Housing Bubble, The Sequel

Goldman Sachs Earnings
Tuesday morning confirmed what everyone knew Monday, Goldman Sachs (GS) had a monster quarter and beat expectations by a mile. I will not recount all the details, but a few notes on the GS news:
-I had never really looked at a GS earnings report. These guys do not disclose anything. There is no way to really know how and where the money is being made.
-To make the killing GS did, they had to be positioned heavy on the long side of the ledger to capture the market rally. One could ask how they were so sure the market would take off, but that question answers itself, yes? What would be VERY interesting is if say, 100 points gets knocked off the S&P 500 by next quarter. If GS is still making a killing I would call bullsh#t. Nobody is that right all the time. Nobody.
-GS commercial real estate holdings are taking a beating. And that is while they are still gamed as mark to fantasy.

Overall, about what you would expect. Still sits very poorly that the bank is making huge cake while all the risk is shouldered by the US government, but what do you want.

Housing Bubble - The Sequel
The big story of Tuesday to me was the floating of an idea that would permanently destroy economic freedom as we know it. While the assault has been harsh over the past year, this new plan would accomplish what the bankers have wanted since time began - total control over private property.

So what is the plan? Here is the Reuters story from Tuesday morning:

U.S. mulling mortgage aid for unemployed
NEW YORK/WASHINGTON (Reuters) - President Barack Obama is mulling new ways to delay foreclosure for jobless homeowners who are unable to keep up with monthly payments, an administration official said on Monday.

The official told Reuters it was reasonable for policymakers to consider options for loan forbearance -- allowing borrowers to delay, defer or skip payments -- that are more effective than those currently available in the private sector.

The number of failing home loans has been climbing for three years as risky borrowers have defaulted on their easy-to-get loans, property values have sunk and the unemployment rate has climbed.

But the official said the idea, which is still evolving, was difficult from a policy perspective and carries potential hazards. It could help more people struggling with economic difficulty, but it also could create perverse incentives that distort the housing market, said the official, who did not want to speak on the record about internal administration debates.

So right from the start we can argue about the morality of this plan. Help for jobless homeowners? Why not help for all homeowners? How about jobless renters? Why the double standard? Writing checks to pay the banks that hold the mortgages does nothing to help the jobless owner, but it does help the banks. The same theme continues unabated.

While the moral hazard of the proposal is heavy indeed, it was in a later article that I saw the true purpose of this scheme. I have to say, I was appalled and amazed at the sheer boldness and morbidity involved here. From Clusterstock:

Obama Considers New Mortgage Solution: Own-To-Rent
Is The Atlantic now the most influential magazine in America?

The most recent issue is pretentiously self-styled as “The Ideas Issue: How To Fix The World.” It contains a brief piece by Felix Salmon making the clever argument that the mortgage defaulters should be turned into renters. The idea does have an attractive symmetry: if one of our problems is that too many people who should be renters wound up taking out mortgages they couldn’t afford to become ersatz homeowners, why not just make them renters?

It's a brilliant reversal of the old idea of rent-to-own homes. But just because it's brilliant doesn't mean it would work.

Now Reuters reports that U.S. government officials are weighing a plan to do just that. The plan would let borrowers who have fallen behind on their mortgage payments avoid eviction by renting their homes. They’d give up all their equity—if they have any—and future claims on the equity, in exchange for getting to keep their homes.
There are lots of problems with this idea, including havoc it would create in securitized mortgages, that it would make the housing market even more illiquid than it is, and that it would create a huge incentive on the part of even more borrowers to default. Think about it: now you don’t even have to walk away.

Reuters also reports that officials are creating a “housing stipend” that would attach to unemployment, hoping to reduce the role in job losses in driving mortgage defaults. This would be either hugely costly or ineffective. (And it would really anger unemployed renters.)

Did you catch the real target of this idea?

Once more:

The plan would let borrowers who have fallen behind on their mortgage payments avoid eviction by renting their homes. They’d give up all their equity—if they have any—and future claims on the equity, in exchange for getting to keep their homes

So what is the single biggest issue banks are facing right now? Falling home prices are causing many "owners" to give up as the up side of ownership has vanished. This has created enormous pressure on mortgage products across the spectrum. Unable to turn the economy around through monetary policy and stimulus, the government is at a loss for options.

