"The amount owed on such loans at the end of March was $115 billion, which Wells estimates is 107 percent of the current value of the properties underlying the mortgages..."
That is a ticking time bomb if I ever saw one. Damocles sword over WFC's head.
I have a feeling that even if you created a sham corporation with a name from the star war movie series, you could get TARP- as long as you got enough MSM idiots to parrot your cause.
You might remember the companies that enron created..
Could creditors seize assets or force an auction for state assets if those creditors were unsecured?
The Eleventh Amendment immunizes states from suits for money damages or equitable relief (e.g. seizure). States can voluntary consent to suits; most states allow certain political subdivisions to be sued, even in BK, but not the state itself. Likewise, the BK Code has provisions for cities and other political subdivisions, but not the state as sovereign.
You have any interesting hypothetical scenarios regarding an insolvent state?
A creditor could try to seize the foreign assets of an insolvent state, provided that both parties are subject to the jurisdiction of the foreign government. Comity would be an issue though. California doesn't have any assets worldwide, does it?
WASHINGTON -- Using strategies dubbed "Death Star," "Get Shorty," and "Fat Boy," Enron Corp.'s energy traders manipulated California's power system to increase profits during the height of the state's 2000-2001 energy crisis, documents released by federal regulators show.
Chewco was a company associated with Enron, which was largely involved in the bankruptcy of that company. It was named after the Star Wars character Chewbacca, because it was created to hide losses from the Joint Energy Development Investment Limited, known by its acronym "JEDI". Like Chewbacca, the Jedi Knights were prominent characters in Star Wars.
Enron created Chewco as a limited partnership which would help keep the JEDI project off its books. It wanted to buy out the California Public Employees’ Retirement System’s interest in JEDI, but it did not want to be forced, by accepted accounting principles, to consolidate JEDI in the Enron financial statements and thus reflect debt and/or financial losses. Enron wanted to keep JEDI afloat, but it needed a partner to take at least a 3% stake, or the partnership's results would have to be included in Enron's financial statements. Chewco was created to be that partner.
We joke about it enough, when are were ever just going to fill out a form and found the Hoocoodanode? branch-less bank forms here, the Charter application, requirements
"A water wheel is a water engine too. I was thinking of the David Mamet play. "
I know, I remember the play from the 70's. You used is sarcastically, but the point of the play was not that the idea was unrealistic (loosely based on a real story) but that the deflation would not be tolerated by the 'power' brokers. Planned obsolescence eventually implodes: see GM. Peak oil is coming, just a matter of generations. The dinosaurs only lasted so long.
Basel Too,
Thanks for the reply, I'm sure you've educated me on the matter before.
Couldn't California turn its back on creditors, it only has reputation / access to future funds / the grace of powerful people to lose. Would probably shock other states' lenders, eh? Are they [/California] near the point where the interest payments outweigh the benefits of any borrowing [California might do] in the next 30 years?
CalPERS actually should have infrastructure investments outside of the USA, although always in some partnership or via PE. Would be very messy chasing all the ants around instead of going for the nest
edit: silly me, with the budget crisis culminated into a dramatic climax -- you could pass anything that doesn't include spending, and in return receive kickbacks. Selling/leaseback of assets, granting various licenses, cutting regulations. Perhaps offshore drilling???
LOS ANGELES (MarketWatch) -- Toyota Motor Corp. (TM 73.52, -0.02, -0.03%) (JP:7203 3,510, -150.00, -4.10%) is planning one of the most drastic management overhauls in its 70-year history next month when Akio Toyoda, grandson of the Japanese car company's founder, takes over as chief executive, the Financial Times reported Thursday. The company will replace 40% of its senior managers and is said to be preparing a sweeping reorganisation of its key North American business that would unify its separate sales and manufacturing arms, it said. "Some people are calling this a revolution or even a coup d'état," the report quoted Koji Endo, motor industry analyst at Credit Suisse, as saying
Not exactly sure of which 'they', but I think it was California. Wouldn't California save more by not having interest payments, than they might gain from bond market access in the medium term
What I Would Say to the MBA Class of 2009 - Bloomberg.com
04:05 PM Thursday May 14, 2009
By John Baldoni
Congratulations, graduates!
The world is a very different place from when you entered your program two years ago. In September 2007, the capital markets were holding steady, companies were hiring, and prospects for continued growth seemed limitless. What a difference a year or two makes. Today the capital markets have lost 40 percent of their value, companies are shedding tens of thousands of employees, and a sense of doom hangs in the air.
Every generation finds its challenges. Yours may be greater than those in recent memory, but they are challenges that ambitious and savvy business graduates will find ways to overcome. Consider what you learned in the classroom not as a foundation, but rather as a spring board that will help you bounce higher and achieve more. So let me offer a few words of wisdom, things I learned from my mentors.
Couldn't California turn its back on creditors, it only has reputation / access to future funds / the grace of powerful people to lose.
Correct.
Would be very messy chasing all the ants around instead of going for the nest
Problem is that the nest is absolutely immunized.
Corrected my original post, because as BG pointed out, CalPERS is a separate legal entity not protected by the Eleventh Amendment. However, CalPERS is a qualified ERISA plan, which means its also immunized from money damages and some equitable remedied, but by federal statute
Please read about the adventures of Enron.. In any case, we could not f**k up the system any worse that Citi, BoA, WFC, JPMC, Capital One, Amex, BNYM or Goldman-Sachs.
Seeing as how they need to borrow for cash flow, I'd say they would have to radically change 1) their collections and 2) their expenditures. Again, just a thought experiment. Who knows how such an event would affect the financial markets at large.
Couldn't California turn its back on creditors, it only has reputation / access to future funds / the grace of powerful people to lose.
Given that many of its bonds are insured, wouldn't that cause a number of the muni bond insurers to choke? Now we're talking "systemic" effects, and the Feds again.
Bond Girl (homepage, profile) wrote on Fri, 5/15/2009 - 12:54 am
Calpers is distinct entity.
All that the people chasing the money have to do is have their external jurisdictions pierce the corporate veil and say CalPERS is just an administrative sham of independence wrapped around an arm of state bureaucracy. Stuff in CA might be safe, but I'd say assets outside its sovereignty are as toast as the people in their jurisdiction of residence feel cheated by CA's flipping them the bird under the rubric of sovereign immunity.
As we watch Capitalism version 2.0 pan out, we are acutely aware of the changing role of government, financial institutions, equity markets in the new landscape. However, look below the surface. The new dynamics are also resulting in a fast-changing kaleidoscope within, with new patterns beginning to emerge.
There is new life kicking in amidst all this talk of gloom and doom.
We are witnessing a burst of fresh entrepreneurial energy as the changing environment encourages people to step out of their comfort zones. The need to think afresh about what works and does not work in the new world is resulting in the birth of new venture ideas and the building of innovative SOHO operations in niche sectors, such as a start-up business insuring your car loan payments in case of layoff.
Across organisations, we are witnessing changing work models. There is a shift from measuring input to evaluating outcome; from rewarding effort to incentivising results. These changes, which began some years ago with the growing popularity of Robert Kaplan and David Norton's Balanced Scorecard, are spreading further with more and more companies adapting their performance management systems to align individual goals with collective business goals.
Performance is becoming the key differentiator in these times. As a recent Business Today Survey revealed, with salary increments going into deep freeze even in India; an economy that is still showing positive growth; carrots now come with sticks. It is variable pay, based directly on performance, that will now be the differentiating income.
We are also seeing changes in commercial models. More companies are offering performance-related pricing, thereby forming a partnership of trust and mutual benefit with their clients.
At HCL, rather than being led by the changed circumstances, we have led the change. (If I do say so myself!) Our belief in aligning IT to business goals, performance-driven pricing, a value-centric approach, employee centricity, accountability, transparency and inverting the pyramid began far before the new environment dictated change. This investment has paid off well. As we move forward, we intend to continue to be a change leader and are already sharply focused on areas such as high-value integrated services and utility computing.
As the world emerges from the slowdown, it will not come back to the same shape and size that we are accustomed to today. There has to be a shift in the mindset: an increasing endeavour to be the most valued rather than the biggest; an increasing grip on discipline, governance, cost efficiencies; a focus on sustainability. As we look forward, I truly believe that going forward 'lean, mean and hungry' is the best way to thrive.
I have no doubts that there are many other manifestations of this kaleidoscopic change and welcome your comments pointing out more. As leaders across the board align their businesses with changes in the external world, we could all learn with each other's experiences in fostering agility, positive thinking and resilience.
There has to be an artistic type out there right now designing Bank of Hoocoodanode's first full-page advertisement. Or maybe a good picture to seed a caption contest?
i was talking to my brother last night about planning for non cash subsistence modes of living like fishing and growing vegetables. he was telling me all the immigrants in S FL are awol and there was worry over who will pick the crops. i think you and i both know who will pick the crops, once they swallow their pride and decide they would like to also like to swallow some food.
the pervasiveness, hell ubiquity, of ignorance about the gravity of the situation is absolutely staggering. people are like, yeh, heard all about the banks, you are harshing my mello. i sent my links of doom to a number of old acquaintances and i'm certain that most will not internalize the implications.
get drunk, watch sports, eat on credit... how did we come to this in perhaps only 8 or ten years? everyone lives in a bubble of media fantasy. the crash will be hard. the population is not only totally unprepared but predominantly totally unaware that life as they know it has ended and the US machine is running on the last fumes of credit.
the saddest part of all is i truly believe this nation has everything it needs for general well being and even prosperity but the greed and looting of the corporate oligarchy along with lack of foresight, reason, and simple human compassion will ensure stupid policies and mis allocation of resources to the point that there will be bonfires in the streets and gunfire at night.
we will reset to a pastoral existence for most and i believe that it is all the better for the planet and the spirit. unfortunately, the opportunity and the money to get all these boat race fans willingly and peaceably to that point has been wasted. it is guaranteed that the only response the government will have to outrage over the collapse will be violence perpetrated against the citizenry.
tonight the government announced it will bail out the insurance companies. pension funds are next. currently the states are begging for money. a massive overarching default by anyone and everyone is in the cards and probably this year. complete horror, but debt based existence had no future.
our thieving leaders will continue to fill the coffers of these failed enterprises while never considering the alternative choices which would have easily been affordable before they blew all the trillions. for example, if the government had leveled with the citizenry and said, look, the banks are bust from bad bets and are going to all fail. our plan is to guarantee all deposits. those who are made of debt will fail. things will get cheaper all over. to alleviate suffering we have chosen to spend the money we could have used to recapitalize the banks instead to pay for for everyone's health needs and make higher education free.
imagine the massive wave of optimism and prosperity that would cleanse this nation of it's self destructive self interested media saturated catatonia. the vast majority of people would feel better off than before or at least see it as a fair trade. large amounts of civil unrest would be averted, people would think their government cared, confidence would be restored, and probably they would take more kindly to direction from the powers that be on how to rebuild the post credit world. they might even work harder to remain in their homes.
...and it would have cost way less.
all we have to do is care about our own people and demand that those who do not get out of the way.
No one gets rich from renewable energy, everyone gets richer, which delays its development. But eventually a Linus Torvalds comes along, recognizing he benefits more by giving it away, if not in dollars.
The amount owed on such loans at the end of March was $115 billion, which Wells estimates is 107 percent of the current value of the properties
This is AFTER they wrote down 20%. The current value of the homes is $123 billion and DROPPING.
And who believes that these properties are not underwater in aggregate? 107 percent? Try 60 percent.
The numbers are bad, but not as bad as the REAL numbers. After we nationalize them, maybe then we'll find out. Although I won't hold my breath. AIG is still a black box, and we own them.
DCRogers
I'm just trying to be crystal clear if I have the ground rules correct.
Default -> We might not lend to you again
No Default -> We will keep lending, but we don't have enough to cover anything but interest payments and a monthly pizza lunch
EvilHenryPaulson (profile) wrote on Fri, 5/15/2009 - 1:05 am
Couldn't California turn its back on creditors, it only has reputation / access to future funds / the grace of powerful people to lose.
