I'll believe them when they record at the courthouse. Banks are going to foreclose on the loans but more often than not fail to take physical possession and the responsibilities associated. The new foreclosure zone; loans check in but the assets don't check out.
I think eventually the govt has to eventually buy these mortgages and give debt foregiveness, like McCain suggested during the campaign.
Either that or one or two of the big banks (hello, Citi) need to be nationalized, forced to do principal reductions, and the other banks can either follow or be next to be nationalized.
This gap is widening as a result of government intervention. ... If they do not ACCELERATE the foreclosure process and release some of the pressure now, the consequences will be disastrous.
CR,
Are you trying to imply government intervention in market economies can have "disasterous consequences"? Why that's preposterous!
"Are you trying to imply government intervention in market economies can have "disasterous consequences"? Why that's preposterous!"
I believe those were Ramsey's words, not CR's. But I do agree with Ramsey. The whole notion of "green shoots" was driven primarily by the foreclosure moratoriums.
It bought the govt time, and they did nothing with that time but bail out the bankers.
"I'll believe them when they record at the courthouse. Banks are going to foreclose on the loans but more often than not fail to take physical possession and the responsibilities associated. The new foreclosure zone; loans check in but the assets don't check out. "
Exactly. These just sit and sit and sit. LawyerLiz has given plenty of examples of people fighting a judgment, then never hearing from the bank again.
The banks don't want these properties. But they don't want to forgive the debt either, not for what it does to that loan, but because of the precedent it sets for the other thousands of people who are also underwater.
Severly delinquent, sure. But if your servicer is just sitting on their hands, not actively modifying or foreclosing, moreover not working on any effort whatsoever to mitigate the loss? - Call your lawyer.
Is the next Homeless Affordable Layaway Plan going to force banks to make principal reductions, in exchange for partial of full compensation from the Fed?
There are several ways out, but will they choose one before there is no way out?
"Is the next Homeless Affordable Layaway Plan going to force banks to make principal reductions, in exchange for partial of full compensation from the Fed?"
That is a good guess. For all I know, that might have been the plan all along. Except the govt knows it couldn't come out with that plan right away, so it started down the road of "interest rate deductions". Then it pays for those interest rate reductions.
Next it pays for principal reductions? Could be. There is money allocated in the budget for "the banks", whatever that means.
Just got my assessment in the mail for 2009-2010 today. Minus 19% from last year, lower than my suggestion, which is a two-edged sword. Taxes will drop about $1,200, but I am about $20k more underwater at this point than expected.
"The whole notion of 'green shoots' was driven primarily by the foreclosure moratoriums.
It bought the govt time, and they did nothing with that time but bail out the bankers."
Well, in fairness, the government also tried to help the bankers stuff money in their own personal pockets, as well as try to bail them out in their official capacity as bankers. Was there something else the government should have been doing?
"I think eventually the govt has to eventually buy these mortgages and give debt foregiveness"
Or they could allow mortgages to be crammed down in bankruptcy on the same terms as every other type of secured debt. But no, that would be too complicated and would be in derogation of the "rule of law."
.....is there now any question that the banks and increasingly the FedGov will own a piece of 67% of the American populace eventually? Talk about a mind-changing, new rule-invoking, micro-managing, psycho, ADHD landlord. Good luck, people - and you thought "the new transparency", and the "we're here to help" mantra sounded SO positive. The first person that makes the remark "Oh but this is so much better than the McCain/GOP (fill in idiocy comment du jour) wins the booby-prize.........
Alameda County (CA) has excellent web-access to public records and I've been following them for a while. The moratorium(s) appear to be over.
During the first five months of 2009 Trustees Deeds (completion of foreclosure) ran between 400 and 500/month. June, however, had 771 and (very early) in July we're on pace for 700-750.
For comparison, the first half of 2008 averaged 600/month and the second half 770/month, so it looks like 2009 in total will be slightly less than 2008, but not enough to claim green shoots (except for the weeds growing up through cracks in the patio).
Note: Alameda County has very diverse housing stock and probably is a good microcosm of California as a whole.
EDIT: The emotican was unintentional, an artifact of a supposedly harmless sequence of characters, But it does seem to fit.
Shnaps, banks have been delaying foreclosure in bad markets for years. I remember a CR/Tanta post, probably in about 2005, about lenders refusing to take title in Cleveland because they didn't want to pay taxes or maintenance expenses. This is only a slight expansion of that tactic.
Take a name asswipe wrote on Tue, 7/7/2009 - 9:28 pm
Goldman Sachs has credit risk to the tune of almost 10 times its capital.
Risk is a relative term. When your lobbyists can bend the space-time continuum, you don't really face any risk.
On topic, however, I note that the pent-up demand for foreclosure is ex the enormous efforts to deny that obviously delinquent loans are in trouble, such as redefining delinquency to longer and longer terms. The elephant yet to traverse the snake is brobdingnagian.
NAWA, Afghanistan — One week after several battalions of Marines swept through the Helmand River valley, military commanders appear increasingly concerned about a lack of Afghan forces in the field.
Can someone tell me WTF Obama is trying to accomplish here doing here ( no need to be Bush light ) when the USA has more pressing economic problems, healthcare problems, job problems, etc. and is essentially broke?
Just why is there so much debt in the Anglo-Saxon world? Bankers and regulators know well that it is in nobody’s long-term interests to have allowed borrowing to escalate to a position where the US now owes far more, as a multiple of the economy, than at the start of the Great Depression.
The answer is capitalism’s dirty little secret: excessive lending was the only way to maintain the living standards of the vast bulk of the population at a time when wealth was being concentrated in the hands of an elite.
It's also unfortunate that Obama and his Wall St bought and paid for economic team have put all their chips on the Banking Oligarchs to pump up great chunks of the Big Shitpile that's essentially worthless unless the peak real estate values of the bubble can be miraculously restored.
I keep on coming back to this blurb by Simon Johnson in his excellent piece The Quiet Coup
"From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent".
The financial engineering racket is simply the best organized white collar crime organization ever !
In short Obamanomics is where
1. The government champions funds
2. Funds champion corporations
3. Corporations champion markets and industries
4. The people ( American taxpayers ) get the tab
I suggest that most should be recalibrating their American dream
Sanityclause - where do you get that idea? Have you been reading Mish, or snorting Comet?
These are overwhelmingly NOT WHOLE LOANS. Write that down, multiple times.
If the 'bank' (mortgage servicer, in reality) doesn't ever foreclose or get the loan to repreform, they have to just keep advancing principal & interest to the investor - indefinitely. Tell me again how they gain in that arrangement?
"As the 'bank' (mortgage servicer, in reality) doesn't foreclose or get the loan to repreform, thy have to just keep advancing principal & interest to the investor...indefinitely? Tell me again how they gain in that arrangement?"
They manage to make it one more quarter before they have to confess and throw themselves at the mercy of the TARP?
Shnaps (profile) wrote on Tue, 7/7/2009 - 9:41 pm replyIgnore userSanityclause - where do you get that idea? Have you been reading Mish, or snorting Comet?
The Great Depression was a cataclysmic event. Between 1929 and 1933, U.S. personal income declined 44 percent, real output fell by30 percent, and the unemployment rate climbed to 25 percent of the labor force. U.S. real estate markets were already showing signs of distressbefore the Great Depression began. T
he number of nonfarm residential real estate foreclosures doubled between 1926 and 1929. With the onsetof the Depression, the number of foreclosuresrose still higher, from 134,900 in 1929 to 252,400in 1933. The foreclosure rate, shown in Figure 1,increased from 3.6 per 1,000 home mortgages in1926, the first year data are available, to a high of13.3 per 1,000 mortgages in 1933. In that year, onaverage 1,000 home mortgages were foreclosedevery day (Federal Home Loan Bank Board, 1937,p. 4). Many more homes were at risk of foreclo-sure—as many as half of urban home mortgageswere delinquent on January 1, 1934 (Bridewell,1938, p. 172
Ok, if the banks dont want to take the house, why should people continue to pay the mortgage. Why not just stop paying and live rent free. For the rest of the economy that would b a major stimulus, not so great for the cash flow of the banks though. Of course they don't have to mark to market, so for reg purposes they can pretend they are worth something like face value and thus never become insolvent.. At this point is seems like mailing in the keys is a very bad idea, just dont mail the mortgage check.
My nephew is back in the ME again. No more Iraq, it is Afganistan now. Gee, and the recruiter told my sister almost 3 years ago he would never get off a boat...
Albrt- granted, there are some properties that would be a liabilty (a small minority). The lender can still force a sale and not bid at auction, there's usually some parties who will bid.
Let's not pretend the entire country has become Wayne County. Please.
OT: If you want to see how the Oligarchy is making out, tune into NYC Prep on Bravo. You'll only be able to stand it for about 2 minutes, but it's eye-opening... and very scary.
[Remind me again, how the "bank" gains from delaying a foreclosure action?]
It's part of the Obama/Biden/Geithner plan for Stimulus II that needs a little more justification tweaking in the opinion polls - maybe a 30% pullback in equities & 12%UE will suffice. They will buy up all the mortgages to save the little guy (swamp the banks with $$$$ and get the CDS sellers off the hook) and then offer cramdowns care of the US Taxpayers. All in due time.
The percentage of total properties for sale in Loudoun County that are foreclosures/bank-owned or short-sales is holding steady around 25 percent. We've been seeing the percentage stay around 25 for most of this year.
Though we'd all like to see that percentage go down, it's definitely good news that it's not increasing. The fact that it's not increasing is another sign that the worse is behind us.
Remember when I said the administration had six months? That's two weeks from today. Fair or unfair, inherited or promulgated it doesn't matter. There is no kick left in the can and a new can isn't going to cut it. Can he shake the shackles and produce something with an end game the citizenry understands and accepts?
One thread late, but the government stalling tactics are ore denial. The siutation in reality in bargaining.
The 5 stages:
2007 - Denial (Remember this? "We're not in a recession, we haen't had 2 bad quarters yet")
2008 - Anger (especially over Paulson's TBTF, and numerous other things we're still not over yet)
2009 - Bargaining (extend and pretend, secondstimulus, etc.)
2010 - Depression (maybe most of the population will actually start calling it a depression)
2011 - Acceptance (the only way recovery is going to happen)
CR, Tanta, and others were a year two ahread of the rest of us. The sad part is the election put everybody else in a state of denial which far too many are still in today. By early 2012, we're bound to have candidates asking "Are you better off today than you were 4 years ago?" Unless we have an even bigger problem to trigger the denial stage all over again.
Rob, if this talk of a second stimulus takes off, man watch out...J6P is just now figuring out how much money went bye-bye in the government sponsored hat trick. Now you see it, now you don't. IT ain't coming back folks. Good luck selling a bigger package the second time. Not that he has to sell it, I am sure Congress will pass it anyway. Have to. The US is too big to fail! We can't let the world down, now can we?
Nova, yes, the crash in 1929 was only the societal recognition, the depression had started several years earlier but only for a small set of ignored people. Our depression began in 2001.
"It's part of the Obama/Biden/Geithner plan for Stimulus II that needs..............."
WAIT A SECOND.............You guys even remember "Stimulas I"? Remember back last spring/summer that monumental spending bill that sent us all (except people like me) $600? I think it cost the US about $135-billion? THAT was Stim#1 - a pre-paid tax credit. The Solution to the Problem. ...........well, maybe not now.
Got a lot of weird looks on the Metro tonight as my outraged snort became a racking cough mixed with expletives, having glanced at the back page of today's Politico.... full page ad from Glodmans, strapline "Meaningful change and lasting reform".
Blah blah lessons learned, we must work with policy makers and regulators, enhancing investor confidence etc etc. And not content with shafting a single country system, there's some flannel on "more global coordination". Excellent.
Final exhortation to the Brilliance That Is Glodmans ... a link to Mr Sacred Harvard Ring himself at gs.com/speech/cii
Dang. I'm he only one that showed up for the pool tourney today. Last week we had six, eight the week before. The job situation seems significantly worse than four weeks ago. This can't go on much longer without a body count.
The banks don't want these properties. But they don't want to forgive the debt either, not for what it does to that loan, but because of the precedent it sets for the other thousands of people who are also underwater.
Yikes. We're going to have a situation not unlike South America where Hernando de Soto wrote of trying to deal with mysterious land title systems. Even if you could get someone to admit that title existed somewhere, it would take years for someone to actually make an effort to track it down. Delays kept people in government jobs, but they also kept capital in a perpetual holding pattern.