Instead of taking a step back and seeing the big picture, this new proposal gives the banks total control over the real estate market. If you think Level III accounting is fantasy, wait for "Real Estate Equity Upside Targeting" by the banks.

Let me explain.

Home owner Joe bought his home for $250,000 in 2005. He has now become "troubled" (by job loss or whatever) and cannot afford the old $1500 a month mortgage (at 6% rate). Added to this, the home is now appraised at $150,000 so Joe is pretty much out of luck. And time.

Enter the "Equity Surrender Plan". Bank X offers Joe a new rental option at about $720 a month (equates to a $120,000 note at 6%) as long as Joe surrenders his ownership and any claim on future upside in the home price. Joe can afford the new rent, and he is less likely to burn the place down after being foreclosed on. Everyone is happy, right?

Well certainly the banks will be.

Think of the magnitude of foreclosures right now. Add in all the shadow inventory that the banks have been sitting on (seemingly to hide loss marks, but now maybe in hopes of this plan). This equates to a not tiny percentage of the housing market today (I have no idea what that number is by the way).

Now the banks, of which there are far fewer in number, have control of any upside for a huge number of properties. The banks are also awash in all the cash created by the Fed that right now is not entering the money supply because banks do not want to lend.

Ask yourself what happens to assets held and controlled by banks should the banks need those assets to go up in value?

They go up in value.

This would be a real world modelling of Level III accounting.

Return to our example. Now the bank has an income of $720 on the home they own the upside on. They can mark the value of the holding as they see fit. Later, buyer John wants to move in to Joe's home and Joe would like to move on. Bank X sends out their appraiser for the home and by magic, the home is now valued at $225,000. Amazing! Bank X is only more than happy to loan John the $225,000 irregardless of credit quality because they know all the other banks are doing the same thing. The market in real estate would be fixed by the banks.

There are many angles to this that I want to flesh out, but I am a bit pressed for time. Use the comments section to offer your own thoughts.

What this appears to be to me is a backdoor way to re inflate the housing market. What adds to the hilarity is the CPI would be depressed (for all you deflation lovers) as the new rents would be used as the housing component. The process of inflating home prices could go on with easy money for a long time this way.

A cunning plan indeed and I would expect nothing less than this kind of craven theft from our banking system and promoted by the government under the silly guise of "helping troubled homeowners".

Comments

[conceptwizard:]

Goldman makes money every time all the time because they control the direction of the market. This is becoming more common knowledge, just recently an employee of theirs that left stole software that GS accused him through the FBI of quote "being able to control the markets" through high speed trading. They of course did not want this technology to fall into the wrong hands, of course feel that theirs are the right hands. Nothing was said otherwise, and GS are not under investigation.
Their oil trading floor is another proof in the pudding with their ability just by sheer volume to sway the market price on oil. In my mind they cannot lose, and this is not BS it is criminal. Because in the markets someone has to win and someone has to lose. So if they win all the time then of course we lose.

On the housing issue, it is common place now to expect the Obama will do what is in the ultimate best interests of the banks. The banks in this scenario keep the upside of the investment, and now have switched the liability issues into revenues streams. That is why the Treasury department has called the top 25 mortgage firms to the meeting table. Obama's plan will make us beholden to the Financial Warlords in everyway, we will be debt ridden, renters with no jobs and low incomes, with weekly hours down to 33 per week and average wages dropping. America is about to change into a serfdom.

Jul 15 10:38 AM

[Arnold Layne:]

So it would be in my self- interest to buy a house now, since Obamanomics will make sure it goes up in value over the next few years; or at least the downside is capped by the banks, etc.???

Jul 15 11:08 AM

[ecliptix543:]

"Obama's plan will make us beholden to the Financial Warlords in everyway, we will be debt ridden, renters with no jobs and low incomes, with weekly hours down to 33 per week and average wages dropping. America is about to change into a serfdom."

