The bank settlement is in.

[milohimself]

Add politics in and T-Town was right - it is a feel good, short-term approach that gets votes, "punishes" greedy bankers and kicks the can down the road.

This I agree with.

However, the total lack of dialogue by anybody to recognize the larger systemic issues that led to the recession worries me (hint, "end the fed" does not count).

 

[n_huffhines]

I'm not in the buyer's market ATM, so I'm not sure what credit requirements look like, but I'll take your word for it.

I have a friend out in the Columbia River Gorge that received a seven figure settlement for being shot in the shoulder point blank by his landlord, and bought about a dozen properties when they hit bottom.

I was looking for a more specific answer, but it's a genuine question; Somewhere between a fifth and a quarter of all home owners are underwater, for simplicity's sake let's assume that applies to the seller's market. What would be the results on a macro level of 30 million homeowners, or whatever the figure is, of either taking a substantial hit on equity or severely damaged credit?

I'm basically asking for a thorough explanation in this situation of the typical "free up the markets = good" explanation.

The crappy thing I see going on in all this, is I see no acknowledgment of the issues that led to tens of millions of untenable loans being written in the first place. Banks rightfully ought to be punished for any cases of that happening illegally, but where is the culpability in market conditions?

Credit requirements are likely stiffer, but I'm talking about purchase price and monthly payments are improving. Even if you can't meet stricter credit requirements you still have the option of renting/leasing homes at discounted rates. There are more residencies than we know what to do with.

Crazy about your friend. Why did his landlord shoot him?

Were there tens of millions of untenable loans? That sounds very high, but I'm not sure. You were likely just putting a big number on it, but I am wondering what would be an accurate figure? All of these bad loans happened in spite of government regulation and involvement. I contend that government involvement made the problem worse. Banks have all sorts of government protections when they lose, so it decreases the pain of losing, thus increasing the incentive to take risks. The market is culpable, because it behaves as it always does. It responds to incentives. There is no known way to change that. Government introduces artificial incentives and the market place goes nuts.

 

[milohimself]

Credit requirements are likely stiffer, but I'm talking about purchase price and monthly payments are improving. Even if you can't meet stricter credit requirements you still have the option of renting/leasing homes at discounted rates. There are more residencies than we know what to do with.

Crazy about your friend. Why did his landlord shoot him?

Were there tens of millions of untenable loans? That sounds very high, but I'm not sure. You were likely just putting a big number on it, but I am wondering what would be an accurate figure? All of these bad loans happened in spite of government regulation and involvement. I contend that government involvement made the problem worse. Banks have all sorts of government protections when they lose, so it decreases the pain of losing, thus increasing the incentive to take risks. The market is culpable, because it behaves as it always does. It responds to incentives. There is no known way to change that. Government introduces artificial incentives and the market place goes nuts.

It was a dispute over some raised rent, and they solved it like people out in the sticks solve things. The former landlord is sitting behind bars right now.

I feel like I have enough info to make a compelling argument that while the government was involved, there were many, many issues that happened to create the recession, particularly in the banking industry, that had absolutely zero to do with the government and still have the capability of happening with no government involvement.

By tens of millions of untenable loans, I meant loans that were written during the bubble that wound up in foreclosure, default, missed payments, etc. That includes additional mortgages, many of which were signed ARMs and a significant number of loans with what amounted to people basically being allowed to fabricate their income. This was incentivized in very large part by trading mechanisms.

I would love to go into more detail, but I don't have the time to write another book at the moment.

 

[rjd970]

Here's the question though - there are plenty of economists that suggest that what you've suggested above is really the better solution - by artificially floating the housing market we are in fact making the pain longer and potentially worse.

Politics aside, I haven't seen evidence that this is good policy from a macro perspective.

Add politics in and T-Town was right - it is a feel good, short-term approach that gets votes, "punishes" greedy bankers and kicks the can down the road.

It is one argument or the other though.

