patrick.net

I am libertarian but also a cynic. Give ill-prepared people enough freedom, and the rest of us wind up paying for their mistakes. We'd all be better off if every high school included as part of its curriculum mandatory classes on personal finance and other practical life skills. Sure such classes would not prevent all the financial stupidity that occurs around us, but it is a shame that folks are sent into the adult world without much preparation to make adult decisions.

I don't know what they mean when they say FB, but I can tell in the context that it is sarcastic.

Well I suppose that the ultimate buyer is the person who buys the income stream when he sells the money that's borrowed for the house. He is the buyer who oughta beware. If those mortgages are insured then maybe its not even the lender who's on the hook. Maybe it's the taxpayers. And in that case if there's too many broken FB's (whatever FB means) then it'll be the non-FB's who will wind up paying the extra taxes. So we oughta buyerbeware when we vote.

HARM :

Excellent rant. Very difficult questions to tackle.

I would first break the responsibility into 2 groups legal and ethical. even as per current laws, legal responsibilities were broken and various frauds have happened. How many would be prosecuted, and how many will be made to pay, is still unclear.

As far as ethical responsibilities, hardly anyone behaves as if there is any. Lenders, appraisers, brokers, realtors don't have any notion of ethics and many buyers/sellers were willing participants. This is where we can say that current laws are inadequate. They definitely need to be changed as it affects life of innocent bystanders like us.

Question is what can we do about making a change ? We are in complete minority.

Dear Sweet Amerika Hating HARM,

What about all that new cock length equity I've heard about?

No matter who *should* have done what, the buyers MUST be blamed. I really have no sympathy for stupid people - especially when their actions have negatively affected my life.

Remember the story posted a couple of threads back ? The couple which had a house, multiple vacation time-share properties, 100K income and still facing bankruptcy ? After being offered a plan to get out of debt, +ve net worth and a plan to start saving decent money - the wife "was not as enthused" ! She said "We won't have the house and only 3K" !! That summed up the cause of the bubble for me. I don't think I have come across any story more disgusting than this.

To some extent this bubble was necessary to separate the fool (like this horrible woman) from the money. I know a lot of well-intentioned people will also be in financial trouble. But some like those in the story very much deserve what they are getting.

OK. One part is assigning the blame. Other part is how this mess will be cleared ? Will we finally let the free market take care of this on its own at its own pace in its own way ?

Sometimes I wonder if the "bailout" bloggers keep mentioning is not just a doom and gloom conspiracy theory.

http://biz.yahoo.com/ap/070125/congress_credit_cards.html?.v=1
Democratic lawmakers challenged credit card executives Thursday over rising late fees and other penalties and marketing practices they portrayed as predatory.
...

This is about credit card debt. I think most people would dismiss this by blaming the people who abuse their credit cards. But the story is alarming. It won't be that difficult to stroke a sympathy wave for "honest hard-working American people, who just want to realize their American dream". Especially, if they are in majority.

What kind of bail-outs might be proposed and what can we do to defeat it ?

Did you guys see the Ad below? Dove Ultimate Clear.

Huh?

Punchbowl Says:
Redeveloping govt land … Putting on price covenants … Using low or not for profit developers …
At which stage are you planning to liquidate the kulaks?

What's wrong with that? Those things are already being done, including in SF I might add -- see how the Fisherman's Wharf project was implemented -- and similar things in Oz and UK. The govt at the very least can do what it wants with its own property, thanks very much... The greatest tragedy is when govt sells off its land holdings to developers at the height of the boom to cash in...

Those approaches produce affordable housing for people who need it. It's better than just sitting back and watching and waiting to see what's going to happen next...

Punchbowl is increasingly looking like some sort of RE specuvestor troll in it for the money...

DinOR,

I've been wondering (from afar) about those BofA/Citigroup offers also.

Perhaps they are smelling the political winds, and are concerned that there could be a legislative "solution" to the reset problem.

Sriram Gopalan Says:

January 25th, 2007 at 9:19 pm e
HARM, aren’t there already laws about fraud and lying and breach of contract and whatnot? What more do you need?

What I "need" is for the existing laws to be enforced, not willfully ignored with a nod and a wink --and this includes prosecuting fraudulent buyers (e.g., Casey Serin getting a nice cozy bunk and boyfriend at Club Fed). I'd also like to see stronger/better laws that apply fiduciary responsibility to mortgage lenders and realtors, similar to the current securities laws. Not too much to ask of my state and federal lying shitbags, is it?

