H_KARLUK Posted February 19, 2009 Report Share Posted February 19, 2009 A few questions about some details :Do you like rising home prices and why?Do you agree that property values rising faster than incomes is a sign of economic disaster to come? Have you ever considered that low property values mean that less money is thrown in th garbage to mortgage interest, property taxes, insurance, etc. How about low real estate values means that it's much easier to build factories, establish farms, plus other real sources of value ? Sorry , hoping rationale people there and await replies. Quote Link to comment Share on other sites More sharing options...
Winstonm Posted February 19, 2009 Author Report Share Posted February 19, 2009 The master of changing the subject from the question/point that was stated to begin with strikes again, surely to vanish into thin air as soon as he's called out on it, as usual...As usual, I try to clarify for you what my words meant after you have misrepresented my statements and then you claim inconsistency? That was not in reply to you. If I find any fault in you at all, changing the subject would be the very last thing, I promise. :) I am SO confused. :) Quote Link to comment Share on other sites More sharing options...
Lobowolf Posted February 19, 2009 Report Share Posted February 19, 2009 Weird, this is the first I am hearing about some apparently huge boon for apartments! And there I was thinking renting was also down. I'm not making a mistake, you are. It's a fact that people who lose their homes have to rent? It's just as hard to afford rent without a job as it is to afford mortgage without a job! Some people moved in with family or friend, some people started renting, and some people are now homeless. From what I've heard (and seen), rental markets are rockin'. Not just apartments, but houses. Yup, it's just as hard if you don't have a job, but there are a lot of people who DO have jobs, but couldn't afford their wacked-out adjustable rate mortgages. Their housing values tanked, so they got out without a big chunk of equity, and now they can afford reasonable payments, but not a down payment, particularly in the new credit environment. Quote Link to comment Share on other sites More sharing options...
Winstonm Posted February 19, 2009 Author Report Share Posted February 19, 2009 Do you like rising home prices and why?Do you agree that property values rising faster than incomes is a sign of economic disaster to come? Have you ever considered that low property values mean that less money is thrown in th garbage to mortgage interest, property taxes, insurance, etc. How about low real estate values means that it's much easier to build factories, establish farms, plus other real sources of value ? 1) If rising at historical norms due to genuine supply/demand then OK.2) Most likely3) Yes4) Correct Quote Link to comment Share on other sites More sharing options...
H_KARLUK Posted February 19, 2009 Report Share Posted February 19, 2009 Do you like rising home prices and why?Do you agree that property values rising faster than incomes is a sign of economic disaster to come? Have you ever considered that low property values mean that less money is thrown in th garbage to mortgage interest, property taxes, insurance, etc. How about low real estate values means that it's much easier to build factories, establish farms, plus other real sources of value ? 1) If rising at historical norms due to genuine supply/demand then OK.2) Most likely3) Yes4) Correct Thanks. No further questions. Quote Link to comment Share on other sites More sharing options...
jdonn Posted February 19, 2009 Report Share Posted February 19, 2009 The master of changing the subject from the question/point that was stated to begin with strikes again, surely to vanish into thin air as soon as he's called out on it, as usual...As usual, I try to clarify for you what my words meant after you have misrepresented my statements and then you claim inconsistency? That was not in reply to you. If I find any fault in you at all, changing the subject would be the very last thing, I promise. :) I am SO confused. :) I quoted lukewarm, made a statement in reply, and you took offense at believing I meant it toward you. If you are still confused by all this then I suggest starting on the ginko pronto! Quote Link to comment Share on other sites More sharing options...
