I see how we got into this mess in the first place now. The borrowers felt like if my house goes down I can always walk away. While these idiots probably always felt they could always drop this on the tax payers if something goes wrong.
Feb. 5 (Bloomberg) -- U.S. service industries unexpectedly contracted in January as the housing slump deepened and consumer spending cooled.
The Institute for Supply Management's non-manufacturing index, which reflects almost 90 percent of the economy, fell to 41.9, the lowest since October 2001, from 54.4 the prior month, the Tempe, Arizona-based ISM said. A reading of 50 is the dividing line between growth and contraction. The group also issued a new composite measure.
ISM came in at 41.9, Holy Crap. That's a lot of contraction.
They reported early with no explantion. They were supposed to report at 10 AM EST. Probobaly to give Ben time for another emergency rate cut beforte the bell.
Someone should tell Mr. Bottorff that the "Classic Homeowner" would probably want a classic fixed rate loan. The resultant classic payments would be too high for most of those "Classic Homeowners" until prices revert to something more classic.
...went so far as to suggest something like a food stamp program to help borrowers with payments.
Seems to me that would make all the people who already lost their houses to forclosure hate the world. Likewise for a lot of people who actually had to pay for their houses and now have to pay for somebody else's house with their tax dollars.
Wow! Who would have thought it would come together like this? ISM Service index crashing on Super Tuesday, the day after the President sends up a budget with a record deficit. It will be a record, over -$500 billion, after the recession drains federal tax revenue.
The country has changed dramatically since the last general election. Hispanics now are 15% of all voters, more even than blacks (12%). For the first time, Hispanics and black voters are aligned with common interests. Women and young voters are more energized, and older voters are more worried.
When millions of people vote in times of change, they exert powerful collective unconscious will. Only 3 people have a chance to be President.
Obama is an interesting empty suit.
McCain is on the wrong side of every trend, with no room to move.
That leaves Hillary. When you think about it, she's probably the right person to lead "New Deal, the Sequel."
Leverage your investments to inflation and try to protect purchasing power. The only way out of this mess is for the govt. to spend.
at the same panel meeting both ghosh and zimmerman from ubs more or less cried for government bailout, and all the panel was extremely negative, with a minor caveat from the Wachovia dude
...went so far as to suggest something like a food stamp program to help borrowers with payments.
calling Misean, calling Misean.
There is a logic to the MER director calling for it of course. I've never heard of the agribusiness coming out AGAINST food stamps either - and when they mention food stamps its ALWAYS to feed the starving - nothing about getting paid for and shifting their product.
The logical disconnect is astounding. "These people are unqualified and unwilling to own these houses therefor we need to do everything to keep them in these houses."
Newsflash; I am not willing to hare the pain and any solution to that effect will not go unchallenged. I suspect there are far more of me than these schemers are expecting.
We need a new field on the loan tapes indicating whether borrower receives food stamps. With this reduction in layered risk, we can then ask the rating agencies to lower our credit enhancement since the borrower will be able to eat for 6 months.
number2son writes:
rich, with all due respect if someone who sat on the board of Walmart leads the next "New Deal" it will rather be a "Raw Deal".
I've never understood what was so wrong with sitting on the board of Wal-Mart back when Wal-Mart was a pretty decent company, when Sam Walton was alive, before it became what it is today.
I'm sure Hillary haters know the answer. And I'm sure most of them shop at Wal-Mart.
uh Oh Ms. Bair Has a book? Lets see last time someone of her stature promoted their book like that , oh what was his name? David Lehrer, Are you misssing the re boom?...what happened lesss than a month after that appearence.....
You are begging for a bullet, sweetie. You can't go around lifting up the curtain at times like this. OF COURSE the guy was begging for a return to imbalance. It ain't like he earns that huge multiple of the median worker's income by creating value. If he can nudge the law and regulation in his own favor, rely on the public to behave far better than he does and swap favors with other individuals in positions of corporate power without fear of retribution, all is well. You are arguing again that. There's gonna be a knock at your door some night.
