The bubble collapse was rife with denial caused by false rumors of homeowner bailouts. Many homeowners held out hope that if they could just keep current on their mortgage long enough, the government would come to their rescue in the form of a mandated bailout program. Many such programs were attempted, but if their stated goal was to keep loanowners in the properties they occupied, these programs were a dismal failure — thankfully. If they had succeeded, the moral hazard would have served to inflate an even more massive housing bubble in the future. Moral hazard is central issue in housing bust. 
Part of the bailout fantasy was not just that people could keep their homes, but that they could keep living their lifestyle as they did during the bubble. What few seemed to realize was any government bailout program would be designed to benefit the lenders by keeping borrowers in a perpetual state of indentured servitude. With all their money going toward debt service payments, little was going to be left over to live a life. Bailouts were designed to benefit the banks, if loanowners got something out of the deal, that was a bonus.
Unfortunately, most people simply don’t get it. Many believe the bailouts were actually designed to help them. This was a public relations boost for the government, but it served to rightfully increase the public’s anger against the banks.
America’s bank bailouts
They did not have to be so unfair
Oct 31st 2012, 12:38 by M.C.K. | WASHINGTON
… The common theme of both Neil Barofsky’s Bailout and Sheila Bair’s Bull by the Horns is that the U.S. government cared a lot more about saving the incumbent banks and bankers than it did about helping regular Americans blindsided by the collapse of the housing market and the ensuing contraction. As a result, many Americans now believe that the rules are rigged against them for the benefit of a few politically-connected financial speculators: privatized gains and socialized losses. It is difficult to disagree.
It is difficult to disagree because that is exactly what happened. Bailouts were only intended to keep incompetent bankers in power. The very men who made reckless and foolish bets — and lost — were given a massive bailout to cushion them from enduring any consequences for their actions.
On one side of the ledger, we see that the big banks are bigger than ever, more than 90% of the gains in GDP in the past four years have accrued to those in the top 1% of the income distribution, and total Wall Street pay is still near record highs despite a sharp drop in employment.
Those statistics are shocking and disturbing. A crony system that rewards incompetence with largess is doomed, but not before the perpetrators loot our economy and the government coffers for their own personal gain.
On the other, we find that median net worth fell by 40% since 2007, real median income is still 8% lower than in 2007, there are still more than 7 million fewer full-time jobs than in 2007, and there have been at least 4 million foreclosures, many of which could have been prevented through investor-friendly government policies.
The average American paid a heavy price for the greed of Wall Street bankers. Of course, the ones who fared the worst are those who played the game themselves. The rich and powerful bankers had better connections in Washington, so they got the bailouts rigged in their favor.
A few excerpts from the review:
Mr Barofsky reports that no one in the Treasury Department and almost nobody at the Federal Reserve seemed concerned that some might try to exploit the government’s largesse. Whenever Mr Barofsky tried to ensure that banks were using TARP funds to make loans—the stated purpose of the programme—he was told that it would be impossible because “all money is green”. Yet the bankers themselves had no problem telling journalists how they planned to use the cheap capital to buy competitors or hoard cash for a rainy day.
Why would banks have lent money in 2008? There were few qualified borrowers, and a significant portion of the national population had embraced Ponzi personal financing. Loaning money to Ponzis is akin to setting it on fire, so that would have served no one. If hoarding cash and buying competitors was the best use of the funds, that’s what these banks should have done. Would it be preferable for them to make more loans to Ponzis and go back for a larger bailout later?
Ms Bair recounts how the methodology used to calculate the “stress tests” was cleverly altered so that Citi would keep its tax breaks.
That one makes me sick. Anyone with half a brain knew the stress tests were a whitewash and a public relations theater to shore up confidence in the banking system. I didn’t know Citi obtained special dispensation.
This resourcefulness was not applied to help keep people in their homes … When asked how the government’s efforts were supposed to help homeowners, Timothy Geithner, the treasury secretary, responded by explaining that they would aid the banks by slowing down the pace of foreclosures.
Timothy Geithner specifically endorsed amend-extend-pretend and the creation of shadow inventory. Bankers must have been thrilled when Obama picked him.