There is no national solution in our present government - there is no microeconomic expertise. Volcker has already been put out to pasture by Summers et al. Any national solution will strictly be election-based. Hope is the antithesis of acceptance.
The house next to me was bought in 2006 for 850k approx. The police finally kicked whoever was left out about a year ago. It's been empty since then and had an. NOD on it for atleast 6. Mos. The front yard has grass up to my stomach. This is in a good part of Fremont,ca.
That shit'll have you trumpeting like an elephant. Anyway, servicers really don't gain anything by delaying a foreclosure. Quite the opposite. The practice of marking mortgage-backed securities to market has nothing to do with it, either.
That said, YES -- government "moratoriums" do create "pent-up" fc sale volume. But I thought California's little experiment with that was over. No?
broward,
they just didn't tell you where the action is.
Lol.
There is always a game in a town with more than four bars.
I used to have a lot of fun watching kids come into the bar. They used to give me crap about my two piece cue.
Left the nice McDermott at home and used my fav Huebler.
They didn't realize the rest of the guys around the table all had Sneaky Pete cues.
I just didn't give a crap. My table, my rules;-}
cutthroat, 3 ball, nineball, 1 on the 5, 3 on the nine, straight eight, billards.
Moral of the story, kids who just turned 21 have no business shooting bar pool- they think having shot a bunch of games at the frat house they know crap.
I remember when we had a bunch of gas pipeline workers come through for a Winter in Williams, Arizona. Those kids would cash their checks at the bar and pay for their education. I remember when one kid got his money, nearly a grand, Dad took back his loan and rent money for the next week- the Kid was poor by closing time, and broke after the barmaid got done with him in the morning.
bANK fAILURE, I have embraced the "edit" feature. My signature typos are a thing of teh psat.
Thanks, poic. There's your "pent-up foreclosures", folks. Don't blame the "banks" who stand to gain in some sinister way by ordering their staff to blink at loan files while pumping farts through their Aerons all day long.
We (the American public) are gonna confront reality eventually. Might as well get on with it. Be nice if the leaders were actually leading this instead of extending and pretending.
The 5 stages:
2007 - Denial (Remember this? "We're not in a recession, we haen't had 2 bad quarters yet")
2008 - Anger (especially over Paulson's TBTF, and numerous other things we're still not over yet)
2009 - Bargaining (extend and pretend, secondstimulus, etc.)
2010 - Depression (maybe most of the population will actually start calling it a depression)
2011 - Acceptance (the only way recovery is going to happen)
"Be nice if the leaders were actually leading this instead of extending and pretending. "
They are. The sailors are leading the rich off to the golden lifeboats on the titanic, while the middle class is locked in behind a gate in the lower tier, chained to their mortgage/bonds/401k. At least the band is playing Hannah Montana's new song, while the illegal immigrants are sneaking past the gates. Will Leonardo find bar rafaeli and her two spectacular floating devices and get to safety?
Kermit suckerpunched in Tokyo during the morning session. Aggregates down, Hang Seng H Financials get a ribbon for worst in show, ASX busting -1% on consumer confidence rebound (why is everything upside down in the antipodes?), bilious mood for Japan bonds.
Might as well lock it up in bonds for the summer guys.
TOKYO (MarketWatch) - Japanese data sets released Wednesday suggested the global recession continues to take a toll, showing up in both lagging and leading indicators.
Listen - in the 80s farm crisis we all saw the same thing... at the peak banks and S&Ls would do anything to NOT foreclose if at all possible... the last thing they wanted was another beat up insolvent underwater farm. But they got them dumped on them anyway...
That was a regional phenomenon - this sucker is bigger: national or even international and across both residential & commercial.
No wonder banks want to extend & pretend as much as is practically possible - who wouldn't if your job [as an employee of the bank] depended on it?
AllenM, no, it's a scheduled tournament. I'm scouting around for another game but I'm still surprised that nobody else showed up. Damn. Now I see how wars start. "make something change, anything, just make something change"
I can't believe that anyone thinks that accelerting foreclosures will matter that much. 1 + 1 still equals 2, even if you delay adding it till tomorrow. The delusion is really sad sometimes..
Someone had more fun than I this past Independence Day!
"The Treasury Department, Secret Service, Federal Trade Commission and Transportation Department Web sites were all down at varying points over the holiday weekend and into this week, according to officials inside and outside the government. Some of the sites were still experiencing problems Tuesday evening.......the Transportation Web site was "100 percent down" for two days......the fact that the government Web sites were still being affected three days after it began signaled an unusually lengthy and sophisticated attack."
"The Treasury Department, Secret Service, Federal Trade Commission and Transportation Department Web sites were all down at varying points over the holiday weekend and into this week, according to officials inside and outside the government. Some of the sites were still experiencing problems Tuesday evening."
Bored hackers on holiday? Angry citizens marking Independence Day?
Hmmm.
But Obama's Cybersecurity Initiative Wins Praise
May 29, 2009 - U.S. President Barack Obama's announcement Friday of a new cybersecurity push by the U.S. government won widespread praise from the technology industry, with many people saying his attention to the issue is a major step toward better securing the nation's computer networks. Obama's Cybersecurity Initiative Wins Praise - PC World
Calling Richard Clarke
BSR / smlandlord - or maybe it was a certain large financial institution having a look-see for some missing code?
Prop(ellerhead) Central, former IB: Hey, who the fk would muscle in on our trade code? Dude... competition? Unh, no, there isn't any. Err, ok, try Treas, SS - yes, I know it says that on their cars, but try anyway - and uh, Trade, no not the WTO wienies, FTC. You mistyped Trans, try T-R, jeebus do I have to do everything myself.. TRA...
Dry and others are correct. Banks (and other fin'l institutions) know this game is a play for survival. The last ones standing win. So delay as long as possible.
Consider two banks, both with the same equity and assets, but different strategies. Bank A 'fesses up to losses right away, and becomes insolvent 3/4 of the way through the worst of the fin'l storm. Bank B has the same losses, but delays recognition. It survives, and at the end of the fin'l storm, now sees a rebound in its asset values and future profits as one of far fewer players in a lucrative market. Even if it's real losses are bigger, it is the winner.
Besides, as the crisis reaches its peak, and more and more banks go belly up, the govt will step up (yeah, even more than now) its banker aid efforts. So it's best to stick around for the most handouts.
I can't help but think this has something to do with zombie banks. Wouldn't foreclosure require realizing a loss, while doing nothing would allow them to postpone it until say Q3 or Q4?
I mean, how much extra loss would you take later if it ment staying in buisness? Or getting a bonus?
Consider two banks, both with the same equity and assets, but different strategies.
Thanks PR - everyone on this forum thinks 'marco'... bank execs could care less - they are 100% 'micro' and only worry about their own fate... they know many if not most of them won't make it to the end of the tunnel but THEY are going to be one of the few and so plan 'accordingly'. Sum that behavior up across many many 'participants' and you have the macro picture.
patientrenter - and that, it horrifies me to suggest, is why now feels like early summer groundhog day. The policy is still Mutually Assumed Denial, the only difference being the credit markets have been partly unthawed by the bailing, alphabet soup, and printery.
Ghesh, people are counting on me for new financial ruin jokes this bbq season.
Read 'The Goal' - they are under-resourced and bottlenecked down stream [courts & real estate market]... why push on a string?
Now that we are living it, the whole Japanese real estate bust and slow decay makes a lot more sense. Everyone is acting rationally in their own interest and the result is a long strung out deflationary depression. But we did it better, spreading financial poison across the globe. The Japanese were first and we should give them props for that.
I can just hear the banks in 2006 saying "it doesn't matter if this is a bubble. We are making so much money even if prices go down 5, even 10% and the correction lasts twice as long 6, even 8 quarters we can still survive comfortably and come out ready to make bank even if it takes all the way into 2008."
I guess the question then becomes Who owns the servicers?
Do banks own them? Are they just paying Peter and robing Paul?
I know some insurance companies own some of the servicers, but I don't know enough about who owns who to really know.
I have a supsition that neither the banks or the servicers are doing anything that would damage themselves. Or do the servicers go BK?
Now that we are living it, the whole Japanese real estate bust and slow decay makes a lot more sense. Everyone is acting rationally in their own interest and the result is a long strung out deflationary depression. But we did it better, spreading financial poison across the globe. The Japanese were first and we should give them props for that.
Japanese make the best prototypes - I know, I work with some.
Irrelevant factoid of the evening - bloomie has just re-scaled their 10yr and 30yr yield axis for the overnight trades to the third decimal. Usually sticks to bps ticks.
Wondered why the tightening looked a bit exuberant.
I'm not sure I understand a lot of the comments here about the need to write off the loans made to people who wanted to pay very high prices for homes. A person has $10,000, and decides to buy a home that costs $500,000. With others' help, they make arrangements to pay the remaining $490,000 later. The price they could sell the home for goes down (so what?) and everyone decides that the economy will crash unless they get to bail on paying the remaining $490,000 in full? That's twaddle. The deal was that you get the house, and you pay $500,000. If you fall down on your end of that deal, what needs to happen is that you lose the other end - ownership of the home. Then you go rent, and someone else who has real money buys the home at the price determined by real money demand.
Why do we all have to pretend that this isn't the straighforward and right solution? It's not rocket science, and it won't be catastrophic, except for people who relied on the unsustainable free lunch of home price appreciation well in excess of inflation. And we need to deliver a catastrophe to those people, to change a lot of wasteful behavior.
I did some graphs of trustee sales based on ForeclosureRadar data. You can see the increase in trustee sales. I update these graphs on the 1st and 15th of the month.
p.s. I was at the trustee sales in Ventura today. Competition was fierce. 10 homes were for sale, 5 went to third parties. The banks have a long way to go before they overload this market. The demand at retail (MLS) is high at 5% interest rates but ability to push price is limited.
Why do we all have to pretend that this isn't the straighforward and right solution? It's not rocket science, and it won't be catastrophic, except for people who relied on the unsustainable free lunch of home price appreciation well in excess of inflation.
Never forget - this crisis is NOT about the homeowners... it's about the banks, the bonds and the derivatives all based on revenue streams from those mortgages... if they go away so do the banks, bonds, derivatives and more importantly pension funds, annuities, 401Ks, insurance plans, endowments etc. who own them [that and those who borrowed to them so they could lever up 30:1].
And all the jobs, bonuses, partnerships & dividends those 'activities' support. Its systemic... houses are the tip of the iceberg.
Remember - Bernanke's 'contained'? I bet he knew then how F'ed we were but was trying to bluff the rest of the table and he got called and busted. Now we are all busted.
So Lear Corp. finally crawled into BK court today.
$500 million in DIP financing from JPM and Citi. $1.27 billion in assets and $4.54 billion in liabilities.
toastaroma...but:
'"We are conducting business as usual and are very pleased to have received strong support from our lender and bondholder groups for our debt restructuring plan," CEO Bob Rossiter said in a statement.'
So I guess this is defaltion. Long live deflation. Gads we are all poorer now.
For now - but longer run it depends on the 'policy response' too. Until we know how far the Fed & Treasury [and congress] is prepared to go then we don't know if deflation or inflation and when.
if they go away so do the banks, bonds, derivatives and more importantly pension funds, annuities, 401Ks, insurance plans, endowments etc. who own them [that and those who borrowed to them so they could lever up 30:1]
Yep, and the suck part is that the middlemen make so damn much losing OPM.
Billy Ray: No thanks, guys, I already had breakfast this morning.
Mortimer Duke: This is not a meal, Valentine. We are here to TRY to explain to you what is we do here.
Randolph Duke: We are 'commodities brokers', William. Now, what are commodities? Commodities are agricultural products... like coffee that you had for breakfast... wheat, which is used to make bread... pork bellies, which is used to make bacon, which you might find in a 'bacon and lettuce and tomato' sandwich.
[Billy Ray turns and gives a long look at the camera]
Randolph Duke: Randolph
[continuing]
Randolph Duke: And then there are other commodities, like frozen orange juice... and GOLD. Though, of course, gold doesn't grow on trees like oranges.
[chuckles]
Randolph Duke: Clear so far?
Billy Ray: [nodding, smiling] Yeah.
Randolph Duke: Good, William! Now, some of our clients are speculating that the price of gold will rise in the future. And we have other clients who are speculating that the price of gold will fall. They place their orders with us, and we buy or sell their gold for them.
Mortimer Duke: Tell him the good part.
Randolph Duke: The good part, William, is that, no matter whether our clients make money or lose money, Duke & Duke get the commissions.
