The new listing at 8695 Tom Kite looked like just another Somersett owner getting serious about today’s real estate market. The home was purchased in October 2005 for $842,306, has probably seen another $100,000 in landscape work, and is listed at $700,000. Interestingly, the owner put 40% down and there is only a $500,000 first loan recorded – an Option Arm for $500,000 through Washington Mutual with a 125% cap (low-ball alert).
The real story turns out to be the owner’s other properties, purchased between October 2004 and April 2006, ALL with Option ARM loans from WaMu:
– 2635 Burr Ct., $495,000, 80% first loan plus 10 % HELOC, later upped to $119,525.
– 2290 Emerald View, $578,750, 72% first.
– 1480 Mescalero, $339,900, 80% first.
– 5895 Blue Canyon, $315,000, 80% first.
– 6052 Bankside, $310,000, 70% first.
– 896 Sauvignon, $311,000, 70 % first.
– 1798 Evening Rock, $642,500, 30% first and a later $239,000 HELOC.
– 1421 Foster, $271,000, 65% first.
– 700 W. Golden Valley, $330,000, 75% first.
Our gentle land baron certainly put some skin in the game on most of these 10 properties. I would guess that the varying first loan percentages may have to do with out-of-state 1039 exchanges. but who knows? I also assume they have been paying the minimum amount required by the loans, which would put them at least 10% negative amortization on each loan by now. And Reno’s median has dropped how much? Safe loans can go really, seriously bad. The owners are current with all payments as far as I can tell – I have no beef with them (well I do on the moral end, but that’s another post). Watch these properties – they may show up as bargains shortly.
So, WaMu. 10 Option ARM loans to one party, and I never saw that Second Home Rider box checked off once. This owner is PERFORMING as far as your books go, but how much longer can that last? You are going to be hosed even on the loans that looked like sure bets. And this is on the Good Stuff on you books. I can’t imagine the rest of the garbage a deep audit would find. You screwed the pooch big time. Time to die for your sins. The thing that makes me run screaming into the night is that you won’t be a JP Morgan Chase savior issue when you belly, you are going to be an FDIC issue. And that means me, the taxpayer, is going to be saddled for your bazillion dollars in criminally stupid underwriting. WooHoo.
BanteringBear
How freaking stupid IS this person!? What in the world were they doing? For gods sake it looks like they were trying their best to overpay for houses, turn around and sink a bunch more dough into them, then sell at a loss! This person deserves everything they get. Unbelievable.
smarten
Good work Mike –
Just curious: was this investor the benefactor of some family parking lot in the Bay Area that was sold for $3M or so with a current $7K/month negative that we discussed about a month or so ago?
Apart from this, it’s likely most of these loans were sold off to Fannie or Freddie; wouldn’t you say? So other than moral retribution, why should WAMU die for these originations [aren’t we taxpayers rather than WAMU “are going to be hosed” on these loans]? More appropriate would be turning this information over to the Justice Department for criminal prosecution [especially if the loan consultant for any more than one of these loans was one and the same]; don’t you think?
In fact, do you suppose you could recover a reward for being a whistle blower?
Reno Ignoramus
Fine work Mike. While perhaps not to this extent for one person, this scenario is playing out all over the country. Hundreds of billions of dollars in Voodoo loans from San Diego to Bangor Maine that are going to crash. It seems that in the past 72 hours Bernanke and Paulson have become aware of the problem. We may be on the verge of the nationalization of the entire financial system. The US govt. is going to guarantee money market investments. Incredible. There is no precedent for what is about to happen.
BanteringBear
“It seems that in the past 72 hours Bernanke and Paulson have become aware of the problem. We may be on the verge of the nationalization of the entire financial system. The US govt. is going to guarantee money market investments. Incredible. There is no precedent for what is about to happen.”
I wish I wouldn’t have read this before going to bed. I shudder to think of what these imbeciles are going to do…
BanteringBear
And let us not forget, these same men who were NOT elected by the people, but who pledge our tax dollars, are the same individuals who said “subprime is contained” over a year ago, while my friend RI and I, as well as many others, warned about the coming meltdown. They ARE imbeciles.