… This subprime loan came in two parts. For the first two or three years borrowers paid a “teaser” interest rate of around 7% or 8%, after which they would then have to pay a much higher rate for the remainder of the thirty-year mortgage—often between 11%-15%. These products were literally designed to be unaffordable. The theory was that borrowers would be forced to perpetually refinance into new hybrid ARMs after the teaser periods expired, which would generate a fortune in fee income. Steep prepayment penalties discouraged refinancing from occurring until after the higher interest rate had already kicked in.
Serial refinancing was one of the sicknesses of the housing bubble. Ponzis came to rely on it, and lenders developed products to exploit the Ponzis. Despicable.
According to Ms Bair’s account, the lenders who originated hybrid ARMs deliberately misled borrowers—precisely the sorts of financially unsophisticated households who could least afford the risks and obscured fees presented by them. This might not have been illegal but it was definitely distasteful.
By late mid-2007, the incipient financial crisis had made it nearly impossible for borrowers to refinance these loans before getting crushed by the higher interest rates. While some might have been driven into default irrespective of the interest rate because they had been betting on future home price appreciation that did not materialize, many others, according to Ms Bair, could have afforded to keep paying their mortgage at the level of the teaser rate. …
Notice that the author of this article downplays the importance of the Ponzis while emphasizing the problems of those who didn’t understand what they were getting into. This is exactly backward. There were very few that got caught up in teaser rate loans without understanding that payments would go up, but these were the exceptions not the rule. Most were Ponzis who wanted the advantage of lower payments and cash out to live the good life. They knew the payments would go up later requiring them to refinance into another Ponzi loan.
The mistake these people made was believing the opportunity to refinance into another Ponzi loan would always be available. Most who got caught up on serial refinancing believed the cycle of serial refinancing would never end. Their mistake was foolishness, not gullibility. That’s an important distinction because the foolish are responsible for their choices whereas the gullible are not. The borrowers caught up with serial refinancing are responsible for the mistakes they made.
Fannie Mae and Freddie Mac, the government-sponsored mortgage insurance companies, had bought about one-third of all the toxic securities issued during the height of the bubble.
The foolish purchase decisions of the managers of the GSEs necessitated the bailouts. Contrary to the popular myth spun by the political Right, the GSEs had little to do with inflating the housing bubble. The bubble was inflated by private mortgage-backed security pools financing Option ARMs and interest-only loans that allowed balances much larger than incomes could support. These pools were not commissioned by the GSEs, nor did they carry GSE insurance guarantees. The GSEs did load up their balance sheets with this toxic crap at the height of the housing bubble because they were losing market share. Well, they got market share, and now we are paying the bills for their mistakes in judgement — not that they didn’t take bonuses and golden parachutes on the way out the door.
As a result, the government should have been able to exert leverage over other investors to come to a deal. Few seriously expected to earn anything above the teaser rate on these products, since they were designed mainly for creating churn fees. Yet Ms Bair reports that Fannie and Freddie were particularly resistant to any modification of the loans in their securities portfolio. …
In October, 2007, Ms Bair gave a presentation to a group that had been involved in bundling together subprime loans into toxic securities. She asked them why they were refusing to do something that was fundamentally in their interests. Subprime borrowers were deadbeats, they said. Give them a gift like this and they’ll blow it on a new flat-screen television.
Yes, they would have. However, I would add that this behavior isn’t limited to subprime. Ponzi borrowing crosses all socioeconomic bounds.
In that case, Ms Bair wanted to know, why had these Armani-clad dealmakers lent out the money in the first place? “Bad regulation,” she was told.
Bullshit. That is part of the right-wing narrative, but it simply isn’t true. The money was lent to these people because the lenders didn’t think they had any risk. First, nobody seriously thought house prices would go down, so even if they defaulted in large numbers — which they did — the resulting default losses would be small. Further, most investors who funded these securities purchased credit default swaps from AIG or other parties who dangerously underpriced the risk involved. To make matters worse, the ratings agencies gave these toxic securities AAA ratings giving a false sense of safety to the investors. Based on the erroneous and foolish assumptions the investors accepted at face value, these were not poor investments. None of this, I repeat, none of this had anything to do with bad regulation — other than perhaps the Greenspan federal reserve should have regulated the credit default swaps more vigorously.
