Interview with FDIC Chairwoman Sheila Bair
Submitted by
CalculatedRisk on Wed, 04/09/2008 - 12:13pm (159 comments)
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Recent Recommendations
First - to be bailed out.
Is that chairwoman or charwoman?
ok..so what are we gonna do?
just basically force banks to do a 20% accorss the board cram down of mortgage balanaces?
i mean. i'm all for something that works, but if it's going to work it' got to be radical, and that's hard to make fair. or at least some amenable proximity of fairness.
Is this the definition of "death spiral"?
We are all socialists now!
Death Spiral - coming to a theatre near you, check local MLS listings for details.
When can we schedule the capital flight?
We all have sympathy now!
What would you say to responsible borrowersthose who pay their mortgage on time and stayed away from exotic productswho consider it unfair to spend taxpayer dollars to rescue struggling homeowners?
First, we've seen a lot of situations where borrowers were in point of fact duped. They did not understand the terms of their loan. Secondly, there were some people who just got in over their heads. But even if you don't have sympathy for these borrowers, the foreclosed properties are going to impact the surrounding neighborhood properties. Vacant houses contribute to crime and erode the tax base, while distressed sales force down the value of nearby properties. In a broader sense, widespread foreclosures tend to undermine the confidence that home buyers and lenders have in the housing markets. That confidence will be essential to the recovery of our financial markets and economy.
If FDIC needs help then why did I walk into Bank of America today and see signs all over begging peoplw to take out no fee Home Equity loans. It is their main push and they tell you you can likely qualify if you have lived more than 3 yrs in your home or if you recently made improvements or if you have paid extra mortgage payments. They seem to want to bring your equity down and that does not jive with FDICs message. What am I missing?
"And yes, it may cost money."
Ok, if she expects everyone to be honest about the whole bailout situation then why can't she an adult and say "will" instead of "may".
I'd love to see her scenario where the homeowners get bailed out and it doesn't cost taxpayers money.
Let the market work and let prices fall. That will solve the affordability problem much faster than all of this socialism which will end up prolonging the problems for decades.
And yes, it may cost money.
"may"
LOL.
Did she get all this great information form the "inbox" in her AOL account?
Has anyone in D.C. actually read Constitution?
"We just need to be honest with people...
No dear. You need to adhere to the rule of law and realize you are prohibited from undertaking these actions regardless of merit.
It just cheezes me off that no one bothers with the first two questions and goes straight to the third:
Rob-
Just send in your tax $$ and shut-up!
Oops - left off the
I bet her nickname is "Bailout" Bair at the Fed.
Oh and Bank of America's home equity teaser loan example is a $40,000 home equity line of credit for just $230 a month with, get this "INTEREST ONLY" payments at 6.99% rate. I thought these interest only loans were a problem. I thought we were supposed to build equity and save again. What a head scratcher this is.
How about a 20% cut in principal--with the lender getting 50% of any future profit when the property is sold?
In Canada with have CHMC (Canada Housing & Mortgage Corp).
Basically they insure highly leveraged mortages and package them into MBS.
Those MBS securites are 100% guranteed by the Canadian Federal Government. Even if the underlying mortages are in default.
How's that for socialist?
One idea is to provide loans directly to troubled borrowers to pay down principal.
Loans... to pay down principal. Do these people actual hear what they are saying?
First, a bit of fun - let's come up with various translations of Bair's comments - paraphrasing a poster on another thread:
"And yes, it may cost money." = It's going to cost a shitpot of money and none of it mine!
Try it, I am sure the creative minds here can do better...
Second, any action that does not allow incomes and house prices to come into alignment is doomed to failure - the only question will be how much damage said effort will do along the way - directly and indirectly through opportunity costs incurred.
When do you think the housing crisis will be resolved?
"My hope is that we will be turning the corner by the end of the year. "
Yeah, sure. By the end of the year, we won't even remember her name, let alone her "hope."
Did she get all this great information form the "inbox" in her AOL account?
Honestly, I suggest we start the bail-out pool with her salary and move on from there. No bailouts. None. Let the market do what it needs to and I don't care about REOs in my hood. No bailouts.
From Crain's Chicago Business:
KDA Chicago stores go dark
By: Lorene Yue April 09, 2008
(Crains) Kitchen Distributors of America Inc. unexpectedly shut its Chicago retail locations Wednesday, driving inquisitive and sometimes frustrated customers to neighboring businesses in search of an explanation.
No more countertops for you!
Her theory is premised on the idea that holding back supply will prop up market prices.
Ummm, can she explain who is going to buy at the higher prices?
Without funny money loans, or jobs creating higher incomes, there just aren't enough people willing/able to pay 2006 prices for a house.
But even if you don't have sympathy for these borrowers, the foreclosed properties are going to impact the surrounding neighborhood properties.
Thinking... Thinking...
Nope, I still don't see how this is my problem.
I (used to) vote Republican for one reason: To see fiscal insanity like this voted down, filibustered, or vetoed.
This administration is just such a disaster by every metric.
If we are turning the corner next year, then lets wait until then and do nothing now. The time for action was 2002-2006.
Hey, Sheila: on this, include me out.
I (used to) vote Republican for one reason: To see fiscal insanity like this voted down, filibustered, or vetoed
Zackly Nemo! That's why I am ostensibly Republican. But seems the parties morphed and I'm a Democrat. I didn't get the memo until around 2000, but didn't believe it totally until around 2003.
As I read early on, the losses are going to have to be taken. Who gets to take 'em? Bank shareholders? Bank creditors? RMBS investors? Borrowers? Taxpayers? All of the above? At least she sees the prospect of the death spiral, and certainly that spiral will overshoot downwards as the market psychology shows property revulsion downwards just as it showed infatuation upwards, but should we as taxpayers be the ones to try and console it and stop short the plunge? I'm tempted to say let the chips fall where they may but recognize that I may be affected anyway.
oy.
I sure hope the next administration requires IQ tests for these jobs.
