Insolvency sounds much more sophisticated than bankruptcy... The English have always been more classy....
Random observation in light of the UFC fight tonight. The countries with the most interest in cage fighting (USA, IRL, GB) are also some of the worst off.... Risk must be in our blood.....
OT
GS is tight with the administration. Any chance Abby Cohen was aware of the 'better than expected' unemployment numbers before she made her bull market statement Thursday? Just wondering!
Maybe this helps to explain why Mr. King & Co. extended their quantitative easing program. I read a Bloomberg article the day before the BOE made their announcement and the vast majority of analysts predicted that BOE's QE program would be ending. Perhaps the worst is yet to come.
Luckily, we have liquidity experts on hand with stuff that solves the insolvency. Calling Federal Reserve: Liquidity Crisis in Aisle 4 with 30 million folks insolvent up to their eyebrows.
$44.95 to watch the closest thing imaginable to what a gladiatorial contest must have looked like back in the day of the Empire, intrigues me.
The only thing that really separates it, is not having a phone number* where the hoi ploy can call in and give the thumb's up or thumb's down as far as possible final removal is concerned...
"...suggests the worst is yet to come"?? Detail? Is he talking trendline for these figures or wider implications, perhaps? Looks like civil and political-order quake to me.
Is their bankruptcy closer to our new law or the old one? Also, they should have a much lower bk rate since health care never leads to bk there--all other things being equal (are they ever).
“Low inventories, cheap money, much cash in the banks and savings institutions, and the optimistic spirit of the American people are all factors which must work to the advantage of the bulls as time goes on.”
'Makes you wonder what the world total % of people are insolvent?'
interesting thought........
or, what percent of the world wakes up and goes on with their day with out giving it a thought one way or another.
'Makes you wonder what the world total % of people are insolvent?'
About 3 years ago on another financial blog, A guy in the major leagues of making loan decisions from a larger financial concern explained just how precarious even sacred cows (doctors, lawyers indian chiefs) that you would think were somewhat bulletproof financially, were oftentimes in reality up to their necks in debt like everybody else, or worse.
How many of your friends and family do you know with $5,000 in the bank?
I know lots & lots of ivory tower types, cops, electricians, people with major salaries, and I'd say 80% are living paycheck to paycheck. Just with more shiny (unpaid-for) things cluttering up their McMansions (also unpaid-for).
I'd like to be able to say the poorer folk are oh so virtuous, with frugal savings & spending habits. But they aren't either. Paycheck to smaller paycheck, like the big players....
This really isn't very many compared to the total population.
I was thinking the same thing. I wonder what the specific meaning of insolvent is in the UK. Maybe it's "bankrupt, and unable to make any payments, period"?
Almost 19,000 people were declared bankrupt during the second quarter of the year
i'm not how or when, but we've lost this type of language construction; probably a result of de-stigmatizing the event. In the US, the debtor files or enters BK, and if the court is satisfied with the terms, then we say the court is satisfied with the terms or that the plan has passed. But rarely will you hear that people were "declared bankrupt."
In the prior thread, there was some speculation about the number of foreclosures held back by banks. Isn't this number reported to some agency of the federal govt? I am sure it is. If so, isn't the FOIA applicable?
i think that's the problem. i can't think of any law or regulation that would have that authority. the closest would be the reporting to the FDIC of non-performing real estate loans, but that's just in aggregate amounts. and it wouldn't require reporting by non-bank mortgage outfits.
That San Diego NOD/foreclosure disparity is most interesting. Perhaps short sales explain some of it. As we enter the slow season, what are they going to do? Put supply on the market in December? Wait for spring?
pavel - that was superb - ever thought about a collection of crisis poems and nursery rhymes for children? Give it a generation and some prudence might come back.
(This acculturation point always occurs to me when I read Elizabethan nursery rhymes to the kids).
UK RE values were even nuttier than in the bubble areas of the US, supported by sunny optimism about ever-rising home prices and loose lending across the board. I suspect that, whatever we go through, the folks in the UK will be seeing twice the pain. Also, finance's share of the UK economy was twice as big as in the USA.
"i think that's the problem. i can't think of any law or regulation that would have that authority. the closest would be the reporting to the FDIC of non-performing real estate loans, but that's just in aggregate amounts. and it wouldn't require reporting by non-bank mortgage outfits."
Fair enough. I just can't imagine that when Larry Summers sits down to assess housing issues, he doesn't have accurate data on the number of homes in the foreclosure pipeline, in total and by region.
Tim has changed and Tim is strange
Here I come, my credit aint the same
Obama, I'm coming home
Times gone by, seems to be
You could have saved me from an NOD
Obama, I'm coming home
You ARMed me in and you drove me out
Yeah, you had me amortized
Lost and found and traunched around
By the FIRE in your guise
You made me cry, you told me lies
But I cant stay my cash ran dry
Obama, I'm coming home
I could be short, I could be long
Hurts so bad, it's been so wrong
Obama, Im coming home
Selfish banks yeah we're both alone
The ride before the fall
But I'm gonna fake this HELOC loan
I just got to have it all
I've seen your debt a hundred times
Everyday we've been apart
I don't care about the sunshine laws yeah
cause Obama, Obama, I'm coming home
I'm coming home
You ARMed me in and you drove me out
Yeah, you had me amortized
Lost and found and traunched around
By the FIRE in your guise
In it, she not only puts her finger on the problem with the "we-just-need-more-regulation" mantra, she even offers some interesting alternatives. I recommend the piece.
patientrenter (profile) wrote on Sat, 8/8/2009 - 10:02 am
I just can't imagine that when Larry Summers sits down to assess housing issues, he doesn't have accurate data on the number of homes in the foreclosure pipeline, in total and by region.
Don't ask don't tell. Some information is too volatile to collect. An honest tally would make for uncomfortable questions about the solvency of the anointed 19. Much easier to pretend.
debtfree asked: "OT
GS is tight with the administration. Any chance Abby Cohen was aware of the 'better than expected' unemployment numbers before she made her bull market statement Thursday? Just wondering!"
Anybody who's been following CR's "Weekly Initial Claims" charts could have made a similar (and reasonable) guess. Well, anybody who looked at them and didn't try to rationalize why they were wrong.
Oh come The F on, what about The Dark Ages and The Middle Ages? Sure, record keeping was not what it is now, but information is always biased in some unusual way...
"The Middle Ages is an unfortunate term. It was not invented until the age was long past. The dwellers in the Middle Ages would not have recognized it. They did not know that they were living in the middle; they thought, quite rightly, that they were time's latest achievement."—Morris Bishop, The Middle Ages (1968)
Fair enough. I just can't imagine that when Larry Summers sits down to assess housing issues, he doesn't have accurate data on the number of homes in the foreclosure pipeline, in total and by region.
What happens if this course if followed to it absurd conclusion?
The Fed monetizes all the non-performing loans and balances are forgiven? Free houses for the defaulters?
Don't the losses have to be recognized at some point?
I just can't imagine that when Larry Summers sits down to assess housing issues, he doesn't have accurate data on the number of homes in the foreclosure pipeline, in total and by region.
the accuracy is provided by modeling and sampling, just like many other economic metrics. The most important political-economic metric is the unemployment rate, which is based on primarily on a survey of 60,000 households. I'd love to see the BLS correction factors for the households that are trying to evade creditors or are living in a camper down by the river.
in terms of private data collection, LPS and First American are pretty good at tracking loan level performances; iirc, they supposedly cover 80-90% of the mortgages outstanding
I'd officially like to change the term "Green Shoots" to Chlorophyta -- a division of green algae, which includes about 7000 species.
Some Chlorophyta conduct sexual reproduction which is oogamy or isogamy. I once had some fantasies with that shit, but then I moved on to bigger things ...
Coinz: "What happens if this course if followed to it absurd conclusion?
The Fed monetizes all the non-performing loans and balances are forgiven? Free houses for the defaulters?
Don't the losses have to be recognized at some point?"
Coinz, you asked a question, then provided the answer, and then asked the same question again. You already have the answer, but let me just rephrase it:
Much of the debt that was owed by homeowners is being transferred to taxpayers. The processes for that transfer are complicated, but basically involve the US govt borrowing vast amounts, and injecting it into the financial system as easy money, and then having various agencies of the govt offer repayment guarantees if the easy money loans are not repaid. There are other techniques too. Loan mods are pretty direct. Savers are being given very low rates, and that increase the margins for banks and other lenders, so they can cover some of the losses they suffer from non-repayment of home loans. Finally, although we haven't seen the impact yet, all debt will likely be devalued in real terms by an engineered inflation. This will enable some of the burden of non-repayment of the debt to be passed along to savers (instead of just taxpayers).
So the losses don't ever have to be fully absorbed by the banks and other lenders. The losses will be filtered and amortized through a system, to be borne ultimately mostly by taxpayers and savers.
I would like to know just how they are gonna do this inflation thing.
I think actually, this would be the best of the various horrible outcomes.
I lived through the 80s. People had jobs. People got raises--often 10%.
Didn't keep up with inflation, but there were raises. Just how is this gonna
happen now? How, precisely is anything gonna enable me to raise my
secy's salary?
Doc, this is merica! We don't do science...junk science maybe, but not science. BTW, which is sexier oogamy or isogamy and what is the link to their youtube videos?
B of A worked out a deal with the toothless, (heck they don't even have gums) SEC to
fine B of A for various nefarious stuff. Fine for the company , but no fine for any employees.
Evil came out of nowhere. So shareholders, who were harmed, get to be harmed more
by a fine!! Judge set the deal for hearing anyway. Hope he insists some actual evildoers
get punisyhed.
"Banks don't have enough employees. Banks don't pay enough for foreclosure
mills to do a decent job. They think this is lean and mean."
Lawyer Liz, I think we've had this conversation before, but here goes:
Banks may be able to point to staffing issues as the proximate cause of their delays in processing foreclosures, and I am sure they do have genuine logistical issues associated with that. But if their future depended on getting foreclosures done as quickly and efficiently as possible, they would have solved those problems long ago. Now the staffing issue is a problem they choose to keep, because it gets them the rate of foreclosures they want to achieve. It's a handy shield for them to stand behind, but most bloggers here know too much to be fall for the deception.
lawyerliz (profile) wrote on Sat, 8/8/2009 - 10:41 am
B of A worked out a deal with the toothless, (heck they don't even have gums) SEC to
fine B of A for various nefarious stuff. Fine for the company , but no fine for any employees.
Evil came out of nowhere. So shareholders, who were harmed, get to be harmed more
by a fine!! Judge set the deal for hearing anyway. Hope he insists some actual evildoers
get punisyhed.
Once BofA "took one for the team" by adsorbing Countrywide and Merrill they were inoculated against any accusations of wrongdoing.
The most important political-economic metric is the unemployment rate, which is based on primarily on a survey of 60,000 households
The drop in the unemployment rate reported on Friday was driven by the reduction in the labor force, as defined by the household survey : Persons are classified as unemployed if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work.
If you are not employed and not actively looking for a job, you are out of labor force. With the unemployment insurance extended beyond one year (and likely to get extended even more this fall), and the economy still very weak, the reliance on active search is increasingly looking dubious.
As energyecon and EHP have been saying for a while, one has to look at EMRATIO, which did drop in June and which also comes from the same household survey.
i believe that ultimately, years down the road, this will end with the feds or a GSE owning a huge chunk of residential housing. this housing will effectively become section 8 housing.
"What I still wonder is what happens to the non-paying homeowner. Are they foreclosed and evicted or left alone to live free in their house?
It seems like the numbers are too big for that strategy to work for more than a couple of years."
Some foreclosures will be allowed to go through. But, politically, foreclosures are a problem, so they will be limited. No matter how big the remaining number of homeowners who can't or won't repay their loans on their originally agreed terms, solutions will be found that involve moving the losses to others. After all, if the total losses on homes that politicians don't want to see in foreclosure reach a big number, say 3 trillion, then that's still small enough to be added to the tab for this recession. Everyone who knows anything has already accepted that the numbers will be that big.
Well, to repeat, I think those Miami condo towers will be section 8 housing someday.
