Summertime Blues — Blue Cheer
Do you remember the predictions post from January 1st. Well, we saw our first major bank failure this week as IndyMac bit the dust. With all of the Alt-A crap on their balance sheet, this shouldn’t be terribly surprising. The only thing that surprises me is the fact that most of the Alt-A loans have not reset yet. The toxic waste they own is going to get much more toxic.
The toxic waste is even starting to poison Freddie Mac and Fannie Mae. The GSEs will be saved, and it is the mechanizm for getting the American Taxpayer on the hook for the housing debacle. I can’t say I am too surprised about that one either…
I like what Mish has to say about Fannie and Freddie …
“If China and Japan were dumb enough to invest in US agencies (and they were), then China and Japan should suffer the consequences, not US taxpayers.”
http://globaleconomicanalysis.blogspot.com/2008/07/us-taxpayer-bailout-of-china-over.html
I agree in spirit, but there is a practical problem.
Most Fannie & Freddie mortgage-backed securities are held by US financial firms. They anchor the balance sheets of American banks, insurance companies and mutual funds.
A 10% impairment of F&F;MBS could cause dozens or hundreds of American banks to fail, which would overwhelm the deposit insurance system — forcing taxpayers to foot the bill anyway.
So there’s apparently no way out of a bailout. But I agree with you that it’s unfair for us to have to rescue dumb lenders.
Countrywide’s bank was the first large FDIC bank to effectively fail. Had it not been rescued by BofA, the run on the bank would not have subsided…
In a little research this morning I read that IndyMac was started by Countrywide and Mozillo in 1985.
And Mish says the American taxpayer will be bailing out mostly foreign investors (like China and Japan) in the bailout.
And finally I read an article by “Tanta” at Calculated Risk last November castigating Peter Eavis for calling Fannie Mae another Enron.
Look like all the chickens are coming home…
I think Mish doesn’t quite understand. The FDIC insures depositors, not investors or shareholders, and only up to $100K. The shareholders are basically toast and will lose pretty much whatever they owned.
The pension funds, and 401ks are literally LOADED with Fannie, Freddy, and the homebuilders.
Say buh bye to the sheep’s 401ks, and pension funds.
Some threads on Calculated Risk are talking about
Freddie threatening run off, which I had never heard of.
Seems that they’re saying: you want me to accumulate some steenkin’ reserves, ok I’ll do it. I’ll do it by collecting the money from mtg payoffs, rejecting proffered loans for nitpicky reasons, and not making any more loans until the capital is up to where you say it should be.
Should take a year. No more loan guarantees from Freddie for a year? Appocalypse!!!
Does Indymac have to keep paying the interest on CDs that haven’t reached maturity yet? Or does the depositer just get his/her money back and that’s that?
My understanding is that the loan pays the interest for the remainder of the CD term.
No, the interest at the original rate is only paid to the day of the FDIC takeover. If I remember right (a long time since my bank failed) it then is reduced to passbook rate.
the dominos are falling, one by one, and the end result will be the taxpayer bailing out idiot borrowers and criminal lenders.
it will always be thus. nobody remembers the S&L;bailout — a pipsqueak compared to what we face. i believe the taxpayer paid $200 billion for that one, money that could have done so much to build our society.
but even that level of coerced generosity — coerced at the point of the federal govt’s gun — will not be able to prevent the hardship and disorder that result as millions of jealous, impoverished idiots eye their solvent neighbors’ houses, wives, and teenaged daughters hungrily.
when finances fall apart, too many people fall apart too. arm yourself!
Dont forget, if the taxpayer does have to bail these crooks out, say buh bye to the US dollar, and all the savers.
IMO, the US is already a 3rd would country, just most people dont know it YET.
That’s funny. Chomsky has been saying that the U.S. is on the path toward third world country status for years.
I think that Joe-Public may be starting to change their mind about a big government bailout. Public polls have a huge influence on the politicos, so keep your eye on public sentiment:
https://www.youtube.com/watch?v=p8xxeURW7kw
Poll: Americans Oppose Sub-Prime Mortgage Bailout
As we all heard that senate passsed mortgage rescue bill to help hundreds of thousands of homeowners avoid foreclosure passes Senate.