This very well seems to be the general plan, does it not? Redefine the term 'citizen' to actually mean 'indentured servant', and this country starts to make a whole lot more sense. Contacting our representatives is useless and our States' governments are so financially castrated so as not to oppose the Feds for fear of losing out on the next bailout... It's either we stand up and fight this or we just roll over and let them destroy this nation. Pick one.

Jul 15 11:15 AM

[Economic Di...:]

Arnold,
if this plan is put in motion as presented I would feel pretty solid about home price escalation. Problem longer term in who will buy it from you later? This will be good for a one time pop and kicking the can down the road 2-3 years, but the underlying fundamentals will emerge, eventually.

Jul 15 11:39 AM

[Robespierre:]

Ah the irony it took an African American president to turn so many Americans into 'indentured servant'. If this doesn't have all the makings of a "let them eat cake" from the public I don't know what it does. To be honest I voted for him because of the "change" thing. All the change I see, however, is the few coins I will be left with when his presidency ends (hopefully single term)


On Jul 15 11:15 AM ecliptix543 wrote:

> "Obama's plan will make us beholden to the Financial Warlords in
> everyway, we will be debt ridden, renters with no jobs and low incomes,
> with weekly hours down to 33 per week and average wages dropping.
> America is about to change into a serfdom."
>
> This very well seems to be the general plan, does it not? Redefine
> the term 'citizen' to actually mean 'indentured servant', and this
> country starts to make a whole lot more sense. Contacting our representatives
> is useless and our States' governments are so financially castrated
> so as not to oppose the Feds for fear of losing out on the next bailout...
> It's either we stand up and fight this or we just roll over and let
> them destroy this nation. Pick one.

Jul 15 11:52 AM

[Accuriz:]

Excellent point, but take it one more step.

If someone can pay rent, that rent can be considered part of a mortgage payment. The government is providing $8,000 for first time buyers, so why can’t the government pay part of the payment and have the borrower repay the government in the future. Here is an example of how it could work.

Mr. and Mrs. ZZZZZ have a mortgage payment of $1,170 ($200,000 loan with 30 year payout at 5.75% interest). The ZZZZ’s lose their job and can only pay $470, so the government pays the difference of $700 so the ZZZZ’s remain homeowners and work through their problem. It takes the ZZZZ’s 10 months to get back on their feet, the government paid out $7,000 and now the ZZZZ’s owe the government. But the government says, okay you can start paying us back in seven years and the payment will be over 10 years at an interest rate of 3%.

What the government has done is provide assistance to the property owner (just like the bailout plans for the Financial Industry and Automotive Industry) and requires them to pay back the obligation starting in seven years. This is not a freebie, but short term assistance. Franklin Roosevelt called it Land Lease.

This program is not perfect, it can assist a lot of people who want to own homes and most importantly it is channeled directly to the property owner, not a large corporation that has motives other than keeping the property owner solvent. A significant benefit of this program is that payments to financial institutions will resume and cash flow will get back to normal levels, thus credit availability should improve.

There need to be conditions, such as confirming gross income via income tax statements, confirming employment and confirming current payroll. The only group of individuals who would be excluded are those who own more than one property (there should be no break to the investor who treated real estate as a business) and cases where mortgage fraud exists in the form of straw buyers and invalid sales (properties that sold more than three times within five years and the value change was greater than 150%)

The total assistance would be capped at $50,000 and could run for 24 to 36 months. So in a given year up to $25,000 could be provided. The government would be releasing the funds over 12 months, this the federal outlay would be limited. The total cost of 10 million loans receive assistance would be $250 Billion per year or $500 billion in total. This is much cheaper than the TARP bailout and part of this can be funded with the current $70 billion in TARP repayments.

The greatest difficulty in implementing this program is processing and accounting. Loan Servicing companies would need to add staff (if one servicer can process 50 applications a week, 4,000 servicers would need to be hired, plus additional support staff) Wow, as many as 10,000 new jobs would be created. Add to this job creation the fact that several million homes do not go into foreclosure and more jobs are not lost to desperate situations.

Yes it is possible and yes it can work.

The reason it can work is because real estate goes through cycles. If people are forced to sell at liquidation prices everyone loses. Give property owners a chance to get back on their feet, get back to work and the whole economy starts to turn around.