I think that the housing will end up being owned by the localities, for non payment of
liens and taxes. Taxes generally have priority over most everything. There are some
exceptions, but they are relatively rare. If they are smart, the locals will keep the taxes
high for property owned by lenders and in foreclosure. You can appeal high taxes, but
I don't think the banks will do this. I also don't think they will fight with insurers over
hurricane damage, which is a question of when, but whether.
I'm not sure if money is involved here, but medical experiments may be a direction to go after bankruptcy.
Re: Some 175 people have enrolled in the trials at the Leicester Royal Infirmary and results may be available in four to six weeks, according to the University Hospitals of Leicester NHS Trust.
As part of the tests volunteers receive two shots of the vaccine with their blood tested to show their levels of immunity. The trial, which is testing different doses of the vaccine, will also establish how far apart the doses need to be given. 404 - Resource not found
Not sure about what The Ulothrix are up to, but Ill keep an eye out.
"pavel - that was superb - ever thought about a collection of crisis poems and nursery rhymes for children? Give it a generation and some prudence might come back.
(This acculturation point always occurs to me when I read Elizabethan nursery rhymes to the kids).
C"
Thank you, Counterpointer. That's a good idea of yours. I do have a book just out:
so, someone please help me understand, because it seems the story in the popular press is that we can issue the "all clear" and all that toxic waste swept under the rug will just go away. Almost like it didnt matter at all in the first place. Are we to just assume that cooking the books is the way to solve economic problems? Me confused.
"This is simply wrong. The inventory liquidation, although large in $bn terms, has NOT
been excessive given the unprecedented 18% collapse in sales (see right-hand chart below).
The rate of inventory decline, at 8% yoy, has barely exceeded that seen at the nadir of the last
shallow recession in 2001/2 when sales fell only around 5% yoy."
Even my formerly beloved NPR is suffering from this. Up is good, down is bad.
Cram downs bad for banks because it would cause them to suffer loss. I started
screaming at the radio, they've already suffered the loss, long before any cram
down.
The employment figures were good, because they were slightly less horrible
than expected. Etc, etc.
I would like to know just how they are gonna do this inflation thing.
If and when inflation hits, and if and when TPTB decide to do something about it, it will be interesting to see how it is dealt with. The Fed/government has its old toolbox(FFR, reserve requirements) and its shiny new toolbox(TARP, C4C, etc.). Are they going to try reining in inflation through broad measures, or removing small hotspots?
Sorry paper pusher. I mean how are they gonna CAUSE inflation, not fix it
afterwards. I am now on the deflation side. Once they cause it and kill some of
the debt, it can be fixed. Volker did it and it can be done again.
I think some inflation is the least horrible of horrible outcomes.
"Are we to just assume that cooking the books is the way to solve economic problems? Me confused."
I think the correct conclusion to draw is that the American public (and, to be fair, the publics of most other countries) would prefer not to have to personally pay for all that they spend. Instead of presenting each individual who spent the money with a bill they cannot wriggle out of, instead spread the costs over other large groups in a complicated way that makes it hard to see who is paying for what. The biggest payments will be borne ultimately by taxpayers, and by savers, with small amounts absorbed by equity investors. It doesn't really solve an economic problem. It just shifts costs from one group to another, in a way that seems to make most voters happy, or at least less unhappy.
I have to think Qualcom Millionaires are very similar to the Amgen Millionaires and Countrywide Millionaires and their ilk who reside in Calabasas, Westlake and Thousand Oaks. Talk about a high end home market waiting for a fall.
i'm waiting until the anniversary of the great collapse. i know several people that liquidated last summer and put millions into local and regional banks. the downside of the public rediscovering risk is that borrowing costs for the banks get a little more steep.
I realize this is OT, but this pisses me way off, from CDC, and they are full of shit, and I mean ugly dark poo! They are going to cause massive deaths IMHO!!!!!!
Re: OK, this is recent stuff>> Flu plan urges against alarm rgj.com | Reno, NV | The Reno Gazette-Journal
"The updated guidelines advise that students can return to school as soon as 24 hours after their fever is gone"
Certainly when you're actively infecting and coughing and sneezing, that's pretty much how you're going to spread the virus. But you can still have virus in your body without having any symptoms. And children are-- it turns out studies suggest that children can shed the virus longer, probably because of their immune status, for instance.
Ok, let's go back in time now: CDC Briefing on Public Health Investigation of Human Cases of H1N1 Flu (Swine Flu)
May 2, 2009, 12:00 p.m. EST
Good afternoon. Today Dr. Anne Schucat is here, director of the National Immunization Respiratory and Disease Center, to provide an update.
"There has been modelling done the last several years. We have invested in preparing and understanding pandemic for influenza. One of the findings was that we know some things were seasonal influenza and some things from studying pandemics from the past century. Schools and children are very common reservoirs for infectious diseases, including infectious viruses like influenza. They tend to have lots of social contacts more than adults. And they-- somebody is laughing here because we know what kids are like. And they also shed the virus longer than adults do. So those circumstances, the frequent social contact, the close proximity in schools, and then the longer period of shedding often without even having symptoms are such that transmission can move quickly through its schools and it may take a longer time to go through different kinds of institution or workplace or community. So some of the modelling about what we call community mitigation or that attempt to really slow spread within a community suggested that schools would be a valuable intervention point. This may not be the case for every influenza virus or pandemic, but the modeling effort suggests this was the proudest area where we thought about social distancing."
So, is Dr. Anne Schucat doing a bit of a 360 degree turn about like a pile of crap in a toilette ....what is it Doc, will this spontaneous mutating H1N1 not going to shed as you said, and thus notcause and compound problems, as you fucking tell parents to send the kids back to school, to shed more H1N1?
I guess she wants to help the statistics explode???
WHO earlier estimated that as many as 2 billion people could become infected over the next two years.
"Even if we have hundreds of thousands of cases or a few millions of cases ... we're relatively early in the pandemic," Fukuda said in an interview at WHO's headquarters in Geneva.
I guesss she wants to make fucking sure that a few million people die, so that schools can stay open, so that The travel and Tourism industries can help spread this, so that a few bogus drugs can be offered, so that a few people can cash in on this pandemic!
Ok, I'm done, sorry about profanity, but she is INSANE! Keep your immune systems on high alert because there will be lots of people dropping this fall!!!!!!!!!! BEWARE!!!!!
I've been thinking about the most recent disorders at the health care plan town meetings. They suggest tensions coming to the surface, anxieties emerging as rage. But they are politically formless, so far.
"the downside of the public rediscovering risk is that borrowing costs for the banks get a little more steep."
Don't you think that any interest rate increases will be held in check by the Fed, increasing money supply as needed to keep rates within a target range?
"Insolvent" and "bankrupt" are such insensitive terms when applied to individuals. I suggest we replace those terms with those used to describe banks and government programs in similar circumstances- "well-capitalized" sounds much less nasty and disagreeable.
The rally, has convinced a true-believer segment that the "all clear, better than expected, beat expectations" is still on. The dollar at condition critical support, and is due for a bounce. FH Analytics is saying overbought set conditon 1SQ....S&P to 954-930....DIVE, DIVE, DIVE !!!!
get in there and sell till you can sleep. ie: rake in the chips on the 3-letter-monte, live to fight another day.
I mean how are they gonna CAUSE inflation, not fix it afterwards.
The debt being accrued will cause interest rates to rise and the value of the dollar to fall. People will react to rising rates and falling value by seeking to acquire more money. Businesses will raise prices as soon as they can. Workers may have to work more, but they will do so to seek more compensation. The dollar will become worth much less than it is today.
Unless of course you think there will never be a recovery.
Well, there's clearly not much appetite here for thinking about regulatory reform (as discussed in Bond Girl's piece I referred to earlier). I suspect this lack of interest is shared on Capitol Hill. Only when our financial system was on the precipice were people at the top ready to consider serious changes. Now, serious change is off the legislative agenda, and is relegated to think-tanks and economists' symposia. The carcass is being used by a few politicians to advance their personal goals (witness the agencies each fight for more turf and their heads for their own jobs and careers), but that's about it.
Nice stuff there, keep up the good work, writing and research!
I did want to comment on: "Let people establish for-profit companies that can compete for government contracts to stress test the holdings of financial institutions independently and audit their records."
It seems that Moody's, Fitch and S&P are already in place and doing a heck of a job!
recovery is here now
best time to buy that house of your dreams
best time to buy that car of your dreams
jobs. well its not really a good time for us to be talking about jobs they will come just like they always have
"How many of your friends and family do you know with $5,000 in the bank? "
Friends are not everyone I know but most of my friends would have easily have 10 to 20+ times that number. Relatives you inherit but a few would also easily have $5K in the bank, most no.
Reported by npr. Normally people who attend these things are not very rowdy,
and if they are they need time to work themselves up
Normally people don't see $15T of their net worth disappear in 18 months, 9.5% UE, hours and wages decline and trillions thrown at Wall ST and the wealthiest among us.
That is a large part of the problem. Normal people are not seeing the losses. They only see what their 401k balance shows, they only hear (sometimes) what the Dow, S&P do for a week. They only see if they have a job and thier spouse has a job. Most people don't see past their own front door.
Even if they hear the number, they don't know what they mean. They know what they are told they mean.
Hmm, Ben, I find it difficult to believe that Countrywide has only 510 REOs that
need selling in Florida. Florida is big. They made a lot of loans here.
Well, there's clearly not much appetite here for thinking about regulatory reform (as discussed in Bond Girl's piece I referred to earlier).
I would suggest the bulk of the comments here on the subject over the past few years have complained about a purposeful lack of regulation and enforcement.
The common thread seems to me to have been: no new laws, just enforce the ones that are there.
Bond Girl, I think one of the reasons that our regulatory system went off the rails in the last 5 years was that there really was an increase in global savings, and it was loaned to us with no questions asked. That, combined with the culmination of a slower but bigger build-up of savings and debt in anticipation of the baby boomers' retirement.
All the other contributing factors - regulatory capture, a credit culture, poor professional standards amongst mortgage brokers and originators, were latent before the last 5 years. But what changed the most in the last 5-10 years is the increase in savings caused by a dramatic increase in incomes in China and some oil producers, combined with very high savings rates there. A bigger share of the world's income went to people who were prodigious savers, so the world's savings rate went up by a small but significant amount. That extra savings was not fully absorbed locally, and was exported disproportionately to the US, because borrowing was always easy in the US.
These two big factors - baby boomers' retirement plans, and China's continued high savings rate and income growth, haven't changed much yet. So it's hard to see any effective system that holds nature in check, and prevents people in the US from doing what comes easiest - spend and buy now, borrow any shortfalls, and hope for the best.
I tend to agree but my little state seems about correct against the county website. That is the part I use. What they have and what is hidden is always the question anymore.
From what I read or hear from the MSM, globalization is here and we can not go back...WHY NOT?
What really has globalization really provided? It has turned our economy from manufacturing to service...It has produced houses that people could not afford...stagnated wages...incurred a lot of private and now public debt....
We need to get back to a review of our basic assumptions about what America needs to be a foreign sovereign...I prefer isolation and protectionism, but that's my opinion...to rebuild this country...
Someone needs to ask the question and to discuss it openly to the American people...Where are we currently at and where do we want to go?
People will put up with sacrifice, if we have a goal and a game plan...If neither, then its "every dog for themselves".
That's funny, the Guardian this morning is reporting 33,000 folks took advantage of the 'cash for bangers' program, in the UK. Turn in your old car and get 2k pounds towards a new one. Presumably the same folks who went broke didn't spring for a new car before they were declared insolvent.
"The common thread seems to me to have been: no new laws, just enforce the ones that are there."
I agree, new laws are just a way for politicians justify their job after they have failed to properly do their job. New laws mean nothing if they neglect them.
"I did want to comment on: "Let people establish for-profit companies that can compete for government contracts to stress test the holdings of financial institutions independently and audit their records."
It seems that Moody's, Fitch and S&P are already in place and doing a heck of a job!"
Doc, BG wasn't suggesting the current rating agency system. In fact, she described how the rating agencies became captured, and why. What she proposed was a much more open system, with enforced circulation of the entities that evaluate banks and other financial institutions. For example, she suggested that these auditors be limited to a maximum of 4 years,so they always know a new auditor will be checking their work fairly soon.