Can't the same be said for the "too big to fail" banks that were told to take TARP funds? Would it not have been better to let economic darwisnism take its course and have the banks buy off and split into smaller entities? Like the housing market, why not rip the band-aid off instead dragging this out? By propping banks up in the interest of saving the system as a whole, all we have done is kick the can down the road making it possible for this to happen again. "Too big to fail" has not changed.


What would happen if 25% of homeowners were forclosed on? Are they not too big to fail? Can they be treated as such? I get the argument that people made bad choices and they shoudl pay for them, but so did the banks. If the argument is it was only a small part of the banks that screwed up, and the whole ship shouldn't come down from the unfortunate circumstances, then it is just as easy to say homeowners were the victims of unfortunate circumstances and should get equal bailout protections.

I guess my issue is with the unequal arguments for both sides. Pick one stance or the other. I say let the banks fail and let the homeowners fail. It's the free market and these are the rules we all signed up for. I don't care if you are a stock trader and your porfolio crashed due to something outside of your control. Home prices dropped on owners due to something outside of their control.

 

[n_huffhines]

It was a dispute over some raised rent, and they solved it like people out in the sticks solve things. The former landlord is sitting behind bars right now.

I feel like I have enough info to make a compelling argument that while the government was involved, there were many, many issues that happened to create the recession, particularly in the banking industry, that had absolutely zero to do with the government and still have the capability of happening with no government involvement.

By tens of millions of untenable loans, I meant loans that were written during the bubble that wound up in foreclosure, default, missed payments, etc. That includes additional mortgages, many of which were signed ARMs and a significant number of loans with what amounted to people basically being allowed to fabricate their income. This was incentivized in very large part by trading mechanisms.

I would love to go into more detail, but I don't have the time to write another book at the moment.

That is undoubtedly true. The free market will produce recessions. It's not perfect, and I guarantee aspects of the free market contributed to this recession independent of government. From a practical policy standpoint, my contention is that byproducts of market interaction (specifically speculation) help to create recessions, but that this is unavoidable no matter how much regulation we throw at an industry. And then our attempts at regulation/involvement tend to exacerbate the recessions. The great crash of 1920 turned into a short and forgettable recession. The free market produced the recession (for the most part), and laissez faire policy righted the wrong in no time.

 

[volinbham]

It is one argument or the other though.

Can't the same be said for the "too big to fail" banks that were told to take TARP funds? Would it not have been better to let economic darwisnism take its course and have the banks buy off and split into smaller entities? Like the housing market, why not rip the band-aid off instead dragging this out? By propping banks up in the interest of saving the system as a whole, all we have done is kick the can down the road making it possible for this to happen again. "Too big to fail" has not changed.

I don't disagree with the following caveat - there was considerable fear that without TARP the whole damn thing would collapse (we'll never know). Doing any number of mortgage bailouts or not will not have the same, immediate impact (supposedly)


What would happen if 25% of homeowners were forclosed on? Are they not too big to fail? Can they be treated as such? I get the argument that people made bad choices and they shoudl pay for them, but so did the banks. If the argument is it was only a small part of the banks that screwed up, and the whole ship shouldn't come down from the unfortunate circumstances, then it is just as easy to say homeowners were the victims of unfortunate circumstances and should get equal bailout protections.

I don't think being underwater and being foreclosed on are the same thing. As stated above, I believe TARP really happened because people in the know felt it absolutely must or we'd see armageddon (big assumption). If the same circumstance were true with homeowners then I'd be more open to similar plans for them.

I guess my issue is with the unequal arguments for both sides. Pick one stance or the other. I say let the banks fail and let the homeowners fail. It's the free market and these are the rules we all signed up for. I don't care if you are a stock trader and your porfolio crashed due to something outside of your control. Home prices dropped on owners due to something outside of their control.

I agree in principle but factor in the situation. Banks are no more deserving but if their failure causes more wide spread pain than individual mortgage failure then I can see the policy rationale for treating them differently.

That was my point in the post you quoted. I haven't seen a compelling "greater good" argument in the mortgage modification plan but have seen "greater pain" arguments associated with doing it. So far, this appears to be more feel good, well-intentioned policy than "greater good" policy.

