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Category: Group Therapy (page 73 of 81)

September 30, 2008

Tom’s Top Ten Reasons He Doesn’t Like the Bailout….

by

Mortgage Officer

Author website
  1. Because a government intervention the financial systems rarely works well.
  2. Because it fails to acknowledge the fundamental shift that is occurring in our society as we move from being “overleveraged” to using credit responsibly.
  3. Because Nancy Pelosi likes it.
  4. Because no one has been able to prove that by buying this garbage from the banks, it will do anything to actually help credit get done.
  5. Because Barney Frank likes it.
  6. Because JP Morgan and the FDIC were able to work out a very smooth transition when Washington Mutual closed down last week and it was done without any unusual interventions.
  7. Because the bailout refuses to consider that not all banks are equal.   Those who are most likely not going to make it would get the same government money as those who are perfectly healthy.    That’s just not right.
  8. Because Rep. Peter Hoekstra (R-Michigan) voted against it, and I have a lot of respect for Pete.
  9. Because the Main Stream Media is preaching an unbelievable amount of panic, distrust and fear and they are doing it with items that are not factual.
  10. Because the government hasn’t done a good job (because I don’t believe they can) in showing that there’s a connection between buying bad assets from the banks and helping Main St.
  11. Because Citigroup and the FDIC worked out a “take over” of Wachovia without any significant market disruptions and without any unusual bailout efforts.

Okay, so it was actually 11.   The point is, the bailout is not good for our country and not good for our economy.   Are banks going to fail?  Yep.   Do I hope that “my bank” isn’t one of them?  Yep.   But like Jeff Brown says, we know how the story ends up and we’ll all be fine.

Tom Vanderwell

September 29, 2008

An Update on the Bailout….

by

Mortgage Officer

Author website

and yes, after doing some more reading on it, I do still consider it a bailout.

I’m going to put a copy of a post that Yves at Naked Capitalism wrote in italics and then my comments will be interspersed in bold print and then I’ve got more thoughts at the end.

Hope this helps you understand it better.

Congressional Charade: Changes in Bailout Bill Cosmetic, and Everyone Knows That

For a quick, one-stop synopsis of the Mother of All Bailouts (as of this month), see this readable version at Clusterstock (we’ve become a recent convert to this site).

Reader and sometimes contributor Lune, who was once a Congressional staffer and still subscribes to the the inside-the-Beltway press, provided a wrap of their coverage of the bailout bill. It makes clear that everyone understands that turning Hank Paulson’s three pager into a 110 page draft made for a nice fig leaf but made virtually no substantive difference.

Gee, why doesn’t that surprise me.   They added 107 pages of rules and regulations and it’s basically just spelling out the same difference as before.

From Lune:

Well folks, we’re almost to a done deal (certainly closer than Thursday). The Hill papers are reporting that they’re getting closer in both the Senate and the House to the needed votes to pass the new bailout bill. Roll Call gives the most frank assessment of what happened over the weekend in an article entitled “Same Bailout, New Dynamic” (subtitle: Outrage Prompts Sales Effort).

All the late-night talks, last-minute demands and dramatic pronouncements aside, the fundamental structure of a $700 billion Wall Street rescue plan that Congress spent the weekend wrangling over has not changed significantly from the outline proposed by a bipartisan group of Senators and House Members last Thursday.

Did you hear that?:  It’s basically the same deal as last week Thursday, just spun differently.

“This is in essence the same,” said Sen. Bob Corker (R-Tenn.), who attended those talks.
. . .
Assuming enough House Republicans agree to vote for the package, it appeared that the House could vote as early as today, while the Senate might have to wait to take it up Wednesday after Rosh Read more

September 26, 2008

Mortgage Market Week in Review – to Bail or not to Bail?

by

Mortgage Officer

Author website

Yikes, every week it’s getting more and more challenging to lay out for you what’s going on in the markets.   Hopefully it will get easier, but I’m not really sure that it will for a while.  So what are we going to talk about this week?   This week it’s about the proposed bailout, the biggest bank failure in the history of our country, and a few thoughts from Dick DeVos (huh – trust me, it will fit in later).