She sounds like she is really in over her head. Reminiscent of Brownie.
How about a good Mexican meal and a stiff margarita?
we can't stop the spiral. we can only waste money tying.
am i the only one having a very hard time finding a sympathetic character that is in foreclosure? The lenders that gave these people money need to eat this.
And if that means that they don't have any money to lend to the rest of us in the meantime, well, then we'll figure out other ways. Maybe people who were wiser (like buffet) will start some new banks (just like new insurers).
My only hope is in the knowledge that the politics of this bailout are so contentious they'll never get anything done.
(fingers crossed)
Rewarding people for screwing up isn't politically popular?
Maybe there's some salvation for us yet.
Irony writ large. In todays local paper the county assessor who has decried everyone who has the gall to challenge their assessment (hey it costs money to defend a challenge to a dubious asssessment) has filed a challenge of how his own condo is being assessed!!!
For anyone who cares here's the link
Assessor Challenges Own Assessment
Some great lines from the article
"Levinson has requested the $502,080 value set by his office for his two-bedroom unit be reduced to $300,770 -- while other two-bedroom Wyndham apartments are currently for sale at prices ranging from $849,000 to more than $1.2 million, according to the Multiple Listing Service of Long Island."
and
Levinson said he would not have challenged his assessment if it wasn't a mathematically based error.
He said state law requires condominiums four stories or higher to be valued at what an investor would pay for the property if run as a rental apartment building. Each unit is assessed at a percentage determined by the builder of the total building value, he said.
Now what's that tell you. If they value the condo according to what it would pencil at as a rental it's valuation is in the $300k range vs $500k where it's appraised based on comps.
Nah - no housing bubble here. Move along...
Why not help the poor more directly.
Instead of mailing the checks to investment banks for their 'death spiral special mortgages'
Stephen Colbert's "Number One Threat to America" is even funnier now with homophone goodness.
From monday tread:
It probably will cost some money.
When I say money I mean your money and when I say some I mean sh¡tloads.
This translation of FDICspeak to English is provided by AOL, the preferred portal of federal chairpersons since 2007 when the internet was discovered.
I am often accused of being heatless but I honestly believe that letting these people fail and maybe kicking them a bit when they are down is the path of greatest benefit. Regardless any held opinions I do know that without a doubt allowing the Supreme Soviet... er Federal Government, sorry, become mortgage noteholders is a very bad idea.
Washington is just crawling with creeps: yes, "may", I like that.
I am often accused of being heatless but I honestly believe that letting these people fail and maybe kicking them a bit when they are down is the path of greatest benefit.
Count me as heartless then too. And include Wall St among those that need a good, hard booting. No other way to send the message, and to get people to see the massive folly of a FIRE dominated economy.
Cal writes:
I bet her nickname is "Bailout" Bair at the Fed.
Cal | Homepage | 04.09.08 - 4:38 pm | #
I'm sure that she could be called Bairout and everyone could pronounce it with a bad Chinese accent.
Inre: Mike in LI's point, when I would get propped for condo conversion loans my first question was always why does adding 20K to the kitchen and bath and changing the form of ownership magically make this property worth 2x what it is as a rental.
The best response I ever heard was: When people own something, it's more valuable to them. I'm convinced this gentleman and GWB share a speech writer.
Also let it be stated for the record I think the perks and benefits given to home owners are patently ridiculous. If we start bailing borrowers and investors out, well it will be just like socialism, you know without all the healthcare and education and stuff.
Steven, i think you are dead-on. I would have no problem whatsoever in taxpayer money going to assist people who have lost their houses find rentals, help them with downpayments, etc.
Anything else will go straight to the banks.
In a broader sense, widespread foreclosures tend to undermine the confidence that home buyers and lenders have in the housing markets. That confidence will be essential to the recovery of our financial markets and economy.
I think that's a sensible argument, but the flip side of this is that now anybody who invests in this country directly or indirectly will have to pay a stiff "bailout tax" on any return they get.
This makes investing in the US much riskier, less rewarding, and thus less attractive.
Isn't investing essential to the recovery of our financial markets and economy too?
Given the attractiveness of developing markets I think there's a real chance that a US bailout economy could send investors and businesses fleeing to other shores.
Why work and take risks to bail out people who bought houses they can't afford?
Never mind if it's the right thing to do.
If you're a businesses or investor who actually makes money, chances are doing the right thing is the last thing you care about.
The real issue here his that as an economy we f---ed up horribly and now everybody is trying to find a way to unf--- up things.
The real world doesn't work that way.
Why was there not intervention when home prices were rising? Real home price history is clearly predictive of the current price drop; see first and last charts here:
Real Dow & Real Homes & Personal Saving & Debt Burden at
Real Dow & Real Homes & Personal Saving & Debt Burden
The people were well-fooled during the price rise, and they are being as-fooled-as-possible still -- by keeping real histories well-out-of-sight.
They didn't have a problem with the ponzi on the way up.
That confidence will be essential to the recovery of our financial markets and economy.
But IMO this is all part of the problem: so much of the 'economy' -- too much -- depends, or seems to depend, on people become debt slaves, e.g. to a mortgage.
Why was there not intervention when home prices were rising?
Maybe we would have had the sense to do so if it weren't for the dot com bailout.
"I am often accused of being heatless but I honestly believe that"
Why would anyone care about your temperature?
In other news, as someone who avoided being scared into buying because of concerns about prices going up forever I need this goddamned price adjustment like yesterday. For real, whenever anyone would tell me that I need to buy now or I'll never be able to afford it, I'd point out that very few things can go up 10-12% per year without wages spiralling out of control.
Rob Dawg - props on parsing Bair speak!
"It's not politically popular."
But according to a recent poll, it's a hell of a lot more politically popular than bailing out Wall Street sleezebags.
"That confidence will be essential to the recovery of our financial markets and economy."
But IMO this is all part of the problem: so much of the 'economy' -- too much -- depends, or seems to depend, on people become debt slaves, e.g. to a mortgage.