That grace is no small matter, given that in many places, the grace of certain individuals extends or withdraws legal protections from a venture. I would expect the "perceived quality" of the arguments to be inversely proportional to the dollar value of the assets lost to the default in a given jurisdiction. Lacking arms to enforce their interest, CA will then sit and spin and write pissed-off letters that are carefully filed into a manila folder and ignored.
...but I'd say asset outside its sovereignty that assets are as toast as the people in their jurisdiction of residence feel cheated by CA's flipping them the bird under the rubric of sovereign immunity.
barfly (profile) wrote on Fri, 5/15/2009 - 1:19 am
...but I'd say asset outside its sovereignty that assets are as toast as the people in their jurisdiction of residence feel cheated by CA's flipping them the bird under the rubric of sovereign immunity.
I may be drunk, but I can still read. WTF?
Fixed:
"I'd say asset outside its sovereignty are as toast as the people in their jurisdiction of residence feel cheated by CA's flipping them the bird under the rubric of sovereign immunity."
CalculatedRisk / CR, Nicolas Cage is at it again chopping the prices on some of his many homes for sale. Dakota over at Curbed LA reports that Cage has cut another $2.25 million off his gorgeous Bel-Air home. The Tudor which Cage bought from singer Tom Jones for $6.469 million back in 1998 was once listed as high as $35 million three years ago.
Cage has also shaved a modest $250,000 off one of his homes in New Orleans taking it down to the $3.45 million he paid for it in 2007. More Nic Cage Price Cuts
If you want to mix up the semi-regular feature of "where that house is now"
Liddy says only 1.5 trillion of exposure left, if you can believe him. He won't share details with a lowly House committee, but in the name of greater transparency confers with Treasury and the Fed.
Will be interesting to see if the CA public sector unions flinch before a bond default happens. The smarter ones must know the goose ain't looking too perky right now. I think given how O appears to be bailing everything in sight, all parties figure he's worth a shot before any serious negotiations start.
otishertz (profile) wrote on Fri, 5/15/2009 - 1:19 am
the pervasiveness, hell ubiquity, of ignorance about the gravity of the situation is absolutely staggering. people are like, yeh, heard all about the banks, you are harshing my mello. i sent my links of doom to a number of old acquaintances and i'm certain that most will not internalize the implications.
get drunk, watch sports, eat on credit... how did we come to this in perhaps only 8 or ten years?
Shocking lack of civics education, and the deliberate policy of national leadership to blow smoke up the collective national ass about how America was the all-singing all-dancing perpetual motion machine of doing anything it wanted.
It left people unable to frame the concept of the consequences that followed from bad policy, and thus left them with little impulse to formulate good policy.
And I wouldn't put the problem just 8 or 10 years back. I knew my cohort couldn't rise to the challenge of policy 15 years ago in college, and the problem was baked in then. You're going to have to go to either Regan, when the fantasy began in earnest, or further back, to the post WW2 era, when US society was reordered along the centralized, industrialized "consumer" model by technocrats who wanted a numb populace that would be easier to play god with. We have certainly internalized their lessons -- "You're not competent to speak on this / Don't resist the hijackers / Smart men from the State will answer this better than you."
His hell would have a squash court, but his older brother (Indian champion) would be on it, always blocking his path to the ball just enough so that the ref doesn't see it. And his only appeal is to Lucifer.
"I'd say asset[s] outside its sovereignty are as toast as the people (with)in their jurisdiction of residence (who) feel cheated by CA's flipping them the bird under the rubric of sovereign immunity."
fixed it for you, but now I can't remember what you were talking about.
tim: can't help you their either. my experience with erisa is mostly on the health care side. pension/labor lawyers are going to be just as busy as the BK attorneys in the next couple years.
I think Bank Whocoulddaknowed would be the best run bank in the WORLD. It would certainly have the best CEO in CR and regular members would make for one hell of a board. But, alas....we are ALL subprime!!!!!!
Lucifer (profile) wrote on Fri, 5/15/2009 - 5:15 am
Some people never learn! If you want to see a real life version of dilbertesque managerial buzz words..
The poor guy probably just learned to write like that in an ivy MBA program.
And, from the WSJ Should the Government Start Buying Jumbo Mortgages? The National Association of Realtors is lobbying the government to do just that, by purchasing mortgage-backed securities that consist of jumbos, which are too large to qualify for government backing from Fannie Mae or Freddie Mac. They’re pushing for the government to scoop up the securities through the Term Asset-Backed Securities Loan Facility, or TALF.
About the CRS: American taxpayers spend nearly $100 million a year to fund the Congressional Research Service, a "think tank" that provides reports to members of Congress on a variety of topics relevant to current political events. Yet, these reports are not made available to the public in a way that they can be easily obtained. A project of the Center for Democracy & Technology, Open CRS provides citizens access to CRS Reports that are already in the public domain and encourages Congress to provide public access to all CRS Reports.
byz, true enough it goes back at least to old mother reagan. the difference in the last 8-10 years may be the total abdication to debt by our power structures and the denial of responsibility for repayment of personal debts. the house bubble is strong testament to that. almost none of the bubble buyers ever conceived of paying the loan back. most never would have ever made enough money even before the collapse.
ours is a culture of denial.
financial denial
environmental denial
political denial
religious denial
sexual denial
emotional denial
conscience denial
I read the first 2 links and they were pretty easy reading: did not reailze #3 was massive. It's worth opening just to see Figure 1 on Page 5... "Projected Economic Growth Rates for Selected Countries" courtesy of Global Insight.
Holy shit! Page 17, Table 1 - Includes a table with potential actions to be taken and Problems.
Problem: Declining Stock Market
Targets of Policy: Investors, Short Sellers
Actions to be Taken: Temporary Ban of short sales, Government purchases of stock?
This seems to be a pretty decent comprehensive analysis...
I'm not part of the regular late night contingent, but can I at least get those great "friend of Bill" interest rates at B of H? I would like a gentle review of my application for $1m for an "urban farming" business inside some foreclosures I can pick up cheap.
And on the actual last post- Wells should be much more scared of the Wachovia written pick a pays than those written when it was still World Savings. Anecdotal evidence is that Wachovia wrote pick-a-pays to anyone with a pulse- and let folks get seconds for the rest of the purchase price. Most borrowers have zero skin in the game and zero incentive pay after their option to pick the low pay expires. Norris seems to have accepted the myth that these were generally written to good borrowers, which I don't think is backed up by reality.
EHP,
Just became aware of these CRS reports... trying to find an alternative to the "news" sites I typically read. Heck. I find the LOC archives a better read than any of the political or other news sites today.
My theory on "how the hell this happened". Reagan allowed the Military-Industrial-Complex a foot into the door and the MIC demonstrated how powerful lobbying was. Soon the Social-Industrial-Complex (SIC), Financial Industrial Complex, (FIC), Health Industral Complex (HIC) and every other IC learned how to play the game and play it well and convince Congress and "the people" that they deserved public funds.
It's just eye opening reading through budget debates from 1990 and seeing: a) Our national debt ceiling was only 3.5T at the time; and b) Congressmen were fretting over $165B interest payments; and I think most of them called exactly what we are going through now. Looking back it's hard to convince myself our country has hardly any fiscally conservative people anymore... what else would explain the purge of fiscal conservatives from both parties in Congress? 20 years ago it seemed like both sides had fiscal conservatives... (maybe I haven't read enough?).
World eaten by Golden West, in turn eaten by Wachovia, in turn eaten by Wells, in turn eaten by Goldman Sachs, in turn eaten by NY Fed. It takes a few meals but eventually everything is consolidated and The Bank of Monsters is everyman's banker, and they have your credit card, your car, your house, your insurance, your genitals, and your life in its grasping, greedy hand.
Aren't capitalism and free markets, and competition that ensures efficiency and fairness wonderful things. Too bad they will be gone, if we ever really had them.
I could write a book on the abuses of Option ARMs, and maybe someday I will, but all I have to say now is, World was by no means a responsible, innocent lender. Their strategy looked great during a bubble, but they would have collapsed sometime last year if they were still independent.
Look at all the OA lenders: WaMu, Indy, Countrywide, Wachovia, Downey.
B_R, if your ego weren't so puffed up, I wouldn't be so interested in popping it. Why? Like the scorpion said to the frog; "It's my nature." Otherwise, I find you to be like my sister, always wanting to get in the last word. Go ahead, prove me wrong.
Hi all, I've been a guest/lurker for about 8 months. I have one of these loans, take out in 2003. My friend and mortgage broker recommended it as both my husband and I are on commission and the flex pay would heip us to manage our cash flow. I asked if there was a reset as I wanted as much stability as I could get with an adjustable rate loan, and she said no. However she didn't mention the recast, due in 10 years. I actually learned about that from this blog. We have been able to make most of the full payments, a few interest only here and there and we aren't underwater yet, but both of our incomes have dropped and I will most likely be out of a job before fall. I could try to refi now before its too late but I doubt we would qualify with the drop in our income. I am wondering if I should start making interest only payments (would be about what rental cost would be) and wait for the inevitable. There is little chance of paying off the house before retirement now anyway. I'd be interested in your input. Except your's Jaz. I think I already know, B&BD
Sell. Get out while you can. You can buy the same house in a year for 20 percent less. You might want to make sure you aren't underwater - I know people tend to have optimistic views on that.
otishertz (profile) wrote on Fri, 5/15/2009 - 1:58 am
byz, true enough it goes back at least to old mother reagan. the difference in the last 8-10 years may be the total abdication to debt by our power structures
If it goes back to the 1950s, I would say that the process yield has started to cycle back into the pump. The problem with the Hobbesian Leviathan -- what happens when you build an idiocracy that is also your sole source of staffing manpower?
The giving over of the public debt to madness is just kleptocracy in action. Don't bother looking for what the money is supposed to be doing, look to where the outlays are going. The actual policies are interesting or attractive fingerpuppets that exist to make the cash flow go. Now in the tarponomic age, cashflow to private companies has become policy, thus making the tightest possible loop.
denial of responsibility for repayment of personal debts.
"If the child is without virtue, blame the father."
letter from old friend in s. korea in response to my links of doom:
"This is all pretty overwelming stuff. The predictions in the last one seem the most realistic but I still feel like he was being a little modest about what it really means. It's scary to think what things will be like in the near future and what the quality of life will be like. As I live in Asia, most of my travels are to third world countries. They all squeak by in ways that Americans are a little too proud to accept. I can't imagine coming back and not having to live with my parents, that is my biggest motivation for staying here.
The real problem is that these third world countries all rely on people like Americans to come to their country and spend their money. Indonesia has one of the worst education systems in the world, but good luck finding any 1 there who doesn't speak at least 3 languages. What happens then? When no1 can travel there. Even people who have the money to go, won't because the tourism industry along with manufacture of exports they rely on will be gone. I was in Bangkok right after Adidas closed a huge factory while the King was out of the country, the people went nuts and the military tried to coup and take over. The King could not come back otherwise he would have been killed.
Is this the kind of future we can expect in the US? I think it is all too likely. All the fuckin jackasses who went out and bought these houses in the hope of turning them over tomorrow, the fuckin celebrities who raped the public with their album sales, pro-athletes like baseball players just sittin on their ass because people needed a place to put their excess income from the job they were way too underqualified for but got it anyway. People need this wake up call, we are heading for another dark age and no1 wants to admit it. And what pisses me off the most is that these fucks are all gonna," put their faith in god." Instead of going out and finding a working solution. They will all blame the government who engineered this all to happen, but they will do nothing. The people who can afford to go and protest are just as much of the problem as anyone. Go to fuckin work, feed your family, grow some rice, do what it takes to put food on the table in the future instead of pissing and moaning for a hand out.