If the existing common sense laws are applied, that alone would take care of the crooks involved.

Yes and no. While there's no way of knowing *for sure* (since the existing laws clearly aren't being enforced), it doesn't appear that Realtors and mortgage brokers are held to anywhere near the same standards as securities brokers (see DinOR's excellent posts). IMO, we need tougher enforcement of existing anti-fraud laws AND tougher laws designed to discourage it before it happens.

The rest is caveat emptor. As tempting as it might be, the government is not the solution. In fact, it is the problem.

On the latter part, we can agree wholeheartedly. However I don't think the opposite of shitty government is NO government. I think the opposite of shitty government is GOOD government.

I DON'T want more government subsidies for banksters or more taxpayer RE risk underwriting --I want a lot LESS of it. The only things I want MORE of from the government is: (a) fraud prosecution, and, (b) re-coupling risk with the originating lenders and fraudulent borrowers. "(b)" alone would quickly result in the return of sane lending standards, including "quaint" practices like requiring down-payments, PMI, and full-doc loans. The government could also increase reserve requirements and outlaw negatively-amortizing mortgages. I would welcome all of these.

SP,

I had to manually approve your post, so something's up. Maybe your IP is being blocked --I'll check.

FYI: Sorry to any who got stuck in moderation. The queue is a nightmare these days (1,000+ spam posts per day). Most of the time, it's easier to just flush it and start clean.

SP,

Yes, your IP was in the moderation list. I removed it.

Holy crap, Sid --I'm getting the same thing! Could it be a temporary setback, or has the long ARM of the law finally caught up with our favorite specuvestor-savant?

Stay tuned... :-)

Or has something else happened to Young Casey?

The creditors may have swooped in and closed up shop on everything -- no ifs, no buts.

They simply stop all of his expenditures -- including hosted websites, even basic ISP access. They simply freeze all his outgoings to pay the creditors, anything that is an inessential expense. It would be debtors prison for him in the old days -- now he will just be paying off his debts out of earnings for years to come... the RE guru seminars he did don't come highly recommended...

Punchbowl,

Yeah, the "good" old days! LOL! It may come as a shock but there was a time when stock firms actually hired guys that were loud, obnoxious and aggressive (but couldn't come close to passing "the 7" exam). So...... they paid somebody else to "stand-in" and take the exam for them!

Now there's finger printing and background checks among a lot of other things. You can check out any RP (registered person) through the NASD's web-site. You just need their CRD Number or full name and firm and you can see if they've had a DUI, bankruptcy and obviously any customer complaints. Again your first complaint, will be your LAST complaint.

What's frustrating is that NAR is still in the "production covers all" mode. As long as they're generating those huge 6% comm. for their broker there's nothing local RE associations can't work around!

I don't think HARM is naive in the least. When I first got registered we were only expected to have a basic understanding of front running, free-riding and churning. Only the most basic aspects of regulatory code. Now? Pffft, I'm practically a securities litigation attorney! At least once a week we get a "Compliance Bulletin" also accompanied by an e-mail version that requires you to send back a receipt to your branch manager or directly to your compliance officer.

Just keeping your license is a major hassle with continuing education every year and if you're an independent we're now registered as NASD Branch Offices. Anything we wish to use as advertisement HAS to be pre-approved by the legal dept. before you can run it. Our corporate AND personal e-mails are monitored.

Compliance has become an industry. Firms like Smarsh create software programs that allow brokerages to search for things like "guarantee" or "15% is in the bag" etc. Firms have the legal right to randomly record broker/client phone calls as does the NASD. They even have "leads cards" that are actually phone numbers where NASD "plants" pretend to be prospective clients! If you haven't been around for awhile, you wouldn't recognize the industry. There's no earthly good reason NAR can't implement the same.

Sid Finster,

Some time back I actually gave old Casey a call. You've got to imagine that guy has a fair amount of "mechanical screening" complete with answering machine and caller I.D! I suppose b/c I wasn't a mortgage broker promising free money to bail him out of his jam or a reporter, my call (along w/many others I'm sure) was not returned.

Is Sid Finster a play on San Francisco?

