patrick.net

How are they going to justify that the homeowners had no idea what they were getting into this time?

anonymous says

but many lenders believe that done with proper controls, the risks can be managed and the business can generate big profits.

sounds SCANDALOUS!

How much damage can subprime auto loans do to the housing market?

It's all Obama's fault!!!

good luck waiting for the bursting of a fictions housing/subprime bubble. Europe still hasn't recovered so don't expect naive victims to buy toxic RE securities anytime soon. after what happened a few years ago, no bank is going to give out subprime loans if they can't re-package them and sell to unsuspecting investors.

Mark D says

Europe still hasn't recovered so don't expect naive victims to buy toxic RE securities anytime soon.

The problem of subprime mortgages does not go away depending on whether Europe is or isn't buying. Someone clearly IS buying them, either by being bank depositiors (as we all are) or as taxpayers (via the Fed), or as pension funds, investors, what have you.

Call it Crazy says

There's your answer...

Uh, I wasn't really asking a question, was I?

HEY YOU says

How much damage can subprime auto loans do to the housing market?

Lots.

They effectively erase any residual income that could've been spent on goods, services, or actual housing (IOW the economy).

Instead it all goes into long term (5-7yr) debt service on a depreciating "asset" that requires constant service and refueling.

tts says

HEY YOU says

How much damage can subprime auto loans do to the housing market?

Lots.

They effectively erase any residual income that could've been spent on goods, services, or actual housing (IOW the economy).

Instead it all goes into long term (5-7yr) debt service on a depreciating "asset" that requires constant service and refueling.

Real men only sign up for 97 month auto loans.

edit: /\/\/\/\/\/\/\/\/\/\/\
I've been wondering if they'll actually break the 100 month car loan psychological barrier for mass market loans for a while now. So far being cynical hasn't steered me wrong yet.

But boy I'd love to be wrong about that...

hrhjuliet says

How are they going to justify that the homeowners had no idea what they were getting into this time?

Most people are still depressingly uninformed or misinformed about the housing bubble + still tons of social pressure from family/friends to buy + banks/RE agents misinform new buyers constantly.

Hell something like a quarter of Americans don't know the Earth orbits the Sun. If that doesn't depress you enough there are plenty of other things Americans don't know or hold as fact despite being plainly wrong: http://thoughtcatalog.com/nico-lang/2013/10/14-surprising-things-americans-dont-know-according-to-poll-numbers/

People in general are pretty stupid and/or aggressively ignorant of things outside their own personal social bubble.

Personally I started to get a handle on just serious of a problem this is when reading an old article* that I found a few years back about rich/middle class people during the Great Depression not believing that things were all that bad.

DURING THE GREAT DEPRESSION.

WITH PEOPLE STARVING IN THE STREETS IN FRONT OF THEM.

Amazing and horrifying to say the least.

*can't find it anymore sorry

tts says

Personally I started to get a handle on just serious of a problem this is when reading an old article* that I found a few years back about rich/middle class people during the Great Depression not believing that things were all that bad.

DURING THE GREAT DEPRESSION.

WITH PEOPLE STARVING IN THE STREETS IN FRONT OF THEM.

Amazing and horrifying to say the least.

How are rich men today like Krugman, advocating wasting resources on fake war against Martians while 40 million American have to resort to food stamps to make ends meet, any different from those FDR "brain trust" who dumped milk into the ocean and burned "excess" farm animals in the field while people starved in the streets?

The starving are always the last ones to get the newly printed money, and consequently their bids in the market for food is trumped by crooks bidding up prices with newly counterfeited money from the government. That's how the FDR "brain trust" bought up the animals and milk to destroy the food, so the poor couldn't get the food. The whole game was about squeezing the middle class and the poor, so the banksters' loans could be serviced by higher price levels.

tts says

DURING THE GREAT DEPRESSION.

WITH PEOPLE STARVING IN THE STREETS IN FRONT OF THEM.

The great depression wasn't as bad as people seem to think. Unemployment (using the U-6 measure) at its peak reached about 25% which means that 1 out of 4 Americans were unemployed. But that didn't last throughout all of the great depression though, not even close.