Few interesting things to note here are:
Its not about subprime, Alt-A, or prime loans, wait what happens due to this new bill that
senate just passed to help distressed homeowners.
Banks to take substantial losses and lower principal – Wow! banks will take the hit = more losses coming = Mortgages will be backed by the
Federal Housing Administration = print more $$ and $ slide to continue, inflation will continue to rise = MBS Investors will be pissed = I need bailout too – What about people who are upside down as well but honest and are still making payments and are not in foreclosure or NOD? Do you think they will continue to make payments?
Why? I think they would want to be treated fairly as well, to qualify they will create conditions where they will become eligible for bailout. i.e. spend their assets or move their assets so it cannot be traced, stop making monthly payments, and wait for NOD letter and get qualified = This will create a ripple effect in the industry with
every household (upside down) wanting to get out and aim to get lower
principal.
I think this is the nail in the coffin for housing industry, a new wave of default movement will begin causing trillions of $$ worth of
new loses as everyone in the mother would want to lower their principal. I cant wait to see this plan executed as its destined for failure.
We all know how much fraud existed in lending industry during bubble, I suspect that more agents will be out on the street advocating people to get into this train and guide them to get on board. Here comes steep slide in housing prices, meaning it doesnt matter good loans or bad loans, they are all in one big stinking pot.
Real big fall in housing prices starts now!
I think Bush, who I think is literally crazy, will veto this. Why not? He’s already way more hated than Herbert Hoover ever was.
Just move along, there’s nothing to see here…
Guess who are the winners of this sub-prime mess?
1. Bush re-fin american’s dream so he can be re-elcted in 2004.
2. AG re-nominated as Fed chain 2005
3. Wall St top exec never mind they exercise 100M stock options already
4. 120% financial home owner, from zero to zero but with 300K cash spent.
Agreed. This is the first domino in the chain, slo mo slide off the cliff. As I thought about IndyMac and the many predictions we’ve made here over the months, I can’t help but get angry. It’s a curious response to recent events for me.
I’m angry because we all know somehow, someway Joe Taxpayer is going to get stuck with this bill while the criminal borrowers, lenders, realtards and investment “wizards” made out. Sure, some have lost their jobs, others are struggling and the borrowers credit will be torpedoed for a few years but what is that compared to wriggling off the hook of what will likely turn out to be the single largest financial meltdown in global history? And let’s face it, the banking and credit industries will grant some sort of clemency soon enough to those who spent a couple of years in credit exile. They’ll call the whole thing a big mistake and sweep it under the rug. Short memories indeed.
I get angry because my wife and I are in one of the upper tier tax brackets and Uncle Sam gets plenty of our earnings because we cannot claim enough tax breaks to make an appreciable dent. Why? Because I suspected this whole thing was coming and after finding this blog, my suspicions we confirmed. So wifey and I stayed out the morass and didn’t buy that overpriced house we had our eye on. Instead, we banked the downpayment, paid off our remaining debt and rented another year. We did the responsible thing for ourselves and our family.
So now it appears imminent that our elected officials will effectively punish our good behavior while rewarding the reckless and irresponsible. DAMMIT this really pisses me off!! How am I supposed to teach my daughter to be a responsible, respectful good citizen when all around us are examples of why not to behave properly like we’ve all been taught by our parents?
So all these jackasses that lived like kings while looking down their noses at us from the wheels of their Range Rovers and H2’s get away with it. They robbed the bank in broad daylight and the Fed is going to let them get away with it while they reach deeper into my pocket to do so.
We need a revolution in this country! I want my government back. I want the criminal participants in this mess either behind bars or forever marginalized for their behavior. They put us all at risk, pushed the whole country right to the brink and I’ve got no more sympathy or empathy left. They didn’t give a sh*t about us while they had their fun so why should we give a damn what happens to them?! Am I alone in this?
No…you are definately not alone in this! We just don’t have the politicians ear. Their sympathy lies with the poor overextended homeowner.
After all, it’s an Election Year.
No, you’re not alone in your anger, but we are outvoted and outmonied by, respectively, the dumbshit real estate buyers and the lenders.
I don’t suppose that we could rally enough troops to make a noise through a protest at Indymac while the government and news stations are focusing attention there?
