OT - This morning on NPR's money show they had an "advisor" who was saying you really should consider walking away if you are upside down and can't afford your payments instead of tapping into your 401K which would be protected. I thought that was interesting advice.
However, than the woman said, "a new report says that they expect 1 in 33 houses to end up in foreclosure".
Anyone seen that report? I thought Vegas was in the 1 in 33 range but most places were 1 in several hundred.
I just got off the phone with a buddy who talked to a lender about refinancing his mortgage that is 60K under water. She advise that he needs to come up with the 60K before they can talk. He doesn't have it. She advised that he go out and buy a new home (at a current good deal) and try to rent out his current house. She advised that if he couldn't rent out his current, then he could walk-away while still having his new home. Even though I've been reading about the phenomena here, I was flabbergasted. The lender told him large numbers of people were doing it. Unbelievable.
He lost his wife to cancer a year ago but he makes good money (currently). He's been doing retail therapy for a year while grieving. New tv, home landscaping, trips, stereo, cars, clothes, etc.. He anticipates not making good money in a year in the teeth of the recession. I laid into him about what he thought he was doing spending all this money now if he thinks he's going to default on his mortgage in a year.
He laid into me about being too judgemental and rigid. I told him I felt like he was just looking for me to co-sign his bs.
Why is affordability such a difficult concept to grasp, even internationally?
I don't care if finanacing is available, I won't buy a Ford fiesta for half a million dollars or a quarter million pounds just because someone might buy it from me later for $600k next year. The payments are unaffordable on any terms, to say nothing of the logic involved.
I wish we could see which bank asks for what to se who's swimming naked. Nodoby's doing 100-125% mortgages there, only Abbey(I believe) is doing 90%.
BofE still has to cut while the ECB & Fed hawks are starting to talk about inflation and raising rates. I know the Fed hawks are just jawboning to get the USD/Euro back don towards $1.50, but the ECB hawks I find odd. I know that there's been some payrises amongst the unions in Germany, but most of the other PPI inflationary pressures are beyond their control.
One particular person here thinks the ECB will cut by year end; but any prior knowledge of the Bundesbank knows that not to be the case unless Chindia implodes in the next 8 months.
It'll be the same thing as here. Use garbage as collateral to push money out into the markets. Just like the Fed, bad debt risk is being transferred to the balance sheet of central banks. It is so over....
Can it be a coincidence that this pops up as RBS prepares to announce a huge loss (£4bn according to FT) and a humongous capital increase of up to $20bn?
Socialize losses is the name of the game now for financials. They are allowed to profit and privatize gains, yet when their greed, arrogance, stupidity blow up in their faces, tax payers are on the hook. The height of insult, financials are likely to rally on news such as this since they're being bailed out, again. More and more I read comments of people seriously wanting the heads of any financial firm accountable for this mess strung up from the highest branch. I for one am getting tired of the taxpayer flipping the bill, yet those who profited at our expense sunbathing on the beach. Regrettable, before this is over, blood will spill, somewhere I fear.
I am reading in English papers that the idea is for bonds of 1 year duration to be issued, in order not to increase the national debt. WTF? Are investors supposed to be idiots and not notice 50 B GBP of extra debt?
If the bonds are indeed of 1 year duration, I just don't see what this can do to help the mortgage market. Banks are in no mood to increase their portfolio of borrow short and lend long. This seems all about ensuring that banks don't go under in the next month or two - the UK government must be hoping that a year's breathing space gives them enough time to raise sufficient cash to stay alive.
So, at what point does it become "socially acceptable" to walk away from other loans and losses as well, so the banks go into truly severe failures? Why should any debt be repaid?
I tend to think this "fix" is just setting us up for the even greater fall later on.
It seems to me that all of the "programs" designed to limit damage have two major problems:
If it is not the true bottom, there is no bailout for either the consumer, lender, or purchaser of the cmo. We will have spent hundreds of billions to no effect- think Iraq.
If it is the bottom, how does the gov insure that the scammers, vultures, etc do not make obscene gains?
☺☺☺"Regrettable, before this is over, blood will spill, somewhere I fear."
stuart | 04.20.08 - 12:39 pm | #
I too believe the social and political repercussions of this could be severe.
The body politic is sick, and the Bank of England and the FED (both autocratic entities answerable to no one) are not treating the disease. Instead they are trying to cover up the sore that has opened with a bandaid. Cardinal is to recognize that their actions run 180 degrees counter to public opinion.
Barry Sussman said that politicians regard the public as "the great gorilla in the political jungle, a beast that must be kept calm." (quote from "What Americans Really Think and Why Our Politicians Pay No Attention")
And indeed, the problems may subside. The FED and BofE may be able to keep the beast calm. For now.
But the moral rot inside the wound continues to fester. The pus continues to accumulate. And the next time the sore erupts, the pain inflicted on the beast will be even more acute.
A friend of mine had a favorite saying: "Pigs get fat. Hogs get slaughtered."
And history has shown that plutocrats almost always tend to be hogs.
I just wonder, the next time the beast awakens, will someone like Franklin D. Roosevelt emerge to protect the hogs from themselves?
In my opinion, when the bankers invented schemes to get bad loans off the balance sheets, borrowers got the right to walk away from houses. If the bankers can pretend not to have losses, the homeowners can pretend not to owe them money.
