Shopping — Pet Shop Boys
In the next week or two, Hank Paulson is going shopping with a $700,000,000,000 credit card courtesy of Congress and the Federal Reserve. What is he going to do with that money? How wisely will he spend it? He faces a dilemma that has no resolution. If he pays fair market value for the securities he buys, he will fail to recapitalize the banks, and the economy will continue its downward spiral into the crapper. If he overpays for the securities to recapitalize the banks, the taxpayers will lose a great deal of money, and he will be accused of favoritism by just about everyone. So what should he do? Look out for the taxpayers, flush the economy and plunge us into a depression? Or does he screw the taxpayers and enrich his buddies and save the economy? Is this a false dichotomy? I don’t think so. I am glad I am not the one making these decisions. In the end, all of his actions will be justified as “necessary” to save the economy, and the justifications may accurately characterize the situation. There will be no way to know. The severity of a problem you avoid is always an unknown open to speculation.
In yesterday’s post, I reminded everyone of the reasons we are in this mess in the first place. When you strip away all the complexities and look to the root of the problem, you find individual borrowers like today’s that took on more debt than they can handle. If this had not occurred, if people had not overpaid, HELOCed and generally over borrowed, prices would not have bubbled. Everyone would be making their house payments, and none of this would have happened.
Asking Price: $459,900
Income Requirement: $114,975
Downpayment Needed: $91,980
Monthly Equity Burn: $3,852
Purchase Price: $360,000
Purchase Date: 12/20/2001
Address: 18 Nuevo #9, Irvine, CA 92612
| Beds: | 3 |
| Baths: | 2 |
| Sq. Ft.: | 1,507 |
| $/Sq. Ft.: | $305 |
| Lot Size: | – |
| Property Type: | Condominium |
| Style: | Traditional |
| Year Built: | 1976 |
| Stories: | 1 Level |
| Floor: | 1 |
| View: | City Lights, Golf Course |
| Area: | Rancho San Joaquin |
| County: | Orange |
| MLS#: | P644097 |
| Source: | SoCalMLS |
| Status: | Active |
| On Redfin: | 89 days |
Rancho San Joaquin Golf Course. Prime Location. This is an end unit.
This charming home has a fireplace, hardwood floors and features 3
patios. Surrounded by beautiful landscaping. The HOA has 2 swimming
pools with spas. Excellent opportunity in a wonderful community.
So how much shopping did today’s owner do? The property was purchased for $360,000 on 12/20/2001. The owner used a $312,500 first mortgage and a $47,500 downpayment. On 10/11/2002 she opened a HELOC for $42,000. It appears as if she spent about $25,000 because on 4/12/2004 she refinanced for $336,000. On 11/23/2004 she opened another HELOC for $50,000. On 5/1/2006 she took more of the free money with a new first mortgage of $492,000. On 7/18/2006 she opened a HELOC for $43,200. Total debt on the property was $535,200. Total Mortgage equity withdrawal was $222,700 which includes her $47,500 downpayment. If this property sells for its asking price, and if a 6% commission is paid, the total loss to the lender/investor will be $102,894. This is not a big loss by Irvine standards, as this owner was not a big-time HELOC abuser. No, this is a very average borrower who lost a very average property doing what all of her friends and neighbors were doing: shopping with free money.
Whenever I profile one of these HELOC abuse properties, there is a natural tendency to want to believe there was some outside event or medical problem that made them spend the money. Nobody wants to believe that someone could lose their house because they liked to go shopping. The reality is that major, life-changing events for which there is not available insurance coverage are very rare. Maybe 1 in 100 of these cases involve that, probably less. Most of these people did go shopping. They did tap their HELOCs every year to pay off the credit cards. They took the free money and spent it. Now they are losing their homes because of this behavior. To deny this reality is to miss learning one of the key lessons of the bubble. The people who own (or owned) the properties I profile are learning this lesson very painfully. Some take joy in this fact, and some feel compassion. In the end, learning from these mistakes benefits everyone.