Mortimer Duke: Well? What do you think, Valentine?
Billy Ray: Sounds to me like you guys a couple of bookies.
Randolph Duke: [chuckling, patting Billy Ray on the back] I told you he'd understand.
what dryfly said, and I would add that according to CR, the two main sources of economic recovery tend to be residential real estate and personal consumption. Fixing mortgages would fix both to some extent and speed recovery of the general economy.
I remember when this whole crisis began to really break the surface, back in the summer of 2007 and the ensuing months. I wondered what the top bank CEOs would be doing to prepare for the tidal wave of bad debts. They were putting together crack teams of their top execs to analyze buying other banks, and executing the analysis in a weekend. Geniuses like Ken Lewis bought Countrywide (and later Merrill) in a hurry. These decisions were much more complicated than coming up with a rapid exit strategy from their worst blocks of mortgage loans. Back then, there were buyers for 95 cents on the dollar. But they couldn't come up with a quick strategy and execute it.
My conclusion is that banks want loan servicers to be overwhelmed. If they wanted to change things, they could. Instead of having to admit that they are waiting for more handouts, they can pretend that it's all just a logistical problem. At a low level, it is, but the industry leaders could change that... if they wanted to.
So Lear Corp. finally crawled into BK court today.
When I was in the maquilas a few weeks back everyone was saying Lear will be the next big tier one to go. I used to work with a plastics company that had (1) Delphi (2) TRW (3) Lear and (4) Visteon as their top accounts... combined they accounted for 70% of their sales. Nice business model [not]...
I have nine grandchildren in Highschool and College. I have been trying to come up with an exit strategy from the sinking ship for the USA. I think the answer is Alberta. They will be a major oil supplier to Canada and need educated talented people. Pains me me to recommend it but my ancestors moved on from Scotland in the 1800;s and now it is time to move on from our very own Titanic.
So I guess this is defaltion. Long live deflation. Gads we are all poorer now.
You are not that much poorer when wages and prices go down at roughly the same rate; i.e., deflation, especially if you don't owe a lot of money.
You are much poorer when your wages stagnate or go down at the same time prices go up; i.e., stagflation. That's what we are living.
This government, Fed and banking system will never let deflation happen. We've known that for a long time. They are aiming for stagflation.
The CPI will not go up for some time, because owner's equivalent rent is almost one-third of the weight. But many other prices, especially commodity prices, will go up. Don't expect your doctor bills, college tuitions, or utility bills to drop much any time soon.
Now's (or soon) is a great time to buy some food, in whatever form you want.
TRW will get "strategic national asset" status for their indispensable other businesses.
Much of TRW's strategic stuff was sold off to ATK I believe [Alliant Tech]. I think they run all the weapons programs, aerospace & missile stuff TRW USED to do. TRW is mostly car parts now [I believe].
Regardless - if TRW has defense left in it... that will go in the 'good bank'... you can bet the 'accounts payable' to the guys I knew will be in the 'bad bank'. After all they don't know anyone at Goldman Sachs.
dryfly;
"I used to work with a plastics company that had (1) Delphi (2) TRW (3) Lear and (4) Visteon as their top accounts..."
Two down, two to go?
I think only TRW is free of the courts right now... Delphi & Visteon went BK a couple years ago... I thought they exited but heard somewhere that they were hung up... Lear went today so that only leaves TRW.
These guys are going to be experts in bankruptcies...
There must be some kind of way out of here
Said the joker to the thief
There's too much confusion
I can't get no relief
Business men they drink my wine
Plowmen dig my earth
No one will level on the line
Nobody of it is worth
No reason to get excited
The thief he kindly spoke
There are many here among us
Who feel that life is but a joke
But you and I we've been through that
And this is not our fate
So let us not talk falsely now
The hour's getting late
All along the watchtower
Princes kept the view
While all the women came and went
Barefoot servants too
Outside in the cold distance
A wild cat did growl
Two riders were approaching
And the wind began to howl
dry, if every homeowner who agreed to pay a high price for a home and who could afford to service their loans on the original terms did so, then this fin'l episode would be survivable with fairly modest intervention. But what's happening now is that people who can service their loans can see they will lose the free lunch of home price appreciation, and they want another deal, ex post facto.
So a lot of what's being done is to help fat banker cats, and big investors, and even little investors (like current and future pensioners etc) saving through fin'l institution. But a very big motivation is enabling homeowners to engage on one-way bets on a massive scale.
"Never forget - this crisis is NOT about the homeowners... it's about the banks, the bonds and the derivatives all based on revenue streams from those mortgages... if they go away so do the banks, bonds, derivatives and more importantly pension funds, annuities, 401Ks, insurance plans, endowments etc. who own them [that and those who borrowed to them so they could lever up 30:1].
And all the jobs, bonuses, partnerships & dividends those 'activities' support. Its systemic... houses are the tip of the iceberg."
I keep repeating, buy up the heavily discounted bonds. They aren't priced exactly right, but huge portions of Federal aid will be absorbed by people who own bonds that are now trading at 5-70 cents on the dollar. Retire those bonds. Otherwise, a large portion of the government guarantees and subsidies are going toward abnormal returns from now onward for bondholders.
Barley is right. Give us 4-6 weeks and it's Oct 2008 again. This time it's banks and munis with problems, not investment banks and AIG.
I have tried to be more optimistic, but my forecast for CA has moved from bad to apocalyptic. Large scale riots, looting, arson. National Guard and Federal troops. Late 2009 or 2010.
So a lot of what's being done is to help fat banker cats, and big investors, and even little investors (like current and future pensioners etc) saving through fin'l institution. But a very big motivation is enabling homeowners to engage on one-way bets on a massive scale.
Exactly - but the reason they are trying to 'save the homeowner' is because that dudes mortgage payment [and millions of others like his] is what is floating the boat. Its like a cock fight... money is flying all around the fight pen but if there are no cocks - there is no wagering. They don't care if one cock or another lives or dies - just so long as there is another fight to wager on. They couldn't believe they would ever run out of roosters.
TJ, I'd be very curious if someone deeper in the mortgage weeds than me could provide actual data on what aggregate losses would come from
a. dialing loan payments down so payments did not exceed 50% of a borrower's income, after first using their net worth to pay down the loan as much as possible, versus
b. the proposed forgiveness schemes, designed to allow most people to avoid the consequences of home price depreciation much below their purchase price.
We've all read the stories about people buying other assets before they default. I think a lot of the forgiveness is going to people who have some capacity to pay, and choose not to. Not necessary, and not my preferred solution. And I am totally unconvinced that our economy will be better for allowing that.
Worst case scenario: if that tries to happen, it won't be allowed to for long. If I were Obama, I would:
Wait until it gets bad enough
Ask for emergency powers from Congress to deal with California as a de facto insurrection. Declare California temporarily ungoverned and ask for a return to territorial status.
Occupy the state with regular and national guard, put an interim administration in place, call a constitutional convention, temporarily suspend all state obligations (to be renegotiated later).
In short, occupy it like a banana republic, ream out the old regime and put in a new one to the cheers of the multitude. Think it wouldn't work? If it got as bad as you fear, I bet he'd get the support he needed.
If it gets that bad. Me, I'm not convinced. But neither am I particularly knowledgeable.
And I am totally unconvinced that our economy will be better for allowing that.
No one that I know is saying 'the economy will be better' for it... they are just sayin WHY the banks [and gov't owned by the big IBs & bond funds] are so desperate at trying to short circuit the downward spiral. YOU might benefit from a cheaper house [being a patient renter]... but the I Banks & funds, etc. would certainly NOT be better off - not the way they structured these securitizations then levered them all up a gazillion to one.
perhaps 770/month is the maximum rate Alameda can process...
.
There appear to be bottlenecks in both the mortgage servicer side and the legal side, so that may indeed be the current limit of the system.
.
Respectfully disagree. California forclosures are nonjudicial so there is no court backlog. No court at all in the foreclosure process.
dry, if maximizing the loan payments were the motivation, then why would we be forgiving interest or principal for people who can afford to pay? We are, either by explicit choice, or through the back door, by claiming that e.g. $3000 is too much to pay to find the true income and assets of each borrower asking for a bailout who shows some signs of having means. If you were told that you could personally collect up to $100,000 from each borrower from their assets and income, I am pretty sure you'd be a lot more aggressive than the servicers. It's a political decision to go easy, and subsidize the successor to the Greenspan put - the Great Housing Put.
TRW will get "strategic national asset" status for their indispensable other businesses.
Much of TRW's strategic stuff was sold off to ATK I believe [Alliant Tech]. I think they run all the weapons programs, aerospace & missile stuff TRW USED to do. TRW is mostly car parts now [I believe].
Dryfly...The cockfight imagery is instructive. And just to make sure there are enough metaphors, the bankers know that when the last cock dies, the tide goes out.
dry, if maximizing the loan payments were the motivation, then why would we be forgiving interest or principal for people who can afford to pay?
Because they walk away otherwise... the homedebtors KNOW they are underwater so the banks are doing ANYTHING to keep as much cash flowing as possible into those instruments... cash is to them is what blood is to a vampire. The banks don't care if the homedebtor could or couldn't pay in theory just so long as they do pay and something is better than nothing. At least for now... if they can foreclose and do better then they'll do that - eventually - but for now that option is off the table... so 'extend & pretend'. Nothing I've heard explains it better than that.
It is perfectly logical on a micro level even if insane viewed from a macro level.
this is what the glodbugs have been saying forever...
fiat may deliver the illusion of growth and even the more fleeting illusion of control for would-be policymakers... but it is simply too weak a vehicle to serve as money in times of stress.
even with the BEST of policy and the most sober of management, the days of FRNs would be numbered - like the paper itself. of course, we had neither, if not the opposite.
do commodity currencies prevent booms and busts? of course not. but they're much, much harder to manipulate into something infinitely worse.
Americans might be poorer, but they certainly aren’t slower. With the economy in the doldrums, more people are discovering that without those 12-hour workdays, they’re able to pursue fitness goals like never before. Marathons, triathlons and road races are filling up in record time.
Some evidence suggests that laid-off marathon runners are actually helping push up the level of competition within their age groups. Olympic-level competition could even go up because more elite athletes coming out of college are opting to pursue their athletic goals rather than look for work in a dismal job market
The defense and systems engineering part was. I don't know who ended up with the rest.
There is a long and storied history involving Hughes Aircraft, Northrup, and Ramo-Wooldridge.
yes, i'm back checking in. haven't had time to keep up on the comments due to, um, work. just got promoted, am now the COO in addition to the CFO of a multi-campus charter school in dc. trying to develop three campus buildings as we speak and manage the 130 person organization. its got me busy to say the least.
overall, doing very well.
would spend more time here if the news seemed like there was any shifts coming. instead the same drum beat continues and looks to for a while.
thank god i got into a growth sector!
hope everyone else is doing well or managing. its been a wild few years at this place...
I disagree with rich; although I haven't lived through a time of stagflation. Who is going to be able to bid the price of commodities higher?
I don't think it is smart of me to disagree with rich, I just envision in the short term we enter a period where cash is king again and go through another crash. This market sure seems f'd up. Down 20% and up 20% all within the first 6 months of this year? Someone convince me why I shouldn't be riding SCO for the next couple of weeks?
Squidward,in california you have a choice of Judicial or Non Judicial Foreclosure.If you hold a non purchase money mortgage (a Recourse Loan) you have to go through a Judicial Foreclosure in order to get a deficiency Judgement.This is VERY RARELY worth the extra time and money involved.Sometimes it is,and I have a friend who is doing this because the Borrower has easily attachable assets and is not in a position to file Bankruptcy.
some investor guy (profile) wrote on Tue, 7/7/2009 - 8:51 pm
reply ignore user
Barley is right. Give us 4-6 weeks and it's Oct 2008 again. This time it's banks and munis with problems, not investment banks and AIG.
I have tried to be more optimistic, but my forecast for CA has moved from bad to apocalyptic. Large scale riots, looting, arson. National Guard and Federal troops. Late 2009 or 2010.
Which is exactly why I plan to put a tv in our driveway playing American Idol reruns 24/7. Better safe than sorry when the mob shows up. Need to keep them at bay. (:
Never forget - this crisis is NOT about the homeowners... it's about the banks, the bonds and the derivatives all based on revenue streams from those mortgages... if they go away so do the banks, bonds, derivatives and more importantly pension funds, annuities, 401Ks, insurance plans, endowments etc. who own them [that and those who borrowed to them so they could lever up 30:1].