 

[NEO]

or maybe you don't see mine. People entered into a contract knowing what their responsibilities were. Things suck and now people want to get out of or amend those contracts because they aren't able to fulfill their end. Why is that the government's responsibility?

there are plenty of options for people to take to get out and move if they really want to. Of course it will screw up things like their credit but that's simply a reflection on how responsible they are paying debts so it seems pretty fair.

My house is worth much less than what I bought it for in 2006. Funny thing is I owe less than it's worth right now. How is that possible? Am I eligible for any assistance for being responsible?

I don't feel sorry for the people who bought houses on 4 year only interest loans or bought houses thinking the would swing them as prices went up but I do feel bad for people who bought houses they could actually afford when the market was at the top and then lost their jobs during the economic collapse and their home values dropped by 30% and they were unable to move their house to help lower their bills. There are people out there like that, not the majority, but they do exist. Good people who bought a 300,000 home that was really only worth 180000 and then lost their jobs and couldnt sell their homes and had to file. The whole thing is sad.

 

[n_huffhines]

I agree in principle but factor in the situation. Banks are no more deserving but if their failure causes more wide spread pain than individual mortgage failure then I can see the policy rationale for treating them differently.

That was my point in the post you quoted. I haven't seen a compelling "greater good" argument in the mortgage modification plan but have seen "greater pain" arguments associated with doing it. So far, this appears to be more feel good, well-intentioned policy than "greater good" policy.

It's like that Milton Friedman quote that goes something like, "The greatest tragedy with government is that we judge their programs by their intent, not their result."

 

[volinbham]

Good quote

 

[volinbham]

I don't feel sorry for the people who bought houses on 4 year only interest loans or bought houses thinking the would swing them as prices went up but I do feel bad for people who bought houses they could actually afford when the market was at the top and then lost their jobs during the economic collapse and their home values dropped by 30% and they were unable to move their house to help lower their bills. There are people out there like that, not the majority, but they do exist. Good people who bought a 300,000 home that was really only worth 180000 and then lost their jobs and couldnt sell their homes and had to file. The whole thing is sad.

It is sad - no other way to put it. So many people had never known a period where housing values dropped or dropped anywhere near this so many of the decisions are understandable.

For me the policy question is what's the best way out?

 

[utvolpj]

I don't feel sorry for the people who bought houses on 4 year only interest loans or bought houses thinking the would swing them as prices went up but I do feel bad for people who bought houses they could actually afford when the market was at the top and then lost their jobs during the economic collapse and their home values dropped by 30% and they were unable to move their house to help lower their bills. There are people out there like that, not the majority, but they do exist. Good people who bought a 300,000 home that was really only worth 180000 and then lost their jobs and couldnt sell their homes and had to file. The whole thing is sad.

I don't really feel sorry for them either (yeah I know, I'm heartless). At this point my wife and I could pay our bills with half of what we're making now. Sure it took a little sacrifice to get there but it wasn't that bad. People got enamored with owning a house at the edge of what they could afford (or higher) and didn't look at what could happen in the future. Some have planned for that and all they get is a possible pat on the back while their neighbor gets a check and isn't out any extra money. Why should they be rewarded with a "bail-out" when I don't get that money back for doing the right thing?

 

[rjd970]

I agree in principle but factor in the situation. Banks are no more deserving but if their failure causes more wide spread pain than individual mortgage failure then I can see the policy rationale for treating them differently.

That was my point in the post you quoted. I haven't seen a compelling "greater good" argument in the mortgage modification plan but have seen "greater pain" arguments associated with doing it. So far, this appears to be more feel good, well-intentioned policy than "greater good" policy.

I agree...I went back and read my post, didn't mean to come across as argumentative with you personally. Hope you didn't take it that way. The whole bailout/TARP thing just gets under my skin.

Realistically, I get why things went down the way they did. I just get irritated when people want to argue capitalism from an academic point of view, then when things don't work out in the real world, they want a pass. I include some homeowners as well as the banks under that umbrella.