These guys overlevered the system in pursuit of bonuses. Now they act surprised. Hoocoodanode. It's clear that the executive and legislative branches aren't doing anything to hold the bad actors accountable. The shareholders need to take aggressive civil action in the courts.
A key here is promoting the simple notion that it's unacceptable to allow financial services to effectively hold everyone hostage. Too big to fail is unacceptable!
"I don't know how the Brits can stop the dollar collapse and rescue their banks at the same time"
There is only one international 'fix' to rescue the dollar, and that is to follow it down. That means dropping interest rates. The issue now with prices, especially commodities, is a price bubble. It is not inflation because wages have not changed (except in some areas in Germany). It is important to note this. Some prices are up but others are down. This rebalances the 'market basket' but it is not inflation until the whole balloon inflates: wages and prices. The market rebalancing issue is a huge problem because it hits people unfairly. It does not matter in Haiti that the price of a 42" 1080p TV set is cheap.
The international response at some point has to be to go after price speculation and commodities 'monopolies of agreement' very, very hard. The irresponsible actions of a limited number of wealthy funds and individuals are now on the verge of kiling people, plain and simple.
This was inevitable, guys and gals. There's been a sharp rise in UK CC debt too since July 2007. There's a nice graph at UK House Bubble. The problem is that a lot of recent mortgages were the rollover types. They have usually a two-year fixed period and then a reset, and the theory is that people will refi before reset. With the substantial drop in new mortgage lending, people can't refi and defaults and repossessions are rising. If this gets much further, prices will really begin to drop and that will push a sharp rise in the default rate.
Spain is launching a huge stimulus program, and part of it will be to cover the bad mortgages as well.
We know what Einstein would say, but Einstein was never a central banker.
for all those thinking that pund wil fllow dolla, it already has. pound has fallen 10,9% during 2007 while usd has fallen 12,5% against euro during this period.
12th Percentile: "OT - This morning on NPR's money show they had an "advisor" who was saying you really should consider walking away if you are upside down and can't afford your payments instead of tapping into your 401K which would be protected. I thought that was interesting advice. "
I think that is right. I am all for people paying what they owe, but not when it can't done without breaking into retirement accounts.
This reminds me the 90's crisis we had here in Finland. Banks were pushing debt to consumers and small companies. And people took mortgages and consumer debts like there was no tomorrow. Housing went absolutely crazy. In one year they built over double the amount of normal. House prices doubled in a couple of years. Inflation started to get out of hands. So, the rates were rised. I remember some of the central bank officer said that "we will go up to sky if neccessary" to tame the inflation. At the same time exports to USSR went down. Lots of companies were in trouble. Unemplyment started to rise. At some point they devaluated the finnish currency. Then the banks were in trouble. Lots of bad debt and nowhere to dump them. Then the government come to rescue them by bail-out. And that was really bad for the people having difficulties with their mortgages. Now, the banks knew that the losses will be paid by government (taxpayer) and they really started to clean up their balance sheets. Lots of houses went foreclosure, companies bankrupted because the banks wanted the mortgages to be paid immediately. Lots of good businesses went down because of that bail-out.
One particular person here thinks the ECB will cut by year end; but any prior knowledge of the Bundesbank knows that not to be the case unless Chindia implodes in the next 8 months.
That person you mention knows the history and says this: when the BOE is low, the US is low, and you aren't it means that your exports come to a grinding, screeching halt as your good and services are priced too high for the other markets that are in re-trench mode. The only thing you can do is cut, even if it's against your will, so that you don't send the economy down the crapper. Trichet isn't stupid.
And wait...Spain is going to blow up, and so is Ireland. Banks are exposed on the continent as much as they are here or in merry old England. It's not going to be a choice, and as wally pointed out, the only solution is to cut and follow the other currencies down. That's what's behind my sentiment. If he doesn't France will start screaming and no one wants to listen to France whine. Not even Germans.
I wonder if the empty homes in MN will fare better than the ones in CA or FLA. Cold versus borderline social anarchy.
giacutter | 04.20.08 - 3:04 pm | #
Oh we got some of that going now too... but so fat its 'contained' to near in suburbs & inner city. Star Tribune had a big article about that LAST week... copper mining in Minneapolis. Gangs supposedly netting $20,000 a week as they gut homes one after another in NE Mpls.
Wait 'till they learn farmers store grain in bins on their land & how much that is stuff is worth... I had a friend holding 100,000 bushels of soybeans... most of it in bins he built over the years to be able to hold for a better price. He got his price - $15/bushel I think is what I was told he sold it for. That means he was sitting on $1.5MM basically unguarded - one old man and a shotgun against the world.
When we read about gangstahs listening to farm reports, watching CBOT cash markets & renting grain trucks we'll know it really is close to the end of the world.
Oh and, incidently, if the Euro stays too high, Trichet can kiss American and British tourism goodbye this year, further complicating the continent's economic outlook. Italy is also a mess, and isn't benefiting at all from the high Euro. Neither is the central/eastern european area that hasn't joined the euro yet. Further noises about it leaving the Euro by Italy could continue if the Euro is still high by the fall. The pressure to cut will be immense.