I have a retail business and retail tenants. Everyday we are confronted with a tapped out consumer. If inflation is right around the corner someone better tell my customers to part with those worthless dollars that they are holding sooo dearly.
Consumer credit down. Home ATM broken. Wages stagnant to down. And we are supposed to see INFLATION??
Too much capacity and slack employment for any game changing in the near term
The incoming head of the British army said in an interview with The Times newspaper Aug. 8 that the NATO mission in Afghanistan could take up to 40 years, and that there is no chance of NATO pulling out of the country. Gen. Sir David Richards, who will become chief of the General Staff on Aug. 28, said British troops will only be needed for the medium term, but that Britain’s involvement in Afghanistan will continue for the next 30 to 40 years. British Shadow Defense Secretary Liam Fox said a commitment of 30 to 40 years would be unaffordable, and that it would require a total re-evaluation of British foreign policy. There are currently 9,000 British soldiers deployed to Afghanistan."
In forty years the name of the UK might well have been changed to Oceania.
I think one of the reasons that our regulatory system went off the rails in the last 5 years was that there really was an increase in global savings
Liquidity injected into the system by the Fed mopping up after bubbles and trying to prevent disasters - LTCM, Asian crisis, Nasdaq, 9/11, recession of 2001 - was as important as the Chinese savings, IMO.
Every time the next bubble was greater than the previous one.
"As long as velocity (turnover of money) is stagnant we expect the increases in the monetary base and all the quantitative easing will lead to a stagnant economy and deflation until the consumer goes into the same borrowing and spending patterns that was characteristic of the 1990s through 2007"
"The common thread seems to me to have been: no new laws, just enforce the ones that are there."
I agree, new laws are just a way for politicians justify their job after they have failed to properly do their job. New laws mean nothing if they neglect them."
Grains of truth in both comments. But the flaw with the enforcement emphasis is that it relies on enforcers. The chief enforcers during the last 5-10 years were Bernanke and Greenspan, and Barney Frank, Chris Dodd, and Chuck Schumer and their predecessors on Capitol Hill, and Bush/Obama, and Summers / Geithner and their predecessors in the Admin. They unanimously supported the housing bubble. So clearly the problem is that the foxes are guarding the hen-house. How can we change that? That's the problem with a focus on increasing the power of regulation.
Well, 4 years was StatsGuy's suggestion, to be fair, but I actually did have something about intermediate-term contracts in one of my earlier drafts. I am glad you guys liked it; I was wondering how much grief I was going to get once it was released. (Thanks MrM)
The global savings glut has been a pretty recent development, but regulatory capture has been around for a long time. I think LTCM kind of reinforced it by giving regulators the idea that it was within their means to influence the banks into cleaning up their own messes (fail).
It's absence allowed for TO BIG, leverage and insane capital ratios.
"The repeal enabled commercial lenders such as Goldman Sachs and Citigroup, which was in 1999 the largest U.S. bank by assets, to underwrite and trade instruments such as mortgage-backed securities and collateralized debt obligations and establish so-called structured investment vehicles, or SIVs, that bought those securities.[15] Elizabeth Warren,[16] co-author of All Your Worth: The Ultimate Lifetime Money Plan (Free Press, 2005) (ISBN 0-7432-6987-X) and one of the five outside experts who constitute the Congressional Oversight Panel of the Troubled Asset Relief Program, has said that the repeal of this act contributed to the Global financial crisis of 2008–2009,[17] [18] although some believe that the increased flexibility allowed by the repeal of Glass-Steagall mitigated or prevented the failure of some American banks.[19]"
"Liquidity injected into the system by the Fed mopping up after bubbles and trying to prevent disasters - LTCM, Asian crisis, Nasdaq, 9/11, recession of 2001 - was as important as the Chinese savings, IMO."
This was a very serious contributor. Better action by the Fed could have prevented it all. But the bubble support was present from at least 1998 on. Arguably, it was present from October 1987 on. Some factors that contributed to the crisis we just had were old, and some were new. I suspect that one of the newer factors is what put the bubble over the top.
The American public has been preached to for 30+ years that "you can have it all" and not pay for it! This message came from the govt., private business and your neighbors...so are we surprised that we are now in this "pickle"?
To paraphrase, do not know the author, If you do not know where you are going in life, your goal is where you end up!
Imagine how dastardly business is right now, and then have the dollar get whacked by 2/3rds, and every imported item costs 3x as much, and we can talk inflation.
All of most of our lives, the price of consumer goods has only gone down, especially so with everything we used to make here, that instead was being made where Asian rates of pay dictated both low quality and low prices ruled the day...
So, retail customers have grown used to buying cheap toasters for $10, will now have to pay $30, when the old stock of inventory runs out, with the same ratio for everything else that used to be dirt cheap, as the consumers are barely clinging onto their jobs, the pay of which is being reduced via furloughs and lessened hours per week~
"What is it about the Russians and Chinese in the playing of chess or go, they plan 6, 8 10 moves a head and Americans on only one?"
Yeah, but we still have bigger homes, bigger cars, bigger meals, more cable channels, more roads, etc than they do. No one can consume like we do! We're the best.
Seriously, the US has natural resources that are excellent, if a little depleted. People who are flexible can enjoy a good quality of life here.
The global savings glut has been a pretty recent development, but regulatory capture has been around for a long time.
I agree with MrM that LTCM started a series of liquidity infusions that got out of control and had far more impact on today's situation than increased wealth in the ME or China.
But in my youth what is now called 'regulatory capture" was just called "the revolving door."
I think we can take it back at least to Eisenhower and his warning about the military industrial complex.
The fact that it has been institutionalized (or socially accepted) for so long has made the problem worse.
No way IMO should a recent officer or employee of Goldman-Sachs become head of the NY Fed or Treasury Secretary. That is no different that making the local gang leader the head of your security force.
"No way IMO should a recent officer or employee of Goldman-Sachs become head of the NY Fed or Treasury Secretary. That is no different that making the local gang leader the head of your security force."
But they pay such sweet kickbacks for all the money they are sending out the back door... How else is Timmy going to get that underwater house taken care of?
Come on, Bond Girl, I did say I liked you post and cheered you with a glass of wine!
It is well thought-through and thought-provoking! I simply shared some of my thoughts
I agree very much with your own comment: it is deeply embedded in our concept of value that the person who is worth more is actually worth more, and that has a very powerful situational translation.
I personally think of this issue as rooted in the deeply ingrained belief across all strata of the American society that the government is always a problem and the private sector always has a better solution (witness the current debate about healthcare and Medicare). I actually think one of the main reasons why the OSFI in Canada is a much more effective regulator than all of the US agencies combined, is because the role of the government is viewed very differently in Canada.
Blackhalo (homepage, profile) wrote on Sat, 8/8/2009 - 12:08 pm
* reply
* Ignore user
"To paraphrase, do not know the author, If you do not know where you are going in life, your goal is where you end up! "
Dead?
Yes, dead in the end...The only problem is that you may spend your remaining years alive "down by the river" huddled around a campfire with nothing to eat, or at best, "moose or squirrel".
I've never missed a meal in my life so far because there was no food available because of lack of harvest or lack of money, and there would be a lot of Americans that would fall into the same category as me...
The price of bread continually rose in France in the run-up to the revolution, and our stomachs are usually the Baedeker to our souls, and who knows what lurks in ours?
"Yes, I agree in part, however it was on borrowed money that will be paid back by the individual or the taxpayer..."
Or a soft default via inflation.
The isolationist/protectionist route leads to Air Bus wiping out Boeing, Canadian Wheat over USA corn, no more big budget movies as the world will ignore our copyrights. Microsoft wiped out as the EU switches to open source. And much, much higher prices for everything from textiles to electronics.
There are surely things we need to do to mitigate the negatives of globalization, like get China to float their currency and reestablish pay/go in our Federal budget. But just because there have been abuses, does not mean there is not a net gain.
Markets for our goods, and a higher standard of living.
Yes, I agree in part, however it was on borrowed money that will be paid back by the individual or the taxpayer..."
No argument about globalization will be settled on a blog. It has become one of those political tribal identification issues. "Which tribe are you in?" "I'm in the pro/anti-globalization tribe. I drive a Japanese/US-made car...."
I generally favor more globalization. I personally live far away from where I was born, and my immediate family is dispersed all over the globe, in every continent but Antarctica. It has pluses an minuses, but I like the pluses more.
Opposing trading with foreigners feels odd to me. Where do you draw the line? Why trade with people in other states in the US? Why trade with people who don't look like you? Why trade with people outside your own family? Why not just be completely self-sufficient, and avoid family relationships? Doesn't this get nutty, pretty obviously, pretty quickly? Why not just trade with people when you want to, and not trade with them when you don't want to? So I'll buy a Korea car if I want to, or a Detroit car if I prefer. All treated equally, with the choice made by me. You get to do the same.
WASHINGTON (Reuters) - U.S. Treasury Secretary Timothy Geithner formally requested that Congress raise the $12.1 trillion statutory debt limit on Friday, saying that it could be breached as early as mid-October.
"It is critically important that Congress act before the limit is reached so that citizens and investors here and around the world can remain confident that the United States will always meet its obligations," Geithner said in a letter to Senate Majority Leader Harry Reid that was obtained by Reuters.
A Treasury spokeswoman declined to comment on the letter.
Treasury officials earlier this week said that the debt limit, last raised in February when the $787 billion economic stimulus legislation was passed, would be hit sometime in the October-December quarter. Geithner's letter said the breach could be two weeks into that period, just as the 2010 fiscal year is getting underway.
It does get nutty. However, it is easier for people to blame others than look at themselves.
If we make it the Chinness low wage or India call center take over or Korea cheep goods - easier than saying we in the US wanted what we had not yet earned and we wanted it NOW. And we wanted it cheap, we wanted people to work for next to nothing so we could have everything.
"Treasury officials earlier this week said that the debt limit, last raised in February when the $787 billion economic dreamliner stimulus legislation was passed, would be hit sometime in the October-December quarter. Geithner's letter said the breach could be two weeks into that period, just as the 2010 fiscal year is getting underway."
When they overturned Glass Segal I was floored. It was put in place so GD1 would not happen again. Leverage was a big cause of GD1, everyone levered, just like investment firms do with people's 401k funds.
401k money has allowed massive and continual inflows of cash to sink into markets. Good, bad or indifferent that money always hits the coffers to be levered. 401ks are the major reason firms were able to end pension funds, now one of the reasons many people near retirement can not retire.
I may be wrong here, however I do not equate trade with Globalization.
Under what is called globalization, money is moving in out of countries at the click of a mouse with devastating consequences. My concern is the exporting of finance---loans that people can not pay, credit cards that are given to people can not repay, etc...Our financial exports are, in my opinion, has impoverish 2nd and 3rd world populations....and then ttheir is our military superiority...
The US exports only two services (not really goods to any real extent) military force and financial WMD...Both are/have caused our (world's) current crisis...
PS: We may be able to buy more "things", however it is poisoning America...
The difference between the 70's and now, that I notice, flight of manufacturing jobs, sizable population that is under the radar and lots lots more of personal/household debt(not to mention the national debt). The usual tools of controlling inflation, raise interest rate for example, may not available.
Blackhalo, I know nothing about Glass-Steagall, but I thought it just forced various banking and other financial activities into separate ownership and control structures. So why would that have prevented the companies that were allowed in that regulatory framework to package mortgage-backed securities from manufacturing large quantities?
Life after the crash. It's coming to a town near you. CR inspired, and includes CR product placement:
I safed the shotgun and tried standing up. I reversed it, used it as a crutch, and tried again. Then I started walking around the outbuilding. Jeebus, I hurt. I grayed out for a second but stayed on my feet. About 15 yards from me a man was exchanging rounds with someone over by the house from behind the older truck. I blew his head off. There were two bodies lying in front of the barn. One had a pair of mangled legs. I saw Diesel coming towards me at a run. He was moving pretty fast for someone who was running crouched. I kept walking towards the barn. I took a fast look over at the house. Someone was down. It looked like Old Guy. I stopped at the white truck, dropped the shotgun, and used my free arm to brace myself against it.
