We are a commune of inquiring, skeptical, politically centrist, capitalist, anglophile, traditionalist New England Yankee humans, humanoids, and animals with many interests beyond and above politics. Each of us has had a high-school education (or GED), but all had ADD so didn't pay attention very well, especially the dogs. Each one of us does "try my best to be just like I am," and none of us enjoys working for others, including for Maggie, from whom we receive neither a nickel nor a dime. Freedom from nags, cranks, government, do-gooders, control-freaks and idiots is all that we ask for.
Our Recent Essays Behind the Front Page
Monday, November 26. 2007
Total Control: How Brussels regulates our daily lives. Der Spiegel
The Times of London tentatively outs Hillary Clinton
American Thinker outs the Nazis
Chauncey Bailey and Oakland's Moslem Bakers. Classical Values
Immigrants an economic boon to NY State? NY Sun. I see no distinction made between legal and illegal in the story, and I wonder about those numbers.
Rowan Williams - Public Embarassment. Roger Kimball
From useful idiot to useless idiot. The Tanja Nijmeijer story.
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Good piece @ American Thinker. It's true, one of the great propaganda coups of all time has been the popular culture penetration of the Soviet meme of Nazism being ''far right''. It just isn't. It can't be, it's statist.
The difference between Hitler and Stalin was much more simple than either 'ism' would have us believe--in fact the difference was that one was German, the other Russian.
Beyond that, what was the practical difference in the two ideologies?
Yes, wealth and money can disappear with no winners
Who are the winners in mortgage mess?
Also: What exactly is a 'write-down'?
By John W. Schoen
Nov. 25, 2007
The financial markets are pretty skittish these days as banks and other mortgage lenders continue to report big losses from mortgage loans gone bad. But in any market, one person’s loss is often another person’s gain. So where did all those “losses” from bad mortgages go? And are there any winners in all of this ?
Recently you see in the headlines all of the big banks "losing" billions of dollars from their participation in the "subprime" mortgage game. What does it really mean that they "lost" this money. It didn't just disappear. Someone gained on this loss, who?
— Rodney Detroit, MI
There may be some potential winners in the Mortgage Meltdown of 2007, but much of the money now being reported as “lost” will never reappear . In some cases, it was never there to begin with. So think of it as having gone to Money Heaven.
For now, the estimates of eventual losses — as much as several hundred billion dollars — are only estimates. Part of the reason is that the story is still being written. Some 2 million homeowners are at risk of defaulting on adjustable loans in the next year or so when those loans “reset” to higher payments. If those loans can be refinanced at more affordable terms, many of those people will be able to continue making payments and will avoid becoming the next foreclosure statistic. If those foreclosures can’t be avoided, you can expect to see reports of additional losses as more loans go bad and more unsold homes get dumped on an already falling housing market.
So far, the losses are being felt in several different places. The first place they’re hitting is the lenders and investors that put up the money used to fund the big pools of mortgages that Wall Street couldn’t get enough of during the housing boom. With home prices rising, lenders assured buyers eager to own a home that they could afford the big fees and high interest rates.
These investors — everyone from hedge funds to insurance companies to wealthy individuals — were looking for the higher returns they could get from bonds that were backed by the monthly payments generated by pools of bundled mortgages. The value of those bonds — and the price investors paid — was determined largely by computer models. These complex formulas looked at borrowers’ credit scores, historical defaults rates, interest rate impact, etc. and helped assure investors they were getting a higher return without taking on higher risk. On Wall Street, that’s a great deal.
In hindsight, the models didn’t work so well. It turns out they didn’t take into account a major bust in the housing market and a full-blown panic in the bond market. When it came time to sell these mortgage-backed bonds, there were no buyers. Even though the bonds are backed by loans which are backed by real houses with real value, in a falling real estate market, no one is quite sure what those houses are worth. And with no buyers, the bonds aren’t worth much.
So when banks and other financial institutions holding these mortgage-backed bonds “marked them to market,” they had to report a big loss on their books. Some adventurous buyers are stepping up and buying these bonds at fire sale prices. If and when the market for these bonds recovers, they may be winners.
The people who wrote these mortgages and then quickly sold them off to Wall Street were also winners. The lenders who originated the loans got paid up front: they collected big fees and then moved on to the next borrower without putting any of their own money at risk. (Some investors are now trying to recover some of those profits in court.)
Homeowners who can’t make their payments are also potential losers: they’ve spent thousands of dollars trying to build equity in a house and will lose all that when they lose their house. When buyers come forward to buy that foreclosed home, they may eventually profit from buying in a depressed market. But they won’t know until the market recovers whether the strategy worked.
Finally, the neighbors of people who lose their homes to foreclosure also lose. Various studies have tried to quantify just how much. But anytime you add a bunch of foreclosed properties to a local market that already has more homes for sale than buyers, the market value of everyone’s house goes down. If you want to identify the winners there, you probably have to look for the home owners who sold during the peak of the housing boom, after years of easy lending pushed prices to unsustainable levels.
What does "write-down" mean?
