Here is the thing. The value of a house is the net rent you can extract from now until the end of time, discounted back to the present day. Nothing the government is doing will affect the value of a single house.
They are going to spend hundreds of billions of dollars doing nothing more than ratifying the prices people paid well above the value.
I cannot imagine a less productive way to blow tax money. Seriously.
Sorry to go off topic from this post - but does anyone know how much commercial real estate AIG & Lehman own? It at least isn't public, though doing sponser searches on costar/reis/trepp/realpoint/twr I'd guess the range is somewhere around 50,000 buildings (mostly from AIG, about half apartments).
Is this all really going to come on the market in the next year? I wonder if the blogging community could create a wiki or something to try to assemble/estimate what markets are going to get hit the hardest. Based on what I found I would guess 10% of the New Jersey apartment market is about to go up for sale...
Do these crony bankers realize the consequences of their actions.. the world is not what it used to be..
In the old days - upto 100 years ago, you could pauperize the masses and still remain rich (if you could avoid a lynching). Now the consumption of the masses keeps people rich, lower consumption = cascade of negative events that make rich peoples money useless.
Ohh.. and also the western world has a top heavy population profile + governments have promised people stuff they cannot pay for.
Various scholars attribute different characteristics to fascism, but the following elements are usually seen as its integral parts: nationalism, corporativism, militarism, totalitarianism, populism, collectivism, statism, dictatorship, and economic planning. (Wikipedia)
ades, first - this is for non-residential construction (just to be clear), and the lag is between architects billing (an early cost) and construction spending (starting with breaking ground on the project).
Construction spending is reported by the Census Bureau monthly and feeds into both residential and non-residential (structure) investment in the GDP report.
Since the ABI dropped off a cliff in early 2008, we should expect a slowdown in non-residential construction spending right about now. That is all this is telling us - and it is starting to happen (from my sources).
I believe that moving away from the gold standard is ironically the very reason rich people are more vulnerable than they were in the past.
In the old days, gold could be stored, hidden and later exchanged for services. Therefore you could keep your loot with you,run away and still live well.
Now, you have to pay with something (cash, credit) that requires the world to be trustful, stable and functional to get almost anything. Therefore it is harder to shield yourself in a down turn, especially if you are rich.
If you do not believe this try paying for day to day stuff or even major capital items with gold (even in the poorest part of the world).
They have been working on it for centuries, but the darned things just keep blowing up.
There are wise people who tell them that humans cannot control the universe, or even the earth, but hubris is deaf and blind.
"girlbear writes:
Instead of designing buildings, architects could now design a new world order....were gonna need it.
girlbear | 09.19.08 - 6:11 pm |"
I understand. I should have clarified a little better.
I'm wondering how much double counting or 'multipliers' there are in Census numbers.
I work for a general and build a $10MM building. Of that $10MM that the owner pays us we send about $90MM to other subcontractors and consultants (surveyors etc)
If they are counting all of these costs, which I doubt, the numbers could change very rapidly.
Nemo writes:
Here is the thing. The value of a house is the net rent you can extract from now until the end of time, discounted back to the present day. Nothing the government is doing will affect the value of a single house.
Houses must be affordable--if wages are stagnant, then housing still has a long downward trek. This administration's ideology always strived to eliminate wage inflation--depressed housing prices are not unexpected consequences--thus this bubble is fraud.
I work for a general and build a $10MM building. Of that $10MM that the owner pays us we send about $90MM to other subcontractors and consultants (surveyors etc)
Hey, that's the Fed's business plan too! (Yes, I know it's a typo.)
Repost from last thread. I will bet $20 tip to CR that Congress keeps the seller on the hook with some type of lien against the firm's future profitability. Just buying time, and equity holders still shaved bald. Otherwise even bazooka boy couldn't have scared em into bipartisan action so fast.
RealEstateRisk, I have read the Lehman owns about 53 million square feet of office, retail space. AIG, in addition to millions of Europe & U.S. office and retail space, owns thousands of apartment buildings through it's subsidiary SunAmerica due to selling low income housing credits.
We will massive amounts of real estate coming on the market as IBs and insurance companies unload assets.