I would be up for a little march at their headquarters. Maybe a phone call to all of the local TV news stations? They seem to like chaos and negativity.
I say we all get up and spend an hour or two venting our anger and contempt for government and greedy banks.
We are outmonied by borrowed money. The lobbyists and politicians can’t tell if you are contributing $ from your paycheck, a home equity loan, or fraud.
Influence follows money, even if it’s borrowed money.
I would like to know how much of the Freddie Mac / Fannie Mae fiasco is due to political correctness. The bleeding hearts pushed these agencies to buy subprime mortgages so “all Americans” could become homeowners. After all, when financial institutions apply reasonable underwriting standards and want things like down payments and good credit scores they are being “discriminatory”. So in addition to the realtards, corrupt brokers and inept bankers, Freddie Mac and Fannie Mae (and the taxpayers) get involved in this mess.
Actually, we can pin this more accurately on Saint Ronny. That’s right, Reagan deregulated the banking industry on his watch which effectively put all these wheels in motion. Without getting into the nitty-gritty, the deregulation effectively blurred the lines between “banks” and investment houses. It’s really much more complicated than that.
Nonetheless, the doors to the treasury were thrown wide open to fraud and worse, the guards to the henhouse were either warned off or outright done away with. Case in point, the OTS was looking the other way while IndyMac, CountryWide and it’s ilk were writing bad loan after bad loan and posting record profits. Chickens home to roost indeed. Let’s not forget that other recent banking collapse in this country happened on the Republican’s watch too. Remember Lincoln Savings & Loan and Silverado Savings & Loan?? GHW Bush had to sign a bailout package to save those bad loan desperados while Joe Taxpayer picked-up the tab. Who was up to his neck in this mess? Neil Bush, son of GHW Bush and brother to the current President. I don’t know that I’d be going around trying to pin this one on the “liberals”. (Remember too that it was Dubya who was crowing about home ownership and an “ownership society”.)
Ask yourself who benefited most from this mess and you might have your answer on whom to blame but don’t forget your history.
We go to Washington and march.
I’ll go.
IR, you have my permission to allow anyone organizing a march on DC for fiscal responsibility to contact me via email.
Because I have the cash, I could do this on very, very short notice.
You are not alone…
The politicians are NOT stupid. They completely understand that this meltdown is going to push income taxes sky high, and they are anticipating one of the two mindsets of people looking to duck the coming tax burden: the underground economy.
Housing bill legislation included a provision that _ALL_ financial transactions through 3rd party intermediaries (think PayPal) must be logged and transmitted to the IRS.
People looking to use the new underground economy (think eBay) to escape this tax burden can no longer hide this type of income from taxes.
Sorry, but I have to say American deserves all this mess.
No, I don’t. I don’t deserve it.
I don’t deserve to designated a DEADBEAT because I pay off all of my credits each month.
I don’t deserve to pay for the cleanup because I had no contribution to making the mess.
In fact, I have been socially punished with loss of social status for refusing to buy into the utter stupidity of it all.
I should be compensated instead.
Dave, you are right, you DONT deserve it. But it’s called collateral damage. Better get use to it….
No, America – of which you are a part – deserves this.
America decided to swallow the Kool-aid that all regulation is bad, and will only stop businesses and people from making as much money as possible.
The lending and banking regulations were scrapped. Even when States tried to put in place common sense regulations over lending, they were told No! by the feds (look up Georgia’s case.)
Once regulation was scrapped, the hot potato game of fiscal malfeasance was started. Ty and make as much as you can before the music stops – if you’re left holding the potato…tough luck!
We get the government (and the regulations) we deserve.
Once things get bad enough, there will be a revolution of sorts. OK, not an “off with their heads”, but it will be ugly.
The looting has already begun.
All you “neocon” ‘haters’ need to keep your opinions to yourself. (Theres enough “Bushies” telling us what to do alreddy.)
****Don’t tell us what you think WE need.
****You dont have the answeres.
****Neocon-Bushie-Haters caused these problems.
As far as political analysis goes, I was a Congressional aide and ran political campaigns when I was younger. My first political involvement was at the age of 16 taking campaign literature door-to-door for McGovern and I have never voted for a Republican in my life. Now we are highly educated Quakers (the group reknown for tolerance and understanding.)I deal in political realities in pedicting voter behavior – have done for years and even got paid for it.