Add confidence to that too. We're an economy dependent on blind confidence where actual judgement is considered the enemy and is actively suppressed.
We're an economy dependent on blind confidence
aka faith.
faith: Belief without reason.
Most people have faith that no matter how bad things get the support structures will not fail and they will be able to eat. Their reasoning is very shallow.
At least the starving masses will get to choose what mcmansion they get to squat in.
Disclaimer: The massive starvation will probably not begin for 5 years or so, and will likely be much less severe in the US than many other countries.
It's going to cost money?????
Okay, let's tax the upper 0.5% of earners an extra 5% on their incomes. And let's tax those same 0.5% a higher capital gains tax, say, an extra 15%.
That should just about do it.
Any questions?
Your welcome.
Chairwoman Bair has spent almost all her career as an academic and a bureaucrat, and as a chief regulator she is inept. Where was she when banks under her purview were engaging in unsafe and unsound lending and investment practices?
Chairwoman Bair should spend her time becoming better acquainted with banking and the bank regulatory process rather than devoting it to developing policy that is totally out of the realm of her responsibility, and which will only serve to keep home prices artificially high and out of the reach of many worthy home buyers.
"And yes, it may cost money"
Like other posters, I cringe at this. Bair has no idea what 'money' means in this context. No idea. Not a ghost of a hint of a clue.
I am increasingly concerned about the foreclosure rate and the potential for a downward spiral, where we have too much inventory, additional foreclosures adding to inventory, which forces home prices down, meaning fewer people can refinance—leading to more foreclosures and more downward pressure on home prices. If this downward spiral takes hold,
Heh, somebody better break the news to her, email bailout_bair@aol.com.
She makes a valid point especially to those that stayed within their means, payed or are paying timely and are now pissed (for good reason). If values continue to slide, those that were prudent may need a backstop before they lose their equity / nut.
Before you jump on me, I think it despicable that we're now faced with this option. But what's the lesser of two evils at this point?
I'd imagine that she is interested in any plan that could possibly prevent the public from discovering how absurdly undercapitalized the FDIC really is.
THAT'S the "honest truth"!!
If values continue to slide, those that were prudent may need a backstop
I'm sorry, but a lingering few of us don't think that gambling with debt is in any way "prudent", no matter how large your down payment, equity/debt ratio, or income/payment ratio.
"I'm sorry, but a lingering few of us don't think that gambling with debt is in any way "prudent", no matter how large your down payment, equity/debt ratio, or income/payment ratio."
Point taken. But realistically, how many people can afford to have paid cash?
Those of us who were fiscally responsible and didn't buy more than we could afford with exotic mortgages and stated incomes, as well as the younger demographics at the typical buying stage of their lifecycle, need a downward spiral! It's sickening that our government is trying to prop up the great housing bubble. Let the "free market" operate.
If real estate values continue to slide, then people who own real estate will see the value of their property decline.
Choices have consequences.
But realistically, how many people can afford to have paid cash?
Well, due to our debt based society, it was increasingly difficult for most.
However, the few people that had read enough history to see the writing on the wall simply put their money into real savings(precious metals, or safe investments), and will be buying with cash at very reasonable prices in a couple years.
Gee Rob Dawg,
Haven't read up on the Great Depression of the 1930's have you? Better do your homework dude. You are failing this class miserably but you make a great class clown. It was exactly that same attitude of being "heatless" (you can't even spell, dude) or heartless, that prolonged and exacerbated the economic slump. Banking is about science, not emotion.
Kick 'em when they are down???
Kick when they are down. Does this mean beating some defenseless homeless person and then going back to the comfort of your 2 million dollar house.
You are the worst hypocrite I have encountered in quite a while.
Totally agree.
But we (younger demo) aren't your generation (with all due respect). I don't believe we had the same opportunities (e.g. cheaper housing, no school loans) that the previous generation had.
Again, there is no excuse for not researching what you're signing / getting into but for those who worked hard (overtime) to save, plan, etc. what's so bad about throwing a bone every now & then.
Please don't respond with "that's life". Thats BS.
Portland Refugee, if you borrowed within your means, and you bought your house to live in, nothing will change for you.
you had equity (illusory) and now you don't (reality).
It seems heartless, but the landscape is changing. Houses will be purchased to live in. If you're living in yours then mission accomplished.
Bet she never met a communist she didn't like.
I'm not so sure if the mission was accomplished.
Right now both me & my wife's job can be wiped out at anytime.
Yes, we saved for a rainy day but if this thing gets heavy we sure as hell don't have the means to be out of work for 1-2 years (like many of my colleagues) Then all we have is the house. IF that goes, its the bread line for us.
Again, there is no excuse for not researching what you're signing / getting into but for those who worked hard (overtime) to save, plan, etc. what's so bad about throwing a bone every now & then.
The first house I bought was underwater for about 10 years. I bought it in the last run-up. So that really is life because that happened in 1989, and no one bailed me out or threw me a bone. I had to keep the property. And it recovered.
melidere is right. if you thought it was an investment, that was your first mistake. It's a house. If you keep it long enough you might be able to think of it as an investment (this house is now rental property for me), but that shouldn't be the plan.
The answer is, as always, time.
it is crazy! "If this downward spiral takes hold, there could be much broader ramifications for the economy as a whole. "
So when the upward spiral took hold, the economy as a whole would be GREAT???
So it only can go up, not go down. At least, we should ask where are you when it was upward spiral out of control.
"But even if you don't have sympathy for these borrowers...."
Just think how great it would be if the govt 'forced' a 30% cramdown on a losing stock position after you bought....or how about a 30% debt forgiveness on the sale of a losing stock position? Never happen.
BUT, everyone in the FIRE economy is begging for this loan reduction bailout, particularly since ALL of them bought multiple properties at the peak, and/or HELOC'd their properties. Bank on it.
But we (younger demo) aren't your generation (with all due respect).
I'm 25.