Treasury official says only U.S.-based institutions will qualify for debt facility; hedge funds prohibited from bringing mortgage-backed securities to proposed debt facility
New York City should be the headquarters of the new federal mortgage bailout agency because it has the professional expertise to launch the rescue quickly and the banking crisis has cost the city and state more jobs than anywhere else, Gov. David Paterson said Friday.
Conflicting interests collide...good post over at Housing Wire. The gist is this:
"Citing deep concerns about the Treasurys program to guarantee money market mutual funds, American Bankers Association president Edward Yingling said that the bailout of money markets will undermine the role of banks during this current crisis and has the potential to have an extremely negative impact in the future...In a letter to Treasury Secretary Henry Paulson and Federal Reserve Chairman Benjamin Bernanke, Yingling posed eight questions about the money market program, the most pointed of which asks how will you address the perception by the market that money market mutual funds now have a permanent implicit government guaranty much like Fannie Mae and Freddie Mac did?...The debt instruments in a money market fund will pay a higher interest rate, and therefore, the fund will pay a higher interest rate than a bank deposit or short-term CD, said Yingling. It also appears that there will be no limit on how much an individual or institution can invest in these funds. Therefore, they will be in a significantly superior market position to FDIC-insured bank deposits. In plain English, this means that the ability of banks to attract and keep deposits may come under pressure as a result of the move to bail out money-markets"...
Did Hank and Ben bother to read this? I think not, as they are too busy concocting cockamamie schemes to protect their reputations. I doubt they thought about it. It's hard to sketch out all of the potential pitfalls of different tactics when you haven't slept in a week and you think you have to slap together a solution in a matter of hours.
Face it...insolvent banks must fail, and fail now. When the FDIC's fund runs out, then have Congress approve a replenishment, funded by Treasuries, which can be sold to Chinese govt and others, who funded the original housing mess.
girlbear writes:
Instead of designing buildings, architects could now design a new world order....were gonna need it.
girlbear | 09.19.08 - 6:11 pm | #
They have been doing that for centuries
Or don't you believe in a Freemason conspiracy?
okay, I'm back--somebody tell me if what I heard on a news report is true, that Cox is already asking for exemptions from the ban on shorting for 'certain market makers'.
Agreed on no big bank failure. I actually think WaMu or WB (or both?) announces some form of sale or merger on Sunday. Both must look a lot more attractive with the ability to park their toxic crap under the taxpayers' big blue TARP.
you really have to wonder what the estimates of the banks assets will be based on:
according to M. Whitney WB and City assume 23% house price decline for example, whereas she predicts over 40%.
If they are crazy enough to keep making risky loans with now govt funds, you have to assume that people will still buy under these conditions and at the present prices: are many stupid enough to do that? I am guessing NOT. The economic climate has changed, the bubble psy. is long gone. Home prices will continue to drop, no matter what they do.
Knowing that, who will buy the bank assets on the govt.s care = at what price as compared to the current estimates in this plan?
If no buyers, how long can govt hold these treasures while home prices try to catch up with their dream estimates?
I cannot wait to see all the actual details of the plan as ready for applicatio
Will the SEC face legal action? Remember a Fed Court declared the hedge fund registr. rule arbitrary. My guess is no judge has the balls to stop them, so it would be pointless.
As I sit here in my 90 degree house without air conditioning due to power not yet being restored, it dawns on me that perhaps paying CEO's up to 400 times a base workers salary was a bad idea. Remember how the executives would come on television and say these ridiculously overinflated salaries were justified because they had to retain talent?
Yeah... They could have paid me a whole lot less and I could probably have ridden these companies into the ground much more efficiently.
I will bet $20 tip to CR that Congress keeps the seller on the hook with some type of lien against the firm's future profitability. Just buying time, and equity holders still shaved bald. Otherwise even bazooka boy couldn't have scared em into bipartisan action so fast.