.
We’re buying and selling your history
How we go about it is no mystery
We check it with the city, then change the law
Are you looking forward?
Now you want some more
We’re S-H-O-PP-I-N-G, we’re shopping
It’s easy when you got all the information
Inside help, no investigation
(No investigation, investigation)
No questions in the house, no give and take
There’s a big bang in the city
We’re all on the make
We’re S-H-O-PP-I-N-G, we’re shopping
We’re S-H-O-PP-I-N-G, we’re shopping
Our gain is your loss, that’s the price you pay
I heard it in the House of Commons: everything’s for sale
We’re shopping
We’re shopping
We’re S-H-O-PP-I-N-G, we’re shopping
We’re S-H-O-PP-I-N-G, we’re shopping
Shopping — Pet Shop Boy
Even the 2001 price of $360k seems steep for a basement level 1976 apartment. Sure 1,500 sq feet 3/2 isn’t bad, but it’s apartment style not townhouse-style and ground-floor with an added basement feel of living in the moat. The lipstick choices aren’t bad for making it livable, nice sponge-paint in earthy-neutrals and recently refinished wood-floors, but it’s still a pig.
What’s a current moving price for this property? 5 Viejo has a garage, and was just $420k.
5 Viejo Thus this should be under $400k, by how much?
Don’t worry, this place will be partying like it’s 2001 in good short order. The clock is still hanging in there around 2003 (not for long though).
http://www.crackthecode.us/images/WhereDidAllTheHELOCGo.jpg
At least he can live in the Caddy.
Does anyone remember the Escalade commercial from a few months ago where the guy was saying he loved his Escalade so much he could live in it?
Maybe his HELCO had run dry and he was evaluating his options?
What were they thinking talking about living in your car as a message in a luxury car commercial? Last time I checked living in your car was not for the top earners.
But can he afford to fill up the gas tank on the Escalade?
Are there lots of Escalades with drawn inside shades in Scottsdale parking lots these days?
Yeah, the $360k price does seem a little high for 2001…probably overpaid.
I looked at these places when I was looking to buy my condo a few years back. Many have detached garages which is kind of annoying, not to mention stray golf balls…
P.S. What did this person spend their HELOC on? Looks like no improvements have been made to the property.
Took the deposition of a HELOC abuser a few days ago. Actual exchange:
Q: Where did the money go?
A: That’s a good question.
LOL!
That is the problem when appreciation is turned into income. If you asked me where did my last two paychecks go, I probably couldn’t tell you (other than to say ‘bills’). If you asked me where did the money I took from savings go, and I could detail it to the penny.
Most of these people had to put their income toward their housing payments, particularly those with 50% or higher DTIs. The HELOC money was their spending money. There have been stories about how dead Las Vegas is right now. I wonder how much HELOC money was blown on trips to Vegas?
Yes, but come on now.
We all know that ‘bills’ is really a codeword for ‘credit cards’.
I can honestly say that none of my earnings go toward credit card payments.
Maybe she used the HELOC money to pay the $348 association fee.
Oopps. $384
5 years of it? Maybe that was part of her self-justification, though. Oh I put myself in this apartment, and it’s more expensive than I thought, now I need this HELOC for groceries, and new clothes for the new job to look professional and get that raise….
What kind of golf course is the Rancho San Joaquin Golf Course? Is it owned by the county or city of the Irvine? Does it add much to the location of this property?
Is it in “Turtle Rock”?
The Rancho San Joaquin golf course is a low-end golf property. I don’t know who owns it, but it is run by American Golf. The playing conditions are generally average to poor. It probably does add some value to the property because the view out the back of the unit is of a manicured greenspace.
In the front view photo the stairs look like they need painting and the landscape looks bare on the side of the sidewalk. In other words, the exterior doesn’t look well maintained. $384 HOA for that level of shabbiness?
A golf course can actually deduct value to a property. Factors such as course financial hardship, mowing noise, golfer noise and invasion of privacy, and application of chemical etc. all can have negative impact on a golf course home.
