Like the illusion of Wall Street, with its vast and powerful investment banks, now shuttered, China too is an illusion perpetuated by the Globalists that gave us the 15,000 mile Caesar salad, poisoned cat food and lead based paint on babies' pacifiers. Like the illusion that money would come from thin air to always push housing prices higher, China has spent a generation pursuing its illusion. Pursuing an unattainable dream to be like the West, while 6000 years of its carefully shepherded top soil blows into the sea.
"So the Footsie has tumbled again. Forgive me for asking, but where are the economists? As the nation approaches recession, an entire profession seems to have vanished over the horizon, like conmen stuffed with cash, and thousands left destitute behind. They said recessions were over. They told politicians to leave things to them and all would be fine. Yet they failed to spot the sub-prime housing crash, and now look at the mess.
When I studied economics we were told we would be masters of the universe. Ours was not a dismal but a noble science. It had harnessed the verities of maths to those of human behaviour and would go on to conquer politics. Rampant recession would go the way of hyperinflation. Like leprosy and cholera, they were epidemics that modern medicine had rid from our shores.
It did not matter if the economists were welfare Keynesians such as Myrdal, Robinson and Galbraith or free-marketeers such as Marshall, Friedman and the Institute of Economic Affairs. All were "social scientists". They claimed to have cracked the DNA of economic exchange, to have turned the base metal of money into political gold.
We believed them. We believed the Keynesians until we slumped into stagflation. We believed light-regulation capitalists such as Margaret Thatcher and Gordon Brown, that they could convert boom-bust into an upward sloping plane of glory. We believed the Bank of England when it said that, in its hands, inflation was dead and prosperity eternal. Bliss was it in that dawn to be alive - and an economist."
Posted: Wed Jul 09, 2008 5:42 pm Post subject: Re: Housing & Economic Collapse - In Progress - #2
Eli wrote:
There are so many Bank owned properties around the country it is frightening.
The Banks themselves are underwater and under capitalized. We haven't even really gotten rolling yet.
edit just read something interesting over at the ticker forum, Indy Mac has 16.5 billion of FDIC insured accounts. The FDIC only has around 50 billion to its name. One bank could wipe out 20% of the FDIC.
Truly scary times.
I don't think the FDIC pays out a lot to cover the deposits... they marry them up with another "solvent" bank. But ya, if there is no groom or shells for the shotgun... your right. _________________ -Dac
Winners never quit and quiters never win, but those that never win and never quit are idiots.
Joined: Oct 23, 2004 Posts: 5928 Location: New Jersey
Posted: Wed Jul 09, 2008 6:37 pm Post subject: Re: Housing & Economic Collapse - In Progress - #2
shortonoil wrote:
Eli quoted:
Quote:
Clearly, investors remain concerned. Credit default swaps - a kind of insurance against the possibility of Fannie (, ) and Freddie (, ) defaulting on their corporate bonds, are at their most expensive levels in 14 weeks; both companies are expected to report steep losses for the second quarter; and their main business, mortgage securitization, is under pressure as home price values decline and foreclosure numbers rise.
With the world sitting on a quad-trillion $s in derivatives, a major counterparty default by or against F&F could bring the whole system down.
It would take the next 200 years just to figure out who owes who. Untold trillions of digi-dollars would just go “poof”. The entire banking/financial system would come to a complete stop - for ever!
The newest finanical crisis, previously predicted in this thread, is gathering momentum.
Fannie/Freddie have seen the interest rates they pay rise smartly today. It won't take another doomsday prediction from Fortis for most to soon realize that Fannie/Freddie are just not going to make it in their present form much longer.
So the question is then - what comes next?
To avoid having thousands of auditors comb through financial company books for the next 200 years, I think the most likely short term resolution of the financial crisis is the direct (non-FDIC) government assumption and/or guarantee of financial companies. This will be as successful as the takeover of Northern Rock (disasterous) but no will care to avoid a financial meltdown before election day.
Needless to say, such actions may cause many new additional problems.
Sorry I don't have much time to respond further this week.
PS as roccman indicates, Indymac is bankrupt, under FDIC control, but not officially declared insolvent. These are strange times.