Sitting at a keyboard blogging only with those who do the same thing and reinforcing each others views is so insular. Go out and talk to Aunt Tilly and Uncle Jake who don’t join in the online club and are the majority of voters.If you don’t deal with the realities – pro and con – you are in a fantasy land.
For me personally, I have had over 30 years of holding my nose and voting for the weak candidates of the Democrats – and that includes Bill Clinton who was politically somewhere to the right of Nixon and Eisenhower on economics. The Dems haven’t had a true viable progressive candidate since FDR died.
This time I may say enough is enough and stay home. I’m out of anti-nausea medication.
Save it for the Huffington Post. This is a housing/economics blog.
Hey, AnnScott. I think you might be out of your anti-psychotic medication, too.
I can recall years ago listening to my neighbors boasting about how their homes were going up and up and up and me trying to explain how this was all a big hoax. So here we are as the clock strikes twelve. This will take years to unravel. Meanwhile, I hope these folks know that if they want to unload their homes for whatever the reason is they will have to come back down to earth. There is no one out there that can afford to buy then and hardly anyone out there that will be lending people the money it’ll take unless they are rock solid.
Irvine housing is dead, completely dead if not because of Asians (especially Korean) still moving in.
Recently, our company,a famous and well-built high tech corp,tries to recruiter a few engineers, and we find out it so hard to find qualified candidates.
The living cost here is so high, as high as San Jose. $100K still not enough to save any $, but in Texas, you can have your own nice house and still save big $ every month.
IAC wellcomes you, they need more slavers working for them.
Your company should be outsourcing it’s engineering to India or China. For 100k you can hire 10 experienced engineers.
Posts like this make me vomit.
If you said Russia I’d agree with you. The work you can get done in India or China isn’t anyone’s priority R&D;. And don’t even think about quality and adherence to delivery milestones.
Every company we have tried outsourcing to has failed miserably. You get what you pay for.
The ultimate result of any bailout will be the loss of the one thing that sets the US apart from all other nations: Trust. The reason money $417K could be lent for 30 years is that there was the implication that it would be paid back with interest. The same folks that created that level of trust will be the survivors of the bailout — People who lived within their means. They will no longer have to compete with people who demonstrated an inability to do so.
Do you remember all the hosannas that Alan Greenspan reaped when he finally retired? I VERY MUCH DOUBT they will be building statues to that man now, he who turned this country into an orgy of low interest rates. How ironic that someone old enough to remember the Great Depression allowed Great Depression II to propagate on his watch!
… even more ironic that an Ayn Rand friend/disciple contributed in large part to this debacle.
I can’t forget Greenspan’s appearance on The Diane Riehm Show where he completely disowned any responsibility whatsoever for the developing housing crash.
Really, Alan? You had nothing to do with this at all? Not one bit? Not even when you recommended that homebuyers take out ARMs en masse?
Never admit your wrong, this mentality will drive this country into the toilet.
sooner or later greenspan will depart this mortal coil. the obituaries have suddenly become a lot more mixed and a lot less effusive than they were — all obits of famous people are pre-written — even 2 years ago.
‘alan greenspan, whose stewardship of the Federal Reserve Board is widely blamed for facilitating the Second Great Depression, died friday…’
Allan
YOu are an idiot. That is obvious from your degeneration into attacks because you disagree with concepts. I hold a degrees in economcis, history, political science and a law degree. The right wing crackers are out in force. They really need to go do some basic reading. Sstart with some high school econ texts and move up to college freshman level . (A process which should only take you around 6 years given your ignorance of such matters .) Then try history. First begin with the development of civilzations and the early days of economic systems and then move on up through the medieval then then the reformation and finally to the industrial revolution. Once you get through that, you may finally begin to grasp the rudiments of the development of economic systems and social systems.
Do you think I should study spelling and grammar, too, or just skip it like you did.
Wow! Where did that huge pile of cat fur come from?
😉
AnnScott,
When you get back on your meds, try reading the US Consitiution for once in your life. Maybe you and your phonies will LEARN somthing for a change.