mike777 Posted February 19, 2009 Report Share Posted February 19, 2009 Hom“It will give millions of families resigned to financial ruin a chance to rebuild,” Obama said in remarks prepared for delivery at 10:15 a.m. in Mesa, Arizona. “By bringing down the foreclosure rate, it will help to shore up housing prices for everyone.” President Obama has fallen into the trap of listening to advisers whose main constituency is the banking industry - this must be so else he would understand that regardless of what anyone attempts, home prices will fall to historical norms and must do so. Until home prices stabalize, there can be no recovery. Home prices by all historical norms are still too high. Shoring up prices of housing will not restore anything to anyone other than the banks who made bad loans on overvalued property and will have to write down billions more in bad loans. When starter homes become affordable the entire home building cycle can restart. Anything that delays the fall in home prices delays the eventual recovery. I agree with your three main points:1) no recovery until home prices stabalize2) Home prices are still high3) Government trying to delay falling home prices will delay the recovery. I am not sure what point you are making about banks and the government. I think these advisors are saying the USA and the world needs a functioning and profitable banking system at any and all cost. What form of assistance the government should do is up for debate. My guess is at this point it is all trial and error, throw everything at the system and pray something sticks. Fix whatever new problems it creates later. From a political standpoint I do not see how the government can bail out banks and car companies and insurance companies and not throw a lifeline to homeowners. Banks do not want to own these homes. They are not in the business of owning homes. At some point many of them will need to refinance these mortgages at a lower home value. Example they will need to simply write down a 200k face value mortgage to 140,000$ and reset the payments to the lower principal value. They can do this two ways, foreclose, and resell the house, expensive, or reset the mortagage with the current family in the house, cheaper. As for the side issue about buying a house and then losing your job, I think we all buy a house knowing this is a very real possibility. We all know it is a real possibility that one can lose a job and in a few short months have no cash for food or shelter. 90% of us live paycheck to paycheck. Quote Link to comment Share on other sites More sharing options...
Winstonm Posted February 19, 2009 Author Report Share Posted February 19, 2009 I am not sure what point you are making about banks and the government. Mike, The only point I am making about banks and the government is that the attempts to prevent home prices from falling futher and forestall foreclosures is not about protecting the innocent homeowner but about protecting the banking system from further write-downs. I favor simply nationalizing banks rather than propping up failing institutions, wiping out the shareholders, and starting over by selling off the pieces. What the U.S. appears to be trying is to stall the inevitable, and our rescue looks more and more like the Japanese model that produced zombi banks and "the lost decade". Quote Link to comment Share on other sites More sharing options...
mike777 Posted February 19, 2009 Report Share Posted February 19, 2009 I understand there is more and more talk about nationalizing banks. If the government is going to wipe out the shareholders who is going to risk buying the new bank if the government may wipe you out in the future? I knew you wanted to raise my taxes in other threads, now you want to take my stocks. :) At some point I won't have any income to pay taxes on. :) But then if the government is going to pay my mortgage, education, food and health care, I may not need to work so much anymore. I just hope all you young people keep working so we can raise your taxes to pay for me. If the government is going to run the banks, who sets the loan policy and is the government really going to be in the business of throwing people of their homes? I assume I can lobby my local congressman for help for a loan. If the workers now are employed by the government do we get federal health insurance, union benefits, etc? As Bernanke said if the government runs the banks they lose their franchise value and counterparties don't like to deal with you because of an uncertain future. Btw the way as an important side note Banks only provide about 20% of the credit/lending in the USA. That means doing something about the other 80% Quote Link to comment Share on other sites More sharing options...
Winstonm Posted February 19, 2009 Author Report Share Posted February 19, 2009 I understand there is more and more talk about nationalizing banks. If the government is going to wipe out the shareholders who is going to risk buying the new bank if the government may wipe you out in the future? I knew you wanted to raise my taxes in other threads, now you want to take my stocks. :) At some point I won't have any income to pay taxes on. :) But then if the government is going to pay my mortgage, education, food and health care, I may not need to work so much anymore. I just hope all you young people keep working so we can raise your taxes to pay for me. If the government is going to run the banks, who sets the loan policy and is the government really going to be in the business of throwing people of their homes? I assume I can lobby my local congressman for help for a loan. If the workers now are employed by the government do we get federal health insurance, union benefits, etc? As Bernanke said if the government runs the banks they lose their franchise value and counterparties don't like to deal with you because of an uncertain future. Nationalization is not a permanent solution - it simply beats continuing to throw money down a black hole. The shareholders of Enron and WorldCom did not receive any government compensation for their loss, yet oil companies and communications companies haven't had problems raising investement money. Why should the shareholders of Ciitgroup be treated differenty simply because they invested in a large bank? Btw, isn't nationalization is essence what occurs when the FDIC closes a bank and sells it to another bank? Quote Link to comment Share on other sites More sharing options...
