December 17, 2007

Alan Greenspan: mendacious or merely senile?

Filed under: Affordable Housing,Alan Greenspan,Bailout,Fed,Financial Responsibility,Rant — labordaytheses @ 7:32 am

Excerpt (at length) via Economist’s View:Greenspan Says He Favors a Government Bailout for Homeowners, by Steve Matthews, Bloomberg: Former Federal Reserve Chairman Alan Greenspan said he favors spending U.S. government money to bail out mortgage borrowers who risk losing their homes because they can’t make payments.

Greenspan, speaking on ABC’s ”This Week” program aired today, said cash bailouts, while creating a larger budget deficit, have the advantage of helping homeowners without distorting property prices or interest-rates on mortgages.

”Cash is available and we should use that in larger amounts, as is necessary, to solve the problems of the stress of this,” Greenspan said. ”It’s far less damaging to the economy to create a short-term fiscal problem, which we would, than to try to fix the prices of homes or interest rates. If you do that, it’ll drag this process out indefinitely.”

Greenspan’s suggested approach differs from that of Treasury Secretary Henry Paulson, who negotiated a freeze on the interest rates of some subprime mortgages without pledging any government money to help homeowners or banks.

The WSJ Economics blog has more. Greenspan is asked next if there needs to be a bias toward activism right now:

It depends what you mean by activism. If you mean doing something that works, absolutely. If you mean doing something just for the sake of perceptions, that’s very costly. I don’t know if [infusing cash] would work, but it would certainly help people — it would help their incomes; it would help their personal state, without affecting the structure of the way markets are behaving and the way adjustment process is going on. It’s very critical that this thing reach a selling climax — if I may put it in other words, exhaust itself. It’s only when the markets are perceived to have exhausted themselves on the downside that they turn. Trying to prevent them from going down just merely prolongs the agony.


Cross-posting the comment I posted there as I so rarely have time to update this blog these days


Seriously? We’re expected to take advice on how to fix the mortgage mess from one of its principal architects?

I have just 3 questions for Alan:

1) Exactly whose “cash is available” please? I have a sneaking suspicion Alan is offering to let me and the rest of the little people who pay taxes pick up the tab for his mortgage mess. I, however, am a little strapped and need to use my savings to pay my expenses which have more than doubled since 2000 (weird, I know, since inflation is so benign)

2) Can someone please explain how handing out cash to the weak hands in the market will help us get the “selling climax” correction that even AG acknowledges is necessary over with faster? I admit to not being an economist, but it sounds like a surefire recipe for *prolonging* the correction to me.

3) Where, in all of this, is the concern for prudent, hard-working families who can no longer afford homes because institutional bubble blowers have allowed property prices to get so wildly out of touch with reality?

I’ve said it before, and I will say it one more time here: this crisis is, at its root, an affordability crisis. People with good jobs and good savings can no longer afford to buy a home for their family in many parts of this country. Absent socialism, we have exactly two options for fixing this – – incomes can rise a *lot* or prices can drop a *lot.* That’s it – there are no other real solutions.

I think it’s high time the geniuses who got us into this mess step out of the way and let the free-market they ostensibly worship do what it’s designed to do — determine appropriate prices.


September 3, 2007

Ant’s Labor Day Theses

From: The Worker Ants of the U.S. Economy

To: The Grasshoppers and Ruling Class Politicians who support them



  • Calling people who got 110% LTV interest-only loans to buy houses “homeowners” is ridiculous and insults the intelligence of anyone who can count.
  • The correct term for these people is “over-leveraged real estate speculators”
  • Calling financial services conglomerates that issued 110% LTV interest-only loans to people who couldn’t possibly repay them unless prices continued to skyrocket “distressed lenders” is equally ridiculous.
  • The correct term for these institutions is “over-leveraged real estate speculators”

Politics – New Rules

  • Politicians currently stumbling all over themselves to get on tv to talk about their shock and dismay with “reckless”, “irresponsible” and predatory lending are required to state at the outset of any interviews their reason for not being concerned with this problem back when there was still time to actually do something about it.
  • Politicians from New York and New York bedroom communiities are not allowed to demagogue on behalf of “homeowners”, period, without first returning all campaign contributions from hedge fund managers who live in their districts.
  • Senator Chris Dodd, in particular, must make the following truth in advertising disclaimer prior to all public comments on the subject of subprime lending. “My name is Chris Dodd and I’m a whore for the financial services industry.
  • While we’re at it, it would save a lot of time if politicians just wore sports jerseys naming their corporate sponsors (like Nascar drivers do) to make it easier to tell who they work for.

