Barack Obama Wants to Reward FBs


By Randy H   Follow   Wed, 29 Aug 2007, 9:57am   6,321 views   271 comments
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I don't follow politics for myriad reasons. I know that pretty much every Congressman and every Presidential hopeful is falling all over themselves to buy as many votes as they can -- business as usual. But I do know that the Obama crowd prides their candidate on his integrity and high ethical bar.

Well, Mr. Obama writes in Todays Financial Times "Comment" section:

Fine unscrupulous mortgage lenders

The implosion of the subprime lending industry is more than a temporary blip on our economic progress. It is a cancer that, given today's integrated financial markets, threatens to spread with devastating impact to housing and to our economy as a whole, unless we act to contain it.

Already I'm sure many of you will take some exception to Mr. Obama's statement. Myself, I don't see too much trouble with his concern; and I also think that the government has some role in providing stability to the core banking structure.

I'll go on, quoting the more objectionable excerpts. To Mr. Obama's credit, he does want to aggressively go after lenders who committed fraud, used deceptive tactics, or systematically exploited the elderly or minorities. To his detriment, not a single word was uttered about regulating or punishing the real-estate industry. I guess even a principled candidate has to be careful which lobbies he crosses.

This all started as a good idea -- helping people buy homes who previously could not afford to.

[...]

Today, as we weigh our options on how to best resolve this crisis, many argue that bailing out the borrowers and investors will just encourage them to engage in more of the same irresponsible practices.

[...]

The real victims in this crisis are the millions of borrowers who followed the rules, whose only crime was taking out mortgages lenders told them they could afford. Normally these borrowers could avoid foreclosure by refinancing their mortgages or selling their homes. The problem today is that they cannot refinance because no one will lend to them, and they cannot sell because the housing market has fallen. With some arguing that the effects of the worst subprime loans will not be felt until 2008 and 2009, this may be just the beginning.

We need to help struggling borrowers to weather this storm. One way to protect innocent homeowners -- at least until this crisis passes -- is to establish a fund to help people refinance or sell to avoid foreclosure.

[...]

That is why I have proposed a Home Score system that would create a simplified, standardised[sic] metric for home mortgages -- rather like the annual percentage rate (APR), the effective interest rate a borrower ends up paying on a loan -- allowing prospective home buyers easily to compare various mortgage products so they can find out whether they can afford to make the payments.

[...]

Owning a home represents a big part of the American dream and all Americans -- no matter what their income level -- should have the power to reach for that dream.

[...]

If we are serious about stopping this crisis [...] Washington needs to stop acting like an industry advocate and start acting like a public advocate.

I'll let you guys defend Barack or rip him apart. I'm not sure why Washington should necessarily advocate either side of the ownership/industry value chain, but I can see how this rhetoric gains populist votes.

One point for Mr. Obama: APR is not the same as EAR. You might want to get get someone on staff who actually knows something about markets, finance and economics before you go making a fool of yourself in the Financial Times.

--Randy H

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  1. Zephyr


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    232   9:52am Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    I don't think the Fed is dimwitted. But the data lags make it very hard to confidently change policy without an obvious event. And the impact lags make it nearly impossible to avoid staying in a policy position too long. So by the time they change direction they need a strong action to more quickly counteract the previous overshoot. Then they get painted into a corner by concerns about market psychology, and are loath to fine tune back to a moderate position.

    BTW, I think the Fed is having some trouble keeping the target up at 5.25%. It traded at 5.0% weds, and 4.75% for a while yesterday. It has been all over the map on some days in the last two weeks.

  2. SFWoman


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    233   9:53am Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    I do agree with this decision by The Decider, however.

    One thing the president promised not do was a direct bailout of homeowners facing foreclosures or of lenders with financial problems traced to portfolios of defaulting subprime loans.

    Such bailouts, he said, "would only aggravate the problem."

  3. Glen


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    234   9:54am Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    It will only prolong the agony of the “debt slave” to an overpriced asset. So I just say… whatever.