Quote:
On July 7, 2008, the Company issued a press release announcing its intention to exit its retail and wholesale mortgage lending business, as a result of the current housing and credit markets. Pursuant to General Instruction F to the Securities and Exchange Commission’s Current Report on Form 8-K, the press release is attached to this Current Report as Exhibit 99.1 and the information contained therein is incorporated by reference herein.
In light of the current operating environment and related deterioration of the Company’s financial position since the end of the first quarter of 2008, the Company and IndyMac Bank, F.S.B. (the “Bank”) have been working closely with its federal banking regulators. The Office of Thrift Supervision (“OTS”) has placed certain restrictions on the Bank’s activities and advised the Bank that it is no longer “well capitalized.” As a result of this reclassification, the Bank is subject to the Federal Deposit Insurance Corporation’s (“FDIC”) brokered deposit regulation. This regulation prohibits the Bank from accepting brokered deposits, except in compliance with 12 C.F.R. Sec. 337.6(b)(2). The Company has requested a waiver from the FDIC but has not yet received a waiver from the FDIC. The Company cannot make any assurances that such a waiver will be granted or what the waiver will require.
The Bank has continued to experience elevated levels of deposit withdrawals since Senator Schumer’s public release of his letters to our regulators and key lending counterparties. In response, these counterparties have placed certain additional restrictions on the Bank’s borrowings. As a result, the Company’s current operating liquidity is approximately $1.7 billion.
Additionally, as a result of not being deemed “well capitalized,” the Bank’s borrowing costs and terms from the Federal Reserve Bank, the Federal Home Loan Bank and other financial institutions, as well as the Bank’s premiums to the Deposit Insurance Fund and the Bank’s assessments and application fees paid to the OTS, are expected to increase.
IndyMac SEC Filing _________________ It's already over, now it's just a matter of adjusting.
Joined: Apr 27, 2007 Posts: 4351 Location: The Great Sonoran Desert
Posted: Wed Jul 09, 2008 6:43 pm Post subject: Re: Housing & Economic Collapse - In Progress - #2
DantesPeak wrote:
So the question is then - what comes next?
1) a systemic global crash of all major economies
2) the start of a new war
3) martial law
4) JP Morgan becomes the one sole standing bank in the US and assumes all "trustee" activities of every other bank.
I may have the order screwed up between 1 and 2.
I also intentionally left out 5, 6, and 7 in an effort to maintain the integrity of this thread...(see mods - I can play nice.) _________________ "There must be a bogeyman; there always is, and it cannot be something as esoteric as "resource depletion." You can't go to war with that." Emersonbiggins
"... hope is a rotten-thighed whore" Niko Kazantzakis
Joined: Jul 04, 2005 Posts: 18 Location: Vancouver, BC
Posted: Wed Jul 09, 2008 7:21 pm Post subject: Re: Housing & Economic Collapse - In Progress - #2
Eli wrote:
There are so many Bank owned properties around the country it is frightening.
The Banks themselves are underwater and under capitalized. We haven't even really gotten rolling yet.
edit just read something interesting over at the ticker forum, Indy Mac has 16.5 billion of FDIC insured accounts. The FDIC only has around 50 billion to its name. One bank could wipe out 20% of the FDIC.
Truly scary times.
I was doing some research the other day on Canadian GIC's and who guarantees them and how well funded they might be. Turns out they are guaranteed by the CDIC, our equivilent of the FDIC. They have a projected balance of assets of $1.7 billion in cash and investments for 2008.
So according to this, they have assets to cover 0.34% of deposits. RBC, who have total deposits (not all of which are covered by deposit insurance) of $365 billion, would wipe out CDIC at least 100 times over.
I guess that this means that my accounts are fully insured, as long as my bank doesn't go bankrupt?
Joined: Sep 16, 2004 Posts: 4901 Location: Southwest WI
Posted: Wed Jul 09, 2008 8:17 pm Post subject: Re: Housing & Economic Collapse - In Progress - #2
You wouldn't think the next depression is near with activity in my town. A lot of building activity going on. New buildings being built, big additions, etc. They turned the former Krispy Kreme in a Buffalo wing shack!! WTF? Its like a million dollar+ brick building and their selling wings!
There are a ton of houses up on the market for sale around here, with very few that i've noticed that have sold.