It looks like that this guy got his four degrees from the hygiene isle of the grocery store.
“DEGREE antiperspirant – Buy 3 get one free”
To quote Lewis Black, “There isn’t enough deodorant for this conversation.”
Listen up all you pseudo intellectuals. This blog is nothing more than a cut and paste + common sense. IR is so full of himself it’s not even funny. I went to HS with a buddy who works for DreamHost in Brea. Want to know who IR is? Stay tuned…
Wait.. I’m sensing something…
Yes….
smarterthanyou bought IndyMac stock on Thursday.
Thank you for making another one of the predictions from the January 1st post come true:
“For my final not-so-bold prediction for 2008, I predict we will see many more angry homedebtor’s troll the blog. As denial turns to fear and acceptance, it often detours through periods of anger. It will be extremely embarrassing for the many sheeple who got caught up in the financial mania to admit they made a huge mistake, particularly the most arrogant and willful of the the bunch. Since people generally do not want to take personal responsibility for their mistakes, many will come here and blame the “negative media” for the decline. We may report on the market, but we don’t influence it, and we certainly don’t control it. We will be a convenient place for many to vent their frustrations.”
Here is calling you out smarterthanyou.
BTW, everyone will find out who IR is in a couple of months when my book gets published. It is not a state secret.
I was at a little meeting today and exactly half of the people were talking about a family member who was losing their condo and declaring BK. One was in Irvine.
It may have been some kind of fluke, but 50% is 50% that are looking at extreme financial hard times.
IR, I’m glad you took the high road on this one.
Keep up the great posts.
BTW, I’m still having trouble seeing good SFH deals in 92606 and 92618….perhaps they’re coming soon 🙂
What is your point? You are not what your name reads for sure. Go get a life!
Any chance you had any education beyond HS?
Mu comment was for smarterthanyou!
Mine too, it’s the nesting.
Lehman Brothers will be next, probably as soon as Labor Day.
Ok, we went to the movies and saw something called Kit Kitsomething, American Girl.
I do not go to the movies for any other reason than entertainment. If there were 20 Indiana Jones movies, I would go to all of them
Kit squared was supposed to be entertaining, but instead it was terrifying. They must have started the planning stages of the movie when confidence and the housing mkt was high and going higher.
Well, foreclosure signs are plastered all over the place, and these ladies who lunch and look very prosperous are interrupted by Kit who is bringing in some young hobos who are hungry. The mom kindly hands over some sandwiches and the hobos, one of which is 5 or 6, say they will come back and work for food, which they do.
All is not what it seems most of the ladies are in financial trouble and the lady next door is being kicked out of her house. Kit’s dad loses
his job and leaves to go look for work.
Kit’s neighborhood has all these really lovely houses, all of which apparently have mtges. . .
A hobo camp is visited by Kit and her friends. One of the inhabitants who is wearing a ratty suit which clearly was once expensive says he used to be in stocks and bonds (it’s 1934).
I have taken to saying I used to be a real estate attorney. And I hear this used to be thing on the big screen echoed back to me.
Eerie, extremely eerie.
Kit & her mom almost get foreclosed out, but the day is saved.
People clapped at the end, which I haven’t heard for years at the movies. When I was a kid people applauded as a hangover from live theater, I suppose.
Now, my house is paid for. Our debt is low. But I found the movie both excellent and really upsetting.
By the way, the Barney’s coffee shop had a barrel of bags of coffee at about half off; they’ve never had a coffee sale before. I got 5 bags, when all I intended to get was a 1 pound bag of beans.
The hub was buying a modest piece of jewelry for my birthday. All the jewelry stores had huge sale signs plastered all over and tho I am not good at pricing jewelry it seemed that a lot of stuff was really cheaper than previously.
J. C. Penney’s which we walked to to get to the jewelry stores was pretty empty, and had scads of signs proclaiming incredible amounts off.
I guess it is nice to have money when everybody else is tapped out. But I’d rather than everybody was well off. I’d rather keep my law office open. I’d rather be doing closings for people buying houses for reasonable amounts.
And I just finish paying off my wife’s 1.21 carat Tiffany & Co diamond ring priced at around $15k.
Whew….
But then I was one of the lucky ones that foresaw the housing bubble and promptly sold off my holdings.