Went to church this morning to pray for better times. Seems like that is all I can contribute at this point, since it looks like the economic ship has sailed. Was treated to a sermon on the fall of the city of Ninevh in ancient Assyria. One sin of the city was that it had developed too large of a merchant class who worshipped wealth. I thought of our banking system. Even in ancient days a price was paid for financial manipulation. Amen and best wishes.
Was treated to a sermon on the fall of the city of Ninevh in ancient Assyria. One sin of the city was that it had developed too large of a merchant class who worshipped wealth.
I wonder if that sermon was a coincidence - Ya think? 'Cause I don't.
How did the McMansion Faction (almost every congregation has some of those) take it? Hear any scuttle butt as you left?
Spain has been investing in infrastructure for some time, the latest plans are just a continuation. Continuing projects are improvement of rail from Alicante to Madrid
New projects include road upgrades out of Madrid to Badajoz in the west and Valencia in the East. Doesn't really do much for local communities(think what happened to Route ^^ towns after I-40 came about) except for construction firms.
When we read about gangstahs listening to farm reports, watching CBOT cash markets & renting grain trucks we'll know it really is close to the end of the world.
Sounds more like Ancient Rome or Egypt, actually. Protecting the grain wagon from marauding highway bandits.
And regarding poor old Olaf and his shotgun...many midwestern farmers I have known own arsenals that rival those of small countries. It's the 24 hour a day vigilance that is the problem in remote locations.
Trichet & co are really in trouble. I wonder if they think that they can independently make a decision of the rates. Lately they have been talking lot of about the inflation and that there is no possibility of lowering the rates. Like ipodius said the pressure from politicians is quite high to cut. My quess is that they will cut in a few months no matter the inflation.
French have made rioting a form of artistic expression kin to 'performance art'. I can hardly wait - do they give out awards, like at Cannes?
lol. as a victim of French "work stoppages" in the past, i can indeed tell you that the French I talked to just shrugged and said "it's always something, we are just used to it". But a palm d'or ought to go for the best performace leasing to a one-day strike, don't you think?
Remember there have been noises from Paris about the Euro too. That will, mostly likely, intensify.
theres one thing you should know about EU and ECB. as long the EU constitution pamflet has not been voted in all 27 memberstates every decision has to be made unanimously basicaly there exist a clausul how to take away power from ECB but for that to hapen all finance ministers from countries with euro currency would have to pull on the same string not gonna happen so ECB will stay independent as long trichet is not overvoted by the other members of ECB board what can happen ...
☺☺☺12th Percentile: "OT - This morning on NPR's money show they had an "advisor" who was saying you really should consider walking away if you are upside down and can't afford your payments instead of tapping into your 401K which would be protected. I thought that was interesting advice. "
☺☺I think that is right. I am all for people paying what they owe, but not when it can't done without breaking into retirement accounts.
Emma Anne | 04.20.08 - 2:51 pm | #
"...but since they are evil and would not keep a pledge to you, then you need not keep yours to them."
"As I have already said, he must stick to the good so long as he can, but, being compelled by necesity, he must be ready to take the way of evil."
"Yet the experience of our own time shows that those princes who had little regard for their word and had the craftiness to turn men's minds have accomplished great things, and, in the end, have overcome those who governed their actions by their pleges."
Went to church this morning to pray for better times
ir's a nice thought, but i'm sure that whatever force governs the universe might be distracted by people starving, blowing themselves up and taking other with them, hacking each other to pieces in sub-saharan africa in tribal warfare, polar bears drowning because the ice sheets are melting, and that whole problem in the SPQ-748372 galaxy where two planets are currently fighting each other over the intra-galactic trade routes in a delicious fruit not unlike our mango only with qualities like a cross between a shot of rum and tab of acid, but only lasting about .25 parsec divisions.
I hope you waved to all of Bush's economic team in the back pew.
can anyone say if IMF loss projections include bank losses in Ireland, Spain and the UK ? When CR says we are further along than Roubini thinks, is this being taken into account ?
If Trichet is ever outvoted, it will be because he wants to keep rates constant, and the rest of the Board votes to raise rates.
Get used to it. The Fed and the BOE are a bunch of children; the ECB for the moment are the grown-ups. Children go for the easy fix every time. But you don't achieve economic prosperity by trashing your currency. It makes your goods a bit more competitive, for a little while, but then you're hit by inflation and they don't stay competitive.
About the ECB and their independence. Their target is to keep the inflation at about 2% if I remember right. Now the inflation is about 3,5 or so. What they should have done in the last meeting? Is the inflation just a short term spike?. IMO they are just a small player in the very large market. Actually they don't "decide" the rates. They follow the markets. Talk is just talk, nothing else. Couple of large write-downs/losses from Swiss or German banks and thats it. CUT.
sorry to dissaoint you a, but trichet might be outvoted by a bunch of ecb board members from southern eu countries which were all "born and bred" by the FED. just run their CVs you find out most of the guys from italy, spain, greece, malta and so on have been working until recently at FED
And regarding poor old Olaf and his shotgun...many midwestern farmers I have known own arsenals that rival those of small countries.
giacutter | 04.20.08 - 3:45 pm | #
Lol - isn't that the truth. I know some of those guys - we used to go out to their farms & shoot their refitted semi-turned-automatic weapons. The gangstahs better read about what happened to Jesse James when he tried to rip off a bunch of dumb rural Norwegian farmers in S Minnesota - that was where his gang met its end.
