MortgageBailoutScam.com

April 18, 2008

Let it burst…

Filed under: Uncategorized — labordaytheses @ 10:38 pm

From the Financial Times:

via Naked Capitalism:

http://www.ft.com/cms/s/0/68636996-0cad-11dd-86df-0000779fd2ac.html?nclick_check=1

What has happened to British phlegm? Instead of greeting news of falling house prices and tightening lending with aplomb, people shriek that the sky is falling. Steven Crawshaw, chairman of the Council of Mortgage Lenders, warns that it is “a real possibility . . . that net lending in 2008 could reach only half last year’s level unless additional funds become available”. Smaller mortgage lenders, dependent on their ability to sell mortage-backed securities, could even be forced out of the market. In sum, the time has come for a bail-out.

I have three answers to this cacophony of special pleading: first, anybody who thinks it is a duty of the state to help keep housing expensive is crazy; second, policymakers should respond only to clear market failures; and, third, with a floating exchange rate and an independent central bank, the UK can weather the storm if it keeps its head.

It is high time the British realised a people cannot become rich by selling ever more expensive houses to one another. According to the International Monetary Fund’s latest World Economic Outlook UK house prices are more overvalued, relative to economic fundamentals, than those of almost any other high-income country. At long last, investors in mortgage-backed securities, all too aware of what has happened in the US, have realised the dangers in the UK.

They must understand that it becomes extraordinarily difficult to know what such securities are worth as soon as house prices start to fall. They must also be aware that UK house prices have risen by a good 150 per cent since 1996, in real terms. Indeed, It would take a 25 per cent fall in real prices to put them on to the 1971-2007 trend line, last hit in January 2002. Such a decline is conceivable. Prices might overshoot downwards, but they are nowhere near that position now.

Peter Spencer, chief economist of the Ernst & Young Item club, argues that the government should step in, by borrowing to fund the mortgage market. With great respect, I think this notion is mad. It is wrong for the government to fund people to purchase houses at what may well prove the beginning of a long slide in prices. It is tantamount to the financial debauching of minors. As important, if you believe, as I do, that house prices probably must fall, it is better for this adjustment to be swift than be dragged out over many years.

So should the government do nothing at all? No. Since mid-March, spreads between rates on interbank and official three-month and six-month lending have been some 20 to 25 basis points higher in the UK than in the US or eurozone. This, it is argued, reflects the illiquidity of mortgage-backed securities. Lenders, argues Mr Crawshaw, hoard cash because they are not sure whether they will be able to borrow in future.

Whatever the source of the problem, a case exists for further action by the Bank of England in its role as lender of last resort. At present, it is working, in conjunction with the Treasury, on a scheme to swap high-grade mortgage-backed securities for government debt for terms of one to three years, after a sensible “haircut”. But credit risk would still remain with the banks.

This facility would be available at all times, but would be limited to securities created up to the end of last year. All that is now needed is for the Treasury to agree to create the needed gilts. The aim of this would be to remove liquidity constraints, not provide a bail-out or reopen the market in mortage-backed securities. The latter may well be gone forever, as can happen to markets in lemons.

In all, this looks sensible. If it succeeds, net mortgage lending may remain lower than before. Yet even if it were to halve, as some fear, the nominal stock of outstanding mortgage debt would grow by a bit over 4 per cent this year, or much the same rate as nominal gross domestic product. The idea that the stock should grow faster than GDP forever is nonsense.

After house prices peak, I would expect the ratio to fall, not just cease rising. Those arguing for still higher growth in net mortgage lending are arguing that the government must subsidise even more house-price inflation and the lenders who have fuelled it. This is demented.

Yet, some will protest, this is a recipe for a recession. This is false. Even the IMF argues that the economy will continue to grow this year and next, at about 1.6 per cent. After 62 quarters of sustained growth, would that be a tragedy? Moreover, the real reason for slower growth is the need to hit the inflation target. The country needs lower inflation, whereupon the Bank will have room to cut interest rates.