Reno Ignoramus
“Treasury Secretary Paulson said on Friday the housing market correction appears to be at or near its bottom and that troubles in the subprime mortgage market will ‘not likely spread throughout the economy'”.
” ‘I don’t see the subprime mortgage market troubles posing a serious problem. I think it’s going to be largely conatined’, said Paulson.”
Reuters News
April 20, 2007
GratefulD_420
Sorry guys. R.I. & B.B., but the boys on wall street knew the whole time. You are so underestimating their coniving and pure wickedness.
In my estimates they had to know probably 5 to 6 years ago what they were doing. Why else after the subprime years would permit the move to higher valued no-doc Alt-A loans? They were plain greedy… and knew the sheep were ripe for a fleecing.
If a simpleton like myself could walk into a lender 3 years ago… ask for a straight 30yr about $340 to $400 (if I found something special)… and he offered my $600k with no doc, becuase I said I made $85k? He was very atomite that I deserved more. I knew then that something was wrong. Very, very wrong.
The question now that they took the riches from the true American piggy bank [balnce of wealth on the banks sheets = homes & real estate], what do we do? We only have two options…. which of course their hand picked Fed guy is giving option #1.
Option#1.
For stability to the existing foundation we must take on the burden as the American taxpayer. We will relieve them of all bad paper and let them keep the good paper. Under this option we know that we will all owe more and have less wealth but it is a know and comfortable path. This of course will allow the chief parties responsible for this criminal fraud to stay in power & control.
Option#2 –
Allow all the banks to fail and enter into uncharterd waters… with no valid banking or stock market in place. I truly believe in American ingenuity and think we should not allow this “bailout.” Everyone must do everything to break us from this reign of tyranny. Travel into unchartered territory, without comfort.
Royal Flush
The fed and more generally our nation’s leadership has, by their action, created the very system we have tried to avoid. And now a bail out branch of the government? Sounds a lot like bush’s leadership post 9/11 “fly to New york and shop”.
I’m sick to my stomach.
Shameful.
Royal Flush
Just in case you missed it: Paulson’s new plan…
“outlining a program that could cost taxpayers “hundreds of billions” of dollars to buy up bad mortgages and other toxic debt that has unhinged Wall Street.”
Reno Ignoramus
Grateful,
Nothing in my post suggests that the “boys on wall street” didn’t know. I agree with you that the “boys on wall street” at the investment banks and hedge funds had to know. I do not, however, think that Bernanke and Paulson knew years ago. I think they were so late to figure it out as to call into question their basic fitness for their jobs. Now, if you are suggesting that the Chairman of the Fed and the Secretary of the Treasury are no more than the “boys on Wall Street”, you are not alone. I am not quite that cynical. I think they were incompetent, but not evil.
BanteringBear
“Treasury Secretary Henry Paulson said the plan to buy troubled bank assets would cost “hundreds of billions” of dollars. Paulson said the plan would include features to protect the taxpayer “to the maximum extent possible.” “The ultimate taxpayer protection will be the stability this troubled asset relief program provides to our financial system, even as it will involve a significant investment of taxpayer dollars,” Paulson said.”
Oh, how thrilling. In essence, we the taxpayers get to cover all of the banks bad bets, while the greedy pig CEO’s walk with billions of dollars of ill gotten gains, sailing off into the sunset on their hundred million dollar yachts. Paulson and others should be publicly hanged, as this is rotten to the core. I can’t believe what is happening in this country right now. This administration is extraordinarily dangerous.
Sully
RI – Paulson was the CEO of Goldman Sachs, the only firm not trying to sell itself right now.
Goldman was one of the top 5 players in the sub-prime market. They just don’t show it on their books. Thinking Enron here.
Paulson will do anything to keep Goldman afloat. My opinion is that Paulson not only knew what was happening, he also knows where all the bodies are buried.
chewgumm
The government is to blame for most of the housing mess as is.
I have friends and family that have worked in banking for a long time. The goverment forced banks to make loans based, not on credit worthiness, but on political correctness. That is the ugly hidden fact of this whole mess.