"Jeebus Gardener. You have a dogs head attached to your leg!"
"Yeah. No shit. It hurts too. So what do we have?"
He tore his eyes off the dogs head. It was still staring at me, and if possible, it looked even more pissed then when it was alive. "Old Guy is down. He is still alive, I think. Ninja is somewhere in the trees. I think he is covering the side door. I am pretty sure he is okay."
True, they are now ~50% of the work force, mostly service jobs. Eventually we may regress back to one job per family; they will find a way where the male will be able to bear children, I suppose.!
"Glass Steagall didn't regulate the activities of investment banks, just commercial ones."
Prior to the repeal, financial institutions could not both take deposits AND trade securities. It was one or the other. Allowing them to do both let them take deposits and use those as assets in high risk trades.
In the U.S., the Glass-Steagall Act, initially created in the wake of the Stock Market Crash of 1929, prohibited banks from both accepting deposits and underwriting securities which led to segregation of investment banks from commercial banks. Glass-Steagall was effectively repealed for many large financial institutions by the Gramm-Leach-Bliley Act in 1999.
lost-confused (profile) wrote on Sat, 8/8/2009 - 3:32 pm replyIgnore userpatientrenter,
I may be wrong here, however I do not equate trade with Globalization.
Under what is called globalization, money is moving in out of countries at the click of a mouse with devastating consequences
"Central Europe is at the epicenter of the global financial crisis. The region became the top destination for foreign capital in 2002, overtaking East Asia; but since September 2008, it has experienced a massive outflow of foreign capital that threatens to crash the region's currencies. The region founded its growth largely on the influx of foreign loans that are now in danger of appreciating in real value as domestic currencies depreciate."
Prior to the repeal, financial institutions could not both take deposits AND trade securities. It was one or the other. Allowing them to do both let them take deposits and use those as assets in high risk trades.
True, the repeal of Glass-Stegall would have affected Citi, BAC, JPM, etc. but none of the bad actors that I had previously listed took deposits. They were non-bank financial institutions and therefore outside of the aegis of G-S.
"True, the repeal of Glass-Stegall would have affected Citi, BAC, JPM, etc. but none of the bad actors that I had previously listed took deposits. They were non-bank financial institutions and therefore outside of the aegis of G-S."
OK, but many banks that were NOT investment banks began trading securities that were GS JPM AIG dependent. These securities (and banks) were put at risk of failure in the event JPM or GS or AIG went down. Prior to Glass-Stegall no one would have cared if the IB's or AIG went under, as the banking system would have remained sound. Post Glass-Stegall the entire financial system gets wiped out.
So yes Glass-Steagall would not have saved GS JPM or AIG, just as it did not save LTCM. But we would not have cared.
At the surety of being excoriated for broad brush oversimplification:
What happened in the 1920s with stocks happened agin in the 2000s with houses. Buying on margin amplifies risk (and reward).
God help us if we allow buying on thin margins to continue in any tradable good. I am including things that have worked for a long time; currencies, oil, wheat, etc.
Related observation: "Margin Call of Cthulu" was the best avatar ever.
"Prior to the repeal, financial institutions could not both take deposits AND trade securities. It was one or the other. Allowing them to do both let them take deposits and use those as assets in high risk trades.
True, the repeal of Glass-Stegall would have affected Citi, BAC, JPM, etc. but none of the bad actors that I had previously listed took deposits. They were non-bank financial institutions and therefore outside of the aegis of G-S."
Basel II has given the best answer to your question. I would just add that you shouldn't lose sight of the forest for the trees. In the Glass-Steagall regime, there was room for entities that repackaged MBSs. As long as there were such entities, that could package crappy loans and re-sell them at full price, then whatever the identities of these entities, we would have had the same outcome when that Ponzi scheme collapsed.
"At the surety of being excoriated for broad brush oversimplification:
What happened in the 1920s with stocks happened agin in the 2000s with houses. Buying on margin amplifies risk (and reward).
God help us if we allow buying on thin margins to continue in any tradable good. I am including things that have worked for a long time; currencies, oil, wheat, etc."
My second-favorite post of the day (after Bond Girl's post over at the Baseline Scenario).
A lot of solutions to the problems that created our recent financial crisis are very complicated or opaque. Like any complicated or opaque solution, they are vulnerable to being derailed. If we had to pick one simple action that was hard to manipulate, and that would avoid the worst of the damage of the recent crisis, it would be strict lower limits on borrower equity in homes being used as collateral for loans. For example, downpayments of 30% or more, with some exceptions down to 20%, and absolutely no interest deductions on any home loans in excess of that. Relatively hard to get around, relatively easy to enforce, relatively low collateral damage (so to speak), and very powerful effects.
patientrenter (profile) wrote on Sat, 8/8/2009 - 1:07 pm
A lot of solutions to the problems that created our recent financial crisis are very complicated or opaque. Like any complicated or opaque solution, they are vulnerable to being derailed. If we had to pick one simple action that was hard to manipulate, and that would avoid the worst of the damage of the recent crisis, it would be strict lower limits on borrower equity in homes being used as collateral for loans. For example, downpayments of 30% or more, with some exceptions down to 20%, and absolutely no interest deductions on any home loans in excess of that.
I agree that progressive deductibility is a useful tax policy. IMO we also need second/HELOCs to be deductible only for home improvement expenditures.
Relatively hard to get around, relatively easy to enforce, relatively low collateral damage (so to speak), and very powerful effects.
And having the additional beauties of turning over quickly and not being retroactive.
The Moderate conservative is an old Motto of our government so it's very hard to believe on these things ! now these issues must be raised in the mainstream !
Looks like I picked the wrong week to quit sniffing insolvents.
Insolvency sounds much more sophisticated than bankruptcy... The English have always been more classy....
Random observation in light of the UFC fight tonight. The countries with the most interest in cage fighting (USA, IRL, GB) are also some of the worst off.... Risk must be in our blood.....
OT
GS is tight with the administration. Any chance Abby Cohen was aware of the 'better than expected' unemployment numbers before she made her bull market statement Thursday? Just wondering!
The Scarlet Letter has moved down the alphabet. The lack of stigma may deepen the loses but will also serve to clear them quicker.
Maybe this helps to explain why Mr. King & Co. extended their quantitative easing program. I read a Bloomberg article the day before the BOE made their announcement and the vast majority of analysts predicted that BOE's QE program would be ending. Perhaps the worst is yet to come.
Luckily, we have liquidity experts on hand with stuff that solves the insolvency. Calling Federal Reserve: Liquidity Crisis in Aisle 4 with 30 million folks insolvent up to their eyebrows.
$44.95 to watch the closest thing imaginable to what a gladiatorial contest must have looked like back in the day of the Empire, intrigues me.
The only thing that really separates it, is not having a phone number* where the hoi ploy can call in and give the thumb's up or thumb's down as far as possible final removal is concerned...
*a 95 cent charge applies
"...suggests the worst is yet to come"?? Detail? Is he talking trendline for these figures or wider implications, perhaps? Looks like civil and political-order quake to me.
C
Is their bankruptcy closer to our new law or the old one? Also, they should have a much lower bk rate since health care never leads to bk there--all other things being equal (are they ever).
Food is way more expensive in the UK, than it is here...
an Oliver Twist.
Makes you wonder what the world total % of people are insolvent?
August 8, 1930
“Low inventories, cheap money, much cash in the banks and savings institutions, and the optimistic spirit of the American people are all factors which must work to the advantage of the bulls as time goes on.”
News from 1930
Solvency is not as important as cash flow.
This really isn't very many compared to the total population.
The people who went into the bk firm formerly down the hall were
always noticeably better dressed than the people coming into
my office for closings.
Most insolvent people don't file bk. One bk atty told me recently that
many now don't have the money to file bk.
'Makes you wonder what the world total % of people are insolvent?'
interesting thought........
or, what percent of the world wakes up and goes on with their day with out giving it a thought one way or another.
False Bull Market Signal Forming
as the
Dollar approaches the Iron Cross.
Front Page Obituaries...
I'm wonderin where our resident communist, Volker the Viking is?
Juvenal Delinquent: Is there a reason you spell it hoi ploy instead of hoi polloi?
Sorry to be picky, but it sets the teeth of my inner linguistics geek on edge...
A pun, I think. But that might set your teeth on edge worser.
So, only 33K willingly call themselves British subjects?
Who do the rest of those geniuses think owns their country's debt?
'Makes you wonder what the world total % of people are insolvent?'
About 3 years ago on another financial blog, A guy in the major leagues of making loan decisions from a larger financial concern explained just how precarious even sacred cows (doctors, lawyers indian chiefs) that you would think were somewhat bulletproof financially, were oftentimes in reality up to their necks in debt like everybody else, or worse.
How many of your friends and family do you know with $5,000 in the bank?
You shall not crucify mankind upon a cross of iron.
The more many make, the more they spend, and sometimes
a higher percentage over the yearly salary than the Joe6packs.
So all that money may be buying bling, but not peace of mind.
My bad.
Maybe I should call em' 'Hoi Pollo Loco' from now on, a bunch of foul up to their pretty little necks in debt.
There is a Cuban chicken place called Pollo Loco.
Pollo is pronounced Poh-yo, by the way.
JD,
I know lots & lots of ivory tower types, cops, electricians, people with major salaries, and I'd say 80% are living paycheck to paycheck. Just with more shiny (unpaid-for) things cluttering up their McMansions (also unpaid-for).
ah yes 33 thousand declared insolvent
BUT
are they illiquid
People with higher salaries make more useful debt-slaves than J6Ps.
I'd like to be able to say the poorer folk are oh so virtuous, with frugal savings & spending habits. But they aren't either. Paycheck to smaller paycheck, like the big players....
After benefits run out for the hoi unempolloid, they are still granted as much air subsidies as they'd like.
On a roll Juvie.
I just picked up some liquid assets.
Vodka, whisky, beer.
This really isn't very many compared to the total population.
I was thinking the same thing. I wonder what the specific meaning of insolvent is in the UK. Maybe it's "bankrupt, and unable to make any payments, period"?
Again, very few guests. Wonder why.
"Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies."
Marx
Almost 19,000 people were declared bankrupt during the second quarter of the year
i'm not how or when, but we've lost this type of language construction; probably a result of de-stigmatizing the event. In the US, the debtor files or enters BK, and if the court is satisfied with the terms, then we say the court is satisfied with the terms or that the plan has passed. But rarely will you hear that people were "declared bankrupt."
I HEARD A LITTLE TAPPING…
I heard a little tapping
A tapping at the trees
As if a little hammer
Were beating down on these
A hammer and an anvil
Are all that’s needed for
The forging of an evil
Or the hinges of a door
A tapping at the basement
A tapping at the beam
A tapping at the firmament
Where all the planets gleam
A tapping at the entrance
The door has opened wide
Either it’s deliverance
Or punishment of pride
A tapping at the panel
A tapping at the rail
A tapping at the lintel
Barriers must fail
Many are the tappings
Every one is small
But taken all together
Down the houses fall
Pavel
August 8, 2009
In the prior thread, there was some speculation about the number of foreclosures held back by banks. Isn't this number reported to some agency of the federal govt? I am sure it is. If so, isn't the FOIA applicable?
All those Potemkin Foreclosures (you can see the foreclosure, but there's no house front up for sale...)
Are just part of the plan that was penciled-out on the back of an envelope in the heat of the moment, when push met shove.
i think that's the problem. i can't think of any law or regulation that would have that authority. the closest would be the reporting to the FDIC of non-performing real estate loans, but that's just in aggregate amounts. and it wouldn't require reporting by non-bank mortgage outfits.
That San Diego NOD/foreclosure disparity is most interesting. Perhaps short sales explain some of it. As we enter the slow season, what are they going to do? Put supply on the market in December? Wait for spring?
pavel - that was superb - ever thought about a collection of crisis poems and nursery rhymes for children? Give it a generation and some prudence might come back.
(This acculturation point always occurs to me when I read Elizabethan nursery rhymes to the kids).
C
SD real estate shot up quicker than anywhere else in so cal...
Remember the term "Qualcom Millionaires?
They're here. The number isn't accurate because of measures I've taken to keep the system load under control.