So at this point, should a person just pull whatever they have in a bank account out and buy whatever (coins/alcohol/dirty magazines)? _________________ Clothing should be optional.
Joined: Jun 18, 2005 Posts: 3978 Location: In a van down by the river
Posted: Wed Jul 09, 2008 8:52 pm Post subject: Re: Housing & Economic Collapse - In Progress - #2
Personally I don't think it really matters.
It is a good idea to have some cash handy in case of a bank run but unless you have over 100,000 dollars in any one bank I wouldn't panic.
Unless you are banking at Indy Mac that is if that is the case I would get in the car right now. There are reports that they are going through some trouble, go figure with the stock down to a buck.
Joined: May 20, 2008 Posts: 972 Location: I have a whole ward
Posted: Wed Jul 09, 2008 8:58 pm Post subject: Re: Housing & Economic Collapse - In Progress - #2
A lot of the blame lies with the business schools and their MBA programs.
In the 1980's & early 90's maximize share holder value was the montra. Leverage buyouts, insane uses of debt to control even greater values in companies, Arbitrage, derivatives and the complex (Totally Ridiculous) formulas were all in vogue.
When questions were raised concerning looking at the big picture, the long term health of a company, and to maintain and grow share holder value over greater periods of time instead of maximizing current returns....they looked at you like you were a little nuts! At least that was the way I saw it at Kenan-Flagler.
The government has lot of the blame in this mess also. Remember about eight years ago when the Congress was jumping down the throats of mortgage companies saying that they were discriminating in their lending practices? Well the lenders opened up the spigots and loaned to any warm body coming through the door. The suits making the loans knew that they could not be paid back. But they thought what the hell, I will get my commission and my big bonus at year end and be gone before the SHTF.
Well.........The S is HTF. _________________ Viddy well, little brother. Viddy well.
Posted: Wed Jul 09, 2008 10:01 pm Post subject: Re: Housing & Economic Collapse - In Progress - #2
AlexdeLarge wrote:
The government has lot of the blame in this mess also. Remember about eight years ago when the Congress was jumping down the throats of mortgage companies saying that they were discriminating in their lending practices? Well the lenders opened up the spigots and loaned to any warm body coming through the door. The suits making the loans knew that they could not be paid back. But they thought what the hell, I will get my commission and my big bonus at year end and be gone before the SHTF.
This little ditty is a favorite bit of propaganda from the suits to blame anyone but themselves for their greed and lies. And it is absurd. The point of fair credit practices was to not redline areas of residence or properties for loans, and to use the same credit standards across the board. Properties still had to appraise well, and borrowers had to meet all credit and income qualifications. Bankers were told not to throw Jose or Jamal out in the street which, frankly, bankers often liked to do, without at least checking credit or qualifications.
Loaning money to any warm body coming in the door was the bankers' idea alone, in order to personally enrich themselves.
Posted: Wed Jul 09, 2008 10:28 pm Post subject: Re: Housing & Economic Collapse - In Progress - #2
roccman wrote:
1) a systemic global crash of all major economies
2) the start of a new war
3) martial law
4) JP Morgan becomes the one sole standing bank in the US and assumes all "trustee" activities of every other bank.
I may have the order screwed up between 1 and 2.
I also intentionally left out 5, 6, and 7 in an effort to maintain the integrity of this thread...(see mods - I can play nice.)
Haven't been posting here in almost three years, but with the development in the markets lately I couldn't resist coming back (and I even remembered my PW!).
Anyway to your points. I don't think that War is really a possiblity. There is a serious question on who would finance it and against whom. Iran is a "logic" target, but I doubt that anybody is will to finance that endavour for the US, much less do I think they want to risk that Iran really does disrup the flow of oil.... But then again, they haven't really shown to be the smartest knife in the drawer these past few years.
Personally I am surprised how quickly this is going down. I had banked on having at least until mid 2010 before the hammer comes down and feel slightly with my ass exposed and are wondering how it will look at the end of the year.... I think a widespread panic is not out of the question and the financial system coming to a grinding halt neither.... And the worst: I see this happening in short order on a global scale.
Posted: Wed Jul 09, 2008 11:18 pm Post subject: Re: Housing & Economic Collapse - In Progress - #2
Quote:
4) JP Morgan becomes the one sole standing bank in the US and assumes all "trustee" activities of every other bank.