" He got his price - $15/bushel I think is what I was told he sold it for. That means he was sitting on $1.5MM basically unguarded - one old man and a shotgun against the world."
I am trying to envision knocking over the soy silos though. Wouldn't it take a lot of trucks and a lot of manpower and time? It's not going to be worth only stealing 100 or so bushels, which sounds like it might fill one truck (not that I am doing anything but guessing).
In my state they steal the copper wiring from along the highways.
By the way, the wiring happens to be used for the street lights along the highway. And they have stolen miles of it. And we have one of the lowest unemployment rates in the nation.
CR: The BoE plan is closest to the Term Securities Lending Facility the Fed introduced in March. The Bank swaps newly issued Gilts for triple-A mortgage backed securities (and other collateral) for a fee and with a haircut (12% basic for MBS, goes up to 25%). But it has some differences - the terms are much longer (one year, renewable for up to three) for a start and only mortgages originated befoer Jan 2008 are eligible.
From my perspective as someone who covers this market for my bread and butter, it seems like a pretty good plan for the market's problems. It creates liquidity without subsisising credit (so far as I can tell, I've got some people crunching the numbers). It doesn't perpetuate an asset bubble by over-encouraging new lending, but clears the overhang and allows the market to absorb newly originated loans at a risk-appropriate price devoid of tehchnical factors.
I see the BOE doing EXACTLY the same thing as the FEd. Pushing money into the markets via dubious collateral. How is that any different than what's being done here???
Oh right the EB's will pass that along to the consumers......
HAHAHAHAHAHAHAHAHAHAHAHAHAHA
Because that worked SOOOOOO well here over the last 6 months.
Mortgages originated during 2007 and possibly late 2006 mostly at pre-credit crisis rates, that for a variety of reasons can't easily be funded in the wholesale markets.
The whole point is to provide liquidity to "dubious" asset classes. The (main) difference between the Bank's plan and the Fed is that the Bank is providing much longer term finance, and obviously that US assets aren't covered. This lets UK lenders park their basically sound mortgages with the Bank in return for liquid collateral while they amortise down. This means that new loans can be financed on their own terms, without investors worrying that £50bn of last year's origination is going to be dumped on them as soon as spreads tighten a bit. In general, it's a very good plan for the UK's problems.
There are questions to be asked around the margins. No formal distinction is made between MBS and covered bonds, nor prime MBS and non-conforming. That said, the Bank is allowed to use its own price estimates and additional haircut when there is no observable market price, which should in theory penalise non-conforming RMBS, for which there is no bid. In practice, however, who knows what they're going to do.
Any cost savings are not going to be passed directly on to the customers, no. But the point is to get banks to start lending at all.
Move the losses in house prices over to government... in other words: move the losses to the neighbors.
Not pretty.
Another move to save the a*** of British fat cats like Sir Fred of RBS.
I'm too cynical to find it worthwhile to come up with a cynical comment about this.
Can't wait to see how much this costs my SKF tommorrow.What was that line about markets being irrational and me being solvent?
OT - This morning on NPR's money show they had an "advisor" who was saying you really should consider walking away if you are upside down and can't afford your payments instead of tapping into your 401K which would be protected. I thought that was interesting advice.
However, than the woman said, "a new report says that they expect 1 in 33 houses to end up in foreclosure".
Anyone seen that report? I thought Vegas was in the 1 in 33 range but most places were 1 in several hundred.
Maybe the British pound will joing the dollar in the crapper. Look out below!!
I just got off the phone with a buddy who talked to a lender about refinancing his mortgage that is 60K under water. She advise that he needs to come up with the 60K before they can talk. He doesn't have it. She advised that he go out and buy a new home (at a current good deal) and try to rent out his current house. She advised that if he couldn't rent out his current, then he could walk-away while still having his new home. Even though I've been reading about the phenomena here, I was flabbergasted. The lender told him large numbers of people were doing it. Unbelievable.
He lost his wife to cancer a year ago but he makes good money (currently). He's been doing retail therapy for a year while grieving. New tv, home landscaping, trips, stereo, cars, clothes, etc.. He anticipates not making good money in a year in the teeth of the recession. I laid into him about what he thought he was doing spending all this money now if he thinks he's going to default on his mortgage in a year.
He laid into me about being too judgemental and rigid. I told him I felt like he was just looking for me to co-sign his bs.
Unbelievable.
Why is affordability such a difficult concept to grasp, even internationally?
I don't care if finanacing is available, I won't buy a Ford fiesta for half a million dollars or a quarter million pounds just because someone might buy it from me later for $600k next year. The payments are unaffordable on any terms, to say nothing of the logic involved.
Harrrumph.
I wish we could see which bank asks for what to se who's swimming naked. Nodoby's doing 100-125% mortgages there, only Abbey(I believe) is doing 90%.
BofE still has to cut while the ECB & Fed hawks are starting to talk about inflation and raising rates. I know the Fed hawks are just jawboning to get the USD/Euro back don towards $1.50, but the ECB hawks I find odd. I know that there's been some payrises amongst the unions in Germany, but most of the other PPI inflationary pressures are beyond their control.