Tanta,
I noticed a typographical error in the post label. It currently reads; "YOU MUST BE KIDDING"
The industry accepted correct term is; "GMAFB"
Thank you for your kid attention to detail.
idoc, you are absolutely right that there is a huge margin of error for shorting HB's and financials. this is an enormous opportunity to get in on the short side, i was selling a lot of stuff on friday and couldn't understand who would be buying many of these stocks. for anyone who reads this and similar blogs, it should be 100% clear that the economy is going to take another big leg down, and as stocks seem to be a coincident and not a leading indicator, down they will go with it.
i'm short KO,HRL,VOD.L,HRL,GS,BBY,GIS,VOD.L,
SPLS,FED,COF,LEN,DSL,GGP,VNO, and am considering MHK and X next amongst others. i'm prepared to hold for 6 months or a year, and just can't see a realistic scenario where banking/credit card/reits/retail stocks are higher. even consumer staples are a sell, market has way overbid them thinking they are a safe haven, but they'll go down like everything else. easy easy money for the taking out there.
Just because I lost money doesn't mean I will quit, no way,'' Devaney, who sold his boatPositive Carry'' and Gulfstream IV, said in a telephone interview from Key Biscayne, Florida. ``Prices have collapsed and this is the best opportunity I've seen in my career.''
[snip]
No new CDOs have been issued this year
[snip]
This time, he's sponsoring dinner and a show by the Blue Man Group, a theatrical troupe that sprays paint on the audience and vomits fake food.
Personal opinion - of all the various aspects of the current 'turmoil', the one getting the least attention to date is the traditional system of appraisals. These are always based on comps, in my experience, with no ties back to construction cost or long-term historic norms. To the degree that is true, appraisals are prone to ride up with bubbles, supporting lending amounts with confirmations of prices based on the unreasonableness of other buyers.
To me, the price bubble is still the fundamental problem. I understand that it is layered with two other issues (lax lending standards and irresponsible - leveraged - securitization), but that price bubble, when collapsing, is what gives borrowers the justification to walk.
....Yet a "landmark" 1992 study from the Boston Fed concluded that mortgage-lending discrimination was systemic.
That study was tremendously flawed - a colleague and I later showed that the data it had used contained thousands of egregious typos, such as loans with negative interest rates. Our study found no evidence of discrimination.
Yet the political agenda triumphed - with the president of the Boston Fed saying no new studies were needed, and the US comptroller of the currency seconding the motion.
No sooner had the ink dried on its discrimination study than the Boston Fed, clearly speaking for the entire Fed, produced a manual for mortgage lenders stating that: "discrimination may be observed when a lender's underwriting policies contain arbitrary or outdated criteria that effectively disqualify many urban or lower-income minority applicants."
Some of these "outdated" criteria included the size of the mortgage payment relative to income, credit history, savings history and income verification. Instead, the Boston Fed ruled that participation in a credit-counseling program should be taken as evidence of an applicant's ability to manage debt.....
I think we now see one of the ways that too great income inequality leads to social incohesion and ultimately a society that's weaker rather than stronger. My reaction to Wall Street asking for help is: screw the rich bastards. Even if ultimately, I'll be screwed too.
I wasn't invited to the American Securitization Forum either. Apparently the topic was securitizing America?
Yep, it's the newest Wall Street product, the TBS (Taxpayer-Backed Security).
See, they divide all of America out into layers by credit risk and then - starting in about 2009 - the poor, poor C's and D's (formerly known as "renters") get to keep their house and credit ratings ... thanks to large Congressionally-mandated cash infusions from the AAA and AA taxpayers!
"we are attracting a lot of buyers who are really renters"
Well what this guy is missing is that TURNED A LOT OF ONCE BUYERS INTO COMMITTED RENTERS.
I am one -- we sold our 4300 sq ft home and went to buy again after a move but the prices were so high that we knew something was up esepcially when our realtor didn't want to give us comps because she said comps no longer mattered because prices were going up so fast. So we fired her and rented instead despite free moving assistance from a company, where we would have gotten free closing costs and points and all. Instead we rented. At first we felt worried about maybe they would take it up forever but we invested our money instead of spending it on a house and now our rent is subsidized by the interest we get and we will never buy again. So not only did they "attract a lot of buyers who are really renters" but they also "created a lot of renters who used to be buyers."