    Dinor,

    I think this is an important observation. Ultimately, some FBs will elect to be debt slaves for at least a few more years. But many more will simply walk away--with or without a bailout.

    My hope is that any federal loans given to FBs will be (1) nondischargeable in bankruptcy; (2) subject to typical federal government collection tactics (withholding tax refunds, wage garnishments, etc...) Just like taxes and federally guaranteed student loans.

    Let's say you owe $500K on a $400K house. The Feds could offer to refinance your $500K debt at a fixed "affordable" rate. But hopefully they will not do so without extracting their (taxpayers') pound of flesh. Make the FB pay the balance in full or else sic the IRS on them.

    But maybe I'm just bitter because I still rent and I'm still paying off my student loans.

  4. skibum


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    235   9:54am Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    Zephyr,
    I disagree that the Fed Funds rate has been artificially high. As Randy H states, I think it has been artificially too low for most of the decade, heck, for most of Greenspan's term. The fallout we are seeing today is not a consequence of the recent tightening, but the effects of getting the "Masters of the Universe" on Wall Street, who have been so used to easy credit, used to "more normal" credit conditions.

    What does it say about the American economy that we can't stomach a 5.25% Federal Funds rate?

  5. Zephyr


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    236   9:54am Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    As far as I can tell Bush isn't a normal anything.

  6. DinOR


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    237   9:55am Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    SP,

    Precisely! What's left to demolish? The "2nd home/vacation home" market? Toast. Condo "specuflipping"? Toast. Other than remote enclaves hunkerd down in the rural areas of the midwest there's nothing left worth bombing!

    In naval terms this would be referred to as "making the rubble bounce" (sending in a second missile just for a sh@ts and grins).

    Oh and my youngest daughter had a great term for the ultra hip 20 something MEW moms commanding their world from a cell phone and a stroller. "New and Improved Soccer Mom". I kind of like it.

  7. skibum


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    238   10:01am Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    Of course, the big economic news of the day is Bendover Ben's speech in Jackson Hole. As I'm sure many of you have noticed, the markets have reacted favorably to it, which by implication suggests it is being interpreted as a signal for a rate cut. Now, this may be well and true, but I think the comments are being taken out of context. Here is the pertinent section of the speech:

    The purpose of the discount window actions was to assure depositories of the ready availability of a backstop source of liquidity. Even if banks find that borrowing from the discount window is not immediately necessary, the knowledge that liquidity is available should help alleviate concerns about funding that might otherwise constrain depositories from extending credit or making markets.

    The Federal Reserve stands ready to take additional actions as needed to provide liquidity and promote the orderly functioning of markets.

    It is not the responsibility of the Federal Reserve - nor would it be appropriate - to protect lenders and investors from the consequences of their financial decisions. But developments in financial markets can have broad economic effects felt by many outside the markets, and the Federal Reserve must take those effects into account when determining policy.

    In a statement issued simultaneously with the discount window announcement, the FOMC indicated that the deterioration in financial market conditions and the tightening of credit since its August 7 meeting had appreciably increased the downside risks to growth. In particular, the further tightening of credit conditions, if sustained, would increase the risk that the current weakness in housing could be deeper or more prolonged than previously expected, with possible adverse effects on consumer spending and the economy more generally.

    The incoming data indicate that the economy continued to expand at a moderate pace into the summer, despite the sharp correction in the housing sector. However, in light of recent financial developments, economic data bearing on past months or quarters may be less useful than usual for our forecasts of economic activity and inflation. Consequently, we will pay particularly close attention to the timeliest indicators, as well as information gleaned from our business and banking contacts around the country. Inevitably, the uncertainty surrounding the outlook will be greater than normal, presenting a challenge to policymakers to manage the risks to their growth and price stability objectives. The Committee continues to monitor the situation and will act as needed to limit the adverse effects on the broader economy that may arise from the disruptions in financial markets.