One particular person here thinks the ECB will cut by year end; but any prior knowledge of the Bundesbank knows that not to be the case unless Chindia implodes in the next 8 months.
hmmm...
so the UK will follow the US.
does this mean the pound will falter?
I'm guessing financials take a big rise tomorrow on this news, as the UK firms can dump all their toxic waste into the govt too...
Guess I too will take a hit on my SKF.
and I'm SURE that the lenders will pass on the savings to the consumers... just like what happened here. [/sarcasm]
It'll be the same thing as here. Use garbage as collateral to push money out into the markets. Just like the Fed, bad debt risk is being transferred to the balance sheet of central banks. It is so over....
Can it be a coincidence that this pops up as RBS prepares to announce a huge loss (£4bn according to FT) and a humongous capital increase of up to $20bn?
Carlomagno,
I'm guessing that RBS found that their cap call was way below what they needed, hence the announcement.
Socialize losses is the name of the game now for financials. They are allowed to profit and privatize gains, yet when their greed, arrogance, stupidity blow up in their faces, tax payers are on the hook. The height of insult, financials are likely to rally on news such as this since they're being bailed out, again. More and more I read comments of people seriously wanting the heads of any financial firm accountable for this mess strung up from the highest branch. I for one am getting tired of the taxpayer flipping the bill, yet those who profited at our expense sunbathing on the beach. Regrettable, before this is over, blood will spill, somewhere I fear.
"scheme" or "scam"?
I am reading in English papers that the idea is for bonds of 1 year duration to be issued, in order not to increase the national debt. WTF? Are investors supposed to be idiots and not notice 50 B GBP of extra debt?
If the bonds are indeed of 1 year duration, I just don't see what this can do to help the mortgage market. Banks are in no mood to increase their portfolio of borrow short and lend long. This seems all about ensuring that banks don't go under in the next month or two - the UK government must be hoping that a year's breathing space gives them enough time to raise sufficient cash to stay alive.
So, at what point does it become "socially acceptable" to walk away from other loans and losses as well, so the banks go into truly severe failures? Why should any debt be repaid?
I tend to think this "fix" is just setting us up for the even greater fall later on.
There were a couple of other good articles in the Telegraph this weekend. Apologies if these have been linked elsewhere:
Investors torn about fate of Royal Bank of Scotland's Fred the Shred
Authorities lose patience with collapsing dollar
I don't know how the Brits can stop the dollar collapse and rescue their banks at the same time... should make for a good show.
It seems to me that all of the "programs" designed to limit damage have two major problems:
"Can't wait to see how much this costs my SKF "
I can't believe anyone holds SKF overnight, much less over the weekend. I play with it, like a terrorist, in and out in under an hour.
☺☺☺"Regrettable, before this is over, blood will spill, somewhere I fear."
stuart | 04.20.08 - 12:39 pm | #
I too believe the social and political repercussions of this could be severe.
The body politic is sick, and the Bank of England and the FED (both autocratic entities answerable to no one) are not treating the disease. Instead they are trying to cover up the sore that has opened with a bandaid. Cardinal is to recognize that their actions run 180 degrees counter to public opinion.
Barry Sussman said that politicians regard the public as "the great gorilla in the political jungle, a beast that must be kept calm." (quote from "What Americans Really Think and Why Our Politicians Pay No Attention")
And indeed, the problems may subside. The FED and BofE may be able to keep the beast calm. For now.
But the moral rot inside the wound continues to fester. The pus continues to accumulate. And the next time the sore erupts, the pain inflicted on the beast will be even more acute.
A friend of mine had a favorite saying: "Pigs get fat. Hogs get slaughtered."
And history has shown that plutocrats almost always tend to be hogs.
I just wonder, the next time the beast awakens, will someone like Franklin D. Roosevelt emerge to protect the hogs from themselves?
In my opinion, when the bankers invented schemes to get bad loans off the balance sheets, borrowers got the right to walk away from houses. If the bankers can pretend not to have losses, the homeowners can pretend not to owe them money.
Socialization of losses continues.
These guys overlevered the system in pursuit of bonuses. Now they act surprised. Hoocoodanode. It's clear that the executive and legislative branches aren't doing anything to hold the bad actors accountable. The shareholders need to take aggressive civil action in the courts.
A key here is promoting the simple notion that it's unacceptable to allow financial services to effectively hold everyone hostage. Too big to fail is unacceptable!
RBR - Reverse Bank Robbery
Maybe they are just baiting Soros to try and break them twice in a lifetime.
If the bankers can pretend not to have losses, the homeowners can pretend not to owe them money
Great line!
The only problem here is that the former is sanctioned by the government, but the latter can be illegal.
The shareholders need to take aggressive civil action in the courts.
Allen C | 04.20.08 - 2:04 pm
Good luck trying to win in court - the courts are clearly not sympathetic to the shareholder.
Well I hope there is some money left in the world to bail out Wright County Minnesota - 'cause it looks like they will need it too.
Boom To Bust
The audio slide show is stunning - what folly. Imagine a frozen Inland Empire & that's what the I 94 Corridor NW if Minneapolis is like now.
Don't know if anyone else posted this yet too. I posted this on an earlier dying thread but its so damned good I kicked it up here too.
Ya its contained all right...