:hi:

 

[volinbham]

I agree...I went back and read my post, didn't mean to come across as argumentative with you personally. Hope you didn't take it that way. The whole bailout/TARP thing just gets under my skin.

Realistically, I get why things went down the way they did. I just get irritated when people want to argue capitalism from an academic point of view, then when things don't work out in the real world, they want a pass. I include some homeowners as well as the banks under that umbrella.

:hi:

I didn't take it as argumentative - just clarifying my position overall. The government has to play a role in a functioning free market economy. I try to stand back and look at the political and economic impact of policy but will admit I lean towards the more free the better default position.

I think the very nature of government is it's unrelenting impulse to "do something". There are clearly times when doing nothing might be the best prescription.

 

[OrangeEmpire]

you act like I don't understand that. However no one can point out why people who make bad choices get rewarded and people who do the right thing get screwed.

In my world if you owe the debt you either pay it or face the consequences. Unfortunately it seems my world is very small

plus million

we are on that island

luv and hugs

 

[Gramps]

I don't feel sorry for the people who bought houses on 4 year only interest loans or bought houses thinking the would swing them as prices went up but I do feel bad for people who bought houses they could actually afford when the market was at the top and then lost their jobs during the economic collapse and their home values dropped by 30% and they were unable to move their house to help lower their bills. There are people out there like that, not the majority, but they do
exist. Good people who bought a 300,000 home that was really only worth 180000 and then lost their jobs and couldnt sell their homes and had to file. The whole thing is sad.

Excellent post.

 

[lawgator1]

Everyone here can hypothesize a distinction between someone who they wouldn't mind benefitting from some kind of bailout versus those they'd just describe as simply having made a bad investment.

Regardless of the line you might draw, figuring out which side everyone falls on is impossible.

 

[GAVol]

I don't really feel sorry for them either (yeah I know, I'm heartless). At this point my wife and I could pay our bills with half of what we're making now. Sure it took a little sacrifice to get there but it wasn't that bad. People got enamored with owning a house at the edge of what they could afford (or higher) and didn't look at what could happen in the future. Some have planned for that and all they get is a possible pat on the back while their neighbor gets a check and isn't out any extra money. Why should they be rewarded with a "bail-out" when I don't get that money back for doing the right thing?

Same boat here. Loan modifications are really hard to swallow.

 

[Orangeslice13]

That is pretty cheap on a "per vote" basis.

This is worth repeating.

 

[utvolpj]

congrats Mr Buffett

Buffett’s Bank of America | Washington Free Beacon

 

[gsvol]

Holder, Breuer connected to players in foreclosure fraud? « Hot Air

For years, the Left has asked why the Obama administration hasn’t pursued prosecutions against lenders who arguably engaged in fraud when foreclosing on mortgages in the wake of the housing-bubble collapse. It turns out that these lenders had friends in high places in the Department of Justice. Reuters reports that both Attorney General Eric Holder and his lieutenant Lanny Breuer, who ran the DoJ’s criminal division, were partners in a law firm that worked on behalf of those very same firms (via JWF’s Just A Grunt):

U.S. Attorney General Eric Holder and Lanny Breuer, head of the Justice Department’s criminal division, were partners for years at a Washington law firm that represented a Who’s Who of big banks and other companies at the center of alleged foreclosure fraud, a Reuters inquiry shows.

The firm, Covington & Burling, is one of Washington’s biggest white shoe law firms. Law professors and other federal ethics experts said that federal conflict of interest rules required Holder and Breuer to recuse themselves from any Justice Department decisions relating to law firm clients they personally had done work for.
-----------------------

Holder and Breuer aren’t alone. Reuters lists a couple more former Covingtom & Burling associates at the DoJ that have since returned to their law practice, including Holder’s deputy chief of staff John Garland and Breuer’s deputy chief of staff Steven ***ell. The law firm itself lists almost two dozen former attorneys now working in the DoJ and another dozen in US Attorney offices around the country. That’s quite an impressive footprint of influence for Covington & Burling, and a valuable one for its clientele.