… Both books also provide delightful accounts of Tim Geithner, the Treasury Secretary. … Ms Bair prefers to focus on Mr Geithner’s obsession with saving Citi and his relationship with Robert Rubin:
Tim Geithner’s mentor and hero, Bob Rubin, had served as the chairman of the organization and, as the Financial Crisis Inquiry Commission would later document, had had a big impact in steering it toward the high-risk lending and investment strategies that had led to its downfall. I frequently wonder whether, if Citi had not been in trouble, we would have had those massive bailout programs. So many decisions were made through the prism of that one institution’s needs.
Billions of dollars of taxpayer money was squandered because Timothy Geithner wanted to bail out Bob Rubin. That is the definition of crony capitalism.
Ms Bair makes the interesting observation that Citi’s large losses in the beginning of 2007 should have caused regulators to step in and prevent it from paying bonuses that year. Had it been normally-sized, this is surely what would have occurred, as well as management changes. Instead, Citi paid out the third-largest volume of dividends of all American firms in 2007. Who was Citi’s top regulator during that time? Timothy Geithner. …
Not just did he bail out the company, he arranged it so they could continue to pay out unwarranted bonuses. Nice job. He will probably be offered a job at Citi after he leaves government. He’s earned it.
Looking back four years after the bailouts began, it is worth taking stock, as these authors did, of the paths not taken. The proponents of the status quo like to present a false narrative that there were only two choices: do exactly what was done, or unleash Armageddon. As Mr Barofsky and Ms Bair show, there were alternatives.
I see many comments from readers who fall into this false dichotomy. We did have other choices. For one, we could have nationalized the banks, thrown out the incompetent management, recapitalized them, and sold them for a profit when conditions improved. This would have greatly accelerated the processing of bad loans and recycling of troubled assets. Perhaps the recession might have been deeper, but it also would have been shorter. The problems we still face today are a direct result of not taking more aggressive action back in 2008 when it was warranted.
Over five years of squatting
As mentioned in the post above Timothy Geithner encouraged the amend-extend-pretend policy of the major banks. As a result, they have been in no hurry to foreclose, particularly on the inflated high-end properties where shadow inventory is much larger than most want to believe.
Today’s featured property sets a new record for squatting. The woman who used to own this property didn’t make a payment for over five years. It must be nice to squat in Newport Coast…
Prior Transfer
Recording Date: 05/03/2012
Type of Sale: Full Amount on Deed
Contract Date: 04/27/2012
Document Type: Trustee’s Deed – (Certificate of Title)
Foreclosure Record
Recording Date: 11/09/2011
Document Type: Notice of Sale
Foreclosure Record
Recording Date: 03/10/2009
Document Type: Notice of Sale
Foreclosure Record
Recording Date: 12/04/2008
Document Type: Notice of Default
Foreclosure Record
Recording Date: 07/22/2008
Document Type: Notice of Rescission
Foreclosure Record
Recording Date: 07/18/2008
Document Type: Notice of Rescission
Foreclosure Record
Recording Date: 07/11/2008
Document Type: Notice of Sale
Foreclosure Record
Recording Date: 04/29/2008
Document Type: Notice of Default
Foreclosure Record
Recording Date: 03/11/2008
Document Type: Notice of Default
Foreclosure Record
Recording Date: 03/27/2007
Document Type: Notice of Rescission
Foreclosure Record
Recording Date: 03/07/2007
Document Type: Notice of Default
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We're sorry, but we couldn't find MLS # U12004140 in our database. This property may be a new listing or possibly taken off the market. Please check back again.