    The sentence that the markets seem to be creaming over is how, "(t)he Federal Reserve stands ready to take additional actions as needed to provide liquidity and promote the orderly functioning of markets." Seems to me that in the context above, this doesn't necessarily mean a rate cut is a given. Ben seems to imply that the discount window is the preferred tool in this liquidity crisis, but the Fed Funds rate could be used if there are any "early" indications of impact on the broader economy. IE, Wall Street shouldn't expect a "Bernanke Put."

    Maybe I'm being hopeful, but that seems reasonable to me. Alternatively, this is just lip service and indeed rate cuts galore are coming...

  8. Zephyr


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    239   10:02am Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    The Fed Funds rate has been artificially too low for a long time -- until recently. The normal position for the fed funds rate is about 100 bps or more below the 10 year treasury.

    The normal position for all rates is to be higher as the duration is longer. Overnight is the shortest duration, and should have the lowest rate. The fact that the fed funds rate is higher than all the other rates on the yield curve makes it clear that it is being artificially pushed to be so high. If the rate were allowed to float freely in the market it would drop by at least 100 bps.

  9. skibum


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    240   10:02am Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    Precisely! What’s left to demolish?

    DinOR,

    There's still The Fortress!

  10. skibum


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    241   10:07am Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    Zephyr,
    I think we discussed this before, but the "normal" calculus of using the 10y treasury as a benchmark comparison for the "normal" fed funds rate seems to me not applicable. The Fed itself has acknowledged "artificially" low long-term treasury yields due to foreign money parked in these securities. Perhaps this underlying cause doesn't matter in the end, but it seems that the Fed has at least taken it into account in determining what they think the rate should be.

  11. Zephyr


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    242   10:10am Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    The 10 year rate is a market-driven rate. The result of natural forces of supply and demand. The fed funds rate is manipulated by the fed to keep it artificially at the level they have decided upon.

  12. Zephyr


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    243   10:12am Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    The long bond raes are not artificially low. The current rate levels are the consequence of natural market forces that should be expected to put the rates at their current levels.

  13. Zephyr


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    244   10:16am Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    If the fed stopped manipulating the market, I would expect the overnight/fed funds rate to fall to 4.0% or lower, and the 10 year treasury would probably settle in around 4.5% to 4.75%.

    This would be the natural level with the current economic conditions.

  14. skibum


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    245   10:17am Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    Of course treasury rates are market-driven, but my point (not clearly made) was that compared historically, the current situation is unusual in that "saver nations" have dumped tons of cash into long-term treasuries in a situation not seen previously.

  15. Zephyr


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    246   10:20am Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    The fed cannot keep the fed funds target at an artificially high (or low) level for very long without causing problems in the economy.

    We all saw the bubble effects of an artificially low fed funds rate. We are beginning to see the efeects of an artificially high rate.

    Throughout all of this manipulation of the short-term rates, the long rates have been relatively stable.

  16. DinOR


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    247   10:21am Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    "There's still The Fortress!"

    I stand corrected.

    Fire when ready Gridley!

  17. DinOR


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    248   10:22am Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    Zephyr,

    I see your point. That's why it's so important to get "the cost of money" right. Well said.

  18. Zephyr


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    249   10:25am Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    The savers of the world look for safe places for their money. This is not new. What is new is WHO these savers are.

  19. Randy H


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    250   10:33am Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    Yield inversions are also "natural forces of the market". Zephyr is correct as a static analysis. But as skibum pointed out, the market structure of Treasuries have changed quite significantly over the same period.

    If the "natural" Fed target is 100bp below the 10yr Treasury in 1990, then it would need to be more like 250bp below the 10yr in 2007 in order to match the effect of nominal versus real interest rates vis-a-vis inflation. The US has progressively been *losing* nominal rate power as an effect of foreign capital flows.

    This is the primary argument against just using a simple, automated or semi-automated, transparent Fed inflation target. Such a target would have to be infinitely complex and is probably impossible to achieve without simply resulting in nominal-rate gaming.