Ken, your comment applies equally well to those asking about foreclosures!
UK RE values were even nuttier than in the bubble areas of the US, supported by sunny optimism about ever-rising home prices and loose lending across the board. I suspect that, whatever we go through, the folks in the UK will be seeing twice the pain. Also, finance's share of the UK economy was twice as big as in the USA.
"i think that's the problem. i can't think of any law or regulation that would have that authority. the closest would be the reporting to the FDIC of non-performing real estate loans, but that's just in aggregate amounts. and it wouldn't require reporting by non-bank mortgage outfits."
Fair enough. I just can't imagine that when Larry Summers sits down to assess housing issues, he doesn't have accurate data on the number of homes in the foreclosure pipeline, in total and by region.
Obama, I'm coming home
Tim has changed and Tim is strange
Here I come, my credit aint the same
Obama, I'm coming home
Times gone by, seems to be
You could have saved me from an NOD
Obama, I'm coming home
You ARMed me in and you drove me out
Yeah, you had me amortized
Lost and found and traunched around
By the FIRE in your guise
You made me cry, you told me lies
But I cant stay my cash ran dry
Obama, I'm coming home
I could be short, I could be long
Hurts so bad, it's been so wrong
Obama, Im coming home
Selfish banks yeah we're both alone
The ride before the fall
But I'm gonna fake this HELOC loan
I just got to have it all
I've seen your debt a hundred times
Everyday we've been apart
I don't care about the sunshine laws yeah
cause Obama, Obama, I'm coming home
I'm coming home
You ARMed me in and you drove me out
Yeah, you had me amortized
Lost and found and traunched around
By the FIRE in your guise
YouTube - Ozzy Osbourne - Mama I'm Coming Home
Ever look at a big city, and just take away a few key industries, and there isn't much there?
Most of big city America is like that.
I just saw a great post by one of our own regulars, Bond Girl, over at Simon Johnson's The Baseline Scenario blog.
http://baselinescenario.com/2009/08/08/filling-the-financial-regulatory-void/
In it, she not only puts her finger on the problem with the "we-just-need-more-regulation" mantra, she even offers some interesting alternatives. I recommend the piece.
patientrenter (profile) wrote on Sat, 8/8/2009 - 10:02 am
I just can't imagine that when Larry Summers sits down to assess housing issues, he doesn't have accurate data on the number of homes in the foreclosure pipeline, in total and by region.
Don't ask don't tell. Some information is too volatile to collect. An honest tally would make for uncomfortable questions about the solvency of the anointed 19. Much easier to pretend.
debtfree asked: "OT
GS is tight with the administration. Any chance Abby Cohen was aware of the 'better than expected' unemployment numbers before she made her bull market statement Thursday? Just wondering!"
Anybody who's been following CR's "Weekly Initial Claims" charts could have made a similar (and reasonable) guess. Well, anybody who looked at them and didn't try to rationalize why they were wrong.
Sebastian
Sing a song of subprime,
A pocket full of lies.
Four and twenty million bad loans,
Baked in a pie.
When the pie was opened,
The loans began to sink;
Wasn't that a dainty dish,
To set before the oligarchy kings?
The king was in his counting house,
Counting out his money;
An employee was in the box store,
Spending his bonus to get something for his honey
The made-men were @ madison square garden,
Hanging out wearing the emperor's new close;
When down came a black swan
And snapped off their nose
Rob is right. Larry, Ben and Timmy don't need no stinkin' data. Unlimited ability to stuff credit channels is enough.
Re: "the highest number ever recorded"
Oh come The F on, what about The Dark Ages and The Middle Ages? Sure, record keeping was not what it is now, but information is always biased in some unusual way...
"The Middle Ages is an unfortunate term. It was not invented until the age was long past. The dwellers in the Middle Ages would not have recognized it. They did not know that they were living in the middle; they thought, quite rightly, that they were time's latest achievement."—Morris Bishop, The Middle Ages (1968)
Fair enough. I just can't imagine that when Larry Summers sits down to assess housing issues, he doesn't have accurate data on the number of homes in the foreclosure pipeline, in total and by region.
What happens if this course if followed to it absurd conclusion?
The Fed monetizes all the non-performing loans and balances are forgiven? Free houses for the defaulters?
Don't the losses have to be recognized at some point?
Well, the 1930s blog always leaves me with dread.
Especially how we seem to rhyme with that time so well.
I think Jesse is on to a gradual change that keeps on coming.
The dollar devaluation leaves us all poorer, especially on a static income.
Someday this war's gonna end...
I just can't imagine that when Larry Summers sits down to assess housing issues, he doesn't have accurate data on the number of homes in the foreclosure pipeline, in total and by region.
the accuracy is provided by modeling and sampling, just like many other economic metrics. The most important political-economic metric is the unemployment rate, which is based on primarily on a survey of 60,000 households. I'd love to see the BLS correction factors for the households that are trying to evade creditors or are living in a camper down by the river.
according to cia world fact book
uk population is 61,113,205
nades, nobody does risk and gambling any better than the chinese. Just don't lose, their version of bankruptcy has such nastly results.
If Major League Baseball adhered to strict accounting rules like the Fed does...
The Washington Nationals would have a 72-38 record presently.
If there any coincidence that the team from DC has the worst record in the Majors?
The DC team always has had a terrible record. See movie/play
Damn Yankees.
in terms of private data collection, LPS and First American are pretty good at tracking loan level performances; iirc, they supposedly cover 80-90% of the mortgages outstanding
I'd officially like to change the term "Green Shoots"
to Chlorophyta -- a division of green algae, which includes about 7000 species.
Some Chlorophyta conduct sexual reproduction which is oogamy or isogamy. I once had some fantasies with that shit, but then I moved on to bigger things ...
If there were accurate figures, then my long-time-for-no-reason-foreclosure
would be checked up on and restarted.
A broker told me they were trying not to do short sales lately. Not sure.
Just one data point.
Banks don't have enough employees. Banks don't pay enough for foreclosure
mills to do a decent job. They think this is lean and mean.
Coinz: "What happens if this course if followed to it absurd conclusion?
The Fed monetizes all the non-performing loans and balances are forgiven? Free houses for the defaulters?
Don't the losses have to be recognized at some point?"
Coinz, you asked a question, then provided the answer, and then asked the same question again. You already have the answer, but let me just rephrase it:
Much of the debt that was owed by homeowners is being transferred to taxpayers. The processes for that transfer are complicated, but basically involve the US govt borrowing vast amounts, and injecting it into the financial system as easy money, and then having various agencies of the govt offer repayment guarantees if the easy money loans are not repaid. There are other techniques too. Loan mods are pretty direct. Savers are being given very low rates, and that increase the margins for banks and other lenders, so they can cover some of the losses they suffer from non-repayment of home loans. Finally, although we haven't seen the impact yet, all debt will likely be devalued in real terms by an engineered inflation. This will enable some of the burden of non-repayment of the debt to be passed along to savers (instead of just taxpayers).
So the losses don't ever have to be fully absorbed by the banks and other lenders. The losses will be filtered and amortized through a system, to be borne ultimately mostly by taxpayers and savers.
When are a few of the Major Major Major Majordomos gonna do a perp walk, if ever?
JD, how about
When down came a black swan
And gave them a hose...job
I would like to know just how they are gonna do this inflation thing.
I think actually, this would be the best of the various horrible outcomes.
I lived through the 80s. People had jobs. People got raises--often 10%.
Didn't keep up with inflation, but there were raises. Just how is this gonna
happen now? How, precisely is anything gonna enable me to raise my
secy's salary?
Take a vow of poverty?
Doc, this is merica! We don't do science...junk science maybe, but not science. BTW, which is sexier oogamy or isogamy and what is the link to their youtube videos?
B of A worked out a deal with the toothless, (heck they don't even have gums) SEC to
fine B of A for various nefarious stuff. Fine for the company , but no fine for any employees.
Evil came out of nowhere. So shareholders, who were harmed, get to be harmed more
by a fine!! Judge set the deal for hearing anyway. Hope he insists some actual evildoers
get punisyhed.
"Banks don't have enough employees. Banks don't pay enough for foreclosure
mills to do a decent job. They think this is lean and mean."
Lawyer Liz, I think we've had this conversation before, but here goes:
Banks may be able to point to staffing issues as the proximate cause of their delays in processing foreclosures, and I am sure they do have genuine logistical issues associated with that. But if their future depended on getting foreclosures done as quickly and efficiently as possible, they would have solved those problems long ago. Now the staffing issue is a problem they choose to keep, because it gets them the rate of foreclosures they want to achieve. It's a handy shield for them to stand behind, but most bloggers here know too much to be fall for the deception.
@patientrenter,
Thank you for that very thoughtful answer. It does appear that the situation is evolving that way.
What I still wonder is what happens to the non-paying homeowner. Are they foreclosed and evicted or left alone to live free in their house?
It seems like the numbers are too big for that strategy to work for more than a couple of years.
lawyerliz (profile) wrote on Sat, 8/8/2009 - 10:41 am
B of A worked out a deal with the toothless, (heck they don't even have gums) SEC to
fine B of A for various nefarious stuff. Fine for the company , but no fine for any employees.
Evil came out of nowhere. So shareholders, who were harmed, get to be harmed more
by a fine!! Judge set the deal for hearing anyway. Hope he insists some actual evildoers
get punisyhed.
Once BofA "took one for the team" by adsorbing Countrywide and Merrill they were inoculated against any accusations of wrongdoing.
The most important political-economic metric is the unemployment rate, which is based on primarily on a survey of 60,000 households
The drop in the unemployment rate reported on Friday was driven by the reduction in the labor force, as defined by the household survey :
Persons are classified as unemployed if they do not have a job, have actively looked for work in the prior 4 weeks, and are currently available for work.
If you are not employed and not actively looking for a job, you are out of labor force. With the unemployment insurance extended beyond one year (and likely to get extended even more this fall), and the economy still very weak, the reliance on active search is increasingly looking dubious.
As energyecon and EHP have been saying for a while, one has to look at EMRATIO, which did drop in June and which also comes from the same household survey.
Then why fine them 35 million dollars?
No double-indemnity problems, justice has been served up.
i believe that ultimately, years down the road, this will end with the feds or a GSE owning a huge chunk of residential housing. this housing will effectively become section 8 housing.
"What I still wonder is what happens to the non-paying homeowner. Are they foreclosed and evicted or left alone to live free in their house?
It seems like the numbers are too big for that strategy to work for more than a couple of years."
Some foreclosures will be allowed to go through. But, politically, foreclosures are a problem, so they will be limited. No matter how big the remaining number of homeowners who can't or won't repay their loans on their originally agreed terms, solutions will be found that involve moving the losses to others. After all, if the total losses on homes that politicians don't want to see in foreclosure reach a big number, say 3 trillion, then that's still small enough to be added to the tab for this recession. Everyone who knows anything has already accepted that the numbers will be that big.
nodhan
This is the best stuff out there, so you better upload then put this on some other media, before they take it down:
Protist Images: Ulothrix tenuissima
Then why fine them 35 million dollars?
Multiple regulators. SEC was left out of the BAC/MER shotgun wedding, and now is defending its turf given the current super-regulator jockeying in DC.
Well, to repeat, I think those Miami condo towers will be section 8 housing someday.
I think that the housing will end up being owned by the localities, for non payment of
liens and taxes. Taxes generally have priority over most everything. There are some
exceptions, but they are relatively rare. If they are smart, the locals will keep the taxes
high for property owned by lenders and in foreclosure. You can appeal high taxes, but
I don't think the banks will do this. I also don't think they will fight with insurers over
hurricane damage, which is a question of when, but whether.
A $33 million fine is Chicken Little feed.
I hope Ulothrix was enjoying itself, but I didn't understand the sequence.
channeling my inner hot chart money monkey
Look out below !!!
Fibonacci retracements are for closers.
I'm not sure if money is involved here, but medical experiments may be a direction to go after bankruptcy.
Re: Some 175 people have enrolled in the trials at the Leicester Royal Infirmary and results may be available in four to six weeks, according to the University Hospitals of Leicester NHS Trust.