Proprietary OC Housing News home purchase analysis
8 CALAIS Newport Coast, CA 92657
$1,279,000 …….. Asking Price
$453,000 ………. Purchase Price
6/2/1994 ………. Purchase Date
$826,000 ………. Gross Gain (Loss)
($36,240) ………… Commissions and Costs at 8%
============================================
$789,760 ………. Net Gain (Loss)
============================================
182.3% ………. Gross Percent Change
174.3% ………. Net Percent Change
5.6% ………… Annual Appreciation
Cost of Home Ownership
——————————————————————————
$1,279,000 …….. Asking Price
$255,800 ………… 20% Down Conventional
3.95% …………. Mortgage Interest Rate
30 ……………… Number of Years
$1,023,200 …….. Mortgage
$256,594 ………. Income Requirement
$4,855 ………… Monthly Mortgage Payment
$1,108 ………… Property Tax at 1.04%
$50 ………… Mello Roos & Special Taxes
$320 ………… Homeowners Insurance at 0.3%
$0 ………… Private Mortgage Insurance
$295 ………… Homeowners Association Fees
============================================
$6,629 ………. Monthly Cash Outlays
($1,232) ………. Tax Savings
($1,487) ………. Equity Hidden in Payment
$348 ………….. Lost Income to Down Payment
$180 ………….. Maintenance and Replacement Reserves
============================================
$4,437 ………. Monthly Cost of Ownership
Cash Acquisition Demands
——————————————————————————
$14,290 ………… Furnishing and Move In at 1% + $1,500
$14,290 ………… Closing Costs at 1% + $1,500
$10,232 ………… Interest Points
$255,800 ………… Down Payment
============================================
$294,612 ………. Total Cash Costs
$68,000 ………. Emergency Cash Reserves
============================================
$362,612 ………. Total Savings Needed
The property above is available for sale on the MLS.
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30 Responses to “Loanowner bailouts were designed to benefit banks, an insider’s view”
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On Friday I published the post realtor to presidential candidates: do no harm… to our commissions. As you might imagine, the agent community had a different perspective on the subject.
Special Series: Liniger Receives a Call-Back as Industry Players Respond
Rapid and overwhelming responses have been pouring in to our editors after the open invitation for dialogue was issued with the write-up on RE/MAX CEO Dave Liniger’s decidedly pointed, yet earnest letter to the presidential hopefuls.
Liniger challenged both candidates to step up to the plate for progress and lay out definitive plans for righting America’s housing market. While the presidential nominees have remained mum on solutions to the housing crisis, DS News readers have not. We’ve been both impressed and inspired by readers’ passion and by your conviction to stand up and speak out for your ideas and ideals.
The vast majority of emails we received heavily supported Liniger’s remarks, even to the point of a subject line that read: “Hail Liniger!” Safe to say this pre-election debate has sparked some extreme enthusiasm. The overwhelming majority of respondents found much to agree with in the RE/MAX co-founder’s letter.
One supporter, Peter Cooke, Jr., aligns with Liniger in his disdain for the candidates’ avoidance of important issues. “I agree with the statements from the chairman. Both candidates have to be asked about many more of the issues in this country that are not being discussed.”
As a licensed CPA, Cooke offers his staunch support of Liniger’s “first, do no harm” decree, along with examples from his daily professional life to directly back Liniger’s views with substance.
“Do no harm first is a powerful statement I fully support,” Cooke said. “I am a CPA who prepares taxes and have seen firsthand the devastation foreclosures and liar loans have done to black and Hispanic communities.”
Cooke harkens back to the famous “a little less conversation, a little more action” mentality with his belief that proposals made thus far by the candidates are purely rhetoric. “The talk of eliminating the mortgage interest deduction is just that: political talk,” he said.
“The AICPA [American Institute of Certified Public Accountants] and ABA [American Bankers Association] will never allow it to happen. These organizations via [their] members write most of the tax legislation at the federal, state, and county levels,” Cooke stated.
Jim Moran, a licensed broker with Coldwell Banker Morris in Bend, Oregon, also wrote in, saying that he is simply grateful that someone is finally talking about this obvious housing debacle for a change. “[Liniger] states the issue very well. Love the quote, ‘ignoring housing at your peril,’” Moran said.
He goes on to expound on the need for more across-the-aisle efforts. “We simply need to move beyond partisan politics and address the housing issues head on. We’ve suffered long enough on all housing fronts.” In a prediction that points to housing as not just important, but vital to the victor, Moran describes housing as “the elephant in the room” that will “determine the outcome of this election.”