What is even worse is the military state that will continue to grow. Every nation has gone or will go through this kind of phase, and how they handle it determines their long term future. Most countries go through it by being invaded, America will invade itself, and the military will have to step in and try to control it. They will indiscriminately, resolve, matters. Every time there is any kind of disaster, the first thing people do is to start looting. How fucked up is that, or is it correct, is it a sign that things are unbalanced and always have been?
Anyway, I'm scared.
Later, "
This goes back at least to the Romans, who found it easier to shave silver off their coins than collect taxes from their far-flung empire. The US and all governments devalue their currencies, whenever they can.
Agreed. Get out while you can. Credit rating is too important, you can be discriminated against in the hiring process for it, or when renting an apartment. Don't give a society busily strangling itself the chance to make you part of the process. Don't ruthlessly default unless you have no choice -- don't do it for economic benefit, do it for economic survival.
Sell and hope there's a greater fool near you standing by. But, if you are looking at shit creek without a paddle, you gotta do what you gotta do.
the population is not only totally unprepared but predominantly totally unaware that life as they know it has ended and the US machine is running on the last fumes of credit.
--otishertz
Maybe not totally unaware. Some of my erstwhile "friends" in this little town now cross the street when they see me coming, but I think it's because they just can't stand facing what they know is true. There are spreading cracks in their rose-colored glasses.
And I suspect that, although none of them admit it, all of them are drowning in debt.
There are only two or three who aren't afraid to talk to me. And they're the ones that I know have very little debt.
I gave up e-mailing links and warnings. Only ever got one response, and it was laced with bitterness.
I appreciated your rant. Couldn't have said it better myself.
Speed,
that is an option that I'm willing to entertain, husband gives me the stink eye. He doesn't read "Doom and Gloom" blogs. I know I'd want to price out low just to get out clean, little to no profit but since we can make the payments, he doesn't se the need. By the time the real pain comes it will be too late. So, should I pay the interest only now (rent with benefits) or try to keep up on the full amount and hope the bank will work with us in three years?
"Aren't capitalism and free markets, and competition that ensures efficiency and fairness wonderful things"
I don't have anywhere near the energy tonight, but I'll just say that we tried laissez-faire at first, allowing banks to circulate their own currencies. It was neither fair nor efficient to those who got stuck with worthless paper. It is not fair or efficient to use the guillotine to settle financial disputes, or martial law. We regulate the currency so that markets can flow more freely, in the interest of public good.
"The federal receivership of California is going to blaze so many new trails I don't expect any of the old rules/assumption to remain intact."
And remember your history, Dawg. I hate to be the guy to mention it, but one of the defining acts of post-Depression Germany was to dissolve state-level governments which acted as a check on federal power.
if it's an option, you can always get a paper divorce, and have the deed and mortgage only on one person's name. if the market and your employment situations completely tanks, and you guys can't get out fast enough, only one person would get dinged. if the market rebounds, get re-married.
caveat: joint property laws are heavily dependent on the state.
Youshouldaknowed,
Can you give us some idea of where you are selling? You should immediately "zillow" you house and ignore the zestimate but look at the recent comparables. That should give you an idea if you can get out with your skin.
broward (homepage, profile) wrote on Thu, 5/14/2009 - 11:38 pm
"The federal receivership of California is going to blaze so many new trails I don't expect any of the old rules/assumption to remain intact."
And remember your history, Dawg. I hate to be the guy to mention it, but one of the defining acts of post-Depression Germany was to dissolve state-level governments which acted as a check on federal power.
I know it and just didn't want to scare anyone. There's also the danger of a Treaty of Versailles solution should the terms of bailout for California prove too onerous.
If you pay interest only, your house will continue to depreciate, so in 3 years, you will be under water - and probably not just a little. At that point, it will cost you money to sell the house or you can let the bank foreclose, and it might be tough to buy again in the near future. If you sell now, you can rent for 3 years and save where you can for another house, which will be substantially cheaper then. Don't kid yourself that you own the house - it's the bank's. I'm off to bed. Good luck! And don't take advice from blogs!
Isn't the best thing to do now attempt to profit from what is coming instead of complaining? We are potentially set up for a number of "once in a lifetime" trades. Of course the timing and manipulation are a bitch as well. Seems like these oscillating markets are sign of huge instability...
Byzantine_Ruins
The money lenders cannot simply discriminate based on foreclosure going forward, like they have in the past. You can treat small groups roughly to motivate larger groups. Do that to a large group, and you force yourself out of business as others take the market share without competition.
Unlike past mass cleansing of debt, there will be a large group of people this time who individually acted responsible but were overwhelmed by job loss, lost savings in the markets, medical problems (correlated to stress, and assume they're uninsured). Meanwhile everyone around them are living in their homes without paying the mortgage for 1 year+, while others are getting whatever bailouts because they are behind on their mortgages. It's a social virus, we will pass the tipping point, the moment when a mob of individuals collectively realize they have power
That is the new majority. If businesses want customers, they'll have to find a way to deal with that target group.
We're in CA so I don't think a paper divorce would work. The consensus seems to sell while we can, if we can. Should make for interesting conversation tomarrow.
barfly (profile) wrote on Thu, 5/14/2009
"There's also the danger of a Treaty of Versailles solution should the terms of bailout for California prove too onerous."
oh, like California's gonna retaliate. Gimme a break.
A broker "friend" of mine also attempted to sell my wife and I a house a couple years ago. I was reading this blog and challenging his logic... "home prices only go up", "never been a better time to buy", etc. Prices are still ridiculous... there are a lot of greater fools out there. I'm positive it will be possible to make something like a 100% per year return on investment shorting the shit out of these greater fools... rather the banks they are borrowing money from... I think a number of people here have already done so...
It's just eye opening reading through budget debates from 1990 and seeing: a) Our national debt ceiling was only 3.5T at the time...
In 1991 I saw a chart of the rising federal debt, and sat down and did the math. It was plain as day what would happen. My wife and I began planning then. Four years later we quit our jobs, moved to the most ideal rural area we could find, got new jobs, and began preparing for the inevitable.
The interest on the debt then was about $300 billion/annum. My rough estimate of the total debt in the country was twenty trillion.
Anyone who got blindsided by this collapse chose to live in deliberate ignorance, and I don't feel much sympathy for them. It's just frigging sad.
Otishertz, your summary of what faces us goes into the keeper pile. "Hoocoodanode" as a cynical rhetorical device, from either PTB or repeated by populace, is so laden with hideous consequences. One of them being the obliteration of socially responsible measures as alternatives.
What value I get from sifting and winnowing the comments here! Not only do a learn a hell of a lot, I also can be reminded that when it comes to the state of our nation, I am not alone finding its decline shocking, which is some comfort. Having lived outside of the US since the middle of the Reagan administration, I use these boards as my periscope on stateside goings on stateside. And sometimes it’s more like a snorkel. But our condition saddens me to no end.
And CBR, you remind me that the smoke up the ass, perpetual motion American dream machine is a hard one to shake. I salute all who are shaking it, despite friends crossing the street, strained holiday dinners and all.
BTW, IMO, your friend's take on the Thai's attitude toward their king is correct, inasmuch any subject would be viewed as certainly crazy to contemplate hitting him, and set upon by extra-legal or mob action instantly. But I can appreciate why he may be staying abroad. I ran to, not away from. But that was a long time ago.
Not necessarily advice but your story reminds me of the seminal "unconscionability" case. A woman bought furniture over many years on layaway, and had paid for about 90% of the total. But the fine print said that if she ever missed a payment, the store could repossess everything, since they applied each payment to some of the balance on each item. The judge said he wouldn't enforce the fine print and order full repossession, leaving the store to its free market remedy-- they did not have to give her any more credit, and restitution--they could repossess the newest items, up to the amount in default.
They can't take half a house, but a judge might refashion the mortgage as fixed rate, if the language was sufficiently misleading or the terms were not commercially practicable. Want to help evolve the common law?
RD, no doubt California produces many different (but crucial?) crops. How about wheat, or soy, or corn? I can just see California holding the rest of the country ransom for arugula. (I am being facetious, of course.)
Wells Fargo is supposed to be modifying these loans into fixed rates at 4.5 % The help for homedebtor fix. According to neighborhood comps we're about 85-90% LTV. I've gone to the website and called, but I haven't gotten any response to the questions I've asked. They're overwhelmed. As others have pointed out, why be underwater if you don't have to be. I freakin love this house tho, Not fancy or large, but comfy with in a good neighboorhood. It would probably sell faster than one of those large, granite countertop monstrosities. It's getting late and I still have a job to go to . Thank you all for your responses.
---King David, who became Public Enemy no. 1 when he showed up the state by killing Goliath, and had to go into the protection rackets, at times lending his services to the allies of Goliath.
YLSP: Isn't the best thing to do now attempt to profit from what is coming instead of complaining? We are potentially set up for a number of "once in a lifetime" trades. Of course the timing and manipulation are a bitch as well. Seems like these oscillating markets are sign of huge instability...
Dude, at this point preservation OF capital is far more important than return ON capital. Even then I'm hard pressed to think of anything that's a sure thing. Even PMs have risk.
I realized last year that some things can't be fixed. An easy concept but for some reason I never believed it deep inside. I suppose it's a uniquely American conceit, that anything can be fixed with enough time, money and effort. A few minutes ago I murmured that phrase, "Some things can't be fixed" as I read this thread and my girlfriend murmured back, "And some things shouldn't be fixed".
Wow.
That was a shocker.
Perhaps California shouldn't be fixed, even if it's possible.
Hoopajoops, seeing as you're a still a high-paid lawyer with almost infinite income for the moment, could you see your way clear to a small loan? Interest-free. Bernanke-style. Green gold, that is.
Youshouldaknowed, I'm with the consensus here. Sell if you can. Especially if you're in an area that will be especially ugly if this sucker goes down. If I were you, I'd be thinking well beyond the immediate problem of the house, as well. I mean, if you're in LA, for example, and things get REALLY ugly, renting rather than owning isn't going to help much.
Build up your supply of non-perishable groceries, buy a gun and ammo, and pick up some silver dollars at a coin or pawn shop.
And make a Plan B, for what you do if everything falls apart overnight--as it well may.
It took courage to come on here and ask your question. You get extra credit for that.
YLSP, perhaps I should be more concise. There's very little to invest in. Gamble on; certainly, but little you can sink your cash into without having to constantly watch it. Where are the long plays? When the market breaks down like this they simply aren't there, and that's when capitalism starts to break down.
I'm still waiting for that giant pop, so I can own something more than paper. But bananas are still 5 for a buck, and we have the vestiges of rent control, to get back at the banks.
Thanks, Uni
We're in a small northern Ca city, God &Guns , not much racial diversity. high unemployment is the biggest problem. I've been storing like a squirrel on steroids since last september when the TARP passed and I started to pay attention. I keep cash on hand, and have been buying junk silver as a hobby. There is the temptation to make interest only payments, build cash reserves and go underwater ( if I can't sell it) I really wouldn't want to walk in three years, (recast time)just refinance to a fixed. The full payment isn't too much for us but it cuts our ability to save more and right now nothing feels better than cash.
Federal Deposit Insurance Corp. officials sought to make top executives and boards of directors of 10 banks accountable for raising more capital by November. The Federal Reserve insisted that managers’ fates be left to boards and shareholders.
While a compromise left the matter to the companies, FDIC Chairman Sheila Bair signaled the debate isn’t done, issuing a statement May 7 that she looked forward to reviewing “corporate governance structures” with the Fed.
The exchanges are a contrast with the clear line the U.S. has taken in other industries -- the heads of General Motors Corp., American International Group Inc., Fannie Mae and Freddie Mac were all removed -- and raises questions about regulators’ handling of the financial rescue.
“It is very clear that we have a special class of corporate citizens,” said Joshua Rosner, managing director at Graham Fisher & Co., a New York research firm. “Banks get special treatment, but we don’t hold them to a higher standard.” ...
Citigroup, the third-largest bank by assets, paid dividends every quarter last year, and reported losses every quarter. It wasn’t until February that the Fed re-stated “guidance” on “prudent” dividend policy. The government stress tests said Citigroup needs to raise $5.5 billion...