With “the maestro” trying to make everyone, regardless of ability to pay, be able to live the American dream(own a house), and government regulators making banks loan to risky borrowers, then waht did everyone think would happen?!?
DonC
Bernake and Paulson have little to do with the problem, the source of which is the confluence of: (1) a political agenda (Phil Gramm et. al) that succeeded in convincing many people that markets were self-regulating and would prosper if only the government would leave them unregulated; and (2) an over reliance on mathematical models which proved deficient.
The lack of government oversight resulted in no transparency — which is obvious since no one has any idea which entity is at what risk — and far too much leverage. Bear Stearns, Lehman, and all the other investment banks, hedge funds, and private equity groups ended up having about three cents of equity for every dollar invested. When the bets went wrong they simply couldn’t come up with money to stay afloat.
And the mathematical models which were designed to prevent such a meltdown by managing risk simply didn’t perform. For example, in the mortgage area, the idea was that all real estate was local, so you could bundle loans from many different locations and if loans from one area, say Reno, went south, loans from other areas, say Bangor Maine, wouldn’t. What the model didn’t predict, because there was no precedent, was that the mortgage loan craziness would go national and all localities would be affected at the same time.
Certainly some people saw the problem developing. I saw it. Many here saw it. Doubtless people working at the rating agencies saw it. But what could they do? If they tried to downgrade a tranche they’d be challenged by the seller and they would have to produce the data to support the downgrade with their model. But there wouldn’t have been any data since the historical data would only support the higher rating, and the model was the lodestar for the rating.
The rating service obviously had financial incentives to keep the higher rating, but it wasn’t simply greed and bad judgement. It was a problem of being required to base decisions on mathematical models that had no capacity to predict all types of risk, even obvious ones.
Fixing the problem is going to be very expensive. Hopefully we’ll get through it and move on. Certainly we have the resources to do this. The lessons that need to be learned is that we need government regulation which ensures more transparency and less leverage, and that mathematical models of risk management have to be used cautiously and not as a means of claiming a free lunch.
Royal Flush
DonC’s explanation although I’m sure holds water is far too overcomplicated.
Here is the real cause. The confluence of: 1) greed, 2) privilege, 3) me first mentality, and 4) an enabling bureaucracy.
BB is right – hang ‘em high!
BanteringBear
DonC-
While we’ve had our go rounds I do admire your insights, and I’m not afraid to concede that you know far more about the financial markets than I do. I agree with your assertion that the computer models, no doubt generated by fresh faced Stanford MBA’s and the like, were a huge problems.
But, to keep it much more simple, the real problem was the complete abandonment of sound lending principles which require that borrowers prove their ability to repay loans. If the borrower hasn’t the ability to service the debt, the models don’t mean a damn thing. It’s criminal, the loans these banks approved. There were no underwriting standards.
chewgumm
Hopefully the new government regulation won’t include forcing banks to lend to people becaues they are green, or blind, or pink, or tall, or short, but rather because they are credit worthy.
I am afraid political correctness won’t allow it though,a dn my faith int he govenment is less than sure.
chewgumm
The FED had a policy of free mnoey with the low low low rates under the “maestro”
The government told banks that they had to find a way to loan money to people who could not afford it.
Banks did this, obviously, through ARMs, etc….
Home maket boomed, because EVERYOBE ws buying a house.
As home values rose, the people who could nto afford it originally, now had equity to supplement their income, so they could spend more, increasing their exposure for the fall.
The ARMs adjsuted.
Housing Crash.
Walk away from my house….ahe no more money to spend.
Banks stuck with loans that nobody can pay.
Ta DA…crisis. Thank you Maestro, thakn you Fed Gov’t.
DonC
BB – Thank you for your kind words. On my part I try to avoid making disagreements personal. We’re here at least in part to get a different viewpoint, so no problems on my end.
You are quite right that at the end of the day the problem here was bad loans. Lots of insanely bad loans actually. The interesting thing is that it’s so obvious how insanely crazy these things are … after the fact. At one point in the 1980s the value of Tokyo real estate eclipsed that of all the world’s stock markets combined. This was crazy if you thought about it, but a whole lot of people never thought about it.