The bailout – $700,000,000,000.00. That’s how much money the Treasury wants to have to bail out the troubled financial institutions.   What do they want to do?   Here it is in a nutshell:

  • They want to buy approximately 5% of the mortgage backed securities (presumably the worst ones) from the banks and investment institutions.
  • Why?  The theory is that if they take those loans off their books, that will free those institutions to start lending again (start loading up their books with better loans this time.)
  • Do we have any guarantee that it will work?   Nope, the only guarantee we have is the word of Treasury Secretary Paulson and Fed Chairman Bernanke, both of whom are very smart but both of whom have been wrong on numerous occasions as the credit crisis has spread.
  • Would the tax payer end up paying for the entire $700 Billion?  Long term, probably substantially less than that because, depending on how the portfolio gets managed, because these loans are backed up by assets (houses) and the value of those won’t go the way of Washington Mutual stock and become worthless.
  • Will banks immediately turn around and start lending more to others?   That’s a question that we don’t know the answer to.
  • I read an article this morning that said that the Central Banks might actually be making the problem worse.   How so?   They keep pumping more money into the system and that is making it easy for banks to borrow money from the Fed so they don’t have to borrow money from each other and that has put a squeeze on the normal credit markets.   Interesting Read more

September 24, 2008

“Buy when there’s blood in the streets”

by

Suburban Phoenix Real Estate Broker

Author website

I wrote $975,000 in new contracts today. No way they’ll all be accepted, but they’re strong offers backed by a lot of cash. If we don’t get these properties, we’ll go for others. Amazingly, the quality of lender-owned properties seems to be going up even as the prices go down. The lord alone knows what will happen in Washington and Manhattan, but it’s a good time — for now, at least — to be a Realtor in Phoenix.

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September 24, 2008

You know, I was wondering….

by

Mortgage Officer

Author website

All of the talking heads and all of the politicians keep talking about how we aren’t just giving $700 Billion to Wall Street, we’re investing in mortgage backed securities that we’ll eventually be able to resell and earn a good portion of that $700 Billion back, heck we might even make a profit on it.

Let me lay out a couple of things that I know:

  1. Chairman Bernanke said that the $700 Billion number was determined in that they feel they need to buy 5% of the mortgages that are “out there.”
  2. They are going to buy the mortgages that no one is able to sell today because the price that they would have to sell them at would require that the seller immediately goes into bankruptcy.
  3. At this point (9:45 PM EST on Thursday), it appears that there is a very good chance that the amount that the Treasury will be paying for these assets is above “what they are worth.”  (It’s hard to know what they are really worth, but it sounds like the price the government will pay is way more than what they could get on the market right now).

Now let me attempt to make a conclusion from this:

  1. The Treasury is going to buy 5% of the mortgage market and I think that it’s a safe assumption they aren’t going to get the highest quality portion of the market.
  2. According to the Federal Reserve’s own report, (just taking that snapshot in time) delinquency ratios for residential mortgages at commercial banks were running approximately 4.2%.
  3. That means that there is a very good chance that the portion of the mortgage backed securities market that the Treasury is going to buy is the “garbage” that’s currently part of the delinquency ratios.
  4. So, if the 4.2% delinquent portion becomes 84% of the the pipeline that the Treasury buys and 80% of that portion becomes essentially worthless, that means that we’d, as tax payers, take on approximately $470,400,000,000 in additional debt that won’t be “paid off” any time soon by the sale of assets.

I’d love it if I was missing something here, but I have a feeling that Read more

September 23, 2008

Roderick T. Long: “The vast regulatory apparatus that emerged in the late 19th and early 20th centuries was thus specifically campaigned for by the business community.”

by

Suburban Phoenix Real Estate Broker

Author website

From The Art of the Possible:

There’s a popular historical legend that goes like this: Once upon a time (for this is how stories of this kind should begin), back in the 19th century, the United States economy was almost completely unregulated and laissez-faire. But then there arose a movement to subject business to regulatory restraint in the interests of workers and consumers, a movement that culminated in the presidencies of Wilson and the two Roosevelts.

This story comes in both left-wing and right-wing versions, depending on whether the government is seen as heroically rescuing the poor and weak from the rapacious clutches of unrestrained corporate power, or as unfairly imposing burdensome socialistic fetters on peaceful and productive enterprise. But both versions agree on the central narrative: a century of laissez-faire, followed by a flurry of anti-business legislation.