That's the issue, isn't it...will those who have accumulated, in the form of financial assets, claims against future production be able to maintain those claims? And how much damage will they do to production in the attempt?
"Who is going to be able to bid the price of commodities higher?"
People who need them. We've reached the point where supply of some commodities is going to dry up. Food may next, dairy farmers are already in deep trouble.
Not oil right away, but longer term, oil is getting more expensive. Short term, have fun with SCO, but make sure you keep your eye on it.
BTW, gasoline can get more expensive while oil gets cheaper. The U.S. hasn't built a new refinery since 1970, and only about 30% of the existing refineries can process the heavier crude that is becoming a more important part of the supply.
"they are under-resourced and bottlenecked down stream"
".......if the "owner" remains in the house, there's a chance it won't be vandalized."
....and most importantly, since the rules of the game change daily, there might not be any hurry to settle due to circumstances/terms improving thru DC.
Man, been an interesting day to say the least. I feel change a coming in my bones, and felt a chill in the air tonight (which is pretty hard in this Texas heat right now). Don't know if I would say this is Oct. 2008 again, feels different for me. Bad voodoo ahead. People be safe, especially out in Cali. Wife's family is still oblivious to what is going on. I guess Barstow and Santa Maria aren't too concerned with the implosion. Life goes on. Good night
"Treasury is going forward with the program (PPIP) largely to improve confidence, said Douglas Elliott, a former investment banker now with the Brookings Institution. He expects that two-thirds of bank losses will be in categories like commercial real estate loans, commercial investment loans and credit cards."
do commodity currencies prevent booms and busts? of course not. but they're much, much harder to manipulate into something infinitely worse.
I've never quite understood this argument. It's just as easy for banks to lever up a backed currency as it is to lever up fiat--they're not the ones backing the currency after all.
And at best, only the currency would be backed, not demand deposits or other forms of money. In a world of electronic, plastic transactions, how much difference would that make?
"Just One Way to Decrease Welfare"......... provide enough people with unemployment checks - thereby disallowing welfare due to income maximums.
"Right now you can get up to 79 weeks of unemployment," Anders says. "And if you're receiving unemployment, you're usually receiving too much in benefits to make you eligible for cash assistance from our area."
sm_landlord,
People who need them? Like us fat Americans who could probably stand to lose 50% of our weight? Not me, per se. The guy in China who is making 10 cents an hour? Oh well maybe now due to inflation he is making 40 cents an hour. 400% inflation! Or how about the growing unemployed? They are going to be the ones who are bidding up the prices?
RockyR (profile) wrote on Tue, 7/7/2009 - 9:51 pm
reply ignore user
Futures are negative. With Japan falling, we may get another negative feedback loop reverberating around the globe. Could be fun!
Don't worry BB will do late night rate cut. Oh wait !!
i would have expected that ratio to be higher (e.g. single mom with 3 kids). also interesting is that the household participation increased faster than the individual metric. must be lots of single unemployeds. no deflation with food stamps; the benefits went from 113/person in March to 133/person in April.
I don't think we've had the "how many bullets does Bernanke have left" discussions recently... have we?
BB: You feeling lucky, punk!
BB: I said you feeling lucky, punk!
BB: Damn, 4 more to go... now; you punk! Are you lucky, huh!
BB (voice quivering now): Punk, the Fed has strong initiatives... that will help ease... capital... markets
BB (voice quivering looking down): I deem thee contained, punk!
BB: Hank, where's your bazooka!!! Hank, hank... oh crap its Timmay! Gonna have to get him from the sandbox to help me on this one.. . you stay there punk... don't move ... or I"ll shoot you with alphabet soup, 3-letter out of nowhere, up-up-down-down, left-right-left-right, B-A start, spin-tire-rate-cut!
We're all clueless. Might as well go into the "public storage housing conversion" field before it gets too hot. I've long been an advocating to my wife we shower at 24 hour fitness and live out of an RV at the beach. For some reason I can't convince her.
I agree with patientrenter upthread that it is criminal to keep housing prices artifically inflated to save our stupid banking system. I guess me and my generation will be expected to buy the houses? At the artificially inflated price?
Oh, I see... this is rich's point about inflation again.
I want to applaud Congress on the excellent job of oversight of the Regulators that had the responsibility of supervising, regulating and enforcing the rules, laws and regulations for the financial system.
I want to sincerely thank the Congress for catering to the wealthy and the powerful class in our society who have shown their disgust for the average citizen.
Keep up the good work Congress. With your expertise in greed and lust for power it won’t be long before the American that you know and love will be a suburb of China.
tough crowd. sure BK'ing a company has a stigma to it, but it also makes me more experienced, savvy and knowledgeable than those that haven't. And there is no shame in trying and failing in my mind.
I've been promoted within 3 months to run the entire company so I guess I'm doing something right, prior BK or not.
Either way, thanks for the well wishes from the old timers and regulars.
Now that's what I call "pent-up demand".
Don't laugh, Nemo --
you'll get "foreclosed on" first, too ...
What is happening with these would-be foreclosures?
I see it every day.
"What is happening with these would-be foreclosures? "
Nothing. Just sitting in a pile on some poor default management clerk's desk.
OK, so what does Ramsey Su think the consequences will be, other than disastrous?
What will blow up, melt down, or vaporize?
"the consequences will be disastrous."
In what sense? Seriously...
Bullshit, ghostface. They'd get sued. It's called a timeline....write that down!
I'll believe them when they record at the courthouse. Banks are going to foreclose on the loans but more often than not fail to take physical possession and the responsibilities associated. The new foreclosure zone; loans check in but the assets don't check out.
More squatting opportunities--
1 in 6 people on Earth are squatting now, and more Americans are going to be literate in this life style of the future.
"What will blow up, melt down, or vaporize? "
I think eventually the govt has to eventually buy these mortgages and give debt foregiveness, like McCain suggested during the campaign.
Either that or one or two of the big banks (hello, Citi) need to be nationalized, forced to do principal reductions, and the other banks can either follow or be next to be nationalized.
This gap is widening as a result of government intervention. ... If they do not ACCELERATE the foreclosure process and release some of the pressure now, the consequences will be disastrous.
CR,
Are you trying to imply government intervention in market economies can have "disasterous consequences"? Why that's preposterous!
Woohoo! Foreclosures for everyone!
"Bullshit, ghostface. They'd get sued. It's called a timeline....write that down! "
Oh, OK, you work at a bank and I don't. I see.
How is it that I can open up any amount of files on my workstation and see loans that are hundreds of days delinquent?
"Are you trying to imply government intervention in market economies can have "disasterous consequences"? Why that's preposterous!"
I believe those were Ramsey's words, not CR's. But I do agree with Ramsey. The whole notion of "green shoots" was driven primarily by the foreclosure moratoriums.
It bought the govt time, and they did nothing with that time but bail out the bankers.
Is everyone having a good time as America becomes a much BIGGER version of Argentina or Mexico in the near future?
However, if you don't have enough $$$ net worth I'm sure you're concerned, very worried, or perhaps shitting bricks...
Despite trillions in investment:
1) Wages are deflating.
2) Unemployment continues to grow.
3) Underemployment is growing faster than unemployment.
ghostfaceinvestah,
You are correct, sir.
And sorry, I forgot: //snark.
This is like Day of the Triffids...you see em coming, you are trapped in your home, and there ain't nothing you or anyone can do.
"I'll believe them when they record at the courthouse. Banks are going to foreclose on the loans but more often than not fail to take physical possession and the responsibilities associated. The new foreclosure zone; loans check in but the assets don't check out. "
Exactly. These just sit and sit and sit. LawyerLiz has given plenty of examples of people fighting a judgment, then never hearing from the bank again.
The banks don't want these properties. But they don't want to forgive the debt either, not for what it does to that loan, but because of the precedent it sets for the other thousands of people who are also underwater.
Severly delinquent, sure. But if your servicer is just sitting on their hands, not actively modifying or foreclosing, moreover not working on any effort whatsoever to mitigate the loss? - Call your lawyer.
"not working on any effort whatsoever to mitigate the loss?"
Define "effort". A computer generated letter once a month with a mod offer that will probably not be read and will never be accepted?
The banks know what needs to be done to keep their stake in the property, while doing as little as possible to collect on that stake.
Is the next Homeless Affordable Layaway Plan going to force banks to make principal reductions, in exchange for partial of full compensation from the Fed?
There are several ways out, but will they choose one before there is no way out?
Goldman Sachs has credit risk to the tune of almost 10 times its capital.
http://3.bp.blogspot.com/_ReItExu3j_U/SlPfTLoJgJI/AAAAAAAAAe4/qPtpENom74I/s1600-h/credit-risk.gif
Crash Market Stocks - Financial Tips On Making Money In A Recession
"Is the next Homeless Affordable Layaway Plan going to force banks to make principal reductions, in exchange for partial of full compensation from the Fed?"
That is a good guess. For all I know, that might have been the plan all along. Except the govt knows it couldn't come out with that plan right away, so it started down the road of "interest rate deductions". Then it pays for those interest rate reductions.
Next it pays for principal reductions? Could be. There is money allocated in the budget for "the banks", whatever that means.
Just got my assessment in the mail for 2009-2010 today. Minus 19% from last year, lower than my suggestion, which is a two-edged sword. Taxes will drop about $1,200, but I am about $20k more underwater at this point than expected.
Remind me again, how the "bank" gains from delaying a foreclosure action?
"The whole notion of 'green shoots' was driven primarily by the foreclosure moratoriums.
It bought the govt time, and they did nothing with that time but bail out the bankers."
Well, in fairness, the government also tried to help the bankers stuff money in their own personal pockets, as well as try to bail them out in their official capacity as bankers. Was there something else the government should have been doing?
"I think eventually the govt has to eventually buy these mortgages and give debt foregiveness"
Or they could allow mortgages to be crammed down in bankruptcy on the same terms as every other type of secured debt. But no, that would be too complicated and would be in derogation of the "rule of law."
.....is there now any question that the banks and increasingly the FedGov will own a piece of 67% of the American populace eventually? Talk about a mind-changing, new rule-invoking, micro-managing, psycho, ADHD landlord. Good luck, people - and you thought "the new transparency", and the "we're here to help" mantra sounded SO positive. The first person that makes the remark "Oh but this is so much better than the McCain/GOP (fill in idiocy comment du jour) wins the booby-prize.........
They get to keep the loan on the books at par, instead of the house at however much less it's actually worth.
Some hard data...
Alameda County (CA) has excellent web-access to public records and I've been following them for a while. The moratorium(s) appear to be over.
During the first five months of 2009 Trustees Deeds (completion of foreclosure) ran between 400 and 500/month. June, however, had 771 and (very early) in July we're on pace for 700-750.
For comparison, the first half of 2008 averaged 600/month and the second half 770/month, so it looks like 2009 in total will be slightly less than 2008, but not enough to claim green shoots (except for the weeds growing up through cracks in the patio).
Note: Alameda County has very diverse housing stock and probably is a good microcosm of California as a whole.
EDIT: The emotican was unintentional, an artifact of a supposedly harmless sequence of characters, But it does seem to fit.
Shnaps, banks have been delaying foreclosure in bad markets for years. I remember a CR/Tanta post, probably in about 2005, about lenders refusing to take title in Cleveland because they didn't want to pay taxes or maintenance expenses. This is only a slight expansion of that tactic.
Take a name asswipe wrote on Tue, 7/7/2009 - 9:28 pm
Goldman Sachs has credit risk to the tune of almost 10 times its capital.
Risk is a relative term. When your lobbyists can bend the space-time continuum, you don't really face any risk.
On topic, however, I note that the pent-up demand for foreclosure is ex the enormous efforts to deny that obviously delinquent loans are in trouble, such as redefining delinquency to longer and longer terms. The elephant yet to traverse the snake is brobdingnagian.
Shnaps wrote on Tue, 7/7/2009 - 9:31 pm
Remind me again, how the "bank" gains from delaying a foreclosure action?
Extend and pretend. Weren't you paying attention earlier?
Afghan Forces Missing in Helmand Offensive Hotlist
Allied Officers Concerned By Lack of Afghan Forces - NY Times
NAWA, Afghanistan — One week after several battalions of Marines swept through the Helmand River valley, military commanders appear increasingly concerned about a lack of Afghan forces in the field.
Can someone tell me WTF Obama is trying to accomplish here doing here ( no need to be Bush light ) when the USA has more pressing economic problems, healthcare problems, job problems, etc. and is essentially broke?