As stated early, this is not perfect and many will complain about the injustice. But think about the injustice of the corporate bailouts, the injustice that first time home buyers get a break, the injustice that shareholders come before the individuals who created value in the companies by buying products. One can go on and on, or we can try. We only fail if we do not try.

Jul 15 01:08 PM

[Economic Di...:]

Accuriz,
While I ceratinly feel that your outline could work, all of the programs, bailouts, and assistance fail to ever ask the key question: Should they work?
I do not think spreading out debt over 10, 30 or however many years is a productive use of capital, governemnt or personal. What needs to happne, what must happen, is the flushing of bad debts once and for all, massive bank losses, and a return to reasonable living and lending. Handing out ever more exotic loans on ever expanding time horizons is a bad choice, whether or not it will work. Just my 2 cents!

Jul 15 01:38 PM

[Troyhector:]

Foreclosures have been a major issue of the economic recession that has hit all countries across the world. The Bush administration overlooked the foreclosure issues of the average homeowners which the Obama administration is struggling to tackle with various initiatives.

The housing delinquencies and foreclosures have seen an alarming rise in the first quarter of this financial year.

Among the 34 million loans that are tracked by The Office of the Comptroller, the foreclosure rates rose by 22% and surprisingly, this is a 73% increase as compared to the same period last year. This puts forth a question whether the banks and policymakers are intelligently tackling the problem.

Check out www.housingnewslive.co...

Jul 15 01:53 PM

[Economic Di...:]

Troy,
Foreclosure is a sympton of the underlying issue; too much debt that cannot be serviced. You cannot "catch" a foreclosure from a sneeze like a virus. Attempting to stem forclosures just treats the symptom, not the underlying cause.

Jul 15 02:29 PM

[Gdub53:]

there is no such word as "irregardless"...

Jul 15 02:31 PM

[John Galt:]

"President Barack Obama is mulling new ways to delay foreclosure for jobless homeowners who are unable to keep up with monthly payments, an administration official said on Monday."

The longer and longer you try to deny economic reality, the longer and worse the pain will be.

Econ 101 says that there is always round 2. People respond to incentives and there are unintended consequences. If you try and rig the market to give benefits to people who don't pay their mortgage... don't be shocked when less people start paying their mortage. When you change the rules in the middle of the game... don't be shocked then the prudent people are angry at the politically favored imprudent.

Jul 15 02:47 PM

[Economic Di...:]

Gdub,
I wuz not an english major in college, so I do make mistakes!

Jul 15 03:16 PM

[Tony Petroski:]

I don't see this as a plus for the banks. They can offer this option to their "troubled" borrowers right now. All this would do would be to cement into place a system which would allow deadbeat owners to become deadbeat tenants, stay in their buildings a few months more without having to pay anything, and then leaving the place trashed anyway.

You missed a class of the "deserving poor": What about the unemployed rental-property owner? I was counting on the troubled borrowers bidding up my rental property and now you are helping them to stay in their homes. Don't I deserve a handout? I guess I too can get a subsidized apartment in my own building.

Jul 15 05:01 PM

[Economic Di...:]

Tony,
excellent point about being a rental property owner waiting to score on the flood of renters.

Jul 15 05:13 PM

[cilka:]

buy Boardwalk (Toronto listing).. They own most of the rental property
(particularly medium price range) in big Canadian cities. Renters deserve the same breaks & handouts as the big banks.

Jul 15 06:06 PM

[MainStreet:]

Right you are John Galt! We should always consider the unintended consequences when someone's ill-conceived do-good intention leaves lots of chips on the table. Too often the blowback is worse than the original fire.

Jul 15 07:40 PM

[markg:]

Two points: 1. I hope all the people that voted for Obama because Bush was in the pocket of the banks are happy now. 2. Did anyone really expect the major financial institutes to do nothing while their assets are declining daily?

Jul 15 09:54 PM

[CNA-Capital:]

Interesting article - thanks for this point of view!

