Monday Afternoon Reading
Its Monday afternoon — time for a quick linkfest:
• Why the ECB Isn’t Acting Like the Fed (Real Time Economics)
• CIT Watch: Analysts Says Debt Load Isn’t the Only Problem (MarketBeat)
• Lessons Learned (Kirk)
• Why Don’t Lenders Renegotiate More HomeMortgages? Redefaults, Self-Cures, and Securitization (Fed Reserve Boston)
• The Real AIG Controversy (Fox Emac)
• Banks May Sign on to Delayed U.S. Home-Equity Plan (Bloomberg)
• From Treasury to Banks, an Ultimatum on Mortgage Relief (NYT)
• Housing Woes: Price Reductions Are Proliferating (Time)
• Chicago Cubs Bankruptcy Looms as Way to Finish Sale by Tribune (Bloomberg)
• Why the #$%! Do We Swear? For Pain Relief (Scientific American)
• Notes on blogging for journalists (Felix)
I miss anything noteworthy?
July 13th, 2009 at 2:36 pm
Deficits in US state budgets (Interactive graphic)
http://www.ft.com/cms/s/0/be5612a6-6c9a-11de-a6e6-00144feabdc0,dwp_uuid=e70ca99e-a4b0-11db-b0ef-0000779e2340.html
July 13th, 2009 at 2:36 pm
pick any site on the sotomayor “hearings.” with such a foregone outcome, why are they wasting time and more of my money? and i can’t wait to hear what tidbits of wisdom come from the mouth of the jr. senator from MN.
July 13th, 2009 at 2:41 pm
“Pick-a-Pay Loans; Worse than SubPrime.”
http://online.wsj.com/article/SB124744382165530247.html#articleTabs%3Dcomments
July 13th, 2009 at 2:44 pm
@mtl:
Thanks for the link to state budgets…gee…anyone still wonder why Palin resigned?
July 13th, 2009 at 3:07 pm
Gasparino’s rant on GS. I posted the link on yesterday’s thread, but likely few would see it there:
http://www.cnbc.com/id/15840232?video=1181161158&play=1
It’s sort of a way to take a shot at the Administration, but they deserve it and making it an issue the Republicans can capitalize on is the only way it will get fixed. At this point my wife would vote for anyone who runs on a platform of lynching Wall St. bankers. She might settle for concentration camps.
July 13th, 2009 at 3:08 pm
[...] News Sources wrote an interesting post today onHere’s a quick excerptIts Monday afternoon — time for a quick linkfest:• Why the ECB Isn’t Acting Like the Fed (Real Time Economics)• • Banks May Sign on to Delayed U.S. Home-Equity Plan (Bloomberg)• Lessons Learned (Kirk)• The Real AIG Controversy (Fox Emac)• From Treasury to Banks, an Ultimatum on Mortgage Relief (NYT)• Housing Woes: Price Reductions Are Proliferating (Time)• Chicago Cubs Bankruptcy Looms as Way to Finish Sale by Tribune (Bloomberg)• Why the #$%! Do We Swear? For Pain Relief (Scientific American)• [...]
July 13th, 2009 at 3:15 pm
another link for afternoon reading: Beware of Rotting Money
http://online.barrons.com/article/SB124726734857225645.html
gotta uphold my reputation…
July 13th, 2009 at 3:16 pm
Regarding the AIG Controversy article…
If the investment banks were able to “price tag” their own bonds, did they also originate the whole CDS scheme and sell it to AIG. And if they did, was Michael Milken’s mind inhibited by pain killers due to a resurgence of cancer or was he just as reckless this time as he was in the eighties?
July 13th, 2009 at 3:18 pm
http://mpettis.com/
RMB 1.5 trillion in new Chinese lending — can we turn this thing off?
“Of course this might not be totally irrational. If you believe, as most of us do, that there is an implicit guarantee by the government on future loan losses, then this is clearly a heads-we-win, tails-the-government-loses proposition. Let them pile on the loans at the guaranteed spread between lending and deposit rates.
I guess it is time to introduce something that I might call the Pettis Rule of Banking (although I am way, way down on the list of people who first thought of this): “It is not even theoretically possible that in a banking system in which bankers are given unlimited liquidity, tremendous pressure to make loans, and an implicit guarantee against losses, that enormous amounts of bad loans will not be made.”
…OK…I get it, but my bet is that this ends badly also…
July 13th, 2009 at 3:18 pm
http://www.princeton.edu/~reinhard/pdfs/French-to-Blame-banking-crisis.pdf
http://economix.blogs.nytimes.com/2009/01/09/an-economists-mea-culpa/
July 13th, 2009 at 3:21 pm
Jeff in Indy:
I read that article early this am…(I get up early)…the kicker is the deficit for the 50 states for the next 12 months…California’s deficit won’t be anywhere close to “just” 26 billion….