As I think you’ve mentioned, here it was the chasm between median incomes and median house prices. During the boom my wife had a couple of employees buying multi-million dollar houses on one income that maybe cracked six figures. There was “no way” these folks should ever have gotten a loan. But they did. I wouldn’t, however, call this abandoning sound lending principles. I’d call it insanity.
At the same time she had sales people who left fairly good jobs because their roommates were making $250K being a regular mortgage broker. When you can make that much with minimal talent and training you know it can’t last. It didn’t, and most of them still haven’t found anything as good was what they left.
Unfortunately it’s going to be expensive to undo the harm, but I do hope we finally do something more systematic. One good thing is that falling housing prices are making it easier to hire people again. High housing prices are a giant buzz kill for relocations.
GreenNV
Not sure who the owner is, but it is not the parking lot magnate!
I know you will all correct me if I’m wrong, but it is my understanding that Option ARMs and HELOCs do not meet Fannie/Freddy underwriting standards, and therefore were not securitized to the level of other loan products. The originating lenders kept these loans in portfolio, so WaMu is most likely holding all the paper on our land baron.
The “old” bailout limited loan restructuring to owner occupied units. I haven’t heard anything to indicate the “new” bailout will have this restriction, or even that it applies only to first mortgages. That really gets my blood boiling. Bailing out banks that made these toxic loans knowing full well that they would have to keep them on their own books is just WRONG.
billddrummer
To GreenNV,
You’re right that Option ARMs and HELOCs didn’t meet Fannie/Freddie guidelines, but that didn’t stop them from entering the securitization market. Primary dealers (Lehman was one, also Merrill and Bear Sterns) would buy up pools of them, price them according to their computer models, and then securitize the pools. After the ratings agencies gave them AAA blessing, they went to market. The yields were immense because market pricing and yield were based on the run rate of the underlying notes. The yields were even better if you had a good FICO along with a low DTI and conforming LTV. Many of the loans that ended up in the pools were qualified based on the teaser rate (1-2%), and the DTI in the file reflected the teaser payment, not the run rate of the note.
And that’s where the problem first started, in my humble opinion. When the subprime notes started to default last year, triggering buybacks from the investors to the originating banks, the market prices became harder to quantify, because no one was sure what the loan performance would be. The illiquidity extended to the rest of the pools–meanwhile, supposedly lower risk loans started defaulting too. Then the secondary market froze up, and no one was buying the collateralized securities.
Now we’ve come full circle, and the government has saved us all. Unless you happen to pay taxes in American dollars. Then you’re toast.
Ralston
So what if the $1 trillion bailout doesn’t work, then what?
Who decides that the Fed and the Treasury are too big to fail, and bails them out?
SufferingLoans
Ralston:
That’s a good question that some knowledgeable people are already asking. Consider that every time the Treasury auctions off a new batch of bills and notes, it’s mostly the Chinese and the Saudis who show up.
That might provide us with a clue.
MikeZ
Bernake and Paulson have little to do with the problem
I could not disagree more with that statement.
It’s fashionable right no to blame lack of regulation, and it’s true that it contributed to our economic catastrophe.
But without the massive influx ($3T!) of cheap (1%!) money into the economy by The Federal Reserve, primarily Greenspan, but also Bernanke, we wouldn’t be in this mess.
What you’re doing is blaming the engine for redlining and blowing up after being fed nitromethane for 6 years.
Myself, I blame the fuel, not the lack of a limiter on the engine.
Reno Ignoramus
It’s everybody’s fault, isn’t it?
It’s the fault of the Fed for keeping money absurdly cheap for way too long after the dot.com implosion.
It’s the fault of investment banks and hedge funds for creating a byzantine world of “exotic” instruments that nobody, not even themselves, totally understood.
It’s the fault of the government for absolutely no oversight or regulation.
It’s the fault of the mortgage orignators like MaMu and Countrywide for provding the funnel of business to the investment banks by essentially giving money away to the most unqualified.
It’s the fault of the friendly neighborhood mortgage broker, in his pretty strip mall storefront, who lied to the willing co-conspirator borrower about how he could always refi before his ARM reset.