Ok yogi, you're on. I say no lien against future profits. Maybe they'll have the balls to restrict bonuses and severance packages for executives at firms selling toxic waste, but what you're suggesting, no way.
yogi writes:
It's always a crisis, never time to lay blame. Push moral hazard to the next century.
yogi | 09.19.08 - 7:03 pm | #
Exactly right, and this is why this stuff keeps happening over and over, because of the delay in identifying the culprits, although we know who they are. Now is the time for accountability, before memories get hazy or are forgotten. With the old RTC, they sold assets to the former owners of the S&Ls that went BK, and they got a hell of a deal. And I would certainly expect these pigmen to try the exact same thing. In this supposed rescue, I foresee even more potential for waste, fraud, and abuse. Let's hope Halliburton isn't given a contract to 'solve' this.
Well, I dunno guys, you are taking your eyes of the ball:
On September 19, 2008, Ameribank, Inc., Northfork, WV was closed by the Office of Thrift Supervision (OTS) and the Federal Deposit Insurance Corporation (FDIC) was named Receiver. No advance notice is given to the public when a financial institution is closed.
I am partner in small A&E firm . We have been in trouble for a year now and will close the doors if things don't turn around by May '09. No, I don't think the Treasury is going send us a check .
" Nemo writes:
Don't worry; the Treasury is going to start paying architects directly.
Nemo | Homepage | 09.19.08 - 5:52 pm " #
Yup. Architect friend of mine was just laid of in Denver.... fortunately has found a two month consulting gig, but then?
Sigh. And his wife was denied her social security disability for her neuro motor disorder, so has to try to go back to work even though her brain implants aren't working properly.
Their older son, who just graduated college, has a lovely $11 an hour contracting job with IBM, and they are trying to put younger son through college now, too.
It's such a great country we live in. I'm really getting sick and tired of watching all my friends suffer and get laid off just as we turn fifty, and our retirement money is vanishing in a failing market.... and our kids are graduating college with such great job prospects. This sucks.
Don't worry; the Treasury is going to start paying architects directly.
Such a pretty symmetrical graph
Here is the thing. The value of a house is the net rent you can extract from now until the end of time, discounted back to the present day. Nothing the government is doing will affect the value of a single house.
They are going to spend hundreds of billions of dollars doing nothing more than ratifying the prices people paid well above the value.
I cannot imagine a less productive way to blow tax money. Seriously.
"an approximate nine to twelve month lag time between architecture billings and construction spending"
CR,
I've been meaning to ask you about this for a while. When you talk about construction spending what is generally included?
Owners payments to General Contractors? (Hard costs)
Owners payments to Architects and Engineers? (Soft costs)
Other owner payments for things like reprographics? (Soft costs)
What about Generals payments to Subcontractors?
Where does it start and end?
I had a similar question about the Fed report that you wrote about a week ago but didnt have the guts to ask or the brains to research it....
(Of course the question is open to anyone who might know!)
Thanks In Advance.
..........
It's a good thing the fundamentals of the economy are sound, otherwise this could have been scary.
Sorry to go off topic from this post - but does anyone know how much commercial real estate AIG & Lehman own? It at least isn't public, though doing sponser searches on costar/reis/trepp/realpoint/twr I'd guess the range is somewhere around 50,000 buildings (mostly from AIG, about half apartments).
Is this all really going to come on the market in the next year? I wonder if the blogging community could create a wiki or something to try to assemble/estimate what markets are going to get hit the hardest. Based on what I found I would guess 10% of the New Jersey apartment market is about to go up for sale...
Do these crony bankers realize the consequences of their actions.. the world is not what it used to be..
In the old days - upto 100 years ago, you could pauperize the masses and still remain rich (if you could avoid a lynching). Now the consumption of the masses keeps people rich, lower consumption = cascade of negative events that make rich peoples money useless.
Ohh.. and also the western world has a top heavy population profile + governments have promised people stuff they cannot pay for.
Various scholars attribute different characteristics to fascism, but the following elements are usually seen as its integral parts: nationalism, corporativism, militarism, totalitarianism, populism, collectivism, statism, dictatorship, and economic planning. (Wikipedia)
Stop looking back, CR. It's a new world - it's morning in America.
ades, first - this is for non-residential construction (just to be clear), and the lag is between architects billing (an early cost) and construction spending (starting with breaking ground on the project).