In his letter, Liniger decried the two candidates’ dismissal of housing in lieu of focusing on only the economy and jobs. Like Liniger, licensed Realtor Stephen R. Kass connects the two as inextricably linked. “Like most all facets of the economy the revitalization of the housing industry is reliant on the creation of jobs, and the next four years will showcase the foreseeable future of the housing industry,” Kass wrote.
Kass goes on to say, “Each elected president has a strong area, a facet of his background that is best suited for a defined challenge to his presidency. I believe that Romney is best suited for the challenge of creating jobs and getting the economy moving and the housing industry along with it.”
Debbie Ferrero, a licensed broker with Henry Homes and More, Inc., weighed in on the issue of mortgage lending requirements and their effect on the market, which Liniger also addressed. “Mr. Liniger is spot on!” Ferrero said.
She goes on to relate her firsthand experiences in her local market and the frustration she encounters with today’s credit criteria. “I am a broker of a small, independent firm in Stockbridge, Georgia, [a suburb of Atlanta] and cannot find houses for first-time homebuyers as they are being bought, sight unseen by investors,” Ferrero said. “[W]hen our potential buyers cannot qualify because of stringent requirements … they become renters.”
Ferrero continued, “It is teaching them the wrong message. The pride a homeowner has in their property is not there in a renter and it brings a neighborhood’s value down, and I believe the family suffers in the long run. Making it terribly difficult for young couples starting out and so easy for foreigners [to buy property] is just un-American.”
As a renter, I can attest to the fact that Ms. Ferrero is full of shit.
Last Jobs Report Before the Election: Will It Have Any Impact?
Friday morning’s jobs report contained some good news with the bad, but analysts doubt there’s enough strength in either direction to influence the upcoming presidential election.
The Bureau of Labor Statistics (BLS) reported the unemployment rate rose slightly to 7.9 percent in October from 7.8 percent in September. Even though the rate increased, the upward movement was due to a rise in entrants into the labor market, not a decrease in jobs. The economy added 171,000 jobs in October, while August and September were revised upward. Together, the two revisions added a combined 84,000 more jobs.
The BLS also noted Hurricane Sandy had no discernible effect on October’s data since the household survey data was completed before the storm.
In a written response from Capital Economics, economist Paul Ashworth wrote, “We doubt that October’s Employment Report is either strong enough or weak enough to have any marked impact on next week’s presidential election.”
In its analysis, Capital Economics highlighted both improvements and disappointing figures.
Positives found in the BLS report included the increase in the labor force, which grew by 578,000, and the employment-to-population ratio, which reached a three-year high of 58.8 percent.
However, the research firm addressed temporary employment, which has been mostly unchanged over the past three months. In addition, average weekly hours worked remained unchanged from 34.4, while the annual growth rate of average hourly earnings slipped to 1.6 percent, a 26-year low, the research firm stated.
In the response, Ashworth concluded, “Overall, this report is sure to be spun politically by both sides. The bottom line is that the labour market remains unusually weak, but whether it is weak enough to prevent Obama getting re-elected is anyone’s guess.”
Economist Nigel Gault at IHS Global Insight also questioned the extent to which the report will impact the election’s outcome.
“Politically there was something for both presidential candidates to grab onto. President Obama can point to faster job creation, while Governor Romney can say that the unemployment rate is higher now than in January 2009 when the president took office. On balance the report is better than expected, which should help the incumbent, but not sufficiently so to be a game-changer,” wrote Gault.
Fannie Mae chief economist Doug Duncan expects the jobs report to be a positive for housing.
“The overall fundamentals-a low interest rate environment, rising housing price expectations, and an improved pace of healing in the labor market-are setting the stage for a solid housing recovery,” Duncan said.
“…Even though the rate increased, the upward movement was due to a rise in entrants into the labor market, not a decrease in jobs.”
A spin at every opportunity. Instead of a chicken in every pot, it’s an excuse in every paragraph.
Young’in entering the job market don’t count in the unemployment stats. The unemployed numbers are those that lost a steady job and can’t find a replacement job. The students did not lose a job to be counted. If you lose a job and go back to school, you’re no longer counted as “unemployed.”