FAB,

The W campaign requirement that you sign a statement of loyalty and support to W in order to attend a political rally actually seemed rather Stalinistic to me. This administration has used intimidation, threats, oh, the outing of your CIA agent wife, attacks by media personnel (not just Fox, I saw Paula Zahn accuse a critic weapons inspector (Scott Ritter) of being disloyal to his country because he found no evidence at all of any WMDs program before the invasion of Iraq.) This administration has famously traded access for towing the line.

I'm not a fan of the left's cult of victimization, but I am terrified of this administration's crushing of dissent. I'm not too happy with Gonzales' assertion that habeas corpus is not protected in the Constitution either.

FAB,

Man Tan was out when I was a little kid. It was just a fake tanner marketed to men, and it turned you orange.

Supposedly the spray tanning booths don't turn you orange. I went to one on Union Street before going on a winter beach weekend a couple of years ago, and there is definitely an orange tone to the stuff.

"Clown Prince of Real Estate" LOL!

Yeah I kind of like that one. It should be used in acronym form and added to the glossary.

My old man had a million "Sid" references. One of his favorites was "Fletcher Brown" (F@cking B@stard!) and he used it freely. Mom always seemed to frown on it, can't imagine why?

Sid Finster,

One of my favorites is "Lou Minnati" the guy is hysterical. He does shorts on the housing bust from Houston featured on youtube and his own site. The man's grasp of the obvious is truly remarkable!

SFWoman,

It isn't Angelo's fake tan that concerns me. Doesn't he look like a cast member from the Soprano's though? He'd fit right in.

Hey everybody! Uncle Angelo's come by to pay his respects, bada-bing!

http://www.mercurynews.com/mld/mercurynews/16551266.htm

Congress may push for loan "suitability"

Nice pickup this week by Athena on her Sonoma blog. (Well, it was news to me. :))

Apparently Dataquick include foreclosures (I.e. returns to lenders) in their sales statistics. Presumably the "price" in this case is the loan amount.

Now that the pace of said foreclosures is quickening . . .

ajh,

Your earlier comment was spot on! Please read lunarpark's link above for some very informative news. I NEVER thought I'd say this BUT...... I'm w/Barney Frank on this one!

Steve O'Conner and Roy DeLoach (both VP's w/the MB Assoc.) portraying the implmentation of a federally mandated "suitability standard" as being "vague and subject" is exactly what they should *not* be saying. It's coming and they can't fight it! It was dumb on their part not to take the same pre-emptive measures that BofA and CitiGroup took. Guys? (Hint o.k?) EMBRACE regulation! (Cause you DESERVE it!)

make that "vague and subjective". (That's what we have NOW and the MBA is just fine w/THAT!)

Now Barney Frank is standing between potential FB's and The American Dream (TM)! (Actually he's standing between the MB's and their loan flipping commissions but why quibble, eh?)

eburbed Says:

> I’d say that W’s administration has encouraged
> a culture of Freedom of Speech suppression.

Then as an example of GW’s “culture of Freedom of Speech suppression” points to a guy who was detained after writing “Kip Hawley (the head of the TSA) is an Idiot” on the outside of a clear plastic quart bags while going through TSA screening at the airport.

This has nothing to do with GW and if you go to any company in the US (or try and visit Hillary Clinton at the Senate) with a plastic bag that says the boss of the company (or Sen. Clinton) is an idiot you will be detained.

Try going to an Oakland Raider game with a bag that says Raider fans are idiots. You will have your face bashed in and will be lucky to get out alive.

It scares me that some people think that it is “Bush” and his “culture of Freedom of Speech suppression” has caused Clinton staffers and Raider fans to disrespect the first amendment…

This goes back to the overall difference between Liberals and Libertarians. Liberals blame others (“I decided to make a point and act like a f’ing idiot writing that the TSA boss is an idiot while going through screening at the airport and since Bush is conducting an immoral war the staffers felt that it was OK to detain a fellow American”) and Libertarians blame themselves (“that was a bad idea to write that the head of the TSA was an idiot on a bag. I’ll learn from this and try not to do it again epically at a Raider game where I would have had my head bashed in”)...

FAB,

Isn't the logical extension of your argument that people should then go on not to criticize the administration if they are reporters because they will quickly learn that it shuts down any access to the White House and is bad for their careers? Unfortunately, that is what happened.