Used to play RSJ every week, we called it “the ranch”. It was the cheapest course in OC that you could get on without a 4 hr wait like at Mile Square.
It’s built on an old dump site so you used to get that nice methane aroma wafting up out of the ground, I think this has slowed down now. Best part of the round was the hot dogs at the turn served at an outdoor grill. Great dogs, don’t miss. You have to make sure to protect your food from the crows, they swoop into your cart if you turn your back and steal everything.
These condo’s looked like a dump back in the 90’s. I couldn’t believe the 2001 price, let alone the bubble.
I worked at RSJ when I was in High School (1976) it was a coll place then. I’ll bet the housing is a little dated now!
It was managed by California Golf at the time! Some lady named Dallas was the owner of CG and she liked the color brown.
It’s always interesting to read what others write about the mortgage meltdown and where they place the majority of the blame.
At a micro level, I blame the individual borrower. Nobody forced them to sign a toxic mortgage. Nobody forced them to take out a HELOC and blow it on living large. It’s hard to not follow the herd, but that really isn’t much of an excuse. If it was, ‘I was just following orders’ would have been an acceptable excuse at Nuremburg.
(yes, taking out a crazy mortgage is not equivalent to Nazi war crimes, just using an extreme example to illustrate that no matter what everyone else is doing, at the end of the day we are all responsible for our own choices… and sometimes the consequences are much more dire than taking a credit hit or being deeply in debt)
At a macro level, I blame the lenders and Wall Street. If you make that much easy money available, if you employ modern advertising and marketing to push this easy money, it is absolutely inevitable that more than a few people will go for it.
It’s a curious situation; if we were talking about illicit drugs, most people would have no problem blaming the pusher. But put those pushers in nice suits and change the product from smack to shitty mortgages, and to some people it becomes all the spending junkie’s fault.
IMHO, there is no such thing as a ‘drug pusher.’
I think this notion was developed during our infant ‘war on drugs’ and gave rise to the image of some used car salesman type praying on children and the disaffected. Someone just needs to have drugs and be willing to trade them for money or barter. There’s not a whole lot of selling involved.
Were there ‘toxic mortgage pushers’ ? Probably to some degree. But I bet a very high percentage of these folks got ‘sold’ by the allure of easy riches, and sought out the bad paper. In fact I knew a couple of playerz in the mortgage game when it was hot and most of the stories they told were of people who would come in saying “Hey you hooked up my buddy with a great loan, can you get me one too?”
My sister and I didn’t buy during the bubble, but we’re educated people and know that old addages such as ‘something for nothing’ are old precicely because they’re timeless, proving true generation after generation. I guess for the big gamblers on wall street, we’ll need to rewrite some of the old morals.
I vote for “heads you lose, tails I win.”
This bailout is bullshit. Let them all eat house. Every single one of those companies who gambled on this bubble should die a violent death. Save the bailout money to prop up FDIC. Those are the only folks who deserve it.
BELIEVE ME people, our country will not shut down because 75% of wall street does. A strong majority of the country operates independently of what those jokers do day in and day out, producing valuable goods and services for Americans. That, by and large will continue in the wake of Wall Streets distruction. HUGE recession TRUE (maybe depression). New companies will emerge, new regulations will emerge (isn’t gambling supposed to be illegal?), and most of all, risk will be factored back into the system again.
You know what we get with this bailout ? MORAL HAZARD, the likes of which this country has never seen. The institutions that are getting bailed out now have reason to feel invincible. Who will benefit ? Investment bankers mostly. So they got payed back for the stupid paper they sold, who thinks they’re going to pass that relief on to joe taxpayer who holds the mortgage.
Survey says ? XXX
The whole thing stinks. I know a fair bit of financial history and this will go down as the biggest heist in American history. Paulson has virtually UNLIMITED authority to print money and UNCHECKED discretion with which to distribute the funds. Let’s all not forget what he did directly before joining the Treasury.