It’s the fault of the lying perpertrator of the liar loan who knew damn well he really didn’t make $180,000 a year working at the bakery in the grocery store.
It’s the fault of the realtor who winked and nodded when the grocery guy said he wanted to buy a $700,000 house, all the while mentally spending the nice commission.
We have seen the enemy, and he is us.
Marla
$700 billion to bail out the banking system and credit markets.
$200 billion to bail out Freddie and Fannie.
$85 billion to bail out AIG.
$40 billion to bail out Bear Stearns in the form of a JP Morgan Chase buy out.
$170 billion “stimulus package.”
$1.2 trillion in the last 6 months. All of it has to be borrowed from the Chinese and the Middle Eastern oil empires.
The national debt, now going to $11.4 trillion, has been increased by 10% in just the last 6 months.
I weep for our children.
SufferingLoans
Don’t weep for our children Marla.
By the time they are our age, America can ask for debt forgiveness. You know, most third world nations eventually get debt relief.
MikeZ
So, WaMu. 10 Option ARM loans to one party, and I never saw that Second Home Rider box checked off once.
What a coincidence, OC Register has a story this week on WaMu making multiple loans to flippers with histories of fraud.
http://tinyurl.com/4esqmj
DonC
MikeZ – Bernake and Paulson were appointed AFTER the vast majority of the the now toxic loans were made. I can’t see how any reasoned position would hold them responsible for events or policies in existence before they showed up on the scene.
As for Greenspan, yes he arguably kept short term interest rates low for too long, but deflation is more of a problem than inflation, and that was his concern for quite a while. Also note the yield curve was relatively flat for most of this period. We didn’t have a yield pole suggesting low short term rates were inappropriate.
It’s not fashion that the lack of regulation is to blame, it’s fact. You simply can’t have so much leverage in the system without ending up with gigantic problems like we have now. It’s just a truism. Basically we haven’t changed the regulatory system in seventy years while the financial system has changed considerably.
Marla – I’m sorry, and I can’t stress enough that I don’t mean you personally, but I generally find the expressed concern about our children to be hollow rhetoric. George Bush was elected twice, and Republican majorities in Congress were returned any number of times, based to a great extent on their claim that they would cut taxes. Guess what? They did what they said they would do. It doesn’t take a genius to understand that if you cut taxes, and if you don’t cut spending, then you end up burdening your children.
If the majority of Americans want to know why their children are burdened they only need look in the mirror. They’re not the victims they’re the perpetrators. They wanted tax cuts and no spending cuts — indeed they wanted to add the expense of fighting a trillion dollar war — and they wanted a house that worked like an ATM. And now they want to blame someone else for the problems? Sure there were those like Larry Kudlow on CNBC preaching the Laffer Curve hogwash, but anyone who didn’t really want to be hoodwinked could understand that cutting taxes doesn’t get the government more tax revenue.
We put the politicians in an impossible position. They could do the right and obvious thing and say that tax cuts were irresponsible under the circumstances, and not get elected, or they could play along and do the irresponsible thing. Can we blame them for doing what we told them to do?
As a complete aside, some of what you’re listing isn’t really a dead weight loss. Yes the stimulus package was just spending. And yes you’ve correctly identified the amount which has to be put up (except Bear Stearns ended up being $29B non recourse loan), but in some cases like AIG I think the loans have a high probability of returning a very healthy return. The Fannie and Freddie money should be OK. I’m far less sanguine about the toxic debt buyout. I hope Congress takes some time to look at this and doesn’t do something just to look like they’re doing something.
smarten
DonC, I’m no economic expert but you state “cutting taxes doesn’t get the government more tax revenue.” I thought revenues are up under the Bush administration specifically because of lower taxes. If so, the problem hasn’t been tax cuts but rather, out of control spending.
SufferingLoans
So now Mr. Bush says to the Congress:
I want you to coronate King Heny Paulson I. His Majesty will have sole and unfettered decison making authority over who gets bailed out, on what conditions, and for what price. His Majesty’s decisions will not be subject to judicial or legislative review. You must give him $700,000,000 to spend as he, and he alone, deems fit.