As part of the tests volunteers receive two shots of the vaccine with their blood tested to show their levels of immunity. The trial, which is testing different doses of the vaccine, will also establish how far apart the doses need to be given.
404 - Resource not found
Fine who? See? The piddling $35m is price of a pardon to prove the system works. 0.02% of their market cap is not a fine.
"pavel - that was superb - ever thought about a collection of crisis poems and nursery rhymes for children? Give it a generation and some prudence might come back.
(This acculturation point always occurs to me when I read Elizabethan nursery rhymes to the kids).
C"
Thank you, Counterpointer. That's a good idea of yours. I do have a book just out:
Amazon.com: Animal Kingdom (9780976858041): Pavel Chichikov: Books
And another should be out in about a year.
I think crisis poems would be interesting, but I hope not too appropriate in the future. Nursery rhymes for children? Worth thinking about.
The hero worship has already begun, way before we even know we're out of this mess. How quaint.
ECONOMIC SCENE; As Economy Turns, Washington Looks Better - NY Times
You can always count on David Leonhardt to shine someone's arse.
The piddling $35m is price of a pardon to prove the system works
... as well as to close the issue from the BofA perspective and move on
so, someone please help me understand, because it seems the story in the popular press is that we can issue the "all clear" and all that toxic waste swept under the rug will just go away. Almost like it didnt matter at all in the first place. Are we to just assume that cooking the books is the way to solve economic problems? Me confused.
"This is simply wrong. The inventory liquidation, although large in $bn terms, has NOT
been excessive given the unprecedented 18% collapse in sales (see right-hand chart below).
The rate of inventory decline, at 8% yoy, has barely exceeded that seen at the nadir of the last
shallow recession in 2001/2 when sales fell only around 5% yoy."
PDF
Scheduled Downtime
patientrenter,
Thanks - I'm glad you liked it
Even my formerly beloved NPR is suffering from this. Up is good, down is bad.
Cram downs bad for banks because it would cause them to suffer loss. I started
screaming at the radio, they've already suffered the loss, long before any cram
down.
The employment figures were good, because they were slightly less horrible
than expected. Etc, etc.
I would like to know just how they are gonna do this inflation thing.
If and when inflation hits, and if and when TPTB decide to do something about it, it will be interesting to see how it is dealt with. The Fed/government has its old toolbox(FFR, reserve requirements) and its shiny new toolbox(TARP, C4C, etc.). Are they going to try reining in inflation through broad measures, or removing small hotspots?
Sorry paper pusher. I mean how are they gonna CAUSE inflation, not fix it
afterwards. I am now on the deflation side. Once they cause it and kill some of
the debt, it can be fixed. Volker did it and it can be done again.
I think some inflation is the least horrible of horrible outcomes.
"Are we to just assume that cooking the books is the way to solve economic problems? Me confused."
I think the correct conclusion to draw is that the American public (and, to be fair, the publics of most other countries) would prefer not to have to personally pay for all that they spend. Instead of presenting each individual who spent the money with a bill they cannot wriggle out of, instead spread the costs over other large groups in a complicated way that makes it hard to see who is paying for what. The biggest payments will be borne ultimately by taxpayers, and by savers, with small amounts absorbed by equity investors. It doesn't really solve an economic problem. It just shifts costs from one group to another, in a way that seems to make most voters happy, or at least less unhappy.
I have to think Qualcom Millionaires are very similar to the Amgen Millionaires and Countrywide Millionaires and their ilk who reside in Calabasas, Westlake and Thousand Oaks. Talk about a high end home market waiting for a fall.
i'm waiting until the anniversary of the great collapse. i know several people that liquidated last summer and put millions into local and regional banks. the downside of the public rediscovering risk is that borrowing costs for the banks get a little more steep.
so... you're saying we're going much higher?
"i'm waiting until the anniversary of the great collapse."
The Future Looking Back at us:
pavel.libsyn.com
I realize this is OT, but this pisses me way off, from CDC, and they are full of shit, and I mean ugly dark poo! They are going to cause massive deaths IMHO!!!!!!
Re: OK, this is recent stuff>> Flu plan urges against alarm
rgj.com | Reno, NV | The Reno Gazette-Journal
"The updated guidelines advise that students can return to school as soon as 24 hours after their fever is gone"
"There has been modelling done the last several years. We have invested in preparing and understanding pandemic for influenza. One of the findings was that we know some things were seasonal influenza and some things from studying pandemics from the past century. Schools and children are very common reservoirs for infectious diseases, including infectious viruses like influenza. They tend to have lots of social contacts more than adults. And they-- somebody is laughing here because we know what kids are like. And they also shed the virus longer than adults do. So those circumstances, the frequent social contact, the close proximity in schools, and then the longer period of shedding often without even having symptoms are such that transmission can move quickly through its schools and it may take a longer time to go through different kinds of institution or workplace or community. So some of the modelling about what we call community mitigation or that attempt to really slow spread within a community suggested that schools would be a valuable intervention point. This may not be the case for every influenza virus or pandemic, but the modeling effort suggests this was the proudest area where we thought about social distancing."
I guess she wants to help the statistics explode???
WHO earlier estimated that as many as 2 billion people could become infected over the next two years.
"Even if we have hundreds of thousands of cases or a few millions of cases ... we're relatively early in the pandemic," Fukuda said in an interview at WHO's headquarters in Geneva.
I guesss she wants to make fucking sure that a few million people die, so that schools can stay open, so that The travel and Tourism industries can help spread this, so that a few bogus drugs can be offered, so that a few people can cash in on this pandemic!
Ok, I'm done, sorry about profanity, but she is INSANE! Keep your immune systems on high alert because there will be lots of people dropping this fall!!!!!!!!!! BEWARE!!!!!
I've been thinking about the most recent disorders at the health care plan town meetings. They suggest tensions coming to the surface, anxieties emerging as rage. But they are politically formless, so far.
"the downside of the public rediscovering risk is that borrowing costs for the banks get a little more steep."
Don't you think that any interest rate increases will be held in check by the Fed, increasing money supply as needed to keep rates within a target range?
"Insolvent" and "bankrupt" are such insensitive terms when applied to individuals. I suggest we replace those terms with those used to describe banks and government programs in similar circumstances- "well-capitalized" sounds much less nasty and disagreeable.
How about non-productive consumer units?
Polically formless? Oh, no Pavel, some of the attendees really are
carpetbaggers, shipped in by the Repubs to foster dissent.
What Im saying is:
The
rally, has convinced a true-believer segment that the "all clear, better than expected, beat expectations" is still on. The dollar at condition critical support, and is due for a bounce. FH Analytics is saying overbought set conditon 1SQ....S&P to 954-930....DIVE, DIVE, DIVE !!!!
get in there and sell till you can sleep. ie: rake in the chips on the 3-letter-monte, live to fight another day.
I mean how are they gonna CAUSE inflation, not fix it afterwards.
The debt being accrued will cause interest rates to rise and the value of the dollar to fall. People will react to rising rates and falling value by seeking to acquire more money. Businesses will raise prices as soon as they can. Workers may have to work more, but they will do so to seek more compensation. The dollar will become worth much less than it is today.
Unless of course you think there will never be a recovery.
"Polically formless? Oh, no Pavel, some of the attendees really are
carpetbaggers, shipped in by the Repubs to foster dissent."
Liz, I'm not doubting you, I wouldn't doubt what you say right off, but how do you know?
Hello Bond Girl - congrats on the well written piece and on the public fame and recognition!
By the way, how does one access all these cute little icons Ken has added?
Where is "Volker the Communist" at?
Pagin "Volker the Communist"!
"Volker the Communist"?
"Volker the Communist"?
Where are you?
United Guaranty loses $488M for Q2 - The Business Journal of the Greater Triad Area:
one of aig's offspring is hAving troubles
10-4
Well, there's clearly not much appetite here for thinking about regulatory reform (as discussed in Bond Girl's piece I referred to earlier). I suspect this lack of interest is shared on Capitol Hill. Only when our financial system was on the precipice were people at the top ready to consider serious changes. Now, serious change is off the legislative agenda, and is relegated to think-tanks and economists' symposia. The carcass is being used by a few politicians to advance their personal goals (witness the agencies each fight for more turf and their heads for their own jobs and careers), but that's about it.
Check the bottom of your screen for "Textual smileys"
Compose tips | Hoocoodanode?
"The secret of life is honesty and fair dealing. If you can fake that, you've got it made."
Marx
Bond Girl,
Nice stuff there, keep up the good work, writing and research!
I did want to comment on: "Let people establish for-profit companies that can compete for government contracts to stress test the holdings of financial institutions independently and audit their records."
It seems that Moody's, Fitch and S&P are already in place and doing a heck of a job!
"recovery" is already underway, no matter how temporary.
Groucho, not Karl
Reported by npr. Normally people who attend these things are not very rowdy,
and if they are they need time to work themselves up.
Mr. M.,
Thanks, I had never noticed that link. If I could, I would buy you a
.
recovery is here now
best time to buy that house of your dreams
best time to buy that car of your dreams
jobs. well its not really a good time for us to be talking about jobs they will come just like they always have
JD
"How many of your friends and family do you know with $5,000 in the bank? "
Friends are not everyone I know but most of my friends would have easily have 10 to 20+ times that number. Relatives you inherit but a few would also easily have $5K in the bank, most no.
Reported by npr. Normally people who attend these things are not very rowdy,
and if they are they need time to work themselves up
Normally people don't see $15T of their net worth disappear in 18 months, 9.5% UE, hours and wages decline and trillions thrown at Wall ST and the wealthiest among us.
When the Voce Populi herd it on the grapevine, means they are fixing to stampede...
LL,
Earlier you mentioned Countrywide's mess. This is interesting
Countrywide Foreclosures (REO) Blog
Also look at some of the days on market in Sac CA.
Sacramento Area Flippers In Trouble
Yep that's the normal scenario. But there isn't any normal.
velocity of money still way down, right?
Debt vanishing to nothingness just as fast as before.
The "money" isn't being injected into the economy, except for some shovel ready projects and C4C. A pittance really.
Banks still not loaning money. Still no credit worthy types who want debt. Not getting lots of CC applications in the mail.
Just wait til the mkt goes back down and all those trillions of illusory wealth disappear again.
That is a large part of the problem. Normal people are not seeing the losses. They only see what their 401k balance shows, they only hear (sometimes) what the Dow, S&P do for a week. They only see if they have a job and thier spouse has a job. Most people don't see past their own front door.
Even if they hear the number, they don't know what they mean. They know what they are told they mean.
Hmm, Ben, I find it difficult to believe that Countrywide has only 510 REOs that
need selling in Florida. Florida is big. They made a lot of loans here.
Well, there's clearly not much appetite here for thinking about regulatory reform (as discussed in Bond Girl's piece I referred to earlier).
I would suggest the bulk of the comments here on the subject over the past few years have complained about a purposeful lack of regulation and enforcement.
The common thread seems to me to have been: no new laws, just enforce the ones that are there.
In order to reform a bad system, wouldn't it be prudent to reform the bad actors orchestrating it first?
Bond Girl, I think one of the reasons that our regulatory system went off the rails in the last 5 years was that there really was an increase in global savings, and it was loaned to us with no questions asked. That, combined with the culmination of a slower but bigger build-up of savings and debt in anticipation of the baby boomers' retirement.
All the other contributing factors - regulatory capture, a credit culture, poor professional standards amongst mortgage brokers and originators, were latent before the last 5 years. But what changed the most in the last 5-10 years is the increase in savings caused by a dramatic increase in incomes in China and some oil producers, combined with very high savings rates there. A bigger share of the world's income went to people who were prodigious savers, so the world's savings rate went up by a small but significant amount. That extra savings was not fully absorbed locally, and was exported disproportionately to the US, because borrowing was always easy in the US.
These two big factors - baby boomers' retirement plans, and China's continued high savings rate and income growth, haven't changed much yet. So it's hard to see any effective system that holds nature in check, and prevents people in the US from doing what comes easiest - spend and buy now, borrow any shortfalls, and hope for the best.
LL
I tend to agree but my little state seems about correct against the county website. That is the part I use. What they have and what is hidden is always the question anymore.
From what I read or hear from the MSM, globalization is here and we can not go back...WHY NOT?