    As to the Fed's overshooting, I still disagree. If "Zephyr" is smart enough to see the overshoot, so are the hundreds of brilliant economists, econometricists, and statisticians working for the Fed. They know quite well how long it takes for rate moves to work into the economy, and they know the nature of their own historical data better than any of us armchair policy wonks.

    The only folks deluded enough to think they could do the job better are global macro hedge fund managers and autistic fools.

  20. skibum


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    251   10:40am Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    Zephyr,
    True re: savers. Moving on, the other thing that's been irking me while following the latest developments is that everyone (talking heads, economists, etc etc) are pushing/expecting the Fed to lower its funds rate to avoid recession, as the "downside risks have increased substantially." Fair enough. Then these folks usually go on to say that a big part of the economy is the consumer. Fair enough. It may not be pretty, but yes, we are a nation of fat, lazy, SUV driving, McMansion-living consumers. Then they all invariably go on to say how the tight credit market and the tight mortgage market leads to lower refi's, less cash-out for consumers to spend.

    This is where the argument pisses me off. So, it's now a foregone conclusion that cash-out refi's as a way to keep the economy going is a GOOD thing? Are economists really truly advocating for a return to those times? God help us all!

  21. justme


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    252   10:47am Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    SFWoman,

    I think the problem is that there are no real conservatives left in the republican party, and I'm also not that convinced that there have been for a long time. Real conservative *voters*, sure, but they seem to prefer voting for conservative rhetoric rather than realizing the true nature of the semi-fascist bandits that are really running the party, and turning the other way.

    "Anything for a tax cut"

  22. skibum


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    253   10:51am Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    Randy H,
    I think that the case-in-point is the fact that the Fed has yet to cut the Fed funds rate as Wall Street Titans have been begging for recently. The Fed sees "downside risks" present, but if they were to overreact, they risk moving when they didn't need to. I see BenB as consciously trying to make moves as slowly as possible. It's like a very slowly responsive, nonlinear and very complex feedback system, but there is only one feedback loop (two if you count the discount rate) that can be manipulated easily. So, you want to manipulate it only when you are fairly certain the effects will be necessary, and perhaps as importantly, predictable.

  23. Zephyr


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    254   10:58am Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    Randy, I agree that the Fed does have an army of experts and great resources to evaluate the markets and the economy(far more than I or anyone else could ever have). However, it does not follow that all those experts have the same opinion of what the best policy is. And the implemented policy need not be the technically correct policy, as politics do exist.

    For all that resource they have sure been far from the mark as far as perfect policy is concerned.

    I agree that changes in the yield curve are natural to the market. But the actions of the Fed unnaturally exacerbate those changes.

  24. Zephyr


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    255   11:15am Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    As far as being delusional in thinking we could do better than the fed, that has good logical basis given the resources of the fed. However, many people (including me) thoughtthat lowering the fed funds rate to 1% was a mistake at the time it was done. In fact, I thought 2% was too low. And whatever artificially low rate would have been best, it should have been used for only a few months. Instead we got the credit bubble. I am not embsarrassed to be among the many "fools" who thought they knew better than the fed back then. And we "fools" were right.

    But, in the end, while I objected to the policies, there was no harm to me from it. This is because I knew what economic craziness would come of their moves and I made piles of mony betting on it.

  25. PermaRenter


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    256   12:22pm Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    Folks,

    Should we blame Japan for world wide currency printing.

    Japan has consistently followed Zero Interest Rate Policy (ZIRP)

    http://en.wikipedia.org/wiki/Zero_interest_rate_policy

    The zero interest rate policy (ZIRP) is a Keynesian macroeconomics scheme for economies exhibiting slow growth with a very low interest rate, such as contemporary Japan. The Keynesian (and neo-Keynesian) thesis is that these countries are in the so-called liquidity trap, an assessment with which neoclassical economics disagrees.

