patrick.net

I'm going a little too fast here. There is actually 20+7B worth of preferred stock.
The 7B appears to be "payment" for the asset guarantee, and the 20B is for cash to the Bank.

Anyway, the term sheet is somewhat interesting reading. Has anyone seen a real term sheet for any of the other TARP deals? This is the first one I have seen, and these really all ought to be made public.

Stop Lying About FDR's Record:

http://economistsview.typepad.com/economistsview/2008/11/stop-lying-abou.html

When F.D.R. took office in 1933, one third of the nation was unemployed. Agriculture was destitute, factories were idle, businesses were closing their doors, and the banking system teetered on the brink of collapse. Violence lay just beneath the surface.

http://campaigningforhistory.blogs.nytimes.com/2007/05/21/when-government-was-the-solution/

Who said that the taxpayers are going to foot the bill?

Look at the extent of the bailout, so far the Fed has already given out over $2T, and pledged a further $5T in the guarantee.

You think the American taxpayers, less than 100M, can cough up a further $20K per head for the $2T already spent, and another $50K for the pledge? That's a total of $70K per taxpayer so far, forget it, paying an extra $70K per head on the existing tax burden is just not going to fly.

America is at the crossroad of raw print in big scale, or die.

OO,

The way I look at it the taxpayers will eventually foot the bill, one way or the other.

Do any of you know how i can invest/gamble in mbs/cdo's?

It appears we have a new Political Party, the National Social1st Debtmongers Party. Charter members are Bush/Paulson, with Obama soon to join.

Party Platform:
1. Privatize profits/Socialize losses for all "too big to fail" debt profiting institutions Emphasis on protection of senior management compensation. After all, senior management decides on campaign contributions.
2. For the general public, discourage savings, encourage debt. Use artificially low interest rates, tax code, and various down payment assistance programs to prop up house prices. Consider falling house prices as a dire national emergency. Get mainstram acceptence of households being perpetually in debt, with fully one half of take home pay used to service residence alone, plus more debt service for autos and consumer goods.
3. Redefine the term "debt." Consumer Debt should not be construed as a drain on future earings to fund present day consumption. Instead, "re-educate" the masses to see debt as "other people money," or "leverage." Refer to anything paid for as "dead equity" that a prudent soul would "liberate."
4. Government will lead. The USA will borrow trillions to fund the bill for socia1zed losses. Show that borrowing is always preferable to making hard (or not so hard) choices, both for gov and households. Example: Have the gov borrow money to fund a new round of stimulus checks. Encourage the recipients to spend these checks (preferably as a down payment) rather than save or pay off any debts.
5. The solution to all problems is to loosen credit.

HeadSet,

I have heard about that same party since, oh, 1980? or was it 1968? It is called the republican feudal warlord indentured servant party. Democrats so far have only gotten to do garbage time, as they call it in football: The democratic second string team only gets to come off the bench and on the field when the republicans have run up the debt so far that there is no danger that the democracts can bring it down again before the game is over.

Headset, go rent "Tropic Thunder" and laugh for a couple of hours. Here's a good article on seller psychology (or should we just call it price stickiness?)
Dan Ariely, a behavioral economics professor at Duke University's Fuqua School of Business and author of "Predictably Irrational," said the "better-than-average" effect is at play. And knowing your next-door neighbors sold their house for $500,000 makes it even more imperative for a homeowner to top that price.
"We feel that we're better than other people. We're unique. We're special," he said. "It stands to reason that our houses are also special."
The attachment to a house only intensifies the more a homeowner personalizes it, creating an extension of themselves.
"The moment we invest in something, we fall in love with it," Ariely said, which applies to something as sentimental as children or as trivial as origami.
That puts real estate agents in a precarious position of pricing a house to sell, but not insulting the homeowner by recommending a lower asking price. To a homeowner, a low but realistic listing price is "like someone calling your kids ugly," Ariely said with a laugh.

Headset, go rent “Tropic Thunder” and laugh for a couple of hours.

Will do. Only I must show Party loyalty. Therefore I will buy instead of rent, while paying with a credit card. Then I will use the Obama stimulus check to make a down payment on a new Sony 60in flat panel so I can watch it in fitting style.

run up the debt so far that there is no danger that the democracts can bring it down again before the game is over.

It does appear that W (with LOTS of Democrat help) is running up the debt just before he leaves office.

Headset,

you seem to think that they will get away with this for some reason. I tend to think they will fail in their efforts.

The only thing that is holding up the seller psychology (aka denial or delusional psychology) is his job.

There is only one kind of seller psychology left when the cash flow runs out, desperation. We will get there.