And, if you do not do this by Friday, the world’s monetary and fiscal infrastructure will collapse.
pineydog
You must give him $700,000,000 to spend as he, and he alone,
——–
How far is $700 billion going to go when Citibank has $500 billion in toxic loans and Wachovia has $122 billion.
SJ
Sully
DonC, if you got your definition of the Laffner Curve from Larry Kudlow, then you probably misunderstood the theory.
Its simply a bell curve showing high tax rates (73% in 1921) produce lower revenues than a lower tax rate would.
When rates were lowered in 1924 to 24%, by 1929 revenue from income tax increased 120+% over 1921.
Tax evasion is the primary reason for the difference, at 73% the risk-reward ratio was good enough to evade, whereas at 24% it wasn’t worth the risk.
The idea that lowering taxes to put more money into the system, for increased production etc., would increase revenues came from the politicans – it had nothing to do with the Laffner Curve.
MikeZ
smarten: I thought revenues are up under the Bush administration specifically because of lower taxes.
Many people are under the same misconception.
Look at actual federal revenue (from the Heritage Foundation, a pro-tax-cut org) drop 20% from 2000 through 2003: http://tinyurl.com/5p4nh2
And now look at GDP from the same period:
http://tinyurl.com/54zvrs
As you can see, GDP was flat/increasing while tax revenue cratered … it’s obvious from the data that the Bush tax cuts caused a massive drop in revenue.
MikeZ
Hrrm … my earlier post has gone AWOL … Ok, let’s try this again … sorry if it’s a repeat …
smarten: I thought revenues are up under the Bush administration specifically because of lower taxes.
That’s a popular misconception.
Federal tax revenue was down – WAY DOWN – following the Bush tax cuts:
http://tinyurl.com/5p4nh2
Note the 20% plunge in tax revenue – and that revenue chart is from the Heritage Foundation, a well-known pro-tax-cut organization.
Also note that for the same time period, 2000 through 2003, GDP was flat/increasing:
http://tinyurl.com/54zvrs
Now, if the tax base was flat/increasing and tax revenue dropped by 20%, then the culprit is the tax rate.
BanteringBear
I can’t help but feel sick to my stomach every time I think of this trillion dollar bank bailout which is, all of a sudden, urgent. According to Henry “Evil” Paulson:
“The cost of doing nothing would have been far more severe because the clogged credit markets would make it harder for businesses to get the loans they need to keep operating, he said. Doing nothing also would make it harder for consumers to get the credit they need for car loans and other purchases, the Treasury secretary said. Consumer spending accounts for two-thirds of total economic activity.”
This is nothing but a BS lie, concocted to garner public support for a taxpayer funded handout of eye popping proportions to the greedy scumbags who sold their souls for riches at the expense of society as a whole.
If the Bush administration, and the government in it’s entirety, were truly concerned about the welfare of the American public, they would let these despicable institutions fail massively, while using the trillion dollars to extend credit to small businesses and credit worthy consumers, all the while ignoring the wailing from these predatory pukes as they died on the vine.
Instead our government has chosen, yet again, to head down the wrong path, further eroding any chance at an increase in living standards over the course of the next several years, if not decades. There is nothing, and I mean NOTHING, in this bailout which addresses to true crisis which is declining wages and skyrocketing unemployment. But the government will ensure the big bankers survival, as the common man goes hungry. It’s a rotten time for this county and it’s citizens.
smarten
BB states Paulson’s assertion that “doing nothing…would make it harder for consumers to get the credit they need for car loans and other purchases…is nothing but a BS lie.”
Wasn’t I the one who alerted this Board as to what has been going on in since May in the real world mortgage market? I’m not saying I agree with the bail out but what Paulson and others feared is what has actually been growing for some months now – it’s just that many people [primarily those not seeking loans] have been shielded from reality.
In fact last Friday I heard some Treasury people saying that if you were a consumer who wanted an automobile loan, you needed a FICO score of 750!
So no BB, it’s not a BS lie!
BanteringBear
“Wasn’t I the one who alerted this Board as to what has been going on in since May in the real world mortgage market?”
Sorry to disappoint your ego Smarten, but you didn’t alert the blog. We’ve been talking for years about the fact that credit would be harder and harder to obtain as the crisis progressed.