---Main stream rhetoric is shifting. When the TARP runs out (soon), some things will get reset.
Some of those protests have been quite meaningful. Back then, the left was in total retreat. As much as the main stream press tried to discredit them, (not hard) they had some vital, valid points, and were not ashamed to shout them out. At least that's what I got, a full coast removed.
Why did everyone I have ever known and a few people I have never known decide to hit me up for money all of a sudden?
Just trying to help out with that savings glut problem you didn't even know you had.
I, on the other hand, don't want a loan. I'm offering the personal equivalent of a TIPS bond. That is, you invest a small amount with me (say 50K) and I'll repay you with interest. That interest to be indexed to the profit the US government makes on it's TARP "investments", that's a sure thing! And to make it even more secure, for another 5K, I'll sell you a CDS, in case I don't pay you back! How can you lose?
I'll take you up, sdtfs. Instead of soon to be useless cash, I'll pay you in these undervalued MBS and ABS I'm, uh, holding. Super duper senior AAA only. I also have plenty of financing windows open, TALF, PPIP, TAF, bridge loans (Brooklyn)...
The problem with the World Savings loans is going to be similar to earlier experiences with reverse mortgages. Those were popular once, but if they are written at too high a value, the person receiving the payments and the person's family had no incentive to maintain the home at all. So when the mortgageholder finally took possession, the house is very devalued and the loss is recognized. The rule of thumb on reverse mortgages is kind of to keep 50% of the value residual, because that creates an incentive to maintain the home and leaves the equity available to do it.
It's amazing how the same banking mistakes keep recurring over and over again.
In another hour the TIC data comes out (Treasury International Capital report for March 2009). Foreign purchases of our Treasuries has propped us up for years - financing our profligate spending habits. It seems that has changed since January 2009. It seems they (foreigners) have sold more than they have purchased the last two months:
Oct 2008: $286-billion
Nov 2008: $58.8-billion
Dec 2008: $74-billion
Jan 2009: -$148.9-billion
Feb 2009: -$97-billion
Is this what has caused us to have to buy our own debt? Nobody else will? Is this as well, the straw that everyone thought would bring down our "house of cards"?
......1100 GM Dealers will be getting the dreaded "Dear John" letter today.
"Franchisees should receive the letters today, said the person, who asked not to be identified because Detroit-based GM hasn’t announced details yet. GM is working to pare U.S. dealers by 42 percent, to 3,600, by the end of next year."
China's yuan 'set to usurp US dollar' as world's reserve currency
The Chinese yuan is preparing to overtake the US dollar as the world's reserve currency, economist Nouriel Roubini has warned
The Social Security Administration, which sent out 52 million checks, says that some of those checks mistakenly went to dead people because the agency had no record of their death. That amounts to between 8,000 and 10,000 checks for millions of dollars.
The feds blame a rushed schedule, because all the checks have to be cut by June. The strange this is, some of the checks were made out to people -- like Romonini -- who were never even part of the Social Security system.
So how many non SS illegals have gotten checks,,,,yes this is the government that cant run medicare, send out checks to dead people, but we trust them to save us.... we are so ignorant... no wait we are born and bred dopes...
Fiduciary Doodie (profile) wrote on Fri, 5/15/2009 - 8:28 am reply
China's yuan 'set to usurp US dollar' as world's reserve currency
Don't see a single hegemonic currency coming out of this. IMO, there will be a couple of regional clearing currencies, becuase currency hegemony is an outgrowth of political / social hegemony and I don't think we're going to see a new global hegemon in the next epoch.
Your interesting morning factoid: In the first quarter, Investment was the lowest % of GDP on record at 11.22%, the next lowest (records go back to 47) was in 1949 at 12.77%, the long term average is 15.99%.
Fiduciary Doodie (profile) wrote on Fri, 5/15/2009 - 8:36 am reply Ignore user Byz,
Just larger versions of airport currency exchange windows?
Sorta, I think most people and places will use just one -- we will have regional superpowers and they will have a currency they Finlandize onto their periphery / secondary states. If we do have a hegemon, I think it will be weak, more like a balance book entity than an all-pervading presence like the Yankee Dollar.
I think the globalist experiment / last vestiges of the neocolonial regime are coming to an end, and you will see more regional trade / regional superpowers as capital, knowledge and atomic weapons finish spreading evenly across the globe. Production factor flows and expoitation of capital base differentials were really definitive of the epoch since the Age of Exploration and I think that process coming to a final conclusion is what is ending the post-neo-colonial era (what Dryfly terms the "vendor financing" era).
Only $325 million of the loans — less than a third of 1 percent — will reset by the end of 2012.
NOT POSSIBLE.
Norris, someone at Wells fed you Grade-A bullshit. EVERY SINGLE ONE of these loans will RESET multiple times over between now and 2012 (most reset the accrual rate each and every month). Also, the bigger issue is that a VERY LARGE percentage of them are contractually scheduled to RECAST between now and then. "Less than a third of 1 percent"? --- Sorry, not even in Dick Kovacevich's filthiest dreamz.
World did not qualify borrowers based on the payments they could have faced at after a loan recast. They were qualified based 'fully amortizing payment' based on the original loan amount and interest rate (index + margin) at the time of origination, which are much lower than the payments faced by borrowers in a recast. In any case, these were pretty meaningless numbers. Most of World's loans were 'Quick Qualifiers', or stated income loans. If you had 20% down, you were gold....
Most of World's mortgages will recast, triggered by one of the two events: 1) the balance (original principal + deferred interest) reaches 125% of the original principal amount borrowed; 2) the payment change in the 121st month of the mortgage.
In some cases, the percentage is decreased to 115% of the initial principal amount of the first mortgage; this was used for some 'piggyback' loans exceeding 85% CLTV.
I am not surprised by the statement that such a low number will recast (that is, borrowers will be forced to repay principal on a shorter term, with a higher rate, and larger balance) by 2012....but I would be really interested to see what that statistic looks like if you push it out to 2015.
Could CalculatedRisk become a bank holding company?
Lucifer, I'm working on my application. I'm including everyone that comments on Hoocoodanode too (that wants to be a BHC).
I think we need at least $2 billion. Maybe a little more to pay retroactive bonuses to all commenters.
best wishes.
"The amount owed on such loans at the end of March was $115 billion, which Wells estimates is 107 percent of the current value of the properties underlying the mortgages..."
That is a ticking time bomb if I ever saw one. Damocles sword over WFC's head.
Hey CR do you know the vintage of these things?
CalculatedRisk,
I have a feeling that even if you created a sham corporation with a name from the star war movie series, you could get TARP- as long as you got enough MSM idiots to parrot your cause.
You might remember the companies that enron created..
Wonder how many have seconds or helocs....
But buffett says WFC is the bomb.. wait.. it is the bomb!
//Damocles sword over WFC's head.//
Could creditors seize assets or force an auction for state assets if those creditors were unsecured?
The Eleventh Amendment immunizes states from suits for money damages or equitable relief (e.g. seizure). States can voluntary consent to suits; most states allow certain political subdivisions to be sued, even in BK, but not the state itself. Likewise, the BK Code has provisions for cities and other political subdivisions, but not the state as sovereign.
You have any interesting hypothetical scenarios regarding an insolvent state?
A creditor could try to seize the foreign assets of an insolvent state, provided that both parties are subject to the jurisdiction of the foreign government. Comity would be an issue though. California doesn't have any assets worldwide, does it?
Blast from the past!
New Documents Show Enron Traders Manipulated California Energy Costs - WSJ.com
WASHINGTON -- Using strategies dubbed "Death Star," "Get Shorty," and "Fat Boy," Enron Corp.'s energy traders manipulated California's power system to increase profits during the height of the state's 2000-2001 energy crisis, documents released by federal regulators show.
I cant resist...
So what really is a COSI Loan or Pick-a-Payment Loan?
This safe and reliable mortgage is based on (in our opinion) the most stable lending index in America, the COSI or Cost of Savings Index.
The resource cannot be found.
Chewco - Wikipedia, the free encyclopedia
Chewco was a company associated with Enron, which was largely involved in the bankruptcy of that company. It was named after the Star Wars character Chewbacca, because it was created to hide losses from the Joint Energy Development Investment Limited, known by its acronym "JEDI". Like Chewbacca, the Jedi Knights were prominent characters in Star Wars.
Enron created Chewco as a limited partnership which would help keep the JEDI project off its books. It wanted to buy out the California Public Employees’ Retirement System’s interest in JEDI, but it did not want to be forced, by accepted accounting principles, to consolidate JEDI in the Enron financial statements and thus reflect debt and/or financial losses. Enron wanted to keep JEDI afloat, but it needed a partner to take at least a 3% stake, or the partnership's results would have to be included in Enron's financial statements. Chewco was created to be that partner.
We joke about it enough, when are were ever just going to fill out a form and found the Hoocoodanode? branch-less bank
forms here, the Charter application, requirements
EvilHenryPaulson,
We could take a page from one of the great innovators of modern finance- Enron!
Calpers is distinct entity.
With the second-half V-shaped recovery, these borrowers will turn out okay. No worries.
Last thread: Not One Cent:
"A water wheel is a water engine too. I was thinking of the David Mamet play. "
I know, I remember the play from the 70's. You used is sarcastically, but the point of the play was not that the idea was unrealistic (loosely based on a real story) but that the deflation would not be tolerated by the 'power' brokers. Planned obsolescence eventually implodes: see GM. Peak oil is coming, just a matter of generations. The dinosaurs only lasted so long.
Basel Thanks for the law porn...
Basel Too,
Thanks for the reply, I'm sure you've educated me on the matter before.
Couldn't California turn its back on creditors, it only has reputation / access to future funds / the grace of powerful people to lose. Would probably shock other states' lenders, eh? Are they [/California] near the point where the interest payments outweigh the benefits of any borrowing [California might do] in the next 30 years?
CalPERS actually should have infrastructure investments outside of the USA, although always in some partnership or via PE. Would be very messy chasing all the ants around instead of going for the nest
edit: silly me, with the budget crisis culminated into a dramatic climax -- you could pass anything that doesn't include spending, and in return receive kickbacks. Selling/leaseback of assets, granting various licenses, cutting regulations. Perhaps offshore drilling???
New Toyota chief to purge executives: report
New Toyota chief to purge executives: report - MarketWatch
May 14, 2009, 9:06 p.m. EST
LOS ANGELES (MarketWatch) -- Toyota Motor Corp. (TM 73.52, -0.02, -0.03%) (JP:7203 3,510, -150.00, -4.10%) is planning one of the most drastic management overhauls in its 70-year history next month when Akio Toyoda, grandson of the Japanese car company's founder, takes over as chief executive, the Financial Times reported Thursday. The company will replace 40% of its senior managers and is said to be preparing a sweeping reorganisation of its key North American business that would unify its separate sales and manufacturing arms, it said. "Some people are calling this a revolution or even a coup d'état," the report quoted Koji Endo, motor industry analyst at Credit Suisse, as saying
By "they" do you mean California or other borrowers?
I don't know what scares me more; that I like the idea of "Bank of the Hoocoodanode" or that we might actually get chartered.
Not exactly sure of which 'they', but I think it was California. Wouldn't California save more by not having interest payments, than they might gain from bond market access in the medium term
Yogi, I see.
Do not tell anyone that you are a Harvard MBA
What I Would Say to the MBA Class of 2009
- Bloomberg.com
04:05 PM Thursday May 14, 2009
By John Baldoni
Congratulations, graduates!
The world is a very different place from when you entered your program two years ago. In September 2007, the capital markets were holding steady, companies were hiring, and prospects for continued growth seemed limitless. What a difference a year or two makes. Today the capital markets have lost 40 percent of their value, companies are shedding tens of thousands of employees, and a sense of doom hangs in the air.