I am especially impressed with your comment regarding the deflationary effect on CPI. The government would continue to provide easy money to counter-act the "deflation!" Of course, the government loves to report that inflation is much lower than actual so that they can keep interest rates on Treasuries low. This way they can pay back everyone's debts later on using dollars that are worth less (because inflation is present) and still keep borrowing costs low because of the artificially low CPI!

Jul 15 09:57 PM

[Mark54:]

Good luck getting this one through congress. Given that most legislators have law backgrounds, I would still hope that they would see see the hazards in this plan. Aren't we basically talking about making banks REITs?

Jul 15 10:46 PM

[derryl:]

Mortgages and other securitized debt are the underpinning of the entire house of cards global capital system. Wall St has monetized the planet. Now their house of cards is falling down because ultimately you can't build a solid financial system on debt. The debt is only worth as much as the assets underpinning it, and the structure of the global capital-debt system requires that asset values only ever go up.

Goldman Sachs honchos go to sleep at night and dream of infinite debt, all owed to them. I think Economic Disconnect has nailed it: the bankers will never rest until they own and control all private property. Mortgage the planet! Hooray!

Jul 15 10:59 PM

[doubleshortetf:]

Hale Hussein the SOCIALIST!

Hussein (Obama's real middle name) is openly socializing banks, health care and our houses. What's next to be socialized and who will pay for it?

THIS IS REAL SOCIALISM!

BTW Book of Revelation mentioned anti-Christ the great DECEIVER...

Jul 15 11:01 PM

[Mr. Ed, Jr.:]

So, we will have a "Rental Czar", and the Czar will decide what the fair market rent is for the home.

Eventually (If not sooner) the Czar will be deciding what the rents in the neighborhood/city/state should be. Of course, they can't do that, because this is America and we still have freedom and rights, don't we ?. So, they will not just impose rent control, but there will be some scheme or some mechanism by which this will happen. Because with government paying mortgages, and government tenants, we can't just allow ruthless speculators to drive up rents in the neighborhood. Or something similar.

And, should you buy one of these homes with a ready-made tenant, good luck getting them evicted, even for non-payment of rent. The bureacrats will set up rules that will allow years of appeals, and then the tenant will still get to stay.

Just like they are not going to increase utility fees-- that would not be the role of the Federal government. But Cap & Trade will penalize the coal burners (electric companies), and your bill is going up. Bigtime.

And you will have a thermostat in your home that the government can over-ride. Your home temperature will be decided by government bureaucrats. This is already started-- in Missouri, one utility has already sent out 35,000 of these remote-controllled thermostats. Feeling a little chilly ? Too bad.

And you will be "allowed" to keep your current health insurance if you prefer. (Thanks much for "allowing" us to keep our health ins.) But your current health insurance will not be able to compete with a government plan that makes the rules for all and needs no profit (And will have no profit). Your employer is going to switch to the government plan for you-- bet on that.

In a few years, you will be covered by the government plan, one way or another. The children in this country will grow up believing that it is only the government that can provide health care. It will be unquestioned, eventually.

Our government now controls banks and car companies and will soon control health care and energy/utilities. Then, rents and whatever else they can think of.

Your costs will be going up, but your income-- should you be lucky enough to have income that is not provided via government check-- will not be increasing.

Eventually, you will lapse into government- induced semi-consciousness. Then zombie-like coma.

But your government health care doesn't cover zombie-like coma. It's considered unnecessary experimental treatment.

Jul 16 02:37 AM

[Moon Kil Woong:]

As long as a bank doesn't have to ever settle a loan or sell on a reposessed property and government regulations let them attach any silly number in their head as to its value rather than marking it to market there is no need for banks to either sell or recognize any losses forever. Problem solved? The only problem is that you are living in some cracked and concocted fantasy land much like we were before the last time it all came tumbling down.

Last time it was marely a method for banks to never have to recognize their losses on bad home loans because some magical 3rd party insured them with derivatives for a unusually low cost because they didn't have any assets to back them and weren't required to have any nor were any parties required to reflect the derivatives or counter party risk on their financials or reserve for them.

Really, the author is right. Finding ways the banks don't have to clear out their bad assets is a recipe for economic chaos and eventual failure. This is especially true when that method has something to do with government and taxpayer involvement.