Debt is capitalism’s dirty little secret
FT.com / Comment / Opinion - Debt is capitalism’s dirty little secret ( Financial Times )
Just why is there so much debt in the Anglo-Saxon world? Bankers and regulators know well that it is in nobody’s long-term interests to have allowed borrowing to escalate to a position where the US now owes far more, as a multiple of the economy, than at the start of the Great Depression.
The answer is capitalism’s dirty little secret: excessive lending was the only way to maintain the living standards of the vast bulk of the population at a time when wealth was being concentrated in the hands of an elite.
It's also unfortunate that Obama and his Wall St bought and paid for economic team have put all their chips on the Banking Oligarchs to pump up great chunks of the Big Shitpile that's essentially worthless unless the peak real estate values of the bubble can be miraculously restored.
I keep on coming back to this blurb by Simon Johnson in his excellent piece The Quiet Coup
"From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent".
The financial engineering racket is simply the best organized white collar crime organization ever !
In short Obamanomics is where
1. The government champions funds
2. Funds champion corporations
3. Corporations champion markets and industries
4. The people ( American taxpayers ) get the tab
I suggest that most should be recalibrating their American dream
Sanityclause - where do you get that idea? Have you been reading Mish, or snorting Comet?
These are overwhelmingly NOT WHOLE LOANS. Write that down, multiple times.
If the 'bank' (mortgage servicer, in reality) doesn't ever foreclose or get the loan to repreform, they have to just keep advancing principal & interest to the investor - indefinitely. Tell me again how they gain in that arrangement?
i thought what separated us from the heathen were property relationships: title, borrowing, due dilly, etc. Looks like the banksters blinked first.
Oh, but this is so much better than the McCain/GOP denial of global warming... err, climate change.
"As the 'bank' (mortgage servicer, in reality) doesn't foreclose or get the loan to repreform, thy have to just keep advancing principal & interest to the investor...indefinitely? Tell me again how they gain in that arrangement?"
They manage to make it one more quarter before they have to confess and throw themselves at the mercy of the TARP?
Shnaps (profile) wrote on Tue, 7/7/2009 - 9:41 pm replyIgnore userSanityclause - where do you get that idea? Have you been reading Mish, or snorting Comet?
Can you snort Comet? Meth or coke like contact?
The Great Depression was a cataclysmic event. Between 1929 and 1933, U.S. personal income declined 44 percent, real output fell by30 percent, and the unemployment rate climbed to 25 percent of the labor force. U.S. real estate markets were already showing signs of distressbefore the Great Depression began. T
he number of nonfarm residential real estate foreclosures doubled between 1926 and 1929. With the onsetof the Depression, the number of foreclosuresrose still higher, from 134,900 in 1929 to 252,400in 1933. The foreclosure rate, shown in Figure 1,increased from 3.6 per 1,000 home mortgages in1926, the first year data are available, to a high of13.3 per 1,000 mortgages in 1933. In that year, onaverage 1,000 home mortgages were foreclosedevery day (Federal Home Loan Bank Board, 1937,p. 4). Many more homes were at risk of foreclo-sure—as many as half of urban home mortgageswere delinquent on January 1, 1934 (Bridewell,1938, p. 172
We are getting kinda close to these numbers....
no problems. i got the 3X CDS coverage on the RMBS courtesy of the AIG.
All is calm as the water recedes ahead of the tsunami. Good time to wander out into the massive tidal zone to pick up all the shiny objects.
I believe Lawyerliz is right- a national solution is the only one that makes sense.
The perpetual kick the can forward model eventually will founder with all the toxic mortgages.
Remember, recovery rates are still dropping, ensuring losses grow with each month on all of the tranches of doom.
I am still awaiting reality from this administration.
Paul K. I await an email inviting me to a private dinner to explain how this is getting better.
I note you just blogged on our very own liquidity trap, thus proving Keynes right again, and with us squarely in the vise.
Time for the O boys to get more radical and start lifting ideas from here.
Timmay and Larry are too conventional and want too much of the old infrastructure to survive.
GS just admitted criminal manipulation of the markets, so start with them, and follow them with NYFed junior, Citibank.
Someday this war's gonna end...
Ok, if the banks dont want to take the house, why should people continue to pay the mortgage. Why not just stop paying and live rent free. For the rest of the economy that would b a major stimulus, not so great for the cash flow of the banks though. Of course they don't have to mark to market, so for reg purposes they can pretend they are worth something like face value and thus never become insolvent.. At this point is seems like mailing in the keys is a very bad idea, just dont mail the mortgage check.
A good point. I should lay off the Comet.
My nephew is back in the ME again. No more Iraq, it is Afganistan now. Gee, and the recruiter told my sister almost 3 years ago he would never get off a boat...
Albrt- granted, there are some properties that would be a liabilty (a small minority). The lender can still force a sale and not bid at auction, there's usually some parties who will bid.
Let's not pretend the entire country has become Wayne County. Please.
"No more Iraq, it is Afganistan now."
Change you can believe in.
OT: If you want to see how the Oligarchy is making out, tune into NYC Prep on Bravo. You'll only be able to stand it for about 2 minutes, but it's eye-opening... and very scary.
[Remind me again, how the "bank" gains from delaying a foreclosure action?]
It's part of the Obama/Biden/Geithner plan for Stimulus II that needs a little more justification tweaking in the opinion polls - maybe a 30% pullback in equities & 12%UE will suffice. They will buy up all the mortgages to save the little guy (swamp the banks with $$$$ and get the CDS sellers off the hook) and then offer cramdowns care of the US Taxpayers. All in due time.
"Let's not pretend the entire country has become Wayne County."
Wayne County, Maricopa County, Potato, Po-tah-to.
from a real estate blog - 1 week ago
The percentage of total properties for sale in Loudoun County that are foreclosures/bank-owned or short-sales is holding steady around 25 percent. We've been seeing the percentage stay around 25 for most of this year.
Though we'd all like to see that percentage go down, it's definitely good news that it's not increasing. The fact that it's not increasing is another sign that the worse is behind us.
Remember when I said the administration had six months? That's two weeks from today. Fair or unfair, inherited or promulgated it doesn't matter. There is no kick left in the can and a new can isn't going to cut it. Can he shake the shackles and produce something with an end game the citizenry understands and accepts?
One thread late, but the government stalling tactics are ore denial. The siutation in reality in bargaining.
The 5 stages:
2007 - Denial (Remember this? "We're not in a recession, we haen't had 2 bad quarters yet")
2008 - Anger (especially over Paulson's TBTF, and numerous other things we're still not over yet)
2009 - Bargaining (extend and pretend, secondstimulus, etc.)
2010 - Depression (maybe most of the population will actually start calling it a depression)
2011 - Acceptance (the only way recovery is going to happen)
CR, Tanta, and others were a year two ahread of the rest of us. The sad part is the election put everybody else in a state of denial which far too many are still in today. By early 2012, we're bound to have candidates asking "Are you better off today than you were 4 years ago?" Unless we have an even bigger problem to trigger the denial stage all over again.
There's a lot of pent- up demand on this board.
Luckily, I'm not part of it!
Rob, if this talk of a second stimulus takes off, man watch out...J6P is just now figuring out how much money went bye-bye in the government sponsored hat trick. Now you see it, now you don't. IT ain't coming back folks. Good luck selling a bigger package the second time. Not that he has to sell it, I am sure Congress will pass it anyway. Have to. The US is too big to fail! We can't let the world down, now can we?
nova - LOL! They're obviously wrong because whatever happens to RE, they're still Loudon County...
C
Remember when I said the administration had six months? That's two weeks from today.
So what? Do you think he's working on your timetable? What are you going to do, fire him?
Nova, yes, the crash in 1929 was only the societal recognition, the depression had started several years earlier but only for a small set of ignored people. Our depression began in 2001.
"It's part of the Obama/Biden/Geithner plan for Stimulus II that needs..............."
WAIT A SECOND.............You guys even remember "Stimulas I"? Remember back last spring/summer that monumental spending bill that sent us all (except people like me) $600? I think it cost the US about $135-billion? THAT was Stim#1 - a pre-paid tax credit. The Solution to the Problem. ...........well, maybe not now.
Got a lot of weird looks on the Metro tonight as my outraged snort became a racking cough mixed with expletives, having glanced at the back page of today's Politico.... full page ad from Glodmans, strapline "Meaningful change and lasting reform".
Blah blah lessons learned, we must work with policy makers and regulators, enhancing investor confidence etc etc. And not content with shafting a single country system, there's some flannel on "more global coordination". Excellent.
Final exhortation to the Brilliance That Is Glodmans ... a link to Mr Sacred Harvard Ring himself at gs.com/speech/cii
Lordy.
C
Dang. I'm he only one that showed up for the pool tourney today. Last week we had six, eight the week before. The job situation seems significantly worse than four weeks ago. This can't go on much longer without a body count.
BSR, I stand corrected, I should have said the third stimulus. Hadn't forgot the first, just dealing with the current President, but you are right.
The banks don't want these properties. But they don't want to forgive the debt either, not for what it does to that loan, but because of the precedent it sets for the other thousands of people who are also underwater.
Yikes. We're going to have a situation not unlike South America where Hernando de Soto wrote of trying to deal with mysterious land title systems. Even if you could get someone to admit that title existed somewhere, it would take years for someone to actually make an effort to track it down. Delays kept people in government jobs, but they also kept capital in a perpetual holding pattern.
There is no national solution in our present government - there is no microeconomic expertise. Volcker has already been put out to pasture by Summers et al. Any national solution will strictly be election-based. Hope is the antithesis of acceptance.
Let's not pretend the entire country has become Wayne County. Please.
Wayne's World then maybe?
S. Korea gets attacked!
by hackers.....
Yahoo! 404 - Page Not Found
The house next to me was bought in 2006 for 850k approx. The police finally kicked whoever was left out about a year ago. It's been empty since then and had an. NOD on it for atleast 6. Mos. The front yard has grass up to my stomach. This is in a good part of Fremont,ca.
This is in a good part of Fremont,ca.
Pic?
"Final exhortation to the Brilliance That Is Glodmans ... a link to Mr Sacred Harvard Ring himself "
They really are shameless, aren't they? You would think that their PR conslutants would tell them to just shut up.
Max, the housing development right across from quarry lake
A good point. I should lay off the Comet.
That shit'll have you trumpeting like an elephant. Anyway, servicers really don't gain anything by delaying a foreclosure. Quite the opposite. The practice of marking mortgage-backed securities to market has nothing to do with it, either.
That said, YES -- government "moratoriums" do create "pent-up" fc sale volume. But I thought California's little experiment with that was over. No?
Btw
But I thought Cali's little experiment with that was over. No?
No, a new 3-month moratorium went into effect July 15.
Edit: Or June 15, forgot which.
Shnaps we just started another 90 day moratorium in ca 2 weeks ago
shnapps.
everybody saw you correct your "practive".......just let it flow.
broward,
they just didn't tell you where the action is.
Lol.
There is always a game in a town with more than four bars.
I used to have a lot of fun watching kids come into the bar. They used to give me crap about my two piece cue.
Left the nice McDermott at home and used my fav Huebler.
They didn't realize the rest of the guys around the table all had Sneaky Pete cues.
I just didn't give a crap. My table, my rules;-}
cutthroat, 3 ball, nineball, 1 on the 5, 3 on the nine, straight eight, billards.
Moral of the story, kids who just turned 21 have no business shooting bar pool- they think having shot a bunch of games at the frat house they know crap.
I remember when we had a bunch of gas pipeline workers come through for a Winter in Williams, Arizona. Those kids would cash their checks at the bar and pay for their education. I remember when one kid got his money, nearly a grand, Dad took back his loan and rent money for the next week- the Kid was poor by closing time, and broke after the barmaid got done with him in the morning.
Someday this war's gonna end...
Max, the housing development right across from quarry lake
Got it.
No, a new 3-month moratorium went into effect July 15.
That moratorium is bluff and bluster. Banks that have a "foreclosure prevention plan" in place are exempt.
"Hope is the antithesis of acceptance."
+10
Still hoping Obama will turn out to be the leader many thought he was.
And just read this:
U.S. mortgage fraud 'rampant' and growing-FBI
bANK fAILURE, I have embraced the "edit" feature. My signature typos are a thing of teh psat.
Thanks, poic. There's your "pent-up foreclosures", folks. Don't blame the "banks" who stand to gain in some sinister way by ordering their staff to blink at loan files while pumping farts through their Aerons all day long.
um, everyone to get from street?
