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Sometimes you have to wonder what country we're living in. Reading Christy's post on tent cities and food rationing, contemplating a trillion dollar war and $4 a gallon gas, you just want to shake your head and wonder how the hell things could slide down so far so fast.
On the political side we see that the usual checks and balances on a power-mad executive have been damaged: Congress, what's left of the judiciary, the Mask Media, and intimidated whistleblowers.
And on the economic side, you can imagine where this is going, the same prosperity-loving administration -- and by prosperity-loving, I mean for the insiders, not the little people out there -- has removed most of the checks and balances from the financial world as well.
Calculated Risk heaps scorn on the regulatory incompetence:
Shocked? Homebuyers were speculating with no money down. Mortgage brokers didn't care because they would sell the loans immediately and collect their fees. Wall Street didn't care because they could package the loans and sell them to investors.
Investors would have cared, except they trusted the rating agencies.
[snip] ...the rating agencies weren't evaluating the underlying loans - they were performing statistical analysis using models based on lenders that cared if the borrower would repay the loan.
At the same time, regulators - despite numerous warnings - mostly ignored the problem, apparently for ideological reasons ("let the free market work"). What a mess. [bold added]
Ian Welsh has given us an overview of the mortgage crisis and proposals for how to unwind this tangled mess. Kevin Phillips joined us last week for Book Salon to discuss how the government systematically removed all the guardrails from the financial markets.
Blame where blame is due: the repeal of Glass-Steagall ripped down the firewall between banks and non-regulated financial firms during the Clinton administration. Then the Bush-Cheney administration finally found something where they were competent: tearing down all the remaining regulations keeping investment firms from going bonkers with the nation's savings.
So, whee! Anybody can start an investment firm, buy a bank, and have the bank invest in their gambling habit stock manipulation great ideas. I mean, what could go wrong?
Do you have a bank account, a pension plan, a mortgage? You could be in trouble without knowing it. Your bank account is probably not FDIC insured, ever check the fine print about that "new kind of account" that they switched you over to, to get more interest? Your mortgage, if taken out recently, might have a clause that allows the monthly payments to double or triple.
If you try to sell your house, you are caught in a market where housing prices are falling [of course, this is good news for people trying to buy houses, silver lining]. People who were counting on selling their homes to get retirement funds are about to get some sad news: home prices are likely to plummet in the next year, and will not recover for several more years.
Millions of people are already "underwater" where the value of the house is less than the money still owed on the mortgage and home equity loans. Millions more will be there soon.
If you have an IRA, company pension plan, or life insurance, or live in a city or state with pension investments, you will be affected by a different kind of crisis in the mortgage market. There have been so many weird kinds of investment vehicles based on fairy tales unfounded assumptions about how much various kinds of mortgages are worth, that no one really knows the value of them.
The tricky part is that financial firms have traded so many of these complicated financial products back and forth with each other that this is where we are now:
Everybody owes everybody else like a giant web of spidersilk. And what holds it together? Housing prices, which are collapsing.
We are beginning to see banks and investment firms write off billions of dollars in losses every quarter, and this will continue for many months. Small and medium size regional banks are in for a world of hurt.
The great unwinding will be painful as shaky investments are settled for pennies on the dollar. The good news is, we'll become poorer only gradually if this process happens slowly. But what if the whole thing starts falling apart all at once?
It's a house of cards. And the wind is blowing.
photo of Cardstacker Bryan Berg building Boston's Government Center by jpolaski
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“So?”
egregious!
nice photo.
YAY!
Egregious on da FRONT PAGE!
How many U of C economists does it take to change a light bulb?
Congrats egregious!
In Phoenix the animal shelters are full of abandon pets, the horse rescue has no more room and looking for volunteers to take in more. We are getting the health warnings for West Nile virus due to abandon pools and the Sheriff Joe is doing flybys to identify pools that could pose health risks….
The charge for my ticket from Milan Italy to Crete just hit my credit card… the Euro rate was $1.59 to US Dollar…. up from $1.35 from last summer…. WOW
“freedom’s just another word for nothin’ left to lose …”
A: None…Market forces will take care of it.
Just what they want…a nation of poor people who will be forced to slave for their corporations….