Jul 16 02:45 AM

[Yitzo:]

Can't the government just prop up investor immigration? Let's say everyone who buys a home outright and sets up a primary residence in the US gets a green card. You'll be surprised how many people will do that in a short amount of time. Inflating the bubble back again is going to be hard if housing demand is streched thin.

Jul 16 05:09 AM

[Economic Di...:]

CNA-Capital,
I am with you on the inflation reporting observation. What a game the CPI is.
24 comments is a record for one of my articles and I extend thanks to all that participated in the discussion!

Jul 16 07:27 AM

[Gem Hudson:]

Lenin's New Economic Policy was to loot the looters but what loot that wasn't looted for his worker state needed freedom in their enterprise for his all workers decree equality pay. Because going from your rags to your riches is building up wealth, you are working out the buisness for him.

So what is new in this world?

Jul 16 09:22 AM

[sunnsea:]

And your alternative to Obama is...??? Palin?? OK Phil Gramm is your Treasury Secretary, then what?


On Jul 15 11:52 AM Robespierre wrote:

> Ah the irony it took an African American president to turn so many
> Americans into 'indentured servant'. If this doesn't have all the
> makings of a "let them eat cake" from the public I don't know what
> it does. To be honest I voted for him because of the "change" thing.
> All the change I see, however, is the few coins I will be left with
> when his presidency ends (hopefully single term)

Jul 16 09:22 AM

[Greame H:]

inflation ! This is just another piece in the coming debt "elimination" through inflation plan that they know is the only "solution" for the US


On Jul 15 11:39 AM Economic Disconnect wrote:

> Arnold,
> if this plan is put in motion as presented I would feel pretty solid
> about home price escalation. Problem longer term in who will buy
> it from you later? This will be good for a one time pop and kicking
> the can down the road 2-3 years, but the underlying fundamentals
> will emerge, eventually.

Jul 16 09:32 AM

[Fred W:]

"irregardless" is akin to the word "ain't"
I would avoid such language for credibility reasons--as your article is well thought out and enlightening

Jul 16 09:45 AM

[Fred W:]

That is not an argument. That is partisan BS that got us here in the first place---Bush did it! no, no, it was that devil Cheney! Sounds just like a bunch of school kids talking about teachers they don't like.
Palin--she is about a qualified as Nancy Pelosi--BOTH should be barred from holding office due to incompetence.


On Jul 16 09:22 AM Sunnsea wrote:

> And your alternative to Obama is...??? Palin?? OK Phil Gramm is your
> Treasury Secretary, then what?

Jul 16 09:48 AM

[Fred W:]

You are almost describing a Ponzi scheme...with the U.S. Treasury as the FINAL entrant--btw: the last guy in a Ponzi losses it all.

Ultimately the pitchforks will come out and GS will go down--just might take a couple years of depression before the fuse is lit. Once lit, there will be no stopping the populace--and of course they will over shoot.


On Jul 15 10:59 PM derryl wrote:

> Mortgages and other securitized debt are the underpinning of the
> entire house of cards global capital system. Wall St has monetized
> the planet. Now their house of cards is falling down because ultimately
> you can't build a solid financial system on debt. The debt is only
> worth as much as the assets underpinning it, and the structure of
> the global capital-debt system requires that asset values only ever
> go up.
>
> Goldman Sachs honchos go to sleep at night and dream of infinite
> debt, all owed to them. I think Economic Disconnect has nailed it:
> the bankers will never rest until they own and control all private
> property. Mortgage the planet! Hooray!

Jul 16 09:53 AM

[ChrisJCook:]

There's another way of doing this

seekingalpha.com/artic...

Properties are transferred to and held in perpetuity by a "Custodian" (like the entire institutional securities market is already) and an affordable rental is set which is then index-linked.

This creates a "rental pool" which is simply divided into proportional Units eg billionths.

Occupiers who pay more than their rent automatically buy Units and hence Equity (ie it'sa variation of rent to buy") - and if they maintain the place themselves they get a "sweat equity" allowance in Units for doing so.