mike777 Posted February 19, 2009 Report Share Posted February 19, 2009 I understand there is more and more talk about nationalizing banks. If the government is going to wipe out the shareholders who is going to risk buying the new bank if the government may wipe you out in the future? I knew you wanted to raise my taxes in other threads, now you want to take my stocks. :) At some point I won't have any income to pay taxes on. :) But then if the government is going to pay my mortgage, education, food and health care, I may not need to work so much anymore. I just hope all you young people keep working so we can raise your taxes to pay for me. If the government is going to run the banks, who sets the loan policy and is the government really going to be in the business of throwing people of their homes? I assume I can lobby my local congressman for help for a loan. If the workers now are employed by the government do we get federal health insurance, union benefits, etc? As Bernanke said if the government runs the banks they lose their franchise value and counterparties don't like to deal with you because of an uncertain future. Nationalization is not a permanent solution - it simply beats continuing to throw money down a black hole. The shareholders of Enron and WorldCom did not receive any government compensation for their loss, yet oil companies and communications companies haven't had problems raising investement money. Why should the shareholders of Ciitgroup be treated differenty simply because they invested in a large bank? But you miss your own point, you want to treat them differently. You want to treat Citicorp differently from WorldCom. If you do not want to throw taxpayer money down a blackhole, dont, no one disagrees with you and your money. I have no disagreement with FDIC taking over a bank per their set of rules. Quote Link to comment Share on other sites More sharing options...
Winstonm Posted February 19, 2009 Author Report Share Posted February 19, 2009 I understand there is more and more talk about nationalizing banks. If the government is going to wipe out the shareholders who is going to risk buying the new bank if the government may wipe you out in the future? I knew you wanted to raise my taxes in other threads, now you want to take my stocks. :) At some point I won't have any income to pay taxes on. :) But then if the government is going to pay my mortgage, education, food and health care, I may not need to work so much anymore. I just hope all you young people keep working so we can raise your taxes to pay for me. If the government is going to run the banks, who sets the loan policy and is the government really going to be in the business of throwing people of their homes? I assume I can lobby my local congressman for help for a loan. If the workers now are employed by the government do we get federal health insurance, union benefits, etc? As Bernanke said if the government runs the banks they lose their franchise value and counterparties don't like to deal with you because of an uncertain future. Nationalization is not a permanent solution - it simply beats continuing to throw money down a black hole. The shareholders of Enron and WorldCom did not receive any government compensation for their loss, yet oil companies and communications companies haven't had problems raising investement money. Why should the shareholders of Ciitgroup be treated differenty simply because they invested in a large bank? But you miss your own point, you want to treat them differently. Mike, Yes, I see how you could think that. All I am saying is of the offered solutions, nationalization is the one I favor. Unfortunately, no one is offering the one I support - let them fail or succeed of their own accord. :) Quote Link to comment Share on other sites More sharing options...
mike777 Posted February 19, 2009 Report Share Posted February 19, 2009 Yes it seems going through a formal bankruptcy would be a better option. AGain keep in mind banks only account for 20% of the lending so first it may help to state what precise problem is trying to be solved. :) In any event I think I said I agree with your three main points in OP. Quote Link to comment Share on other sites More sharing options...
hrothgar Posted February 19, 2009 Report Share Posted February 19, 2009 If the government is going to wipe out the shareholders who is going to risk buying the new bank if the government may wipe you out in the future? Lets be clear about a couple things: 1. The government didn't wipe out the shareholders. The managers of the banks wiped out the shareholders. 2. As I understand matters, no one is forcing the mangers of the banks to sell out to the government. This isn't a case where the government is using the military to seize control of the Suez Canal, some oil fields, what have you. Rather, the government is offering the banks an alternative to declaring chapter 11. If the management of the banks declare to go the chapter 11 route, nothing is stopping them... Please note: I'm not sure whether Chapter 11 even applies in cases like this one. (There are lots of forms of bankrupcy and I don't have the time of the interest to keep them all separate). Then again, I don't work in accounting or financial planning or anything like that. As I recall, you actually charge people money for advice on these types of matters, which is part of the reason that I find so many of your posting so very, very scary... Quote Link to comment Share on other sites More sharing options...
Al_U_Card Posted February 19, 2009 Report Share Posted February 19, 2009 Recall the "roller coaster" of inflation adjusted house prices over the last century or so http://www.speculativebubble.com/videos/re...ler-coaster.php you can see where the "actual" price should be these days. They need just adjust for speculation and voila! Quote Link to comment Share on other sites More sharing options...