— Rod Vancouver, WA
Accountants who are concerned with tracking how much a company’s assets are worth often have to face up to the fact that things aren’t worth what they thought they were the last time they looked at the books. To reflect the change, they have to “write down” the lost value of that asset on the books. Companies that sell shares to the public are required to ’fess up once every three months in a financial statement that lays out how things are going since the last filling. There are all kinds of reasons why companies write down assets.
Sometimes the falling value of an asset is expected. A piece of equipment loses value over time, and there are rules for how quickly its value depreciates. (That lost value often can be deducted from income, helping to reduce taxes.)
Other write downs are unexpected. Unsold inventory that includes outdated technology or designs won’t get the retail price for this year’s model. If a company closes down a store or a factory that isn’t profitable, the hard assets (real estate, machine tools, etc.) may be sold for a fraction of the value they hold as a profitable business. So the books have to reflect that lost value. (If the asset is worth nothing, the accountants may decide to write it off the books completely and take a “write-off.”)
Write-downs aren’t necessarily a bad thing: a lot depends on the reason the company gives for taking the write-down. When General Motors recently took a $38 billion write-down for tax credits it said it could no longer use, some GM watchers were left wondering: why are they now worthless? Was it because GM was too optimistic in claiming the tax credits in the first place? Or because the company doesn’t expect to have enough future profit to be able to take advantage of them?
Banks and other lenders have been taking billions in write downs lately because of losses on the value of bonds backed by mortgage loans — no that some of those loans are going bad. Part of the problems is that the value of these securities was originally calculated from a computer model — not from an actual market price from a real buyer or seller. It turns out the computers didn’t count on a market panic; some of these bonds now can’t find buyers at any price.
What’s got Wall Street so rattled these days is that companies only have to fess up to writedowns once every three months. No one is really sure if or when there are more shoes to drop from losses on these mortgage bonds. So it may take awhile before the financial markets are convinced the worst of the mortgage writedowns is over.
© 2007 MSNBC Interactive
Citibank hinting this morning that (cough) 40 billion may be their true hickey.
I've been reading Secrets of the Federal Reserve by Eustice Mullins.
I have reached a point where I believe that two time Medal of Honor winner, Marine General Smedley Butler, was correct in this essay "War is a Racket".
I am also at the point where I FULLY understand why Ronald Reagan as well as most of the Founding Fathers said government was our greatest threat.
The "Fed" is, and this is generous, only a quasi-governmental agency, born in total secrecy, and the laws and architecture constructed exclusively by the big banks to allow the big banks to control the US currency.
How does this fit in with Citibank 40 billion loss ..I don't believe a word of what comes out of the mouths of any CEO,CFO of a bank or brokerage firm in this country or any other country. They have proved over the entire life of banking and brokerage in this country that they will lie , cheat ,steal, cook the books, and do whatever is necessary to manipulate the publics investment dollars. It also explains why so few really big corporations with ties to the "Fed" ever fail..the "Fed", being run by banks isn't going to allow it to happen.
Yeah , yeah but Habu what about all the people who did make money??....peanuts is what they got. Their returns could have been much higher, were it not for oleaginous money men. The money game is fixed.
Debt financing is how young people get the tools to build the economy with. Without it, they'd have to save practically their whole lives in order to get into a house and car with which to start adding to the national wealth.
Sure, in a free market there's gonna be bubbles--but the antidote to bubbles is capital controls, and controls always weaken the golden goose while providing ample corruption for the gov't-connected and oleaginous.
This whole credit crisis is about house prices running up a smidge too high, a tad too fast, on the strength of the slug of easy credit it took to beat back the dot-com recession, 911, the war, and Katrina almost all at once.
Obviously, the easy money was also a bit too much, a tad too long. Gov't changes direction only after it goes too far--going too far is the signal for it too change direction, alas.
So, now we have to take the haircut. But the haircut is at a far higher level of GDP, with much sronger corporate balance sheets, then if we'd kept tight money as the Hoover-type antidote to the above-named troubles.
Hoover thought he was protecting the economy by protecting the banks. This time around, it's the banks taking the hit--the banks and r/e speculators (including a few hundred thousand who alas live in the r/e they were speculating).
It's us people--and our eternal internal battle between fear and greed--who who make it a choice between a controlled economy with restricted growth and opportunity vs a dynamic economy with regular bubbles every five or ten years.
Debt financing has it's place but when lenders throw away the underwriting guidlelines they are culpable in the creation of these situations far more so than Joe Sixpack who doesn't even understand simple interest.
And that's what the banks and brokerage houses did, they took people on as borrowers who couldn't spell mortgage, at a time when the consumer was the only thing holding up the entire economy. They then turned around an sold "securitized" financial "investments that were built on a house of cards...they knew what they were doing and they knew if things went to hell they'd be insulated because it's tough to lose when your salary is seven figures, your golden parachute is seven figures and you can simply look at the public and say caveat emptor, sucker.
To them it's a hiccup, a press statement larded with half truths and lies, but to Joe Sixpack it's a long term catastrophy from which he may never fully recover.
I was talking with a retired three star general this Thanksgiving who was in the defense business for years after he retired. Unsolicited he said that business' are run for the top two rungs on the ladder..the CFO's,CEO's and the Senior VP's..the rest can go hang. I was shocked by his candor but not by his observation.