"I don't know how the Brits can stop the dollar collapse and rescue their banks at the same time"
There is only one international 'fix' to rescue the dollar, and that is to follow it down. That means dropping interest rates. The issue now with prices, especially commodities, is a price bubble. It is not inflation because wages have not changed (except in some areas in Germany). It is important to note this. Some prices are up but others are down. This rebalances the 'market basket' but it is not inflation until the whole balloon inflates: wages and prices. The market rebalancing issue is a huge problem because it hits people unfairly. It does not matter in Haiti that the price of a 42" 1080p TV set is cheap.
The international response at some point has to be to go after price speculation and commodities 'monopolies of agreement' very, very hard. The irresponsible actions of a limited number of wealthy funds and individuals are now on the verge of kiling people, plain and simple.
Lectures on the exponential function
YouTube - The Most IMPORTANT Video You'll Ever See (part 1 of 8)
What a Darling idea. BOE looks at what the FED is doing. Monkey see, monkey do do do.
This was inevitable, guys and gals. There's been a sharp rise in UK CC debt too since July 2007. There's a nice graph at UK House Bubble. The problem is that a lot of recent mortgages were the rollover types. They have usually a two-year fixed period and then a reset, and the theory is that people will refi before reset. With the substantial drop in new mortgage lending, people can't refi and defaults and repossessions are rising. If this gets much further, prices will really begin to drop and that will push a sharp rise in the default rate.
Spain is launching a huge stimulus program, and part of it will be to cover the bad mortgages as well.
We know what Einstein would say, but Einstein was never a central banker.
Maybe they are just baiting Soros to try and break them twice in a lifetime.
it sure seems like it....
hopefully the US figures something out and the Brits get the message earlier...
Of course the current preview we've provided for the last year hasnt helped yet....
for all those thinking that pund wil fllow dolla, it already has. pound has fallen 10,9% during 2007 while usd has fallen 12,5% against euro during this period.
12th Percentile: "OT - This morning on NPR's money show they had an "advisor" who was saying you really should consider walking away if you are upside down and can't afford your payments instead of tapping into your 401K which would be protected. I thought that was interesting advice. "
I think that is right. I am all for people paying what they owe, but not when it can't done without breaking into retirement accounts.
Thanks for the link, dryfly. Very interesting story.
I wonder if the empty homes in MN will fare better than the ones in CA or FLA. Cold versus borderline social anarchy.
Tanta:
Here's some red meat for you:
FAIR GAME; Piling On: Borrowers Buried by Fees - NY Times
Swerving Mervin bailing out his butt buddies and Big Bone Benny bailing out his. Blow up dolls are the next bubble.
This reminds me the 90's crisis we had here in Finland. Banks were pushing debt to consumers and small companies. And people took mortgages and consumer debts like there was no tomorrow. Housing went absolutely crazy. In one year they built over double the amount of normal. House prices doubled in a couple of years. Inflation started to get out of hands. So, the rates were rised. I remember some of the central bank officer said that "we will go up to sky if neccessary" to tame the inflation. At the same time exports to USSR went down. Lots of companies were in trouble. Unemplyment started to rise. At some point they devaluated the finnish currency. Then the banks were in trouble. Lots of bad debt and nowhere to dump them. Then the government come to rescue them by bail-out. And that was really bad for the people having difficulties with their mortgages. Now, the banks knew that the losses will be paid by government (taxpayer) and they really started to clean up their balance sheets. Lots of houses went foreclosure, companies bankrupted because the banks wanted the mortgages to be paid immediately. Lots of good businesses went down because of that bail-out.
One particular person here thinks the ECB will cut by year end; but any prior knowledge of the Bundesbank knows that not to be the case unless Chindia implodes in the next 8 months.
That person you mention knows the history and says this: when the BOE is low, the US is low, and you aren't it means that your exports come to a grinding, screeching halt as your good and services are priced too high for the other markets that are in re-trench mode. The only thing you can do is cut, even if it's against your will, so that you don't send the economy down the crapper. Trichet isn't stupid.
And wait...Spain is going to blow up, and so is Ireland. Banks are exposed on the continent as much as they are here or in merry old England. It's not going to be a choice, and as wally pointed out, the only solution is to cut and follow the other currencies down. That's what's behind my sentiment. If he doesn't France will start screaming and no one wants to listen to France whine. Not even Germans.
I wonder if the empty homes in MN will fare better than the ones in CA or FLA. Cold versus borderline social anarchy.
giacutter | 04.20.08 - 3:04 pm | #
Oh we got some of that going now too... but so fat its 'contained' to near in suburbs & inner city. Star Tribune had a big article about that LAST week... copper mining in Minneapolis. Gangs supposedly netting $20,000 a week as they gut homes one after another in NE Mpls.
Wait 'till they learn farmers store grain in bins on their land & how much that is stuff is worth... I had a friend holding 100,000 bushels of soybeans... most of it in bins he built over the years to be able to hold for a better price. He got his price - $15/bushel I think is what I was told he sold it for. That means he was sitting on $1.5MM basically unguarded - one old man and a shotgun against the world.
When we read about gangstahs listening to farm reports, watching CBOT cash markets & renting grain trucks we'll know it really is close to the end of the world.
MOM - We know what Einstein would say,
Uhh, no; what would he say?