Show of hands, who thinks a man with a personal net worth of $700m is really looking out for the little people ?
I’m about one cup of coffee from driving down to home depot, buying up some pitch forks and wood for torches and heading to washington !
*sigh* Ok, I feel better now. Back to my cubicle.
“This bailout is bullshit. Let them all eat house. Every single one of those companies who gambled on this bubble should die a violent death. Save the bailout money to prop up FDIC. Those are the only folks who deserve it.”
Think I agree with you here. Lets protect the FDIC so they can protect the people who have bothered to save some money. The lifestyle of spend every penny and then get a HELOC, lets not reward it.
So, the wealthy investors want the rules of the games changed after they have lost some money. They want to get their money lost to investment back while I as a small investor do not have that type of perks. All should then get together and stop paying for all bills to protest this barbaric oppression of the common people.
They even gave a stupid reason that if their lost investment is not recuperated the economy would go into the crapper. That is total bullshit. Their lost investment is all in real estate where it has contributed very little to the long term healthy grow of the economy. Why ask for rescue now? It is more likely they see the ALT-A tsunami coming and cannot get into safety while they have suppressed all mentions of the upcoming ALT-A disaster. Are Goldman Sachs and Morgan Stanley loaded with ALT-A papers or something?
There is a middle course to this bail out proposal. Like you, I was astounded at the generality and brevity of this scheme (which I understand runs three pages); but I was even more shocked that it would apparently enable financial institutions to unload bad debt on the Treasury with very light financial repercussions (i.e. through “reverse auctions”).
What needs to be included in this proposal is that any institution that participates gives up 80% dilutive interest in that institution, either through warrants or stock — much as the AIG deal went down. Also, executive compensation at any institution that participates needs to be capped.
If these two items are included, the Treasury may come out whole, or even ahead of the game in a few years. The “moral hazard” is lessened considerably — stockholders of firms that participate would lose most of their money, and the executives that participated in creating this mess would see their compensation cut dramatically.
If these two items are NOT included, however … I’m with ya, brother — torches and pitchforks.
“This bailout is bullshit. Let them all eat house. ”
Quote of the day.
heh
I’m honored IR. ; p
FYI – My brother was an English major in college. I couldn’t have said it better myself bro – you make me proud.
I’m not so convinced that the micro level is only on the borrowers. Most borrowers walk in focused on the monthly payment, which is understandable because they’re contemplating a purchase of something that they couldn’t pay for with 5 years of post-tax income. The enormity of a house purchase makes it natural to focus on the monthly payment.
So, take a person who (I think understandably, even if incorrectly) walks into a bank focused on the monthly payment. Then, they get offered a plan that allows them to afford this dream home they just looked at. Yes, the paperwork is daunting: thick, legalese, and understanding the costs would require a bit of comfort with math (or, at least, not being math-phobic). If the person had put some thought into it, their first thought might have been “well, the bank doesn’t want to give me a loan that I can’t pay back” (having absolutely no knowledge that the bank sells the loan after that).
I’m not saying that the borrowers are blameless: far from it. I wouldn’t sign a loan that I couldn’t afford, and I’d insist on going home and doing the math before I knew what I could afford. A lot of people drank the kool-aid. But a doctor doesn’t write a prescription for a med-seeker; a bartender cuts off a drunk; as a professor, I am constantly spending a lot of my time trying to convince students to do things the right way (which involves more work for me, as grading something that is obviously wrong is ridiculously easy). These borrowers came into the bank drunk on kool-aid, and the loan officer didn’t bat an eye. Take today’s HELOC abuser: the bank just said “sure, why not?” many times.
I think any individual borrower, like the drunk, is responsible for their own situation (again, excepting those who got cancer or whatever). But, at the micro level, they weren’t getting told “this is a bad idea” by the lender who was acting nicely and encouraging this borrower to think that the lender had their best interests at heart. And the lender is an expert who knows (or should know) better.