Improve job numbers and dramatic lower gas prices just before the elections shows the PTB want to hedge their bets.
Sandy will be a job creator. All the rebuilding, influx of insurance money and public charity. Americans and churches will open their pocketbooks to help the less fortunate on the East coast, even if it means personal sacrifices.
Sandy (as in hurricane) might ‘create’ jobs, but they are the wrong kind of jobs. Capital will be diverted away from productive ventures to rebuild. This is not job creation, this is job destruction; talking viable jobs.
You subscribe to the broken window fallacy. Sandy is bad for the economy.
Yes. By that reasoning, we should cheer for large natural disasters that destroy our modes of production.
“A spin at every opportunity. Instead of a chicken in every pot, it’s an excuse in every paragraph. ”
That sums up most financial reporting on real estate as well.
The unemployment numbers will remain stubbornly high as long as so much consumer debt is weighing down demand. Even if people have a job, they don’t have any spending money to create demand for goods and services that will create other jobs.
The banks are testing the solidity of the shield they purchased with the attorneys general settlement earlier this year.
Wells Fargo Contends Mortgage Suit Violates Settlement Terms
The U.S. government is violating the terms of the national mortgage settlement with its recently filed lawsuit against Wells Fargo, attorneys for the bank argue.
The U.S. Attorney’s Office for the Southern District of New York filed suit against Wells Fargo in early October alleging “more than 10 years of misconduct” in connection with the bank’s participation in the Federal Housing Administration (FHA) Direct Endorsement Lender Program. The lawsuit alleges Wells Fargo misrepresented the underwriting quality of its FHA-insured mortgages, costing the government hundreds of millions of dollars after many of those loans defaulted.
Now, Wells Fargo is fighting back.
In a motion filed in a U.S. District Court, attorney Douglas Baruch says the settlement “wiped the slate clean for Wells Fargo in terms of facing any further liability to the United States (except in carefully crafted, narrow circumstances) for a wide range of Wells Fargo conduct relating to the bank’s Federal Housing Administration (FHA) mortgage loan portfolio, among other areas.”
When it comes to underwriting quality control, the government can only bring a case against Wells Fargo on a loan-by-loan basis and only if it can be proven that the underwriter knowingly certified an ineligible loan. Because the latest suit against the bank deals with company-wide conduct and does not include a specific underwriter’s actions, it is considered outside the scope of those criteria, Baruch contends.
A spokesperson for the U.S. Attorney’s Office in Manhattan declined to comment.
The legal maneuver’s impact may be far-reaching if the court finds in the bank’s favor. Federal officials have also gone after JPMorgan Chase and Bank of America for their alleged roles in the housing crash. A successful defense in Wells Fargo’s case might give the other banks a platform to fight those lawsuits against them.
Political grandstanding. Make a deal with the banks for some fines but giving future immunity. The fines if “paid” by government approved methods, such as “short sale” instead of a FC can be applied to the cost of the fine (also likely against income and taxes). The government can then grandstand by prosecution just before the elections to act like a really tough guy looking out for the little guy for things covered under the immunity agreement. Why not give the banksters another govt sponsored bonus?
Remember… the ‘house’ always wins.
Unfortunately, homedebtors (hematic sheep) — especially in the bubble counties — have become nothing more than pawns on an ‘insiders’ gambling table, so it makes total sense that the various bailouts were designed to benefit banks.
I find the cartoon of the bankers playing poker with the stripped down taxpayer particularly apt. The sheeple have no idea how much they are being manipulated and ripped off. It’s the kind of political environment where a populist could flourish, but instead we have to presidential candidates competing to see who can give the banker’s asses the sloppiest kiss.
At Las Bankas:
Make a bet and the house (banksters) takes 1-2% off the top of each bet.
They keep the profits from the bets. If they make large strings of bad bets, no worries, the government (taxpayers) will cover their losses and give them a retention bonus with a smile for saving us from a depression. Bah-bah.
Government cannot ‘save’ us from a depression. It can only mask the depression; allowing the masses to debate over such nonsense: “double dip recession” “triple dip recession”
In reality, we are in a greater economic contraction. I am of the opinion it is the 2nd Great Depression. The difference between recession, recovery, and depression depends on whose numbers you’re using and to what degree they have been massaged.