    Under ZIRP, the central bank maintains a 0% nominal interest rate, and then maintains inflation of the currency to make the value of otherwise stable investments, such as real estate, rise over time. It is effectively a way of imposing a negative real interest rate.

    For instance, if an investment earns 0% interest and there exists a 4% inflation rate, a house or commercial property will appreciate in value by 4% a year. This means that the return on the investment is calculated as if the interest rate is actually -4%.

    The effect of a ZIRP policy is to encourage investment throughout the economy by making capital purchases more financially attractive. Whether ZIRP succeeds in achieving this goal is a matter of much debate.

  26. Jimbo


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    257   12:45pm Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    Bush said the Federal Housing Administration, a government agency that provides mortgage insurance to borrowers through lenders in the private sector, would launch in coming days a program called FHA Secure. The program would let homeowners who have good credit histories but can't afford their current mortgage payments to refinance into mortgages insured by the FHA.

    "This means that many families who are struggling now will be able to refinance their loans, meet their monthly payments and keep their homes," Bush said.

    Bush also urged Congress to modernize and improve the FHA so more homeowners could qualify for the mortgage insurance provided by the agency. Last year the House passed legislation to modernize FHA, but Congress has not yet sent a bill to the White House. "I look forward to signing a bill as quickly as possible," Bush said.

    Bush also pledged to work with Congress to reform a key housing provision of the federal tax code, which will make it easier for homeowners to refinance their mortgages.

    "Let's say the value of your house declines by $20,000 and your adjustable rate mortgage payments have grown to a level you cannot afford," Bush said. "If the bank modifies your mortgage and forgives $20,000 of your loan, the tax code treats that $20,000 as taxable income. When your home is losing value and your family is under financial stress, the last thing you need to do is to be hit with higher taxes."

    Bush also said the administration would launch a new foreclosure avoidance initiative to help homeowners figure out a way to refinance. He said Housing Secretary Alphonso Jackson and Treasury Secretary Henry Paulson would reach out to groups that offer foreclosure counseling and refinancing assistance for homeowners.

    Bush is going to guarantee a bunch of people who got in over their head and can't refi, by using FHA loan programs. He is also going to modify the tax code, so that forgiven debt won't be counted as taxable income.

    Bush has been the banner carrier for the Republican Party and the Conservative movement for over seven years now. It is amusing to watch all those who cheered his so loudly when he played "dress-up hero" in his flight suit abandon him now.

  27. HeadSet


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    258   1:02pm Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    Jimbo said about Bush
    "He is also going to modify the tax code, so that forgiven debt won’t be counted as taxable income."

    The lack of a tax penalty will take away a big disadvantage of short sales. Buyers may then benefit from lower prices at the expense of the bank that made the original loan.

  28. Randy H


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    259   1:14pm Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    ZIRP can be very effective if applied to a country not subject to a liquidity trap. There is no reason to believe the US would suffer from the same liquidity trappings as Japan. The US reacts quite well to monetary inflation based growth -- we are a consumer society.

    The problem with ZIRP in relation to US policy is that it is a draconian measure, to say the least. It effectively translates into a subversive default on US foreign debts, and a subversive subsidy for US exports. It also shifts even more US inflation oversees. The reaction of foreign debt holders will be to either eat it, or to fight back. Fighting back would cause US hyperinflation, except for two saving reasons that is all but impossible: 1) by fighting back they will suffer worse than we do simply due to their low percentage domestically derived GDPs; 2) the US won't hyperinflate because no country willingly hyperinflates, and all countries with credible, projectable military forces escape hyperinflation without exception.

  29. Different Sean


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    260   1:25pm Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    ZIRP is a policy of renewed interest for me, in that the govt and central bank of Japan has mandated that the IR always be 0%, unlike other economies where it flaps around in the wind of the market a lot more. ZIRP seems highly interventionist to me, whereas other central banks are supposed to be reactive to market conditions, for better or for worse. This means therefore that interest rates in other industrialised countries can climb up to, say, the 17% we've seen in past decades, causing a lot of grief for mortgagors and businesses carrying overdrafts alike.