The adjustment of the economy towards exports and away from domestic spending is now, at last, under way. Fortunately, the exchange rate is taking much of the strain. In eight months, competitiveness has improved by 16 per cent against the UK’s eurozone partners, something Spain or Italy will only achieve painfully, after years of disinflation.

A combination of close attention to the liquidity logjam and flexible monetary policy is all that is needed. It is not the government’s job to reflate house-price bubbles. It would have been a good idea if it had done more to prevent them, instead. Now it must let events undo that mistake, rather than try to compound it.

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April 17, 2008

Risk & Reward (Technology Entrepreneurship vs. Hedge fund management)

Filed under: Uncategorized — labordaytheses @ 8:11 am

The below is the text of a comment reply I posted over at The Big Picture.  I wanted to keep a copy for reference as it relates to a topic I’ve been giving a lot of thought recently, so I’m  pasting it below…

===================

BR: Plenty of rewards have flowed to entrepreneurs: Steve Jobs, the Google boys, the Facebook kid, etc.

Not in proportion to relative value created or personal risk taken.

I’m a huge fan of yours, Barry, but this comparison is way off base. Rewards for technology entrepreneurs are demonstrably lower than the rewards being raked in by hedgies, the competition is greater, and the personal risks are an order of magnitude larger.

I think it’s this last item which really bugs most of us. Reward is supposed to be proportional to risk. If hedge fund managers were genuinely at risk in proportion to their rewards, I doubt many here would begrudge them their paydays.

Contrast their downside, however, with the downside for technology entrepreneurs. An example from just this week: a very well known mobile technology expert had to fold his startup this year because he just wasn’t able to get traction. He blogged about the personal consequences:

…I’m *thousands* of dollars in debt to my family and friends, maxed out on every credit card (all of which are in collections), on my last chance for my apartment (if I bounce one more check…), had my car repossessed *twice*, electricity turned off, cellphones switched off, landline canceled outright, and on more than one occasion (this weekend in particular) eaten little more than buttered macaroni as I waited for an overdue PayPal deposit to arrive…

And this wasn’t some random schmuck – Russell is very well known and respected in the industry. What’s more, even though he failed, he has in the process created a product of demonstrable value (he has users, just not enough to sustain the business.) How many failed hedge fund managers can say that?

Even the mega-successful tech entrepreneurs (Google/Facebook/etc.) have most or all of their personal net worth tied up in their endeavors. If they face-plant and destroy their investors’ value, most of their net worth will go with it. Until hedge fund managers can say the same, the comparison is inappropriate.

BTW, can you tell me how you would construct an economy that somehow prevents “the greatest rewards flow to traders and not entrepreneurs?” I can’t figure that out . . .

Sure you can. It would arguably be socialist, of course, but socialism appears to be quite fashionable on Wall Street these days…

September 30, 2007

NetBank (Bank failures then-and-now, Part II)

Filed under: Uncategorized — labordaytheses @ 8:14 pm

NetBank homepage (September 2007) 

 

 

American Banker Magazine (November 1981)

 

Netbank – Failed Bank Information (FDIC)

NetBank Files for Bankruptcy After Regulators Take Over Unit

September 27, 2007

Federal bailout for vacation spending and dining out. Sweet!

Filed under: Uncategorized — labordaytheses @ 10:36 am

From Bloomberg

Robert Murray of Middletown, New Jersey, said he didn’t pay enough attention when he took out a five-year adjustable-rate mortgage in 2002. This month, his payments ballooned to $1,800 from $1,300. Because he makes about $90,000 a year at his Newark Liberty International Airport maintenance job and hasn’t missed a payment, he said he hoped he might be a good candidate to refinance…

…For now, Murray will struggle to make his monthly payments, foregoing vacations, restaurants and perhaps parochial school for his 5-year-old daughter. He yearns for help from the government.

The Federal Reserve Bank pumped $62 billion into the banking system on Aug. 9 and Aug. 10 in an effort to soothe a credit crisis. Murray said the Fed should do the same for borrowers.

“If they gave us that money, we’d be able to be out of this predicament,” he said.

So let’s review.  Murray wants me to pay his mortgage for him because “he didn’t pay enough attention” and the cost of that inattention now means that he has to forgo vacations, restaurants, and expensive private schools.