Every part of this story is false. To begin with, there never was anything remotely like a period of laissez-faire in American history (at least not if “laissez-faire” means “let the market operate freely” as opposed to “let the rich and powerful help themselves to other people’s property”). The regulatory state was deeply involved from the start, particularly in the banking and currency industries and in the assignment of property titles to land. (Even such land as was not stolen from the natives was seldom appropriated in accordance with any sort of Lockean homesteading principle; instead, vast tracts of unimproved land were simply declared property by barbed wire or legislative fiat.)

The early republic’s two major political factions – to oversimplify a bit, call them the Jeffersonians (as represented by the Democrats) and the Hamiltonians (as represented successively by the Federalists, Whigs, and Republicans) – disagreed primarily about which forms of governmental interference to emphasise. To be sure, both sides paid lip service (and sometimes more than lip service) to the “Principles of ’76,” i.e., the libertarian ideals enshrined in the Declaration of Independence; but each side quickly deviated from those principles when doing so served its economic interest. The Hamiltonians, whose chief base of support was in the urban financial centers of the northeast, called for Read more

September 23, 2008

Newt Gingrich: Kill the Paulson Plan. Hard.

by

Suburban Phoenix Real Estate Broker

Author website

US News:

A few quotes and Gingrichian observations:

1) He called it a “stupid plan” that looks like it had been designed by autocrat Vladimir Putin. He also said it will be a “nightmare” to implement and full of corruption.

2) He said the Paulson Plan would be a “dead loser” on Election Day that will “break against anyone who votes for it.” It will hurt even worse with the 2010 election once Americans see what a drag it is on the economy when implemented.

3) He recently chatted with economic historian Alan Meltzer who advocated doing nothing rather than implanting the Paulson Plan. Meltzer apparently joked to Gingrich that this was about the third time he had seen Wall Street scream “the apocalypse was nigh” only to have the economy keep right on chugging along.

4) Gingrich thinks that if the Paulson Plan isn’t passed by this weekend, it is dead and the White House better have a Plan B, economic-growth package ready. Right now, he still thinks it has an 80 percent chance of passage, partly because of Paulson’s apocalyptic tone that if a bill isn’t passed, “the whole world will end on Tuesday.”

5) He advises McCain to play the maverick and come out against the Paulson Plan. Then it will be the Obama-Bush plan.

Much more here.

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September 22, 2008

Wall Street bailout plan to include more than bad mortgage debt: Feds to absorb unpaid bar bets, inadvertently laundered postage stamps, unredeemed soda cans and insufficient tooth-fairy disbursements

by

Suburban Phoenix Real Estate Broker

Author website

Totally absurd? Think twice:

In the dark of night over the weekend when most people were snoozing, the Treasury dramatically expanded its bailout plan to include buying student loans, car loans, credit card debt and any other “troubled” assets held by banks.

The changes, which were included in draft language that also opened the bailout program to foreign banks with extensive loan operations in the United States, potentially added tens of billions of dollars to the cost of the program.

Although it was a major addition to what was already the nation’s largest-ever bailout, it did not become part of the debate between Democrats and the Treasury over details of the program. A Monday counterproposal by Senate Banking Committee Chairman Christopher J. Dodd included such consumer loans as well as mortgages, just as the Treasury’s draft did Saturday night.

“The costs of the bailout will be significantly higher than originally considered or acknowledged,” said Joshua Rosner, managing director of Graham Fisher & Co., who charged that the Treasury and Federal Reserve have not been “forthright” about the ultimate cost to the public. The plan gives Treasury the discretion to buy the non-mortgage loans and securities in consultation with the Fed.

Conservatives cited the move as a sign that the massive plan to take over bad mortgage debt already is opening the door to further government bailouts.

“Such a large takeover by the government will surely be accompanied by adverse, unintended consequences,” said Pat Toomey, president of the Club for Growth, a conservative advocacy group. “Already, other companies and industries are lining up at government’s door asking for their own bailout.”

In my column for this week’s Republic, I argue that buyers should not even consider bidding on short sales: Too much hassle to catch a falling knife. In the same respect, in this climate, I can’t see any reason for sellers to participate in the short sale process — except, arguably, to extend the amount of time they remain in the home without making any payments.

