“But another contributing factor was perhaps not so obvious: liberalized underwriting standards,”

Damned liberals. I told you they were the cause of all this!

BTW there is no more historically reliable indicator of the terminal stages of speculative excess than bubbly art. Though in this case it does seem that we are taking it to new extremes:

The Art Trading Fund, which describes itself as the world's first "regulated fine art hedge fund...

This is the same art you'll see wasting away in the bottom of cellars and back of caves in WWIII movies a few decades from now because the markets completely dissolved amidst political strife and mediums of commerce collapsed along with cities and borders.

And by the time things stabilize people will have their priorities straight and be saying: "Pffft... any 7 year old could do that."

hoocoodanode?

"not so obvious"

Seriously?
Whatever his salary, he's overpaid.

CR - thanks for tracking this stuff on the "Delinquency Contagion". Think we're seeing your long progged spread of bad mortgages across all the rest of the stuff. However I think the problem is both wider and has deeper consequences. Right off the bat this means several more round of the writedown goat rodeos. But with a weakening economy this contagion is going to spread over into consumer and business loans. Tried to capture the feedback loops in this graphic:
TinyURL.com - shorten that long URL into a tiny URL

FWIW.

If it's anywhere in the ballpark somebody will tell me when it's time to be scared ? Right...guy...guys ?

Oh and I forgot "good con artist"

I'm a Massachusetts liberal who's never voted for a Republican in my life, I'm for a national health service, for increased taxes on the wealthy, and most of the rest. But rent control is bullshit.

Within a few years, it will reward the lucky at the cost of the unlucky. Keep it in place for 40-50 years and you end up with New York's system of arbitrary rent subsidies. I knew a woman who was widowed with all the kids long gone, who had a very nice 3-bedroom apartment in mid-town Manhattan. The market price on that would have been astronomical. Meanwhile there are families with three kids crammed into apartments half the size and paying twice as much.

If you want to subsidize rents, you need to allocate money for vouchers or something like that.

Don't like rent control - OK, just so long as we agree the current system of housing doesn't work either. Whatcha gonna do when all those baby boomers want to downsize from their McMansions? Don't look at me, I won't buy one.

How about everyone calling the president at '3AM' asking for the housing bailout bill to be vetoed? OK 3AM was a joke.
Instead of sitting on our sorry a*ses and complaining, why don't we all do something that works? If lobbying is the only way, then so be it. I'm sure we have enough fire power amongst us to push this bill away for a year or two.

"But hey, if rent control is a good idea then you won't mind making it rure rent control in the spirit of the minimum wage. Rent minimums and if you lose a renter you can apply for unrentered assistance."

Didn't say it was a good idea. Said it looked like one. It's a bandaid when the economics of housing are out of control. Long-term, the answers are ending easy $$$ for speculative investing, and zoning laws that ensure sufficient housing where it's needed.

The Prop 98 people are selling prop 98 as anything but ending rent control. Whatever your ideology, any law that you have to lie into existence is crap law.

Let's just impose a own-time, 50% net wealth tax on Bill Gates and Warren Buffet. That should help for a quarter.

I've heard it said that Japan brought on their "Lost Decade" by not recognizing losses

Stephen Colbert doesn't see race.

I can't recognize losses. I just can't do it. CEO material?

Emma Anne --

Can someone tell me what "not a capital issue" means?

"Earnings" is what you make. "Capital" is what you've got.

He is saying that losses on these instruments will hurt net earnings at the largest banks, but not actually cause those net earnings to become negative. (To a first approximation, positive earnings result in an increase in capital; negative earnings result in a decrease in capital.)

The implication being "'tis a mere flesh wound".

If you want to subsidize rents, you need to allocate money for vouchers or something like that.

vouchers just end up in the pockets of the landlord, too.

The only way to "control" rents is to tax them instead of taxing income or sales.

cf. the Georgist 'single tax'

Thanks Nemo.

Rent control is not a subsidy. It's a price control. The property owner would like to convince you that the rent-controlled tenant is getting a subsidy, and pretend it's some kind of free lunch, but he's not--he's getting the privelege of paying a government-regulated price. If the apartment next door pays a market rate, it's just an unregulated price next door. That's all.

What is a comptroller? I see the word 'troll' in it. Could I get the job?

S.