    There were reasons for instating a ZIRP in the first place, to do with Japan's own economic crisis and asset bubble, and it has created a peculiar international carry trade in the yen which has woven itself into the market.

    Monetary policy and macroeconomics aren't my particular strong suit, and ZIRP has been mentioned before, I think in its own thread, but I'm suddenly intrigued again due to the Oz opposition 'alternative govt' promising in an election year to 'keep interest rates low'. Historically neither side of politics has been keen to interfere with the setting of interest rates, to the detriment of mortgagors who buy at the top of a price bubble, if the Fed starts escalating interest rates to 'calm an overheated economy'.

    (I have my own views on the limits of using one lever only, interest rates and the reserve, to attempt to 'manage' every single aspect of the economy at once, being housing, personal borrowing, business borrowing and investment, and so on.)

    Any thoughts? Dare I start a thread?

  30. Randy H


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    261   1:29pm Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    I have lots of thoughts. We did have a thread on this a while back. It's too bad wordpress doesn't have a scroller of recent comments so we could just add to that thread, so as to not repeat all the same base arguments. The subject is very complex and writing level headed responses takes a lot of time and effort. I'm just too tired and heading into a holiday weekend to think much more about ZIRP.

  31. Different Sean


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    262   1:41pm Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    as per http://patrick.net/wp/?p=213, authored by yourself.

    I've just re-read it, and my feelings were similar at the micro level, that it would only encourage more investment in property and price inflation, and provide a field day for landlords, as interest rates are one of the hurdles to property investment. Low interest rates seem to have been a big factor in the bubble, along with liberalised credit products from lenders.

    I think I'm just amazed at comments by both parties about the merits of 'keeping interest rates low' to keep voters onside, when in fact I and others argue low interest rates helped spark the bubble in the first place. I'm not sure whether the economists working for the parties are autistic, or whether they're being over-ridden, assuming they employ any, due to populist vote-grabbing. In the meantime, the Fed just pushed up interest rates 25 base points, and are tipped to do it again straight after the next election. Their economists obviously see things differently, and I am not sure what sort of changes the opposition expect to put in place to suddenly be able to promise to 'keep interest rates low', short of creating a centralised command economy to manage every other externality that might arise.

  32. Jimbo


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    263   1:58pm Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    Easy money is always politically popular, both parties play that game. Personally, I think Greenspan did exactly the right thing, by saving us from a major recession in 2001 and that Bernanke is doing the right thing now, by trying to execute the fabled "soft landing."

    Unfortunately, no one wants to use actual Keynesian stimulus anymore, which would have probably been more appropriate in 2001 and would not have led to an asset bubble. When you only have one lever (interest rates) everything looks like cause for an interest rate cut.

  33. Zephyr


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    264   2:30pm Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    The fed did the right thing -- they just did too much of it.

  34. skibum


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    265   4:21pm Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    Jimbo, I disagree. Zephyr is more on target, although saying the Fed did the right thing but too much of it more or less says they screwed up, at least partly.

    I'm more old school. We need recessions once in a while. You need an impetus to clean out the system and clear out the dead weight once in a while.

  35. Jimbo


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    266   4:56pm Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    Back in the day when we used to have an industrial base, it made sense that we might "need" a recession to clear out over capacity. But what does that mean in the context of a service economy? Too many software developers? Isn't that what happened in 2001-2002? Too many new homes chasing too few credit-worthy borrowers? That is what we are seeing now. Better financial engineering and better inventory control mean recessions are going to be shorter and less severe.

    For those in tech during 2001, that was not a mild recession at all. I ended up out of work for six months, then got a job, only to be laid off in a big down sizing at the second place seven months later. I finally found another job three months later. And I was one of the survivors.

    Most people I know who joined the party late, moved back to their home towns and left the field entirely. The only thing that kept me employed at all was my network, which I had built up since college.