Interesting times…
July 13th, 2009 at 3:22 pm
http://www.spiegel.de/international/business/0,1518,635051,00.html
July 13th, 2009 at 3:37 pm
Re: failure of banks to renegotiate
It’s about as politically tone-deaf as can be. The opportunity for radical intervention was lost in the fall. Mark-to-myth meant little incentive to do a symmetrical mark-down on the debtor side. As valuations went down due to the bubble bursting, that should have been reflected in revising mortgages. Mark-to-myth sets us up for a secondary burst as banks stick to nonsensical terms and fail — again! — to factor in risk.
The data reflecting 50% re-default doesn’t answer because principal should have been written down. The unilateral aspect of this whole thing continues to be poking a very pissed off tiger. Morons.
July 13th, 2009 at 3:41 pm
the new consumer
http://www.time.com/time/specials/packages/article/0,28804,1891475_1891477,00.html
probably will stay this for a few decades (5-6) like last time.
July 13th, 2009 at 3:43 pm
“Mark-to-myth sets us up for a secondary burst as banks stick to nonsensical terms and fail — again! — to factor in risk.”
Very clever, and correct, and the green shoots nonsense has amplified the burst, obviously. People have been buying $1M houses lately and I have to say…. DUH!
July 13th, 2009 at 3:47 pm
http://zerohedge.blogspot.com/2009/07/jp-morgan-high-frequency-predator.html
People mad as h$ll youtube video: http://tinyurl.com/lqe73a
July 13th, 2009 at 3:51 pm
i can say with reasonable certainty that the $500k+ market in Indianapolis is about as dead as a door-nail can get; including refi’s.
July 13th, 2009 at 3:59 pm
Steve Barry
Re: Palin. Yep, it sure was easier when she had all that easy oil money pouring in to pay off the voters with, eh? LOL
Now it’s just sooo hard. I think I’ll quit. Hopefully she just fades away, at least in the political realm. I’m sure we’re going to see and hear much more from her elsewhere as she cashes in on her moment of fame.
July 13th, 2009 at 4:24 pm
Re: Fed Res of Boston paper on why banks don’t renegotiate
Just reinforces the point I’ve been making. This study provides cover for banks persisting in folly. The “self-cure” issue can be addressed by limiting the pool of applicants based on household income and equity in the home. The redefault rate is based on restructured loans of any kind, not those with reductions in principal as is really needed:
[W]e broaden our definition of renegotiation to include any modification, regardless of whether
it lowers the borrower’s payment. Report, page 13
Hello? So you define “renegotiation” to include changes that are of no real short-term benefit to borrowers . . . Strange how the data then support a finding that borrowers “redefault.” Please.
Let’s compare apples to apples: offer borrowers restructuring ONLY IF they qualify based on certain need-based criteria — not whether or not they are currently in default. Let’s reward people for being proactive for once, shall we? Call the bank as soon as you lose your job and get a call back within a couple of business days? Crazy, I know . . .
So (1) borrowers need to meet certain criteria (income, equity) and
(2) the bank principal write-off should be roughly pegged to comps in that particular market.
As the NYT article said, do the freaking underwriting due diligence you should have done in the first place!
July 13th, 2009 at 4:34 pm
Let’s see..if your investments go sour, maybe you can get your money back if you sue your broker..?
Ok…then if you own a hotel and , for whatever the reason, the hotel business takes a powder, maybe we can sue the hotel chain? Naw, probably never work…….
http://www.nytimes.com/aponline/2009/07/13/business/AP-AR-Hotel-Verdict-InterContinental.html?_r=1
Ark. Man Gets $25M Award in Suit Over Texas Hotel
LITTLE ROCK, Ark. (AP) — InterContinental Hotels Group, owners of Holiday Inn Worldwide, has been ordered by a court to pay $25 million in damages to an Arkansas franchisee for fraud involving a hotel in Texas.
July 13th, 2009 at 4:54 pm
Fans of Mish’s simple but effective sledgehammer approach will enjoy this one:
http://globaleconomicanalysis.blogspot.com/2009/07/housing-update-how-far-to-bottom.html
July 13th, 2009 at 5:06 pm
This musical animated chart porn will appeal to BR:
http://zerohedge.blogspot.com/2009/07/housing-tunes-acme-cheap-credit-vs-wile.html
Note the incompletely punctured New York bubble… heh heh heh…
July 13th, 2009 at 5:15 pm
CIT claims its TBTF:
CIT Group Says Its Failure Risks Demise of Customers
http://www.bloomberg.com/apps/news?pid=20601109&sid=aHKDW8rEvwDM
July 13th, 2009 at 5:25 pm
People have been buying $1M houses lately and I have to say…. DUH!
$800k
orand bust.Reminds me of the old joke:
Donner — party of eight? Party of seven . . . party of six . . .
July 13th, 2009 at 5:44 pm
It just gets better and better…
http://www.nytimes.com/2009/06/29/business/29loanmod.html
“I’m” going to start treating call centers the way they (apparently) want to treat me…
“Sorry, we must have lost the paperwork. Please submit it.”
“We have no record of you calling us.”
“Sorry, you’ve reached the laundry room. You want the home office. Call back.”
“It’s in the queue — we’re really behind here. Call back in six months.”
“You left out our (secret) form BG5774/Q2n — you have to start the process from scratch.”