Not surprisingly, you’ve completely missed the point of my post. There are no guarantees that the bailout will provide easier access to credit for consumers and businesses. Furthermore, the bailout money could be used to provide credit to worthy recipients, ensuring this. But, you’re always looking for something minute to disagree with, so I understand your getting lost in the big picture. If you can’t see that Paulson is doing the talk show circuit to rouse public support under a veil of false pretenses, you’re one of the clueless.
chewgumm
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aSKSoiNbnQY0
unbelievable.
Mike
This bickering is so stupid ‘oooh it’s the Democrats fault’ ‘Oooh this is the Republican’s fault’. At this point, does it matter who’s fault it is? No.
This country is staring down the barrel of a financial Smith & Wesson revolver, and all the analysts, politicans can do is try to place blame?
When a construction crane suddenly collapses, we first fix the emergency, then find out what went wrong. We don’t sit there right after the collapse and say ‘Oh it must have been so and so.’
I really don’t think any of the current players are competent to fix this. Not Obama, not McCain not Paulson, who a year ago didn’t even see this coming, certainly not the Fed Chairman. I have no faith in the federal governemnt whatsoever now.
Now they want $700 billion with little to no oversight on how that should be divided up. I have a huge problem with my tax money paying for these corporate ceo’s severance packages when they knew exactly what was going on.
The bail-out plan proposed fits on 3 pages. 3 PAGES!! It probably just says ‘give us $700 billion and we’ll fix the problem. The end’
Mike
Oh, and after we DO fix or stablize this somehow, then I say we start talking prison sentences for these ceo’s. If Enron’s ceo can go to prison for manipulating energy markets, shouldn’t the CEOs of these companies do some prison time for knowingly keeping this charade going for profit?
BanteringBear
We’re really starting to see the dire effects capitalistic greed has on a country, it’s citizens, and it’s economy. Look at what happened with oil today. It rocketed up for the largest gain in history. This has absolutely NOTHING to do with demand. It is 100% pure speculation. Yet everyone loves to talk down the effect oil speculators have on prices. The whole market is rigged in order to line the pockets of the wealthy while the average person’s wallet is emptied at the gas pump. People HAVE to buy fuel. There’s some real trouble brewing right now.
From Marketwatch:
“Crude futures rallied Monday to a high of $130 a barrel — their highest intraday level in two months — buoyed by a steep drop in the U.S. dollar and speculation that the Bush administration’s proposal to stabilize the financial sector might help revive economic growth…Trading was halted for five minutes after the October crude contract reached the daily price-movement limit of $10 per barrel. Under trading rules, the price-change limit is increased by another $10…Crude for October delivery rose $16.37, or 15.7%, to close at $120.92 a barrel on the New York Mercantile Exchange.”
“Oil’s move ‘underscores that energy is the only place to expect outsized profits these days and the money is flocking into that market.'”
— Neal Ryan, Ryan Oil & Gas Parnters
The public will tire of the rich barons playing games with their food and fuel. If unemployment keeps rising at the rate it has been, look for rioting and unrest in the very near future.
Doug B. Cooper
Good discussion!
RON PAUL saw this coming and spoke of it over and over and over again… Don’t believe me? Check out youTube and see for yourself. The dates don’t lie. Unfortunately, no one bothered to listen to him because the problem hadn’t affected them until NOW… or they didn’t want the cat out of the bag just then… hence Obama and McCain. The American people along with their E!, MTV, bottled water, starbucks, overpriced McMansions, and elected politicians are the ones to blame for letting this happen. We are sheep I tell you, SHEEP! Blinded by money and fear.
It’s amazing how this blog has changed… Once their wallets got hit, people have finally got their heads out of their arses… only because this mess is finally affecting THEM!
No one cares when they’re making money… GREED.
chewgumm
I love the argument “It doesn’t matter whose fault it is, we jsut have to fix it now.” Especially as I listen to Chairman Dodd’s opening statements.
So, let’s see Dodd and Frank push for no regulation because they want EVERYONE to buy a home. Things go drastically South, specifically because of where they stood and the policies they forced, YET….now they are in charge of fixing it, and the people’s response is “Let’s not pplace blame.”???
hahaha, right.