Government officials have been blathering on about the recovery for three years now, but nothing has changed. It doesn’t feel like much of a recovery to me.
“…saving us from a depression. Bah-bah.” That’s the sound of sheepeople buy the message of false salvation.
Analysis: Waiting for housing to drive the U.S. economy
By Leah Schnurr
NEW YORK | Sun Nov 4, 2012 4:02pm EST
(Reuters) – The U.S. housing market is on the mend, but the so-called “missing piston” of the world’s biggest economy doesn’t have enough power to get the broader recovery firing on all cylinders any time soon.
Construction and related activity will help rather than hinder U.S. economic growth this year for the first time since 2005. That was before the housing bust helped push the United States into recession, triggering the global financial crisis.
Higher sales, prices and building, albeit modest so far, are a welcome boost as other drivers of the economy falter.
Nonetheless, housing still accounts for only a small part of gross domestic product compared with the boom years.
The housing sector “would have to be on steroids to significantly boost GDP growth,” Paul Dales, an economist with Capital Economics, wrote in a recent research note.
Neither presidential candidate has signaled any new plans to help housing, although the Federal Reserve, aware of the important role of the sector in underpinning the economy, is focusing its latest stimulus efforts in mortgage bonds.
Typically, housing leads the U.S. economy out of recession. But the vast equity losses have stymied the market this time.
Housing’s most direct impact on growth is via construction, remodeling and associated services, known as residential investment. Its contribution to GDP has shrunk from a historical average of about 5 percent, and over 6 percent in 2005, to 2.5 percent in the third quarter of this year.
Economists expect residential investment will add two- to three-tenths of a percentage point to GDP in 2013, helping the economy maintain this year’s pace of growth.
”Economists expect residential investment will add two- to three-tenths of a percentage point to GDP in 2013, helping the economy maintain this year’s pace of growth.”
———————————————————————————————
LOL
judging by the USNIM vs GDP below, RI aint drive’n squat in 2013.
just right click on the 2nd chart–view image, for a nice big discernable chart.
http://jahhou.blogspot.com/2012/11/are-10-year-yields-about-to-collapse.html
Again, I fundamentally agree with most of your points, but want to point out some basic errors. Most importantly, you imply that banks did not lend money because there were too many PONZIs. But TARP was intended to stimulate businesses, especially small to medium size ones, which would in turn hire more workers and bolster growth. It was not primarily intended to be used for consumer lending, mortgage or otherwise.
Had the Feds carried out Paulson’s stated goal for TARP–the establishment of a Bad Bank–trust would have been restored to the markets much sooner, the profiteers of the bubble years would have been wiped out, and the economy would be in much better shape today. But who would have hired Timmay when he steps down this January?
Just as we will not overthrow our corrupt bipartisan Kleptocracy until we have changed election financing (made it 100% public financed) so too will we not fix our economy until we establish a bright red line between regulators and the regulated. Public employees should be “lifers,” inculcated with the same sense of pride and duty as military or State Dept officers. Stop the revolving door and you stop the great American taxpayer ripoff.
“Had the Feds carried out Paulson’s stated goal for TARP–the establishment of a Bad Bank–trust would have been restored to the markets much sooner, the profiteers of the bubble years would have been wiped out, and the economy would be in much better shape today. But who would have hired Timmay when he steps down this January?”
This would have worked too, but if I understand his proposal correctly, the bad bank would have simply absorbed all the losses at taxpayer expense with no chance of recovery. At least the nationalization plan had an opportunity for recovery when bank stock is later resold. It’s basically what we did with Citi.
I like the idea of making public employees immune to political pressure, but making them “lifers” has the potential to make them lazy and unproductive as well. What’s their incentive to work hard and do well when they know they can’t be fired? It’s the same trap tenured professors run into. I also like the idea of preventing former government employees from going to work for lobbyists who lobby the agencies they used to work for. The corruption potential there is incredible.