The Economy

  • At it’s root the “mortgage crisis” is nothing more than an affordability crisis.  Put simply, people with good jobs, good savings and good credit can no longer afford to purchase a home in many parts of this country without taking on a suicide loan.
  • There are exactly two ways this situation can be corrected in a free market – prices have to drop or incomes have to rise.  A lot.
  • Contrary to popular belief, a housing price contraction is one of the best possible things that could happen for the long term health of the American economy.
  • Those who dispute that fact please answer this question:  pretend you’re a 30 year old software engineer (one of the few industries where America still makes something that the rest of the world wants to buy, and has a positive balance of trade) working in Silicon Valley and competing with engineers in Bangalore and Bulgaria who can live handsomely on $10/hr.  Does being forced to pay 1 million dollars for a starter home make you more or less competitive in the global economy?

My response to “Loan Bailouts a Hard Sell”

I wrote this in response to the John Lasner’s Friday column in the OC Register. The comment board there would not allow me to post it, so I decided to share my rant here instead 😉

His message to “Angry Renters” was:

“If housing’s too expensive for your wallet, don’t root against those who had the nerve to play the game… in many cases it” (taking out suicide loans, lying about income and assets to qualify for a bigger loan, etc.) was “a noble error”


So people who lied and chose to play Russian Roulette with their family’s financial future were “noble” while those who didn’t were chickens who didn’t have “the nerve to play the game?”

That’s both untrue and incredibly insulting.

Real nobility, sir, is being a responsible adult and parent. Nobility is looking your young daughter in the eye when she asks you why she has to live in an apartment when all of her friends live in houses with yards and saying “because we just can’t afford it right now.”

Nobility is explaining to your wife why you can’t afford to buy a house when all of your friends can “afford” it (and seem to be getting rich in the process.) It’s bearing the look of disappointment on her face while she tries to reconcile the words with the emotional reality that her husband works 80+ hours a week – so hard that she never really gets to see him – yet for some reason is unable to provide the home that everyone else around her seems to be able to “afford.” It’s protecting the best interests of your family by sticking to what you know to be true rather than succumbing to the siren song of easy money and getting to look like a hero to your family based on a lie.

Nobility is taking responsibility for your life and planning for the future; telling your wife that the numbers don’t lie, that the “affordability” of ARMs and NINJA mortgages is an illusion, and that when rates reset in a couple of years, the speculators will have to bail out, and you’ll be able to find a home for your family that you can afford without taking out a suicide loan and endangering your family’s future in the process.

Nobility is being an adult. Facing up to hard facts. Telling the truth, even when its painful. Last but not least, it’s rolling up your sleeves and working hard to build honest prosperity for your family rather than thinking you’re entitled to easy money and a life of leisure through engineered asset inflation.

I’m not at all surprised you think it’s a good idea for the government to take the money I’ve worked very hard to save as a down payment on my family’s future, and use it to prop up the value of your wildly overinflated asset, but please spare me the flowery language while you rob me – – it’s an insult to every responsible person reading.

I don’t wish anyone ill, even real estate speculators. I’m also not looking for a handout. I just want a fair shake at a fair market, free of massive credit distortions created by government and wealthy entrenched interests. Is that really too much to ask?

ps – the “logical” arguments you present in your column are every bit as specious as the emotional ones. I’ll cover those next.


September 1, 2007

Not bitter

Filed under: Rant,Taxes — labordaytheses @ 8:47 am

Left this in response to a comment over at Big Picture about Gen X’ers not saving enough for retirement. I seem to have become quite the whiner this week.

Better to do it here than in RL, though, I suppose. I would be deeply depressing to hang out with if I vented this stuff to friends or coworkers… 😉


>When Gen x keeps cashing out their 401k’s instead of rolling them<

Some of us are trying, I swear to God we are.

Unfortunately, we’re getting squeezed hard in the job market in both directions. Competing in the low and midrange with Indians and Eastern Europeans who can live like kings on $12/hr, and having a hell of a time moving up the ladder in part because the damn boomers won’t retire.

Meanwhile we’ve still got 100k in student loans to pay off, and buying a starter home for our family anywhere within driving distance of our job costs 700k (thank you Easy Al!)

Hopefully we can start replenshing the retirement funds soon, but if not, at least I know those FICA withdrawals I’ve been paying all these years will help cover me when I’m too old to work. Oh no, wait – – another Ponzi scheme that will expire with the Boomers. Social Security currently scheduled to run out of money the year I hit 65. Sweet.

I’d stay to chat, but I gotta get back to my second job managing graveyard shift for an Indian call center.

ed:  back dating because I want to keep other stuff at top of page for a while.  original date 9/8/2007.

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