We are entering the stage where ideology and education about sustainability and living within carrying capacity will be augmented by the reality of identifiable consequences of our overshoot. External consequences like the peaking and decline of below ground energy and commodity resources, above ground environmental degradation of our climate, soils, fisheries and climate will have a profound effect on our culture.
2009 is the year when we start to feel it.
Posted: Sat Sep 06, 2008 8:28 am Post subject: Re: Fannie Mae and Freddie Mac are toast!
Paulson isn't intervening here because it's only a $25 bil problem. No way. The auditor's (Morgan Stanley) saw something that even shocked them. Betcha the ultimate price tag to the taxpayer will be fifty times $25 bil. Depending on where the cost of govt debt goes with the bailout it could cost us 400 times the $25 bil. Paulson and his Wall Street cronies are full of crap. _________________ Civilization: the biosphere's skin disease
Posted: Sat Sep 06, 2008 9:25 am Post subject: Re: Fannie Mae and Freddie Mac are toast!
With the typical foresight of a cockroach, the government is jumping into the Potomac with an anvil tied around its neck. Has anyone in Washington noticed that housing prices are going down! Even according to the most optimistic analysts they will continue to go down. Many can see another 40% drop.
If 40% does occur (I’ll put money on it that it does) those $6 trillion in mortgages will be worth $2.4 trillion less. The government is backing them with the “full faith and credit” of the US.
So instead of providing money to the Highway Fund to keep our out dated and obsolete bridges standing, we will be working 24/7 to provide income to Wall Street and Chinese bond holders. This must be the Washington epitome of government service to the people?
When this whole fiasco comes crashing down around our ears, act surprised! That way people won’t accidentally confuse you with someone who may be from the government.
Joined: Sep 25, 2004 Posts: 4825 Location: Boston, MA
Posted: Sat Sep 06, 2008 10:55 am Post subject: Re: Fannie Mae and Freddie Mac are toast!
Wait, what?
How does a mortgage default lead to a Total Loss for the lender?
Unlike a credit card loan, a mortgage is backed by an asset. That asset doesn't suddenly become worthless once the debtor defaults.
If someone default, you take the house and rent it out until you can find a buyer. _________________ "www.peakoil.com is the Myspace of the Apocalypse."
Posted: Sat Sep 06, 2008 11:23 am Post subject: Re: Fannie Mae and Freddie Mac are toast!
Tyler_JC wrote:
Wait, what?
How does a mortgage default lead to a Total Loss for the lender?
Unlike a credit card loan, a mortgage is backed by an asset. That asset doesn't suddenly become worthless once the debtor defaults.
If someone default, you take the house and rent it out until you can find a buyer.
In an ideal world, that would be true.
But we speak here of a housing market where a significant amount of new housing was built in suburbs. Many of those suburban houses, once foreclosed, may be impossible to either sell or rent.
Sky-high gas prices (for all the price declines we've seen over the past two months, oil is still above $100) and growing unemployment means that far fewer can afford to live in the suburbs, even as renters. Diffused absentee landlordship has resulted in the physical erosion of tens of thousands of new homes from neglect and house-stripping theft.
I don't know what the exact numbers are, but I'd guess that hundreds of millions of dollars of mortgages are back by completely worthless housing assets. And many of these unsaleable, unrentable properties may even be liabilities because of property taxes.
Joined: Mar 12, 2007 Posts: 1014 Location: As close as I can get to the beginning of the pipe.
Posted: Sat Sep 06, 2008 11:32 am Post subject: Re: Fannie Mae and Freddie Mac are toast!
In addition to the extreme loss of value of large, hard to heat houses far from jobs, many of these mortgages have been leveraged 20:1 or more. Thus a loss in value of the original asset (the house) of only 5%, or even less, can expunge the entire value in the mortgage paper. And many of the original mortgages were $0 down, which means that there was never any value in them to begin with. _________________ "When fascism comes to America it will be wrapped in a flag and carrying a cross." --Sinclair Lewis
Joined: Oct 15, 2004 Posts: 2322 Location: Arkansas
Posted: Sat Sep 06, 2008 11:42 am Post subject: Re: Fannie Mae and Freddie Mac are toast!
Tyler_JC wrote:
Wait, what?
How does a mortgage default lead to a Total Loss for the lender?
Unlike a credit card loan, a mortgage is backed by an asset. That asset doesn't suddenly become worthless once the debtor defaults.
If someone default, you take the house and rent it out until you can find a buyer.
I agree with an above post that it depends on what that asset is. Not all things have value, and some things have negative value. For example, there are lots of unfinished subdivisions here, which have no value, even negative value if you consider paying taxes on them. Same with unfinished homes which banks are taking back, which are deteriorating while at the same time the bank is paying real estate taxes on them and insurance (yes, insurance at least liability insurance). Or, some finished homes may not have any value, either bc the area they cannot be sold, deteriorate, need upkeep (it amazing how fast a home without utilities turned on starts to deteriorate), paying real estate taxes, paying insurance. So, its not always true that an asset has some value.
Posted: Sat Sep 06, 2008 12:08 pm Post subject: Re: Fannie Mae and Freddie Mac are toast!
firestarter wrote:
Betcha the ultimate price tag to the taxpayer will be fifty times $25 bil..
It has to be. The 25 billion is an underestimate and is based around other numbers fixed in a static state. But economic numbers are always dynamic and they are all racing each other, goading each other on, towards an epic crescendo, money wise. It'll be trillions before it's all done.
Posted: Sat Sep 06, 2008 12:34 pm Post subject: Re: Fannie Mae and Freddie Mac are toast!
Tyler_JC wrote:
Wait, what?
How does a mortgage default lead to a Total Loss for the lender?
Unlike a credit card loan, a mortgage is backed by an asset. That asset doesn't suddenly become worthless once the debtor defaults.
If someone default, you take the house and rent it out until you can find a buyer.
I dunno, maybe I'm a bit slow here, but are you all not missing the point?
A mortgage gets packaged with a load of other mortgages into different tranches for pension funds etc, a pension fund buys this crap for x amount & then sees a 9% default rate, so naturally the pension fund wants this crap off their books but they can't find any suckers to buy it.
I don't really think the pension fund is concerned with how it all plays out, it just wants to cut it's losses so the loss is a hell of alot more than 9%.
Seriously, I'm not being sarcastic, if anyone can set me straight, please do.
Posted: Sat Sep 06, 2008 12:46 pm Post subject: Re: Fannie Mae and Freddie Mac are toast!
Hiderow wrote:
Tyler_JC wrote:
Wait, what?
How does a mortgage default lead to a Total Loss for the lender?
Unlike a credit card loan, a mortgage is backed by an asset. That asset doesn't suddenly become worthless once the debtor defaults.
If someone default, you take the house and rent it out until you can find a buyer.
I dunno, maybe I'm a bit slow here, but are you all not missing the point?
A mortgage gets packaged with a load of other mortgages into different tranches for pension funds etc, a pension fund buys this crap for x amount & then sees a 9% default rate, so naturally the pension fund wants this crap off their books but they can't find any suckers to buy it.
I don't really think the pension fund is concerned with how it all plays out, it just wants to cut it's losses so the loss is a hell of alot more than 9%.
Seriously, I'm not being sarcastic, if anyone can set me straight, please do.
Yeah. It completely damages confidence. That's why credit has frozen. Noone wants to accept this crap anymore.
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