And so on.
I’ve not made it through the 45-odd page “why banks don’t want to renegotiate” white paper yet. In the meantime, will SOMEBODY please answer me:
WHY DIDN’T THE BANKS JUST EXTEND THE TEASER RATES? Simple to implement, and it would have given all concerned time to come up with a realistic and reasonable plan, instead of the panic’ed mayhem we all seem to find ourselves in instead?
July 13th, 2009 at 5:48 pm
Here’s another…
How many people have lost their jobs because they’re spending all of their time reading and commenting about the Great Real Estate Disaster instead of doing the work they ought to be doing?
Oops.
July 13th, 2009 at 5:54 pm
leftback:
Thanks for posting that link at ZeroHedge. I watched that video and I noticed something interesting: at the beginning houses were a fraction of per capita income. Then it got to where it was on par with per capita income. Then it got to 1.5 to 2x per capita income. Now it seems to be sliding back. I am sure that at some point it will get back to a fraction of income again, but that will take several years, probably.
July 13th, 2009 at 5:55 pm
OK. Here’s a great business idea. I’m too lazy to do it myself, nevertheless I truly believe that, if not profitable, it could be a truly philonthropic boon for all mankind…
Create an overseas call center FOR INDIVIDUALS.
Kids call my kids they get (for purposes of illustration only) India. Friends call my wife, they get India. Telemarketers get India. Pollsters get India. Bill collectors (heaven forbid) get India. IRS? India.
Lawyers? Process Servers? India. Prank calls (but I repeat myself)? India. Call the damn cell phone at 4am? India.
Is this great or what? Whomever implements this, sign me up!
July 13th, 2009 at 6:00 pm
Mother-in-law calls for the tenth time today looking for my wife? India. India. India. India. India. India. India. India. India. India.
July 13th, 2009 at 6:40 pm
bergsten@5:44pm
I believe whoever holds the securitized mortgage has to eat a loss if they take on more years with the (lower) teaser payments. As was shown by cramdowns being shot down in the Senate by bank lobbyists, nobody wants to eat a loss like that unless it is enforced by the free market.
Stupid? You bet. In fact, Yves Smith at Naked Capitalism has pointed out that a30-50% cramdown of a delinquent borrower’s mortgage principal would cost less to banks than foreclosing on and auctioning the house.
July 13th, 2009 at 6:54 pm
@emmanuel117
Thanks (I’ve been asking this on and off for weeks, and you’re the first one to actually answer).
Thing of it is, though, WOULD the holders eat a loss? If they’ve been losing on their investment up until now, one would think one would have heard about it — it’s been 3-5 years now.
In any event, I’m not suggesting lowering principal, “simply” extending the original terms of the loan long enough for something sensible (if possible) be done. Seems to me that if you lower principal when value goes down, it’s “only fair” to raise principal when value goes up.
Bet that won’t fly either…
July 13th, 2009 at 7:13 pm
@bergsten: the Boston Fed piece discounts the securitization problem. But only 130,000 mortgages were renegotiated — VERY broadly defined — during the period they looked at.
July 13th, 2009 at 8:36 pm
saw this suggestion here http://economistsview.typepad.com/economistsview/2009/07/the-shadow-knows.html#more
ll this proposed regulation is not necessary. Just change the rules so that any officer of a company may not exercise options granted to them until they’re not officers of the company anymore, at which point they MUST exercise and hold the shares for at least 5 years.’
maybe even that 5 year span isn’t long enough. buts a start
July 13th, 2009 at 8:50 pm
Geniuses again at work:
U.S. mulling mortgage aid for unemployed
http://www.reuters.com/article/newsOne/idUSTRE56D04920090714
It’s not actually mortgage aid for the homeowners, but a secret subsidy for the banks. As Meredith said this morning in qualifying her endorsement of banks, unemployment is likely to rise to 14% and the banks cannot survive that. Obviously, banks not surviving is unthinkable in certain quarters, so just use taxpayer money to allow them to pretend these people aren’t unemployed. When the banks don’t go out of business, they can tell us how realistic the stress tests were.
July 13th, 2009 at 9:23 pm
I’m really going to follow this advice from the article:
“I would advise people, if they hurt themselves, to swear,” he adds.
July 14th, 2009 at 1:01 am
“Last week a story which gained very little traction hit the financial newswires. The U.S. Treasury is working on an internal project informally called “Plan C” which seeks to deal with further problems in the economy before they occur. The anonymous report came out stating the administration is reluctant to commit any additional money especially to the level mentioned in the report. However this is a disturbing new development in our bailout nation since this is one of the first times that the U.S. Treasury will try to preemptively deal with a financial problem.
The issues with this Plan C is that it is setup to be a buffer on further deterioration in various loan categories but the big one is commercial real estate. The commercial real estate market is gigantic and many of those loans are still active:…”
http://www.mybudget360.com/the-doctrine-of-preemptive-bailouts-and-the-biggest-bailout-you-havent-heard-about-the-us-treasury-plan-c-and-the-35-trillion-you-will-be-paying/