Now a happy renter 🙂
IR, well stated. And quite frankly Soapboxpolitico’s idea has a good ring to it. The Pubs and Dems both let it happen. IndyMac and the rest were the enablers that shut us out for years.
Let them twist in the wind.
:red: Invest in alcohol stocks; tough times are a coming.
A lot of these blogs including Patrick and CR and even Mish have a lot of angry saver/renters who are blaming the order takers and the suckers for the whole mess. There’s a pecking order and the chickens at the bottom are fighting each other while the wolves and wolves in sheeps clothing will take over the global economy, buy up RE and land and hard assets for pennies on the dollar when the sheeple get desperate. New laws including surveillance and new profiteering wars will be the New Order. This cycle has happened before with the creation of central banking, WWI. roaring 20’s boom bubble, Depression w/contraction of credit, WWII…years of inflation, new bubble, new wars, concentration and consolidation Of Power Elite control and wealth.
See the pattern that private central banking enforced by government or fascistic socialism for the super rich brings. The great transfer and liquidation of wealth of the middle class. Then default on debt(social security) to the middle class. Final endgame…the elimination of the middle class for a two-class system…super rich power elite and the useless unemployed insolvent feeders(about 90% of the planet). See where this is going as we tear each other apart and blame each other as the vampires feed on the life force or this current generation of savings & assets of the workers. The Plan is a success.
Forums that Mish participates in:
http://forum.themarkettraders.com/
Pretty good readers/posters on a variety of economic topics.
Seriously, you think that all these people were living under a rock these past five years. What goes up must not come down? More proof that money does indeed cause blindness.
Anyone thinking there will be a “Northern Rock” style bank run on IndyMac Monday morning ?
If I had money there, Id be down there 1st thing Monday trying to get my money back !
They will move from the iPhone line into the IndyMac line!
Peter Schiff on Fanny and Freddie:
http://www.europac.net/Schiff-FBN-7-11-08_lg.asp
“Treasury, Fed move to rescue Fannie and Freddie”
http://www.marketwatch.com/news/story/treasury-fed-move-rescue-fannie/story.aspx?guid={AF7D0E9C-115C-4B41-9AF6-97BD668BC455}
The US dollar is now TOAST !!!!!!!
Got gold ?
those of us who husband our pennies will be coerced into paying for all this. a colossal injustice.
i never bought. i probably have way too much in my nearly zero-interest checking account. over $10K. various sums in mutual funds that will crater for at least a couple years, but i don’t need that money in an imminent way.
there are plenty others like me on this board, those who never drank kool-aid and worked hard and saved. but the press ignores us b/c we don’t provide melodramatic footage or interviews. the bankrupt sheeple, when they aren’t mocking us for being dull and colorless, hate and envy us for still having a few bucks or find us threatening.
that’s the american way now. despise those whose behavior preserves the system. praise and bail out those who steered this ship into an iceberg.
Unrelated to the topic, but since this blog deals with Irvine housing issue I have a question to ask. Where can I find a good Irvine rental blog? We are planning on moving to Irvine area but we don’t know much about the area. We are currently renting in Corona area and use the metrolink but it’s getting very old and we’d like to live closer to our work. Any suggestions or help would be greatly appreciated.
There is quite a bit of information on our forums about experiences at various apartment communities in the Irvine area:
https://www.irvinehousingblog.com/forums
is this realistic or too stretched?
http://realestate.msn.com/rentals/Article2.aspx?cp-documentid=8377648>1=35000
WOW! This whole thing seems to be unraveling at stunning speed!
The asian financial markets are down after the Fed’s announcement Sunday that they’d make funds available to Fannie and Freddie at the benchmark rate “if such funds were needed”.
Uh oh. The blood is in the water and the sharks are circling. This is not good, definitely not good. But I guess we’re all “whiners” and this is a “recession of the mind” according to Phil Gramm. WOW! What a bozo! And to think he’s an economic advisor to McCain AND a former Chairman of the Senate Banking Committee and even better (you just can’t make this crap up!) … he was considered for the Secretary of the Treasury post in the current administration … AND he sits on the board of UBS Investment Bank. (Suppose he’s got a hidden agenda or interest there?)