Lenders aren’t blameless in this; not by a long shot.
Matt,
Great comments, strong argument. I have to agree and have said before, I think much of the blame for this mess can be directed squarely at a failure of regulation. I don’t want to get too political here, but I believe the PRIMARY responsibility of government is to protect its citizenry against force, fraud and deceit. Boy, has our government been asleep at the wheel.
Banks need to be required to hold loans they write. Period. There should be no independent mortgage brokers. No packaging them up, no selling them off to unsuspecting foreign trusts… buy and hold. Debtor can’t pay the loan ? Well I guess you should have verified income and credit.
We’re either going to have a capitalist system or we’re not. What we’ve got now is some inbred, mutated version of capitalism and socialism. It’s ‘laissez-faire’ on the way up and ‘for the good of mother USA’ on the way down. BULLSHIT ! We want capitalism? Hey I’m all for it. Step 4 of the capitalist cookbook: creative destruction. Learn it, live it. Let those stupid bastards eat the results of their folly. This includes the dumb-shit borrowers, brokers, banks, insurance firms, structured finance gurus, rating agencies and fund managers.
I believe in personal responsibility. It’s a complex world we live in. Intelligence is a growing requirement to succeed in it. Couple thousand years ago, the only thing you needed to raise a family was a strong back and a work ethic. Welcome to the 21st century everyone. We’ve raised the bar. Maybe if someone was too dumb to Google a mortgage calculator and spend 10 minutes online trying to figure out how it was possible to buy a half a million dollar home on 50 grand a year, they deserve to lose their credit rating and rent in some shitty area of Santa Ana for awhile. But for those compassionate types who’s knee jerk reaction is to blame capitalism and rail against the fat cats who took advantage of the poor unwashed masses while making millions, cool let’s regulate ! Capitalism works for everyone when the framework is sound and effectively prevents fraud. The only thing that enabled the fat cats to screw the little folk (if you believe that’s what they did) is because they could con someone else into assuming all the risk. That con began with structured finance, and it’s ending with a multi-trillion dollar bailout that will be paid for by savers most of all, cause ultimately it’s the dollar that will suffer.
Government failed us. Republicans AND Democrats. And now that they’ve made a grand mess of things, they want MORE power to come in and try to fix the mess they created all the while destroying the very foundation of our financial system, the currency.
IR, if you’re reading this, you chilled my blood the other day with that quotation from Plato. I remember reading that in college and thinking to myself, “This is a great country, but long term, it’s doomed.” Though I don’t believe this is the end, I think we’ve taken a major step toward revolutionary change.
I worry for my folks who worked their whole lives saving for retirement and are scared to death right now. Inflation screws the most productive, responsible members of our society, the very souls for which the government has the greatest responsibility to protect. For what else is capitalism, but a framework that should encourage a society to strive for the betterment of itself? Shakespeare said,
“Neither a borrower nor a lender be;
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry.”
Our version of it rewards the worst of our society. Gamblers and liars.
The dollar is the ONLY thing we should be bailing out right now.
Everyone else gets a strong lesson in personal responsibility.
Great rant!
You’re missing a few zeros, Irvine Renter. 700,000 won’t get Paulson far. Maybe 2,000 square feet in Irvine? 🙂
You are correct. I updated the post. The real number with all the zeros is much more dramatic.
I am in the range for something around 300,000, would NEVER consider this dump, who wants to live in a 70’s shack with someone above you. Sheesh. I wonder if the owner was young and dumb, or old and dumb.
Or middle aged and dumb.
“When you strip away all the complexities and look to the root of the problem, you find individual borrowers like today’s that took on more debt than they can handle. ”
A fundamental truth.
And what is scary is Congress is bellyaching to reward it and find a way to keep those people in homes.
This is exactly right.
What it comes down to is – do we look in the mirror and hold ourselves accountable for being stupid? Or do we take the easy path of pointing the finger at the evil greedy executive who profited off of our being stupid?