Oh and, incidently, if the Euro stays too high, Trichet can kiss American and British tourism goodbye this year, further complicating the continent's economic outlook. Italy is also a mess, and isn't benefiting at all from the high Euro. Neither is the central/eastern european area that hasn't joined the euro yet. Further noises about it leaving the Euro by Italy could continue if the Euro is still high by the fall. The pressure to cut will be immense.
If he doesn't France will start screaming and no one wants to listen to France whine. Not even Germans.
ipodius | 04.20.08 - 3:30 pm | #
French have made rioting a form of artistic expression kin to 'performance art'. I can hardly wait - do they give out awards, like at Cannes?
Went to church this morning to pray for better times. Seems like that is all I can contribute at this point, since it looks like the economic ship has sailed. Was treated to a sermon on the fall of the city of Ninevh in ancient Assyria. One sin of the city was that it had developed too large of a merchant class who worshipped wealth. I thought of our banking system. Even in ancient days a price was paid for financial manipulation. Amen and best wishes.
Was treated to a sermon on the fall of the city of Ninevh in ancient Assyria. One sin of the city was that it had developed too large of a merchant class who worshipped wealth.
I wonder if that sermon was a coincidence - Ya think? 'Cause I don't.
How did the McMansion Faction (almost every congregation has some of those) take it? Hear any scuttle butt as you left?
MoM,
Spain has been investing in infrastructure for some time, the latest plans are just a continuation. Continuing projects are improvement of rail from Alicante to Madrid
New projects include road upgrades out of Madrid to Badajoz in the west and Valencia in the East. Doesn't really do much for local communities(think what happened to Route ^^ towns after I-40 came about) except for construction firms.
When we read about gangstahs listening to farm reports, watching CBOT cash markets & renting grain trucks we'll know it really is close to the end of the world.
Sounds more like Ancient Rome or Egypt, actually. Protecting the grain wagon from marauding highway bandits.
And regarding poor old Olaf and his shotgun...many midwestern farmers I have known own arsenals that rival those of small countries. It's the 24 hour a day vigilance that is the problem in remote locations.
Trichet & co are really in trouble. I wonder if they think that they can independently make a decision of the rates. Lately they have been talking lot of about the inflation and that there is no possibility of lowering the rates. Like ipodius said the pressure from politicians is quite high to cut. My quess is that they will cut in a few months no matter the inflation.
French have made rioting a form of artistic expression kin to 'performance art'. I can hardly wait - do they give out awards, like at Cannes?
lol. as a victim of French "work stoppages" in the past, i can indeed tell you that the French I talked to just shrugged and said "it's always something, we are just used to it". But a palm d'or ought to go for the best performace leasing to a one-day strike, don't you think?
Remember there have been noises from Paris about the Euro too. That will, mostly likely, intensify.
In response to Dryfly, a banker friend asked if I thoguht that the pastor was talking about him. I replied, only if you are securitizing liar loans.
theres one thing you should know about EU and ECB. as long the EU constitution pamflet has not been voted in all 27 memberstates every decision has to be made unanimously basicaly there exist a clausul how to take away power from ECB but for that to hapen all finance ministers from countries with euro currency would have to pull on the same string not gonna happen
so ECB will stay independent as long trichet is not overvoted by the other members of ECB board what can happen ...
finlander, i agree, and think the cut will come by Q3 but if not absolutely by Q4. I think Alec must be German
"Went to church this morning to pray for better times."
Resorting to faith based economics. Were any central bankers there too?
Let me know how it works out!
☺☺☺12th Percentile: "OT - This morning on NPR's money show they had an "advisor" who was saying you really should consider walking away if you are upside down and can't afford your payments instead of tapping into your 401K which would be protected. I thought that was interesting advice. "
☺☺I think that is right. I am all for people paying what they owe, but not when it can't done without breaking into retirement accounts.
Emma Anne | 04.20.08 - 2:51 pm | #
"...but since they are evil and would not keep a pledge to you, then you need not keep yours to them."
"As I have already said, he must stick to the good so long as he can, but, being compelled by necesity, he must be ready to take the way of evil."
"Yet the experience of our own time shows that those princes who had little regard for their word and had the craftiness to turn men's minds have accomplished great things, and, in the end, have overcome those who governed their actions by their pleges."
--Niccolo Machiavelli, "The Prince"
I also asked for more rain for the barley but got snow instead.
Went to church this morning to pray for better times
ir's a nice thought, but i'm sure that whatever force governs the universe might be distracted by people starving, blowing themselves up and taking other with them, hacking each other to pieces in sub-saharan africa in tribal warfare, polar bears drowning because the ice sheets are melting, and that whole problem in the SPQ-748372 galaxy where two planets are currently fighting each other over the intra-galactic trade routes in a delicious fruit not unlike our mango only with qualities like a cross between a shot of rum and tab of acid, but only lasting about .25 parsec divisions.
I hope you waved to all of Bush's economic team in the back pew.
As Barak said, we simple country folks tend to cling to our religion and our guns during difficult times. Inciteful of him. We do what we can.
Einstein: "There are two Infinities,the Universe and human stupidity".
can anyone say if IMF loss projections include bank losses in Ireland, Spain and the UK ? When CR says we are further along than Roubini thinks, is this being taken into account ?
If Trichet is ever outvoted, it will be because he wants to keep rates constant, and the rest of the Board votes to raise rates.