Every generation finds its challenges. Yours may be greater than those in recent memory, but they are challenges that ambitious and savvy business graduates will find ways to overcome. Consider what you learned in the classroom not as a foundation, but rather as a spring board that will help you bounce higher and achieve more. So let me offer a few words of wisdom, things I learned from my mentors.
"I think we need at least $2 billion." Don't shoot the squirrels, put them on the wheel. 2 billion isn't that many watts in the new currency.
...next month when Akio Toyoda, grandson of the Japanese car company's founder, takes over as chief executive, ...
Couldn't California turn its back on creditors, it only has reputation / access to future funds / the grace of powerful people to lose.
Correct.
Would be very messy chasing all the ants around instead of going for the nest
Problem is that the nest is absolutely immunized.
Corrected my original post, because as BG pointed out, CalPERS is a separate legal entity not protected by the Eleventh Amendment. However, CalPERS is a qualified ERISA plan, which means its also immunized from money damages and some equitable remedied, but by federal statute
Rob Dawg,
Please read about the adventures of Enron.. In any case, we could not f**k up the system any worse that Citi, BoA, WFC, JPMC, Capital One, Amex, BNYM or Goldman-Sachs.
//or that we might actually get chartered.//
restated, Would the lack of a Californian repudiation of state debt indicate cronyism and the neglect of politicians' fiduciary duties?
EHP,
Seeing as how they need to borrow for cash flow, I'd say they would have to radically change 1) their collections and 2) their expenditures. Again, just a thought experiment. Who knows how such an event would affect the financial markets at large.
Couldn't California turn its back on creditors, it only has reputation / access to future funds / the grace of powerful people to lose.
Given that many of its bonds are insured, wouldn't that cause a number of the muni bond insurers to choke? Now we're talking "systemic" effects, and the Feds again.
Bond Girl (homepage, profile) wrote on Fri, 5/15/2009 - 12:54 am
Calpers is distinct entity.
All that the people chasing the money have to do is have their external jurisdictions pierce the corporate veil and say CalPERS is just an administrative sham of independence wrapped around an arm of state bureaucracy. Stuff in CA might be safe, but I'd say assets outside its sovereignty are as toast as the people in their jurisdiction of residence feel cheated by CA's flipping them the bird under the rubric of sovereign immunity.
Some people never learn! If you want to see a real life version of dilbertesque managerial buzz words..
Emerging Patterns in the Crisis Economy
02:30 PM Thursday May 14, 2009
By Vineet Nayar
- Bloomberg.com
As we watch Capitalism version 2.0 pan out, we are acutely aware of the changing role of government, financial institutions, equity markets in the new landscape. However, look below the surface. The new dynamics are also resulting in a fast-changing kaleidoscope within, with new patterns beginning to emerge.
There is new life kicking in amidst all this talk of gloom and doom.
We are witnessing a burst of fresh entrepreneurial energy as the changing environment encourages people to step out of their comfort zones. The need to think afresh about what works and does not work in the new world is resulting in the birth of new venture ideas and the building of innovative SOHO operations in niche sectors, such as a start-up business insuring your car loan payments in case of layoff.
Across organisations, we are witnessing changing work models. There is a shift from measuring input to evaluating outcome; from rewarding effort to incentivising results. These changes, which began some years ago with the growing popularity of Robert Kaplan and David Norton's Balanced Scorecard, are spreading further with more and more companies adapting their performance management systems to align individual goals with collective business goals.
Performance is becoming the key differentiator in these times. As a recent Business Today Survey revealed, with salary increments going into deep freeze even in India; an economy that is still showing positive growth; carrots now come with sticks. It is variable pay, based directly on performance, that will now be the differentiating income.
We are also seeing changes in commercial models. More companies are offering performance-related pricing, thereby forming a partnership of trust and mutual benefit with their clients.
At HCL, rather than being led by the changed circumstances, we have led the change. (If I do say so myself!) Our belief in aligning IT to business goals, performance-driven pricing, a value-centric approach, employee centricity, accountability, transparency and inverting the pyramid began far before the new environment dictated change. This investment has paid off well. As we move forward, we intend to continue to be a change leader and are already sharply focused on areas such as high-value integrated services and utility computing.
As the world emerges from the slowdown, it will not come back to the same shape and size that we are accustomed to today. There has to be a shift in the mindset: an increasing endeavour to be the most valued rather than the biggest; an increasing grip on discipline, governance, cost efficiencies; a focus on sustainability. As we look forward, I truly believe that going forward 'lean, mean and hungry' is the best way to thrive.
I have no doubts that there are many other manifestations of this kaleidoscopic change and welcome your comments pointing out more. As leaders across the board align their businesses with changes in the external world, we could all learn with each other's experiences in fostering agility, positive thinking and resilience.
EHP wrote: Would the lack of a Californian repudiation of state debt indicate cronyism and the neglect of politicians' fiduciary duties?
You can't be serious. These folks aren't blushing brides.
There has to be an artistic type out there right now designing Bank of Hoocoodanode's first full-page advertisement. Or maybe a good picture to seed a caption contest?
i was talking to my brother last night about planning for non cash subsistence modes of living like fishing and growing vegetables. he was telling me all the immigrants in S FL are awol and there was worry over who will pick the crops. i think you and i both know who will pick the crops, once they swallow their pride and decide they would like to also like to swallow some food.
the pervasiveness, hell ubiquity, of ignorance about the gravity of the situation is absolutely staggering. people are like, yeh, heard all about the banks, you are harshing my mello. i sent my links of doom to a number of old acquaintances and i'm certain that most will not internalize the implications.
get drunk, watch sports, eat on credit... how did we come to this in perhaps only 8 or ten years? everyone lives in a bubble of media fantasy. the crash will be hard. the population is not only totally unprepared but predominantly totally unaware that life as they know it has ended and the US machine is running on the last fumes of credit.
the saddest part of all is i truly believe this nation has everything it needs for general well being and even prosperity but the greed and looting of the corporate oligarchy along with lack of foresight, reason, and simple human compassion will ensure stupid policies and mis allocation of resources to the point that there will be bonfires in the streets and gunfire at night.
we will reset to a pastoral existence for most and i believe that it is all the better for the planet and the spirit. unfortunately, the opportunity and the money to get all these boat race fans willingly and peaceably to that point has been wasted. it is guaranteed that the only response the government will have to outrage over the collapse will be violence perpetrated against the citizenry.
tonight the government announced it will bail out the insurance companies. pension funds are next. currently the states are begging for money. a massive overarching default by anyone and everyone is in the cards and probably this year. complete horror, but debt based existence had no future.
our thieving leaders will continue to fill the coffers of these failed enterprises while never considering the alternative choices which would have easily been affordable before they blew all the trillions. for example, if the government had leveled with the citizenry and said, look, the banks are bust from bad bets and are going to all fail. our plan is to guarantee all deposits. those who are made of debt will fail. things will get cheaper all over. to alleviate suffering we have chosen to spend the money we could have used to recapitalize the banks instead to pay for for everyone's health needs and make higher education free.
imagine the massive wave of optimism and prosperity that would cleanse this nation of it's self destructive self interested media saturated catatonia. the vast majority of people would feel better off than before or at least see it as a fair trade. large amounts of civil unrest would be averted, people would think their government cared, confidence would be restored, and probably they would take more kindly to direction from the powers that be on how to rebuild the post credit world. they might even work harder to remain in their homes.
...and it would have cost way less.
all we have to do is care about our own people and demand that those who do not get out of the way.
No one gets rich from renewable energy, everyone gets richer, which delays its development. But eventually a Linus Torvalds comes along, recognizing he benefits more by giving it away, if not in dollars.
The amount owed on such loans at the end of March was $115 billion, which Wells estimates is 107 percent of the current value of the properties
This is AFTER they wrote down 20%. The current value of the homes is $123 billion and DROPPING.
And who believes that these properties are not underwater in aggregate? 107 percent? Try 60 percent.
The numbers are bad, but not as bad as the REAL numbers. After we nationalize them, maybe then we'll find out. Although I won't hold my breath. AIG is still a black box, and we own them.
DCRogers
I'm just trying to be crystal clear if I have the ground rules correct.
Default -> We might not lend to you again
No Default -> We will keep lending, but we don't have enough to cover anything but interest payments and a monthly pizza lunch
BofA Urged by Regulators to Revamp Board of Directors
BofA Urged by Regulators to Revamp Board of Directors - WSJ.com
EvilHenryPaulson (profile) wrote on Fri, 5/15/2009 - 1:05 am
Couldn't California turn its back on creditors, it only has reputation / access to future funds / the grace of powerful people to lose.
That grace is no small matter, given that in many places, the grace of certain individuals extends or withdraws legal protections from a venture. I would expect the "perceived quality" of the arguments to be inversely proportional to the dollar value of the assets lost to the default in a given jurisdiction. Lacking arms to enforce their interest, CA will then sit and spin and write pissed-off letters that are carefully filed into a manila folder and ignored.
AIG is still a black box, and we own them.
I think you meant "black hole".
The federal receivership of California is going to blaze so many new trails I don't expect any of the old rules/assumption to remain intact.
...but I'd say asset outside its sovereignty that assets are as toast as the people in their jurisdiction of residence feel cheated by CA's flipping them the bird under the rubric of sovereign immunity.
Lucifer I happen to know Vineet. Unfortunately his writing doesn't match his beautiful, smooth game of squash.
Basel Too
CALpers is protected by federal statue... that's where the PBGC comes in they could tear up all the contracts right?
1 currency now -yogi,
I am constructing a new level of hell for him right now!
//Lucifer I happen to know Vineet. Unfortunately his writing doesn't match his beautiful, smooth game of squash.//
barfly (profile) wrote on Fri, 5/15/2009 - 1:19 am
...but I'd say asset outside its sovereignty that assets are as toast as the people in their jurisdiction of residence feel cheated by CA's flipping them the bird under the rubric of sovereign immunity.
Fixed:
"I'd say asset outside its sovereignty are as toast as the people in their jurisdiction of residence feel cheated by CA's flipping them the bird under the rubric of sovereign immunity."
CalculatedRisk / CR,
Nicolas Cage is at it again chopping the prices on some of his many homes for sale. Dakota over at Curbed LA reports that Cage has cut another $2.25 million off his gorgeous Bel-Air home. The Tudor which Cage bought from singer Tom Jones for $6.469 million back in 1998 was once listed as high as $35 million three years ago.
Cage has also shaved a modest $250,000 off one of his homes in New Orleans taking it down to the $3.45 million he paid for it in 2007. More Nic Cage Price Cuts
If you want to mix up the semi-regular feature of "where that house is now"
tim:
that question is way above my pay grade. there are some parts of CalPERS that are exempt from ERISA/PBGC and other parts are covered by it.
dryfly, I'm sure you would get a kick out of this
"AIG is still a black box, and we own them. "
Liddy says only 1.5 trillion of exposure left, if you can believe him. He won't share details with a lowly House committee, but in the name of greater transparency confers with Treasury and the Fed.
Basel
Last question. did the 2006 Pension Protection act allow the government to lower the minimum payments by the PBGC (currently 52k I believe)?
Will be interesting to see if the CA public sector unions flinch before a bond default happens. The smarter ones must know the goose ain't looking too perky right now. I think given how O appears to be bailing everything in sight, all parties figure he's worth a shot before any serious negotiations start.
1 currency now -yogi,
That is 1.5 quadrillion.. liddy had a brain freeze
//Liddy says only 1.5 trillion of exposure left,//
otishertz (profile) wrote on Fri, 5/15/2009 - 1:19 am
the pervasiveness, hell ubiquity, of ignorance about the gravity of the situation is absolutely staggering. people are like, yeh, heard all about the banks, you are harshing my mello. i sent my links of doom to a number of old acquaintances and i'm certain that most will not internalize the implications.
get drunk, watch sports, eat on credit... how did we come to this in perhaps only 8 or ten years?
Shocking lack of civics education, and the deliberate policy of national leadership to blow smoke up the collective national ass about how America was the all-singing all-dancing perpetual motion machine of doing anything it wanted.