Construction spending is reported by the Census Bureau monthly and feeds into both residential and non-residential (structure) investment in the GDP report.
Since the ABI dropped off a cliff in early 2008, we should expect a slowdown in non-residential construction spending right about now. That is all this is telling us - and it is starting to happen (from my sources).
Best Wishes.
I believe that moving away from the gold standard is ironically the very reason rich people are more vulnerable than they were in the past.
In the old days, gold could be stored, hidden and later exchanged for services. Therefore you could keep your loot with you,run away and still live well.
Now, you have to pay with something (cash, credit) that requires the world to be trustful, stable and functional to get almost anything. Therefore it is harder to shield yourself in a down turn, especially if you are rich.
If you do not believe this try paying for day to day stuff or even major capital items with gold (even in the poorest part of the world).
Instead of designing buildings, architects could now design a new world order....were gonna need it.
They have been working on it for centuries, but the darned things just keep blowing up.
There are wise people who tell them that humans cannot control the universe, or even the earth, but hubris is deaf and blind.
"girlbear writes:
Instead of designing buildings, architects could now design a new world order....were gonna need it.
girlbear | 09.19.08 - 6:11 pm |"
CR,
I understand. I should have clarified a little better.
I'm wondering how much double counting or 'multipliers' there are in Census numbers.
I work for a general and build a $10MM building. Of that $10MM that the owner pays us we send about $90MM to other subcontractors and consultants (surveyors etc)
If they are counting all of these costs, which I doubt, the numbers could change very rapidly.
........
Nemo writes:
Here is the thing. The value of a house is the net rent you can extract from now until the end of time, discounted back to the present day. Nothing the government is doing will affect the value of a single house.
Houses must be affordable--if wages are stagnant, then housing still has a long downward trek. This administration's ideology always strived to eliminate wage inflation--depressed housing prices are not unexpected consequences--thus this bubble is fraud.
No worries...architects index has been added to the non-shorting list. This index has been revised upward...
I work for a general and build a $10MM building. Of that $10MM that the owner pays us we send about $90MM to other subcontractors and consultants (surveyors etc)
Hey, that's the Fed's business plan too! (Yes, I know it's a typo.)
ot to worry ...
we'll need plenty of architects to build the new Hoovervilles...
Hey, that's the Fed's business plan too! (Yes, I know it's a typo.)
MensaJD | 09.19.08 - 6:19 pm | #
LOL ! ! !
.....
Repost from last thread. I will bet $20 tip to CR that Congress keeps the seller on the hook with some type of lien against the firm's future profitability. Just buying time, and equity holders still shaved bald. Otherwise even bazooka boy couldn't have scared em into bipartisan action so fast.
OT:
Is this the Shock Doctrine in effect? Our poor Congress-critters were stunned into silence from Hank's and Ben's dog-and-apocalypse show:
- NY Times
For a primer on the Shock Doctrine, check out Keith Olberman's interview with Naomi Klein:
YouTube -
RealEstateRisk, I have read the Lehman owns about 53 million square feet of office, retail space. AIG, in addition to millions of Europe & U.S. office and retail space, owns thousands of apartment buildings through it's subsidiary SunAmerica due to selling low income housing credits.
We will massive amounts of real estate coming on the market as IBs and insurance companies unload assets.
Treasury official says only U.S.-based institutions will qualify for debt facility; hedge funds prohibited from bringing mortgage-backed securities to proposed debt facility
New York City should be the headquarters of the new federal mortgage bailout agency because it has the professional expertise to launch the rescue quickly and the banking crisis has cost the city and state more jobs than anywhere else, Gov. David Paterson said Friday.
Locate new U.S. mortgage bailout agency in NYC: Gov
| Reuters
You drop that little darling right here, we have plenty of experienced thieves when dealing with OPM.