Get used to it. The Fed and the BOE are a bunch of children; the ECB for the moment are the grown-ups. Children go for the easy fix every time. But you don't achieve economic prosperity by trashing your currency. It makes your goods a bit more competitive, for a little while, but then you're hit by inflation and they don't stay competitive.
Jus Me - "The definition of insanity is doing the same thing over and over again and expecting a different result."
Alec, did you hear about Zap's plan for a 400 Euro payout per person? I wouldn't exactly call that "infrastructure". Also banks, builders....
About the ECB and their independence. Their target is to keep the inflation at about 2% if I remember right. Now the inflation is about 3,5 or so. What they should have done in the last meeting? Is the inflation just a short term spike?. IMO they are just a small player in the very large market. Actually they don't "decide" the rates. They follow the markets. Talk is just talk, nothing else. Couple of large write-downs/losses from Swiss or German banks and thats it. CUT.
sorry to dissaoint you a, but trichet might be outvoted by a bunch of ecb board members from southern eu countries which were all "born and bred" by the FED. just run their CVs you find out most of the guys from italy, spain, greece, malta and so on have been working until recently at FED
And regarding poor old Olaf and his shotgun...many midwestern farmers I have known own arsenals that rival those of small countries.
giacutter | 04.20.08 - 3:45 pm | #
Lol - isn't that the truth. I know some of those guys - we used to go out to their farms & shoot their refitted semi-turned-automatic weapons. The gangstahs better read about what happened to Jesse James when he tried to rip off a bunch of dumb rural Norwegian farmers in S Minnesota - that was where his gang met its end.
Still who wants to guard the grain-gold 24X7?
" He got his price - $15/bushel I think is what I was told he sold it for. That means he was sitting on $1.5MM basically unguarded - one old man and a shotgun against the world."
I am trying to envision knocking over the soy silos though. Wouldn't it take a lot of trucks and a lot of manpower and time? It's not going to be worth only stealing 100 or so bushels, which sounds like it might fill one truck (not that I am doing anything but guessing).
We're all copper miners now:
Thieves ransacking house after house in search of copper
The new underground currency | StarTribune.com
In my state they steal the copper wiring from along the highways. I have no idea how they manage to do such a thing without getting caught.
Dryfly,
I'm waiting for a couple of those bronze statues in Minneapolis parks to turn up missing. Or maybe the roof off a cathedral or two?
In my state they steal the copper wiring from along the highways.
By the way, the wiring happens to be used for the street lights along the highway. And they have stolen miles of it. And we have one of the lowest unemployment rates in the nation.
"This reminds me the 90's crisis we had here in Finland."
So does this...
YouTube - Leningrad Cowboys & Red Army Choir - SWEET HOME ALABAMA
--Niccolo Machiavelli, "The Prince"
DownSouth | 04.20.08 - 4:03 pm | #
DownSouth, wow. I better read that book again.
tg writes:
Lectures on the exponential function
YouTube
- Broadcast Yourself.? v=F...feature=related
tg | 04.20.08 - 2:32 pm | #
big big thanks tg
just awesome well worth seeing the entire set.
we are in deep voodoo.
CR: The BoE plan is closest to the Term Securities Lending Facility the Fed introduced in March. The Bank swaps newly issued Gilts for triple-A mortgage backed securities (and other collateral) for a fee and with a haircut (12% basic for MBS, goes up to 25%). But it has some differences - the terms are much longer (one year, renewable for up to three) for a start and only mortgages originated befoer Jan 2008 are eligible.
From my perspective as someone who covers this market for my bread and butter, it seems like a pretty good plan for the market's problems. It creates liquidity without subsisising credit (so far as I can tell, I've got some people crunching the numbers). It doesn't perpetuate an asset bubble by over-encouraging new lending, but clears the overhang and allows the market to absorb newly originated loans at a risk-appropriate price devoid of tehchnical factors.
Define the term "overhang"......
I see the BOE doing EXACTLY the same thing as the FEd. Pushing money into the markets via dubious collateral. How is that any different than what's being done here???
Oh right the EB's will pass that along to the consumers......
HAHAHAHAHAHAHAHAHAHAHAHAHAHA
Because that worked SOOOOOO well here over the last 6 months.
Needed a good laugh this morning.....
Ciao
MS
"Define the term "overhang"......"
Mortgages originated during 2007 and possibly late 2006 mostly at pre-credit crisis rates, that for a variety of reasons can't easily be funded in the wholesale markets.
The whole point is to provide liquidity to "dubious" asset classes. The (main) difference between the Bank's plan and the Fed is that the Bank is providing much longer term finance, and obviously that US assets aren't covered. This lets UK lenders park their basically sound mortgages with the Bank in return for liquid collateral while they amortise down. This means that new loans can be financed on their own terms, without investors worrying that £50bn of last year's origination is going to be dumped on them as soon as spreads tighten a bit. In general, it's a very good plan for the UK's problems.
There are questions to be asked around the margins. No formal distinction is made between MBS and covered bonds, nor prime MBS and non-conforming. That said, the Bank is allowed to use its own price estimates and additional haircut when there is no observable market price, which should in theory penalise non-conforming RMBS, for which there is no bid. In practice, however, who knows what they're going to do.
Any cost savings are not going to be passed directly on to the customers, no. But the point is to get banks to start lending at all.