DS: Punchbowl is increasingly looking like some sort of RE specuvestor troll in it for the money…

LOL. I guess that's what I get for calling you a name. Turnabout is fair play.

I just think that HARM is wrong about more regulation being needed. Fraud is already a criminal offense. If fraud has been done, then let the perpetrators be punished, criminally and civilly. People who have made misrepresentations that resulted in losses to others deserve to be behind bars or have their assets confiscated.

That makes me a libertarian, not a specuvestor. Meanwhile, you're still a Stalinist. ;-)

FAB,

I would also question your assertion that this describes a libertarian:
"Libertarians blame themselves (“that was a bad idea to write that the head of the TSA was an idiot on a bag. I’ll learn from this and try not to do it again epically at a Raider game where I would have had my head bashed in”)…"

I would say that is more of a description of a conformist. I can't really imagine a libertarian would be quite so ready to give up unpopular speech for the convenience factor.

I don't understand why the Mortgage Brokers Association just doesn't adopt the same ROA (return on assets) formula the securities industry uses? It's not that damn difficult!

Let's see? You "slammed" $1,600,000 in "loanownership" this month doing the Lord's work preserving The American Dream (TM). That means on a 1% ROA you get $16,000 to split with "the house". Start liking it.

But...but...bu I do a lot of sub-prime loans and they "can" be more difficult so shouldn't I get paid MORE for that? No, you shouldn't. You should stop writing sub-prime loans. But...but...bu we have HUGE advertising budgets and we won't be able to stay in business.

Uh, start doing nice work, take care of your clients like they were your mother and you'll get plenty of business through referrals. Since when did being a Loon Officer instantly translate to making big bucks? Look at the bank distribution channel, those guys/gals make a decent living but they're certainly not knocking down the big bucks.

His site is down because the real estate market had a spring bounce, his properties skyrocketed in value and he was able to sell them, made a killing, and is at his new house in the south of France without WiFi access?

Libertarians blame themselves (“that was a bad idea to write that the head of the TSA was an idiot on a bag. I’ll learn from this and try not to do it again epically at a Raider game where I would have had my head bashed in”)…

So... the TSA, an agency composed of men and women who are supposed to be protecting us from terrorists, are of the same caliber of professionalism as Raiders fans.

Interesting point.

Peter P,

I'm hearing the options exchanges are starting a pilot program to trade in penny increments (select issues). Have you been holding out on us?

A bit more crushing of dissent:

Jonathan S. Landay
McClatchy Newspapers
Friday, January 26, 2007

WASHINGTON - Vice President Dick Cheney exerted "constant" pressure on the Republican former chairman of the Senate Intelligence Committee to stall an investigation into the Bush administration's use of flawed intelligence on Iraq, the panel's chairman charged Thursday.

In an interview with McClatchy Newspapers, Sen. Jay Rockefeller of West Virginia also accused President Bush of running an illegal program by ordering eavesdropping on Americans' international e-mails and telephone communications without court-issued warrants....

Long Island is so silly

http://www.nytimes.com/2007/01/26/nyregion/26long.html?_r=1&adxnnl=1&oref=slogin&adxnnlx=1169836686-jrXmJnFbiYCFiAWik9fRGg

Apparently only 2% of houses sold are affordable compared to 60% in 2000.

At first, that seemed worse than here - but then the reason was revealed:

In 2000, 60 percent of the homes sold on Long Island could be classified as “affordable” for families earning up to $100,000 a year, under the old rule of thumb that buyers should spend no more than 2.5 times their income on places to live.

I guess the NYAR (?) hasn't learned from CAR that you have to change the way you measure things yet.

eburbed Says:

> So… the TSA, an agency composed of men and
> women who are supposed to be protecting us from
> terrorists, are of the same caliber of professionalism
> as Raiders fans.

While the average (average not every) IQ of Rader fans is at least one standard deviation below the mean it is well above the average IQ of the people working for the TSA (and most other “government” jobs)…

I’m hearing the options exchanges are starting a pilot program to trade in penny increments (select issues).

Good news.

My friend asked me if he should sell a whole bunch of 0.05 calls near expiration.

It reminds me of russian roulette. LOL!

Oh, is it bad that I feel like celebrating?

SQT, welcome back.

Why is it bad that history unfolds as we have predicted? ;)