In grade school, when the teacher singled us out and punished us for doing something that other people in the class were doing, we would say “Why am I in trouble, everyone else was doing it to!” and the teacher would say “Well if everyone jumped off of a cliff, would you do that too?” to which we had no reasonable argument.
I thought we all learned these lessons in childhood. Apparantly not.
People over-borrowed for their houses because “everyone else was doing it”. It’s as simple as that. The educated people said “I am not going to borrow more than I can afford just because some other competitive buffoon is willing to shoot the moon on whatever his lender is willing to throw him”.
When I look at the photo of the property I think immediately of a mildew smell. Has anyone else noticed that a lot of the condos/townhomes built with that Irvine ’70s wood architecture has a permanent mildew smell to it. I’ve noticed it in Woodbridge, Deerfield, Turtle Rock and University Park. I don’t think that those communities are aging very well and I wonder if the HOA dues are going to get nailed with some additional charges in the next few years. It’s one thing to paint the trim around the garage door but it’s gotta be expensive to replace the whole garage. Although Irvine is a very nice and safe community, I’m not impressed with the quality of building that has taken place. My Mom’s house in San Diego is 70 years old and appears that it can go another 30 years. I don’t think a lot of these Irvine condos will make it to their 45th year.
Most homes are built to last 50 years.
My brother lives in a place like this in Newport. It is falling apart. Solution: $30,000 special assessment. It took years to get it to pass and as those years passed, more and more damage because of failing siding.
The joys of owning!
I think that there are a lot of Irvine communities that are facing this very assessment in the near future. Better work that into your monthly condo owning budget. Right next to your mortgage pmnt, HOA dues, property tax and possibly mello-roos.
I’m pissed about the coming bailout.
‘Pissed’ doesn’t quite describe my anger!
Ah, I suppose you are one of those people who would rather see that money spent on things like health-care or various other red-commie enterprises that would take this country down the Marxist path. Next thing you know, the government would be involved the insurance or mortgage lending businesses – are you nuts?
Save the economy for the sake of the children.
http://www.crackthecode.us/images/TooBigToFail.jpg
Speaking of health care, why don’t they just provide a whole mess of H1-Bs to foreign doctors who are making pennies on the dollars compared to the doctors here?
Oh I forgot, Amelicans are too good for those stink’n foreign doctors who no speaka good Ingrish.
(to those that would argue my point, here’s a damn clue: there are people that are still alive outside of US, plenty of them I might add and so I guess the foreign doctors aren’t so bad after all)
Seriously, it’s time to think outside the box. Gotta housing market problem? Open up immigration. Completely. Amnesty for all illegal aliens. So long as they pay rent, or a mortgage. Make a lease or a mortgage all you need for drivers license, passport etc. Or if you want to be mean about it, make buying a house with a mortgage be the only contingency for a visa outside the existing systems. Too bad the economy has already tanked so there’s no jobs for this influx. Doh! Guess we should have tried this solution 2 years ago.
Cara, I can only hope that this was satire.
pie in the sky, unrealistic and not thought through, yes.
Satire? not exactly. I am actually in principle in favor of a much much more liberal and open immigration policy, just because of all the foreigners I know in my field. And I do favor amnesty for illegal immigrants partially to give them greater protections from unscrupulous employers and landlords, and it had been suggested back when the sub-prime crisis started that allowing more people to be legally here would alleviate the overhang of housing inventory. The actual “plan” above? That was not one I’d truly advocate.
Fair enough, so long as we all know your perspective. : )
I just don’t get this. As IR pointed out, several watchful “economists” have been issuing warnings about this outcome since 2005/2006. I remember one news where federal responded by saying that “these are private institutes and we cannot govern them, we can only provide guidelines..” really? but now it is your business, isn’t it? those hedge fund managers should be in jail.
I see a reason to avoid big meltdown and widespread efects, but at the same time it hurts as to why the people who were conservative and took the std 30 yr loan with higher int rate w/o drinking koolaid should suffer for it.