Thanks Chainsaw, just try pushing acceptium on the street corner...
Reminds me, what exactly was that surge in Afghanistan all about? If there are no combatants what are they doing? Farming?
Oh.
C
picosec,
perhaps 770/month is the maximum rate Alameda can process...
CP,
We (the American public) are gonna confront reality eventually. Might as well get on with it. Be nice if the leaders were actually leading this instead of extending and pretending.
I cant here myself, but I can here ya'll
Number 41
guess the guest/user ratio.
I see 7.28
That moratorium is bluff and bluster. Banks that have a "foreclosure prevention plan" in place are exempt.
I think that is what we are talking about... foreclosure prevention plan = don't ask, don't tell... extend & pretend.
Charles Kiting,
how have those 5 stages played out in Japan?
The 5 stages:
2007 - Denial (Remember this? "We're not in a recession, we haen't had 2 bad quarters yet")
2008 - Anger (especially over Paulson's TBTF, and numerous other things we're still not over yet)
2009 - Bargaining (extend and pretend, secondstimulus, etc.)
2010 - Depression (maybe most of the population will actually start calling it a depression)
2011 - Acceptance (the only way recovery is going to happen)
? t a h w e h t
perhaps 770/month is the maximum rate Alameda can process...
There appear to be bottlenecks in both the mortgage servicer side and the legal side, so that may indeed be the current limit of the system.
Rereading my last post, I just realized there is still some idealism remaining within me. I had thought that was gone by now.
"Be nice if the leaders were actually leading this instead of extending and pretending. "
They are. The sailors are leading the rich off to the golden lifeboats on the titanic, while the middle class is locked in behind a gate in the lower tier, chained to their mortgage/bonds/401k. At least the band is playing Hannah Montana's new song, while the illegal immigrants are sneaking past the gates. Will Leonardo find bar rafaeli and her two spectacular floating devices and get to safety?
Kermit suckerpunched in Tokyo during the morning session. Aggregates down, Hang Seng H Financials get a ribbon for worst in show, ASX busting -1% on consumer confidence rebound (why is everything upside down in the antipodes?), bilious mood for Japan bonds.
Might as well lock it up in bonds for the summer guys.
Wow, and it just so happens...
C
Bryan Marsal said it plainly - everyone is buying time.
Bryan Marsal said it plainly - everyone is buying time.
Perhaps everyone should be buying "thyme".
@ Speed (profile) wrote on Tue, 7/7/2009 - 7:38 pm
Bryan Marsal said it plainly - everyone is buying time.
What for REAL hope and change ?
Hilarious
TOKYO (MarketWatch) - Japanese data sets released Wednesday suggested the global recession continues to take a toll, showing up in both lagging and leading indicators.
Japanese current-account, machinery data downbeat - MarketWatch
Listen - in the 80s farm crisis we all saw the same thing... at the peak banks and S&Ls would do anything to NOT foreclose if at all possible... the last thing they wanted was another beat up insolvent underwater farm. But they got them dumped on them anyway...
That was a regional phenomenon - this sucker is bigger: national or even international and across both residential & commercial.
No wonder banks want to extend & pretend as much as is practically possible - who wouldn't if your job [as an employee of the bank] depended on it?
coinz, why by thyme, when you can let the cilantro go deep root and get the coriander ..... good stuff in a curry hurry.
if yer not eating out of yer own garden.... you're missing the "real" green shoots.
AllenM, no, it's a scheduled tournament. I'm scouting around for another game but I'm still surprised that nobody else showed up. Damn. Now I see how wars start. "make something change, anything, just make something change"
I can't believe that anyone thinks that accelerting foreclosures will matter that much. 1 + 1 still equals 2, even if you delay adding it till tomorrow. The delusion is really sad sometimes..
Updated list of servicers exempted from the California foreclosure prevention act:
Sacramento Real Estate Statistics: More California Foreclosure "Prevention" Act Exemptions
Short time.
C
Someone had more fun than I this past Independence Day!
"The Treasury Department, Secret Service, Federal Trade Commission and Transportation Department Web sites were all down at varying points over the holiday weekend and into this week, according to officials inside and outside the government. Some of the sites were still experiencing problems Tuesday evening.......the Transportation Web site was "100 percent down" for two days......the fact that the government Web sites were still being affected three days after it began signaled an unusually lengthy and sophisticated attack."
Federal Web sites knocked out by cyber attack
Somebody's getting upset with the FedGov:
Federal Web sites knocked out by cyber attack
"The Treasury Department, Secret Service, Federal Trade Commission and Transportation Department Web sites were all down at varying points over the holiday weekend and into this week, according to officials inside and outside the government. Some of the sites were still experiencing problems Tuesday evening."
Bored hackers on holiday? Angry citizens marking Independence Day?
Hmmm.
BlackStar,
You beat me by less than a second!
sorry, smLand.....I read slow.......
But Obama's Cybersecurity Initiative Wins Praise
May 29, 2009 - U.S. President Barack Obama's announcement Friday of a new cybersecurity push by the U.S. government won widespread praise from the technology industry, with many people saying his attention to the issue is a major step toward better securing the nation's computer networks.
Obama's Cybersecurity Initiative Wins Praise - PC World
Calling Richard Clarke
Our depression began in 2001. ...Broward
I am no economist but this rings true.
Counterpointer,
"Short time."
So what's on your short list?
I'm thinking that CRE REITS have some juice left in them.
I'm thinking bout buying some more TIP to park cash. I've been buying on dips below $100.
Corp bonds scare me.
BSR / smlandlord - or maybe it was a certain large financial institution having a look-see for some missing code?
Prop(ellerhead) Central, former IB: Hey, who the fk would muscle in on our trade code? Dude... competition? Unh, no, there isn't any. Err, ok, try Treas, SS - yes, I know it says that on their cars, but try anyway - and uh, Trade, no not the WTO wienies, FTC. You mistyped Trans, try T-R, jeebus do I have to do everything myself.. TRA...
C
"Federal Web sites knocked out by cyber attack"
Some hackers were trying to find the secret sauce to US government's automated stock/commodities/bonds/oil trading business?
if yer not eating out of yer own garden.... you're missing the "real" green shoots.
We have tomatoes, lemons, limes (not producing yet), cilantro and mint. Not exactly bunker ready, but something. Never enough thyme.
Federal Web sites knocked out by cyber attack
Yahoo! 404 - Page Not Found
Gee what did I just post right above
sorry Scrooge McDuck I set up the straw man!
Dry and others are correct. Banks (and other fin'l institutions) know this game is a play for survival. The last ones standing win. So delay as long as possible.
Consider two banks, both with the same equity and assets, but different strategies. Bank A 'fesses up to losses right away, and becomes insolvent 3/4 of the way through the worst of the fin'l storm. Bank B has the same losses, but delays recognition. It survives, and at the end of the fin'l storm, now sees a rebound in its asset values and future profits as one of far fewer players in a lucrative market. Even if it's real losses are bigger, it is the winner.
Besides, as the crisis reaches its peak, and more and more banks go belly up, the govt will step up (yeah, even more than now) its banker aid efforts. So it's best to stick around for the most handouts.
I can't help but think this has something to do with zombie banks. Wouldn't foreclosure require realizing a loss, while doing nothing would allow them to postpone it until say Q3 or Q4?
I mean, how much extra loss would you take later if it ment staying in buisness? Or getting a bonus?
Counterpointer..luv yer stuff.
ITs like watching Brazil, in real time Financialstanimation.
Lie in Our Graves
Im blown away.....
but why are the servicers delaying?
Consider two banks, both with the same equity and assets, but different strategies.
Thanks PR - everyone on this forum thinks 'marco'... bank execs could care less - they are 100% 'micro' and only worry about their own fate... they know many if not most of them won't make it to the end of the tunnel but THEY are going to be one of the few and so plan 'accordingly'. Sum that behavior up across many many 'participants' and you have the macro picture.
patientrenter - and that, it horrifies me to suggest, is why now feels like early summer groundhog day. The policy is still Mutually Assumed Denial, the only difference being the credit markets have been partly unthawed by the bailing, alphabet soup, and printery.
Ghesh, people are counting on me for new financial ruin jokes this bbq season.
C
but why are the servicers delaying?
Read 'The Goal' - they are under-resourced and bottlenecked down stream [courts & real estate market]... why push on a string?
they are under-resourced and bottlenecked down stream
And, if the "owner" remains in the house, there's a chance it won't be vandalized.
but why are the servicers delaying?
Read 'The Goal' - they are under-resourced and bottlenecked down stream [courts & real estate market]... why push on a string?
Now that we are living it, the whole Japanese real estate bust and slow decay makes a lot more sense. Everyone is acting rationally in their own interest and the result is a long strung out deflationary depression. But we did it better, spreading financial poison across the globe. The Japanese were first and we should give them props for that.
I can just hear the banks in 2006 saying "it doesn't matter if this is a bubble. We are making so much money even if prices go down 5, even 10% and the correction lasts twice as long 6, even 8 quarters we can still survive comfortably and come out ready to make bank even if it takes all the way into 2008."
I guess the question then becomes Who owns the servicers?
Do banks own them? Are they just paying Peter and robing Paul?
I know some insurance companies own some of the servicers, but I don't know enough about who owns who to really know.
I have a supsition that neither the banks or the servicers are doing anything that would damage themselves. Or do the servicers go BK?
they are under-resourced and bottlenecked down stream
For you non-mfg types that have never read 'The Goal'... think of it this way:
If you have a pretty severe intestinal blockage - are you gonna make three trips to the salad bar? That is sort of how the servicers feel about now.
Now that we are living it, the whole Japanese real estate bust and slow decay makes a lot more sense. Everyone is acting rationally in their own interest and the result is a long strung out deflationary depression. But we did it better, spreading financial poison across the globe. The Japanese were first and we should give them props for that.
Japanese make the best prototypes - I know, I work with some.
Irrelevant factoid of the evening - bloomie has just re-scaled their 10yr and 30yr yield axis for the overnight trades to the third decimal. Usually sticks to bps ticks.
Wondered why the tightening looked a bit exuberant.
C
I'm not sure I understand a lot of the comments here about the need to write off the loans made to people who wanted to pay very high prices for homes. A person has $10,000, and decides to buy a home that costs $500,000. With others' help, they make arrangements to pay the remaining $490,000 later. The price they could sell the home for goes down (so what?) and everyone decides that the economy will crash unless they get to bail on paying the remaining $490,000 in full? That's twaddle. The deal was that you get the house, and you pay $500,000. If you fall down on your end of that deal, what needs to happen is that you lose the other end - ownership of the home. Then you go rent, and someone else who has real money buys the home at the price determined by real money demand.
Why do we all have to pretend that this isn't the straighforward and right solution? It's not rocket science, and it won't be catastrophic, except for people who relied on the unsustainable free lunch of home price appreciation well in excess of inflation. And we need to deliver a catastrophe to those people, to change a lot of wasteful behavior.
Patientrenter,
Short answer: fractional lending.
Counterpointer.
any other Sovereign curves look suspect?
Ants Marching is my favorite game.
followed close second by Tupelo Honey. and swarming bees
I have to go now.
I did some graphs of trustee sales based on ForeclosureRadar data. You can see the increase in trustee sales. I update these graphs on the 1st and 15th of the month.
Orange County:
Effective Demand: Orange County Trustee sales for June 2009
Los Angeles:
Effective Demand: Los Angeles Trustee sales for June 2009
San Diego:
Effective Demand: Updated San Diego Trustee Sales for June 2009
Ventura County:
Effective Demand: Ventura County Trustee Sales for June 2009
p.s. I was at the trustee sales in Ventura today. Competition was fierce. 10 homes were for sale, 5 went to third parties. The banks have a long way to go before they overload this market. The demand at retail (MLS) is high at 5% interest rates but ability to push price is limited.
@patientrenter (profile) wrote on Tue, 7/7/2009 - 8:21 pm
I'm not sure I understand a lot of the comments here about the need to write off the loans
Listen to this YouTube - Jefferson Airplane-D.C.B.A.-25 ....it will help
So I guess this is defaltion. Long live deflation. Gads we are all poorer now.
Why do we all have to pretend that this isn't the straighforward and right solution? It's not rocket science, and it won't be catastrophic, except for people who relied on the unsustainable free lunch of home price appreciation well in excess of inflation.