Martin
Bernanke said today that the Congress must turn over $700 billion to Paulson or else a recession will occur.
A recession? $700 billion in taxpayer borrowed money to avert a recession?
I thought he was going to say the world was going to come to an end without the $700 billion.
He said there will be a recession and more foreclosures. Thats why Paulson, the former CEO of Goldman who owned $600 million in Goldman stock as of 2006, needs $700 billion as soon as possible. To “avoid a recession”.
This things smells worse with each passing hour.
BanteringBear
“Bernanke said today that the Congress must turn over $700 billion to Paulson or else a recession will occur.
A recession? $700 billion in taxpayer borrowed money to avert a recession?
I thought he was going to say the world was going to come to an end without the $700 billion.”
Exactly. This whole “bailout” is the biggest money grab scam that’s ever been seen. The Paulson/Bernanke mantra went from “subprime is contained and won’t spread to the economy” to “we need a trillion dollars immediately or there’s going to be a meltdown”.
As is evidenced by Paulson’s close ties to GS, they’re trying to save their banker buddies. This taxpayer funded bailout will do NOTHING for you, me, or the economy. Scream, and scream loud people. Call and write your senators and congressmen/women.
Martin
“Trust me” said Mr. Bush, there are weapons of mass destruction in Iraq and the safety of the planet depends on our eliminating them.
“Trust me” said Mr. Bush, there is an impending meltdown of the world’s financial markets and the planet’s economic stability depends on our eliminating it.
Since Mr. Bush has no credibility left, however, it is Mr. Paulson who has to do his bidding.
Grand Wazoo
From the WSJ this evening:
“What if Paulson is Wrong?”
“What if Treasury Secretary Henry Paulson is wrong about home prices, and the market is right? If so, his $700 billion bailout plan may prove ineffective and could lead to losses for taxpayers.
Mr. Paulson told senators Tuesday that his plan will “fundamentally and comprehensively address the root cause of this turmoil” in financial markets. But that supposes that markets have frozen because overly pessimistic investors have made it impossible for banks to sell assets, and free up needed balance-sheet space, at anything but fire-sale prices. And that this, in turn, has choked off mortgage availability, driving property prices down further.
Breaking this logjam, the thinking goes, would mean home prices stabilize, if not rebound. Markets, on the other hand, see a more intractable cause: Homes were grossly overpriced, fueled by binge borrowing. For that to correct, prices must return to more affordable levels.
So far, markets have won the argument. Mr. Paulson hopes that $700 billion will change that. But even if he is right, it isn’t clear home prices will rise. They could simply stagnate.
That could still leave taxpayers shouldering losses on mortgage assets purchased from banks that haven’t yet accepted reality: Prices are unlikely to rebound soon.
They and the government may be fighting housing-market gravity. That is usually a losing battle.”
Royal Flush
http://www.atimes.com/atimes/Global_Economy/JI23Dj06.html
billddrummer
To Royal Flush,
Thank you for the link. A most instructive article, and one that starkly outlines the dilemma facing millions of 50-ish Americans. There’s no way to earn the returns of the past, and if you haven’t saved (or raided your retirement funds to pay for things), you’re stuck working for the rest of your life. As younger people become more qualified to take higher paying jobs, you’ll be pushed downward in the economic soup, until there’s nothing to look forward to but living paycheck to (almost) paycheck as you flip burgers or retrieve grocery carts.
Grim, isn’t it?
Whatever happened to the optimism of the American people? 9/11 didn’t break our spirit. On the contrary, it brought the nation together. And don’t forget the euphoria that swept up the nation at the beginning of the Iraqi war. (War is a wonderful mechanism for galvanizing a people.) Now, our political leaders are dismissed as special interest-seeking puppets, our international standing is tarnished as the world recognizes we are a debtor nation with our hands out, the financial community is pilloried as a bunch of greedy, self-serving morons, and the average American just wants to turn on the TV and not be bothered with political ads.
I hope that the American spirit hasn’t been snuffed out. But the more I read, the less I believe that it hasn’t.