Portland, nothing is secure. Certainly not jobs, as we all know. You are lucky, you have a partner and it's unlikely you'll both be unemployed at the same time for any length of time. But there is no certainty in anything. And what would you do if you were paying rent? You'd still have to do that. Uncertainty does suck, and I feel you there. But somehow we all get through.
If you lose your jobs then the last thing you need is a house.
It really sucks and it's scary. We know. We've been there. When we bought our house it looked like the biggest payment in the world and like the poster above, we were underwater for at least a decade. Don't think i'm smart enough to take my own advice; as soon as we saw the light of day we bought a rental property and sat with THAT underwater for 13 years.
sighs.
you lose your job. it sucks. you get another one.
if there is any light in this mess, it is that property values will fall enough and get back in line so your children won't be debt slaves forever.
SweetHomeKilla
Dude, then you should be out getting lucky.
So...
The chairwoman of the FDIC is concerned, and believes the government needs to intervene, because 'too much inventory leads to downward pressure on prices'?
No good can come of that.
Dude, then you should be out getting lucky.
Yeah, that's what the guys that are now losing their houses did instead of learning how to build a life. lol
And there's always time for that, trust me.
You are the worst hypocrite I have encountered in quite a while. - Zarley
You don't know me. Why not identify yourself and come over for a talk? Obviously something other than a dropped "r" is bothering you. Don't inflict these nice people with your issues. I won't.
melidere,
you're dead on. But! There aren't jobs to be had.
And that's no joke. Hiring Freezes across the board.
Look, a 10%-20% slide is manageable (hopefully). But a death spiral is a horse of another color.
I don't think this interview quite squares with what was announced today...
Bush to Expand Help on Mortgages - WSJ.com
The Administration is planning to expand FHASecure by about 25% and on the same day, Bair gets quoted, saying "I think we need to be realistic about what FHA can do. A refinancing process that is going to modify loans one at a time is going to take time."
Oops. Lucky this is the end of an administration or someone might be out of a job!
To people bashing the Bush administration for the bailout, please, please read White House Rejects Senate Housing Bill; Next Moves Uncertain : HousingWire || financial news for the mortgage market
The Bush administration is responsible for a lot of bad things in this country, but this might be on of the very few instances where they really are doing the right thing (possibly accidentally).
To the FDIC socialist moron:
When you say "It's not politically popular", what you mean to say is "it's all the rage politically at the moment". There's nobody in politics other than the white house who is not proposing or promoting some sort of socialist bailout. Get off AOL and read the actual news, or go a step further and think more than 6 months in advance, where the bailout comes back to cause more problems. That's probably asking too much, though.
It can be a social game to guess the answer when you don't know what the question is.
But, with 100,000 (is it?)foreclosures per month, there almost has to be one of each possible fact situation that anyone wants to use as an example. any given bad guy. everyone bad. no one at fault. Whatever.
At the same time, if we are trying to create a public policy, I thought the usual rule was trying to get the greatest good for the greatest number, not just some benefit for any one person. I don't see how we get to discussing the fix if we don't first identify the actual problem.
"ipodius writes:
Portland, nothing is secure. Certainly not jobs, as we all know. You are lucky, you have a partner and it's unlikely you'll both be unemployed at the same time for any length of time. But there is no certainty in anything. And what would you do if you were paying rent? You'd still have to do that. Uncertainty does suck, and I feel you there. But somehow we all get through."
I hear ya........ Duly noted
Portland Refugee-
If you are running out of equity and don't feel your jobs are secure then I would stop making payments(don't move out though, free rent possibly for years!) and start saving everything you can. Housing price in the US will not recover in real terms, and I think you are very smart and ahead of the curve with your realistic expectations of the job market.
Of course the smart and diligent people will (hopefully) be the ones to keep their jobs.
"But a death spiral is a horse of another color."
Metaphor alert!
SweetHomeKilla-
If you are only 25, you are waaaay ahead of the curve.
I would venture to say that only one out of 100 in your age bracket are cognizant of what is actually going on right now.
I am 40 and believe that only one out of 20 in my age bracket know what the terms SIV, CDO, derivative or non-recourse means.
Many are soon to find out. Especially the terms recourse and non-recourse.
should--53
should not--41
DK/NA--6
Should--28
Should not---62
DK/NA--10
Should--30
Should not--61
DK/NA--8
http://graphics8.nytimes.com/packages/pdf/politics/20080403_POLL.pdf
Portland Refugee, seriously, worry about things when they actually happen, or you'll make yourself sick.
If you want to feel pro-active, then cut spending down to the bone, (you'll be surprised at how many little things add up) and then if the worst doesn't come to pass, you'll be ahead.
Your house value is pretty irrelevant in the scheme of things (unless you are counting on helocs or something as rainy day money.) if you're here, reading these blogs then you know that you can't count on that.
So you can work on productive things, like making sure you don't lose that job.
One thing i've learned in more years than i'll admit to, there's nothing in any bailout that would actually help you anyway.
The real question remains;
Where are the cops?
Homeowners? When they're borrowers with interest-only loans, or negative amortization loans, they're not homeowners.
I am not entirely opposed to bailouts, if, and only if, they are tied to very tough new regulations that make these kind of problems less likely. The price of the bailout for the bailees is accepting rules going forward that will seriously limit their upside, while protecting against this kind takes everyone with out downside.
For example, what about a new law that any kind of loan requires the buyer to put up a minimum of ten percent, for a house, a car, a new sofa, a commercial building, or project, a franchise, stocks or securities, or an LBO. For credit cards a a linked savings account with at least ten percent of the credit limit held therein. That would certainly reduce asset price inflation, in general, and while it would not eliminate speculation it limit people the size of speculative bets.
I am sure the mere thought makes millions scream "That would lead to the doom of our economy." I think we might just survive, but hey, if you want a bailout now it is the future price to be paid.