Never forget - this crisis is NOT about the homeowners... it's about the banks, the bonds and the derivatives all based on revenue streams from those mortgages... if they go away so do the banks, bonds, derivatives and more importantly pension funds, annuities, 401Ks, insurance plans, endowments etc. who own them [that and those who borrowed to them so they could lever up 30:1].
And all the jobs, bonuses, partnerships & dividends those 'activities' support. Its systemic... houses are the tip of the iceberg.
Remember - Bernanke's 'contained'? I bet he knew then how F'ed we were but was trying to bluff the rest of the table and he got called and busted. Now we are all busted.
So Lear Corp. finally crawled into BK court today.
$500 million in DIP financing from JPM and Citi. $1.27 billion in assets and $4.54 billion in liabilities.
toastaroma...but:
'"We are conducting business as usual and are very pleased to have received strong support from our lender and bondholder groups for our debt restructuring plan," CEO Bob Rossiter said in a statement.'
dryfly - U work for prototypes?
$1.27 billion in assets and $4.54 billion in liabilities.
duh - Ya think they would have seen this coming! Friggen MBA gurus who dont have a clue....
Re possible Alameda County Trustee Deed processing bottleneck...
Just checked, August '08 there were 991, Sept. there were 948. We still have room to grow (and will).
Rob Dawg (homepage, profile) wrote on Tue, 7/7/2009 - 8:17 pm replyIgnore userPatientrenter,
Short answer: fractional lending.
Fractional lending up and down the entire food chain, And then they made up new meals to lend more.
So I guess this is defaltion. Long live deflation. Gads we are all poorer now.
For now - but longer run it depends on the 'policy response' too. Until we know how far the Fed & Treasury [and congress] is prepared to go then we don't know if deflation or inflation and when.
if they go away so do the banks, bonds, derivatives and more importantly pension funds, annuities, 401Ks, insurance plans, endowments etc. who own them [that and those who borrowed to them so they could lever up 30:1]
Yep, and the suck part is that the middlemen make so damn much losing OPM.
Billy Ray: No thanks, guys, I already had breakfast this morning.
Mortimer Duke: This is not a meal, Valentine. We are here to TRY to explain to you what is we do here.
Randolph Duke: We are 'commodities brokers', William. Now, what are commodities? Commodities are agricultural products... like coffee that you had for breakfast... wheat, which is used to make bread... pork bellies, which is used to make bacon, which you might find in a 'bacon and lettuce and tomato' sandwich.
[Billy Ray turns and gives a long look at the camera]
Randolph Duke: Randolph
[continuing]
Randolph Duke: And then there are other commodities, like frozen orange juice... and GOLD. Though, of course, gold doesn't grow on trees like oranges.
[chuckles]
Randolph Duke: Clear so far?
Billy Ray: [nodding, smiling] Yeah.
Randolph Duke: Good, William! Now, some of our clients are speculating that the price of gold will rise in the future. And we have other clients who are speculating that the price of gold will fall. They place their orders with us, and we buy or sell their gold for them.
Mortimer Duke: Tell him the good part.
Randolph Duke: The good part, William, is that, no matter whether our clients make money or lose money, Duke & Duke get the commissions.
Mortimer Duke: Well? What do you think, Valentine?
Billy Ray: Sounds to me like you guys a couple of bookies.
Randolph Duke: [chuckling, patting Billy Ray on the back] I told you he'd understand.
@patientrenter,
what dryfly said, and I would add that according to CR, the two main sources of economic recovery tend to be residential real estate and personal consumption. Fixing mortgages would fix both to some extent and speed recovery of the general economy.
I remember when this whole crisis began to really break the surface, back in the summer of 2007 and the ensuing months. I wondered what the top bank CEOs would be doing to prepare for the tidal wave of bad debts. They were putting together crack teams of their top execs to analyze buying other banks, and executing the analysis in a weekend. Geniuses like Ken Lewis bought Countrywide (and later Merrill) in a hurry. These decisions were much more complicated than coming up with a rapid exit strategy from their worst blocks of mortgage loans. Back then, there were buyers for 95 cents on the dollar. But they couldn't come up with a quick strategy and execute it.
My conclusion is that banks want loan servicers to be overwhelmed. If they wanted to change things, they could. Instead of having to admit that they are waiting for more handouts, they can pretend that it's all just a logistical problem. At a low level, it is, but the industry leaders could change that... if they wanted to.
So Lear Corp. finally crawled into BK court today.
When I was in the maquilas a few weeks back everyone was saying Lear will be the next big tier one to go. I used to work with a plastics company that had (1) Delphi (2) TRW (3) Lear and (4) Visteon as their top accounts... combined they accounted for 70% of their sales. Nice business model [not]...
I have nine grandchildren in Highschool and College. I have been trying to come up with an exit strategy from the sinking ship for the USA. I think the answer is Alberta. They will be a major oil supplier to Canada and need educated talented people. Pains me me to recommend it but my ancestors moved on from Scotland in the 1800;s and now it is time to move on from our very own Titanic.
You are not that much poorer when wages and prices go down at roughly the same rate; i.e., deflation, especially if you don't owe a lot of money.
You are much poorer when your wages stagnate or go down at the same time prices go up; i.e., stagflation. That's what we are living.
This government, Fed and banking system will never let deflation happen. We've known that for a long time. They are aiming for stagflation.
The CPI will not go up for some time, because owner's equivalent rent is almost one-third of the weight. But many other prices, especially commodity prices, will go up. Don't expect your doctor bills, college tuitions, or utility bills to drop much any time soon.
Now's (or soon) is a great time to buy some food, in whatever form you want.
So, the Infinity Put did not come off as planned?
Time for Dead Man again:
YouTube - Neil Young - Dead Man theme / Infinite / -w. words
C
...
dryfly;
"I used to work with a plastics company that had (1) Delphi (2) TRW (3) Lear and (4) Visteon as their top accounts..."
Two down, two to go?
Banks want to be Johnny B. Goode
You thought Chuck Berry right.....check out this version by one-or-two-in-a-century kinda musicians. Absolutely insane.
YouTube - Johnny B. Goode
Out...
TRW will get "strategic national asset" status for their indispensable other businesses.
rich - I sense we are back to Oct of 08....lots of nerves
TRW will get "strategic national asset" status for their indispensable other businesses.
Much of TRW's strategic stuff was sold off to ATK I believe [Alliant Tech]. I think they run all the weapons programs, aerospace & missile stuff TRW USED to do. TRW is mostly car parts now [I believe].
Regardless - if TRW has defense left in it... that will go in the 'good bank'... you can bet the 'accounts payable' to the guys I knew will be in the 'bad bank'. After all they don't know anyone at Goldman Sachs.
Looks like Nikki's back from lunch. How was it? [Blurggghghh.] Oh, I see, too much rohm and yonekyu, better out than in, as they say.
Afterlunch dive to -2.16%.
nytol
C
If wew are headed for stagflation....mmm those 20 plus year bonds aint lookin' so good.
dryfly;
"I used to work with a plastics company that had (1) Delphi (2) TRW (3) Lear and (4) Visteon as their top accounts..."
Two down, two to go?
I think only TRW is free of the courts right now... Delphi & Visteon went BK a couple years ago... I thought they exited but heard somewhere that they were hung up... Lear went today so that only leaves TRW.
These guys are going to be experts in bankruptcies...
OK, if we're going to post Hendrix videos, this one is pretty on topic:
YouTube -
There must be some kind of way out of here
Said the joker to the thief
There's too much confusion
I can't get no relief
Business men they drink my wine
Plowmen dig my earth
No one will level on the line
Nobody of it is worth
No reason to get excited
The thief he kindly spoke
There are many here among us
Who feel that life is but a joke
But you and I we've been through that
And this is not our fate
So let us not talk falsely now
The hour's getting late
All along the watchtower
Princes kept the view
While all the women came and went
Barefoot servants too
Outside in the cold distance
A wild cat did growl
Two riders were approaching
And the wind began to howl
@Hanging by a thread
You are one smart grandparent; your grandkids are very lucky to have you.
I thought Visteon was toast already, too.
ISTR that Visteon went BK again about a month ago.
Dupe
Nytol.
dry, if every homeowner who agreed to pay a high price for a home and who could afford to service their loans on the original terms did so, then this fin'l episode would be survivable with fairly modest intervention. But what's happening now is that people who can service their loans can see they will lose the free lunch of home price appreciation, and they want another deal, ex post facto.
So a lot of what's being done is to help fat banker cats, and big investors, and even little investors (like current and future pensioners etc) saving through fin'l institution. But a very big motivation is enabling homeowners to engage on one-way bets on a massive scale.
From Dryfly
"Never forget - this crisis is NOT about the homeowners... it's about the banks, the bonds and the derivatives all based on revenue streams from those mortgages... if they go away so do the banks, bonds, derivatives and more importantly pension funds, annuities, 401Ks, insurance plans, endowments etc. who own them [that and those who borrowed to them so they could lever up 30:1].
And all the jobs, bonuses, partnerships & dividends those 'activities' support. Its systemic... houses are the tip of the iceberg."
I keep repeating, buy up the heavily discounted bonds. They aren't priced exactly right, but huge portions of Federal aid will be absorbed by people who own bonds that are now trading at 5-70 cents on the dollar. Retire those bonds. Otherwise, a large portion of the government guarantees and subsidies are going toward abnormal returns from now onward for bondholders.
patientrenter,
Gotta disagree. Although they're certainly a factor, there were plenty of people that bought homes they couldn't afford to make it "unsurvivable".
Barley is right. Give us 4-6 weeks and it's Oct 2008 again. This time it's banks and munis with problems, not investment banks and AIG.
I have tried to be more optimistic, but my forecast for CA has moved from bad to apocalyptic. Large scale riots, looting, arson. National Guard and Federal troops. Late 2009 or 2010.
So a lot of what's being done is to help fat banker cats, and big investors, and even little investors (like current and future pensioners etc) saving through fin'l institution. But a very big motivation is enabling homeowners to engage on one-way bets on a massive scale.
Exactly - but the reason they are trying to 'save the homeowner' is because that dudes mortgage payment [and millions of others like his] is what is floating the boat. Its like a cock fight... money is flying all around the fight pen but if there are no cocks - there is no wagering. They don't care if one cock or another lives or dies - just so long as there is another fight to wager on. They couldn't believe they would ever run out of roosters.
Right. The debt just keeps moving around and breaking the next weakest link. Feds know it, just hoping for a miracle.
Ooooo! I'm really going to enjoy the next several months!
Let's see. Now where's my checklist?
Well, see you guys at the rendezvous!
TJ, I'd be very curious if someone deeper in the mortgage weeds than me could provide actual data on what aggregate losses would come from
a. dialing loan payments down so payments did not exceed 50% of a borrower's income, after first using their net worth to pay down the loan as much as possible, versus
b. the proposed forgiveness schemes, designed to allow most people to avoid the consequences of home price depreciation much below their purchase price.
We've all read the stories about people buying other assets before they default. I think a lot of the forgiveness is going to people who have some capacity to pay, and choose not to. Not necessary, and not my preferred solution. And I am totally unconvinced that our economy will be better for allowing that.
Worst case scenario: if that tries to happen, it won't be allowed to for long. If I were Obama, I would:
In short, occupy it like a banana republic, ream out the old regime and put in a new one to the cheers of the multitude. Think it wouldn't work? If it got as bad as you fear, I bet he'd get the support he needed.
If it gets that bad. Me, I'm not convinced. But neither am I particularly knowledgeable.
And I am totally unconvinced that our economy will be better for allowing that.
No one that I know is saying 'the economy will be better' for it... they are just sayin WHY the banks [and gov't owned by the big IBs & bond funds] are so desperate at trying to short circuit the downward spiral. YOU might benefit from a cheaper house [being a patient renter]... but the I Banks & funds, etc. would certainly NOT be better off - not the way they structured these securitizations then levered them all up a gazillion to one.
perhaps 770/month is the maximum rate Alameda can process...
.
There appear to be bottlenecks in both the mortgage servicer side and the legal side, so that may indeed be the current limit of the system.
.
Respectfully disagree. California forclosures are nonjudicial so there is no court backlog. No court at all in the foreclosure process.
dry, if maximizing the loan payments were the motivation, then why would we be forgiving interest or principal for people who can afford to pay? We are, either by explicit choice, or through the back door, by claiming that e.g. $3000 is too much to pay to find the true income and assets of each borrower asking for a bailout who shows some signs of having means. If you were told that you could personally collect up to $100,000 from each borrower from their assets and income, I am pretty sure you'd be a lot more aggressive than the servicers. It's a political decision to go easy, and subsidize the successor to the Greenspan put - the Great Housing Put.
