic long-term investments.
Hoowah, how about those wholesale prices? Came in a tad hot, about 100% above expectations (3.2% total vs 1.5% total expected, core at 0.4% instead of 0.2% core expected).
Looks like retail sales ex-gas are .6%, which in real terms is probably .2-.3%. Not too bad, but then the early Thanksgiving makes it hard to draw conclusions from it.
Select Comfort, the mattress maker, warned last night that sales weakened after Black Friday promotions. Wonder how much of that we'll be hearing.
Hello,
My wife an I bought our house in 2002, and we're doing fine. We have a HELOC which we used when we remodeled our kitchen, and we're going to use again while we replace our windows and siding.
We have plenty of equity in the house (If we observed no price appreciation from 2002 purchase, we'd still have 25% equity).
How does our HELOC fit into the MEW equation?
How would our "re-insertion" of equity in our home be accounted for? What about when we have an un-used HELOC?
Thanks,
Pat
S&P on third quarter subprime trends:
http://www2.standardandpoors.com/portal/site/sp/en/us/page.article/4,5,5,1,1148449791002.html
I'll take a stab, completely off the cuff. This idea isn't well-thought out, but here goes:
Clearly the housing bubble and stupidity of giving credit to folks who have inappropriate income levels has led to tremendous 'malinvestments'. These need to be worked off and/or sold off at firesale prices.
One thought is that the Federal government could purchase abandoned housing developments from near BK builders or perhaps simply seize them using eminent domain. These could then be bulldozed and turned into public parks, greenpaces or other land uses. Agriculture also comes to mind.
Obviously the redevelopment would have to be appropriate for the area ... far flung exurban big boxes would be the most likely candidates for redevelopment, with close in or inner city housing more likely to be saved or perhaps re-purpased.
This would have two beneficial effects - supply of houses would be reduced, and also jobs created to do the work of tearing down McMansions and converting the land back to greenspace.
Big drawback is that it would require more Federal spending, and the taxpayers would be implicitly footing the bill. However, at least we'd get something useful for our money.
In any sort of complex litigation, legal expense typically exceeds the costs of judgments and settlements combined by a factor of 2 to 1.
Do you buy, or grow your own?
Then you had an offsetting "Mortgage Equity Deposit". So your net MEW was zero. Technically, would have been $40,000 (or whatever, I don't know if you went all Jenn-Air or what) the quarter in which you drew on your line.
In the quarter in which you paid it back, your MEW was $-40,000
An unused HELOC contributes nothing to MEW.
Lemark - LOL
@Sportsfan / Misean - Aw shucks, thanks, you guys. Really, I'm blushing over here.
My wife an I bought our house in 2002, and we're doing fine. We have a HELOC which we used when we remodeled our kitchen, and we're going to use again while we replace our windows and siding.
This is an example of why HELOCs were created in the first place - it's what they are intended for.
Before the real-estate bubble hit, if you'd taken $40K in equity out of your house, dropped it all on new cars / vacations / golf memberships without spending a dime on the house itself, and justified it with, "Who cares? My house will be worth $40K more by this time next year anyway," you'd have been laughed at. Or possibly committed.
Our company's 401(k) plan offers two classes of loans - a "house purchase" loan, which requires documented proof of use but carries fewer restrictions, longer payback times, and a lower interest rate; and a "general purpose" loan that can be used for, well, whatever, but carries more restrictions and a higher rate.
Why the hell would it be so difficult for banks offering HELOCs and other post-purchase MEW to require this distinction be drawn? If you want to add a bedroom, upgrade the kitchen, something that will add value to my collateral, then sure, I'll give you a flexible prime-rate loan to do it. If you're just gonna use it as a credit card ... well, then, I'm gonna charge you credit-card type rates for it, because I'm increasing my risk without increasing the associated collateral value.
This is where I'd start with the reforms, and this is why I have approximately zero sympathy for the MEW lenders in this whole mess.
centra_scrutinizer Yes! That is exactly right. What is saddest about what happened in the last several years is not so much that there was too much building, but rather that what was built was so WRONG! Household size shrinking, while average house size doubles? Insane! There was and still is a need for smaller, supre-energy efficient residences in real communities with services in walking distance and adaptable to residents diminished mobility as aging occurs. I will go out on a limb and say that even in this horrible market a smart builder could still make money on those type of projects. There are a few small local developers who are rehabbing abandoned inner city houses and industrial buildings, but I don't see Lennar and Toll doing anything like that. Unfortunately, the stuff they built is so far removed from what's needed that I see little alternative to bulldozing it.
As far as taxpayer money, it should be invested in things that will add to the national wealth and productive capacity. The most compelling needs are to fix the public infrastructure. We need high speed rail, wind power and a whole host of green technologies. And let's bill the Iraqis for the cost of the war; after all Wolfowitz and Rumsfeld said they'd pay for it!
Some of my US contacts have told me that when people see their equity evaporating and figure they may lose their house, they 'withdraw' the remaining equity now before it disappears.
Pay off the cards.
Start again when house prices have dropped enough.