Or how about any entity that borrows short time money to invest long is automatically under the scope of federal regulation and subject to capital adequacy requirements. Let rescue be had, but make the price steep.
melidere, sweethome,
duly noted x2
Why not:
Bailout via cram down. BUT when you sell, you're taxed at full value with no capital gains exemption for life of ownership. Also, you can't purchase another house (even if a primary res) unless you "cure" the forgiven amount?
SHK,
All bets are off if ug99 gets here in under five years...
SweetHomeKilla--"Of course the smart and diligent people will (hopefully) be the ones to keep their jobs."
"For the Depression had wrecked so many of the assumptions upon which the American people had depended tht millions of them were inwardly shaken.
"Let us look for a moment at the pile of wreckage. In it we find the assumption that well-favored young men and women, coming out of school or college, could presently get jobs as a matter of course; the assumption that ambition, hard work, loyalty to the firm, and the knack of salesmanship would bring personal success; the assumption that poverty (outside of the farm belt and a few distressed communities) was pretty surely the result of incompetence, ignorance, or very special misfortune, and should be attended to chiefly by local charities; the assumption that one could invest one's savings in 'good bonds' and be assured of a stable income thereafter, or invest them in the 'blue-chip' stocks of 'our leading American corporations' with a dizzying chance of appreciation; the assumption that the big men of Wall Street were economic seers, business forecasters could forecast, and business cycles followed nice orderly rhythms; and the assumption that the American economic system was sure of a great and inspiring growth.
"Not everybody, of course, had believed all of these things. Yet so many people had based upon one or more of them their personal conceptions of their status and function in society that the shock of seeing them go to smash was terrific...
"Since Yesterday" Frederick Lewis Alle
So Bairout wants to spend money, but Bush doesn't want to allow cramdowns--possibly the only sensible solution to slowing the tide of foreclosures, and one that wouldn't necessarily prop prices above true values?
OK, so it's clear. We're going to turn the full force of the US treasury on refilling banker's pockets.
RowdyRoddyPiper said:
I'm sure that she could be called Bairout and everyone could pronounce it with a bad Chinese accent.
Isn't the R/L transposition a strictly Japanese phenomenon?
"Nick writes:
To people bashing the Bush administration for the bailout, please, please read Page not found : HousingWire || financial news for the mortgage market
The Bush administration is responsible for a lot of bad things in this country, but this might be on of the very few instances where they really are doing the right thing (possibly accidentally)."
Thanks for reminding us, Nick. But it's still a good idea to call your U.S. Senators and urge them to vote against the Mortgage Foreclosure Act. Even though it's been reported that Bush will veto it, I don't trust him.
gee whiz, I'd send the wench a nasty-gram, but her email ain't listed on fdic.gov (near as I can tell)
Who woulda thunk that you couldn't get in touch with your masters (mistresses) ?
Rob Dawg,
What bothers me is hypocrisy and ignorance. You happen to be the face of it presently.
I do not know you personally but I know your words and you know mine.
Maybe I'll take you up on your offer but I have some loans to work on first.
No hard feelings as this is all about free speech and exchange of ideas. I just like hardball and not softball.
Bair has been talking this for awhile now, a national bailout, but hasn't figured out how to finance it or solve the various moral hazards invovled. What she is saying between the lines is that this problem is bigger then the garden variety housing downturn we have experienced in the past given that its national combined with a consumer recession now in progress this will get very ugly.
I don't understand why lower housing price is an overall issue? There are enough people (financially responsible) that will buy houses when the price is back down to reasonable range. So the foreclosure thing is not a bad thing.
Thank you downsouth, for that reference. I ordered the book from amazon.
I've been looking for some books that talk more about how people 'felt' during the depression.
the shock of accomplished people having to take menial jobs to pay the bills seems to have been one of the biggees.
i knew a guy who lost his job during the dot-com crash. For two years he battled looking for another job. finally, he took a job painting houses (found that he liked it actually
and after two years finally landed a job back in his industry at higher pay.
but the experience rocked him to his core.
OiCu812 writes:
The real question remains;
Where are the cops?
Didn't you learn growing up that the cops only arrive after the robbery is over. Obviously, we're not done getting shaken down.
if the govt intervention, even if it "may cost money," is not applied to also benefit the individual in the same way as to a man-made, legally created, organization of any kind, i'm not in favor of it
downsouth...I second melidere's opinion.... nice quote.....
melidere,
"the shock of accomplished people having to take menial jobs to pay the bills seems to have been one of the biggees."
i'm seeing a lot of that already...crazy stuff indeed
Vacant houses contribute to crime and erode the tax base, while distressed sales force down the value of nearby properties.
I forsee the upcoming summer, when wildfires strike again and homeowners are trying desperately to block firefighters from saving their homes.
Either home prices plunge to get closer to median income, or home prices are supported and median incomes rise significantly.
Which alternative is most feasible?
So what happens when prices continue to fall anyway, and those spared the ignominy of foreclosure default again?
To get an on-the-ground glimpse of how quite a lot of prospective homeowners got shafted by the industry, check this piece on NPR:
Ex-Subprime Brokers Help Troubled Homeowners
Ex-Subprime Brokers Help Troubled Homeowners : NPR
I knew it was bad, but not that bad. The incentives to cheat people were just too juicy for some to pass.
I don't believe we had the same opportunities (e.g. cheaper housing, no school loans) that the previous generation had.
In my youthful days, young people bitched to high heaven about not having access to credit. Today young people bitch about having access to credit.
Politicians are merely posturing right now for the electorate. Nothing will get done at the Federal level to address the debt crisis until a new President is in office. By then the spiral will have already unwound quite a bit and a bailout will be pretty much useless. Everything will already be baked into the cake.
Since the FHA Secure program is now touted as the major new solution to the foreclosure problem, and Tanta's well known affection for mortgage brokers, I thought the following would be of interest. (Yes, it's real).
All you need to know to start producing FHA loans in ONE WEBINAR!
*Who is Federal Housing Authority and what is their roll in the Mortgage Market today
*Current FHA Guideline Review
*How to Start Producing FHA loans TODAY!
*Marketing tips on generating FHA loans!