The truth is even during the great depression era many people were still well off. Most Americans still went to the movies had food and lived fine. The Great Depression was just glorified into a horror story but the truth is the next bubble was make the Great Depression look like a kid. Simply because the government will continue it inflation policies and prices won't come down like they did in the great depression but instead go up.

No it was that bad. I assume you've either not read Grapes of Wrath or the horror of reading it has made you recoil mentally and retreat into disbelief that millions were forced to live like that during that time period.

It would certainly explain why you'd try and trivialize a 25% U6, which even if it was the peak "only" for a few years, doesn't tell you the whole story for the avg. American for the time period.

At all.

It is just a measuring unemployment and not income or the standard of living.

While "many" in terms of nominal numbers of people (ie. hundreds of thousand, millions, etc.) lived well during those years in terms of percentage of the population most people were impoverished and had the rest of their entire lives influenced by that event. Often their lives were drastically shortened.

Also historically a deflationary depression like the US experienced in the 20's was an aberration. Historically most countries have experienced a inflationary depression. Japan for instance would be a fairly modern example of such a thing.

That comment shouldn't be taken as a belief on my part that all inflation is bad BTW. Just that it -can- be bad too.

Mark D says

good luck waiting for the bursting of a fictions housing/subprime bubble. Europe still hasn't recovered so don't expect naive victims to buy toxic RE securities anytime soon. after what happened a few years ago, no bank is going to give out subprime loans if they can't re-package them and sell to unsuspecting investors.

You must have missed this:
http://www.reuters.com/article/2014/02/14/us-banks-subprime-insight-idUSBREA1D07820140214

tts says

It is just a measuring unemployment and not income or the standard of living.

Don't confuse standard of living then with today's standard of living. Did the avg. american own a house? Sure certainly not, not many had cars either. But all those came later with technological advancements which would eventually improve our standard of living.

However, with the way things were back then it only took one parent's income to raise a family of 5-8. Today the avg. american family cannot even fathom that or come close. In a sense standard of living was much cheaper then than today. Hell, with a silver dime you were able to watch a movie, get candy or popcorn and still have change.

Also the average income for the avg. american would range from $15 to $30 per week depending on which industry they were working in. A home usually cost about $3,000. If someone made $30 a week that ends up being $1560 a year, about 1/2 the price to own a home.

Wage and cost inflation over nearly a century has nothing to do with the standard of living for that era.

Same thing goes with home ownership or family size or income earners per household.

None of which I brought up, so I don't know why you're even bringing them up.

tts says

Wage and cost inflation over nearly a century has nothing to do with the standard of living for that era.

Same thing goes with home ownership or family size or income earners per household.

None of which I brought up, so I don't know why you're even bringing them up.

If I read correctly you said Unemployment didn't measure the standard of living during that time period. Sure it doesn't if you just focus on unemployment. I am saying the that the great depression wasn't as bad as many think, as standard of living was much cheaper back then than today.

You also state that most depression have inflationary depression, sure but that's due to the central banks creating easy credit or money policies. In a true depression without a central bank pumping money into the economy, prices and wages fall and then stabilize then growth will eventually resume again. It occurred in the last depression (if you don't count 2008 as a depression) because the FED or central banks didn't eject a lot of money into the economy.

Today, Ben Bernanke or Yellen or even Japan did the opposite of what the FED did during the great depression. Only this time things are worst, because prices are rising but wages are not. That is part of the reason why will we not recover from the 2008 recession, and yes we still are in the 2008 recession. Why? Because QE is the only thing propping up our economy. As you can see with just a small taper of 20 billion removed from the original 85 billion, our economy has had nothing but horrible news and even before the taper we mostly had nothing but bad news since 2008.

Mark my words, Yellen will increase QE and probably increase it to 100 billion or more. Becuase without it, our economy wll only get worst and worst. Sadly eve with QE the economy will still get worst. I guess we're damned if we do and damned if we don't.

spydah_hh says

I am saying the that the great depression wasn't as bad as many think

Yea I get that and U6 unemployment numbers was the one example you gave as proof of such.