The outcome is essentially a REIT, but one where the Units are reeemable against property occupation. Investment comes form long term investors looking for property-based; index-linked; secure (because affordability=certainty) revenue. eg pension funds; soverign wealth funds; Islamic investment (this is genuinely Islamically sound, unlike most of it which is just putting lipstick on a pig).

As Taleb said in the FT recently, we need to move from debt to equity: well this is Equity -just not as we know it, Jim.

What's not to like?

Jul 16 10:02 AM

[Rhett:]

The Goldman Sachs/Federal Government alliance is as CORRUPT as any criminal scheme I have ever encountered in my long lifetime. Instead of the Goldman fraudsters being under federal criminal investigation, they are running the federal government and criminal investigations of others who are not nearly as culpable as the Goldman Sachs crooks. Their announcement of huge quarterly earnings after receiving billion$ from the federal government is the height of their cynicism - and astounding corruption!

Jul 16 10:21 AM

[sunnsea:]

It's all in this week's Rolling Stone. Read it. Matt Taibbi's article on GS: "The Great American Bubble Machine." It's all in there if you can bear to read it....according to Taibbi, GS has engineered every bubble since the 20s and cleaned up accordingly and of course has essentially taken over our government.


On Jul 15 10:38 AM conceptwizard wrote:

> Goldman makes money every time all the time because they control
> the direction of the market. This is becoming more common knowledge,
> just recently an employee of theirs that left stole software that
> GS accused him through the FBI of quote "being able to control the
> markets" through high speed trading. They of course did not want
> this technology to fall into the wrong hands, of course feel that
> theirs are the right hands. Nothing was said otherwise, and GS are
> not under investigation.
> Their oil trading floor is another proof in the pudding with their
> ability just by sheer volume to sway the market price on oil. In
> my mind they cannot lose, and this is not BS it is criminal. Because
> in the markets someone has to win and someone has to lose. So if
> they win all the time then of course we lose.
>
> On the housing issue, it is common place now to expect the Obama
> will do what is in the ultimate best interests of the banks. The
> banks in this scenario keep the upside of the investment, and now
> have switched the liability issues into revenues streams. That is
> why the Treasury department has called the top 25 mortgage firms
> to the meeting table. Obama's plan will make us beholden to the Financial
> Warlords in everyway, we will be debt ridden, renters with no jobs
> and low incomes, with weekly hours down to 33 per week and average
> wages dropping. America is about to change into a serfdom.

Jul 16 10:28 AM

[Buck East:]

Home prices must drop to the point of affordability before a recovery in housing can begin, so even falling home prices are desirable. The sooner home prices fall to the point of affordability, the better of everyone will be. This recession and a rising savings rate are both necessary ingredients to restore fiscal sanity. Deflation should not be feared; deflation should be embraced. What should be feared is the reckless expansion of consumer and corporate credit made possible by Fed policies under both Greenspan and Bernanke. Deflation is not the problem, it is the cure for those reckless policies.

Jul 16 10:50 AM

[Buck East:]

I think there is in Texas


On Jul 15 02:31 PM Gdub53 wrote:

> there is no such word as "irregardless"...

Jul 16 11:08 AM

[Jade Queen:]

What about requiring banks/credit unions to stay within cages, i.e., state boundaries, so they can't get TBTF and so they will be vested in particular places, where you can find their boards and track the individuals locally?

Presumably, local individuals can go out and kick the tires on local property and decide on a case-by-case basis what a work-out should be.

They will still form trade groups to lobby D.C. and to trade overnight with each other and such.

If they were to lobby as a clump against special privileges for GS, maybe some headway could be made. It's not that one bacterium can't bring down a hydra like GS. It's that it would be quicker if bacteria, viruses, and fungi got together for a feast.

Many believe the loot given to GS went offshore, and that is one reason it did not have an inflationary effect on shore.

It wasn't enough, I guess, because then there was the tizzy fit about giving money to the IMF.

If possession is nine-tenths of the law, we have a real problem with GS. Their minions are pulling out the stops to stop a GAO Fed audit. The race is on.

U.S. people don't do street things after the 70's. Most who would be inclined to do that are pretty aware they could just get mowed down or put in a private prison.