I know someone in OC who took out almost 200K in HELOC, bought a corvette, land rover for his wife and vacations in bahamas. now he is simply turning his home back to WAMU and moving back to his old home while KEEPING his cars. he causally says, ya, i really enjoyed last 3 yrs.
I just DONT get it, is something not wrong in this picture?
while the people living by rules are working still harder to barely meet gas prices, these people are driving in their HELOC fancy cars?
Just think of the values that these fine citizens are bestowing upon their offspring.
Get ready for a whole new “something for nothing” generation.
Look on the brighter side – these people who exploited the system are addicted to their habits – habits that are unsustainable. Therefore unless they really change their lifestyle and attitude towards life they are in for a long bout of ‘withdrawl symptoms’!
Simple solution: Debtors prisons.
That’ll spunge some ‘froth’ out of the system.
Attica!
Attica!
AZDavidPhz,
Great post!
Yes, they will get their comeuppance.
On the one hand, it is satisfying to see Wall Street hang out to dry.
OTOH, the problems were created by Congress ( unregulated overseas OTC trading ) and the Fed ( lazy oversight of lending practices ).
This has little to do with Bush and a lot to do with Congress, the Fed and Wall Street.
So, now we have a dilemma. Do we let Wall Street croak? If we do so we throw the baby with the bathwater and we need the baby.
Oops, got cut off….
On the one hand, it is satisfying to see Wall Street hang out to dry.
OTOH, the problems were created by Congress ( unregulated overseas OTC trading ) and the Fed ( lazy oversight of lending practices ).
This has little to do with Bush and a lot to do with Congress, the Fed and Wall Street.
So, now we have a dilemma. Do we let Wall Street croak? If we do so we throw the baby with the bathwater and we need the baby.
I think that paying 30 cents to the dollar makes sense as it assumes that that paper is has gone down 70% in value. Effectively this destroys money just as the underlaying collateral has been destroyed. Doing so keeps the pool of money smaller and protects the dollar.
Longer term we must bring back regulation into the markets to introduce transparency in trades. That is, no more off the record trading on global OTC markets ( London….. ).
And the idiots in Congress who allowed this, the likes of Senator Dodd, chairman of the Banking Committee, should be forced to resign. It is with Dodd, his buddies and Greenspan that the blame is to be laid on.
“In the next week or two, Hank Paulson is going shopping with a $700,000,000,000 credit card courtesy of Congress and the Federal Reserve.”
Really? The impression I’m getting is that so many people are upset AND contacting their representatives about it that there is now a little “push back” by Congress going on.
I think people are willing to suffer a worse economy just to teach the Wall St. bastards a lesson. Starve the body a little to kill the worm feeding within. Just as well, as it is time to stop putting new wine in old wine sacks!
I hope everyone on this blog has contacted their reps. I have.
Congress “pushing”?
You gotta be joking… that’s just a show from the very same people that passed the laws that allowed these issues to happen.
The fox guarding the chicken coop.
This will pass. Congress will bitch and moan and put up a self-righteous front but they know who fucked up and they know it was them.
I wouldn’t be surprised if behind they scenes several of these esteemed public servants have already been given a deal: “talk a little but vote for this or we’ll show that you’re up to your eyeballs on this and we’ll throw your sorry ass in jail for a while”….
Well, we all know politicians aren’t above “putting on a show”. By the same token, these people will vote to keep their jobs even if they think their actions (voting against the bailout) are (arguably) detrimental to the overall health of the economy.
Complaining to the elected official may seem like a waste of time, but that is not a reason to not participate in the process – especially in a crisis like now! The more people complain, the more they will HAVE to listen.
That’s how our imperfect system is designed and in this respect it is perfect.
Complaining in this particular case needs to be focused.
The bailout is necessary and it must be fast, we can not let this crap go on.
The Treasury should go in an price this crap at 30 cents to the dollar and make a “take it or leave” offer. This will pretty much create a price for stuff that right now has no value because no one knows how to price it.