You use the model provided by a very well run Civil Service–think the Colonial Service in 19th and 20th century Britain. These guys took a rigorous entrance exam after university. They had a very clear path up the ladder. Pay was excellent. If you lived to see it, retirement was early (usually after 20 years) and generous. Any hint of corruption and you were drummed out. The system was largely self-policing.
Believe it or not, it worked. The US State Department uses a similar model, and while it is less successful we do not have much of a revolving door or corruption problem. Even incompetence is rare.
It can be done. Recruit early from the same pool as Wall Street, but control for morality. Compensate handsomely, reward talent, but make it unacceptable to jump into Wall Street jobs. If there was a will it could work.
Perhaps I wasn’t clear enough in the post. I didn’t expect banks to lend to Ponzis with the bailout money, but small and mid sized businesses were in no better shape because the Ponzis were their customers. With consumer spending drying up, businesses had no demand for their products. The only way out of this recession is for the consumer to deleverage or alternatively to have their debts made manageable through low interest rates. That’s why the federal reserve has been lowering interest rates so much. It’s the only way to make consumer solvent and allow them to start spending again. Unfortunately, it also encourages more Ponzi borrowing.
I just wonder how the US government is going to separate from Fannie and Freddie? Part of reinflating the housing bubble is purchasing loans from Fannie and Freddie. Also, transferring some of the private risk to the tax payer. I think this arrangement is here to stay.
The other side that’s keeping home prices higher, increasing rents.
October home prices rise 2.9% as rents soar above 5%
By Kerri Ann Panchuk November 5, 2012 • 9:14am
Home prices rose 2.9% over last year in October, but had nothing on the rental market which saw rates rise 5.1% from 2011 levels, Trulia said Monday.
The numbers show a national real estate market that is experiencing gradual price appreciation. Yet, the impact of potential buyers unable to obtain mortgages is exemplified by climbing rental rents, especially in markets like Houston and Miami, where rents rose 16.5% and 10%, respectively.
The online real estate site released this data from its Trulia Price Monitor and Trulia Rent Monitor for the month of October.
Prices from September to October edged up 0.7%, according to real estate listing data within Trulia’s website.
When removing distressed assets from the equation, home listing prices grew 3.6% from October 2011 to last month.
The reports I prepare each month show the same thing. Rents are rising in most of Orange County, but the rent increases are in the normal and sustainable 3% range. The rent increases will put continued pressure on people to buy homes.
Renters are really being hosed by landlords, with the collusion of the government.
Post-foreclosure families have little chance of saving for a down payment down the road when they are spending a huge chunk of income renting usually run down houses from new suburban slumlords.
Worse yet, most of these rentals are in neighborhoods with minimal tenant protections in place. It’s “like it or lump it” according to the local authorities. After paying every dime of rent on time for nearly two years and giving him back his crappy ranch in basically the same condition (if not a bit better) our a-hole of a landlord deducted nearly $1000 from our obscenely large deposit for “damages” that should have qualified as reasonable wear and tear. But it would have cost that much to retain a lawyer and take him to court. Our state is not friendly to tenants, and only college towns and big cities have statutes on the books favoring them. Live and learn. Always TAKE PICTURES on day one and after moving out!
Nevermind, closing on a new place in two weeks. Renting is a nightmare, not the “new American Dream.”
Thanks for sharing your experience. I appreciate all your thoughtful comments. You add much to the blog.
For that amount of money is a small claims court (SCC) case. Pictures are need or it’s just he said she said case. I had a similar situation with pictures, but was too far to sue in SCC and the landlord knew my time was worth money (he could just ask for a delay a few days before the court date and I would be force to by another airline ticket).
Dividend taxes increase in January 2013. Not that the banks are paying anything, however I wonder it will push more investors to purchasing housing?
All it will really do is cause people to shift their income from dividends to capital gains where they can still avoid full personal income taxes.
[...] these loans were disasters waiting to happen. So why did we do it? To save the banks, of course. Bailouts were designed to benefit banks, not borrowers, and certainly not taxpayers. Government officials like Timothy Geithner bailed out [...]
[...] these loans were disasters waiting to happen. So why did we do it? To save the banks, of course. Bailouts were designed to benefit banks, not borrowers, and certainly not taxpayers. Government officials like Timothy Geithner bailed out [...]