Conflicting interests collide...good post over at Housing Wire. The gist is this:
"Citing deep concerns about the Treasurys program to guarantee money market mutual funds, American Bankers Association president Edward Yingling said that the bailout of money markets will undermine the role of banks during this current crisis and has the potential to have an extremely negative impact in the future...In a letter to Treasury Secretary Henry Paulson and Federal Reserve Chairman Benjamin Bernanke, Yingling posed eight questions about the money market program, the most pointed of which asks how will you address the perception by the market that money market mutual funds now have a permanent implicit government guaranty much like Fannie Mae and Freddie Mac did?...The debt instruments in a money market fund will pay a higher interest rate, and therefore, the fund will pay a higher interest rate than a bank deposit or short-term CD, said Yingling. It also appears that there will be no limit on how much an individual or institution can invest in these funds. Therefore, they will be in a significantly superior market position to FDIC-insured bank deposits. In plain English, this means that the ability of banks to attract and keep deposits may come under pressure as a result of the move to bail out money-markets"...
Did Hank and Ben bother to read this? I think not, as they are too busy concocting cockamamie schemes to protect their reputations. I doubt they thought about it. It's hard to sketch out all of the potential pitfalls of different tactics when you haven't slept in a week and you think you have to slap together a solution in a matter of hours.
Face it...insolvent banks must fail, and fail now. When the FDIC's fund runs out, then have Congress approve a replenishment, funded by Treasuries, which can be sold to Chinese govt and others, who funded the original housing mess.
girlbear writes:
Instead of designing buildings, architects could now design a new world order....were gonna need it.
girlbear | 09.19.08 - 6:11 pm | #
They have been doing that for centuries
Or don't you believe in a Freemason conspiracy?
Kung Fu Panda that is why I posed the question earlier today on where to find money market funds with the best returns. Why keep it in a bank?
okay, I'm back--somebody tell me if what I heard on a news report is true, that Cox is already asking for exemptions from the ban on shorting for 'certain market makers'.
A repost from previous thread because I am sooo right.
Maybe no big bank tonight. They can hold to the TARP is ready. SHould only be a week. Better for the spin also.
Agreed on no big bank failure. I actually think WaMu or WB (or both?) announces some form of sale or merger on Sunday. Both must look a lot more attractive with the ability to park their toxic crap under the taxpayers' big blue TARP.
you really have to wonder what the estimates of the banks assets will be based on:
according to M. Whitney WB and City assume 23% house price decline for example, whereas she predicts over 40%.
If they are crazy enough to keep making risky loans with now govt funds, you have to assume that people will still buy under these conditions and at the present prices: are many stupid enough to do that? I am guessing NOT. The economic climate has changed, the bubble psy. is long gone. Home prices will continue to drop, no matter what they do.
Knowing that, who will buy the bank assets on the govt.s care = at what price as compared to the current estimates in this plan?
If no buyers, how long can govt hold these treasures while home prices try to catch up with their dream estimates?
I cannot wait to see all the actual details of the plan as ready for applicatio
Commercial real estate, WaMu, and the Seattle Art Museum: an interesting little episode:
The Seattle Art Museum and the fall of Washington Mutual
Will the SEC face legal action? Remember a Fed Court declared the hedge fund registr. rule arbitrary. My guess is no judge has the balls to stop them, so it would be pointless.
Interesting piece on derivatives, Fannie, Freddie, and AIG:
Web of Debt - IT’S THE DERIVATIVES, STUPID! WHY FANNIE, FREDDIE AND AIG ALL HAD TO BE BAILED OUT
As I sit here in my 90 degree house without air conditioning due to power not yet being restored, it dawns on me that perhaps paying CEO's up to 400 times a base workers salary was a bad idea. Remember how the executives would come on television and say these ridiculously overinflated salaries were justified because they had to retain talent?
Yeah... They could have paid me a whole lot less and I could probably have ridden these companies into the ground much more efficiently.
Thanks for that, CSC.
DSL HQ is just down the street from me (could walk there). Should I go try to open a new account and see what they say?
KFP - "?...The debt instruments in a money market fund will pay a higher interest rate"
Wow. Yield chasers will flee banks & s&l. Not only Schumer - Hank & Ben causing bank runs too!
What a fargin mess!!!
MoTruth, Link please, on the exclusions.
Why are you misspelling FASCISM?