It left people unable to frame the concept of the consequences that followed from bad policy, and thus left them with little impulse to formulate good policy.
And I wouldn't put the problem just 8 or 10 years back. I knew my cohort couldn't rise to the challenge of policy 15 years ago in college, and the problem was baked in then. You're going to have to go to either Regan, when the fantasy began in earnest, or further back, to the post WW2 era, when US society was reordered along the centralized, industrialized "consumer" model by technocrats who wanted a numb populace that would be easier to play god with. We have certainly internalized their lessons -- "You're not competent to speak on this / Don't resist the hijackers / Smart men from the State will answer this better than you."
"a new level of hell"
His hell would have a squash court, but his older brother (Indian champion) would be on it, always blocking his path to the ball just enough so that the ref doesn't see it. And his only appeal is to Lucifer.
"I'd say asset[s] outside its sovereignty are as toast as the people (with)in their jurisdiction of residence (who) feel cheated by CA's flipping them the bird under the rubric of sovereign immunity."
tim: can't help you their either. my experience with erisa is mostly on the health care side. pension/labor lawyers are going to be just as busy as the BK attorneys in the next couple years.
fixed it for you, but now I can't remember what you were talking about.
Crawl back in your bottle, little man.
I think Bank Whocoulddaknowed would be the best run bank in the WORLD. It would certainly have the best CEO in CR and regular members would make for one hell of a board. But, alas....we are ALL subprime!!!!!!
Okay... 1:30 am. Good night all.
1 currency now -yogi,
More along the lines of having him hear management speak for eternity.. in a meeting that lasts forever.
//And his only appeal is to Lucifer.//
So are the infamous group of 19
//we are ALL subprime!!!!!!//
Lucifer (profile) wrote on Fri, 5/15/2009 - 5:15 am
Some people never learn! If you want to see a real life version of dilbertesque managerial buzz words..
The poor guy probably just learned to write like that in an ivy MBA program.
i see mish had the same exact problem i was having:
California's Budget Deficit: What The Hell Is It?
And, from the WSJ
Should the Government Start Buying Jumbo Mortgages?
The National Association of Realtors is lobbying the government to do just that, by purchasing mortgage-backed securities that consist of jumbos, which are too large to qualify for government backing from Fannie Mae or Freddie Mac. They’re pushing for the government to scoop up the securities through the Term Asset-Backed Securities Loan Facility, or TALF.
Hey, we could make Lucifer the loan officer. That way when anyone came in looking for a loan we could just tell them to go to...
In honor of BFF... some papers from the Congressional Research Service (CRS). These are all pretty recent.
Insolvency of Systemically Significant Companies: Bankruptcy vs. Conservatorship/Receivership
Comparing the TARP to the Federal Reserve Response
The Global Financial Crisis: Analysis and Policy Implications
About the CRS:
American taxpayers spend nearly $100 million a year to fund the Congressional Research Service, a "think tank" that provides reports to members of Congress on a variety of topics relevant to current political events. Yet, these reports are not made available to the public in a way that they can be easily obtained. A project of the Center for Democracy & Technology, Open CRS provides citizens access to CRS Reports that are already in the public domain and encourages Congress to provide public access to all CRS Reports.
Not One Cent,
Yes, but he should have the sense to shut up now!
Basel Thanks anyways... Late
TJ and The Bear,
I prefer to torture MBAs with endless meetings to drive them insane.
YLSP
I've been reading them for months. More often than not, boring. They are good for summaries of already announced policies
TJ and The Bear,
Jas could do that better.
//Hey, we could make Lucifer the loan officer.//
byz, true enough it goes back at least to old mother reagan. the difference in the last 8-10 years may be the total abdication to debt by our power structures and the denial of responsibility for repayment of personal debts. the house bubble is strong testament to that. almost none of the bubble buyers ever conceived of paying the loan back. most never would have ever made enough money even before the collapse.
ours is a culture of denial.
financial denial
environmental denial
political denial
religious denial
sexual denial
emotional denial
conscience denial
after denial comes pain
Byzantine_Ruins
Takes himself seriously.
No sense of humor.
have another, barfly
I read the first 2 links and they were pretty easy reading: did not reailze #3 was massive. It's worth opening just to see Figure 1 on Page 5... "Projected Economic Growth Rates for Selected Countries" courtesy of Global Insight.
Holy shit! Page 17, Table 1 - Includes a table with potential actions to be taken and Problems.
Problem: Declining Stock Market
Targets of Policy: Investors, Short Sellers
Actions to be Taken: Temporary Ban of short sales, Government purchases of stock?
This seems to be a pretty decent comprehensive analysis...
I volunteer to handle foreign exchange. As long as I get a trained nemomonkey.
yogi if you were in charge there would be no foreign exchange.
would you settle for the monkey?
barfly (profile) wrote on Fri, 5/15/2009 - 1:55 am
Byzantine_Ruins
Takes himself seriously.
No sense of humor.
Oh, a mean poem! On top of a grammar flame! I'm mortally wounded.
Do you have something to contribute to the discussion, or are you going to flick boogers from off the band?
If you just feel like being insulted, you can go over to my homepage and get insulted there.
I'm not part of the regular late night contingent, but can I at least get those great "friend of Bill" interest rates at B of H? I would like a gentle review of my application for $1m for an "urban farming" business inside some foreclosures I can pick up cheap.
And on the actual last post- Wells should be much more scared of the Wachovia written pick a pays than those written when it was still World Savings. Anecdotal evidence is that Wachovia wrote pick-a-pays to anyone with a pulse- and let folks get seconds for the rest of the purchase price. Most borrowers have zero skin in the game and zero incentive pay after their option to pick the low pay expires. Norris seems to have accepted the myth that these were generally written to good borrowers, which I don't think is backed up by reality.
"And I say a monkey CAN mow our lawn!!!"
--Homer Simpson, arguing with Marge, heard by Bart and Lisa all the way from their school.
EHP,
Just became aware of these CRS reports... trying to find an alternative to the "news" sites I typically read. Heck. I find the LOC archives a better read than any of the political or other news sites today.
My theory on "how the hell this happened". Reagan allowed the Military-Industrial-Complex a foot into the door and the MIC demonstrated how powerful lobbying was. Soon the Social-Industrial-Complex (SIC), Financial Industrial Complex, (FIC), Health Industral Complex (HIC) and every other IC learned how to play the game and play it well and convince Congress and "the people" that they deserved public funds.
It's just eye opening reading through budget debates from 1990 and seeing: a) Our national debt ceiling was only 3.5T at the time; and b) Congressmen were fretting over $165B interest payments; and I think most of them called exactly what we are going through now. Looking back it's hard to convince myself our country has hardly any fiscally conservative people anymore... what else would explain the purge of fiscal conservatives from both parties in Congress? 20 years ago it seemed like both sides had fiscal conservatives... (maybe I haven't read enough?).
World eaten by Golden West, in turn eaten by Wachovia, in turn eaten by Wells, in turn eaten by Goldman Sachs, in turn eaten by NY Fed. It takes a few meals but eventually everything is consolidated and The Bank of Monsters is everyman's banker, and they have your credit card, your car, your house, your insurance, your genitals, and your life in its grasping, greedy hand.
Aren't capitalism and free markets, and competition that ensures efficiency and fairness wonderful things. Too bad they will be gone, if we ever really had them.
The premium paid when exchanging currency is a monkey on our backs.
Subject
SP 500 PE is 62, not 15
Response (Customer Service) 05/15/2009 02:06 AM
Dear WSJ Customer,
Thank you for contacting The Wall Street Journal Online regarding incorrect data.
We are researching the issue and will provide a more detailed response shortly.
We appreciate your patience while we work to resolve your question.
Best Regards,
The Wall Street Journal Online Customer Support
.....................................................................................................
I could write a book on the abuses of Option ARMs, and maybe someday I will, but all I have to say now is, World was by no means a responsible, innocent lender. Their strategy looked great during a bubble, but they would have collapsed sometime last year if they were still independent.
Look at all the OA lenders: WaMu, Indy, Countrywide, Wachovia, Downey.
See anything familiar?
YLSP
another interesting site I've stumbled onto, Silobreaker: Welcome
B_R, if your ego weren't so puffed up, I wouldn't be so interested in popping it. Why? Like the scorpion said to the frog; "It's my nature." Otherwise, I find you to be like my sister, always wanting to get in the last word. Go ahead, prove me wrong.
Hi all, I've been a guest/lurker for about 8 months. I have one of these loans, take out in 2003. My friend and mortgage broker recommended it as both my husband and I are on commission and the flex pay would heip us to manage our cash flow. I asked if there was a reset as I wanted as much stability as I could get with an adjustable rate loan, and she said no. However she didn't mention the recast, due in 10 years. I actually learned about that from this blog. We have been able to make most of the full payments, a few interest only here and there and we aren't underwater yet, but both of our incomes have dropped and I will most likely be out of a job before fall. I could try to refi now before its too late but I doubt we would qualify with the drop in our income. I am wondering if I should start making interest only payments (would be about what rental cost would be) and wait for the inevitable. There is little chance of paying off the house before retirement now anyway. I'd be interested in your input. Except your's Jaz. I think I already know, B&BD
Conjure for Collections Officer. When it comes time to collect our pound of fleash... well you get it.
Youshouldaknowed,
but.. suzzane researched it!
"we aren't underwater yet"
Sell. Get out while you can. You can buy the same house in a year for 20 percent less. You might want to make sure you aren't underwater - I know people tend to have optimistic views on that.
otishertz (profile) wrote on Fri, 5/15/2009 - 1:58 am
byz, true enough it goes back at least to old mother reagan. the difference in the last 8-10 years may be the total abdication to debt by our power structures
If it goes back to the 1950s, I would say that the process yield has started to cycle back into the pump. The problem with the Hobbesian Leviathan -- what happens when you build an idiocracy that is also your sole source of staffing manpower?
The giving over of the public debt to madness is just kleptocracy in action. Don't bother looking for what the money is supposed to be doing, look to where the outlays are going. The actual policies are interesting or attractive fingerpuppets that exist to make the cash flow go. Now in the tarponomic age, cashflow to private companies has become policy, thus making the tightest possible loop.
denial of responsibility for repayment of personal debts.
"If the child is without virtue, blame the father."
Youshouldaknowed,
Hubris.. my favorite sin. PS- I feel sorry for your husband.
"we aren't underwater yet"
Youshouldaknowed,
I second the sell now or be priced in forever advice. You aren't protecting anything by holding on.
EHP,
While we are trading links...
Cryptome
I hope others might find this information helpful...
letter from old friend in s. korea in response to my links of doom:
"This is all pretty overwelming stuff. The predictions in the last one seem the most realistic but I still feel like he was being a little modest about what it really means. It's scary to think what things will be like in the near future and what the quality of life will be like. As I live in Asia, most of my travels are to third world countries. They all squeak by in ways that Americans are a little too proud to accept. I can't imagine coming back and not having to live with my parents, that is my biggest motivation for staying here.
The real problem is that these third world countries all rely on people like Americans to come to their country and spend their money. Indonesia has one of the worst education systems in the world, but good luck finding any 1 there who doesn't speak at least 3 languages. What happens then? When no1 can travel there. Even people who have the money to go, won't because the tourism industry along with manufacture of exports they rely on will be gone. I was in Bangkok right after Adidas closed a huge factory while the King was out of the country, the people went nuts and the military tried to coup and take over. The King could not come back otherwise he would have been killed.
Is this the kind of future we can expect in the US? I think it is all too likely. All the fuckin jackasses who went out and bought these houses in the hope of turning them over tomorrow, the fuckin celebrities who raped the public with their album sales, pro-athletes like baseball players just sittin on their ass because people needed a place to put their excess income from the job they were way too underqualified for but got it anyway. People need this wake up call, we are heading for another dark age and no1 wants to admit it. And what pisses me off the most is that these fucks are all gonna," put their faith in god." Instead of going out and finding a working solution. They will all blame the government who engineered this all to happen, but they will do nothing. The people who can afford to go and protest are just as much of the problem as anyone. Go to fuckin work, feed your family, grow some rice, do what it takes to put food on the table in the future instead of pissing and moaning for a hand out.
