How naive I was. Cleaning up the computator, I ran across the first guest post I ever contributed here on RRB, Jaded in Wonderland. It is worth another read from June 2007- it is where "Jaded" was born and got me my gig as an un-indicted co-conspirator here on this blog. I thought the pricing needed to drop 25% from the peaks to match the banks’ REO pricing. At this point, the median is down over 40%. Lots of great comments from folks you will recognize (Lindie, come back to the 5 and Dime!) and it is interesting to see how true to their comments then that they remain today. Cute that D wouldn’t let me post actually addresses in those olden days!
I offer this chance to laugh at / with me because I see a sea change starting to happen out there. First it was a couple trashed properties, then it started to grow and spread to decent homes, and now is percolating up to nice properties. The pricing that has been sort of tracking to mid 2003 values for REOs is in free fall, and a lot of 2001-2 comps are showing up, especially on properties that were bought as resales.
So I thought I was the Big Mac – I bought early in the safety zone in 2001. That safety zone is starting to feel a bit less safe these days. And I can’t imagine being in the boots of the Class of 2005.
BanteringBear
Smarten posted:
“And wasn’t this my statement to you some months ago when all the blame was being placed on sub-prime mortgages? My point then [as now] was that if we were just talking about mortgage defaults [even a lot of them], the market would absorb it. But because what we’re facing is well beyond mortgages or housing for that matter, we’re experiencing something far, far worse.”
My comment could have been worded a little better as I was FIGURATIVELY stating that the meltdown has nothing to do with housing. Literally, it has everything to do with it. It was meant to illustrate that in the broader scope of things, NONE of this would have been possible without blatant lying, cheating, and the general corruption of elected officials.
smarten
BB, don’t you mean “NONE of this would have been possible without blatant lying, cheating, and the general corruption of” unscrupulous sales agents, loan consultants, mortgage brokers, banks and the people who purchased properties they couldn’t afford using borrowed money they could never repay? Sure, maybe government could have done something to protect the rest of us but when you get down to the real root of the problem, isn’t it really just human nature?
BanteringBear
Smarten posted:
“BB, don’t you mean “NONE of this would have been possible without blatant lying, cheating, and the general corruption of” unscrupulous sales agents, loan consultants, mortgage brokers, banks and the people who purchased properties they couldn’t afford using borrowed money they could never repay?”
No, that’s not what I meant. Those people were but pawns in the game. This is all a result of failed monetary policy and a complete lack of regulation and oversight on the part of the government, working solely in the favor of itself and special interest groups.
Move to Reno
BB, have to agree wtih you on that point. The current economic mess is no accident, it was intentional negligence on the part of policy makers at many governmental agencies.
MikeZ
I just can’t get on board the “we need more regulation” bandwagon … it seems to me that we have more than adequate regulation of banking if we just let the stupid companies run by stupid people die a very public death … and also prosecute criminals like Madoff under existing laws.
Instead, we’re going to create yet more regulations … with either more bureaucracies or more lack of enforcement (pick one, either is bad) … and then, of course, we’ll have more reasons for bigger and better “safety nets” to help the stupid executives when they do stupid things the next time.
So, we’ll continue to reward bad and reckless behavior and malinvestment with trillions and trillions of taxpayers’ dollars in the form of “liquidity injections.”
It seems like the 180-degree wrong “solution” to me.
Sully
MikeZ, actually we don’t. The Banking Act of 1999 took away many safequards when it repealed the Glass Steagal Act of 1933.
Additionally, the SEC allowed the banks, brokerages and insurance companies to increase their leverage bets from 10 to 40 times.
So what we need, at the very least, is the amount of regulation we once had – before Clinton and Co. decided to give it away.
Gary
Sully, it’s interesting that you refer to the law in question as “The Banking Act of 1999.” Actually, that’s not the correct name at all. It was the “Gramm-Leach-Bliley Financial Services Modernization Act,” often shortened to the “Gramm-Leach-Bliley Act” or GLBA. It gets its name from the three Republican lawmakers (one Senator and two Congressmen) who introduced and championed the bill.
Just so we’re clear, repealing the Glass-Steagall Act of 1933 (to which you seem so adamantly opposed) was a Republican idea, which seemed a little obscure when you called the law that did it by your misleading generic name. I don’t mean to diminish the fact that there was significant Democratic complicity in final passage, but the origin of the bill deserves a bit of attention as well. Don’t hog all the credit for “Clinton and Co.” Cheers.
Sully
Gary, does it matter? You’re talking about two wings on the same bird of prey!
Gary
Sully, I’ve seen one too many irrational attempts by Republicans to foist not just some, but most of the responsibility for this disaster on Democrats, and as a Democrat I may be getting a little gun shy. To me, your earlier comment looked a little too much like more of same. In fact it may have been nothing more than an indictment of the continued degeneration of our political system as it becomes yet another subsidiary of corporate interests. My apologies for the mistake.
And I, for one, welcome our new financial overlords 😉
MikeZ
Additionally, the SEC allowed the banks, brokerages and insurance companies to increase their leverage bets from 10 to 40 times.
So what?! If we let the overleveraged investment banks fail, what’s the problem, and why should we even care?
Stupid, reckless, overleveraged companies fail all the time, and as they’re pruned from the tree and their market share is consumed by their smarter, healthier competition, our economy is stronger and healthier for it.
Help me understand: what makes investment banks (and carmakers) so special that we have to bail them out instead of letting them just run themselves into the ground and let their competitors take up the slack?
Gene
Mike, they have power, lobbyists, a history of donations and other “favors” to call upon, and they know that the great silent American middle class has none of those things.
Sully
Mike, in a perfect world what you say is exactly what should happen.
But, when was the last time you met a benevolent banker or your stock broker refunded your 90% stock losses? Or your insurance company giving you a refund because you haven’t had a claim in 20 years?
And then we have credit default swaps, which are 100% unregulated. Yeah, I liked the way that worked out!!!!!
Just what we need more deregulation so the financial service industry can show us how much worst they can get.
MikeZ
But, when was the last time you met a benevolent banker or your stock broker refunded your 90% stock losses?>
Sully, I dont expect stock losses to be refunded and neither should you!
Investing is NOT a sure thing and any efforts to socialize investors’ losses will only make this much MUCH WORSE.
This is insanity!
Sully
Of course I don’t expect refunds, I also didn’t expect the gov’t to socialize the financial system.
Without investors, of some sort, there is no financial system. Without some sort of regulation, I doubt there will be many investors. A vicious circle, or maybe we should all give our money to Madoff – let him invest it the right way! 🙂