New World Order….its not a conspiracy theory…it is real…Bush41 mentioned it in his inaugural address I think..or State of the Union…
I figure we’ve got about a year left of price declines on houses- then several years of a flat market as the psychology tries to recover…It’s dicey as to whether we start to see an upswing in time for the re-election campaign of the next prez which is likely to be Obama.
“So, whee! Anybody can start an investment firm, buy a bank, and have the bank invest in their gambling habit stock manipulation great ideas. I mean, what could go wrong?”
_______________
Recall the S&L debacle.
They let developers etc buy control of S&Ls (usually via borrowed money themselves). Soon there was a friggin’ building boom everywhere. Needed or not. Didn’t matter, everyone was cashin’ in, knowing that the taxpayers were ultimately on the hook.
Going for my walk….. around my neighborhood…. where there are two houses that have been for sale now for over a year, they are empty and have had multiple different reality agencies trying to sell them….
then there are more who have been on the market for months….. only one house has been sold in the last year in the two sections of the subdivision
And the Congressional Democrats are so ineffective they are perfectly positioned to be blamed by the Republics.
Lucky me, I am slowly trying to get my life back together after going down early in the mortgage fiasco.
My last mortgage had a TEN percent interest rate, it got sold twice that I can remember and finally got bought by Capitol One. SPIT.
Lying thieving sonsabitches. They changed the contract twice and I finally went under and sold the damn thing literally days before it was going to be foreclosed on.
Now I live in my portable Rat Hole and am going to do my damndest to get out of town and start trying to get off the grid and sit back and watch the horror show.
First I have to finish getting out of the hole.
Hey pups!
“Thank God almighty! We are free at last!”
——-MLK
Not sure this is exactly what King had in mind.
It is very scary. I live in a community of manufactured houses.
There are many homes for sale on each street and I worry for the sellers. I wonder where they are going? Tent City?
((((( Egregious )))))
… the wind is blowing … from a fan that was made in China …
In Vegas we have the highest foreclosure rate in the nation. More than one in twenty houses valley-wide is in foreclosure. In my former ZIP code, 89108, it’s one in four. Glad I moved to the south side 5 years ago.
the wind is bLowing from the flatulent ass of bush
this may be optimistic, there’s another big batch of mortgage resets hitting in 2010-2011. I’ve seen this several places, one of which was yesterday at bonddad blog
That is awful. What the apartment situation like? Are they being closed, too?
So…if you don’t have a job, and you don’t have a home, and you don’t have food…and you can’t get credit…and the economy is in the sh*ts…and then your government starts a Borat war on Iran….what do you do? Join the military? Makes you wonder….
A president could help a lot by just standin up and askin americans to “buy american”. He doesn’t need to raise tarrifs or change policy- just make it patriotic to buy american and we will begin to see a demand for US goods- this president won’t do it cause it would offend his supporters who are gettin rich importing from China–the communist supplier to the world….something kinda Ironic bout that. Ronnie BEAT the commies didn’t he?
Turn the photo up 180. That’s his mouth.
Egregious!!!
I’m going to be reading this in a minute, but I want to tell you guys what just happened here at school. We just had an assembly of Chinese acrobats and contortionists. It was unbelievable. The Chinese “Beaureo of Lectures” sent them over and it was free for us. Part of getting ready for the Olympics, I guess. I’m wondering how many groups like this are going to how many countries?
None of teh kids were wearing Free Tibet shirts…but it was a surprise assembly!
egregious!
the wind is blowing up out OF the deep dark DEPRESSION
It’s hard to find anything made in America. I’ve started looking for things made in South America or India - any where but China.
It’s an understandable mistake when the bastard has had his head up his ass his whole life.
We just saw an article in the paper last week about uncompleted apartment / condo projects on the far south side (hot area of new growth in recent years). Developers ran outa money (and ran off with peoples’ deposits).
Rent City.
After taking loss on previous home, they’ll be in position to pack up and move (skip out) if things get worse. They’ll still be on hook for loan on previous home, probably.
The question is, will they be able to afford enough gasoline to move again?
Around here, unless you had money to begin with, buying a house was (is) impossible. Prices are so high that you either need to inherit or win the lottery. And that is still true with prices falling.