Ha! They disintermediated the landlords. I guess they should have qualified those tenants a bit more carefully. Well I guess they are about to learn a lot about how to be a hands on property management.
MPinCO indirectly makes a good point. There are strong racial aspects to this mortgage bubble. It appears to me that a large percent of these crazy mortgages have been taken out by black americans. Especially in the smaller middle america segments. For example a 75,000 neg amort arm in cleveland. This was part of Bushs dream of home ownership for all. blah, blah, blah...
I haven't seen a single news story black-america sub prime problem. Maybe I'll look tonite.
Hey, it's not fair!! It Tanta gets her Classic Investment Banker then I want a pony!!! I want a pony NOWWWWWWWW!!! WAAAAAHHHHHHH!!!!!
Oh, and Rich? Run the good Senator's name and my name through a search engine sometime. You'll find my opinions I'm sure...Indemnify servicers from any legal action resulting from the modification of loans my ass... Apparently everyone has forgotten how to spell "White Water".
One of the more humorous bumper stickers I've seen in the campaign so far - "Monica Lewinsky's ex boyfriend's wife for President".
Hillary could promise that the government will make mortgage payments for everybody who can't or isn't right now. That should give her campaign a boost.
I doubt there are any race related aspects to the current issues but you can bet some will try and make that case to take advantage of the situation.
The bottom line is that many standards were relaxed during the 90's, from traditional loan criteria to accounting standards (Enron). It was the heyday of the 90's in which even the Fed participated in "ever increasing productivity". Just look at the exponential spike in tax revenue from capital gains. In reality government budget 'debt' was reduced on the back of stock market bubbles, relaxed standards and the Feds printing press. The perspective on the late 90's debt was never real because traditional standards were thrown out the window.
I'm at the ASF conference myself. If you'd like I can provide a wrap up when I get back, or if I have some time at the airport. There have been some quite interesting discussions.
"has a vested interest in something other than writing free puts? Just a thought."
Hysterical, Tanta, simply hysterical. I am so p*ssed about how the grown ups left the room (Fed, OFHEO, CoC, Tsy, Pres.) while all the kiddos played on. Just amazing. Remember the day when you found a house you could afford, went to the local bank, actually produced W-2's bank statements, etc. and they even called your employer............... ah what's the use...........
I see how we got into this mess in the first place now. The borrowers felt like if my house goes down I can always walk away. While these idiots probably always felt they could always drop this on the tax payers if something goes wrong.
Can we have one of those, too? Can we? Can we?
not until you finish your cauliflower and clean up that mess you left in the living room. then we'll talk.
With apologies for the OT but here goes;
ISM Services Index Fell to 41.9 in January From 54.4
By Shobhana Chandra
Feb. 5 (Bloomberg) -- U.S. service industries unexpectedly contracted in January as the housing slump deepened and consumer spending cooled.
The Institute for Supply Management's non-manufacturing index, which reflects almost 90 percent of the economy, fell to 41.9, the lowest since October 2001, from 54.4 the prior month, the Tempe, Arizona-based ISM said. A reading of 50 is the dividing line between growth and contraction. The group also issued a new composite measure.
[snip]
ISM came in at 41.9, Holy Crap. That's a lot of contraction.
They reported early with no explantion. They were supposed to report at 10 AM EST. Probobaly to give Ben time for another emergency rate cut beforte the bell.
OT- i've said it before and i'll say it again. it pays to hold your shorts.
charlie,
The yen was already tanking hard - think that one got out - just my SWAG.
AND that is a 'Holy Crap!' print, no doubt about it.
Leaked.....
Dead cat bounce in futures right now, big boys want to get out.
i don't see anyway out of this print in conjunction with last Fri GDP. it was all a short squeeze.
Someone should tell Mr. Bottorff that the "Classic Homeowner" would probably want a classic fixed rate loan. The resultant classic payments would be too high for most of those "Classic Homeowners" until prices revert to something more classic.
Waiter, my free lunch, and make it snappy !!!
...went so far as to suggest something like a food stamp program to help borrowers with payments.
Seems to me that would make all the people who already lost their houses to forclosure hate the world. Likewise for a lot of people who actually had to pay for their houses and now have to pay for somebody else's house with their tax dollars.