PassedOut Posted February 19, 2009 Report Share Posted February 19, 2009 Yes, I see how you could think that. All I am saying is of the offered solutions, nationalization is the one I favor. Unfortunately, no one is offering the one I support - let them fail or succeed of their own accord. It seems to me that proper anti-trust laws would make sure that no company could become "too big to fail," thereby averting the need for taxpayer bailouts. Quote Link to comment Share on other sites More sharing options...
luke warm Posted February 19, 2009 Report Share Posted February 19, 2009 The master of changing the subject from the question/point that was stated to begin with strikes again, surely to vanish into thin air as soon as he's called out on it, as usual...As usual, I try to clarify for you what my words meant after you have misrepresented my statements and then you claim inconsistency? That was not in reply to you. If I find any fault in you at all, changing the subject would be the very last thing, I promise. :) I am SO confused. :D I quoted lukewarm, made a statement in reply, and you took offense at believing I meant it toward you. If you are still confused by all this then I suggest starting on the ginko pronto! i'm not confused or insulted :) now i'll disappear again Quote Link to comment Share on other sites More sharing options...
mike777 Posted February 19, 2009 Report Share Posted February 19, 2009 As I noted if the managers are wiping out shareholder value fair enough. It just concerns me that forced nationalization will only make things worse. Bankruptcy in some form or voluntary nationalization or the FDIC stepping in is a different matter from what I heard Winston and others in the media discussing. I quoted Bernanke and his concerns. Back to the OP, another concern with this bailout is that some suggest as many as 55% of those who receive help will end up failing to make the new level of payments in 12 months. Perhaps Winston is concerned this will just delay the overall recovery and stabalization in home prices. Quote Link to comment Share on other sites More sharing options...
mike777 Posted February 19, 2009 Report Share Posted February 19, 2009 Yes, I see how you could think that. All I am saying is of the offered solutions, nationalization is the one I favor. Unfortunately, no one is offering the one I support - let them fail or succeed of their own accord. It seems to me that proper anti-trust laws would make sure that no company could become "too big to fail," thereby averting the need for taxpayer bailouts. We may indeed new more laws or regulations and that is worth discussing. I think this may be the third time in 20 years Citi has been bailed out. IMO it seems we do not have enough jails, judges, enforcement of the ones already on the books. My concern is passing even more laws will simply mean more people not following the rules. Keep in mind we have people who do not pay taxes or find fraud now. It would be interesting to roll back the clock and let Bear Stearns and other investment banks fail without a taxpayer backing of their debt such as what happened with Lehman. Keep in mind that commercial banks and FNMA and Freddie Mac basically exist with government backing. They can borrow money cheaper than anyone else because directly or indirectly the taxpayer will step in and back the checking and savings accounts or mortgages in the case of FNMA. This allows 90% of us to buy a house with a lower cost mortgage. We can make these large companies such as FNMA go away but I do not see the President or Congress advocating such a thing. Quote Link to comment Share on other sites More sharing options...
barmar Posted February 20, 2009 Report Share Posted February 20, 2009 The difference between Citigroup and Enron/WorldCom is that the failures of the latter companies were not indicative of industry-wide problems, they were due to malfeasance unique to their management. While there was poor judgement on the parts of the banks, it was so widespread that you can't really blame any particular company. When everyone was buying and selling CDOs, it would have been imprudent not to join that process, even though it didn't really stand up to detailed scrutiny. It's kind of like expecting companies that do business in China not to participate in the graft that has been practically institutionalized over there, because it's a violation of western business ethics (hmm, is that an oxymoron?). If everyone else is doing it, you have to join in to be competitive. Quote Link to comment Share on other sites More sharing options...
Gerben42 Posted February 20, 2009 Report Share Posted February 20, 2009 It seems to me that proper anti-trust laws would make sure that no company could become "too big to fail," thereby averting the need for taxpayer bailouts. The logic is that a big company failing costs 100,000s of jobs (those in the company and those who have them as customers), and paying social benefits for all those people would be more expensive than saving the company. This is of course not correct, because either their is a market for the products, in which case someone will take over the plants and continue to produce the product, or there is no market for the product and saving the company will work only for a short time. Quote Link to comment Share on other sites More sharing options...