Damn! And I know of a lot of people who left LA for Las Vegas.
Last time I was there (business) the traffic sucked.
But, still you have no state tax? And, people still cannot afford their mortgages?
Yeah- but the resets are only a small part of the problem in my opinion. The bubble burst because the rate of price increases could NOT be sustained- buyers ran out of income needed to qualify for houses of ever increasing prices…it HAD to burst and while the mortgage shennanigans HURT- they were only a small part of the story..
If prices were still escalating- we wouldn’t be having the foreclosures. People would just refinance or sell at a nice profit and downsize etc.
Loo Hoo
the descendants of the Mongols have an amazing natural ability for contortionism, most likely because of all those generations that lived on horseback
I <3 the Steppelanders
Global education?
Glad for your kiddies. You too.
Here is a weird story…a friend told Mr. LS that there are rows of large condo buildings on the beach in South Florida that are basically empty and are apparently a part of a “flipping” scam. Ever hear about that? Sounds like a money laundering thing or pyramid scam…ties into the loan crisis though, if true.
Information by zip code available free online from foreclosures.com
I checked out my hometown in Ohio to see if the data matched anecdotal info, and indeed there are a lot of what my mom calls sheriff sales. The houses on both sides of hers have been vacant and for sale a year and half now.
This was a formerly prosperous blue and white collar town with steel, paper, and other factory jobs. What the decline has done to the school system makes me cry. It used to be really good.
There should be a caravan to the Bush Brush Ranch.
our strength came from the depth and breadth of our manufacturing base, but we tax-freed it all offshore.
we are the fools to be pitied, we are now going to pay the price for those freeloaders.
Same thing on the “Emerald Coast” of Florida. Half built homes and condos galore.
Hate to go OT this early, but according to MSNBC.com, the ship that fired on the Iranian ship this morning was the “Westward Venture” A little Googling produced this link that says the following:
My bold.
The date on the webpage is 2007, so the info may be out of date, but Hmmmm…
Also, found a tracking map here.
Real estate prices were completely over blown to begin with.
A downward correction is catching a lot of folks with their pants around their ankles though.
My first house was a little over priced when I bought it for sixty grand, 800 Square feet.
Five years later it went for ninety, a year and a half after I sold it for sixty five.
That kind of price jump is not sustainable forever.
But, but, but…
My mortgage plus the rent/lease we pay for the space is still lower than rents…argh.
At least here we have a nice little yard and the communal pool and spas.
I think I would rather live in a tent in the forest than a ghetto/barrio apartment. See what an elitist I am?
In Phoenix a lot of the established apartment complexes have been turned into Condo’s. These are complexes who are 5-10 years old. I think they have hit the time frame where repairs are greater than what they are making on rent.
Who in their right mind would buy a former apartment that could be 10plus years old with marginal maintenance?
The new home building has dried up, we have over 50,000 homes on the market here….. now builders are building commercial property…. the problem… so many are sitting empty too….. WTF?
Yeah, Vegas is interesting. Outa control.
A good friend of mine is a successful optician here. He’s having to let the house he bought 3 years ago go to foreclosure. He bought high, mortgaged with an ARM that ballooned out the wazoo. He can’t rent it for enough to cover more than a third of his monthly costs (he’s livin’ in a condo). So, he’s gonna cast it off. Can’t sell it.
We’re personally fortunate. We bought “low” five years ago, right before the run-up. Got a 5% fixed note. We’re still in way positive territory. But, we couldn’t sell right now if we had to. We gotta ride it out.
I’ve heard of “flipping scams”. During the S and L debacle- thousands of condos were built in the Dallas area- some by the notorius Denny Faulkner (if I am remembering his name correctly.)
One developer would build the units and they would pass them around- each paying more than the last for the units which the complicit S and L’s would finance at the new higher price.
The units were never sold as units or occupied- they were just cannon fodder for the flippin wars. Eventually the last owner defaulted and the S and L ended up holding the bag- then Bush Sr. came an bailed em out–so it was all done at OUR expense.
Don’t know whatever happened to the condos.
*Ouch* … nothing displays China’s dictatorial regime like a group of kids beaten until they’re perfect acrobats.