It's nice to feel needed. -- walkaway.
Wall Street promoting the philosophic merit of food stamps
???
I think the classic homeowner is one who puts 20% down. I'm not sure we have any of those left in this country.
The employment subindex in the service ISM went from 51.8 to 43.9 month to month - it had been in the 51-52 range for the last 4 months.
Imports also went from 50.5 to 41.5, no wonder the Baltic is crashing
I'm truely shocked that they want to write real loans, well that's until after they get bailed by me. Then back to bad paper.
Wow! Who would have thought it would come together like this? ISM Service index crashing on Super Tuesday, the day after the President sends up a budget with a record deficit. It will be a record, over -$500 billion, after the recession drains federal tax revenue.
The country has changed dramatically since the last general election. Hispanics now are 15% of all voters, more even than blacks (12%). For the first time, Hispanics and black voters are aligned with common interests. Women and young voters are more energized, and older voters are more worried.
When millions of people vote in times of change, they exert powerful collective unconscious will. Only 3 people have a chance to be President.
Obama is an interesting empty suit.
McCain is on the wrong side of every trend, with no room to move.
That leaves Hillary. When you think about it, she's probably the right person to lead "New Deal, the Sequel."
Leverage your investments to inflation and try to protect purchasing power. The only way out of this mess is for the govt. to spend.
rich, with all due respect if someone who sat on the board of Walmart leads the next "New Deal" it will rather be a "Raw Deal".
i've always been a stagflationist and that means GLOD!
On a related note, the FDIC's Sheila Bair appeared on CNBC today talking HER book.
Video - CNBC.com
at the same panel meeting both ghosh and zimmerman from ubs more or less cried for government bailout, and all the panel was extremely negative, with a minor caveat from the Wachovia dude
Man, that BofA analyst who upgraded some homebuilders must be feeling like an idiot right now. Heh
When is the AICPA going to propose something like a food stamp program to help taxpayers pay more, er I mean pay FOR accounting fees?
...went so far as to suggest something like a food stamp program to help borrowers with payments.
calling Misean, calling Misean.
There is a logic to the MER director calling for it of course. I've never heard of the agribusiness coming out AGAINST food stamps either - and when they mention food stamps its ALWAYS to feed the starving - nothing about getting paid for and shifting their product.
-K
-K
ille_vir
Dan Oppenheim keeps missing his mark. over and over. when will they fire him?
The logical disconnect is astounding. "These people are unqualified and unwilling to own these houses therefor we need to do everything to keep them in these houses."
Newsflash; I am not willing to hare the pain and any solution to that effect will not go unchallenged. I suspect there are far more of me than these schemers are expecting.
Tanta,
We need a new field on the loan tapes indicating whether borrower receives food stamps. With this reduction in layered risk, we can then ask the rating agencies to lower our credit enhancement since the borrower will be able to eat for 6 months.
Dow is -272.89 @ 9:36am.
What... me worry?
great opportunity for those who covered or are looking to get in on short side. short the inevitable market maker saves this AM.
I've never understood what was so wrong with sitting on the board of Wal-Mart back when Wal-Mart was a pretty decent company, when Sam Walton was alive, before it became what it is today.
I'm sure Hillary haters know the answer. And I'm sure most of them shop at Wal-Mart.
huge margin of error on HB's and financials after big runup of last 2 wks.
uh Oh Ms. Bair Has a book? Lets see last time someone of her stature promoted their book like that , oh what was his name? David Lehrer, Are you misssing the re boom?...what happened lesss than a month after that appearence.....
Tanta,
You are begging for a bullet, sweetie. You can't go around lifting up the curtain at times like this. OF COURSE the guy was begging for a return to imbalance. It ain't like he earns that huge multiple of the median worker's income by creating value. If he can nudge the law and regulation in his own favor, rely on the public to behave far better than he does and swap favors with other individuals in positions of corporate power without fear of retribution, all is well. You are arguing again that. There's gonna be a knock at your door some night.
Tanta,
I noticed a typographical error in the post label. It currently reads; "YOU MUST BE KIDDING"
The industry accepted correct term is; "GMAFB"
Thank you for your kid attention to detail.
