I am interested in what people have to say about the recent and ongoing problems, termed a "crisis", in the financial markets related to both credit and real estate.
I am trying to assess the degree of financial literacy reflected in a random sample of views -- nothing scientific going on here.
And I would like to learn what people have read and what they believe is the case regarding such things as the Bear Stearns bailout, the subprime mortgage issue, real estate values in the USA, the foreclosure rate, the relationship of all this to available credit, and, finally, the effect of all these things on the US and world economy.
Not a debate, as such, but merely want to know what folks have observed.
Originally posted by ScriabinI smell opportunity. I never had anything, but now I have a pretty good job. Houses, cars, it's all going to get cheaper...and now I have a decent job...
I am interested in what people have to say about the recent and ongoing problems, termed a "crisis", in the financial markets related to both credit and real estate.
I am trying to assess the degree of financial literacy reflected in a random sample of views -- nothing scientific going on here.
And I would like to learn what people have read and what ...[text shortened]... and world economy.
Not a debate, as such, but merely want to know what folks have observed.
🙂
Gas prices going up? No problem! I'm tired of fat ass SUVs clogging up my city's streets and parking lots.
Nobody's paying their debts back? Wonderful! Because I AM paying my debts back. Those other fools just make me look good.
Keep in mind that President Reagan changed the way the Federal government reports inflation. The Consumer Price Index now excludes energy and food price increases. If you add those back in, which no layman can do and come up with a revised national inflation figure, the rate of inflation in relation to growth in the GDP would present a different picture than the one painted now by the Administration.
Here is how US federal banking regulatory officials describe what the situation is, to help focus the discussion:
The U.S. economy remains in a slump caused in large part by the continuing housing downturn. The first quarter of 2008 marked the second consecutive quarter of GDP growth below 1.0 percent as the protracted slowdown in the housing market caused overall economic output to remain sluggish.
Existing home sales have fallen, and the number of homes available for sale have risen to the highest level since 1985. The result of homes lingering on the market is a considerable pullback in new home construction. Home prices continue to fall.
Delinquencies are increasing significantly among lenders with option ARM loans, even before payment resets. This is especially true in markets where values have declined significantly, such as Florida. The over-building that has occurred in certain markets has caused many developers to abandon projects or file for bankruptcy protection, resulting in significant increases in delinquencies, extended periods of time for sales and further reductions in earnings. The persistent contraction in residential investment has had its usual, negative effect on consumer spending, which grew only by 1% , less than half the rate of increase of last year.
Recent delinquency and foreclosure data for residential mortgage loans are mixed. It is encouraging to see a deceleration over the past two months in the growth in delinquencies of fixed–rate and adjustable-rate mortgages, as well as in those loans to subprime and Alt-A and prime borrowers. But two months do not make a trend and it is premature to conclude that delinquencies have stabilized. Borrowers with option ARMs still face headwinds from loan recasts due to negative amortization triggers.
Foreclosures have risen across the board. The continued housing market distress resulted in declines in earnings during the quarter, and a decline in asset quality measures. That said, capital measures for the industry continue to be strong, stable and well in excess of minimum requirements. However, many thrifts have adjusted their business models to accommodate the current economic environment and they continue to experience credit quality problems.
Originally posted by ScriabinI'm working over the summer pulling permits for a general contractor (construction company) and business is indeed slow.
Keep in mind that President Reagan changed the way the Federal government reports inflation. The Consumer Price Index now excludes energy and food price increases. If you add those back in, which no layman can do and come up with a revised national inflation figure, the rate of inflation in relation to growth in the GDP would present a different picture tha ...[text shortened]... modate the current economic environment and they continue to experience credit quality problems.
Talking about banks, specifically thrift institutions that make the most mortgage loans, first, and foremost, sound underwriting is the most basic principle of lending.
As credit risks increase, significant additions are required to loan loss provisions and these additional provisions reduce earnings with a potential future impact on capital for some institutions.
How did we get into this mess? There were breakdowns in loan underwriting and ineffective disclosures to both borrowers and investors. In some cases, there was also inadequate assessment of the borrowers’ ability to repay their mortgages.
Thrift institutions should have effective systems in place to analyze, monitor, and manage portfolios for adherence to underwriting standards and the early detection and monitoring of problem assets, such as: credit concentrations; pre- and post-closing quality control reviews; undisbursed credit lines; exposure to third-party mortgage insurers or due to recourse obligations; lender liability; risk layering; collateral value; demographic indicators, including unemployment levels in geographic lending areas; and economic indicators such as interest rates, consumer spending patterns, and lending trends.
One example of what all institutions should be analyzing for all categories of loans are concentrations of loans geographically, by borrowers and developers and exposure to recourse obligations.