The banks won’t come out clean, no way, no how… they’ll have some serious, massive write off losses.. 70 cents on the dollar.. but at least a lot of this stuff will get out of the system and there will be a shot of liquidity to the system.
Insofar as Congress is concerned, we should be telling those idiots to
(1) stop the uncontrolled OTC futures trading,
(2) demand that all trading on US commodities and products by US firms be subject to registration and tracking rules (NYMEX…)
(3) action be taking to decouple the rating agencies from making profits on their ratings…
After all, S&P, Moody’s et all were raking in big money by assigning AAA to crap left and right. If any one should be accused of malfeasance on this are the credit agencies.
It is obvious that the Congress allows Wall Street way too much lenience on this.
Blame? Save enough for the California dreamers who wanted to make the jump from homeowner to real estate multimillionaire by buying multiple houses, often out of state. Evidence was the Census Department’s very high house vacancy rate, meaning livable houses, at a time of very high homebuilding. I know several of these former dreamers. Don’t blame all equity withdrawl on indulgences and none on “investing”. And used to be lenders were rather punitive of non-owner occupied risk. No blame for lenders?
Maybe Mr. Paulson should learn a lesson from the bubble. It result of overpaying for an asset is never good unless you are buying at the bottom of the market? Is this the bottom? Is he paying a fire sale price?
All of you, write every last one of your congressmen now. Okay, you can be cynical and say it won’t do any good, but if you don’t it, you guarantee that they don’t feel any pain for rewarding this behavior. Let’s hold our congressmen’s feet to the fire on this one.
what do you think about voting against all congressional incumbants?
I’m so furious I’d like to kick them all out of office and put my dog into office. Everybody knew what was going on, they all just conveniently looked the other way until now. Now, we get….righteous indignation AND a bailout. Throw the bums out!
I am from Rhode Island and love this site. What I don’t understand is that the lenders are still playing games. Today, my friend sold one of his investment homes (located in RI), and the buyers were a young couple just starting out. Their mortgage company is CountryWide (recently taken over). They bought the house with no money down with a 1st and 2nd mortgage. Here’s the kicker. They received a $700 check at the signing. How can that be possible, especially in these times?? I don’t understand the math behind it. Can someone explain this to me? I thought the mortgage games were behind us.
You got me on that one. I didn’t realize anyone was still doing 100% financing. Add another foreclosure to the list…
But what is the math model? Why the kick back of cash to the buyer who puts nothing down? Why $700 on this sale vs $2,000. There must be some formula or reasoning to come up with a specific dollar amount. I am very ignorant on the money side of these dealings and have never worked in the business.
Thanks in advance for your response.
Oops, the purchase price was $182K
http://michellemalkin.com/2008/09/24/illegal-immigration-and-the-mortgage-mess/
…for your consideration cara
I know. There’s been plenty of coverage of individual instances of such foul play in the papers out here as well, but this is a good article.
I do, however, feel that part of the problem is that they were illegal, and hence it was infinitely harder to protect them from unscrupulous would-be-moguls. As it was, being illegal makes them much easier marks. Language barriers and lack of education exacerbate this of course, and just making them legal won’t miraculously protect them from exploitation. But it won’t hurt.
Oh yes, and everywhere else that doesn’t have as many illegals? They do these house-fraud rings the old fashioned way. With poor people. While I suppose it helps being able to write the advertising in another language so that it escapes the notice of more people who might otherwise be concerned, I think the over-arching structure of such schemes is the exploitation of the working poor regardless of race. Though I would agree that the lax oversight that was tantamount to allowing all immigration, helped create healthy pockets of these marks to be exploited, and might be a partial explanation for why sub-prime emerged from SoCal. But looking the other way is not the same thing as legalizing the immigration.
Am I wrong or did I hear that a couple years ago, homeowners here were hit with huge special assessments from the HOA to pay for costs related to the settling of their foundations? Does anyone know about this?