Here's what my local paper says, is it any wonder I'm confused?
"Commercial mortgage-backed securities are still doing well, Pat Respeliers says." KansasCity.com | 404
Wilbur Ross on the Financial Entertainment Television this morning...
His Master Plan is for Uncle Sam to buy a significant fraction of the bad mortgages. Then freeze the reset rate at 4%.
Moral hazard only applies, I guess, if you can't handle a 4% reset.
idoc, you are absolutely right that there is a huge margin of error for shorting HB's and financials. this is an enormous opportunity to get in on the short side, i was selling a lot of stuff on friday and couldn't understand who would be buying many of these stocks. for anyone who reads this and similar blogs, it should be 100% clear that the economy is going to take another big leg down, and as stocks seem to be a coincident and not a leading indicator, down they will go with it.
i'm short KO,HRL,VOD.L,HRL,GS,BBY,GIS,VOD.L,
SPLS,FED,COF,LEN,DSL,GGP,VNO, and am considering MHK and X next amongst others. i'm prepared to hold for 6 months or a year, and just can't see a realistic scenario where banking/credit card/reits/retail stocks are higher. even consumer staples are a sell, market has way overbid them thinking they are a safe haven, but they'll go down like everything else. easy easy money for the taking out there.
[snip]
Just because I lost money doesn't mean I will quit, no way,'' Devaney, who sold his boatPositive Carry'' and Gulfstream IV, said in a telephone interview from Key Biscayne, Florida. ``Prices have collapsed and this is the best opportunity I've seen in my career.''
[snip]
No new CDOs have been issued this year
[snip]
This time, he's sponsoring dinner and a show by the Blue Man Group, a theatrical troupe that sprays paint on the audience and vomits fake food.
[snip]
full article:
http://www.bloomberg.com/apps/news?pid=20601087&sid=anEgTK3aK4gs&refer=home
Fake vomit will have to wait until Thursday for the Shnapster. Anyone sticking around after the conference?
2and20
thats one impressive list and i've many an overlap.
Personal opinion - of all the various aspects of the current 'turmoil', the one getting the least attention to date is the traditional system of appraisals. These are always based on comps, in my experience, with no ties back to construction cost or long-term historic norms. To the degree that is true, appraisals are prone to ride up with bubbles, supporting lending amounts with confirmations of prices based on the unreasonableness of other buyers.
To me, the price bubble is still the fundamental problem. I understand that it is layered with two other issues (lax lending standards and irresponsible - leveraged - securitization), but that price bubble, when collapsing, is what gives borrowers the justification to walk.
"Classic Homeowner" - I'll settle for owner occupied.
There's a serious moral hazard lurking within the high LTV no doc mortgage that was either mispriced or ignored.
I wasn't invited to the American Securitization Forum either. Apparently the topic was securitizing America?
Party like it is 1999!
THE REAL SCANDAL
HOW FEDS INVITED THE MORTGAGE MESS
THE REAL SCANDAL - NYPOST.com
....Yet a "landmark" 1992 study from the Boston Fed concluded that mortgage-lending discrimination was systemic.
That study was tremendously flawed - a colleague and I later showed that the data it had used contained thousands of egregious typos, such as loans with negative interest rates. Our study found no evidence of discrimination.
Yet the political agenda triumphed - with the president of the Boston Fed saying no new studies were needed, and the US comptroller of the currency seconding the motion.
No sooner had the ink dried on its discrimination study than the Boston Fed, clearly speaking for the entire Fed, produced a manual for mortgage lenders stating that: "discrimination may be observed when a lender's underwriting policies contain arbitrary or outdated criteria that effectively disqualify many urban or lower-income minority applicants."
Some of these "outdated" criteria included the size of the mortgage payment relative to income, credit history, savings history and income verification. Instead, the Boston Fed ruled that participation in a credit-counseling program should be taken as evidence of an applicant's ability to manage debt.....
Renters you say?
This really takes "welfare for the rich" to a new, more literal level, doesn't it?
I see no one has commented that HSBC="Household Finance," We Cover Up the Interest Rates With Our Elbows So You Can Keep RefinancingTM.