What really has globalization really provided? It has turned our economy from manufacturing to service...It has produced houses that people could not afford...stagnated wages...incurred a lot of private and now public debt....
We need to get back to a review of our basic assumptions about what America needs to be a foreign sovereign...I prefer isolation and protectionism, but that's my opinion...to rebuild this country...
Someone needs to ask the question and to discuss it openly to the American people...Where are we currently at and where do we want to go?
People will put up with sacrifice, if we have a goal and a game plan...If neither, then its "every dog for themselves".
EDIT for spelling
"The common thread seems to me to have been: no new laws, just enforce the ones that are there."
Agreed, but it might be nice to get an old law, back on the books.
http://en.wikipedia.org/wiki/Glass-Steagall_Act
That's funny, the Guardian this morning is reporting 33,000 folks took advantage of the 'cash for bangers' program, in the UK. Turn in your old car and get 2k pounds towards a new one. Presumably the same folks who went broke didn't spring for a new car before they were declared insolvent.
"What really has globalization really provided?"
Markets for our goods, and a higher standard of living.
"The common thread seems to me to have been: no new laws, just enforce the ones that are there."
I agree, new laws are just a way for politicians justify their job after they have failed to properly do their job. New laws mean nothing if they neglect them.
"I did want to comment on: "Let people establish for-profit companies that can compete for government contracts to stress test the holdings of financial institutions independently and audit their records."
It seems that Moody's, Fitch and S&P are already in place and doing a heck of a job!"
Doc, BG wasn't suggesting the current rating agency system. In fact, she described how the rating agencies became captured, and why. What she proposed was a much more open system, with enforced circulation of the entities that evaluate banks and other financial institutions. For example, she suggested that these auditors be limited to a maximum of 4 years,so they always know a new auditor will be checking their work fairly soon.
Somebody mentioned Vespasian the other day, and they just found his palace-with granite countertops, no doubt...
Vespasian Birthplace: Roman Emperor's 2000-Year-Old Villa Unearthed Near Cittareale
What really has globalization really provided? It has turned our economy from manufacturing to service...
Globalization provided the mythical 8% yields upon which people built their retirement hopes.
Put me in the deflation camp (for now).
I have a retail business and retail tenants. Everyday we are confronted with a tapped out consumer. If inflation is right around the corner someone better tell my customers to part with those worthless dollars that they are holding sooo dearly.
Consumer credit down. Home ATM broken. Wages stagnant to down. And we are supposed to see INFLATION??
Too much capacity and slack employment for any game changing in the near term
Blackhalo, yes, resurrecting Glass-Steagall was also a common point made here over the years.
"In order to reform a bad system, wouldn't it be prudent to reform the bad actors orchestrating it first?"
Why cure the disease when there is so much hay to be made treating the symptoms?
" August 8, 2009
The incoming head of the British army said in an interview with The Times newspaper Aug. 8 that the NATO mission in Afghanistan could take up to 40 years, and that there is no chance of NATO pulling out of the country. Gen. Sir David Richards, who will become chief of the General Staff on Aug. 28, said British troops will only be needed for the medium term, but that Britain’s involvement in Afghanistan will continue for the next 30 to 40 years. British Shadow Defense Secretary Liam Fox said a commitment of 30 to 40 years would be unaffordable, and that it would require a total re-evaluation of British foreign policy. There are currently 9,000 British soldiers deployed to Afghanistan."
In forty years the name of the UK might well have been changed to Oceania.
I think one of the reasons that our regulatory system went off the rails in the last 5 years was that there really was an increase in global savings
Liquidity injected into the system by the Fed mopping up after bubbles and trying to prevent disasters - LTCM, Asian crisis, Nasdaq, 9/11, recession of 2001 - was as important as the Chinese savings, IMO.
Every time the next bubble was greater than the previous one.
"As long as velocity (turnover of money) is stagnant we expect the increases in the monetary base and all the quantitative easing will lead to a stagnant economy and deflation until the consumer goes into the same borrowing and spending patterns that was characteristic of the 1990s through 2007"
Deleveraging the U.S. Economy
Glass-Steagall (at least the separation of commercial and investment banking part) had no effect on: AIG, FNM, FRE, MER, BSC, GS.
"The common thread seems to me to have been: no new laws, just enforce the ones that are there."
I agree, new laws are just a way for politicians justify their job after they have failed to properly do their job. New laws mean nothing if they neglect them."
Grains of truth in both comments. But the flaw with the enforcement emphasis is that it relies on enforcers. The chief enforcers during the last 5-10 years were Bernanke and Greenspan, and Barney Frank, Chris Dodd, and Chuck Schumer and their predecessors on Capitol Hill, and Bush/Obama, and Summers / Geithner and their predecessors in the Admin. They unanimously supported the housing bubble. So clearly the problem is that the foxes are guarding the hen-house. How can we change that? That's the problem with a focus on increasing the power of regulation.
. . .new laws are just a way for politicians justify their job after they have failed to properly do their job.
Sad, but true. I would rather see the DOJ announce a new major fraud prosecution about once a week.
Well, 4 years was StatsGuy's suggestion, to be fair, but I actually did have something about intermediate-term contracts in one of my earlier drafts. I am glad you guys liked it; I was wondering how much grief I was going to get once it was released. (Thanks MrM)
The global savings glut has been a pretty recent development, but regulatory capture has been around for a long time. I think LTCM kind of reinforced it by giving regulators the idea that it was within their means to influence the banks into cleaning up their own messes (fail).
"Glass-Steagall had no effect on: AIG, FNM, FRE, MER, BSC, GS."
What!?!? It's absence most assuredly did. Plus, it's absence facilitated Enron.
It's absence allowed for TO BIG, leverage and insane capital ratios.
"The repeal enabled commercial lenders such as Goldman Sachs and Citigroup, which was in 1999 the largest U.S. bank by assets, to underwrite and trade instruments such as mortgage-backed securities and collateralized debt obligations and establish so-called structured investment vehicles, or SIVs, that bought those securities.[15] Elizabeth Warren,[16] co-author of All Your Worth: The Ultimate Lifetime Money Plan (Free Press, 2005) (ISBN 0-7432-6987-X) and one of the five outside experts who constitute the Congressional Oversight Panel of the Troubled Asset Relief Program, has said that the repeal of this act contributed to the Global financial crisis of 2008–2009,[17] [18] although some believe that the increased flexibility allowed by the repeal of Glass-Steagall mitigated or prevented the failure of some American banks.[19]"
"Liquidity injected into the system by the Fed mopping up after bubbles and trying to prevent disasters - LTCM, Asian crisis, Nasdaq, 9/11, recession of 2001 - was as important as the Chinese savings, IMO."
This was a very serious contributor. Better action by the Fed could have prevented it all. But the bubble support was present from at least 1998 on. Arguably, it was present from October 1987 on. Some factors that contributed to the crisis we just had were old, and some were new. I suspect that one of the newer factors is what put the bubble over the top.
If the Baksters went on trial then they would roll over on the politicians. Short of a revolution elect the next bunch of bandits I guess.
The American public has been preached to for 30+ years that "you can have it all" and not pay for it! This message came from the govt., private business and your neighbors...so are we surprised that we are now in this "pickle"?
To paraphrase, do not know the author, If you do not know where you are going in life, your goal is where you end up!
Imagine how dastardly business is right now, and then have the dollar get whacked by 2/3rds, and every imported item costs 3x as much, and we can talk inflation.
All of most of our lives, the price of consumer goods has only gone down, especially so with everything we used to make here, that instead was being made where Asian rates of pay dictated both low quality and low prices ruled the day...
So, retail customers have grown used to buying cheap toasters for $10, will now have to pay $30, when the old stock of inventory runs out, with the same ratio for everything else that used to be dirt cheap, as the consumers are barely clinging onto their jobs, the pay of which is being reduced via furloughs and lessened hours per week~
What is it about the Russians and Chinese in the playing of chess or go, they plan 6, 8 10 moves a head and Americans on only one?
More green shoots! Cheerio!
Deleveraging the U.S. Economy
Deleveraging the U.S. Economy - OnlineTradersForum.com
Looks more and more like a lost decade or two.
Fortnight Thinking = Weak minds that can only think back a week, or forward a week.
Blackhalo (homepage, profile) wrote on Sat, 8/8/2009 - 11:51 am
* reply
* Ignore user
"What really has globalization really provided?"
Markets for our goods, and a higher standard of living.
Yes, I agree in part, however it was on borrowed money that will be paid back by the individual or the taxpayer...
"To paraphrase, do not know the author, If you do not know where you are going in life, your goal is where you end up! "
Dead?
"What is it about the Russians and Chinese in the playing of chess or go, they plan 6, 8 10 moves a head and Americans on only one?"
Yeah, but we still have bigger homes, bigger cars, bigger meals, more cable channels, more roads, etc than they do. No one can consume like we do! We're the best.
Seriously, the US has natural resources that are excellent, if a little depleted. People who are flexible can enjoy a good quality of life here.
Will people go nuts if food costs twice as much, same in % terms, as in say rest of the world?
The global savings glut has been a pretty recent development, but regulatory capture has been around for a long time.
I agree with MrM that LTCM started a series of liquidity infusions that got out of control and had far more impact on today's situation than increased wealth in the ME or China.
But in my youth what is now called 'regulatory capture" was just called "the revolving door."
I think we can take it back at least to Eisenhower and his warning about the military industrial complex.
The fact that it has been institutionalized (or socially accepted) for so long has made the problem worse.
No way IMO should a recent officer or employee of Goldman-Sachs become head of the NY Fed or Treasury Secretary. That is no different that making the local gang leader the head of your security force.
"No way IMO should a recent officer or employee of Goldman-Sachs become head of the NY Fed or Treasury Secretary. That is no different that making the local gang leader the head of your security force."
But they pay such sweet kickbacks for all the money they are sending out the back door... How else is Timmy going to get that underwater house taken care of?
Come on, Bond Girl, I did say I liked you post and cheered you with a glass of wine!
It is well thought-through and thought-provoking! I simply shared some of my thoughts
I agree very much with your own comment:
it is deeply embedded in our concept of value that the person who is worth more is actually worth more, and that has a very powerful situational translation.
I personally think of this issue as rooted in the deeply ingrained belief across all strata of the American society that the government is always a problem and the private sector always has a better solution (witness the current debate about healthcare and Medicare). I actually think one of the main reasons why the OSFI in Canada is a much more effective regulator than all of the US agencies combined, is because the role of the government is viewed very differently in Canada.
Re: town hall disruptions:
CBS, Fox reports on town hall disruptions ignore conservative strategy | Media Matters for America
Town Hall Disruption Memo Sample
Blackhalo (homepage, profile) wrote on Sat, 8/8/2009 - 12:08 pm
* reply
* Ignore user
"To paraphrase, do not know the author, If you do not know where you are going in life, your goal is where you end up! "
Dead?
Yes, dead in the end...The only problem is that you may spend your remaining years alive "down by the river" huddled around a campfire with nothing to eat, or at best, "moose or squirrel".
MrM,
I was thanking you for the good cheer!
Let's see how this knifecatcher/remodeler does (this at the high end):
131 CROCKER Ave, Piedmont, CA 94610 | MLS# 40423483
Just went on the market
I've never missed a meal in my life so far because there was no food available because of lack of harvest or lack of money, and there would be a lot of Americans that would fall into the same category as me...
The price of bread continually rose in France in the run-up to the revolution, and our stomachs are usually the Baedeker to our souls, and who knows what lurks in ours?
blackhalo, I might be missing something, but how would Glass-Steagall have prevented Bear Stearns or MER from collapsing?
Good interview on Residential RE ( starting at minute 8:00) Dan Alpert of Westwood Cap - looking for another 16% decline
Bloomberg News
"Yes, I agree in part, however it was on borrowed money that will be paid back by the individual or the taxpayer..."
Or a soft default via inflation.
The isolationist/protectionist route leads to Air Bus wiping out Boeing, Canadian Wheat over USA corn, no more big budget movies as the world will ignore our copyrights. Microsoft wiped out as the EU switches to open source. And much, much higher prices for everything from textiles to electronics.