Capitalism rewards thrift, zeal, planning, self-reliance. Socialism in all its many flavors rewards theft — so long as there is anything left to Read more

September 22, 2008

The Vanderwell Proposal – “Project Rebuild Banking”

by

Mortgage Officer

Author website

Since Secretary Paulson put his proposal in three pages, I’m going to lay out my proposal in less space than that.   Here goes:

Point #1 – The Treasury is hereby authorized to spend up to $700 Billion to stabilize the banking and financial services sector in such manner as it sees fit.   There will be two main priorities in their decision making:  a) To increase the flow of credit in the banking and mortgage markets so that the healthy of the economy is improved, not hindered and b) To increase the likelihood that eventually the taxpayer will receive a profit rather than incur a loss.

Point #2 – Any institution that sells any “troubled” assets to the  Treasury shall sell them at a price that is established by joint decision of the Treasury, the institution, and a committee formed of 2 members of the Senate Banking Committee, the Vice President of the United States, and 2 members of the House Banking Committee and the chairman of the SEC.   The target price shall be no more than 45 cents on the dollar.   Under no situation will the purchase price be more than 50 cents on the dollar without the joint approval of the House and Senate Banking Committees, and no more than 65 cents on a dollar without approval by the full Congress.

Point #3 – Any institution that sells troubled assets to the Treasury shall immediately reduce their dividend to 20% of what it was (can be adjusted for inflation annually according to the CPI), and all officer level employees (from the CEO down 3 levels on the corporate hierarchy) will have their salary reduced to a maximum of 3 times the average salary that they pay their employees.   So if the average Bank of America employee makes $50,000 per year, the CEO’s salary will be no more than $150,000.

Point #4 – If the institution is currently servicing the debt, they will remain servicing the debt and will provide monthly reports to the Treasury on the status of the payment history, collection procedures and, if necessary, foreclosure efforts.

Point #5 – If a bank, like Read more

September 22, 2008

What happened? “Fannie Mae and Freddie Mac exploded, and many bystanders were injured in the blast, some fatally”

by

Suburban Phoenix Real Estate Broker

Author website

Things fall apart: Kevin Hassett at Bloomberg.com is getting death threats over this news analysis:

The financial crisis of the past year has provided a number of surprising twists and turns, and from Bear Stearns Cos. to American International Group Inc., ambiguity has been a big part of the story.

Why did Bear Stearns fail, and how does that relate to AIG? It all seems so complex.

But really, it isn’t. Enough cards on this table have been turned over that the story is now clear. The economic history books will describe this episode in simple and understandable terms: Fannie Mae and Freddie Mac exploded, and many bystanders were injured in the blast, some fatally.

Fannie and Freddie did this by becoming a key enabler of the mortgage crisis. They fueled Wall Street’s efforts to securitize subprime loans by becoming the primary customer of all AAA-rated subprime-mortgage pools. In addition, they held an enormous portfolio of mortgages themselves.

In the times that Fannie and Freddie couldn’t make the market, they became the market. Over the years, it added up to an enormous obligation. As of last June, Fannie alone owned or guaranteed more than $388 billion in high-risk mortgage investments. Their large presence created an environment within which even mortgage-backed securities assembled by others could find a ready home.

The problem was that the trillions of dollars in play were only low-risk investments if real estate prices continued to rise. Once they began to fall, the entire house of cards came down with them.

Take away Fannie and Freddie, or regulate them more wisely, and it’s hard to imagine how these highly liquid markets would ever have emerged. This whole mess would never have happened.

Read the whole thing.

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September 21, 2008

Where Do You Draw the Line?

by

CEO, Redfin.com

Author website

Two questions for my colleagues in real estate!

#1: How much information about yourself do you share with prospective clients? I have to ask only because Redfin has lately been working with clients who want us to publish detailed statistics on each agent, and have wondered how far we should go. Today, we publish each transaction and, if the client has responded to our survey,  the agent’s rating on that transaction.

But especially in our bulletin boards — why doesn’t Bloodhound have online discussions (it could be a great consumer resource)? — folks ask detailed questions about our business model. They want to make sure our agents aren’t too busy, our houses sell for a good price, our files are locked, our clients are happy, our lawyers are idle, our — dozens of questions! The questions have been pretty good so we have tried to answer them all, but I wonder sometimes if we’re setting a precedent that will be hard to keep up.