I think we now see one of the ways that too great income inequality leads to social incohesion and ultimately a society that's weaker rather than stronger. My reaction to Wall Street asking for help is: screw the rich bastards. Even if ultimately, I'll be screwed too.
I wasn't invited to the American Securitization Forum either. Apparently the topic was securitizing America?
Yep, it's the newest Wall Street product, the TBS (Taxpayer-Backed Security).
See, they divide all of America out into layers by credit risk and then - starting in about 2009 - the poor, poor C's and D's (formerly known as "renters") get to keep their house and credit ratings ... thanks to large Congressionally-mandated cash infusions from the AAA and AA taxpayers!
It's a brilliant plan. Brilliant, I tell you!
@idoc
ALL HAIL GLOD!
"we are attracting a lot of buyers who are really renters"
Well what this guy is missing is that TURNED A LOT OF ONCE BUYERS INTO COMMITTED RENTERS.
I am one -- we sold our 4300 sq ft home and went to buy again after a move but the prices were so high that we knew something was up esepcially when our realtor didn't want to give us comps because she said comps no longer mattered because prices were going up so fast. So we fired her and rented instead despite free moving assistance from a company, where we would have gotten free closing costs and points and all. Instead we rented. At first we felt worried about maybe they would take it up forever but we invested our money instead of spending it on a house and now our rent is subsidized by the interest we get and we will never buy again. So not only did they "attract a lot of buyers who are really renters" but they also "created a lot of renters who used to be buyers."
Ha! They disintermediated the landlords. I guess they should have qualified those tenants a bit more carefully. Well I guess they are about to learn a lot about how to be a hands on property management.
MPinCO indirectly makes a good point. There are strong racial aspects to this mortgage bubble. It appears to me that a large percent of these crazy mortgages have been taken out by black americans. Especially in the smaller middle america segments. For example a 75,000 neg amort arm in cleveland. This was part of Bushs dream of home ownership for all. blah, blah, blah...
I haven't seen a single news story black-america sub prime problem. Maybe I'll look tonite.
MICHAEL L
It's all about getting back at the Man.
Hey, it's not fair!! It Tanta gets her Classic Investment Banker then I want a pony!!! I want a pony NOWWWWWWWW!!! WAAAAAHHHHHHH!!!!!
Oh, and Rich? Run the good Senator's name and my name through a search engine sometime. You'll find my opinions I'm sure...Indemnify servicers from any legal action resulting from the modification of loans my ass... Apparently everyone has forgotten how to spell "White Water".
One of the more humorous bumper stickers I've seen in the campaign so far - "Monica Lewinsky's ex boyfriend's wife for President".
Hillary could promise that the government will make mortgage payments for everybody who can't or isn't right now. That should give her campaign a boost.
Greedscam:
Ditto my brother, Ditto!
I think we need a more descriptive label. Maybe-
WTF?!?
I doubt there are any race related aspects to the current issues but you can bet some will try and make that case to take advantage of the situation.
The bottom line is that many standards were relaxed during the 90's, from traditional loan criteria to accounting standards (Enron). It was the heyday of the 90's in which even the Fed participated in "ever increasing productivity". Just look at the exponential spike in tax revenue from capital gains. In reality government budget 'debt' was reduced on the back of stock market bubbles, relaxed standards and the Feds printing press. The perspective on the late 90's debt was never real because traditional standards were thrown out the window.
I'm at the ASF conference myself. If you'd like I can provide a wrap up when I get back, or if I have some time at the airport. There have been some quite interesting discussions.
Please do Ginger, please do recap for us.
I'd be interested in what was doing there as well, Ginger.
"has a vested interest in something other than writing free puts? Just a thought."
Hysterical, Tanta, simply hysterical. I am so p*ssed about how the grown ups left the room (Fed, OFHEO, CoC, Tsy, Pres.) while all the kiddos played on. Just amazing. Remember the day when you found a house you could afford, went to the local bank, actually produced W-2's bank statements, etc. and they even called your employer............... ah what's the use...........
do Ginger?
I haven't seen a single news story black-america sub prime problem. Maybe I'll look tonite.
SONY PSP
rc helicopter
Led Flashlight