Wow.

I was unaware that that level of hardship qualified one for a federal bailout.  Here I’ve been eating Ramen and forgoing vacations for years trying to save to buy a house my family could afford while the idiot speculators of the world who “weren’t paying attention” bid them up to heights I could not possibly afford.

Can someone please advise how I sign up for this bailout money?  I appear to be a prime candidate.

September 20, 2007

Thanks Ben

Filed under: Uncategorized — labordaytheses @ 6:11 am

Saudi Arabia has refused to cut interest rates in lockstep with the US Federal Reserve for the first time, signalling that the oil-rich Gulf kingdom is preparing to break the dollar currency peg in a move that risks setting off a stampede out of the dollar across the Middle East.

-The Telegraph

September 19, 2007

Headlines

Filed under: Uncategorized — labordaytheses @ 3:00 am

The bailout train rolls on…

WASHINGTON — The House passed a bill on Tuesday that lowers down payments for borrowers, raises loan limits and boosts funds for housing counseling. Passed by a vote of 348 to 72, the bill reforms the Federal Housing Administration and is the latest lifeline thrown to borrowers from Washington as the fallout in the subprime-mortgage market continues. It also directs up to $300 million a year into an affordable housing fund. The Senate Banking Committee is scheduled to begin work on its version of the bill on Wednesday

SAN FRANCISCO — The dollar dropped Tuesday after the Federal Reserve cut its key fed funds rate by 50 basis points, instead of the 25-basis point cut expected by many investors. The euro rose to $1.3953, compared to $1.3885 before the Fed decision, and the trade-weighted dollar index fell to 79.375, compared to 79.645. The dollar was trading at 115.77 yen, compared to 115.80 yen.

September 1, 2007

Today’s Reading

Filed under: Uncategorized — labordaytheses @ 12:25 am

ForeclosurePulse Blog
The Slowing World of Government Loans | FHA Mortgage Guide
The Bernanke Fed Could Ignite Hyper-Inflation – Seeking Alpha
Five Game-Changing ETFs – Seeking Alpha
DBV: 28.07 +0.25 (0.88%) – Powershares DB G10 Currency Harvest Fund
DJP: 53.45 -0.02 (-0.04%) – BARCLAYS BK PLC
Jim Wiandt’s Five Favorite ETFs – Seeking Alpha
dowjones-aig_commodity_indexes_monthly_preliminary_performance.pdf (application/pdf Object)
WSJ.com
Bloomberg.com: Worldwide
vanguard agriculture etf – Google Search
An Agriculture ETF That Goes “MOO” | ETF Trends
MOO: Basic Chart for MKT VECT AGRBSHS – Yahoo! Finance
Nuclear and Agricultural ETFs Launching Soon | ETF Trends
DBA: Profile for POWERSHARES DB AGRIC – Yahoo! Finance also DBC and DJP
Look Out For Nuclear Energy ETF | ETF Trends
ETFs for Good Health | ETF Trends
Rogers International Commodity Index TRAKRS vs. Other Commodity ETFs – Seeking Alpha
How Attractive is the US Commodity ETF? (DBC) – Seeking Alpha
Which China ETF is the Best ? – Seeking Alpha
LONG/SHORT EQUITY RESEARCH ANALYST Job at QIF Management LLC
Hard Decision on China A-Shares Investment – Seeking Alpha
MOO: 44.55 +1.00 (2.30%) – MARKET VECTORS ETF TR
Neural Nets Vs Genetic Algorithms – SciForums.com
Back to A Shares: Am I Being Stupid? – Seeking Alpha

http://seekingalpha.com/article/47920-precious-metals-and-clean-energy-lead-fed-inspired-rally

http://finance.google.com/finance?client=ob&q=PBW

http://finance.google.com/finance?q=hero&hl=en

http://www.minyanville.com/articles/gold-inflation-CPI-stagflation-dollar-GLD-GDX-GFI-HMY-ASA-GSS-MRB-AU-NSU-MFN-NEW-UXG-GG/index/a/13450

http://finance.google.com/finance?client=ob&q=GDX

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