hotShot Posted February 20, 2009 Report Share Posted February 20, 2009 The logic is that a big company failing costs 100,000s of jobs (those in the company and those who have them as customers), and paying social benefits for all those people would be more expensive than saving the company. This is of course not correct, because either their is a market for the products, in which case someone will take over the plants and continue to produce the product, or there is no market for the product and saving the company will work only for a short time. Although you are not wrong, you fail to see the true complexity here.If a big company fails, the market is gone (at least for a while) too. At first there is the direct loss of jobs in the company that failed.Secondly there is a loss of jobs in the businesses that provided raw materials and services to the company.The third domino that falls are the businesses (shops and craftsmen and other services) who's regular costumers lost their jobs. And this is not even the worst part yet. The people who still have jobs, but have to see that colleges or friends lose their jobs and that businesses go bankrupt, start to prepare for the worst and cut their budgets too. Now that's a big problem! If 50% of the consumers cut their budgets by 4%, all businesses will average a sales loss of 2%. Of cause they will (have to) reduce the costs of human resources and now the big job loss numbers emerge when 2% of all jobs are lost. If this is getting into a self-supporting trend, there is no stop to it. It seems logical to stop this as close to the beginning as possible. Saving the company seems a good start and if done well, future profits from the company could be used to repay the costs. Companies used to get along by borrowing money from banks, but the banks are "broke" and don't lend money any longer. Quote Link to comment Share on other sites More sharing options...
Gerben42 Posted February 20, 2009 Report Share Posted February 20, 2009 If a big company fails, the market is gone (at least for a while) too. I do not agree with this. Take for example GM, part of which is Opel. If GM goes broke, Opel is part of the bankruptcy, but... there is a market for Opel cars. So suddenly we have a complete company for sale to the highest bidder, with factories, materials, human resources, connections, everything. Someone will buy this and the money will be used to pay off the GM debt. The production of Opel cars will continue and life goes on for the workers. Big companies that go bankrupt always live on in some way, because there are so many resources. The real job losses are caused by: * Small companies going bankrupt so that no one notices the difference.* Shrinking companies.* Companies relocating their production. The people who still have jobs, but have to see that colleges or friends lose their jobs and that businesses go bankrupt, start to prepare for the worst and cut their budgets too. Now that's a big problem! If 50% of the consumers cut their budgets by 4%, all businesses will average a sales loss of 2%. Of cause they will (have to) reduce the costs of human resources and now the big job loss numbers emerge when 2% of all jobs are lost.If this is getting into a self-supporting trend, there is no stop to it. This part is largely self-inflicted, and partially comes true because the bloody media keep telling us that we are in the worst crisis since 1930. The economy was doing just fine here, until people started believing this. Quote Link to comment Share on other sites More sharing options...
kenberg Posted February 20, 2009 Report Share Posted February 20, 2009 Jumping back for a moment to housing: I have a hypothetical family to help me in thinking about this. Husband and wife are about 30 years old. They have two kids who will soon be in school, reducing their day care expenses. They live in an apartment but figure it's time to get a house. Combined, they make around 130K a year with stable jobs. I think, but I am not sure, that with the fall in home prices they could find a three bedroom house, perhaps with a basement and a garage, with decent but not superb schools, for somewhere around 350 to 400. This would be in suburban Washington, neither close in nor far out, and neither in pricey nor hopeless areas. OK, what happens and how does it affect the housing market? A. They can find a house but credit is so tight they cannot swing a loan? B. Housing prices are still in the stratosphere and nothing like what I suggest is available? C. There just aren't that many couples out there in the situation I describe? D. It would all work but they decide to sit tight waiting for a further drop in home prices? E. It's fine, this is actually happening? Winston says the Obama plan is not addressing the real issue. Thinking about this a little, I realized I really cannot select among A through E above. Can anyone help me understand? Quote Link to comment Share on other sites More sharing options...
helene_t Posted February 20, 2009 Report Share Posted February 20, 2009 A. They can find a house but credit is so tight they cannot swing a loan? Prices will fall until people can buy them for whatever tiny amount the mortgage banks are willing to lend.B. Housing prices are still in the stratosphere and nothing like what I suggest is available?Well if there are enough people able to pay stratospheric prices, the prices will remain high and our 300K couple will remain in the appartment. Otherwise, prices will fall. C. There just aren't that many couples out there in the situation I describe?Prices will fall until poorer couples can afford the houses. D. It would all work but they decide to sit tight waiting for a further drop in home prices? Prices will fall until people don't expect them to fall anymore, or until people don't care because they are cheap enough. E. It's fine, this is actually happening? The prices have hid the bottom. Quote Link to comment Share on other sites More sharing options...
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