Join us for FREE "FHA Bootcamp" Webinar by HighTechLending
Date: Thursday, April 17, 2008
Time: 11:00 AM - 12:00 PM PDT
One would think that there is not enough current capacity in the FHA loan production market - wait - that doesn't sound right.
Russ,
You can't compare the two.
In your day, college didn't cost as much as a house.
Today, in order to maximize your earnings potential you must attend college. Some need credit to do so.
You gotta pay to play.
I don't like the idea of borrowing in order to pursue bailouts. I don't like hearing proposals which imply there's money available - we're a debtor nation behaving as if we weren't.
I don't like it when Washington sets out to help anyone. They're really not good at it. Never mind Katrina - think of Charleston or Kendall or Baghdad or the Missouri floods. Really, really not good at it.
I don't like it when Washington operates on the assumption that sending the bill to taxpayers over time dilutes the impact. By the time you've launched a few dozen costly programs, you've achieved correlation, not dilution. Just like Wall Street.
Most of you are calling "bullshit" on Blair but what if she is right?
I remember the Teton Dam failure in Idaho. The photos of the dam workers trying plug the leak are very much like what the people like Blair are trying to do with the dam that holds the "big shitpile".
They threw heavy equipment into the Teton leak. This was big stuff and the attempt failed. What if we are like the people of Rexburg, just downstream, oblivious to the wall of water coming towards them. Are we downstream a big flood of economic pain?
Who knows. Who is willing to take the risk that we are downstream of a flood of economic pain? Many of you assume you are safely above the economic pain level. I am guessing that many of you are not.
Up thread commenters asked why someone didn't do something to stop the unstable price appreciation in RE. My mental image was of many people hung from lamp posts in DC if anyone had tried.
It would have been like the police trying to take the kegs away from the frat boys. When they did that in San Jose the frat boys drove a tractor at the police. In this day and age the fraters would most likely burned down the neighborhood.
Portland, i know it's hard to see the bigger picture here but it's important.
college didn't cost as much as a house, but you couldn't borrow to pay for it, so you had to save or you didn't go. (actually, i got my grandmother to co-sign my loans, but that's another story)
college costs as much as a house now BECAUSE of easy credit. Houses cost 3 times what they ought to BECAUSE of easy credit.
lots of easy cash in the system has made anything worth having unbearably dear which is what mish (mike shedlock) is talking about when he says we are debt slaves.
this debacle is going to be a revolution in the way we all think about debt. it's evil. you think you got something you wanted (a college education) but when you have to go into debt to get it, you're a slave and not in control of your own life. you worry yourself sick over having even the slightest thing go wrong.
it has to stop. we couldn't seem to stop it on our own so now it's going to stop itself. it's not going to be pretty. but the path we were on was sucking the blood out of us.
"Many of you assume you are safely above the economic pain level."
maybe they do, but i don't. i own a small business and i feel like a teeny tiny boat in the middle of a tsunami.
but the madness has to stop. maybe i go broke. maybe i find myself driving a taxi.
but our children will have a chance at a better life.
I'm having trouble keeping up with all the bailout stuff (i'm sure you all understand), but unless I'm mistaken, is it the case that NONE of the bailout proposals to date have dealt with the issue of home equity extraction?
While it may be acceptable for some to
subsidize a homeowner's mortgage, it is certainly not acceptable to
subsidize whatever they felt like purchasing with cash extracted from
their homes.
All right. I have my check book here. Just tell me how much it does cost me and let's get done with it.
melidere....
you're pretty darn good....
best
portland refugee
Regarding comments that a bailout must go forward to instill "confidence" in the economy, may I say...
BS. What instills more confidence, knowing that the bad debt and inflated assets have been fully wrung out of the economy, or knowing that they still exist, and on top of that, they're being subsidized with taxpayer dollars?
A bailout is like wrapping a pathetic little "confidence" band-aid on an economic shotgun wound.
thanks, portland. just to finish...
i know i am beating on a dead horse here, but credit messes up everything. I own a small business, do a good job, but some nutcase can borrow tons of money against his house and throw it away against me. Yea, he'll fail, but will i live long enough to tell the tale?
easy credit means my landlord thinks this building is worth millions and my rent should be in the stratosphere.
easy credit means the colleges think that 50,000 a year is reasonable and i have to figure out how to get my kid through college.
somebody on these blogs has "someday this war will end" as his tag line.
he's right. it's a war. it's a war for our kids and their futures.
( i wish there was an edit function cuz i would add..)
and we all should be marching in the streets before we let the politicians call it a 'bailout' and hand money back to these criminals at the banks and let our kids spend the rest of their lives paying for it.
maybe our fathers had to put guns in their hands to protect our freedoms. Our generation has it's task, and it is to take the pain and deal with it.
and let our kids spend the rest of their lives paying for it.
I have a feeling that when the day of reconning comes, people will certainly "take to the streets", but it won't be us, it will be our kids, or our kids' kids.
No hard feelings as this is all about free speech and exchange of ideas. I just like hardball and not softball. - Zarley
No hard feelings about being called an ignorant hypocrite? Gee why would there be any hard feelings. That Constitution I was speaking of? It don't cover you for what you are trying to do.
You may have a potty mouth and nothing better than that but I've got grease monkey and know how to use it. No more Zarley.
melidere
great perspective & a good thinker....
unwinding of debt will cripple, perhaps destroy us..... continuing the status quo will do the same.
You know, Im a flipping genius. I should work for the bank industry.
What that banks should do is loan more money to homeowners in trouble, at 6% interest, so the homeowners can continue making payments. But, no payments due for at least 3-4 yrs.
In the meantime, the more money the banks loan, the more the more value they add to their books. Especially playing the credit spread with the current fed rate.
These loans cant be written down becauase they have no chance of default for 3-4 yrs, enough time for housing to begin to recover. It could delay the inevitable for a while.
They could snare the homeowners with the story that their future equity could be used to pay it off.