Yes, I know, we do the same to our gymnasts …
(((bustedknuckles)))
hang on buddy.
Hell, since my wife broke her leg I tried to sell my Springsteen tickets for half price, not one bite!
Now that I think on it- I think it was DANNY Faulkner.
They tore down a grocery store and restaurant in the little downtown area where I lived and some guy spent twelve million dollars just to have a freakin tax write off and built these fancy new three story buildings with little shops in them.
The rent is so high no one can afford them and the whole schmear sits empty.
Brand new.
Wall to wall san diego shark attack
I saw the Chinese acrobats in China and they are really scary - and beautiful. They do things that no person should ever try. They obviously are made to do this because some of it is really dangerous. You just hold your breath the entire time.
Xin Loi
Don’t worry, I’m a survivor. I grew up poor with my grandparents who lived through the depression.
I know how to get by.
Jefferson again warned all………………….
“I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation,. the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people.”
Well, so much for that whole “Ownership Society” idea, huh, George?
What’s that you say? I misunderstood? You meant society is owned by the megabanks and megacorps?
I see. Thanks for clearing that up.
“One developer would build the units and they would pass them around- each paying more than the last for the units which the complicit S and L’s would finance at the new higher price.”
____________
Yeah, that’s essentially an “Enron” M.O. Enron, among numerous other odious practices, constructed hundreds of wholly-owned paper “corporation” subsids, traded contracts back & forth between them as fast as the fax machines would transmit, and booked each “sale” as “revenue.”
I’m afraid to look.
You’re one of the lucky ones to be able to afford a recently made mortgage. You did well to get a fixed rate. So you’re “lucky” except that you can’t move any time soon.
This brings up a good point about mobility: There are people who need to move for their jobs, or to be near an ailing parent, etc, and they can’t sell their house without bankrupting themselves. It’s a sorry mess.
If there was no risk no one would watch it. Ever been to the Cirque?
(((((Busted))))) Been there, done that. My best to you.
Heh, I had to Google that one.
No worries mate!
Potemkin America.
Hang in there, busted.
Now that’s some economic indicator!
No but would like to. I think some of the entertainment we are likely to see from the Olympics will be mind-blowing. China strutting its stuff.
Aha!!! Here is the Florida story - ground zero for mortgage fraud:
http://www.reuters.com/article.....38;sp=true
Jeebus, they lowered my taxes by 20%, and my house dropped 20% in value.
People cannot afford the house prices, period, and that won’t change in a year, unless there will be very great adjustments, which no one will agree to voluntarily. So what does that have to do with psychology, and what data do you have to back up your ‘one year’ theory.
Hah!
I got laid off 14 months ago, then my wife got the axe in October. I’ve had job offers requiring relocation, which I now cannot do, owing in large measure to having moved my ailing geriatric parents here from Florida last year. So, I’m really stuck here.
My wife finally got a good job offer the other day. Guess where?
Shanghai, China.
Nuke plant project. She may have to take it.
Fucking wonderful.
Where, busted?
Well, even before this current crisis, we still have office buildings sitting empty due to the bursting of the tech bubble. At one time you couldn’t get any space and people were literally crammed into their cubicles with cubemates. One real estate agent laughed at my husband (who was looking for a new space at the time) saying all the yet to be opened office space in one building was already spoken for. It’s been sitting empty for years now.
Mr. Dosido was fortunate enough to get space from a new client in an existing and sought after space a few months later. This all happened about four years ago.
I have heard a LOT of people complaining about their property taxes going through the roof as real estate prices surged (Heh, I said surged).
Now to see if the tax rates follow the real estate draw down.
THAT will be interesting to watch.
((((( Loo Hoo )))))
I sent you an e- mail earlier …
(((((Busted)))))
I’ve been poor, even hungry, but never lost my home. Dad’s family lost the house during the depression when the government cut veterans’ benefits.
People refer to the Great Depression the same way folks talked about the Great War [World War One], as if there could never be another one. It’s coming.
A little town 20 miles East of Vancouver Washington called Washougal.
But, but, but your rebate check is in the mail….
The long answer is “No”.
Beans, rice, cooking oil and propane.
You have to sign up for 7 days “free” access. I didn’t. But there are two screens of listings for my zipcode.