What makes you think that JP Morgan would be the one to survive? I think it will be one of the first big ones to go. It has over $81 trillion dollars in Derivatives with $1.4 trillion in assets. It's credit derivatives are over $8 trillion. These numbers are staggering. The credit derivatives are almost as much and the US National debt. If its credit derivatives lose only 10% (which is pretty conservative), that's more than the Fed can bail out.
This is a bank that is too big to fail but there is no way to stop it unless they create huge amounts of money (which is what I think they will do).
Just about the only sales in my neighborhood are foreclosures, short sales and other distressed sales. They are going for about half their peak value a couple of years ago.
There's a humonguous house (I'd guess about 5000-6000 sqft) that was under construction nearby. The exterior shell was completed about a year ago and all work has pretty much stopped at that point. The unusual part is that the family appears to be living in the house in it's very much unfinished state for many months now. When they first started living in it, it had no doors or windows.
We have another neighbor who has been a real estate rental investor (including apartment buildings), for many years. I figured she would be doing pretty well since she had bought the real estate before the boom. I looked in the county records and it appears that she did a lot of buying during the boom (no selling) and mortgaged to the hilt. Then, starting in Feb. 2006, I see lots of foreclosure filings (22) against her. She had no records of foreclosures before that point. Only 9 have been completed (foreclosure judgement rendered). So I can see a pattern where in early 2006, foreclosures only took 2-4 months from initial filing and now they are taking 8 months or more. There are many from early 2007 that haven't completed yet. That leads me to believe that the courts are getting backlogged.
So the banks are really getting hit hard here in Florida. How long can they survive with such losses?
Posted: Thu Jul 10, 2008 4:13 am Post subject: Re: Housing & Economic Collapse - In Progress - #2
Fannie and Freddie insolvent according to former St Loius fed president.
Quote:
July 10 (Bloomberg) -- Borrowing at Fannie Mae, the U.S. government-sponsored mortgage company, has never been so expensive and it may not get better any time soon.
Fannie Mae paid a record yield relative to Treasuries on the sale of $3 billion in two-year notes yesterday amid concern the biggest provider of financing for U.S. home loans won't have enough capital to weather the worst housing slump since the Great Depression. The company's credit-default swaps show traders are treating the AAA rated debt as if it were five steps lower. Fannie Mae shares tumbled 13 percent yesterday in New York to the lowest level in almost 14 years.
Chances are increasing that the U.S. may need to bail out Fannie Mae and the smaller Freddie Mac, former St. Louis Federal Reserve President William Poole said in an interview. Freddie Mac owed $5.2 billion more than its assets were worth in the first quarter, making it insolvent under fair value accounting rules, he said. The fair value of Fannie Mae's assets fell 66 percent to $12.2 billion, data provided by the Washington-based company show, and may be negative next quarter, Poole said.
``Congress ought to recognize that these firms are insolvent, that it is allowing these firms to continue to exist as bastions of privilege, financed by the taxpayer,'' Poole, 71, who left the Fed in March, said in the interview yesterday.
Joined: May 20, 2008 Posts: 972 Location: I have a whole ward
Posted: Thu Jul 10, 2008 7:15 am Post subject: Re: Housing & Economic Collapse - In Progress - #2
Fiddlerdave wrote:
This little ditty is a favorite bit of propaganda from the suits to blame anyone but themselves for their greed and lies. And it is absurd. The point of fair credit practices was to not redline areas of residence or properties for loans, and to use the same credit standards across the board. Properties still had to appraise well, and borrowers had to meet all credit and income qualifications. Bankers were told not to throw Jose or Jamal out in the street which, frankly, bankers often liked to do, without at least checking credit or qualifications.
I disagree. It was not propaganda that the feds were threatening litigation and investigations. It was an open opportunity for civil suits against the lending institutions for "alleged" discrimination in their lending practices. The lenders then went out of their way to lend to anyone......Jose, Jamal, Tommy, linda or Billy Bob. Greed also played a big part just like I said. The suits figured they would loan to anyone, even marginal customers, get their commisions and bonuses..........and be gone, working somewhere else before the "Chickens came home to roost." _________________ Viddy well, little brother. Viddy well.
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