I'm saying your "proof" isn't giving you the whole picture.

And there is plenty of proof to the contrary of your idea that the Great Depression wasn't all that bad:
http://facts.randomhistory.com/2009/04/12_great-depression.html

When GNP drops nearly 50% and almost the same percentage of children in the entire country are living without adequate food, shelter, or medical care you can safely say that the Great Depression was well and truly as bad as presented in the history books and stories from the time period.

spydah_hh says

as standard of living was much cheaper back then than today.

Based on what metric? Sure they had to spend much less money vs today in nominal terms but they also made far far faaar less. They also had to spend more of their income on food than we do normally today.

spydah_hh says

In a true depression

Deflation has nothing to do with a "true" Depression which is a specific economic term related to a drop and/or stagnation of growth of GDP over a long time period. "Long" in this case would generally be considered to be over 18 months. That can be due to a variety of reasons and deflation or inflation are only 2 of them. The modern term for a Depression is "L shaped recession" because of this and this term is used instead of Depression for the same reason that economists and govt. officials in the 1920's stopped using the word "panic": they're playing stupid word games to confuse people and reduce the chance of them freaking out.

spydah_hh says

Sadly eve with QE the economy will still get worst.

The FED can dump money into the economy but they can't direct where it goes. Congress does that. And Congress is loaded with corrupt self aggrandizing sell outs who would rather rule over a pile of ashes than see most of that money directed towards the public via WPA work programs as it was during the Great Depression.

The composition of Congress itself must change, with most or nearly all incumbents voted out, before that situation starts to improve.

Barring some sort of major crisis that causes people to vote accordingly to above the earliest possible date that is likely to start occurring is 2020 due to demographics shift slowly taking place across the US. Its turning the Red states Purple and even Blue in some cases. This in turn is reducing the ability of the Repubs to act on a national level and giving the Dems an advantage there.

Not that the Dems are all that great either but they at least are willing to try and toss a bone or 2 to the public. Its the start of at least some sort of reform that is badly over due and will help ease the gridlock we currently are forced to deal with in Congress.

tts says

Based on what metric? Sure they had to spend much less money vs today in nominal terms but they also made far far faaar less. They also had to spend more of their income on food than we do normally today.

I am not speaking of nominal terms here, but in real terms. Money back then had more value than today. http://en.wikipedia.org/wiki/United_States_dollar. Scroll down to the value section, compare the dollar back in the 1920-40s to today and you'll see that the dollar lost a ton of purchasing power over the decades. Like I said, it's why even the poor could afford families of 5-8 people with just one income, unlike today.

tts says

Deflation has nothing to do with a "true" Depression which is a specific economic term related to a drop and/or stagnation of growth of GDP over a long time period. "Long" in this case would generally be considered to be over 18 months.

The Central banks can easily prop GDP by ejecting money into the economy or even lowering interest rates. Both create false signals and mal-investments that ALWAYS lead to a bubble.

tts says

The FED can dump money into the economy but they can't direct where it goes. Congress does that.

Congress doesn't even direct where it goes, not unless you're talking about the money the FED loans to the government from U.S. Treasuries purchases then yes, but not with QE that's total different in that sense the FED buys bonds or other assets from the banks which allows them to have more cash to loan. The money then gets distributed to the wealthy, through assets appreciation. Meaning only those who have money are able to afford and enjoy the asset appreciation e.i. stock market, housing, and etc. While the rest, the middle class and poor suffer as they don't have the means to invest in the result of assets appreciation in fact they suffer from it.

tts says

ot that the Dems are all that great either but they at least are willing to try and toss a bone or 2 to the public. Its the start of at least some sort of reform that is badly over due and will help ease the gridlock we currently are forced to deal with in Congress.

What reform are we talking about here? Political reform from both parties? Don't see it not until after the next bubble or bubbles. Both the Dems and Repubs are going to sell out to the public by promising social programs that are causes american to pay for through taxes (by which now we can't even pay for with the tax revenue). They do this because it's good politics and it wins seats.