What is even worse is the military state that will continue to grow. Every nation has gone or will go through this kind of phase, and how they handle it determines their long term future. Most countries go through it by being invaded, America will invade itself, and the military will have to step in and try to control it. They will indiscriminately, resolve, matters. Every time there is any kind of disaster, the first thing people do is to start looting. How fucked up is that, or is it correct, is it a sign that things are unbalanced and always have been?
Anyway, I'm scared.
Later, "
YSLP have you read "Empire of Debt"?
This goes back at least to the Romans, who found it easier to shave silver off their coins than collect taxes from their far-flung empire. The US and all governments devalue their currencies, whenever they can.
No Green Shoots for Germany: German GDP down 3.8%, estimates were for a 3% contraction. Euro taking heavies.
Agreed. Get out while you can. Credit rating is too important, you can be discriminated against in the hiring process for it, or when renting an apartment. Don't give a society busily strangling itself the chance to make you part of the process. Don't ruthlessly default unless you have no choice -- don't do it for economic benefit, do it for economic survival.
Sell and hope there's a greater fool near you standing by. But, if you are looking at shit creek without a paddle, you gotta do what you gotta do.
the population is not only totally unprepared but predominantly totally unaware that life as they know it has ended and the US machine is running on the last fumes of credit.
--otishertz
Maybe not totally unaware. Some of my erstwhile "friends" in this little town now cross the street when they see me coming, but I think it's because they just can't stand facing what they know is true. There are spreading cracks in their rose-colored glasses.
And I suspect that, although none of them admit it, all of them are drowning in debt.
There are only two or three who aren't afraid to talk to me. And they're the ones that I know have very little debt.
I gave up e-mailing links and warnings. Only ever got one response, and it was laced with bitterness.
I appreciated your rant. Couldn't have said it better myself.
Speed,
that is an option that I'm willing to entertain, husband gives me the stink eye. He doesn't read "Doom and Gloom" blogs. I know I'd want to price out low just to get out clean, little to no profit but since we can make the payments, he doesn't se the need. By the time the real pain comes it will be too late. So, should I pay the interest only now (rent with benefits) or try to keep up on the full amount and hope the bank will work with us in three years?
"Aren't capitalism and free markets, and competition that ensures efficiency and fairness wonderful things"
I don't have anywhere near the energy tonight, but I'll just say that we tried laissez-faire at first, allowing banks to circulate their own currencies. It was neither fair nor efficient to those who got stuck with worthless paper. It is not fair or efficient to use the guillotine to settle financial disputes, or martial law. We regulate the currency so that markets can flow more freely, in the interest of public good.
"The federal receivership of California is going to blaze so many new trails I don't expect any of the old rules/assumption to remain intact."
And remember your history, Dawg. I hate to be the guy to mention it, but one of the defining acts of post-Depression Germany was to dissolve state-level governments which acted as a check on federal power.
otishertz,
I like your friend, may not agree on every point but certainly good conversation
youshouldaknowed:
if it's an option, you can always get a paper divorce, and have the deed and mortgage only on one person's name. if the market and your employment situations completely tanks, and you guys can't get out fast enough, only one person would get dinged. if the market rebounds, get re-married.
caveat: joint property laws are heavily dependent on the state.
Youshouldaknowed,
Can you give us some idea of where you are selling? You should immediately "zillow" you house and ignore the zestimate but look at the recent comparables. That should give you an idea if you can get out with your skin.
...My friend and mortgage broker...
--Youshouldaknowed
I'm morally certain that's an oxymoron.
broward (homepage, profile) wrote on Thu, 5/14/2009 - 11:38 pm
"The federal receivership of California is going to blaze so many new trails I don't expect any of the old rules/assumption to remain intact."
And remember your history, Dawg. I hate to be the guy to mention it, but one of the defining acts of post-Depression Germany was to dissolve state-level governments which acted as a check on federal power.
I know it and just didn't want to scare anyone. There's also the danger of a Treaty of Versailles solution should the terms of bailout for California prove too onerous.
strangely, a divorce re-qualifies ex-spouses as "first-time home purchasers" eligible for the 8k federal credit.
If you pay interest only, your house will continue to depreciate, so in 3 years, you will be under water - and probably not just a little. At that point, it will cost you money to sell the house or you can let the bank foreclose, and it might be tough to buy again in the near future. If you sell now, you can rent for 3 years and save where you can for another house, which will be substantially cheaper then. Don't kid yourself that you own the house - it's the bank's. I'm off to bed. Good luck! And don't take advice from blogs!
There's also the danger of a Treaty of Versailles solution should the terms of bailout for California prove too onerous.
Isn't the best thing to do now attempt to profit from what is coming instead of complaining? We are potentially set up for a number of "once in a lifetime" trades. Of course the timing and manipulation are a bitch as well. Seems like these oscillating markets are sign of huge instability...
Byzantine_Ruins
The money lenders cannot simply discriminate based on foreclosure going forward, like they have in the past. You can treat small groups roughly to motivate larger groups. Do that to a large group, and you force yourself out of business as others take the market share without competition.
Unlike past mass cleansing of debt, there will be a large group of people this time who individually acted responsible but were overwhelmed by job loss, lost savings in the markets, medical problems (correlated to stress, and assume they're uninsured). Meanwhile everyone around them are living in their homes without paying the mortgage for 1 year+, while others are getting whatever bailouts because they are behind on their mortgages. It's a social virus, we will pass the tipping point, the moment when a mob of individuals collectively realize they have power
That is the new majority. If businesses want customers, they'll have to find a way to deal with that target group.
We're in CA so I don't think a paper divorce would work. The consensus seems to sell while we can, if we can. Should make for interesting conversation tomarrow.
barfly (profile) wrote on Thu, 5/14/2009
"There's also the danger of a Treaty of Versailles solution should the terms of bailout for California prove too onerous."
Hungry?
YLSP
The trades come when they do, all you can do is be prepared to take advantage of the opportunity. It's a manic market
Unirealist, It is now! Actually, at the time she had the same loan. She got out a couple of years later. Didn't say a word. Beeyotch.
A broker "friend" of mine also attempted to sell my wife and I a house a couple years ago. I was reading this blog and challenging his logic... "home prices only go up", "never been a better time to buy", etc. Prices are still ridiculous... there are a lot of greater fools out there. I'm positive it will be possible to make something like a 100% per year return on investment shorting the shit out of these greater fools... rather the banks they are borrowing money from... I think a number of people here have already done so...
RD, don't be ridiculous. You have as much chance of retaining the valley, as Saudi Arabia does the oil fields.
It's just eye opening reading through budget debates from 1990 and seeing: a) Our national debt ceiling was only 3.5T at the time...
In 1991 I saw a chart of the rising federal debt, and sat down and did the math. It was plain as day what would happen. My wife and I began planning then. Four years later we quit our jobs, moved to the most ideal rural area we could find, got new jobs, and began preparing for the inevitable.
The interest on the debt then was about $300 billion/annum. My rough estimate of the total debt in the country was twenty trillion.
Anyone who got blindsided by this collapse chose to live in deliberate ignorance, and I don't feel much sympathy for them. It's just frigging sad.
Otishertz, your summary of what faces us goes into the keeper pile. "Hoocoodanode" as a cynical rhetorical device, from either PTB or repeated by populace, is so laden with hideous consequences. One of them being the obliteration of socially responsible measures as alternatives.
What value I get from sifting and winnowing the comments here! Not only do a learn a hell of a lot, I also can be reminded that when it comes to the state of our nation, I am not alone finding its decline shocking, which is some comfort. Having lived outside of the US since the middle of the Reagan administration, I use these boards as my periscope on stateside goings on stateside. And sometimes it’s more like a snorkel. But our condition saddens me to no end.
And CBR, you remind me that the smoke up the ass, perpetual motion American dream machine is a hard one to shake. I salute all who are shaking it, despite friends crossing the street, strained holiday dinners and all.
BTW, IMO, your friend's take on the Thai's attitude toward their king is correct, inasmuch any subject would be viewed as certainly crazy to contemplate hitting him, and set upon by extra-legal or mob action instantly. But I can appreciate why he may be staying abroad. I ran to, not away from. But that was a long time ago.
Youshoulda:
Not necessarily advice but your story reminds me of the seminal "unconscionability" case. A woman bought furniture over many years on layaway, and had paid for about 90% of the total. But the fine print said that if she ever missed a payment, the store could repossess everything, since they applied each payment to some of the balance on each item. The judge said he wouldn't enforce the fine print and order full repossession, leaving the store to its free market remedy-- they did not have to give her any more credit, and restitution--they could repossess the newest items, up to the amount in default.
They can't take half a house, but a judge might refashion the mortgage as fixed rate, if the language was sufficiently misleading or the terms were not commercially practicable. Want to help evolve the common law?
barfly (profile) wrote on Thu, 5/14/2009 - 11:57 pm
You have as much chance of retaining the valley, as Saudi Arabia does the oil fields.
I agree but not in the way you think.
unirealist: ...My friend and mortgage broker...
--Youshouldaknowed
I'm morally certain that's an oxymoron.
And how, LOLWB (with bitterness).
Basel your divorce advice could put you in jail in New York State, if given in a professional setting.
Thanks again, all. Gotto run to the orthodontist w/ my eldest. How's that for a professional setting for extraction.....
Why did everyone I have ever known and a few people I have never known decide to hit me up for money all of a sudden?
YouTube - California Uber Alles (Dead Kennedys)
Biafra tried to break free; Nixon sent them Jello
Hoopajoops LTD,
You mean you didn't get the contract for the Fed's emergency order of Hoopajoops?...
I dunno, maybe there was a generation of layoffs, and then this is the time when unemployment benefits run out? or some other coordinating influence
RD, no doubt California produces many different (but crucial?) crops. How about wheat, or soy, or corn? I can just see California holding the rest of the country ransom for arugula. (I am being facetious, of course.)
Wells Fargo is supposed to be modifying these loans into fixed rates at 4.5 % The help for homedebtor fix. According to neighborhood comps we're about 85-90% LTV. I've gone to the website and called, but I haven't gotten any response to the questions I've asked. They're overwhelmed. As others have pointed out, why be underwater if you don't have to be. I freakin love this house tho, Not fancy or large, but comfy with in a good neighboorhood. It would probably sell faster than one of those large, granite countertop monstrosities. It's getting late and I still have a job to go to . Thank you all for your responses.
"Unlike past mass cleansing of debt..."
"There is nothing new under the sun."
---King David, who became Public Enemy no. 1 when he showed up the state by killing Goliath, and had to go into the protection rackets, at times lending his services to the allies of Goliath.
YLSP: Isn't the best thing to do now attempt to profit from what is coming instead of complaining? We are potentially set up for a number of "once in a lifetime" trades. Of course the timing and manipulation are a bitch as well. Seems like these oscillating markets are sign of huge instability...
Dude, at this point preservation OF capital is far more important than return ON capital. Even then I'm hard pressed to think of anything that's a sure thing. Even PMs have risk.
I realized last year that some things can't be fixed. An easy concept but for some reason I never believed it deep inside. I suppose it's a uniquely American conceit, that anything can be fixed with enough time, money and effort. A few minutes ago I murmured that phrase, "Some things can't be fixed" as I read this thread and my girlfriend murmured back, "And some things shouldn't be fixed".
Wow.
That was a shocker.
Perhaps California shouldn't be fixed, even if it's possible.
Hoopajoops, seeing as you're a still a high-paid lawyer with almost infinite income for the moment, could you see your way clear to a small loan? Interest-free. Bernanke-style. Green gold, that is.