There is only one kind of seller psychology left when the cash flow runs out, desperation.
Here are some random notes from the frontlines:
I know someone with an IT consulting business, and he's had to move some of his employees from full time to part time due to declining business.
Someone else, who does legal aid type work, noted that one of their clients has a landlord who is trying to "renegotiate" her lease, even though this person is on a Section 8 voucher (rents are fixed). Evidently, the landlord owns several buildings and is having "cash flow" issues. Section 8 is guaranteed payments, so you know this landlord is in real trouble.
Some rumors and innuendo from Socketsite:
A regular rents a $1million+ home in Lamorinda (some of the top schools in the state) for less than $4k a month. The landlord owns several more recently acquired, leveraged properties that aren't selling.
Another woman owns a couple of marginal rentals and has bought houses for her two kids (way in the future -- wouldn't want them priced out after college). Anyway, they bleed as much as $500 a month on some of their places, but it is no big deal as they are two high income wage earners. Not a problem -- until is becomes one.
Still seems like a lot a deleveraging to come in the real estate arena.

Jing Hua Wu Bing Bing Broke

EBGuy,

I just got back from a Taxi convention is Tampa, which was attended by mostly large fleet operators from all over the USA and Canada. What I heard from other attendees is the same as what I am experiencing - the number of people applying to drive taxis is increasing, while the amount of passengers is decreasing. Here in VA, driver applicants have tripled since last year, but ridership has decreased about 10%. This would indicate people need jobs, and that disposable income for households and agencies has decreased. The regional city bus folks have said bus ridership has increased.

Regarding FDR’s Record:

FDR did many things in a well intended effort to resolve the Great Depression. But the state of the art in economics was not so great at the time. Accordingly, some mistakes were made, and the recovery was delayed/impaired because of it. FDR did what he/they thought was best. Many of his policies were helpful, but some turned out to be detrimental.

However, the worst mistakes were made well before FDR was even elected. Severely tight monetary policy combined with protectionist trade policies and higher taxes turned what should have been only a significant recession (1928+) into a severe collapse (1929-1933).

FDR came into office after all of this had already occurred. He inherited one hell of a mess. And he wasted no time in taking action. If economic knowledge had been better he would have made fewer mistakes and the depression would have ended well before WWII. However, it is not fair to judge him based on what we know now. He had to take action with what was known at the time.

BTW, Leave it to the NY Times to exaggerate or fabricate facts (SOP for them). During the 40 or so years that I have seen, heard and read reports about the Great Depression, the accepted and respected estimate of unemployment has always been a likely peak of somewhere around 15%, with a possible worst case of perhaps 25%. The NY Times claims 33%. This is the first time that I have ever heard any estimate above 25%.

Zephyr says: If economic knowledge had been better he would have made fewer mistakes and the depression would have ended well before WWII. However, it is not fair to judge him based on what we know now. He had to take action with what was known at the time.

Zephyr, you've got to be joking, right?

If we're so damned good at economic knowledge now, then how did we arrive at our present vast debacle in the first place? People can look back and criticize FDR, but they only offer alternative theories on how things might have played out. That implies the academics could know the unintended effects of implementing their own theories, which is almost definitely not the case. Such events play out infrequently on the world stage, and are of such scale that culture, government policy, global situation, natural resources and a host of other factors can distort the final results.

Case in point---if Bernanke is such a student of the Great Depression and other economic catastophes, why aren't the warning signs abating already? Give it another 50 years, and economists will have all sorts of great theories on how we could have fixed this problem much better, except that our knowledge of economics was primitive and unsophisticated at the beginning of the 21st century.

:o

Tivo layoff:

Nov 18 (Reuters) - TiVo Inc:

ANNOUNCES PLAN TO REDUCE OPERATIONAL EXPENSES PRIMARILY THROUGH REDUCTION IN
headcount - filing

EXPECTS PRE-TAX CHARGES OF APPROX $1 MILLION PRIMARILY FOR EMPLOYEE-RELATED
severance benefits and out-placement costs

EXPECTS TO RECORD THESE CHARGES IN Q4 OF FISCAL YEAR 2009 ENDING JANUARY 31,
2009 - filing

“If we’re so damned good at economic knowledge now, then how did we arrive at our present vast debacle in the first place?”

We are in this mess because people still get caught up in manias - and always will. People do stupid things, and take excessive risks. It is nearly impossible to prevent bubble manias.

Further, even with better economic knowledge people still make mistakes, and Greenspan’s super easy monetary policy was a huge mistake. It was gasoline on the fire, and was the primary cause of the real estate bubble and mortgage crisis that started this financial panic.

And yes we will gain knowledge from studying this crisis. Just as we have learned from the many other panics and financial meltdowns that have occurred since the Great Depression in various places and times.