I believe the proper spelling is
FARSISM
Wall Street rallies the day we take a giant step closer to nationalizing the banking industry.
If the Feds can run a post office they can run an investment bank better than Goldman Sachs. They already share the talent.
Socialize the profits!
CR needs to go home and take a nap. Pray for a calm weekend, at least until Sunday night.
Seattle Post-Intelligencer: David Horsey
Billion or Trillion? What'll it be?
"Treasury is going to start paying architects directly."
I'm almost certain that architects aren't in the club.
It's always a crisis, never time to lay blame. Push moral hazard to the next century.
Krugman using comrade meme on BBG interview...
Bloomberg.com:
Editors' Video Picks
Who will design the new RTC^2 building?
2 hours until FFDIC can announce his secret location.
FDIC: Failed Bank List
No takers for my bet? Anyone dumping what turns out to be toxic waste pays no dividend, no bonuses, until US gets back every penny.
I will bet $20 tip to CR that Congress keeps the seller on the hook with some type of lien against the firm's future profitability. Just buying time, and equity holders still shaved bald. Otherwise even bazooka boy couldn't have scared em into bipartisan action so fast.
Ok yogi, you're on. I say no lien against future profits. Maybe they'll have the balls to restrict bonuses and severance packages for executives at firms selling toxic waste, but what you're suggesting, no way.
Plans announced on Friday for a massive taxpayer-funded clean-up of toxic debt that has swamped the U.S. financial system quickly reshaped the landscape for Federal Reserve interest rate policy.
US RATE FUTURES-Debt plan smacks down Fed rate cut views
| Reuters
Looks like the media is getting past sugar coating it that's an improvment.
When I said "some kind of lien" I hadn't thought it through. Will you take no dividend or bonus?
yogi writes:
It's always a crisis, never time to lay blame. Push moral hazard to the next century.
yogi | 09.19.08 - 7:03 pm | #
Exactly right, and this is why this stuff keeps happening over and over, because of the delay in identifying the culprits, although we know who they are. Now is the time for accountability, before memories get hazy or are forgotten. With the old RTC, they sold assets to the former owners of the S&Ls that went BK, and they got a hell of a deal. And I would certainly expect these pigmen to try the exact same thing. In this supposed rescue, I foresee even more potential for waste, fraud, and abuse. Let's hope Halliburton isn't given a contract to 'solve' this.
Well, I dunno guys, you are taking your eyes of the ball:
On September 19, 2008, Ameribank, Inc., Northfork, WV was closed by the Office of Thrift Supervision (OTS) and the Federal Deposit Insurance Corporation (FDIC) was named Receiver. No advance notice is given to the public when a financial institution is closed.
FDIC: Failed Bank Information - Bank Closing Information for Ameribank, Inc., Northfork, WV
-K
errr, you mean something more important that tiddly bank failures is going on ?
LOLOLOLOLOL
-K
Will these firms still be allowed to lobby? FNM and FRE were specifically told not to lobby. This should be enacted immediately.
Todays BFF is - (drum role)
Ameribank, Inc., Northfork, WV
Oops - to late!
Todays BFF is - (drum role)....
Too soon to close the books on 9/19. I think we get something from... Utah ?
I am partner in small A&E firm . We have been in trouble for a year now and will close the doors if things don't turn around by May '09. No, I don't think the Treasury is going send us a check .
" Nemo writes:
Don't worry; the Treasury is going to start paying architects directly.
Nemo | Homepage | 09.19.08 - 5:52 pm " #
Good to see that everyhing is returning to normal .
"Now it feels like a Friday! "
Yup. Architect friend of mine was just laid of in Denver.... fortunately has found a two month consulting gig, but then?
Sigh. And his wife was denied her social security disability for her neuro motor disorder, so has to try to go back to work even though her brain implants aren't working properly.
Their older son, who just graduated college, has a lovely $11 an hour contracting job with IBM, and they are trying to put younger son through college now, too.
It's such a great country we live in. I'm really getting sick and tired of watching all my friends suffer and get laid off just as we turn fifty, and our retirement money is vanishing in a failing market.... and our kids are graduating college with such great job prospects. This sucks.