I’m always looking for a job, ’cause I’ve been temping ever since I was laid off by Warner Bros (dickheads).
Saw an ad yesterday: English teacher wanted. Free airfare and housing.
Korea.
The mortgage boom was a classic pyramid scheme. We made it to the top, and the view isn’t so hot.
I’ve wondered about that. I bought my condo (1400 square feet) 14 years ago for $268. Took money directly from sale of house and paid cash (thank goodness). Units just like mine are now - or were - selling for over $800. Isn’t that absurd! Taxes very high. Waiting to see if they go down.
I guess we’re supposed stop complaining about the economy and be grateful that gays can’t marry.
egregious……….this is all outrageous and was all predictable!
deja vu with some subtle twits…for those of you who where alive and remember!!!!
Hey, Egregious. Speaking of homes, how’s your new diggs working out?
Anya ha say o yobaseao
There are 85 pages in my zip code.
Sorry, Busted. Rice has been rationed.
It’s bad in LA too.
The people who get foreclosed on move into apartments, which means the vacancy rate is near-zero and the demand will push rents up generally. I know people who put their house up for sale two years ago, but it still hasn’t sold; that was when the market had just started to slide into the hole.
My area is morphing into a retirement community. What used to be a bustling school district is losing students who grow up and out and young families just can’t afford to live here. It’s really sad to see–this is a fantastic place to be a kid.
So, no silver lining for those in Massachussetts?
Heh, I bought ten pounds two months ago and twenty pounds of pinto beans at the same time.
I might be slow but I ain’t stupid.
Yeah.
We would just take the gig and both go to China (don’t know what I’d do, but that’s another issue). The money and bennies are great (’cuz they have all our money), but, like I said, I’m now constrained to be here while my folks remain alive, and, we probably would take a huge hit selling our house right now.
Dunno.
I was able to get info from foreclosures.com without signing up for anything. Maybe if you sign up they give you more recent data.
That’s what happens with good school districts. People snap up all the houses, and stay in then when the kids move on. Then, the houses are too expensive for anybody with kids to afford.
Oh, Demi. I hope you’re not tempted to bite. Korea doesn’t have a steller reputation for teaching. Other places are good, though.
Well my wife is a real estate broker and I look at the data on prices regularly—my estimate is very rough and based on socal markets only. If you put a normal curve of appreciation against a graph of the actual appreciation, you see that prices are coming down now to the neighborhood of the normal curve. The air is almost out of the bubble…
These markets are VERY psychological.. The bubble was grown in large part by speculation and an urge to “get rich quick”…the first drivers of price collapse were the speculators bailing out of the market.
Egregious, great post - so glad to see you on the front page.
hunh?
me no speakeee
I don’t know what Mrs. G’s field of expertise is, but Canada is building more Nuclear Power Plants and it is closer and cleaner than China … Good Luck Bro !
Yeah–
Sams Club limits people to four bags per trip…course those are 25 pound bags. 100 pounds of rice is quite a bit of rice.
It didn’t slide down so fast. Gas has been slowly, but steadily climbing since Bush came into office. The war came on pretty fast, I admit.
I came to the realization yesterday (maybe I’m slow) that the economy cannot be measured by how well the stock market is doing. Most people don’t own stock, or if they do, it’s in some account like a retirement account, where it just sits. And these people, myself included, don’t make any money on their stocks.
The people who trade stocks make money, but they are a very small percentage of the US work force.
Everyone else, makes the same amount that they did five years ago, but prices have been steadily going up with the oil prices. People are just starting to feel it, but it’s been bad for a while.
But Bush gets on the air and points to the DJIA and says, everything’s OK. That’s where they get you. The DJIA is a measure of how well the stock market is doing, but not how well the US economy is doing. They are very separate.
The first state to impose the “Life Tax!” Irony??? We need to meet a the Concord Bridge again and let off a few rounds of “silver” to ward off the werewolf which is eviscerating us all!!!
There’s a great feature article in a recent Atlantic Monthly, “The Next Bubble” (which the author predicts will be focused on “green” companies), wherein there’s a great explication of the current real estate bubble.
I’ll have to read it when I get home, Petro.