Interesting...

Pimco’s chief piles into mortgage debt

Gross triples holding to more than 60%

from FT.com

Sadly I hate to say it but it is 100% lack of work ethic or direction in life. I look at it this way...as long as slackers don't wan't to go into the manual trades it's more work and money for me...

I see enormous waste and lack of productivity in white-collar, service-related office America. There are vast numbers of workers who accomplish very little in the course of many given days except meetings and motion. There aren't any real productivity metrics or expectations. Paper gets shuffled from desk to desk and ideas get bounced from meeting to meeting, and a lot just ends up in the trash.

I think there is room and now motive to slash huge fat out of these white-collar workplaces. A lot of the corporate travel is useless and wasteful and now with high gas and plane fares it's getting slashed. Without so much travel, white-collar companies will figure out they don't need so many people.

Younger people, in particular, don't come out of colleges these days with a sense of hitting daily or weekly production quotas or targets. It's not taught anywhere in their backgrounds, schools or homes. Their idea of productivity is to look at a computer screen or piece of paper, doodle a few comments, and send it on to the next desk down the row.

Pathetic values and work ethics.

OT: If you're following the Moody's misratings, this is priceless: NakedShorts: That Moody’s investigation in fool I

And another indication that inflation continues to deplete the fuel in Ben's fleet of helicopters...

Yuan Set for Biggest Weekly Gain in 2008 as China Curbs Prices

May 23 (Bloomberg) -- The yuan headed for its biggest weekly gain of 2008 on signs China is accelerating the currency's appreciation to battle inflation as oil prices rose to a record.

Yuan Has Biggest Weekly Gain in 2008 as China Battles Inflation - Bloomberg.com

I see enormous waste and lack of productivity in white-collar, service-related office America.

So true, rich. As my wife opines, "if you can't explain your job to someone in one short sentence, you don't have a real one."

Few on this blog might agree with this (Cobra driver would), but this country's real productivity has been plummeting for decades. Most white-collar work is a waste of time, and worse, the real producers have to support all the white-collar workers.

Sorry guys, but I tip my hat to the truck drivers, mechanics, farmers, miners, engineers, and (god bless my wife) teachers. Without them all the fancipants would starve.

People don't live in communities anymore. We don't talk to our neighbors anymore... we're too busy working to get ahead... and buy the latest toys, and have the biggest house. Although I don't like living in a 1000 sqft apartment, I've got to wonder what the energy bill is going to look like for someone living in 3000 sqft!

Yes, of course people are buying precious metals... my dollars are going to be back by the full faith and credit of Gold-ETF... not that I like having something like "paper gold" but "paper gold" seems to be doing a whole lot better than this "paper money" thing...

Paul said:
There is no waste in white collar America. They have been busy for the last 20 years shipping those jobs of "hard working" Americans off shore.

But comon man! We've had such fun watching our 401(k)'s expand... it'll be more fun watching them contract (well the dollars will stay the same but yeah... it'll contract). We're saving money! Your such a buzz kill... those people who were offshored weren't being productive... and anyways, that money goes further in the Philipines and China! I can only house, and feed 1 American family for what it takes to house and feed 10 Chinese families! This is fantastic and much better to society than keeping Americans employed... I mean, I might be an American, my parents might've been American... and my grandparents and ancestors all American... but profit is the American way... its how my family would've wanted it! Additionally, my boss asked me to save money, I offshored that job, and it saved money! In fact it's easy money... so easy you don't even need to do a silly analysis on long-term-impacts other than looking at the cost of sending that job to China! I mean so what if eventually everyone who knows how to make what we're making speaks Chinese, I can learn how to speak Chinese too... and so what if they have more relaxed environmental standards... MONEY! Think about the money dude!

If you're complaining about offshoring than obviously your one of these new breed lazy American's yourself! Find yourself a useful skill... after all you should be able to educate yourself... why is it more expensive?

Disgusting, it's like the Internet is teaching you!

And, lo, a really swell explanation of why we are in this HELOC (and other loan) mess:

"I'm not here to help, I'm here to sell you something:" Confessions of a BofA personal banker:

The Consumerist: Search Results

Yuan Set for Biggest Weekly Gain in 2008 as China Curbs Prices

That's like the safest currency bet. I put I bunch of cash into a yuan money market account and the gain is already more than a $ MM would have earned for the year.