There are surely things we need to do to mitigate the negatives of globalization, like get China to float their currency and reestablish pay/go in our Federal budget. But just because there have been abuses, does not mean there is not a net gain.
""What really has globalization really provided?"
Markets for our goods, and a higher standard of living.
Yes, I agree in part, however it was on borrowed money that will be paid back by the individual or the taxpayer..."
No argument about globalization will be settled on a blog. It has become one of those political tribal identification issues. "Which tribe are you in?" "I'm in the pro/anti-globalization tribe. I drive a Japanese/US-made car...."
I generally favor more globalization. I personally live far away from where I was born, and my immediate family is dispersed all over the globe, in every continent but Antarctica. It has pluses an minuses, but I like the pluses more.
Opposing trading with foreigners feels odd to me. Where do you draw the line? Why trade with people in other states in the US? Why trade with people who don't look like you? Why trade with people outside your own family? Why not just be completely self-sufficient, and avoid family relationships? Doesn't this get nutty, pretty obviously, pretty quickly? Why not just trade with people when you want to, and not trade with them when you don't want to? So I'll buy a Korea car if I want to, or a Detroit car if I prefer. All treated equally, with the choice made by me. You get to do the same.
Saw this on Zero Hedge, might have been discussed here but I didn't see it in this thread.
Geithner asks Congress for higher U.S. debt limit
| Reuters
From the article, emphasis mine
WASHINGTON (Reuters) - U.S. Treasury Secretary Timothy Geithner formally requested that Congress raise the $12.1 trillion statutory debt limit on Friday, saying that it could be breached as early as mid-October.
"It is critically important that Congress act before the limit is reached so that citizens and investors here and around the world can remain confident that the United States will always meet its obligations," Geithner said in a letter to Senate Majority Leader Harry Reid that was obtained by Reuters.
A Treasury spokeswoman declined to comment on the letter.
Treasury officials earlier this week said that the debt limit, last raised in February when the $787 billion economic stimulus legislation was passed, would be hit sometime in the October-December quarter. Geithner's letter said the breach could be two weeks into that period, just as the 2010 fiscal year is getting underway.
I find it quite humorous how formal the fall is.
It does get nutty. However, it is easier for people to blame others than look at themselves.
If we make it the Chinness low wage or India call center take over or Korea cheep goods - easier than saying we in the US wanted what we had not yet earned and we wanted it NOW. And we wanted it cheap, we wanted people to work for next to nothing so we could have everything.
Most of us in the US are very spoilt.
How long did the fed wait before attempting to fight inflation in the 70s? Why would it be different this time?
"Treasury officials earlier this week said that the debt limit, last raised in February when the $787 billion economic dreamliner stimulus legislation was passed, would be hit sometime in the October-December quarter. Geithner's letter said the breach could be two weeks into that period, just as the 2010 fiscal year is getting underway."
added a little minus...
"blackhalo, I might be missing something, but how would Glass-Steagall have prevented Bear Stearns or MER from collapsing? "
It would have prevented them from levering up to 30 or 40 to 1 capital ratios, and not allowed them to trade in unregulated derivatives.
They had Disco, we have heavily Discounted Loans.
30 or 40 to 1 leverage is a big red flag.
When they overturned Glass Segal I was floored. It was put in place so GD1 would not happen again. Leverage was a big cause of GD1, everyone levered, just like investment firms do with people's 401k funds.
401k money has allowed massive and continual inflows of cash to sink into markets. Good, bad or indifferent that money always hits the coffers to be levered. 401ks are the major reason firms were able to end pension funds, now one of the reasons many people near retirement can not retire.
patientrenter,
I may be wrong here, however I do not equate trade with Globalization.
Under what is called globalization, money is moving in out of countries at the click of a mouse with devastating consequences. My concern is the exporting of finance---loans that people can not pay, credit cards that are given to people can not repay, etc...Our financial exports are, in my opinion, has impoverish 2nd and 3rd world populations....and then ttheir is our military superiority...
The US exports only two services (not really goods to any real extent) military force and financial WMD...Both are/have caused our (world's) current crisis...
PS: We may be able to buy more "things", however it is poisoning America...
The difference between the 70's and now, that I notice, flight of manufacturing jobs, sizable population that is under the radar and lots lots more of personal/household debt(not to mention the national debt). The usual tools of controlling inflation, raise interest rate for example, may not available.
Glass Steagall didn't regulate the activities of investment banks, just commercial ones.
Blackhalo, I know nothing about Glass-Steagall, but I thought it just forced various banking and other financial activities into separate ownership and control structures. So why would that have prevented the companies that were allowed in that regulatory framework to package mortgage-backed securities from manufacturing large quantities?
Great then, my karma is saved
Later all...
Not very many women were in the workplace in the 1970's, compared to now...
Life after the crash. It's coming to a town near you. CR inspired, and includes CR product placement:
I safed the shotgun and tried standing up. I reversed it, used it as a crutch, and tried again. Then I started walking around the outbuilding. Jeebus, I hurt. I grayed out for a second but stayed on my feet. About 15 yards from me a man was exchanging rounds with someone over by the house from behind the older truck. I blew his head off. There were two bodies lying in front of the barn. One had a pair of mangled legs. I saw Diesel coming towards me at a run. He was moving pretty fast for someone who was running crouched. I kept walking towards the barn. I took a fast look over at the house. Someone was down. It looked like Old Guy. I stopped at the white truck, dropped the shotgun, and used my free arm to brace myself against it.
"Jeebus Gardener. You have a dogs head attached to your leg!"
"Yeah. No shit. It hurts too. So what do we have?"
He tore his eyes off the dogs head. It was still staring at me, and if possible, it looked even more pissed then when it was alive. "Old Guy is down. He is still alive, I think. Ninja is somewhere in the trees. I think he is covering the side door. I am pretty sure he is okay."
more: American Apocalypse
"I may be wrong here, however I do not equate trade with Globalization."
Am I right in saying that you define globalization as trading on credit in excess of certain limits?
The Gov's motto for the last 30 years,
"See no evil, hear no evil, speak no evil".
and I am a moderate to conservative Dem.
True, they are now ~50% of the work force, mostly service jobs. Eventually we may regress back to one job per family; they will find a way where the male will be able to bear children, I suppose.!
"Glass Steagall didn't regulate the activities of investment banks, just commercial ones."
Prior to the repeal, financial institutions could not both take deposits AND trade securities. It was one or the other. Allowing them to do both let them take deposits and use those as assets in high risk trades.
In the U.S., the Glass-Steagall Act, initially created in the wake of the Stock Market Crash of 1929, prohibited banks from both accepting deposits and underwriting securities which led to segregation of investment banks from commercial banks. Glass-Steagall was effectively repealed for many large financial institutions by the Gramm-Leach-Bliley Act in 1999.
Investment banking - Wikipedia, the free encyclopedia
lost-confused (profile) wrote on Sat, 8/8/2009 - 3:32 pm replyIgnore userpatientrenter,
I may be wrong here, however I do not equate trade with Globalization.
Under what is called globalization, money is moving in out of countries at the click of a mouse with devastating consequences
"Central Europe is at the epicenter of the global financial crisis. The region became the top destination for foreign capital in 2002, overtaking East Asia; but since September 2008, it has experienced a massive outflow of foreign capital that threatens to crash the region's currencies. The region founded its growth largely on the influx of foreign loans that are now in danger of appreciating in real value as domestic currencies depreciate."
The Recession in Central Europe, Part 2: Country by Country - John Mauldin's Outside the Box - InvestorsInsight.com | Financial Intelligence, Advice & Research / Investment Strategies & Planning for Individual Investors.
Prior to the repeal, financial institutions could not both take deposits AND trade securities. It was one or the other. Allowing them to do both let them take deposits and use those as assets in high risk trades.
True, the repeal of Glass-Stegall would have affected Citi, BAC, JPM, etc. but none of the bad actors that I had previously listed took deposits. They were non-bank financial institutions and therefore outside of the aegis of G-S.
"True, the repeal of Glass-Stegall would have affected Citi, BAC, JPM, etc. but none of the bad actors that I had previously listed took deposits. They were non-bank financial institutions and therefore outside of the aegis of G-S."
OK, but many banks that were NOT investment banks began trading securities that were GS JPM AIG dependent. These securities (and banks) were put at risk of failure in the event JPM or GS or AIG went down. Prior to Glass-Stegall no one would have cared if the IB's or AIG went under, as the banking system would have remained sound. Post Glass-Stegall the entire financial system gets wiped out.
So yes Glass-Steagall would not have saved GS JPM or AIG, just as it did not save LTCM. But we would not have cared.
At the surety of being excoriated for broad brush oversimplification:
What happened in the 1920s with stocks happened agin in the 2000s with houses. Buying on margin amplifies risk (and reward).
God help us if we allow buying on thin margins to continue in any tradable good. I am including things that have worked for a long time; currencies, oil, wheat, etc.
Related observation: "Margin Call of Cthulu" was the best avatar ever.
"Prior to the repeal, financial institutions could not both take deposits AND trade securities. It was one or the other. Allowing them to do both let them take deposits and use those as assets in high risk trades.
True, the repeal of Glass-Stegall would have affected Citi, BAC, JPM, etc. but none of the bad actors that I had previously listed took deposits. They were non-bank financial institutions and therefore outside of the aegis of G-S."
Basel II has given the best answer to your question. I would just add that you shouldn't lose sight of the forest for the trees. In the Glass-Steagall regime, there was room for entities that repackaged MBSs. As long as there were such entities, that could package crappy loans and re-sell them at full price, then whatever the identities of these entities, we would have had the same outcome when that Ponzi scheme collapsed.
Yeah, who was Margin Call of Cthulu? Some old-timers have come back recently, interestingly enough.
C
"At the surety of being excoriated for broad brush oversimplification:
What happened in the 1920s with stocks happened agin in the 2000s with houses. Buying on margin amplifies risk (and reward).
God help us if we allow buying on thin margins to continue in any tradable good. I am including things that have worked for a long time; currencies, oil, wheat, etc."
My second-favorite post of the day (after Bond Girl's post over at the Baseline Scenario).
A lot of solutions to the problems that created our recent financial crisis are very complicated or opaque. Like any complicated or opaque solution, they are vulnerable to being derailed. If we had to pick one simple action that was hard to manipulate, and that would avoid the worst of the damage of the recent crisis, it would be strict lower limits on borrower equity in homes being used as collateral for loans. For example, downpayments of 30% or more, with some exceptions down to 20%, and absolutely no interest deductions on any home loans in excess of that. Relatively hard to get around, relatively easy to enforce, relatively low collateral damage (so to speak), and very powerful effects.
patientrenter (profile) wrote on Sat, 8/8/2009 - 1:07 pm
A lot of solutions to the problems that created our recent financial crisis are very complicated or opaque. Like any complicated or opaque solution, they are vulnerable to being derailed. If we had to pick one simple action that was hard to manipulate, and that would avoid the worst of the damage of the recent crisis, it would be strict lower limits on borrower equity in homes being used as collateral for loans. For example, downpayments of 30% or more, with some exceptions down to 20%, and absolutely no interest deductions on any home loans in excess of that.
I agree that progressive deductibility is a useful tax policy. IMO we also need second/HELOCs to be deductible only for home improvement expenditures.
Relatively hard to get around, relatively easy to enforce, relatively low collateral damage (so to speak), and very powerful effects.
And having the additional beauties of turning over quickly and not being retroactive.
The President said it was expensive healthcare that caused bankruptcies... isn't healthcare FREE in the UK???
Yep - the drop in the unemployment rate looks to be all about people leaving the labor force...
Related observation: "Margin Call of Cthulu" was the best avatar ever.
Who was this person, and where did they go?
A sock puppet?
It's True now people are leaving labor jobs its also making a good impact on unemployment !
Reverse mortgage loans
Crisis poem is to good because now we are us too of it!
our economical situation is not very good so we will have to take some actions!
Reverse mortgage loans
The Moderate conservative is an old Motto of our government so it's very hard to believe on these things ! now these issues must be raised in the mainstream !
Reverse mortgage loans
Well the stats are telling that there is a change in the labor enforcement! people leaving labor jobs and joining finding the other ways !
Reverse mortgage