Statement of Sheila C. Bair, Chairman, Federal Deposit Insurance Corporation on Using FHA for Housing Stabilization and Homeownership Retention; before the Committee on Financial Services, U.S. House of Representatives; 2128 Rayburn House Office Building
April 9, 2008
FDIC: Error 404 - Page Not Found
thanks for the compliment..
but no, you're letting them feed you bull....ending it won't destroy us..
it will destroy the banks. they are spreading fear so that we will be compliant while they attempt to mortgage the future of every single american, born and unborn to feed their machine.
i would be more concerned if i thought they could pull it off, but the gods are kind. they thought they were being so smart when they put the most incompetent people they could think of in positions of power, but now they have to live with the consequences. the mess has gotten too big to prop up.
acceptance. with acceptance comes peace.
night all
Portland, if you're reading here it's likely you've begun to see through the comforting lies of mammon and moloch.
First advice, keep reading here.
Second advice, kill your television.
Third advice, assume that the entire system is going down, beginning with the financial, then the economic, then the political. Chaos will follow, and either fascism or some sort of modern feudalism shortly thereafter.
Position yourselves accordingly. Maybe that means stopping mortgage payments and saving the money, either as actual cash or gold/silver. Maybe it means acquiring a firearm and ammo and learning to use them. Maybe it means going rural ASAP. Have a Plan B. Stock up on staples--sugar, salt, flour, tp, canned foods, pasta, etc.
Anyway, that's all of what my family and I have done. (Except stopping payments. We worked five jobs and paid off our very cheap rural house in ten years.)
And yes, I realize not everyone here is quite so apocalyptic. IMO, that is due to wishful thinking and/or a failure of imagination.
Study histories of civilization, and make your own call.
"melidere writes:
Thank you downsouth, for that reference. I ordered the book from amazon.
I've been looking for some books that talk more about how people 'felt' during the depression.
Don't know if this has been mentioned but Studs Terkel has a book - its basically a series of interviews with people from different backgrounds and areas of the country and their recollections of the Depression. I just finished it, its called "Hard Times - An Oral History of The Great Depression".
My local library had it and I'm glad I read it...
"If values continue to slide, those that were prudent may need a backstop before they lose their equity / nut."
Prices for houses, whether new or used, will continue to fall. That's a given. Whether you consider yourself "prudent" or not, is no concern of the marketplace. If a stock I invest in falls in price, I lose money. I don't get to announce that I'm a "prudent investor" and demand a "backstop".
FDIC - A Check On Excess (Bank Lawyer's Blog)
...the district court found that the FDIC had acted in bad faith that its suit was part of a larger government conspiracy to extort the redwoods from Hurwitz. The court found that the Government pursued claims "like Soviet threats;" acted as a "secret society of extortionists;" filed "imaginary claims;" used "slander as legal leverage;" embodied the "progressive," bureaucratic "nightmare on 17th Street;" engaged in a personal vendetta against Hurwitz arising from bureaucrats and their like-thinking co-conspirators appreciation of a successful entrepreneur as the personification of what they opposed in America;" and fought a "political guerrilla war at the behest of interest groups and the administration." The court concluded that the FDICs employees, attorneys, and chairwoman who testified that the FDIC had a legitimate interest unrelated to the redwoods had all lied.
Bank Lawyer's Blog: FDIC
Question: At what point does the good Financial Terminator travel back in time to try to save us from fi-net and its weapons of mass financial destruction?
spike666
my opinion was that if this epidemic is gonna turn our country into a sesspool of default and poverty, maybe a helping hand aint so bad after all. Maybe its a necessary evil?
Bair's main job as you all know is to protect U.S. banks. Consumers are treated like 'insured' step children, however by bailing out consumers it will help banks if she is lucky. Always read Bair's statements as added protection for banks and not really consumers. If banks were not failing Bair would remain deadly silent about consumers except when Congress forces the FDIC to act. Then you have the correct answers.
FDIC insurance trust is in the same baot as the SS Trust Fund.
What about selling thsat off to satisfy Ms Bair's kindness?
dilbert dogbert--"Up thread commenters asked why someone didn't do something to stop the unstable price appreciation in RE. My mental image was of many people hung from lamp posts in DC if anyone had tried."
"The soldiers of the French army went to kill the Russian soldiers at Borodino not because of Napoleon's orders, but by their own volition. At the sight of an army barring their road to Moscow, the whole army--the French, Italians, Germans, Poles--hungry, ragged, and exhausted by the campaign, felt that the wine was drawn and must be drunk. Had Napoleon then forbidden them to fight the Russians, they would have killed him and would have proceeded to fight the Russians because it was inevitable."--Leo Tolstoy, "War and Peace"
Mr. Yen did offer the same advice:
'Mr. Yen' sees U.S. financial policy as behind the curve - Los Angeles Times
DownSouth,
When the blood is hot, only the foolish or the brave with lots of firepower stand between the people and the object of their desires.
In my little corner of the world, RE is still hot and money is still easy to get. Don't know when that will change but change it will.
But even if you don't have sympathy for these borrowers, the foreclosed properties are going to impact the surrounding neighborhood properties. Vacant houses contribute to crime and erode the tax base...
Hahaha! How do more vacant houses contribute to more crime? All of a sudden normal people become criminals because "hey, there are more vacant houses...". Logic and reason thrown out the door years ago...
Isn't the R/L transposition a strictly Japanese phenomenon?
FatalException | 04.09.08 - 6:08 pm | #
I have no idea. I don't tend to fact check ridiculous sterotypes.
FFDIC writes:
Bair's main job as you all know is to protect U.S. banks. Consumers are treated like 'insured' step children, however by bailing out consumers it will help banks if she is lucky. Always read Bair's statements as added protection for banks and not really consumers. If banks were not failing Bair would remain deadly silent about consumers except when Congress forces the FDIC to act. Then you have the correct answers.
wish this was the case ffdic, but bair and gruenberg's agenda is consumer protection. bailout bair said as much in a speech last year to a csbs meeting last year. if bair was concerned about banks, she would not be wasting time delivering speeches on this topic or lecturing servicers outside of her supervision on doing loan mods.