  36. skibum


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    267   5:04pm Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    Too many software developers?

    In a word, yes. The good ones will remain employed, the bad ones will go back to serving coffee at Starbucks.

    Perfect current example - so much of Web 2.0 is useless crap. A good recession will clear that out.

  37. Jimbo


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    268   11:26pm Fri 31 Aug 2007   Share   Quote   Permalink   Like   Dislike  

    It will not require a recession for it to happen though, that is what I am saying. Why should there be an economy-wide recession, just to correct an imbalance in one sector?

    Maybe the housecleaning happens faster that way, but I am not really convinced that this is better for the economy when it does. Eventually VCs will grow tired of throwing money after all the "me too" social networking sites, but remember, before Google, everyone thought that search was a tired and done sector.

  38. Donald


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    269   2:16pm Sat 1 Sep 2007   Share   Quote   Permalink   Like   Dislike  

    Bitter renters!

    The NAR and NAHB funded government will bail out homeowners and there is nothing you can do about it. Washington is going to keep my property value high and allow me to sell for a nice profit before the end of the decade. Government does not care abotu renters. You do not contribute to political campaigns and you do not pay property taxes.

    Go ahead and sign all of your little "No Bailout Petitions." Nobody can care less about them. Remeber to pay your income taxes this April so that the flipper down the street from me can sell for a $300,000 profit. If you don't, you can go to jail for income tax evasion.

    That should be the new motto for distressed homeowners: "Pay my mortgagae or go to jail!"

  39. Randy H


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    270   9:24am Sun 2 Sep 2007   Share   Quote   Permalink   Like   Dislike  

    If the NAR and NAHB want to fund a bailout, then I have no objections. I didn't know these organizations were in the business of giving money for bail outs, though.

    Maybe you were mistakenly referring to the National Association of Retards and the National Association of Hemorrhaging Buyers?

  40. KatieJ


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    271   7:42am Fri 10 Oct 2008   Share   Quote   Permalink   Like   Dislike  

    Until I hear one address what is to be done about the CEO's of these comapnies/banks.... that were part of the lending that lead to this meltdown ...that taxpayers are now being saddled with....I have little respect for any. I hear a lot of posturing, but not ONE has mentioned these CEO's walking away with MILLIONS...MILLIONS...while we tax payers already struggling are left to pay for their mess...and they walk away with parachute packages worth MILLIONs....Only one..has refused to accept his windfall and sent the money and perks back to be used to cover the debt that his company is responsible for. UNTIL these politicians hold those responsible accountable...Do not think anythnig they say will matter to the American public..I don't care what grand plans they have...beyond it's money out of my pocket, and your pocket to cover the mess made by those who are walking away millionaires. Let's hear a candidate address that issue and what's to be done to hold them accountable..Like maybe NO bail out for any that accept the golden parachutes and leave them on their own to sink or swim. If you want the American public to pay for your mess then first take care of as much of the debt as you can yourself. Every Joe Schome that goes to Bankrupty court has to cover as much of the debt as he can and we're not talking multi millionaires here or Billionaires but average working class struggling Americans...They don't get to walk away scott free....

    Will we ever hear a politician actually stand up and say..NO we wont bail you out...we wont offer a plan..we wont do anything until you help yourself out of this mess and cover as much as you can...SEE I have a huge problem with this...And no one ever mentions it...I wish someone with financial background would look into it and come up with the figures of how much overall these CEO's and Coporate officers are going to walk away with as the taxpayers are forced to bail out their mess...and will the bail out money be used for their golden parachute packges..Is that part of the deal? Where does that Money come from?

    I've had enough political posturing and plans (that amount to basically nothing...beyond more money from taxpayers..) I want real answers to real concerns....and no more sound bytes or the same speeches over and over that say nothing...

    Thanks to you Patrick as you seem to be the first person anywhere to even question Obama or his plans....He gets a free pass from the media..so I applaud your courage.

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