It’s not as if the fraud was particularly esoteric, either. Reuters began its own reporting on massive numbers of forged endorsements, part of the robo-signing scandal that halted foreclosure processing for more than a year. Those forgeries got submitted to courts on many occasions as part of the foreclosure process. Despite this, Holder has done nothing — at least publicly — to press an investigation into these forgeries, and as Reuters reports today, more are on their way:

 

[gsvol]

I'm aware.


Karma is fine. Karma is good. Karma is necessary.

But, just for fun, let's just think this out on a macro level: What happens when a quarter of all homeowners in the US are left with underwater mortgages indefinitely?

I doubt that you are very aware of anything!


Buffett’s Bank of America | Washington Free Beacon

Warren Buffett’s stake in Bank of America Corp. increased in value by $154 million after President Obama and the U.S. Justice Department announced a $25 billion foreclosure abuse settlement with the five largest U.S. banks Thursday, records show.

Buffett invested $5 billion in Bank of America (B of A) on Aug. 25, 2011. As part of his investment deal, Buffett gained warrants that allow him to buy 700 million shares of Bank of America stock at a strike price of $7.14 a share. However, on Dec. 19, 2011, it was reported that Buffett was $1.5 billion underwater on his stock warrants, with shares of B of A stock trading at $4.94. But on Thursday, after President Obama personally announced the details of the settlement, B of A stock closed at $8.13 a share. The stock opened Friday morning at $8.31 and reached as high as $8.35 a share.

If Buffett had exercised his warrants Friday morning, he would have made $847 million. $154 million of that profit would have been related to the foreclosure deal.

Buffett has personally contributed $5,000 to Obama this election cycle, while Berkshire Hathaway has contributed $30,800 to the Democratic National Committee.

This summer, Obama will accept the Democratic Party’s 2012 presidential nomination with a speech at Bank of America Stadium in Charlotte, N.C.

It's like that Milton Friedman quote that goes something like, "The greatest tragedy with government is that we judge their programs by their intent, not their result."

It's deeper than that, remember who was the big faciltator of BCCI (bank of crooks and criminals international) back during the Carter crooks and criminals administration that facilitated the mullah takeover of Iran?

Yep, you guessed right, it was BOA who was complicent in the attempted takeover of American banking by islamic financial forces and now we have a head of government that is even more aligned toward those same people.

I don't now why I try to explain these things to so many people who are in such complete denial.

congrats Mr Buffett

Buffett’s Bank of America | Washington Free Beacon

Congrats Pj, you beat me to that one, but more on the topic:

10% Of Trades On The NYSE Involve A Single Notorious Company

On a normal day, 4 billion shares of stock change hands on the New York Stock Exchange. One in 10 belongs to a single company. It's not McDonald's or IBM, both of which have been on a tear.

It's Bank of America — bailed out by the government three years ago, reviled for being part of the mortgage frenzy that helped wreck the economy and selling for not much more than an ATM fee.

When the market goes up because of positive news about the economy, Bank of America stock shoots up past the stocks of other big banks. When traders get worried about Greek debt, Bank of America takes the biggest plunge.

The big swings are not driven by a fundamental bet that the bank will be more profitable because the economy is getting better or a real concern that it will lose more money than others if there is a default in Greece.

Instead, Bank of America is the stock of the moment for high-frequency trading, the supercomputer-driven buying and selling that barely existed a few years ago and now accounts for as much as two-thirds of U.S. trading.

 

[milohimself]

2nd grade level insult and posting the same pic twice in one post.

Superb retort, chap.

 

[KiffinKiller]

retort schmetort!

 

[milohimself]

Anybody have thoughts on the governors of Wisconsin and Missouri using significant chunks of the settlement to aid in balancing the state budget?

 

[KiffinKiller]

Anybody have thoughts on the governors of Wisconsin and Missouri using significant chunks of the settlement to aid in balancing the state budget?

not to mention the previous one used to balance the Texas budget by perry.