As the general counsel at my last job used to say in answer to almost any question (Am I going to get fired? or where’s the bathroom?): “Answering that question now would obligate me to answer it in the future…” So, when someone unknown to you starts asking plenty of good questions, where do you draw the line?

#2: how do you protect the safety of an agent visiting a prospective client in a home the client wants to sell? We had our annual company meeting Friday, and this was one question we had to defer until we could consult others. Safety has always been a concern in real estate, but since prospective clients only communicate with us online before asking for an in-home consultation, it seems like the usual precautions may not be enough.

Any help would be much appreciated!

September 21, 2008

This endless election season may give the real estate market time to self-correct before new legislation can make things worse

by

Suburban Phoenix Real Estate Broker

Author website

This is my column for this week from the Arizona Republic (permanent link).

 
This endless election season may give the real estate market time to self-correct before new legislation can make things worse

Looking for a silver lining amidst the black clouds of financial news? Here’s one: The fact that we’re in the middle of an election campaign gives us at least a fighting chance of solving our own problems without more government interference in the real estate market.

Everything that’s happened so far has been a triumph for the government approach to what should be free markets. Since the 1930s, the Federal government has been guaranteeing home loans. That made it easier for Americans to buy homes, but it dulled that flinty due diligence we expect in bankers.

Our tax laws favor homeownership with deductions, credits, capital gains exclusions and favorable loan terms. It’s nice to save on taxes, but these incentives induce us to own homes where we might otherwise do something else with our money.

In the recent past, the Federal government decided everyone should own a home, no matter what. After 9/11, the Federal Reserve Bank reduced the cost of money to almost nothing. Hundreds of different arms of government at all levels gave away financial incentives to homeownership. And the U.S. Treasury seemed to hint that American mortgage-backed securities were as safe as houses.

This has turned out to have unhappy consequences. That old-style flinty banker could never conceive of houses losing even 20% of their value, where the Phoenix market has given back twice that much since the market peaked.

Even so, the sky has not fallen. Wealth is not dollars, wealth is the productive power of the American economy. The majority of Americans still have significant equity in their homes, with many of them being owned outright.

What’s happened is that lenders and their financiers and, unfortunately, the American taxpayer, have taken a hit to the wallet. If the Federal government can restrain itself from overreacting, we’ll dig ourselves out in due course. And that’s why we’re blessed by this election: It will be at a least a year before the Feds Read more

September 19, 2008

… Reality Steps into View … No Longer Living Lies in Paradise

by

Realtor, Rabble-Rouser

Author website

You never know when inspiration will strike you … for me – in the strangest places.

In a comment I posted to Greg’s latest post regarding the irony of our President’s administration’s policies and actions regarding the current financial meltdown, I lamented that when I read the news, blogs and watch the news regarding this domino-effect collapse of our financial markets, I get so angry I can’t see straight.

My partner has banned me from CNN, NPR and talk radio.   This is not good for me – I am not one to sit in silence – at least not for long.

Banned from the TV and radio BUT not the PC!

Okay – to avoid driving everyone crazy, I decided to put my mad DJ skillz to work on Blip.fm – frequented by my fellow Twitterers.  Mindless entertainment – for me an opportunity not to sit in silence.   I love the fact that I can create my own playlist of favorite songs – my own virtual radio station.  Why can’t I download this list directly to my iPod?

Twitter has opened my eyes to so many new tools and sites – time vacuum is the technical classification for toys ..er tools like Blip.fm.

Anyway – in an attempt to clear my mind of the thoughts of politics and dreams lost while living under a sham, socially conservative, laissez-faire regime masked as a wholesale broker, casting a blind eye while stuffing the pockets of special interest, I decided to search for happy, uplifting songs written and sung by my favorite artists – armed with a double single malt scotch on the rocks parked next to the mouse.

My music taste is varied to say the least – open and non-judgmental – truly all inclusive really.  From good ol’ country to techno-80s – classical to jazz.  I mean – come on – how can you not like a song with words like “… I can’t get no satisfaction and my tractor don’t get no traction?”

Okay – maybe it’s just me.

** searching for happy and uplifting songs **

So – I come across a song titled “Fairy Tales” – sung by one Read more

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