What is a comptroller? I see the word 'troll' in it. Could I get the job?

Maybe it's just 'cause it's a Friday morning, but kudos, Seb - this one made me laugh.

Bloddy -

Sounds like a sound investment plan for those who...could never accumulate like that at 60 hr/wk jobs for 10 years.

I fixed it for you. There is nothing more to it than that.

People aren't stupid, and they know when the game is rigged - there is nothing particularly amoral or indolent about refusing to be gamed in an unfair system.

If anyone ever does anything about the raping (short-term stripping) of value from the economic system - think copper pipes in foreclosed houses - by the CEO/'Investor Class', then perhaps you'll be able to persuade the little guy that he really should be a good little worker bee and try to squirrel away by working 60/wk.

I put I bunch of cash into a yuan money market account and the gain is already more than a $ MM would have earned for the year.

Folks that are doing this, do keep in mind that these funds are exposed to profound political risk. It used to be that that this was less true for the buck but having political risk on both sides of a currency trade is not a stabilizing effect.

China is as much a part of this bubble as America and they are as trapped by their overcapitalization and inadequate administrative means as we are by our handicaps. Just because it's farther away doesn't make it better, it just makes it hard to see the details.

I have friends who have reported on conditions there to me and it is a dumping ground for misallocated capital routed to its destination by guanxi and people's brother-in-law down at the bank.

Some of you may remember me as one of the people who un-suppressed the E&Y Chinese NPL report a few years back, and conditions have not improved materially. I don't really want to get into the specifics, and of course it's anecdotal, but I think they are going to take as big a nut-shot as the US.

IMO, both dynasties are at serious risk, and if you think that you can predict where and when that nascent risk will mature, I think you are kidding yourself.

To DH at 11:14

Roubini is free if you do the free registration--this is as of a month or so ago.

rich,
My wife is a Spanish instructor. Some of her clients are the management team of a Fortune 500 company. Most of the children she teaches are from the uppper class extreme upper middle class.
Doesn't that tell a story?

"Comptroller" is an antiquated term for "Controller". It's only used in governmental posts these days.

The ability to write coherently ties into the ability to think and work productively, especially in the white-collar world.

No disagreement from me here - in fact with regard to the required qualities for white-collar success in my response to Dry, I mentioned two buckets - "operational thinking / problem-solving" was the first and "communications ability" was the second.

If you ever want a depressing testament to our lack of same in today's educational system, wander into a bookstore specializing in old books and pick up a late-19th / early-20th century school primer. The complexity of the language being taught to, and the command of vocabulary and comprehension expected of, second- and third-graders in those days would flummox a large percentage of today's high schoolers!

And that's another skill that too much of white-collar America views in isolation - everything is spreadsheets and bullet lists, to the point that it's what everyone else expects. Why, if someone can't communicate what something is or why it works, you should expect them to be able to make it work at all - it's a question that's too often unthought, and certainly untaught.

Mooksaid: If we can place our country's workforce into higher-skilled, more value-added jobs by sending lower-skilled grunt-work offshore, I'm all for it.

This is something I've never quite understood.

How was the country's grunt-work force supposed to feed itself once the level of value-added jobs exceeded its competence level?

It seems to be a topic that's anathema to discuss, but the preponderance of the population is, dare I say it, normal, average, not terribly talented*, nor imaginative. I'm not criticizing, it's just the way it is. Pretending that the grunt-force can become software developers or systems analysts "if only it acquired the retraining," is one of the absurdities that has, and is going to further, bite us in the ass.

• Years of acquired experience can produce a modicum of competence.

So, how do people of middling intelligence feed themselves when suitable jobs are no longer available?

Average people need something to do. Necessities are one reason; self-esteem is another.

Government stipend?

At what point will the masses no longer be able to afford the (transportable) necessities no matter where they come from?

The ability to write coherently ties into the
ability to think and work productively,
especially in the white-collar world.
Laziness in learning fundamentals like
sentence structures and punctuation
translates into bad work habits and ethics.

Ethics? Is that why investment bankers ran amok -- a poor ability to write coherently?

Methinks you think writing is critically important because you are a professional writer. Don't confuse self importance with importance. It's important for many jobs, but so are a lot of other skills.