Another is that thrifts should increase the frequency of internal asset reviews for income properties, construction, and development loans, particularly if a loan or group of loans have higher risk characteristics (i.e., located in a deteriorating real estate market, borrower has other problem loans with institution, etc.)
Originally posted by ScriabinCredit and real estate crisis eh? No mention of energy related concerns? For me, the real estate bubble is simply a natural correction that occurs, however, recovering from bubbles such as this is a bit more trickey when OPEC has the US by its gonades. In fact, you might even say it may be impossible to recover from. Add to the fact that the US national debt has ballooned thus devaluing the dollar and what you have is an ugly situation. Of course, another reason the US is in such debt is, you guessed it, they are defeding oil fields in the Middle East!!
I am interested in what people have to say about the recent and ongoing problems, termed a "crisis", in the financial markets related to both credit and real estate.
I am trying to assess the degree of financial literacy reflected in a random sample of views -- nothing scientific going on here.
And I would like to learn what people have read and what ...[text shortened]... and world economy.
Not a debate, as such, but merely want to know what folks have observed.
Credit and real estate crisis? Give me a break. Fix the energy crisis and the problems surrounding it and the rest will correct naturally. You may have heard the saying never to start a war on two fronts, however, the US is now fighting on three. They are fighting the credit and real estate crisis coupled with the devaluing of the dollar due to its enormous debt and the current energy crisis.
Understand Noam Chomsky, and you see it all clearly.
He states "The taxation system is a welfare state for the rich" (or similar)
Basically, corporations like Norther Rock, Stearns, etc made millions upon millions in profits for years, whilst using every scam in the book to avoid paying tax on that profit.
Then they got greedier still and thought they could make even more money from people who were not really credit worthy.
The money which N.R., Strearns, etc then borrowed to lend out was eventually called in and they could not get it back from the lenders, whose house price had reduced in value.
Thus they went bankrupt.
Here is the sick part: The Governments (France, UK, USA, etc) then used TAX-PAYERS money to bail out these greedy, tax dodgy corporations.
Talk about robbing the poor to give to the rich!
They should have let these companies go to the wall as a future warning to other companies.
Originally posted by howardgeeYour analysis is full of holes, but I'd strongly disagree about letting the banks go to the wall as an example - what about the people unfortunate enough to work for organisations like Northern Rock?
Understand Noam Chomsky, and you see it all clearly.
He states "The taxation system is a welfare state for the rich" (or similar)
Basically, corporations like Norther Rock, Stearns, etc made millions upon millions in profits for years, whilst using every scam in the book to avoid paying tax on that profit.
Then they got greedier still and thought th ...[text shortened]... !
They should have let these companies go to the wall as a future warning to other companies.
The people who caused the credit crunch belong to the same club as those who have caused the energy crisis.
We knew more than half a century ago that dependence on Middle East oil, or indeed any foreign oil could do us nothing but harm as a nation, while serving well the interests of the few very rich and powerful industrialists and their stooges in the extractive industries. What Theodore Roosevelt said in 1910 is equally true today.
He quoted Abraham Lincoln as saying: "I hold that while man exists it is his duty to improve not only his own condition, but to assist in ameliorating mankind. ...Let not him who is houseless pull down the house of another, but let him work diligently and build one for himself, thus by example assuring that his own shall be safe from violence when built."
TR then said:
"In every wise struggle for human betterment one of the main objects, and often the only object, has been to achieve in large measure equality of opportunity. In the struggle for this great end, nations rise from barbarism to civilization, and through it people press forward from one stage of enlightenment to the next. One of the chief factors in progress is the destruction of special privilege. The essence of any struggle for healthy liberty has always been, and must always be, to take from some one man or class of men the right to enjoy power, or wealth, or position, or immunity, which has not been earned by service to his or their fellows."
Then he got to the heart of it all:
"... our government, National and State, must be freed from the sinister influence or control of special interests. Exactly as the special interests of cotton and slavery threatened our political integrity before the Civil War, so now the great special business interests too often control and corrupt the men and methods of government for their own profit. We must drive the special interests out of politics."
He said:
"I believe that the officers, and, especially, the directors, of corporations should be held personally responsible when any corporation breaks the law."
And so do I.
He said:
"The absence of effective State, and, especially, national, restraint upon unfair money-getting has tended to create a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power. The prime need to is to change the conditions which enable these men to accumulate power which it is not for the general welfare that they should hold or exercise. We grudge no man a fortune which represents his own power and sagacity, when exercised with entire regard to the welfare of his fellows."
Again, he got it right.
We've yet to learn the lesson.
If I described the political creed I would like to see advance in the USA, it would be called Bullmoose Progressivism. Its time has come round again and it is long past time to banish the rough beasts that slouch in and out of the White House.
Originally posted by ScriabinWhat you are saying is that we need to combat human nature. In fact, name one government that is devoid of this problem. Granted, there are some to greater degrees than others.