We all need to stop pretending that we are Republicans, Democrats, Libertarians or whatever and start admitting that we live in a socialist state.
We are all gold bugs now!
She makes a valid point especially to those that stayed within their means, payed or are paying timely and are now pissed (for good reason). If values continue to slide, those that were prudent may need a backstop before they lose their equity / nut.
Baloney. The have exactly the same house they paid for, and they are making the same payments. They are getting exactly the same utility for their money, regardless of the current market value of the house.
My computer is worth a lot less today than when I paid for it, and I knew this would happen. No consumer should buy any durable good - house, car, whatever - with any expectations of future resale value. Only for value of use per cash outlay.
The diagnosis is not at issue: moral hazard risks abound.
The cure, then, will maximize the likelihood that gratuitous moral hazard is too impolitic.
Historically, a job largely for the fourth estate (e.g., Jacob Riis, H.L. Mencken).
How, then, to make it maximally profitable for the fourth estate of today to muckrake?
Imho, the key insights:
1) The introduction of particular online markets, starting with a new kind of market for the ad spaces on blogs, will provide people with new and improved ways to develop, showcase and profit from expertise.
2) Owning popular markets of the aforesaid kinds is an ideal way to increase profits for an American media conglomerate that owns a broadcast TV network.
3) The less benefit individual speculators can derive from moral hazard, the more they will utilize said markets.
Details are online at love madison wall and fords at loveatmadisonandwall.com.
Given the above, the sooner media conglomerates start introducing/popularizing the aforesaid markets, the sooner a lot of top-quality entertainment programming will, in part:
1) increase awareness of (proposed) public policies that (would) put taxpayers on the receiving end of gratuitous moral hazard (e.g., increase awareness via a next-gen Jed Bartlet channeling Jon Stewart and Vietnam-era Walter Cronkite)
2) showcase elected representatives who protect taxpayers from gratuitous moral hazard
Thoughts?
Best,
Real world- I'm on the sidelines and saving money the old fashioned way to buy a home to live in for 30 years. I won't do so until the prices in my area return to the fundamentals of affordability, which is a 33% price drop in my view- back to historical trend-levels, etc.
Any government policy related to housing ought to allow the market prices to return to fundamenatally sound levels, and then incent folks like me to buy and support this level. Anything else will be laid on quicksand and have unintended effects desribed by many of you above.
Goodie!
So, I am smart enough to NOT buy an overpriced house, so instead the government will take my money and give it to idiots who did buy overpriced houses (while in many cases lying on their loan application forms) AND we'll try to keep real estate prices unaffordably high so prudent people will NEVER be able to buy their own place. Brilliant!
Or... we could just let the crooks get what's coming to them. What a novel idea!
"In your day, college didn't cost as much as a house."
Actually, it did. Houses were much cheaper back then. So was college. I went to a midwestern State U back in the 1960s-1970s and bought a house in the 1970s.... 4 years college roughly equaled the house.
However, back then my salary level, even with little experience, was higher relative to both. That is the big change since then: earnings have gone way down compared to the costs.
So we built too many houses that are too big and bought them for prices that are too high. Seems stupid. Someone has to take a hit. It will be all of us. No amount of non-bailout policy will prevent the pain of this recession from hitting all of us. Oil at all time highs! Yeah!
crispy&cole writes:
Is this the definition of "death spiral"?
Slim Pickens says get on the falling bomb and yell Yee! Haw!
Welcome to the BUSH ECONOMY.
Do nothing until (except start a war pro-actively) there are only bad choices.
-Economy double the Federal DEbt
-FEMA Appoint a political hack
-IRAQ Lie and start a pre-emptive war that oh by the way was going to pay for itself with oil revenue)
-Deregulation do nothing and watch as the whole thing blows up (FAA, FED, FDIC,FDA, EPA etc)
That is what you get when you elect an incompetent imature addict as president.
Sit back and enjoy the ride folks, it is just begining.
"And yes, it may cost money?" That calls for a video. George Harrison provides the details.
YouTube -
rent_to_own writes:
And as a postscript (which might be better left unwritten) - 'That Constitution I was speaking of? It don't cover you for what you are trying to do. '
What, provide his opinion that you are the 'worst hypocrite' he has encountered for a while, based on your words? Seems like exactly the thing that the Constitution I grew up with was written to protect, especially when someone attempts to make a veiled threat, since it most certainly does cover what he is doing, not merely trying to do - call you a hypocrite and ignorant.
Zarley was not expressing an opinion. He was attempting to disrupt a conversation by trying to pick a fight using inflammatory words. Not for the first time either. It was his lame attempt at censorship via incitement to chaos you appear to be defending.
Yes he was expressing an opinion, and I have no problem defending his right to say 'What bothers me is hypocrisy and ignorance. You happen to be the face of it presently.' I also have no problem with the moderators of this form deleting comments they find unacceptable (though it is polite, in my opinion, to note a deletion - banning is fine too, without notice).
But it is his opinion, and though it may be 'disruptive,' in your opinion (and very possibly others), it is completely within the rights granted by the Constitution you first invoked. And then seemingly yanked away in his case, which has the unfortunate effect of at least giving some basis for his point about hypocrisy, at least when commenting that some can't read the Constitution correctly.
I most certainly do not follow every discussion, but at least in the couple of comments of his I read here, there was no 'potty mouth' involved.
we need help now!! it is going to hurt everyone in the longrun if something is not done now!!there are going to be breaking in these house and destroying them, etc. our house has already dropped 10,000 & our accessor says it will drop again next year..food, gas,etc. is going way up, what are people suppose to do? you know it costs the mortgage companies $50,000-60,000 if the house goes into a foreclosure!!why can't they lower their interest rate to 5% for subprime mortgages? even though your house is worth less now, you still owe more than what the house is worth!!!!help,help!!!!!!!