U.S. people can be pretty good at boycotts, procotts, and work-arounds, however. My hunch is that is what is coming up.

When the gas monopoly announced a 40% hike around these parts, the wood stove guys got booked a month out, and some yoga people turned their thermostats off and worked out more.

This is the land of Sometimes a Great Notion and One Flew Over the Cuckoo's Nest. Give us mandates and our tinkerer's brains go into over-drive and so do our tendencies to have meetings, volunteer, and that kind of thing.

We may die, but at least we will go down while making our statements. I appreciate the thread and hope to hear more.

Jul 16 12:30 PM

[UK farmer:]

In Italy the debt is assigned to the property, not the individual- would this help ?

Jul 17 01:54 AM

[CLH:]

The govt. will muck around in the market but true value will still come out in the long run. What this means is that the bad debt crisis will be extended by many years. Like the 1930s.

Jul 17 05:28 AM

[Michael Clark:]

Exactly. Time to send in the investigators and clean up the system. Goldman-Sachs is the Las Vegas casino owner. Some make money -- most don't. I don't have any problem with a company being smart and skilled at trading. But they apparently are running ahead of the markets with their high-speed computer trading system -- front running. Time to break them down and sell their parts in the open market.


On Jul 15 10:38 AM conceptwizard wrote:

> Goldman makes money every time all the time because they control
> the direction of the market. This is becoming more common knowledge,
> just recently an employee of theirs that left stole software that
> GS accused him through the FBI of quote "being able to control the
> markets" through high speed trading. They of course did not want
> this technology to fall into the wrong hands, of course feel that
> theirs are the right hands. Nothing was said otherwise, and GS are
> not under investigation.
> Their oil trading floor is another proof in the pudding with their
> ability just by sheer volume to sway the market price on oil. In
> my mind they cannot lose, and this is not BS it is criminal. Because
> in the markets someone has to win and someone has to lose. So if
> they win all the time then of course we lose.
>
> On the housing issue, it is common place now to expect the Obama
> will do what is in the ultimate best interests of the banks. The
> banks in this scenario keep the upside of the investment, and now
> have switched the liability issues into revenues streams. That is
> why the Treasury department has called the top 25 mortgage firms
> to the meeting table. Obama's plan will make us beholden to the Financial
> Warlords in everyway, we will be debt ridden, renters with no jobs
> and low incomes, with weekly hours down to 33 per week and average
> wages dropping. America is about to change into a serfdom.

Jul 18 03:44 AM

[Goingfwd:]

The government still doesn't get it! What made this Country great was teaching the men to catch their own fish, not handing the fruits of the labors of others over day after day after day! Eventually the guy who is catching all of the fish says "ENOUGH" I think that as a Nation we have arrived at that point and the politicians know it. That is why there is suddenly another "Crisis" on the radar in healthcare, in "global warming" (climate change the p.c. version) Never mind that those so called problems have been around for decades, and since the global temp just went down again last year, I don't see the need to hit the panic button for the 4th time in 6 months. There is no doubt in my mind that it stinks to loose a job and not have the money to make the mortgage each month (been there, anyone remember Arthur Andersen and the susequent tech bubble burst?)
But you pick up the pieces that are left of your life and move on as best you can.
B.O. needs to get off this crisis kick, it is getting old. He should just fess up! "Look people(congressmen), my numbers are heading south and so are yours, if you go home to your constituents over that August break and hear how angry everyone is about the spending in Washington and the taxing out there, you will know that if you pass my pet bills, you will loose your seat in 2010, so let's just pass this thing already! Don't listen to the people who you represent, they don't understand how politics works." It sounds an awful lot like what they accused the banks of doing to all of those "unfortunate" homeowners.
Don't read the fine print,
Oh sure you can afford that, and if you can't you can always sell it at a nice profit,
hey did I mention that interest rates are going to go up next week
and oh by the way we have this nice new no gain no pain mortgage we are offering?
Sure you can have the lawyer look it over, but it is only good 'till tomorow at this rate
HURRY HURRY HURRY THIS IS A LIMITED TIME OFFER!!!

Jul 19 01:13 AM