"The absence of effective State, and, especially, national, restraint upon unfair money-getting has tended to create a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power. The prime need to is to change the conditions which enable these men to accumulate power which it is not for the general w nd it is long past time to banish the rough beasts that slouch in and out of the White House.[/b]
I think this is what made the US a special place. It was formed by men who forknew the ravages of human nature. Therefore, they institutued checks and balances in an attempt to thwart such abuses, however, over time these checks and balances fade daily as we head increasingly towards collectivism and centralized power in the federal government. I think we will head farther whether McCaian or Obama gets elected, granted, maybe a little faster with Obama.
I think a better approach is not to rid government of special interests, rather, we should find ways to have more powerful checks and balances as well as continued and mandatory reform!! That is a healthier and more realistic approach, however, the natural tendency of the powers that be is to create more power for themselves. Why then would they voluntarily seek to create greater checks and balances? If you ask me, there is no turning back. They do this by dangling carrots in the publics face by saying that if you want free this and free that then give us more power to be able to give them to you. All I can say is beware of Greeks bearing gifts! Perhaps we can delay the process but only to a certain extent.
As far as your quip about the White House needing a change, what about the rest of the government!! In fact, what about the Administrations that preceeded the Bush administration including Democratic administrations? Over the years the US put all of its eggs in one basket which was foreing oil. Bush is merely continuing playing the same game by sending troops over there to defend what was left him. Also, many of the Democrats within Congress voted and agreed to go over there as well in the first place. This vote to go over there was suppose to be a check and balance. LOL. Naturally they wash their hands of the situation and I suspect Bush will be the scapegoat as we continue to play the same game long after he is gone.
Originally posted by whodey14 edits?
What you are saying is that we need to combat human nature. In fact, name one government that is devoid of this problem. Granted, there are some to greater degrees than others.
I think this is what made the US a special place. It was formed by men who forknew the ravages of human nature. Therefore, they institutued checks and balances in an attempt to ...[text shortened]... I suspect Bush will be the scapegoat as we continue to play the same game long after he is gone.
Originally posted by ScriabinThread 96323 : recession? what recession?
I am interested in what people have to say about the recent and ongoing problems, termed a "crisis", in the financial markets related to both credit and real estate.
I am trying to assess the degree of financial literacy reflected in a random sample of views -- nothing scientific going on here.
And I would like to learn what people have read and what ...[text shortened]... and world economy.
Not a debate, as such, but merely want to know what folks have observed.
The issue is not recession. The definition of recession, the very concept is felt to be obsolete, in private conversation, among experts such as members of the Board of Governors of the Federal Reserve. Also, top officials within the other federal banking regulatory agencies see little economic relevance, but plenty of political propaganda value, in the outmoded idea of recession. The word does not cover the kind of crisis we are in. It isn't negative growth we are worried about -- it is the collapse of our financial markets due to a lack of confidence and trust in the value of the securities that up until recently constituted the bulk of the debt supporting the US economy: housing loans bundled and securitized.
When we decoupled energy and food prices from the Consumer Price Index, we made the old concept of inflation obsolete.
When we allowed non-federally regulated brokers and investment banks and ratings firms to bundle both good mortgage loans and bad mortgage loans, abandoning all sound underwriting and risk management principles in the process, they made the idea of recession obsolete.
Instead what we have is a crisis of confidence, a serious lack of trust among large financial institutions and potential borrowers. No one can be sure or willing to take the risk that what they are loaning money on is really worth as collateral what the bundle is represented to be worth.
Thus, the credit crunch.
We're caught between a rock and a hard place, as has been pointed out recently, as any course of action we may take now in monetary policy will have an adverse effect on the US economy.
Apparently the previous poster did not trouble to read the previous posts in this thread.
We aren't talking about recession here.
We are talking about nothing less than the potential meltdown of our entire financial system.
Case in point: Sen Charles Shumer sent a letter to the OTS recently asking what that federal regulator was doing about the shaky financial position of a New York thrift. As a result of the Senator's public finger pointing, there was a run on that thrift and more than $100 million were withdrawn by depositors within days of the letter.
Another serious symptom of the problem: the growing threat to national security and our way of life posed by the encroachment of foreign sovereign funds taking over American assets. When it even reaches the Sunday comics -- making jokes about auctioning off the interstate highway system to Australia, the statue of Liberty being sold back to France, etc. -- then this problem appears widespread enough to be a real concern.
We are using band aids and masking tape to keep the US economy from going into freefall. We are borrowing from our progeny and theirs in order to keep treading water. We are very close to either a strong set of reforms (unlikely real soon or in time), or a collapse (not correction) on a scale never seen before.
For investors, I'd say now is the time to go to the mattresses.