Note: Buy apartment Reits... looks like a steady flow of new customers for the next decade.

http://www.counterpunch.org/2014/02/14/foreclosure-filings-jump-as-investors-eye-exits/

" Keep in mind, that a lot of first time homebuyers are collage grads who want to start a family and put down roots. Regrettably, nearly half of those potential buyers have been scrubbed from the list due to their burgeoning student loans which now exceed $1 trillion. These kids will probably never own a home, let-alone have a positive impact on sales in 2014. Ain’t gonna happen."

spcwby says

" Keep in mind, that a lot of first time homebuyers are collage grads who
want to start a family and put down roots. Regrettably, nearly half of those
potential buyers have been scrubbed from the list due to their burgeoning
student loans which now exceed $1 trillion. These kids will probably never own a
home, let-alone have a positive impact on sales in 2014. Ain’t gonna
happen."

What benefit is it sending these new graduate kids out into the world starting with a huge debt burden? It seems to be the debt trap that this country continually embraces....

Analyzer says

What benefit is it sending these new graduate kids out into the world starting with a huge debt burden? It seems to be the debt trap that this country continually embraces....

Is it really any different if they're paying rent instead of a mortgage?

tatupu70 says

Analyzer says

What benefit is it sending these new graduate kids out into the world starting with a huge debt burden? It seems to be the debt trap that this country continually embraces....

Is it really any different if they're paying rent instead of a mortgage?

I feel less trapped by paying rent.

Analyzer says

spcwby says

" Keep in mind, that a lot of first time homebuyers are collage grads who

want to start a family and put down roots. Regrettably, nearly half of those

potential buyers have been scrubbed from the list due to their burgeoning

student loans which now exceed $1 trillion. These kids will probably never own a

home, let-alone have a positive impact on sales in 2014. Ain’t gonna

happen."

What benefit is it sending these new graduate kids out into the world starting with a huge debt burden? It seems to be the debt trap that this country continually embraces....

Totally agree. Yes, we embrace the debt trap and support it. We are ignorant of our own government and system, so we become pawns. The propaganda is so perverse that people don't even realize their own power to escape. Our power is in our ability NOT to buy. Do not buy an inflated home. Do not go to an overpriced college. Do not purchase goods you don't need, and never buy anything from corrupt corporations. Educate yourself on which corporations those are. I know it's work to research that info, especially because it's meant to be hidden, but it's worth it. Stop buying into it all, literally. That's your power. No one can make you buy anything. Sticking to necessesties and researching companies, and who and what they support, is our strongest weapon against the corruption in our system. They are counting on your addiction to things, junk, and desires to keep you in your place. They are counting on your ignorance and they are counting on your apathy, greed and fear, but most of all they are counting on you believing the myth that you are powerless.

Analyzer says

tatupu70 says

Analyzer says

What benefit is it sending these new graduate kids out into the world starting with a huge debt burden? It seems to be the debt trap that this country continually embraces....

Is it really any different if they're paying rent instead of a mortgage?

I feel less trapped by paying rent.

Flexibility is a legitimate reason for renting. I agree.

I don't see the aversion to debt though. Unless you plan on living in your car or under the bridge, you will always have a housing payment. Whether it's a mortgage or rent--it will be there. Renting is a lifetime of debt. Owning is (usually) 30 years.

spydah_hh says

I am not speaking of nominal terms here, but in real terms. Money back then had more value than today

I know, that is why I also mentioned they made far less too. A tenth or less of average wages today was common back then.

spydah_hh says

Congress doesn't even direct where it goes

The WPA programs I mentioned are a real world example of them doing exactly such. The FED can use QE to finance Congressionial action just as well as it can to prop up the banks and Wall St. After all the FED is ultimately under Congress' control.

spydah_hh says

What reform are we talking about here?

The point was that Congress will be able to start doing stuff instead of being locked up like it currently is. We can quibble all day long about what should and shouldn't be done as reform and not come to an agreement on the details.