TRW will get "strategic national asset" status for their indispensable other businesses.
Much of TRW's strategic stuff was sold off to ATK I believe [Alliant Tech]. I think they run all the weapons programs, aerospace & missile stuff TRW USED to do. TRW is mostly car parts now [I believe].
Regardless - if TRW has defense left in it...
Wasn't TRW bought by Northrup Grumman?
Dryfly...The cockfight imagery is instructive. And just to make sure there are enough metaphors, the bankers know that when the last cock dies, the tide goes out.
dry, if maximizing the loan payments were the motivation, then why would we be forgiving interest or principal for people who can afford to pay?
Because they walk away otherwise... the homedebtors KNOW they are underwater so the banks are doing ANYTHING to keep as much cash flowing as possible into those instruments... cash is to them is what blood is to a vampire. The banks don't care if the homedebtor could or couldn't pay in theory just so long as they do pay and something is better than nothing. At least for now... if they can foreclose and do better then they'll do that - eventually - but for now that option is off the table... so 'extend & pretend'. Nothing I've heard explains it better than that.
It is perfectly logical on a micro level even if insane viewed from a macro level.
this is what the glodbugs have been saying forever...
fiat may deliver the illusion of growth and even the more fleeting illusion of control for would-be policymakers... but it is simply too weak a vehicle to serve as money in times of stress.
even with the BEST of policy and the most sober of management, the days of FRNs would be numbered - like the paper itself. of course, we had neither, if not the opposite.
do commodity currencies prevent booms and busts? of course not. but they're much, much harder to manipulate into something infinitely worse.
I guess this also a commentary on the type people who are unemployed.
WSJ: Fast Times for Jobless Runners
As Unemployed Amp Up Their Training, Marathon Results and Participation Rise
Americans might be poorer, but they certainly aren’t slower. With the economy in the doldrums, more people are discovering that without those 12-hour workdays, they’re able to pursue fitness goals like never before. Marathons, triathlons and road races are filling up in record time.
Some evidence suggests that laid-off marathon runners are actually helping push up the level of competition within their age groups. Olympic-level competition could even go up because more elite athletes coming out of college are opting to pursue their athletic goals rather than look for work in a dismal job market
Wasn't TRW bought by Northrup Grumman?
I think it was pieced out - ATK got some, Goodrich Aerospace got some and maybe NG too. Not sure.
"Wasn't TRW bought by Northrup Grumman?"
The defense and systems engineering part was. I don't know who ended up with the rest.
There is a long and storied history involving Hughes Aircraft, Northrup, and Ramo-Wooldridge.
TRW - Wikipedia, the free encyclopedia
yes, i'm back checking in. haven't had time to keep up on the comments due to, um, work. just got promoted, am now the COO in addition to the CFO of a multi-campus charter school in dc. trying to develop three campus buildings as we speak and manage the 130 person organization. its got me busy to say the least.
overall, doing very well.
would spend more time here if the news seemed like there was any shifts coming. instead the same drum beat continues and looks to for a while.
thank god i got into a growth sector!
hope everyone else is doing well or managing. its been a wild few years at this place...
dc1000
I disagree with rich; although I haven't lived through a time of stagflation. Who is going to be able to bid the price of commodities higher?
I don't think it is smart of me to disagree with rich, I just envision in the short term we enter a period where cash is king again and go through another crash. This market sure seems f'd up. Down 20% and up 20% all within the first 6 months of this year? Someone convince me why I shouldn't be riding SCO for the next couple of weeks?
Squidward,in california you have a choice of Judicial or Non Judicial Foreclosure.If you hold a non purchase money mortgage (a Recourse Loan) you have to go through a Judicial Foreclosure in order to get a deficiency Judgement.This is VERY RARELY worth the extra time and money involved.Sometimes it is,and I have a friend who is doing this because the Borrower has easily attachable assets and is not in a position to file Bankruptcy.
Tom, thank you.
In any case, the courthouse ain't the foreclosure rate bottleneck .
http://en.wikipedia.org/wiki/TRW
I looked up ATK - they got their defense biz from Honeywell & Thiokol. I thought they got the Thiokol from TRW - not so.
I call on the old 'TRW Lucas' group [now Goodrich] so at least got that part right. Oh well...
I'm still in the camp that believes Obama will bail out Cali. That's my call!
dc1000
Glad things are going well, DC.
some investor guy (profile) wrote on Tue, 7/7/2009 - 8:51 pm
reply ignore user
Barley is right. Give us 4-6 weeks and it's Oct 2008 again. This time it's banks and munis with problems, not investment banks and AIG.
I have tried to be more optimistic, but my forecast for CA has moved from bad to apocalyptic. Large scale riots, looting, arson. National Guard and Federal troops. Late 2009 or 2010.
Which is exactly why I plan to put a tv in our driveway playing American Idol reruns 24/7. Better safe than sorry when the mob shows up. Need to keep them at bay. (:
Nikkei is shooting for -3%
Never forget - this crisis is NOT about the homeowners... it's about the banks, the bonds and the derivatives all based on revenue streams from those mortgages... if they go away so do the banks, bonds, derivatives and more importantly pension funds, annuities, 401Ks, insurance plans, endowments etc. who own them [that and those who borrowed to them so they could lever up 30:1].
That's the issue, isn't it...will those who have accumulated, in the form of financial assets, claims against future production be able to maintain those claims? And how much damage will they do to production in the attempt?
what explains the "foreclosure backlog" that's the subject of CR's post?
Is it all due to modification efforts?
"Who is going to be able to bid the price of commodities higher?"
People who need them. We've reached the point where supply of some commodities is going to dry up. Food may next, dairy farmers are already in deep trouble.
Not oil right away, but longer term, oil is getting more expensive. Short term, have fun with SCO, but make sure you keep your eye on it.
BTW, gasoline can get more expensive while oil gets cheaper. The U.S. hasn't built a new refinery since 1970, and only about 30% of the existing refineries can process the heavier crude that is becoming a more important part of the supply.
"they are under-resourced and bottlenecked down stream"
".......if the "owner" remains in the house, there's a chance it won't be vandalized."
....and most importantly, since the rules of the game change daily, there might not be any hurry to settle due to circumstances/terms improving thru DC.
As predicted:
Toxic asset program may be too late to help banks
dc1000 is the CFO of a 100+ employee institution yet six months ago, he trying to figure out which Chapter BK to file.
Welcome to the New Normal!
Wondering whether a market drop is needed to inspire Congress to approve another stimulus.
i'd welcome the days of 3% stock market growth + 5% wage growth instead of 10% stock market growth and 0% wage growth.
Man, been an interesting day to say the least. I feel change a coming in my bones, and felt a chill in the air tonight (which is pretty hard in this Texas heat right now). Don't know if I would say this is Oct. 2008 again, feels different for me. Bad voodoo ahead. People be safe, especially out in Cali. Wife's family is still oblivious to what is going on. I guess Barstow and Santa Maria aren't too concerned with the implosion. Life goes on. Good night
"Treasury is going forward with the program (PPIP) largely to improve confidence, said Douglas Elliott, a former investment banker now with the Brookings Institution. He expects that two-thirds of bank losses will be in categories like commercial real estate loans, commercial investment loans and credit cards."
........more calvinball fecal matter.
do commodity currencies prevent booms and busts? of course not. but they're much, much harder to manipulate into something infinitely worse.
I've never quite understood this argument. It's just as easy for banks to lever up a backed currency as it is to lever up fiat--they're not the ones backing the currency after all.
And at best, only the currency would be backed, not demand deposits or other forms of money. In a world of electronic, plastic transactions, how much difference would that make?
In other happy news, US census released their 2009 initial numbers
i'd welcome the days of 3% stock market growth + 5% wage growth instead of 10% stock market growth and 0% wage growth.
But GS wouldn't and their opinion counts more than yours. Sorry.
"Just One Way to Decrease Welfare"......... provide enough people with unemployment checks - thereby disallowing welfare due to income maximums.
"Right now you can get up to 79 weeks of unemployment," Anders says. "And if you're receiving unemployment, you're usually receiving too much in benefits to make you eligible for cash assistance from our area."
State Welfare Rolls Feel Impact Of Recession : NPR
a record 33.8 million participated in the Agriculture Department's Supplemental Nutrition Assistance Program in April
Financial Armageddon: Latest Food Stamp Data Makes for Sober Reading
TJ&B
Is that 33.8 people or households?
Futures are negative. With Japan falling, we may get another negative feedback loop reverberating around the globe. Could be fun!
that better be people, since there are "only" about 110M households (which is sure to decrease)
sm_landlord,
People who need them? Like us fat Americans who could probably stand to lose 50% of our weight? Not me, per se. The guy in China who is making 10 cents an hour? Oh well maybe now due to inflation he is making 40 cents an hour. 400% inflation! Or how about the growing unemployed? They are going to be the ones who are bidding up the prices?
RockyR (profile) wrote on Tue, 7/7/2009 - 9:51 pm
reply ignore user
Futures are negative. With Japan falling, we may get another negative feedback loop reverberating around the globe. Could be fun!
Don't worry BB will do late night rate cut. Oh wait !!
33.8M people in 15.3M households. Nice, huh?
RockyR (profile) wrote on Tue, 7/7/2009 - 9:51 pm
will do late night rate cut. Oh
ROFL.
And yet is really is scary. I can laugh or cry.
33.8M people in 15.3M households
i would have expected that ratio to be higher (e.g. single mom with 3 kids). also interesting is that the household participation increased faster than the individual metric. must be lots of single unemployeds. no deflation with food stamps; the benefits went from 113/person in March to 133/person in April.
33.8M people
A little more than 1 in 10. Not as shocking when looked at that way.
I don't think we've had the "how many bullets does Bernanke have left" discussions recently... have we?
BB: You feeling lucky, punk!
BB: I said you feeling lucky, punk!
BB: Damn, 4 more to go... now; you punk! Are you lucky, huh!
BB (voice quivering now): Punk, the Fed has strong initiatives... that will help ease... capital... markets
BB (voice quivering looking down): I deem thee contained, punk!
BB: Hank, where's your bazooka!!! Hank, hank... oh crap its Timmay! Gonna have to get him from the sandbox to help me on this one.. . you stay there punk... don't move ... or I"ll shoot you with alphabet soup, 3-letter out of nowhere, up-up-down-down, left-right-left-right, B-A start, spin-tire-rate-cut!
Nytol - leaving it up to the night shift.
In a first world country which is (was) also the worlds biggest economic power.. It is shocking.
//A little more than 1 in 10. Not as shocking when looked at that way.//
He is clueless, not vile..
//dc1000 is the CFO of a 100+ employee institution yet six months ago, he trying to figure out which Chapter BK to file.//
They will be clueless, even after they move in with you.. soon.
//Wife's family is still oblivious to what is going on.//
We're all clueless. Might as well go into the "public storage housing conversion" field before it gets too hot. I've long been an advocating to my wife we shower at 24 hour fitness and live out of an RV at the beach. For some reason I can't convince her.
I agree with patientrenter upthread that it is criminal to keep housing prices artifically inflated to save our stupid banking system. I guess me and my generation will be expected to buy the houses? At the artificially inflated price?
Oh, I see... this is rich's point about inflation again.
"yet six months ago"
working for your own business is a bit tougher than working for someone else
Working for myself has never been more difficult than working for someone else.
Fewer hours, more vacations, same money, periodic agrivations.
When younger I had a larger business, way too many agrivations. I like the simple life.
Still hoping Obama will turn out to be the leader many thought he was.
In 2008 Obama was the leader in accepting money from GS. All else follows...
It must really suck to live in CA.
I want to applaud Congress on the excellent job of oversight of the Regulators that had the responsibility of supervising, regulating and enforcing the rules, laws and regulations for the financial system.
I want to sincerely thank the Congress for catering to the wealthy and the powerful class in our society who have shown their disgust for the average citizen.
Keep up the good work Congress. With your expertise in greed and lust for power it won’t be long before the American that you know and love will be a suburb of China.
tough crowd. sure BK'ing a company has a stigma to it, but it also makes me more experienced, savvy and knowledgeable than those that haven't. And there is no shame in trying and failing in my mind.
I've been promoted within 3 months to run the entire company so I guess I'm doing something right, prior BK or not.
Either way, thanks for the well wishes from the old timers and regulars.
"PR conslutants" very funny yet appropriate. It might need to go in the glossary.