I get your drift--just don't know how much good it does us to lament human nature and the principle of power.
Folks, somewhere around ten trillion in market cap evaporated after the dotcom bubble burst. And, the markets survived. I suspect the mortgage crisis is a blip on the radar in comparison. The subprime market is small percentage of total loans and somewhere around 85% of subprime borrowers are paying their bills. As well, I'm sure lenders factored in higher loss rates with subprime borrowers and they covered their bets with higher rates and fees. The real estate market had to take a breather. The breather will last for years I'm sure but the sky is definitely not falling. In fact, if it were not for the 24 hour talking heads spreading fear and hysteria, most people would not take much notice of all this. Yes, if you are in the 2 or 3 percentile who lose your homes its a crisis. The rest of us don't have a lot to worry about.
Re: Classical Values
Classical Oakland day to day hasn't changed a mite since wonderful hallicon 60's.
The trouble with Oakland is that when you get there, there isn't any there there.
Oakland is a great place.
Probably all the better for Missy Gertrude's discouraging prudes and yanks.
Oakland is a great place......
Compared to Detroit, Dearborn, or New Orleans it's practically heaven.
Oakland--Altamount, where the Stones mercifully killed Woodstock.
Altamont isn't in Oakland, which is a beautiful city.
Me thinks, a mull is a called for on that one.
this is whut i meant--
Anyone who hires Red n Black to police a drug festival are out of their minds.
They just got scared, me thinks.
Never been to those places, and I wager y'all haven't been to Oakland.
Been to LA, SF, NYC.
Oakland can't be brought low enough to compare.
Real American City.
Unless there's been a miracle performed in Oakland then I'll stick with Gertrude.
Been on all seven continents and most every capital city of every country on those continents .....Oakland does not rank: it is rank.
Apples and oranges comparisons.
No capitol in Oakland.
But I get your drift and like I wrote to anumissy, Gertrude and Alice can stay on the other side of the bay or in Berkley.
Oakland is not for the faint.
good commonsense article on the sub-prime mess,imo
(caveat: there's no financial wizard posting this):
from Colorado Springs Biz Journal
The injustice of ‘doing something’ about subprime
By Alex Epstein | November 23, 2007
Read only if your lunch is already safely settled.
i meant the InfoUSA/Opinion Researcch/CNN/ nexus, not the Huma Abedan part--which is just tabloid, and being laid out--you'll pardon the expression--as a misdirection.
I know Oakland. My sis lived in Oakland. I spent lots of time in Oakland. Oakland sucks.
She lived right smack on top of a big fault line running through the Oakland hills. House on the side of the hill, kinda hanging there. Once she moved I've never been back.
Good article Gumshoe... and you are correct re the commonsense part... which usually means it will never happen... the Dem's will find a way to make political hockey out of this business. Supported by a number of Repub's I'm afraid.
Read that Insty link earlier Buddy... why the hell isn't more being done to investigate that crap, at least by media if not enforcement... never mind... I know the answer.
Yeah Buddy I believe you're correct. Lamenting the fear/greed thing is a bit like always sailing inot a headwind. I had a weak moment for the little guy. I have to guard against that or they'll take my Gen Curtis LeMay/Quantrell's Raiders membership away.
No it does take two to tango and even if Joe Sixpack can't spell mortgage he knows when he has a sawbuck left at the end of the month that he might want to remain a renter until he at least harvests his next crop of wildwood weed.
BTW, I've got to go up to Montana this week to help out my sick mother in law and her husband, both of whom are in their 80's. Right now it's about 76 outside..Thursday it'll be about 11 outside ....burrrrrr.
"I had a weak moment for the little guy"
LOL --that's classic habu, habu--savage attack on social darwinism, couched in throwaway line. But, point taken. I wasn't being Hobbesian so much as hmmm...stumped...well i guess i was being Hobbesian.
Hope the old folks are okay up there. That could be a helluva deal if you get blizzarded in--better take a few bottles of brandy and leave one of 'em with the EMS on your way thru town.
BTW, fix DC here:
I've already filled the flask for the frozen north.
Charles Murray is brilliant but damaged goods in the world ever since "The Bell Curve" where once again truth was severely mugged by PC'ers.
Plus, we'll never get away from the welfare system..well never is a long time but it's gonna be a L O N G time com'in.
It's a bit like finding a cure for cancer. It's an industry. We can't afford to find a cure for cancer or a dozen other diseases. Too many people "working " the problem to ever solve it. If a guy/gal solved cancer tonight in a lab somewhere he/she would be dead by morning.
How many times have you heard the story of the garage tinkerer who developed a carburetor that gave a V8 60 mpg only to find he'd "been mistaken" as announced by NOGO Gas Cartel.
Want to begin becoming un -PC ...wish everyone a Merry Christmas at work instead of the PC "'Happy Holidays"...
sure Kareem is gonna scream and all the other atheists, Godless commie pinko bastards but fcuk'em ...
Merry Christmas ..try it like you did when you were a kid and the world only had four countries with ICBM's ...ah the good ole days.