Youshouldaknowed, I'm with the consensus here. Sell if you can. Especially if you're in an area that will be especially ugly if this sucker goes down. If I were you, I'd be thinking well beyond the immediate problem of the house, as well. I mean, if you're in LA, for example, and things get REALLY ugly, renting rather than owning isn't going to help much.
Build up your supply of non-perishable groceries, buy a gun and ammo, and pick up some silver dollars at a coin or pawn shop.
And make a Plan B, for what you do if everything falls apart overnight--as it well may.
It took courage to come on here and ask your question. You get extra credit for that.
Here in Manhattan, we used to grow money on trees, but the industry moved to DC. We still try to grow culture--the old one gets moldy.
yogi
you know what I meant, post FICO score creation
"my girlfriend murmured back, "And some things shouldn't be fixed".
Buddy, that was a cueball. You're her pet.
yogi - and a vibrant culture it is. I visited a couple of times, and never felt more alive. Ran me broke, but that's another story.
YLSP, perhaps I should be more concise. There's very little to invest in. Gamble on; certainly, but little you can sink your cash into without having to constantly watch it. Where are the long plays? When the market breaks down like this they simply aren't there, and that's when capitalism starts to break down.
"Why did everyone I have ever known and a few people I have never known decide to hit me up for money all of a sudden? "
Aren't you going back to school? Debtors aren't dumb, just have different values.
EEngineer
You're right about preservation of capital. Look at the recent stock market rally for instance. Stick to patience and preparation.
"Ran me broke, but that's another story. "
I'm still waiting for that giant pop, so I can own something more than paper. But bananas are still 5 for a buck, and we have the vestiges of rent control, to get back at the banks.
Thanks, Uni
We're in a small northern Ca city, God &Guns , not much racial diversity. high unemployment is the biggest problem. I've been storing like a squirrel on steroids since last september when the TARP passed and I started to pay attention. I keep cash on hand, and have been buying junk silver as a hobby. There is the temptation to make interest only payments, build cash reserves and go underwater ( if I can't sell it) I really wouldn't want to walk in three years, (recast time)just refinance to a fixed. The full payment isn't too much for us but it cuts our ability to save more and right now nothing feels better than cash.
"Buddy, that was a cueball. You're her pet."
Yes, I figured that part out already.
I learn an enormous amount from her.
Tonight i discovered she was in the WTO protests.
All the clues lead to
trails which lead back to
old lives and dry locations
and previous events
which create synchronicity which is hard
to unravel cause from effect
and purpose from chance
some things have no meaning
most have meaning which doesn't matter.
Bberg:
Federal Deposit Insurance Corp. officials sought to make top executives and boards of directors of 10 banks accountable for raising more capital by November. The Federal Reserve insisted that managers’ fates be left to boards and shareholders.
While a compromise left the matter to the companies, FDIC Chairman Sheila Bair signaled the debate isn’t done, issuing a statement May 7 that she looked forward to reviewing “corporate governance structures” with the Fed.
The exchanges are a contrast with the clear line the U.S. has taken in other industries -- the heads of General Motors Corp., American International Group Inc., Fannie Mae and Freddie Mac were all removed -- and raises questions about regulators’ handling of the financial rescue.
“It is very clear that we have a special class of corporate citizens,” said Joshua Rosner, managing director at Graham Fisher & Co., a New York research firm. “Banks get special treatment, but we don’t hold them to a higher standard.” ...
Citigroup, the third-largest bank by assets, paid dividends every quarter last year, and reported losses every quarter. It wasn’t until February that the Fed re-stated “guidance” on “prudent” dividend policy. The government stress tests said Citigroup needs to raise $5.5 billion...
---Main stream rhetoric is shifting. When the TARP runs out (soon), some things will get reset.
We're in a small northern Ca city, God &Gun"
Some people shouldn't own guns.
You should know which group you're in before buying one.
Time will make liars of us all
Of course. I have them to protect myself from those that shouldn't have them.
Some of those protests have been quite meaningful. Back then, the left was in total retreat. As much as the main stream press tried to discredit them, (not hard) they had some vital, valid points, and were not ashamed to shout them out. At least that's what I got, a full coast removed.
Why did everyone I have ever known and a few people I have never known decide to hit me up for money all of a sudden?
Just trying to help out with that savings glut problem you didn't even know you had.
I, on the other hand, don't want a loan. I'm offering the personal equivalent of a TIPS bond. That is, you invest a small amount with me (say 50K) and I'll repay you with interest. That interest to be indexed to the profit the US government makes on it's TARP "investments", that's a sure thing! And to make it even more secure, for another 5K, I'll sell you a CDS, in case I don't pay you back! How can you lose?
I'll take you up, sdtfs. Instead of soon to be useless cash, I'll pay you in these undervalued MBS and ABS I'm, uh, holding. Super duper senior AAA only. I also have plenty of financing windows open, TALF, PPIP, TAF, bridge loans (Brooklyn)...
.......here is another mind boggling report.......Six Insurers Named to Get U.S. Taxpayer Aid .......
- NY Times
By the way, Hoopajoops, old buddy...
I was kinda wondering if you could spot me a $20. Just till payday, you know.
.......here is another mind boggling report.......
Your mind is boggled too easily. At this rate you're never gonna last long enough to see the second half recovery.
The Second Coming! Hardly are those words out
When a vast image out of Spritus Mundi
Troubles my sight
Maxed Out Mom has insomnia? Uh-oh.
Heh heh. Another EST / left coast barney. You're all right of course, except the wrong ones.
Try this, the state BK telethon cont.:
http://www.cbpp.org/cms/index.cfm?fa=view&id=711
C
There's also the danger of a Treaty of Versailles solution should the terms of bailout for California prove too onerous.
California should be thinking in terms of conquering Venezuela about now.
From Bloomie, new "special class" created in Fed / FDIC piss match, bit like uber-kulak:
U.S. Regulators Clash Over Holding Banks Accountable (Update1) - Bloomberg.com
C
We regulate the currency so that markets can flow more freely, in the interest of public good.
You don't regulate anything... unless you work at GS, etc..
The problem with the World Savings loans is going to be similar to earlier experiences with reverse mortgages. Those were popular once, but if they are written at too high a value, the person receiving the payments and the person's family had no incentive to maintain the home at all. So when the mortgageholder finally took possession, the house is very devalued and the loss is recognized. The rule of thumb on reverse mortgages is kind of to keep 50% of the value residual, because that creates an incentive to maintain the home and leaves the equity available to do it.
It's amazing how the same banking mistakes keep recurring over and over again.
SDTFS - I got up early to read the Euro GDP reports. Now I feel sick. The Austrian banks have done it again.
In another hour the TIC data comes out (Treasury International Capital report for March 2009). Foreign purchases of our Treasuries has propped us up for years - financing our profligate spending habits. It seems that has changed since January 2009. It seems they (foreigners) have sold more than they have purchased the last two months:
Oct 2008: $286-billion
Nov 2008: $58.8-billion
Dec 2008: $74-billion
Jan 2009: -$148.9-billion
Feb 2009: -$97-billion
Is this what has caused us to have to buy our own debt? Nobody else will? Is this as well, the straw that everyone thought would bring down our "house of cards"?
......1100 GM Dealers will be getting the dreaded "Dear John" letter today.
"Franchisees should receive the letters today, said the person, who asked not to be identified because Detroit-based GM hasn’t announced details yet. GM is working to pare U.S. dealers by 42 percent, to 3,600, by the end of next year."
China's yuan 'set to usurp US dollar' as world's reserve currency
The Chinese yuan is preparing to overtake the US dollar as the world's reserve currency, economist Nouriel Roubini has warned
China's yuan 'set to usurp US dollar' as world's reserve currency - Telegraph
MILLIONS IN STIMULUS CHECKS: FOR DEAD PEOPLE?
Well if ACORN registers 'em, they voted, then why not?
U.S. May Empire State index -4.6 vs. -14.7 April
8:30am Today
U.S. April consumer price index flat
8:30am Today
Ever know a really bad alcoholic?
Just a short time away from the sauce and delirium tremens kicks in, as their body is so used to getting it's fix.
That's the USA, but replace alcohol with loans from foreigners. Withdrawal brings on the d.t.'s
"Delirium Treasuries"
The Social Security Administration, which sent out 52 million checks, says that some of those checks mistakenly went to dead people because the agency had no record of their death. That amounts to between 8,000 and 10,000 checks for millions of dollars.
The feds blame a rushed schedule, because all the checks have to be cut by June. The strange this is, some of the checks were made out to people -- like Romonini -- who were never even part of the Social Security system.
So how many non SS illegals have gotten checks,,,,yes this is the government that cant run medicare, send out checks to dead people, but we trust them to save us.... we are so ignorant... no wait we are born and bred dopes...
Fiduciary Doodie (profile) wrote on Fri, 5/15/2009 - 8:28 am reply
China's yuan 'set to usurp US dollar' as world's reserve currency
Don't see a single hegemonic currency coming out of this. IMO, there will be a couple of regional clearing currencies, becuase currency hegemony is an outgrowth of political / social hegemony and I don't think we're going to see a new global hegemon in the next epoch.
Byz,
Just larger versions of airport currency exchange windows?
Your interesting morning factoid: In the first quarter, Investment was the lowest % of GDP on record at 11.22%, the next lowest (records go back to 47) was in 1949 at 12.77%, the long term average is 15.99%.
It's been less than a decade since the Euro replaced individual country's currencies, but imagine if the system was running the old way?
The Irish Punt & Spanish Peseta sails would be trimmed severely...
AMF - delerium treasuries, +1.
C
Would it be safe to say that cash transactions account for no more than 15% of all transactions in total dollar number in the USA?
C, Welcome back. I missed your transportation wisdom
"Would it be safe to say that cash transactions account for no more than 15% of all transactions in total dollar number in the USA?"
...not here (Nevada). More like 85%.
Fiduciary Doodie (profile) wrote on Fri, 5/15/2009 - 8:36 am reply Ignore user Byz,
Just larger versions of airport currency exchange windows?
Sorta, I think most people and places will use just one -- we will have regional superpowers and they will have a currency they Finlandize onto their periphery / secondary states. If we do have a hegemon, I think it will be weak, more like a balance book entity than an all-pervading presence like the Yankee Dollar.
I think the globalist experiment / last vestiges of the neocolonial regime are coming to an end, and you will see more regional trade / regional superpowers as capital, knowledge and atomic weapons finish spreading evenly across the globe. Production factor flows and expoitation of capital base differentials were really definitive of the epoch since the Age of Exploration and I think that process coming to a final conclusion is what is ending the post-neo-colonial era (what Dryfly terms the "vendor financing" era).
From the article:
Only $325 million of the loans — less than a third of 1 percent — will reset by the end of 2012.
NOT POSSIBLE.
Norris, someone at Wells fed you Grade-A bullshit. EVERY SINGLE ONE of these loans will RESET multiple times over between now and 2012 (most reset the accrual rate each and every month). Also, the bigger issue is that a VERY LARGE percentage of them are contractually scheduled to RECAST between now and then. "Less than a third of 1 percent"? --- Sorry, not even in Dick Kovacevich's filthiest dreamz.
World did not qualify borrowers based on the payments they could have faced at after a loan recast. They were qualified based 'fully amortizing payment' based on the original loan amount and interest rate (index + margin) at the time of origination, which are much lower than the payments faced by borrowers in a recast. In any case, these were pretty meaningless numbers. Most of World's loans were 'Quick Qualifiers', or stated income loans. If you had 20% down, you were gold....
Most of World's mortgages will recast, triggered by one of the two events: 1) the balance (original principal + deferred interest) reaches 125% of the original principal amount borrowed; 2) the payment change in the 121st month of the mortgage.
In some cases, the percentage is decreased to 115% of the initial principal amount of the first mortgage; this was used for some 'piggyback' loans exceeding 85% CLTV.
I am not surprised by the statement that such a low number will recast (that is, borrowers will be forced to repay principal on a shorter term, with a higher rate, and larger balance) by 2012....but I would be really interested to see what that statistic looks like if you push it out to 2015.