But that does not mean we will be able to prevent the next one. We know more than ever about medicine, and people still get very sick. We understand how earthquakes work. Why can’t we prevent them? This inability does not disprove our increased knowledge.

SNL on the big 3 automaker congressional hearings:

http://videocafe.crooksandliars.com/media/play/wmv/6836/24222

Case Shiller is out.

SFO now at 145.53
Down 3.89% MOM
Down 29.51% YOY
Down 33.36% from Peak

Accelerating my model to 2% MOM depreciation we can reach equilibrium by April 2009. This means reverting to norm using the BA price appreciation of 4.25% a year.

It is clear that we will overshoot equilibrium. Up to now I have been quoting corrections to return us FROM the bubble. We simply now must begin to factor in the credit crunch and the recession. Guessing that the recession lasts at least 2 more years and that prices seem likely to fall at their current rate through that period, we could see 1998 pricing in early 2011. This means most RE is simply unthinkable until late 2010 as we are seeing YOY declines in excess of 20%. Um, unless you do not mind your 20% down payment being immediately vaporized.

Headset,
Not sure what else you folks discuss at conventions... What is the word on the street regarding maintenance costs for hybrid fleets?

mickrussom,

I think your tinfoil hat is on too tight.

http://www.coinlink.com/Articles/top-ten/the-top-ten-largest-gold-reserves-in-bullion/

I guess its possibly Fort Knox is full of gold-painted bricks; but when you think about it anything is possible, really.

If the SHF in a major way we can just roll the military into NYC and seize the Federal Reserve building and confiscate all the other countries gold as well. What would stop us?b

What is the word on the street regarding maintenance costs for hybrid fleets?

That was a major topic. The New York City fleets owners had nothing good to say about hybrids. They strongly discouraged anyone from using them. On the other hand, the owner of a large Phoenix/Scottsdale company recently put 200 Prius hybrids in one of his fleets. He was very happy with them. The difference may be that the New Yorkers are looking at Ford Escapes, while the Phoenix folks are using Toyotas.

Duke, I have a similar view of the cycle timing. I think price declines will continue into 2010, but I expect that 2010 will be nearly flat overall. I see no reason to buy before then. In fact, I will wait until I see a beginning of price increases.

As an investor there is no reason to rush in - RE prices recover very slowly at first. If you aare buying for personal use you will have other needs that could accelerate your move.

30 year Mortgage rates below 5%

I bow to out mint masters.

typo: I bow to our mint masters.

sa,

that mortgage rate monitor table is showing 5.98%.

It's always interesting to check in and see what the CME has to say about the market. Next stop for Ess Eff (and environs) is 122.0 in May 2009 (an approximately 16% drop from where we currently stand). Looks like the market likes you prediction, Duke.

OO,

I suspect, It might show up tomorrow.

PermaRenter Says:
Tivo layoff:
EXPECTS PRE-TAX CHARGES OF APPROX $1 MILLION PRIMARILY FOR EMPLOYEE-RELATED severance benefits and out-placement costs

If the charge is only 1 million, it probably is a small layoff. (Temps and contractors are not counted, of course)

I just called a loan agent, 5.5%, already reflected in this rate, for $417K conforming or below, 75% LTV max, that is the best they can do.

No drop for non-conforming jumbo.

The funding for the above quote is from Chase and Wells Fargo and reflects the latest drop.

If we really just dropped the 30 year rate to 4.875 by direct governeent intervention - wow. Just wow.
That will: help clear inventory, prop up prices, re-emply people into finance (to handle the re-fi load), help stabailize property tax incomes to states. It is an amazing, if expensive, method to buy time until the public works programs can ramp up. In fact, that lower rate in interest paid savings may compare directly over a 30 year period to current lost equity.

Normally I would hate this kind of massive housing intervention, but in terms of staving-off our spiral into Depression, at first blush this looks really smart.

Yeah, and as a result of this intervention, Euro is again above 1.3

So, its boosting exports and hindering imports. . .

(lets just ignore the destruction of value of the dollar and savings)

Hmm. Gentleman, I give you the Bigger Bubble. The Government.

OK, just called up Chase, my home loan servicer and bag holder, here is what they are offering, all fixed

5.25% for 30 years, fee $2,500
5.25% for 15 years, fee $4,100
5.25% for 10 years, fee $3,600

Now can you tell me which loan do the banks and the government want to herd everybody into?

If it really drops below 5%, I will refinance to the 10yr fixed, but so far I will still wait for our government to pull an even bigger wonder :-)

@OO

I thought you sold your house and were renting. Are you planning to buy again soon?